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Gelita USA, Inc. v. Hammond Water Works Department

United States District Court, N.D. Illinois, Eastern Division

June 24, 2019

GELITA USA, INC., Plaintiff,
v.
HAMMOND WATER WORKS DEPARTMENT, Defendant.

          MEMORANDUM OPINION AND ORDER

          MATTHEW F. KENNELLY UNITED STATES DISTRICT JUDGE

         Gelita USA, Inc. has sued the Hammond Water Works Department, arguing that the Department's refusal to provide water for Gelita's Illinois manufacturing plant at a reasonable rate violates Indiana law and the Commerce Clause of the United States Constitution. The Department has moved for judgment on the pleadings. For the reasons set forth below, the Court grants the motion.

         Background

         The following facts are drawn from Gelita's allegations in its amended complaint, which the Court accepts as true for the purposes of the Department's motion for judgment on the pleadings. See Bishop v. Air Line Pilots Ass'n, Int'l, 900 F.3d 388, 400 (7th Cir. 2018).

         The Hammond Water Works Department is a municipally owned utility that operates a water filtration plant in northwest Indiana. The Department's sole customer outside the state of Indiana is Gelita, which operates a gelatin manufacturing facility in Illinois near the Indiana border. The Department has supplied water to Gelita (or predecessor businesses on the same site) for over one hundred years.

         The Indiana Utility Regulatory Commission authorizes the rates that the Department may charge for its services. Since 1985, Gelita has paid a graduated rate of about 38 cents per thousand gallons, which accords with the current schedule of charges previously approved by the regulatory commission. By statute, the Department is required to charge rates that are "nondiscriminatory, reasonable, and just." Ind. Code § 8-1.5-3-8(b).

         Since 2012, the Department has sought to significantly raise the rate it charges Gelita. Gelita has refused, and the parties have been unable to negotiate a mutually agreeable rate. In 2018, Gelita filed the present lawsuit, alleging that the Department's efforts to charge a rate higher than the one approved by the regulatory commission violate the United States Constitution and Indiana state law. The Department has moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c).

         Discussion

         "The standard for entering judgment on the pleadings is the same as that for dismissing a complaint for failure to state a claim: the complaint must state a claim that is plausible on its face." Armada (Singapore) PTE Ltd. v. Amcol Int'l Corp., 885 F.3d 1090, 1092 (7th Cir. 2018) (internal quotation marks omitted). The Court considers only "the matters presented in the pleadings" and "must consider those pleadings in the light most favorable" to the non-moving party. Unite Here Local 1 v. Hyatt Corp., 862 F.3d 588, 595 (7th Cir. 2017).

         In its response brief, Gelita has voluntarily withdrawn its claim in count 2 for violations of the Privileges and Immunities Clause of Article IV of the Constitution. The Court therefore dismisses count 2.

         A. Dormant Commerce Clause claim

         In count 1, Gelita alleges that the Department's effort to charge a higher rate to an out-of-state customer violates the dormant Commerce Clause, which "precludes states from discriminat[ing] between transactions on the basis of some interstate element." Comptroller of Treasury of Md. v. Wynne, 135 S.Ct. 1787, 1794 (2015) (alteration in original) (internal quotation marks omitted).

         1. Market participant doctrine

         The Department argues that Gelita cannot prevail on its dormant Commerce Clause claim because the Department is acting as a market participant. "[W]hen a state or local government enters the market as a participant it is not subject to the restraints of the Commerce Clause." White v. Mass. Council of Constr. Emp'rs, Inc., 460 U.S. 204, 208 (1983). The market participant doctrine "reflects a basic distinction . . . between States as market participants and States as market regulators, [t]here [being] no indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free ...


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