Court Opinion

ID: 4395876
Source: CourtListenerOpinion
Date Created: 2019-05-10 15:03:24.013419+00
Date Added: 2024-06-11T09:26:56.423426
License: Public Domain

MEMORANDUM DECISION

Pursuant to Ind. Appellate Rule 65(D),                                         FILED
this Memorandum Decision shall not be
                                                                        May 10 2019, 8:48 am
regarded as precedent or cited before any
court except for the purpose of establishing                                   CLERK
                                                                         Indiana Supreme Court
the defense of res judicata, collateral                                     Court of Appeals
                                                                              and Tax Court

estoppel, or the law of the case.

ATTORNEYS FOR APPELLANT                                 ATTORNEYS FOR APPELLEE
William I. Fine                                         INDIANA-AMERICAN WATER
Indiana Utility Consumer Counselor                      CO.
Scott C. Franson                                        David L. Pippen
Daniel M. Le Vay                                        General Counsel,
Deputy Consumer Counselors                              Indiana-American Water Co.
Indianapolis, Indiana                                   Greenwood, Indiana
                                                        Peter J. Rusthoven
                                                        Nicholas K. Kile
                                                        Hillary J. Close
                                                        Barnes & Thornburg, LLP
                                                        Indianapolis, Indiana
                                                        ATTORNEYS FOR APPELLEE
                                                        INDIANA UTILITY
                                                        REGULATORY COMMISSION
                                                        Curtis T. Hill, Jr.
                                                        Attorney General of Indiana
                                                        Patricia C. McMath
                                                        Aaron T. Craft
                                                        Deputy Attorneys General
                                                        Indianapolis, Indiana
                                                        Beth E. Heline
                                                        General Counsel, Indiana Utility
                                                        Regulatory Commission
                                                        Jeremy Comeau
                                                        Assistant General Counsel
                                                        Indianapolis, Indiana

Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019                     Page 1 of 16
                                                        ATTORNEYS FOR APPELLEE
                                                        TOWN OF SCHERERVILLE
                                                        J. Christopher Janak
                                                        Kristina Kern Wheeler
                                                        Bose McKinney & Evans, LLP
                                                        Indianapolis, Indiana
                                                        David M. Austgen
                                                        Austgen Kuiper Jasaitis, P.C.
                                                        Crown Point, Indiana

                                          IN THE
    COURT OF APPEALS OF INDIANA

Indiana Office of Utility                               May 10, 2019
Consumer Counselor,                                     Court of Appeals Case No.
Appellant-Statutory Representative,                     18A-EX-2030
                                                        Appeal from the Indiana Utility
        v.                                              Regulatory Commission
                                                        The Honorable Sarah E. Freeman,
Indiana-American Water                                  Commissioner
Company, Inc.,                                          The Honorable David E. Veleta,
Appellee-Petitioner,                                    Senior Administrative Law Judge
                                                        Cause No. 45043
and
Indiana Utility Regulatory
Commission,
Appellee-Administrative Agency,

and

Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019        Page 2 of 16
      Citizens Action Coalition of
      Indiana, Inc. and Town of
      Schererville, Indiana,1
      Appellees-Intervenors.

      Mathias, Judge.

[1]   Indiana-American Water (“Indiana-American”) submitted a plan (“the Plan”)

      to the Indiana Utility Regulatory Commission (“IURC”) seeking the IURC’s

      approval of its proposed Customer Lead Service Line Replacement Program

      (“Replacement Program”). This Replacement Program called for Indiana-

      American to replace aging lead water lines owned by Indiana-American

      customers if the customer agreed to the replacement. In exchange, the Plan

      would allow Indiana-American to recoup its expenses by a rate increase. The

      Indiana Office of Utility Consumer Counselor (“OUCC”) objected to certain

      portions of Indiana-American’s Plan. Relevant to his appeal, the OUCC

      objected to an indemnification and release clause (“the Indemnification

      Clause”) that was included in an attached license agreement (“License

      Agreement”) seeking customer consent to participate in the Replacement

      Program, which Indiana-American submitted as an attachment to its Plan. The

      1
       Appellee-Intervenor Citizens Action Coalition of Indiana, Inc., did not file an attorney appearance or brief
      on appeal. However, pursuant to Indiana Appellate Rule 17(A), a party of record in the trial court shall be a
      party on appeal. Appellee-Intervenor Town of Schererville, Indiana filed a Notice of Intent to Not File an
      Appellee’s Brief, which was accepted by this court on January 11, 2019.

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019                      Page 3 of 16
      IURC approved Indiana-American’s Plan but found that the License

      Agreement and its Indemnification Clause were not part of the submitted Plan.

      Thus, the IURC declined to make a determination as to whether the terms of

      the Indemnification Clause were appropriate. The OUCC appeals the IURC’s

      order and presents two issues for our review, one of which we find dispositive

      and restate as whether the IURC erred in finding that the License Agreement

      and Indemnification Clause were not part of the Plan.

[2]   We reverse and remand.

                                                The Parties

      A. Indiana-American

[3]   Indiana-American is a corporation that provides water utility services to

      approximately 300,000 customers in various communities throughout Indiana.

      Indiana-American, like most water utility companies, owns the water mains

      and lines that deliver water up to the customer’s property, usually to the water

      meter located near the property line. The customer, however, owns and is

      responsible for the water line that delivers the water from the meter to the

      customer’s home or other building.

      B. The IURC

[4]   The Indiana General Assembly created the IURC primarily as a fact-finding

      body with the technical expertise to administer the regulatory scheme devised

      by the legislature. NIPSCO Indus. Grp. v. N. Ind. Pub. Serv. Co., 31 N.E.3d 1, 5

      (Ind. Ct. App. 2015) (citing N. Ind. Pub. Serv. Co. v. U.S. Steel Corp., 907 N.E.2d

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019   Page 4 of 16
      1012, 1015 (Ind. 2009)); see also Ind. Code § 8-1-1-2 (establishing the IURC).

      The IURC’s role is to ensure that public utilities provide constant, reliable, and

      efficient service to the citizens of Indiana. NIPSCO Indus. Grp., 31 N.E.3d at 5.

      The IURC only can exercise power conferred upon it by statute. Id. The

      IURC’s “authority also ‘includes implicit powers necessary to effectuate the

      statutory regulatory scheme.’” Id. (quoting U.S. Gypsum, Inc. v. Ind. Gas Co., 735
N.E.2d 790, 795 (Ind. 2000)). Indiana Code section 8-1-3-1 provides for direct

      appeal from the IURC to this court.2 See Office of Util. Consumer Counselor v.

      Citizens Tel. Corp., 681 N.E.2d 252, 255 n.1 (Ind. Ct. App. 1997).

      C. The OUCC

[5]   The General Assembly also created the OUCC, which can “place itself in the

      shoes of the public for purposes of hearings and appeals” before the IURC.

      Citizens Tel. Corp., 681 N.E.2d at 255 n.1; see also Ind. Code § 8-1-1.1-2 (creating

      the OUCC). Pursuant to Indiana Code section 8-1-1.1-4.1:

                 (a) The consumer counselor may appear on behalf of ratepayers,
                 consumers, and the public in:

      2
          This statute provides in relevant part:
                 Any person, firm, association, corporation, limited liability company, city, town, or public
                 utility adversely affected by any final decision, ruling, or order of the commission may,
                 within thirty (30) days from the date of entry of such decision, ruling, or order, appeal to
                 the court of appeals of Indiana for errors of law under the same terms and conditions as
                 govern appeals in ordinary civil actions . . . .
      I.C. § 8-1-3-1.

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019                        Page 5 of 16
                  (1) hearings before the [IURC], the department of state
                  revenue, or the Indiana department of transportation;

                  (2) appeals from the orders of the [IURC], the department of
                  state revenue, or the Indiana department of transportation;
                  and

                  (3) suits and actions in a court that may involve rates for
                  service, services, extensions, and contracts for service,
                  valuations of utilities, applications of utilities for authority to
                  issue securities, applications for mergers and sales, and in all
                  other proceedings, including proceedings before federal
                  agencies, and suits and actions in which the subject matter of
                  the action affects the consumers of a utility, motor carrier, or
                  railroad doing business in Indiana.

              (b) The counselor shall decide whether to appeal an order of the
              [IURC], the department of state revenue, or the Indiana
              department of transportation and may on the counselor’s own
              motion initiate an appeal.

      Ind. Code § 8-1-1.1-4.1

                                 Facts and Procedural History
[6]   It is common knowledge that lead is a dangerous neurotoxin. As recent events

      in Flint, Michigan have shown, lead in drinking water is a serious public health

      concern. As noted above, Indiana-American owns the water service lines up to

      the point of the customer’s property, and the customer owns the water service

      lines located on his or her property. Thus, to fully address the risk that lead

      from service lines might leach into the water supply, a water utility cannot

      simply replace its water mains and lines; instead, the customer-owned service

      lines must be tested for lead and replaced if they could contaminate the

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019      Page 6 of 16
      customer’s water supply. In fact, replacing only the utility-owned portion of the

      service lines can counterintuitively make the situation worse and increase the

      lead in water supply. Replacing a customer-owned water service line is not

      trivial task and can cost a customer hundreds, if not thousands, of dollars.

[7]   To address these concerns, and to allow water utilities to replace customer-

      owned portions of lead service lines, the General Assembly enacted Indiana

      Code chapter 8-1-31.6, which became effective on July 1, 2017. This chapter

      allows water utilities to petition the IURC for permission to implement a plan

      to replace customer-owned lead services lines, even though these lines are not

      owned by the utility, and to recover its expenses through a rate adjustment. See

      Ind. Code § 8-1-31.6-6(b), (c). Before a water utility may do so, it must first

      submit a plan to the IURC for approval.

[8]   Pursuant to Indiana Code section 8-1-31.6-6(a)(8), a utility’s proposed plan

      must include:

              The water utility’s proposal for:
              (A) communicating with the customer the availability of the
              water utility’s plan to replace the customer owned portion of the
              lead service line in conjunction with the water utility’s
              replacement of the utility owned portion of the lead service line;
              and
              (B) documenting the customer’s consent or lack of consent to
              replace the customer owned portion of the lead service line.

[9]   On January 29, 2018, Indiana-American petitioned the IURC for approval of

      its customer-owned lead service line Replacement Plan. In doing so, Indiana-

      Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019   Page 7 of 16
American submitted its Plan to the IURC, and attached to the plan were

examples of Indiana-American’s proposed customer communications materials.

To comply with the statutory requirements listed above, Indiana-American’s

Plan includes the following provisions:

        8. Indiana American’s Communication and Documentation
        Proposal
                                               ***
        Indiana American’s Communication Plan
        Indiana American has developed a comprehensive
        communication plan for communicating with customers
        regarding lead and drinking water.

        Lead and Drinking Water Information
        Indiana American has created a webpage on its customer
        website, www.indianaamwater.com, in the Water Quality tab,
        discussing lead and drinking water. Topics on the webpage
        include: water treatment and corrosion control; results from lead
        sampling; assessing exposure to lead; minimizing exposure to
        lead; home treatment for lead; and testing water for lead.
        Additional information from outside sources is also included on
        the webpage. The webpage link is: https://amwater.com/inaw/
        water-quality/lead-and-drinking-water.

        Communication Plan for Customers with Lead Service Lines
        Indiana American has developed a comprehensive
        communication plan for informing customers about project work
        and about lead and drinking water. The communication also
        informs customers about lead service lines, and steps for
        identifying and replacing lead services lines in conjunction with
        Indiana American work. Communications are described in the
        sections below. Examples of referenced communication materials
        are attached in the Appendices of this plan.

Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019   Page 8 of 16
                                                 ***

         3. Customer License Agreement to Replace Customer Owned
            Lead Service Line, and Lead Fact Sheet
            Indiana American personnel or consultant representatives
            share by mail, or in person, the customer owned water service
            line replacement license agreement entitled “Water Service
            Line Replacement”. Indiana American personnel or
            consultant representatives share details about the work and
            schedule and answer any questions in person or by telephone.
            The license agreement describes the work, the schedule, a 12-month
            workmanship warranty, indemnification provisions, the provisions
            that the service line will continue to be owned and maintained by the
            customer, and acknowledgements by the customer, including
            an acknowledgment that they have received and read the
            “Important Notice About Your Water” and the “Lead” fact
            sheet, which is given to them at this time. The “Lead” fact
            sheet describes lead and drinking water, health effects,
            exposures to lead, ways to minimize exposure to lead, testing
            for lead, frequently asked questions, and further contact
            information.
            The customer can agree to permit Indiana American to
            replace their lead service line by signing the license
            agreement. The customer can also decline to permit Indiana
            American to replace their lead service line, and sign the
            acknowledgement indicating they decline. If the customer
            declines to sign the acknowledgement, all relative safety and
            educational materials will be left with the customer, Indiana
            American will document the customer’s choice, and will
            maintain that information in its records. Indiana American
            also maintains copies of signed license agreements.

                                                 ***

        All documents listed above are attached to this Plan and listed as
        “Communication Materials Included with Customer Lead
        Service Line Replacement Plan”.
Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019    Page 9 of 16
       Appellant’s App., pp. 36–37, 65 (emphases added).

[10]   The documents listed above and attached to the Plan were admitted into

       evidence at the IURC’s hearing on Indiana-American’s petition to approve its

       plan. One of these documents, entitled “Water Service Line Replacement,” is a

       proposed license agreement (the “License Agreement”) between Indiana-

       American and the customer who owns the lead service line. This License

       Agreement includes the Indemnification Clause, which provides as follows:

               IN CONSIDERATION FOR PERFORMING THE WORK TO
               INSTALL THE CUSTOMER SERVICE LINE AT
               COMPANY’S COST AND THE COMPANY’S
               AGREEMENT TO PROVIDE A 12-MONTH LIMITED
               WORKMANSHIP WARRANTY, CUSTOMER AGREES TO
               INDEMNIFY, RELEASE AND HOLD HARMLESS
               COMPANY AND ITS AFFILIATES AND AGENTS FROM
               AND AGAINST ALL CLAIMS, LIABILITY AND COSTS
               (“CLAIMS”) RESULTING FROM ACTS AND OMISSIONS
               OF COMPANY AND/ OR ITS APPROVED
               SUBCONTRACTORS IN INSTALLING THE CUSTOMER
               SERVICE LINE.

       Id. at 75.

[11]   On April 13, 2018, the OUCC filed its response to the Plan. The OUCC

       objected to the inclusion of the Indemnity Clause in the License Agreement.

       The OUCC argued that any costs associated with a risk of liability for damages

       should have been included in Indiana-American’s estimate of the costs of

       replacing the customer-owned lines and that Indiana-American’s customers

       should not be held responsible for damage caused by Indiana-American or its

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019   Page 10 of 16
       contractors. See Ex. Vol., Public’s Ex. 1, p. 17. Thus, the OUCC asked that the

       IURC reject the Indemnity Clause.

[12]   Indiana-American responded on April 23, 2018, noting that it already uses

       indemnification provisions when restoring private property after construction

       projects. It also noted that it was offering to replace customer-owned lead

       service lines at no cost to the customer, including a one-year warranty. Thus,

       under the Plan, customers were to receive a benefit with no direct costs that

       they would not otherwise get without the Plan. Indiana-American also argued

       that the Indemnification Clause allowed it to calculate its risks, and without

       such language, would be unable to reliably estimate its liability under the Plan.

[13]   On July 25, 2018, the IURC issued its Order, which is the subject of the instant

       appeal. With regard to the Indemnification Clause, the Order provides:

               E. Indemnification. [The OUCC] objected to the inclusion of an
               indemnification provision in the standard contract that Indiana
               American will use when it replaces a customer owned lead
               service line. Because the specific provisions of the contract are not part of
               the Plan that we are being asked to approve, we therefore decline to make
               a determination whether the terms of a particular indemnification
               provision are appropriate or not.

       Appellant’s App., p. 18. The OUCC now appeals.

                                          Standard of Review
[14]   Our standard from decisions of the IURC is governed by Indiana Code section

       8-1-3-1, which provides:

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019      Page 11 of 16
               Any person, firm, association, corporation, limited liability
               company, city, town, or public utility adversely affected by any
               final decision, ruling, or order of the commission may, within
               thirty (30) days from the date of entry of such decision, ruling, or
               order, appeal to the court of appeals of Indiana for errors of law
               under the same terms and conditions as govern appeals in
               ordinary civil actions, except as otherwise provided in this
               chapter and with the right in the losing party or parties in the
               court of appeals to apply to the supreme court for a petition to
               transfer the cause to said supreme court as in other cases. An
               assignment of errors that the decision, ruling, or order of the
               commission is contrary to law shall be sufficient to present both
               the sufficiency of the facts found to sustain the decision, ruling,
               or order, and the sufficiency of the evidence to sustain the finding
               of facts upon which it was rendered.

[15]   In interpreting this statute, our courts have held that “[a] multiple-tier standard

       of review is applicable to the IURC’s orders.” Citizens Action Coal. of Ind., Inc. v.

       S. Ind. Gas & Elec. Co., 70 N.E.3d 429, 438 (Ind. Ct. App. 2017) (quoting Citizens

       Action Coal. of Ind., Inc. v. S. Ind. Gas & Elec. Co., 45 N.E.3d 483, 491 (Ind. Ct.

       App. 2015)). Pursuant to this tiered standard:

               A court on review must inquire whether specific findings exist as
               to all factual determinations material to the ultimate conclusions;
               whether substantial evidence within the record as a whole
               supports the findings of fact; and whether the decision, ruling, or
               order is contrary to law.

       Id.

[16]   In applying this standard:

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019   Page 12 of 16
               [w]e review the conclusions of ultimate facts, or mixed questions
               of fact and law, for their reasonableness, with greater deference
               to matters within the IURC’s expertise and jurisdiction.
               Additionally, [w]e neither reweigh the evidence nor assess the
               credibility of witnesses and consider only the evidence most
               favorable to the IURC’s findings. On matters within its
               jurisdiction, the IURC enjoys wide discretion and its findings and
               decision will not be lightly overridden simply because we might
               reach a different decision on the same evidence.

       Id. at 438–39 (citations and internal quotation marks omitted).

                                      Discussion and Decision
[17]   The OUCC claims that the IURC erred by finding that the Indemnification

       Clause was not part of the Indiana-American’s Plan. The OUCC notes that the

       Indemnification Clause was submitted to the IURC as part of the Plan, was

       referred to by Indiana-American’s own witnesses as part of its Plan, and was

       directly referenced in the Plan. Thus, the OUCC argues that the proposed

       License Agreement that included Indemnification Clause was clearly part of the

       proposed Plan Indiana-American submitted to the IURC. We agree.

[18]   First, it is clear that Indiana-American included the Indemnification Clause in

       the License Agreement it submitted to the IURC. Pursuant to Indiana Code

       section 8-1-31.6-6(a)(8)(B), Indiana-American was required by statute to include

       in its Plan a proposal for “documenting the customer’s consent or lack of

       consent to replace the customer owned portion of the lead service line.” In that

       portion of its Plan dealing with this requirement, Indiana-American stated that

       it would provide to its customers a line-replacement license agreement that

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019   Page 13 of 16
       would “describe[] the work, the schedule, a 12-month workmanship warranty,

       indemnification provisions, the provisions that the service line will continue to

       be owned and maintained by the customer . . . .” Appellant’s App., p. 37

       (emphasis added). Indiana-American attached to its Plan its proposed License

       Agreement which included the Indemnification Clause.

[19]   Thus, Indiana-American submitted the License Agreement with its

       Indemnification Clause to the IURC as part of its Plan to fulfill its statutory

       obligations. This strongly indicates that the License Agreement, with its

       Indemnification Clause, was part of Indiana-American’s Plan. And the text of

       the Plan itself directly refers to the “indemnification provisions” that Indiana-

       American would include in its license agreement with the customers, effectively

       incorporating by reference the License Agreement and Indemnification Clause

       into the Plan itself.

[20]   In addition, Indiana-American’s own evidence demonstrates that the License

       Agreement and its Indemnification Clause were intended to be part of its Plan.

       Specifically, the testimony of Indiana-American’s Director of Engineering

       includes the following question and answer:

               Q. Please describe Attachment GMV-1 [the License Agreement].

               A. Attachment GMV-1 is the Customer Lead Service Line
               Replacement Plan that has been prepared by Indiana American
               Water as required under House Enrolled Act 1519.

       Ex. Vol., Petitioner’s Ex. 2, p. 6 (emphasis added)

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019   Page 14 of 16
[21]   Thus, Indiana-American’s initial position before the IURC was that the License

       Agreement and its Indemnification Clause were part of Indiana-American’s

       Plan. Only after the OUCC objected to the Indemnification Clause did Indiana-

       American claim that the License Agreement was not part of its Plan, in clear

       contradiction to its own submitted evidence.

[22]   In short, there was no evidence to suggest that the License Agreement,

       including its Indemnification Clause, was not part of Indiana-American’s

       submitted Plan. To the contrary, the evidence points only to a conclusion other

       than that reached by the IURC: that the Indemnification Clause was part of the

       Plan. The controlling statute requires Indiana-American to include in its Plan

       its proposal for documenting a customer’s consent to participate in the

       Replacement Program. To fulfill this statutory obligation, Indiana-American’s

       Plan states that it will send to its customers a license agreement which includes,

       among other terms, “indemnification provisions.” Attached to the Plan was the

       License Agreement that included the Indemnification Clause. And Indiana-

       American’s own witness testified that the License Agreement, and therefore the

       Indemnification Clause included therein, was part of the Plan. Under these

       facts and circumstances, we can only conclude that the IURC erred by finding

       that the License Agreement, including its Indemnification Clause, was not part

       of the Plan submitted by Indiana-American.

                                                 Conclusion
[23]   We reverse the order of the IURC and remand for proceedings consistent with

       this opinion. We express no opinion on the propriety of the License Agreement
       Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019   Page 15 of 16
       and the Indemnity Clause. We hold only that the License Agreement and

       Indemnity Clause were part of the Plan submitted by Indiana-American that,

       accordingly, the IURC must either approve or disapprove the License

       Agreement and Indemnity Clause.

[24]   Reversed and remanded.

       Vaidik, C.J., and Crone, J., concur.

       Court of Appeals of Indiana | Memorandum Decision 18A-EX-2030 | May 10, 2019   Page 16 of 16