In Re Illinois Bell Switching Station Litigation

641 N.E.2d 440, 161 Ill. 2d 233, 204 Ill. Dec. 216, 1994 Ill. LEXIS 97

• Court: Illinois Supreme Court
• Decided: July 28, 1994
• Docket: 73999
• Status: Published

Opinions

JUSTICE HEIPLE

delivered the opinion of the court:

This case arose after a telephone switching station caught fire, allegedly due to the negligent or willful failure of Illinois Bell Telephone Company to take adequate fire-prevention measures. The fire left the affected class (plaintiffs) without telephone services for about a month. Plaintiffs now seek to recover the economic damages they incurred from that loss of service.

At issue is whether this statutory action for civil damages brought against Illinois Bell Telephone Company (Bell) is barred by either Illinois’ "economic loss doctrine” or an exculpatory clause in Bell’s tariff filed with the Illinois Commerce Commission.

Plaintiffs filed a complaint in the circuit court of Cook County, framed as a class action representing customers of Bell, against Bell alleging economic damages as a result of a fire in Bell’s Hinsdale, Illinois, switching station which disrupted service for one month. Counts I and II of plaintiffs’ complaint alleged violations of the Illinois Public Utilities Act (Act) (220 ILCS 5/1— 101 et seq. (West 1992)), and count V sought a declaratory judgment that a provision in Bell’s tariff did not bar their claims. Counts III and IV are not before this court.

The circuit court dismissed counts I through IV and granted summary judgment for Bell on count V. Plaintiffs appealed the court’s order pertaining to counts I, II and V, but the appellate court affirmed with one justice dissenting. (234 Ill. App. 3d 457.) We affirm.

Bell has five telephone switching stations which route and direct telephone calls over particular geographic areas. The subject of this litigation is Bell’s switching station in Hinsdale, Illinois. The Hinsdale station services the western and southwestern suburbs of Chicago and is able to process 3.5 million calls per day.

In order to protect the computer equipment and cables housed in its Hinsdale station from fire, Bell equipped it with an automatic fire sensor which would detect the presence of fire. In addition, Bell equipped the Hinsdale station with a fire alarm which would sound if a fire was detected; the alarm was connected so that, if sounded, it would register in Bell’s office in Springfield. However, Bell did not connect the alarm to a local fire or police department. Further, although the Hinsdale station was automated and usually devoid of people, Bell did not install automatic fire-fighting equipment. Rather, it merely bolted manual extinguishers on the walls of the station.

On the afternoon of May 8, 1988, a fire started in Bell’s Hinsdale switching station. No one was in the station at this time; however, the fire alarm was triggered and, at 3:50 p.m., registered for nine consecutive minutes in Bell’s Springfield office. After the alarm sounded, Bell did not respond. The fire triggered a second alarm in Bell’s Springfield office at 4:20 p.m., but Bell again did not respond.

At 4:50 p.m., someone passing the Hinsdale station saw smoke coming from the building and alerted the fire department. Although the fire department arrived within minutes, the Hinsdale station was already consumed by fire and the contents of the station destroyed. Consequently, telephone service to the western and southwestern suburbs of Chicago was disrupted.

Because of the fire damage, telephone service to the area affected was disrupted for approximately one month. Thereafter, numerous Bell customers filed class action lawsuits against Bell as a result of the disruption in service. The cases were eventually consolidated. The complaint in its present form was filed as plaintiffs’ second-amended complaint.

In count I of their second-amended complaint, plaintiffs charged Bell with violating sections 8 — 101 and 8 — 401 of the Act, as well as Illinois Commerce Commission Rules (Commission Rules) 402(a) and 408(a). Count II charged Bell with the willful violations of these same sections.

Section 8 — 101 requires Bell to

"furnish, provide and maintain such service instrumentalities, equipment and facilities as shall promote the safety, health, comfort and convenience of its patrons, employees and public and as shall be in all respects adequate, efficient, just and reasonable.” (220 ILCS 5/8 — 101 (West 1992).)

Section 8 — 401 similarly requires Bell to provide service and facilities "which are in all respects adequate, efficient, reliable and environmentally safe.” (220 ILCS 5/8 — 401 (West 1992).) Commission Rule 402(a) requires Bell to adopt and pursue maintenance programs aimed at preventing service interruptions. Commission Rule 408(a) requires Bell to make reasonable provisions to meet emergencies caused by fire. 83 Ill. Adm. Code §§ 730.402(a), 730.408(a) (1985).

The source of plaintiffs’ remedy is section 5 — 201 of the Act (220 ILCS 5/5 — 201 (West 1992)). That section, which is applicable to Illinois Bell by virtue of section 13 — 101 of the Universal Telephone Service Protection Law of 1985 (220 ILCS 5/13 — 101 (West 1992)), provides:

"In case any public utility shall do, cause to be done or permit to be done any act, matter or thing prohibited, forbidden or declared to be unlawful, or shall omit to do any act, matter or thing required to be done either by any provisions of this Act or any rule, regulation, order or decision of the [Illinois Commerce] Commission, issued under authority of this Act, the public utility shall be liable to the persons or corporations affected thereby for all loss, damages or injury caused thereby or resulting therefrom, and if the court shall find that the act or omission was wilful, the court may in addition to the actual damages, award damages for the sake of example and by the way of punishment.” (Emphasis added.) 220 ILCS 5/5 — 201 (West 1992).

The complaint as it presently reads alleges an action based in tort. In dispute is whether the General Assembly intended to allow plaintiffs to recover economic damages in tort when it allowed affected persons and customers to recover "all” losses, damages or injuries.

Plaintiffs argue that the word "all” means exactly that — any loss, damage or injury whatsoever that can be traced to a utility’s negligent or wilful violation of the Act or Commission rules. However, this court has previously rejected that very argument. In Barthel v. Illinois Central Gulf R.R. Co. (1978), 74 Ill. 2d 213, the plaintiffs sued for personal injuries and wrongful death resulting from a collision between a car and one of the defendant’s freight trains. The Barthel plaintiffs sued under section 5 — 201 (then section 73) of the Act, alleging violations by the defendant of various regulations relating to the safety of railroad crossings. The Barthel plaintiffs made the same argument made by plaintiffs here: that when the General Assembly stated that a utility violating the Act "shall be liable” for "all loss, damages or injury,” the utility’s liability was conclusively demonstrated. In Barthel, the plaintiffs sought the abrogation of the common law defense of contributory negligence.

This court, in rejecting the plaintiffs’ argument, noted that the Act is in derogation of the common law, and therefore the tort principles limiting the plaintiffs’ claims under the Act would not be deemed abrogated unless "it plainly appears that the intent of the statute” is to do so. (Barthel, 74 Ill. 2d at 221.) Statutes in derogation of the common law are to be strictly construed in favor of persons sought to be subjected to their operation. The courts will read nothing into such statutes by intendment or implication. (Barthel, 74 Ill. 2d at 220.) The court then held that the common law defense of contributory negligence was available, despite the Act’s provision of liability for "all *** damages” resulting from a violation of the Act.

Having established that the General Assembly did not provide for limitless recovery, we must next determine if it meant to allow for recovery of economic damages in tort.

At common law, purely economic damages are generally not recoverable in tort actions. (Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill. 2d 69.) In Moorman, the plaintiff had purchased a grain storage tank from defendant, which developed a crack. The plaintiff sued, seeking damages for the cost of replacing the tank and for loss of its use. The plaintiff’s complaint was based upon the tort theories of strict liability, negligence and misrepresentation, as well as contract theories.

This court in Moorman enunciated the proposition that purely economic losses are generally not recoverable in tort actions. Three exceptions were articulated: (1) where the plaintiff has sustained damage resulting from a sudden or dangerous occurrence (Moorman, 91 Ill. 2d at 86); (2) where the plaintiffs damages are the proximate result of a defendant’s intentional, false representation (fraud) (Moorman, 91 Ill. 2d at 88-89); and (3) where the plaintiffs damages are a proximate result of a negligent misrepresentation by a defendant in the business of supplying information for the guidance of others in their business transactions. (Moorman, 91 Ill. 2d at 89.) None of these exceptions is present in this case.

The Moorman decision defined economic losses as " 'damages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits — without any claim of personal injury or damage to other property ***’ [citation] as well as 'the diminution in the value of the product because it is inferior in quality and does not work for the general purposes for which it was manufactured and sold.’ [Citation.]” (Moorman, 91 Ill. 2d at 82.) The Moorman holding is bottomed upon the theory that tort law affords a remedy for losses occasioned by personal injuries or damage to one’s property, but contract law and the Uniform Commercial Code offer the appropriate remedy for economic losses occasioned by diminished commercial expectations not coupled with injury to person or property. The Moorman court concluded that qualitative defects are best handled by contract rather than tort law. Tort law is "appropriately suited for personal injury or property damage resulting from a sudden or dangerous occurrence” whereas the remedy for a "loss relating to a purchaser’s disappointed expectations due to deterioration, internal breakdown or nonaccidental cause *** lies in contract.” Moorman, 91 Ill. 2d at 86.

This action, if allowed, would be in derogation of the common law. Therefore, under Barthel the Act must be strictly construed against plaintiffs. A strict construction of section 5 — 201 in Bell’s favor leads us to conclude that plaintiffs’ complaint cannot stand. Section 5 — 201’s provision that allows recovery for "all loss, damages or injury” permits recovery of all losses and damages authorized under the common law. Since the allegations of plaintiffs’ complaint call forth no exception to the Moor-man doctrine, a tort action is precluded.

The second issue presented for our review is whether the trial court correctly entered summary judgment in favor of Bell on count V of plaintiffs’ second-amended complaint. In that count, plaintiffs sought a declaratory judgment that an exculpatory clause in the tariff that Bell filed with the Illinois Commerce Commission does not preclude this action. This issue is not rendered moot by our disposition of the first issue. Were we to conclude that the tariff does not bar this action, we could remand this cause to allow plaintiffs to amend their complaint.

The most recent tariff, like other tariffs filed by Bell going back several decades, lists among its general "regulations” a service interruption liability exclusion. That exclusion provides:

"The liability of the Company for damages arising out of mistakes, omissions, interruptions, delays, errors or defects in transmission occurring in the course of furnishing service *** shall in no event exceed an amount equivalent to the proportionate charge to the customer for the period of service during which such mistake, omission, interruption, delay, error or defect in transmission occurs. No other liability shall in any case attach to the Company.” Illinois Bell Telephone Company Tariff, Illinois Commerce Commission, No. 5, pt. 1, § 5, par. 3.1.

Plaintiffs contend that Bell’s tariff, filed with the Commission in accordance with the Act, is actually in contravention of the Act and therefore does not protect Bell from liability for interruption in service. Moreover, although the tariff, which describes the "terms and conditions of service,” preempts any contract expectancy from customers and contains an exculpatory clause which bars recovery for consequential damages due to interruptions in service, plaintiffs maintain that it is against public policy and should not bar plaintiffs’ claims.

In response, Bell contends that the tariff is not against public policy and, further, that the tariff, accepted by the legislature for 50 years, legally defines the limits of its liability for interruptions in service. Consequently, Bell maintains that the tariff bars plaintiffs’ claims.

Plaintiffs predicate their claims upon Bell’s duties pursuant to the same sections of the Act and the same Commission rules which it uses to support its tort claim: sections 8 — 101 and 8 — 401 of the Act (220 ILCS 5/8— 101, 8 — 401 (West 1992)), and Commission Rules 402(a) and 408(a) (83 Ill. Adm. Code §§ 730.402(a), 730.408(a) (1985)). Plaintiffs assert that Bell, in failing to provide automatic fire-fighting equipment and in failing to respond to the alarms which sounded in its Springfield office, violated both the Act and the Commission’s rules. Consequently, plaintiffs argue that Bell should not be able to escape liability by use of exculpatory language in contravention of both the Act and the Commission’s rules.

Initially, it should be noted that Bell is nowhere charged with the duty to provide completely uninterrupted service. Rather, it is required to provide "service and facilities which are in all respects adequate, efficient, reliable and environmentally safe and which *** constitute the least-cost means of meeting the utility’s service obligations.” (220 ILCS 5/8 — 401 (West 1992).) Adequate, efficient and reliable service is not tantamount to infallible service. Temporary disruptions may occur without reducing Bell’s service to a level less than adequate, efficient or reliable. Thus, the tariff’s provision which limits Bell’s liability in the event such a disruption in service occurs is not contrary to the Act or the rules.

In fact, the tariff is required by the Act and plays an integral role in allowing Bell to meet the expectations of the General Assembly. In enacting the Act, the legislature intended that "[telecommunications services should be available to all people of the State of Illinois at just, reasonable and affordable rates and be provided as widely and economically as possible.” (Joint Committee on Public Utility Regulations (April 1985), at 21.) Bell is required to file a tariff "which describes the nature of the service, applicable rates and other charges, [and] terms and conditions of service” (220 ILCS 5/13— 501 (West 1992)), in order to meet the legislature’s dictate that it provide cost-effective service. Bell has done so for over 50 years, and during that time has always included the limitation of liability challenged here. The legislature has approved this limitation for over half a century.

We hold that the exculpatory language in Bell’s tariff properly limits claims from disruption of service to a rebate of the costs for the missed service. This language, accepted for decades by the General Assembly, is neither in contravention of the Act passed by that same body, the rules passed by the Commission (an agency of that body), nor against public policy. Plaintiffs’ claims are therefore barred.

In passing, we note that the California Supreme Court was faced with virtually the same factual scenario 20 years ago, and ruled as we do today. In Waters v. Pacific Telephone Co. (1974), 12 Cal. 3d 1, 523 P.2d 1161, 114 Cal. Rptr. 753, the plaintiff sued defendant Pacific Telephone Company after it failed to furnish adequate telephone service. Under California’s Public Utilities Code, the defendant had to "furnish and maintain such adequate, efficient, just, and reasonable service, instrumentalities, equipment, and facilities as are necessary to promote the safety, health, comfort, and convenience of its patrons, employees, and the public,” language very similar to section 8 — 101 of the Illinois Act. California’s code provided that "any public utility which does, causes to be done, or permits any act, matter, or thing prohibited or declared unlawful, or which omits to do any act, matter or thing required to be done *** shall be liable to the persons or corporations affected thereby for all loss, damages, or injury caused thereby or resulting therefrom.” This language is very similar to section 5 — 201 of the Illinois Act.

Finally, California’s code established the Public Utilities Commission, which inter alia had the authority to approve or disapprove tariffs filed by utilities. In Waters, the defendant had filed a tariff which limited its liability in the event of a service interruption to a "credit allowance” in an amount limited to "the total fixed charges for exchange service” for the period of phone service interruption.

The California Public Utilities Commission approved of the tariff, including the exculpatory clause. Their supreme court found that the exculpatory clause was enforceable and barred the action. In so ruling, it quoted a California appellate court opinion, noting:

" 'The theory underlying [decisions upholding the right of regulated utilities to limit their liabilities] is that a public utility, being strictly regulated in all operations with considerable curtailment of its rights and privileges, shall likewise be regulated and limited as to its liabilities. In consideration of its being peculiarly the subject of state control, "its liability is and should be defined and limited.” [Citation.] There is nothing harsh or inequitable in upholding such a limitation of liability when it is thus considered that the rates as fixed by the commission are established with the rule of limitation in mind. Reasonable rates are in part dependent upon such a rule.’ ” Waters v. Pacific Telephone Co. (1974), 12 Cal. 3d 1, 7, 523 P.2d 1161, 1164, 114 Cal. Rptr. 753, 756, quoting Cole v. Pacific Telephone & Telegraph Co. (1952), 112 Cal. App. 2d 416, 419, 246 P.2d 686, 689.

In interpreting a statute, the primary rule, to which all other rules are subordinate, is to ascertain and give effect to the true intent and meaning of the legislature. (Kraft, Inc. v. Edgar (1990), 138 Ill. 2d 178, 189.) A statute or ordinance must receive a sensible construction, even though such construction qualifies the universality of its language. (City of East St. Louis v. Union Electric Co. (1967), 37 Ill. 2d 537, 542.) In this regard, it is relevant to note the absurdity of plaintiffs’ suggested reading of the phrase "all loss, damages or injury.”

The Hinsdale switching station is able to process 3.5 million calls per day. During the month the phone services were discontinued, there were potentially more than 100 million phone calls that were inconvenienced or prevented due to the fire.

Plaintiffs argue that the telephone company is liable for all losses flowing from this service interruption. They interpret all losses to mean losses of every type and description and to whomsoever they occur. Such losses would include lost business and defeated expectations of every type and, presumably, would not be limited to subscribing customers but would include anyone and everyone who might have routed a phone call through this facility. Given the imagination and resourcefulness of today’s litigants, it is easy to speculate that this figure might run into the tens or even hundreds of millions of dollars. In short, the plaintiffs could well end up owning the telephone company as the result of a service interruption. Another possible alternative would be that phone rates would have to be increased astronomically to recoup such liability payments. That old adage still holds. There is no such thing as a free lunch. We do not believe that the current state of the law contemplates the result which the plaintiffs seek.

For the foregoing reasons, the judgment of the appellate court is affirmed.

Affirmed.