California Department of Water Resources v. Powerex Corp. ( 2008 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CALIFORNIA DEPARTMENT OF WATER 
RESOURCES,
Plaintiff-Appellee, No. 06-15285
v.
 D.C. No.
CV-05-00518-GEB
POWEREX CORP., a Canadian
Corporation, dba POWEREX ENERGY OPINION
CORP.,
Defendant-Appellant.

Appeal from the United States District Court
for the Eastern District of California
Garland E. Burrell, District Judge, Presiding
Argued and Submitted
December 4, 2007—San Francisco, California
Filed July 22, 2008
Before: Robert E. Cowen,* Michael Daly Hawkins and
N. Randy Smith, Circuit Judges.
Opinion by Judge Hawkins
*The Honorable Robert E. Cowen, Senior United States Circuit Judge
for the Third Circuit, sitting by designation.
8969
8972 CALIFORNIA DEP’T OF WATER v. POWEREX
COUNSEL
David C. Frederick (briefed and argued), Kellogg, Huber,
Hansen, Todd, Evans and Figel, Washington, D.C., for the
defendant-appellant.
CALIFORNIA DEP’T OF WATER v. POWEREX 8973
Annadel A. Almendras (briefed and argued) and Song J. Hill
(briefed), Office of the Attorney General of the State of Cali-
fornia, San Francisco, California, for the plaintiff-appellee.
Mark B. Stern (briefed and argued) and Alisa B. Klein
(briefed), United States Department of Justice, Washington,
D.C., for the United States as amicus curiae.
Roy T. Englert, Jr. (briefed), Robbins, Russell, Englert,
Orseck and Untereiner, Washington, D.C., for the Province of
British Columbia as amicus curiae.
Margaret K. Pfeiffer (briefed), Sullivan and Cromwell, Wash-
ington, D.C., for the Government of Canada as amicus curiae.
OPINION
HAWKINS, Circuit Judge:
In this second look, we re-examine whether Powerex, a
Canadian corporation that markets and distributes electric
power, is a “foreign state” within the meaning of the Foreign
Sovereign Immunities Act of 1976 (“FSIA”). 28 U.S.C.
§ 1603(a), (b). Four years ago, we held that it was not, but the
Supreme Court vacated that decision without resolving the
issue. California v. NRG Energy Inc., 391 F.3d 1011, 1026
(9th Cir. 2004), vacated sub nom. Powerex Corp. v. Reliant
Energy Servs., Inc., 127 S. Ct. 2411 (2007).
To reach that question, we must first consider whether 28
U.S.C. § 1447(d) deprives us of the authority to review a dis-
trict court’s decision to decline an exercise of supplemental
jurisdiction and remand to state court. Holding that it does
not, we also must decide whether a writ of mandamus is the
only means of obtaining review of a 28 U.S.C. § 1367(c)
remand, or whether an appeal under 28 U.S.C. § 1291 will
suffice.
8974 CALIFORNIA DEP’T OF WATER v. POWEREX
I. General Facts and Procedural Background
This is one of many cases arising out of the 2000-2001 Cal-
ifornia energy crisis.1 By February 2001, the state’s
deregulated energy markets had experienced “a rapid, unfore-
seen shortage of electric power and energy available in the
state and rapid and substantial increases in wholesale energy
costs and retail energy rates.” Cal. Water Code § 80000(a).
This caused rolling blackouts throughout California and “con-
stitute[d] an immediate peril to the health, safety, life, and
property” of Californians. Id.In response, the California Legislature turned to the state’s
Department of Water Resources (“DWR”), giving it a man-
date: “do those things necessary and authorized” under the
Water Code “to make power available directly or indirectly to
electric consumers in California.” Cal. Water Code § 80012.
To fulfill this responsibility, DWR was empowered to con-
tract with any person or entity for the purchase of power. Id.§ 80100. According to DWR’s Amended Complaint, between
January 17, 2001,2 and December 31, 2001, DWR and
Powerex transacted thousands of “out of market” purchases
and “numerous exchange transactions.”3
1
See, e.g., Port of Seattle v. FERC, 499 F.3d 1016 (9th Cir. 2007); Pub.
Utils. Comm’n of Cal. v. FERC, 474 F.3d 587 (9th Cir. 2006); Pub. Util.
Dist. No. 1 of Snohomish County v. FERC, 471 F.3d 1053 (9th Cir. 2006);
Pac. Gas & Elec. Co. v. FERC, 464 F.3d 861 (9th Cir. 2006); Bonneville
Power Admin. v. FERC, 422 F.3d 908 (9th Cir. 2005); California ex rel.
Lockyer v. FERC, 383 F.3d 1006 (9th Cir. 2004).
2
From mid-January 2001 until February 1, 2001, DWR was authorized
to purchase power under statutorily-granted emergency authority. Cal.
Water Code § 200 (2001) (repealed 2002).
3
According to DWR’s Amended Complaint, an “exchange transaction”
is one in which “an out-of-market supplier agrees to deliver a requested
amount of electricity to a counter-party in return for the counter-party’s
promise to provide an equal or greater volume of power in the future.”
Allegedly, Powerex frequently insisted on receiving 2.5 megawatts of
power for every megawatt it provided.
CALIFORNIA DEP’T OF WATER v. POWEREX 8975
In February 2005, DWR filed suit against Powerex in Cali-
fornia state court, alleging Powerex had “manipulated the
California energy markets through Enron-style gaming and
trading strategies.” More specifically,
Powerex was aware of and participated in the market
manipulation and market gaming that resulted in the
California Energy Crisis. The manipulation and
gaming activity tended to tighten the supply of elec-
tricity in the California energy markets. The tighten-
ing of supply was part of a larger plan that allowed
marketers, including Powerex, to give the appear-
ance of a shortage of supply in the markets . . . .
Alleging various violations of state contract law, the com-
plaint sought a declaration that all these transactions were
void, rescission of all transactions, restoration of all money
and benefits that unjustly enriched Powerex, and compensa-
tory damages.
In response, Powerex removed the case to federal court, cit-
ing the Federal Power Act, 16 U.S.C. § 825p, and FSIA, 28
U.S.C. § 1441(d). DWR moved to remand the case back to
state court, and Powerex moved to dismiss. The district court
denied the motion to remand, finding that DWR’s complaint
was artfully plead and that it presented a substantial federal
question. Turning to the merits, the court then dismissed the
case because the “Plaintiff’s claims require the determination
of the fair price of the electricity that was delivered under the
contracts,” which placed the action squarely within the Fed-
eral Energy Regulatory Commission’s exclusive jurisdiction.
DWR responded with an amended complaint requesting
only declaratory relief stating that the transactions between
the parties were void. No longer seeking rescission, restitu-
8976 CALIFORNIA DEP’T OF WATER v. POWEREX
tion, or damages, DWR moved to remand anew under 28
U.S.C. § 1447(c)4 and 28 U.S.C. § 1367(c).
This time, the district court found that the Amended Com-
plaint presented only state law contract issues. The district
court also found Powerex’s FSIA argument squarely fore-
closed by our decision in California v. NRG Energy Inc., 391
F.3d 1011 (9th Cir. 2004), in which we determined Powerex
was not a “foreign state.”
Because the Amended Complaint did not present a federal
question, the district court had the discretion to decline sup-
plemental jurisdiction. See 28 U.S.C. § 1367(c)(3). Recogniz-
ing that all the claims over which it had original jurisdiction
had been dismissed, the court remanded the case to the Cali-
fornia court because the Eleventh Amendment and the “values
of economy, convenience, fairness, and comity” all weighed
in favor of dismissing the state law claims as well. See Acri
v. Varian Assocs., Inc., 114 F.3d 999, 1001 (9th Cir. 1997)
(en banc) (citing United Mine Workers of Am. v. Gibbs, 383
U.S. 715, 726-27 (1966)).
On appeal, Powerex argues that the district court erred by
finding that the corporation is not a “foreign state,” and that
DWR’s Amended Complaint in fact presents claims that
“arise under” the Federal Power Act.
II. Jurisdiction
We confront two jurisdictional issues. As a threshold mat-
ter, we must address DWR’s contention that 28 U.S.C.
§ 1447(d) bars us from exercising jurisdiction. If that hurdle
4
In relevant part, § 1447(c) states: “A motion to remand the case on the
basis of any defect other than lack of subject matter jurisdiction must be
made within 30 days after the filing of the notice of removal under section
1446(a). If at any time before final judgment it appears that the district
court lacks subject matter jurisdiction, the case shall be remanded.”
CALIFORNIA DEP’T OF WATER v. POWEREX 8977
can be leapt, we then must decide whether Powerex can con-
test the district court’s remand order by way of an appeal
under 28 U.S.C. § 1291, or whether a writ of mandamus is the
exclusive remedy.
A. 28 U.S.C. § 1447(d)
At argument, DWR asserted that 28 U.S.C. § 1447(d) pre-
cludes this court from reviewing the remand order. That stat-
ute provides:
An order remanding a case to the State court from
which it was removed is not reviewable on appeal or
otherwise, except that an order remanding a case to
the State court from which it was removed pursuant
to section 1443 of this title [pertaining to certain
civil rights cases] shall be reviewable by appeal or
otherwise.
[1] Although this language appears comprehensive, the
Supreme Court has explained that the provision does not pro-
hibit review of all types of remands. Rather, Ҥ 1447(d) must
be read in pari materia with § 1447(c), so that only remands
based on grounds specified in § 1447(c) are immune from
review under § 1447(d).” Things Remembered, Inc. v.
Petrarca, 516 U.S. 124, 127 (1995) (citing Thermtron Prods.,
Inc. v. Hermansdorfer, 423 U.S. 336, 345-46 (1976)). Thus,
only remands based on defects in removal procedure or on
lack of subject-matter jurisdiction escape our review. Id. at
127-28.
[2] Here the district court clearly identified 28 U.S.C.
§ 1367(c) as the source of its authority to remand, and explic-
itly stated that it was declining to exercise supplemental juris-
diction. In this circuit, “a district court’s order remanding
pendent state claims on discretionary grounds [is] not pursu-
ant to § 1447(c),” and thus a “district court’s discretionary
remand of pendent state claims is a reviewable order.” Lee v.
8978 CALIFORNIA DEP’T OF WATER v. POWEREX
City of Beaumont, 12 F.3d 933, 935 (9th Cir. 1993) (internal
quotation marks omitted); see also Niehaus v. Greyhound
Lines, Inc., 173 F.3d 1207, 1210-11 (9th Cir. 1999); Executive
Software N. Am., Inc. v. U.S. Dist. Court, 24 F.3d 1545, 1549
(9th Cir. 1994).
As DWR notes, the Federal Circuit has come to the oppo-
site conclusion, holding that “a remand based on declining
supplemental jurisdiction must be considered within the class
of remands described in § 1447(c) and thus barred from
appellate review by § 1447(d).” HIF BIO, Inc. v. Yung Shin
Pharm. Indus. Co., 508 F.3d 659, 667 (Fed. Cir. 2007). That
decision, which split with several circuits, id. at 665, found
support in the Supreme Court’s recent statement that “[i]t is
far from clear . . . that when discretionary supplemental juris-
diction is declined the remand is not based on lack of subject-
matter jurisdiction for purposes of § 1447(c) and § 1447(d).”
Powerex Corp. v. Reliant Energy Servs., Inc., 127 S. Ct. 2411,
2418-19 (2007).
[3] The Federal Circuit’s disagreement does not give a
three-judge panel in this circuit license to overrule the bind-
ing, authoritative decision of a prior three-judge panel. See
Miller v. Gammie, 335 F.3d 889, 899 (9th Cir. 2003) (en
banc). Similarly, that the question remains unanswered by the
Supreme Court does not relax our obligation to abide by stare
decisis. In light of clear precedent, then, we hold that review
of a district court’s decision to decline an exercise of supple-
mental jurisdiction is not barred by § 1447(d).
B. Appeal or Mandamus
[4] Having decided that we are not statutorily precluded
from examining the district court’s remand order, we now
consider whether a discretionary decision to decline supple-
mental jurisdiction under 28 U.S.C. § 1367(c) must be chal-
lenged in a petition for writ of mandamus (“mandamus
petition”), or pursuant to an appeal under 28 U.S.C. § 1291.
CALIFORNIA DEP’T OF WATER v. POWEREX 8979
Although our precedents have held that a mandamus petition
is the exclusive procedure, we believe that intervening
Supreme Court authority is clearly irreconcilable with such a
rule, and we therefore take the unusual step of departing from
our earlier decisions.
In both its Notice of Appeal and its brief, Powerex identi-
fies 28 U.S.C. § 1291 as the basis for our jurisdiction.
Although neither party addresses the mandamus issue, we
have an obligation to satisfy ourselves that jurisdiction prop-
erly lies. Snodgrass v. Provident Life & Accident Ins. Co., 147
F.3d 1163, 1165 (9th Cir. 1998) (per curiam).
The distinction between mandamus and appellate review is
greater than a simple difference in filing requirements. It is
considerably more difficult to obtain a writ of mandamus, for
a petitioner will not succeed simply by identifying a lower
court’s legal error. See Bauman v. U.S. Dist. Court, 557 F.2d
650, 654-55 (9th Cir. 1977) (five-factor balancing test to
guide appellate court’s mandamus analysis, including whether
“district court’s order is clearly erroneous as a matter of
law”); see also In re Morgan, 506 F.3d 705, 712-13 (9th Cir.
2007) (applying Bauman test).
For example, if we were to hold that the district court erro-
neously concluded that Powerex was not a “foreign state,” we
would reverse the court on an appeal, but it does not necessar-
ily follow that we would issue a writ of mandamus if we
thought the district court’s decision was not clearly erroneous,
see In re Morgan, 506 F.3d at 713, or an “important issue of
first impression,” San Jose Mercury News, Inc. v. U.S. Dist.
Court, 187 F.3d 1096, 1100 (9th Cir. 1999).
Generally, when a district court remands to state court after
exercising its discretion to decline supplemental state law
claims, an aggrieved party must seek mandamus relief.5 This
5
Our discussion oversimplifies our jurisprudence. In reality, this circuit
developed a test that distinguishes between remands based solely on “ju-
8980 CALIFORNIA DEP’T OF WATER v. POWEREX
rule was first announced in Survival Systems Division of the
Whittaker Corp. v. U.S. District Court, 825 F.3d 1416, 1418
(9th Cir. 1987), and has been reaffirmed in subsequent cases,
see, e.g., Executive Software N. Am., Inc. v. U.S. Dist. Ct., 24
F.3d 1545, 1549-50 (9th Cir. 1994); Lee, 12 F.3d at 935-36.
Under our precedents, Powerex’s § 1291 appeal would fail,
and we would have to decide whether to treat the appeal as
a mandamus petition. See Lee, 12 F.3d at 936.
[5] We believe, however, that an intervening Supreme
Court decision, Quackenbush v. Allstate Insurance Co., 517
U.S. 706 (1996), is clearly irreconcilable with our earlier
cases. A review of the pre-Quackenbush case law will illumi-
nate our thinking.
Our rule proscribing § 1291 review of remand orders that
follow declines of supplemental jurisdiction traces its roots
back to the Supreme Court’s decision in Thermtron Products,
Inc. v. Hermansdorfer, 423 U.S. 336 (1976). The Thermtron
Court was confronted with a remand to state court of a
properly-removed case. Similar to the analysis we present
today, the Court conducted a two-step jurisdictional inquiry.
First, it announced the rule, discussed above, that 28 U.S.C.
§ 1447(c) and § 1447(d) must be read in pari materia, and the
Court found that the remand at issue was not based on the
grounds listed in § 1447(c) and thus not immune from review.
Thermtron, 423 U.S. at 351-52.
risdictional decisions,” which could only be reviewed by way of a manda-
mus petition, and remands that followed “substantive decisions,” which
could be appealed. See, e.g., Lee, 12 F.3d at 935-36 (explaining that an
exception to the general mandamus requirement “occurs where the district
court bases the remand order on a substantive decision”); Price, 829 F.2d
at 874 (holding that remand order was only reviewable by way of a man-
damus petition because “the remand order did not result from a determina-
tion on the merits of a non-jurisdictional issue”). For the purpose of this
appeal and our holding, however, the simplified discussion suffices.
CALIFORNIA DEP’T OF WATER v. POWEREX 8981
Second, the Themtron court determined that the defendant
had properly chosen to petition for a writ of mandamus
instead of pursuing an appeal. Id. at 352. The Court explained
that “because an order remanding a removed action does not
represent a final judgment reviewable by appeal, [t]he remedy
in such a case is by mandamus to compel action.” Id. at 352-
53 (internal quotation marks omitted; alteration in original).
In this part of the jurisdictional analysis, Thermtron appeared
to announce a bright-line rule: remand orders that fall outside
the scope of § 1447(d) are reviewable only by a mandamus peti-
tion.6
The situation became more complicated, however, with the
Supreme Court’s subsequent decision in Moses H. Cone
Memorial Hospital v. Mercury Construction Corp., 460 U.S.
1 (1983). Moses H. Cone dealt not with a remand order, but
with a district court’s stay of a case pending the outcome of
a concurrent state court suit. 460 U.S. at 4. Because the state
and federal actions presented an identical issue, the district
court concluded that the Supreme Court’s decision in Colo-
rado River Water Conservation District v. United States, 424
U.S. 800 (1976), counseled deference to the state proceeding.
Moses H. Cone, 460 U.S. at 4, 7.
The stay was appealed to the Court of Appeals under 28
U.S.C. § 1291. That statute provides, in relevant part, that
“[t]he courts of appeals . . . shall have jurisdiction of appeals
from all final decisions of the district courts of the United
States.” One of the questions before the Supreme Court was
whether a Colorado River based stay was a “final decision”
for purposes of § 1291. Moses H. Cone, 460 U.S. at 8-9.
6
By holding that a mandamus petition was the proper means for chal-
lenging a remand order, Thermtron effectively held that there is no juris-
diction under 28 U.S.C. § 1291. As the Supreme Court explained in a later
decision, “a court of appeals has no occasion to engage in extraordinary
review by mandamus ‘in aid of [its] jurisdictio[n],’ 28 U.S.C. § 1651,
when it can exercise the same review by a contemporaneous ordinary
appeal.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S.
1, 8 n.6 (1983) (alterations in original).
8982 CALIFORNIA DEP’T OF WATER v. POWEREX
Citing two separate rationales, Moses H. Cone found the
stay “final” within the meaning of § 1291. As explained in
Idlewild Bon Voyage Liquor Corp. v. Epstein, a district court
order that places the parties “effectively out of court” is final
and appealable. 370 U.S. 713, 715 n.2 (1962) (per curiam)
(internal quotation marks omitted). Moses H. Cone made clear
that “ ‘[e]ffectively out of court’ means effectively out of fed-
eral court.” 460 U.S. at 9 n.8. Because the Colorado River
stay anticipated a possible state court resolution of the issue
that might have res judicata effect in federal court, the order
“amount[ed] to a dismissal of the suit” and the Court of
Appeals had jurisdiction under § 1291. Id. at 10. Summing up
the limited nature of the Idlewild doctrine, Moses H. Cone
explained that a stay order is final only “when the sole pur-
pose and effect of the stay are precisely to surrender jurisdic-
tion of a federal suit to a state court.” Id. at 11 n.11.7
As an alternative to its reliance on Idlewild, Moses H. Cone
found that the stay was final under the collateral order doc-
trine of Cohen v. Beneficial Industrial Loan Corp., 337 U.S.
541 (1949). That doctrine recognizes that a “small class” of
decisions is appealable under § 1291, even though they do not
satisfy the ordinary definition of finality. Id. at 546. For a col-
lateral order to be appealable, it must: (1) “ ‘conclusively
determine the disputed question,’ ” (2) “ ‘resolve an important
issue completely separate from the merits of the action,’ ” and
(3) “ ‘be effectively unreviewable on appeal from a final judg-
ment.’ ” Moses H. Cone, 460 U.S. at 11-12 (quoting Coopers
& Lybrand v. Livesay, 437 U.S. 463, 468 (1978)).
The stay order at issue in Moses H. Cone undoubtedly sat-
isfied the second and third criteria, but one of the parties
argued that it did not “conclusively determine the disputed
question.” The Court rejected that position because “there
[was] no basis to suppose that the District Judge contemplated
any reconsideration of his decision to defer to the parallel
state-court suit.” Moses H. Cone, 460 U.S. at 12-13. In con-
trast to orders “as to which some revision might reasonably be
CALIFORNIA DEP’T OF WATER v. POWEREX 8983
expected in the ordinary course of litigation,” the first require-
ment of the collateral order doctrine is satisfied by orders
“made with the expectation that they will be the final word on
the subject addressed.” Id. at 12 n.14.
Although a remand to state court also seems to satisfy both
the Idlewild and Cohen tests for finality, Moses H. Cone did
not purport to overrule Thermtron. As a result, when, in Sur-
vival Systems, we first confronted a remand of a supplemental
state law claim, we held that “[t]he only avenue of review
available is by mandamus under the authority of Thermtron.”
825 F.2d at 1418. Notwithstanding the latent conflict between
Survival Systems and Moses H. Cone, our cases continually
held that remands preceded by discretionary declines of juris-
diction over state law claims could be reviewed only by way
of a mandamus petition. See Executive Software N. Am., 24
F.3d at 1550; Lee, 12 F.2d at 936; Price v. PSA, Inc., 829 F.2d
871, 874 (9th Cir. 1987); Paige v. Henry J. Kaiser Co., 826
F.2d 857, 865-66 (9th Cir. 1987). But see Scott v. Machinists
Auto. Trades Dist. Lodge No. 190 of N. Cal., 827 F.2d 589,
592 (9th Cir. 1987) (per curiam) (reviewing in an ordinary
appeal a remand that followed a discretionary decline of sup-
plemental jurisdiction).
Ordinarily, we would be bound by Survival Systems, and
the task of correcting any perceived errors would fall to an en
banc panel of this court. An exception to this rule occurs,
however, when an intervening Supreme Court decision “un-
dercut[s] the theory or reasoning underlying the prior circuit
precedent in such a way that the cases are clearly irreconcil-
able.” Miller, 335 F.3d at 900. This is true even when the
intervening case dealt with an issue that is not identical to the
one presented in the circuit precedent. Id.[6] The reasoning in Quackenbush convinces us that Sur-
vival Systems and its progeny are no longer good law. In
Quackenbush, the Supreme Court considered whether an
abstention-based remand is appealable under § 1291. 517 U.S.
8984 CALIFORNIA DEP’T OF WATER v. POWEREX
at 709. Comparing such a remand to the stay at issue in Moses
H. Cone, the Court had little difficulty finding it appealable.
More so than the stay reviewed in Moses H. Cone, the remand
placed the litigants “effectively out of court”—the Idlewild
rationale. Id. at 714 (“When a district court remands a case to
a state court, the district court disassociates itself from the
case entirely, retaining nothing of the matter on the federal
court’s docket.”). The abstention-based remand also satisfied
the Cohen test for finality; it conclusively determined an issue
separate from the merits, it was sufficiently important to war-
rant an immediate appeal, and it would not be subsumed in
any other appealable order. Id.Because the Court was reviewing a remand, the conflict
between Moses H. Cone and Thermtron was manifest. Rather
than attempt to reconcile the two cases, the Court held that
“[t]o the extent Thermtron would require us to ignore the
implications of our later holding in Moses H. Cone, . . . we
disavow it.” Quackenbush, 517 U.S. at 715.
This overruling of Thermtron effectively destroys the foun-
dation for Survival Systems. When Survival Systems ruled that
a mandamus petition was required for review of a discretion-
ary decision to remand a pendent state law claim, it cited the
“authority of Thermtron.” 825 F.2d at 1418; accord Price,
829 F.2d at 874 (rejecting the analysis used in Moses H. Cone
because, “under Thermtron, the order is reviewable on a peti-
tion for a writ of mandamus”). In Lee v. City of Beaumont, we
described the Moses H. Cone analysis as “an exception” to the
Thermtron rule. 12 F.3d at 935. It is now clear, though, that
Moses H. Cone did not supplement Thermtron; it supplanted
it.
Although Survival Systems has not yet been explicitly over-
ruled, we have already recognized that “[t]he Supreme
Court’s decision in Quackenbush refined and expanded our
test for determining whether an exceptional remand order is
reviewable on appeal.” Snodgrass, 147 F.3d at 1165. In a case
CALIFORNIA DEP’T OF WATER v. POWEREX 8985
of first impression, Snodgrass held that a remand under the
Declaratory Judgment Act, 28 U.S.C. § 2201, is reviewable
under § 1291. In doing so, it rejected Survival Systems’ analy-
sis in favor of Moses H. Cone’s Idlewild and Cohen tests.7
[7] We now recognize that Quackenbush is clearly irrecon-
cilable with Survival Systems and its progeny. Cf. In re
Bethesda Mem. Hosp., Inc., 123 F.3d 1407, 1408 (11th Cir.
1997) (“Quackebush . . . overrules this circuit’s cases holding
that mandamus is the proper vehicle to review remand
orders.”); Pa. Nurses Ass’n v. Pa. State Educ. Ass’n, 90 F.3d
797, 801 (3rd Cir. 1996) (stating that Quackenbush supports
view that remands under § 1367(c) are reviewable under
§ 1291); Gaming Corp. of Am. v. Dorsey & Whitney, 88 F.3d
536, 542 (8th Cir. 1996) (holding that district court’s remand
7
We have found only two published decisions in this circuit that have
applied the jurisdictional/substantive test, see supra note 5, since Quack-
enbush was decided. Niehaus v. Greyhound Lines, Inc. cited Lee and
repeated that “when a remand order is based on a substantive determina-
tion of the merits, the order is reviewable on appeal as a final collateral
order.” 173 F.3d 1207, 1211 (9th Cir. 1999). But Niehaus had no occasion
to revisit Survival Systems and Lee. In a single paragraph of jurisdictional
analysis, Niehaus found that the remand order before it was based on a
substantive decision and was therefore reviewable under § 1291. Thus, the
outcome of the § 1291 analysis would have been the same whether or not
the jurisdictional/substantive test remained in force.
In Lyons v. Alaska Teamsters Employer Service Corp., we discussed at
some length the jurisdictional/substantive test. 188 F.3d 1170, 1172-73
(9th Cir. 1999). Lyons, though, considered the distinction as part of the
§ 1447(d) analysis. The court never reached the mandamus issue because
it concluded that the district court’s “substantive preemption analysis was
part of the jurisdictional determination,” and the court of appeals, there-
fore, “lack[ed] jurisdiction to review the remand order pursuant to 28
U.S.C. § 1447(d).” Id. at 1174.
We have not found any case decided after Quackenbush in which this
court confronted a remand to state court and rejected a § 1291 appeal in
favor of a mandamus petition under the authority of Survival Systems or
related cases. Thus, we consider Quackenbush to be “intervening” within
the meaning of our stare decisis jurisprudence.
8986 CALIFORNIA DEP’T OF WATER v. POWEREX
under § 1367(c) was reviewable under § 1291 because
remand’s effect was “identical to that of the order reviewed
in Quackenbush,” notwithstanding earlier circuit case law that
indicated mandamus petition was the proper procedure). We
conclude that Moses H. Cone should guide our review of
remands to state court, and, on the authority of Quackenbush,
we overrule circuit precedents that instruct otherwise.
[8] Applying Moses H. Cone to this case, we find that we
have jurisdiction under § 1291 to review the remand order.
The Idlewild “effectively out of court” test is satisfied because
“ ‘the district court disassociate[d] itself from the case
entirely, retaining nothing of the matter on the federal court’s
docket.’ ” Snodgrass, 147 F.3d at 1166 (quoting Quacken-
bush, 517 U.S. at 714).
[9] The remand also qualifies as an appealable collateral
order under Cohen. By holding that the factors identified in
United Mine Workers of America v. Gibbs, 383 U.S. 715, 726
(1966), cut against an exercise of supplemental jurisdiction,
the district court “conclusively determined a disputed ques-
tion completely separate from the merits.” Snodgrass, 147
F.3d at 1166. That decision “could not be reviewed on appeal
from the final judgment ultimately entered by the state court.”
Id.[10] Additionally, the Supreme Court has recently
explained that the collateral order doctrine can be invoked
only to advance a “weighty public objective” that is sufficient
to overcome “the substantial finality interests § 1291 is meant
to further.” Will v. Hallock, 546 U.S. 345, 350, 353 (2006).
For example, a district court’s decision denying a state’s
claim of Eleventh Amendment immunity is an appealable col-
lateral order because of the “need to ensure vindication of a
State’s dignitary interests.” Id. at 352 (citing P.R. Aqueduct &
Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 146
(1993)). The public interest in promoting foreign relations is
substantial enough to give this court collateral-order jurisdic-
CALIFORNIA DEP’T OF WATER v. POWEREX 8987
tion over a district court’s decision denying a party’s claim for
FSIA’s procedural protections. See, e.g., Gupta v. Thai Air-
ways Int’l, Ltd., 487 F.3d 759, 763-64 & n.6 (9th Cir. 2007)
(noting that orders denying foreign sovereign immunity are
collateral orders and that “the text of the FSIA and the legisla-
tive history of the Act ‘support[ ] a prompt appellate determi-
nation of sovereign immunity’ ” (quoting Compania
Mexicana de Aviacion, S.A. v. U.S. Dist. Ct., 859 F.2d 1354,
1358 (9th Cir. 1988) (per curiam))).
We proceed to the merits of the dispute under § 1291 stan-
dards.
III. FSIA
[11] Congress has granted procedural and substantive pro-
tections to foreign sovereigns and entities with certain rela-
tionships to them. Procedurally, “foreign state[s],” as defined
by 28 U.S.C. § 1603(a), are empowered to remove civil
actions brought against them to federal court for a bench trial.
28 U.S.C. § 1441(d).8 Substantively, “a foreign state shall be
immune from the jurisdiction of the courts of the United
States and of the States,” unless it falls within certain excep-
tions. 28 U.S.C. § 1604.
[12] Because this action concerns contracts between DWR
and Powerex, Powerex concedes that this case falls within the
“commercial activity” exception to substantive immunity. See
28 U.S.C. § 1605(a)(2). Powerex maintains, though, that it is
entitled to a bench trial in federal court because it falls within
the definition of “foreign state” in § 1603(a) and (b).
8
In relevant part, § 1441(d) states,
Any civil action brought in a State court against a foreign state
as defined in [28 U.S.C. § 1603(a)] may be removed by the for-
eign state to the district court of the United States for the district
and division embracing the place where such action is pending.
Upon removal the action shall be tried by the court without jury.
8988 CALIFORNIA DEP’T OF WATER v. POWEREX
[13] Section 1603(a) includes within the definition of “for-
eign state” a “political subdivision of a foreign state or an
agency or instrumentality of a foreign state as defined in
[§ 1603(b)].” Section 1603(b) provides that
An “agency or instrumentality of a foreign state”
means any entity—
(1) which is a separate legal person, corpo-
rate or otherwise, and
(2) which is an organ of a foreign state or
political subdivision thereof, or a majority
of whose shares or other ownership interest
is owned by a foreign state or political sub-
division thereof, and
(3) which is neither a citizen of a State of
the United States as defined in section
1332(c) and (e) of this title, nor created
under the laws of any third country.
[14] There is no dispute that Powerex satisfies the
§ 1603(b)(1) and (3) definitional requirements of “agency or
instrumentality of a foreign state.” Rather, this case turns on
whether Powerex is an “organ” of either Canada or a Cana-
dian political subdivision.9
As noted at the outset, in California v. NRG Energy Inc.,
we held that Powerex was not an organ of British Columbia
(sometimes, “the Province”). 391 F.3d 1011, 1025-26 (9th
Cir. 2004), vacated sub nom. Powerex Corp. v. Reliant
9
Powerex contends that it is an organ of British Columbia and that a
majority of its shares are owned by British Columbia. Because we hold
that Powerex passed the organ test, we need not reach its majority-of-
shares argument. See EIE Guam Corp. v. Long Term Credit Bank of
Japan, Ltd., 322 F.3d 635, 639 (9th Cir. 2003) (noting that “organ” and
“majority of shares” prongs are disjunctive).
CALIFORNIA DEP’T OF WATER v. POWEREX 8989
Energy Servs., Inc., 127 S. Ct. 2411 (2007). Because that
decision was vacated on jurisdictional grounds by the
Supreme Court, however, we are not bound by it, and we
accord that opinion deference only to the extent we find it
persuasive. See Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, 494
F.3d 788, 804 n.15 (9th Cir. 2007). We can also consider the
persuasive force of Justice Breyer’s dissent in Powerex.
Whereas the Powerex majority never reached the FSIA ques-
tion, finding that it lacked the jurisdiction to do so, Justice
Breyer would have held that the Court had jurisdiction and
that Powerex is an organ of the Province. See Powerex, 127
S. Ct. at 2424-26 (Breyer, J., joined by Stevens, J., dissent-
ing).
[15] An entity is an organ of a foreign state (or political
subdivision thereof) if it “engages in a public activity on
behalf of the foreign government.” Patrickson v. Dole Food
Co., 251 F.3d 795, 807 (9th Cir. 2001), aff’d on other
grounds, 538 U.S. 468 (2003). To determine whether an
entity satisfies this definitional test,
“courts examine the circumstances surrounding the
entity’s creation, the purpose of its activities, its
independence from the government, the level of gov-
ernment financial support, its employment policies,
and its obligations and privileges under state law.”
An entity may be an organ of a foreign state even if
it has some autonomy from the foreign government.
EIE Guam Corp. v. Long Term Credit Bank of Japan, Ltd.,
322 F.3d 635, 640 (9th Cir. 2003) (citations omitted) (quoting
Patrickson, 251 F.3d at 807). Consistent with Congress’s
intent, this court defines “organ” “broadly,” mindful that
“ ‘agency or instrumentality of a foreign state’ could
assume a variety of forms, including a state trading
corporation, a mining enterprise, a transport organi-
zation such as a shipping line or airline, a steel com-
8990 CALIFORNIA DEP’T OF WATER v. POWEREX
pany, a central bank, an export association, a
government procurement agency or a department or
ministry which acts and is suable in its own name.”
Gates v. Victor Fine Foods, 54 F.3d 1457, 1460 (9th Cir.
1995) (quoting H.R. Rep. No. 94-1487 (1976), as reprinted in
1976 U.S.C.C.A.N. 6604, 6614).
[16] Powerex’s relationship with British Columbia cannot
be fully understood without first examining Powerex’s parent
company, BC Hydro. In 1964, BC Hydro was created by the
British Columbia Hydro and Power Authority Act in order to
hold the Province’s assets and to promote major hydroelectric
development. Its responsibilities included, for example, build-
ing dams and power-related facilities along the Peace River
system.
Early in its existence, BC Hydro assisted the Province and
Canada in negotiating and implementing a treaty pertaining to
power generation and flood control along the Columbia River.
See Treaty Between the United States of America and Canada
Relating to Cooperative Development of the Water Resources
of the Columbia River Basin, U.S.-Can., Jan. 22-Sep. 16,
1964, 15 U.S.T. 1555 [hereinafter Columbia River Treaty].
The Columbia River Treaty contained a provision in which
both Canada and the United States agreed to “designate enti-
ties . . . empowered and charged with the duty to formulate
and carry out the operating arrangements necessary to imple-
ment the Treaty.” Id., art. XIV, § 1, 15 U.S.T. at 1566. BC
Hydro was duly designated as such, and was tasked with,
among other things, constructing reservoir facilities on the
Columbia River. During the 1980s, the corporation actively
sold power to United States entities at the international bor-
der.
BC Hydro is governed by British Columbia’s Hydro and
Power Authority Act. R.S.B.C., ch. 212, § 1(1) (1996). By
that legislation, the corporation is “for all its purposes an
CALIFORNIA DEP’T OF WATER v. POWEREX 8991
agent of the government and its powers may be exercised only
as an agent of the government.” Id. § 3(1). BC Hydro direc-
tors are appointed by, and hold office during the pleasure of,
the Lieutenant Governor in Council,10 who also determines
their salaries and other remuneration. Id. § 4(1), (3). The pow-
ers vested in the corporation by the legislation are “[s]ubject
to the approval of the Lieutenant Governor in Council.” Id.
§ 12(1).
In NRG Energy, we concluded that “BC Hydro was an
immune foreign sovereign as defined by the Foreign Sover-
eign Immunities Act,” and that the decisions it made relating
to the energy crisis in 2000-2001 were “sovereign functions,
not commercial ones.” 391 F.3d at 1024. We explained that
“BC Hydro is responsible for decisions relating to, for exam-
ple, flood control, management of fisheries, and construction
of dams. These are governmental responsibilities, unlike any
responsibilities of a private, commercial actor.” Id.
10
Who is the Lieutenant Governor in Council? According to the website
of British Columbia’s current Lieutenant Governor,
“Lieutenant Governor” is The Queen’s representative and CEO
of the province. . . . The Queen is the Head of the Common-
wealth and the Canadian Head of State, thus The Queen of Can-
ada. The Lieutenant Governor is appointed by the Governor
General, on the advice of the Prime Minister of Canada, for a
period of not less than five years.
....
“Lieutenant Governor in Council” appears in many government
documents, such as acts of legislation. Legally, it refers to the
Lieutenant Governor acting on and with the advice of the Execu-
tive Council or Cabinet. When the Cabinet makes a decision and
it has been approved by the Lieutenant Governor, it is said to
have been made by the Lieutenant Governor in Council.
See Office of the Lieutenant Governor, Frequently Asked Questions: What
is the difference between “Lieutenant Governor” and “Lieutenant Gover-
nor in Council”?, http://www.ltgov.bc.ca/faq/default.htm#difference (last
visited June 20, 2008).
8992 CALIFORNIA DEP’T OF WATER v. POWEREX
Having familiarized ourselves with BC Hydro, we can now
turn our focus to Powerex.
In November 1988, British Columbia’s Minister of Energy,
Mines, and Petroleum Resources notified BC Hydro’s CEO
and Chairman that the Provincial Cabinet desired a “single
window agency to be responsible to market the export of
power outside the province and that this entity should be a
wholly owned subsidiary of BC Hydro.” Powerex (under a
different name) was incorporated one month later.
BC Hydro wholly owns Powerex and appoints Powerex’s
board of directors. That board is made up of inside directors
who sit on both BC Hydro’s and Powerex’s boards, and out-
side directors who are appointed by the inside directors. Any
outside directors—i.e., non-BC Hydro directors—on
Powerex’s board are subject to the approval of the office of
the British Columbia Premier.
[17] The “circumstances surrounding [Powerex’s] creation”
weigh in favor of finding Powerex an organ of British Colum-
bia.11 It owes its very existence to the Province, which
instructed BC Hydro to establish a subsidiary that would
assist it with its sovereign functions. BC Hydro did not con-
tract with an outside, private company; pursuant to the Prov-
ince minister’s instructions, it created an “agency” that
qualifies as a “government body” under the Province’s fiscal
control statute. See Powerex, 127 S. Ct. at 2425 (Breyer, J.,
dissenting) (citing Financial Administration Act, R.S.B.C. ch.
11
One reason we may reach a different outcome than the NRG Energy
court is because we believe these circumstances are relevant, whereas
NRG Energy appears to have given them no consideration. See NRG
Energy, 391 F.3d at 1025-26. We choose to follow other cases that have
recognized the significance of the circumstances surrounding an entity’s
creation, and that have relied upon them in finding that entities qualified
as organs. See, e.g., EIE Guam, 322 F.3d at 640, 642; Corporacion Mex-
icana de Servicios Maritimos, S.A. de C.V. v. M/T Respect, 89 F.3d 650,
653-55 (9th Cir. 1996).
CALIFORNIA DEP’T OF WATER v. POWEREX 8993
138, § 1 (1996)). But cf. Patrickson, 251 F.3d at 808 (reject-
ing corporations’ claim of organ status under FSIA, even
though foreign state’s law classified corporations as “govern-
ment companies”). DWR points out that Powerex was not leg-
islatively created. Creation by formal legislation, however, is
not a precondition for recognition as an organ of a foreign
state under FSIA. See EOTT Energy Operating Ltd. P’ship v.
Winterthur Swiss Ins. Co., 257 F.3d 992, 995, 998 (9th Cir.
2001) (remanding to district court for further factfinding on
organ status of entity, even though entity was a private insur-
ance company purchased by foreign state); Gates, 54 F.3d at
1460 (holding that an association of private hog producers
was an organ, where such association became an official
industry marketing board pursuant to Alberta law after receiv-
ing approval from Alberta government).
“[T]the purpose of [Powerex’s] activities,” also reveals the
entity’s public nature. Since its incorporation in 1988,
Powerex has been marketing surplus power from the BC
Hydro system. Powerex receives power from BC Hydro at the
Province’s border, and then sells it wholesale to entities in
Canada and the United States. Although there is nothing
inherently public about this type of activity, in this case
Powerex is fulfilling the precise mission originally dictated by
the Province’s Ministry of Energy, Mines, and Petroleum
Resources.
The Province has also looked to Powerex to further other
public policies. Under the direction of the Provincial Govern-
ment, Powerex fulfills the goals of the Power for Jobs Devel-
opment Act, the purpose of which is “to help ensure that
British Columbia’s electric power resources contribute to the
creation and retention of jobs in British Columbia and to
regional economic development.” Power for Jobs Develop-
ment Act, S.B.C. ch. 51, § 2 (1997); id. § 1 (defining “author-
ity” as BC Hydro and “a subsidiary of the British Columbia
Hydro and Power Authority”). In furtherance of that Act,
Powerex has supplied power on favorable terms to expanding
8994 CALIFORNIA DEP’T OF WATER v. POWEREX
businesses in British Columbia, and negotiated on behalf of
the Province with “industrial undertakings” that have consid-
ered establishing facilities in the Province.
Powerex has also played a role in treaty formation and
implementation. See Powerex, 127 S. Ct. at 2425 (Breyer, J.,
dissenting) (citing agreements). For example, its executives
negotiated, and then the corporation assumed, some of Cana-
da’s rights and interests under the Columbia River Treaty in
the 1990s. Finally, Powerex was to serve as the vehicle for the
Province’s now-abandoned attempt to create an auction mar-
ket for electricity trading. All of these activities were in fur-
therance of policies adopted by the Province, and thus they
were activities pursued for “public” purposes. See EIE Guam,
322 F.3d at 640-42 (finding that “key” fact to entity’s organ
status was that entity’s “purpose is to carry out Japanese
national policy” (internal quotation marks omitted)); Gates,
54 F.3d at 1461 (holding that entity is organ, and explaining
that the “conclusion is especially sound here given that the
purpose of the entity in question is to advance the Province
of Alberta’s interest”).
Turning to the next factor, we respectfully disagree with the
NRG Energy court’s finding that Powerex enjoys a “high
degree of independence from the government.” 391 F.3d at
1026. On the contrary, Powerex is restrained by provincial
regulations and directives applicable to government corpora-
tions, the Province can limit Powerex’s ability to enter bank-
ing and other financial arrangements, and Powerex’s financial
operations are reviewed by the Province’s comptroller general.12
Powerex, 127 S. Ct. at 2425 (Breyer, J., dissenting) (citing
Financial Administration Act, R.S.B.C. ch. 138, §§ 4.1,
8(2)(c)(i), 75, 79.3 (1996)).
12
Br. for the Province of British Columbia as Amicus Curiae Supporting
Appellant at 24.
CALIFORNIA DEP’T OF WATER v. POWEREX 8995
Most importantly, “[t]he British Columbian Government,
through BC Hydro, has sole beneficial ownership and control
of Powerex.” Id. at 2426. As noted above, the Province sets
Powerex’s objectives and indirectly appoints and approves its
board members to ensure that Powerex carries out its public
duties. Although Powerex may enjoy a limited degree of tacti-
cal independence, its purposes and strategies—indeed, its
continued existence—are determined by the Province.
DWR argues that it is BC Hydro, and not the Province, that
directly supervises Powerex. This hardly matters. If BC
Hydro conducts sovereign functions as an agent of the Prov-
ince, there is no obvious reason why it is significant that
Powerex reports to BC Hydro, so long as Powerex’s relation-
ship to the Province otherwise satisfies FSIA’s criteria. There
is no reason to think Congress cared for the manner in which
foreign states interacted with their organs—i.e., whether the
foreign state supervises the organ directly, or through an
incorporated agent. See Gates, 54 F.3d at 1460 (holding that
entity was organ, because even though government did “not
appear to exercise day-to-day control over [the entity, the
government did] play an active supervisory role”). In any
event, this circuit has already rejected this line of argument
with respect to a second-tier subsidiary of the government of
Mexico. Corporacion Mexicana de Servicios Maritimos, 89
F.3d at 655.
Discussing some of the remaining factors in this circuit’s
test for determining “organ” status, NRG Energy observed
Powerex’s “lack of financial support from the government
and its lack of special privileges or obligations under Cana-
dian law.” 391 F.3d at 1026.
Again, we take a different view. Notably, Powerex does not
pay federal or provincial income tax. This is a special privi-
lege under Canadian law, and it likely amounts to substantial
financial support. And we have already discussed other obli-
gations under the Province’s laws—Powerex’s role in imple-
8996 CALIFORNIA DEP’T OF WATER v. POWEREX
menting treaties and assisting the Province with its job-
creation efforts, as well as its duty to comply with sundry reg-
ulations that apply to government corporations.
NRG Energy noted the district court’s finding that
“Powerex acted not in the public interest, but rather as an
independent commercial enterprise pursuing its own profits,”
and that “any profits and losses from [Powerex’s] sales of
power are solely the responsibility of PowerEx and are in no
way guaranteed or subsidized by the government.” 391 F.3d
at 1026.
According to the evidence before this court, Powerex does
not reap its profits. BC Hydro’s treasurer declared:
Powerex’s earnings are consolidated with those of
BC Hydro for purposes of establishing BC Hydro’s
rates. . . . The benefits of Powerex’s export trade
activity are passed through to the Provincial Govern-
ment through the consolidation of Powerex’s earn-
ings into the net income of BC Hydro and the
requirement that, whenever its debt equity ratio
would not drop below certain specified levels, BC
Hydro pay approximately 85% of its consolidated
net income to the BC Government annually.13
In other words, “if Powerex earns a profit, that profit must
be rebated directly or indirectly to British Columbia’s resi-
dents.” Powerex, 127 S. Ct. at 2426 (Breyer, J., dissenting).
For this reason, it is irrelevant that Powerex is profit-
driven, for, as Justice Breyer explained,
a well-run nationalized firm should make a reason-
able profit; nor should it have to borrow from the
13
Decl. of Valerie Lambert in Support of British Columbia Hydro and
Power Authority’s Motion to Dismiss ¶ 6.
CALIFORNIA DEP’T OF WATER v. POWEREX 8997
government itself. The relevant question is not
whether Powerex earns a profit but where does that
profit go? Here it does not go to private sharehold-
ers; it goes to the benefit of the public in payments
to the province and reduced electricity prices.
Powerex, 127 S. Ct. at 2426 (Breyer, J., dissenting) (citations
omitted); see also EIE Guam, 322 F.3d at 641 (holding that
entity is organ, notwithstanding “the commercial nature” of
its work, because of “Congress’ belief that an entity’s
involvement in commercial affairs does not automatically ren-
der the entity non-governmental” (internal quotation marks
omitted)).
Powerex’s employment policies do not obviously qualify it
or disqualify it as an “organ” of British Columbia. Although
Powerex employees are not civil servants and are not paid
within provincial guidelines nor included in the government
pension program, this court has repeatedly held that “[a] com-
pany may be an organ of a foreign state for purposes of the
FSIA even if its employees are not civil servants.” EIE Guam,
322 F.3d at 641 (citing Gates, 54 F.3d at 1461). Further,
Powerex employees enjoy the same standard employee bene-
fits as BC Hydro employees and participate in the same pen-
sion plan, and it seems pretty clear that BC Hydro would
qualify as an “organ.”
[18] Taking a holistic view of Powerex, one sees a corpora-
tion that is a wholly-owned, second-tier subsidiary of British
Columbia, created pursuant to an order of the Province. A
majority of its directors are indirectly selected by the Lieuten-
ant Governor in Council, and its remaining directors are sub-
ject to government approval. It is immune from taxation. By
statute, the government’s comptroller oversees its financial
operations. It implements international agreements at the
direction of the government, and it carries out domestic policy
goals. Its profits redound to the benefit of the Province’s citi-
zens. For these reasons, we agree with Justice Breyer that
8998 CALIFORNIA DEP’T OF WATER v. POWEREX
“Powerex is the kind of government entity that Congress had
in mind when it wrote the FSIA’s ‘commercial activit[y]’ pro-
visions.” Powerex, 127 S. Ct. at 2426 (Breyer, J., dissenting)
(alteration in original) (quoting 28 U.S.C. § 1602).
IV. Conclusion
[19] Because we hold that Powerex is an organ of British
Columbia, it falls within the definition of “foreign state” and
is entitled to a federal bench trial. See 28 U.S.C. §§ 1441(d),
1603. We express no opinion on the Federal Power Act issue.
REVERSED and REMANDED.