Brent Adams v. Traverse City Light and Power ( 2020 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to revision
until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
ESTATE OF ZACHARY ADAMS, by BRENT UNPUBLISHED
ADAMS and LOU ANN MORGAN, personal September 24, 2020
representatives,
Plaintiffs-Appellants,
v No. 341472
Grand Traverse Circuit Court
TRAVERSE CITY LIGHT AND POWER, LC No. 2016-031740-NO
Defendant-Appellee,
and
TREES, INC.,
Defendant.
Before: STEPHENS, P.J., and SERVITTO and RONAYNE KRAUSE, JJ.
STEPHENS, J. (dissenting).
I disagree with the majority’s conclusion that defendant’s operation of an electric utility was not a
proprietary function.
I believe that this defendant’s operations are more akin to the landfill in Coleman1 than the hospital
in Hyde2. I am mindful that the defendant’s agents have testified that the primary purpose of operating
the electric utility is to provide low-cost and reliable energy to its customers. This is indeed one of its
purposes, but a review of its operation belies low-cost energy being its primary purpose. Defendant
generates an annual average profit greater than that in Coleman serving customers in a wide geographic
1
Coleman v Kootsillas, 456 Mich. 615; 575 NW2d 527 (1998).
2
Hyde v Univ of Michigan Bd of Regents, 426 Mich. 223; 393 NW2d 847 (1986).
-1-
area spanning two counties.3 Defendant transfers a significant fee from its gross revenues and again from
its net profits to the City’s general fund to be spent in ways that include “reducing the current indebtedness
of the City” and “supplementing the tax revenues of the City by using this money to defray the usual
expenses of City government”. Payment of the fee undoubtedly results in revenue for the City and further
weighs in favor of a pecuniary motive, especially given that the fee is a compulsory five percent of
defendant’s gross revenue. Additionally, defendant passed its excess revenue on to the City for its own
use, as the landfill did in Coleman. See Coleman, 456 Mich. at 622. Like the distant consumers in
Coleman, there is no evidence that the non-resident users reaped the benefits from the City’s use of the
revenue deposited into the general fund or from the unrelated improvements to the City by defendant’s
million-dollar-gift in 2013.
Addressing the issue of whether the function at issue is normally supported by taxes and fees, the
defendant has correctly noted that this Court previously found that the public lighting function in the city
of Detroit was a governmental function, not a proprietary one. In both Herman4 and Taylor5, the agency
was a general fund entity and operated at a loss. Additionally, the services rendered by the department of
public lighting were limited to consumers within the corporate limits of Detroit. Thus, the analogy to this
entity which serves consumers outside of its corporate limits, generates a significant and consistent profit,
and is not a general fund agency, fails. The issue here is quite direct: Is the service provided by the
defendant one that is normally supported by fees and taxes? This Court can take judicial notice that
electrical power is offered commercially by the myriad entities regulated by the Public Service
Commission. However, the defendant has presented neither this Court nor the trial court with any other
power generating entity within the state that is operated by a city of less than twenty-five thousand
residents that generates a consistent profit. The trial court in this case did not engage in the analysis urged
by this Court in Dextrom v Wexford County, 287 Mich. App. 406, 426; 789 NW2d 211 ( 2010):
Thus, the Court looked at how other communities supported their landfills, rather than
merely the funding history of the activity in question. Therefore, under Coleman, the trial
court must consider the scope of defendants’ landfill in relation to the size of the
community, its profitability, and how other communities of similar size support their
landfills.
Neither the trial court nor this panel has been provided with any comparative data on any municipally
operated utility. As was the case in Dextrom, a question of fact exists as to whether the City’s utility
service was an activity “normally supported by taxes or fees”.
I would reverse and remand the matter for plaintiffs to proceed to trial on their negligence claim
under the proprietary function exception to governmental immunity.
/s/ Cynthia Diane Stephens
3
In Coleman, the city “generated a substantial profit, ultimately exceeding 7 million dollars” over eight
years’ time. 456 Mich. at 622.
4
Herman v Detroit, 261 Mich. App. 141; 680 NW2d 71 (2004).
5
Taylor v Detroit, 182 Mich. App. 583; 452 NW2d 826 (1989).
-2-