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Supreme Court Holds that State Claims Can Stand In Natural Gas Price-Fixing Case

The Supreme Court has reaffirmed a ruling by the Ninth Circuit Court of Appeals, which held that state antitrust law claims in a price-fixing case are not preempted by the Federal Natural Gas Act ("NGA"). In the case before the Supreme Court, Oneok, Inc., et al v. Learjet, Inc., et al, 2015 WL 1780926 (U.S. Apr. 21, 2015), Learjet and other purchasers of natural gas alleged that Oneok and other wholesale sellers had engaged in price fixing during the 2000-2002 energy crisis. Specifically, the buyers alleged that the sellers "reported false information to the natural-gas indices on which [buyers'] natural-gas contracts were based. The indices affected not only retail natural-gas prices, but also wholesale natural-gas prices."1

In 2011, a number of cases charging natural gas sellers with price-fixing were consolidated in the United States District Court for the District of Nevada. That court ruled that the NGA preempted the state antitrust claims because the Federal Energy Regulatory Commission ("FERC") had the executive authority to regulate the interstate transportation and sale of natural gas, as well as the authority to regulate the companies providing such interstate services. The Ninth Circuit Court reversed the lower court's decision, however, and held that the state law claims could stand, a ruling with which the Supreme Court agreed.2 The energy company defendants argued that "state regulations fall within the field occupied by the NGA when they are aimed at issues over which FERC has exclusive authority."3 The companies asserted that the alleged actions of the wholesale sellers fell under FERC's jurisdiction and that no state claims should stand.

The Supreme Court disagreed with the companies and held that "the Natural Gas Act 'was drawn with meticulous regard for the continued exercise of state power, not to handicap or dilute it in any way.'"4 The Court also disagreed with the companies' separate argument that it should "defer to FERC's determination that field pre-emption bars respondents' claims [because the companies] fail to point to a specific FERC determination that state antitrust claims fall within the field pre-empted by the Natural Gas Act."5

Agreeing with the Ninth Circuit, the Supreme Court wrote that state antitrust laws are not specifically tailored to natural gas companies, but to all businesses in a market. Justice Stephen Breyer, writing for the Court's 7-2 majority, noted that states have broad and well-established "common-law and statutory remedies against monopolies and unfair business practices" and added that the "broad applicability of state antitrust law supports a finding of no pre-emption here."6 The ruling will allow consumers to monitor natural gas companies' prices and enforce antitrust violations under state antitrust laws.

The legal team at SFMS has substantial experience litigating antitrust matters. If you have any questions regarding this subject or this posting, please contact Valerie Chang ([email protected]) or Michael Ols ([email protected]). We can also be reached toll-free at (866) 540-5505.

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