Electric Reliability v. Just Energy ( 2023 )

Case: 22-20424 Document: 00516599835 Page: 1 Date Filed: 01/05/2023
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
January 5, 2023
No. 22-20424 Lyle W. Cayce
Clerk
In the Matter of Just Energy Group, Incorporated; Et
Al
Debtors,
Electric Reliability Council of Texas, Incorporated;
Calpine Corporation; NRG Energy, Incorporated,
Appellants,
versus
Just Energy Texas, L.P.; Fulcrum Retail Energy, L.L.C.;
Hudson Energy Services, L.L.C.; Just Energy Texas I
Corporation; Just Energy Group, Incorporated,
Appellees.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:21-AP-4399
Before Southwick, Graves, and Engelhardt, Circuit Judges.
Kurt D. Engelhardt, Circuit Judge:
This direct appeal from the bankruptcy court arises out of the soaring
electricity prices charged during week-long winter storm Uri, which
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incapacitated most of Texas’s power-generating facilities. The bankruptcy
court’s refusal to abstain under Burford was in error. Accordingly, we
VACATE and REMAND.
I.
Texas’s Public Utility Regulatory Act (“PURA”) “establish[es] a
comprehensive and adequate regulatory system for electric utilities to assure
rates, operations, and services that are just and reasonable to the consumers
and to the electric utilities.” Tex. Util. Code § 31.001(a); accord §§
31.001(c), 39.001(a). Through PURA, the Texas legislature “created a
pervasive regulatory scheme intended to be the exclusive means” of
regulating electric utilities in Texas. In re Entergy Corp., 142 S.W.3d 316, 322
(Tex. 2004). The Public Utility Commission of Texas (“PUCT”) is the
agency charged with overseeing and implementing PURA. This includes
ultimate authority over Texas’s intrastate electric grid, see Tex. Util.
Code § 39.151(d), which is independent of the two larger national grids.
The PUCT is required by statute to certify an independent
organization to manage the wholesale electricity market and ensure the Texas
electric grid’s adequacy and reliability. Tex. Util. Code §§ 39.151(b),
(d). It put appellant Electric Reliability Council of Texas, Inc. (“ERCOT”)
to the task. ERCOT Nodal Protocols § 1.2(1). 1 ERCOT determines
market-clearing prices unless otherwise directed by the PUCT, its state
regulator. 16 Tex. Admin. Code § 25.501(a). ERCOT is the sole buyer
to each seller, and the sole seller to each buyer, of all energy in Texas.
ERCOT Nodal Protocols § 1.2(4).
1
All ERCOT Nodal Protocols in effect during winter storm Uri may be found here:
https://www.ercot.com/files/docs/2021/08/18/February_1__2021_Nodal_Protocols.p
df.
2
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According to the operative complaint, during winter storm Uri, which
devastated Texas residents from February 13, 2021, through February 20,
2021, ERCOT and the PUCT allegedly “intervened in the market for
wholesale electricity by setting prices [that were] orders of magnitude higher
than what market forces would ordinarily produce.” Energy supply
plummeted as power plants were forced offline by the storm’s impact. As
demand for electricity outpaced supply, ERCOT ordered “load” to be
“shed” to reduce strain on the power grid – i.e., it ordered cuts in electricity
consumption in the form of forced outages. In response, the PUCT issued
orders (the “PUCT orders”) directing ERCOT to ensure that load shed was
accounted for in ERCOT’s scarcity pricing signals.
The complaint alleges that these orders were “invalid” because they
were not tied “to a fact-based analysis of the current market conditions” and
failed to “explain the reasoning behind [the PUCT’s] determination that
energy prices should be set at the high-system-wide offer cap.” It further
provides that ERCOT, following the PUCT orders, “impermissibly” priced
the energy at the maximum of $9,000 per megawatt hour (“MWh”) – the
cap – for more than eighty consecutive hours. ERCOT then allegedly left
this price in place for 33 hours after the PUCT rescinded its orders. Once
ERCOT allowed normal supply-and-demand forces to set the price of power
on February 19, the trading price plummeted within one hour from
$9,000/MWh to $27/MWh, later falling to less than $5/MWh.
Appellee Just Energy, a retail energy provider, purports that after the
storm, ERCOT “floored” it with invoices totaling approximately $335
million for the operating days of February 13, 2021, through February 20,
2021. Lacking sufficient liquidity to satisfy the invoices on its own, Just
Energy commenced bankruptcy proceedings in Canada and filed this Chapter
15 case in the United States Bankruptcy Court for the Southern District of
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Texas, Houston Division. 2 Under protest, Just Energy paid ERCOT the
monies owed, disputing “no less than $274 million of the invoiced amounts.”
Just Energy challenges its invoice obligations “because, among other
things, the Invoices are based on the PUCT Orders, which themselves are
unlawful under the [Administrative Procedure Act] and the [Public Utility
Regulatory Act], and otherwise are inconsistent with the ERCOT Protocols
and the [Standard Form Market Participant Agreement].” 3 In the
alternative, Just Energy contends that “even if the PUCT Orders are valid,
[it] still has valid claims because ERCOT had no basis to apply the
$9,000/MWh price after 11:55 p.m. on February 17, 2021.” 4 ERCOT moved
to dismiss the complaint, arguing that each count “attempts to obtain judicial
repricing of energy charges” and “implicate[s] the filed rate doctrine, the
PUCT’s rulemaking, ERCOT’s sovereign immunity, 5 and Burford
abstention.”
2
Just Energy’s efforts to mitigate the consequences of the invoices included:
“submitting filings to ERCOT and the PUCT both individually and through the Texas
Energy Association of Marketers; lobbying the Texas state legislature; commencing
restructuring proceedings for the second time in six months, i.e., the Canadian Proceedings
and Chapter 15 Cases; obtaining approval from both the Canadian Court and th[e]
[Bankruptcy] Court to enter into a $125 million financing facility; and using a significant
portion of the facility proceeds to pay ERCOT.”
3
The standard form market participant agreement “incorporates by reference, and
requires compliance with ERCOT’s nodal protocols (the “ERCOT Protocols”).”
4
This post-“11:55 p.m. on February-17, 2021” price contemplates the 33 hours
that ERCOT left the $9,000/MWh price in place after the PUCT rescinded its orders
mandating that rate.
5
Whether ERCOT is entitled to sovereign immunity is an issue pending before the
Texas Supreme Court in winter-storm-Uri-related litigation. See, e.g., ERCOT v. Panda
Power Generation Infrastructure Fund, LLC, No. 22-0196 (Tex. Sept. 2, 2022); CPS Energy
v. ERCOT, No. 22-0056 (Tex. Sept. 2, 2022).
4
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At a hearing on the motion, the court dismissed all counts but four: (1)
“Declaration Of Preference Under [Companies’ Creditors Arrangement Act
(“CCAA”), a Canadian law] (§ 36.1), [Bankruptcy and Insolvency Act
(“BIA”), a Canadian law] (§ 95) – Invoice Obligations”; (2) “Declaration
Of Preference Under CCAA (§ 36.1), BIA (§ 95) – Prepetition Transfers”;
(3) “Recovering Proceeds If Transferred – CCAA (§ 36.1), BIA (§ 98)”; and
(4) turnover under 11 U.S.C. § 542(a). The first three of these counts seek a
declaratory judgment that ERCOT’s Uri-related invoices and transfers paid
to satisfy them are void as preferences because they were incurred or made
in favor of ERCOT over Just Energy’s other creditors. The fourth count
alleges that property transferred to satisfy the invoices is subject to turnover.
ERCOT timely appealed the court’s partial dismissal.
II.
This Court “review[s] an abstention ruling for abuse of discretion, but
‘[it] review[s] de novo whether the requirements of a particular abstention
doctrine are satisfied.’” Stratta v. Roe, 961 F.3d 340, 356 (5th Cir. 2020)
(applying this standard to Burford abstention) (quoting Aransas Project v.
Shaw, 775 F.3d 641, 648 (5th Cir. 2014)). “Because the exercise of discretion
must fit within the specific limits prescribed by the particular abstention doc-
trine invoked, a court necessarily abuses its discretion when it abstains out-
side of the doctrine’s strictures.” Id. (quoting Webb v. B.C. Rogers Poultry,
Inc., 174 F.3d 697, 701 (5th Cir. 1999)) (alteration and internal quotation
marks omitted).
At the hearing on ERCOT’s motion to dismiss, the bankruptcy court
stated that it would strike various language like, “subject to reduction only
after a finding by the Court concerning a legally appropriate energy price per
megawatt hour as proven by expert testimony, if appropriate, but in no event
greater than the price per megawatt hour in effect after market forces took
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effect.” By striking this and similar language sprinkled throughout the
complaint, the court concluded, without explanation, that “th[is] change
solves the [abstention] problem.” We disagree. Abstention under Burford 6
is proper because: (1) the doctrine applies in the bankruptcy context; and (2)
four of the five Burford factors counsel in favor of abstention.
A. Section 1334(c) and Burford
The parties dispute whether Burford applies in the bankruptcy
context. Just Energy argues that §1334(c) 7 subsumes Burford abstention, so
Burford itself is inapplicable. Further, relying on our decision in Firefighters’
Ret. Sys. v. Citco Grp. Ltd., 796 F.3d 520 (5th Cir. 2015), it argues that 28
U.S.C. § 1334(c) bars abstention where, as here, the case arises under
Chapter 15. ERCOT disclaims bankruptcy-specific abstention under §
1334(c) and instead urges that abstention is proper under Burford, a separate
abstention doctrine distinct from §1334(c).
We have already decided that §1334(c) does not subsume Burford
abstention. See Wilson v. Valley Elec. Membership Corp., 8 F.3d 311, 315 (5th
Cir. 1993). In Wilson, a Chapter 11 bankruptcy case, we reviewed a district
court’s abstention under Burford as opposed to under §1334(c). Id. at 313
(observing district court’s jurisdiction under §1334). There, we
acknowledged bankruptcy abstention under §1334(c), yet applied Burford.
6
Burford v. Sun Oil Co., 319 U.S. 315 (1943).
7
The statute provides:
Except with respect to a case under chapter 15 of title 11, nothing in this section
prevents a district court in the interest of justice, or in the interest of comity with State
courts or respect for State law, from abstaining from hearing a particular proceeding arising
under title 11 or arising in or related to a case under title 11.
§ 1334(c)(1) (emphasis added).
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Id. at 315. Had §1334(c) “subsumed” Burford, we would not have had
appellate jurisdiction to review the court’s decision, see 28 U.S.C. §1334(d)
(stating that any decision to abstain or not to abstain made under §1334(c) is
not reviewable by our court), nor would we have applied the five Burford-
specific factors. See Wilson, 8 F.3d at 313-16. Our application of Burford in
the § 1334 context demonstrates that the two types of abstention are distinct
and stand alone. See also Webb v. B.C. Rogers Poultry, Inc., 174 F.3d 697, 699-
701 (5th Cir. 1999) (concluding that § 1334(d) did not bar appellate review
where court abstained under Burford, not § 1334(c)).
Because § 1334(c) and Burford are independent abstention doctrines,
Just Energy’s reliance on Firefighters’ is misplaced. In Firefighters’, a
Chapter 15 case, the question presented was whether the district court erred
by permissibly abstaining under § 1334(c), 796 F.3d at 523-24, which applies
“[e]xcept with respect to a case under chapter 15 of title 11.” § 1334(c)(1).
There, we reversed the district court’s decision to remand and held “that a
district court cannot permissively abstain from exercising jurisdiction in
proceedings related to Chapter 15 cases.” Id. at 528. However, “[w]e
limit[ed] [our] holding to only Chapter 15–related cases that are remanded
based on § 1334(c)(1) permissive abstention.” Id. at 526 (emphasis added).
We made no mention of abstention under Burford or other judicially-created
abstention doctrines. Here, in this Chapter 15 case, had ERCOT argued
abstention under § 1334(c), Firefighters’ might apply. But it did not. It
exclusively argued abstention under Burford, so § 1334(c)(1)’s statutory bar
in Chapter 15 cases is irrelevant here.
In any event, Just Energy holds out Firefighters’ to mean that a court
may never permissively abstain in the Chapter 15 context. Then it argues
that Burford is a permissive abstention doctrine, such that Firefighters’
forecloses its application. Firefighters’ stood for no such thing. Instead,
Firefighters’ applies only to abstention under § 1334(c) in a Chapter 15 case,
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Firefighters’, 796 F.3d at 526, which, considering ERCOT’s Burford-only
abstention theory, is inapplicable here. Against this limited holding, we need
not decide whether Burford is a mandatory or permissive abstention doctrine.
We need only affirm our precedent establishing that: (1) abstention under §
1334(c) is distinct from abstention under Burford; and (2) Burford applies in
the bankruptcy context. See Wilson, 8 F.3d at 313-16; see also In re DPH
Holdings Corp., 580 F. App’x 10, 13 (2d Cir. 2014) (affirming district court’s
Burford analysis in the bankruptcy context); Paul P. Daley & George W.
Shuster, Jr., Bankruptcy Court Jurisdiction, 3 DePaul Bus. & Com. L.J.
383, 430 (2005) (“The Rooker-Feldman and Burford abstention doctrines
are fairly rare in the bankruptcy context but do apply from time to time in
cases where a final state court judgment or a preeminent state policy would
be disrupted by an inconsistent federal court decision.”).
B. Burford Analysis
“Federal courts have a ‘virtually unflagging obligation’ to exercise
[their] jurisdiction.” Grace Ranch, L.L.C. v. BP Am. Prod. Co., 989 F.3d 301,
313 (5th Cir. 2021), as revised (Feb. 26, 2021) (quoting Colo. River Water
Conservation Dist. v. United States, 424 U.S. 800, 817 (1976)). “As a result,
‘abstention from the exercise of federal jurisdiction is the exception, not the
rule.’” Wilson, 8 F.3d at 313 (quoting Colo. River Water, 424 U.S. at 813)
(alteration omitted). Nevertheless, bankruptcy courts may abstain in the rare
instances where the Burford-abstention doctrine permits. See Wilson, 8 F.3d
at 313-14 (applying the Burford-abstention doctrine to bankruptcy case).
Burford abstention “allows federal courts to avoid entanglement with
state efforts to implement important policy programs.” Grace Ranch, 989
F.3d at 313. Under the doctrine, “[federal] courts have discretion to abstain
from deciding unclear questions of state law arising in complex state
administrative schemes when federal court intervention would undermine
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uniform treatment of local issues.” Harrison, 48 F.4th at 339 (citing New
Orleans Pub. Serv., Inc. v. Council of New Orleans, 491 U.S. 350, 362 (1989)
(“NOPSI”), and Burford v. Sun Oil Co., 319 U.S. 315, 332 (1943)). “Where
timely and adequate state-court review is available,” the Supreme Court
explained that “a federal court sitting in equity must decline to interfere with
the proceedings or orders of state administrative agencies” in two instances:
(1) when there are difficult questions of state law bearing on
policy problems of substantial public import whose importance
transcends the result in the case then at bar; or
(2) where the exercise of federal review of the question in a case
and in similar cases would be disruptive of state efforts to
establish a coherent policy with respect to a matter of
substantial public concern.
NOPSI, 491 U.S. at 361. So, “[t]he power to abstain under Burford charges
courts with a careful balancing of state and federal interests, but one that
‘only rarely favors abstention.’” Grace Ranch, 989 F.3d at 313 (quoting
Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 728 (1996)); see also Aransas,
775 F.3d at 653 (“Burford abstention is disfavored as an abdication of federal
jurisdiction.”). “In deciding whether to abstain under Burford, [federal]
courts consider: (1) whether the plaintiff raises state or federal claims, (2)
whether the case involves unsettled state law or detailed local facts, (3) the
importance of the state’s interest in the litigation, (4) the state’s need for a
coherent policy in the area, and (5) whether there is a special state forum for
judicial review.” Harrison, 48 F.4th at 339-40 (citing Grace Ranch, 989 F.3d
at 313). Here, these factors weigh in favor of abstention.
i. The first Burford factor
We begin with the first factor: whether the plaintiff raises state or fed-
eral claims. Just Energy’s Chapter 15 claims are pleaded under Canadian and
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federal law. While this first factor weighs against abstention, it does not settle
the issue. See Aransas, 775 F.3d at 649; see also Sierra Club v. City of San
Antonio, 112 F.3d 789, 794 (5th Cir. 1997) (abstaining on an Endangered Spe-
cies Act claim).
ii. The second Burford factor
Next: whether the case involves unsettled state law or detailed local
facts. “Burford abstention does not so much turn on whether the plaintiff’s
cause of action is alleged under federal or state law, as it does on whether the
plaintiff’s claim may be in any way entangled in a skein of state law that must
be untangled before the federal case can proceed.” Aransas, 775 F.3d at 649-
50 (quoting City of San Antonio, 112 F.3d at 795). So, “this [second] factor
turns in part on whether the court will be forced to weigh competing local
interests and mostly review an agency’s decision in an area in which that
agency is arguably an expert.” Id. at 650 (citing Wilson, 8 F.3d at 315).
“What would amount to [this Court’s] review of state agency action in a state
law framework would be grounds for abstention,” id., such as a “claim that a
state agency has misapplied its lawful authority or has failed to take into con-
sideration or properly weigh relevant state-law factors.” Id. (quoting
NOPSI, 491 U.S. at 362).
“Following Burford’s logic, [this Court] ha[s] found abstention
proper when [its] exercise of jurisdiction would involve the federal court in
an open-ended ‘fairness’ inquiry into predominantly local matters or allow
the court to second-guess the policy decisions of state regulators.” Grace
Ranch, 989 F.3d at 316. And so has the Supreme Court. In Alabama Public
Service Commission, a railroad challenged a state commission order that de-
nied it permission to discontinue certain routes. 341 U.S. 341, 342-43 (1951).
The relevant, settled legal test required “balancing the loss to the railroad
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from continued operation of [the affected routes] with the public need for
that service.” Id. at 347-48. Despite the legal framework being clear, the
Supreme Court held abstention proper to avoid “the essentially local prob-
lem.” Id. at 347, 349–50. What this shows, then, is that “Burford abstention
is particularly appropriate where,” as here, “‘by proceeding the district
court would have risked reaching a different answer than the state institutions
with greater interest in and familiarity with such matters.’” City of San An-
tonio, 112 F.3d at 796 (quoting Wilson, 8 F.3d at 315).
Here, the merits of this case significantly implicate our “review [of]
an agency’s decision [namely, PUCT and ERCOT’s decision] in an area in
which that agency is arguably an expert.” Aransas, 775 F.3d at 650. For ex-
ample, Just Energy asks us to decide that: (1) either (a) the PUCT orders are
invalid, or (b) ERCOT “had no basis to apply the $9,000/MWh price after
11:55 p.m. on Friday 17, 2021”; which would mean that (2) ERCOT misap-
plied its lawful authority; thus making (3) the invoices invalid; therefore (4)
requiring ERCOT to return some or all of Just Energy’s payments. But for
us “to determine whether it was appropriate [for ERCOT] to disregard the
Protocols,” we, necessarily, would have to second guess ERCOT’s decision
making and authority during the unusual, emergency circumstances of winter
storm Uri. That, in turn, “risk[s] reaching a different answer than the state
institutions with greater interest in and familiarity with such matters.” See
City of San Antonio, 112 F.3d at 796. “This is precisely the sort of highly
localized, specialized, judgmental, and perhaps partisan analysis” that begs
abstention. Wilson, 8 F.3d at 315 (citing Allstate Ins. Co. v. Sabbagh, 603 F.2d
228, 231 n.2 (1st Cir. 1979) (“[W]e see no reason or policy which would ex-
clude as a ‘difficult question of state law’ a question, requiring the most so-
phisticated analysis of complex facts, whether a rate meets a legal
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standard.”). 8 Because Just Energy’s claims (and, arguably, at least one of
ERCOT’s affirmative defenses) would be “entangled in a skein of state law
that must be untangled before the federal [bankruptcy] case c[ould] pro-
ceed,” Aransas, 775 F.3d at 649-50, this second factor weighs in favor of ab-
stention.
iii. The third Burford factor
To the third factor: the importance of the state’s interest in the litiga-
tion. “[W]hen a state administrative scheme guards an ‘over-all plan of reg-
ulation of vital interest to the general public’ from federal interference,” the
state’s interest is considered “paramount.” Grace Ranch, 989 F.3d at 316
(quoting Burford, 319 U.S. at 324). Texas’s electricity market is such a
scheme.
Texas’s interest in utility regulation and litigation is clear from the
face of PURA. Therein, the Texas legislature explained that PURA was “en-
acted to protect the public interest inherent in the rates and services of elec-
tric utilities” and its purpose is “to establish a comprehensive and adequate
regulatory system for electric utilities to assure rates, operations, and services
that are just and reasonable to the consumers and to the electric utilities.”
Tex. Util. Code § 31.001(a); In re Entergy Corp., 142 S.W.3d 316, 323
(Tex. 2004). It went on to say: “the public interest requires that rules, poli-
cies, and principles be formulated and applied to protect the public interest
in a more competitive marketplace”; so, “[t]he development of a competi-
tive wholesale electric market that allows for increased participation by elec-
tric utilities and certain nonutilities is in the public interest.” Tex. Util.
8
As an aside, there are other unsettled state-law matters, including ERCOT’s
affirmative defenses that it is entitled to immunity and that the PUCT is an indispensable
party with a right to intervene.
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Code § 31.001(c). Most importantly, to protect this public interest, the
state legislature gave its own state agency, the PUCT, “‘exclusive original
jurisdiction over the rates, operations, and services of an electric utility’ in
certain geographic areas and exclusive appellate jurisdiction in others.” In re
CenterPoint Energy Houston Elec., LLC, 629 S.W.3d 149, 157 (Tex. 2021)
(quoting Tex. Util. Code § 32.001(a), (b)), reh’g denied (Oct. 15, 2021).
That the state retains exclusive control and oversight of the market under-
scores its interest in this electricity-related litigation.
Moreover, “utility regulation ‘is one of the most important of the
functions traditionally associated with the police power of the States.’” Wil-
son, 8 F.3d at 315 (quoting NOPSI, 491 U.S. at 365) (alteration omitted). The
Texas supreme court has repeatedly recognized Texas’s interest in utility
regulation and litigation and its protection of the electricity-related public in-
terest. See, e.g., Oncor Elec. Delivery Co. LLC v. Chaparral Energy, LLC, 546
S.W.3d 133, 139 (Tex. 2018); Hearts Bluff Game Ranch, Inc. v. State, 381
S.W.3d 468, 489 (Tex. 2012) (observing electricity as a state interest); In re
Entergy Corp., 142 S.W.3d 316, 323 (Tex. 2004). In Oncor, the court observed
that “the statutory description of PURA as ‘comprehensive’ demonstrates
the Legislature’s belief that PURA would comprehend all or virtually all per-
tinent considerations involving electric utilities operating in Texas.” Oncor,
546 S.W.3d at 139 (quoting In re Entergy Corp., 142 S.W.3d at 323). Again,
with state-agency PUCT in charge of virtually all pertinent considerations
regarding the electricity market in Texas, Tex. Util. Code § 32.001(a),
(b), Texas’s interest in this litigation is paramount.
Finally, because the electricity grid is entirely intrastate, the manage-
ment of the market is “a matter of particular importance to the state.” City
of San Antonio, 112 F.3d at 794 (“The defendants correctly note that both the
aquifer and the endangered species are entirely intrastate, which makes
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management of the aquifer a matter of peculiar importance to the state.”).
With the state interest so strong, this factor counsels in favor of abstention.
iv. The fourth Burford factor
To the fourth factor: the state’s need for a coherent policy in the area.
“Although Burford abstention ‘is concerned with protecting complex state
administrative processes from undue federal interference, it does not require
abstention whenever there exists such a process or even in all cases where
there is a potential for conflict with state regulatory law or policy.’” Aransas,
775 F.3d at 651 (quoting NOPSI, 491 U.S. at 362). The doctrine “is intended
to avoid recurring and confusing federal intervention in an ongoing state
scheme,” Wilson, 8 F.3d at 315 (citing Burford, 319 U.S. at 332), or “worri-
some meddling.” Grace Ranch, 989 F.3d at 317.
Abstention is proper when a state regulatory scheme faces potential
disruption, cf. Grace Ranch, 989 F.3d at 318, such that it would “crumble.”
Harrison v. Young, 48 F.4th 331, 340 (5th Cir. 2022). Such a scheme existed
in City of San Antonio. In that case, the question before us was whether a
federal court ruling on an Endangered Species Act claim would interfere with
the “comprehensive regulatory scheme” through which Texas governed an
aquifer. City of San Antonio, 112 F.3d at 794. The state agency that oversaw
the aquifer controlled its water withdrawal through a permit system. Id. Like
in Burford, where a federal court ruling concerning the drilling rights of one
landowner would have conflicted with the need, “based on geologic realities,
[for] each oil and gas field [to] be regulated as a unit for conservation pur-
poses,” Burford, 319 U.S. at 319, a federal court injunction regulating the aq-
uifer’s water use would have directly conflicted with the water withdrawals
set by the state agency. City of San Antonio, at 794-95, 798. Because the fed-
eral court ruling would “necessarily affect[ ] other parties” within “a single
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integrated system,” abstention was proper. Id. at 794-95, 98.
Here, central to this case is “the type of ‘complex state administrative
processes’ that Burford abstention aims to ‘protect from undue federal inter-
ference,’” Grace Ranch, 989 F.3d at 317 (quoting NOPSI, 491 U.S. at 362)
(alterations omitted), namely, Texas’s wholesale electricity market. “The
Legislature’s description of PURA as ‘comprehensive,’ coupled with the fact
that PURA regulates even the particulars of a utility’s operations and ac-
counting, demonstrates the statute’s pervasiveness.” In re Entergy Corp., 142
S.W.3d at 323 (citing Tex. Util. Code § 14.202 (allowing PUCT to audit
utilities as frequently as needed); § 36.056 (empowering PUCT to establish
proper rates of depreciation, amortization, and depletion); § 38.004 (man-
dating clearance requirements for transmission and distribution lines)). 9
And, as in City of San Antonio, Just Energy’s desired outcome jeopardizes
Texas’s pervasive, administrative electricity scheme.
Federal intervention necessarily affects all market participants.
Should ERCOT repay monies for the energy Just Energy expended, it would
have to allocate the debt owed to other market participants. ERCOT Pro-
tocols §§ 9.19(1)(e), 9.19.1(2)) (describing procedure to recover revenue
due to a defaulting market participant’s unpaid invoices from non-defaulting
market participants owed revenue for their generation). That means that
9
Just Energy’s attempt to undermine Texas’s utility scheme is unavailing. It
contends that “this lawsuit arises out of a deregulated market that does not involve electric
utilities over which the PUCT has exclusive jurisdiction,” so, Burford may not apply. But
Just Energy’s characterization of the market misses the mark. This Court “do[es] not
believe that Burford abstention is applicable only where the state regulatory scheme is fully
in place.” City of San Antonio, 112 F.3d at 796. Instead, Burford applies in the context of
“a comprehensive scheme governing a matter of vital state interest, and one where uniform
application of rules was important.” Id. Here, Texas’s comprehensive electricity scheme,
guarded by uniform application of PURA, is certainly one to which Burford applies.
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ERCOT would recoup the disputed $335 million from other market partici-
pants to remain revenue neutral and to ensure that energy-generating partic-
ipants were paid. So, if Just Energy escapes its payment obligations, all other
market participants will necessarily be affected, see City of San Antonio, 112
F.3d at 793–94, as they would financially bear the burden of an order in favor
of Just Energy. This resulting domino effect is exactly the type of “worri-
some” federal court interference with an interdependent administrative
scheme that Burford seeks to prevent. See Grace Ranch, 989 F.3d at 317. Ac-
cordingly, the potential disruption of Texas’s regulatory electricity scheme
tips this fourth factor in favor of abstention. 10
v. The fifth Burford factor
Finally, the last factor: whether there is a special state forum for judi-
cial review. “To justify abstention, there must be a forum that offers ‘timely
and adequate state-court review.’” Aransas Project, 775 F.3d at 651-52 (quot-
ing NOPSI, 491 U.S. at 361) (alteration omitted). That “[r]eview typically
10
Just Energy argues that this proceeding is the “one-time affair” that we
envisioned would not warrant abstention in Wilson. In Wilson, we found that while the
power-distribution dispute “appear[ed] to be more of a one-time affair arising from a single
landmark Louisiana decision, the history of rural cooperatives in the state reveals a long-
running seesaw battle between nonregulation and regulation.” Wilson, 8 F.3d at 315. Here,
while the storm existed for a finite number of days, the dispute is not the “one-time affair”
we referenced in Wilson. This scheme is not so different from that in City of San Antonio,
where, after the aquifer suffered a severe drought, Sierra Club sued the city for “taking”
endangered species due to the water withdrawals. City of San Antonio, 112 F.3d at 792.
That historic drought was not a “one-time affair” where, “[a]s in Burford, there is a need
for unified management and decision-making regarding the aquifer, since allowing one
party to take water necessarily affects other parties.” Id. at 794; see also Burford, 319 U.S.
at 319 (concluding that entire, ongoing industry “must be regulated as a unit for
conservation purposes”). Just like in City of San Antonio, ERCOT’s decisions during Uri
do not amount to an impermissible one-time affair where the entire industry will be
necessarily affected by Just Energy’s possible recoupment of funds.
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includes the ability to appeal agency orders to a state trial court, with available
state appellate review, and such review may include initial review by the
agency.” Id. at 652. “[R]eview should be more than a fact finding venture
with only the remote possibility of enforcement.” Id. (citation omitted).
Just Energy says that its bankruptcy claims cannot be adjudicated in an
administrative proceeding before the PUCT or before a Texas state court.
So, it says that the bankruptcy court is the proper forum to “examine whether
it was appropriate to disregard the [ERCOT] Protocols, and to do so through
the PUCT Orders under the Texas APA and PURA.” But behind the guise
of Just Energy’s bankruptcy action is its challenge to ERCOT’s pricing deci-
sion and invoices. Texas law mandates that those types of challenges – i.e.,
challenges to invoices and regulatory actions – must be filed with ERCOT in
the first instance, with a right of appeal to the PUCT, and then to Travis
County district court. See, e.g., ERCOT Protocols §§ 6.3(7), 9.2.5(1),
9.5.6(1), 9.14.2, 9.14.4, 9.5.5, 20.1(1, 20.10.1, Tex. Util. Code § §
32.001(a), 39.151(d-4)(6), 11.07(a), 15.001; 16 Tex. Admin. Code §
22.251(b), (c), 2001.176(b)(1)).
Texas selected the Travis County district court “[t]o prevent the con-
fusion of multiple review of the same general issues.” Burford, 319 U.S. at
326. Here, the root issue falls within the exclusive jurisdiction of the state
court. The only way that Just Energy can get the relief it seeks – at least $274
million of the $335 million paid – is for a court to answer the question central
to Just Energy’s case: Did ERCOT charge a lawful filed rate calculated in
accordance with market-based protocols? If the answer is yes, the $335 mil-
lion dollar invoice stands, and no money is returned to Just Energy. If the
answer is no, Just Energy can claw black some or all of its money through its
bankruptcy action. Only one court is permitted to answer Just Energy’s
$335-million-dollar question: Travis County district court. Tex. Gov’t
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Code § 2001.176(b)(1); Tex. Util. Code §§ 11.007(a), 15.001.
That state court is well equipped to adjudicate Just Energy and ER-
COT’s dispute. It routinely reviews whether the PUCT fails to follow the
language of its own regulations, see Pub. Util. Comm’n of Tex. v. Gulf States
Utilities Co., 809 S.W.2d 201, 207 (Tex. 1991) (collecting cases), or whether
an affiliated independent organization – i.e., ERCOT – complied with the
PUCT’s rules and orders. See Tex. Util. Code § 39.151(d-4)(5). Should
the court decide that the invoices are unlawful, such that the rates are exces-
sive, it may award recovery against the PUCT. Tex. Util. Code §
15.003. Texas’s legal scheme explicitly addresses the question Just Energy
seeks to have answered. So, for this Court to inject itself into the matter
would be exactly the type of interference Burford abstention exists to avoid.
Because the answer central to Just Energy’s claims can only be found in a
specific state forum, this last factor weighs in favor of abstention. 11
So, four of the five factors favor abstention. Just Energy fails to cite
any caselaw where the scoreboard is this lopsided in favor of abstention, yet
Burford was inapplicable. Cf. Grace Ranch, 989 F.3d at 319 (holding that ab-
stention was not warranted when the first three factors favored abstention).
Accordingly, the district court abused its discretion in declining to abstain.
11
To be sure, we do not conclude that the Travis County district court is the
appropriate court to handle Just Energy’s bankruptcy proceeding. Rather, it is the
appropriate court to consider the merits of Just Energy’s claims: i.e., whether the ERCOT
invoices stand. Without this answer, the bankruptcy proceedings cannot move forward.
Because this merits question may only be decided by the Travis County district court, the
bankruptcy court must abstain from answering it.
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III. Conclusion
Accordingly, we VACATE the bankruptcy court’s order and
REMAND with instructions to determine the appropriate trajectory of this
case after abstention.
19