On July 23, 2013, the United States Court of Appeals for the District of Columbia Circuit (“DC Circuit”) denied energy trader Moussa Kourouma’s challenge to a FERC order that found he violated market behavior rules and ordered him to pay a civil penalty of $50,000.  The DC Circuit rejected Kourouma’s arguments that FERC committed procedural and substantive errors, and instead agreed with FERC’s finding that an evidentiary hearing was unnecessary in this case.  In addition, the DC Circuit held that, despite Kourouma’s assertions, “intent to deceive” is not an element of FERC’s Market Behavior Rule 3, 18 C.F.R. § 35.41(b), which requires that sellers provide accurate and factual information and not submit any misleading information in any communication with the Commission and any Commission-approved regional transmission organizations.

In 2009, Kourouma filed a petition for Market-Based Rate (“MBR”) authority on behalf of Quntum Energy LLM (“Quntum”).  Following protests regarding the accuracy of the information provided, the Commission rejected the MBR application and instituted a non-public investigation (see February 24, 2011 edition of the WER).   On February 14, 2011, the Commission issued an order to show cause for alleged violations of the Commission’s regulations.  Following the order to show cause, Kourouma submitted an affidavit to FERC in which he admitted falsely using the name of his daughter on a form submitted to FERC and the name of a friend on a form submitted to PJM Interconnection, L.L.C. (“PJM”).  He stated these actions were intended to avoid making a former employer with whom he was under a non-compete clause, Energy Endeavors, aware of his involvement in Quntum.

On June 16, 2011, the Commission issued an order on the show cause response and found that, based on the “lack of any effort” to remedy the violations and other factors, a $50,000 civil penalty was appropriate for Kourouma.  The Commission also found that summary disposition was appropriate, as there were no material facts in dispute, and the undisputed facts demonstrated that Kourouma violated section 35.41(b) of the Commission’s regulations (Market Behavior Rule 3) in his communications with the Commission and PJM.

In his appeal to the DC Circuit, Kourouma argued: (1) he was entitled to an administrative hearing; (2) FERC erred insofar as there was no showing that Kourouma had any intent to deceive FERC or PJM with his filings, and as a related argument, he had no notice that FERC would read Market Behavior Rule 3 so broadly; and (3) FERC’s order failed under the Administrative Procedure Act (“APA”).  First, the DC Circuit rejected Kourouma’s argument concerning a hearing, finding Kourouma’s admissions supported FERC’s grant of summary disposition without a hearing.  Second, the DC Circuit found that Market Behavior Rule 3 does not include the intent to deceive, but rather that the plain language of that regulation provides “ample notice” that FERC will enforce the rule without requiring intent.  Third, the DC Circuit rejected Kourouma’s arguments that FERC’s order failed under the APA, finding Kourouma tried to introduce new evidence at a late stage of the proceeding and that FERC’s penalty was “rationally supported by multiple pieces of evidence.”

A copy of the DC Circuit Opinion is available here.