Steven Brooks v. Commonwealth Edison Company ( 2022 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 21-2861, 21-2872 & 21-2873
SOUTH BRANCH LLC, et al.,
Plaintiffs-Appellants,
v.
COMMONWEALTH EDISON COMPANY and EXELON CORPORA-
TION,
Defendants-Appellees.
____________________
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
Nos. 1:20-cv-4980, -4405 & -4555 — Jorge L. Alonso, Judge.
____________________
ARGUED MAY 17, 2022 — DECIDED AUGUST 22, 2022
____________________
Before SYKES, Chief Judge, and KIRSCH and JACKSON-
AKIWUMI, Circuit Judges.
KIRSCH, Circuit Judge. Nine Illinois energy consumers sued
their electricity provider, Commonwealth Edison Company,
and its parent, Exelon Corporation, on behalf of themselves
and those similarly situated for damages under the Racketeer
Influenced and Corrupt Organizations Act (RICO) alleging
injury from increased electricity rates. These rates increased,
2 Nos. 21-2861, 21-2872, & 21-2873
the plaintiffs allege, because ComEd bribed the former Illinois
Speaker of the House to shepherd three bills through the
state’s legislature. The district court dismissed the suit. Be-
cause paying a state’s required filed utility rate is not a cog-
nizable injury for a RICO damages claim, we affirm.
I
Since we are reviewing a dismissal on the pleadings, we
treat the following well-pleaded facts in the complaint as true.
See Bilek v. Fed. Ins. Co., 8 F.4th 581, 586 (7th Cir. 2021). When
appropriate, we also cite matters of public record not subject
to reasonable dispute for which we take judicial notice. See
Orgone Cap. III, LLC v. Daubenspeck, 912 F.3d 1039, 1044 (7th
Cir. 2019).
Exelon Corporation is a utility services holding company
engaged in the energy distribution and transmission business
across multiple states through several subsidiaries, including
Commonwealth Edison Company. 1 ComEd purchases, trans-
mits, distributes, and sells electricity to retail customers in
northern Illinois. As an Illinois public utility, ComEd must file
its electricity rates with the Illinois Commerce Commission
(ICC). See 220 Ill. Comp. Stat. §§ 5/9-102, 5/9-104.
To secure passage of favorable legislation, ComEd en-
gaged in a yearslong “pay to play” scheme with Michael
Madigan, the former Speaker of the Illinois House of Repre-
sentatives and Chair of the Illinois Democratic Party. Through
that scheme, ComEd paid bribes to Madigan’s associates, and,
in return, Madigan used his roles as Speaker and Party Chair
to push advantageous bills through the state legislature. As
1 Except where otherwise noted, this opinion generally refers to the de-
fendants collectively as ComEd.
Nos. 21-2861, 21-2872, & 21-2873 3
relevant here, three bills became law during the ComEd-
Madigan scheme: (1) the Energy Infrastructure and Moderni-
zation Act of 2011 (EIMA); (2) 2013 amendments to that legis-
lation; and (3) the Future Energy Jobs Act of 2016 (FEJA).
First, in 2011, ComEd paid three Madigan connections in-
directly as subcontractors for little or no work, contracted
with a Madigan-affiliated law firm, and hired paid interns
from Madigan’s ward, to influence Madigan to secure the pas-
sage of EIMA. In return, Madigan used his power as Speaker
to permit the House of Representatives to vote on the bill and
to ensure House members would vote in support. The House
approved the bill, with 67 of 116 representatives voting for its
passage. The Senate then approved the bill as well, with 31 of
55 senators voting in its favor.
When the bill reached the governor’s desk, however, Gov-
ernor Pat Quinn vetoed it. So Madigan again used his powers
and influence to permit a vote overriding the veto and to urge
support of the override. That effort succeeded after Madigan
pressured ten members of the House Democratic caucus and
four members of the Senate Democratic caucus who had not
originally supported the bill to vote to override the veto.
Once enacted, EIMA weakened the role of the ICC.
Although Illinois law still required public utilities to file rates
with the ICC, EIMA implemented statutorily prescribed,
performance-based rate increases that limited the ICC’s
discretion in reviewing rates. EIMA also authorized at least
$2.6 billion in ComEd spending on smart meters and smart
grid infrastructure, costs that were required to be passed on
to customers.
4 Nos. 21-2861, 21-2872, & 21-2873
Second, in 2013, ComEd secured amendments to EIMA
that further curbed the ICC’s regulatory authority and pro-
tected ComEd’s profit margins. The General Assembly again
passed the legislation over Governor Quinn’s veto, and Madi-
gan provided the votes to do it.
And third, in 2016, ComEd had Madigan usher FEJA
through the General Assembly. Madigan’s top advisers and
ComEd’s lobbyists handpicked lawmakers to vote on the bill
in the House legislative committee. After ComEd identified
six Democratic committee members who were likely to vote
against the bill, Madigan removed them from the committee
and replaced them with lawmakers more favorable to the leg-
islation. The bill passed 16-0 out of committee and went on to
pass in the House (63 out of 101 votes) and the Senate (32 out
of 50 votes). Governor Bruce Rauner signed the bill into law.
FEJA provided $2.35 billion in funding for nuclear power
plants operated by Exelon paid for through a new fee for util-
ity customers based on a Zero Emissions Credits system. Un-
der that system, the Illinois Power Agency procures these
Credits from zero-emissions utilities (such as Exelon’s nuclear
power plants). Public utilities like ComEd must purchase the
Credits from the Power Agency at a statutory rate. And
ComEd then passes that cost on at a flat per-kilowatt hour rate
to all retail customers. Illinois electricity consumers pay $235
million annually for the Zero Emissions Credit system, and
FEJA authorized the system to last at least ten years. FEJA also
allowed ComEd to charge ratepayers for all energy efficiency
programs and for some expenses relating to employee incen-
tive compensation, pensions, and other post-employment
benefits.
Nos. 21-2861, 21-2872, & 21-2873 5
Because of these three pieces of legislation, Illinois electric-
ity consumers have had to pay more for electricity. The plain-
tiffs sued ComEd and Exelon on behalf of themselves and
those similarly situated, bringing a federal RICO claim and
several state-law claims. ComEd moved to dismiss the federal
RICO claim under Federal Rule of Civil Procedure 12(b)(6),
arguing that (1) the complaint failed to allege enough for
proximate causation; (2) the court could not award damages
under the filed rate doctrine; and (3) Fletcher v. Peck, 10 U.S. 87(1810), required dismissal.
Based on ComEd’s first and third arguments, the district
court granted this motion. It dismissed the civil RICO claim
with prejudice and declined to exercise jurisdiction over the
remaining state-law claims. The plaintiffs have appealed the
dismissal of their RICO claim.
II
We start and end with what the district court passed over:
the filed rate doctrine. See Smith v. RecordQuest, LLC, 989 F.3d
513, 517 (7th Cir. 2021) (“[W]e may affirm on any basis in the
record.”) (citation omitted). Although the district court men-
tioned this doctrine as a potential “slam dunk” for ComEd,
the court thought it inappropriate to address at the Rule
12(b)(6) stage since we’ve said that the filed rate doctrine is an
affirmative defense properly addressed through a Rule 12(c)
motion for judgment on the pleadings. See Gunn v. Cont’l Cas.
Co., 968 F.3d 802, 806 (7th Cir. 2020). But since the district
court had before it all that was needed to rule on the defense,
we construe ComEd’s motion arguing for dismissal based on
the filed rate doctrine as a motion for judgment on the plead-
ings under Rule 12(c) and proceed to consider it below. See id.6 Nos. 21-2861, 21-2872, & 21-2873
at 807; Walczak v. Chicago Bd. of Educ., 739 F.3d 1013, 1016 n.2
(7th Cir. 2014).
Before turning to our analysis of the plaintiffs’ federal
RICO claim, we explain the significance of a utility’s rate filing
in Illinois (where ComEd operates). Effectively, a filed rate
has the force and effect of a legislative statute. Illinois requires
electricity utilities to file tariffs, which set “forth services be-
ing offered; rates and charges with respect to services; and
governing rules, regulations, and practices relating to those
services,” with the ICC. Adams v. N. Illinois Gas Co., 809 N.E.2d
1248, 1263 (Ill. 2004); see 220 Ill. Comp. Stat. § 5/9-102. Utilities
must charge no more or less than the rates filed in their tariffs.
See 220 Ill. Comp. Stat. § 5/9-240 (“Except as in this Act other-
wise provided, no public utility shall charge, demand, collect
or receive a greater or less or different compensation … than
the rates or other charges applicable … as specified in its
schedules on file and in effect at that time, … nor shall any
such public utility refund or remit … any portion of the rates
or other charges so specified … .”). Under a rule known as the
filed rate doctrine, Illinois state courts cannot adjust rates that
have been filed with the appropriate regulator for any reason.
See Sheffler v. Commonwealth Edison Co., 955 N.E.2d 1110, 1119
(Ill. 2011); Adams, 809 N.E.2d at 1263. As explained by the Illi-
nois Supreme Court, when a tariff filed with the ICC speaks
to a utility’s specific duty, then “the tariff controls,” Sheffler,
955 N.E.2d at 1121, and it has “the force and effect of a stat-
ute,” Adams, 809 N.E.2d at 1263 (citation omitted).
Federal courts, too, have long applied the filed rate doc-
trine to bar judicial adjustments of rates filed with regulators.
See Keogh v. Chicago & N.W. Ry. Co., 260 U.S. 156, 163 (1922)
(listing cases); Montana-Dakota Utilities Co. v. Nw. Pub. Serv.
Nos. 21-2861, 21-2872, & 21-2873 7
Co., 341 U.S. 246, 251 (1951) (“It can claim no rate as a legal
right that is other than the filed rate, whether fixed or merely
accepted by the Commission, and not even a court can author-
ize commerce in the commodity on other terms.”). And alt-
hough the Supreme Court developed the federal doctrine in
suits involving rates filed with federal regulators, see Keogh,
260 U.S. at 160; Montana-Dakota Utilities Co., 341 U.S. at 248,
circuit courts, including our own, have uniformly held it ap-
plies when rates are filed with state regulators as well, see,
e.g., Goldwasser v. Ameritech Corp., 222 F.3d 390, 402 (7th Cir.
2000) (applying doctrine to rates approved by state public
utility commission); Rothstein v. Balboa Ins. Co., 794 F.3d 256,
261 (2d Cir. 2015) (“The doctrine … protects rates approved
by federal or state regulators.”); Leo v. Nationstar Mortg. LLC,
964 F.3d 213, 214 (3d Cir. 2020); Texas Com. Energy v. TXU En-
ergy, Inc., 413 F.3d 503, 509 (5th Cir. 2005); Crumley v. Time
Warner Cable, Inc., 556 F.3d 879, 881 (8th Cir. 2009) (per cu-
riam); Ellis v. Salt River Project Agric. Improvement & Power
Dist., 24 F.4th 1262, 1275 (9th Cir. 2022); Coll v. First Am. Title
Ins. Co., 642 F.3d 876, 886 (10th Cir. 2011); Patel v. Specialized
Loan Servicing, LLC, 904 F.3d 1314, 1317 (11th Cir. 2018).
The plaintiffs acknowledge that the rates they paid to
ComEd were filed with the ICC. And although that would
seem to trigger the filed rate doctrine’s bar on judicial adjust-
ments to filed utility rates, the plaintiffs seek monetary dam-
ages (and not declaratory or equitable relief) for “over-
pay[ment] for electricity” from ComEd under RICO. See 18
U.S.C. § 1964(c). In effect, they request a federal judgment ret-
roactively adjusting the electricity rates they paid. To allow
such a claim to proceed, we would need to hold that the filed
rate doctrine has been displaced by RICO. We must therefore
decide whether Congress, in passing the broadly applicable
8 Nos. 21-2861, 21-2872, & 21-2873
civil RICO statute, authorized federal courts to award dam-
ages in contravention of the filed rate doctrine. We hold that
it did not.
RICO allows for civil damages only when a person has
been “injured in his business or property.” 18 U.S.C. § 1964(c).
Congress modeled RICO’s private civil-action provision on
that of the federal antitrust statute: “[A]ny person who shall
be injured in his business or property by reason of anything
forbidden in the antitrust laws may sue therefor … .” 15
U.S.C. § 15(a); see Holmes v. Sec. Inv. Prot. Corp., 503 U.S. 258,
268 (1992) (“We may fairly credit the 91st Congress, which en-
acted RICO, with knowing the interpretation federal courts
had given the words earlier Congresses had used first in § 7
of the Sherman Act, and later in the Clayton Act’s § 4. … It
used the same words, and we can only assume it intended
them to have the same meaning that courts had already given
them.”). In interpreting that provision, the Supreme Court
held that the statute’s use of “injured” requires the “violation
of a legal right.” Keogh, 260 U.S. at 163 (emphasis added); see
also Injury, Black’s Law Dictionary (11th ed. 2019) (defining
“injury” to mean “[t]he violation of another’s legal right, for
which the law provides a remedy”) (emphasis added). Apply-
ing that interpretation, the Supreme Court held that when a
company paid a carrier’s rate that had been filed with a fed-
eral regulator, it had not been “injured” as required by the
antitrust law’s private civil action provision for damages.
Keogh, 260 U.S. at 163–65. It reasoned that “[t]he legal rights”
between a railroad, as a common carrier, and its customer
were “measured by the published tariff,” and the rate in-
cluded in that tariff was “for all purposes, the legal rate” that
could not “be varied or enlarged by either contract or tort of
the carrier.” Id. at 163. More than half a century later, the
Nos. 21-2861, 21-2872, & 21-2873 9
Supreme Court reaffirmed Keogh. See Square D Co. v. Niagara
Frontier Tariff Bureau, Inc., 476 U.S. 409, 423 (1986) (“The emer-
gence of subsequent procedural and judicial developments
does not minimize Keogh’s role as an essential element of the
settled legal context in which Congress has repeatedly acted
in this area.”).
More recently, the en banc Eleventh Circuit applied
Keogh’s reasoning in a RICO case closely resembling ours. In
Taffet v. S. Co., 967 F.2d 1483, 1485 (11th Cir. 1992) (en banc), a
class of utility customers brought a RICO claim against elec-
tric utilities that had fraudulently obtained rate increases
from state public service commissions. After analyzing Keogh,
the Taffet court held that the customers had failed to state a
viable RICO claim for damages because they had suffered no
“legally cognizable injury by virtue of paying the filed rate.”
Id. at 1488–94. Besides the Eleventh Circuit, at least three other
circuits have employed the filed rate doctrine in dismissing
RICO damages suits. See, e.g., Rothstein, 794 F.3d at 259; Leo,
964 F.3d at 218; H.J. Inc. v. Nw. Bell Tel. Co., 954 F.2d 485, 486,
495 (8th Cir. 1992).
We join these circuits and hold that the filed rate doctrine
forecloses the plaintiffs’ RICO claim for damages. Setting re-
tail utility rates is traditionally a matter of state concern, and
Illinois has long provided for the ICC’s exclusive regulation
of retail electricity rates. See Arkansas Elec. Co-op. Corp. v. Ar-
kansas Pub. Serv. Comm’n, 461 U.S. 375, 377 (1983) (“[T]he reg-
ulation of utilities is one of the most important of the func-
tions traditionally associated with the police power of the
States.”); Joseph D. Kearney & Thomas W. Merrill, The Great
Transformation of Regulated Industries Law, 98 Colum. L. Rev.
1323, 1354–55 (1998) (“The generation and distribution of
10 Nos. 21-2861, 21-2872, & 21-2873
electricity have traditionally been regulated by state public
utility commissions … .”); 220 Ill. Comp. Stat. § 5/9-240 (first
adopted in 1921). We typically presume that a federal statute
does not preempt or disrupt a state’s legal or regulatory re-
gime in areas traditionally associated with state police power
without stating so clearly. See Bond v. United States, 572 U.S.
844, 858 (2014) (“It has long been settled … that we presume
federal statutes do not … preempt state law … .”); id. (“[I]t is
incumbent upon the federal courts to be certain of Congress’
intent before finding that federal law overrides the usual con-
stitutional balance of federal and state powers”) (quoting
Gregory v. Ashcroft, 501 U.S. 452, 460 (1991)) (cleaned up). Like-
wise, we generally understand Congress to speak clearly
when it seeks to unsettle long-rooted legal policies. See, e.g.,
United States v. Wilson, 503 U.S. 329, 336 (1992) (“It is not
lightly to be assumed that Congress intended to depart from
a long established policy.”) (citation omitted); Square D Co.,
476 U.S. at 418–19 (looking for evidence that a 1980 statute
had changed or “supplant[ed] the Keogh rule” and the filed
rate doctrine). If RICO was meant to allow claims like the
plaintiff’s—a claim which threatens to substitute a long-
rooted state policy in favor of judicially imposed electricity
rates courtesy of the federal courts—one would expect the
statute to say something to that effect. Yet RICO is silent on
this front.
Moreover, disregarding the filed rate doctrine would risk
entangling courts in quintessentially legislative judgments.
See Sheffler, 955 N.E.2d at 1119 (“Setting utility rates is a legis-
lative function.”); Adams, 809 N.E.2d at 1266 (“The fixing of
rates is not a judicial function.”) (citations omitted); Minnesota
Rate Cases, 230 U.S. 352, 433 (1913) (“The rate-making power
is a legislative power and necessarily implies a range of
Nos. 21-2861, 21-2872, & 21-2873 11
legislative discretion.”). We are not in the business of second-
guessing legislative judgment calls. See Fletcher v. Peck, 10 U.S.
at 136 (“It is the peculiar province of the legislature to pre-
scribe general rules for the government of society.”); City of
Columbia v. Omni Outdoor Advert., Inc., 499 U.S. 365, 377 (1991)
(noting that courts “have consistently sought to avoid” the
“deconstruction of the governmental process and probing of
the official ‘intent’”). If this suit were allowed to proceed, the
plaintiffs could not rest on their allegations as they can here
at the motion-to-dismiss stage; they would need to conduct
discovery for facts supporting their contention that ComEd’s
bribery of Madigan directly caused the three pieces of legisla-
tion to pass. See Anza v. Ideal Steel Supply Corp., 547 U.S. 451,
459–60 (2006) (civil RICO damages claim requires “a direct
causal connection” between the predicate offense and the al-
leged harm). That would necessarily involve probing the mo-
tives of individual state legislators who voted to enact the leg-
islation to understand Madigan’s influence on them. Yet judi-
cial tribunals rarely dive so deeply into the legislative process
or into legislators’ motives. See Fletcher, 10 U.S. at 130 (“If the
majority of the legislature be corrupted, it may well be
doubted, whether it be within the province of the judiciary to
control their conduct, and, if less than a majority act from im-
pure motives, the principle by which judicial interference
would be regulated, is not clearly discerned.”); Tenney v.
Brandhove, 341 U.S. 367, 377 (1951) (noting that Fletcher held it
“not consonant with our scheme of government for a court to
inquire into the motives of legislators”); cf. City of Columbia,
499 U.S. at 377 n.6 (citing a “very limited and well-defined
class” of constitutional cases where the court proceeds other-
wise).
12 Nos. 21-2861, 21-2872, & 21-2873
Still, the plaintiffs offer two arguments against applying
the filed rate doctrine in this case. First, they contend that this
case involves only RICO damages and thus does not directly
request rate adjustments. And second, the plaintiffs contend
that the filed rate doctrine no longer applies because the Illi-
nois legislation functionally eliminated the ICC’s role.
Neither point persuades us. Determining a damages
award here based on the alleged overpayment for electricity
would involve asking what the reasonable rate should have
been had the three pieces of legislation not been passed. And
the filed rate doctrine bars such judicial determinations of rea-
sonable utility rates. See Goldwasser, 222 F.3d at 402 (holding
that the plaintiff could not pursue a damages claim because it
“necessarily implicate[d] the rates [the utility] [wa]s charg-
ing,” which was barred by the filed rate doctrine); H.J. Inc.,
954 F.2d at 494 (rejecting the plaintiffs’ argument that a RICO
damages action did not involve ratemaking activities because
“RICO damages can only be measured by comparing the dif-
ference between the rates the Commission originally ap-
proved and the rates the Commission should have approved
absent the conduct of which the class complains”); see also
Montana-Dakota Utilities Co., 341 U.S. at 246 (highlighting the
problems with judicial determinations of “what the reasona-
ble rates during the past should have been”); Keogh, 260 U.S.
at 164 (suggesting that any attempt to reassess the reasonable-
ness of rates would require the judiciary to “reconstitut[e] the
whole rate structure” of the industry). As the Second Circuit
expressed in a similar case, “the fact that the remedy sought
can be characterized as damages … does not negate the fact
that the court would be determining the reasonableness of
rates.” Wegoland Ltd. v. NYNEX Corp., 27 F.3d 17, 21 (2d Cir.
1994).
Nos. 21-2861, 21-2872, & 21-2873 13
For the plaintiffs’ second argument based on limits to the
ICC’s role, they have pointed to no case tying the filed rate
doctrine’s application to the breadth of a regulator’s author-
ity, and we have found none. See, e.g., Goldwasser, 222 F.3d at
402 (filed rate doctrine applied even when public utility com-
missions only “nominally overs[aw] … rate-setting” and
“rarely exercise[d] their muscle and thus g[ave] no meaning-
ful review to the rate structure”); Town of Norwood v. New Eng.
Power Co., 202 F.3d 408, 419 (1st Cir. 2000) (“It is the filing of
the tariffs, and not any affirmative approval or scrutiny by the
agency, that triggers the filed rate doctrine.”); McCray v. Fid.
Nat. Title Ins. Co., 682 F.3d 229, 238 (3d Cir. 2012) (“[T]he Su-
preme Court has never indicated that the filed rate doctrine
requires a certain type of agency approval or level of regula-
tory review. Instead, the doctrine applies as long as the
agency has in fact authorized the challenged rate.”); Texas
Com. Energy, 413 F.3d at 509–10 (holding that the filed rate
doctrine applies even when market forces set prices); Carlin v.
DairyAmerica, Inc., 705 F.3d 856, 871 (9th Cir. 2013) (“mean-
ingful review” by agency is “not a prerequisite to the applica-
tion of the filed rate doctrine”). In any event, the ICC still re-
tains an important role in utility rate regulation. Under EIMA
and the 2013 amendments to it, the ICC still has to review a
public utility’s rate filing and “enter an order approving, or
approving as modified, the performance-based formula rate
… as just and reasonable” using “evidentiary standards …
concerning the prudence and reasonableness of the costs in-
curred by the utility.” 220 Ill. Comp. Stat. § 5/16-108.5(c). And
under FEJA, the ICC has to review and approve the charges
imposed by the Zero Emissions Credits system before they
are passed on to electricity customers. See id. § 3855/1-75.
Moreover, recently enacted Illinois law requires the ICC to
14 Nos. 21-2861, 21-2872, & 21-2873
investigate whether ComEd used any ratepayer funds to pay
for fines related to the alleged bribery scheme. See id. § 5/4-
604.5(b). If the ICC concludes that ComEd did so, ComEd
must pay a refund to ratepayers for that amount spent, id., the
exact form of relief we are unable to award here.
At bottom, when the plaintiffs paid their electricity bills
based on rates which had been properly filed with the ICC,
they paid the state’s required legal rate. Based on our above
analysis, we hold that the plaintiffs suffered no legally cog-
nizable injury by paying this legal rate and thus were not “in-
jured in [their] business or property,” as required to pursue a
claim for damages under § 1964(c) of RICO.
AFFIRMED
Nos. 21-2861, 21-2872, & 21-2873 15
JACKSON-AKIWUMI, Circuit Judge, concurring. I concur
solely on the ground that plaintiffs’ claims are foreclosed by
Fletcher v. Peck, 10 U.S. 87 (1810), as the majority explains, see
ante 10–11, and as resolved by the district court. If this suit
proceeded, plaintiffs “would need to conduct discovery for
facts supporting their contention that ComEd’s bribery of
Madigan directly caused the three pieces of legislation to
pass.” Ante 11. The subsequent resolution of their claims after
discovery “would necessarily involve [a court] probing the
motives of individual state legislators who voted to enact the
legislation to understand Madigan’s influence on them,”
which Fletcher prohibits. Ante 11; see also Tenney v. Brandhove,
341 U.S. 367, 377 (1951). Accordingly, I would have resolved
the matter on this basis alone and not reached the filed-rate
affirmative defense.