Williams Pipe Line Co. v. Empire Gas Corp.

• Decision Date: 14 February 1996
• Docket Number: No. 95-5053,95-5053
• Citation: 76 F.3d 1491
• Parties: WILLIAMS PIPE LINE COMPANY, a Delaware corporation, Plaintiff-Appellant, v. EMPIRE GAS CORPORATION, a Missouri corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1491

76 F.3d 1491

WILLIAMS PIPE LINE COMPANY, a Delaware corporation Plaintiff-Appellant, v. EMPIRE GAS CORPORATION, a Missouri corporation, Defendant-Appellee.

No. 95-5053.

United States Court of Appeals Tenth Circuit.

Feb. 14, 1996.

C. Kevin Morrison, John T. Schmidt and Randolph L. Jones, Jr., Conner & Winters, Tulsa, Oklahoma, for Plaintiff-Appellant.

Steven G. Emerson, Thomas H. Davis, Watson & Marshall L.C., Kansas City, Missouri and Jerry Truster, Tulsa, Oklahoma, for Defendant-Appellee.

Before BALDOCK, BRORBY, and KELLY, Circuit Judges.

BALDOCK, Circuit Judge.

Under the Interstate Commerce Act, pipeline common carriers are required to establish rates and practices related to the transportation they provide, and file a tariff containing the rates and practices with the Federal Energy Regulatory Commission ("FERC"). 42 U.S.C. § 7172(b), 49 U.S.C. §§ 60501, 10501(a), 10762(a). A filed tariff rate or practice "governs the legal relationship between" a carrier and its shippers, unless subsequently invalidated. See Maislin Indus., U.S. v. Primary Steel, Inc., 497 U.S. 116, 126, 128, 110 S.Ct. 2759, 2765, 2766-67, 111 L.Ed.2d 94 (1990). FERC is empowered "on its own initiative or on complaint" to invalidate a tariff practice if it determines the practice is unreasonable or discriminatory. 49 U.S.C. §§ 10701(a); 10704(f); 10741(a); see also 18 C.F.R. §§ 385.206, 385.207 (filing complaint or petition with regulatory agency). The court can invalidate a tariff practice if it determines the practice is contrary to public policy. See Southwestern Sugar & Molasses Co. v. River Terminals Corp., 360 U.S. 411, 416-21, 79 S.Ct. 1210, 1214-17, 3 L.Ed.2d 1334 (1959).

Under the doctrine of primary jurisdiction, a court presented with a question whether a tariff practice is contrary to public policy should, in certain circumstances, refer the matter to the pertinent regulatory agency to allow the agency to make the initial determination. See id. at 420-21, 79 S.Ct. at 1216-17; United States v. Western Pac. R.R. Co., 352 U.S. 59, 63-65, 77 S.Ct. 161, 164-66, 1 L.Ed.2d 126 (1956). In the instant case, the district court invalidated on public policy grounds a tariff indemnity provision filed with FERC by Plaintiff Williams Pipe Line Company ("Williams"). We conclude the district court should not have itself determined the validity of the provision in the first instance, but should have stayed proceedings and referred the initial determination to FERC under the doctrine of primary jurisdiction. ¹

I.

Williams operates a system of interstate pipelines for the transportation of liquid petroleum products, including propane, throughout the midwestern United States. Defendant Empire Gas Corporation ("Empire") is a large retail distributor of propane. Empire consigned propane to Williams, which Williams transported through its pipelines to its delivery terminal in Carthage, Missouri. Federal regulations required Williams to inject the propane with an odorant once the fuel reached the delivery terminal. Williams injected the propane with the odorant ethyl mercaptan. Empire then delivered the propane from Williams' delivery terminal to Empire's customers.

In 1989, two of Empire's customers, Donna Pipes and Mae Cook, were injured in a propane explosion at Ms. Pipes' mobile home in Monett, Missouri. In 1991, Ms. Pipes filed suit against Empire and Williams in Missouri state court; Ms. Cook threatened to sue. In her suit, Pipes asserted numerous breaches of duties owed to her and specifically brought claims against Empire and Williams for negligence, products liability, breach of implied warranty, and negligence per se. Pipes sought compensatory and punitive damages in excess of $2,000,000.

In November 1991, Williams served a demand for defense and indemnity on Empire pursuant to the following tariff indemnity provision, which it had filed with FERC:

[Empire] agree[s] ... to indemnify, hold harmless and defend [Williams] from and against any and all claims and liabilities based on or arising out of the selection or use of ethyl mercaptan or other odorant designated by [Empire] as an odorant of propane, including any claim against [Williams] for product liability, negligence, breach of warranty or other fault.

Empire refused Williams' demand. Williams subsequently settled Pipes' claims and Cook's potential claims against it for a total of $375,000. Empire conceded that the settlement amount was reasonable.

After settling with Pipes and Cook, Williams brought the instant indemnification action against Empire in federal district court. Williams maintained that it was entitled to indemnification under its tariff indemnity provision. ² Williams contended that its tariff indemnity provision constituted a binding contract, which Empire breached by refusing to defend and indemnify Williams against Pipes' claims. Williams sought $375,000 for settlement monies paid and over $50,000 for expenses and attorney's fees incurred in defending the Pipes' suit.

Empire moved for summary judgment, or, in the alternative, stay pending referral of the matter to FERC under the doctrine of primary jurisdiction. Empire asserted that FERC had "uniformly" held unreasonable indemnity provisions like Williams' that purport to indemnify a pipeline carrier for its own negligence. Empire maintained, therefore, that Williams' indemnity provision was void as against public policy. ³

Williams responded with a motion for partial summary judgment. In response to Empire's arguments, Williams contended that it was not negligent in any respect and that it was seeking indemnity for Empire's conduct under the tariff indemnity provision. Williams maintained, therefore, that any public policy against indemnification for one's own negligence was inapplicable to the instant case. Williams noted that Empire had asserted no other affirmative defenses to the enforcement of its tariff indemnity provision. Accordingly, because Empire conceded that the amount of the settlement was reasonable, Williams maintained it was entitled to partial summary judgment as to the $375,000 settlement monies, leaving for trial only the issue regarding the attorney's fees and costs.

The district court granted Empire's motion for summary judgment and denied Williams' motion for partial summary judgment. The court noted that whether Williams was actually negligent was irrelevant. Rather, the court indicated that "[t]he issue ... is interpretation of [tariff] language, not evidentiary proof of fault."

The court focused on the terms of the tariff indemnity provision, which purported to indemnify Williams "against any and all claims" asserted against it, including claims for its own negligence. The court concluded that "[t]he tariff as written falls within that group which FERC has disapproved"--i.e., provisions that seek to indemnify a pipeline carrier for its own negligence. The court therefore invalidated Williams' tariff indemnity provision. The court noted that the doctrine of primary jurisdiction was not implicated because FERC had already expressed "its view of this type of indemnity provision." This appeal followed.

II.

On appeal, Williams argues that the court erred by invalidating its tariff indemnity provision. Specifically, Williams maintains that because it was not negligent in any respect in the instant case, any FERC policy against self-indemnification-for-negligence clauses is simply irrelevant. Williams contends that its indemnity provision does not "seek indemnity for [Williams'] own negligence, but rather for any claims arising out of its shippers' decision regarding the selection of odorant to be used." Empire responds that the tariff indemnity provision is invalid because FERC disfavors self-indemnification-for-negligence clauses.

"We review the grant or denial of summary judgment de novo, applying the same legal standard used by the district court pursuant to Fed.R.Civ.P. 56(c)." Wolf v. Prudential Ins. Co., 50 F.3d 793, 796 (10th Cir.1995). Summary judgment is appropriate if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c).

A.

In essence, the parties dispute the validity of the tariff indemnity provision. Williams contends the tariff indemnity provision is valid because FERC's policy against self-indemnification-for-negligence clauses is inapplicable because Williams was not negligent. Empire argues that the tariff indemnity provision is invalid because FERC has "uniformly" invalidated self-indemnification-for-negligence clauses. Accordingly, the issue before us is whether Williams' tariff indemnity provision is invalid in whole or part as against public policy.

The question whether a tariff provision is contrary to public policy implicates the doctrine of primary jurisdiction. See Southwestern Sugar, 360 U.S. at 420-21, 79 S.Ct. at 1216-17. Although Empire asserted the doctrine of primary jurisdiction before the district court, neither party has raised it on appeal. Nonetheless, because the doctrine of primary jurisdiction "exists for the proper distribution of power between judicial and administrative bodies and not for the convenience of the parties," Fontan-de-Maldonado v. Lineas Aereas Costarricenses, S.A., 936 F.2d 630, 632 (1st Cir.1991) (quotation omitted), we may examine whether it applies sua sponte. United States v. Western Pac. R.R. Co., 352 U.S. 59, 63, 77 S.Ct. 161, 164-65, 1 L.Ed.2d 126 (1956); see also Mical Communications, Inc. v. Sprint Telemedia, Inc., 1 F.3d 1031, 1037-1040 (10th Cir.1993).

B.

"The doctrine of primary jurisdiction ... is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties." Western Pac. R.R. Co., 352 U.S. at 63, 77 S.Ct. at 165. In essence, the doctrine represents a determination that administrative agencies are better equipped than the courts to handle...