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Washington Suburban Sanitary Commission v. Lafarge North America, Inc.

Court of Appeals of Maryland

June 18, 2015

WASHINGTON SUBURBAN SANITARY COMMISSION
v.
LAFARGE NORTH AMERICA, INC.

Barbera, C.J., Harrell, Battaglia, Greene, Adkins, McDonald, Watts, JJ.

Harrell, J.

Lafarge North America, Inc. ("Lafarge") operated a ready-mix concrete plant in Rockville, Maryland, during the time relevant to this case. It sought a refund from the Washington Suburban Sanitary Commission ("WSSC") for allegedly erroneously assessed and paid water and sewer service charges for the operation of the plant. Lafarge sought initially from the WSSC administrative review and action on its refund request from the WSSC. The WSSC did not hold a hearing or decide the refund request within 180 days of its filing, as it was obliged to do by Maryland Code (1998, 2010 Repl. Vol.), Public Utilities Article, § 25-106 ("PUA"). The same statutory scheme decreed that the refund request was deemed denied by operation of law because of the WSSC's failure to render a timely decision. PUA § 25-106(d)

Lafarge turned to the Circuit Court for Montgomery County for judicial review, noting that its claim was deemed denied by the WSSC's inaction. The Circuit Court concluded that the deemed denial was not supported by substantial evidence in the record and was arbitrary and capricious because the WSSC failed to act timely. As a result, that court remanded the matter to the WSSC with directions to determine and issue an appropriate refund. On direct appeal by the WSSC, a panel of the Court of Special Appeals affirmed unanimously the judgment of the Circuit Court. We granted the WSSC's petition for a writ of certiorari. For the reasons explained below, we affirm.

Factual and Procedural Background

The WSSC operates the public water supply, sewage collection and treatment, and storm water management systems in most of Prince George's and Montgomery counties. This bi-county, state agency levies separate charges for water consumption and sewer services, but its sewerage charges are determined by the water consumption of a user. PUA § 25-503(a). If some of the water consumed by a commercial, industrial, or multi-family residential use is "used exclusively for any purpose that results in the [consumed] water not entering the [WSSC's] sewer system[, ]" however, the WSSC may not impose sewer charges for that portion of the water consumption. PUA § 25-503(d) and (e). To avoid being billed for water consumption not entering into the sewer system, a property or business owner must have a submeter installed to measure the water not discharged into the sewer. Id. After installation of a submeter, the WSSC calculates the sewerage bill by subtracting the water passing through the submeter from the amount of water passing through a primary meter at the site. Id.

The WSSC delivered large quantities of water to Lafarge's ready-mix concrete plant in Rockville. According to Lafarge's refund request, the production of concrete consumes the vast majority of the water delivered to the plant. This water is not discharged into the WSSC's sewer system. The only incoming water discharged into the public sewer system as "sewage" came from an employee bathroom on the premises. Lafarge asserted further in its refund request that the number of employees and activity levels at the plant remained the same over the past decade.

In 2000, at Lafarge's request and expense, the WSSC installed on the property a submeter to measure the water used to make concrete.[1] In August 2005, the submeter was moved elsewhere on-site after the structure housing the submeter (described by Lafarge as a "shed") was destroyed by fire. Lafarge maintained, in its refund request, that the submeter ceased working properly after the fire and relocation, resulting in sewer charges for substantial amounts of water that Lafarge's operations did not discharge into the sewer system.

An internal investigation into sewerage charges following a submeter malfunction in February of 2012 alerted Lafarge for the first time to the charges it came to believe were in error. Before the 2005 fire, the Rockville plant was billed consistently for discharging into the sewer system approximately one-tenth of the plant's total water consumption. After the fire, Lafarge was billed for a water-to-sewage ratio of between 2-to-1 and 1-to-1. Lafarge claims that such indicated sewage discharges were erroneously high. On 16 February 2012, Lafarge contacted initially the WSSC about the erroneous sewerage charges.

On 6 March 2012, Lafarge, pursuant to PUA § 25-106, submitted a letter (with attachments) to the WSSC requesting a refund for the allegedly erroneous charges.[2] On 9 April 2012, Lafarge completed and submitted a refund hearing request form, as directed by the WSSC. The WSSC did not hold a hearing or issue a decision on Lafarge's claim within 180 days, as required by PUA § 25-106(d).[3]

Pursuant to PUA § 25-106(d) and (e), Lafarge petitioned the Circuit Court for Montgomery County for judicial review of the "deemed final rejection" of its claim.[4] The WSSC filed a motion for a stay of the proceedings until it could hold a hearing so that a fuller evidentiary record could be developed and actual final action made. The Circuit Court denied the WSSC's motion.

The WSSC filed thereafter with the court the "agency record." The "record" consisted of, in its entirety, Lafarge's 6 March 2012 letter requesting a refund and the 9 April 2012 hearing request (both of which had supporting documents attached by Lafarge). Lafarge responded with a motion requesting that the court require the WSSC to supplement the "record" with any documents created during the agency's investigation of the claim, if any. The WSSC opposed the motion. On 8 January 2013, the Circuit Court granted Lafarge's motion. Thereafter, the WSSC provided to the Circuit Court additional documents.[5]

On 17 June 2013, the Circuit Court determined that: (1) the WSSC's deemed denial of Lafarge's claim was not supported by substantial evidence; (2) the WSSC's failure to decide the claim within the 180-day window required by PUA § 25-106(d) was arbitrary and capricious; (3) it would be inappropriate to give the WSSC a second opportunity to consider whether to deny the refund request after the agency failed to make a determination within the time-period required by the statute; and, (4) therefore, Lafarge was entitled to a refund in some appropriate amount. The court remanded the matter to the WSSC with directions to issue a refund according to the agency's standard operating procedures.[6] On 20 September 2013, the Circuit Court granted Lafarge's motion to alter or amend the judgment and required additionally that the WSSC issue the refund within 30 days.[7]

On 3 July 2013, the WSSC appealed timely to the Court of Special Appeals. The WSSC did not argue to the intermediate appellate court that Lafarge was not due a refund, but rather attempted to persuade the court that the Circuit Court exceeded its powers in requiring the WSSC to supplement the "record, " as submitted originally, with the agency's investigative file and by making factual determinations absent a proper agency record, agency findings, or agency conclusions. Lafarge retorted that the appellate court was not authorized expressly to consider appeals from the Circuit Court under PUA § 25-106(e).[8]

A panel of the Court of Special Appeals, in an unreported opinion, examined the legislative history of PUA §25-106(e) and held that the Legislature intended to allow further appeals to the Court of Special Appeals from judgments by a circuit court, after judicial review of PUA § 25-106 refund claims. On the merits of the case, however, the intermediate appellate court affirmed.

The WSSC petitioned us to issue a writ of certiorari. The WSSC requested further that we stay enforcement of the mandate of the Court of Special Appeals pending our consideration of the petition. On 19 September 2014, we granted the WSSC's petition and motion to stay the enforcement of the intermediate appellate court's judgment, pending our consideration and disposition of the following questions:

1) Did the Court of Special Appeals err in holding that a [circuit court] may exceed the permissible scope of judicial review when considering a "deemed" rejection of a refund claim under PUA § 25-106?
2) Did the Court of Special Appeals err in upholding the [Circuit Court's] order mandating that WSSC's investigative files be produced as part of the ...

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