February 10, 2012, Pat Parenteau: Why the State Must Appeal

I’ve been on the fence about whether Vermont should appeal Judge Murtha’s decision by the Feb. 21 deadline. Even though there are plenty of reasons to question the decision, there is no guarantee Vermont could win an appeal and there is some risk of making a bad situation worse from the state’s point of view.

Vermont did win an important victory when Judge Murtha rejected Entergy’s show-stopper claim that the Federal Power Act preempts any form of state regulation over merchant power plants and that the Public Service Board (PSB) lacks any power to require a new certificate of public good (CPG).

Should Vermont appeal, Entergy would almost certainly cross-appeal and resurrect that argument. Further, should the Second Circuit uphold Judge Murtha’s preemption ruling and validate his unorthodox view that courts are required to parse legislative history to divine the motivations of individual legislators that would cement a very dangerous precedent with implications far beyond the future of Vermont Yankee.

But Entergy’s shocking demand that the state pay $4.62 million in attorney fees and costs incurred to date (with the threat of more to come) raises the economic stakes considerably. In the face of this large potential financial liability, given the state’s strong arguments on appeal and the small incremental costs of appeal now that the record has been made, the interests of Vermont taxpayers will clearly be best served if the Attorney General decides to prosecute an appeal.

Another reason to appeal is Entergy’s demand that the PSB issue a new 20-year CPG forthwith, with no opportunity for further hearings or presentation of additional evidence. This clearly signals Entergy’s intention to vigorously contest any attempt by the PSB to conduct a careful searching inquiry into whether a new certificate would serve the public good.

Judge Murtha’s decision hangs like a sword of Damocles over the PSB, and Entergy can be counted on to challenge any decision the board makes on the ground that it is biased and “motivated” by illicit concerns about public health. To clear the air and restore integrity of the Act 78 process, Judge Murtha’s decision must be reversed.

That begs the question: What are the strongest grounds for appeal? To win, the AG must convince a three judge panel of the Second Circuit that Judge Murtha committed “reversible error.” The standard of review here is what lawyers call “de novo,” which simply means that the Second Circuit does not owe any deference to Judge Murtha’s legal analysis; nor are any facts in dispute. In short, the Appeals Court is free to take a fresh look at the case as if nothing had happened.

Here are the mistakes Judge Murtha made that could add up to reversible error:

  • He failed to accord proper weight to the presumption against preemption that applies in cases where there is no express preemption and no actual conflict between state and federal law, which is precisely the situation here. In fact, Judge Murtha only mentions this presumption in passing when discussing the PGE case where the U.S. Supreme Court relied heavily on the presumption in upholding California’s nuclear moratorium despite evidence that the legislation was adopted against a background of strong public concerns about the safety of the Diablo Canyon plant, as I described in a 1976 law review article. More recently, in a case many Vermonters will recognize, the Supreme Court reaffirmed the presumption against preemption in Wyeth v. Levine, where Diana Levine was entitled to recover damages under state tort law for serious injury from a mislabeled drug that had been certified by the FDA. There is a long line of Supreme Court decisions upholding the presumption in the absence of a “clear and manifest intent” by Congress to preempt a state’s exercise of its traditional authority over such things as land use, environmental protection and utility regulation; no such intent is to be inferred. This principle was forcefully reaffirmed just last year in Chamber of Commerce v Whiting, upholding Arizona’s regulation of undocumented workers in the face of an implied preemption challenge similar to the one presented here. These precedents place the burden squarely on Entergy to prove by clear and convincing evidence that Congress intended to prohibit the Vermont Legislature from considering the interconnected issues of plant safety, reliability, land use, the environment and economics during its deliberations on Acts 160 and 74. Judge Murtha took the view that any consideration of safety tainted the whole legislative process and forced the state to prove a negative: that it would have acted despite such concerns. This is a tortured interpretation that essentially reverses the presumption and wrongly shifts the burden to the state to prove that it was not motivated by preempted purposes.
  • Judge Murtha misreads PGE. In fact, the kind of microscopic examination of the legislative history that he embarked upon—probing the mental processes of individual legislators and piecing together snippets of testimony to fashion a composite portrait of legislative purpose—is precisely what the PGE Court warned against. After noting that California’s intent in enacting the moratorium was “subject to varying interpretations,” including safety concerns, the Court said: “[W]e should not become embroiled in trying to ascertain California’s true motive.” The Court explained: “What motivates one legislator to vote for a statue is not necessarily what motivates scores of others to enact it.” And the Court concluded: “Therefore, we accept California’s avowed economic purpose as the rationale for enacting [the moratorium].” The unmistakable holding and rationale of PGE is that courts are not to do what Murtha did and seek to find ulterior motives for enacting laws that on their face do not purport to regulate the safety aspects of nuclear plants. Nor do Acts 160 and 74, in fact, regulate any aspect of the operation of Vermont Yankee that would in any way conflict with NRC regulations or frustrate any Congressional purpose. Again, the PGE Court spoke directly to this issue when it said: “The NRC’s imprimatur, however, indicates only that it is safe to proceed with such plants, not that it is economically wise to do so…. Moreover because the NRC’s regulations are aimed at insuring the plants are safe, not necessarily that they are economical, [the California law] does not interfere with the objective of the federal regulation.” Similarly, the Vermont laws do not trench upon any federal prerogatives regarding safety regulations. They neither duplicate nor expand upon any federal regulations. They do not attempt to regulate in any way, shape or form. They represent the judgment of the Legislature that continued operation of Vermont Yankee is not in the best interests of Vermonters. People may disagree with that judgment, but it is not for the courts to decide matters of public policy. Safety and reliability, as well as waste disposal and economics, are inseparable concepts. It is impossible to talk about the economics of nuclear power and not consider the extra costs that are involved to meet safety requirements set by the federal government. There is nothing in the text or history of the Atomic Energy Act, and certainly nothing in the PGE opinion, that suggests Congress meant to prohibit states from taking all of these factors into account when deciding what role nuclear power was to play in energy policy. In short, the fact that NRC says a plant is safe does not end the inquiry into whether a particular plant serves the public good. It is a misuse of the preemption doctrine to impose upon states the burden of proving that the stated purpose of a law is, in fact, the “real” purpose. I have looked hard and found no other preemption case where the motives of individual legislators led a court to strike down a state law that did not have the effect of regulating in a preempted field.
  • Judge Murtha applied the wrong legal standard to judge the constitutionality of Vermont’s laws. He bought Entergy’s argument that once safety entered the discussion, the burden shifted to Vermont to prove that the Legislature would have enacted these laws in the absence of safety concerns. This was the so-called “dog that didn’t bark” argument so cleverly presented by Entergy lawyer Kathleen Sullivan. But a better name might be “this dog won’t hunt.”  The cases that Judge Murtha relies upon, which are lifted wholesale from Entergy’s brief, are taken from civil rights cases involving discrimination and First Amendment violations. The Arlington Heights case figured prominently in his analysis. That case dealt with an allegedly racially discriminatory housing ordinance. Arlington Heights holds that to establish a prima facie case of an equal protection violation, the person alleging discrimination must first show (through use of legislative history, a pattern of events or departures from usual procedures) that discrimination was a motivating factor in the decision. Then, according to the Court, the burden shifts to the city to show that the same decision would have resulted even if the discriminatory motive was not present. But this “disparate impact” test has never been applied to preemption cases and it frankly makes no sense in the context of the doctrine of Federalism, which governs the relationship between state and federal governments, especially in the field of energy and environmental regulation. Again, Judge Murtha ignored the fact that there is an express savings provision in the Atomic Energy Act, which states that “Nothing in this Act shall be construed to affect the authority of any state or local agency to regulate activities for purposes other than protection against radiation hazards.” The PGE Court cited this in noting that “[W]e start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.” Importing tests used to judge the constitutionality of laws under the First and Fourteenth Amendments into a case involving the balance of governmental regulatory authority over nuclear power plants where the Supreme Court has already ruled that there is dual responsibility is just plain wrong.
  • Judge Murtha misused the legislative history. There is a good argument that he should not have looked at the legislative history of Acts 160 and 74 at all because on their face there was no mention of radiological health and safety and no assertion of any regulatory authority over such matters. And to the extent that the term “public health” as used in the statutes is susceptible to more than one interpretation, Judge Murtha should have deferred to the state’s interpretation that it did not refer to radiation safety instead of accepting Entergy’s interpretation that it did. But assuming for the sake of argument that Judge Murtha was correct to consult legislative history he had a duty to consider all of it, not just the statements of a dozen individuals cherry-picked by Entergy from a vast record that spanned several years and thousands of pages of transcripts. Some of the individuals cited were not even legislators; they were witnesses in hearings free to say whatever they wanted. Others were not even identified by name. This is sausage making at its worst. One does not have to be a “textualist” like Justice Scalia to see that such random reflections are hardly a reliable indicatory of legislative intent. It is difficult enough to discern the intent of a single person let alone an entire institution comprised of 180 members. In short, Judge Murtha erred in relying on snippets of legislative history to override the plain language of the statutes in question.
  • Judge Murtha eviscerated the 2002 memorandum of understanding by ruling that it did not constitute a binding waiver by Entergy of its right to sue the state on the very preemption grounds raised in this case. Indeed, if the MOU wasn’t a waiver, what in the world was it? The MOU is a contract negotiated at arm’s length under which Entergy received an asset of great value, and in return for which the state got a promise that Entergy would not do what it has, in fact, done. There is no reason that Entergy should not be held accountable to the bargain it struck. Judge Murtha cites the fact that the MOU is a promise not to sue the PSB for failure to grant a new CPG but not a promise not to sue the state if the Legislature prevents the PSB from deciding whether to issue a new CPG. This is a distinction without a difference. Further, Judge Murtha fails to cite the Duquense Power and Light case where the Supreme Court held that “It cannot seriously be contended that the Constitution prevents state legislatures from giving specific instructions to their utility commissions.” In short, under the doctrine of constitutional avoidance, the Second Circuit needn’t reach the preemption issues in this case at all because Entergy contracted away its right to challenge the state’s refusal to issue a new CPG. The Circuit can avoid a difficult constitutional issue by simply enforcing the terms of the contract Entergy signed. The policy reasons in favor of holding companies to the promises they make to state utility commissions are powerful. By contrast, Judge Murtha’s strained effort to release Entergy from its commitment sends a terrible message to the regulated community that promises are not worth the paper they are written on.
  • Finally, as my colleague Don Kreis has explained, Judge Murtha’s ruling on the dormant commerce clause is dead wrong as a matter of law. Rather than take up more space here, I refer readers to Don’s trenchant analysis on this point. I would only add that Entergy’s claim for megabucks in attorney fees rests squarely on this issue. The Supreme Court has ruled that fees may be recovered for parties who prevail on commerce clause claims but not solely for supremacy clause claims. Thus, should the Circuit overturn Judge Murtha on this point, even if it were to uphold the preemption ruling, Entergy would not be entitled to fee recovery under the “American Rule” that each side normally bears its own costs in the absence of an explicit fee shifting provision.

In conclusion, the state should appeal because it stands to gain more than it might lose. I applaud AG Sorrell’s decision to consult with David Frederick, a seasoned Supreme Court advocate, on the best strategy for an appeal. The AG’s office has a talented group of lawyers who have worked extremely hard on this case. But the stakes are high and Vermont may have only one more shot at victory. It better put the best closer on the mound.

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