Opposition Brief — New Orleans Public Service, Inc. v. City of New Orleans

IN THE |

Supreme Court of the GAnited States

OCTOBER TERM, 1986

NEW ORLEANS PUBLIC SERVICE INC.,

Petitioner,

we

THE CITY OF NEW ORLEANS, et al.,

Respondents.

On Petition For Writ Of Certiorari To The United

States Court of Appeals For The Fifth Circuit

BRIEF FOR THE CITY OF NEW ORLEANS,

ET AL., IN OPPOSITION TO THE PETITION

OKLA JONES, II CLINTON A. VINCE*

City Attorney L. JOHN OSBORN

THOMAS W. MILLINER BERNHARDT K. WRUBLE

Deputy City Attorney BARBARA K. HEFFERNAN

Bruce E. NAcCARI ROBERT J. MANGAS

Assistantt City Attorney VERNER, LIIPFERT, BERNHARD,

1300 Perdiido Street McPHERSON AND HAND, CHARTERED

New Orleans, Louisiana 70112 1660 L Street, N.W.

(504) 586-4651 Suite 1000

Washington, D.C. 20036

Brop BaGiERT (202) 775-1047

AUGUSTINE, BAGERT, McConpuit *Counsel of Record

AND HIL.FERTY

Suite 1800)

1100 Poydiras Street

New Orleans, Louisiana 70163

(504) 582-2223

November 7, 1986

PRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203

QUESTION PRESENTED

Had this case not been rendered moot by a nego-

tiated settlement, it would have presented the follow-

ing question: Where an electric utility asserted a claim

of federal preemption in seeking to enjoin an ongoing

state regulatory proceeding that was needed to ad-

dress complex issues of deep concern to the local

community and had not yet ripened into an agency

decision, could the federal court exercise discretion

to abstain from adjudicating the preemption claim,

recognizing that state courts were competent to pro-

vide swift review of issues arising under both federal

and state law?

il

TABLE OF CONTENTS

Page

QUESTION PRESENTG® sacceeeoeeen i

TABLE OF CONTEIE® ssticnnseneceeeeeeee ii

TABLE OF AUTHORIEERS ccstssectutnctpeecsssens iil

OPINIONS BELOW occu 1

JURISDICTION . ..cnnescsssasaenensas nee l

STATEMENT OF THE: CAGE caccbenscessesens 2

REASONS FOR DENYING THE PETITION ...... 10

CONCLUSION ......::<:csaxcasseeoesssnieies ee 28

iil

TABLE OF AUTHORITIES

CASES: Page

Abbott Laboratories v. Garner, 387 U.S. 136

a aga cen sekveavncndieedasveitannesse 25

Alabama Public Service Commission v. Southern Ry.

Sr MEE CFR, RE CRMOLD cscsceneccorcsesancssersvessse 17

Allegheny Airlines, Inc. v. Pennsylvania Public Util-

ity Commission, 465 F.2d 237 (8rd Cir. 1972),

cert. denied, 410 U.S. 943 (1973) _.................. 18

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

State of North Carolina, 713 F.2d 1024 (4th

Cir. 1983), cert. denied, 465 U.S. 1052 (1984)

CORREO EEE HEHEHE E HEHEHE HEHEHE EEE EES

tho

i)

American Electric Power Co. v. Kentucky Public

Service Commission, No. 85-5129 (6th Cir. Mar.

24, 1986), petition for cert. filed, 55 U.S.L.W.

3032 (U.S. July 17, 1986) (No. 86-49) 0.0.00... 20,24

Appalachian Power Co. v. Public Service Commis-

sion of West Virginia, 614 F.Supp. 64

(S.D.W.Va. 1985), aff'd, 770 F.2d 159 (4th Cir.

1985), on remand, 630 F.Supp. 656 (S.D.W.Va

eas hal cs pecekcdiasicnssekeeiinshesiahestean 23

Baggett v. Department of Professional Regulation,

Board of Pilot Commissioners, 717 F.2d 521

EE, IUD > oxcadnsdrinvosccvisdensansensenisesetanedsnses 15,23

Browning-Ferris, Inc. v. Baltimore County, Mary-

land, 774 F.2d 77 (4th Cir. 1985)... 18

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

California v. Oroville-Wyandotte Irrigation Dis-

trict, 409 F.2d 532 (9th Cir. 1969) _ .............. 23

Colorado River Water Conservation District v.

United States, 424 U.S. 800 (1976)... 13

DeFunis v. Odegaard, 416 U.S. 312 (1974)... 12

Doran v. Salem Inn, Ine., 422 U.S. 922 (1975) .... 25,26

Family Division Trial Lawyers v. Moultrie, 725

fi SY i RD |” | 23

Table of Authorities Continued

Page

F.P.C. v. Southern California Edison Co., 376 U.S.

SO eS ta aie dees toes Seen dd acnctaebudcantinsannciic 16

Gibson v. Berryhill, 411 U.S. 564 (1973) ou... 21

Hall v. Beals, 396 U.S. 45 (1969) ........eeeee 12

Hawaui Housing Authority v. Midkiff, 467 U.S. 229

SUMED }’xaiccosnaxetaipaxinteveaaemisbaesdwnnseedinewianinseieetss 20

Helvering v. Gowran, 302 U.S. 238 (1987) ......... 14

Illinois Commerce Commission v. Thomson, 318 U.S.

SEEN © paOccsnstcacnsbavekaievaienindspeanientns 26

Illinois Natural Gas Co. v. Central Illinois Public

Service Co., 314 U.S. 498 (1942) .................. 16

International Brotherhood of Electrical Workers v.

Public Service Commission of Nevada, 614 F.2d

SR Ue ME SOD... nu ctesrsbiishenienishcossebiamcssineess 23

Kentucky West Virginia Gas Co. v. Pennsylvania

Public Utilities Commission, 791 F.2d 1111

i aeiiee cc. 15,23

Local No. 8-6, Oil, Chem. & Atomic Workers v.

Missouri, 361 U.S. 363 (1960) .....................ee. 11,12

Local 102, International Ladies’ Garment Workers’

Union v. United States, 489 U.S. 1070

CREPE UE > ksi Janightancebdunbincceencuneaiaed almsnetinnnsemnciosins 13

Louisiana Power & Light Co. v. Ackel, 616 F.Supp.

a a ls BUD > cevdadovackeicnditnanisusenarecdeccansns 18,27

Louisiana Power & Light Co. v. Louisiana Public

Service Commission, No. 292,026 (19th Dist.

Baas Sy Tees. I scthidicedonmanaccciemcnmnegueebeadesess 18

Louisiana Power & Light Co. v. Louisiana Public

Service Commission, No. 292,026 (19th Dist.

GS I ice 18

Table of Authorities Continued

Page

Middle South Energy, Inc., 31 F.E.R.C. (CCH)

¢ 61,305 (1985) (Opinion No. 234), 32 F.E.R.C

(1985) { 61,425 (Opinion No. 234-A), appeal

docketed sub nom. Mississippi Industries v.

FERC, Nos. 85-1611 et al. (D.C. Cir. filed Sept.

26, 1985) dpdidshighidaniaecadaseeseacteasiaodae eames 4

Middle South Energy, Inc. v. Arkansas Public Ser-

vice Com’n, 772 F.2d 404 (8th Cir. 1985), cert.

denied., 106 S.Ct. 884 (1986) ............cccseeeeees 23

Middle South Energy, Inc., et al. v. City of New

Orleans, et al., No. 85-5273 (E.D. La. filed No-

vonteer 26, FOMGe | crevice 9

Middle South Energy, Inc., et al. v. City of New

Orleans, 800 F.2d 488 (5th Cir. 1986). ........ 21

Middlesex County Ethics Committee v. Garden State

Bar Association, 457 U.S. 423 (1982) _ .......... 19

Mills v. Green, 159 U.S. 651 (1985) ..........cccccceees 11

Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41

CREED ccisscssnsessdessaiesscatinssspineeenaeanan 26

Nantahala Power and Light Co. v. Thornburg, 106

DAR. TOGD CD svccnsiscnvscscressemmdcacinseks 15,16,18

Natural Gas Pipeline Co. v. Slattery, 302 U.S. 300

CRETE)... ccosccecssnnassunranniacsapaeniacanmmganaeinananienione 26

Ohio Civil Rights Commission v. Dayton Christian

Schools, Inc., 106 S.Ct. 2718 (1986) ............ 15,19,25

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

sources Conservation and Development Com-

mission, 461 U.S. 190 (1983) — ........cccccscccescees 25

Public Service Commission v. Wycoff Co., 344 U.S.

SOT CURRED kétsemtisccnniaisinnanenuenateins 26

Railroad Commission of Texas v. Pullman Co., 312

U.S. Ge GOED) | Ancien 14,23

Ringsby Truck Lines, Inc. v. Western Conf. of

Teamsters, 686 F.2d 720 (9th Cir. 1982) ..... 13

Table of Authorities Continued

Page

Robert-Gay Energy Enterprises, Inc. v. State Cor-

poration Commission of Kansas, 753 F.2d 857

(ROG Cie. SEER vcmiiencinsinentincdnatanes 18

Roe v. Wade, 410 U.S. 118 (1973) oo... 11

Socialist Labor Party v. Gilligan, 406 U.S. 583

(197%). “ ccanimmniicssnweinananena 25

South Central Bell Telephone Co. v. Louisiana Pub-

lic Service Commission, 744 F.2d 1107 (5th Cir.

1984), vacated and remanded on other grounds,

106 BACK. SE Ce ~ . iccicstsienditmenan 22

Steffel v. Thompson, 415 U.S. 452 (1974) ..........0. 25,26

Swift & Co. v. Wickham, 382 U.S. 111 (1965)... 28

United Services Automobile Association v. Muir, 792

P26 SEG GG Car SO cteirestteeuiemcssnen 19

United States v. Munsingwear Corp., 340 U.S. 36

(ROGGE sccsrscciasduncossesansaashabeccesiniestalsasteassentmentns 13

United States v. New York Telephone Co., 434 U.S.

BED CIGTT). — sesssesissceasectaviddeibiainiasiolcagadtes 28

Velsicol Chem. Corp. v. United States, 435 U.S. 942

CABS. secsnnacesececacoceitencesesansneunsbandeamataienaasndinn 13

Washington v. Yakima Indian Nation, 439 U.S. 463

(TINGE ssciiioomimmabaalin aedeae 28

Williams v. Red Bank Board of Education, 662 F.2d

O08 Gord Gir. BRTED sncenvindercatssteiseesinsincinns 19

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

STATUTES:

Commerce Clause, U.S. Const. art. I, § 8, el. 3 l

Supremacy Clause, U.S. Const. art. VI, cl. 2 .... 1,27,28

Federal Power Act, 16 U.S.C. §791-828c¢ (1982) ..... 1,27

1G URC... 8 GR Ce citekaneaseicetteccactccesinsteansss l

28 U.S.C. § 1254(1) (1982 & Supp. III 1985) _..... 1

28 U.S.C. § 2281 (repealed 1976) .........cccccccscsseees 28

Johnson Act, 28 U.S.C. § 1842 (1982) ............. 7,8,27,28

GB UBL. 9 ROGB CRD ctrntctrtanctecneccsrscecnensivetovnns 1

vil

Table of Authorities Continued

Page

MISCELLANEOUS:

Note, Collateral Estoppel and Supreme Court Dis-

78 Mich. L. Rev. 946

position of Moot Cases,

FAGIO) - avsscnsnenesonsnntonnnnmnsnnnvaconnnennsrentert 7 13

17 Wright, Miller & Cooper, Federal Practice and

Procedure § 3532.6 (Supp. 1986) ss ae 16

17 Wright, Miller & Cooper, Federal Practice and

20

Procedure § 4254 (Supp. 1986) --sesssererreree

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1986

No. 86-546

New ORLEANS PUBLIC SERVICE INC.,

Petitioner,

V.

THe Ciry Or New ORLEANS, ef a/.,

Respondents.

BRIEF FOR THE CITY OF NEW ORLEANS,

ET AL., IN OPPOSITION TO THE PETITION

OPINIONS BELOW

The first opinion of the Court of Appeals is re-

ported at 782 F.2d 1236. The amended opinion of the

Court of Appeals is reported at 798 F.2d 858. The

opinion of the District Court for the Eastern District

of Louisiana is unpublished. Each of these opinions

is reprinted in the appendix to the petition.

JURISDICTION

Before the Eastern District of Louisiana and the

Fifth Circuit, NOPSI asserted claims based on the

Commerce Clause, the Supremacy Clause, the

‘‘Preemption Doctrine,’’ and the Federal Power Act, 16

U.S.C. § 791-828c¢ (1982), and invoked federal jurisdic-

tion under the Federal Power Act, 16 U.S.C. § 825p

Neen

"A

(1982), and 42 U.S.C. § 1983 (1982). Before this Court,

NOPSI asserts jurisdiction under 28 U.S.C. § 1254(1)

(1982 & Supp. III 1985).

STATEMENT OF THE CASE

The City of New Orleans is a municipal corporation

existing under the laws of the State of Louisiana and

its Home Rule Charter. The Council of the City of

New Orleans (the ‘‘Council’’) exercises all legislative

powers of the City, and also is empowered under state

law to regulate the rates and other activities of public

utilities serving New Orleans.' Petitioner, New Or-

leans Public Service Inc. (‘“‘NOPSI’’), is a member of

the Middle South System? and is engaged in the retail

sale of electricity to consumers in New Orleans.

This case arises from the efforts of the Council, in

the exercise of its undisputed regulatory authority

over NOPSI’s retail rates, to address and, if possible,

to mitigate the severe ‘‘rate shock”’ effect’ to the New

‘The individually named respondents served as members of

the Council at the time this action was instituted. The Council

is on an equal plane with the Louisiana Public Service Com-

mission in regulating public utilities, but the responsibility of

each body is geographically different.

‘Middle South Utilities, Inc. (‘MSU’’) is an investor-owned

public utility holding company, the wholly-owned operating sub-

sidiaries of which include NOPSI, Arkansas Power & Light Com-

pany (“AP&L’’), Louisiana Power & Light Company (‘““LP&L’’)

and Mississippi Power & Light Company (‘““MP&L’’). Another

wholly-owned subsidiary of MSU, Middle South Energy, Inc.

(*‘MSE”’) (now System Energy Resources, Inc.), owns an undi-

vided 90% interest in the nuclear power plant involved in this

case, the remaining 10% of which is owned by non-Middle South

interests.

‘NOPSI sought an immediate rate increase of $168 million

Orleans community threatened by NOPSI’s partici-

pation in the costly Grand Gulf nuciear project, lo-

eated near Port Gibson, Mississippi. NOPSI brought

this action in the District Court prematurely, before

the Council had an opportunity to rule on the merits

of the company’s retail rate application. NOPSI now

seeks review by this Court despite the fact that the

issues raised by the complaint were rendered moot

through a March, 1986 settlement between NOPSI

and the Council. But for the settlement, the narrow

issue presented would be whether the District Court,

in the circumstances of this case, abused its discretion

by invoking federal abstention to permit the local reg-

ulatory proceedings to be completed and the matter

to be reviewed by the state courts.

The Grand Gulf project is, by any measure, a com-

mercial failure. Grand Gulf Unit I originally was pro-

jected to cost approximately $600 million, and entered

commercial operations in July 1985 at a cost in excess

of $3.6 billion. Construction of a second Grand Gulf

unit has been suspended, with approximately $1 bil-

lion spent and the unit likely to be cancelled. NOPSI

became involved in the Grand Gulf project in 1974

when, without informing its local regulator, it entered

into the first of a series of private agreements with

annually, which would have resulted in an abrupt rate increase

of approximately 50-60%. Evidence before the Council showed

that such a dramatic increase in electric rates would have caused

substantial hardship, loss of jobs, decline of business and increase

of poverty in New Orleans, already one of the poorest cities in

the country. The settlement ultimately adopted by NOPSI and

the Council moderated the rate increase in a manner similar to

that employed in similar circumstances by state regulatory

authorities throughout the country, with annual increases limited

to about 6% under a multi-year ‘‘phase-in’’ plan.

the other Middle South operating companies whereby

they guaranteed indebtedness for the construction of

the plant and agreed to purchase indeterminate por-

tions of its output.:

In the early 1980’s, agreements addressing the al-

location of Grand Gulf I capacity, energy and ex-

penses among the Middle South operating companies,

as well as sales of power and energy by and between

the operating companies generally, were filed with

the Federal Energy Regulatory Commission

(“FERC’’), which has exclusive authority to regulate

the transmission and sale at wholesale of electric en-

ergy in interstate commerce. After extensive pro-

ceedings, the FERC issued its Opinion Nos. 234 and

234A,’ which adopted a formula to allocate the whole-

sale costs of Grand Gulf I among NOPSI and its much

larger operating company Affiliates, as follows:

AP&L—36%; LP&L—14%; MP&L—33%; NOPSI—

17%.

The FERC did not address the need to moderate

the Grand Gulf rate increase at the local level through

‘‘phase-in” plans, nor did it determine the appropriate

allocation of the increase among different classes of

retail ratepayers (‘‘rate design’’). The FERC likewise

‘The Council first became cognizant of the potential impact

of Grand Gulf on NOPSI and New Orleans in September 1980.

At that time, NOPSI’s chief executive officer assured the Coun-

cil, under oath, that New Orleans would not have to pay for

Grand Gulf should the Council deem it inappropriate, and that

NOPSI would instead sell its power to other utilities.

* Middle South Energy, Inc., 31 F.E.R.C.(CCH) © 61,305 ((1985)

(Opinion No. 234) and 32 F.E.R.C.(CCH) € 61,425 (1985) (Opinion

No. 234-A), appeal docketed sub nom., Mississippi Industries v.

FERC, Nos. 85-1611 et al. (D.C. Cir. filed Sept. 26, 1985).

or

did not address the “‘prudence”’ of any entity's par-

ticipation in Grand Gulf (either that of the wholesale

seller, which incurred significant cost overruns, or

that of the operating company purchasers, which

might have taken steps to limit their exposure to

Grand Gulf). In sum, the FERC did not, and did not

purport to, preempt retail regulatory bodies from ad-

dressing issues bearing upon the manner, timing or

magnitude of the retail rate increases required as a

result of Grand Gulf.*

* The FERC recognized the role of the States in the regulation

of the Middle South operating companies:

[W]e concurred in [Judge Head’s] discussion of the need to

balance Federal and State interests in exercising our juris-

diction. Furthermore, we think our opinion, taken as a whole,

as well as Judge Head’s discussion, which we adopted, clearly

recognize the role of the States in regulating retail electric

rates and the need to balance overlapping State and Federal

electric rate jurisdiction.

32 FERC at 61,952.

On the issue of prudence, the then-Acting Chairman of FERC

subsequently testified in a congressional hearing:

The Commission did not determine the prudence of the pur-

chase of power by the Middle South utilities from the Grand

Gulf Nuclear Generating Station in Opinion Nos. 234 and

234-A.

See Prepared Testimony of the FERC Before Subcommittee on

Energy, Conservation and Power, of the House of Represen-

tatives Committee on Energy and Commerce, Hearing on Prud-

ence Reviews (March 14, 1986). Moreover, the FERC

administrative law judge who heard the matter, confronted with

the suggestion by Middle South attcrneys that he should make

some type of implicit prudence findings, repeatedly stated ‘I’m

not getting into that,’ and indicated that he could not prevent

the issue from being litigated in a state forum. F.E.R.C. Docket

No. ER82-616-000, Tr. 228, 235-36, 248-51 (Mar. 14, 1983). The

On May 17, 1985, NOPSI filed an application with

the Council seeking to recoup Grand Gulf costs

through a formula-based increase in its retail rates.

The application was filed a month before the FERC

determined NOPSI’s allocation of Grand Gulf costs

and just two days after the Council reacquired reg-

ulatory authority over NOPSI (which had been vested

in the Louisiana Public Service Commission for a pe-

riod of four years). The Council promptly advised

NOPSI of the need to conform its application for

permanent rate relief to certain standard filing re-

quirements, but also invited NOPSI to make an ab-

breviated request for interim rate relief and pledged

expedited treatment.

Rather than requesting interim relief, NOPSI com-

menced this action on August 2, 1985, seeking pre-

liminary and permanent injunctive relief and damages

against the City,-the Council and its members indi-

vidually. After hearing live testimony on August 12,

1985, the District Court denied preliminary relief and

directed NOPSI to seek interim rate relief from the

Council.

Following expedited hearings on NOPSI’s request,

the Council, on September 5, 1985, granted interim

relief which it found would strike an equitable bal-

ancing of the interests of NOPSI, its stockholders and

ratepayers, and would permit NOPSI to meet its

Grand Gulf obligations and remain solvent through

District Court in this case found that a mandate for state reg-

ulatory authorities to immediately pass Grand Gulf-related ex-

penses through to retail ratepayers was ‘‘conspicuous by its

absence” from the FERC’s opinion (Pet. at A-43), and another

federal court contemporaneously reached a similar conclusion.

See note 22, infra.

cia

~)

accelerated Council proceedings on the request for

permanent rate relief. The Council (a) granted NOPSI

$28.3 million of interim rate relief; (b) directed NOPSI

to recover $32 million of excess advance payments

made to MSE, part of approximately $67 million in

total advance payments made by NOPSI; (c) reaf-

firmed a prior authorization for NOPSI to issue $35

million in new debt securities; (d) specified that NOPSI

could recover, with interest, the amount of relief fi-

nally determined to be proper, for the period of the

Council’s deliberations; and (e) invited NOPSI to seek

additional interim relief as necessary. NOPSI imme-

diately requested certain changes in the interim rate

order, but returned to the District Court before the

Council could act on that request and again sought

permanent injunctive relief mandating an unmoder-

ated and immediate pass-through of all Grand Guit

costs.

The District Court dismissed the action on Septem-

ber 16, 1985, finding that the Johnson Act, 28 U.S.C.

§ 1342 (1982), deprived it of jurisdiction and that, in

any event, it should abstain from exercising jurisdic-

tion under Burford v. Sun Oil Co., 319 U.S. 315

(1943). The court emphasized that the Council had

not yet addressed the issue of NOPSI’s request for

a permanent rate increase, and found, based on the

extensive evidence submitted, that the Council was

acting responsibly and was ‘‘determined to assist

NOPSI in maintaining a positive cash position by pur-

suing a number of feasible alternatives.’ (Pet. at A-

46).’

‘As matters developed, NOPSI did remain in a positive cash

position, never sought additional interim relief from the Council,

On appeal by NOPSI, the Fifth Circuit initially re-

versed the District Court on February 14, 1986, hold-

ing that the Johnson Act did not defeat federal

jurisdiction in this case and further holding (in < terse

discussion) that the lower court erred in abstaining.

On March 20, 1986, NOPSI and the Council eatered

into a comprehensive settlement of the permanent

rate application that was the subject of this litigation,

the terms of which were published in Council Reso-

lution No. R-86-112. The settlement provides, inter

alia, that NOPSI’s shareholders will absorb $51.2 mil-

lion of Grand Gulf I costs and that remaining costs

(with interest) will be recovered from retail ratepayers

under a phase-in plan designed to avoid the adverse

effects of ‘trate shock.’’*

Although the settlement is subject to the resolution

of certain other issues involving ongoing or po-ential

litigation between the parties,’ it does resolve the

and was able to meet each monthly payment on its Grand Gulf

obligation through and beyond the date of the March 186 set-

tlement.

~The settlement is similar in many respects to settlements

entered into in other jurisdictions by AP&L P&L and MP&L,

each of which agreed to moderate the retail rate impact of Grand

Gulf and to absorb, in some fashion, a portion of the expenses

allocated to it by the FERC. (In other parts of the country,

local regulators and their jurisdictional utilities have struck sim-

ilar compromises designed to deal with the effects of high cost

nuclear plants.)

"Among the issues not resolved by the settlement was the

prudence of NOPSI’s conduct with respect to Grand Gulf, in-

cluding the company’s failure to sell off all, or some portion of,

its Grand Gulf allocation in order to reduce its cost exposure.

NOPSI's prudence is the subject of an ongoing Council inves-

tigation, which was instituted on October 10, 1985, after the

9

issues raised by the instant complaint and obviate the

relief sought by NOPSI in this action. Indeed, in

NOPSI II the company recently made the following

admission with respect to the issues that were con-

tested in this action and addressed by the settlement:

First, plaintiffs do not contest the Council’s

regulatory jurisdiction over retail rates. Nor

do they contest the Council’s right to deter-

mine traditional ratemaking issues such as

the cost of capital, rate-base, rate of return

on rate-base, and allocation of rates among

customer classes. Plaintiffs also do not con-

test the Council’s right to determine whether

the FERC-allocated Grend Gulf 1 costs can

be offset in whole or in part by savings in

other areas. Finally, plaintiffs do not contest

the Council’s right to work with NOPSI to

determine how the Grand Gulf 1-related costs

can best be phased-in. (Indeed, all of these

traditional retail rate issues have already

been resolved). (emphasis added)"

instant action was dismissed. Neither the District Court nor the

Fifth Circuit had occasion to consider the issue of prudence in

this case. Instead, NOPSI and MSE filed a second federal com-

plaint challenging the Council’s authority to conduct a prudence

investigation. Civil Action No. 85-5273, Middle South Energy,

Inc., et al. v. City of New Orleans, et al. (E.D. La. filed No-

vember 14, 1985) (‘‘NOPSI II’). NOPSI II currently is the sub-

ject of a motion to dismiss on the grounds of, inter alia, lack

of ripeness, failure to exhaust administrative remedies, and ab-

stention. Assuming dismissal of NOPSI IJ, NOPSI will still have

an opportunity to seek judicial review of the Council's final

decision on prudence, which is expected to be issued at or near

the end of 1986.

" A copy of this NOPSI pleading has been lodged with the

Court.

10

The Council, in turn, publicly has stated that its reg-

ulatory proceedings would not seek to invalidate any

FERC-approved agreement relating to Grand Gulf I

or order NOPSI to pay MSE a wholesale rate other

than that determined by the FERC through its al-

location.

The Fifth Circuit withheld issuance of the mandate

following its February 14, 1986 opinion and, on June

10, 1986, advised the parties that it was contemplat-

ing revision of its treatment of abstention, requesting

letter briefs on this issue. On September 2, 1986, the

Fifth Circuit issued an order withdrawing Part IV of

its earlier opinion and substituting a new Part IV,

which concluded that ‘‘the district court’s decision to

abstain on the instant facts was a proper exercise of

diseretion.”’ (Pet. at A-24.) The Fifth Circuit found

that abstention was proper under both Burford and

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

REASONS FOR DENYING THE PETITION

I. THIS ACTION HAS BEEN RENDERED MOOT BY

SETTLEMENT OF THE RETAIL RATE PROCEED-

ING

The issue NOPSI seeks to have this Court decide—

whether the District Court erred in abstaining in the

face of a claim of federal preemption—has been ren-

dered moot by the March 1986 settlement of the retail

rate proceeding before the Council. The essence of

‘' The letter brief submitted by the City had informed the

Fifth Circuit of the settlement, and the NOPSI letter brief spe-

cifically addressed the issue of mootness. The Court, however,

did not discuss the settlement or address the issue of mootness,

and simply revised the prior opinion issued in February.

11

NOPSI’s preemption claim was that, in the wake of

the FERC’s allocation of Grand Gulf costs at the

wholesale level, the Council had no lawful retail rate-

making functions to perform and was obligated simply

to implement a full and immediate pass-through of

wholesale costs to retail customers. NOPSI’s preemp-

tion claim did not survive the settlement, which ad-

dressed the very matters NOPSI had contended were

beyond the Council’s jurisdiction and, with NOPSI’s

concurrence, fashioned a comprehensive plan for re-

covery of Grand Gulf costs in retail rates. As NOPSI

itself recently acknowledged in NOPSI II, ‘‘all of these

traditional retail rate issues have already been re-

solved.’’ Thus, review by this Court of the District

Court’s determination to abstain would serve no pur-

pose and would not affect the rights of the parties.

This Court has held that it is the duty of federal

courts ‘‘to decide actual controversies by a judgment

which can be carried into effect, and not to give

opinions upon moot questions or abstract propositions,

or to declare principles or rules of law which cannot

affect the matter in issue in the case before it.’’ Local

No. 8-6, Oil, Chem. & Atomic Workers v. Missour.,

361 U.S. 363, 367 (1960), citing Mills v. Green, 159

U.S. 651, 653 (1895). Moreover, an actual controversy

and an adversity of interests must exist “‘at all stages

of appellate or certiorari review, and not simply at

the date the action is initiated.’’ Roe v. Wade, 410

U.S. 118, 125 (1973). Given the settlement between

NOPSI and the Council, any decision by this Court

on.the abstention issue would be purely advisory and

would not affect the rights of the parties.

NOPSI seeks to downplay the effect of the ‘‘partial

settlement” (Pet. at 6 n. 7), arguing that the settle-

iciiieiiiaaiieeeeeea

~~

i)

ment ‘‘did not contemplate or require that any liti-

gation between the parties be dismissed” and that

the Council reserved all its rights, including ‘‘alleged

rights” (id.) to review NOPSI’s prudence with respect

to Grand Gulf and to abrogate certain NOPSI con-

tracts respecting Grand Gulf.

On the first point, the fact that the settlement did

not expressly require dismissal of this action is of no

consequence because the settlement in fact disposed

of the issues before the District Court. On the second

point, the answer is that the rights reserved by the

Council were not at issue before the District Court

and, in fact, are at issue in separate pending litiga-

tion.'* While NOPSI speculates that the outcome of

other litigation may later affect the retail rates estab-

lished pursuant to the settlement, this Court has held

that “speculative contingencies afford no basis for our

passing on the substantive issues [the petitioner] would

have us decide.” DeFunis v. Odegaard, 416 U.S. 312,

320 n. 5 (1974), citing Hall v. Beals, 396 U.S. 45, 49

(1969); see also Local No. 8-6, Qil, Chem. & Atomic

Workers, supra, 361 U.S. at 370.

As noted earlier, the Council currently is conducting an

investigation of NOPSI’s prudence with respect to Grand Gulf.

NOPSI challenged the Council’s right to conduct such an in-

vestigation through a second complaint filed before the Eastern

District of Louisiana in NOPSI IJ, but has since amended its

complaint so as to limit its objection to the type of remedy the

Council could order if it found imprudence. In filing the second

complaint, NOPSI specifically alleged that it raised an issue—

prudence—not foreclosed by dismissal of the instant action. The

other reserved right of the Council alluded to by NOPSI, in-

volving potential abrogation of certain NOPSI contracts, is the

Subject of tigation pending before a Louisiana court and was

not before the District Court in this matter.

13

For these reasons, this case is moot and the NOPSI

petition should, accordingly, be denied."

Il. THE FIFTH CIRCUIT’S DECISION TO ABSTAIN

WAS PROPER AND CREATES NO CONFLICT

AMONG THE CIRCUIT COURTS

The abstention doctrine is based on notions of com-

ity and on the iong-standing policy that the federal

courts should not ordinarily interfere with state ju-

dicial and administrative proceedings.'! This Court has

's The Court has stated that its normal practice in dealing

with a civil case from a federal court that has become moot is

to vacate the judgment below and remand with directions to

dismiss. United States v. Munsingwear Corp., 340 U.S. 36 (1950).

However, respondents urge the Court in this case to follow the

course advocated by the government (and perhaps taken by this

Court) in Velsicol Chem. Corp. v. United States, 435 U.S. 942

(1978), which suggests that in situations where the Court would

have denied the petition on the merits (see discussion, infra,

pp.13-26), it should deny the petition notwithstanding a sugges-

tion of mootness. Cf. Local 102, International Ladies’ Garment

Workers’ Union v. United States, 489 U.S. 1070 (1979). Denial

of the petition is particularly appropriate here, where mootness

results not from events beyond the control of the petitioning

party but from a settlement voluntarily entered into by both

parties. Ringsby Truck Lines, Inc. v. Western Conf. of Teamsters,

686 F.2d 720 (9th Cir. 1982). Alternatively, the Court should

deny the NOPSI petition regardless of whether, but for moot-

ness, it would have granted certiorari, because NOPSI had a

“full and fair opportunity to litigate’? the abstention issue before

the District Court and the Fifth Circuit, and has no entitlement

to further review by the Supreme Court. See Note, Collateral

Estoppel and Supreme Court Disposition of Moot Cases, 78 Mich.

L. Rev. 946 (1980).

'4In Younger v. Harris, 401 U.S. 36, 44 (1971), this Court

referred to these basic principles as ‘“‘Our Federalism’’ and noted

that the concept represents ‘‘a system in which there is sensi-

14

defined three general categories of abstention, two of

which were relied upon by the Fifth Circuit in this

case.!°

The principal thrust of NOPSI’s petition is that the

Fifth Circuit’s decision to abstain on the facts of this

case was erroneous and creates a direct conflict with

decisions of other circuit courts. With unabashed hy-

perbole, NOPSI asserts that this abstention issue

“may become the major legal battleground in utility

regulatory matters during the latter half of the 20th

century.”’ (Pet. at &, footnote omitted).

In truth, the Fifth Circuit’s decision to abstain

properly focused on the circumstances of this case,

which arose under a statutory scheme that explicitly

preserves the authority of local regulators over retail

electric rates, and involved a local regulator that had

not yet had an opportunity to issue a final decision.

The court recognized “that abstention in the face of

a federal preemption claim is, at a minimum, prob-

tivity to the legitimate interests of both State and National

Governments... .’’ See also, Colorado River Water Conservation

District v. United States, 424 U.S. 800 (1976).

'° See Burford v. Sun Oil Co., 319 U.S. 315 (1943) (“Burford

abstention’’), Younger v. Harris, 401 U.S. 87 (1971) (“Younger

abstention”), and Railroad Commission of Texas v. Pullman Co.,

312 U.S. 496 (1941) (“Pullman abstention”). The Fifth Circuit

relied on Burford and Younger, but Pullman also supported

dismissal of the complaint in this case because, but for the

settlement, state court review of issues of state law addressed

in a final Council decision on NOPSI’s rate application might

well have eliminated the need to decide NOPSI’s claims based

on the Supremacy and Commerce Clauses of the Federal Con-

stitution. If the Fifth Circuit’s decision to abstain is supportable

on any basis, it should be upheld. See Helvering v. Gowran, 302

U.S. 238, 245 (1937).

15

lematical,”” and expressly declined to intimate ‘‘that

abstention in the face of a preemption claim under

the Federal Power Act may never constitute an abuse

of discretion... .’’ (Pet. at A-15, A-17). While other

circuits have declined to abstain when confronted with

a preemption claim in other circumstances, those cases

either have not involved the strong tradition of state

control over retail rates preserved by the Federal

Power Act or have involved state action directly in

conflict with a federal statute.'* Even circuit courts

that have declined to abstain have simultaneously de-

clined to establish a per se rule against abstention in

the context of a preemption claim." |

In short, there exists no hard-and-fast rule for or

against abstention in the face of a federal preemption

claim. and the lower courts are proceeding on a Case-

by-case basis to strike a reasonable balance between

the interest of federal plaintiffs in a federal forum

and the need for deference to the state judicial and

administrative process. Plenary review is not war-

ranted here, particularly in view of the guidance re-

cently provided by this Court on the issue of

abstention, Ohio Civil Rights Comm’n v. Dayton

Christian Schools, Inc., 106 S.Ct. 2718 (1986), and on

the underlying issue of preemption, Nantahala Power

and Light Co. v. Thornburg, 106 S.Ct. 2349 (1986).

* See pp. 21-24, insra.

‘7 See, e.g., Baggett v. Dept. of Professional Regulation, Board

of Pilot Commissioners, 717 F.2d 521, 524 (11th Cir. 1983);

Kentucky West Virginia Gas Co. v. Pennsylvan ia Public Utilities

Commission, 791 F.2d 1111, 1117 (3d Cir. 1986).

iii

16

A. Burford Abstention Was Proper on the Facis of This !

Case

Burford abstention is appropriate where there ex-

ists a comprehensive state regulatory system and

where federal interference would disrupt efforts to

develop a reasoned response to a matter of legitimate

local concern. In finding Burford abstention proper

in this case, the Fifth Circuit properly accorded sig-

nificance to the “‘bright line’’ that exists between fed-

eral and state jurisdiction under the Federal Power

Act, denying ‘“‘state power to regulate a sale ‘at

wholesale to local distributing companies’ and _al-

low[ing] state regulation of the sale at ‘local retail

rates to ultimate consumers.’ ’’'* While NOPSI’s ar-

guments focused on the potential for disruption of a

federal scheme, the Fifth Circuit correctly found that

federal court intervention in this case might well

“constitute a disruption of a state regulatory scheme,

for retail ratemaking is clearly a field left to the

jurisdiction of the states.’’!

With this dual system of state and federal regu-

lation in mind, the Fifth Circuit correctly found that

the precepts for Burford abstention were satisfied in

this case. Pet. at A-19, A-20. First, the regulation of

retail rates is a matter of substantial local concern

* FPLC. v. Southern California Edison Co., 376 U.S. 205, 214

(1964), quoting Illinois Natural Gas Co. v. Central Illinois Public

Service Co., 314 U.S. 498, 504 (1942).

'' Pet. at A-16. (emphasis in original). Resolution of the ab-

stention issue presented by this case did not require a deter-

mination of the precise limits of the Council’s authority to

determine retail rates following the FERC’s allocation of whole-

sale costs, for the Council had not yet had an opportunity to

rule on the merits of NOPSI’s rate application. As the Fifth

NN et ai A ane

17

and require: 'ocal administrative expertise. In the ex-

treme and unusual circumstances of this case, the

Council had a legitimate interest in addressing—1n-

deed, a responsibility to address—the threat of “‘rate

shock’’ to the entire New Orleans economy and pop-

ulation.””

Second, the Fifth Circuit also correctly concluded

that the Louisiana state courts were fully competent

to resolve NOPSI’s claims based on actions taken by

the Council.2! The local administrative process pro-

vided NOPSI with the right to support its position

through testimony and evidence, and further provided

Circuit stated: ‘‘Concerns of federalism lead us to treat chal-

lenges to anticipated state action ‘with special skepticism.’ ”’ Pet.

at A-24, quoting 17 Wright, Miller & Cooper, Federal Practice

and Procedure § 3532.6 (Supp. 1986). Thus, this case, as it

confronted the District Court, did not require resolution of issues

such as those this Court decided in Nantahala Power and Light

Co. v. Thornburg, 106 S.Ct. 2349 (1986).

“” Evidence developed in the Council proceedings showed that

the immediate, unmitigated pass-through of Grand Gulf costs

would result in the loss of over 6,000 jobs, make it impossible

for over 1,100 otherwise qualified families to qualify for mort-

gage loans, push the income of 1,760 families below the poverty

line, reduce state and local tax revenues by over $30 million

annually, and otherwise have a profound adverse effect on local

manufacturing and service businesses.

“1 See Alabama Public Service Commission v. Southern Ry. Co.,

341 U.S. 341, 349-50 (1951), in which this Court found that an

injunction should not be granted if there is ‘‘adequate state court

review of an administrative order based upon predominately local

factors ....’’ While the Fifth Circuit focused on the competence

of Louisiana courts to address federal claims, and seemed to

suggest that no issues of state law were involved, a final Council

decision on NOPSI’s application almost certainly would have

involved novel issues of state utility law.

18

for direct appeal of the Council’s ruling to the Civil

District Court for the Parish of Orleans.” The result

of abstention is not the absence of federal judicial

review. Instead, the abstention doctrine requires that

a matter be referred first to the local regulator and

the local courts for development, review and rectifi-

cation, with ultimate review, if needed, by this Court.”

“The path followed in contemporaneous circumstances by

LP&L, NOPSI’s sister company, illustrates the proper course of

litigation. First, LP&L sought federal injunctive relief to require

the. Louisiana Public Service Commission (‘‘LPSC’’) to immedi-

ately pass through its Grand Gulf costs. The district court dis-

missed this action on the basis of the Johnson Act. Louisiana

Power & Light Co. v. Ackel, 616 F.Supp 445 (M.D. La. 1985).

LP&L then commenced a similar action in state court. The state

court initially remanded the case to the LPSC for expedited

consideration. Louisiana Power & Light Co. v. Louisiana Public

Service Commission, No. 292,026, Slip Op. at 3 (19th Dist. La.,

Aug. 29, 1985). When the LPSC flatly refused to recognize the

Grand Gulf costs, the state court swiftly found that the LPSC

was acting arbitrarily and capriciously and imposed an immediate

remedy. Louisiana Power & Light Co. v. Louisiana Public Ser-

vice Commission, No. 292,026 (19th Dist. La., Oct. 9, 1985).

°3 See, e.g., Nantahala Power and Light Co. v. Thornburg, 106

S.Ct. 2349 (1986). See also Robert-Gay Energy Enterprises, Inc.

v. State Corporation Commission of Kansas, 753 F.2d 857, 860

(10th Cir. 1985) (“If adequate state court review of an admin-

istrative order based upon predominantly loca! factors is avail-

able, intervention of a federal court is not necessary for the

protection of federal rights.’’); Browning-Ferris, Inc. v. Balti-

more County, Maryland, 774 F.2d 77, 80 (4th Cir. 1985) (ongoing

state administrative proceedings were found to provide ‘‘the op-

portunity for adequate and fair administrative review.’’); and

Allegheny Airlines, Inc. v. Pennsylvania Public Utility Commis-

ston, 465 F.2d 237, 242 (8rd Cir. 1972), cert. denied, 410 U.S.

943 (1973) (federal courts should refuse to intervene when ad-

equate state judicial review is available.)

ee ee ee ee

ee a ee Fane

19

B. Younger Abstention Was Proper On The Facts Of This

Case.

The Fifth Circuit proper!y concluded that abstention

was required under Younger v. Harris, 401 U.S. 37

(1971), which holds that abstention is appropriate

where, absent bad faith, harassment, or a patently

invalid state statute, federal claims can be raised and

preserved in ongoing state judicial proceedings that

concern important state interests." The facts of this

case satisfied each element of the three-prong test

for Younger abstention, as recently set forth in- Ohio

Civil Rights and Middlesex County Ethics Commiitee

v. Garden State Bar Association, 457 U.S. 423 (1982).

Pet. at A-23, A-24.

First, the Fifth Circuit properly found, consistent

with this Court’s decisions in Middlesex® and Ohio

Civil Rights Commission v. Dayton Christian Schools,

Inc., 106 S.Ct. 2718 (1986),?° that an administrative

24 Although Younger originally was limited to pending state

criminal proceedings, this Court’s decision in Middlesex County

Ethics Committee v. Garden State Bar Association, 457 U.S.

423, 432 (1982), makes clear that the doctrine is applicable to

non-criminal proceedings ‘“‘when important state interests are

involved.”’ See also, Ohio Civil Rights Commissicn v. Dayton

Christian Schools, Inc., 106 S.Ct. 2718 (1986).

2° In Middlesex, this Court found that state bar disciplinary

proceedings before a ‘‘District Ethics Committee’’ were judicial

proceedings within the meaning of Younger. 457 U.S. at 432-

433.

26 In Ohio Civil Rights, this Court held that an administrative

proceeding before the Ohio Civil Rights Commission to deter-

mine whether a school was guilty of employment discrimination

was a judicial proceeding. 106 S.Ct. at 2723.

20

proceeding before the Council is judicial because it is

appealable ‘* a state court.”

Second, for reasons already discussed, the Council’s

ongoing administrative proceeding clearly involved an

‘important state interest’ in determining the retail

rate treatment of Grand Gulf costs. NOPSI now claims

that it did not seek to enjoin the Council’s right to

set retail rates, but NOPSI’s request for a full and

immediate pass-through of Grand Gulf charges—be-

fore any final ruling by the Council—clearly conflicted

with the Council’s right and obligation to consider

such local regulatory issues as rate shock, rate design

and phase-in.

Finally, but for the intervening settlement, NOPSI

would have had ample opportunity to present its fed-

eral claims to the Louisiana Civil District Court fol-

lowing Council action on its rate application. As the

Fifth Circuit observed, NOPSI cited ‘‘no authority

indicating that state review cannot be had of its

IIPon

claims.”

-" Pet. at A-23. See United Services Automobile Association v.

Muir, 792 F.2d 356, 365 (83rd Cir. 1986) (a state administrative

proceeding is part of its judicial proceeding, for Younger pur-

poses, if it provides an adequate opportunity to raise constitu-

tional challenges); Williams v. Red Bank Board of Education,

662 F.2d 1008, 1017 (8rd Cir. 1981) (where federal intervention

into state administrative proceedings would be substantial and

disruptive, and where the state proceedings are adequate to

vindicate federal claims and reflect strong and compelling state

interests, abstention is proper under Younger). Cf; Hawaii Hous-

ing Authority v. Midkiff, 467 U.S. 229, 238 (1984) (Younger

abstention not appropriate where under the terms of the Hawaii

Land Reform Act of 1967, administrative proceedings are not

part of, and are not themselves, a judicial proceeding).

*-NOPSI also argues that abstention typically is not invoked

21

C. There Is No Per Se Rule Barring Abstention In The

Face Of Preemption Claims, And The Circuit Courts

Properly Have Addressed The Issue Of Abstention On

A Case-By-Case Basis.

In determining that this was an appropriate case

for abstention, the Fifth Circuit was fully aware that

the circuit courts have not developed a uniform policy

either requiring or prohibiting abstention whenever a

claim of federal preemption is asserted. Instead, the

courts have applied settled abstention jurisprudence

to the facts of each case, with particular attention to

unless the state is the plaintiff in a state court action. As the

Fifth Circuit noted, however, this view has been ‘vigorously

criticized.’”’ Pet. at A-22 n. 2, quoting 17 Wright, Miller & Cooper,

Federal Practice and Procedure § 4254 at 216 (Supp. 1986). See

also American Electric Power Co. v. Kentucky Public Service

Commission, No. 85-5129 (6th Cir. Mar. 24, 1986), petition for

cert. filed, 55 U.S.L.W. 3032 (U.S. July 17, 1986) (No. 86-49).

NOPSI further argues that two exceptions to the Younger doc-

trine—bias of the agency and irreparable harm to the federal

plaintiff—are applicable in this case. However, the Fifth Circuit

found that there was no “bad faith, harrassment [sic] or other

exceptional circumstances’’ sufficient to preclude Younger ab-

stention. (Pet. at. A-24). Unlike the situation in Gibson v. Ber-

ryhill, 411 U.S. 564 (1973), which involved hearings before an

administrative board, the members of which had a substantial

and personal pecuniary interest in the outcome, there was no

suggestion here that the Council or its individual members had

any pecuniary interest in the disposition of NOPSI’s rate ap-

plication. Moreover, NOPSI’s assertion that the Council is pur-

suing a plan to take over the company’s electric utility business

was the subject of a separate federal court action dismissed for

lack of ripeness. Middle South Energy, Inc., et al. v. City of

New Orleans, 800 F.2d 488 (5th Cir. 1986). Finally, this case

involved no threat of irreparable injury sufficient to evade

Younger, and the cases cited by NOPSI on this point (Pet. at

17 n. 20) either involved no abstention issue or were decided

before both Younger and Burford.

22

the status of the state proceeding and the extent to

which it has conflicted with, or is likely to conflict

with, the federal scheme. The flexibility and effec-

tiveness of the lower courts in addressing this issue,

and the absence of any need for further guidance

from this Court, are illustrated by examining not just

the results reached by different circuits but also the

different results reached by particular circuits in dif-

fering factua! and legal contexts.

For example, in a different factual setting, the Fifth

Circuit itself has refused to abstain from intervening

in ongoing state administrative proceedings. In South

Central Bell Telephone Co. v. Louiviana Public Service

Commission, 744 F.2d 1107 (5th Cir. 1984), vacated

and remanded on other grounds, 106 S.Ct. 2884

(1986), the Fifth Circuit found that regulatory action

by the Louisiana Commission was “directly contrary’’

to an order issued by the Federal Communications

Commission and that the case was “in no way de-

pendent on local factors or local expertise for [its]

resolution.” 744 F.2d at 1123. Under these circum-

stances, abstention was held to be improper.

Similarly, the Fourth Circuit has reached different

conclusions, in differing contexts, regarding the pro-

priety of abstaining in the face of a preemption claim.

In Aluminum Co. of America v. Utilities Comm’n of

State of North Carolina, 713 F.2d 1024 (4th Cir. 1983), |

cert. denied, 465 U.S. 1052 (1984), the court abstained

under Burford from reviewing a state commission rate

order involving ‘important and basic considerations

of state policy” (id. at 1029), but noted that a refusal

to abstain would be required where the “challenged

state action clearly conflicts with preemptive federal

law.”’ Id. at 10380. Subsequently, the Fourth Circuit

23

upheld a lower court’s refusal to abstain where the

state commission, in reliance upon a West Virginia

statute, created a “direct, facial conflict’’ with federal

law by asserting authority to disapprove an interstate

transmission agreement previously approved by the

FERC. Appalachian Power Co. v. Public Service Com-

mission of West Virginia, 614 F.Supp. 64 (S.D.W.Va.

1985), aff'd, 770 F.2d 159 (4th Cir. 1985), on remand,

630 F. Supp. 656 (S.D.W.Va. 1986).”

Other cases relied upon by NOPSI in an effort to

show dissension among the circuits. do not involve a

statutory regime, such as the Federal Power Act,

which carefully preserves the role of state regulation,

and these cases establish no per se rule for or against

abstention.*

2° Other cases that involved the Federal Power Act or the

Natural Gas Act and in which the court refused to abstain li-

kewise involved a direct, facial conflict. Kentucky West Virginia

Gas Co. v. Pennsylvania Publie Utilities Commission, 791 F.2d

1111 (3rd Cir. 1986), (outright denia! by Pennsylvania Commis-

sion of a utility's request to recover costs it incurred pursuant

to FERC-approved tariffs); Middle South Energy, Inc. v. Ar-

kansas Public Service Comm’n, 772 F.2d 404 (8th Cir. 1985),

cert. denied, 106 S. Ct. 884 (1986) (direct attempt by APSC to

declare FERC-approved agreements void ab initio). NOPSI’s

contention (Pet. at 8) that Middle South Energy involved the

‘“dentical abstention issue” presented in this case is specious.

% Family Division of Trial Lawyers v. Moultrie, 725 F.2d 695

(D.C. Cir. 1984) (no Younger abstention because several federal

plaintiffs were not parties to state court action in which con-

stitutional challenges would be resolved); Baggett v. Department

of Professional Regulation, Board of Pilot Commissioners, 717

F.2d 521 (11th Cir. 1983) (no Younger abstention where involved

tug boat pilotage subject to exclusive federal jurisdiction); In-

ternational Brotherhood of Electrical Workers v. Public Service

Commission of Nevada, 614 F.2d 206 (9th Cir. 1980) (Burford

ye

24

Finally, the Sixth Circuit’s decision in American

Electric Power Co. v. Kentucky Public Service Com-

mission, No. 85-5129 (6th Cir. March 24, 1986),

petition for cert. filed, 55 U.S.L.W. 3032 (U.S. July

17, 1986) (No. 86-49), represents a proper exercise of

federal court discretion to invoke Younger abstention

where an important state interest was involved and

the claim of federal preemption could be raised in an

ongoing state judicial proceeding. Even American

Electric bears important factual distinctions from this

case, however, since the state commission there had

rendered a final decision and the relief sought did

not, in the view of the court’s majority, implicate

questions of state law (regarded by the majority as

necessary for Burford abstention). Here, the Council

had not had an opportunity to rule on the merits of

federal or state law issues raised by NOPSI’s retail

application.

III. THE JUDGMENT BELOW ALSO IS SUPPORTA-

BLE ON GROUNDS OF LACK OF RIPENESS AND

FAILURE TO EXHAUST ADMINISTRATIVE

REMEDIES

There exist two alternative grounds upon which dis-

missal of NOPSI’s complaint could properly have been

based: lack of ripeness and failure to exhaust admin-

istrative remedies. Although these grounds were not

relied upon (or, for that matter, directly considered)

by the District Court or the Fifth Circuit, they were

abstention inappropriate for preemption claim based on Labor

Management Relations Act, though Pullman abstention deemed

appropriate); see also California v. Oroville-Wyandotte I rrigation

District, 409 F.2d 532 (9th Cir. 1969) (federal courts should not

intervene where federal preemption claims may be raised in

pending state administrative proceedings).

25

argued by respondents at all stages of the litigation

and provide independent support for the judgment of

dismissal.

The ripeness doctrine is intended to prevent the

federal courts “from entangling themselves in ab-

stract disagreement over administrative policies, and

also to protect the agencies from judicial interference

until an administrative decision has been formalized

and its effects felt in a concrete way by the chal-

lenging parties.” Abbott Laboratories v. Garner, 387

U.S. 136, 148-149 (1967). See also Socialist Labor

Party v. Gilligan, 406 U.S. 583 (1972). The claims

asserted by NOPSI in this case clearly were prema-

ture because they were presented before the Council

had ruled upon the merits of NOPSI’s retail rate ap-

plication. At this early stage, it was impossible to

determine whether the Council’s actions would ac-

tually be in conflict with the FERC’s allocation of

Grand Gulf expenses at the wholesale level.*! More-

over, NOPSI did not face “hardship” sufficient under

Abbott to warrant judicial relief in advance of the

Council’s determination on the merits, since the Coun-

cil had afforded interim relief and, as the District

Court found (Pet. at. A-45), was “‘utilizing every fea-

sible alternative to keep NOPSI in a cash positive

position.’

31 See Pacific Gas and Electric Co. v. State Energy Resources

Conservation and Development Commission, 461 U.S. 190 (1983),

in which this Court held that a preemption challenge to a state

commission charged with responsibility for determining the ad-

equacy of a nuclear plant’s storage capacity was not ripe for

review since the state commission had not yet found the plant’s

capacity to be inadequate.

82 This Court’s recent decision in Ohio Civil Rights does not

mamma

26

The doctrine of exhaustion of administrative rem-

edies provides ‘‘that no one is entitled to judicial relief

for a supposed or threatened injury until the pre-

scribed administrative remedy has been exhausted.”’

Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41,

50-51 (1938). This prohibition applies with equal force

to state administrative proceedings. See Public Service

Commission v. Wycoff Co., 344 U.S. 237 (1952); II-

linois Commerce Commission v. Thomson, 318 U.S.

675 (1943); Natural Gas Pipeline Co. v. Slattery, 302

U.S. 300 (1937). In this case, NOPSI improperly

sought judicial intervention without first attempting

to exhaust its administrative remedies before the

Council and, indeed, obstructed the administrative

process by depleting the Council’s limited resources

through an expedited motions practice in federal

court. Such disruption of the administrative process

is precisely what the exhaustion requirement is de-

signed to avoid, and the wisdom of requiring that

administrative remedies be pursued is underscored by

the fact that the Council proceedings culminated in

a settlement of the issues raised by NOPSI’s federal

complaint.

support a finding of ripeness here. There the Court, relying on

Steffel v. Thompson, 415 U.S. 452 (1974), and Doran v. Salem

Inn, Inc., 422 U.S. 922 (1975), held that the actual filing of an

administrative action threatening sanctions in breach of rights

protected by the First Amendment presented a ripe controversy,

just as threatened criminal prosecutions in violation of consti-

tutional rights presented ripe controversies in Steffel and Doran.

Here, even if NOPSI’s preemption claim were regarded as con-

stitutional (contrary to petitioner’s position), it did not implicate

personal constitutional rights and, as a practical matter, could

not have been adjudicated before the scope of the Council’s final

decision was known.

27

IV. THE JOHNSON ACT DEPRIVED THE DISTRICT

COURT OF JURISDICTION

The Court should deny the petition because this

case has become moot, because the District Court

properly abstained, and because NOPSI’s claims were,

in any event, premature. Should the Court grant the

petition, however, it would be appropriate to consider

whether the Fifth Circuit erred in overruling the Dis-

trict Court’s determination that the Johnson Act, 28

U.S.C. § 1342 (1982), barred the exercise of federal

jurisdiction in the circumstances of this case. In its

first opinion, the Fifth Circuit held that the Johnson

Act did not bar jurisdiction because its first crite-

rion—that jurisdiction be based solely on repugnance

of the state commission’s rate order to the Federal

Constitution—had not been satisfied. This holding was

not altered by the second opinion, which affirmed the

District Court on the issue of abstention.

With due respect, the Fifth Circuit erred when it

held that a claim of federal preemption, which ulti-

mately is grounded in the Supremacy Clause, should

be treated as a statutory claim rather than a consti-

tutional claim for Johnson Act purposes. Although the

court characterized NOPSI’s preemption claim as

“statutorily-based”’ (as did NOPSI), at no point did it

identify a federal right of action available to NOPSI

under any provision of the Federal Power Act.** This

83 The Fifth Circuit did not decide whether jurisdiction existed

under 16 U.S.C. § 825p, which grants jurisdiction to the federal

courts to enforce duties created by the Federal Pov.er Act or

by orders of the FERC. (Pet. at A-5). The District Court held

that § 825p did not support federal jurisdiction because no “duty”

was imposed on the Council by either the Act or the FERC’s

Opinion No. 234. (Pet. at A-42.) A similar result was reached

28

Court has on occasion characterized preemption claims

as statutory where such treatment served a valid pol-

icy objective, Swift & Co. v. Wickham, 382 U.S. 111

(1965) (claimed invalidity of state statute under Su-

premacy Clause due to conflict with federal statute

deemed not to involve a constitutional challenge re-

quiring three-judge court under 28 U.S.C. § 2281 (re-

pealed 1976)), but treating preemption claims as

statutory for purposes of the Johnson Act would ef-

fectively nullify that provision’s important limitation

on federal jurisdiction, especially in view of the prev-

alence of preemption claims today. While respondents

do not believe that this case is a proper vehicle for

Supreme Court review of any issue raised by the

petition, should certiorari be granted the Johnson Act

issue could properly be considered and would provide

én independent ground for sustaining the judgment

below.*4

CONCLUSION

For all of these reasons the petition should be de-

nied.

in Louisiana Power & Light Co. v. Ackel, 616 F.Supp. 445 (M.D.

La. 1985).

‘*The Johnson Act issue is properly raised in this brief in

opposition because a cross-petition is not necessary for the pre-

vailing party to defend its judgment on any ground properly

raised below, so long as it would not change the judgment.

Washington v. Yakima Indian Nation, 439 U.S. 463, 476 n. 20

(1979); United States v. New York Telephone Co., 434 U.S. 159,

166 n. 8 (1977).

OKLA JONES, II

City Attorney

THomas W. MILLINER

Deputy City Attorney

Bruce E. NACCARI

Assistant City Attorney

1300 Perdido Street

New Orleans, Louisiana

(504) 586-4651

70112

Brop BAGERT

AUGUSTINE, BAGERT, MCCONDUIT

AND HILFERTY

Suite 1800

1100 Poydras Street

New Orleans, Louisiana

(504) 582-2223

70163

29

Respectfully submitted,

CLINTON A. VINCE*

L. JOHN OSBORN

BERNHARDT K. WRUBLE

BARBARA K. HEFFERNAN

RoBERT J. MANGAS

VERNER, LIIPFERT, BERNHARD,

McPHERSON AND

HAND, CHARTERED

1660 L Street, N.W.

Suite 1000

Washington, D.C. 20036

(202) 775-1047

*Counsel of Record

November 7, 1986

CURIAE

EF

Cs) Supreme Court, U.S.

\2/ EILED

NOV, 7% 1986

WOSEPH F. SPANIOL, JR.

In the Supreme Court of the

OCTOBER TERM, 1986

NEw ORLEANS PUBLIC SERVICE, INC., PETITIONER

v.

THE City OF NEw ORLEANS, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE FIFTH CIRCUIT

MEMORANDUM FOR THE UNITED STATES

AS AMICUS CURIAE

CHARLES FRIED

Solicitor General

Department of Justice

Washington, D.C. 20530

(202) 633-2217

In the Supreme Court of the Gnited States

OCTOBER TERM, 1986

No. 86-546

New ORLEANS PUBLIC SERVICE, INC., PETITIONER

¥.

THE City OF NEW ORLEANS, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE FIFTH CIRCUIT «

MEMORANDUM FOR THE UNITED STATES

AS AMICUS CURIAE

On October 6, 1986, the Court invited the Solicitor

General to file a brief expressing the views of the United

States in American Electric Power Co. v. Kentucky Public

Service Commission, No. 86-49. That case presents the

questicn whether, when a public utility brings a suit in

federal court against a state public service commission,

claiming that the state commission’s ratemaking deter-

mination violates the “filed rate doctrine” under which a

state commission is bound to honor the interstate

wholesale rates filed with or fixed by the Federal Energy

Regulatory Commission (see Nantahala Power & Light

Co. v. Thornburg, No. 85-568 (June 17, 1986) slip op. 8),

it is inappropriate for the federal court to abstain from ad-

judicating the federal claim.

On October 3, 1986, petitioners in the present case filed

a petition for a writ of certiorari that raises a similar ques-

tion in a somewhat different procedural posture. In our

response to the Court’s invitation in No. 86-49, which we

expect to file promptly, we will offer the Court our views

l

mm

2

on whether the question presented in these cases merits the

Court’s attention at this time and, if so, which, if either, of

the two cases presents the question in an appropriate

posture for this Court’s review. We therefore suggest that

the Court postpone its disposition of the petition in No.

86-546 until we have had an opportunity to express the

views of the United States in No. 86-49.

It is therefore respectfully submitted that the petition

for a writ of certiorari should be considered together with

the petition for a writ of certiorari in American Electric

Power Co. v. Kentucky Public Service Commission, No.

86-49.

CHARLES FRIED

Solicitor General

NOVEMBER 1986

U.S. GOVERNMENT PRINTING OFFICE: 1986— 181-483/40065