Opinion
Plaintiffs/appellants Milton Wise, Leroy Williams, Yvonne Williams and Gwen Wise, individually and on behalf of the
Background
A demurrer admits the truth of all material factual allegations, and we are required to accept them as such, together with those matters subject to judicial notice. (Blankv. Kirwan (1985)
PG&E is a regulated utility providing gas and electrical services to customers throughout approximately 60 percent of California, and requires PUC approval of its rates for electricity and natural gas.
In approximately January 1984 PG&E initiated a Gas Regulator Replacement Program (GRRP) to replace all its old regulators, which were corroding and/or did not contain an internal pressure relief valve (IRV). The lack of an IRV rendered the older regulators susceptible to overpressurization, which could result in spontaneous gas leaks. In 1986, during the course of a general rate case proceeding, PG&E represented to the PUC that approximately 2,000,000 regulators would be replaced, the GRRP would occur over a seven-year period between 1984 and 1990, and PG&E would actively categorize and designate all non-IRV regulators in residences and small businesses and replace them with IRV regulators. PG&E also represented to the PUC that the cost of the GRRP from 1987 to 1990 would be $18 million annually, and the estimated seven-year cost would exceed $101 million.
PG&E asked the PUC to allow a rate increase to reflect the costs already incurred as well as those to be incurred between 1987 and 1989 for the GRRP, representing that it would continue the GRRP and would replace approximately 260,000 regulators per year at an annual cost of $18 million. Based on PG&E’s representations the PUC authorized an increased rate, and PG&E’s customers paid a gas rate which included the cost PG&E represented it would incur in conducting the GRRP.
In approximately June 1988 PG&E unilaterally ceased actively initiating regulator replacements, and since that time has replaced non-IRV regulators only if some other service call justified its physical presence at a residence or business and required a shutoff of the main gas line leading to the premises. Under this new maintenance program only a nominal volume of old regulators would be replaced.
During subsequent rate proceedings, PG&E did not inform the PUC of the change in the GRRP, and that it was not incurring the costs it had previously represented it would incur. PG&E’s internal documents suggest that PG&E’s personnel were instructed not to disclose to the PUC that PG&E had terminated its active GRRP unless specifically asked by PUC members, and its specific company policy was to withhold information from the PUC regarding termination of the GRRP.
As a result of its alleged surreptitious termination of the GRRP, PG&E charged appellants and the general public the sum of $42,240,000, for services it failed to provide.
Appellants also allege that since June 1988 PG&E has continued to charge its ratepayers $1.1 million annually for the cost of its ongoing maintenance program, despite the fact that as of 1990 it had already charged its ratepayers for replacement of every old regulator in its service area. Consequently, appellants allege, each annual charge for the ongoing maintenance program constitutes a double recovery by PG&E.
PG&E demurred on the grounds the court lacks subject matter jurisdiction because exclusive jurisdiction resides with the PUC (Code Civ. Proc., § 430.10, subd. (a)), and that the complaint fails to state a cause of action because relief is barred by the filed rate doctrine. As to the fraud causes of action PG&E also argued that classwide reliance could not be proven, and appellants had failed to plead the elements of representation and reliance.
In opposition to the demurrer appellants argue that pursuant to San Diego Gas & Electric Co. v. Superior Court (1996)
The court sustained the demurrer without leave to amend, and this appeal ensued.
Discussion
I
Article VI, section 1 of the California Constitution vests the judicial power of this state in the courts. However, article XII establishes the PUC and gives it broad regulatory power over public utilities, “including the power to fix rates, establish rules, hold various types of hearings, award reparation, and establish its own procedures.” (Covalt, supra,
Pursuant to this constitutional scheme, the Legislature has enacted, inter alia, two statutes upon which the parties rely. In support of its position that the courts lack jurisdiction over appellants’ action, PG&E relies primarily on Public Utilities Code
In Waters the Supreme Court harmonized sections 1759 and 2106 by holding that judicial authority to award damages under section 2106 applies only in “those situations in which an award of damages would not hinder or frustrate the [PUC’s] declared supervisory and regulatory policies.” (Waters, supra, 12 Cal.Sd at p. 4.) Waters was an action by a telephone customer for damages arising from the telephone company’s failure to provide adequate service. The trial court limited plaintiff’s damages to a credit allowance established by a PUC tariff schedule and the Supreme Court affirmed, noting that in limiting any recovery available for lack of service, the PUC was securing lower rates for the consumer, which was a proper regulatory function.
Covalt was an action by homeowners against a regulated electrical utility, alleging damages from electromagnetic field (EMF) radiation. The PUC had adopted a general policy concerning the potential effect of EMF’s, and what action, if any, electrical utilities should take to minimize any potential risk. Affirming the Court of Appeal’s directive that the electric company’s demurrer be sustained without leave to amend, Covalt confirmed that pursuant to the Waters rule, “an action for damages against a public utility pursuant to section 2106 is barred by section 1759 not only when an award of damages would directly contravene a specific order or decision of the [PUC], i.e., when it would ‘reverse, correct, or annul’ that order or decision, but also when an award of damages would simply have the effect of undermining a general supervisory or regulatory policy of the [PUC], i.e., when it would ‘hinder’ or ‘frustrate’ or ‘interfere with’ or ‘obstruct’ that policy.” (Covalt, supra,
Explaining the Waters rule, Covalt noted; “When the bar raised against a private damages action has been a ruling of the [PUC] on a single matter such as its approval of a tariff or a merger, the courts have tended to hold that the action would not ‘hinder’ a ‘policy’ of the [PUC] within the meaning of Waters and hence may proceed. But when the relief sought would have interfered with a broad and continuing supervisory or regulatory program of the [PUC], the courts have found such a hindrance and barred the action under section 1759.” (13 Cal.4th at pp. 918-919.)
By way of illustration, Covalt cited Cellular Plus, Inc. v. Superior Court (1993)
Brian T. was an action by parents of minor children against a telephone company,
By contrast, Cellular Plus was an action under the Cartwright Act (Bus. & Prof. Code, § 16700 et seq.) against two cellular telephone companies for price fixing. In overruling a judgment sustaining the companies’ demurrers the Court of Appeal held that the price-fixing action did not impede the PUC’s supervisory or regulatory policies, noting that, like the instant case, the plaintiffs were not challenging the PUC’s ratemaking authority or seeking to change any rates the PUC had approved. Stepak was a class action by a minority shareholder of a telephone utility seeking to prevent a merger. Again, the Court of Appeal ruled that the action was authorized by section 2106, noting that the PUC had no policy on the subject of safeguarding minority investor interests.
PG&E contends the present action interferes with the PUC’s ratemaking policy. However, appellants disclaim any challenge to the PUC’s established rates. In essence, appellants contend PG&E failed to provide the services, i.e., the new valves, for which appellants were charged. PG&E does not cite, and the record does not contain any evidence of any existing regulation or policy of the PUC which might be impeded if appellants’ action proceeds. The claim that PG&E charged for services it failed to deliver does not interfere, hamper, hinder, frustrate or otherwise impede any supervisory or regulatory PUC policy.
n
PG&E contends the trial court properly invoked the primary jurisdiction doctrine to bar the action.
The primary jurisdiction doctrine “ ‘applies where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such a case the judicial process is suspended pending referral of such issues to the administrative body for its views.’ ” (Farmers Ins. Exchange v. Superior Court (1992) 2 Cal.4th 311, 390 [
The primary jurisdiction doctrine advances two related policies: (1) it enhances judicial efficiency by permitting courts to take advantage of administrative expertise; and (2) it helps to assure uniform application of regulatory laws. (Farmers Ins. Exchange, supra,
Courts have frequently applied the primary jurisdiction doctrine and stayed actions where the issues raised in the trial court action were pending before an administrative agency. (See Farmers Ins. Exchange, supra, 2 Cal.4th at pp. 388-389, 401-402, citing Nader v. Allegheny Airlines (1976)
PG&E advances the primary jurisdiction doctrine based on the PUC’s potential adoption of a policy or regulatory scheme concerning the GRRP. With no objection and pursuant to Evidence Code sections 452, subdivisions (c) and (h), and 459, PG&E requests that we judicially notice the PUC decision in Carey v. Pacific Gas & Electric Co. (1998) Cal.P.U.C. Dec. No. 98-12-076 {Carey) and the testimony of a witness in the evidentiary hearing before the administrative law judge in the Carey PUC proceeding. In the trial court PG&E, without opposition, asked the court to judicially notice the Carey PUC complaint and its related joinder, but the record contains no express ruling on the request for judicial notice.
Evidence Code section 452, subdivision (c) (official acts) permits the Court of Appeal to take judicial notice of a PUC decision. Judicial notice of the PUC’s Carey decision is appropriate here since that decision, which is relevant to the instant case, was filed after the trial court’s ruling on the demurrer in this case. (Vila v. Tahoe Southside Water Utility (1965)
In November 1997 Joanne Carey filed a complaint against PG&E with the PUC after a fire and explosion destroyed a 15-unit apartment complex. In April 1998 several tenants filed a joinder in the Carey PUC complaint, in which they claimed that the incident was caused in part by PG&E’s fraudulent termination of the GRRP, and requested that the PUC impose a fine against PG&E in an amount at least equal to the money it saved by suspending the GRRP.
The PUC’s December 1998 decision in the Carey adjudicatory proceeding stated: “In the Scoping Memo[
Our Supreme Court has stated that “[n]o rigid formula exists for applying the primary jurisdiction doctrine [citation]. Instead, resolution generally hinges on a court’s determination of the extent to which the policies noted above are implicated in a given case. [Citations.] This discretionary approach leaves courts with considerable flexibility to avoid application of the doctrine in appropriate situations, as required by the interests of justice.” (Farmers Ins. Exchange, supra, 2 Cal.4th at pp. 391-392, fns. omitted.)
Appellants argue that their UCL and fraud claims are not subject to the primary jurisdiction doctrine. However, this contention was rejected by Farmers Ins. Exchange insofar as the UCL claims are concerned. (2 Cal.4th at pp. 392-395) As to the fraud claims, “[t]he doctrine of primary jurisdiction ‘is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties.’ . . . Even when common-law rights and remedies survive and the agency in question lacks the power to confer immunity from common-law liability, it may be appropriate to refer specific issues to an agency for initial determination” to take advantage of administrative expertise or to assure uniform application of regulatory laws. “The doctrine has been applied, for example, when an action otherwise within the jurisdiction of the court raises a question of the validity of a rate or practice included in a tariff filed with an [administrative] agency . ... , particularly when the issue involves technical questions of fact” within the agency’s expertise. {Nader, supra, 426 U.S. at pp. 303-304 [
Generally, the standards to be applied in a common law fraud action are within the conventional competence of the courts and involve no technical questions of fact requiring agency expertise. {Nader, supra, 426 U.S. at pp. 305-306 [96 S.Ct. at pp. 1987-1988]; Farmers Ins. Exchange, supra,
Appellants further contest the applicability of the primary jurisdiction doctrine on the ground that the PUC lacks subject matter jurisdiction over their claims and cannot provide them with a suitable remedy. This is not entirely correct. Although the PUC has no jurisdiction to award monetary damages for tortious conduct (Vila, supra,
The PUC may exercise equitable jurisdiction as an incident to its express duties and authorities. Pursuant thereto, it may, for example, issue injunctions in aid of its jurisdiction, direct that a trust fund be created to conserve potential refunds during a stay of an order lowering rates, reform contracts of public utilities to make them conform to the public interest, and issue cease and desist orders. (Consumers Lobby, supra,
Appellants necessarily allege, by implication at least, that PG&E obtained an excessive and unreasonable tariff by defrauding the PUC, but claim the PUC is without jurisdiction to respond to the fraud. In construing the rule against retroactive ratemaking (§ 734), we employ the fundamental rule of statutory construction that a statute “must be given a reasonable and common sense interpretation consistent with the apparent purpose and intention of the lawmakers, practical rather than technical in nature, which upon application will result in wise policy rather than mischief or absurdity.” (DeYoung v. City of San Diego (1983)
As we have noted, the PUC is not an ordinary administrative agency, but a constitutional body with broad legislative and judicial powers. (Covalt, supra, 13 Cal.4th at pp. 914-915.) Any action the PUC might take in the Carey proceeding concerning the GRRP will determine whether this action can or should be entertained by the court. Consequently, we conclude the case is appropriate for application of the primary jurisdiction doctrine.
Disposition
The judgment is reversed and remanded with directions to stay judicial proceedings and retain the matter on the court’s docket pending further PUC proceedings, and to monitor the progress of the PUC proceedings to ensure against unreasonable delay of appellants’ action. (See Farmers Ins. Exchange, supra, 2 Cal.4th at pp. 401-402.) Costs to appellants.
Jones, P. J., and Stevens, J., concurred.
A petition for a rehearing was denied January 19, 2000, and the petition of appellant Pacific Gas and Electric Company for review by the Supreme Court was denied April 19, 2000. Chin J., did not participate therein. Mosk, J., was of the opinion that the petition should be granted.
Notes
All further undesignated section references are to the Public Utilities Code.
According to PG&E, a scoping memo in a PUC proceeding “serves roughly the same purpose as a pretrial conference order, defining the issues that will be contested in that proceeding.”
See footnote 1, ante, page 287.