Commercial – Federal question jurisdiction triggered by energy tariff claim

Where an electric cooperative brought state law claims against a regional transmission company in an effort to recover certain electric generation costs, but the claims implicated a federal tariff, there was federal question jurisdiction over the suit.

Background

Following a severe cold weather outbreak in January 2014, Old Dominion Electric Cooperative unsuccessfully sought to recover certain electricity generation costs from PJM Interconnection LLC in an administrative proceeding before the Federal Energy Regulatory Commission, or FERC. Old Dominion subsequently instituted the underlying litigation in Virginia state court, pursuing four putative state law claims against PJM which seek the same relief unsuccessfully claimed before FERC.

PJM timely removed the state court proceedings to the Eastern District of Virginia. PJM maintained therein that Old Dominion’s complaint contests electricity transmission rates set forth in PJM’s federally filed tariff and that the district court was vested with federal question jurisdiction. PJM promptly moved to dismiss the complaint for failure to state a claim, while Old Dominion moved for a remand to state court.

On March 31, 2020, the district court denied Old Dominion’s remand motion and dismissed each of its claims with prejudice.

Jurisdiction

The crux of this appeal concerns the applicability of Bryan v. BellSouth Communications, Inc., 377 F.3d 424 (4th Cir. 2004), to the facts of this case and whether Old Dominion’s claims may fairly be said to necessarily raise a substantial federal question. PJM deems Bryan to be dispositive, while Old Dominion considers that decision to be watered down at best, if not impliedly overruled by the Supreme Court.

The Bryan decision controls in this appeal because, as was the situation therein, the type of relief sought here is incontrovertibly barred by the governing regulatory tariff. That is, determining that the four putative state claims afford Old Dominion a right to relief in the first instance requires consideration and construction of the federal tariff that controls the entirety of Old Dominion’s relationship with PJM.

In Bryan, the refund sought by the plaintiff was barred and forbidden by BellSouth’s FCC tariff. Here, the reimbursement for electricity generation costs sought by Old Dominion’s amended complaint is similarly precluded by the PJM tariff. In both situations, the plaintiff seeks a special tariffed rate unique to it, which federal law plainly disallows. Because no court can award the damages that Old Dominion seeks without finding some way around the terms of the PJM tariff, “the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal law.”

Under Bryan, it is evident that the substance of each of Old Dominion’s four claims necessarily invokes a substantial federal question. The PJM tariff, then, cannot be construed simply as a defense to the claims’ allegations when the tariff is vital to the relief that they seek. Old Dominion maintains that, if anything, the tariff only extinguishes its right to relief. The court finds that characterization to be premature, however, as determining that the utility enjoys such a right in the first place requires consulting the terms of the tariff.

In these circumstances, the court is persuaded that the Bryan decision permits only one resolution of this appeal. The nature of Old Dominion’s claims places them squarely within the scope of the PJM tariff, such that the utility’s right to relief is inextricably intertwined with federal law. Critically, that fact does not change by virtue of Old Dominion having artfully clothed its inherently federal claims “in state garb.”

Old Dominion alternatively asserts that, irrespective of how it may bear on this appeal, the Bryan decision “has not withstood the test of time.” According to Old Dominion, Bryan lacks “continuing precedential force” in view of this court’s subsequent decisions. Old Dominion’s arguments in this regard are unconvincing.

Old Dominion also argues that the Supreme Court’s decisions in Gunn v. Minton, 568 U.S. 251 (2013), and Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308 (2005), impliedly overruled Bryan by seeking to “refine” the “unruly” substantial federal question doctrine as it existed at the time of Bryan’s decision. This court agrees with the district court, however, that Bryan’s explicit standard “closely tracks the Gunn-Grable framework,” and that the latter did no harm to the former.

Although the district court grounded its jurisdictional determination in Bryan’s standard, it appropriately conducted an independent assessment of the Gunn-Grable framework. This court perceives no error in the court’s explicit conclusion that the same result obtains when the Supreme Court’s standard is applied to the facts here.

Affirmed.

Old Dominion Electric Cooperative v. PJM Interconnection LLC (Lawyers Weekly No. 001-007-22, 31 pp.) (Robert Bruce King, J.) Case No. 20-1483. Jan. 19, 2022. From E.D. Va. at Richmond (M. Hannah Lauck, J.) Joseph Michael Rainsbury for Appellant. Lucas M. Walker for Appellee. 4th Cir.