Ashland, LLC v. Va.-Am. Water Co.

878 S.E.2d 378

ASHLAND, LLC

v.VIRGINIA-AMERICAN WATER COMPANY

Record No. 210800

Supreme Court of Virginia.

October 13, 2022

Gibson S. Wright (McCandlish Holton, on briefs), Richmond, for appellant

Julie S. Palmer (John R. Owen ; Harman Claytor Corrigan & Wellman, on brief), Glen Allen, for appellee.

PRESENT: All the Justices

OPINION BY JUSTICE WESLEY G. RUSSELL, JR.

Ashland, LLC ("Ashland") appeals the circuit court's dismissal of its claim against Virginia-American Water Company ("Virginia-American") for an alleged breach of contract. Specifically, Ashland contends that the circuit court erred in concluding that Article IX, Section 4 of the Constitution of Virginia deprived the circuit court of jurisdiction to adjudicate Ashland's contract claim. For the reasons that follow, we agree with Ashland, reverse the judgment of the circuit court, and remand the matter for further proceedings consistent with this opinion.

I. Background

Virginia-American is a private utility company that operates water plants, including one in the City of Hopewell. It provides water to local customers, including Ashland, a chemical manufacturer. Virginia-American provides its customers water service pursuant to a tariff issued by the State Corporation Commission ("Commission").¹

In 2018, Virginia-American undertook repairs at its Hopewell water plant. The repairs involved installation of a bypass line that carried water near electronic equipment critical to proper operation of the water plant. The bypass line ruptured, damaging the electronic equipment and rendering associated water pumps inoperative. The equipment failure caused an outage that disrupted water service to Ashland. During the outage, Ashland was unable to manufacture the chemicals it sells.

Alleging that the outage resulted in $515,000 in damages due to lost business and profits, Ashland filed suit against Virginia-American in the Circuit Court of the City of Hopewell. Ashland's complaint asserted a breach of contract claim based on an alleged violation of the tariff. Ashland relied on Rule 19(c) of the tariff, which provides that Virginia-American "will undertake to use reasonable care and diligence in order to prevent and avoid interruption and fluctuations in the service, but it cannot and does not guarantee that such will not occur." Ashland claimed that Virginia-American's placement of the bypass line near the electronic equipment constituted "a breach of its contractual duty to use reasonable care."

Virginia-American demurred to the complaint by asserting that other provisions of the tariff barred Ashland's claim. Virginia-American cited tariff Rule 8(f), which provides in part that Virginia-American "shall not, in any way or under any circumstances, be held liable or responsible to any party ... for any losses or damage resulting from any ... deficiency in ... supply of water due to any cause whatsoever[,]" and Rule 17(a), which states that Virginia-American "does not guarantee a[n] ... uninterrupted supply of water, and customers are cautioned to provide sufficient storage of water where an absolutely uninterrupted supply must be assured."

Although not initially raised by Virginia-American, the question of whether the circuit court had jurisdiction to hear Ashland's breach of contract claim arose during the briefing of and argument about Virginia-American's demurrer.² In its questions of counsel, the circuit court explored whether it had jurisdiction to hear the matter or whether resolution of this type of dispute was committed to the Commission. The circuit court also provided the parties an opportunity to brief the jurisdictional issue.

After taking the matter under advisement, the circuit court issued a letter opinion addressing "whether [it] ha[d] subject matter jurisdiction to hear this case." The circuit court concluded that Ashland's "contention that jurisdiction is appropriate because it has brought a contract action fails to properly interpret a ‘tariff.’ " The circuit court explained, "[i]t remains true that ‘circuit courts have jurisdiction over common law contract claims’ [and that] a tariff ‘establishes the contractual relationship between the parties’[; y]et, these two truths do not mean that a dispute over tariff provisions is merely a common law contract claim." The circuit court concluded that "while the two may appear to be similar, a tariff is not the equivalent of a contract."

In further examining the issue, the circuit court referenced provisions of the Code that govern consumer complaints about entities subject to Commission regulation. It found that the "statutes show a proclivity on the part of the General Assembly to place the [Commission] in charge of controversies involving public utilities and customers." Finally, and "[m]ost importantly," the circuit court concluded that it lacked jurisdiction because Article IX, Section 4 of the Constitution of Virginia provides that only the Supreme Court may hear appeals of decisions of the Commission and that " ‘no other court ... shall have jurisdiction to review, reverse, correct, or annul any action of the Commission or to enjoin or restrain it in the performance of its official duties.’ " Finding that the promulgation of a tariff by the Commission is an " ‘action’ " of the Commission, the circuit court concluded that "[t]o sit for this controversy, [it] must ‘review’ the [t]ariff" and that it lacked the power to do so.

The circuit court memorialized its ruling in an order dated May 24, 2021. The order specified that, "[u]pon consideration of the pleadings, briefs, and argument, for the reasons stated in the [l]etter [o]pinion ..., the [c]ourt finds that it lacks jurisdiction to address the merits of the controversy, including the merits of [Virginia-American's d]emurrer." On that basis, the circuit court dismissed Ashland's complaint.

Ashland noted an appeal to this Court, asserting that the circuit court erred in concluding that it lacked subject matter jurisdiction over Ashland's breach of contract claim and in declining to reach the merits of and ultimately overrule Virginia-American's demurrer. We granted Ashland's petition for appeal.

II. Analysis

A. Standard of review

Ashland's challenge to the circuit court's determination that it lacked jurisdiction over Ashland's breach of contract claim presents a question of law subject to de novo review in this Court. Andrews v. Richmond Redevelopment & Hous. Auth. , 292 Va. 79, 85, 787 S.E.2d 96 (2016). To the extent that the circuit court's determination regarding jurisdiction turned on its interpretation of the Constitution of Virginia, questions of constitutional interpretation also are questions of law subject to de novo review. Montgomery Cnty. v. Virginia Dep't of Rail & Pub. Transp. , 282 Va. 422, 435, 719 S.E.2d 294 (2011).

B. Circuit court's ruling on jurisdiction

The Commission was created "to protect the public rights by regulating public utilities." Newport News & O.P. Ry. & Elec. Co. v. Hampton Roads Ry. & Elec. Co. , 102 Va. 847, 851, 47 S.E. 858 (1904). Article IX, Section 2 of the Constitution of Virginia provides that "[s]ubject to such criteria ... prescribed by law, the Commission shall have the power and be charged with the duty of regulating the rates, charges, and services and, except as may be otherwise authorized by this Constitution or by general law, the facilities of railroad, telephone, gas, and electric companies" and that it also "shall have such other powers and duties not inconsistent with this Constitution as may be prescribed by law." The General Assembly has provided by statute for the Commission to exercise similar ratemaking and other regulatory authority over water companies like Virginia-American. See Code §§ 12.1-12 & 56-261, et seq. ; see also City of Alexandria v. State Corp. Comm'n , 296 Va. 79, 95, 818 S.E.2d 33 (2018).

The authority conferred upon the Commission by the Constitution and the General Assembly to set the rates for and otherwise regulate water companies is near plenary, subject to review only in this Court. Entitled "Appeals from actions of the Commission[,]" Article IX, Section 4 of the Constitution of Virginia provides that "[a]ll appeals from the Commission shall be to the Supreme Court only" and that "[n]o other court of the Commonwealth shall have jurisdiction to review, reverse, correct, or annul any action of the Commission or to enjoin or restrain it in the performance of its official duties[.]"³

Much as the Commission has been granted near plenary authority over matters committed to it by the Constitution or statute, circuit courts have, subject to an amount in controversy requirement, been given similar authority to adjudicate contract actions. Code § 17.1-513 provides that the circuit courts

shall have original and general jurisdiction of all civil cases, except cases upon claims to recover personal property or money not of greater value than $100, exclusive of interest, and except such cases as are assigned to some other tribunal; ... and also, of all cases, civil or criminal, in which an appeal may be had to the Supreme Court.^{[4 ]}

As we previously have observed, "[t]o state the obvious, circuit courts have subject matter jurisdiction over contract disputes," Pure Presbyterian Church of Washington v. Grace of God Presbyterian Church , 296 Va. 42, 56, 817 S.E.2d 547 (2018), and exercise that authority "[u]nless ousted of jurisdiction by law." Appalachian Power Co. v. John Stewart Walker, Inc. , 214 Va. 524, 530, 201 S.E.2d 758 (1974). Thus, a circuit court has jurisdiction over a common law contract claim unless a provision of the Constitution or an enactment of the General Assembly strips it of that authority.

Given these potentially conflicting grants of jurisdiction, the proper characterization of Ashland's claim for damages is critical. Ashland characterizes its claim as nothing more than a common law breach of contract action with the tariff merely supplying the terms of the contract...