The Supreme Court of the United States issued decisions in two cases today:
Hughes v. Talen Energy Marketing, LLC, No. 14-614: Congress, though the Federal Power Act (“FPA”), 16 U.S.C. §791a et seq., vested exclusive jurisdiction over wholesale sales of electricity in the interstate market with the Federal Energy Regulatory Commission (“FERC”). FERC’s regulatory scheme includes regulating wholesale capacity auctions to ensure they efficiently balance supply and demand, in order to produce a just and reasonable clearing price. The State of Maryland enacted its own regulatory program, based upon its view that FERC’s scheme did not provide sufficient incentive for new electricity generation in the State. Under Maryland’s program, subsidies were awarded to a new generator through state-mandated contracts. Receipt of the subsidies was conditioned on the generator selling capacity into a FERC-regulated wholesale auction, but the new generator would receive a contract price for those sales, rather than the clearing price from the auction. Competitors of Maryland’s new generator brought suit in federal court, and both the District Court and Fourth Circuit held that Maryland’s scheme impermissibly intruded upon FERC’s authority over the wholesale electricity market. The Court today affirmed, holding Maryland’s program preempted because it disregards an interstate wholesale rate required by FERC. The Court expressly stated that nothing in the opinion should be read to foreclose Maryland and other States from encouraging production of new or clean generation through measures untethered to a generator’s wholesale market participation.
The Court's decision is available here.
Franchise Tax Bd. of Cal. v. Hyatt, No. 14-1175: Respondent Gilbert P. Hyatt brought a lawsuit in Nevada state court against California’s Franchise Tax Board (“Board”) seeking damages for abusive audit and investigative practices. This stemmed from the Board’s investigation and audit of Hyatt after he moved from California to Nevada, and the Board’s assertion that Hyatt moved to Nevada later than he had claimed, and thus still owed California taxes. Hyatt prevailed in a jury trial. The Nevada Supreme Court set aside much of the damages, but affirmed $1 million of the award, and in remanding for a retrial on certain other damages, stated that those damages were not subject to the statutory cap of $50,000 that Nevada statutes imposed upon a similar suit against its own officials. The Board petitioned the Court, seeking 1) that Nevada v. Hall, 440 U.S. 410 (1979) be overruled, which held that one State can open its courts to a private citizen’s lawsuit against another State without the other State’s consent; and 2) that the decision be reversed as improperly awarding private citizens greater damages than Nevada law would permit a private citizen to obtain against Nevada’s own agencies. Today, the Court vacated and remanded, affirming Nevada’s exercise of jurisdiction over California because the Court was equally divided on that question, but holding that Nevada’s application of its damages law in this case reflected a special, and constitutionally forbidden, policy of hostility to the public Acts’ of a sister State, in violation of the Constitution’s Full Faith and Credit Clause.
The Court's decision is available here.