Motion-Secondary: 17 CV H 10 0585 SUBURBAN NATURAL GAS COMPANY vs. COLUMBIA GAS OF OHIO INC EHK

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                                IN THE COURT OF COMMON PLEAS
DELAWARE COUNTY, OHIO:

SUBURBAN NATURAL GAS COMPANY, CASE NO. 17-CVH-100585

Plaintiff, JUDGE EVERETT H. KRUEGER

COLUMBIA GAS OF OHIO, INC.
TO PLAINTIFF SUBURBAN
NATURAL GAS COMPANY’S
MEMORANDUM IN OPPOSITION
TO MOTION TO DISMISS

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)
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v. ) REPLY OF DEFENDANT
)
)
COLUMBIA GAS OF OHIO, INC., )
)
Defendant. )

Defendant Columbia Gas of Ohio, Inc. (“Columbia Gas’) hereby files its Reply to
Plaintiff Suburban Natural Gas Company’s (“Suburban”) Memorandum in Opposition to Motion
to Dismiss. As set forth below and in Columbia Gas’ Motion to Dismiss, this Court lacks subject
matter jurisdiction over this action and must dismiss Suburban’s Complaint pursuant to Rule

12(B)(1) of the Ohio Rules of Civil Procedure.
I. The PUCO Order, Not the Stipulation, Is the Binding and Enforceable Document.
Suburban repeatedly attempts to cast this action as a breach of contract case centering
upon the Stipulation only. However, the PUCO Order approving and adopting the Stipulation is
the operative, legally-binding document at issue in this case. See Ohio Consumers’ Counsel v.
Pub. Util. Comm. of Ohio, 114 Ohio St.3d 340, 344 (2007) (holding that “[a] stipulation
presented to the commission is entitled to the force of law only if it is approved by an order of
the commission.”); see also Mot. to Dismiss, Ex. A, Stipulation, {Al (expressly stating that the
Stipulation, including {A10 thereto, is subject to the “consent and approval of the commission
pursuant to R.C. § 4905.48”) and FC3 (“If the commission rejects any part or all of this
Stipulation, the Parties agree that the Stipulation shall be null and void and will be withdrawn,
and shall not constitute any part of the record in this proceeding, nor shall it be used for any

purpose whatsoever by any party to this or any other proceeding.”). Gommon Dloxs Ceurk
Dslawars Connty, Ohio
General Division
Bek

12/08/2017 O1:47 PM

{70978646 } 1The Stipulation is not a contract that is independently binding upon or enforceable
against the parties. Instead, the PUCO Order, which not only approved and adopted the
Stipulation in its entirety, but also modified certain customer rate terms therein, is what is
binding and enforceable. This is a fact that Suburban cannot ignore.

Il. The PUCO Retains Exclusive Jurisdiction Over Its Own Orders.

Ohio Revised Code 4903.12 provides, in pertinent part, that “[nJo court other than the
supreme court shall have power to review, suspend, or delay any order made by the public
utilities commission, or enjoin, restrain, or interfere with the commission * * *.” The Supreme
Court of Ohio has ruled that R.C. 4903.12 leaves the other courts with “limited subject matter
jurisdiction over tort and some contract claims involving utilities regulated by the commission.”
State ex rel. Ohio Edison Co. v. Parrott, 73 Ohio St.3d 705, 708 (1995). In other words, courts
of common pleas do not possess subject matter jurisdiction over PUCO orders. See State ex rel.
Columbus Southern Power Co. vy. Fais, 117 Ohio St.3d 340, 345 (2008).

The PUCO alone has exclusive jurisdiction over its orders, a fact reinforced by
Suburban’s own arguments. See Memo in Opp., pp. 9-10 (quoting DiFranco v. FirstEnergy
Corp., 134 Ohio St.3d 144 (2012) for the proposition that “the commission is the fact-finder
best_suited_to_review_and_ analyze various charged rates, rate designs, tariff schedules, and
commission orders.”’) (emphasis added). In order for this Court to adjudicate Suburban’s claims
in this case, it obviously would need to “review” and “analyze” the PUCO Order approving and
adopting the Stipulation. This Court lacks the jurisdiction to do so.

Ohio law is clear that courts and other adjudicatory bodies, like the PUCO, retain
jurisdiction over their own orders. See e.g., State ex rel. Cleveland Elec. Illum. Co. v. Cuyahoga
Cty. Court of Common Pleas, 88 Ohio St.3d 447, 450 (2000) (holding that the PUCO has

exclusive jurisdiction over its orders subject to Supreme Court of Ohio review), Trustees of the

{70978646 } 2Sheet Metal Workers v. Beckley Mechanical, Inc., No. 1:09ev1170, 2013 WL 968273, *2 (N.D.
Ohio 2013) (holding a district court retains jurisdiction “to enforce a settlement agreement if ‘the
dismissal order expressly incorporates the terms of the settlement agreement’”)(citation omitted).

The PUCO’s continuing and exclusive jurisdiction over its Order and the Stipulation is
confirmed by the three past and current PUCO proceedings initiated by Suburban that center
upon the exact same PUCO Order and Stipulation. See Mot. to Dismiss, Ex. E (2017 PUCO
Complaint), Ex. F (2007 Motion to Enforce), and Ex. G (2013 Motion to Enforce). In each of
these PUCO proceedings, Suburban specifically invoked the PUCO’s subject matter jurisdiction
over the PUCO Order and Stipulation and requested the PUCO to enforce the PUCO Order and
Stipulation against Columbia Gas. See id. Suburban cannot brush away these admissions simply
because they now inconveniently conflict with its current position.

Nor can Suburban ignore the following prefiled direct testimony of its Chairman, David
L. Pemberton, Sr., in PUCO Case No. 13-1216-GA-UNC confirming the PUCO’s jurisdiction
over the PUCO Order and Stipulation, including specifically §A10:

a. The Settlement Agreement has been characterized as simply a sale and
transfer of facilities and customers. Do you agree with this characterization?

A. No, it was much more. The sale and transfer of facilities was not the main
object of the Settlement Agreement. As the Settlement Agreement, itself, makes
clear, the main object of the Settlement Agreement was to resolve the extensive,
costly, and ongoing litigation between the parties regarding the practices and
methods employed by Columbia in competing with Suburban and the sale and
transfer of facilities was merely ancillary to this purpose. Accordingly, failure to
enforce the Settlement Agreement, including specifically, paragraph A,10,
would return the parties to the same destructive and_wasteful_environment
which the Commission found not to be in the public interest when it assisted
the parties in resolving their competitive difficulties. That is why the parties
specifically provided _for_the Commission’s_ continuing jurisdiction “to
supervise and assure the Parties’ compliance with [the] Joint Stipulation and
Recommendation_of_the_Parties.”_(Paragraph_C.5_of_the Settlement

Agreement).

{70978646 } 3See Pemberton Prefiled Direct Testimony, p. 20 (emphasis added) (attached as Exhibit A)!

Suburban contends that JA10 of the Stipulation falls outside the PUCO’s jurisdiction
because the PUCO Order did not specifically reference or approve §A10. Mr. Pemberton, Sr.’s
testimony, as well as Suburban’s own PUCO filings, invalidates Suburban’s argument. See Mot.
to Dismiss, Ex. G, 2013 Motion to Enforce Memo in Support, pp. 4-5 (Suburban admitting that
the Stipulation, and specifically {A10, was adopted by the PUCO). Notwithstanding Suburban’s
attempt to rewrite history, the PUCO Order did not approve and adopt only certain portions of
the Stipulation. Nor did it carve out §A10 from the Stipulation. It approved and adopted the
entire Stipulation, including {A10. Suburban’s argument that the PUCO only has jurisdiction
over certain portions of the PUCO Order and Stipulation is baseless and erroneous.

Suburban argues that the PUCO lacks jurisdiction because it purportedly cannot obtain
time-sensitive interconnection relief from the PUCO. See Compl. 418 (“Existing and projected
customer demand require Suburban to construct and place in service an additional delivery point
by no later than the Winter 2018/19 heating seasons.”). Suburban contends that “[p]ursuing its
claims at the PUCO would simply deny Suburban a remedy for untold months or years, and
likely end up back in this Court in any event.” Memo in Opp., p. 18. Suburban’s perceived
exigencies and desire for expediency, however, do not confer subject matter jurisdiction upon
this Court (or divest exclusive jurisdiction from the PUCO) nor do they permit forum shopping.

The PUCO has exclusive authority to enforce its own orders, like the PUCO Order
approving and adopting the Stipulation. See Chillicothe Elec. Ry. L. & P. Co. v. Norfolk &

Western Ry., 27 Ohio C.D. 240, 242-43 (4th Dist. 1916) (stating that PUCO enforcement of its

t A full and complete copy of Mr. Pemberton, Sr.’s Prefiled Direct Testimony in PUCO Case No. 13-1216-

GA-UNC is being filed separately and contemporaneously with the Court.

{70978646 } 4orders “is the exclusive remedy for enforcing the orders of the commission”)*, City of Columbus
v. The New York Central Railroad Co., 112 Ohio App. 314, 318 (10th Dist. 1960) (“LAI issues
in connection with orders of the P.U.C.O. must be tried before the Commission or before the
Supreme Court. To hold otherwise is to vest in a court other than the Supreme Court the
authority to review the orders of the Commission.”), North Ridge Inv. Corp. v. Columbia Gas of
Ohio, Inc., 49 Ohio App.2d 74, 76 (9th Dist. 1973) (holding that “the Court of Common Pleas is
without jurisdiction, either in mandamus or injunction, to order a public utility to provide service
and facilities upon application of a prospective user.”).

In what is a common theme in this case, Suburban’s past PUCO filings and admissions
contradict Suburban’s present argument that the PUCO lacks the authority to enforce the PUCO
Order and Stipulation. In 2007 and 2013, Suburban filed Motions to Enforce the PUCO Order
and Stipulation against Columbia Gas with the PUCO. See Mot. to Dismiss, Exs. F and G.
Significantly, Suburban’s 2013 Motion to Enforce centered upon §A10 of the Stipulation — the
exact same provision at issue here. In both cases, Suburban alleged that Columbia Gas violated
the PUCO Order and Stipulation, sought PUCO enforcement of the PUCO Order and Stipulation
(even filing a motion for judgment on the pleadings on the issue of liability (attached as Exhibit
B)), and requested the PUCO to issue a finding of a violation against Columbia Gas to allow
Suburban to thereafter commence an action for monetary damages under R.C. 4905.61. See id.

It is disingenuous for Suburban now to claim that the PUCO cannot enforce the PUCO
Order and Stipulation or that it cannot provide an adequate remedy to Suburban. As

demonstrated by Suburban’s own actions, R.C. 4905.26 provides the proper mechanism for

2 Chillicothe was decided under Gen. Code §614-67, which is substantively identical to R.C. 4905.60.

{70978646 } 5complaints against a public utility for alleged violations of PUCO orders.> If the PUCO issues a
finding that one of its orders was violated, only then may the complainant commence a lawsuit in
a court of common pleas and seek monetary damages under R.C. 4905.61 for such violation. See
Cleveland Mobile Radio Sales, Inc. v. Verizon Wireless, 113 Ohio St.3d 394, 400 (2007), see
also North Ridge, 49 Ohio App.2d at 76 (holding that an action for damages under R.C. 4905.61
“must be preceded by the successful prosecution of a complaint under R.C. 4905.26” before the
PUCO). Suburban’s position that it cannot seek PUCO enforcement of the PUCO Order and
Stipulation and cannot obtain an adequate remedy from the PUCO is erroneous.

I. This Court Has No Jurisdiction Over “Appropriate Rate and Service Conditions.”

Suburban contends that Columbia Gas’ alleged interconnection obligations under 4A10
of the Stipulation are “unconditional.” Compl., §24. This is simply false. Paragraph Al0
expressly states that Columbia Gas’ not-yet-constructed Northern Loop pipeline “shall also be
available, subject to appropriate rate and service conditions, as a supply source for Suburban’s
system.” Mot. to Dismiss, Ex. A, Stipulation, {A10 (emphasis added). The interconnection that
Suburban seeks is not “unconditional” in any way, shape, or form. Instead, it is explicitly
conditioned upon “appropriate rate and service conditions” that must be approved by the PUCO.

Ohio Revised Code 4905.31 and 4905.48 permit public utilities to enter into “reasonable
arrangements” and “contracts” whereby one public utility supplies natural gas at specified rate
and service terms (¢.g., rate per Mcf, annual Mcf volume, payment of facility construction and
improvement costs, etc.) to another public utility so that the recipient utility may deliver gas to
its customers. That is what interconnection is, and PUCO approval is statutorily required. See

R.C, 4905.31(E) (“No such schedule or arrangement is lawful unless it is filed with and approved

3 In its 2007 and 2013 Motions to Enforce, Suburban specifically requested that its motions and supporting

memoranda be treated as “complaints” in accordance with R.C. 4905.26. See Mot. to Dismiss, Exs. F and G.

{70978646 } 6by the commission pursuant to an application that is submitted by the public utility * * *. Every
such schedule or reasonable arrangement shall be under the supervision and regulation of the
commission * * *.”), see also R.C. 4905.48 (“With the consent and approval of the public
utilities commission: (A) Any two or more public utilities * * * may enter into contracts with
each other that will enable them to operate their lines or plants in connection with each other.”).

Suburban argues that “the PUCO does not regulate * * * pipeline interconnections” and
“t]he PUCO does not regulate whether and under what conditions other gas companies may
connect to Columbia’s lines.” Memo in Opp., pp. 3, 13. This is incorrect. Interconnections are
regulated by the PUCO pursuant to R.C. 4905.31 and 4905.48 and therefore fall within the
PUCO’s exclusive jurisdiction. See e.g., Kazmaier Supermarket, Ine. v. Toledo Edison Co., 61
Ohio St.3d 147, 150 (1991) (“[T]he legislature created the [PUCO] and empowered it with broad
authority to administer and enforce the provisions of Title 49.”).

Moreover, Suburban knows this to be true. On at least four prior occasions, Suburban
has entered into interconnection “arrangements” or “contracts” with Columbia Gas, whereby
Columbia Gas agreed to supply gas to Suburban in accordance with specified rate and service
terms. In each instance, such interconnections were submitted (sometimes jointly) to the PUCO
for its approval under R.C. 4905.31 and/or 4905.48 and thereafter approved by the PUCO. See
PUCO Case No, 97-730-GA-AEC (attached as Exhibit C), PUCO Case No. 01-2326-GA-AEC
(attached as Exhibit D), PUCO Case No. 02-1239-GA-AEC (attached as Exhibit E), and PUCO
Case No. 13-1780-GA-AEC (attached as Exhibit F), see also PUCO Case No. 08-934-GA-ATR
(Joint Application by KNG Energy, Inc. and The East Ohio Gas Company for PUCO approval of
an interconnection agreement under R.C. 4905.48, filed by, among others, one of Suburban’s

own attorneys in this case, and PUCO Entry approving the interconnection pursuant to R.C.

{70978646 } 74905.48(A)) (attached as Exhibit G .4 Suburban knows that interconnections between public
utilities, including the specific rate and service terms for such interconnections, must be
approved by the PUCO. See id. It is disingenuous for Suburban to claim otherwise.

It likewise is disingenuous for Suburban to contend that “appropriate rate and service
conditions” are not at issue in this case. See Memo in Opp., p. 5. In its Complaint, Suburban
seeks specific performance (i.¢., interconnection) and declaratory relief regarding which party
must bear the costs required to interconnect Suburban to the Northern Loop pipeline. See
Compl., Prayer for Relief. As detailed above, Suburban’s alleged right to interconnection is
expressly conditioned upon and subject to “appropriate rate and service conditions.” Such rate
and service conditions, include, but are not limited to, the volume of gas to be delivered by
Columbia Gas, the gas service rates to be charged by Columbia Gas and paid by Suburban, point
of delivery and measuring station determinations, and the costs of facility construction,
installations, and betterments necessary for Columbia Gas to supply gas to Suburban. See e.g.,
Exhibits C-G. This Court has no statutory authority or jurisdiction to determine “appropriate rate
and service conditions” for interconnections between two natural gas public utilities.” The
determination and approval of rate and service conditions, including the “appropriateness” of
such conditions, fall exclusively within the PUCO’s jurisdiction. See R.C. 4905.31 and 4905.48.

Suburban attempts to overcome this jurisdictional roadblock by claiming that

“appropriate rate and service conditions” are irrelevant because Columbia Gas purportedly has

‘ The relevant filings, including the applications and statements requesting approval of the interconnection

agreements and the corresponding PUCO orders approving such interconnections, are attached as Exhibits C-G.
The dockets for these cases also can be accessed through the PUCO’s Docketing Information System

‘ Without addressing the merits (or lack thereof) of Suburban’s claims, Suburban alleges that Columbia Gas
has breached the Stipulation, but the “appropriate rate and service conditions” upon which Suburban’s breach of
contract claims are predicated are neither specified nor determined. Accordingly, even if this Court had subject
matter jurisdiction (which it does not), it cannot adjudicate whether or not an alleged breach has even occurred.
without first determining such “appropriate rate and service conditions” (which only the PUCO may approve),

{70978646 } 8“denied” Suburban’s interconnection request. Memo in Opp., pp. 7, 15. However, Suburban’s
own Complaint contradicts Suburban’s claim. Columbia Gas has stated that it “remains willing
to discuss providing Suburban with service from the Northern Loop if Suburban is willing to
discuss payment of the required betterment” of Columbia Gas’ facilities to provide the volume of
gas service requested by Suburban. See Compl., Ex. C. Suburban cannot rewrite history and
delete “subject to appropriate rate and service conditions” from the PUCO Order and Stipulation
simply because doing so better fits Suburban’s flawed narrative. Interconnection to Columbia
Gas’ Northern Loop pipeline is not “unconditional.” The parties’ interconnection rights and
obligations are expressly “subject to appropriate rate and service conditions,” which include
required betterments to Columbia Gas’ facilities. Despite what Suburban contends, “appropriate
rate and service conditions” are directly relevant in this case.

IV. The Allstate Test Confirms That This Court Lacks Subject Matter Jurisdiction.

“The Allstate test was never intended to deprive the PUCO of matters that fall squarely
within its jurisdiction; instead, the test was adopted to guide courts in evaluating claims that
present a close question * * *.” Saks v. East Ohio Gas Co., 8th Dist. Cuyahoga No. 97770,
2012-Ohio-2637, 415. In this case, subject matter jurisdiction is not a close question. PUCO
administrative expertise is necessary for adjudication of Suburban’s claims and pipeline
interconnections constitute a practice normally authorized by natural gas public utilities (subject
to review and approval by the PUCO). Accordingly. this Court lacks subject matter jurisdiction.

With respect to the first prong, Suburban argues that PUCO administrative expertise is
not necessary because “administrative agencies do not have special expertise in interpreting
contracts.” Memo in Opp., p. 11. However, as demonstrated above, this is not a “pure contract”

ease. The PUCO Order approving and adopting the Stipulation is the binding, operative

{70978646 } 9document, and the PUCO has exclusive jurisdiction to enforce its own orders. This reality is
confirmed by the fact that Suburban on three other occasions commenced proceedings with the
PUCO ~ not a court of common pleas — alleging violations of the PUCO Order and Stipulation
(including JA10) and requesting PUCO enforcement against Columbia Gas. In each instance,
Suburban specifically invoked the PUCO’s jurisdiction over the PUCO Order and Stipulation.
Now, despite those admissions, Suburban argues that the PUCO somehow lacks jurisdiction over
the exact same PUCO Order and Stipulation. Suburban cannot have it both ways, and its attempt
to cast its specious allegations as “pure contract” claims should be rejected by this Court.
Suburban’s reliance upon City of Cleveland v. Cleveland Elec. Illum. Co., 115 Ohio
App.3d 1 (8th Dist. 1996) is misplaced. See Memo in Opp., p. 11. Cleveland Elec. involved a
private contract with an entity regulated by the Federal Energy Regulatory Commission
(FERC”), not the PUCO. Suburban even acknowledges that “state courts have concurrent
jurisdiction with FERC regarding the interpretation of contracts on file with FERC.” Jd. This
case does not involve FERC-regulated entities. Ohio courts do not have concurrent jurisdiction
with the PUCO; rather, Ohio courts have limited jurisdiction only in cases involving pure torts or
contracts. See Parrott, 73 Ohio St.3d at 708. Ohio courts do not have jurisdiction to review or
enforce PUCO orders, like the PUCO Order in this case. See Fais, 117 Ohio St.3d at 345.
Suburban further argues that “[t]he PUCO’s administrative expertise is most apparent in
rate-related issues” and that this case purportedly does not involve rate issues. Memo in Opp.,
pp. 9. 11. As detailed above, this is incorrect. Contrary to Suburban’s selective interpretation of
the PUCO Order and Stipulation, it does not have an “unconditional” right to interconnect to
Columbia Gas’ Northern Loop pipeline. The parties’ interconnection rights and obligations are

expressly “subject to appropriate rate and service conditions.” This Court lacks the statutory

{70978646 } 10authority to determine and approve rate and service conditions for natural gas public utilities.
Pipeline interconnections require PUCO approval, a fact demonstrated by Suburban’s own past
interconnections with Columbia Gas. See R.C. 4905.31 and 4905.48; see also Exhibits C-F. The
first question of the Al/state test therefore is answered in the affirmative.

Regarding the second prong of the Allstate test, Suburban remarkably argues that utility
interconnections are not a “normally authorized” practice despite the fact that Suburban on at
least four prior occasions has entered into interconnection agreements with Columbia Gas. See
Memo in Opp., p. 12; see also Exhibits C-F. Suburban contends that “[w]hether a practice is
‘normally authorized’ is a question of whether the conduct or practice is specifically authorized.
by statute.” Memo in Opp., p. 12. As detailed above, interconnections are authorized by and
require PUCO approval under R.C. 4905.31 and 4905.48, a fact again confirmed by Suburban’s
other interconnections with Columbia Gas. See Exhibits C-F; see also Exhibit G (PUCO-
approved interconnection between two natural gas public utilities pursuant to R.C. 4905.48(A)).

Suburban contends that R.C. 4905.48(A) does not apply to JA10 because “no transaction
was proposed and none was approved.” Memo in Opp., p. 12. In doing so, Suburban only
confirms why the PUCO has exclusive jurisdiction over this case. PUCO approval is required
for Suburban to obtain the specific performance that it seeks (i.¢., interconnection). See R.C.
4905.31 and 4905.48. If no interconnection transaction was proposed or approved under JA10
as Suburban contends, PUCO approval of such an arrangement, including “appropriate rate and
service conditions,” certainly now is required for Suburban to interconnect to the Northern Loop
pipeline. The second question of the Al/state test therefore is answered in the affirmative.

Because both prongs of the Allstate test are affirmatively satisfied, this Court lacks

subject matter jurisdiction in this case.

{70978646 } 11Vv. Columbia Gas Is Entitled To Recover Its Costs And Reasonable Attorney Fees.

The PUCO’s exclusive jurisdiction in this case is not a close call. That is why Columbia
Gas attempted to resolve this issue without extensive motion practice. Suburban summarily
rejected Columbia Gas’ efforts. See Mot. to Dismiss, Exs. B-C. Suburban’s jurisdictional
claims and arguments are repeatedly contradicted by its own past conduct, filings, and
admissions. The frivolity of Suburban’s claims is detailed throughout Columbia Gas’ Motion to
Dismiss and this Reply Brief. As such, Columbia Gas is entitled to recover its costs and
reasonable attorney fees pursuant to Rule 11 of the Ohio Rules of Civil Procedure and R.C.
2323.51.

Accordingly, based upon the foregoing and for the reasons contained in Columbia Gas’
Motion to Dismiss, Columbia Gas respectfully requests that this Court issue an Order granting
Columbia Gas’ Motion to Dismiss in its entirety.

Respectfully submitted,

s/ Matthew R. Rechner

MATTHEW R. RECHNER (0074446)

ADAM C. SMITH (0087720)

McDonald Hopkins LLC

600 Superior Avenue East, Suite 2100

Cleveland, Ohio 44114-2653

Telephone: (216) 348-5400

Facsimile: (216) 348-5474

Email: mrechner@medonaldhopkins.com
acsmith@medonaldhopkins.com

ANTHONY M. HEALD (0002095)
Heald Law

125 North Sandusky Street
Delaware, Ohio 43015

Telephone: (740) 363-1369
Facsimile: (740) 369-1616

Email: tonyheald@heald-law.com
Counsel for Defendant Columbia Gas of Ohio, Ine.

{70978646 } 12CERTIFICATE OF SERVICE

A copy of the foregoing Reply of Defendant Columbia Gas of Ohio, Inc. to Plaintiff
Suburban Natural Gas Company’s Memorandum in Opposition te Motion to Dismiss was
served via electronic mail on December 8, 2017 upon:

Stephen D. Martin, Esq.

Manos, Martin & Pergram Co., LPA
50 North Sandusky Street

Delaware, Ohio 43015

smartin@mmpdlaw.com

Mark A. Whitt, Esq.

Whitt Sturtevant LLP
KeyBank Building

88 E. Broad Street, Suite 1590
Columbus, Ohio 43215

whitt@whitt-sturtevant.com
Counsel for Plaintiff
Suburban Natural Gas Company

s/ Matthew R. Rechner

MATTHEW R. RECHNER (0074446)
ADAM C. SMITH (0087720)
MeDonald Hopkins LLC

ANTHONY M. HEALD (0002095)
Heald Law

Counsel for Defendant Columbia Gas of Ohio, Ine.

{70978646 } 13EXHIBIT Are

SCUYAK RNR E

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RECEIVED °

MAY 2 7.2014

DOCKETING DIVISION
BEFORE Public Utilities Commission of Ohio

PUBLIC UTILITIES COMMISSION OF OHIO

Suburban Natural Gas Company,
Case No. 13-1216-GA-CSS
Complainant
Case No. 93-1569-GA-SLF
Vv.

Case No. 94-938-GA-ATR

Columbia Gas of Ohio, Inc.,
Case No. 94-939-GA-ATA

eee

Respondent

DIRECT TESTIMONY OF DAVID L. PEMBERTON, SR.
ON BEHALF OF
SUBURBAN NATURAL GAS COMPANY
Q. Please state your name and business address.
A. My name is David L. Pemberton, Sr. My business address is 2626 Lewis
Center Road, Lewis Center, Ohio 43035.
Q. By whom are you employed?
A | am employed by Suburban Natural Gas Company.
Q. — Whatis Suburban Natural Gas Company?

A. Suburban Natural Gas Company, which | shall hereafter refer to as
Suburban, is a corporation incorporated under Ohio law in 1927 for the
purpose of gathering and distributing natural gas to consumers in
northwestern Ohio. Prior to its incorporation, Suburban operated as an

unincorporated business entity established in 1882 for that purpose.

. BER Dake
GAG Ue peel eye a8 ksh ns of business

ACCULR TS in the reguiax Coution
document aalivee Sa pate Processed WAY 29204.
Pecnnieias ——442

443

444

445

446

447

448

449

450

43st

482

453

454

455

456

457

458

459

460

461

462

463

A.

Exhibit H graphically illustrates the potentially disastrous consequences to
Suburban of permitting Columbia the unlimited use of the Northern Loop

pipeline in southern Delaware County and its misuse in this case.

Q. The Settlement Agreement has been characterized as simply a sale and transfer

of facilities and customers. Do you agree with this characterization?

A.

No, it was much more. The sale and transfer of facilities was not the main
object of the Settlement Agreement. As the Settlement Agreement, itself,
makes clear, the main object of the Settlement Agreement was to resolve
the extensive, costly, and ongoing litigation between the parties regarding
the practices and methods employed by Columbia in competing with
Suburban and the sale and transfer of facilities was merely ancillary to this
purpose. Accordingly, failure to enforce the Settlement Agreement,
including specifically, paragraph A.10, would return the parties to the
same destructive and wasteful environment which the Commission found
not to be in the public interest when it assisted the parties in resolving their
competitive difficulties. That is why the parties specifically provided for the
Commission's continuing jurisdiction “to supervise and assure the Parties’
compliance with [the] Joint Stipulation and Recommendation of the

Parties.” (Paragraph C.5 of the Settlement Agreement).

Q. Did the parties discuss any specific time period for the duration of the Settlement

Agreement or any of the covenants contained therein, including, specifically,

paragraph A.10?

20EXHIBIT BBEFORE
THE PUBLIC UTILITIES COMMISSION OF OHIO

Suburban Natural Gas Company,
Case No, 13-1216-GA-CSS
Complainant,
Case No. 93-1569-GA-SLP
ve
Case No. 94-938-GA-ATR
Columbia Gas of Ohio, Inc,,
Case No, 94-939-GA-ATA

ee

Respondent,

 

SUBURBAN NATURAL GAS COMPANY'S
MOTION FOR JUDGMENT ON THE PLEADINGS
ON THE ISSUE OF LIABILITY

 

Under Ohio Rule of Civil Procedure 12(C), Suburban Natural Gas Company
(“Suburban”) hereby moves for judgment on the pleadings on the issue of Columbia Gas of
Ohio, Inc.’s (“Columbia”) liability. As described more fully in the attached Memorandum in
Support, the Stipulation and Order adopting it is clear and Columbia admits that its actions have
violated it. Accordingly, Suburban is entitled to judgment on the pleadings on the issue of
liability.

Respectfully submitted,

SUBURBAN NAT L. GAS COMPANY

 

 

 

Willi{ln J. Mithael (00709215
General Copnsel
Suburban Natural Gas Company
2626 Lewlg Center Road
Lewis Center, Ohio 43035
Tel: 740-548-2450
Fax: 740-548-2455
ichael COMMEMORANDUM IN SUPPORT

ih Yutroduction

On January 18, 1996, the Commission journalized its Finding and Order in in ihe Matter
of the Self-Complaint of Columbia Gas of Ohio Concerning its Existing Tariff Provisions, Case
No. 93-1569-GA-SLF; In the Matter of the Joint Petition of Columbia Gas of Ohio, Inc. and
Suburban Natural Gas Company for Approval of an Agreement to Transfer Certain Facilities
and Customers, Case No. 94-938-GA-ATR; and In the Matter of the Joint Application of
Columbia Gas of Ohio, Inc. and Suburban Natural Gas Company for Approval of Certain Tariff
Modifications, Case No, 94-939-GA-ATA. In the Finding and Order, the Commission adopted
as its Order the Second Amended Joint Petition, Application, and Stipulation and
Recommendation of Columbia Gas of Ohio, Inc. and Suburban Natural Gas Company
(“Stipulation”), See Finding and Order at p. 6. In relevant part, the Stipulation prohibits
Columbia Gas of Ohio, Inc. (‘Columbia”) from using its high pressure natural gas pipeline,
commonly referred to as the “Northern Loop,” for any purpose other than transporting gas from
existing and future sources of supply to various gas distribution systems owned and operated by
Columbia in, southern Delaware and northern Franklin Counties to points outside those areas.
See Stipulation at p. 7, para. A.10. In its Answer, Columbia admits that it has tapped the
Northern Loop to serve customers at 5930, 5730, 5782, 6460, 6476, 6480, 6660, 6405, and 5950
Jayoox Road, Galena, Ohio 43021. See Columbia’s Answer at p. 2, para. 2. Accordingly, there
is no doubt that Columbia has violated the Stipulation and the Order adopting it and, therefore,
Suburban Natural Gas Company (“Suburban”) is entitled to judgment as a matter of law on

liability.H Argument
A Standard of Review

Rule 12(C) provides that “[a}fter the pleadings are closed but within such time as not to
delay the trial, any party may move for judgment on the pleadings.” Ohio R. Civ, Pro. 12(C). A
motion for judgment on the pleadings is granted when, after viewing the allegations and
reasonable inferences therefrom in the light most favorable to the nonmoving party, itis apparent
that the moving party is entitled to judgment as a matter of law. Huntington Nat'l Bank v.
Kazmaier, 175 Ohio App. 3d 130, 134 (Wood 2008) (citations omitted). In order to grant the
motion, a trial court must find beyond doubt ‘that the non-movant can prove no set of facts in
support of the claim that would entitle him or her to relief. id. (citation omitted). Exhibits
attached to pleadings may be considered on a 12(C) motion. See, eg. Schmitt y. Educ. Serv.
Cir, 2012 Ohio 2208, J 10 (Cuyahoga 2012) (citations omitted); see also Civ. R. 10(C) (a copy
of any written instrument attached to a pleading is a part of the pleading for alt purposes). Also,
judicial notice of appropriate matters may be taken when ruling on a motion for judgment on the
pleadings. See, e.g., State ex rel Neff v. Corrigan, 75 Ohio St. 3d 12, 16 (1996); Rosenbrook v.
Ba. of Lucas County Commrs,, 2012 Ohio 6247, para, § (Lucas 2012) (standard of review under
Rules 12(C) and 12(B)(6) the same).

As explained below, Suburban meets this standard here as it relates to Colimbia’s
violation of the Stipulation and Order adopting it and, thus, Suburban is entitled to judgment as a
matter of law on liability.

B. Columbia Has Violated The Stipulation And Order Adopting It

L The Stipulation Is A Contract
The Commission’s Finding and Order adopting the Stipulation itself confirms that it is a

“settlement agreement.” See, e.g, Finding and Order at para. 10; see also Stipulation at p. 9,

2
PUCQV13-1216-GA-CSS/ Motion for Judgmentpara, 1 (affirming that the Stipnlation is a “compromise and settlement”). As such, tho
settlement agreement is a contract — like any other contract (albeit one adopted as a Commission
Order). Jn re All Kelley & Ferraro Asbestos Cases, 104 Ohio St. 3d 605, 613 (2004) (citations
omitted); State ex rel, Petro v. Rut, Reynolds Tabacco Co., 104 Ohio St. 3d 559, 564 (2004), “A
settlement agreement is a contract to which general rules of contract law apply.” Huffy Corp. v.
MRED Properties, 1993 Ohio App. LEXIS 5620, *6 (Mercer 1993).

When confronted with an issue of contract interpretation, the Commission should give
effect to the intent of the parties to the agreement. See Martin Marietta Magnesia Specialties,
LLC. v. PUC of Ohio, 129 Ohio St. 3d 485, 490 (2011), The Commission should examine the
cotitract as a whole and presume that the intent of the parties is reflected in the language used in
the agreement. See id. (citation omitted). “Where the parties following negotiation make mutual
promises which thereafter are integrated into an unambiguous contract duly executed by them,
courts will not give the contract a construction other than that which the plain language of the
contract provides.” Jd. (citation omitted). “When the language of a written contract is clear, a
court may look no further than the writing itself to find the intent of the parties.” Jd. (citation
omitted). Whether a contract is clear or ambiguous is a question of law. See, e.g., O'Bannon
Meadows Homeowners Ass'n v. O'Bannon Props., LLC, 2013 Ohio 2395, para. 20 (Clermont
2013).

Cc The Stipulation Is Clear And Prohibits Columbia From Serving Customers
From The Northern Loop

Paragraph A.10 of the Stipulation states:

Nothing in this stipulation shall be construed as preventing
Columbia from installing, in any of the areas described, a high-
pressure natural gas pipeline, the purpose of'which is to be limited
fo transporting gas from existing and future sources of supply to
various gas distribution systems owned and operated by Columbia

3
PUCO/13-1216-GA-CSS/ Motion for Judgmentin southern Delaware and northern Franklin Counties to points
outside of said areas, . . .

Stipulation at para. A.10 (italics added).! The Commission may take administrative notice of
geography, such as where southern Delaware and northeta Franklin Counties are. See State v.
Burkhalter, 2006 Ohio 1623, para. 18 (Lucas 2006) (“We may take judicial notice of facts easily
ascertainable from a reasonably reliable source, such as a map. The judge may inform himself as
to the facts of geography, such as . . . the location of a given place within the jurisdiction, by
resort to * * * public documents, maps, etc.”) (citation and quotations omitted); Stare v. Davis,
2004 Ohio 5680, para. 22 (Pickaway 2004); Hafer v. C, H &D, R, BR. Co., 4 Obio Dec. 487, 492
(CP. Hamilton 1892) (“The court takes judicial notice of the geography and the general
commercial relation of cities and regions.”); see also In the Matter of the Commission
Investigation Relative to the Establishment of Local Exchange Competition and Other
Competitive Issues, 2006 Ohio PUC Lexis 9, *10 (2006) (Commission took judicial notice); i
the Maiter of the Regulation of the Electric Fuel Component Contained Within the Rate
Schedules of the Ohio Edison Company and Related Maiters, 1983 Ohio PUC Lexis 49, *24
(1983) (acknowledging ability to take administrative notice and explaining that “ihe guidelines
for determining whether administrative notice should be taken are the same as those set forth for
judicial notice in Ohio Evidence Rule 201.").

Paragraph A.10’s plain language does not restrict Columbia’s ability to compete in
southern Delaware and northern Franklin Counties (and Suburban is not arguing that it does) —
Columbia may install mains, service lines, and any other infrastructure necessary to compete
with Suburban in southern Delaware and northern Franklin Counties. Under paragraph A.10,
+ Columbia has existing sources of supply, and may have future sources of supply, for its distribution systems in

southern Delaware and northern Franklin Counties. Consistent with paragraph A.10, Columbia may pipe gas using
the Norther Loop from such sources of supply to points outside southern Delaware and northern Franklin Counties,

4
PUCOVI3-1216-GA-C8S/ Mation for JudgmentColumbia may not, however, use the Northerh Loop to supply gas to such facilities or to
customers, It has done so by supplying gas to customers on Jaycox Road, which is in southern
Delaware County. See Columbia’s Answer at p. 2, para, 2. Columbia has therefore violated the
Stipulation and Order adopting it,
Conclusion

Parageaph A.10 of the Stipulation is clear and mambiguous ~ it limits, in relevant part,
Columbia's use of the Northem Loop fo “transporting gas from existing and future sources of
supply fo various gas distribution systems owned and operated by Columbia in southern
Delaware and northern Franklin Counties to points outside of said areas, .. .” Stipulation at para.
A.10. Columbia has admittedly used the Northern Loop for other purposes ~ specifically,
supplying customers in southern Delaware County ~ in violation of the Stipulation, Suburban is

therefore entitled to judgment on the pleadings on the issue of liability.

Respectfully submitted,

SUBURBAN NA PURAL GAS COMPANY

  

Lewis Centet, Ohio 43035
Tel: 740-548-2450
Fax: 740-548-2455
bmichae! 00.COM

PUCO/L3-1216-GA-CSS/ Mation for JudgmentCERTIFICATE OF SERVICE

The undersigned hereby certifies that a true and accurate copy of the foregoing Suburban
Natural Gas Company’s Motion for Judgment on the Pleadings on the Issue of Liability was
served upon the following counsel of record by regular U.S, mail, postage prepaid, this.) 5 day

of June 2013,

Daniel R. Conway, Esq.

Kathleen M. Trafford, Esq.

Porter Wright Morris & Arthur, LLP
41S, High Street

Columbus, OH 43215

Stephen B. Seiple

Assistant General Counsel
Brooke E, Leslie, Counsel
Columbia Gas of Ohio, Inc.
200 Civic Center Drive

PO Box 117

Columbus, OH 43216-0117

 

PUCO/13-1216-GA-CSS/Motion for JudgmentThis foregoing document was electronically filed with the Public Utilities

Commission of Ohio Docketing Information System on

6/25/2013 3:06:31 PM

Case No(s). 13-1216-GA-CSS

Summary: Motion Suburban Natural Gas Company's Motion for Judgment on the Pleadings
on the Issue of Liability electronically filed by Brandi L. Kayser on behalf of Suburban Natural
Gas CompanyEXHIBIT CBEFORE 57 ay . Peri ely
THE PUBLIC UTILITIES COMMISSION OF OHIO

In the Matter of the Application
of Columbia Gas of Ohio, Inc.
for Approval of an Arrangement
with the Suburban Natural Gas
Company for the Purchase and
Sale of Natural Gas,

Case No. 97-3 9° GA-AEC

APPLICATION AND STATEMENT

Now comes the applicant. Columbia Gas of Ohio. Inc. (Columbia), and files with the
Commission for its approval. pursuant to the provisions of Section 4905.31. Revised Code, an
arrangement with the Suburban Natural Gas Company (Suburban). for the purchase by Suburban
and sale by Columbia of certain volumes of natural gas.

In support of this application, Columbia represents to the Commission that:

1. Columbia is a public utility and a natural gas company subject to the jurisdiction
of the Commission by virtue of the pravisions of Section 4905.03(A)(6), Revised Code.

2. Suburban is engaged in the distribution and sale of natural gas to customers within
the state of Ohio.

3. Suburban does not presently hold any ownership or interest in Columbia, nor does
Columbia hold any ownership or interest in Suburban.

4, Columbia and Suburban haye entered into an Agreement, under which Columbia

will provide natural gas service to Suburban at Columbia’s Gas Cost Recovery Rate plus 10¢
per Mef. Deliveries from Columbia to Suburban have already begun, and therefore, this rate will
be applied to ail such volumes already delivered.
5. The maximum annual gas volumes purchased and delivered under this
arrangement will be 35,000 Mcf. If annual purchases by Suburban exceed such level for any
period of twelve months, upgrades of Columbia's facilities will be required. In such case.
Suburban and Columbia have agreed to negotiate in good faith for an increase in the rate
referenced above for such purchases or for a contribution in aid of construction of the required
upprades. ‘

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eetA copy of the arrangement between Columbia and Suburban is attached to this application

as Exhibit A and made a part hereof as if fully rewritten herein.

WHEREFORE, Columbia prays that the Commission forthwith approve the agreement

herein attached as Exhibit A and authorize Columbia to implement the same without delay,

COLUMBIA GAS OF OHIO, INC.

By: Cony k Rorrectoke
Amy ©. Koncelik

Trial Attorney

Andrew J. Sonderman, General
Counsel

Amy L. Koncelik, Attorney
200 Civic Center Drive

P.O. Box 117

Columbus, Ohio 43216-0117
(614) 460-4666

Attorneys for Applicant
Columbia Gas of Ohio, Ine.EXHIBIT A
Agreement for the Purchase and Sale of Natural Gas

This Agreement is made and entered into as of this 20 4 day of June 1997. by
and between Columbia Gas of Ohio, Inc.. 200 Civic Center Drive. P.O. Box 117. Columbus.
Ohio 43216-0117 (Columbia™). and Suburban Natural Gas Company. 2626 Lewis Center Road,
Lewis Center, Ohio 43035 (“Suburban”).

WHEREAS, Columbia is a natural gas distribution company providing retail gas
service to customers located throughout the State of Ohio, in accordance with rate schedules
approved by the Public Utilities Commission of Ohio (*PUCO”): and

WHEREAS, Suburban is also engaged in the distribution and sale of natural gas
to customers within the State of Ohio; and

WHEREAS, Suburban wishes to provide natural Bas service to various customers
located north of Lazelle Road in Delaware County. Ohio: and

WHEREAS, Suburban further wishes to contract with Columbia to purchase
volumes of natural gas in that vicinity so as to enable Suburban to provide such service; and

WHEREAS, Columbia is willing to provide such gas service, under the terms and
conditions set forth herein;

Now, therefore. in consideration of the premises and covenants hereinafter set
forth, the parties mutually agree as follows:

1. Columbia agrees to provide. and Suburban agrees to take, natural gas service
from Columbia in accordance with the rates, terms, and conditions set forth in this Agreement.

2. All volumes of gas to be sold by Columbia to Suburban shall be delivered to

Suburban at a measuring station constructed by Columbia. at its cost and expense, in the vicinityof Lazelle and Sancus Roads in Delaware County, Ohio. Columbia shall read both the master
meter located at the measuring station referred to herein, and the meters of its individual
customers on the dates specified in Exhibit A, attached hereto and made a part hereof as if fully
rewritten herein. Lixhibit A shall be modified as reading dates become available. The volumes
delivered to Suburban will be calculated by subtracting the volumes of gas consumed by
Columbia's customers in all phases of the Oak Creek and Wynstone Subdivisions from the
volumes recorded at the measuring station plus the Unaccounted for Gas Percentage (“UFG™) as
reflected in the most recent annual UFG calculation made by Columbia, which percentage shail
not exceed 2.00 percent. Suburban shall be given access to both the master meter and individual
customer meter readings each month for the purpose of comparing such readings to any customer
readings that Suburban may take of its own customers’ meters. If a discrepancy exists between
Columbia's and Suburban’s readings. the parties agree to negotiate in good faith for a reasonable
resolution of any such discrepancies. For so long as the aforesaid measuring station is
considered to be the point of delivery for determining Suburban’s responsibility for the volumes
of gas delivered hereunder, deliveries to Columbia's customers through said station shall be
limited to those customers specified herein.

3. The rate for gas service to Suburban under this Agreement will be Columbia’s
Gas Cost Recovery (GCR) Rate effective during the billing period plus 10¢ per Mef.

4. The rate specified in paragraph 3, above. is predicated upon maximum annual
purchases by Suburban from Columbia under this Agreement of 35,000 Mef per year. It is
understood and agreed by the parties that, if Suburban’s annual purchases of natural gas under

this Agreement exceed 35.000 Mcf per year for any period of twelve consecutive months,Columbia may need to upgrade facilities upstream of the delivery point. Suburban will be held
responsible only for rate increases or contributions in aid of construction that are associated with
actual upgrades required to meet Suburban’s purchases in excess af 35,000 Mef per year. In the
event of such an inerease in Suburban purchases from Columbia, Suburban and Columbia agree
to negotiate. in good faith, an increase in the rate for such purchases or for a contribution in aid
of construction of the required upgrades. In the event that Suburban and Columbia are unable to
agree as to the amount of such rate increase or contribution in aid of construction, they shall
submit the matter to the Public Utilities Commission of Ohio for resolution.

5. Except for the obligation to make payment for services provided hereunder,
neither party to this Agreement shall be liable to the other for any act or omission which was
directly attributable to events of force majeure. For purposes of this Agreement, the term force
majeure shall mean acts of God, including. but not limited to. lightning. earthquakes. storms. and
floods; and. in addition, shall mean any acts of the enemy. sabotage, wars, blockades, insurrec-
tions, riots, epidemics, landslides, fires, washouts, arrests and restraints, civil disturbances,
explosions. breakages of or accidents to machinery or lines of pipe. failure of equipment or
materials, freezing of wells or delivery facilities, orders of a court or governmental authority. or
any other event which is beyond the reasonable control of the party claiming Jorce majeure,
provided that such event was not caused by the negligent or intentional act or omission of such
party, and provided, further, that such party cannot, through reasonable diligence, remedy the
force majeure event. Neither party may claim force majeure (1) to the extent that such party's
failure to perform its obligations hereunder was due to the contributory negligence of such party.

(2) to the extent that such party's failure to perform its obligations hereunder was due to itsfailure to remedy a force majeure condition through reasonable diligence, or (3) to the extent
that such party's failure to perform its obligations was due to ceonomie hardship. which shall not
constitute force niujeure for purposes of this Agreement.

6. Except as otherwise provided in this Agreement, service to Suburban shall be
governed by Columbia's Rules and Regulations Governing the Distribution and Sale of Gas, as
approved by the PUCO from time to time.

7. The parties recognize that this Agreement is subject to the approval of the
PUCO. This Agreement shail be null and void if it is not approved by the PUCO, and either party
may terminate the Agreement. upon ten (10) days written notice to the other party, if the PUCO
modifies the Agreement in a manner which is unacceptable to such party. If the Agreement is
not approved by the PUCO or is terminated in accordance with this paragraph, the parties agree
to negotiate in good faith on the rate to be paid by Suburban to Columbia for all volumes of gas
previously transported by Columbia to the Delivery Point.

8. By the mutual agreement of the parties, which agreement is evidenced herein
and by the delivery of natural gas to Suburban by Columbia which has been occurring since
March [5, 1996, the term of this Agreement shall be presumed to have begun on March 15.
1996. This Agreement shall continue for a period coincident with the term of the January 23,
1996 Pipeline