Opinion ID: 699520
Heading Depth: 2
Heading Rank: 1

Heading: Retroactive Vacatur of National's CD Reduction

Text: 27 National argues that the Commission misapplied all three of the Chevron Oil elements but it concentrates its fire upon the third. Specifically, the petitioner challenges the Commission's conclusion that National did not rely detrimentally upon the CD reduction aspect of Order No. 436 by foregoing its right instead to elect CD conversion. The Commission, supported by Tennessee as intervenor, defends its application of the Chevron Oil test, of course. Before we turn to the merits of the Chevron Oil dispute, however, we consider the continuing vitality of that case in light of Beam and its progeny.
28 In Beam the Supreme Court considered whether a rule of law newly announced in a judicial decision must be applied retroactively to claims arising on facts antedating that decision. 501 U.S. at 532, 111 S.Ct. at 2441. Noting that both parties before the Court had assumed that Chevron Oil permitted exceptions to the rule of retroactive application in civil cases, Justice Souter (joined by Justice Stevens) concluded that Chevron Oil did not provide an answer. Id. at 537-39, 111 S.Ct. at 2444-45. He pointed out that Chevron Oil had been a case with no retroactive application at all--the new rule announced therein was applied neither to that case nor to others involving conduct or events occurring prior to the announcement of the new rule--and determined that the selectively retroactive application of a judicial decision never [had] been endorsed in the civil context. Id. 29 Concluding that selective retroactivity breaches the principle that litigants in similar situations should be treated the same, a fundamental component of stare decisis and the rule of law generally, id. at 537-38, 111 S.Ct. at 2444, and invoking the nature of precedent, as a necessary component of any system that aspires to fairness and equality,id. at 543, 111 S.Ct. at 2447, Justice Souter held that it was error to refuse to apply a rule of federal law retroactively after the case announcing the rule has already done so. Id. at 540, 111 S.Ct. at 2446. Four other Justices concurred separately in that view. See id. at 544, 111 S.Ct. at 2448 (White J., concurring in the judgment); id. at 547, 111 S.Ct. at 2449-50 (Blackmun J., joined by Marshall J. and Scalia, J., concurring in the judgment); id. at 548, 111 S.Ct. at 2450 (Scalia J., joined by Marshall J. and Blackmun J., concurring in the judgment). 30 Nonetheless, Justice Souter did leave open the possibility that a court might, as a remedial matter, decline to apply a judicial decision retroactively. In his view, retroactivity as a remedial matter presents a different question than does retroactivity as a choice of law matter (referring here to the choice between the new and the old rule). Id. at 538-39, 111 S.Ct. at 2444-45. Justice Souter specifically reserved judgment on the question whether a court might simultaneously apply a decision retroactively yet relieve the adverse party of its full consequences, based upon the equities of its particular case. See id. (respondent [may] demonstrate reliance interests entitled to consideration in determining the nature of the remedy that must be provided ...). Indeed, the result in Beam highlights the distinction between choice-of-law and remedy: the Court held a Georgia tax law unconstitutional based upon the retroactive application of a recent Court decision, but expressed no opinion upon the question whether the plaintiff was entitled to a refund of the taxes it had already paid. Although none of the Justices concurring in the judgment of the Court commented separately upon Justice Souter's distinction between retroactivity as a choice-of-law and as a remedial issue, their joining in the judgment remanding the case for a determination of the proper remedy at least suggests that Chevron Oil may have had some continuing role to play as a remedial doctrine. 31 Two years later, however, in Harper the Supreme Court solidified its position, holding that the Court's application of a rule of federal law to the parties before [it] requires every court to give retroactive effect to that decision. --- U.S. at ----, 113 S.Ct. at 2513. Noting that Justice Souter's view of retroactivity [in Beam ] superseded 'any claim based on a Chevron Oil analysis,'  the Court held that a rule of federal law, once announced and applied to the parties to the controversy, must be given full retroactive effect by all courts adjudicating federal law. Id. at ----, 113 S.Ct. at 2517. 32 Nonetheless, the Court still did not make entirely clear (1) whether it adhered to Justice Souter's distinction between retroactivity as a choice-of-law and as a remedial question and (2) if it did, whether Chevron Oil had any continuing validity. On the one hand, the Court clearly held that the federal law applicable to a particular case does not turn on whether litigants actually relied on an old rule or how they would suffer from retroactive application of a new one, thereby suggesting that reliance interests are irrelevant, presumably even at the remedial stage. See id. at ---- n. 9, 113 S.Ct. at 2516 n. 9. On the other hand, the Court declined to decide whether Chevron Oil represented a true choice-of-law principle or merely a remedial principle for the exercise of equitable discretion by federal courts, and thus it did not expressly overrule that case. Id. 33 Moreover, the outcome of Harper suggested that the distinction between remedy and choice-of-law was alive and well: Reversing the decision of the Supreme Court of Virginia holding that Chevron Oil countenanced its failure to apply the U.S. Supreme Court's earlier decision to the later plaintiff, the Court nevertheless declined to order that the amounts paid under the unconstitutional tax be refunded, leaving to Virginia courts ... the crafting of any appropriate remedy. Id. at ----, 113 S.Ct. at 2520. 34 Harper was the Supreme Court's last word on retroactivity prior to the Commission's issuance of the Third and Fourth Orders. As noted above, the Commission concluded in the Third Order that Chevron Oil survived as a remedial doctrine under which it could grant relief to a party that had acted in reliance upon the law as it stood prior to our decision supposedly announcing a new rule of law. While that conclusion is perhaps understandable after Harper, it is untenable in light of the Court's subsequent decision in Reynoldsville Casket Co. v. Hyde, --- U.S. ----, 115 S.Ct. 1745, 131 L.Ed.2d 820 (1995), which was issued only after the oral argument in this case. 35 In Hyde, the Supreme Court clearly held that retroactive application of a judicial decision cannot, except in certain limited and specifically defined circumstances, be blunted at the remedial stage. The plaintiff in Hyde acknowledged that her case was governed by Harper and that a prior decision of the Supreme Court had retroactively invalidated the tolling provision that [made] her suit timely. Id. at ----, 115 S.Ct. at 1748. She nevertheless asked the Court to allow her suit to go forward, not[ing] the possibility of recharacterizing Chevron Oil as a case in which the Court simply took reliance interests into account in tailoring an appropriate remedy for a violation of federal law. Id. 36 The Court, per Justice Breyer, squarely rejected that argument: 37 [W]e do not see how ... the Ohio Supreme Court could change a legal outcome that federal law ... would otherwise dictate simply by calling its refusal to apply that federal law an effort to create a remedy. 38 Id. at ----, 115 S.Ct. at 1749. The Court then noted that the plaintiff's reliance interest was of the same kind and degree as that involved in Chevron Oil, and asked rhetorically: 39 If Harper has anything more than symbolic significance, how could virtually identical reliance, without more, prove sufficient to permit a virtually identical denial simply because it is a denial based on remedy rather than non-retroactivity? Id. 40 In Hyde, the Court clearly holds that Chevron Oil does not allow a court to depart, even at the remedial stage, from the rule of Harper requiring that a judicial decision be applied retroactively. Instead, where Harper is applicable, a remedy other than retroactive application of a prior decision can be awarded only in four specific circumstances: 41 [A] court may find (1) an alternative way of curing the constitutional violation, (2) a previously existing, independent legal basis (having nothing to do with retroactivity) for denying relief, or (3) as in the law of qualified immunity, a well-established legal rule that trumps the new rule of law, which general rule reflects both reliance interests and other significant policy justifications, or (4) a principle of law ... that limits the principle of retroactivity itself. 42 Id. at ----, 115 S.Ct. at 1751. Thus, to the extent that a court may, after Hyde, still depart from the norm of retroactive application based upon a party's reliance interest, its authority to do so has been limited to the most compelling circumstances. See Ryder v. United States, --- U.S. ----, ---- - ----, 115 S.Ct. 2031, 2036-37, 132 L.Ed.2d 136 (1995) (whatever the continuing validity of Chevron Oil after [Harper ] and [Hyde ], there is not the sort of grave disruption or inequity involved in awarding retrospective relief to this petitioner that would bring that doctrine into play). Hence, if Harper is applicable here, then we do not need to consider whether the Commission properly applied Chevron Oil; we need only consider whether any of the four circumstances identified in Hyde might apply here. 43
44 We consider first whether Harper and Hyde apply to this case. Although those cases surely appear to require the retroactive application of AGD against National, the Commission argues that it is unclear whether Harper applies here because the overruling of Chevron Oil does not necessarily govern in the context of agency action. In this regard, the agency contends that Beam and its progeny are grounded on Article III of the Constitution, which is inapplicable to administrative agencies, and that this and other courts have recognized that the overruling of Chevron Oil does not necessarily govern in the context of agency action, for which it cites Laborers' Int'l Union v. Foster Wheeler Corp., 26 F.3d 375, 387-88 n. 8 (3d Cir.1994); Atlantic Richfield v. DOE, 977 F.2d 611, 614 (Temp.Emer.Ct.App.1992); and District Lodge 64 v. NLRB, 949 F.2d 441, 447 (D.C.Cir.1991). 45 The Commission's argument is unpersuasive for two reasons. First, Article III is not the Supreme Court's only basis for requiring the retroactive application of judicial decisions. Although the Court in Harper noted that the nature of judicial review strips [a court] of the quintessentially legislative prerogative to make rules retroactive or prospective as [it] sees fit, --- U.S. at ----, 113 S.Ct. at 2516, which does indirectly marshal the force of Article III against prospectivity, the Court also noted that the selective application of new rules violates the principle of treating similarly situated parties the same. Id. Indeed, Justice Souter in Beam seemed to rely primarily upon the latter point; he reasoned that selective retroactivity breaches the principle that litigants in similar situations should be treated the same, a fundamental component of stare decisis and the rule of law generally. Beam, 501 U.S. at 537-38, 111 S.Ct. at 2444. We see no reason why that pre-constitutional rationale would apply with any less force when it falls to an agency rather than a court to apply a judicial decision. See District Lodge 64, 949 F.2d at 447 (citing Justice Souter's opinion in Beam and observing that concern for equity and the rule of law would seem applicable also in the agency context). 46 Second, the Commission's Article III argument seems to miss the distinction between an administrative agency's retroactive application of a judicial decision--the case before us here--and the agency's retroactive application of its own adjudicative decision. Because Article III does not apply to an agency adjudication, the Commission may have some freedom to apply its own decisions prospectively even after Harper. Id. (Beam does not clearly foreclose selective retroactivity of an agency's own adjudications). But see UFCW, Local No. 150-A v. NLRB, 1 F.3d 24, 35 (D.C.Cir.1993) (stating that Harper and Beam may apply even to the retroactive application of agency adjudications) (emphasis in original); Southwestern Public Service Company v. FERC, 952 F.2d 555, 563 (D.C.Cir.1992) (FERC should take note of our recent suggestion that [Beam ] may forbid agencies to apply rules with selective retrospectivity). Because the decision of an Article III court, however, announces the law as though [it] were finding it--discerning what the law is, rather than decreeing what it is ... changed to, or what it will tomorrow be, Beam, 501 U.S. at 549, 111 S.Ct. at 2451 (Scalia, J., joined by Marshall, J. and Blackmun, J., concurring in the judgment), all parties charged with applying that decision, whether agency or court, state or federal, must treat it as if it had always been the law. The agency must give retroactive effect to the ruling of a federal court because of the nature of that court. Just as an Article III court may not issue an advisory decision, it may not issue a decision for less than all seasons, for some citizens and not others, as an administrator shall later decide. In sum, the decision of a federal court must be given retroactive effect regardless whether it is being applied by a court or an agency. 47 Our conclusion here is not at all inconsistent with the three cases upon which the Commission relies. Neither District Lodge 64 nor Foster Wheeler deals with the question whether an agency must apply a judicial decision retroactively. Instead, they consider only whether Harper requires an agency to apply its own adjudications retroactively. While Atlantic Richfield does deal with an agency's retroactive application of a judicial decision, it was decided before Harper or Hyde; the court declined to require the agency to apply an earlier court decision retroactively, but it did so purportedly as a remedial matter. See District Lodge 64, 949 F.2d at 447 (if Beam is applicable to this case, its application does not entitle [the appellant] to the desired remedy ...). In sum, neither the rationale underlying the Harper doctrine nor the decisions cited by the Commission give us any reason to believe that an agency may decline to apply a federal court decision retroactively. 48 Because we think that Harper and Hyde do apply here, we do not need to determine whether the Commission correctly applied Chevron Oil. Instead, we need to determine only whether retroactive application of our decision in AGD, vacating Order No. 436, to National's CD reduction on Tennessee for well-established legal reasons, does not determine the outcome of [this] case,Hyde, --- U.S. at ----, 115 S.Ct. at 1751, or presents any other special circumstance, id., such as grave disruption or inequity to National. Ryder, --- U.S. at ----, 115 S.Ct. at 2033. We turn now to consider, under those standards, whether National's arguments provide any reason for the Commission to award Tennessee a remedy other than the retroactive application of AGD (and consequent vacatur of National's election of CD reduction). 49 National says that the Commission's conclusion that it did not detrimentally rely upon the CD reduction option by foregoing its right to CD conversion is arbitrary and capricious. This claim is based upon National's premise that such reliance requires that we provide Tennessee with a remedy other than the retroactive application of AGD. After Hyde, however, it is clear that simple reliance of the sort at issue in Chevron Oil  and in Hyde, see --- U.S. at ----, 115 S.Ct. at 1751, is insufficient to warrant a departure from the rule of Harper. We are cognizant, moreover, of the Commission's conclusion that National's reliance arguments, even if valid, would not place the equities in National Fuel's favor and overcome the legal presumption for retroactivity, Fourth Order at 61,650--a conclusion to which we owe considerable deference, see Towns of Concord, Norwood, and Wellesley v. FERC, 955 F.2d 67, 76 (D.C.Cir.1992) (Commission's discretion at its zenith when the challenged action relates to the fashioning of remedies). Against all of this, National offers us no reason to believe that the retroactive application of AGD to National's CD reduction would create the sort of grave disruption or inequity that might warrant relief from retroactivity per Harper. See Ryder, --- U.S. at ---- - ----, 115 S.Ct. at 2036-38. 50 Furthermore, it is clear that the retroactive application of AGD to vacate National's CD reduction would fall into none of the four circumstances that Justice Breyer identified in Hyde. There is here involved no previously existing, independent legal basis (having nothing to do with retroactivity) for denying relief, no well-established general legal rule that trumps AGD, nor any principle of law ... that limits the principle of retroactivity itself. The only exception to the rule of Harper even possibly applicable here is the first, which allows the court (or agency) retroactively applying the new judicial decision to find an alternative way of curing the problem infecting the rule of law that the new rule replaced. The Court conceived that exception with the special circumstance of the tax cases in mind: a state court may cure the constitutional defect in a state tax law where the violation depends, in critical part, upon differential treatment of two similar classes of individuals ... either by similarly burdening, or by similarly unburdening, both groups. Id.; see, e.g., McKesson Corp. v. Division of Alcoholic Beverages and Tobacco, Fla. Dept. of Business Regulation, 496 U.S. 18, 40-41, 110 S.Ct. 2238, 2252-53, 110 L.Ed.2d 17 (1990); Davis v. Michigan Dept. of Treasury, 489 U.S. 803, 109 S.Ct. 1500, 103 L.Ed.2d 891 (1989). This suggests that an administrative agency may be able to cure the problem that a court has found in its order--such as inadequate support in the record--and repromulgate the order with retroactive effect. We need not resolve that question today, however; while the Commission may have had the discretion to choose an alternative way of curing the problems we identified in AGD, its decision in Order No. 500-H to abandon the CD reduction provision made retroactive vacatur of the CD elections that pipeline customers had made the only way to cure the APA violation we had identified.