Case: 21-60130 Document: 00516246998 Page: 1 Date Filed: 03/21/2022
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
March 21, 2022
No. 21-60130 Lyle W. Cayce
Clerk
Ray C. Turnage, on behalf of themselves and all others similarly situated;
Reverend D. Franklin Browne, on behalf of themselves and all
others similarly situated; Dennis D. Henderson, on behalf of themselves
and all others similarly situated; Carlos Wilson, on behalf of themselves
and all others similarly situated; Fred Burns, on behalf of themselves and
all others similarly situated; Charles Bartley, on behalf of themselves
and all others similarly situated; Clarence Magee, on behalf of themselves
and all others similarly situated; Linda Patrick-Crafton, on behalf of
themselves and all others similarly situated; Barbara Young, on behalf of
themselves and all others similarly situated; Juanita J. Griggs, on behalf
of themselves and all others similarly situated; Chernise Seaphus, on
behalf of themselves and all others similarly situated; Mount Carmel
Baptist Church; Pinebelt Community Services,
Incorporated; Hall-Fairley Mortuary; Deborah
Delgado,
Plaintiffs—Appellants,
versus
Sam Britton, Mississippi Public Service Commissioner; Cecil Brown,
Mississippi Public Service Commissioner; Brandon Presley, Mississippi
Public Service Commissioner; Mississippi Power Company,
Defendants—Appellees.
Appeal from the United States District Court
for the Southern District of Mississippi
USDC No. 3-18-CV-818
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Before Dennis, Higginson, and Costa, Circuit Judges.
Gregg Costa, Circuit Judge:
In 2015, the Supreme Court of Mississippi ordered an electric utility
to refund the money it had collected from customers under a faulty rate
order. In this federal sequel to that state-court lawsuit, ratepayers contend
that an erroneous calculation of the interest on their refunds shorted them
millions of dollars in the aggregate.
This appeal raises two jurisdictional questions and one merits
question. We agree with the district court that sovereign immunity bars the
ratepayers’ claims against the Mississippi Public Service Commissioners.
We also agree that the Johnson Act does not preclude federal jurisdiction
over the claims against the utility. On the merits, however, we disagree with
the accrual date the district court used in dismissing the case on limitations
grounds.
I.
This dispute traces back to a rate increase the Mississippi Public
Service Commission approved almost a decade ago. To allow Mississippi
Power Company 1 to raise more than $330 million to construct a power plant
in Kemper County, the Commission authorized the utility to increase its
rates by 15% in 2013 and an additional 3% in 2014.
The Supreme Court of Mississippi invalidated the rate increase. In
addition to finding that the Commission exceeded its authority in blessing the
rate hike, it concluded that the Commission and Mississippi Power violated
ratepayers’ due process rights. Miss. Power Co., Inc. v. Miss. Pub. Serv.
1
Mississippi Power provides electricity to roughly 188,000 customers in
southeastern Mississippi.
2
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Comm’n, 168 So. 3d 905, 912, 916 (Miss. 2015). The supreme court ordered
Mississippi Power to refund the unauthorized charges.
Id. at 916.
Under state law, the utility was required to refund the excess to
customers “in full, including interest at the lawful rate.” Miss. Code
Ann. § 77-3-39(12). Mississippi’s lawful interest rate is “eight percent (8%)
per annum, calculated according to the actuarial method.”
Id. § 75-17-1(1).
Mississippi Power submitted a proposed refund plan to the
Commission on July 21, 2015, which the Commission approved on August
6th.
Mississippi Power began issuing refund checks on November 6, 2015
and mailed out the final batch of checks on December 4, 2015. Ratepayers
who did not elect to receive a refund check received a credit on their utility
bill instead. The refund program formally ended on May 27, 2016, when an
independent auditor confirmed that all refunds had been distributed or were
otherwise accounted for.
At some point before the checks issued, some ratepayers
commissioned economist Mark A. Cohen to compare the interest they would
receive under the refund plan to the interest guaranteed by statute. On
August 13, 2016, Cohen informed them that he believed that Mississippi
Power had shorted them more than ten million dollars. Although the plan
purports to use an interest rate higher than the statutory 8%, Cohen contends
that the plaintiffs received less than they were owed using either rate. This
discrepancy may be due to how the refund plan compounded interest.
On November 21, 2018, more than two years after receiving Cohen’s
report, individual and institutional electricity customers filed a putative class
action against Mississippi Power and the three Mississippi Public Service
Commissioners in their official capacities. The ratepayers brought claims
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under state law, as well as section 1983 claims under the Due Process Clause
and the Takings Clause.
The district court dismissed the claims against the Commissioners
and Mississippi Power in separate orders. It first held that sovereign
immunity barred the ratepayers’ claims against the Commissioners. In a
second order, the district court determined that the Johnson Act, 28
U.S.C. § 1342, did not deprive it of subject matter jurisdiction over the
remaining federal claims but then dismissed the federal claims against
Mississippi Power as time-barred. Finally, the court declined to exercise
supplemental jurisdiction over the remaining state law claims based on the
Class Action Fairness Act’s home state exception and dismissed them
without prejudice. The ratepayers timely appeal all of these rulings except
the without-prejudice dismissal of the state law claims.
II.
As we must, we first address the jurisdictional issues. Ramming v.
United States, 281 F.3d 158, 161 (5th Cir. 2001).
A.
Recognizing “the problems of federalism inherent in making one
sovereign appear against its will in the courts of the other,” the Eleventh
Amendment and general principles of sovereign immunity prohibit federal
courts from hearing certain lawsuits against the states. Pennhurst State Sch.
& Hosp. v. Halderman, 465 U.S. 89, 100 (1984) (quoting Emps. v. Miss. Pub.
Health & Welfare Dep’t,
411 U.S. 279, 294 (1973) (Marshall, J., concurring));
see also Allen v. Cooper,
140 S. Ct. 994, 1000 (2020) (recognizing that although
the text of Eleventh Amendment “applies only if the plaintiff is not a citizen
of the defendant State,” the amendment reflects a broader immunity
principle inherent in the federal system). Commissioners Bailey, Maxwell,
and Presley invoke this sovereign immunity.
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Although sovereign immunity bars most suits against states and their
agencies in federal court, it is not absolute. City of Austin v. Paxton, 943 F.3d
993, 997 (5th Cir. 2019). It does not apply when the state consents to suit or
when Congress abrogates the state’s immunity.
Id. Additionally, under Ex
parte Young,
209 U.S. 123 (1908), sovereign immunity does not bar suits
against state officers for prospective declaratory or injunctive relief because
officers act as private persons “stripped of [their] official clothing” when
they violate federal law. K.P. v. LeBlanc,
627 F.3d 115, 124 (5th Cir. 2010).
Congress has not abrogated the states’ immunity from section 1983 claims
and Mississippi has not consented to suit, so federal jurisdiction over the
Commissioners turns on Young.
The Young exception to state sovereign immunity applies when the
party invoking it establishes three criteria. First, the complaint “must name
individual state officials as defendants in their official capacities.” Raj v. La.
State Univ., 714 F.3d 322, 328 (5th Cir. 2013). Second, the complaint must
allege an ongoing violation of federal law. Verizon Md., Inc. v. Pub. Serv.
Comm’n of Md.,
535 U.S. 635, 645 (2002). And finally, the complaint must
seek prospective relief.
Id.
The complaint easily satisfies Young’s first requirement. The Public
Service Commissioners are state officials ordinarily shielded by sovereign
immunity. Gulf Park Water Co., Inc. v. Miss. Dep’t of Env’tl Quality, 59 F.3d
1241, 1241,
1995 WL 413105 (5th Cir. 1995) (unpublished). And they are sued
in their official capacities.
The ratepayers stumble at Young’s second requirement. Young does
not apply when the injurious conduct occurred “at one time or over a period
of time in the past.” Corn v. Miss. Dep’t of Pub. Safety, 954 F.3d 268, 275 (5th
Cir. 2020) (citing Papasan v. Allain,
478 U.S. 265, 278 (1986)). When there
is no ongoing violation of federal law, Young jurisdiction is not needed to
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prevent state officials from “employ[ing] the Eleventh Amendment as a
means of avoiding compliance with federal law.” P.R. Aqueduct & Sewer
Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 146 (1993).
The conduct that the ratepayers complain of is not ongoing. They
argue that “enforcement of the Kemper Refund Plan and its improper
[interest calculation method]” deprives them of their rights under the
Takings and Due Process Clauses. But as the district court correctly pointed
out, neither the Commission nor Mississippi Power have taken any action to
administer or enforce the refund plan in years. Mississippi Power issued the
final batch of refund checks to customers in December 2015 and the refund
program formally ended after the May 2016 audit. Just last year, we found
no continuing illegality when the investigation and administrative
proceedings “forming the basis of the allegations . . . [we]re completed.”
Spec’s Fam. Partners, Ltd. v. Nettles, 972 F.3d 671, 681 (5th Cir. 2020).
Likewise here, the relief sought “focuses on past behavior”—the conduct of
government officials during a now-concluded adjudicatory process.
Id.
Young requires the ratepayers to “allege that the defendant is violating
federal law, not simply that the defendant has done so.” NiGen Biotech,
L.L.C. v. Paxton, 804 F.3d 389, 394 (5th Cir. 2015). Because the ratepayers
failed to identify an ongoing violation of federal law, the district court
properly dismissed the claims against the Commissioners for lack of
jurisdiction. 2
2
The district court also held that any relief would be retrospective, contrary to
Young’s third requirement. We do not need to reach this issue because Young jurisdiction
fails for lack of an ongoing violation of federal law.
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B.
Mississippi Power also challenges federal jurisdiction. The utility
contends that the Johnson Act, 28 U.S.C. § 1342, makes state court the only
proper forum for this suit.
1.
The Johnson Act divests federal courts of subject matter jurisdiction
over certain disputes involving state rate orders. It states that district courts
may not “enjoin, suspend or restrain . . . any order affecting rates chargeable
by a public utility” when four criteria are met:
(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.
28 U.S.C. § 1342.
The Johnson Act resulted from early twentieth century tension over
federal court intervention in state rate regulation. Supreme Court decisions
like Ex parte Young, 209 U.S. 123 (1908), and Home Telephone & Telegraph Co.
v. City of Los Angeles,
227 U.S. 278 (1913), had expanded the ability of federal
courts to intervene in the work of state agencies. Clinton A. Vince & John S.
Moot, Energy Federalism,
42 Admin. L. Rev. 323, 358 (1990). Regulated
industries used this new-found federal jurisdiction to challenge state
regulatory actions in federal court.
Id. Some utilities so desired federal
jurisdiction to challenge state ratemaking that they changed their state of
incorporation to manufacture diversity jurisdiction. 78 Cong. Rec. 2031
(1934) (statement of Sen. Norris) (describing how a Nebraska utility
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reincorporated in Maine, where it did not have any business, to create
diversity jurisdiction to sue Nebraska regulators).
A backlash ensued against federal courts’ issuance of rate injunctions.
See Edward A. Purcell, Jr., Brandeis and the Progressive
Constitution 23–26 (2000). Progressives believed that “federal
jurisdiction enabled companies to delay and often defeat administrative
orders regardless of the merits involved.” Id. at 24 (quoting New York
Mayor Fiorello LaGuardia’s comments that these lawsuits were a “flagrant
misuse of the Federal courts” and “used for the purpose of legalizing the
exploitation of these greedy corporations”); 78 Cong. Rec. 8335 (1934)
(statement of Sen. Johnson) (worrying that public utilities sued in federal
court not in search of a neutral forum for legitimate claims, but instead “to
delay, hinder, and impede the states in their regulatory actions”). Statesrights advocates lamented federal intrusion into the states’ traditional
ratemaking prerogative. Purcell, supra, at 24–26; 78 Cong. Rec. at 8324
(statement of Rep. Mapes) (states should be able to “perform their proper
functions in the supervision and fixing of rates, without interference of
Federal law.”).
Progressives and advocates for states’ rights united in 1934 to pass the
Johnson Act, see Purcell, supra, at 26, which took the extraordinary step of
restricting federal jurisdiction, see Burford v. Sun Oil, 319 U.S. 315, 337 (1943)
(Frankfurter, J., dissenting) (“Aside from the Johnson Act . . . the many
powerful and persistent legislative efforts to abolish or restrict diversity
jurisdiction have ever since the Civil War been rejected by Congress.”). The
Act aimed to “channel normal rate litigation into the state courts.” Gulf
Water Benefaction Co. v. Pub. Util. Comm’n,
674 F.2d 462, 468 (5th Cir.
1982); see also Tennyson v. Gas Serv. Co.,
506 F.2d 1135, 1138 (10th Cir. 1974)
(explaining that the Act “was intended to keep constitutional challenges to
orders affecting rates out of the federal courts ‘lock, stock, and barrel.’”).
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Congress largely succeeded. Today, courts routinely deny federal
jurisdiction over utilities’ constitutional challenges to state and local
regulators’ rejection of rate hikes. See, e.g., People’s Nat’l Util. Co. v. City of
Houston, 837 F.2d 1366, 1367–68 (5th Cir. 1988) (applying the Johnson Act
to utility’s claim that city’s failure to approve its request for a rate increase
constituted an uncompensated taking); U.S. West, Inc. v. Tristani,
182 F.3d
1202, 1206, 1211 (10th Cir. 1999) (applying the Johnson Act to utility’s claim
that state’s consideration of subsidiary’s advertising revenue in rate
calculation violated the utility’s freedom of expression and constituted an
uncompensated taking). 3 With this foundation in mind, we address whether
the Johnson Act bars federal jurisdiction over this class action.
2.
This case comes to us in a posture that the Johnson Act’s supporters
may not have foreseen. Instead of the utility seeking a federal forum, it is the
ratepayers who prefer to have this suit in federal court. Despite this oddity,
we proceed to apply the Act as written.
The Johnson Act deprives a federal court of jurisdiction over
challenges to “order[s] affecting rates” only when all four of its conditions
are met. 4 28 U.S.C. § 1342. As the party arguing that the Act displaces
3
Preemption claims are the exception. In the 1980s, several courts held the
Johnson Act inapplicable to preemption cases because preemption is not “solely” based on
claims of unconstitutionality but on a combination of the Supremacy Clause and federal
statutory law. Vince & Moot, supra, at 359–60. New Orleans Pub. Serv., Inc. v. City of New
Orleans is typical. 782 F.2d 1236, 1242 (5th Cir. 1986), withdrawn in part,
798 F.2d 858 (5th
Cir. 1986).
4
As a threshold matter, ratepayers briefly argue that the Johnson Act is
inapplicable before even reaching the four factors because their suit does not involve an
“order affecting rates.” The 2015 refund order impacts rates because the amount
ratepayers ultimately paid for service in 2013 and 2014 “would necessarily be less as a result
of the order.” Hill v. Kan. Gas Serv. Co., 323 F.3d 858, 864 (10th Cir. 2003).
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federal question jurisdiction that otherwise exists, Mississippi Power bears
the burden of proving the Act’s elements. Williams v. Pro. Transp., Inc., 294
F.3d 607, 612 (4th Cir. 2002). The ratepayers concede that three are
satisfied: jurisdiction is based solely on federal constitutional questions (due
process and takings claims); the challenged order affects only Mississippi;
and Mississippi courts provide a remedy for “[a]ny party aggrieved by any
final finding, order or judgment of the commission in any utility rate
proceedings,”
Miss. Code Ann. § 77-3-72(1).
So federal jurisdiction depends on the Johnson Act’s third criteria:
whether the Commission’s 2015 order approving the refund plan was made
“after reasonable notice and hearing.” 28 U.S.C. § 1342(3). This
requirement recognizes a greater justification for federal review of
ratemaking when state agency procedures lack the basic hallmarks of due
process. See Nucor Corp. v. Neb. Pub. Power Dist.,
891 F.2d 1343, 1348 (8th
Cir. 1989) (recognizing that the Act’s process requirement “had been
interpreted as requiring that the minimum standards of due process be
met.”).
Notice is reasonable “if it is transmitted in a manner which, at a
minimum, has a reasonable certainty of resulting in actual notice.” Id. This
is a fact-specific standard with little caselaw providing on-point help. The
notice factor is a close call, but we ultimately agree with the district court that
the 2015 refund order was not issued after “reasonable” process.
Mississippi Power and the Commission did not notify ratepayers of
the 2015 refund proceedings. The Commission only notified the six parties
who intervened in the 2013 rate increase proceeding before it approved the
utility’s 2015 refund proposal. In re Notice of Intent of Miss. Power Co. for a
Change in Rates Related to the Kemper Cnty. IGCC Project, 2015 WL 4880634,
at *1 (Miss. P.S.C. Aug. 6, 2015). It gave those parties a week to respond or
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object. Id. The utility and the Commission did not provide similar notice to
nonparty customers like the plaintiffs.
It does not matter that the ratepayers could have sought leave to
intervene in the refund proceedings. The Johnson Act imposes no such
requirement on customers; it places the burden of notice on the utility. The
utility further points to its “extensive public notice campaign” publicizing
the details of the refund plan. This is also irrelevant because the Johnson Act
requires prior notice—after all, only that enables a timely objection—and the
public education campaign occurred after the Commission issued the refund
order. See 28 U.S.C. § 1342(3).
Given the absence of process specific to the 2015 refund order,
Mississippi Power relies on the process it provided in the initial 2013
ratemaking. The utility maintains that its 2013 notice met state law
requirements for all the subsequent hearings and that its compliance should
be per se reasonable. Before it raised its rates in 2013, Mississippi Power
mailed notice of the proposed rate increase to affected customers, published
a notice in the Clarion Ledger, and notified all parties of record in the last
proceeding in which the company sought a major rate change, In re Notice of
Intent of Miss. Power Co. for a Change in Rates Related to the Kemper Cnty.
IGCC Project, 2013 WL 871246, at *2 (Miss. P.S.C. Mar. 5, 2013). The
Commission then held a public hearing on the rate increase, at which it
allowed six intervenors to participate by submitting prewritten testimony,
presenting their own evidence, and cross-examining all witnesses.
Id. at *2–
3. 5 State law did not require the utility to provide any additional notice to
5
The district court concluded that the 2013 process was not reasonable, finding
that the state supreme court’s prior determination to that effect was preclusive. This was
an error because the supreme court’s holding did not relate to the 2013 order approving the
rate increase but to a prior proceeding approving construction of the new plant. See Miss.
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ratepayers before the refund proceeding two years later because it was
considered part of the same matter. See Miss. Code Ann. § 77-3-39
(contemplating refunds following judicial invalidation of rate orders but
requiring notice and hearing only upon utility’s initial filing of notice of intent
to change rates).
In the context of a refund hearing to remedy an illegal rate, Mississippi
Power’s compliance with state law was not enough to satisfy the Johnson
Act’s reasonable process requirement. One court of appeals has held that
giving notice in the form required by state law satisfies the Johnson Act.
Brooks v. Sulphur Springs Valley Elec. Co-op, 951 F.2d 1050, 1054 (9th Cir.
1991). But see Nucor Corp.,
891 F.2d at 1348 (rejecting idea that compliance
with state law is a safe harbor). But no federal court has held that state law
controls when Johnson Act notice is due in the first place. And we have
explained that it is the court’s duty to define reasonable process. City of
Meridian v. Miss. Valley Gas. Co.,
214 F.2d 525, 526 (5th Cir. 1954) (finding it
“plain” that the court, not the ratemaking body, defines reasonableness
under the Johnson Act).
Understanding that the Johnson Act’s procedural requirements
reflect due process principles, Nucor Corp., 891 F.2d at 1348, we do not see
how notice of the 2013 rate hearing gave ratepayers meaningful notice of the
refund hearing two years later. The Johnson Act’s requirement of both
“notice and hearing,” seemingly ties one component of process to the other.
After all, the right to be heard “has little reality or worth unless one is
informed that the matter is pending.” Mullane v. Cent. Hanover Bank & Tr.
Co.,
339 U.S. 306, 314 (1950). And requiring notice for both a rate hike
Power Co., 168 So. 3d at 914–15. The state court opinion recognizes that the ratepayers did
receive notice of the rate increase in 2013. Id. at 914 (“Ratepayers first received notice of
MPC’s intent to increase rates after entry of the April 24, 2012, Order . . .”).
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hearing and a refund hearing held years later is consistent with due process
law in other areas. Cf. Cleveland Bd. of Ed. v. Loudermill, 470 U.S. 532, 546–
47 (1985) (requiring notice of both pre- and post-deprivation hearings in
challenge to termination of public employment).
To be sure, a hypervigilant customer could have followed the full
history of the rate increase as it wound its way through the state agency and
state courts only to end up back in a 2015 agency hearing to determine the
amount of the refund. But it is not reasonable to expect that level of diligence
from a utility customer not following administrative and court dockets as a
lawyer might. As reasonableness is the touchstone of the Johnson Act’s
notice requirement, independent notice had to be provided for the 2015
refund hearing in order to insulate it from federal court scrutiny. 6 Because
such notice was not provided, this case is properly in federal court.
III.
With the jurisdictional questions decided, we turn to Mississippi
Power’s substantive dismissal motion. Mississippi Power contends that the
ratepayers’ federal claims are time-barred. Failure to file within the statute
of limitations justifies dismissal under Rule of Civil Procedure 12(b)(6) when
“it is evident from the plaintiff’s pleadings that the action is barred and the
pleadings fail to raise some basis for tolling or the like.” Jones v. Alcoa, Inc.,
339 F.3d 359, 366 (5th Cir. 2003). But the timeliness of a claim can depend
on evidence obtained in discovery or even require a factfinder to resolve
disputed issues. See Margolies v. Deason,
464 F.3d 547, 554–55 (5th Cir.
6
We do not hold that every separate rate hearing requires separate notice to satisfy
the third Johnson Act element. But here the hearings occurred two years apart and
addressed substantially different questions. A ratepayer who received notice in 2013 of a
possible rate hike might not have desired to comment on that common occurrence but
might have been quite interested in commenting on the refund for an illegal rate.
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2006). We review dismissal for failure to state a claim de novo. Raj, 714 F.3d
at 329–30.
In Mississippi, the limitations period for section 1983 claims is three
years. Cuvillier v. Taylor, 503 F.3d 397, 401–02 (5th Cir. 2007) (incorporating
Miss. Code Ann. § 15-1-49, Mississippi’s general personal injury
limitations period). The ratepayers filed this action on November 21, 2018,
so their federal claims are timely if they accrued on or after that date in 2015.
Although state law provides the limitations period for a section 1983
claim, federal law determines when the claim accrues. Wallace v. Kato, 549
U.S. 384, 388 (2007). A claim accrues when the would-be plaintiff “knows
or has reason to know . . . that he has been hurt and who has inflicted the
injury.” Gartrell v. Gaylor,
981 F.2d 254, 257 (5th Cir. 1993) (per curiam)
(quotation omitted). Plaintiffs have reason to know of their cause of action
when they have “notice of facts which, in the exercise of due diligence, would
have led to actual knowledge” of injury and causation. Roe v. United States,
839 F. App’x 836, 843 (5th Cir. 2020) (quotation omitted). If plaintiffs have
access to facts that they do not understand themselves, due diligence can
require them to “seek professional advice” about their potential claims.
Harrison v. United States,
708 F.2d 1023, 1027 (5th Cir. 1983). In short, the
limitations period begins when “the circumstances would lead a reasonable
person to investigate further.” Piotrowski v. City of Houston,
51 F.3d 512, 516
(5th Cir. 1995).
Recall that the ratepayers’ claims challenge the interest calculation
used in determining their refunds. The district court concluded these claims
accrued on August 6, 2015, when the Commission approved the refund plan
proposed by Mississippi Power. The plan’s main text does not mention
interest or explain how interest would be calculated on the refunds, but a
footnote—at the end of a sentence detailing the amount the utility collected
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unlawfully—clarifies that “carrying costs . . . will be calculated using the 2015
cost of capital filed in the Company’s 2015 ECO filing, adjusted for income
taxes, with annual compounding of interest.” From this, the district court
concluded, a reasonable person would have sought professional advice to
confirm that the plan provided for lawful interest.
Even assuming that the ratepayers had access to the refund plan on
the day the Commission approved it, the plan’s language did not put them
on notice of facts that would cause a reasonable person to further investigate
the interest issue. The footnoted sentence is not about interest; it merely
catalogues the total amount of money that Mississippi Power collected under
the faulty rate order. 7 The footnote is not obviously about interest either; it
explains how the utility intended to calculate “carrying costs,” or the costs a
business incurs to hold stock inventory. See Will Kenton, Carrying Costs,
INVESTOPEDIA (2020), https://www.investopedia.com/terms/c/carryingcosts.asp (defining carrying costs). Nowhere does the plan say what the
interest rate is or the method of calculating it. And, of course, the plan does
not tell ratepayers the amount of individual refunds. It is asking a lot of a
reasonable person to recognize from the plan’s obtuse and technical
references that it uses a method to calculate interest different from the one
required by law. The ratepayers’ claims did not accrue on August 6, 2015. 8
7
In full, the above-the-line sentence preceding the footnote reads: “As of June 30,
2015, [Mississippi Power] had collected approximately $331 million pursuant to the Mirror
CWIP Order and accrued an additional $22 million of carrying costs.”
8
The district court also noted that the ratepayers actually did retain an expert to
advise them on the interest calculation issue sometime before November 2015. When a
plaintiff has actual knowledge of causation and injury, it is unnecessary to consider what a
“reasonable person” would know. See Smith v. Reg’l Transit Auth., 827 F.3d 412, 421 (5th
Cir. 2016). But the record does not reflect who hired Cohen or when. And while those
who retained Cohen developed actual knowledge of their injury at some point, we do not
know when Cohen first realized they were underpaid.
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Nor did their claims accrue on August 16, 2016, when Cohen issued
his report finding that Mississippi Power miscalculated interest on the
refunds. Using this late date is at odds with the accrual standard. Our cases
ask when a would-be plaintiff should seek professional advice, not when they
actually receive it. See Harrison, 708 F.2d at 1027. To hold otherwise would
allow litigants to evade the statute of limitations by delaying expert opinions
for months or even years.
Other possible accrual dates remain. One possibility is that the claims
accrued when Mississippi Power explained on the FAQ page of its website
that it would pay interest at its “after tax WACC (weighted average cost of
capital) rate of 9.5% . . . over the entire refund period (March 2013 – July
2015) and up to Nov. 7 when we begin issuing the refunds.” 9 The interest
described in the FAQ differs from the interest guaranteed by statute in
several aspects. For one, the FAQ promises 9.5% interest rather than the 8%
guaranteed by law. See Miss. Code Ann. § 75-17-1. Additionally, the
FAQ indicates that Mississippi Power intended to calculate interest “over
the entire refund period” rather than “per annum” and “according to the
actuarial method,” as the statute requires. See
id. These discrepancies,
combined with the fact that the FAQ (unlike the refund plan footnote)
explicitly mentions interest, may have led a reasonable person to “investigate
further.” Piotrowski,
51 F.3d at 516.
It could be, however, that the ratepayers could not have ascertained
their injury from the FAQ, because it was not clear at that time that they
would be underpaid. Cohen calculated that, compounded annually,
Mississippi Power would have owed customers $40.7 million in interest at
9
We do not know the exact date that Mississippi Power published the FAQ. It was
certainly posted by November 1, 2015, when Cohen accessed it online.
16
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No. 21-60130
the statutory rate and $48.2 million in interest at the 9.5% WACC rate. Either
method would result in a payout higher than the $30 million that Mississippi
Power’s FAQ anticipated the company would pay in total interest. Further
complicating the calculation, it is not clear whether Mississippi Power would
compound interest annually, as alluded to in the plan footnote, or “over the
entire refund period,” as stated in the FAQ, a distinction that could be the
difference between overpayment and underpayment.
Another possibility is that the ratepayers’ claims accrued upon the
receipt of their refunds. Citing cases from the tax refund context, the
ratepayers contend that an underpayment-based injury cannot occur until the
injured party receives their deficient check, because before that point, the
government could alter the amount to be refunded. See, e.g., United States v.
Wurts, 303 U.S. 414, 417 (1938) (concluding that IRS’s wrongful refund
claim accrued when a taxpayer received the erroneous refund, not when the
IRS Commissioner approved it). On this theory, only some of the ratepayers
would be barred from suing. Mississippi Power issued refund checks in seven
batches between November 6 and December 4, 2015. Only those ratepayers
who received their checks after November 21st could continue this action. It
is unclear from the record if any of the named plaintiffs fall into the latter
category. 10
The ratepayers’ claims did not accrue on August 6, 2015, when the
Commission approved the refund plan, or on August 16, 2016, when Cohen
concluded that Mississippi Power shorted them. Given the uncertainties in
the record that we have noted, and the possible benefit of limited discovery
on the limitations issue, we remand for the district court to decide in the first
10
Some ratepayers received their refunds as a credit on their utility bills instead of
a check. We do not know if any named plaintiffs chose the credit option, and if so, when
that credit was posted to their accounts.
17
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No. 21-60130
instance which of the remaining options outlined above is the correct accrual
date. 11
…
We AFFIRM the dismissal of the claims against the Commissioners
but VACATE the district court’s dismissal of the claims against Mississippi
Power on limitations grounds. We REMAND for further proceedings
consistent with this opinion.
11
It may be, however, that the district court need not reach the limitations issue.
Mississippi Power raised two additional arguments for dismissal: first, that it is not a state
actor subject to suit under section 1983, and second, that the ratepayers do not have a
property interest in the refund protected by the Due Process Clause. Mississippi Power
asks us to affirm on those alternative grounds, but the district court should consider those
issues in the first instance. We do not intimate what decisions it should reach on those
questions.
18
