Northeastern Rural Electric Membership Corp. v. Wabash Valley Power Ass'n
707 F.3d 883
7th Cir.2013Background
- Northeastern and Wabash Valley entered a 1977 wholesale power contract for 40 years with rates set by Wabash Valley and subject to applicable regulatory approvals.
- The contract initially contemplated Indiana regulatory control; the clause referenced 'applicable regulatory authorities' but left it undefined, permitting potential regulatory changes.
- In 2004, Wabash Valley prepaid REA debt, making FERC the exclusive regulator for rates; FERC filed a tariff and assumed jurisdiction over the contract terms.
- Northeastern sued in Indiana state court seeking a declaratory judgment that the 2004 shift to FERC breached the contract.
- Wabash Valley removed to federal court arguing the claim arose under the Federal Power Act; district court granted a preliminary injunction blocking Northeastern from ceasing performance.
- The Seventh Circuit vacated the injunction and remanded for remand to state court, holding the claim is a state-law contract claim not arising under federal law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the complaint arise under federal law? | Northeastern: contract interpretation may implicate federal tariff regime; potential preemption concerns. | Wabash Valley: the case challenges a federally filed tariff and thus arises under federal law. | No federal question; state-law contract claim; remand proper. |
| Is there complete preemption under the Federal Power Act? | Northeastern: federal regulation could preempt state law in this context. | Wabash Valley: complete preemption should apply because of the filed-rate regime. | No complete preemption; FPA does not completely occupy the field; jurisdiction remains with state court. |
| Is removal appropriate where a federal defense is present but not necessary to the claim? | Northeastern: removal should be avoided when not necessary for federal question. | Wabash Valley: removal proper if federal question is embedded in the claim through a filed-rate regime. | Removal improper; court remands to state court. |
Key Cases Cited
- Pan American Petroleum Corp. v. Superior Court of Del., 366 U.S. 656 (1961) (state-law contract rights can accompany federal regulation; no complete preemption)
- Mottley, Louisville & Nashville R.R. v. Mottley, 211 U.S. 149 (1908) (federal question must be on face of well-pleaded complaint)
- Cahnmann v. Sprint Corp., 133 F.3d 484 (7th Cir. 1998) (timing of preemption matters; preemption not based solely on post-contract tariff)
- Bastien v. AT&T Wireless Services, 205 F.3d 983 (7th Cir. 2000) (complete preemption under the Federal Communications Act can create federal jurisdiction)
- Grable & Sons Metal Products, Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005) (embedded federal issues can create federal question jurisdiction if substantial and disputed)
- Montana-Dakota Utilities Co. v. Northwestern Public Service Co., 341 U.S. 246 (1951) (filed-rate doctrine limits judicial review of rates but not jurisdiction)
- Arkansas Louisiana Gas Co. v. Hall, 453 U.S. 571 (1981) (state claims may coexist with federal regulation; preemption not complete)
- Pollitt v. Health Care Serv. Corp., 558 F.3d 615 (7th Cir. 2009) (complete preemption doctrine does not apply where federal scheme does not fully occupy field)
- Wabash Valley Power Ass’n, Inc. v. Rural Electrification Admin., 903 F.2d 445 (7th Cir. 1990) (precedent on REA-regulated utilities and jurisdictional considerations)