Opinion ID: 889492
Heading Depth: 1
Heading Rank: 2

Heading: Memorandum and Order of April 14, 2006, Regarding the State's Motion for Summary Judgment on PPL's Declaratory Judgment Action

Text: ถ 11 In its April 14, 2006 Memorandum and Order, the District Court granted summary judgment in favor of the State on PPL's declaratory judgment action. First, the District Court concluded that the State's claims for compensation were not preempted by the federal navigational servitude. As noted above, see Opinion, ถ 7, the federal navigational servitude is the power of Congress to ensure that navigable waters remain open to interstate and foreign commerce. Citing to Fed. Power Commn. v. Niagara Mohawk Power Corp., 347 U.S. 239, 74 S.Ct. 487, 98 L.Ed. 666 (1954), the District Court observed that the exercise of the federal navigational servitude requires clear authorization from Congress. In Niagara, the Supreme Court held that Congress had not given such clear authorization under the FPA. See Niagara, 347 U.S. at 249-51, 74 S.Ct. at 493-94. The District Court noted that federal courts interpreting the FPA have specifically held that it recognizes the property rights of parties whose land is affected by federally-licensed hydroelectric projects, and expressly prohibits the use of private property without proper compensation. See United States v. Cent. Stockholders' Corp. of Vallejo, 52 F.2d 322, 331-32 (9th Cir.1931) (discussing the applicability of the FPA regarding property rights created under state law); Public Utility Dist. No. 1 of Pend Oreille Co. v. City of Seattle, 382 F.2d 666, 671-72 (9th Cir.1967) (same). Accordingly, the District Court concluded that the federal navigational servitude did not preempt the State's claims for compensation. ถ 12 The District Court also concluded that the FPA did not preempt the State's ability in general to seek compensation for PPL's use of state-owned riverbeds. The District Court noted the three types of federal preemption under Montana law: express, field, and conflict. See Vitullo v. Int. Bhd. of Elec. Workers, Local 206, 2003 MT 219, ถ 14, 317 Mont. 142, 75 P.3d 1250. In Vitullo, we described these forms of preemption as follows: This Court recognizes three ways in which federal law may preempt state law. The first is by express preemption, wherein Congress includes a preemption clause providing that state law will not apply in the area governed by the federal statute. Absent express preemption, this Court recognizes two types of implied preemption. The first is field preemption, wherein the scheme of federal regulation is so pervasive or comprehensive that it is reasonable to infer that Congress intended to occupy the field and leave no room for supplementary state regulation. The second type of implied preemption is conflict preemption. Conflict preemption manifests itself as an inability of state law to comply with federal law or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. Vitullo, ถ 14 (citing Dukes v. Sirius Constr., Inc., 2003 MT 152, ถ 20, 316 Mont. 226, 73 P.3d 781; Favel v. Am. Renovation and Constr. Co., 2002 MT 266, ถ 40, 312 Mont. 285, 59 P.3d 412). ถ 13 The District Court concluded that express preemption did not apply because the FPA did not contain any language expressly preempting state law. The District Court also concluded that neither field preemption nor conflict preemption barred the State's claims under the HRA. ถ 14 Relying on First Iowa Hydro-Electric Coop. v. Fed. Power Commn., 328 U.S. 152, 66 S.Ct. 906, 90 L.Ed. 1143 (1946), the District Court noted that the FPA establishes a dual system of control between the states and the federal government. First Iowa, 328 U.S. at 167-68, 66 S.Ct. at 913. The FPA grants FERC the authority to issue licenses for the construction, operation, and maintenance of dams, including the power to regulate regarding the engineering, economic, and financial soundness of such facilities. First Iowa, 328 U.S. at 172, 66 S.Ct. at 915-16. However, the FPA also preserves the role of state law within the federal licensing structure. For instance, one section of the FPA requires an applicant for a FERC license to demonstrate that it has complied with the requirements of state law with respect to the beds and banks and to the appropriation, diversion, and use of water for power purposes for the state in which the proposed projected is located. First Iowa, 328 U.S. at 161 n. 6, 66 S.Ct. at 910 n. 6 (quoting 16 U.S.C. ง 802); see also 16 U.S.C.A. ง 821 (West 2010). ถ 15 Moreover, federal courts have concluded the FPA recognizes the validity of state property rights and contemplates compensation for property use under state law. For instance, in Jordan v. Randolph Mills, Inc., 716 F.2d 1053 (4th Cir.1983), the Fourth Circuit recognized that a FERC license neither transfers nor diminishes any right of possession or enjoyment possessed by a landowner, and that use of another's property by a FERC-licensee requires either acquisition of the owner's rights or the use of the power of eminent domain. Jordan, 716 F.2d at 1055. Additionally, the District Court noted that the FPA specifically requires licensees to notify any party who is an owner of record of any interest covered by a proposed project, including state, federal, and municipal entities. 16 U.S.C.A. ง 802(b) (West 2010). The FPA also requires the licensee to submit information about the price paid for water rights, rights-of-way, lands, or interests in lands. 16 U.S.C.A. ง 797(b) (West 2010). Further, federal courts have concluded that the FPA itself specifically allows property owners to bring state law tort actions against a licensee for damages caused by a hydroelectric facility pursuant to 16 U.S.C. ง 803(c). See Nez Perce Tribe v. Idaho Power Co., 847 F.Supp. 791, 812 (D.Idaho 1994) (stating that under 16 U.S.C. ง 803(c) Congress did not preempt property-based state common law claims against FERC licensees); DiLaura v. Power Auth. of the State of N.Y., 982 F.2d 73, 78 (2d Cir.1992) (same). In other words, while the FPA grants FERC the ultimate authority to license a hydroelectric project in accordance with federal law, it explicitly permits the operation of state law with regard to proprietary rights which may be affected by a FERC-licensed facility. See First Iowa, 328 U.S. at 175-76, 66 S.Ct. at 917. Accordingly, the District Court concluded that the FPA did not preempt the State's compensation claims against PPL. ถ 16 The District Court also rejected the argument that the HRA was preempted by the FPA. As noted above, the HRA contains a section which authorizes the Land Board to enter into a lease with entities that use power sites within Montana for the generation of hydroelectric power. See Opinion, ถถ 4-5. However, Section 203 of the HRA reads as follows: In issuing any lease or license under the provisions of this part, the board shall have the power and it shall be its duty to incorporate in the lease or license such reasonable restrictions and regulations as it finds necessary in order to protect the interest of the state and its people. Section 77-4-203, MCA. ถ 17 PPL argued that Section 203 was an impermissible attempt by the State to regulate its FERC-licensed facilities, and that this section rendered the entire HRA preempted. The District Court agreed that Section 203 was preempted by federal law, but concluded that, given the FPA's clear recognition of state property rights, the FPA did not preempt those aspects of the HRA which empowered the State/Land Board to seek compensation. The District Court rejected the argument that the State's efforts to receive compensation through a lease with PPL somehow represented an impermissible infringement upon the federal government's licensing and regulatory authority under the FPA. As stated by the District Court, The Utilities take the position that merely asking them to sit down and negotiate a lease with the State constitutes regulation preempted under the Federal Power Act. However, the Court cannot accept this position. It would make no sense to reserve property rights under the Federal Power Act and then hold that any process to vindicate those rights is preempted. The ability to negotiate the terms and conditions of a lease is an incident of ownership all property owners possess. The Utilities cite a number of cases under the doctrines of field or conflict preemption in support of their position. However, none of the cases are property cases, nor do they hold that a state is preempted from enforcing its property rights. (Citations omitted.) ถ 18 In sum, the District Court concluded that the FPA did not occupy the field or otherwise conflict with the State's efforts to seek compensation from PPL. However, the District Court declined to rule to on PPL's as-applied challenge to the HRA on federal preemption grounds, concluding that resolution of this question presented factual issues requiring a more developed record. ถ 19 In this same order, the District Court also granted the State's motion for summary judgment on PPL's affirmative defenses. See Opinion, ถ 7. With respect to PPL's claim for a prescriptive easement, the District Court noted that under Montana law a party cannot obtain title to government property through adverse possession or use. See e.g. Roe v. Newman, 162 Mont. 135, 142, 509 P.2d 844, 848 (1973) (citing Bode v. Rollwitz, 60 Mont. 481, 199 P. 688 (1921)). Regarding PPL's equitable estoppel defense, the District Court concluded that the State cannot be estopped by the unauthorized acts or representations of its officers or agents. See Norman v. State, 182 Mont. 439, 444, 597 P.2d 715, 718 (1979). Because no state employee would have the authority to make representations about the disposal of trust land in a manner contrary to the State and Land Board's fiduciary duties as trustees, see Opinion, ถ 3, estoppel could not be asserted against the State in this case. The District Court further concluded that the defenses of laches and the statute of limitations were barred for similar reasons. Because the State claimed its efforts to seek compensation were taken in accordance with its trust duties under the Montana Constitution, those efforts stand on a different plane from an ordinary suit to regain title or remove a cloud upon it. Norman, 182 Mont. at 446, 597 P.2d at 719. Thus, the District Court concluded that estoppel, laches, and the statute of limitations could not be asserted against the State. ถ 20 Finally, the District Court concluded that PPL could not assert a waiver or breach of agreement defense against the State. The District Court noted that under Montana law, a law established for a public reason cannot be contravened by private agreement. See Collection Bureau Servs., Inc. v. Morrow, 2004 MT 84, ถ 9, 320 Mont. 478, 87 P.3d 1024; see also Cape-France Enters. v. Est. of Peed, 2001 MT 139, ถถ 33-34, 305 Mont. 513, 29 P.3d 1011. Under these principles, the State could not waive its right to rental payments, nor could it enter into an agreement which would have the effect of prohibiting it from carrying out its trust obligations. ถ 21 Accordingly, the District Court granted the State's motion for summary judgment, disposing of PPL's preemption arguments and its affirmative defenses.