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The scene in U.S. District Court in Brattleboro last Wednesday during closing arguments before Judge J. Garvan Murtha in the Entergy v. Vermont trial in Brattleboro.

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Both sides rest in Entergy v. Vermont trial

Three days of testimony complete, ruling expected by November

BRATTLEBORO—Three days of legal arguments were completed on Sept. 14 in the Entergy v. Vermont federal case, the verdict of which could enforce closing Entergy’s Vermont Yankee nuclear power station in Vernon in 2012 — or result in the overturning of three Vermont statutes that now stand in the way of the plant’s continued operation past that date.

U.S. District Court Judge J. Garvan Murtha told the litigants — the Louisiana-based Entergy and the state of Vermont — on Wednesday that he expects to return a ruling by November.

He also asked both parties for more analysis of the legal equity issues of “waiver,” “estoppel,” “laches,” and “unclean hands.”

In the Entergy v. Vermont case, “waiver” refers to whether Entergy waived its right to sue Vermont.

“Estoppel” is a doctrine that says parties can’t disown their responsibilities to prior commitment. For example, the state has documented examples of Entergy acknowledging the state’s authority to enact legislation that regulates the plant.

Another doctrine, “laches,” holds that parties must act on concerns in a timely manner. If Entergy was worried that Vermont was in pre-emption territory, why did the company wait years to sue?

The doctrine of “unclean hands” boils down to, if litigants wants to plead for equity, their legal hands must also be clean.

Murtha then asked both parties to brief him on the possibility of separating Vermont’s Section 248 from the other statutes Entergy has challenged.

Finally, he asked Entergy’s legal team to spell out precisely what kind of relief it was seeking.

Both briefs are due Sept. 26.

Now, the waiting begins.

Entergy filed suit against the state in April over a Certificate of Public Good (CPG). Vermont requires utilities operating in the state to have a CPG, and the general assembly reserves the right to vote on whether the Public Service Board (PSB) can hear a nuclear plant’s CPG case.

The corporation claims that the state senate was motivated by the desire to regulate radiological safety when it voted 26-4 in 2010 against allowing the PSB to hear VY’s case.

Regulating nuclear safety is the domain of the federal government.

The U.S. Nuclear Regulatory Commission (NRC) renewed VY’s federal operating license last March for an additional 20 years. The plant’s current license expires March 21, 2012.

During the trial, Entergy lawyers requested Murtha to overturn three state statutes — Act 74, Act 160, and Act 189 — which in their view go beyond the state’s jurisdiction under the 1954 federal law that established the U.S. government’s turf.

Two sides argue

The state disputes Entergy’s claims of pre-emption, saying that the company willingly agreed to following Vermont statutes providing the company always got its way. As soon as the state put its foot down, however, Entergy cried lawsuit, the state’s attorneys argued.

Both sides cited the 1983 U.S. Supreme Court case, Pacific Gas & Electric (PG&E) v. California, to prove their respective arguments.

Entergy’s lead attorney, Kathleen Sullivan, termed PG&E the “dividing line” between the federal government’s authority over nuclear safety, and a state’s authority to regulate other concerns.

Sullivan took aim at Vermont’s motives behind its enacting the three acts by playing excerpts from the legislative record.

“How empty and hollow the state’s evidence was,” she said, because it never told the court “what it actually did.”

Sullivan described the state’s defense as displaying “hypothetical, theoretical purposes” for the legislators’ motives.

According to Sullivan, the state’s requirements over Entergy acted as “a hand on our throats.”

Sullivan also characterized the Legislature’s debates about VY as “a fig leaf to put on the naked safety concerns at stake.”

In her closing arguments, Vermont Assistant Attorney General Bridget Asay said Entergy repeatedly renewed its commitment to the state’s statutes over many years each time it agreed to new legislation.

Asay also said Entergy had broken its contract with the state by filing a lawsuit even after the company waived its right to sue in a 2002 document that accompanied the state Public Service Board’s agreement to let Entergy the plant.

According to Asay, it was not the court’s job to review the legislative record and its “cacophony of voices” in an attempt to parse motive. Instead, the court should look only at the statutes and their output, she argued.

“There’s nothing pre-emptive about a conversation,” said Asay.

Weighing in

The trial has drawn a lot of attention from legal minds. Vermont Law School professor Patrick A. Parenteau attended day one of the trial and wrote about the case on the law school’s VY blog.

Of the overall trial, Parenteau said, “it takes a long time to sugar this baby off, because there’s so much noise.”

Parenteau, who described Murtha as “solid” and thorough, predicted that the judge will “take his time” before releasing his ruling.

Parenteau, senior counsel to the Environmental and Natural Resources Law Clinic, also thinks the questions Murtha asked both parties Wednesday were “telling.”

The equity issues caught Parenteau’s attention because he feels Murtha has “no reason” to focus on them at this stage.

The two reasons for Murtha to home in on the state’s equity argument now, Parenteau predicted, are if the judge feels the state has a good argument or if he wants a way to avoid the pre-emption question completely.

If Murtha finds for the state, the case will be dismissed.

Parenteau litigated against Entergy in environmental court in front of Judge Merideth Wright over VY’s latest discharge permit.

According to Parenteau, Entergy “threw 10 lawyers” at him and the law students working on the case. Wright, who retired last month after 20 years, told him that the case had 60 motions, the most in Vermont’s history.

“[Entergy] is a scorched-earth-policy corporation,” said Parenteau, describing the company’s management as “bare-knuckled fighters doling out millions in this case.”

Knock out?

Last week’s trial, however, didn’t deliver a “knock-out blow” for Entergy, said Parenteau.

The company failed to deliver “smoking-gun” evidence showing nuclear safety as the Legislature’s prime motive for shutting down VY, Parenteau said. He doesn’t think Entergy will win on the motives question.

Parenteau also feels the state stopped cold Entergy’s argument that the company couldn’t legally waive its pre-emption claim because pre-emption belongs in federal territory.

Instead, the state required Entergy to agree to waive “its right to sue.” Waiving this right is standard in contract negotiations, said Parenteau.

Entergy waived its litigation rights in exchange for a “boatload of money,” said Parenteau, and its suing the state now mirrors someone expecting to own a leased car after the 10-year lease expires.

Parenteau thinks the state had the better of the two legal arguments. If Vermont loses, it “will be on narrow legal grounds.”

“Not overwhelmed”

Still, said Parenteau, the state’s three days in court left him “not overwhelmed.”

The state never answered the question about the Vermont’s other-than-safety goals like wanting more energy diversity, Parenteau said.

Although the questions were circumstantial, he said, Entergy did raise the issue of whether the state had “clearly articulated” motives regarding closing the plant.

The state wrote fantastic briefs, he said, and backed them up with “good legal arguments.” But, he added, the legal team’s “on their feet” arguments before Murtha did not come across as focused and polished as Entergy’s.

Code words in the statehouse

During her closing arguments, Sullivan described the Legislature as using words like “reliability” as code words for “nuclear safety.”

A judge shouldn’t try to pry open the minds of an entire state legislature, said Parenteau, who feels that Murtha will “respect the sausage making process” of debate, hearings, and testimony that go into legislation.

“[Vermont’s] is a lay legislature — this is a citizen legislature,” he said. “It is perfectly appropriate for [members] to be asking these [safety-related] questions.”

Even though Parenteau agrees that Murtha should look at the state’s statute, the law professor points out ambiguity around phrases like “public health.”

Parenteau said that in the above instance, he would want the state to show him the “public health” conversation or alternative-energy goals in the legislative record to buttress an ambiguous legal term.

In respect to the “show me the record” legal test, “Entergy was on the right track if it could have found a smoking gun,” said Parenteau.

The PG&E v. California case plays an important role here because it presents two points of view for Murtha to follow, said Parenteau.

The decision set the precedent for states to have the authority to say “no new nuclear plants,” he said. But the majority and concurring decisions differed on how close to the territory of nuclear safety states could tread.

In the majority ruling, U.S. Supreme Court Justice Byron White wrote that if a state acted for reasons related to nuclear safety, than those actions fell into the realm of pre-emption, said Parenteau.

“That’s the one hook Entergy can hold onto in this case,” he said, though he feels that Sullivan did not “nail” the argument.

According to Parenteau, U.S. Supreme Court Justice Harold Blackmun wrote the concurring opinion and felt that states could discuss, think about nuclear safety, and say “no” to new plants providing they stopped short of regulating the plants for nuclear safety.

And where are the feds?

Parenteau said Entergy has put forward a “radical” definition of pre-emption regarding its arguments on regulating merchant plants like VY.

Merchant plants are beholden to shareholders, not local ratepayers, which changes states’ authority over them.

Separate from the nuclear safety issue, Entergy lawyers have argued that only the Federal Power Act and Federal Energy Regulatory Commission (FERC) can regulate merchant plants.

“If the Federal courts say that states have no authority over economic regulation of merchant plants — that’s stunning,” said Parenteau.

“Merchant plants” would mean all plants powered by all sources, not just atomic energy, he said.

Parenteau feels Entergy, however, “overreaches with that [argument], and hurts their credibility.”

FERC regulates rates only, not actions like construction, he said.

The NRC has maintained its position that although VY met the criteria for its federal-issued operating license, the plant still needs to meet Vermont’s criteria.

Parenteau warns people to “don’t make too much of feds staying out” of the fray. Politically “it’s not good millage for the feds “to weigh in against a little state over big energy company.”

So why did Entergy wait from 2005, when the Legislature approved Act 74, until 2011 to file suit?

“Entergy waited because it benefited them,” said Parenteau. “The minute the state didn’t give them what they wanted, their true colors showed through.”

In Parenteau’s opinion, waiting over five years before filing a pre-emption claim could prove a “big problem” for the company. In order to “reserve your right to challenge your assertion” at a later date, he said, a litigant needs to speak up and get the concern on the record.

Litigants “can’t sit on [their] rights,” he said.

Parenteau said he would have preferred a summary judgment over a trial. All the arguments in this case fell under “characterizations,” he said, and neither legal team disputed the facts of the situation.

Consequently, there was “no need for a trial,” he said.

After the trial ended last week, Vermont Attorney General William Sorrell reiterated the state’s stance on why it voted against the CPG in 2010.

According to Sorrell, the state did not trust Entergy’s management, did not receive a sufficiently good power purchase agreement as the company promised, and perceived the Enexus spinoff — an abortive plan that would have assigned ownership of VY and other plants in the fleet to a new company — as a “shell game.”

Sorrell did not provide a current estimate on what the trial is costing Vermont.

But, he said, it’s “way less than it’s costing Entergy.”

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Originally published in The Commons issue #119 (Wednesday, September 21, 2011).

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