Overview
On October 5, the Third Circuit issued a precedential opinion in George E. Warren LLC v. Colonial Pipeline Co. affirming dismissal of a significant lawsuit against our client, Colonial Pipeline Company, based on the filed rate doctrine. The case builds upon an earlier filed rate doctrine case Steptoe litigated in the First Circuit, Breiding v. Eversource Energy, 939 F.3d 47 (1st Cir. 2019), and demonstrates the power of the filed rate doctrine as a defense in litigation for regulated energy companies.
A pipeline shipper, George E. Warren LLC (GEW), challenged the practice of blending butane into the stream of gasoline moving through the pipeline as unlawfully reducing the value of gasoline GEW received from Colonial by reducing its “blend margin.” GEW asserted claims under the Carmack Amendment and state tort law against Colonial and a related joint venture, Powder Springs Logistics.
The Third Circuit affirmed the dismissal of these claims, reasoning that GEW was only entitled to receive gasoline meeting the same Federal Energy Regulatory Commission (FERC)-approved tariff specification as the gas that it tendered to the pipeline. GEW conceded that the product it received met those specifications. By claiming a right to "blend margin" not specified in the tariff, the Third Circuit concluded that GEW "seeks an enlargement of its rights under the FERC-approved tariff and therefore violates the filed-rate doctrine." The Third Circuit rejected GEW's argument that the filed rate doctrine was inapplicable because blending was a non-jurisdictional activity and the joint venture conducting the blending did not have a tariff on file. Instead, the Third Circuit emphasized that "the nature of the defendants' conduct…does not control whether the filed-rate doctrine applies," and instead investigated whether allowing the case to proceed would implicate the doctrine’s non-discrimination or non-justiciability principles. The court found both were implicated: the former because GEW "seeks treatment under the tariff that differs from how Colonial could treat any other gasoline shipper," and the latter because "the claims seek an impermissible judicial interference in the rate-making process."
The Third Circuit's opinion relied heavily on Breiding, another case in which Steptoe successfully obtained a circuit court's affirmance of dismissal on filed rate grounds. The First Circuit in Breiding dismissed an antitrust challenge to electric utility practices concerning release of capacity along a FERC-jurisdictional pipeline because such practices were subject to a FERC tariff. In both cases, the courts' recognition and understanding of how the FERC tariffs interacted with the challenged conduct were crucial to the ultimate outcome in the case.
The GEW decision is important not only for oil pipelines that may wish to engage in blending, but all regulated entities that face challenges to their conduct and claims for relief that implicate FERC-jurisdictional tariffs. The Third Circuit explicitly rejected the argument that the activity in question must fall within "FERC's regulatory oversight" for the doctrine to be utilized. Moreover, the Third Circuit's application of the defense barred claims against the joint venture that conducted the blending even though it did not have a tariff on file.
The GEW and Breiding decisions dramatically underscore the potential utility of the filed rate defense and the need for a well-informed assessment of whether a claim for relief would infringe on a regulated entity's right – either explicitly recognized or permitted because it is not precluded – under an agency-approved tariff. Challenged activity frequently can be characterized as outside of FERC's purview, even if in reality it touches on FERC-regulated tariffs. The GEW decision reinforces the importance of evaluating, at the beginning of a litigation, whether claims raised in court proceedings may implicate state or federal tariffs, or more broadly the regulatory framework in which the regulated entity operates. Steptoe’s recent successes litigating the filed rate defense have led to the dismissal of lawsuits claiming hundreds of millions of dollars.
