6:13-cv-06487
W.D.N.Y.Mar 11, 2015Background
- NOCO (an ESCO) contracted with RG&E (a utility) under an Operating Agreement to obtain monthly capacity forecasts and buy wholesale capacity through NYISO auctions; the agreement incorporates various documents including RG&E’s Electric Supplier Manual (ESM), the NYISO ICAP Manual, and federally filed NYISO tariffs.
- From November 2007 to June 2013 RG&E allegedly combined NOCO’s and competitor USEP’s capacity forecasts and reported the combined figure as NOCO’s, causing NOCO to bid for and pay for USEP’s capacity; RG&E allegedly conceded the error but refused reimbursement.
- NOCO sued in New York State Supreme Court asserting state-law claims: breach of contract (RG&E), conversion (RG&E), breach of implied contract (USEP), unjust enrichment (USEP), and conversion (USEP).
- RG&E removed to federal court asserting federal-question jurisdiction under 28 U.S.C. § 1331, arguing the dispute concerns federally filed tariffs and NYISO procedures; NOCO moved to remand and APP/USEP opposed remand.
- The district court evaluated whether the complaint “arises under” federal law (well-pleaded complaint and artful-pleading doctrines), the scope of incorporated documents (ESM, ICAP Manual, NYISO tariff), and related defenses (primary jurisdiction, filed-rate doctrine).
- Court concluded NOCO’s claims are state-law causes of action that do not necessarily arise under federal law and remanded the case to state court; RG&E’s motion to dismiss was denied as moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal-question jurisdiction exists under §1331 (removal) | NOCO contends claims are state-law contract and tort claims brought in state court only | RG&E contends resolution requires interpretation of federally filed NYISO tariffs and related federal law, supporting removal | Court held no federal-question jurisdiction; remand granted — interpreting federal materials incidentally does not convert state claims into federal ones |
| Whether the complaint is an artful-pleading attempt to cloak federal claims | NOCO says it pleaded only state-law claims governed by NY law per the Operating Agreement | RG&E says incorporation of tariff-based documents makes federal law the only source of rights, so plaintiff artfully avoided federal claims | Court held NOCO did not artfully plead away a necessary federal question; parties have rights under state law documents too, so artful-pleading exception not met |
| Whether disputes must be decided first by NYISO/FERC (primary jurisdiction / dispute-resolution provisions) | NOCO proceeded in court without invoking NYISO/FERC remedies | RG&E argues forum/process provisions and tariff dispute procedures require administrative resolution first | Court noted primary jurisdiction and tariff dispute procedures are defenses/thresholds for administrative deference but are not jurisdictional and do not justify federal removal; primary jurisdiction requires a court have subject-matter jurisdiction first |
| Whether federal filed-rate doctrine or preemption prevents state-court adjudication | NOCO does not challenge tariff rates and frames claims as contract/tort under NY law | RG&E implies tariff-based rules and filed-rate principles affect the dispute | Court treated filed-rate doctrine as a merits defense, not a basis for federal jurisdiction; no preemption asserted and remand still warranted |
Key Cases Cited
- United States v. Bond, 762 F.3d 255 (2d Cir.) (jurisdictional threshold must be decided before merits)
- Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83 (U.S.) (subject-matter jurisdiction is threshold issue)
- Marcus v. AT & T Corp., 138 F.3d 46 (2d Cir.) (not every state claim touching filed tariffs arises under federal law)
- Romano v. Kazacos, 609 F.3d 512 (2d Cir.) (artful-pleading doctrine analysis)
- Grable & Sons Metal Prods. v. Darue Eng’g & Mfg., 545 U.S. 308 (U.S.) (when a state claim can ‘‘arise under’’ federal law for jurisdictional purposes)
- Sullivan v. American Airlines, 424 F.3d 267 (2d Cir.) (interpretation of federal law incidental to state claim does not create federal jurisdiction)
- Fax Telecom., Inc. v. AT & T, 138 F.3d 479 (2d Cir.) (distinguishing claims that are independent of federal tariffs from those that are creatures of federal law)