Allied Chemical, an Operating Unit of Allied Corp. v. Niagara Mohawk Power Corp.

• Decision Date: 07 July 1988
• Parties: , 528 N.E.2d 153 ALLIED CHEMICAL, AN OPERATING UNIT OF ALLIED CORPORATION, Appellant, v. NIAGARA MOHAWK POWER CORPORATION et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

Page 230

532 N.Y.S.2d 230

72 N.Y.2d 271, 528 N.E.2d 153

ALLIED CHEMICAL, AN OPERATING UNIT OF ALLIED CORPORATION, Appellant, v. NIAGARA MOHAWK POWER CORPORATION et al., Respondents.

Court of Appeals of New York.

July 7, 1988.

Paul A. Feigenbaum, New York City, Algird F. White, Jr., and Lawrence H. Cooke, Albany, for appellant.

Leon A. Allen, Jr., New York City, Gary J. Lavine, Syracuse, Cathleen A. McNulty and Bert H. Ware, New York City, for Niagara Mohawk Power Corp., respondent.

Marilyn Mann Faulkner and Robert A. Simpson, for Public Service Com'n of the State of N.Y., respondent.

OPINION OF THE COURT

WACHTLER, Chief Judge.

In this contract action plaintiff, Allied Chemical, alleges that defendant, Niagara Mohawk Power Corporation (NIMO), has not fully paid for electricity it agreed to purchase from plaintiff. The dispositive issue in this dispute, however, unlike Staatsburg Water Co. v. Staatsburg Fire Dist., 72 N.Y.2d 147, 531 N.Y.S.2d 876, 527 N.E.2d 754 [decided today], was fully, fairly and conclusively litigated by these parties, at their request, in a quasi-judicial proceeding before the Public Service Commission (PSC), thereby precluding relitigation of the issue in this action.

The Public Utility Regulatory Policies Act of 1978 (PURPA) (16 U.S.C. § 2601 et seq.) and the regulations of the Federal Energy Regulatory Commission (see, 18 CFR 292.303, 292.304) require that regulated utilities purchase electricity from certain alternative generators of electricity known as "qualifying cogenerating facilities". The rate paid by the utility for the electricity depends upon the date of commencement of construction of the cogenerating facility. Cogenerators for which construction commenced after November 9, 1978 are "new capacity" and receive payment at a rate at least equal to full avoided costs, ^* while facilities for which construction commenced before that date are "old capacity", and the payment rate may be less than full avoided costs, subject to the determination of the State regulatory authority (18 CFR 292.304[b][2]-[3] ).

Allied Chemical owns an old capacity qualifying cogeneration facility located in Solvay, New York. In 1981 it entered into a contract with NIMO, a regulated utility, for the sale of electricity from the Solvay cogenerator at a rate less than full avoided costs. The contract provided, however, that "either party may elect to replace the price for energy as specified above with the applicable rate specified by the [PSC] either in a general tariff approved by the [PSC] or upon petition by either party to this Agreement."

On May 12, 1982, the PSC issued opinion No. 82-10, requiring electric utilities, including NIMO, to file tariff leaves reflecting payment for cogenerated electricity at full avoided costs. NIMO then filed a new tariff, which became effective on February 20, 1984. On March 20, 1984, Allied Chemical advised NIMO that the new tariff was an "applicable rate" under the contract, and that Allied Chemical elected to receive this new rate for the sale of electricity from its Solvay cogenerator.

NIMO then filed a petition with the PSC, under section 204 of the State Administrative Procedure Act, seeking a declaratory ruling that the new tariff did not apply to old capacity cogenerators, and thus did not constitute an "applicable rate" under the contract. Allied Chemical responded by filing a counterpetition and complaint with the PSC, alleging that the tariff did cover old capacity cogenerators, and that as a result it could elect to receive full avoided costs for its sale of electricity to NIMO.

The PSC considered the parties' claims in the context of its more general proceedings to implement PURPA; in a single proceeding the PSC considered not only the question of whether the new tariff constituted an "applicable rate" under the contract, but also, generically, whether in the future old capacity generators should be entitled to receive payment at the full avoided costs rate. The PSC then issued two statements. The first, dated January 22, 1985, held that the new tariff did not include old capacity cogenerators, and thus Allied Chemical could not elect to receive the new tariff rate under the contract. In that ruling the PSC also suggested that a 10-year phase-in of a full avoided cost rate for old capacity cogenerators may be appropriate, and solicited comments on the issue. On February 14, 1986, after receiving comments on the proposal, the PSC issued a second statement, formally adopting a 10-year phase-in of a full avoided cost rate for old capacity cogenerators.

Allied Chemical did not seek article 78 review of either PSC ruling. It did, however, commence the present contract action, seeking payment at the full avoided costs rate from March 20, 1984, the date of the alleged election under the contract, and February 14, 1986, the date on which the PSC allowed a phase-in of the full avoided costs rate. NIMO then moved to dismiss the complaint, primarily on res judicata grounds. Before deciding the motion, the trial court directed that the PSC be added as a party, and the PSC was served with a summons and amended complaint on July 30, 1986. The PSC then moved for summary judgment, on res judicata and Statute of Limitations grounds. The trial court granted the motions of NIMO and PSC, dismissing Allied Chemical's complaint, and the Appellate Division affirmed. 129 A.D.2d 233, 517 N.Y.S.2d 635. We now also affirm.

The elements necessary in all cases for issue preclusion are well known. It is required that an issue in the present proceeding be identical to that necessarily decided in a prior proceeding, and that in the prior proceeding the party against whom preclusion is sought was accorded a full and fair opportunity to contest the issue ( Schwartz v. Public Adm'r, 24 N.Y.2d 65, 71, 298 N.Y.S.2d 955, 246 N.E.2d 725; Ryan v. New York Tel. Co., 62 N.Y.2d 494, 500-502, 478 N.Y.S.2d 823, 467 N.E.2d 487). While issue preclusion may arise from the determinations of administrative agencies, in that context the doctrine is applied more flexibly, and additional factors must be considered by the court ( cf., Staatsburg Water Co. v. Staatsburg Fire Dist., 72 N.Y.2d 147, 531 N.Y.S.2d 876, 527 N.E.2d 754 [decided today], supra ). These additional requirements are often summed up in the beguilingly simple prerequisite that the administrative decision be "quasi-judicial" in character ( see, e.g., Ryan v. New York Tel. Co., supra, at 500, 478 N.Y.S.2d 823, 467 N.E.2d 487; Bernstein v. Birch Wathen School, 71 A.D.2d 129, 132, 421 N.Y.S.2d 574, affd. 51 N.Y.2d 932, 434 N.Y.S.2d 994, 415 N.E.2d 982). However, the determination of whether an agency proceeding was "quasi-judicial" actually involves a multifaceted inquiry.

First, the court must make the threshold determination that the agency has the statutory authority to act adjudicatively. If the agency has such authority, the court must then ascertain whether the procedures used in the administrative proceeding assured that the information presented to the agency were sufficient both quantitatively and qualitatively, so as to permit confidence that the facts asserted were adequately tested, and that the issue was fully aired ( see, Brugman v. City of New York, 64 N.Y.2d 1011, 1012, 489 N.Y.S.2d 54, 478 N.E.2d 195; Ryan v. New York Tel. Co., supra, at 498, 478 N.Y.S.2d 823, 467 N.E.2d...