[00:00:00] Speaker 01:
We're ready for the second case, please.

[00:00:01] Speaker 01:
25-3047, Stoneburger v. BP Energy Company.

[00:00:10] Speaker 01:
Please proceed.

[00:00:11] Speaker 02:
Thank you, Honor.

[00:00:12] Speaker 02:
May I please the Court?

[00:00:13] Speaker 02:
My name is Sam Olens on behalf of the plaintiffs in these consolidated cases.

[00:00:20] Speaker 02:
I think the broad issue that these cases present is whether the state of Kansas has any authority whatsoever to protect its captive

[00:00:28] Speaker 02:
retail natural gas consumers in the face of a declared disaster and a failed natural gas market.

[00:00:36] Speaker 02:
The specific issue the district court decided below was that the Natural Gas Act, the federal Natural Gas Act, preempted the plaintiff's Kansas Consumer Protection Act claims.

[00:00:48] Speaker 02:
For three reasons, the district court erred and the plaintiff's Kansas case CPA claims are not preempted.

[00:00:55] Speaker 02:
The controlling case is,

[00:00:57] Speaker 02:
The Supreme Court's decision in One Oak Inc.

[00:01:00] Speaker 02:
versus Learjet Inc.

[00:01:02] Speaker 02:
that controls for three reasons.

[00:01:04] Speaker 02:
The test under field preemption in the Natural Gas Act context is whether the state law aims at the market, at the FERC jurisdictional market of sales for resale or interstate transportation of natural gas.

[00:01:18] Speaker 02:
Here, the KCPA does not specifically aim at that market like the antitrust.

[00:01:23] Speaker 03:
So whether the statute itself aims at it or whether the specific action taken under that statute aims at that market.

[00:01:31] Speaker 02:
I think that's a critical distinction, Your Honor.

[00:01:33] Speaker 02:
And the answer is, in our view, it is the law.

[00:01:36] Speaker 02:
The plain language of the Supreme Court's reasoning in One Oak is what is the target of the law.

[00:01:43] Speaker 03:
So in One Oak, you didn't really have to look at the markets at all.

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You could see it was an antitrust case.

[00:01:48] Speaker 03:
And that's not targeted at natural gas, so case over.

[00:01:52] Speaker 03:
Why did the Supreme Court have to go into all these other considerations?

[00:01:57] Speaker 02:
Well, there are really two primary considerations.

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One is that the antitrust statutes were broad laws of general applicability.

[00:02:04] Speaker 02:
They're enacted pursuant to states' historic police power, just like the Kansas Consumer Protection Act is.

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And I think the other key in One Oak is that what

[00:02:17] Speaker 02:
The court was looking at, in particular, was a Wisconsin statute, specifically section 133.18, and a Kansas statute, 50-161B.

[00:02:29] Speaker 02:
Both of those antitrust statutes allow for claims by plaintiffs, whether they were direct or indirect purchasers.

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And when the Supreme Court was construing those two statutes in 1.0, it didn't draw a distinction in those laws themselves.

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between plaintiffs who were direct purchasers under either 133.18 or 50-161B and those who were direct purchasers.

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And that should have ended the case then.

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They didn't need to decide that they're not seeking any constraints on interstate, that they're focused on retail sales that are local.

[00:03:10] Speaker 03:
That was irrelevant to the result in One Oak then.

[00:03:14] Speaker 03:
Is that what you're saying?

[00:03:15] Speaker 02:
I wouldn't go so far as saying it was totally irrelevant, Your Honor, because under the facts of 1.0, the plaintiffs alleged, and it was a review of a summary judgment order, that the plaintiffs were all direct purchasers.

[00:03:27] Speaker 02:
And the practices at issue affected both state-regulated retail rates and federal-regulated wholesale rates.

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That fact wasn't necessarily just positive.

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It isn't just positive here, because what the plaintiffs are complaining about

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are state-regulated retail rates and its conduct in connection with those retail rates that are at the heart of the plaintiff's complaint.

[00:03:54] Speaker 03:
Well, your only complaint about the retail rates is that they responded to rates on interstate transactions.

[00:04:02] Speaker 03:
Isn't that right?

[00:04:04] Speaker 02:
Well, I think it is correct to an extent, but it's, again, not just positive, because as the Supreme Court acknowledged in One Oak and it also acknowledged in Burke versus EPSA, the retail and the wholesale markets, in One Oak's terms, there's no platonic separation.

[00:04:19] Speaker 02:
In EPSA's terms, the markets are not hermetically sealed from one another.

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In other words, something that happens in one market can affect the other.

[00:04:26] Speaker 03:
Yes.

[00:04:27] Speaker 03:
And in One Oak, the market that was being targeted

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was the retail market and the rates set in that market could affect the rates established for interstate market.

[00:04:41] Speaker 03:
Here, what's being targeted are interstate rates, the wholesale rates, and those certainly can affect what the retail rates are going to be.

[00:04:53] Speaker 03:
So it's a mirror image of One Oak, is it not?

[00:04:55] Speaker 02:
I disagree, Your Honor, that the wholesale rates are exactly what's being targeted here.

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And the distinction is, the target is, what is the target of the law?

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And the target of the law here is the Consumer Protection Act.

[00:05:08] Speaker 01:
Judge Hart's hit on, well, both of his points are key points.

[00:05:11] Speaker 01:
But on the question of what is the target, One Oak specifically says on page 386, quote, the lawsuits are directed at practices affecting retail rates.

[00:05:23] Speaker 01:
The lawsuits.

[00:05:25] Speaker 01:
not the law, the lawsuits.

[00:05:27] Speaker 01:
And so why doesn't that language support the notion that what we're talking about is the claims, not the law?

[00:05:34] Speaker 01:
And again, that would bleed into Judge Hart's second point, which is that really what you're focusing on is how those claims affect retail rates.

[00:05:44] Speaker 02:
I think, I'm sorry.

[00:05:46] Speaker 01:
No, or the reverse, actually, here.

[00:05:48] Speaker 02:
I think two points, Your Honor.

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First, the lawsuits here are directed at retail rates.

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The Kansas Consumer Protection Act claim is predicated on a consumer transaction.

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You have to be a consumer.

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That is a person in Kansas at the end of the supply chain that purchases household goods, enters a consumer transaction that's a disposition for value in Kansas for property from a supplier.

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And what matches in the KCPA and the antitrust statutes at issue

[00:06:18] Speaker 02:
in 1.0 is that the definition of supplier includes those suppliers who are engaging in or enforcing consumer transactions, whether or not dealing directly with the consumer.

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And that matches the statutory language in the Wisconsin statute, Section 133.18, NKSA 50-161B.

[00:06:40] Speaker 02:
My second point on that, Your Honor, is I think it goes more to whether the Supreme Court's analysis in Kearns versus railroad friction products should apply here.

[00:06:48] Speaker 01:
I thought you said One Oak was our guiding star.

[00:06:52] Speaker 01:
And if One Oak is our guiding star, that language would suggest that we're focusing on claims.

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And Judge Hart's point about essentially, well, there's always going to be an impact on retail rates, even if you affect wholesale rates.

[00:07:07] Speaker 01:
And so the notion being, why?

[00:07:10] Speaker 01:
In every case where retail rates are, as a derivative matter, affected, you're saying that there is not preemption?

[00:07:20] Speaker 02:
I'm not saying every case.

[00:07:23] Speaker 02:
You're saying this case.

[00:07:24] Speaker 02:
Well, in this case, there are certainly special circumstances in this case.

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We have a declared disaster, an obviously failed market.

[00:07:31] Speaker 02:
Prices had skyrocketed from $2.50 on February 1 to $622 by February 17.

[00:07:38] Speaker 02:
the people that bear the brunt of those prices are retail rate patrons.

[00:07:42] Speaker 00:
And to get back a little bit... But the retail rates here, or I think you allege this, are entirely a product of the rates upstream, right?

[00:07:51] Speaker 02:
It is.

[00:07:51] Speaker 02:
So it may depend on the distributor, Your Honor, but each distributor, at least if they're the three that are regulated by the KCC, have to pass... But didn't you allege there was pass-through?

[00:08:00] Speaker 00:
The pass-through isn't

[00:08:02] Speaker 00:
in its entirety all the way down to the retail.

[00:08:04] Speaker 00:
So the retail rates here are entirely a product of what happened at the wholesale level.

[00:08:10] Speaker 02:
They are in large part the cost of the gas that is acquired at the wholesale level.

[00:08:14] Speaker 00:
In large part or entirely?

[00:08:15] Speaker 02:
Well, there are other costs that distributors have to account for that can account for the cost of the natural gas that's spread across the consumer base.

[00:08:22] Speaker 02:
But in large part, the purchase gas authorization passes the cost of wholesale transactions that the distributors enter onto the retail market.

[00:08:31] Speaker 01:
And why doesn't that create a significant problem for you?

[00:08:34] Speaker 01:
I mean, if we're focused on what is the target of the claim,

[00:08:38] Speaker 01:
And your acknowledgment that really to the extent that retail rates are affected, which would be perhaps outside the zone of preemption, to the extent that retail rates are affected, they're only affected as a derivative matter because wholesale rates are affected and wholesale rates from a distributor put you in the zone of preemption, don't they?

[00:08:59] Speaker 02:
No, Your Honor, and if I may, I just want to push back and try one more time at One Oak and whether this One Oak focuses on the nature of the claim.

[00:09:07] Speaker 01:
Tell me what to do with the language that I quoted to you.

[00:09:10] Speaker 02:
That the lawsuits are what the lawsuits were aimed at, I understand that, but the test that Justice Kennedy set forth was the target at which the state law aimed.

[00:09:18] Speaker 02:
And what's important in understanding, I think, that phrase is what

[00:09:23] Speaker 02:
What the court initially said and what the court rejected in the defendant's briefing was this distinction between a Kearns versus Railroad Friction Products Analysis and a Sprytsma versus Mercury Marine Analysis, which I think turns the case in the plaintiff's favor here.

[00:09:41] Speaker 02:
And what the issue was in Kearns is the Locomotive Inspection Act.

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And Kearns relies on an earlier case that says the LIA admits of no exception.

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to any state regulation whatsoever.

[00:09:54] Speaker 02:
That's a far cry from the savings clause in the Natural Gas Act in Section 1B where the Natural Gas Act, as the Supreme Court has long said, expresses a meticulous regard for the continued exercise of state power and therefore it reserves... State power over retail.

[00:10:11] Speaker 02:
Over production, Your Honor, and retail and local distribution.

[00:10:15] Speaker 02:
That's correct.

[00:10:17] Speaker 02:
Where that lines up is with the Supreme Court's initial citation in one up to Spruzma versus Mercury or Marin.

[00:10:24] Speaker 02:
And what was important about Spruzma is the case interpreting the Federal Boat Safety Act.

[00:10:29] Speaker 02:
And what that preemption clause does is it barred state laws or regulations and it didn't say anything about barring state common law actions.

[00:10:40] Speaker 02:
What happened, and so the state common law action in Spreechmo was allowed to go forward because Congress didn't expressly or impliedly print that state common law action.

[00:10:49] Speaker 02:
And what's happening in the savings clause here in Section 1B is Congress is reserving to the states authority over retail rates.

[00:10:58] Speaker 02:
And that's what is ultimately at the heart of the plaintiff's claims is these retail rates in some cases will take up to a decade to pay back.

[00:11:07] Speaker 02:
And so this regulation by claim analysis that the district court accepted under Kern simply doesn't apply under the Natural Gas Act, a statute of cooperative federalism that still allows for states to exercise authority over retail rates.

[00:11:24] Speaker 02:
And the Supreme Court, both in 1.0 and in EPSA, if I may reiterate, clarified that these markets are not, there's no hermetically ceiling between these markets.

[00:11:34] Speaker 02:
What happens in 1.0

[00:11:35] Speaker 02:
inevitably affects.

[00:11:37] Speaker 02:
Let me put it this way.

[00:11:40] Speaker 03:
There's a difference between the target and the affected party.

[00:11:45] Speaker 03:
In One Oak, the target was retail rates.

[00:11:49] Speaker 03:
They affected wholesale rates.

[00:11:53] Speaker 03:
I would think that the target in your case would have to be

[00:11:59] Speaker 03:
at the level where the mistakes were made.

[00:12:02] Speaker 03:
You're not complaining about anything that the retail sellers did where they had to respond to the wholesale rates.

[00:12:12] Speaker 03:
Your complaint is about what happened at the wholesale level.

[00:12:16] Speaker 03:
Why isn't that the target, just as the target in One Oak was the retail rate?

[00:12:23] Speaker 02:
It's not the target, Your Honor, because I point to the statutory language that we're relying on.

[00:12:28] Speaker 02:
The target of the Kansas Consumer Protection Act is the consumer, and it's KSA 50-63B.

[00:12:36] Speaker 02:
The whole purpose of the Kansas Consumer Protection Act is to protect consumers from suppliers who commit deceptive and unconscionable acts and practices.

[00:12:44] Speaker 02:
Consumers, to be protected under the Kansas Consumer Protection Act, you have to be a consumer who entered a consumer transaction.

[00:12:54] Speaker 03:
So the target is the injured party, not the injurer?

[00:12:58] Speaker 02:
Well, the target is the retail rate.

[00:13:01] Speaker 02:
And I think that's what's important under the Natural Gas Act is really, is the state exercising jurisdiction under the sphere of authority that Congress has given it?

[00:13:13] Speaker 02:
And so the state here under the KCPA is exercising jurisdiction over retail rates.

[00:13:19] Speaker 02:
It has defined supplier to include those who engage or enforce consumer transactions, whether directly or indirectly, interacting directly or indirectly.

[00:13:30] Speaker 02:
But that's no different than what the Supreme Court held not preempted, the statutes themselves, the antitrust statutes themselves in 1.0.

[00:13:39] Speaker 01:
What's the, is there any Kansas authority that defines supplier?

[00:13:45] Speaker 02:
The authority I would point to, we cited Stair versus Gaylord.

[00:13:48] Speaker 02:
Your Honor, as a Kansas Supreme Court decision, I believe from 1981, it applies the KCPA to a supply chain beginning with the manufacturer, good year tire, to a distributor and a dealer down to the consumer farmer.

[00:14:01] Speaker 01:
And it goes, it explains what solicitation engage and enforces?

[00:14:06] Speaker 02:
Well, it explains that the KCPA applies to that supply chain and it does it by reference specifically to the statutory language.

[00:14:13] Speaker 02:
Another case is an unpublished case I'd point to, a Kansas Court of Appeals case called Cole v. Hewlett-Packard that discusses and describes

[00:14:23] Speaker 02:
That Hewlett Packard in that case was a supplier who manufactured, I believe it was a computer or a printer that was sold to an employer that was then sold to an employee.

[00:14:33] Speaker 02:
I see I have 40 seconds left.

[00:14:34] Speaker 02:
I'd like to reserve if possible.

[00:14:36] Speaker 02:
Can I ask you a question?

[00:14:36] Speaker 00:
Yes, of course.

[00:14:37] Speaker 00:
I'll allow you some time.

[00:14:39] Speaker 00:
So to follow up on Judge Hartz's question, then, if we were to adopt your position, what then prevents clever counsel in the future from using state laws that are of general applicability to circumvent FERC's authority, whether it's Consumer Protection Acts or any other statutory authority that would allow individuals to pursue or damage its claims?

[00:15:07] Speaker 02:
Yeah, I think the limiting principles are found in section 1B of the Natural Gas Act in the language of One Oak itself.

[00:15:14] Speaker 02:
So it has to be a broad law, a general applicability.

[00:15:18] Speaker 02:
It must be a state law that relies on its historic police powers, the kind of police powers that Congress intended to preserve in the Natural Gas Act after the Supreme Court had invalidated several state regulations under the Dormant Commerce Clause.

[00:15:34] Speaker 02:
All right, thank you.

[00:15:35] Speaker ?:
Thank you.

[00:16:00] Speaker 04:
Good morning, and may it please the court.

[00:16:01] Speaker 04:
Beatrice Franklin from Sussman Godfrey on behalf of Macquarie Energy, and today I'll be presenting argument on behalf of all appellees.

[00:16:09] Speaker 04:
I'd like to begin with a language from one of that Chief Judge Holmes was relying on, the language about looking at the target of what the lawsuits in act.

[00:16:18] Speaker 04:
It comes from a paragraph where the court and Justice Breyer's opinion was discussing a parallelism between Northern Natural, Northwest Central,

[00:16:26] Speaker 04:
and then the claims in that case.

[00:16:28] Speaker 04:
And the court drew a distinction between the regulation at issue in Northern Natural, which was targeted at wholesale, the regulation at issue in Northwest Central, which was targeted at production on the state side of the divide, and then the lawsuits in One Oak, which were targeted at practices affecting retail rates and transactions that took place exclusively in the retail sphere.

[00:16:52] Speaker 04:
That language and the rest of the One Oak analysis

[00:16:55] Speaker 04:
shows that One Oak does not mean that state laws of general applicability are categorically exempted from a preemption analysis under the Natural Gas Act.

[00:17:04] Speaker 04:
If that were the case, the court would not have proceeded to analyze what the actual conduct at issue in that case was.

[00:17:10] Speaker 04:
And then the court just a year later, in Hughes and EPSA, would not have provided a gloss on One Oak that said that this positive fact in One Oak was that the conduct there was all on the retail side of the bright line

[00:17:23] Speaker 04:
under the Natural Gas Act, and that at most, the lawsuits there had an incidental effect on the wholesale market.

[00:17:32] Speaker 04:
Plaintiffs placed a lot of emphasis on the idea that maybe there may have been some indirect purchases underlying the facts in the one-out cases, but that's nowhere in the face of the Supreme Court's opinion.

[00:17:43] Speaker 04:
From the very first line, Justice Breyer makes clear that it's a case about direct purchases and practices that occur in the retail market.

[00:17:51] Speaker 04:
The focus of the conspiracy there

[00:17:53] Speaker 04:
was on inflating prices in the retail market.

[00:17:55] Speaker 04:
And that makes sense, because the defendants were defendants that engaged in retail sales.

[00:18:00] Speaker 04:
So unlike here, where the defendants have only ever engaged in wholesale sales, at least during the trading that's discussed in Winter Storm URI, the defendants, they were retail sellers.

[00:18:12] Speaker 04:
And so the conspiracy was affecting retail rates.

[00:18:16] Speaker 04:
Now, if you look at the actual.

[00:18:20] Speaker 03:
If I have a voice, I'd like to ask a question.

[00:18:22] Speaker 03:
Excuse me.

[00:18:25] Speaker 03:
Your opposing counsel quoted, I believe, another sentence in one oak that referred to the target of the statute.

[00:18:36] Speaker 03:
Explain how you get around that language.

[00:18:39] Speaker 04:
Sure, Your Honor.

[00:18:40] Speaker 04:
So, I mean, at a couple of points in the opinion, the court talks about, you know, looking at what the statute as a whole intends to do, what are the aims of the statute as a whole.

[00:18:50] Speaker 04:
But the court does not say that that's just positive.

[00:18:53] Speaker 04:
The court does not say that just because plaintiffs are bringing suit under a general antitrust statute, that means that the preemption analysis simply doesn't apply.

[00:19:01] Speaker 04:
The court says that that is one factor in the analysis, and that's a factor that Judge Crabtree here, in our case, considered.

[00:19:08] Speaker 04:
Judge Crabtree gave absolute deference to the fact that Natural Gas Act does preserve a role for the states.

[00:19:15] Speaker 04:
But of course, Judge Crabtree correctly recognized that the Natural Gas Act

[00:19:20] Speaker 04:
exists exactly because the states have no traditional authority over the sphere of wholesale transactions.

[00:19:26] Speaker 04:
That was the Attleboro Gap that the Natural Gas Act was created to fill.

[00:19:31] Speaker 04:
So when we are talking about the wholesale sphere and we're talking about prices and practices that involve interstate sales for resale under the language of the Natural Gas Act, that is an area where there's been no traditional state regulation.

[00:19:44] Speaker 04:
And so even if you're looking at a state statute of general applicability, you have to look to see what the plaintiffs are actually asking a court to do, the conduct on which the plaintiffs are actually asking a court to impose liability.

[00:19:57] Speaker 04:
Of course, in Mississippi Power, the Supreme Court said that the principle that wholesale rates cannot be attacked by state law, that is a principle that is binding on state and federal courts.

[00:20:10] Speaker 04:
It's not just binding on state and federal regulators, it doesn't just apply

[00:20:14] Speaker 04:
to state and federal, I'm sorry, to state regulations that affect only the natural gas industry, it is a principle that says that plaintiffs cannot come into court and use state law to try and ask for a redetermination of wholesale rates or a redetermination of the validity of wholesale practices that Congress has placed under exclusive federal authority.

[00:20:35] Speaker 04:
Plaintiffs in their briefing in here today have tried to reframe this case as one that is involving

[00:20:41] Speaker 04:
retail practices, and retail rates, but that simply can't be squared with their complaints, which are, of course, what the court considers on a 12b6 motion.

[00:20:51] Speaker 04:
If you look at paragraph 89 of the Mell complaint, which is at page 180 of the first volume of the appendix, and I'll use Mell as representative of each of the five complaints in this case, paragraph 89 lists the common legal and factual questions in this case.

[00:21:09] Speaker 04:
And those questions all involve questions targeted at wholesale prices and wholesale practices.

[00:21:15] Speaker 04:
So for example, whether defendants charged PGS, the distributor there, unconscionable prices, those are wholesale prices and wholesale transactions.

[00:21:24] Speaker 04:
Whether defendants profiteered by charging unconscionable prices to PGS, wholesale prices and wholesale transactions.

[00:21:32] Speaker 04:
So again, as Judge Crabtree found, as cases like EPSA and Hughes, which post-date one out make clear, an incidental or a downstream effect on retail prices is not the relevant scope of the court's analysis.

[00:21:46] Speaker 04:
The relevant scope of the court's analysis is what conduct are the plaintiffs actually targeting in this case, and what are plaintiffs actually asking the court to do.

[00:21:54] Speaker 04:
Here, the plaintiffs are asking a court

[00:21:57] Speaker 04:
to come in and redetermine the validity of rates that are exclusively under FERC's jurisdiction.

[00:22:03] Speaker 03:
Does it matter that there's no ruling by FERC here?

[00:22:08] Speaker 03:
They investigated and did nothing.

[00:22:11] Speaker 03:
Does that affect the analysis?

[00:22:13] Speaker 04:
No, it doesn't, Your Honor, for a couple of reasons.

[00:22:15] Speaker 04:
First, the touchstone of the preemption analysis is congressional intent, and Congress's intent in the Natural Gas Act and subsequent legislation was to create exclusive federal authority

[00:22:26] Speaker 04:
over the regulation of wholesale practices and prices.

[00:22:30] Speaker 04:
Since the passage of the Natural Gas Act, Congress has determined that the best way to preserve the various interests at play in the national natural gas market is to have a deregulated market.

[00:22:42] Speaker 04:
And so what Congress has intended is that market participants will presumptively set the rates for wholesale gas subject to FERC's oversight and authority.

[00:22:51] Speaker 04:
So FERC has a variety of tools in its toolkit to address perceived manipulation,

[00:22:56] Speaker 04:
or other perceived wrongdoing in the wholesale sphere.

[00:23:00] Speaker 04:
But what's critical for the purposes of preemption is that Congress intends FERC to be the one with the duty and the authority to oversee wholesale rates.

[00:23:09] Speaker 04:
And that makes sense because as the pleadings and the briefing in this case make very clear, as is the case law, the national natural gas market is an interstate market.

[00:23:19] Speaker 04:
There are lots of connections between states.

[00:23:22] Speaker 04:
Transactions could be on one side of a

[00:23:25] Speaker 04:
state line or on another, interstate pipelines go all across the country, and wholesale marketers like the defendants here, they are going to be engaging in practices, they're going to be engaging in transactions that can't be subject to a patchwork of liability under different states' laws.

[00:23:42] Speaker 04:
That's exactly the opposite of what Congress intended.

[00:23:44] Speaker 04:
And furthermore, cases like Transco versus Mississippi from 1986, that illustrates that FERC doesn't need to make some sort of affirmative determination

[00:23:54] Speaker 04:
of whether or not a rate is valid for field preemption to apply.

[00:23:58] Speaker 04:
What matters is that Congress intended those decisions to happen solely under the FERC umbrella.

[00:24:05] Speaker 04:
But to respond to something that plaintiff's counsel said earlier today, the district court did not hold that there is no ability for Kansas to regulate retail rates.

[00:24:14] Speaker 04:
The district court did not hold that there is no recourse for consumers.

[00:24:18] Speaker 04:
And the district court did not hold that the KCPA

[00:24:21] Speaker 04:
is preempted in every application, certainly, or even in every application to the natural gas market.

[00:24:28] Speaker 01:
Let me talk about the KCPA for a second.

[00:24:32] Speaker 01:
In the Kansas cases that you cited, did any of those cases involve a dismissal that focused on the defendant's role in the transaction that didn't amount to soliciting, engaging, enforcing consumer transactions?

[00:24:46] Speaker 01:
I'm trying to understand what that language actually means.

[00:24:50] Speaker 01:
and whether that language has been flushed out in Kansas cases?

[00:24:54] Speaker 04:
So in several of the cases that we cited, so for example, L.O.B.

[00:24:59] Speaker 04:
and Barry, and then Kastner from this court, they talk more generally about when an upstream supplier can be held liable under the KCPA.

[00:25:08] Speaker 04:
They said that where the defendant did not engage directly with the consumer, whether in terms of the transaction itself, and also in those cases there was no advertisement, no marketing, no solicitation,

[00:25:20] Speaker 04:
a KCPA claim wasn't stated.

[00:25:22] Speaker 04:
If you look at the cases that plaintiffs rely on, so Cole and Stair, the facts there flesh out what it does mean to solicit or engage in.

[00:25:31] Speaker 04:
So in Stair, for example, Goodyear, which was the upstream supplier, Goodyear had made representations to consumers, Goodyear had made warranties to consumers, and Goodyear played a role in enforcing the consumer transaction because it was ultimately responsible through a middleman

[00:25:48] Speaker 04:
for the return of the defective product in that case and processing the return.

[00:25:52] Speaker 04:
Likewise, in coal, HP had made advertisements to consumers and marketed its products in a certain way, which makes sense because when you have a consumer good, typically the manufacturer of the consumer good may participate in the marketing and the advertising of the good, even if it's not the one who's actually selling it.

[00:26:12] Speaker 04:
Here, the complaints have no allegation whatsoever that defendants solicited, engaged in, or play a role in enforcing consumer transactions.

[00:26:21] Speaker 04:
Upstream wholesale marketers, they don't market natural gas to consumers.

[00:26:25] Speaker 04:
They don't solicit consumer transactions.

[00:26:28] Speaker 04:
The only relationship between defendants and any downstream party in this case are between defendants and their sophisticated commercial counterparties, like these very large gas distributors in Kansas.

[00:26:42] Speaker 04:
And the failure of plaintiffs to plead a substantive KCPA complaint mirrors why the claims are preempted.

[00:26:48] Speaker 04:
Because plaintiffs are trying to hold upstream suppliers in the wholesale market liable for conduct that takes place far downstream, that takes place in the sale to consumers.

[00:27:01] Speaker 04:
And neither the KCPA nor federal law really permits that kind of broad scope of liability.

[00:27:08] Speaker 00:
Here, of course- Let me ask you, it feels like there's this tension

[00:27:11] Speaker 00:
in the Supreme Court's decision and went okay.

[00:27:14] Speaker 00:
And it starts out with Justice Breyer saying, the Natural Gas Act was drawn with meticulous regard for the continued exercise of state power not to handicap or dilute it in any way.

[00:27:24] Speaker 00:
That's pretty broad language.

[00:27:27] Speaker 00:
And I feel like there's this tension.

[00:27:29] Speaker 00:
And so I guess I'm trying to figure out if there is, if we're taking the allegations of the complaint as true.

[00:27:36] Speaker 00:
So given that, there's no, in your estimation, even with this language that I think

[00:27:41] Speaker 00:
you have to agree doesn't set out a bright line test for us.

[00:27:48] Speaker 00:
I mean, there is some hedging in there.

[00:27:50] Speaker 00:
And it certainly, I read the opinion to preserve the scope of state authority.

[00:27:56] Speaker 00:
So how do you square some of that language with the argument you're making here today?

[00:28:02] Speaker 00:
It feels like there are places where, if there's price gouging or some other wrongful conduct upstream, that consumers have the right to take action.

[00:28:15] Speaker 00:
How do you address that language?

[00:28:17] Speaker 04:
I think that the facts on the ground of what happened here during winter storm urine afterward, which are included in the complaint, demonstrates exactly the way that state and federal authority can work together in a complementary fashion.

[00:28:30] Speaker 04:
So FERC, as I said, has a variety of tools in its toolkit to investigate alleged wrongdoing.

[00:28:35] Speaker 04:
On the wholesale side, FERC gets extensive market data.

[00:28:39] Speaker 04:
They receive huge amounts of financial trading data.

[00:28:42] Speaker 04:
They review that.

[00:28:43] Speaker 04:
They survey that.

[00:28:44] Speaker 04:
They follow up on tips.

[00:28:45] Speaker 04:
They did so here.

[00:28:46] Speaker 04:
They conducted a number of investigations.

[00:28:48] Speaker 04:
That's on the wholesale side.

[00:28:50] Speaker 04:
On the retail side, there are state agencies like the Kansas Corporation Commission.

[00:28:54] Speaker 04:
which here was also very active in the days and months following Winter Storm Yuri.

[00:28:59] Speaker 04:
The KCC opened dockets to investigate the retail charges that were passed on by several distributors in this case.

[00:29:07] Speaker 04:
The KCC held extensive hearings, did extensive fact findings.

[00:29:11] Speaker 04:
Consumers were represented during those hearings by a consumer organization.

[00:29:16] Speaker 04:
The consumer organization participated in the settlement negotiations and the settlement approval

[00:29:21] Speaker 04:
And the consumer organization was one of the parties that advocated for the settlements that were reached that are described in the complaints because they were in consumers' interest.

[00:29:32] Speaker 04:
So that shows that FERC operates on the wholesale line of the divide exactly as Congress intended.

[00:29:38] Speaker 04:
And then state regulators can operate on the retail side of the divide exactly in line with the state preservation of authority

[00:29:49] Speaker 04:
under the NGA.

[00:29:51] Speaker 00:
What plaintiffs are trying to do here... But is there any language that says that is always the case, that there's a bright line rule?

[00:29:58] Speaker 04:
Bright line, of course, is a phrase that's used in many of the Supreme Court's other energy precedents.

[00:30:05] Speaker 04:
I mean, what One Oak is looking specifically is at their wholesale retail divide and says that where... I agree, as EPSA says, they're not hermetically sealed.

[00:30:15] Speaker 04:
But you can look at what the actual target of a lawsuit is and you can say, is this lawsuit attacking prices and practices on the retail side or is it attacking prices and practices?

[00:30:26] Speaker 04:
on the wholesale side.

[00:30:27] Speaker 04:
This case is much easier.

[00:30:29] Speaker 00:
Well, it's trying to address wrongs, maybe the practices and the problems are at the wholesale side, but it's the consumers who suffered because of that conduct.

[00:30:43] Speaker 00:
And I think it's trying to address that issue, isn't it?

[00:30:48] Speaker 04:
Well, what Congress was trying to do in the Natural Gas Act is to figure out how is the market, including consumers,

[00:30:55] Speaker 04:
best going to be served.

[00:30:57] Speaker 04:
And what Congress determined was that the best interest of the market, including consumers, if I can finish answering the question, thank you.

[00:31:05] Speaker 04:
The best interest of the market, including consumers, is to have a uniform system of natural gas enforcement.

[00:31:12] Speaker 04:
And that falls under FERC's authority.

[00:31:14] Speaker 04:
One Oak itself says that Congress decided that a deregulated market was in the best interests of everyone.

[00:31:20] Speaker 04:
And that determination

[00:31:23] Speaker 04:
has to be honored.

[00:31:24] Speaker 04:
So what One Oak says is that when you are looking at a lawsuit that really is about retail practices and retail prices, that doesn't interfere with congressional intent because it doesn't cross the line into the interstate sales of natural gas for resale.

[00:31:39] Speaker 04:
But there's no dispute that that is what plaintiffs are attacking here.

[00:31:42] Speaker 04:
And that makes this a much easier case, frankly, than One Oak because everyone agrees that the crux of plaintiff's complaint is, in fact,

[00:31:50] Speaker 04:
Wholesale prices and wholesale practices under FERC's exclusive jurisdiction.

[00:31:54] Speaker 04:
For those reasons, we think that the district court's thorough opinion is exactly correct, and we respectfully request that the court affirm.

[00:32:01] Speaker 04:
Thank you.

[00:32:02] Speaker 01:
Thank you, counsel.

[00:32:07] Speaker 01:
If you'd give one minute 30.

[00:32:18] Speaker 02:
Thank you, Your Honor.

[00:32:20] Speaker 02:
Subject to the Court's questions, I hope I can be faster than that.

[00:32:24] Speaker 02:
Two quick points.

[00:32:25] Speaker 02:
One, I'd just like to point out on page 24 to 25 of the appellee's answer brief are a list of published Supreme Court cases.

[00:32:33] Speaker 02:
What distinguishes every one of those cases

[00:32:36] Speaker 02:
from this case is that each of those cases relies on a specific state measure that targets interstate market participation.

[00:32:44] Speaker 02:
It's not a broad law of general applicability like the Kansas Consumer Protection Act.

[00:32:49] Speaker 02:
And then if I could just briefly follow up Judge Holmes on your question on suppliers, it occurred to me one more case

[00:32:55] Speaker 02:
to bring to your attention on the necessary connection between suppliers and a consumer transaction.

[00:33:01] Speaker 02:
I'd point to via Christie versus Reed and the critical statutory language, at least in the non-class action case, is when a consumer is aggrieved by a supplier's conduct, they have a right of action under the KCPA.

[00:33:13] Speaker 02:
In the class action context, it's when a consumer suffers a loss as a result of a supplier's conduct subject to the court's questions.

[00:33:23] Speaker 02:
Thank you.

[00:33:25] Speaker 01:
Thank you, counsel.

[00:33:26] Speaker 01:
Thank you.

[00:33:27] Speaker 01:
Case is submitted.

[00:33:28] Speaker 01:
Thank you for refined arguments.