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ComEd Ruling Invites Plaintiffs To Bypass Filed Rate Doctrine

By Tyson Covey
October 8, 2021
Law360

ComEd Ruling Invites Plaintiffs To Bypass Filed Rate Doctrine

By Tyson Covey
October 8, 2021
Law360

Read below

Commonwealth Edison Co., the retail electric utility for the Chicago area, has been accused of bribing Michael Madigan, the former speaker of the Illinois 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 U.S. District Court for the Northern District of Illinois, alleging violations of state law and the federal Racketeering Influenced and Corrupt Organizations Act. As damages, the plaintiffs sought a refund of the fee increases that they alleged led to them overpaying for electricity.

Last month, in its decision in Gress v. Commonwealth Edison Co., the court dismissed the RICO claim for failure to plead sufficient facts and under the principle of Fletcher v. Peck. The court found 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 of the filed rate doctrine affirmative defense at the motion-to-dismiss stage.

That ruling had no practical effect in this instance, because the RICO claim was dismissed with prejudice on other grounds. But it is notable because of its implications for other cases.

Impact of the Ruling

The ruling potentially invites plaintiffs to make an end run around 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 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 that fail to mention whether the relevant service was purchased and paid for under a filed tariff.

First, in evaluating a filed rate doctrine defense, courts considering motions to dismiss often 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.[1]

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.[2]

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 possibly 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 Twombly/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 could be 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.[3]

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.[4]

Defendants can credibly argue such allegations do not satisfy Twombly and Iqbal.[5] And defendants can argue a plaintiff offering such allegations should be required to replead with more specificity as to 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.

J. Tyson Covey is a partner at Duane Morris LLP.

Notes

[1] 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").

[2] 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").

[3] 2021 WL4125085 at *5.

[4] See id. ("Conclusory allegations are not entitled to be assumed to be true, nor are legal conclusions") (internal quotation marks omitted).

[5] See 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).