Ocean State Power LLC v. Town of Burrillville

Filing 21

MEMORANDUM AND ORDER granting Defendant's 15 Motion to Dismiss Plaintiff's declaratory judgment action. So Ordered by Judge Mary M. Lisi on 8/14/2015. (Duhamel, John)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND

OCEAN STATE POWER LLC
v.

C.A. No. 15-046-ML

TOWN OF BURRILLVILLE, by and through
its Finance Director John P. Mainville, and
PETER KILMARTIN in his capacity as
Attorney General for the State of Rhode Island

MEMORANDUM AND ORDER
The plaintiff in this action, Ocean State Power LLC (together
with its corporate predecessors, “OSP”) is a Rhode Island limited
liability company which owns and operates two power plants in the
Town of Burrillville (the “Town”)1. OSP has filed several tax
assessment appeals against the Town, which are currently pending in
Rhode Island state courts. According to OSP’s complaint (the
“Complaint”), the Town, in response to OSP’s first tax assessment
appeal, obtained special legislation from the State of Rhode Island
that limits pre-judgment interest related to tax assessment appeals

1

In addition to the Town, which is a Rhode Island municipality,
State Attorney General Peter Kilmartin is named as a defendant
because OSP challenges the constitutionality of a Rhode Island
State statute. Complaint ¶ 4.
1

against the Town2 to $100,000 per appeal. OSP seeks a declaratory
judgment

that

R.I.

Gen.

Laws

§44-5-31.1

(the

“Statute”)

is

unconstitutional because it violates OSP’s equal protection and
substantive due process rights under the United States Constitution
and the Rhode Island Constitution.

Complaint ¶ 1. In essence, OSP

seeks injunctive relief against a possible application of the
Statute, should OSP prevail in the still pending tax assessment
appeals. Id.
The matter is before the Court on the Town’s motion to dismiss
the Complaint pursuant to Rules 12(b)(1) and 12(b)6) of the Federal
Rules of Civil Procedure. The Town submits that (1) OSP’s claim is
premature and not ripe for determination; and (2) the Statute at
issue in this action is (a) constitutional and valid, and (b)
applicable to all municipalities and taxpayers in Rhode Island.
I.

Factual and Procedural Summary
The parties agree, for the most part, on the underlying facts

of this litigation. OSP owns and operates two gas-fired combined
cycle power plants (“OSP I” and “OSP II,” together, the “Power
Plants”) and a holding pond (the “Holding Pond,” together with OSP
I and OSP II, the “Tangible Personal Property”), which is used for
the operation of the Power Plants. The Tangible Personal Property

2

Although the operative language of Section 44-5-31.1 does not
specifically reference the Town and/or OSP, OSP maintains that the
Statute “does not apply to any other taxpayer in Rhode Island.”
Complaint ¶ 44.
2

is

located

on

two

tax

parcels

(the

“Real

Estate,”

totaling

approximately 62 acres) within the Town limits. Complaint ¶¶ 1, 1015. In 1988, the Town and OSP entered into a Tax Treaty and
Agreement (the “Tax Treaty”), pursuant to which OSP, without the
benefit of annual assessments of its property values, paid fixed
annual taxes to the Town. Complaint ¶ 16. OSP agreed to pay the
Town $73 million in taxes over a twenty-year period, ranging from
$2.5 million per year for years 1-4, to $5 million per year for
years 19-20 (an annual average of $3.65 million). Id.
In 1995, the Town and OSP entered into an amendment to the Tax
Treaty, pursuant to which OSP agreed to pay fixed taxes of $850,000
over a twenty-year period for the Holding Pond, ranging from $0 for
the first four years to $67,462 annually for years 19 and 20 (an
annual average of $42,500). Complaint ¶ 17. According to OSP, the
Town did not put OSP’s properties on its tax rolls during the years
the Tax Treaty was in effect; rather it kept the OSP payments
separate from that of other property tax payers. Complaint ¶ 19.
The Town appears to acknowledge that it first placed OSP on its tax
rolls in 2011, after the Tax Treaty had expired and no new
agreement was reached between the parties. Town’s Mot. Dismiss at
1; Complaint ¶ 22.
In 2011, the Town assessed OSP’s Real Property and Tangible
Personal Property at a total value of $164,213,039, for which it

3

levied $1,804,1673 in taxes. Complaint ¶ 28. According to OSP, the
Town’s valuation amounted to more than twice the value assessed by
OSP’s own expert ($82,000,000). Id. Similarly, in 2012, the Town
assessed

OSP’s

properties

at

$165,564,313

(compared

to

OSP’s

valuation of $104,000,000), resulting in taxes of $2,677,174.
Complaint ¶ 29. In 2013, the Town’s assessment was $189,545,124
(compared to OSP’s valuation of $92,000,000), resulting in taxes of
$3,521,748. Complaint ¶ 30. In 2014, the Town’s assessment was
$184,787,293, resulting in taxes of $3,488,784.4 Complaint ¶ 31.
According to the Complaint, and undisputed by the Town, OSP
promptly made all tax payments based on the Town’s assessments.
Complaint ¶ 32.

For tax years 2011 through 2014, OSP paid a total

of $11,491,873 in taxes, based on the Town’s assessments. OSP also
filed four separate lawsuits in Rhode Island state court to appeal
the Town’s assessments for

those tax years, in which OSP sought

“the abatement of over $5.5 million, plus the recovery of all
interest and costs.” Complaint ¶¶ 33, 34; OSP’s Obj. to Mot.
Dismiss at 5. In other words, based on its own valuations of the
OSP properties (which valued the OSP properties at about half of
the assessments made by the Town), OSP seeks abatement of nearly
3

Because the Tax Treaty had different expiration dates
regarding OSP II and the Holding Pond, those properties were
assessed at a reduced value for 2011. Complaint at ¶ 24.
4

At the time it filed the Complaint, OSP had not yet submitted
its own valuation.
4

half the taxes it has paid during those four years.
According to the Complaint, OSP alleges that the Town has
“repeatedly and forcefully objected to the lawsuit regarding Tax
Year 2011" (filed on April 10, 2012). Complaint ¶ 35. Nevertheless,
that case was assigned to the trial calendar and trial is scheduled
to commence on December 7, 2015. OSP’s Obj. at

6.

OSP’s lawsuit

regarding Tax Year 2012, filed on April 25, 2013, was dismissed by
the Rhode Island Superior Court on the Town’s motion for summary
judgment, on the ground that OSP did not timely comply with R.I.
Gen. Laws § 44-5-26 in filing its administrative appeal to the tax
assessor. OSP’s appeal of that determination is currently pending
in the Rhode Island Supreme Court. Complaint ¶ 36.
OSP also alleges that the Town has refused to mediate OSP’s
tax

assessment

appeals.

OSP

suggests

that,

because

the

Town

believes that the Statute limits the Town’s exposure to prejudgment interest payments to $100,000, the Statute chills the
purpose of Rhode Island’s pre-judgment interest statute, R.I. Gen.
Laws § 9-21-10: i.e., to facilitate the settlement of disputes.
Complaint ¶ 38.
According

to

OSP,

following

the

filing

of

OSP’s

first

assessment appeal in April 2012, the Town began efforts to limit
pre-judgment interest in tax assessment appeals. Complaint ¶ 39. On
July 17, 2013, “at Burrillville’s request,” the Rhode Island State
General Assembly enacted R.I. Gen. Laws § 44-5-31.1. Complaint ¶

5

43. R.I. Gen. Laws § 44-5-31.1, titled “Burrillville-Judgment,”
provides as follows:
Notwithstanding any provision contained in § 9-21-105, in
any tax assessment appeal or civil action brought
pursuant to the applicable provisions of chapter 44-56 in
which a verdict is rendered or a decision made for
pecuniary damages, the amount of interest which shall be
included in addition to the judgment entered therein
shall not exceed the sum of one hundred thousand dollars
($100,000) R.I. Gen. Laws 44-5-31.1 (Emphases added).
On February 12, 2015, OSP filed a declaratory judgment action
in

this

Court

in

order

to

(1)

have

the

Statute

declared

unconstitutional on the grounds that it violates OSP’s equal
protection and substantive due process rights, and (2) preclude
application of the Statute in the event OSP prevails in one or more
of the tax appeals currently pending against the Town in Rhode
Island state courts. Complaint (Dkt. No. 1). On May 19, 2015, the

5

R.I. Gen. Laws § 9-21-10(a) provides, in pertinent part, that
“[i]n any civil action in which a verdict is rendered or a decision
made for pecuniary damages, there shall be added by the clerk of
the court to the amount of damages interest at the rate of twelve
percent (12%) per annum thereon from the date the cause of action
accrued, which shall be included in the judgment entered therein.
Post-judgment interest shall be calculated at the rate of twelve
percent (12%) per annum and accrue on both the principal amount of
the judgment and the prejudgment interest entered therein.”
6

Title 44 of Chapter 5 of the Rhode Island General Laws relates
to the levy and assessment of local taxes. R.I. Gen. Laws § 44-5-30
provides, in pertinent part, that taxpayers who prevail in tax
abatement cases shall be paid “the sum by which he or she has been
so overtaxed, or illegally taxed, plus the amount of any penalty
paid on the tax, with interest from the date on which the tax and
penalty were paid and costs, which judgment shall be paid to the
petitioner by the city or town treasurer out of the treasury.”
6

Town filed a motion to dismiss the Complaint (Dkt. No. 15), to
which OSP filed an objection on June 18, 2015 (Dkt. No. 18). The
Town responded with a reply on July 15, 2015 (Dkt. No. 20).
II. Standards of Review
A.

Motion to Dismiss

The dismissal of a complaint is governed by Rule 12 of the
Federal Rules of Civil Procedure. The Court may dismiss a complaint
inter alia, for lack of subject-matter jurisdiction, Fed. R. Civ.
P. 12(b)(1), or for failure to state a claim upon which relief can
be granted, Fed. R. Civ. P. 12(b)(6). The standard of review under
Fed. R. Civ. P. 12(b)(1) “is similar to that accorded a dismissal
for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6).”
Murphy v. United States, 45 F.3d 520, 522 (1st Cir. 1995) cert.
denied,

515

U.S.

1144,

115

S.Ct.

2581,

132

L.Ed.2d

831

(1995)(citing Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683,
1686, 40 L.Ed.2d 90 (1974)).
It is well established that, “when a defendant moves to
dismiss for lack of federal subject matter jurisdiction,

‘the

party invoking the jurisdiction of a federal court carries the
burden of proving its existence.’” Johansen v. United States, 506
F.3d 65, 68 (1st Cir. 2007)(quoting Murphy v. United States, 45
F.3d at 522). In determining a motion to dismiss a case for lack of
subject matter jurisdiction, the Court “give[s] weight to the
well-pleaded factual averments in the operative pleading (here, the

7

petitioners' amended complaint) and indulge[s] every reasonable
inference

in

the

pleader's

favor.”

Aguilar

v.

United

States

Immigration and Customs Enforcement Div. of Dept. of Homeland
Security, 510 F.3d. 1, 8 (1st Cir. 2007); Muñiz–Rivera v. United
States, 326 F.3d 8, 11 (1st Cir.2003). Accordingly, the Court must
“construe the complaint liberally, treat all well-pleaded facts as
true, and

indulge

plaintiff.”

all

reasonable

inferences in favor

of

the

Aversa v. United States, 99 F.3d 1200, 1210 (1st

Cir.1996). However, a “plaintiff cannot rest a jurisdictional basis
merely on ‘unsupported conclusions or interpretations of law.”
Johansen v. United States, 506 F.3d at 68 (quoting Murphy, 45 F.3d
at 522 (quoting Washington Legal Found. v. Massachusetts Bar
Found., 993 F.2d 962, 971 (1st Cir.1993)).
Similarly, in deciding a motion for dismissal pursuant to Fed.
R. Civ. P. 12(b)(6), the Court accepts “all well-pleaded facts as
true and draw[s] all reasonable inferences” in favor of the party
objecting to the dismissal. Carreiro v. Rhodes Gill and Co., Ltd.,
68 F.3d 1443,

1446 (1st Cir. 1995)(citing Washington Legal Found.

v. Massachusetts Bar Found., 993 F.2d 962, 971 (1st Cir.1993)).
However, “[t]hreadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice.”
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d
868 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127
S.Ct. 1955, 167 L.Ed.2d 929 (2007)(noting that the court is “not

8

bound to accept as true a legal conclusion couched as a factual
allegation”)(internal citation and quotation marks omitted).
B.

The Declaratory Judgment Act and Ripeness

Under the Declaratory Judgment Act (“DJA”), 28 U.S.C. §§
2201–2202 (1988), a federal court is empowered to grant declaratory
relief in a case of actual controversy. Although the DJA provides
another means for the resolution of disputes between litigants, it
does not itself confer subject matter jurisdiction. Franchise Tax
Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 15–16, 103
S.Ct.

2841,

2849–50,

77

L.Ed.2d

420

(1983)(noting

that

the

operation of the DJA is “procedural only” and that, although
“Congress enlarged the range of remedies available in the federal
courts, [it] did not extend their jurisdiction.”
Accordingly,

is

well

established

that

“requests

for

a

declaratory judgment may not be granted unless they arise in a
context of a controversy ‘ripe’ for judicial resolution.” Verizon
New Eng., Inc. v. IBEW, 651 F.3d 176, 188 (1st Cir. 2011)(quoting
Abbott Labs. v. Gardner, 387 U.S. 136, 148–49, 87 S.Ct. 1507, 18
L.Ed.2d 681 (1967), abrogated on other grounds by Califano v.
Sanders, 430 U.S. 99, 105, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977). The
plain language of the DJA emphasizes the requirement of ripeness.
28 U.S.C. § 2201(a)(“In a case of actual controversy within its
jurisdiction ... a court of the United States, upon the filing of
an appropriate pleading, may declare the rights or other legal

9

relations of any interested party seeking such declaration, whether
or not further relief is or could be sought.”)(Emphasis added).
The First Circuit has held that “where challenges are asserted
to government actions and ripeness questions arise, a court must
consider both ‘fitness for review’ and ‘hardship.’” Verizon New
Eng., Inc. v. IBEW, 651 F.3d at 188 (citing Ernst & Young v.
Depositors Econ. Prot. Corp., 45 F.3d 530, 536 (1st Cir.1995)). The
“fitness for review” inquiry centers upon “whether the claim
involves uncertain and contingent events that may not occur as
anticipated or may not occur at all.” Ernst & Young v. Depositors
Econ. Prot.
omitted).
concerning

Corp.,

As

45

such,

F.3d

the

finality,

at

536

inquiry

(internal

“involves

definiteness,

and

quotation

subsidiary

the

extent

marks

queries

to

which

resolution of the challenge depends upon facts that may not yet be
sufficiently developed.” Id. (citing

W.R. Grace & Co. v. EPA, 959

F.2d 360, 364 (1st Cir.1992)).
Underlying this process is the “institutional awareness that
the fitness requirement has a pragmatic aspect: issuing opinions
based on speculative facts or a hypothetical record is an aleatory
business, at best difficult and often impossible.” Ernst & Young v.
Depositors Econ. Prot. Corp., 45 F.3d at 536 (citing Calif. Bankers
Ass'n v. Schultz, 416 U.S. 21, 56, 94 S.Ct. 1494, 1515, 39 L.Ed.2d
812

(1974)

situation

(“This
in

which

Court,

in

competing

the

absence

of

associational

10

a
and

concrete

fact

governmental

interests can be weighed, is simply not in a position to determine
[the question presented].”))
Although courts may be willing to “decide cases that turn on
legal issues not likely to be significantly affected by further
factual development,” Ernst & Young v. Depositors Econ. Prot.
Corp., 45 F.3d at 536

(citing

Pacific Gas & Elec. Co. v. State

Energy Resources Conserv. & Dev. Comm'n, 461 U.S. 190, 201, 103
S.Ct. 1713, 1720–21, 75 L.Ed.2d 752 (1983)), a plaintiff’s claim is
considered unripe if the claim, “although predominantly legal in
character, depends upon future events that may never come to pass,
or that may not occur in the form forecasted.” Id. at 537.
In addition, the Court must also “consider the extent to which
hardship looms—an inquiry that typically ‘turns upon whether the
challenged action creates a “direct and immediate” dilemma for the
parties.’” Id. The First Circuit, in line with the majority view on
this matter, has held that “both prongs of the test ordinarily must
be satisfied in order to establish ripeness,” acknowledging the
possibility, however, “that there may be some sort of sliding scale
under which, say, a very powerful exhibition of immediate hardship
might compensate for questionable fitness (such as a degree of
imprecision in the factual circumstances surrounding the case), or
vice versa.” Ernst & Young v. Depositors Econ. Prot. Corp., 45 F.3d
at 536. In sum, “the greater the hardship, the more likely a court
will be to find ripeness.” McInnis-Misenor v. Maine Medical Center,

11

319 F.3d 63, 70 (1st Cir. 2003).
III. The Parties’ Positions
OSP contends that (1) the Statute is unconstitutional and
violative of OSP’s constitutional rights because OSP “is the only
property owner in Rhode Island to which this interest limitation
statute applies,” Complaint ¶ 1; and (2) in reliance on the
Statute’s cap on pre-judgment interest, the Town has refused to
mediate OSP’s tax assessment appeals. OSP also suggests that the
Statute’s pre-interest limitation has chilled the purpose of Rhode
Island’s pre-judgment interest statute, R.I. Gen. Laws § 9-21-10.
The Town, on its part, takes the position that OSP’s claim is
not ripe for review because (1) it is unknown whether OSP will
prevail in the tax assessment appeals still pending in Rhode Island
state courts; and (2) OSP has failed to show that deferring
judicial review will result in imminent hardship. In addition, the
Town argues (1) that the Statute is entitled to a presumption of
validity

and

constitutionality;

and

(2)

that

the

Statute

is

applicable to all tax assessment appeals in Rhode Island in which
a verdict has been rendered or a decision on pecuniary damages has
been made.
IV.

Discussion
To

summarize

the

situation

in

which

the

parties

find

themselves: The Town, pursuant to a Tax Treaty with OSP, and
without providing annual tax value assessments of OSP’s properties,

12

received nearly $74 million from OSP over a twenty year period,
averaging approximately $3.7 million per year. After the Tax Treaty
expired and the parties were unable to come to a similar agreement,
the Town put OSP’s properties on its tax rolls, provided annual
property value assessments, and taxed OSP’s properties based on
those assessments. For the years 2011 through 2014, OSP paid the
Town $11,491,876 in taxes. Although OSP promptly paid its tax
bills, it disagreed with the Town’s assessments of OSP’s property
values and challenged those assessments by filing four separate
appeals in

Rhode

Island state

court

(where

the

cases

remain

pending).
It is generally OSP’s contention that its properties should
have been assessed at only at about half the value the Town
assigned to them. Accordingly, OSP seeks an abatement of about half
the taxes it has already paid to the Town. The first of OSP’s
appeals is scheduled to go to trial later this year. The second of
OSP’s appeals was dismissed on the Town’s motion for summary
judgment and is currently on appeal in the Rhode Island Supreme
Court. The last two appeals are in the discovery stage and have not
yet been scheduled for trial.
In the event OSP prevails in one or more of its appeals, the
Statute, if upheld, may preclude OSP from collecting, or being
credited with, any pre-judgment interest amounts in excess of
$100,000. Whether OSP is entitled to pre-judgment interest greater

13

than $100,000 depends not only on whether OSP prevails in any of
its

assessment

appeals,

but

also

on

the

extent

the

Town’s

assessment values are reduced. If, however, the Town prevails in
its tax assessments of OSP’s properties or if the assessments are
reduced by only a portion of OSP’s suggested evaluations, the
challenged Statute will not come into play at all. In other words,
the validity of the Statute and its potential impact on OSP will
become relevant to OSP only after a determination has been made in
OSP’s tax assessment appeals now pending in Rhode Island state
court.
In this declaratory action, OSP has requested that the Court
declare unconstitutional a Rhode Island statute, the application of
which has not yet happened and may never happen. At the same time,
proceedings involving the parties to this suit are already pending
in

Rhode

Island

state

courts

and

a

determination

as

to

the

Statute’s applicability may occur within a few months. Although the
question of the Statute’s validity is primarily a legal one, “the
concrete factual situation placing the facial constitutionality of
the [Statute]

at

issue does

not yet

exist.”

Operation

Clean

Government v. Rhode Island Ethics Com’n, 315 F.Supp.2d 187, 195-96
(D.R.I.

April

28,

2004).

Accordingly,

the

Court

finds

that

determining the Statute’s constitutionality before its enforcement
has even been attempted amounts to rendering an advisory opinion.
Moreover, the Statute’s enforceability may become an issue in the

14

pending state court proceedings in a matter of months and a
determination at this time is both unnecessary and premature.
As to OSP’s assertion of hardship, without a determination
(which is anticipated within the next four months) of whether and
to what extent the Statute may even be applicable to OSP’s stateraised claims against the Town, no immediate, direct harm has been
asserted in this declaratory action. Moreover, OSP itself suggests
that “this Court could wait until the completion of the [Rhode
Island state court] trial before” determining the merits of this
case on cross-motions for summary judgment. OSP’s Obj. at 14 (Dkt.
No. 18). OSP’s

contention

that

it

is suffering

an

immediate

hardship because the Town, in reliance on the Statute’s prejudgment interest cap, has refused to mediate the tax appeals, see
Complaint at ¶ 38, is speculative and unsupported. Even if taken at
face value, OSP’s contention constitutes, at most, an assertion of
an indirect injury, which provides insufficient grounds to deny the
Town’s motion to dismiss the Complaint for lack of ripeness. In
sum, the Court finds that the Statute, which has not yet had, and
may never have, a direct effect on OSP’s claims against the Town,
does not inflict a present hardship on OSP sufficient to support a
finding of ripeness.
Conclusion
For the reasons stated herein, the Town’s motion to dismiss

15

OSP’s declaratory judgment action is GRANTED.
SO ORDERED.
/s/ Mary M. Lisi
Mary M. Lisi
United States District Judge
August 14, 2015

16