State of Illinois ex rel. Pusateri v. The Peoples Gas Light and Coke Company presented an important question for the utilities bar: do the Circuit Courts have jurisdiction to order rate refunds on the grounds that the utility allegedly used falsified information in support of its rate case? On Thursday morning, a unanimous Illinois Supreme Court answered “No.” Our detailed summary of the underlying facts and lower court opinions in Pusateri is here. Our report on the oral argument is here.

Plaintiff filed a sealed complaint under what was then called the Whistleblower Reward and Protection Act (it’s now the Illinois False Claims Act) in 2009. The plaintiff – a former management-level employee of the defendant – alleged that the defendant was required to file a written report with the Illinois Commerce Commission whenever it took more than an hour to respond to a report of a gas leak. The plaintiff claimed that he and others had been instructed to falsify the reports to bring response times down below the threshold, and that the defendant had used this exaggerated record to support a rate case (as the Supreme Court noted, the complaint was never clear as to which rate case). The plaintiff alleged that after the rate increase was approved, the invoices sent by the defendant to the State as a gas customer were fraudulent claims for payment under the Act.

The Circuit Court dismissed, holding that the ICC apparently doesn’t consult the reports in rate making. The Appellate Court reversed with one Justice dissenting, finding that the reports could indeed have been part of the basis for a rate case.

In an opinion by Chief Justice Garman, the Supreme Court unanimously reversed. The matter was ultimately a simple one, the Court held. The ICC had exclusive jurisdiction over ratemaking, which is a legislative function, not a judicial one. Even when the courts reverse a ratemaking order, the court ordinarily doesn’t mandate a new rate, and where the new rate hasn’t been stayed pending appeal, ratepayers are often not entitled to a refund. “At its heart,” the Court found, “Pusateri’s complaint alleges [the defendant] used fraudulent means to get the State (and others) to pay too much for natural gas.” That made it a request for refunds, and only one entity in the State has original jurisdiction to order such relief – the ICC.

Moreover, the complaint amounted to a prohibited collateral attack on ICC ratemaking orders. In order to give the plaintiff any relief, the trial court would have had to determine what rates would have been absent the allegedly fraudulent safety reports, and ratemaking authority is statutorily reserved to the ICC alone. The plaintiff argued that the defendant had forfeited the jurisdictional argument by failing to raise it below, but the Court held that attacks on subject matter jurisdiction can’t be waived.

Plaintiff’s interpretation of the False Claims Act would “invite the circuit court to review a Commission rate order collaterally, in the absence of any specific grant of jurisdiction and less deferentially than the manner prescribed under the Public Utilities Act,” the Court concluded.

Image courtesy of Flickr by Steven Depolo (no changes).