Court Dismisses Class Action Suit Seeking Consumer Rebates For LB City Hall's Elevated Dec 00-May 01 Natural Gas Bills; Court Grants City Hall Summary J'ment, Finds No Charter Violation, Fraud Or Abuse of Discretion
(Sept. 15, 2003, updated @ 9:30 p.m. % 2:30 p.m. from initial post 12:15 p.m.) -- A Los Angeles Superior Court has dismissed a class action suit, brought by several LB activists, which sought rebates on behalf of LB consumers for elevated natural gas bills from LB City Hall's natural gas utility in the period Dec. 2000-May 2001.
In granting City Hall's motion for summary judgment, Superior Court Judge Charles W. McCoy wrote (bracketed material by us for clarity):
"The [City] Charter [section 1502] and [LB Municipal] Code provide that Long Beach's rates must be 'reasonable and comparable to rates...charge[d] by other like utilities in the Southern California area." [LB Muni] Code § 15.36.100. It was for Long Beach to decide what constituted a 'like' utility...On this record, no triable issue exists as to whether Long Beach abused its discretion in selecting like utilities in the given circumstances."
The Court noted:
"California law recognizes a presumption that rates established by entities possessing rate-setting authority are reasonable and lawful. [citation omitted] The record before the Court does not overcome this presumption. First, nothing in the record indicates fraud on the part of Long beach. Second, there is no evidence that Long Beach's rates were unreasonably and arbitrarily different from those charges by other gas utilities operating in Southern California."
[update] LBReport.com posts the ruling verbatim in pdf form on the following link: Donaldson et al v. City of LB, et al.
The suit, filed May 31, 2001, sought rebates for thousands of LB residents and businesses who were charged natural gas commodity rates by their City Hall-run utility roughly twice as high as So. Cal Gas between Dec. 2000 and May 2001. Had the plaintiffs prevailed, LB residents might have received hundreds of dollars per household, thousands for some LB businesses...while LB City Hall could have faced a $38 million bill.
The suit was filed on behalf of plaintiffs LB Citizens for Utility Reform (LBCUR) and LB residents John Donaldson, Adrea and Pete Stoker, Amelia Nieto, Roger Erickson, John R. Deats, Traci Wilson-Kleekamp, Joseph Weinstein, Colette Marie and Richard McLaughlin and Ronald B. Noe "and a class consisting of all customers of the City of Long Beach Gas Department from December 1, 2000, through the date of trial."
It alleged in pertinent part that the City of Long Beach, the City Council and then-City Manager Henry Taboada (in his official capacity) violated City Charter 1502 "by not basing the rates for gas by the City of Long Beach Gas Department upon the prevailing rates charged for gas by like utilities in the Southern California area and by instead charging plaintiffs and members of the class significantly more for gas than is being charged by these other utilities. This conduct has caused the proposed plaintiff class to suffer significant damages, in an amount estimated to exceed $38 million."
LB City Charter section 1502 provides, "The rates to be charged users for any services or commodities supplied by any public utility owned and operated by the City shall be based upon the prevailing rates for similar services and commodities supplied or sold by other like utilities whether public or private, operating in the Southern California area."
The suit also alleged that the City Council violated LB Municipal Code section 15.36.100 by failing to adopt resolutions disapproving rates posted by the City Manager, which the suit alleges were not reasonable or comparable to other like utilities, and alleged a taxpayer claim against all named defendants claiming waste of public funds.
Responding to the Superior Court ruling upholding City Hall's legal position, City Attorney Robert Shannon told LBReport.com, "We're pleased. It's a positive result for the city and the taxpayers."
[update] Lead plaintiff and LBCUR co-founder John Donaldson emailed lengthy comments to LBReport.com from which excerpt the following (bracketed material by us for clarity):
We never wanted to sue in the first place. Not talking about [City Charter sections] 1501 and 1502 was what brought about the suit. The City Council still never has...
This will be a good discussion for Charter revision. It needs to be clarified as to what like utilities are...We also need to define what "Prudent" operation of the utilities is and what public reports the Energy Dept. should be required to make. Like how much profit is it making and where is it going? What is the state of repair of the system and how much money is set aside for replacement?...
Maybe we need to compare the management of the Energy Dept. to the Water Dept. a Charter controlled utility that reports to a commission and is run not for profit. My brief observation is that while the Energy Dept. was asleep at the wheel the Water Dept. was keeping our supply state of the art and safe, upgrading its infrastructure and keeping rates low. It even took over the sewer system and has been steadily upgrading it after the Public Works Dept. (a General Fund Dept. managed under the City Manager) let it get to the same state of disrepair as out sidewalks, curbs, and streets.
In regard to the lawsuit and the granting of a summary judgment motion for the city, as Mr. Shannon says "It's is not over until there is no appealable issue." And there are certainly many appealable issues...
In the footnote on the last page, the word reluctantly was used to describe raising gas rates. When did the City Council even know the rates went up and who at City Hall was reluctant to raise them? In no document we read did we ever see any reluctance to raise rates...
...Mr. Shannon will tell you he did his very best in getting a settlement in the El Paso suit. Have you seen the settlement? Does anyone believe they will ever see a dime?
The only way to be certain is to hold those responsible, accountable. Where will the money come from? Well, [former City Manager] Henry [Taboada] said let us put the higher rates on our credit cards. Maybe the money should come from their bloated salaries and pension benefits.
Reached for comment on the ruling, Traci Wilson-Kleekamp, a co-plaintiff and LBCUR co-founder, said:
"We were forced to file a lawsuit because the City Council refused to have a public conversation about City Charter sections 1501 and 1502. Had the Council been willing to do that, we wouldn't have had to have a lawsuit. The result is, we effectively have low gas prices, our lawsuit forced City Hall to reform their gas purchasing policies and LB residents benefited because of our efforts...If the city's excuse is that they were blindsided by the marketplace, that's not a good excuse. City management personnel are paid over $100,000 a year because they're supposedly experts."
On the day the suit was filed, LB City Hall released a response quoting LB City Attorney Robert Shannon as saying:
"While the City of Long Beach recognizes and sympathizes with its natural gas consumers who were subjected to an outrageous rise in natural gas rates beginning in December, 2000, the rate increase was due to an unlawful conspiracy by other parties to restrict the supply of gas purchased by the City. Long Beach Energy was forced to pay grossly inflated rates for natural gas and that increased cost was passed to the ratepayer. The City did not profit from the rate hike and is itself a victim of this unlawful activity..."
The 2001, the City Attorney's office filed an anti-trust class action suit on behalf of LB ratepayers against a number of entities including El Paso Natural Gas Co. to recover that money. In March 2003, the City Attorney's office announced that the City of LB will receive $17 million from El Paso Natural Gas as a result of that firm's settlement of the suit.
The El Paso settlement did not affect LB's claims against other named defendants which at last report was scheduled for trial in 2004.