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Metropolitan Edison Co. v. Pennsylvania Public Utility Commission

United States District Court, Third Circuit

September 30, 2013

METROPOLITAN EDISON COMPANY; and PENNSYLVANIA ELECTRIC COMPANY, Plaintiffs
v.
PENNSYLVANIA PUBLIC UTILITY COMMISSION; ROBERT F. POWELSON; JOHN F. COLEMAN, JR.; PAMELA A. WITMER; WAYNE E. GARDNER; and JAMES H. CAWLEY in their official capacities as Commissioners of the Pennsylvania Public Utility Commission, Defendants and OFFICE OF SMALL BUSINESS ADVOCATE; MET-ED INDUSTRIAL USERS GROUP; and PENELEC INDUSTRIAL CUSTOMER ALLIANCE, Intervenor-Defendants

GLEN R. STUART, ESQUIRE MATTHEW J. SIEMBIEDA, ESQUIRE C.M. NAEVE, ESQUIRE JOHN N. ESTES, III, ESQUIRE JOHN LEE SHEPHERD, JR., ESQUIRE BRADLEY A. BINGAMAN, ESQUIRE MORGAN E. PARKE, ESQUIRE, On behalf of Plaintiffs.

ASPASSIA V. STAEVSKA, ESQUIRE JAMES P. MELIA, ESQUIRE KENNETH R. STARK, ESQUIRE ROBERT F. YOUNG, ESQUIRE BOHDAN R. PANKIW, ESQUIRE, On behalf of Defendants.

OPINION

JAMES KNOLL GARDNER, United States District Judge.

This matter is before the court on Defendants’ Amended Motion to Dismiss Pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6)(“Motion to Dismiss”).[1] For the reasons expressed below, the Motion to Dismiss is granted.

INTRODUCTION

This action for declaratory and equitable relief arose against the backdrop of the deregulation of the electricity industry in Pennsylvania and across the country during the 1990’s, [2] and involves a dispute stemming from proceedings before defendant Pennsylvania Public Utility Commission (“PPUC”) and the Commonwealth Court of Pennsylvania in which plaintiff Metropolitan Edison Company and plaintiff Pennsylvania Electric Company (together, “the company plaintiffs”), defendant PPUC and the Commissioner Defendants[3] (together, “the PPUC defendants”), and the intervenor-defendants participated.[4]

In short, the company plaintiffs allege that they sought permission from the PPUC to pass along certain costs (referred to interchangeably by the parties as “line losses”, “transmission line losses”, “transmission marginal energy losses” and “marginal losses”) to their retail electricity ratepayers. The company plaintiffs further allege that the PPUC defendants, by Opinion and Order issued March 3, 2010[5], denied the company plaintiffs’ request. The company plaintiffs appealed the PPUC March 3, 2010 Opinion and Order to the Commonwealth Court of Pennsylvania. On June 14, 2011, the Commonwealth Court of Pennsylvania affirmed the PPUC March 3, 2010 Order denying the company plaintiffs’ request.[6]

The essence of this federal action for declaratory and injunctive relief is the company plaintiffs’ allegation that the March 3, 2010 Opinion and Order of the PPUC is invalid because it impermissibly traps (and forces the companies to bear) line loss costs charged to the plaintiff companies pursuant to tariffs approved the Federal Energy Regulatory Commission (“FERC”), thereby violating the Supremacy Clause of the United States Constitution and the Federal Power Act of 1935, 16 U.S.C. §§ 791-828c., and more specifically, the federal filed-rate doctrine.[7]

SUMMARY OF DECISION

In the within motion, the PPUC defendants seek to have the company plaintiffs’ claims dismissed based upon claim preclusion, issue preclusion, Burford[8] abstention, and judicial estoppel.

For the reasons expressed below, I grant the Amended Motion to Dismiss based upon issue preclusion. Specifically, I grant the motion because the claims asserted by the company plaintiffs are premised upon legal arguments which were raised by plaintiffs in the Commonwealth Court of Pennsylvania and rejected in the Commonwealth Court’s Opinion entered June 14, 2011, which was not disturbed on appeal by either the Supreme Court of Pennsylvania or the United States Supreme Court.

JURISDICTION

Jurisdiction in this case is based upon federal question jurisdiction pursuant to 28 U.S.C. § 1331.

VENUE

Venue is proper pursuant to 28 U.S.C. § 1391(b)(1), and (c)(1)-(2), because all defendants are residents of Pennsylvania, [9] and for purposes of venue, defendant PPUC, defendant Powelson, and defendant Gardner each reside in this judicial district.[10]

PROCEDURAL HISTORY

The company plaintiffs initiated this action by filing their Complaint for Declaratory and Injunctive Relief on July 13, 2011.[11]

On July 14, 2011 the company plaintiffs filed a Petition for Allowance of Appeal to the Supreme Court of Pennsylvania, which sought discretionary review of the Commonwealth Court’s June 14, 2011 Opinion affirming the PPUC March 3, 2010 Opinion and Order.[12]

On July 27, 2011 the Office of the Small Business Advocate (“OSBA”) of the Commonwealth of Pennsylvania filed a motion to intervene as a defendant in the within action.[13]

On August 4, 2011, the PPUC defendants filed a Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6).[14]

On August 29, 2011, the company plaintiffs filed their Amended Complaint for Declaratory and Injunctive Relief.[15] By Order dated August 30, 2011 and filed August 31, 2011, [16] I dismissed as moot the PPUC defendants’ initial motion to dismiss upon the filing of the Amended Complaint.

On September 2, 2011 the Met-Ed Industrial Users Group (“MEIUG”) and the Penelec Industrial Customer Alliance (“PICA”) filed a motion to intervene as defendants in the within action.[17]

On September 15, 2011 the PPUC defendants filed a Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6)[18] seeking to dismiss the Amended Complaint.

On February 28, 2012 the Supreme Court of Pennsylvania denied the company plaintiff’s petition for allowance of appeal.[19]

By Order dated March 28, 2012 and filed March 29, 2012, and for the reasons expressed in that Order, I granted the motion to intervene filed by the OSBA and the motion to intervene filed jointly by MEIUG and PICA.[20]

On June 27, 2012 the company plaintiffs filed a Petition for Writ of Certiorari in the Supreme Court of the United States.[21]

By Order dated September 26, 2012 and filed September 27, 2012, [22] for the reasons expressed in that Order, I dismissed the PPUC defendants’ then-pending motion to dismiss plaintiff’s Amended Complaint without prejudice for the PPUC defendants to re-file the same motion to dismiss, or an amended motion to dismiss, if appropriate, upon denial of plaintiffs’ Petition for Writ of Certiorari (if the petition were denied) or upon the disposition of plaintiffs’ appeal by the United States Supreme Court (if the petition were granted).

On October 9, 2012, the United States Supreme Court denied the company plaintiffs’ petition for writ of certiorari.[23]

Pursuant to the scheduling Order dated October 18, 2012 and filed October 19, 2012, [24] which was modified at the parties request by my Order dated October 26, 2012 and filed November 2, 2012, [25] the within Motion to Dismiss was filed on December 21, 2012 together with a brief and exhibits.

On January 9, 2013, the company plaintiffs’ Answer to Motion was filed together with a brief and exhibits.

On January 16, 2013, the PPUC defendants filed their reply brief.[26] On January 23, 2013, the company plaintiffs filed their sur-reply brief and an exhibit.[27]

Oral argument on the within Motion to Dismiss was held before me on May 20, 2013. At the conclusion of oral argument, I took the matter under advisement. Hence this Opinion.

STANDARD OF REVIEW

A claim may be dismissed under Federal Rule of Civil Procedure 12(b)(6) for "failure to state a claim upon which relief can be granted." A Rule 12(b)(6) motion requires the court to examine the sufficiency of the complaint. Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 102, 2 L.Ed.2d 80, 84 (1957)(abrogated in other respects by Bell Atlantic Corporation v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Generally, in ruling on a motion to dismiss, the court relies on the complaint, attached exhibits, and matters of public record, including other judicial proceedings. Sands v. McCormick, 502 F.3d 263, 268 (3d Cir. 2008).

Except as provided in Federal Rule of Civil Procedure 9, a complaint is sufficient if it complies with Rule 8(a)(2), which requires "a short and plain statement of the claim showing that the pleader is entitled to relief". Rule 8(a)(2) does not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face. Twombly, 550 U.S. at 570, 127 S.Ct. at 1974, 167 L.Ed.2d at 949.[28]

In determining whether a complaint is sufficient, the court must accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading, the plaintiff may be entitled to relief. Fowler, 578 F.3d at 210 (citing Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)).

Although “conclusory” or “bare-bones allegations” will not survive a motion to dismiss, Fowler, 578 F.3d at 210, a complaint may not be dismissed merely because it appears unlikely that the plaintiff can prove those facts or will ultimately prevail on the merits. Phillips, 515 F.3d at 231. Nonetheless, to survive a Rule 12(b)(6) motion, the complaint must provide "enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element." Id. at 234 (quoting Twombly, 550 U.S. at 556, 127 S.Ct. at 1965, 167 L.Ed.2d at 940) (internal quotations omitted).

The court is required to conduct a two-part analysis when considering a Rule 12(b)(6) motion. First, the factual matters averred in the complaint, and any attached exhibits, should be separated from legal conclusions asserted. Fowler, 578 F.3d at 210. Any facts pled must be taken as true, and any legal conclusions asserted may be disregarded. Id. at 210-211.

Second, the court must determine whether those factual matters averred are sufficient to show that the plaintiff has a “plausible claim for relief.” Id. at 211 (quoting Iqbal, 556 U.S. at 679, 129 S.Ct. at 1950, 178 L.Ed.2d at 884).

Ultimately, this two-part analysis is “context-specific” and requires the court to draw on “its judicial experience and common sense” to determine if the facts pled in the complaint have “nudged [plaintiff’s] claims” over the line from “[merely] conceivable [or possible] to plausible.” Iqbal, 556 U.S. at 679-680, 129 S.Ct. at 1949-1951, 178 L.Ed.2d at 884-885.

A well-pled complaint may not be dismissed simply because “it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.” Twombly, 550 U.S. at 556, 127 S.Ct. at 1965, 167 L.Ed.2d at 940-941.

FACTS

Based upon the factual allegations averred in the company plaintiffs’ Amended Complaint, construed in the light most favorable to the plaintiff, which I must accept as true under the applicable standard of review discussed above, and the public record of the parties’ and judicial documents pertaining to the underlying state proceedings, the pertinent facts are as follows.

Parties

Plaintiffs Metropolitan Edison Company (“Met-Ed”) and Pennsylvania Electric Company (“Penelec”) are Pennsylvania corporations with their principal place of business co-located in Reading, Pennsylvania. Met-Ed and Penelec are electric distribution companies which furnish electric service within authorized service areas in the Commonwealth of Pennsylvania.[29]

Defendant Pennsylvania Public Utility Commission is an administrative agency of the Commonwealth of Pennsylvania, with its principal office located in Harrisburg, Pennsylvania. The PPUC also has an office in Philadelphia, Pennsylvania.[30] The PPUC is comprised of five appointed members: defendants Robert F. Powelson (Chairman), John F. Coleman (Vice Chairman), Pamela A. Witmer, Wayne E. Gardner, and James H. Cawley.[31]

The PPUC, is, among other things, responsible for regulating the business of Met-Ed and Penelec, including the retail electric rates that they charge to their customers.[32]

Regional Transmission Organization

The company plaintiffs’ electric distribution facilities are interconnected with an interstate electric transmission grid that is operated by a federally-regulated regional transmission organization (“RTO”) ...


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