Richard Pressl v. Appalachian Power Company

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-2348
RICHARD A. PRESSL; THERESA PRESSL,
Plaintiffs - Appellants,
v.
APPALACHIAN POWER COMPANY,
Defendant - Appellee.
Appeal from the United States District Court for the Western
District of Virginia, at Roanoke. Norman K. Moon, Senior
District Judge. (7:15-cv-00343-NKM-RSB)
Argued: October 26, 2016 Decided: November 21, 2016
Before MOTZ, TRAXLER, and FLOYD, Circuit Judges.
Vacated and remanded by published opinion. Judge Motz wrote the
opinion, in which Judge Traxler and Judge Floyd joined.
ARGUED: James Frederick Watson, CASKIE & FROST, P.C., Lynchburg,
Virginia, for Appellants. Frank Kenneth Friedman, Matthew
Patrick Warren Pritts, WOODS ROGERS, PLC, Roanoke, Virginia, for
Appellee. ON BRIEF: Pavlina B. Dirom, CASKIE & FROST, P.C.,
Lynchburg, Virginia, for Appellants. C. Carter Lee, WOODS
ROGERS, PLC, Roanoke, Virginia, for Appellee.
DIANA GRIBBON MOTZ, Circuit Judge:
Landowners brought this action in state court seeking a
declaration of their rights to build a dock on property subject
to a flowage easement. After the power company, which owns the
easement, removed the case to federal court, the landowners
sought to remand the case to state court. The district court
denied the motion to remand and then dismissed the landowners’
complaint. Because the district court lacked subject matter
jurisdiction, we must vacate and remand.
I.
Richard A. Pressl and Theresa Pressl own property adjacent
to Smith Mountain Lake in Franklin County, Virginia. They own
about two and a half acres of land sitting more than 800 feet
above median sea level. The Pressls also own half an acre of
adjoining land below the 800-foot elevation contour. They
acquired the property subject to a flowage easement that the
Pressls’ predecessors in interest granted in 1960 to Appalachian
Power Company (“APCO”).
The flowage easement recites APCO’s intention to construct
a dam and operate a hydroelectric power station at Smith
Mountain. It provides that the elevation of the impounded
waters the dam creates generally would not exceed 800 feet. The
easement grants APCO the right to:
2
overflow and/or affect so much of said premises as may
be overflowed and/or affected, continuously or from
time to time in any manner whatsoever, as the result
of the construction, existence, operation and/or
maintenance of the aforesaid dam and/or power station,
the impounding of the waters of [Roanoke] river and
tributaries and/or the varying of the level of the so
impounded waters by reason of the operation of said
power station, including any pumping as part of such
operation.
The easement also gives APCO the right to:
enter upon said premises at any time and from time to
time and, at Appalachian’s discretion, to cut, burn
and/or remove therefrom any and all buildings,
structures, improvements, trees, bushes, driftwood and
other objects and debris of any and every kind or
description which are or may hereafter be located on
the portion of said premises below the contour the
elevation of which is 800 feet.
The easement provides that the landowners retain the right to
“possess and use said premises in any manner not inconsistent
with” APCO’s flowage easement, including crossing the land for
recreational purposes.
After acquiring the property, the Pressls sought to
construct a dock below the 800-foot elevation contour. APCO
advised the Pressls that, as a condition for building the dock,
they had to execute an Occupancy and Use Permit and agree to
abide by its restrictions.
Balking at this requirement, the Pressls filed suit in
Virginia state court, seeking a declaratory judgment that APCO’s
demands violated the flowage easement. The complaint asks the
court to declare “that APCO has no regulatory authority over the
3
plaintiffs’ property which lies below the 800 foot contour
beyond those rights defined by the flowage easement, the
contemporaneous expressions of the parties, and vested rights to
build and own structures to access Smith Mountain Lake for
recreational purposes.” It further requests the court to hold
that the Pressls “be allowed to use their property in any manner
not inconsistent with the maintenance of a dam and hydro-
electric power generation plant operated by APCO at Smith
Mountain.”
APCO removed the case to the United States District Court
for the Western District of Virginia. APCO asserted that the
federal district court had subject matter jurisdiction because
the Pressls’ property lies within the project boundary for
APCO’s Smith Mountain hydroelectric project, which APCO operates
under a license issued by the Federal Energy Regulatory
Commission (“FERC”).
The district court agreed. It concluded that it had
jurisdiction under both 28 U.S.C. § 1331 and 16 U.S.C. § 825p.
The court then granted APCO’s motion to dismiss, analyzing the
easement under Virginia law. The court held that the plain
language of the flowage easement gave APCO the right to remove
any dock built below the 800-foot elevation contour and that
APCO’s exercise of that right would be in furtherance of the
original purpose of the easement -- to allow APCO to operate its
4
hydroelectric project. The district court also held that the
Pressls needed to raise any complaints about APCO’s actions with
FERC prior to filing suit. The Pressls timely noted this
appeal.
Before us, the Pressls renew their argument that the
federal district court lacked subject matter jurisdiction. 1 We
review questions as to subject matter jurisdiction de novo.
Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 815-16 (4th Cir.
2004) (en banc). The party seeking to remove a case to federal
court has the burden of demonstrating federal jurisdiction. Id.
at 816. “If federal jurisdiction is doubtful, a remand is
necessary.” Mulcahey v. Columbia Organic Chems. Co., Inc., 29
F.3d 148, 151 (4th Cir. 1994). APCO argues that jurisdiction
lies under 18 U.S.C. § 1331 and 16 U.S.C. § 825p. We consider
each statute in turn.
II.
To determine whether a case “arises under” federal law for
the purposes of establishing federal question jurisdiction under
28 U.S.C. § 1331, we follow the well-pleaded complaint rule.
Jurisdiction exists “only when a federal question is presented
1
The Pressls also challenge the district court’s dismissal
of their complaint on the merits. Because we hold that the
court did not have subject matter jurisdiction, we do not reach
that contention.
5
on the face of the plaintiff’s properly pleaded complaint.”
Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). It is
not enough that there may be a defense grounded in federal law
or that the complaint anticipates and rebuts such a defense.
Id. at 392-93.
In an action for declaratory judgment, however, “the
federal right litigated may belong to the declaratory judgment
defendant rather than the declaratory judgment plaintiff.”
Columbia Gas Transmission Corp. v. Drain, 237 F.3d 366, 370 (4th
Cir. 2001). Under this “coercive action doctrine,” although the
declaratory judgment plaintiff does not assert a claim arising
under federal law, federal question jurisdiction exists if “the
complaint alleges a claim arising under federal law that the
declaratory judgment defendant could affirmatively bring against
the declaratory judgment plaintiff.” Id. See generally 13D
Charles Alan Wright, et al., Federal Practice and Procedure
§ 3566 (3d ed.), Westlaw (database updated April 2016).
In this case, the Pressls seek a declaratory judgment that
APCO does not possess rights under the flowage easement to
prevent or regulate construction of a dock on their property.
APCO maintains that federal question jurisdiction lies because
its hypothetical coercive suit, seeking a declaration as to its
rights to prevent or regulate construction or an injunction to
enforce those rights, would arise under federal law.
6
“[T]he vast majority” of cases arising under federal law
“are those in which federal law creates the cause of action.”
Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808 (1986).
Cases may also arise under federal law, however, when “the
vindication of a right under state law necessarily turn[s] on
some construction of federal law.” Id. (quoting Franchise Tax
Bd. v. Constr. Laborers Vacation Tr., 463 U.S. 1, 9 (1983)).
APCO admits that neither the Pressls’ complaint nor APCO’s
hypothetical coercive suit alleges a federal cause of action.
APCO contends that federal jurisdiction nonetheless exists
because its rights under state law necessarily turn on the
construction of its federal license. For a federal court to
have jurisdiction in these circumstances, the federal issue must
be “(1) necessarily raised, (2) actually disputed, (3)
substantial, and (4) capable of resolution in federal court
without disrupting the federal-state balance approved by
Congress.” Gunn v. Minton, 133 S. Ct. 1059, 1065 (2013); see
also Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545
U.S. 308, 312-14 (2005). Federal jurisdiction will lie only if
a case meets all four requirements. Gunn, 133 S. Ct. at 1065.
A.
i.
We first address whether this case necessarily raises a
federal question. APCO emphasizes that the property subject to
7
the flowage easement lies within the project boundary for the
Smith Mountain Hydroelectric Project that APCO operates. FERC
imposes certain duties on APCO for managing development and
construction within the project boundary -- including managing
the construction of docks. APCO argues that the Pressls’
complaint necessarily raises federal issues because it seeks a
declaration that APCO does not have authority to regulate
construction of a dock. According to APCO, a court must examine
APCO’s authority under its federal license to adjudicate the
issue. Appellee Br. at 13-15, 20-21, 25-26.
In proffering this argument, APCO misreads the Pressls’
complaint. The Pressls do not challenge APCO’s substantial
duties to FERC. Nor do they dispute the extent of APCO’s
authority over the property in the event the flowage easement
provides APCO with sufficient property rights.
The Pressls maintain only that APCO has not acquired the
property right to constrain the Pressls’ construction of a dock.
Because neither the Federal Power Act nor APCO’s FERC license
provides APCO with the property rights necessary to operate the
hydroelectric project, see, e.g., Appalachian Power Co., 153
FERC ¶ 61299, at ¶ 29 (Dec. 17, 2015), APCO must acquire these
rights either through condemnation or contract. APCO has not
(yet) condemned any of the Pressls’ land, and the Pressls
maintain that the contract provision at issue here -- the
8
flowage easement -- does not provide APCO with sufficient
property rights. In accord with this theory, the Pressls’
complaint asserts that the “controversy between the parties
regard[s] the rights granted . . . pursuant to the . . . flowage
easement” and “aver[s] that the flowage easement does not give
APCO the right to regulate any use which [the Pressls] may make
of their property.” This controversy does not necessarily raise
a federal question.
ii.
Alternatively, APCO maintains that a federal question
necessarily arises in interpreting the scope of the flowage
easement. It argues that its right to prevent the Pressls from
building a dock derives from two easement provisions: the
provision allowing APCO to “overflow and/or affect” the property
“by reason of the operation of [the Smith Mountain] power
station” and the provision allowing APCO to remove “any and
all . . . structures.” APCO asserts that, under Virginia law, a
reasonableness inquiry based on the original purpose of the
easement limits these broad powers. Because the purpose of the
easement was to allow it to construct and operate a dam and
power station, APCO contends that a court must interpret its
FERC license to determine the reasonable limit of its rights
under the easement. Appellee Br. at 21-22.
9
But a claim “necessarily depends on a question of federal
law only when every legal theory supporting the claim requires
the resolution of a federal issue.” Flying Pigs, LLC v. RRAJ
Franchising, LLC, 757 F.3d 177, 182 (4th Cir. 2014)(quoting
Dixon, 369 F.3d at 816). Accordingly, if even one theory for
interpreting the flowage easement does not involve
interpretation of federal law, the claim does not “arise under”
federal law. Dixon, 369 F.3d at 817.
Because of this requirement, we have rejected a similar
contention that interpretation of an easement necessarily
depends on a question of federal law. See Columbia Gas
Transmission Corp. v. Drain, 191 F.3d 552, 559 (4th Cir. 1999).
There, a company regulated by FERC under the Natural Gas Act
brought an action in federal court to enforce an easement for
operation of a gas line. Id. at 554. Because the easement did
not explicitly specify the width of the right of way, the court
needed to determine what width was “reasonably necessary” under
state law. Id. at 557. We explained that the determination of
that question is often reached without reference to federal law
or regulations. Id. at 558. Accordingly, we held that the
state law easement claim did not necessarily raise issues of
federal law. Id. at 559; see also Columbia Gas Transmission,
LLC v. Singh, 707 F.3d 583, 589-90 (6th Cir. 2013)(holding that
interpretation of an easement owned by an entity subject to FERC
10regulation did not necessarily raise a federal question because
the obligation created by the federal regulation was just one of
many factors considered in the state law inquiry). 2
The same analysis applies in this case. Under Virginia
law, the most important factor in interpreting an easement is
the language of the easement itself. Pyramid Dev., L.L.C. v.
D&J Assocs., 553 S.E.2d 725, 728 (Va. 2001) (“[W]hen the
language of a deed is ‘clear, unambiguous, and explicit,’ a
court interpreting it ‘should look no further than the four
corners of the instrument under review.’” (quoting Langman v.
Alumni Ass’n of Univ. of Virginia, 442 S.E.2d 669, 674 (Va.
1994)). Indeed, in holding that the easement at issue here gave
APCO the right to remove any structure below the 800-foot
elevation contour, the district court relied primarily on the
easement’s text. It did not need to analyze the meaning of
APCO’s license to determine the reasonable limits of the
easement. The court simply noted that the original purpose of
2VA Timberline, L.L.C. v. Appalachian Power Co., 343 F.
App’x 915 (4th Cir. 2009) (per curiam), an unpublished opinion
on which APCO relies, offers the company little assistance.
There we upheld the grant of summary judgment to APCO on a claim
involving an easement owner’s right to build a dock. But the
conveyances at issue in Timberline were explicitly made subject
to APCO’s FERC license “and any amendments thereof or
supplements thereto.” Id. at 916. Because the plaintiff’s
easement only gave it the right to construct docks that complied
with APCO’s license, interpreting the license was necessary to
resolve the case.
11
the easement was to allow APCO to operate a hydroelectric
project regulated by FERC. Such tangential reference to federal
law does not suffice to create “arising under” jurisdiction.
In sum, this case does not necessarily raise any federal
issue.
B.
Moreover, no federal question in this case is actually
disputed. There is no dispute over the validity of APCO’s
federal license. Nor is there any dispute as to APCO’s
obligations to FERC. The Pressls challenge only whether the
flowage easement by its terms allows APCO to prevent them from
building a dock. This seems a simple enough dispute, which the
district court may well have properly resolved -- had it arisen
under federal law. But, of course, it did not. Rather, this
case presents solely a dispute as to state property law.
C.
Finally, we believe that any federal interest in
interpreting the flowage easement is not substantial and that
asserting federal jurisdiction over cases like this would
disrupt the congressionally approved federal-state balance.
State courts are just as able (perhaps more able) to interpret
and enforce the property rights conveyed through instruments
governed by state law.
12
Undoubtedly, there is a federal interest in ensuring the
effective operation of hydroelectric projects. But resolving
property disputes in state court does not undermine that
interest. After all, if a state court ultimately holds that
APCO did not acquire all of the property rights it needs to
operate the project in compliance with its license, APCO can
obtain those rights through contract or through eminent domain.
16 U.S.C. § 814. Thus, a ruling against APCO in this case could
not substantially affect federal interests. The interpretation
of a state conveyance is a quintessential question of state
property law, and Congress has limited our jurisdiction over
such cases. Accordingly, we conclude that 28 U.S.C. § 1331provides no basis for federal jurisdiction over this case.
III.
Finally, we turn to the question of whether the exclusive
jurisdiction provision in the Federal Power Act, 16 U.S.C.
§ 825p, provides a basis for jurisdiction. Section 825p grants
federal district courts exclusive jurisdiction over “all suits
in equity and actions at law brought to enforce any liability or
duty created by, or to enjoin any violation of, [the Federal
Power Act] or any rule, regulation, or order thereunder.” 16
U.S.C. § 825p.
13
Neither the Pressls’ suit seeking to define the scope of
the flowage easement nor APCO’s hypothetical coercive action
would be brought to “enjoin any violation of” the Federal Power
Act. As discussed above, the Pressls seek only to determine
APCO’s property rights. They do not allege that APCO violated
its license or its duties to FERC. And, since FERC regulates
only APCO, the Pressls themselves could not violate the Federal
Power Act by constructing a dock.
APCO nevertheless maintains that § 825p provides a basis
for federal jurisdiction here. APCO notes that it has a duty
under the Federal Power Act to manage property within the
project boundary in compliance with its license. The company
contends that its hypothetical suit seeking a declaratory
judgment that APCO has sufficient property rights to meet its
federal obligations -- or a suit to enjoin the Pressls from
constructing a dock -- would thus be “brought to enforce [a]
liability or duty created by” the Federal Power Act. The
Supreme Court’s recent decision in Merrill Lynch, Pierce, Fenner
& Smith Inc. v. Manning, 136 S. Ct. 1562 (2016), dooms this
argument.
In Merrill Lynch, the Court interpreted the nearly
identical “brought to enforce” language in the exclusive
jurisdiction provision of § 27 of the Securities Exchange Act of
1934. The Court held that the jurisdictional test established
14
by § 27 of the Exchange Act is the “same as the one used to
decide if a case ‘arises under’ a federal law” under 28 U.S.C.
§ 1331. Id. at 1566. In doing so, the Court rejected the
argument that the “brought to enforce” language provides broad
jurisdiction over complaints that simply mention a duty
established by the federal law. Id. at 1568-69. Rather, claims
are “brought to enforce” such a duty only if their “very success
depends on giving effect to a federal requirement.” Id. at
1570. The Court further explained that this interpretation of
the “brought to enforce” language best comports with its
precedents, preserves the balance between federal and state
courts, and provides a judicially administrable rule. Id. at
1567-68; see also Pan Am. Petroleum Corp. v. Superior Court of
Del. In & For New Castle Cty., 366 U.S. 656, 664 (1961).
Of particular import here, the Merrill Lynch Court
expressly noted that the “brought to enforce” language in the
statute before it -- § 27 of the Exchange Act -- was materially
indistinguishable from § 825p in the Federal Power Act, the
statute on which APCO relies. The Supreme Court specifically
identified § 825p as a provision with “[m]uch the same wording”
as § 27 of the Exchange Act and suggested that the two
provisions should be interpreted in the same way. See Merrill
Lynch, 136 S. Ct. at 1568 & n.3, 1572, 1575.
15
Because we have held that this case does not “arise under”
federal law for purposes of federal question jurisdiction under
28 U.S.C. § 1331, we must also hold that there is no basis for
exclusive jurisdiction under 16 U.S.C. § 825p.
IV.
For the foregoing reasons, we vacate the judgment of the
district court and remand the case.
VACATED AND REMANDED
16