No. 78-1789
Argued: April 20, 1981Decided: July 2, 1981
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. 576-585. [453 U.S. 571, 572]
- (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. 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. 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. 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. 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. 585. STEVENS, J., filed a dissenting opinion, in which REHNQUIST, J., joined, post, p. 586. STEWART, J., took no part in the consideration or decision of the case.
Reuben Goldberg argued the cause for petitioner. With him on the briefs were Robert Roberts, Jr., Marlin Risinger, Jr., W. Michael Adams, and Glenn W. Letham. [453 U.S. 571, 573]
James Fleet Howell argued the cause and filed a brief for respondents. *
[ Footnote * ] Briefs of amici curiae urging reversal were filed by Solicitor General McCree, Elliott Schulder, Jerome Nelson, Jerome M. Feit, and Joshua Z. Rokach for the United States et al.; and by Edward Kliewer, Jr., Dean W. Wallace, and Patrick J. McCarthy for Northern Natural Gas Co.
James R. Coffee and Edward J. Kremer filed a brief for Atlantic Richfield Co. as amicus curiae urging affirmance.
JUSTICE MARSHALL delivered the opinion of the Court.
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.
I
Respondents are producers of natural gas, and petitioner Arkansas Louisiana Gas Co. (Arkla) is a customer who buys their gas. In 1952, respondents 1 and Arkla entered into a contract under which respondents agreed to sell Arkla natural gas from the Sligo Gas Field in Louisiana. The contract contained a fixed price schedule and a “favored nations clause.” The favored nations clause provided that if Arkla purchased Sligo Field natural gas from another party at a rate higher than the one it was paying respondents, then respondents would be entitled to a higher price for their sales to Arkla. 2 [453 U.S. 571, 574] In 1954, respondents filed with the Federal Power Commission (now the Federal Energy Regulatory Commission) 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.
In its answer, Arkla denied that its lease payments were purchases of gas within the meaning of the favored nations clause. Arkla subsequently amended its answer to allege in addition that the Commission had primary jurisdiction over the issues in contention. Arkla also sought a Commission ruling that its lease payments had not triggered the favored nations clause. The Commission did not act immediately, and the case proceeded to trial. The state trial court found that Arkla’s payments had triggered the favored nations clause, but nonetheless held that the filed rate doctrine precluded [453 U.S. 571, 575] 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).
While Arkla’s petition for certiorari was pending, the Supreme Court of Louisiana granted respondents’ petition for review and reversed the intermediate court on the measure of damages. 368 So.2d 984 (1979). The court held that respondents were entitled to damages for the period between 1961 and 1972 notwithstanding the filed rate doctrine. The court reasoned that Arkla’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 had respondents filed rate increases with the Commission, the rate increases would have been approved. Id., at 991. After the decision by the Supreme Court of Louisiana, the Commission in May 1979 finally declined to exercise primary jurisdiction over the case, holding that the interpretation of the favored nations clause raised no matters on which the Commission had particular expertise. Arkansas Louisiana Gas Co. v. Hall, 7 FERC § 61,175, p. 61,321. 4 The Commission [453 U.S. 571, 576] did, however, state: “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. 18. 5 Under that doctrine, no regulated seller is legally entitled to collect a rate in excess of the one filed with the Commission for a particular period. See infra, at 576-579. We granted Arkla’s subsequent petition for certiorari challenging the judgment of the Louisiana Supreme Court. 449 U.S. 1109 (1981). 6
II
Sections 4 (c) and 4 (d) of the Natural Gas Act, 52 Stat. 822-823, 15 U.S.C. 717c (c) and 717c (d), require sellers of [453 U.S. 571, 577] natural gas in interstate commerce to file their rates with the Commission. Under 4 (a) of the Act, 52 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, 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, 251 (1951). 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, 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, 520 -521 (1939); Pennsylvania R. Co. v. International Coal Co., 230 U.S. 184, 196 -197 (1913), and has been extended across the spectrum of regulated utilities. “The considerations underlying the doctrine . . . are preservation of the agency’s primary jurisdiction [453 U.S. 571, 578] 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. 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, 152 -153 (1962); FPC v. Sierra Pacific Power Co., 350 U.S. 348, 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.
In sum, the 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. Petitioner Arkla and the Commission as amicus curiae both argue that these rules taken in tandem are sufficient to dispose of this case. No matter how the ruling of the Louisiana Supreme Court may be characterized, they argue, it amounts to nothing less than the award of a retroactive rate increase based on speculation [453 U.S. 571, 579] 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.
In asserting that the filed rate doctrine has no application here, respondents contend first that the state court has done no more than determine the damages they have suffered as a result of Arkla’s breach of the contract. 9 No federal interests, they maintain, are affected by the state court’s action. But the Commission itself has found that permitting this damages award could have an “unsettling effect . . . on other gas purchase transactions” and would have a “potential for disruption of natural gas markets . . . .” Arkansas Louisiana Gas Co. v. Hall, 13 FERC § 61,100, p. 61,213 (1980). 10 [453 U.S. 571, 580]
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, 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.
We rejected an analogous claim earlier this Term in Chicago & North Western Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311 (1981). There, a shipper of goods by rail sought to assert a state common-law tort action for damages stemming from a regulated rail carrier’s decision to cease service on a rail line. We held unanimously that because the Interstate Commerce Commission had, in approving the cessation, ruled on all issues that the shipper sought to raise in the state-court suit, the common-law action was pre-empted. In reaching our conclusion, we explained that “[a] system under which each State could, through its courts, impose on rail-road 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 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 324.
In the case before us, the Louisiana Supreme Court’s award of damages to respondents was necessarily supported by an assumption that the higher rate respondents might have filed with the Commission was reasonable. Otherwise, there would have been no basis for that court’s conclusion, 368 [453 U.S. 571, 581] So.2d, at 991, that the Commission would have approved the rate. But under the filed rate doctrine, the Commission alone is empowered to make that judgment, and until it has done so, no rate other than the one on file may be charged. And far from approving the rate here in issue, the Commission has expressly declined to speculate on what its predecessor might have done. 11 The court below, like the state [453 U.S. 571, 582] 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, 820 -822 (1968); United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332, 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 820. See United Gas Pipe Line Co. v. Mobile Gas Service Corp., supra, at 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, 97 (1915); Texas & Pacific R. Co. v. Mugg, 202 U.S. 242, 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 . . . .” Louisville & Nashville R. Co. v. Maxwell, supra, at 97. Moreover, to permit parties to vary by private agreement the rates filed with the Commission would undercut the clear purpose of the congressional scheme: granting the Commission an opportunity in every case to judge the reasonableness of the rate. Cf. United Gas Pipe Line Co. v. Mobile Gas Service Corp., supra, at 338-339. 12 [453 U.S. 571, 583]
Respondents also appeal to what they say are equitable considerations. The filed rate doctrine and the Supremacy Clause, we are told, should not bar recovery when the defendant’s misconduct prevented filing of a higher rate. We do not find this argument compelling. The court below did not find that Arkla intentionally failed to inform respondents of its lease payments to the United States in an effort to defraud them. Consequently, we are not faced with affirmative misconduct, and we need not consider the application of the filed rate doctrine in such a case. 13 The courts [453 U.S. 571, 584] below found that Arkla has done no more than commit a simple breach of its contract. But when a court is called upon to decide whether state and federal laws are in conflict, the fact that the state law has been violated does not affect the analysis. Every pre-emption case involves a conflict between a claim of right under federal law and a claim of right under state law. A finding that federal law provides a shield for the challenged conduct will almost always leave the state-law violation unredressed. Thus in San Diego Building Trades Council v. Garmon, 359 U.S. 236 (1959), the mere fact that a group of unions violated state law through their peaceful picketing did not permit enforcement of that law when it would conflict with the federal regulatory scheme. That the state-court suit was one for damages rather than for the type of relief available from the National Labor Relations Board weighed against pre-emption, not in favor of it. “[S]ince remedies form an ingredient of any integrated scheme of regulation,” Justice Frankfurter wrote for the Court, “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 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.
III
We hold that the filed rate doctrine prohibits the award of damages for Arkla’s breach during the period that respondents were subject to Commission jurisdiction. 14 In all respects other than those relating to damages, the judgment of the Supreme Court of Louisiana is affirmed. With respect [453 U.S. 571, 585] to its calculation of damages, the judgment is vacated, and the case is remanded for further proceedings not inconsistent with this opinion.
