Opinion
G058630
03-29-2021
APPLIED MEDICAL RESOURCES CORPORATION, Plaintiff and Appellant, v. SOUTHERN CALIFORNIA EDISON COMPANY, Defendant and Respondent.
Knobbe, Martens, Olson & Bear, Mark D. Kachner, Daniel P. Hughes, Stephen C. Jensen, and Joseph F. Jennings for Plaintiff and Appellant. Sklar Kirsh, Justin M. Goldstein, Enrique A. Monagas, and Jessica Pettit; Southern California Edison Company, Patricia A. Cirucci and Jeffrey S. Renzi for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2018-00982743) OPINION Appeal from a judgment of the Superior Court of Orange County, Linda S. Marks, Judge. Affirmed. Knobbe, Martens, Olson & Bear, Mark D. Kachner, Daniel P. Hughes, Stephen C. Jensen, and Joseph F. Jennings for Plaintiff and Appellant. Sklar Kirsh, Justin M. Goldstein, Enrique A. Monagas, and Jessica Pettit; Southern California Edison Company, Patricia A. Cirucci and Jeffrey S. Renzi for Defendant and Respondent.
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A utility customer sued its electric utility for fraud and related claims based on the utility's alleged false promises, misrepresentations, and omissions concerning the customer's plan options, electricity rates, and related matters. The trial court granted summary judgment in favor of the utility company. Because we conclude the customer cannot establish justifiable reliance as a matter of law, we affirm.
FACTS
Plaintiff Applied Medical Resources Corporation (Applied) is a medical device company with manufacturing facilities in Orange County. Its Rancho Santa Margarita campus has over a dozen separate buildings, many of which are separated by public streets. Defendant Southern California Edison Company (SCE) provides electric service to all those buildings.
In June 2015, Applied purchased a commercial building, which it designated as "R100," adjacent to its Rancho Santa Margarita campus. The R100 building has two fuel cells that use natural gas to generate electricity. Because these fuel cells could generate significantly more energy than Applied could use at R100, Applied wanted to physically connect the fuel cells to the neighboring Applied buildings, R101, R102, and R104, so that it could consume all the energy its fuel cells generated.
That summer, Applied personnel met with SCE representatives to discuss its options. Applied explained it wanted to install its own power line to physically connect the R100 fuel cells with other buildings at its campus so it could utilize the R100 fuel cells' excess output in its neighboring buildings. SCE told Applied a dedicated physical connection was "unnecessary" and Applied could achieve the "same outcome" in a different way. SCE then informed Applied about different virtual metering billing options that would allow Applied to take advantage of the fuel cells' excess generation.
Applied was receptive to SCE's proposed alternatives to meet its "short-term needs," but reiterated it wanted to explore a physically connected campus as a more "long-term" or "permanent" solution. At the time, SCE did not object to the idea of a dedicated physical connection or otherwise indicate it would block SCE's attempts to build a direct power link between R100 and Applied's other buildings. Applied therefore assumed SCE could and would facilitate such a connection sometime in the future.
After reviewing the available options under SCE's tariffs, Applied ultimately decided to move forward with a virtual metering arrangement under SCE's Fuel Cell Net Energy Metering (FC-NEM) schedule, which is a tariff filed with the California Public Utilities Commission (CPUC). In December 2015, Applied and SCE entered into a Generating Facility Interconnection Agreement (the Interconnection Agreement) governed by FC-NEM.
As a public utility, SCE must file its tariffs with the CPUC and comply with all CPUC orders and rules. (See Pub. Util. Code, §§ 489, subd. (a), 702.)
The parties apparently had different understandings about how billing under FC-NEM would work. According to SCE, under FC-NEM, Applied would send its excess fuel cell energy to the power grid and thereafter receive a credit to offset a specific portion, but not all, of its overall charges. Specifically, Applied would receive a "generation credit" for any unused excess energy produced at R100; that amount would be credited against generation charges at R100 and also would offset generation charges at R101, R102, and R104. The generation credit would not offset other charges, such as the delivery component of the energy charge, the demand charges, or taxes, all of which would still be billed. Applied, on the other hand, claims it believed the value of the excess energy produced at R100 would offset its electricity usage charges at its other buildings, and Applied would be charged only for any additional power usage at those buildings.
For the first half of 2016, Applied operated its R100 fuel cells at near full capacity, believing the fuel cells' excess output would reduce Applied's overall energy consumption and yield the same "equivalent outcome" as having a dedicated physical connection. Meanwhile, SCE sent Applied bills that Applied found "confusing and unclear."
In July 2016, Applied met with SCE to discuss the bills. SCE explained that under FC-NEM, SCE purchased the excess electricity generated by Applied's fuel cells at wholesale rates of 3 to 4 cents per kilowatt hour (kWh) and then sold that energy back to Applied for use at its other buildings at about 15 cents/kWh. In other words, rather than aggregating the energy use of Applied's various buildings, SCE bought the energy produced by Applied at R100 at a low rate and then sold it back to Applied at about four times the purchase price for use at R101, R102, and R104. Applied insists it never would have entered into the Interconnection Agreement had it known SCE interpreted the FC-NEM tariff in that manner.
In November 2016, Applied spoke with SCE and again requested to physically connect R100 to other buildings at its campus. In response, SCE suggested two different options for electrically consolidating certain Applied buildings behind a single electrical meter at R100. However, under both options, SCE would own and operate the distribution network between the buildings, which meant Applied would still lack the ability to control its own private distribution network.
Applied responded that it wanted to own its own distribution facilities. SCE then acknowledged there was "no clear legal bar" to Applied owning and operating a distribution system, "provided it obtains any necessary building permits and the City's permission to extend the system under the public streets." SCE also noted "there may be significant practical hurdles and safety concerns to implementing this proposal."
In January 2018, Applied contacted the City of Rancho Santa Margarita (the City) to discuss building a private electrical connection across a public street and asked for a letter of support for the potential project. The City responded via email that although it was generally supportive of Applied connecting its buildings in a private distribution network, it could not definitively bind itself in the absence of a project application.
The following month, SCE informed Applied it would not allow Applied to install a private physical connection crossing public streets: "SCE's executive management gave this request thorough consideration . . . . In light of the operational and safety risks, especially those raised by an unregulated entity owning, operating, and maintaining a high-voltage distribution system under large public thoroughfares, SCE decided that it will not accommodate Applied Medical's request. SCE's management believes that the added-facilities option offered to Applied Medical will achieve the meter-consolidation benefits that Applied Medical requested without introducing any additional operational or safety risks associated with Applied Medical's customer-owned high-voltage distribution system proposal."
Applied then began to redesign its energy grid at its Rancho Santa Margarita campus, designing a privately owned microgrid and cogeneration project that would not cross public streets. According to its financial projections, the redesigned grid would yield significant savings in Applied's electricity costs. Applied contends it would have developed its microgrid years earlier had it known SCE would block its attempts to build a dedicated physical connection.
In March 2018, Applied filed a complaint against SCE, alleging causes of action for intentional misrepresentation, negligent misrepresentation, promissory fraud, fraud in the inducement and execution, promissory estoppel, and statutory unfair competition. As we read it, the complaint asserts that SCE caused Applied to believe an alternative arrangement with SCE (i.e., the Interconnection Agreement under FC-NEM) would yield the same energy cost as a dedicated physical connection, SCE dissuaded Applied from installing dedicated electrical connections between its buildings, and SCE improperly hindered Applied from transitioning to a self-sufficient system.
According to Applied, SCE's misrepresentations and concealments damaged Applied in several ways: (1) because SCE misrepresented that FC-NEM would yield the same "equivalent outcome" as a dedicated physical connection, Applied (a) wasted employee time pursuing the Interconnection Agreement under FC-NEM and (b) operated its fuel cells beyond the load it could consume at R100, at a financial loss; and (2) because SCE failed to disclose it would oppose Applied's efforts to build a dedicated physical connection, Applied delayed developing its own self-generated electrical infrastructure microgrid.
SCE filed a motion for summary judgment, asserting (1) California's filed rate doctrine (which we discuss below) bars each cause of action; (2) there is no triable issue of fact as to whether Applied justifiably relied on SCE's alleged misrepresentations and omissions; and (3) the CPUC has exclusive jurisdiction to hear Applied's claims.
The trial court agreed on all points. It found the filed rate doctrine bars Applied's claims for damages based on wasted employee time and the cost of operating the fuel cells. It also rejected Applied's claim for damages based on SCE's concealment of the fact it would block any effort to build a dedicated physical connection, finding that theory was not alleged in the complaint. The court further held that Applied's reliance on SCE's alleged misrepresentations was unsupported as a matter of law. And finally, citing Public Utilities Code section 1759, the court held it lacked jurisdiction to hear the dispute. It therefore granted SCE's motion and entered judgment for SCE. Applied appealed.
DISCUSSION
Applied now contends (1) contrary to the trial court's finding, the complaint does allege SCE concealed its plans to block Applied's plans to build a dedicated physical connection, or alternatively, Applied should be permitted to amend its complaint to allege that theory; (2) the filed rate doctrine is inapplicable to the types of damages Applied is seeking; (3) Applied's reliance on SCE's alleged misrepresentations was justifiable because FC-NEM is ambiguous; and (4) the court has jurisdiction in this case.
We review the trial court's decision to grant summary judgment de novo, considering all the evidence set forth in the moving and opposing papers, except that to which objections were made and sustained. (Hampton v. County of San Diego (2015) 62 Cal.4th 340, 347.) A defendant moving for summary judgment meets its initial burden of showing that a cause of action has no merit if it shows at least one element of the cause of action cannot be established or there is a complete defense to the cause of action. (Code Civ. Proc., § 437c, subd. (p)(2).) If this burden is met, the plaintiff bears the burden of showing the existence of disputed facts. (Ibid.)
In granting summary judgment for SCE, the trial court found, among other things, that Applied's reliance on SCE's alleged misrepresentations was unjustifiable as a matter of law. "Generally, the question of whether reliance is justifiable is one of fact. [Citations.] But the issue 'may be decided as a matter of law if reasonable minds can come to only one conclusion based on the facts.' [Citations.] Thus, in such instances where the absence of justifiable reliance is one of law, summary judgment or summary adjudication is an appropriate vehicle." (Hoffman v. 162 North Wolfe LLC (2014) 228 Cal.App.4th 1178, 1194.)
Applied's complaint appears to rest on two alleged misrepresentations or omissions by SCE: (1) SCE misrepresented that the FC-NEM tariff would yield the same outcome as a dedicated physical connection, and (2) SCE failed to disclose it would oppose Applied's efforts to build a dedicated physical connection. We address these separately.
1. SCE's Misrepresentations Regarding FC-NEM
The trial court concluded Applied could not prove it justifiably relied on SCE's misrepresentation that the FC-NEM tariff would yield the same outcome as a dedicated physical connection. After considering the matter de novo, we agree.
In this portion of its ruling, the trial court relied in large part on what it referred to as the California filed rate doctrine. This doctrine comes from Public Utilities Code section 532, which bars a public utility from charging a rate other than that published in its schedules, or from refunding the scheduled rates for its services either directly or indirectly. Citing this statute, our Supreme Court has held that "as a general rule, utility customers cannot recover damages which are tantamount to a preferential rate reduction even though the utility may have intentionally misquoted the applicable rate." (Empire West v. Southern California Gas Co. (1974) 12 Cal.3d 805, 809 (Empire West).) "[A] public utility 'cannot by contract, conduct, estoppel, waiver, directly or indirectly increase or decrease the rate as published in the tariff . . . .'" (Ibid.) Even in the case of a misrepresentation, "[s]cheduled rates must be inflexibly enforced in order to maintain equality for all customers and to prevent collusion which otherwise might be easily and effectively disguised." (Ibid.)
Moreover, filed rates have "'the force and effect of a statute'" and "'are binding on the public.'" (Pink Dot, Inc. v. Teleport Communications Group (2001) 89 Cal.App.4th 407, 416 (Pink Dot).) Thus, once rates are filed and published, "the customer is charged with knowledge of the contents of the published rate schedules and, therefore, may not justifiably rely on misrepresentations regarding rates for utility service." (Empire West, supra, 12 Cal.3d at p. 810.)
These principles are not to be confused with the federal filed rate doctrine, which has its origins in cases interpreting the Interstate Commerce Act of 1887 (Feb. 4, 1887, ch. 104, 24 Stat. 379) and which "forbids a regulated entity to charge rates for its services other than those properly filed with the appropriate federal regulatory authority." (Arkansas Louisiana Gas Co. v. Hall (1981) 453 U.S. 571, 577; see Duggal v. G.E. Capital Communications Services, Inc. (2000) 81 Cal.App.4th 81, 88 [discussing federal filed rate doctrine].) Where, as here, no federal tariff is implicated, the federal filed rate doctrine does not apply. (Pink Dot, supra, 89 Cal.App.4th at p. 416.)
The parties, the trial court, and the Pink Dot court all refer to the principles announced in Empire West as the "state" or "California" filed rate doctrine. (See Pink Dot, supra, 89 Cal.App.4th at p. 416.) However, the Empire West decision does not actually use the phrase "filed rate doctrine." (See also Carlin v. DairyAmerica, Inc. (9th Cir. 2013) 705 F.3d 856, 869, fn.9 ["California has declined to create a state filed rate doctrine"]; Knevelbaard Dairies v. Kraft Foods, Inc. (9th Cir. 2000) 232 F.3d 979, 993 ["there is no reason to think that California would apply the filed rate doctrine that it has so clearly rejected"].)
That is not to say all fraud claims against a utility are necessarily precluded. (Pink Dot, supra, 89 Cal.App.4th at p. 416.) For example, "a utility customer who has been actually damaged by a utility's fraudulent misrepresentations regarding matters not contained in the published tariffs [is] entitled to bring suit to recover those damages." (Empire West, supra, 12 Cal.3d at pp. 810-811, fn. omitted, italics added [public utility could be liable for fraud when it falsely claimed to have the expertise to prepare a cost analysis of the operating cost of a central gas heating and cooling system]; see, e.g., Pink Dot, supra, 89 Cal.App.4th at pp. 411, 416-418 [telephone company could be liable for misrepresenting its ability to install caller ID].)
Applying those principles here, we conclude Applied cannot, as a matter of law, establish it justifiably relied on SCE's alleged misrepresentations that a virtual metering arrangement under FC-NEM would yield the same outcome as a dedicated physical connection. Applied is charged with knowledge of the contents of the FC-NEM tariff, and as a matter of law, it could not justifiably rely on any misrepresentations by SCE, intentional or otherwise, about whether rates under FC-NEM would be more or less expensive than other alternatives. (Empire West, supra, 12 Cal.3d at p. 810 [utility customer "may not justifiably rely on misrepresentations regarding rates for utility service"].)
Allowing Applied to recover damages based on its decision, however misguided, to proceed with a virtual metering arrangement under FC-NEM would be tantamount to granting Applied a rate reduction because Applied would be effectively receiving different rates than other SCE customers. Applied cannot circumvent that point by characterizing its damages as claims for wasted employee time or the cost of operating the fuel cells, because those damages derive from SCE's alleged misrepresentation about its rates.
In its briefing and during oral argument, Applied insists its reliance on SCE's misrepresentations regarding FC-NEM was justifiable because FC-NEM's billing provisions are ambiguous, thus rendering the filed rate doctrine inapplicable. (See Carriers Traffic Service, Inc. v. Anderson, Clayton & Co. (7th Cir. 1989) 881 F.2d 475, 481 [under federal filed rate doctrine, "courts have permitted departures from the filed rates" where the rate is "ambiguous"].) We are not persuaded. Applied does not allege SCE misrepresented how the specific offset provisions of FC-NEM work; rather, Applied alleges SCE misrepresented that FC-NEM would provide the "same outcome" as a direct physical connection. Thus, any alleged ambiguity in FC-NEM's billing terms has no bearing on whether Applied justifiably relied on SCE's conclusory misrepresentation that FC-NEM would yield the same "equivalent outcome" as a dedicated physical connection.
Our holding is bolstered by the following facts, which Applied concedes are undisputed. Applied is a sophisticated medical device manufacturing company working in a highly regulated industry; the Interconnection Agreement was not the first interconnection agreement Applied entered into with SCE; since at least 2012, Applied has understood the difference between an electric utility's demand charge and energy charge and has understood the energy charge has a delivery component and a generation component; Applied had access to and reviewed FC-NEM before entering into the Interconnection Agreement; while discussing the various options, SCE sent Applied a copy of FC-NEM, highlighting the provisions SCE believed to be applicable to Applied; and finally, Applied's corporate representative admitted at his deposition he did not take the FC-NEM rate schedule "very seriously" and "didn't make the attempt to really understand fully what [it] means to every extent."
With this factual record, and under the principles articulated in Empire West, Applied cannot establish it justifiably relied on SCE's misrepresentations that a virtual metering arrangement under FC-NEM would yield an energy cost equivalent to that resulting from a dedicated physical connection.
2. SCE's Omission Regarding Blocking a Physical Connection
We next consider Applied's theory that SCE fraudulently failed to disclose its intent to oppose Applied's efforts to build a dedicated physical connection.
As a preliminary matter, Applied challenges the trial court's conclusion that Applied's complaint does not allege that theory with the requisite specificity. (See Tindell v. Murphy (2018) 22 Cal.App.5th 1239, 1249 [elements of misrepresentation, knowledge of falsity, intent to defraud, justifiable reliance, and damage "must be alleged in full, factually and specifically"].) Applied's complaint alleges that when the parties discussed various alternatives in 2015, Applied informed SCE it wanted to install dedicated physical connections between the R100 fuel cells and the adjacent buildings (¶13); SCE "concealed its intentions to delay and attempt to prevent Applied from installing dedicated electrical connections" (¶¶29, 34); and Applied fundamentally changed its position in reliance on those "omissions" and "forewent installing dedicated electrical connections between its buildings" (¶¶30, 62). But the complaint does not mention Applied's early 2018 communications with SCE and the City about a possible dedicated physical connection, SCE's eventual refusal to allow such a connection, or the microgrid Applied built. Applied never sought leave in the trial court to amend its complaint to include those facts. After the trial court granted a motion for summary judgment in favor of SCE, Applied cannot do so for the first time on appeal. (Distefano v. Forester (2001) 85 Cal.App.4th 1249, 1265.)
In any event, even if we assume arguendo that the complaint alleges SCE concealed its plan to block any efforts to build a dedicated physical connection, any fraud claim based on that alleged omission necessarily fails for lack of justifiable reliance—not because of the principles articulated in Empire West, but because the facts showing justifiable reliance are wholly lacking. Applied does not allege SCE ever expressly committed to approving a dedicated physical connection, nor does Applied identify any statement or conduct by SCE implying it would one day approve such a connection. To the contrary, according to Applied's complaint, when SCE and Applied discussed various options in the summer of 2015, SCE "dissuaded" and repeatedly "discouraged" Applied from pursuing a dedicated physical connection, noting "it would be a challenge to pursue a physical connection in the midst of other projects." Although Applied later reminded SCE that it wanted to explore a physically connected campus as a more "long-term" or "permanent" solution, the parties' subsequent e-mail discussions instead focused on the various tariff options, with no further mention of the direct connection.
On this record, Applied had no basis to assume SCE could or would facilitate a direct connection between Applied's buildings. Because Applied failed to produce evidence showing a triable issue existed as to whether its reliance on SCE's silence was justifiable, summary judgment for SCE was appropriate.
Since Applied has not addressed the trial court's summary adjudication of its statutory unfair competition cause of action, "we do not address the merits of th[at] cause[] of action. Although our review of a summary judgment is de novo, it is limited to issues which have been adequately raised and supported in [the appellant's] brief. [Citations.] Issues not raised in an appellant's brief are deemed waived or abandoned." (Reyes v. Kosha (1998) 65 Cal.App.4th 451, 466, fn. 6.) Further, in light of our holding, we need not address Applied's argument that the court erred in concluding it lacked jurisdiction to hear the dispute.
DISPOSITION
The judgment is affirmed. In the interest of justice, the parties shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(5).)
GOETHALS, J. WE CONCUR: MOORE, ACTING P. J. FYBEL, J.