Cannara v. Nemeth, No. 20-16202 (9th Cir. 2021)
Annotate this CaseUnder the Johnson Act, federal courts lack jurisdiction over all suits affecting state-approved utility rates. The Ninth Circuit affirmed the district court's dismissal based on lack of subject matter jurisdiction of an action brought by public utility ratepayers challenging California Assembly Bill 1054, which addresses the financial burdens that wildfires impose on electrical utilities. The panel concluded that plaintiffs' claims challenge ratemaking within the meaning of the Johnson Act, as this circuit's precedent has interpreted it. The court also concluded that the CPUC satisfied the Johnson Act's procedural requirements. Accordingly, the Johnson Act applies to this case and the panel lacked subject matter jurisdiction.
Court Description: Johnson Act, 28 U.S.C. § 1342. The panel affirmed the district court’s order dismissing for lack of subject matter jurisdiction an action brought by public utility ratepayers challenging California Assembly Bill 1054, which addresses the financial burdens that wildfires impose on electrical utilities. Assembly Bill 1054 (“AB 1054”), among other things, created a “Wildfire Fund” to cover utility liabilities resulting from wildfires and instructed the California Public Utilities Commission (“CPUC”) to consider imposing a surcharge on * Formerly known as Danielle J. Hunsaker. CANNARA V. NEMETH 3 ratepayers to help capitalize this Fund. The CPUC decided to impose the surcharge contemplated by AB 1054, and Plaintiffs challenged AB 1054 as it relates to the Wildfire Fund and ratepayer surcharge under the Due Process Clause of the Fourteenth Amendment and the Takings Clause of the Fifth Amendment. Defendants moved to dismiss Plaintiffs’ claims on several grounds, including lack of subject matter jurisdiction under the Johnson Act, 28 U.S.C. § 1342, which deprives courts of jurisdiction over all suits affecting state- approved utility rates. The panel concluded that Plaintiffs’ challenge was subject to the Johnson Act, and citing US West, Inc. v. Nelson, 146 F.3d 718, 722 (9th Cir. 1998), rejected Plaintiffs’ assertion that the Johnson Act did not apply because their claims were non-rate related. The panel noted that the First Amended Complaint described the wildfire surcharge as the “heart of [their] due process claims.” And their takings claim was premised on an alleged “unjust and unreasonable rate.” Indeed, the second paragraph of the First Amended Complaint alleged “a multi-billion-dollar scheme for California’s utility customers to finance the [utilities’] fire liabilities.” But most significant, the relief that Plaintiffs sought conclusively demonstrated that they were challenging a ratemaking: they asked the Court to find unconstitutional and enjoin only sections 6 and 16 of AB 1054, which created the Wildfire Fund and the process by which a utility company may seek assistance from the Fund. This relief would necessarily “affect state-approved utility rates,” despite Plaintiffs’ attempts to reframe their claims as non-rate related. The panel further held that the CPUC surcharge proceedings satisfied the Johnson Act’s procedural requirements, noting that the process that the CPUC 4 CANNARA V. NEMETH provided in its surcharge proceedings surpassed what had been accepted in prior cases. The CPUC allowed anyone interested to become a party to the proceedings, circulated notice of the hearing in the CPUC’s widely disseminated monthly newsletter, assisted people unfamiliar with CPUC procedures, allowed all parties to present their opinions at multiple stages of the process, allowed oral argument, accepted comments on the Proposed Decision, and responded to those comments in the Final Decision. Contrary to the Plaintiffs’ argument, the CPUC’s decision not to hold an evidentiary hearing did not violate the Johnson Act’s procedural requirements.
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