Source: http://openjurist.org/491/us/350
Timestamp: 2015-11-28 02:20:57
Document Index: 202844687

Matched Legal Cases: ['§ 824', 'art, 262', '§ 824', '§ 33', '§ 4', '§ 1342']

491 US 350 New Orleans Public Service Inc v. Council of City of New Orleans | OpenJurist
491 U.S. 350 - New Orleans Public Service Inc v. Council of City of New Orleans Homethe United States Reports491 U.S.
491 US 350 New Orleans Public Service Inc v. Council of City of New Orleans 491 U.S. 350
109 S.Ct. 2506
105 L.Ed.2d 298
NEW ORLEANS PUBLIC SERVICE, INC., Petitioner,v.COUNCIL OF the CITY OF NEW ORLEANS et al.
No. 88-348.
The Federal Energy Regulatory Commission (FERC) allocated the cost of the Grand Gulf 1 nuclear reactor among several jointly owned companies, including petitioner New Orleans Public Service, Inc. (NOPSI), that had agreed to finance the reactor's construction and operation. NOPSI, which provides retail electrical service to New Orleans, then sought from respondent New Orleans City Council (Council), the local ratemaking body, a rate increase to cover the increase in its wholesale rates resulting from FERC's allocation of Grand Gulf costs. Although deferring to FERC's implicit finding that NOPSI's decision to participate in the Grand Gulf ven ure was reasonable, the Council determined that the costs incurred thereby should not be completely reimbursed through a rate increase because NOPSI's management was negligent in failing, after the risks of nuclear power became apparent, to diversify its supply portfolio by selling a portion of its Grand Gulf power. NOPSI filed a petition in state court for review of the Council's final rate order. In parallel federal proceedings in the District Court, NOPSI sought declaratory and injunctive relief on the ground that the Council's order was pre-empted by federal law under Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 106 S.Ct. 2349, 90 L.Ed.2d 943 (1986), which held that, for purpose of setting intrastate retail rates, a State may not differ from FERC's allocations of wholesale power by imposing its own judgment of what would be just and reasonable. The District Court concluded that it should abstain from deciding the suit under Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), and Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971). The Court of Appeals affirmed.
Held: The District Court erred in abstaining from exercising jurisdiction. Pp. 358-373.
(a) The Burford abstention doctrine—under which federal equity courts must decline to interfere with complex state regulatory schemes in cases involving (1) difficult state-law questions bearing on policy problems of substantial public import, or (2) efforts to establish a coherent state policy regarding a matter of substantial public concern—is not applicable. This case does not involve a state-law claim, nor even an assertion that NOPSI's federal claims are in any way entangled in a skein of state law that must be unraveled before the federal case can proceed. Because NOPSI's facial pre-emption claim may be resolved without venturing beyond the four corners of the Council's rate order, federal adjudication of the claim would not unduly intrude into state governmental process or undermine the State's ability to maintain desired uniformity in the treatment of essentially local problems. Although NOPSI's alternative claim—that the rate order's nominal emphasis on NOPSI's failure to diversify its power supply was merely a cover for the determination that the original Grand Gulf investment was itself unwise—cannot be resolved on the face of the order, resolution of that claim does not demand significant familiarity with, and will not disrupt state resolution of, distinctively local facts or policies, since wholesale electricity is not bought and sold within a predominantly local market. Pp. 360-364.
(b) Nor is abstention appropriate under Younger, which held that, absent extraordinary circumstances, traditional equity concerns and principles of comity require federal courts to refrain from enjoining pending state criminal prosecutions. This Court has expanded Younger abstention beyond criminal proceedings, and even beyond proceedings in courts, but never to proceedings that are not "judicial in nature." The Council proceedings at issue here are not judicial in nature, since ratemaking, which establishes a rule for the future, is essentially a legislative act. See, e.g., Prentis v. Atlantic Coast Line Co., 211 U.S. 210, 226-227, 29 S.Ct. 67, 69-70, 53 L.Ed. 150 (1908). Nor can the proceedings in this case be considered a unitary and still-to-be-completed legislative process by virtue of the ongoing state-court review proceedings. There is no contention here that the Louisiana courts' review involves anything other than a judicial act—that is, the declaration of NOPSI's rights vis-a-vis the Council on present or past facts under existing law. NOPSI's pre-emption claim was therefore ripe for federal review when the Council completed the legislative action by entering its final order. Pp. 364-373.
850 F.2d 1069, (CA5, 1988), reversed and remanded.
SCALIA, J., delivered the opinion of the Court, in which BRENNAN, W ITE, MARSHALL, STEVENS, O'CONNOR, and KENNEDY, JJ., joined, and in Parts I and II-B of which REHNQUIST, C.J., joined. BRENNAN, J., filed a concurring opinion, in which MARSHALL, J., joined, post, p. 373. REHNQUIST, C.J., filed an opinion concurring in part and concurring in the judgment, post, p. 373. BLACKMUN, J., filed an opinion concurring in the judgment, post, p. 374.
Richard J. Lazarus, Washington, D.C., for U.S. and F.E.R.C., as amici curiae, in support of petitioner, by special leave of Court.
Clinton A. Vince, Washington, D.C., for respondent.
In Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 106 S.Ct. 2349, 90 L.Ed.2d 943 (1986), we held that for purposes of setting intrastate retail rates a State may not differ from the Federal Energy Regulatory Commission's allocations of wholesale power by imposing its own judgment of what would be just and reasonable. Last Term, in Mississippi Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354, 108 S.Ct. 2428, 101 L.Ed.2d 322 (1988), we held that FERC's allocation of the $3 billion-plus cost of the Grand Gulf 1 nuclear reactor among the operating companies that jointly agreed to finance its construction and operation pre-empted Mississippi's inquiry into the prudence of a utility retailer's decision to participate in the joint venture. Today we confront once again a legal issue arising from the question of who must pay for Grand Gulf 1. Here the state ratemaking authority deferred to FERC's implicit finding that New Orleans Public Service, Inc.'s decision to participate in the Grand Gulf venture was reasonable, but determined that the costs incurred thereby should not be completely reimbursed because, it asserted, the utility's management was negligent in failing later to diversify its supply portfolio by selling a portion of its Grand Gulf power. Whether the State's decision to provide less than full reimbursement for the FERC-allocated wholesale costs conflicts with our holdings in Nantahala and Mississippi Power & Light is not at issue in this case. Rather, we address the threshold question whether the District Court, which the utility petitioned for declaratory and injunctive relief from the state ratemaking authority's order, properly abstained from exercising jurisdiction in deference to the state review process.
* Because the abstention questions at stake here have little to do with the intricacies of the factual and procedural history underlying the controversy, we may sketch the background of this case in brief.1 Petitioner New Orleans Public Service, Inc. (NOPSI), a producer, wholesaler, and retailer of electricity that provides retail electrical service to the city of New Orleans, is one of four wholly owned operating subsidiaries of Middle South Utilities, Inc. Middle South operates an integrated "power pool" in which each of the four operating companies transmits produced electricity to a central dispatch center and draws back from the dispatch center the power it needs to meet customer demand. In 1974, NOPSI and its fellow operating companies entered a contract with Middle South Energy, Inc. (MSE), another wholly owned Middle South subsidiary, whereby the operating companies agreed to finance MSE's construction and operation of two 1250 megawatt nuclear reactors, Grand Gulf 1 and 2, in return for the right to the reactors' electrical output. The estimated cost of completing the two reactors was $1.2 billion.
During the late 1970's, consumer demand turned out to be far lower than expected, and regulatory delays, enhanced construction requirements, and high inflation led to spiraling costs. As a result, construction of Grand Gulf 2 was suspended, and the cost of completing Grand Gulf 1 alone eventually exceeded $3 billion. Not surprisingly, the cost of the electricity produced by the reactor greatly exceeded that of power generated by Middle South's conventional facilities.
Acting pursuant to its exclusive regulatory authority over interstate wholesale power transactions, 49 Stat. 847, as amended, 16 U.S.C. § 824 et seq., FERC conducted extensive proceedings to determine "just and reasonable" rates for Grand Gulf 1 power and to prescribe a "just, reasonable, and nondiscriminatory" allocation of Grand Gulf's costs and output. In June 1985, the Commission issued a final order, Middle South Energy, Inc., 31 FERC ¶ 61,305, rehearing denied, 32 FERC ¶ 61,425 (1985), aff'd sub nom. Mississippi Industries v. FERC, 257 U.S.App.D.C. 244, 808 F.2d 1525, rehearing granted and vacated in part, 262 U.S.App.D.C. 41, 822 F.2d 1104, cert. denied, 484 U.S. 985, 108 S.Ct. 501, 98 L.Ed.2d 499 (1987), in which it concluded that, because the planned nuclear reactors had been designed "to meet overall System needs and objectives," 31 FERC, p. 61,655, the Middle South subsidiaries should pay for the Grand Gulf project "roughly in proportion to each company's share of System demand," id., at 61,655-61,656. The Commission allocated 17 percent of Grand Gulf costs (approximately $13 million per month) to NOPSI, rejecting Middle South's proposal of 29.8 percent as well as the 9 percent figure favored by the respondent here, the New Orleans City Council.
"Although it did not expressly discuss the 'prudence' of constructing Grand Gulf and bringing it on line, FERC implicitly accepted the uncontroverted testimony of [Middle South] executives who explained why they believed the decisions to construct and to complete Grand Gulf 1 were sound, and approved the finding that 'continuing construction of Grand Gulf Unit No. 1 was prudent because Middle South's executives believed Grand Gulf would enable the Middle South system to diversify its base load fuel mix and, it was projected, at the same time, produce power for a total cost (capacity and energy) which would be less than existing alternatives on the system.' " Mississippi Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S., at 363, 108 S.Ct., at 2434-2435, quoting Middle South Energy, Inc., 26 FERC ¶ 63,044, pp. 65,112-65,113 (1984).
When NOPSI sought from the New Orleans City Council (Council) the local ratemaking body with final authority over the utility's retail rates, see 16 U.S.C. § 824(b); La.Rev.Stat.Ann. §§ 33:4405, 33:4495 (West 1988); Home Rule Charter of the City of New Orleans § 4-1604 (1986), as amended by Ordinance No. 8264 M.C.S., as amended by Ordinance No. 10340 M.C.S.—a rate increase to cover the increase in wholesale rates resulting from FERC's allocation of Grand Gulf costs, the Council denied an immediate rate adjustment, explaining that a public hearing was necessary to explore " 'the legality and prudency [sic] of the [contracts relating to Grand Gulf 1, and] the prudency [sic ] and reasonableness of the said expenses.' " Brief for United States et al. as Amici Curiae 5, quoting Council Resolution R-85-423. NOPSI responded by filing an action for injunctive and declaratory relief in the United States District Court for the Eastern District of Louisiana, asserting that federal law required the Council to allow it to recover, through an increase in retail rates, its FERC-allocated share of the Grand Gulf expenses.
The District Court granted the Council's motion to dismiss, holding that pursuant to the Johnson Act, 28 U.S.C. § 1342, it had no jurisdiction to entertain the action, and that even if it had jurisdiction it would be compelled by Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), to abstain. On appeal, the Fifth Circuit initially reversed on both grounds, but later, on its own motion, vacated i § earlier opinion in part and held that abstention was proper both under Burford and under Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971). New Orleans Pub. Serv., Inc. v. New Orleans, 782 F.2d 1236, modified, 798 F.2d 858 (1986), cert. denied, 481 U.S. 1023, 107 S.Ct. 1910, 95 L.Ed.2d 515 (1987) (NOPSI I ).
By resolution of October 10, 1985, while NOPSI I was still pending before the Fifth Circuit, the Council initiated an investigation into the prudence of NOPSI's involvement in Grand Gulf 1. Resolution R-85-636 stated the Council's intention to examine all aspects of NOPSI's relationship with Grand Gulf, including NOPSI's " 'efforts to minimize its total cost exposure for the purchase,' " and Grand Gulf's " 'impact on its other power supply opportunities,' " " 'for the purpose of determining what portion, if any, of NOPSI's Grand Gulf 1 expense shall be assumed by [NOPSI's] shareholders.' " App. 113-114. The resolution specifically provided, however, that in setting the appropriate retail rate, the Council would " 'not seek to invalidate any of the agreements surrounding Grand Gulf 1 or to order NOPSI to pay MSE a rate other than that approved by the FERC.' " Id., at 114.
The Council completed its prudence review on February 4, 1988, and immediately entered a final order disallowing $135 million of the Grand Gulf costs. The order was based on the Council's determinations that "NOPSI's . . . oversight and review of its Grand Gulf obligation . . . was uncritical and severely deficient," App. 24, and that NOPSI acted imprudently in failing to reduce the risk of its Grand Gulf commitment, in the wake of the Three Mile Island nuclear incident in March 1979, "by selling all or part of its share off-system," id., at 24-25.
Upon receipt of the Council's decree, NOPSI turned once again to the District Court for the Eastern District of Louisiana, seeking declaratory and injunctive relief on the ground that, in light of this Court's recent decision in Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 106 S.Ct. 2349, 90 L.Ed.2d 943 (1986), the Council's rate order was pre-empted by federal law. Although the District Court expressed considerable doubt as to the merits of the Council's position on the pre-emption question,2 it concluded that, notwithstanding Nantahala, it should still abstain from deciding the suit.
Anticipating that the District Court might again abstain, NOPSI had filed a petition for review of the Council's order in the Civil District Court for the Parish of Orleans, Louisiana. As filed, NOPSI's petition raised only state-law claims and federal due process and takings claims, but NOPSI informed the state court by letter that it would amend to raise its federal pre-emption claim if the federal court once again dismissed its complaint. When that happened, it did so.3
In the parallel federal proceedings, the Fifth Circuit affirmed the District Court's dismissal, agreeing that the case was effectively controlled by NOPSI I, i.e., that Burford and Younger abstention applied. 850 F.2