Breiding v. Eversource Energy ( 2019 )

United States Court of Appeals
For the First Circuit
No. 18-1995
SCOTT BREIDING; AMY POLLUTRO; MIKAELA ORTSTEIN-OTERO; BENJAMIN
ROSE; MARGARET LEWIS; RICHARD LEWIS; ERIC LONG; PETER STEERS;
BRADFORD KEITH; JOHN ODUM; DAVID LEIGHTON; DONNA CORDEIRO;
JANICE ANGELILLO; ANNA MARIA FORNINO; MICHELE CASSETTA; JUDY
CENNAMI, on behalf of themselves and others similarly situated,
Plaintiffs, Appellants,
ERIK ALLEN; NICHOLAS CORREIA; JANICE BRADY; OPAL ASH;
ROBERTO PRATS; MARK LEJEUNE,
Plaintiffs,
v.
EVERSOURCE ENERGY, a Massachusetts voluntary association;
AVANGRID, INC., a New York corporation,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Denise J. Casper, U.S. District Judge]
Before
Torruella, Selya, and Kayatta,
Circuit Judges.
Thomas M. Sobol, with whom Kristie A. LaSalle, Bradley
Vettraino, Steve W. Berman, Hagens Berman Sobol Shapiro LLP, David
F. Sorensen, Michael Dell'Angelo, Glen L. Abramson, and Berger
Montague PC were on brief, for appellants.
Whitney E. Street, Block & Leviton LLP, Sandeep Vaheesan, and
Open Markets Institute on brief for Open Markets Institute as
amicus curiae.
Richard P. Bress and John D. Donovan, Jr., with whom Shannen
W. Coffin, Douglas G. Green, Steptoe & Johnson LLP, Chong S. Park,
Ropes & Gray LLP, Marguerite M. Sullivan, Allyson M. Maltas,
Caroline A. Flynn, and Latham & Watkins LLP were on brief, for
appellees.
September 18, 2019
KAYATTA, Circuit Judge. Eversource Energy and Avangrid,
Inc. ("the defendants") are two large energy companies that
purchase natural gas directly from producers and then resell that
gas to retail natural gas consumers throughout New England. In
order to transport the natural gas that the defendants purchase
from far-away producers to their own, localized system of pipeline
infrastructure for delivery to their customers, the defendants
reserve transportation capacity along the interstate Algonquin Gas
pipeline. The plaintiffs, a putative class of retail electricity
customers in New England, allege that the defendants strategically
reserved excess capacity along the Algonquin Gas pipeline without
using or reselling it. This conduct, they claim, unduly
constrained the volume of natural gas flowing through New England,
thereby raising wholesale natural gas prices, which in turn
resulted in higher retail electricity rates paid by New England
electricity consumers.
The plaintiffs brought this lawsuit in the U.S. District
Court for the District of Massachusetts, asserting that the
defendants' conduct violated section 2 of the Sherman Act, 15
U.S.C. § 2, and various state antitrust and consumer-protection
laws. The district court dismissed the plaintiffs' claims as being
barred by the filed-rate doctrine and, alternatively, for lack of
antitrust standing and the plaintiffs' failure to plausibly allege
a monopolization claim under the Sherman Act. Although our
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reasoning differs from that of the district court in several
respects, we agree that the filed-rate doctrine presents an
insurmountable hurdle for the plaintiffs' federal and state-law
claims. We therefore find no need to reach the district court's
alternative grounds for dismissal.
I.
Because the district court disposed of the plaintiffs'
claims on a motion to dismiss for failure to state a claim, Fed.
R. Civ. P. 12(b)(6), "we take as true all well-pleaded facts in
[their] complaint[], scrutinize them in the light most hospitable
to [their] theory of liability, and draw all reasonable inferences
therefrom in [their] favor." Fothergill v. United States, 566
F.3d 248, 251 (1st Cir. 2009). In so doing, we may also consider
"facts subject to judicial notice, implications from documents
incorporated into the complaint, and concessions in the
complainant's response to the motion to dismiss." Arturet-Vélez
v. R.J. Reynolds Tobacco Co., 429 F.3d 10, 13 n.2 (1st Cir. 2005).
We first trace the regulatory contours of the relevant
markets for natural gas and electricity before turning to the
details of the plaintiffs' antitrust and unfair competition
claims.
A.
"Wellhead" sales comprise the first step in the chain of
market transactions that readies extracted natural gas for
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consumption in the form of retail electricity. At this initial
stage, natural gas producers sell natural gas to direct purchasers
through gas futures contracts, in which the producer agrees to
sell a specific quantity of natural gas at some fixed time in the
future to the direct purchaser. Load-distribution companies
(LDCs) -- those entities that locally distribute natural gas,
primarily to retail consumers who use the gas for heating and
cooking -- have a relatively predictable need for natural gas and,
thus, often make use of this type of contract.1 Consumers with
more variable demand for natural gas, such as power generators,
often purchase gas on the secondary wholesale "spot market." The
spot market for natural gas allows direct purchasers that find
themselves with rights to excess, unneeded natural gas to resell
those rights in the immediate or near future.
The Federal Energy Regulatory Commission (FERC) is the
agency charged with implementing and executing the Natural Gas Act
(NGA), "a comprehensive scheme of federal regulation of 'all
wholesales of natural gas in interstate commerce.'" N. Nat. Gas
Co. v. State Corp. Comm'n, 372 U.S. 84, 91 (1963) (quoting Phillips
Petroleum Co. v. Wisconsin, 347 U.S. 672, 682 (1954)); see also 15
U.S.C. § 717c(a) (tasking FERC with ensuring that rates charged
1 The defendants nevertheless point out that LDCs operating
in New England do face some variability in demand for natural gas
due to rapidly changing weather conditions in the region.
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for sales of natural gas within FERC's jurisdiction are "just and
reasonable"). Notwithstanding the comprehensiveness of this
regulatory scheme, Congress also exempted wellhead sales from
FERC's regulatory jurisdiction. See 15 U.S.C. § 3431(a)(1)(A).
Accordingly, market forces dictate the wellhead price of natural
gas. Id. § 3431(b)(1)(A) ("[A]ny amount paid in any first sale of
natural gas shall be deemed to be just and reasonable."). And
while the NGA grants FERC regulatory authority over "sale[s] . . .
for resale" in the spot market for natural gas, see 15 U.S.C.
§ 717(b), FERC has issued a "blanket certificate of public
convenience and necessity" that allows such transactions to
proceed at market rates, see 18 C.F.R. § 284.402.
Direct purchasers of natural gas also pay for the
transmission of natural gas from the wellhead. The Algonquin Gas
pipeline serves as the primary interstate artery through which
natural gas is transported in New England. Direct purchasers in
New England must reserve transmission capacity -- that is, the
physical space in the pipeline needed to transport the natural gas
purchased from the producer -- along the Algonquin pipeline
commensurate with their transportation needs. FERC also has
"exclusive jurisdiction over the transportation . . . of natural
gas in interstate commerce for resale" and is charged with
"determin[ing] a 'just and reasonable' rate for [its]
transportation." Schneidewind v. ANR Pipeline Co., 485 U.S. 293,
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300–01 (1988). Pursuant to this exclusive authority, FERC requires
interstate pipeline operators like Algonquin to allow LDCs to
purchase capacity using "no-notice" contracts. See Order No. 636,
57 Fed. Reg. 13,267 (Apr. 16, 1992). Such contracts allow LDCs to
adjust capacity reservations downward or upward (up to their daily
"firm entitlements") at any time without incurring penalties. Id.
at 13,286. Importantly, FERC regulations allow, but do not
require, LDCs to resell unneeded transportation capacity to other
natural gas purchasers when they downwardly adjust their capacity
reservations. See 18 C.F.R. § 284.8; Tenn. Gas Pipeline Co., 102
FERC ¶ 61,075, 61,119 (2003) ("[N]othing requires a shipper to
release its capacity: it does so by choice.").
In the wholesale market for electricity, load-serving
entities (LSEs) that sell and deliver electricity to consumers for
retail consumption purchase electricity from power generators.
The Federal Power Act (FPA) charges FERC with regulating these
wholesale sales2 of electricity in interstate commerce and ensuring
that rates in that market are "just and reasonable." See 16 U.S.C.
§§ 824(b)(1), 824d(a). In executing that charge, FERC has
delegated authority to nonprofit organizations, including
independent system operators (ISOs), to manage auctions for
wholesale electricity in the various regional markets across the
2 A "[s]ale of electric energy at wholesale" is a "sale of
electric energy to any person for resale." 16 U.S.C. § 824(d).
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country. Hughes v. Talen Energy Mktg., LLC, 136 S. Ct. 1288, 1292
(2016). ISO New England (ISO-NE) oversees the markets for
wholesale electricity in the New England region and administers
two auctions for wholesale electricity that are relevant to this
appeal: a same-day auction and a next-day auction to satisfy LSEs'
short-term and near-term demand for electricity. In both auctions,
ISO-NE accepts orders from LSEs designating the amount of energy
they need at a given time. Power generators then submit bids
indicating the amount of electricity they can produce at those
times and the price they are willing to charge for it. ISO-NE
accepts those bids from lowest to highest until demand is
satisfied. The price of the last accepted bid is the "clearing
price," which sets the price paid to all the generators whose bids
were accepted.
Approximately half of New England's electricity is
generated from natural gas power plants. As a result, bids from
natural gas generators usually set the clearing price for wholesale
electricity, which then drives the retail prices charged by LSEs
to retail consumers. FERC does not oversee the retail sale of
electricity. See FERC v. Elec. Power Supply Ass'n, 136 S. Ct.
760, 766 (2016) ("[T]he law places beyond FERC's power, and leaves
to the States alone, the regulation of 'any other sale' -- most
notably, any retail sale -- of electricity." (citing 16 U.S.C.
§ 824(b)).
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B.
Defendants Eversource Energy and Avangrid, Inc. are
energy companies that own two of the eight largest natural gas
LDCs in New England. They also own multiple retail electricity
LSEs in the region. The plaintiffs allege that the defendants
violated the Sherman Act and state consumer-protection and
antitrust laws by artificially restricting the supply of natural
gas in the New England transmission market. This restriction, in
turn, increased the cost of natural gas in the spot market, and
led to higher wholesale electricity prices and, ultimately, higher
retail electricity prices paid by consumers.
According to the plaintiffs, the defendants accomplished
this scheme by manipulating their no-notice contracts for pipeline
transmission capacity. By consistently reserving in advance and
then cancelling at the end of each day significant amounts of
transmission capacity without reselling that excess capacity to
other LDCs or power generators, the defendants' collective conduct
reduced the daily effective capacity along the Algonquin Gas
pipeline by 14%, raising natural gas prices by 38% in the natural
gas spot market, and increasing retail electricity prices by 20%.
The defendants, who hold significant stakes in non-natural gas
power-generating facilities, benefited from this practice because
it artificially increased the demand for and value of these non-
natural gas resources. It also enabled the defendants to advocate
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for the construction of costly (and allegedly unnecessary) energy
infrastructure projects throughout New England.
The district court dismissed the plaintiffs' claims,
holding that the filed-rate doctrine barred their federal
antitrust and derivative state suits. Breiding v. Eversource
Energy, 344 F. Supp. 3d 433, 451 (D. Mass. 2018). The "filed rate"
upon which the district court primarily relied was FERC's approval
of market-based rates in the electricity market administered by
ISO-NE. Id. at 447–48. The court held, in the alternative, that
plaintiffs failed to show antitrust standing and failed to plead
a plausible claim of antitrust monopolization. Id. at 456, 458.
Unsatisfied with the district court's disposition of their claims,
the plaintiffs filed this timely appeal.
II.
At oral argument, counsel for the plaintiffs conceded
that the plaintiffs do not have antitrust standing to bring their
federal antitrust damages claim. Nevertheless, the plaintiffs
continue to press their state-law claims and their federal
antitrust claim for injunctive relief on appeal. Accordingly, we
consider those claims on the merits, addressing first the
plaintiffs' remaining federal antitrust challenge before turning
to the district court's disposition of the plaintiffs' state-law
claims. Our review is de novo. See Abdallah v. Bain Capital LLC,
752 F.3d 114, 119 (1st Cir. 2014).
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A.
The filed-rate doctrine is "a set of rules that have
evolved over time but revolve around the notion that . . . utility
filings with the regulatory agency prevail over . . . other claims
seeking different rates or terms than those reflected in the
filings with the agency." Town of Norwood v. FERC, 217 F.3d 24,
28 (1st Cir. 2000). "[O]nce filed, a rate may not be collaterally
attacked in the courts." Phillip E. Areeda & Herbert Hovenkamp,
Antitrust Law: An Analysis of Antitrust Principles and Their
Application ¶ 247 (4th ed. 2019). This rule applies with equal
force to challenges brought "under state law and federal antitrust
laws to rates set by federal agencies." E. & J. Gallo Winery v.
EnCana Corp., 503 F.3d 1027, 1033 (9th Cir. 2007). Accordingly,
the doctrine can be understood as "a form of deference and
preemption, which precludes interference with the rate setting
authority of an administrative agency, like FERC." Wah Chang v.
Duke Energy Trading & Mktg., LLC, 507 F.3d 1222, 1225 (9th Cir.
2007). The filed-rate doctrine does not apply only to
"traditional" rates for service; rather, it "sweeps more broadly
and governs ancillary conditions and terms included in [a FERC-
approved] tariff" as well. Town of Norwood v. New Eng. Power Co.,
202 F.3d 408, 416 (1st Cir. 2000).
Importantly, the doctrine prohibits antitrust challenges
to agency-approved tariffs even in energy markets in which FERC
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has eschewed traditional ratemaking. See, e.g., id. at 419(rejecting the argument that the doctrine does not apply when
regulated rates are left to the "free market," and observing that
"[i]t is the filing of the tariffs, and not any affirmative
approval or scrutiny by the agency, that triggers the filed rate
doctrine"); Pub. Util. Dist. No. 1 of Snohomish Cty. v. Dynegy
Power Mktg., Inc., 384 F.3d 756, 760 (9th Cir. 2004) (applying the
doctrine to alleged anticompetitive behavior in the wholesale
electricity market). But cf. Town of Norwood, 202 F.3d at 419("Of course, if [the defendant's] rates were truly left to the
market, with no filing requirement or FERC supervision at all, the
filed rate doctrine would by its terms no longer operate."). In
short, just as FERC might approve a specified rate as just and
reasonable, it might also determine that rates produced in a
competitive market that it oversees are just and reasonable. The
filed-rate doctrine applies just the same, so long as a FERC-
approved tariff governs those market transactions.
The plaintiffs maintained below, and argue on appeal,
that the filed-rate doctrine should not bar their claims because
they challenge the defendants' anticompetitive conduct in the spot
market for natural gas, a market in which "FERC has abdicated its
regulatory oversight." The district court rejected that argument,
reasoning that the plaintiffs' requested relief would require it
to determine "the reasonableness of wholesale electricity prices
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exclusively regulated by FERC" and "the difference between
wholesale electricity rates during the class period and
hypothetical rates that would have been charged but for [the
defendants'] purported anticompetitive conduct" -- "exactly the
analysis," according to the district court, that "the filed rate
doctrine prohibits." Breiding, 344 F. Supp. 3d at 447.
We agree with the plaintiffs that the district court's
reasoning is in some tension with our previous opinion in Town of
Norwood. In that case, we deemed the filed-rate doctrine
inapplicable to an antitrust challenge that alleged that a power
generator sold its non-nuclear generating assets in order to reduce
the supply of wholesale electricity in the New England market and
"exert upward pressure" on wholesale electricity prices. 202 F.3d
at 422–23. In doing so, we found that a FERC-issued tariff in the
wholesale electricity market did not bar a challenge to a merger
of generators merely because the merger affected wholesale energy
rates. See id. at 422. And in reaching that conclusion, we
observed that though "it is not clear in all cases where the
boundary lies between the filed rate doctrine and the default rule
retaining antitrust liability," FERC did not have the "explicit
power to immunize approved mergers." Id.; see also id. (noting
that though "[d]irect antitrust attacks on federally regulated
rates" and "attacks on other regulated matters underlying rates"
"have . . . been limited by the filed rate doctrine," there is "no
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across-the-board antitrust immunity for agency-approved
transactions" (citing California v. Fed. Power Comm'n, 369 U.S.
482 (1962)). Our decision in Town of Norwood comports with the
weight of the case law, which generally deems the filed-rate
doctrine inapplicable to challenges to upstream, non-
jurisdictional activity that indirectly affects downstream FERC-
approved tariffs. See, e.g., Sierra Pac. Res. v. El Paso Corp.,
250 F. App'x 776, 777–78 (9th Cir. 2007) (finding the filed-rate
doctrine inapplicable to plaintiffs' challenges to non-
jurisdictional "first sales" of natural gas); E. & J. Gallo
Winery, 503 F.3d at 1046–48 (same); cf. Brown v. Ticor Title Ins.
Co., 982 F.2d 386, 394 (9th Cir. 1992) ("[I]f those rates were the
product of unlawful activity prior to their being filed and were
not subjected to meaningful review by the state, then the fact
that they were filed does not render them immune from challenge.").
But see Dynegy Power Mktg., 384 F.3d at 759 (finding the filed-
rate doctrine applicable when the defendant "withheld supply,
waited until emergency conditions were declared and prices rose,
and then offered the[] supply at [a] higher price").
The district court's invocation of the FERC-approved
ISO-NE tariff, which governs transactions in the wholesale
electricity market, to bar the plaintiffs' challenge to upstream
conduct affecting the spot market for natural gas implicates
analogous, difficult questions concerning the precise reach of the
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filed-rate doctrine. As we explain, however, the instant appeal
does not require that we endorse or reject the broad application
of the filed-rate doctrine espoused by the district court. Rather,
we train our attention on a different FERC tariff that is directly
implicated by plaintiffs' claims: the tariff approved for sales
and purchases of natural gas transmission capacity.
All of the conduct that the plaintiffs say violates
federal and state law occurred in the natural gas transmission
market. Distilled to its essence, the plaintiffs' description of
that conduct is as follows: (1) "Eversource and Avangrid possess
a large number of 'no-notice' contracts for natural gas
transmission capacity along the Algonquin Pipeline"; and
(2) "Eversource and Avangrid regularly reserved more pipeline
capacity than they knew they needed and then, at the last minute,
cancelled portions of their reservations" without "releas[ing]
that capacity, so that others could take advantage of it."
Accordingly, if there exists any tension between what the
plaintiffs say is wrongful conduct and any agency-sanctioned
tariff, it is most clearly and most directly with the FERC-approved
tariffs in the natural gas transmission market. So, to determine
whether the filed-rate doctrine bars the plaintiffs' claims, we
start -- and ultimately end -- our inquiry there.
Pursuant to FERC's exclusive authority to regulate
natural gas transmission, FERC mandates that natural gas companies
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file "schedules showing all rates and charges for any
[jurisdictional] transportation or sale of natural gas." 18 C.F.R.
§ 154.1(b). In addition, FERC requires operators of interstate
natural gas pipelines like the Algonquin Gas pipeline to provide
"'no-notice' transportation service" to ensure that LDCs are able
to meet unexpected demand. Order No. 636, 57 Fed. Reg. at 13,286.
In accordance with these mandates, the FERC-approved
tariff for the Algonquin Gas pipeline includes Algonquin's
statement of rates and rate schedule for transportation services
along the pipeline. See Algonquin Gas Transmission, LLC Tariff,
pts. 4–5 [hereinafter Algonquin Tariff]. The tariff also
addresses no-notice contracts and provides, in relevant part:
Notwithstanding the quantities nominated by
Customer and scheduled by Algonquin hereunder,
Customer shall be entitled to increase its
deliveries up to the [Maximum Daily Delivery
Obligation] at any Primary Point(s) of
Delivery, up to the [Maximum Hourly
Transportation Quantity] during any Hour, and
up to the [Maximum Daily Transportation
Quantity], or to decrease its deliveries.
Provided that all of the operational
conditions specified in Section 5 of this rate
schedule (the "Section 5 Conditions") are met,
Algonquin shall consent to such increase or
decrease in deliveries, thereby nullifying any
daily scheduling or hourly scheduling penalty
that would otherwise be applicable pursuant to
Section 23 of the General Terms and
Conditions.
Algonquin Tariff, pt. 5, Rate Schedule AFT-E, § 4.3. Furthermore,
that tariff, consonant with FERC's regulations, see 18 C.F.R.
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§ 284.8, permits an LDC to resell its excess reserved capacity:
"A Customer under any firm rate schedule under Part 284 may release
all or a part of its capacity under an Existing Service
Agreement . . . ." Algonquin Tariff, pt. 6, Capacity Release,
§ 14.2. But the tariff says nothing that would require an LDC to
release excess capacity along the Algonquin pipeline to other
users.
In the plaintiffs' amended complaint, neither defendant
is alleged to have engaged in any conduct other than that allowed
by Algonquin's detailed and reasonably comprehensive FERC-approved
tariff. FERC, in conformity with its broader regulatory scheme,
expressly declined to require direct purchasers to release excess
capacity in recognition of the fact that direct purchasers facing
variable demand for natural gas might need to retain that capacity
to ensure reliability. See, e.g., Order No. 636, 57 Fed. Reg. at
13,269 ("[T]he Commission is providing for a 'no-notice'
transportation service in response to those who have expressed a
particular concern about reliability during peak periods."). The
filed-rate doctrine prohibits us from questioning that reasoned
judgment in this lawsuit.
All of the defendants' alleged misconduct, we might add,
was done in the open and in plain view of Algonquin, the
defendants' competitors, and FERC. Furthermore, maintaining the
efficient use of limited transmission capacity falls squarely
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within the bull's-eye of FERC's regulatory aims. See, e.g., id.
("The Commission's primary aim in adopting the instant regulations
is to improve the competitive structure of the natural gas industry
and at the same time maintain an adequate and reliable service.").
And Congress has given FERC the tools to police anticompetitive
conduct in the market for transmission capacity. The NGA makes it
"unlawful for any entity, directly or indirectly, to use or employ,
in connection with . . . the purchase or sale of transportation
services subject to the jurisdiction of [FERC], any manipulative
or deceptive device or contrivance . . . in contravention of such
rules and regulations as [FERC] may prescribe." 15 U.S.C.
§ 717c-1. All parties acknowledge that this provision and FERC's
implementing regulation, see 18 C.F.R. § 1c.1(a), "prohibit[] the
anticompetitive abuse of no-notice contracts" in the market for
natural gas transmission. Moreover, Congress empowered FERC to
investigate and bring civil enforcement actions against willful
and knowing violators of the NGA and FERC's regulations. See 15
U.S.C. § 717t-1; see also Enf't of Statutes, Orders, Rules, &
Regulations, 132 FERC ¶ 61,216, 62,149 (2010) (explaining that
FERC also requires disgorgement of "profits illegally
obtained . . . to those who were harmed by the violations"). And,
in fact, FERC did investigate the defendants' alleged manipulation
of their no-notice contracts but found "no evidence of
anticompetitive withholding of natural gas pipeline capacity."
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News Release: FERC Staff Inquiry Finds No Withholding of Pipeline
Capacity in New England Markets, Fed. Energy Regulatory Comm'n (Feb. 27,
2018), https://www.ferc.gov/media/news-releases/2018/2018-1/02-27-18.pdf.
On appeal, the plaintiffs acknowledge that challenges to
"practices over which FERC ha[s] jurisdiction and actually
regulate[s]" are barred pursuant to the filed-rate doctrine. As
a general matter, we agree (at least in so far as those practices
are included in a FERC-approved tariff as an exercise of FERC's
ratemaking authority, see Town of Norwood, 202 F.3d at 416). For
this reason, it seems quite clear that the filed-rate doctrine
precludes the plaintiffs' claims in this suit.
The plaintiffs' principal rejoinder to this conclusion
rests on the fact that they now seek only injunctive relief. They
point to the Supreme Court's decision in Georgia v. Pa. R.R. Co.,
324 U.S. 439, 455 (1945) (finding the filed-rate doctrine
inapplicable to an equitable claim that was not "a matter subject
to the jurisdiction of the [agency]," did not request "an
injunction against the continuance of any tariff," and did not
"seek to have any tariff provision cancelled"). But in Town of
Norwood, we explained that injunctive relief that "would require
the alteration of [a] tariff[]" that FERC "actually scrutinized"
is incompatible with the doctrine's purpose of "protect[ing] the
exclusive authority of the agency to accept or challenge such
tariffs." 202 F.3d at 420. To rule against the defendants and
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grant the plaintiffs' requested "order[,] enjoining defendants
from further engaging in the unlawful conduct described in th[e]
Complaint," a judge would need to direct, in substance and effect,
that the defendants not hold on to excess, unused capacity without
reselling it. Of course, one might argue that such an order would
not directly conflict with the tariff because the tariff does not
actually prohibit the resale of capacity. FERC's regulation of
transmission along the Algonquin Gas pipeline, though, is
sufficiently comprehensive and detailed such that a judge-mandated
elimination of the purchaser's freedom to choose whether to resell
excess capacity would effectively overrule, or at least qualify,
FERC's decision that the LDC's "may" release their reserved
capacity. Accordingly, the plaintiffs' federal antitrust claim
fails.
B.
That leaves the plaintiffs' state-law claims. As
already explained, the filed-rate doctrine applies with equal
force to state-law challenges. See E. & J. Gallo Winery, 503 F.3d
at 1033. Nor do the plaintiffs argue otherwise in their brief on
appeal. So, it would seem to follow from the foregoing analysis
that dismissal of the plaintiffs' state claims is also warranted.
We nevertheless hesitate because it is not immediately clear from
the district court's opinion whether the court dismissed the
plaintiffs' state claims for the same reasons that it deemed the
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federal claims non-cognizable or whether the court declined to
exercise supplemental jurisdiction over those state claims upon
determining that the plaintiffs could not proceed with their
federal claims, thereby leaving open the possibility that the
plaintiffs might pursue their state claims in a separate action in
state court.
On the one hand, the district court made clear that the
filed-rate doctrine barred both the plaintiffs' federal and state-
law claims, see Breiding, 344 F. Supp. 3d at 451 ("[T]he Court
holds that the doctrine bars the federal and state law claims in
the amended complaint."), and went on to conclude that the
plaintiffs' alleged injuries were "too remote to satisfy the
causation prongs of the various state law claims," id. at 459. On
the other hand, the district court concluded its opinion with the
following statement: "[T]he Court, for the reasons previously
mentioned, has dismissed all of Plaintiffs' federal claims and
declines to exercise jurisdiction over the remaining state law
claims." Id. The district court then entered an order dismissing
the plaintiffs' complaint without mentioning whether the dismissal
was with prejudice or not. The district court also made no mention
of the plaintiffs' alternative invocation of federal-court
jurisdiction under the Class Action Fairness Act (CAFA), 28 U.S.C.
§ 1332(d)(2) (creating original jurisdiction over class actions
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with minimal diversity and aggregate damages that exceed
$5,000,000).
We construe the district court's opinion as dismissing
the plaintiffs' state-law claims on the merits, notwithstanding
the court's mixed signals, for the following reasons. First, the
district court, in "declin[ing] to exercise jurisdiction over the
remaining state law claims," appeared to do so as an alternative
basis for dismissing those challenges, perhaps in contemplation of
the possibility that we might disagree with its application of the
filed-rate doctrine to the plaintiffs' claims. See id. at 458("Although the filed rate doctrine applies with equal force to
Plaintiffs' state law claims, the Court concludes that Plaintiffs'
state law claims also fail for the reasons stated below." (citation
omitted)). Having concluded that the filed-rate doctrine does,
indeed, bar all the plaintiffs' claims, we have no need to reach
the district court's alternative bases for dismissal.
Second, it would have made little sense to decline to
exercise supplemental jurisdiction over the residual state-law
claims for purposes of dismissing them after finding the
plaintiffs' federal claims non-cognizable due to the filed-rate
doctrine. To be sure, normally "the unfavorable disposition of a
plaintiff's federal claims at the early stages of a suit . . .
will trigger the dismissal without prejudice of any supplemental
state-law claims." Rodriguez v. Doral Mortg. Corp., 57 F.3d 1168,
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1177 (1st Cir. 1995). But "[i]n an appropriate situation, a
federal court may retain jurisdiction over state-law claims
notwithstanding the early demise of all foundational federal
claims." Id. In deciding whether to do so, federal courts
consider "the interests of fairness, judicial economy,
convenience, and comity." Camelio v. Am. Fed'n, 137 F.3d 666, 672
(1st Cir. 1998). Here, the interests of fairness, judicial
economy, and convenience all support retaining jurisdiction
because the survival of the plaintiffs' state and federal claims
hinges on an application of the filed-rate doctrine to the
plaintiffs' complaint. That the doctrine applies with equal effect
and vigor to the plaintiffs' state-law claims, in turn, is
effectively undisputed. Furthermore, in order to affirm a decision
to decline supplemental jurisdiction, we would first need to
determine whether original jurisdiction exists under CAFA, a
matter not briefed by the parties. Finally, retaining jurisdiction
to dismiss the state-law claims would raise no comity concerns
because the dismissal of those claims would not turn on an
application of state law.
Having so construed the district court's opinion, we
find that the plaintiffs' state-law challenges are also barred by
the filed-rate doctrine for the reasons described above.
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III.
Because we find that all of the plaintiffs' claims are
defeated by application of the filed-rate doctrine, we affirm the
district court's dismissal of the plaintiffs' federal antitrust
and state-law claims. Nothing in this holding approves or
disapproves of any of the defendants' conduct. We simply hold
that the plaintiffs' allegations, assuming their truth, describe
an issue for FERC to address.
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