On January 4, 2019, the U.S. District Court for the District of Maine (“Maine District Court”) issued an order on two motions for summary judgment concluding that FERC’s assessment of a civil penalty against Competitive Energy Services, LLC (“CES”) and its managing member, Richard Silkman (collectively, “Respondents”) was not time-barred by the statute of limitations under 28 U.S.C. § 2462. In doing so, the Maine District Court denied the Respondents’ motion for summary judgment.
In July 2012, FERC initiated Order to Show Cause (“OSC”) proceedings against four entities, including Respondents, alleged to have engaged in manipulative conduct in connection with ISO-New England Inc.’s Day-Ahead Load Response Program. In August 2013, following the OSC proceedings, FERC issued an order assessing civil penalties against Respondents (“2013 Assessment Order”). In December 2013, after Respondents did not pay the assessed penalties, FERC filed an enforcement action (“2013 Enforcement Action”) against the Respondents in the U.S. District Court for the District of Massachusetts (“Massachusetts District Court”). In April 2016, the Massachusetts District Court denied Respondent’s motion to dismiss for several reasons, including on statute of limitations grounds, and transferred the case to the Maine District Court (see April 18, 2018 edition of the WER). In February 2018, Respondents and FERC filed cross-motions for summary judgment on Respondents’ statute of limitations challenge. Respondents’ motion for summary judgment challenged FERC’s assessment of civil penalties, and alleged that the 2013 Enforcement Action brought by FERC was time-barred under the general statute of limitations. Specifically, 28 U.S.C. § 2462 requires government agencies such as FERC to bring a claim “within five years from the date when the claim first accrued.” Thus, Respondents argued that FERC improperly filed the 2013 Enforcement Action five years after the alleged misconduct occurred. FERC also filed its motion for partial summary judgment on the issue of the statute of limitations. In March 2018, FERC responded to Respondents’ motion, maintaining several of the same arguments made previously which, in sum, claimed that FERC’s 2013 Enforcement Action was timely filed.
In its order, the Maine District Court first addressed two threshold issues. First, FERC argued that Respondents waived its statute of limitations defense because Respondents failed to raise the defense by February 2013, six months before FERC issued its 2013 Assessment Order. On this issue, the Maine District Court agreed with the Massachusetts District Court Judge Woodlock’s assessment that Respondents did not waive their statute of limitations defense by failing to raise it during the FERC proceeding because the case had not yet ripened. According to Judge Woodlock, requiring respondents to raise defenses that might only have potential merit is not “practicable.” Second, FERC contended that the amount of penalty assessed against Respondents based on disgorgement falls under its remedial authority and is therefore not subject to the statute of limitations. In applying U.S. Supreme Court precedent in Kokesh v. SEC, 137 S. Ct. 1635 (2017) (“Kokesh”), in which the court found that U.S. Securities and Exchange Commission (“SEC”) disgorgement constitutes a penalty within the meaning of 28 U.S.C. § 2462, the Maine District Court found that SEC penalties are equivalent to FERC penalties and, therefore, FERC’s disgorgement was subject to the statute of limitations. The Maine District Court then boiled the parties’ disputes down to one main issue: when the five-year statute of limitations for 2013 Enforcement Action first accrued.
The Maine District Court found that although FERC did not file the 2013 Enforcement Action against Respondents until December 2013 (more than five years after the conduct began), FERC’s action was timely. The Maine District Court disagreed with Respondents’ argument that United States v. Meyer (“Meyer”), which held that that the enforcement action does not “accrue” until the penalty has been assessed, is no longer good law following Supreme Court’s decisions in Gabelli v. SEC (“Gabelli”) and Kokesh. According the Maine District Court’s analysis, the issue in Meyer (whether the claim accrues at the time of the violation, or at the time a claim is brought to enforce a penalty order) was not at issue in Gabelli or Kokesh. The Maine District Court found that neither case addressed the specific statute of limitations questions presented in Meyer. Furthermore, the Maine District Court also rejected Respondents’ argument that Meyer is distinguishable, because FERC’s penalty assessment proceeding amounted to a “decision to prosecute,” rather than an adjudicatory administrative proceeding that was afforded the defendants in Meyer, and therefore Meyer does not apply here. The Maine District Court found that FERC’s OSC proceeding, while it did not provide full discovery or a live hearing before an Administrative Law Judge, was not a mere decision to prosecute and therefore the Meyer framework applied. In Meyer, the U.S. Court of Appeals for the First Circuit determined that there were two periods for the statute of limitations: (1) one five-year period for FERC to initiate a proceeding to assess the penalty; and (2) one five-year period to enforce the penalty once it has been assessed. Accordingly, the Maine District Court found that FERC’s enforcement action is not time-barred and denied Respondents’ motion for summary judgment.
The Maine District Court’s order was issued on January 4, 2019 in Case No. 1:16-cv-00205-JAW.