USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 93-1824
BRISTOL ENERGY CORPORATION, d/b/a ALEXANDRIA POWER ASSOCIATES,
BIO-ENERGY CORPORATION, BRIDGEWATER POWER COMPANY, L.P.,
HEMPHILL POWER AND LIGHT COMPANY, PINETREE POWER, INC.,
PINETREE POWER - TAMWORTH, INC., TIMCO, INC., AND
WHITEFIELD POWER AND LIGHT COMPANY,
Plaintiffs, Appellants,
v.
STATE OF NEW HAMPSHIRE PUBLIC UTILITIES COMMISSION,
Defendant, Appellee.
____________________
No. 93-1835
BRISTOL ENERGY CORPORATION, d/b/a ALEXANDRIA POWER ASSOCIATES,
BIO-ENERGY CORPORATION, BRIDGEWATER POWER COMPANY, L.P.,
HEMPHILL POWER AND LIGHT COMPANY, PINETREE POWER, INC.,
PINETREE POWER - TAMWORTH, INC., TIMCO, INC., AND
WHITEFIELD POWER AND LIGHT COMPANY,
Plaintiffs, Appellants,
v.
STATE OF NEW HAMPSHIRE PUBLIC UTILITIES COMMISSION,
Defendant, Appellee,
AMERICAN HYDRO, INC. - PETERBOROUGH AND ENERGY TACTICS, INC.,
Intervenors, Appellants.
____________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Shane Devine, Senior U.S. District Judge]
__________________________
____________________
Before
Selya, Circuit Judge,
_____________
Bownes, Senior Circuit Judge,
____________________
and Stahl, Circuit Judge.
_____________
____________________
Bryan K. Gould, with whom Robert A. Olson and Brown, Olson &
______________ _______________ ______________
Wilson, P.C. were on brief for appellants and Peter W. Brown,
____________ _______________
Daniel W. Allegretti, and Brown, Olson & Wilson, P.C. on brief
_____________________ ____________________________
for intervenors, appellants.
Harold T. Judd, Senior Assistant Attorney General, with whom
______________
Jeffrey R. Howard, Attorney General, was on brief for appellee.
_________________
Susan Tomasky, Jerome M. Feit and Samuel Soopper on brief
_____________ ______________ ______________
for Federal Energy Regulatory Commission, amicus curiae.
____________________
January 18, 1994
____________________
BOWNES, Senior Circuit Judge. Plaintiffs-
BOWNES, Senior Circuit Judge
_______________________
appellants, a group of power producers, challenge the
district court's dismissal of their suit to enjoin defendant-
appellee, New Hampshire Public Utilities Commission (PUC),
from ordering a disclosure of their business and financial
data.1 PUC requested the information for a study conducted
pursuant to section 712 of the federal Energy Policy Act of
1992, 16 U.S.C. 2621(d)(10). Plaintiffs allege that
federal law preempts PUC's inquiries. The district court
dismissed the suit for lack of subject matter jurisdiction.
Concluding that the case presents a federal question, we find
jurisdiction, but affirm the dismissal because plaintiffs
failed to state a cognizable claim.
I.
I.
Background
Background
__________
Plaintiffs are non-utility power producers known as
"qualifying small power production facilities" and
"qualifying cogeneration facilities" (collectively "QFs"),
see 16 U.S.C. 796(17)(C), (18)(B). QFs are a class of
___
facilities, defined by their size, fuel use, efficiency, and
____________________
1. Throughout this opinion, we use the term "plaintiffs" to
include the plaintiffs-intervenors, Energy Tactics, Inc. and
American Hydro, Inc.-Peterborough, as well as the original
plaintiffs: Bristol Energy Corp.; Bio-Energy Corp.;
Bridgewater Power Co., L.P.; Hemphill Power and Light Co.;
Pinetree Power, Inc.; Pinetree Power-Tamworth, Inc.; Timco,
Inc.; and Whitefield Power and Light Company. The complaints
of these parties are identical in all relevant respects.
-3-
3
ownership, see FERC v. Mississippi, 456 U.S. 742, 750 & n.11
___ ____ ___________
(1982), entitled to special treatment under federal and state
laws regulating power producers. See 16 U.S.C. 824a-
___
3(e)(1); 18 C.F.R. 292.602(c)(1). The Federal Energy
Regulatory Commission (FERC) promulgates regulations
affecting QFs. State utility regulatory commissions such as
PUC implement FERC's regulations on the purchases and sales
of power between utilities and QFs.
In passing the legislation authorizing special
rules for QFs, the Public Utility Regulatory Policies Act of
1978 (PURPA), Congress viewed QFs as desirable alternatives
to traditional electric utility generating facilities. See
___
FERC, 456 U.S. at 750. At that time, Congress perceived two
____
impediments to QF development: [1] the reluctance of public
utilities to sell power to and buy power from QFs; and [2]
the financial burdens imposed on QFs by state and federal
laws designed to regulate utilities providing electricity to
the public. See id. at 750-51. To overcome the first
___ ___
impediment, Congress mandated that FERC promulgate
regulations, for states to implement, governing transactions
between utilities and QFs, including a requirement that
utilities purchase electricity from QFs at a rate up to the
utility's avoided cost (i.e., the utility's cost if it
____
generated the power itself, or purchased it from another
source). See 16 U.S.C. 824a-3(b), -3(d).
___
-4-
4
To solve the second problem, Congress eased the
financial burdens on QFs by authorizing FERC to exempt QFs
from certain federal laws, and from state laws or regulations
"respecting the rates, or respecting the financial or
organizational regulation, of electric utilities," if
necessary to encourage QFs. Id. 824a-3(e). FERC's
___
exemptions for QFs are codified at 18 C.F.R. 292.601 and
.602. Plaintiffs allege that PUC's business and financial
disclosure order violates the regulation exempting QFs from
state regulation of the finances and organization of electric
utilities. See id. 292.602(c)(1)(ii) (hereinafter "QF
___ ___
exemption").
On April 16, 1993, PUC commenced proceedings to
perform a study of wholesale power supplies required by the
Energy Policy Act of 1992, 16 U.S.C. 2621(d)(10).2 In
connection with its study, PUC sent detailed data requests to
eighty QFs in New Hampshire, including plaintiffs, seeking
detailed disclosures offinancial and proprietaryinformation.3
____________________
2. Congress passed the Energy Policy Act in part to foster
greater competition in the wholesale power production market.
See generally H.R. Rep. No. 474(I), 102d Cong., 2d Sess. 138-
___ _________
40 (1992), reprinted in 1992 U.S.C.C.A.N. 1953, 1961-63.
_________ __
3. Plaintiffs characterize these requests as inquiries into:
[1] each facility's business form and ownership;
[2] plaintiff's financing agreements, including
the identity of the lender, and the amount of the
loan, its rate of interest, any required operating
reserve, and the priority of creditors;
[3] plaintiff's retired debt;
-5-
5
On June 14, 1993, plaintiffs filed an action in the
United States District Court for the District of New
Hampshire, alleging that they were exempt from PUC's
inquiries, pursuant to FERC's QF exemption. They sought a
declaratory judgment and an injunction to prevent PUC from
enforcing its disclosure orders. PUC countered that, because
the QF exemption does not apply to PUC's data requests, the
complaint failed to state a claim upon which relief could be
granted.4
On July 20, 1993, the district court dismissed
plaintiffs' action sua sponte, stating that it lacked subject
___ ______
matter jurisdiction. In denying plaintiffs' motion for
reconsideration, the district court ruled:
____________________
[4] allocations of income, gains, losses,
distributions, credit, and cash, from the closing
of any construction loans through the present;
[5] the form of sales of power, monthly volume of
electricity generated, and the identity of their
customers; and
[6] each facility's fuel use, including heat rate,
price paid for fuel, projected fuel use through the
year 2000, method of fuel transportation, fuel
storage capacity, and fuel use risk management
strategies.
PUC's data requests also seek copies of plaintiffs' fuel
supply contracts and a year-by-year spreadsheet analysis of
financial operations from the commencement of operation
through the year 2010. Joint Br. for Appellants and
________________________________
I n t e r v e n o r s - A p p e l l a n t s a t 4 - 5 .
___________________________________________
4. PUC did not file a motion to dismiss under Fed. R. Civ.
P. 12(b)(6), but alleged as a defense in its answer that
plaintiffs failed to state a cognizable claim.
-6-
6
Assuming arguendo that this court could
exercise jurisdiction over plaintiffs'
purported preemption claim at this stage
in the process, there remain at least two
problems with plaintiffs' argument.
First, defendant's data requests were
issued pursuant to federal law; i.e., the
Energy Policy Act of 1992. Therefore,
[FERC's regulation exempting QFs from
state regulation] is inapposite. . . .
Bristol Energy Corp. v. New Hampshire Pub. Utils. Comm'n, 827
____________________ ________________________________
F. Supp. 81, 83 (D.N.H. 1993). Plaintiffs appealed. By
order of this court dated August 30, 1993, we directed the
parties to address the merits, as well as the jurisdictional
issue.
II.
II.
Discussion
Discussion
__________
A. Jurisdiction
A. Jurisdiction
____________
The district court ruled that 16 U.S.C. 2633
stripped it of jurisdiction. That statute provides, in
pertinent part: "Notwithstanding any other provision of law,
no court of the United States shall have jurisdiction over
any action arising under [16 U.S.C. 2611 - 2634] . . . ."
The authority PUC cited for issuing its data requests is 16
U.S.C. 2621(d)(10). Thus, we would lack jurisdiction if
this case were, in fact, an "action arising under" section
2621(d)(10).
According to plaintiffs, the district court looked
at the wrong "action" in deciding the jurisdictional issue.
Although PUC sent out data requests pursuant to section
-7-
7
2621(d)(10), plaintiffs argue that this case does not
"aris[e] under" that section. Rather, plaintiffs argue that
their cause of action implicates principles of preemption,
relating to the QF exemption and the Supremacy Clause.
Plaintiffs maintain that this preemption claim triggers
federal question jurisdiction. We agree.
"It is well established that to invoke federal
question jurisdiction, a federal issue must appear on the
face of a well pleaded complaint." Cable Television Ass'n v.
______________________
Finneran, 954 F.2d 91, 94 (2d Cir. 1992); see also Colonial
________ ___ ____ ________
Penn Group v. Colonial Deposit Co., 834 F.2d 229, 233 (1st
__________ _____________________
Cir. 1987). Here, plaintiffs allege that FERC's QF exemption
under PURPA preempts PUC's authority under state law to order
QFs to disclose business and financial information.
Plaintiffs seek an injunction, as well as a declaratory
judgment, to prevent the enforcement of PUC's data requests.
This case is thus aligned with Shaw v. Delta Air Lines, Inc.,
____ _____________________
463 U.S. 85 (1983), in which the Supreme Court noted:
It is beyond dispute that federal courts
have jurisdiction over suits to enjoin
state officials from interfering with
federal rights. See Ex parte Young, 209
_______________
U.S. 123, 160-62 (1908). A plaintiff who
seeks injunctive relief from state
regulation, on the ground that such
regulation is pre-empted by a federal
statute which, by virtue of the Supremacy
Clause of the Constitution, must prevail,
thus presents a federal question which
the federal courts have jurisdiction
under 28 U.S.C. 1331 to resolve.
-8-
8
Shaw, 463 U.S. at 96 n.14; see also Playboy Enters. v. Public
____ ___ ____ _______________ ______
Serv. Comm'n, 906 F.2d 25, 31 (1st Cir.), cert. denied, 458
____________ _____ ______
U.S. 959 (1990).
We have considered--and we reject--PUC's argument
that 16 U.S.C. 824a-3(g) divests federal courts of
jurisdiction. Section 824a-3(g) places limits on federal
jurisdiction in proceedings involving rules implementing 16
U.S.C. 824a-3(a) and -3(f), rules not at issue in this
case.5 See id. 824a-3(g). The record in this case
___ ___
confirms what PUC's counsel conceded at oral argument: PUC's
data requests were issued pursuant to both state law and 16
U.S.C. 2621(d)(10), not under the rules cited in section
824a-3(g). We conclude that federal question jurisdiction
exists in this case, as in Shaw, because plaintiffs allege a
____
preemption claim and seek to enjoin state officials from
interfering with a federal right, i.e., the QF exemption.
____
B. Merits
B. Merits
______
Plaintiffs have alleged that they are entitled to
declaratory and injunctive relief because PUC's action is
preempted by federal law. The federal law that allegedly
preempts PUC's inquiries is the QF exemption. That
regulation provides in pertinent part: "Any qualifying
____________________
5. Section 824a-3(a) and -3(f) rules concern, inter alia,
_____ ____
the purchases and sales of power between electric utilities
and QFs. See 16 U.S.C. 824a-3(a), -3(f).
___
-9-
9
facility shall be exempted . . . from State law or regulation
respecting . . . [t]he financial and organizational
regulation of electric utilities." 18 C.F.R.
292.602(c)(1)(ii). We consider, seriatim, two issues: [1]
________
whether PUC's one-time inquiry of QFs to gather information
for a study mandated by 16 U.S.C. 2621(d)(10) constitutes
state "regulation respecting . . . [t]he financial and
organizational regulation of electric utilities"; and [2]
whether Congress intended state agencies such as PUC to
request information from QFs to complete the study mandated
by 16 U.S.C. 2621(d)(10).
1. Are QFs Exempt from PUC's Inquiries?
1. Are QFs Exempt from PUC's Inquiries?
____________________________________
FERC, as an amicus in this case, argues that the QF
exemption does not preempt PUC's inquiries because PUC is
seeking information on a one-time basis, to complete a
federally mandated study of wholesale power supplies. See
___
section 712 of the Energy Policy Act of 1992, 16 U.S.C.
2621(d)(10). According to FERC, such a limited collection of
information for a federally mandated study does not
contravene the letter or the spirit of the QF exemption from
state "regulation respecting . . . the financ[es] and
organization[]" of QFs. We agree.
FERC promulgated the QF exemption pursuant to
Congress's mandate that QFs be exempted from state
regulations on the rates, finances, and organization of
-10-
10
electric utilities, if FERC found such an exemption necessary
to encourage QF power production. See 16 U.S.C. 824a-
___
3(e)(1). FERC takes the position that its exemption allows
QFs to avoid "utility-type" regulation, 45 Fed. Reg. 12,214,
12,232 (Feb. 25, 1980) (preamble to final rule), including
state control of electricity rates and the finances,
capitalization, and organization of electric utilities.
PUC's inquiries are not preempted by FERC's QF
exemption. We do not dispute that PUC is seeking financial
and organizational information from plaintiffs. And we can
visualize circumstances in which a state agency's standing
order requiring periodic disclosures of financial records
might be part-and-parcel of the control over electric
utilities from which QFs are exempt. See generally 18 C.F.R.
___ _________
292.601(c) (exempting QFs from, inter alia, 16 U.S.C.
_____ ____
825(b) (authorizing FERC to have access "at all times" to
accounts, records, and memoranda of public utilities)); 44
Fed. Reg. 38,863, 38,865 (July 3, 1979) (FERC Staff Paper)
(noting that FERC could exempt QFs from "requirements for
filing voluminous reports concerning operating, cost and
revenue data").
But PUC did not assert such plenary authority over
QFs when it issued the document requests. In fact, PUC cited
only its authority under state law and the necessity of
completing the evaluation mandated by section 712 of the
-11-
11
Energy Policy Act, 16 U.S.C. 2621(d)(10). The record
suggests that PUC's inquiries seek information related to the
factors enumerated in 16 U.S.C. 2621(d)(10)--assuming QFs
are proper sources of such information. Because PUC is
gathering data on a one-time basis to perform the study
mandated by the Energy Policy Act, 16 U.S.C. 2621(d)(10),
the QF exemption is not a sound foundation for a preemption
claim. Such an inquiry is not utility-type regulation. Nor
does the record suggest that the information will be used for
utility-type regulation.
2. Did Congress Intend QFs To Be Included in the Study?
2. Did Congress Intend QFs To Be Included in the Study?
____________________________________________________
Plaintiffs argue that Congress did not intend QFs
to be included in the Energy Policy Act study. The Energy
Policy Act requires that certain state agencies perform "a
general evaluation" of four factors relating to wholesale
power supplies: [1] the impact of long-term wholesale power
purchases on a utility's cost of capital and retail rates;
[2] the effect of the debt-laden capital structure of "exempt
wholesale generators" on utilities and on reliability; [3]
the propriety of advance approval for long-term wholesale
power purchase contracts; and [4] the need for assurances of
fuel supply adequacy in long-term wholesale power purchase
contracts.6 See 16 U.S.C. 2621(d)(10)(A); see generally
___ ___ _________
____________________
6. Section 2621(d)(10) provides, in pertinent part:
(A) To the extent that a State
regulatory authority requires or allows
-12-
12
Jeffrey D. Watkiss & Douglas W. Smith, The Energy Policy Act
_____________________
of 1992--A Watershed for Competition in the Wholesale Power
_____________________________________________________________
Market, 10 Yale J. on Reg. 447, 475 & n.130 (1993). PUC is
______
included in the class of state agencies required to perform
this study; that is, those requiring or allowing utilities to
purchase long-term wholesale power supplies. See 16 U.S.C.
___
____________________
electric utilities for which it has
ratemaking authority to consider the
purchase of long-term wholesale power
supplies as a means of meeting electric
demand, such authority shall perform a
general evaluation of:
(i) the potential for increases or
decreases in the costs of capital for
such utilities, and any resulting
increases or decreases in the retail
rates paid by electric consumers, that
may result from purchases of long-term
wholesale power supplies in lieu of the
construction of new generation facilities
by such utilities;
(ii) whether the use by exempt wholesale
generators . . . of capital structures
which employ proportionally greater
amounts of debt than the capital
structures of such utilities threatens
reliability or provides an unfair
advantage for exempt wholesale generators
over such utilities;
(iii) whether to implement procedures for
the advance approval or disapproval of
the purchase of a particular long-term
wholesale power supply; and
(iv) whether to require as a condition
for the approval of the purchase of power
that there be reasonable assurances of
fuel supply adequacy.
16 U.S.C. 2621(d)(10). A state agency need not perform the
evaluation or implement any procedures suggested by it, if
such action would be inconsistent with state law or
inappropriate under PURPA. See 16 U.S.C. 2621(a), (c)(1);
___
FERC, 456 U.S. at 764-70. PUC has decided that it is
____
required to perform the study.
-13-
13
2621(d)(10)(A). The statute provides that states must
"consider and make a determination concerning whether . . .
to implement the[se] standards" by October 24, 1993. Id.
___
2621(d)(10)(E).
Plaintiffs maintain that the Energy Policy Act
study concerns only a new class of non-utility power
producers called "exempt wholesale generators" (EWGs).7
Plaintiffs also contend that the only power producers
intended by Congress to be subject to PUC's inquiries are
EWGs, electric utilities, and certain affiliates of EWGs.
The central issue is whether Congress intended
state agencies to make inquiries of QFs to complete their
evaluation of wholesale power supplies. Considering first
the language of the statute to be construed, see American
___ ________
Tobacco Co. v. Patterson, 456 U.S. 63, 68 (1982), we note
___________ _________
that Congress mandated that agencies, including PUC, perform
"a general evaluation" of the enumerated factors respecting
wholesale power supplies. Although the statute makes no
mention of QFs, the use of the term "general evaluation"
suggests that the scope of the study is intended to be broad.
Only the second factor--the impact of debt-laden EWG capital
structures on utilities and on reliability--explicitly refers
____________________
7. EWGs are so called because they are entitled to
exemptions from certain federal utility regulations,
including ownership and capitalization restrictions under the
Public Utility Holding Company Act and the Federal Power Act.
See generally Watkiss & Smith, supra, at 465 n.74, 467.
___ _________ _____
-14-
14
to EWGs; the remaining three factors refer to "long-term
wholesale power purchases." It is undisputed that plaintiffs
supply power at wholesale to electric utilities in New
Hampshire under long-term contracts, and that QFs entering
the market in the future could enter into long-term contracts
with utilities in the state. The language and structure of
the statute indicate that Congress intended QFs to be a
source of information.
Common sense reinforces this conclusion. Congress
clearly intended the "general evaluation" of wholesale power
supply issues to be meaningful and comprehensive, especially
because the Energy Policy Act is designed to increase
competition in the wholesale power production market. See
___
generally H.R. Rep. No. 474(I), supra, at 138-40, reprinted
_________ _____ _________
in 1992 U.S.C.C.A.N. at 1961-63; Watkiss & Smith, supra, at
__ _____
449. Nurtured by FERC's regulations and by PURPA since 1978,
QFs have become an important source of power for utilities to
purchase at wholesale. For example, there were at least
eighty QFs operating in New Hampshire in the spring of 1993.
EWGs, in contrast to QFs, are a new category of wholesale
power producer, created by the Energy Policy Act of 1992. A
company can become an EWG only by filing an application with
FERC. See 15 U.S.C. 79z-5a(a)(1). Accordingly, there were
___
no EWGs in existence when Congress enacted the provision
requiring states to study wholesale power supply issues. We
-15-
15
are led inexorably to the conclusion that Congress intended
state agencies to gather data from QFs, because they are
significant existing sources of wholesale power, in order to
assess the present power situation and to predict the impact
of new entrants into the wholesale power market.
At oral argument, counsel for plaintiffs stated
that state agencies could acquire information regarding QFs
from third-party sources. This point does not affect our
determination that Congress intended states to make inquiries
of QFs, so that the general evaluation of long-term wholesale
power purchases would be meaningful. No source of
information on QFs would be as authoritative as the QFs
themselves. If Congress intended information regarding QFs
to be part of the Energy Policy Act "general evaluation,"
presumably Congress intended that QFs would be the source of
this information.
Plaintiffs' next argument is that section 714 of
the Energy Policy Act, 16 U.S.C. 824(g)(1), manifests
Congress's intent that states cannot subject QFs to business
and financial inquiries. Section 714 provides, "[u]pon
written order of a State commission, a State commission may
examine the books, accounts, memoranda, contracts, and
records of" electric utilities, EWGs, and affiliates of EWGs.
16 U.S.C. 824(g)(1). Because Congress enacted both section
714 and the provision mandating the study of wholesale power
-16-
16
supplies under the Energy Policy Act, plaintiffs argue that
section 714 limits the scope of the "general evaluation"
required by 16 U.S.C. 2621(d)(10) to electric utilities,
EWGs, and their affiliates.
Plaintiffs' argument elevates a rule of statutory
construction--that two provisions of the same legislation
must be read together--above a full and sensible reading of
the statutes at issue. Section 714 specifically provides:
"Nothing in this section shall-- (A) preempt applicable State
law concerning the provision of records and other
information; or (B) in any way limit rights to obtain records
and other information under Federal law, contracts, or
otherwise." 16 U.S.C. 824(g)(4). That provision negates
plaintiffs' attempt to use the facilities enumerated in
section 714 as an exclusive list of power producers
susceptible to state data requests pursuant to section
2621(d)(10).
Furthermore, there is an obvious reason why
Congress would have omitted QFs from section 714, while still
intending that QFs respond to inquiries pursuant to section
2621(d)(10): section 714 is an unrestricted grant of
authority. The statute provides that a state agency may
examine the records of electric utilities, EWGs, and
affiliates of EWGs, "if such examination is required for the
effective discharge" of the agency's "responsibilities
-17-
17
affecting the provision of electric service." 16 U.S.C.
824(g)(1). The statute does not mention section 2621(d)(10),
let alone limit the exercise of this document inspection
authority to gathering information for an evaluation of long-
term wholesale power supply purchases. If QFs were among the
power producers listed in section 714, a court could infer
Congress's intent to repeal partially FERC's QF exemptions,
so that QFs would be proper subjects of any information
requests by state agencies. See Natural Resources Defense
___ __________________________
Council v. Environmental Protection Agency, 824 F.2d 1258,
_______ ________________________________
1278 (1st Cir. 1987) (more recent, more specific enactments
prevail over prior, more generalized law); 1A Norman J.
Singer, Sutherland on Stats. 23.14, at 372 (5th ed. 1993).
____________________
Excluding QFs from section 714 preserves the general QF
exemption from state laws and regulations respecting the
finances and organization of electric utilities.
Finally, plaintiffs argue that allowing PUC to make
inquiries into the finances and organization of QFs is
tantamount to finding an implied repeal of the QF exemption.
Our holding does not cut that broadly. We hold that PUC may
make inquiries of QFs on a one-time basis because it is
acting to complete a study mandated by federal law. Such
regulatory action is not a state "law or regulation
respecting . . . [t]he financial and organizational
regulation of electric utilities," 18 C.F.R.
-18-
18
292.602(c)(1)(ii). Our decision does not alter the QF
exemption.
In light of the foregoing, we reject plaintiffs'
preemption claim. Even accepting all plaintiffs' factual
allegations as true, we find no basis on which plaintiffs may
proceed. This case is thus properly dismissed under Fed. R.
Civ. P. 12(b)(6) for failure to state a cognizable claim.
We recognize that the district court did not rely
on this ground for dismissing this case. We note, however,
that PUC affirmatively pleaded that the complaint failed to
state a claim. Moreover, the district court stated that even
if it had subject matter jurisdiction, there would still be
"problems with plaintiffs' argument," Bristol Energy, 827 F.
______________
Supp. at 83, and we ordered the parties to address the merits
on appeal. Even assuming the district court did not deem
that reason dispositive, we may affirm the court's ruling on
any theory supported by the record. See Willhauck v. Halpin,
___ _________ ______
953 F.2d 689, 704 (1st Cir. 1991). We do so here.8
We conclude in this case that plaintiffs'
allegations provide a basis for federal question
jurisdiction, but we find that their preemption claim lacks
____________________
8. We also note that an appellate court may dismiss a claim
sua sponte on Rule 12(b)(6) grounds when, taking a
___ ______
plaintiff's factual allegations as true, there is a
dispositive issue of law. See Gregory v. United
___ _______ ______
States/United States Bankruptcy Court, 942 F.2d 1498, 1500
______________________________________
(10th Cir. 1991), cert. denied, 112 S. Ct. 2276 (1992).
_____ ______
-19-
19
merit. The district court's dismissal of this case is
therefore
Affirmed.
Affirmed.
_________
-20-
20