Mo. high court affirms utility merger

By Jessica M. Karmasek | Jul 28, 2011


JEFFERSON CITY, Mo. (Legal Newsline) -- The Missouri Supreme Court, in a ruling last week, upheld the approval of a merger of two utility companies by the state's Public Service Commission.

Praxair Inc., AG Processing Inc., a cooperative, and Sedalia Industrial Energy Users' Association appealed the PSC's approval of Great Plains Energy Inc.'s acquisition of Aquila Inc., a Missouri utility company.

Praxair argued that the PSC improperly failed to consider Great Plains' allegedly inadequate gift policy -- a policy that, Praxair asserted, should have caused the merger to be rejected.

Praxair also argued that the regulatory law judge erred in precluding it from making an offer of proof as to Great Plains' gift policy, as it prevented the state's high court from considering whether the gift policy was relevant and material to the merger decision.

The Court, in its July 19 opinion, said the regulatory law judge is given the discretion to preclude a testimonial offer of proof when -- as in this case -- he finds the offered evidence to be "wholly irrelevant."

However, the Court said the judge erred in failing to allow a written offer of proof to be made as to Great Plains' gift policy.

"Were such an offer of proof not permitted, the decision to exclude evidence as 'wholly irrelevant' itself would be wholly unreviewable by the courts, and, therefore, would violate article V, section 18 of the Missouri Constitution and section 386.510, both of which provide for judicial review of PSC decisions," Justice Laura Denvir Stith wrote for the Court.

"Here, however, this Court directed the parties to file a written offer of proof and any response thereto directly in this Court. The Court finds that while the evidence as to Great Plains' gift policy should have been admitted, its exclusion was not prejudicial as the gift policy could not have substantially impacted the weight of the evidence evaluated to approve the merger."

In a separate but related appeal, the state's Office of Public Counsel questioned the denial of its motion to dismiss the application for approval of the merger.

The office argued that the PSC decision cannot stand because some of the PSC commissioners who heard the merger application had been subject to inappropriate ex parte contact with executives from Great Plains at various meetings held about three months prior to the filing of the application for approval of the merger.

The office argued this created an appearance of impropriety and that an appearance of impropriety creates a basis for recusal under the Code of Judicial Conduct. It argued that the Code of Judicial Conduct applies to PSC commissioners just as much as it applies to judges, and that the Court should hold it was improper for the commissioners to decide the merger question.

The Court agreed that a failure to recuse after ex parte meetings concerning specific cases that are to be filed before the PSC creates an appearance of impropriety and that the appearance of impropriety is a basis for recusal under the Code of Judicial Conduct.

However, the PSC commissioners act in a quasi-judicial capacity -- they are not judges, but members of the executive branch of government -- and therefore the Code of Judicial Conduct does not govern their actions, the Court said.

"Public Counsel does not suggest that the ex parte meetings resulted in actual bias, however, and presented no evidence that could support a finding of actual bias. Moreover, the record is clear that those involved believed that the contacts were not inappropriate and did not require recusal where no case had yet been filed," it wrote.

"Public Counsel has not overcome the presumption that the PSC acted impartially."

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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