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State v. Talen Montana, LLC

United States District Court, D. Montana, Helena Division

August 1, 2018

STATE OF MONTANA, Plaintiff,
v.
TALEN MONTANA, LLC, f/k/a PPL MONTANA, LLC, and NORTHWESTERN CORPORATION, d/b/a Northwestern Energy, a Delaware Corporation, Defendants.

          ORDER

          DANA L. CHRISTENSEN, CHIEF DISTRICT JUDGE.

         This case has followed a long course from its inception in 2003 to Defendants' pending motions to dismiss. On October 10, 2017, this Court determined that it has federal question jurisdiction under 28 U.S.C. § 1331. (Doc. 171 at 14.) Promptly following this decision, Defendants Talen Montana, LLC ("Talen") and Northwestern Corporation ("Northwestern") renewed their respective motions to dismiss, which had previously been denied as moot on January 24, 2017. At this juncture, Defendants contend that in PPL Montana v. Montana, 565 U.S. 576 (2012) (hereinafter "PPL"), the Supreme Court of the United States settled the issue of navigability for title of the Great Falls reach, effectively barring Plaintiff, the State of Montana ("Montana" or "the State"), from seeking recovery for that section of the Missouri River. Montana opposes Defendants' motions, arguing that the Supreme Court issued an "open mandate" which merely established a new legal rule to be applied afresh in this case upon a more thoroughly developed factual record. Consequently, the Court must now determine whether the navigability of the entire Great Falls reach has been fully resolved. For the following reasons, the Court accepts as established that one section of the Great Falls reach, "from the head of the first waterfall to the foot of the last, is not navigable for purposes of riverbed title under the equal footing doctrine" and will dismiss Montana's claims as to rents owing from dams within that stretch. PPL, 565 U.S. at 599.

         Background

         In 2003, PPL Montana, LLC ("PPL"), was sued by parents of Montana schoolchildren in the Missoula division of this Court based upon diversity jurisdiction. The plaintiffs alleged that PPL was operating hydroelectric facilities on state-owned riverbeds and that the riverbeds were part of Montana's school trust lands which entitled plaintiffs to compensation for PPL's use of the property. The parents were dismissed for lack of standing after the State intervened as a party plaintiff. PPL then moved to dismiss the case for lack of subject matter jurisdiction asserting that the State is not a citizen for purposes of diversity jurisdiction. The Court granted PPL's motion and dismissed the case.

         In 2004, PPL filed suit in state court seeking a declaration that the State was not entitled to compensation for PPL's use of the riverbeds. The State counterclaimed seeking a declaration that it owned the riverbeds and was entitled to collect rent from PPL for their use. The trial court granted summary judgment to the State and ordered PPL to pay Montana $41 million in rent for its riverbed use between 2000 and 2007. The trial court found that the riverbeds of the Clark Fork, Missouri, and Madison rivers were navigable and accordingly held that the State owned the riverbeds through navigability for title under the Equal Footing Doctrine. The Montana Supreme Court affirmed the state district court in PPL Montana, LLC v. State of Montana, 229 P.3d 421, 443 (Mont. 2010), concluding the rivers were navigable as a matter of law at the time of statehood in 1889, meaning the State acquired title to the riverbeds at that time under the Equal Footing Doctrine.

         PPL petitioned the United States Supreme Court for a writ of certiorari, which was granted on the issue of whether the Montana Supreme Court erred in its application of the navigability for title doctrine by applying a whole-river analysis. The Supreme Court reversed, holding, in relevant part, that the Montana Supreme Court erred in disregarding the segment-by-segment approach to navigability for title. PPL, 565 U.S. at 593. The Montana Supreme Court erroneously found the "segment-by-segment approach ... inapplicable [to the Great Falls reach] because it does not apply to 'short interruptions of navigability in a stream otherwise navigable." Id. at 596 (internal quotation marks and citations omitted). The United States Supreme Court explained that this was a mistake because the Court had not yet established that short interruptions should "merit treatment as part of a longer, navigable reach for purposes of title under the equal-footing doctrine," and, even if it had, the Great Falls reach "certainly would not" qualify as a "short interruption." Id. Further, the Court clarified that the Montana Supreme Court erred in its finding that portages are insufficient to defeat a finding of navigability-"[i]n most cases," portages logically defeat navigability because a portage, by necessity, requires "transportation over land rather than over the water." Id. at 597.

         In the process of clarifying these principles, the Court applied them to the Great Falls reach, finding "no evidence" that this reach was navigable, stating that the need for a portage of this reach defeats a finding of navigability, and concluding that "the 17-mile Great Falls reach, at least from the head of the first waterfall to the foot of the last, is not navigable for purposes of riverbed title under the equal-footing doctrine." Id. at 597-99. Thereafter, the Court remanded the case for the "ultimate decision" on the navigability of "the other disputed river stretches" to be "assessed in light of the principles discussed in [their] opinion." Id. at 600. It is the Supreme Court's analysis of the Great Falls reach which spurred the present controversy. Within the Great Falls reach are five hydroelectric facilities. Beginning upstream at Black Eagle Falls and continuing downstream, these dams are the Black Eagle Dam, the Rainbow Dam, the Cochrane Dam, the Ryan Dam (situated on the eponymous Great Falls), and the Morony Dam.

         This case reached an eddy after the United States Supreme Court rendered its decision, during which time Northwestern entered into a purchase and sale agreement for the acquisition of PPL's hydroelectric facilities in Montana, including the facilities at issue here. (Doc. 1-1 at 4.) The acquisition was approved by the Montana Public Service Commission in September 2014. (Id.) In June 2015, PPL Montana, LLC changed its legal name to Talen Montana, LLC. (Docs. 1-1 at 4; 13-3 at 2-3.)

         The State and Talen stipulated in late March of 2016 that the State would be realigned as the Plaintiff and Talen would be realigned as the Defendant. (Doc. 13-3 at 3.) The parties also stipulated to bifurcate the issues of liability and damages, with all claims or defenses relating to navigability at the time of statehood to be adjudicated first. (Id.) Six days later, on March 31, 2016, the State filed its complaint on remand in state court, naming both Talen and North Western as Defendants. (Doc. 13-4.) The State asks for a declaration that it owns the land occupied by Defendants' hydroelectric facilities and seeks to recover rental payments for these lands, including a claim for the five dams along the Great Falls reach.

         On April 20, 2016, North Western filed a notice of removal invoking this Court's federal question jurisdiction. (Doc. 1.) Talen consented in writing to the removal. (Doc. 1-3.) The State moved to remand the case back to state court, arguing that mere application of federal law did not mean that the case arose under federal law for purposes of federal question jurisdiction and that state law governed "equal footing lands." (Doc. 160 at 11 (internal quotation marks omitted).) As previously mentioned, this Court determined that federal question jurisdiction existed because the vindication of the State's claims necessarily turned upon the construction of federal law. (Doc. 171 at 14.) Accordingly, the State's request for remand was denied.

         On October 16, 2017, Defendants renewed their motions to dismiss, asserting that the decision of the Supreme Court precludes relitigation of the navigability of the Great Falls reach. Talen argues that the mandate rule allows this Court to dismiss the State's claims regarding the Great Falls reach because navigability of this segment of the river should be considered as disposed of and finally settled by the Supreme Court. (Doc. 5 at 10.) Northwestern joins in Talen's argument and further asserts that, as a nonparty in a subsequent suit, Northwestern is entitled to invoke the Supreme Court's decision to dismiss Montana's claims against it. (Doc. 7 at 5.) A hearing on Defendants' motions was held on May 25, 2018.

         Discussion

         Defendants have moved for dismissal of the State's claim pertaining to the Great Falls reach pursuant to Federal Rule of Civil Procedure 12(b)(6) and the mandate rule. (Docs. 4 at 1; 6 at 2.) Dismissal under Rule 12(b)(6) is "proper only when the complaint either (1) lacks a cognizable legal theory or (2) fails to allege sufficient facts to support a cognizable legal theory." Zixiang Li v. Kerry, 710 F.3d 995, 999 (9th Cir. 2013). Unfortunately, Defendants have not explained how Rule 12(b)(6) relates to the mandate rule. Despite invoking Rule 12(b)(6), Defendants proceed to assert their case for dismissal upon a theory that the mandate rule deprives this Court of the authority to render a decision regarding the Great Falls reach-implying that this Court lacks subject-matter jurisdiction, a contention which has already been litigated in this case (as condensed above) and which would be appropriately filed as a Rule 12(b)(1) motion. Nonetheless, the Court proceeds with the analysis satisfied that dismissal under Rule 12(b)(6) is appropriate where "the plaintiff 'cannot possibly win relief.'" Reed v. Lieurance, 863 F.3d 1196, 1207 (9th Cir. 2017) (quoting Lee v. City of Los Angeles, 250 F.3d 668, 683 n. 7 (2001)). If the mandate rule supports the contention that this Court cannot consider the navigability for title of the Great Falls reach, then Montana "cannot possibly win relief on its claims to that stretch of the river and those claims will be dismissed.

         A. ...


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