Thursday, February 21, 2019

Judge Orders FERC to Pay Gates Brothers’ Attorney’s Fees in FOIA Dispute

By Ted Caddell

FERC has been ordered to pay attorney’s fees for stonewalling an energy trading company’s request for documents under the Freedom of Information Act.

ferc, foia, sts energy partners

Bates | District Court of DC

While the award — $60,168 — was not huge, the fact that a U.S. District Court judge ruled against FERC was unusual.

Kevin and Rich Gates, acting as principals of the energy trading company STS Energy Partners, filed FOIA requests seeking documents related to investigations by FERC’s Office of Enforcement into two other energy trading companies, Oceanside Energy and Black Oak Energy.

The Gates brothers, who have been involved in a very public battle with FERC over market manipulation allegations against one of their other companies, Powhatan Energy Fund, said in filings that they wanted the documents “to shine light on FERC’s recent and punitive efforts against small power market traders for engaging in legal and ubiquitous activity.” They have accused FERC of withholding information before. (See Gates, Powhatan Say FERC Enforcers Didn’t Share Crucial Info.)

FERC eventually produced the information STS had asked for, but the two sides couldn’t agree on the attorney’s fees issue, and it was argued in D.C. District Court.

In his Oct. 5 ruling, Judge John D. Bates noted that the award of legal fees can serve two purposes: encouraging FOIA suits that benefit the public, and compensating plaintiffs for “enduring an agency’s unreasonable obduracy in refusing to comply” with FOIA requirements.

Bates noted that “FERC did show some recalcitrance and at least ‘appeared’ to ‘withhold’ the segregable portions of requested documents merely to avoid embarrassment or frustrate the requester.”

The commission initially issued “blanket denials” for the 41 documents related to the Oceanside investigation and the 294 records identified in the Black Oak case, Bates noted.

FERC released several documents after STS filed suit over the denial, and it released all or parts of 115 documents after the court denied the agency’s summary judgment motion. The commission reached a settlement with the company over the remaining documents in May 2015.

Bates said the agency’s contention that the requested information could not be culled out, or “segregated,” was not a “reasonable basis in law.”

“Nor can FERC prevail on the reasonable basis factor by deciding to release the documents only after forcing the requester to sue,” he wrote.

Last year, FERC ordered the Gates brothers and their associates to pay $34.5 million in penalties and disgorged profits in the Powhatan case. (See FERC Orders Gates, Powhatan to Pay $34.5 Million; Next Stop, Federal Court?)

The brothers have asked the U.S. District Court for the Eastern District of Virginia to allow it to defend itself against FERC’s allegations in a jury trial (3:15-CV-00452-MHL).

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