Taffet v. Southern Co.

• Decision Date: 24 July 1992
• Docket Number: 90-8452,Nos. 90-7088,s. 90-7088
• Citation: 967 F.2d 1483
• Parties: Util. L. Rep. P 26,234, RICO Bus.Disp.Guide 8055 M.R. TAFFET and Robert M. Fierman, on behalf of themselves and all of the persons, corporations, municipalities, and other entities, other than the defendants, who are similarly situated, Plaintiffs-Appellants, v. The SOUTHERN CO., Southern Company Services, Inc., Alabama Power Company and Arthur Andersen & Co., Defendants-Appellees. Frederick Rodgers CARR, Carr Sales Company, O.E.M. Products, Inc., Timothy Dunn Stokely, Clark Stokely, III and All Others Similarly Situated, Plaintiffs-Appellants, v. The SOUTHERN COMPANY, Southern Company Services, Inc., Georgia Power Company, and Arthur Andersen & Co., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1483

967 F.2d 1483

Util. L. Rep. P 26,234, RICO Bus.Disp.Guide 8055

M.R. TAFFET and Robert M. Fierman, on behalf of themselves

and all of the persons, corporations, municipalities, and

other entities, other than the defendants, who are similarly

situated, Plaintiffs-Appellants, v.The SOUTHERN CO., Southern Company Services, Inc., Alabama

Power Company and Arthur Andersen & Co.,

Defendants-Appellees.

Frederick Rodgers CARR, Carr Sales Company, O.E.M. Products,Inc., Timothy Dunn Stokely, Clark Stokely, III andAll Others Similarly Situated,Plaintiffs-Appellants, v.The SOUTHERN COMPANY, Southern Company Services, Inc.,Georgia Power Company, and Arthur Andersen & Co.,

Defendants-Appellees.

Nos. 90-7088, 90-8452.

United States Court of Appeals Eleventh Circuit.

July 24, 1992.

Eddie Leitman, Andrew P. Campbell, S. Lynne Stephens, Leitman, Siegal, Payne & Campbell, P.C., Birmingham, Ala., Richard H. Gill, Robert D. Segall, J. Fairley McDonald, III, Copeland, Franco, Screws & Gill, P.A., Montgomery, Ala., John A. Boudet, Jerry R. Linscott, Baker & Hostetler, Orlando, Fla., Andrew M. Scherffius, Andrew M. Scherffius, P.C., A. Timothy Jones, Joseph C. Freeman, Jack N. Sibley, Freeman & Hawkins, Atlanta, Ga., Larry Moffett, Jackson Henderson Chiles, III, Daniel, Coker, Horton and Bell, P.A., Jackson, Miss., for plaintiffs-appellants in No. 90-7088.

M. Roland Nachman, Jr., T.W. Thagard, Jr., Maury D. Smith, John P. Scott, Jr., Balch & Bingham, Montgomery, Ala., for defendant-appelleeAla. Power Co. in No. 90-7088.

James E. Joiner, Troutman Sanders, Atlanta, Ga., for defendant-appelleeSouthern Co. in No. 90-7088.

M. Robert Thornton, Michael C. Russ, King & Spaulding, Kevin C. Greene, A William Loeffler, Ralph H. Greil, Troutman Sanders, Atlanta, Ga., for defendant-appelleeArthur Andersen & Co. in No. 90-7088.

Joe C. Freeman, Jr., A. Timothy Jones, Jack N. Sibley, Freeman & Hawkins, Andrew M. Scherffius, Atlanta, Ga., William Byrd Warlick, Jack B. Long, Nixon, Yow, Waller & Capers, Augusta, Ga., for plaintiffs-appellants in No. 90-8452.

Wyck A. Knox, Jr., Augusta, Ga., James E. Joiner, Michael C. Russ and M. Robert Thornton, Kevin C. Greene, A. William Loeffler, Ralph H. Greil, Troutman Sanders, Atlanta, Ga., for defendant-appellee in No. 90-8452.

Appeal from the United States District Court for the Middle District of Alabama.

Appeal from the United States District Court for the Southern District of Georgia.

Before TJOFLAT, Chief Judge, FAY, KRAVITCH, HATCHETT, COX, and DUBINA, Circuit Judges.^*

TJOFLAT, Chief Judge:

These two cases, ¹ consolidated on appeal, raise the question whether a private suit under the federal Racketeer Influenced and Corrupt Organizations Act (RICO),18 U.S.C. § 1964(c)(1988), may be brought against a utility to recover for excessive charges for electrical power resulting from the utility's fraudulent and material misrepresentations to a state rate-setting commission.The appellants in these cases seek to represent those who have purchased electrical power from Georgia Power Company and Alabama Power Company(the Utilities), both of which are subsidiaries of The Southern Company.The appellants allege that the Utilities, in conspiracy with Arthur Andersen & Co., their independent accounting firm, understated their net income in rate applications to their state public service commissions (the PSCs) by improperly accounting for purchases of spare parts; thus, the Utilities fraudulently obtained rate increases.²

The district courts below dismissed the appellants' complaints under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted.Both courts, finding that the exclusive authority to set rates for electricity is vested in the PSCs, based dismissal upon the filed rate doctrine, the primary jurisdiction doctrine, the clear statement doctrine, and abstention based upon federalism interests.Taffet v. Southern Co., No. 89V-712N, 1990 U.S. Dist. LEXIS 4189, at *3-5(M.D.Ala.Jan. 5, 1990);Carr v. Southern Co., 731 F.Supp. 1067, 1071-72(S.D.Ga.1990).On consolidated appeal to this court, a divided panel reversed; the majority rejected each of the doctrines relied upon by the district courts as a basis for dismissal of the cases at hand.Taffet v. Southern Co., 930 F.2d 847, 851-57(11th Cir.1991), vacated, 958 F.2d 1514(11th Cir.1992)(per curiam).The dissent argued that the filed rate doctrine and the primary jurisdiction doctrine foreclose application of RICO to a public utility after a rate has been approved by a state rate-making body; thus, the appellants' actions must be dismissed.Id. at 857(Birch, J., dissenting).

A majority of this court's judges in regular active service ordered that the consolidated appeals be reheard by the court en banc.Taffet v. Southern Co., 958 F.2d 1514(11th Cir.1992)(per curiam).³On rehearing en banc, we affirm the district courts' dismissals of these actions.

I.

Section 1964(c) of RICO allows a private plaintiff to recover for injuries that he has suffered to his business or property as a result of a violation of the criminal prohibitions in section 1962 of RICO.⁴Section 1962 imposes criminal liability on

those who engage in, or aid and abet another to engage in, a pattern of racketeering activity if they also do the following: invest income derived from the pattern of racketeering activity in the operation of an enterprise engaged in interstate commerce (section 1962(a)); acquire or maintain, through the pattern of racketeering activity, any interest in or control over such an enterprise (section 1962(b)); or conduct, or participate in the conduct of, the affairs of such an enterprise through a pattern of racketeering activity (section 1962(c)).Section 1962(d) makes it a crime to conspire to violate sections 1962(a), (b), or (c).

Pelletier v. Zweifel, 921 F.2d 1465, 1495-96(11th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 167, 116 L.Ed.2d 131(1991).Title 18 U.S.C. section 1961(1) lists the acts that constitute "racketeering activity" under RICO.⁵A "pattern" of racketeering activity consists of at least two acts of racketeering activity committed within ten years of each other (excluding any period of imprisonment).18 U.S.C. § 1961(5)(1988).

The RICOplaintiff, to recover, must show that the defendant is criminally liable under section 1962, Pelletier, 921 F.2d at 1496, and that the plaintiff has suffered an injury that "flow[s] from the commission of the [criminal violation]."Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 497, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346(1985)(footnote omitted).

In the instant cases, the appellants allege that they have suffered an injury to their business and property, within the purview of title 18 U.S.C. section 1964(c), in the form of excessive and illegal charges paid for electrical utility services, and that this injury is the proximate result of the appellees' racketeering activities, in violation of the prohibitions set forth in title 18 U.S.C. section 1962, ⁶ relating to their conspiracy and scheme to obtain PSC approval of excessive rate increases by means of fraudulently accounting for spare parts held in inventory.

The appellants' argument rests on the assumption that they enjoy a legal right to have been charged a lower rate than they actually were charged; the appellants, unless they enjoy such a right, have suffered no legally cognizable injury by having paid the higher rate.We conclude that the appellants do not possess this right; therefore, they have failed to state a claim upon which relief can be granted under RICO.

A.

We find support for our conclusion that the appellants have not suffered a legally cognizable injury sufficient to predicate a RICO civil action in a line of Supreme Courtcases that developed what has come to be known as the "filed rate doctrine."The origin of the filed rate doctrine can be traced back to Texas & Pacific Railway v. Abilene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed.553(1907), in which the Supreme Court addressed the issue of whether a shipper could maintain a common law action for damages against a common carrier for "the exaction of an alleged unreasonable rate, although the rate collected and complained of was the rate stated in the schedule filed with the Interstate Commerce Commission...."Id. at 436, 27 S.Ct. at 353.The Court held that the shipper could not maintain such an action.After acknowledging that, at common law, a shipper had a right of action for damages against a carrier who refused to carry goods except upon the payment of an unreasonable sum, id., the Court held that the Interstate Commerce Act implicitly had changed the common law, id. at 436, 27 S.Ct. at 353-54, and that the shipper's only redress was through the Interstate Commerce Commission(ICC) which had the power to alter established rates.Id. at 448, 27 S.Ct. at 358.The Court reasoned that the existence of a shipper's right to recover damages on the basis that the established rate was unreasonable was "wholly inconsistent with the administrative power conferred upon the [ICC], and with the duty, which the [Interstate Commerce Act] casts upon that body, of seeing to it that the statutory requirement as to uniformity and equality of rates is observed."Id. at 440-41, 27 S.Ct. at 355.

Following Abilene Cotton, federal courts have applied the filed rate doctrine in a variety of contexts to bar recovery by those who claim injury by virtue of having paid a filed rate.See, e.g., Keogh v. Chicago & Northwestern Ry., 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183(1922)(plaintiff may not recover under federal antitrust laws for asserted injury related to paying the rate approved by the ICC);H.J. Inc. v. Northwestern Bell Tel. Co., 954 F.2d 485(8th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 2306, 119 L.Ed.2d 228(1992)(filed rate doctrine precludes suit under RICO to recover claimed damages relating to...