767 F.3d 912
9th Cir.2014Background
- Bonneville Power Administration (BPA) marketed federal power in the Pacific Northwest and must operate according to "sound business principles" and statutory rate rules favoring public "preference" customers.
- BPA entered into several monetized/subsidy arrangements with aluminum direct-service industrial customers (DSIs) — notably the 2007 Block Contracts and a later Alcoa Amendment — and a subsidized resale arrangement for Port Townsend via Clallam County.
- This court in PNGC I (580 F.3d 792) and PNGC II (596 F.3d 1065) invalidated the subsidy/monetization provisions as contrary to BPA’s statutory obligations and remanded whether BPA should seek refunds.
- On remand (the Lookback), BPA concluded: the Block Contracts contained enforceable damages-waivers (so refunds barred); the Alcoa Amendment presented little or no viable legal/equitable basis for recovery and exposed BPA to counterclaims; and recovery from Port Townsend was legally and practically uncertain — so BPA declined to pursue refunds.
- Preference customers and other petitioners challenged BPA’s decision not to seek refunds; the court reviewed BPA’s Lookback under the APA arbitrary-and-capricious standard with deference to business-judgment findings.
Issues
| Issue | Plaintiffs' Argument | Defendant's Argument (BPA) | Held |
|---|---|---|---|
| Whether BPA is constitutionally or statutorily obligated to seek refunds of illegally disbursed funds | BPA must recover unlawfully disbursed funds (Appropriations Clause and § 838g duty to lower rates) | No blanket constitutional or statutory duty; decisions to seek recovery are discretionary business judgments | No categorical duty; BPA need not always pursue recovery; evaluate discretionary decisions under APA deference |
| Enforceability of damages-waiver clauses in the 2007 Block Contracts | Waivers cannot shield retention of unlawful subsidies and are contrary to statutory limits (PGE) | Waivers are mutual, severable, and a lawful exercise of BPA's settlement/compromise authority (Alcoa precedent) | Waivers enforceable here; BPA reasonably concluded waivers bar recovery under the Block Contracts — petition denied as to Block Contracts |
| Whether BPA reasonably declined to pursue recovery under the Alcoa Amendment (no waiver) | BPA had a duty to estimate recoverable amounts and pursue recovery; BPA improperly deferred to Alcoa’s counterclaim threats without adequate record analysis | Litigation risk, potential counterclaims (underpayment theory), and uncertain recoverable amount justified forgoing suit | BPA's stated reasons for abandoning recovery under the Alcoa Amendment were inadequately grounded; remand required for a defensible analysis and quantification |
| Whether BPA reasonably declined to pursue recovery from Port Townsend/Clallam arrangement | Petitioners: BPA should seek recovery | BPA: legal uncertainty (no direct contract with Port Townsend), practical limits (small amounts, bankruptcy, collection infeasibility) | Decision not to pursue was reasonable and adequately supported; petition denied as to Port Townsend |
Key Cases Cited
- Pacific Nw. Gen. Coop. v. Dep’t of Energy, 580 F.3d 792 (9th Cir. 2009) (invalidated 2007 Block Contracts monetization/subsidies; remanded waiver/severability issues)
- Pac. Nw. Gen. Coop. v. Bonneville Power Admin., 596 F.3d 1065 (9th Cir. 2010) (invalidated Alcoa Amendment subsidy; remanded refund questions)
- Alcoa, Inc. v. Bonneville Power Admin., 698 F.3d 774 (9th Cir. 2012) (upheld damages-waiver in comparable BPA contract; held BPA need not maximize profit and gave deference to BPA business judgments)
- Portland Gen. Elec. Co. v. Bonneville Power Admin., 501 F.3d 1009 (9th Cir. 2007) (BPA settlement/contracting authority is constrained by statutory limits)
- United States v. Wurts, 303 U.S. 414 (1938) (government may recover funds wrongfully or illegally paid)
- Office of Personnel Mgmt. v. Richmond, 496 U.S. 414 (1990) (court cannot order agency to expend funds contrary to statute)
- Heckler v. County Health Servs., 467 U.S. 51 (1984) (limits on equitable estoppel against the government)