United States: Fifth Circuit Overturns Lower Court's Use Of Primary Jurisdiction Doctrine To Order Indefinite Stay While Awaiting FERC PURPA Decision; Orders 180-Day Stay Instead

On January 4, 2016, the United States Court of Appeals for the Fifth Circuit (the "Fifth Circuit") vacated a federal district court's indefinite stay of proceedings before it involving disputed Public Utility Regulatory Policies Act ("PURPA") issues while awaiting administrative action from FERC, and instead ordered a definite period of 180 days for FERC to act.

The district court had supported its indefinite stay by applying the doctrine of primary jurisdiction—a doctrine that permits a federal court with non-exclusive jurisdiction over a proceeding to, under appropriate circumstances, defer to another forum (such as an administrative agency like FERC) that also has non-exclusive jurisdiction over the issue, based on the court's determination that the benefits of obtaining aid from the other forum outweigh the need for expeditious litigation. While the Fifth Circuit found the doctrine applicable in the circumstances presented, it determined that the indefinite nature of the stay would unfairly harm the interests of one of the litigants.

The underlying facts of the case center around Occidental Chemical Corporation ("Occidental"), the owner of a Qualifying Facility ("QF") under PURPA in Entergy Louisiana, LLC's ("Entergy") service territory. As the owner of a QF with no direct access to a competitive wholesale market, Occidental historically had the ability under PURPA to compel Entergy to purchase the output of Occidental's QF at Entergy's avoided cost, among other things.

However, in 2013, Entergy fully integrated its transmission facilities into the Midcontinent Independent System Operator, Inc. ("MISO")—a Regional Transmission Organization operating a competitive wholesale market. On January 17, 2013, Occidental filed a complaint at FERC against MISO (the "2013 Complaint") claiming, among other things, that Entergy and MISO planned to integrate QFs within Entergy's service territory into MISO, thereby stripping those QFs of many of the rights they enjoyed under PURPA by virtue of not having direct access to an organized wholesale market. While Occidental had sought fast-track processing of the 2013 Complaint, FERC took no action aside from a March 6, 2014 letter order requiring Occidental to supplement the record with additional information.

On February 5, 2014, Occidental filed another complaint with FERC against the Louisiana Public Service Commission ("LPSC"), contesting a January 9, 2014 LPSC order that, according to Occidental, effectively adopted Entergy's plan for integrating the QFs in its service territory into MISO. Occidental requested that FERC initiate an enforcement action against the LPSC to enforce certain provisions of PURPA that Occidental claimed had been violated by the LPSC's January 9, 2014 order. On April 4, 2014, FERC issued a notice of its intent not to bring such an action, noting the ongoing proceeding initiated by the 2013 Complaint against MISO. FERC stated that "[o]ur decision not to initiate an enforcement action at this time means that Occidental may itself bring an enforcement action against the Louisiana Commission in the appropriate court."

Occidental subsequently filed an action in federal district court against Entergy, the LPSC, and the LPSC Commissioners (the "Defendants"). In response, the Defendants moved for a stay of the case pending an administrative determination by FERC in the 2013 Complaint proceeding. In support of their motion, the Defendants invoked the doctrine of primary jurisdiction—a doctrine that permits a federal court with non-exclusive jurisdiction over a proceeding to, under appropriate circumstances, defer to another forum (such as an administrative agency like FERC) that also has non-exclusive jurisdiction over the proceeding, based on the court's determination that the benefits of obtaining aid from the other forum outweigh the need for expeditious litigation.

On January 20, 2015, the district court granted the Defendants' motion, and stayed the case until FERC issued a decision in the 2013 Complaint proceedings. In its opinion, the court stated that while it agreed with Occidental's position that the claims must ultimately be decided by the court, "a determination by FERC as to the MISO issues upon which Plaintiff's claims are based would be helpful to the Court." Occidental appealed.

In its January 4, 2016 opinion, the Fifth Circuit stated that the primary jurisdiction doctrine "requires the district court to balance the assistance potentially provided by an agency's specialized expertise against the litigants' certainty of delay." The court rejected Occidental's primary argument that, under judicial precedent, the primary jurisdiction doctrine is not available for actions under PURPA because Congress had "coordinated" work between FERC and the federal courts by: (i) permitting FERC to bring an enforcement action first; and (ii) permitting a private party to subsequently file an enforcement action in federal court, in the event that FERC declined to bring an enforcement action. The court noted that while Congress had indeed "coordinated" work between FERC and federal courts in drafting PURPA, the statute did not address the power to stay proceedings, and did not preclude application of the primary jurisdiction doctrine.

While the Fifth Circuit rejected Occidental's argument, and found the exercise of primary jurisdiction appropriate, it noted that FERC's resolution of the issues initiated by the 2013 Complaint could take years, and found that the indefinite stay granted by the district court pending such resolution would be inappropriate. Accordingly, the Fifth Circuit vacated the lower court's indefinite stay, and remanded the case back to the district court with instructions to enter an order staying the proceedings before it for a period of 180 days, to allow FERC the opportunity to rule on the issues stemming from the 2013 Complaint. In the event that FERC failed to act, the Fifth Circuit stated that the district court could extend the deadline if: (i) FERC showed good cause; and (ii) the delay would not irreparably harm Occidental's rights. In the absence of such a demonstration, the Fifth Circuit instructed the district court to "proceed to adjudicate the rights of the parties without further deference to the expertise of FERC."

A copy of the Fifth Circuit's opinion may be found here.

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