Amicus Curiae Brief — New Orleans Public Service, Inc. v. Council of City of New Orleans

FILED

No. 88-348 maR 31 1989

] JOSEPH F.S ANIOL, JRe

IN THE Cie

Supreme Court of the United Statea —

OCTOBER TERM, 1988

NEW ORLEANS PUBLIC SERVICE INC.,

Petitioner,

V.

THE COUNCIL OF THE CITY OF NEW ORLEANS, et al.,

Respondents.

On Writ of Certiorari to the United States

Court of Appeals for the Fifth Circuit

BRIEF OF THE NATIONAL LEAGUE OF CITIES,

NATIONAL CONFERENCE OF STATE LEGISLATURES,

UNITED STATES CONFERENCE OF MAYORS,

INTERNATIONAL CITY MANAGEMENT ASSOCIATION,

NATIONAL ASSOCIATION OF COUNTIES, AND

COUNCIL OF STATE GOVERNMENTS

AS AMICI CURTAE IN SUPPORT OF RESPONDENTS

BENNA RUTH SOLOMON *

Chief Counsel

CHARLES ROTH FELD

STATE AND LOCAL LEGAL CENTER

144 N. Capitol Street, N.W.

Suite 349

Washington, D.C. 20001

(202) 638-1445

Counsel of Record for the

Amici Curiae

WILSON - Eres Printing Co... Inc. - 789-0096 - WasHiInGTON, 0. C. 20001

QUESTION PRESENTED

Whether a federal court should abstain from adjudi-

cating a claim that relates to an intrastate retail rate-

making currently under review in the state courts.

(i)

TABLE OF CONTENTS

QUESTION PRESENTED ...................2.2--c2cc-cc-eceeseeeeeees

TABLE OF AUTHORITIES ........--- eee

INTEREST OF THE AMICI CURIAE ...........00............

SUMMARY OF ARGUMENT ....00202.0.e eens

EL

THE COURTS BELOW PROPERLY ABSTAINED

a

I.

Il.

ITI.

YOUNGER ABSTENTION IS PROPER IN

TE cetaatthtdinenieneetccsennecsentpsonnsesmnenscsesnsceneznes

A. The Younger Prerequisites Have Been Met

ESSE

B. The Exceptions To Younger Abstention Do

CEE

C. The Court Should Not Create A Special Ex-

ception To Younger For Preemption Claims..

D. The Solicitor General’s Arguments Do Not

Justify A Refusal To Abstain Under

EELS a

BURFORD ABSTENTION IS PROPER IN

EE

THE COURTS BELOW SHOULD NOT SUB-

STITUTE THEIR JUDGMENT FOR THAT

OF THE STATE COURTS IN DETERMINING

THE AVAILABILITY OF PRELIMINARY

Page

19

22

28

30

iv

TABLE OF AUTHORITIES

CASES: Page

Abney v. United States, 431 U.S. 651 (1977)........ 17

Alabama Public Service Comm’n v. Southern Ry.

a passim

Aluminum Co. of America v. Utilities Comm’n, 713

F.2d 1024 (4th Cir. 1983), cert. denied, 465 U.S.

RR LS ae 24

American Trucking Ass’n v. Gray, 108 S.Ct. 2

CIID cnnternatiosrsesvteniednaninnimmstensstindeniidveumdaiilns 29

Arkansas Electric Cooperative Corp. v. Arkansas

Public Service Comm’n, 461 U.S. 375 (1983) ....3, 9-10,

10

Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571

(1981) ... ie 10

Babbitt v. United Ferm Workers, “442 US. “289

EI civescisscstatdesieeilsadibiediididelaiialaDcasieeh aah eDes 12, 28

Burford v. Sun Oil Co., 319 U.S. 315 (1943) ......... passim

Central Hudson Gas & Electric Corp. v. Public

Service Comm’n, 447 U.S. 557 (1980) —.............. 10, 24

Colorado River Water Conservation District v.

United States, 424 U.S. 800 (1976) -........00000...... 22, 23

Connecticut Light & Power Co. v. Federal Power

Comm’n, 824 U.S. 515 (1946)................................ 10, 27

Consolidated Edison Co. v. Public Service Comm’n,

447 U.S. 530 (1980) .. ean 10

County of Allegheny v. Frank Mashuda Co., “360

ee Se CID cschsinsuisoneinsiiiceniniacniesienetiinnemntecettsaceaie 7

Deakins v. Monaghan, 108 S.Ct. 523 (1988) _......... 21

Doran v. Salem Inn, Inc., 422 U.S. 922 (1975) ....... 5, 28

Federal Power Comm'n v. Hope Natural Gas Co.,

ileal 10

Federal Power Comm’n v. Sierra Pacific Power

eS Se Ene eels 10

Frost v. Corporation Comm’n, 278 U.S. 515

RAREST PRE a teasers om Fr Ra BS 10

Hawaii Housing Authority v. Midkiff, 467 U.S.

RRR ree POETS es Ee 8

Huffman v. Pursue, Ltd., 420 U.S. 592 ( 1975) eee passim

Interstate Natural Gas Co. v. Federal Power

Comm’n, 331 U.S. 682 (1947) ...2...2........-ccceeeeeeeeees 10, 27

ee ee ets

Vv

TABLE OF AUTHORITIES—Continued

Page

Juidice v. Vail, 430 U.S. 327 (1977) ............. 7, 9, 20, 22, 29

Lake Carriers’ Ass’n v. MacMullan, 406 U.S. 498

CIID occnnsinvicrseviconsdticntisiemnininiennisaamnertamaninaainints 18

Leiter Minerals, Inc. v. United States, 352 U.S. 220

Aree 28

McNeese v. Board of Education, 373 US. 668

) ene 26

Middlesex County Ethics Comm. v. Garden State

Bar Ass’n, 457 U.S. 423 (1982) -..................... 7, 8, 10, 20

Mississippi Power & Light Co. v. Mississippi ex rel.

Moore, 108 §.Ct. 2428 (1988) -............--..--ceeeeeeeeeeee passim

Moore v. Sims, 442 U.S. 415 (1979) ............ 7, 11, 16-17, 22

Nantahala Power & Light Co. v. Thornburg, 476

FR ree 8, 14, 15, 17

NOPSI v. City of New Orleans, 798 F.2d 858

(5th Cir. 1986), cert. denied, 481 U.S. 1023

UII . sunkscicessiesesendendutnssdeetiianammmnnppamanpibintiauanbnenpieerh 24

Ohio Bureau of Employment Services v. Hodory,

BS ee 4,12

Ohio Civil Rights Comm’n v. Dayton Christian

Schools, Inc., 477 U.S. 619 (1986) —................ passim

Pacific Gas & Electric Co. v. State Energy Re-

sources Conservation & Development Comm’n,

ee Ts Se ED edoastcsnieentmereininiedmtinaiiiens 11

Pennzoil Co. v. Texaco Inc., 481 U.S. 1 (1987) ...... 6, 9, 21,

22

Pike v. Bruce Church, Inc., 397 U.S. 137 (1970)... 28

Public Service Comm’n v. Wycoff Co., 344 U.S.

I III 1 sd race isha aac tenecetiealiansiieneliiadaiinedininlneddapens 21

Public Utilities Comm’n v. United Fuel Gas Co.,

SE OD EID cn. cntncstcccerendasedaineniatanenstiedenionenien 26

Public Utilities Comm’n v. United States, 855 U.S.

Be CD icra stistienccnistisnsennsestasiitantinienineminnerenesdenentain 26-27

Samuels v. Mackell, 401 U.S. 66 (1971) .................. 5, 21

Trainor v. Hernandez, 431 U.S. 434 (1977) ............. 11

Younger v. Harris, 401 U.S. 37 (1971) .---------.-------. passim

Zwickler v. Koota, 389 U.S. 241 (1967)..........-.....-- 22

vi

TABLE OF AUTHORITIES—Continued

CONSTITUTIONAL PROVISIONS: Page

Supremacy Clause, U.S. Const., Art. VI, cl. 2... 18

La. Const. Art. 4, § 21(C) (West 1977) ....... 25

STATUTES:

Gc eacatiniaaembaneoaiaa 28

Ea ee =

Act of June 27, 1988, Pub. L. No. 100-532

TTT SES LTS SRT abe ae ae ee 20

EE Re eae eee 20

La. Rev. Stat. Ann. ch. 45, § 1192 (West 1982)... 25

BOOKS & TREATISES:

P. Bator, D. Meltzer, P. Mishkin & D. Shapiro,

Hart & Wechsler’s The Federal Courts & the

Federal System (3d ed. 1988) 0.000000... 12, 23

Shapiro, Jurisdiction and Discretion, 60 N.Y.U.L.

SF ene 6, 21

C. Wright, A. Miller & E. Cooper, Federal Practice

ME cnnsnsicceinsevicrrsicsneiineticansntaniignsnnininaieen 17, 25

IN THE

Supreme Court of the United States

OCTOBER TERM, 1988

No. 88-348

NEW ORLEANS PUBLIC SERVICE INC.,

. Petitioner,

THE COUNCIL OF THE CITY OF NEW ORLEANS, et al.,

Respondents.

On Writ of Certiorari to the United States

Court of Appeals for the Fifth Circuit

BRIEF OF THE NATIONAL LEAGUE OF CITIES,

NATIONAL CONFERENCE OF STATE LEGISLATURES,

- UNITED STATES CONFERENCE OF MAYORS,

INTERNATIONAL CITY MANAGEMENT ASSOCIATION,

NATIONAL ASSOCIATION OF COUNTIES, AND

COUNCIL OF STATE GOVERNMENTS

AS AMICI CURIAE IN SUPPORT OF RESPONDENTS

INTEREST OF THE AMICI CURIAE

The amici are organizations whose members include

state, county, and municipal governments and officials

throughout the United States. They have a compelling

and continuing interest in the issue presented here:

whether the jurisdiction of the federal courts may be

invoked to pretermit state regulatory processes.

This case follows upon a proceeding before the Federal

Energy Regulatory Commission (FERC) to allocate power

produced by the Grand Gulf I nuclear facility among the

members of the Middle South Utilities, Inc. (MSU) sys-

tem, one of which is petitioner. See Mississippi Power &

Light Co. v. Mississippi ex rel. Moore, 108 S.Ct. 2428

2

(1988). Following FERC’s determination, respondent ini-

tiated a review to set petitioner’s intrastate retail

rates. During the course of that review, respondent

(the Council of the City of New Orleans) expressly dis-

avowed any intention of challenging the prudence of peti-

tioner’s decision to participate in the Grand Gulf project,

and fully accepted both the interstate rates set and the

allocation of Grand Gulf power made by FERC. Re-

spondent found, however, that petitioner’ management

had been imprudent in 1979-1980 when it failed to diver-

sify its risks by selling a portion of its Grand Gulf I

power off-system. Respondent accordingly concluded that

petitioner should not be permitted to pass on certain

Grand Gulf costs to retail customers. Petitioner chal-

lenges this determination as inconsistent with FERC’s

order and with this Court’s decision in Mississippi Power.

Petitioner had an opportunity to raise its preemption

claim before respondent, which in fact closely considered

the preemption issue and limited its order in light of the

FERC opinion. Petitioner also may litigate its preemp-

tion arguments before the Louisiana courts as part of

the regular process of administrative review; indeed, there

are now three proceedings related to respondent’s order

pending in the state courtc. Petitioner nevertheless

brought this action in federal district court, seeking a

preliminary injunction against respondent’s rate order

and a resolution of the preemption claims. The district

court and the court of appeals instead abstained, holding

that review of respondent’s action should proceed in the

state courts. Petitioner then brought the case to this

Court.

Amici and their members have a significant practical

interest in the abstention rules that the Court will ad-

dress in this case. Retail ratemaking for electric utili-

ties is a matter of profound concern to States, local gov-

ernments, and all of their citizens. And the setting of

rates is a matter that requires both administrative ex-

pertise and a familiarity with local conditions. Allowing

federal courts to insert themselves into ongoing rate pro-

3

ceedings would disturb that delicate process. It also would

cast aspersions on the competence of state courts to ad-

judicate federal issues. For these reasons, amici submit

this brief to assist the Court in the resolution of this

case.’

SUMMARY OF ARGUMENT

1. Under Younger v. Harris, 401 U.S. 37 (1971), and

its progeny, federal courts should decline jurisdiction

when they are asked to take action that will interfere

with “|1]| state administrative proceedings in which [2]

important state interests are vindicated, so long as [3}

in the course of those proceedings the federal plaintiff

could have a full and fair opportunity to litigate his con-

stitutional claim.” Ohio Civil Rights Comm’n v. Dayton

Christian Schools, Inc., 477 U.S. 619, 627 (1986). When

these factoms are present, abstention is “‘the normal

thing to do.’” Jbid. (emphasis in original) (quoting

Younger, 401 U.S. at 45). Petitioner does not deny that

the first and third of these prerequisites are present here.

And the second plainly is as well. Protecting the integ-

rity of the processes of administrative review is itself an

important state concern. At the same time, the under-

lying state interest in the regulation of utilities, which

“is one of the most important of the functions tradition-

ally associated with the police power of the States” (Ar-

kansas Electric Cooperative Corp. v. Alabama Public

Service Comm’n, 461 U.S. 375, 377 (1983)), is plainly

substantial enough to warrant abstention.

Petitioner nevertheless argues that the courts below

should not have abstained because respondent’s order is

assertedly inconsistent with this Court’s decision in Mis-

sissippi Power & Light Co. v. Mississippi ex rel. Moore,

108 S.Ct. 2428 (1988). But federal courts should not

forgo abstention and pretermit state court litigation sim-

1 The parties have consented to the filing of this brief pursuant

to Rule 36 of the Rules of this Court. Their letters of consent have

been filed with the Clerk of the Court.

4

ply because a state agency or trial court makes what is

asserted to be a plain error of federal law; such a result

would in equal parts disrupt and insult the state adjudi-

cative process, while denying “the State an opportunity

to ‘set its own house in order.’” Ohio Bureau of Employ-

ment Services v. Hodory, 431 U.S. 471, 479-480 (1977).

In any event, petitioner grossly overstates its case in

asserting that respondent's order is inconsistent with

Mississippi Power. In its decision there, the Court held

only that States may not challenge FERC-ordered alloca-

tions of Grand Gulf power. But respondent here fully

accepted petitioner’s obligation to purchase its FERC-

allocated share of power from Grand Gulf; respondent

concluded that petitioner was imprudent in failing to

diversify its risks by selling a portion of the Grand Gulf

power off-system. The propriety of such an order is

simply not addressed in Mississippi Power, and it should

not be addressed in the first instance during the course

of a federal court’s abstention analysis.

Petitioner is equally incorrect in asserting that ab-

stention always is inappropriate when the federal claim

is one of preemption. If respondent erred in its interpre-

tation of the Federal Power Act, that mistake, like any

other error of federal constitutional or statutory law,

may be remedied on appeal to the state courts. Surely

state judges will-be no less willing to enforce federal

statutory than federal constitutional claims (as to which

abstention plainly is appropriate), and surely the fed-

eral Government’s interest in the effectuation of con-

stitutional rights is no weaker than its interest in the

vindication of statutorily created programmatic concerns.

For his part, the Solicitor General offers a series of ar-

guments that cannot bear substantial weight. This is not

an “interstate dispute,” as the Solicitor General suggests;

respondent’s proceeding, which did not disturb FERC’s

allocation of Grand Gulf power within the MSU system,

-_—

5

concerned only intrastate retail rates, a matter that has

no conceivable bearing on the interests of other States.

It is irrelevant that this case involves a request for de-

claratory rather than injunctive relief, since “the declara-

tory relief alone has practically the same practical im-

pact as a formal injunction would.” Samuels v. Mackell,

401 US. 66. 72 (1971). And the nature of the suit that

petitioner filed in state court has no bearing on the ab-

stention question: a necessary concomitant of Younger

is that a party must exhaust its state appellate remedies

before seeking relief in federal court. Huffman v. Pur-

sue, Ltd., 420 U.S. 592, 609 (1975).

2. Burford abstention is proper when the exercise of

the district court’s jurisdiction would disrupt an ongoing

state administrative proceeding; there need not be an

unsettled issue of state law in the case. Alabama Public

Service Comm'n v. Southern Ry. Co., 341 US. 341

(1951). This case falls squarely within that rule. Al-

most by definition, intervention by the federal courts at

this stage of the proceeding would disrupt the adminis-

trative process by precluding state court consideration

of the regulatory issues. And choosing among rate struc-

tures is a matter of paramount local concern that de-

mands the application of local administrative expertise.

3. Finally, petitioner and the Solicitor General are

incorrect in arguing that, even if abstention is otherwise

appropriate, the district court should have determined

the availability of preliminary injunctive relief. That

argument was at least implicitly rejected in Doran v.

Salem Inn, Inc., 422 U.S. 922 (1975). And it is incon-

sistent with the principles of Younger and Burford.

Those doctrines presume that state courts are willing

and able to enforce federal rights; if state courts are

trusted to resolve federal claims for all time by issuing

final judgments on the merits, surely they may be trusted

to decide questions of interim relief.

6

ARGUMENT

THE COURTS BELOW PROPERLY ABSTAINED

IN THIS CASE

Petitioner and the Solicitor General suggest that the

courts below did something extraordinary, observing that

abstention is unusual and that federal courts generally

hear the cases that fall within their jurisdiction. There

is something to this, of course: in the vast universe of

cases, the ones in which abstention is proper are com-

paratively rare.? But when the prerequisites for absten-

tion are present—in particular, when the federal court

is asked to interfere with ongoing state judicial or ad-

ministrative proceedings—there are “strong policies coun-

seling against the exercise of [federal] jurisdiction” that

make abstention “ ‘the normal thing to do.’” Ohio Civil

Rights Comm’n v. Dayton Christian Schools, Inc., 477

U.S. 619, 626, 627 (1986) (emphasis in original) (quot-

ing Younger v. Harris, 401 U.S. 37, 45 (1971)). This is

such a case.

The decisions below rest on two forms of abstention

that, like abstention doctrines generally, “reflect a com-

plex of considerations designed to soften the tensions in-

herent in a system that contemplates parallel judicial

processes.” Pennzoil Co. v. Texaco Inc., 481 U.S. 1, 11

n.9 (1987). Younger abstention, in Justice Black’s fa-

mous words, is grounded on “ ‘comity,’ that is, a proper

respect for state functions, a recognition of the fact that

the entire country is made up of a union of separate

state governments, and a continuance of the belief that

the National Government will fare best if the States

and their institutions are left free to perform their sep-

arate functions in their separate ways.” Younger, 401

U.S. at 44. The Younger doctrine thus reflects the

Court’s conclusion that federal interference with state

2? But it is not, perhaps, as rare as petitioner and the Solicitor

General suggest. See generally Shapiro, Jurisdiction and Discre-

tion, 60 N.Y.U.L. Rev. 543 (1985).

7

proceedings “not only ‘unduly interfere{s] with the le-

gitimate activities of the Stat{e],’ Younger, [401 U.S.]

at 44, but also ‘can readily be interpreted “as reflecting

negatively upon the state court’s ability to enforce con-

stitutional principles.”’” Juidice v. Vail, 430 U.S. 327,

336 (1977) ‘quoting Huffman v. Pursue, Ltd., 420 U.S.

592, 604 (1975)). Burford abstention, first articulated

in Burford v. Sun Oil Co., 319 U.S. 315 (1943), is based

on similar “grounds of comity with the States when the

exercise of jurisdiction by the federal court would dis-

rupt a state administrative process.” County of Alle-

gheny v. Frank Mashuda Co., 360 U.S. 185, 189 (1959).

The decisions below are entirely unexceptional applica-

tions of both doctrines.

I. YOUNGER ABSTENTION IS PROPER IN THIS

CASE

The prerequisites to Younger abstention have become

familiar. Under Younger and its progeny, federal courts

should decline jurisdiction when they are asked to take

action that will interfere with “{1] state administrative

proceedings in which [2] important state interests are

vindicated, so long as [3] in the course of those pro-

ceedings the federal plaintiff could have a full and fair

opportunity to litigate his constitutional claim.” Dayton

Christian Schools, 477 U.S. at 627. See Middlesex County

Ethics Comm. v. Garden State Bar Ass’n, 457 U.S. 423,

432 (1982). If these three elements are present, a fed-

eral court may decline to abstain only if the case in-

volves a challenge to a statute that “is flagrantly and

patently violative of express constitutional prohibitions in

every clause, sentence and paragraph, and in whatever

manner and against whomever an effort might be made

to apply it” (Moore v. Sims, 442 U.S. 415, 424 (1979)

(citations and internal quotation marks omitted)), if

state enforcement authorities are acting in bad faith, or

in other undefined “extraordinary” circumstances. See

id. at 433; Juidice, 430 U.S. at 338-339. We address

these elements of the Younger test in turn.

A. The Younger Prerequisites Have Been Met In This

Case

i. Neither petitioner nor the Solicitor General denies

that the first and third of the Younger prerequisites are

present here. Nor could they. While the Younger doc-

trine was developed to preclude interference with state

courts, the Court has made it clear that Younger’s prin-

ciples also apply to state administrative proceedings that

have a judicial aspect. See Dayton Christian Schools, 477

U.S. at 627; Middlesex County Ethics Comm., 457 U.S.

at 432. Both courts below properly held that the pro-

ceedings before respondent, with review in the state

courts, were judicial in nature. See Pet. App. 20A, 28A

n.8.° In any event, there currently are three suits in-

volving respondent’s order—including petitioner’s own

challenge—pending in state court. By the same token,

petitioner will have ample opportunity to litigate its pre-

emption claim during the course of those judicial pro-

ceedings; claims very similar to petitioner’s are routinely

resolved by state courts. See Nantahala Power & Light

Co. v. Thornburg, 476 U.S. 953, 964-966 (1986). Indeed,

petitioner had an opportunity to raise its federal argu-

ments in the administrative proceedings, where respond-

ent carefully considered the preemption question and

tailored its order to avoid inconsistency with FERC’s de-

cision. See J.A. 23-24, 52-61.

2. Petitioner does maintain (Br. 28-32) that respond-

ent is unable to establish the second Younger prerequi-

site: the presence of an “important” state interest. In

petitioner’s view, the only state interest asserted here

is respondent’s “adjudicatory interest in having its state

* “Of course, if state law expressly indicates that the administra-

tive proceedings are not even ‘judicial in nature,’ abstention may

not be appropriate.” Dayton Christian Schools, 477 U.S. at 628

n.2, citing Hawaii Yousing Authority v. Midkiff, 467 U.S. 229

(1984). But both courts below—which are familiar with Louisiana

law—-concluded that “[t}he Council proceeding, followed by the

opportunity for state review, * * * constitutes an ongoing judicial

proceeding.” Pet. App. 20A. See id. at 28A n.8.

court resolve federal issues” (Br. 29), which petitioner

contrasts with what it describes as a “legitimate sub-

stantive state interest” (Br. 30). This contention, in our

view, is grounded on a misunderstanding both of the

Younger doctrine and of respondent’s real concerns here.

At the outset, we take issue with petitioner’s premise:

protecting the integrity of the adjudicatory process—

here, the process of state court judicial review of ad-

ministrative determinations—is an important state inter-

est. While the Court has not yet held that Younger ab-

stention is necessary whenever parallel proceedings are

pending in state and federal court (see, €.g., Pennzoil,

481 U.S. at 14 n.12), it has indicated that certain ad-

judicatory interests are themselves “important” within

the meaning of Younger; abstention is appropriate to

forestall federal interference with state judicial proceed-

ings that would “prevent[] the state not only from ef-

fectuating its substantive policies, but also from continu-

ing to perform the separate function of providing a

forum competent to vindicate any constitutional objec-

tions interposed against those policies.” Huffman, 420

U.S. at 604 (emphasis added). It is, of course, this con-

sideration that motivated the Court’s holdings in Penn-

zoil and Juidice, which respectively held abstention ap-

propriate in actions to enjoin execution of a state civil

judgment and a judgment of contempt. See 418 U.S. at

12-13; 430 U.S. at 335-336. To the State, using its own

courts for the review of administrative decisions is an

equally important adjudicatory concern—one important

enough, as we explain below (at 22-23), to serve as the

principal justification for Burford abstention.

In any event, petitioner entirely disregards the existence

of a central, substantive state concern in this case: re-

spondent’s interest in establishing fair and reasonable rates

for the consumers of electric power. The Court itself re-

cently observed that “the regulation of utilities is one of

the most important of the functions traditionally associ-

ated with the police power of the States” (Arkansas Elec-

10

tric Cooperative Corp. v. Arkansas Public Service Comm'n,

461 U.S. 375, 377 (1983); “[t}he State’s concern that

rates be fair and efficient represents a clear and substan-

tial governmental interest.” Central Hudson Gas & Elec-

tric Corp. v. Public Service Comm'n, 447 U.S. 557, 569

(1980). Cf. Consolidated Edison Co. v. Public Service

Comm’n, 447 U.S. 530, 549-550 (1980) ( Blackmun, J.,

dissenting) ; Frost v. Corporation Comm'n, 278 U.S. 515,

534-535 (1929) (Brandeis, J., dissenting). For its part,

Congress has recognized the importance of these concerns,

showing in the Federal Power and Natural Gas Acts a

“constant purpose to protect rather than to supervise

authority of the states.” Connecticut Light & Power Co.

v. Federal Power Comm’n, 324 U.S. 515, 525 (1945).*

See Interstate Natural Gas Co. v. Federal Power Comm'n,

331 U.S. 682, 690 (1947) ; Federal Power Comm'n v. Hope

Natural Gas Co., 320 U.S. 591, 612 (1944). See also

Mississippi Power & Light Co. v. Mississippi ex rel.

Moore, 108 S.Ct. 2428, 2447, 2449 (1988) (Brennan, J.,

dissenting). Indeed, Congress enacted those statutes not

to deprive States of ratemaking authority but to close the

regulatory gap created by this Court’s holdings that the

Commerce Clause prohibited the States from regulating

the interstate sale of power. See Arkansas Electric, 461

U.S. at 377-380; Connecticut Power, 324 US. at 526-

527.

By any measure, the regulation of utilities ranks in

importance with the other substantive interests that the

Court’s decisions have established as “vital” within the

meaning of Younger: regulation of attorneys (Middlesex

County Ethics Comm. v. Garden State Bar Ass'n, supra) ;

restriction of pornographic theaters (Huffman v. Pursue,

Ltd., supra) ; elimination of sex discrimination (Ohio Civil

Rights Comm’n v. Dayton Christian Schools, supra) ; pre-

4The Court has interpreted the Federal Power and Natural

Gas Acts as “ ‘in all material respects identical.’” Arkansas Lowi-

siana Gas Co. v. Hall, 453 U.S. 571, 577 n7 (1981) (quoting

Federal Power Comm'n wv. Sierra Pacific Power Co., 350 US. 348,

353 (1956) ).

ll

vention of child abuse (Moore v. Sims, supra) ; and other

“important state policies such as safeguarding the fiscal

integrity of [public assistance] programs.” Trainor v.

Hernandez, 431 U.S. 434, 444 (1977); see id. at 448

(Blackmun, J., concurring). Ratemaking is a traditional

state function; the “economic aspects of electrical genera-

tion have been regulated for many years and in great

detail by the States.” Pacific Gas & Electric Co. v. State

Energy Resources Conservation & Development Comm’n,

461 U.S. 190, 206 (1983) (footnote omitted).® And that

regulation has a far more profound effect on the lives of a

far greater number of people than, for example, the disci-

plining of attorneys or the regulation of obscenity. In-

deed, in this case respondent heard testimony that the

rate increase sought by petitioner would have led to the

elimination of thousands of jobs and the impoverishment

of thousands of families in New Orleans. J.A. 21 & n.2.

These concerns are plainly important enough to satisfy

the second Younger prerequisite.

B. The Exceptions To Younger Abstention Do Not

Apply

1. Finding that federal involvement would disrupt im-

portant state proceedings normally would be the end of

the Younger inquiry. But petitioner asserts (Br. 35-38)

that abstention is improper here because respondent’s or-

der is inconsistent with this Court’s decision in Missis-

sippi Power. That asserted inconsistency, petitioner

maintains, brings into play the Younger exception for

challenges to “flagrantly and patently” unconstitutional

statutes (Br. 35 n.41). Underlying this argument is pe-

titioner’s contention that Younger abstention is inap-

propriate when a federal court is asked to determine that

“a state proceeding or order * * * is invalid on its face”

(Br. 35). Again, however, we take issue both with pe-

5 Many States had created commissions to regulate electric utili-

ties as early as 1920. and every State now has such a regulatory

body. Pacific Gas & Electric, 461 U.S. at 206 n.17. With the excep-

tion of a brief interlude, respondent has regulated petitioner since

1922. Pet. App. 22A.

12

titioner’s legal premise and with its application of that

premise to the record here.

First, in our view, the Younger exception is not ap-

plicable when federal court intervention is sought be-

cause a state administrative order or trial court de-

cision, rather than a statute, is said to be “patently un-

constitutional.” If federal courts are not required to

abstain in such circumstances, they could pretermit state

lawsuits whenever a state agency or trial court made

what was purported to be a plain error of federal law,

a result that would be extraordinarily disruptive of the

State’s adjudicative process. That result also would be

singularly inappropriate because it typically is “a judi-

cial systom’s appellate courts which are by their nature

a litigant’s most appropriate forum for the resolution of

constitutional contentions.” Huffman, 420 U.S. at 609.

And it would fly in the face of Younger’s principal aim:

giving “the State an opportunity to ‘set its own house

in order’ when the federal issue is already before a state

tribunal.” Ohio Bureau of Employment Services v.

Hodory, 431 U.S. 471, 479-480 (1977).

Indeed, if it is true that respondent’s order is plainly

inconsistent with federal law (a point we discuss below),

federal intervention is unnecessary; the more patently

incorrect the administrative decision, the likelier it is

that the state courts will detect and correct the illegality."

Petitioner’s rule, moreover, would require the federal

courts to resolve the merits of claims that are ongoing in

state court before deciding to abstain, a wasteful and

duplicative process that is illustrated by the heated ar-

guments exchanged by the parties here about the merits

of respondent’s decision.‘

®‘Cf. P. Bator, D. Meltzer, P. Mishkin & D. Shapiro, Hart &

Wechsler’s The Federal Courts and the Federal System 1403 (3d

ed. 1988) (“Isn't it a particular insult to the state courts to sug-

gest that they will be unable to detect patent unconstitutionality

in state statutes?”).

7As the court of appeals explained, “|wjhen a federal court

decides to abstain, it does not decide to keep federal hands off

13

2. Having said this, we feel bound to accept petition-

er’s invitation to discuss the substance of the preemption

claim: we think it clear that petitioner’s submission on

the merits is grossly overstated, and that it is at worst

an open question whether respondent’s order is preempted

by FERC’s determinations in the Grand Gulf proceed-

ing. In Mississippi Power, upon which petitioner prin-

cipally relies, the Court concluded that FERC had im-

plicitly settled the propriety both of the decision to con-

struct Grand Gulf I and of the agreements between par-

ticipants in the Middle South Utilities, Inc. (MSU) sys-

tem. See 108 S.Ct. at 2434-2435, 2441. The Court there-

fore held that a state utility commission could not re-

consider the prudence of the system-wide agreements, of

the FERC-ordered allocations of Grand Gulf power, or

of a utility’s decision to be a party to the construction

and operation of Grand Gulf I. See id. at 2441.

Because the state court in Mississippi Power had or-

dered a state commission to consider the prudence of the

decision to construct Grand Gulf I (se id. at 2347) and

therefore sought “to permit the State to set rates based

on an assumption that [the utility] is obligated to pur-

chase less Grand Gulf power than FERC has ordered it

to purchase” (id. at 2439), the Court held that the state

ruling was inconsistent with FERC’s order. See id. at

2440. “[{I]t obviously cannot be unreasonable,” the Court

held, “for |the utility] to procure the particular quantity

of high-priced Grand Gulf power that FERC has ordered

it to pay for.” Jbid. At the same time, however, the

Court recognized that it might be unreasonable for a

utility to obtain high-cost power—even at a FERC-

approved rate—if the utility were able to obtain substi-

only so long as the state agency behaves as the court thinks proper.

Instead, it decides not to interfere at all, leaving to the state

agency, the state courts, and, ultimately, the United States Supreme

Court, the interpretation of both state and federal law and the

ultimate protection of the federal constitution.” Pet. App. 18A-

19A.

14

te low-cost power from an alternative source. See id.

- 2440; Nentahala, 476 U.S. at 972. See also id. at 967

(wholesale and retail rates may diverge if costs other

-than those “resulting from the purchase of FERC-

regulated power or gas were to decrease’”’).

In this case, respondent challenged neither the alloca-

tion of Grand Gulf power to petitioner nor the prudence

of the decision to construct Grand Gulf I, the points that

this Court’s opinion in Mississippi Power held to have

been resolved by FERC. To the contrary, respondent’s

Prudence Resolution “expressly stated that ‘(t]he Coun-

cil will not seek to invalidate any of the agreements sur-

rounding Grand Gulf I or to order NOPSI to pay MSU

a rate other than that approved by the FERC.’ "a A. 54.

And respondent’s order expressly disclaimed any inten-

tion to “adopt a different allocation formula as the basis

for retail rates than that adopted by the FERC for whole-

sale rates,” explaining that “such an action would * is

violate the Supremacy Clause.” J.A. 58. Indeed, while

respondent in fact held the view that petitioner's com-

mitment to Grand Gulf I was imprudent, it explained

that, “{blecause of the FERC’s determination, which

legally established NOPSI’s share of Grand Gulf I, we

do not * * * alter or interfere with that allocation or base

any monetary remedy on the foregoing finding of im-

prudence.” J.A. 23.

Instead, respondent concluded that petitioner's man-

agement, had it been prudent, would have recognized in

1979-1980 the difficulties and potential expense associated

with the production nuclear plants, and “sought to limit

its risk by selling all or part of its share off-system.

NOPSI could then have purchased less expensive coal-

fired capacity to meet its future needs.” J.A. 25. Re-

spondent reasoned that “NOPSI could have stood by its

commitment to take and pay for Grand Gulf I power as

required by the System and ultimately determined by

the FERC, but should have reduced its risks by making

power sales of that portion of its commitment which

15

exceeded a 9 percent share of Grand Gulf.” * Respondent

emphasized that the resulting reduction in costs would

follow “from an offset to such costs and not from a re-

jection of the FERC’s allocation of them.” Jd. at 25. See

Pet. App. 8A-9A, 244A.

Because respondent’s decision (unlike the order of the

Mississippi Supreme Court at issue in Mississippi Power)

questions the prudence neither of the allocation of Grand

Gulf power within the MSU system nor of the wholesale

rate set by FERC, the Mississippi Power decision is not

plainly dispositive.’ Indeed, had respondent found that

petitioner were now in fact able to sell expensive Grand

Gulf power off-system and replace it with cheaper power

obtained elsewhere, it plainly would have been consistent

with Mississippi Power and Nantahala for respondent to

have held that a failure to do so was imprudent. While

it may no longer be possible for petitioner to engage in

* Petitioner (Br. 14, 37) and the Solicitor General (Br. 18 n.8)

take issue with the eight percent disallowance. But w'.» number

was not selected randomly. While respondent suggested that peti-

tioner might reasonably have disposed of all of its Grand Gulf

power, it was willing to assume, “based on expert testimony in the

record,” that petitioner could prudently “have retained a portion of

Grand Gulf I relative to its comparative size within the MSU

system —that is, about 9 percent of the system’s Grand Gulf I obli-

gation.” J.A. 25. Because petitioner is obligated to accept 17% of

Grand Gulf I’s output, respondent found the eight percent dis-

allowance appropriate.

* Petitioner asserts that it could not have been held imprudent

“for failing to avoid its Grand Gulf allocation unless the allocation

was itself unreasonable” (Br. 36). But that is not so: the con-

clusion that petitioner should have cushioned its risk by arranging

to sell some Grand Gulf power off-system says nothing about the

reasonableness of the allocation between MSU system participants.

Petitioner also reads Mississippi Power and Nantahala for the

proposition that States may not base prudence determinations on

steps that utilities should have taken to reduce costs in the past

(Br. 37 n.43\. The cited pages of those opinions, however, indicate

only that “States may not alter FERC-ordered allocations of power

by substituting their own determinations of what would be just and

fair.” Mississippi Power, 108 S.Ct. at 2438. See Nantahala, 476

U.S. at 955.

16

such a transaction, the question here is whether respond-

ent may find petitioner’s failure to do so in 1979-1980—

when it may well have been possible ’—to have been

imprudent. That question is not addressed in Mississippi

Power. And however the courts ultimately answer it, the

answer should not come in an offhand manner during

the course of a federal court’s abstention analysis.

C. The Court Should Not Create A Special Exception

To Younger For Preemption Claims

Petitioner also argues for something that amounts to

an entirely new exception to Younger: it contends that

abstention is inappropriate whenever the federal claim is

one of preemption (Br. 32-34). Petitioner’s reasoning,

as we understand it, is that a preemptive federal law

would deny jurisdiction over the subject matter to a state

administrative tribunal, thus depriving the State of any

legitimate interest in conducting the pending proceeding

(Br. 32). Any such contention, however, is squarely fore-

closed by this Court’s precedents. Dayton Christian

Schools, upon which petitioner relies, is in fact one of

the cases in which the Court has “repeatedly rejected the

argument that a constitutional attack on state procedures

themselves ‘automatically vitiates the adequacy of those

procedures for purposes of the Younger-Huffman line of

cases.” 477 U.S. at 628 (quoting Moore, 442 U.S. at

!” Petitioner appears to suggest a finding by “the lower courts”

that such a transaction would not have been possible in 1979-1980

(Br. 37). While the district court expressed skepticism on the

point, it plainly made no such finding, and in fact noted that peti-

tioner’s president had testified in 1980 that petitioner could sell

Grand Gulf power off-systern (see Pet. App. 30A & n.11); for its

part, the court of appeals did not address the factual issue at all.

This issue should, of course, be resolved in petitioner’s pending

state court lawsuit challenging respondent's order as, among other

things, based on clearly erroneous findings of fact. Needless to

say, the pendency of a state suit involving factual claims that are

related to and could obviate the federal issues, particularly constitu-

tional issues like preemption, counsels restraint by the federal

courts.

17

427 n.10). See 17A C. Wright, A. Miller & E. Cooper,

Federal Practice & Procedure § 4255 at 259 (1988).

In any event, petitioner is incorrect in asserting that

respondent lacks either jurisdiction over or an interest

in the rate proceedings."' The proceeding in this case was

initiated to settle intrastate retail rates, a matter that

is squarely within respondent’s jurisdiction. In the course

of that—or any—rate proceeding, respondent was obli-

gated to determine which cost factors had to be disre-

garded as a matter of federal law. Indeed, as the court

of appeals explained, the filed rate doctrine was developed

for precisely that reason, “to ensure the supremacy of

FERC’s orders in state as well as federal proceedings.”

Pet. App. 14A. If respondent errs in its interpretation

of its FERC-imposed obligations, that mistake, like any

other error of federai Statutory or constitutional law,

may be remedied on appeal to the state courts. See Nan-

tahala, 476 U.S. at 964-966 (citing cases in which state

courts applied the filed rate doctrine to set aside the deci-

sions of state utility commissions) .

Abstention thus does not amount to a decision on the

merits, as petitioner argues (see Pet. Br. 32), when the

federal claim is one of preemption. Petitioner evidently

intends to suggest that a federal court may abstain only

when the State has an important interest in the proceed-

ing, that the State’s interest cannot be important if the

preemption claim is valid, and that a decision to abstain

therefore necessarily implies a finding that the preemp-

tion claim is insubstantial. We note that this analysis

hardly serves to distinguish preemption from other fed-

—=- —-_—_ —

'! While petitioner puts its argument in terms of jurisdiction,

this is not a case like, for example, one involving the Double

Jeopardy Clause (compare Abney v. United States, 431 U.S. 651

(1977) ), where simply subjecting a party to a particular proceed-

ing denies that party its federal rights. Here, respondent has

undoubted authority to subject petitioner to a proceeding designed

to set intrastate rates. Petitioner’s real complaint is with the

merits of respondent's rate order.

18

eral constitutional claims; under petitioner’s analysis, the

State does not have a legitimate interest in, for example,

enforcing nuisance regulations that are asserted to violate

the First Amendment (as was alleged in Huffman), al-

though abstention nevertheless repeatedly has been held

proper in the face of such claims. But petitioner's argu-

ment misses a broader point. The State’s underlying inter-

est (here, setting retail rates; in Huffman, regulating nuis-

ances) remains legitimate and substantial ; if petitioner

is correct on the merits of its preemption argument, re

spondent simply made an error in its effectuation of that

interest. Indeed, under petitioner’s analysis, it is the

decision not to abstain that requires resolution of the

merits, for the State is deprived of its interest in the

proceeding only if its action is preempted. A decision to

abstain does not require any consideration of the merits ;

the federal court need find only that the federal claim

may be presented to a competent state court.

In fact, there is nothing magic in a claim of preemption

__which is, of course, a Supremacy Clause claim that is

grounded on the asserted inconsistency of state action

with a federal statute—that distinguishes such a claim

from other constitutional claims for abstention purposes.

Cf. Lake Carriers’ Ass’n v. MacMullan, 406 U.S. 498,

510-512 (1972) (Pullman abstention warranted in the

face of a preemption claim). Surely there is no reason

to presume that state judges, who are bound by Article

VI of the Constitution to enforce federal statutes, will

be less willing to vindicate federal statutory than fed-

eral constitutional rights. See generally Huffman, 420

U.S. at 611. Surely federal statutory rights are not more

“important” in comity terms to the federal Government

than are rights created directly by the federal Constitu-

tion. And surely the federal interest in the effectuation

of federal constitutional rights—an interest that is re-

flected not only in th Constitution itself but also in Con-

gress’s enactment of 42 U.S.C. § 1983—is no weaker

than its interest in the vindication of statutorily created

—#-!

19

programmatic concerns."* A special rule for preemption

cases accordingly is unnecessary.

D. The Solicitor General’s Arguments Do Not Justify

A Refusal To Abstain Under Younger

The Solicitor General’s Younger arguments are note-

worthy principally because they fail to overlap at even

a single point with petitioner’s analysis. While the Solici-

tor General must get credit for creativity and candor,

we believe that his arguments are ultimately inconsistent

with this Court’s precedents.

The Solicitor General initially contends that the no

tions of comity underlying Younger are due little respect

in this case; pointing to petitioner’s participation with

other utilities in a multi-state common pool, the Solicitor

General suggests that “the interests of several states are

at odds” in this “inherently interstate dispute” (Br. 21).

Despite the Solicitor General’s disclaimer (ibid.), we

note that this analysis makes sense only on the assump-

tion that state courts cannot be trusted to recognize the

legitimate interests of sister States, a proposition that

surely “‘reflect[s] negatively upon the state court’s abil-

ity to enforce constitutional principles.” Huffman, 420

U.S. at 604." But however that may be, the short

"2 The Solicitor General suggests (Br. 22) that certain pre-

emption claims may be unsuitable for resolution by the state courts

because they turn on an understanding “of a complex federal regu-

latory scheme.” But even granting the dubious proposition that

statutory claims are more difficult than constitutional ones, there

is no reason to suppose that the federal courts have an expertise

superior to that of the state courts in resolving claims under the

Federal Power Act in general and the filed rate doctrine in par-

ticular. Indeed, the state courts, which routinely review challenges

to the orders of state utility commissions (see page 8, supra),

may well be the superior fora for the resolution of such claims.

The district judge below was himself “confident that Louisiana's

state courts are more than competent to handle any federal question

presented.” Pet. App. 27A.

13 Indeed, the regulatory interest in Burford itself was strikingly

similar to that in this case: the rights to oil at issue there were

developed by the Texas Railroad Commission “in cooperation with

answer to the Solicitor General’s argument is that this

is a an interstate dispute. Respondent disturbed nei-

ther FERC’s allocation of Grand Gulf power within the

MSU system nor the interstate wholesale rates to be

paid by petitioner; respondent’s administrative proceed-

ing concerned only intrastate retail rates, and addressed

the simple question whether certain of petitioner's costs

would be absorbed by petitioner rather than by its in-

state retail customers. This is a wholly intrastate ques-

tion that has no conceivable bearing on the interests of

other States—a conclusion that is borne out by the fail-

ure of any of the purportedly affected States to file in

opposition to respondent."*

The Solicitor General also suggests that the nature of

the proceeding here makes Younger abstention inappro-

priate, noting that petitioner sought declaratory relief

rather than an injunction against the pending state ju-

ia oil producing States” as part of the Interstate Oil Compact

Commission. 319 U.S. at 320-321 & n.12.

14 icitor General more ambitiously offers a multi-part

is oy which he derives the conclusion that Seem

is improper here because (1) the federal claim would be disposi -

of the merits of the lawsuit; (2) there are no unresolved threshol

issues of state law; and (3) there are “multi-state interests” in

this case (Br. 22-23). But the first and second of these factors

were present in many of this Court’s decisions under Younger.

See, e¢.g., Dayton Christian Schools ; Middlesex County Ethics

Comm.; Juidice; Huffman. And as we explain in text, the third

factor, even if relevant, is simply not present in this case. The

Solicitor General also notes that parties may no longer appeal to

this Court from state courts as a matter of right when state stat-

utes are upheld against constitutional attack (Br. 22 n.15). bay

Act of June 27, 1988, Pub. L. No. 100-532, §§ 1, 7, 102 Stat. :

664. The Court has made it clear, however, that the existence “

such a right is not an essential element of Younger abstention :

“quite apart from appellee's right to appeal [to this Court) he

remained in state court, we conclude that it should not be permi '

the luxury of federal litigation of issues presented by —

state proceedings, a luxury which, as we have already explained,

is quite costly in terms of the interests which Younger seeks to

protect.” Huffman, 420 U.S. at 605-606.

21

dicial proceedings; “|t)he sole impact of the federal

court’s ruling would be its res judicata effect” which, the

Solicitor General states, “is not in itself enough to war-

rant abstention” (Br. 25). In fact, however, this Court

has made it clear that abstention is in order when the

party seeking federal relief requests a declaratory judg-

ment, since “the declaratory relief alone has practically

the same practical impact as a formal injunction would.”

Samuels v. Mackeil, 401 U.S. 66, 72 (1971). See Deak-

ins v. Monaghan, 108 S.Ct. 523, 533 (1988) (White, J.,

concurring). See also Shapiro, Jurisdiction and Discre-

tion, 60 N.Y.U.L.Rev. 543, 582 (1985) (footnote omitted)

(“questions of federalism arise in contexts other than a

prayer for a federal court injunction against a state pro-

ceeding. Such questions are also raised, for example, by

the existence of parzllel state and noninjunctive federal

proceedings’’).

In a related vein, the Solicitor General suggests that

petitioner “should not be deemed to have triggered

Younger abstention” by filing a suit for review of re-

spondent’s order in state court (Br. 26). Whether and

when petitioner chose to file its state suit, however—and

6“ ‘Ts the declaration contemplated here to be res juad cata, so

that the [state court] cannot hear evidence and decide any matter

for itself? If so, the federal court has virtually lifted the case

out of the State [court]! before it could be heard. If not, the fed-

eral judgment serves no useful purpose as a final determination

of rights.” Samuels, 401 U.S. at 72 (quoting Pwhlic Service

Comm'n Vv. Wycoff Co., 344 U.S. 237, 247 (1952)). The Solicitor

General contends (Br. 25) that requiring abstention in cases

seeking declaratory relief would make abstention mandatory when-

ever parallel proceedings are pending in state and federal court.

In fact, however—-as the Solicitor General implicitly acknowledges

(Br. 25 n.20)—the limiting principle adopted by the Court involves

not the type of relief sought but the importance of the state inter-

est at issue. See Pennzoil, 481 U.S. at 14 n.12. We also note that

petitioner did seek to enjoin respondent's order, a request that,

if granted, would have pretermitted the state court's consideration

of the right to interim relief—an important part of the ongoing

state proceeding. Cf. id. at 14. See also Alabama Public Service

Comm'n v. Southern Ry. Co., 341 U.S. 341, 349 (1951).

22

nature of any other pending suits (see Br. 25-26)"

7 simply irrelevant here. A party that takes issue

with a state trial court (or, as in this case, administra-

tive) determination may not simply decide to forgo the

use of state appellate procedures: “a necessary concom-

itant of Younger is that a party in [petitioner s] posture

must exhaust his state appellate remedies before seeking

relief in the District Court.” Huffman, 420 US. at 608.

Petitioner “had available the remedy of appeal” in state

court, and that is enough to make Younger abstention , 3

propriate. Jd. at 610. See also Pennzoil, 481 US. at 1

n.13, 15; Moore, 442 U.S. at 425; Juidice, 430 U.S. at

337.

IL BURFORD ABSTENTION IS PROPER IN THIS

CASE

Burford abstention is appropriate “in situations In

aan oe exercise of jurisdiction by a federal court

would disrupt a state administrative process. Zwickler

»v. Koota, 389 U.S. 241, 256 (1967) (Harlan, J., concur-

ring in the judgment). See Colorado River Water Con-

servation District v. United States, 424 U.S. 800, 814

(1976). Petitioner is incorrect in asserting (Br. 22, 23)

that the existence of an unsettled issue of state law is a

prerequisite to Burford abstention; it is interference with

state processes of regulation and with the formulation of

state regulatory policy that is central.” The point was

16 The Solicitor General suggests (Br. 25-26) that none of the

pending state judicial proceedings implicates important state a

ests. As we explain above, however, ratemaking is a vital sta

concern, and the State has a compelling interest in seeing its —_

perform what the district court described as their function °

“assessing and formulating state policy” with regard to utilities

(Pet. App. 27A). ine

1 Quoti rom Colorado River, petitioner states u

Prtinnny 4 poets only when a case involves difficult coreg

of state law and federal review would disrupt the development

coherent state policy (Br. 22). Quoting virtually identical language

from the same opinion, the Solicitor General states that —

is proper under Burford when the case involves difficult quest _

of state law or federal review would disrupt the development

settled in Alabama Public Service Comm’n v. Southern

Ry. Co., 341 U.S. 341 (1951), which involved a challenge

to a regulatory decision of the state public service com-

mission. This Court acknowledged that there were no

344 &

n.5; see P. Bator, D. Meltzer, P. Mishkin & D. Shapiro,

Hart & Wechsler’s The Federal Courts & T.

System 1365 (3d ed. 1988)), and the only ground on

which the order was challenged in federal court was its

asserted inconsistency with the Due Process Clause of

the federal Constitution. See 341 U.S. at 346-347; 91

F.Supp. 980, 986-987, 995. The Court nevertheless held

abstention appropriate “‘so as to avoid needless obstruc-

~ tion of the domestic policy of the states’” (341 U.S. at

ground that the issues in the case were entirely federal.

See 341 U.S. at 355, 359-362 (Frankfurter, J., concur-

ring in the result). Indeed, Justice Frankfurter read

Alabama Public Service Comm’n as effectively holding

that “hereafter no federal court should entertain a suit

against any action of a state agency” so long as judicial

review is available in the state courts. Jd. at 362 ( Frank-

furter, J., concurring in the result) ."*

coherent state policy (Br. 16). The Solicitor General’s reading of

Colorado River is correct. See 424 U.S. at 814 (emphasis added)

(“it is enough that exercise of federal review of the question in

a case and in similar cases would be disruptive of state efforts

to establish a coherent policy with respect to a matter of substan-

tial public concern”).

The Solicitor General suggests (Br. 19) that Alabama Public

Service Comm'n is inapplicable here because the federal Govern-

ment had no regulatory role in that case—which involved the

regulation of intrastate rai! service—comparable to the one played

here by FERC. But the authority of the Interstate Commerce

Commission under the scheme at issue in Alabama Public Service

Comm'n was strikingly similar to FERC’s authority in adminis-

tering the Federal Power Act. See 341 U.S. at 345-346. And the

authority of the States to regulate intrastate power rates under

the Federal Power Act is every bit as great as their authority over

intrastate transportation. See page 10, supra.

24

This case falls squarely within the rule of Alabama

Public Service Comm'n. Almost by definition, federal in-

volvement at this stage of the proceeding would disrupt

” Aluminum Co. of America v. Utilities Comm'n,

713 F.2d 1024, 1029 (4th Cir. 1983), cert. denied, 465

U.S. 1052 (1984). Choosing “among rate structures in-

volves difficult and important questions of economic sup-

ply and distributional fairness” (Central Hudson, 447

US. at 569); it is difficult to disagree with the court of

appeals’ recognition at an earlier stage of this proceeding

that, “{a}s with the regulatory scheme at issue in Bur-

of New Orleans, 798 F.2d 858, 862 (5th Cir. 1986), cert.

denied, 481 U.S. 1023 (1987).

The Solicitor General suggests (Br. 18-19) that the

here is not a predominantly local one. But the

tion of intrastate rates, as well as the considera-

t’s order (the behavior of

i J.A. 24-25)),

petitioner’s management in 1979-1980 (see

is entirely local in character. The related argument that

resolution of the i

consideration of “ ‘local factors’” (Br. 18 (quoting Ala-

bama Public Service Comm'n, 341 U.S. at 349)) assumes

that answering the federal question here will be a simple

matter of looking within the four corners of FERC’s

exam _ a prudence disallowance must be premised on

Saas that were possible in the marketplace (see, ¢9.,

Pet. App. 31A n.11)—that in turn may require analysis

both of the state law on prudence and of the factual

record. These questions should be answered by

—

25

that is sensitive to local concerns.’® “As adequate state

court review of an administrative order based upon pre-

dominantly local factors is available to [petitioner], in-

tervention of a federal court is not necessary for the

protection of federal rights.” Alabama Public Service

Comm’n, 341 U.S. at 349 (footnote omitted) .*°

In response to these points, petitioner argues princi-

pally that this Court “has repeatedly held Burford ab-

stention improper” when the challenge to a state regula-

tory decision “raises only federal claims” (Br. 23). The

cases that petitioner cites for this proposition—which is,

19 The Solicitor General also maintains (Br. 17) that any dis-

ruption to state policy from a finding of preemption would follow

from the congressional allocation of regulatory power. But this

argument confuses the merits with the abstention question. Cer-

tainly, if the Council ultimately is found to have exceeded its

regulatory authority, that holding will rest on congressional ac-

tion—just as a ruling against the regulator in Alabama Public

Service Comm'n would have turned on the meaning of the Due

Process Clause. It is the consideration and decision of the issue

by a court that is unfamiliar with local considerations that threat-

ens disruption to the state administrative scheme.

* Petitioner (Br. 26 n.28) and the Solicitor General (Br. 19

n.10) argue that the state courts here cannot be viewed as part of

the regulatory process because review of intrastate rate orders is

not concentrated in a single Louisiana court. But whether or not

concentrated, the nature of the administrative review here is iden-

tical to that characterized as “an integral part of the regulatory

process” under state law in Alabama Public Service Comm'n (341

U.S. at 348). See 17A C. Wright, A. Miller & E. Cooper, supra,

§ 4244 at 83 (labeling “too narrow” the assertion that Burford

abstention is proper only when administrative review takes place

in a specialized court). In any event, the intensely local nature of

the process of review is in fact emphasized by the Louisiana

scheme. While orders of the Louisiana Public Service Commission,

which regulates most state utilities, are reviewable by a state

district court sitting in Baton Rouge (sce La. Rev. Stat. Ann.

ch. 45, § 1192 (West 1982)), the Commission has no jurisdiction

over utilities that, like petitioner, are regulated by the governing

authority of a political subdivision. La. Const. art. 4, § 21(C)

(West 1977). Review of respondent’s rate orders is accordingly

conducted by local courts that are, in contrast with courts sitting

in Baton Rouge, especially familiar with local conditions.

26

in any event, inconsistent with Alabama Public Service

Comm’n—do not support it. The Court’s decision in

Public Utilities Comm’n v. United Fuel Gas Co., 317

U.S. 456 (1943), upon which petitioner heavily relies

(Br. 24), was rendered prior to the reargument and de-

cision in Burford, and therefore could hardly have con-

tained even an implicit holding that Burford abstention

was inapplicable in a challenge to the regulatory proceed-

ing involved.* The Court’s refusal to abstain in McNeese

v. Board of Education, 373 U.S. 668 (1963) (cited at

Pet. Br. 23), was motivated at least in part by doubts

that the state administrative remedy was adequate to

effectuate federal rights. See 373 U.S. at 674-676. In

addition, McNeese involved a claim of racial discrimina-

tion brought under 42 U.S.C. § 1983, for which use of a

federal forum was deemed particularly appropriate. See

973 US. at 671-673. Public Utilities Comm'n v. United

21 Indeed, Justice Black, the author of the Court’s opinion in

Burford, vigorously dissented in United Fuel (see 317 U.S. at

470): the author of the Court’s opinion in United Fuel, Justice

Frankfurter, issued a vigorous dissent in Burford (see 319 U.S. at

226). Justice Frankfurter offered an equally vigorous separate

opinion in Alabama Public Service Comm'n, suggesting that the

Court there departed from prior practice by ordering abstention

in a case that involved only issues of federal law. See 341 U.S. at

355-356, 362 (Frankfurter, J., concurring in the result). This

strongly suggests that the limitations on abstention that petitioner

draws from United Fuel, even if present in the case, are no longer

good law. In any event, the preemption claim in United Fuel was

not, as petitiener maintains (Br. 24), identical to the one in this

case. While the investigation there was commenced in the con-

text of a retail ratemaking, it involved the utility commission’s

explicit assertion of jurisdiction over wholesale interstate rates.

See 317 U.S. at 458, 461, 465. Here, of course, respondent has made

no such assertion. In addition, the Court’s decision in United Fuel

to resolve an issue of local law was motivated in large part by

its conclusion that the litigation—which had been commenced in

district court in 1935 and not resolved by that court until 1942—

“has already been in the federal courts an inordinately long time,”

so that “considerations of equity require that the litigation be

brought to an end as quickly as possible.” Jd. at 463; see id. at

460-461 & n.?.

27

States, 355 U.S. 534 (1958), upon which petitioner also

relies (Br. 24), does not discuss Burford abstention. In

any event, the case involved an action by the United

States brought in anticipation of a state enforcement

proceeding (see 355 U.S. at 536-539), in a setting in

which the state agency might not have entertained the

federal claim (see id. at 539-540).

Finally, petitioner (Br. 25-26) and the Solicitor Gen-

eral (Br. 17, 18-19) repeat their contentions that absten-

tion is inappropriate in cases where preemption is as-

serted. Again, we fail to see why state courts should

be presumed competent to resolve federal constitu-

tional, but not statutory, claims. In any event, petitioner

and the Solicitor General fail to recognize that every

preemption claim involves not only a federal interest

that is said to have a preemptive effect, but also a state

interest that is said to be preempted. That state interest

gives the state courts both a familiarity with the issues

and a concern for reaching the proper outcome that is

every bit as great as that of the federal courts.

_The flip sides of the preemption inquiry are plainly

visible here. The Federal Power Act was enacted both

to grant the federal Government authority to regulate

the interstate sale of power and to exclude the federal

Government from the regulation of intrastate sales: “it

could not be plainer that the statutes at issue were de-

signed to confine the scope of FERC’s jurisdiction by

prohibiting FERC from regulating matters within the

sphere of authority States had to regulate retail utilities

under our old Commerce Clause cases.” Mississippi

Power, 108 S.Ct. at 2447 (Brennan, J., dissenting). See

generally Interstate Natural Gas Co., 331 U.S. at 690;

Connecticut Light & Power, 324 U.S. at 525. The state

interests are thus manifest in the federal statute itself.

In such circumstances, the federal courts should not pre-

vent the state courts from completing the normal admin-

istrative process.

28

lll. THE COURTS BELOW SHOULD NOT SUBSTITUTE

THEIR JUDGMENT FOR THAT OF THE STATE

COURTS IN DETERMINING THE AVAILABILITY

OF PRELIMINARY RELIEF

In a final attempt to embroil the federal courts in this

dispute, petitioner (Br. 28.39) and the Solicitor Gen-

eral (Br. 27-30) argue that, even if abstention is other-

wise appropriate, the district court should have deter-

mined the availability of preliminary injunctive relief.

But nothing in this Court’s decisions supports the creation

of such a hybrid action, in which the preliminary litiga-

tion would proceed in one forum while the litigation pro-

ceeding toward the final judgment on the merits would

move forward in another.”

To the contrary, the Court’s disposition of the federal

claims in Doran v. Salem Inn, Inc., 422 U.S. 922 ( 1975),

suggests that a special exception to the abstention rules

should not be created for preliminary relief. In Doran,

three operators of bars (Salem, Tim-Rob, and M & L)

brought suit in federal court to vhallenge the constitu-

tionality of a ban on topless dancing, seeking a temporary

restraining order, preliminary injunctive relief, and a

declaratory judgment. See id. at 924-925. Because there

were no pending state proceedings involving Salem and

Tim-Rob, this Court held that the district court had

properly declined to abstain in their actions; the Court

went on to affirm the district court’s award of preliminary

injunctive relief to Salem and Tim-Rob because the bars

faced the prospect of irreparable injury in the form of

22 The decisions cited by petitioner and the Solicitor General

stand for no such proposition. Babbitt v. United Farm Workers,

442 U.S. 289, 312 n.18 (1979) (cited at Pet. Br. 39 and U.S. Br.

29), and, evidently, Pike v. Bruce Church, Inc., 397 U.S. 137, 140

n.3 (1970) (cited at U.S. Br. 29 & n.26), involved a form of

Pullman abstention; there were, in those cases, no pending state

proceedings to which the federal courts could defer. Leiter Min-

erals, Inc. v. United States, 352 U.S. 220 (1957) (cited at US.

Br. 29), was not an abstention case at all; it involved the inter-

pretation of 28 U.S.C. § 2283 and turned on the special status of

the United States as a litigant. See 352 U.S. at 225-226.

- 29

“a substantial loss of business and perhaps even bank-

ruptey.” Id. at 932. But M & L stood in a different po-

sition, having been served with criminal summonses in

state court while its federal action was still “in an em-

bryonic stage.” Although M & L presumably faced the

same irreparable injury as the other operators, the Court

a 9" - pendency of the state proceedings meant

. ’s prayer for injunction is squa

by Younger.” Id. at 929. a

This conclusion followed directly from the princi

that underlie the Younger psorernd Younger ee

that state courts are willing and able to enforce federal

rights. And if state courts are permitted to settle the

existence of a party’s federal rights for all time (subject

to review in this Court*) by issuing a final judgment

on the merits, surely they may be trusted to decide ques-

tions of interim relief. Indeed, a federal court’s substi-

tution of its judgment for that of a state court about the

availability of preliminary relief reflects just as “nega-

tively upon the state court’s ability to enforce constitu-

tional principles” (Juidice, 430 U.S. at 336 (citations

and internal quotation marks omitted)) as would a fed-

eral court’s decision on the merits. So long as state court

procedures make provision for the award of preliminary

relief, principles of comity preclude the involvement of

federal courts.

The same conclusion is appropriate under Burford. In

Alabama Public Service Comm’n the Court squarely re-

jected the proposition that a federal court should take

jurisdiction “whenever a plaintiff can show irreparable

loss caused by an allegedly invalid state administrative

order ripe for individual review in the state courts.” 341

U.S. at 344-345. The Court therefore held federal inter-

* Despite the Solicitor General’s hint to the contrary (Br. 28

n.24), interim relief is available from this Court in cases pending

“ state oo when that is necessary to protect federal rights

See, e.a., American Trucking Ass'n v. Gray, 108 S

(opinion of Blackmun, J.). . sad al ssn

30

vention inappropriate in the absence of a showing that

the “state procedure for review of Commission orders is

in any way inadequate to preserve for ultimate review in

this Court any federal questions arising out of such or-

ders.” Id. at 349 (footnote omitted). That reasoning is

fully applicable here.

CONCLUSION

The judgment of the court of appeals should be af-

firmed.

Respectfully submitted,

BENNA RUTH SOLOMON *

Chief Counsel

CHARLES ROTHFELD

STATE AND LOCAL LEGAL CENTER

444 N. Capitol Street, N.W.

Suite 349

Washington, D.C. 20001

(202) 638-1445

Counsel of Record for the

March 31, 1989 Amici Curiae