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In a recently concluded case, Parr Richey attorneys representing Clark County REMC, a southern Indiana rural electric utility, were successful in persuading the Indiana Supreme Court to reverse earlier decisions of the trial court and Court of Appeals.  The case involved four former REMC directors who claimed the REMC breached a contractual obligation to provide them with free, lifetime health insurance benefits after their board service ended. Their claim was based on a longstanding company policy that obligated the company to provide free health insurance benefits to former directors who met certain age and years of service requirements before leaving the board.

After the company ended that policy in 2018, the affected former directors sued. Both the trial judge and intermediate appellate court held that that the policy constituted a contractual obligation of the REMC which had been breached.  But in an issue of first impression, the Indiana Supreme Court unanimously held the policy did not form an enforceable contract and, as with other policies of the company, it was subject to change or termination at the will of the board.  Hence, no benefits were due after the policy’s termination.

The Parr Richey team who worked on the case included Kent Frandsen, Katie Moore, Erin Borissov, and John Kinney. Click here to read the Court’s opinion.

On February 8, 2021, the Fifth Circuit Court of Appeals affirmed the Southern District of Mississippi’s dismissal of a plaintiffs’ complaint for failure to state a claim. Harper v. So. Pine Electric Cooperative, 987 F.3d 417 (5th Cir. 2021). The complaint was brought by a member-ratepayer of the Cooperative alleging that Mississippi law requires electric cooperatives like Southern Pine to distribute expenses over and above what is needed for operating expenses, payments of principal and interest, improvements, new construction, etc., back to its members. The members claimed that Southern Pine should be required to distribute all funds over an asset-to-equity ratio of 30%. For Southern Pine, it would have required them to distribute $112.5 million of a retained $248 million in accumulated income in 2016. The Southern District of Mississippi held that “the modern version of the statute, § 77-5-235(5) applied retroactively, and, in any event, plaintiffs failed to state a claim under either version.”

The Fifth Circuit found both of the plaintiffs’ arguments lacking regarding which of two Mississippi versions of a statute applied. First, the plaintiffs could not “point to any case indicating that the Stone exception applies only in the limited circumstances for which they advocate.” The court surmised that if they accepted the plaintiffs’ contentions, both the Supreme Court of Mississippi and courts within the circuit have applied the Stone exception erroneously. Instead, the court used the Supreme Court of Mississippi’s characterization: “[E]very right or remedy created solely by the repealed or modified statute disappears or falls with the repealed or modified statute . . . save that no such repeal or modification shall be permitted to impair the obligation of a contract or to abrogate a vested right.” With no contract at issue, the court then turned to whether a vested right had been abrogated.

In Mississippi, a vested right is one that must have “become a completed, consummated right for present or future enjoyment; not contingent; unconditional; absolute.” Here, the court looked at the previous statute to determine whether it conferred a vested right to the plaintiffs or not. Importantly, the court found that the relevant question is not whether the board must return excess revenues, but “[w]ho gets to determine when the revenues become ‘not needed’ for the defined purposes such that they must ‘be returned to the members?’” Unambiguously, the statute leaves that discretion to “the board” as it “may from time to time prescribe.” Only when the board makes that determination does the statute require the funds be returned to the members, which makes the right contingent to the members and not vested.

The District Court for the Southern District of Indiana published an order on November 18, 2020 remanding the Class Action lawsuit against Netflix, Disney, Hulu, DirectTV and Dish to Marion County Superior Court.

The city of Fishers, Indianapolis, Evansville and Valparaiso filed a class action lawsuit on behalf of all units entitled to receive franchise fees to compel the streaming services pay franchise fees governed by Indiana’s Video Service Franchises Act in Ind. Code §8-1-34-4 “VSF Act.” The VSF Act requires companies that provide video service in Indiana to apply and receive certificates of franchise authority. The companies must pay a quarterly franchise fee to certain governmental units. The units include counties, municipalities and townships under Ind. Code §8-1-34-12. The streaming services (“Defendants”) sent the case to federal court under Class Action Fairness Act under 28 USC §1332(d) and diversity jurisdiction under 28 USC §1322(a). The Cities filed a motion to send the case back to state court, arguing under comity principles, the matter is more appropriate for Indiana courts to decide.

The Cities argued the case should move back to Marion County because the enforcement and franchise fee collection is “a commercial matter over which the Indiana legislature and Indiana Unit have traditional enjoyed wide regulatory latitude, that does not implicate any fundamental right of Defendants.” ·

Parr Richey attorney, Aleasha J. Boling, will be a presenter at the Great Lakes Technology Showcase Virtual Event on Wednesday, October 21, 2020. Aleasha’s topic will be “Collecting on customer accounts in light of the COVID-19 service disconnect moratorium.” This event is hosted by Indiana Broadband and Technology Association, Ohio Telecom Association, and Telecommunications Association of Michigan. Complete seminar details, including the full agenda, can be found at the link below:

Seminar Details

Members of Delta Electric Power Association (“Delta”) filed a lawsuit alleging Delta was retaining excess revenues that it did not need to fund operations. Delta filed a motion to compel arbitration pursuant to an arbitration clause included in its bylaws. The trial court denied Delta’s motion to compel and held the arbitration provision was unenforceable for the following reasons:

• Plaintiffs did not agree to arbitrate the dispute;

• Bylaws contained two separate arbitration provisions: mandatory and nonmandatory;

Indiana Code §8-1-8.5-3.1(b) in 2019 ordered the Indiana Utility Regulatory Utility Commission (IURC) to conduct a study of statewide impacts of:

  • Transitions in the fuel sources and other resources used to generate electricity by electric utilities; and
  • New and emerging technologies on local grids or distribution infrastructure; on electric generation capacity, system reliability, system resilience, and cost of electric service for consumers. The IURC shall consider timelines for transitions in fuel sources and other resources and for implementation of new and emerging technologies.

On August 5, 2020, the Indiana Utility Regulatory Commission (IURC) approved $1,110,000 in civil penalties for pipeline safety violations in 2018 for Northern Indiana Public Service Company, LLC (NIPSCO).  NIPSCO failed to locate or mark its pipelines in the two days required by safety procedures.  Mr. Boyd, the Division’s Director, claimed NIPSCO committed 230 violations in 2018.

In 2017, the IURC approved a settlement agreement that outlined the cost of each violation NIPSCO commits in 2017, 2018 and 2019 with respect to locating underground gas pipelines and facilities subject to approval.  Each side recommended the Commission approved $1,110,000 in damages.  The Division’s deadline to file the petition for approval of 2019 penalties is December 31, 2020.

To access the order, visit this website: https://www.in.gov/iurc/files/44970%20S2%20PSD%20NIPSCO%20Order.pdf.

On July 30, 2020, the Indiana Court of Appeals concluded that a county’s refusal to issue a document indicating that no rezoning or variance would be necessary for an applicant’s operation of a proposed waste transfer station was “arbitrary, capricious, and an abuse of discretion.” Monster Trash, Inc. v. Owen County Council, Owen County Commissioners, and Owen County Board of Zoning Appeals. In the case, Monster Trash, Inc. applied to Indiana Department of Environmental Management for a license to operate a solid waste transfer station in Owen County. As a condition of approval, applicants are required to provide a “document from a county official confirming zoning requirements are not needed for the location of the proposed facility.” Owen County’s Board of Zoning Appeals refused to provide this document to Monster Trash, Inc., thus resulting in litigation.

Owen County had an ordinance in place that prohibited waste transfer stations, which did not allow appeals for a use variance to the Owen County Board of Zoning Appeals, however, the ordinance specifically stated that waste transfer stations are not prohibited if licensed and approved by the State of Indiana. Thus, the Court of Appeals then addressed Owen County’s refusal to provide the requested document to Monster Trash. The Court concluded “zoning requirements” were not a requirement to operate this solid waste transfer station, which resulted in its conclusion that the County’s refusal to provide the document went against its own ordinance and qualified as “arbitrary, capricious, and an abuse of discretion,” pursuant to Indiana statute. Therefore, the Court determined that there was no legally justifiable reason for the County to refuse the document and its refusal prejudiced Monster Trash from obtaining a State-issued license.

James A.L. Buddenbaum is a partner of the law firm of Parr Richey Frandsen Patterson Kruse LLP with offices in Indianapolis and Lebanon, Indiana. He advises business, utility and municipal and hospital clients in the areas of corporate compliance, corporate governance, employment, real estate, commercial transactions and regulatory law as well as representing policyholders in insurance disputes. He has 30 years of experience representing rural electric and telephone cooperatives.

On April 6, 2020, the Supreme Court of the United States answered the question as to whether 29 U.S.C. § 633a(a) of the Age Discrimination in Employment Act of 1967 imposes liability only when age is a “but-for cause” of the personnel action at issue. Babb v. Wilkie, 106 L. Ed. 2d 432, 438 (2020). 29 U.S.C. § 633a(a), in essence, provides that individuals aged 40 and older “shall not be subjected to personnel actions based on age discrimination,” with a few exceptions. In Babb, the plaintiff, who was born in 1960, is a clinical pharmacist at the U.S. Department of Veterans Affairs Medical Center in Bay Pines, Florida. Id. at 439. The plaintiff brought a suit in 2014 against the Secretary of Veterans Affairs (“VA”), alleging she had been subjected to age discrimination. Id. There were three personnel actions made by the VA that the plaintiff centers around her claim. The VA took away her “advanced scope” designation, which had made her eligible for promotion, was denied training opportunities and passed over for positions in the hospital’s anticoagulation clinic, and lastly, was placed in a new position but her holiday pay was decreased. Id. The plaintiff alleged that throughout this time period supervisors made several “age-related comments” to her as well. Id.

The Supreme Court granted certiorari in this case due to the Circuit split over the interpretation of § 633a(a). The Court’s analysis starts off with looking at the plain meaning of the provision, which leads to the conclusion that “age need not be a but-for cause of an employment decision in order for there to be a violation.” Id. at 440. To support the Court’s conclusion, the language of “free from” found within the provision is examined closely, and the Court concludes that the language coupled with “any” means there cannot be any discrimination whatsoever based on age. Id. at 440-441. Reading the rest of the provision together, the Court determines that “age must be a but-for cause of discrimination, but it does not necessarily have to be a but-for cause of a personnel action itself.” Id. at 441. As a result, the Court concludes that the statute “does not require proof that an employment decision would have turned out differently if age had not been taken into account.” Id.

The Government attempts to make an argument that compares the text of 29 U.S.C. § 633a(a) with other statutes interpreted in prior cases, one of which is the private-sector provision of the ADEA. 29 U.S.C. § 623(a)(1). This provision makes “it unlawful for an employer . . . to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s age.” Id. The Court discusses the critical difference between § 623(a)(1) and § 633a(a), which is § 633a(a) “prohibits any age discrimination in the ‘making’ of a personnel decision, not just with the respect to end results.” Babb at 444. After noting this difference between the two provisions, the Court recognizes that federal employers are held to a stricter standard. However, the Court then addresses how Congress could have added the federal government to the definition of “employer” in the ADEA’s private sector provision but chose not to. Id. at 445.

The Indiana Court of Appeals recently upheld the finding of a de facto merger in successor companies when allowing the enforcement of a judgment against the predecessor company. New Nello Operating Co., LLC v. CompressAir. The Court noted four exceptions to the general rule that when one corporation purchased the assets of another the buyer does not assume the debts and liabilities of the seller.

According to the Court, those four exceptions which allow for successor liability are:

(1) an implied or express agreement to assume liability;

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