Pressl v. Appalachian Power Co.

• Decision Date: 21 November 2016
• Docket Number: No. 15-2348,15-2348
• Citation: 842 F.3d 299
• Parties: Richard A. Pressl; Theresa Pressl, Plaintiffs–Appellants, v. Appalachian Power Company, Defendant–Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

842 F.3d 299

Richard A. Pressl; Theresa Pressl, Plaintiffs–Appellants,

v.Appalachian Power Company, Defendant–Appellee.

No. 15-2348

United States Court of Appeals, Fourth Circuit.

Argued: October 26, 2016

Decided: November 21, 2016

ARGUED: James Frederick Watson, Caskie & Frost, P.C., Lynchburg, Virginia, for Appellants. Frank Kenneth Friedman, Matthew Patrick Warren Pritts, Woods Rogers, PLC, Roanoke, Virginia, for Appellee. ON BRIEF: Pavlina B. Dirom, Caskie & Frost, P.C., Lynchburg, Virginia, for Appellants. C. Carter Lee, Woods Rogers, PLC, Roanoke, Virginia, for Appellee.

Before MOTZ, TRAXLER, and FLOYD, Circuit Judges.

Vacated and remanded by published opinion. Judge Motz wrote the opinion, in which Judge Traxler and Judge Floyd joined.

DIANA GRIBBON MOTZ, Circuit Judge:

Landowners brought this action in state court seeking a declaration of their rights to build a dock on property subject to a flowage easement. After the power company, which owns the easement, removed the case to federal court, the landowners sought to remand the case to state court. The district court denied the motion to remand and then dismissed the landowners' complaint. Because the district court lacked subject matter jurisdiction, we must vacate and remand.

I.

Richard A. Pressl and Theresa Pressl own property adjacent to Smith Mountain Lake in Franklin County, Virginia. They own about two and a half acres of land sitting more than 800 feet above median sea level. The Pressls also own half an acre of adjoining land below the 800–foot elevation contour. They acquired the property subject to a flowage easement that the Pressls' predecessors in interest granted in 1960 to Appalachian Power Company ("APCO").

The flowage easement recites APCO's intention to construct a dam and operate a hydroelectric power station at Smith Mountain. It provides that the elevation of the impounded waters the dam creates generally would not exceed 800 feet. The easement grants APCO the right to:

overflow and/or affect so much of said premises as may be overflowed and/or affected, continuously or from time to time in any manner whatsoever, as the result of the construction, existence, operation and/or maintenance of the aforesaid dam and/or power station, the impounding of the waters of [Roanoke] river and tributaries and/or the varying of the level of the so impounded waters by reason of the operation of said power station, including any pumping as part of such operation.

The easement also gives APCO the right to:

enter upon said premises at any time and from time to time and, at Appalachian's discretion, to cut, burn and/or remove therefrom any and all buildings, structures, improvements, trees, bushes, driftwood and other objects and debris of any and every kind or description which are or may hereafter be located on the portion of said premises below the contour the elevation of which is 800 feet.

The easement provides that the landowners retain the right to "possess and use said premises in any manner not inconsistent with" APCO's flowage easement, including crossing the land for recreational purposes.

After acquiring the property, the Pressls sought to construct a dock below the 800–foot elevation contour. APCO advised the Pressls that, as a condition for building the dock, they had to execute an Occupancy and Use Permit and agree to abide by its restrictions.

Balking at this requirement, the Pressls filed suit in Virginia state court, seeking a declaratory judgment that APCO's demands violated the flowage easement. The complaint asks the court to declare "that APCO has no regulatory authority over the plaintiffs' property which lies below the 800 foot contour beyond those rights defined by the flowage easement, the contemporaneous expressions of the parties, and vested rights to build and own structures to access Smith Mountain Lake for recreational purposes." It further requests the court to hold that the Pressls "be allowed to use their property in any manner not inconsistent with the maintenance of a dam and hydroelectric power generation plant operated by APCO at Smith Mountain."

APCO removed the case to the United States District Court for the Western District of Virginia. APCO asserted that the federal district court had subject matter jurisdiction because the Pressls' property lies within the project boundary for APCO's Smith Mountain hydroelectric project, which APCO operates under a license issued by the Federal Energy Regulatory Commission ("FERC").

The district court agreed. It concluded that it had jurisdiction under both 28 U.S.C. § 1331 and 16 U.S.C. § 825p. The court then granted APCO's motion to dismiss, analyzing the easement under Virginia law. The court held that the plain language of the flowage easement gave APCO the right to remove any dock built below the 800–foot elevation contour and that APCO's exercise of that right would be in furtherance of the original purpose of the easement—to allow APCO to operate its hydroelectric project. The district court also held that the Pressls needed to raise any complaints about APCO's actions with FERC prior to filing suit. The Pressls timely noted this appeal.

Before us, the Pressls renew their argument that the federal district court lacked subject matter jurisdiction.¹ We review questions as to subject matter jurisdiction de novo. Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 815–16 (4th Cir. 2004) (en banc). The party seeking to remove a case to federal court has the burden of demonstrating federal jurisdiction. Id. at 816. "If federal jurisdiction is doubtful, a remand is necessary." Mulcahey v. Columbia Organic Chems. Co., Inc., 29 F.3d 148, 151 (4th Cir. 1994). APCO argues that jurisdiction lies under 18 U.S.C. § 1331 and 16 U.S.C. § 825p. We consider each statute in turn.

II.

To determine whether a case "arises under" federal law for the purposes of establishing federal question jurisdiction under 28 U.S.C. § 1331, we follow the well-pleaded complaint rule. Jurisdiction exists "only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). It is not enough that there may be a defense grounded in federal law or that the complaint anticipates and rebuts such a defense. Id. at 392–93, 107 S.Ct. 2425.

In an action for declaratory judgment, however, "the federal right litigated may belong to the declaratory judgment defendant rather than the declaratory judgment plaintiff." Columbia Gas Transmission Corp. v. Drain, 237 F.3d 366, 370 (4th Cir. 2001). Under this "coercive action doctrine," although the declaratory judgment plaintiff does not assert a claim arising under federal law, federal question jurisdiction exists if "the complaint alleges a claim arising under federal law that the declaratory judgment defendant could affirmatively bring against the declaratory judgment plaintiff." Id. See generally13D Charles Alan Wright, et al., Federal Practice and Procedure§ 3566 (3d ed.), Westlaw (database updated April 2016).

In this case, the Pressls seek a declaratory judgment that APCO does not possess rights under the flowage easement to prevent or regulate construction of a dock on their property. APCO maintains that federal question jurisdiction lies because its hypothetical coercive suit, seeking a declaration as to its rights to prevent or regulate construction or an injunction to enforce those rights, would arise under federal law.

"[T]he vast majority" of cases arising under federal law "are those in which federal law creates the cause of action." Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986). Cases may also arise under federal law, however, when "the vindication of a right under state law necessarily turn[s] on some construction of federal law." Id.(quoting Franchise Tax Bd. v. Constr. Laborers Vacation Tr., 463 U.S. 1, 9, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983) ).

APCO admits that neither the Pressls' complaint nor APCO's hypothetical coercive suit alleges a federal cause of action. APCO contends that federal jurisdiction nonetheless exists because its rights under state law necessarily turn on the construction of its federal license. For a federal court to have jurisdiction in these circumstances, the federal issue must be "(1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress." Gunn v. Minton, ––– U.S. ––––, 133 S.Ct. 1059, 1065, 185 L.Ed.2d 72 (2013) ; see alsoGrable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 312–14, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005). Federal jurisdiction will lie only if a case meets all four requirements. Gunn, 133 S.Ct. at 1065.

A.

i.

We first address whether this case necessarily raises a federal question. APCO emphasizes that the property subject to the flowage easement lies within the project boundary for the Smith Mountain Hydroelectric Project that APCO operates. FERC imposes certain duties on APCO for managing development and construction within the project boundary—including managing the construction of docks. APCO argues that the Pressls' complaint necessarily raises federal issues because it seeks a declaration that APCO does not have authority to regulate construction of a dock. According to APCO, a court must examine APCO's authority under its federal license to adjudicate the issue. Appellee Br. at 13–15, 20–21, 25–26.

In proffering this argument, APCO misreads the Pressls' complaint. The Pressls do not challenge APCO's substantial duties to FERC. Nor do they dispute the extent of APCO's authority over the property in the event the flowage easement provides APCO with sufficient property rights.

The Pressls maintain only that APCO has not acquired the property right to constrain the Pressls' construction of a dock. Because neither the Federal Power Act...