CenterPoint Energy 2008 Annual Report Download - page 119

97
these lawsuits, which were instituted between 2003 and 2007. In October 2006, RRI reached a settlement of 11 class
action natural gas cases pending in state court in California. The court approved this settlement in June 2007. In the
other gas cases consolidated in state court in California, the Court of Appeals found that the Company was not a
successor to the liabilities of a subsidiary of RRI, and the Company was dismissed from these suits in April 2008. In
the Nevada federal litigation, three of the complaints were dismissed based on defendants’ filed rate doctrine
defense, but the Ninth Circuit Court of Appeals reversed those dismissals and remanded the cases back to the district
court for further proceedings. In July 2008, the plaintiffs in four of the federal court cases agreed to dismiss the
Company from those cases. In August 2008, the plaintiffs in five additional cases also agreed to dismiss the
Company from those cases, but one of these plaintiffs has moved to amend its complaint to add CenterPoint Energy
Services, Inc., a subsidiary of CERC Corp., as a defendant in that case. As a result, the Company remains a party in
only two remaining gas market manipulation cases, one pending in Nevada state court in Clark County and one in
federal district court in Nevada. The Company believes it is not a proper defendant in the remaining cases and will
continue to pursue dismissal from those cases.
Electricity Market Manipulation Cases. A large number of lawsuits were filed against numerous market
participants in connection with the operation of the California electricity markets in 2000-2001. The Company’s
former affiliate, RRI, was a participant in the California markets, owning generating plants in the state and
participating in both electricity and natural gas trading in that state and in western power markets generally. The
Company was named as a defendant in certain of these suits. These lawsuits, many of which were filed as class
actions and which were based on a number of legal theories, have all been resolved. In August 2005, RRI reached a
settlement with the Federal Energy Regulatory Commission (FERC) enforcement staff, the states of California,
Washington and Oregon, California’s three largest investor-owned utilities, classes of consumers from California
and other western states, and a number of California city and county government entities that resolves their claims
against RRI related to the operation of the electricity markets in California and certain other western states in 2000-
2001, including the claims made by plaintiffs in the suits against RRI naming the Company. The settlement was
approved by the FERC, by the California Public Utilities Commission and by the courts in which the electricity class
action cases were pending. An appeal by two parties to the California Court of Appeals was denied with no further
appeal sought. A party in the FERC proceedings sought review of the FERC’s order approving the settlement in the
Ninth Circuit Court of Appeals, but in December 2008, that party voluntarily withdrew its petition for review, and
the settlement is now final. The Company is not a party to the settlement, but may rely on the settlement as a
defense to any claims.
Other Legal Matters
Natural Gas Measurement Lawsuits. CERC Corp. and certain of its subsidiaries are defendants in a lawsuit filed
in 1997 under the Federal False Claims Act alleging mismeasurement of natural gas produced from federal and
Indian lands. The suit seeks undisclosed damages, along with statutory penalties, interest, costs and fees. The
complaint is part of a larger series of complaints filed against 77 natural gas pipelines and their subsidiaries and
affiliates. An earlier single action making substantially similar allegations against the pipelines was dismissed by the
federal district court for the District of Columbia on grounds of improper joinder and lack of jurisdiction. As a
result, the various individual complaints were filed in numerous courts throughout the country. This case has been
consolidated, together with the other similar False Claims Act cases, in the federal district court in Cheyenne,
Wyoming. In October 2006, the judge considering this matter granted the defendants’ motion to dismiss the suit on
the ground that the court lacked subject matter jurisdiction over the claims asserted. The plaintiff has sought review
of that dismissal from the Tenth Circuit Court of Appeals, where the matter remains pending.
In addition, CERC Corp. and certain of its subsidiaries are defendants in two mismeasurement lawsuits brought
against approximately 245 pipeline companies and their affiliates pending in state court in Stevens County, Kansas.
In one case (originally filed in May 1999 and amended four times), the plaintiffs purport to represent a class of
royalty owners who allege that the defendants have engaged in systematic mismeasurement of the volume of natural
gas for more than 25 years. The plaintiffs amended their petition in this suit in July 2003 in response to an order
from the judge denying certification of the plaintiffs’ alleged class. In the amendment the plaintiffs dismissed their
claims against certain defendants (including two CERC Corp. subsidiaries), limited the scope of the class of
plaintiffs they purport to represent and eliminated previously asserted claims based on mismeasurement of the
British thermal unit (Btu) content of the gas. The same plaintiffs then filed a second lawsuit, again as representatives
of a putative class of royalty owners, in which they assert their claims that the defendants have engaged in