In a case at the intersection of antitrust and energy regulation, the Sixth Circuit Court of Appeals ruled that the "filed rate doctrine" did not bar the trial court's jurisdiction over claims for antitrust violations and other federal and state claims. A three-judge appellate panel in Williams v. Duke Energy International, Inc., concluded that the trial court misapplied the filed rate doctrine, reiterating that the doctrine "bars challenges to the reasonableness of a filed rate" and not "payments made outside of the rate scheme."1 The court then deemed the plaintiffs' allegations sufficient to pursue their claim that an electric utility's purported side agreements with certain consumers violated the Robinson-Patman Act of 1936 ("the Act"), 15 U.S.C. § 13, et seq.
The facts leading up to the court's opinion began in 1999, when the Ohio General Assembly enacted legislation to increase competition in the highly-regulated electric industry. The law required electric utility companies to file a transition plan with the Public Utilities Commission of Ohio (PUCO), the state agency charged with regulating the electric industry.
Cincinnati Gas & Electric (CGE), one of the region's electric utility companies, submitted its transition plan for residential and non-residential customers. In 2003, CGE sought to modify the rates it charged to non-residential customers. PUCO ordered the utility to file a rate transition plan to govern the rates it would charge non-residential customers. Some large companies and the Ohio Consumers' Counsel, a consumer advocacy organization, objected to CGE's plan.
CGE eventually reached an agreement with many of the objecting parties, who withdrew their opposition to a revised CGE rate transition plan. The Ohio Consumers' Counsel continued to object, contending that CGE engaged in side agreements with some of the largest objecting companies. The Ohio Consumers' Counsel claimed that the utility offered rebates to some large companies in exchange for their support of a settlement agreement to the PUCO proceeding. It was these alleged side agreements that form the basis of the plaintiffs' lawsuit.
After protracted litigation before the administrative agency and the Ohio Supreme Court,2 a group of individuals and businesses brought suit in federal court against Duke Energy International, alleging a violation of the Act, which makes it unlawful for persons "engaged in commerce . . . to discriminate in price between different purchasers of commodities of like grade and quality . . . .," and other state and federal claims.3
The Trial Court Held that the Filed Rate Doctrine Bars Jurisdiction
The trial court granted the defendants' motion to dismiss the case, finding that the filed rate doctrine precluded the court's subject-matter jurisdiction.4 The filed rate doctrine prevents a challenge to the reasonableness of the rates charged by regulated entities if the rates have been approved by an appropriate regulatory agency.5 The court ruled that "whether payments are rebates or kickbacks depends upon an analysis of the filed rate. A party claiming rate discrimination is contending that the effective rate charged one party is too low, while the charges to the plaintiffs are too high."6 The trial court found that analyzing the rate to determine whether any side agreements qualified as illegal price-fixing agreements would implicate the filed rate doctrine.
The 6th Circuit Reversed, Concluding that the Courts Have Jurisdiction to Address Plaintiffs' Antitrust Claim
In a 3-0 decision, a panel of the Sixth Circuit Court of Appeals reversed the trial court decision. The court stated "Plaintiffs' challenge does not concern the particular rate set by the PUCO, but rather payments made outside of the rate scheme." Under this reasoning, the courts had jurisdiction over the case because the payments in question were not duly submitted to the regulatory agency but made pursuant to various side agreements, which were not approved by PUCO. According to the court, the plaintiffs did not challenge the reasonableness of the rate set by PUCO; they argued that defendants conspired to aid certain favored companies. As a result, the court could not dismiss the suit for lack of jurisdiction.
After concluding that the federal court had jurisdiction over the case, the appellate court evaluated the plaintiffs' allegations, including the alleged violation of the Act. First, the court found that electricity is a commodity covered by the Act. Other courts have concluded that electricity is not a commodity under the statute.7 Second, the judges rejected the defendants' argument that the Act did not apply because the plaintiffs and the alleged favored customers do not compete in the electricity market. The court found that plaintiffs were injured when they needed to pay more for electricity than other competitors because of the rebates provided to some large customers. Third, the court ruled that the Act does not require that discrimination must have harmed competition, but only that there is a reasonable probability that it may have such an effect. Fourth, according to the court, plaintiffs did not need to identify the favored or disfavored purchasers because discovery had not taken place, and one alleged favored purchaser had already been identified.
Issues to Consider
The court of appeals remanded the case to the trial court, allowing the plaintiffs to pursue their case. Although the case is still pending before the district court, the Sixth Circuit's opinion raises important issues that regulated companies should consider. The filed rate doctrine may not always preclude jurisdiction over a claim involving an agreement to settle a disputed rate proceeding. Electric utilities should also note that the Sixth Circuit, and some courts across the country, classify electricity as a commodity that can be subject to the Act. Finally, any company should consider whether rebates to a specific category of customers implicates the Act.
1 Williams v. Duke Energy Int'l, Inc., 681 F.3d 788, 797 (6th Cir. 2012).
2 See Ohio Consumers' Counsel v. Pub. Util. Comm'n, 856 N.E.2d 213 (Ohio 2006); Ohio Consumers' Counsel v. Pub. Util. Comm'n, 904 N.E.2d 853 (Ohio 2009).
3 15 U.S.C. § 13; see Williams v. Duke Energy Int'l, Inc., 606 F. Supp. 2d 783 (S.D. Ohio 2009), rev'd, 681 F.3d 788 (2012). CGE is the predecessor to Duke Energy International and Duke Energy Corp. Id. at 785.
4 Williams, 606 F. Supp. 2d at 794.
5 See, e.g., Louisville & Nashville R.R. Co. v. Maxwell, 237 U.S. 94 (1915).
6 Williams, 606 F. Supp. 2d at 790.
7 See, e.g., City of Newark v. Delmarva Power & Light Co., 467 F. Supp. 763, 772–74 (D. Del. 1979).
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