Gov. Ned Lamont.Photo by Michael Marciano/ALM

A Manhattan-based federal appeals court on Tuesday refused to revive a lawsuit by Connecticut energy customers who claimed the state's decision to transfer millions of dollars from two dedicated energy funds to the general coffers violated the U.S. Constitution.

A three-judge panel of the U.S. Court of Appeals for the Second Circuit sided with Connecticut Gov. Ned Lamont and state Treasurer Shawn Wooden in finding that the plaintiffs, a group of individuals, energy-efficiency businesses and nonprofits, had no contractual right to control how the funds were spent. Because the transfer simply reallocated state revenue, the plaintiffs were barred by the taxpayer-standing doctrine from bringing their lawsuit, the panel said.

The ruling upheld a lower court's decision from October 2018 that nixed claims for breaches of contract and the Equal Protection Clause of the Constitution.

The plaintiffs had argued that a 2018 law authorizing the transfer of $77.5 million in "tariffs" and other charges paid by two state-created energy funds had impaired their contractual rights to have the money spent on conservation and green energy programs.

The Second Circuit, however, found that service contracts between the energy customers and investor-owned electric distribution companies were limited in scope, and the payments were governed by state statutes, which are subject to change by the Legislature.

"Furthermore, there is nothing in the language of the tariffs that explicitly limits how money is to be spent once deposited into an energy fund," Judge Peter J. Hall wrote on behalf of the court.

"The express language of the tariffs, therefore, does not grant appellants the right to control transfers from the energy funds to the general fund," he said.

With regard to the equal protection claim, Hall said, plaintiffs had, at best, a "unilateral expectation" of how the revenues would be spent and not a "clear entitlement" that would vest them with a property interest in the funds.

"In sum, because the transfer of previously collected revenue from the energy funds to the general fund is not a transfer of appellants' property to the state, it cannot constitute a tax," Hall said in the 20-page opinion. "At its core, appellants' argument is that funds previously collected for green energy and conservation initiatives will now be expended for another use. But taxpayers do not have standing to challenge such expenditures."

Hall was joined in the decision by Judges Ralph K. Winter Jr. and Richard J. Sullivan.

Attorney General William Tong, whose office represented the state officials, welcomed the ruling in a brief statement Tuesday.

"I want to thank the attorneys in my office who fought hard at the district court and before the Second Circuit, and we are pleased that the court agreed with our position," he said.

An attorney for the plaintiffs did not immediately respond to an email seeking comment on the ruling.

The governor, treasurer and state Comptroller Kevin Lembo were represented on appeal by Assistant Attorney General Phillip Miller.

The plaintiffs were represented by Benjamin Wattenmaker and John M. Wolfson of Feiner Wolfson in Hartford, Stephen J. Humes of Holland & Knight and Roger Reynolds of the Connecticut Fund for the Environment.

The case, before the Second Circuit, was captioned Colon de Mejias v. Lamont.

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