LOWENBURG v. Council of City of New Orleans
| Decision Date | 08 October 2003 |
| Docket Number | No. 2003-CA-0809, No. 2003-CA-0902. |
| Citation | 859 So.2d 804 |
| Parties | Thomas P. LOWENBURG, Martin Adamo, Vern K. Baxter, Philip D. Carter, Bernard Gordon, Leonard Levine, Ivory S. Madison, Donetta Dunn Miller, 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. The Alliance for Affordable Energy v. The Council of the City of New Orleans. |
| Court | Court of Appeal of Louisiana — District of US |
Walter C. Thompson, Jr., Mark P. Seyler, James M. White, III, Jan K. Frankowski, Barkley & Thompson, L.C., New Orleans, LA, Larry M. Roedel, J. Kenton Parsons, C.J. Blanche, Luke F. Piontek, Terri M. Collins, Roedel, Parsons, Koch, Blache, Balhoff & McCollister, Baton Rouge, LA, Bob F. Wright, James Parkerson Roy, Domengeaux, Wright, Roy & Edwards, Lafayette, LA, for Plaintiffs/Appellants.
J. Wayne Anderson, Kathryn J. Lichtenberg, Timothy S. Cragin, Alyssa Maurice-Anderson Entergy Services, Inc., Robert E. Winn, Sharon Cormack Mize, Sessions, Fishman & Nathan, L.L.P., New Orleans, LA, for Entergy New Orleans, Inc.
Henry P. Julien, Jr., Robert P. Lombardi, The Kullman Law Firm, A PLC, Russ M. Herman, Steven J. Lane, Soren E. Gisleson, Herman, Herman, Katz & Cotlar, LLP, New Orleans, LA, for the Council of The City of New Orleans.
Court composed of Chief Judge WILLIAM H. BYRNES, III, Judge TERRI F. LOVE, and Judge EDWIN A. LOMBARD.
In No. 02-14176 on the docket of the Civil District Court for the Parish of Orleans, plaintiffs, Thomas P. Lowenburg and other utility ratepayers of the defendant, Entergy New Orleans, Inc. ("ENO"), sought judicial review by appeal or by supervisory writ of certain resolutions and orders issued on August 8, 2002 by the Council of the City of New Orleans (Council) or, alternatively, for declaratory and injunctive relief. In No.XXXX-XXXXX, The Alliance for Affordable Energy (Alliance) filed a petition against the Council for "Declaratory [sic] and Specific Performance" seeking a declaration that certain provisions of a 1991 agreement between the Alliance, Citizens for Safe Energy (CFSE), the Council, New Orleans Public Service, Inc. (NOPSI), ENO's predecessor, and an individual, Gary Groesch applies to proceedings before the Council and an order requiring the Council to intervene on behalf of the petitioners in the Lowenburg lawsuit.
The underlying issue in the litigation giving rise to these consolidated appeals is allocation of costs incurred by ENO's predecessor, NOPSI, in connection with construction of the Grand Gulf I Nuclear Power Plant. In 1985, the Federal Energy Regulatory Commission (FERC) allocated seventeen percent of the plant's cost to NOPSI. FERC found that the plant had been planned and completed to meet the needs of the Middle South Utilities System, of which NOPSI was a part, as a whole and found that this was part of a reasonable system plan to diversify power sources. FERC established rates that would allow Middle South Energy, the plant's owner, to recoup all of its Grand Gulf costs from the Middle South power companies in proportion to their relative demand for all energy generated by the Middle South system. NOPSI's demand was nine percent of the total system demand, but since NOPSI had no nuclear plant of its own it was required to bear seventeen percent of the Grand Gulf costs in order to bear its nine percent share of the total nuclear power costs. New Orleans Public Service, Inc. v. Council of the City of New Orleans, 911 F.2d 993, 996 n. 3 (5th Cir.1990).
In 1988, the Council in the exercise of its rate regulation function determined that NOPSI's subsequent conduct was imprudent and disallowed the imposition on ratepayers through the NOPSI rate base of approximately thirty-one percent of the costs on ratepayers through the NOPSI rate base. In order that NOPSI might avoid insolvency, the Council granted a partial rate increase so that NOPSI might recover a portion of its imprudently invested costs.
NOPSI sued the Council in state and federal court. The federal courts abstained; however the United States Supreme Court reversed and remanded the cases to the district court for consideration of the merits. New Orleans Public Service, Inc. v. The Council of the City of New Orleans, 491 U.S. 350, 109 S.Ct. 2506, 105 L.Ed.2d 298 (1989). In deciding whether the district court's abstention was correct, the issue was whether the Council proceedings were judicial in nature so as to apply an extension of the Younger1 principle that absent extraordinary circumstances federal courts should not enjoin pending state criminal proceedings. The Supreme Court found the Council ratemaking proceedings not to be judicial in nature, holding:
On remand, the federal district court rejected NOPSI's argument that federal law preempted the Council's order and stayed NOPSI's remaining claims in light of pending state court proceedings. The United States Fifth Circuit Court of Appeals affirmed in New Orleans Public Service, Inc. v. The Council of the City of New Orleans, supra..
In the related Louisiana state court litigation, NOPSI claimed the Council abused its discretion in disallowing the "imprudency" costs, and the Council sought to enforce its rate rule. Gary Groesch, a principal in both the Alliance and CFSE, sued the Council alleging abuse of discretion in allowing the partial rate increase. In Alliance for Affordable Energy v. Council of the City of New Orleans, 578 So.2d 949, 953 (La.App. 4 Cir.1991), this Court amended the Council's rate order to disallow the pass through of any of the imprudently incurred costs for a total disallowance of $476,580,000. The Louisiana Supreme Court granted writs and, pending a decision of that court, the parties in 1991 confected a settlement agreement. The agreement and the Supreme Court's decision in Gulf States Utilities v. Louisiana Public Service Commission, 578 So.2d 71 (La.1991)2 resulted in the Supreme Court's vacating this Court's decision in a consent decree. Alliance for Affordable Energy v. The Council of the City of New Orleans, 588 So.2d 89 (La.1991).
The 1991 settlement agreement incorporated by reference in the Louisiana Supreme Court's Alliance consent decree and enacted into law3 by the Council in Resolution and Order No. R-91-157 is a focus of the instant litigation. The agreement was signed by Gary Groesch individually and as attorney for the Alliance and CFSE, by the Advisors to the Council and by a NOPSI vice-president. The settlement agreement allowed NOPSI to recover a part of its Grand Gulf I costs over a ten year period and fixed rates for electricity for a five year period. Mr. Groesch, the Alliance and CFSE were given $380,000 in attorney's fees.4
After having confected the settlement agreement, Messrs. Groesch and Lowenburg concluded that their settlement could be challenged under a 1922 settlement agreement between NOPSI and the City memorialized as Ordinance No. 6822, C.C.S. that provided for a maximum rate of return of seven and one-half percent on NOPSI's rate base. There is no evidence in the record to indicate that the Alliance, CFSE or Mr. Groesch or his succession have placed the $380,000 in attorney's fees provided by the 1991 agreement in an escrow account or court registry. It does not appear that the plaintiffs seek to overturn the portion of the agreement that awarded them these significant attorney's fees.
By the time Messrs. Groesch and Lowenburg brought a class action suit on behalf of residential and commercial utility customers for alleged overcharges, NOPSI had been succeeded by ENO. ENO filed exceptions of lack of subject matter jurisdiction and failure to exhaust legislative remedies, which the trial court overruled. This Court denied ENO's application for supervisory review; however, the Louisiana Supreme Court remanded the writ application to this Court for consideration on the merits. On remand, we granted ENO's writ application, holding that the Council's pronouncements regarding rate regulation, including the 1922 ordinances and subsequent regulations, are subject to interpretation. The Home Rule Charter of the City of New Orleans (Charter) vests the Council with original jurisdiction over matters involving regulation of utility rates. We held that the underlying subject matter of the case involves utility rate regulation, and because of the powers vested in the Council under Charter Section 3-130(1), the Council is entitled to have the opportunity to interpret their ordinances and resolutions before the matter goes to the trial court for review. We held that the trial court lacks original subject matter jurisdiction in the case and that the class plaintiffs must first present their claims to the Council. Lowenburg v. Entergy New Orleans, Inc., 99-1270 pp. 4-5 (La.App. 4 Cir. 5/17/2000), 763 So.2d 751, 753. The concurring opinion points out that because this is primarily a rate case, that is, one concerning establishment and regulation of electric utility rates, a matter reserved to the exclusive jurisdiction of the New Orleans City Council, the doctrine of primary jurisdiction suggests that this case should first be considered by the Council. In Daily Advertiser v. Trans-La., 612 So.2d 7 (La.1993), the Supreme Court relied on primary jurisdiction in holding a district could lacked subject matter jurisdiction where the crux of...
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