Public Power Council v. Johnson

• Decision Date: 13 April 1982
• Docket Number: No. 1,No. 81-7806,1,81-7806
• Citation: 674 F.2d 791
• Parties: PUBLIC POWER COUNCIL; City of Seattle, City Light Department; Central Lincoln Peoples' Utility District; City of Eugene, by the Eugene Water & Electric Board; City of Tacoma, Department of Public Utilities; Clatskanie Peoples' Utility District; Public Utility Districtof Chelan County; Public Utility Districtof Snohomish County, Petitioners, and Pacific Power & Light Company, Portland General Electric Company, Puget Sound Power & Light Company, the Washington Water Power Company, Idaho Power Company, the Montana Power Company, Utah Power & Light Company, CP National Corporation, and the Columbia River Peoples' Utility District, Petitioner-Intervenors, v. Peter JOHNSON, as Administrator of the Bonneville Power Administration, Department of Energy, and James Edwards, as Secretary of the Department of Energy, and the United States of America, Respondents, and Aluminum Company of America, the Anaconda Company, Crown Zellerbach Corporation, Elkem Metals Company, Georgia Pacific Corporation, Hanna Nickel Smelting Company, Intalco Aluminum and Chemical Corporation, Kaiser Aluminum and Chemical Corporation, Martin Marietta Aluminum, Inc., Oregon Metallurical Corporation, Reynolds Metal Company, and Stauffer Chemical Company, Respondent-Intervenors.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 791

674 F.2d 791

PUBLIC POWER COUNCIL; City of Seattle, City Light Department; Central Lincoln Peoples' Utility District; City of Eugene, by the Eugene Water & Electric Board; City of Tacoma, Department of Public Utilities; Clatskanie Peoples' Utility District; Public Utility District No. 1 of Chelan County; Public Utility District No. 1 of Snohomish County, Petitioners and Pacific Power & Light Company, Portland General Electric Company, Puget Sound Power & Light Company, the Washington Water Power Company, Idaho Power Company, the Montana Power Company, Utah Power & Light Company, CP National Corporation, and the Columbia River Peoples' Utility District, Petitioner-Intervenors, v. Peter JOHNSON, as Administrator of the Bonneville Power Administration, Department of Energy, and James Edwards, as Secretary of the Department of Energy, and the United States of America, Respondents and Aluminum Company of America, the Anaconda Company, Crown Zellerbach Corporation, Elkem Metals Company, Georgia Pacific Corporation, Hanna Nickel Smelting Company, Intalco Aluminum and Chemical Corporation, Kaiser Aluminum and Chemical Corporation, Martin Marietta Aluminum, Inc., Oregon Metallurical Corporation, Reynolds Metal Company, and Stauffer Chemical Company, Respondent-Intervenors.

No. 81-7806.

United States Court of Appeals Ninth Circuit.

April 13, 1982.

Before KENNEDY, NELSON, and REINHARDT, Circuit Judges.

KENNEDY, Circuit Judge:

The Bonneville Power Administration (BPA) has moved to quash certain subpoenas issued for depositions and other discovery materials. Petitioners seek the discovery in their action brought directly in this court to challenge certain actions of the BPA. It is necessary to expedite consideration of the underlying case on the merits and to rule immediately upon the question whether petitioners are entitled to discovery. We heard argument on the discovery motion on April 6, 1982. By order of April 8, 1982, we denied the motion to quash and directed discovery to proceed. We discuss briefly the considerations that led to our conclusions.

The BPA has been the federal agency entrusted since 1937 with marketing the electric power generated and acquired by federal projects and plants in the Pacific Northwest. See H.R.Rep.No.976, 96th Cong., 2d Sess., Part II, 23-24, reprinted in (1980) U.S.Code Cong. & Ad.News 5989, 5989-90 (hereinafter "House Report"). The increased demands on the low-cost federal power in the Pacific Northwest, see id. at 24-27, (1980) U.S.Code Cong. & Ad.News at 5990-92, led to the passage of the Pacific Northwest Electric Power Planning and Conservation Act, Pub.L.No. 96-501, 94 Stat. 2697 (1980) (to be codified at 16 U.S.C. § 839 et seq.) ("Regional Act"), which became effective on December 5, 1980. The Act was passed "to assure the Pacific Northwest of an adequate, efficient, economical, and reliable power supply," and to conserve electric power and develop renewable resources within the Pacific Northwest. Section 2(1), (2), 16 U.S.C.A. § 839(1), (2) (West Supp.1982). The Act directed the BPA to allocate federal power and to negotiate initial long-term contracts to various classes of customers, including public utilities and direct service industrial customers (DSIs), within nine months after the effective date of the Act. Section 5(g)(1), 16 U.S.C.A. § 839c(g)(1) (West Supp.1982). The BPA negotiated with its customers, held limited public hearings, and offered twenty-year contracts to its customers on August 28, 1981.

In a previous case, public utility customers challenged the power contracts offered to the DSIs by the BPA. Central Lincoln Peoples' Utility District, et al. v. Johnson, 673 F.2d 1076 (9th Cir. 1982) (Central Lincoln I ). The case before us was initiated by the statutory preference customers of BPA, namely, publicly-owned and cooperative utility companies, including Public Power Council. They contend, apparently, that contracts offered by the BPA to them did not comply with the statute, that the contracts were not negotiated as to all relevant terms, and that negotiations by BPA were in bad faith. Petitioners assert that a complete administrative record is required for fair judicial review of their claims. They insist a complete record is not yet before the court, and they argue the record will not be complete unless it contains testimony of two officials of the BPA who negotiated the contracts and certain documents involved, including notes and memoranda of negotiating sessions. They argue as well that such supplemental material is necessary to interpret complex provisions of the contracts.

The BPA brought this motion to quash the discovery on the ground that our scope of review is circumscribed and limited to the agency record. The agency's position is that the contracts offered to petitioners and the draft proposals that preceded them constitute, essentially, the entire record needed for us to determine whether the contracts were in fact negotiated, and whether they were formulated within the agency's broad discretion. These contracts are presently in the record and are, apparently, of great complexity. The petitioner power companies assure us that a reading of the contracts themselves would not adequately inform us either of the negotiation process that the BPA used or the respects in which petitioners seek to challenge it. The DSIs have intervened as respondents in this suit; private utilities concerned with the precedential impact of the case have intervened as petitioners.

Although the agency eventually may prevail as to its position of what should constitute the record upon review, there are compelling reasons to allow the discovery to proceed at this stage, reserving for the panel on the merits the ultimate determination of what should constitute the record before the court.

The underlying proceeding to review the BPA's offer of the contracts to the power companies is brought under our original jurisdiction to review final agency actions and decisions under section 9(e)(5) of the Act, 16 U.S.C.A. § 839f(e)(5) (West Supp.1982). We have recognized that this original jurisdiction raises procedural problems that must be resolved on a case-by-case basis. Central Lincoln I, at 1460, at ----. We adhere to that determination and decline at this juncture to set forth categories of cases under the Act in which discovery might be appropriate.

The BPA relies on the section of the Act characterizing enumerated agency actions, including "sales" of electric power, as final actions for purposes of the Administrative Procedure Act (APA), section 5(e)(1), 16 U.S.C.A. § 839c(e)(1) (West Supp.1982). The statute provides that the "record upon review of such final actions shall be limited to the administrative record compiled in accordance with this Act," section 5(e)(2), 16 U.S.C.A. § 839c(e) (2) (West Supp.1982). In Central Lincoln I we held that the contracts offered to the DSIs constituted sales and were to be reviewed by the standard of whether they were arbitrary or capricious, an abuse of discretion, or otherwise not in accordance with law, 5 U.S.C. § 706(2)(A) (1976). Central Lincoln I, at 1461, at ----. This suit involves different types of challenges to the BPA's actions, and the parties contend that different APA standards of review should apply. We need not at this stage, however, decide either the scope of the record or scope of review to be applied to petitioner's claims on the merits of the case.

Rather, in considering petitioner's discovery requests, we recognize that even when judicial review is confined to the record of the agency, as in reviewing informal agency actions, there may be circumstances to justify expanding the record or permitting discovery. The broadest exception to the general rule that review is to be restricted to the record certified by the agency is one which permits expansion of the record when necessary to explain agency action. When there is "such a failure to explain administrative action as to frustrate effective judicial review," the court may "obtain from the agency, either through affidavits or testimony, such additional explanations of the reasons for the agency decision as may prove necessary," Camp v. Pitts, 411 U.S. 138, 143, 93 S.Ct. 1241, 1244, 36 L.Ed.2d 106 (1973) (per curiam); see Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 420, 91 S.Ct. 814, 825, 28 L.Ed.2d 136 (1971); Environmental Defense Fund, Inc. v. Costle, 657 F.2d 275, 285 (D.C.Cir.1981); Asarco, Inc. v. U. S. E. P. A., 616 F.2d 1153, 1160 (9th Cir. 1980) (reviewing court should go outside administrative record to consider evidence relevant to the substantive merits of the agency action "for the limited purposes of ascertaining whether the agency considered all the relevant factors or fully explicated its course of conduct or grounds for decision"); Doraiswamy v. Secretary of Labor, 555 F.2d 832, 842 (D.C.Cir.1976); Appalachian Power Co. v. Environmental Protection Agency, 477 F.2d 495, 507 (4th Cir. 1973). Because this exception is so broad in its formulation, courts have been reluctant to invoke it. When there is a need to supplement the record to explain agency action, the preferred procedure is to remand to the agency for its amplification, see, e.g., Asarco, supra; Appalachian Power Co., supra. There are instances, however, in which the courts admit certain testimony in the judicial proceeding, see Camp v. Pitts, supra, or provide limited discovery when serious gaps would frustrate challenges to the agency's action, cf. Sierra Club v. Costle, 657 F.2d 298, 390 n.450 (D.C.Cir.1981); Doraiswamy, 555 F.2d at 842.

In addition to the exception applied when it is necessary to explain agency action, there is a further exception to the general rule that agency actions are to be judged on the agency record alone, without discovery. This exception arises when it appears the agency has relied on documents or materials not...