NextEra v. LSP Transm Holdings II ( 2022 )

Case: 20-50168 Document: 00516569807 Page: 1 Date Filed: 12/07/2022
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
December 7, 2022
No. 20-50168 Lyle W. Cayce
Clerk
NextEra Energy Capital Holdings, Incorporated;
NextEra Energy Transmission, L.L.C.; NextEra Energy
Transmission Midwest, L.L.C.; Lone Star Transmission,
L.L.C.; NextEra Energy Transmission Southwest, L.L.C.,
Plaintiffs—Appellees,
and
LSP Transmission Holdings II, L.L.C.; East Texas
Electric Cooperative, Incorporated,
Movants—Appellants,
versus
Commissioner Arthur C. D’Andrea, Public Utility Commission of
Texas, in his official
capacity; Commissioner Shelly Botkin, Public Utility Commission
of Texas, in her official capacity;
Chairman Deann T. Walker, Public Utility Commission of Texas, in
her official capacity,
Defendants—Appellees,
and
Entergy Texas Incorporated; Oncor Electric Delivery
Company, L.L.C.;
Southwestern Public Service Company,
Movants—Appellants.
Case: 20-50168 Document: 00516569807 Page: 2 Date Filed: 12/07/2022
No. 20-50168
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:19-CV-626
Before Dennis and Elrod, Circuit Judges. †
Per Curiam:*
In 2019, Texas enacted a law known as Senate Bill (SB) 1938 granting
the ability to build, own, or operate new electric transmission lines “that
directly [connect] with an existing utility facility . . . only to the owner of that
existing facility”—i.e., granting a right of first refusal. Tex. Util. Code
§ 37.056(e). Plaintiff NextEra Energy Capital Holdings, Inc. filed this suit
against the Commissioners of the Public Utility Commission of Texas
challenging the constitutionality of SB 1938. This appeal presents the sole
question of whether five other entities involved in the electric transmission
market may intervene in this case to variably attack or defend SB 1938.
Because these entities meet the liberal standard to intervene as of right, we
REVERSE the district court’s order denying intervention and REMAND
for further proceedings.
I.
In 2018, NextEra, a Florida-based corporation with transmission lines
in multiple states but not in Texas, won a bid with the Midcontinent
Independent System Operator, Inc. (MISO) to build a new transmission line
known as the Hartsburg-Sabine Line in East Texas. Before construction
could begin, however, Texas enacted SB 1938 limiting the right to build and
operate transmission lines in Texas to those entities already owning
transmission lines in Texas. SB 1938 ultimately prevented NextEra from
†
This appeal is being decided by a quorum. 28 U.S.C. § 46(d).
*
This opinion is not designated for publication. See 5th Circuit Rule 47.5.
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being able to construct the Hartsburg-Sabine Line. On June 17, 2019,
NextEra filed suit against the Commissioners of the of the Public Utility
Commission of Texas under 42 U.S.C. § 1983, alleging SB 1938 violates the
dormant Commerce Clause and the Contracts Clause and seeking
declaratory and injunctive relief.
Before the Commissioners filed responsive pleadings, several third
parties sought to intervene as a matter of right or, alternatively, permissively.
Three entities sought to intervene to defend SB 1938. Entergy Texas, Inc.;
Oncor Electric Delivery Co. LLC; and Southwestern Public Service Co.
(SPS) are all entities owning transmission lines in Texas who hold the rights
of first refusal granted by SB 1938. Entergy moved to intervene on August 6,
2019; Oncor on August 7, 2019; and SPS on August 8, 2019. Two entities
sought to intervene to challenge the constitutionality of SB 1938, LSP
Transmission Holdings II, LLC and East Texas Electric Cooperative, Inc.
(ETEC). LSP is a transmission utility without a presence in Texas which
intended to compete for transmission projects in Texas but was prevented
from doing so by SB 1938. LSP filed its motion to intervene on July 12, 2019.
ETEC is a non-profit rural electric cooperative that owns power-generating
plants and power transmission lines in the part of Texas within Entergy’s
transmission area. ETEC is largely dependent on Entergy’s transmission
lines, and SB 1938 prevents ETEC and other entities who might compete
with Entergy from building new lines from lines owned by Entergy. ETEC
moved to intervene on August 19, 2019.
The Defendant Commissioners filed a motion to dismiss NextEra’s
complaint for failure to state a claim under the dormant Commerce Clause
and Contracts Clause on August 23, 2019. Six months later, on February 26,
2020, the district in one order both denied the motions to intervene and
granted the motion to dismiss.
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NextEra appealed the district court’s decision to grant the motion to
dismiss, and Entergy, Oncor, SPS, LSP, and ETEC appealed the denial of
their motions to intervene. The merits and intervention appeals proceeded
separately. This court has already reversed in part and affirmed in part the
district court’s order granting the motion to dismiss, reversing the dismissal
of NextEra’s dormant Commerce clause claims because SB 1938 is facially
discriminatory under the dormant Commerce Clause and because dismissal
of NextEra’s discriminatory purpose and effects claims was premature, while
affirming the dismissal of NextEra’s Contracts Clause claim. NextEra Energy
Cap. Holdings, Inc. v. Lake, 48 F.4th 306 (5th Cir. 2022). The instant appeal
concerns only the district court’s denial of the motions to intervene.
II.
Federal Rule of Civil Procedure 24 allows certain parties to intervene
by right. Fed. R. Civ. P. 24(a). If the right to intervene is not granted by
some other federal statute, see Fed. R. Civ. P. 24(a)(1), a party can still
intervene if it satisfies the four elements of Rule 24(a)(2):
(1) the application for intervention must be timely;
(2) the applicant must have an interest relating to the property
or transaction which is the subject of the action;
(3) the applicant must be so situated that the disposition of the
action may, as a practical matter, impair or impede his ability
to protect that interest; [and]
(4) the applicant’s interest must be inadequately represented
by the existing parties to the suit.
La Union del Pueblo Entero v. Abbott, 29 F.4th 299, 305 (5th Cir. 2022)
(quoting Texas v. United States, 805 F.3d 653, 657 (5th Cir. 2015)). It is the
movant’s burden to establish the right to intervene, but “Rule 24 is to be
liberally construed.” Brumfield v. Dodd, 749 F.3d 339, 341 (5th Cir. 2014).
“Federal courts should allow intervention ‘where no one would be hurt and
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the greater justice could be attained.’” Sierra Club v. Espy, 18 F.3d 1202,
1205 (5th Cir. 1994) (quoting McDonald v. E.J. Lavino Co., 430 F.2d 1065,
1074 (5th Cir. 1970)). “A ruling denying intervention of right is reviewed de
novo.” Wal-Mart Stores, Inc. v. Texas Alcoholic Beverage Comm’n, 834 F.3d
562, 565 (5th Cir. 2016) (quoting Texas, 805 F.3d at 656).
The district court concluded that no party seeking to intervene could
meet the Rule 24 standard largely because “the existing parties adequately
protect th[eir] interest[s].” However, on appeal, no party contests that
Entergy, Oncor, SPS, LSP, and ETEC meet the standard to intervene as of
right. We agree and allow these parties to intervene.
A.
The first prong is timeliness. Timeliness “is contextual; absolute
measures of timelines should be ignored.” Id. at 565 (quoting Espy, 18 F.3d
at 1205). Timeliness “is not limited to chronological considerations but is to
be determined from all the circumstances.” Id. (internal quotations omitted)
(quoting Stallworth v. Monsanto Co., 558 F.2d 257, 263 (5th Cir. 1977)). We
consider four factors in evaluating timeliness: 1) the length of time during
which the would-be intervenor actually or reasonably should have known of
his interest in the case before he petitioned for leave to intervene; 2) the
extent of prejudice that the existing parties to the litigation may suffer as a
result of the would-be intervenor’s failure to apply for intervention as soon
as he actually knew or reasonably should have known of his interest in the
case; 3) the extent of the prejudice that the would-be intervenor may suffer
if his petition for leave to intervene is denied; and 4) the existence of unusual
circumstances militating either for or against a determination that the
application is timely. Ross v. Marshall, 426 F.3d 745, 754 (5th Cir. 2005)
(quoting Stallworth, 558 F.2d at 264-66).
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In this case, Entergy, Oncor, SPS, LSP, and ETEC each sought to
intervene within two months of NextEra filing suit and before the Defendant
Commissioners filed responsive pleadings. Cf. Ass’n of Pro. Flight Attendants
v. Gibbs, 804 F.2d 318, 321 (5th Cir. 1986) (finding intervention timely when
filed five months after receiving notice of the party’s interest in the case).
Intervention this early before discovery and before litigation of major issues
would not cause extensive prejudice or delay. See Wal-Mart, 843 F.3d at 565-
66 (“Because the Association sought intervention before discovery
progressed and because it did not seek to delay or reconsider phases of the
litigation that had already concluded, the Association's motion was
timely.”). Entergy, Oncor, SPS, LSP, and ETEC’s interventions were
timely.
B.
Second, each of Entergy, Oncor, SPS, LSP, and ETEC has
demonstrated an interest in the subject of this action. “The precise
definition of an ‘interest’ has been hard to pin down, but we have
interpreted Rule 24(a)(2) to require a ‘direct, substantial, legally protectable
interest in the proceedings.’” La Union, 29 F.4th at 306 (quoting Edwards
v. City of Houston, 78 F.3d 983, 995 (5th Cir. 1996)). “Property interests are
the quintessential rights Rule 24(a) protects, but we have made clear that
Rule 24(a)(2) does not require ‘that a person must possess a pecuniary or
property interest to satisfy the requirement of Rule 24(a)(2).’” Id. (quoting
Mothersill D.I.S.C. Corp. v. Petroleos Mexicanos, S.A., 831 F.2d 59, 62 (5th
Cir. 1987)). Nor does a “legally protectable interest” mean the interest must
be “legally enforceable”; rather “[a]n interest is sufficient if it is of the type
that the law deems worthy of protection, even if the intervenor does not have
an enforceable legal entitlement or would not have standing to pursue her
own claim.” Id. (quoting Texas, 805 F.3d at 659).
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Generally, we will not grant intervention of right for purely
“ideological, economic, or precedential” reasons. Id. (quoting Texas, 805
F.3d at 658). However, “economic interests can justify intervention when
they are directly related to the litigation.” Wal-Mart, 834 F.3d at 568 (citing
Espy, 18 F.3d at 1207). For example, a scheme’s “prospective interference
with [economic] opportunities can justify intervention.” Black Fire Fighters
Ass’n of Dallas v. City of Dallas, 19 F.3d 992, 994 (5th Cir. 1994) (finding an
interest where a decree threatened promotion opportunities); see also
Edwards, 78 F.3d at 1004 (finding an interest where a decree threatened
“equal access to a promotion system and promotion opportunities”);
Brumfield, 749 F.3d at 343 (finding an interest where a potential decree
threatened “equal access to” educational “opportunities”). Moreover, we
have found the “intended beneficiary of a government regulatory system”
has a legally protected interest in a case challenging that system. Wal-Mart,
834 F.3d at 567-69; see also Texas, 805 F.3d at 660.
In this case, the parties seeking to intervene in SB 1938’s defense—
Entergy, Oncor, and SPS—are all entities who hold the rights of first refusal
granted by SB 1938 and are thus the intended beneficiaries of SB 1938.
Because the constitutionality of SB 1938’s right-of-first-refusal scheme is
the subject of this case, Entergy, Oncor, and SPS have each demonstrated a
legally protectable interest related to the subject matter of this case. See Wal-
Mart, 834 F.3d at 567-69; Texas, 805 F.3d at 660.
Turning to the parties seeking to challenge SB 1938, LSP is an out-
of-state transmission company which would be qualified to compete for
transmission projects in Texas but is prevented from entering the Texas
market by SB 1938. ETEC owns power-generating plants and power
transmission lines in the part of Texas within Entergy’s transmission area.
ETEC would like to build its own new lines from those owned by Entergy or
contract with other entities who do so, but SB 1938 prevents anyone but
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Entergy from building lines off of those owned by Entergy and thus forces
ETEC to be dependent on Entergy. Both ETEC and one of LSP’s
subsidiaries competed for the contract to build the Hartsburg-Sabine Line
which was ultimately awarded to NextEra. Because SB 1938 prospectively
interferes with LSP and ETEC’s business opportunities, they have each
demonstrated a legally protectable interest related to the subject matter of
this case. See Black Fire Fighters Ass’n, 19 F.3d at 994; Edwards, 78 F.3d at
1004; Brumfield, 749 F.3d at 343.
C.
Entergy, Oncor, SPS, LSP, and ETEC have also each satisfied the
third prong that disposition of this action may, as a practical matter, impair
or impede their abilities to protect their interests. “The impairment
requirement does not demand that the movant be bound by a possible future
judgment, and the current requirement is a great liberalization of the prior
rule.” Brumfield, 749 F.3d at 344. “Though the impairment must be
‘practical’ and not merely ‘theoretical,’ the [parties seeking to intervene]
need only show that if they cannot intervene, there is a possibility that their
interest could be impaired or impeded.” La Union, 29 F.4th at 307 (citing
Brumfield, 749 F.3d at 344-45). We have held that a party’s interest in a
regulatory scheme “is impaired by the stare decisis effect of the district
court’s judgment” as to the scheme’s validity. Espy, 18 F.3d at 1207(quoting Ceres Gulf v. Cooper, 957 F.2d 1199, 1204 (5th Cir. 1992)). That is
the case here. A finding that SB 1938 is unconstitutional would impair the
rights of first refusal of Entergy, Oncor, and SPS, while a finding that SB
1938 is constitutional would impair LSP and ETEC’s business prospects.
D.
Finally, Entergy, Oncor, SPS, LSP, and ETEC have each met their
minimal burden of showing inadequate representation. Parties seeking to
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intervene as of right “‘need not show that the representation by existing
parties will be, for certain, inadequate,’ but instead that it may be
inadequate.” La Union, 29 F.4th at 307-08 (quoting Texas, 805 F.3d at 661-
64). This burden is “minimal.” Id. at 608 (quoting Edwards, 78 F.3d at
1005); see also Wal-Mart, 834 F.3d at 569. However, we have recognized
“two presumptions of adequate representation,” Brumfield, 749 F.3d at 345.
The first presumption arises when the intervenor “has the same ultimate
objective as a party to the lawsuit.” Texas, 805 F.3d at 661–62. This
presumption can be overcome by showing “adversity of interest, collusion,
or nonfeasance on the part of the existing party.” Id. (quoting Edwards, 78
F.3d at 1005). An intervenor can establish an adversity of interest if “its
interests diverge from the putative representative’s interests in a manner
germane to the case.” Id. at 662. The second presumption arises when the
existing party “is a governmental body or officer charged by law with
representing the interests” of the intervenor, which can be overcome by
showing that the intervenor’s “interest is in fact different from that of the”
governmental party “and that the interest will not be represented by” the
existing governmental party. Id. at 661–62 (quoting Edwards, 78 F.3d at
1005). Assuming these presumptions apply, Entergy, Oncor, SPS, LSP, and
ETEC have rebutted them by showing adversity of interest.
First, the parties seeking to defend SB 1938—Entergy, Oncor, and
SPS—have shown their interests may diverge from the Texas
Commissioners defending the law. The Commissioners have many interests
in this case, including defending the SB 1938 statewide while also
maintaining “its relationship with the federal government,” which highly
regulates the energy sector, and “with the courts.” Brumfield, 749 F.3d at
346. Entergy, Oncor, and SPS, on the other hand, are more concerned with
protecting their business interests, particularly the rights of first refusal they
have enjoyed. “The government must represent the broad public interest,
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not just the economic concerns of” Entergy, Oncor, and SPS. Espy, 18 F.3d
at 1208; see also Brumfield, 749 F.3d at 346; La Union, 29 F.4th at 309.
Indeed, the Commissioners have expressed contrary views in the past,
issuing an advisory opinion in 2017—before SB 1938’s passage—that
allowed for competitive bidding among transmission projects, and the
Commissioners’ past views have been used by NextEra to attempt to
undermine SB 1938 and the motive behind its passage. Entergy, Oncor, and
SPS, then, may be in a better position to defend their interests, especially as
litigation progresses and compromises are made. “We cannot say for sure
that the [Commissioners’] more extensive interests will in fact result in
inadequate representation, but surely they might, which is all that the rule
requires.” Brumfield, 749 F.3d at 346; see also La Union, 29 F.4th at 309.
As for the parties seeking to challenge SB 1938—LSP and ETEC—
they have shown their interests may diverge from NextEra’s. LSP, ETEC,
and NextEra are all competitors in the transmission market. NextEra’s
motivation in challenging SB 1938 has been to vindicate its awarded contract
to build the Hartsburg-Sabine Line. Thus, NextEra brought a Contracts
Clause claim, which LSP and ETEC have no interest in. See Brumfield, 749
F.3d at 346 (emphasis added) (“The lack of unity in all objectives, combined
with real and legitimate additional or contrary arguments, is sufficient to
demonstrate that the representation may be inadequate.”). Concerned with
its own business interests, NextEra continually sought expedited
consideration of its claims in the district court and in this court, while LSP
and ETEC have no such interest. See Entergy Gulf States La., L.L.C. v. U.S.
Env’t Prot. Agency, 817 F.3d 198, 204 (5th Cir. 2016) (noting adverse
interests between “prompt disclosure of requested documents” and
“eventual disclosure”). LSP and ETEC have thus “specif[ied] the
particular ways in which their interests diverge” from NextEra’s and have
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“identif[ied] the particular way in which these divergent interests have
impacted the litigation.” Texas, 805 F.3d at 663.
III.
Because Entergy, Oncor, SPS, LSP, and ETEC have protectable
interests that may be impaired or injured by the outcome of this lawsuit and
because Entergy, Oncor, SPS, LSP, and ETEC have shown that the present
parties may not adequately represent their interests, Entergy, Oncor, SPS,
LSP, and ETEC are entitled to intervene as of right. 1 Thus, we need not
address the district court’s denial of permissive intervention.
Accordingly, we REVERSE the district court’s denial of Entergy,
Oncor, SPS, LSP, and ETEC’s motions to intervene and REMAND for
further proceedings consistent with this opinion.
1
NextEra requests “reasonable conditions” on Entergy, Oncor, SPS, LSP, and
ETEC’s interventions. See, e.g., Beauregard, Inc. v. Sword Servs., L.L.C., 107 F.3d 351, 352-
53 (5th Cir. 1997). We leave this issue to the district court and take no position on what
conditions, if any, are appropriate in this case.
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