Court Opinion

ID: 4100548
Source: CourtListenerOpinion
Date Created: 2016-11-21 20:01:13.898208+00
Date Added: 2024-06-11T09:36:30.097838
License: Public Domain

PUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                             No. 15-2348

RICHARD A. PRESSL; THERESA PRESSL,

                Plaintiffs - Appellants,

           v.

APPALACHIAN POWER COMPANY,

                Defendant - Appellee.

Appeal from the United States District Court for the Western
District of Virginia, at Roanoke.       Norman K. Moon, Senior
District Judge. (7:15-cv-00343-NKM-RSB)

Argued:   October 26, 2016                Decided:   November 21, 2016

Before MOTZ, TRAXLER, and FLOYD, Circuit Judges.

Vacated and remanded by published opinion. Judge Motz wrote the
opinion, in which Judge Traxler and Judge Floyd joined.

ARGUED: James Frederick Watson, CASKIE & FROST, P.C., Lynchburg,
Virginia, for Appellants.      Frank Kenneth Friedman, Matthew
Patrick Warren Pritts, WOODS ROGERS, PLC, Roanoke, Virginia, for
Appellee.   ON BRIEF: Pavlina B. Dirom, CASKIE & FROST, P.C.,
Lynchburg, Virginia, for Appellants.      C. Carter Lee, WOODS
ROGERS, PLC, Roanoke, Virginia, for Appellee.
DIANA GRIBBON MOTZ, Circuit Judge:

      Landowners brought this action in state court seeking a

declaration of their rights to build a dock on property subject

to a flowage easement.            After the power company, which owns the

easement,    removed    the      case     to       federal   court,     the   landowners

sought to remand the case to state court.                        The district court

denied the motion to remand and then dismissed the landowners’

complaint.      Because the district court lacked subject matter

jurisdiction, we must vacate and remand.

                                           I.

      Richard A. Pressl and Theresa Pressl own property adjacent

to Smith Mountain Lake in Franklin County, Virginia.                           They own

about two and a half acres of land sitting more than 800 feet

above median sea level.                The Pressls also own half an acre of

adjoining    land    below       the    800-foot       elevation      contour.     They

acquired the property subject to a flowage easement that the

Pressls’ predecessors in interest granted in 1960 to Appalachian

Power Company (“APCO”).

     The flowage easement recites APCO’s intention to construct

a   dam   and   operate      a    hydroelectric          power   station      at   Smith

Mountain.       It   provides      that    the       elevation     of   the   impounded

waters the dam creates generally would not exceed 800 feet.                         The

easement grants APCO the right to:

                                               2
     overflow and/or affect so much of said premises as may
     be overflowed and/or affected, continuously or from
     time to time in any manner whatsoever, as the result
     of the construction, existence, operation and/or
     maintenance of the aforesaid dam and/or power station,
     the impounding of the waters of [Roanoke] river and
     tributaries and/or the varying of the level of the so
     impounded waters by reason of the operation of said
     power station, including any pumping as part of such
     operation.

The easement also gives APCO the right to:

     enter upon said premises at any time and from time to
     time and, at Appalachian’s discretion, to cut, burn
     and/or   remove  therefrom   any and   all  buildings,
     structures, improvements, trees, bushes, driftwood and
     other objects and debris of any and every kind or
     description which are or may hereafter be located on
     the portion of said premises below the contour the
     elevation of which is 800 feet.

The easement provides that the landowners retain the right to

“possess and use said premises in any manner not inconsistent

with” APCO’s flowage easement, including crossing the land for

recreational purposes.

     After     acquiring    the   property,      the   Pressls   sought    to

construct a dock below the 800-foot elevation contour.                    APCO

advised the Pressls that, as a condition for building the dock,

they had to execute an Occupancy and Use Permit and agree to

abide by its restrictions.

     Balking    at   this   requirement,   the    Pressls   filed   suit    in

Virginia state court, seeking a declaratory judgment that APCO’s

demands violated the flowage easement.            The complaint asks the

court to declare “that APCO has no regulatory authority over the

                                     3
plaintiffs’       property      which     lies       below     the    800    foot      contour

beyond        those    rights     defined       by     the     flowage      easement,       the

contemporaneous expressions of the parties, and vested rights to

build    and     own    structures       to    access        Smith   Mountain       Lake    for

recreational purposes.”              It further requests the court to hold

that the Pressls “be allowed to use their property in any manner

not   inconsistent         with    the    maintenance          of    a    dam    and    hydro-

electric       power     generation       plant      operated        by   APCO    at    Smith

Mountain.”

        APCO removed the case to the United States District Court

for the Western District of Virginia.                          APCO asserted that the

federal district court had subject matter jurisdiction because

the   Pressls’         property    lies       within    the     project      boundary       for

APCO’s Smith Mountain hydroelectric project, which APCO operates

under     a     license     issued       by    the     Federal       Energy      Regulatory

Commission (“FERC”).

        The    district     court    agreed.           It     concluded      that      it   had

jurisdiction under both 28 U.S.C. § 1331 and 16 U.S.C. § 825p.

The court then granted APCO’s motion to dismiss, analyzing the

easement under Virginia law.                       The court held that the plain

language of the flowage easement gave APCO the right to remove

any dock built below the 800-foot elevation contour and that

APCO’s exercise of that right would be in furtherance of the

original purpose of the easement -- to allow APCO to operate its

                                               4
hydroelectric project.                The district court also held that the

Pressls needed to raise any complaints about APCO’s actions with

FERC       prior    to    filing    suit.     The    Pressls    timely       noted     this

appeal.

       Before       us,    the     Pressls   renew     their    argument       that    the

federal district court lacked subject matter jurisdiction. 1                             We

review      questions       as   to    subject     matter   jurisdiction       de     novo.

Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 815-16 (4th Cir.

2004) (en banc).            The party seeking to remove a case to federal

court has the burden of demonstrating federal jurisdiction.                             Id.

at   816.          “If   federal      jurisdiction    is    doubtful,    a    remand    is

necessary.”          Mulcahey v. Columbia Organic Chems. Co., Inc., 29

F.3d 148, 151 (4th Cir. 1994).                     APCO argues that jurisdiction

lies under 18 U.S.C. § 1331 and 16 U.S.C. § 825p.                            We consider

each statute in turn.

                                             II.

       To determine whether a case “arises under” federal law for

the purposes of establishing federal question jurisdiction under

28 U.S.C. § 1331, we follow the well-pleaded complaint rule.

Jurisdiction exists “only when a federal question is presented

       1
       The Pressls also challenge the district court’s dismissal
of their complaint on the merits.     Because we hold that the
court did not have subject matter jurisdiction, we do not reach
that contention.

                                             5
on   the    face    of    the    plaintiff’s       properly     pleaded   complaint.”

Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987).                          It is

not enough that there may be a defense grounded in federal law

or that the complaint anticipates and rebuts such a defense.

Id. at 392-93.

       In   an     action       for    declaratory     judgment,      however,    “the

federal right litigated may belong to the declaratory judgment

defendant        rather     than      the   declaratory        judgment   plaintiff.”

Columbia Gas Transmission Corp. v. Drain, 237 F.3d 366, 370 (4th

Cir. 2001).        Under this “coercive action doctrine,” although the

declaratory judgment plaintiff does not assert a claim arising

under federal law, federal question jurisdiction exists if “the

complaint alleges a claim arising under federal law that the

declaratory judgment defendant could affirmatively bring against

the declaratory judgment plaintiff.”                     Id.      See generally 13D

Charles     Alan    Wright,      et    al.,    Federal   Practice     and   Procedure

§ 3566 (3d ed.), Westlaw (database updated April 2016).

       In this case, the Pressls seek a declaratory judgment that

APCO   does      not     possess      rights   under   the     flowage    easement   to

prevent or regulate construction of a dock on their property.

APCO maintains that federal question jurisdiction lies because

its hypothetical coercive suit, seeking a declaration as to its

rights to prevent or regulate construction or an injunction to

enforce those rights, would arise under federal law.

                                               6
       “[T]he vast majority” of cases arising under federal law

“are those in which federal law creates the cause of action.”

Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808 (1986).

Cases    may    also      arise    under    federal       law,   however,   when     “the

vindication of a right under state law necessarily turn[s] on

some construction of federal law.”                       Id. (quoting Franchise Tax

Bd. v. Constr. Laborers Vacation Tr., 463 U.S. 1, 9 (1983)).

       APCO admits that neither the Pressls’ complaint nor APCO’s

hypothetical coercive suit alleges a federal cause of action.

APCO    contends       that       federal   jurisdiction         nonetheless      exists

because       its   rights    under     state      law    necessarily    turn   on   the

construction of its federal license.                       For a federal court to

have jurisdiction in these circumstances, the federal issue must

be     “(1)     necessarily         raised,        (2)    actually      disputed,    (3)

substantial,        and    (4)    capable     of    resolution     in   federal     court

without       disrupting         the   federal-state         balance      approved     by

Congress.”          Gunn v. Minton, 133 S. Ct. 1059, 1065 (2013); see

also Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545

U.S. 308, 312-14 (2005).               Federal jurisdiction will lie only if

a case meets all four requirements.                  Gunn, 133 S. Ct. at 1065.

                                            A.

                                            i.

       We first address whether this case necessarily raises a

federal question.            APCO emphasizes that the property subject to

                                              7
the flowage easement lies within the project boundary for the

Smith Mountain Hydroelectric Project that APCO operates.                                         FERC

imposes     certain       duties      on        APCO    for    managing     development           and

construction within the project boundary -- including managing

the   construction         of    docks.            APCO       argues     that   the     Pressls’

complaint necessarily raises federal issues because it seeks a

declaration        that       APCO    does        not    have     authority       to    regulate

construction of a dock.               According to APCO, a court must examine

APCO’s authority under its federal license to adjudicate the

issue.     Appellee Br. at 13-15, 20-21, 25-26.

      In   proffering          this    argument,          APCO     misreads       the   Pressls’

complaint.         The    Pressls          do    not     challenge       APCO’s    substantial

duties     to    FERC.        Nor     do    they        dispute    the    extent       of    APCO’s

authority over the property in the event the flowage easement

provides APCO with sufficient property rights.

      The Pressls maintain only that APCO has not acquired the

property right to constrain the Pressls’ construction of a dock.

Because neither the Federal Power Act nor APCO’s FERC license

provides APCO with the property rights necessary to operate the

hydroelectric          project,      see,        e.g.,    Appalachian       Power       Co.,      153

FERC ¶ 61299, at ¶ 29 (Dec. 17, 2015), APCO must acquire these

rights either through condemnation or contract.                                 APCO has not

(yet)    condemned        any    of    the        Pressls’        land,   and     the       Pressls

maintain        that    the    contract          provision        at   issue    here        --    the

                                                   8
flowage    easement       --       does     not       provide       APCO     with     sufficient

property    rights.           In     accord      with    this        theory,      the     Pressls’

complaint       asserts       that    the     “controversy           between        the    parties

regard[s] the rights granted . . . pursuant to the . . . flowage

easement” and “aver[s] that the flowage easement does not give

APCO the right to regulate any use which [the Pressls] may make

of their property.”            This controversy does not necessarily raise

a federal question.

                                              ii.

      Alternatively,           APCO       maintains          that     a     federal       question

necessarily      arises       in     interpreting            the    scope    of     the    flowage

easement.       It argues that its right to prevent the Pressls from

building    a    dock     derives         from    two    easement          provisions:           the

provision allowing APCO to “overflow and/or affect” the property

“by   reason     of     the    operation          of    [the       Smith     Mountain]       power

station” and       the    provision          allowing         APCO    to    remove        “any   and

all . . . structures.”               APCO asserts that, under Virginia law, a

reasonableness        inquiry        based       on    the    original       purpose       of    the

easement limits these broad powers.                          Because the purpose of the

easement was to allow it to construct and operate a dam and

power station, APCO contends that a court must interpret its

FERC license to determine the reasonable limit of its rights

under the easement.            Appellee Br. at 21-22.

                                                  9
     But a claim “necessarily depends on a question of federal

law only when every legal theory supporting the claim requires

the resolution of a federal issue.”                 Flying Pigs, LLC v. RRAJ

Franchising,    LLC,     757   F.3d   177,    182    (4th    Cir.     2014)(quoting

Dixon, 369 F.3d at 816).             Accordingly, if even one theory for

interpreting       the      flowage      easement          does     not    involve

interpretation of federal law, the claim does not “arise under”

federal law.    Dixon, 369 F.3d at 817.

     Because of this requirement, we have rejected a similar

contention     that      interpretation       of    an     easement    necessarily

depends   on   a   question     of    federal       law.      See     Columbia   Gas

Transmission Corp. v. Drain, 191 F.3d 552, 559 (4th Cir. 1999).

There, a company regulated by FERC under the Natural Gas Act

brought an action in federal court to enforce an easement for

operation of a gas line.         Id. at 554.         Because the easement did

not explicitly specify the width of the right of way, the court

needed to determine what width was “reasonably necessary” under

state law.     Id. at 557.      We explained that the determination of

that question is often reached without reference to federal law

or regulations.          Id. at 558.         Accordingly, we held that the

state law easement claim did not necessarily raise issues of

federal law.       Id. at 559; see also Columbia Gas Transmission,

LLC v. Singh, 707 F.3d 583, 589-90 (6th Cir. 2013)(holding that

interpretation of an easement owned by an entity subject to FERC

                                        10
regulation did not necessarily raise a federal question because

the obligation created by the federal regulation was just one of

many factors considered in the state law inquiry). 2

       The same analysis applies in this case.                                Under Virginia

law, the most important factor in interpreting an easement is

the language of the easement itself.                              Pyramid Dev., L.L.C. v.

D&J    Assocs.,           553    S.E.2d     725,       728    (Va.    2001)     (“[W]hen     the

language         of   a    deed    is    ‘clear,       unambiguous,       and   explicit,’    a

court      interpreting           it    ‘should    look      no    further    than    the   four

corners of the instrument under review.’” (quoting Langman v.

Alumni Ass’n of Univ. of Virginia, 442 S.E.2d 669, 674 (Va.

1994)).          Indeed, in holding that the easement at issue here gave

APCO       the    right     to     remove    any       structure      below     the   800-foot

elevation contour, the district court relied primarily on the

easement’s text.                 It did not need to analyze the meaning of

APCO’s       license        to     determine       the       reasonable      limits    of   the

easement.          The court simply noted that the original purpose of

       2VA Timberline, L.L.C. v. Appalachian Power Co., 343 F.
App’x 915 (4th Cir. 2009) (per curiam), an unpublished opinion
on which APCO relies, offers the company little assistance.
There we upheld the grant of summary judgment to APCO on a claim
involving an easement owner’s right to build a dock.     But the
conveyances at issue in Timberline were explicitly made subject
to   APCO’s  FERC   license   “and any  amendments   thereof  or
supplements thereto.”     Id. at 916.   Because the plaintiff’s
easement only gave it the right to construct docks that complied
with APCO’s license, interpreting the license was necessary to
resolve the case.

                                                  11
the   easement      was    to    allow      APCO     to    operate    a     hydroelectric

project regulated by FERC.                Such tangential reference to federal

law does not suffice to create “arising under” jurisdiction.

      In sum, this case does not necessarily raise any federal

issue.

                                             B.

      Moreover,      no    federal        question    in    this     case      is    actually

disputed.         There   is    no   dispute       over    the     validity         of   APCO’s

federal   license.          Nor      is    there     any    dispute       as    to       APCO’s

obligations to FERC.              The Pressls challenge only whether the

flowage easement by its terms allows APCO to prevent them from

building a dock.          This seems a simple enough dispute, which the

district court may well have properly resolved -- had it arisen

under federal law.             But, of course, it did not.                  Rather, this

case presents solely a dispute as to state property law.

                                             C.

      Finally,       we     believe        that      any     federal        interest         in

interpreting the flowage easement is not substantial and that

asserting    federal        jurisdiction          over     cases     like      this       would

disrupt     the    congressionally           approved       federal-state            balance.

State courts are just as able (perhaps more able) to interpret

and   enforce      the    property    rights       conveyed      through       instruments

governed by state law.

                                             12
         Undoubtedly, there is a federal interest in ensuring the

effective operation of hydroelectric projects.                    But resolving

property     disputes    in    state    court      does   not   undermine     that

interest.         After all, if a state court ultimately holds that

APCO did not acquire all of the property rights it needs to

operate the project in compliance with its license, APCO can

obtain those rights through contract or through eminent domain.

16 U.S.C. § 814.        Thus, a ruling against APCO in this case could

not substantially affect federal interests.                 The interpretation

of   a    state   conveyance   is   a   quintessential      question    of   state

property law, and Congress has limited our jurisdiction over

such cases.         Accordingly, we conclude that 28 U.S.C. § 1331

provides no basis for federal jurisdiction over this case.

                                        III.

         Finally, we turn to the question of whether the exclusive

jurisdiction       provision   in   the       Federal   Power   Act,   16    U.S.C.

§ 825p, provides a basis for jurisdiction.                 Section 825p grants

federal district courts exclusive jurisdiction over “all suits

in equity and actions at law brought to enforce any liability or

duty created by, or to enjoin any violation of, [the Federal

Power Act] or any rule, regulation, or order thereunder.”                       16

U.S.C. § 825p.

                                         13
        Neither the Pressls’ suit seeking to define the scope of

the    flowage      easement     nor    APCO’s      hypothetical        coercive      action

would be brought to “enjoin any violation of” the Federal Power

Act.        As discussed above, the Pressls seek only to determine

APCO’s property rights.                They do not allege that APCO violated

its license or its duties to FERC.                       And, since FERC regulates

only APCO, the Pressls themselves could not violate the Federal

Power Act by constructing a dock.

       APCO nevertheless maintains that § 825p provides a basis

for federal jurisdiction here.                     APCO notes that it has a duty

under    the     Federal      Power     Act    to    manage     property       within   the

project boundary in compliance with its license.                             The company

contends       that    its     hypothetical         suit    seeking      a     declaratory

judgment that APCO has sufficient property rights to meet its

federal obligations -- or a suit to enjoin the Pressls from

constructing a dock -- would thus be “brought to enforce [a]

liability      or     duty    created    by”       the   Federal    Power      Act.     The

Supreme Court’s recent decision in Merrill Lynch, Pierce, Fenner

& Smith Inc. v. Manning, 136 S. Ct. 1562 (2016), dooms this

argument.

       In     Merrill        Lynch,     the    Court       interpreted       the      nearly

identical       “brought       to     enforce”       language      in    the    exclusive

jurisdiction provision of § 27 of the Securities Exchange Act of

1934.       The Court held that the jurisdictional test established

                                              14
by § 27 of the Exchange Act is the “same as the one used to

decide if a case ‘arises under’ a federal law” under 28 U.S.C.

§ 1331.          Id. at 1566.          In doing so, the Court rejected the

argument that the “brought to enforce” language provides broad

jurisdiction           over     complaints        that     simply        mention     a     duty

established by the federal law.                    Id. at 1568-69.         Rather, claims

are “brought to enforce” such a duty only if their “very success

depends on giving effect to a federal requirement.”                                      Id. at

1570.          The Court further explained that this interpretation of

the       “brought     to     enforce”     language        best     comports       with     its

precedents,        preserves         the   balance       between    federal        and    state

courts, and provides a judicially administrable rule.                                    Id. at

1567-68; see also Pan Am. Petroleum Corp. v. Superior Court of

Del. In & For New Castle Cty., 366 U.S. 656, 664 (1961).

          Of    particular       import     here,        the     Merrill     Lynch        Court

expressly noted that the “brought to enforce” language in the

statute before it -- § 27 of the Exchange Act -- was materially

indistinguishable             from   § 825p   in     the       Federal    Power     Act,    the

statute on which APCO relies.                      The Supreme Court specifically

identified § 825p as a provision with “[m]uch the same wording”

as    §    27     of   the     Exchange     Act     and    suggested       that     the     two

provisions should be interpreted in the same way.                             See Merrill

Lynch, 136 S. Ct. at 1568 & n.3, 1572, 1575.

                                              15
     Because we have held that this case does not “arise under”

federal law for purposes of federal question jurisdiction under

28 U.S.C. § 1331, we must also hold that there is no basis for

exclusive jurisdiction under 16 U.S.C. § 825p.

                               IV.

     For the foregoing reasons, we vacate the judgment of the

district court and remand the case.

                                             VACATED AND REMANDED

                               16