Jeff Simmons v. Sabine River Authority, et , 732 F.3d 469 ( 2013 )

Case: 12-30494 Document: 00512402572 Page: 1 Date Filed: 10/09/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
October 9, 2013
No. 12-30494 Lyle W. Cayce
Clerk
JEFF SIMMONS; ALICE SIMMONS; JEANNE SIMMONS; GERALD
EDWARD MCBRIDE; EDWARD BRYANT BONNER; ET AL,
Plaintiffs-Appellants,
v.
SABINE RIVER AUTHORITY STATE OF LOUISIANA; LOUISIANA
DEPARTMENT OF TRANSPORTATION AND DEVELOPMENT; LINDA
CURTIS SPARKS; ENTERGY GULF STATES LOUISIANA L.L.C.;
ENTERGY CORPORATION; ENTERGY SERVICES INCORPORATED;
ENTERGY LOUISIANA, L.L.C.,
Defendants-Appellees.
Appeal from the United States District Court
for the Western District of Louisiana
Before STEWART, Chief Judge, and SMITH and WIENER, Circuit Judges.
CARL E. STEWART, Chief Judge:
This case asks us to resolve whether the Federal Power Act preempts
property damage claims under state law where the claim alleges negligence for
failing to act in a manner FERC expressly declined to mandate while operating
a FERC-licensed project. We hold that it does, and so we AFFIRM the district
court’s dismissal of Plaintiffs’ case with prejudice.
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I. BACKGROUND
A. Facts
The Sabine River meanders between Texas and Louisiana. Two state
agencies jointly regulate the Sabine River’s waterways: the Sabine River
Authority of Louisiana and the Sabine River Authority of Texas (collectively,
“Authorities”). Upon application by the Authorities, the Federal Power
Commission1 granted a fifty-year license (the “License”), commencing October
1, 1963, to the Authorities for the “construction, operation and maintenance” of
Project Number 2305 (the “Project”). The Project included the construction of a
dam (the “Toledo Bend Dam” or the “Dam”), a large reservoir, a spillway, and a
hydroelectric plant. The Dam spans the Texas/Louisiana state line and is
located in the southern part of the reservoir.
Under a Power Sales Agreement (the “Agreement”), the Authorities
granted Defendant-Appellant Entergy2 the right to oversee the generation of
power and to purchase the generated power. Under the terms of the Agreement,
Entergy is subject to the terms and conditions of the License. The License
requires the Authorities to maintain a normal maximum reservoir elevation of
172 feet mean sea level (“msl”). To generate power, a minimum reservoir
elevation of 162.2 feet msl is required. To maintain the required reservoir levels,
water is released through the spillway gates, the power turbines, or both.
Entergy and the Authorities operate the spillway gates, which are located in
Louisiana.
1
In 1977, the Federal Power Commission was reorganized and renamed the Federal
Energy Regulatory Commission (“FERC”). References to FERC herein encompass both the
Federal Power Commission and FERC.
2
The Agreement was entered into with Entergy’s predecessors, but we refer simply to
“Entergy” for ease of understanding. For purposes of this appeal, Entergy includes all of the
named Entergy defendants.
2
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Between 2000 and 2003, pursuant to Article 43 of the License, FERC
considered several requests to modify the Project’s operations.3 FERC conducted
an analysis of historical floods and found that the Dam had not had “any
significant effect” on flooding. FERC ultimately denied most of the requests,
including a request to raise the Project’s minimum reservoir elevation, and
issued a report explaining its reasoning. In declining to order changes to project
operations during floods, FERC observed that the Project “cannot provide any
significant flood control benefits.” However, FERC did require improvements to
the Project’s Emergency Action Plan.
B. Procedural History
Plaintiffs-Appellants (“Plaintiffs”) are 28 individuals who allege that their
properties were flooded and eroded after the Authorities and Entergy opened the
spillway gates from October 30, 2009 through November 2009.4
In October 2010, Plaintiffs filed suit in Louisiana state court, alleging
negligence, nuisance, trespass, unconstitutional taking, damage of property
without just compensation, and due process violations under the Louisiana and
United States constitutions. Plaintiffs sought, inter alia, damages and a
permanent injunction “enjoining [Defendants] from opening the flood gates of
the Toledo Bend Dam in such a manner as will cause the inundation of the
downstream properties of the Plaintiffs.”
Defendants thereafter removed the action under 16 U.S.C. § 825p, which
provides federal courts with jurisdiction over duties and liabilities created by the
Federal Power Act (“FPA”), and under 28 U.S.C. § 1331. Plaintiffs subsequently
3
Article 43 states, “The Licensees shall install additional capacity or make other
changes in the project as directed by the Commission, to the extent that it is economically
sound and in the public interest to do so, after notice and opportunity for hearing.”
4
Plaintiffs have not specified the precise date in November 2009 on which the gates
were closed.
3
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filed a motion to remand, arguing, inter alia, that their complaint did not
present a federal question. While Plaintiffs’ motion to remand was pending,
Defendants filed a motion to dismiss the suit under Federal Rules of Civil
Procedure 12(b)(6) and 12(b)(7). Plaintiffs then filed an opposed motion for leave
to amend their complaint; the motion sought to delete references to the United
States Constitution. Plaintiffs’ amendments, if granted, would have left only
state causes of action, but would have left undisturbed their request for a
permanent injunction. Six months later, without any action having been taken
on any of the pending motions, Plaintiffs filed an opposed motion for leave to
amend their complaint a second time. This amendment sought to remove
Plaintiffs’ requests for injunctive relief.
Subsequently, without ruling on any of Plaintiffs’ pending motions, the
district court held a hearing on the pending motion to dismiss. The district court
then granted Defendants’ motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6), finding that Plaintiffs’ state law-based property damage
claims were preempted by the FPA and the License, and entered judgment
dismissing Plaintiffs’ case with prejudice. This appeal followed.5
II. STATE TORT CLAIMS
Plaintiffs argue that the district court improperly dismissed Plaintiffs’
claims based on preemption.
A. Standard of Review
We review the district court’s grant of a motion to dismiss de novo. Bass
v. Stryker Corp., 669 F.3d 501, 506 (5th Cir. 2012) (citation omitted). Well-
pleaded facts are viewed in the light most favorable to the plaintiff. Castro v.
5
Plaintiffs have abandoned any challenge to the district court’s holding that the FPA
preempts their injunctive relief claim by failing to brief any argument and by continuing to
press their attempt to amend their complaint to excise this claim. See Soadjede v. Ashcroft,
324 F.3d 830, 833 (5th Cir. 2003) (citation omitted).
4
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Collecto, Inc., 634 F.3d 779, 783 (5th Cir. 2011) (citation and internal quotation
marks omitted).
B. Preemption
“Federal preemption is an affirmative defense that a defendant must plead
and prove.” Fisher v. Halliburton, 667 F.3d 602, 609 (5th Cir. 2012) (citations
omitted). Defendants did so plead. If the complaint establishes the applicability
of a federal preemption defense, it can properly be the subject of a Federal Rule
of Civil Procedure 12(b)(6) motion to dismiss. Id. (citation omitted).
As is well known, federal preemption is based on the Supremacy Clause,
which provides that federal law “shall be the supreme Law of the Land.” U.S.
Const. art. VI, cl. 2. There are three types of preemption: (1) express
preemption,6 (2) field preemption, and (3) conflict preemption. Kurns v. R.R.
Friction Prods. Corp., 132 S. Ct. 1261, 1265-66 (2012). Field preemption occurs
when
[t]he intent to displace state law altogether can be
inferred from a framework of regulation so
pervasive . . . that Congress left no room for the States
to supplement it or where there is a federal interest . . .
so dominant that the federal system will be assumed to
preclude enforcement of state laws on the same subject.
Arizona v. United States, 132 S. Ct. 2492, 2501 (2012) (citation and internal
quotation marks omitted). Conflict preemption occurs “where compliance with
both federal and state regulations is a physical impossibility, and those
instances where the challenged state law stands as an obstacle to the
accomplishment and execution of the full purposes and objectives of Congress.”
Id. (citations and internal quotation marks omitted).
6
Express preemption is not implicated here, so we do not discuss it further.
5
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The district court was not explicit as to which type of preemption it found
applicable. However, we may affirm the district court’s judgment for any reason
supported by the record. United States v. Gonzalez, 592 F.3d 675, 681 (5th Cir.
2009) (citation omitted).
C. Federal Power Act
In order to understand whether the FPA preempts state property damage
claims, we look to the text of the Act, its history, and the way in which the
Supreme Court, our circuit, and our sister circuits have interpreted it. We note
that this is a question of first impression in this circuit. Our analysis leads us
to conclude that the FPA preempts property damage claims based in state tort
law where the alleged damage is the result of “negligently” operating in
compliance with a FERC-issued license.
The Federal Power Act of 1935 indicates congressional intent for “a broad
federal role in the development and licensing of hydroelectric power.” California
v. FERC, 495 U.S. 490, 496 (1990). There are several FPA sections relevant to
the claims at issue here. First, Section 4(e) of the Act authorizes FERC to issue
licenses for projects “necessary or convenient . . . for the development,
transmission, and utilization of power across, along, from, or in any of the
streams . . . over which Congress has jurisdiction.” 16 U.S.C. § 797(e). Second,
Section 10(a)(1) of the Act requires FERC to issue licenses that the Commission
determines are “best adapted” for power development and other public uses of
the waters, including flood control. 16 U.S.C. § 803(a).
Third, Section 10(c) of the Act is central to Plaintiffs’ arguments and our
analysis. First, it requires the licensee to maintain the project and conform to
Commission rules. 16 U.S.C. § 803(c). Importantly, it also states that “[e]ach
licensee hereunder shall be liable for all damages occasioned to the property of
others by the construction, maintenance, or operation of the project works or of
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the works appurtenant or accessory thereto, constructed under the license, and
in no event shall the United States be liable therefor.” Id.Finally, Section 27 of the Act is a savings clause:
Nothing contained in this chapter shall be construed as
affecting or intending to affect or in any way to
interfere with the laws of the respective States relating
to the control, appropriation, use, or distribution of
water used in irrigation or for municipal or other uses,
or any vested right acquired therein.
16 U.S.C. § 821.
The Act “careful[ly] preserv[ed] separate interests of the states throughout
the Act, without setting up a divided authority over any one subject.” First Iowa
v. Hydro-Elec. Coop. v. Fed. Power Comm’n, 328 U.S. 152, 174 (1946) (footnote
omitted). As several cases recount, members of Congress who were involved in
formulating the FPA emphasized that the state retained some water rights. For
example, Representative William L. LaFollette of Washington stated, “The
property rights are within the State. It can dispose of the beds, or parts of them,
regardless of the riparian ownership of the banks, if it desires to[.]” Id. (citing
56 Cong. Rec. 9810) (other citation omitted); see also Skokomish Indian Tribe v.
United States, 410 F.3d 506, 519 (9th Cir. 2005) (citations omitted) (holding that
the FPA “does not create a federal private right of action, but instead preserves
only existing state-law claims against licensees”); DiLaura v. Power Auth. of
N.Y., 982 F.2d 73, 78 (2d Cir. 1992) (citation omitted) (concluding that “[t]he
floor debate on the FPA . . . indicates that property damage caused by licensees
was to be determined by reference to state law”).
D. Supreme Court Precedent and Other Persuasive Authority
The district court relied on First Iowa and California v. FERC for its
preemption determination. Both cases concern state water permitting schemes
rather than state tort law, as is at issue here; thus while neither is directly on
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point, we find them both informative, as is Federal Power Commission v.
Niagara Mohawk Power Corp., 347 U.S. 239 (1954).
In First Iowa, the Supreme Court considered whether a proposed federal
hydroelectric project was required to obtain a state permit, as mandated by Iowa
law, in addition to its federal license. 328 U.S. at 161. The Court held that such
a state permit was not required because it would allow the state agency a “veto
power over the federal project” and thereby subvert the comprehensive control
of the project granted to the federal government. Id. at 164. The Court also held
that the savings clause, 16 U.S.C. § 821, was “limited to laws as to the control,
appropriation, use or distribution of water in irrigation or for municipal or other
uses of the same nature” and therefore focused on state property rights. Id. at
175-76. Accordingly, the Court held that the state regulation was not among the
category of rights reserved to the states in the FPA’s savings clause and that the
FPA preempted the state permit requirement at issue. Id. at 175-76, 182.
In Niagara Mohawk, the Supreme Court held that the Federal Water
Power Act of 19207 did not eliminate preexisting water rights, grounded in state
law, on navigable streams. 347 U.S. at 248. In so holding, the Court recognized
the United States’s “dominant servitude . . . under which private persons hold
physical properties obstructing navigable waters of the United States and all
rights to use the waters of those streams,” but it also recognized “that the
exercise of that servitude, without making allowances for preexisting rights
under state law, requires clear authorization.” Id. at 249 (internal footnote
omitted). Moreover, the Court concluded that while the Act reserves the ability
to “exercise . . . the federal servitude and . . . federal rights of purchase or
condemnation, there is no purpose expressed to seize, abolish or eliminate water
rights without compensation merely by force of the Act itself.” Id. at 251-52
7
The Federal Water Power Act, as amended, is now part of the Federal Power Act. See
Niagara Mohawk, 347 U.S. at 241 n.1 (citations omitted).
8
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(footnote omitted). Importantly for the issue here, the Court noted that the Act
“merely imposes” on the owners of state-based property rights “the additional
obligation of using them in compliance” with the Act. Id. at 252. The Court
expressed disbelief that the Act abolished “preexisting water rights on a
nationwide scale,” stating that such action would require “a convincing
explanation of that purpose,” which the Court did not find. Id. at 252-53.
If that were the end of our inquiry, the issue before us would present a
closer question. However, California v. FERC, decided over four decades after
First Iowa, indicated that the FPA has occupied the field of “power development
and other public uses of the waters,” with the exception of a narrow carve-out for
water use rights. California v. FERC, 495 U.S. at 494, 506 (citing 16 U.S.C. §
803(a)). In California v. FERC, the Supreme Court considered whether FERC
had the exclusive authority to set minimum stream flow rates, thereby
preempting California’s regulation of the same. Id. at 493. Relying on First
Iowa, the Court concluded that California’s regulations were preempted because
Section 27 of the FPA, 16 U.S.C. § 821, was a limited savings clause, exempting
only requirements that “reflect [or] establish ‘proprietary rights’ or ‘rights of the
same nature as those relating to the use of water in irrigation or for municipal
purposes.’” 495 U.S. at 498 (quoting First Iowa, 328 U.S. at 176) (other citations
omitted).
The language in California v. FERC indicates that the Supreme Court has
interpreted the FPA as occupying the field of public water use and power
generation except for water use rights. Thus, we agree with the Ninth Circuit’s
statement that First Iowa and its progeny have “read the broadest possible
negative pregnant into [the FPA’s] savings clause,” exempting only “a state
property law regime [that] enables users of streams and wells to obtain
proprietary rights in a continuing quantity of water.” Sayles Hydro Assocs. v.
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Maughan, 985 F.2d 451, 454-55 (9th Cir. 1993) (also discussing California v.
FERC’s interpretation of First Iowa).
The importance of a single federal agency controlling public water use and
dam operations is underscored by the factual scenario presented by the instant
case. The Dam spans the Texas and Louisiana state lines, and the FERC license
was granted to an entity comprised of both state agencies. Yet, Plaintiffs assert
claims only under Louisiana law and only against Louisiana state agencies, in
addition to the private defendants. That each state may have different causes
of action and different standards of conduct that it could impose on the FERC
licensee is problematic when states are jointly involved in such a project.
E. Property Damage Claims Under FPA § 10(c)
California v. FERC’s interpretation of Section 27’s general savings clause
is instructive for our interpretation of Section 10(c)’s limited savings clause. The
latter cannot be interpreted so broadly as to allow state tort law to supplant
FERC’s exclusive control of dam operations.8
Because the state law property damage claims at issue here infringe on
FERC’s operational control, we hold that they are conflict preempted.
Essentially, Plaintiffs allege that Defendants were negligent because they failed
to act in a manner FERC had expressly declined to require. But FERC, not state
tort law, must set the appropriate duty of care for dam operators. See 16 U.S.C.
8
Although neither party cites it, this circuit previously considered whether licensees
were exempt from property damage claims when operating projects pursuant to a FERC-
issued license. Seaboard Air Line R.R. v. Cnty. of Crisp, Ga., 280 F.2d 873 (5th Cir. 1960).
There, we held that a railroad was able to seek damages from the operator of a FERC-licensed
dam, noting that in the FPA, “Congress contemplated damage inflicted after as well as at the
time of construction.” Id. at 876-77. Seaboard presented a minority view that the FPA itself
creates a cause of action for damages. As the case before us concerns claims for damages
under state law, and Plaintiffs have not argued an FPA-created cause of action, Seaboard does
not bear on the question before us. Furthermore, Seaboard is doubtful authority as it
predated the Court’s four-factor test for “determining whether a private remedy is implicit in
a statute not expressly providing one,” Cort v. Ash, 422 U.S. 66, 78 (1975).
10
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§ 803(c) (“[T]he licensee . . . shall conform to such rules and regulations as the
Commission may from time to time prescribe.”).
The Supreme Court has recognized that damages claims can serve the
same effect as regulations. See Kurns, 132 S. Ct. at 1269 (“[S]tate regulation can
be . . . effectively exerted through an award of damages, and [t]he obligation to
pay compensation can be, indeed is designed to be, a potent method of governing
conduct and controlling policy.” (second alteration in original) (citation and
internal quotation marks omitted)). Plaintiffs attempted, through the proper
administrative procedure channels, to impose changes on Dam operations.
FERC considered these requests and issued a report denying most of the
requested changes. Plaintiffs have not asserted that this administrative decision
was improper. Nonetheless, failing to achieve their objective, Plaintiffs now seek
to use state law to accomplish the same aims, alleging that Defendants were
negligent for not changing their operations. Permitting such state property
damage claims in an attempt to force changes to a FERC-issued license would
“constitute a veto of the project that was approved and licensed by FERC.”
California v. FERC, 495 U.S. at 507 (citations and internal quotation marks
omitted); see also City of Lowell v. ENEL N. Am., Inc., 796 F. Supp. 2d 225, 231
(D. Mass. 2011) (citation omitted) (holding that a “negligence claim is preempted
by the FERC license because [the plaintiff] cannot use state tort law to prevent
[the FERC licensee] from doing something that FERC has sanctioned” and
describing the negligence claim as a “collateral attack on the FERC license”).9
9
We do not hold that all state property damage claims are preempted by the FPA. For
example, a claim alleging negligence for failure to conform to FERC’s guidelines would not
conflict with FERC’s operational control. Nor does our holding conflict with the cases cited by
Plaintiffs. The D.C. Circuit, for example, held that “Congress intended for § 10(c) merely to
preserve existing state laws governing the damage liability of licensees,” so FERC could not
impose strict liability on dam operators. S.C. Pub. Serv. Auth. v. FERC, 850 F.2d 788, 795
(D.C. Cir. 1988). That does not imply that Congress intended for § 10(c) to enable state tort
law to replace FERC’s determination of the appropriate duty of care.
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Applying state tort law to set the duty of care for the operation of FERC-
licensed projects would “stand[] as an obstacle to the accomplishment and
execution of the full purposes and objectives” of the FPA. See Arizona, 132 S. Ct.
at 2501 (citations and internal quotation marks omitted). We therefore hold that
the district court properly concluded that the FPA preempts Plaintiffs’ claim for
negligence.10
III. MOTIONS TO AMEND AND REMAND
After Defendants filed their motion to dismiss, Plaintiffs filed two motions
to amend their complaint. The first motion to amend sought to delete references
to the United States Constitution, which Plaintiffs characterized as “mistaken”
additions to their complaint. The second motion to amend sought, without
explanation, to remove the complaint’s claim for injunctive relief. The district
court did not explicitly rule on these motions before granting Defendants’ motion
to dismiss. Plaintiffs argue the district court abused its discretion in failing to
permit them to amend their complaint. Plaintiffs also argue that the district
court erred when it implicitly denied their motion to remand.
A. Standard of Review
A district court’s denial of leave to amend is reviewed for an abuse of
discretion. Ballard v. Devon Energy Prod. Co., 678 F.3d 360, 364 (5th Cir. 2012)
(citation omitted). Similarly, a district court’s failure to remand state law claims
to the state court from which the case was removed is reviewed for abuse of
discretion. Enochs v. Lampasas Cnty., 641 F.3d 155, 158 (5th Cir. 2011) (citation
omitted).
10
As we are able to affirm the district court’s judgment on preemption grounds, we
need not address Defendants’ argument that the doctrine of primary jurisdiction further
supports the district court’s ruling.
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B. Motions to Amend
Although the district court did not explicitly deny Plaintiffs’ motions to
amend, it implicitly did so when it entered its ruling in favor of Defendants’
motion to dismiss and dismissed the case with prejudice. See Norman v. Apache
Corp., 19 F.3d 1017, 1021 (5th Cir. 1994) (citation omitted).
“[A] party may amend its pleading only with the opposing party’s written
consent or the court’s leave. The court should freely give leave when justice so
requires.” Fed. R. Civ. P. 15(a)(2). “Whether to grant leave to amend a
complaint is entrusted to the sound discretion of the district court[.]” Ballard,
678 F.3d at 364 (citation and internal quotation marks omitted).
“Denial of leave to amend may be warranted for undue delay, bad faith or
dilatory motive on the part of the movant, repeated failure to cure deficiencies,
undue prejudice to the opposing party, or futility of a proposed amendment.” Id.(citation and internal quotation marks omitted). Where, as here, the district
court has not “engage[d] in a formal recitation of reasons[, the] reason for denial
must be clear . . . either from the findings of the district court or elsewhere in the
record.” Lone Star Ladies Inv. Club v. Schlotzsky’s Inc., 238 F.3d 363, 367 (5th
Cir. 2001) (citations omitted).
Defendants argue that Plaintiffs’ proposed amendments were futile in
light of the district court’s holding that the FPA preempted their state law
claims. We agree. “Clearly, if a complaint as amended is subject to dismissal,
leave to amend need not be given.” Pan-Islamic Trade Corp. v. Exxon Corp., 632
F.2d 539, 546 (5th Cir. 1980), abrogated on other grounds by Associated Gen.
Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 536
n.33 (1983) (citation omitted). Here, the complaint as amended would have left
only state law claims for property damage. As we have determined that the
district court correctly dismissed these claims, Plaintiffs’ motions to amend were
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futile. Accordingly, the district court did not abuse its discretion in implicitly
denying Plaintiffs’ motions to amend.
C. Motion to Remand
Because we have concluded that the district court properly granted
Defendants’ motion to dismiss, we need not consider whether the district court
abused its discretion in denying Plaintiffs’ motion to remand.
IV. CONCLUSION
For the foregoing reasons, the judgment of the district court is
AFFIRMED.
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