Case Summary for December 15, 2010

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Case Summary for December 15, 2010

THE FOLLOWING DOCKET SUMMARIES ARE PREPARED BY THE COURT'S STAFF FOR THE INTEREST AND CONVENIENCE OF THE READER. THE SUMMARIES MAY NOT INCLUDE ALL ISSUES PENDING BEFORE THE COURT AND DO NOT REFLECT ANY OPINION OF THE COURT ON THE MERITS OF A CASE. COPIES OF ALL BRIEFS FILED WITH THE COURT ARE AVAILABLE AT THE SUPREME COURT BUILDING, COURT EN BANC DIVISION. SUMMARIES ARE UNOFFICIAL AND SHOULD NOT BE QUOTED OR CITED.

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DOCKET SUMMARIES
SUPREME COURT OF MISSOURI

9:30 a.m. Wednesday, Dec. 15, 2010

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SC91109
Arbor Investment Company, LLC, et al. v. City of Hermann
Gasconade County
Hancock Amendment challenge to city utility charges
Listen to the oral argument:

Arbor was represented during arguments by James E. Mello of Armstrong Teasdale LLP in St. Louis, and the city was represented by Kenneth J. Heinz of Curtis, Heinz, Garrett & O'Keefe PC in St. Louis.

In December 2006, a group of Hermann utility customers brought a class action lawsuit against the city of Hermann, alleging the city charged utility customers “grossly excessive amounts” for utilities, thereby violating the Hancock Amendment of the state constitution by subsidizing city operations through a “hidden tax.” The city is the sole provider of utilities for its taxpayers. The trial court granted summary judgment in favor of the city. The utility customers appeal.

The utility customers argue the trial court erred in entering summary judgment in the city’s favor. They contend that the undisputed facts show – or, alternatively, that there is a disputed material fact whether – the city increased utility fees and violated article x, section 22 of the Missouri Constitution (part of the Hancock Amendment) by setting utility charges at a level to increase the city’s general revenue and subsidize general governmental expenditures. The customers assert this is tantamount to raising taxes without a vote of the people.

The city responds that the trial court did not err in entering summary judgment in its favor. It argues the facts are undisputed and show the city’s utility charges are not subject to the Hancock Amendment because: the utility charges are not a tax; the trial court properly applied the correct legal test in determining the charges are not a tax; the test produces “consistent results;” and municipally owned utilities are not required to be operated at “cost.”

The attorney general and state auditor argue, as friends of the Court, that when a municipal utility that is the sole provider of essential services sets rates to fund non-utility expenses, it adds “user fees” taxes that are subject to the Hancock Amendment. They contend that although the Hancock Amendment does not bar a municipal utility from continuing to collect fees for general revenue as a portion of its existing rate, it requires a public vote if the utility seeks to increase the portion of the rate that is not being collected to pay the costs of the service.

The Missouri Municipal League argues, as a friend of the Court, that the trial court properly held the city’s utility charges were not subject to the Hancock Amendment. It contends applying the Hancock Amendment to any contractual service generating revenue is unsupported by law and violates public policy, thereby depriving the public of fair compensation for use of public property and services. It asserts the attorney general and state auditor’s arguments improperly distinguish sole providers of utilities.

The Missouri Public Utility Alliance, the Missouri Joint Municipal Electric Utility Commission and the Municipal Gas Commission of Missouri argue, as friends of the Court, that the city’s transfer of utility funds to general revenue funds is not a tax or a fee. They contend the utility customers consent to the city providing them utilities and are free to discontinue their use of the city’s services. Finally, they assert the attorney general and state auditor’s arguments fail to consider that utility revenues may increase or decrease based on external economic factors.

SC90982
State of Missouri ex rel. Aquila, Inc., et al. v. Public Service Commission of the State of Missouri
Cole County
Challenge to electric company tariffs
Listen to the oral argument:

The association was represented during arguments by David L. Woodsmall of Finnegan, Conrad & Peterson LC in Jefferson City, the commission was represented by Jennifer Heintz of the Missouri Public Service Commission in Jefferson City, and Aquila was represented by Karl Zobrist of SNR Dento US LLP in Kansas City.

In July 2006, electric company Aquila Inc. filed a fuel adjustment tariff and proposed rate schedules designed to implement a general rate increase. The public service commission rejected Aquila’s tariff and proposed schedules and ordered Aquila to file new fuel adjustment and rate schedule tariff sheets. In May 2007, a regulatory law judge approved Aquila’s new rate tariffs but rejected its new fuel adjustment tariffs. In June 2007, Aqualia again filed fuel adjustment tariff sheets, which the regulatory law judge approved. The Sedalia Industrial Energy Users’ Association filed applications for rehearing from the regulatory law judge’s orders, which the commission denied. The association then sought review in the circuit court, which affirmed the commission’s orders. The association appeals.

The association argues the regulatory law judge’s orders are unlawful. It contends the commission cannot delegate authority to enter those orders because case law holds “the final act must be that of the commission as a body.” Alternatively, it asserts that even if the commission lawfully could delegate the authority to issue the orders, the commission failed to “expressly authorize or approve” the regulatory law judge’s orders, as required by section 386.240, RSMo.

The commission responds that it has the statutory authority to delegate approval of orders to its regulatory law judges. It argues the orders approving the tariffs are lawful because the commission approved the regulatory law judge’s actions when it denied the association’s applications for rehearing and allowed the tariffs to take effect. The commission contends that because the tariffs would have become effective 30 days after they were filed pursuant to section 393.140(11), RSMo – in the absence of any action by the commission – the association cannot obtain relief through this appeal.

SC91010
E & B Granite, Inc. v. Director of Revenue
Cole and St. Louis counties
Exemptions in sales and use taxes
Listen to the oral argument:

The director was represented during arguments by Deputy Solicitor General Jeremiah J. Morgan of the attorney general's office in Jefferson City, and E & B was represented by Lamar E. Ottsen of Ottsen, Mauzé, Leggat & Belz LC in St. Louis.

E & B Granite purchases raw granite slabs either for ultimate sale to customers at retail as granite countertops or other items or for its own use as a construction contractor. In 2009, E & B paid state and local sales and use taxes under protest on its purchase price of granite slabs that it used in making real-property improvements as a construction contractor. E & B claimed an exemption from state sales tax and state and local use taxes pursuant to section 144.054.2, RSMo, arguing that all granite slabs it purchased were “materials used or consumed in the manufacturing … of any product.” The director of revenue disallowed the exemption, and E & B appealed the decision to the administrative hearing commission. The commission granted the exemption and awarded sales and use tax refunds to E & B, holding that “an installed countertop is a product.” The director appeals.

The director argues the commission erred in awarding sales and use tax refunds to E & B. The director contends the tax exemption in section 144.054.2 does not apply. It asserts that installing a countertop is a real-property improvement, not a “product” and that a countertop that is “cut, polished, and permanently attached to real property” is not within the statutory meaning of “materials used or consumed in the manufacturing … of any product.”

E & B responds that the commission properly awarded it sales and use tax refunds. It argues a granite countertop is a “product” under section 144.054.2 because it is tangible personal property that eventually is affixed to real estate. It contends that a raw granite slab used to manufacture a granite countertop is within the meaning of “materials used or consumed in the manufacturing … of any product” under section 144.054.2.

SC91186
In the Matter of the Care and Treatment of James Brasch
St. Charles County
Constitutional challenge to involuntary civil commitment under sexually violent predator law
Listen to the oral argument:
Brasch was represented during arguments by Emmett D. Queener of the public defender's office in Columbia, and the state was represented by Jayne T. Woods of the attorney general's office in Jefferson City.

When James Brasch was 14, he was accused of sexual abuse. No charges were brought. In 1984, when Brasch was 19, he was accused of entering a home and touching the owner’s breasts. No charges were brought. In May 1993, police arrested Brasch for first-degree sexual abuse, third-degree assault and first-degree burglary. The prosecutor dismissed the sexual abuse and burglary charges when Brasch pleaded guilty to the assault charge. In July 2003, police arrested Brasch for sexual abuse and first-degree burglary. The prosecutor dismissed the sexual abuse charge when Brasch pleaded guilty to first-degree burglary and was imprisoned. The state released Brasch on parole in 1996. Shortly after, Brasch entered at least four homes, looking to make sexual contact. After police arrested Brasch, a department of mental health doctor diagnosed Brasch with schizophrenia and paranoid delusions and found Brasch incompetent to stand trial. After three years of treatment, Brash pleaded guilty to one count of sodomy and three counts of burglary for the 1996 home invasions. The circuit court sentenced him to 12 years in prison. While in prison, Brasch’s schizophrenia interfered with his ability to participate in the Missouri sexual offender treatment program. Prior to Brasch’s scheduled release, the state filed a petition to commit Brasch to the custody of the department of mental health as a sexually violent predator. After the circuit court ordered the department to conduct an evaluation, the department found Brasch met the definition of a sexually violent predator. Following a jury trial, the circuit court committed James Brasch to secure confinement in the department’s custody as a sexually violent predator. Brasch appeals.

Brasch argues the circuit court erred in committing him to the department’s custody because Missouri’s sexually violent predator law is unconstitutional as applied to him. He contends his involuntary civil commitment under that law violates his due process rights as it does not provide “meaningful treatment affording a genuine opportunity for future release.” Brasch asserts the court abused its discretion in failing to declare a mistrial because the state’s argument that the jurors had a “responsibility” to prevent another victim was a plea to the jurors’ emotions, passions and prejudices.

The state responds that the circuit court did not err because Missouri’s sexually violent predator law is not unconstitutional as applied to Brasch. The state argues that Brasch’s claim is without merit and that it would have been improper for the court to dismiss the case because Brasch’s response to treatment does render unconstitutional either the law or Brasch’s commitment under it. The state contends the court did not abuse its discretion in not declaring a mistrial. It asserts that its argument to the jurors was proper and based on the evidence and that it was required to prove Brasch was more likely than not to commit another sexually violent offense if not confined.