Opinion
No. C-04-4169 MMC, (Docket Nos. 10, 24).
November 30, 2004
ORDER DISMISSING ACTION; VACATING HEARING
Before the Court are two matters, both of which are scheduled to be heard December 3, 2004: (1) the parties' responses to the Court's October 8, 2004 order to show cause why the above-titled action should not be dismissed pursuant to the doctrine of Younger abstention, and (2) defendants' motion to dismiss. Plaintiff Sempra Energy Trading Corp. ("SET") has responded to the order to show cause, defendants have filed opposition to that response, and SET has filed a reply. SET has filed opposition to defendants' motion to dismiss, to which defendants have replied. Having reviewed the papers filed in connection with the order to show cause and the motion to dismiss, the Court finds the matters appropriate for decision without oral argument, see Civil L.R. 7-1(b), and hereby VACATES the December 3, 2004 hearing on both matters. For the reasons set forth below, the above-titled action is hereby DISMISSED, without prejudice to SET's pursuing a remedy in the below-referenced state proceedings.
Defendants are Geoffrey Brown, Susan P. Kennedy, Loretta M. Lynch, Michael R. Peevey, and Carl Wood, in their official capacities as Commissioners of the California Public Utilities Commission ("CPUC").
BACKGROUND
On November 21, 2002, the CPUC issued an order instituting a two-phase investigation to examine the reason for spikes in the price of natural gas delivered at the California border from March 2000 to May 2001 ("Border Price Spike Investigation"). (See First Amended Complaint ("FAC") ¶ 20; see also Yudkowsky Decl. Ex. A.) In Phase I of the investigation, the CPUC named as respondents the Sempra Energy Companies ("Sempra"), Southern California Gas Company ("SoCalGas") and San Diego Gas Electric Company ("SDGE"). (See FAC ¶ 21; see also Yudkowsky Decl. Ex. A at 1.) In Phase II of the investigation, the CPUC named as respondents Southwest Gas ("SW Gas"), Pacific Gas and Electric Company ("PGE"), and Southern California Edison Company ("Edison"). (See FAC ¶ 21; see also Yudkowsky Decl. Ex. A at 1-2.)
SoCalGas and SDGE are subsidiaries of Sempra. (See FAC ¶ 2.) Plaintiff SET is also a subsidiary of Sempra, and maintains a separate corporate structure from Sempra, SoCalGas and SDGE. (See id.) SET operates as a wholesale energy trading company engaged in the purchase, sale and trade of physical and financial commodities, including natural gas and electricity in interstate commerce; it is not named as a respondent in the Border Price Spike Investigation. (See id.)
The purpose of the Border Price Spike Investigation is to determine the reasons why the price of natural gas delivered to the California border was extraordinarily high in 2000 and 2001, particularly during the period between December 2000 and May 2001. (See Yudkowsky Decl. Ex. A at 1.) On April 16, 2003, the CPUC issued a "Scoping Memo" to define the issues to be investigated in Phase I. (See FAC ¶ 23; see also Yudkowsky Decl. Ex. B.) In the Scoping Memo, the CPUC stated its intent to investigate whether any of the affiliates of SoCalGas and SDGE, or their parent company, Sempra, played a role in causing the increase in border prices, and whether "concerns about the affiliates or the parent's financial position" caused SoCalGas and/or SDGE to take actions that may have increased gas costs. (See Yudkowsky Decl. Ex. B at 5.) In addition, the CPUC stated its intent to investigate whether SET played a role in causing an increase in border prices, and to answer the following questions: (1) Did SET take positions in the electric market that allowed it or any of its affiliates to unjustifiably benefit from increased border prices during the subject period? (2) Did SET become aware of SoCalGas' gas hedging activities during the subject period, and if so, did SET use that knowledge to its benefit? (3) Did SET report false trades and/or false prices to the trade press, and did any such reports affects border prices during the subject period? and (4) Did SoCalGas, SDGE, and SET share information? (See FAC ¶ 24; see also Yudkowsky Decl. Ex. B at 5.) The investigation is also intended to determine whether the respondents' "gas cost incentive mechanisms create[d] perverse incentives to increase or otherwise manipulate natural gas prices at the California border" and whether those "incentive mechanisms" should be modified or eliminated to prevent such activity. (See Yudkowsky Decl. Ex. A at 10.)
Phase I of the investigation is intended to investigate the past conduct of the respondents. (See Yudkowsky Decl. Ex. A at 2.) "If the investigation reveals that the conduct of respondents contributed to the gas price spikes at the California border during the named period, [the CPUC] may modify or eliminate the respondent's Gas Cost Incentive Mechanism (GCIM), reduce the amount of the shareholder award for the period involved, or order respondents to issue a refund to ratepayers to offset the higher rates paid." (Id.) "If the investigation reveals that statutory laws, or rules or orders of the [CPUC] were violated, the [CPUC] may enter into an adjudicatory phase of [the] investigation." (Id.)
SET alleges that on May 15, 2003 and June 5, 2003, respectively, Edison improperly propounded sets of data requests to SET. (See FAC ¶ 25.) On August 27, 2003, the CPUC issued a subpoena duces tecum to SET, on Edison's behalf, requiring SET to produce specified documents at the CPUC on September 24, 2003. (See FAC ¶ 26; see also Yudkowsky Decl. Ex. C.) SET moved to quash the subpoena on the ground that certain of the data requests exceeded the CPUC's subject matter jurisdiction by seeking the production of materials relating solely to SET's activities in the interstate wholesale energy markets, an area that SET contends is regulated exclusively by the Federal Energy Regulatory Commission ("FERC") and preempted by federal law. (See FAC ¶ 27; see Yudkowsky Reply Decl. Ex. I.)
On October 30, 2003, Administrative Law Judge ("ALJ") Sarah R. Thomas denied the motion to quash. (See FAC ¶ 28; see also Yudkowsky Decl. Ex. D at 56-64.) ALJ Thomas concluded that the CPUC's "power to subpoena documents is broader than its jurisdiction to regulate entities" and, thus, the subpoena was not beyond the CPUC's jurisdiction. (See FAC ¶ 29(a); see also Yudkowsky Decl. Ex. D at 56:15-22.) ALJ Thomas also concluded, however, that some of the data requests were overbroad, and ordered Edison to submit revised data requests the following day. (See FAC ¶ 30; see also Yudkowsky Decl. Ex. D at 64:26-65:16, 79:18-20.)
Edison propounded amended data requests to SET on October 31, 2003, which were modified at a subsequent hearing before ALJ Thomas on November 13, 2003, and further modified at subsequent hearings and by agreement of Edison and SET pursuant to court-ordered "meet and confer" discussions. (See FAC ¶¶ 30-31; see also Yudkowsky Decl. Ex. E.) The amended data requests were supplemented by two subsequent subpoenas duces tecum issued by the CPUC on behalf of Edison. (See FAC ¶ 31; see also Yudkowsky Decl. Exs. F and G.)
As a result of the denial of SET's motion to quash and ALJ Thomas' subsequent ruling on November 13, 2003, SET produced its first set of responsive documents to certain of the amended data requests on November 24, 2003. (See FAC ¶ 36.) Thereafter, SET sought leave from ALJ Charlotte F. TerKeurst to file a motion for reconsideration of the October 30, 2003 ruling and for a stay. (See FAC ¶ 37.) On December 15, 2003, ALJ TerKeurst granted SET's request. (See id. ¶ 38.)
After November 24, 2003, Edison did not pursue any further discovery from SET, and allowed a December 10, 2004 testimony submission deadline to expire without submitting any testimony as to SET. (See id. ¶¶ 38-39.) Edison subsequently filed a motion for leave to file supplemental testimony as to SET in the Border Price Spike Investigation, which ALJ Thomas denied on January 9, 2004. (See id. ¶ 39.) According to SET, ALJ Thomas stated that "SET acted with due diligence" and that "the ball was in Edison's court, after SET served discovery on November 24, 2003, to follow up with SET." (See id.) After ALJ Thomas' ruling, SET believed that discovery as to SET had been completed, and that a motion for reconsideration of the October 30, 2003 ruling and for a stay was moot. (See id.)
Thereafter, however, Edison was granted an extension of time to file testimony and, on February 13, 2004, a hearing was held before ALJ Thomas and ALJ TerKeurst to determine the adequacy of SET's responses to the amended data requests and the sufficiency of documents produced in connection therewith. (See FAC ¶ 40; see also Yudkowsky Decl. Ex. H.) At the hearing, SET was ordered to restore and review email stored electronically for a 15-month period, for purposes of searching for responsive documents ("February 13 Discovery Order"). (See FAC ¶ 41;see also Yudkowsky Decl. Ex. H at 144:1-3.)
Thereafter, SET filed a motion to require Edison to pay SET's costs in searching for and retrieving the pertinent email records, which, in an order dated April 15, 2004, ALJ John E. Thorson denied. (See Yudkowsky Decl. Ex. I.) Although ALJ Thorson noted that SET is not a named party to the Border Price Spike Investigation (see id. at 2), he also rejected SET's contention that it was an uninvolved third party who should not be required to bear the cost of producing documents for the investigation (see id. at 7-8.) ALJ Thorsen explained:
[I]n approving the reorganizations and mergers that resulted in Sempra's current corporate configuration, the [CPUC] imposed perpetual transparency on the parent, subsidiaries, and affiliates to ensure that the conditions of the merger continue to be satisfied and anticompetitive transactions among these entities do not occur. This proceeding has been initiated to determine whether the Sempra entities have complied with relevant statutes and [CPUC] decisions pertaining to the [Sempra] holding company and the transactions among the affiliated corporations. . . . Discovery aimed at obtaining admissible evidence concerning these issues is a necessary component of this proceeding and assists the [CPUC] in satisfying its regulatory obligations. Because the Sempra entities, including SET, have an ongoing obligation to provide information sufficient to demonstrate compliance with prior Commission decisions an orders concerning the mergers, they must provide this information at their own expense.
(See id. at 7-8.)
On April 21, 2004, SET filed a motion for reconsideration of the February 13 Discovery Order and requested that the motion be referred to the full CPUC if the motion for reconsideration were denied. (See FAC ¶ 42.) The motion was based on the grounds that the February 13 Discovery Order was unduly burdensome and that, because of the extra-jurisdictional nature of the amended data requests, the CPUC would not be able to act on the materials that SET was required to produce. (See id.)
While the motion for reconsideration was pending, and to ensure immediate compliance with the February 13 Discovery Order, ALJ Thorson issued a ruling on June 10, 2004, requiring SET to assign a total of fifteen attorneys to review the restored emails and to produce to Edison all emails responsive to the amended data requests. (See FAC ¶ 43; see also Yudkowsky Decl. Ex. J at 2.) ALJ Thorson further ordered SET and Edison to jointly report to him on a weekly basis as to SET's progress in conducting the email review.
On June 25, 2004, ALJ Thomas denied the motion for reconsideration of the February 13 Discovery Order, without reference to SET's request to refer the matter to the full CPUC for review. (See FAC ¶ 42; see also Yudkowsky Reply Decl. Ex. D.) ALJ Thomas expressly concurred with ALJ Thorson's April 15, 2004 ruling that SET is not "a stranger" to the investigation, cited to the above-quoted language from ALJ Thorson's opinion, and held that "SET is not a non-party to the investigation entitled to a higher degree of protection from discovery than would be its utility affiliates." (See id. at 2.)
On August 23, 2004, SET filed with the California Court of Appeal a petition for a writ of mandate, challenging the rulings requiring SET to pay the costs of complying with the ALJs' discovery orders. (See Yudkowsky Reply Decl. Ex. E.) According to SET, that petition subsequently was withdrawn by agreement of counsel for SET and the CPUC, in order that "SET could file a motion substantively similar to the Petition with the CPUC, which would be heard by the full Commission." (See Yudkowsky Reply Decl. ¶ 2; see also Morris Decl. Exs. A and B.)
There is no allegation or evidence that any such motion has been filed with the CPUC.
On September 20, 2004, ALJ Thorson and ALJ TerKeurst jointly held a discovery hearing to "determine how the email review process [could] be expedited." (See FAC ¶ 46; see also Morris Decl. Ex. C.) At the hearing, the ALJs modified the amended data requests to require SET to produce only documents relating to "the potential impact on the . . . price of energy in the Western United States," thereby relieving SET of the burden of attempting to match each document to the 54 questions in the amended data requests. (See FAC ¶ 46; see also Morris Decl. Ex. C at 1466:12-20.) SET concedes that the September 20 order was intended to hasten completion of the review process, but contends that the order nonetheless impermissibly requires SET to produce documents related to SET's activities in the interstate wholesale energy markets. (See id.)
According to SET, the cumulative effect of the February 13 Discovery Order, the June 10, 2004 order, and the September 20, 2004 modification has been to require SET to incur to date: (1) costs in excess of $209,000 to restore the email from digital backup tapes in order that it could be reviewed and produced; (2) attorneys' fees to review approximately 218,000 documents resulting therefrom; and (3) the costs of producing documents responsive to the amended data requests. (See FAC ¶ 48.) SET alleges that it has spent approximately $1,600,000 in attorneys' fees and costs to date and will continue to incur attorneys' fees and costs in excess of $500,000 per month until the process is completed sometime in early 2005. (See FAC ¶ 49.)
On October 1, 2004, SET filed the instant action. On November 10, 2004, SET filed a First Amended Complaint, in which SET asserts two claims for relief against defendants. The first claim, for injunctive relief, seeks an order enjoining enforcement of the February 13 Discovery Order, as modified, on the ground that it seeks information respecting activities that are within the exclusive jurisdiction of FERC, pursuant to the Natural Gas Act, 15 U.S.C. §§ 717 et seq. ("NGA"), and the Federal Power Act, 16 U.S.C. § 791a et seq. ("FPA"). (See FAC ¶¶ 51-56.) SET's second claim, for declaratory relief, seeks a declaration that the February 13 Discovery Order, as modified, is preempted under the NGA and the FPA to the extent it requires production of information related to the interstate wholesale energy markets. (See id. ¶¶ 57-60.) In its prayer for relief, SET seeks an order (1) declaring the CPUC's actions to be preempted by the FPA and the NGA; (2) declaring that SET is not required to comply with the February 13 Discovery Order or the September 20, 2004 modification of that order; (3) enjoining the CPUC from prospectively considering any information previously produced by SET in response to those orders; and (4) ordering Edison to return to SET all responses and documents produced in connection with those orders.
On October 8, 2004, the Court denied SET's ex parte motion for a temporary restraining order and issued an order to show cause why the action should not be dismissed pursuant to the doctrine of Younger abstention. On October 22, 2004, defendants filed, on a variety of grounds, including Younger abstention, a motion to dismiss the original complaint. On November 15, 2004, defendants filed a document informing the Court that their motion to dismiss applied equally to the First Amended Complaint and should be heard, as noticed, on December 3, 2004.
DISCUSSION
A. Order to Show Cause re: Younger Abstention
As SET asks this Court to intervene in an ongoing state administrative proceeding, the Court issued an order to show cause why the above-titled action should not be dismissed, pursuant to the doctrine of Younger abstention.
In Younger v. Harris, 401 U.S. 37, 46 (1971), the Supreme Court, recognizing a "fundamental policy against federal interference with state criminal prosecutions," held that in the interests of comity, federal courts ordinarily should avoid issuing injunctions against pending state court criminal proceedings, except under extraordinary circumstances.See id. at 44-45. Subsequent to Younger, the doctrine of Younger abstention has been expanded to apply to federal actions seeking relief with respect to state civil proceedings, where such relief "would have the same practical effect on the state proceeding as a formal injunction" and where the state proceeding: (1) is pending at the time the federal action is filed; (2) is a judicial proceeding that implicates important state interests; and (3) affords the federal plaintiff an adequate opportunity to present his federal claims.See Gilbertson v. Albright, 381 F.3d 965, 975, 977-78 (9th Cir. 2004) (en banc). "Younger abstention applies to actions seeking to enjoin pending state administrative proceedings (as well as state court proceedings) if an important state interest is involved." Baffert v. California Horse Racing Board, 332 F.3d 613, 617 (9th Cir. 2003). "An exception to abstention applies if the state proceedings demonstrate `bad faith, harassment, or some other extraordinary circumstances that would make abstention inappropriate.'" Id. (quoting Keneally v. Lungren, 967 F.2d 329, 331 (9th Cir. 1992)).
In the instant case, it is not disputed that the state proceeding was pending when the federal action was filed, nor does SET dispute defendants' contention that the CPUC proceedings are a type of administrative proceeding to which Younger abstention is applicable, or that the state proceedings afford SET an adequate opportunity to present its federal claims. Consequently, the first and third prongs of the test for Younger abstention are met. SET disputes the second prong, however, and also presents several additional arguments as to why Younger abstention does not apply in the instant case.
The Court notes that the Supreme Court has held that "ratemaking is an essentially legislative act" not subject to Younger abstention. See New Orleans Public Service, Inc. v. Council of the City of New Orleans ("NOPSI"), 491 U.S. 350, 371 (1989). In NOPSI, the administrative proceeding at issue was the plaintiff's request, directed to the local ratemaking body, for a rate increase to cover an increase in wholesale power rates. See id. at 350. The Supreme Court held that the proceedings were not judicial in nature and thus not subject to Younger abstention.See id. at 370. The Court explained that "`[a] judicial inquiry investigates, declares and enforces liabilities as they stand on present or past facts and under laws supposed to already exist'" while legislation "`looks to the future and changes existing conditions by making a new rule to be applied thereafter to all or some part of those subject to its power.'" See id. at 370-71 (quoting Prentis v. Atlantic Coast Line Co., 211 U.S. 210, 226 (1908)). Here, unlike in NOPSI, however, the CPUC is not merely setting rates for the future, but is investigating whether the respondents engaged in wrongdoing such that they should be required to refund rates already paid; the CPUC thus is engaging in a judicial inquiry. See id.; see also Fireman's Fund Ins. Co. v. Garamendi, 790 F. Supp. 938, 956-57 (N.D. Cal. 1992) (finding state regulatory proceedings to determine whether insurers should refund portions of premiums already paid were quasi-judicial in nature and thus subject to Younger abstention). The Court also notes that the CPUC's subpoena power is equivalent to that of the state courts, see Cal. Pub. Util. Code § 312, and the Supreme Court has held that Younger abstention is applicable to federal actions seeking to interfere with the enforcement of a subpoena. See Juidice v. Vail, 430 U.S. 327, 335-36 (1977).
Indeed, SET has repeatedly raised its federal claims before the ALJs. (See Yudkowsky Reply Decl. Ex. C at 21-26, Ex. I at 7 and n. 5, and Ex. J at 4, 7-8.)
1. Important State Interest
SET argues that the CPUC proceedings do not involve an important state interest because the CPUC's investigation into SET's activities in interstate wholesale energy markets is preempted by federal law.
In determining the substantiality of the state's interest in its proceedings, the Supreme Court has held that courts should not "look narrowly to [the state's] interest in the outcome of a particular case" but to "the importance of the generic proceedings to the State." See NOPSI, 491 U.S. at 365 (emphasis in original). "In Younger, for example, [the Supreme Court] did not consult California's interest in prohibiting John Harris from distributing handbills, but rather its interest in `carrying out the important and necessary task' of enforcing its criminal laws." Id. (quoting Younger, 401 U.S. at 51-52).
In NOPSI, the plaintiff asserted that the defendant's denial of a rate increase for retail electrical service, which was sought because FERC had allocated a portion of the cost of a nuclear reactor to the plaintiff, conflicted with certain Supreme Court decisions precluding a state from disregarding FERC's allocations of wholesale power costs. See NOPSI, 491 U.S. at 352-55. The Supreme Court held that the proper inquiry was "not whether Louisiana [had] a substantial, legitimate interest in reducing NOPSI's retail rate below that necessary to recover its wholesale costs, but whether it [had] a substantial, legitimate interest in regulating intrastate retail rates." See id. at 365. The Supreme Court expressly held that "[w]hether the State's decision to provide less than full reimbursement for the FERC-allocated wholesale costs" conflicted with the Supreme Court's holdings in prior cases was "not at issue." See id. at 353. The Supreme Court concluded that a state has a substantial, legitimate interest in regulating intrastate retail rates because "`regulation of utilities is one of the most important of the functions traditionally associated with the police power of the States.'" See id. at 365 (quotingArkansas Electric Cooperative Corp. v. Arkansas Public Serv. Comm'n, 461 U.S. 375, 377 (1983)).
The Supreme Court, in NOPSI, declined to decide whether a "facially conclusive" claim of federal preemption suffices to render Younger abstention appropriate on the ground that the state lacks a substantial interest in its proceedings. See NOPSI, 491 U.S. at 367. The Ninth Circuit, however, has stated it "will not apply Younger abstention in a case of clear preemption." See Bud Antle, Inc. v. Barbosa, 45 F.3d 1261, 1273 (9th Cir. 1994). Nevertheless, there is no such "clear preemption" here, as the NGA and FPA, respectively, grant FERC exclusive jurisdiction over wholesale sales in interstate commerce of natural gas, and electric power, while the CPUC proceedings at issue are intended only to address rates for intrastate sales of natural gas. See Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 300-301 (1988); New England Power Co. v. New Hampshire, 455 U.S. 331 (1982); see also Yudkowsky Decl. Ex. A at 2. While the information sought by the CPUC may have some relevance with respect to SET's interstate wholesale prices, both the Ninth Circuit and the Supreme Court have held that "[c]ourts will not presume that information sought by state officials for which there is a legitimate purpose will be put to an unconstitutional use." See Lewis v. Younger, 653 F.2d 1258, 1260 (9th Cir. 1981) (citing Natural Gas Pipeline Co. v. Slattery, 302 U.S. 300, 309 (1937)).
The Supreme Court's opinion in Public Utilities Commission of Ohio v. United Fuel Gas Co., 317 U.S. 456 (1943) affirming the district court's injunction against discovery into interstate wholesale gas rates is not to the contrary; in that case, the Public Utilities Commission of Ohio sought to regulate wholesale gas rates in interstate commerce, an exercise of authority that is clearly preempted by the NGA, and not present in the instant case. See id. at 458-59, 467-68.
Accordingly, in determining whether California has a substantial interest in the state proceedings at issue, this Court does not examine the merits of SET's preemption argument, other than to determine whether preemption is "clear," but rather looks to "the importance of the generic proceedings to the State." See NOPSI, 491 U.S. at 365. Here, the CPUC is investigating whether the respondents to the Border Price Spike Investigation engaged in any wrongdoing that caused high gas prices at the California border. (See Yudkowsky Decl. Ex. A at 2.) In the CPUC's Order Instituting Investigation, the CPUC states that "[i]f the investigation reveals that the conduct of respondents contributed to the gas spikes at the California border during the named period, it may modify or eliminate the respondents' Gas Cost Incentive Mechanism (GCIM), reduce the amount of the shareholder award for the period involved, or order respondents to issue a refund to ratepayers to offset the higher rates paid." See id. As the Supreme Court has held that states have a substantial, legitimate interest in regulating utilities, see NOPSI, 491 U.S. at 365, the Court finds that the CPUC proceedings at issue "implicate important state interests." See Gilbertson v. Albright, 381 F.3d at 975.
As noted, the Supreme Court has held that the enforcement of subpoenas also is an important state interest. See Juidice v. Vail, 430 U.S. at 335-36.
2. Involvement in State Proceeding
SET further argues that Younger abstention does not apply in the instant action because SET is not a party to the CPUC's Border Price Spike Investigation and is not otherwise subject to Younger abstention by reason of its relationship to such a party.
The Ninth Circuit has stated that Younger abstention generally does not apply where the plaintiffs in the federal action "were not involved in the state litigation." See Green v. City of Tucson, 255 F.3d 1086, 1099 (9th Cir. 2001), overruled on other grounds, Gilbertson v. Albright, 381 F.3d at 968-69. In Green, four persons filed a federal court action challenging the constitutionality of a state statute while litigation concerning the constitutionality of that statute was pending in state court. See id. at 1088. As the federal plaintiffs had no involvement in the state court action, the Ninth Circuit held that the doctrine ofYounger abstention did not apply, and that the federal plaintiffs were free to pursue their suit in federal court. See id. at 1099-1100. The Ninth Circuit explained that where a federal plaintiff is not a party to an ongoing state court proceeding, "[c]ongruence of interests" with the state parties is not enough to trigger application of Younger abstention, "nor is identity of counsel," but that a party "whose interest is so intertwined with those of the state court party that direct interference with the state court proceeding is inevitable may, under Younger, not proceed." See id. at 1100.
The Ninth Circuit has since held that direct interference with state court proceedings is not required for Younger abstention to apply.See Gilbertson v. Albright, 381 F.3d at 978.
In the instant case, SET is unquestionably a party to the state discovery proceedings it is seeking to enjoin. As SET has been ordered by the ALJs to produce documents, and SET asks this Court to set aside those discovery rulings, SET cannot plausibly claim to be uninvolved in the state proceedings. Moreover, even though SET is not a named party to the Border Price Spike Investigation, the ALJs have repeatedly rejected SET's contention that it should be treated as an uninvolved stranger to the investigation. (See Yudkowsky Decl. Ex. I at 4 (rejecting SET's contention that it is an "uninvolved third part[y]" to the investigation); see also Yudkowsky Reply Decl. Ex. D (stating "SET is not a non-party to this investigation entitled to a higher degree of protection from discovery than would be its utility affiliates."). Accordingly, the Court rejects SET's contention that Younger abstention cannot apply to this action because SET is not a party to the CPUC investigation.
3. Degree of Interference with State Proceedings
SET further argues that Younger abstention is inapplicable in the instant action because the injunction SET seeks from this Court would not completely enjoin the CPUC proceedings.
SET relies on the Ninth Circuit's en banc decision in Gilbertson v. Albright, in which the Ninth Circuit held that federal actions for damages are subject to Younger abstention only if the relief sought "would have the same practical effect on the state proceedings as a formal injunction." See Gilbertson, 381 F.3d at 978. Gilbertson, however, was not concerned with a claim for injunctive relief, nor did the Ninth Circuit even suggest, let alone hold, that a proposed federal injunction could not trigger Younger abstention unless it would enjoin all aspects of a state proceeding. Indeed, Gilbertson expressly rejected the Ninth Circuit's earlier holding, in Green, that the federal proceeding must "directly interfere" with the state proceeding or "stop that proceeding cold." See Gilbertson, 381 F.3d at 976-78.
Indeed, the Ninth Circuit previously had held that "the application of Younger abstention has not been limited to injunctions that apply to entire proceedings." See Dubinka v. Judges of the Superior Court of the State of California for the County of Los Angeles, 23 F.3d 218, 223 (9th Cir. 1994) (applying Younger abstention to federal action seeking to enjoin application of new discovery law to pending state criminal actions); see also Delta Dental Plan of California, Inc. v. Mendoza, 139 F.3d 1289, 1295 (9th Cir. 1998) (noting Younger abstention "inappropriate where the federal proceedings would have no impact on the pending state proceedings"; finding district court erred in refusing to abstain where relief sought would "significantly impact" state proceedings) (emphasis in original).
Here, SET seeks an injunction that would directly interfere with the CPUC proceedings by precluding the CPUC from enforcing its discovery orders against SET and precluding it from "prospectively considering" any information SET has already produced. (See FAC at 18, Prayer for Relief). Although the relief SET seeks would not halt the CPUC proceedings in their entirety, the Court rejects SET's contention that the interference in those proceedings SET seeks is insufficiently intrusive to warrant applicability of the doctrine of Younger abstention.
4. Extraordinary circumstances
SET's final argument is that, assuming Younger abstention otherwise would apply, extraordinary circumstances nonetheless require this Court to exercise its jurisdiction.
"If state proceedings are conducted in bad faith or to harass the litigant, or other extraordinary circumstances exist, the district court may exercise jurisdiction even when the criteria for Younger abstention are met." Baffert, 332 F.3d at 621. SET does not contend that the CPUC proceedings were brought in bad faith or constitute harassment, but rather contends that it is suffering irreparable injury by having to comply with the CPUC's discovery orders. In particular, SET argues, without citation to a declaration, that it has already spent approximately $1.4 million to comply with the CPUC's discovery orders and may have to expend as much as $3 million more in order to complete the document review and production ordered by the CPUC, which expenditures, according to SET, will not be recoverable even if SET ultimately were to prevail in an appeal to the CPUC or in state court. (See SET's Response to Order to Show Cause at 20.)
Few cases have addressed the scope of the "extraordinary circumstances" exception to Younger abstention. In Younger, the Supreme Court suggested that "extraordinary circumstances" might be present when a state statute being enforced in the state proceedings is "`flagrantly and patently violative of express constitutional prohibitions in every clause, sentence and paragraph, and in whatever manner and against whomever an effort might be made to apply it.'" See Younger, 401 U.S. at 53-54 (quoting Watson v. Buck, 313 U.S. 387, 402 (1941)). The Supreme Court also has stated that the exception may apply where the state tribunal is incapable of fairly adjudicating the state proceeding. See Kugler v. Helfant, 421 U.S. 117, 124 (1975) ("Only if `extraordinary circumstances' render the state court incapable of fairly and fully adjudicating the federal issues before it, can there be any relaxation of the deference to be accorded to the state criminal process."); see also Gibson v. Berryhill, 411 U.S. 564, 578-79 (affirming district court's finding that state board was incompetent to adjudicate license revocation proceeding where it had pecuniary interest in the outcome; finding Younger abstention inappropriate).
SET has cited no case holding that the cost of complying with a discovery order in a state proceeding constitutes the type of "extraordinary circumstances" that would permit the Court to "exercise jurisdiction even when the criteria for Younger abstention are met." See Baffert, 332 F.3d at 621. Indeed, the Supreme Court has held, albeit not in a case addressing Younger abstention, that "[m]ere litigation expense, even substantial and unrecoupable cost, does not constitute irreparable injury." See Renegotiation Board v. Bannercraft Clothing Co., 415 U.S. 1, 24 (1974).
Accordingly, the Court finds that SET has not set forth "extraordinary circumstances" such as to warrant this Court's exercise of jurisdiction over the instant action.
5. Summary
For the reasons set forth above, the Court finds that each of the elements of Younger abstention is applicable in the instant case, and that SET has not demonstrated that any exception to Younger abstention applies.
Accordingly, the Court will dismiss the above-titled action, without prejudice to SET's pursuing, in the state proceedings, any remedy to which it may be entitled.
B. Motion to Dismiss
In light of above ruling, the Court does not reach the other issues raised in defendants' motion to dismiss.
CONCLUSION
For the reasons set forth above, the above-titled action is hereby DISMISSED, without prejudice to SET's seeking in the state proceedings all remedies to which it may be entitled.
This order closes Docket Nos. 10 and 24.
The Clerk shall close the file and terminate any pending motions.
IT IS SO ORDERED.