PJM Interconnection LLC et al v. City Power Marketing LLC et al

Filing 30

MEMORANDUM OPINION re 12 Motion to Remand. Signed by Judge Richard G. Andrews on 4/12/2013. (nms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
PJM INTERCONNECTION, LLC and PJM :
SETTLEMENT, INC.,
Plaintiffs,
Case No.1 :12-cv-01779-RGA

v.
CITY POWER MARKETING, LLC,
ENERGY ENDEAVORS, LLC, ENERGY
ENDEAVORS LP and CRANE ENERGY,
INC.,
Defendants

MEMORANDUM OPINION
Richard A. Barkasy, Esq., Fred W. Hoensch, Esq., SCHNADER HARRISON SEGAL & LEWIS
LLP, Wilmington, DE.
Attorney for Plaintiffs PJM Interconnection, LLC and PJM Settlement, Inc.
Theodore J. Tacconelli, Esq., RickS. Miller, Esq., FERRY JOSEPH & PEARCE, P.A.,
Wilmington, DE.
Attorneys for Defendants City Power Marketing, LLC, Energy Endeavors, LLC, Energy
Endeavors, LP and Crane Energy, Inc.

April

11. 2013

AND~~fATES

DISTRIC JUDGE:

Plaintiffs PJM Interconnection, LLC and PJM Settlement, Inc. (collectively, "PJM") seek
a ruling concerning this Court's jurisdiction to hear the breach of contract claim that PJM brings
against City Power Marketing, LLC, Energy Endeavors, LLC, Energy Endeavors, LP, and Crane
Energy, Inc. (collectively, "Defendants"). Asserting that its claim raises no federal question, and
that this Court therefore lacks subject matter jurisdiction, PJM moves, pursuant to 28 U.S.C. §
1447(c), to remand the claim to state court.
BACKGROUND
PJM, a Regional Transmission Organization ("RTO"), runs the electric transmission grid
for a region encompassing thirteen states and the District of Columbia. (D.I.11 at 1). As an RTO,
PJM operates under the authority of the Federal Energy Regulatory Commission ("FERC"). (!d.).
PJM also administers a competitive wholesale electricity market in which over 800 members do
business. (!d. at 1-2). Defendants are members of the market. (!d.). Relations between PJM and
Defendants are governed by a PERC-approved transmission tariff (the "Tariff') and a contract
filed with FERC (the "PJM Operating Agreement"). (!d. at 4-5).
In 2009, FERC issued orders directing PJM to refund certain payments to certain market
members. (!d. at 7). Accordingly, PJM refunded approximately $23 million to Defendants from
October 2009 to January 2010. (!d. at 8). However, FERC reversed its 2009 orders in July 2011.
(!d.). Defendants and other market members have tried to stay PJM's collection of the refunds

through filings with the U.S. Court of Appeals for the D.C. Circuit and FERC itself; both have
been unsuccessful. (!d. at 9). However, petition for review ofFERC's 2011 reversal of its 2009
orders is currently pending before the U.S. Court of Appeals for the D.C. Circuit. (!d. at 9). Oral

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argument is apparently scheduled for April2013. (D.I.17 at 5).
The PJM Operating Agreement requires market member signatories to provide payment
for "all bills rendered in connection with or arising under or from this Agreement, any service or
rate schedule, [or] any tariff. .. notwithstanding any disputed amount .... " (D.I.ll-1 at 123). In
July 2012, PJM billed Defendants for the refund amounts. (D.I.ll at 11). Defendants have not yet
paid. (!d.). Plaintiffs filed a complaint in the Superior Court ofthe State of Delaware in and for
New Castle County, alleging breach of contract. 1 The case was removed to federal court. (D.I.l ).
The Plaintiffs now seek to remand the case to Superior Court. (D.I.12).
DISCUSSION
1. Standard for Motion to Remand
A defendant may remove to federal court "any civil action brought in a state court of
which the district courts ofthe United States have original jurisdiction." 28 U.S.C. § 1441(a).
The party seeking removal bears the burden of showing that federal jurisdiction exists. Kaufman

v. Allstate New Jersey Ins. Co., 561 F.3d 144 (3rd Cir. 2009). Due to federalism concerns, "the
removal statutes are to be strictly construed against removal and all doubts should be resolved in
favor of remand." Boyer v. Snap-on Tools Corp., 913 F.2d 108, Ill (3rd Cir. 1990) (internal
quotation marks omitted) (citation omitted).
2. Subject Matter Jurisdiction
Where, as here, the parties lack diversity, federal jurisdiction only exists if the cause of
action is one "arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. §

1

The complaint filed in Superior Court is at D.I.1-1, at 4-16. A page or two appears to be

missing.
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1331. This standard is supplemented by the well-pleaded complaint rule, which recognizes
federal question jurisdiction only if a federal question is presented "on the face of the plaintiffs
properly pleaded complaint." Caterpillar Inc. v. Williams, 482 U.S. 386,392 (1987). Ifthe
plaintiffbrings only state law claims, despite the existence of federal claims and potential federal
defenses, there is no federal question jurisdiction. See Franchise Tax Bd. of the State of

California v. Constr. Laborers Vacation Trust for S. California, 463 U.S. 1, 10 (1983).
The Supreme Court has long recognized that federal jurisdiction will lie over state claims
that implicate significant federal issues. Grable & Sons Metal Prods., Inc. v. Darue Eng 'g &

Mfg., 545 U.S. 308, 312 (2005). To determine which state claims fall into this category, courts
ask whether the claim "necessarily raise[ s] a stated federal issue, actually disputed and
substantial, which a federal forum may entertain without disturbing any congressionally approved
balance of federal and state judicial responsibilities." I d. at 314. In other words, federal
jurisdiction is proper if "some substantial, disputed question of federal law is a necessary element
of one of the well-pleaded state claims .... " Franchise Tax Bd., 463 U.S. at 13.
Here, PJM argues that its complaint states a "straightforward breach of contract claim."
(D.I.13 at 4). Although it admits that the PJM Operating Agreement constitutes "a rate schedule
to PJM's FERC-filed tariff," PJM points out that its complaint does not challenge the tariff rates
themselves, just Defendants' failure to pay under the contract. (Id. at 8). Therefore, because the
claim fails to "both implicate the tariff and challenge its terms," PJM argues, no federal question
jurisdiction exists. (Id. at 7).
PJM cites to Central Iowa Power Co-op. v. Midwest Independent Transmission System

Operator, Inc., 561 F.3d 904 (8th Cir. 2009), in support of its position. (D.I.13 at 8). In that case,

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a non-public utility brought state law claims against a system operator in similar circumstances.

Central Iowa Power, 561 P.3d at 906. After the case was removed to federal court, the plaintiff
filed a motion to remand. !d. The District Court denied the motion, concluding that the state law
claims "necessarily depended" on the resolution of federal issues. !d. Specifically, the court noted
that the state law claims required resolution of whether the operator violated the PERC-filed
operating agreement and the PERC-approved transmission tariff, both of which had the force of
federal law. !d. at 912, 915. The Eighth Circuit Court of Appeals reversed, reasoning that the
state law claims did not require the utility to show that the agreement and tariff were violated "in
such a way as to implicate the PERC-filed rates." !d. at 914. In other words, because the basis for
the claims was independent of the rates set by PERC, a court would not have to "second-guess" a
decision made by PERC. !d. at 915. An adjudication of the state law claims would therefore not
require resolution of a substantial federal question. !d. at 919.
Here, as in Central Iowa Power, the state law claims do not challenge PERC's tariff rates.
Likewise, the state law claims here do not challenge PERC's 2011 decision requiring Defendants
to repay PJM. Rather, PJM's complaint simply asserts that Defendants have not met the payment
provision ofthe PJM Operating Agreement. (D.I.11 at 11). While challenges to PERC's decision
or tariff rates may arise as defenses to the state law claim, that fact will not defeat PJM's decision
to bring its case in state court. See Franchise Tax Bd., 463 U.S. at 10. Accordingly, PJM's claim
does not raise a substantial federal issue. There is thus no concern about crossing the line, drawn
by Congress, between state and federal judicial power. See Grable, 545 U.S. at 314.
An appropriate order will issue.

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