United States: Ninth Circuit Dismisses RICO Class Action Against Power Marketer On Filed-Rate Doctrine Grounds

In an unpublished opinion issued May 12, 2017, a three-judge panel on the U.S. Court of Appeals for the Ninth Circuit ("Ninth Circuit") affirmed the dismissal of a civil suit alleging that a JPMorgan Chase & Co. subsidiary—J.P. Morgan Ventures Energy Corporation ("JPM Ventures")—fraudulently manipulated rates in the California wholesale electricity market in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO").

The plaintiff-appellant's suit against JPM Ventures was dismissed by the district court on the basis of the filed-rate doctrine—the principle that prevents collateral attacks on rates that were filed with, and approved by, state and federal regulators.  The class plaintiffs appealed to the Ninth Circuit.  On appeal, the Ninth Circuit agreed with the district court and reiterated its long line of cases reaffirming "the reach of the filed rate doctrine's formidable barrier to suit in cases involving California's wholesale electricity market."  The plaintiff-appellants sought to escape this precedent by analogizing to a milk industry RICO case in which the Ninth Circuit refused to apply the doctrine because the rate-setting agency in that case had already rejected the challenged rates as fraudulent.

In the present case, the Ninth Circuit was unconvinced by the analogy.  The Ninth Circuit distinguished the prior decision by stressing its narrow holding and inapplicability to rates set by FERC—the exact agency involved in the present appeal.  As such, the court noted that plaintiff-appellant's claims fundamentally alleged that California's wholesale electricity markets rates were, for a time, too high.  The court reasoned that the Ninth Circuit was not the proper venue for these types of claims, where it stated, "[o]ur precedents make clear that the 'only avenue' for such a complaint, however framed, '[is] with FERC.'"

The Ninth Circuit opinion can be found in Woolsey et al. v. J.P. Morgan Ventures Energy Corp. et al., Case number 15-56697, and is available here.

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