Daniel L. Moore and Marie Moore v. City of Westlake

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

CA 20-556 consolidated with CA 20-557, CW 20-376, CW 20-377
CW 21-155 & CW 21-156

DANIEL L. MOORE AND

MARIE MOORE

VERSUS

CITY OF WESTLAKE

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APPEAL FROM THE
FOURTEENTH JUDICIAL DISTRICT COURT
PARISH OF CALCASIEU, NO. 2015-4200 C/W 2015-4201
HONORABLE CLAYTON DAVIS, DISTRICT JUDGE

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J. LARRY VIDRINE‫٭‬
JUDGE

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Court composed of Billy H. Ezell, D. Kent Savoie, and J. Larry Vidrine‫٭‬, Judges.

AFFIRMED.

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‫ ٭‬Honorable J. Larry Vidrine participated in this decision by appointment of the
Louisiana Supreme Court as Judge Pro Tempore.

J. Michael Veron
Peyton F. Pawlicki
Veron, Bice, Palermo & Wilson, LLC
P.O. Box 2125
Lake Charles, LA 70602-2125
(337) 310-1600
COUNSEL FOR DEFENDANT/APPELLEE:
City of Westlake

Steven Broussard
Aaron Broussard
Michael Williamson
Jason R. Bell
Rachel K. Couvillion
John Mark Fezio
Broussard & Williamson, LLC
1301 Common Street
Lake Charles, LA 70601
(337) 439-2450
COUNSEL FOR PLAINTIFFS/APPELLANTS:
Paula Johnson
Marie Moore
Philmer Johnson, Jr.
Daniel L. Moore

Thomas P. Anzelmo, Sr.
Lynda Tafaro
McCranie, Sistrunk, Anzelmo,
Hardy, McDaniel & Welch, L.L.C.
909 Poydras Street, Suite 1000
New Orleans, LA 70112
(504) 831-0946
COUNSEL FOR DEFENDANTS/APPELLEES:
OneBeacon Services, LLC
Atlantic Specialty Insurance Company

Soren E. Gisleson
Charles M. King
Herman, Herman & Katz
820 O’Keefe Avenue
New Orleans, LA 70113
(504) 581-4892
COUNSEL FOR PLAINTIFFS/APPELLANTS:
Daniel L. Moore
Marie Moore
Paula Johnson
Philmer Johnson, Jr.

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VIDRINE, Judge Pro Tempore.

This consolidated matter arises from whether Plaintiffs can annul ordinances

passed by the City of Westlake in January of 2015. Plaintiffs in the matters assert

that utility rate increases authorized by the municipal ordinances constitute taxes.

Such taxes require a vote by those impacted in order to be enacted. In one

proceeding, the court granted summary judgment to the City of Westlake approving

the utility rate increases, while in another, Plaintiffs were granted partial summary

judgment annulling the utility rate increases.

FACTS AND PROCEDURAL HISTORY:

In 2015, two separate suits were filed against the City of Westlake and its

insurer, One Beacon Atlantic Specialty (“Beacon Atlantic”) challenging Ordinance

880, which increased utility gas rates. One of the two suits was filed on behalf of

municipal gas customers living inside the City of Westlake, the other filed on behalf

of those customers living outside the City of Westlake. These “gas rate” suits were

consolidated and assigned to one division of the Fourteenth Judicial District Court.

In 2017, two additional lawsuits were filed against the City of Westlake

challenging Ordinances 881 and 882 which raised the utility water and sewage rates.

These “water and sewage” rate cases were assigned to a different division of the

Fourteenth Judicial District Court than the gas rate cases.

Beacon Atlantic filed for and was granted exceptions of no cause of action

dismissing the gas rate cases regarding the issue that the gas rate increases

constituted an illegal tax and were discriminatory. Plaintiffs’ sole remaining claim

was that the gas rate increases were illegal because they were not tied to the cost of

providing the service. Thereafter, the City of Westlake was granted its motion for

summary judgment dismissing all Plaintiffs’ claims related to Ordinance 880’s gas

rate increases.

Regarding the water and sewage rate cases, the parties filed competing

motions for summary judgment. There, the trial court denied Westlake’s motion for

summary judgment to dismiss all of Plaintiffs’ claims and granted Plaintiffs’ partial

motion for summary judgment on liability.

Each party filed appeals in both the gas, water and sewage rate cases. We

consolidated the matters. The issue before us is whether Plaintiffs can successfully

challenge Ordinances 880-882.

STANDARD OF REVIEW:

In these consolidated matters, both summary judgments and exceptions of no

cause of action were granted and denied. The peremptory exception of no cause of

action is subject to a de novo review of the record. Descant v. King Buffet, Inc., 20-

310 (La.App. 3 Cir. 12/16/20), 310 So.3d 228. Motions for summary judgment are

also subjected to a de novo review of the record. Perry v. Rhodes, 20-109 (La.App.

3 Cir. 9/30/20), 304 So.3d 1036. Therefore, we will conduct a de novo review of

the issues raised in these consolidated matters.

ISSUES PRESENTED FOR REVIEW:

1. Do Westlake’s municipal ordinances 880-882 constitute illegal taxes?

2. Are Westlake’s municipal ordinances 880-882 discriminatory?

3. Are Westlake’s municipal ordinances 880-882 reasonable given one of their

purposes was to generate revenue to Westlake’s general fund?

ISSUE PRESENTED FOR REVIEW NUMBER ONE:

Plaintiffs’ first argument is that they have a valid cause of action as to whether

Westlake municipal ordinances 880-882 constitute an improper tax. We find no

merit to this argument.

A summary judgment is reviewed using the de novo standard of
review by focusing on the identical criteria that govern the trial court’s
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consideration of whether summary judgment is appropriate. As such,
we are tasked to make a determination whether the motion,
memorandum, and supporting documents show that there is no genuine
issue as to material fact and that the mover is entitled to judgment as a
matter of law.

In adjudicating a motion for summary judgment, a court cannot
consider the merits, make credibility determinations, evaluate
testimony, or weigh evidence. Moreover, although summary judgments
are now favored, factual inferences reasonably drawn from the
evidence must be construed in favor of the party opposing the motion,
and all doubt must be resolved in the opponent’s favor.

GBB Properties Two, LLC v. Stirling Properties, LLC, 18-158, pp. 2-3 (La.App. 3

Cir. 10/24/18), 259 So.3d 500, 502 (citations omitted), writ denied, 18-890 (La.

2/11/19), 263 So.3d 895.

In the case before us, notices of the proposed ordinances were published,

public meetings were held, and the Westlake City Council passed them, per

applicable law on municipal rate increases. However, none of the rate increases

were submitted to the public for a vote for approval, as required for municipal tax

increases.

The record establishes that Westlake had not previously increased its utility

rates in twelve years. The rate increases were passed on the recommendation of

David Medlin, an independent governmental consultant who volunteered to analyze

the City’s financial status and compared the city’s utility rates to some nine (9) other

municipal systems. The ordinances increased by 50%, then 4% per year thereafter,

the identical municipal utility charges imposed on customers inside and outside of

Westlake for natural gas, water, and sewer utility services.

Plaintiffs support its argument that the ordinances constitute illegal taxes by

citing Audubon v. Bernard, 434 So.2d 1072 (La.1983). In Audubon, our supreme

court dealt with legislation allowing the Insurance Rating Commission to collect

from insurers a percentage of their collected premiums to go towards the
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Firefighter’s Retirement System. Plaintiffs in this matter point out that the Audubon

court stated:

It is well settled generally and in Louisiana that not every
imposition of a charge or fee by the government constitutes a demand
for money under its power to tax. If the imposition has not for its
principal object the raising of revenue, but is merely incidental to the
making of rules and regulations to promote public order, individual
liberty and general welfare, it is an exercise of the police power. In
similar fashion, the police power may be exercised to charge fees to
persons receiving grants or benefits not shared by other members of
society. But if revenue is the primary purpose for an assessment and
regulation is merely incidental, or if the imposition clearly and
materially exceeds the cost of regulation or conferring special benefits
upon those assessed, the imposition is a tax.

Audubon, 434 So.2d at 1074 (citations omitted).

According to Plaintiffs, by applying these principles expressed in Audubon,

this court should find that the Westlake ordinances constitute taxes because their

primary purpose is to generate revenue. We agree that the purpose of ordinances

880-882 was to generate revenue. The City of Westlake stated as much when it

acknowledged that it was nearly bankrupt due to declining revenues when these

ordinances were passed, and that it had an urgent need to generate revenue.

However, while we are mindful of the excerpt of Audubon cited by Plaintiffs,

we find Plaintiffs’ assertion that if a law has a primary purpose of generating revenue,

then it is a tax, is not an accurate interpretation of Audubon, nor of our supreme

court’s ideals regarding such a bright-line rule on whether legislation constitutes a

tax.

In City of Lake Charles v. Wallace, 170 So.2d 654 (La.1964), our supreme

court upheld the constitutionality of a city ordinance that declared that the collection

and disposal of garbage was a revenue-producing utility and imposed a service

charge to defray the expenses of disposal and maintenance. Of note, our supreme

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court stated in Wallace, 170 So.2d at 660 (quoting Am.Jur.Taxation, § 16, pp. 48-

49) stated the following:

(A state or one of its subdivisions frequently receives income
from sources other than taxation, so that all forms of public revenue
cannot with accuracy be called taxes. Thus, a city or town is frequently
authorized to furnish some form of public service for profit, or at least
for compensation. Such charges are not in any just sense taxes. Thus, it
is well settled that the charges made upon consumers by municipal
waterworks are not taxes, but merely the price paid for commodity sold.)

Further, we find Audubon distinguishable from this case. The Louisiana

Supreme Court in Audubon struck down an amendment to La.R.S. 22:1419 (now

La.R.S. 22:1476) that required insurers and policyholders of every kind to pay an

assessment based on percentage of collected premiums that benefitted the

Firefighters’ Retirement system. Audubon addressed legislatively-imposed

assessment on insurers, rather than revenue generated from a revenue-producing

public utility. This distinguishment is relevant because legislatively-created

authorizations for revenue generation is not the same for the Louisiana Insurance

Rating Commission as it is for municipalities. Taxes are not the only forms of

permissible revenue for local governments.

Part II of Louisiana Constitution Article 6 authorizes local governments to

establish revenue-producing public utilities. Louisiana Constitution Article 6, § 37,

states, in part, the following:

(A) Authorization. The legislature by law may authorize
political subdivisions to issue bonds or other debt obligations to
construct, acquire, extend, or improve any revenue-producing public
utility or work of public improvement. The bonds or other debt
obligations may be secured by mortgage on the lands, buildings,
machinery, and equipment or by the pledge of the income and revenues
of the public utility or work of public improvement. They shall not be
a charge upon the other income and revenues of the political
subdivision.

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In accordance with La.Const. art. 6, § 37, La.R.S. 33:4161 - 33:4320 provides

for the creation and funding of revenue-producing public utilities, which are defined

as:

[A]ny revenue-producing business or organization that regularly
supplies the public with a commodity or service, including electricity,
gas, water, . . ., and other like services; or any project or undertaking,
including public lands and improvements thereon, owned and operated
by a political subdivision authorized by the Constitution of Louisiana
or by law to issue bonds, from the conduct and operation of which
revenue can be derived.

La.R.S. 33:4161.

Additionally, La.R.S. 33:4163 authorizes a political subdivision, such as

Westlake, to “sell and distribute the commodity or service of the public utility . . .

and may establish rates, rules, and regulations with respect to the sale and

distribution.”

Accordingly, we find that a political subdivision may legally raise revenue for

its general funds from revenue-producing public utilities as authorized by La.Const.

art. 6, § 37 and La.R.S. 33:4161 - 33:4320. See Bd. of Com’rs of La. Mun. Power

Comm’n v. All Taxpayers, Property Owners, and Citizens, 360 So.2d 863, 868

(La.1978), wherein our supreme court acknowledged that “historically, net utility

revenues have been transferred to the general funds of the cities.”

Further, we find no merit to Plaintiffs’ argument that it was impermissible for

Westlake to pass ordinances 880-882 beyond the cost to operate and fund the utility

without subjecting those ordinances to a public vote as taxes. As established above,

the fact that an ordinance has a purpose of generating revenue does not mandate that

the ordinance is a tax. Here, Westlake’s ordinances, while for the stated purpose to

generate revenue, relate to its legal sale of commodities through utility services.

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Accordingly, we find that Westlake Ordinances 880-882 are not taxes. As

such, a public vote was not mandated for the ordinances’ legal enactment. Passage

by Westlake’s City Council and Mayor were sufficient.

ISSUE PRESENTED FOR REVIEW NUMBER TWO:

Plaintiffs second issue presented for review is that Westlake’s Ordinances

880-882 were discriminatory, and, hence, illegal. We find no merit to this issue

presented by Plaintiffs.

Plaintiffs cite Hicks v. City of Monroe Utility Commission, 237 La. 848, 112

So.2d 635 (1959) for its position that Westlake’s ordinances 880-882 were

discriminatory. We find Hicks inapplicable to the case before us. In Hicks, the City

of Monroe acquired a for-profit out-of-town water system, then issued its newly

acquired out-of-town customers notice that they would have to pay some 400% more

for the water unless they also obtained their electricity services from Monroe’s

electrical system rather than a competitor, Louisiana Power and Light. Thus, Hicks

dealt with whether a municipality-owned utility could charge a higher rate for water

to customers outside its city limits who take water service only than it would charge

for water to those customers outside the city who take the combined service of water

and electric power. In Hicks the Louisiana Supreme Court struck down the utility

fee increase because it “[was] entirely collateral to and unconnected with the

particular service being rendered.” Id. at 649.

Here, Westlake’s increased utility fees are charged only against utility

customers that benefit from the services the municipality is providing and at a

uniform rate. There is no evidence that Westlake is charging higher fees to

customers outside the city limits, nor is there any evidence that Westlake is

attempting to coerce its customers to bundle their municipal utility services.

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Therefore, we find Hicks inapplicable to the case before us. Further, we find that

Westlake’s ordinances 880-882 are not discriminatory due to their uniform

application to its customers.

ISSUE PRESENTED FOR REVIEW NUMBER THREE:

The final issue presented for review is whether Westlake’s Ordinances 880-

882 were reasonable given that one of their stated purposes was to generate revenue

for Westlake’s general fund. We find that the ordinances were reasonable.

In Liberty Rice Mill, Inc. v. City of Kaplan, 95-1656, p. 5 (La.App.3 Cir.

5/8/96), 674 So.2d 395, 398, writ denied, 96-1919 (La. 11/1/96), 681 So.2d 1263,

this court stated:

The regulation of public utility rates rests solely with the agency
or political subdivision of the state vested with the authority to
supervise the operation of the utility, subject to judicial review of the
reasonableness of the regulation. State ex rel. Guste v. Council of City
of New Orleans, 309 So.2d 290 (La.1975). A classification and a rate
schedule made for the purpose of keeping in the community industries
that employ a large number of persons is not “unreasonable.” There
may have been other, “better” schemes, but that is neither the issue nor
the standard by which a municipal’s actions in this area are judged. The
action by the city need only be reasonable. The scheme enacted in this
case is reasonable and understandable—even laudatory in the sense that
it is the expression of the hope that the entire community will benefit
and prosper.

This court determined in Liberty Rice that it was “in the interest of the public”

for the City of Kaplan to strategically discriminate its utility rates such as to charge

one commercial employer less than another to stimulate economic growth by

preserving jobs. Based on Liberty Rice, this court has iterated, except in clear-cut

situations of unreasonableness like in Audubon or Hicks, great deference is given to

local utility providers and regulators.

Reviewing the record before us, the City of Westlake was confronted with an

imminent financial crisis and took the steps immediately available to avert that crisis.

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Those steps involved increasing its municipal revenues via utility rate increases, of

which had not occurred in the previous twelve years. Given our finding in Liberty

Rice, wherein we found it reasonable to directly discriminate in favor of one

customer for the public economic welfare, we find that Westlake’s Ordinances 880-

882 were reasonable considering that their application is uniform and for the stated

purpose of preserving the City of Westlake’s economic viability.

ANCILLARY MATTER:

Both Plaintiffs and Beacon Atlantic address whether Beacon Atlantic’s policy

of insurance sold to Westlake provided coverage in this matter. Our findings that

Westlake’s ordinances 880-882 were legally enacted, were not discriminatory, and

were reasonable pretermits this issue.

CONCLUSION:

The parties addressed whether Westlake’s Ordinances 880-882 dealing with

utility rate increases for gas, water, and sewage were legally enacted, discriminatory,

and reasonable. We render that these ordinances were legally enacted, were not

discriminatory, and were reasonable. Therefore, we reverse the judgment of the trial

court granting Plaintiffs’ motion for summary judgment and affirm the judgment of

the trial court granting Westlake’s motion for summary judgment dismissing all

claims by Plaintiffs regarding the propriety of Ordinances 880-882. Further, we

pretermit the issues raised pertaining to insurance coverage provided by One Beacon

Atlantic Specialty. Costs of this appeal are assessed to Plaintiffs.

AFFIRMED.

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