Duking It Out With Duke Energy’s Kickback Scheme
Anthony Williams, et al. v. Duke Energy International, Inc., et al., Case No. 1:08-cv-00046.
Markovits, Stock & DeMarco, LLC, prevailed and a settlement with a total value of more than $80 million was reached.
Beginning in the early 2000s, energy company giant Duke Energy was suspected of providing kickbacks to some of its large industrial customers. In order to gain the support of these customers for a previously opposed rate hike, Duke paid rebates to these companies, through sham entities, while the homeowner customer received nothing.
Plaintiffs alleged that from 2005 to 2008, Duke Energy unlawfully paid rebates through an affiliate to 24 large industrial or commercial customers under separate side agreements. This, the plaintiffs alleged, was a violation of federal racketeering and antitrust laws, as well as state racketeering and common law claims. The defendants denied the allegations.
After a whistleblower brought the kickback scheme to light, the team at Markovits, Stock & DeMarco, LLC, filed a complaint in federal court on behalf of all the ratepayers who were forced to pay higher utility bills as a result of the kickback scheme.
MSD’s attorneys took the lead role in all aspects of the case, from developing the complex legal and regulatory theories that would ultimately prevail in court, to sifting through millions of documents, to deposing dozens of witnesses, to achieving a certified class of over a million Southwest Ohio ratepayers.
This was our back yard; we were representing our friends, our neighbors and our local businesses. And we wanted to win.
The case was heavily litigated on both sides, but after more than eight years of dogged determination on MSD’s part, the energy company finally capitulated – agreeing to settle the class action for a total value of $80,875,000.
Residential and commercial ratepayers received fixed payment amounts for each qualifying day they paid a tariffed rate during the class period (Jan. 1, 2005 through Dec. 31, 2008).
Early in the case, Duke was able to convince a district court to throw out the lawsuit on the basis that the district court did not have jurisdiction to determine the case. Although it was very complex, we had the better legal arguments; we just needed the 6th Circuit to give us a fair look.
The critical turning point in this case was when the U.S. Court of Appeals for the 6th Circuit adopted MSD’s legal theories wholesale – and laid out a roadmap for victory.
The 6th Circuit reversed, finding that the ratepayers were absolutely entitled to challenge the alleged kickback scheme in federal court. The 6th Circuit even upheld the ratepayers’ right to seek damages against Duke for RICO (money laundering) claims. Once the 6th Circuit greenlit MSD’s legal theories, Duke’s chances of prevailing were dramatically reduced.
This was our backyard; we were representing our friends, our neighbors and our local businesses. And we wanted to win. This was a big utility company deciding that the rules didn’t apply to it, and it could profit on the backs of its smaller customers.
It took a lot of good, old-fashioned investigatory work to untangle what would prove to be a very complex case. We had to uncover who got the rebates and how they worked. We enlisted an energy expert to help us navigate the byzantine world of filed rates. We also enlisted a forensic accountant to help us understand how the money was flowing. We spent a lot of our own money on these experts in service of the case. If we would have lost, we weren’t getting that money back. That was a big gamble for a relatively young firm and it paid off – because we stuck with it and outworked the team on the other side of the aisle.