Kourouma v. Fed. Energy Regulatory Comm'n

• Decision Date: 23 July 2013
• Docket Number: No. 11–1283.,11–1283.
• Citation: 723 F.3d 274
• Parties: Moussa I. KOUROUMA, Petitioner v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

723 F.3d 274

Moussa I. KOUROUMA, Petitioner

v.FEDERAL ENERGY REGULATORY COMMISSION, Respondent.

No. 11–1283.

United States Court of Appeals,District of Columbia Circuit.

Argued Dec. 13, 2012.

Decided July 23, 2013.

On Petition for Review of an Order of the Federal Energy Regulatory Commission.

Paul B. Mohler argued the cause for petitioner. With him on the briefs were Joseph H. Fagan, Julie D. Hutchings, and Stephen L. Markus.

Robert M. Kennedy, Attorney, Federal Energy Regulatory Commission, argued the cause for respondent. With him on the brief were Tony West, Assistant Attorney General, U.S. Department of Justice at the time the brief was filed, Mark B. Stern, and Lindsey Powell, Attorneys, and Robert H. Solomon, Solicitor, Federal Energy Regulatory Commission.

Before: GARLAND, Chief Judge, ROGERS and GRIFFITH, Circuit Judges.

Opinion for the Court filed by Circuit Judge GRIFFITH.

GRIFFITH, Circuit Judge:

In a summary disposition, the Federal Energy Regulatory Commission (FERC) ordered energy trader Moussa Kourouma to pay a $50,000 civil penalty because he had made false statements and material omissions in forms he filed with the Commission and a market operator the Commission regulates. For the reasons set forth below, we deny Kourouma's challenge to the order.

I

The Federal Power Act (FPA) grants FERC the authority to regulate the activity of traders who participate in energy markets. See16 U.S.C. §§ 791a–825r. To ensure the integrity and smooth functioning of the markets, FERC has promulgated a range of rules, one of which is 18 C.F.R. § 35.41(b), or “Market Behavior Rule 3,” which states:

A Seller must provide accurate and factual information and not submit false or misleading information, or omit material information, in any communication with the Commission, Commission-approved market monitors, Commission-approved regional transmission organizations, Commission-approved independent system operators, or jurisdictional transmission providers, unless Seller exercises due diligence to prevent such occurrences.

18 C.F.R. § 35.41(b). The definition of “Seller” includes “any person that ... seeks authorization to engage in sales for resale of electric energy, capacity or ancillary services at market-based rates....” 18 C.F.R. § 35.36(a)(1). In other words, energy traders like Kourouma may not make false or misleading submissions to the Commission or to the other types of entities named in the regulation.

From January 2008 to March 2009, Kourouma worked as a trader in various energy markets with Energy Endeavors LP. When he began with Energy Endeavors, Kourouma signed an employment contract that contained a non-compete clause that committed him to trade only for Energy Endeavors during his time at the firm and for two years after leaving the firm. In early 2009, Kourouma grew concerned over the business prospects of Energy Endeavors and formed his own trading firm, despite the terms of his contract. On February 18, 2009, Kourouma incorporated Quntum Energy LLC, using his daughter's name as Quntum's registered agent in place of his own. In order to participate in the energy markets, Kourouma filed applications with FERC and a regional transmission organization that operates electricity trading markets, PJM Interconnection LLC, in March 2009. Kourouma did not include his name on any of the forms he filed with FERC or PJM. In the form filed with FERC, he again concealed his role in Quntum by using his daughter's name in place of his own. In the form filed with PJM, he claimed that a friend was Quntum's manager, which was not true.

Energy Endeavors soon discovered Kourouma's activities with Quntum; its parent company sought enforcement of his employment contract, see Crane Energy, Inc. v. Kourouma, No. 4512–VCS (Del. Ch. June 5, 2009), and protested the application Quntum filed with FERC. FERC conducted an investigation into Kourouma's activities and issued an order stating that he had submitted false and misleading forms to FERC and PJM in violation of 18 C.F.R. § 35.41(b) and directing him to show cause why a $50,000 civil penalty was not appropriate. See Kourouma, 134 FERC ¶ 61,105 (2011).

The order also informed Kourouma that he could choose between two procedural options. See16 U.S.C. § 823b(d)(1); see also id. § 825 o–1 (requiring FERC to follow the 16 U.S.C. § 823b(d) procedures). He could elect for FERC to “promptly assess [the] penalty, by order,” a choice which would immediately vest him with appeal rights. Id. § 823b(d)(3)(A); see id. § 823b(d)(1), (2)(B). Or he could elect for the Commission to assess a penalty only “after a determination of violation has been made on the record after an opportunity for an agency hearing pursuant to section 554 of Title 5 before an administrative law judge....” Id. § 823b(d)(2)(A). Any resulting assessment order “shall include the administrative law judge's findings and the basis for [the] assessment.” Id.

In response to FERC's order, Kourouma submitted an affidavit in which he admitted that he falsely used the name of his daughter on a form submitted to FERC and the name of a friend on a form submitted to PJM instead of his own name. He explained that he used those names “in order to avoid making Energy Endeavors aware” of his involvement in Quntum.

Regarding his procedural options, Kourouma urged the Commission to dismiss the case against him by summary disposition. If the Commission chose not to dismiss the charges, he asked for an administrative hearing. The Commission determined the matter fit for summary disposition, but against Kourouma, not for him. Relying on the admissions of false filings Kourouma made in his affidavit, the Commission held that Kourouma violated Market Behavior Rule 3 and assessed a $50,000 civil penalty payable over five years to accommodate his financial condition.

In this petition for review, Kourouma alleges that FERC committed procedural and substantive errors. We have jurisdiction under 16 U.S.C. § 823b(d)(2)(B). See Bluestone Energy Design, Inc. v. FERC, 74 F.3d 1288, 1293 (D.C.Cir.1996).

II

We first consider Kourouma's argument that he was entitled to an administrative hearing under 16 U.S.C. § 823b(d)(2)(A).

We agree with FERC that Kourouma's admissions supported summary disposition without a hearing. FERC Rule of Practice and Procedure 217 provides that when “there is no genuine issue of fact material to the decision of a proceeding ..., [FERC] may summarily dispose of all or part of the proceeding.” 18 C.F.R. § 385.217(b). That rule does not run afoul of § 823b. We have routinely recognized that an agency need not hold an administrative hearing when no material facts are in dispute. As we stated in Citizens for Allegan County, Inc. v. Federal Power Commission,

the right of opportunity for hearing does not require a procedure that will be empty sound and show, signifying nothing. The precedents establish, for example, that no evidentiary hearing is required where there is no dispute on the facts and the agency proceeding involves only a question of law.

414 F.2d 1125, 1128 (D.C.Cir.1969) (citations omitted); see also, e.g., Moreau v. FERC, 982 F.2d 556, 568 (D.C.Cir.1993) (holding that the Natural Gas Act's hearing provision, 15 U.S.C. § 717f, does not require a hearing “when there are no disputed issues of material fact”); Pa. Pub. Util. Comm'n v. FERC, 881 F.2d 1123, 1126 (D.C.Cir.1989) (stating that “we have often held ... that a formal trial-type hearing is unnecessary where there are no material facts in dispute” (citations omitted)). Here, after receiving Kourouma's admissions, FERC faced only a question of law: Did Kourouma's admitted actions amount to a violation of Market Behavior Rule 3? No evidentiary hearing was needed.

We have never had occasion to consider this issue with regard to § 823b(d), but the principle upon which we rely is well-established. “Even when an agency is required by statute or by the Constitution to provide an oral evidentiary hearing, it need do so only if there exists a dispute concerning a material fact.” 1 Richard J. Pierce Jr., Administrative Law Treatise § 8.3 (5th ed.2010) (citing, e.g., Weinberger v. Hynson, Westcott & Dunning, Inc., 412 U.S. 609, 93 S.Ct. 2469, 37 L.Ed.2d 207 (1973)). This holds even where, as here, the governing statute requires that final civil penalty orders “shall include the administrative law judge's findings.” 16 U.S.C. § 823b(d)(2)(A). When the regulated party's own admissions make clear that no material facts are in dispute, it is unnecessary to require a judge to recite these facts as “findings” after a hearing. As we have already stated, Kourouma's affidavit makes the violation clear. In the affidavit he submitted to FERC in response to the order to show cause, Kourouma admitted that he falsified and omitted multiple names on his forms, and that he had kept his involvement in Quntum a secret to avoid alerting Energy Endeavors to his violation of the non-compete. Kourouma's admissions resolved all disputes of material fact, making an evidentiary hearing unnecessary.

III

Kourouma next argues that FERC erred because there was no showing that he had any intent to deceive FERC or PJM with his false filings. But intent to deceive is not an element of Market Behavior Rule 3. The Rule's plain text lacks any reference to intent and forgives false or misleading submissions only if they are made inadvertently despite the filer's due diligence to avoid such errors. The text provides no hint that a seller would be in the clear if, for example, he submitted false information recklessly, but without ill will. To the contrary, the fact that only due diligence excuses a false filing implies even negligent misrepresentations may be actionable. Contrary to Kourouma's assertion, so read, Market Behavior Rule 3 does not subject filers like Kourouma to strict liability, but reserves punishment for those who do not act with requisite care when submitting information to...