ROSANNA MALOUF PETERSON, United States District Judge.
BEFORE THE COURT are the parties' Cross Motions for Summary Judgment. The Court has considered the briefing, the relevant precedent, the record, and is fully informed.
This case involves the cryptocurrency industry and the rates that cryptocurrency companies pay for electricity. Cryptocurrency is a digital currency that exists solely on the internet; it is unregulated and unmanaged by third parties, such as banks or governments. ECF No. 81 at 7-8. Cryptocurrency is made possible by a technology called blockchain. Id. Blockchain is the technology through which cryptocurrency transactions are verified and tracked across networks of computers, working as a digital ledger. Id. Blockchain, functioning as a ledger, records every transaction in which each particular crypto coin has been used. For blockchain to track cryptocurrency transactions, the transactions must be verified by independent blockchain participators. ECF No. 81 at 7-8. These blockchain participants, also known as cryptocurrency miners, verify cryptocurrency transactions, essentially by solving complicated mathematical problems. ECF No. 81 at 8-9. The first miner to solve the problem, verifying the transaction on the blockchain (ledger), is rewarded, often in cryptocurrency. Id. Miners rely on advanced and specialized computer hardware to successfully mine cryptocurrency. Id.
Because cryptocurrency mining is technologically complex and requires advanced equipment, one of a miner's biggest expenses is electricity. ECF No. 81 at 9; ECF No. 106-3 at 4. Cryptocurrency miners work to reduce their power bills by locating their operations in areas with inexpensive and reliable access to large amounts of electricity. ECF No. 106-3 at 4.
Grant County, Washington, has some of the lowest electric rates in the country. Id. Electric rates in Grant County are set by Public Utility District No. 2 ("the District"). See id. The District is established under Title 54 of the Revised Code of Washington and operates as a municipal corporation at the direction of elected Commissioners, who are assisted by hired staff. ECF No. 37 at 9. Pursuant to District Resolution 8768, district staff prepare electric rate schedule proposals. ECF No. 106-3 at 6. Then, the Commission decides whether to adopt the proposed rate schedules. Id.
Prior to 2017, the district had fifteen distinct rate schedules, each schedule pertaining to a different "customer class," or group of costumers with similar, relevant characteristics. See id. at 5. Common examples of "customer classes" include "residential" and "industrial" classes. Id. at 29. Ultimately, members of a particular customer class "tend to exhibit common characteristics —whether in terms of electricity usage or otherwise—such that they can be effectively grouped together for [the District's] cost allocation purposes." Id. The customer class that a person falls into determines which rate schedule is applicable to her, thereby setting the rate that she will pay for electricity.
In the summer of 2017, the District claims that it experienced a large influx of requests for power service from cryptocurrency
Plaintiffs dispute the "influx" of service requests from cryptocurrency miners, arguing that the District has inflated this number. See ECF No. 136 at 7. Plaintiffs claim that the District did not take appropriate measures to get a realistic estimate of cryptocurrency miners interested in Grant County. See id. Regardless of the actual number of cryptocurrency mining companies interested in Grant County, the District thought it necessary to put together a team of staff ("Staff") to analyze how the District could satisfy the new demand while simultaneously servicing existing customers. Id. at 7.
At the direction of the Commission, the Staff analyzed how to respond to the unprecedented number of new requests for service, primarily from cryptocurrency miners. Id. Eventually, the Staff recommended that a new rate schedule, "RS 17," and a corresponding new customer class, the "Evolving Industries" class, be created. To decide if an industry falls into the Evolving Industries class, and is thus subject to RS 17 rates, the Staff recommended a test focused on certain risk factors presented by the industry in question. ECF No. 37-6 at 91. These risks are:
Id.
The District argues that these risks are significant for the purposes of rate setting in part, because if an industry requiring a large percentage of the district's power fails, numerous costs related to infrastructure or contracts with other power companies will be passed on to the remaining customers in the District. As explained in one Staff memorandum: "When retail load increases, it increases Grant PUD's obligation under [its] Power Sales Contract to purchase additional energy permanently. That increased commitment to purchase power ... will remain if the [Evolving Industries] customers leave Grant's power system resulting in surplus power. To the extent that the sale of this surplus results in a loss, these costs will be borne by remaining Grant PUD's [sic] customers." ECF No. 37-6 at 94. Additionally, the District reasoned that the expansion of Evolving Industries, which by definition requires a relatively large percentage of the District's power, likely will necessitate the development of additional infrastructure. Id. at 94. Thus, if an Evolving Industry relocated to another district, or failed, the remaining customers would be forced to bear the costs of infrastructure upgrades necessitated by that Evolving Industry. Id.
In addition to the creation of the Evolving Industry class and RS 17, the Staff recommended a "two-queue" approach, under which "traditional" customers are placed in one queue to have their service requests addressed, and those belonging to the Evolving Industries class, like cryptocurrency
After RS 17 and the two-queue approach were drafted, but before they were adopted by the District, members of the cryptocurrency industry were notified. See ECF No. 106-3 at 11. During October of 2017, District Staff held an in-person meeting and took questions. Id. Additionally, all Commission meetings are open to the public and have a public comment period, including those during which the Commission discussed RS 17 and the two-queue approach. Id. at 12. During the comment period held at every public meeting, any person is permitted to comment on the issues raised during the meeting. Id. Prior to each meeting, the District posts an agenda, commission packets, and presentation materials on the District Website, so that members of the community can become informed about the upcoming meeting and prepare thoughtful comments. See id. at 12.
Between October 24, 2017, and August 28, 2018, the Commission held eleven open meetings during which it discussed RS 17 and the two-queue approach. Id. at 12-13. Various cryptocurrency mining companies made public comments at many of these meetings. Id. at 13-15. At the end of the process, on August 24, 2018, the Commission adopted RS 17 and the two-queue approach in Resolution 8891. Id. at 13. Because the cryptocurrency mining industry falls within the newly created Evolving Industries class, cryptocurrency mining companies are subject to RS 17 and placed in the Evolving Industries queue.
On December 19, 2018, Plaintiffs filed a complaint in this Court, challenging the District's new rate schedule under federal and Washington state law. ECF No. 1. Plaintiffs in this case are cryptocurrency mining entities with operations in Grant County and one individual involved in cryptocurrency mining in Grant County. Id. at 4-6. Plaintiffs have alleged nine causes of action against the District, premised on the U. S. and Washington State Constitutions, and federal and state laws. Plaintiffs claim that the District has violated the Commerce Clause of the Federal Constitution and the Due Process Clause of the Fifth and Fourteenth Amendments. ECF No. 81 at 37-39. For the alleged constitutional violations, Plaintiffs bring claims for damages and attorneys' fees under 42 U.S.C. §§ 1983 and 1988. Id. at 39. Plaintiffs also argue that the District violated Section 20 of the Federal Power Act, 16 U.S.C. § 813, by creating an unfair and discriminatory rate schedule. Id. at 40. Finally, Plaintiffs argue that the district violated Washington ratemaking law, the Due Process Clause of the Washington State Constitution, and the Privileges and Immunities Clause of the Washington State Constitution. Id. at 40-46.
On March 19, 2019, this Court denied Plaintiffs' motion for a preliminary injunction and, on interlocutory appeal, the Ninth Circuit affirmed this Court's decision in an unpublished opinion. ECF Nos. 52, 101; Blocktree Properties, LLC v. Pub. Util. Dist. No. 2 of Grant Cty. Wash., 783 Fed. Appx. 769 (9th Cir. 2019).
The District first moved for summary judgment on May 8, 2019. However, the Court granted Plaintiffs' motion to defer summary judgment pursuant to Rule 56(d). ECF No. 89. The District renewed its Motion for Summary Judgment on December 19, 2019, and Plaintiffs moved for summary judgment shortly thereafter. ECF Nos. 106 and 108.
When parties file cross-motions for summary judgment, the Court considers each
The moving party bears the burden of showing the absence of a genuine issue of material fact, or in the alternative, the moving party may discharge this burden by showing that there is an absence of evidence to support the nonmoving party's prima facie case. Celotex, 477 U.S. at 325, 106 S.Ct. 2548. The burden then shifts to the nonmoving party to set forth specific facts showing a genuine issue for trial. See id. at 324, 106 S.Ct. 2548. The nonmoving party "may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided... must set forth specific facts showing that there is a genuine issue for trial." Id. at 322 n.3, 106 S.Ct. 2548 (internal quotations omitted).
The Court will not infer evidence that does not exist in the record. See Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888-89, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990). However, the Court will "view the evidence in the light most favorable" to the nonmoving party. Newmaker v. City of Fortuna, 842 F.3d 1108, 1111 (9th Cir. 2016). "The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
Plaintiffs have alleged both a substantive and a procedural due process claim under the U.S. Constitution against the District. The Court considers each claim in turn.
To succeed on a substantive due process claim, the plaintiff "must show as a threshold matter that a state actor deprived it of a constitutionally protected life, liberty or property interest." Shanks v. Dressel, 540 F.3d 1082, 1087 (9th Cir. 2008). Not all property interests are protected by substantive due process. Regents of Univ. of Mich. v. Ewing, 474 U.S. 214, 229, 106 S.Ct. 507, 88 L.Ed.2d 523 (1985) (J. Powell, concurring). The property interests protected by substantive due process are fewer than those protected by procedural due process. Id. This is because procedural due process protects property interests derived from state law, while substantive due process does not. Ewing, 474 U.S. at 229, 106 S.Ct. 507 (J. Powell, concurring); see also Santiago de Castro v. Morales Medina, 943 F.2d 129, 130-31 (1st Cir. 1991) (explaining that the Supreme Court never has suggested "that the constitutional safeguards accorded under the substantive component of the Due Process Clause embrace all state-created property interests entitled to procedural due process protection"); Bailey v. City of Pinellas Park, 147 Fed. Appx. 932, 934 (11th Cir. 2005) (finding that substantive due process protects fundamental rights under the federal constitution, whereas procedural
Because Plaintiffs' due process claim has morphed over the course of this litigation, it is difficult to determine exactly what the property interest at issue is. Plaintiffs have recharacterized their alleged property interest several times. For instance, in their Complaint, Plaintiffs alleged that RS 17 would deprive them "of their property by massively and unjustifiably increasing their electric rates, thereby destroying the millions of dollars of investments they have made in Grant County." ECF No. 1 at 39. Accordingly, the Complaint defines the property at issue as Plaintiffs' investment in their land and operations. Plaintiffs have not directed the Court to any cases suggesting that a person's or company's "investment" alone is a property interest protected by substantive due process. As this Court already has explained in the course of this litigation, accepting Plaintiffs' argument would improperly "make anything of monetary value a property interest protected by the due process clause." Blocktree Properties, LLC v. Pub. Util. Dist. No. 2 of Grant Cty. Wash., 380 F.Supp.3d 1102, 1122 (E.D. Wash. 2019).
Plaintiffs also have defined their alleged property interest as the right to a fair, non-arbitrary utility rate. ECF No. 131 at 25. Again, the Court can find no cases, and Plaintiffs cite none, indicating that a consumer's interest in a non-arbitrary utility rate is a protected interest for the purposes of substantive due process.
Most recently, Plaintiffs have categorized their purported property interest as a right to be free of confiscatory rates that amount to the taking of property without due process of law. See id. at 26. The doctrine of "confiscatory rates" applies to utility companies. See Mich. Bell Tele. Co. v. Engler, 257 F.3d 587, 593 (6th Cir. 2001) (quoting Duquesne Light Co. v. Barasch, 488 U.S. 299, 307, 109 S.Ct. 609, 102 L.Ed.2d 646 (1989) (citation omitted)). When a government forces a utility company to provide power at a rate that is too low, or confiscatory, that action is considered a taking because "the State has taken the use of utility property without paying just compensation." Duquesne Light Co., 488 U.S. at 307-308, 109 S.Ct. 609. Accordingly, the due process clause protects utility companies from being forced to provide power at confiscatory rates. Id. Plaintiffs in this case are not utility companies. Therefore, their due process argument regarding confiscatory rates lacks merit.
Because Plaintiffs have not identified a viable property interest protected by substantive due process, they cannot demonstrate that they have been deprived of such an interest without due process. Therefore, Plaintiffs' substantive due process claim fails as a matter of law.
In addition to their substantive due process claim, Plaintiffs have brought a procedural due process claim under the U.S. Constitution. Procedural due process claims have two elements: (1) a deprivation of a protected liberty or property interest, and (2) a "denial of adequate procedural protections." Brewster v. Bd. of Educ. of
For the purposes of procedural due process, property interests are created by a source independent of the Constitution, like state law. See Regents of Univ. of Mich. v. Ewing, 474 U.S. 214, 229, 106 S.Ct. 507, 88 L.Ed.2d 523 (1985) (J. Powell, concurring); Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972) (explaining that property interests are "created and their dimensions are defined by existing rules or understandings that stem from an independent source," like state law). These property interests "include anything to which a plaintiff has a `legitimate claim of entitlement.'" Nozzi v. Hous. Auth. of City of L.A., 806 F.3d 1178, 1191 (9th Cir. 2015) (quoting Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 576-77, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972)).
To have a legitimate claim of entitlement to a benefit, a plaintiff "must have more than a unilateral expectation of it." Id. at 577, 92 S.Ct. 2701. To create an entitlement to a benefit, an independent source, such as state law, must establish and define the contours of that benefit. Id. When state law describes the nature of the benefit, who is entitled to receive it, and under what circumstances they are entitled to receive it, a qualified plaintiff is more likely to have a legitimate claim of entitlement to that benefit. See Goldberg v. Kelly, 397 U.S. 254, 262, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970). Similarly, when the law "contains mandatory language that restricts the discretion" of the body administering the benefit, it is more likely that the benefit is a protected property interest. Kraft v. Jacka, 872 F.2d 862, 868 (9th Cir. 1989) abrogated on other grounds by Dennis v. Higgins, 498 U.S. 439, 442 n.2, 111 S.Ct. 865, 112 L.Ed.2d 969 (1991). On the other hand, if a statute gives the administering body broad authority to act with regard to the benefit, then the plaintiff is less likely to establish that he or she is entitled to that benefit. Id. Thus, the benefit is less likely to be a protected property interest. Id.
Plaintiffs argue that Washington law establishes a property interest in nondiscriminatory, non-arbitrary electricity rates. They claim that this property interest arises from language in RCW 54.24.080, which states that PUD rates must be "fair" and "nondiscriminatory," and "from the requirement that Grant's Commission may not change those rates except at a properly-noticed public meeting with publicly recorded votes...." ECF No. 131 at 25 (quoting RCW 54.24.080).
It is not clear that a "fair" or "nondiscriminatory" rate can be considered property, or a property interest. However, even if a "fair" or "nondiscriminatory" rate could be construed as a property interest, Washington law is clear: RCW 54.24.080 does not provide utility users and licensees with a private, enforceable right to fair and nondiscriminatory utility rates. The State Supreme Court reached this conclusion in Snohomish Cty. PUD No. 1 v. Broadview Television Co., 91 Wn.2d 3, 586 P.2d 851 (1978). There, the State Supreme Court explained that reading such a right into RCW 54.24.080 would "nullif[y] completely the grant of `full and exclusive authority' to the district, making its rates subject to judicial review upon complaint of any user or licensee." Id. at 854. The State Supreme Court confirmed the broad authority of public utility districts to set rates; such authority is not subject even to the review of the Washington Utilities and Transportation Committee. Id. at 855.
Assuming arguendo that a protectable property interest in the general concept of
Defendants also argue that setting rates is a legislative act, to which procedural due process does not apply. Thus, even if a property interest exists, which the Court does not concede, Plaintiffs were not entitled to the protections of procedural due process in the setting of RS 17.
Procedural due process does not apply to legislative acts. Bi-Metallic Inv. Co. v. State Bd. of Equalization, 239 U.S. 441, 445-46, 36 S.Ct. 141, 60 S.Ct. 372 (1915). Therefore, before procedural due process rights attach, a plaintiff must show that the deprivation occurred as a result of an adjudicatory process rather than a legislative process. See Harris v. Cty. of Riverside, 904 F.2d 497, 501 (9th Cir. 1990). The parties dispute whether the adoption of RS 17, including Plaintiffs' placement in the Evolving Industries category, was a legislative act.
Plaintiffs argue that, because RS 17 applies to relatively few people, it should be characterized as an adjudicatory act, to which procedural due process rights apply. Plaintiffs find support for their argument in the case of Londoner v. City & Cty. of Denver, 210 U.S. 373, 385-86, 28 S.Ct. 708, 52 S.Ct. 1103 (1908). In Londoner, a local board had to decide "whether, in what amount, and upon whom" a tax for paving a street should be levied. Bi-Metallic Inv. Co., 239 U.S. 441, 445-6, 36 S.Ct. 141 (quoting Londoner, 210 U.S. at 385, 28 S.Ct. 708). Because only a few people were affected by the tax, and because each of them was affected "upon individual grounds," the Court found that the affected individuals had a due process right to a hearing before the tax was passed. Plaintiffs claim that, because RS 17 only has been applied to cryptocurrency mining companies, Londoner applies and requires certain procedural due process protections, such as notice and a hearing.
While there is merit to Plaintiffs' Londoner argument, Plaintiffs do not adequately respond to precedent that explicitly identifies rate setting as a legislative act, rather than an adjudicatory act. In Prentis v. Atlantic Coast Line Co., a case involving train ticket rates, the Supreme Court explained why rate setting is legislative in nature. 211 U.S. 210, 29 S.Ct. 67, 53 S.Ct. 150 (1908). In Prentis, a Virginia commission regulated the maximum rates that railway companies could charge their customers. Id. at 224, 29 S.Ct. 67. The commission was responsible for creating and enforcing those rates, and ensuring that they were "reasonable and just." Id. Prior to passing a new rate schedule, the commission held a hearing, during which it heard objections to the proposed rates. Id. After the hearing, the commission enacted
The Prentis Court concluded that the commission's proceedings in adopting the new rate scheme were plainly legislative. Id. at 226, 29 S.Ct. 67. In doing so, it explained the difference between a judicial inquiry and a legislative act, stating:
Id. The Court further announced that a legislative action cannot be recast as an adjudicatory action simply because the commission or other legislative body engaged in factfinding prior to reaching a decision. Id. at 227, 29 S.Ct. 67. As the Supreme Court explained, "[m]ost legislation is preceded by hearings and investigations." Id. Therefore, "it does not matter what inquiries may have been made as a preliminary to the legislative act." Id. The Supreme Court decided Prentis six months after deciding Londoner and still concluded that rate setting is legislative in nature.
Since Prentis, courts consistently have held that rate setting is a legislative act. See e.g., Pub. Utils. Comm'n of State of Cal. v. United States, 356 F.2d 236, 241-42 (9th Cir. 1966) (explaining that ratepayers have no constitutional right to participate in legislative procedures setting rates); Earle M. Jorgensen Co. v. City of Seattle, 99 Wn.2d 861, 665 P.2d 1328, 1331-32 (1983) (confirming that rate setting is a legislative act, "even with respect to rate allocation and design").
Because rate setting is a legislative act, procedural due process rights do not attach. Therefore, even if Plaintiffs could point to a valid property interest, which the Court does not concede that they did, Plaintiffs' procedural due process claim fails as a matter of law.
The Dormant Commerce Clause prohibits states and local governments from passing laws that burden interstate commerce. It ensures that producers and businesses in any given state have access to markets in other states by forbidding laws that effectuate economic protectionism. See Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 808, 96 S.Ct. 2488, 49 L.Ed.2d 220 (1976). When a state or local law discriminates against interstate commerce on its face, the law almost certainly violates the Dormant Commerce Clause. Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 471, 101 S.Ct. 715, 66 L.Ed.2d 659 (1981) (citing Philadelphia v. New Jersey, 437 U.S. 617, 624, 98 S.Ct. 2531, 57 L.Ed.2d 475 (1978)). When the challenged law is not facially discriminatory, it violates the Dormant Commerce Clause only if it places a burden on interstate commerce that is "clearly excessive in relation to the putative local benefits." Id. (quoting Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970)).
The Supreme Court routinely has explained that the Dormant Commerce Clause "protects the interstate market, not particular interstate firms, from prohibitive
Plaintiffs' Dormant Commerce Clause argument is difficult to follow. First, the Court notes that the majority of the Plaintiffs in this matter are in-state companies conducting cryptocurrency mining operations in Grant County, Washington. However, as two of the Plaintiff entities are not Washington State organizations, the Court will proceed to analyze Plaintiffs' claim.
RS 17 is not facially discriminatory, as it treats in-state and out-of-state cryptocurrency mining companies the same; all are classified as Evolving Industries, and all are subject to heightened electricity rates due to the nature of their industry. The mere existence of the instant litigation, in which in-state and out-of-state Plaintiffs have brought the exact same claims, highlights the fact that the rate schedule is not facially discriminatory.
Therefore, the only question that remains is whether RS 17 places a burden on interstate commerce, and whether that burden is "clearly excessive in relation to the putative local benefits." Minnesota v. Clover Leaf Creamery Co., 449 U.S. at 471, 101 S.Ct. 715 (quoting Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970)).
Plaintiffs' argument that higher electricity rates in Grant County burden interstate commerce is not supported. Essentially, Plaintiffs argue that higher electricity rates make their business less profitable, and, because they sell to consumers around the country, such rate increases inherently burden interstate commerce. Plaintiffs claim that, if other states or localities increase electricity rates similarly, they will be driven out of business. Plaintiffs argue: "If utilities outside Grant County adopted rate structures similar to Rate Schedule 17, interstate and international commerce using cryptocurrency and blockchain technology would be destroyed. Rate Schedule 17 therefore imposes undue burdens on interstate and international commerce" that violate the Dormant Commerce Clause. ECF No. 1 at 38.
Plaintiffs' argument does not support a Dormant Commerce Clause claim because it does not demonstrate a burden on interstate commerce. See Exxon Corp., 437 U.S. at 125-28, 98 S.Ct. 2207. The injustice that Plaintiffs perceive in this case is not that local laws will restrict the flow of goods across state lines, or that the higher rate will promote in-state cryptocurrency producers at the expense of out-of-state producers. Rather, Plaintiffs worry that other states and localities will see what Grant County has done and find that cryptocurrency miners should be required to pay a higher rate for electricity. Plaintiffs' arguments fail because the Dormant Commerce Clause does not protect an industry's profit margin, structure, or even its existence. See id. Rather, it ensures that states and local governments do not enact laws that protect in-state industry by burdening interstate commerce. Plaintiffs have shown no such burden here, and their Dormant Commerce Clause claim fails as a matter of law.
Plaintiffs argue that Section 20 of the Federal Power Act prevents the District from charging unreasonable, discriminatory, and unjust electric rates. 16 U.S.C. § 813. Section 20 of the Federal Power Act states:
Id. Defendants have raised several arguments that they claim foreclose Plaintiffs' Federal Power Act Claim, and the Court addresses each in turn.
First, the District argues that Section 20 does not apply because the power in question did not enter into interstate commerce. Plaintiffs counter that Section 20 applies to the District because the District holds a federal hydroelectric license for the Priest Rapids Project, and because electricity from that project enters interstate commerce. They argue that, once power enters any interstate grid, it immediately becomes interstate power subject to the provisions of Section 20. ECF No. 131 at 8-9 (citing New York v. FERC, 535 U.S. 1, 7, 122 S.Ct. 1012, 152 L.Ed.2d 47 (2002)).
The Court is skeptical of Plaintiffs' argument. The electricity in this case was generated by a local dam and provided to county customers by a local public utility district. However, given the lack of briefing and clear guidance on this point, the Court will assume, without finding, that the electricity is interstate, and proceed with its analysis.
The District also argues that Section 20 does not apply to retail sales. In FERC v. Electric Power Supply Association, the Supreme Court explained that the FPA does not apply to retail sales. ___ U.S. ___, 136 S.Ct. 760, 768, 193 L.Ed.2d 661 (2016). It declared, "The FPA delegates responsibility to FERC to regulate the interstate wholesale market for electricity —both wholesale rates and the panoply of rules and practices affecting them." Id. at 773. "That means that FERC has the authority—and, indeed, the duty—to ensure that rules or practices `affecting' wholesale rates are just and reasonable." Id. at 774.
At first glance, the District's supporting case law seems to unequivocally foreclose Plaintiffs' argument. However, upon closer examination, it is apparent that all of the precedent supporting the District's argument, including the Supreme Court decision in FERC v. Electric Power Association, interprets Part II of the FPA, not Section 20, which is located in Part I. The interplay between Section 20 of the FPA and the relevant provisions of Part II of the FPA has not been sufficiently briefed or argued. Although the Court has found no cases applying Section 20 to retail sales, the Court is hesitant to issue a finding on this matter. As the Court's decision does not depend on this point, the Court will assume for the purposes of analysis, without finding, that Section 20 applies to retail sales.
Defendants assert that Section 20 does not create a private cause of action that allows customers to challenge electricity rates. Numerous courts, under varying sets of facts, have held that the FPA does not create a general, private cause of action. See e.g., City of Gainesville v. Fla. Power & Light Co., 488 F.Supp. 1258, 1275 (S.D. Fl. 1980) ("[T]his Court concludes that there exists no private right of action of the nature sought by the plaintiffs under the Federal Power Act."); Coalition for Competitive Electricity, Dynegy Inc., v. Zibelman, 272 F. Sup. 3d 554, 565 (S.D.N.Y. 2017) (explaining that the omission of a general private cause of action in the FPA should be construed as intentional); Village of Old Mill Creek v.
However, none of these cases addresses the specific statute in the FPA to which Plaintiffs point, Section 20, or 16 U.S.C. § 813. Therefore, the Court must analyze Section 20 to determine if it provides a private right of action to Plaintiffs.
"Like substantive federal law itself, private rights of action to enforce federal law must be created by Congress." Alexander v. Sandoval, 532 U.S. 275, 286, 121 S.Ct. 1511, 149 L.Ed.2d 517 (2001). The federal statute through which the plaintiff brings his or her claim must create both a private right and a private remedy. Id. Without both a private right and a private remedy, "a cause of action does not exist and courts may not create one, no matter how desirable that might be as a policy matter, or how compatible with the statute." Id. at 286-87, 121 S.Ct. 1511; see also UFCW Local 1500 Pension Fund v. Mayer, 895 F.3d 695, 699 (9th Cir. 2018).
When deciding if a private right exists, courts should examine the statute for "rights-creating language." Sandoval, 532 U.S. at 288-89, 121 S.Ct. 1511. Rights-creating language focuses on the class of individuals protected by the statute, rather than the class of individuals or entities regulated by the statute. Id. The Ninth Circuit has declared that "the statute must place an unmistakable focus" on the class that the statute protects in order to create a private right of enforcement. Mayer, 895 F.3d at 699 (quoting Ball v. Rodgers, 492 F.3d 1094, 1106 (9th Cir. 2007)).
Section 20 requires that services provided and rates charged by licensees be "reasonable, nondiscriminatory, and just to the customer." 16 U.S.C. § 813. The statute declares "all unreasonable discriminatory and unjust rates [and] services ... to be unlawful[.]" Id. Plaintiffs essentially argue that this language is rights-creating language. The Court disagrees with that assessment. Plaintiffs' analysis ignores the remainder of the statute, and the statute's context in Part I of the Federal Power Act, formerly the Federal Water Power Act.
Part I of the Federal Power Act, passed in 1920, establishes the Federal Power Commission (FERC's predecessor), and gives the agency authority to regulate certain water power projects. While Section 20 requires licensees to charge rates and offer services that are "just to the customer," the remainder of the statute is largely jurisdictional, providing FERC with enforcement authority in some, limited circumstances. See 16 U.S.C. § 813. For instance, Section 20 explains that, if a state has established a commission to enforce the provisions of Section 20, then FERC generally does not have jurisdiction to enforce those same provisions.
Even if a private right could be found, which the Court does not concede, Plaintiffs have not established that a private remedy exists. "[T]o create a private remedy, a statute must (at the very least) avoid remedy-foreclosing language." Mayer, 895 F.3d at 699. If the statute provides for an express remedial scheme, then the right to enforce the statute through a separate, private action likely is foreclosed. Id. "That is because providing for `one method of enforcing' a private right `suggests that Congress intended to preclude all others.'" Id. (quoting Sandoval, 532 U.S. at 290, 121 S.Ct. 1511).
Section 20 explicitly assigns either FERC or the states to enforce its provisions. As the Court already has explained, Section 20 deals with jurisdictional issues, delineating when FERC is empowered to enforce the statute and when the states are empowered to enforce it. See 16 U.S.C. § 813. Moreover, the statute contemplates that a "person aggrieved" may file a complaint with FERC, under certain circumstances, to invoke FERC jurisdiction. Id. This express language regarding enforcement suggests that Congress intended Section 20 to be enforced through FERC procedures, or through state ratemaking procedures, rather than through private, federal actions.
Plaintiffs argue that Section 20 provides them with a private remedy under these facts. ECF No. 113 at 10. They claim that this remedy exists because Section 20 includes the following language:
16 U.S.C. § 813.
Plaintiffs maintain that the above-quoted language entitles them to the rights of hearing and review listed in Subtitle IV of Title 49, which governs railroad regulation. However, the plain language of Section 20 only provides those "rights of hearing, defense, and review" to the "parties subject" to Section 20's regulation. The parties subject to Section 20's regulation are licensees, such as the District, not customers, such as the Plaintiffs.
Even assuming arguendo that customers are entitled to the remedies found in Subtitle IV of Title 49, it is apparent that none of those remedies applies here. As noted above, Section 20 cross-references Subtitle IV of Title 49, thus making the provisions of Subtitle IV of Title 49 relevant to Section 20, to the extent that they are "applicable." 16 U.S.C. § 813. One statute within Subtitle IV of Title 49 outlines the "[r]ights and remedies of persons injured by rail carriers." 49 U.S.C. § 11704. Plaintiffs assert that they are entitled to the same kinds of remedies listed in that statute, as Section 20 cross-references it. Under that statute, individuals are given the right to sue private rail companies in certain, limited circumstances. However, in each of those circumstances, the federal agency must have jurisdiction to enforce the relevant statute. See 49 U.S.C. § 11704(a). Here, the federal agency, FERC, does not have jurisdiction to enforce Section 20 against the District. See Yakama Nation v. PUD No. 2 of Grant Cty. Wash., 103 FERC P 61073, 2003 WL 1889817, at **3 (2003). Upon review of Subtitle IV of Title 49, the Court finds that none of the express methods of enforcement provided therein is relevant to this case.
Plaintiffs allege Section 1983 claims against the Commissioners for the alleged violations of their constitutional rights. "Traditionally, the requirements for relief under [§] 1983 have been articulated as (1) a violation of rights protected by the Constitution or created by a federal statute, (2) proximately caused (3) by the conduct of a `person' (4) acting under color of state law." Crumpton v. Gates, 947 F.2d 1418, 1420 (9th Cir. 1991). As described in the preceding paragraphs, the Court has concluded that Plaintiffs' constitutional and federal law claims fail as a matter of law. Accordingly, Plaintiffs Section 1983 claims against the Commissioners fail as a matter of law.
A district court may assert supplemental jurisdiction over claims that "form part of the same case or controversy" over which a district court has original jurisdiction. 28 U.S.C. § 1367(a). However, if a district court dismisses all claims over which it has original jurisdiction, the court "may decline to exercise supplemental jurisdiction" over the remaining claims. 28 U.S.C. § 1367(c)(3). If all original jurisdiction claims are dismissed before trial, it is common practice to decline to exercise jurisdiction over any remaining state law claims. See Acri v. Varian Assocs., Inc., 114 F.3d 999, 1001 (9th Cir. 1997); Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 n.7, 108 S.Ct. 614, 98 L.Ed.2d 720 (quoting United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966)) (Usually, "if the federal claims are dismissed before trial ... the state claims should be dismissed as well.").
The Court had original jurisdiction over Plaintiffs' federal claims under federal question jurisdiction. See 28 U.S.C. § 1331. However, now that the Court has granted summary judgment in favor of Defendants on those federal claims, there is no remaining basis for federal question jurisdiction. Furthermore, Plaintiffs have not alleged a basis for the Court to assert diversity jurisdiction over the remaining state law claims. Because the Court dismissed the claims over which it had an independent basis for subject matter jurisdiction, and because it did so early in the litigation, the Court declines to exercise supplemental jurisdiction over Plaintiffs' remaining state law claims. See 28 U.S.C. § 1367(c)(3); Acri, 114 F.3d at 1001.
Accordingly,
1. Defendants' Renewed Motion for Summary Judgment,
2. Plaintiffs' Motion for Summary Judgment,
3. Plaintiffs' federal claims are
4. Plaintiffs' state law claims are
5. Judgment shall be entered for all Defendants on all federal claims.
6. Any remaining, pending motions, including the motions at
