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Seventh Circuit hears racketeering case against Illinois energy giant

Two years ago, the largest energy utility in Illinois admitted to orchestrating a bribery scheme involving a top state lawmaker. A federal appeals court is now considering whether the company needs to pay residents back for rate increases.

CHICAGO (CN) — A class action against Illinois energy corporation Commonwealth Edison came before the Seventh Circuit on Tuesday, with an attorney for the class arguing that the company owes a debt to potentially millions of state residents.

Commonwealth Edison, known locally as ComEd, is Illinois' largest energy utility, supplying electricity to more than half the state and effectively all of Chicagoland. It admitted to a federal bribery charge in 2020, paying and steering jobs to several close associates of former Illinois House Speaker Mike Madigan between 2011 and 2019. In exchange, Madigan and his associates allegedly worked to pass laws that would benefit ComEd's bottom line by raising customers' electricity rates.

Madigan currently faces criminal bribery and racketeering charges for his alleged role in the scheme. He has pleaded not guilty.

ComEd paid a $200 million fine in July 2020 to secure a deferred prosecution agreement with the federal government, but in August of that year a number of private Illinois businesses and residents filed a federal class action against the company for an additional $150 million. The suit alleges that Madigan and his allies illegally influenced the state legislature on ComEd's behalf to pass the Energy Infrastructure Modernization, or Smart Grid, Act in 2011, and the Future Energy Jobs Act in 2016.

"Madigan and his fellow-racketeers have used their power as public officials to line their own pockets by infiltrating and corrupting both public and private enterprises subject to his power and selling secret and unlawful indulgences to the highest bidder," the class action states.

The Future Energy Jobs Act gave $235 million in annual subsidies to ComEd's parent company Exelon to maintain two of its nuclear power plants in the state, and the Smart Grid Act was primarily meant modernize Illinois' energy grid with digital “smart meters.” However, it also allows private utilities like ComEd to automatically raise customers' electric rates as they see fit. The rates are subject to review by the Illinois Commerce Commission, but only after the utility has already sent the bill.

The class claims these inflated electricity rates resulted in its members collectively and unfairly paying ComEd over $5 billion through the 2010s. ComEd itself reported over $4.7 billion in profits between 2013 and 2019.

U.S. District Judge Jorge Alonso, a Barack Obama appointee based in Chicago, didn't buy it and tossed the suit last September. He didn't dispute ComEd's admitted profiteering, but instead opined that the class failed to establish a causal link between the company bribing Madigan and his allies and the passage of the bills favoring ComEd through both chambers of the Illinois Legislature.

"Although plaintiffs allege Madigan brought the bill to the legislature, plaintiffs fail to allege that the bribe of Madigan caused the members of the Illinois House and Senate to vote in favor of [the Smart Grid Act]," Alonso wrote.

The class members disagreed, appealing to the Chicago-based Seventh Circuit a month after Alonso handed down his dismissal order.

Jonathan Selbin, one of the attorneys representing the putative class, argued before a three-judge panel Tuesday morning that Alonso's proximate cause finding doesn't add up.

"They bribed the one guy who could do this, and they admitted they bribed the guy who did this... the fact that more things had to happen isn't a defense," said Selbin, of Lieff Cabraser.

He compared ComEd's bribery of Madigan and associates to an arsonist lighting fires in a high wind: An arsonist wouldn't need to personally torch a building in such conditions, as the wind itself would carry the flames, but ultimately any fire damage that occurred would still be the result of the arsonist's actions.

The attorney pointed to the Seventh Circuit's ruling in a series of cases involving the now-closed Empress Casino in Joliet, Illinois, to support his arguments, particularly the 2014 case Empress Casino Joliet Corp. v. Johnston. In that case, the appeals court found there was sufficient evidence for Empress to claim that former Illinois Governor Rod Blagojevich had imposed a 3% tax on the casino's revenue to benefit the state's horseracing industry, due to Blagojevich receiving a bribe from top players in that industry.

"This court has accepted the principle that, 'in an appropriate case, a finding that bribery of a government official proximately caused a plaintiff’s injury can rest on evidence of that individual’s influence over the proceedings,'" Selbin wrote in his brief to the court. "This is just such a case. The Illinois electricity customers are the direct, intended, and only victims of ComEd’s successful cash-for-statutes scheme. The injuries for which they seek recovery are not collateral or incidental to ComEd’s bribery of Madigan; they were its direct result and very purpose."

Chief U.S. Circuit Judge Diane Sykes, a George W. Bush appointee, pushed back on this argument, claiming there was a difference in institutional power between a governor like Blagojevich and a state House speaker like Madigan, a Democrat.

"He doesn't control the Republicans," Sykes said.

Selbin disagreed. He noted Madigan served as the chairman of the Democratic Party of Illinois at the same time he was House speaker, and the Democratic Party controlled both legislative chambers during his tenure. Selbin argued this gave him and his associates de facto control of Springfield.

"He was in a position to control both sides [of the Illinois General Assembly]," Selbin said.

This was a point vehemently refuted by Selbin's opposing counsel, ComEd attorney Matthew Price. He argued that accepting Selbin's framing of the Legislature as being under Madigan's monarchial control would undermine the foundational assumptions of representative government.

"We cannot accept that legislators are dupes or mere tools," Price said.

He also pointed out that despite ComEd's admitted bribery scheme, both laws for which the class seeks damages are still on the books in Illinois. State legislators actually expanded provisions of the Future Energy Jobs Act in 2021, when they passed the Climate and Equitable Jobs Act with Governor J.B. Pritzker's blessing.

If the court found that ComEd customers are due payback from these laws' enactment, Price said, it would effectively declare them illegitimate and strip state lawmakers of some of their authority.

"If the state legislature is dissatisfied with the laws it enacted, it can change them... there are no laws with asterisks in our democracy. This is an issue for the legislature," Price said.

Selbin rebutted this claim, saying the class is not asking for the court to declare the laws unconstitutional or to set state electricity rates – only to award Illinoisans some payback for having their electric bills raised due to a massive energy company's unethical meddling.

"What you're bribing your way out of is having to pay back the people you stole from," Selbin said.

The panel was rounded out by U.S. Circuit Judges Thomas Kirsch and Candace Jackson-Akiwumi, appointed by Donald Trump and Joe Biden, respectively. The judges took the arguments under advisement but didn't say when they would issue a ruling.

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