George E. Warren LLC v. Colonial Pipeline Co

Citation: Not availableDocket: 20-3569

Court: Court of Appeals for the Third Circuit; October 5, 2022; Federal Appellate Court

Original Court Document: View Document

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

George E. Warren LLC, a shipper and blender of gasoline, appealed against Colonial Pipeline Company and Powder Springs Logistics LLC regarding the blending of gasoline products transported through Colonial's pipeline. The shipment was governed by a tariff approved by the Federal Energy Regulatory Commission (FERC), which defined gasoline grades and required Colonial to deliver gasoline that met specific criteria, including being "on specification." Warren received gasoline that complied with the tariff but claimed a reduced blend margin—profit earned from blending cheaper additives—after the transportation process. The District Court ruled that Warren's claims were barred by the filed-rate doctrine, which maintains that the rates and terms filed with FERC are binding. The appeal centers on whether Warren is entitled to a blend margin within the delivered gasoline, as the tariff does not explicitly address this issue. Ultimately, the court affirmed the lower court's ruling, supporting the conclusion that Warren's claims could not proceed under the existing tariff framework.

Blending gasolines is aimed at maximizing profitability by mixing cheaper gasolines with more expensive ones to increase the volume of "on specification" gasoline available for sale. Warren has been blending gasolines to enhance profit margins but claims that Colonial’s in-line blending process reduces the blend margin of the gasoline it receives, impairing its ability to blend cheaper stock effectively. This led Warren to sue Colonial and its joint venture, Powder Springs, for lost profits, alleging state law claims such as conversion and unjust enrichment. The District Court granted summary judgment to Colonial and Powder Springs, citing the filed-rate doctrine, which maintains that utility filings with regulatory agencies take precedence over other claims related to rates or terms. The doctrine aims to prevent price discrimination and respects the regulatory agency's expertise in rate-making. It dictates that tariffs set by agencies like FERC cannot be altered by carrier actions or third-party torts, thereby limiting plaintiffs from pursuing claims that contradict these established tariffs, even in cases of perceived inequity. Warren subsequently appealed the decision.

The District Court's summary judgment in favor of Colonial is affirmed due to Warren's request for an expanded entitlement under the FERC-approved tariff, which violates the filed-rate doctrine. Warren's claims are barred by the nondiscrimination principle of this doctrine, as the tariff does not grant Warren a specific blend margin; it only provides for on-specification gasoline matching the grade and volume initially entrusted to Colonial. Warren has consistently received compliant gasoline, and its request for a blend margin would effectively create a preferential treatment that contradicts the tariff’s provisions. The argument that court-awarded damages would not constitute discrimination is rejected, as such damages would act as an unauthorized discount on the FERC-approved rate, leading to unequal pricing among shippers.

Warren's assertion that Colonial's in-line blending falls outside FERC’s regulatory jurisdiction does not exempt its claims from the filed-rate doctrine, which applies when nondiscrimination or nonjusticiability principles are at stake. The tariff stipulates that as long as the gasoline meets defined specifications, it satisfies the tariff requirements, regardless of the specific attributes of the gasoline. Recognizing a right for Warren to receive gasoline with a high blend margin would establish a right not acknowledged by the tariff, undermining the nondiscrimination principle.

The District Court also noted that Warren's claims likely violate the nonjusticiability principle, which reflects the judiciary's deference to Congress's decision to assign regulatory authority to agencies like FERC. This principle prevents judicial actions that could disrupt agency rate-making authority. The court referenced Breiding v. Eversource Energy, where a similar challenge was dismissed, thus supporting its decision.

Higher retail electricity rates resulted from the defendants' actions, which were deemed permissible under the FERC-approved tariff governing the Algonquin pipeline. The court cited the filed-rate doctrine, concluding that plaintiffs' claims were barred as the tariff did not mandate the release of excess capacity to other users. The court emphasized that both the defendants' conduct and FERC's decision not to impose a requirement for releasing excess capacity could not be scrutinized by the court. Furthermore, Warren's claims were found to violate the nonjusticiability principle, as they sought to interfere with the rate-making process and requested compensation for a blend margin that was not specified in the tariff, thus undermining FERC’s authority.

The District Court granted summary judgment to both Colonial and Powder Springs, ruling that Warren's state-law tort claims against Powder Springs were an attempt to circumvent the filed-rate doctrine, as they sought to challenge the blend margin received from Colonial. The court referred to the Supreme Court's decision in Square D Co. v. Niagara Frontier Tariff Bureau, Inc., which established that tort claims against third parties are precluded by the filed-rate doctrine if they seek to extend a party's rights under a tariff. Warren’s claims were characterized as a collateral attack on the tariff, which does not guarantee any blend margin.

Any grievances Warren has regarding Colonial's blending practices stem from the tariff specifications, which fall under FERC’s regulatory authority. The court reiterated that any needed changes to the tariff should be addressed by FERC, as the court lacks the authority to intervene. Consequently, the District Court's decisions to grant summary judgment in favor of Colonial and Powder Springs were affirmed.