United States Court of Appeals,
Fifth Circuit.
No. 92-9551.
Durwood WILSON, et al., Plaintiffs-Appellees,
v.
VALLEY ELECTRIC MEMBERSHIP CORP., et al., Defendants-Appellants.
Cajun Electric Power Cooperative, Inc., Movant-Appellant.
Dec. 8, 1993.
Appeals from the United States District Court for the Eastern District of Louisiana.
Before SNEED*, REYNALDO G. GARZA, and JOLLY, Circuit Judges.
SNEED, Circuit Judge:
Customers of rural electric cooperatives sued to obtain refunds of rate increases that allegedly
violated the Louisiana Constitution. The district court abstained in favor of contemporaneous
proceedings in the Louisiana Public Service Commission. We affirm.
I.
FACTS
Appellants are rural cooperatives distributing electric power to customers in Louisiana.
Traditionally, such cooperatives were not subject to the authority of the Louisiana Public Service
Commission (the Commission), which regulates public utilities in the state. A 1970 statute, however,
included cooperatives within the definition of "public utility." Together with the 1974 state
constitution, which gave the Commission broad powers over utilities, this statute gave the
Commission jurisdiction over rural cooperatives.
After a brief period of Commission regulation, a 1978 statute again exempted cooperatives'
rates from the Commission's purview. However, the Louisiana Supreme Court subsequently held that
the statutory exemption violated the state constitution. Cajun Elec. Power Coop., Inc. v. Louisiana
Pub. Serv. Comm'n, 544 So.2d 362 (La.), cert. denied, 493 U.S. 991, 110 S.Ct. 538, 107 L.Ed.2d
*
Senior Circuit Judge of the Ninth Circuit, sitting by designation.
536 (1989).
Following the Cajun Electric decision, customers of two rural cooperatives filed a class action
in state court on behalf of all cooperative members, seeking refunds for rate increases entered without
Commission approval pursuant to the now-unconstitutional exemption. As one of the cooperatives
was then entering Chapter 11 reorganization, the cooperatives removed the case to federal district
court.
The cooperatives moved for summary judgment, arguing that Cajun Electric should only
apply prospectively, or alternatively that the rate increases, promulgated in good faith reliance on the
statutory exemption, should be upheld. Shortly thereafter, the Commission initiated a review of rates
charged by one cooperative during the exemption period. The district court granted the plaintiff
members' motion to abstain in favor of the contemporaneous Commission proceedings, relying on the
Supreme Court's decision in Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424
(1943). The cooperatives appeal.
II.
JURISDICTION AND STANDARD OF REVIEW
The district court had jurisdiction pursuant to 28 U.S.C. § 1334(a)-(b) (1988). This court
has appellate jurisdiction under 28 U.S.C. § 1291.1
We review a district court's decision to abstain for abuse of discretion. See American Bank
& Trust Co. v. Dent, 982 F.2d 917, 922 n. 6 (5th Cir.1993) (citing Allen v. Louisiana State Bd. of
Dentistry, 948 F.2d 946, 949 (5th Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 1764, 118 L.Ed.2d
426 (1992)). However, the allowable discretion is quite narrow, because it "must be exercised within
the narrow and specific limits prescribed by the particular abstention doctrine involved." Id. (citing
C-Y Dev. Co. v. City of Redlands, 703 F.2d 375, 377 (9th Cir.1983)).
III.
1
A district court's decision to abstain is considered "final" for purposes of appellate review.
Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 8-13, 103 S.Ct. 927,
932-36, 74 L.Ed.2d 765 (1983); Barnhardt Marine Ins., Inc. v. New England Int'l Sur. of
America, Inc., 961 F.2d 529, 531 (5th Cir.1992).
DISCUSSION
We start with the command that the federal courts have a "virtually unflagging obligation ...
to exercise the jurisdiction given them." Colorado River Water Conservation Dist. v. United States,
424 U.S. 800, 817, 96 S.Ct. 1236, 1246, 47 L.Ed.2d 483 (1976). As a result, "[a]bstention from the
exercise of federal jurisdiction is the exception, not the rule." Id. at 813, 96 S.Ct. at 1244.
Nevertheless, t he Supreme Court has enunciated several abstention doctrines, including that of
Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943).
In Burford, an oil company challenged a drilling permit issued by the Texas Railroad
Commission, arguing that the order violated state law and the federal Due Process Clause. Id. at
316-17, 63 S.Ct. at 1098-99. Jurisdiction was based on diversity of citizenship as well as on the
constitutional question. Id. at 317, 63 S.Ct. at 1099. The Supreme Court noted the complexity and
importance of oil field regulation, and observed that Texas law gave the Railroad Commission "broad
discretion" in that area, with a special procedure for centralized judicial review by the state court
system. Id. at 318-27, 63 S.Ct. at 1099-1104. Expressing concern that federal intervention would
result in needless confusion and conflict with the state system, the Court held that "a sound respect
for the independence of state action requires the federal equity court to stay its hand." Id. at 327-34,
63 S.Ct. at 1104-08.
Burford abstention is proper "[w]here timely and adequate state-court review is available,"2
and "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.' " New Orleans Pub. Serv., Inc. v. Council of the City of New Orleans, 491 U.S. 350, 361,
109 S.Ct. 2506, 2514, 105 L.Ed.2d 298 (1989) (NOPSI ) (quoting Colorado River, 424 U.S. at 817,
2
The cooperatives express concern that one member of the Louisiana Commission may be
biased against them. However, they do not challenge the adequacy of Louisiana's system of
judicial review of Commission orders, arguing instead that this factor is at best a neutral one.
Accordingly, we focus our attention only on the disruptive effect of federal review. See Alabama
Pub. Serv. Comm'n v. Southern Ry. Co., 341 U.S. 341, 349, 71 S.Ct. 762, 768, 95 L.Ed. 1002
(1951) (finding abstention proper where "[a]ppellee has not shown that the [state] procedure for
review of Commission orders is in any way inadequate to preserve for ultimate review in this
Court any federal questions arising out of such orders").
96 S.Ct. at 1246). The Burford line of cases reveals several factors that are relevant in making this
determination: (1) whether the cause of action arises under federal or state law, see NOPSI, 491 U.S.
at 361-62, 109 S.Ct. at 2514-15 (finding abstention inappropriate where the case "d[id] not involve
a state-law claim");3 (2) whether the case requires inquiry into unsettled issues of state law, see
Burford, 319 U.S. at 331, 63 S.Ct. at 1106 (listing difficult issues present in petitioner's case), or into
local facts, see Alabama Pub. Serv. Comm'n v. Southern Ry. Co., 341 U.S. 341, 347-48, 71 S.Ct.
762, 767-68, 95 L.Ed. 1002 (1951); (3) the importance of the state interest involved, see Burford,
319 U.S. at 324, 63 S.Ct. at 1102 (citing state interest in oil regulation); (4) the state's need for a
coherent policy in that area, see id. at 324, 327, 63 S.Ct. at 1102, 1104 (describing complexity,
volume, and interdependence of oil cases); and (5) the presence of a special state forum for judicial
review, see id. at 320, 325-27, 63 S.Ct. at 1100, 1103-04 (observing that regulatory commission had
primary jurisdiction, with a special system of centralized judicial review).4
Multiple factor tests are difficult to apply and are particularly difficult in this case because of
the narrowness of our discretion. Despite this difficulty, we hold the Burford doctrine supports the
trial court's decision.
A. Federal or State Basis of Claim
There are only state law issues in this case. These are, first, whether the Louisiana Supreme
Court's decision in Cajun Electric should apply retroactively, and, second, if so, whether it invalidates
prior rate increases. The Supreme Court has declared: "When questions of state law are at issue,
state courts generally have the authority to determine the retroactivity of their own decisions."
3
Although Burford itself involved federal and state law claims, the federal constitutional issue
was not substantial. NOPSI, 491 U.S. at 360, 109 S.Ct. at 2513.
4
The Seventh Circuit has adopted a four-factor Burford test, considering (1) whether the cause
of action is exclusively federal, (2) whether difficult or unusual state laws are at issue, (3) the need
for coherent state doctrine, and (4) whether state procedures indicate a desire to create a special
forum to adjudicate the issues involved. See General Ry. Signal Co. v. Corcoran, 921 F.2d 700,
708-09 (7th Cir.1991). The Tenth Circuit has a similar formulation, rephrasing item (2) as
"whether the suit requires the court to determine issues ... directly relevant to ... state policy."
Grimes v. Crown Life Ins. Co., 857 F.2d 699, 704 (10th Cir.1988), cert. denied, 489 U.S. 1096,
109 S.Ct. 1568, 103 L.Ed.2d 934 (1989). The district court in this case employed the Seventh
Circuit test. We do not express any opinion as to either test.
American Trucking Ass'ns v. Smith, 496 U.S. 167, 177, 110 S.Ct. 2323, 2330, 110 L.Ed.2d 148
(1990) (plurality opinion) (citing Great N. Ry. v. Sunburst Oil & Ref. Co., 287 U.S. 358, 364, 53
S.Ct. 145, 148, 77 L.Ed. 360 (1932)).
B. Inquiry into Unsettled Law or Local Facts
Resolving the issue of retroactivity also would require delving into highly local issues of fact.
To be sure, Louisiana law appears reasonably settled in this area. In Lovell v. Lovell, 378 So.2d 418
(La.1979), the Louisiana Supreme Court adopted the test of Chevron Oil Co. v. Huson, 404 U.S. 97,
92 S.Ct. 349, 30 L.Ed.2d 296 (1971), for determining whether its decisions should apply
retroactively. This test considers (1) whether the decision to be applied establishes a new principle
of law, (2) whether retrospective application will further or retard the rule established, and (3) the
inequity imposed by retroactivity. See Lovell, 378 So.2d at 421-22.
To apply the Lovell test, at the very least, we would need to assess the i nequity of
retrospective application. This in turn wo uld require that we compare the rates charged by the
cooperatives during the exemption period against the rates that would have resulted from
Commission jurisdiction, and that we weigh the customers' interests against those of the cooperatives.
This is precisely the sort of highly localized, specialized, judgmental, and perhaps partisan analysis
that brings this case squarely within the Supreme Court's decision to abstain in Alabama Public
Service Comm'n v. Southern Railway Co., 341 U.S. 341, 71 S.Ct. 762, 95 L.Ed. 1002 (1951).
In Alabama Public Service Comm'n, a railroad challenged a state commission order that
denied it permission to discontinue certain routes. Id. at 342-43, 71 S.Ct. at 764-65. The relevant
legal test was apparently settled, and required "balancing the loss to the railroad from continued
operation of [the affected routes] with the public need for that service." Id. at 347-48, 71 S.Ct. at
767-68. While the legal framework was clear, the Supreme Court still held abstention proper to avoid
"the essentially local problem." Id. at 347, 349-50, 71 S.Ct. at 767, 768-69; see also Allstate Ins.
Co. v. Sabbagh, 603 F.2d 228, 231 n. 2: "[W]e see no reason or policy which would exclude as a
"difficult question of state law' a question, requiring the most sophisticated analysis of complex facts,
whether a rate meets a legal standard."
As in Alabama Public Service Comm'n, applying the seemingly clear legal standard for
retroactivity would involve the federal court in an open-ended "fairness" inquiry into predominantly
local matters. By proceeding, the district court would have risked reaching a different answer than
the Louisiana institutions with greater interest in and familiarity with such matters.
C. Importance of State Interest
The third Burford factor, the importance of the state interest at stake, obviously weighs in
favor of abstention. The Supreme Court has recognized that ut ility regulation "is one of the most
important of the functions traditionally associated with the police power of the States." NOPSI, 491
U.S. at 365, 109 S.Ct. at 2516. On the other hand, the federal courts have little interest in hearing
this case. The cooperatives do not argue that this suit will interfere with the reorganization that
catapulted it into the federal system. Nor does the Bankruptcy Code represent a supervening federal
interest; to the contrary, "[n]othing ... prevents a district court ... in the interest of comity with State
courts or respect for State law, from abstaining from hearing a particular proceeding ... arising in or
related to a case under title 11" of the Code. 28 U.S.C. § 1334(c)(1).
D. The State's Need for Coherent Policy
Louisiana has a need for coherent policy in this area. Burford abstention is intended to avoid
recurring and confusing federal intervention in an ongoing state scheme. See Burford, 319 U.S. at
332, 63 S.Ct. at 1106 (quotation omitted): "[W]e should leave these problems of Texas law to the
state court where each may be handled as one more item in a continuous series of adjustments."
While the dispute here appears t o 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. The Cajun Electric decision is merely the latest salvo.
Federal intervention this late in the day would be inappropriate.
Further, the Louisiana Supreme Court has already hinted that it would apply Cajun Electric
retroactively. In a previous case, that Court noted in dicta that Co mmission jurisdiction "was not
interrupted" by the statutory exemption. See Dixie Elec. Membership Coop. v. Louisiana Pub. Serv.
Comm'n, 509 So.2d 1002, 1007 (La.1987). It would be unseemly for this court to join the chorus
when a state court may have already spoken. That court needs neither our harmonious nor
disharmonious notes. Finally, while the issue in this case might appear unique, the underlying
customer refund suit is a more common dispute and may recur.
E. Presence of Special State Forum
Consistent with its need for coherent regulatory policy, Louisiana has established a special
forum for rate cases. Primary jurisdiction for such cases rests in the Commission, which has broad
power to address legal issues related to its regulatory duties. See Daily Advertiser v. Trans-La, 612
So.2d 7, 16-18 (La.1993) (describing Commission's jurisdiction as "plenary"). As in Burford, the
Commission is vested with broad discretion. See Dixie Elec. Membership Coop., 509 So.2d at 1007.
The Louisiana Constitution centralizes appeals in the state district court in the state capital and
provides for expedited review with a right of direct appeal to the state supreme court. La. Const. art.
IV, § 21(A), (E); see also La.Rev.Stat.Ann. 45:1192 (West Supp.1993). This procedure is similar
to the centralized system of review in Burford.
Louisiana's courts have zealously guarded this constitutional framework. A recent state
supreme court decision observed that "a line of Louisiana cases has uniformly rejected semantic
endeavors by parties to circumvent the [Commission's] exclusive jurisdiction over rate matters."
Daily Advertiser, 612 So.2d at 27 (collecting cases).
In Daily Advertiser, customers of a regulated gas distributor argued that the distributor and
its supplier illegally inflated their costs and thereby overcharged customers. Id. at 11-14. The
plaintiffs sued for fraud and violations of state antitrust laws. Id. at 13. Finding that the case
involved assessing the reasonableness of Commission-authorized rates, and that the plaintiffs
essentially demanded a refund for overcharges, the court dismissed a portion of the suit and stayed
the remainder in favor of a contemporaneous Commission investigation. Id. at 26-32.
As in Daily Advertiser, the plaintiffs in this case are in essence arguing that they paid too
much for the cooperatives' services and are seeking a refund. Resolving this issue requires assessing
the reasonableness of the cooperatives' rates. Neither semantic endeavors to describe the case
otherwise, nor the fortuity of a basis for federal jurisdiction, should allow the parties to circumvent
the Commission's exclusive jurisdiction. See Construction Aggregates Corp. v. Rivera de Vicenty,
573 F.2d 86, 96 (1st Cir.1978) (abstaining from customer's challenge to insurance rates, where Puerto
Rican law provided centralized review of Insurance Fund orders with direct review by Puerto Rican
Supreme Court).
The cooperatives paint this case as a purely abstract legal exercise in retroactive application.
But we cannot divorce the legal question from the suit for rate refunds from which it came, nor from
the inquiry into local interests to which it must lead. The district court did not abuse its discretion
in abstaining from jurisdiction.
AFFIRMED.