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South Carolina Electric & Gas Co. v. Whitfield

United States District Court, D. South Carolina, Columbia Division

July 26, 2018

South Carolina Electric & Gas Company, Plaintiff,
Swain E. Whitfield, in his official capacity as Chairman of the South Carolina Public Service Commission; Comer H. Randall, in his official capacity as Commissioner of the South Carolina Public Service Commission; John E. Howard, in his official capacity as Commissioner of the South Carolina Public Service Commission; Elliott F. Elam, Jr., in his official capacity as Commissioner of the South Carolina Public Service Commission; Elizabeth B. Fleming, in her official capacity as Commissioner of the South Carolina Public Service Commission; Robert T. Bockman, in his official capacity as Commissioner of the South Carolina Public Service Commission; and G. O'Neal Hamilton, in his official capacity as Commissioner of the South Carolina Public Service Commission, Defendants.


         Plaintiff South Carolina Electric and Gas Company (“SCE&G”) brings this action pursuant to 42 U.S.C. § 1983 alleging constitutional claims against the following Defendants in their official capacities as Commissioners of the South Carolina Public Service Commission (“PSC”): Swain E. Whitfield, Comer H. Randall, John E. Howard, Elliot F. Elam, Jr., Elizabeth B. Fleming, Robert T. Bockman, and G. O'Neal Hamilton (collectively, “Defendants”). (ECF No. 1.) Specifically, SCE&G alleges that its rights under the Due Process Clause of the Fourteenth Amendment to the United States Constitution; the Bill of Attainder Clause of Article 1, § 10 of the United States Constitution; and the Takings Clause of the Fifth and Fourteenth Amendments to the United States Constitution were violated when the South Carolina General Assembly passed 2018 South Carolina Laws Act 287 (H.B. 4375) (“Act 287”[1]) and 2018 South Carolina Laws Resolution 285 (S. 0954) (“Resolution 285”).[2] (ECF No. 1 at 1 ¶ 2 & 42 ¶ 216-47 ¶ 258.)

         This 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”) (together “Intervenor Defendants”).[3] (ECF Nos. 48, 50, 52.) SCE&G has not yet responded to Defendants and Intervenor Defendants' Motions; however, as explained below, the pleading deficiencies in SCE&G's Complaint cannot be remedied by arguments of counsel. Therefore, in light of the expedited schedule in this case, the court exercises its discretion to decide the matter without awaiting SCE&G's response. See, e.g., Planned Parenthood of Kan. v. Mosier, No. 16-2284-JAR-GLR, 2016 WL 3597457, at *1 (D. Kan. July 5, 2016) (deciding a motion to dismiss in a preliminary injunction case even though the motion to dismiss had not been fully briefed), rev'd, on other grounds, 882 F.3d 1205 (10th Cir. 2018). For the reasons stated below, the court GRANTS IN PART AND DENIES IN PART the Motions to Dismiss.


         This case arises out of SCE&G's attempt to construct two nuclear reactors known as VC 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, [4] and enable it to meet the electricity demands of its South Carolina customers. (See ECF No. 1 at 6 ¶ 19, 13 ¶¶ 56-59.) SCE&G alleges that the incentive for the Project occurred as a result of the South Carolina General Assembly's passage of the Base Load Review Act, SC Code Ann. § 58-33-210 et seq. (2015[5]) (“BLRA”), which became “effective upon signature of the Governor on May 3, 2007.”[6] S.C. Code Ann. § 58-33-210.

         The PSC is granted the power to regulate, oversee, and approve “electric rates that SCE&G charges to retail electric ratepayers, and prudency determinations of SCE&G's actions under the BLRA.” (ECF No. 1 at 5 ¶ 15 (citing S.C. Code Ann. § 58-3-140(A) (“[T]he commission is 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.”)).) As a result, all rates charged by a utility in the state of South Carolina must be approved by the PSC. See S.C. Code Ann. §§ 58-27-820, -830. Prior to the passage of Act 287 and Resolution 285, South Carolina law provided two processes for utility rate changes. Pursuant to 2006 S.C. Acts 318 (codified in and modifying Title 58, specifically S.C. Code Ann. §§ 58-27-860, -870, -920, -930, and -33-310), a public utility desiring to change its rates began the process by filing a schedule of its proposed rates with the PSC. S.C. Code Ann. § 58-27-860. The PSC then held a public hearing on the proposed rates and within six (6) months granted, modified, or denied the proposed rate schedule. S.C. Code Ann. § 58-27-870(A), (E). A utility was barred from filing another proposed rate schedule for twelve (12) months after the filing of a proposed rate schedule. S.C. Code Ann. § 58-27-870(E). However, under S.C. Code Ann. § 58-27-920, the PSC could sua sponte issue new rates, subject to certain procedural protections for utilities, see S.C. Code Ann. § 58-27-930. Any final order of the PSC was appealable to the Supreme Court of South Carolina or the South Carolina Court of Appeals. S.C. Code Ann. §§ 58-33-310, 58-27-2310.

         Pursuant to the BLRA, a utility undertaking the construction of a base load review plant, as defined in S.C. Code Ann. § 58-33-220(2), could petition the PSC for permission to charge revised rates to recoup construction costs of the plant. S.C. Code Ann. § 58-33-280. The utility could petition for revised rates yearly, SC Code Ann. § 58-33-280(A), and the PSC was required to issue an order granting, modifying, or denying the proposed rates within four (4) months of the request, SC Code Ann. § 58-33-280(E). These proceedings were subject to the same procedural rules as other rate proceedings, including the right to appeal. See S.C. Code Ann. § 58-33-240(A). Thus, SCE&G alleges that under the BLRA, it could construct the Project and “recover its capital costs related to the plant through revised rate filings or general rate proceedings.” (ECF No. 1 at 11 ¶ 44 (quoting S.C. Code Ann. § 58-33-275(C).)

         SCE&G alleges that on May 30, 2008, it filed a Combined Application for Certificate of Environmental Compatibility, Public Convenience and Necessity[7] (the “Application”) with the PSC, pursuant to the BLRA. (ECF No. 1 at 14 ¶ 63.) SCE&G sought approval for construction of the Project based on a projected cost of $6.3 billion. (Id. ¶ 64.) On March 2, 2009, the PSC approved SCE&G's Application to construct the Project finding that its construction “is reasonable and prudent.” (See ECF No. 1-3 at 6 ¶ 11; see also ECF Nos. 1-1, 1-2.) Thereafter, SCE&G alleges that from 2008 through 2016, the PSC approved revised rates related to recovery for the capital costs of the Project amounting to $445 million annually. (See ECF Nos. 1-5 to 1-12.) In or around July 31, 2017, SCE&G alleges that it was forced by specified circumstances to reach a decision that it could not complete the Project and “announced that it would cease construction of the Units and request recovery of its abandoned costs, an outcome expressly contemplated by the BLRA.”[8] (ECF No. 1 at 30 ¶ 156.)

         SCE&G alleges that on August 1, 2017, it filed with the PSC a Petition for Prudency Determination Regarding Abandonment, Amendments to the Construction Schedule, Capital Cost Schedule and Other Terms of the BLRA Orders for the V.C. Summer Units 2 & 3 and Related Matters to abandon construction of the Project (the “Petition”). (Id. at 31 ¶ 157.) In the Petition, SCE&G alleges that it asked the PSC to “enter an order finding that SCE&G's decision to abandon the construction of the [V.C. Summer] Units was reasonable and prudent” and “sought authorization to calculate revised rates reflecting SCE&G's incurred construction costs and costs of abandonment, pursuant to the BLRA.” (Id. ¶¶ 158-159.) On August 15, 2017, SCE&G alleges that it voluntarily withdrew its Petition “after legislative leadership demanded more time for legislators to review the project and threatened to bring the South Carolina General Assembly back into a special session for the specific purpose of preventing SCE&G from recovering its abandoned costs.” (Id. ¶¶ 162-163.) After it announced its abandonment of the Project, SCE&G alleges that numerous members of the South Carolina political community expressed the desire “to punish SCE&G for its decision to abandon the nuclear facilities.” (Id. at 34 ¶ 172; see generally ECF No. 1 at 32 ¶ 166-35 ¶ 174.)

         With the passage of Act 287 and Resolution 285, the South Carolina General Assembly modified the process for establishing and appealing 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. 2018 S.C. Acts 258 § 3. Act 287 specified that the “experimental rate” would be effective from the PSC's implementation until the conclusion of the proceedings currently before the PSC regarding the Project. Id. To facilitate this timeline, Act 287 removed the deadlines for PSC determinations regarding rate changes discussed above.[9] Id. Then, Resolution 285 prohibited the PSC from holding a hearing or issuing a final decision in its proceedings prior to November 1, 2018. 2018 S.C. Acts 285 § 1. Both the Act and the Resolution repealed any sections of law in conflict with their operation. 2018 S.C. Acts 258 § 2; 2018 S.C. Acts 285 § 3. The Act and Resolution did not repeal S.C. Code Ann. § 58-33-310, which addresses the appealability of PSC decisions; however, SC Code Ann. § 58-33-310 only grants a right to appeal following a final order by the PSC. See S.C. Code Ann. § 58-33-310.

         On 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 that 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.) SCE&G's federal lawsuit does not challenge or seek review of any order by the PSC.[10] (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. (Id.) The first billing cycle in August begins on August 7, 2018. (ECF No. 9 at 2.) In light of the August 7, 2018 implementation date, the court granted an expedited schedule for this case. (ECF No. 21.)

         Additionally, on July 3, 2018, Intervenor Defendants filed Motions to Intervene (ECF Nos. 7, 8), which the court granted on July 18, 2018. (ECF No. 41.) Additionally, on July 5, 2018, Alan Wilson, Attorney General of South Carolina (“Attorney General Wilson”), moved to file an Amicus Brief (ECF No. 10) and the court granted Attorney General Wilson's Motion on July 12, 2018. (ECF No. 27.)

         Thereafter, on July 20, 2018, Defendants and Intervenor Defendants filed the instant Motions to Dismiss.


         A. 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, 588 F.3d 186, 192 (4th Cir. 2009) (citations omitted); see also Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (“A motion to dismiss under Rule 12(b)(6) . . . does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.”). To be legally sufficient, a pleading must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2).

         A Rule 12(b)(6) motion should not be granted unless it appears certain that the plaintiff can prove no set of facts that would support her claim and would entitle her to relief. Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). When considering a Rule 12(b)(6) motion, the court should accept as true all well-pleaded allegations and should view the complaint in a light most favorable to the plaintiff. Ostrzenski v. Seigel, 177 F.3d 245, 251 (4th Cir. 1999); Mylan Labs., Inc., 7 F.3d at 1134. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         B. 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 Fredrick, Md., 191 F.3d 394, 399 (4th Cir. 1999). In determining whether jurisdiction exists, the court is to “regard the pleadings' allegations as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment.” Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991) (citing Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982)). “The moving party should prevail only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law.” Id. (citation omitted). “[W]here a party challenges the subject matter jurisdiction of the court on the grounds that the party is an arm of the state entitled to sovereign immunity, the burden of persuasion lies with the party asserting the immunity.” Hutto v. S.C. Ret. Sys., 899 F.Supp.2d 457, 466 (D.S.C. 2012) (citing Woods v. Rondout Valley Cent. Sch. Dist. Bd. of Educ., 466 F.3d 232, 237 (2d Cir. 2006)).

         III. ANALYSIS

         A. Failure to State a Claim

         Defendants bring a Motion to Dismiss pursuant to Rule 12(b)(6). (ECF Nos. 48-1 at 8- 17.) Defendants assert that SCE&G has failed to state a claim as to any of its alleged constitutional violations. (ECF No. 48-1 at 8-17.)

         SCE&G is able to bring a Section 1983 claim because it is considered an “other person” for the purposes of Section 1983 and it is suing in its own right.[11] See ANR Pipeline Co. v. Mich. Pub. Serv. Comm'n, 608 F.Supp. 43, 46 (W.D. Mich. 1984). SCE&G is able to bring suit against the individual commissioners in their official capacities because “[u]nder Ex Parte Young[, 209 U.S. 123 (1908)], private citizens may sue state officials in their official capacities in federal court to obtain prospective relief from ongoing violations of federal law.” Allen v. Cooper, No. 17-1522, 2018 WL 3352378, at *11 (4th Cir. July 10, 2018).[12] The suit against the Commissioners must be based on some action that the commissioners took that is an “ongoing violation of federal law.” See Id. (“[The Ex Parte Young exception] to Eleventh Amendment immunity is designed to preserve the constitutional structure established by the Supremacy Clause and rests on the notion, often referred to as a fiction, that a state officer who acts unconstitutionally is stripped of his official or representative character and thus subjected in his person to the consequences of his individual conduct.”) (quoting Antrican v. Odom, 290 F.3d 178, 184 (4th Cir. 2002)) (internal quotations and citations omitted).

         SCE&G seeks review of the alleged unconstitutional statutory provisions enacted by the South Carolina General Assembly, and it does not challenge or seek review of any order by the PSC or any other South Carolina agency. (ECF No. 1 at 3 ¶ 4.) However, SCE&G also seeks to enjoin the experimental rate set by the PSC from being implemented. (ECF No. 5-1 at 18.) Additionally, SCE&G requests that the court “[e]nter a temporary, preliminary and permanent injunction that directs 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 the unconstitutional Act and Joint Resolution.” (ECF No. 1 at 48 ¶ B.) SCE&G has not alleged that any of the PSC Commissioners, acting under color of state law, violated SCE&G's constitutional rights. (See ECF No. 7 at 5); see also Clelland v. Glines, No. CIV. A. 02-2223-KHV, 2002 WL 31855267, at *5 (D. Kan. Dec. 17, 2002), aff'd, 96 Fed.Appx. 660 (10th Cir. 2004) (“Personal participation is an essential allegation in a section 1983 action. . . . Absent allegations of personal participation by individual defendants, the court [must dismiss the allegation for failure to state a claim upon which relief can be granted].”).

         SCE&G must “state a claim to relief that is plausible on its face, ” pleading facts that allow the court to reasonably infer that Defendants are liable for the misconduct alleged. See Iqbal, 556 U.S. at 678; Twombly, 550 U.S. at 570. SCE&G has failed to state a plausible claim against the individual commissioners, and without individual allegations against the individual commissioners, the court cannot infer that any actions by the Commissioners violated SCE&G's constitutional rights under the color of state law.

         B. The Johnson Act

         Defendants and Intervenor Defendants all assert that the Johnson Act applies because SCE&G seeks to enjoin the experimental rate set by the PSC's July 3, 2018 Order (ECF No. 33-4). (See ECF Nos. 48-1 at 17, 52-1 at 11-12, 50-1 at 24.)

         The Johnson Act codified in 28 U.S.C. § 1342 states that:

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 ...

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