Alabama Power Company v. Calhoun Power Company LLC

Filing 8

MEMORANDUM OPINION. Signed by Judge William M Acker, Jr on 12/28/12. (KGE, )

FILED
2012 Dec-28 PM 03:44
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
ALABAMA POWER COMPANY,
Plaintiff,
v.
CALHOUN POWER COMPANY, LLC,
Defendant.

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CIVIL ACTION NO.
2:12-cv-3798-WMA

MEMORANDUM OPINION
Defendant Calhoun Power Company, LLC (“Calhoun Power”) removed
the above-entitled action to this court from the Circuit Court of
Jefferson County, Alabama. Calhoun Power alleges (1) that there is
diversity jurisdiction pursuant to 28 U.S.C. § 1332; (2) that there
is federal question jurisdiction pursuant to 28 U.S.C. § 1331; and
(3) that the Federal Power Act (“FPA”), 16 U.S.C. § 825(p), grants
jurisdiction

to

this

court.

Plaintiff

Alabama

Power

Company

(“Alabama Power”) has moved to remand the case, denying that this
court has subject matter jurisdiction.
Background Information
On October 5, 2012, Alabama Power filed this complaint seeking
a declaratory judgment and injunctive relief. The complaint asks
for a declaration of rights under a Power Purchase Agreement
(“PPA”) that Alabama Power and Calhoun Power signed in September of
2000. Under the agreement, Calhoun Power receives monthly payments
from Alabama Power for the electricity produced at Calhoun Power’s
1

Eastaboga, Alabama plant. The PPA states that it “shall be governed
by and construed in accordance with the laws of the State of
Alabama.” Both parties have performed their duties under the
contract since it was executed.
Calhoun Power has notified Alabama Power of its belief that it
is entitled to a separate payment for the reactive power associated
with the production of electricity, and that it plans to institute
a Federal Energy Regulatory Commission (FERC) proceeding to reach
this end. Alabama Power asserts that the PPA “plainly prohibits
this FERC filing.” Its complaint seeks an order declaring:
(1) APCo has no duty to pay additional amounts
for reactive power, which is necessary for
Calhoun to perform as required by the
Agreement, but something for which Calhoun may
not seek additional payment; (2) Calhoun
cannot seek to have the Agreement effectively
amended by initiating a FERC proceeding,
because
the
Agreement
prohibits
such
unilateral action by Calhoun; and (3) Calhoun
must pay APCo’s costs associated with this
dispute.
Alabama Power complaint ¶ 4.
Calhoun Power was served with the complaint on October 5,
2012, and timely removed it on November 2, 2012.1 Calhoun Power’s
notice of removal asserts that there is diversity jurisdiction
pursuant to 28 U.S.C. §
pursuant to 28 U.S.C. §

1332, federal question jurisdiction

1331, and that the FPA, 16 U.S.C. § 825p,

1

See 28 U.S.C. § 1446(b) (requiring a notice of removal of a civil
action to be filed within 30 days after defendant receives service).

2

gives federal district courts jurisdiction over claims like this
one. Calhoun Power claims that this is a federal case rather than
a state law case because although the complaint is framed in terms
of the PPA, it is actually “an attempt to attack, modify, or
nullify

rights

granted

to

Calhoun

Power

in

the

May

2001

Interconnection Agreement filed with FERC...and accepted by FERC.”
Calhoun Power quotes a portion of the Interconnection Agreement
(“IA”) that says “[i]n addition, [Calhoun Power] shall have the
right to seek compensation for reactive power or other generationbased ancillary services pursuant to a FERC-approved tariff.” Doc
1 quoting Ex. 1 to Ex, C. § 4(c) of Appendix A to the IA. This
portion of the FERC-approved IA provides the basis for much of
Calhoun Power’s argument.
Discussion
The burden is on the removing party to establish that the
federal court has subject matter jurisdiction. See Williams v. Best
Buy Co., Inc., 269 F. 3d 1316 (11th Cir. 2001). Federal courts are
courts of limited jurisdiction; therefore, this places a heavy
burden on a removing defendant. Accordingly, removal statutes are
construed narrowly, and doubts about removal are resolved in favor
of remand. Univ. of South Alabama v. Am. Tobacco Co., 168 F.3d 405,
411 (11th Cir. 1999).
Diversity Jurisdiction
In order for there to be diversity jurisdiction, 28 U.S.C. §
3

1332 requires that “the matter in controversy exceeds the sum or
value of $75,000...and is between citizens of different states.”
Calhoun Power has not demonstrated that its citizenship is diverse
from that of Alabama Power.
Calhoun

Power

is

a

limited

liability

company

(“LLC”);

therefore it is a citizen of any state of which any member of the
company is a citizen. See Rolling Greens, MHP, L.P. v. Comcast SCH
Holdings L.L.C., 374 F.3d 1020, 1022 (11th Cir. 2004). Its principal
place of business and state under whose laws it is organized do not
matter. Regarding its citizenship, CPC says this:
Calhoun Power’s sole member is Calhoun Power
Company Holdings, LLC, a limited liability
company organized under Delaware law with its
headquarters in East Brunswick, New Jersey.
Its operations are directed, controlled, and
coordinated by its officers from the state of
New Jersey. None of its officers have offices
located in or direct the company’s activities
from Alabama. As such, Calhoun Power Company
Holdings, LLC is not a citizen of the State of
Alabama.
Defendant’s notice of removal at paragraph 9 (internal citations
removed). Calhoun then elaborates further on its citizenship in a
footnote:
Calhoun Power Company Holdings, LLC’s sole
member is Calhoun Generating, LLC, a limited
liability company organized under Delaware law
with its headquarters in and operations
directed, coordinated and controlled by its
officers from the State of New Jersey. Calhoun
Generating, LLC’s members are LS Power Calhoun
Blocker II, LLC and LS Power Equity Partners
II, LLP. These are Delaware entities with
their headquarters in and operations directed,
4

controlled and coordinated by their officers
from New York. These entities have their own
members, and none of the members, including
any additional limited liability companies or
other
unincorporated
associations,
are
citizens of Alabama or have any members who
are citizens of Alabama.
Defendant’s notice of removal, Doc 1 at fn. 2 (internal citations
omitted). Despite defendant’s efforts to inform the court of the
headquarters and laws under which each LLC is organized, this
information is irrelevant to a determination of citizenship.
The pertinent information Calhoun Power should have provided
is the citizenship of LS Power Calhoun Blocker II, LLC (“LPCB”) and
LS Power Equity Partners II, LLP (“LPEP”). An LLP’s citizenship is
also determined by the citizenships of its partners. See Carden v.
Arkoma Assocs., 494 US 185, 195-96 (1990). Because Calhoun Power
has the burden of proving citizenship, it should have listed each
of LPCB and LPEP’s members and their citizenship. Simply stating
that no members are citizens of Alabama is not sufficient. “To
sufficiently

allege

the

citizenships

of

these

unincorporated

business entities, a party must list the citizenships of all the
members of the limited liability company and all the partners of
the limited partnership.” Rolling Greens MHP, L.P. v. Comcast SCH
Holdings L.L.C., 374 F. 3d 1020 (11th Cir. 2004). In Rolling Greens,
the Eleventh Circuit went on to remand the case as a result of
defendant’s failure to allege adequately the citizenships of the
members and partners of the parties.

5

Calhoun Power argues that Alabama Power is incorrect in
arguing that Rolling Greens supports their argument because the
issue in that case was not a “deficiency regarding fourth tier
ownership entities.” It is true that Rolling Greens does not
present the same issue as this case in which Calhoun Power’s sole
member is an LLC, (Calhoun Power Company Holdings LLC - “CPCH”)
whose sole member is an LLC (Calhoun Generating, LLC - “CG”), whose
two members are an LLC and an LLP (LS Power Calhoun Blocker II, LLC
and LS Power Equity Partners II, LLP). However, Rolling Greens is
still highly instructive. A determination of CPC’s citizenship
looks to its member, CPCH. Since it is an LLC, CPCH’s citizenship
is determined by its member, CG. Also an LLC, CG’s citizenship is
then determined by its members: LPCB and LPEP. Thus to demonstrate
diverse citizenship, CPC should have listed the citizenship of each
member of LPCB and LPEP. Since CPC did not do this, it did not
carry its burden of proving that there is diversity of citizenship.
Additionally, the amount in controversy requirement is not
satisfied. It is well settled in the Eleventh Circuit that “[w]hen
a plaintiff seeks injunctive or declaratory relief, the amount in
controversy is the monetary value of the object of the litigation
from the plaintiff’s perspective.” Cohen v. Office Depot, Inc., 204
F. 3d 1069, 1077 (11th Cir. 2000). The Eleventh Circuit elaborated
on what this means: “[i]n other words, the value of the requested
injunctive relief is the monetary value of the benefit that would

6

flow

to

the

plaintiff

if

the

injunction

were

granted.”

Id.

(emphasis added). Plaintiff seeks an injunction that, under the
PPA, Calhoun Power cannot file a rate tariff with FERC. If this
injunction is put in place, no new monetary value will flow to
plaintiff.
Calhoun Power argues that if it wins and is allowed to proceed
with a FERC proceeding, it could be allowed to charge Alabama Power
in excess of an extra one million dollars a year. However, the
Eleventh Circuit has held that the value of a declaratory action is
judged by the value a plaintiff will receive if an injunction is
granted,

not

if

it

is

denied.

See

Cohen,

204

F.

3d

1077.

Furthermore, neither party will receive any money from this claim;
any potential benefit or loss to either party would only come
following

a

speculative.

FERC
See

proceeding.

Ericsson

GE

Therefore,
Mobile

any

recovery

Communications,

is

Inc.

v.

Motorola Communications & Electronics, Inc., 120 F. 3d 216 (1997)
(addressing

speculative

benefits

that

do

not

satisfy

the

jurisdictional amount).
It

is

possible

that

Calhoun

Power

could

provide

more

information to demonstrate that there actually is diversity of
citizenship; however, that endeavor would be fruitless because the
amount in controversy requirement of 28 U.S.C. §
satisfied.
Federal Question Jurisdiction
7

1332 is not

Calhoun Power also asserts that there is federal question
jurisdiction.

Federal question jurisdiction exists for “all civil

actions arising under the Constitution, laws, or treaties of the
United States.” 28 U.S.C. § 1331. It is well established that a
claim “arises under” federal law “when a federal question is
presented

on

the

face

of

the

plaintiff’s

properly

pleaded

complaint. See Gully v. First National Bank, 299 U.S. 109, 112-3
(1936) The rule makes the plaintiff the master of the claim; he or
she may avoid federal jurisdiction by exclusive reliance on state
law.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987).
However, federal jurisdiction still exists if the plaintiff engages
in artful pleading and attempts to avoid federal jurisdiction by
“omitting to plead necessary federal questions in a complaint.”
Franchise

Tax Bd.

Of

State

of

Cal.

v.

Construction

Laborers

Vacation Trust for Southern California, 463 US 1, 22 (1983).
Calhoun Power argues that Alabama Power engaged in artful
pleading because in a determination of the parties’ rights, it is
necessary to look at the parties’ FERC-approved IA. Calhoun Power
asserts that since the IA has been filed with and accepted by FERC,
it is “the equivalent of a federal regulation.” Doc. 7 at 4 citing
California ex rel Lockyer v. Dynegy, 375 F. 3d 831 (9th Cir. 2004).
However, Alabama Power is looking for a determination of rights
under the PPA; therefore, this is a contract dispute governed by
Alabama state law. Calhoun Power asserts that the rate schedules
8

filed

with

FERC

have

to

be

interpreted

and

are

necessarily

implicated, but the mere fact that a removing defendant introduces
a federal issue and tries to recharacterize the complaint does not
create federal jurisdiction. See Louisville & N.R. Co. v. Mottley,
211 U.S. 149 (1908). Alabama Power’s omission of the IA from its
complaint does not amount to artful pleading. Alabama Power is
asking the state court to make a determination of rights under
state contract law; it is not up to Alabama Power to include every
possible federal issue that Calhoun Power might inject to support
its position, and the fact that Calhoun Power has introduced a
federal issue does not create federal jurisdiction.
In an alternative attempt to demonstrate that the FERCapproved IA creates federal jurisdiction, Calhoun Power states
“[t]his case is the same as Grable.” It is referring to Grable &
Sons Metal Prods., Inc. v. Darue Engineering & Mfg., 545 U.S. 308
(2005). Calhoun Power’s statement indicates a misunderstanding of
the holding in Grable. Calhoun Power asserts that the case is the
same because this case involves “an important issue of federal law
that sensibly
However,

the

belongs
mere

in federal

fact

that

court.” Doc.

there

is

an

7

quoting

important

Id.

federal

implication does not mean that there is federal jurisdiction. In
Grable, the court held that there was federal jurisdiction because
there is a national interest in having federal tax issues litigated
in federal court. Id. This was a narrow holding that the Court
9

reached because of the importance of uniformity in tax law. It was
not meant to give every party seeking federal jurisdiction the
argument that its issue is an “important federal issue,”2 and it
does not create federal jurisdiction in this case.
Federal Power Act
Calhoun also argues that the Federal Power Act (FPA) creates
federal jurisdiction for this type of case. It states:
The District Courts of the United States. . .
shall
have
exclusive
jurisdiction
of
violations of this chapter or the rules,
regulations, and orders thereunder, and of all
suits in equity and actions at law brought to
enforce any liability or duty created by, or
to enjoin any violation of this chapter or any
rule, regulation or order thereunder.
16 U.S.C. § 825p.

The FPA does not grant jurisdiction to this

court. The claim is based on a contract and does not claim a
violation or a liability arising out of the FPA or another related
regulation.
Calhoun Power argues that in a similar case, Alabama Power
took the position that the FPA created federal jurisdiction because
there were FERC licenses at issue. See Otwell v. Alabama Power
Company, Civil Action no.: 6:11-cv-02139 (N.D. Ala. 2011). However,

2

The Court stated “[b]ecause arising-under jurisdiction to hear a statelaw claim always raises the possibility of upsetting the state-federal line
drawn (or at least assumed) by Congress, the presence of a disputed federal
issue and the ostensible importance of a federal forum are never necessarily
dispositive; there must always be an assessment of any disruptive portent in
exercising federal jurisdiction.” Id. at 314. The Court then goes on to discuss
the huge importance of federal tax matters and how this holding will affect
such few cases that it will have “only a microscopic effect on the federalstate division of labor.” Id. at 315.

10

that case varied from this one. In Otwell, the court denied
plaintiffs’ motion to remand because the complaint invoked the
“limits set forth in the controlling FERC license” and sought an
injunction

prohibiting

Alabama

Power

from

violating

the

FERC

license. Id. The case before this court does not seek to “enforce
any liability or duty created by, or to enjoin any violation,” 16
U.S.C. § 825p, of a FERC license. It seeks a declaration of each
party’s rights under a contract that is governed by state law. The
IA approved by FERC is merely something

injected by the defendant

as a defense of their position.
Conclusion
Alabama Power filed a complaint regarding a contract governed
by state law. Calhoun Power has not met the requirements for
establishing diversity jurisdiction, and its attempt to raise a
federal issue that it claims is essential is not sufficient to
establish federal question jurisdiction. Therefore, Alabama Power’s
motion to remand will be granted by a separate order.
DONE this

28th

day of December, 2012.

_____________________________
WILLIAM M. ACKER, JR.
UNITED STATES DISTRICT JUDGE

11