Schuster v. Northwestern Energy Co.

December 3 2013

DA 13-0044

IN THE SUPREME COURT OF THE STATE OF MONTANA
2013 MT 364

LARRY G. SCHUSTER,

Plaintiff and Appellant,

v.

NORTHWESTERN ENERGY COMPANY,

Defendant and Appellee.

APPEAL FROM: District Court of the Thirteenth Judicial District,
In and For the County of Yellowstone, Cause No. DV 12-0021
Honorable Mary Jane Knisely, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Larry G. Schuster; self-represented; Billings, Montana

For Appellee:

Sarah N. Norcott; Attorney at Law; Helena, Montana

Submitted on Briefs: November 20, 2013
Decided: December 3, 2013

Filed:

__________________________________________
Clerk
Justice Jim Rice delivered the Opinion of the Court.

¶1 Larry Schuster (Schuster) appeals from the order of the Thirteenth Judicial District

Court, Yellowstone County, dismissing his complaint against NorthWestern Energy

(NWE) based on lack of subject-matter jurisdiction. The District Court concluded the

Public Service Commission (PSC) had the power to hear Schuster’s complaint against

NWE, a public utility, and only after the PSC acted could Schuster seek judicial relief.

Because Schuster had failed to exhaust this administrative remedy, the court determined

it was without jurisdiction to hear the claim. We reverse and remand.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 As alleged, Schuster was an electric service customer of NWE (formerly Montana

Power Company) for a residence he owned in Great Falls from 1991 to 2009. On or

around January 9, 2009, NWE disconnected electric service to Schuster’s residence based

on an outstanding balance of $16 on his utility bill. Schuster alleges the termination of

service caused the furnace to fail, which led to water pipes freezing and bursting. The

water damage to the property resulted in damages of approximately $100,000 to real

property, and $40,000 to personal property.

¶3 Schuster filed an action in district court alleging property damage due to NWE’s

negligence and negligence per se in terminating his electric service. Specifically,

Schuster alleged that NWE terminated his service without legal justification and in

violation of Admin. R. M. 38.5.1402 (termination without justification), 38.5.1405

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(failure to give notice prior to termination), and 38.5.1410 (termination when temperature

expected to fall below freezing).

¶4 NWE filed a motion to dismiss based on lack of subject-matter jurisdiction for

Schuster’s failure to exhaust administrative remedies before the PSC. NWE argued that

the PSC was the entity that must determine whether it had violated the administrative

rules or its tariff1 with the PSC. The District Court granted NWE’s motion and dismissed

the action. Schuster filed a motion for relief from judgment pursuant to M. R. Civ. P.

60(b), which was deemed denied after 60 days. This appeal followed.

¶5 Following dismissal of his complaint in District Court, Schuster filed a formal

complaint with the PSC. That matter is pending.2

STANDARD OF REVIEW

¶6 A district court’s determination that it lacked subject-matter jurisdiction is a

conclusion of law. We review a lower court’s dismissal of a complaint based on lack of

subject-matter jurisdiction to determine whether the court’s interpretation of law is

correct. Mt. Water Co. v. Mont. Dept. Pub. Serv. Reg., 2005 MT 84, ¶ 8, 326 Mont. 416,

110 P.3d 20.

1
A tariff is a published schedule of rates or charges with associated rules, regulations, and other
information issued by a public utility which must be filed with and approved by the Public
Service Commission. See § 69-3-301, MCA; Admin. R. M. 38.2.601(1)(o); 38.5.2601.
2
Docket No. D2012.9.92.
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 DISCUSSION

¶7 Subject-matter jurisdiction is the power of a court to hear and determine a

particular class of cases. State ex rel. Morgan v. State Bd. of Examiners, 131 Mont. 188,

212, 309 P.2d 336, 349 (1957). If a court lacks subject-matter jurisdiction it “cannot

acquire it even by consent of the parties.” Stanley v. Lemire, 2006 MT 304, ¶ 31, 334

Mont. 489, 148 P.3d 643. Courts “have an independent obligation to determine whether

subject-matter jurisdiction exists, even in the absence of a challenge from any party.”

Stanley, ¶ 32 (quoting Arbaugh v. Y & H Corp., 546 U.S. 500, 514, 126 S. Ct. 1235, 1244

(2006)). The district courts are courts “of general jurisdiction, unquestionably possessed

[of] authority, pursuant to Mont. Const. Art. VII, § 4, to hear a negligence claim.”

LaPlante v. Town Pump, Inc., 2012 MT 63, ¶ 15, 364 Mont. 323, 274 P.3d 724.

¶8 The District Court held that “before a party can seek declaratory relief in district

court, it must exhaust its administrative remedies,” citing Mt. Water Co., ¶ 14. However,

Schuster is not seeking declaratory relief. Rather, he claims that NWE was negligent in

the manner that it turned off his service, causing damages for which he seeks recovery.

¶9 The PSC is an administrative agency created by statute. Section 69-1-102, MCA.

It has the power to supervise, regulate, and control public utilities in this state. Section

69-3-102, MCA. The PSC is charged with “inquir[ing] into any neglect or violation of

the laws of this state by any public utility” and enforcing the regulations through referral

to the attorney general for prosecution if necessary. Section 69-3-110(1), MCA.

However, the PSC is not vested with judicial powers. Section 69-3-103(1), MCA.

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¶10 In State ex rel. Public Service Commission v. District Court, 107 Mont. 240,

84 P.2d 335 (1938), a group of farmers filed a complaint with the PSC alleging that

Montana Power Company unreasonably and unlawfully stored water during irrigation

seasons, depriving them of their water rights. The district court issued a writ prohibiting

the PSC from assuming jurisdiction over the matter. We upheld the writ of prohibition,

holding that the PSC had no authority over the dispute because “[t]he relief sought has

nothing to do with the regulation of public utilities as contemplated by the statutes. The

statutes were enacted for the benefit of the consumers of the utilities’ products, and not to

arbitrate controversies between utilities and private persons.” State ex rel. PSC, 107

Mont. at 242, 84 P.2d at 335. Although this reasoning was stated too broadly to

constitute a general rule, the holding remains that, despite the PSC’s power to regulate

the Montana Power Company, it was not empowered to hear a dispute involving the

administration of water rights and the Montana Power Company’s storage of water. State

ex rel. PSC, 107 Mont. at 243, 84 P.2d at 336.

¶11 Here, the PSC has no authority to decide whether Schuster is entitled to recover

damages from NWE, a conclusion necessarily involving the adjudication of the legal

rights and responsibilities of each party. Though one of Schuster’s theories of recovery

posits that NWE violated certain rules promulgated by the PSC, that does not divest this

controversy of its essential nature—a claim for monetary damages for NWE’s allegedly

negligent actions, a controversy over which the PSC has no authority.

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¶12 Even though an administrative proceeding may exist, exhaustion of administrative

remedies is not required where it would be futile. In Local Union No. 400 v. Bosh, 220

Mont. 304, 309, 715 P.2d 36, 39 (1986), we held that union members were not required

to exhaust an administrative remedy before filing an action in district court alleging

breach of fiduciary duty by union officials and seeking return of misappropriated funds.

Because the only available relief from intra-union procedures was discipline and possible

expulsion of the officials for violation of their obligations, we held that resort to the

administrative process would be futile. The union did not have authority to order

recovery of the misappropriated funds. Local Union No. 400, 220 Mont. at 309, 715 P.2d

at 39.

¶13 NWE argues that Schuster’s claim for monetary damages does not negate the

PSC’s authority over the matter.3 It cites several cases for the proposition that “even

when a money judgment is requested the administrative appeals process” must be

followed, including Throssell v. Bd. of Trustees of Gallatin Co. Sch. Dist., 232 Mont.

497, 500, 757 P.2d 348, 350 (1988) (retired school administrator sought decision that his

contract with the school district entitled him to the same benefits as teachers under the

new retirement plan); Pryor Sch. Dist. v. Superintendent of Pub. Instr., 218 Mont. 73, 707

P.2d 1094 (1985) (principal reinstated through administrative proceeding following
3
We note that in the proceeding pending before the PSC, NWE filed a motion to dismiss
alleging Schuster “failed to state a cause of action for which the [PSC] can grant relief.
Specifically, [Schuster] . . . lacks standing to file a claim.” NWE’s motion argued that the
remedy Schuster seeks—property damages—cannot be granted by the PSC, and that Schuster is
not “directly affected” by any action of NWE and thus cannot bring a claim before the PSC.
Though the motion was denied by the PSC, NWE’s conflicting positions would leave Schuster
with no recourse for its alleged wrongdoing.
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wrongful dismissal and awarded compensation at contract rate for time lost during the

appeal); and Harris v. Bauer, 230 Mont. 207, 749 P.2d 1068 (1988) (following court

decision that discharged school psychologist had tenure, administrative board held

hearing and awarded back wages and benefits since the date of dismissal). However, in

each of these cases, the administrative agency had authority to grant the monetary

damages being sought in the civil action. Here, the PSC has no authority to grant

damages caused by NWE’s alleged negligence.

¶14 For a regulatory violation, the PSC has authority to (1) fine the utility pursuant to

§ 69-3-209, MCA, (2) order a refund of money collected for services pursuant to

§ 69-3-330(2), MCA, (3) report a violation to the attorney general pursuant to

§ 69-3-110(1), MCA, (4) issue an order citing NWE for a violation of the law, or

(5) require NWE to reinstate service. None of these remedies can provide the relief

sought by Schuster, and would thus be futile. Although NWE asserts that “Schuster’s

recourse to administrative remedies is not futile as there are several available remedies,

including one that could redress the harm,” the PSC has no authority to adjudicate

Schuster’s damage claim.

¶15 Several cases illustrate that a negligence action seeking damages can be

maintained against the power company in district court. In Stout v. Montana Power Co.,

234 Mont. 303, 304, 762 P.2d 875, 875-76 (1988), we affirmed a jury verdict awarding

plaintiffs damages for their building that was destroyed by a fire. The jury determined

that the fire was caused by the power company’s failure to inspect and maintain its power

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equipment and service lines. The jury heard the issue even though maintenance of utility

equipment falls under PSC regulation, § 69-4-201, MCA; Admin. R. M. 38.5.2101(1).

Similarly, Hash v. Montana Power Co., 164 Mont. 493, 524 P.2d 1092 (1974), and

Farmers Union Grain Terminal Assn. v. Montana Power Co., 216 Mont. 289, 700 P.2d

994 (1985), involved damage actions filed in the district court for the power company’s

negligent maintenance of equipment. In both Barmeyer v. Montana Power Co., 202

Mont. 185, 657 P.2d 594 (1983), and Martel v. Montana Power Co., 231 Mont. 96, 752

P.2d 140 (1988), the jury determined whether the power company failed to satisfy the

National Electrical Safety Code in its construction of equipment, as required by § 69-4-

201, MCA, and whether damages should be awarded to the plaintiffs. Though exhaustion

of administrative remedies was not raised in these cases, the courts implicitly proceeded

on the assumption that subject-matter jurisdiction existed.

¶16 The PSC has authority to investigate and hear complaints by customers against a

public utility. Section 69-3-110(1), MCA. If the PSC determines NWE has acted in

violation of its tariff or the administrative rules, it can take action against NWE for that

violation as mentioned above. We recognize that one of the parties may seek to introduce

any tariff determination made by the PSC into litigation before the District Court. That

issue is not before us here and it will be up to the District Court, in the first instance, to

determine what effect, if any, a PSC determination will have on the proceeding before it.

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¶17 We reverse the District Court’s dismissal of Schuster’s complaint, and remand for

further proceedings consistent with this opinion.

/S/ JIM RICE

We concur:

/S/ MIKE McGRATH
/S/ PATRICIA COTTER
/S/ BETH BAKER
/S/ MICHAEL E WHEAT

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