Util. L. Rep. P 13,930 Wabash Valley Power Association, Inc., an Indiana Not-For-Profit Corporation v. Rural Electrification Administration

RIPPLE, nied, Before FLAUM and Circuit 476 U.S. SHADUR, (1986),

Judges, Senior District L.Ed.2d 687 the Indiana Judge.* Court reiterated that the “used or useful” applies rule to customer-owned utilities and

FLAUM, Judge. Circuit upheld the IURC’s denial of Wabash Val history appeal grant of this from a ley’s request The for a rate hike. National summary judgment against the Rural Cooperative Rural Utilities Finance (“REA”) Administration Corp. Electrification is v. Public Service Commission of Indiana, long unhappy. ap- In 1978 the REA (Ind.App.1988), 528 N.E.2d 95 proved guarantees (Ind.1990). in aff'd, million loan 552 N.E.2d $360 power supply cooperative Wabash Val- Having recoup failed to in state court the (“Wabash ley Valley”) Power Association monies Valley, extended to Wabash 17-percent to invest in a share the Mar- jurisdiction REA asserted ratemaking over power facility. ble Hill nuclear The Public by means of a letter to Wabash Company Service of Indiana owned the oth- Valley and the IURC. The REA’s letter 83-percent er Subsequently, share. Valley instructed Wabash to raise its rates guarantees REA committed to additional immediately and detailed a rate schedule. Valley’s million to $588 Wabash Marble We found the REA’s letter to venture, Hill for a total of million $948 comply be invalid because it did not with guarantees. loan To collateralize these requirements the notice and comment guarantees, required the REA Wabash Val- the Administrative Procedure Act. Wa- ley forty-year requirements to enter into all Valley bash Power Association v. Rural (officially pow- contracts labelled wholesale Administration, 903 F.2d Electrification contracts) er with each of its distribution (7th Cir.1990) (“ 7”). Wabash At the According members. to the level, federal court the REA also raised the contracts, agreed terms of these the REA possibility implied preemption for the third-party to be bound as beneficiaries to principles first time. We pre- held that “subject approval rates of the Public prevented clusion the REA from asserting Service Commission Indiana.” implied an preemption argument at that stage late litigation. Id. overruns, Because of sizable cost Company Public Service canceled the Mar While that case pending was still before power ble Hill facility nuclear in January of court, published the REA a notice of April, Valley 1984. That Wabash request proposed rulemaking. Fed.Reg. 12194- ed a rate increase from the Utility Indiana 2, 1990). (April After the notice and Regulatory (“IURC”)1 Commission in or period, comment promulgated the REA two repay der to expended loan monies on Mar preemption regulations. new Fed.Reg. ble Hill guaranteed. that the REA had Pri- (September 19, 1990). The or resolution rate increase rule, concerning first preemption for inade- IURC, Valley rates, Wabash defaulted quate on its pertinent part: reads reorganization REA loans and filed for un (a) regulatory authority State jurisdic- 11; Chapter der and the REA was left tion over a supply borrower’s holding the bag.’ multi-million-dollar At the preempted by shall be the RE Act filing, time of Valley Wabash had outstand if the Administrator shall have deter- ing totalling debts to the REA million. $671 mined that the approved borrower’s rates Subsequently, Valley’s petition are, the state the IURC for a rate hike to cover its obli taking after into account the borrower’s gations to the REA Relying was denied. expenses, inadequate costs and pro- on its decision in Citizens Action Coali duce permit revenues sufficient to tion v. Northern Indiana Public Service required borrower to payments make Co., (Ind.1985), 485 N.E.2d 610 cert. de- its secured loans the borrower has ^[*] The Honorable Milton I. ern District Illinois, Shadur, sitting by designation. of the North- 1. The Indiana Indiana. formerly the Public Service Commission of Utility Regulatory Commission Harnish, Govern- R.& M. Weidenbaum on its payments required make failed Devel- Energy Subsidies Credit ment loans. secured per- traditionally (1976). It opment second (1991). The 1717.305 7 C.F.R. § reducing the cost function formed bankruptcy, concerning borrowers rule, as other as well cooperatives, funding to provides: provi- through the organizations, nonprofit Authority jurisdiction Regulatory State guarantees. and loan loans of insured sion rates shall borrower’s over Tele- Electric and Rural recently, the Until shall and REA RE Act by the pre-empted rather (“RETRF"), Revolving Fund phone the bor- over jurisdiction exclusive have itself, monies advanced rates: rower’s borne and has guarantees the loans and respect (a) On October electri- rural under the incurred any losses a against whom by or any borrower to turn, RETRF, in The program.2 fication of Bankruptcy Code the under case repayments lending from its financed has and prior to amended, commenced as certifi- sales of and and interest principal of 19,1990; outstanding on October remains Federal ownership to the of beneficial cates and (“FFB”).3 Financing Bank borrow- other to all respect (b) With cost government’s the offered When by or petition filing aof ers, the upon sub- by the made REA borrowing, loans of a commencing case the borrower rate the The interest power. rural sidize Bankruptcy Code the under only is money pay to government amended. With- investment. a risk-free return the on Stripped of 1717.354 assistance, 7 C.F.R. borrowers § REA out preemp- both the trappings, interest rate of higher semantic pay their a have would regula- bankruptcy the be- and loans guaranteed tion or insured to obtain risk of shift the designed The involved. rules risk are non-zero tions of the cause REA to rate from government’s REA loans on between default difference pro- REA would After the borrower members. the rate and of interest Valley subsidy; rules, is the pay these had mulgated otherwise have risk declara- is the for a government court in federal cost brought suit markets, interest enforce- credit their prevent private In default. tory judgment a risk incorporate rules fees guarantee held the court and The district ment. induces both premium This premium.4 We affirm. invalid. be of default risk to bear lenders I. by bor- average, payments that, on assures loss- default to cover sufficient REA program, rowers credit a federal As risk default lending, government in elec- es. investment facilitates promotes and The cost measure. extent) equal least in at exists lesser (and telephones, to tricity taxpayers by risk, is borne which to ensure order areas in rural fee that is the compensation, direct without at reasonable regions receive these a lender to induce Office, required would Budget Congressional See prices. when Consequently, risks. bear Treat- Budgetary Approaches New Electrifi- Rural program guarantee (1984); Assistance Credit Federal ment of FFB, rate “not interest ways made Reform Act Credit the Federal 2. Under applicable to interest the rate phased out and than more Revolving Fund was REA purchas- being covering made or then loans Account similar Liquidating other replaced (Supp. In addi- §§ 7 U.S.C. 1991. October [FFB]." before made es loans Treasury’s bor- was established tion, Financing equal 1992). Account rate is This 1, 1991. percentage October one-eighth after of a plus advanced funds rowing cover rate (Supp.1992). § 661 2 U.S.C. at 4 n. 1. App. See Brief point. per- loans, small constitute which Insured prohibits the Act Electrification Rural 4.The activity, at a 5 are made centage REA credit 7 U.S.C. fee. guarantee charging a REA of REA share lion’s The rate. percent interest § al- almost guarantees, loan consists credit leveraged a more The than bonds. (1980 rather & seq. et Act, 7 U.S.C. § cation required return is, higher the firm all REA Act”), requires (“RE Supp.1992) capital. attract in order to only will be the debt of interest a rate pay borrowers position leveraged Therefore, more government’s higher marginally the lower cooperative, rate rural electric of a (.125%higher), borrowing cost of proportion charged it is substantially rate the interest is by REA borrowers paid charge. would the market borrowing by com- to what long-term than on lower private markets. seeking credit panies RE by the unconstrained In an world scope project of Act, in a the risk mechanisms loan the current Both of the obvi- conjunction with Hill—in REA- Marble these subsidies. reflect bor- a customer-owned sub- incentives interest ous a hidden contain insured loans charge Valley to such as Wabash between rower difference representing sidy adjust REA to lead the obtain low rates —should would the borrower rate the interest would, in charged, interest rate the interest assistance without Valley rates Wabash money. turn, increase the pay for must the government rate However, the charge its customers. an ex- would contain Moreover, loans the insured Ad- the REA and making RE allocates to Act government subsidy if the plicit authority for effec- only limited rates below ministrator interest loans insured As a RE of the Act. tuating goals loans REA-guaranteed borrowing. cost rely on obliged to is consequence, the REA subsidy to borrowers both provide also wholesale financing documents—the savings and a cost rate of interest the form contract, and the contract, the loan power of risk.5 in the form government to the repay- condition is by security the firm instrument —to of default chance When the itself. thereby protect val- and substantial ment can have high, guarantee large loan.6 ue on a II. Furthermore, contain loans all REA decision, previous in our indicated As we is reflected subsidy which more latent can utilities function customer-owned al- the REA leverage that the amount they have because self-regulating entities cooperatives to Loans lows its borrowers.7 rates for charge to excessive no incentive in their the entire investment represent I, 903 they sell. electricity companies must private property, whereas Therefore, co REA-financed at 447. F.2d their investment large part finance require protection operatives do of securities costly classes through more cooperatives en- Act, urged "be Congress that subsidizing policy of evidence of a 5. Further develop resources couraged to their and assisted in the is found rural electrification strength ability financial achieve and affording the discretion the REA provision satisfy their credit enable needed to them period of loans and lengthen repayment organizations financial from their needs own position in government's lien subordinate terms and at reasonable rates other sources and coopera- by a REA-financed default event ability applicant’s loan with the consistent (1980 Supp.1992). & §§ tive. 7 U.S.C. objectives.” pay the achievement Act’s and of these subsidies and duration The existence However, very structure 930. § U.S.C. recognized Congress has strongly indicate that ability of adopted Congress undermines the that government to absorb for the need develop of financ- other sources cooperatives to electrification. the costs of rural some of sup- leverage power extremely high ing. The payment debt is- cooperatives fixed ply makes guarantee is the loan present value of a 6. The very risky credi- cooperatives such sued today willing pay would amount lenders tors, high unusually inter- which would lead risk of default themselves all to relieve Horne, J. Van Finan- that See est rates on debt. unguaranteed R. equivalent loan. otherwise Policy At Management and cial Corporate Principles Myers, Brealey S. time, cooper- nonprofit status of these same Finance 567 soliciting private eq- prohibits them atives uity capital improve capital their in order to Moreover, capi- power policy keeping accorded to treatment The structure. favorable cooperative impede appear one distribution contributions supply would tal borrowers ave- forecloses another to a goals minimum assistance—function- members of REA basic capital improving structure. their the RE nue ing amendment to it. In a without sion, power contracts them- Despite the wholesale managers’ decisions. their own lynchpin of by the structure constitute the provided selves the incentives Act, however, lending regulatory agen- A state program. of the RE operation utility cy not have unfettered discre- borrowers do that sets too exercises control over The REA itself low frustrate effectiveness of tion. would imposition through power contracts. re- all of borrowers the wholesale As a (and not requirements sult, ratemaking of contractual that the REA contends regulation of electrici- through explicit seriously regulatory agencies state addition, rates). also ty In eleven states ability of REA borrowers compromises coopera- regulate prices charged by their required payments to make states the electric utilities. tive preemption. guarantees with its loans and

REA makes regulation ap- knowledge state A. plies.8 government When the federal among relationship power supply The authority, it is within its constitutional acts cooperatives, and cooperatives, distribution empowered preempt laws to the through the whole- the REA is structured it action to be neces extent believes such contract obli- power sale contract. This sary Suprem The purposes. to achieve its pur- cooperative to gates a distribution acy Clause of Constitution authorizes fjxed all of its electric over a chase action, phrase and the this federal “Laws (in instance, forty years) from a term this of the United States” of Article IV encom lending When power supply cooperative. passes both federal statutes themselves money power supply cooperatives, properly and federal they enter into requires au adopted with accordance with member power wholesale contracts reason, Supreme thorization. For this (Likewise, cooperatives. when distribution only of established a number Court entering relationships distri- into such with ways Congress in which can be understood requires the REA cooperatives, bution law, preempted state see Louisi to have cooperatives enter into those distribution F.C.C., 476 v. ana Public Service Comm’n cooper- power supply similar contracts with 1890, 1898-99, 355, 368-69, U.S. 106 S.Ct. atives.) arrangement ensures that This (1986), has also but the Court 90 L.E.2d 369 power be able to supply borrowers will agency acting federal recognized that “a power suffi- earn revenue from the sale of dele scope congressionally within the of cient to meet their costs. One level of regula pre-empt state gated authority may security protection is the interest the 369, at 1898-99. Id. 106 S.Ct. tion.” types physical of takes assets both cooperatives respective as as in the of well REA to enforce its In order for the rights party of each under and interests it regulations, must overcome power contracts. the wholesale hurdle The first significant two obstacles. presumption taking longstanding is security

In addition to interest traditionally supply coopera- preemption of an area power assets of the tive, power regulation. See v. including con- to state the wholesale California 93, 100, U.S. tracts, requires power Corp., 490 supply the REA ARC American (1989). borrower, 1661, 1665, Valley, 109 104 L.Ed.2d 86 to obtain S.Ct. such Wabash traditionally regulation of a field regulatory agencies When approval of state states, start lending by the “we projects occupied for its investment before assumption police powers historic money. system supervi- of that the Within Corp. language Valley’s Cooperative Arkansas Public Service example, v. 8. For of Wabash 388, 1905, 1914, Comm’n, 375, repeats general mortgage agreement the more S.Ct. 461 U.S. 103 mortgages, language (1983), of standard REA "any an REA L.Ed.2d 1 reference in 76 "subject provide rates would be ‘regulatory commission’ could document regu- applicable laws and rules and orders regulatory agency." only a state mean According latory bodies.” to Arkansas Electric 1486 not to superseded by (1982). the States were 73 L.Ed.2d 664 If authorized Act statute, Federal unless that was the clear regulations agency of an will purpose Congress.” and manifest Rice preempt state law that conflicts with such Corp., 218, Fe Santa Elevator 331 U.S. regulations or purpose frustrates 231, 1146, 1152, 67 S.Ct. 91 L.Ed. 1447 regulations. those City New York v. (1947). principle applies The same when an F.C.C., 64, 57, 1637, U.S. 108 S.Ct. agency preempt acts field. Hillsbor (1988); 100 L.Ed.2d Capital Cities ough County v. Automated Medical Labo Cable, Crisp, Inc. v. 467 U.S. 104 S.Ct. ratories, Inc., 707, 715, S.Ct. 2694, 81 L.Ed.2d 580

2371, 2376, L.Ed.2d 714 More fifty years regulation coop state B. (in utility erative those states that Much of the disagree- discussion—and regulate rates) have continued to ment—over the REA’s since the enactment the RE Act certain preempt turns on single Supreme Court ly Congress reflects fact has not decision in this area. Arkansas Electric occupied Therefore, the field. Cooperative Corp. v. Arkansas Public must demonstrate a conflict between state Comm’n, Service 461 U.S. regulation cooperatives and the federal (1983), 76 L.Ed.2d 1 that, established rural electrification program strong that is rule, as a may regulate states electricity enough presumption to overcome the prices charged by cooperatives that have ratemaking constitutionally state can coex received credit from the REA. However, financing regime. ist with the federal potential Court identified two The second obstacle in the REA’s exceptions: path scope is the agency’s authority There come a time when the REA in rulemaking. Legal authorization for changes present policy, and an- preemptive follows nounces that regulation rate of ru- “First, precepts. two fundamental power ral cooperatives is inconsistent agency literally act, has no let with federal If policy. hap- that were to pre-empt alone validly legisla enacted pen, and if such rule was valid under State, tion sovereign of a unless and until Act, the Rural Electrification it would of Congress power upon Second, confers it. preempt any course further exercise of way determining best of whether Con jurisdiction by regulatory au- [state gress regulations intended the of an admin thority] Moreover, .... even without an agency displace istrative state law is to explicit REA, statement particu- a scope examine the nature and of the au lar rate set au- [state thority granted by Congress agen to the thority] may seriously compromise so im- cy.” Comm’n, Louisiana Public Service portant interests, federal including the 374, 476 U.S. at 106 S.Ct. at 1901. Under ability of the [cooperative] repay its very deferential standard of review loans, as implicitly to be preempted by Supreme Court, enunciated our in the Rural Electrification Act. quiry is whether a agency prop federal has 388-89, Id. at erly exercised its 103 S.Ct. at delegated own 1915. Earlier in protracted this simply litigation, rather than Congress whether forwent properly press exercised its chance to legislative power. exception, second Thus, determining in which when have pre strongest state law is been its argu- empted by regulation, ment. a When originally proceeding “narrow in focus on Congress’ supersede investment, intent Indiana to recover REA, its state law misdirected” us, because reasons that are not clear [is] did not “[a] preemptive regulation’s force does raise possibility not de implied preemption. pend express on congressional Having authoriza failed to the implied raise preemp- displace tion to state law.” Fidelity argument Fed tion in the administrative and eral Savings & Assn. v. judicial Loan De la proceedings Indiana, Cues in the REA ta, 141, 154, 458 3014, U.S. 3023, 102 S.Ct. prevented by principles preclusion

1487 judicata in whether res bars from attempting to so federal court. do I, When applying 903 F.2d at 455. to the REA. See Wabash liti- previous in the foreclosed Academy avenue was Marrese v. American Ortho regu- the two new gation, 373, the REA enacted 470 105 paedic Surgeons, U.S. S.Ct. not di- Although the REA does lations.9 1327, (1985); generally 84 L.Ed.2d 274 see argu- implied preemption rectly attempt an Hart and The Federal Courts Wechsler’s agency on appeal, in this relies ment (3d System, the Federal 1627-29 ed. and Elec- language Arkansas the relevant law, 1988). According to Indiana which we to reinforce assertion tric Krajewski, summarized in v. 803 F.2d Leal utility regula- preempt state authority to (7th Cir.1986), 332, preclusion claim 334 Valley response, contends tion. In (1) following four follows from the factors: effectively prohibits res judicata competent jur judgment from a court of relying implied preemption, REA from isdiction, merits, (2) (3) on the in a suit rulemaking particularly if intent of its (4) parties, the same between holding. to circumvent our earlier been, was, might or have matter collat- judicata, paternal twin Res and its former suit. Rather determined estoppel, have been eral therefore, action, a claim or a cause cases. widespread in numerous discussion to decide whether there is we are left Mendoza, See, v. 464 e.g., States United coincidence in the matter at issue in 568, 571, 154, 157-59, 104 S.Ct. 78 U.S. previous litigation. and the (1984); Dep’t L.Ed.2d 379 Federated Stores, 394, 398, Moitie, 452 v. U.S. Inc. formulation for what con Indiana’s 2424, 2427, (1981); 69 L.Ed.2d 103 a matter at issue is more narrow stitutes 90, 101 S.Ct. McCurry, v. 449 U.S. Allen rule, single than our federal under which “ (1980); 411, Ho- 66 L.Ed.2d 308 Parklane ‘a core of cause of action consists 322, 326, Shore, siery Co. v. 439 U.S. rise to a reme operative give facts’ which (1979); 645, 649, 58 L.Ed.2d 552 S.Ct. Energy Cooperative, dy,” In re Matter of City Chicago, 820 F.2d 916 Smith v. (7th Cir.), Inc., 1226, F.2d cert. Cir.1987). (7th According denied, 484 U.S. S.Ct. Court, prevents party “from judicata res Carriers, (1987) (quoting L.Ed.2d 254 Car relitigating the same cause action Co., 789 F.2d Inc. v. Ford Motor parties prior to a decision.” (7th Cir.1986)). pre- purposes of claim For Mendoza, 464 104 S.Ct. at 574. clusion, “[ejvery which was within [matter] illuminating, the Fifth Circuit has More which, issues, issues, under the judicata judg that res “treats a elaborated presumed proved, been will be might have rendered, ment, as the full measure once adjudicated.” Pe proved to have been the same relief to be accorded between Founda Culver Educational terson parties the same ‘claim’ or ‘cause of on 448, (Ind.App.1980) tion, 402 460 N.E.2d rules claim action.’ ... Under these (quoting Flora v. Indiana Service Town of preclusion, judgment the effect of ex 253, 161 222 Ind. 53 N.E.2d Corporation, all relevant litigation issues tends Williams, (1944)); Co. v. see Yellow Cab par same the claim between the same (Ind.App.1991); 774, N.E.2d 777-79 583 ties, or not raised at trial.” whether Ras 836, (Ind. Meltzer, N.E.2d 841 v. 487 M.R. Works, par Engineering Inc. v. Leco Wire 977, Marsh, 446 N.E.2d Biggs App.1986); Inc., 530, Machinery, F.2d 535-36 575 & recognized in we (Ind.App.1983). As (5th Cir.1978). law is I, inquiry under Indiana Wabash suits deal with originated essentially whether two litigation this in

Because or occurrence. Indiana, a common transaction preclusion its rules of determine specific regards action. the REA absent 9. The concurrence our conclusion that implied press regula- the REA missed its chance preemption REA enacted Once argument statement, held out naturally explicit we turn tions—its fact, Electric as silence. Court in Arkansas authority to do so. to its language suggests possible recourse bring use of those conceptualization, not sufficient this Under F.2d at 456. Valley within regulations against Wabash of Indiana’s construction very expansive a con- principles judicata. of res Such might conceivably ex- judicata of res rule unwarranted distortion attempt apply the clusion would be an REA’s tend to the in I Valley. posture litigants of the to Wabash of the regulations preclusion.10 and the Indiana rules litiga posture of the procedural The complicates analysis. substantially tion III. that the REA level, appear does At it one rulemaking in order to resorted to not judicata res does The fact that holding. of our earlier impact avoid relieve the REA of this suit does not bar that its maintains REA nevertheless The validity the need to establish the particular expressly preempt authority to According to the regulations themselves. from the RE Act implied state rates can be Electric, in expressed standard Arkansas REA fact that the Arguably, the itself. if expressly preempted state law would be respect implied preemption with has waived “if change policy and the REA were to in favor Valley would militate to Wabash the Rural a rule valid under such were appli judicata res bars finding at Electrification Act.” 461 U.S. are regulations cation of these —which at 1915. Prior to the enactment S.Ct. implied authori themselves derived policy regulations, published Valley. It would follow ty Wabash —to required to “submit borrowers relying that the REA is that to the extent changes any regulatory proposed rate our earlier decision implied preemption, having jurisdiction and commissions [to] revisiting that issue. has foreclosed approval prescribed in the manner seek 111-4 However, reasoning REA Bulletin is flawed two those commissions.” Electric, First, (1972)(quoted 1-2 argu- the REA’s Arkansas important respects. 1914). Pre simply one founded on the 461 U.S. at ment is not regulatory jurisdiction preemption. emption It is as- of state principle implied wholly with authority engage in would have been inconsistent serting implied guidelines. pre The new preemptive rulemaking rather than the au- the REA’s own emption regulations apply only thority impliedly preempt. In this re- —which regulations Valley but to all REA-financed gard, the REA asserts that its to Wabash cooperatives change policy. compatible statutory responsi- are —manifests denying delegated by the RE Act to the While not states bilities Second, cooperatives, the regulate charged by REA. Administrator of the attempted specific out purposes of Indiana law REA has to carve matter at issue exceptions general could not have been to this rule. 7 C.P.R. regulations 1717.300-310, litigation Our preceding be- 1717.350-356 §§ therefore, they principal inquiry, not in existence. is whether cause were While timing preemption Congress rationale of the intended for the REA to exercise suspect, preemption power.11 that alone is such Ass’n, singular Ind.App. 10. Under the concurrence's notion of Education 389 N.E.2d longer preclusion, apparently can no Accordingly, of re- rely regu- to overcome Indiana's on federal law sorting implied preemption put to rest in Valley’s approach rates. This lation of Wabash previous opinion. pre- our Enforcement of the preclusion to claim lavishes attention on the regulations emption It is was not. axiomatic potential outcome of the REA’s actions at the only preclusion that the reach of claim extends identifying expense of the claim—in the sense of to theories which could have been raised those defining scope In the cause of action. of proceeding. in the earlier (and preclusion, preclusion claim not subsequent which is irrelevant to a suit between subsidiary 11. A consideration is whether action), parties to an earlier our ultimate lawfully delegated properly REA has exercised courts. When other source is the Indiana facts power. statutory intervene, Provided that authorization forming or conditions a new basis for exists, claim, regulations adopted pursuant preclusion to notice apply. claim does not Cf. rulemaking South Bend Federation Teachers v. National and comment constitutes a lawful

1489 power supply coop- ity utility rates of over A. through proposed rules for eratives occupied Congress has not Because basis, regu- preempting, an ad hoc state on field, some REA must establish general ratemaking for bank- lation in and regula for the new basis other param- proceedings. Subject ruptcy end, argues that the REA To this tions. statute, proposed rules eters of underlying the purpose the fundamental express represent a valid exercise of would repaid. Authority that loans be RE Act is authority they an im- preemptive if serve from Act it derives for this assertion portant According to the federal interest. self, provides loans “shall that REA, important interest at Administrator finds and unless the be made solely repayment consists stake security judgment that in his certifies reviewing validity the federal loans. such reasonably adequate and therefor is regulations, court does utilize agreed.” repaid the time will within loan be standard that deferential finds 904. If the Administrator 7 U.S.C. § York, 64, urges. at City New 486 U.S. the loan repaid,” then that the loan “will be 1642; Cuesta, at De 458 108 la U.S. S.Ct. statute, statutorily- at the authorized However, 154, at 102 at 3023. S.Ct. Id. If the loan will not fixed rate. interest standard, must applying this we deferential prohibited from repaid, the REA is then be significant factors. take account for two making the loan. power con wholesale First, Standard is silent with re statute itself into REA borrowers tracts entered spect rulemaking by the REA. Unlike customers, which distribution the REA relies for the the cases which revenues, repre the stream of determine review, the RE Act deferential standard an REA principal security for loan sent the any general delega itself does not contain guarantee. A revenues or borrower's discretionary Admin power to the tions of electricity will constitute ade its sales of York, 486 E.g., City New U.S. istrator. repayment of security ensure quate 67-68, 108 (Commission at S.Ct. a position if is in only loan the borrower may er such rules and “[m]ake large quantity of electric sufficiently sell a restrictions, not incon prescribe such high price. The REA ity sufficiently at a law, necessary to sistent with implausible to construe contends that it is chapter”) of this provisions carry out the bor require loan documents to the REA’s 303); Cuesta, (quoting 47 De la U.S.C. § structures design rowers to their rate (Federal 160, at 3026 102 S.Ct. 458 U.S. generates revenues sufficient manner regula- may issue Loan Bank Board Home repayment, yet at the same loan enable organization, in- provide “to for the tions agencies empower regulatory time to state examination, operation, and corporation, necessary for a disapprove [savings and associa- regulation of loan] generate required to revenues borrower 1464(a)(1)); tions.”) (quoting 12 U.S.C. § Fed.Reg. repayment meet schedules. 55 Brown, 441 U.S. Chrysler Corp. v. see also agencies regulatory can If. 281, 308-09, 1705, 1721, 60 L.Ed.2d S.Ct. through imposition impair repayment Congress did not argue To rates, argument goes, inadequate goals for states frustrate intend may jeopardize viability agencies those establishing a Act short of the RE falls program. of the rural electrification sweeping REA’s statutory basis for the over outcome, assumption of prevent In order to Any au- ratemaking cooperatives.12 its author- the REA now seeks formalize REA; Francis, cooperatives, and the con- power. the distribution of that Batterton exercise REA, sequently, would allow such a contract 2405 n. 419 n. rights third-party example, enforce its as a L.Ed.2d beneficiary See Tri- the revenue stream. Ass’n v. Shoshone underlying Generation & Trans. State contracts 12. The wholesale (10th Power, Inc., 874 F.2d argument do the rela- River the REA’s serve define However, Cir.1989). contracts are not so power supply cooperative, tionship among the merely Although preemption regulations the REA is eratives. thority exercisable responsi- may adequate regulatory response Administrator’s of the be derivative future, operation of the loan and similar circumstances in the bilities for the Con- gress regulatory ap- under the RE Act. not guarantee programs embraced proach in See, Utility Big original Dist. No. 1 v. statute or its e.g., Public amend- Inc., 618 F.2d 601 ments. Cooperative, Industry Bend Elec. Securities Ass’n v. Cf. Cir.1980). (9th Board Governors Federal Reserve 137, 153-54, System, 468 U.S. 104 S.Ct. Moreover, single phrase to extract a 2979, 2988, 82 L.Ed.2d 107 This comprehensive legislative scheme from a fact, as congressional well as sustained defining and christen it as characteris- electrification, subsidization of rural indi- comport spirit tic does not of the cate that the REA would need to show history. or its 7 U.S.C. statute See §§ state action that is more drastic or even opinions 930. Because Arkansas discriminatory before federal is legislative history detail the Electric Allowing warranted. the Administrator to Act, repeat RE will not that here. we See particular vitiate according state rates set Electric, 386-88, 461 U.S. at Arkansas long-established principles of ratemak- 398-401; 1913-14, 1920-21. 103 S.Ct. ing compatible is not with this Certainly, purpose of the RE Act can- scheme. single overriding not reduced to a con- be cern for the welfare of federal Trea- Being lending agency administering a electrification, sury. Rural whether en- program federal credit regu- rather than a abling electricity purchases by distribution latory agency, disposal the REA has at its assisting customers or the de- repayment means to secure that are less velopment generation and transmission disruptive the recognized prerogative facilities, goal remains the fundamental regulate cooperative states to utility rates. congressional the RE Act. Continued will- Fed.Reg. See 38641. Because interest ingness power develop- rural subsidize RE guaranteed Act insured and ment confirms this conclusion. areWe statute, loans are fixed 7 U.S.C. 935- §§ persuaded regu- that national rules for rate ordinary the REA—unlike an commer- cooperatives, lation of rural electric admin- cial option lender—does not have the basis, istered on an ad hoc is the answer to making a loan at an enhanced interest rate safeguard viability of the rural electri- compensate perceived for the risk of program protect fication itself or to Instead, default. the REA has the stick of Treasury defaulting borrowers. to lend or not to lend in a Cf. Foods, Inc., United States v. Kimbell 440 particular jurisdiction protect against de- 715, 729, 1448, 1459, fact, faulting In ap- debtors. the RE Act L.Ed.2d 711 pears assumption by to reflect an Congress when it created the Rural Electrification Second, presumption Administration protect that the REA could preemption reinforces our conclusion that by setting itself conditions on the extension nondiscriminatory regulation state of credit. legitimate fosters state interests should not subject Act, the manner Under the RE the REA finances proposes. that the REA denying now power-supply only borrowers with the re- Valley early rate hike to Wabash quired approvals of all state litigation, the Indiana 904; authorities acted in authorities. 7 Fed.Reg. U.S.C. § longstanding principles accordance with state, Accordingly, if a in its utility regulation. discretion, rate We do not find that declines approve proposed the federal in recovering loan, interest its monies permit then the RE Act does not sufficiently strong upset the tradition hand, loan to be made. On the other if the of shared responsibility state and federal gives approval, then the loan is utility over the rates of eoop- REA-financed authorized to the “terms and condi- strong weight system as to utility bear the regulation proposes. of a that the REA purpose language or the express the either 7 Administrator. the imposed tions” its justify to RE Act of the operation condition, and the or a term As 904. § U.S.C. Accordingly, we regulations. preemption unless loans to make may refuse REA the grants statute the that infer formally com- cannot authorities state authority he seeks. the repay- Administrator allow to enough high rates tomit to similarly refuse may The REA reasons, decision ment. the foregoing the For customers, the unless loan approve is Affirmed. court of the district real are the buy power promise whose loan or the debt, guarantee the security Judge, SHADUR, District Senior If rates. oversee REA to the authorize in the result. concurring cooperative customer the or the state either an admi- provides opinion Judge Flaum’s else- funds its may deploy balks, the REA extremely com- anof exposition rably clear power Thus, REA conditions the where.13 as matter, especially overlaid plex set commitments on state supply loans by a case inis subject matter that enough to en- high power wholesale litigation. repeated history of tortuous to so REA failed The repayment. loan able inability to enforce result —REA’s the And Val- to Wabash guarantees its loan qualify against Wa- regulation its ley. unexceptionable. Valley equally bash —is company part regretfully must I Where B. gone having its is in majority with the would essence, REA the its Distilled that I believe one that beyond absorb Valley’s subscribers have Wabash validity the decision: unnecessary to the be Valley’s from Wabash stemming the losses regulation invalidity the or its mishandling of the REA’s default regulation is, the (that whether its face on monies the While arrangement. security borrow- against REA viable potentially properly REA through the disbursed cir- under Valley than Wabash ers other the grants, than rather as credit regarded set unique than other cumstances repayment ensure kit to REA’s tools case). in this facts other any As with limits. without are not opin- reach that added only is Not risk the business lender, assumes resolution unnecessary ion organiza- specific money to a advancing us, also but it controversy before two-party not organization will tion, that the risk that: me seems history and repay. Given able be on regulation Invalidation 1. Act, scope of RE of the function sought simply face, than rather that possibility incorporates risk Valley, is Wabash applied impede occasionally regulation ap jurisprudential sound with the odds to re- cooperatives supply power ability of Brandéis by Justice counseled proach reasonably ar- One could loans. pay their power in another concurrence famous his operation structure that the gue TVA, case — Ashwander reflect REA through the provided subsidies 482-83, 80 L.Ed. 346-48, 56 S.Ct. govern- preference congressional dealt though Ashwander (1936). Even coop- risk, rather bearing this ment’s avoiding constitution wisdom with the event, it is clear members. erative legislative Congress’ toas questions al shall who dictate may not REA to be had questions those unless power amount would risk because bear case, I particular decide reached on itself. power conferring agency Cf. judicial notion same believe Comm’n, Public Service Louisiana decid not to our extend should restraint REA The 1902. S.Ct. at U.S. at adminis- of an general ing authority in a source identified has not stan- useful” or "used legislature amended be un- should strength this stick The repay- specifically to accommodate dard difficulties financial After derestimated. Ind.Code See REA. obligations to the ment of suspended its Valley, (West Supp.1992). § 8-1-17-20 Ann. Subsequently, the Indiana lending in Indiana. “legislate,” agency to where re- low a rate. In I we scotched trative Wabash equally solving question is nones- that attempted agency REA’s use of an letter the current decision. sential to sought as the means which it regulation Invalidation of also preempt though state law. Even REA now gives insufficient credence to one place seeks to that old wine into the new implied preemption specifi- prospects for regulation, legal bottle of a claim in cally held out Court implied preemption is no different than be- Coop. Corp. v. Arkan- Arkansas Elec. litigate fore. REA is no more entitled to Comm’n, 375, 461 U.S. sas Pub. Serv. claim, having forgone opportunity 1905, 1915, 389, 76 L.Ed.2d 1 103 S.Ct. prior litigation to do so in the between the sure, that statement To be parties, any losing plaintiff same in judges just dictum. But as district any other lawsuit is free to assert the same expected pay heed to dicta from their claim a second time by developing around Appeals least in situations Courts of —at legal theory another holding for the defen- there is need to evaluate the where no dant liable. force) (or dicta in force lack of such specific order to case at is- decide majority opinion’s parsing Thus the concept judicial sue—so the basic of our argument “asserting REA’s current as one hierarchy Appeals for calls Courts implied authority engage preemp- in in approach Supreme Court dicta rulemaking tive rather than the gingerly same fashion. (at 1488) impliedly preempt” gives REA Although no extended discussion is re- type more than its due. That of distinction points quired explain departure those preclu- is one without a difference for claim majority opinion, explana- from brief purposes sion is fundamental to claim —it certainly tion is in order. preclusion, preclusion, in contrast to issue First, REA must lose this case under that the only every former bars not principles preclusion. established of claim urged by losing party but also My principal generally prefer reason for every urged issue that could have been ring preclusion” the terms “claim and “is (Leal support position Krajewski, of its preclusion” sue over the more traditional 332, (7th Cir.1986) 803 F.2d (apply- judicata” estoppel” “res and “collateral ter ing law)). Indeed, majority’s Indiana minology any is to avoid confusion that stated readily para- distinction could might judica- stem from the fact that “res phrased give every disgruntled litigant generic ta” is often used as the term for lawsuit, apple second bite at the preclusion stemming both another branches of from (see prior litigation Justice Blackmun’s the mere dreaming up device of its opinion in Migra Court v. Warren theory fresh that it did not tender to the Educ., City School Dist. Bd. 465 U.S. court the first time around. 77 n. 894 n. implied pre- Hence REA must lose on its (1984)). instance, L.Ed.2d emption against claim Valley, Wabash though, contrasting preclusion” “claim already because it has day had its in court preclusion” usage versus “issue also serves argue and it then chose not that claim highlight the reason Valley that Wabash (as I, 455). we held in 903 F.2d Wabash prevail should ground. here the former my And that leads point depar- second REA’s us is the claim before same claim majority ture from the opinion, which— asserting that it eschewed despite having quoted Arkansas Elec- Valley original litigation Indiana be- opinion’s potential tric and that two bases them, tween and that we therefore barred (at 1486) avoids it advancing preclusion on claim —then discussion of the second of those grounds I, bases for in Wabash 903 F.2d at 455: the (at 1488-91) claim the entire balance of the text preempts law regulation Indiana because it judicata has set too that follows the res discussion. pros- announce than to no more does prospect second is the here repeat, To out as held kind pect Electric, U.S. at in Arkansas out held state- Electric by the Arkansas possibility at 1915: 389, 103 S.Ct. argu- that And quoted. I have that ment explicit state- an Moreover, even without REA, but was available was indeed ment rate set REA, particular a the by ment litigation. it, earlier in the by made not authority] regulatory the [state could that a matter therefore That feder- important seriously compromise so in the urged and determined been have ability of the including the interests, al stated, already that as litigation and, first — loans, as to be repay its [cooperative] Indiana in preclusion claim test for is the Elec- by the Rural preempted implicitly (as everywhere). Act. trification any useful serve view, not it does In that state- a such over fairly gloss cannot We it suggest that I would (and indeed purpose being silent Court ment principles) jurisprudential sound undercuts unquestionably language That it. about it that issues two to decide for this Court preemp- implied possibility out the holds against to rule in order not resolve need any need to rates without of state tion history here: litigation light in REA Elec- the Rural- in specific source identify a implied prospect 1. whether Electric’s (unlike Arkansas Act trification possi- a held out as is indeed preemption occupies the exception, potential first in said Supreme Court bility by what the pages at discussion substantive entire Electric, and here). Arkansas opinion majority regulation essentially 2. whether — sure, statement just-quoted beTo announcement agency’s advance an (though judicial source the ultimate from and of possibility such a existence dictum) of its leaves all concededly via govern its will principles that general agencies, courts, administrative readers — ap- way to appropriate an exercise—is divination, pro- task of lawyers—with posi- REA’s community of legal prise at mortals occupied lesser that has cess respects. in tion those began to Delphic Oracle since least affirma- merit an questions REA has And If those both pronouncements. its issue is valid regulation answer, reads that then It process: that in tive engaged now express grounding regula- lack of despite it its permitting language ques- But those it would statutory that authorization. the rule to announce tion by a court for decision left in future situations are better applying tions contemplate date, REA if, later some authority has “seri- at in the future where regulation in- new apply that important were ously eompromise[d] rate involving inadequate [cooper- ability of the case including terests, concrete face in the agency by a state loans.” repay approved its ative] (a different very regulation preemption major- 10 to the footnote from appears It confront that we one from situation made the may not have I that ity opinion here). approach with I find difficulty that entirely agree I although Accordingly, risk At the entirely clear. there taken position of REA’s emptiness with briefly. REA let me summarize repetition, right has forfeited it case because express au- pointed has not itself Wa- against preemption implied argue Act Electrification thority in Rural I sub- cannot regret I that Valley, regulation, bash promulgation REA forecloses that decision to a scribe painstakingly has Judge Flaum its word Supreme Court taking the such ex- that no demonstrated persuasively others who future in the dealing I Hence authority exists. press in circum- litigation, parties prevail seek to must REA that believe its own has not tied where that stances ground only on it here—if can— Valley. Wabash- as it hands basis available implied in the here, I concur reasons stated For the regulation just set out: I have by majority result reached but not in its arriving

rationale for result. America,

UNITED STATES

Plaintiff-Appellee, Tolson,

Truman TOLSON Darrell

Defendants-Appellants. 91-1634,

Nos. 91-1720.

United States Court of Appeals,

Seventh Circuit.

Argued Sept. 1992.

Decided March

Case Details

Case Name: Util. L. Rep. P 13,930 Wabash Valley Power Association, Inc., an Indiana Not-For-Profit Corporation v. Rural Electrification Administration

Court Name: Court of Appeals for the Seventh Circuit

Date Published: Mar 16, 1993

Citation: 988 F.2d 1480

Docket Number: 91-3673

Court Abbreviation: 7th Cir.