Opinion ID: 2735161
Heading Depth: 4
Heading Rank: 2

Heading: Alcoa Amendment

Text: As the Alcoa Amendment does not contain a damage waiver, BPA is not contractually barred from seeking recovery of the subsidies invalidated in PNGC II. BPA nonetheless declined to seek recoupment of subsidies it provided pursuant to the Amendment, viewing the chances of succeeding in doing so as slight, and outweighed by the potential recovery costs. BPA’s rationales for this conclusion boiled down to two: (1) Alcoa may have defenses to any equitable or quasicontract claim, including perhaps an estoppel defense; and (2) Alcoa may be able to defeat a claim for unjust enrichment, and succeed on a counterclaim against BPA, by showing that, far from being enriched, it obtained less in monetary value than it was entitled to under the governing statutes. We hold both rationales “so implausible that [they] could not be ascribed to a difference in view or the product of agency expertise.” Lands Council, 537 F.3d at 987. As a result, we cannot approve the current ROD’s conclusion as to recovery of the Alcoa Amendment subsidies. As to the ROD’s first rationale, the evaluation of the merits of any possible defenses Alcoa might assert was far too generous. In particular, BPA’s prediction that “Alcoa would have a reasonably good chance of . . . mounting a ICNU V. BPA 33 viable estoppel defense against any claim by BPA,” is particularly dubious. It is unlikely that the DSIs could successfully estop the government from recovering a refund if, in fact, a court determined that they had received unlawful overpayments. As Richmond emphasized, although the Supreme Court has never categorically foreclosed estoppel against the government with regard to monetary payments, it has “reversed every finding of estoppel that [it has] reviewed.” 496 U.S. at 422. Ignoring this history, BPA looked only at this court’s estoppel cases, concluding “the Ninth Circuit is more receptive to claims of estoppel against the Government than some other circuits.” Whether that vague comparison is correct or not is beside the point. It is of no help in assessing the actual risk of a successful estoppel claim in this case. What is relevant is our actual standard: the party claiming estoppel must show both (1) “affirmative misconduct” on the part of the government and (2) that “the government’s wrongful act will cause a serious injustice, and the public’s interest will not suffer undue damage.” United States v. Hatcher, 922 F.2d 1402, 1409, 1411 n.12 (9th Cir. 1991) (internal quotation marks omitted). Under this standard, we have very occasionally applied estoppel against the government in immigration cases. See, e.g., Salgado-Diaz v. Gonzales, 395 F.3d 1158, 1165–66 (9th Cir. 2005). But we know of no Ninth Circuit case estopping the government from recovering an erroneous monetary payment, nor have the parties identified one. Cf. Heckler v. Cnty. Health Servs. of Crawford Cnty., Inc., 467 U.S. 51 (1984). The ROD also reasoned that BPA may not be able successfully to pursue an unjust enrichment claim against 34 ICNU V. BPA Alcoa for several reasons. One concern expressed in the ROD was that a claim for unjust enrichment cannot lie where the relationship between the parties is governed by a valid express contract concerning the particular issue. See Sutter Home Winery, Inc. v. Vintage Selections, Ltd., 971 F.2d 401, 408–09 (9th Cir. 1992). But by the time the ROD here challenged issued, this court had already invalidated the relevant portion of the Alcoa Amendment. See PNGC II, 596 F.3d at 1085–86. That being so, no valid contractual provision stood in the way of an unjust enrichment claim. The ROD’s second rationale — that Alcoa may be able to show that it was not enriched, but rather illegally disadvantaged, by the subsidies in the Alcoa Amendment — has more support in the record. The record does establish, at least, that the amount of any damages BPA could actually recover from the aluminum DSIs is uncertain and disputed. Moreover, if BPA sues, Alcoa could well counterclaim, arguing that it actually lost money through the partially invalidated contracts. Had BPA not insisted on a monetized contract, Alcoa maintains, BPA could have (and, according to BPA, likely would have) sold Alcoa physical power instead at the IP rate. The ROD noted Alcoa’s contention that, as matters turned out, Alcoa had to pay a significantly higher rate during the Alcoa Amendment period than the IP rate because of rising market rates.8 The ROD also acknowledged that Alcoa had 8 More specifically, Alcoa’s explanation in its briefs to this court of its position begins by pointing out that, if BPA sells to DSIs, it must offer them the IP rate, rather than a market rate. See PNGC I, 580 F.3d 812–13; PNGC II, 596 F.3d at 1073. Alcoa then represents that, as demanded by BPA and required under the 2007 Block Contracts and Alcoa Amendment, ICNU V. BPA 35 argued previously that it “is potentially entitled to recoup those additional payments.” Alcoa’s brief to this court elaborates on its overpayment argument, maintaining that, far from receiving overpayments under the 2007 Block Contracts and the Alcoa Amendment, the company ended up paying “$218 million more for power than it would have” had BPA sold it power directly, including $26.1 million during the Amendment period. One major flaw in Alcoa’s argument, and BPA’s acceptance of it as sufficiently meritorious to constitute a substantial risk in any litigation to recover, is that BPA could — under our PNGC decisions — have refused to sell Alcoa power at all, leaving Alcoa to buy power at full market rates. But Alcoa’s position is still not entirely implausible. Given BPA’s practices regarding Alcoa, it might be hard for BPA to establish as a factual matter that it would have refused to sell Alcoa power at the IP rate. And Alcoa’s persistence as to its contention suggests that it would take an equally aggressive litigation position in any collection action BPA might initiate. In that light, as BPA argued, choosing to pursue recovery it entered into forward power purchase contracts “at a time when power prices were relatively high.” The rates it obtained were well above what it could afford and, even after applying the credits that it received from BPA under the 2007 Block Contracts and Amendment, were significantly higher than the IP rate. The third link in Alcoa’s net loss argument is that, assuming that BPA would have offered to sell to Alcoa at the IP rate in the absence of the Amendment (as it has said it would have), Alcoa paid more, rather than less, than had it not entered into the Amendment. Further, when the contracts were invalidated, Alcoa had to resell the power back into the market to “unwind” its purchases, and because the market had declined, it sold this power at a rate significantly lower than what it had paid. 36 ICNU V. BPA from Alcoa “would expose BPA to some risk of a judgment to Alcoa under its theory of underpayment.” But the ROD did not objectively evaluate the degree of this risk so much as capitulate to Alcoa’s threats. As noted, the above explanation of the possible counterclaim comes largely from Alcoa’s briefs and comments, not the ROD. The ROD vaguely implies that the costs and risks of litigation would outweigh its possible benefits, citing statutory and regulatory provisions requiring agencies to weigh costs of collection actions against benefits. At the same time, the ROD acknowledged, in a conclusory fashion, that “Alcoa’s purported claim that it has been underpaid by almost $200 million is dubious,” yet nowhere ventured any alternative estimate of a likely litigation outcome, or of the litigation costs likely to be incurred in obtaining that outcome. In fact, as petitioners point out, BPA never attempted “to calculate the actual amounts paid” to the aluminum DSIs, and so was in no position to determine whether there were or were not net overpayments to Alcoa. Those gaps are reason enough for skepticism about the ROD’s conclusion that, whatever those amounts are, they are not worth trying to recover. In addition, the final ROD evaluated only possible avenues for litigation, not other ways BPA might seek to recover the subsidies, such as offsets from future sales contracts with Alcoa. We may not uphold an agency decision that “entirely failed to consider an important aspect of the problem.” Lands Council, 537 F.3d at 987. BPA’s assumption that Alcoa might succeed in showing that it was not enriched, and could even recover on an affirmative counterclaim, suffers from such a lapse. We therefore remand to BPA to provide a ICNU V. BPA 37 defensible estimate of the amount of the subsidy it provided to Alcoa under the Alcoa Amendment prior to its invalidation; to provide some analysis of whether Alcoa’s claim of net underpayment has any fair chance of success; to analyze alternative plans for recovery of any overpayment to Alcoa; and either to adopt one of those plans or to explain why, with respect to each of them, the costs and downside risks justify abandonment of the opportunity to recover any overpayment.