Washington-St. Tammany Electric Cooperative, Inc. et al v. Louisiana Generating, LLC
Filing
227
RULING and ORDER : Motion to Dismiss for Lack of Subject Matter Jurisdiction (Doc. 183) is GRANTED;IT IS FURTHER ORDERED that the case is DISMISSED; andIT IS FURTHER ORDERED that all pending motions are therefore DENIED AS MOOT. Signed by Judge John W. deGravelles on 02/18/2020. (ELW)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
WASHINGTON-ST. TAMMANY
ELECTRIC COOPERATIVE, INC., AND
CLAIBORNE ELECTRIC COOPERATIVE, INC.
CIVIL ACTION
VERSUS
NO. 17-405-JWD-RLB
LOUISIANA GENERATING, LLC
RULING AND ORDER
This matter is before the Court on a Motion to Dismiss for Lack of Subject Matter
Jurisdiction (“Motion”) filed by Louisiana Generating LLC (“Defendant” or “LaGen”). (Doc.
183.) LaGen also filed Louisiana Generating LLC’s Memorandum in Support of Motion to
Dismiss for Lack of Subject Matter Jurisdiction. (Doc. 188.) In response, Plaintiff filed
Memorandum in Opposition to Louisiana Generating LLC’s Motion to Dismiss. (Doc. 193.) In
reply, Defendant filed Louisiana Generating LLC’s Reply Memorandum in Support of Motion to
Dismiss for Lack of Subject Matter Jurisdiction. (Doc. 197.) The Court held oral argument on the
Motion on January 16, 2020.1 Having considered the arguments raised by the parties, the facts,
At oral argument, the Court also heard argument on Louisiana Generating LLC’s Motion to Disqualify Counsel for
Plaintiffs. (Doc. 203.) The Court is ruling on the Motion to Dismiss rather than the Motion to Disqualify because, as
the Supreme Court has explained, subject-matter jurisdiction is “fundamentally primary.” Leroy v. Great W. United
Corp., 443 U.S. 173, 180 (1979). In addition, there is Fifth Circuit dicta that supports the proposition that where a
court does not have subject matter jurisdiction, a motion to disqualify counsel is moot. Enable Mississippi River
Transmission, LLC v. Nadel & Gussman, LLC, 844 F.3d 495, 501 (5th Cir. 2016) (“Having concluded that this court
lacks subject matter jurisdiction to hear the underlying suit, we deny as moot Enable’s motion to disqualify Nadel’s
counsel.”) In addition, as a general rule a jurisdictional question is decided first, as the Southern District Mississippi
stated,
Courts have regularly found that when faced with contemporaneous motions to dismiss for lack of
jurisdiction and to disqualify an attorney, it is proper to decide the jurisdictional question
first. See Rice v. Rice Found., 610 F.2d 471, 478 (7th Cir. 1979) (explaining that district court must
have and exercise subject matter jurisdiction before ruling on motion to disqualify); ESN, LLC v.
Cisco Sys., Inc., 685 F. Supp. 2d 631, 645-646 (E.D. Tex. 2009) (concluding that subject matter
jurisdiction was lacking so that case could not proceed on the merits, thus making motion to
disqualify counsel moot); Dinger v. Gulino, 661 F. Supp. 438, 442 (E.D.N.Y. 1987) (concluding
that question of jurisdiction should be considered before motion to disqualify attorney since
“[a]bsent jurisdiction, it would be inappropriate for this Court to enter orders, even regarding a
1
the law and for reasons set out below, the Court will grant the Motion and dismiss the case for
lack of subject matter jurisdiction.
I.
RELEVANT FACTS
a. Factual background
Washington St. Tammany Electric Cooperative, Inc. and Claiborne Electric Cooperative,
Inc., (together, “Plaintiffs”) are member-owned, non-profit electric cooperative corporations
organized under the laws of Louisiana and domiciled in Louisiana. (Doc. 1 at ¶¶ 1-2.) Plaintiffs
filed this case alleging that Louisiana Generating, LLC (“LaGen” or “Defendant”) breached its
contracts with Plaintiffs by charging Plaintiffs for costs associated with remediation of
environmental conditions that existed before the contracts were executed. Plaintiffs also seek a
declaration that LaGen may not assess such costs in the future. (Doc. 1 at 1.)
Defendant owns and operates electric power generation and transmission operations
including the plants at issue in the case. (Doc. 1 at ¶ 3.) As a producer of electricity, LaGen has a
market-based tariff (“LaGen Tariff”) with the Federal Electric Regulatory Commission
(“FERC”) that states in relevant part:
LOUISIANA GENERATING LLC
FERC ELECTRIC TARIFF, VOLUME NO. 1
1. Availability: Louisiana Generating LLC ("Seller") makes available under this
Tariff the following services to customers with whom Seller has contracted:
a. electric energy and capacity available under this tariff to any purchaser;
and
b. ancillary services, as described in section 5 below.
motion to disqualify an attorney”); Vetter v. Sands, No. 81 Civ. 5072, 1984 WL 794, 2 (S.D.N.Y.
Aug. 23, 1984) (finding that defense motion to disqualify plaintiffs' counsel should be continued
until determination of motion to dismiss challenging subject matter jurisdiction); see also Arora v.
Hartford Life and Annuity Ins. Co., 519 F. Supp. 2d 1021, 1024 (N.D. Cal. 2007) (granting motion
to remand based on lack of subject matter jurisdiction and declining to rule on motion to disqualify).
Heimer v. Knight, No. 3:13CV115TSL-JMR, 2013 WL 12209912, at *1 (S.D. Miss. May 16, 2013).
2
2. Applicability: This Tariff is applicable to all wholesale power sales, including
energy and capacity sales not otherwise subject to a particular rate schedule of
Seller, and applicable ancillary services.
3. Rates: All sales shall be made at rates established by agreement between the
purchaser and Seller.
4. Other Terms and Conditions: All other terms and conditions shall be established
by agreement between the purchaser and Seller. . . .
(Doc. 188-5 at 4.) LaGen had previous market-based tariffs starting on March 29, 2000. (Doc.
188 at 6, n.13 (citing Doc. 1).)
Pursuant to the LaGen Tariff, Plaintiffs contracted with LaGen in Power Supply and
Service Agreements (“PSSAs”) that set the rates, charges and terms and conditions for the
electrical power. (Doc. 1 at ¶ 4.) The PSSAs are filed with FERC. (Doc. 1 at ¶ 4.) At issue in this
case is Section 10.4 (“Environmental Law Clause”) of the PSSAs, which states in relevant part:
BUYER and SELLER agree that the rates contained in this Agreement make no
provision for the potential effects of a change in Environmental Law (including
without limitation any new law or regulation, any change in any existing law or
regulation or any change in the interpretation of any law or regulation), the
additional costs of complying with such change in continuing to provide electric
service to BUYER or any increased costs incurred by SELLER due to a decrease
in operating efficiency caused by such a change. In the event of such change, then
the Parties shall meet, upon written notice from SELLER, to discuss the effect of
such change on SELLER and the Parties’ efforts to mitigate the costs thereof.
BUYER agrees to pay its portion of such costs in a manner computed by SELLER
to recover all of such costs (including a reasonable return of and return on capital
in accordance with the terms of this Section) from SELLER’s customer. In no event
shall Buyer be required to pay the cost of any activities to remediate any
environmental condition in existence at the Plants prior to such change of law or
any penalties charges or costs resulting from the breach or violation of any
Environmental Law (now existing or hereinafter enacted).
(Doc. 1-1 at 35; and Doc. 1-3 at 30.)
In 2009, the United States Environmental Protection Agency (“EPA”) filed a complaint
against LaGen alleging violations of the Prevention of Significant Deterioration (“PSD”)
provisions of the Clean Air Act. (Doc. 1 at ¶ 11.) To resolve this action LaGen entered into a
consent decree with EPA (“Consent Decree”) and agreed to take certain remediation measures.
3
(Doc. 1 at ¶ 16-17.) A recital in the Consent Decree states that LaGen “affirms that a portion of
the emissions technology, including related to PM emissions and refueling, under this consent
decree, will allow it to comply with the Mercury Air Toxics Rule [sic], a change in
environmental law promulgated after the filing of the Complaint.” (Doc. 1 at ¶ 21.) Plaintiffs
allege that Defendant has passed on the charges of compliance with the Consent Decree
impermissibly by improperly classifying remediation costs required under the Consent Decree as
related to the Mercury Air Toxics Rule (“MATS”). (Doc. 1 at ¶ 21-26.)
Plaintiffs’ Complaint contains two counts: Count 1 – Breach of Contract; and Count II –
Declaratory Judgment.
b. The jurisdictional allegations of the Complaint relate to the Federal Power Act
Plaintiffs allege in the Complaint that federal jurisdiction is appropriate because the
PSSAs:
are within the scope of the Federal Power Act, 16 U.S.C. §§ 791a et seq., which
provides that:
all rates and charges made, demanded, or received by any public utility for
or in connection with the transmission or sale of electric energy subject to
the jurisdiction of the [Federal Energy Regulatory] Commission, and all
rules and regulations affecting or pertaining to such rates or charges shall
be just and reasonable, and any such rate or charge that is not just and
reasonable is hereby declared to be unlawful.
16 U.S.C. § 824d(a). The [PSSAs], along with the tariffs contained therein, specify
the rates, charges, terms and conditions for the sale of electric energy at wholesale
in interstate commerce, and were filed with, and accepted by, the Federal Energy
Regulatory Commission under the Federal Power Act as required by the [PSSAs].
...
(Doc. 1. at ¶ 4.) Plaintiffs further allege original jurisdiction arises because:
LaGen now seeks to unilaterally and unreasonably alter those rates in contravention
of the Federal Power Act and the Contracts. Under these circumstances, this court
has original jurisdiction over the subject matter of this civil action pursuant to 28
U.S.C. § 1331, because this action presents questions of federal law, and, more
particularly pursuant to 28 U.S.C. § 1337, because this action arises under federal
laws regulating commerce. See Montana-Dakota Utils. Co. v. Northwestern Pub.
Serv. Co., 341 U.S. 246 (1951).
4
(Doc. 1 at ¶ 5.)
II.
APPLICABLE STANDARD
Federal courts are courts of limited jurisdiction; without jurisdiction conferred by statute,
they lack the power to adjudicate claims. In re FEMA Trailer Formaldehyde Prods. Liab. Litig.,
668 F.3d 281, 286-87 (5th Cir. 2012) (citing Kokkonen v. Guardian Life Ins. Co. of Am., 511
U.S. 375, 377 (1994); Stockman v. FEC, 138 F.3d 144, 151 (5th Cir. 1998), Hall v. Louisiana, 12
F. Supp. 3d 878 (M.D. La. 2014)). Under Federal Rule of Civil Procedure 12(b)(1), a claim is
“properly dismissed for lack of subject-matter jurisdiction when the court lacks the statutory or
constitutional power to adjudicate” the claim. Id. (quoting Home Builders Ass'n, Inc. v. City of
Madison, 143 F.3d 1006, 1010 (5th Cir. 1998)).
The Fifth Circuit Court of Appeals has explained the standard for motions pursuant to
Rule 12(b)(1) as follows:
Motions filed under Rule 12(b)(1) of the Federal Rules of Civil Procedure allow a
party to challenge the subject matter jurisdiction of the district court to hear a case.
Fed. R. Civ. P. 12(b)(1). Lack of subject matter jurisdiction may be found in any
one of three instances: (1) the complaint alone; (2) the complaint supplemented by
undisputed facts evidenced in the record; or (3) the complaint supplemented by
undisputed facts plus the court's resolution of disputed facts. Barrera-Montenegro
v. United States, 74 F.3d 657, 659 (5th Cir. 1996).
The burden of proof for a Rule 12(b)(1) motion to dismiss is on the party asserting
jurisdiction. McDaniel v. United States, 899 F.Supp. 305, 307 (E.D. Tex. 1995).
Accordingly, the plaintiff constantly bears the burden of proof that jurisdiction does
in fact exist. Menchaca v. Chrysler Credit Corp., 613 F.2d 507, 511 (5th Cir. 1980).
When a Rule 12(b)(1) motion is filed in conjunction with other Rule 12 motions,
the court should consider the Rule 12(b)(1) jurisdictional attack before addressing
any attack on the merits. Hitt v. City of Pasadena, 561 F.2d 606, 608 (5th Cir. 1977)
(per curiam).
Considering a Rule 12(b)(1) motion to dismiss first “prevents a court without jurisdiction from
prematurely dismissing a case with prejudice.” In re FEMA Trailer Formaldehyde Prods. Liab.
Litig., 668 F.3d at 286-87.
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In examining a Rule 12(b)(1) motion, the district court is empowered to consider
matters of fact which may be in dispute. Williamson v. Tucker, 645 F.2d 404, 413
(5th Cir. 1981). Ultimately, a motion to dismiss for lack of subject matter
jurisdiction should be granted only if it appears certain that the plaintiff cannot
prove any set of facts in support of his claim that would entitle plaintiff to
relief. Home Builders Ass'n of Miss., Inc. v. City of Madison, Miss., 143 F.3d 1006,
1010 (5th Cir. 1998).
Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001).
III.
DISCUSSION
a. Parties’ arguments
1. Defendant’s arguments
Defendant argues in the Motion to Dismiss that the Court lacks subject matter jurisdiction
over the case because there is no federal question jurisdiction. (Doc. 188 at 9.) Defendants
maintain that federal question jurisdiction does not exist because: (1) Plaintiffs’ cause of action
arises under the Louisiana law of obligations; (2) Plaintiffs’ right to relief does not depend on the
resolution of a substantial question of federal law; and (3) federal question jurisdiction does not
exist merely because the dispute arises out of a contract that is filed with Federal Energy
Regulatory Commission (“FERC”). (Doc. 188 at 9-24.)
Defendant argues that federal question jurisdiction can be invoked by (1) either pleading
a cause of action created by federal law or (2) by pleading a state law claim that implicates
significant federal issues. (Doc. 188 at 9.) If federal question jurisdiction is based on a state law
claim that implicates significant federal issues then, Defendant argues, a plaintiff must show that:
(1) resolving the federal issue is necessary to resolution of the state-law claim; (2) the federal
issue is actually disputed; (3) the federal issue is substantial; and (4) federal jurisdiction will not
disturb the balance of federal and state judicial responsibilities. (Doc. 188 at 9 (citing, Singh v.
Duane Morris LLP, 538 F.3d 334, 337-38 (5th Cir. 2008)).)
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A. Plaintiff’s claim does not arise under federal law.
Defendant maintains that Plaintiffs’ cause of action does not arise under federal law
because the Federal Powers Act, 16 U.S.C. § 824d(a), does not create a private right of action.
(Doc. 188 at 9 (citing, Montana-Dakota Utilities Co. v. Northwestern Pub. Serv. Co., 341 U.S.
246 (1951)).) As such, Defendant maintains that there is no private right of action under the FPA
to seek a “just and reasonable” rate. (Doc. 188 at 9.) In support of its argument, Defendant cites
City of Gainesville v. Florida Power & Light Co., 488 F.Supp. 1258, 1270-1275 (S.D. Fla. 1980)
for the proposition that the FPA provides neither an express nor implied private cause of action.
Defendant asserts that in City of Gainesville, the court stated that Congress’s intent under §
824d(a) was “to create a fairly common rate-making and regulatory scheme.” (Doc. 188 at 9
(citing, 488 F.Supp. at 1271-72).) Defendant argues that the structure of the FPA supports this
analysis as it provides an exclusive administrative remedy before FERC to contest rates or tariff
violations and provides appeals rights. (Doc. 188 at 11.) Therefore, Defendants argue that federal
law cannot form the basis of Plaintiffs’ claims.
B. Plaintiffs’ right to relief does not depend on the necessary resolution of a substantial
question of federal law.
Defendant argues because federal law does not form the basis of Plaintiffs’ claims,
federal question jurisdiction can only arise if the state law claim implicates federal issues. (Doc.
188 at 11-12.) Defendant states the Supreme Court in Grable & Sons Metal Prods, Inc. v. Darue
Eng’g & Mfg., 545 U.S. 308 (2005), set out a four part test to determine federal question
jurisdiction over state law claims: “(1) resolving a federal issue is necessary to resolution of the
state-law claim; (2) the federal issue is actually disputed; (3) the federal issue is substantial;
and(4) federal jurisdiction will not disturb the balance of federal and state judicial
responsibilities.” (Doc. 188 at 12.)
7
First, Defendant argues that resolution of the case depends on the interpretation of
Section 10.4 of the PSSAs, which is a state-law contract issue. (Doc. 188 at 13.) Defendant
points to the fact that Plaintiffs’ Motion for Partial Summary Judgment on liability does not
reference the FPA, the FERC tariff; or “just and reasonable rates.” (Doc. 188 at 13.) Instead,
Defendant highlights that Plaintiffs case rests on an alleged contractual right, not a federal right,
and interpretation of the contractual provision will not affect any party outside of those
contracted. (Doc. 188 at 13.) In support of its argument, Defendant points the Court to Pacific
Gas and Elec. Co. v. Arizona Elec. Power Coop., Inc., 479 F. Supp.2d 1113, 1125-26 (E.D. Cal.
2007). The court in Pacific Gas, explained,
[t]he Plaintiffs are seeking to enforce a private contract between private parties
which will afford relief only if the contract terms, from wherever drawn, are found
to have been breached . . . it is not the federal tariff itself, standing as the law, that
will give life to the merits of Plaintiffs' claim. It is the contract language, standing
only as a representation of the agreement between the Parties, that will inform the
resolution of this matter. . . . On that same note, this is not a suit alleging violations
of the FPA itself or of any rule or regulation thereunder. Instead, this is a suit to
enforce a contract between private parties that has merely incorporated by reference
terms that are contained in a federal regulation.
(Doc. 188 at 13-14 (citing, 479 F. Supp. 2d at 1125-26).) Defendant argues that this case is
analogous and therefore, resolving a federal issue is not necessary to the resolution of the
Plaintiffs’ claims. (Doc. 188 at 14.)
Second, Defendant argues that the alleged federal question is not in dispute. (Doc. 188 at
14.) Specifically, Defendant maintains that there is no dispute that Section 10.4 of the PSSAs is
just and reasonable as provided under Section 15.16 of the PSSAs. (Doc. 188 at 14.) Instead, the
dispute centers on the interpretation of the contractual provision and application of that
interpretation to the facts of the case. (Doc. 188 at 14.) Because it is not necessary to interpret
any provision of the tariff or whether its terms are just and reasonable, there is no dispute as to
the federal question. (Doc. 188 at 14.)
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Third, Defendant argues the alleged federal question is not substantial because a court’s
decision as to the contractual provision will not impinge on the operation of public utilities in
other states. (Doc. 188 at 14-15.) Defendant asserts that courts routinely hold that a federal
question is not substantial when it does not present a “a nearly pure issue of law, one that could
be settled once and for all and thereafter would govern numerous ... cases,” but rather is “factbound and situation-specific.” (Doc. 188 at 15 (citing, Becker v. Ute Indian Tribe of the Uintah
& Ouray Reservation, 770 F.3d 944, 947–48 (10th Cir. 2014); and Bennett v. Southwest Airlines
Co., 484 F.3d 907, 910 (7th Cir. 2007) (holding no federal question jurisdiction where there was
“a fact-specific application of rules that come from both federal and state law rather than a
context-free inquiry into the meaning of a federal law.”)).)
Defendant analogizes this case to that of Great Lakes Gas Transmission Ltd. P'ship v.
Essar Steel Minnesota LLC, 843 F.3d 325 (8th Cir. 2016).2 The Eighth Circuit in Great Lakes
Gas Transmission recognized,
there is little national interest in having a federal court interpret tariff provisions if
it will merely apply state law [because] [a]ny interpretation by a federal court of
the language of the tariffs will only speak to how those tariffs should be construed
in this state. Accordingly, the reach of any such adjudication will not have federal
reverberation. In addition, to the extent federal interests are implicated, the state
court is quite competent to apply the language of the tariffs and is certainly well
positioned to do so where, as here, the tariff language is to be construed in accord
with state law.
(Doc. 188 at 15 (citing, 843 F.3d at 332-333) (internal quotations and citations omitted).)
Defendant likewise points out that because there is no private right of action under the FPA,
2
Great Lakes Gas Transmission arose under the National Gas Act rather than the Federal Power Act. However, the
jurisdictional components of the statutes are identical, and courts have repeatedly cited the decisions interpreting the
“just and reasonable rates” provision of each statute interchangeably. See Arkansas Louisiana Gas Co. v. Hall, 453
U.S. 571, 578 at n.7 (1981) (“Montana-Dakota Utilities was a case under the Federal Power Act rather than under
the Natural Gas Act, but as we have previously said, the relevant provisions of the two statutes are in all material
respects substantially identical. In this opinion we therefore follow our established practice of citing interchangeably
decisions interpreting the pertinent sections of the two statutes.”) (internal quotations and citations omitted).
9
Congress did not intend to have the interpretation of a FERC-filed contract to confer federal
question jurisdiction. (Doc. 188 at 16.)
Last, Defendant asserts that the exercise of federal question jurisdiction would disturb the
balance of federal and state judicial responsibilities because state courts should resolve state-law
contract claims. (Doc. 188 at 16.) Defendant again cites to the Eighth Circuit’s analysis in Great
Lakes Gas Transmission, in which the court explained that the balance of federal and state
judicial responsibilities would be disturbed because:
First, the combination of no federal cause of action and no preemption of state
remedies serves as an important clue suggesting a congressionally approved
balance disfavoring federal involvement. Second, the presence of the exclusive
jurisdiction provision indicates that Congress did not intend this particular type of
case to end up in federal court, because exclusive jurisdiction over breach of
contract cases would result in the very disturbance that Grable warned against.
Specifically, exclusive federal jurisdiction over these cases would preclude state
courts from adjudicating contract disputes governed by their own state law. As the
Supreme Court has emphasized, when a statute mandates, rather than permits,
federal jurisdiction—thus depriving state courts of all ability to adjudicate certain
claims—our reluctance to endorse broad readings, if anything, grows stronger. Our
reluctance is especially heightened in this case because the interpretation of a
contract is ordinarily a matter of state law to which we defer.
(Doc. 188 at 16-17 (citing, Great Lakes Gas Transmission, 843 F.3d at 334) (emphasis in
original) (internal quotations and citations omitted).) Defendant maintains that this same federal
and state balance is at issue in this case. (Doc. 188 at 17.)
C. The case does not arise under federal law because the dispute arises out of a contract
that is filed with FERC.
Defendant likewise argues this case does not arise under federal law merely because the
relevant contract was filed with FERC pursuant to a FERC tariff and FERC tariffs have the force
of federal law. (Doc. 188 at 17.) Defendant first points the Court to Monforte Expl. LLC v. ANR
Pipeline Co., No. 09-3395, 2010 WL 143712 (S.D. Tex. Jan. 7, 2010). In the context of a motion
to remand, the court in Monforte examined whether federal question jurisdiction existed over a
10
breach of contract dispute between a natural gas producer and a natural gas pipeline company. At
issue in the case was an Operational Flow Order that was issued pursuant to a FERC tariff. The
defendant in Monforte argued that the implementation of the Operational Flow Order, required
interpretation of the FERC tariff and thereby created federal question jurisdiction. The court was
not persuaded and explained
It is true that [Plaintiff’s] OFO was issued pursuant to its FERC tariff, and such
tariffs take on the force of federal law. See Carter v. Am. Tel. & Tel. Co., 365 F.2d
486, 496 (5th Cir.1966) (“[A] tariff, required by law to be filed, is not a mere
contract. It is the law.”). Since resolving the breach of contract claim will likely
require an analysis of the validity and enforceability of the OFO under the FERC
tariff, a court addressing this dispute will have to consider federal law. This does
not mean, however, that [Plaintiff’s] claim arises under federal law. [Plaintiff]
alleges that [Defendant's] issuance of the OFO breached the Interconnect
Agreement under Texas law; Monforte makes no allegation that the OFO was in
violation or the FERC tariff. . . . While federal law may well be relevant in resolving
the state law claim in this action, a Texas state court is competent to apply federal
law.
Monforte Expl. L.L.C. v. ANR Pipeline Co., No. 09-3395, 2010 WL 143712, at *4 (S.D. Tex. Jan.
7, 2010). Defendant analogizes this reasoning to this case arguing,
even though the PSSAs were filed pursuant to the FERC tariff, the Plaintiffs can
point to no specific provision of the tariff that is violated by the charge-through of
the disputed costs — because that issue is governed by the PSSAs, not the tariff.
(Doc. 188 at 18-19.)
Defendant next points the Court to Fla. Gas Transmission Co., LLC v. Bay Gas Storage
Co., No. CIV.A. H-08-3472, 2009 WL 361592, at *3 (S.D. Tex. Feb. 11, 2009). The court in this
case observed, “Importantly, once filed, tariffs take on the force of federal law.” Fla. Gas
Transmission Co., LLC v. Bay Gas Storage Co., No. CIV.A. H-08-3472, 2009 WL 361592, at *3
(S.D. Tex. Feb. 11, 2009) (citing, Carter v. Am. Tel. & Tel. Co., 365 F.2d 486, 496 (5th
Cir.1966) (“[A] tariff, required by law to be filed, is not a mere contract. It is the law.”)).
However, the court reasoned that there was still not federal question jurisdiction because the
11
contract between the parties “exists apart from the filed tariffs and the [contract] fundamentally
defines the parties' respective obligations” and the plaintiff’s claims did not challenge the
reasonableness of a federal law, regulation or tariff. (Id. at 4.) Defendant argues this reasoning is
applicable in this case because
[although] Plaintiffs have described their claim as related to a filed tariff, they do
not challenge any specific provision of the tariff, nor do they challenge the
reasonableness of the filed rate. Moreover, the filed rate is the contractually agreed
upon rate that Plaintiffs also agreed was just and reasonable. The only disputed
issues in the case are fact issues and state-law issues of contractual interpretation.
(Doc. 188 at 19.)
Defendant also reiterates the applicability of Pacific Gas and Elec. Co. v. Arizona Elec.
Power Coop., Inc., in which the agreement between the parties and the terms of the agreement
would be construed according to state law. (Doc. 188 at 20.) The court determined that federal
question jurisdiction did not exist, even though FERC tariffs were incorporated by reference into
the agreement. The court explained,
Any interpretation by a federal court of the language of the tariffs will only speak
to how those tariffs should be construed in this state. Accordingly, the reach of any
such adjudication will not have federal reverberation. In addition, to the extent
federal interests are implicated, the state court is quite competent to apply the
language of the tariffs and is certainly well positioned to do so where, as here, the
tariff language is to be construed in accord with state law.
Pacific Gas & Elec. Co. v. Arizona Elec. Power Coop., Inc., 479 F. Supp. 2d 1113, 1123 (E.D.
Cal. 2007). Defendant states that this case is similar because
In this case, the tariff provides that "all sales shall be made at rates established by
agreement between the purchaser and the Seller." Further, "[a]ll other terms and
conditions shall be established by agreement between the purchaser and the Seller."
There is no need to interpret any provision of the tariff, because the tariff simply
refers to the negotiated contracts.
(Doc. 188 at 21.) Further the PSSAs provide:
This Agreement shall be governed by the laws of the State of Louisiana, except for
any conflicts of laws, rules or principles calling for application of the laws of
12
another jurisdiction, or except when preempted by the federal law of the United
States of America.
(Doc. 188 at 21.) Therefore, because no form of preemption has been alleged, Defendant
maintains that it is "the contract language, standing only as a representation of the agreement
between the Parties that will inform the resolution of this matter." (Doc. 188 at 21.)
Last, Defendant cites again to Great Lakes Gas Transmission Ltd. P'ship v. Essar, for the
proposition that the jurisdictional provision of the FPA does not create an express cause of action
under which a plaintiff can recover. The Eighth Circuit explained, interpreting the identical
jurisdictional provision under the National Gas Act (“NGA”):
Although Section 717u of the NGA provides that district courts have “exclusive
jurisdiction of violations of [the NGA] or the rules, regulations, and orders
thereunder,” 15 U.S.C. § 717u, the district court correctly ruled that this provision
“does not create a cause of action, but merely states that federal district courts have
exclusive jurisdiction over cases that otherwise arise under federal law or involve
a substantial question of federal law.” Indeed, “[e]xclusiveness is a consequence of
having jurisdiction, not the generator of jurisdiction.” Thus, the NGA does not
create an express federal cause of action.
Great Lakes, 843 F.3d at 329. Defendant reasons that in this case
under FPA § 825p, the courts are granted exclusive jurisdiction of claims for
violation of the FPA, but that does not mean that FPA § 825p creates a private cause
of action. To the contrary, it merely recognizes that the federal district courts will
have exclusive jurisdiction over cases that otherwise arise under the FPA or involve
a substantial question of federal law.
(Doc. 188 at 22.)
2. Plaintiffs’ response
Plaintiffs argue that there is federal question jurisdiction because the case arises under
federal law and presents substantial federal questions. (Doc. 193 at 1.) Plaintiffs maintain that the
case arises under federal law because
[t]he contracts between Plaintiffs and Defendant Louisiana Generating, LLC
(“LaGen”) are on file with the Federal Energy Regulatory Commission (“FERC”)
under LaGen’s FERC tariff. The tariff references the contracts as the method for
13
determining Plaintiffs’ rates. Thus, interpretation of the contracts is a federal
question.
(Doc. 193 at 1.) Plaintiffs also argue that the dispute requires interpretation of the Clean Air Act
and its regulations, and a federal consent decree issued by this Court resolved alleged violations
of federal law. Plaintiffs also take issue with the fact that Defendant filed this motion after
discovery had been completed and the parties had filed motions for summary judgment. (Doc.
293 at 4.)
A. Plaintiffs’ claims arise under federal law
Plaintiffs argue that although the central claim in the dispute is a breach-of-contract
claim, the case still arises under federal law because “the PSSAs are governed by the FPA, are
filed with FERC under [Defendant’s] tariff, and are considered federal regulations by operation
of law.” (Doc. 193 at 8.) Plaintiffs maintain that service agreements filed under a FERC tariff
apply with the force of federal law and are therefore the equivalent to a federal regulation. (Doc.
193 at 8-9 (citing, Bryan v. BellSouth Commc’ns, Inc., 377 F.3d 424, 429 (4th Cir. 2004) ([A]
filed tariff carries the force of federal law.”); Cahnmann v. Sprint Corp., 133 F.3d 484, 488 (7th
Cir. 1998); and Mississippi ex rel. Hood v. Entergy Miss., Inc., No. 3:08-cv-780, 2015 WL
13448017, at *6 (S.D. Miss. Apr. 10, 2015)).)
Overall, Plaintiffs maintain that the PSSAs have the force of federal law because they are
linked to the LaGen tariff. Plaintiffs argue:
LaGen ignores that (1) the tariffs explicitly provide that the PSSAs are the
instruments through which the rates and terms of service will be established; (2)
the PSSAs are listed as power service agreements under LaGen’s market-based
rates in FERC’s index of LaGen’s tariffs/rate schedules, Danish Decl., Ex. B; and
(3) federal regulation establishes that agreements for the sale of electricity such as
the PSSAs are part of a seller’s tariff.
(Doc. 193 at 9.) Plaintiffs’ argument that the PSSAs have the force of federal law is first, a tariff
is defined by the FERC regulations as “compilation, in book form, of rate schedules of a
14
particular public utility, effective under the [FPA], and a copy of each form of service
agreement.” (Doc. 193 at 9 (citing, 18 C.F.R. § 35.2(b), n.1 (2000)).) Second, that rate schedules
“may take the physical form of a contractual document, purchase or sale agreement, lease of
facilities, tariff or other writing.” (Doc. 193 at 9, (citing, 18 C.F.R. § 35.2(b) (2000)).) Third, the
PSSAs are rate schedules. (Id.) Therefore, Plaintiffs reason that the PSSAs are tariffs with the
force and effect of federal law. (Id.)
Plaintiffs cite cases in support of the proposition that the agreements between parties that
are filed with FERC have the force and effect of federal law. First, Plaintiffs point the Court to
New York State Gas & Elec. v. New York Indep. Sys. Operator, Inc., No. CIV.00-CV1526HGMGJD, 2001 WL 34084006, at *6 (N.D.N.Y. Jan. 19, 2001). In New York State Gas &
Elec., the court examined whether there was federal question jurisdiction in a breach of contract
case where the contracts specifically incorporated the tariffs into the service agreements between
the parties. New York State Gas & Elec, 2001 WL 34084006, at *1. The court found:
While these claims appear to be simple state claims on their face, each relate to the
rights and duties of each party described in agreements that are incorporated into
tariffs filed with FERC. Because these tariffs assume the mantel of federal law by
virtue of their filing with FERC, the conclusion that federal subject matter
jurisdiction exists and the action was properly removed seems inevitable.
Id. at *6. Plaintiffs argue that this case is analogous to New York State Gas & Elec. because the
key fact relied on by the court to determine “federal jurisdiction is also present here: the service
agreements are incorporated into LaGen’s FERC tariff as the means of establishing rates, and
thus, assume the mantel of federal law.” (Doc. 193 at 10-11.)
Plaintiffs likewise point the Court to City of Chanute, Kan. v. Kansas Gas & Elec. Co.,
No. 06-4096, 2007 WL 1041763 (D. Kan. Apr. 4, 2007). City of Chanute, the defendant argued
for removal and federal jurisdiction stating,
15
while plaintiff brings a claim for breach of contract, the contract in question is
actually a tariff that was filed with the Federal Energy Regulatory Commission
(“FERC”), and that once a contract is filed with FERC, it becomes “more than a
contract between private parties; it is federal law.”
City of Chanute, Kan. v. Kansas Gas & Elec. Co., No. 06-4096, 2007 WL 1041763, at *2 (D.
Kan. Apr. 4, 2007). The court reasoned:
In this case, the 1995 contract between the parties was accepted for filing with
FERC. However, plaintiff argues that while FERC accepted the 1995 contract, such
acceptance does not mean that the contract is FERC-approved when FERC
specifically informed defendants that the acceptance for filing “does not constitute
approval of any service, rate, charge, classification, or any rule, regulation, contract
or practice....” Yet, “the legality of rates so filed is not conditioned upon the
Commission's approval. Unless they are challenged ... the filed rates become legal
rates.” Accordingly, the 1995 contract is the legal rate, which is the equivalent to a
federal regulation.
City of Chanute, 2007 WL 1041763, at *3 (citing New York State Gas & Elec., 2001 WL
34084006, at *6). Ultimately, the court found:
Under the jurisdictional provision of the FPA, federal courts have exclusive
jurisdiction of violations of the FPA or the “rules, regulations and orders
thereunder” and of suits to enforce any liability or duty created by the FPA or any
“rule, regulation, or order thereunder.” Because a tariff filed with a federal agency
is the equivalent of a federal regulation, the term “regulation” as provided in the
exclusive jurisdiction provision of the FPA “necessarily includes FERC approved
tariffs filed by public utilities....” Therefore, “federal courts have exclusive
jurisdiction over any claims involving violations of the [filed] tariffs.”
City of Chanute, 2007 WL 1041763, at *3. Plaintiffs again analogize to City of Chanute and
states that the same facts are present in this litigation because:
(1) the dispute centers on how the pricing is formulated under the PSSAs, as
environmental costs passed on to the [Plaintiffs] are part of the [Plaintiffs’] rates;
(2) the court must construe the terms of the FERC-filed PSSAs to determine what
the terms of the parties’ agreements were; and (3) the court must construe the terms
of the PSSAs to determine whether LaGen was in violation of the PSSAs when it
determined that the disputed costs should be part of the rates charged to the
[Plaintiffs].
(Doc. 193 at 11.)
16
Last, Plaintiffs cite City of Osceola, Ark. v. Entergy Arkansas, Inc., 791 F.3d 904, 907–08
(8th Cir. 2015) to support the proposition that FERC “‘filed tariffs are the equivalent of a federal
regulation,’ and therefore a suit to enforce them arises under federal law.” (Doc. 193 at 12
(citing, City of Osceola, Ark., 791 F.3d 904 at 907-908).) The Eighth Circuit explained,
[t]he contract Osceola seeks to enforce is its Power Coordination, Interchange, and
Transmission Agreement with Entergy. Under federal law this agreement is
required to be filed with FERC. 16 U.S.C. § 824d(c). Moreover, FERC has
determined that all rates and charges set out in the agreement were “just and
reasonable” as required by federal law. 16 U.S.C. § 824d(a). Any rate or charge not
determined just and reasonable is unlawful. Id. Osceola seeks to enforce the tariff
contained in the agreement and approved by FERC. Such filed tariffs are “the
equivalent of a federal regulation,” and therefore a suit to enforce them arises under
federal law. Cahnmann v. Sprint Corp., 133 F.3d 484, 488 (7th Cir.1998).
City of Osceola, Ark, 791 F.3d at 907–08. Plaintiffs maintain that this case is analogous and
federal jurisdiction exists. (Doc. 193 at 12.)
Plaintiffs next argue that the Defendant’s cited cases are readily distinguishable. First,
Plaintiffs state Monforte is inapplicable because the plaintiff did not allege a breach of a FERC
tariff, only a private agreement. (Doc. 193 at 12-13.) Plaintiffs maintain that the argument for
federal jurisdiction in Monforte was a federal defense, which does not provide a basis for
removal. (Doc. 193 at 13.) Plaintiffs argue that Monforte is therefore distinguishable because the
PSSAs were filed under the FERC tariff and the court in Monforte did not address the meaning
of a contract filed with FERC. (Doc. 193 at 13.) Second, Plaintiffs maintain Florida Gas is not
applicable because the court found that the agreements existed apart from the filed tariffs, which
they argue is not the case here. (Doc. 193 at 14.) Third, Plaintiffs assert Pacific Gas does not
apply because the court relied on the fact that the dispute was between a non-public utility that is
exempt from FERC oversight to support its conclusion that no federal jurisdiction existed. (Doc.
193 at 14.) Plaintiffs point out that Defendant is a public utility and there is no exemption at
issue in this case. (Id.) Last, Plaintiffs maintain Great Lakes Gas Transmission, is likewise
17
distinguishable because it differs in material aspects: (1) Although the agreement at issue in
Great Lakes incorporated the terms of a tariff, the agreement was not filed with FERC; and (2)
the claims in Great Lakes centered on the interpretation of provisions of the agreement that were
unrelated to the FERC tariff and the “FERC approved rate formula.” (Doc. 193 at 15.) Because
the PSSAs were filed with FERC and the claims challenge the application of the rate formula,
Plaintiffs maintain that this case is distinguishable.
Last, Plaintiffs argue that no private right of action is necessary for a claim to “arise
under” federal law. (Doc. 193 at 15.) Plaintiffs maintain that the courts in New York Gas & Elec.,
City of Chanute, and City of Osceola did not consider whether there was a private right of action
to find federal jurisdiction. (Id.) Further, Plaintiffs detail that pre-Gable case law demonstrates
that arising under jurisdiction can be found regardless of whether the Grable test is met. (Id.
(citing MCI Telecomm. Corp. v. Garden State Inv. Corp., 981 F.2d 385, 388 (8th Cir. 1992) (“
Because the service relationship . . . arises under the Communications Act and the tariff required
by the Act, we conclude the district court had subject matter jurisdiction over [the] lawsuit under
28 U.S.C. § 1337(a). Thus, the district court did not need to consider whether there is a need for
uniform federal common law as a basis for jurisdiction.”).)
B. The Complaint depends on substantial questions of federal law.
Plaintiffs maintain that the Court has jurisdiction under the Grable doctrine because “(1)
resolving a federal issue is necessary to resolution of the state-law claim; (2) the federal issue is
actually disputed; (3) the federal issue is substantial; and (4) federal jurisdiction will not disturb
the balance of federal and state judicial responsibilities.” (Doc. 193 at 16 (citing, Singh v. Duane
Morris LLP, 538 F.3d 334, 338 (5th Cir. 2008)).)
First, Plaintiffs argue that resolving federal issues is necessary to the resolution of the
state-law claims because a contract filed with FERC has the force and effect of federal law and
18
therefore the interpretation of those contracts is a federal question. (Doc. 193 at 16-17 (citing
Prairie Horizon Agri-Energy, LLC v. Tallgrass Interstate Gas Transmission, LLC, No. 14-1236JTM, 2014 WL 7384767, at *2 (D. Kan. Dec. 29, 2014) (“a claim that involves the validity,
construction, or effect of a filed FERC tariff invokes federal subject matter jurisdiction.”)
(citation omitted); T & E Pastorino Nursery, 268 F. Supp. 2d at 1247 (“Because the parties’
contractual duties arise under the terms of the . . . tariff, any claim stemming from Defendants’
breach of their obligations under the ancillary services contracts is necessarily based on an
assumed violation of the tariff itself.”)).) Plaintiffs assert that to resolve the claims, the Court
must interpret the meaning of the PSSAs as federal law to determine if Defendant improperly
implemented a rate formula in a FERC filed contract. (Doc. 193 at 16.)
Plaintiffs also list other federal questions they maintain pervade the case relating to the
specific terms of the consent decree entered by the Court and the relevant regulations under the
Clean Air Act. (Doc. 193 at 17.) Taken together Plaintiffs maintain that these support the
argument that resolution of federal law issues is necessary to the resolution of the Plaintiffs’ state
law claims. (Doc. 193 at 17.)
Second, Plaintiffs argue that the federal issues are actually disputed because the
interpretation of the PSSAs is a matter of federal law. (Doc. 193 at 18.) Plaintiffs therefore
reason that because the PSSAs operate with the force of federal law, the dispute as to the
meaning of and the implementation of the PSSAs is actually disputed federal law. (Id.) In
addition, Plaintiffs point to the consent decree and the Clean Air Act regulations as actually
disputed federal issues. (Doc. 193 at 18.)
Third, Plaintiffs argue that the federal issues are substantial because the PSSAs have the
force and effect of federal law. Plaintiffs detail, “[D]ismissal for lack of subject-matter
19
jurisdiction because of the inadequacy of the federal claim is proper only when the claim is so
insubstantial, implausible, foreclosed by prior decisions of [the Supreme] Court, or otherwise
completely devoid of merit as not to involve a federal controversy.” (Doc. 193 at 19-20 (citing,
Gilbert v. Donahoe, 751 F.3d 303, 311 (5th Cir. 2014) (quoting Steel Co. v. Citizens for a Better
Env’t, 523 U.S. 83, 89 (1998)) (internal quotation marks omitted)).) Plaintiffs maintain that there
is a substantial federal interest in “ensuring [the] calculation of rates, or allocation of costs under
rate formulae.” This substantial federal interest is evidenced by the exclusive authority to oversee
tariffs that is vested in FERC and the ongoing reporting requirements with which Defendant is
obliged to comply. (Doc. 193 at 20.) Plaintiffs next argue that the federal issues are substantial
because, “[i]f states are permitted to interpret provisions of FERC-filed tariffs and agreements
directly related to rates or rate calculations, each state could enforce its own findings as to the
meaning of a filed tariff or agreement.” (Id.) Plaintiffs also assert that a private right of action is
not dispositive as to whether there is a substantial federal issue. (Doc. 193 at 21.) Instead,
Plaintiffs maintain that a private right of action is merely evidence relative to whether there is a
substantial federal issue. (Doc. 193 at 21 (quoting Grable, 545 U.S. at 318 (“Merrell Dow should
be read in its entirety as treating the absence of a federal private right of action as evidence
relevant to, but not dispositive of, the ‘sensitive judgments about congressional intent’ that §
1331 requires.”)).)
Plaintiffs again cite to the disputes regarding the consent decree, and the Clean Air Act
regulations as presenting substantial federal issues. In support, Plaintiffs cite to a pre-Gable
Fourth Circuit case, Ormet Corp. v. Ohio Power Co., 98 F.3d 799, 807 (4th Cir. 1996), which
explained, “resolution of the dispute requires the interpretation and application of the Act to the
contractual arrangement between the parties. This is undoubtedly a federal question and, we
20
believe, sufficiently substantial to justify invocation of federal-question jurisdiction.” (Doc. 193
at 21.) Moreover, Plaintiffs maintain that there is a substantial federal issue because of the
consent decree negotiated by the EPA that was intended to resolve violations of the federal CAA
will necessarily need to be construed because both parties rely on it in support of their case. In a
case where the parties disputed dispositive issues as to the requirements of a consent decree, the
Sixth Circuit found that there was a substantial federal interest. United States v. City of Loveland,
Ohio, 621 F.3d 465, 472 (6th Cir. 2010). Plaintiffs argue that because the EPA has entered
similar consent decrees with other utility providers, there is a need for uniformity of
interpretation of any consent decree provisions. (Doc. 193 at 22.)
Last, Plaintiffs maintain that federal question jurisdiction will not disturb the balance of
federal and state judicial responsibilities because FPA issues and FERC-filed tariffs have
traditionally been left to the federal courts. (Doc. 193 at 23.) Plaintiffs argue that there would not
be a flood of state-based claims if the Court kept jurisdiction because it would only apply to
claims arising from contracts filed with FERC under FERC-filed tariffs. (Doc. 193 at 23.)
Plaintiffs maintain that federal courts already have jurisdiction over the consent decree and the
Clean Air Act regulations so there is no harm in maintaining jurisdiction over the case from that
perspective.
C. The Court should sanction Defendant for filing the Motion to Dismiss
Plaintiffs argue that under Federal Rule of Civil Procedure 16(f), the Court may sanction
Defendant for filing the Motion to Dismiss outside of the timeframes set by the scheduling order.
(Doc. 193 at 24) (citing United States v. Ken Mar Associates, Ltd., 697 F. Supp. 400, 404 (W.D.
Okla. 1987) (sanctioning a plaintiff for moving to dismiss after the dispositive motion deadline
because “the circumstances and evidence supporting the . . . Motion to Dismiss [existed] at the
time of the [dispositive motion] deadline.”)).) Plaintiffs argue all the facts necessary for
21
Defendant to raise the issue were developed long before the dispositive motions deadline and
that the Court should therefore sanction the Defendant. (Doc. 193 at 24.)
3. Defendant’s reply
A. The PSSAs are not subject to arising under federal question jurisdiction based on
being filed with FERC.
In reply, Defendant maintains Plaintiffs concede that there is no private cause of action
under the FPA. (Doc. 197 at 1.) Defendant argues that the Court should reject Plaintiffs’
argument that “(1) a FERC tariff has the force of federal law; (2) the PSSAs are filed with FERC
under [Defendant’s] FERC tariff; (3) the PSSAs are thus legally tethered to the tariff; and (4)
therefore, a claim for breach of the PSSAs arises under federal law” is superficial and overlysimplistic. (Doc. 197 at 1-2.) Defendant argues that Plaintiffs’ logic fails because the LaGen
Tariff is a market-based tariff that allows Defendant and its customers the freedom to contract
the rates and all other terms and provisions. (Doc. 197 at 2 (citing Doc. 188-3).) The LaGen
Tariff is not a cost-based tariff that FERC approves as “just and reasonable.” (Doc. 197 at 2.)
Defendant asserts that the filing of the PSSAs does not federalize the PSSAs because (1)
FERC considers such filings information; (2) FERC does not examine the service agreement for
reasonableness; and (3) FERC’s acceptance of the service agreement “does not constitute
approval of any service, rate, charge, classification or any rule, regulation, contract or practice
affecting such rate or service provided in the filed documents.” (Doc. 197 at 2.) As such,
Defendant argues that FERC leaves the terms and conditions to the contracting parties and in this
case, that contractual language provides that it “shall be governed by the laws of the State of
Louisiana.” (Doc. 197 at 3, n.5.) Because the PSSA is filed under a market-based tariff,
Defendant maintains that the PSSA does not have the force and effect of federal law and that
therefore, arising under jurisdiction is not warranted.
22
B. Defendant’s market-based tariff and the PSSAs do not satisfy the Grable test
Defendant argues that the Grable test is not met because Plaintiffs’ analysis—that the
FERC filed PSSAs necessarily raise significant and important federal issues of interpretation—
fails. Defendant argues that market-based service agreements that are interpreted under state law
do not have federal significance.
Defendant reiterates that the cases it originally cited are on point and analogous.
Regarding Monforte, Defendant states, “Plaintiffs seek to distinguish Monforte because the
plaintiff did not allege a breach of the FERC tariff, but Plaintiffs also have not alleged a breach
of any provision of LaGen’s market-based tariff.” (Doc. 197 at 4.) Instead, Defendant maintains
that Plaintiffs only seek an interpretation of the contracts entered into under the LaGen Tariff.
(Doc. 197 at 4, n.6.) As to Florida Gas, Defendant argues,
Plaintiffs attempt to distinguish Florida Gas because the court found that the
transportation services agreement “fundamentally defined the parties’ respective
obligations and that the agreement existed ‘apart from the filed tariffs’” [However,]
there can be no question that the PSSAs in the present case “fundamentally define”
the obligations of Plaintiffs and LaGen, and that they exist “apart from the tariff.”
(Doc. 197 at 5.) Regarding Pacific Gas, Defendant refutes that the court relied solely on the
status of the defendants as exempt from the FPA because the court stated that this exemption was
not dispositive. (Doc. 197 at 5.) Last, as to Great Lakes, Defendant argues that Plaintiffs’ attempt
to distinguish Great Lakes does not stand because the fact that the agreement was not filed with
FERC did not impact the Grable analysis. Therefore, Defendant maintains that, like in Great
Lakes, “Plaintiffs claims involve the interpretation of provisions of the PSSAs that are not
dictated by any provision of the FERC tariff and are unrelated to any FERC-approved rate
formula or any FERC ruling or order.” (Doc. 197 at 6.) Defendant also points the Court to
Newmont Nevada Energy Inv., LLC v. Sierra Pac. Power Co., No. 3:12-CV-00349-RCJ, 2012
23
WL 4339572 (D. Nev. Sept. 20, 2012), which also involved a dispute arising out of a contract
entered into by the parties and filed with FERC. (Doc. 197 at 6.) The court explained:
[Defendant] cannot show that this routine interpretation of contractual terms
involves any provisions of the FPA or orders and regulations of the FERC. When
contract language “inform[s] the resolution of this matter” rather than the federal
tariff itself, there is no federal question jurisdiction.
Newmont Nevada Energy Inv., LLC v. Sierra Pac. Power Co., No. 3:12-CV-00349-RCJ, 2012
WL 4339572, at *6 (D. Nev. Sept. 20, 2012).
Defendant argues that in contrast, Plaintiffs’ cases either pre-date Grable, do not address
Grable, fail to recognize the Grable factors, or fail to recognize that state law determines the
resolution of the matter. (Doc. 197 at 7.) Defendant also asserts:
Moreover, the critical fact that the PSSAs were filed under LaGen’s market-based
tariff distinguishes this case from all those upon which Plaintiffs rely to support
their claim that the PSSAs must be subject to federal jurisdiction. None of those
decisions indicate that they involved contracts entered into pursuant to a marketbased tariff. Instead, they involved disputes requiring interpretation or application
of a FERC Order or Ruling; requiring that the court determine whether the
defendants were in violation of a FERC tariff’s pricing formulation; requiring that
the court interpret and apply a FERC tariff provision requiring that the defendant
deliver the least costly mix of electric power; requiring the court to interpret and
apply a natural gas quality provision in a FERC tariff; or requiring the court to
determine a claim involving a violation of a FERC tariff provision relating to
reserve capacity.
(Doc. 197 at 7.) Defendant reasons that, unlike these cases, because the provisions of the marketbased tariffs are not at issue, and Plaintiffs’ claims do not invoke any provision of the FPA or
rely on any FERC finding, order, or ruling, Plaintiffs’ state law claims do not invoke a
substantial federal question. (Doc. 197 at 7-8.)
Regarding the third factor, whether the federal issues are substantial, Defendant argues
Plaintiffs’ concern—that “if states are permitted to interpret provisions of FERC-filed tariffs and
agreements directly related to rates or rate calculations, each state could enforce its own findings
as to the meaning of a filed tariff or agreement”—does not apply because the LaGen Tariff is
24
market-based. (Doc. 197 at 11.) As such, the terms of sale do not rely on any provisions of the
tariff but are reflected in the contract, which is interpreted as a matter of state law. (Doc. 197 at
11.)
C. The interaction between the PSSAs and federal environmental law is factual and
therefore does not satisfy the Grable test
Defendant argues that Plaintiffs assert a new argument that their breach of contract claim
is intertwined with federal environmental law so as to warrant jurisdiction under Grable. (Doc.
197 at 8.) However, Defendant asserts that the argument is a red herring because “Plaintiffs are
not seeking to enforce the Consent Decree (they cannot because they are not parties to it) and are
not bringing an action under [the Clean Air Act regulations] (which would require a Clean Air
Act citizen suit complaint).” (Doc. 197 at 8.) Instead, Defendant maintains the Clean Air Act
regulations only interact with the Plaintiffs’ claims as “factual background for interpretation of
the specific language, and if deemed relevant the parties’ intent, in the PSSAs.” (Doc. 197 at 8.)
As such, any interpretation by the court would be strictly factual.
Under the first Grable factor, Defendant maintains that federal environmental law does
not need to be interpreted to determine if Defendant breached Section 10.4. of the PSSA, which
states,
In no event shall Buyer be required to pay the cost of any activities to remediate
any environmental condition in existence at the Plants prior to such change of law
or any penalties charges or costs resulting from the breach or violation of any
Environmental Law (now existing or hereinafter enacted).
(Doc. 197 at 8.) Defendant argues Plaintiffs do not expressly allege and have not presented
evidence through an expert witness or otherwise to show that Defendant violated any Clean Air
Act regulation. (Doc. 197 at 9.) Because liability for violating the federal environmental laws is
not at issue, Defendant argues any reference to the consent decree of the Clean Air Act
regulations will merely be context for the contract interpretation. (Doc. 197 at 9.) Defendant
25
points out that, in response to Defendant’s motion for summary judgment, Plaintiffs argued “The
crux of the dispute in this litigation, therefore, is not whether LaGen violated the Prevention of
Significant Deterioration (“PSD”) provisions, but rather whether or not it properly
characterized the disputes costs as attributable to MATS compliance.” (Doc. 197 at 9.)
Further, Defendant states Plaintiffs’ reliance on the pre-Grable case of Ormet Corp. does
not advance their argument because, unlike in Ormet Corp., Plaintiffs have not alleged a
violation of environmental law and there is no question of Defendant’s compliance with the
terms and conditions of the consent decree. (Doc. 197 at 10.)
As to the second factor, whether the federal issues are actually disputed, Defendant
argues “there are no federal environmental law issues to be resolved because those issues are
solely factual background for deciding the true dispute under the PSSAs.” (Doc. 197 at 10.) As
such, Defendant maintains the only relevant question as to the federal environmental laws or the
consent decree is “what effect the Consent Decree, and LaGen’s affirmation that some of those
technologies that it agreed to install (refueling Unit 2 and PM emission controls) will allow it to
comply with MATS, should have on the interpretation of the PSSAs.” (Doc. 197 at 11.) This
does not rise to an actual dispute. (Id.)
Regarding the third factor, whether the federal issues are substantial, Defendant argues
Whatever position a court takes as to how the cited rules or the Consent Decree
affect the PSSAs, that position will be relevant only in that limited factual context.
Such a determination would not interpret or assess the application of Consent
Decree language between the actual parties, and thus can have no impact on future
legal interpretations of any other Consent Decrees.
(Doc. 197 at 12.) As such, Defendant maintains City of Loveland, does not apply because that
case involved the termination of the actual consent decree requirements, which are not at issue in
the case. (Doc. 197 at 12-13.) Similarly, Defendant argues that Herrold does not apply because
26
“nothing about the interpretation requested or the relief sought in this case will impact the
Consent Decree in any way.” (Doc. 197 at 14.)
Last, Defendant reiterates that the federal state balance favors a finding of no jurisdiction
because Louisiana and its state courts have a substantial interest in resolving contract disputes
under state law. (Doc. 197 at 14.)
D. Sanctions are not warranted
Defendant argues that sanctions are not warranted and that Plaintiffs’ reliance on United
States v. Ken Mar Associates, Ltd., 697 F. Supp. 400 (W.D. Okla. 1987) is inappropriate because
that case involved a motion to dismiss under sovereign immunity grounds which is a dispositive
motion. (Doc. 197 at 14.) Moreover, Defendant urges that Plaintiffs have not shown hardship and
that the jurisdictional issues were properly brought before the Court. (Doc. 197 at 15.)
b. Law governing
“Federal courts are courts of limited jurisdiction.” Gunn v. Minton, 568 U.S. 251, 256
(2013) (“Federal courts are courts of limited jurisdiction, possessing only that power authorized
by Constitution and statute.”) (quoting Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S.
375, 377 (1994)). Federal district courts “have original jurisdiction of all civil actions arising
under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. The Supreme
Court has stated:
For statutory purposes, a case can “aris[e] under” federal law in two ways. Most
directly, a case arises under federal law when federal law creates the cause of action
asserted. See American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260,
36 S.Ct. 585, 60 L.Ed. 987 (1916) (“A suit arises under the law that creates the
cause of action”). As a rule of inclusion, this “creation” test admits of only
extremely rare exceptions, see, e.g., Shoshone Mining Co. v. Rutter, 177 U.S. 505,
20 S.Ct. 726, 44 L.Ed. 864 (1900), and accounts for the vast bulk of suits that arise
under federal law, see Franchise Tax Bd. of Cal. v. Construction Laborers Vacation
Trust for Southern Cal., 463 U.S. 1, 9, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983).
Minton's original patent infringement suit against NASD and NASDAQ, for
27
example, arose under federal law in this manner because it was authorized by 35
U.S.C. §§ 271, 281.
But even where a claim finds its origins in state rather than federal law—as
Minton's legal malpractice claim indisputably does—we have identified a “special
and small category” of cases in which arising under jurisdiction still lies. Empire
Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 699, 126 S.Ct. 2121, 165
L.Ed.2d 131 (2006). In outlining the contours of this slim category, we do not paint
on a blank canvas. Unfortunately, the canvas looks like one that Jackson Pollock
got to first. See 13D C. Wright, A. Miller, E. Cooper, & R. Freer, Federal Practice
and Procedure § 3562, pp. 175–176 (3d ed. 2008) (reviewing general confusion on
question).
In an effort to bring some order to this unruly doctrine several Terms ago, we
condensed our prior cases into the following inquiry: Does the “state-law claim
necessarily raise 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”? Grable, 545 U.S., at 314, 125
S.Ct. 2363. That is, federal jurisdiction over a state law claim will lie if a federal
issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable
of resolution in federal court without disrupting the federal-state balance approved
by Congress. Where all four of these requirements are met, we held, jurisdiction is
proper because there is a “serious federal interest in claiming the advantages
thought to be inherent in a federal forum,” which can be vindicated without
disrupting Congress's intended division of labor between state and federal
courts. Id., at 313–314, 125 S.Ct. 2363.
Gunn, 568 U.S. at 257- 258; see Singh v. Duane Morris LLP, 538 F.3d 334, 337–38 (5th Cir.
2008) (“A federal question exists “only [in] those cases in which a well-pleaded complaint
establishes either that federal law creates the cause of action or that the plaintiff's right to relief
necessarily depends on resolution of a substantial question of federal law.”).
Courts apply the Grable test to determine if a case is within the “special and small
category of cases in which arising under jurisdiction still lies.” Gunn, 568 U.S. at 257.
Interpreting Grable the Fifth Circuit explained:
The fact that a substantial federal question is necessary to the resolution of a statelaw claim is not sufficient to permit federal jurisdiction: “Franchise Tax Board ...
did not purport to disturb the long-settled understanding that the mere presence of
a federal issue in a state cause of action does not automatically confer federalquestion jurisdiction.” Likewise, “the presence of a disputed federal issue ... [is]
never necessarily dispositive.” Instead, “[f]ar from creating some kind of automatic
28
test, Franchise Tax Board thus candidly recognized the need for careful judgments
about the exercise of federal judicial power in an area of uncertain jurisdiction.”
Singh v. Duane Morris LLP, 538 F.3d 334, 338 (5th Cir. 2008) (citing Merrell Dow Pharms. Inc.
v. Thompson, 478 U.S. 804, 813 (1986) and Grable, 545 U.S. at 314). Therefore, when an action
involves a highly fact bound and situation specific inquiry, federal jurisdiction is likely lacking.
Id.; see Baca v. Sabine River Auth., No. CV 17-253-BAJ-EWD, 2017 WL 9485534, at *5 (M.D.
La. Oct. 31, 2017), report and recommendation adopted, No. CV 17-00253-BAJ-EWD, 2017
WL 5957099 (M.D. La. Nov. 30, 2017); State v. Astrazeneca AB, No. CV 15-274-JWD-RLB,
2015 WL 5813342, at *4 (M.D. La. Sept. 14, 2015), report and recommendation adopted, No.
15-274-JWD-RLB, 2015 WL 5838487 (M.D. La. Oct. 5, 2015).
c. Analysis
As the Court states in Gunn, there are only two ways in which a case can arise under
federal law: (1) “. . . when federal law creates the cause of action asserted” and (2) in that “small
and special category of cases” where “even where the claim finds its origins in state rather than
federal law,” there is a federal component in the case substantial enough such that “arising under
jurisdiction still lies.” Gunn, 568 U.S. at 257- 258 (internal quotations and citations omitted).
Plaintiffs argue first, to use the language of Gunn, that “federal law creates the cause of
action” asserted by them. Alternatively, they argue that, even if this dispute “finds its origins in
state rather than federal law” there is federal question jurisdiction under the Grable test as
reiterated in Gunn. The Court rejects both of these arguments.
1. Cause of action not created by federal law
The Federal Power Act (“FPA”) was enacted “to curb abusive practices of public utility
companies by bringing them under effective control, and to provide effective federal regulation
of the expanding business of transmitting and selling electric power in interstate commerce.”
29
Gulf States Utilities Co. v. Fed. Power Comm'n, 411 U.S. 747, 758 (1973). The FPA created
FERC, which is granted broad regulatory power. Id. 16 U.S.C. § 824d, Rates and charges;
schedules; suspension of new rates; automatic adjustment clauses, states:
(a) Just and reasonable rates. All rates and charges made, demanded, or received by
any public utility for or in connection with the transmission or sale of electric
energy subject to the jurisdiction of the Commission, and all rules and regulations
affecting or pertaining to such rates or charges shall be just and reasonable, and any
such rate or charge that is not just and reasonable is hereby declared to be unlawful.
16 U.S.C. § 824d(a). The Supreme Court in Montana-Dakota Utilities Co. v. Nw. Pub. Serv. Co.,
recognized that § 824d(a) did not give rise to an express private cause of action. 341 U.S. 246,
251 (1951) (“[Plaintiff] cannot litigate in a judicial forum its general right to a reasonable rate,
ignoring the qualification that it shall be made specific only by exercise of the Commission's
judgment, in which there is some considerable element of discretion. It can claim no rate as a
legal right that is other than the filed rate, whether fixed or merely accepted by the Commission,
and not even a court can authorize commerce in the commodity on other terms.”)
Further, courts have refused to read an implied private cause of action into § 824d(a)
because:
Sections 205 and 206 of the Federal Power Act, 16 U.S.C. ss 824d & 824e,
demonstrates that Congress in 1935 intended to create a fairly common rate-making
and regulatory scheme for interstate electricity. Sections 205 and 206 form just a
small part of an overall regulatory scheme in which Congress designated the
Federal Power Commission (now the Federal Energy Regulatory Commission) as
the body to oversee interstate utilities in the public interest. As indicated by the
Supreme Court in Montana-Dakota, in such a regulatory scheme the Courts have
little role to play “except for review of the Commission's orders.” 341 U.S. at 252,
71 S.Ct. at 695. This case involves neither the review of a Commission order (such
review being available only in the Court of Appeals), nor an action brought by the
Commission itself to enforce one of its orders. See 16 U.S.C. ss 825l (b) and 825m.
City of Gainesville v. Fla. Power & Light Co., 488 F. Supp. 1258, 1272 (S.D. Fla. 1980); see
Great Lakes Gas Transmission Ltd. P'ship v. Essar Steel Minnesota LLC, 843 F.3d 325, 331 (8th
Cir. 2016) (“Therefore, we find no implied federal cause of action for breach of contract in the
30
NGA.”); Allco Renewable Energy Ltd. v. Massachusetts Elec. Co., 875 F.3d 64, 73 (1st Cir.
2017) (“Moreover, a number of courts have concluded that the NGA does not contain such a
right. See Great Lakes Gas Transmission Ltd. P'ship v. Essar Steel Minn. LLC, 843 F.3d 325, 32
9-30 (8th Cir. 2016); Columbia Gas Transmission, LLC v. Singh, 707 F.3d 583, 587 (6th Cir.
2013); Clark v. Gulf Oil Corp., 570 F.2d 1138, 1150 (3d Cir. 1977). We agree with them, and
thus conclude that the FPA does not provide a private right either.”)
No private cause of action is likewise created by 16 U.S.C. § 825p, Jurisdiction of
offenses; enforcement of liabilities and duties, which states:
The District Courts of the United States, and the United States courts of any
Territory or other place subject to the jurisdiction 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 court in City of Gainesville also considered § 825p, finding that the
jurisdictional provision: (1) created a cause of action in favor of FERC to prosecute actions in
equity; and (2) interpreted the phrase “actions at law” to mean “the explicit private causes of
action for damages” enumerated in the FPA. 488 F.Supp. at 1272-74, (citing Touche Ross & Co.
v. Redington, 442 U.S. 560, 577 (1979) (“The source of plaintiffs' rights must be found, if at all,
in the substantive provisions of the . . . Act which they seek to enforce, not in the jurisdictional
provision.”).3
3
See Great Lakes Gas Transmission Ltd. P'ship v. Essar Steel Minnesota LLC, 843 F.3d 325, 329 (8th Cir. 2016),
construing the jurisdictional grant in the NGA:
We agree with the district court that federal law does not create an express cause of action under
which Great Lakes may sue for breach of contract. The Tariff was filed pursuant to the NGA, and
nothing in the NGA expressly creates a cause of action for breach of contract. Although Section
717u of the NGA provides that district courts have “exclusive jurisdiction of violations of [the NGA]
or the rules, regulations, and orders thereunder,” 15 U.S.C. § 717u, the district court correctly ruled
that this provision “does not create a cause of action, but merely states that federal district courts
have exclusive jurisdiction over cases that otherwise arise under federal law or involve a substantial
31
Under the FPA, an electric producer must file its tariff with FERC. 18 C.F.R. § 35.1.
When the parties first contracted in the PSSAs in 2000, the term tariff was defined as, “[A]
compilation in book form of rate schedules of a particular public utility effective under the
Federal Power Act, and a copy of each form of service agreement.”4 18 CFR 35.2 at n.1 (2000).
Once filed,
A tariff . . . is the equivalent of a federal regulation, and so a suit to enforce it, and
even more clearly a suit to invalidate it as unreasonable under federal law (both
types of suit being comprehended in the plaintiff's contract count), arise under
federal law. And since the federal regulation defines the entire contractual relation
between the parties, there is no contractual undertaking left over that state law
might enforce. Federal law does not merely create a right; it occupies the whole
field, displacing state law.
Cahnmann v. Sprint Corp., 133 F.3d 484, 488–89 (7th Cir. 1998) (internal citations omitted).
Therefore, courts agree that there is federal subject matter jurisdiction in an action to enforce the
terms of a FERC tariff or to determine a “just and reasonable rate.” Ne. Rural Elec. Membership
Corp. v. Wabash Valley Power Ass'n, 707 F.3d 883, 897 (7th Cir. 2013), as amended (Apr. 29,
2013).
As to Plaintiffs’ argument, that federal law creates the cause of action asserted by them,
Plaintiffs contend that “the PSSAs are governed by the FPA, are filed with FERC under
[Defendant’s] tariff, and are considered federal regulations by operation of law.” (Doc. 193 at 8.)
Plaintiffs cite cases in support of their argument. For example, a court in the Southern District of
question of federal law.” Indeed, “[e]xclusiveness is a consequence of having jurisdiction, not the
generator of jurisdiction.” Thus, the NGA does not create an express federal cause of action.
(internal citations omitted).
4
The PSSAs between the parties were amended in 2011 and 2012 at which point, 18 C.F.R § 35.2(c)(1) defined a
tariff as:
a statement of (1) electric service as defined in paragraph (a) of this section offered on a generally
applicable basis, (2) rates and charges for or in connection with that service, and (3) all
classifications, practices, rules, or regulations which in any manner affect or relate to the
aforementioned service, rates, and charges. This statement shall be in writing. Any oral agreement
or understanding forming a part of such statement shall be reduced to writing and made a part
thereof. A tariff is designated with a Tariff Volume number.
32
California found exclusive federal jurisdiction over a breach of an ancillary service contract. The
court stated:
Here, the Federal Power Act's (“FPA”) jurisdictional provision provides federal
courts “exclusive jurisdiction of violations of [the FPA] or the
rules, regulations, and orders thereunder.” A tariff filed with a federal agency is the
equivalent of a federal regulation. Thus, the term “regulation” as provided in
Section 825p of the FPA necessarily includes FERC-approved tariffs filed by
public utilities such as the [] tariff. As a result, federal courts have exclusive
jurisdiction over any claims involving violations of the [] tariffs. Duties arising
under the ancillary services contracts are governed by the FERC-approved [] tariff.
Because the parties' contractual duties arise under the terms of the [] tariff, any
claim stemming from Defendants' breach of their obligations under the ancillary
services contracts is necessarily based on an assumed violation of the tariff itself.
In this regard, if Defendants' actions violated their obligations under the ancillary
services contracts, any claim falls under the imperative of 16 U.S.C. § 825p, which
grants the federal courts “exclusive jurisdiction of violations of this chapter or the
rules, regulations, and orders thereunder ....” In this manner, Plaintiffs' cause of
action is plainly premised, in part, on federal law.
T & E Pastorino Nursery v. Duke Energy Trading & Mktg., L.L.C., 268 F. Supp. 2d 1240, 1247
(S.D. Cal. 2003). The Plaintiffs also cite New York State Gas & Elec., in which the Northern
District of New York found:
While these claims appear to be simple state claims on their face, each relate to the
rights and duties of each party described in agreements that are incorporated into
tariffs filed with FERC. Because these tariffs assume the mantel of federal law by
virtue of their filing with FERC, the conclusion that federal subject matter
jurisdiction exists and the action was properly removed seems inevitable.
New York State Gas & Elec., 2001 WL 34084006, at *6.
While there is no Fifth Circuit jurisprudence on this question, the Court is persuaded by
the rulings from the Seventh and Eighth Circuits, district court rulings, as well as FERC’s rulings
on jurisdiction, which rejected the same arguments made by Plaintiffs herein.5 See Ne. Rural
The Fifth Circuit has explained that “Outside of the bankruptcy context, the FPA does not provide FERC with
exclusive jurisdiction over the breach of a FERC approved contract. While the FPA does preempt breach of contract
claims that challenge a filed rate, district courts are permitted to grant relief in situations where the breach of
contract claim is based upon another rationale.” In re Mirant Corp., 378 F.3d 511, 519 (5th Cir. 2004).
5
33
Elec. Membership Corp., 707 F.3d 883, at 896-897; Great Lakes Gas Transmission Ltd. P'ship v.
Essar Steel Minnesota LLC, 843 F.3d 325, 332 (8th Cir. 2016); Clarksdale Pub. Utilities
Comm'n v. Entergy Services Inc., 93 FERC ¶ 61002, 61005–06 (Oct. 2, 2000); Fla. Gas
Transmission Co., LLC v. Bay Gas Storage Co., No. CIV.A. H-08-3472, 2009 WL 361592, at *3
(S.D. Tex. Feb. 11, 2009).
For example, a court in the Eastern District of California found that a service agreement
does not create a federal question created by federal law, explaining:
Rather, this is a purely state based contract action implicating certain language
contained in a federal tariff. Plaintiffs seek to persuade the Court that this chiefly
federal issue is merely played out against the backdrop of a state law contract claim.
Defendants, predictably, claim the federal tariffs, while admittedly crafted pursuant
to federal law, play but a bit role in an entirely state law contract action. In fact, this
case poses the “litigation-provoking problem” of a federal issue embedded in a
state-created cause of action. More precisely, the question before this Court is
whether the incorporation by reference of federal regulations into a purely state law
contract is sufficient to confer federal subject matter jurisdiction.
Pacific Gas & Elec. Co. v. Arizona Elec. Power Coop., Inc., 479 F. Supp. 2d 1113, 1121 (E.D.
Cal. 2007).6
The Seventh Circuit distinguished when a breach of contract action under a federally
filed tariff arises under federal law, reasoning,
[Defendant] rests this argument on our previous decision holding that a state law
action seeking to enforce or challenge terms of a federally-filed tariff arises under
federal law. The reason behind this is straightforward. Tariffs filed with
federal agencies are the equivalent of federal regulations issued by the agency. Any
liability the plaintiff seeks to enforce necessarily arises under federal law because
federal law created the liability. If [Plaintiff’s] suit sought to challenge a filed tariff,
6
In 2000, when the parties first contracted for the PSSAs, the regulations did not define service agreement. The
regulations in effect when the PSSAs were amended in 2011 and 2012, defines a service agreement as:
an agreement that authorizes a customer to take electric service under the terms of a tariff. A service
agreement shall be in writing. Any oral agreement or understanding forming a part of such statement
shall be reduced to writing and made a part thereof. A service agreement is designated with a Service
Agreement number.
18. U.S.C. § 35.2(c)(2).
34
the same reasoning would support jurisdiction under section 825p because it would
be seeking to challenge the tariff—a regulation issued under the Federal Power Act.
Ne. Rural Elec. Membership Corp., 707 F.3d at 896. See Great Lakes Gas Transmission Ltd.
P'ship v. Essar Steel Minnesota LLC, 843 F.3d 325, 331 (8th Cir. 2016) (“. . . this claim was not
brought to enforce the terms of a tariff as previously interpreted by FERC. This dispute did not
“center[ ] on” an interpretation of a “FERC approved rate formula,” nor did the FAC seek
“damages permissible under” the NGA or FERC decisions. See id. Rather, the FAC alleged a
simple breach of contract claim. There was no indication that federal law created this cause of
action or played any role in Great Lakes’s right to relief.”)
In addition, the Seventh Circuit also recognized that FERC routinely declines to exercise
jurisdiction over state-law contract claims, stating:
FERC itself recognizes a role for state contract law in adjudicating contract disputes
involving federal tariffs. See Portland General Electric Co., 72 FERC ¶ 61009, at
*3 (July 5, 1995) (“our jurisdiction to settle disputes over the meaning of rate
schedules does not as a matter of law preclude state courts from entertaining
contract litigation....”); Arkansas Louisiana Gas Co. v. Hall, 7 FERC ¶ 61175, at
*3 (May 18, 1979) (discussing when FERC will exercise primary jurisdiction over
contract disputes that would otherwise be subject to state court jurisdiction); see
also PPL Montana, LLC, 96 FERC ¶ 61313 (Sept. 14, 2001) (deferring to state
courts to resolve power contract disputes). If the Federal Power Act completely
preempted state law causes of action, we would not expect FERC—the agency that
administers the statute—to recognize any role for state court adjudication of
contract disputes involving filed tariffs.
Ne. Rural Elec. Membership Corp., 707 F.3d at 896-897. In addition, where the tariff is marketbased, and therefore all rates are set by contract between the parties, FERC routinely expresses
that market-based rate disputes are contractual disputes not appropriate for the regulatory
commission to respond to. FERC has explained:
The Commission has a longstanding policy of minimizing involvement in
agreements with market-based rates. As a consequence, we have long held that
disputes over a contract for the sale of electric energy at negotiated, market-based
rates are more appropriately resolved in state courts or arbitration.
35
Clarksdale Pub. Utilities Comm'n, 93 FERC ¶ 61002, 61005–06 (Oct. 2, 2000).7
The Court agrees that tariffs have the force of federal law; however, the Court does not
find that federal law “creates the cause of action asserted” because the PSSAs between the
parties “exist[] apart from the filed tariffs and the [contract] fundamentally defines the parties'
respective obligations” and the Plaintiffs’ claim does not challenge the reasonableness of a
federal law, regulation, or tariff. Fla. Gas, 2009 WL 361592, at *4; see Newmont Nevada Energy
Inv., LLC v. Sierra Pac. Power Co., No. 3:12-CV-00349-RCJ-VPC, 2012 WL 4339572, at *6
(D. Nev. Sept. 20, 2012) (“When contract language ‘inform[s] the resolution of this matter’
rather than the federal tariff itself, there is no federal question jurisdiction.”) (citing, Pacific Gas
and Elec. Co. v. Ariz. Elec. Power Coop ., Inc., 479 F.Supp.2d 1113, 1125 (E.D.Cal.2007)).
In this case, the PSSAs were filed under the LaGen Tariff, which in relevant part states:
. . . 3. Rates: All sales shall be made at rates established by agreement between the
purchaser and Seller.
4. Other Terms and Conditions: All other terms and conditions shall be established
by agreement between the purchaser and Seller. . . .
(Doc. 188-5 at 4.) Therefore, as a market-based tariff, the LaGen Tariff acknowledges that the
parties have freedom of contract to set the rates and terms of their obligations. The PSSAs, while
created under the LaGen Tariff, exist apart from the LaGen Tariff and the PSSAs define the
parties’ obligations. Moreover, Plaintiffs do not challenge any provision of the LaGen Tariff or
allege that Defendant breached the terms of the LaGen Tariff. Instead, Plaintiffs challenge
whether LaGen breached its contractual obligation in the PSSAs. In resolving the breach of
See Dartmouth Power Assocs. Ltd. P'ship, 73 FERC ¶ 61096, 61309 (Oct. 18, 1995) (“The Agreement is for the
sale of electric energy at negotiated, market-based rates. The Agreement was expressly filed with the Commission
on this basis and was expressly accepted by the Commission on this basis. Now, a dispute has arisen as to the proper
calculation of the rates and billings under the Agreement. Where parties have negotiated the terms of their power
sales agreement in a competitive environment and the agreement has been accepted by the Commission on a market
basis, the Commission's policy has been to minimize its involvement in such negotiated arrangements. We see no
compelling reason to make an exception in the present dispute. Therefore, we will dismiss the complaints in this
case.”)
7
36
contract claim, a court will have to consider the context of LaGen Tariff, which has the force of a
federal regulation. But it does not follow that consideration of the LaGen Tariff for this purpose
means that the Plaintiffs’ claim for breach of the PSSAs arise under federal law. See Monforte
Expl. LLC v. ANR Pipeline Co., No. 09-3395, 2010 WL 143712, at *4 (S.D. Tex. Jan. 7, 2010)
(“Since resolving the breach of contract claim will likely require an analysis of the validity and
enforceability of the OFO under the FERC tariff, a court addressing this dispute will have to
consider federal law. This does not mean, however, that [Plaintiff’s] claim arises under federal
law.”); see also Michigan Elec. Transmission Co. v. Consumers Energy Co., No. 1:17-CV-259,
2018 WL 3146728, at *7 (W.D. Mich. Jan. 29, 2018) (“In short, the Court concludes that the fact
that the parties’ FERC-filed Agreements have the force of a federal regulation does not compel
the conclusion that METC’s state-law claims necessarily raise a federal issue, actually disputed
and substantial.”).
In conclusion, the Court concludes that there is not a federal law which creates, expressly
or impliedly a cause of action under which this case arises. This brings the Court to Plaintiff’s
alternative argument, i.e. that even if this case arises under state law, there is a federal
component in the case substantial enough that arising under jurisdiction still lies.
2. Substantial question of federal law under the Grable test
Under Grable, courts have declined to find federal question jurisdiction over the state law
claims involving a power service agreement. Great Lakes, 843 F.3d at 334; see Crosstex LIG,
LLC v. BG Energy Merchants, LLC, No. 3:11-CV-1259-B, 2011 WL 4368002, at *2 (N.D. Tex.
Sept. 16, 2011) (reasoning that where the terms of the tariff did not impact the resolution of the
case there is no federal question jurisdiction over a breach of contract case involving a service
agreement under the NGA); and Michigan Elec. Transmission Co. v. Consumers Energy Co.,
No. 1:17-CV-259, 2018 WL 3146728, at *7 (W.D. Mich. Jan. 29, 2018); see also Enable
37
Mississippi River Transmission, 844 F.3d at 499 (holding under the NGA that “[b]ecause no
element of a Louisiana civilian conversion claim requires the resolution of a federal law issue,
there is no federal question jurisdiction over this suit.”).
Under the first and second prongs, whether a federal issue is necessarily raised and
actually disputed, courts examining a breach of contract claim have gone both ways. For
example, as cited by Defendant, in Monforte Expl. L.L.C. v. ANR Pipeline Co., the Southern
District of Texas explained:
Since Monforte's petition only seeks relief for a breach of the Interconnect
Agreement under state law, the court concludes that it does not on its face raise a
federal question. Nor does the petition state “a federal issue, actually disputed and
substantial,” such that the state law claim would be removable to federal
court. See Grable, 125 S.Ct. at 2368. While federal law may well be relevant in
resolving the state law claim in this action, a Texas state court is competent to apply
federal law.
No. 09-3395, 2010 WL 143712, at *4 (S.D. Tex. Jan. 7, 2010); On the other hand, the Eighth
Circuit acknowledged that a federal issue may necessarily be raised and actually disputed by a
power service agreement under a federal tariff. Great Lakes, 843 F.3d at 332.
Under the first prong, Plaintiffs argue that by virtue of the PSSAs being filed with FERC
a federal issue is necessarily raised. The Court disagrees. As the court in Pacific Gas stated:
[t]he Plaintiffs are seeking to enforce a private contract between private parties
which will afford relief only if the contract terms, from wherever drawn, are found
to have been breached . . . it is not the federal tariff itself, standing as the law, that
will give life to the merits of Plaintiffs' claim. It is the contract language, standing
only as a representation of the agreement between the Parties, that will inform the
resolution of this matter. . . . On that same note, this is not a suit alleging violations
of the FPA itself or of any rule or regulation thereunder. Instead, this is a suit to
enforce a contract between private parties that has merely incorporated by reference
terms that are contained in a federal regulation.
479 F. Supp. 2d at 1125-26; see Enable Mississippi River Transmission, , 844 F.3d at 499
(holding under the NGA that “[b]ecause no element of a Louisiana civilian conversion claim
requires the resolution of a federal law issue, there is no federal question jurisdiction over this
38
suit.”). This case involves a contract between two parties formed under the terms of a federal
tariff. However, the federal tariff does not give life to the Plaintiffs’ claims because Plaintiffs
claims are limited to the interpretation of Section 10.4 of the PSSAs. There is no element of a
breach of contract claim under Louisiana law that requires the resolution of a federal law issue.
Therefore, this dispute does not necessarily raise a federal issue.
Under the second prong, whether the federal issue is actually disputed, the Court is also
unpersuaded by Plaintiffs arguments. Again, Plaintiffs argue that by virtue of filing the PSSAs
with FERC, a breach of contract claim presents an actually disputed federal issue. However, as
Defendant points out, determining whether Section 10.4 of the PSSAs was breached does not
implicate any terms of the LaGen Tariff and there are no allegations that the LaGen Tariff was
not “just and reasonable.”
Plaintiffs’ arguments regarding the Consent Decree, and the Clean Air Act regulations
are also unpersuasive. First, Plaintiffs’ reliance on cases decided prior to Grable are unavailing.
For example, in Ormet Corp. the court found federal question jurisdiction in a case where the
claims were for violations of federal environmental law and the terms of a prior consent decree.
Plaintiffs in this case are not parties to the Consent Decree. There are no allegations that the
Consent Decree or federal environmental law has been violated. Instead, the Clean Air Act
regulations and the Consent Decree are fact-specific frameworks that are implicated by breach of
contract arguments. Because neither the federal energy regulatory framework of the LaGen
Tariff nor the fact-specific framework of federal environmental law is actually disputed, the
Court finds that the federal issue is not actually disputed.
Under the third prong, the Supreme Court in Empire Healthchoice Assurance, Inc. v.
McVeigh, 547 U.S. 677, 700–701 (2006), recognized that substantial issues of federal law are
39
raised when there is a “nearly pure issue of law” that “could be settled once and for all and
thereafter would govern” the area of federal law. Id. at 701. The Supreme Court reasoned that
when a case is “fact-bound and situation-specific” the case does not present a substantial issue of
federal law. As Magistrate Judge Bourgeois explained:
The Supreme Court has not provided an exhaustive list of factors for determining
whether a federal issue is substantial. The lack of a private cause of action under
federal law is relevant to, but not dispositive of, the question of whether the right is
substantial enough to satisfy the exercise of federal jurisdiction. Merrell Dow
Pharm., Inc. v. Thompson, 478 U.S. 804, 814 n. 12 (1986). The Eastern District of
Louisiana has looked to the following factors in determining whether the
substantiality requirement of the Grable four-part inquiry is satisfied: (1) the
importance of the federal questions at stake; (2) whether the resolution of the
federal questions affects only the parties; (3) whether there is an express challenge
or a specific action of a federal agency or a collateral attack on a regulatory scheme;
and (4) whether nearly pure issues of law are at issue. Bd. of Comm'rs of the Se.
Louisiana Flood Prot. Authority–East v. Tennessee Gas Pipeline Co., LLC, 29
F.Supp.3d 808, 859–63 (E.D.La.2014) (finding federal question jurisdiction over
removed state court action where state flood control agency alleged that oil and gas
operations of 92 companies caused erosion of coastal lands that resulted in
increased flood risks from storm surges).
State v. Astrazeneca AB, No. 15-274-JWD-RLB, 2015 WL 5813342, at *4 (M.D. La. Sept. 14,
2015), report and recommendation adopted, No. 15-274-JWD-RLB, 2015 WL 5838487 (M.D.
La. Oct. 5, 2015).
Applying the third prong to PSSAs under the FPA, courts have found that the federal
issue is not substantial when the agreement is (1) fact-specific to the parties; (2) interpreted
under state law; and (3) does not otherwise challenge the terms of the tariff or the FPA. The
Eighth Circuit explained:
there is little national interest in having a federal court interpret tariff provisions if
it will merely apply state law [because] [a]ny interpretation by a federal court of
the language of the tariffs will only speak to how those tariffs should be construed
in this state. Accordingly, the reach of any such adjudication will not have federal
reverberation. In addition, to the extent federal interests are implicated, the state
court is quite competent to apply the language of the tariffs and is certainly well
positioned to do so where, as here, the tariff language is to be construed in accord
with state law.
40
Great Lakes, 843 F.3d at 332–33 (quoting Pacific Gas, 479 F.Supp.2d at 1123 (E.D. Cal. 2007);
Michigan Elec. Transmission Co. v. Consumers Energy Co., No. 1:17-CV-259, 2018 WL
3146728, at *6 (W.D. Mich. Jan. 29, 2018) (“Hence, even assuming arguendo that METC’s
state-law claims necessarily give rise to a disputed federal issue based on the force of their
Agreements, the federal issue is not substantial.”).
The Court is persuaded by the reasoning of the Eighth Circuit. In this case, the federal
issue is not substantial because: (1) the PSSAs are by agreement to be construed under Louisiana
state law, which minimizes the importance of the federal issue at stake as any interpretation will
not have an impact outside of the state; (2) the issues are fact specific to the parties in this case
and therefore affect only the parties; and (3) there is not an express or implied challenge of a
specific federal agency action as the Plaintiffs do not challenge the terms of the LaGen Tariff and
the federal environmental laws are merely a fact-specific framework; and (4) there is not a pure
issue of law at stake.
Under the fourth prong, the Eighth Circuit likewise explained how mandating federal
jurisdiction would disturb the federal-state balance approved by Congress, explaining:
First, the combination of no federal cause of action and no preemption of state
remedies serves as an important clue suggesting a congressionally approved
balance disfavoring federal involvement. Second, the presence of the exclusive
jurisdiction provision indicates that Congress did not intend this particular type of
case to end up in federal court, because exclusive jurisdiction over breach of
contract cases would result in the very disturbance that Grable warned against.
Specifically, exclusive federal jurisdiction over these cases would preclude state
courts from adjudicating contract disputes governed by their own state law. As the
Supreme Court has emphasized, when a statute mandates, rather than permits,
federal jurisdiction—thus depriving state courts of all ability to adjudicate certain
claims—our reluctance to endorse broad readings, if anything, grows stronger. Our
reluctance is especially heightened in this case because the interpretation of a
contract is ordinarily a matter of state law to which we defer.
Great Lakes, 843 F.3d at 334 (internal quotations and citations omitted.)
41
Again, the Court agrees with the reasoning of the Eighth Circuit. In this case, under the
fourth prong, the Court finds that it is not capable of resolving the case in federal court without
disrupting the federal-state balance approved by Congress. This is a breach of contract claim
brought under state law, and therefore interests of comity dictate that state courts have a strong
incentive in interpreting and enforcing the law of contracts in their state. While the state courts
may have to reference federal law, including the federal environmental framework within which
the dispute arose and the federal Consent Decree, the state courts are competent and able to do
so.
The Plaintiffs’ claims do not arise under federal law and do not present a federal issue
that is necessarily raised, actually disputed, and substantial and which will not disrupt the
federal-state court balance envisioned by Congress; therefore, the Court finds there is no federal
question jurisdiction in this case. The Court likewise denies Plaintiffs request for sanctions.
CONCLUSION
IT IS ORDERED that the Defendant’s Motion to Dismiss for Lack of Subject Matter
Jurisdiction (Doc. 183) is GRANTED;
IT IS FURTHER ORDERED that the case is DISMISSED; and
IT IS FURTHER ORDERED that all pending motions are therefore DENIED AS
MOOT.
Signed in Baton Rouge, Louisiana, on February 18, 20202.
S
JUDGE JOHN W. deGRAVELLES
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
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