Free Status Report - District Court of Federal Claims - federal

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS

PACIFIC GAS AND ELECTRIC COMPANY, SOUTHERN CALIFORNIA EDISON COMPANY, AND CALIFORNIA ELECTRICITY OVERSIGHT BOARD, Plaintiffs, v. THE UNITED STATES, Defendant. SAN DIEGO GAS & ELECTRIC COMPANY, a California corporation, Plaintiff, v. THE UNITED STATES, Defendant. THE PEOPLE OF THE STATE OF CALIFORNIA EX REL., EDMUND G BROWN JR., ATTORNEY GENERAL OF THE STATE OF CALIFORNIA, and the CALIFORNIA DEPARTMENT OF WATER RESOURCES BY AND THROUGH ITS CALIFORNIA ENERGY RESOURCES SCHEDULING DIVISION, Plaintiff, v. THE UNITED STATES, Defendant.

No. 1:07-cv-00157-LAS No. 1:07-cv-00167-LAS Consolidated HON. LOREN A. SMITH

No. 1:07-cv-00184-LAS HON. LOREN A. SMITH

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JOINT STATUS REPORT The undersigned parties in the above-captioned actions submit this Joint Status Report pursuant to the Court's Order at the hearing on Defendant's Motion to Dismiss held on June 24, 2008 in San Francisco, California. At that hearing, the Court scheduled a telephone status conference for July 31, 2008 and ordered the parties to submit a joint statement in advance of the conference. Prior to this filing, the parties' counsel met and conferred and hereby set forth the parties' joint statement regarding the two issues to be addressed at the status conference. I. Proposed Case Schedule Plaintiffs' Proposal: Consistent with the Court's Order on June 24, 2008, as well as the Rules of the United States Court of Federal Claims ("RCFC"), Plaintiffs propose the following case schedule:1 Defendant's Answer Tutorial Hearing Early Meeting of Counsel Joint Preliminary Status Report Initial disclosures Preliminary Scheduling Conference Defendant's Proposal: Defendant's Answer Requirement for an answer stayed. September 2, 2008 Week of September 29, 2008 Week of September 22 or 29, 2008 October 14, 2008 November 14, 2008 October 27, 28, or 29, 2008

The parties did not understand the Court's June 24, 2008 Order to call for the submission of a Joint Preliminary Status Report (as described in Appendix A(III)(4) of the Rules of the United States Court of Federal Claims) since the deadline to file that report is 49 days after defendant has filed its Answer, an event that has not yet transpired in this case.

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Evidentiary Hearing Discovery Post-trial briefing due

March, 2009 August, 2008, to January, 2009 April, 2009

II.

Proposed Initial Presentation Plaintiffs' Position: Plaintiffs understood the Court's comments at the June 24, 2008 hearing as requesting an

informal presentation, in the nature of a tutorial, to be held in the near future to help educate the Court about certain background information relevant to the case. (An excerpt from the transcript of the June 24, 2008 hearing at which the Court addressed this topic is attached to this Report as Exhibit A.) In particular, Plaintiffs believe that the Court would benefit from early informal presentations on several topics, including (1) the restructuring of the California wholesale energy markets, including AB 1890; (2) the nature of the PX and ISO markets, including relevant Tariff provisions; (3) the operation of the PX and ISO markets, including auction market and out-ofmarket transactions; (4) the roles of market participants; (5) the economics of market transactions; and (6) the 2000-2001 Western Energy Crisis in general. A detailed outline of Plaintiffs' proposal for this presentation is attached to this Report as Exhibit B. Plaintiffs believe that such an informal presentation could take place in September, 2008 (see proposed schedule, supra.) Contrary to Defendant's proposal set forth below, Plaintiffs believe it is premature to conduct any kind of formal, fact-finding hearing on the record for several reasons. First, the parties would be entitled to take discovery, including depositions of any witnesses, prior to any hearing consisting of formal testimony leading to the entry of findings of fact. The need for discovery would substantially delay the start date of the hearing and obviate the introductory purpose of the requested presentation. Second, a formal, fact-finding hearing would have to be held in conjunction with some formal noticed motion that sets the legal framework in which the Court could make binding findings of fact in this case. The parties presumably would wish to 3

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submit briefs in connection with any such motion, further delaying the presentation itself. Plaintiffs do not believe it is appropriate or efficient for the presentation to be directed at a reconsideration of Defendant's motion to dismiss, which the Court denied. More specifically, the government's proposal that this court hold an evidentiary hearing--in effect a bifurcated trial pursuant to RCFC 42(b)--before an answer is filed and the issues joined is both irregular and inefficient. If a fact-finding hearing goes forward, plaintiffs believe that this should happen at trial after an answer is filed and discovery, including expert discovery, has been conducted. See, e.g., Jaynes v. United States, 75 Fed. Cl. 218 (2007) (ordering a separate trial pursuant to RCFC 42(b) only after Defendant had filed an answer and the court had ruled on cross-motions for summary judgment). As the Court has just determined, Plaintiffs have pleaded viable claims against the United States to recover tens of millions of dollars (or more, when all the claims are valued and interest is assessed) in electricity overcharges that were borne by California businesses and individual ratepayers. Plaintiffs are entitled to have their claims considered on a full record that is adduced in a timely and orderly manner. Defendant's ill-considered proposal would rush this case through a hasty and truncated trial without the United States even having joined issue on the pleadings. For all these reasons, Plaintiffs believe the most productive and efficient way to proceed is to hold an informal tutorial presentation in which presenters for both Plaintiffs and Defendant participate, as described in Exhibit B. Defendant's Position: Defendant understood the Court to contemplate holding an on-the-record hearing for the purpose of reviewing evidence concerning (1) whether the participants in the ISO and PX markets intended to be bound to one another in contract, and (2) any other factual issues bearing upon other arguments raised in defendant's motion to dismiss, e.g., whether certain of plaintiffs' claims present a case or controversy. At the conclusion of the June 24, 2008 hearing on defendant's motion to dismiss, the Court denied defendant's motion to dismiss but also noted that defendant had advanced "pretty strong arguments" in support of its motion. Exhibit A, p. 4

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170. The Court then stated that to determine "whether there's privity or not, what the intent of the scheme was," it would be "useful to have some kind of short hearing . . . where the Court can hear some of the people who were involved in what this transaction was all about, with a relatively limited focus of understanding the factual background of these cases." Id. at 172. The Court suggested that such a "factual hearing" would be "essential" in helping the Court "to understand the legal issues of privity." Id. at 173. Defendant proposes that the Court conduct a limited hearing in accordance with RCFC 42(b), which is expressly designed for this purpose, to decide the issue of privity of contract and any other relevant threshold issues. RCFC 42(b) provides that: The court, in furtherance of convenience or to avoid prejudice, or when separate trials will be conducive to expedition and economy, may order a separate trial of any claim, counterclaim, or third-party claim, or of any separate issue or of any number of claims, counterclaims, third-party claims, or issues. RCFC 42(b); see, e.g., Centex Corp. v. United States, 55 Fed. Cl. 381, 382-83 (2003) (noting Rule 42(b) proceeding in case related to United States v. Winstar Corp., 518 U.S. 839 (1996)). In any hearing conducted pursuant to this rule, the "testimony of witnesses shall be taken in open court, unless a federal law, these rules, the Federal Rules of Evidence, or other rules adopted by the Supreme Court provide otherwise." RCFC 43(a). In particular, a hearing conducted in accordance with Rule 42(b) would be consistent with the Federal Rules of Evidence ("FRE"), which bind this Court. See 28 U.S.C. § 2503. FRE 603 requires that "[b]efore testifying, every witness shall be required to declare that the witness will testify truthfully, by oath or affirmation . . . ." FRE 603. Defendant recognizes that discovery will be necessary prior to the hearing, and that further briefing will also be required, but this hearing will enable the Court to decide

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fundamental threshold issues in the case in a targeted, expeditious, and procedurally sound manner.2 Defendant strongly objects to plaintiffs' proposal to hold a secret, off-the-record, uncontrolled "tutorial" for the Court regarding the issues presented by their case. See Exhibit B. The procedures plaintiffs propose have no place in a court of law. Plaintiffs improvidently urge this Court to flout the rules of evidence and basic standards of due process -- to expose this tribunal to the unsworn testimony of individuals who cannot be cross examined and who may have no foundation for what they say. Cross examination, prior discovery, and other evidentiary safeguards are especially indispensable here because the issues plaintiffs propose for discussion -- for example, the roles of market participants -- are issues that this Court will eventually have to rule upon. The Court's consideration of extra-judicial information related to these issues would irretrievably taint the record in this case. Defendant further objects to plaintiffs' proposal to make these proceedings "confidential." Plaintiffs would have the Court defy the general principle that "a trial is a public event. What transpires in the court room is public property." Richmond Newspapers, Inc. v. Virginia, 448 U.S. 555, 593 (1980) (Brennan, concurring) (internal brackets and quotations omitted); see also BBA Nonwovens Simpsonville, Inc. v. Superior Nonwovens, LLC, 303 F.3d 1332, 1335 n.1 (Fed. Cir. 2002) (noting that "the beneficial effects of public scrutiny upon the administration of justice support a presumption in favor of public access to judicial records.") (internal quotation marks omitted); Grove Fresh Distributors, Inc. v. Everfresh Juice Co., 24 F.3d 893, 897 (7th Cir. 1994) (noting that public scrutiny over the court system serves to "(1) promote If the Court intends to consider more than threshold issues at this hearing, or to require defendant to file an answer, defendant may request that the Court stay this matter until the conclusion of the FERC proceedings referenced in our motion to dismiss on page 7, note 3.
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community respect for the rule of law, (2) provide a check on the activities of judges and litigants, and (3) foster more accurate fact finding."). These proceedings should be on the record and open to the public, a particularly appropriate course of action in a suit against the United States in which plaintiffs seek public money as recompense. See F.T.C. v. Standard Financial Management Corp., 830 F.2d 404, 410 (1st Cir. 1987). Plaintiffs' proposed proceedings would also be highly inefficient. The parties and the Court would spend a considerable amount of time and resources preparing for and conducting plaintiffs' proposed "tutorial," but would then be prevented from relying upon anything said in that proceeding to resolve any issue in the case because any information presented there would not be evidentiary in nature. The "tutorial" would accordingly in no way advance this case. Defendant sees no utility in such an empty exercise. Finally, defendant disagrees with plaintiffs' assertion that the Court may not hold a hearing in this matter absent a formal noticed motion that sets the legal framework in which the Court could make rulings. RCFC 40 provides that this Court may set a case for trial in any "manner as the court deems expedient." RCFC 40. Accordingly, the Court may set a hearing in this case pursuant to RCFC 40, and it may frame the issues to be decided -- issues raised by plaintiffs' complaints -- in that hearing pursuant to RCFC 42(b). Such a procedure would provide the parties with adequate notice of the issues before the Court. Respectfully submitted, DATED: July 25, 2008 By: s/ Marie L. Fiala MARIE L. FIALA HELLER EHRMAN LLP 333 Bush Street San Francisco, CA 94104-2878 Telephone: (415) 772-6000

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Facsimile: (415) 772-6268 ATTORNEY OF RECORD FOR PLAINTIFF PACIFIC GAS AND ELECTRIC COMPANY OF COUNSEL: RUSSELL P. COHEN HELLER EHRMAN LLP 333 Bush Street San Francisco, CA 94104-2878 Telephone: (415) 772-6000 Facsimile: (415) 772-6268 STAN BERMAN PEGGY J. WILLIAMS HELLER EHRMAN LLP 701 Fifth Ave, Suite 6100 Seattle, WA 98104-7098 Telephone: (206) 447-0900 Facsimile: (206) 447-0849 MARK PATRIZIO PACIFIC GAS AND ELECTRIC COMPANY 77 Beale Street, MailCode B30A San Francisco, CA 94105 Telephone: (415) 973-6344 Facsimile: (415) 973-5520 Attorneys for Plaintiff Pacific Gas and Electric Company

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DATED: July 25, 2008

By: s/ Jane I. Ryan JANE I. RYAN STEPTOE & JOHNSON LLP 1330 Connecticut Avenue NW Washington, DC 20036 Telephone: (202) 429-3000 Facsimile: (202) 429-3902 ATTORNEY OF RECORD FOR PLAINTIFF SOUTHERN CALIFORNIA EDISON COMPANY

OF COUNSEL: DANIEL C. SAULS STEPTOE & JOHNSON LLP 1330 Connecticut Avenue NW Washington, DC 20036 Telephone: (202) 429-3000 Facsimile: (202) 429-3902 LEON BASS, JR. SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Rosemead, CA 91770 Telephone: (626) 302-6967 Attorneys for Plaintiff Southern California Edison Company

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DATED: July 25, 2008

By: s/ Laura Lindgren LAURA LINDGREN HENNIGAN BENNETT & DORMAN LLP 865 S. Figueroa Street Los Angeles, California 90017 Telephone: (213) 694-1200 Facsimile: (213) 694-1234 ATTORNEY OF RECORD FOR PLAINTIFF SAN DIEGO GAS & ELECTRIC COMPANY

OF COUNSEL: J. MICHAEL HENNIGAN ROBERT W. MOCKLER HENNIGAN BENNETT & DORMAN LLP 865 S. Figueroa Street Los Angeles, California 90017 Telephone: (213) 694-1200 Facsimile: (213) 694-1234 Attorneys for Plaintiff San Diego Gas & Electric Company

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DATED: July 25, 2008

By: s/ Martin Goyette MARTIN GOYETTE Supervising Deputy Attorney General Office of the Attorney General 1515 Clay Street, 20th Floor P.O. Box 70550 Oakland, CA 94612-0550 Tel. (510) 622-2207 Fax (510) 622-2270 [email protected] ATTORNEY OF RECORD FOR PLAINTIFFS THE PEOPLE OF THE STATE OF CALIFORNIA EX REL. EDMUND G. BROWN JR., ATTORNEY GENERAL OF THE STATE OF CALIFORNIA, and the CALIFORNIA DEPARTMENT OF WATER RESOURCES BY AND THROUGH ITS CALIFORNIA ENERGY RESOURCES SCHEDULING DIVISION

OF COUNSEL: GARY ALEXANDER JOSHUA SONDHEIMER JULIA JE Deputy Attorneys General Office of the Attorney General 455 Golden Gate Avenue, Suite 11000 San Francisco, CA 94102-7004 Tel. (415) 703-5500 Fax (415) 703-5480 PEGGY BERNARDY California Department of Water Resources California Energy Resources Scheduling Division 3310 El Camino Avenue, Suite 120 Sacramento, CA 95821 Tel. (916) 574-0321 Fax (916) 654-9822

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DATED: July 25, 2008

By: GREGORY G. KATSAS Assistant Attorney General s/ Jeanne E. Davidson JEANNE E. DAVIDSON Director s/ Mark A. Melnick MARK A. MELNICK Assistant Director Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit, 8th Floor 1100 L Street, N.W. Washington, D.C. 20530 Telephone: (202) 616-0475 Facsimile: (202) 305-7644 ATTORNEYS FOR DEFENDANT

OF COUNSEL: SEAN B. McNAMARA Trial Attorney Department of Justice Peter Burger Attorney Bonneville Power Administration John D. Bremer Attorney Western Area Power Administration

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