SWKI-Seward West Central, Inc. v. Kansas Corporation Comm'n ( 2022 )

NOT DESIGNATED FOR PUBLICATION
Nos. 123,506
123,510
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
SWKI-SEWARD WEST CENTRAL, INC.
and SWKI-STEVENS SOUTHEAST, INC.,
Appellees,
v.
KANSAS CORPORATION COMMISSION,
Appellant,
and
ANADARKO NATURAL GAS COMPANY LLC,
Appellee.
SWKI-SEWARD WEST CENTRAL, INC.
and SWKI-STEVENS SOUTHEAST, INC.,
Appellees,
v.
KANSAS CORPORATION COMMISSION,
Appellee,
and
ANADARKO NATURAL GAS COMPANY LLC,
Appellant.
MEMORANDUM OPINION
Appeal from Shawnee District Court; MARY E. CHRISTOPHER, judge. Opinion filed April 8,
2022. Affirmed and remanded with directions.
1
Brian G. Fedotin, general counsel and special assistant attorney general, Kansas Corporation
Commission, for appellant/appellee Kansas Corporation Commission.
James P. Zakoura and Connor A. Thompson, of Smithyman & Zakoura, Chartered, of Overland
Park, for appellee/appellant Anadarko Natural Gas Company L.L.C.
Timothy J. Sear, Frank A. Caro, Anne E. Callenbach, and Andrew Schulte, of Polsinelli PC, of
Kansas City, Missouri, for appellees SWKI-Seward West Central, Inc. and SWKI-Stevens Southeast, Inc.
Before MALONE, P.J., POWELL and ISHERWOOD, JJ.
POWELL, J.: SWKI-Seward West Central, Inc. (SWKI-SWC) and SWKI-Stevens
Southeast, Inc. (SWKI-SE) (collectively the SWKIs) and Anadarko Natural Gas
Company (Anadarko) entered into two gas sales agreements in 1998 and 2002. The
SWKIs alleged Anadarko failed to file the contracts with the Kansas Corporation
Commission. The Commission dismissed the complaint for failure to state a claim. The
district court affirmed the Commission, but a prior panel of our court remanded the case
to the Commission to determine whether the contracts were properly filed and, if not,
whether a remedy was appropriate. The Commission issued an order denying the SWKIs'
complaint, finding Anadarko did not file the contracts, but that it lacked the statutory
authority to order a remedy. Following the SWKIs' petition for judicial review, the
district court reversed, finding the Commission did not comply with the panel's mandate.
Both the Commission and Anadarko have appealed in separate cases which we have
consolidated. After a careful review of the record, we affirm the district court.
FACTUAL AND PROCEDURAL BACKGROUND
The facts here were explained in detail in the first appeal, SWKI-Seward West
Central, Inc. v. Kansas Corporation Comm'n, No. 116,795, 2018 WL 385692 (Kan App.
2
2018) (unpublished opinion). Because the parties are well acquainted with the facts, we
repeat only those facts necessary for background and to settle the current issues before us.
SWKI-SE entered into a gas purchase agreement with Anadarko Energy Services
Company, a company related to Anadarko, in 1998. In 2002, SWKI-SWC entered into a
similar contract with Anadarko.
In 2013, Anadarko and Black Hills Energy filed a joint application with the
Commission, seeking approval of Anadarko's sale of its assets and assignment of its
customer contracts in exchange for a portion of its service territory. The SWKIs'
agreements were among those contracts. During consideration of the application, the
Commission's staff reported it could not find any Commission order approving the gas
sales contracts Anadarko was seeking to transfer.
The SWKIs filed a complaint with the Commission against Anadarko, asserting
Anadarko provided gas to them based on contracts never filed with or approved by the
Commission. The SWKIs also claimed the price they paid was significantly higher than
the price Anadarko charged other customers. The SWKIs requested the Commission find
all rates charged by Anadarko were unlawful, void, and subject to refund, with interest.
Anadarko moved to dismiss the complaint for failure to state a claim. The
Commission agreed and dismissed the complaint. The SWKIs timely sought
reconsideration, but the Commission denied the motion. The SWKIs then petitioned for
judicial review of the Commission's order in Stevens County District Court. Having been
granted permission to intervene, Anadarko successfully transferred the case to the
Shawnee County District Court. The district court denied the SWKIs' petition, and the
SWKIs appealed.
3
A prior panel of our court concluded the Commission erred in relying on K.S.A.
66-154a in evaluating Anadarko's obligations to the SWKIs and held that a complaint
alleging a public utility's rates or regulations are unlawful is equivalent to alleging the
rates are unreasonable, unfair, or unjust. Thus, according to the panel, the Commission
erred when it dismissed the SWKIs' complaint for failure to state a claim. 2018 WL
385692, at *9. Moreover, the panel explained that under the filed rate doctrine, when "a
reasonable rate goes unfiled, the Commission has the statutory authority to order a
remedy, . . . which may include the time value of money paid by the customer pursuant to
an unfiled rate." 2018 WL 385692, at *13. The panel remanded the case with directions
for the Commission to determine whether the contracts were ever filed and approved by
the Commission and, if not, whether the SWKIs were entitled to a remedy for Anadarko's
violations. 2018 WL 385692, at *14.
On remand, after an investigation, the Commission found the 1998 and 2002 gas
service agreements had not been timely filed. But despite this court's holding to the
contrary, the Commission stated it was only empowered to establish rates that are just
and reasonable under K.S.A. 66-154a and the SWKIs never alleged the contract rates
were unreasonable, unfair, unjust, unjustly discriminatory, or unduly preferential. As the
Commission found both parties performed their obligations under the agreements, it
believed granting a refund to the SWKIs would be equivalent to adjusting the rates and
was beyond the Commission's authority. Because the parties fully performed the
contracts, the Commission found the contracts were valid. The Commission also found
the SWKIs were seeking equitable relief and the proper forum under the gas service
agreements was arbitration in Houston, Texas, not the Commission.
The SWKIs sought reconsideration of the Commission's order, but this was
denied. The SWKIs then petitioned for judicial review in the Shawnee County District
Court.
4
The district court held the Commission erred by relying on K.S.A. 66-154a and by
ignoring this court's holding that a complaint alleging rates are unlawful is consistent
with asserting such rates are unreasonable, unfair, or unjust. The district court also found
the Commission's order lacked specific evidence supporting its finding that Anadarko's
rates were reasonable. Addressing the filed rate doctrine, the district court found the
Commission had failed to apply the filed rate doctrine as it was supposed to. The district
court also directed the Commission to hold a hearing on remand.
Both the Commission and Anadarko timely appeal.
ANALYSIS
The Commission and Anadarko bring separate appeals from the district court's
order granting the SWKIs' petition for judicial review. Both assert the district court erred
when it found the Commission did not follow the mandate from the prior panel. We
consolidated these appeals after oral argument.
Appeals from actions of the Commission are reviewed according to the Kansas
Judicial Review Act (KJRA), K.S.A. 77-601 et seq. K.S.A. 66-118c. We exercise the
same statutorily limited review of agency action as the district court, as though the appeal
was made directly to us. Romkes v. University of Kansas, 49 Kan. App. 2d 871, 880, 317
P.3d 124 (2014). The KJRA is the exclusive means of judicial review of an agency's
action. K.S.A. 77-606. The party asserting the invalidity of the agency action holds the
burden to prove that action was invalid. K.S.A. 77-621(a)(1).
K.S.A. 77-621(c) lists eight reasons entitling a court to grant relief from an agency
action. Of those eight reasons, the SWKIs relied on five in their petition for judicial
review to the district court:
5
"(3) the agency has not decided an issue requiring resolution;
"(4) the agency has erroneously interpreted or applied the law;
"(5) the agency has engaged in an unlawful procedure or has failed to follow
prescribed procedure;
....
"(7) the agency action is based on a determination of fact, made or implied by the
agency, that is not supported to the appropriate standard of proof by evidence that is
substantial when viewed in light of the record as a whole, which includes the agency
record for judicial review, supplemented by any additional evidence received by the court
under this act; or
"(8) the agency action is otherwise unreasonable, arbitrary or capricious." K.S.A.
77-621(c)(3)-(5), (7)-(8).
K.S.A. 77-621(d) defines "'in light of the record as a whole'" to mean:
"[T]he adequacy of the evidence in the record before the court to support a particular
finding of fact shall be judged in light of all the relevant evidence in the record cited by
any party that detracts from such finding as well as all of the relevant evidence in the
record, compiled pursuant to K.S.A. 77-620, and amendments thereto, cited by any party
that supports such finding, including any determinations of veracity by the presiding
officer who personally observed the demeanor of the witness and the agency's
explanation of why the relevant evidence in the record supports its material findings of
fact. In reviewing the evidence in light of the record as a whole, the court shall not
reweigh the evidence or engage in de novo review."
I. DO WE HAVE JURISDICTION TO HEAR THE COMMISSION'S APPEAL?
After the Commission and Anadarko filed their notices of appeal, the SWKIs
asked us to dismiss their appeals on the grounds that we lacked jurisdiction to hear them.
Our court's motions panel denied the motion but directed the parties to brief the
jurisdiction issue.
6
The Commission does not address the jurisdictional issue in its primary brief, but,
in its reply brief, the Commission asserts that exceptional circumstances to Holton
Transport, Inc. v. State Corp. Commission, 10 Kan. App. 2d 12, 690 P.2d 399 (1984),
apply here, allowing us to hear this appeal because the district court's decision and this
appeal address whether the Commission properly complied with the mandate.
Anadarko offers several avenues to jurisdiction. First, Anadarko briefly mentions
that the district court's decision was a final decision making it reviewable. Second,
Anadarko claims jurisdiction exists as an interlocutory appeal under K.S.A. 2020 Supp.
60-2102(c). Third, Anadarko argues we may hear the appeal under the collateral order
doctrine.
Relying on Holton, the SWKIs claim the district court's order is not appealable
because it is not a final order as the district court remanded the matter to the Commission
for additional factual findings. See 10 Kan. App. 2d at 13. The SWKIs also note the
district court refused to certify an interlocutory appeal. Finally, the SWKIs assert
Anadarko fails to show how the district court's order would be "effectively unreviewable
on appeal from a final judgment" under the collateral order doctrine.
Standard of Review
The right to appeal is statutory, with legislatively imposed limits to appellate
jurisdiction. The existence of appellate jurisdiction presents a legal question over which
we exercise de novo review. In re Care and Treatment of Emerson, 306 Kan. 30, 34, 392
P.3d 82 (2017).
7
Analysis
The right to appeal in civil cases is neither a vested nor a constitutional right but
must be defined by statute. Wiechman v. Huddleston, 304 Kan. 80, 86, 370 P.3d 1194(2016). Under K.S.A. 77-623, "[d]ecisions on petitions for judicial review of agency
action are reviewable by the appellate courts as in other civil cases."
Kansas law provides two ways a party can pursue an appeal in a civil case—after a
final decision or upon certification from the district court for an interlocutory appeal.
K.S.A. 2020 Supp. 60-2102(a)(4), (c). Both the Commission's and Anadarko's docketing
statements state their authority for seeking an appeal is a final decision under K.S.A. 60-
2102(a)(4). The Commission did not seek an interlocutory appeal, and, in any event, the
district court denied Anadarko's motion to certify an interlocutory appeal, finding its
order was final.
A final decision is "'one which finally decides and disposes of the entire merits of
the controversy, and reserves no further questions or directions for the future or further
action of the court.' [Citation omitted.]" Kansas Medical Mutual Insurance Co. v. Svaty,
291 Kan. 597, 610, 244 P.3d 642 (2010). "The term 'final decision' is self-defining and
refers to an order that definitely terminates a right or liability involved in an action or that
grants or refuses a remedy as a terminal act in the case. [Citation omitted.]" Kaelter v.
Sokol, 301 Kan. 247, 250, 340 P.3d 1210 (2015).
Interlocutory appeals are disfavored in the administrative process. Southwestern
Bell Tel. Co. v. Kansas Corporation Commission, 6 Kan. App. 2d 444, 452, 629 P.2d
1174 (1981). The SWKIs rely on Holton to support their lack of jurisdiction argument. In
Holton, the appellant sought relief from a district court order remanding the matter to the
Commission for more specific factual findings. The Holton panel noted the general rule is
that remand orders are not appealable except in exceptional circumstances. The panel
8
found there was not a final order which finally decided and disposed of the entire merits
of the case. 10 Kan. App. 2d at 12-13. As a result, the panel held that, "absent exceptional
circumstances, a district court order remanding a proceeding to the Kansas Corporation
Commission for further findings is not a final decision appealable as of right under
K.S.A. 60-2102(a)(4)." 10 Kan. App. 2d at 13.
Here, the district court remanded the case to the Commission for additional factual
findings, but the district court's order did so in the context of finding the Commission did
not comply with the mandate. Thus, the remand was about more than factual findings; it
was about whether the Commission complied with the directions from this court.
Compliance with an appellate mandate was not at issue in Holton.
When an appellate court's decision becomes final, the mandate and opinion "shall
be controlling in the conduct of any further proceedings necessary in the district court."
K.S.A. 60-2106(c). The appellate mandate ensures lower courts do not ignore an
appellate order; it does not set up broad limits on subject matter jurisdiction on remand.
State v. Soto, 310 Kan. 242, 252, 445 P.3d 1161 (2019). "'[Thus, it] is axiomatic that on
remand for further proceedings after a decision by an appellate court, the trial court must
proceed in accordance with the mandate and the law of the case as established on
appeal.'" 310 Kan. at 253. Lower courts "'must implement both the letter and spirit of the
mandate,'" accounting for the appellate court's opinion and its circumstances. 310 Kan. at
253.
Agencies also must comply with appellate mandates. See Leffel v. City of Mission
Hills, 47 Kan. App. 2d 8, 16, 270 P.3d 1 (2011). In its petition for judicial review, the
SWKIs asserted the Commission ignored the mandate. The district court agreed and
remanded the case for the Commission to take actions to comply with the mandate. The
district court remanded the case for additional factual findings but only because it found
the Commission failed to comply with the appellate mandate. Though the district court's
9
order does not finally determine the issues, a holding that the Commission's order did
comply with the appellate mandate would be finally determinative of the case. And we
have the jurisdiction to decide whether the appellate mandate was followed. See Sierra
Club v. Mosier, 305 Kan. 1090, 1105, 391 P.3d 667 (2017).
Anadarko raises an alternate path to jurisdiction under the collateral order
doctrine. The collateral order doctrine is a "'very narrow exception' to the final order
requirement." Svaty, 291 Kan. at 611. This "'"small class" of collateral rulings that,
although they do not end the litigation, are appropriately deemed "final."' [Citations
omitted.]" 291 Kan. at 612. "[T]o be collaterally appealable, the order must '"(1)
conclusively determine the disputed question, (2) resolve an important issue completely
separate from the merits of the action, and (3) be effectively unreviewable on appeal from
a final judgment."' [Citations omitted.]" 291 Kan. at 612. The collateral order doctrine is
rarely applied. The Supreme Court has "emphasized that a party is in a risky position
when relying on the collateral order doctrine." 291 Kan. at 612.
We conclude the collateral order doctrine is inapplicable here because whether the
Commission complied with this court's mandate is determinative of the case and is not
completely separate from the merits but tied to it. If we agree with the district court that
the Commission failed to comply with the mandate, that resolves the appeal. Thus, we
hold we have the jurisdiction to determine whether the Commission complied with the
appellate mandate.
II. DID THE DISTRICT COURT ERR WHEN IT FOUND THE COMMISSION DID NOT
COMPLY WITH THE COURT OF APPEALS' MANDATE?
The Commission asserts it complied with the appellate mandate and the district
court erred by misinterpreting the mandate. The Commission claims the district court
10
ordered it to determine the appropriate remedy under the filed rate doctrine, while the
mandate instructed the Commission to determine whether a remedy was appropriate.
Anadarko offers us three reasons why the Commission complied with the
mandate. First, Anadarko asserts the Commission complied with the mandate by finding
the Commission could not order a remedy because the SWKIs never alleged the rates in
the gas service agreements were unreasonable, unfair, unjust, unjustly discriminatory, or
unduly preferential. Second, Anadarko argues the Commission was not required to hold
an evidentiary hearing because the Commission did not utilize the Kansas Administrative
Procedure Act (KAPA), K.S.A. 77-501 et seq., in deciding the SWKIs' complaint and
K.S.A. 66-1,205 only requires a hearing when the Commission is making changes to
rates. Third, Anadarko argues the district court erred when it ordered the Commission to
apply the filed rate doctrine on remand.
For their part, the SWKIs agree with the district court's finding that the
Commission failed to follow the mandate. The SWKIs complain: (1) The Commission's
finding that the contract rates were reasonable because both parties performed was
erroneous; (2) it was error for the Commission to refuse to hold a hearing; and (3) the
Commission erred by refusing to apply the filed rate doctrine.
Standard of Review
The interpretation of a mandate and the determination whether the mandate was
complied with involves legal questions which we review de novo. In re Estate of Einsel,
304 Kan. 567, 584, 374 P.3d 612 (2016); Fawcett Trust v. Oil Producers, Inc. of Kansas,
58 Kan. App. 2d 855, 865, 475 P.3d 1268 (2020), rev. granted 313 Kan. 1040 (2021).
"[A]bsent specific direction by the appellate court, the trial court possesses discretion in
implementing the mandate." Leffel, 47 Kan. App. 2d at 16.
11
Analysis
At the end of its opinion, the prior panel of this court issued its directions to the
Commission:
"Accordingly, we reverse the Commission's order finding that the SWKIs had
failed to state a valid claim for relief and remand for additional proceedings to determine
if the contracts were ever filed and approved by the Commission. If not, the Commission
is directed to determine, in its discretion, if the SWKIs are entitled to a remedy for
Anadarko's violations." SWKI, 2018 WL 385692, at *14.
On remand, the Commission found the 1998 Gas Sales Agreement was not timely
filed and the 2002 Gas Sales Agreement was never filed with the Commission. No party
disputes those conclusions. But the Commission then found the SWKIs were not harmed
because both parties fully performed and the SWKIs never claimed the gas was defective
or substandard or that the price was unreasonable. The Commission held it was only
empowered to establish rates that are just and reasonable, and, since the SWKIs did not
allege the rates were unreasonable, unfair, unjust, unjustly discriminatory, or unduly
preferential, the Commission lacked the authority to grant a refund. The dispute before us
centers on whether the Commission complied with the appellate mandate in reaching this
decision.
Under Kansas law, on remand, a mandate and opinion from an appellate court is
controlling in any further necessary proceedings. K.S.A. 2020 Supp. 60-2106(c). "On
remand, '[a] trial court must implement both the letter and spirit of the mandate, taking
into account the appellate court's opinion and the circumstances it embraces.' [Citation
omitted.]" Gannon v. State, 303 Kan. 682, 703, 368 P.3d 1024 (2016).
The mandate rule is "'[t]he doctrine that, after an appellate court has remanded a
case to a lower court, the lower court must follow the decision that the appellate court has
12
made in the case, unless new evidence or an intervening change in the law dictates a
different result.'" Fawcett Trust, 58 Kan. App. 2d at 861; Black's Law Dictionary 1150
(11th ed. 2019). Put another way, the higher court's "view of the law controls over that of
the lower court." 58 Kan. App. 2d at 861.
The mandate rule shows how the law-of-the-case doctrine applies, binding a
district court to the appellate court's opinion as the law of the case and requiring it to
carry out the appellate court's order according to the appellate court's mandate. 58 Kan.
App. 2d at 861; see Soto, 310 Kan. at 253. "The law of the case doctrine is a common-
law rule in Kansas. Under the doctrine, '[w]hen a second appeal is brought . . . , the first
decision is the settled law of the case on all questions involved in the first appeal" and
will be reconsidered only if it is clearly erroneous or would cause manifest injustice. See
State v. Cheeks, 313 Kan. 60, 66, 482 P.3d 1129 (2021). "[T]he doctrine is '"'not an
inexorable command,'" nor is it a constitutional requirement.' [Citation omitted.]" 313
Kan. at 66.
When interpreting the mandate rule, our duty is to consider the reasons for the
rule: the finality of judgments and the hierarchy of our justice system. Without such a
rule, litigation would be never-ending. Parties could, on remand, try to amend their
claims to allege new theories and avoid application of an unfavorable holding, creating
"an unworkable cycle of claims, appeal, remand, amendment, and appeal with no end to
the litigation." Fawcett Trust, 58 Kan. App. 2d at 861.
The mandate rule prevents the district court on remand from acting contrary to an
appellate court opinion when an issue has been finally settled. But the mandate rule does
not prevent a district court from taking whatever other action necessary to dispose of a
case. A district court must not only do as the mandate directs but also take whatever steps
necessary to settle any other outstanding issues in the case untouched by the appellate
proceedings. Fawcett Trust, 58 Kan. App. 2d at 862.
13
When the appellate mandate merely reverses the ruling of the district court and
remands the case for further proceedings but does not direct the judgment of the district
court, the district court retains the discretion to preside over any remaining trial
proceedings, as though the district court had originally made the ruling mandated by the
appellate court. The district court may address the issues necessary to resolving the case
left open by the appellate court's mandate. Leffel, 47 Kan. App. 2d at 16.
While most caselaw addresses the effect of a mandate on the district court, the
same rules apply to agencies on remand. See 47 Kan. App. 2d at 16.
1. Following instructions on remand
In its original order, the Commission found it lacked the authority under K.S.A.
66-154a to grant the SWKIs their desired remedy. On appeal, the panel disagreed and
held: "Thus, it appears that the Commission erred in relying on K.S.A. 2016 Supp. 66-
154a in evaluating Anadarko's obligations to the SWKIs." SWKI, 2018 WL 385692, at
*6. Grounding its reasoning in Sunflower Pipeline Co. v. State Corporation Commission,
5 Kan. App. 2d 715, 624 P.2d 466 (1981), the panel determined that, under K.S.A. 66-
101, "the Commission had the statutory authority 'as a means of . . . enforcing its power
to regulate rates' to determine appropriate remedies for violations of approved tariffs,
including ordering refunds to customers charged rates higher than those authorized by the
utility's filed tariff. 5 Kan. App. 2d at 719-20." SWKI, 2018 WL 385692, at *13.
The panel found that the question was whether K.S.A. 66-1,205 applies when a
party complains that a public utility violated the requirement of K.S.A. 66-1,203 that
natural gas utilities publish and file all schedules of rates and contract for services with
the Commission. SWKI, 2018 WL 385692, at *7; see K.S.A. 66-1,203. K.S.A. 66-
1,205(a) grants the Commission the authority to investigate and order a remedy against
any natural gas public utility that charges rates that are "unreasonable, unfair, unjust,
14
unjustly discriminatory or unduly preferential . . . ." The panel noted that Kansas caselaw
"has often equated 'unreasonableness' in rates to unlawful rates." SWKI, 2018 WL
385692, at *8. The panel reasoned:
"A complaint which reports that a public utility's rates or regulations are unlawful
is consistent with asserting that such rates are unreasonable, unfair, or unjust. This broad
reading of K.S.A. 66-1,205 is also consistent with K.S.A. 66-1,207 which, like many
similar statutes governing the Commission's authority, requires that statutory provisions
granting the Commission power 'shall be liberally construed, and all incidental powers
necessary to carry into effect the provision of this act are expressly granted to and
conferred upon the commission.' [Citations omitted.]" 2018 WL 385692, at *9.
The panel held the Commission erred in concluding the SWKIs' allegation that the gas
service agreements were illegal because they were not filed with the Commission was a
failure to state a claim upon which relief could be granted. 2018 WL 385692, at *9.
On remand, the Commission again stated the SWKIs never alleged the rates in the
two gas service agreements were "unreasonable, unfair, unjust, unjustly discriminatory,
or unduly preferential." The Commission found that since there was no allegation or
evidence of unreasonable, unfair, unjust, unjustly discriminatory, or unduly preferential
rates, the Commission had no authority to adjust the rates in the gas service agreements.
The Commission also found giving the SWKIs a refund would be the equivalent of
adjusting the rates and was outside the Commission's authority.
We are forced to conclude the Commission disregarded the prior panel's holding
by continuing to find it could not grant a remedy under K.S.A. 66-154a. Its finding that
the SWKIs did not allege the rates in the gas service agreements were unreasonable,
unfair, or unjust directly contradicts the panel's holding that alleging the rates were
unlawful is consistent with alleging the rates were unreasonable, unfair, or unjust. The
panel held the Commission had the inherent power under K.S.A. 66-101 to resolve the
15
SWKIs' complaint and had the authority to hear and remedy the SWKIs' claims, if the
Commission believed a remedy was warranted. 2018 WL 385692, at *13. Instead, the
Commission chose to find it had no authority to issue a remedy. The Commission's
refusal to exercise its discretion in determining whether a remedy was warranted and
instead take the position that it could not order a remedy violated the appellate mandate.
If the Commission disagreed with the panel's holding, it could have petitioned for
review with the Kansas Supreme Court. It did not; thus, the Commission has waived any
argument with that holding. See State v. Arnett, 307 Kan. 648, 650, 413 P.3d 787 (2018).
The same is true for Anadarko. The Commission's finding that it lacked the authority
under K.S.A. 66-154a contradicted the mandate.
We thus affirm the district court's conclusion that the Commission failed to
comply with the mandate. On remand, the Commission is to comply with the appellate
mandate and determine whether the SWKIs are entitled to a remedy for Anadarko's
failure to register the gas service agreements, keeping in mind the prior panel's holding
that a claim of illegal rates for failing to register the contracts is equivalent to a claim the
rates were unreasonable, unfair, or unjust. However, we stress that a remedy is not
required, and the discretion on whether to grant a remedy to the SWKIs remains with the
Commission.
2. Evidentiary Hearing
In their petition for judicial review, the SWKIs also objected to the Commission's
refusal to hold a hearing. The district court agreed, finding K.A.R. 82-1-232(b)(2)
requires the Commission to hold a hearing. The district court found the provisions of
KAPA applied rather than the non-KAPA provision in K.A.R. 82-1-232(b)(1) because
the Commission's first discovery and protective order specifically mentioned KAPA. The
Commission's discovery and protective order filed after the remand from this court also
16
provided the parties the opportunity to file a petition for reconsideration pursuant to
KAPA.
Curiously, the Commission does not challenge the district court's ruling on this
issue. Typically, issues not raised on appeal are deemed waived or abandoned. Arnett,
307 Kan. at 650. By not challenging that portion of the district court's ruling, we would
normally construe the Commission's position as abandoning any challenge to the district
court's order that it conduct a hearing.
However, Anadarko does argue the district court erred in ordering a hearing.
Anadarko asserts the text of K.S.A. 66-1,205(a) requires the Commission to hold a
hearing only if the Commission is issuing an order changing rates, rules and regulations,
practices, or acts that were complained about.
This issue requires statutory interpretation, which presents a legal question subject
to de novo review. When interpretating a statute, we first attempt to divine "legislative
intent through the statutory language, giving common words their ordinary meanings."
Nauheim v. City of Topeka, 309 Kan. 145, 149, 432 P.3d 647 (2019).
K.S.A. 66-1,205(a) grants the Commission the authority to act when a complaint
alleges that any rates from a natural gas public utility "are in any respect unreasonable,
unfair, unjust, unjustly discriminatory or unduly preferential, or both . . . ." The
subsection goes on to instruct:
"No order changing such rates, rules and regulations, practices or acts
complained of shall be made or entered by the commission without a formal public
hearing in accordance with the provisions of the Kansas administrative procedure act, of
which due notice shall be given by the commission to such natural gas public utility or to
such complainant or complainants, if any." K.S.A. 66-1,205(a).
17
Anadarko argues the Commission is not required to hold a hearing because the
statute only requires a hearing when the Commission is changing rates, something not
happening here. However, Anadarko's argument ignores the prior panel's holding that the
SWKIs could bring their claim under K.S.A. 66-1,205(a) because the allegation that the
rates were illegal was the same as alleging the rates were unreasonable, unfair, or unjust.
SWKI, 2018 WL 385692, at *9. So, just like an order changing an unreasonable rate, any
finding that Anadarko should compensate the SWKIs for illegal rates would require a
hearing be performed.
Moreover, the Commission's own regulations appear to require a hearing. The
district court noted the difference between the two provisions that guide when orders are
issued without a hearing. The first, K.A.R. 82-1-232(b)(1), addresses non-KAPA
proceedings:
"(1) Non-KAPA proceeding. If the commission has not used KAPA to govern the
conduct of a proceeding and a decision or order is rendered without a hearing, any party
affected by the order or decision and deeming it to be improper, unreasonable, or contrary
to law may apply, by petition, for a hearing on the matter before the commission. The
petition shall contain a statement of every ground of objection that the petitioner will
raise against the decision or order. The petition for a hearing may be granted or denied by
the commission. If a hearing is granted, it shall be subject to the commission's rules and
regulations. If a hearing is denied, the denial shall be construed as a denial of a petition
for reconsideration on the matter for purposes of an application for judicial review of the
order or decision."
K.A.R. 82-1-232(b)(2)(A) addresses KAPA proceedings:
"(2) KAPA proceeding. (A) Orders may be issued without hearing in summary
proceedings pursuant to KAPA. Any order issued in a summary proceeding shall disclose
that any party may file a petition requesting a hearing within 15 days after service of an
order."
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K.S.A. 66-1,205(a) only addresses when the Commission must hold a hearing. It
does not direct when the Commission can refuse to hold a hearing. K.A.R. 82-1-232(b)
provides additional regulations for when the Commission must hold an evidentiary
hearing.
The Commission's order shows it was proceeding in this case under KAPA. Its
first discovery and protective order instructed the prehearing officer to conduct any
prehearing conferences necessary to address anything appropriately considered in a
prehearing conference, "including all items listed in K.S.A. 77-517(b) of [KAPA]." On
remand, the Commission again cited to KAPA in a discovery and protective order when
instructing the parties they had 15 days to file a petition to reconsider the order.
The Commission's discovery and protective orders show it was proceeding under
KAPA, triggering the application of K.A.R. 82-1-232(b)(2)(A) and requiring the
Commission to inform the SWKIs they could petition for a hearing within 15 days of the
Commission's order on contract status. The Commission did not perform its duty. Yet,
the SWKIs still requested an evidentiary hearing in their petition for reconsideration,
filed exactly 15 days after the order. The Commission denied that request in its order
denying reconsideration.
Under the Commission's regulations, the SWKIs were entitled to request a
hearing. The district court was correct in finding the Commission should have held an
evidentiary hearing.
3. Filed Rate Doctrine
The district court also found the Commission violated the mandate by not applying
the filed rate doctrine. The filed rate doctrine, at its base, "'forbids a regulated entity to
charge rates for its services other than those properly filed with the appropriate federal
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regulatory authority.' Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571, 577, 101 S. Ct.
2925, 69 L. Ed. 2d 856 (1981)." SWKI, 2018 WL 385692, at *9. In Kansas, K.S.A. 66-
109 codifies the filed rate doctrine, which forbids common carriers and public utilities to
"charge, demand, collect or receive a greater or less compensation . . . than is specified in
the printed schedules or classifications" required by the Commission.
"The filed rate doctrine serves a two-fold purpose. First, it protects the regulatory
agency's primary jurisdiction to determine the reasonableness of rates charged by
regulated industries. Second, the doctrine ensures that regulated companies charge only
those rates which the agency has approved. Thus, courts lack authority to impose or
enforce a different rate than that approved by the regulatory agency . . . . The doctrine
also prohibits agencies from retroactively substituting a new rate. [Citations omitted.]"
2018 WL 385692, at *9.
The district court found the filed rate doctrine applied. The Commission argues the
prior panel never made that finding and there are multiple methods to address this claim;
therefore, it did not err in not applying the filed rate doctrine.
The prior panel recognized this case presented the unique question of whether the
filed rate doctrine applied when there was no filed rate. 2018 WL 385692, at *11. The
panel analyzed two cases: Michigan Elec. Transmission Co. v. Midland Cogenerations
Venture, Ltd. Partnership, 737 F. Supp. 2d 715 (E.D. Mich. 2010), and Carolina Power
& Light Company, 87 FERC ¶ 61,083, 199 WL 219889 (1999). SWKI, 2018 WL 385692,
at *11-12. The panel held those cases "support the proposition that in the absence of a
filed rate, should the appropriate regulatory agency deem the rate reasonable, the time
value of the money collected from the unfiled rate is a permissible remedy available
under a regulatory agency's broad powers to set and approve rates." 2018 WL 385692, at
*13.
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While the panel did not specifically require the Commission to apply the filed rate
doctrine, it did hold that where no filed rate existed, if the rate used by the parties is
deemed to be reasonable, the time value of money collected from the unfiled rate is a
permissible remedy. 2018 WL 385692, at *13. The Commission found the rate was
reasonable but did not address the appropriateness of a remedy based on the time value of
money. The Commission's failure to address the possible remedy violated the panel's
mandate.
The Commission did not address the possibility of a remedy because it believed it
lacked the authority. Again, this is directly contrary to the panel's finding that the
Commission had the authority under its power to regulate gas service agreements. 2018
WL 385692, at *13. On remand, the Commission should address the filed rate doctrine
and consider to what extent the time value of money may be an appropriate remedy.
The panel gave the Commission two directions: First, to determine whether
Anadarko ever filed the gas service agreements and if the Commission approved those
agreements; and second, if they were not filed and approved, to determine, in its
discretion, whether the SWKIs were entitled to a remedy for Anadarko's violations. 2018
WL 385692, at *14. The Commission complied with the first direction but not the
second. Instead, the Commission ignored the mandate and continued to find it lacked the
authority to order a remedy under K.S.A. 66-154a. On remand, we order the Commission
to address the panel's second direction under the Commission's inherent authority to
regulate under K.S.A. 66-101. If it determines a remedy is appropriate, the Commission
should apply the time value of money. However, we again emphasize that the
Commission is not required to order a remedy. Nevertheless, the Commission must
exercise its discretionary authority to determine whether the SWKIs are entitled to a
remedy.
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III. DID THE DISTRICT COURT ERR IN IGNORING CONTRACTUAL LANGUAGE
REQUIRING ARBITRATION IN TEXAS?
Finally, both the Commission and Anadarko argue the district court erred by
ignoring language in the gas service agreements requiring any dispute to be arbitrated in
Texas under Texas law. The Commission asserts it lacked the authority to grant the
SWKIs the equitable relief they were seeking and the proper forum for that is arbitration
in Texas. The Commission alleges the forum selection clause is binding on the parties
and the district court judgment should be reversed under K.S.A. 77-621(c)(4).
The SWKIs respond that its complaint is not a contractual dispute but an
allegation that the gas sales agreements violated Kansas law because Anadarko did not
register the contracts with the Commission. The SWKIs assert the Commission has the
legal authority to grant a remedy under an allegation that the rates were illegal. The
SWKIs also assert they are not seeking equitable relief but a remedy under the
Commission's authority to regulate, set, and approve rates.
Standard of Review
Resolution of this issue, at least in part, requires interpretation of the arbitration
provisions in the gas sales agreements. Our review over the interpretation of a contract is
de novo because it involves a legal question. Born v. Born, 304 Kan. 542, 554, 374 P.3d
624 (2016). The primary rule for interpreting written contracts is to determine the parties'
intent. If the contract language is clear, the parties' intent is determined from the
contract's language without applying rules of construction. If the language is ambiguous,
courts may use extrinsic or parol evidence to construe the contract. Russell v. Treanor
Investments, 311 Kan. 675, 680, 466 P.3d 481 (2020).
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Analysis
Forum-selection clauses are enforceable unless enforcement is unreasonable and
unjust or the clause is invalid for such reasons as fraud or overreaching. Vanier v.
Ponsoldt, 251 Kan. 88, 100, 833 P.2d 949 (1992). But that is only an issue if the forum-
selection clause is triggered. A review of the record shows the arbitration in Texas
requirement is not at issue because there was no actual contractual dispute. Instead, the
SWKIs challenged the legality of the rates because Anadarko never filed the gas sales
agreements with the Commission. The SWKIs do not take issue with the terms of the
contracts but, instead, claim that under Kansas law those agreements must be filed with
the Commission and the rates approved by the Commission.
The 1998 and 2002 gas sales agreements contained identical arbitration
provisions:
"Any dispute arising out of or relating to this Agreement or the breach,
termination or validity thereof, shall be finally settled by arbitration conducted
expeditiously in accordance with the Center for Public Resources Rules for Non-
Administered Arbitration of Business Disputes by three independent and impartial
arbitrators, of whom each party shall appoint one. The arbitration shall be governed by
the United States Arbitration Act, 9 U.S.C. Section 1-16, as same may be amended from
time to time, and judgment upon the award rendered by the arbitrators may be entered by
any court having jurisdiction thereof. The place of arbitration shall be in Houston, Texas.
The arbitrators are not empowered to award incidental, consequential, indirect, special,
punitive or exemplary damages, and each party hereby irrevocably waives any damages
other than actual direct damages."
The prior panel did not address the arbitration section in its opinion, but the
Commission addressed it on remand. The Commission found the gas service agreements
were valid because the contracts were fully performed. The Commission stated the
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SWKIs were seeking equitable relief and, if the rates were already just and reasonable,
the Commission could not provide the relief sought. The Commission noted the parties
agreed any disputes would be settled through arbitration in Houston, Texas. The
Commission stated: "Since the GSAs are governed by Texas law, any claim for equitable
relief arising out of or relating to the GSAs is, in accordance with the terms of the GSAs,
properly brought in Texas."
The district court rejected the Commission's reasoning and found the Commission
could not now conclude the only remedy in the case was equitable in nature and that any
claim must be brought before arbitrators in Texas.
From the beginning, the SWKIs have stated that their complaint is not a contract
dispute. The SWKIs have not challenged any provision of the gas sales agreements, nor
have they asserted Anadarko violated the contracts. Instead, the SWKIs sought a remedy
for Anadarko's failure to register the gas sales agreements with the Commission or
receive the Commission's approval of the contract rates as required by Kansas law. Thus,
the dispute goes to the Commission's authority to regulate the industry under Kansas law,
not the terms of the contracts.
The arbitration provisions in the gas sales agreements do not apply to this dispute.
As such, the district court was correct to find the Commission erred in finding any
remedy must come from arbitration in Texas.
Affirmed and remanded to the Commission with directions.
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