Gordon v. Council of the City of New Orleans

• Decision Date: 25 February 2008
• Docket Number: No. 2005-CA-1381.,2005-CA-1381.
• Citation: 977 So.2d 212
• Parties: Reverend C.S. GORDON, Jr., J. Michael Malec, Darryl Malek-Wiley, Willie Webb, Jr., and Maison St. Charles, L.L.C. d/b/a Quality Inn Maison St. Charles v. The COUNCIL OF the CITY OF NEW ORLEANS and Entergy New Orleans, Inc.
• Court: Court of Appeal of Louisiana — District of US

977 So.2d 212

Reverend C.S. GORDON, Jr., J. Michael Malec, Darryl Malek-Wiley, Willie Webb, Jr., and Maison St. Charles, L.L.C. d/b/a Quality Inn Maison St. Charles v. The COUNCIL OF the CITY OF NEW ORLEANS and Entergy New Orleans, Inc.

No. 2005-CA-1381.

Court of Appeal of Louisiana, Fourth Circuit.

February 25, 2008.

Rehearing Denied in Part, Granted in Part April 4, 2008.

J. Kenton Parsons, Luke F. Piontek, Roedel Parsons Koch Blache Balhoff & McCollister, Baton Rouge, LA, Bob F. Wright, James Parkerson Roy, Domengeaux, Wright, Roy & Edwards, Lafayette, LA, Edwin R. Murray, Michael C. Darnell, Murray, Darnell & Associates, L.L.C., Walter C. Thompson, Jr., James M. White, III, Barkley & Thompson, L.C., New Orleans, LA, for Plaintiffs/Appellants.

Clinton A. Vince, Regina Speed-Boost, Orlando E. Vidal, Sullivan & Worcester, LLP, Washington, DC, Walter J. Wilkerson, Wilkerson & Henry, L.L.C., New Orleans, LA, for the Council of the City of New Orleans.

Ewejl E. Eagan, Jr., Marcy V, Massengale, Wendy Hickok Robinson, Phillip J. Arttis, Jr., Gordon, Arata, McCollam, Duplantis & Eagan, L.L.P., J. Wayne Anderson, Matthew R. Suffern, Margot G.

Augustin, Entergy Services Inc., New Orleans, LA, for Entergy New Orleans, Inc.

(Court composed of Judge CHARLES R. JONES, Judge DAVID S. GORBATY, and Judge EDWIN A. LOMBARD).

CHARLES R. JONES, Judge.

The Appellants, Rev. C.S. Gordon, Jr., et al, seek review of an adverse district court judgment that affirmed the earlier decision of the New Orleans City Council (hereinafter "the City Council"), a named Appellee, by which the City Council ordered Entergy New Orleans, also a named Appellee, to reimburse ratepayers for alleged Fuel Adjustment Clause (hereinafter "FAC") overcharges, but for only a fraction of the damages actually prayed for by the Appellants. We affirm in part and reverse in part.

FACTS AND PROCEDURAL HISTORY

Entergy New Orleans, Inc. (hereinafter "ENO"), is an electric utility company engaged in the manufacture, generation, transmission, distribution and sale of electric power and energy to residential, commercial, industrial, and governmental customers in the State of Louisiana. ENO is a part of the Entergy Corporation and one of five (5) "Operating Companies"¹ which collectively form an integrated System which is operated pursuant to what is referred to as "the System Agreement."

The City Council is the legislative branch of local government in New Orleans. Its purpose is to enact laws to protect the public health, safety and welfare of the citizens of New Orleans.

Reverend C.S. Gordon, Jr., on behalf of the New Zion Baptist Church, Michael Malec, Darryl Malek-Wiley, Willie Webb, Jr., and Maison St. Charles, L.L.C., d/b/a Quality Inn Maison St. Charles (hereinafter "the Appellants") appealed the February 5, 2004, Resolution of the New Orleans City Council, No. R-04-66, under the administrative adjudicatory proceeding they brought as Plaintiffs for the recovery of alleged overcharges billed to them and all other ratepayers (more than 180,000) by ENO.² They also alleged that the overcharges perpetrated by ENO were routinely done at the direction of and with the participation of ENO's parent company, Entergy Corporation, and its unregulated affiliate, Entergy Services, Inc., (ESI), by improperly passing ineligible costs for fuel through a fuel adjustment charge component on its bills for electric service.

The City Council Proceedings³

On May 12, 1999, the Appellants filed a complaint with the New Orleans City Council in which they alleged that they, as ratepayers, had incurred or paid, overcharges for electricity service sold by ENG. They further alleged that these charges were incurred or levied by ENO through costs included in its FAC without advance approval from the City Council. In the alternative, the Appellants alleged that the portion of the unapproved items and amounts that were included as purported costs were actually costs which were, not "prudently" incurred, or which did not produce "just and reasonable rates, or which were otherwise improperly included."

The complaint also alleged that Entergy overcharged ratepayers over "$160 million dollars, including interest, through its FAC charges from the period of 1985 through 2001."

Nevertheless, during the City Council proceedings, the Appellants were allowed to submit the written, pre-filed testimony of their experts concerning their respective opinions on Entergy's FAC charges. In response, ENO, the Interveners,⁴ and the Advisors of the City Council⁵ also submitted pre-filed expert testimony.

After the initial investigation and testimony was reviewed, it was determined that the Advisors of the City Council agreed with the Appellants and recommended that more than $34 million dollars be refunded to the New Orleans ratepayers as a result of ENO's "improper fuel adjustment practices and charges."

An administrative trial was conducted before the City Council's appointed administrative hearing officer, from February 26, 2002, through March 15, 2002. Pursuant to Resolution No. 99-525, the hearing officer's authority was limited to making evidentiary rulings, compiling records of the proceeding, and submitting the record to the City Council for final consideration.

Eventually, the City Council adopted a resolution, but instead of ordering refunds in the amounts recommended by both the Appellants' experts and the Advisors of the City Council, the City Council instead ordered Entergy to issue refunds to the Appellants of a lesser sum. The City Council did not consider ordering repayment of the refunds as recommended by the Advisors of the City Council. The Appellants contend that this action by the Council was arbitrary and capricious.⁶

The Civil District Court Proceedings

In April 1998, the Appellants filed suit in the Civil District Court for the Parish of Orleans against ENO, Entergy, Inc., and a number of Entergy's affiliates,⁷ including ESI, alleging imprudent practices and overcharges. They also sought damages, including treble damages for the Appellees' alleged violations of Louisiana antitrust law and other state laws. Specifically, the Appellants alleged that Entergy charged ratepayers more than $190 million dollars, including interest, through its FAC.

After filing their petition, the Appellants also filed a complaint with the New Orleans City Council seeking an administrative remedy against ENO for refunds of alleged overcharges billed through fuel adjustment charges.

From February 26th through March 15th, 2002, the City Council's trial of the administrative proceedings occurred. At trial the Appellants' experts testified that the overcharges resulting from the fuel adjustment charges exceeded $90 million dollars since 1985. The record also indicates that the City Council's own experts also testified that ratepayers were overcharged at least $34,300,000.00, which they too also recommended be refunded. However, by its February 5, 2004 Resolution, the City Council declined to award the, refund of the non-fuel costs that were allegedly passed to ratepayers in the fuel adjustment charge found on ENO's utility bills for electric service. Rather, the City Council adopted Resolution, No. R-04-66 and awarded $7,203,427.00⁸ in refunds to ratepayers.

Subsequently, the Civil District Court for the Parish of Orleans, which heard the case pursuant to the Administrative Procedures Act, La. R.S. § 49:950, affirmed the City Council's adoption of the resolution on May 26, 2005,⁹ and concluded that:

a. the City Council correctly applied the burden of proof, requiring the plaintiffs to make a showing of a "serious doubt" with regard to allegations of imprudence. Additionally, the District Court held that ENO proved the prudence of his actions;

b. the City Council's decision not to order refunds of SFI Period Costs that were passed on to customers through the FAC was supported by the evidence in the record;

c. the City Council's calculation of a refund in the amount of $1,831,404 plus interest due to ENO's customers relating to what the plaintiffs referred to as "wrongful profits" that were not "trued up" in base rates is supported by the evidence in the record;

d. the City Council's decision not to order a refund of the AECC Energy Adders included in the FAC was supported by evidence in the record;

e. the City Council's calculation of refunds and the amount of $3,957,925 plus interest related to purchases of EPI energy by EAI, was supported by the evidence in the record;

f. the City Council's decision not to order refunds resulting from the System's use of the margin in making power purchases in the wholesale market was supported by the evidence in the record. In addition, the City Council's decision to require ENO to provide an annual analysis of third-party offers to demonstrate that the use of the margin remains an effective tool to secure power at the lowest reasonable cost is supported by the record;

g. the City Council's conclusion that resale of wholesale power to third-party purchasers was not imprudent, and therefore that no refund should be ordered, was supported by the record;

h. the City Council's decision that ENO was not imprudent and not purchasing power for its own account was supported by the evidence in the record;

i. the City Council was not arbitrary or capricious in concluding that the plaintiffs failed to present credible evidence that less expensive power , was available for purchase, and could have been purchased by ENO or the System. The district court found that the evidence in the record supported the City Council's decision; and,

j. the administrative law judge properly denied and the City Council properly affirmed the denial of the plaintiffs motion for judgment on the pleadings.

Additionally, in its written reasons for judgment, the district court indicated "for its reasons for judgment, this [c]ourt adopts the memoranda and argument of Entergy New...