Powerex Corp. v. Reliant Energy Services, Inc.

PETITIONER: Powerex Corp.
RESPONDENT: Reliant Energy Services, Inc., et al.
LOCATION: United States Court of Appeals for the Ninth Circuit

DOCKET NO.: 05-85
DECIDED BY: Roberts Court (2006-2009)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 551 US 224 (2007)
GRANTED: Jan 19, 2007
ARGUED: Apr 16, 2007
DECIDED: Jun 18, 2007

ADVOCATES:
Douglas Hallward-Driemeier - for the United States, as amicus curiae, by special leave of the Court
David C. Frederick - for the petitioner
Leonard B. Simon - for the respondents

Facts of the case

The state of California suffered an energy crisis in 2001. Citizens filed suit against energy company Reliant Energy Services et al (Reliant) for conspiring to fix energy price levels. Reliant filed cross-claims against multiple energy companies and regulatory agencies involved in the price fixing, including the Canadian company Powerex Corporation. PowerEx exported surplus Canadian hydropower on behalf of its owner, the British Columbia Hydro and Power Authority (BC Hydro). Since BC Hydro was a governmental corporation and Powerex was its subsidiary, both argued that they were entitled to sovereign immunity under the Foreign Sovereign Immunity Act of 1976 (FSIA). FSIA defines a foreign sovereign as an "organ of a foreign state" (28 U.S.C. Section 1603(b)). Reliant claimed that the two companies were exempt from FSIA sovereign immunity because their commercial activity had a "direct effect" on California energy markets.

A District Court ruled that BC Hydro was a foreign sovereign, but PowerEx was not. The District Court issued a remand order sending the case back to state court. Powerex appealed to the U.S. Court of Appeals for the Ninth Circuit, claiming that it operated for the "public interest" as an instrumentality of the government. The Ninth Circuit held that PowerEx was not a "foreign sovereign" because BC Hydro, not the Canadian government, owned PowerEx's shares.

Question

1) Does an entity whose shares are wholly owned by a governmental corporation that acts on behalf of a foreign state qualify as an "organ of a foreign state" for purposes of the Foreign Sovereign Immunities Act of 1976 and therefore have sovereign immunity?

2) Did the Court of Appeals have jurisdiction to review the District Court's order sending the case back to state court?

Media for Powerex Corp. v. Reliant Energy Services, Inc.

Audio Transcription for Oral Argument - April 16, 2007 in Powerex Corp. v. Reliant Energy Services, Inc.

Audio Transcription for Opinion Announcement - June 18, 2007 in Powerex Corp. v. Reliant Energy Services, Inc.

John G. Roberts, Jr.:

Justice Scalia has our opinion this morning in case 05-85 PowerEx Corporation versus Reliant Energy.

Antonin Scalia:

This case is here on writ of certiorari to the United States Court of Appeals for the Ninth Circuit.

The plaintiff’s respondents filed a suit in State Courts alleging that various companies in California’s Energy Market had conspired to fix prices in violation of State Law.

Some of the defendants filed cross-claims seeking indemnity from among other entities two federal agencies BC Hydro a Canadian Corporation that is wholly owned by British-Columbia and thus is a “foreign state” under the Foreign Sovereign Immunities Act and petitioner PowerEx which is a wholly owned subsidiary of BC Hydro.

These four cross-defendants removed the entire case to Federal Court with BC Hydro and the petitioner here PowerEx relying on the Foreign Sovereign Immunities Act which permits removal by foreign sovereigns.

The plaintiff’s respondents moved to remand the case back to State Court arguing that petitioner PowerEx was not a foreign state under FSIA and does not entitled to remove to Federal Court, and that the claims against the other three removing defendants the two Federal Agencies and BC Hydro a foreign state were barred by sovereign immunity.

The District Court agreed and remanded the entire case.

As relevant here petitioner appealed arguing that it was a foreign sovereign under FSIA.

The plaintiff’s respondents rejoin that the appeal was jurisdictionally barred by 28 U.S.C §1447(d) which provides “an order remanding a case to the State Court from which it was removed, is not reviewable on appeal, or otherwise.”

The Ninth Circuit held that §1447(d) did not precluded from considering petitioner’s appeal but it then rejected the appeal on the merits.

Affirming the District Court’s determination that petitioner was not a “foreign state” within the meaning of FSIA.

We granted certiorari to consider whether petitioner is a foreign state but we also ask the parties to address whether the Ninth Circuit was correct that appellate jurisdiction existed not withstanding §1447(d).

In an opinion filed with the clerk today we vacate the judgment of the Ninth Circuit in relevant part and hold that §1447(d) barred review of petitioner’s appeal.

As I described earlier §1447(d) provides “an order remanding a case to the State Court from which it was removed is not reviewable on appeal or otherwise.”

Despite this seeming categorical language our cases have interpreted the provision in a more limited fashion.

We have read §1447(d) in pari materia with §1447(c), so that only remand based on the grounds specified in §1447(c) are shielded from review by §1447(d).

What that means for this case given the language of §1447(c) and the proceedings below is that §1447(d) bars review only if the District Court remanded the case based on a lack of subject matter jurisdiction.

At the outset, we reject petitioner’s claim that a case cannot be remanded for lack of subject matter jurisdiction within the meaning of §1447(c) if the case was properly removed in the first place.

Section 1447(c) contains no such limitation in its text and its statutory history conclusively refutes it.

We hold that when a District Court remands a properly removed case because it nonetheless lacks subject matter jurisdiction the remand is covered by §1447(c) and shield it from review by §1447(d).

Of course, that still requires us to determine whether the District Court in this case remanded based on subject matter jurisdiction.

One thing leads to another.

As an initial matter it is clear from the record that the court was purporting to remand for lack of subject matter jurisdiction.

We have never decided whether §1447(d) permits an Appellate Court to look behind the District Court’s characterization of the ground upon which it is remanding that is in the context of the present case to determine whether the District Court was correct, that if PowerEx was not a foreign sovereign and the other cross defendants had sovereign immunity there was no jurisdiction over claims against PowerEx.

While we do not definitively resolve that question today we do hold that such review if permitted at all is limited to insuring that the characterization as lack of subject matter jurisdiction was colorable.

Because the ground upon which the District Court based its remand was at least arguably jurisdiction will naturally hold that §1447(d) bars appellate review.

So, we never will reach the point of whether the District Court was correct that PowerEx was not a foreign sovereign.

The Ninth Circuit held that §1447(d) does not preclude reviewing a District Court’s substantive determinations that precede a remand order to whit it substantive determination that PowerEx was not a foreign sovereign.

That holding appears to be premised on our decision in WACO versus United States Fidelity & Guaranty Company the Ninth Circuit erred in relying on WACO because that case does not permit an appeal when as here there is no order separate from the un-reviewable remand order.

Finally, we reject petitioner’s contention that Congress did not intend §1447(d) to govern suits properly removed under FSIA that argument is flatly refuted by a long standing precedent back to court from one of our cases absent a clear statutory comment to the contrary we assume that Congress is aware of the universality of the practice of denying appellate review of remand orders when Congress creates a new ground for removal.