Wednesday, August 26, 2020
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday affirmed the dismissal of a putative class action against 27 city officials—including the mayor, City Council members, the city attorney, and members of the Water & Power Commission—seeking “a sum of approximately one billion dollars” in general damages based on overcharges for electricity.
The Department of Water and Power (“DWP”), in charging more than what it costs to supply power, then shifting surplus revenues to the city’s coffers, consumers were subjected to what amounts, under California, to an unlawful tax, the plaintiffs contended.
Judge Daniel P. Collins wrote the opinion for a three-judge panel. It affirms a Jan. 3, 2019 dismissal with prejudice of the federal claims by District Court Judge Fernando M. Olguin of the Central District of California.
Olguin declined to retain jurisdiction over state claims.
In 2013, the city acknowledged that the DWP had been overcharging customers, blaming it on a computer foul-up. In settling Los Angeles Superior Court litigation, in Eck v. City of Los Angeles, the city agreed to set up a $52 million settlement fund and to make refunds in the form of per kilowatt-hour credits.
Despite that settlement, the federal action continued, with the plaintiffs contending that the defendants are personally liable in their individual capacities. In litigation spearheaded by attorneys Marion R. Yagman and Joseph Reichmann of the Venice Beach firm of Yagman & Reichmann, punitive damages were sought in an amount “not less than” $1 million per defendant.
The plaintiffs claimed that the transfer of surplus moneys collected by DWP to the city’s general fund was a tax which, under Art. XIIIC, §2 of the state Constitution was subject to voter-approval requirements, and no vote had been taken.
Each of the defendants was in violation of the federal Hobbs Act, the plaintiffs asserted. That act provides:
“Whoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity m commerce, by robbery or extortion or attempts or conspires so to do, or commits or threatens physical violence to any person or property in furtherance of a plan or purpose to do anything in violation of this section....”
Extortion, it was pled, took the form of threatening to turn off power if customers did not pay the sum assessed.
Collins said the act “merely defines a criminal offense and the prescribed punishment for that offense” and contains no language “manifesting an intent to create an accompanying civil private right of action for victims of extortion (or anyone else, for that matter).” He expressed agreement with the Second Circuit and Eighth Circuit “that the Hobbs Act does not support a private civil right of action.”
He said Olguin correctly dismissed a claim under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), but did so for the wrong reason. The District Court judge cited the rule that a RICO action may not be asserted against a municipality.
But, Collins pointed out, the defendants were sued in their individual capacities.
“In our view,” he wrote, “Plaintiffs’ RICO claim fails as a matter of law because it does not adequately allege a cognizable predicate act.”
The plaintiffs contended that the defendants had committed mail fraud and wire fraud, obstruction of justice, and extortion. Collins scoffed:
“Plaintiffs’ allegations of mail and wire fraud rest on the theory that Defendants caused DWP to send electric bills that falsely implied that the charges were consistent with California law. But especially given the open and public process by which the electric rates were set and the later transfers were made. Plaintiffs cannot repackage the underlying legal dispute under Article XIIIC of the California Constitution as mail fraud or wire fraud.”
He said that the operative pleading “contains only a conclusory assertion” of obstruction of justice, “devoid of factual enhancement, which is plainly inadequate.”
There was no extortion, the jurist declared, because there was no private gain.
The plaintiffs alleged violations of 42 U.S.C. §1983, a civil rights statute, in the form of due-process deprivations. Jurisdiction over the claims does not exist, in light of the Johnson Act, Collins said.
That act provides:
“The district courts shall not enjoin, suspend or restrain the operation of. or compliance with, any order affecting rates chargeable by a public utility and made by a State administrative agency or a rate-making body of a State political subdivision, where:
“(1) Jurisdiction is based solely on diversity of citizenship or repugnance of the order to the Federal Constitution; and,
“(2) The order does not interfere with interstate commerce; and,
“(3) The order has been made after reasonable notice and hearing; and,
“(4) A plain, speedy and efficient remedy may be had in the courts of such State.”
All four of those conditions was met, Collins observed.
The case is Abcarian v. Lavine, 19-55129.
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