Third Circuit disposition — 03-3339

PRECEDENTIAL
UNITED STATES COURT OF
APPEALS FOR THE THIRD CIRCUIT
___________
No. 03-3339
___________
UTILIMAX.COM, INC.,
Appellant,
vs.
PPL ENERGY PLUS, LLC; PPL
CORPORATION; ABC CORPS. 1-10;
JOHN DOES 1-10,
___________
APPEAL FROM THE UNITED
STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF
PENNSYLVANIA
(D.C. No. 02-cv-07160)
District Judge: The Honorable
Anita B. Brody
___________
ARGUED MARCH 11, 2004
BEFORE: SLOVITER and NYGAARD,
Circuit Judges.
and SHADUR,* District Judge.
(Filed : August 9, 2004)
___________
Brian J. Fruehling, Esq. (Argued)
Fruehling & Stevens
66-68 Main Street
P. O. Box 476
Madison, NJ 07940
James K. Fruehling, Esq. (Argued)
Fruehling & Stevens
66-68 Main Street
P. O. Box 476
Madison, NJ 07940
Counsel for Appellant
James R. Atwood, Esq. (Argued)
Covington & Burling
1201 Pennsylvania Avenue, N.W.
Washington, DC 20004
John G. Harkins, Jr., Esq.
Harkins Cunningham
2005 Market Street
2800 One Commerce Square
Philadelphia, PA 19103
Counsel for Appellees
___________
OPINION OF THE COURT
___________
NYGAARD, Circuit Judge.
In this appeal, Utilimax argues that
the District Court erred when it dismissed
its claims against PPL Energy Plus, LLC
and PPL Energy Corporation (collectively
*Honorable Milton I. Shadur, Senior
District Judge for the United States
District Court for the Northern District of
Illinois, sitting by designation.

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“PPL”) based on the filed rate doctrine.
We will affirm the District Court’s order.
I.
A. The Regulatory Scheme
The factual underpinnings of this
suit involve the wholesale and retail
electrical energy markets in Pennsylvania.
The wholesale market for electrical energy
is regulated by the Federal Energy
Regulatory Commission (“FERC”). See
Federal Power Act, 16 U.S.C. §§ 791a-
828c. One of FERC’s duties is to set “‘just
and reasonable’” wholesale electric rates.
See 16 U.S.C. §§ 824d, 824e. During the
period relevant to this appeal, FERC
utilized a market-based rate to determine
the cost of wholesale electricity. Under
this scheme, any retail supplier of
electricity in Pennsylvania had to have
sufficient capacity1 to provide one day’s
worth of the electrical energy to those
customers the retail supplier had
contracted to serve.
A retail supplier could satisfy its
capacity obligations in one of two ways. It
could cover its retail contractual obligation
by having the ability to generate its own
electrical energy. Alternatively, it could
purchase capacity credits from other
entities. If the retail supplier chose to
purchase energy to satisfy its capacity
obligations, it again had two general
choices. It could enter into a bilateral
contract with an entity that could supply it
with capacity, or it could purchase its
needed capacity in an auction market.
Both the contractual and auction market
options were regulated by FERC and
authorized by PJM Interconnection, the
FERC-established regional wholesale
electricity market that coordinated the
buying, selling and delivery of wholesale
electricity.
In the PJM daily auction market,
which is the market relevant to this appeal,
entities with excess capacity were able to
sell capacity credits to retail suppliers
seeking to meet their daily obligations.
Those sellers offered their excess capacity
at a price they set – a “sell offer.” The
retail suppliers purchasing capacity credits
made an offer to purchase capacity by
placing a bid called a “buy bid.” Once all
the sell offers and buy bids were placed,
PJM set the market-clearing price by
ranking all sell offers and buy bids and
determining at what price the next sell
offer is equal to or less than the next buy
bid. Once the market-clearing price was
set, sellers who offered energy at or below
that price received the market-clearing
price and buyers who bid at or above that
price paid it to obtain the capacity they
need.
A regulatory penalty for failing to
meet capacity obligations added an
additional dimension to this auction
mechanism. If a retail supplier of
electricity failed to meet its capacity
obligations for a given day, it then had to
pay a penalty (the “capacity deficiency
rate” or “CDR”). During the time period
1.Capacity refers to the retail supplier’s
ability to generate electrical energy.

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relevant to this appeal, the FERC-
approved CDR was $177.30/MW-day.
This penalty was doubled on days when
there was an overall shortage of available
capacity.
The revenue from the CDR was
given by PJM to entities that had unused
excess capacity and had made that capacity
available to the PJM. Thus, in essence, the
penalty system forced deficient retail
suppliers of electricity to purchase their
needed capacity from entities with
available excess capacity at the CDR.
B. Utilimax and PPL’s roles in the
electrical energy market and the
complained of conduct.
Utilimax was a retail supplier of
electricity that was licensed to purchase
electrical energy in the wholesale market
and resell that energy to end-users of
electricity in Pennsylvania. Utilimax was
not capable of generating its own
electricity and, therefore, had to purchase
sufficient capacity to meet its capacity
obligations. During the relevant period of
time, it used the PJM daily auction market
as its primary method for satisfying its
capacity obligations.
PPL is both a retail supplier of
electricity and a seller of electricity in the
wholesale market. According to
Utilimax’s complaint, during the first
quarter of 2001 PPL was the only entity
that had excess capacity available that
Utilimax could purchase to satisfy its
capacity obligations. Thus, under the
regulatory system described above, PPL
was able to ensure that it received the
CDR for its excess energy either by
offering it for sale in the daily auction
market at the CDR price or by simply
collecting CDR revenues from any retail
supplier that failed to meet its capacity
obligations. According to Utilimax, PPL
engaged in these practices during the first
quarter of 2001. As a result of this
conduct, CDR revenues during that quarter
were $11,767,541, compared to CDR
revenues of $1,000 or less during the
fourth quarter of 2000. PPL received
almost all of the CDR revenues for the
first quarter of 2001.
Utilimax claims that PPL’s actions
violated § 2 of the Sherman Act, §§ 1 and
3 of the Clayton Act and various
Pennsylvania state laws. The District
Court dismissed Utilimax’s complaint
because it found that the filed rate doctrine
barred the claims.
II.
We have jurisdiction over this
appeal under 28 U.S.C. § 1291 and
exercise de novo review over the District
Court’s decision to dismiss Utilimax’s
complaint pursuant to Federal Rule of
Civil Procedure 12(b)(6). Mariana v.
Fisher, 338 F.3d 189, 195 (3d Cir. 2003).
The filed rate doctrine, and its
exceptions, are central to this appeal. That
doctrine bars antitrust suits based on rates
that have been filed and approved by
federal agencies. In re Lower Lake Erie
Iron Ore Antitrust Litig., 998 F.2d 1144,
1157-58 (3d Cir. 1993); Keogh v. Chicago
& N.W. Ry. Co., 260 U.S. 156, 162-63
(1922). The doctrine operates to bar both

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federal antitrust actions and state law
claims. See Arkansas Louisiana Gas Co.
v. Hall, 453 U.S. 571, 580 (1981). Under
the filed rate doctrine, a plaintiff may not
sue the supplier of electricity based on
rates that, though alleged to be the result of
anticompetitive conduct, were filed with
the federal agency responsible for
overseeing such rates. See Montana-
Dakota Utils. Co. v. N. W. Pub. Serv. Co.,
341 U.S. 246, 251-52 (1951).
Utilimax is claiming that PPL
exerted undue market influence over the
wholesale capacity market and, as a result,
was able to charge excessive rates for its
capacity. Those rates, though allegedly
excessive, were the result of PPL’s
temporary monopolistic position in the
wholesale capacity market that was
established and approved by FERC and
PJM. Other than a brief and unconvincing
argument that PPL violated the “sound
utility practices” and “good faith”
requirements of PJM, Utilimax makes no
claim that PPL charged rates that were not
in conformity with the requirements of the
FERC and PJM -approved market model.
Thus, absent an exception, the filed rate
doctrine precludes Utilimax’s claims
against PPL.
Utilimax argues the District Court
erred in not accepting either of the two
pertinent exceptions to the doctrine – the
c o m p e t i t o r a n d t h e n o n - r a t e
anticompetitive activity exceptions.
In Essential Communications
Systems, Inc. v. American Telephone &
Telegraph Co., we explained that a
competitor exception to the filed rate
doctrine exists because “competitors are
not the intended beneficiaries of that rule
of public utility regulation.” 610 F.2d
1114, 1121 (3d Cir. 1979). Based on this
reason, we refused to apply the filed rate
doctrine to bar the suit of a
communications company’s competitor
based on the company’s actions in
formulating a tariff and in customer
service. Id. at 1122. Similarly, in Lower
Lake Erie, we held that the railroads’
competitors were not precluded by the
filed rate doctrine from suing the railroads
for their antitrust activities. Lower Lake
Erie, 998 F.2d at 1161.
Utilimax claims that because it
competes with PPL in the retail energy
supply market, it is a competitor and,
therefore, the filed rate doctrine does not
prevent its antitrust claims. PPL argues
that while Utilimax is a competitor of PPL
in the retail electrical energy market, it is a
customer in the wholesale market and it is
PPL’s actions in the wholesale market that
Utilimax is alleging were anticompetitive.
Thus, we must determine whether
Utilimax is suing as a competitor of PPL
or as a customer.
We are not the first court to have to
parse the capacity in which a plaintiff was
suing. In Georgia v. Pennsylvania R.R.
Co., the State of Georgia sued the
defendant railroads for what it alleged to
be a conspiracy to fix their rates “so as to
prefer the ports of other States over the
ports of Georgia.” 324 U.S. 439, 443
(1945). Georgia sued the railroads in two
relevant capacities: In its parens patriae

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capacity on behalf of its residents and as
the owner of a competing railroad
company. Id. The Supreme Court
determined that Georgia’s real claims were
in its parens patriae capacity, and its claim
as a compet it or w as m er ely a
“makeweight.” Id. at 450. Having so
concluded, the Court went on to hold that
in its parens patriae capacity Georgia was
suing on behalf of Georgia citizens who
were customers of the railroad. Therefore,
based on the filed rate doctrine, it could
not maintain its antitrust claims to the
extent they were seeking damages based
on the defendant railroads’ alleged
conspiracy to fix rates. Id. at 453 (relying
on Keogh, 260 U.S. at 161-63).
The Supreme Court in Georgia had
the benefit of the plaintiff expressly stating
the two different capacities in which it was
suing. Here, Utilimax argues that it is
suing only as a competitor, not as a
customer. Its complaint, however, belies
this argument. In describing the conduct
of PPL that Utilimax claims violated the
Sherman Act, the Clayton Act and various
state laws, Utilimax alleges that PPL
exercised undue market power over the
wholesale electricity market and, as a
result
65. Utilimax was effectively
put out of business, as it
could not operate under the
burden of the artificially
inflated capacity prices . . .
66. Utilimax and many
other [retail suppliers of
electricity] simply were
crushed and eviscerated by
the artificially inflated
prices set by PPL.
J.A. at 47.
The only fair reading of these
allegations is that Utilimax, as a customer
in the wholesale electricity market, could
not afford to pay the rates that PPL was
able to charge because of its allegedly
anticompetitive conduct. The result of
Utilimax’s inability to buy capacity offered
by PPL in the wholesale market was that it
went out of business in the retail market
and PPL had one fewer competitor in that
latter market. That result, however, came
about because Utilimax (as a customer of
PPL) could not afford to buy capacity.
While the ramifications were felt in its
competitor role, the damage to Utilimax
occurred because of its status as a
customer of PPL. As Utilimax states in its
complaint, “[Utilimax] was required to
cover its capacity requirements per PJM
rules and was compelled to buy capacity
delivered by PPL under these
anticompetitive conditions.” J.A. at 48
(emphasis added).
It hardly needs stating that when an
entity buys something from another entity
there is a customer/seller relationship for
that transaction, even if the two entities are
competitors under other circumstances.
See, e.g., Montana-Dakota Utils., 341 U.S.
at 251-52 (applying the substance of the
filed rate doctrine, without calling it such,
to a suit where the plaintiff, who was a
competitor of the defendant in the electric
utility business, was suing based on rates it

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negotiated with the defendant to purchase
electric energy and those rates were filed
with and accepted by FERC’s predecessor
commission). Based on Utilimax’s
allegations, it is clear that although it may
have been a competitor with PPL in one
market, it was a customer in the wholesale
market. And it is PPL’s actions in that
latter market that form the corpus of
Utilimax’s complaint. Therefore, Utilimax
does not qualify as a competitor of PPL
with respect to its claims, and the
competitor exception to the filed rate
doctrine does not apply.
Utilimax also argues that the filed
rate doctrine should not apply because its
claims allege non-rate anticompetitive
activity on the part of PPL. In Lower Lake
Erie, several groups of plaintiffs sued
various railroad companies alleging that
those companies engaged in activities
designed to prevent a new technology from
entering the iron ore transportation market.
988 F.2d at 1154. According to the
plaintiffs, this new technology would have
allowed lower cost, non-railroad owned
docks to enter the market for transporting
iron ore from the shores of Lake Erie to
inland sites. Id. We held that even those
plaintiffs who were customers of the
railroads, and who did not therefore
qualify for the competitor exception to the
filed rate doctrine, could maintain their
suit against the railroads because their
claims rested on non-rate anticompetitive
activity. Id. at 1161.
Whereas Lower Lake Erie dealt
with the defendant railroads’ activities
related to a technological innovation
wholly separate from rates, here Utilimax
alleges that PPL simply positioned itself in
the wholesale capacity market to be able to
charge exorbitant rates for capacity.
Utilimax does not allege any non-rate
anticompetitive activity, but simply claims
that PPL exploited its market position by
raising its rates. Therefore, Utilimax’s
claims are not saved from the filed rate
doctrine by the non-rate anticompetitive
activity exception.
III.
For the foregoing reasons, we will
affirm the District Court’s order.

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