State-Court PURPA Compliance Rulings Collaterally Estop Later Federal Preemption Suits Against Vermont’s Standard Offer Program

Precedents Cited (and How They Shaped the Decision)

1) Full faith and credit / preclusion framework

• 28 U.S.C. § 1738 (Full Faith and Credit Statute): The court anchored its analysis in the statutory mandate that federal courts must give state judicial proceedings the same preclusive effect they would receive in the state’s courts.
• E. Fork Funding LLC v. U.S. Bank, 118 F.4th 488 (2d Cir. 2024) (Menashi, J., concurring) (quoting Conopco, Inc. v. Roll Int'l, 231 F.3d 82 (2d Cir. 2000)): Cited for the proposition that, if the state proceeding comported with due process, the federal court must apply the state’s preclusion rules to the resulting final judgment.
• Kremer v. Chemical Const. Corp., 456 U.S. 461 (1982): The opinion relied on Kremer to reject the idea that an underlying administrative character prevents preclusion once there is a judicial affirmance. The order emphasized Kremer’s principle that “judicial affirmance of an administrative determination is entitled to preclusive effect.”
• Swapshire v. Baer, 865 F.2d 948 (8th Cir. 1989) and Kremer v. Chem. Const. Corp., 456 U.S. 461 (1982) (Blackmun, J., dissenting): Used to reinforce that limited or deferential state-court review does not defeat preclusion under § 1738.

2) Vermont’s willingness to raise preclusion sua sponte (and federal analogs)

• Merrilees v. Treasurer, 159 Vt. 623 (1992): Supported Vermont’s policy of addressing preclusion “on its own” when needed to avoid judicial waste and to affirm on any valid legal ground.
• In re Joyce, 208 Vt. 226 (2018): Provided the procedure: Vermont appellate courts may independently raise preclusion after requesting briefing to ensure notice and fairness—mirroring what the Second Circuit did.
• Goldman v. Rio, 788 F. App'x 82 (2 d Cir. 2 019), Emerald Pointe, LLC v. Taney County, 78 F.4th 428 (8th Cir. 2023), and Arizona v. California, 530 U.S. 392 (2000): Cited to validate sua sponte consideration of res judicata/issue preclusion to serve systemic interests in finality and efficiency.

3) Vermont’s elements of issue preclusion and privity

• Echeverria v. Town of Tunbridge, 219 Vt. 585 (2024) (quoting Trepanier v. Getting Organized, Inc., 155 Vt. 259 (1990)): Supplied the five-factor Vermont test for issue preclusion: party/privity; final merits judgment; same issue; full and fair opportunity; and fairness in application.
• Pomfret Farms Ltd. P'ship v. Pomfret Assocs., 174 Vt. 280 (2002) (quoting Cutler v. Jennings, 99 Vt. 85 (1925)): Used to show that Vermont allows preclusion against “nominally different” parties that are “really and substantially in interest the same”—supporting privity among Allco entities.

4) Preclusion in administrative/utility contexts

• Scott v. City of Newport, 177 Vt. 491 (2004), and In re Tariff Filing of Cent. Vt. Pub. Serv. Corp., 172 Vt. 14 (2001): Cited to demonstrate Vermont’s practice of applying issue preclusion to challenges to administrative determinations, including utility rate cases.
• Allco’s reliance on State Corp. Comm'n v. Wichita Gas Co., 290 U.S. 561 (1934), and FTC v. Texaco, Inc., 555 F.2d 862 (D.C. Cir. 1977) (Leventhal, J., concurring): The Second Circuit effectively distinguished these concerns by focusing on the presence of a state supreme court judgment affirming the agency action.

5) PURPA interpretation and “auxiliary programs” (background to the estopped issue)

• In re Investigation to Review Avoided Costs that Serve as Prices for Standard-Offer Program in 2020, 215 Vt. 140 (2021): The Vermont Supreme Court held (i) a state may run “auxiliary programs” with different pricing structures so long as it offers a PURPA-compliant option, and (ii) Vermont’s Rule 4.100 program complied with PURPA notwithstanding a seven-year term. The Second Circuit treated this as the dispositive earlier adjudication that Allco could not relitigate.
• FERC notices: Otter Creek Solar LLC, 143 FERC ¶ 61282 (2013); Winding Creek Solar LLC, 2015 FERC ¶ 61103 (2015): These FERC actions, relied upon by the Vermont Supreme Court, supported the proposition that states can offer additional procurement options beyond PURPA so long as a PURPA-compliant path remains available.
• Cal. Pub. Util. Comm'n, 133 FERC ¶ 61059 (2010): Cited for FERC’s acceptance of similar approaches to PURPA contract structures/pricing, which the Vermont Supreme Court used to reject Allco’s Rule 4.100 compliance attack.

6) Takings doctrine (per se vs. Penn Central) and application

• Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005), and Principle Homecare, LLC v. McDonald, 158 F.4th 326 (2d Cir. 2025): Provided the threshold distinctions: physical takings and regulations that “completely deprive” all economic use (per se categories) versus the Penn Central balancing test.
• Comm. Hous. Improvement Program v. City of New York, 59 F.4th 540 (2d Cir. 2023) (quoting Penn Central): Restated the three primary Penn Central factors (economic impact, investment-backed expectations, character of action).
• 74 Pinehurst LLC v. New York, 59 F.4th 557 (2d Cir. 2023): Used to illustrate how difficult it is to plead a taking under Penn Central without concrete allegations; the court cited precedent rejecting takings claims even with 75–90% value diminutions.
• Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470 (1987): Used (via 74 Pinehurst) to contrast public-regarding regulation with regulation enacted solely to benefit private parties—supporting Vermont’s public-interest character.
• PLH Vineyard Sky LLC v. Vermont Pub. Util. Comm'n, No. 23-CV-154, 2024 WL 1072017 (D. Vt. Mar. 12, 2024): Quoted to show the broader environmental/aesthetic/public-health framework under which Vermont evaluates energy projects, reinforcing the “character of governmental action” factor.

7) Standards of review / appellate posture

• Slattery v. Hochul, 61 F.4th 278 (2d Cir. 2023) (quoting Henry v. County of Nassau, 6 F.4th 324 (2d Cir. 2021)): Established de novo review of Rule 12(b)(6) dismissals.
• Beijing Neu Cloud Oriental Sys. Tech. Co., Ltd. v. IBM, 110 F.4th 106 (2d Cir. 2024) (quoting Headley v. Tilghman, 53 F.3d 472 (2d Cir. 1995)): Provided authority for affirmance on any ground supported by the record—enabling the Second Circuit to affirm on collateral estoppel even though the district court reached the merits.

Legal Reasoning

A. Why collateral estoppel barred the preemption claim

The court’s core move was to shift the focus from “is Vermont preempted?” to “has that issue already been decided in a proceeding that must be respected under § 1738?” Applying Vermont’s issue-preclusion law (via Echeverria v. Town of Tunbridge), the court concluded:

1. Same parties/privity: Allco entities were petitioners in the Vermont proceedings; Vermont preclusion reaches parties “really and substantially in interest the same” (Pomfret Farms Ltd. P'ship v. Pomfret Assocs. (quoting Cutler v. Jennings)).
2. Final judgment on the merits: The Vermont Supreme Court’s affirmance in In re Investigation to Review Avoided Costs that Serve as Prices for Standard-Offer Program in 2020 was final and merits-based.
3. Same issue: The federal suit repackaged arguments already presented (auxiliary-program theory; Rule 4.100 duration cap; Rule 4.100 pricing compliance), and even “additional arguments” were ones Allco could have raised in the Vermont case given that Rule 4.100 compliance was directly at issue.
4. Full and fair opportunity: The court emphasized the issues were legal in nature—no discovery was needed to make the arguments—and Allco did in fact present extensive legal briefing.
5. Fairness: It was fair to preclude relitigation where Allco had already litigated and lost the same federal compliance contention embedded in state law.

The Second Circuit also rejected Allco’s attempt to characterize the Vermont appeal as purely state-law procedural review under 30 V.S.A. § 8005a(f)(3). It pointed to Allco’s own Vermont Supreme Court briefing asserting that the statute required a “merits determination” of consistency with federal law—confirming that the federal issue was actually litigated and decided.

B. Why the takings claim failed under Penn Central

Having found no physical taking and no total wipeout of economic use (per Lingle v. Chevron U.S.A. Inc. and Principle Homecare, LLC v. McDonald), the court applied Penn Central as framed by Comm. Hous. Improvement Program v. City of New York. The takings claim failed because:

• Economic impact not plausibly pleaded: Allco asserted a substantial loss in value from exclusion from the Standard Offer Program but did not quantify the loss, and it retained alternative uses and the ability to participate in Rule 4.100.
• Investment-backed expectations were not “distinct” and “reasonable” in context: Given a history of evolving administration and statutory amendment affecting eligibility, the court found it implausible that Allco could reasonably expect stable access to the Standard Offer Program terms.
• Character of the action was public-regarding: The court described Vermont’s PURPA implementation and PUC review as serving important public interests (environment, aesthetics, health and safety), not as a transfer enacted solely for private benefit (citing the public-interest framing in 74 Pinehurst LLC v. New York and Keystone Bituminous Coal Ass'n v. DeBenedictis).

C. Why dismissal with prejudice stood

The court held there was no abuse of discretion in failing to allow amendment because Allco never requested leave to amend—squarely governed by Allco Fin. Ltd. v. Klee and Gallop v. Cheney.

Impact

Although nonprecedential, the order is significant for litigants in energy regulation and administrative-law pathways because it highlights concrete litigation consequences:

• Forum choice and claim sequencing matter: When state law “bakes” federal compliance into state administrative/judicial review (as Vermont did for PURPA-related pricing), a developer that litigates and loses in state court may be unable to refile a federal preemption challenge later, even if federal jurisdiction would otherwise exist.
• “New” arguments may still be barred: The court treated additional federal-law arguments as precluded where they could have been raised in the prior state appeal addressing the same compliance question. Practically, parties must fully develop all federal compliance theories at the state-court review stage when the issue is in play.
• Administrative procedure objections may not avoid preclusion once there is judicial affirmance: The court’s reliance on Kremer v. Chemical Const. Corp. suggests that, even where the underlying agency process is informal or exempted from contested-case procedures, the subsequent state supreme court judgment can still carry preclusive force.
• Takings claims based on loss of regulatory advantage face a high bar: Exclusion from a more favorable procurement program (where other economically viable options remain) is unlikely to satisfy Penn Central absent concrete, quantified economic impact and strong, reasonable investment-backed expectations.