Court Opinion

ID: 8409042
Source: CourtListenerOpinion
Date Created: 2022-11-02 16:51:41.060931+00
Date Added: 2024-06-11T16:47:38.507678
License: Public Domain

CALLAHAN, Circuit Judge,
dissenting, in part.
I agree with the majority’s opinion, but for the decision to allow Grays Harbor to amend its complaint.
My colleagues carefully and correctly show that Grays Harbor’s contract-related claims are preempted because they trigger the exclusive jurisdiction of FERC. They explain that the Federal Power Act (“FPA”) delegates to FERC “exclusive authority to regulate the transmission and sale at wholesale of electric energy in interstate commerce.” New England Power Co. v. New Hampshire, 455 U.S. 331, 340, 102 S.Ct. 1096, 71 L.Ed.2d 188 (1982). They, however, would permit Grays Harbor to amend its complaint because offering declaratory relief as to contract formation “would not necessarily intrude upon the rate-setting jurisdiction of FERC.”
I question the factual basis of this assertion. Grays Harbor cannot escape preemption by restating a claim that is based on “dysfunctional markets, market manipulation and the intentional withholding of generation capacity from the market.” We recently held that a lawsuit by the State of California to enforce its unfair competition laws against producers that engaged in fraudulent energy transactions was preempted because California sought “to impose judicial remedies in addition to those that FERC may impose.” People of California v. Dynegy, 375 F.3d 831 (9th Cir.2004). In addition, we have also rejected a suit for money damages “allegedly resulting from the operation of an interstate electricity intertie expressly approved by FERC, where the manner of operation was necessarily contemplated at the time of approval.” Transmission Agency of Northern California v. Sierra Pacific Power Company, 295 F.3d 918, 928 (9th Cir.2002).
It is true that claims that are strictly contractual in nature are not preempted by the FPA, and that FERC has often declined jurisdiction over contractual matters that do not involve FERC’s expertise. See Gulf States Utilities v. Alabama Power Co., 824 F.2d 1465 (5th Cir.1987) (stating that “The FPA would preempt a claim that frustration[of purpose of a contract] occurs because of high rates; the FPA would not preempt a claim that frustration occurs by buying electricity from Southern at any price.”); see also National Fuel Gas Supply Corporation, 27 F.E.R.C. ¶ 63,074 (June 15,1984).
Nonetheless, here, the issues of contract formation are tightly intertwined with complex matters of federal energy regulation. This case calls to mind the famous ontological debate of whether the chicken begat the egg. Like the scrambled relationship of the chicken and the egg, it is *654impossible to sever the issues of state contract formation in this case from matters of federal energy regulation that are purely within the province of FERC.
Grays Harbor’s claims of unilateral and mutual mistake are rooted in an allegation that the Pacific Northwest energy market was not functioning properly at the time of contract formation.1 Even if the amended complaint would not require the court to set a fair rate, it would still require an inquiry into the functioning of the energy market. This is the kind of technical inquiry that is best left to FERC’s expertise.
Furthermore, considering that we are an appellate court, it is wrong to hold that the district court abused its discretion in denying leave to amend the complaint when neither the plaintiff nor the district court itself were able to conceive of any meaningful claim that was not preempted. Grays Harbor did not request leave to amend to seek declaratory relief until after the possibility of such relief was proffered by the panel.
In sum, as the contract formation issues involved in the present case cannot be unscrambled from matters that fall within the sole jurisdiction of FERC, I dissent.

. I note that these allegations conflict with the findings of the administrative law judge whose recommendations were considered by FERC in prior proceedings relating to these energy transactions. The judge determined that “evidence demonstrates that the Pacific Northwest market for spot sales of electricity was competitive and functional during the relevant period of time....” See Puget Sound Energy, Inc. v. All Jurisdictional Sellers of Energy and/or Capacity at Wholesale Into Electric Energy and/ or Capacity Markets in the Pacific Northwest, Including Parties to the Western Systems Power Pool Agreement, 103 F.E.R.C. ¶ 61,348 (June 25, 2003). Therefore, it would be impossible for a court to take judicial notice of the market's dysfunction as this fact is apparently a matter that is disputed.