Plaintiffs, a group of manufacturers, hospitals, and other institutions that bought large quantities of natural gas directly from interstate pipelines, sued the pipelines alleging manipulation of natural gas prices during the energy crisis between 2000 and 2002, in violation of state antitrust laws. Specifically, plaintiffs alleged that the pipelines reported false information to publishers of natural-gas indices upon which plaintiffs’ natural-gas contracts were based, causing them to overpay. This behavior allegedly affected both wholesale prices, which are federally regulated, and retail prices, which are not. Specifically, the NGA gives the Federal Energy Regulatory Commission (“FERC”) authority to regulate certain aspects of the natural-gas market, including determining whether wholesale rates charged by natural-gas companies, or practices affecting such rates, are just and reasonable.2The NGA leaves regulation of other portions of the industry, such as retail sales, to the states.3
After removing the cases to federal court, defendants moved for summary judgment, arguing that the NGA preempted plaintiffs’ state-law antitrust claims. The District Court granted defendants’ motion,4 holding that the pipelines were “jurisdictional sellers,” and plaintiffs’ state-law antitrust claims that were “aimed at” these sellers’ practices were preempted by the NGA.5
The Ninth Circuit reversed,6 holding that the NGA did not preempt state-law antitrust claims aimed at excessively high retail prices, even if the price-manipulation of which plaintiffs complained also increased wholesale prices.7 The Court construed the NGA’s scope narrowly and held that Congress did not intend to extend FERC’s jurisdiction to retail transactions, and thus remanded the case back to district court.
In July 2014, the Supreme Court granted defendants’ petition to “resolve confusion in the lower courts as to whether the Natural Gas Act preempts retail customers’ state antitrust law challenges to practices that also affected wholesale rates.”8 The Supreme Court affirmed the Ninth Circuit’s ruling, holding that the NGA did not preempt the state-law antitrust claims at issue. The Court held that “in passing the Act, Congress occupied the field of matters relating to wholesale sales and transportation of natural gas in interstate commerce,”9 but emphasized the importance of considering the target at which the state law antitrust claims aim.
Justice Breyer, writing for the majority and distinguishing a number of previous cases finding preemption under the NGA, stressed that the NGA was drafted with “meticulous regard for the continued exercise of state power, not to handicap or dilute it in any way,” including the power to regulate retail gas sales. The Court held that “where (as here) a state law can be applied to nonjurisdictional [retail] as well as jurisdictional [wholesale] sales, we must proceed cautiously, finding pre-emption only where detailed examination convinces us that a matter falls within the pre-empted field as defined by our precedents.”10 “Those precedents emphasize the importance of considering the target at which the state law aims in determining whether that law is pre-empted.”11 The Court held that in this case the aim was “retail prices,” which are “firmly on the States’ side of that dividing line.”12The Court further noted that states have “a long history” of providing common-law and statutory remedies for unfair business practices, and thus held the state antitrust law claims at issue here were not field preempted by the NGA.
In making this finding, however, the Court explicitly “leave[s] conflict pre-emption questions for the lower courts to resolve.”13 The Court relied on this distinction between field and conflict preemption to distinguish a Supreme Court opinion finding for NGA preemption. The prior case dealt with federal action to curtail gas deliveries to all customers, including retail customers.14 The Court also noted that there has been no determination by the FERC that its regulation preempts the field into which Respondents’ state antitrust claims fall—specifically, FERC has not found that its “detailed rules governing manipulation of price indices” preempt state antitrust suits where retail rates are affected, and the Court does “not consider what legal effect such a determination might have.”15
Justice Scalia, in a dissenting opinion joined by Chief Justice Roberts, held that the Court’s “make-it-up-as-you-go-along approach to preemption has no basis in the Act, contradicts our cases, and will prove unworkable in practice.”16 He further said that the NGA and case law interpreting it “draw a firm line between national and local authority over this trade: If the Federal Government may regulate a subject, the States may not . . . [t]oday the Court smudges this line” by holding that States may use their antitrust laws to regulate practices already regulated federally.17
This case raises significant federalism concerns, and is a particularly important development when considering the scope of FERC’s enforcement authority versus state authorities in the future. Companies that do business in multiple states may also be concerned about having to comply with what the dissent termed “discordant regulations of 50 states.”18 The 7-2 decision also may signal a willingness by the majority of the Court to accept concurrent federal and state regulation, particularly with respect to regulation of energy companies, presenting substantial compliance challenges for natural gas companies and pipelines going forward.