State Farm Fire and Casualty Company v. Jefferson et al

Filing 17

MEMORANDUM AND ORDER - IT IS HEREBY ORDERED that: 1) Defendant United Water Company's Motion to Dismiss is DENIED; 2) The Defendant United Water Company's Motion to Bifurcate and Stay is GRANTED as follows; a)This matter is TRANSFERRED to t he PA Public Utility Commission, consistent with my accompanying memorandum; b) The Clerk shall mark this matter CLOSED for statistical purposes and place it in the civil suspense file pending receipt of the PA Public Utility Commission's findi ng and conclusions; c) Counsel are directed to submit a brief status report every 90 days and upon completion of their proceedings before the PA Public Utility Commission. Signed by Honorable Lawrence F. Stengel on 7/17/13. (Attachments: # 1 Order)(aaa)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
STATE FARM FIRE AND CASUALTY
COMPANY a/s/o Brittany Lehman and
Nathan Becker, Charles K. Powell, Jr., and
Anthony Cuthbertson,
Plaintiff,
v.
TINA JEFFERSON, ANDRE
DRAYTON, SYMONE SCOTT,
AND UNITED WATER COMPANY,
Defendants.

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CIVIL ACTION

NO. 12-1107

MEMORANDUM
STENGEL, J.

July 17, 2013

State Farm Fire & Casualty Co. (State Farm) brings this lawsuit against United
Water Pennsylvania, Inc. (United Water), alleging negligence in connection with a fire at
the Quail Run Apartment Complex (Quail Run) in Harrisburg, Pennsylvania.1 United
Water moves to dismiss for lack of subject matter jurisdiction or, in the alternative, to
bifurcate and stay the case pursuant to the primary jurisdiction doctrine. For the
following reasons, I will grant the motion in part and deny it in part.
I.

BACKGROUND
State Farm insured the real and personal property of several Quail Run residents.

Compl. ¶¶ 9-12. United Water provided domestic water services to Quail Run, to its fire
hydrants, and to hydrants in the immediate vicinity. Id. ¶ 15. On June 11, 2010, a fire

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State Farm also sued Tina Jefferson, Andre Drayton, and Symone Scott, all of whom occupied the unit in
which the fire originated. These parties have since been dismissed. Doc. No. 16.

broke out in one of Quail Run’s units. Id. ¶ 16. The Colonial Park Fire Department
responded but could not obtain adequate water volume from nearby hydrants despite
twice requesting that United Water increase the water pressure serving the fire scene. Id.
¶ 33. The fire spread to neighboring units insured by State Farm, causing damage. Id. ¶
18.
State Farm paid a total of $109,498.18 to its insureds as a result of the fire. State
Farm, as subrogee of its insureds, now alleges that United Water negligently failed to
supply Quail Run’s fire hydrants with adequate water volume and pressure. Id. ¶¶ 17, 32,
34.
II.

DISCUSSION
A.

Subject Matter Jurisdiction

United Water contends that the Pennsylvania Public Utility Code (the Utility
Code) divests this court of subject matter jurisdiction by placing primary jurisdiction in
the Pennsylvania Public Utility Commission (the Commission). Accordingly, it moves
pursuant to Federal Rule of Civil Procedure 12(b)(1) to dismiss State Farm’s complaint
for lack of subject matter jurisdiction.
A motion under Rule 12(b)(1) may be treated as either a facial or factual challenge
to the court’s subject matter jurisdiction. Gould Electronics Inc. v. United States, 220
F.3d 169, 176 (3d Cir. 2000). Because United Water contends that State Farm’s
allegations, accepted as true, fail to invoke this court’s jurisdiction, it asserts a facial
challenge. M.C. v. Bianchi, 782 F. Supp. 2d 127, 128 (E.D. Pa. 2011). “In reviewing a
facial attack, the court must only consider the allegations of the complaint and documents
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referenced therein and attached thereto, in the light most favorable to the plaintiff.”
Gould, 220 F.3d at 176.
United Water’s argument is mistaken in two fatal respects. First, the primary
jurisdiction doctrine, in both federal and Pennsylvania courts, “has nothing to do with
subject matter jurisdiction.” MCI Telecommunications Corp. v. Teleconcepts, Inc., 71
F.3d 1086, 1107 (3d Cir. 1995) (Nygaard, J., concurring); Reiter v. Cooper, 507 U.S.
258, 268-69 (1993); White v. Conestoga Title Ins. Co., 53 A.3d 720, 728 n.14 (Pa. 2012).
Rather, the doctrine “is concerned with promoting proper relationships between the
courts and administrative agencies charged with particular regulatory duties.” U.S. ex
rel. Haskins v. Omega Inst., Inc., 11 F. Supp. 2d 555, 560 (D.N.J. 1998); Elkin v. Bell
Tel. Co. of Pennsylvania, 420 A.2d 371, 376 (Pa. 1980). Thus, assuming for the moment
the Commission does have primary jurisdiction over this dispute, that alone would not
deprive this court of its properly invoked subject matter jurisdiction. Second, and more
to the point, “state statutes cannot divest federal courts of jurisdiction.” Dolan v. Cmty.
Med. Ctr. Healthcare Sys., 500 F. Supp. 2d 503, 509 (M.D. Pa. 2007); Marshall v.
Marshall, 547 U.S. 293, 314 (2006). The Utility Code therefore does not and could not,
under any circumstances, divest this court of subject matter jurisdiction.
This court has subject matter jurisdiction pursuant 28 U.S.C. § 1332(a). State
Farm is a citizen of Illinois, United Water is a citizen of Pennsylvania, and the amount in
controversy exceeds $75,000.00. Compl. ¶¶ 1, 5-6. United Water’s motion is therefore
denied insofar as it seeks dismissal of the complaint for want of subject matter
jurisdiction.
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B.

Primary “Jurisdiction”

United Water’s argument that the Commission has primary jurisdiction over this
dispute warrants a closer look. As indicated, the phrase “primary jurisdiction” is a
misnomer insofar as the doctrine bearing its name “does not involve any question of
subject matter jurisdiction.” Ostrov v. I.F.T., Inc., 586 A.2d 409, 413 (Pa. Super. Ct.
1991); Pettko v. Pennsylvania Am. Water Co., 39 A.3d 473, 478 n.9 (Pa. Commw. Ct.
2012) (“In contrast to the primary jurisdiction doctrine, we note that courts have defined
subject matter jurisdiction generally as a court’s or tribunal’s power to hear cases of the
class to which the case at issue belongs.”). Rather, in Pennsylvania:
[T]he doctrine of primary jurisdiction is jurisprudential, developed by [the
Pennsylvania Supreme Court] to accommodate the respective spheres of
adjudicatory authority of the Commonwealth’s administrative agencies and
the common pleas courts. Under the doctrine, a trial court, which has
subject matter jurisdiction over a claim, determines that an agency’s
expertise is needed on a particular issue. Accordingly, it refers the question
to the agency and stays judicial proceedings, pending the agency’s
determination. The agency’s subsequent determination on the issue, when
final, is binding and not subject to collateral attack upon the resumption of
judicial proceedings.
White, 53 A.3d at 728 n.14 (citations and internal quotation marks omitted).2 Referral to
a state agency under the primary jurisdiction doctrine is appropriate only “where the
subject matter is within an agency’s jurisdiction and where it is a complex matter
requiring special competence, with which the judge or jury would not or could not be
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Under Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), and its progeny, a federal court sitting in diversity
“must apply the substantive law of the forum state.” Chin v. Chrysler LLC, 538 F.3d 272, 278 (3d Cir. 2008). The
doctrine of “primary jurisdiction is part of the substantive law of Pennsylvania.” MCI Telecommunications Corp. v.
Teleconcepts, Inc., 71 F.3d 1086, 1110 (3d Cir. 1995) (Nygaard, J., concurring). Accordingly, to the extent a
Pennsylvania common pleas court would defer to a state agency’s primary jurisdiction, so must I. Id. at 1112
(Nygaard, J., concurring); see also e.g., Virginia Imports, Inc. v. Kirin Brewery of Am., LLC, 296 F. Supp. 2d 691,
698 n.1 (E.D. Va. 2003) (“Assuming that primary jurisdiction did apply, under the principles established by Erie,
Federal courts will defer to the primary jurisdiction of a state agency, if state courts would defer.”).

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familiar.” Elkin, 420 A.2d at 377 (emphasis added). In making this determination,
courts must look beyond the “form of [the] action or the manner in which is titled” to
“the essence of the underlying claims.” DeFrancesco v. W. Pennsylvania Water Co., 453
A.2d 595, 597 n.5 (Pa. 1982).
United Water argues that primary jurisdiction rests with the Commission for two
reasons. First, United Water contends that resolving this dispute will require “the
adjudication of issues involving the reasonableness, adequacy and sufficiency of public
utility services,” for which the Commission “has long been recognized as the appropriate
forum.” Elkin, 420 A.2d at 374; 66 Pa. C.S. §§ 1504-05. And second, United Water
contends that State Farm’s claim implicates United Water’s tariff, the interpretation of
which is considered to be “peculiarly within the expertise of the . . . Commission.” Bell
Tel. Co. of Pennsylvania v. Uni Lite, Inc., 439 A.2d 763, 765 (Pa. Super. Ct. 1982).
Regarding “fire hydrant service or private fire hydrant sprinkler and hose service,” the
tariff provides that United Water “shall have no greater duty . . . than to supply only such
volumes of water at such pressures as may be available in the normal operation of the
waterworks facilities at the time of use.” Doc. No. 5-4 at 55, ¶ 53. Regarding its liability
for “a loss resulting from failure to supply water or pressure or for any other cause,” the
tariff provides that United Water “shall not be held liable for any amount in excess of ten
percent of the annual charge for public fire hydrant service or for private fire fighting
service.” Id. ¶ 54.
Applying Elkin’s two-part test, and looking to the essence of State Farm’s claims,
I find that referral to the Commission is appropriate to determine whether United Water
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supplied “such volumes of water at such pressures as may be available in the normal
operation of the waterworks facilities at the time of use.” Doc. No. 5-4 at 55, ¶ 53. State
Farm appears to concede that the subject matter of its suit is within the Commission’s
jurisdiction, Doc. No. 10 at 11, and I agree. The essence of State Farm’s claim is that
“United Water failed to provide enough water pressure to allow for a sufficient amount of
water to extinguish the . . . fire.” Compl. ¶ 17; see also id. ¶ 33 (“United Water owed a
duty Quail Run to provide adequate and sufficient quantities of water for firefighting
purposes at the Quail Run Apartment Complex.”); id. ¶ 34 (alleging acts of “negligence
and carelessness” such as “[f]ailing to provide sufficient water volume to Quail Run to
allow the Colonial Park Fire Department to properly fight the fire,” “[c]ausing and/or
allowing the fire to spread due to a lack of appropriate water volume at Quail Run,” and
“[f]ailing to notice, observe, understand, discern and/or perceive the dangerous condition
caused by failing to provide adequate water volume to Quail Run at the time of the fire”).
Surely, these allegations raise issues involving the reasonableness, adequacy, and
sufficiency of United Water’s service. While State Farm disputes that the Commission’s
expertise is required, I have little trouble concluding that it is. “Public utility tariffs have
the force and effect of law, and are binding on the customer as well as the utility.” PPL
Elec. Utilities Corp. v. Pennsylvania Pub. Util. Comm’n, 912 A.2d 386, 402 (Pa.
Commw. Ct. 2006). United Water’s alleged “duty . . . to provide adequate and sufficient
quantities of water for firefighting purposes,” Compl. ¶ 33, is explicitly defined in its
tariff. Doc. No. 5-4 at 55, ¶ 53. There is accordingly no doubt that resolving this dispute
will require a determination of United Water’s compliance with its tariff, even though
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unmentioned by State Farm in its complaint. Because Pennsylvania courts are uniform in
holding that “it is the Commission that has the expertise to examine and interpret tariff
language,” referral of this question is necessary. PPL Elec. Utilities Corp., 912 A.2d at
403; Teleconcepts, Inc., 71 F.3d at 1105 (“The agency that can best determine [a utility’s]
compliance with [its] tariff is the [Commission].”).
In opposition, State Farm focuses on DeFrancesco, 453 A.2d 595, which
addressed the primary jurisdiction doctrine on facts seemingly quite similar to those here.
The plaintiffs’ properties were destroyed by a fire, which the Pittsburgh Fire Department
was unable to contain. They sued the Western Pennsylvania Water Company (West
Penn), “alleging that the fire was not controlled because West Penn failed to provide
water pressure in the fire hydrant near [their] properties.” Id. at 595. In holding that
primary jurisdiction did not rest with the Commission, the court explained that:
The controversy now before us . . . is not one in which the general
reasonableness, adequacy or sufficiency of a public utility’s service is
drawn into question. Resolution of appellant’s claims depended upon no
rule or regulation predicated on the peculiar expertise of the PUC, no
agency policy, no question of service or facilities owed the general public,
and no particular standard of safety or convenience articulated by the PUC.
Rather, the gravamen of the allegations at trial was within the prescan
authority of the courts, i.e., that the utility negligently failed to provide
service required.
Id. at 597.
State Farm argues that DeFrancesco controls because, like the plaintiffs there, it
alleges that a public utility “acted negligently failing to supply enough water pressure to
the subject fire hydrants.” Doc. No. 10 at 10. I find DeFrancesco’s holding to be more
nuanced than that. The allegation of negligence before the court was “that West Penn’s
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employees had worked on the hydrant the day of the fire and, as a result, the water
pressure in the hydrant sputtered off and on, below its normal pressure.” DeFrancesco,
453 A.2d at 596.3 On this point, DeFrancesco is distinguishable. State Farm does not
contend that a discrete act of negligence caused the hydrant’s insufficient water pressure;
it alleges that the hydrant’s insufficient water pressure was itself negligent. Put another
way, State Farm alleges that United Water failed to supply Quail Run’s hydrants with
adequate water volume and pressure in the ordinary course of business. This is a
categorically different allegation than the one advanced by the DeFrancesco plaintiffs. It
is therefore not surprising that resolution of the plaintiffs’ claims in Defrancesco,
confined as they were to an act of negligent repair, “depended upon no rule or regulation
predicated on the peculiar expertise of the PUC.” Id. at 597. As explained, State Farm’s
claim turns directly on a regulation within the Commission’s peculiar expertise. Doc.
No. 5-4 at 55, ¶ 53.
For these reasons, the Commission has primary jurisdiction over whether United
Water supplied “such volumes of water at such pressures as may be available in the
normal operation of the waterworks facilities at the time of use.” Doc. No. 5-4 at 55, ¶
53.4 In accordance with the bifurcated procedure adopted by the Pennsylvania Supreme

The Superior Court clarified the parties’ allegations on remand: “The issue at trial was who was
responsible for the inadequate supply of water. The mains that supplied water to the hydrants were owned and
maintained by [West Penn]. [The plaintiffs] contended that the inadequate supply of water was caused by [West
Penn’s] employees’ negligent repairs on August 10, 1973—the day before the fire. [West Penn] contended that the
inadequate supply was caused by the Fire Department’s use of too many pumpers.” DeFrancesco v. W.
Pennsylvania Water Co., 478 A.2d 1295, 1298 (Pa. Super. Ct. 1984).
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I note for clarity that while the Commission does have primary jurisdiction, it does not have exclusive
primary jurisdiction, as United Water appears to contend. “[A]n administrative agency does not have exclusive
jurisdiction unless it has the power to award relief that will make a successful litigant whole.” Pettko v.

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Court, Elkin, 420 A.2d at 376-77, I will transfer this matter to the Commission for a
determination of United Water’s compliance with its tariff, as indicated above. The
Commission is directed to address any other issue within its expertise that will aid in
resolving this dispute. This case will be stayed pending receipt of the Commission’s
findings and conclusions, at which time it “may continue, guided in scope and direction
by the nature and outcome of the agency determination.” Elkin, 420 A.2d at 377.
IV.

CONCLUSION
United Water’s motion is granted in part and denied in part.
An appropriate order follows.

Pennsylvania Am. Water Co., 39 A.3d 473, 484 (Pa. Commw. Ct. 2012); DiSanto v. Dauphin Consol. Water Supply
Co., 436 A.2d 197, 202 (Pa. Super. Ct. 1981). State Farm seeks money damages, which the Commission has no
power to award. Elkin, 420 A.2d at 375. Because the Commission cannot make State Farm whole, it does not have
exclusive primary jurisdiction over this dispute.

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