972 F.3d 1019
9th Cir.2020Background
- Plaintiffs are customers of the Los Angeles Department of Water and Power (DWP) who allege DWP charged electric rates that exceeded reasonable costs, producing annual surpluses that were transferred from DWP’s Power Revenue Fund to the City General Fund.
- DWP electric rates were set by Board action and approved by City Council ordinances (2008, 2012, 2016) after public hearings; transfers of $254–$300 million annually occurred during the relevant period.
- Plaintiffs sued 27 City and DWP officials in federal court asserting (among other claims) a private Hobbs Act cause of action, civil RICO, and 42 U.S.C. § 1983 due-process claims, plus state-law claims; a parallel state class action (Eck) produced a stay but later settlement led to lifting the stay and filing of the First Amended Complaint.
- The FAC alleged extortion (Hobbs Act), mail/wire fraud, obstruction, and state-law predicates, and sought class relief and damages.
- The district court dismissed federal claims with prejudice and declined to retain state claims; on appeal the Ninth Circuit affirmed dismissal of the Hobbs Act, RICO, and § 1983 claims, and held amendment would be futile.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Hobbs Act creates an implied private civil cause of action for victims of extortion | Hobbs Act proscribes extortion and victims (Plaintiffs) may bring a civil action for money extracted by extortion | Hobbs Act is a criminal statute with no rights-creating language; Congress creates private remedies when it intends to do so | No implied private right; Hobbs Act does not provide a private civil cause of action (affirmed) |
| Whether Plaintiffs alleged a viable RICO claim (predicate acts including extortion, fraud, obstruction) | Overcharges and threats to terminate service constitute extortion and predicate acts; mail/wire and obstruction allegations support pattern of racketeering | Municipal-rate setting and public-process conduct do not fit Hobbs Act/common-law extortion; mail/wire fraud and obstruction allegations are deficient | RICO claim dismissed: mail/wire fraud and obstruction inadequately pled; extortion predicate fails under Wilkie (no private-beneficiary extortion) |
| Whether civil RICO can be asserted against municipal officers in their personal capacities for official acts | Plaintiffs asserted personal-capacity RICO liability for officials who acted to obtain funds | Defendants argued RICO cannot reach municipalities (and official-capacity suits are equivalent to suits against the municipality) | Court rejected the district court’s municipal-immunity rationale for personal-capacity suits but dismissed RICO on other grounds (predicate failure) |
| Whether § 1983 due-process claims challenging rate orders could proceed in federal court given the Johnson Act (28 U.S.C. § 1342) | Plaintiffs claim deprivation of property (overcharges) under the Fourteenth Amendment; Hobbs/RICO claims provide federal statutory bases too | Johnson Act bars federal courts from enjoining or otherwise interfering with state/local utility rate orders when four conditions are met | Johnson Act strips jurisdiction over Plaintiffs’ § 1983 claims because (1) remaining federal basis is solely constitutional repugnance, (2) orders do not "interfere" with interstate commerce, (3) rates were made after notice/hearing, and (4) an adequate state remedy exists; § 1983 claims dismissed for lack of jurisdiction |
Key Cases Cited
- Alexander v. Sandoval, 532 U.S. 275 (statutory intent is determinative for implying private rights)
- Wilkie v. Robbins, 551 U.S. 537 (Hobbs Act/extortion incorporates common-law public-corruption focus; distinguishes public vs private beneficiaries)
- Hafer v. Melo, 502 U.S. 21 (personal-capacity suits against officials are distinct from suits against the government)
- City of Newport v. Fact Concerts, Inc., 453 U.S. 247 (limits on punitive damages against municipalities; distinction between municipal and personal liability)
- Central Bank of Denver v. First Interstate Bank, 511 U.S. 164 (Congress’s express creation of private remedies where intended)
- US West, Inc. v. Nelson, 146 F.3d 718 (Johnson Act jurisprudence and burden to show interference with interstate commerce)
- Brooks v. Sulphur Springs Valley Elec. Coop., 951 F.2d 1050 (Johnson Act bars federal jurisdiction over actions affecting state-approved utility rates)
- Evans v. New York State Pub. Serv. Comm’n, 287 F.3d 43 (where only constitutional claims remain, Johnson Act can bar federal suit challenging rates)