DocketNumber: Civil Action No.: 3:18-cv-01795-JMC
Citation Numbers: 331 F. Supp. 3d 485
Judges: Childs
Filed Date: 8/2/2018
Status: Precedential
Modified Date: 7/25/2022
Plaintiff South Carolina Electric & Gas Company ("SCE & G") brings this action pursuant to
*490This matter is before the court by way of Motions to Dismiss pursuant to Rules 12(b)(1) and 12(b)(6) filed by Defendants and by South Carolina House of Representatives Speaker Jay Lucas ("Speaker Lucas") and South Carolina Senate President Pro Tempore Hugh K. Leatherman, Sr. ("President Leatherman")
I. RELEVANT BACKGROUND TO PENDING MOTIONS
This case arises out of SCE & G's abandonment of the construction of two nuclear reactors known as V.C. Summer Units 2 and 3 (the "Project") in Jenkinsville, South Carolina, and the South Carolina General Assembly's passage of Act 287 and Resolution 285. (E.g. , ECF No. 1 at 17 ¶¶ 81-82, 43 ¶ 220.) The purpose of the Project was to increase SCE & G's base load capacity and enable it to meet the electricity demands of its South Carolina customers. (See ECF No. 68 at 7 ¶ 20, 13 ¶ 54-14 ¶ 61.) SCE & G's incentive for the Project occurred as a result of the South Carolina General Assembly's passage of the Base Load Review Act,
SCE & G alleges that from 2008 through 2016, the PSC approved revised rates, permitting SCE & G to recover for the capital costs of the Project amounting to $445 million annually. (ECF No. 68 at 29 ¶ 141; see also ECF Nos. 1-5 to 1-12.) On or around July 31, 2017, SCE & G alleges it was forced by specified circumstances to conclude it could not complete the Project and "announce[ ] that it would cease construction of the Units and request[ ] recovery of its abandoned costs, an outcome expressly contemplated by the BLRA." (ECF No. 68 at 31-32 ¶ 158.)
SCE & G alleges that in response to the Project's abandonment, the South Carolina General Assembly passed Act 287 and Resolution 285. (ECF No. 68 at 36 ¶ 177.) Further, SCE & G alleges that with the passage of Act 287 and Resolution 285, the South Carolina General Assembly modified the process that was in place for establishing and revising utility rates. Act 287 instructed the PSC to set utility rates for SCE & G at a level equal to their current rates less the increases previously granted under the BLRA within five (5) days of the passage of the Act.
*491On June 29, 2018, SCE & G filed its Verified Complaint for Declaratory Judgment and Temporary, Preliminary, and Permanent Injunctive Relief against Defendants challenging the constitutionality of both Act 287 and Resolution 285, asserting the elimination of the rate increases violates SCE & G's constitutional rights and "impermissibly interfere[s] with interstate commerce." (ECF No. 1 at 2 ¶ 2.) This lawsuit does not challenge or seek review of any PSC order. (Id. at 3 ¶ 4.)
On July 3, 2018, the PSC set an experimental rate, as required by Act 287. (See ECF No. 33-4.) The PSC's July 3, 2018 Order directs SCE & G to begin implementing the experimental rate in the first billing cycle in August, which begins on August 7, 2018. (ECF No. 33-4; ECF No. 9 at 2.)
On July 20, 2018, Defendants and Intervenor Defendants filed Motions to Dismiss. (ECF Nos. 48, 50, 52.) On July 26, 2018, the court granted in part and denied in part those Motions, dismissed the Complaint, and granted SCE & G leave to file an amended complaint until July 27, 2018. (ECF No. 67.) On July 27, 2018, SCE & G filed an Amended Complaint, renewing its request that the court: (1) "Enter a declaratory judgment declaring Act 287 and Resolution 285 are unconstitutional in that they constitute an unlawful taking; violate the substantive and procedural components of the Due Process Clause, and constitute an unlawful bill of attainder"; and (2) "Enter a temporary, preliminary and permanent injunction directing the Chairman and Commissioners of the PSC, and their officers, agents, servants, employees, and attorneys, and any other persons who are in active concert or participation with them, to refrain from implementing Act [287] and Joint Resolution [285]." (ECF No. 68 at 53.)
On July 28, 2018, Defendants and Intervenor Defendants filed renewed Motions to Dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and (b)(6)
II. LEGAL STANDARD
A. Motions to Dismiss Pursuant to Rule 12(b)(1)
A Rule 12(b)(1) motion for lack of subject matter jurisdiction raises the fundamental question of whether a court has jurisdiction to adjudicate the matter before it. Fed. R. Civ. P. 12(b)(1). "Federal courts are courts of limited subject matter jurisdiction, and as such there is no presumption that the court has jurisdiction." Pinkley, Inc. v. City of Frederick, Md. ,
B. Motions to Dismiss Pursuant to Rule 12(b)(6)
A Rule 12(b)(6) motion for failure to state a claim upon which relief can be granted "challenges the legal sufficiency of a complaint." Francis v. Giacomelli ,
A Rule 12(b)(6) motion should not be granted unless it appears certain the plaintiff can prove no set of facts that would support her claim and would entitle her to relief. Mylan Labs., Inc. v. Matkari ,
III. ANALYSIS
A. The Johnson Act
The Johnson Act codified at
The district courts shall not enjoin, suspend or restrain the operation of, or compliance with any order affecting rates chargeable by a public utility and made by a state administrative agency or a rate-making body of a State political subdivision, where: (1) jurisdiction is based solely on diversity of citizenship or repugnance of the order to the Federal Constitution; (2) the order does not interfere with interstate commerce; (3) the order has been made after reasonable notice and hearing; and (4) a plain, speedy and efficient remedy may be had in the courts of such State.
Defendants and Intervenor Defendants argue, in their original and present Motions to Dismiss, as well as at the preliminary injunction hearing, the Johnson Act applies because they interpret SCE & G to be challenging the PSC's July 3, 2018 Order. Accordingly, Defendants and Intervenor Defendants assert that the court should decline jurisdiction over SCE & G's *493claims pursuant to the Johnson Act because there is a plain, speedy and efficient remedy available to SCE & G in state court. (See ECF Nos. 76, 77, 78.)
In its Response to Defendants and Intervenor Defendants' Motions to Dismiss and during the preliminary injunction hearing, SCE & G clarified that the Johnson Act does not apply because this lawsuit "seeks an injunction to prevent the PSC's commissioners from taking any further actions to implement or enforce th[e] unconstitutional [statutory] provisions [enacted by the South Carolina General Assembly] or from otherwise taking any actions that violate SCE & G's federal constitutional rights." (ECF No. 91 at 19.) SCE & G also states this position in its Amended Complaint. (ECF No. 68 ¶ 4) ("This lawsuit seeks review only of the unconstitutional statutory provisions enacted by the South Carolina General Assembly ... It does not ask this Court to review the terms or legality of any order issued by the PSC or any other South Carolina agency.").
The Johnson Act does not divest a court of jurisdiction where "the challenge is not to a rate 'order' but to a statute." Pub. Utilities Comm'n of the State of Cal. v. United States ,
Here, SCE & G seeks relief from an alleged unconstitutional legislative enactment , not an agency order. It is not asking the court to enjoin any order, but instead to declare that the Act is unconstitutional and enjoin Defendants from continuing to violate SCE & G's constitutional rights by implementing this allegedly unconstitutional legislation. Indeed, the fact that SCE & G filed both their original Complaint and their Motion for Preliminary Injunction before the July 3, 2018 Order was issued is informative of SCE & G's intent to focus on the alleged unconstitutionality of the legislative enactment, not the Order. (See ECF Nos. 1, 5.) Accordingly, because SCE & G is not challenging any "order affecting rates," the Johnson Act does not apply to this matter.
B. Abstention
1. Younger Abstention
Defendants assert the court should decline jurisdiction over SCE & G's claims pursuant to the Younger abstention doctrine. (ECF No. 76-1 at 1.) The Younger abstention doctrine requires a court to abstain from exercising jurisdiction over an on-going state proceeding where: (1) the state proceeding is judicial in nature; (2) the proceeding implicates important state interests; and (3) there exists an adequate opportunity in the state proceeding to raise constitutional challenges. Middlesex Ethics Comm'n v. Garden State Bar Ass'n ,
The South Carolina Supreme Court has held that PSC proceedings are quasi-judicial. See *494Util. Servs. of S.C., Inc. v. S.C. Office of Regulatory Staff ,
2. Pullman Abstention
Defendants argue the court should abstain from hearing this case because of the restrictions on federal judicial intervention first enumerated in Railroad Comm'n of Tex. v. Pullman Co. ,
There is nothing ambiguous about the effect of Act 287 and Resolution 285. Act 287 instructs the PSC to set an experimental rate until the conclusion of proceedings currently before the PSC regarding the prudency of SCE & G's abandonment of the Project.
Defendants draw the court's attention to the current state court case, see Cleckley v. SCE & G , 2017-CP-40-04833 (filed Apr. 13, 2018), addressing the constitutionality of the BLRA, and assert a decision *495in that case would impact the issues before this court as described in Pullman . (ECF No. 48-1 at 24; ECF No. 76-1 at 6.) The court disagrees. A ruling by the state court in Cleckley would not affect or moot the federal questions raised in this case because a decision regarding the constitutionality of the BLRA fails to impact Act 287 or Resolution 285. Additionally, Defendants posit that SCE & G could raise any constitutional issues regarding Act 287 and Resolution 285 in the proceedings at the PSC and this ability strips the court of jurisdiction under Pullman . (ECF No. 48-1 at 24.) As previously discussed, this assertion is incorrect because the PSC can only rule on whether a law violates constitutional rights as applied, not whether a law is constitutional on its face. Travelscape ,
3. Burford Abstention
Under the Burford abstention doctrine,
Where timely and adequate state-court review is available, a federal court sitting in equity must decline to interfere with the proceedings or orders of state administrative agencies: (1) when there are "difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar"; or (2) where the "exercise of federal review of the question in a case and in similar cases would be disruptive of state efforts to establish a coherent policy with respect to a matter of substantial public concern."
NOPSI 12v. Council of New Orleans ,
At the outset, the court finds timely and adequate state-court review is available, as the state supreme court and circuit courts of South Carolina have the authority to decide constitutional law questions presented by petitioners in a declaratory judgment action. See S.C. Pub. Interest Found. v. S.C. Transp. Infrastructure Bank ,
*496Monroe v. Pape ,
Defendants argue the court should decline to exercise jurisdiction over SCE & G's claims under Burford because there are many difficult factual and legal issues underpinning SCE & G's constitutional claims that would require the court to decide South Carolina law, disrupting South Carolina's efforts to establish a coherent policy. (ECF No. 48-1 at 22-23.) Intervenor Defendants argue SCE & G's constitutional claims are all based on the premise that the BLRA provided SCE & G with a vested property right to continue to charge ratepayers the revised rates for financing the Project, even under the facts that exist today. (ECF No 50-1 at 31; ECF No 52-1 at 20.) President Leatherman argues that in determining "th[is] foundational state law issue," the court would necessarily resolve at least four other issues of state law and to do so would be inappropriate under Burford "because they are state law issues, the resolution of which will require an extensive factual analysis, ... SCE & G has filed a petition with the PSC requesting abandonment rates in which these issues will be resolved, ... and the PSC has docket 2018-217-E to implement and monitor the experimental rates for constitutional concerns." (ECF No. 50-1 at 33.)
SCE & G acknowledges, and the court recognizes, this case may require the court to answer questions of state law, but this alone does not necessitate Burford abstention because, "[w]hile Burford is concerned with protecting complex state administrative processes from undue federal interference, it does not require abstention whenever there exists such a process, or even in all cases where there is a 'potential for conflict' with state regulatory law or policy. " NOPSI ,
As to the second prong of Burford -the disruption of state efforts to establish a coherent policy-the court finds the "federal forum [does not] threaten[ ] to frustrate the purpose" of the administrative system established by the General Assembly. Quackenbush ,
C. Sovereign Immunity
Defendants and Speaker Lucas contend the court should dismiss SCE & G's *497Amended Complaint because its allegations fail to demonstrate that Defendants' actions regarding Act 287 and Resolution 285 allow for application of the Ex parte Young exception to Eleventh Amendment immunity.
Under Ex parte Young ,
"Courts have found traceability [or 'some connection'] where the public official has taken, or has threatened, actions to enforce a statute alleged to be unconstitutional." Inclusive Cmtys. Project, Inc. v. Abbott , C/A No. 3:17-cv-0440-D,
In its Order dismissing the Complaint (ECF No. 67), the court observed that the Ex parte Young exception is inapplicable "because SCE & G has not stated allegations regarding specific acts of Defendants showing their enforcement of Act 287 and Resolution 285 that would subject them to the consequences of their official conduct." (ECF No. 67 at 26.) To address this failure, SCE & G added the following relevant allegations in the Amended Complaint:
The PSC is charged with implementing the provisions of the Act. Each of the defendants, as individual Commissioners on the PSC, have been, and are expected to be, personally involved in taking actions to implement the Act and violate SCE & G's constitutional rights. (ECF No. 68 at 6-7 ¶ 17.)
On July 2, 2018, the PSC issued Order No. 2018-459 (ordered by defendants Elam, Ervin, Hamilton, Howard, Randall, and Whitfield) and in furtherance of the Act directed SCE & G to reduce its retail electric rates. (Id. at 42 ¶203.)
On July 3, 2018, the PSC issued Order No. 2018-460 (ordered by defendants Elam, Ervin, Hamilton, Howard, Randall, and Whitfield), requiring SCE & G to reduce its electric rates beginning with the first billing cycle of August 2018. These reduced rates will take effect as early as by August 7, 2018. (ECF No. 68 at 42 ¶ 205.)
Defendants, acting through the PSC under color of state law, are obligated to implement and enforce the Act and Joint Resolution. (Id. ¶ 207.)
Defendants, acting through the PSC under color of state law, are continuing to implement and enforce the Act and Joint Resolution in violation of federal constitutional guarantees and in violation of SCE & G's constitutional rights. (Id. ¶ 208.)
Unless the Commissioners of the PSC are enjoined from continuing to implement the Act and Joint Resolution under color of state law, they will continue to take actions that strip SCE & G of its rights and SCE & G will continue to *499suffer ongoing constitutional violations. (Id. at 43 ¶ 214.)
Because the Act provides that the defendants, acting through the PSC under color of state law, must issue an order revoking SCE & G's right to revised rates, the Act will result in immediate and irreparable injury, loss, and damage to SCE & G. (Id. at 44 ¶ 215.)
Because the Act and Joint Resolution violate federal law (and, in particular, the United States Constitution), defendants' ongoing efforts to implement the Act and Joint Resolution constitute an ongoing violation of federal law (and, in particular, the United States Constitution), against which SCE & G is entitled to prospective, injunctive relief. (ECF No. 68 at 46 ¶ 236.)
Defendants have a sufficient connection to the Act and Joint Resolution because they have commenced and threatened to take actions to implement and enforce the Act and Joint Resolution against SCE & G, all over SC & EG's objection and in violation of SCE & G's constitutional rights. (Id. ¶ 237.)
Implementation of the Act by the defendants, acting through the PSC under color of state law, will additionally violate SCE & G's right to protection against the taking of its property without just compensation under the United States Constitution. (ECF No. 68 at 48 ¶ 252.)
Implementation of the Act by the defendants (acting through the PSC under color of state law) will violate SCE & G's right to be free of laws that attach severe, new legal consequences to events completed before the law's enactment. (Id. at 49 ¶ 261.)
Implementation of the Act by the defendants (acting through the PSC under color of state law) will violate SCE & G's right to notice and a hearing prior to a deprivation of property. (Id. at 51 ¶ 272.)
Implementation of the Act by the defendants (acting through the PSC under color of state law) will work a violation of the Bill of Attainder Clause, U.S. Const. art. I, § 10, as to SCE & G. (ECF No. 68 at 52 ¶ 282.)
In the foregoing allegations, SCE & G necessarily implicates the Ex parte Young exception because it seeks to enjoin Defendants from future implementation of Act 287 and Resolution 285, which allegedly violate specified rights of SCE & G protected by the United States Constitution. See Verizon Md., Inc. v. Pub. Serv. Comm'n ,
*500Watford v. Quinn , Case No. 14-cv-00571-MJR,
Upon review, the court is persuaded that SCE & G's allegations regarding Defendants' connection with implementation of Act 287 and Resolution 285 is enough to satisfy the Ex parte Young exception to Eleventh Amendment immunity. Defendants, as Commissioners of the PSC, are vested "with power and jurisdiction to supervise and regulate the rates and service of every public utility in this State and to fix just and reasonable standards, classifications, regulations, practices, and measurements of service to be furnished, imposed, or observed, and followed by every public utility in this State."
IV. CONCLUSION
For the reasons stated above, the court DENIES Defendants and Intervenor Defendants' Motions to Dismiss (ECF Nos. 76, 77, 78).
IT IS SO ORDERED.
"Act 287" was ratified as "R287," but is enumerated as Act 258. To be consistent with the filings in this case, the court will refer to 2018 South Carolina Laws Act 287 as "Act 287."
Act 287 became law on June 28, 2018, and Resolution 285 became law on July 2, 2018.
President Leatherman only cites to Federal Rule of Civil Procedure 12(b)(1) as the basis for his Motion to Dismiss. (See ECF No. 78.)
On July 18, 2018, the court granted Motions to Intervene filed by Intervenor Defendants. (ECF Nos. 41, 82.)
Defendants and Intervenor Defendants incorporated all of the arguments from their previous Motions to Dismiss and requested that the court reconsider its analysis denying those Motions. (ECF No. 76-1 at 6; ECF No. 77-1 at 2 n.1; ECF No. 78-1 at 1, 3.) For the present Motions to Dismiss, the court considers all arguments presented by Defendants and Intervenor Defendants.
In their previous and renewed Motions to Dismiss, Defendants and Intervenor Defendants make this argument pursuant to Rule 12(b)(1). (See ECF No. 48-1 at 17; 50-1 at 23; 52-1 at 9; 76-1 at 1.) Speaker Lucas makes his argument pursuant to Rule 12(b)(6) in his renewed Motion. (ECF No. 77-1 at 12.)
Defendants appear to make this argument pursuant to Federal Rule of Civil Procedure 12(b)(1). Having not been advised otherwise, the court analyzes the argument under Rule 12(b)(1). (See ECF No. 48-1 at 19; ECF No. 76-1 at 1.)
Defendants appear to make this argument pursuant to Federal Rule of Civil Procedure 12(b)(1). Having not been advised otherwise, the court analyzes the argument under Rule 12(b)(1). (See ECF No. 48-1 at 24; ECF No. 76-1 at 5.)
In their previous and renewed Motions to Dismiss, Defendants and Intervenor Defendants appear to make this argument pursuant to Rule 12(b)(1). (See ECF No. 48-1 at 19; 50-1 at 28; 52-1 at 17; 76-1 at 1; 78-1 at 10.) Speaker Lucas makes his argument pursuant to Rule 12(b)(6) in his renewed Motion. (ECF No. 77-1 at 12.)
Defendants assert application of sovereign immunity under Rule 12(b)(1), while Speaker Lucas generally relies on Rule 12(b)(6). (ECF No.76-1 at 2; ECF No. 77-1 at 5-9.)
" 'Enforcement' means 'the act or process of compelling compliance with a law, mandate, command, decree, or agreement.' " Meltzer/Austin Rest. Corp. v. Benihana Nat'l Corp. , No. A-11-CV-542-AWA,
If the court determines the relief a plaintiff seeks "is an excessive intrusion into an area of special state sovereign interest, Ex Parte Young does not apply, and the Eleventh Amendment bars the suit." Elephant Butte Irr. Dist. of N.M. v. Dep't of Interior ,