Hanlin Group v. POWER AUTHORITY OF STATE OF NY, 87 Civ. 0570 (JMW).

• Decision Date: 13 January 1989
• Docket Number: No. 87 Civ. 0570 (JMW).,87 Civ. 0570 (JMW).
• Citation: 703 F. Supp. 305
• Parties: HANLIN GROUP, INC. (f/k/a LCP Chemicals & Plastics, Inc.), Plaintiff, v. POWER AUTHORITY OF the STATE OF NEW YORK and Village of Solvay, Defendants.
• Court: U.S. District Court — Southern District of New York

703 F. Supp. 305

HANLIN GROUP, INC. (f/k/a LCP Chemicals & Plastics, Inc.), Plaintiff, v. POWER AUTHORITY OF the STATE OF NEW YORK and Village of Solvay, Defendants.

No. 87 Civ. 0570 (JMW).

United States District Court, S.D. New York.

January 13, 1989.

Michael Press, Whitman & Ransom, New York City, and Philip Chabot, Chartered, Washington, D.C., for plaintiff.

Thomas J. Lynch, Walter N. Munson, Wiles, Fahey & Lynch, Syracuse, N.Y., for defendant Village of Solvay.

Arthur T. Cambouris, Asst. Gen. Counsel, and Mitchell Borger, New York City, for defendant PASNY.

MEMORANDUM AND ORDER

WALKER, District Judge:

Defendants have moved to dismiss the complaint on the grounds of lack of jurisdiction, improper venue, violations of applicable statutes of limitations, and failure to state a claim upon which relief can be granted. Plaintiff claims jurisdiction under 28 U.S.C.A. §§ 1331 ("federal question") and 1332 ("diversity"). This motion is granted pursuant to Fed.R.Civ.P. 12(b)(1) on the ground that this Court refuses jurisdiction over this action pursuant to the Burford abstention doctrine.

I. BACKGROUND

This is a rate dispute case concerning the sale of electric power. There are three parties to this action. Plaintiff Hanlin (f/k/a "LCP Chemicals and Plastics, Inc.", hereinafter "Hanlin" or "LCP") is a Delaware corporation with headquarters and principal place of business in New Jersey. Hanlin operates a chlor-alkali manufacturing facility in the County of Onandaga, New York. Hanlin obtains retail electric service for this facility from the municipal electric department of the Village of Solvay, New York.

Defendant PASNY of the State of New York ("PASNY) is a public authority of the State of New York created by statute, and set forth in the Public Authorities Law of the State of New York, Article 5, § 1000, et seq. The PASNY operates the Niagara and St. Lawrence hydroelectric projects under authority of licenses issued to it by the Federal Energy Regulatory Commission.¹ The PASNY sells electric power wholesale to municipalities that in turn retail the power to customers at rates regulated and approved by the PASNY.

Defendant Village of Solvay ("Village") is a New York State municipal corporation. The Village owns and operates a municipal electric system which obtains its bulk power supply from the PASNY. The Village sells power to the system's residential, commercial and industrial customers at retail rates approved by the PASNY.

Plaintiff contracted with defendant Village for electric power on May 22, 1984. In August, 1986, the Village performed a cost of service study and prepared a revision of its electric power retail rates to be presented to PASNY. The PASNY published notice of its proposed rule making action concerning its proposed rate revisions in the New York State Register on August 27, 1986. Further, on September 8 and 15, 1986, the PASNY published notices in a local newspaper of the proposed rate revisions and public hearing before the Village Board to be held on September 22, 1986.

At the September 22, 1986 hearing, a representative of plaintiff Hanlin presented a written position statement and made oral remarks concerning the proposed rate revisions. The Board of Trustees of the Village adopted the proposed rate revisions on September 23, 1986. In a letter to the PASNY dated September 25, 1986, the Mayor of the Village summarized the results of the hearing and informed the PASNY of the adoption of the proposed rate revisions. Subsequently, on September 30, 1986, the Trustees of the PASNY adopted a resolution approving the rate revisions proposed by the Village. Notice of the PASNY's approval of the proposed rate revisions was published in the New York Register on October 22, 1986. The revised rates became effective on October 24, 1986.

The PASNY received a letter from Hanlin on February 10, 1987, requesting a declaratory ruling from the PASNY concerning the approved revised rates. By letter dated March 5, 1987, the PASNY denied Hanlin's request for a declaratory ruling.

Hanlin filed a complaint in this Court against the PASNY on January 28, 1987, and an amended complaint against the PASNY and the Village on March 19, 1987. Both the original and the amended complaints were served on the PASNY on March 27, 1987. The amended complaint alleges that procedures used by defendants to determine power rates, and the rates themselves, were unlawful. Plaintiff's claims sound in constitutional, statutory and contractual rights. Defendants each moved to dismiss the complaint arguing, among other things, that this Court lacks subject matter jurisdiction.

II. DISCUSSION

Although federal courts have a "virtually unflagging obligation ... to exercise jurisdiction given to them," Colorado River Water Conservation District v. United States, 424 U.S. 800, 817, 96 S.Ct. 1236, 1246, 47 L.Ed.2d 483 (1976), certain exceptions to this rule exist. Pragmatic considerations of judicial efficiency, as well as reasons of comity between federal and state courts, have led to an expanding abstention doctrine. See, e.g. Zwickler v. Koota, 389 U.S. 241, 88 S.Ct. 391, 19 L.Ed. 2d 444 (1967); Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941).

The Supreme Court's abstention adjudications have recognized that abstention may be appropriate: "(1) to avoid a decision of a federal constitutional question where the case may be disposed of as a question of state law; (2) to avoid needless conflict with the administration of a state of its own affairs Burford v. Sun Oil Company, 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943); (3) to leave to the states the resolution of unsettled questions of state law Railroad Commission of Texas v. Pullman Company, 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941); and (4) to ease the congestion of the federal court docket' when a similar action is pending in state court. Colorado River Water Conservation District v. U.S., 424 U.S. 800, 817, 96 S.Ct. 1236, 1246, 47 L.Ed.2d 483 (1976)." Society for Good Will to Retarded Children v. Cuomo, 652 F.Supp. 515, 522 (E.D. N.Y.1987), citing C.A. Wright, Law of the Federal Courts 303 (4th ed.1983). Moreover, under Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), and its progeny, abstention is appropriate to avoid federal court interference with pending state judicial proceedings. The particular type of abstention relevant in this case is Burford abstention, also known as administrative abstention.

A. Purpose of Burford Abstention

Burford abstention is frequently employed as a means to "avoid resolving difficult state law issues involving important public policies or avoid interfering with state efforts to maintain a coherent policy in an area of comprehensive regulation or administration." American Disposal Services, Inc. v. O'Brien, 839 F.2d 84, 87 (2d Cir.1988). See also Corcoran v. Ardra Insurance Co., 842 F.2d 31, 37 (2d Cir.1988) (the purpose of Burford abstention is "avoiding interference with specialized state regulatory schemes.") Essentially, federal courts will defer due to the existence of a complex subject matter of special state interest, or the possibility of disturbing a detailed state regulatory scheme. Long Island Lighting Co. v. Cuomo, 666 F.Supp. 370, 399 (N.D.N.Y. 1987).

Burford concerned an action challenging an order of the Texas Railroad Commission granting a permit to drill oil wells. Jurisdiction of the federal district court was invoked because of diversity and a federal due process claim. The Supreme Court agreed with the district court's decision that it should decline to exercise jurisdiction because the Texas regulatory system governing oil conservation was complex and a matter of great public importance. Moreover, there was an effective state administrative system in place from which judicial review was available in state courts. Burford, 319 U.S. at 325, 63 S.Ct. at 1103. The Court found that should the federal courts exercise their jurisdiction, delay, confusion and "needless federal conflict with the state policy would be the inevitable product of this double system of review." Id. at 327, 63 S.Ct. at 1104. See also Alabama Public Service Comm'n v. Southern Ry Co., 341 U.S. 341, 71 S.Ct. 762, 95 L.Ed. 1002 (even though there was no dispute as to the clarity of state law, the Court allowed the district court to abstain from hearing the case primarily because it was a unique problem of local concern).

The analysis conducted to determine the applicability of Burford abstention focuses on the underlying rationale of administrative abstention. A court balances the plaintiff's choice of forum against possibilities for maintaining a harmonious relationship between state and federal governments. Comment, 46 U.Chi.L.Rev. 971, 979 (1979). Through application of Burford abstention, federal courts are able to "refrain from becoming involved with state policy making and enforcement procedures in complex areas of which are primarily the state's concern." Society for the Good Will to Retarded Children v. Cuomo, supra, 652 F.Supp. at 523.

B. Applying Burford

The decision to invoke the Burford abstention doctrine must be made after considering many factors, no one criterion being dispositive. Courts that have ruled on the matter of administrative abstention have concentrated upon the following factors: the degree of specificity of the state regulatory scheme, the necessity for discretionary interpretation of state statutes, and whether the subject matter of the litigation is traditionally one of state concern.

1. Specificity of Regulatory Scheme

Foremost among the factors considered is the presence of a sophisticated and extensive state regulatory scheme involving a complicated area of special state concern.² The Second Circuit recently relied upon this factor in dismissing an action on the basis of Burford abstention, in the case of Law Enforcement Insurance...