Wah Chang v. Duke Energy Trading & Marketing, LLC

PREGERSON, Circuit Judge,

dissenting:

These cases require us to decide whether the filed rate doctrine bars the claims of retail electricity consumers who do not directly challenge FERC’s established rates. Because I believe we should not extend the reach of this flawed doctrine, I dissent.

The majority holds that the filed rate doctrine bars the claims of Wah Chang, a retail consumer of electricity. The filed rate doctrine, a doctrine of agency deference, prohibits courts from invalidating FERC-established rates. California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 852-53 (9th Cir.2004). Pursuant to this doctrine, we have required those who contest a filed rate to first bring their claims before FERC. See, e.g., Pub. Util. Dist. No. 1 of Snohomish County v. Dynegy, 384 F.3d 756, 762 (9th Cir.2004); California ex rel. Lockyer v. FERC, 383 F.3d 1006, 1012 (9th Cir.2004). In this case, however, the plaintiff is not directly contesting a filed rate, and it is not clear that FERC has jurisdiction to hear Wah Chang’s claims.

*1228I.

Wah Chang, a chemical manufacturer with a plant in Oregon, contracted with PacifiCorp, its local electricity utility, to provide electricity for its plant. Under the terms of the agreement, the price of electricity was indexed to spot market wholesale prices at the California-Oregon border, as reported by the Dow Jones California-Oregon Border Electricity Price Index (“Dow Jones COB Index”). Wah Chang alleges that the Defendants engaged in illegal practices that artificially raised electricity prices throughout the Pacific Northwest, including at the delivery points considered by the Dow Jones COB Index.

Wah Chang did not purchase electricity from the Defendants, nor does Wah Chang challenge any filed rates. Instead, Wah Chang alleges that (1) the Defendants’ illegal market manipulations artificially increased filed rates, (2) these filed rates influenced the Dow Jones COB Index, (3) Wah Chang’s contract with PacifiCorp tied energy prices to the Dow Jones COB Index, and thus (4) Wah Chang paid higher energy prices as a result of the Defendants’ illegal market manipulations.1

Wah Chang is not asking the court to calculate what the filed rates should have been but instead is seeking acknowledgment that the Defendants’ fraudulent actions and anti-trust market manipulations adversely affected Wah Chang’s retail contract with PacifiCorp. Although Wah Chang alleges injury resulting from the Defendants’ actions, its claims arise out of a retail contract between Wah Chang and PacifiCorp, and not from a wholesale contract between Wah Chang and any of the Defendants.2 Thus, Wah Chang’s claims do not fall directly under the purview of the filed rate doctrine because Wah Chang is not seeking a judicial review of the validity of the filed rate, nor is Wah Chang asking the court to establish what the filed rate should have been.

II.

We have deferred to FERC cases arising out of the 2000-2001 energy crisis where the eases involved evaluation of FERC-established filed rates. FERC’s *1229jurisdiction in such situations is clear. It is not clear, however, that FERC has jurisdiction over Wah Chang’s claims.

Under the Federal Power Act (“FPA”), FERC has jurisdiction over facilities engaged in “the transmission of electric energy in interstate commerce and [ ] the sale of electric energy at wholesale in interstate commerce.” 16 U.S.C. § 824(b)(1).3 However, “[rjetail sales of electricity and wholesale intrastate sales are within the exclusive jurisdiction of the States.” Duke Energy Trading & Mktg., L.L.C. v. Davis, 267 F.3d 1042, 1056 (9th Cix.2001).

Wah Chang purchased power for its chemical manufacturing facility from Paci-fiCorp, its local electric utility. This transaction was a retail intrastate purchase, not a wholesale interstate transaction subject to FERC’s regulatory oversight. Wah Chang did not contract with the Defendants and does not seek a refund of filed rates. Therefore, it is not clear that FERC could entertain Wah Chang’s claim for relief.4 When FERC does not have jurisdiction over a claim, the rationale for the filed rate doctrine does not apply.

III.

The majority argues that granting Wah Chang relief will necessarily require the court to determine what the filed rate should have been. Maj. Op. 1225-26. But, there is no need to do that to calculate damages in this case.

For example, Wah Chang suggests that the District Court could calculate a monetary remedy based on the difference between the Dow Jones COB rate and an existing alternate uncorrupted rate under which Wah Chang could have purchased power. Wah Chang contends that if it had not executed the retail contract tying prices to the Dow Jones COB Index, it would have purchased power from Pacifi-Corp under a default retail tariff established by the Oregon Public Utilities Council (“OPUC”). Thus, the District Court could calculate Wah Chang’s damages based on the difference between the rates Wah Chang paid under the retail contract with PacifiCorp and the rates it would have paid under the OPUC default retail tariff. This method of computing damages would not require the District Court to calculate what the appropriate rate should have been absent the Defendants illegal conduct.5

IV.

In sum, Wah Chang’s position as a outsider to the chain of transactions flowing from FERC rates is important in three respects. First, because Wah Chang did not contract with any of the Defendants, it is not clear that Wah Chang could pursue its claim before FERC. Second, because Wah Chang is not a customer of a regulated entity, an award of relief to Wah Chang does not raise the specter of price discrimination among competing customers. Third, because Wah Chang did not purchase power from the Defendants, it does *1230not seek, and would not benefit from, a refund of a filed rate.

Wah Chang did not directly participate in transactions regulated by FERC and does not seek to invalidate a filed rate approved by FERC. Nonetheless, the majority invokes the filed rate doctrine to avoid impinging on FERC’s authority to regulate wholesale interstate power sales. I do not agree that Wah Chang’s claims would require a court to review filed rates approved by FERC.

One other important point: the original purpose of the filed rate doctrine is to ensure that all those who compete in the same market and transfer their products by rail are charged at the same rate. The doctrine has been extended to prevent price discrimination in the electricity industry. See Mont-Dakota Utils. Co. v. Nw. Pub. Serv. Co., 341 U.S. 246, 251-52, 71 S.Ct. 692, 95 L.Ed. 912 (1951). The purpose of the filed rate doctrine is not to protect companies engaging in illegal antitrust manipulative practices.

I would reverse the district court’s dismissal and remand for further proceedings.

. I am also aware of E. & J. Gallo Winery v. Encana Corp., 503 F.3d 1027 (9th Cir.2007). One of the issues presented in E. & J. Gallo was whether all the rates reported in the natural gas indices were authorized by FERC. The court conducted an in-depth analysis of the Natural Gas Policy Act of 1978, Pub.L. No. 95-621, 92 Stat. 3352 (codified as amended at 15 U.S.C. §§ 3301-3432 (1994)), and the Wellhead Decontrol Act of 1989, Pub.L. No. 101-60, 103 Stat. 157, to determine that certain rates reported were not FERC-author-ized. Thus, the court held that the plaintiff, a retail purchaser of natural gas, was not barred from bringing damages claims to the extent that they were based on rates derived from transactions that were not subject to FERC's jurisdiction.

Here, the issue presented is different. It is not whether the Dow Jones COB Index included reports of market rates that were not authorized by FERC; the issue is whether the Defendants’ illegal practices affected filed rates, in turn influencing the Dow Jones COB Index. For this reason, and because FERC’s control of the natural gas market is different from its control over the electricity market, I agree that E. & J. Gallo does not control the outcome of this case.

. The majority suggests that the present case is controlled by County of Stanislaus, 114 F.3d 858, 863 (9th Cir.1997), in which we held that the filed rate doctrine barred customers’ antitrust claims against a public utility and its pipeline subsidiary. The present case is distinguishable. Although the plaintiffs in County of Stanislaus were also retail consumers of a public utility, they directly challenged a filed rate. Id. at 863. By contrast, Wah Chang alleges it was injured because its retail contract with PacifiCorp was indexed to the Dow Jones COB Index, not to a specific filed rate.

. The federal government could regulate retail sales and wholesale intrastate sales under its expansive Commerce Clause power. Congress has not chosen to do, however, but has limited FERC’s reach to interstate transmission of electricity and wholesale interstate transactions.

. Although the Defendants argue that Wah Chang intervened in related FERC proceedings, the majority denied a request that we take judicial notice of those proceedings. Therefore, we cannot determine whether FERC has agreed to hear any of Wah Chang’s claims.

.This is but one example of a potential damage calculation a district court could consider on remand. Wah Chang also asserts damage claims based on consequential damages, calculation of which would not necessarily involve examination of any rates.