Wah Chang v. Duke Energy Trading & Marketing, LLC

507 F.3d 1222, 2007 U.S. App. LEXIS 26797, 2007 WL 4111910

• Court: Court of Appeals for the Ninth Circuit
• Decided: November 20, 2007
• Docket: 05-55367, 05-55369
• Status: Published

Opinions

Opinion by Judge FERNANDEZ; Dissent by Judge PREGERSON.

FERNANDEZ, Circuit Judge:

Wah Chang, a division of TDY Industries, Inc., a California corporation, appeals the district court’s dismissal of its actions against Duke Energy Trading and Marketing, L.L.C., Avista Corporation, and a multitude of other companies (all hereafter referred to as the Energy Companies). Wah Chang, whose complaints arise out of the energy crisis of 2000-2001, seeks to recover damages because of the difference between the rate it was actually charged for electricity, which was a retail rate based upon the wholesale rate, and the rate that it claims a fair rate would have been were it not for manipulation of the market by the Energy Companies and others. Like the actions of those who have come before it, Wah Chang’s actions must fail. We affirm.

BACKGROUND

As pled by Wah Chang,¹ it purchased electricity for its plant in Oregon at retail from PaeifiCorp, a purchaser of electricity in the wholesale spot market. Under its purchase contract, Wah Chang’s rates were indexed to the wholesale spot market price at the California-Oregon border so that price changes in that market were passed on to Wah Chang.

During the 2000-2001 energy crisis, the wholesale price of electricity increased substantially,² and so too did Wah Chang’s costs. It asserts that the reason for the change was rates that were artificially increased by the Energy Companies through their anticompetitive and fraudulent manipulation of the wholesale markets, which affected customers, like Wah Chang, who purchased power in the Pacific Northwest market. Of course, the rates in question were, as a matter of law, a result of tariffs approved by the Federal Energy Regulatory Commission under its market-based rate setting approach. We have described the nature of that approach in our prior forays into this territory. See, e.g., Pub. Util. Dist. No. 1 of Snohomish County v. Dynegy Power Mktg., 384 F.3d 756, 760-61 (9th Cir.2004); Loclcyer, 383 F.3d at 1012-13. Suffice it to say that its legal effect is the same as the effect of any other tariff set by FERC. See, e.g., Snohomish County, 384 F.3d at 761; Pub. Util. Dist. No. 1 of Grays Harbor County Wash. v. IDACORP Inc., 379 F.3d 641, 650-52 (9th Cir.2004); Dynegy, 375 F.3d at 852-53. Because of that, the district court dismissed these actions. Wah Chang appealed.

JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction pursuant to 28 U.S.C. § 1291.

We review a district court’s decision to dismiss a complaint for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) de novo. See Assoc. of Am. Med. Colls. v. United States, 217 F.3d 770, 778-79 (9th Cir.2000).

DISCUSSION

While the problems arising out of the 2000-2001 energy crisis were serious and even scandalous, we have often discussed them at length. Moreover, we have analyzed the market-based approach and have, effectively, said that the claims of those who have come before us must be presented to FERC. Thus, we have turned away purchasers of electricity when they have attempted to bring a direct federal rate action against sellers in the position of the Energy Companies. See Grays Harbor, 379 F.3d at 646-52; Dynegy, 375 F.3d at 849-53. We have done so on the basis of a number of doctrines, including the filed rate doctrine.

That doctrine is a form of deference and preemption, which precludes interference with the rate setting authority of an administrative agency, like FERC. See Dynegy, 375 F.3d at 852-53. It is a far reaching doctrine. As we have explained:

At its most basic, the filed rate doctrine provides that state law, and some federal law (e.g. antitrust law), may not be used to invalidate a filed rate nor to assume a rate would be charged other than the rate adopted by the federal agency in question. The doctrine applies to rates charged by railroads, natural gas companies, and other interstate operators over whom federal agencies have exclusive power to set rates. More relevant here, the Supreme Court has extended the doctrine to the Federal Power Act and to electricity rates.

As further developed, the filed rate doctrine has prohibited not just a state court (or a federal court applying state law) from setting a rate different from that chosen by FERC, but also from assuming a hypothetical rate different from that actually set by FERC.

Transmission Agency of N. Cal. v. Sierra Pac. Power Co., 295 F.3d 918, 929-30 (9th Cir.2002) (TANC) (citations omitted); see also Ark. La. Gas Co. v. Hall, 453 U.S. 571, 578-579, 101 S.Ct. 2925, 2931, 69 L.Ed.2d 856 (1981) (speculation on what Commission “might have done” is prohibited). And, as we have explained, the doctrine applies to the market-based tariffs and rates in question here, even if they were not set in the traditional way. See Snohomish County, 384 F.3d at 761; Lockyer, 383 F.3d at 1012-13; Grays Harbor, 379 F.3d at 650-51; Dynegy, 375 F.3d at 852-53.

The filed rate doctrine’s fortification against direct attack is impenetrable. It turns away both federal and state antitrust actions;³ it turns away Racketeer Influenced and Corrupt Organization Act actions; ⁴ it turns away state tort actions;⁵ and it even turns away state attempts to assert sovereign power to commandeer power contracts.⁶ In short, it turns away attempts like Wah Chang’s, which necessarily hinge on a claim that the FERC approved rate was too high and would, therefore, undermine FERC’s tariff authority through the medium of direct court actions against the Energy Companies.⁷

But, argues Wah Chang, its actions differ from others we have considered because it did not directly purchase wholesale power. Rather, it was a retail customer. That is an asthenic distinction at best. If we do not have a retail customer’s case on all fours with this one, we do have a case standing on three legs, with the fourth just a millimeter off the ground. We have considered a situation where direct retail (residential and commercial) customers of a utility sued it and its FERC regulated pipeline subsidiary for alleged antitrust violations. County of Stanislaus, 114 F.3d at 860. We determined that all of the customers’ claims challenged “a rate that a federal agency [FERC] has reviewed and filed.” Id. at 866. The claims were, therefore, barred by the filed rate doctrine. Id. at 867. Wah Chang’s claims amount to the same thing. Try as it may, Wah Chang cannot avoid the fact that it seeks what amounts to having the courts determine what rates the Energy Companies should have charged instead of the rates they did charge. Wah Chang would inevitably drag the courts into a determination of what rate would be fair and proper. That is precisely what Wah Chang cannot do. See TANC, 295 F.3d at 930 (holding that courts can neither set a rate different from that set by FERC nor assume a different hypothetical rate).

Wah Chang attempts to reinforce its faltering attack on the filed rate fortress by rushing in snippets from various opinions, but those troops are not up to the task assigned to them. For example, Wah Chang points to the exception for antitrust actions by competitors,⁸ but ignores the fact that we have not extended that exception to a third-party customer,⁹ which it admits it is. And, Wah Chang argues, the doctrine was originally designed to prevent price discrimination among customers,¹⁰ which it perceives no danger of here, but, even if its own perception is not obscured, it ignores the fact that an exceedingly strong prop for the doctrine is preservation of the exclusive role of the regulatory agencies.¹¹ Wah Chang’s actions would undermine that role. Still, Wah Chang says, it will not have a separate right of action for damages if it does not have this one,¹² but lack of a damage remedy is not determinative.¹³ We will not speculate about other possible remedies against (or involving) those from whom Wah Chang actually purchased electricity.

Wah Chang does point to a case allowing relief where sham protests were filed with an agency in order to delay rate requests by the plaintiff,¹⁴ but neither the rates ultimately adopted by the agency nor its own procedures were in question.¹⁵ That case avails Wah Chang nothing; it is far removed from the rate claims made here.

Finally, Wah Chang ululates about FERC’s lax oversight, but laxness does not indicate, much less establish, that Wah Chang can turn directly to the courts for rate relief. See Square D, 476 U.S. at 422, 106 S.Ct. at 1929-30; Lockyer, 383 F.3d at 1016. To permit it to do so would make the vices suppressed by the filed rate doctrine recrudescent.

In fine, none of these added points overcomes, or even seriously undermines, the fact that what Wah Chang seeks against the Energy Companies is a deviation in its favor from the FERC-accepted wholesale power rates that Wah Chang, by its own hypothesis, wound up being charged with.¹⁶

CONCLUSION

There may well have been a shadow of wrongdoing brooding over the Pacific Northwest wholesale power market, but Wah Chang cannot succeed in this forum. The filed rate doctrine bars its rate-based action,¹⁷ just as it has barred the similar actions brought by other victims of the 2000-2001 energy crisis. Perhaps Wah Chang can hope to obtain relief for some of its alleged damages, but it cannot realize that hope in this litigation.

AFFIRMED.

1 . Because the district court dismissed Wah Chang's complaints pursuant to Federal Rule of Civil Procedure 12(b)(1), all material factual allegations in the complaint are taken as true. See Whisnant v. United States, 400 F.3d 1177, 1179 (9th Cir.2005); United States v. One 1997 Mercedes E420, 175 F.3d 1129, 1130 n. 1 (9th Cir.1999) (per curiam).

2 . We have outlined the nature of that crisis previously, and need not repeat the history here. See California ex rel. Lockyer v. FERC, 383 F.3d 1006, 1009-10 (9th Cir.2004), certs. denied, - U.S. -, 127 S.Ct. 2972, 168 L.Ed.2d 719 (2007), - U.S. -, 127 S.Ct. 2972, 168 L.Ed.2d 719 (2007); California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 836-37 (9th Cir.2004).

3 . See Square D Co. v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409, 422, 106 S.Ct. 1922, 1929-30, 90 L.Ed.2d 413 (1986); Keogh v. Chi. & Nw. Ry. Co., 260 U.S. 156, 162, 43 S.Ct. 47, 49, 67 L.Ed. 183 (1922); County of Stanislaus v. Pac. Gas & Elec. Co., 114 F.3d 858, 863 (9th Cir.1997).

4 . We have not previously addressed RICO as such. However, we agree with the Second Circuit Court of Appeals that those actions are barred. See Sun City Taxpayers’ Ass'n v. Citizens Utils. Co., 45 F.3d 58, 61-62 (2d Cir.1995) (holding that the filed rate doctrine precludes a RICO action); Wegoland Ltd. v. NYNEX Corp., 27 F.3d 17, 22 (2d Cir.1994) (same); see also Taffet v. S. Co., 967 F.2d 1483, 1485-86, 1488 (11th Cir.1992) (en banc) (same); H.J. Inc. v. Nw. Bell Tel. Co., 954 F.2d 485, 494 (8th Cir.1992) (same).

5 . See Dynegy, 375 F.3d at 836-37, 852-53; TANC, 295 F.3d at 932-33.

6 . See Duke Energy Trading & Mktg., L.L.C. v. Davis, 267 F.3d 1042, 1056-59 (9th Cir.2001).

7 . We note that Wah Chang is not attacking the contract it had with PacifiCorp; it seeks damages against the Energy Companies only. Cf. Grays Harbor, 379 F.3d at 652-53 (an attempt to reform a contract might be sustainable, but damages are not available).

8 . See Cost Mgmt. Servs., Inc. v. Wash. Natural Gas Co., 99 F.3d 937, 945-48 (9th Cir.1996).

9 . County of Stanislaus, 114 F.3d at 866; see also, Cost Mgmt., 99 F.3d at 945 (clarifying that it is speaking about competitors, not customers).

10 . See Keogh, 260 U.S. at 163, 43 S.Ct. at 49-50; Verizon Del., Inc. v. Covad Comms. Co., 377 F.3d 1081, 1086 (9th Cir.2004).

11 . Verizon Del., 377 F.3d at 1086.

12 . See Keogh, 260 U.S. at 162, 43 S.Ct. at 49 (alluding to possible separate right).

13 . See County of Stanislaus, 114 F.3d at 862-67; see also Montana-Dakota Utils. Co. v. Nw. Pub. Serv. Co., 341 U.S. 246, 254-55, 71 S.Ct. 692, 697, 95 L.Ed. 912 (1951); Lockyer, 383 F.3d at 1016.

14 . Clipper Exxpress v. Rocky Mountain Motor Tariff Bureau, Inc., 690 F.2d 1240, 1250-51, 1254 (9th Cir.1982).

15 . Id. at 1266-67.

16 . We are well aware of E. & J. Gallo Winery v. Encana Corp., 503 F.3d 1027 (9th Cir.2007). However, that does not affect our analysis because, as Gallo acknowledges, FERC’s control over the natural gas market is quite different from its control over the electricity market.

17 . Because we hold that the filed rate doctrine completely disposes of this case, we do not address the issues of field and conflict preemption.