Wednesday, July 1, 2026
Tia Hilton et al. v. City of Lorain et al., Case No. 2025-1334
Ninth District Court of Appeals (Lorain County)
Perrigo Sales Corporation v. Patricia Harris, tax commissioner of Ohio et al., Case No. 2025-1477
Ohio Board of Tax Appeals
In re Application of Ohio Power Co., Case Nos. 2025-1240 and 2025-1241
Public Utilities Commission of Ohio
Should Trial Court Have Certified City Water Customers for Class-Action Lawsuit?
Tia Hilton et al. v. City of Lorain et al., Case No. 2025-1334
Ninth District Court of Appeals (Lorain County)
ISSUE: Did a trial court conduct the required rigorous analysis when denying class certification to residents claiming a city overcharged them for water and sewer services?
BACKGROUND:
In March 2020, Tia Hilton and two other Lorain County residents filed a lawsuit against the city of Lorain and several other city and county governmental bodies. The residents proposed a class action lawsuit against the local governments for excessive charges for water and sewer service dating back to 2012. As the suit was filed on the eve of the COVID-19 pandemic, the litigation faced significant delays at the trial court level.
Hilton and the others listed the class as “ratepayers.” They identified that the city has 64,000 water users, with payments made through 23,000 water accounts. Relying largely on a state auditor’s report that found the city’s rates are high compared to other providers, the ratepayers claimed they are due refunds. The lawsuit also cited several other actions taken by the city that led to excessive rates being charged to all residential and business customers.
In 2024, the Lorain County Common Pleas Court issued an opinion on whether customers could qualify to be certified as a class to move forward with their lawsuit. The trial court noted seven requirements are needed to meet class-action status under the Ohio Rules of Civil Procedure, and that the trial court must conduct a “rigorous analysis” of the factors. The trial court found that the ratepayers met five of the seven standards but failed to prove two.
The trial court wrote that the term “ratepayers” was unclear and that the class failed to meet the requirement that there be an identifiable and unambiguous class. The trial judge also found that the class failed to meet the “predominance” requirement because they didn’t show how a common question of law would resolve the issue for all class members. Instead, the trial court found that individual issues regarding who actually paid the bills — property owners, or tenants — and how much they paid, dominated the dispute.
The ratepayers appealed to the Ninth District Court of Appeals. In a 2-1 decision, the appeals court ruled that the trial judge’s opinion was confusing and contradictory. It concluded that the trial court failed to conduct a rigorous analysis and remanded the case for further proceedings.
Lorain appealed the decision to the Supreme Court of Ohio, which agreed to hear the case.
Citizen Can’t Establish Class, City Argues
Lorain maintains that the term “ratepayer” lacks an accepted dictionary definition and isn’t defined in state statute. The city argues the citizens have failed to define who would qualify as members of the class and how they would prove they are members. The citizens didn’t point to any records or documents they possess to determine class membership, the city asserts. The citizens are relying on a series of actions taken by local governments over the years to cobble together a claim of being overcharged, without demonstrating how those actions commonly affected a class of customers, Lorain argues.
The trial court conducted a rigorous analysis, going through each requirement for establishing a class, the city asserts. Whether the Ninth District agreed with the findings or not, the appeals court can’t overturn the trial court’s decision if it finds the analysis was rigorous, the city argues. The trial court thoroughly examined all aspects of the citizens’ claims and explained in detail the reasons for rejecting their claims, Lorain asserts.
In addition, the city argues the trial court's key findings might have seemed contradictory, but as the dissenting opinion in the Ninth District noted, the decision as a whole addresses some of the perceived contradictions. The city maintains the essential problem with the citizens’ complaint is that they failed to prove that, as a class, they were all injured by the city’s actions to set water and sewer rates. Additionally, Lorain argues the trial court correctly noted there is no common evidence that can predominate over the entire class to prove an injury. The proof would come from individual cases, which might vary in explaining any injury to the customer, making the matter unsuitable for a class-action lawsuit, the city concludes.
Class Should Be Certified, Resident Maintains
The trial court was able to recognize an identifiable class of ratepayers in part of its findings and should have had no trouble establishing an identifiable and unambiguous group that can pursue a class-action lawsuit, Hilton argues. “Ratepayers” are persons, both individuals and businesses, who pay water department rates for services, she asserts. The trial court unnecessarily raised questions about which entities actually paid for the services, Hilton asserts, confusing the issue about who is eligible to sue. Whoever paid isn’t an issue for the court, because the city has an identifiable class of 23,000 customers who receive bills for service, she maintains. Those are contracts with people who are obligated to pay for services, she argues. Whether tenants or property owners actually paid the bills is an issue for the class-action members to resolve among themselves once refunds are issued if the lawsuit prevails, she notes.
The trial court’s analysis showed the residents met several standards to qualify as a class, including that the number of potential class members justified a class-action lawsuit and that Hilton and the other two residents were typical of the persons making a claim against the city. The city’s argument that members are too difficult to identify is wrong, Hilton asserts, and the city’s own laws state that property owners are responsible for payment of water services. The city has records of every property owner for the period covered by the lawsuit and can identify who a ratepayer is, Hilton maintains.
Hilton also argues that a single issue predominates over the whole class. If the suit moves forward, the class will prove that a series of actions taken by the city led to an excessive charge. Once the overcharge rate is determined, all class members will receive the same rate reduction, Hilton argues. The amount of damages for each member will vary based on amounts paid; however, the evidence of city mismanagement justifying the refund is the same for all ratepayers, she concludes.– Dan Trevas
Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.
Contacts
Representing Tia Hilton et al.: Gerald Phillips, gwp@phillips-lpa.com
Representing City of Lorain et al.: Richard Panza, rpanza@wickenslaw.com
Does Pharmaceutical Company Pay Business Tax on Drug List Prices or Actual Prices?
Perrigo Sales Corporation v. Patricia Harris, tax commissioner of Ohio et al., Case No. 2025-1477
Ohio Board of Tax Appeals
ISSUE: Does calculation of Ohio commercial activity tax (CAT) require gross receipts to include amounts invoiced to prescription drug wholesale distributors or actual prices paid by retail pharmacies?
BACKGROUND:
Perrigo Sales Corporation is a manufacturer and distributor of generic pharmaceutical products. Perrigo ships its prescription drugs to wholesale distributors, such as AmerisourceBergen, Cardinal Health, Keysource, and McKesson. These distributors then deliver the drugs to their customers, which include retailers like Walgreens and CVS.
For tax years 2016 through 2018, the Ohio tax commissioner determined that Perrigo underpaid its commercial activity tax (CAT) in Ohio by $304,023. The tax commissioner stated that Perrigo also owed $38,387 in interest and $13,681 for a penalty.
The CAT is a tax on the privilege of doing business in Ohio. The commissioner explains that CAT in Ohio is based on “gross receipts.” In other states and at the federal level, businesses are taxed on a different basis related to income.
Disagreement Centers on ‘Chargebacks’
The dispute with Perrigo focuses on “chargebacks.” Perrigo distributes the prescription drugs to wholesale distributors based on an agreement for the “wholesale acquisition cost,” or WAC. Perrigo also contracts with retail pharmacies to provide the drugs at a set price. Those prices typically aren’t the same. When the distributor sells the drugs to retail pharmacies, it submits a chargeback to Perrigo to adjust the amount the distributor pays, given any difference between the WAC and the price the pharmacies paid.
The tax commissioner concluded that the chargeback adjustments couldn’t be deducted from Perrigo’s gross receipts when determining the basis for what it owed in CAT.
Perrigo appealed the tax commissioner’s conclusions to the Board of Tax Appeals (BTA). The board found that the distributor’s WAC is a list price, not the actual price of the drugs. The chargebacks adjust the WAC to reflect the purchase prices actually paid by the retail pharmacies. The board concluded that Perrigo could reduce the WAC by the chargebacks when calculating the company’s gross receipts for the CAT.
The tax commissioner appealed to the Supreme Court of Ohio, which must accept the appeal of the BTA decision. Tax appeals are typically referred to a master commissioner for oral argument. However, the Supreme Court granted Perrigo’s request to hold oral argument before the full court.
Commissioner Argues Invoiced Amounts Are Basis for Business Tax
The tax commissioner contends that Perrigo sends invoices to the distributors showing the WAC prices. These invoiced amounts are gross receipts and should be used to calculate the CAT, the commissioner maintains. Perrigo shouldn’t have subtracted the chargebacks from the invoiced WAC amounts, because state law in R.C. 5751.01(F) prohibits a company from deducting from its gross receipts “the costs of goods sold or other expenses incurred,” the commissioner argues.
The commissioner also asserts that the BTA improperly viewed gross receipts for the CAT to be the same as federal gross income. Gross income allows for adjustments, while gross receipts do not, and Perrigo wasn’t entitled to adjust its gross receipts for the chargebacks, the commissioner concludes.
Pharmaceutical Company Counters That Purchase Prices Are Used to Calculate Tax
Perrigo disagrees, arguing that gross receipts are based on the “actual amount realized” by the company based on the contracts establishing the drug prices. The language “actual amount realized” is part of the R.C. 5751.01(F) definition of “gross receipts.” The company asserts that the actual amount realized in this case is the price actually charged to the retail pharmacies when they purchase the drugs. The CAT can’t be calculated based on the WAC, which is a theoretical invoice amount, Perrigo maintains. Perrigo states that it never receives the WAC amounts that are invoiced, and the company, the distributors, and the retail pharmacies all understand that the WAC isn’t the actual sales price of the drugs.
Perrigo also contends that the chargebacks aren’t an improper deduction as an expense or cost of goods sold. Instead, the chargebacks are part of a pricing mechanism that ultimately results in the amount the company is paid, Perrigo concludes.
State Chamber of Commerce Submits Arguments
An amicus curiae brief supporting Perrigo’s positions was submitted by Ohio Chamber of Commerce.
– Kathleen Maloney
Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket.
Contacts
Representing Patricia Harris, tax commissioner of Ohio: Jeffrey Lipps, lipps@carpenterlipps.com
Representing Perrigo Sales Corporation: Paul Melniczak, pmelniczak@reedsmith.com
Can Utility Own and Operate Data Center’s On-Site Electric Generation System?
In re Application of Ohio Power Co., Case Nos. 2025-1240 and 2025-1241
Public Utilities Commission of Ohio
ISSUE: Can an electric utility install, own, operate, and maintain an on-site fuel cell system for a data center operator that is fully paid for by the operator and isn’t connected to the utility’s electric grid?
BACKGROUND:
In 2019, state lawmakers enacted former R.C. 4928.47, which allowed the Public Utilities Commission of Ohio (PUCO) to approve agreements between an electric distribution utility and a commercial customer “for the purpose of constructing a customer sited renewable energy resource” to supply a substantial portion of electricity to the commercial customer. The law has since been repealed.
In February 2025, Ohio Power Company (AEP Ohio) sought PUCO approval to assist Amazon Data Services’ and Cologix with their Johnstown data centers. AEP proposed to install, own, operate, and maintain solid oxide fuel cell systems located on Amazon’s and Cologix’s properties. The systems are fueled by natural gas and qualify under Ohio law as a renewable energy resources. AEP Ohio is considered an “electric distribution utility (EDU).” AEP’s applications noted that Bloom Energy would construct and install the systems, and Amazon and Cologix would pay Bloom. AEP would then own and operate the system, sending electricity to the data centers.
The Ohio Manufacturers’ Association Energy Group objected to the proposals. The PUCO declined the group’s request to conduct a hearing on the applications. In May 2025, it approved the agreement between AEP and the data center operators. The manufacturers' group appealed the decision to the Supreme Court of Ohio, which is required to hear this type of appeal
Law Forbids Utility Ownership of Fuel Cell System, Group Asserts
The manufacturers argue the agreements contradict Ohio’s 25-year electric deregulation law. An EDU like AEP is supposed to distribute and transmit electricity and must operate separately from electricity generation providers, the group explains. The arrangements with Amazon and Cologix violate two state laws: one that limits AEP’s role in helping a commercial customer construct a renewable energy resource, and the corporate separation law that aims to keep AEP’s monopoly distribution business separate from its generation services.
The group argues the timing of the approvals demonstrates AEP intended to use its monopoly distribution power to coerce companies into giving AEP ownership of their generation resources. At the time, AEP had a self-imposed moratorium on expanding or adding data centers, saying its grid couldn’t accommodate the massive electrical needs of the companies. The manufacturers argue that the only way AEP would support Amazon’s and Cologix’s growth is if it granted AEP ownership rights to the fuel cell systems. The move meant large commercial customers and data centers that wanted to expand could do so only with AEP’s permission, and those that did business with AEP would get preferential treatment, the group maintains.
The ability for AEP to use its distribution role to profit from generation is contrary to what Ohio lawmakers envisioned when they deregulated the electric generation market, the manufacturers assert. The law only allows AEP to help “construct” a facility and doesn’t allow it to own and operate the system, the group says. The PUCO’s approval violates the plain language of the law, and it contradicts the separation of the distribution and generation businesses of a utility that is outlined in R.C. 4928.17.
The group notes that the PUCO has lifted AEP’s data center moratorium after approving a separate plan to address data center expansion. However, the group contends that AEP can still grant favorable treatment to some customers if the company's distribution arm owns a commercial customer’s generation facilities.
Plant Ownership Permitted, Commission Maintains
The PUCO argues that the manufacturers are taking one word – “constructing” – out of context to conclude that AEP can’t assist Amazon and Cologix in developing and operating the fuel cell systems. Looking at the statute as a whole and the provisions in state law governing EDUs, the commission properly approved the agreement between AEP and the companies, the PUCO asserts. R.C. 4928.47 specified that EDUs could enter into long-term agreements with commercial businesses to construct renewable energy resources, the commission explains, and the language indicates that lawmakers meant “constructing” to mean developing, owning, and operating on-site generation services.
AEP is granted limited authority to own the generation facilities because they are fully paid for by the commercial user and supply electricity only to the site, the commission maintains. The fuel cell system isn’t connected to the grid and doesn’t receive or supply electricity to other AEP customers, the commission notes. The PUCO argues that the law specifically forbids EDUs from using any ratepayer funds to operate on-site generation facilities and that it has no impact on the competitive nature of electric generation in an EDU’s service territory.
The commission maintains the corporate separation law, R.C. 4829.17, restricts the ownership of generation facilities used to supply competitive services. The on-site plants aren’t competitive services, so the law doesn’t restrict AEP from owning the systems, the commission asserts. The PUCO also argues the arrangement is not anti-competitive because any commercial business in AEP’s service territory can contract with the utility to construct on-site generation resources. Businesses are also free to arrange for other companies to construct and operate on-site generation without AEP’s involvement, the commission notes.
Agreement Serves Customer Needs, Utility Asserts
The Supreme Court allowed AEP to intervene in the case and argue on its own behalf. The company notes these “behind the meter” electric generation systems allow a commercial business to meet its power needs without burdening any other AEP customers. The systema are fully paid for and used by Amazon and Cologix, and the law forbids AEP from passing on any of the costs of operating the fuel center systems to its other customers, the utility notes.
AEP denies the manufacturers’ allegation that the utility was picking and choosing who could expand during its moratorium and that the moratorium didn’t affect companies that wanted to increase their own generation capacity. With the moratorium lifted, Amazon and other data center operators are granted a specified percentage of electricity they can receive from the electric grid, and the new on-site generation technologies will help the centers meet their power needs, AEP notes.
Friend-of-Court Brief Submitted
An amicus curiae brief supporting the PUCO was submitted by the Ohio Chamber of Commerce.
– Dan Trevas
Docket entries, memoranda, briefs (including amicus briefs), and other information about this case may be accessed through the case docket (2025-1240 and 2025-1241).
Contacts
Representing the Ohio Manufacturers’ Association Energy Group: Kimberly Bojko, bojko@carpenterlipps.com
Representing the Public Utilities Commission of Ohio from the Ohio Attorney General’s Office: Amy Botschner O’Brien, amy.botschnerobrien@ohioago.gov
Representing the Ohio Power Company: Steven Nourse, stnourse@aep.com
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