Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-15-05082/USCOURTS-ca13-15-05082-0/pdf.json

Parties Involved:
California Department of Water Resources
Appellant
Pacific Gas and Electric Company
Appellant
People of the State of California Ex Rel. Edmund G. Brown Jr., Attorney General of the State of California
Appellant
San Diego Gas & Electric Company
Appellant
Southern California Edison Company
Appellant
United States
Appellee

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

PACIFIC GAS AND ELECTRIC COMPANY, 

SOUTHERN CALIFORNIA EDISON COMPANY, 

SAN DIEGO GAS & ELECTRIC COMPANY, 

PEOPLE OF THE STATE OF CALIFORNIA EX REL. 

EDMUND G. BROWN JR., ATTORNEY GENERAL 

OF THE STATE OF CALIFORNIA, CALIFORNIA 

DEPARTMENT OF WATER RESOURCES, BY AND 

THROUGH ITS CALIFORNIA ENERGY 

RESOURCES SCHEDULING DIVISION,

Plaintiffs-Appellants

v.

UNITED STATES,

Defendant-Appellee

______________________ 

2015-5082

______________________ 

Appeal from the United States Court of Federal 

Claims in Nos. 1:07-cv-00157-SGB, 1:07-cv-00167-SGB, 

1:07-cv-00184-SGB, Judge Susan G. Braden.

______________________ 

October 3, 2016 

______________________ 

CARTER GLASGOW PHILLIPS, Sidley Austin LLP, Washington, DC, argued for plaintiffs-appellants. Also repreCase: 15-5082 Document: 105-2 Page: 1 Filed: 10/03/2016
2 PACIFIC GAS AND ELECTRIC CO. v. US

sented by TOBIAS SAMUEL LOSS-EATON, QUIN M.

SORENSON; MARIE L. FIALA, San Francisco, CA; STAN 

BERMAN, Seattle, WA. 

JANE IRENE RYAN, Steptoe & Johnson, LLP, Washington, DC for plaintiff-appellant Southern California Edison 

Company. Also represented by HEATHER HORNE. 

MARK FOGELMAN, Friedman & Springwater, LLP, San 

Francisco, CA, for plaintiff-appellant San Diego Gas & 

Electric Company. Also represented by RUTH STONER 

MUZZIN. 

GARY ALEXANDER, Office of the Attorney General, California Department of Justice, San Francisco, CA, for 

plaintiffs-appellants People of the State of California Ex 

Rel. Edmund G. Brown, Jr., Attorney General of the State 

of California, California Department of Water Resources.

JAMES R. SWEET, Commercial Litigation Branch, Civil 

Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented 

by BENJAMIN C. MIZER, ROBERT E. KIRSCHMAN, JR.,

MARTIN F. HOCKEY, JR.; MARK WILLIAM PENNAK, Appellate 

Staff, Civil Division, United States Department of Justice, 

Washington, DC. 

CANDACE J. MOREY, California Public Utilities Commission, San Francisco, CA, for amicus curiae Public 

Utilities Commission of the State of California. Also 

represented by AROCLES AGUILAR. 

JAMES BRADFORD RAMSAY, National Association of 

Regulatory Utility Commissioners, Washington, DC, for 

amicus curiae National Association of Regulatory Utility 

Commissioners.

______________________ 

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PACIFIC GAS AND ELECTRIC CO. v. US 3

Before NEWMAN, DYK, and WALLACH, Circuit Judges.

Opinion for the court filed by Circuit Judge DYK. 

Dissenting opinion filed by Circuit Judge NEWMAN. 

DYK, Circuit Judge. 

Pacific Gas and Electric Company, Southern California Edison Company, San Diego Gas & Electric Company, 

and the state of California (collectively, “appellants”),

brought suit against the United States claiming that two

federal government agencies selling electricity (the Western Area Power Administration and the Bonneville Power 

Administration) (collectively, “the government”) overcharged appellants for electricity. 

The United States Court of Federal Claims (the 

“Claims Court”) dismissed their breach of contract action

for lack of standing. Appellants appeal. We conclude that 

appellants lack privity of contract or any other relationship with the government that would confer standing. 

Because appellants lack standing, we affirm. This does 

not, however, suggest that appellants were without a 

remedy for the alleged overcharges against the parties

with whom they are in contractual privity—two California

electricity exchanges—or that the exchanges lacked a 

breach of contract remedy for overcharges against the 

government agencies that sold them electric power. 

BACKGROUND

I 

Under the Tucker Act, the Claims Court has jurisdiction over contract cases in which the government is a 

party. See 28 U.S.C. § 1491(a)(1); Gonzales & Gonzales 

Bonds & Ins. Agency v. Dept. of Homeland Sec., 490 F.3d 

940, 943 (Fed. Cir. 2007). Normally, a contract between 

the plaintiff and the United States is required to establish 

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4 PACIFIC GAS AND ELECTRIC CO. v. US

standing to sue the government on a contract claim. S. 

Cal. Fed. Sav. & Loan Ass’n v. United States, 422 F.3d 

1319, 1328 (Fed. Cir. 2005) (“A plaintiff must be in privity 

with the United States to have standing to sue the sovereign on a contract claim.”). 

This case involves the purchase and sale of electricity 

in the California market. Appellants contend that they 

were overcharged for electricity during the period from 

October 2, 2000, to June 20, 2001 (“the 2000–2001 period”), and seek to recover the overcharges from the United 

States based on sales by two federal government agencies—the Western Area Power Administration (“WAPA”) 

and the Bonneville Power Administration (“BPA”). Two 

exchanges were involved in these transactions—the 

California Power Exchange (“Cal-PX”) and the California 

Independent System Operator (“Cal-ISO”). These exchanges were responsible for acquiring and distributing 

electricity between producers and consumers in California 

and setting prices for the electricity. The basic question is 

whether purchase and sale contracts existed between the

exchanges, on the one hand, and the appellants and 

defendant government agencies, on the other, or whether 

the contracts were between the appellants and the government agencies—the consumers and producers of 

electric power. If the contracts were between the exchanges and market participants individually, appellants’ 

remedy is against the exchanges. If the contracts were 

between the consumers and producers of electricity, 

appellants’ remedy is against the government producers. 

Appellants contend that a contract existed between 

two groups—one group consisting of all consumers of 

electricity (including appellants) and the other group 

consisting of all producers of electricity (including the 

government agencies) in California. Under appellants’ 

theory, appellants and all other power consumers are in 

privity of contract with all producers in the California 

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PACIFIC GAS AND ELECTRIC CO. v. US 5

markets, including the government sellers. The government, on the other hand, contends that the contracts were

only between the middleman entities that facilitated and 

operated the California electricity markets—Cal-PX and 

Cal-ISO—and the consumers and producers individually. 

Under the government’s theory, appellants are in privity 

of contract with Cal-PX and Cal-ISO, and the government 

is also in privity of contract with Cal-PX and Cal-ISO, but 

appellants are not in privity with the government. 

II

On the face of it, the only contracts here were between 

the exchanges—Cal-PX and Cal-ISO—and individual 

market participants (the consumers and producers). Both 

of these exchanges entered into individual contracts with 

each of the consumers and producers of electricity. The 

basis for appellants’ alternative theory requires some 

understanding of the background. 

In the late 1990s, California restructured and deregulated its energy market. In 1996, California established 

two non-profit organizations to acquire and distribute 

electricity and to otherwise organize and supervise all of 

the wholesale energy transactions in the state. One nonprofit, Cal-PX, was designed to facilitate and conduct all 

wholesale electric power transactions for the state of 

California. Cal-PX’s responsibilities included, inter alia, 

collecting supply and demand bids from sellers and buyers of wholesale electricity respectively, processing those 

bids to develop aggregate supply and demand curves from 

the total pool of bids received, setting a market clearing 

price based on the intersection point of the aggregate 

supply and demand curves, preparing financial settlements by issuing statements to all market participants, 

establishing a calendar for payment, and settling payment individually with each market participant by debiting or crediting its Cal-PX account. Cal-PX was also 

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6 PACIFIC GAS AND ELECTRIC CO. v. US

responsible for determining the proper distribution of 

funds in the event of an overpayment, collecting the 

overpaid funds from the overpaid participants, and remitting those funds to the market participants who overpaid.

The other exchange, Cal-ISO, was established to assume operational control over all of California’s electric 

transmission facilities and ensure supply and demand on 

a real-time basis. Cal-ISO was responsible for, inter alia, 

operating the transmission grid, ensuring the necessary 

supply of energy, maintaining nondiscriminatory access to 

the grid, purchasing and providing ancillary services, and 

maintaining a real-time spot market for electricity to 

balance out any last-minute disparities between supply 

and demand in the Cal-PX market. In this regard, CalISO operated as a back-up to the primary Cal-PX market 

for wholesale energy. 

Cal-PX and Cal-ISO filed tariffs with the Federal Energy Regulatory Commission (“FERC”), the independent 

federal agency with regulatory authority over the interstate sale of all wholesale electricity and transmission 

service. The tariffs (“Cal-PX Tariff” and “Cal-ISO Tariff,” 

respectively) established the terms and conditions of 

service and rates for the California markets. The Cal-PX 

Tariff and the Cal-ISO Tariff both contained clauses 

known in the industry as Memphis clauses, which preserved the ability of consumers and producers in the 

California markets to exercise their rights under the 

Federal Power Act (“FPA”) to petition FERC for a change 

in the terms or rates of the tariffs. 

All consumers and producers of wholesale energy in 

the California markets entered into individual agreements with Cal-PX and Cal-ISO, known as participation 

agreements. Every Cal-PX participation agreement 

incorporated the Cal-PX Tariff, and every Cal-ISO participation agreement incorporated the Cal-ISO Tariff. None 

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PACIFIC GAS AND ELECTRIC CO. v. US 7

of the consumers and producers of wholesale energy

purported to contract directly with one another; rather, 

all participants in the California markets executed separate participation agreements with Cal-PX and Cal-ISO 

only. Indeed, individual contracts between consumers 

and producers were not feasible since electricity is fungible, and purchases and sales of electricity could not be 

traced to particular consumers and producers in the 

California markets. 

Appellants entered into participation agreements 

with Cal-PX and Cal-ISO shortly after California deregulated the market to purchase electricity. WAPA and BPA, 

the defendant federal power-producing administrations, 

also executed participation agreements with Cal-PX and 

Cal-ISO. No agreements were executed between appellants and the federal agencies. In 1999, the government

agencies began selling energy into the California markets 

through Cal-PX and Cal-ISO, along with many other 

sellers. Appellants were among the many consumers of 

that energy. 

To transact energy in California, potential consumers 

and producers submitted bids to Cal-PX to buy or sell 

wholesale electric power. Based on all of the bids received, Cal-PX compiled supply and demand curves to 

calculate a “market price” that it then applied uniformly 

to all transactions within a given market. Consumers

paid Cal-PX, which organized and disbursed the funds to 

sellers in proportion to the amount of energy each supplied. Consumers never paid producers directly. Cal-ISO 

operated in a similar fashion. In this way, Cal-PX and 

Cal-ISO served as exchanges or centralized clearinghouses, acquiring electric power from producers and distributing it to consumers and otherwise facilitating wholesale 

energy transactions for market participants pursuant to 

the conditions and constraints imposed by the governing 

tariffs. 

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8 PACIFIC GAS AND ELECTRIC CO. v. US

As a result of the method of pricing in the California 

energy market, appellants contend that they and each of 

the many other consumers were overcharged for purchases during the 2000–2001 period, allegedly as a result of 

improper pricing mechanisms. Cal-PX set prices on an 

hourly basis to satisfy short-term demand for “spot markets.” While Cal-PX also set prices over a larger period 

for long-term or “forward contract” markets, most purchases and sales were in the spot markets. Pac. Gas & 

Elec. Co. v. United States, 122 Fed. Cl. 315, 322–23 

(2015). Appellants and other consumers became subject 

to unstable spot market purchases. “Sellers quickly 

learned that the California spot markets could be manipulated by withholding power . . . to create scarcity and then 

demanding extremely high prices when scarcity was 

probable.” Pub. Utilities Comm’n of Cal. v. FERC, 462 

F.3d 1027, 1039 (9th Cir. 2006). By May 2000, the price 

of wholesale power in the California markets doubled. 

Blackouts rolled across the state as it descended into an 

energy crisis. 

By August 2000, appellants and all other consumers

were charged prices three to four times greater than the 

market rates of less than a year earlier. Appellants 

believed the rates established by the exchanges were 

unjust and unreasonable. Appellants sought relief by 

filing a complaint with FERC, which, with respect to nongovernment entities, has the authority to set an effective 

date, determine whether rates charged after that date are 

unjust and unreasonable, and order refunds for rates 

charged after that date if it determines that they are

unjust and unreasonable. Here, FERC set an effective 

date of October 2, 2000, determined that rates charged 

after that date were unjust and unreasonable, and ordered that refunds be paid by all sellers in the California 

market. 

A series of appeals to the Ninth Circuit ensued. As is 

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PACIFIC GAS AND ELECTRIC CO. v. US 9

relevant here, the Ninth Circuit held that FERC lacked 

jurisdiction to order the government to pay refunds, 

Bonneville Power Admin. v. FERC, 422 F.3d 908, 926 (9th 

Cir. 2005), a determination that is not now contested. 

This was so because government agencies are not subject 

to FERC jurisdiction, as § 201(f) of the Federal Power Act 

makes clear: “No provision of this subchapter shall apply 

to . . . the United States . . . or any agency, authority, or 

instrumentality [thereof].” 16 U.S.C. § 824(f); see also 

Bonneville, 422 F.3d at 920. Although FERC lacked the 

authority to order the government to pay refunds, the 

Ninth Circuit upheld FERC’s ability to find the rates 

charged by all sellers, including the government agencies, 

to be unjust and unreasonable. See City of Redding v. 

FERC, 693 F.3d 828, 841 (9th Cir. 2012) (explaining that 

to the extent that FERC revised or reset the market rate 

for the 2000–2001 period, this was within FERC’s authority, as it “necessarily involved reevaluating the price 

previously charged by all market participants because the 

market clearing price was the same for all of them”). 

Since FERC lacked jurisdiction to order refunds by 

the government,1 appellants brought this breach of contract action in the Claims Court, alleging that the government producers had breached agreements between the 

consumers and producers by overcharging appellants and 

all other consumers and by failing to pay a refund for 

unjust and unreasonable prices charged during the 2000–

 

1 Later, in August 2005, Congress passed legislation to amend FERC’s § 206 refund authority, extending it 

to cover certain federal entities if they voluntarily make 

short-term sales of electricity of more than 8 million MWh 

per year. See Energy Policy Act of 2005, Pub. L. No. 109-

58, § 1286, 119 Stat. 594, 981; see also Bonneville, 422 

F.3d at 921 n.10. This legislation is inapplicable here. 

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10 PACIFIC GAS AND ELECTRIC CO. v. US

2001 period. 

After a trial, Judge Smith found in favor of appellants. See Pac. Gas & Elec. Co. v. United States, 105 Fed. 

Cl. 420, 440 (2012). Judge Smith held that “the facts at 

trial showed that the Agencies contracted with and owe 

contract obligations to [appellants].” Id. at 432. In his 

view, Cal-PX and Cal-ISO “were pass-through entities or 

clearinghouses” only, and he therefore concluded that “the 

payment obligations were between the buyer [consumer]

and seller [producer].” Id. at 432–33. Judge Smith further held that the government had breached its contract 

with appellants by failing to pay refunds. See id. at 439–

40. 

Before the damages-phase proceedings began, Judge 

Smith retired from the bench. His successor, Judge 

Braden, vacated Judge Smith’s opinions and dismissed 

the case for, inter alia, lack of standing. Pacific Gas, 122 

Fed. Cl. at 329–335, 343. Judge Braden held that while 

appellants were in privity of contract with the exchanges, 

they lacked privity with the government. See id. at 331. 

Judge Braden further held that appellants failed to 

demonstrate the existence of an agency relationship 

between the government and the exchanges, see id. at 

334–35, and failed to demonstrate that appellants were 

third-party beneficiaries of the government’s contracts 

with the exchanges, see id. at 332–34.2 This appeal 

followed. We have jurisdiction pursuant to 28 U.S.C. 

§ 1295(a)(3). 

 

2 Judge Braden additionally held that the Claims 

Court lacked subject matter jurisdiction, see id. at 336–37, 

and that, assuming appellants have standing, appellants’ 

breach of contract claim failed on the merits, see id. at 

341–43. In light of our resolution based on standing, we 

need not address these other issues. 

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PACIFIC GAS AND ELECTRIC CO. v. US 11

DISCUSSION

I 

Appellants first contend that Judge Braden violated 

the law of the case doctrine by vacating Judge Smith’s 

rulings. 

According to appellants, the law of the case doctrine 

“counsels particular caution when one judge is asked—or, 

as here, decides sua sponte—to reconsider her predecessor’s decisions.” Br. of Appellants at 32–33. Appellants 

assert that this case should be remanded because Judge 

Braden’s decision to reconsider Judge Smith’s decisions 

constituted an abuse of discretion. 

But the dispositive issue addressed on reconsideration 

here—standing—is a pure issue of law, which we review 

de novo. See S. Cal. Fed. Sav. & Loan Ass’n, 422 F.3d 

1319, 1328 (Fed. Cir. 2005).3 And the question of standing here depends on contract interpretation, which also is 

a question of law that we review de novo. See, e.g., S. 

Nuclear Operating Co. v. United States, 637 F.3d 1297, 

1301 (Fed. Cir. 2011). Indeed, appellants agree that 

“Judge Braden’s specific errors in interpreting the contracts and the Ninth Circuit’s decisions were purely legal, 

and are therefore subject to plenary review.” Br. of Appellants at 62 n.11. Judge Smith’s contract interpretation 

was also legal in character. Judge Smith made no rele-

 

3 See also DaimlerChrysler Corp. v. Cuno, 547 U.S. 

332, 340 (2006) (Every court has an “obligation to assure 

[itself] of litigants’ standing under Article III.” (internal 

quotation marks and citation omitted)); Am. Canoe Ass’n 

v. Murphy Farms, Inc., 326 F.3d 505, 515 (4th Cir. 2003) 

(“Article III standing in particular . . . represents perhaps 

the most important of all jurisdictional requirements.” 

(internal quotation marks and citation omitted)). 

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12 PACIFIC GAS AND ELECTRIC CO. v. US

vant findings of fact with respect to interpretation of the 

contract provisions at issue.4 See, e.g., Thatcher v. Kohl’s 

Dept. Stores, Inc., 397 F.3d 1370, 1373 (Fed. Cir. 2005). 

Accordingly, even if appellants could demonstrate that 

Judge Braden erred in reconsidering Judge Smith’s 

interlocutory decisions, they have suffered no prejudice, 

since our review of both decisions of the Claims Court is 

de novo. We thus proceed to consider the issue of stand-

 

4 Appellants contend that “evidence of trade practice and custom plays an important role in contract interpretation,” Metric Constructors, Inc. v. Nat’l Aeronautics 

& Space Admin., 169 F.3d 747, 752 (Fed. Cir. 1999), and 

therefore that Judge Smith’s consideration of testimony 

regarding the “industry’s established understanding of 

the tariff language,” in particular with respect to the 

Memphis clauses, is owed deference. Reply Br. of Appellants at 6. Appellants rely heavily on testimony of their 

former employees and former employees of Cal-PX as to 

the significance of various tariff provisions, but appellants 

point to no testimony that establishes “a contract term 

having an accepted industry meaning different from its 

ordinary meaning” of the sort required for evidence of 

trade practice to be relevant in contract interpretation. 

See, e.g., TEG-Paradigm Envtl., Inc. v. United States, 465 

F.3d 1329, 1338 (Fed. Cir. 2006) (internal quotation 

marks and citation omitted). 

The extrinsic evidence presented in this case simply 

established that the Memphis clauses were understood in 

the industry as meaning what they said: market participants retained authority to petition FERC for a determination of whether the prices charged were just and 

reasonable, a finding that is not relevant to the issue 

before us, as discussed below. The issue of contract 

interpretation here remains a pure question of law which 

we review de novo. 

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PACIFIC GAS AND ELECTRIC CO. v. US 13

ing. S. Cal. Fed. Sav. & Loan Ass’n, 422 F.3d at 1328. 

II

As noted above, typically “[t]o have standing to sue 

the sovereign on a contract claim, a plaintiff must be in 

privity of contract with the United States,” Anderson v. 

United States, 344 F.3d 1343, 1351 (Fed. Cir. 2003), and 

“[s]tanding is a threshold jurisdictional issue that implicates Article III of the Constitution.” S. Cal. Fed. Sav. & 

Loan Ass’n, 422 F.3d at 1328. “Not only is privity a 

fundamental requirement of contract law, but it takes on 

even greater significance in cases such as this, because 

the ‘government consents to be sued only by those with 

whom it has privity of contract.’” Id. (quoting Erickson 

Air Crane Co. of Wash. v. United States, 731 F.2d 810, 813 

(Fed. Cir. 1984)). “The effect of finding privity of contract 

between a party and the United States is to find a waiver 

of sovereign immunity.” Cienega Gardens v. United 

States, 194 F.3d 1231, 1239 (Fed. Cir. 1998). We do not 

lightly presume that the government’s actions give rise to 

contractual obligations when the government is not a 

named party to the contract in dispute. See United States 

v. Algoma Lumber Co., 305 U.S. 415, 421 (1939). 

Limited exceptions to the privity requirement have 

been recognized when a “party standing outside of privity

by contractual obligation stands in the shoes of a party 

within privity,” such as when a party can demonstrate 

that it was an intended third-party beneficiary under the 

contract, see, e.g., First Hartford Corp. Pension Plan & Tr.

v. United States, 194 F.3d 1279, 1289 (Fed. Cir. 1999), or 

when a party can demonstrate that a prime contractor 

acted as purchasing agent on behalf of the government in 

contracting with a subcontractor. See Nat’l Leased Hous. 

Ass’n v. United States, 105 F.3d 1423, 1435–36 (Fed. Cir. 

1997); United States v. Johnson Controls, Inc., 713 F.2d 

1541, 1551 (Fed. Cir. 1983). 

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14 PACIFIC GAS AND ELECTRIC CO. v. US

III

We first address the issue of contractual privity, addressing later in this opinion appellants’ alternative 

theories of agency and third-party beneficiary. The 

government argues that the only contracts for the purchase and sale of electricity here were between each 

market participant and the exchanges. We agree. There 

is no question that each of the many buyers and sellers 

entered into contracts with the exchanges. Each individual participant in the California markets executed a 

contract with one or both exchanges incorporating the 

relevant tariff. Each contract described the parties as 

being the individual participant and the exchange only. 

For example, BPA’s contract with Cal-PX explicitly provided that “THIS AGREEMENT . . . is entered into, by 

and between: (1) BONNEVILLE POWER 

ADMINISTRATION . . . and (2) THE CALIFORNIA 

POWER EXCHANGE CORPORATION.” J.A. 424. No 

parties other than the individual participant and the 

relevant exchange were listed on any contract. 

While the Uniform Commercial Code (“UCC”) does not 

apply directly to government contracts, see, e.g., GAF 

Corp. v. United States, 932 F.2d 947, 951 (Fed. Cir. 1991), 

the UCC “provides useful guidance in applying general 

contract principles,” Hughes Commc’ns Galaxy, Inc. v. 

United States, 271 F.3d 1060, 1066 (Fed. Cir. 2001); see 

also Diversified Energy, Inc. v. Tenn. Valley Auth., 339 

F.3d 437, 446 n.9 (6th Cir. 2003); Tech. Assistance Int’l, 

Inc. v. United States, 150 F.3d 1369, 1372 (Fed. Cir. 

1998). The parties appear to agree that the provision of 

electricity involves the sale of a good which would invoke 

the UCC. See, e.g., Br. of Appellants at 41 (“Here . . . the 

Agencies sold the power itself—which is personal property 

under [41 U.S.C.] § 7102(a)(4) . . . .”). Indeed, we would 

lack jurisdiction under the Contract Disputes Act if the 

contracts were interpreted as involving the provision of 

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PACIFIC GAS AND ELECTRIC CO. v. US 15

services rather than goods. See 41 U.S.C. § 7102(a). 

Under the Supreme Court’s decision in United States v. 

Eurodif, S.A., the fact that electricity is fungible suggests 

that the exchanges bought from and sold electricity to 

market participants, rather than merely facilitating a 

transfer between producers and consumers. See 555 U.S. 

305, 319–20 (2009) (explaining that a transaction involving a fungible product is more likely to be viewed as the 

sale of a good as opposed to the sale of a service).5 

On the face of the agreements, the exchanges were 

performing a typical middleman function with respect to 

transactions in goods as described in commentary on the 

UCC. See Lary Lawrence, 2 Lawrence’s Anderson on the 

Uniform Commercial Code, §§ 2-103:18, 103:44 (3d ed. 

2012). Under typical middleman contracts, “courts will 

treat as a buyer [and seller] a middleman who contracts 

for the sale of goods to be delivered to a third person.” 

Lawrence, at § 2-103:18; see also id. at §§ 2-103:19, 

103:44–45. Though the title to the electricity passes 

directly from producers to consumers, the UCC makes 

quite clear that this is not inconsistent with a middleman 

contract for purchase and sale. “A middleman making a 

contract . . . is a ‘seller’ for the purpose of Article 2, even 

though the middleman does not have, [nor] will ever have, 

title to the goods, as title is to pass directly from the 

 

5 Some cases suggest that the provision of water or 

electricity involves the provision of services, see, e.g., 

Mattoon v. City of Pittsfield, 775 N.E. 2d 770, 783 (Mass. 

App. Ct. 2002) (water); Sterling Power Partners, L.P. v. 

Niagara Mohawk Power Corp., 657 N.Y.S.2d 407, 407 

(App. Div. 1997) (electricity), but often such suggestion 

arises only because courts have concluded that the provision of water or electricity involves both a service and a 

good. E.g., Mattoon, 775 N.E. 2d at 783. 

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16 PACIFIC GAS AND ELECTRIC CO. v. US

supplier to the customer of the middleman.” Id. at § 2-

103:45. 

The incorporated tariffs confirm this reading. On 

their face the tariffs contemplate that the exchanges will 

acquire energy from the producers and transfer it to the 

consumers. See, e.g., S.A. 15 (“[Cal-PX] shall . . . allocate 

to PX Participants costs incurred by the PX under this 

Tariff and the ISO Tariff in . . . buying or selling Energy

. . . .” (emphasis added)); S.A. 119 (“The PX shall settle 

with each PX Participant for Energy traded . . . . Each PX 

Seller shall be credited with an amount equal to its 

scheduled sales of Energy . . . . Each PX Buyer shall be 

debited by the PX with an amount equal to its scheduled 

purchase of Energy . . . .” (emphasis added)); S.A. 337 

(Cal-ISO “shall purchase Ancillary Services capacity.” 

(emphasis added)); S.A. 513 (“Unstructured Imbalance 

Energy attributable to each [market participant] for each 

Settlement Period in the relevant Zone shall be deemed to 

be sold or purchased, as the case may be, by the ISO . . . .” 

(emphasis added)); S.A. 519; S.A. 339; S.A. 381. 

The tariffs do not just contemplate that the exchanges 

will provide and distribute electric power; rather, they 

also contemplate that the exchanges will set the price of 

the electricity itself. See, e.g., J.A. 456. The tariffs were 

also clear that in the event of an overcharge by the producers (the allegation here), the producers were obligated 

to make payment to the exchange, not the consumers

directly. See, e.g., S.A. 59 (“Each PX Participant acknowledges that it incurs separate financial obligations to the 

PX in respect to its PX Core Market Transactions . . . . 

All PX Participants shall honor their obligations to pay all 

of the amounts owed to the PX in a timely manner.” (emphasis added)); S.A. 60 (“If for any reason a PX Creditor 

receives on any Payment Date more than the amount to 

which it is entitled under the PX Tariff, . . . [it] shall 

forthwith pay the excess amount into a PX Account speciCase: 15-5082 Document: 105-2 Page: 16 Filed: 10/03/2016
PACIFIC GAS AND ELECTRIC CO. v. US 17

fied by the PX.” (emphasis added)); S.A. 528–29 (“If for 

any reason . . . a [market participant] receives an overpayment . . . [it] shall forthwith pay the overpayment into 

an ISO Account specified by the ISO.”); S.A. 529 (“The 

ISO shall be responsible for payment to those entitled to 

the sum which has been overpaid.”). 

This arrangement is confirmed by other provisions of 

the tariffs concerning settlement obligations. With respect to payment, for example, the Cal-PX Tariff explains 

that “[t]he PX shall settle with each PX Participant for 

Energy traded in the PX Markets in the manner set forth 

in Schedule 6.” J.A. 466 (emphasis added). Neither tariff 

contemplates direct payment from consumers to producers, or vice versa; indeed, such payment would be impossible because specific buyers were never matched with 

and could not be identified by specific sellers. Instead, 

Cal-PX allocated payment and energy in proportion to the 

bids submitted by each participant. Cal-PX was responsible for calculating, collecting, and disbursing all payments 

for energy on the market. “The PX shall (1) calculate the 

prices at which trades in Energy are transacted in the PX 

Markets, (2) settle trades in Energy between PX Participants, (3) . . . allocate to PX Participants costs incurred by 

the PX under this Tariff . . . [and] (4) prepare and distribute to PX Participants invoices . . . .” J.A. 456. The 

same was true with respect to Cal-ISO. 

Appellants argue that these participant/exchange contracts nonetheless should not be interpreted as contracts 

for the purchase and sale of goods because of two types of 

provisions appearing in the tariffs. First, there is a 

provision in the Cal-PX Tariff which purports to limit the 

exchange’s role in the energy transactions: Cal-PX “will 

not be, and shall not be deemed to be, a counterparty to 

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18 PACIFIC GAS AND ELECTRIC CO. v. US

any trade transacted through the PX Markets.” J.A. 457.6 

The meaning of this provision in the Cal-PX Tariff is 

unclear. “Counterparty” is defined as “the party with 

whom one is consummating a contract.” Counterparty, 

Black’s Law Dictionary (10th ed. 2014). But it is undisputed here that Cal-PX contracted directly with each 

market participant. In saying that the exchange is not a 

counterparty to any “trade,” the above provision appears 

only to provide that Cal-PX did not take title to any of the 

energy transferred. As described, this is consistent with 

Cal-PX’s role as a middleman. See Lawrence, at § 2-

103:44. 

In any event, the counterparty provision cannot be

read to bar the existence of a purchase and sale contract 

between the exchanges and each individual market participant, because such a provision would directly conflict

with all of the provisions discussed above which clearly 

contemplate that Cal-PX, as middleman, contracted for 

the purchase and sale of electricity. When there is an 

apparent conflict between contractual provisions, we

“enforce the clause[s] relatively more important or principal to the contract.” 11 Williston on Contracts § 32:15 

(4th ed. 2016). Thus, for example, in Oleson v. Bergwell, 

283 N.W. 770 (Minn. 1939), the court held that a contract

containing many provisions contemplating the outright 

sale of stock should be construed to provide for a sale even 

though the agreement stated that it “shall be deemed and 

considered by the parties as an option to purchase.” Id. at

 

6 As discussed below in section VIII, there are also 

provisions that are claimed to create an agency relationship. These provisions do not prevent the existence of 

purchase and sale contracts between the exchanges and 

individual market participants, but rather form the basis 

of appellants’ argument regarding agency. 

Case: 15-5082 Document: 105-2 Page: 18 Filed: 10/03/2016
PACIFIC GAS AND ELECTRIC CO. v. US 19

772 (emphasis added). Because “the principal purpose of 

this contract was to effectuate a sale,” id. at 773, the court 

treated the contract as a sales contract. See id.; see also 

Nicholas Acoustics & Specialty Co. v. H & M Constr. Co., 

695 F.2d 839, 843 (5th Cir. 1983) (enforcing the “dominant” of two conflicting contract provisions by considering 

the “tenor” of the agreement as a whole). 

Here, the lone provision cited by appellants purporting to limit Cal-PX’s role is vastly outweighed in both 

number and significance by the other provisions of the 

tariff, which clearly establish Cal-PX’s role as a middleman purchasing and selling electricity. Accordingly, we 

do not read the counterparty provision as disclaiming the 

existence of a middleman contract for the purchase and 

sale of electricity. There is, moreover, no similar provision in the Cal-ISO Tariff. 

Second, appellants rely on provisions that appear to 

contemplate that suits may be brought by one participant 

against another. Significantly, as described below, these 

provisions do not suggest that the groups of all consumers 

and producers are collectively liable to each other, as 

appellants contend. In any case, these provisions hardly 

suggest that suits may not be brought by participants 

against the exchanges or that there are no purchase and 

sale contracts between the market participants and the 

exchanges. Indeed, as described below, the tariffs make 

clear that the exchanges had remedies against defaulting 

participants.7 

 

7 There are also provisions in the tariffs which limit 

the exchanges’ liability to acts of negligence or intentional 

wrongdoing. See S.A. 30 (Cal-PX “shall not be liable in 

damages to any PX Participant for any losses, damages, 

claims, liability, costs or expenses (including legal exCase: 15-5082 Document: 105-2 Page: 19 Filed: 10/03/2016
20 PACIFIC GAS AND ELECTRIC CO. v. US

We conclude that the contracts between the exchanges and the participants are middleman contracts for the 

purchase and sale of electricity. 

IV

Appellants nonetheless contend that the above events 

should be construed as involving contracts directly between the groups of purchasers and consumers of electricity in the California markets. Appellants concede that 

there are no individual agreements between consumers

and producers. The only documents that purport to be 

contractual agreements are the agreements between the 

exchanges and the consumers and producers of electricity. 

As discussed, those agreements on their face are agreements between a particular consumer or producer and 

each exchange. Appellants’ theory is instead that the 

agreement of each of the consumers and producers to 

abide by the tariff creates an agreement between all 

consumers, on the one hand, and all producers, on the 

other. No written document purports to be such an 

agreement, and the various provisions on which appellants rely cannot be read to create such an agreement. 

Appellants originally argued that the Memphis clauses in the Cal-PX and Cal-ISO tariffs (incorporated into 

each individual contract) somehow established a contractual obligation by the government agencies to pay refunds 

in accordance with the FERC order to appellants. Appel-

 

penses) arising from the performance or non-performance 

of its obligations under this Tariff, except to the extent 

that they result from negligence or intentional wrongdoing on the part of [Cal-PX].”); S.A. 550 (same for Cal-ISO). 

We need not decide what limitations these provisions 

might impose on the ability of the consumers to recover 

from the exchanges. 

Case: 15-5082 Document: 105-2 Page: 20 Filed: 10/03/2016
PACIFIC GAS AND ELECTRIC CO. v. US 21

lants have now abandoned this argument, and wisely so. 

The Memphis clauses simply provide that “[n]othing 

contained in this Tariff or any service or participation 

agreement shall be construed as affecting, in any way, the 

ability of any PX Participant receiving service under this 

Tariff to exercise its rights under Section 206 of the FPA 

and pursuant to FERC’s rules and regulations promulgated thereunder.” J.A. 471; see also J.A. 1040 (Cal-ISO 

Tariff). While the Memphis clauses preserve the market 

participants’ rights to petition FERC to limit unjust and 

unreasonable rates pursuant to the FPA, such rights do 

not extend from one market participant to another, and 

cannot be construed as the source of any contractual 

obligation between market participants. 

Instead of relying on the Memphis clauses, appellants 

now primarily rely on the overpayment provisions. See 

S.A. 60 (“The PX shall be responsible for ascertaining the 

identity of those PX Participants entitled to receive 

amounts overpaid to another PX Participant and for 

disbursing those funds to the persons entitled to them 

promptly after they are returned in accordance with 

Section 4.3.3 above.”); S.A. 529 (“The ISO shall be responsible for payment to those entitled to the sum which has 

been overpaid.”). But such provisions provide that a 

payment obligation exists only between the market participants and the exchanges, not between consumers and 

producers directly. As discussed above, if a market participant learned that it had received excess payment, the 

tariffs make clear that it was obligated to return those 

funds “into a PX Account specified by the PX.” J.A. 501; 

see also J.A. 1015–16 (Cal-ISO Tariff). In other words, 

excesses owed were to be paid back to Cal-PX or Cal-ISO, 

not to the parties directly. Thus, it was the exchanges 

that were “responsible for ascertaining the identity of 

those PX Participants entitled to receive amounts overpaid” and for “disbursing those funds to the persons 

Case: 15-5082 Document: 105-2 Page: 21 Filed: 10/03/2016
22 PACIFIC GAS AND ELECTRIC CO. v. US

entitled to them,” J.A. 501, not the other market participants, see also J.A. 1015–16 (Cal-ISO Tariff). Cal-PX and 

Cal-ISO were solely responsible for collecting from the 

overpaid participant and remitting proportionately to all 

owed participants. Contrary to appellants’ characterization, this arrangement creates no obligations directly 

between buyers and sellers. 

Nor do the provisions of the tariffs concerning possible 

legal action between market participants suffice to create 

a contract. At most there are provisions in the Cal-ISO 

Tariff which contemplate suit between market participants. See S.A. 529 (“Each ISO Creditor shall give notice 

to the ISO before instituting any action or proceedings in 

any court against an ISO Debtor to enforce payments due 

to it.”); S.A. 530 (“The ISO shall, on request, certify in 

writing the amounts owed by an ISO Debtor that remain 

unpaid and the ISO creditors to whom such amounts are 

owed and shall provide [a certificate which] . . . may be 

used as prima facie evidence of the amount due by an ISO 

Debtor to ISO Creditors in any legal proceedings.”). The 

Cal-PX Tariff contains no such provision, but provides 

that Cal-PX will identify a defaulting market participant 

to other affected participants. See S.A. 64 (Cal-PX “will 

identify the defaulting Participant to all other affected PX 

Participants by the most expeditious means available.”). 

These provisions do not purport to create a right of action 

by one market participant against another, nor do they 

create any payment obligation between market participants. These provisions do not support appellants’ theory 

of collective liability, and fall well short of creating obligations between consumers and producers. 

Finally, the tariffs explicitly grant the exchanges 

remedies against a defaulting participant. “If the PX 

Participant fails to pay any sum or to perform any other 

obligation to the PX . . . when due, then the PX may, in its 

sole discretion and without further notice to the defaultCase: 15-5082 Document: 105-2 Page: 22 Filed: 10/03/2016
PACIFIC GAS AND ELECTRIC CO. v. US 23

ing PX Participant or regard to formalities of any kind, 

pursue all remedies under [this] Section,” J.A. 504–05 

(emphasis added), including the right to “recoup, set-off 

and apply any amount to which any defaulting PX Participant is entitled towards satisfaction of any of that PX 

Participant’s debts,” S.A. 68. See also J.A. 501–03; J.A. 

1013–14 (Cal-ISO Tariff). The tariffs provide that Cal-PX 

“and PX Participants . . . may be parties to a dispute [in 

arbitration]” arising under the contracts, arbitration

being the specified dispute resolution mechanism. S.A. 

141; see also S.A. 536 (Cal-ISO). Accordingly, these 

provisions concerning possible legal action between consumers and producers do not create a contract between 

groups of consumers and producers. 

Quite apart from the lack of any written document reflecting an agreement between buyers and sellers, the 

alleged agreements cannot satisfy the requirement of 

reasonable certainty applicable to the essential terms of

all contracts. See Restatement (Second) of Contracts 

§ 131 (Am. Law. Inst. 1981) (a contract within the Statute 

of Frauds must “state[] with reasonable certainty the 

essential terms of the unperformed promises in the contract,” and the “parties must be reasonably identified”); 10 

Williston on Contracts, § 29:8 (a contract “must contain 

the essential or material terms . . . including the parties, 

the subject matter, a description of the property or goods 

affected, and in at least some jurisdictions, the price or 

consideration and an indication that the parties have 

mutually assented to the terms of the agreement”); see 

also U.C.C. § 2-201 (Am. Law Inst. & Unif. Law Comm’n 

1977) (“[A] contract for the sale of goods . . . is not enforceable . . . unless there is some writing sufficient to 

indicate that a contract for sale has been made between 

the parties and signed by the party against whom enforcement is sought.”). Although under the UCC an 

omitted term does not necessarily render a sales contract 

Case: 15-5082 Document: 105-2 Page: 23 Filed: 10/03/2016
24 PACIFIC GAS AND ELECTRIC CO. v. US

unenforceable, see § 2-204(3), “it is still necessary for the 

person claiming the benefit of the contract to establish 

that, in fact, there was a contract and to establish its 

terms,” 2 Lawrence, § 2-201:15. There is no basis here for 

determining the groups that are supposed parties to the 

contracts at any particular time or the particular obligations that each group owes to the other. Nor is there any 

basis for determining the duration or other material 

terms of the alleged agreement(s). The certainty required 

for the existence of a contract is simply lacking. 

V 

Appellants additionally argue by analogy to the law of 

stock exchanges that “participants in an exchange may 

assert claims against one another based on provisions of 

the governing contract.” Br. of Appellants at 45. The two 

cases upon which appellants rely, Muh v. Newburger, 

Loeb & Co., 540 F.2d 970 (9th Cir. 1976), and Coenen v. 

R.W. Pressprich & Co., 453 F.2d 1209 (2d Cir. 1972), do 

not support such a broad proposition. In Muh, the Ninth 

Circuit held that the arbitration provision of a stock 

exchange’s constitution was binding in a lawsuit brought 

by one member of the exchange against another member 

for breach of a separate contract. Muh, 540 F.2d at 973. 

There was no dispute in Muh that the members were in 

privity of contract with respect to the contract involved in 

the action for breach. See id. at 971–72. Similarly, in 

Coenen the Second Circuit held that an arbitration provision of a stock exchange’s constitution applied to a lawsuit 

brought by one member against another for refusal to 

allow the transfer of certain shares of stock under a 

separate agreement. Coenen, 453 F.2d at 1210–11. There 

was also no dispute in Coenen that the members were in 

privity with respect to the separate agreement. See id. 

Thus in neither case was the constitution of the stock 

exchange itself the source of privity between the parties 

in suit. Rather the courts simply read into the explicit 

Case: 15-5082 Document: 105-2 Page: 24 Filed: 10/03/2016
PACIFIC GAS AND ELECTRIC CO. v. US 25

separate contracts between exchange members a clause of 

the exchanges’ governing constitutions. 

It is well-settled that the constitution of a stock exchange does not automatically confer privity upon all 

those who transact in the exchange. In the analogous 

context of suits brought by purchasers of stock against 

insider traders, courts have recognized that there is no 

direct privity of contract in the traditional sense between 

buyers and sellers on the exchange. See, e.g., William H. 

Painter, Inside Information: Growing Pains for the Development of Federal Corporation Law Under Rule 10b-5, 65 

Colum. L. Rev. 1361, 1372–73 (1965); see also Cochran v. 

Channing Corp., 211 F. Supp. 239, 245 (S.D.N.Y. 1962); 

Joseph v. Farnsworth Radio & Television Corp., 99 F. 

Supp. 701, 706 (S.D.N.Y. 1951), aff’d, 198 F.2d 883 (2d 

Cir. 1952). It was for this very reason that the implied 

private right of action under section 10(b) of the Securities 

Exchange Act was fashioned to avoid any requirement of 

traditional privity to bring suit. See Veronica M. 

Dougherty, A [Dis]semblance of Privity: Criticizing the 

Contemporaneous Trader Requirement in Insider Trading, 

24 Del. J. of Corp. L. 83, 89–90 (1999). Because there is 

no private right of action upon which appellants can rely 

here, appellants’ argument by analogy to the law of stock 

exchanges is unavailing. 

Appellants also rely on one court decision holding a 

contracting party liable as a result of the incorporation of 

a tariff into a separate contract. See Alliant Energy v. 

Neb. Pub. Power Dist., 347 F.3d 1046 (8th Cir. 2003). 

Alliant Energy does not lend support to the notion that 

buyers and sellers in an energy exchange are in contractual privity. In that case, there was a contract for the 

provision of services between parties to an energy exchange. See Alliant Energy, Inc. v. Neb. Pub. Power Dist., 

No. 00-2139 ADM/FLN, 2001 WL 1640132, at *1 (D. 

Minn. Oct. 18, 2001). A tariff governed the terms of those 

Case: 15-5082 Document: 105-2 Page: 25 Filed: 10/03/2016
26 PACIFIC GAS AND ELECTRIC CO. v. US

services. See id. at *1–2. The court held that a FERC 

finding that the rates charged for those services were 

discriminatory required a refund under the contract. See 

Alliant Energy, 347 F.3d at 1049–50 (“When a contract 

provides that its terms are subject to a regulatory body, 

all parties to that contract are bound by the actions of the 

regulatory body.” (emphasis added)). The court in Alliant 

Energy did not find privity in the absence of an explicit 

contract.

Nor is this a situation in which appellants are entitled 

to step into the shoes of the exchanges and sue the government directly. Indeed, appellants make no such 

argument. It is well-settled that a party cannot step into 

the shoes of another party to pursue a contract claim

absent explicit assignment of the claim or assignment by 

operation of law under equitable subrogation. See, e.g., 

Lumbermens Mut. Cas. Co. v. United States, 654 F.3d 

1305, 1312–13 (Fed. Cir. 2011). There has been no suggestion here that the contracts between the exchanges 

and market participants were assigned or that appellants 

are subrogated to the rights of the Cal-PX and Cal-ISO. 

Nor could there be. We have held that equitable subrogation is a narrow exception to the traditional privity requirement, and we have only found equitable subrogation 

in the surety context. See Ins. Co. of the W. v. United 

States, 243 F.3d 1367, 1370 (Fed. Cir. 2001); Admiralty

Constr., Inc. v. Dalton, 156 F.3d 1217, 1222 (Fed. Cir. 

1998). 

VI

Significantly, both FERC and the Ninth Circuit understood that the contracts between individual market 

participants and the exchanges were middleman contracts 

for the purchase and sale of electricity, and that no contractual privity existed between market participants. In 

a related proceeding, FERC explained that “[i]n these 

Case: 15-5082 Document: 105-2 Page: 26 Filed: 10/03/2016
PACIFIC GAS AND ELECTRIC CO. v. US 27

circumstances, we believe it is reasonable to construe both 

the bidding participants and the PX to be engaged in sales 

of electric energy. Accordingly, we conclude that the 

bidding PX participants will be engaged in sales of electric 

energy at wholesale to the PX, who will then resell that 

energy to wholesale and retail customer participants.” S. 

Cal. Edison Co., 80 FERC 61,262, 61,946 (1997) (emphasis added). FERC described that Cal-PX “will be the 

intermediary that contracts with the entities that sell into 

the PX as well as with the wholesale and retail customers 

that purchase from the PX.” Id. (emphasis added). Similarly, in a related proceeding, FERC held that “there are 

no sales contracts between sellers and buyers of electricity 

sold into the PX.” S. Cal. Edison Co., 80 FERC at 61,945 

(1997) (emphasis added). FERC further explained, “[i]n 

this proceeding, we are faced with a new market institution in which sellers and buyers of electric energy will not 

contract directly with one another, as has been traditionally done in the industry, but instead will contract with the 

PX.” Id. (emphasis added). Indeed, FERC understood 

that, as a consequence of this lack of privity between 

buyers and sellers, any refunds due as a result of a FERC 

refund order would be paid to the exchanges, not directly 

to the underpaid market participants. See San Diego Gas 

& Elec. v. Sellers of Energy & Ancillary Servs., 102 FERC 

61,317, 62,079–80 (2003). These interpretations were 

echoed by the Ninth Circuit. See S. Cal. Edison Co. v. 

Lynch, 307 F.3d 794, 800 (9th Cir. 2002) (holding that 

market participant SoCal Edison “is in privity with the 

California Power Exchange Corporation, not with [other 

market participants]”). 

VII

Finally, appellants argue that it would be unfair to 

deny appellants a remedy for the government’s overcharges and to allow the government to retain the windfall profits. Appellants assert that, without a finding of 

Case: 15-5082 Document: 105-2 Page: 27 Filed: 10/03/2016
28 PACIFIC GAS AND ELECTRIC CO. v. US

privity between consumers and producers here, “the 

[government] [is] wholly immunized from public or private accountability.” Br. of Appellants at 71. But the 

absence of an agreement between consumers and producers hardly suggests the lack of a remedy. It may well be 

that the producers of electric power would have been

liable to the exchanges for any overcharges, and that the 

exchanges in turn would have been liable to the appellant 

consumers. The procedural mechanisms for such suits 

clearly exist under the tariffs. 

Although interpleader, which is ordinarily the remedy 

for a party in appellants’ position, is not available here 

because the government is a party, see Gonzales, 490 F.3d 

at 943, appellants could have sought recovery from the 

exchanges, with which they are in direct privity of contract, as is clearly contemplated by the arbitration dispute 

resolution procedures established by the tariffs. See S.A. 

141, 535. The exchanges in turn could have sought contribution from the government under the same arbitration 

procedures, which may have provided for a mechanism 

similar to traditional interpleader.8 Appellants failed to 

pursue this course, however, and instead would have us 

manufacture privity among all buyers and sellers in the 

California markets where there is none. This we decline 

to do.

VIII 

Alternatively, appellants contend that they have 

standing under an agency theory. Appellants argue that, 

 

8 We have no occasion to decide here whether the 

arbitration remedy would now be foreclosed by the passage of time, or by waiver. Nor do we decide whether the 

exchanges could have recovered in arbitration against the 

federal government defendant agencies. 

Case: 15-5082 Document: 105-2 Page: 28 Filed: 10/03/2016
PACIFIC GAS AND ELECTRIC CO. v. US 29

even if the only contracts are between the exchanges and 

market participants, the exchanges acted as agents for all 

consumers and producers in the California markets in 

every energy transaction. Under certain circumstances, 

an entity not in direct contractual privity with another 

party may nevertheless sue if it contracted with a third 

entity, and an agency relationship is demonstrated between that third entity and the defendant. See Nat’l 

Leased Hous. Ass’n v. United States, 105 F.3d 1423, 1435–

36 (Fed. Cir. 1997); United States v. Johnson Controls, 

Inc., 713 F.2d 1541, 1551 (Fed. Cir. 1983). 

“The relationship of principal and agent is created by 

a manifestation of assent by both parties.” 12 Williston 

on Contracts § 35:1 (4th ed. 2016). “The consent of both 

principal and agent is necessary to create an agency.” Id. 

“[T]he principal must intend for the agent to act for the 

principal, and the agent must intend to accept the authority and act on it; and the intention of the parties must 

find expression either in words or other conduct between 

them.” Id. As a “general rule, the party asserting the 

agency has the burden of proving both the existence of the 

relationship and the authority of the agent.” 12 Williston 

on Contracts at § 35:2; see also Restatement (Third) of 

Agency § 1.02(d) (Am. Law Inst. 2006) (“The party asserting that a relationship of agency exists generally has the 

burden in litigation of establishing its existence.”). 

Here, appellants rely on two provisions of the tariffs 

that they argue created an agency relationship between 

all consumers on the one hand and all producers on the 

other, with the exchanges acting as agent for both groups. 

Appellants cite the Cal-PX Tariff, which provides that 

“the PX acts as an Agent for the PX Participants and its 

inclusion in a Payment Flow does not infer that it is a 

principal in the financial transaction,” J.A. 1846, and the 

Cal-ISO Tariff, which provides that “[i]n contracting for 

Case: 15-5082 Document: 105-2 Page: 29 Filed: 10/03/2016
30 PACIFIC GAS AND ELECTRIC CO. v. US

Ancillary Services and Imbalance Energy the ISO will not 

act as principal but as agent for and on behalf of the 

relevant [market participants],” J.A. 753.9 

Even if those provisions are read to address an agency 

relationship for the purchase and sale of electricity, it is 

well established that parties’ statements in a contract are 

not dispositive as to the existence of an agency relationship. “Whether a relationship is characterized as agency 

in an agreement between parties or in the context of 

industry or popular usage is not controlling.” Restatement (Third) of Agency § 1.02; see also, e.g., Matter of 

Carolin Paxson Advert., Inc., 938 F.2d 595, 598 (5th Cir. 

1991). The key to the existence of an agency relationship 

is not any characterization in a contract,10 but rather is 

set forth in section 1.01 of the Restatement of Agency. An 

agency relationship “arises when one person (a ‘principal’) 

manifests assent to another person (an ‘agent’) that the 

agent shall act on the principal’s behalf and subject to the 

principal’s control, and the agent manifests assent or 

otherwise consents to so act.” Restatement (Third) of 

 

9 The Cal-ISO Tariff also provides that “[Cal-]ISO 

may bring proceedings against any [market participant] 

on behalf of those [market participants] who have indicated to the ISO their willingness for the ISO first so to act, 

for the recovery of any amounts due by that [market 

participant].” S.A. 530. 10 Appellants additionally rely on statements made 

by a Vice President for one of the government agencies 

suggesting that the exchanges acted as an “agent.” See 

Br. of Appellants at 60, J.A. 3726–27. But the fact that 

various individuals participating in the process may have 

characterized the relationship as an agency similarly does 

not establish an agency relationship as a matter of law. 

Restatement (Third) of Agency § 1.02. 

Case: 15-5082 Document: 105-2 Page: 30 Filed: 10/03/2016
PACIFIC GAS AND ELECTRIC CO. v. US 31

Agency § 1.01. Agency thus requires “control” by the 

principal. See Hollingsworth v. Perry, 133 S. Ct. 2652, 

2666 (2013) (“An essential element of agency is the principal’s right to control the agent’s actions.” (internal 

quotation marks and citations omitted)). “[T]he principal’s right to control the agent . . . differentiates . . . 

agency relationships from nonagency relationships.” 

Restatement (Third) of Agency § 1.01 cmt. e. Here the 

requisite control is clearly deficient. 

“A relationship is not one of agency within the common-law definition unless the agent consents to act on 

behalf of the principal, and the principal has the right 

throughout the duration of the relationship to control the 

agent’s acts.” Id. at § 1.01 cmt. c (emphasis added). It is 

for this reason that a mere “middleman” is not typically 

an agent. Id. at cmt. h. The control necessary to demonstrate an agency relationship requires that “a principal 

[have] the right to give interim instructions or directions 

to the agent once their relationship is established.” Id. at 

cmt. f; see also Clackamas Gastroenterology Assocs., P.C. 

v. Wells, 538 U.S. 440, 448 (2003). 

Judge Braden recognized that, notwithstanding the

provisions purporting to create an agency relationship, no 

agency relationship exists because, inter alia, the government lacked sufficient control over the exchanges. See 

Pacific Gas, 122 Fed. Cl. at 334. We agree.11 

 

11 Appellants contend that the government conceded 

that an agency relationship exists with respect to CalISO. While the government’s position regarding Cal-ISO 

is confusing and appears to be self-contradictory, compare 

Br. of Appellees at 37–38 (“Even though the ISO (as 

opposed to the PX) was an agent of the scheduling coordinators, the Buyers do not have standing to pursue claims 

Case: 15-5082 Document: 105-2 Page: 31 Filed: 10/03/2016
32 PACIFIC GAS AND ELECTRIC CO. v. US

Here, the alleged principals—the buyers and sellers—

lack any meaningful control over the exchanges. The 

tariffs provide that the exchanges have plenary control 

over, inter alia, setting prices; charging, collecting, and 

remitting payments; ensuring the transfer of the appropriate amount of energy from each transaction; and 

collecting and remitting money in the event of overpayment. Indeed it is the exchanges that are explicitly 

empowered with the ability to issue instructions, detailing, inter alia, settlement and payment obligations to the 

buyers and sellers, not the other way around. Appellants 

point to no provision of the tariffs that affords the government meaningful control over the exchanges. Without 

such evidence of the alleged principal’s control over the 

alleged agent, there can be no agency relationship.12 

 

upon the ISO contracts on their own.”), with id. at 40 

(“the ISO cannot be an agent”), the absence of an agency 

relationship is clear for both exchanges. We have an

independent obligation to address standing regardless of 

any position the government has taken in the case. See, 

e.g., Nat’l Org. for Women, Inc. v. Scheidler, 510 U.S. 249, 

255 (1994); see also Gonzalez v. Thaler, 132 S. Ct. 641, 648 

(2012). 12 See, e.g., Transamerica Leasing, Inc. v. La Republica de Venezuela, 200 F.3d 843, 848–50 (D.C. Cir. 2000) 

(a subsidiary corporation was not the agent of its parent 

because the parent did not exercise “control over the 

subsidiary in a manner more direct than by voting a 

majority of the stock in the subsidiary or making appointments to the subsidiary’s Board of Directors”); Johnston v. Warren Cty. Fair Ass’n, 110 F.3d 36, 38 (8th Cir. 

1997) (holding that the lack of evidence of the alleged 

principal’s control over the alleged agent “precludes the 

finding of an agency relationship”); Matter of Carolin 

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PACIFIC GAS AND ELECTRIC CO. v. US 33

Nothing in this court’s decisions contemplating an

agency exception to the privity requirement suggest that 

control is not required for agency. Indeed, those cases, 

which have been limited to the primecontractor/subcontractor context, hold that a subcontractor cannot sue the government directly unless, inter alia, 

there is an explicit provision in the contract which provides that the government will be “directly liable to the 

vendors for the purchase price.” Nat’l Leased Housing, 

105 F.3d at 1436 (quoting Johnson Controls, 713 F.2d at

1551). Even assuming that this situation was comparable 

to the prime-contractor/subcontractor context, it is undisputed that there is no such provision in the contracts 

here. 

We conclude that the agreements cannot be interpreted as creating agency relationships.

IX

Finally, appellants contend that they have standing to 

sue the government because they are third-party beneficiaries of the government’s contracts with Cal-PX and 

Cal-ISO. One of the “[l]imited exceptions” to the general 

privity requirement for standing is when the plaintiff can 

demonstrate that it was an intended third-party beneficiary under the contract. S. Cal. Fed. Sav. & Loan Ass’n, 

422 F.3d at 1328; First Hartford, 194 F.3d at 1289. 

“Third party beneficiary status is an ‘exceptional privilege,’” Glass v. United States, 258 F.3d 1349, 1354 (Fed. 

Cir. 2001) (quoting German All. Ins. Co. v. Home Water 

Supply Co., 226 U.S. 220, 230 (1912)), and the require-

 

Paxson, 938 F.2d at 598–99 (finding no agency relationship for lack of sufficient control because the alleged 

principals had “no control over the method by which” the 

alleged agent performed its duties).

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34 PACIFIC GAS AND ELECTRIC CO. v. US

ments to demonstrate third-party beneficiary status are 

“stringent,” Anderson, 344 F.3d at 1352. “Before a 

stranger can avail himself of the exceptional privilege of 

suing for a breach of an agreement to which he is not a 

party, he must, at least, show that it was intended for his 

direct benefit.” German All., 226 U.S. at 230. To demonstrate third-party beneficiary status, therefore, a party 

must prove that “the contract not only reflects the express 

or implied intention to benefit the party, but that it 

reflects an intention to benefit the party directly.” 

Flexfab, L.L.C. v. United States, 424 F.3d 1254, 1259 (Fed. 

Cir. 2005) (quoting Glass, 258 F.3d at 1354). Third-party 

beneficiary status is not established “merely because [a] 

contract would benefit [a party].” Fed. Deposit Ins. Corp. 

v. United States, 342 F.3d 1313, 1319 (Fed. Cir. 2003). 

As the Restatement makes clear, typical third-party 

beneficiary situations arise when, for example, one party 

promises another to pay a debt to a third party. In such 

circumstances, the third party is a third-party beneficiary

with standing to sue on the contract. Restatement (Second) of Contracts § 302 illus. 1 (Am. Law Inst. 1981). 

While a third-party beneficiary need not always be named 

explicitly in the contract, have the “direct right to compensation[,] or the power to enforce that right against the 

promisor,” the contract must demonstrate a clear intent to 

benefit a third-party beneficiary “personally, independent 

of his or her status” as a member of a group generally 

benefited by a contract’s performance. Anderson, 344 

F.3d at 1352 (internal quotation marks and citations 

omitted); see also Castle v. United States, 301 F.3d 1328, 

1338 (Fed. Cir. 2002). In other words, at a minimum 

there must be a particular, identifiable benefit that was 

clearly intended to flow to the third party. 

Anderson v. United States is instructive. In Anderson

we held that two individuals were not third-party beneficiaries of an alleged contract with the government simply 

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PACIFIC GAS AND ELECTRIC CO. v. US 35

because they were named beneficiaries of a trust which 

was owed certain contractual obligations from the government. See 344 F.3d at 1351–52. We explained that, 

“[u]nder the contract, every promise the government 

allegedly failed to keep . . . pertains to the regulatory 

treatment of [the Trust]. Nothing suggests that the 

government made any promises expressly intended to 

benefit [the individuals] personally, independently of 

their status as beneficiaries of the Trust.” Id. at 1352. 

Similarly, in Glass v. United States we held that shareholders of a corporation were not third-party beneficiaries 

of a contract between the corporation and the government

because the contract manifested no intent to benefit the 

shareholders individually, independent of their status as 

shareholders. 258 F.3d at 1354–55. 

Here appellants contend that they are third-party 

beneficiaries based on the overpayment provisions of the 

tariffs. But, as discussed, the overpayment provisions 

create obligations and remedies for Cal-PX and Cal-ISO, 

not the market participants. Contrary to appellants’ 

assertion that these provisions gave appellants “an explicit contractual right to a refund by sellers of any overpayments [appellants] made when purchasing electricity,” Br. 

of Appellants at 58, the very text quoted by appellants 

reveals that the overpayment procedures hold Cal-PX and 

Cal-ISO solely responsible for collecting and disbursing 

overpayments. “The PX shall be responsible for ascertaining the identity of those PX Participants entitled to receive amounts overpaid to another PX Participant and for 

disbursing those funds to the persons entitled to them 

promptly.” J.A. 501; see also J.A. 1016 (Cal-ISO Tariff). 

There is no specific, identifiable benefit that flows directly 

from producer to consumer under the tariffs. 

The only opinion appellants cite in which we have 

recognized third-party beneficiary standing is H.F. Allen 

Orchards v. United States, 749 F.2d 1571, 1576 (Fed. Cir. 

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36 PACIFIC GAS AND ELECTRIC CO. v. US

1984). In H.F. Allen, the plaintiffs were farmers in the 

State of Washington who were members of water-user 

associations. See H.F. Allen Orchards v. United States, 4 

Cl. Ct. 601, 603 (1984). Those associations contracted 

with the federal government regarding a federal water 

project. See id. In 1943, a federal district court entered a 

consent decree setting forth the allotment of water from 

the federal project to the water-user associations. Id. The 

plaintiff farmers later brought suit against the federal 

government for an alleged breach of the consent decree. 

H.F. Allen Orchards, 749 F.2d at 1572. The Claims Court 

held that plaintiffs lacked standing to sue the government. Id. On appeal, we disagreed. See id. at 1576. We 

explained that the water-user associations “act[ed] as a 

surrogate for the aggregation of farmers.” Id. The farmers themselves held a “property right in the water to the 

extent of their beneficial use thereof,” and a specific, 

identifiable benefit flowed from the government to each 

farmer under the consent decree. Id. Accordingly, we 

held that the farmers were the “true parties in interest” to 

sue under the decree. Id. 

Here there is no identifiable benefit flowing from the 

particular government agencies to the particular appellants. Appellants were simply some of the many participants on the buy-side of the California wholesale energy

market, and it is impossible to trace the transfer of electric power from producers to consumers. Appellants 

cannot demonstrate any particular benefit flowing to 

them from the government agencies, let alone that the 

exchanges’ contracts with the government intended to 

benefit them specifically, independent of all other market 

participants. Accordingly, appellants fail to establish the 

“stringent” requirements to demonstrate the “exceptional 

privilege” of third-party beneficiary status. Anderson, 344 

F.3d at 1352; Glass, 258 F.3d at 1354. As such, appellants lack third-party beneficiary standing.

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PACIFIC GAS AND ELECTRIC CO. v. US 37

X 

Because appellants are not in direct privity of contract 

with the government, fail to demonstrate an agency 

relationship, and do not qualify as third-party beneficiaries on the contract, appellants lack standing to sue the 

government on the contract claims asserted here. Accordingly, we affirm the decision of the Claims Court dismissing appellants’ suit for lack of standing.

AFFIRMED

COSTS

Costs to the United States.

Case: 15-5082 Document: 105-2 Page: 37 Filed: 10/03/2016
United States Court of Appeals 

for the Federal Circuit ______________________ 

PACIFIC GAS AND ELECTRIC COMPANY, 

SOUTHERN CALIFORNIA EDISON COMPANY, 

SAN DIEGO GAS & ELECTRIC COMPANY, 

PEOPLE OF THE STATE OF CALIFORNIA EX REL. 

EDMUND G. BROWN JR., ATTORNEY GENERAL 

OF THE STATE OF CALIFORNIA, CALIFORNIA 

DEPARTMENT OF WATER RESOURCES, BY AND 

THROUGH ITS CALIFORNIA ENERGY 

RESOURCES SCHEDULING DIVISION,

Plaintiffs-Appellants

v.

UNITED STATES,

Defendant-Appellee

______________________ 

2015-5082

______________________ 

NEWMAN, Circuit Judge, dissenting. 

The United States does not dispute that it overcharged the plaintiffs for electric power, and that it is 

required to repay the overcharge in accordance with the 

FERC rate schedule and the governing federal statutes. 

Nonetheless, the United States’ position is that it will not 

comply with this law, for nobody can sue it to enforce the 

law. We agree that FERC, a federal agency, cannot order 

a refund of the overages charged by the United States,

but that does not insulate the United States from suit by

Case: 15-5082 Document: 105-2 Page: 38 Filed: 10/03/2016
2 PACIFIC GAS AND ELECTRIC CO. v. US

the overcharged buyers of electric power from the United 

States. My colleagues on this panel strain to find a remedy, by announcing that maybe these buyers can recover 

something from the exchanges that brokered the overcharged transactions—but my colleagues hold that there 

is no other remedy for the government’s refusal to comply 

with the statute that the government admits to have 

violated. 

The first assigned judge of the Court of Federal 

Claims rejected this position, on proceedings that lasted 

seven years. However, the successor judge of that court 

discarded the prior adjudication, and held that the court 

is helpless to act. The Federal Circuit now agrees. I 

respectfully dissent.

Legal protection of property rights is a cornerstone of our government

No person shall . . . be deprived of life, liberty, or 

property, without due process of law; nor shall 

private property be taken for public use, without 

just compensation.

U.S. CONST. amend. V.

Government is instituted to protect property of 

every sort; as well that which lies in the various 

rights of individuals, as that which the term particularly expresses. This being the end of government, that alone is a just government, which 

impartially secures to every man, whatever is his 

own. 

The Complete Madison at 45 (Saul K. Padover ed. 1953), 

letter to James Monroe, Oct. 15, 1786 (emphasis in original).

Our court is reminded of this high obligation by these

watchwords of the Nation’s duty to citizens, carved on the 

Case: 15-5082 Document: 105-2 Page: 39 Filed: 10/03/2016
PACIFIC GAS AND ELECTRIC CO. v. US 3

wall of this courthouse, welcoming those who seek justice

in suit against the government:

It is as much the duty of government to render 

prompt justice against itself, in favor of citizens, 

as it is to administer the same between private 

individuals.

President Abraham Lincoln, First Annual Message Before 

the U.S. Senate and House of Representatives (Dec. 3, 

1861); engraved in the Lobby of the Howard T. Markey 

National Courts Building, 717 Madison Place, NW, Washington, DC 20439. 

These obligations are formalized in the Tucker Act 

and other implementing legislation, and are assigned to 

this court.

The overcharge and the statutory refund obligation are not disputed

The overcharge is not disputed: the plaintiffs paid 

money to the federal power agencies at prices set by 

FERC-regulated auction markets, and the federal sellers 

of power and others made windfall profits. FERC then 

required that these profits be refunded, on the basis of 

just and reasonable market clearing prices. All of the 

FERC-ordered refunds to the affected purchasers have

been paid by the obligated entities, with the exception of 

the federal agencies the Bonneville Power Administration 

(BPA) and the Western Area Power Administration 

(WAPA) (collectively, the Power Administrators).1

Both the BPA and the WAPA had agreed, as a condition of participating in the California power market 

 

1 This suit is concerned only with the BPA and 

WAPA and their power sales in California.

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4 PACIFIC GAS AND ELECTRIC CO. v. US

(CalPX and ISO) to accept FERC-regulated tariffs. However, BPA and WAPA have refused to make the designated repayments in accordance with the FERC-ordered 

retroactive market clearing prices, which, as the Ninth

Circuit held, reach the entirety of the market, not just a 

portion of the market transactions. City of Redding v. 

FERC, 693 F.3d 828, 842 (9th Cir. 2012). My colleagues 

hold that the courts cannot require such compliance with 

law. This cannot be, for compliance with law is the judicial role, and federal compliance is assigned to the Court 

of Federal Claims and the Federal Circuit. 

The Power Administrators acknowledge the overcharges, and do not disagree that the statute requires 

them to refund the overcharges. The overpayment is not 

disputed by the government. The panel majority provides

details, see Maj. Op. 8 (“By August 2000, appellants and

all other consumers were charged prices three to four 

times greater than the market rates of less than a year 

earlier . . . . FERC . . . ordered that refunds be paid by all 

sellers in the California market.”).

The Ninth Circuit upheld FERC’s authority to find 

the rates charged by all sellers, including the federal

agencies, to be unjust and unreasonable. City of Redding, 

693 F.3d at 842 (“[FERC’s] July 2001 Order ‘reset’ the 

market clearing prices in the CalPX and ISO spot markets during the refund period to just and reasonable 

levels for the purpose of calculating the amount of refund 

due [from FERC-regulated entities]. This calculation 

necessarily involved reevaluating the price previously 

charged by all market participants because the market 

clearing price was the same for all of them.”).

It is not disputed that the overage charges are able to 

be determined, and the refunds properly allocated. The 

charges, overages, refund allocations, and the like have 

already been litigated, settled, or otherwise disposed of 

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PACIFIC GAS AND ELECTRIC CO. v. US 5

via FERC’s California Refund Proceeding and related 

litigation, much of which has received judicial review in 

the Ninth Circuit. See, in summary, FEDERAL ENERGY 

REGULATORY COMMISSION, THE COMMISSION’S RESPONSE 

TO THE CALIFORNIA ELECTRICITY CRISIS AND TIMELINE FOR 

DISTRIBUTION OF REFUNDS (available at

www.ferc.gov/legal/staff-reports/comm-response.pdf); see 

also, e.g., 102 FERC ¶ 61120 (establishing a mitigated 

market clearing price (“MMCP”)). “Under the MMCP 

methodology, refunds were to be determined by the difference between the market clearing price, which was the 

price charged by all electricity suppliers at a given time, 

and the MMCP calculated for each hour of the Refund 

Period, subject to certain adjustments.” PUC v. FERC, 

462 F.3d 1027, 1043 (9th Cir. 2006)).

Yet the BPA and the WAPA refuse to make the refunds, stating that neither FERC nor the courts have

jurisdiction to force them to meet these obligations. 

BPA/WAPA Br. at 8 (“FERC has no . . . jurisdiction over 

[the agencies].”); Id. at 18 (“The Court of Federal 

Claims . . . does not possess jurisdiction.”); Id. at 58 

(“Court of Federal Claims had no jurisdiction.”). However, that is incorrect. Jurisdiction is indeed possessed by

the Court of Federal Claims and this court.

The Constitution and the Tucker Act provide 

remedy, whether on a theory of contract or 

taking of property

My colleagues hold that no court or agency possesses 

authority to enforce payment of the refunds due from the 

United States to the Appellants. The court refuses to 

apply the standard that FERC requires and enforces of 

private actors in the same position. All power generators 

and power purchasers affected by the rates that FERC 

corrected on the California energy markets are bound by 

this standard. The Tucker Act formalizes the judicial 

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6 PACIFIC GAS AND ELECTRIC CO. v. US

authority whereby this standard is enforced against the 

federal suppliers of power. The Tucker Act provides 

jurisdiction to render judgment upon any claim against 

the United States “founded either on the Constitution, or 

any Act of Congress or any regulation of an executive 

department, or any express or implied contract with the 

United States, or for liquidated or unliquidated damages 

in cases not sounding in tort.” 28 U.S.C. § 1491(a)(1).

(a) The contract claim

My colleagues hold that since there was an “exchange” acting as broker between the federal power 

sellers and the state power purchasers, the purchasers 

can sue only the exchange on the federal overcharges. My 

colleagues hold that only the broker “middle-man” is in 

privity with the government. This is not the law of contracts. The exchange was not a principal in these transactions, it had explicitly disclaimed any counterparty 

status, and the electric power was not the property of the 

exchange. The exchange simply acted as a broker and 

passed the sales proceeds to the sellers who provided the 

power. My colleagues err in holding that the exchanges 

alone are liable for payment of the overcharges that were 

charged by the federal sellers of power.

The court is correct that claims against the BPA and 

WAPA are separate from the FERC statutory jurisdiction. 

The BPA and the WAPA were not obligated to sell power 

in areas covered by the CalPX and ISO, but, in choosing 

to do so, they agreed, as a condition of their participation

in that market, to be held to the rules and price-setting 

mechanisms of the FERC-regulated tariffs. In doing so, 

the BPA and the WAPA agreed to the Memphis clause, 

which my colleagues hold has no role in the resolution of 

this case. Maj. Op. at 21. The majority correctly states

that the Memphis clause does not serve as a “source of 

any contractual obligation between market participants,” 

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PACIFIC GAS AND ELECTRIC CO. v. US 7

id., but this means only that prices charged under the 

tariff contract are not “fixed,” but rather are subject to 

review and change by FERC. These are the prices 

charged by suppliers like the BPA and the WAPA to the 

consumers like PG&E, through the CalPX and ISO.

The Memphis clause binds the price charged to FERC 

determinations; the tariff binds the parties to use the 

CalPX and ISO for sale/purchase of energy; the parties, 

conducting sales through the CalPX and ISO to purchase/supply energy amongst themselves, are bound to 

each other through their market transactions, the rules of 

the tariff, and the FERC regulations. “When a contract 

provides that its terms are subject to a regulatory body, 

all parties to that contract are bound by the actions of the 

regulatory body.” Alliant Energy v. Neb. Pub. Power Dist., 

347 F.3d 1046, 1050 (8th Cir. 2003). See Inter-City Gas 

Corp. v. Boise Cascade Corp., 845 F.2d 184, 187 (8th Cir. 

1988) (holding that parties to a contract which provided 

that its rates “may be approved, ordered or set by any 

valid law, order, rule or regulation of any . . . regulatory 

authority . . . having jurisdiction,” were bound by a FERC

rate determination, even though they were not directly 

subject to FERC’s jurisdiction). The sellers and buyers of 

power achieved privity through the sale and purchase of 

electricity, brokered by the exchange. 

FERC has the statutory authority to determine the 

“just and reasonable” rate on and after the Refund Effective Date, and all parties had previously agreed to be 

bound by such rates. The Ninth Circuit recognized that 

FERC could not order the United States to pay these 

mandated refunds. Bonneville Power Admin. v. FERC, 

422 F.3d 908, 926 (9th Cir. 2005). This is where the 

Tucker Act comes in, for this contractual obligation between the federal power sellers and the state purchasers.

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8 PACIFIC GAS AND ELECTRIC CO. v. US

(b) Other Tucker Act Authority

In addition to the contractual relation between the 

Power Administrators, as sellers, and the Appellants, as 

buyers, the Tucker Act also provides remedy on a Constitution-based theory of property taking, just compensation, 

and/or illegal exaction. An illegal exaction arises when 

“the plaintiff has paid money over to the Government, 

directly or in effect, and seeks return of all or part of that 

sum” that “was improperly paid, exacted, or taken from 

the claimant in contravention of the Constitution, a 

statute, or a regulation.” Eastport S.S. Corp. v. United 

States, 372 F.2d 1002, 1007 (Ct. Cl. 1967). This cause 

arises when “some specific provision of law commands 

expressly or by implication the payment of money, upon 

proof of conditions he is said to meet.” City of Manassas 

Park v. United States, 633 F.2d 181, 183 (Ct. Cl. 1980).

When overcharges were made and required by the 

government, this may support a takings claim. And when 

the overcharges were designated by FERC as illegal and 

repayment was ordered, their exaction became illegal. On 

either theory, the Fifth Amendment provides for recovery

of the overpayment. Even on the theory that there was no 

contractual relationship between the federal power sellers 

and the state power buyers, repayment of the overcharge 

is required, for it is not disputed that “the Government 

has the citizen’s money in its pocket,” money to which the 

government concedes it has no right. Clapp v. United 

States, 117 F. Supp. 576, 580 (Ct. Cl. 1954). 

The claimant must demonstrate that the statute or 

provision causing the exaction provides, either expressly 

or by “necessary implication,” that “the remedy for its 

violation entails a return of money unlawfully exacted.” 

Cyprus Amax Coal Co. v. United States, 205 F.3d 1369, 

1373 (Fed. Cir. 2000). The Power Administrators imposed 

an “unjust and unreasonable” price on the appellants, 

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PACIFIC GAS AND ELECTRIC CO. v. US 9

who “paid money over to the Government, . . . and seek[]

return of all or part of that sum” that “was improperly 

paid . . . in contravention of [statute and regulation].” 

Eastport S.S. Corp., 372 F.2d at 1007. This standard is 

met here, and the remedy laid out by statute is refund of 

the overpayment.

The court has previously addressed similar issues. In 

Ontario Power Generation, Inc. v. United States this court 

recognized that “there are some circumstances under 

which jurisdiction exists even though the plaintiff did not 

pay money directly to the government.” 369 F.3d 1302 

(Fed. Cir. 2004). In Camellia Apartments, Inc. v. United 

States, 334 F.2d 667 (Ct. Cl. 1964), the court held that 

Tucker Act jurisdiction existed even though the plaintiff 

had not paid the exacted sums directly to the government. 

In that case, the Federal Housing Administration required that the plaintiff pay a “prepayment premium 

charge” to its mortgagees as a precondition to refinance 

its properties with private lenders. Id. at 669. The mortgagees then transmitted the premium to the Federal 

Housing Administration. In rejecting the government’s 

motion to dismiss for lack of jurisdiction, the court said: 

The fact that the FHA acted through the mortgagees in requiring the payments of which plaintiffs 

complain is immaterial; under the pertinent regulation, the mortgagees were required to collect 

these funds and to remit them to the Commissioner. Therefore, we do not think that defendant can 

seriously deny plaintiffs’ allegation that the mortgagees acted solely as the FHA’s agents in so doing.

Id. Similarly here, the BPA and the WAPA collected the 

overcharges through the CalPX and ISO. “Under decisions of the Supreme Court and this court, a compensable 

taking does not occur unless the government’s actions on 

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10 PACIFIC GAS AND ELECTRIC CO. v. US

the intermediate third party have a ‘direct and substantial’ impact on the plaintiff asserting the takings claim.” 

Casa De Cambio Comdiv S.A. De C.V. v. United States, 

291 F.3d 1356, 1361 (Fed. Cir. 2002). It cannot be denied 

that the retention of the “unjust and unreasonable” rate 

charges by the government has, and continues to have, a 

“direct and substantial impact” on the Appellants.

Whether under either a theory of contract or taking, 

the Court of Federal Claims has jurisdiction of this claim 

against the government, as it initially held.

Conclusion

It is contrary fundamental law to exclude this claim 

from access to judicial review and remedy. “The government of the United States has been emphatically termed 

a government of laws, and not of men. It will certainly 

cease to deserve this high appellation, if the laws furnish 

no remedy for the violation of a vested legal right.” Marbury v. Madison, 5 U.S. (1 Cranch) 137, 163 (1803). The 

judicial obligation and authority is to remedy the “unjust 

and unreasonable” rate charges as determined by FERC 

and confirmed on Ninth Circuit review. The remedy is 

assigned to the Court of Federal Claims and to the Federal Circuit.

I respectfully dissent from the court’s rejection of that 

assignment.

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