Daily Advertiser v. Trans-La, a Div. of Atmos Energy Corp.

• Citation: 612 So.2d 7
• Decision Date: 19 January 1993
• Docket Number: TRANS-LA,Nos. 92-C-0988,CL-B,92-C-1001,L,s. 92-C-0988
• Parties: The DAILY ADVERTISER, Richard D'Aquin, Mr. Cook Licensing Corporation d/b/a Mr. Cook Restaurants, Compagnie Vermilion Incorporated, Compagnietd., and C. Earl Hagood, Jr., Individually and on Behalf of All Others Similarly Situated v.(A DIVISION OF ATMOS ENERGY CORPORATION d/b/a Energas Company), Louisiana Intrastate Gas Corporation, Lig Chemical Company, Tuscaloosa Pipeline Company, and Trans-Louisiana Industrial Gas Company, Inc.
• Court: Supreme Court of Louisiana

Page 7

612 So.2d 7

140 P.U.R.4th 528

The DAILY ADVERTISER, Richard D'Aquin, Mr. Cook Licensing

Corporation d/b/a Mr. Cook Restaurants, Compagnie Vermilion

Incorporated, Compagnie CL-BM, Ltd., and C. Earl Hagood, Jr., Individually and on Behalf of All Others Similarly Situated v. TRANS-LA (A DIVISION OF ATMOS ENERGY CORPORATION d/b/a

Energas Company), Louisiana Intrastate Gas Corporation, Lig

Chemical Company, Tuscaloosa Pipeline Company, and

Trans-Louisiana Industrial Gas Company, Inc.

Nos. 92-C-0988, 92-C-1001.

Supreme Court of Louisiana.

Jan. 19, 1993.

Sheryl Lines Hopkins, New Orleans, Orrin L. Harrison, III, Vinson & Elkins, Don E. James, Dallas, Tex., Jon Kenton Parsons, Roedel, Parsons, Forrester & Koch, Baton Rouge, for applicant.

Oscar E. Reed, Jr., William Martin Hudson, III, Oats & Hudson, Bob F. Wright, James Parkerson Roy, Domengeaux & Wright, Lafayette, Eddie J. Jordan, Jr., Sessions & Fishman, Walter C. Thompson, Jr., Barkley & Thompson, Ernest L. Edwards, George Frazier, IV, C. David Vasser, Jr., Lemle & Kelleher, New Orleans, Lawrence E. Donohoe, Jr., Onebane, Donohoe, Bernard, Torian, Diaz, Abel & McNamara, Lafayette, Jeffrey Allan Riggs, LeDoux R. Provosty, Jr., Provosty, Sadler & deLaunay, Alexandria, for respondent.

Constance Charles Willems, McGlinchey Stafford Lang, New Orleans, for Entex, a div. of Arkla, Inc., and Louisiana Gas Service Co., a div. of Citizens Utilities Co., amicus curiae.

Thomas O. Lind, J. Wayne Anderson, Margaret McAliste Silverstein, Monroe & Lemann, New Orleans, for Louisiana Power and Light Co., amicus curiae.

Robert Ryland Percy, III, Percy & Pujol, Gonzales, for East Ascension Telephone Co., amicus curiae.

Carolyn L. DeVitis, Denham Springs, Michael R. Fontham, Paul Lewis Zimmering, Karen H. Freese, Stone, Pigman, Walther, Wittmann & Hutchinson, New Orleans, Rickey Wayne Miniex, Simien & Miniex, Lafayette, for Louisiana Public Service Com', amicus curiae.

John B. Hussey, Jr., Wilkinson, Carmody, Gilliam & Hussey, Shreveport, for Southwestern Elec. Power Co., amicus curiae.

Ashton R. Hardy, Regina Carol Scotto Wedig, Marjorie Ruth Esman, New Orleans, for Radiofone, Inc., amicus curiae.

Edward Hart Bergin, M. Megan Shemwell, T. Michael Twomey, Leslie Barbee Ponder IV, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, for BellSouth Telecommunications, Inc. d/b/a South Central Bell Telephone Co., amicus curiae.

Richard P. Ieyoub, Atty. Gen., James Marshall Ross, Baton Rouge, for State of La., amicus curiae.

James Leeper Ellis, Baton Rouge, for Gulf States Utilities Co., amicus curiae.

William O. Bonin, New Iberia, for Central Louisiana Elec. Co., amicus curiae.

HALL, Justice. ^*

We granted certiorari to decide whether the district court or the Louisiana Public Service Commission ("LPSC") has subject matter jurisdiction to adjudicate a claim by a class of residential and commercial end users of natural gas against several intrastate natural gas pipeline companies and distributors, arising out of the alleged manipulation of automatic fuel adjustment clauses. ¹ To resolve this issue, we must determine whether this is an antitrust or a damage action properly commenced in the district court, as the lower courts held, or a rate case within the LPSC's exclusive jurisdiction, as defendants strongly urge. We find that this is primarily a rate case that must be decided, in the first instance, by the LPSC and thus reverse in part.

I.

The plaintiffs are residential and commercial natural gas customers of Trans-La, a Division of Atmos Energy Corporation d/b/a Energas Company ("Trans-La"). Plaintiffs have styled their claim as a class action brought on behalf of themselves individually and on behalf of all others similarly situated. The individual plaintiffs are The Daily Advertiser; ² Richard D'Aquin; Mr. Cook Licensing Corporation d/b/a Mr. Cook Restaurants; Compagnie Vermilion Incorporated; Compagnie CL-BM, Ltd.; and C. Earl Hagood, Jr. The total number of class members is alleged to exceed 60,000 present and prior customers, and the class members are alleged to be geographically dispersed throughout Trans-La's service area, which encompasses several parishes.

Plaintiffs have named as defendants five entities, two of which are LPSC-regulated and three of which are unregulated. The regulated entities are Trans-La and Louisiana Intrastate Gas Corporation ("LIG"). Trans-La is a local distribution company in the business of supplying natural gas in several Louisiana parishes to residential and commercial customers, including plaintiffs. LIG is a Louisiana intrastate pipeline in the business of receiving gas from different areas and transporting it to, among others, local distribution companies, including Trans-La.

Pursuant to an alleged 1983 contract between LIG and Trans-La (the "1983 Contract"), Trans-La acquired virtually all of its gas during the relevant period from LIG. Because of the procedural posture of this case (pre-trial motions stage), the 1983 Contract has not yet been admitted into evidence, and it is unclear whether any of the other defendants were signatories to this contract. Nonetheless, plaintiffs allege that the 1983 Contract has a 10-year term and obligates Trans-La to obtain all of its intrastate natural gas requirements from LIG unless LIG waives this "all requirements" provision. Plaintiffs further allege that the price under this contract is set by reference to LIG's tariff on file with the LPSC.

The three unregulated defendants are affiliates of the two regulated defendants. Namely, the three unregulated defendants are LIG Chemical Company ("Lig Chem"), Tuscaloosa Pipeline Company ("Tuscaloosa"), and Trans-Louisiana Industrial Gas Company, Inc. ("T-Lig"). T-Lig is a subsidiary of Trans-La; Lig Chem and Tuscaloosa are subsidiaries of LIG. ³ The affiliates are in the business of transporting, selling, and/or brokering intrastate natural gas in the unregulated industrial market. ⁴

Another relevant player in this case is the LPSC. As noted above, the LPSC regulates both LIG and Trans-La. In so doing, it sets the rates at which LIG sells its gas to Trans-La, and the rates at which Trans-La, in turn, resells such gas to its customers. The LPSC, spurred by plaintiffs' claims, has instigated an investigation into the rates charged by Trans-La and LIG.

The rate that the LPSC mandates LIG charge its customers, including Trans-La, is comprised of two components: LIG's weighted average cost of gas ("WACOG") plus $0.13 per mcf. ⁵ The LPSC has issued orders authorizing intrastate pipelines, like LIG, to pass onto their customers any fluctuations in their WACOG on a monthly basis; hence, the WACOG functions as an automatic fuel adjustment clause. ⁶ The LPSC has also issued orders requiring intrastate pipelines to inform their customers of any such changes in their WACOG each month. Pursuant to the LPSC's orders and its tariff, LIG files its WACOG computations monthly with the LPSC. These computations specify the gas purchases and costs by producer, contract, volume, and amount paid. These filings go into effect when approved by the LPSC. The LPSC has approved each of LIG's filings since the early to mid-1970's.

The rate that the LPSC mandates local distribution companies, like Trans-La, charge their customers likewise has two components: their actual cost of gas and an approved amount for return on equity. ⁷ As mentioned above, Trans-La purchased virtually all of its gas during the relevant period from LIG under the 1983 Contract. Thus, Trans-La's actual cost of gas purchased during this time frame was equal to LIG's WACOG plus $0.13 per mcf, and LIG's WACOG is the only variable rate component at issue. The mechanism via which Trans-La passes on its increases or decreases in gas costs to its customers is its purchase gas adjustment ("PGA") clause. ⁸ Similar to LIG, Trans-La files its PGA computations monthly with the LPSC, setting out the cost of gas that it pays to LIG and passes through to its customers. The LPSC has approved each of Trans-La's PGA filings. ⁹

II.

In March 1991, plaintiffs commenced the instant class action seeking monetary, injunctive, and declaratory relief against defendants in the Fifteen Judicial District Court for the Parish of Lafayette. ¹⁰ Plaintiffs allege in their petition five state law causes of action: antitrust violations, breach of contract pour autrui, breach of fiduciary duty, unjust enrichment, and fraud. These claims are all based on the same operative facts, which plaintiffs' lengthy petition portrays as follows.

Beginning around 1981 or 1982, LIG allegedly implemented a "marketing plan" in order to enhance its profits. This plan included, among other things, the diversion of many of its less expensive intrastate natural gas purchase contracts (so called "cheap gas") to the unregulated defendants--LIG Chem, Tuscaloosa and T-LIG (the "Affiliate Corporations")--leaving the more expensive gas for resale to its regulated customers, such as Trans-La. This diversion of cheap gas had a two-fold effect. First, it enabled the Affiliate Corporations to engage in price competition in the unregulated intrastate industrial gas market. Second, it caused a concomitant increase in LIG's WACOG, as the cheap gas thereby was excluded from LIG's WACOG computations.

Plaintiffs allege that defendants further manipulated the WACOG computations by conspiring to include improper costs, and to exclude proper credits, within the rate structure and the WACOG component of the rate structure, resulting in an artificial increase in LIG's WACOG and, in turn, excessive rates being passed onto them via Trans-La's PGA clause. Particularly, plaintiffs identify four items that allegedly were improperly included in LIG's WACOG calculations: (1) take-or-pay costs, (2) third-party transportation costs, (3) commissions paid in connection with the acquisition of intrastate natural gas supplies, and (4) charges associated...