author: THOMAS, Chief Judge:

text:
    CALIFORNIA PUBLIC UTILITIES COMMISSION, Petitioner, Mirant Americas Energy Marketing, LP; Nevada Power Company; Sierra Pacific Power Company; City of Seattle; City of Glendale; Mieco, Inc., Intervenors, and City of Glendale, California, v. FEDERAL ENERGY REGULATORY COMMISSION, Respondent. The People of the State of California, ex rel. Xavier Becerra, Attorney General, Petitioners, Nevada Power Company; Sierra Pacific Power Company; City of Seattle; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent. Southern California Edison Company, Petitioner, NRG Power Marketing, Inc.; Public Utility District No. 2 of Grant County, Commission of the State of California; Port of Seattle, Washington; City of Tacoma, Washington; The People of the State of California, ex rel. Xavier Becerra, Attorney General; El Paso Merchant Energy L.P.; Sacramento Municipal Utility District; Mirant Americas Energy Marketing, LP; Mirant California, LLC; Mirant Delta, LLC, Mirant Potrero, LLC; Dynegy Power Marketing, Inc.; El Segundo Power LLC, Long Beach Generation, LLC; Cabrillo Power I, LLC; Cabrillo Power II, LLC; Portland General Electric Company; PacifiCorp; Transmission Agency of Northern California (TANC); Northern California Power Agency, Public Service Company of New Mexico; Coral Power, L.L.C., Constellation Power Source; Coral Power, L.L.C.; Constellation Energy Commodities Group, Inc.; California Independent System Operator Corporation; Salt River Project Agricultural Improvement and Power District; CA State Assembly; Pacific Gas & Electric Company, Intervenors, Port of Seattle; City of Tacoma; The People of the State of California; City of San Diego; CA State Assembly, Petitioners-Intervenors, Nevada Power Company; Sierra Pacific Power Company; City of Seattle, Intervenors, City of Pasadena, Petitioner-Intervenor, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. California Public Utilities Commission, Petitioner, Southern California Edison Company; The People of the State of California, ex rel. Xavier Becerra, Attorney General; City of Tacoma, Washington; Port of Seattle Washington, Petitioners-Intervenors, Portland General Electric Company; Avista Corporation; El Paso Merchant Energy L.P.; Coral Power, L.L.C.; Northern California Power Agency; Avista Energy, Inc.; Morgan Stanley Capital Group, Inc.; Merrill Lynch Capital Services Inc.; Duke Energy North America, LLC, Duke Energy Trading and Marketing, LLC, (Collectively, “Duke Energy”); Pacific Gas & Electric Company; PacifiCorp; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent, M-S-R Public Power Agency; Modesto Irrigation District; City of Redding, California; City of Santa Clara, California; Dynegy Power Marketing, Inc., El Segundo Power LLC, Long Beach Generation LLC, Cabrillo Power I LLC, and Cabrillo Power II LLC (Collectively, “Dynegy”), Respondents-Intervenors. Pacific Gas & Electric Company, Petitioner, The People of the State of California, ex rel. Xavier Becerra, Attorney General; Southern California Edison Company, Petitioners-Intervenors, Avista Corporation; Cogeneration Association of CA (CAC), Nevada Independent Energy Coalition (NIEC) and Cogeneration Coalition of WA (CCW); California Independent System Operator Corporation; Portland General Electric Company; Dynegy Power Marketing, Inc.; El Segundo Power; Cabrillo Power; Cabrillo Power II LLC; Morgan Stanley Capital Group, Inc.; Modesto Irrigation District; City of Santa Clara, California; Avista Energy; Puget Sound Investment Group; The City of Los Angeles Department of Water and Power; Coral Power, L.L.C.; Mirant Americas Energy Marketing, LP, Mirant CA, LLC, Mirant Delta, LLC, and Mirant Potereo, LLC (Collectively, “Mirant”; Transcanada Energy Ltd.; Northern California Power Agency; City of Tacoma, Washington; Port of Seattle Washington; PacifiCorp; PacifiCorp; Salt River Project Agricultural Improvement and Power District; City of Redding, California; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent, Metropolitan Water District of Southern California, Respondent-Intervenor. Southern California Edison Company, Petitioner, Pacific Gas & Electric Company, Petitioner-Intervenor, Salt River Project Agricultural Improvement and Power District; PacifiCorp; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent. Southern California Edison Company, Petitioner, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. San Diego Gas & Electric Company, Petitioner, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. California Public Utilities Commission, Petitioner, Port of Seattle Washington; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent. Portland General Electric Company, Petitioner, Modesto Irrigation District; City of Santa Clara; City of Redding; California Independent System Operator Corporation; Transcanada Energy; California Public Utilities Commission; Southern California Edison Company; California Electricity Oversight Board; Pacific Gas & Electric Company; The People of the State of California, ex rel. Xavier Becerra, Attorney General; Northern California Power Agency; Port of Seattle; Tucson Electric Power Company; PacifiCorp; El Paso Merchant Energy L.P.; Constellation Energy Commodities Group, Inc.; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent. Southern California Edison Company, Petitioner, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. Southern California Edison Company, Petitioner, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. Southern California Edison Company, Petitioner, California Electricity Oversight Board; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent, California Independent System Operator Corporation, Intervenor, Port of Seattle Washington; Avista Energy Inc.; California Electricty Oversight Board; Dynegy Power Marketing, Inc., El Segundo Power LLC, Long Beach Generation LLC, Cabrillo Power I LLC, and Cabrillo Power II LLC (Collectively, “Dynegy”), Applicants-Intervenors. The People of the State of California, ex rel. Xavier Becerra, Attorney General, Petitioner, California Electricity Oversight Board; Port of Seattle; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent, California Independent System Operator Corporation, Intervenor. Port of Seattle Washington; Coral Power, L.L.C.; Avista Energy Inc.; Puget Sound Energy, Inc; California Electricty Oversight Board; Dynegy Power Marketing, Inc., El Segundo Power LLC, Long Beach Generation LLC, Cabrillo Power I LLC, and Cabrillo Power II LLC (Collectively, “Dynegy”), Applicants-Intervenors. Pacific Gas & Electric Company, Petitioner, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent, California Independent System Operator Corporation, Intervenor, Duke Energy North America, LLC, Duke Energy Trading and Marketing, LLC, (Collectively, "Duke Energy"); Southern California Edison Company, (Edison); Port of Seattle Washington; Coral Power, L.L.C.; Avista Energy, Inc.; California Electricty Oversight Board; Dynegy Power Marketing, Inc., El Segundo Power LLC, Long Beach Generation LLC, Cabrillo Power I LLC, and Cabrillo Power II LLC (Collectively, "Dynegy"), Applicants-Intervenors. Pacific Gas & Electric Company, Petitioner, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. Southern California Edison Company, Petitioner, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. Pacific Gas & Electric Company, Petitioner, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. The People of the State of California; Xavier Becerra, Attorney General, Petitioners, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. California Public Utilities Commission; California Electricity Oversight Board, Petitioners, Port of Seattle, Washington; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent. The People of the State of California; Xavier Becerra, Attorney General, Petitioners, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. Pacific Gas & Electric Company, Petitioner, California Electricity Oversight Board; Southern California Edison Company, Petitioners-Intervenors, Modesto Irrigation District; The People of the State of California, ex rel. Xavier Becerra, Attorney General; Avista Energy Inc.; California Independent System Operator Corporation; Enron Power Marketing Inc.; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent, Dynegy Power Marketing, Inc.; Modesto Irrigation District; Northern California Power Agency; California Independent System Operator Corporation; The People of the State of California, ex rel. Xavier Becerra, Attorney General, Respondents-Intervenors. Southern California Edison Company, Petitioner, Modesto Irrigation District; The People of the State of California, ex rel. Xavier Becerra, Attorney General; Sempra Energy Trading Corp.; Avista Energy Inc.; California Independent System Operator Corporation; Enron Power Marketing Inc.; City of Los Angeles Department of Water and Power; Williams Power Company, Inc; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent. California Public Utilities Commission; California Electricity Oversight Board, Petitioners, Modesto Irrigation District; The People of the State of California, ex rel. Xavier Becerra, Attorney General; Sempra Energy Trading Corp.; Avista Energy Inc.; Enron Power Marketing Inc.; Williams Power Company, Inc; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent, The People of the State of California, ex rel. Xavier Becerra, Attorney General, Respondent-Intervenor. Pacific Gas & Electric Company, Petitioner, Modesto Irrigation District; The People of the State of California, ex rel. Xavier Becerra, Attorney General; Sempra Energy Trading Corp.; Avista Energy Inc.; Puget Sound Energy, Inc; California Independent System Operator Corporation; Enron Power Marketing, Inc.; Williams Power Company, Inc; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent. Southern California Edison Company, Petitioner, Tucson Electric Power Company, Intervenor, Modesto Irrigation District, Respondent-Intervenor, The People of the State of California, ex rel. Xavier Becerra, Attorney General; Avista Energy Inc.; California Independent System Operator Corporation; Enron Power Marketing Inc.; Williams Power Company, Inc; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent, Williams Power Company, Inc; PacifiCorp, Applicants-Intervenors. The People of the State of California, ex rel. Xavier Becerra, Attorney General, Petitioner, Modesto Irrigation District; The People of the State of California, ex rel. Xavier Becerra, Attorney General; Avista Energy Inc.; California Independent System Operator Corporation; Enron Power Marketing, Inc.; Williams Power Company, Inc; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent. The People of the State of California, ex rel. Xavier Becerra, Attorney General, Petitioner, Modesto Irrigation District; The People of the State of California, ex rel. Xavier Becerra, Attorney General; Sempra Energy Trading Corp.; Avista Energy Inc.; California Independent System Operator Corporation; Enron Power Marketing, Inc.; California Independent System Operator Corporation; City of Los Angeles Department of Water and Power; Avista Energy Inc.; Williams Power Company, Inc; Sempra Energy Trading Corp.; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent. California Public Utilities Commission; California Electricity Oversight Board, Petitioners-Appellants, The People of the State of California, ex rel. Xavier Becerra, Attorney General; Avista Energy Inc.; Enron Power Marketing Inc.; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent-Appellee. Pacific Gas & Electric Company, Petitioner, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. Southern California Edison Company, Petitioner, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. The People of the State of California, Petitioner, Port of Seattle, Petitioner-Intervenor, Portland General Electric Company; El Segundo Power LLC; California Edison Company, Intervenors, Mieco, Inc., Intervenor, and Pinnacle West Company, v. Federal Energy Regulatory Commission, Respondent, Southern California Edison Company, Applicant-Intervenor. California Public Utilities Commission; California Electricity Oversight Board, Petitioners, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. Pacific Gas & Electric Company, Petitioner, Southern California Edison Company; The People of the State of California, ex rel. Xavier Becerra, Attorney General, Petitioners-Intervenors, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent, Tucson Electric Power Company; PacifiCorp, Respondents-Intervenors, California Electricity Oversight Board; Williams Power Company, Inc; Constellation Energy Commodities Group, Inc.; Portland General Electric Company; Avista Energy Inc.; Constellation Energy Commodities Group, Inc.; Enron Power Marketing, Inc.; City of Seattle, Washington; Midway Sunset Cogeneration Company, Applicants-Intervenors. The People of the State of California, ex rel. Xavier Becerra, Attorney General, Petitioner, Southern California Edison Company, Petitioner-Intervenor, Federal Energy Regulatory Commission, Respondent, Pacific Gas & Electric Company; Avista Energy; The City of Los Angeles Department of Water and Power; Enron Power Marketing Inc.; Portland General Electric Company; California Electricity Oversight Board; Mieco, Inc., Intervenors, v. Modesto Irrigation District; The City of Santa Clara; City of Redding, Respondents-Intervenors. California Public Utilities Commission; California Electricity Oversight Board, Petitioners, Southern California Edison Company, Petitioner-Intervenor, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. Southern California Edison Company, Petitioner, Pacific Gas & Electric Company; Coral Power, L.L.C.; Mieco, Inc., Intervenors, and California Electricity Oversight Board, v. Federal Energy Regulatory Commission, Respondent. The People of the State of California, ex rel. Xavier Becerra, Attorney General; California Public Utilities Commission; Pacific Gas & Electric Company; Southern California Edison Company, Petitioners, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. The People of the State of California, ex rel. Xavier Becerra, Attorney General; California Public Utilities Commission; Pacific Gas & Electric Company; San Diego Gas & Electric Company; Southern California Edison Company, Petitioners, Sacramento Municipal Utility District; City of Pasadena, California; Mieco, Inc., Intervenors, v. Federal Energy Regulatory Commission, Respondent. The People of the State of California, ex rel. Xavier Becerra, Attorney General; California Public Utilities Commission; Southern California Edison Company; Pacific Gas & Electric Company, Petitioners, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. The People of the State of California, ex rel. Xavier Becerra, Attorney General; California Public Utilities Commission; Southern California Edison Company; Pacific Gas & Electric Company, Petitioners, Mieco, Inc., Intervenor, v. Federal Energy Regulatory Commission, Respondent. The People of the State of California, ex rel. Xavier Becerra, Attorney General; California Public Utilities Commission; Pacific Gas & Electric Company; Southern California Edison Company, Petitioners, v. Federal Energy Regulatory Commission, Respondent. The People of the State of California, ex rel. Xavier Becerra, Attorney General; California Public Utilities Commission; Pacific Gas & Electric Company; Southern California Edison Company, Petitioners, Midway Sunset Cogeneration Company, Intervenor, v. Federal Energy Regulatory Commission, Respondent. The People of the State of California, ex rel. Xavier Becerra, Attorney General; California Public Utilities Commission; Pacific Gas & Electric Company; Southern California Edison Company, Petitioners, v. Federal Energy Regulatory Commission, Respondent. The People of the State of California, ex rel. Xavier Becerra, Attorney General; California Public Utilities Commission; Pacific Gas & Electric Company; Southern California Edison Company, Petitioners, v. Federal Energy Regulatory Commission, Respondent. The People of the State of California, ex rel. Xavier Becerra, Attorney General; California Public Utilities Commission; Pacific Gas & Electric Company; Southern California Edison Company, Petitioners, v. Federal Energy Regulatory Commission, Respondent.
    No. 01-71934, No. 01-71944, No. 02-70219, No. 02-71426, No. 02-72136, No. 02-72488, No. 02-72548, No. 02-72585, No. 03-74471, No. 03-74647, No. 03-74729, No. 04-70564, No. 04-72162, No. 04-72169, No. 04-72210, No. 04-72539, No. 04-72756, No. 04-73242, No. 04-73259, No. 04-73405, No. 04-73491, No. 04-74984, No. 04-75496, No. 04-75503, No. 04-75609, No. 04-75720, No. 04-75838, No. 04-75840, No. 04-76095, No. 05-71761, No. 05-72614, No. 05-72678, No. 05-72954, No. 06-71320, No. 06-71642, No. 06-72006, No. 06-72195, No. 08-74306, No. 08-74834, No. 09-71953, No. 09-71961, No. 10-71708, No. 11-71542, No. 12-70406, No. 12-70407, No. 12-71034
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted March 22, 2017 San Francisco, California
    Filed April 21, 2017

      Stan Berman (argued) and Eric Todde-rud, Sidley Austin LLP, Seattle, Washington; Mark D. Patrizio and Joshua S. Levenberg, Pacific Gas and Electric Company; for Petitioner Pacific Gas and Electric Company.
    Candace J. Morey; Arocles Aguilar, General Counsel; San Francisco, California; as and for Petitioner Public Utilities Commission of the State of California.
    Kevin J. McKeon, Judith D. Cassel, and Whitney E. Snyder, Hawke McKeon & Sniscak LLP, Harrisburg, Pennsylvania; Danette E. Valdez, Supervising Deputy Attorney General; Martin Goyette, Senior Assistant Attorney General; Mark Breck-ler, Chief Assistant Attorney General; Office of the Attorney General, San Francisco, California; for Petitioners People of the State of California ex rel. Xavier Becerra, Attorney General.
    Richard L. Roberts and Catherine M. Giovannoni, Steptoe & Johnson LLP, Washington, D.C.; Russell C. Swartz, J. Eric Isken, and Russell A. Archer, Southern California Edison Company, Rose-mead, California; for Petitioners Southern California Edison Company.
    Beth Guralnick Pacella (argued), Deputy Solicitor; Robert H. Solomon, Solicitor; Max Minzner, General Counsel; Washington, D.C., for Respondent Federal Energy-Regulatory Commission.
    Before: SIDNEY R. THOMAS, Chief Judge, and M. MARGARET McKEOWN and RICHARD R. CLIFTON, Circuit Judges.
   OPINION

THOMAS, Chief Judge:

This petition for review returns to us as part of a long series of administrative cases arising out of the California energy crisis in 2000 and 2001, the background of which we have described in detail in earlier opinions. This petition requires us to determine whether the Federal Energy Regulatory Commission (“FERC” or “Commission”) acted arbitrarily or capriciously in calculating certain refunds.

We review FERC decisions to determine whether they are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” Pac. Gas & Elec. Co. v. FERC, 373 F.3d 1315, 1319 (D.C. Cir. 2004) (citing 5 U.S.C. § 706(2)(A); Sithe/Indep. Power Partners v. FERC, 165 F.3d 944, 948 (D.C. Cir. 1999)). “FERC must be able to demonstrate that it has made a reasoned decision based upon substantial evidence in the record.” Id. (quoting N. States Power Co. v. FERC, 30 F.3d 177, 180 (D.C. Cir. 1994)). The Court also must ensure that FERC “artieulate[s] a satisfactory explanation for its action including a rational connection between the facts found and the choice made.” Id. (alteration in original) (quoting Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State Farm Mut. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 4 43 (1983)).

We grant the petition in part and deny it in part.

I

After we concluded in Bonneville Power Administration v. FERC that FERC had acted outside its jurisdiction when ordering governmental entities/non-public utilities to pay refunds, 422 F.3d 908, 926 (9th Cir. 2005), the Commission vacated each of its orders in the California refund proceeding to the extent that they ordered governmental entities/non-public utilities to pay refunds. San Diego Gas & Elec. Co. v. Sellers of Energy & Ancillary Servs. (“2007 Order on Remand”), 121 FERC ¶ 61,067, 61,352-53, 2007 WL 3047581, at *9 (2007). The Commission directed the California Power Exchange Corporation (“Cal-PX”) and the California Independent System Operator Corporation (“Cal-ISO”) to complete refund calculations with all entities that participated in the Cal-PX and Cal-ISO markets and not to redo the refund calculations to remove the governmental entities/non-public utilities. Id.

FERC agreed with the California parties (“California”) that energy sales and purchases should be netted before calculating each party’s refund. amount, but it found that netting these sales and purchases over the entire refund period could have the indirect effect of requiring governmental entities and other non-public utilities to pay refunds. 2008 Order on Rehearing and Motions for Clarification and Accounting, 125 FERC ¶ 61,214, 62,-112-13, 2008 WL 4962565, at *4-5 (2008). FERC instead found that in order to calculate the total refund shortfall resulting from Bonneville, Cal-ISO should net sales and purchases over hourly intervals. Id. The Commission noted that under the Cal-ISO Tariff, a settlement period was defined in terms of hourly intervals, and therefore, it directed Cal-ISO to net over hourly intervals to ensure consistency with its tariff requirements. Id.

In a later order, FERC applied the same rationale to CalPX, whose tariff also specified hourly settlement intervals, and directed Cal-PX to perform its final refund calculations netting purchases and sales over hourly intervals to reflect the period during which the obligation was incurred. 2011 Order Accepting Compliance Filings and Providing Guidance, 136 FERC ¶ 61,-036, 2011 WL 2750775, at *11 (2011).

California argues that the applicable tariffs unambiguously require Cal-ISO and Cal-PX to net for the entire refund period, not over hourly intervals. Although California makes a plausible case for its interpretation, we cannot conclude that FERC acted arbitrarily or capriciously in its interpretation of the tariffs. Though the tariffs provide for netting in certain situations over an interval shorter than an hour or for netting charges over an hour and later summing the charges over the day and over the entire month to generate monthly invoices, nothing suggests that the netting interval should span the entire refund period, which lasted nine months. Similarly, FERC’s interpretation of the tariff amendments was likewise reasonable. Cal-ISO Amendment No. 51 and Cal-PX Amendment No. 23 segregated transactions during the refund period. The amendments did not address calculating the total net refunds; they related only to performing settlement reruns and invoice adjustments (prerequisites to calculating final refunds). FERC reasonably interpreted the amendments as inapplicable.

California also argues that FERC’s decision to net governmental entity sales on an hourly basis departed from its prior orders without explanation. However, the prior orders cited do not address how the refunds should be netted; they address cost offset allocations.

California also suggests that the result is unduly discriminatory because hourly netting improperly permits governmental entities and non-public utilities to receive unlawfully excessive rates charged for sales made in one hour (without having to repay sellers for the excessive rates), while collecting refunds if that same entity bought power in another hour or in a different market in that same hour. The data do suggest some disparity. However, that is a natural consequence of our jurisdictional decision in Bonneville.

In sum, although the tariffs are not specific on these points, we cannot conclude that FERC acted arbitrarily or capriciously in its construction of the tariffs.

II

The second issue in the petition for review concerns a $5 million deficit in the Cal-PX settlement clearing account that resulted from a transfer of funds from the settlement clearing account to the operating, account in March 2001; the $5 million was used for operating expenses. The Commission determined that the deficit was attributable to an accounting error on the part of Cal-PX and found that, given the delay in discovering that the funds had erroneously been transferred, it appeared unlikely that Cal-PX would “be able to determine how, precisely, this $5 million was used, separate and apart from other funds in the operating account during the same period.” 2011 Order Accepting Compliance Filings and Providing Guidance, 136 FERC ¶ 61,067, 2011 WL 2750775, at *15. Therefore, the Commission determined that the most efficient and equitable solution was to treat the settlement account deficit “like a refund shortfall and allocate the shortfall among all net refund recipients in proportion to their final refund positions.” Id. The Commission denied rehearing of its decision, concluding that only net refund recipients (net buyers) would be financially affected by the reduction in the total amount of available funds and that this approach was consistent with its decisions about how to allocate other shortfalls. 2012 Order Denying Rehearing (II), 138 FERC ¶ 61,092, 61,-398, 2012 WL 372854, at *3 (2012).

California argues that FERC should have allocated the $5 million deficit to both buyers and sellers, rather than just to net buyers. In this respect, we are guided by Pacific Gas & Electric, in which the D.C. Circuit concluded that FERC was required to allocate costs across the entire market. 373 F.3d at 1319-22. Pacific Gas & Electric involved Cal-PX “winding up” its business affairs. Id. at 1317-18. Because CalPX had no funding source during the wind-up period, FERC allocated the costs of Cal-PX’s wind-up and ongoing operations among its customers on the basis of their prior purchases. Id. at 1318, 1320. However, the D.C. Circuit held that “FERC’s imposition of additional charges on Cal-PX’s customers allocated on the basis of their prior purchases without reflection of any new jurisdictional services directly violate[d] the filed-rate doctrine or the rule against retroactive rulemaking.” Id. at 1320. Because Cal-PX’s former customers had already paid the filed rate for the past jurisdictional services, any imposition of new costs based on the previous transactions was prohibited. Id. The court also held that FERC’s cost allocation methodology was unreasonable because there was no connection between “the size of [a customer’s] account balance” and the “customer’s likely benefit from ... [Cal-Px’s] wind-up activities.” Id. at 1321.

Here, the allocation of the shortfall is not a new charge but is the result of Cal-PX’s accounting error. Nonetheless, the $5 million was used for operating expenses and, as noted in Pacific Gas & Electric, all market participants benefitted from the continued operation of Cal-PX. Id. at 1321. Therefore, consistent with the treatment in Pacific Gas & Electric, the shortfall should be allocated among all market participants. See id.

FERC argues that its decision was consistent with prior proceedings and, specifically, that the shortfall after Bonneville was allocated to refund recipients based on their final net refund positions. See 2007 Order on Remand, 121 FERC ¶ 61,067, 61,352-53, 2007 WL 3047581, at *9. However, allocation of the Bonneville shortfall is distinguishable because it was a shortfall in refunds. Because governmental entities could not be ordered to pay refunds, there was less money to be allocated to buyers. Here, on the other hand, the shortfall exists in the account from which refunds will be made, but is unrelated to the refund proceeding.

In sum, we agree with the logic employed by the D.C. Circuit and conclude that FERC acted arbitrarily and capriciously in allocating the refund only to net buyers and not to all market participants.

III

In conclusion, we deny the petition as to the question whether refunds should be netted hourly or across the entire refund period. We grant the petition as to the allocation of the deficit in the Cal-PX settlement clearing account. Each party shall bear its own fees and costs on appeal.

PETITION GRANTED IN PART; DENIED IN PART.

        . See, e.g., MPS Merch. Servs., Inc. v. FERC, 836 F.3d 1155, 1160 (9th Cir. 2016); Cal. ex rel. Harris v. FERC, 809 F.3d 491, 496-98 (9th Cir. 2015); Pub. Utils. Comm’n of State of Cal. v. FERC, 462 F.3d 1027, 1036-45 (9th Cir. 2006); Bonneville Power Admin. v. FERC, 422 F.3d 908, 911-14 (9th Cir. 2005); Cal. ex rel. Lockyer v. FERC, 383 F.3d 1006, 1008-11 (9th Cir. 2004).

      . All proceedings below share this case name. Orders will be referred to by their year and title for the sake of brevity and to avoid confusion.

      . Petitioners the California Parties consist of the Public Utilities Commission of the State of California; the People of the State of California ex rel. Xavier Becerra, Attorney General; Pacific Gas aild Electric Company; and Southern California Edison Company.


source: Caselaw Access Project

author: M. SMITH, Circuit Judge:

license: Public Domain

text:
    CITY OF LOS ANGELES, a municipal corporation (acting by and through its Department of Airports), Third-Party-Plaintiff-Appellant, v. AECOM SERVICES, INC.; Tutor Perini Corporation, Third-Party-Defendants-Appellees, and BCI Coca-Cola Bottling Company of Los Angeles; Jaroth, Inc., Third-Party-Defendants
    No. 15-56606
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted April 5, 2017, Pasadena, California
    Filed April 24, 2017

      Timothy T. Coates (argued) and Edward L. Xanders, Greines Martin Stein & Rich-land LLP, Los Angeles, California; Kevin Gilbert, Lozano Smith, Walnut Creek, California; Kerrin Tso, Los Angeles City Attorney’s Office, Los Angeles, California; for Third-Party-Plaintiff-Appellant.
    Robert Nida (argued), Edward Wei, and Nomi L. Castle, Castle & Associates APLC, Beverly Hills, California, for Third-Party-Defendant-Appellee Tutor Perini Corporation.
    Noel Eugene Macaulay (argued) and Steven H. Schwartz, Schwartz & Janzen LLP, Los Angeles, California, for Third-Party-Defendant-Appellee AECOM Services, Inc.
    Christine Van Aken, Chief of Appellate Litigation; Dennis J. Herrera, City Attorney; City Attorney’s Office, San Francisco, California; for Amici Curiae League of California Cities and California Association of Joint Powers Authorities.
    Before: MILAN D. SMITH, JR. and N.R. SMITH, Circuit Judges, and GARY FEINERMAN, District Judge.

       The Honorable Gary Feinerman, United States District Judge for the Northern District of Illinois, sitting by designation.

   OPINION

M. SMITH, Circuit Judge:

This appeal presents a single legal question that has not yet been addressed by our court: Do Title' II of the Americans with Disabilities Act (ADA) and Section 504 of the Rehabilitation Act of 1973 (§ 504) preempt a city’s state-law claims for breach of contract and de facto contribution against contractors who breach their contractual duty to perform services in compliance with federal disability regulations? For the reasons set forth in this opinion, we hold that neither Title II nor § 504 preempts such claims.

FACTUAL AND PROCEDURAL BACKGROUND

Two disabled individuals filed suit against Appellant City of Los Angeles (the City), alleging that the City’s FlyAway bus facility and service — a bus system that provides transportation between Los An-geles International Airport and various locations — failed to meet the accessibility standards set forth in Title II of the ADA, 42 U.S.C. §§ 12131 et seq.; § 504 of the Rehabilitation Act, 29 U.S.C. §§ 701 et seq.; and various California statutes. The complaint specifically alleged that the FlyAway bus facility in Van Nuys, California, had been constructed in such a manner that it was inaccessible by disabled individuals. Plaintiffs sought damages, attorneys’ fees, and an injunction requiring the City to modify its Van Nuys FlyAway facility so that it would become compliant with state and federal disability access standards.

The City subsequently filed a third-party complaint against Appellees AECOM Services, Inc. (AECOM) and Tutor Perini Corporation (Tutor). The City’s third-party complaint alleged that pursuant to the contract entered into by the City and the company hired to design and construct the Van Nuys FlyAway facility (which was AECOM’s predecessor-in-interest), AE-COM was obligated “to defend, indemnify, and hold harmless the City against all suits, claims, losses, demands, and expenses to the extent that any such claim results from the negligent and/or intentional wrongful acts or omissions of [AE-COM], its subcontractors, officers, agents, servants, [or] employees.” (emphasis added). The complaint also tracked the language of the contract, pursuant to which AECOM’s predecessor-in-interest agreed

to defend, indemnify and hold City ... harmless from and against all suits and causes of action, claims, losses, demands and, expenses ... to the extent that any claim for personal injury and/or for property damage results from the negligent and/or the intentional wrongful acts or omissions of Consultant, its subcontractors of any tier, and its or their officers, agents, servants, or employees, successors or assigns.

(emphasis added).

The City further alleged that Tutor, the successor-in-interest to another company retained by the City to construct the Van Nuys FlyAway facility, was contractually obligated “to defend, indemnify, and hold harmless the City against all costs, liability, damage or expense ... sustained as a proximate result of the acts or omissions of [Tutor] or relating to acts or events pertaining to, or arising out of, the contract.” The contract between the City and Tutor’s predeeessor-in-interest also required that the contractor, in performing its contractual obligations, “comply with all applicable present and/or future local, ... State and Federal Laws, statutes, ordinances, rules, regulations, restrictions and/or orders, including ... the Americans with Disabilities Act of 1990,” and stated that “Contractor shall be solely responsible for any and all damages caused, and/or penalties levied, as the result of Contractor’s noncompliance with such enactments.” The contract also stated that

[e]xcept for the City’s sole negligence or willful misconduct, Contractor expressly agrees to ... defend, indemnify, keep and hold City ... harmless from any and all costs, liability, damage or expense ... sustained as a proximate result of the acts or omissions of Contractor, its agents, servants, subcontractors, employees or invitees; or [ ] relating to acts or events pertaining to, or arising from or out of, this Contract.

Based on the foregoing contractual provisions between the City and Appellees’ respective predecessors-in-interest, the City’s third-party complaint against Appel-lees sought damages for breach of contract, express contractual indemnity, and declaratory relief establishing Appellees’ obligations to defend and indemnify the City.

Tutor moved to dismiss the City’s claims pursuant to Federal Rule' of Civil Procedure 12(b)(6), on the theory that Title II and § 504 preempt the City’s claims for indemnification. The district court granted Tutor’s motion to dismiss on preemption grounds. The district court also denied the City’s request for leave to amend its complaint, because it believed that any potential amendment would be futile. The City and AECOM then stipulated that the district court could rule on the viability of the City’s claims against AECOM on the same basis as it did on Tutor’s motion to dismiss because AECOM had asserted an identical preemption defense. The district court subsequently dismissed the City’s claims against AECOM in an order substantively identical to the order previously issued in regard to Tutor’s motion to dismiss. The City now appeals the district court’s dismissal of its third-party claims against Ap-pellees.

JURISDICTION AND STANDARD OF REVIEW

The district court entered a final judgment as to all parties in this appeal on October 8, 2015. We have jurisdiction over final judgments of the district court pursuant to 28 U.S.C. § 1291. We review de novo a district court’s dismissal for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). In re Apple iPhone Antitrust Litig., 846 F.3d 313, 317 (9th Cir. 2017). We similarly review de novo questions of preemption under the Supremacy Clause. Kroske v. U.S. Bank Corp., 432 F.3d 976, 980 (9th Cir. 2005).

ANALYSIS

I. The Americans with Disabilities Act and the Rehabilitation Act of 1973

Title II of the ADA states that “no qualified individual with a disability shall, by reason of such disability, be excluded from participation in or be denied the benefits of the services, programs, or activities of a public entity, or be subjected to discrimination by any such entity.” 42 U.S.C. § 12132. This echoes § 504 of the Rehabilitation Act, which states that “[n]o otherwise qualified individual with a disability ... shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.” 29 U.S.C. § 794(a). Title II “extends the anti-discrimination prohibition embodied in section 504 [of the Rehabilitation Act of 1973] to all actions of state and local governments,” H.R. Rep. No. 101-485(11), at 84 (1990), reprinted in 1990 U.S.C.C.A.N. 303, 367, and should be read “broadly in order to effectively implement the ADA’s fundamental purpose of providing a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities.” Hason v. Med. Bd. of Cal., 279 F.3d 1167, 1172 (9th Cir. 2002) (internal quotation marks and alteration omitted). In the context of claims brought under Title II, “the ADA’s broad language brings within its scope anything a public entity does.” Lee v. City of Los Angeles, 250 F.3d 668, 691 (9th Cir. 2001) (internal quotation marks omitted).

II. Federal Preemption of State Law

The Supremacy Clause of the United States Constitution provides that the “Constitution, and the Laws of the United States which shall be made in Pursuance thereof ... shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” U.S. Const. art. VI, cl. 2. The Supreme Court has set forth two principles to guide courts in applying the federal preemption principle embodied in this constitutional provision. First, “the purpose of Congress is the ultimate touchstone in every pre-emption case.” Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996) (internal quotation marks and alteration omitted). Second, “[i]n all pre-emption cases, and particularly in those in which Congress has legislated in a field which the States have traditionally occupied, we start with the assumption that the historic police powers of the States were .not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.” Id. (internal quotation marks and ellipsis omitted); see also Wyeth v. Levine, 555 U.S. 555, 565, 129 S.Ct. 1187, 173 L.Ed.2d 51 (2009).

We have recognized three ways in which a federal law may preempt state legislation:

First, Congress may preempt state law by so stating in express terms. Second, preemption may be inferred when federal regulation in a particular field is so pervasive as to make reasonable the inference that Congress left no room for ■the States to supplement it. In such cases of field preemption, the mere volume and complexity of federal regulations demonstrate an implicit congressional intent to displace all state law. Third, preemption may be implied when state law actually conflicts with federal law. Such a conflict arises when compliance with both federal and state regulations is a physical impossibility, or when state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.

Bank of Am. v. City & Cty. of S.F., 309 F.3d 551, 558 (9th Cir. 2002), as amended on denial of reh’g and reh’g en banc (Dec. 20, 2002) (internal quotation marks and citations omitted).

The Supreme Court has stated, in the context of banking regulations, that the general presumption against preemption “is not triggered when the State regulates in an area where there has been a history of significant federal presence.” United States v. Locke, 529 U.S. 89, 108, 120 S.Ct. 1135, 146 L.Ed.2d 69 (2000). Taken in isolation, this language might suggest that any time the federal government has historically regulated in a given area, the typical presumption against preemption does not apply. However, the Court, in Wyeth v. Levine, 555 U.S. 555, 129 S.Ct. 1187, 173 L.Ed.2d 51 (2009), somewhat cabined its language from Locke by further explaining the role of historic federal regulation in conducting a preemption analysis:

Wyeth argues that the presumption against pre-emption should not apply to this case because the Federal Government has regulated drug labeling for more than a century. That argument misunderstands the principle: We rely on the presumption because respect for the States as “independent sovereigns in our federal system” leads us to assume that “Congress does not cavalierly preempt state-law causes of action.” Lohr, 518 U.S. at 485 [116 S.Ct. 2240]. The presumption thus accounts for the historic presence of state law but does not rely on the absence of federal regulation.

Id. at 565 n.3, 129 S.Ct. 1187 (emphasis added). Locke’s assertion that the presumption against preemption will not apply “where there has been a history of significant federal presence” must therefore be considered in conjunction with the specific circumstances attendant to banking regulations, and particularly the fact that in Locke, a state had “enacted legislation in an area where the federal interest has been manifest since the beginning of our Republic.” Locke, 529 U.S. at 99, 120 S.Ct. 1135. The Supreme Court found a wholly different situation in Wyeth, and, although Congress had enacted a “significant public health law” as early as 1906, the Court nevertheless recognized public health and safety as a realm in which the presumption applies. 555 U.S. at 565-66, 565 n.3, 129 S.Ct. 1187.

III. Neither Title II nor Section 504 Preempts State-Law Claims for Contribution

Neither Title II nor § 504 contains a statement of express preemption, and no party in this appeal contends otherwise. The district court’s opinion suggests, however, that field preemption applies to preclude Appellant’s claims. We disagree. Field preemption occurs “where the scheme of federal regulation is sufficiently comprehensive to make reasonable the inference that Congress left no room for supplementary state regulation,” or “where the field is one in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject.” Hillsborough Cty. v. Automated Med. Labs., Inc., 471 U.S. 707, 713, 105 S.Ct. 2371, 85 L.Ed.2d 714 (1985) (internal quotation marks omitted). Title II specifically states that “[njothing in this chapter shall be construed to invalidate or limit the remedies, rights, and procedures of ... any State or political subdivision of any State or jurisdiction that provides greater or equal protection for the rights of individuals with disabilities than are afforded by this chapter.” 42 U.S.C. § 12201(b). In other words, the ADA expressly disavows preemptive federal occupation of the disability-rights field.

Nevertheless, we may affirm on any basis finding support in the record, and Ap-pellees contend — as they did before the district court — that conflict preemption precludes the City’s claims. Appellees’ argument rests largely upon the Fourth Circuit Court of Appeals’ decision in Equal Rights Center v. Niles Bolton Associates, 602 F.3d 597 (4th Cir. 2010). That case concerned a housing developer that filed crossclaims for implied and express contractual indemnification against the architect of its properties, seeking damages stemming from those properties’ failure to comply with, inter alia, the ADA’s disability accessibility requirements. See id. at 599. The Fourth Circuit held that the ADA preempted the developer’s claim for indemnification, and further concluded that granting the developer leave to amend to include a claim for contribution would be futile, because any contribution claim would be a de facto indemnification claim, and thus similarly preempted. Id. at 602.

The Equal Rights Center court found that obstacle preemption, which is a subset of conflict preemption, applied to the claims there at issue. Id. at 601-02. It explained that the purpose of the ADA is “regulatory rather than compensatory,” and that therefore “denying indemnification encourages the reasonable care required by the [federal statute].” Id. It further emphasized the nondelegable nature of responsibility under the ADA, pursuant to which “an owner cannot insulate himself from liability for discrimination in regard to living premises owned by him and managed for his benefit merely by relinquishing the responsibility for preventing such discrimination to another party.” Id. at 602 (internal quotation marks and ellipsis omitted).

As an initial matter, the factual circumstances of Equal Rights Center materially differ from those in this appeal. Most importantly, the Equal Rights Center court emphasized that the developer “sought to allocate the full risk of loss to [the architect] for the apartment buildings at issue,” and determined that “[a]llowing an owner to completely insulate itself [in that manner] from liability for an ADA or FHA violation through contract [would] diminish[] its incentive to ensure compliance with discrimination laws.” Id. (emphases added). Here, by contrast, the relevant contractual provisions assign liability to Appellees only to the extent that their own actions give rise to liability. Thus, the Equal Rights Center court’s concern with permitting a responsible party to completely insulate itself from Title II liability is not in play here. On the contrary, under the present circumstances, the greater concern is the potential for contractors to shield themselves from any liability they caused under both state contract law and federal disability regulations if Title II and § 504 are found to preempt Appellant’s claims.

Furthermore, while the developer in Equal Rights Center sought leave to amend to add a claim for contribution, the Fourth Circuit affirmed the district court’s denial on the ground that the developer “really [sought] to have [the architect] pay all damages,” and that any such claim would therefore be a “de facto claim for indemnification.” 602 F.3d at 602, 604. Because the so-called contribution claim really constituted a claim for indemnification, the court declined to reach the question of whether a genuine state-law claim for contribution would be preempted. See id. at 604 n.2.

Appellees also cite Independent Living Center v. City of Los Angeles, 973 F.Supp.2d 1139 (C.D. Cal. 2013) in support of their preemption argument. That district court case concerned a suit for Title II and § 504 liability against the City of Los Angeles, and various owners of residential properties in the City of Los Ange-les that received federal funds from or through the City, for having engaged in a “ ‘pattern or practice’ of discrimination against people with disabilities in violation of • federal and state antidiscrimination laws.” Id. at 1142. The City crossclaimed for express and implied contribution or indemnity against the property owners. Id. at 1143. The property owners moved to dismiss the City’s crossclaims. Id. The district court found that no cause of action for implied contribution or indemnification exists under Title II or § 504. Id. at 1154, 1156. The district court also determined that state-law indemnity and contribution claims posed an obstacle to the full implementation of Title II and § 504, and that they were accordingly preempted. Id. at 1160. It reasoned “that congressional objectives are best served when parties with duties under the antidiscrimination statutes remain independently responsible for compliance,” and held that “allowing public entities regulated by Section 504 and Title II to seek indemnification or contribution through state law to offset their liability would interfere with the methods by which the federal statutes were designed to reach their goal.” Id. (internal alterations and quotation marks omitted). The court further held that the City’s contractual indemnity crossclaim derived from the first-party claims under the ADA and FHA, citing Equal Rights Center for the proposition that such claims present an impermissible attempt to contract around the nondelegable nature of a party’s duties under the ADA and FHA, and that permitting those claims would therefore undermine federal law. Id. at 1161. The Independent Living Center court rested its analysis regarding contract claim preemption wholly on Equal Rights Center, and did not discuss any difference between claims seeking contractual contribution, and those seeking indemnity. Id. We are, of course, not bound in any way by Independent Living Center, but we address its reasoning in this opinion as part of our analysis.

The district court in this case declined to address two aspects of Independent Living Center that cabin its persuasive effect on the present appeal. First, as the Independent Living Center court emphasized, the first-party plaintiffs in that matter alleged that the City had “failed ... to maintain policies, practices, or procedures to ensure that accessible housing units [were] made available and [were] meaningfully accessible to people with disabilities,” and that they additionally “failed to monitor compliance with the Rehabilitation Act accessibility requirements.” Id. at 1144-45 (internal quotation marks omitted, emphases added). The court expressly found that “the main focus of [the] lawsuit [was] the legality of the overall housing program,” and that “Plaintiffs did not file this case because a particular building violated provisions under the various statutes.” Id. at 1148 (internal alterations omitted). Rather, the plaintiffs sought redress for a programmatic failure on the part of the City to maintain adequate policies and oversight under the relevant federal statutes. See id. at 1148-49.

That factual circumstance stands in stark contrast to the situation presented by this appeal. Cities implement policies and procedures as part of their standard operation. Were courts to permit a city to contract away its liability to implement policies and procedures that comply with federal disability regulations, they would indeed be permitting delegation of an entity’s duties under the ADA. Here, however, the City does not seek indemnification or contribution for damages arising out of its own failure to implement policies or exercise oversight. Rather, it seeks redress for specific construction and design failures related to the FlyAway bus service. Cities usually have no choice but to contract out design and construction of public facilities because they do not have the expertise, personnel, or equipment necessary to construct public projects. They delegate that task by necessity. Accordingly, an important component in a city’s doing all it can to fulfill its duties under Title II and § 504 is to require as part of its contracts with necessary third party entities that the requirements of those statutes be met. Permitting enforcement of contract claims seeking to hold a contractor liable for duties necessarily delegated to it does not raise the specter of entirely insulating public entities from ongoing Title II or § 504 liability posed by offloading all the city’s responsibilities under those laws.

Second, although it found that conflict preemption precluded the City’s claims for both contribution and indemnification, the Independent Living Center court relies almost entirely on Equal Rights Center — a case that expressly declined to address whether conflict preemption would apply to claims for contribution, as opposed to those for indemnification. See Indep. Living Ctr., 973 F.Supp.2d at 1160-61. Independent Living Center expresses a clear concern regarding attempts to shift a responsible party’s liability under federal disability statutes to another party, and accordingly explains how permitting express contractual indemnification claims poses an obstacle to the regulatory purpose of the ADA. It does not, however, explain how permitting claims for contribution commensurate with a third-party’s own wrongdoing would pose a similar obstacle.

As discussed supra, analysis under the Supremacy Clause begins with a presumption against preemption, “unless [preemption] was the clear and manifest purpose of Congress.” Medtronic, 518 U.S. at 485, 116 S.Ct. 2240. The Independent Living Center court held that “the presumption against preemption is inapplicable [to the ADA], because the states have not traditionally occupied the field of antidis-crimination law.” 973 F.Supp.2d at 1157. We disagree with this characterization of the historical legal landscape, and we believe the district court erred in concluding that the presumption against preemption is inapplicable to claims brought under Title II of the ADA.

In Federation of African American Contractors v. City of Oakland, 96 F.3d 1204, 1214 (9th Cir. 1996), we observed that “[pjrivate causes of action against state actors who impair federal civil rights have not been traditionally relegated to state law.” However, the mere co-existence of state and federal causes of action does not support a rejection of the presumption. See Wyeth, 555 U.S. at 565 n.3, 129 S.Ct. 1187. Similarly, the fact that “Congress enacted Title II against a backdrop of pervasive unequal treatment in the administration of state services and programs,” and that its “enactment of the ADA represents its judgment that there should be a comprehensive national mandate for the elimination of discrimination against individuals with disabilities,” 973 F.Supp.2d at 1158, does not render the presumption against preemption inapplicable. As the Supreme Court has explained, the presumption is rooted in federalism concerns. See, e.g., Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S.Ct. 1305, 51 L.Ed.2d 604 (1977); see also Wyeth, 555 U.S. at 565 n.3, 129 S.Ct. 1187; id. at 583-87, 129 S.Ct. 1187 (Thomas, J., concurring in the judgment). The relevant question is whether a given area is one in which states have historically had the power to regulate, not whether states have previously regulated in the precise manner or to the degree that the federal government has itself chosen to regulate. See Wyeth, 555 U.S. at 565, 565 n.3, 129 S.Ct. 1187. Indeed, if state and federal regulatory choices perfectly aligned, there would be no cause for federal legislation at all. Conversely, if the presumption against preemption failed to apply anytime federal regulations add something to state legislation, the presumption would be a nullity.

States have historically regulated in the area of civil rights generally, and in the field of discrimination against disabled individuals specifically. See, e.g., Bd. of Trustees of Univ. of Ala. v. Garrett, 531 U.S. 356, 368 n.5, 121 S.Ct. 955, 148 L.Ed.2d 866 (2001) (“It is worth noting that by the time that Congress enacted the ADA in 1990, every State in the Union had enacted such measures [against disability discrimination].”); see also Bob-Lo Excursion Co. v. Michigan, 333 U.S. 28, 33, 68 S.Ct. 358, 92 L.Ed. 455 (1948) (noting that “many states” had at that time enacted civil rights statutes); Rodriguez v. Barrita, Inc., 10 F.Supp.3d 1062, 1073 (N.D. Cal. 2014) (“Long before Congress passed the ADA, California enacted several statutes to prohibit disability discrimination at the state level.”). We therefore apply the presumption against preemption, and, accordingly, will find preemption only if Congress indicated a “clear and manifest purpose” to that effect. Nation v. City of Glendale, 804 F.3d 1292, 1298 (9th Cir. 2015).

Obstacle preemption applies when a given “state law[ ] stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Crosby v. Nat’l Foreign Trade Council, 530 U.S. 363, 373, 120 S.Ct. 2288, 147 L.Ed.2d 352 (2000) (quoting Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941)). “What is a sufficient obstacle is a matter of judgment, to be informed by examining the federal statute as a whole and identifying its purpose and intended effects.” Id. Accordingly, whether claims for express contractual indemnification or contribution conflict with Title II and § 504 requires consideration of those statutes’ animating purposes and intended consequences.

Congress expressly set forth the purpose of Title II as “to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities” through “clear, strong, consistent, enforceable standards addressing discrimination against individuals with disabilities.” 42 U.S.C. § 12101(b)(1) — (2). We have noted that “[t]here is no significant difference in analysis of the rights and obligations created by the ADA and the Rehabilitation Act.” Zukle v. Regents of Univ. of Cal., 166 F.3d 1041, 1045 n.11 (9th Cir. 1999) (listing cases); see also Weinreich v. L.A Cty. Metro. Transp. Auth., 114 F.3d 976, 978 (9th Cir. 1997) (“Title II of the ADA was expressly modeled after Section 504 of the Rehabilitation Act.”).

Nothing in Title II or § 504 addresses claims for state-law indemnification or contribution filed by a public entity against a contractor. In Equal Rights Center, the Fourth Circuit drew on its reasoning in Baker, Watts & Co. v. Miles & Stockbridge, 876 F.2d 1101 (4th Cir. 1989), to nevertheless find contractual indemnification precluded. It explained that

In holding the indemnification claim [in Baker, Watts & Co.] preempted, we analyzed whether the claim represented an obstacle to the regulatory goals of the federal law. We explained that “Congress ha[d] not provided a right to indemnification in the federal securities laws under any circumstances.” Furthermore, we emphasized the total nature of a claim for indemnity, concluding that “it would run counter to the basic policy of the federal securities laws to allow a securities wrongdoer . . to shift its entire responsibility for federal violations on the basis of a collateral state action for indemnification.” As we explained, “[t]he goal of the 1933 and 1934 Acts is preventive as well as remedial, and ‘denying indemnification encourages the reasonable care required by the federal securities provisions.’ ”

Equal Rights Ctr., 602 F.3d at 601 (internal citations omitted). To the extent that this analysis relies on congressional omission of a federal cause of action for indemnification, it turns the presumption against preemption on its head. The basic premise of the presumption is that absent an affirmative indication to the contrary, a federal regulation will not preempt state law. The failure to provide a federal analogue to a state-law cause of action does not meet this standard.

Any concern that a public entity will be able to contract out of Title II or § 504 compliance makes sense in the context of indemnification for an entity’s failure to maintain appropriate policies and practices — in other words, for its failure to take action solely within its control, as was arguably the case in Equal Rights Center. Permitting a shift of liability to a party lacking the power to remedy the violation would frustrate the federal statutes’ regulatory purpose. As we have stated in the Title III context of landlords and lessees,

a covered entity may not use a contractual provision to reduce any of its obligations under [the ADA].... [A] public accommodation’s obligations are not extended or changed in any manner by virtue of its lease with the other entity. H.R.Rep. No. 101-485(11), at 104, reprinted in 1990 U.S.C.C.A.N. 303, 387. The legislative history [of the ADA] confirms that a landlord has an independent obligation to comply with the ADA that may not be eliminated by contract.

Botosan v. Paul McNally Realty, 216 F.3d 827, 833 (9th Cir. 2000). This principle applies equally to Title II’s requirements for public services. Crucially, however, the third-party claims asserted by the City against Appellees do not seek to shift liability in such a manner.

Unlike the crossclaims at issue in Equal Rights Center, the City’s third-party claim seeks only to collect for violations arising out of Appellees’ own negligence or wrong doing. In this sense, though styled as a claim for “indemnification,” the City functionally seeks contribution from Appellees. Allowing the City to seek redress for liability incurred by virtue of a third-party contractor’s actions does not plausibly pose an obstacle to the intended purpose and effect of Title II or § 504. Rather, finding such claims precluded would itself hamper the statutes’ regulatory purpose. The most a public entity may be able to do in furtherance of its duties under the respective acts may, in many situations, be to expressly contract for compliance (contractual provisions for which it will potentially have to pay a premium to the contractor). From there, the entity best situated to ensure full compliance may well be the contractor tasked with designing or constructing the public resource in question, and precluding contract clauses for contribution reduces a contractor’s incentives to do so. Cf. Baker, Watts & Co., 876 F.2d at 1107 (finding indemnification claims preempted by federal securities law, but stating that “Congress did not remove it from the power of a state to conclude that a state right to contribution would further the regulatory purposes of the federal securities laws by holding all violators to account.” (emphasis added)).

In sum, neither Title II of the ADA nor § 504 of the Rehabilitation Act preempt the City’s state-law claims for de facto contribution, however styled, against Ap-pellees.

CONCLUSION

For the reasons set forth in this opinion, we REVERSE the district court’s order dismissing the City’s third-party claims, and REMAND for further proceedings consistent with this opinion.

      . The City also named two other companies as third-party defendants, but neither of those entities is a party to this appeal.

      . We acknowledge that were we to find state-law contribution claims preempted, future plaintiffs could still elect to bring suit directly against the contracting parties. We also acknowledge, however, that as a practical matter, it will often be the public-facing municipal entity that provides the most attractive target for litigation. That is precisely what happened here.

      . Notably, in Baker, Watts & Co. v. Miles & Stockbridge, 876 F.2d 1101 (4th Cir. 1989), a case upon which the Equal Rights Center court relied heavily for its preemption analysis, the Fourth Circuit held that federal securities law preempted claims for indemnification, but that it did not similarly preempt claims for contribution. Id. at 1108.
      In the present case, we do not view the labels of "indemnification” or "contribution” as dispositive of the analysis. Here, though the City may seek "indemnification” for a contractor’s wrong-doing, that compensation only constitutes a portion of the City’s total liability under federal disability statutes. In other words, the relief sought may be complete indemnification from the perspective of the contractor’s liability; but it constitutes only partial contribution from the perspective of the City’s liability exposure.

      . In considering the actions for which Title II intends to impose liability on a public entity, we have previously framed the question in terms of the "outputs” of a public entity:
      Consider, for example, how a Parks Department would answer the question, "What are the services, programs, and activities of the Parks Department?” It might answer, "We operate a swimming pool; we lead nature walks; we maintain playgrounds.” It would not answer, "We buy lawnmowers and hire people to operate them.” The latter is a means to deliver the services, programs, and activities of the hypothetical Parks Department, but it is not itself a service, program, or activity of the Parks Department.

        Zimmerman v. Or. Dep’t of Justice, 170 F.3d 1169, 1174 (9th Cir. 1999) (emphases added). In line with this analysis, the Zimmerman court found that the defendant Parks Department was not liable under Title II for employment discrimination, because employment is not a "service, program, or activity” of a public entity within the meaning of Title II, which relates to public services. Id.; see also Barden v. City of Sacramento, 292 F.3d 1073, 1076 (9th Cir. 2002) (framing analysis of the scope of Title II as asking whether a given activity constitutes "a normal function of a governmental entity”).
      Though Zimmerman was not a preemption case, its analysis is instructive insofar as it considered Congress' intention for the scope of actions falling under Title II. Preemption analysis focuses, first and foremost, on congressional intent. See Hughes v. Talen Energy Mktg., LLC, — U.S. —, 136 S.Ct. 1288, 1297, 194 L.Ed.2d 414 (2016). If one frames the scope of Title II as encompassing a public entity’s outputs, this supports the notion that Congress did not intend to preempt claims for liability arising from tasks that a City does not — and in many cases simply cannot — do itself, but must instead contract with others to provide the service.


author: ADELMAN, District Judge:

text:
    Aileen RIZO, Plaintiff-Appellee, v. Jim YOVINO, Fresno County Superintendent of Schools, Erroneously Sued Herein as Fresno County Office of Education, Defendant-Appellant.
    No. 16-15372
    United States Court of Appeals, Ninth Circuit.
    Argued and Submitted February 17, 2017 San Francisco, California
    Filed April 27, 2017

      Michael Gary Woods (argued) and Timothy J. Buchanan, McCormick Barstow Sheppard Wayte & Carruth LLP, Fresno, California, for Defendant-Appellant.
    Daniel M. Siegel (argued) and Kevin Brunner, Siegel & Yee, Oakland, California, for Plaintiff-Appellee.

      Barbara L. Sloan (argued), Attorney; Margo Pave, Assistant General Counsel; Jennifer S. Goldstein, Associate General Counsel; P. David Lopez, General Counsel; Office of the General Counsel, Washington, D.C.; as and for Amicus Curiae Equal Employment Opportunity Commission.
    Before: A. WALLACE TASHIMA and ANDREW D. HURWITZ, Circuit Judges, and LYNN S. ADELMAN, District Judge.

       The Honorable Lynn S. Adelman, United States District Judge for the Eastern District of Wisconsin, sitting by designation.

   OPINION

ADELMAN, District Judge:

The plaintiff, Aileen Rizo, is an employee of the public schools in Fresno County. After discovering that the County pays her less than her male counterparts for the same work, she brought this action under the Equal Pay Act, 29 U.S.C. § 206(d), Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-5, and the California Fair Employment and Housing Act, Cal. Gov. Code § 12940. When the County moved for summary judgment, it conceded that it paid the plaintiff less than comparable male employees for the same work. However, it argued that this result was lawful because the pay differential was “based on any other factor other than sex,” an affirmative defense to a claim under the Equal Pay Act. This other factor was prior salary, and the district court concluded that when an employer bases a pay structure “exclusively on prior wages,” any resulting pay differential between men and women is not based on any other factor other than sex. Rizo v. Yovino, No. 1:14-cv-0423-MJS, 2015 WL 9260587, at *9 (E.D. Cal. Dec. 18, 2015). Based on this conclusion, the district court denied the County’s motion for summary judgment.

The district court candidly recognized that its decision potentially conflicted with this court’s decision in Kouba v. Allstate Insurance Co., in which we held that prior salary can be a factor other than sex, provided that the employer shows that pri- or salary “effectuate[s] some business policy” and the employer uses prior salary “reasonably in light of [its] stated purpose as well as its other practices,” 691 F.2d 873, 876-77 (9th Cir. 1982), and thus certified its decision for interlocutory appeal under 28 U.S.C. § 1292(b). We permitted that appeal and authorized the County to appeal from the order denying summary judgment.

We conclude that this case is controlled by Kouba. We therefore vacate the district court’s order and remand with instructions to reconsider the County’s motion for summary judgment.

I.

In 2009, the County hired the plaintiff as a math consultant, a position it classifies as management-level. When the County hired Rizo, it used a salary schedule known as “Standard Operation Procedure 1440” to determine the starting salaries of management-level employees. This schedule consists of twelve “levels,” each of which has progressive “steps” within it. New math consultants receive starting salaries within Level 1, which has ten steps, with pay ranging from $62,133 at Step 1 to $81,461 at Step 10. To determine the step within Level 1 on which the new employee will begin, the County considers the employee’s most recent prior salary and places the employee on the step that corresponds to his or her prior salary, increased by 5%.

Prior to being hired by Fresno County, the plaintiff worked as a math teacher at a middle school in Arizona. When she left that position, she was receivihg a salary of $50,630 per year, plus an annual stipend of $1,200 for her master’s degree. Adding 5% to the plaintiffs prior compensation resulted in a salary lower than Fresno County’s Level 1, Step 1 salary. Thus, under Standard Operation Procedure 1440, the plaintiffs starting salary was set at the minimum Level 1 salary: $62,133. However, the County also paid the plaintiff a $600 stipend for her master’s degree, so her total starting pay was $62,733 per year.

In July 2012, the plaintiff was having lunch with her colleagues when a male math consultant who had recently been hired informed her that he started on Step 9 of Level 1. The plaintiff subsequently learned that the other math consultants, all of whom were male, were paid more than she was. The plaintiff complained to the County about this disparity, but the County informed her that all salaries had been properly set under Standard Operation Procedure 1440.

Dissatisfied with the County’s response, the plaintiff initiated this suit. The County moved for summary judgment, arguing that' the plaintiffs salary, though less than her male colleagues’, was based on “any other factor other than sex,” namely, prior salary. The district court determined that, under the Equal Pay Act, prior salary alone can never qualify as a factor other than sex, reasoning that “a pay structure based exclusively on prior wages is so inherently fraught with the risk ... that it will perpetuate a discriminatory wage disparity between men and women that it cannot stand, even if motivated by a legitimate non-discriminatory business purpose.” Rizo, 2015 WL 9260587, at *9. The court therefore denied the County’s motion for summary judgment.

II.

Under the Equal Pay Act, the plaintiff has the burden of establishing a prima facie case of discrimination. Stanley v. Univ. of S. Cal., 178 F.3d 1069, 1073-74 (9th Cir. 1999). “The Equal Pay Act creates a type of strict liability; no intent to discriminate need be shown.” Maxwell v. City of Tucson, 803 F.2d 444, 446 (9th Cir. 1986) (internal quotation marks and citation omitted). Thus, to make out a prima facie case, the plaintiff must show only that he or she is receiving different wages for equal work. Hein v. Or. Coll. of Educ., 718 F.2d 910, 916 (9th Cir. 1983).

“Once the plaintiff establishes a prima facie case, the burden of persuasion shifts to the employer to show that the wage disparity is permitted by one of the four statutory exceptions to the Equal Pay Act: ‘(i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex.’ ” Maxwell, 803 F.2d at 446 (quoting 29 U.S.C. § 2069(d)(1)). “These exceptions are affirmative defenses which the employer must plead and prove.” Kouba, 691 F.2d at 875.

In the district court, the County conceded that the plaintiff had established a prima facie case under the Equal Pay Act, but asserted the affirmative defense that the pay differential was “based on any other factor other than sex.” Because the County sought summary judgment on the basis of an affirmative defense on which it would bear the burden of proof at trial, it must show at the summary-judgment stage that “no reasonable trier of fact” could fail to find that it had proved that defense. Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). However, the issue that prompted this interlocutory appeal is purely one of law: whether the district court’s conclusion that prior salary alone can never be a “factor other than sex” is correct.

In Kouba, the employer, Allstate Insurance, “compute[d] the minimum salary guaranteed to a new sales agent on the basis of ability, education, experience, and prior salary.” 691 F.2d at 874. As result of this practice, on average, female agents made less than male agents. Id. at 875. The plaintiff alleged that Allstate’s “use of prior salary caused the wage differential,” and that therefore the differential violated the Equal Pay Act. Id. Allstate argued that, to.the extent its use of prior salary “caused the wage differential,” “prior salary constituted a factor other than sex.” Id. The district court rejected this argument, reasoning that (1) because so many employers paid discriminatory salaries in the past, the court would presume that a female agent’s prior salary was based on her gender unless the employer presented evidence to rebut that presumption, and (2) absent such a showing, prior salary is not a factor other than sex. Id.

On appeal, we rejected the district court’s interpretation of the Equal Pay Act. Id. at 876. We held that “the Equal Pay Act does not impose a strict prohibition against the use of prior salary,” even though an employer could “manipulate its use of prior salary to underpay female employees.” Id. at 878. However, we did not hold that prior salary automatically qualifies as a factor other than sex. Rather, we held that an employer could maintain a pay differential based on prior salary (or based on any other facially gender-neutral factor) only if it showed that the factor “effeetuatefe] some business policy” and that the employer “use[s] the factor reasonably in light of the employer’s stated purpose as well as its other practices.” Id. at 876-77. We then noted that Allstate had offered “two business reasons for its use of prior salary” and directed the district court to evaluate those reasons on remand. Id. at 877.

The County has offered four business reasons for using Standard Operation Procedure 1440, under which starting salaries are based primarily on prior salary: (1) the policy is objective, in the sense that no subjective opinions as to the new employee’s value enters into the starting-salary calculus; (2) the policy encourages candidates to leave their current jobs for jobs at the County, because they will always receive a 5% pay increase over their current salary; (3) the policy prevents favoritism and ensures consistency in application; and (4) the policy is a judicious use of taxpayer dollars. But, the district court did not evaluate whether these reasons effectuate a business policy or determine whether the County used prior salary “reasonably,” as required by Kouba. Rather, the district court determined that, even though in Kouba we held that the Equal Pay Act does not impose a strict prohibition against the use of prior salary, Kouba does not preclude a finding that, an employer may not use prior salary “as the only factor.” Rizo, 2015 WL 9260587, at *7. According to the district court, “[t]he Ninth Circuit in Kouba was not called upon to, and did not, rule on the question of whether a salary differential based solely on prior earnings would violate the [Equal Pay Act], even if motivated by legitimate, non-discriminatory business reasons.” Id. at *8. The district court then followed cases from other circuits holding that prior salary alone cannot justify a pay disparity. Id. at *8-9 (citing, among other cases, Angove v. Williams-Sonoma, Inc., 70 Fed.Appx. 500, 508 (10th Cir. 2003); Irby v. Bittick, 44 F.3d 949, 954 (11th Cir. 1995); Price v. Lockheed Space Operations Co., 856 F.2d 1503, 1506 (11th Cir. 1988); Glenn v. Gen. Motors Corp., 841 F.2d 1567, 1570-71 (11th Cir. 1988)).

We do not agree with the district court that Kouba left open the question of whether a salary differential based solely on prior earnings violates the Equal Pay Act. To the contrary, that was exactly the question presented and answered in Kouba. The plaintiff in Kouba alleged that Allstate’s “use of prior salary caused the wage differential.” 691 F.2d at 875 (emphasis added). Although noting that Allstate “question[ed]” whether its use of pri- or salary caused the differential, we left the question of causation for the district court to resolve on remand. Id. at 875 n.5. It is true that Allstate, in setting an employee’s pay, considered factors other than prior salary, including “ability, education, [and] experience.” Id. at 874. However, we did not attribute any significance to Allstate’s use of these other factors. Rather, we focused on prior salary alone and determined that it would be a “factor other than sex” within the meaning of the Equal Pay Act, provided that Allstate could show on remand that its use of prior salary was reasonable and effectuated some business policy. Id. at 876-78.

The plaintiff and the EEOC, as amicus curiae, argue that prior salary alone cannot be a factor other than sex because when an employer sets pay by considering only its employees’ prior salaries, it perpetuates existing pay disparities and thus undermines the purpose of the Equal Pay Act. But this argument was presented in Kouba, and the result we reached was to allow an employer to base a pay differential on prior salary so long as it showed that its use of prior salary effectuated some business policy and that the employer used the factor reasonably in light of its stated purpose and its other practices. Id. We did not draw any distinction between using prior salary “alone” and using it in combination with other factors.

Moreover, we do not see how the employer’s consideration of other factors would prevent the perpetuation of existing pay disparities if, as we assumed in Kouba and as is the allegation here, prior salary is the only factor that causes the current disparity. For example, assume that a male and a female employee have the same education and number of years’ experience as each other, but the male employee was paid a higher prior salary than the female employee. The current employer sets salary by considering the employee’s education, years of experience, and prior salary. Using these factors, the employer gives both employees the same salary credit for their identical education and experience, but the employer pays the male employee a higher salary than the female employee because of his higher prior salary. In this example, it is prior salary alone that accounts for the pay differential, even though the employer also considered other factors when setting pay. If prior salary alone is responsible for the disparity, requiring an employer to consider factors in addition to prior salary cannot resolve the problem that the EEOC and the plaintiff have identified.

III.

Because Kouba holds that a pay differential based on the employer’s use of prior salary can be “a differential based on any other factor other than sex,” we vacate the district court’s order denying the County’s motion for summary judgment and remand for further proceedings. On remand,' the district court must evaluate the four business reasons offered by the County and determine whether the County used prior salary “reasonably in light of [its] stated purpose[s] as well as its other practices.” Kouba, 691 F.2d at 876-77. We emphasize that because these matters relate to the County’s affirmative defense rather than to the elements of the plaintiffs claim, the County has the burden of persuasion. See Maxwell, 803 F.2d at 446. Thus, unlike in a typical case under Title VII involving the burden-shifting method of McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973), the plaintiff does not have to present evidence that the County’s explanation for the pay differential is a pretext for intentional gender discrimination. Rather, it is up to the employer to persuade the trier of fact that its stated “factor other than sex” actually caused the salary differential, that the stated factor “effectuate[s] some business policy,” and that the employer used the factor “reasonably in light of [its] stated purpose as well as its other practices.” Kouba, 691 F.2d at 876-77. Of course, the plaintiff is free to introduce evidence of pretext (or any other matter that casts doubt on the employer’s affirmative defense) if it chooses to do so. Maxwell, 803 F.2d at 446.

VACATED and REMANDED. Each party shall bear its own costs.

      . The defendant is Jim Yovino, the Fresno County Superintendent of Schools. However, because Yovino is sued in his official capacity, in this opinion we will refer to the defendant as the County.

      . The plaintiff also alleges claims under Title VII and the California Fair Employment and Housing Act. “When a Title VII claimant contends that she has been denied equal pay for substantially equal work, ... Equal Pay Act standards apply.” Maxwell, 803 F.2d at 446; see also Kouba, 691 F.2d at 875. For this reason, we do not separately discuss the plaintiff's Title VII claim. Because the parties do not assert that there are differences between federal law and the California Fair Employment and Housing Act, we also do not separately discuss California law.

      . We also note that, if an employer's use of prior salary alone were unacceptable under the Equal Pay Act, but the employer's mere consideration of some other factor in addition to prior salary (other than sex) cured the problem, then in the present case the County’s pay structure would be lawful. That is because, in addition to prior salary, the County considers a new hire’s education when setting pay, as reflected in the "stipend” that the plaintiff received for holding a master’s degree.