Wisconsin Court Reaffirms Liability Limitation’s Preemptive Force

Electric transmission owners, like any other company, regularly face a variety of tort claims. However, by virtue of their federal regulation, they have unique and powerful tools at their disposal that can combine to provide a strong defense against such claims, as a recent Wisconsin Court of Appeals decision confirmed.

In Bahr v. Am. Transmission Co., the Wisconsin Court of Appeals affirmed that a negligence claim couldn’t proceed against American Transmission Company LLC because of the limitation of liability clause in the Midcontinent Independent System Operator Inc.’s federal tariff. Many other regional transmission organizations and independent system operators also have similar liability-limiting provisions.

The case underlines the importance for transmission owners to consider and evaluate early on whether negligence or other claims brought against them in court may be preempted by Federal Energy Regulatory Commission tariffs.

Bahr concerned what seems like a traditional tort claim at first glance: an allegation that a company had been negligent by not sufficiently marking certain of its facilities when it had a duty to do so, leading to a tragic helicopter crash. However, the facilities in question were a shielding wire and a grounding wire that were part of ATC’s electric transmission system, even though neither wire transmitted electricity.

ATC is a member of MISO, whose tariff provides that any member that is a transmission owner isn’t liable, whether based on tort or otherwise, to any third party or other person for any damages arising or resulting from any act or omission associated with service provided under the tariff. The FERC approved this limitation of liability provision in 2005, finding it “balance[s] lower rates for all customers against the burden of limited recovery for some[.]”

As the court explained, these tariff provisions are the equivalent of federal regulations, and any state laws that conflict with federal regulations are preempted. The court found that, as a matter of law, ATC’s maintenance of the wires involved in the helicopter crash was “associated” with ATC’s service of transmitting electricity under the tariff, meaning it fell within the tariff’s limitation.

The court found this to be true even though the wires didn’t transmit electricity, and the plaintiffs in the case had argued that ATC’s alleged failure to mark the wires had nothing to do with providing electrical service to customers. The court disagreed, explicitly noting the tariff’s broad language quoted above, and explaining that “ATC only maintains the wires at issue (negligently unmarked or not) for the purpose of providing the service of transmitting electricity to its customers.”

While the case concerned a transmission owner in MISO, many regional transmission organizations and independent system operators have similar limitation of liability clauses as part of their FERC tariffs. These provisions may preempt a wide variety of claims, including ordinary negligence actions.

For example, the Wisconsin court favorably cited a Pennsylvania state court decision involving a nearly identical limitation of liability provision in PJM Interconnection LLC’s tariff.

The Wisconsin court’s decision shows that claims that seem far removed from the federal regulatory space may be preempted by federal tariffs. It’s important to evaluate whether the limitation of liability clause may apply early on in a dispute, or if the claim otherwise conflicts with anything in the regulated entity’s tariff.

Even if the limitation of liability clause doesn’t apply, causes of action may be inconsistent with the filed rate doctrine, which “precludes claims that conflict with a tariff or would vary or enlarge a party’s rights as defined by a tariff.”

The case is Bahr v. Am. Transmission Co., Wis. Ct. App., No. 2022AP2189, 11/8/23.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Shaun Boedicker is partner at Steptoe, focused on litigation and regulatory matters for energy companies before the Federal Energy Regulatory Commission and state and federal courts.

Elizabeth A. Cassady is partner and co-lead of Steptoe’s global ESG team.

Jennifer Quinn-Barabanov is partner and co-leader of Steptoe’s commercial litigation group, focused on high-stakes, high-profile commercial, and class action disputes.

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