PINAL v. SOUTHWEST GAS

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NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE ) ) ) ) Plaintiff/Appellant, ) ) v. ) ) SOUTHWEST GAS CORPORATION, a ) California corporation, ) ) Defendant/Appellee. _______________________________________ ) PINAL ENERGY, LLC, an Arizona limited liability company, DIVISION ONE FILED: 10/15/2013 RUTH A. WILLINGHAM, CLERK BY: mjt 1 CA-CV 12-0620 DEPARTMENT B MEMORANDUM DECISION (Not for Publication - Rule 28, Arizona Rules of Civil Appellate Procedure) Appeal from the Superior Court in Maricopa County Cause No. CV 2012-050939 The Honorable Michael D. Gordon, Judge AFFIRMED IN PART; REVERSED AND REMANDED IN PART; VACATED IN PART Craig A. Marks, PLC By Craig A. Marks Phoenix And Quarles & Brady, LLP By Don P. Martin and Lauren Elliott Stine Phoenix And Fennemore Craig, P.C. By Timothy J. Berg Attorneys for Plaintiff/Appellant Phoenix Gallagher & Kennedy, P.A. By Michael M. Grant Phoenix and Mark Deatherage and Laura E. Antonuccio Attorneys for Defendant/Appellee N O R R I S, Judge ¶1 This dismissal of Southwest appeal a Gas jurisdiction. arises lawsuit filed Corporation out by of the superior Energy, lack for Pinal of court s LLC against subject matter We affirm the superior court s dismissal of count 3 of the complaint, but we hold the superior court has exclusive subject matter jurisdiction over the parties dispute as to counts 1 and 2 and accordingly should not have dismissed those counts. Therefore, we reverse and remand for further proceedings consistent with this decision as to counts 1 and 2. We also vacate the superior court s fee award in Southwest Gas s favor. FACTS 1 AND PROCEDURAL BACKGROUND ¶2 Southwest Gas is a public service corporation as defined in Article 15, Section 2, of the Arizona Constitution. 1 We accept as true all well-pleaded facts alleged in the complaint. Dunlap v. City of Phoenix, 169 Ariz. 63, 65, 817 P.2d 8, 10 (App. 1990) (appellate court accepts well-pleaded facts alleged in complaint in reviewing order granting motion to dismiss based on statute of limitations). In any event, as Southwest Gas acknowledged in its motion to dismiss, the relevant facts were undisputed. Thus, the superior court was not required to resolve any factual disputes to decide the motion. 2 It has the exclusive right to distribute and sell natural gas in Pinal County. ¶3 Pinal Energy operates an ethanol production facility in Pinal County that consumes large quantities of natural gas. Because of its then-current and projected natural gas needs, Pinal Energy planned to build a pipeline to bypass Southwest Gas and obtain natural gas services directly from Natural Gas Pipeline rather than Southwest Gas. the El Paso Rather than build its own pipeline, however, Pinal Energy negotiated with Southwest Gas to have Southwest Gas build pipeline facilities and continue to supply natural gas to Pinal Energy at a reduced rate. It did this pursuant to a B-1 tariff issued by Southwest Gas. 2 ¶4 with The B-1 tariff allows Southwest Gas to negotiate rates customers who demonstrate they would otherwise bypass Southwest Gas and obtain their natural gas service from some other source rates. at rates Pinal satisfaction imminent. 2 Energy that economically, lower than Southwest demonstrated bypassing operationally services and to from Gas s effective Southwest Southwest physically Gas s Gas feasible was and Thus, Pinal Energy was able to receive its natural A tariff lists the services and products offered by a gas company and sets forth the terms, conditions, and rates and charges of the services and products. Ariz. Admin. Code R14-2-301(44) (2012). gas and transportation service from Southwest Gas at a lower negotiated rate. ¶5 The parties entered into four agreements, including a September 11, 2006 Incremental Natural Gas Facilities Agreement as modified by an April 10, 2007 Addendum 1; an April 10, 2007 Facilities Extension Agreement; and a July 20, 2007 Service Agreement - Transportation of Customer Secured Natural Gas Under Rate Schedule B-1. Under these agreements, Southwest Gas built a pipeline denominated as the Northern Route. It also agreed to use all commercially reasonable efforts to build a second pipeline denominated as the Permanent further agreed Route by October 1, rates or 2008. ¶6 The parties volumetric charges. to effective Pinal Energy agreed to pay a Type A rate for fixed annual volumes of natural gas -- minimum amounts -and a Type B rate for all volumes actually delivered. parties also agreed to an arrangement whereby these The charges would be adjusted according to a formula that would reflect the actual cost of constructing the facilities, described in the facilities agreement as the construction cost true-up. According to Pinal Energy, because of the deteriorating economy, reduced customer demand, and 4 Southwest Gas s improved distribution system, Southwest Gas neither built the Permanent Route nor adjusted the Type A charges. ¶7 On March 9, 2012, Pinal Energy sued Southwest Gas and, in counts 1 and 2 alleged breach of contract and breach of the covenant of good faith and fair dealing asserting Southwest Gas had failed to build the Permanent Route and adjust the charges under the agreements. 3 Southwest Gas moved to dismiss for lack of subject matter jurisdiction 4 arguing the superior court lacked jurisdiction because the dispute concerned rates and therefore was within the exclusive jurisdiction of the Arizona Corporation 3 In count 3, Pinal Energy also asked for a declaration that it met the eligibility requirements for bypass rates under the B-1 tariff. At oral argument before this court, counsel for Pinal Energy explained that Pinal Energy was willing to confine the scope of this appeal to only the breach claims (counts 1 and 2) of the complaint. Thus, we affirm the superior court s dismissal of Pinal Energy s request for declaratory relief. 4 Southwest Gas also moved to dismiss for failure to state a claim. The superior court did not address its arguments in support of that motion and nor will we, as those arguments should first be considered by the superior court. We express no opinion on the merits of those arguments or on the merits of the dispute between the parties. 5 Commission. The superior court agreed 5 and granted Southwest Gas s motion. 6 DISCUSSION I. Southwest Gas s Motion to Dismiss Appeal ¶8 As a preliminary matter, Southwest Gas argues we should dismiss the appeal as moot because after the superior court entered judgment in its favor, Pinal Energy filed a complaint with the Corporation Commission asking it to order Southwest Gas to construct the Permanent Route, perform the true-up, reduce or eliminate ongoing Type A charges, refund any excess Type A charges paid, and correctly misclassified revenues received from Pinal Energy. classify any According to 5 The superior court alternatively found the Corporation Commission had concurrent jurisdiction and also granted dismissal under the primary jurisdiction doctrine. 6 The superior court s dismissal did not specify whether the dismissal was with or without prejudice. Generally, we do not have jurisdiction over an order granting a motion to dismiss without prejudice, but there are exceptions, including when the dismissal is for lack of subject matter jurisdiction. See Ariz. Rev. Stat. ( A.R.S. ) § 12-2101(A)(3) (Supp. 2012) (appeal may be taken [f]rom any order affecting a substantial right made in any action when the order in effect determines the action and prevents judgment from which an appeal might be taken ); Garza v. Swift Transp. Co., Inc., 222 Ariz. 281, 284, ¶¶ 15-16, 213 P.3d 1008, 1011 (2009) (discussing jurisdiction over appeals from orders that preclude obtaining final judgments as matter of law); Dusold v. Porta-John Corp., 167 Ariz. 358, 361, 807 P.2d 526, 529 (App. 1990) ( [W]e would have jurisdiction over an appeal from [an order determining subject matter jurisdiction] as affecting a substantial right which in effect determines the action and prevents judgment from which an appeal might be taken. (quoting A.R.S. § 12-2101(D))). 6 Southwest Gas, by seeking relief from the Corporation Commission, Pinal Energy accepted the superior court s decision that the Corporation Commission has exclusive jurisdiction over the parties dispute. ¶9 We disagree. First, in making this argument, Southwest Gas relies on several cases that generally recognize a case becomes moot when a party voluntarily complies with a judgment against it. All of the cases, but the factually distinguishable. Arizona cases in particular, are For example, in Brown v. Kester, 39 Ariz. 545, 547, 8 P.2d 453, 454 (1932), the appeal was moot after the appellant voluntarily paid release from imprisonment for contempt. a judgment to obtain Likewise, in Forty-Four Hundred East Broadway Co. v. 4400 East Broadway, 139 Ariz. 498, 502, 679 P.2d 521, 525 (App. 1983), the appeal was moot when someone other than the cross-appellant paid the judgment. ¶10 Second, Pinal Energy has not voluntarily accepted the superior court s decision dismissing subject matter jurisdiction. its case for lack of Pinal Energy only filed with the Corporation Commission after the court dismissed its case -- a decision we reverse here. Indeed, in its complaint before the Corporation Commission, Pinal Energy reserved its rights to make any arguments with this court jurisdiction. 7 concerning subject matter ¶11 Third, this appeal will determine the exclusive forum for resolving the parties dispute. practical effect on the parties. Our decision will have a Arpaio v. Maricopa Cnty. Bd. of Supervisors, 225 Ariz. 358, 361, ¶ 7, 238 P.3d 626, 629 (App. 2010) ( A case becomes moot when an event occurs which would cause the outcome of the appeal to have no practical effect on the parties. (quoting Sedona Private Prop. Owners Ass n v. City of Sedona, 192 Ariz. 126, 127, ¶ 5, 961 P.2d 1074, 1075 (App. 1998))). II. Thus, the appeal is not moot. Subject Matter Jurisdiction ¶12 This court must decide whether the Corporation Commission or the superior court has subject matter jurisdiction over the parties dispute. our review is de novo. This issue is one of law and thus Hill v. Peterson, 201 Ariz. 363, 365, ¶ 5, 35 P.3d 417, 419 (App. 2001); Mitchell v. Gamble, 207 Ariz. 364, 367, ¶ 6, 86 P.3d 944, 947 (App. 2004). ¶13 The Corporation Commission has broad constitutional and statutory powers to regulate public service corporations. Campbell v. Mountain States Tel. & Tel. Co., 120 Ariz. 426, 431, 586 P.2d 987, 992 (App. 1978). power in the field of [I]t has full and exclusive prescribing rates which cannot be interfered with by the courts, the legislature or the executive branch of state government. Qwest Corp. v. Kelly, 204 Ariz. 8 25, 30, ¶ 12, 59 P.3d 789, 794 (App. 2002) (citation omitted) (internal quotation marks omitted); Ariz. Const. art. 15, § 3; Ariz. Rev. Stat. ( A.R.S. ) § 40-203 (2011). ¶14 The Corporation Commission, however, has no authority over the construction and interpretation of contracts. Trico Elec. Coop. v. Ralston, 67 Ariz. 358, 365, 196 P.2d 470, 474 (1948); Gen. Cable Corp. v. Citizens Utils. Co., 27 Ariz. App. 381, 386, 555 P.2d 350, 355 (1976). Commission has recognized a Indeed, the Corporation superior court should decide traditional civil law claims by a customer against a utility based on common law theories. Rattlesnake Pass, L.L.C. v. Tucson Electric Power Co., Docket No. E-01933A-10-0125, Decision No. 73561, at 15-16, ¶¶ 43-44, (Ariz. Corp. Comm n Oct. 17, 2012). ¶15 In respective this case, obligations the are parties under the dispute what agreements their and more specifically whether Southwest Gas is obligated to construct the Permanent Route and adjust the charges pursuant to the true-up mechanism. This is common law theories. rate grievance exclusive and a quintessential contract case based on Although Southwest Gas argues this is a therefore jurisdiction, the the Corporation claims most Commission important has aspects involve facts and theories of . . . contract far afield of the 9 Commission s area of expertise and statutory responsibility. Campbell, 120 Ariz. at 432, 586 P.2d at 993. ¶16 That the agreements were authorized by the B-1 tariff does not take this case out of the exclusive jurisdiction of the superior court. Indeed, in its motion to dismiss, Southwest Gas confirmed, as Pinal Energy had alleged, that Pinal Energy had established to Southwest Gas s satisfaction that Pinal Energy qualified under the then-applicable B-1 tariff. B-1 tariff itself is in dispute. Nothing in the Instead, the parties respective obligations under the agreements are in dispute -the case presents traditional claims that our superior courts handle and decide every day. Id. ¶17 Corp., In General Cable we addressed a situation similar to this case and concluded the superior court, and not the Corporation Commission, had exclusive jurisdiction to resolve a contract dispute. 386, 555 P.2d at 355. subject matter 27 Ariz. App. at There, as here, a utility agreed to construct new facilities to meet the anticipated service needs of a utility customer. Id. at 383, 555 P.2d at 352. There, as here, the customer agreed to pay for minimum amounts of service. 10 Id. There, as here, the customer s demand for service changed, and it did not require all of the anticipated service. 7 ¶18 Id. The customer filed a complaint with the Corporation Commission alleging the rates under its contract with utility were unjust, unreasonable, and discriminatory. 385, 555 P.2d at 354. the Id. at The Corporation Commission dismissed the complaint because it did not have jurisdiction to determine the legality of the contract. court agreed with the Id. The superior court and this commission s determination that the superior court had jurisdiction to interpret the parties legal rights under the contract. Id. We explained in words directly applicable here that the construction and interpretation to be given to legal rights under a contract reside solely with the courts and not with the Corporation Commission. 555 P.2d at 355. Id. at 386, Consistent with General Cable, the superior court should not have dismissed Pinal Energy s claims against 7 Southwest Gas emphasizes the related case, General Cable Corp. v. Arizona Corp. Commission, 27 Ariz. App. 386, 555 P.2d 355 (App. 1976), in which the customer appealed the dismissal of its superior court complaint that challenged a ruling of the Corporation Commission. We affirmed the dismissal because the customer failed to request a rehearing before the effective date of the challenged order as required by statute. The holding of that case is irrelevant to the issue before us. 11 Southwest Gas for lack of subject matter jurisdiction. 8 Thus, we reverse the judgment in Southwest Gas s favor on Pinal Energy s breach claims (counts 1 and 2) and remand to the superior court. On remand, prevails on Pinal Energy those may claims, pursue seek those damages claims, and pursuant if to it the agreements with Southwest Gas. III. Attorneys Fees ¶19 After Pinal Energy appealed the dismissal, Southwest Gas moved for an award of attorneys fees, which the superior court granted. 9 Once a notice of appeal is filed, the superior court generally is divested of jurisdiction to proceed except in 8 Because the superior court and not the Corporation Commission has exclusive jurisdiction over the parties dispute, we do not need to address the primary jurisdiction doctrine. See Campbell, 120 Ariz. at 429, 586 P.2d at 990 (declining to address additional issues when the first issue is dispositive of the appeal). 9 Although Pinal Energy requested attorneys fees in its complaint, the superior court implicitly denied that request when it ruled in favor of Southwest Gas. Southwest Gas did not request attorneys fees until after the superior court had entered judgment and Pinal Energy had filed its notice of appeal. Thus, no fee request was pending when the superior court entered judgment, and the notice of appeal was not premature. See Fields v. Oates, 230 Ariz. 411, 286 P.3d 160 (App. 2012). 12 furtherance of the appeal. Continental Cas. Co. v. Indus. Comm n, 111 Ariz. 291, 294, 528 P.2d 817, 820 (1974); Allstate Ins. Co. v. Universal Underwriters, Inc., 199 Ariz. 261, 266, ¶ 15, 17 P.3d 106, 111 (App. 2000) (citing Trebilcox v. Brown & Bain, P.A., 133 Ariz. 588, 653 P.2d 45 (App. 1982), overruled on other grounds). superior court Pinal Energy s appeal therefore divested the of jurisdiction motion for attorneys fees. 10 to entertain Southwest Gas s Thus, we vacate the award of fees and costs entered by the superior court on October 3, 2012. ¶20 Pinal Energy requests its fees and costs incurred on appeal pursuant to A.R.S. §§ 12-341.01(A) (Supp. 2012) and 12341 (2003). as the We grant its request for reasonable fees and costs successful party on appeal, contingent upon its compliance with Rule 21 of the Arizona Rules of Civil Appellate Procedure. 10 Southwest Gas also failed to request attorneys fees in its motion to dismiss, and therefore, was not entitled to a fee award. Balestrieri v. Balestrieri, 232 Ariz. 25, 26, ¶ 1, 300 P.3d 560, 561 (App. 2013). In any event, Southwest Gas is no longer the successful party and is not, therefore, entitled to a fee award. See A.R.S. § 341.01(A) (Supp. 2012). CONCLUSION ¶21 favor For the foregoing reasons, we affirm the judgment in of Southwest Gas on count 3, reverse and remand the judgment in favor of Southwest Gas on counts 1 and 2, and vacate the award of attorneys fees to Southwest Gas. /s/ PATRICIA K. NORRIS, Judge CONCURRING: /s/ PETER B. SWANN, Presiding Judge /s/ DIANE M. JOHNSEN, Judge 14

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