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Court sides with FERC again on statute of limitations in enforcement cases

The Federal Energy Regulatory Commission scored a win in federal court when a U.S. district judge ruled recently that the agency's enforcement action against a Maine energy consulting company and its managing member for alleged demand response manipulation was not time-barred.

That court order marked the second time the commission prevailed on statute-of-limitations issues in an enforcement case before a U.S. district court. Enforcement staff, however, remains likely to act more swiftly in future investigations to ensure any federal court complaint is filed within five years of alleged misconduct to avoid similar disputes, said David Applebaum, co-head of Akin Gump's energy regulation, markets and enforcement practice.

Facing nearly $9 million in combined penalties and disgorgement, energy consultant Competitive Energy Services of Portland, Maine, and CES managing member Richard Silkman sought to have the case dismissed on grounds that FERC's actions against them were barred by the five-year statute of limitations found in 28 U.S.C. Section 2462, a federal statute on timing of enforcement proceedings (FERC v. Silkman et al., 1:16-cv-00205).

Supreme Court precedent

CES and Silkman argued before the U.S. District Court for the District of Maine that FERC's petition was filed with the court nearly six years after the alleged wrongdoing ceased. Relying on Supreme Court precedent, they asserted that FERC's July 17, 2012, orders to show cause (FERC dockets IN12-12, IN12-13) for alleged wrongdoing that occurred from July 2007 until February 2008 did not satisfy the statute of limitations in enforcement cases as it was no more than a decision to prosecute and not itself a prosecution.

A similar argument proved successful in the long-running power market manipulation case against Barclays Bank and several former traders in the U.S. District Court for the Eastern District of California (FERC v. Barclays Bank et al., 2:13-cv-02093).

But district court Judge John Woodcock said in an order issued Jan. 4 that he was beholden to case law in the U.S. Court of Appeals for the 1st Circuit, particularly that established in United States v. Meyer, which held that Section 2462 "affords an additional five-year period following final administrative assessment of a civil penalty during which the government may sue to enforce the action."

He also noted an earlier decision in the proceeding before it was transferred to Maine from Massachusetts, in which the judge in that district also tossed the statute of limitations objection.

'Better approach'

The U.S. District Court for the Eastern District of Virginia in Richmond in September 2018 also sided with FERC over Powhatan Energy Fund's argument that accusations that it and others manipulated the PJM Interconnection's electricity markets in 2010 should be dismissed as time-barred (FERC v. Powhatan Energy Fund et al., 3:15-cv-00452).

Though the reasoning in the Powhatan and Silkman cases differs and addresses separate case law, both decisions are significant in that they counter the Barclays ruling that found FERC must file its federal court complaint within five years of the conduct occurring, said Applebaum, a former FERC Division of Investigations director. Rather, "you're allowed to and must consider what happened at the agency level before determining whether the five years has run," he said of the Powhatan and Silkman rulings.

"I think the takeaway from all three of these rulings in general is just going to be let's not fight about statute of limitations," Applebaum said. "The better approach will be to make sure we can file our federal court complaint within five years of the conduct occurring so there's no dispute at all. I think that's what the agency is going to be doing from this point forward."

Jasmin Melvin is a reporter for S&P Global Platts, which, like S&P Global Market Intelligence, is owned by S&P Global Inc.