65 A.D.2d 378 | N.Y. App. Div. | 1978
OPINION OF THE COURT
This is an appeal from an order at Special Term denying motions of Niagara Mohawk Power Corporation ("Niagara Mohawk”) and Power Authority of the State of New York ("PASNY”) to dismiss the complaint or in the alternative to stay all further proceedings. Plaintiffs, major industrial facilities in western New York and purchasers of electric power from Niagara Mohawk, who claim rights as third-party beneficiaries under the terms of a contract ("Contract NS-1”) between Niagara Mohawk and PASNY relating to the sale of electric power generated on the Niagara River, seek a mandatory injunction and money damages arising from Niagara Mohawk’s alleged breach of the contract.
From the complaint and moving papers it appears that the United States was permitted, pursuant to certain treaties with Canada, to divert portions of the flow of the Niagara River for the purpose of generating hydroelectric power. Niagara Mohawk by virtue of a license issued by the Federal Power Commission ("FPC”) utilized a portion of the river flow for power generation purposes at certain generating stations on the Niagara River (Federal Power Commission Project 16) with a capacity of 445,000 kilowatts until June 7, 1956 when a rock slide destroyed the generating station which was the principal source of this power. Thereafter, the Congress of the United States enacted Public Law 85-159 (71 US Stat 401, US Code, tit 16, § 836), also known as the Niagara Power Project Act ("Act”), which authorized the FPC to issue a license to PASNY to construct and operate a power project with capacity to utilize all of the share of the water of the Niagara River which was permitted to be used by the United States under its treaties. As a condition of the issuance of the license to PASNY and in order to restore low-cost power to western New York industries, the Act provided that: "(3) The licensee shall contract, with the approval of the Governor of the State of New York, pursuant to the procedure established by New York law, to sell to the licensee of Federal Power Commission project 16 for a period ending not later than the final maturity date of the bonds initially issued to finance the project works herein specifically authorized, four hundred and forty-
Plaintiffs claim that they are entitled to all or a part of the relinquished replacement power and that Niagara Mohawk’s conduct in this regard has been in violation, breach and derogation of plaintiffs’ rights under Contract NS-1 and the Federal Act. Thus, the action was commenced against Niagara Mohawk. PASNY was joined as a necessary party defendant. In lieu of answering, both defendants have submitted motions arguing that the New York State Supreme Court does not have jurisdiction over the subject matter because section 317 of Federal Power Act (US Code, tit 16, § 825p) grants exclusive jurisdiction to the District Courts of the United States. PASNY additionally asserts that it has petitioned the Federal Energy Regulatory Commission ("FERC”), successor to the FPC, for a declaratory order construing article 22 of the license granted by the FPC for the Niagara Power Project, and that plaintiffs who have intervened in these proceedings
Section 317 of the Federal Power Act (US Code, tit 16, § 825p) grants to the District Courts of the United States exclusive jurisdiction of violations of the Federal Power Act and of all suits in equity and actions at law brought to enforce any liability or duty created by, or to enjoin any violation of the Act or of any rule or regulation or order thereunder. The Federal Power Act which is specifically referred to in the Niagara Power Project Act (Public Law 85-159) was the source of FPC’s power to issue the order granting the PASNY license which was authorized by the Act. Thus the order licensing PASNY to construct and operate the Niagara Power Project was an order issued under the Power Act and exclusive jurisdiction over any suit to enforce liabilities or duties created by the order would be in the District Courts of the United States. The replacement power would not exist except for the Federal statutes and it is obvious that the scope of the rights eventually to be allocated by contract was Federally defined. It does not follow, however, that the order by which PASNY was granted its license is the source of the rights asserted by plaintiffs.
It is clear that traditional common-law claims do not lose their character because it is common knowledge that there exists a related, and perhaps relevant, scheme of Fed
The language of the complaint describes violations of
Niagara Mohawk’s violation of the contract does not constitute a violation by PASNY of the license. The relief plaintiffs seek is not related to the power of the Federal Government to regulate for power purposes the navigable waters—because this has already been done. Plaintiffs are not trying to exercise dominion or control over navigable waters. While Federal law may be the source of all the rights in issue, the court is called upon only to determine whether Niagara Mohawk is failing to carry out the terms of a contract made within New York State, affecting only New York State interests and deriving its force from New York State law. Plaintiffs make no claim that the contract violates the Federal statutes and do not seek to revise any congressional actions. FERC has no jurisdiction over resales of power. Furthermore, it has no jurisdiction over plaintiffs, Niagara Mohawk or PASNY, except to ensure that PASNY complies with the condition of the issuance of the license to contract to sell to Niagara Mohawk —and this has been accomplished. FERC’s concern with the disposition of the 445,000 kilowatts of power ceased once the contract was made. It does not have the authority necessary
Furthermore, plaintiffs have and claim no right independent of the contract. PASNY has the right to develop the available energy source, conditioned upon its contracting with Niagara Mohawk "to restore low power costs to * * * industries [which purchased power provided by project 16 before June 7, 1956] and for the same general purposes for which power from project 16 was utilized” (US Code, tit 16, § 836, subd [b], par [3]). By the terms of the Act plaintiffs were accorded nothing more than a mere expectation that low-cost power would again become available, and any enforceable rights to that power were granted only by Contract NS-1. Clearly, Contract NS-1 is the focus of the controversy.
Plaintiffs seek protection for a property right under the contract against an alleged breach of the contract, and will endeavor to establish at trial that Niagara Mohawk had no right under Contract NS-1 to reserve any of the replacement power capacity for its own general system requirements. The ground for recovery is Contract NS-1, not the Act or the Federal power law, and New York courts may determine questions which may arise under the Federal power law when incidental to cases not arising under this law (see New Era Elec. Range Co. v Serrell, 252 NY 107, 112, supra).
Appellants’ reliance on City of Cleveland v Cleveland Elec. Illuminating Co. (570 F2d 123) is misplaced. There the city was ordered by FPC to enter into a contract (at issue) and the cause of action was to enforce a specific order of FPC, which had previously determined the rights of the parties. The cause of action was deemed to be within the District Court’s jurisdiction. Both parties were subject to the FPC order in question, an element entirely lacking here. PASNY, the party primarily subject to the FPC order, is a necessary party defendant only because it is the other party to Contract NS-1. Niagara Mohawk has been issued no license, is not subject to any FPC order, and was not specifically directed by the Act or the license to contract with PASNY.
The motion to dismiss for failure to join all necessary parties is also without merit. Dismissal is not dictated solely by the absence of a necessary party (McLaughlin, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR 1001:1, p 368). FERC is the only party claimed by Niagara Mohawk to be a necessary party which is not subject to the jurisdiction of the court. FERC, being neither a party to nor a beneficiary under Contract NS-1, can in no way be prejudiced by a New York interpretation of the language contained in that instrument and is not a necessary party. No industry, joined or nonjoined, received any right by virtue of the license; it is a construction of the contract that is sought in this lawsuit and the court will be able to afford complete relief in the absence of FERC. Further, for the reasons previously set forth Special Term did not abuse its discretion in denying defendant’s motion for a stay (2A Weinstein-Korn-Miller, NY Civ Prac, par 2201.05).
The order appealed from should be affirmed.
Cardamone, J. P., Dillon and Wither, JJ., concur.
Order unanimously affirmed, with costs.