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AG: ALJ's Dismissal Of ICC Staff Allegations Against Retail Supplier Leads To Conclusion That "Lying" To Staff Not Prohibited By Law


Judge Dismisses Dozens Of Additional Staff Allegations On Lack of ICC Jurisdiction, Though Permits Staff To Replead


September 14, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

A ruling on a motion to dismiss issued by an Illinois ALJ in a proceeding adjudicating allegations made by Illinois Commerce Commission Staff against Sperian Energy Corp. results, the Illinois Attorney General alleges in a motion for interlocutory review, in, "the illogical and disturbing conclusion ... that lying to the Staff of the Commission as they conduct investigations of any kind on behalf of the Commission is not prohibited by law."

See background on Staff's complaint here

The AG sought interlocutory review of the ALJ's August 17 dismissal of two counts alleged by Staff against Sperian. Specifically, Staff had alleged that two of the scripts that Sperian provided in response to a Staff request by email were altered before they were submitted. Staff alleged that Sperian therefore knowingly provided false and misleading information to Staff in violation of Section 5-202.1 of the Public Utilities Act.

Among other defenses, Sperian argued that Staff's allegation failed to state a claim because the scripts were not submitted, "in a proceeding," as required under Section 5-202.1. Sperian observed that Staff conceded that the information at issue was submitted well before the ICC opened the investigatory proceeding

As an aside, apart from its legal objection to Staff's allegation, Sperian also countered that Staff misrepresented the nature of Sperian's submission, and that the scripts were not altered in response to Staff's inquiry, that the edits were made in the normal course of business to monitor and enhance compliance with regulatory requirements as the new management team took over, and that the changes were readily visible (not hidden) to Staff.

The ALJ agreed with Sperian's arguments concerning Section 5-202.1, noting, "Sperian correctly asserts that Allegations 6 and 16 should be dismissed since the conduct described in Section 5-202.1 must have occurred 'in a proceeding' and the information provided by Sperian was provided before the Commission initiated this proceeding."

The ALJ noted that Section 5-202.1 states in part: "Any person or corporation, as defined in Sections 3-113 and 3-114 of this Act, who knowingly misrepresents facts or knowingly aids another in doing so or knowingly permits another to misrepresent facts through testimony or the offering or withholding of material information in any proceeding shall be subject to a civil penalty."

"Contrary to Staff’s assertion that the request was part of an 'informal investigation', it does not appear that Staff’s email contained any statement indicating that it was part of an 'informal investigation'. Moreover, Staff’s assertion that an argument could be made that Section 5-202.1 could apply to informal investigations is unpersuasive. The language in this Section clearly and unambiguously states that the misrepresentation must have occurred 'in a proceeding,'" the ALJ said

"Additionally, the Section is entitled 'Misrepresentation Before Commission; penalty' which further demonstrates that this Section applies to proceedings before the Commission and not any communication that a party has with Staff," the ALJ said, dismissing the two counts

That prompted the AG to seek interlocutory review of the ALJ's order, arguing, "the illogical and disturbing conclusion to be drawn from the ALJ’s analysis is that lying to the Staff of the Commission as they conduct investigations of any kind on behalf of the Commission is not prohibited by law."

"There is no reason to believe the General Assembly endorsed lying in some contexts but not others, nor does the August 17th Ruling cite any evidence of that intent. If the limited applicability of Section 5-202.1 advanced by the August 17th Ruling is allowed to stand, or is accepted by the Commission, it will create a perverse incentive for persons or corporations to lie or withhold information from the Commission or its Staff," the AG said

"The interpretation of Section 5-202.1 contained in the August 17th Ruling effectively permits (and perhaps even incentivizes) persons or corporations to lie or misrepresent information to the Staff to avoid the opening of a docket, or in this case, to avoid a proceeding," the AG said. "Based on the ALJ’s interpretation, utilities, ARES and others would only have to worry about producing accurate information when the Commission expends resources to start a docket or hold an open meeting. If the very basis for opening a docket – which in this case included the misrepresentations to Commission employees – is precluded merely because it happened outside a proceeding, then proceedings could always be avoided by the submission of materially false information to the Staff. This absurd outcome contravenes the intent and purpose of the Act, which is to ensure “fair treatment” to consumers. 220 ILCS 5/1-102(d)," the AG said.

"The language of the statute itself is more plainly read as applying to misrepresentations to the Commission in any context. First, the statute’s description of scenarios under which misrepresentations are actionable does not initially mention a 'proceeding' as the context in which any of the various misrepresentations may occur. Instead, three contexts in which misrepresentations may occur are stated first: 1) the knowing misrepresentation of facts; 2) knowingly aiding someone else in making misrepresentations of fact; and 3) knowingly permitting someone else to misrepresent or withhold material information in the course of a proceeding," the AG said

The AG further said that, "The ALJ’s ruling also relies on the heading of Section 5-202.1, 'Misrepresentation Before Commission: Penalty,' to conclude that the term 'Commission' limits the application of the law to formal proceedings and therefore cannot be said to apply when any ICC Staff act as the Commission’s investigators. The Ruling cites no case law or precedent to reach this conclusion and suggests that there is no legal relationship between the Commission and its own Staff."

Other Allegations

The ALJ's August ruling also dismissed dozens of additional Staff allegations against Sperian, for lack of ICC jurisdiction; however, unlike the two allegations described above, the ALJ would allow Staff to replead these allegations in a manner invoking Commission jurisdiction.

Generally, in these counts Staff alleges that Sperian violated various statutes such as the Telephone Solicitation Act and Section 2EE(b) of the Consumer Fraud Act.

Sperian argued, citing ICC precedent, that the Commission lacks jurisdiction to adjudicate claims under such statutes, as the ICC is only empowered to adjudicate claims under the Public Utilities Act

The ALJ agreed with Sperian.

"[T]he Commission only has jurisdiction over a claim if there is statutory authority in the Act for the Commission to entertain it. As Sperian correctly states, there is nothing in the [Public Utilities] Act or the Solicitation Act that gives the Commission authority to hear matters under the Solicitation Act," the ALJ said, as the ALJ reached a similar conclusion with respect to the Consumer Fraud Act.

The ALJ cited a prior ICC ruling in which the Commission said, "The Commission’s jurisdiction resides in enforcing the [Public Utilities Act]. Claims of violation of the [Consumer Fraud Act], the [Deceptive Trade Practices Act], and Illinois common law cannot be brought before us. Parties alleging damages of these laws should seek redress in a court of general jurisdiction. If, in that proceeding, the court determines that violations of these laws have occurred, then this Commission has jurisdiction under the [Public Utilities Act] to consider these violations..."

Thus, the Commission cannot adjudicate violations of either statute (except in a limited circumstance with respect to Section 2EE not present here), the ALJ said

However, Staff was granted leave to replead these allegations to the extent Staff seeks to allege Sperian's behavior at issue violated ICC rules.

The ALJ declined to dismiss allegations that Sperian violated Section 412.170(c) of the ICC rules when its agents allegedly used deceptive or misleading language. Sperian had argued that these allegations should be dismissed because the Commission exceeded its regulatory authority in adopting the Part 412 regulations that Sperian is alleged to have violated.

While the ICC's authority to promulgate ARES rules is the subject of current court cases, the ALJ said that, "these rules have been adopted and are presumed valid."

Sperian Energy provided the following statement to EnergyChoiceMatters.com:

"As set forth in Sperian’s prior filings with the Commission, Sperian denies that it misrepresented any facts to the Staff of the Commission. Rather, Sperian cooperated in good faith with the Staff and the Commission. As to the Attorney General’s Verified Petition for Interlocutory Review, the AG’s arguments lack merit and Sperian will be filing a response in opposition to the AG’s Petition on September 14, 2016. With respect to the dismissal of the allegations under Section 5-202.1 of the PUA, the Commission ALJ ruled that the law is clear and warranted dismissal of these particular allegations against Sperian. Sperian agrees (with the ALJ) that the language of Section 5-202.1 is clear and does not have the meaning now urged by the AG."

Docket 15-0438

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