The filed rate doctrine (also called the filed tariff doctrine) is a century-old cornerstone of regulated-industries law that, generally speaking, bars claims where the effect would be to allow a customer to receive service, or the carrier to provide service, on rates, terms, or conditions that differ from the carrier’s tariff filed with the relevant regulatory agency. Central Office Tel., Inc. v. AT&T Corp., 524 U.S. 214, 222-23 (1998). The rule is strict and, where it applies, unyielding. Id. The recent district court decision in Smith v. FirstEnergy Corp., No. 2:20-cv-03755 et al., 2021 WL 496415 (S.D. Ohio, Feb. 10, 2021), however, declined to apply the filed rate doctrine where the rates at issue were set directly by legislation.
In the summer of 2020, former Speaker of the Ohio House of Representatives Larry Householder and his political associates were indicted for an alleged $60 million-dollar federal racketing conspiracy. The criminal complaint asserted that Householder and others, in exchange for large bribes from FirstEnergy Corp., collaborated to pass House Bill 6 (HB 6), a near billion-dollar nuclear power plant bailout that would benefit FirstEnergy. HB 6 required that a monthly surcharge be added to ratepayers’ bills (capped at 85 cents for residential customers and $2,400 for commercial customers), along with other adjustments that would increase rates. Ratepayers sued FirstEnergy on behalf of a proposed class, asserting federal claims under RICO and other statutes and a state-law claim under the Ohio Corrupt Practices Act. The alleged injury was having to pay costs and fees set forth in HB 6, and the plaintiffs sought both prospective relief (to stop enforcement of HB 6) and retroactive relief for charges already paid as a result of HB 6.
FirstEnergy moved to dismiss on various grounds, including that the RICO claim was barred by the filed rate doctrine. As FirstEnergy noted, the filed rate doctrine bars claims for refunds based on excessive filed rates, even when the rates allegedly were obtained through bribery or fraud. E.g., Leo v. Nationstar Mortg. LLC, 964 F.3d 213, 215-17 (3d Cir. 2020); Wegoland Ltd. v. NYNEX Corp., 27 F.3d 17, 20-21 (2d Cir. 1994). In Smith v. FirstEnergy, however, the district court declined to apply the doctrine to dismiss the RICO claim. Focusing on the assertion that the rates at issue were “not filed by the carriers but specifically mandated by the legislature,” and that HB 6 “overrode the normal rate-filing process,” the court stated that application of the filed rate doctrine depends on the filing of rates or tariffs, and that without such filing the doctrine does not apply. Id. at *5. In reaching this conclusion, the court disagreed with FirstEnergy’s point that under HB 6 the state public utility commission “will ultimately utilize its discretion to dictate the allocation and structure of the surcharge and hence set the rate,” because, according to the court, that point “do[es] not address the filing of the rates.” Id. The court also believed that the two core policies that support using the filed rate doctrine to dismiss claims – namely that court intervention in ratesetting matters risks creating discriminatory rate application or improperly intruding on an agency’s ratesetting function – did not apply where a statute dictates the rates to be charged. Id.
The question whether the filed rate doctrine applies to rates set by the legislature, as opposed to rates filed by a utility with a regulatory agency, appears to be novel. Neither the district court nor the parties’ briefs on the motion to dismiss identified any case that was directly on-point. Moreover, the district court’s analysis leaves some open questions. In particular, there are two main policy concerns behind applying the filed rate doctrine to bar claims that seek to deviate from filed tariffs. One is non-discrimination, which seeks to ensure that all similarly-situated customers pay the same amount. If relief is granted to the plaintiffs and not all rate payers equally, the non-discrimination policy would be violated. The second policy is non-justiciability, which seeks to ensure courts do not invade the exclusive province of expert agencies with respect to setting the proper rate and recognizes that courts are not well-suited to address ratesetting issues. The court in First Energy concluded that neither policy applies when a legislature, rather than an agency, sets rates, but it did not spell out its rationale. The court also gave no weight to FirstEnergy’s argument that the state public utility commission does have a role in implementing HB 6, in that it determines the method of allocation of surcharges and sets the “level and structure of the charge” (see Ohio Rev. Code § 3706.46(A)(2)), but did not explain why the agency’s involvement in setting the level and structure of the charge would necessarily be irrelevant in this context. It also is unclear from the opinion whether the surcharge or other rate increases required by HB 6 would eventually be reflected in any tariff.
Although situations where a legislature is deemed to directly set rates may not arise often, the apparently novel issue in Smith v. FirstEnergy certainly could arise again. In particular, there is a pending case in Illinois state court involving the major electric utility, Commonwealth Edison, and allegations that bribery or fraudulent conduct led to passage of an Illinois statute regarding adjustments to electric rates. Kuhn v. Commonwealth Edison Co., No. 2020-CH-05138 (Cook County Circuit Court). The Illinois statute is quite different than the Ohio statute, of course, but Commonwealth Edison has raised the filed rate doctrine as a defense and it is possible the plaintiffs will respond by asserting, as in Smith v. FirstEnergy, that the rate increases were more the product of a statute than of regulatory action.