Ohio Utility Can’t Dodge Claims Tied to Lawmaker Bribery Scandal

Finding electricity rate hikes are linked to a bribery scheme involving a former Ohio lawmaker, a federal judge refused to dismiss a racketeering case against an Akron-based utility.

Then-Ohio House Speaker Larry Householder sits at the head of a legislative session in Columbus in October 2019. (AP Photo/John Minchillo, File)

CINCINNATI (CN) — A federal judge ruled Wednesday that energy surcharges included in Ohio legislation now tainted by the arrest of former House Speaker Larry Householder are a concrete injury that grants standing for residents to pursue racketeering claims against FirstEnergy Corporation.

U.S. District Court Judge Edmund Sargus Jr.’s opinion denied FirstEnergy’s motion to dismiss the class action filed last October based on allegations that Householder, a Republican, used a dark money organization to solicit bribes and pass the legislation. Householder is not named as a defendant in the suit.

The rate increases in Ohio’s House Bill 6 were part of an almost $1 billion bailout for FirstEnergy and two of its failing nuclear power plants, and were set to go into effect last month.

In the aftermath of the arrest and indictment of Householder and several of his alleged co-conspirators, however, a state court issued a preliminary injunction to prevent collection of any fees related to HB 6.

FirstEnergy argued in its motion to dismiss that the injunction deprived the plaintiffs of standing because “the surcharge provision has not yet taken effect and may never take effect.”

But Sargus, a Bill Clinton appointee, disagreed and ruled that because the exact amount of the proposed surcharge is known, the plaintiffs have pleaded an “ascertainable” and imminent harm.

“Unlike an unknowable future injury at an undiscernible point in time,” he wrote, “the injury here is defined monetarily and there is no vague contingent future event – the surcharges are part of an enacted law with an effective date.”

The judge also rejected the utility’s argument that the so-called “filed rate doctrine” prevents it from being sued over the surcharges. The doctrine protects regulated energy providers from litigation over their rates so long as the rate or surcharge has been approved by a regulatory agency.

However, Sargus found that because the surcharges were established via the passage of HB 6 – and not through the “normal rate-filing process” – the doctrine gives no protection to FirstEnergy.

The company also sought to use Householder and his political allies as a means of avoiding liability, arguing that “independent actors broke the chain of causation between plaintiffs’ injuries and defendants’ RICO violations.”

Sargus conceded that the passage of HB 6 required “four independent, equally necessary steps,” including votes in the Ohio Senate and House, the signing of the bill into law by Governor Mike DeWine and the survival of a ballot referendum. But he emphasized that liability can be meted out across all stages.

“If it is plausible from the face of the complaint that defendants’ RICO violations caused HB 6 to pass in the Ohio House or to survive the referendum, that is sufficient to plead proximate cause,” the judge found.

Sargus detailed the allegations in the complaint that FirstEnergy bribed Householder to appoint certain legislators to certain committees to ensure that HB 6 would become law. His opinion states that “plaintiffs have sufficiently alleged a direct connection between the passage of HB 6 in the House and defendants’ bribes to the Householder enterprise.”

FirstEnergy’s argument that a possible repeal of the legislation would “cut off causation” fared no better with the court.

“If HB 6 were repealed, the issue would not be one of causation, but mootness,” Sargus wrote. “And until a possible repeal is rejected, any argument that there is no proximate causation because the other lawmakers would have acted in the same manner absent alleged bribes is premature, particularly at the pleading stage.”

Householder has yet to enter a plea in the criminal case against him, while several of his co-defendants pleaded guilty to racketeering charges in October.

Generation Now, the dark money group involved the alleged bribery scheme and named as a defendant alongside Householder in the criminal case, also pleaded guilty to a single charge of racketeering conspiracy last week.

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