Public Util., Grays Harbor, Wa v. Idacorp, No. 03-35207.

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Writing for the CourtPregerson
Citation379 F.3d 641
Docket NumberNo. 03-35207.
Decision Date10 August 2004
PartiesPUBLIC UTILITY DISTRICT NO. 1 OF GRAYS HARBOR COUNTY WASHINGTON, Plaintiff-Appellant, v. IDACORP INC., an Idaho corporation; Idaho Power Company, an Idaho corporation; IDACORP Energy L.P., a Delaware limited partnership, Defendants-Appellees.
379 F.3d 641
PUBLIC UTILITY DISTRICT NO. 1 OF GRAYS HARBOR COUNTY WASHINGTON, Plaintiff-Appellant,
v.
IDACORP INC., an Idaho corporation; Idaho Power Company, an Idaho corporation; IDACORP Energy L.P., a Delaware limited partnership, Defendants-Appellees.
No. 03-35207.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted June 10, 2004.
Filed August 10, 2004.

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William J. Ohle, Schwabe, Williamson & Wyatt, Portland, OR, for the plaintiff-appellant.

Gordon E. Erspamer, Morrison & Foerster, Walnut Creek, CA, for the defendants-appellees.

Appeal from the United States District Court for the Western District of Washington; Robert J. Bryan, District Judge, Presiding, D.C. No. CV-02-05572-RJB.

Before PREGERSON, THOMPSON, and CALLAHAN, Circuit Judges.

PREGERSON, Circuit Judge.


This dispute arises out of the West Coast's recent energy crisis. The case involves contract-related claims against energy wholesalers by a public utility which contends it was forced to pay exorbitant prices for electricity. The utility's case was dismissed by the district court because its claims were found to be preempted. For the reasons discussed below, we affirm in part and remand.

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BACKGROUND1

Appellant Public Utility District No. 1 of Grays Harbor County, Washington ("Grays Harbor") is a public utility district that provides retail electric power services to residential, commercial, and government customers within Grays Harbor County, Washington. Appellees Idaho Power Company and IDACORP Energy L.P. market and sell electric power in the wholesale markets of the Pacific Northwest. Appellee IDACORP Inc. is the holding company for both Idaho Power Company and IDACORP Energy L.P., and it is also the general partner of IDACORP Energy L.P.

At the center of this dispute is a contract for power. On or about March 19, 2001, Grays Harbor entered into a 20 megawatt purchase transaction with Idaho Power Company for the purchase of electric power from October 1, 2001 through March 31, 2002, at the "market rate," which turned out to be $249 per megawatt hour. In or around June 2001, Idaho Power Company assigned all of its rights and obligations under the contract to IDACORP Energy L.P. Subsequently, IDACORP Energy L.P. delivered the power under the contract, and Grays Harbor paid IDACORP Energy L.P. $21,757,620 for the power.

This contract was negotiated during a time — the summer and winter of 2000-2001 — when the West Coast was experiencing extreme power shortages and price volatility. These shortages resulted in numerous blackouts in California and threatened blackouts in the Northwest. According to Grays Harbor, this situation was allegedly caused by "dysfunctional markets, market manipulation and the intentional withholding of generation capacity from the market."

On or about October 10, 2002, Grays Harbor filed suit against IDACORP, Inc.; Idaho Power Company; and IDACORP Energy L.P. in Washington state court. In the complaint, Grays Harbor sought rescission or reformation of the contract based on four theories — mutual mistake, unilateral mistake, duress, and unconscionability. The complaint also asserted a claim for unjust enrichment against IDACORP Inc. and IDACORP Energy L.P.2 In essence, the complaint alleges that the market rate of $249 per megawatt hour price was agreed to only because Grays Harbor believed that the rate was based on a properly functioning market, when in fact the price resulted from a dysfunctional, manipulated market.

As to the unjust enrichment claim, the complaint seeks restitution from IDACORP Inc. and IDACORP Energy L.P. in an amount "equal to the difference between $249 per megawatt hour and the fair value for the electric power delivered by IDACORP Energy L.P." pursuant to the contract. Alternatively, the complaint seeks rescission or reformation of the contract "to a price that reflects a fair price absent dysfunction, manipulation and the intentional withholding of electric power and restitution from defendants jointly and sever [ally] in an amount equal to the difference

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between $249 per megawatt hour and the fair value for the electric power" delivered under the contract.

On November 4, 2002, the defendants removed the case to the United States District Court for the Western District of Washington. On November 12, 2002, the defendants filed a motion to dismiss, which was ultimately heard on January 24, 2003. At the hearing on January 24, 2003, the district court issued an oral ruling dismissing the complaint. The district court concluded that it did not have jurisdiction to resolve the issues raised in the complaint. The court explained that the relief sought would require the court to determine a fair price and that "[the Federal Energy Regulatory Commission] has preempted the field of determining fair value of power...." The judge stated, "all of the relief requested in the complaint would require this Court to undermine the Congressional scheme of uniform regulation of rates."3 On January 28, 2003, the court issued a minute order and a judgment, dismissing the complaint. Grays Harbor filed a timely notice of appeal on February 27, 2003.

ANALYSIS

A. Standard of Review

A dismissal for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6) is reviewed de novo. Libas Ltd. v. Carillo, 329 F.3d 1128, 1130 (9th Cir.2003). A dismissal for failure to state a claim may be affirmed on any basis supported in the record. Ove v. Gwinn, 264 F.3d 817, 821 (9th Cir.2001). Review is limited to the contents of the complaint and all allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Id.

Denial of leave to amend, which we discuss hereafter, is reviewed for abuse of discretion, United States ex rel. Lee v. SmithKline Beecham, Inc., 245 F.3d 1048, 1051 (9th Cir.2001); "[d]ismissal with prejudice and without leave to amend is not appropriate unless it is clear on de novo review that the complaint could not be saved by amendment," Eminence Capital, L.L.C. v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir.2003).

B. Discussion

The arguments raised on appeal all involve the scope of preemption in the energy context and how that preemption applies to Grays Harbor's contract claims.4 As an initial matter, it is clear that the Federal Power Act (the "FPA") grants FERC "`exclusive authority to regulate the transmission and sale at wholesale of electric energy in interstate commerce.'" Transmission Agency of N. Cal. v. Sierra Pac. Power Co., 295 F.3d 918, 928 (9th Cir.2002) ("TANC") (quoting New England Power Co. v. New Hampshire, 455 U.S. 331, 340, 102 S.Ct. 1096, 71 L.Ed.2d 188 (1982)); see also 16 U.S.C. §§ 824-824m. Through the FPA, "`Congress meant to draw a bright line easily ascertained, between state and federal jurisdiction.... This was done in the Power Act by making [FERC] jurisdiction plenary

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and extending it to all wholesale sales in interstate commerce except those which Congress has made explicitly subject to regulation by the States.'" Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 966, 106 S.Ct. 2349, 90 L.Ed.2d 943 (1986) (quoting Fed. Power Comm'n v. S. Cal. Edison Co., 376 U.S. 205, 215-16, 84 S.Ct. 644, 11 L.Ed.2d 638 (1964)). This power includes the exclusive authority to determine the reasonableness of wholesale rates. See Miss. Power & Light Co. v. Miss. ex rel. Moore, 487 U.S. 354, 371, 108 S.Ct. 2428, 101 L.Ed.2d 322 (1988); see also 16 U.S.C. § 824e(a) (stating that FERC shall determine the just and reasonable rate when it finds that "any rate, charge, or classification, demanded, observed, charged, or collected by any public utility for any transmission or sale subject to the jurisdiction of the Commission, or that any rule, regulation, practice, or contract affecting such rate, charge, or classification is unjust, unreasonable, unduly discriminatory or preferential...."). To the extent that it bars states from acting within the zone of FERC's authority, this exclusive jurisdiction is grounded in the Supremacy Clause of the Constitution. See Miss. Power & Light Co., 487 U.S. at 371, 108 S.Ct. 2428; U.S. Const. art. VI, cl. 2; see also Duke Energy Trading & Mktg., L.L.C. v. Davis, 267 F.3d 1042, 1055 (9th Cir.2001) (noting that a preemption claim involving state actions that conflict with the Federal Power Act are properly understood as predicated on the Supremacy Clause).

There are three preemption-related theories that require this case to be dismissed. They are: field preemption, conflict preemption, and the filed rate doctrine.5 We address them separately below.

1. Field Preemption

"Field preemption occurs when the federal statutory scheme is sufficiently comprehensive to infer that Congress left no room for supplementary regulation by the states." Gadda, 363 F.3d at 869. "When the federal government completely occupies a given field or an identifiable portion of it ..., the test of preemption is whether `the matter on which the state asserts the right to act is in any way regulated by the federal government.'" Pac. Gas & Elec. Co. v. State Energy Res. Conservation & Dev. Comm'n, 461 U.S. 190, 212-13, 103 S.Ct. 1713, 75 L.Ed.2d 752 (1983) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 236, 67 S.Ct. 1146, 91 L.Ed. 1447 (1947)). "When considering preemption, no matter which type, `[t]he purpose of Congress is the ultimate touchstone.' "Ting v. AT&T, 319 F.3d 1126, 1136 (9th Cir.2003) (quoting Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992)).

Grays Harbor's basic argument in this respect is that its complaint merely alleges facts that under state common law would allow the court to grant the equitable remedies of rescission or reformation and that the FPA does not necessarily grant FERC exclusive jurisdiction over...

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