State v. Chiplease, Inc. (In re Res. Tech. Corp.)

• Decision Date: 28 June 2013
• Docket Number: No. 11–1633.,11–1633.
• Citation: 721 F.3d 796
• Parties: In re RESOURCE TECHNOLOGY CORP., Debtor. State of Illinois, Claimant–Appellant, v. Chiplease, Inc., Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

721 F.3d 796

In re RESOURCE TECHNOLOGY CORP., Debtor.State of Illinois, Claimant–Appellant,

v.Chiplease, Inc., Appellee.

No. 11–1633.

United States Court of Appeals, Seventh Circuit.

Argued Dec. 7, 2012.

Decided June 28, 2013.

Alex Pirogovsky, Attorney, Pirogovsky Fremderman, Northbrook, IL, for Debtor.

Richard S. Huszagh (argued), Attorney, Office of the Attorney General, Chicago, IL, for Appellant.

Louis D. Bernstein (argued), Attorney, Bernstein Law Firm, Chicago, IL, for Appellee.

George P. Apostolides, Attorney, Arnstein & Lehr LLP, Chicago, IL, for Trustee.

Before POSNER, WOOD, and WILLIAMS, Circuit Judges.

WOOD, Circuit Judge.

In 1987 the Illinois General Assembly enacted a program under which funds were made available to subsidize the development of certain power-generating facilities. The Public Utilities Act, 220 ILCS § 5/8–403.1 (the Act), required subsidized facilities to repay these monies (which in substance were loans) as soon as they retired all of the capital costs or indebtedness incurred to develop the facility. In June 2006, the Act was amended to provide additional conditions that would trigger the obligation of a subsidized facility to repay its loans.

The question before us is whether these new conditions, which essentially provide additional grounds on which the state can demand repayment, can be applied retroactively. We find the answer in Illinois's Statute on Statutes, which guides the interpretation of all Illinois statutes and provides that laws apply prospectively absent a clear indication of retroactive temporal reach. Caveney v. Bower, 207 Ill.2d 82, 278 Ill.Dec. 1, 797 N.E.2d 596, 601–02 (2003) (quoting 5 ILCS § 70/4). Because the 2006 amendment does not clearly indicate that the new repayment conditions apply to monies received prior to the amendment, we must construe the statute prospectively. This in turn leads us to affirm the district court's judgment.

I

The program at issue was designed to encourage the development of power plants that convert solid waste to electricity. Public Utilities Act, 220 ILCS 5/8–403.1. Power plants were entitled to apply to the Illinois Commerce Commission (ICC) for designation as qualified solid waste energy facilities (Qualified Facilities). Qualified status brought along with it a significant commercial advantage: the ICC required local electric utilities to enter into ten-year agreements to purchase power from the Qualified Facility at a rate exceeding the rate established under federal law. The state compensated electric utilities for these mandatory overcharges by allowing them to take a tax credit equal to the difference between the elevated price they paid for qualified electricity and the federal rate. Subsection (d) of the Act provided that a Qualified Facility became obliged to reimburse the state for the tax credits its customers had claimed, but this obligation arose only after the facility had repaid all of the capital costs it incurred for development and implementation of the plant.

Many Qualified Facilities failed before they repaid their capital costs. An important consequence of these failures was that Illinois never got its money back for the tax credits taken by the electric utilities that had bought power from the facility (implicitly, the loans to the Qualified Facility). This was seen as a problem, and so the Illinois General Assembly amended the Act effective July 1, 2006. Its aim was to terminate the Qualified Facility program and close what it saw as a serious loophole. The amendment establishes a moratorium on new Qualified Facilities, provides additional grounds for disqualifying facilities from the subsidy, and expands the conditions under subsection (d) that trigger a facility's liability to repay electric utilities' tax credits, adding the italicized language to the former law:

Whenever a qualified solid waste energy facility has paid or otherwise satisfied in full the capital costs or indebtedness incurred in developing and implementing the qualified solid waste energy facility, whenever the qualified solid waste energy facility ceases to operate and produce electricity from methane gas generated from landfills, or at the end of the contract entered into pursuant to subsection (c) of this Section, whichever occurs first, the [Qualified Facility] shall reimburse the Public Utility Fund and the General Revenue Fund in the State treasury for the actual reduction in payments to those Funds caused by this subsection (d).

220 ILCS 5/8–403.1(d) (emphasis added).

The events underlying this case began in 1997, when the ICC issued an order designating ten facilities owned by Resource Technology Corporation (RTC) as Qualified Facilities. The ICC then ordered Commonwealth Edison (ComEd), an electric utility, to sign three ten-year power purchase agreements with RTC; those agreements covered facilities at Lyons, Congress/Hillside, and Pontiac. Things did not go smoothly for long. In 1999, RTC's creditors filed an involuntary Chapter 7 bankruptcy petition against RTC; the trustees of its estate continued to operate its Qualified Facilities as a debtor-in-possession. (The case was converted to a Chapter 11 proceeding in January 2000, but it fell back into Chapter 7 status in 2005.) ComEd reported tax credits as compensation for purchasing electricity at the elevated Qualified–Facility rate from September 2005 until July 2006.

In 2005, RTC's trustee filed a suit against Chiplease (a debtor of RTC) and some others. The bankruptcy court approved a settlement of that case in 2006, under which Chiplease was assigned certain leases and executory contracts. At that point, the trustee shut down the estate's operations at all three plants. Under other control, however, the facility at Pontiac continued to operate until July 2006; payments (at the retail rate) were sent to RTC's bankruptcy “lockbox.”

Along with the assets, Chiplease acquired RTC's liability for the tax credits ComEd had taken to compensate it for buying Qualified–Facility power at inflated rates. On January 4, 2007, the State of Illinois filed an administrative expense claim against the estate for all of the tax credits ComEd took for power bought from RTC's Pontiac, Congress/Hillside, and Lyons facilities. As amended, the state sought a total of $1,518,048.72, plus another $14,358.82 for a separate tax-related claim that is not contested at this point. Since some of ComEd's purchases had occurred before the 2006 amendment and others after it, the bankruptcy court raised the question whether the amendment to the Act applies only prospectively (in which case Chiplease would have no duty to reimburse for credits taken before June 6, 2006) or retroactively (in which case it would be required to reimburse all credits). Ultimately, the bankruptcy court concluded that the Illinois Statute on Statutes, 5 ILCS § 70/4, requires the amendment to be construed prospectively. Based on that legal determination, the court held Chiplease liable only for the $175,710.58 in credits that ComEd took after the effective date of the amendment. The district court affirmed the bankruptcy court's ruling; it commented that “[h]ad the legislature intended otherwise, it could have said so in plain language.”

II

We review de novo the conclusions of law made by both the district court and the bankruptcy court. Ojeda v. Goldberg, 599 F.3d 712, 716 (7th Cir.2010). And the only question before us is one of law: whether the 2006 amendment to the Act has retroactive effect. Under Illinois law, the answer depends on “whether the legislature has clearly indicated the temporal reach of an amended statute.” Caveney, 278 Ill.Dec. 1, 797 N.E.2d at 601 (citing Landgraf v. USI Film Prods., 511 U.S. 244, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994)); Doe A. v. Diocese of Dallas, 234 Ill.2d 393, 334 Ill.Dec. 649, 917 N.E.2d 475, 483 (2009) (“Illinois courts need never go beyond th[is] threshold step ... because the legislature will always have clearly indicated the temporal reach of an amended statute, either expressly in the new legislative enactment or by default in section 4 of the Statute on Statutes.”). Thanks to the Statute on Statutes, we know that “[i]f the amendatory act does not contain a clear indication of legislative intent, then it is to be assumed that the amendatory act was framed in view of the provisions of [5 ILCS § 70/4].” Caveney, 278 Ill.Dec. 1, 797 N.E.2d at 603 (emphasis in original) (internal quotation marks omitted).

A term in a statute is ambiguous “if it is capable of being understood by reasonably well-informed persons in two or more different ways.” Krohe v. City of Bloomington, 204 Ill.2d 392, 273 Ill.Dec. 779, 789 N.E.2d 1211, 1213 (2003). An act that “does not state whether it is to be applied retroactively or prospectively is ambiguous to that extent.” Randall v. Wal–Mart Stores, Inc., 284 Ill.App.3d 970, 220 Ill.Dec. 540, 673 N.E.2d 452, 455 (1996). Illinois courts have found that an amendment clearly indicates retroactive reach when a statutory provision specifically refers to actions or events taking place before enactment. E.g., Lazenby v. Mark's Const., Inc., 236 Ill.2d 83, 337 Ill.Dec. 884, 923 N.E.2d 735, 743 (2010) ( “[T]he legislature clearly expressed its intent that the statute be given retroactive effect. [It] states that ‘[t]his Section applies to all causes of action that have accrued, will accrue, or are currently pending before a court....’ ”); Diocese of Dallas, 334 Ill.Dec. 649, 917 N.E.2d at 483 (“[The statute] specifically provides that the 2003 amendment applies to actions pending when the changes took effect on July 24, 2003.... By its terms, the amendment is not limited to situations where the events giving rise to the cause of action took place after the amendment's effective date.”); Allegis Realty Investors v. Novak, 223 Ill.2d 318, 307 Ill.Dec. 592, 860 N.E.2d 246, 254 (2006) (“[T]he new section 6–620 of the Illinois Highway Code is...