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Wednesday, July 9, 2014

In the Matter of the Application of Ohio Power Company to Update its Transmission Cost Recovery Rider Rates Industrial Energy Users-Ohio v. Public Utilities Commission of Ohio, Case no. 2013-0154
Public Utilities Commission of Ohio

State of Ohio v. Matthew T. Mole, Case no. 2013-1619
Eighth District Court of Appeals (Cuyahoga County)

Infinite Security Solutions, LLC v. Karam Properties I, Ltd., Case nos. 2013-1671 and 2013-1795
Sixth District Court of Appeals (Lucas County)

Docks Venture LLC v. Dashing Pacific Group Ltd., Case no. 2013-0473
Sixth District Court of Appeals (Lucas County)

Was PUCO Approval of AEP Recovery of Costs from Certain Customers Retroactive Ratemaking?

In the Matter of the Application of Ohio Power Company to Update its Transmission Cost Recovery Rider Rates Industrial Energy Users-Ohio v. Public Utilities Commission of Ohio, Case no. 2013-0154
Public Utilities Commission of Ohio


Providing electricity involves the generation of power, transmission of electricity to local facilities, and distribution to customers. In 1999, the Ohio General Assembly deregulated electric utilities and unbundled these rates. As a result, customers may choose a retail electric service provider for generation and transmission of their electricity. In this case, customers who remained with AEP for these services are referred to as “non-shopping customers,” while those who selected a different provider are called “shopping customers.”

Shopping customers pay AEP a rate for distribution services, but not for generation and transmission of their electricity. For shopping customers, AEP’s charges for generation and transmission are described as “bypassable.”

For services to transmit power to its customers, AEP pays an outside organization. AEP recovers its transmission costs from customers through a transmission cost recovery rider (TCRR), which must be approved by the PUCO. Each year, AEP is required to file an application to update this rider to determine the transmission cost rate for the upcoming year and to adjust rates to account for any difference between the transmission costs it paid and the costs it charged to non-shopping customers.

In its June 2012 application, AEP calculated that it had been billed $36 million more for transmission costs than it had collected from customers. The PUCO approved an increase in rates over three years to recover the amount. The commission also authorized AEP to collect the difference on a “non-bypassable basis” – meaning from all customers, including shopping customers.

Industrial Energy Users-Ohio (IEU), a statewide association of manufacturers, appealed to the Ohio Supreme Court.

Retroactive ratemaking?
Attorneys for IEU note that the commission’s authority to approve recovery of transmission costs in a TCRR is granted in R.C. 4928.05(A)(2). Related administrative rules also state that “the rider shall be avoidable by all customers who choose alternative generation suppliers,” IEU’s attorneys explain.

The attorneys contend that shopping customers, who pay a separate electric company for their transmission services, were not responsible for any of the transmission costs that AEP paid to serve its customers. As a result, IEU’s attorneys conclude, the PUCO’s order retroactively charges shopping customers for AEP’s transmission costs.

“The result of the TCRR Order and the retroactive increase is that shopping customers are being billed twice for transmission service: once for their own transmission service that is provided through their [retail electric service] provider, and once to pay a portion of the cost AEP-Ohio incurred to serve non-shopping customers over the prior annual period,” IEU’s attorneys wrote in their brief to the court.

Attorneys for the PUCO respond that the recovery of transmission costs is specifically permitted by the statute, so it cannot be retroactive ratemaking. AEP agrees. (The Ohio Supreme Court has allowed the power company to intervene as an appellee in this case, given its direct interest in the outcome.) Attorneys for AEP argue that the order allows for future recovery of costs that were previously authorized, as they assert the costs in this case were.

Phase-in authority under R.C. 4928.144
R.C. 4928.144 allows for the phase-in of electricity rates that the PUCO decides are needed “to ensure rate or price stability for consumers” and authorizes the collection of phase-ins through a “non-bypassable surcharge” – that is, on all customers.

IEU’s attorneys assert that the PUCO, however, did not authorize the transmission cost rider under this section of law. Instead, the PUCO approved the rider under R.C. 4928.05(A)(2), they argue, so it cannot collect the undercharged transmission costs from shopping customers, who have chosen another electric company for transmission services.

The PUCO’s attorneys contend, though, that the commission approved a phase-in of the undercharged $36 million as permitted in R.C. 4928.144, and that this statute requires collection of deferred amounts from all customers, including shopping customers. The attorneys explain that the number of AEP’s non-shopping customers who became shopping customers and changed electric companies during the time period in question went from less than 10 percent to about 40 percent. The PUCO in its order found that “[i]t would be unreasonable to require non-shopping customers to shoulder the entire burden of the under-collection, given that the associated costs were incurred for customers that were receiving service from [AEP] during the period in which the costs were incurred, but have since decided to switch to an alternative generation supplier.”

The attorneys argue that the customers who changed companies that year helped create the shortfall, so it is only fair that they help pay the transmission costs given that they received the service from AEP for some part of the year.

AEP’s attorneys add that the PUCO determined that the non-bypassable rate was appropriate in the circumstances of this case and would lessen the impact on customers that would have occurred if the undercharged amount was recovered in just one year and only from the remaining non-shopping consumers.

They also contend that the administrative rule cited by IEU states that the commission has the right to waive the rule if it shows good cause, and the PUCO fully explained its reasons for waiving the rule.

Commission precedent
Attorneys for IEU also maintain that earlier decisions from the PUCO mandate that the charge not be imposed on bypassable consumers. Citing a decision involving Duke Energy Ohio, the attorneys argue that the commission ruled these types of reconciliations cannot be collected from shopping customers “under any circumstances” because it would create an illegal “anti-competitive subsidy.”

The PUCO attorneys counter that this case and the Duke matter are distinguishable – the AEP case involves transmission costs, while Duke was about capacity and fuel costs.

Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.

Representing Industrial Energy Users-Ohio: Samuel Randazzo, 614.469.8000

Representing Ohio Power Company/AEP: Steven Nourse, 614.716.1608

Representing the Public Utilities Commission of Ohio from the Attorney General’s Office: Thomas McNamee, 614.466.4396

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Does Law Prohibiting Sex Between Peace Officers and Minors Violate Equal Protection Rights?

State of Ohio v. Matthew T. Mole, Case no. 2013-1619
Eighth District Court of Appeals (Cuyahoga County)

ISSUE: Is R.C. 2907.03(A)(13), which prohibits sex between peace officers and minors, a violation of equal protection rights guaranteed by the U.S. and Ohio constitutions?

Matthew T. Mole met J.S. through a smartphone app in December 2011. Mole was 35, and J.S. told Mole he was 18 and in high school. However, J.S. was actually 14 years old. The two arranged to meet at J.S.’s house where they engaged in sexual activity. Afterward, they were discovered by J.S.’s mother, who contacted police. Mole was arrested and also identified as a police officer for the city of Waite Hill. No evidence indicated that J.S. knew Mole was an officer.

Mole was charged with unlawful sexual conduct with a minor and with sexual battery. A jury heard the unlawful sexual conduct case and could not come to a decision, so the court declared a mistrial. However, the sexual battery charge was considered by a judge, who convicted Mole and sentenced him to two years in prison and designated him as a Tier III sex offender. The unlawful sexual conduct charge was then dismissed.

Mole challenged the verdict in the Eighth District Court of Appeals, which reversed the trial court’s ruling and found the section of the sexual battery law involving peace officers to be unconstitutional.

The state appealed to the Ohio Supreme Court, which agreed to consider the case.

R.C. 2907.03(A)(13) states:

(A) No person shall engage in sexual conduct with another, not the spouse of the offender, when any of the following apply:

(13) The other person is a minor, the offender is a peace officer, and the offender is more than two years older than the other person.

Attorneys from the Cuyahoga County Prosecutor’s Office argue that the state has a legitimate government interest in making it illegal for peace officers to have sex with minors. The state has an interest even in the conduct of off-duty officers because of their role in the community, the state’s attorneys claim. In reviewing the legislative history of section (A)(13), they contend that the legislature wanted to hold law enforcement to a higher standard and chose not to require the sexual relationship with the minor to arise in the context of the peace officer performing his or her official duties.

They assert that the government’s interests in enacting this law were to protect children and to maintain public confidence and trust in these officers. And the law has a rational connection to these goals by making it illegal for peace officers to have sex with a person under the age of 18.

The prosecutors maintain that Mole must show that the law is invalid in all circumstances to prove that it is unconstitutional on its face. However, neither he nor the Eighth District appeals court has met that burden, they argue. Just because the statute fits imperfectly to the intended goal does not mean the law is irrational, the prosecutors conclude.

Attorneys for Mole respond that section (A)(13) is unlike any of the other parts of the statute.

“[T]he subsection at issue establishes minimal elements to convict a peace officer of criminal conduct,” Mole’s attorneys write in their brief to the court. “It clearly does not require that the peace officer have knowledge the other person is a minor. It does not require that the minor know the offender is a peace officer. It does not require that the peace officer in some way use his or her authority and status as a peace officer to effectuate the sexual conduct.”

Mole’s attorneys contend the sexual battery law in its entirety was enacted to prevent a person from sexually taking advantage of another person based on coercion, deceit, or the offender’s occupation or special relationship with the other person. However, they argue that section (A)(13) stands apart because it does not require any connection or relationship between the peace officer and the minor based on the peace officer’s occupation, and it does not include a mens reas element.”

They add that the law came about following a case in Logan County in which a detective investigating a crime became sexually involved with a 16-year-old girl who had been shot. But the section, as enacted, makes no mention of a need for a relationship or connection to be established between the minor and the officer, Mole’s attorneys point out. They argue that no rational basis exists for a law that punishes an officer for sexual conduct with someone at least 16, Ohio’s age of consent, without requiring that the victim either knew the offender was an officer or that the officer used his or her position to get consent.

Mole’s attorneys assert that Mole did not unduly influence J.S. or use his status as a police officer to have sex, yet Mole now has to contend with a lifelong designation as a sex offender and struggle with limitations on where he can work and live.

“[I]n every possible set of circumstances when prosecuting under R.C. 2907.03(A)(13), the State would never need to prove either (1) that the offender was a law enforcement officer, who has a special relationship with the public; (2) that the offender knew, or was reckless or even negligent in determining the age of the victim; (3) that the victim knew the offender was a peace officer or (4) that there was any connection between the offender’s occupation and the offense,” the brief states. “If the statute is designed to prevent offenders from taking ‘unconscionable advantage’ over minors and from asserting ‘undue influence,’ then it is only rational that one, if not more, of the above factors be included as elements, just as they are included in some form in all of the other subsections of the statute.”

As a result, R.C. 2907.03(A)(13) does not meet the rational basis test to show that it is constitutional, they conclude.

An amicus curiae brief supporting the position of the Cuyahoga County Prosecutor’s Office has been submitted by Ohio Attorney General Michael DeWine. At the request of both the attorney general’s and the prosecutor’s offices, the court will allow the parties to share the 15 minutes allotted to the prosecutors for oral argument.

Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.

Representing the State of Ohio from the Cuyahoga County Prosecutor’s Office: Daniel Van, 216.443.7800

Representing Matthew T. Mole: Richard Perez, 440.953.1310

Representing Ohio Attorney General Michael DeWine: Eric Murphy, 614.466.8980

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How Detailed Must Language Be in Dismissal Entry to Enforce Terms of Settlement Agreement Later?

Infinite Security Solutions, LLC v. Karam Properties I, Ltd., Case nos. 2013-1671 and 2013-1795
Sixth District Court of Appeals (Lucas County)

ISSUE: Is a trial court’s dismissal entry that does not include the terms of a settlement agreement or expressly reserve jurisdiction to enforce the settlement an unconditional dismissal?

Editor’s Note: The Supreme Court determined that a conflict exists between multiple appellate districts on this issue and ordered that the certified-conflict case (2013-1671) be consolidated with the appeal from the Travelers Indemnity Company (2013-1795) for oral arguments.

After compensating a Toledo apartment complex for a 2008 Independence Day fire, Travelers Indemnity Company sought to recover the $8.9 million it paid to Karam Managed Properties from the security company that failed to stop the launch of fireworks that day by one of the tenants. The lawsuit between Travelers and Infinite Security Solutions and another lawsuit Infinite filed against Karam for $99,000 in unpaid services were consolidated in Lucas County Common Pleas Court. Karam also countersued Infinite, seeking to recover its claimed uninsured portion of the fire loss.

Infinite agreed to settle Travelers’ and Karam’s claims. As part of the settlement, Travelers and Karam agreed they would try to resolve their competing claims to the proceeds and submit the dispute to the trial court if they could not. After the court issued its entry dismissing the case, Travelers and Karam could not agree. Travelers then filed a motion to set aside the court’s entry and sought the settlement proceeds. Meanwhile, Infinite asked the court to enforce the settlement. Karam responded to both motions. The court granted Travelers’ motion for the proceeds and ordered payment according to the settlement. Karam appealed to the Sixth District Court of Appeals, which concluded that the trial court had unconditionally dismissed the case and lacked jurisdiction to enforce the settlement. Travelers filed a notice with the Supreme Court certifying a conflict and asked the Supreme Court to hear the case outright. The Supreme Court agreed to hear the matter and consolidated the cases.

In their brief to the Supreme Court, attorneys for Travelers point to the conditional elements of the trial court’s entry as proof that the court had the authority later on to enforce the settlement agreement.

“The Dismissal Entry (1) stated the parties had resolved their differences; (2) stated the dismissal was without prejudice; (3) reserved to the parties the right to file a final entry of dismissal; and (4) provided a time frame for the filing of the final entry of dismissal.”

Based on the wording the court included, the attorneys claim, the entry included the “quintessential feature of a condition” because it “contemplated future action.”

Travelers’ attorneys encourage the Supreme Court to adopt the less restrictive, less detailed dismissal entry language of many district courts of appeals that have considered the conditional/unconditional issue.

“The decision of the (Sixth District) court of appeals undermines the twin policies of encouraging settlement agreements and promoting judicial efficiency,” the attorneys write. “The requirement that a dismissal entry actually embody the terms of a settlement agreement will result in settlements that are negotiated in haste and will deter out-of-court settlements by parties who do not want the terms of such agreements to be made public. The requirement that a dismissal entry expressly reserve jurisdiction to the trial court will discourage judicial economy and will prevent the court with the most knowledge of the case from enforcing a settlement agreement in line with its presumed jurisdiction.”

Karam’s attorneys counter that the trial court’s “placeholder” entry to take the case off the docket while the parties continued to negotiate is not authorized by the Civil Rules. If the Supreme Court adopts the less restrictive dismissal entry view, it will increase the “misuse” of placeholder entries that really pose as stays of the proceedings rather than dismissals, they argue.

“By contrast, requiring courts to reserve the right to enforce a settlement is likely to discourage dismissal based on settlements that do not exist,” the attorneys claim.

“Indeed, had the Trial Court consulted with parties in this case prior to dismissing the case sua sponte, it would have learned that Travelers believed the settlement was incomplete and opposed the dismissal,” the attorneys write. “In turn, the trial court would have addressed the procedural issues prior to dismissal, leaving only the merits in dispute and shortening appellate review by years.”

Karam’s attorneys assert that by including detailed language in a dismissal entry, a court puts parties on notice of the court’s continuing jurisdiction and that the parties must consider the entry carefully before rushing to judgment.

“Requiring a dismissal entry to embody the terms of the settlement or expressly reserve jurisdiction would not impose any undue burden on the trial courts, most of which already follow the majority rule,” the attorneys argue. “Instead, adoption of the majority view would avoid confusion by promoting clear, unequivocal dismissal entries, and encourage cooperation between the courts and parties in preparing dismissal entries.”

An amicus curiae brief supporting Travelers’ position has been submitted by the Ohio Association of Civil Trial Attorneys.

Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket (2013-1671 and 2013-1795).

Representing Travelers Indemnity Company: Paul Eklund, 216.348.1700

Representing Karam Properties I, Ltd.: John Reagan, 330.869.9007

Representing Infinite Security Solutions, LLC: Martin Holmes Jr., 419.243.6281

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At What Point May Contempt Order Be Appealed?

Docks Venture LLC v. Dashing Pacific Group Ltd., Case no. 2013-0473
Sixth District Court of Appeals (Lucas County)

ISSUE: Is a trial court’s judgment finding a party in contempt and imposing a sentence a final and appealable order when the sentence is imposed, even if there are purge conditions, or when the party has not met the conditions of the contempt order and the sentence is executed?

Docks Venture and Dashing Pacific Group entered into leases on two Toledo restaurants in March 2011. The agreements noted that the gas, water, and electricity were not separately metered, and the utilities were not divided between the two restaurants. The lease provided that the lessee, Docks Venture, would pay for utilities, and the lessor, Dashing Pacific, would install separate meters for all utilities inside the premises of the restaurants.

In January 2012, Docks filed a complaint against Dashing asking the court to order the lessor to comply with the lease provisions, and seeking damages. The trial court issued a preliminary injunction on April 19 directing Dashing to set up separately metered utilities for the restaurants within 30 days. In October, the trial court found the landlord in contempt and ordered it to fix the utilities within 30 days or be fined $1,000 per day until it complied with the order.

Dashing appealed the order to the Sixth District Court of Appeals and also separated the utilities inside the two premises. Docks asked the court to dismiss the appeal because, it argued, the trial court’s order was not a final order that may be appealed. In February 2013, the appellate court certified to the Ohio Supreme Court that a conflict existed on the issue between it and the Eleventh District Court of Appeals. The Supreme Court agreed.

Attorneys for Docks contend that the trial court’s October contempt order was not a final, appealable order based on R.C. 2505.02. According to the statute, an order is final if it “grants or denies a provisional remedy,” “determines the action with respect to the provisional remedy,” and the “appealing party would not be afforded a meaningful or effective remedy by an appeal following final judgment ….”

Docks’ attorneys assert that the contempt order in this case included conditions by which the lessor could remove the contempt. As a result, they claim the order did not finalize the contempt action.
“The contempt action is only determined after a purge hearing is held and when the announced sanction or sentence is carried into execution,” the attorneys write in their brief to the court. “Until that point, the punishment is conditional in nature ….” The purge hearing must be completed, its conditions must expire, and the sentence must be executed before a party may appeal, they conclude.

Dashing’s attorneys counter that the trial court’s sentence of $1,000 per day affects the company’s substantial rights under R.C. 2505.02(B)(1) to protect its property, as provided in the Ohio Constitution. Given the potential consequences, the attorneys contend that the company must have the right to an immediate appeal of the contempt finding before the matter is finally resolved in order to protect its rights.

“A finding that the October 2, 2012 Order is not final and appealable would place Dashing Pacific, and other similarly situated contemnors, in the impossible position of choosing between failing to satisfy the purge conditions, and risking execution of the sentence, or satisfying the purge conditions and forfeiting the right to any meaningful appeal,” they write in their brief.

Docks claims that contempt orders do not affect substantial rights, but rather are provisional remedies under the statute. Even if that is correct, Dashing’s attorneys assert that contempt orders are still final and may be appealed. To have any meaningful remedy, Dashing must have the right to appeal the order immediately, they maintain.

Dashing’s attorneys add that seven of Ohio’s 12 appeals courts agree that a civil contempt order is final and appealable, regardless of any conditions established to remove the contempt, because it includes a finding of contempt and imposes a penalty.

Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.

Representing Docks Venture, LLC: John Potts, 419.255.2800

Representing Dashing Pacific Group, Ltd.: Byron Choka, 419.252.6208

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These informal previews are prepared by the Supreme Court's Office of Public Information to provide the news media and other interested persons with a brief overview of the legal issues and arguments advanced by the parties in upcoming cases scheduled for oral argument. The previews are not part of the case record, and are not considered by the Court during its deliberations.

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