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6th Circuit Limits Applicability of the Filed-Rate Doctrine and Holds that Electricity is a “Commodity” under Robinson-Patman

Posted in Energy/Commodities

by Nick GrimmerGregory E. Heltzer and Shauna A. Barnes

On June 6, 2012, in Williams v. Duke Energy Int’l, Inc., the U.S. Court of Appeals for the 6th Circuit reversed a dismissal of Robinson-Patman Act (price discrimination) claims, amongst others.  In the district court, a class of electricity purchaser plaintiffs alleged that defendant electricity providers gave an unfair competitive advantage to several of the defendants’ largest customers by paying them undisclosed rebates in side agreements, such that the favored customers paid effective rates below those approved by the governing agency, while the plaintiffs still had to pay higher agency-approved rates.  The plaintiffs alleged that while the favored customers initially objected to the defendants’ proposed rate plan, they withdrew their objections in exchange for the undisclosed rebates.  The district court dismissed the plaintiffs’ claims under the filed-rate doctrine, which bars challenges to the reasonableness of a “filed rate” (i.e., a rate approved by the governing regulatory agency).

The 6th Circuit reversed, holding that while the “filed-rate doctrine bars challenges to the reasonableness of a filed-rate,” the plaintiffs were not challenging the filed (i.e., approved) rate.  Instead, the court explained that the plaintiffs challenged “the lawfulness and purpose of payments made . . .  pursuant to various side agreements” that were “made outside of the [approved] rate scheme” – that is, these side agreements “were not filed with any agency, including the [governing agency].”  The court held that the plaintiffs properly stated a cause of action by alleging that via rebate payments, the defendants charged certain favored customers less than the actual filed rate, thereby harming the plaintiffs by giving the favored customers an unfair competitive advantage.

The extent to which other circuits will follow Williams is not clear, particularly if award of damages would have the effect of altering the filed rate (a point argued by the Williams defendants, but unaddressed by the 6th Circuit).  In the 8th Circuit (FirstCom, Inc. v. Qwest Corp.), for instance, “to the extent [a plaintiff] seeks recovery for a price discount it was allegedly entitled to, its claims are barred by the filed rate doctrine.”  And in the 11th Circuit (Hill v. BellSouth Telecomms., Inc.), the filed-rate doctrine bars claims where “an award of damages to the customer-plaintiff would, effectively, change the rate paid by the customer to one below the filed rate paid by other customers.”  However, these cases (and similar cases, for instance, the 2nd Circuitin Marcus v. AT & T Corp.) did not involve allegations that side deals caused the effective rates to vary from the filed rates.

Another noteworthy holding of Williams is that electricity is a commodity for purposes of the Robinson-Patman Act – a statute that makes it unlawful to price discriminate between purchasers of commodities of like grade and quality.”  This holding is in conflict with district courts in other circuits (Delaware, for instance, in City of Newark v. Delmarva Power & Light Co.) holding that under the Robinson-Patman Act, electricity is not a commodity.  The 6th Circuit in Williams reasoned that electricity is a commodity because it – unlike, for example, cell phone service – can be produced, felt, stored, transmitted, and distributed in discrete quantities. 

The takeaway:  Clients dealing in commodities – including electricity – where pricing is regulated must be very careful about rebates or discounts from agency-approved prices.

A copy of the case is attached here.