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Raspberry Junction Holding, LLC v. Southeastern Connecticut Water Authority

Supreme Court of Connecticut

April 9, 2019

RASPBERRY JUNCTION HOLDING, LLC
v.
SOUTHEASTERN CONNECTICUT WATER AUTHORITY

          Argued November 13, 2019

         Procedural History

         Action to recover damages sustained as a result of the alleged negligence of the defendant, and for other relief, brought to the Superior Court in the judicial district of New London, where the court, Vacchelli, J., granted the defendant's motion for summary judgment and rendered judgment thereon, from which the plaintiff appealed. Reversed; further proceedings.

          Santa Mendoza, for the appellant (plaintiff).

          Stephanie S. Berry, with whom were Ryan L. McLean and, on the brief, Lloyd L. Langhammer, for the appellee (defendant).

          Robinson, C. J., and Palmer, McDonald, D'Auria, Mullins, Kahn and Ecker, Js.

          OPINION

          McDONALD, J.

         The dispositive question in this appeal is whether the special act creating the defendant, Southeastern Connecticut Water Authority, authorized the defendant to promulgate a rule immunizing itself from liability for failures or deficiencies in its supply of water to its customers. The plaintiff, Raspberry Junction Holding, LLC, appeals from the trial court's judgment rendering summary judgment in favor of the defendant on the basis of such a rule. We reverse the judgment of the trial court.

         The record reveals the following undisputed facts and procedural history. The defendant was created in 1967 by a special act of the General Assembly as a body politic and corporate of the state, designated to perform the ‘‘essential government function'' of planning, operating, and maintaining a water supply system for the benefit of the southeastern Connecticut planning region. 33 Spec. Acts 478, No. 381 (1967) (special act).[1]Section 14 of that act sets forth the powers and duties conferred on the defendant, including ‘‘the power: (a) to sue and be sued . . . (i) to make . . . rules for the sale of water and the collection of rents and charges therefor . . . (m) to fix rates and collect charges . . . such as to provide revenues sufficient at all times to pay . . . the princip[al] and interest on the bonds or notes of the authority together with the maintenance of proper reserves, in addition to paying . . . the expense of operating and maintaining the properties of the authority together with proper reserves for depreciation, maintenance and contingencies and all other obligations and indebtedness of the authority . . . (p) to do all things necessary or convenient to carry out the powers expressly given in this act . . . .'' 33 Spec. Acts 481, 483-84, No. 381, § 14 (1967).

         On the basis of the authority purportedly granted to it by § 14 of the special act, the defendant adopted ‘‘Rules Governing Water Service, '' including rule 5, entitled ‘‘SUPPLY OF WATER.'' Rule 5 provides in relevant part: ‘‘It is expressly agreed that the [defendant] shall not be liable for a deficiency or failure in the supply of water or the pressure thereof for any cause whatsoever, or for any damage caused thereby, or for the bursting or breaking of any main or service pipe or any attachment to the [defendant's] property. . . .''[2]

         In 2016, the plaintiff commenced the present action against the defendant, seeking damages on the basis of a loss of water service at The Bellissimo Grande Hotel in North Stonington, operated by the plaintiff. In its one count complaint, the plaintiff alleged that the hotel lost water service for several days in June, 2015, due to the explosion of a hydropneumatic tank at a pumping station operated by the defendant as a result of the defendant's negligent construction, operation, inspection or maintenance of the tank and its valves. The plaintiff further alleged that the water outage caused the plaintiff to lose revenue due to its inability to rent rooms and the need to give refunds to hotel guests during the water outage.

         The defendant moved for summary judgment on two grounds. First, it contended that rule 5 immunized it from liability for the plaintiff's damages, and that the rule was a proper exercise of its authority under the special act's grant of power to make ‘‘rules for the sale of water and the collection of rents and charges therefor.'' See 33 Spec. Acts 483, No. 381, § 14 (i) (1967). Second, it contended that, because the plaintiff was seeking damages for monetary loss only, the claim is barred by the common-law economic loss doctrine.[3] The plaintiff opposed the motion, arguing that the defendant, as a municipal corporation engaged in a proprietary function, is not immune from suit and has no authority, express or implied, to promulgate rules that waive liability for negligence. The plaintiff also argued that the economic loss doctrine does not apply under the circumstances presented.

         The trial court rendered summary judgment in favor of the defendant. The court recognized that the defendant's authority to promulgate rule 5 depended on an express or implied grant in the special act. It further recognized that, as a general matter, the defendant could be sued like a private water supply company. Nonetheless, it reasoned that, unlike a private company, the defendant is an administrative agency that has the power to promulgate regulations having the force and effect of law. On the basis of that conclusion, the court focused its analysis exclusively on the question of whether a rule limiting a water company's liability for service outages was a reasonable exercise of the defendant's rule-making authority. Finding no Connecticut authority on this question, it relied on authority from other jurisdictions holding that reasonable rates required for such services depend in part on a rule limiting liability. It also noted that other jurisdictions generally have held that such limitations on liability are enforceable only to the extent of ordinary negligence. Because the present case alleged only ordinary negligence, the court held that rule 5 was enforceable as to the present action.[4] In light of this conclusion, the court did not address the applicability of the economic loss doctrine. The plaintiff appealed from the trial court's judgment to the Appellate Court, and, pursuant to General Statutes § 51-199 (c) and Practice Book § 65-1, we transferred the appeal to this court.

         On appeal, the plaintiff renews its claim that rule 5 is unenforceable because the special act does not expressly or impliedly grant to the defendant the power to promulgate a rule limiting its liability otherwise established when it acts in its proprietary capacity. The plaintiff further asserts that rule 5 would not be a reasonable exercise of authority because the defendant is not subject to regulation that might otherwise circumscribe its ability to set rates to cover liability costs.[5] In response, the defendant contends that rule 5 was validly promulgated pursuant to the special act's express grant of power to set reasonable rates for service and make rules for the sale of water. Alternatively, the defendant asserts that such authority is properly implied because it is necessary to carry into effect its stated purpose under the special act of ...


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