Keyspan Gas E. Corp. v North Atl. Util., Inc.
Annotate this CaseDecided on December 15, 2005
Supreme Court, Kings County
Keyspan Gas East Corporation d/b/a/ KEYSPAN ENERGY DELIVERY LONG ISLAND , Plaintiff, -
against
NORTH ATLANTIC UTILITIES, INC., Defendant
45184/02
Francois A. Rivera, J.
By notice of motion filed on August 13, 2004, plaintiff (hereinafter Keyspan LI) moves pursuant to CPLR §3212 for an order granting summary judgment against the defendant and dismissing defendant's counterclaims. By notice of cross-motion filed on December 3, 2004, defendant North Atlantic Utilities, Inc., (hereinafter NAU) opposes plaintiff's motion and cross-moves pursuant to CPLR §3212 for an order granting summary judgment dismissing plaintiff's complaint and granting defendant summary judgment on its first counterclaim.
The New York State Public Service Commission ( hereinafter PSC) is the New York State agency authorized by the legislature to regulate and monitor the rates and practices of public utility companies and the retail energy industry in New York through tariffs. These tariffs are public documents setting forth rates, schedules, terms and conditions under which a utility renders services to its customers. Tariffs are not contracts, but have the force and effect of law (Lee v. Consolidated Edison Co. of NY, 98 Misc 2d 304, 305-306 see, Public Service Law §66[12]). Plaintiff, Keyspan LI, is a public utility company that provides the only means to deliver natural gas to customers in Long Island and also sells natural gas there. NAU is a corporation organized and existing under the laws of the State of Delaware engaged in the independent marketing of natural gas. NAU is required to utilize plaintiff's transportation services to deliver natural gas to its customers on Long Island.
In 1984, the New York legislature enacted Public Service Law §66-d which authorized the PSC to order a gas utility to transport gas owned by third parties, provided that no undue burden on the utility or its customers result, and that the ability to provide adequate gas to its customers is not impaired. The PSC adopted the Uniform Retail Access Business Practices and ordered local gas distribution companies such as the plaintiff to file revised tariffs consistent with the uniform practices issued by the PSC.
Plaintiff's retail access program served customers taking firm or interruptible service. [*2]Firm service customers are entitled to continuous uninterrupted service. Interruptible customers accept service that may be interrupted at any time for various reasons as set forth in the tariff and pay a lower rate for this lesser quality of service. Pursuant to the tariff binding the parties, a marketer of interruptible service is obligated to deliver its interruptible daily quantity (IDQ) which is based upon the customer's weather normalized historical estimate of consumption. If the marketers gas deliveries fall below more than two percent below its required aggregate daily transportation quantity for reasons other than force majeure, the marketer must pay a surcharge of $25.00 for dekatherm for the shortage on critical gas days for gas supplies and $10.00 per dekatherm on all other days. According to the tariff, plaintiff could discontinue its transportation service if the marketer fails to comply with the terms and conditions of the tariff.
Plaintiff commenced the instant action alleging three causes of action for breach of contract and for an account stated. Defendant interposed an answer asserting two counterclaims. Defendant also claimed lack of subject matter jurisdiction and plaintiff's drawing down of $25,000.00 from a letter of credit for partial payment in plaintiff's second and third cause of action. On March 7, 1996, defendant executed an agreement to be bound by the terms and conditions of plaintiff's tariffs approved by the PSC. In support of its first cause of action, plaintiff alleges that contrary to the tariff requirements, defendant failed to deliver the Aggregate Daily Transportation Quantity of gas required during December 2000 and January 2001 in the amount of 394,580 dekatherms. On January 24, 2001, plaintiff commenced discontinuance of the defendant's transportation service pursuant to the PSC's Uniform Retail Access Business Practices. By letter dated January 24, 2001, plaintiff notified the defendant of its defaults and of their intention to discontinue service if the defaults were not cured within ten days. Defendant failed to do so. By letter dated February 6, 2001, plaintiff notified the defendant of its intention to terminate services effective March 1, 2001. Due to these alleged shortages plaintiff billed the defendant ($10,381, 826.54) due as of April 13, 2001. Defendant did not pay the bill nor contest the accuracy of same. In support of its second cause of action plaintiff contends that defendant purchased 20,000 dekatherms of gas during October 9, 10 and 11, 1999 for a total price of $51,875.00. Plaintiff claims it delivered same and defendant has yet to pay. For their third cause of action plaintiff claims an account stated for the arrears set forth in the second cause of action.
Defendant's cross-motion admits, in pertinent part, the factual allegation of the plaintiff alleging that defendant failed to deliver the Aggregate Daily Transportation Quantity of gas required during December 2000 and January 2001 in the amount of 394,580 dekatherms. Defendant asserts, however, that plaintiff failed to comply with the tariff by improperly declaring a critical day and imposing a more severe penalty before a flow control order was issued. The declaring of a critical date increased the penalty imposed on the defendant for gas not delivered from $10.00 to $25.00 per dekatherm. By imposing the more severe penalty, plaintiff allegedly prevented the defendant from being able to elect between paying the lower penalty or shipping to its customers the excess gas which its customers were not using. Plaintiff allegedly used the inflated penalty to force the defendant out of the Long Island market. Defendant also contends that plaintiff failed to follow the tariff procedures in responding to defendant's complaint issued to them in writing. Moreover, defendant disputes the calculation of the penalties imposed for the December 2000 and January 2001 period in question.
Defendant NAU is owned by Stefan Geiringer. In the pleadings pertinent to the instant [*3]motion, plaintiff attached portion of Stefan Geiringer's deposition testimony. Plaintiff contends that Geiringer's deposition testimony admits every essential allegation to support its motion for summary judgment on the first cause of action. That testimony establishes that defendant was aware of the terms of the tariff between the parties. His testimony establishes that NAU did not deliver the amount required by the tariff for the period in question and did not pay the tariff charges for under-deliveries. Furthermore, there is no dispute that NAU was notified by the plaintiff of the breach of the tariff and nevertheless made a decision not to cure the default because it could not afford the penalties. Defendant's opposition papers to the instant motion did not answer plaintiff's motion for summary judgment on their second and third cause of action.
Prior to the commencement of the instant action, NAU sued the plaintiff in the Supreme Court of Nassau County in an action bearing index number 2756/01 (hereinafter the Nassau action). The complaint contained forty two allegations of fact in support of three causes of action. The first cause of action alleged that Keyspan LI's conspired to unfairly compete with NAU through improper use of penalties. The second cause of action claimed a violation of Public Service Commission Law §65 and sought monetary damage. The third cause of action claimed Keyspan LI engaged in deceptive trade practices in violation of the General Business Law. NAU sought an injunction preventing Keyspan LI from terminating NAU's service contract and treble damages based on their allegedly anti-competitive and improper imposition of a penalty charge of $25.00 per dekatherm for under-deliveries of gas. NAU also sought a declaration that the imposition of $25.00 per dekatherm penalty was improper, null and void and that their conduct were violations of the Donnelly Act. There is no dispute that the transactions complained of in the Nassau action covered the same time period and encompassed the same alleged overcharge of penalties contained in the instant action.
Keyspan LI sought, inter alia, an accelerated judgment dismissing NAU's complaint on the Nassau action contending that the claims were primarily premised upon Keyspans LI s allegedly improper and unfair tariff charges and that NAU brought no claims before the PSC regarding the assessment of these penalties.
By decision and order issued by Justice Geoffrey J. O'Connell in the aforementioned Nassau action, NAU's request for a preliminary injunction barring Keyspan LI from supplying natural gas to its customers was denied. The court also dismissed NAU's complaint on two grounds. Justice O'Connell determined that the claims pertaining to the improper use of a tariff penalty must first be reviewed by the Public Service Commission. The court also advised that a public utility is protected from liability, where it acts in accordance with its filed tariff (Porr v. NYNEX Corp., 230 AD2d 564 [2nd Dept. 1997]. The court also dismissed NAU's claims under the Donnelly Act on the basis that NAU failed to plead and prove the existence of a reciprocal agreement between two or more separate economic entities that restrain competition, the sina qua non of such a cause of action. The court found that Keyspan LI and its subsidiaries are a single entity under antitrust principles. The court further found that the conduct of Keyspan LI and its subsidiaries did not constitute a viable cause of action under the Donelly Act.
NAU appealed the dismissal of its complaint and denial of its request for a preliminary injunction. By decision of the Appellate Division Second Department dated July 28, 2003, in North Atlantic Utilities v. Keyspan Corp., 307 AD2d 342 , the decision and order of Justice O'Connell was affirmed in its entirety. [*4] "We agree with the Supreme Court's determination that the "filed tariff" doctrine and the doctrine of primary jurisdiction bar judicial review at this juncture of the plaintiff's claims challenging the defendants' actions under a tariff filed and approved by the Public Service Commission...Moreover, the Supreme Court correctly concluded that the plaintiff failed to state a cause of action under the Donnelly Act ... The defendants are a parent corporation and several of its wholly-owned subsidiaries. A parent corporation and its wholly-owned subsidiaries are considered a single entity under antitrust principles and, therefore, cannot engage in anti-competitive acts....Similarly, sister subsidiary corporations which are wholly-owned by the same parent corporation are legally incapable of conspiring with each other ."
NAU sought leave of the Court of Appeals to appeal the decision of the Appellate Division Second Department affirming Justice O'Connell decision dismissing NAU's complaint and denying its request for a preliminary injunction. The Court of Appeals denied NAU's motion for leave to appeal (North Atlantic Utilities v. Keyspan Corp., 1 NY3d 503 [2003]. Plaintiff contends that the concept of transactional res judicata bars all of NAU's counterclaims asserted in the instant action. Under the doctrine of res judicata, once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred even if based upon different theories or if seeking a different remedy (O'Brien v. City of Syracuse, 54 NY2d 353-356 [1981]; see also Eagle Insurance Co. v. Facey, 272 AD2d 399 [2nd Dept 2000]). The doctrine is applicable to an order or judgment taken by default which has not been vacated, as well as to issues which were or could have been raised in the prior proceeding (Sterling Doubleday Enterprises v. Marro, 238 AD2d 502 [2nd Dept. 1997]. Thus, a court order dismissing a complaint, is res judicata as to any claims which were raised or could have been raised in that proceeding (Fireman's Ins. Co. v. Hopkins, 244 AD2d 485 [2nd Dept 1997]).
It is well settled that a party seeking summary judgment must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact (Zarr v. Riccio, 180 AD2d 734 [2nd Dept. 1992]). A prima facie showing shifts the burden to the opposing party to produce evidentiary proof in admissible form sufficient to establish the existence of material questions of fact (Zuckerman v. City of New York, 49 NY2d 557, 562 [1998]). There is no issue of fact presented on plaintiff's first cause of action claiming NAU's violation of the applicable tariff which resulted in the incurring of penalties. Defendant admits to the operative allegations of fact but asserts plaintiff's improper or unfair manipulation of the tariff. For the reasons set forth below, defendant's response and counterclaim do not raise an issue of fact. On plaintiff's second and third cause of action, defendant did not answer or contest plaintiff's motion. Plaintiff demonstrated its entitlement to judgment as a matter of law on its first, second and third cause of action on the issue of liability. Defendant's contentions pertaining to the improper and unfair application of a tariff belongs before the PSC and not before the court in the first instance.
With regard to NAU's counterclaims, those transactions and occurrences which were the basis of the counterclaims in the instant action were the same transactions and occurrences which [*5]were part of the Nassau action pertaining to alleged violations of the Donnelly Act. The Nassau action allegations pertaining to the Donnelly Act were dismissed on the merits on Keyspan LI's motion for an accelerated judgment. This dismissal on the merits serves as a bar under the concept of transactional res judicata to NAU's asserted counterclaims in the instant action. For the foregoing reasons, plaintiff's motion for summary judgment on the three causes of action asserted on the instant complaint is granted. Defendant's counterclaims are dismissed. Plaintiff may proceed to an inquest on the measure of damages
The foregoing constitutes the decision and order of the court.
__________________________________x
J.S.C
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
