Nucor Corp. v. Nebraska Public Power Dist.

• Decision Date: 16 March 1990
• Docket Number: 87-2046,Nos. 87-1963,s. 87-1963
• Citation: 891 F.2d 1343
• Parties: 29 Fed. R. Evid. Serv. 364 NUCOR CORPORATION, Appellee, v. NEBRASKA PUBLIC POWER DISTRICT, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1343

891 F.2d 1343

29 Fed. R. Evid. Serv. 364

NUCOR CORPORATION, Appellee, v. NEBRASKA PUBLIC POWER DISTRICT, Appellant.

Nos. 87-1963, 87-2046.

United States Court of Appeals,

Eighth Circuit.

Submitted May 12, 1989.

Decided Dec. 13, 1989.

Rehearing and Rehearing En Banc Denied March 16, 1990.

James A. Eske, Lincoln, Neb., for appellant.

Roger P. Cox, Lincoln, Neb., for appellee.

Before JOHN R. GIBSON and WOLLMAN, Circuit Judges, and HEANEY, Senior Circuit Judge.

JOHN R. GIBSON, Circuit Judge.

Nebraska Public Power District appeals from a judgment in favor of Nucor Corporation on a breach of contract claim against Nebraska Power based on electric rate overcharges. A panel of this court heard argument and then remanded for additional findings on the issue of whether the Johnson Act, 28 U.S.C. § 1342 (1982), required us to hold that the district court lacked jurisdiction to entertain this action. The district court ¹ tried the issue and certified its findings to this court. We affirm the district court's determination that the Johnson Act did not deprive it of jurisdiction, and we affirm the judgment on the merits.

Nebraska Power is a public corporation which provides wholesale and retail electric service throughout Nebraska. It owns and operates electric generation, transmission, and distribution facilities. Nebraska Power's largest customer, as measured by electrical usage, is Nucor, a Delaware corporation with its principal place of business in Charlotte, North Carolina. Nucor operates a steel mill near Norfolk, Nebraska, which uses electric arc furnaces to melt scrap metal. In 1972, Nebraska Power and Nucor entered into a contract for Nebraska Power to fulfill Nucor's electrical needs at the Norfolk plant. The contract contained a rate schedule, designated as HTS-2, which is available only to industrial or manufacturing customers which meet minimum demand requirements and receive service directly from high voltage facilities. Nucor is the only customer to qualify for the HTS-2 rate.

Nebraska Power establishes its electric rates through resolutions enacted by its board of directors. No state administrative agency in Nebraska is authorized to review Nebraska Power's rates; rather, rates are subject to direct judicial review in state court. Nebraska law requires that the rates be fair, reasonable, and nondiscriminatory. Neb.Rev.Stat. § 70-655 (Reissue 1986). ² The contract in issue contained a rate review provision which also required that the rate be fair, reasonable, and nondiscriminatory. The contract further provided that the rate must be "sufficient, but only sufficient, to collect the expense and estimated net revenue requirements associated with Large Industrial Primary Power Service." During 1973 and at two year intervals thereafter, Nebraska Power was required by the contract to prepare a study of the operating expenses and estimated net revenue requirements for this service, and Nucor's rates were to be based on the results of the studies.

Nucor brought this action against Nebraska Power claiming that Nebraska Power had continuously breached the agreement by charging unfair, unreasonable, and discriminatory rates to Nucor by using incorrect, improper, and unfair methods to allocate costs; failing to grant credits for hydroelectric power; and failing to follow the recommendations of its own consultant as to the rate charged Nucor. It prayed for damages and appropriate injunctive relief.

At trial, the jury was instructed on a breach of contract theory which required Nucor to establish by a preponderance of the evidence that Nebraska Power had breached one or more of its obligations under the rate review provision, that the breaches proximately caused damage to Nucor, and to show the extent of Nucor's damage. The jury was instructed that Nebraska law, as embodied in section 70-655, authorized the board of directors to establish rates and required that such rates be fair, reasonable, and nondiscriminatory. The jury was also instructed that this section of the Nebraska statutes should be considered part of the contract between Nucor and Nebraska Power. Special interrogatories were submitted to the jury, and the jury found that the rate for each year from 1974 through 1986 was not fair, reasonable, and nondiscriminatory. The jury also specified the amount of damages sustained by Nucor for each year, an amount totalling $7,492,340. The court entered judgment only for damages occurring after August 14, 1980, determined to be $4,403,546.70, because it found that the statute of limitations applicable to written contracts barred recovery for damages before that date.

Nebraska Power appealed the judgment to this court, arguing that ratemaking is a legislative function which cannot be exercised by the courts, that the district court usurped the legislative power vested in the Nebraska Power board of directors, and that the contract rate review provision neither alters the nature of the cause of action nor permits an award of damages. Nebraska Power further asserts that the district court erred in permitting the jury to construe the contractual and statutory terms and in admitting certain evidence.

When a panel of this court heard this appeal, a question of jurisdiction arose because of concern that the Johnson Act ³ applied. The Johnson Act prohibits district courts from interfering with ratemaking by public utilities if the four criteria of the Act are met. The case was then remanded to the district court for additional findings on the jurisdictional issue. The district court began by noting that Nebraska Power is a publicly-owned utility which regulates itself, and that its ratemaking decisions are not subject to review by any independent regulatory body. Although the court expressed serious reservations about whether the Johnson Act applied in such circumstances, it did not resolve the issue.

Assuming that the Act did apply, the court recognized that all four statutory criteria must be satisfied in order to bar federal jurisdiction, citing our decision in Arkansas Power & Light Co. v. Missouri Public Service Commission, 829 F.2d 1444, 1449 (8th Cir.1987). Since subject matter jurisdiction in federal court is based solely upon diversity of citizenship, the parties conceded that the first element had been satisfied. As to the second element, requiring that the order not interfere with interstate commerce, the court noted that the parties had not addressed this issue but nevertheless concluded that the order could potentially interfere with interstate commerce. This conclusion was based on evidence that Nebraska Power sold Nucor electricity generated in other states, that Nucor's products were distributed in other states, and that Nucor's corporate headquarters were located outside of Nebraska.

The court then turned to the third requirement of the Johnson Act, which requires that the rate order be made after reasonable notice and a hearing. The court examined both the due process clause of the Constitution and Nebraska statutes, and found that Nebraska Power did not provide reasonable notice to Nucor under either standard. Finally, the court analyzed the fourth requirement of the Johnson Act, that there exists a plain, speedy, and efficient remedy in the state courts. The court found that the state court remedy, which, in most cases, would be to remand to the board of directors to establish new rates, was inadequate. Accordingly, the court determined that the Johnson Act did not deprive federal courts of jurisdiction in this case, and certified its findings to this court.

I.

We first consider the issue of federal jurisdiction. It is well-settled that the plaintiff bears the burden of establishing subject matter jurisdiction. Nebraska Power asserts that the district court erred by improperly requiring it to bear the burden of establishing that federal jurisdiction was lacking rather than requiring Nucor to establish that jurisdiction was present. Our reading of the record, however, reveals that the court properly placed the burden upon Nucor to establish federal jurisdiction. Furthermore, we believe the record fully supports the court's conclusion that the Johnson Act does not preclude federal jurisdiction in this case.

The district court, in its order determining that the Johnson Act did not bar its jurisdiction, expressed serious doubts that the Act was intended to preclude federal jurisdiction in cases such as this one, where rates are established by a public utility not regulated by an independent state agency. Nebraska Power argues that since the Johnson Act applies to all ratemaking bodies of political subdivisions, this necessarily includes the board of directors of the Nebraska Public Power District. As the district court did not rest its decision on this ground, it is not necessary that we do so. ⁴

We may resolve the jurisdictional issue, however, without holding that the Johnson Act is inapplicable here because we are satisfied that the district court correctly determined that the Act's requirements are not met and thus federal courts are not deprived of jurisdiction by the Act.

We turn first to the notice requirement of the Johnson Act and recite the district court's findings of fact on this issue. Nucor was Nebraska Power's single largest retail customer and the only customer qualified to receive service under the HTS-2 rate schedule. Nebraska Power's board of directors set utility rates by adopting rate resolutions during board meetings at Nebraska Power's general office in Columbus, Nebraska. Columbus is approximately 45 miles from Norfolk, which is close to Nucor's steel mill. Advance notice of each board meeting was published in The Columbus Telegram which has a circulation of 10,000 to 12,000 readers. Norfolk is not within the Telegram's coverage area. Neither Nucor nor its officers subscribed to the Telegram, and, in fact, the newspaper had only one subscriber in ...