Middle South Energy, Inc. v. City of New Orleans

• Decision Date: 24 September 1986
• Docket Number: No. 85-3619,85-3619
• Citation: 800 F.2d 488
• Parties: MIDDLE SOUTH ENERGY, INC. and New Orleans Public Service Inc., Plaintiffs-Appellants, v. The CITY OF NEW ORLEANS and the Council of the City of New Orleans, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 488

800 F.2d 488

MIDDLE SOUTH ENERGY, INC. and New Orleans Public Service Inc., Plaintiffs-Appellants, v. The CITY OF NEW ORLEANS and the Council of the City of New Orleans, Defendants-Appellees.

No. 85-3619.

United States Court of Appeals Fifth Circuit.

Sept. 24, 1986.

Charles W. Lane, III, Joseph P.H. Babington, Herschel L. Abbott, Jr., New Orleans, La., for plaintiffs-appellants.

Bruce E. Naccari, Michael L. Martin, Asst. City Atty., Thomas W. Milliner, Beverly Jackson Zervigon, Salvador Anzelmo, New Orleans, La., for defendants-appellees.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before BROWN, REAVLEY, and JONES, Circuit Judges.

EDITH Hollan JONES, Circuit Judge:

New Orleans Public Service, Inc. (NOPSI), an electrical utility company serving the City of New Orleans (City), appeals from the denial of declaratory and injunctive relief aimed at preventing the City from exercising an option to purchase the utility. Because the district court properly concluded that the dispute is not ripe for adjudication, we AFFIRM.

NOPSI has provided electric power to the City since 1922 under a franchise agreement that gives the City the option to purchase NOPSI's electrical facilities. ¹ NOPSI is a wholly owned subsidiary of Middle South Utilities (MSU), a public utility holding company, which also owns power companies in Arkansas, Louisiana, and Mississippi. Middle South Energy (MSE) was formed by MSU to finance and construct the Grand Gulf nuclear power plant in Mississippi. Begun in the early 1970's, Grand Gulf Unit One was near completion at the time this lawsuit commenced. According to reports, NOPSI's customers will be faced with a substantial increase in their electric bills because of Grand Gulf's cost overruns.

Concerned about the projected rate increases for New Orleans residents, the City, in 1983, began exploring the option of acquiring NOPSI, as provided by the 1922 franchise agreement. The City created a task force to study and make recommendations about the option; it hired a consultant to determine the feasibility of the purchase; it created an agency, the New Orleans Public Power Authority (NOPPA), to which the assets of NOPSI could be transferred in case the City decides to exercise its option; and it successfully presented to the voters a referendum returning regulatory control over NOPSI's retail rate structure from the state power commission to the City Council. The City has also initiated several lawsuits in state court to prevent NOPSI from increasing the "rate base" value of its properties by incorporating its participation in Grand Gulf into the rate base, a move which would increase the City's purchase price if the option is exercised. ² The City has, however, stopped short of exercising its option, as it can only do by formal vote of the Council.

As has been its wont in this on-going dispute over the starcrossed Grand Gulf project, the utility brought suit in federal court, seeking, this time, a declaration that the City's acquisition of NOPSI, free of NOPSI's share of the Grand Gulf project, (1) is necessarily qualified and limited by federal statute and regulation governing interstate utility operations; (2) would impermissibly burden interstate commerce; and (3) if done without FERC's approval, would violate Section 203 of the Federal Power Act, 16 U.S.C. Sec. 824b. MSE and NOPSI also sought an injunction against the City's exercising its purchase option or attempting to regulate power contracts among the various MSU units. ³ The district court dismissed the action for lack of subject matter jurisdiction on the ground that, until the City actually decides to exercise its option, there is no actual case or controversy between the parties within the meaning of article III of the Constitution and the Declaratory Judgment Act, 28 U.S.C. Sec. 2201.

A federal court may not issue a declaratory judgment unless there exists an "actual controversy," i.e., there must be a substantial controversy of sufficient immediacy and reality between parties having adverse legal interests. Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 512, 85 L.Ed. 826 (1941); Johnson v. Onion, 761 F.2d 224, 225 (5th Cir.1985); Wolfer v. Thaler, 525 F.2d 977, 979 (5th Cir.), cert. denied, 425 U.S. 975, 96 S.Ct. 2176, 48 L.Ed.2d 800 (1976). This requirement is a cautionary one, designed to

prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect agencies from judicial interference until an administrative decision has been formalized.

Abbott Laboratories v. Gardner, 387 U.S. 136, 148, 87 S.Ct. 1507, 1515, 18 L.Ed.2d 681 (1967). Further, because the City made a "factual attack" on the pleadings in the trial court, NOPSI was required to prove the existence of subject-matter jurisdiction by a preponderance of the evidence. Paterson v....