Opinion
No. CV06 5002674S
May 29, 2009
MEMORANDUM OF DECISION RE MOTION TO DISMISS (#130)
This action arises out of an agreement that the plaintiff, Yankee Gas Services Co., entered into with the defendant, Redding Life Care, LLC, in 1998. In the amended complaint, the plaintiff alleges the following facts that are relevant to the motion that is presently before the court. Pursuant to the agreement between the parties, the plaintiff, which is a public service company that furnishes natural gas services, installed gas distribution lines and other necessary equipment and facilities in order to provide natural gas service to a residential community known as Meadow Ridge that the defendant was developing in Redding, Connecticut. The parties agreed that the defendant would make certain payments to the plaintiff, including payments that would reimburse the plaintiff for some of the costs it incurred in designing, constructing and installing the gas services equipment. The defendant also agreed to pay the plaintiff an annual amount, which the parties called a recapture fee, that was calculated by using a formula based on the difference between a set figure and the amount of natural gas that the defendant actually used each year. According to the agreement, the recapture fee was intended to reimburse the plaintiff for the additional costs that it incurred in installing the gas service lines.
The defendant paid the plaintiff recapture fees for 2000 through 2002 and one-half of the fee due for 2002 to 2003. According to the formula, the defendant owes the plaintiff recapture fees for one-half of 2002 to 2003, and for the entire periods of 2003 to 2004, 2004 to 2005, 2005 to 2006 and 2006 to 2007. Nevertheless, the defendant has refused the plaintiff's demand that it pay the fees for these periods. In the amended complaint, the plaintiff alleges a claim against the defendant for breach of contract. The plaintiff seeks to recover the unpaid recapture fees, late charges thereon, costs, attorneys fees and interest.
On July 5, 2007, the defendant filed a second amended answer, special defenses and counterclaim. In that pleading, the defendant denies the material allegations of the plaintiff's complaint, and alleges, as special defenses, that the agreement is unenforceable in that it was procured by fraud or is unreasonable. The defendant also includes a five-count counterclaim in which it alleges the following facts. Before the parties entered into the agreement, the plaintiff told the defendant that it would cost the plaintiff from $2.7 million to over $3.1 million in construction costs to connect the defendant's development to the plaintiff's existing gas transmission lines. The defendant relied on these representations when it agreed to two provisions in the agreement pursuant to which it would help pay for the plaintiff's construction costs, the total of which was to be $1,345,000. It refers to these payments as costs in aid of construction (CIAC). The first provision was an installation fee of $850,000, which the defendant has paid in full; and the second was a fifteen-year minimum annual purchase requirement, which is the recapture provision that is the basis for the plaintiff's complaint. Based on the plaintiff's representations, the defendant anticipated that it would pay the plaintiff a total of about $495,000 in recapture fees for the first fifteen years of the agreement. Nevertheless, over the first six years of the agreement, the plaintiff billed the defendant for, and the defendant paid, $334,894.52 in recapture fees, and it has billed the defendant for hundreds of thousands of dollars since that time.
The defendant arrived at this figure by subtracting the installation fee of $850,000 from the plaintiff's estimate that the defendant's total CIAC would be $1,345,000.
Furthermore, the defendant alleges that, unbeknowst to it, at the time the parties entered into their agreement in November 1998, the plaintiff was negotiating an agreement with a third party, the Southern Connecticut Gas Company (SCG), that would substantially reduce the construction costs that the plaintiff would incur in providing gas services to the defendant. The plaintiff and SCG entered into such an agreement in April 1999. The plaintiff continues to refuse to disclose to the defendant the amount it saved in construction costs as a result of its agreement with SCG. The defendant also believes that the plaintiff intends to allow another third party to use a portion of the same gas main to supply gas to its development. Nevertheless, the plaintiff continues to seek to recover its alleged construction costs from the defendant pursuant to the recapture provision.
In the counterclaim, the defendant alleges claims against the plaintiff for violations of the Connecticut Unfair Trade Practices Act, General Statutes § 42-110b, intentional and negligent misrepresentation, unjust enrichment, and asks for a declaratory judgment. The defendant seeks actual and punitive damages, attorneys fees, return of money it paid in recapture fees, costs and interest, a declaration that the recapture provision is unenforceable and "such further and other relief as the Court finds just and appropriate."
On February 18, 2009, the plaintiff filed a motion to dismiss the defendant's counterclaims and special defenses on the ground that the court lacks subject matter jurisdiction over the issues raised therein because the defendant did not exhaust its administrative remedies. The plaintiff filed a memorandum and several documents in support of its motion. The defendant filed a memorandum and several documents in opposition to the motion on April 29, 2009. The court heard the matter on the short calendar on May 4, 2009, at which time, the court granted the parties permission to file additional memoranda. `The plaintiff and the defendant did so on May 11 and 19, 2009, respectively.
"[A] motion to dismiss . . . properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court." (Internal quotation marks omitted.) Caruso v. Bridgeport, 285 Conn. 618, 627, 941 A.2d 266 (2008). "When a [trial] court decides a jurisdictional question raised by a pretrial motion to dismiss, it must consider the allegations of the complaint in their most favorable light . . . The motion to dismiss . . . admits all facts which are. well pleaded, invokes the existing record and must be decided upon that alone . . . Where, however . . . the motion is accompanied by supporting affidavits containing undisputed facts, the court may look to their content for determination of the jurisdictional issue . . ." (Citation omitted; internal quotation marks omitted.) Cogswell v. American Transit Ins. Co., 282 Conn. 505, 516, 923 A.2d 638 (2007). In such cases, the court "need not conclusively presume the validity of the allegations of the complaint." (Internal quotation marks omitted.) Ferreira v. Pringle, 255 Conn. 330, 346-47, 766 A.2d 400 (2001).
The issue exhaustion of administrative remedies "implicates the subject matter jurisdiction" of the court. (Internal quotation marks omitted.) Stepney, LLC v. Fairfield, 263 Conn. 558, 563, 821 A.2d 725 (2003). "It is a settled principle of administrative law that if an adequate administrative remedy exists, it must be exhausted before the Superior Court will obtain jurisdiction to act in the matter . . . We have frequently held that where a statute has established a procedure to redress a particular wrong, a person must follow the specified remedy and may not institute a proceeding that might have been permissible in the absence of such a statutory procedure . . . The doctrine [of exhaustion of administrative remedies] provides that no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted . . .
"A primary purpose of the doctrine is to foster an orderly process of administrative adjudication and judicial review, offering a reviewing court the benefit of the agency's findings and conclusions. It relieves courts of the burden of prematurely deciding questions that, entrusted to an agency, may receive a satisfactory administrative disposition and avoid the need for judicial review . . . Moreover, the exhaustion doctrine recognizes the notion, grounded in deference to [the legislature's] delegation of authority to coordinate branches of Government, that agencies, not the courts, ought to have primary responsibility for the programs that [the legislature] has charged them to administer." (Citations omitted; internal quotation marks omitted.) Id., 563-64.
In the present case, the plaintiff's exhaustion argument is premised on the following additional undisputed facts, which are gleaned from the documents submitted by the parties. Before the parties entered into their agreement, which occurred in November 1998, the plaintiff sought to enter into a contract with SCG pursuant to which SCG would allow the plaintiff to use part of its existing gas main, thereby decreasing the length of the main that the plaintiff would have to construct to meet its obligations in its agreement with the defendant. In return, the plaintiff would pay SCG a transportation fee for carrying the gas required by the defendant. The plaintiff and SCG entered into their agreement in April 1999.
Because the plaintiff's agreement with SCG required the approval of the department of public utility control (DPUC), SCG submitted an application for such approval in May 1999. The DPUC then designated the defendant as a party to the proceeding, and, in December 1999, determined, inter alia, that the agreement between the plaintiff and the defendant was a special contract and, therefore, required the department's approval. Further, the department concluded that "[t]he terms of the contract between Yankee and Redding are approved so long as the costs and proceeds under the transaction, for the period subsequent to the initial 15 years of the contract and for ratemaking purposes, are allocated 50%/50% between Yankee shareholders and ratepayers." In the same decision, the DPUC also approved the plaintiff's agreement with SCG, provided that those entities made similar changes thereto. No one appealed this decision.
In October 2007, approximately eighteen months after the plaintiff commenced the present action, and three months after the defendant filed its amended answer, special defenses and counterclaims, the defendant filed a complaint with the DPUC pursuant to General Statutes § 16-20(b) regarding the conduct that the plaintiff allegedly engaged in regard to the CIAC portion of the parties' agreement. In its complaint, the defendant essentially repeated the allegations regarding the plaintiff's conduct that form the basis for its counterclaims and special defenses. In fact, the defendant referred to its claims and defenses, noted that it was seeking damages in this action, and stated that it was asking that the DPUC equitably reform the agreement "going forward" "to reflect both the accurate cost of the facilities and the fact that a new customer is or will be served through those facilities. The defendant also stated that if the DPUC decided that the defendant was entitled to refunds on the amounts it had already paid to the plaintiff, it "specifically waives any request that the Department award damages to [the defendant]."
In February 2008, the plaintiff filed a motion for summary judgment as to the defendant's DPUC's complaint or, in the alternative, a motion to stay that proceeding. In its motion, the plaintiff advanced several arguments, including, inter alia, that the DPUC should grant its motion and dismiss the defendant's complaint because the proper forum for the defendant's claims is the present action in the Superior Court; the defendant did not have a valid claim under § 16-20(b) and; even if the defendant did have a valid claim under that statute, the DPUC previously reviewed the parties' agreement and determined that the rates set therein are reasonable. The defendant opposed the plaintiff's motion, and the DPUC held a hearing thereon.
On March 6, 2008, the DPUC issued a decision in which it granted the plaintiff's motion for summary judgment on the ground that in its 1999 decision, it approved the parties' agreement, the defendant did not ask the department to reconsider its decision, nor did it file an appeal therefrom, and the defendant admitted that the plaintiff complied with the terms of the agreement. The defendant did not appeal this decision. This decision, as well as the DPUC's 1999 decision, and the defendant's failure to appeal therefrom, provide the basis for the plaintiff's argument that the court lacks subject matter jurisdiction over the defendant's special defenses and counterclaims under the doctrine of exhaustion of administrative remedies.
General Statutes § 16-20(b) provides in relevant part: "If any public service company or private water company unreasonable fails or refuses to furnish adequate service at reasonable rates to any person within the territorial limits within which the company has authority to furnish the service . . . and if no other specific remedy is provided in this title or in regulations adopted thereunder, the person may bring a written petition to the Department of Public Utility Control alleging the failure or refusal. The department shall investigate and . . . (1) if appropriate, issue an order prescribing the service to be furnished by the company, the conditions under which the maximum rates or charges at which the service shall be furnished or (2) order that a hearing be held on the matter . . ."
The statute does not expressly state that a party that thinks the rate that a public utility charges it is unreasonable is required to exhaust its administrative remedies prior to bringing a claim in the Superior Court. "Where a statutory requirement of exhaustion is not explicit, courts are guided by [legislative] intent in determining whether application of the doctrine would be consistent with the statutory scheme . . . Thus, the exhaustion doctrine is based on a judicial determination of a legislative intent that in certain cases the courts do not have initial subject matter jurisdiction because the legislature has committed the initial resolution of the matters in question to an administrative agency. [In contrast], this doctrine does not apply when the legislature determines, by appropriate legislation, that a court may exercise subject matter jurisdiction despite the fact that there also may be administrative procedures available that would, absent such legislation, normally deprive the court of jurisdiction." (Citations omitted.) Waterbury v. Washington, 260 Conn. 506, 529-30, 800 A.2d 1102 (2002). Thus, the exhaustion of administrative remedies doctrine "requires a party to exhaust such remedies before seeking judicial relief and contemplates the situation in which the claim is initially enforceable exclusively by administrative action." (Emphasis in original; internal quotation marks omitted.) Mazzola v. Southern New England Telephone Co., 169 Conn. 344, 349-50, 363 A.2d 170 (1975).
The Connecticut Supreme Court has made a judicial determination that § 16-20 is not intended to be a party's exclusive remedy when the issue pertains to more than the reasonableness of the rate that a utility is charging. Steele v. Clinton Electric Light Power Co., 123 Conn. 180, 187, 193 A. 613 (1937). As the court said in that case, "[e]ven though procedure to test [the utility's interpretation of the method it was permitted to use in charging the plaintiff] and its application to the situation of the plaintiff might be within the scope of § 3598 of the General Statutes [now § 16-20], we find nothing in the statute to indicate that resort to it for that purpose would be an exclusive remedy and the controversy here appears to be an appropriate subject for judicial determination." Id.
Moreover, as both parties have noted in various memoranda, the facts of this case are similar to those that were before the court in Seymour Water Co. v. Horischak, 149 Conn. 435, 181 A.2d 112 (1962). In that case, the plaintiff water company entered into an agreement to extend water mains to a real estate development that was owned by the defendants. The parties' agreements required the defendants to pay the plaintiff in advance for some of the costs of installing the water system and to guarantee the plaintiff a certain annual revenue for ten years. When the defendants were not able to pay the full amount of the advance, they delivered a promissory note to the plaintiff, and the plaintiff then brought an action to recover on the note.
The defendants filed a counterclaim in which they asked for an accounting, cancellation of the note, judgment against the plaintiff for amounts they had paid in excess of their proper liability under the contracts and general equitable relief. These claims were premised on their allegation that, at the time of the agreement, the plaintiff was already obligated to construct the water system for its existing customers, that the defendants were not aware of this obligation and the plaintiff was aware of their lack of knowledge, but did not disclose the obligation to them, and that they would not have agreed to the terms of the contract if that had been aware of this obligation. The plaintiff filed a motion to strike the counterclaim of the ground that the claims alleged therein "must be addressed in the first instance to the Public Utilities Commission." Id., 441. The trial court granted the plaintiff's motion. The Supreme Court determined that it erred in so doing, and set that ruling aside. Id., 443.
As the court explained, "[t]he plaintiff claims, in support of the [motion to strike], that the legislature, by the enactment of § 16-20 of the General Statutes, has delegated to the public utilities commission the authority, in the first instance, to pass upon the reasonableness of rates, including charges for the extension of service. This statute provides that if any public service company unreasonably fails or refuses to furnish adequate service at reasonable rates to any person within the territorial limits within which the company has authority to furnish such service, such person may bring a written petition to the commission alleging the failure or refusal. If, after a hearing, the commission finds the allegations of the petition to be true, it may prescribe the service to be furnished and the conditions under which and the maximum rates or charges at which the service shall be furnished. The statute applies only when the public service company unreasonably fails or refuses to furnish adequate service at reasonable rates. In the present case, the defendants do not allege in the counterclaim any such failure or refusal. In effect, they allege that they were induced to enter into a contract wherein they were required to advance funds, as capital, to construct a high-level water system, when the plaintiff was already under an obligation, as a public utility, to construct such a system because the service was not then adequate to meet the existing requirements of the plaintiff's customers; that the plaintiff knew or ought to have known that the defendants were unaware of this existing need; that notwithstanding these facts the plaintiff failed to disclose the true situation to the defendants; and that, had the defendants known the actual facts, they would not have executed the contracts as drafted.
"The defendants rely on the doctrine of unilateral mistake and inequitable conduct on the part of the plaintiff in bringing about the execution of the first contract. The pleadings would allow evidence of facts which, if proved, would entitle the defendants to equitable relief . . . The claims advanced by the defendants are inextricably connected with the note which is the subject matter of the complaint. Where this situation occurs, the controversy, wherever possible, should be disposed of in one proceeding. Ordinarily, a court of equity which has obtained jurisdiction or a controversy will retain jurisdiction for the purpose of administering complete relief . . . If we assume, without deciding, that the public utilities commission would have jurisdiction to entertain the claims made by the defendants, the jurisdiction provided under § 16-20 is not exclusive. Steele v. Clinton Electric Light Power Co., [ supra, 123 Conn. 187]. The case is clearly one where the court, having once acquired jurisdiction, should retain it as to the whole controversy so as to effectuate a proper and full adjudication of the rights of the parties. The [trial] court erred in [granting the motion to strike]." (Citations omitted.) Seymour Water Co. v. Horischak, supra, 149 Conn 441-43.
In the present case, the defendant's special defenses and the claims that the defendant alleges in its counterclaim are similarly premised on its contention that the plaintiff engaged in inequitable conduct with regard to the information that it provided or failed to provide to the defendant and thereby induced the defendant into agreeing to the terms of the recapture provision. These claims and defenses, if proved may entitle the defendant to equitable relief. Moreover, the defendant's counterclaims, as was also true in Seymour Water Co., are directly related to the subject matter of the plaintiff's claim, which is that the defendant breached the recapture provision of the parties' agreement by not paying the plaintiff all of the amounts due it thereunder.
Accordingly, in this case, as in Seymour Water Co., the defendant is not required to exhaust the administrative remedies available to it under § 16-20. This case also presents the circumstance where "the court, having once acquired jurisdiction, should retain it as to the whole controversy so as to effectuate a proper and full adjudication of the rights of the parties." Seymour Water Co. v. Horischak, supra, 149 Conn. 442-43.
For the forgoing reasons, the court does not lack subject matter jurisdiction over the defendant's special defenses and counterclaims. The plaintiff's motion to dismiss is therefore denied.