e.g., Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 114 S. Ct. 1673, 1675, 128 L. Ed. 2d 391 (1994). Further, "it is to be presumed that a cause lies outside this limited jurisdiction . . . and the burden of establishing the contrary rests upon the party asserting jurisdiction." Id. (citations omitted). In order for a federal court to have jurisdiction over any controversy, the Supreme Court has made clear that "the Constitution must have given the court the capacity to take it, and an act of Congress must have supplied it." Finley v. United States, 490 U.S. 545, 109 S. Ct. 2003, 2006, 104 L. Ed. 2d 593 (1989) (internal quotations omitted)(emphasis omitted).
Plaintiffs argue that we have jurisdiction over this matter pursuant to 28 U.S.C. § 1331.
Although the statutory language of § 1331 echoes Article III, Section 2 of the Constitution, the Supreme Court has taken a narrower view in interpreting that jurisdictional statute. See, e.g., Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 494-95, 76 L. Ed. 2d 81, 103 S. Ct. 1962 (1983). See also Erwin Chemerinsky, Federal Jurisdiction § 5.2, 253-55 (1994).
In determining whether an action "arises under" federal law, we are governed by the well-pleaded complaint rule, which requires that a federal question be presented on the face of the complaint. See Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 96 L. Ed. 2d 318, 107 S. Ct. 2425 (1987); Louisville & Nashville Railroad v. Mottley, 211 U.S. 149, 53 L. Ed. 126, 29 S. Ct. 42 (1908). When reviewing the face of a complaint for federal question jurisdiction, there are two categories of cases through which a suit may "arise under" federal law. Justice Holmes phrased the first category: "A suit arises under the law that creates the cause of action." American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260, 60 L. Ed. 987, 36 S. Ct. 585 (1916). The second is when the plaintiff's cause of action is based on state law, but a federal law that creates a cause of action is an essential component of the plaintiff's complaint. See, e.g., Hopkins v. Walker, 244 U.S. 486, 61 L. Ed. 1270, 37 S. Ct. 711 (1917).
Turning to the first category of cases, there are in essence three ways in which federal law "creates" a cause of action: first, when a federal law provides both a substantive right and a remedy for vindicating that right, see, e.g., Feibelman v. Packard, 109 U.S. 421, 27 L. Ed. 984, 3 S. Ct. 289 (1883), second, when a federal law grants a substantive right and a federal remedy fairly may be implied from that right, see, e.g., Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U.S. 353, 72 L. Ed. 2d 182, 102 S. Ct. 1825 (1982), and, third, when federal law so thoroughly preempts state law that it "converts an ordinary state common-law claim into one stating a federal claim for purposes of the well-pleaded complaint rule." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65, 95 L. Ed. 2d 55, 107 S. Ct. 1542 (1987) ("complete preemption"). None of these three applies to plaintiffs' claims in this case.
While plaintiffs cite PURPA as the federal statutory predicate for their complaint, they have not alleged private causes of action against PECO that are either expressly or impliedly created by PURPA. Rather, plaintiffs' claims against PECO sound in tort and contract--traditional state law claims.
See, e.g., Schuylkill Energy Resources, Inc. v. Pennsylvania Power & Light Co., 113 F.3d 405, 418 (3d Cir 1997) (affirming the district court's decision, upon dismissal of federal antitrust claims, to decline to exercise supplemental jurisdiction over "state law claims" concerning a breach of a PPA entered into pursuant to PURPA); see also Crossroads Cogeneration Corp. v. Orange and Rockland Utilities, Inc., 969 F. Supp. 907, 916 (D.N.J. 1997)(holding that plaintiff cogenerator's contract law claim against defendant public utility, while entered into pursuant to PURPA, did not "arise under" PURPA for purposes of jurisdiction, and therefore, could only be premised on diversity of citizenship).
Nor does this case qualify as a federal question on a complete preemption theory. The complete preemption doctrine operates in narrow areas such as Section 301(a) of the Labor Management Relations Act and Section 502(a) of the Employee Retirement Income Security Act. See, e.g., Caterpillar, Inc. v. Williams, 482 U.S. 386, 393-94, 96 L. Ed. 2d 318, 107 S. Ct. 2425 (1987). Based upon a review of the relevant case law, there is no evidence that the Supreme Court or our Court of Appeals has treated PURPA as a statute that completely preempts the field of power contracts, and nothing in the text or history of PURPA suggests Congressional intent to grant exclusive federal question jurisdiction over state law claims that may involve or implicate PURPA.
While plaintiffs' complaint does not fit neatly into any of these three lines of analysis, plaintiffs now argue that their action is in truth the creation of PURPA, and "arises under" federal law based upon the decision of our Court of Appeals in Freehold Cogeneration v. Board of Regulatory Commissioners of the State of New Jersey, 44 F.3d 1178 (3d Cir. 1994). In Freehold, the plaintiff, a QF, sought a declaratory judgment against the New Jersey Board of Regulatory Commissioners ("BRC")
after the BRC directly ordered the plaintiff and a New Jersey utility to renegotiate its purchase rate under a PPA. Our Court of Appeals concluded that the court had federal question jurisdiction pursuant to § 1331 because the BRC's Order violated the plaintiff's federally-created exemption from such regulation under § 210(e) of PURPA. See Freehold, 44 F.3d at 1184-85. The Court of Appeals decision in Freehold appears to be based, in part, upon the Supreme Courts decision in Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 77 L. Ed. 2d 490, 103 S. Ct. 2890 (1983), in which the Supreme Court stated:
It is beyond dispute that federal courts have jurisdiction over suits to enjoin state officials from interfering with federal rights . . . . A plaintiff who seeks injunctive relief from state regulation, on the ground that such regulation is pre-empted by a federal statute which, by virtue of the Supremacy Clause of the Constitution, must prevail, thus presents a federal question which the federal courts have jurisdiction under 28 U.S.C. § 1331 to resolve.
Id. at 96 n.14 (citations omitted).
Unlike Freehold, however, in this case the plaintiffs cannot allege that a state regulatory authority or a state actor has interfered with their federally-created exemption. See supra (finding a lack of "case" or "controversy" as between the plaintiffs and the PUC). Rather, all of plaintiffs' claims in the complaint are premised, in one form or another, on the allegation that PECO, a private, non-diverse entity, wrongfully terminated the PPAs. As noted above, such claims are governed entirely by state contract and tort law, rather than federal law, and it tortures the reality of this dispute to shoehorn it into Freehold 's mold.
Having failed to allege a cause of action against PECO "created" by federal law, the plaintiffs are left to argue that the resolution of their state law claims somehow requires a determination of federal law. See, e.g., Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 65 L. Ed. 577, 41 S. Ct. 243 (1921) (a case "arises under" federal law where a right under state law necessarily turned for its vindication on a construction of federal law). See also P. Bator, P. Mishkin, D. Shapiro & H. Wechsler, Hart and Wechsler's The Federal Courts and the Federal System, 889 (2d ed. 1973) (a case "arises under" federal law "if in order for the plaintiff to secure the relief sought he will be obliged to establish both the correctness and the applicability to his case of a proposition of federal law."). Since plaintiffs' claims at this time do not affirmatively turn on any particular construction of PURPA, plaintiffs' rights, if any, under that statute only arise in anticipation of PECO's possible defenses. An anticipated defense, however, is not part of a plaintiff's well-pleaded complaint. See Louisville & Nashville Railroad v. Mottley, 211 U.S. 149, 53 L. Ed. 126, 29 S. Ct. 42 (1908).
Mottley is most instructive here. The Louisville & Nashville Railroad settled a claim that Mr. and Mrs. Mottley had against it by agreeing to give them free lifetime passes. In 1906, Congress adopted a statute prohibiting free railroad passes, and the railroad refused to give the Mottleys passes for the following year. The Mottleys sued in federal court for breach of contract and sought specific performance, alleging that the statute did not apply to them, and that if it did, it was unconstitutional. After the district court ruled for the plaintiffs, the Supreme Court, raising the issue of jurisdiction sua sponte, found that the federal court lacked subject matter jurisdiction under § 1331 because the plaintiffs' complaint presented a state law claim for breach of contract, and the federal issues only arose from the plaintiffs' anticipation of a defense based upon the federal statute. Speaking for a unanimous Court, Justice Moody explained:
It is not enough that the plaintiff alleges some anticipated defense to his cause of action, and asserts that the defense is invalidated by some provision of the Constitution of the United States. Although such allegations show that very likely, in the course of the litigation, a question under the Constitution would arise, they do not show that the suit, that is, the plaintiff's original cause of action, arises under the Constitution.
Id. at 152. See also Caterpillar Inc. v. Williams, 482 U.S. 386, 393, 96 L. Ed. 2d 318, 107 S. Ct. 2425 (1987) (holding that federal question jurisdiction would not exist on the basis of an asserted federal defense, "including the defense of pre-emption, even if the defense is anticipated in the plaintiff's complaint, and even if both parties concede that the federal defense is the only question truly at issue.").
The defenses plaintiffs here anticipate are doubly removed from Mottley. As earlier noted, the PUC is plaintiffs' ally, not its adversary. The PUC in its Prehearing Memorandum not only agrees that plaintiffs should win against PECO, but even adopts plaintiffs' legal theory: "Reliance upon PaPUC action as justification of the cancellation of the PURPA agreement between Grays Ferry and PECO is misplaced." PUC Prehearing Memorandum at 2.
Our Mottley analysis would come to the same conclusion even if the PUC had not been so forthright in its support of plaintiffs here. Throughout their complaint, plaintiffs rehearse the view that PECO violated the PPAs when it intentionally or negligently failed to request stranded cost recovery from the PUC for the PPAs. Plaintiffs only mention the PUC, the Customer Choice Act, and PURPA in the context of the most hypothetical "ifs," in anticipation of PECO's defense that the Customer Choice Act or the PUC prevented PECO from receiving cost recovery from PECO's customers of the amounts paid for electricity purchases from the Grays Ferry Project. Plaintiffs' subjective voice on this point is quite revealing: "If the Customer Choice Act or the December PUC Order were to permit PECO to alter the terms of the Power Purchase Agreements, the Customer Choice Act and the December PUC Order would be inconsistent with and preempted by PURPA and FERC regulations promulgated thereunder which exempt QFs from state utility regulation." Plaintiffs' Complaint at P 67 (emphasis added). Such hypothetical responses to anticipated defenses are simply not a basis for federal question jurisdiction.
It is of no moment to this analysis that plaintiffs seek declaratory relief in Count One. The Supreme Court almost half a century ago confirmed that the presence of a declaratory judgment does not change the "arising under" rules we have just canvassed. In Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 94 L. Ed. 1194, 70 S. Ct. 876 (1950), the Supreme Court held that it would "distort the limited procedural purpose of the Declaratory Judgment Act" to find "arising under" federal question jurisdiction based on declaratory judgments that anticipate federal defenses. Id. at 673-74.
The power of the Skelly Oil rule was thrown into remarkably bold relief thirty-three years later in a case where an issue of federal preemption was explicitly raised in a declaratory judgment action, though one bottomed on a state law controversy. In Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 77 L. Ed. 2d 420, 103 S. Ct. 2841 (1983), the California Tax Board filed suit in state court against an employee welfare benefit plan that was subject to regulation under ERISA. The Board sought $ 380 in taxes that the Vacation Trust had refused to pay from three members' funds, and sought a declaratory judgment that ERISA did not preempt the state's ability to obtain these funds from the Vacation Trust. The Board asserted this latter claim because ERISA was the only justification the Trust gave the Tax Board for not seeking payment of these taxes from the tax delinquent members. The Trust removed the case to federal court, but a unanimous Supreme Court, through Justice Brennan, applied Mottley and Skelly Oil and held that the action did not arise under ERISA. Because the Tax Board's claim was founded on state law and the ERISA issue could only arise as a defense, the Court held that, as explained four years later in Metropolitan Life Insurance Co. v. Taylor, 481 U.S. 58, 64, 95 L. Ed. 2d 55, 107 S. Ct. 1542 (1987), "ERISA preemption, without more, does not convert a state claim into an action arising under federal law."
Plaintiffs' preemption claims here are less directly involved than in Franchise Tax Board. Unlike the Vacation Trust, no defendant here has explicitly invoked PURPA to justify their actions or inactions. Even if any did, they would have done no more than what the Supreme Court held to be of no jurisdictional consequence in Franchise Tax Board.
We therefore conclude that we are without power to address the merits of plaintiffs' weighty claims.
AND NOW, this 19th day of March, 1998, upon consideration of defendant PECO Energy Company's motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(1), and after argument this morning on the question of subject matter jurisdiction, and for the reasons set forth in the accompanying memorandum, it is hereby ORDERED that:
1. Defendant PECO Energy Company's motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(1) is GRANTED;
2. Plaintiffs' complaint is DISMISSED for lack of subject matter jurisdiction; and
3. The Clerk shall CLOSE this case statistically.
BY THE COURT:
Stewart Dalzell, J.