Williams v. Duke Energy Int'l, Inc.

• Decision Date: 25 July 2012
• Docket Number: No. 10–3604.,10–3604.
• Citation: 2012 Trade Cases P 77913,681 F.3d 788
• Parties: Anthony WILLIAMS; BGR, Inc.; Munafo, Inc.; Aikido of Cincinnati, Plaintiffs–Appellants, v. DUKE ENERGY INTERNATIONAL, INC.; Duke Energy Corporation; General Motors Corporation, Defendants–Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

681 F.3d 788

2012-1 Trade Cases P 77,913

Anthony WILLIAMS; BGR, Inc.; Munafo, Inc.; Aikido of Cincinnati, Plaintiffs–Appellants,

v.DUKE ENERGY INTERNATIONAL, INC.; Duke Energy Corporation; General Motors Corporation, Defendants–Appellees.

No. 10–3604.

United States Court of Appeals,Sixth Circuit.

Argued: Jan. 11, 2012.

Decided and Filed: June 4, 2012.

Rehearing and Rehearing En Banc Denied July 25, 2012.

ARGUED:Paul Michael De Marco, Waite, Schneider, Bayless & Chesley Co., L.P.A., Cincinnati, Ohio, for Appellants. Joseph R. Guerra, Sidley Austin LLP, Washington, D.C., for Appellees. ON BRIEF:Paul Michael De Marco, Stanley M. Chesley, W.B. Markovits, Christopher D. Stock, Waite, Schneider, BAYLESS & Chesley Co., L.P.A., Cincinnati, Ohio, Randolph H. Freking, George M. Ruel, Jr., Freking & Betz, LLC, Cincinnati, Ohio, for Appellants. James E. Burke, W. Jeffrey Sefton, Cincinnati, Ohio, Peter D. Keisler, Eric D. McArthur, Sidley Austin LLP, Washington, D.C., for Appellees.

Before: SILER and GRIFFIN, Circuit Judges; TARNOW, District Judge. ^*

OPINION

TARNOW, Senior District Judge.

Plaintiffs appeal the dismissal of their case pursuant to Fed.R.Civ.P. 12(b)(1). The district court, following a hearing, found that the “filed-rate doctrine” denied the court federal question subject-matter jurisdiction. The district court also found that the Public Utilities Commission of Ohio (“PUCO”) had exclusive jurisdiction over Defendants' state-law claims, depriving the court of diversity jurisdiction. The district court granted Defendants' motion to dismiss pursuant to 12(b)(1). The district court did not assess Defendants' arguments that dismissal was also proper under Fed.R.Civ.P. 12(b)(6).¹

Plaintiffs raise three issues on appeal. First, Plaintiffs argue that the PUCO does not have exclusive jurisdiction over the state-law claims raised by Plaintiffs. Second, Plaintiffs argue that the filed-rate doctrine does not apply to their federal claims. Third, Plaintiffs argue that even if the district court was correct in dismissing some of Plaintiffs claims under the filed-rate doctrine and because of PUCO's exclusive jurisdiction, the district court should still have considered Plaintiffs' request for injunctive and other non-monetary relief.

For the following reasons, we REVERSE the judgment of the district court and REMAND for proceedings consistent with this opinion.

I. Background

Plaintiffs Anthony Williams, BGR, Inc., Munafo, Inc., and Aikido of Cincinnati, individuals and businesses based in Ohio, brought suit against Defendants Duke Energy International, Inc. and Duke Energy Corporation, retail electricity service providers, alleging violation of the Robinson–Patman Act of 1936, 15 U.S.C. § 13, et seq., Ohio's Pattern of Corrupt Activity Act, Ohio Rev.Code § 2923.31, et seq., a civil RICO claim pursuant to 18 U.S.C. § 1962(c), and common-law claims of fraud and civil conspiracy. Defendant Duke Energy International, Inc.² was dissolved in May of 2005, and was a subsidiary of Duke Energy Carolinas, LLC ³ (“Duke”). Plaintiffs' case centers on a subsidiary of Duke Energy Carolinas, Duke Energy Ohio, Inc. (“DEO”) and an affiliated company, Duke Energy Retail Sales ⁴ (“DERS”).

Plaintiffs allege that Duke,⁵ through subsidiaries and an affiliated company, paid unlawful and substantial rebates to certain large customers, including General Motors, in exchange for the withdrawal by said customers of objections to a rate-stabilization plan that Duke was attempting to have approved by the PUCO.

In 1999, the Ohio General Assembly enacted legislation which “restructured Ohio's electric-utility industry to increase retail competition.” Ohio Consumers' Counsel v. Pub. Util. Comm'n, 111 Ohio St.3d 300, 856 N.E.2d 213, 218 (2006). The restructuring legislation also provides for a transition “market development period,” not to exceed five years, which was to end when specified numbers of customers switched suppliers of electricity. Id. After the market-development period, the legislation removed the authority of the PUCO to set electricity rates. SeeOhio Rev.Code § 4928.05.

On January 10, 2003, Duke Energy International's predecessor-in-interest, Cincinnati Gas & Electric Company (“CGE”), filed an application with the PUCO to establish market-based pricing of electrical rates. Ohio Consumers' Counsel, 856 N.E.2d at 219. Thereafter, the PUCO directed CGE to file a proposed rate-stabilization plan (“RSP”). Id. at 302, 856 N.E.2d 213. A number of parties filed objections to the proposed RSP, which would govern the rates CGE would be permitted to charge until December 28, 2008. In re Cincinnati Gas & Elec. Co., No. 03–93–EL–ATA, 2007 WL 3197045, at *2 (Ohio Pub.Util.Comm'n, Oct. 24, 2007). These parties included major consumer of electricity such as General Motors as well as the Ohio Consumers' Counsel (“OCC”), which represents Ohio consumers in actions before the PUCO. The hearing was adjourned to facilitate ongoing settlement negotiations. Ohio Consumers' Counsel, 856 N.E.2d at 219. Thereafter, CGE filed a stipulation regarding the outstanding rate issues. The stipulation was agreed to by a number of parties, including General Motors, who withdrew their objections to the RSP. Id. The OCC opposed the stipulation. Id.

Shortly after the stipulation was filed, the OCC sought discovery from CGE to determine whether the utility had entered into side agreements (not filed with the PUCO) in an effort to persuade General Motors and other large consumers to withdraw their objections to the rate-stabilization plan. Ohio Consumers' Counsel, 856 N.E.2d at 219. The PUCO denied the request for discovery of any side agreements. Id. Both the OCC and CGE requested a rehearing. Id. at 220. The PUCO denied the OCC's request for a rehearing on the issue of the side agreements, and accepted some of the alternative aspects of the rate-stabilization plan proposed by CGE. Id. A second rehearing request by the OCC was denied on January 19, 2005, and a third on April 13, 2005. Id. In the second and third rehearing decisions, the PUCO approved additional modifications to the rate-stabilization plan. Id.The OCC appealed to the Ohio Supreme Court. Id.

The Ohio Supreme Court unanimously reversed the PUCO's refusal to allow discovery of the side agreements between CGE and the parties that had withdrawn their objections to support the RSP stipulation:

OCC argues that the existence of side agreements could be relevant to a determination that the stipulation was not the product of serious bargaining. OCC suggests that if [CGE] and one or more of the signatory parties agreed to a side financial arrangement or some other consideration to sign the stipulation, that information would be relevant to the commission's determination of whether all parties engaged in “serious bargaining.” We agree.... [w]hether the stipulation was the product of serious bargaining ... cannot be resolved solely by reviewing the proposed stipulation. The commission cannot rely merely on the terms of the stipulation but, rather, must determine whether there exists sufficient evidence that the stipulation was the product of serious bargaining. Any such concessions or inducements apart from the terms agreed to in the stipulation might be relevant to deciding whether negotiations were fairly conducted ... [t]herefore, we hold that the commission erred in denying discovery of this information based on lack of relevancy.

Ohio Consumers' Counsel, 856 N.E.2d at 234–35.

In addition, the court found that the PUCO had failed to provide its reasoning in allowing additional charges and fees to be included in the rate-stabilization plan after CGE's request for a rehearing. Id. at 223–25.

On remand, the PUCO ordered discovery of any documents relevant to side agreements between Duke ⁶ and its customers ⁷ that might be relevant to evaluate the seriousness of the bargaining. Thereafter, the PUCO conducted an evidentiary hearing on the issue of whether the rate-stabilization plan was reasonable.

The PUCO expressly rejected the earlier stipulation:

Certain of the parties to the stipulation had signed side agreements that required them to support the stipulation ... we have limited evidence ... regarding the willingness of Duke to compromise with parties who may not have been discussing side arrangements ... we find that the existence of side agreements, in which several of the signatory parties agreed to support the stipulation, raises serious doubts about the integrity and openness of the negotiation process related to that stipulation ... we now reach the inevitable conclusion that there is a sufficient basis to question whether the parties engaged in serious bargaining and, therefore, that we should not have adopted the stipulation. We now expressly reject the stipulation on such grounds.

Id. at *19.

However, having rejected the stipulated RSP, the PUCO determined that the Ohio Supreme Court's concerns about particular allowed charges in the plan were “moot” as the stipulation had been rejected. The PUCO then considered the original RSP submitted by Duke on January 26, 2004. The PUCO approved this plan with some modifications. Id. at *20–32.⁸

The OCC again appealed to the Ohio Supreme Court, contending that the PUCO improperly limited the consideration of the side agreements to whether serious bargaining occurred. Ohio Consumers' Counsel, 904 N.E.2d at 856–57. The OCC contended that the PUCO should have considered whether Duke engaged in unlawful discounting or discrimination in the supply of electricity. Id.

The Ohio Supreme Court upheld the PUCO's decision, finding that the PUCO was not required to investigate Duke's alleged unlawful activities in the context of Duke's application to approve its market-based service rate-stabilization plan:

Pursuant to our remand, the side agreements were relevant to the commission's evaluation of the serious bargaining aspect of the reasonableness review for stipulations...