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South Carolina Electric & Gas Co. v. Randall

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

August 2, 2018

South Carolina Electric & Gas Company, Plaintiff,
v.
Cromer H. Randall, in his official capacity as Chairman of the South Carolina Public Service Commission; Swain E. Whitfield, 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; Elliot F. Elam, Jr., in his official capacity as Commissioner of the South Carolina Public Service Commission; G. O'Neal Hamilton, in his official capacity as Commissioner of the South Carolina Public Service Commission; and Thomas J. Ervin, in his official capacity as Commissioner of the South Carolina Public Service Commission, Defendants.[1]

          ORDER AND OPINION

         Plaintiff South Carolina Electric & 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., Thomas J. Ervin, and G. O'Neal Hamilton (collectively, “Defendants”). (ECF No. 68.) 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”[2]) and 2018 South Carolina Laws Resolution 285 (S. 0954) (“Resolution 285”).[3] (ECF No. 68 at 7 ¶ 18 & 47 ¶ 239-53 ¶ 284.)

         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”)[4] (together, “Intervenor Defendants”).[5] (ECF Nos. 76, 77, 78.) SCE&G opposes these Motions in their entirety. (ECF No. 91.) For the reasons set forth below, the court DENIES Defendants and Intervenor Defendants' Motions to Dismiss (ECF Nos. 76, 77, 78).

         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, SC Code Ann. § 58-33-210 et seq. (2015[6]) (“BLRA”), which became “effective upon signature of the Governor on May 3, 2007.” S.C. Code Ann. § 58-33-210.

         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. 2018 S.C. Acts 258 § 3. Act 287 specified the “experimental rate” would be effective from the PSC's implementation until the conclusion of the abandonment proceedings regarding the Project currently before the PSC. Id. Resolution 285 prohibited the PSC from holding a hearing or issuing a final decision in the abandonment 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.

         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 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)[7] (ECF Nos. 76, 77, 78). On July 30, 2018, SCE&G filed a response in opposition (ECF No. 91). The court heard the parties' arguments regarding the Motions to Dismiss during the Preliminary Injunction hearing on July 30-31, 2018.

         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 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)).

         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, 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 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 the 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.

         III. ANALYSIS

         A. The Johnson Act[8]

         The Johnson Act codified at 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 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 claims 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, 355 U.S. 534, 540 (1958); see also Monongahela Power Co. v. Schriber, 322 F.Supp.2d 902, 914 (S.D. Ohio 2004) (“Because [the utility] challenges the statute, and not the [agency] orders per se, the Johnson Act does not divest this Court of jurisdiction.”); cf. Hill v. Kansas Gas Serv. Co., 323 F.3d 858, 863 (10th Cir. 2003) (explaining that the Johnson Act does not deprive a federal court of jurisdiction “unless a plaintiff's challenge is to an ‘order affecting rates'”).

         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 ...


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