Metropolitan Edison Co. v. Pennsylvania Public Utility Commission
767 F.3d 335
| 3rd Cir. | 2014Background
- Metropolitan Edison (Met-Ed) and Pennsylvania Electric (Penelec) (the Companies) sought to recover increased "line-loss" costs billed to them by PJM after FERC required PJM to switch from an average-loss to a marginal-loss methodology, which raised the Companies' wholesale charges.
- The Companies' ability to pass those costs to retail customers depended on whether line-loss costs were classified as generation (subject to a generation-rate cap from a prior Settlement Agreement) or transmission (recoverable via transmission riders).
- The Pennsylvania Public Utility Commission (PUC) ruled that the Companies must treat line-loss costs as generation costs; the Commonwealth Court (en banc) affirmed; the Pennsylvania Supreme Court and the U.S. Supreme Court denied further review.
- While the state appeals were pending, the Companies sued in federal district court seeking declaratory and injunctive relief under the Federal Power Act (FPA), the filed-rate doctrine, and the Due Process Clause to recover >$250 million in line-loss charges.
- The District Court dismissed the federal suit on issue-preclusion grounds; the Third Circuit affirmed, holding the Commonwealth Court decision precluded relitigation in federal court and rejecting the Companies' exceptions to full faith and credit and related jurisdictional/preemption arguments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Commonwealth Court decision precludes the Companies' federal claims (issue preclusion/collateral estoppel) | The Companies: state decision decided same federal-preemption and filed-rate issues, but exceptions apply; Counts II–III are distinct and not precluded | PUC: Commonwealth Court squarely decided filed-rate/trapping issues; state judgment final; full preclusion applies | Held: Issue preclusion applies; Counts I–III are precluded because they depend on the same adjudicated filed-rate/trapping issue (absent any valid exception) |
| Whether the state proceeding was "legislative" (so §1738 inapplicable) | The Companies: the PUC/Commonwealth Court action was legislative, not judicial, so Full Faith and Credit/statutory preclusion shouldn’t bar federal suit | PUC: state proceedings were adjudicative (on-the-record ALJ hearing, findings, adversarial process); character is judicial | Held: Proceedings were judicial in nature (NOPSI test); state characterization and record show adjudicative process; no legislative-exception to preclusion |
| Whether differing burdens/standards (difference-in-burden exception) defeat preclusion | The Companies: Commonwealth Court applied deferential review/standard that imposed a heavier burden than a federal de novo review, so preclusion should not bind the federal forum | PUC: Companies conflate standard of review with burden of persuasion; no meaningful heavier burden shown | Held: Even assuming such exception exists, Companies failed to show a materially heavier burden; exception does not save relitigation |
| Whether state tribunals lacked subject-matter jurisdiction because FPA/FERC preemption ousted state authority (so judgment void) | The Companies: FPA and the filed-rate doctrine preempt state jurisdiction to reclassify FERC-mandated wholesale transmission charges; state rulings void for lack of jurisdiction | PUC: FPA leaves a role for states; the PUC/Commonwealth Court had at least an arguable basis to adjudicate retail classification; concurrent jurisdiction presumption applies | Held: State tribunals had an arguable basis to act; the Companies' preemption argument is a merits defense (not a jurisdictional nullity); state-court jurisdiction not divested and State Decision stands |
Key Cases Cited
- New York v. FERC, 535 U.S. 1 (2002) (describing FERC jurisdiction over wholesale transmission and the role of federal regulation)
- Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953 (1986) (filed-rate doctrine requires state commissions to give binding effect to interstate rates set or filed with FERC)
- Mississippi Power & Light Co. v. Mississippi, 487 U.S. 354 (1988) (discussing "cost-trapping" and limits on state action where federal rates are implicated)
- Allen v. McCurry, 449 U.S. 90 (1980) (federal courts must give preclusive effect to issues already decided in earlier suits)
- Tafflin v. Levitt, 493 U.S. 455 (1990) (presumption of concurrent state-court jurisdiction over federal claims unless Congress clearly provides otherwise)
- Durfee v. Duke, 375 U.S. 106 (1963) (limits on applying res judicata where tribunal acted beyond its jurisdiction)
- San Remo Hotel, L.P. v. City & County of San Francisco, 545 U.S. 323 (2005) (federal courts must give full faith and credit to state-court judgments unless a recognized exception applies)
- Kentucky W. Va. Gas Co. v. Pa. Pub. Util. Comm’n, 837 F.2d 600 (3d Cir. 1988) (state agency adjudications can be judicial in nature and entitled to preclusive effect)
- Crossroads Cogeneration Corp. v. Orange & Rockland Utils., 159 F.3d 129 (3d Cir. 1998) (a tribunal’s determination of its own jurisdiction is generally given preclusive effect)
- Southern Union Co. v. FERC, 857 F.2d 812 (D.C. Cir. 1988) (declining to apply issue preclusion where state enforcement of an award would conflict with FERC jurisdiction)