Source: https://supreme.justia.com/cases/federal/us/453/571/
Timestamp: 2019-04-21 04:20:47+00:00

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In 1952, respondent natural gas producers and petitioner entered into a contract under which respondents agreed to sell petitioner natural gas from a certain gas field in Louisiana. The contract contained a fixed price schedule and a "favored nations clause," which provided that, if petitioner purchased gas from the gas field from another party at a higher rate than it was paying respondents, then respondents would be entitled to a higher price for their sales to petitioner. In 1954, respondents filed the contract and their rates with the Federal Power Commission (now the Federal Energy Regulatory Commission) and obtained from it a certificate authorizing the sale of gas at the specified contract rates. In 1961, petitioner purchased certain leases in the same gas field from the United States and began producing gas on its leasehold. In 1974, respondents filed an action in a Louisiana state court, contending that petitioner's lease payments to the United States had triggered the favored nations clause. Because petitioner had not increased its payments to respondents as required by that clause, respondents sought as damages an amount equal to the difference between the price they actually were paid in the intervening years and the price they would have been paid had that clause gone into effect. Although finding that the clause had been triggered, the trial court held that the "filed rate doctrine," which prohibits a federally regulated seller of natural gas from charging rates higher than those filed with the Commission pursuant to the Natural Gas Act, precluded an award of damages for the period prior to 1972 (the time during which respondents were subject to the Commission's jurisdiction). The intermediate appellate court affirmed, but the Louisiana Supreme Court reversed, holding that respondents were entitled to damages for the period between 1961 and 1972 notwithstanding the filed rate doctrine. The court reasoned that petitioner's failure to inform respondents of the lease payments to the United States had prevented respondents from filing rate increases with the Commission, and that, if they had done so, the increases would have been approved.
Held: The filed rate doctrine prohibits the award of damages for petitioner's breach during the period that respondents were subject to the Commission's jurisdiction. Pp. 453 U. S. 576-585.
(a) The Natural Gas Act bars a regulated seller of natural gas from collecting a rate other than the one filed with the Commission, and prevents the Commission itself from imposing a rate increase for gas already sold. Here, the Louisiana Supreme Court's ruling amounts to nothing less than the award of a retroactive rate increase based on speculation about what the Commission might have done had it been faced with the facts of this case. This is precisely what the filed rate doctrine forbids. It would undermine the congressional scheme of uniform rate regulation to allow a state court to award as damages a rate never filed with the Commission, and thus never found to be reasonable within the meaning of the Act. Pp. 453 U. S. 576-579.
(b) Congress has granted exclusive authority over rate regulation to the Commission, and, in so doing, withheld the authority to grant retroactive rate increases or to permit collection of a rate other than the one on file. It would be inconsistent with this purpose to permit a state court to do through a breach of contract action what the Commission may not do. Under the filed rate doctrine, the Commission alone is empowered to approve the higher rate respondents might have filed with it, and until it has done so, no rate other than the one on file may be charged. The court below thus has usurped a function that Congress has assigned to a federal regulatory body. Cf. Chicago & North Western Transp. Co. v. Kalo Brick & Tile Co., 450 U. S. 311. This the Supremacy Clause will not permit. Pp. 453 U. S. 579-582.
(c) Under the filed rate doctrine, when there is a conflict between the filed rate and the contract rate, the filed rate prevails. P. 453 U. S. 582.
(d) Permitting the state court to award what amounts to a retroactive right to collect a rate in excess of the filed rate "only accentuates the danger of conflict," and no appeal to equitable principles can justify such usurpation of federal authority. Pp. 453 U. S. 583-584.
368 So.2d 984, affirmed in part, vacated in part, and remanded.
MARSHALL, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, WHITE, and BLACKMUN, JJ., joined. POWELL, J., filed a dissenting opinion, post, p. 453 U. S. 585. STEVENS, J., filed a dissenting opinion, in which REHNQUIST, J., joined, post, p. 453 U. S. 586. STEWART, J., took no part in the consideration or decision of the case.
The "filed rate doctrine" prohibits a federally regulated seller of natural gas from charging rates higher than those filed with the Federal Energy Regulatory Commission pursuant to the Natural Gas Act, 52 Stat. 821, as amended, 15 U.S.C. § 717 et seq. (1976 ed. and Supp. III). The question before us is whether that doctrine forbids a state court to calculate damages in a breach of contract action based on an assumption that, had a higher rate been filed, the Commission would have approved it.
In 1954, respondents filed with the Federal Power Commission (now the Federal Energy Regulatory Commission) [Footnote 3] the contract and their rates and obtained from the Commission a certificate authorizing the sale of gas at the rates specified in the contract.
In September, 1961, Arkla purchased certain leases in the Sligo Field from the United States and began producing gas on its leasehold. In 1974, respondents filed this state court action contending that Arkla's lease payments to the United States had triggered the favored nations clause. Because Arkla had not increased its payments to respondents as required by the clause, respondents sought as damages an amount equal to the difference between the price they actually were paid in the intervening years and the price they would have been paid had the favored nations clause gone into effect.
an award of damages for the period prior to 1972. The intermediate appellate court affirmed, 359 So.2d 255 (1978), and both parties sought leave to appeal. The Supreme Court of Louisiana denied Arkla's petition for appeal, 362 So.2d 1120 (1978), and Arkla sought certiorari in this Court on the question whether the interpretation of the favored nations clause should have been referred to the Commission. We denied the petition. 444 U.S. 878 (1979).
natural gas in interstate commerce to file their rates with the Commission. Under § 4(a) of the Act, 2 Stat. 822, 15 U.S.C. § 717c(a), the rates that a regulated gas company files with the Commission for sale and transportation of natural gas are lawful only if they are "just and reasonable." No court may substitute its own judgment on reasonableness for the judgment of the Commission. The authority to decide whether the rates are reasonable is vested by § 4 of the Act solely in the Commission, see FPC v. Hope Natural Gas Co., 320 U. S. 591, 320 U. S. 611 (1944), and "the right to a reasonable rate is the right to the rate which the Commission files or fixes," Montana-Dakota Utilities Co. v. Northwestern Public Service Co., 341 U. S. 246, 341 U. S. 251 (1951). [Footnote 7] Except when the Commission permits a waiver, no regulated seller of natural gas may collect a rate other than the one filed with the Commission. § 4(d), 52 Stat. 823, 15 U.S.C. § 717c(d). These straightforward principles underlie the "filed rate doctrine," which forbids a regulated entity to charge rates for its services other than those properly filed with the appropriate federal regulatory authority. See, e.g., T.I.M.E. Inc. v. United States, 359 U. S. 464, 359 U. S. 473 (1959). The filed rate doctrine has its origins in this Court's cases interpreting the Interstate Commerce Act, see, e.g., Lowden v. Simonds-Shields-Lonsdale Grain Co., 306 U. S. 516, 306 U. S. 520-521 (1939); Pennsylvania R. Co. v. International Coal Co., 230 U. S. 184, 230 U. S. 196-197 (1913), and has been extended across the spectrum of regulated utilities.
over reasonableness of rates and the need to insure that regulated companies charge only those rates of which the agency has been made cognizant."
City of Cleveland v. FPC, 174 U.S.App.D.C. 1, 10, 525 F.2d 845, 854 (1976). See City of Piqua v. FERC, 198 U.S.App.D.C. 8, 13, 610 F.2d 950, 955 (1979).
Not only do the courts lack authority to impose a different rate than the one approved by the Commission, but the Commission itself has no power to alter a rate retroactively. [Footnote 8] When the Commission finds a rate unreasonable, it "shall determine the just and reasonable rate . . . to be thereafter observed and in force." § 5(a), 52 Stat. 823, 15 U.S.C. § 717d(a) (emphasis added). See, e.g., FPC v. Tennessee Gas Co., 371 U. S. 145, 371 U. S. 152-153 (1962); FPC v. Sierra Pacific Power Co., 350 U. S. 348, 350 U. S. 353 (1956). This rule bars "the Commission's retroactive substitution of an unreasonably high or low rate with a just and reasonable rate." City of Piqua v. FERC, supra, at 12, 610 F.2d at 954.
about what the Commission might have done had it been faced with the facts of this case. This, they contend, is precisely what the filed rate doctrine forbids. We agree. It would undermine the congressional scheme of uniform rate regulation to allow a state court to award as damages a rate never filed with the Commission, and thus never found to be reasonable within the meaning of the Act. Following that course would permit state courts to grant regulated sellers greater relief than they could obtain from the Commission itself.
Even were the Commission not on record in this case, the mere fact that respondents brought this suit under state law would not rescue it, for when Congress has established an exclusive form of regulation, "there can be no divided authority over interstate commerce." Missouri Pacific R. Co. v. Stroud, 267 U. S. 404, 267 U. S. 408 (1925). Congress here has granted exclusive authority over rate regulation to the Commission. In so doing, Congress withheld the authority to grant retroactive rate increases or to permit collection of a rate other than the one on file. It would surely be inconsistent with this congressional purpose to permit a state court to do, through a breach of contract action, what the Commission itself may not do.
"[a] system under which each State could, through its courts, impose on railroad carriers its own version of reasonable service requirements could hardly be more at odds with the uniformity contemplated by Congress in enacting the Interstate Commerce Act."
Id. at 450 U. S. 326. To hold otherwise, we said, would merely approve "an attempt by a disappointed shipper to gain from the Iowa courts the relief it was denied by the Commission." Id. at 450 U. S. 324.
court in Kalo Brick, has consequently usurped a function that Congress has assigned to a federal regulatory body. This the Supremacy Clause will not permit.
Respondents' theory of the case would give inordinate importance to the role of contracts between buyers and sellers in the federal scheme for regulating the sale of natural gas. Of course, as we have held on more than one occasion, nothing in the Act forbids parties to set their rates by contract. E.g., Permian Basin Area Rate Cases, 390 U. S. 747, 390 U. S. 820-822 (1968); United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U. S. 332, 350 U. S. 338-340 (1956). But those cases stand only for the proposition that the Commission itself lacks affirmative authority, absent extraordinary circumstances, to "abrogate existing contractual arrangements." Permian Basin Area Rate Cases, supra, at 390 U. S. 820. See United Gas Pipe Line Co. v. Mobile Gas Service Corp., supra, at 350 U. S. 338-339. That rule does not affect the supremacy of the Act itself, and, under the filed rate doctrine, when there is a conflict between the filed rate and the contract rate, the filed rate controls. See, e.g., Louisville & Nashville R. Co. v. Maxwell, 237 U. S. 94, 237 U. S. 97 (1915); Texas & Pacific R. Co. v. Mugg, 202 U. S. 242, 202 U. S. 245 (1906).
"This rule is undeniably strict, and it obviously may work hardship in some cases, but it embodies the policy which has been adopted by Congress. . . ."
"to allow the State to grant a remedy here which has been withheld from the National Labor Relations Board only accentuates the danger of conflict."
Id. at 359 U. S. 247.
The same principle applies here. Permitting the state court to award what amounts to a retroactive right to collect a rate in excess of the filed rate "only accentuates the danger of conflict." No appeal to equitable principles can justify this usurpation of federal authority.
to its calculation of damages, the judgment is vacated, and the case is remanded for further proceedings not inconsistent with this opinion.
Respondents include both original parties to the contract and successors in interest to parties to the contract.
"If at any time during the term of this agreement Buyer should purchase from another party seller gas produced from the subject wells or any other well or wells located in the Sligo Gas Field at a higher price than is provided to be paid for gas delivered under this agreement, then in such event the price to be paid for gas thereafter delivered hereunder shall be increased by an amount equal to the difference between the price provisions hereof and the concurrently effective higher price provisions of such subsequent contract."
On October 1, 1977, the relevant responsibilities of the Federal Power Commission were transferred to the Federal Energy Regulatory Commission. See 10 CFR § 1000.1(d) (1980). The term "Commission" in this opinion refers to the Federal Power Commission when referring to action taken prior to that date and to the Federal Energy Regulatory Commission when referring to action taken after that date.
The May, 1979, order was actually the Commission's second decision on primary jurisdiction. The Commission initially declined to exercise primary jurisdiction in March, 1976, citing a then-existing policy against assuming jurisdiction over matters pending before a court. Arkansas Louisiana Gas Co. v. Hall, 55 F.P.C. 1018, 1020-1021. On rehearing, the Commission further noted that, on October 19, 1972, respondents had gained "small producer" status, see n 5, infra, and were therefore no longer required to make rate increase filings. Arkansas Louisiana Gas Co. v. Hall, 56 F.P.C. 2905 (1976). Arkla challenged the Commission's automatic deferral policy before the United States Court of Appeals for the District of Columbia Circuit. While the matter was pending before that court, the Commission asked that the record be remanded to it for further consideration, and the Court of Appeals granted the motion. The May, 1979, order resulted from this remand, and review of that order is pending before the Court of Appeals.
The Commission limited its disagreement with the state court to the period before 1972 because of its additional finding that, as of October, 1972, respondents had become "small producers," and were no longer required to file their rates with the Commission. See 18 CFR § 157.40 (1980). It therefore took the position that the filed rate doctrine did not apply to respondents after that date. Arkla disputes here the administrative determination that respondents met the criteria to be considered "small producers." The Commission's finding itself is not before us, and we do not believe that the state courts erred in deferring to that finding.
Subsequent to the award of damages but prior to our action on Arkla's petition for certiorari, the Commission informed respondents that, in order to collect a damages award amounting to a retroactive rate increase, they would have to ask the Commission to waive the filing requirements of the Natural Gas Act. Respondents sought a waiver, which was denied by the Commission. Arkansas Louisiana Gas Co. v. Hall, 13 FERC ¦ 61,000 (1980). In its order, the Commission explained that, in order to grant a waiver, it would have to "speculat[e] as to what the Commission would or would not have done in 1961. . . ." Id. at 61,213. The Commission added that, because the request for an increase called for contract interpretation, the 1961 Commission "would almost certainly have either suspended or rejected the filing." Ibid. The Commission added that granting a waiver in this case would present a "potential for disruption of natural gas markets." Ibid. Review of that order is pending before the United States Court of Appeals for the Fifth Circuit.
Montana-Dakota Utilities was a case under the Federal Power Act, rather than under the Natural Gas Act, but, as we have previously said, the relevant provisions of the two statutes "are in all material respects substantially identical." FPC v. Sierra Pacific Power Co., 350 U. S. 348, 350 U. S. 353 (1956). In this opinion we therefore follow our established practice of citing interchangeably decisions interpreting the pertinent sections of the two statutes. See, e.g., ibid.; Permian Basin Area Rate Cases, 390 U. S. 747, 390 U. S. 820-821 (1968).
Although the Commission may not impose a retroactive rate alteration, and, in particular, may not order reparations, see, e.g., FPC v. Sunray DX Oil Co., 391 U. S. 9, 391 U. S. 24 (1968), it may, "for good cause shown," 15 U.S.C. § 717c(d), waive the usual requirement of timely filing of an alteration in a rate. Assuming, arguendo, that waiver is available for retroactive collection of a higher rate than the one on file, we note that, in this case, the Commission has expressly found that respondents have not demonstrated that good cause exists for waiving the filing requirements on their behalf. See n 6, supra.
Arkla seeks to have this Court determine, as a matter of law, whether it actually breached its contract with respondents. This we decline to do. We see no reason to disagree with the Commission's judgment that interpretation of the favored nations clause raises only questions of state law. The state court found that the contract had been breached. We will not overturn the construction of Louisiana law by the highest court of that State.
Apparently in an effort to challenge this determination, respondents assert that the damages would be paid entirely from Arkla's corporate assets, and would not be passed on to consumers. We see no reason why this fact, even if true, would alter our analysis. In any case, the record does not support respondents' assertion that Arkla could not pass the damages award along to its customers. In its order denying respondents' request for a waiver of the § 4(d) notice requirement, the Commission conceded that Arkla would have the right to do so, even though all the natural gas for which Arkla would be paying was long since sold. 13 FERC, at 61,213.
Respondents assert, and the Supreme Court of Louisiana found, that the Commission has expressly approved the damages award through its repeated statements that the award is not in excess of applicable ceilings. This is simply not the case. The court below based its conclusion on the Commission's order denying rehearing on Arkla's request that it exercise primary jurisdiction. 368 So.2d at 991, citing Arkansas Louisiana Gas Co. v. Hall, 56 F.P.C. 2905 (1976). Nothing in that order approves the retroactive rate increase; it only lists, at the request of the parties, "the maximum rates . . . which, if contractually authorized and if proper filing procedures had been followed, would have been approved. . . ." Id. at 2906. The fact that the retroactive rate increase was within the rate ceiling does not mean that it would have been approved if actually submitted, and certainly does not mean that it would be approved after the fact. In rejecting respondents' request for a waiver of its filing requirements, the Commission set forth several reasons for disapproving a rate increase falling within the ceiling rates, and expressly declined to speculate on what the earlier Commission might have done. See n 6, supra.
In addition to the order denying rehearing, respondents also rely on language in the Commission's May 18, 1979, order declining to exercise primary jurisdiction and in a letter from the Commission's staff counsel. Staff counsel's letter is ambiguous, at best, and, in any case, it should be unnecessary to add that staff counsel may not speak for the Commission. The language relied on in the May 18 order appears to have reference only to damages for the period after 1972. The same order twice disapproves granting damages for the period prior to respondents' assumption of small producer status. See Arkansas Louisiana Gas Co. v. Hall, 7 FERC ¦ 61,175, p. 61,325, n. 18 (1979) ("It is our opinion that the Louisiana Supreme Court's award of damages for the 1961-1972 period violates the filed rate doctrine"); id. at 61,325, n. 20 ("As we stated above, the Louisiana Supreme Court, in effect, waived one of this Commission's filing requirements when it determined that [respondents'] group was entitled to damages back to 1961. This holding of the Louisiana Supreme Court conflicts with the filed rate doctrine"). The unconnected and ambiguous references on which respondents and the court below rely to find Commission "approval" of the retroactive rate increase cannot override these express statements of disapproval.
None of the other cases relied on by respondents commands a contrary result. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667 (1950), held only that federal courts are not granted jurisdiction over state law declaratory judgment actions merely because a federal question might potentially be raised in defense of the suit. The only issue in Skelly Oil was whether certain contracts had properly been terminated, so there was no occasion to consider whether the filed rate doctrine barred a damages remedy. United Gas Pipe Line Co. v. Memphis Light, Gas and Water Division, 358 U. S. 103 (1958), like the cases mentioned in text, held only that the Act does not automatically abrogate all private contracts. And Pan American Petroleum Corp. v. Superior Court, 366 U. S. 656 (1961), stated only that a state rather, than a federal, court was the proper forum in which a buyer should bring a breach of contract action to obtain a refund of charges in excess of the filed rate. Permitting that action in no way contravened the filed rate doctrine; in fact, it furthered the doctrine's purpose.
We note that a panel of the District of Columbia Circuit stated in City of Cleveland v. FPC, 174 U.S.App.D.C. 1, 10-11, 525 F.2d 845, 854-855 (1976), that "the proposition that a filed rate variant from an agreed rate is nonetheless the legal rate wages war with basic premises of the . . . Act." That case is immediately distinguishable from the one before us, because it involved a claim that the rate itself had been filed in violation of a contract. We express no opinion on the merits of that case, but, to the extent that the quoted dictum would lead to a contrary result in the instant case, it is expressly disapproved.
We agree with the Commission's finding that Arkla "could have reasonably assumed that the government royalty payment did not trigger the [favored nations clause]." 13 FERC at 61,213. Because the record contains no findings of misconduct, respondents' argument that this Court has consistently recognized the doctrine of estoppel has no relevance. We save for another day the question whether the filed rate doctrine applies in the face of fraudulent conduct.
There is no bar to damages for the period after respondents gained "small producer" status. See n 5, supra.
I agree with much of JUSTICE STEVENS' dissenting opinion, and would affirm the judgment of the Supreme Court of Louisiana. Respondents are entitled to the relief they seek based on Louisiana state contract law.
By virtue of the "most favored nations" clause in its contract with respondents, petitioner was obligated to pay respondents the higher rate it paid a comparable supplier. Petitioner did not comply with this provision, but the Court today holds that respondents nevertheless may not recover damages because they failed to file with the Commission the increased rate. It is said that the "filed rate doctrine" requires such a filing.
had any knowledge of their entitlement to invoke the clause until they finally obtained the facts through the Freedom of Information Act. In these circumstances, the filed rate doctrine should not preclude a state law damages action. In holding to the contrary, the Court in effect rewards petitioner's breach of its state law contractual duty to notify respondents that it was paying a higher rate to a comparable supplier.
From 1961 through 1975, petitioner Arkansas Louisiana Gas Co. (Arkla) acquired natural gas from two different sources in the Sligo Gas Field in Louisiana. By the terms of a contract that was entirely consistent with the federal policies reflected in the Natural Gas Act, 52 Stat. 821, as amended, 15 U.S.C. § 717 et seq. (1976 ed. and Supp. III), Arkla was obligated to pay both sources of supply the same price. [Footnote 2/1] In fact, however, unbeknown to respondents, and in violation of their contract, Arkla paid them a substantially lower price than it paid to the United States, its other source for Sligo Field gas. No one, not even Arkla, suggests that there is any legitimate justification for the discrimination.
Despite the fact that Arkla breached its contract, and despite the fact that no federal policy is threatened by allowing the Louisiana courts to redress that breach, the Court today denies respondents the benefit of their lawful bargain. Surely, if the price paid to the United States was just and reasonable, the same price paid to private sellers of gas taken from the same field at the same time and delivered to the same customer also would be just and reasonable. The statutory policy favors uniformity, not secret discrimination.
Yet the Court, by a wondrous extension of the so-called "filed rate doctrine," concludes that the Louisiana courts may not assess damages against petitioner for breach of its contract to pay respondents the same price it paid to a comparable supplier. Because no federal rule of law deprives the State of Louisiana of the power to prevent Arkla from profiting so handsomely from its own wrong, and because I believe that enforcement of the state court's judgment is not only consistent with federal regulatory policies, but actually will further those policies, I respectfully dissent.
located in the Sligo Field. [Footnote 2/4] See ante at 453 U. S. 573-574, n. 2. In fact, however, it paid respondents only about two-thirds of the price paid to the United States.
"it was more probable than not that the Commission would have approved a contractually authorized price increase if the proper filing procedures had been followed."
368 So.2d 984, 991 (1979).
propositions must be taken as having been established: (1) Arkla breached its contract with respondents; (2) Arkla is responsible for respondents' failure to file new rate schedules with the Commission; (3) if such schedules had been filed, and if Arkla had paid respondents the same prices it paid to the United States, those prices would not have exceeded the applicable area rate ceilings established by the Commission; and (4) because prices well below the applicable rate ceilings are, at the very least, presumptively "just and reasonable," it is indeed more probable than not that the Commission would have approved the new rate schedule if it had been promptly filed. These propositions are plainly adequate to support respondents' recovery of damages as a matter of state law. In my opinion, they also support the conclusion that the applicable rules of state law have not been preempted by federal law.
Section 4 of the Natural Gas Act, 52 Stat. 822, 15 U.S.C. § 717c, identifies four separate federal policies that are arguably implicated by this litigation. The judgment of the Supreme Court of Louisiana is fully consistent with each of these policies.
Second, subsection (b) of § 4 expresses the strong federal policy -- reflected in most regulatory statutes -- against discriminatory pricing. [Footnote 2/16] The result the Court reaches today not only tolerates a blatant violation of that policy, but also will encourage such violations in the future.
Entirely apart from Arkla's contractual undertaking to pay respondents the same price it paid to other producers of comparable gas in the same field, this statutory policy surely favors a holding that results in equal treatment of competing suppliers. Nothing other than Arkla's proven wrongdoing provides any explanation for its discrimination against respondents. For no one has pointed to any even arguably legitimate justification for any differential pricing at all -- let alone a differential of the magnitude revealed by this record. The lesson this case will teach is that, notwithstanding the plain language in § 4(b), it is perfectly proper to grant an undue preference if one can conceal it.
Arkla and the United States relating to production in the Sligo Gas Field was not made available to the public. Only by resort to the remedies provided by the Freedom of Information Act were respondents able to obtain access to that contract and to confirm their suspicions that Arkla was violating its "favored nations" undertaking. By rewarding Arkla's successful concealment of a contract that directly affected rates payable for gas produced in the Sligo Field, the Court simply ignores the statutory policy which the Louisiana Supreme Court's judgment would plainly serve.
Fourth, subsection (d) of § 4 imposes a procedural requirement that is designed to protect the substantive policy interests reflected in the three preceding subsections. [Footnote 2/18] Because none of these substantive policies is infringed in the slightest by the state court's judgment, it surely exalts procedure over substance to deny respondents relief because they were wrongfully prevented from following the normal statutory procedures.
respondents to file a new rate schedule negligently failed to do so, he might defend against a malpractice complaint by arguing that respondents were not damaged because the Commission would have rejected the new rates in all events. But if respondents could prove that rejection was highly unlikely, it would be absurd to deny them any recovery at all simply because the defendant's own wrongdoing had made it impossible to know with absolute certainty that new rates would have been accepted as "just and reasonable." In damages actions, whether in tort or in breach of contract, it is often necessary to deal in probabilities.
This case also raises a question that requires the evaluation of probabilities. Because the rates in issue were below the applicable Commission ceilings, and because no legitimate reason for rejecting them has been adduced, it is only reasonable to presume that they would have become effective routinely. As a garden-variety issue of damages, there is no significant difference between this case and one in which a purchaser might have employed thugs to waylay the respondents' lawyer on the way to the Commission to prevent him from filing a new schedule.
by reference to any standard except a rate that has been duly filed with the Commission in accordance with the procedural requirements of § 4(d), there could be no state law recovery no matter what kind of wrong prevented respondents from filing. And conversely, if a high probability that a timely filing would have been accepted is an adequate standard for measuring damages in a tort case, why should not that probability be adequate in a breach of contract case, as well? The fact that a regulated carrier or seller has no right to collect a rate or price that has not been duly filed with the appropriate regulatory body is surely not a sufficient reason for leaping to the conclusion that an injured party may never prove damages by reference to a standard that is less certain than a filed rate.
The federal policy that comes closest to supporting Arkla's position is that of protecting the Commission's primary jurisdiction to determine whether or not a new rate is reasonable. But, in this case, the basic reasonableness determination was made by the Commission when it established the area rate ceilings. Because the rates at issue in this case are well below those ceilings, the danger that a court might venture into the area of ratemaking on its own is not present. Moreover, on more than one occasion, Arkla requested the Commission to assume jurisdiction of this controversy and the Commission consistently declined to do so. [Footnote 2/22] In assessing damages for the breach of an executory contract, the state courts exercised a jurisdiction that the Commission did not have. In no sense did the Louisiana courts usurp the primary jurisdiction of the Commission. In sum, whether we test the state court judgment against the substantive or the procedural requirements of the federal statute, it seems perfectly clear that the relief that has been awarded is fully consistent with federal policy.
Although, until today, the term "filed rate doctrine" had never been used by this Court, our prior decisions have established rather clear contours for the doctrine. It apparently encompasses two components, both of which are entirely consistent with the award of damages ordered by the Louisiana Supreme Court in this case.
entity whose prices or rates are regulated by a federal agency has no federal right to claim any rate or price that has not been filed with and approved by the agency. Thus, these respondents, without either filing the escalated rates or obtaining a waiver of the filing requirement, have no federal right to require Arkla to pay the higher rates. That does not mean, however, that they have no contractual right to require Arkla to do so. Cf. Pan American Petroleum Corp. v. Superior Court, 366 U. S. 656, 366 U. S. 662-664. The question whether a state court could measure damages for breach of contract, or a tort, by reference to a rate schedule that presumably would have been accepted if it had been filed earlier is by no means the same as the question whether respondents had a federal right to collect such rates. There would be a valid federal objection to such a damages award if there were reason to believe that the parties had entered into an agreement to circumvent either a procedural or a substantive requirement of the Natural Gas Act, or if the litigation arguably represented a collusive method of granting an unlawful preference. But no such considerations are present in this case.
as it has been in this case -- that consideration simply does not apply to an award of damages measured by reference to a standard that is well within that zone.
the procedures established for the vindication of such rights, nor do they seek to overturn the determinations of the expert federal agency; respondents merely seek to recover the higher of two rates, both of which are within the federal zone of reasonableness, because it is the rate they contracted to receive. [Footnote 2/27] Cf. Hewitt-Robins Inc. v. Eastern Freight-Ways, Inc., 371 U. S. 84.
law, it was unlawful under the contract. The Court accordingly held that the Commission had erred in failing to reject United's filing, and directed that United make restitution to Mobile of all overpayments. Id. at 350 U. S. 347.
doctrine, nor any other principle of federal regulatory law, requires the result the Court announces today.
that the Louisiana Supreme Court had erred in awarding damages for the period between 1961 and 1972. [Footnote 2/32] Because the Commission had decided to lend its support to Arkla in this Court, it is not surprising that some of the statements in that order are consistent with Arkla's argument. What is most significant about that order is the fact that the Commission does not advance any reason why a rate schedule filed by respondents in 1961 in accordance with the favored nations clause of their contract with Arkla would not have been deemed just and reasonable.
Although the Commission stated that it was reluctant to speculate about what its predecessors might have done in response to such a filing, the only issues that it now can describe as speculative are issues that have been decided against Arkla. I do not believe speculation that the Commission might have committed error in 1961 is an adequate reason for not presuming that just and reasonable rates would have been routinely approved when filed.
1961 is applicable to the contracts between respondents and Arkla is demonstrated by the fact that the escalated rates are accepted by the Court and the Commission for the purpose of computing respondents' damages for the period between 1972 and 1975. If the favored nations clause in this pre-1961 contract were not perfectly lawful, respondents would receive no damages at all, rather than the truncated recovery which the Court's holding today allows.
that those cases should be decided in the same way. After all, we are concerned here merely with cases in which a utility has failed to pay an agreed price that is well below the just and reasonable ceiling set by the Commission.
I agree that speculation about what the Commissioners might have done in 1961 is inappropriate. Unlike the Court, however, I see no need to speculate in this case. Rather than speculate, I would presume that the Commission would have acted in a lawful manner and that it would then have perceived the correct answer to disputed questions that have subsequently been resolved.
In my judgment, the Court's decision today is founded on nothing more than the mechanical application to this case of principles developed in other contexts to serve other purposes. The Court commits manifest error by applying the filed rate doctrine to ratify action by Arkla that not only breached its contract with respondents, but also directly undercut the substantive policies identified in § 4 of the Natural Gas Act. Because absolutely no federal interest is served by today's intrusion into state contract law, I respectfully dissent.
This obligation was created by the "favored nations clause" in the natural gas sales contract between Arkla and respondents. The clause is quoted ante at 453 U. S. 573-574, n. 2.
Arkla does business in Arkansas, Louisiana, Texas, Oklahoma, Kansas, and Missouri.
For example, in 1968, the relevant area base rate ceiling established by the Federal Power Commission for sales of natural gas was 18.6 cents per thousand cubic feet (Mcf). See Arkansas Louisiana Gas Co. v. Hall, 56 F.P.C. 2905, 2906 (1976). The trial court in this case found that, during 1968, Arkla paid the United States a fraction over 14 cents per Mcf. See App. 11. Under the terms of the 1952 contract with respondents, Arkla paid a fraction under 10 cents per Mcf for gas produced during 1968. See id. at 98.
Although Arkla consistently has contended that its lease arrangement with the United States was not a "purchase" within the meaning of the favored nations clause in its contract with respondents, that issue has been resolved against Arkla by every court that has considered it. See id. at 16; 359 So.2d 255, 261-262 (La.App.1978); 368 So.2d 984, 989, and n. 4 (La.1979). See also Eastern Petroleum Co. v. Kerr-McGee Corp., 447 F.2d 569 (CA7 1971). The Court properly declines to reopen this question of state law. See ante at 453 U. S. 579, n. 9.
Because the Louisiana courts held that the contract required Arkla to pay to respondents the higher price that was being paid to the United States, and because such payments could not have been made without revealing the existence of the higher price, there can be no doubt about Arkla's contractual duty to disclose the differential even though the Louisiana Supreme Court had no occasion to comment on this specific obligation other than by noting the applicability of the principle "that one should not be able to take advantage of his own wrongful act." 368 So.2d at 990.
"A 'small producer' (as defined by the Commission's regulations) may obtain a 'small producer certificate' exempting it from the requirement of having to file a rate schedule as long as the increase in rate does not exceed the ceiling rate set by the Commission. See 18 C.F.R. § 157.40. Several of the plaintiffs obtained 'small producer certificates' in October, 1972, and the certificates issued to those parties were made effective as to all plaintiffs by order of the Commission."
Throughout this opinion, the term "Commission" refers to the Federal Power Commission with respect to actions taken before October 1, 1977, and to the Federal Energy Regulatory Commission with respect to actions taken thereafter. See ante at 453 U. S. 574, n. 3.
"Article 2040, properly interpreted, means that the condition is considered fulfilled when it is the debtor, bound under that condition, who prevents the fulfillment. George W. Garig Transfer v. Harris, [226 La. 117, 75 So.2d 28 (1954)]; Southport Mill v. Friedrichs, [171 La. 786, 132 So. 346 (1931)]; Morrison v. Mioton, [163 La. 1065, 113 So. 456 (1927)]. This rule is but an application of the long-established principles of law that he who prevents a thing may not avail himself of the nonperformance he has occasioned, and that one should not be able to take advantage of his own wrongful act. See Cox v. Department of Highways, 252 La. 22, 209 So.2d 9 (1968)."
"To realize this higher, contractually authorized price, plaintiffs, pursuant to the Natural Gas Act, were required to file new rate schedules with the Commission. However, plaintiffs were effectively precluded from making the requisite filings because they were not, at any time, informed by defendant that it was, in fact, paying a higher price to another party seller. Although defendant was only bound to pay plaintiffs a higher price if plaintiffs filed new rate schedules with the Commission, it is apparent that defendant prevented the fulfillment of that condition (plaintiffs filing with the Commission) by failing to inform plaintiffs of its contractual arrangements with the United States government. Pursuant to article 2040 and this court's jurisprudence interpreting that article, the condition (that plaintiffs file new rate schedules) is considered fulfilled."
"We note that plaintiffs make no claim that they would have been entitled to a price increase under their contract in excess of the respective area base rate ceilings for sales of natural gas as established by order of the Commission."
Id. at 991, n. 7.
"At trial, a November 8, 1976, order of the Commission was produced which indicated the maximum rates to which plaintiffs would have been entitled if contractually authorized and if proper filing procedures had been followed (Exhibit 59). The Commission clearly indicated in its order that it would have approved such rates. No evidence was adduced by defendant to establish that Commission approval would have been unlikely."
Id. at 991 (emphasis in original).
"All rates and charges made, demanded, or received by any natural gas company for or in connection with the transportation or sale of natural gas subject to the jurisdiction of the Commission, and all rules and regulations affecting or pertaining to such rates or charges, shall be just and reasonable, and any such rate or charge that is not just and reasonable is declared to be unlawful."
52 Stat. 822, 15 U.S.C. § 717c(a).
See App. 18-19; 368 So.2d at 991, and n. 7; 56 F.P.C. at 2906.
"Finally, we must decide now what impact this case has on our regulatory responsibilities. This type of case, involving small producers not required by regulation under the Natural Gas Act to file for rate increases authorized by contract, is not a matter of great import to our regulatory responsibility, as we find no need for a uniform interpretation of a contractual provision, and find that the rates requested are within what the Commission has determined to be the zone of reasonableness."
"On the facts of this case, the damages do not exceed applicable area ceiling rates. The Louisiana Supreme Court concluded that the Hall group was entitled to damages measured by the difference between the price Arkla paid the United States under the royalty agreement and the price it paid the Hall group. In so doing, it noted that it considered the fact that the Commission, in previous orders in this case, had stated the maximum rates to which the Hall group would have been entitled if contractually authorized and if proper filing procedures had been followed. The Supreme Court of Louisiana further stated:"
"In light of the fact that the Hall group makes no claim for damages higher than the applicable area ceiling rates, that the Louisiana Supreme Court did not authorize rates higher than the applicable area ceiling rates, and that the state district court on remand from the Louisiana Supreme Court will presumably not award damages higher than the area ceiling rates, we do not feel that our regulatory responsibilities are so affected that we must exercise our jurisdiction in this case."
Arkansas Louisiana Gas Co. v. Hall, 7 FERC ¦ 61,175, pp. 61,323-61,324 (1979) (footnotes omitted).
Arkla has argued that the award of damages improperly included an amount attributable to the liquefiable hydrocarbons in the natural gas produced from respondents' wells. If that argument were valid, it would simply establish an error in the computation of the amount required to be paid to respondents under their contract, and would require adjustment of the post-1972, as well as the pre-1972, award. No tribunal has found any greater merit in this argument than in Arkla's continuing claims that it did not breach its contract because its lease arrangement with the United States did not trigger the favored nations clause, and that respondents are not really small producers. At any rate, Arkla has challenged the Louisiana courts' computation of damages in a separate petition for certiorari, No. 79-1896, Arkansas Louisiana Gas Co. v. Hall (vacated and remanded, post, p. 917), and the question thus is not properly presented here.
"No natural gas company shall, with respect to any transportation or sale of natural gas subject to the jurisdiction of the Commission, (1) make or grant any undue preference or advantage to any person or subject any person to any undue prejudice or disadvantage, or (2) maintain any unreasonable difference in rates, charges, service, facilities, or in any other respect, either as between localities or as between classes of service."
52 Stat. 822, 15 U.S.C. § 717c(b).
"Under such rules and regulations as the Commission may prescribe, every natural gas company shall file with the Commission, within such time . . . and in such form as the Commission may designate, and shall keep open in convenient form and place for public inspection, schedules showing all rates and charges for any transportation or sale subject to the jurisdiction of the Commission, and the classifications, practices, and regulations affecting such rates and charges, together with all contracts which in any manner affect or relate to such rates, charges, classifications, and services."
"Unless the Commission otherwise orders, no change shall be made by any natural gas company in any such rate, charge, classification, or service, or in any rule, regulation, or contract relating thereto, except after thirty days' notice to the Commission and to the public. Such notice shall be given by filing with the Commission and keeping open for public inspection new schedules stating plainly the change or changes to be made in the schedule or schedules then in force and the time when the change or changes will go into effect. The Commission, for good cause shown, may allow changes to take effect without requiring the thirty days' notice herein provided for by an order specifying the changes so to be made and the time when they shall take effect and the manner in which they shall be filed and published."
"In construing the Act, we should bear in mind that it evinces no purpose to abrogate private rate contracts as such. To the contrary, by requiring contracts to be filed with the Commission, the Act expressly recognizes that rates to particular customers may be set by individual contracts. In this respect, the Act is in marked contrast to the Interstate Commerce Act, which, in effect, precludes private rate agreements by its requirement that the rates to all shippers be uniform, a requirement which made unnecessary any provision for filing contracts."
"Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it."
Hadley v. Baxendale, 9 Ex. 341, 354, 156 Eng.Rep. 145, 151 (1854).
The Court seems to attach great significance to the fact that respondents failed to prove that Arkla was guilty of actual fraud, see ante at 453 U. S. 583-584, and n. 13, but suggests no reason why the case might be decided differently if actual fraud had been proved by clear and convincing evidence. Surely a state court should not be able to avoid federal preemption of state remedies by applying a different label to conduct with precisely the same economic consequences. Cf. Montana-Dakota Utilities Co. v. Northwestern Public Service Co., 341 U. S. 246, 341 U. S. 252-253.
See Arkansas Louisiana Gas Co. v. Hall, 55 F.P.C. 1018 (1976); 7 FERC ¦ 61,175 (1979).
In Montana-Dakota Utilities, the plaintiff claimed injury because the filed rates that had applied to past transactions with an affiliate allegedly were unjust and unreasonable, and had been fraudulently established. The ultimate issue was whether a federal claim for relief had been alleged, because there was no diversity of citizenship to support federal jurisdiction. The Court first held that the Federal Power Act's requirement that rates be reasonable did not provide a statutory basis for a federal cause of action, because the courts have no authority to determine what a reasonable rate in the past should have been. The Court then held that the allegations of fraud added nothing to the plaintiff's federal claim. Assuming that an actionable wrong had been alleged, the Court concluded that, in the absence of diversity, a federal court could only dismiss the complaint for failure to state a claim cognizable in federal court. And finally, the Court rejected the argument of Justice Frankfurter in dissent that it should fashion an implied federal judicial remedy in which the issue of reasonableness could be referred to the Commission. In refusing to create a federal remedy for a common law fraud, the Court assumed that appropriate relief would be available in a state tribunal. Its opinion surely cannot be read as preempting any such state claim.
In T.I.M.E. Inc., the Court refused to find a federal remedy for a shipper who claimed that the rates charged by a motor carrier were unreasonable and unlawful even though they had been properly filed with the Interstate Commerce Commission. The case involved little more than a determination that the express remedies afforded against rail carriers in Part I and against water carriers in Part III of the Interstate Commerce Act, having been deliberately omitted from Part II, which regulated motor carriers, would not be judicially implied. In T.I.M.E. Inc., as in Montana-Dakota Utilities, the question was whether a federal court had authority to decide that a filed rate was unlawful because it violated the reasonableness requirement of the relevant regulatory statute. In the present case, however, there is no claim that the price that Arkla paid to respondents was illegal in any sense. Both that price and the higher price paid to the United States were well within the zone of reasonableness and in full compliance with the statute's substantive requirements. The fact that respondent might not be able to assert a federal claim for violation of the federal statute sheds no light on the question whether their state law cause of action for breach of contract may be maintained.
See also Texas Pacific R. Co. v. Abilene Cotton Oil Co., 204 U. S. 426.
"We hold that the right to a reasonable rate is the right to the rate which the Commission files or fixes, and that, except for review of the Commission's orders, the courts can assume no right to a different one on the ground that, in its opinion, it is the only or the more reasonable one."
341 U.S. at 341 U. S. 251-252. Of course, in this case, respondents are not invoking a federal right to receive a reasonable rate, but rather a state law right to receive the rate for which they contracted. Similarly, the Louisiana Supreme Court's decision is not based on a determination that the rate requested by respondents is "the only or the more reasonable one," but rather on a determination that respondents are entitled to that rate under their contract with Arkla.
This distinction not only undercuts the Court's reliance on the filed rate doctrine, but also renders wholly inapposite our decision earlier this Term in Chicago & North Western Transp. Co. v. Kalo Brick & Tile Co., 450 U. S. 311, on which the Court relies heavily. See ante at 453 U. S. 580-582. The filed rate doctrine was not remotely implicated in that decision. Our holding in Kalo Brick that the Interstate Commerce Commission had decided the precise issues that the shipper sought to raise in state court litigation is wholly dissimilar from this case in which the regulatory agency rejected the opportunity to decide the questions presented to the Louisiana courts. This is not merely an attempt by a disappointed litigant to gain from the state courts the relief it has been denied by the Commission. See ante at 453 U. S. 580.
As the Court noted, whenever a new rate is filed, "the Commission's only concern is with the reasonableness of the new rate." 350 U.S. at 350 U. S. 340 (emphasis in original).
"Our conclusion that the Natural Gas Act does not empower natural gas companies unilaterally to change their contracts fully promotes the purposes of the Act. By preserving the integrity of contracts, it permits the stability of supply arrangements which all agree is essential to the health of the natural gas industry."
Id. at 350 U. S. 344.
While there are differences between this case and United Gas, it seems to me that the cases are nonetheless closely analogous. In the present case, as in United Gas, one party to a duly filed contract attempted unilaterally to change the price at which natural gas would be sold under the contract. In United Gas, United did so directly by filing an increased rate with the Commission; in this case, the unilateral change was accomplished indirectly when Arkla prevented respondents from taking the steps necessary to recover the contractually authorized higher rate. Of course, in United Gas, the lawful contract rate had actually been approved by the Commission, while in this case, the contract rate claimed by respondents has never been filed. This distinction is not, however, of controlling significance. In United Gas, the Court was confronted with two rates, both presumptively reasonable, of which only one was lawful under the contract. In the present case, we are confronted with essentially the same situation. While the rate ultimately awarded in United Gas had, in fact, been filed with the Commission, it was not the rate currently recognized by the Commission as "just and reasonable," because it had been replaced by the new rate filed by United. The Court nonetheless directed that Mobile pay only the old rate, which the Commission's order had purported to supersede. The lawful rate in United Gas is analogous to the contractually authorized rate in this case, because it was presumptively reasonable, having received Commission approval, but was not the currently applicable filed rate for the gas sales at issue. In light of this fact, I can see no reason why respondents should be precluded from recovering from Arkla a presumptively reasonable rate, well below applicable Commission rate ceilings, merely because Arkla's own breach of contract prevented respondents from filing that rate with the Commission.
"Finally, we confess that we are at least troubled by the prospect of speculating as to what the Commission would or would not have done in 1961 had it been confronted at that time with a rate increase filing by the Hall group. . . . Whether the Commission in 1961 would have provided a forum for resolving the contractual dispute is a question we cannot answer definitively. . . . At that time, the Commission might well have concluded that the favored nations clause was not triggered. More importantly, even if the Commission in 1961 had reached the same contractional interpretation as the Louisiana court, the Commission might have determined that the public interest would not permit the grant of rate increases based upon the triggering of favored nations clauses even in existing contracts."
Arkansas Louisiana Gas Co. v. Hall, 13 FERC ¦ 61,100, p. 61,213 (1980).
The petition was filed on May 29, 1979. On October 1, 1979, the Court requested the views of the Solicitor General. A brief was filed by the Solicitor General on behalf of the United States and the Federal Energy Regulatory Commission on February 11, 1980, in which the amici took the position that the Louisiana Supreme Court had erred. The amici maintained that the error was sufficiently serious to warrant review, but recommended that the Court defer action until the Commission had acted on respondents' request for a waiver of the § 4(d) filing requirement. The Commission denied that request in its November 5 order, and, shortly thereafter, the amici recommended that certiorari be granted, and that the decision of the Louisiana Supreme Court be reversed.
"This case presents a question of concurrent jurisdiction, not primary or exclusive jurisdiction. The Commission has jurisdiction over rates, filing and notice as to both Arkla and Respondents. While this Commission has jurisdiction to decide the subject contract question, the Louisiana court also has jurisdiction over an action based upon asserted breach of contract. Accordingly, we believe it appropriate to defer to the court to decide these contract questions."
55 F.P.C. at 1020 (footnote omitted). On May 18, 1979, the Federal Energy Regulatory Commission reexamined this issue and came to the same conclusion, although for different reasons, in the order from which I have quoted in n. 14, supra.
"However, we are convinced that we cannot declare the escalation provisions in Pure's contracts with El Paso void or voidable, and thus in effect strike them from the contracts. There is no question but that these exceedingly material parts of the contracts were a basic part of the exchange between the parties in arriving at these agreements. Under familiar rules of law, if these material provisions are stricken, the contracts, which lack any provisions for the severability of parts found invalid, must also fall. This would result in legal and regulatory problems that might cause material harm to the public, harm that might well exceed the injurious effects of the escalation provisions themselves. For example, if these provisions were stricken and the contracts fell, the producer's sales might then presumably constitute ex parte offerings of gas and the producer could change its rates at will, unimpeded by any contractual limitations of the kind that presently exist. Thus, instead of being limited under the Mobile and related decisions only to increases permitted by contractual provisions, the company could file for increases whenever it happened to feel justified in doing so. Thus, the uncertainty and spiraling prices resulting from the escalation clauses might well be compounded many times over."
The Pre Oil Co., 25 F.P.C. 383, 388-389 (1961).

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