TRAVELERS INS CO V DETROIT EDISON CO
Annotate this Case
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Michigan Supreme Court
Lansing, Michigan 48909
_____________________________________________________________________________________________
C hief Just ice
Justices
Maura D . Corrigan
Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
Opinion
____________________________________________________________________________________________________________________________
FILED JULY 27, 2001
THE TRAVELERS INSURANCE COMPANY,
Plaintiff-Appellee,
v
No. 116610
THE DETROIT EDISON COMPANY,
Defendant-Appellant,
and
CITY OF DETROIT WATER AND SEWERAGE DEPARTMENT,
Nonparticipating Defendants.
______________________________________________
BEFORE THE ENTIRE BENCH
MARKMAN, J.
We granted leave to appeal in this case, directing the
parties to address: (1) whether the doctrine of primary
jurisdiction is properly characterized as a “defense,” and, if
so, (2) whether such a defense is waived by a party’s failure
to raise it in the first responsive pleading.
463 Mich 906
(2000), citing Rinaldo’s Construction Corp v Michigan Bell
Telephone Co, 454 Mich 65, 70; 559 NW2d 647 (1997), and Grand
Blanc Landfill Inc v Swanson Environmental Inc, 448 Mich 859;
528 NW2d 734 (1995).
For
the
reasons
set
forth
below,
we
hold
that
the
doctrine of primary jurisdiction is not a defense, but rather
a prudential doctrine of judicial deference and discretion.
We further conclude that the doctrine is not waivable, and the
circuit court did not err in deferring plaintiff’s claim to
the Michigan Public Service Commission (MPSC ).
Therefore, we
reverse the judgment of the Court of Appeals and reinstate the
decision of the Wayne Circuit Court.
I. FACTUAL BACKGROUND
Endeavoring to service certain customers in downtown
Detroit, Detroit Edison Company (Detroit Edison) sent steam
power to Heaven on Earth Inn.1
Because repairs were being
performed on one of its steam lines in January of 1994,
Detroit Edison shut off steam power to the Inn.
As a result,
the Inn’s water pipes froze, and flood damage resulted.
The
Inn was insured by appellee, Travelers Insurance Company.
After paying on the claim filed by the Inn, Travelers sought
subrogation
from
Detroit
Edison.
1
On
October
17,
1995,
Detroit Edison provided the steam power pursuant to
tariff no. 4, which had been filed and approved by the MPSC .
2
Travelers filed several tort claims and a breach of contract
claim before the Wayne Circuit Court.
On March 19, 1996, the
court granted partial summary disposition on the tort claims
in Detroit Edison’s favor.
The sole remaining claim that
survived this disposition was the breach of contract claim.2
Nearly twelve months after the circuit court’s grant of
partial summary disposition, and seventeen months after the
original complaint had been filed, Travelers moved to amend
its original complaint.
Travelers motion.
The circuit court granted, in part,
Detroit Edison countered with an answer to
Travelers amended complaint and, for the first time, asserted
the doctrine of primary jurisdiction.
that the
MPSC
Detroit Edison claimed
was the agency with the sole authority to assert
jurisdiction over the contract dispute between itself and
Travelers.3
After this assertion, Detroit Edison moved for
2
Specifically, in count III of the complaint, Travelers
alleged that Detroit Edison had contracted with the Inn to
provide steam service to the Inn’s property.
Travelers
further alleged that Detroit Edison’s cessation of steam
service was a breach of its contractual obligations, and that
such breach caused foreseeable damage to the Inn’s property.
Travelers claimed that the Inn sustained property damage in
the amount of $1,632,710.00.
3
Detroit Edison’s assertion that the MPSC had primary
jurisdiction over the action was based on the breach of
contract claim brought by Travelers, alleging that Detroit
Edison had violated general rule no. 4 of MPSC tariff no. 4.
That rule states:
The Company will endeavor, but does not
guarantee, to furnish continuous and adequate steam
3
summary disposition under MCR 2.116(C)(4)4 on the ground that
the court lacked subject-matter jurisdiction.5
Entertaining
the
parties’
oral
arguments
on
Detroit
Edison’s motion, the circuit court ruled that Detroit Edison
could rely on the doctrine of primary jurisdiction, even
though the doctrine was first asserted in an answer to an
amended complaint over eighteen months after the filing of the
initial complaint in the case.
conflict
among
The circuit court noted a
jurisdictions
regarding
whether
primary
jurisdiction can be asserted after judicial proceedings have
service . . . . Service is subject to interruption
by agreement, by accident, or by necessity of
maintenance or system operation or other causes not
under the control of the Company.
The Company will not be liable for damages,
either direct or consequential, caused by any
interruption of service . . . due to strike,
accident, . . . storm or flood, or other natural
disasters or any cause whatsoever beyond its
control except such as may result from failure of
the Company to exercise reasonable care and skill
in furnishing the service. [237 Mich App 485, 487;
603 NW2d 317 (1999).]
4
That rule
disposition
provides
that
a
motion
for
summary
may be based on one or more of these grounds, and
must specify the grounds on which it is based:
* * *
(4) The court lacks jurisdiction of the subject
matter.
5
Detroit Edison also relied on this Court’s decision in
Rinaldo’s, supra.
4
commenced, or whether the assertion has been waived by a
party’s failure to raise it.
Citing Rinaldo’s, supra at 70,
the circuit court stated:
Michigan courts recognize the concept of
primary jurisdiction as, not so much divesting a
court of its subject-matter jurisdiction in favor
of the exclusive jurisdiction of an administrative
agency, but a “concept of judicial deference and
discretion,” and that it exists as “recognition of
the need for orderly and sensible coordination of
the work of agency and of courts.”
Concerning the present case, the circuit court held that
“while [Detroit] Edison ha[d] defended the case and ha[d]
participated in discovery, nonetheless, the case ha[d] not yet
come to an adjudicatory phase with respect to the breach of
contract claim.”
The court found that the reasons for not
allowing waiver of primary jurisdiction expressed in Dist of
Columbia v Thompson, 570 A2d 277 (DC App, 1990), also applied
here.6
Further,
the
court
stated
that
this
result
was
consistent with the direction of the court in White Lake Ass’n
v Whitehall, 22 Mich App 262, 284; 177 NW2d 473 (1970), to
wit, that the primary jurisdiction doctrine should not be
applied where “judicial proceedings have advanced to a point
where it would be unfair to remit the plaintiff to another and
duplicative proceeding” and where “a court of equity might
6
Thompson held that the primary jurisdiction doctrine
was not waivable and that policy considerations dictated
against ignoring the doctrine, even after judicial proceedings
had commenced.
5
well
conclude
that
the
proper
administration
of
justice
requires it to retain jurisdiction and itself to decide the
matter.”
The circuit court stated that here there was no
danger of duplicative proceedings as the plaintiff’s breach of
contract claims had not yet been tried.
II. APPELLATE HISTORY
Detroit Edison’s victory was short lived. In a published
opinion, the Court of Appeals reversed the circuit court’s
grant of summary disposition holding that Detroit Edison had
waived primary jurisdiction by failing to raise the doctrine
until eighteen months had passed from the time of the filing
of the original complaint.
In the Court of Appeals view, the trial court erred when
it ruled that primary jurisdiction was a defense similar to
that of subject-matter jurisdiction, and that it could be
raised at any time during the proceedings.
Id. at 492.
Citing LeDuc, Michigan Administrative Law, § 10:43, at 70, the
Court of Appeals concluded that “[b]ecause the defense of
primary jurisdiction says nothing about the power of the court
to resolve a dispute before it, there would appear to be no
policy
that
justifies
equating
primary
jurisdiction
with
subject-matter jurisdiction for purposes of MCR 2.111(F)(3)
and MCR 2.116(C)(4).”
Id. at 493.
6
Also, citing Campbell v St John Hosp, 434 Mich 608, 613
615; 455 NW2d 695 (1990), the Court of Appeals drew an analogy
between asserting the doctrine of primary jurisdiction as a
defense and raising an arbitration agreement as an affirmative
defense.
The Court of Appeals noted that, in Campbell, this
Court “recognized that despite the Malpractice Arbitration Act
. . . and the uniform arbitration act . . . the circuit court
was not deprived of jurisdiction to decide medical malpractice
claims where the complaining party [had] signed a valid
arbitration agreement.”
omitted).
237 Mich App 493 (internal citations
The Court of Appeals determined that Campbell held
that the failure of a party to assert, as an affirmative
defense, the existence of an arbitration agreement in its
original responsive pleading constituted a waiver of that
defense.
Id. at 494, citing Campbell, supra at 615-617.
The
Court concluded that the “affirmative defense of primary
jurisdiction, which does not deprive the trial court of
subject-matter jurisdiction, is more closely akin to the
affirmative
defense
of
the
existence
of
agreement and should be treated similarly.”
an
arbitration
Id. at 494.
In
contrast, the Court refused to “equate the defenses of primary
jurisdiction and subject—matter jurisdiction . . . .”
Id.
Thus, the Court of Appeals likened the doctrine of primary
jurisdiction to those other affirmative defenses noted in MCR
7
2.116(C)(7) that must be pleaded in response to a complaint in
order to be preserved.7
The Court of Appeals concluded that the doctrine of
primary
jurisdiction
was
an
“affirmative
defense,”
and,
therefore, pursuant to MCR 2.111(F)(2)8 and (3),9 Detroit
Edison’s failure to timely raise the defense constituted a
waiver.
Id. at 494-95, citing Stanke v State Farm Mut Auto
7
MCR 2.116(C) provides that a motion for summary
disposition “may be based on one or more of these grounds, and
must specify the grounds on which it is based . . . .”
Paragraph 7 provides that a motion for summary disposition
may be based on an assertion that
[t]he claim is barred because of release, payment,
prior judgment, immunity granted by law, statute of
limitations, statute of frauds, an agreement to
arbitrate, infancy or other disability of the
moving party, or assignment or other disposition of
the claim before commencement of the action.
8
MCR 2.111(F)(2) states:
A party against whom a cause of action has
been
asserted
by
complaint,
cross-claim,
counterclaim, or third-party claim must assert in a
responsive pleading the defenses the party has
against the claim. A defense not asserted in the
responsive pleading or by motion as provided by
these rules is waived, except for the defenses of
lack of jurisdiction over the subject matter of the
action, and failure to state a claim on which
relief can be granted.
9
MCR 2.111(F)(3) provides: “Affirmative defenses must
be stated in a party’s responsive pleading, either as
originally filed or as amended in accordance with MCR 2.118.”
8
Ins Co, 200 Mich App 307, 312; 503 NW2d 758 (1993).10
III.
THE DOCTRINE
OF
PRIMARY JURISDICTION
The doctrine of primary jurisdiction originated in Texas
& Pacific R Co v Abilene Cotton Oil Co, 204 US 426; 27 S Ct
350; 51 L Ed 553 (1907).
There, the United States Supreme
Court examined “the scope and effect of the [Interstate
Commerce A]ct to regulate commerce upon the right of a shipper
to maintain an action at law against a common carrier to
recover
damages
because
unreasonable rate . . . .”
of
the
exaction
Id. at 436.
of
an
alleged
The Court concluded
that the “shipper seeking reparation predicated upon the
unreasonableness of the established rate must, under the act
to regulate commerce, primarily invoke redress through the
Interstate Commerce Commission, which body alone is vested
with the power originally to entertain proceedings for the
alteration of an established schedule . . . .”
Id. at 448.
Since the pronouncement of the doctrine in Texas & P R, the
Supreme Court has expanded application of the doctrine of
primary jurisdiction to other agencies, recognizing their
10
Stanke also relied on Campbell, supra at 616, ns 5 &
6, which noted that “case law recogniz[ed] the existence of
affirmative defenses not specifically set forth in MCR
2.111(F)(3)(a)” and those defenses, failure to state a claim
and subject-matter jurisdiction, that cannot be waived if
omitted from a responsive pleading.
9
regulatory areas of expertise.11
Following Texas & P R, supra, this Court stated that “the
jurisdiction of courts to determine the reasonableness of the
tariff
published
and
filed
with
the
Interstate
Commerce
Commission is denied by the Supreme Court of the United States
. . .” L Starks Co v Grand Rapids & I R Co, 165 Mich 642, 647;
131 NW 143 (1911), citing Texas and P R. Eventually, Michigan
articulated
this
doctrine
as
focusing
upon
“whether
the
questions . . . involved are administrative in character such
as
to
preclude
the
state
court
from
inquiring
into
and
adjudicating them without application having been first made
to the commission.”
Anderson v Chicago M & St P R Co, 208
Mich 424, 429; 175 NW 246 (1919).
As with the Supreme Court
of the United States, this Court recognized application of the
11
See, e.g., Communications Workers of America v Beck,
487 US 735, 743; 108 S Ct 2641; 101 L Ed 2d 634 (1988)
(holding that employees may not circumvent the primary
jurisdiction of the National Labor Relations Board simply by
casting statutory claims as violations of the union’s duty of
fair representation, a claim ordinarily sounding in tort);
Federal Communications Comm v ITT World Communications Inc,
466 US 463, 468; 104 S Ct 1936; 80 L Ed 2d 480 (1984)
(applying the doctrine of primary jurisdiction to the Federal
Communications Commission and stating that the district court
should have dismissed the plaintiff’s claim where the central
element of the complaint was the agency’s past conduct); San
Diego Building Trades Council v Garmon, 359 US 236, 245; 79 S
Ct 773, 3 L Ed 2d 775 (1959) (holding that “[w]hen an activity
is arguably subject to [sections] of the [National Labor
Relations Act], the States as well as the federal courts must
defer to the exclusive competence of the [National Labor
Relations Board] if the danger of state interference with
national policy is to be averted”).
10
primary jurisdiction doctrine to agencies other than the
Interstate Commerce Commission.
See, e.g., Abel v Behrendt,
320 Mich 616, 621; 32 NW2d 4 (1948).
There, this Court
affirmed a trial court’s refusal to grant a motion to dismiss
on grounds that the plaintiffs could not bypass the Civil
Service
Commission
by
requesting
a
court
to
enter
a
declaratory judgment “blanketing the plaintiffs into civil
service status.”
In addition, the primary jurisdiction of the
administrative
agency
in
charge
of
the
MPSC ,
tariff
the
under
consideration in the instant case, was recognized in Consumers
Power Co v Michigan, 383 Mich 579, 581; 177 NW2d 160 (1970).
There, the Court stated that “[t]he primary jurisdiction and
control of electric utilities lies with the Public Service
Commission.” Id.
Later, this Court addressed what types of claims were
subject to the primary jurisdiction of the
MPSC .
In Valentine
v Michigan Bell Telephone Co, 388 Mich 19, 21; 199 NW2d 182
(1972),
the
negligence,
plaintiff
fraud,
and
alleged
breach
of
misrepresentation.
contract,
Id.
gross
at
21.
Defendant moved for summary disposition on the basis of the
doctrine of primary jurisdiction, and the fact that the
MPSC
was currently reviewing a similar action brought by Valentine.
Id. at 22.
The trial court granted summary disposition and
11
the Court of Appeals affirmed, concluding that plaintiff’s
claims were based on inadequate service and equipment, claims
over which the MPSC had primary jurisdiction. Id. This Court
granted
leave
to
appeal,
and
held
that
the
plaintiff’s
complaint failed to set forth claims in negligence, gross
negligence, fraud, misrepresentation, or some other tort that
would bring subscribers’ claims within the jurisdiction of the
circuit courts.
Id. at 30.
The most recent case concerning the immediate issue is
Rinaldo’s, supra.
There, the issue presented was “whether a
circuit court may entertain a cause of action against a
telephone company alleging negligence, despite the
MPSC ’s
primary jurisdiction over customer claims arising under
tariffs.”
Id. at 66-67, emphasis added.
MPSC
The Court held that
“although a cause of action in tort against a telephone
company
or
a
claim
that
the
company
has
violated
the
regulatory code or tariff may proceed in a court of general
jurisdiction, the doctrine of primary jurisdiction require[d]
dismissal of plaintiff’s claim because it [arose] solely out
of the contractual relationship between the telephone company
and the plaintiff . . . .”
Id. at 67.
IV. PURPOSE
OF THE
DOCTRINE
The doctrine of primary jurisdiction is grounded in the
12
principle of separation of powers.12
The doctrine has been
compared to the political question doctrine and the exhaustion
doctrine, both of which are also concepts rooted in separation
of powers principles.13
“All of the doctrines that cluster about Article
III—not only standing but mootness, ripeness,
political question, and the like—relate in part,
and in different though overlapping ways, to an
idea, which is more than an intuition but less than
a
rigorous
and
explicit
theory,
about
the
constitutional and prudential limits to the powers
of an unelected, unrepresentative judiciary in our
kind of government.” [Allen v Wright, 468 US 737,
750; 104 S Ct 3315; 82 L Ed 2d 556 (1984) (emphasis
added), quoting Vander Jagt v O’Neill, 226 US App
DC 14, 26-27; 699 F 2d 1166 (1983) (Bork, J.,
concurring).]
Allen extensively discussed the principle of separation of
powers and stated that the “several doctrines that have grown
12
South Lake Worth Inlet Dist v Ocean Ridge, 633 So 2d
79, 82 (Fla App, 1994) (noting the “companion concepts of
primary jurisdiction and exhaustion of administrative
remedies, which are in turn bound up with constitutional
limitations on the separation of powers); Good Fund Ltd v
Church, 540 F Supp 519, 540 (1982), rev’d on other grounds by
McKay v United States, 703 F2d 464 (CA 10, 1983) (stating
that
“separation
of
powers
is
a
basis
of
primary
jurisdiction”). See also Hawkens, The exhaustion component of
the Mindes justiciability test, 166 Military L R 67, 79
(stating that exhaustion of administrative remedies doctrine
“is a critical factor in an integrated, reviewability matrix
that—like the political question doctrine and the primary
jurisdiction doctrine—serves separation of powers concerns”);
Talmadge, Understanding the limits of power: Judicial
restraint in general jurisdiction court systems, 22 Seattle
Univ L R 695, 715, n 65 (1999).
13
See note 12. See also Davis, Administrative Law (3d
ed), § 19.01, p 373, stating that the doctrine of primary
jurisdiction “merges with the exhaustion doctrine.”
13
up to elaborate that requirement are ‘founded in concern about
the proper—and properly limited—role of the courts in a
democratic society.’” Id., citing Warth v Seldin, 422 US 490,
498; 95 S Ct 2197; 45 L Ed 2d 343 (1975).
The
doctrine
practical
concerns
of
primary
regarding
jurisdiction
respect
for
legislatively imposed regulatory duties.
also
reflects
the
agency’s
Adhering to the
doctrine of primary jurisdiction reinforces the expertise of
the agency to which the courts are deferring the matter, and
avoids the expenditure of judicial resources for issues that
can better be resolved by the agency.14
“A question of
‘primary jurisdiction’ arises when a claim may be cognizable
in a court but initial resolution of issues within the special
competence
of
an
administrative
agency
is
required.”
Thompson, supra at 288. Closely related is the rule requiring
the exhaustion of administrative remedies:
The doctrine . . . is concerned with promoting
proper relationships between the courts and
administrative agencies charged with particular
regulatory duties.
“Exhaustion” applies where a
claim is cognizable in the first instance by an
administrative agency alone; judicial interference
is withheld until the administrative process has
run its course.
“Primary jurisdiction,” on the
other hand, 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
14
Talmadge, supra at 715, n 65.
14
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. [United States v Western P R Co, 352
US 59, 63-64; 77 S Ct 161; 1 L Ed 2d 126 (1956),
(emphasis added), citing General American Tank Car
Corp v El Dorado Terminal Co, 308 US 422, 433; 60 S
Ct 325; 84 L Ed 361 (1940).][15]
“The
doctrine
administrative
intended
to
reflects
agencies,
be
the
created
repositories
of
courts’
recognition
that
by
Legislature,
are
competence
and
the
special
expertise uniquely equipped to examine the facts and develop
public policy within a particular field.”
Baron, Judicial
review of administrative agency rules: A question of timing,
43 Baylor L R 139, 158 (1991).
Thus, whether judicial review
will be postponed in favor of the primary jurisdiction of an
administrative agency “necessarily depends upon the agency
rule at issue and the nature of the declaration being sought
in the particular case.” Id. at 159.
No fixed formula exists for applying the
doctrine of primary jurisdiction.
In every case
the question is whether the reasons for existence
of the doctrine are present and whether the
purposes it serves will be aided by its application
in the particular litigation. [Western Pacific,
supra at 64.]
Several reasons have been advanced for invocation of the
primary
jurisdiction
doctrine.
15
First,
the
doctrine
See also Reiter v Cooper, 507 US 258, 268-270, n 3; 113
S Ct 1213; 122 L Ed 2d 604 (1993), discussing the primary
jurisdiction doctrine and the exhaustion of administrative
remedies doctrine.
15
underscores the notion that administrative agencies possess
specialized and expert knowledge to address issues of a
regulatory nature.
Use of an agency’s expertise is necessary
in regulatory matters in which judges and juries have little
familiarity.
Western Pacific, supra at 64, citing Far East
Conf v United States, 342 US 570, 574; 72 S Ct 492; 96 L Ed
576 (1952).
Thus, the doctrine is principally applicable to
controversies involving regulatory agencies.
Jaffe, Primary
jurisdiction, 77 Harvard L R 1037, 1039 (1964).
A second
consideration relates to respect for the separation of powers
and the statutory purpose underlying the creation of the
administrative
agency,
the
powers
granted
to
it
by
the
legislature, and the powers withheld. Id. This justification
includes the principle that courts are not to make adverse
decisions that threaten the regulatory authority and integrity
of the agency. Att’y Gen v Diamond Mortgage Co, 414 Mich 603,
613; 327 NW2d 805 (1982). Third, the doctrine exists to
promote consistent application in resolving controversies of
administrative law. Texas and P R, supra at 440-441.
application of the doctrine,
[u]niformity and consistency in the regulation of
business entrusted to a particular agency are
secured, and the limited functions of review by the
judiciary are more rationally exercised, by
preliminary
resort
for
ascertaining
and
interpreting the circumstances underlying legal
issues to agencies that are better equipped than
courts by specialization, by insight gained through
16
By
experience, and by more flexible procedure.
East Conf, supra at 574-575.]
[Far
In Diamond Mortgage Co, supra, this Court explained its
adoption of these justifications for primary jurisdiction.
In cases raising issues of fact not within the
conventional
experience
of
judges
or
cases
requiring
the
exercise
of
administrative
discretion, agencies created by Congress for
regulating the subject matter should not be passed
over. This is so even though the facts after they
have been appraised by specialized competence serve
as a premise for legal consequences to be
judicially defined. [Id. at 612-613, quoting Far
East Conf, supra at 574-575.]
Thus,
this
Court
recognized
application
of
the
primary
jurisdiction doctrine to all cases in which it was deemed that
an administrative agency possessed superior knowledge and
expertise in addressing recurring issues within the scope of
their authority. Quoting Western Pacific, supra at 63-64, the
Court concluded that “‘[p]rimary jurisdiction’ . . . 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 . . . .”
Diamond Mortgage, supra at 613 (internal
citations omitted).
V. COURT
OF
APPEALS DECISION
In our judgment, the Court of Appeals misinterpreted our
recent pronouncements concerning the applicability of the
17
doctrine of primary jurisdiction. The Court of Appeals quoted
Rinaldo’s, supra at 70-74, stating that “the Legislature has
broadly defined the power and jurisdiction of the MPSC over
such matters, without explicitly providing that this power and
jurisdiction is exclusive.”
added).
237 Mich App 493 (emphasis
The Court of Appeals then interpreted this statement
regarding
the
lack
of
reposing
in
the
MPSC
exclusive
jurisdiction over matters regarding public utilities to mean
that the circuit court could not, in this case, defer to the
MPSC. Id. at 494-496.
such
a
holding
would
Clearly, this cannot be the case, as
deprive
the
courts
altogether
of
discretion and deference, and would likewise deprive the
agency of its principal authority to address issues that are
within its competence. “In cases raising issues of fact not
within
the
conventional
experience
of
judges,
or
cases
requiring the exercise of administrative discretion, agencies
created by Congress for regulating the subject matter should
not be passed over.” Diamond Mortgage, supra at 612.
In Rinaldo’s, the circuit court, in applying the doctrine
of primary jurisdiction, reasoned that there was no cause of
action in tort where the relationship between the parties was
purely contractual in nature, since any alleged duties owed
plaintiff by defendant were governed by controlling MPSC
tariffs.
The Court of Appeals affirmed.
18
This Court then
affirmed, as well.
Citing 2 Davis & Pierce, Administrative
Law (3d ed), § 14.1, at 272, we reaffirmed the fundamental
rationale of the doctrine of primary jurisdiction. “Under the
telephone act of 1913, the MPSC possessed the ‘power and
jurisdiction to hear and pass upon all matters pertaining to,
necessary,
or
incident
to
the
regulation
of
utilities, including . . . telephone . . . .’”
all
public
Id. at 74,
citing MCL 460.6(1).16
While Michigan case law has unequivocally held that
claims sounding in tort against public utilities are properly
brought before the circuit courts, these holdings do not,
expressly or by implication, preclude exercise by the
MPSC
of
jurisdiction over those claims that have traditionally fallen
16
MCL 460.6 now provides:
The public service commission is vested with
complete power and jurisdiction to regulate all
public utilities in the state . . . The public
service commission is vested with the power and
jurisdiction to regulate all rates, fares, fees,
charges, services, rules, conditions of service,
and all other matters pertaining to the formation,
operation, or direction of such public utilities.
The public service commission is further granted
the power and jurisdiction to hear and pass upon
all matters pertaining to, necessary, or incident
to the regulation of all public utilities,
including electric light and power companies,
whether private, corporate, or cooperative; gas
companies, water, telegraph, oil, gas, and pipeline
companies;
motor
carriers;
and
all
public
transportation and communication agencies other
than railroads and railroad companies.
19
within its authority.
Rinaldo’s, supra at 69, Valentine,
supra at 25-26, and Thomas v Gen Telephone Directory Co, 127
Mich App 788, 792; 339 NW2d 257 (1983) (stating that under
Valentine, if the plaintiff’s claim sounds in tort, it is for
the court; if it is a claim on a contract, it is for the
MPSC ).17
17
To the extent that Valentine and Rinaldo’s are viewed
as being in tension with one another with regard to
application of the primary jurisdiction doctrine to claims
sounding in tort, and to breach of contract claims, we suggest
that this perception is incorrect. In Valentine, this Court
stated, in dicta, that “[a] claim that sets forth facts
showing a plaintiff suffered damage as a result of a violation
of the tariffs and regulations can be entertained by a court
of general jurisdiction . . . .” Id. at 30 (emphasis added).
Clearly, this language does not suggest that the court’s
jurisdiction over such claims is exclusive. Furthermore, that
statement was based on a mistaken premise.
The Court in
Valentine stated that “[t]he jurisdiction of the Public
Service Commission is primarily prospective—a matter of
promulgating regulations and setting rates.” Id.
Yet, an
agency’s power and authority must be measured by the statutory
enactments from which it is created. Att’y Gen v MPSC, 231
Mich App 76, 78; 585 NW2d 310 (1998).
It is clear from
reading the enabling statute of the MPSC that the agency’s
jurisdiction extends well beyond the Valentine Court’s
purported restriction. For example, MCL 460.6 vests in the
MPSC the “power and jurisdiction to regulate all rates, fares,
fees, charges, services, rules, conditions of service, and all
other matters pertaining to the formation, operation, or
direction of such public utilities.” Pursuant to MCL 460.6,
the MPSC is also “granted the power and jurisdiction to hear
and pass upon all matters pertaining to, necessary, or
incident to the regulation of all public utilities . . . .”
Id. (emphasis added), see also Att’y Gen v MPSC, supra. This
includes the power and jurisdiction to hear and decide breach
of contract claims.
Dominion Reserves Inc v Michigan
Consolidated Gas Co, 240 Mich App 216, 221; 610 NW2d 282
(2000); Energy Reserves Inc v Consumers Power Co, 221 Mich App
210, 216; 561 NW2d 854 (1997); North Michigan Land & Oil Corp
v Public Service Comm, 211 Mich App 424, 437; 536 NW2d 259
20
The Court of Appeals also drew an analogy between the
doctrine of primary jurisdiction and the affirmative defense
of the existence of an arbitration agreement.
493-494.
The
237 Mich App
We find the Court of Appeals analogy unpersuasive.
doctrine
of
primary
jurisdiction
applies
where
an
administrative agency possesses expertise concerning specific
claims over which it has authority and jurisdiction.
To
equate this doctrine with the affirmative defense of an
arbitration agreement overlooks this rationale. While a court
might
prefer
to
have
a
malpractice
claim
submitted
to
arbitration, no principle of deference would compel the court
to
do
so,
jurisdiction.
as
might
be
true
in
the
case
of
primary
It would be no more difficult for a court than
an arbitration panel to address medical malpractice claims.
In the case of primary jurisdiction, however, the principle of
deference to the agency’s expertise compels courts, in certain
circumstances and at their discretion, to suspend the action
pending referral and resolution of the claims over which the
agency with primary jurisdiction has authority and expertise.
In this case, the
MPSC
clearly possessed the authority and
expertise to consider Travelers’ breach of contract claims
under general rule no. 4 of
MPSC
tariff no. 4.
(1995); Miller Bros v Public Service Comm, 180 Mich App 227,
233; 446 NW2d 640 (1989).
21
Further, responding to the circuit court’s conclusion
that
primary
jurisdiction
was
similar
to
subject-matter
jurisdiction, and therefore not subject to waiver, the Court
of Appeals refused to equate these two doctrines.
The Court
of Appeals then concluded that such a decision required
treating primary jurisdiction differently than subject-matter
jurisdiction, to wit, that it could be waived if it had not
been originally asserted.
237 Mich App 493.
That subject
matter jurisdiction and primary jurisdiction are distinct
doctrines is indisputable.
However, it does not follow that,
because the two doctrines are distinct, and because subject
matter jurisdiction is not susceptible to waiver, that primary
jurisdiction is subject to waiver.
Subject-matter jurisdiction is not subject to waiver
because it concerns a court’s “abstract power to try a case of
the kind or character of the one pending” and is not dependent
on the particular facts of the case.
Campbell, supra at 613
614 (emphasis added); see also Harris v Vernier, 242 Mich App
306, 319; 617 NW2d 764 (2000).
A court either has, or does
not have, subject-matter jurisdiction over a particular case.
Bowie v Arder, 441 Mich 23, 39; 490 NW2d 568 (1992).
Primary
jurisdiction, on the other hand, is not subject to waiver
because it is determined, not by a right to which the parties
are entitled, such as an affirmative defense that may be
22
waived by a party’s failure to assert it, but rather by
prudential
considerations
concerning
respect
for
the
relationship between the court and the administrative agency,
and the nature of the claims being addressed.
It may be
raised whenever a dispute can more appropriately be resolved
by the administrative agency with authority over such claims.
Rinaldo’s, supra at 72.
Thus, a determination of waiver in
the case of primary jurisdiction does not depend on whether
the
doctrine
is
similar
or
dissimilar
to
subject-matter
jurisdiction.
Further, the Court of Appeals mistakenly concluded that
just because the doctrine of primary jurisdiction is not
mentioned as an exception in MCR 2.111(F)(2), see footnote 8,
it
necessarily
follows
that
it
is
a
“defense”
indistinguishable from the other defenses ordinarily subject
to waiver within that court rule.
This, too, ignores that
primary jurisdiction is a doctrine, created not for the
convenience of the parties and the efficiencies attendant to
adhering to the court rules, but for consideration “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.”
supra
at
71,
quoting
(emphasis added).
from
Western
Pacific,
Rinaldo’s,
supra
at
64
Thus, primary jurisdiction does not fall
23
within the list of defenses found in MCR 2.116(C)(7), which,
according to MCR 2.111(F)(2), must be asserted in order to be
preserved.
We now proceed to apply the doctrine of primary
jurisdiction to the present case.
VI. APPLICATION
We review the grant or denial of a motion for summary
disposition de novo. Maiden v Rozwood, 461 Mich 109, 118; 597
NW2d 817 (1999).
Here, the circuit court granted Detroit
Edison’s motion for summary disposition under MCR 2.116(C)(4)
on the ground that the primary jurisdiction doctrine required
deferral of Travelers’ remaining breach of contract claim to
the
MPSC .
Jurisdictional questions under MCR 2.116(C)(4) are
questions of law that are also reviewed de novo.18
Citizens
for Common Sense in Government v Att’y Gen, 243 Mich App 43,
50; 620 NW2d 546 (2000).
The circuit court did not err in concluding, as a matter
18
Primary jurisdiction and subject-matter jurisdiction
are distinct legal doctrines. In this case, Detroit Edison
raised the issue of primary jurisdiction in a motion for
summary disposition under MCR 2.116(C)(4)(lack of subject
matter jurisdiction). Such a pleading was inapt, not only
because the doctrines are distinct, but also because
invocation of primary jurisdiction is not the equivalent of
summary disposition as the latter represents a final
disposition of a claim while the former merely defers a claim
to an administrative agency.
However, Detroit Edison’s
pleading affects neither the standard of review that we apply
in reviewing the circuit court, nor the analysis of its
substantive decision. Primary jurisdiction can be raised by
the court sua sponte, or directly by any party.
24
of law, that the doctrine of primary jurisdiction was not
waivable, and that the
MPSC
had primary jurisdiction over
Travelers’ remaining breach of contract claim.
First, the
doctrine of primary jurisdiction can be raised “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.” Rinaldo’s,
supra at 71, citing Western Pacific, supra at 64 (emphasis
added).
This language, which Michigan has adopted, Diamond
Mortgage Co, supra at 613, does not place a restriction on
when the doctrine may be asserted.19 In Western Pacific at 64,
19
We recognize that, as a prudential doctrine, primary
jurisdiction
does
not
always
compel
resort
to
the
administrative agency. There may well be cases, for example,
in which the invocation of primary jurisdiction is not
appropriate because litigation with respect to the particular
claim that would normally be subject to the jurisdiction of
the administrative agency has “advanced to a point where it
would be unfair to remit the [party] to another and
duplicative proceeding . . . .” White Lake Ass’n, supra at
284. See also Pace v Honolulu Disposal Service Inc, 227 F3d
1150, 1156 (CA 9, 2000) (responding to an argument that a
party had to raise the issue of primary jurisdiction in a
cross-appeal, the court stated that the doctrine of primary
jurisdiction is “unlike garden-variety defenses such as in
personam jurisdiction, for it implicates the ‘strong policy of
judicial deference’” and its importance is such that “we
raised the . . . doctrine sua sponte”); Montgomery Co v
Broadcast Equities, 360 Md 438, 451; 758 A2d 995 (2000)
(noting that the rule requiring the courts of appeal of
Maryland to consider only issues that have been preserved
recognized an exception by allowing the issue of primary
jurisdiction to be raised sua sponte); Williams Pipe Line Co
v Empire Gas Corp, 76 F3d 1491, 1496 (CA 10, 1996) (explaining
that, because the doctrine of primary jurisdiction exists for
the proper distribution of power between judicial and
25
the United States Supreme Court made clear that “in such a
case, the judicial process is suspended pending referral of
such issues to the administrative body for its views.”
More
recently, the same Court has described the effect of the
doctrine as requiring “the [trial court] to . . . stay[]
further proceedings so as to give the parties reasonable
opportunity to seek an administrative ruling.”
Reiter v
Cooper, 507 US 258, 268; 113 S Ct 1213; 122 L Ed 2d 604
(1993).
Thus, the Court explained, “[r]eferral of the issue
to the administrative agency does not deprive the court of
jurisdiction; it has discretion either to retain jurisdiction
or, if the parties would not be unfairly disadvantaged, to
dismiss the case without prejudice.” Id. at 268-269 (emphasis
added), citing Carnation Co v Pacific Westbound Conf, 383 US
213, 222-223; 86 S Ct 781; 15 L Ed 2d 709 (1966); Mitchell
Coal & Coke Co v Pennsylvania R Co, 230 US 247, 266-67; 33 S
Ct 916; 57 L Ed 1472; Jaffe, supra at 1055.
Second, consistent with a sense of deference to agency
expertise, the circuit court reasoned that Travelers’ claim
was one that was anticipated and controlled by the tariff, and
that application of § 4 of the tariff would depend on a
factual inquiry best left to the determination of the
MPSC .
administrative bodies and not for the convenience of the
parties, a court may consider its application sua sponte).
26
The
MPSC
“possesses the degree of expertise with regard to the
purpose and effect of the governing tariffs to decide whether
the presumptively valid tariff provisions apply to particular
facts that do not constitute tortious conduct or a violation
of the code or tariff.” Michigan Basic Property Ass’n v
Detroit Edison Co, 240 Mich App 524, 533; 618 NW2d 32 (2000).
Such matters should be deferred to the MPSC.
Id.
Third, following from the rationale of deferring to the
expertise of the agency, the circuit court also concluded that
deferral would promote uniformity and consistency in the
application of tariff no. 4.
Specifically, the circuit court
noted that judicial decision making over the type of claim
involved in the instant case could lead to an imposition of
liability that the
MPSC
itself might not otherwise recognize.
Fourth, it is clear from the record that no inconvenience
to the parties has occurred concerning Travelers’ remaining
breach of contract claim.
The claims sounding in tort were
dismissed by partial summary disposition before the circuit
court considered Travelers’ claim of breach of contract, and
Detroit Edison’s claims that the breach of contract allegation
should be deferred to the
jurisdiction.
MPSC
under the doctrine of primary
Any discovery that has been obtained by either
party has been done so with regard to the original tort
claims,
but
since
the
contract
27
claim
had
not
yet
been
adjudicated, neither party has been unfairly disadvantaged.
To the extent that the discovery that had been carried out
could be utilized in the breach of contract claim before the
MPSC ,
the circuit court concluded that such discovery as had
occurred could only contribute to a swifter resolution of the
matter by the
jurisdiction
MPSC .
is
Further, since the doctrine of primary
one
that
requires
“referral,”
but
not
necessarily dismissal of an action, neither party is precluded
from seeking judicial review of the MPSC’s decision after it
has heard Travelers’ claim.
Reiter, supra at 268.
Pursuant
to the discretion afforded a court in determining whether
specific claims have been properly brought before it, or
whether
those
claims
primarily
deserve
review
by
the
administrative agency charged with authority over the issues
raised, the circuit court did not commit legal error in
determining that the remaining contract claim concerning the
tariff
could
first
be
brought
before
the
unfairness or disadvantage to either party.
MPSC
without
The circuit
court’s opinion proceeded in great depth to explain its
reasoning in this regard.20
20
While seventeen months may appear to be a long time
from the commencement of the lawsuit for Detroit Edison to
have raised the doctrine, it should be noted that our decision
in Rinaldo’s had not yet been released before Detroit Edison’s
raising the issue. Rinaldo’s was decided on March 4, 1997.
Detroit Edison filed its amended pleading on April 1, 1997.
Rinaldo’s clarified what claims could be addressed by the MPSC
28
Fifth, the circuit court stated that the doctrine of
primary jurisdiction applies where there is “recognition of
the need for orderly and sensible coordination of the work of
agency and of courts.”
Rinaldo’s, supra at 70.
The circuit
court had discretion to determine that, as a matter of law,
the breach of contract action based on
MPSC
general rule no.
4, tariff 4, should be first determined by the
MPSC .
This
rationale has found support in the decisions of other courts
that have concluded that the doctrine of primary jurisdiction
cannot be waived “since the doctrine exists for the proper
distribution of power between judicial and administrative
bodies and not for the convenience of the parties.” Distrigas
of Mass Corp v Boston Gas Co, 693 F2d 1113, 1117 (CA 1, 1983).
See, also Nader v Allegheny Airlines, Inc, 167 US App DC 350,
365, n 37; 512 F2d 527 (1975), rev’d on other grounds 426 US
under the doctrine of primary jurisdiction. Presumably, this
was a part of Detroit Edison’s impetus for raising the
doctrine at that time. Further, as noted above, the trial
court had not yet even considered Travelers’ breach of
contract claim, as the tort claims were addressed first. For
most of this seventeen-month period, before the issue of
primary jurisdiction was raised, the claims of the plaintiff
were in contract and tort. Only the contract claims could be
Thus, to have raised the doctrine of
heard by the MPSC .
primary jurisdiction while both claims survived would have
subjected Detroit Edison and Travelers to bifurcated
proceedings—tort claims in circuit court and the breach of
contract claim in the MPSC .
Thus, it seems perfectly
reasonable for Detroit Edison to have waited until the tort
claims were dismissed before asking that what remained—a
contract claim alone—be referred to the MPSC .
29
290, 96 S Ct 1978, 48 L Ed 2d 643 (1976); Louisiana & Arkansas
R Co v Export Drum Co, 359 F2d 311, 314 (CA 5, 1966); Locust
Cartage Co v Transamerican Freight Lines Inc, 430 F2d 334
(CA 1, 1970).
Indeed, it has been noted that
[t]he primary jurisdiction doctrine is another form
of judicial restraint. It is more complicated than
the political question doctrine because it involves
congressional delegation of discretion to an
agency. It will arise when Congress has passed a
statute regulating an area under the supervision of
an expert administrative agency whose supervision
involves factual determinations aided by the
special expertise of the agency. Once the agency
has acted, the court must determine the extent to
which it will defer to that special expertise or
review the agency’s action.” [Good Fund Ltd v
Church, 540 F Supp 519, 546 (D Colo, 1982), rev’d
sub nom McKay v United States, 703 F2d 464 (CA 10,
1983).]
The circuit court noted that judicial resolution of the issue
could adversely affect the regulatory responsibilities of the
MPSC.
See, Diamond Mortgage, supra at 613.
The circuit
court’s reasoning was consistent with the rationale set forth
by this Court in Rinaldo’s, supra at 71-72.
considered
the
issue
in
light
of
the
It thoroughly
requisite
agency
expertise, the necessity for uniform resolution of the issue
underlying the dispute, and the effect of a judicial, rather
than an administrative, resolution.
In our judgment, the circuit court, in assessing the
factors applicable to questions of primary jurisdiction, did
not err as a matter of law, and properly applied the doctrine
30
to the instant case.
CONCLUSION
For the foregoing reasons, we conclude that the doctrine
of
primary
jurisdiction
is
not
a
defense,
but
rather
a
doctrine of judicial deference and discretion, a prudential
doctrine, designed to accord respect to the separation of
powers in our constitutional system. Because we conclude that
the doctrine of primary jurisdiction is not a defense, it was
unnecessary for Detroit Edison to have raised the issue in its
first responsive pleading.
The circuit court did not err in
concluding that the proper forum for Travelers’ breach of
contract claim was before the MPSC.
We, therefore, reinstate
the decision of the circuit court.
Reversed.
CORRIGAN , C.J., and CAVANAGH , KELLY , TAYLOR , and YOUNG , JJ.,
concurred with MARKMAN , J.
31
S T A T E
O F
M I C H I G A N
SUPREME COURT
THE TRAVELERS INSURANCE COMPANY,
Plaintiff-Appellee,
v
No. 116610
THE DETROIT EDISON COMPANY,
Defendant-Appellant,
and
CITY OF DETROIT WATER AND SEWERAGE DEPARTMENT,
Nonparticipating Defendants.
______________________________________________
WEAVER, J. (concurring).
I concur with the result of the majority opinion and the
analysis of part VI.
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