Colon de Mejias v. Malloy

The Second Circuit Court of Appeals affirmed the rejection of constitutional claims challenging Connecticut’s transfers of funds from the Energy Conservation and Load Management Fund and Clean Energy Fund (the Energy Funds) to the State’s General Fund. The Second Circuit agreed with the federal district court for the District of Connecticut that the appellants—who were electric distribution company customers who paid charges to the Energy Funds pursuant to tariffs—did not have a contractual right to prevent transfer of the funds. The Second Circuit therefore found that the appellants failed to plead a violation of the Contract Clause. The Second Circuit also found that the appellants did not have a property interest in monies in the Energy Funds. The appellate court therefore agreed that the law transferring the funds was not a tax, and that the taxpayer standing doctrine—which provides that taxpayers generally have standing to challenge imposition of taxes but not tax revenue expenditures—barred the appellants’ Equal Protection claim, which was based on allegations that the transfers to the General Fund amounted to a tax that customers of municipalities were not required to pay.

The federal district court for the District of Connecticut rejected constitutional claims against Connecticut’s governor, treasurer, and comptroller in connection with transfers of funds from Connecticut’s Energy Conservation and Load Management Fund (ECLMF) and Clean Energy Fund (CEF) to the State’s General Fund. The transfers from the funds—which receive funds from surcharges on electricity bills—were authorized by laws enacted in 2017 and 2018. The court found no basis for concluding that the contracts plaintiffs had with electric distribution companies for provision of electricity gave them any contractual rights over how the funds in the ECLMF and CEF were spent. The court also dismissed for lack of standing the plaintiffs’ claim that the transfers violated the Equal Protection Act by assessing a tax on electric distribution company customers that did not have a rational relation to a legitimate governmental purpose. The court declined to exercise jurisdiction over the plaintiffs’ state law claims.

A group of individuals, organizations, and companies filed a lawsuit against Connecticut’s governor, treasurer, and comptroller to stop the officials from “sweeping” the Connecticut Energy Efficiency Fund (CEEF) and Clean Energy Fund. The plaintiffs described themselves as “invested in improving the State’s energy efficiency and clean energy economy” and asserted that the defendants were seeking to transfer funds to the State’s General Fund that had been collected from ratepayers and held for certain purposes—including lowering carbon emissions and investing in Connecticut’s Green Bank. The plaintiffs asserted that the diversion of the funds violated the Contracts Clause of the U.S. and Connecticut State Constitutions and the Equal Protection Clause of the U.S. Constitution. The plaintiffs also asserted that the sweep violated the legislation establishing the Green Bank and violated the tax-exempt status of one of the plaintiffs. In addition, they asserted a promissory estoppel claim.