Respondents Brief — Powerex Corp. v. Reliant Energy Services, Inc.

C > AYM 9 .

No. 05-85

IN THE

Supreme Court of the United States

POWEREX CORP.,

Petitioner,

Vv. \

RELIANT ENERGY SERVICES, INC., ET AL.,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

BRIEF OF RESPONDENT RELIANT ENERGY

SERVICES IN SUPPORT OF THE PETITION

J. GREGORY COPELAND TERRY J. HLOULIHAN

BAKER Botts L.L.P. Counsel of Record

One Shell Plaza NORA CREGAN

910 Louisiana Street

Houston, Texas 77002-4995

(713) 229-1301

BINGHAM MCCUTCHEN LLP

Three Embarcadero Center

San Francisco, CCA 94111

JEFFREY A. LAMKEN (415) 393-2000

BAKER Botts L.L.P.

1299 Pennsylvania Ave., NW

Washingten, D.C. 20004-2400

(202) 6389-7700

Counsel for Respondent Reliant Energy Services, Inc.

SS ee,

WiLSON-EPEsS PRINTINGCC .INC — (202) 789-0096 — WASHINGTON,DC. 20001

QUESTION PRESENTED

Whether petitioner Powerex Corporation is an “organ of

a foreign state” under the Foreign Sovereign Immunities

Act of 1976 (FSIA), 28 U.S.C. § 1603(b)(2).

(i)

ii

LIST OF PARTIES

Reliant adopts the list of parties set forth in the petition

as if set forth fully herein.

RULE 29.6 STATEMENT

Reliant Energy Services, Inc. is a wholly-owned

subsidiary of Reliant Energy, Inc., a publicly traded

company. No publicly held company owns 10% or more of

the stock of Reliant Energy, Inc.

TABLE OF CONTENTS

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TABLE OF AUTHORITIES

CASES

Bogle v. Phillips Petroleum Co., 24 F.3d

Pe ee Ce BO ceccncnsccncsesccscncsenssnsnenmennssescnene

California ex rel. Lockyer v. Dynegy, Inc.,

375 F.3d 831 (9th Cir. 2004), cert. denied,

NE

Carnegie-Mellon University v. Cohill, 484

OR

Kircher v. Putnam Funds Trust, 373 F.3d

By ee, I cetccenectatenttcnperecninesennanininincicianiens

Prairie Island Dakota Sioux, In re, 21 F. ad

fe | ee ee

Public Util. Dist. No. 1 of Grays Harbor

Washington v. Idacorp, Inc., 379 F.3d

Ee ee

Public Util. Dist. No. 1 of Snohomish

County v. Dynegy Power Mktg., Inc.,

384 F.3d 756 (9th Cir. 2004), cert. denied,

BEG, Ce. SG Cae ccccccsevescencncsscvnsssascscsesnsneneee

(iii)

iv

TABLE OF AUTHORITIES-Continued

Page

Quackenbush v. Allstate Ins. Co., 517 U.S.

SUITE Tatas icaceccta pinciteeceiata Di aaibcatanaalbittaiimiacaeiitanibias 7

Thermtron Products, Inc. v.

Hermansdorfer, 423 U.S. 336 (1976)... 6,7

Things Remembered, Inc. v. Petrarca, 516

is BIT ititecestnininnaialsdaneitasetteisiaaaiiimasmninaens 6, 7

United Mine Workers v. Gibbs, 383 U.S.

STENT iccineshitirnstiiinintainiatindsaiatdgianiiauiaubvabiniusanouataneeten 7

Verlinden B.V. v. Central Bank of Nigeria,

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STATUTES.

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| | REPT o ean ooo en mT an eee 2, 4,6

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I ati initiate isi 2

a et Ae I icniniscsnianinssdininencneninicasiiindanianininisininn 6, 7

ET A ere eee 6, 7

The Foreign Sovereign Immunities Act

(FSIA), Pub. L. No. 94-583, 90 Stat. 2891

(28 U.S.C. 1330, 1602, et seq. ):

Be ee OF II ace rcnnsetesedcnnnttinieuntbninantaccenes 2,4

ics Oe MED ccsecutnicntecnpnesinstatnnnianseanionses 2,4

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Renita iP TI i cecsisipsntnrincetencinisandianiniitpiabatinizes 5

a ee OP MIT cainicicicciniccrsnenanenitiineninsibecsitaiians 5

IN THE

Supreme Court of the United States

POWEREX CORP.,

Petitioner,

V.

RELIANT ENERGY SERVICES, INC., ET AL.,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

BRIEF OF RESPONDENT RELIANT ENERGY

SERVICES IN SUPPORT OF THE PETITION

Respondent Reliant Energy Services, Inc. (“Reliant”)

respectfully submits this brief in support of the Petition for

a Writ of Certiorari filed by Powerex Corp. (“Powerex”).

OPINIONS BELOW

The district court’s opinion (Pet. App. 18a-44a) is

unreported. The court of appeals’ opinion (Pet. App. 1a-

17a) is reported at 391 F.3d at 1011.

JURISDICTION

The court of appeals entered its judgment on December

8, 2004, and denied rehearing on March 3, 2005. Pet. App.

45a. On May 23, 2005, Justice O’Connor extended the time

for filing a petition for a writ of certiorari to and including

July 1, 2005. On June 22, 2005, Justice O’Connor further

2

extended the time to and including July 15, 2005, and the

petition was filed on that day. The jurisdiction of this Court

is invoked under 28 U.S.C. § 1254(1).

RELEVANT STATUTORY PROVISIONS

Relevant statutory provisions, including 28 U.S.C.

§§ 1441, 1447, and portions of the Foreign Sovereign Immu-

nities Act, 28 U.S.C. § 1603(a), (b), are set forth in the

Appendix at la-3a.

STATEMENT

For present purposes, Reliant adopts Powerex’s state-

ment of the case. Reliant, however, adds as follows:

1. The named plaintiffs brought this lawsuit on behalf

of a putative class that includes certain retail electric cus-

tomers in California in 2000 and 2001. Plaintiffs allege that

Reliant and certain other defendants “combin|ed]| to with-

hold supply from electricity markets and colludjed| to fix

electricity prices,” in violation of California’s antitrust and

unfair competition laws, and that their conduct caused what

has become known as the California energy crisis of 2000-

2001.

The complaint, however, named only a small number of

the many entities that participated in California wholesale

electric markets during the relevant period. Public and

private power companies throughout 13 western states,

Canada, and Mexico traded and supplied power through the

interconnected transmission grid that services California,

and they continue to do so today. Sellers include traders,

independent generators (such as Reliant), and numerous

public entities—domestic and _ international—including

municipal utility districts, public irrigation districts, and

federal and state agencies.

According to the complaint, the unlawful conduct oc-

curred in markets operated by the California Power

Exchange (“PX”) and the California Independent System

Operator (“ISO”). Under the PX and ISO tariffs filed with

3

the Federal Energy Regulatory Commission, Reliant and

the other market participants did not set the prices at which

they sold wholesale power. Rather, the PX or ISO set a

single “market clearing price” or “MCP” based on the

“highest accepted offer to sell” for a particular timeframe.

In general, the MCP applied to all sellers, regardless of the

bids.

Because of that structure, the MCP was often set by

market participants other than the ones named as defen-

dants in the original complaint. Indeed, the bids of

numerous entities trading in the California electricity mar-

kets factored into the MCP in precisely the same manner as

-the bids of Reliant and the other parties that plaintiffs

named as defendants. Yet the plaintiffs omitted most of

those entities from their complaint.

2. Reliant denies that it violated any state antitrust or

unfair competition law,' and has set forth additional de-

fenses, including preemption under the Federal Power Act

and the filed rate doctrine.” Nonetheless, because many

entities other than the ones named in plaintiffs’ lawsuit had

participated in the market in the same manner as Reliant

and the other original defendants, and because many could

be held liable to the same extent as Reliant under plaintiffs’

theories, Reliant cross-complained against other major |

participants in the California markets, including Powerex.

' Reliant believes that California’s energy crisis was caused by a

variety of factors, including the State’s decision to have wholesale

energy prices determined in volatile short-term bid markets with

single market clearing prices.

* Claims like plaintiffs’ consistently have been dismissed on pre-

emption and filed-rate grounds. See California ex rel. Lockyer v.

Dynegy, Inc., 375 F.3d 831 (9th Cir. 2004), cert. denied, 125 S. Ct.

1836 (2005); Publie Util. Dist. No. 1 of Grays Harbor Washington v.

Idacorp, Inc., 379 F 3d 641 (9th Cir. 2004); and Public Util. Dist. No.

1 of Snohomish County v. Dynegy Power Mktq., lne., 384 F 3d 756

(9th Cir. 2004), cert. denied, 125 S. Ct. 2957 (2005).

|

Powerex and several other cross-defendants (e.g., BC

Hydro and the Bonneville Power Administration), in turn,

removed the case to federal court. Plaintiffs moved for a

remand to state court. The district court held that the case

was properly removed in the first instance because many of

the removing cross-defendants were governmental entities

entitled to removal under 28 U.S.C. §§ 1441, 1442. It also

granted the motions of several cross-defendants for dis-

missal on (for example) sovereign immunity grounds. The

district court then remanded the case—including the claims

against Powerex—to state court, and the Ninth Circuit

affirmed. Powerex, those courts held, is not “an organ” of

the provincial government of British Columbia entitled to

insist on a federal forum-under the Foreign Sovereign

Immunities Act and 28 U.S.C. § 1441(d). For the reasons

stated below, Reliant agrees with Powerex that the district

court and Ninth Circuit erred, and that the issue warrants

this Court’s review.

REASONS FOR GRANTING THE PETITION

Enacted in 1976, the Foreign Sovereign Immunities Act

(FSIA), Pub. L. No. 94-583, 90 Stat. 2891 (28 U.S.C. 1330,

1602, et seq.) establishes “a comprehensive set of legal stan-

dards governing claims of immunity in every civil action

against a foreign state or its political subdivisions, agencies,

or instrumentalities.” Verlinden B.V. v. Central Bank of

Nigeria, 461 U.S. 480, 488 (1983). The FSIA broadly

defines “foreign state” as including both a sovereign nation

and any “agency or instrumentality of a foreign state.” 28

U.S.C. § 1603(a). The phrase “agency or instrumentality”

includes entities that are separate legal persons from the

state (e.g., corporations) if they are “an organ of a foreign

state” and they meet certain further requirements. See 28

U.S.C. § 1603(b)(1)-(3).

Whether or not an entity qualifies as an “organ” of a

foreign state is often a critical question—not merely for

~

oa

individual litigants, but also for foreign governments and

the federal courts. Under the FSIA, organs of foreign

states are subject to suit only under specified circumstances

and are entitled to special protections. See, e.g., 28 U.S.C.

$§ 1604, 1605, 1607. Of particular importance here, foreign

sovereigns are entitled to remove and have their cases

heard in federal rather than state court. See 28 U.S.C.

§ 1441(d).

In this case, the Ninth Circuit concluded that Powerex

was not an “organ” of the provincial government of British

Columbia and thus not a “foreign state” within the meaning

of the FSIA. Accordingly, it held that the claims against

Powerex were properly remanded to state court. Reliant

agrees with Powerex’s contention (Pet. 18-24) that the test

articulated and applied by the Ninth Circuit for deter-

mining Powerex’s status under the FSIA differs from the

more comprehensive, fact-sensitive tests employed by the

Second, Third and Fifth Circuits, and that the Ninth Cir-

cuit’s test is contrary to Congress’s intent in enacting the

FSIA. The Ninth Circuit’s decision, moreover, introduces

considerable uncertainty into this area of law. Its cramped

view of what constitutes “an organ” improperly strips

foreign states of their right to a federal forum. Throughout

the territory of the Ninth Circuit, foreign sovereigns now

risk losing the benefits of the FSIA unless they conform the

characteristics of their commercial enterprises to the

peculiar test the Ninth Circuit has now articulated.

Foreign sovereigns often participate in commerce in the

United States through indirect instrumentalities. The un-

certainty created by this decision discourages interstate

and foreign trade by those entities and increases the risks

involved in, and thus the costs of, any trading that does

occur. Reliant continues to trade reguiarly with entities

that should rightly be considered organs under the FSIA,

including Canadian entities such as Powerex and Hydro-

Quebec. During the period from January 1, 2004 through

6

July 26, 2005, for example, Reliant entered into over 1,000

separate power purchase or sale transactions with Powerex

alone. Reliant sold over 66,000 megawatt hours of electric

energy to Powerex, while purchasing over 500,000 mega-

watt hours, with a notional value of nearly $30.5 million.

Although the value of these transactions is itself significant,

they represent a relatively small portion of the total power

trades in which Powerex is a party.

This Court should grant the petition for a writ of

certiorari to ensure that the approach to foreign sovereigns

set forth in the FSIA is uniformly followed in the federal

courts. Foreign sovereign entities must be secure in their

rights with respect to potential litigation in the United

States so that they will be willing to continue to conduct

business in and provide critical resources to United States

markets. Reliant and other domestic companies engaged in

trade with entities created by foreign sovereigns also

benefit from the certain and predictable application of the

FSIA. The Ninth Circuit’s decision here creates uncer-

tainty and undermines the goal of foreign participation in

United States markets.’

-

* The Ninth Circuit correctly rejected plaintiffs’ contention that 28

U.S.C. § 1447(d) deprived that court of jurisdiction. Pet. App. 9a-

10a. Section 1447(d) states that an “order remanding a case to the

State court from which it is removed is not reviewable on appeal or

otherwise * * * .” In Thermtron Products, Inc. v. Hermansdorfer,

423 U.S. 336, 345 (1976), this Court held that Section 1447(d) “must

be construed together” with Section 1447(c), which specifies when

certain remands are permitted (“on the basis of any defect other

than lack of subject matter jurisdiction” on motion filed within 30

days, and “at any time before final judgment” if “it appears that the

district court lacks subject matter jurisdiction”). Reading Section

1447(c) and (d) “in pari materia,” Thermtron held that “only

remand orders issued under § 1447(c) and invoking the specified

grounds therein—that removal was improvident” or that the district

court was “without jurisdiction”—are immune from review under

§ 1447(d). Thermtron, 423 US. at 346. Accord, Things Remem-

7

CONCLUSION

For the reasons stated here and in the petition for a writ

of certiorari, the petition should be granted.

bered, Ine. v. Petrarca, 516 US. 124, 127 (1995) (Section “1447(d)

must be read in pari materia with § 1447(c), so that only remands

based- on grounds specified in § 1447(c) are immune from review

under § 1447(d).”); Quackenbush v. Allstate Ins. Co., 517 U.S. 706,

711-712 (1996) (same). Here, as in Thermtron, Section 1447(d) does

not preclude appellate review because the district court did not

remand based on grounds set forth in Section 1447(¢). Removal did

not suffer from procedural defects; it is undisputed that (at a

minimum) BC Hydro was statutorily entitled to remove the entire

case—including all defendants—under 28 U.S.C. 1441(d), while the

Bonneville Power Administration and Western Power Administra-

tion were entitled to do so under 28 U.S.C. § 1442. Nor did the dis-

trict court “lack jurisdiction.” It simply remanded what was left of

the case once it resolved the federal issues. See Kircher v. Putnam

Funds Trust, 373 ¥ 3d 847, 850-851 (7th Cir. 2004). This Court has

reviewed an analogous remand decision, Carnegie-Mellon Univ. v.

Cohill, 484 U.S. 343 (1988) (reviewing decision remanding pendent

state claims under United Mine Workers v. Gibbs, 383 U.S. 715

(1966), after resolution of federal issues), and the federal courts

regularly hold that such remands fall outside § 1447(c), (d), and are

reviewable as a result, see Bogle v. Phillips Petroleum Co., 24 F.3d

758, 761 (Sth Cir. 1994); Jn re Prairie Island Dakota Sious, 21 F 3d

302, 304 (8th Cir. 1994) (per curiam).

RESPECTFULLY SUBMITTED.

J. GREGORY COPELAND TERRY J. HOULIHAN

BAKER Botts L.L.P. Counsel of Record

nt pr ey ' NORA CREGAN

,oulsiana Stree BINGHAM MCCUTCHEN LLP

Houston, Texas 77002-4995 Three Embarcadero Center

(713) 229-1301 San Francisco, CA 94111

(415) 393-2000

JEFFREY A. LAMKEN

BAKER BoTrts L.L.P.

1299 Pennsylvania Ave., NW

Washington, D.C. 20004-2400

(202) 639-7700

Counsel for Respondent Reliant Energy Services, Inc.

AUGUST 8, 2005

APPENDIX

STATUTORY APPENDIX

1. Section 1441 of Title 28 of the United States Code

provides in relevant part:

§ 1441. Actions removable generally

(a) Except as otherwise expressly provided by Act of

Congress, any civil action brought in a State court of which

the district courts of the United States have original juris-

diction, may be removed by the defendant or the defen-

dants, to the district court of the United States for the dis-

trict and division embracing the place where such action is

pending. For purposes of removal under this chapter, the

citizenship of defendants sued under fictitious names shall

be disregarded.

(b) Any civil action of which the district courts have

original jurisdiction founded on a claim or right arising

under the Constitution, treaties or laws of the United States

shall be removable without regard to the citizenship or

residence of the parties. Any other such action shall be re-

movable only if none of the parties in interest properly

joined and served as defendants is a citizen of the State in

which such action is brought.

(c) Whenever a separate and independent claim or cause

of action within the jurisdiction conferred by section 1331 of

this title is joined with one or more otherwise non-

removable claims or causes of action, the entire case may be

removed and the district court may determine all issues

therein, or, in its discretion, may remand all matters in

which State law predominates.

(d) Any civil action brought in a State court against a

foreign state as defined in section 1603(a) of this title may

be removed by the foreign state to the district court of the

United States for the district and division embracing the

place where such action is pending. Upon removal the

action shall be tried by the court without jury. Where

removal is based upon this subsection, the time limitations

(la)

2a

of section 1446(b) of this chapter may be enlarged at any

time for cause shown.

* * * * €

2. Section 1447 of Title 28 of the United States Code

provides in relevant part:

§ 1447. Procedure after removal generally

(a) In any case removed from a State court, the district

court may issue all necessary orders and process to bring

before it all proper parties whether served by process

issued by the State court or otherwise.

(b) It may require the removing party to file with its

clerk copies of all records and proceedings in such State

court or may cause the same to be brought before it by writ

of certiorari issued to such State court.

(c) A motion to remand the case on the basis of any

defect other than lack of subject matter jurisdiction must be

made within 30 days after the filing of the notice of removal

under section 1446(a). If at any time before final judgment

it appears that the district court lacks subject matter

jurisdiction, the case shall be remanded. An order remand-

ing the case may require payment of just costs and any

actual expenses, including attorney fees, incurred as a

result of the removal. A certified copy of the order of

remand shall be mailed by the clerk to the clerk of the State

court. The State court may thereupon proceed with such

case.

(d) An order remanding a case to the State court from

which it was removed is not reviewable on appeal or

otherwise, except that an order remanding a case to the

State court from which it was removed pursuant to section

1443 of this title shall be reviewable by appeal or otherwise.

(e) If after removal the plaintiff seeks to join additional

defendants whose joinder would destroy subject matter

3a

jurisdiction, the court may deny joinder, or permit joinder

and remand the action to the State court.

3. The Foreign Sovereign Immunities Act (FSIA), Pub.

L. No. 94-583, 90 Stat. 2891 (28 U.S.C. 1330, 1602, et seq.),

provides in relevant part:

§ 1603. Definitions

For purposes of this chapter—

(a) A “foreign state”, except as used in section 1608 of

this title, includes a political subdivision of a foreign state or

an agency or instrumentality of a foreign state as defined in

subsection (b).

(b) An “agency or instrumentality of a foreign state”

means any entity--

(1) which is a separate legal person, corporate or

otherwise, and

(2) which is an organ of a foreign state or political

subdivision thereof, or a majority of whose shares or

other ownership interest is owned by a foreign state or

political subdivision thereof, and

(3) which is neither a citizen of a State of the United

States as defined in section 1332(c) and (e) of this title,

nor created under the laws of any third country.

* * * * *