No. 12293
IN THE SUPREME COURT OF THE STATE OF MONTANA 1972

XHE STATE OY NONTANA ex re1THE MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY, Relator,

THE DISIXICT COURT OF THE SECOND JUDICIAL DISTRICT OF THE STATE dF MONTANA, INAND FOR THE COUNTY OF SILVER BOW, THE HONORABLE JAMES D. FREEBOURN, JUDGE PRESIDING, Respondents.

Original proceedings. ~ounsel of Record: Fox Appellant: Hughes, Bennett and Cain, Helena, Montana 59601 Alan Cain argued, Helena, Montana 59601. For Kespondent: S. 0. Meyers argued, Butte, Montana 59701. Poore, McKenzie and Roth, Butte, Montana 59701. James A. Poore 111 argued, Butte, Montana 59701.

Submitted: June 21, 1972 Decided: 

### ;NOV 1972

ClerkMr, Justice Gene 

### B. Daly delivered the Opinion of the Court.

This is an originalproceedingwherein relator,The Mountain States Telephone and Telegraph Company (hereinafter referred to asMountain States), petitioned this Court for a writ of supervisory control directed to and requiring the respondentdistrict court to grant Mountain States' motion for summary judgment in a civil action entitled: "Mary Jane Davidson and John G. Davidson, Plaintiffs,vs. TheMountain States Telephone and Telegraph Company, Defendant." Relator asked this Court to review the record of the district court in this action and its order denying relator summary judgment. The civil action seeks damages for omission ofplaintiffs' listing and advertisement in defendant

## 's telephone directory and its yellowpages. This Court assumed jurisdiction, briefswere filed and oral argumenthad, PlaintiffsMary Jane Davidson and John G, Davidson assumed ownership and management of an existing ski shop in Butte, As

a part of such ownership and management, they subscribed to a business telephone from Mountain States. In February 1.971, plaintiffswere contacted by Mountain States and at that time they requested, in writing, that certain advertisingbe placed in theyellowpages, and further requested their listing in the white pages be inbold faced print. InMarch 1971,Mountain States acknowledged the order and indicated the listingswould be in the next issue of the telephone directory. Neither the "white pages" listingnor the "yellow pages1'listing and advertisement appeared in the spring, 1971, Butte telephone directory. Suitwas brought by plaintiffs alleging negligent omission

on the part ofMountain States, resulting in loss ofprofits and other damages to plaintiffs. Mountain States admitted the omission, and admitted the listing should have been inboth the white pages and yellowpages of its directory.In their complaint, plaintiffs demanded damages in the amount of $7,990 for "'actual" damage totheirbusiness and $2,000 punitive damages. The punitive damage claimwas stricken from the complaint by the respondent court on motion of Mountain States. At the time of the pretrial conference Mountain States confessedjudgment, however only inan amount limited by provisions which it contends are controlling. Mountain States then moved for summary judgment to enforce those limitations, The district court refused togrant summary judgment, and Mountain Statesnow applies to this Court for an appropriatewrit, Mountain States contends that liabilityfor omission in the white pages of itsdirectory is limited by the limitation of liabilitycontained inthe General Exchange Tariff, published by the Montana Public Service Commission, and which states: "3. The Telephone Company's liability arising from errors in or omissions of directory listings shallbe limited to and satisfiedby a refund not exceeding the amount of the charges for such of the subscriber's service as isaffected during the period covered by the directory inwhich the error or omission occurs. 11 Mountain States contends that under section 70-101, et.seq., R.C.M. 1947, it isrequired to filea schedule of itsrates, tariffs, rules and regulationswith the Montana Public Service Commission; that the Commission has complete authority to regulate allactivities of the utility and pursuant tothis authority requires Mountain States topublish a directory listing the names, addresses and phone numbers of its subscribers. It further contends errors and omissions in listing are inevitable, despite the most exactingproofreading standards. Even ifdecreased business or sales can be shown by a business whose listinghas been omitted, the problem of causation when the offended subscriber isa business enterprisewould be a problem for courts, Businesses suffer fluctuations from year toyear, mostly unexplained, making the determination of damage a complex problem, In addition, the telephone company's exposure to liabilityis one factorwhich determines the rates the company is permitted by the Public Service Commission to charge. If the companymust litigate every case of error in, or omission of a listing, the telephone ratesmust necessarily rise to reflect this increase in costs. All this is in the area of its public service,properly regulated by the Public Service Commission. Plaintiffs strongly question the authority of the Public Service Commission to act in the field of limitation of liability in this manner, as beyond its authority and an unconstitutional delegation of legislativepowers,(Art.IV, Sec. 1,Montana Constitution), if the legislature has such power, Plaintiffsmaintain the entire subject matter is governed by the Montana statutes on damages, sections 17-301and 17-401,R.C.M. 1947, Plaintiffs cite Great Northern Utilities Co. v. Public Service Comm., 88 Mont. 180, 293 

### P. 294, (also cited by Mountain States

as authority to regulate rates), as a demonstration of the fact that the authority to regulaterates in that case had to be "inferred" from the statute. Therefore, they contend, the statutesnever contemplated permitting the extension of authority of the Public Service Commission to limit liability for error or omission. In a senseplaintiffs are correct in that in Great Northern Utilities the Court did rule that the statutes enacted in relation to the Public Service Commissiondid authorize ratemaking authority, but this was not as arbitrary or confined as the term "inferred1' might imply. Great Northern Utilities was a lengthy in depth discussionby Judge Leiper on utilities, the monopolistic aspect,public interest, statutory construction,legislative intent and much more, The Court either spoke directly or affirmed langauge from other jurisdictiomand the federal courts inmany
areas. In regard to public utilities generally, the Court discussed and approved the principle of private property devoted to public use, as it differs fromproperty used in business generally. This concept is based on the principle that propertydevoted to public use or a use inwhich the public has an interest, grants to the public an interest inthe use which

can be controlledby the public for the common good, This is done through the Public Service Commission inMontana and the Court furtherheld that the Commission isrequired not only to regulate charges, but has a duty to see toreasonable service being rendered, among other regulatory functions. This places the utilityina classof corporations strictly regulated in itsrights and privileges and it therefore should be regulated, atleast to the extent of its staticknown exposure to liabilities such as its directory omissions and errors when this function isrequired by the Commission, and atthe very least indirectly involved inrate and service considerations. The language of Great Northern Utilities isbroad enough to include this function by the Commission. The Court there further observed that the utilityand the public were adequately protected under the system of regulated monopoly control constitutionally, in asmuch as allpermitted regulations orrates must be reasonable. In a review of the cases cited to this Court, the majority have held infact situations similar tothose here that the limitation contained in the General Exchange Tariff isreasonable and binding on the subscriber. Bird v. Chesapeake and Potomac Telephone Company, (D,C.App.), 185 A.2d 917; Warner v. Southwestern Bell Telephone Company, (Mo,1968), 428 S.W.2d 596; 92 ALR2d 917. We agree. The second issuehere isthe extent of Mountain states' liability for failingto list plaintiffs inthe yellow pages. The yellow pages advertising isoutside Mountain statesfarea of public service, and isnot under the authority of the Public Service Commission, but rather is governed by the rules of law applicable toprivate contracts. Here we are concerned with the provision in the advertising contract which limitsthe liability of Mountain States for theomission of classified advertising. It provides:

11In case of error in the advertisement as published or in case of the omission of all or anypart of the advertisement from publication, the Telephone Company's liability, if any, shall be limited to a pro rata abatement of the charge paid to the Telephone Company for such advertisement in the sameproportion that the error or omission reduces, if at all, the value of the entire advertisement, but inno event shall such liability exceed the amount payable to the Telephone Company for said advertisement during the service life of the directory in which the error or omission occurs.11 We do not agreewith the contention that this limitation falls under section 13-804,R.C.M. 1947, "Contracts fixing damages void", but rather provides for a maximum recovery as will be discussed later in this opinion. Williston on Contracts, 3d Ed., 

### V. 5 5781-A. The majority of the cases cited to us have upheld the provision that we have under consideration and under similar circumstances. A leading decision is McTighe v. New England Telephone & Telegraph Co., 216 F.2d 26, 28. The jurisdictions of South Carolina, Ohio,New Mexico, Florida, California, Missouri,Maryland, Texas and Louisiana are generally in accord with the principle that it iswithin the utility's domain of private contract and there are many alternate methods of advertising; that the error or omission is generally a simplemistake not amounting to gross negligence and the rationale in these jurisdictions ranges all the way from the determination that the provision is a reasonablerestriction to the principle that lacking fraud,willful, or wanton misconduct, the parties are free to contract and reasonableness is not an issue. As Judge Medina stated in McTighe:

1IIf there be some disparity in the bargaining power of the contracting parties it isnot more than may be found generally to exist

## **

# *.I' Plaintiffshave cited Allen v. Michigan Bell Telephone Company, 18 Mich.App, 632, 171N,W,2d 689,to the contrary as their principal authority and furnished a Colorado and Oregon citationby permission after oral argument.The Michigan Court criticizes other jurisdictions holding the exculpatory paragraph in the advertising contractvalid forhaving 

### not recognized the problem of unconscionability, meaning the absence of a meaningful choice on the part of one party (subscriber) and the contract terms unreasonably favoring the other (telephone company), Further, therebeing no competing alternate, except at 

### a prohibitive disproportionate cost. Plaintiffs' argument isbased on the Michigan decision and the monopolistic quality of the defendant utility company and, in addition,points out a resulting general nationwide deterioration of telephone service, As plaintiffs point out, defendant is apublic utility monopoly. Since the utility corporationhas devoted its assets to a public service, it is a permitted legal monopoly to be regulated by the public through its elected officials. Great Northern Utilities Co,v. Public Service Commission, 88 Mont. 180, 

### 293 P. 

### 294, In this respect, it is set apart in the family of corporations from theprofit corporation which is not regulated and can and does deal in the market place. Even though the yellow pagesadvertising isnot part of the utility's public function, the utility isnot in the "market place" advertising business per se and if it offersrhis service at all it is necessarily, at least in fact,a part of its directory function and subject to some of the same disabilities in relation to errors and omissions as is thewhite pagedirectory. In this area, once an error or omission ismade in the advertising there is no opportunity to correct this problem, any more than in the white listing, until the next publication. On the other hand "market place" advertisers can correct ormitigate in the next issue or broadcast. The same problems attendant to damages exist here and if they could be accurately ascertainable they could conceivably run for a considerableperiod of time, with no opportunity to mitigate or abate. Themonopolistic character of the yellowpages which the Michigan Court decries as resulting in nomeaningful choice oror no competing alternate, except at a prohibitive disproportionate cost, isnot exactly, as has been discussed,a oneway street, particularly when one considers further thatby the Michigan court's own definition the service is desirable and at a more reasonable cost than "market place" advertising. Itnecessarily follows that in some cases itmay appear harsh at timesbut not ur~conscionable. The mere fact of claimed unequal bargaining position doesnot render it so in today's world of commerce, where situations of this nature are not uncommon, McAlear

### v, Saint Paul Insurance Companies, 158Mont. 452 

### , 493 P.2d 331, 

### 29 St. Rep. 73. Plaintiffs claim that permitting this kind of limitation could be extended to limitations on recovery for personal injuries caused by the utility, The problem of an extension of this kind and also the acceptance of limitations of liability generally is well stated in some of the most modem enactments contained in the Uniform CommercialCode, 

### In subsection (3),of section 87A-2-719,R,C.M, 1947, the section ofMontana's Uniform CommercialCodewherein limitation of recoveryby contract is provided for, it is stated: 

# "* +

# * Limitation of consequentialdamages for in.iury to the person in the case of consumer goods is 

# F facie unconscionable but limitation of damagesw ere moss is commercial isnot," (Emphasis supplied). Without a demonstrationof bad faith, fraud,orwillful

or wanton conduct by Mountain States,a limitation of liability for errors and omissions in its advertising expressed in a written and signed contract is reasonable and nowise against public policy and it iswithin the power of the company and subscribers to its directory to make such contracts and they become a valid and binding limitation, The abstracts of the two cases submitted after argument are interestingbut not helpful on our principal point. The Oregon case,Macca v. General Telephone Company of the Northwest, Inc., Oregon Superior Court 

### # 9849, is a different situationinvolving two phone companies and an invasionof privacy

or harassment complaint resulting froma number switchwhich does not seem to turn on a contract limitation of yellowpages advertising. The Colorado case, Irishv. The Mountain States Telephone & Telegraph Company, Colorado Court ofAppeals /, 71-326,involves the failure to include a dentist's listing in the yellowpages section,although it appeared in the white pages. That court's discussion is confined to the proof of damages and proximate

cause and nomention is made of any contract limitation on damages. It does not appear that either of the two cases submitted by plaintiffs after argument reaches our problem and it is clear that insofar as damages are concerned those two cases are unique situations inwhich damages could be much more accurately ascertained than in the ordinary commercial enterprise. The order denying summary judgment is reversed with instructions to enter judgment within the limitations of the liability expressed in the General Exchange Tariff and the yellow pages advertising contract.

Associate Justice.-----------I--_------------ OfChief Justice -



## / l~ssociate Justice