On June 8, 2017, the U.S. Court of Appeals for the Fifth Circuit (“Fifth Circuit”) dismissed Total Gas & Power N.A., Inc., Aaron Hall, and Therese Tran’s (collectively, “Total”) arguments that the Natural Gas Act (“NGA”) provides federal district courts – not FERC – with exclusive authority to adjudicate violations of the NGA and assess civil penalties, finding that Total’s claims were unripe because FERC neither has determined that Total has violated the NGA nor assessed any civil penalties. The Fifth Circuit also dismissed Total’s arguments that FERC’s procedures for appointing Administrative Law Judges (“ALJs”) and conducting hearings are unconstitutional.
In November 2015, FERC’s Office of Enforcement recommended that FERC initiate enforcement proceedings against Total for allegedly making uneconomic trades of physical natural gas intended to affect monthly index prices that would benefit Total’s related financial positions (see May 1, 2016 edition of the WER). After receiving notice of the recommendation, Total filed a complaint for declaratory judgment in federal district court on January 27, 2016. In particular, Total requested a declaration that NGA Section 24 provides that the district courts have exclusive jurisdiction over violations of the NGA and assessment of civil penalties. Therefore, Total argued that FERC may only recommend a finding of a violation of the NGA and propose a penalty to the federal district courts. In addition, Total argued that FERC’s process for appointing ALJs violates the Appointments Clause and that FERC’s procedures for conducting hearings violate the Fifth and Seventh Amendments. On July 15, 2016, the federal district court granted FERC’s motion to dismiss Total’s declaratory action because, among other reasons, the case was not yet ripe. After the district court denied Total’s motion for reconsideration and leave to amend the complaint, Total appealed the district court’s orders.
In its opinion, the Fifth Circuit affirmed the district court’s holding that Total’s claims are unripe. The Fifth Circuit noted that it had previously rejected an identical argument to the one Total raised. In that case, the Fifth Circuit held that the petition for review was not ripe when FERC had denied the plaintiff’s request for summary disposition and issued an order scheduling the enforcement matter for a hearing. By comparison, the Fifth Circuit stated that Total’s enforcement proceeding is less developed and that FERC can terminate the proceeding against Total at any time or ultimately decline to find that Total violated the NGA. Thus, the Fifth Circuit held that Total cannot raise its challenges to FERC’s jurisdiction until FERC conclusively determines that Total has violated the NGA and imposes civil penalties. In addition, the Fifth Circuit found that Total’s constitutional arguments were premised on the assumption that FERC will ultimately schedule a hearing before an ALJ and issue a final order assessing civil penalties against Total, and that FERC ultimately may not take these actions.
A copy of the opinion is available here.