Alliant Energy Corp. v. Bie

Citation330 F.3d 904
Decision Date29 May 2003
Docket NumberNo. 02-2618.,02-2618.
PartiesALLIANT ENERGY CORPORATION and Wisconsin Power And Light Company, Plaintiffs-Appellants, v. Ave M. BIE, Burneatta Bridge and Robert M. Garvin, in their official capacities as Commissioners of the Wisconsin Public Service Commission, Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

Thomas M. Pyper (argued), Whyte, Hirschboeck & Dudek, Madison, WI, for Plaintiffs-Appellants.

James E. Doyle, Edwin J. Hughes (argued), Office of Attorney General, Wisconsin Dept. of Justice, Madison, WI, for Defendants-Appellees.

Kendall W. Harrison, Lafollette, Godfrey & Kahn, Madison, WI, for Amicus Curiae.

Before FLAUM, Chief Judge, and COFFEY and WILLIAMS, Circuit Judges.

FLAUM, Chief Judge.

This case involves various statutes regulating public utilities and public utility holding companies in Wisconsin. The plaintiffs challenge the constitutionality of the statutes under the Commerce and Equal Protection clauses of the United States Constitution. The district court granted summary judgment in favor of the defendants. The plaintiffs appeal. For the reasons stated herein, we affirm in part and reverse in part.

I. Background
i. The Parties

The plaintiffs in this case are Alliant Energy Corporation ("Alliant") and its subsidiary, Wisconsin Power and Light Company ("WPLC").1 Alliant is incorporated in Wisconsin and functions as a Wisconsin public utility holding company. Under WIS. STAT. § 196.795(1)(h)(1)(a) that means that Alliant owns or controls more than 5% — in this case 100% — of the outstanding voting securities in a Wisconsin public utility, namely WPLC, a Wisconsin corporation that provides utility services in Wisconsin. Alliant has two other subsidiaries: Interstate Power and Light Company, which provides utility services in Iowa, Minnesota and Illinois; and Alliant Energy Resources, Inc., which owns Alliant's nonutility holdings. Alliant is subject to regulation by the Minnesota Public Utilities Commission, the Iowa Utilities Board, the Illinois Commerce Commission, the Securities and Exchange Commission, and most relevantly the Wisconsin Public Service Commission ("PSC"). WPLC is also regulated by the PSC.

This is a suit against the PSC (the named defendants in this case, Ave Bie, Burneatta Bridge and Robert M. Garvin, are sued in their official capacities as commissioners of the PSC).

ii. The Statutory Provisions

There are numerous provisions of Wisconsin law that are challenged in this appeal, and two other provisions that, though unchallenged, are relevant to our analysis. The relevant unchallenged provisions are as follows:

Ch. 180:2 This chapter provides the rules for incorporation within Wisconsin. Both Alliant and WPLC are incorporated under ch. 180. Alliant is seeking to reincorporate in another state.

§ 196.795(2): This is the section specifically providing for and authorizing the formation of utility holding companies. It is by virtue of this provision that Alliant is authorized to exercise ownership and control over WPLC; to put it another way, without this provision Alliant would not exist at all as a holding company.

The challenged provisions are as follows:

§ 196.53: "No license, permit or franchise to own, operate, manage or control any plant or equipment for the production, transmission, delivery or furnishing of heat, light, water or power may be granted or transferred to a foreign corporation [with some exceptions]."

§ 196.795(5)(L) ("in-state incorporation provision"): This provision requires that a public utility holding company be incorporated in Wisconsin, under WIS. STAT. CH. 180.

§ 196.795(3) ("the takeover provision"): This provision requires PSC approval before a person can acquire more than 10% of the outstanding voting securities of a public utility holding company.

§ 196.795(6m)(b) ("the asset cap"): This provision limits the extent to which a public utility holding company may invest in non-utility businesses.

§§ 196.195(5)(a) and (7)(a), 201.01(2), and 201.03(1) ("the securities regulation provisions"): These provisions provide that PSC may regulate the issuance of securities by "public service corporations." The provisions also define the application of the term "public service corporations."3

The in-state incorporation provision, the takeover provision, the asset cap, and the securities regulation provisions are all part of the Wisconsin Utilities Holding Company Act (WUHCA).

iii. The Challenge

Alliant and WPLC challenge the constitutionality of the in-state incorporation provision, the takeover provision, the asset cap, and the securities regulation provisions as well as § 196.53. Alliant argues that these provisions violate the Commerce and Equal Protection clauses of the United States Constitution.4 The district court found that the provisions are not unconstitutional and alternatively that Alliant is estopped from challenging the provisions in the first place. Accordingly, the district court granted summary judgment in favor of the defendants.

II. Discussion

Alliant presents its arguments generally as to all challenged provisions with few distinctions between them. The issues of this case cannot be meaningfully analyzed in such a manner. The provisions of the statute have very different purposes and effects. We therefore deal with the provisions in three distinct categories: the first category is simply the in-state incorporation provision requiring that a holding company be incorporated under Wisconsin law; the second category is § 196.53, the provision requiring that licenses, permits and franchises for local utilities not be granted or transferred to foreign corporations and the third category is made up of the remaining provisions, which regulate the financial structure and activities of the holding company (hereinafter "the structural provisions").

a. Constitutional Estoppel and Severability

The district court found that Alliant was estopped from challenging the constitutionality of the Wisconsin statutes. The district court reasoned that because Alliant is authorized to exist as a holding company by virtue of WUHCA, in provision § 196.795(2), it cannot then challenge the constitutionality of other parts of the act. The district court based its holding on Fahey v. Mallonee, 332 U.S. 245, 67 S.Ct. 1552, 91 L.Ed. 2030 (1947). The Supreme Court in Fahey explained, "It is an elementary rule of constitutional law that one may not retain the benefits of the Act while attacking the constitutionality of one of its important conditions." Id. at 255, 67 S.Ct. 1552 (quotations and citations omitted). As elementary as the rule may have been, the "doctrine has unquestionably been applied unevenly in the past, and observed as often as not in the breach." Arnett v. Kennedy, 416 U.S. 134, 153, 94 S.Ct. 1633, 40 L.Ed.2d 15 (1974); accord Brockert v. Skornicka, 711 F.2d 1376, 1380 (7th Cir.1983). We therefore view the rule as one to be applied on a case-by-case basis. See Kadrmas v. Dickinson Pub. Sch., 487 U.S. 450, 456-57, 108 S.Ct. 2481, 101 L.Ed.2d 399 (1988) ("[W]e doubt that plaintiffs are generally forbidden to challenge a statute simply because they are deriving some benefit from it."). It is also important to recognize the close tie between the rule of estoppel and the question of severability of statutory provisions. The question of severability was essential to the decision in Fahey:

In the name and right of the Association it is now being asked that the Act under which it has its existence be struck down in important particulars, hardly severable from those provisions which grant its right to exist. Plaintiffs challenge the constitutional validity of the only provision under which proceedings may be taken to liquidate or conserve the Association for the protection of its members and the public. If it can hold the charter that it obtained under this Act and strike down the provision for terminating its powers or conserving its assets it may perpetually go on, notwithstanding any abuses which its management may perpetuate.

Fahey, 332 U.S. at 255-56, 67 S.Ct. 1552. As the challenged provision was "hardly severable" from the provision that allowed the plaintiffs in that case to exist, it made sense to estop them from making the challenge. If the plaintiffs were allowed to challenge a non-severable provision, the result would be strange indeed — a victorious plaintiff would have litigated itself out of existence.

The defendants argue that the challenged provisions, as part of WUHCA, are not severable from the other provisions of that act, especially WIS. STAT. § 196.795(2), the provision under which Alliant is authorized to exist as a holding company. In making this argument the plaintiffs must overcome the presumption in Wisconsin of severability of statutory provisions. Wisconsin Statute § 990.001(11) provides,

The provisions of the statutes are severable. The provisions of any session law are severable. If any provision of the statutes or of a session law is invalid, or if the application of either to any person or circumstance is invalid, such invalidity shall not affect other provisions or applications which can be given effect without the invalid provision or application. This presumption can only be overcome by showing that the legislature, intending the statute to be effective only as an entirety, would not have enacted the valid part of the statute by itself. State v. Hezzie R., 219 Wis.2d 848, 863-66, 220 Wis.2d 360, 580 N.W.2d 660 (1998).

The merit of the defendants' argument that the provisions are not severable from § 196.795(2) is different for each of the three categories of challenged provisions. For the group we refer to as the structural provisions the defendants have a strong argument. These provisions were part of a larger legislative compromise. Wisconsin clearly has an interest in...

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