in the minds of regulators that is sufficiently specific that a fact-finder would have a standard for determining what rate would have been deemed reasonable absent the alleged fraud. They do not provide any option for surgical intervention by the courts. Rather, in innumerable different ways and for a period of six years, the cost structures of the regulated entities would have to be redetermined, and then the fact finders would have to assess what would have been (or what would have been deemed) reasonable rates.
Second, the misrepresentations alleged in LILCO were of a kind that courts and jurors regularly judge, and they were not of a kind for which agencies are supposed to possess any particular expertise. The plaintiffs contended that certain individuals testifying to the PSC had stated that they expected construction to be complete on a certain date, when in fact they did not expect construction to be complete on that date. The fact-finders (in this case, the jury, followed by the district court judge and the circuit court judges), insofar as they were required to determine whether fraud had occurred, were asked only whether the individuals and entities had a certain belief about the expected completion date of a construction project.
By contrast, the misrepresentations alleged in these cases are of a kind that requires fact-finding that falls within the expertise of agencies. They are not garden-variety determinations regularly made by judges and jurors. Although I do not believe that jurors and judges are incompetent to find facts as to whether the price-setting by the unregulated defendants was inflated, these determinations clearly invoke agency expertise in a way that the assessment of fraud in LILCO did not. To this extent, the facts of the cases at bar present this court with much stronger cases for the application of the filed rate doctrine than the facts in LILCO presented to the Second Circuit.
Third, LILCO presented itself to the Second Circuit as an unusual case in which the utility sought rate increases to serve a purpose -- building a plant for the future -- that was ancillary to the provision of services to the current ratepayers. In these circumstances, the court was not required to face the question of whether widespread suits of this nature would harm the relation between courts and agencies. And, as mentioned, it did not address that question.
In contrast, the complaints before this court essentially allege that the regulated entities defrauded regulatory agencies and ratepayers by fraudulently misrepresenting their costs. Because similar allegations are commonly found in suits challenging rates, it is clear here -- as it was not in LILCO -- that permitting an action would open the door to innumerable similar complaints with respect to other utilities, each effectively alleging a right to have courts award damages based, in effect, on a court-set retroactive rate readjustment.
In sum, LILCO does not provide a basis for rejecting application of the filed rate doctrine here. In LILCO, a damage award could be deduced from a framework pre-set by the commission, with only minor intrusion by the court; the fraud alleged was not of the sort that regulatory bodies are better equipped than courts to detect; and the factual allegations were sufficiently "unusual" that permitting an action did not open the floodgates to suits that would threaten, in cumulative effect, to alter the relation between courts and regulatory bodies. The cases at bar are not benign in any of these respects. Given these differences, given the facts that LILCO never addressed the filed rate doctrine, and that the Second Circuit ultimately affirmed j.n.o.v. for the utility, and given the vitality of the filed rate doctrine as indicated by Maislin, H.J., and Taffet II, it would be inappropriate to view LILCO as a bar to the filed rate doctrine in these cases.
V. THE STATE LAW CAUSE OF ACTION
In addition to two RICO claims, one state law cause of action survived the Magistrate Judge's Report. Given that the filed rate doctrine has been held to bar state causes of action, Arkla, and that plaintiffs seek essentially the same relief under the state causes of action as under RICO, the considerations above provide an adequate basis for dismissing the state causes of action under the filed rate doctrine. However, even if, arguendo, the filed rate doctrine should not be applied to the state causes of action in the cases at bar, I would nevertheless dismiss those actions. Once the RICO actions have been dismissed, there is no basis for subject matter jurisdiction over the state claims, other than the trace of discretionary pendent jurisdiction that remains because a federal cause of action was initially part of the complaint. Although this court might enjoy some power to retain the state claims, I would not exercise that power, in light of the strong reasons enumerated above for keeping federal courts out of this area, and in light of the overwhelming preponderance of state interests over federal interests that would remain in the case if the RICO action were dismissed.
For the reasons stated above, the Complaints are dismissed pursuant to Fed. R. Civ. P. 12(b)(6).
DATED: New York, New York
November 13, 1992
Kimba M. Wood
United States District Judge