Texas Commercial Energy v. Txu Energy, Inc.

• Decision Date: 17 June 2005
• Docket Number: No. 04-40962.,04-40962.
• Citation: 413 F.3d 503
• Parties: TEXAS COMMERCIAL ENERGY, a Texas Limited Liability Company, Plaintiff-Appellant, v. TXU ENERGY, INC., et al., Defendants, TXU Energy Inc., TXU Generation Services Company LP, TXU Portfolio Management Company LP, formerly known as TXU Energy Trading Company LP, TXU Energy Solutions Management Company, formerly known as TXU Energy Services Co., American Electric Power Inc.; AEP Texas Central Company, AEP Texas North Company, American Electric Power Service Corp., AEP Texas Commercial Industrial Retail LP, Reliant Energy Inc., Reliant Resources Inc., Reliant Energy Electric Solutions LLC, Reliant Energy Retail Services LLC, Reliant Energy Solutions LLC, Automated Power Exchange Inc., Electric Reliability Counsel of Texas, Texas Genco LP, Centerpoint Energy Inc., Centerpoint Energy Houston Electric LLC, Texas Independent Energy LP, Odessa-Ector Power Partners LLP, Guadalupe Power Partners LLP, Tractebel Energy Marketing, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

413 F.3d 503

TEXAS COMMERCIAL ENERGY, a Texas Limited Liability Company, Plaintiff-Appellant, v. TXU ENERGY, INC., et al., Defendants TXU Energy Inc., TXU Generation Services Company LP, TXU Portfolio Management Company LP, formerly known as TXU Energy Trading Company LP, TXU Energy Solutions Management Company, formerly known as TXU Energy Services Co., American Electric Power Inc.; AEP Texas Central Company, AEP Texas North Company, American Electric Power Service Corp., AEP Texas Commercial Industrial Retail LP, Reliant Energy Inc., Reliant Resources Inc., Reliant Energy Electric Solutions LLC, Reliant Energy Retail Services LLC, Reliant Energy Solutions LLC, Automated Power Exchange Inc., Electric Reliability Counsel of Texas, Texas Genco LP, Centerpoint Energy Inc., Centerpoint Energy

Houston Electric LLC, Texas Independent Energy LP, Odessa-Ector Power Partners LLP, Guadalupe Power Partners LLP, Tractebel Energy Marketing, Inc., Defendants-Appellees.

No. 04-40962.

United States Court of Appeals, Fifth Circuit.

June 17, 2005.

Mikal C. Watts (argued), Gregory Lamar Gowan, Watts Law Firm, Corpus Christi, TX, for Plaintiff-Appellant.

Thomas Glascock Slater, Jr. (argued), Hunton & Williams, Richmond, VA, Richard L. Adams, Hunton & Williams, Dallas, TX, Thomas Michael Hughes, Hunton & Williams, Washington, DC, Darrell L. Barger, Hartline, Dacus, Barger, Dreyer & Kern, Corpus Christi TX, for TXU Energy Inc., TXU Generation Services Co. LP, TXU Portfolio Management Co. LP and TXU Energy Solutions Management Co.

Steven John Routh, Mary Anne Mason, Hogan & Hartson, Washington, DC, G. Don Schauer, Schauer & Simank, Corpus Christi, TX, for American Elec. Power Inc., AEP Texas Cent. Co., AEP Texas North Co., American Elec. Power Serv., Corp. and AEP Texas Commercial Indus. Retail LP.

Rufus W. Oliver, III, David Keith Isaak, Baker Botts, Houston, TX, for Reliant Energy Inc., Reliant Resources Inc., Reliant Energy Elec. Solutions LLC, Reliant Energy Retail Services, LLC and Reliant Energy Solutions Inc.

Osborne J. Dykes, William Joseph Boyce, Lance R. Bremer, Fulbright & Jaworski, Houston, TX, for Automated Power Exchange Inc.

Judith R. Blakeway, Strasburger & Price, San Antonio, TX, for Electric Reliability Counsel of Texas.

Daniel K. Hedges, John A. Irvine, Porter & Hedges, Houston, TX, for Texas Genco LPP, Centerpoint Energy Inc. and Centerpoint Energy Houston Elec. LLC.

Lawrence A. Gaydos, Kathleen McIntosh Beasley, Haynes & Boone, Dallas, TX, for Texas Independent Energy, LP, Odessa-Ector Power Partners LLP and Guadalupe Power Partners LLP.

Ernest L. Edwards, B. Richard Moore, Jr., Amy L. Baird, Lemle & Kelleher, New Orleans, LA, for Tractebel Energy Marketing Inc.

Robert S. Potosky (argued), Dallas, TX, for Cirro Energy Corp. and Utility Choice LP, amici curiae.

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

Before GARZA and BENAVIDES, Circuit Judges.^*

EMILIO M. GARZA, Circuit Judge:

Texas Commercial Energy ("TCE"), an energy retailer, appeals the district court's dismissal of its lawsuit against TXU Energy, Inc. ("TXU"), a generator of electric power, and twenty-three other defendants. TCE argues that the district court erred by applying the filed rate doctrine to preclude it from recovering damages it sustained when TXU allegedly manipulated its market position to create substantial price increases in the short-term energy market.

I

Texas deregulated its energy market in 1999 with the passage of Senate Bill 7. Act of May 27, 1999, 76th Leg., R.S., ch. 405, 1999 Tex. Gen. Laws 2543. Bill 7 amended the Public Utility Regulatory Act ("PURA") and split the state's integrated utilities into three groups: electric generation companies, transmission and distribution companies, and retail electric providers. TEX. UTIL.CODE ANN. § 39.051(b). The statute also gives the Public Utility Commission of Texas ("PUCT") authority to regulate the state's electric grids and to monitor and remedy market power abuses.¹ Specifically, PUCT has broad power to maintain "safe, reliable, and reasonably priced electricity" and to "ensure that ancillary services necessary to facilitate the transmission of electric energy are available at reasonable prices with terms and conditions that are not unreasonably preferential, prejudicial, discriminatory, predatory, or anticompetitive." TEX. UTIL.CODE ANN. §§ 39.101(a)(1), 35.004(e). PUCT is also empowered to remedy market abuses by "seeking an injunction or civil penalties as necessary to eliminate or to remedy the market power abuse or violation as authorized by Chapter 15, by imposing an administrative penalty as authorized by Chapter 15, or by suspending, revoking, or amending a certificate or registration as authorized by Section 39.356." TEX. UTIL.CODE ANN. § 39.157(a).

TCE is a retail electric provider that sells electricity to customers in Texas by entering into bilateral agreements with generators and by purchasing electricity through the ancillary Balancing Energy Service ("BES") market. The BES market is a bid-based wholesale market for short-term electricity power. PUCT contracted with a private organization, the Electric Reliability Council of Texas, Inc. ("ERCOT"), to administer the BES market. Under the terms of the contract, ERCOT was required to ensure system reliability, nondiscriminatory access to transmission and distribution systems, access to market information, and clearance of all market transactions. PUCT also created the Market Oversight Division ("MOD") to ensure general compliance with the requirements of PURA. In 2002, MOD required all participants in the Texas electricity market to file an affidavit with PUCT pledging that they would not engage in market manipulation.

In February 2003, during severe winter weather, the price for electricity on the BES market soared. As a result, TCE was forced to pay considerably higher sums for the energy it had to supply its customers. The resulting losses led TCE to meet with MOD and express their concern that the price spikes were the result of anti-competitive bids and market manipulation. TCE alleged that, at the time of the price fluctuations, TXU controlled anywhere from seventy-five to ninety-nine percent of the BES market and that it used its market strength to purposefully withhold energy from the market in order to increase the price. TCE argues that while ERCOT made some attempts to force TXU to rectify the situation, it failed to follow its own protocols. Due to the mounting losses, TCE was forced to file for Chapter 11 bankruptcy.

TCE filed suit against twenty-four market participants including TXU, its subsidiaries, and ERCOT. According to the complaint, TCE alleges that the defendants violated the federal Sherman Antitrust Act and the Texas Free Enterprise and Antitrust Act ("TFEAA"). TCE also alleges fraud, negligent misrepresentation, breach of contract, defamation, business disparagement, and civil conspiracy. The defendants filed motions to dismiss. After holding a hearing on the motions, the district court dismissed TCE's fraud, negligent misrepresentation, and state and federal antitrust claims on the basis of the filed rate doctrine. The court also dismissed some of the breach of contract and civil conspiracy claims, and denied ERCOT's motion to dismiss the defamation and business disparagement claims. Having dismissed the federal claims, the district court dismissed the entire case, finding that there was no basis for diversity jurisdiction on the remaining state law claims. TCE now appeals the district court's dismissal of its antitrust claims.²

II

We review a district court's grant of a motion to dismiss de novo. Martin K. Eby Const. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir.2004). A complaint "should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

The district court held that, even if the defendants had engaged in market manipulation, the filed rate doctrine precluded TCE from recovering for its losses under federal and state antitrust law. The filed rate doctrine bars judicial recourse against a regulated entity based upon allegations that the entity's "filed rate" is too high, unfair or unlawful. See, e.g., Square D Co. v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409, 106 S.Ct. 1922, 90 L.Ed.2d 413 (1986) (filed rate doctrine bars damage action against motor carriers under antitrust laws even though carriers colluded to set artificially high filed rate). The Supreme Court established this doctrine in Keogh v. Chicago & Northwestern Railway, Co., 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183 (1922). In Keogh, the Supreme Court held that a shipper could not bring an antitrust action against carriers in connection with tariffs paid because those tariffs had been filed and approved by the Interstate Commerce Commission. Id. at 163, 43 S.Ct. 47. The Court reasoned that even if the carriers had conspired to eliminate competition, the shipper could not recover under antitrust law because it could receive a rebate that might give the shipper "preference over his trade competitors." Id. Furthermore, the Court held that it was up to the respective governmental agency to determine whether the rates were discriminatory or unlawful, not the courts. Id. at 164, 43 S.Ct. 47.

Since Keogh, courts have consistently applied the filed rate doctrine in a number of energy cases to preclude lawsuits against companies based on rates that were filed with a government agency. See, e.g., Ark. La. Gas Co. v. Hall, 453 U.S. 571, 578, 101 S.Ct. 2925, 69 L.Ed.2d 856 (1981) (filed rate doctrine prohibits seller of natural gas to collect a rate different than the one it filed with the Federal Power Commission.); Tex. E. Transmission Corp. v. Fed....