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GREEN v. PEOPLES ENERGY CORPORATION

March 26, 2003

ROBERT GREEN, SHERIDAN EAST, INC., LEWIS CLARK, AND CATHY GAFFNEY, EACH INDIVIDUALLY AND ON BEHALF OF ALL PERSONS SIMILARLY SITUATED, PLAINTIFFS,
v.
PEOPLES ENERGY CORPORATION D/B/A THE PEOPLES GAS LIGHT AND COKE COMPANY, NORTH SHORE GAS COMPANY AND NICOR A/K/A NORTHERN ILLINOIS GAS COMPANY, DEFENDANTS.



The opinion of the court was delivered by: Ronald A. Guzman, United States Judge.

MEMORANDUM OPINION AND ORDER

Robert Green, Lewis Clarke, Cathy Gaffney and Sheridan East, Inc. ("Plaintiffs") have filed a class action complaint ("Complaint") against The Peoples Gas Light and Coke Company ("Peoples Gas"), North Shore Gas Company ("North Shore") and Nicor (a/k/a Northern Illinois Gas Company) for violation of sections 1 and 2 of the Sherman Act (Count I) by providing natural gas meters to their customers and charging them a monthly rental fee. Plaintiffs also allege that defendants' practice constitutes violation of sections 3, 4 and 11 of the Clayton Act (Count II), which prohibit illegal tying arrangements. People's Energy Corporation is the holding company of both Peoples Gas and North Shore (collectively "Peoples Energy"). Before the Court are Peoples Energy and Nicor's motion to dismiss the complaint pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). For the reasons provided in this Memorandum Opinion and Order, the Court grants the motions.

FACTS

Peoples Gas, North Shore and Nicor are the major providers of natural gas to residential customers in the metropolitan regions of Chicago, Illinois and Northeastern Illinois, including distribution in the counties of Cook, Will, Dupage, Kane, Lake and other counties. (Compl. ¶ 7.) Peoples Gas, North Shore and Nicor control facilities such as natural gas storage facilities and pipelines essential to the transmission and distribution of natural gas to the end users. (Id. ¶ 9.) Green, Sheridan East, Inc., Clarke and Gaffney are customers of the above providers purchasing natural gas for end use. (Id. ¶ 10.) It is necessary for all end users and customers to have a gas meter to measure the amount of gas delivered for consumption. (Id. ¶ 11.) For at least the last four years preceding the filing of the Complaint, defendants Peoples Gas, North Shore and Nicor have purchased large quantities of residential gas meters and installed them at the home of their customers, charging the customers a monthly rental fee for the meters but not disclosing it as a rental fee by including it in a customer charge. (Id. ¶¶ 15, 17.) Defendants may have submitted the customer fee as part of their submission of a rate plan to a regulatory agency or commission. (Id. ¶ 18.) Similar residential gas meters are available for sale in northern Illinois, northwest Indiana, southeast Illinois as well as over the internet. (Id. ¶ 16.) All three providers refuse to allow their customers to purchase or rent their own meters from some other source. (Id. ¶¶ 19, 21.) Green, Sheridan East, Inc., Clarke and Gaffney all could have purchased their own meters at a price lower than the accumulated charges for the rental of the meters over the past four years preceding the filing of the Complaint. (Id. ¶ 24.)

DISCUSSION

In ruling on a motion to dismiss, the court must accept all allegations as true and draw all reasonable inferences in favor of the non-moving party. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984). The purpose of a motion under Rule 12(b)(6) is to test the formal sufficiency of the statement of the claim for relief; it is not a procedure for resolving a contest about the facts or merits of the case. Stepan Co. v. Winter Panel Corp., 948 F. Supp. 802, 805 (N.D. Ill. 1996). This provision must be read in conjunction with Rule 8(a) which mandates a short and plain statement of the claim showing that the pleader is entitled to relief. Id. The Federal Rules of Civil Procedure only require notice pleading, and the pleadings "must be liberally construed and mere vagueness or lack of detail alone cannot be sufficient grounds for dismissal." Id. As a result, a motion to dismiss may be granted only if the court concludes that the nonmovant can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

A. The Filed Rate Doctrine

Defendants argue that plaintiffs' claims are barred by the filed rate doctrine. Defendants contend that plaintiffs are attacking the Customer Charge approved by the Illinois Commerce Commission (the "ICC") as a part of their rates.

Plaintiffs counter that the filed rate doctrine is inapplicable to the case at bar. Plaintiffs put forward five arguments. First, they argue that they are not attacking any regulated rates, but tying of products, i.e., the tying of meters to the provision of natural gas. Second, they assert that the filed rate doctrine has never been held to bar equitable relief. Third, they argue that the Supreme Court in Square D Co. v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409 (1986), expressly stated that the filed rate doctrine does not create an exemption to the antitrust laws. Fourth, plaintiffs question the continued viability of the doctrine. Fifth, plaintiffs cite F.T.C. v. Ticor Title Ins. Co., 504 U.S. 621 (1992), for the proposition that more than simply a "filed rate" is needed for the doctrine to apply.

The filed rate doctrine forbids a court to revise a regulated utility or common carrier's filed tariff, i.e., one that has been approved by the regulating agency. Arsberry v. Illinois, 244 F.3d 558, 562 (7th Cir. 2001) (stating filed rate doctrine barred antitrust claim by state prison inmates against telephone companies). A customer or competitor can challenge the filed tariff before the agency itself. Id. If dissatisfied, the challenger may seek judicial review, but he or she cannot petition a court to revise the tariff. Id. The doctrine was first enunciated by the Supreme Court in Keogh v. Chicago & Northwestern Railway Co., 260 U.S. 156, 163-65 (1922). In Keogh, the Supreme Court dismissed antitrust claims arising as a result of an alleged conspiracy among railroads to fix high rates, which had been approved by the Interstate Commerce Commission. Id. The doctrine has since been frequently applied. See, e.g., Square D, 476 U.S. at 424 (affirming dismissal of antitrust class action for treble damages in which a conspiracy to keep rates unreasonably high was alleged); In re Wheat Rail Freight Rate Antitrust Litig., 759 F.2d 1305, 1311-13 (7th Cir. 1985) (affirming dismissal of antitrust claim under FED. R. Civ. P. 12(b)(6)); Wegoland Ltd. v. NYNEX Corp., 27 F.3d 17, 18 (2d Cir. 1994) (stating that a filed rate is "per se reasonable and unassailable in judicial proceedings brought by ratepayers").

The filed rate doctrine is based both on "historical antipathy to rate setting by courts" and on "a policy of forbidding price discrimination by public utilities and common carriers." Arsberry, 244 F.3d at 562. Indeed, one rationale for this doctrine is to protect the "exclusive authority" of a regulating agency to set such tariffs. Town of Norwood v. New England Power Co., 202 F.3d 408, 420 (1st Cir. 2000) (citing Arkansas La. Gas Co. v. Hall, 453 U.S. 571, 577-78 (1981)). Though many earlier cases discuss the doctrine in the context of federal tariffs, the filed rate doctrine has consistently been invoked in the Seventh Circuit and at least two other Circuits to dismiss claims based on rates filed with a state regulatory agency. See, e.g., Goldwasser v. Ameritech Corp., No. 97 C 6788, 1998 WL 60878, at *7 (N.D. Ill. Feb. 4, 1998), aff'd, 222 F.3d 390, 402 (7th Cir. 2000) (affirming district court's application of doctrine to dismiss federal class action antitrust suit challenging telephone rates approved by state public utility commissions); H.J. Inc. v. Northwestern Bell Tel. Co., 954 F.2d 485, 494 (8th Cir. 1992) ("the rationale underlying the filed rate doctrine applies whether the rate in question is approved by a federal or state agency"); Taffet v. Southern Co., 967 F.2d 1483, 1494 (11th Cir. 1992) (holding that the filed rate doctrine "applies with equal force" whether the rate at issue is set by a state or federal agency).

This Court concludes that the filed rate doctrine applies to the facts here. Despite plaintiffs' allegation to the contrary, they are in fact challenging the Customer Charge filed as part of the tariffs.

Peoples Gas, North Shore and Nicor are public utilities that are subject to the provisions of the Illinois Public Utilities Act (the "PUA"), 220 ILL. COMP. STAT. 5/1-101, et seq. Section 9-201 of the PUA requires the filing of rates with the ICC and authorizes the ICC "to enter upon a hearing concerning the propriety of such [filed] rate or other charge. . . ." Id. 5/9-201. All three defendants have respectively filed their Schedule of Rates with the ICC. A Customer Charge is expressly included as part of the rates charged by all defendants. Nicor's filed tariff provides that "[c]harges shall be the sum" of (a) Monthly Customer Charge, (b) Distribution Charge, and (c) Gas Supply Cost. (Mem. Supp. Def Nicor's Mot. Dismiss, Ex. C.) In the case of both Peoples Gas and North Shore, the filed tariffs provide that "[t]he rates for services hereunder shall consist of a Gas Charge, a Customer Charge and a Distribution Charge." (Def. Peoples Energy's Mem. Supp. Def.'s Mot. Dismiss, Ex. E & F.) In both Peoples Gas and North Shore's tariffs, the Customer Charge is defined as "[a] fixed monthly charge that recovers the costs associated with making service available to customers." (Id.)

In sum, the Customer Charge is not a "meter rental charge" as plaintiffs assert, but part and parcel of the rates filed with the ICC. Because plaintiffs are in fact challenging the defendant utilities' filed rates under the guise of federal antitrust allegations, the filed rate doctrine squarely bars their claims. Indeed, plaintiffs themselves acknowledge as much when they allege defendants might have submitted the Customer Charge to the ICC. (Compl. ΒΆ 19.) This Court will not venture into the unchartered territory of rate-setting at the urging of plaintiffs; it is long settled that ratesetting is a job better left to the regulating agency, which is the ...


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