California Dept. of Water v. Powerex Corp.

• Decision Date: 22 July 2008
• Docket Number: No. 06-15285.,06-15285.
• Citation: 533 F.3d 1087
• Parties: CALIFORNIA DEPARTMENT OF WATER RESOURCES, Plaintiff-Appellee, v. POWEREX CORP., a Canadian Corporation, dba Powerex Energy Corp., Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

533 F.3d 1087

CALIFORNIA DEPARTMENT OF WATER RESOURCES, Plaintiff-Appellee, v. POWEREX CORP., a Canadian Corporation, dba Powerex Energy Corp., Defendant-Appellant.

No. 06-15285.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 4, 2007.

Filed July 22, 2008.

[533 F.3d 1089]

David C. Frederick (briefed and argued), Kellogg, Huber, Hansen, Todd, Evans and Figel, Washington, D.C., for the defendant-appellant.

Annadel A. Almendras (briefed and argued) and Song J. Hill (briefed), Office of the Attorney General of the State of California, San Francisco, CA, for the plaintiff-appellee.

Mark B. Stern (briefed and argued) and Alisa B. Klein (briefed), United States Department of Justice, Washington, D.C., for the United States as amicus curiae.

Roy T. Englert, Jr. (briefed), Robbins, Russell, Englert, Orseck and Untereiner, Washington, D.C., for the Province of British Columbia as amicus curiae.

Margaret K. Pfeiffer (briefed), Sullivan and Cromwell, Washington, D.C., for the Government of Canada as amicus curiae.

Appeal from the United States District Court for the Eastern District of California; Garland E. Burrell, District Judge, Presiding. D.C. No. CV-05-00518-GEB.

Before: ROBERT E. COWEN,^* HAWKINS and N. RANDY SMITH, Circuit Judges.

MICHAEL DALY HAWKINS, Circuit Judge:

In this second look, we re-examine whether Powerex, a Canadian corporation that markets and distributes electric power, is a "foreign state" within the meaning of the Foreign Sovereign Immunities Act of 1976 ("FSIA"). 28 U.S.C. § 1603(a), (b). Four years ago, we held that it was not, but the Supreme Court vacated that decision without resolving the issue. California v. NRG Energy Inc., 391 F.3d 1011, 1026 (9th Cir.2004), vacated sub nom. Powerex Corp. v. Reliant Energy Servs., Inc., ___ U.S. ___, 127 S.Ct. 2411, 168 L.Ed.2d 112 (2007).

To reach that question, we must first consider whether 28 U.S.C. § 1447(d) deprives us of the authority to review a district court's decision to decline an exercise of supplemental jurisdiction and remand to state court. Holding that it does not, we also must decide whether a writ of mandamus is the only means of obtaining review of a 28 U.S.C. § 1367(c) remand, or whether an appeal under 28 U.S.C. § 1291 will suffice.

I. General Facts and Procedural Background

This is one of many cases arising out of the 2000-2001 California energy crisis.¹ By February 2001, the state's deregulated energy markets had experienced "a rapid, unforeseen shortage of electric power and energy available in the state and rapid and substantial increases in wholesale energy costs and retail energy rates." Cal. Water Code § 80000(a). This caused rolling blackouts throughout California and "constitute[d] an immediate peril to the health, safety, life, and property" of Californians. Id.

In response, the California Legislature turned to the state's Department of Water Resources ("DWR"), giving it a mandate: "do those things necessary and authorized" under the Water Code "to make power available directly or indirectly to electric consumers in California." Cal. Water Code § 80012. To fulfill this responsibility, DWR was empowered to contract with any person or entity for the purchase of power. Id. § 80100. According to DWR's Amended Complaint, between January 17, 2001,² and December 31, 2001, DWR and Powerex transacted thousands of "out of market" purchases and "numerous exchange transactions."³

In February 2005, DWR filed suit against Powerex in California state court, alleging Powerex had "manipulated the California energy markets through Enron-style gaming and trading strategies." More specifically,

Powerex was aware of and participated in the market manipulation and market gaming that resulted in the California Energy Crisis. The manipulation and gaming activity tended to tighten the supply of electricity in the California energy markets. The tightening of supply was part of a larger plan that allowed marketers, including Powerex, to give the appearance of a shortage of supply in the markets. . . .

Alleging various violations of state contract law, the complaint sought a declaration that all these transactions were void, rescission of all transactions, restoration of all money and benefits that unjustly enriched Powerex, and compensatory damages.

In response, Powerex removed the case to federal court, citing the Federal Power Act, 16 U.S.C. § 825p, and FSIA, 28 U.S.C. § 1441(d). DWR moved to remand the case back to state court, and Powerex moved to dismiss. The district court denied the motion to remand, finding that DWR's complaint was artfully plead and that it presented a substantial federal question. Turning to the merits, the court then dismissed the case because the "Plaintiff's claims require the determination of the fair price of the electricity that was delivered under the contracts," which placed the action squarely within the Federal Energy Regulatory Commission's exclusive jurisdiction.

DWR responded with an amended complaint requesting only declaratory relief stating that the transactions between the parties were void. No longer seeking rescission, restitution, or damages, DWR moved to remand anew under 28 U.S.C. § 1447(c)⁴ and 28 U.S.C. § 1367(c).

This time, the district court found that the Amended Complaint presented only state law contract issues. The district court also found Powerex's FSIA argument squarely foreclosed by our decision in California v. NRG Energy Inc., 391 F.3d 1011 (9th Cir.2004), in which we determined Powerex was not a "foreign state."

Because the Amended Complaint did not present a federal question, the district court had the discretion to decline supplemental jurisdiction. See 28 U.S.C. § 1367(c)(3). Recognizing that all the claims over which it had original jurisdiction had been dismissed, the court remanded the case to the California court because the Eleventh Amendment and the "values of economy, convenience, fairness, and comity" all weighed in favor of dismissing the state law claims as well. See Acri v. Varian Assocs., Inc., 114 F.3d 999, 1001 (9th Cir.1997) (en banc) (citing United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726-27, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966)).

On appeal, Powerex argues that the district court erred by finding that the corporation is not a "foreign state," and that DWR's Amended Complaint in fact presents claims that "arise under" the Federal Power Act.

II. Jurisdiction

We confront two jurisdictional issues. As a threshold matter, we must address DWR's contention that 28 U.S.C. § 1447(d) bars us from exercising jurisdiction. If that hurdle can be leapt, we then must decide whether Powerex can contest the district court's remand order by way of an appeal under 28 U.S.C. § 1291, or whether a writ of mandamus is the exclusive remedy.

A. 28 U.S.C. § 1447(d)

At argument, DWR asserted that 28 U.S.C. § 1447(d) precludes this court from reviewing the remand order. That statute provides:

An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise, except that an order remanding a case to the State court from which it was removed pursuant to section 1443 of this title [pertaining to certain civil rights cases] shall be reviewable by appeal or otherwise.

Although this language appears comprehensive, the Supreme Court has explained that the provision does not prohibit review of all types of remands. Rather, "§ 1447(d) must be read in pari materia with § 1447(c), so that only remands based on grounds specified in § 1447(c) are immune from review under § 1447(d)." Things Remembered, Inc. v. Petrarca, 516 U.S. 124, 127, 116 S.Ct. 494, 133 L.Ed.2d 461 (1995) (citing Thermtron Prods., Inc. v. Hermansdorfer, 423 U.S. 336, 345-46, 96 S.Ct. 584, 46 L.Ed.2d 542 (1976)). Thus, only remands based on defects in removal procedure or on lack of subject-matter jurisdiction escape our review. Id. at 127-28, 116 S.Ct. 494.

Here the district court clearly identified 28 U.S.C. § 1367(c) as the source of its authority to remand, and explicitly stated that it was declining to exercise supplemental jurisdiction. In this circuit, "a district court's order remanding pendent state claims on discretionary grounds [is] not pursuant to § 1447(c)," and thus a "district court's discretionary remand of pendent state claims is a reviewable order." Lee v. City of Beaumont, 12 F.3d 933, 935 (9th Cir.1993) (internal quotation marks omitted); see also Niehaus v. Greyhound Lines, Inc., 173 F.3d 1207, 1210-11 (9th Cir.1999); Executive Software N. Am., Inc. v. U.S. Dist. Court, 24 F.3d 1545, 1549 (9th Cir. 1994).

As DWR notes, the Federal Circuit has come to the opposite conclusion, holding that "a remand based on declining supplemental jurisdiction must be considered within the class of remands described in § 1447(c) and thus barred from appellate review by § 1447(d)." HIF Bio, Inc. v. Yung Shin Pharm. Indus. Co., 508 F.3d 659, 667 (Fed.Cir.2007). That decision, which split with several circuits, id. at 665, found support in the Supreme Court's recent statement that "[i]t is far from clear . . . that when discretionary supplemental jurisdiction is declined the remand is not based on lack of subject-matter jurisdiction for purposes of § 1447(c) and § 1447(d)." Powerex Corp. v. Reliant Energy Servs., Inc., ___ U.S. ___, 127 S.Ct. 2411, 2418-19, 168 L.Ed.2d 112 (2007).

The Federal Circuit's disagreement does not give a three-judge panel in this circuit license to overrule the binding, authoritative decision of a prior three-judge panel. See Miller v. Gammie, 335 F.3d 889, 899 (9th Cir.2003) (en banc). Similarly, that the question remains unanswered by the Supreme Court does not relax our obligation to abide by stare decisis. In light of clear precedent, then, we hold that review of a district court's decision to decline an exercise of supplemental jurisdiction is not barred by § 1447(d).

B. Appeal or Mandamus

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