M.R. Taffet and Robert M. Fierman, on Behalf of Themselves and All of the Persons, Corporations, Municipalities, and Other Entities, Other Than the Who Are Similarly Situated v. The Southern Co., Southern Company Services, Inc., Alabama Power Company and Arthur Andersen & Co., Frederick Rodgers Carr, Carr Sales Company, O.E.M. Products, Inc., Timothy Dunn Stokely, Clark Stokely, III and All Others Similarly Situated v. The Southern Company, Southern Company Services, Inc., Georgia Power Company, and Arthur Andersen & Co.M.R. Taffet and Robert M. Fierman, on Behalf of Themselves and All of the Persons, Corporations, Municipalities, and Other Entities, Other Than the Who Are Similarly Situated v. The Southern Co., Southern Company Services, Inc., Alabama Power Company and Arthur Andersen & Co., Frederick Rodgers Carr, Carr Sales Company, O.E.M. Products, Inc., Timothy Dunn Stokely, Clark Stokely, III and All Others Similarly Situated v. The Southern Company, Southern Company Services, Inc., Georgia Power Company, and Arthur Andersen & Co.
M. Roland Nachman, Jr., T.W. Thagard, Jr., Maury D. Smith, John P. Scott, Jr., Balch & Bingham, Montgomery, Ala., for defendant-appellee Ala. Power Co. in No. 90-7088.
James E. Joiner, Troutman Sanders, Atlanta, Ga., for defendant-appellee Southern Co. in No. 90-7088.
M. Robert Thornton, Michael C. Russ, King & Spaulding, Kevin C. Greene, A. William Loeffler, Ralph H. Greil, Troutman Sanders, Atlanta, Ga., for defendant-appellee Arthur Andersen & Co. in No. 90-7088.
Joe C. Freeman, Jr., A. Timothy Jones, Jack N. Sibley, Freeman & Hawkins, Andrew M. Scherffius, Atlanta, Ga., William Byrd Warlick, Jack B. Long, Nixon, Yow, Waller & Capers, Augusta, Ga., for plaintiffs-appellants in No. 90-8452.
Wyck A. Knox, Jr., Augusta, Ga., James E. Joiner, Michael C. Russ and M. Robert Thornton, Kevin C. Greene, A. William Loeffler, Ralph H. Greil, Troutman Sanders, Atlanta, Ga., for defendant-appellee in No. 90-8452.
Appeal from the United States District Court for the Middle District of Alabama.
Appeal from the United States District Court for the Southern District of Georgia.
Before TJOFLAT, Chief Judge, FAY, KRAVITCH, HATCHETT, COX, and DUBINA, Circuit Judges.*
TJOFLAT, Chief Judge:
These two cases,1 consolidated on appeal, raise the question whether a private suit under the federal Racketeer Influenced and Corrupt Organizations Act (RICO),
The district courts below dismissed the appellants’ complaints under
A majority of this court‘s judges in regular active service ordered that the consolidated appeals be reheard by the court en banc. Taffet v. Southern Co., 958 F.2d 1514 (11th Cir.1992) (per curiam).3 On rehearing en banc, we affirm the district courts’ dismissals of these actions.
I.
Section 1964(c) of RICO allows a private plaintiff to recover for injuries that he has suffered to his business or property as a result of a violation of the criminal prohibitions in section 1962 of RICO.4 Section 1962 imposes criminal liability on
those who engage in, or aid and abet another to engage in, a pattern of racketeering activity if they also do the following: invest income derived from the pattern of racketeering activity in the operation of an enterprise engaged in interstate commerce (section 1962(a)); acquire or maintain, through the pattern of racketeering activity, any interest in or control over such an enterprise (section 1962(b)); or conduct, or participate in the conduct of, the affairs of such an enterprise through a pattern of racketeering activity (section 1962(c)). Section 1962(d) makes it a crime to conspire to violate sections 1962(a), (b), or (c).
Pelletier v. Zweifel, 921 F.2d 1465, 1495-96 (11th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 167, 116 L.Ed.2d 131 (1991). Title 18 U.S.C. section 1961(1) lists the acts that constitute “racketeering activity” under RICO.5 A “pattern” of racketeering activity consists of at least two acts of racketeering activity committed within ten years of each other (excluding any period of imprisonment).
The RICO plaintiff, to recover, must show that the defendant is criminally liable under section 1962, Pelletier, 921 F.2d at 1496, and that the plaintiff has suffered an injury that “flow[s] from the commission of the [criminal violation].” Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 497, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985) (footnote omitted).
In the instant cases, the appellants allege that they have suffered an injury to their business and property, within the purview of title 18 U.S.C. section 1964(c), in the form of excessive and illegal charges paid for electrical utility services, and that this injury is the proximate result of the appellees’ racketeering activities, in violation of the prohibitions set forth in title 18 U.S.C. section 1962,6 relating to their conspiracy and scheme to obtain PSC approval of excessive rate increases by means of fraudulently accounting for spare parts held in inventory.
The appellants’ argument rests on the assumption that they enjoy a legal right to have been charged a lower rate than they actually were charged; the appellants, unless they enjoy such a right, have suffered no legally cognizable injury by having paid the higher rate. We conclude that the appellants do not possess this right; therefore, they have failed to state a claim upon which relief can be granted under RICO.
We find support for our conclusion that the appellants have not suffered a legally cognizable injury sufficient to predicate a RICO civil action in a line of Supreme Court cases that developed what has come to be known as the “filed rate doctrine.” The origin of the filed rate doctrine can be traced back to Texas & Pacific Railway v. Abilene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed. 553 (1907), in which the Supreme Court addressed the issue of whether a shipper could maintain a common law action for damages against a common carrier for “the exaction of an alleged unreasonable rate, although the rate collected and complained of was the rate stated in the schedule filed with the Interstate Commerce Commission....” Id. at 436, 27 S.Ct. at 353. The Court held that the shipper could not maintain such an action. After acknowledging that, at common law, a shipper had a right of action for damages against a carrier who refused to carry goods except upon the payment of an unreasonable sum, id., the Court held that the Interstate Commerce Act implicitly had changed the common law, id. at 436, 27 S.Ct. at 353-54, and that the shipper‘s only redress was through the Interstate Commerce Commission (ICC) which had the power to alter established rates. Id. at 448, 27 S.Ct. at 358. The Court reasoned that the existence of a shipper‘s right to recover damages on the basis that the established rate was unreasonable was “wholly inconsistent with the administrative power conferred upon the [ICC], and with the duty, which the [Interstate Commerce Act] casts upon that body, of seeing to it that the statutory requirement as to uniformity and equality of rates is observed.” Id. at 440-41, 27 S.Ct. at 355.
Following Abilene Cotton, federal courts have applied the filed rate doctrine in a variety of contexts to bar recovery by those who claim injury by virtue of having paid a filed rate. See, e.g., Keogh v. Chicago & Northwestern Ry., 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183 (1922) (plaintiff may not recover under federal antitrust laws for asserted injury related to paying the rate approved by the ICC); H.J. Inc. v. Northwestern Bell Tel. Co., 954 F.2d 485 (8th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 2306, 119 L.Ed.2d 228 (1992) (filed rate doctrine precludes suit under RICO to recover claimed damages relating to allegedly fraudulent rate approved by the Minnesota Public Utilities Commission). In Keogh, the Supreme Court held that a private shipper could not recover damages under the federal antitrust laws against carriers who allegedly had fixed rates in violation of those laws. As in Abilene Cotton, the rates at issue had been filed with the ICC. The Court held that the shipper‘s payment of the approved rates could not give rise to an injury to business or property prerequisite to recovery under the antitrust laws. Keogh, 260 U.S. at 162-63, 43 S.Ct. at 49-50. The Court reasoned:
Section 7 of the Anti-Trust Act gives a right of action to one who has been “injured in his business or property.” Injury implies violation of a legal right. The legal rights of shipper as against carrier in respect to a rate are measured by the published tariff. Unless and until suspended or set aside, this rate is made, for all purposes, the legal rate, as between carrier and shipper. The rights as defined by the tariff cannot be varied or enlarged by either contract or tort of the carrier.
Id. at 163, 43 S.Ct. at 49 (citation omitted).
More recently, the Supreme Court reaffirmed the rule of Keogh. In Square D. Co. v. Niagara Frontier Tariff Bureau, Inc., 476 U.S. 409, 106 S.Ct. 1922, 90 L.Ed.2d 413 (1986), the plaintiffs alleged that they had been forced to pay excessive rates for interstate shipping because the defendants collectively had engaged in price-fixing, in violation of the Sherman Act, pursuant to an agreement filed with the ICC. The plaintiffs sought treble damages, measured by the difference between the rates they paid and the rates that they allegedly would have paid in a freely competitive market. The Supreme Court noted that the rates at issue were “duly submitted, lawful rates under the Interstate Commerce Act,” id. at 417, 106 S.Ct. at 1927, and, following the rule of Keogh, held that even if the plaintiffs’ allegations of price-fixing were true, the plaintiffs could not have been injured in their business or property within the meaning of the antitrust laws by paying the rate approved by the ICC. Id. at 416-17, 423-24, 106 S.Ct. at 1926-27, 1930-31.
[T]he problem is whether it is open to the courts to determine what the reasonable rates during the past should have been. The petitioner, in contending that they are so empowered ... regard[s] reasonableness as a justiciable legal right rather than a criterion for administrative application in determining a lawful rate.... It is not the disembodied “reasonableness” but that standard when embodied in a rate which the Commission accepts or determines that governs the rights of buyer and seller. A court may think a different level more reasonable. But the prescription of the statute is a standard for the Commission to apply and, independently of Commission action, creates no right which courts may enforce.
Petitioner cannot separate what Congress has joined together. It cannot litigate in a judicial forum its general right to a reasonable rate, ignoring the qualification that it shall be made specific only by exercise of the Commission‘s judgment, in which there is some considerable element of discretion. It can claim no rate as a legal right that is other than the filed rate....
Id. at 251, 71 S.Ct. at 695 (emphasis added).
As the cases discussed above illustrate, the filed rate doctrine recognizes that where a legislature has established a scheme for utility rate-making, the rights of the rate-payer in regard to the rate he pays are defined by that scheme. To determine whether the appellants in the cases at hand have alleged a cognizable injury to their business or property within the purview of RICO, we examine the rate-making schemes in Alabama and Georgia which define the rights these appellants enjoy in regard to the rates they pay for electric power.
B.
It is settled under both Alabama and Georgia law that a consumer does not have a property right in the utility rate he pays. See Alabama Metallurgical Corp. v. Alabama Pub. Serv. Comm‘n, 441 So.2d 565, 570 (Ala.1983) (“a consumer has no property right in a given level of utility rates“); Georgia Power Co. v. Allied Chem. Corp., 233 Ga. 558, 212 S.E.2d 628, 631 (1975) (“consumer has no ‘property’ right in the rate he pays for utilities“). In both states, regulation of utilities and setting of utility rates is purely a legislative function. Alabama Metallurgical, 441 So.2d at 570; Georgia Power Co. v. Georgia Pub. Serv. Comm‘n, 196 Ga.App. 572, 396 S.E.2d 562, 568 (1990). Thus, the only “rights” that the appellants have in relation to utility rates are those that the legislature of Alabama or Georgia provide.
Upon written complaint by a rate-payer that an effective or proposed rate is unfair, the Alabama PSC has the duty to investigate the reasonableness of the challenged rate.
The scheme for regulating utilities and setting utility rates under Georgia law is similar to the Alabama scheme discussed above. The General Assembly of Georgia has vested the Georgia PSC with “exclusive power to determine what are just and reasonable” electric power rates.
Georgia‘s Assembly sought to ensure that consumers of utility services are adequately represented in proceedings affecting utility rates and services. See 1981 Ga.Laws 122. Thus, anyone with an interest in the rate-determination proceeding may file a motion to intervene in the proceeding.
The rate-setting schemes in both Alabama and Georgia are incompatible with a rate-payer‘s cause of action to recover damages measured by the difference between the filed rate and the rate that would have been charged absent some alleged wrongdoing. Allowing consumers of the Utilities’ services to recover damages for “fraudulent” rates or otherwise “erroneous” rates would disrupt greatly the states’ regulatory schemes and, in the end, would cost consumers dearly. For the appellants in these cases to recover, they first would have to establish that the rates set by the PSC were in fact unreasonable. Thus, the trial judge, or a jury, would have to determine what rate should have been set by the PSC. Regardless of what the PSC has determined is a reasonable rate, a trial court would be empowered to set, in effect, a new rate.9
Of course, it is the Utilities’ present and future customers who would get stuck with the bill in the end. The Utilities’ litigation costs, the awarded damages and attorneys’ fees, and any revenue lost because of an erroneous court-set rate would become part of each Utility‘s rate base. It is likely that the PSCs would take all of this into account when setting a future rate for electricity, especially if the PSC disagreed with the district court‘s determination of a reasonable rate. Even if the PSCs would not allow the Utilities to recoup in a new rate all of the costs stemming from the appellants’ suit, the Utilities still would recoup those costs at the expense of future customers by cutting the quality of service they provide to those customers.
There is another way in which damage awards for “erroneous” rates would undermine the states’ regulatory schemes. Alabama and Georgia both have chosen to establish procedures that allow public participation in the rate-making process. Allowing plaintiffs to collect damages measured by the difference between the filed rate and the rate a court finds reasonable would encourage consumers of a utility‘s services to sit out the state‘s rate-making process and then to repair to court to play litigation lottery. There could be no end to the number of strike suits that would be brought as eager lawyers, using the class action vehicle, circumvent the states’ rate-making mechanisms--all at the expense of consumers.
Rather than provide for a right to recover damages, Alabama and Georgia have structured their rate-making schemes so that the PSCs can provide a remedy for the defendants’ fraud that will adequately compensate the appellants while not undermining the PSCs’ authority to set reasonable rates: in both Georgia and Alabama, the PSC can set a prospective rate low in order to compensate consumers for excessive rates they paid in the past that were procured by fraud.
It is true that, under Alabama law, a PSC cannot declare retrospectively that a rate it previously approved was unreasonable and, therefore, unlawful. See
Although this might suggest that the PSC could never award future low rates because of past misconduct, the Alabama Supreme Court has indicated that past misconduct--improper or dishonest management--is a relevant consideration in determining whether a rate provides a fair return to a utility. In Continental Telephone Company v. Alabama Public Service Commission, 376 So.2d 1358 (Ala.1979), overruled on other grounds by Alabama Gas Corp. v. Alabama Pub. Serv. Comm‘n, 425 So.2d 430 (Ala.1982), for instance, the Alabama Supreme Court stated that “[i]mproper management may always be considered by the [PSC] in determining a fair rate of return.” Id. at 1368. Similarly, the court has noted that “a utility is under a duty ... to manage its business honestly, efficiently, and economically. If the company performs these functions, it is entitled to a rate of return that will be fair to it and fair to the consuming public.” Continental Tel. Co. v. Alabama Pub. Serv. Comm‘n, 479 So.2d 1195, 1214-15 (Ala.1985) (emphasis added); cf. Continental Tel., 427 So.2d at 988 (PSC “required to grant only those rates consistent with good management practices“); Alabama Power Co., 422 So.2d at 773 (implying that evidence “that the basic data submitted [to the PSC] by the [utility] were inaccurate or that the [utility] was guilty of inefficient or dishonest management” should be considered by the PSC in determining a reasonable rate of return on the utility‘s investment); Birmingham Elec. Co. v. Alabama Pub. Serv. Comm‘n, 254 Ala. 140, 47 So.2d 455, 460 (1949) (standards for reasonable rate of return “presuppose[ ] efficient, economical and honest management“).
Likewise, Georgia has recognized that the PSC may consider dishonest or improper management in setting the rate for a utility‘s services. See Georgia Power Co., 396 S.E.2d at 569 (PSC may exclude from calculation of utility‘s investment in public service “what might be found to be dishonest or obviously wasteful or imprudent expenditures“). While, like Alabama law, Georgia law forbids the PSC from retroactively declaring filed rates illegal or awarding reparations for excesses paid by consumers, see Georgia Public Service Commission v. Atlanta Gas Light Co., 205 Ga. 863, 55 S.E.2d 618, 631 (1949), as in Alabama law, nothing in Georgia law forbids the PSC from setting prospective rates that are low enough to compensate consumers for excesses paid in the past because a utility defrauded the PSC. Georgia law requires the PSC to set rates that are “just and reasonable,”
Given that the PSCs are equipped to take the defendants’ fraud into account in setting future rates, a court‘s award of damages against a utility for “fraudulent rate-making” would be unnecessarily disruptive to the state‘s scheme of utility regulation.
In sum, the legislatures of both Alabama and Georgia have provided by law that the PSCs shall establish the legal rate for a utility‘s services. A consumer of a utility‘s services has the right to participate in the rate-setting process within the parameters set up by the legislature. The consumer, however, has no legal right to pay any rate other than the one established by the PSC.
C.
The appellants raise two issues regarding the application of the filed rate doctrine to the cases at hand that merit some discussion. First, the appellants submit that the filed rate doctrine is a federal doctrine that applies only to rates approved by federal regulatory agencies. They contend that the filed rate doctrine and the principles underlying it are, therefore, wholly inapposite to the instant cases since the rates in question in these cases were approved by state, not federal, regulatory authorities. We disagree.
Where the legislature has conferred power upon an administrative agency to determine the reasonableness of a rate, the rate-payer “can claim no rate as a legal right that is other than the filed rate....” Montana-Dakota Util., 341 U.S. at 251, 71 S.Ct. at 695. This principle, which is central to the filed rate doctrine and to our decision today, applies with equal force to preclude recovery under RICO whether the rate at issue has been set by a state rate-making authority or a federal one. See H.J. Inc., 954 F.2d at 494 (“the filed rate doctrine applies whether the rate in question is approved by a federal or state agency“).12
The appellants contend also that the filed rate doctrine should not apply where a regulated entity allegedly has defrauded an administrative agency to obtain approval of a filed rate. Again, we disagree. A regulated entity‘s alleged fraud does not create a right to a reasonable rate that exists independently of agency action. Thus, even if the filed rate is obtained through fraud, it remains true that one does not suffer the predicate “injury to business or property” by paying the filed rate. Cf. H.J. Inc., 954 F.2d at 489 (“the impact [a civil action] will have on agency procedures and rate determinations,” rather than the defendant‘s underlying conduct, controls whether the filed rate doctrine applies).13
Based on the foregoing, we AFFIRM the district courts’ dismissals of the appellants’ claims.
IT IS SO ORDERED.
Notes
(1) “racketeering activity” means (A) any act or threat involving murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in narcotic or other dangerous drugs, which is chargeable under State law and punishable by imprisonment for more than one year; (B) any act which is indictable under any of the following provisions of title 18, United States Code: Section 201 (relating to bribery), section 224 (relating to sports bribery), sections 471, 472, and 473 (relating to counterfeiting), section 659 (relating to theft from interstate shipment) if the act indictable under section 659 is felonious, section 664 (relating to embezzlement from pension and welfare funds), sections 891-894 (relating to extortionate credit transactions), section 1029 (relating to fraud and related activity in connection with access devices), section 1084 (relating to the transmission of gambling information), section 1341 (relating to mail fraud), section 1343 (relating to wire fraud), section 1344 (relating to financial institution fraud), sections 1461-1465 (relating to obscene matter), section 1503 (relating to obstruction of justice), section 1510 (relating to obstruction of criminal investigations), section 1511 (relating to the obstruction of State or local law enforcement), section 1512 (relating to tampering with a witness, victim, or an informant), section 1513 (relating to retaliating against a witness, victim, or an informant), section 1951 (relating to interference with commerce, robbery, or extortion), section 1952 (relating to racketeering), section 1953 (relating to interstate transportation of wagering paraphernalia), section 1954 (relating to unlawful welfare fund payments), section 1955 (relating to the prohibition of illegal gambling businesses), section 1956 (relating to the laundering of monetary instruments), section 1957 (relating to engaging in monetary transactions in property derived from specified unlawful activity), section 1958 (relating to use of interstate commerce facilities in the commission of murder-for-hire), sections 2251-2252 (relating to sexual exploitation of children), sections 2312 and 2313 (relating to interstate transportation of stolen motor vehicles), sections 2314 and 2315 (relating to interstate transportation of stolen property), section 2321 (relating to trafficking in certain motor vehicles or motor vehicle parts), sections 2341-2346 (relating to trafficking in contraband cigarettes), sections 2421-24 (relating to white slave traffic), (C) any act which is indictable under title 29, United States Code, section 186 (dealing with restrictions on payments and loans to labor organizations) or section 501(c) (relating to embezzlement from union funds), (D) any offense involving fraud connected with a case under title 11, fraud in the sale of securities, or the felonious manufacture, importation, receiving, concealment, buying, selling, or otherwise dealing in narcotic or other dangerous drugs, punishable under any law of the United States, or (E) any act which is indictable under the Currency and Foreign Transactions Reporting Act.
The appellants in No. 90-7088 (the Taffet appellants) allege in their complaint that The Southern Company, Southern Company Services, Inc., Alabama Power Company, and Arthur Andersen & Co. (collectively the Taffet appellees) committed or conspired in and aided the commission of numerous predicate acts involving the racketeering activity of mail fraud under
The Taffet appellants allege that the Taffet appellees’ misconduct is a violation of
The appellants in No. 90-8452 (the Carr appellants) allege in their complaint that The Southern Company, Southern Company Services, Inc., Georgia Power Company, and Arthur Andersen & Co. (collectively the Carr appellees) have violated
The specific acts of racketeering alleged by the Carr appellants, which they contend constitute mail fraud under
Moreover, the filed rate doctrine principles that the Supreme Court explicated in the context of adjudicating claims under the federal antitrust laws apply as readily in the context of a RICO adjudication. Congress modeled the civil remedy provision of RICO,
Congress passed RICO in 1970, 48 years after the Supreme Court held in Keogh that one is not “injured in his business or property” when one pays the rate set by an agency with rate-making authority. We presume that Congress, when it conferred standing under RICO to one “injured in his business or property,” intended that this language conferring standing would be interpreted just as section 4 of the Clayton Act had been. As the Supreme Court stated recently: “We may fairly credit the 91st Congress, which enacted RICO, with knowing the interpretation federal courts had given the words earlier Congresses had used first in section 7 of the Sherman Act, and later in the Clayton Act‘s section 4. It used the same words, and we can only assume it intended them to have the same meaning that courts had already given them.” Holmes, --- U.S. at ----, 112 S.Ct. at 1317-18 (citations omitted).