Fifth Circuit Ruling Relies on Filed Rate Doctrine to Dismiss Claims Against Natural Gas Company

by Cozen O'Connor

In July 2013, the U.S. Court of Appeals for the 5th Circuit issued a ruling in which it relied upon the filed rate doctrine to dismiss a claim against a federally regulated natural gas company. In Medco Energi US, LLC v. Sea Robin Pipeline Co. (5th Cir. 2013),1 Medco Energi US, LLC (Medco) sought damages from Sea Robin Pipeline Company (Sea Robin) stemming from an interruption in service. The ruling is significant to regulated utilities as an example of how the filed rate doctrine can preclude claims against a utility that are derivative of provisions or services addressed in the utility’s tariff.

Utility tariffs set forth the rates and conditions related to the provision of service by a utility. Tariffs must be approved by the utility’s regulator. Depending on the type of utility, the appropriate regulator could be the Federal Energy Regulatory Commission (FERC) or a state utility commission.

Many tariffs also include exculpatory clauses that release the utility from direct or consequential damages arising out of, or resulting from, the provision of service. The utility, however, would still be liable for damages arising out of its own negligence, recklessness or willful misconduct.

Under the filed rate doctrine, a public utility providing services under a tariff must strictly adhere to the provisions of the tariff. The tariff, in effect, has the force of law and governs the relationship between a utility and its customers.

The Supreme Court has recognized that the filed rate doctrine bars claims against a utility that conflict with its tariff or claims that would vary or enlarge a party’s rights as defined by the tariff. See Am. Tel. & Tel. Co. v. Cent. Office Tel., Inc., 524 U.S. 214 (1998) (AT&T).

Courts have also recognized that the filed rate doctrine bars claims against a utility that would require a court to evaluate the reasonableness of the tariff, even if the claim did not directly challenge the filed rate. This is because courts should give deference to utility regulators who are tasked with determining the reasonableness of tariffs.

For example, in Hill v. BellSouth Tel., Inc., 197 F.3d 694 (11th Cir. 2004), the court dismissed plaintiff’s claims that BellSouth Telecommunications, Inc. misled customers about tariff rates it charged to customers, finding that “even if a claim does not directly attack the filed rate, an award of damages to the customers that would, in effect, result in a judicial determination of the reasonableness of that rate is prohibited under the filed rate doctrine.”

The Medco decision is the latest of the filed rate doctrine cases emanating from the AT&T decision. Sea Robin operated a pipeline that was damaged by Hurricane Ike in 2008. As a result of the damage, Medco and other producers in the Gulf of Mexico were unable to transport gas through Sea Robin’s pipeline. Medco alleged that Sea Robin misrepresented when the pipeline would become available for use and sought damages to recover lost revenue and business interruption damages.

The court evaluated Medco’s claims under Sea Robin’s tariff. The court determined that under the tariff: (1) the service provided to Medco was on an interruptible basis with no guaranteed right to delivery; (2) Sea Robin made no representation as to available capacity on its pipeline; and (3) Sea Robin was not required to perform services unless all its facilities necessary to render service were in good operating condition.

The court dismissed Medco’s claims, finding that “the filed rate doctrine recognizes the broad authority granted to agencies and not to the courts to determine whether the rates, including the services, classifications and practices included in the filing are reasonable,” and that under the filed rate doctrine, all filed rates are “per se reasonable and unassailable in judicial proceedings brought by ratepayers.” Medco at 5 (citing Tex. Commercial Energy v. TXU Energy, Inc., 413 F.3d 503, 508 (5th Cir. 2005)).

Since the tariff provided that Sea Robin need only supply Medco with interruptible service, the court determined that allowing recovery for damages incurred when Medco could not use Sea Robin’s pipeline would conflict with the interruptible rate and provisions of the tariff.” Medco at 7. Medco’s claims were dismissed because the claims were derivative of terms expressly provided for in Sea Robin’s tariff’s provisions. Id. at 8.

Utilities and other industry stakeholders should note Medco’s continued support of the filed rate doctrine as set forth by the Supreme Court in AT&T. If a utility is facing claims that are derivative of terms or provisions in its tariff, the utility should consider how courts in its own judicial jurisdiction have interpreted the filed rate doctrine.

1 This decision was unpublished and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4.

Written by:

Cozen O'Connor

Cozen O'Connor on:

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