Illinois Decision Raises Issues Regarding Use of Filed Rate Doctrine on Motions to Dismiss

The ruling.  Commonwealth Edison (ComEd), the retail electric utility for the Chicago area, has been accused of bribing the Illinois Speaker of the House to help pass laws that led to ComEd being able to increase its charges by billions of dollars.  In 2020, a putative class of retail consumers sued ComEd in the Northern District of Illinois, alleging RICO and state-law violations.  As damages, they sought a refund of the “fee increases” that led to them “overpaying for electricity.”  Last week, in Gress v. Commonwealth Edison Co., Nos. 20-cv-4405 et al., 2021 WL 4125085 (N.D. Ill. Sept. 9, 2021), the court dismissed the RICO claim for failure to plead sufficient facts and under the principle of Fletcher v. Peck, 10 U.S. 87 (1810), finding that the RICO claim effectively asked a federal court to nullify the state laws that led to the rate increases based on the state legislators having bad motives, which Fletcher precludes.

Prior to making those rulings, however, the court declined to dismiss the RICO claim under the filed rate doctrine – a century-old rule that shields public utilities from liability on claims they charged excessive rates when the rates charged were those in their filed tariffs.  The court reasoned that the filed rate doctrine is an affirmative defense as to which the defendant must prove each element, and that because the complaint did not expressly state the plaintiffs paid for service under ComEd’s filed tariffs, ComEd could not prove all the elements it needed at the motion-to-dismiss stage.  (For discussion of another recent case involving alleged bribery of legislators to increase public utility rates in Ohio, see here).

The impact.  While that ruling had no practical effect in this instance (because the RICO claim was dismissed with prejudice on other grounds), it is notable because of its implications for other cases. The ruling potentially invites plaintiffs to end-run the filed rate doctrine by failing to mention in their complaint that they obtained service under a public utility’s filed tariff and paid the rates in that tariff.  If that were permitted, as in Gress, plaintiffs could avoid dismissal and force defendants to endure expensive (and potentially needless) discovery when the filed rate doctrine might otherwise entitle them to judgment as a matter of law.  Thus, if the Gress approach were adopted by other courts, the utility of the filed rate doctrine as a way to weed out, at the dismissal stage, claims that are barred as a matter of law could be diminished.

Practice tips.  Although the court did not consider them, defense counsel could employ a couple different tools to deal with complaints they believe artfully plead around the filed rate doctrine by failing to mention that the relevant service and charges were governed by a filed tariff.

First, in evaluating a filed rate doctrine defense, courts considering motions to dismiss routinely take judicial notice of filed tariffs, associated public utility commission decisions, the pertinent public utility regulatory structure, and sometimes even the public utility’s bills to customers.  E.g., Simon v. Keyspan Corp., 694 F.3d 196, 198 (2d Cir. 2012) (“Where necessary, we take judicial notice of the regulatory structure governing the New York City electricity market.”); Zurich American Ins. Co. v. S. Conn. Gas Co., 442 F.Supp.3d 510, 511 (D. Conn. 2021); Schafer v. Exelon Corp., 619 F.Supp.2d 507, 512-13 (N.D. Ill. 2007) (“On a motion to dismiss, this court can take judicial  notice of the rates on file with, and the publications of, FERC and the Illinois Commerce Commission ….”)  Likewise, while tariffs are akin to specialized contracts, they also are typically described as having the weight of statutes, and no one could object to a court considering a potentially dispositive statute on a motion to dismiss.  See Old Dominion Elec. Coop. v. PJM Interconnection, LLC, No. 19cv233, 2020 WL 1545882, *1 n.3 (E.D. Va. 2020) (“While PJM suggests in its briefing that the Court may take judicial notice of the federally-governed PJM Tariff and its terms, it seems questionable that the Court need take judicial notice of an agreement that bears the force of federal law.”). If the court took judicial notice of a filed tariff, and perhaps agency orders and the regulatory structure requiring the tariff, it could review the relevant rates, terms, and conditions in the tariff and be in a better position to decide whether a viable claim exists.

Second, if a complaint avoids mentioning the relevant tariff or that the charges at issue came from that tariff, defendants could argue the complaint does not meet the Twombley/Iqbal pleading requirements.  Those cases require a complaint’s allegations to support a plausible claim for relief.  But if a plaintiff alleges she paid excessive rates for a public utility service, yet does not allege where those rates came from (contract or tariff) or that the rates departed from a governing contract or tariff, then it is entirely possible the plaintiff merely paid tariffed rates and that her claim is therefore barred by the filed rate doctrine.  As the Gress court recognized, “[a]llegations that are as consistent with lawful conduct as they are with unlawful conduct are not sufficient” under Iqbal.  2021 WL4125085 at *5.  A complaint that simply says “I was charged excessively high rates for a public utility service,” without more facts or context, is arguably conclusory.  Indeed, it would be similar to allegations such as “the defendant breached a contract” (without identifying the contract) or “the defendant violated a statute” (without identifying the statute).  See id. (“Conclusory allegations are not entitled to be assumed to be true, nor are legal conclusions.”) (internal quotation marks omitted).  Defendants can credibly argue such allegations do not satisfy Twombley and IqbalSee id. (“The notice-pleading rule does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.”) (internal quotation marks omitted).   Defendants can argue a plaintiff offering such allegations should be required to re-plead with more specificity where the allegedly excessive rates came from and the benchmark for measuring whether they are excessive.  Then, once the plaintiff presents a complaint with the pertinent facts, the court will be in a much better position to determine whether the filed rate doctrine applies and whether the claim should be allowed to proceed.

If you have any questions regarding this post or other telecommunications or public utility legal issues, please contact Ty Covey (jtcovey@duanemorris.com) or Brian McAleenan (bamcaleenan@duanemorris.com) of the Duane Morris Technology, Media & Telecom practice group.