Seventh Circuit Throws Out RICO Case Against ComEd
A $150 million class action lawsuit against ComEd’s parent company, Exelon, had previously been filed and appealled to the Seventh Circuit. The lawsuit points to the alleged bribery and numerous indictments, including “Public Official A,” former House Speaker Mike Madigan, as a basis to bring forward the complaint under the Racketeer Influenced and Corrupt Organizations Act (“RICO”).
Yesterday, the Seventh Circuit agreed with the District Court to toss the case. The injury alleged was based upon rate increases deriving from the fact that ComEd had been bribed by the former Speaker of the Illinois House. The District Court had dismissed the suit as it stated that paying a state mandated utility rate is not a cognizable injury under RICO, the Appellate Court affirmed.
The Seventh Circuit opinion goes into some detail about the type of corruption that was allegedly in play in Springfield and beyond. The court states that through the scheme, ComEd paid bribes to people associated with the Madigan enterprise and that in return, favorable legislation to ComEd was passed through the Illinois House of Representatives. The primary two specific bills, which were signed into law, involved the Energy Infrastructure and Modernization Act of 2011; the 2013 amendments to the 2011 legislation; and the Future Energy Jobs Act of 2016.
Some of the bribes that were allegedly paid included three Madigan directed subcontractors who did “little or no work,” a contract with a Madigan affiliated law firm, and paid interns from the Speaker’s Ward. Notably, the 2013 bill was originally vetoed by then Governor Pat Quinn. The Speaker called it up for a vote again in an override attempt. The Speaker was able to swing several Democratic legislators who had previously voted against the legislation, to now vote for it. He was successful, the bill was passed into law absent a signature from the Governor.
The legislation that was passed in 2013 changed the way energy was regulated in several ways. First, it limited the authority of the ICC. Rather than have fairly broad authority to determine rates, the rate increases were now largely determined by statute. Additionally, certain infrastructure improvements were authorized by the utility and ComEd was allowed to pass on that cost to the consumer.
Regarding the 2016 law, the Speaker also had six members of a committee removed, members who were likely to vote against the bill. Rather than face committee opposition, it passed unanimously. That bill allocated billions for nuclear power plants, a new fee based on Zero Emissions Credits, and new utilities.
The Seventh Circuit’s analysis of the complaint focuses on the “filed rate doctrine.” This doctrine states that a filed rate has the “force and effect” of a statute. As this is the case, Illinois courts do not have the authority to change rates for any reason.
The court construes the complaint as seeking the court to retroactively adjust the rates that had been paid, which runs afoul of the filed rate doctrine, which has also been largely adopted by federal courts. The court relies heavily on Keogh, 260 U.S., a U.S. Supreme Court decision which found that in order to sustain an injury of a legal right violation under RICO, that an injury had not occurred when a company paid a carrier’s rate.
The court’s decision strikes a blow to the RICO claim against ComEd, largely due to the fact that ComEd’s decision making is interpreted as subjected to similar deference as a government actor.
KEY TAKEAWAY
While the criminal cases against Speaker Madigan and others involving the ComEd issues will surely continue to keep the Department of Justice busy, the filed rate doctrine is said to have largely have been the wedge which prevented this case from moving forward any further.