Indiana Business Lawyer Blog

April 3, 2018

FERC Legal – FERC Determination in Docket No. EC17-131-000

by Parr Richey Frandsen Patterson Kruse LLP

In June 2017, Florida Power and Light (“FPL”), a rate-regulated electric utility, filed an application with FERC requesting authorization to transfer its ownership interests in substation equipment and other assets to JEA, the largest community-owned electric utility in Florida. FERC dismissed FPL’s application for lack of jurisdiction. The net book value of the retained assets to be given to JEA was $3 million, including a $1.1 million value for the substation equipment.

FERC determined that FPL’s application was unnecessary and that FERC lacked jurisdiction to review the application. Under section 203(a)(1) of the FPA, FERC only has jurisdiction to review applications where a public utility seeks to: (A) sell, lease, or dispose of the whole of its facilities which are valued above $10 million; (B) merge or consolidate facilities with another person; (C) purchase , acquire, or take a security of another public utility in excess of $10 million; or (D) purchase, lease, or otherwise acquire an existing generation facility valued over $10 million that is used for interstate wholesale sales over which FERC has jurisdiction for ratemaking. 16 U.S.C. § 824b(a)(1) (2017). Subsection (A) did not apply because the value of the assets to be transferred was under $10 million. Subsections (C) and (D) likewise did not apply.

FPL stated in its application that subsection (B) applied to transactions involving the acquisition of transmission facilities from non-jurisdictional municipal entities and that FERC had not yet addressed whether subsection (B) applied to the disposition of transmission facilities from a jurisdictional public utility to a non-jurisdictional municipal entity. FERC determined that subsection (B) did not apply to the sale or other disposition of jurisdictional facilities. Additionally, subsection (B) did not apply because the party acquiring the facilities is a municipal entity.

March 13, 2018

SUPREME COURT HOLDS POST-RETIREMENT BENEFITS PROVIDED BY A LABOR CONTRACT DID NOT VEST FOR LIFE

by Parr Richey Frandsen Patterson Kruse LLP

On February 20, 2018, the U.S. Supreme Court in CNH Industrial v. Reese rejected the Sixth Circuit’s approach to interpreting collective bargaining agreements (“CBA”), instead affirming that courts must interpret such agreements in accordance with ordinary principles of contract law. The Court held the only reasonable interpretation of the CBA was that post-retirement health care benefits offered under the CBA did not vest for life but rather expired when the CBA expired.

In 1998, CNH agreed to a CBA that provided health care benefits to certain employees who retired under the company’s pension plan. The CBA specified that all other coverages outside of health care benefits, such as life insurance, ceased upon retirement. It also contained a clause stating that the agreement would expire in May 2004 and that the CBA “dispose[d] of any and all bargaining issues, whether or not presented during negotiations.”

When the CBA expired in 2004, a group of CNH retirees and spouses sued CNH, seeking a declaration that their health care benefits vested for life and an injunction to prevent CNH from revoking them. After the district court granted summary judgment to the retirees, CNH appealed. Relying on principles of contract interpretation established in an earlier Sixth Circuit decision, known as Yard-Man inferences, the Sixth Circuit affirmed the district court’s decision. The Sixth Circuit concluded that, since the CBA was silent on whether health care benefits vested for life, and since it tied health care benefits to pension eligibility, the CBA was ambiguous as a matter of law. Because it was ambiguous, the Sixth Circuit held, extrinsic evidence could be considered in interpreting the CBA. Upon considering extrinsic evidence, the Sixth Circuit ruled that the evidence supported lifetime vesting.

January 8, 2018

Allco Renewable Energy, Ltd. v. Mass. Elec. Co.

by Parr Richey Frandsen Patterson Kruse LLP

The First Circuit Court of Appeals recently issued an opinion finding that the Public Utility Regulatory Policies Act (“PURPA”) does not authorize lawsuits between cogeneration facilities and electric utilities because there is no express or implied private right of action in the statutory language. Allco Renewable Energy, Ltd. V. Mass. Elec. Co., 875 F.3d 64 (1st Cir. 2017). PURPA was enacted to encourage the development of energy-efficient cogeneration and small power production facilities, requiring electric utilities to purchase energy from “qualifying facilities” at a regulation-specified cost rate. Under FERC regulations, the cost rate is the rate equal to the utility’s full avoided cost. A qualifying facility under PURPA is a “nontraditional” facility which produces energy from sources such as biomass, waste, renewable resources, or geothermal resources.

In Allco, the plaintiff was a qualifying facility that wanted to negotiate a purchase agreement with defendant National Grid, an electric utility. Instead of negotiating a purchase agreement, National Grid offered to purchase Allco’s energy under its standard power purchase contract. Allco petitioned the Massachusetts Department of Public Utilities (“MDPU”) to investigate the reasonableness of National Grid’s offer, which the MDPU denied. FERC subsequently denied Allco’s petition asking FERC to bring an enforcement action against MDPU, and Allco sued National Grid and other state defendants.

The court analyzed section 210 of PURPA to determine whether it created an express or implied private right of action allowing a qualifying facility to sue an electric utility. PURPA expressly authorizes FERC to bring enforcement actions against a state in federal court and allows a qualifying facility to sue the state utility regulatory agency in state court for PURPA violations—it does not authorize suits between qualifying facilities and electric utilities. The court also held that Congress did not implicitly authorize this kind of lawsuit because of the aforementioned express enforcement provisions. Additionally, the court invalidated MDPU regulations relating to calculating a utility’s avoided costs, but left the proper calculation to the MDPU since state utility regulatory agencies are responsible for implementing FERC’s regulations for rate determinations.

May 16, 2017

Update on FCC Broadband Privacy Rules

by Parr Richey Frandsen Patterson Kruse LLP

The FCC recently adopted broadband privacy rules which will be implemented on a staggered schedule. The FCC did not provide calendar dates for implementing the rules and some of the dates are based on pending PRA approvals. The following is a summary of the new privacy rules and the dates they are scheduled to take effect.

On January 3, 2017, sections 64.2010 and 64.2011(a) became effective. Section 64.2010 pertains to the Business Customer Exemption for Provision of Telecommunications Services other than BIAS, and states that Telecommunication carriers can utilize other contractual privacy and data security regimes for services other than BIAS as long as the issues of transparency, choice, data security, and data breach are addressed. There must also be a mechanism for the customer to communicate concerns to the carrier. Section 64.2011(a) pertains to BIAS Offers Conditioned on Waiver of Privacy Rights and states that a BIAS provider cannot condition providing BIAS on a customer’s agreement to waive privacy rights, nor may a BIAS provider terminate or refuse to provide service based on a customer’s refusal to waive their privacy rights. Section 64.2011(b) is not effective until on or after December 4, 2017, as discussed below.

On March 2, 2017, new section 64.2005 replaced old sections 64.2009 (Safeguards required for use of customer proprietary network information) and 64.2010 (Safeguards on the disclosure of customer proprietary network information). Section 64.2005 covers data security, states a carrier must take reasonable measures to protect customers’ proprietary information, and lists four factors for determining reasonableness—the nature and scope of the carrier’s activities, the sensitivity of the data, the size of the carrier, and technical feasibility.

May 10, 2017

Changes to Indiana 811 Call Before You Dig Law

by Parr Richey Frandsen Patterson Kruse LLP

The Indiana General Assembly recently made changes to the Indiana Underground Plant Protection statute (Indiana Code § 8-1-26) which will take effect July 1, 2017. S.B. 472, 120th Gen. Assem., Reg. Sess. (Ind. 2017). The main change in this chapter is the creation of a new voluntary “design information notice” which applies to advance planning efforts relating to a demolition or excavation project. The amendments also establish procedures for Indiana 811 and operators once a design information notice is received.

A design engineer, consultant, or architect may voluntarily submit a design information notice to Indiana 811, which must include contact information for the person serving the notice, the person responsible for project planning activities, and the person planning to perform the excavation or demolition, if known. The notice must also include the scope and location of the proposed project and whether white lining will be performed. The person responsible for the project may not serve more than two design information notices for the same project within any 180-day period. Additionally, if the person serving the design information notice is unable to provide the physical location of the proposed excavation or demolition project with the location’s address or legal description, the person must perform white lining in the area affected by the proposed project. Indiana 811 must receive the notice at least ten working days, but not more than twenty calendar days before preliminary planning activities commence. Indiana 811 is required to adopt policies for processing design information notices, including alerting the operators of underground facilities that will be affected by the proposed project and providing this list of operators to the party serving the design information notice.

Once an operator or utility receives a design information notice, it must, within ten working days, contact the person serving the notice and inform them whether the operator has underground facilities located in the project area. If the operator does have underground facilities in the area, it must provide either a description of the location and type of facility affected by the proposed project, allow an inspection of the operator’s drawings or records for all of the operator’s underground facilities within the project area, or mark the location of the operator’s underground facilities within the project area with temporary markers. The operator must also, where applicable, provide the person serving the notice with the necessary maps or information to describe the location of all facility markers marking the underground utility. An operator may reject a design information notice where there are security considerations or the operator would be placed at a competitive disadvantage by producing the information. An operator who rejects a design information notice must provide notice to the person serving the design information notice and may request additional information.

May 1, 2017

Use Tax Owed on Storage of Exhibition Booth Components

by Parr Richey Frandsen Patterson Kruse LLP

The Indiana Tax Court recently ruled in Zimmer, Inc. v. Indiana Department of Revenue that Zimmer, Inc.’s Indiana activities regarding exhibition booth components constituted a taxable use and thus owed tax for some of the exhibition booth components. Zimmer is in the business of designing, manufacturing and distributing a wide variety of medical device products. In its activities, it participates in many out-of-state trade shows and conventions and has an elaborate system for construction storage, repair, refurbishment and modification of exhibit booth components, all of which are stored in its Indiana warehouse for use out-of-state. The Indiana Department of Revenue argued, on four bases, that the exhibition booth components are subject to Indiana Use Tax for which the Indiana Tax Court disagreed as to three but agreed as to one basis.

First, the Indiana Department of Revenue argued that the revolving storage, out-of-state use, re-storage and reuse rendered the exhibition booth components taxable. The Indiana Tax Court disagreed citing that the scheme is consistent with the statutory exclusion under Indiana statute allowing storage in Indiana “for subsequent use outside of the state”.

Second, the Department argued that Zimmer exercised other rights of ownership of the exhibition components while located in Indiana which constituted a taxable use. In particular, it was argued that the selection of components for a particular convention, etc., were those ownership rights. The Tax Court disagreed with the Department’s assertion that Zimmer’s act of decision-making in Indiana made those components taxable when none of those decisions were associated with physical actions in Indiana.

April 26, 2017

Discretionary Function Immunity

by Parr Richey Frandsen Patterson Kruse LLP

The Indiana Supreme Court ruled evidence of more than financing alone must be presented to demonstrate that the City has engaged in a policy-oriented decision making process in order for discretionary function immunity to apply. Cathy Beloat sued the City of Beech Grove after breaking her leg by stepping in hole in Main Street in the City. The City of Beech Grove claimed discretionary function immunity and presented an affidavit from its Mayor and minutes of the City Council and the Board of Works and Safety. The Mayor’s affidavit was not enough to demonstrate that an official policy decision was made. The minutes of City Council and the Board of Works and Safety, while establishing that the financing was discussed and approved, did not demonstrate the cost-benefit analysis, weighing of other options, and prioritization discussions that are required to decide that the City has engaged in a policy-oriented decision making process. The Court found that while the inference could be drawn that the City Council and/or the Board of Works and Safety did engage in the policy discussion necessary, the standard of review forbids that kind of inference.

Based on the Court’s decision, evidence of financing alone is not enough to show that the City completed all that was necessary to be shielded by discretionary function immunity. Had minutes been produced that demonstrated the cost-benefit analysis, weighing of options, why specific repairs were to be made and why total reconstruction rather than piecemeal, the Court might likely have found the City was immune.

James A. L. Buddenbaum has practiced law for more than 25 years with Parr Richey representing municipalities and businesses in utility, healthcare and general business sectors in both regulatory and transactional matters. Jim also has extensive experience in representing businesses in making large property damage and similar insurance claims.

March 27, 2017

Broadband Access in Rural Areas and Mandatory E-filing

by Parr Richey Frandsen Patterson Kruse LLP

Attorneys practicing in Indiana are well aware that Indiana courts and administrative agencies are moving to “mandatory” electronic filing. The Indiana Supreme Court’s e-filing project is rolling along, with e-filing now mandatory (except upon a petition showing good cause) for the Supreme Court and Appellate Courts and over twenty counties. More county courts are going “E” every month. By 2018, e-filing will be mandatory in all circuit courts in Indiana. The specific schedule is available at http://www.in.gov/judiciary/4273.htm. In addition, some administrative agencies such as the Indiana Utility Regulatory Commission (“IURC”) are also moving to mandatory e-filing. See IURC RM-15-02.

As an attorney practicing in a major metropolitan area with ample access to high-speed internet, I welcome this transition. Many (probably most) attorneys have been exchanging documents and information electronically for many years. The world is going digital, and the ability to e-file court and agency documents is, to be frank, rather 2001. But would I welcome mandatory e-filing with such open arms if I practiced in a small town or rural area in Indiana, as many of our distinguished colleagues do?

Rural broadband access is a hot topic these days. At the national level, the Federal Communications Commission (“FCC”) has made broadband access a priority. The FCC’s 2016 Broadband Progress Report notes “there continues to be a significant disparity of access to advanced telecommunications capability across America with more than 39 percent of Americans living in rural areas lacking access to advanced telecommunications capability, as compared to 4 percent of Americans living in urban areas….” 2016 Broadband Progress Report at 3, GN Docket No. 15-191, Jan. 29, 2016. I represent a number of rural electric cooperatives who serve much of the rural territory in Indiana. The cooperatives and their members are acutely aware that significant portions of rural Indiana lack access to high-speed internet. For attorneys that live or practice in these areas, “mandatory” e-filing could present a challenge.

March 20, 2017

Liability Limitation for Indiana’s Weekend Warriors

by Parr Richey Frandsen Patterson Kruse LLP

On February 16, 2017, the Indiana Supreme Court issued an opinion regarding a sports participant’s duty owed to other participants in sports-injury tort cases. Megenity v. Dunn (No. 22D03-1309-CT-1354, decided Feb. 16, 2017). The Court affirmed the trial court’s ruling that a participant does not breach a duty owed to another participant by engaging in conduct ordinary in the sport, unless the participant intentionally or recklessly did so.

In Megenity, the plaintiff was a black belt in karate and attended classes at one particular studio for two years. At one session, she volunteered to hold a flying-kick bag while students practiced. The defendant was a green belt and accidentally executed a jump kick (both feet are off the ground) instead of a flying kick (one foot remains on the ground), which sent the plaintiff “flying and crashing to the floor”. The plaintiff suffered a knee injury, requiring surgery and months of physical therapy.

The plaintiff sued, arguing that the defendant breached a duty to her because a jump kick is never done during a flying kick drill. The trial court granted summary judgment for the defendant, finding a jump kick was an ordinary behavior during a kick-the-bag drill. The Supreme Court agreed, finding that “ordinary conduct” should be determined looking at the sport generally, not in the specific activity within the sport. As jump kicks are ordinary in the general sport of karate and the defendant did not intentionally or recklessly execute a jump kick, the defendant did not breach a duty even though the jump kick was contrary to protocol.

March 15, 2017

Indiana Stormwater Act: Municipalities May Assess Fee on Property Owners Even When Property Does Not Cause Runoff

by Parr Richey Frandsen Patterson Kruse LLP

On February 15, 2017, the Indiana Court of Appeals issued a published opinion affirming a municipality’s ability to charge a Stormwater Fee to all property owners within the boundaries of the city. Mint Management, LLC v. City of Richmond (No. 89a01-1603-PL-496, decided February 15, 2017). The Court of Appeals found the definition of “user” under the statute included all property owners within the boundaries of the city, regardless of whether a particular property owner contributed to the city’s storm water runoff.

The City of Richmond adopted an ordinance in 2007 which created a Stormwater Management District in Richmond, which was financed by imposing a Stormwater Fee on all property within the city that directly or indirectly contributed to Richmond’s stormwater system. Four property owners whose stormwater runoff did not directly or indirectly drain into the city’s stormwater system sued, requesting a declaratory judgment that they were not required to pay the fee and a reimbursement of the fees already paid. The trial court granted summary judgment to the city, finding that the definition of “user” under the ordinance included the property owners.

The Court of Appeals agreed, finding that there would be “an irrational and disharmonizing interpretation” of the ordinance if the definition of “user” and statutory language was not taken into account. Specifically, the Stormwater Act under the Indiana Code (section 8-1.5-5-7) allows a stormwater management district to collect user fees “from all of the property of the storm water district” without exceptions. The Court found the ordinance also used language which encompassed all property owners within the city’s boundaries. Further, the court noted that the stormwater system benefitted everyone who uses any sewer infrastructure, so the property owners did directly or indirectly contribute to the stormwater system.