Kourouma v. Federal Energy Regulatory Commission , 723 F.3d 274 ( 2013 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 13, 2012 Decided July 23, 2013
No. 11-1283
MOUSSA I. KOUROUMA,
PETITIONER
v.
FEDERAL ENERGY REGULATORY COMMISSION,
RESPONDENT
On Petition for Review of an Order of
the Federal Energy Regulatory Commission
Paul B. Mohler argued the cause for petitioner. With him
on the briefs were Joseph H. Fagan, Julie D. Hutchings, and
Stephen L. Markus.
Robert M. Kennedy, Attorney, Federal Energy Regulatory
Commission, argued the cause for respondent. With him on
the brief were Tony West, Assistant Attorney General, U.S.
Department of Justice at the time the brief was filed, Mark B.
Stern, and Lindsey Powell, Attorneys, and Robert H.
Solomon, Solicitor, Federal Energy Regulatory Commission.
Before: GARLAND, Chief Judge, ROGERS and GRIFFITH,
Circuit Judges.
Opinion for the Court filed by Circuit Judge GRIFFITH.
2
GRIFFITH, Circuit Judge: In a summary disposition, the
Federal Energy Regulatory Commission (FERC) ordered
energy trader Moussa Kourouma to pay a $50,000 civil
penalty because he had made false statements and material
omissions in forms he filed with the Commission and a
market operator the Commission regulates. For the reasons set
forth below, we deny Kourouma’s challenge to the order.
I
The Federal Power Act (FPA) grants FERC the authority
to regulate the activity of traders who participate in energy
markets. See 16 U.S.C. §§ 791a-825r. To ensure the integrity
and smooth functioning of the markets, FERC has
promulgated a range of rules, one of which is 18 C.F.R.
§ 35.41(b), or “Market Behavior Rule 3,” which states:
A Seller must provide accurate and factual
information and not submit false or misleading
information, or omit material information, in any
communication with the Commission, Commission-
approved market monitors, Commission-approved
regional transmission organizations, Commission-
approved independent system operators, or
jurisdictional transmission providers, unless Seller
exercises due diligence to prevent such occurrences.
18 C.F.R. § 35.41(b). The definition of “Seller” includes “any
person that . . . seeks authorization to engage in sales for
resale of electric energy, capacity or ancillary services at
market-based rates . . . .” 18 C.F.R. § 35.36(a)(1). In other
words, energy traders like Kourouma may not make false or
misleading submissions to the Commission or to the other
types of entities named in the regulation.
3
From January 2008 to March 2009, Kourouma worked as
a trader in various energy markets with Energy Endeavors LP.
When he began with Energy Endeavors, Kourouma signed an
employment contract that contained a non-compete clause
that committed him to trade only for Energy Endeavors
during his time at the firm and for two years after leaving the
firm. In early 2009, Kourouma grew concerned over the
business prospects of Energy Endeavors and formed his own
trading firm, despite the terms of his contract. On February
18, 2009, Kourouma incorporated Quntum Energy LLC,
using his daughter’s name as Quntum’s registered agent in
place of his own. In order to participate in the energy markets,
Kourouma filed applications with FERC and a regional
transmission organization that operates electricity trading
markets, PJM Interconnection LLC, in March 2009.
Kourouma did not include his name on any of the forms he
filed with FERC or PJM. In the form filed with FERC, he
again concealed his role in Quntum by using his daughter’s
name in place of his own. In the form filed with PJM, he
claimed that a friend was Quntum’s manager, which was not
true.
Energy Endeavors soon discovered Kourouma’s activities
with Quntum; its parent company sought enforcement of his
employment contract, see Crane Energy, Inc. v. Kourouma,
No. 4512-VCS (Del. Ch. June 5, 2009), and protested the
application Quntum filed with FERC. FERC conducted an
investigation into Kourouma’s activities and issued an order
stating that he had submitted false and misleading forms to
FERC and PJM in violation of 18 C.F.R. § 35.41(b) and
directing him to show cause why a $50,000 civil penalty was
not appropriate. See Kourouma, 134 FERC ¶ 61,105 (2011).
4
The order also informed Kourouma that he could choose
between two procedural options. See 16 U.S.C. § 823b(d)(1);
see also id. § 825o-1 (requiring FERC to follow the 16 U.S.C.
§ 823b(d) procedures). He could elect for FERC to “promptly
assess [the] penalty, by order,” a choice which would
immediately vest him with appeal rights. Id. § 823b(d)(3)(A);
see id. § 823b(d)(1), (2)(B). Or he could elect for the
Commission to assess a penalty only “after a determination of
violation has been made on the record after an opportunity for
an agency hearing pursuant to section 554 of Title 5 before an
administrative law judge . . . .” Id. § 823b(d)(2)(A). Any
resulting assessment order “shall include the administrative
law judge’s findings and the basis for [the] assessment.” Id.
In response to FERC’s order, Kourouma submitted an
affidavit in which he admitted that he falsely used the name of
his daughter on a form submitted to FERC and the name of a
friend on a form submitted to PJM instead of his own name.
He explained that he used those names “in order to avoid
making Energy Endeavors aware” of his involvement in
Quntum.
Regarding his procedural options, Kourouma urged the
Commission to dismiss the case against him by summary
disposition. If the Commission chose not to dismiss the
charges, he asked for an administrative hearing. The
Commission determined the matter fit for summary
disposition, but against Kourouma, not for him. Relying on
the admissions of false filings Kourouma made in his
affidavit, the Commission held that Kourouma violated
Market Behavior Rule 3 and assessed a $50,000 civil penalty
payable over five years to accommodate his financial
condition.
5
In this petition for review, Kourouma alleges that FERC
committed procedural and substantive errors. We have
jurisdiction under 16 U.S.C. § 823b(d)(2)(B). See Bluestone
Energy Design, Inc. v. FERC, 74 F.3d 1288, 1293 (D.C. Cir.
1996).
II
We first consider Kourouma’s argument that he was
entitled to an administrative hearing under 16 U.S.C.
§ 823b(d)(2)(A).
We agree with FERC that Kourouma’s admissions
supported summary disposition without a hearing. FERC Rule
of Practice and Procedure 217 provides that when “there is no
genuine issue of fact material to the decision of a
proceeding . . . , [FERC] may summarily dispose of all or part
of the proceeding.” 18 C.F.R. § 385.217(b). That rule does not
run afoul of § 823b. We have routinely recognized that an
agency need not hold an administrative hearing when no
material facts are in dispute. As we stated in Citizens for
Allegan County, Inc. v. Federal Power Commission,
the right of opportunity for hearing does not require a
procedure that will be empty sound and show,
signifying nothing. The precedents establish, for
example, that no evidentiary hearing is required where
there is no dispute on the facts and the agency
proceeding involves only a question of law.
414 F.2d 1125, 1128 (D.C. Cir. 1969) (citations omitted); see
also, e.g., Moreau v. FERC, 982 F.2d 556, 568 (D.C. Cir.
1993) (holding that the Natural Gas Act’s hearing provision,
15 U.S.C. § 717f, does not require a hearing “when there are
no disputed issues of material fact”); Pa. Pub. Util. Comm’n
6
v. FERC, 881 F.2d 1123, 1126 (D.C. Cir. 1989) (stating that
“we have often held . . . that a formal trial-type hearing is
unnecessary where there are no material facts in dispute”
(citations omitted)). Here, after receiving Kourouma’s
admissions, FERC faced only a question of law: Did
Kourouma’s admitted actions amount to a violation of Market
Behavior Rule 3? No evidentiary hearing was needed.
We have never had occasion to consider this issue with
regard to § 823b(d), but the principle upon which we rely is
well-established. “Even when an agency is required by statute
or by the Constitution to provide an oral evidentiary hearing,
it need do so only if there exists a dispute concerning a
material fact.” 1 RICHARD J. PIERCE JR., ADMINISTRATIVE
LAW TREATISE § 8.3 (5th ed. 2010) (citing, e.g., Weinberger
v. Hynson, Westcott & Dunning, Inc., 412 U.S. 609 (1973)).
This holds even where, as here, the governing statute requires
that final civil penalty orders “shall include the administrative
law judge’s findings.” 16 U.S.C. § 823b(d)(2)(A). When the
regulated party’s own admissions make clear that no material
facts are in dispute, it is unnecessary to require a judge to
recite these facts as “findings” after a hearing. As we have
already stated, Kourouma’s affidavit makes the violation
clear. In the affidavit he submitted to FERC in response to the
order to show cause, Kourouma admitted that he falsified and
omitted multiple names on his forms, and that he had kept his
involvement in Quntum a secret to avoid alerting Energy
Endeavors to his violation of the non-compete. Kourouma’s
admissions resolved all disputes of material fact, making an
evidentiary hearing unnecessary.
III
Kourouma next argues that FERC erred because there
was no showing that he had any intent to deceive FERC or
7
PJM with his false filings. But intent to deceive is not an
element of Market Behavior Rule 3. The Rule’s plain text
lacks any reference to intent and forgives false or misleading
submissions only if they are made inadvertently despite the
filer’s due diligence to avoid such errors. The text provides no
hint that a seller would be in the clear if, for example, he
submitted false information recklessly, but without ill will. To
the contrary, the fact that only due diligence excuses a false
filing implies even negligent misrepresentations may be
actionable. Contrary to Kourouma’s assertion, so read, Market
Behavior Rule 3 does not subject filers like Kourouma to
strict liability, but reserves punishment for those who do not
act with requisite care when submitting information to FERC.
Because Kourouma’s actions were worse than careless, FERC
reasonably concluded that he violated Market Behavior Rule
3. ∗
Kourouma argues as well that he had no notice that
FERC would read the Rule so broadly and might move
against those who lacked intent to deceive FERC or regional
∗
Without a requirement of intent, Kourouma argues, the Rule
fails to provide constitutionally adequate notice to regulated parties
of what is forbidden and invites discriminatory enforcement. See
Hill v. Colorado, 530 U.S. 703, 732-33 (2000); City of Chicago v.
Morales, 527 U.S. 41, 56 (1999). But these constitutional
challenges to a garden-variety ban on making false statements to
regulators are meritless. As discussed above, the Rule’s clear terms
provide sufficient notice to regulated parties of what conduct the
Rule prohibits, and those clear enforcement parameters prevent
FERC from engaging in unconstitutionally discriminatory
enforcement. To the extent Kourouma argues that he received
harsher treatment because he decided to withdraw his FERC
application rather than amend it, his argument is unconvincing.
There is no evidence that his decision to withdraw his FERC
application resulted in disparate treatment.
8
transmission organizations like PJM. Indeed, although we
typically defer to agencies’ interpretations of their own
regulations, we also require agencies to provide fair notice of
the actions they consider unlawful. See, e.g., PMD Produce
Brokerage Corp. v. USDA, 234 F.3d 48, 52 (D.C. Cir. 2000).
This ensures that “a regulated party acting in good faith” will
be able “to identify, with ascertainable certainty, the standards
with which the agency expects parties to conform.” Star
Wireless, LLC v. FCC, 522 F.3d 469, 473 (D.C. Cir. 2008)
(internal quotation marks omitted).
Not only does the plain language of § 35.41(b) provide
ample notice that FERC will enforce the Rule without
requiring intent, but the Commission’s prior public statements
regarding § 35.41(b) confirm the point as well. For instance,
in 2004, FERC considered but rejected the option of adding
an “express intent requirement” to § 35.41(b). See
Investigation of Terms and Conditions of Pub. Util. Market-
Based Rate Authorizations, 107 FERC ¶ 61,175, 61,715
(2004). FERC eschewed this proposal, leaving the due
diligence safe harbor as the only exception to the rule. See id.And although the initial promulgation of Market Behavior
Rule 3 stated that the Rule was “prohibit[ing] the knowing
submission of false or misleading data,” that statement was
intended to clarify that “inadvertent submission of inaccurate
or incomplete information will not be sanctioned.”
Investigation of Terms and Conditions of Pub. Util. Market-
Based Rate Authorizations, 105 FERC ¶ 61,218, 62,157
(2003). Moreover, the 2004 commentary on the Rule made
clear that FERC’s goal was to ensure that inadvertent false
submissions would not be penalized. See 107 FERC ¶ 61,175,
61,715. Kourouma’s false filings were not inadvertent.
9
IV
Next, we briefly turn to three arguments that sound under
the Administrative Procedure Act. We find each of them to
lack merit.
First, Kourouma claims that FERC failed to follow its
own summary disposition rule that evidence must be “viewed
in light most favorable” to the non-moving party. See Phillips
Pipe Line Co., 67 FERC ¶ 63,002, 65,002 (1994). Departing
from precedent without explanation is a form of capricious
agency action. See, e.g., Lone Mountain Processing, Inc. v.
Sec’y of Labor, 709 F.3d 1161 (D.C. Cir. 2013). But the
summary disposition rule requires only that FERC draw all
“reasonable” inferences in Kourouma’s favor. See, e.g.,
Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133,
150 (2000). Kourouma wishes that FERC would simply
accept his explanation that his actions were inadvertent. See
Pet’r’s Br. 35. But as we have already shown, such an
inference could not be reasonable.
Second, at a late stage in the administrative process,
Kourouma sought to introduce new evidence, and he argues
that FERC’s decision to exclude it was an abuse of discretion.
But FERC Rule of Practice and Procedure 213 prohibits
respondents from submitting additional answers, see 18
C.F.R. § 385.213(a)(2), and it was no abuse of discretion to
adhere to the rule.
Third, Kourouma argues that FERC failed to support its
imposition of a $50,000 penalty with substantial evidence,
thus violating 5 U.S.C. § 706(2)(E). But FERC’s decision to
impose a $50,000 penalty is rationally supported by multiple
pieces of evidence. FERC highlighted the fact that Kourouma
acted deliberately, and remarked upon the seriousness of the
10
threat posed by Kourouma’s actions to transparent market
operations. In particular, FERC pointed to the inability to
properly evaluate Kourouma’s misleading forms and to the
signal his actions sent about the integrity of the energy
market. The record also belies Kourouma’s argument that
FERC failed to consider his circumstances in imposing its
final order. In fact, FERC tailored Kourouma’s payment
schedule to accommodate his problems with cash flow by
allowing him to pay his penalty over a period of five years.
Based on its judgment regarding the seriousness of
Kourouma’s violation – especially that, in the Commission’s
judgment, Kourouma had “knowingly and deliberately” filed
false information, Kourouma, 135 FERC ¶ 61,245, 62,397 –
and the mitigating factor of his financial position, the
Commission reasonably arrived at the decision to impose a
$50,000 penalty, payable over five years.
V
Finally, we turn to Kourouma’s argument that FERC
enhanced his penalty based on the goal of promoting general
deterrence, in violation of Clifton Power Corp. v. FERC, 88
F.3d 1258, 1267 (D.C. Cir. 1996). Kourouma misreads Clifton
Power. In that case, while expressly leaving the issue open,
we questioned whether FERC could increase the dollar
amount of a penalty recommended by an ALJ in order to deter
other market participants. See id. at 1271. In contrast, in this
case, Kourouma makes no showing that FERC increased his
penalty to promote general deterrence. Indeed, the record
shows that FERC only considered general deterrence when
deciding whether to impose a monetary penalty, not when
determining its amount. See Kourouma, 135 FERC ¶ 61,245,
62,398. Thus, our unresolved discussion of general deterrence
in Clifton Power is inapposite.
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VI
For the foregoing reasons, the petition for review is
denied.
So ordered.