Development Recovery Co., LLC v. Public Service Company of Colorado

2017 COA 86, 410 P.3d 1264

• Court: Colorado Court of Appeals
• Decided: June 15, 2017
• Docket: 16CA0940
• Status: Published

Opinion

16CA0940 Development Recovery v Public Svs 06-15-2017 2017COA86

COLORADO COURT OF APPEALS

Court of Appeals No. 16CA0940 City and County of Denver District Court No. 15CV34584 Honorable Catherine A. Lemon, Judge

Development Recovery Company, LLC,

Plaintiff-Appellant,

v.

Public Service Company of Colorado, d/b/a Xcel Energy Company,

Defendant-Appellee.

JUDGMENT AFFIRMED

Division I Opinion by JUDGE ROMÁN Taubman and Lichtenstein, JJ., concur

Announced June 15, 2017

MMARTINLAW LLC, E. Gregory Martin, Michael G. Martin, Denver, Colorado, for Plaintiff-Appellant

Gordon & Rees LLP, John M. Palmeri, Franz Hardy, Lance J. Ream, Gregory S. Hearing II, Denver, Colorado, for Defendant-Appellee

Cynthia H. Coffman, Attorney General, Jessica L. Lowrey, Assistant Attorney General, Denver, Colorado, for Amicus Curiae Colorado Public Utilities Commission ¶1 In this case, we are asked to decide whether the district court

has jurisdiction over a breach of contract case against a public

utility where the essence of the claims involves the enforcement of

tariffs. We conclude that where common-law claims are, in

essence, brought to enforce the rates, charges, or tariffs, they fall

within the broad authority granted to the Colorado Public Utilities

Commission (PUC). Because we conclude that the claims in this

case were brought to enforce the rates, charges, and tariffs of a

public utility, we agree with the district court that it lacked subject

matter jurisdiction over the complaint. Accordingly, we affirm the

district court’s dismissal of the complaint.

I. Background

¶2 Plaintiff, Development Recovery Company, LLC (DRC), appeals

the district court’s dismissal of its complaint against the Public

Service Company of Colorado, d/b/a Xcel Energy Co. (Xcel). Xcel is

a utility company providing electric and gas service that is regulated

by the PUC. DRC is the assignee of claims from real estate

developers who entered into extension agreements with Xcel for the

construction of distribution facilities to provide gas or electric

service for homes in new developments.

1 A. Extension Agreements

¶3 Pursuant to one-page extension agreements, the developers

made construction payments in an amount determined by Xcel, and

Xcel constructed the facilities to deliver electricity or gas to new or

planned developments.1 The agreements referred several times to

Xcel’s extension policies and specifically required that “the

application and interpretation of this Agreement, including the

definitions of terms used herein, shall be in accordance with [Xcel’s

Service Rules and Regulations, including the extension policy] on

file and in effect from time to time with the Public Utilities

Commission of the State of Colorado and that said Rules and

Regulations constitute a part of this Agreement and are binding on

the parties hereto.”

1 Xcel submitted two extension agreements in support of its motion to dismiss — one for indeterminate electric service and one for permanent gas service. Because these are the only agreements in the record and there was no evidence or argument that they are not representative, we consider these two agreements representative of all the agreements that are the subject of this case. See Redfern v. U S W. Commc’ns, Inc., 38 P.3d 566, 568 (Colo. App. 2000).

2 ¶4 According to the electric and gas service extension policies on

file with the PUC, referred to as “tariffs,”2 when an applicant

requests electric or gas service at premises not connected to Xcel’s

distribution system, Xcel designates the type of service as

permanent, indeterminate, or temporary, and then “construct[s] the

extension with reasonable promptness in accordance with the terms

of” applicable plans described in the tariffs.3 The tariffs provide

that extension contracts are based on the estimate of the cost to

construct and install the necessary facilities to provide the

requested service. Thus, Xcel is responsible for estimating the cost

of materials, labor, and rights-of-way, as well as related costs such

2 Public utilities are required to maintain open schedules showing rates and charges, along with factors affecting rates or service. See § 40-3-103, C.R.S. 2016. “Tariffs are the means by which utilities record and publish their rates along with all policies relating to the rates.” AviComm, Inc. v. Colo. Pub. Utils. Comm’n, 955 P.2d 1023, 1031 (Colo. 1998). In support of its motion to dismiss, Xcel submitted the schedules relating to the extension of electric and gas service, which DRC had referenced in its complaint. See Barry v. Bally Gaming, Inc., 2013 COA 176, ¶ 8 (evidence outside the pleadings may be considered to resolve a challenge to subject matter jurisdiction). 3 Although electric and gas service are covered in different tariffs,

the pertinent provisions are similar. Because the parties refer to the tariffs collectively and do not argue that any differences are pertinent, we also discuss the tariffs this way.

3 as trenching or tree trimming, “together with all incidental and

overhead expenses.”

¶5 These construction costs in turn are divided into two parts.

First, if applicable, Xcel bears a portion of the cost in an amount

listed in the tariffs — the “construction allowance.”4 Second, the

“construction payment” is the “[a]mount advanced by applicant to

pay all construction costs in excess of [the] [c]onstruction

[a]llowance.”

¶6 The tariffs specifically describe if and when Xcel’s portion —

the construction allowance — will be credited, depending on the

designated type of service. The tariffs also explain when refunds of

the construction payment could become due and how they would be

calculated.

B. DRC’s Allegations in Support of Claims For Relief

¶7 DRC filed the complaint against Xcel alleging breach of

contract, breach of the implied covenant of good faith and fair

dealing, unjust enrichment, and violation of section 40-7-102,

C.R.S. 2016, related to an unspecified number of extension

4The amount of the construction allowance provided in the tariffs changed during the period covered by the complaint.

4 agreements (the agreements) between developers and Xcel during

the course of eighteen years.

¶8 Specifically, DRC alleged in support of its claims for relief that

 Xcel inflated the costs of construction;

 Xcel failed to properly credit construction allowances;

 Xcel failed to refund construction payments; and

 Xcel violated section 40-7-102 by including provisions in

the agreements not permitted by the applicable tariffs.

¶9 Xcel moved to dismiss the complaint for lack of subject matter

jurisdiction, arguing that this matter was within the exclusive

jurisdiction of the PUC. Alternatively, Xcel argued that if the PUC

did not have exclusive jurisdiction, the court should nonetheless

refer the matter to the PUC under the primary jurisdiction doctrine.

¶ 10 The district court agreed with Xcel on both grounds and

dismissed the case.

¶ 11 DRC appeals the trial court’s dismissal, arguing that the

district court, not the PUC, has exclusive subject matter jurisdiction

over DRC’s common law claims.

II. Legal Standards

5 ¶ 12 In considering a district court’s dismissal of a claim under

C.R.C.P. 12(b)(1) for lack of subject matter jurisdiction, we review

factual findings for clear error and legal conclusions de novo.

Auxier v. McDonald, 2015 COA 50, ¶ 9; City of Aspen v. Kinder

Morgan, Inc., 143 P.3d 1076, 1078 (Colo. App. 2006).

¶ 13 If subject matter jurisdiction is challenged, the plaintiff has

the burden of proving it. Associated Gov’ts of Nw. Colo. v. Colo. Pub.

Utils. Comm’n, 2012 CO 28, ¶ 7; City of Aspen, 143 P.3d at 1078.

Evidence outside the pleadings may be considered. City of Aspen,

143 P.3d at 1078. The trial court considers the facts alleged and

the relief requested to determine the substance of the claim and

whether the court has subject matter jurisdiction. Id. at 1078-79

(“We are not bound by the form in which the plaintiff asserts its

claim, but rather it is the facts alleged and the relief requested that

decide the substance of a claim, which in turn is determinative of

the existence of subject matter jurisdiction.” (quoting City of Boulder

v. Pub. Serv. Co., 996 P.2d 198, 203 (Colo. App. 1999))).

III. Public Utilities Commission (PUC)

¶ 14 The General Assembly is empowered by the Colorado

Constitution to designate to an agency “all power to regulate the

6 facilities, service and rates and charges therefor” for an entity

operating as a public utility in Colorado. Colo. Const. art. XXV.

¶ 15 Under section 40-3-102, C.R.S. 2016, the legislature

designated the PUC as the regulatory body. Specifically,

[t]he power and authority is hereby vested in the public utilities commission of the state of Colorado and it is hereby made its duty to adopt all necessary rates, charges, and regulations to govern and regulate all rates, charges, and tariffs of every public utility of this state to correct abuses; to prevent unjust discriminations and extortions in the rates, charges, and tariffs of such public utilities of this state; to generally supervise and regulate every public utility in this state; and to do all things, whether specifically designated in articles 1 to 7 of this title or in addition thereto, which are necessary or convenient in the exercise of such power, and to enforce the same by the penalties provided in said articles through proper courts having jurisdiction.

§ 40-3-102.

¶ 16 “The Public Utilities Commission is a legally constituted

administrative body with exclusive jurisdiction in its constituted

field.” Intermountain Rural Elec. Ass’n v. Colo. Cent. Power Co., 135

Colo. 42, 48, 307 P.2d 1101, 1104 (1957). The legislature has also

provided that complaints may be made to the PUC, and it has

7 outlined the procedures to be followed to resolve complaints. See

§§ 40-6-108, -109, C.R.S. 2016.

IV. Analysis

¶ 17 The PUC has exclusive jurisdiction over claims for the

enforcement of tariffs. See AviComm, Inc. v. Colo. Pub. Utils.

Comm’n, 955 P.2d 1023, 1031 (Colo. 1998). “[T]he proper

application of rates and tariffs is within the regulatory authority of

the PUC.” Id.; see also Associated Gov’ts, ¶ 7 (the legislature may

limit the constitutional grant of general subject matter jurisdiction

to the district courts); City of Aspen, 143 P.3d at 1081

(“Determining whether defendants comply with the PUC

requirements and fashioning a remedy for any violation is within

the PUC’s authority.”). Thus, although DRC seeks to distinguish

City of Aspen and City of Boulder as cases addressing ratemaking,

the PUC’s jurisdiction is more expansive, including the application

of and compliance with tariffs. See AviComm, 955 P.2d at 1031;

City of Aspen, 143 P.3d at 1081.

¶ 18 DRC asserts that the trial court erred in concluding that the

substance of its claims is merely the enforcement of tariffs. We

disagree.

8 ¶ 19 DRC relies primarily on its own characterization of the claims

it pled — breach of contract, breach of the implied covenant of good

faith and fair dealing, unjust enrichment, and violation of section

40-7-102 — arguing that only the district court has jurisdiction

over such claims. However, we are not bound by the labels of the

causes of action pled; rather, we must consider the substance of the

claims asserted. See City of Aspen, 143 P.3d at 1078-79; City of

Boulder, 996 P.2d at 203.

¶ 20 We turn next to DRC’s complaint.

A. Inflating Estimated and Actual Costs of Construction

¶ 21 DRC claims that Xcel breached the agreements and the

implied covenant of good faith and fair dealing by inflating the

estimated and actual costs of construction. Although the

agreements provide the amount of the required construction

payments, the factors used to determine the costs of construction

are addressed by the tariffs. Thus, assessment of whether those

charges are excessive is within the PUC’s jurisdiction. See § 40-3-

102 (empowering PUC to adopt and enforce regulations to govern

and regulate public utilities; “to correct abuses; to prevent unjust

discriminations and extortions . . . ; to generally supervise and

9 regulate every public utility in this state; and to do all things, . . .

which are necessary or convenient in the exercise of such power”);

City of Boulder, 996 P.2d at 205 (district court lacked subject

matter jurisdiction over claim for breach of duty of good faith and

fair dealing for improperly calculating payments due, where the

parties’ agreements incorporated amounts set forth in the

PUC-approved tariff and the utility had to calculate the rate for its

tariff filing in accordance with PUC’s methodology and other

regulations).

B. The Treatment of Construction Allowances

¶ 22 DRC takes issue with Xcel’s treatment of construction

allowances. However, the only mention of construction allowances

in the agreements is that “[n]othing in this Agreement shall be

construed to waive the right,” if any, of a construction allowance or

refund thereof “associated with distribution and/or service lateral

installations pursuant to the Rules and Regulations currently on

file with the Public Utilities Commission.” The agreements merely

recognize that developers might be entitled to a construction

allowance as provided by the tariffs. While DRC’s complaint alleges

that Xcel exercised discretion in classifying the service for each

10 contract (which impacts whether and when a construction

allowance is credited), the tariffs define the classification of service.

DRC’s claim that Xcel failed to properly credit construction

allowances is, therefore, also a claim for enforcement of the tariffs.

See City of Aspen, 143 P.3d at 1079-80 (concluding that, although

the plaintiff attempted to re-characterize claim to avoid PUC

jurisdiction, matters within the PUC’s exclusive jurisdiction were

still “inextricably intertwined” with the claims).

C. Failure to Refund Construction Payments

¶ 23 DRC claims that Xcel failed to refund construction payments.

Here, again, the agreements explicitly invoke the tariffs to describe

Xcel’s obligations: “Any possible refunds [of the Construction

Payment] will be made in accordance with the terms and conditions

of [Xcel’s extension policy]. This policy is on file with the Public

Utilities Commission . . . .” Once again, DRC’s claim is for

enforcement of the tariffs, and is thus within the PUC’s jurisdiction.

See id.

D. Violation of Section 40-7-102

11 ¶ 24 Finally, DRC claims that Xcel also violated section 40-7-102

by including provisions in the agreements not permitted by the

applicable tariffs. Section 40-7-102(1) provides as follows:

In case any public utility does, causes to be done, or permits to be done any act, matter, or thing prohibited, forbidden, or declared to be unlawful, or omits to do any act, matter, or thing required to be done, either by the state constitution, any law of this state, or any order or decision of the commission, such public utility shall be liable to the persons or corporations affected thereby for all loss, damage, or injury caused thereby or resulting therefrom. . . . An action to recover such loss, damage, or injury may be brought in any court of competent jurisdiction by any corporation or person.

¶ 25 Yet, even if DRC has a cause of action under section 40-7-102,

exhaustion of administrative remedies before the PUC is required.

See City of Aspen, 143 P.3d at 1081-82 (“Even if Aspen were correct

[that this section supports an action against a utility for violation of

the Colorado Consumer Protection Act (CCPA)], it has failed to

exhaust remedies before the PUC and therefore cannot at this time

invoke them to support its CCPA claims. . . . [T]he PUC would still

be the proper forum for first determining whether defendants

violated its regulations.”); City of Boulder, 996 P.2d at 206-07

12 (where plaintiffs sought damages under section 40-7-102(1), the

district court properly dismissed because, although the statute

creates a private cause of action for damages resulting from

conduct of a regulated utility which violates state law, subject

matter jurisdiction does not exist in the district court unless and

until administrative remedies have been exhausted as provided in

sections 40-6-108 and 40-6-109). DRC did not allege or establish

that it had exhausted administrative remedies. See § 40-6-115,

C.R.S. 2016 (providing for district court review of a final decision by

the PUC).

E. Alleged Damages

¶ 26 Beyond the particular causes of action alleged, DRC

additionally asserts that the district court must have jurisdiction

because only the district court can award the relief DRC sought.

We disagree.

¶ 27 “Subject matter jurisdiction concerns ‘the court’s authority to

deal with the class of cases in which it renders judgment.’”

Monaghan Farms, Inc. v. City & Cty. of Denver, 807 P.2d 9, 18 (Colo.

1991) (quoting Closed Basin Landowner’s Ass’n v. Rio Grande Water

Conservation Dist., 734 P.2d 627, 636 (Colo. 1987)). “A court has

13 jurisdiction of the subject matter ‘if the case is one of the type of

cases that the court has been empowered to entertain by the

sovereign from which the court derives its authority.’” Closed Basin

Landowner’s Ass’n, 734 P.2d at 636 (quoting Paine, Webber,

Jackson & Curtis, Inc. v. Adams, 718 P.2d 508, 513 (Colo. 1986)).

Where, as here, the power to determine claims regarding the

enforcement of tariffs has been vested in the PUC in the first

instance, DRC cannot confer subject matter jurisdiction on the

district court simply by requesting relief in the form of damages.

Subject matter jurisdiction “either exists or it does not. The parties

cannot confer subject matter jurisdiction upon the court, nor may

the court confer it upon itself.” Cornstubble v. Indus. Comm’n, 722

P.2d 448, 450 (Colo. App. 1986) (quoting Sanchez v. Straight Creek

Constructors, 41 Colo. App. 19, 21, 580 P.2d 827, 829 (1978)).

¶ 28 Nonetheless, we note that the PUC has authority to order

reparations where excessive charges have been collected by a public

utility for any product or service:

When complaint has been made to the commission concerning any rate, . . . and the commission has found, after investigation, that the public utility has charged an excessive or discriminatory amount . . . the commission

14 may order that the public utility make due reparation to the complainant therefor, with interest from the date of collection, provided no discrimination will result from such reparation.

§ 40-6-119(1), C.R.S. 2016. Distilled to their essence, DRC’s claims

here are that the developers were ultimately required to foot more of

the bill for the utility extensions than was due according to the

terms of the tariffs. As a result, reparations for excessive charges

could be an appropriate remedy in this case. See Peoples Nat. Gas

Div. of N. Nat. Gas Co. v. Pub. Utils. Comm’n, 698 P.2d 255, 262-63

(Colo. 1985) (PUC had statutory authority to award reparations to

utility customers for overbilling); Village of Evergreen Park v.

Commonwealth Edison Co., 695 N.E.2d 1339, 1343 (Ill. App. Ct.

1998) (“The fact that the plaintiff labels its action a breach of

contract action is not dispositive . . . . Irrespective of that label, it is

apparent that the plaintiff is seeking a refund of part of the charges

it paid the defendant and, consequently, plaintiff is alleging a claim

for reparations.”) (citations omitted).5

5 DRC also asserts that the district court must have jurisdiction because it is the only venue in which DRC can be afforded a jury trial, as demanded in the complaint. A demand for a jury trial,

15 ¶ 29 Considering the allegations in the complaint in conjunction

with the evidence submitted on the issue of subject matter

jurisdiction, we agree with the district court that DRC failed to carry

its burden to establish subject matter jurisdiction in the trial

court.6

V. Conclusion

¶ 30 The judgment is affirmed.

JUDGE TAUBMAN and JUDGE LICHTENSTEIN concur.

however, does not go to the substance of the claim. See City of Aspen v. Kinder Morgan, Inc., 143 P.3d 1076, 1078 (Colo. App. 2006) (consider the facts alleged and the relief requested to determine the substance of the claim and whether the court has subject matter jurisdiction). We will not permit a party to circumvent the jurisdiction of the PUC simply by including a demand for jury trial in the complaint. 6 Nor are we persuaded by DRC’s reliance on Great Western Sugar

Co. v. Northern Natural Gas Co., 661 P.2d 684, 690 (Colo. App. 1982). The division in Great Western Sugar considered whether the trial court erred by declining to exercise its discretion to refer issues to the Federal Energy Regulatory Commission under the doctrine of primary jurisdiction. Id. Because we conclude that the district court lacked subject matter jurisdiction, we do not reach the issue of discretionary referral under the doctrine of primary jurisdiction, and Great Western Sugar is inapplicable.