Court Opinion

ID: 9910032
Source: CourtListenerOpinion
Date Created: 2023-12-14 19:00:43.42466+00
Date Added: 2024-06-11T12:50:36.134253
License: Public Domain

Case: 23-60154    Document: 00517001706        Page: 1     Date Filed: 12/14/2023

           United States Court of Appeals
                for the Fifth Circuit                                 United States Court of Appeals
                                                                               Fifth Circuit
                               ____________
                                                                             FILED
                                                                     December 14, 2023
                                No. 23-60154
                              Summary Calendar                          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

   Mississippi Power Company,

                                            Defendant—Appellee.
                  ______________________________

                 Appeal from the United States District Court
                   for the Southern District of Mississippi
                           USDC No. 3:18-CV-818
                 ______________________________
Case: 23-60154         Document: 00517001706             Page: 2      Date Filed: 12/14/2023

   Before Jones, Smith, and Dennis, Circuit Judges.
   Per Curiam: *
          Plaintiffs-Appellants, on behalf of themselves and a putative class of
   all Mississippi Power Company (“MPC”) ratepayers, filed this 42 U.S.C. §
   1983 class action against Defendant-Appellee MPC. The Plaintiffs allege that
   MPC used an incorrect interest rate when calculating a Mississippi Supreme
   Court-ordered refund, leading to millions of dollars of damages in the
   aggregate. The district court granted the Defendant’s Motion to Dismiss,
   finding that the Plaintiffs had failed to plead sufficient facts demonstrating
   that MPC was a state actor for the purposes of § 1983, and that Mississippi
   law had not created a protectable property interest in a specific utility rate.
   We AFFIRM.
                  I.    Facts and Procedural Background
          The origins of this dispute are more than a decade old, encompassing
   proceedings before the Mississippi Public Service Commission (“the
   Commission”), the Mississippi Supreme Court, the U.S. District Court for
   the Southern District of Mississippi, and our court. For the sake of brevity,
   we only recount the facts most relevant to our resolution of the present
   appeal.
          On March 5, 2013, the Commission unlawfully authorized MPC to
   raise its customers’ utility rates. In 2015, the Mississippi Supreme Court
   invalidated the rate increase, ordering MPC to refund to its customers the
   money it collected from the increased rate. Miss. Power Co., Inc. v. Miss. Pub.
   Serv. Comm’n, 168 So. 3d 905, 916 (Miss. 2015). MPC submitted a proposed
   refund plan to the Commission on July 21, 2015, which the Commission
          _____________________
          *
              This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 23-60154      Document: 00517001706            Page: 3    Date Filed: 12/14/2023

                                      No. 23-60154

   approved on August 6, 2015. Relevant to this appeal, the refund plan
   provided for repayment of the overpaid bills with interest, calculated at the
   company’s “after tax WACC (weighted average cost of capital) rate of 9.5%
   over the entire refund period.” MPC finished issuing the refunds on
   December 4, 2015.
          On August 13, 2016, the Plaintiffs’ commissioned economist issued a
   report comparing the interest they received under the refund plan—the after-
   tax WACC rate of 9.5% over the refund period—to the interest potentially
   guaranteed by Mississippi statute. The economist calculated that MPC’s
   application of the 9.5% WACC rate, rather than the “statutory rate” of 8%,
   resulted in an underpayment of over $10 million to the Plaintiffs. After
   receiving the results of their economist’s report, the Plaintiffs filed this
   lawsuit on November 21, 2018, amending their complaint on March 19, 2019,
   to assert five claims against MPC and three members of the Commission in
   their official capacities. The Plaintiffs asserted claims under state law, as well
   as § 1983 claims under the Due Process Clause and Takings Clause, based on
   the underpayment of refunds.
          In two separate orders, the district court dismissed the claims against
   the Commissioners and MPC, determining that sovereign immunity barred
   the Plaintiffs’ claims against the Commissioners in their official capacities,
   and that the claims against MPC were time-barred under Mississippi law. On
   appeal, we affirmed the dismissal of the claims against the Commissioners
   but remanded the claims against MPC to the district court, finding that it had
   applied the incorrect accrual date for the statute of limitations. Turnage v.
   Britton, 29 F.4th 232, 237-38 (5th Cir. 2022). When we remanded the case to
   the district court, we did note:
          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

                                           3
Case: 23-60154        Document: 00517001706            Page: 4   Date Filed: 12/14/2023

                                        No. 23-60154

            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 . . . [T]he district court should consider those
            issues in the first instance.
   Id. at 246 n.11.
            On remand, the district court did not address the accrual issue, but
   instead granted the Defendant’s Motion to Dismiss for two separate and
   independently sufficient reasons: (1) MPC is not a state actor subject to suit
   under § 1983, and (2) the ratepayers do not have a property interest in the
   refund protected by the Due Process Clause.
                           II.     Legal Standard
            We review a district court’s dismissal for failure to state a claim under
   Federal Rule of Civil Procedure 12(b)(6) de novo and we apply the same legal
   standards as the district court. Raj v. La. State Univ., 714 F.3d 322, 329-30
   (5th Cir. 2013). Rule 12(b)(6) permits a court to dismiss a complaint for
   “failure to state a claim upon which relief can be granted.” FED. R. CIV. P.
   12(b)(6). We must view properly pleaded facts in the light most favorable to
   the nonmoving party and dismiss only if the plaintiff failed to allege a facially
   plausible claim for relief. Bass v. Stryker Corp., 669 F.3d 501, 506 (5th Cir.
   2012).
                                 III.    Analysis
            As the district court correctly found, the Plaintiffs failed to plead the
   necessary facts to demonstrate that MPC is a state actor for § 1983 purposes.
   “Section 1983 imposes liability on anyone who, under color of state law,
   deprives a person ‘of any rights, privileges, or immunities secured by the
   Constitution and laws.’” Blessing v. Freestone, 520 U.S. 329, 340 (1997)
   (quoting 42 U.S.C. § 1983). For a plaintiff to successfully state a cause of
   action under § 1983 against a private defendant like MPC, “the conduct of

                                             4
Case: 23-60154         Document: 00517001706              Page: 5       Date Filed: 12/14/2023

                                          No. 23-60154

   the private defendant that forms the basis of the claimed constitutional
   deprivation must constitute state action under color of law.” Morris v. Dillard
   Dep’t Stores, Inc., 277 F.3d 743, 747 (5th Cir. 2001). The United States
   Supreme Court has utilized numerous tests 1 to determine whether the
   conduct of a private actor can be fairly attributed to the state, two of which
   the Plaintiffs raise: the state compulsion test and the nexus test. We address
   both in turn.
                                    A. Compulsion Test
           Under the compulsion test, “a State normally can be held responsible
   for a private decision only when it has exercised coercive power or has
   provided such significant encouragement, either overt or covert, that the
   choice must in law be deemed to be that of the state.” Bass v. Parkwood Hosp.,
   180 F.3d 234, 242 (5th Cir. 1999) (citing Blum v. Yaretsky, 457 U.S. 991, 1004
   (1982)).
           The Plaintiffs allege that “MPC’s use of the WACC was compelled
   by the Commission’s July 2015 order” thus “there is little question . . . that
   MPC’s conduct was the result of the Commission’s compulsion or
   ‘significant encouragement.’” But this bare allegation is insufficient to
   demonstrate state action. As the Supreme Court found in Jackson v.
   Metropolitan Edison Co., “the nature of governmental regulation of private
   utilities is such that a utility may frequently be required by the state
   regulatory scheme to obtain approval . . . .” 419 U.S. 345, 357 (1974). A state
   utility commission’s approval “does not transmute a practice initiated by the
   utility and approved by the commission into ‘state action.’” Id. The facts
           _____________________
           1
             The Supreme Court has not determined “whether these different tests are
   actually different in operation or simply different ways of characterizing [this] necessarily
   fact-bound inquiry.” Lugar v. Edmondson Oil Co., 457 U.S. 922, 939 (1982). We find no
   occasion to weigh in on the issue here.

                                                5
Case: 23-60154      Document: 00517001706            Page: 6    Date Filed: 12/14/2023

                                      No. 23-60154

   pleaded by the Plaintiffs merely demonstrate that the Commission approved
   the incorrect utility rate, not that it compelled MPC to do so.
                         B. The Nexus or Joint Action Test
          Similarly, the nexus test, or joint action test, finds that a private
   actor’s conduct amounts to state action if “there is a sufficiently close nexus
   between the State and the challenged action of the regulated entity so that
   the action of the latter may be fairly treated as that of the State itself.” Id. at
   351.
          The Plaintiffs allege in their complaint that the pattern of illegal
   behavior described in the Mississippi Supreme Court case between MPC and
   the Commission demonstrates a sufficiently close nexus such that MPC can
   be held liable as a state actor. This fails to establish a nexus for at least two
   reasons.
          First, the activities the Plaintiffs describe in their complaint, and the
   activities referred to in the Mississippi Supreme Court’s decision, relate to
   the 2013 ratemaking proceedings. See generally Miss. Pub. Serv. Comm’n, 168
   So. 3d at 905. But the alleged “joint action”—the Commission’s order
   approving MPC’s proposed “illegal” interest rate—did not occur until 2015,
   months after that decision was released. Thus, it is irrelevant to MPC’s
   challenged action here.
          Second, as the district court discussed, the Plaintiffs never pleaded
   any specific facts tending to show a prior agreement between MPC or the
   Commission that led to the enactment of a refund plan. Instead, they recite
   blanket allegations that MPC “acted in concert with [the Commision]” to
   deprive the Plaintiffs of the interest to which they were allegedly entitled.
   These mere “labels and conclusions” are insufficient to establish an
   entitlement to relief and defeat the Defendant’s motion to dismiss. See Bell
   Atlantic Corp v. Twombly, 550 U.S. 544, 545 (2007).

                                           6
Case: 23-60154       Document: 00517001706            Page: 7   Date Filed: 12/14/2023

                                       No. 23-60154

          Moving beyond these bare allegations, the Plaintiffs’ complaint
   “shows nothing more than that [MPC] was a heavily regulated, privately
   owned utility” which is insufficient to “make [their] conduct attributable to
   the State for the purposes of the Fourteenth Amendment.” Jackson, 419 U.S.
   at 358. Because MPC’s conduct is not state action, which is dispositive of this
   appeal, we have no need to decide whether the ratepayers had a property
   interest in a specific interest rate. See id. at 359.
                              IV.     Conclusion
          Because the district court properly granted the Defendant’s motion to
   dismiss, we AFFIRM the district court’s judgment.

                                             7