Ninth Circuit Upholds FERC's Interpretation Of Statute Of Limitations To Enforce Civil Penalties

• Published date: 23 August 2023
• Subject Matter: Litigation, Mediation & Arbitration, Energy and Natural Resources, Energy Law, Oil, Gas & Electricity, Trials & Appeals & Compensation
• Law Firm: Pierce Atwood LLP
• Author: Mr Jared Des Rosiers, Valerie L. Green and Randall Rich

On August 18, 2023, the United States Court of Appeals for the Ninth Circuit upheld a district court order adopting the Federal Energy Regulatory Commission's (FERC) interpretation of the statute of limitations applicable to enforcement proceedings resulting in a civil penalty under the Federal Power Act. In FERC v. Vitol, No. 22-15584 (9th Cir. Aug. 18, 2023), the circuit court ruled that the five-year limitations period applicable to affirming FERC's penalty assessment under the Federal Power Act (FPA) begins to run when FERC assesses the penalty, not when the unlawful trading at issue occurs.

In 2019, FERC assessed a civil penalty against Vitol for $1,515,738 and against one of Vitol's traders for
$1 million, plus disgorgement of certain profits, based on trades that occurred in 2013. When neither Vitol nor the trader paid the penalties, FERC filed a complaint in federal district court to enforce its assessment of civil penalties under 16 U.S.C. ' 823b(d)(5).

Vitol moved to dismiss, claiming that the general statute of limitations under 28 U.S.C. ' 2462 had expired because more than five years had elapsed between the date of the unlawful electricity trades at issue and FERC's initiation of the district court action. (The FPA does not have its own statute of limitations.) FERC responded that Vitol's argument conflates the two limitations clocks under Section 2462. The first clock required FERC to issue a notice of proposed penalty within five years of the wrongdoing. FERC timely issued such a notice because the parties agreed to toll the statute of limitations for one year.

A second five-year clock began to run when FERC assessed a penalty and its claim to affirm that penalty accrued. FERC's complaint to enforce Vitol's payment of its civil penalty assessment was initiated well within that five-year period. The district court agreed with FERC and denied Vitol's motion to dismiss, finding that FERC's claim did not accrue until FERC concluded its administrative proceedings and issued its order assessing civil penalties.

On appeal of the district court's ruling, the Ninth Circuit examined when FERC's claim "accrues." The court found that a cause of action for affirming FERC's assessment of a civil penalty did not accrue until FERC had assessed the civil penalty. "Only then does the cause accrue, so only then does the statute of limitations begin to run." Slip op. at 9. The decision rejected Vitol's attempt to frame FERC's claim as the enforcement of a...