Foresight Coal Sales, LLC v. Chandler, CIVIL 3:21-cv-00016-GFVT

CourtUnited States District Courts. 6th Circuit. United States District Court of Eastern District of Kentucky
Writing for the CourtGregory F. Van Tatenhove United States District Judge
PartiesFORESIGHT COAL SALES, LLC, Plaintiff, v. KENT CHANDLER, et al., Defendants.
Docket NumberCIVIL 3:21-cv-00016-GFVT
Decision Date03 November 2021

FORESIGHT COAL SALES, LLC, Plaintiff,
v.

KENT CHANDLER, et al., Defendants.

CIVIL No. 3:21-cv-00016-GFVT

United States District Court, E.D. Kentucky, Central Division

November 3, 2021


OPINION & ORDER

Gregory F. Van Tatenhove United States District Judge

This case gives the Court a distinct sense of déjà vu. Although the factual predicate has changed somewhat over the past year, Plaintiff Foresight Coal Sales, LLC, and the Defendants[1]are essentially back for round two. On May 15, 2020, this Court issued a Memorandum Opinion and Order denying Plaintiff Foresight Coal Sales, LLC's Motion for Preliminary Injunction because Foresight had failed to show a strong likelihood of success on the merits. Foresight Coal Sales, LLC v. Schmitt, 2020 WL 2513821, at *13 (E.D. Ky. May 15, 2020). At issue in the prior case was a regulation the Kentucky Public Service Commission adopted that permitted the Commission to “evaluate the reasonableness of fuel costs in contracts and competing bids” without considering any coal severance tax. Id. at *1.

The matters presently before the Court are Foresight's Motion for Preliminary Injunction

1

[R. 20] and Defendants' Motion to Dismiss.[2] [R. 22.] Foresight argues that Senate Bill 257, which became law on March 25, 2021, violates the dormant Commerce Clause by discriminating against out of state coal producers from states that do not impose severance taxes. [R. 1; R. 19.] The parties agree that the language of S.B. 257 is essentially identical to the language of the regulation at issue in the prior litigation between these parties. [R. 19 at 26; R. 25 at 6.] For the following reasons, Defendants' Motion to Dismiss is DENIED and Foresight's Motion for Preliminary Injunction is also DENIED.

I

Plaintiff Foresight Coal Sales, LLC, is a coal producer that sells coal produced in Illinois. [R. 19 at 2.] Foresight directly competes with companies that sell coal produced in Kentucky and other states through the submission of bids in response to requests for proposals from regulated utilities in Kentucky. Id. Kentucky's Public Service Commission, which is an administrative agency, “directly regulates the award of regulated utilities' coal supply contracts through its laws and regulations, including 807 Ky. Admin. Regs. 5:056, the Fuel Adjustment Clause.” Id.

Because of Kentucky's fuel adjustment clause, utilities may “adjust the rates they charge consumers, above or below the utilities' base rates, to account for these ever-fluctuating fuel costs.” Id. at 8. Fuel prices can wildly fluctuate in a short period of time, as can purchase power. Id. Because of the nature of fluctuating costs, the Commission has broad discretion to regulate the “rates and service of utilities” and determine whether the rates are “fair, just, and reasonable.” [Id. (citing KRS § 278.040; KRS § 278.2207); see also R. 21 at 4.]

2

This matter involves Senate Bill 257, which was passed by the Kentucky General Assembly during the 2021 legislative session and signed into law by Governor Andrew Beshear. Senate Bill 257 reads:

In any review by the commission of any fuel adjustment clause, for any contracts entered into on or after July 1 2021, the commission shall, in determining the reasonableness of fuel costs in procurement contracts and fuel procurement practices, evaluate the reasonableness of fuel costs in contracts and competing bids based on the cost of the fuel less any coal severance tax imposed by any jurisdiction

S.B. 257.

The Commonwealth levies a 4.5% severance tax on any coal that is mined within its borders. See K.R.S. § 143.020. Illinois, by contrast, does not impose a severance tax on coal producers in Illinois. [R. 19 at 11.] Foresight argues that the impact of S.B. 257 is that if “a Kentucky coal producer bid $50 per ton for a utility contract, while an Illinois coal producer bid $48 per ton…the Kentucky coal producer would appear, artificially, to be the lowest-cost provider.” Id. at 20. This law, Foresight argues, is aimed at “giving a leg up to Kentucky's coal producers and discouraging utilities from purchasing coal from out-of-state producers.” Id. at 33. Foresight argues that this new law violates the dormant Commerce Clause facially, purposefully, and in practical effect. Id. at 29. Foresight also argues that the law fails the balancing test from Pike v. Bruce Church, Inc., 397 U.S. 137 (1970). [R. 21 at 24.] The parties both agree that the language of S.B. 257 is identical to the language of the regulation at issue in the prior case involving these parties. [R. 19 at 26; R. 25 at 6.] The Court held a motion hearing with the parties on July 23, and the parties have filed their responses and replies with the Court.

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II

A

An initial matter is the question of standing. Town of Chester, N.Y. v. Laroe Estates, Inc., 137 S.Ct. 1645, 1650 (2017) (“a plaintiff must demonstrate standing for each claim he seeks to press and for each form of relief that is sought”) (quoting Davis v. Fed. Election Comm'n, 554 U.S. 724, 734 (2008)); see also DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006). “At least one plaintiff must have standing to seek each form of relief requested in the complaint.” Town of Chester, N.Y., 137 S.Ct. at 1651.

Standing is a threshold inquiry in every federal case that may not be waived by the parties. See, e.g., Warth v. Seldin, 422 U.S. 490, 498 (1975); Planned Parenthood Ass'n of Cincinnati, Inc. v. Cincinnati, 822 F.2d 1390, 1394 (6th Cir. 1987). “To satisfy the ‘case' or ‘controversy requirement' of Article III, which is the ‘irreducible constitutional minimum' of standing, a plaintiff must, generally speaking, demonstrate that he has suffered an ‘injury in fact,' that the injury is ‘fairly traceable' to the actions of the defendant, and that the injury will likely be redressed by a favorable decision.” Bennett v. Spear, 520 U.S. 154, 162 (1997) (citations omitted). Plaintiffs' injury-in-fact must be both particularized and concrete. Spokeo, Inc. v. Robins, 578 U.S. 330, 334 (2016) (citing Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000)). “For an injury to be particularized, it must affect the plaintiff in a personal and individual way.” Id. (internal quotation marks omitted). Further, a “concrete” injury is a de facto injury that actually exists. Id. Finally, “a plaintiff must also establish, as a prudential matter, that he or she is the proper proponent of the rights on which the action is based.” Haskell v. Washington Twp., 864 F.2d 1266, 1275 (6th Cir. 1988) (citations omitted).

4

Here, Defendants argue in their response to the preliminary injunction motion that Foresight lacks standing for three reasons: (1) Foresight has failed to establish that an injury is “certainly impending;” (2) Foresight cannot “manufacture standing” by inflicting harm on itself based on a hypothetical fear of future harm; and (3) Foresight's alleged harm is not fairly traceable to S.B. 257. [R. 25 at 9-15.] In reply, Foresight argues that it does have a certainly impending injury, that Foresight's argument regarding economic loss and competitive disadvantage are sufficient to both establish injury and to confer standing, and finally that the altered marketplace because of S.B. 257 has created a sufficient injury to confer standing. [R. 29 at 2-6.]

Here, Foresight has established standing in this case for many of the same reasons Foresight established standing in the prior litigation.[3] First, Defendants argue that Foresight has failed to establish an injury in fact because they have not demonstrated that their injury is “certainly impending.” [R. 25 at 9.] However, Foresight states that 807 KAR 5:056(3)(5) caused the Commission to begin “singling out severance taxes as an individual input.” [R. 29 at 3.] Foresight argues that this constituted a “substantial shift in the agency's operating procedure” and caused Foresight to have to alter its bidding practices as a result. [R. 29 at 3.] Given that the parties agree that the language of S.B. 257 is identical to the now-withdrawn 807 KAR 5:056(3)(5) regulation, the Court finds that Defendants' first argument is without merit.

Northeastern Fla. Chapter, Associated Gen. Contractors of Am. v. Jacksonville, 508 U.S. 656 (1993), is instructive. In Northeastern Florida, the plaintiffs brought an equal protection

5

challenge against a city ordinance that gave preferential treatment to minority-owned businesses in awarding city contracts. The Supreme Court wrote:

When the government erects a barrier that makes it more difficult for members of one group to obtain a benefit than it is for members of another group, a member of the former group seeking to challenge the barrier need not allege that he would have obtained the benefit but for the barrier in order to establish standing. The “injury in fact” in an equal protection case of this variety is the denial of equal treatment resulting from the imposition of the barrier not the ultimate inability to obtain the benefit.... And in the context of a challenge to a set-aside program, the “injury in fact” is the inability to compete on an equal footing in the bidding process, not the loss of a contract

Id. at 666. “Courts have applied [Northeastern Florida's] ‘equal footing' doctrine to find standing where plaintiffs challenge state laws they allege are discriminatory under the dormant Commerce Clause.” Byrd v. Tenn. Wine and Spirits Retailers Ass'n, 2017 WL 1021296, at *2 (M.D. Tenn. Mar. 16, 2017) (citing cases from the Ninth Circuit and the Seventh Circuit applying the Northeastern Florida equal footing test to the dormant Commerce Clause context). Here, Foresight is alleging that they cannot “compete on an equal footing in the bidding process” because of S.B. 257. Northeastern Florida, 508 U.S. at 666. Therefore, the Court finds that Foresight has...

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