Learjet, Inc. v. Oneok, Inc. , 715 F.3d 716 ( 2013 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE: WESTERN STATES No. 11-16786
WHOLESALE NATURAL GAS
ANTITRUST LITIGATION, D.C. Nos.
2:03-cv-01431-
PMP-PAL
LEARJET, INC.; TOPEKA UNIFIED 2:06-cv-00233-
SCHOOL DISTRICT 501, PMP-PAL
Plaintiffs-Appellants,
v.
ONEOK, INC.; ONEOK ENERGY
MARKETING & TRADING CO., L.P.;
THE WILLIAMS COMPANIES, INC.;
WILLIAMS MERCHANT SERVICES
COMPANY, INC.; WILLIAMS ENERGY
MARKETING & TRADING COMPANY;
AMERICAN ELECTRIC POWER
COMPANY, INC.; AEP ENERGY
SERVICES, INC.; DUKE ENERGY
CORPORATION; DUKE ENERGY
TRADING AND MARKETING, LLC;
DYNEGY MARKETING AND TRADE;
EL PASO CORPORATION; EL PASO
MERCHANT ENERGY, L.P.; CMS
ENERGY CORPORATION; CMS
MARKETING SERVICES & TRADING
COMPANY; CMS FIELD SERVICES;
RELIANT ENERGY, INC.; RELIANT
2 IN RE: WESTERN STATES ANTITRUST LITIG.
ENERGY SERVICES, INC.; CORAL
ENERGY RESOURCES, L.P.; XCEL
ENERGY, INC.; EPRIME, INC.,
Defendants-Appellees.
IN RE: WESTERN STATES No. 11-16798
WHOLESALE NATURAL GAS
ANTITRUST LITIGATION, D.C. Nos.
2:03-cv-01431-
PMP-PAL
HEARTLAND REGIONAL MEDICAL 2:07-cv-00987-
CENTER; PRIME TANNING CORP.; PMP-PAL
NORTHWEST MISSOURI STATE
UNIVERSITY,
Plaintiffs-Appellants,
v.
ONEOK, INC.; ONEOK ENERGY
MARKETING & TRADING CO., L.P.;
THE WILLIAMS COMPANIES, INC.;
WILLIAMS MERCHANT SERVICES
COMPANY, INC.; WILLIAMS ENERGY
MARKETING & TRADING COMPANY;
AMERICAN ELECTRIC POWER
COMPANY, INC.; AEP ENERGY
SERVICES, INC.; DUKE ENERGY
CORPORATION; DUKE ENERGY
TRADING AND MARKETING, LLC;
DYNEGY MARKETING AND TRADE;
EL PASO CORPORATION; EL PASO
MERCHANT ENERGY, L.P.; CMS
IN RE: WESTERN STATES ANTITRUST LITIG. 3
ENERGY CORPORATION; CMS
MARKETING SERVICES & TRADING
COMPANY; CMS FIELD SERVICES;
RELIANT ENERGY, INC.; RELIANT
ENERGY SERVICES, INC.; CORAL
ENERGY RESOURCES, L.P.; XCEL
ENERGY, INC.; EPRIME, INC.,
Defendants-Appellees.
IN RE: WESTERN STATES No. 11-16799
WHOLESALE NATURAL GAS
ANTITRUST LITIGATION, D.C. Nos.
2:03-cv-01431-
PMP-PAL
BRECKENRIDGE BREWERY OF 2:06-cv-01351-
COLORADO, LLC; BBD ACQUISITION PMP-PAL
CO.,
Plaintiffs-Appellants,
v.
XCEL ENERGY, INC.; EPRIME, INC.,
Defendants-Appellees.
4 IN RE: WESTERN STATES ANTITRUST LITIG.
IN RE: WESTERN STATES No. 11-16802
WHOLESALE NATURAL GAS
ANTITRUST LITIGATION, D.C. Nos.
2:03-cv-01431-
PMP-PAL
REORGANIZED FLI, INC., 2:05-cv-01331-
Plaintiff-Appellant, PMP-PAL
v.
ONEOK, INC.; ONEOK ENERGY
MARKETING & TRADING CO., L.P.;
THE WILLIAMS COMPANIES, INC.;
WILLIAMS MERCHANT SERVICES
COMPANY, INC.; WILLIAMS ENERGY
MARKETING & TRADING COMPANY;
AMERICAN ELECTRIC POWER
COMPANY, INC.; AEP ENERGY
SERVICES, INC.; DUKE ENERGY
CORPORATION; DUKE ENERGY
TRADING AND MARKETING, LLC;
DYNEGY MARKETING AND TRADE;
EL PASO CORPORATION; EL PASO
MERCHANT ENERGY, L.P.; CMS
ENERGY CORPORATION; CMS
MARKETING SERVICES & TRADING
COMPANY; CMS FIELD SERVICES;
RELIANT ENERGY, INC.; RELIANT
ENERGY SERVICES, INC.; CORAL
ENERGY RESOURCES, L.P.; XCEL
ENERGY, INC.; EPRIME, INC.,
Defendants-Appellees.
IN RE: WESTERN STATES ANTITRUST LITIG. 5
IN RE: WESTERN STATES No. 11-16818
WHOLESALE NATURAL GAS
ANTITRUST LITIGATION, D.C. Nos.
2:03-cv-01431-
PMP-PAL
SINCLAIR OIL CORPORATION, 2:06-cv-00282-
Plaintiff-Appellant, PMP-PAL
v.
ONEOK ENERGY SERVICES
COMPANY, L.P.,
Defendant-Appellee.
IN RE: WESTERN STATES No. 11-16821
WHOLESALE NATURAL GAS
ANTITRUST LITIGATION, D.C. Nos.
2:03-cv-01431-
PMP-PAL
SINCLAIR OIL CORPORATION, 2:06-cv-00267-
Plaintiff-Appellant, PMP-PAL
v.
EPRIME, INC.; XCEL ENERGY, INC.,
Defendants-Appellees.
6 IN RE: WESTERN STATES ANTITRUST LITIG.
IN RE: WESTERN STATES No. 11-16869
WHOLESALE NATURAL GAS
ANTITRUST LITIGATION, D.C. Nos.
2:03-cv-01431-
PMP-PAL
ARANDELL CORPORATION; 2:07-cv-01019-
MERRICK’S INC.; SARGENTO FOODS PMP-PAL
INC.; LADISH CO., INC.; CARTHAGE
COLLEGE; BRIGGS & STRATTON
CORPORATION,
Plaintiffs-Appellants,
v.
XCEL ENERGY, INC.; NORTHERN
STATES POWER COMPANY; EPRIME,
INC.; AMERICAN ELECTRIC POWER
COMPANY, INC.; AEP ENERGY
SERVICES, INC.; CMS ENERGY
CORPORATION; CMS FIELD
SERVICES; CMS MARKETING
SERVICES & TRADING COMPANY;
CORAL ENERGY RESOURCES, L.P.;
DUKE ENERGY CAROLINAS, LLC;
DUKE ENERGY TRADING AND
MARKETING LLC; DYNEGY ILLINOIS
INC.; DMT G.P. L.L.C.; DYNEGY GP
INC.; EL PASO CORPORATION; EL
PASO MERCHANT ENERGY, L.P.;
ONEOK, INC.; ONEOK ENERGY
MARKETING & TRADING CO., L.P.;
RRI ENERGY, INC., FKA RELIANT
ENERGY, INC.; RRI ENERGY
IN RE: WESTERN STATES ANTITRUST LITIG. 7
SERVICES, INC., FKA Reliant Energy
Services, Inc.; THE WILLIAMS
COMPANIES, INC.; WILLIAMS POWER
COMPANY, INC.; WILLIAMS ENERGY
MARKETING & TRADING COMPANY;
WILLIAMS MERCHANT SERVICES
COMPANY, INC.,
Defendants-Appellees.
IN RE: WESTERN STATES No. 11-16876
WHOLESALE NATURAL GAS
ANTITRUST LITIGATION, D.C. Nos.
2:03-cv-01431-
PMP-PAL
NEWPAGE WISCONSIN SYSTEM, INC., 2:09-cv-00915-
Plaintiff-Appellant, PMP-PAL
v.
CMS ENERGY CORPORATION; CMS
MARKETING SERVICES & TRADING
COMPANY; CMS FIELD SERVICES;
XCEL ENERGY, INC.; NORTHERN
STATES POWER COMPANY; EPRIME,
INC.; CORAL ENERGY RESOURCES,
L.P.; DUKE ENERGY TRADING AND
MARKETING LLC; DYNEGY ILLINOIS
INC.; DMT G.P. L.L.C.; DYNEGY GP
INC.; DYNEGY MARKETING AND
TRADE; EL PASO CORPORATION; EL
PASO MERCHANT ENERGY, L.P.;
ONEOK, INC.; ONEOK ENERGY
8 IN RE: WESTERN STATES ANTITRUST LITIG.
MARKETING & TRADING CO., L.P.;
RRI ENERGY SERVICES, INC., FKA
Reliant Energy Services, Inc.; THE
WILLIAMS COMPANIES, INC.;
WILLIAMS POWER COMPANY, INC.;
WILLIAMS ENERGY MARKETING &
TRADING COMPANY; WILLIAMS
MERCHANT SERVICES COMPANY,
INC.,
Defendants-Appellees.
IN RE: WESTERN STATES No. 11-16880
WHOLESALE NATURAL GAS
ANTITRUST LITIGATION, D.C. Nos.
2:03-cv-01431-
PMP-PAL
ARANDELL CORPORATION; 2:09-cv-01103-
MERRICK’S INC.; SARGENTO FOODS PMP-PAL
INC.; LADISH CO., INC.; CARTHAGE
COLLEGE; BRIGGS & STRATTON OPINION
CORPORATION,
Plaintiffs-Appellants,
v.
CMS ENERGY CORPORATION; CMS
MARKETING SERVICES & TRADING
COMPANY; CMS FIELD SERVICES,
Defendants-Appellees.
IN RE: WESTERN STATES ANTITRUST LITIG. 9
Appeal from the United States District Court
for the District of Nevada
Philip M. Pro, District Judge, Presiding
Argued and Submitted
October 19, 2012—San Francisco, California
Filed April 10, 2013
Before: Carlos T. Bea and Paul J. Watford, Circuit Judges,
and Willliam K. Sessions, District Judge.*
Opinion by Judge Bea
SUMMARY**
Energy Law
The panel reversed in part, and affirmed in part, the
district court’s orders in cases consolidated into a
multidistrict litigation proceeding, and arising out of the
energy crisis of 2000-2002.
Plaintiffs, retail buyers of natural gas, alleged that
defendants, natural gas traders, manipulated the price of
natural gas by reporting false information to price indices
*
The Honorable William K. Sessions, III, District Judge for the U.S.
District Court for the District of Vermont, sitting by designation.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
10 IN RE: WESTERN STATES ANTITRUST LITIG.
published by trade publications and engaging in wash sales.
The district court entered summary judgment against
plaintiffs in most of the cases, finding that state law antitrust
claims were preempted by the Natural Gas Act.
The panel held that the Natural Gas Act does not preempt
the plaintiffs’ state antitrust claims, and reversed the
summary judgment entered in favor of the defendants. The
panel also held that the 2003 enactment of the Federal Energy
Regulatory Commission’s Code of Conduct did not affect the
panel’s conclusion that the Natural Gas Act does not grant
FERC jurisdiction over claims arising out of false price
reporting and other anticompetitive behavior associated with
nonjurisdictional sales. The panel further held that the
district court did not abuse its discretion in denying either of
the two motions for leave to amend complaints. The panel
reversed in part the district court’s orders dismissing the AEP
defendants from the Wisconsin Arandell and Missouri
Heartland suits, and affirmed all the other orders at issue in
these appeals.
COUNSEL
Jennifer Gille Bacon (argued), William E. Quirk, and
Gregory M. Bentz, Polsinelli Shughart PC, Kansas City,
Missouri, for Appellants Learjet, Inc., et al., Heartland
Regional Medical Center, et al., Breckenridge Brewery of
Colorado, LLC, et al., Reorganized FLI, Inc., and Sinclair Oil
Corporation.
Robert L. Gegios, Alexander T. Pendleton, and William E.
Fischer, Kohner, Mann & Kailas, S.C., Milwaukee,
Wisconsin, for Wisconsin Plaintiffs-Appellants.
IN RE: WESTERN STATES ANTITRUST LITIG. 11
Mark E. Haddad (argued), Michelle B. Goodman, and Nitin
Reddy, Sidley Austin LLP, Los Angeles, California, for
Defendants-Appellees CMS Energy Corp., CMS Energy
Resources Management Co., and Cantera Gas Company.
Michael J. Kass and Douglas R. Tribble, Pillsbury Winthrop
Shaw Pittman LLP, San Francisco, California, for
Defendants-Appellees Dynegy Marketing & Trade, Dynegy
Illinois, Inc., DMT G.P. L.L.C., and Dynegy GP Inc.
Joshua D. Lichtman, Fulbright & Jaworski L.L.P., Los
Angeles, California, and Roxanna A. Manuel, Quinn Emanuel
Urquhart & Sullivan, LLP, for Defendant-Appellee Coral
Energy Resources, L.P.
Joel B. Kleinman, Adam Proujanski, and Lisa M. Kaas,
Dickstein Shapiro LLP, Washington, D.C., for Defendants-
Appellees Duke Energy Trading and Marketing, L.L.C. and
Duke Energy Carolinas, LLC.
Robert B. Wolinsky, Hogan Lovells US LLP, Washington,
D.C., and Steven J. Routh, Orrick, Herrington & Sutcliffe,
L.L.P., Washington, D.C., for Defendants-Appellees
American Electric Power Company, Inc. and AEP Energy
Services, Inc.
Brent A. Benoit and Stacy Williams, Locke Lord Bissell &
Liddell LLP, Houston, Texas, for Defendants-Appellees El
Paso Corporation, El Paso Merchant Energy, L.P., and El
Paso Marketing, L.P.
12 IN RE: WESTERN STATES ANTITRUST LITIG.
Amelia A. Fogleman, Oliver S. Howard, and Craig A.
Fitzgerald, Gable Gotwals, A Professional Corporation,
Tulsa, Oklahoma, for Defendants-Appellees ONEOK, Inc.,
ONEOK Energy Services Company L.P.
J. Gregory Copeland and Mark R. Robeck, Baker Botts LLP,
Houston, Texas, for Defendant-Appellee Reliant Energy
Services, Inc.
Graydon Dean Luthey, Jr. and Sarah Jane Gillett, Hall, Estill,
Hardwick, Gable, Golden & Nelson, P.C., Tulsa, Oklahoma,
for Defendants-Appellees The Williams Companies, Inc.,
Williams Merchant Services Company, Inc., Williams Power
Company, Inc., and Williams Energy Marketing & Trading
Company.
Michael John Miguel, K & L Gates LLP, Los Angeles,
California, for Defendants-Appellees Xcel Energy, Inc., e
prime, inc., e prime Energy Marketing, Inc., and Northern
States Power Company.
OPINION
BEA, Circuit Judge:
These cases arise out of the energy crisis of 2000–2002.
Plaintiffs (retail buyers of natural gas) allege that Defendants
(natural gas traders) manipulated the price of natural gas by
reporting false information to price indices published by trade
IN RE: WESTERN STATES ANTITRUST LITIG. 13
publications and engaging in wash sales.1 Plaintiffs brought
various claims in state and federal court beginning in 2005,
and all cases were eventually consolidated into the underlying
multidistrict litigation proceeding. In July 2011, the district
court entered summary judgment against Plaintiffs in most of
the cases,2 finding that their state law antitrust claims were
preempted by the Natural Gas Act, 15 U.S.C. § 717 et seq.
(“NGA”). Plaintiffs appeal the district court’s order granting
summary judgment, as well as orders denying as untimely
Plaintiffs’ motions to amend their complaints, orders
dismissing the AEP Defendants from two cases for lack of
personal jurisdiction, and an order granting partial summary
judgment to Defendant Duke Energy Trading and Marketing,
LLC.
We have jurisdiction pursuant to 28 U.S.C. § 1291. We
reverse the district court’s order granting summary judgment
to the Defendants, reverse in part the district court’s orders
dismissing the AEP Defendants from the Wisconsin Arandell
and Missouri Heartland suits, and affirm all of the other
orders at issue in this appeal. We remand to the district court
for further proceedings consistent with this opinion.
1
Wash sales are prearranged sales in which traders execute a trade on
an electronic trading platform, and then immediately offset that trade by
executing an equal and opposite trade.
2
The district court’s judgment is final in all cases except Sinclair v. E-
Prime, No. 11-16821, and Sinclair v. Oneok, No. 11-16818. The
Plaintiffs’ complaints in the Sinclair cases contain federal claims that were
not preempted, but the District Court declared that there was “no just
reason for delay,” making the preemption rulings in Sinclair v. E-Prime
and Sinclair v. Oneok final and appealable pursuant to Federal Rule of
Civil Procedure 54(b).
14 IN RE: WESTERN STATES ANTITRUST LITIG.
I. Facts and Regulatory Framework
A. Energy Crisis of 2000–2002
A brief recitation of the background of this litigation, as
well as a description of the regulatory framework governing
this case, is useful to set the stage for our holding. These
cases arise out of claims that the Defendants violated antitrust
laws by manipulating the natural gas market and selling
natural gas at artificially inflated prices, leading to the energy
crisis of 2000–2002. The Federal Energy Regulatory
Commission (“FERC”) conducted a fact-finding investigation
of the energy crisis, and concluded that “[s]pot gas prices rose
to extraordinary levels, facilitating the unprecedented price
increase in the electricity market.” This market distortion
stemmed in part from efforts of energy trading companies to
manipulate price indices compiled by trade publications.
The natural gas industry relied on two trade publications,
Gas Daily and Inside FERC, which published the most
widely-used price indices. Gas Daily published a daily gas
price index, while Inside FERC published a monthly gas price
index. Gas Daily relied on telephone interviews with natural
gas market participants (traders, end users,3 and producers) to
collect pricing data. Inside FERC collected pricing data
through standardized spreadsheets, which traders filled out
and emailed to Inside FERC. Buyers and sellers relied on
these indices as reference points to determine the market
price for natural gas transactions. In short, the prices for
actual transactions were pegged to price indices that were
subject to manipulation by energy traders.
3
The term “end users” refers to industrial, commercial, and residential
consumers of gas, such as the Plaintiffs in this case.
IN RE: WESTERN STATES ANTITRUST LITIG. 15
After the energy crisis of 2000–2002, a number of energy
trading companies admitted that their employees provided
false pricing data to Gas Daily and Inside FERC.
Government investigations revealed that the companies had
few, if any, internal controls in place to ensure the accuracy
of the data reported to the trade publications. A 2003 FERC
report described the process as follows:
Traders from all companies describe a typical
trading day as hectic, pressure packed, and
frenetic. One of their many tasks was to report
trading data to the Trade Press; this was
viewed as bothersome but necessary. Often it
was a job given to the newest employee.
Many companies report passing around a form
and using a spreadsheet on a shared drive. . . .
There was nothing to stop a trader from
changing the numbers someone else had
entered. In other cases, traders took an oral
“survey” to get a sense of where the market
was trading. Sometimes they represented it to
the Trade Press as an actual survey, but in
other cases they made up trades to average out
to a number that was consistent with this
“survey.”
In addition to reporting false data to the price indices, traders
also manipulated the market by engaging in “wash sales,” or
prearranged sales in which traders “agreed to execute a buy
or a sell on an electronic trading platform . . . and then to
immediately reverse or offset the first trade by bilaterally
executing over the telephone an equal and opposite buy or
sell.”
16 IN RE: WESTERN STATES ANTITRUST LITIG.
B. Overview of Natural Gas Regulation
Whether Plaintiffs’ state law antitrust claims are
cognizable depends, for one thing, on whether the field of
natural gas regulation has been preempted by federal
regulation. This court’s preemption analysis is governed by
the framework of natural gas regulation, and more
importantly, the distinction between categories of sales that
fall within FERC’s jurisdiction (“jurisdictional sales”) and the
categories of sales that fall outside of FERC’s jurisdiction
(“non-jurisdictional sales”).
Individual states were originally responsible for the
regulation of the production, sale, and transportation of
natural gas. However, as the volume of gas sold and
transported along interstate pipelines increased, state
regulations became regarded by Congress as ineffective. See
Panhandle Eastern Pipe Line Co. v. Pub. Serv. Comm’n of
Ind., 332 U.S. 507, 515 (1947). In 1938, Congress enacted
the Natural Gas Act (“NGA”) in response to the demand for
federal regulation and to curb the market power of interstate
pipelines. Id. at 516; see also E. & J. Gallo Winery v. Encana
Corp., 503 F.3d 1027, 1036 (9th Cir. 2007). FERC is the
agency charged with the administration of the NGA, and its
jurisdiction is laid out in Section 1(b) of the Act as follows:
The provisions of this chapter shall apply to
the transportation of natural gas in interstate
commerce, to the sale in interstate commerce
of natural gas for resale for ultimate public
consumption for domestic, commercial,
industrial, or any other use, and to natural-gas
companies engaged in such transportation or
sale, and to the importation or exportation of
IN RE: WESTERN STATES ANTITRUST LITIG. 17
natural gas in foreign commerce and to
persons engaged in such importation or
exportation, but shall not apply to any other
transportation or sale of natural gas or to the
local distribution of natural gas or to the
facilities used for such distribution or to the
production or gathering of natural gas.
15 U.S.C. § 717(b). Put simply, the NGA applies to:
(1) transportation of natural gas in interstate commerce,
(2) natural gas sales in interstate commerce for resale (i.e.,
wholesale sales), and (3) natural gas companies4 engaged in
such transportation or sale. The NGA does not apply to retail
sales (i.e., direct sales for consumptive use). See Panhandle
Eastern Pipe Line Co., 332 U.S. at 517 (“The line of the
statute [is] thus clear and complete. It cut[s] sharply and
cleanly between sales for resale and direct sales for
consumptive uses.”).
Since the passage of the NGA, Congress has removed
other categories of sales from the scope of FERC’s
jurisdiction as part of a general effort to reduce federal
regulation of the natural gas industry. In 1989, Congress
passed the Natural Gas Wellhead Decontrol Act of 1989, Pub.
L. No. 101-60, which removed “first sales”5 from FERC’s
4
A “natural-gas company” is defined as “a person engaged in the
transportation of natural gas in interstate commerce, or the sale in
interstate commerce of such gas for resale.” 15 U.S.C. § 717a(6).
5
The statutory definition of “first sales” is quite complex, see 15 U.S.C.
3301(21), but as this court stated in Gallo, “first sales are, in essence,
merely sales of natural gas that are not preceded by a sale to an interstate
pipeline, intrastate pipeline, local distribution company, or retail customer.
In other words, sales by pipelines, local distribution companies, and their
18 IN RE: WESTERN STATES ANTITRUST LITIG.
jurisdiction, therefore completely eliminating FERC’s
authority to set prices at the wellhead. In 1992, to give effect
to the North American Free Trade Agreement, Congress
amended the NGA to provide that all natural gas sales from
Canadian and Mexican sellers to buyers in the United States
are also first sales, and therefore not subject to FERC’s
jurisdiction. See Energy Policy Act of 1992, Pub. L. No. 102-
486 (codified at 15 U.S.C. § 717b(b)).
The final aspect of the natural gas regulatory scheme
relevant to this appeal is FERC’s practice of issuing “blanket
marketing certificates.”6 Following congressional efforts to
reduce federal regulation of the industry, FERC began its own
deregulation process. In 1992, FERC promulgated Order
636, which “required all interstate pipelines to ‘unbundle’7
affiliates cannot be first sales unless these entities are selling gas of their
own production.” Gallo, 503 F.3d at 1037.
6
Under blanket certificates issued pursuant to Section 7(c) of the NGA,
“a natural gas company may undertake a restricted array of routine
activities without the need to obtain a case-specific certificate for each
individual project.” See BLANKET CERTIFICATES, FEDERAL ENERGY
REGULATORY COMMISSION (last visited on March 25, 2013),
http://www.ferc.gov/industries/gas/indus-act/blank-cert.asp. A company
with a blanket certificate may “construct, modify, acquire, operate, and
abandon a limited set of natural gas facilities, and offer a limited set of
services, provided each activity complies with constraints on costs and
environmental impacts set forth in the Commission's regulations.” Id.7
“Prior to the early 1980s, most natural gas was sold at or near the
wellhead to the intrastate or interstate pipeline in the field. . . . The
pipeline purchasers typically provided a bundled service which included
the gathering, processing, storage and transmission of the gas to market.”
Judith M. Matlock, Federal Oil and Gas Pipeline Regulation: An
Overview, ROCKY MOUNTAIN MINERAL LAW FOUND. Paper No. 4 (Feb.
23–24, 2011).
IN RE: WESTERN STATES ANTITRUST LITIG. 19
their transportation from their own natural gas sales.”
General Motors Corp. v. Tracy, 519 U.S. 278, 284 (1997);
Pipeline Service Obligations and Revisions to Regulations
Governing Self-Implementing Transportation; and Regulation
of Natural Gas Pipelines After Partial Wellhead Decontrol,
57 Fed. Reg. 13,267 (Apr. 16, 1992). FERC also issued
blanket sale certificates to interstate pipelines that allowed
them to offer “unbundled” natural gas at market-based rates,
rather than at rates filed with FERC. See 57 Fed. Reg. at
13,270. FERC continued its own deregulation process by
issuing blanket sales certificates for all other resales of
natural gas. See Regulations Governing Blanket Marketer
Sales Certificates, 57 Fed. Reg. 57,952; 57,957–58 (Dec. 8,
1992). These blanket certificates had the effect of allowing
all natural gas companies subject to FERC’s jurisdiction to
charge market-based rates, as opposed to rates filed with and
approved by FERC.
II. Procedural History
Beginning in 2001, a series of class action lawsuits were
filed around the country and were eventually consolidated
into a multi-district litigation in the District of Nevada. Two
of the earliest cases, Texas-Ohio Energy, Inc. v. AEP Energy
Services, Inc., et al. (“Texas-Ohio”) and Abelman v. AEP
Energy Services, Inc., et al. (“Abelman”) alleged both
Sherman Act and parallel state antitrust claims. See In re
Western States Wholesale Natural Gas Antitrust Litig.,
368 F. Supp. 2d 1110 (D. Nev. 2005); In re Western States
Wholesale Natural Gas Antitrust Litig., 408 F. Supp. 2d 1055(D. Nev. 2005). The core allegations in Texas-Ohio and
Abelman – that the defendant energy companies conspired to
manipulate the price indices – were similar to the allegations
in the present case.
20 IN RE: WESTERN STATES ANTITRUST LITIG.
The defendants in Texas-Ohio and Abelman moved to
dismiss the complaints in those cases on the grounds that all
claims were barred by the filed-rate doctrine8 and that the
state-law claims were preempted by the NGA. In 2005, four
months before the first of the present cases was filed, the
District Court granted summary judgment to the Texas-Ohio
and Abelman defendants. It held that because the plaintiffs
asked for actual damages, any judgment by the court would
necessarily decide whether the privately-published price
indices (which the court concluded were effectively FERC-
approved rates) were reasonable. Since the price indices used
to set the rates were FERC-approved, the federal and state
law claims were barred by the filed-rate doctrine. Texas-
Ohio, 368 F. Supp. 2d at 1116; Abelman, 408 F. Supp. 2d at
1069.
Shortly after the judgments in Texas-Ohio and Abelman,
plaintiffs in Farmland,9 Learjet, Breckenridge, Arandell, and
Heartland began filing suits alleging state antitrust claims in
Colorado, Kansas, Missouri, and Wisconsin state courts.
Plaintiffs in Sinclair v. E-Prime and Sinclair v. Oneok
8
The filed-rate doctrine “is a judicial creation that arises from decisions
interpreting federal statutes that give federal agencies exclusive
jurisdiction to set rates for specified utilities” and bars “challenges under
state law and federal antitrust laws to rates set by federal agencies.” E. &
J. Gallo Winery v. Encana Corp., 503 F.3d 1027, 1033 (9th Cir. 2007).
See also Arkansas Louisiana Gas Company v. Hall, 453 U.S. 571, 577
(1981) (stating that because the Natural Gas Act required sellers of natural
gas in interstate commerce to file their rates with FERC for FERC’s
approval, “[n]o court may substitute its own judgment on reasonableness
for the judgment of the Commission”).
9
As a result of bankruptcy proceedings, the name of the Plaintiff in this
case has changed to “Reorganized FLI, Inc.” For the sake of simplicity
we refer to this Plaintiff as “Farmland” in this opinion.
IN RE: WESTERN STATES ANTITRUST LITIG. 21
brought suit in federal court, alleging various state and
federal causes of action. The state cases were removed to
federal court on grounds of diversity of citizenship and all
cases were consolidated into the present multidistrict
litigation.
Defendants in the present case filed a number of motions
for summary judgment, alleging that the Plaintiffs’ claims
were barred by the filed-rate doctrine, or that their state
claims were preempted by the NGA. In 2006, the District
Court granted the Defendants’ motion to dismiss in
Farmland, finding that the NGA preempted the Plaintiffs’
claims under Kansas antitrust statutes. The District Court
reasoned that because the Defendants possessed blanket
marketing certificates that subjected Defendants and their
conduct to FERC’s jurisdiction under the NGA, FERC had
exclusive jurisdiction over the alleged anti-competitive
misconduct at issue. In July 2007, the District Court
reconsidered and vacated its prior ruling granting Defendants’
motion to dismiss after Plaintiffs clarified that they did not
concede the factual question of whether Defendants
possessed blanket marketing certificates.
In September 2007, this court issued its decision in E. &
J. Gallo Winery v. Encana Corp., holding that the filed-rate
doctrine does not bar state or federal antitrust claims arising
out of manipulation of the price indices because the
challenged price indices were compiled using transactions
outside of FERC’s jurisdiction as well as transactions within
FERC’s jurisdiction. 503 F.3d at 1048.
In November 2007, Defendants filed a new motion for
summary judgment in in all of the present cases, arguing that
Plaintiffs’ state claims were preempted by the NGA. In May
22 IN RE: WESTERN STATES ANTITRUST LITIG.
2008, the District Court denied the motion, relying in part on
this court’s decision in Gallo.
In July 2008, Defendants filed a motion for
reconsideration of the District Court’s May 2008 order,
arguing that FERC had jurisdiction during the relevant time
period to regulate “any practice” affecting a rate subject to
the jurisdiction of the Commission (i.e., a “jurisdictional
rate”). In November 2009, the District Court held that
because the same price indices are used to set the prices in
transactions falling within and outside FERC’s jurisdiction,
any manipulation of these indices falls within FERC’s
exclusive jurisdiction under Section 5(a) of the NGA.
Section 5(a) provides:
[Whenever FERC finds] that any rate, charge,
or classification . . . [or] rule, regulation,
practice, or contract affecting such rate,
charge, or classification is unjust,
unreasonable, unduly discriminatory, or
preferential, the Commission shall determine
the just and reasonable rate, charge,
classification, rule, regulation, practice, or
contract to be thereafter observed or in force,
and shall fix the same by order.
15 U.S.C. § 717d (emphases added). The District Court
reasoned that pursuant to Section 5(a) of the NGA, FERC has
jurisdiction to regulate any “practice” by a jurisdictional
seller that affects a jurisdictional rate. The court ordered
Defendants to re-file their motion for summary judgment, and
in July 2011, the court granted the Defendants’ motion for
summary judgment as applied to all Plaintiffs. This appeal
followed.
IN RE: WESTERN STATES ANTITRUST LITIG. 23
III. The Natural Gas Act and Preemption
A. Standard of Review
This court reviews a district court’s grant of summary
judgment de novo. See Lee v. Gregory, 363 F.3d 931, 932
(9th Cir. 2004). Summary judgment is appropriate only
where the “pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of
law.” Rosenbaum v. Washoe Cnty., 663 F.3d 1071, 1075 (9th
Cir. 2011) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986); Fed. R. Civ. P. 56(c)). “Viewing the evidence in the
light most favorable to the non-moving party,” this court
“must determine whether there are any genuine issues of
material fact and whether the district court correctly applied
the relevant substantive law.” Devereaux v. Abbey, 263 F.3d
1070, 1074 (9th Cir. 2001). This court also reviews a district
court’s decisions regarding preemption de novo. See Whistler
Investments, Inc. v. Depository Trust & Clearing Corp.,
539 F.3d 1159, 1163 (9th Cir. 2008).
B. Preemption
The “touchstone in every pre-emption case” is expressed
congressional intent. Wyeth v. Levine, 555 U.S. 555, 565
(2009). The Supreme Court recently emphasized that in
preemption cases, courts should “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. In the present case, the
presumption against preemption applies with particular force
24 IN RE: WESTERN STATES ANTITRUST LITIG.
in light of Congress’s deliberate efforts to preserve traditional
areas of state regulation of the natural gas industry.
The question presented by this appeal is as follows: does
Section 5(a) of the NGA, which provides FERC with
jurisdiction over any “practice” affecting jurisdictional rates,
preempt state antitrust claims arising out of price
manipulation associated with transactions falling outside of
FERC’s jurisdiction? We conclude that such an expansive
reading of Section 5(a) conflicts with Congress’s express
intent to delineate carefully the scope of federal jurisdiction
through the express jurisdictional provisions of Section 1(b)
of the Act. Our analysis is guided by several circuit court
decisions counseling in favor of a narrow reading of Section
5(a). As a result, we hold that the NGA does not preempt the
Plaintiffs’ state antitrust claims, and reverse the district
court’s order granting summary judgment to the Defendants.
1. When Congress enacted the NGA in 1938, it expressly
limited federal jurisdiction over natural gas to “the sale in
interstate commerce of natural gas for resale.” 15 U.S.C.
§ 717(b). An early Supreme Court case interpreting the scope
of the NGA described Congress’s intent as follows:
The omission of any reference to other sales,
that is, to direct sales for consumptive use, in
the affirmative declaration of coverage was
not inadvertent. It was deliberate. For
Congress made sure its intent could not be
mistaken by adding the explicit prohibition
that the Act “shall not apply to any other . . .
sale.”
IN RE: WESTERN STATES ANTITRUST LITIG. 25
Panhandle Eastern Pipe Line Co. v. Pub. Serv. Comm’n of
Ind., 332 U.S. 507, 516 (1947). A later Supreme Court
decision further emphasized Congress’s intent to limit the
reach of the NGA:
When it enacted the NGA, Congress carefully
divided up regulatory power over the natural
gas industry. It did not envisage federal
regulation of the entire natural gas field to the
limit of constitutional power. Rather it
contemplated the exercise of federal power as
specified in the Act.
Nw. Cent. Pipeline Corp. v. State Corp. Comm’n of Kan.,
489 U.S. 493, 510 (1989). Since the passage of the NGA,
Congress has further demonstrated its intent to limit the scope
of federal regulation by enacting statutes removing first sales
from FERC’s jurisdiction. See Natural Gas Wellhead
Decontrol Act of 1989, Pub. L. No. 101-60, 103 Stat. 157.10
2. This court’s decision in Gallo provides further support
for our holding that the NGA does not preempt all state
antitrust claims. The claims in Gallo were essentially the
same as the Plaintiffs’ claims in the present case. E. & J.
Gallo Winery alleged that EnCana Corp., a natural gas
supplier, conspired to inflate the price of natural gas by
manipulating the prices reported to private indices published
by natural gas trade publications and the execution of wash
10
In 1978 Congress enacted the Natural Gas Policy Act (“NGPA”), Pub.
L. No. 95-621, 92 Stat. 3352, which eliminated the low price ceilings on
wellhead sales. However, the Natural Gas Wellhead Decontrol Act of
1989 (“WDA”) completely eliminated FERC’s authority to set prices at
the wellhead.
26 IN RE: WESTERN STATES ANTITRUST LITIG.
trades. Gallo, 503 F.3d at 1030–32. Gallo’s complaint
consisted of federal and state antitrust actions, as well as
state-law damages claims. Id. at 1032. Encana Corp. moved
for summary judgment, claiming that the filed-rate doctrine
barred all of Gallo’s federal claims, and federal preemption
principles barred Gallo’s state claims. Id. at 1032. The
district court denied EnCana’s summary judgment motion,
and this court affirmed the district court. Id. at 1030.
We noted in Gallo that although FERC did not set the
rates charged by the natural gas companies, it did engage in
market oversight by granting blanket market certificates after
determining that the seller lacked market power. Id. at 1041.
As a result of FERC’s market oversight, the court found “that
the market-based rate for natural gas transactions under
FERC’s jurisdiction are FERC-authorized rates, and cannot
be the basis of a federal antitrust or state damage action”
because of the filed-rate doctrine. Id. at 1043 (emphasis
added).
Although this court found that the filed-rate doctrine
barred claims based on FERC-authorized rates, it
distinguished claims based on FERC-authorized rates from
claims based on the rates reported in the price indices. Id. at
1045. It stated that the record reflected that “the indices
potentially include transactions that are under FERC’s
jurisdiction as well as transactions outside FERC’s
jurisdiction.” Id. There were two relevant categories of non-
FERC-authorized rates included in the challenged price
indices:
First, there is evidence in the record some
index pricing inputs were misreported or
wholly fictitious. Misreported rates and rates
IN RE: WESTERN STATES ANTITRUST LITIG. 27
reported for fictitious transactions are not
FERC-approved rates, and barring claims that
such fictitious transactions damaged
purchasers in the natural gas market would
not further the purpose of the filed rate
doctrine.
Moreover, as part of its investigation of
the indices, FERC concluded that it “has
jurisdiction over most of the transactions that
form the basis for the indices.” . . . This
language indicates that at least some of the
transactions included in the indices are not
subject to FERC’s jurisdiction, and thus
would be subject to challenge by Gallo.
Id. at 1045 (internal citations omitted). The non-
jurisdictional transactions included in the price indices
included first sales at the wellhead or via imports from
Canada or Mexico. Id.We explained in depth why the removal of certain
transactions from FERC’s jurisdiction meant that claims
arising out of those transactions were not preempted by the
NGA. Id. at 1046. Most importantly, we assumed that
Congress was aware of the existing context of state and
federal antitrust law when it enacted the Wellhead Decontrol
Act and other statutes limiting FERC’s jurisdiction. Id. State
and federal antitrust laws complement Congress’s intent to
move to a less regulated market, because such laws support
fair competition. Id. (“By enabling private parties to combat
market manipulation and other anti-competitive actions, the
laws under which Gallo brought its claim support Congress’s
determination that the supply, the demand, and the price of
28 IN RE: WESTERN STATES ANTITRUST LITIG.
high-cost first sale gas be determined by market forces.”)
(internal quotations omitted). For these reasons, we
concluded that “Congress did not preclude plaintiffs from
basing damage claims on rates associated with first sales.”
Id. Our reasoning in Gallo applies with equal force to the
question presented by this case: federal preemption doctrines
do not preclude state law claims arising out of transactions
outside of FERC’s jurisdiction.
C. The NGA’s Jurisdictional Limitations
The district court in the present case acknowledged this
court’s holding in Gallo, but distinguished that case on the
grounds that “Gallo did not address whether FERC’s
exclusive jurisdiction over natural gas companies and their
practices which affect jurisdictional rates preempts state
jurisdiction over the same subject matter.” It reasoned that
Defendants’ status as FERC-regulated entities, combined
with FERC’s authority under Section 5(a) of the NGA to
regulate “any rule, regulation, practice, or contract” affecting
a jurisdictional rate, conferred exclusive jurisdiction on FERC
to regulate the conduct at issue in this case.
The district court read the word “practices” in Section
5(a) of the NGA to preempt impliedly the application of state
laws to the same transactions (first sales and retail sales) that
Congress expressly exempted from the scope of FERC’s
jurisdiction in Section 1(b) of the Act. However, this reading
runs afoul of the canon of statutory construction that statutory
provisions should not be read in isolation, and the meaning of
a statutory provision must be consistent with the structure of
the statute of which it is a part. See, e.g., Waggoner v.
Gonzales, 488 F.3d 632, 636 (5th Cir. 2007) (“When
interpreting statutes . . . each part or section of a statute
IN RE: WESTERN STATES ANTITRUST LITIG. 29
should be construed in connection with every other part or
section to produce a harmonious whole.”). The district
court’s reading is also inconsistent with case law interpreting
the provisions of Section 5(a) of the NGA narrowly to
comport with the jurisdictional limitations established by
Section 1(b) of the Act. While the Ninth Circuit has not had
the opportunity to define the scope of Section 5(a), the
Supreme Court and other circuits have read Section 5(a)
narrowly to define the scope of FERC’s jurisdiction within
the limitations imposed by Section 1(b).
1. In Northwest Central Pipeline Corp. v. State
Corporation Commission of Kansas, the Supreme Court
relied on the jurisdictional limitations established in Section
1(b) of the NGA to uphold a state regulation on the
production of gas. 489 U.S. 493, 496 (1989). The State
Corporate Commission of Kansas (KCC) had adopted a
regulation governing the timing of natural gas production
from the Kansas-Hugoton field. Id. The regulation provided
that the right to extract assigned amounts of gas from the field
would be lost if pipelines delayed production for too long. Id.
at 497. Northwest Central Pipeline Corporation challenged
the regulation, arguing that it was preempted by federal
regulation of the interstate gas industry because the regulation
exerted pressure on pipelines to increase their purchases
from the Hugoton field and therefore affected the pipelines’
cost structures. Id. at 497, 507 (noting that Northwest
Central argued that “the federal regulatory scheme pre-empts
state regulations that may have either a direct or indirect
effect on matters within federal control”).
The Supreme Court rejected Northwest Central’s
argument, relying on the fact that Section 1(b) of the NGA
“expressly carve[d] out a regulatory role for the States” and
30 IN RE: WESTERN STATES ANTITRUST LITIG.
provided that states would retain jurisdiction over the
production of natural gas. Id. at 507. It also rejected the
pipeline’s claim that federal regulations preempted all state
regulations that may affect rates within federal control,
stating:
To find field pre-emption of Kansas’
regulation merely because purchasers’ costs
and hence rates might be affected would be
largely to nullify that part of NGA § 1(b) that
leaves to the States control over production,
for there can be little if any regulation of
production that might not have at least an
incremental affect on the costs of purchasers
in some market and contractual situation.
Id. at 514.
In American Gas Association v. Federal Energy
Regulatory Commission, the D.C. Circuit examined FERC’s
refusal to use its authority under Section 5 of the NGA to
modify “take-or-pay” contracts11 between natural gas
producers and pipelines. 912 F.2d 1496, 1503 (D.C. Cir.
1990). A “major premise” of FERC’s refusal to act was its
conclusion that its Section 5 power did not reach
nonjurisdictional contracts. Id. at 1505. The court
concluded, “As we read the Natural Gas Act, the Commission
11
Certain contracts entered into by producers and pipelines between
1977–1982 contained “take-or-pay” clauses requiring the pipelines either
to purchase a specified percentage of the producer’s deliverable gas or to
make “pre-payments” for that percentage. See Associated Gas Distribs.
v. FERC, 824 F.2d 981, 1021 (D.C. Cir. 1987).
IN RE: WESTERN STATES ANTITRUST LITIG. 31
was absolutely right: Congress clearly limited its § 5 powers
to jurisdictional contracts.” Id.
The petitioners in American Gas Association had offered
an argument similar to the one offered by the Defendants in
the present case: they isolated the phrase “contract affecting
such rates” and argued that FERC had jurisdiction to assess
the justness and reasonableness of the provisions of any
contract that would likely influence a pipeline’s end-of-
pipelines prices. Id. FERC, on the other hand, interpreted
“contract affecting such rates” as being limited to contracts
involving a jurisdictional seller and directly governing the
rate in a jurisdictional sale. Id. at 1506. The D.C. Circuit
agreed with FERC, stating that “petitioners’ theory is, more
generally, an oxymoron – Commission jurisdiction over
nonjurisdictional contracts.” Id. The court also noted that the
petitioners’ expansive reading of Section 5 had no
“conceptual core” because under their interpretation, Section
5 would reach “pipelines’ contracts for every other possible
factor of production – even legal services.” Id. at 1507.
We find the analysis of these cases persuasive, and apply
them here. Interpreting the jurisdictional provision in Section
5(a) broadly to find FERC jurisdiction over price
manipulation associated with nonjurisdictional sales would
risk nullifying the jurisdictional provisions of Section 1(b),
which reserve to the states regulatory authority over
nonjurisdictional sales, such as first sales at the wellhead or
from sellers in Canada and Mexico. Under the broad reading
of Section 5(a) that Defendants propose, there is no
“conceptual core” delineating transactions falling within
FERC’s jurisdiction and transactions outside of FERC’s
jurisdiction. There would be nothing stopping a future court
from finding that first sales themselves (which are exempted
32 IN RE: WESTERN STATES ANTITRUST LITIG.
from FERC’s jurisdiction pursuant to Section 1(b) of the Act)
are “practices” affecting jurisdictional rates that fall within
the jurisdictional provision in Section 5(a). We reject this
broad reading and hold that the district court erred in
concluding that FERC had jurisdiction over the reporting
practices associated with nonjurisdictional sales under
Section 5(a).
2. Another D.C. Circuit case, California Independent
System Operator Corporation v. Federal Energy Regulatory
Commission, does not address the interplay between the
jurisdictional limits outlined in Section 1(b) and the
jurisdictional provision in Section 5(a), but it does provide
further support for a narrow interpretation of the word
“practices” in Section 5(a). 372 F.3d 395 (D.C. Cir. 2004).
The California Independent System Operator Corporation
(CAISO) was a non-profit entity created by the state of
California to operate electric grid facilities in California. Id.
at 397. By statute, CAISO was obligated to follow certain
procedures for selecting a board of directors composed
exclusively of California residents. Id. After the energy
crisis of 2000, FERC directed CAISO to utilize a different
selection method for its board of directors. Id. at 397–98.
FERC claimed that it had authority to issue such a directive
under Section 206 of the Federal Power Act,12 which
provided, “Whenever the Commission [shall find] that any
12
The language at issue from the Federal Power Act in CAISO is
identical to the language at issue from the NGA in the present case. The
Supreme Court noted in Arkansas Louisiana Gas Company v. Hall that the
relevant provisions of the Federal Power Act and the Natural Gas Act “are
in all material respects substantially identical,” and therefore the Court’s
established practice is to “cit[e] interchangeably decisions interpreting the
pertinent sections of the two statutes.” 453 U.S. 571, 577 n.7 (1981)
(internal quotations omitted).
IN RE: WESTERN STATES ANTITRUST LITIG. 33
rule, regulation, practice, or contract affecting such rate,
charge, or classification is unjust, unreasonable, unduly
discriminatory or preferential,” the Commission shall
determine the just and reasonable practice to be observed
thereafter. Id. at 399 (quoting 16 U.S.C. § 824e(a)).
Specifically, FERC claimed that the composition and method
of selection of a utility company’s governing board was a
“practice . . . affecting [a] rate,” and that because FERC had
found that CAISO’s selection method was discriminatory,
FERC had authority to determine a just and reasonable
practice. Id.
The D.C. Circuit began its analysis with the “plain
language” of the statutory text. Id. at 400. It found that the
word “practices” is a word of sufficiently diverse meanings
that the proper method for determining Congressional intent
was to apply the canon of statutory construction “noscitur a
sociis.”13 The court looked at the word “practices” in context,
finding that Section 5(a) comes into play only after the
Commission has a hearing and determines that a “rate,
charge, or classification” employed by a regulated utility in
a jurisdictional transaction is unjust or unreasonable. Id.
Therefore, the court found that by using the word “practice,”
Congress had intended to empower FERC to “effect a
reformation of some ‘practice’ in a more traditional sense of
actions habitually being taken by a utility in connection with
a rate found to be unjust or unreasonable.” Id. The court
noted that the implications of a broader reading of the word
“practices” would be “staggering” because FERC would have
13
Noscitur a sociis means that “a word is known by the company it
keeps,” and this canon is applied “where a word is capable of many
meanings in order to avoid the giving of unintended breadth to the Acts of
Congress.” Jarecki v. G.D. Searle & Co., 367 U.S. 303, 307 (1961).
34 IN RE: WESTERN STATES ANTITRUST LITIG.
jurisdiction over a plethora of activities, such as the methods
of contracting for services, labor, or office space, as long as
FERC found that such “practices” affected the jurisdictional
rates. We agree with the D.C. Circuit’s approach to reading
the word “practices” narrowly as to not expand unduly the
scope of FERC’s jurisdiction.
3. Defendants rely on Mississippi Power & Light Co. v.
Mississippi ex rel. Moore, 487 U.S. 354 (1988) (“MP&L”) for
the proposition that “FERC’s jurisdiction over a practice or
contract affecting a jurisdictional rate preempts state law
from being used to regulate that practice or contract.”
Mississippi Power & Light involved a FERC order requiring
four utility companies to purchase a particular share of a
nuclear power plant’s output at rates FERC determined to be
just and reasonable. Mississippi Power & Light Co., 487 U.S.
at 364. One of the utility companies, Mississippi Power &
Light, filed an application with the Mississippi Public Service
Commission (“MPSC”) seeking a substantial increase in its
retail rates to recoup the costs of purchasing a portion of the
nuclear power plant’s output. Id. at 365. The Mississippi
Supreme Court eventually ruled that the MPSC was required,
in accordance with state law, to review the prudence of
incurring costs associated with purchasing the nuclear power
plant’s output. Id. at 367.
The Supreme Court reversed. The Court stated that
FERC’s exclusive jurisdiction over wholesale rates also
encompassed “power allocations that affect wholesale rates.”
Id. at 371. Because the “prudence inquiry” mandated by the
Mississippi Supreme Court required the state commission to
review the prudence of the FERC order determining the
allocation of costs associated with the nuclear power plant,
the inquiry was preempted by FERC’s exclusive jurisdiction.
IN RE: WESTERN STATES ANTITRUST LITIG. 35
Id. The Court concluded, “FERC-mandated allocations of
power are binding on the States, and States must treat those
allocations as fair and reasonable when determining retail
rates.” Id. at 371.
We do not find Defendants’ reliance on Mississippi
Power & Light Co. to be persuasive. Mississippi Power &
Light Co. stands for the proposition that states cannot use
their jurisdiction over retail rates to second-guess or review
FERC-authorized rates that may affect retail rates. See Gallo,
503 F.3d at 1044 (relying on Mississippi Power & Light Co.
to “support EnCana’s position that wholesale sellers such as
EnCana may raise the filed rate doctrine as a defense to
actions putatively attacking retail rates, but having the effect
of disallowing FERC-approved wholesale rates.”). However,
Mississippi Power & Light Co. does not support Defendants’
broad reading of the phrase “practice . . . affecting
[jurisdictional] rates.” In Mississippi Power & Light Co.,
FERC had used its jurisdiction over practices affecting
wholesale rates to determine an equitable allocation of
nuclear power costs. Defendants attempt to analogize the
power allocations at issue in Mississippi Power & Light Co.
with the market manipulation associated with
nonjurisdictional transactions at issue in the present case.
However, that analogy cannot be squared with the Gallo
court’s holding that the NGA does not preempt state antitrust
challenges to rates and practices associated with such
nonjurisdictional sales.
D. FERC’s Regulatory Authority
One final issue dividing the parties in this appeal is the
extent to which FERC had authority to regulate the market
manipulation that gave rise to the energy crisis in 2000–2001.
36 IN RE: WESTERN STATES ANTITRUST LITIG.
The Defendants point to the Code of Conduct promulgated by
FERC in 2003 as evidence that FERC had regulatory
authority over the anticompetitive conduct at issue, including
the false price reporting and wash sales. FERC promulgated
the Code of Conduct by amending the blanket market
certificates governing jurisdictional sellers. See Amendments
to Blanket Sales Certificates, 68 Fed. Reg. 66,323 (Nov. 26,
2003). The Commission stated that the need for the Code of
Conduct “was informed by the types of behavior that
occurred in the Western markets during 2000 and 2001.” Id.
¶ 2. The Code prohibited jurisdictional sellers14 “from
engaging in actions without a legitimate business purpose that
manipulate or attempt to manipulate market conditions,
including wash trades and collusion.” Id. ¶ 4. The Code
further provides that jurisdictional sellers are required to
provide complete and accurate transactional information to
publishers of gas price indices. Id. ¶ 5.
While Defendants rely on the promulgation of the Code
of Conduct as evidence that FERC had jurisdiction over the
market manipulation at issue, there are two significant flaws
in their argument. First, two years after the promulgation of
the Code, Congress enacted the Energy Policy Act of 2005
(“EPA”),15 which prohibits market manipulation and
14
Section III.A of the Commission’s final order is titled “Application of
Code of Conduct to Jurisdictional Sellers,” and paragraphs 14–22 discuss
the scope of FERC’s jurisdiction over the natural gas industry.
15
The EPA provides, in relevant part:
It shall be unlawful for any entity, directly or indirectly,
to use or employ, in connection with the purchase or
sale of natural gas or the purchase or sale of
transportation services subject to the jurisdiction of the
IN RE: WESTERN STATES ANTITRUST LITIG. 37
authorizes FERC to promulgate rules and regulations to
protect natural gas ratepayers. There is a canon of statutory
interpretation that counsels against reading acts of Congress
to be superfluous. See American Nat’l Red Cross v. S.G.,
505 U.S. 247, 263 (1992). This canon suggests that Congress
enacted the relevant provision of the EPA because FERC did
not already have regulatory authority over the anticompetitive
conduct at issue.
The second flaw in Defendants’ argument is more
relevant to our jurisdictional analysis. Even if FERC did
have the statutory authority to promulgate the 2003 Code of
Conduct and to make it applicable to “first sales” and other
nonjurisdictional sales, a close reading of the Code reveals
that FERC limited the application of the Code to sales within
its jurisdiction. FERC acknowledged that because of acts
deregulating first sales of natural gas, such sales were outside
the scope of FERC’s jurisdiction. Amendments to Blanket
Sales Certificates, 68 Fed. Reg. 66,323 ¶ 14 (Nov. 26, 2003).
FERC further noted that some commenters had raised
“concerns regarding the potential adverse effect of imposing
the proposed code of conduct only on the portion of the
natural gas market under the Commission’s jurisdiction,” id.
¶ 16, and responded by stating, “The fact that the
Commission does not regulate the entire natural gas market
does not compel the Commission to refrain from exercising
its authority over that portion of the gas market which is
Commission, any manipulative or deceptive device or
contrivance. . . . in contravention of such rules and
regulations as the Commission may prescribe as
necessary in the public interest or for the protection of
natural gas ratepayers.
Pub. L. No. 109-58 tit. III, § 315 (codified at 15 U.S.C. § 717c-1).
38 IN RE: WESTERN STATES ANTITRUST LITIG.
within its jurisdiction to prevent the manipulation of prices.”
Id. ¶ 21. The discussion of jurisdictional limitations within
the Code of Conduct itself suggests that the Code does not
support the Defendants’ argument that FERC had jurisdiction
over the anticompetitive behavior related to nonjurisdictional
sales. For these reasons, the 2003 enactment of the Code of
Conduct does not affect our conclusion that the NGA does
not grant FERC jurisdiction over claims arising out of false
price reporting and other anticompetitive behavior associated
with nonjurisdictional sales.
IV. The District Court’s Orders Denying Plaintiffs
Leave to Amend
The Farmland, Breckenridge, Learjet, and Heartland
Plaintiffs appeal the district court’s October 29, 2010, order
denying them leave to amend their complaints to add federal
antitrust claims. Their motions for leave to amend their
complaints were filed nine months after the March 2, 2009,
scheduling deadline to amend pleadings. The Breckenridge
Plaintiffs also appeal the district court’s April 21, 2008, order
denying them leave to amend their complaint to add a state
law treble damages remedy.
We review a district court’s decision denying leave to
amend pleadings for abuse of discretion. See Johnson v.
Mammoth Recreations, Inc., 975 F.2d 604, 607 (9th Cir.
1992). We hold that in the present case, the district court did
not abuse its discretion in denying either of the two motions
for leave to amend complaints, and therefore affirm both the
October 29, 2010, order denying the Farmland, Breckenridge,
Learjet, and Heartland Plaintiffs leave to amend their
complaints to add federal antitrust claims, as well as the April
21, 2008, order denying the Breckenridge Plaintiffs leave to
IN RE: WESTERN STATES ANTITRUST LITIG. 39
amend their complaint to add a state law treble damages
claim.
A. October 29, 2010, Order
We summarize briefly the procedural history of this case
to provide context for our decision to affirm the district
court’s October 29, 2010, order.
On April 8, 2005, the district court granted summary
judgment to the defendants in the Texas-Ohio and Abelman
cases on the ground that the plaintiffs’ claims in those cases
were barred by the filed-rate doctrine. See In re Western
States Wholesale Natural Gas Antitrust Litig., 368 F. Supp.
2d 1110 (D. Nev. 2005), rev’d by 243 Fed. App’x 328 (9th
Cir. 2007) and In re Western States Wholesale Natural Gas
Antitrust Litig., 408 F. Supp. 2d 1055 (D. Nev. 2005), rev’d
by 248 Fed. App’x 821 (9th Cir. 2007). Four months later,
the first of these present actions was filed. In September
2007, this court issued its decision in Gallo and
simultaneously reversed Texas-Ohio and Abelman, holding
that the filed-rate doctrine does not bar state or federal
antitrust claims arising out of the allegations that energy
traders manipulated the price index. See E. & J. Gallo
Winery v. Encana Corp., 503 F.3d 1027 (9th Cir. 2007); In
re Western States Wholesale Natural Gas Antitrust Litig.,
243 Fed. App’x 328 (9th Cir. 2007) (reversing Texas-Ohio);
In re Western States Wholesale Natural Gas Antitrust Litig.,
248 Fed. App’x 821 (9th Cir. 2007) (reversing Abelman). In
November 2007, Defendants in the present case filed a new
motion for summary judgment, and in May 2008, the District
Court denied the motion, relying in part on Gallo. In July
2008, Defendants asked the District Court to reconsider its
May 2008 order denying their preemption-based motion for
40 IN RE: WESTERN STATES ANTITRUST LITIG.
summary judgment. Finally, in November 2009 the District
Court agreed to reconsider its May 2008 order.
The deadline to amend pleadings in this case was March
2, 2009. On December 15, 2009 (approximately one month
after the District Court agreed to reconsider its May 2008
order denying summary judgment), Plaintiffs filed motions to
modify the scheduling order and for leave to amend their
complaints to add claims under the federal Sherman Antitrust
Act.
The district court denied the Plaintiffs’ motions to amend
their pleadings, noting that when a party seeks to amend a
pleading after the pretrial scheduling order’s deadline for
amending the pleadings has expired, the moving party must
satisfy the “good cause” standard of Federal Rule of Civil
Procedure 16(b)(4), which provides that “[a] schedule may be
modified only for good cause and with the judge’s consent,”
rather than the liberal standard of Federal Rule of Civil
Procedure 15(a).16 “Unlike Rule 15(a)’s liberal amendment
policy which focuses on the bad faith of the party seeking to
interpose an amendment and the prejudice to the opposing
party, Rule 16(b)’s ‘good cause’ standard primarily considers
the diligence of the party seeking the amendment.” Johnson,
975 F.2d at 609. While a court may take into account any
prejudice to the party opposing modification of the
scheduling order, “the focus of the [Rule 16(b)] inquiry is
16
Fed. R. Civ. P. 15(a) provides that a party may amend its pleadings
once as a matter of course within certain deadlines, and that in “all other
cases, a party may amend its pleading only with the opposing party’s
written consent or the court’s leave. The court should freely give leave
when justice so requires.” (emphasis added).
IN RE: WESTERN STATES ANTITRUST LITIG. 41
upon the moving party’s reasons for seeking modification . . .
[i]f that party was not diligent, the inquiry should end.” Id.The district court in the present case noted, “The good
cause standard typically will not be met where the party
seeking to modify the scheduling order has been aware of the
facts and theories supporting amendment since the inception
of the action.” The district court found that Plaintiffs were
not diligent in seeking the amendment to add federal Sherman
Antitrust Act claims, because they had known since 2007
(after this court held in Gallo that federal antitrust claims
were not barred by the filed-rate doctrine) that federal
antitrust claims may be viable.
We hold that the district court did not abuse its discretion
in concluding that the Plaintiffs were not diligent in seeking
to amend their complaints to add federal antitrust claims. Our
analysis is guided by this court’s decision in Johnson v.
Mammoth Recreations, Inc., 975 F.2d 604 (9th Cir. 1992). In
Johnson, Dairl Johnson was injured while skiing at Mammoth
Mountain ski resort. Id. at 606. He filed a diversity action
against the ski lift manufacturer and Mammoth Recreations,
Inc., a holding company that owned a majority of the stock in
Mammoth Mountain Ski Area, Inc., the entity that actually
owned and operated the ski resort. Id. The district court filed
a scheduling order which established a cut-off date of
October 17, 1989, for joining additional parties. Id. Four
months after this deadline passed, Johnson moved to join
Mammoth Mountain Ski Area, Inc., claiming that he was
unaware of the existence of Mammoth Mountain Ski Area,
Inc., and its corporate relationship with Mammoth
Recreations, Inc. Id. at 607. The court found that Johnson
had failed to demonstrate good cause for his belated motion
to amend, since “Mammoth Recreation’s answer to the
42 IN RE: WESTERN STATES ANTITRUST LITIG.
complaint and response to interrogatories amply indicated
that Mammoth Recreations did not own and operate the ski
resort, and thus any theory of liability predicated upon that
fact would fail.” Id. at 609. As in Johnson, the Plaintiffs
here have failed to demonstrate good cause for their untimely
motion to amend, and thus, the district court did not abuse its
discretion in denying that motion. We therefore affirm the
district court’s October 29, 2010, order denying Plaintiffs
leave to amend their complaints to add federal antitrust
claims.
B. April 21, 2008, Order
On March 4, 2008, the Heartland Plaintiffs filed a motion
for leave to amend their complaint to add a treble damages
claim under the Colorado state antitrust statute. Previously,
their complaint had sought only a full refund. The district
court denied the motion, stating, “Plaintiffs have been aware
of the availability of an actual damages claim under the
Colorado antitrust statutes since the inception of the case, but
chose to plead under the full refund provision only.” The
district court found that Plaintiffs’ failure to seek leave to add
an actual damages claim was explicable during the time
between the district court’s 2005 ruling in Texas-Ohio and
Abelman that such claims were barred by the filed-rate
doctrine and this court’s decision in Gallo holding that such
claims were not barred. However, this court decided Gallo in
September 2007, and Plaintiffs did not move to amend their
complaint to add an actual damages claim until March 4,
2008.
The district court considered it relevant that Plaintiffs had
requested leave to amend to add an additional defendant on
October 12, 2007, but did not make a request to add the treble
IN RE: WESTERN STATES ANTITRUST LITIG. 43
damages claim at that time. The court denied the Plaintiffs’
March 4, 2008, motion for leave to amend to add a treble
damages claims, finding that Plaintiffs unduly delayed
amendment by waiting “until after this Court granted
summary judgment on the full consideration claim, several
months after Gallo, to seek leave to amend to add a new
theory of liability of which Plaintiffs have been aware since
the inception of this suit.”
Although Federal Rule of Civil Procedure 15(a) provides
that leave to amend “shall be freely given when justice so
requires,” it “is not to be granted automatically.” Jackson v.
Bank of Hawaii, 902 F.2d 1385, 1387 (9th Cir. 1990). This
court considers the following five factors to assess whether to
grant leave to amend: “(1) bad faith, (2) undue delay,
(3) prejudice to the opposing party, (4) futility of amendment;
and (5) whether plaintiff has previously amended his
complaint.” Allen v. City of Beverly Hills, 911 F.2d 367, 373
(9th Cir. 1990).
The district court in the present case relied heavily on the
fifth factor. It noted that a “district court’s discretion
[whether to grant leave to amend] is ‘particularly broad’ in
deciding subsequent motions to amend where the court
previously granted leave to amend.” This court’s decision in
Royal Insurance Company of America v. Southwest Marine,
194 F.3d 1009 (9th Cir. 1999) is instructive. Royal Insurance
Company sued Southwest for breach of contract, breach of
warranty, and negligence after Southwest allegedly caused
$900,000 of damage to a boat insured by Royal Insurance.
Id. at 1013. Royal Insurance amended its complaint twice –
once to correct minor deficiencies in the original complaint,
and once to assert additional claims against Southwest. Id. at
1013 n.1. However, the district court denied Royal
44 IN RE: WESTERN STATES ANTITRUST LITIG.
Insurance’s motion for leave to file a third amended
complaint to assert further claims against Southwest, which
Royal filed after the district court granted summary judgment
in favor of Southwest. Id. at 1013.
On appeal, this court stated, “Late amendments to assert
new theories are not reviewed favorably when the facts and
the theory have been known to the party seeking amendment
since the inception of the cause of action.” Id. at 1016–17
(internal quotation marks omitted). We relied on the fact that
Royal Insurance had knowledge of the relevant facts from the
inception of the lawsuit, and also the fact that Royal had
twice before amended its complaint, to hold that the district
court did not abuse its discretion by denying Royal’s motion
for leave to file a third amended complaint. Id. at 1017(“Considering that Royal had twice before amended its
complaint and moved to amend a third time only after the
district court dismissed its claims on summary judgment, the
district court did not abuse its discretion by denying Royal’s
motion to amend.”).
In the present case, we find that the district court did not
abuse its discretion in denying the Heartland Plaintiffs’
motion for leave to amend to add a treble damages state law
claim. We therefore affirm the district court’s order denying
that motion.
IN RE: WESTERN STATES ANTITRUST LITIG. 45
V. Dismissal of the AEP Defendants from the Arandell
and Heartland Lawsuits
The district court entered separate orders dismissing the
AEP Defendants17 from the Arandell suit filed in Wisconsin
state court and dismissing the AEP Defendants from the
Heartland suit filed in Missouri state court prompted by the
AEP Defendants’ motions to dismiss for lack of personal
jurisdiction pursuant to Federal Rule of Civil Procedure
12(b)(2). This court reviews de novo a district court’s
determination that it does not have personal jurisdiction over
a defendant. See Schwarzenegger v. Fred Martin Motor Co.,
374 F.3d 797, 800 (9th Cir. 2004).
A. Facts
The operative facts alleged in each case are substantially
similar. The Arandell Plaintiffs filed a class action in
Wisconsin pursuant to the Wisconsin Antitrust Act,
Wisconsin Statutes ch. 133, brought by and on behalf of a
class consisting of all Wisconsin industrial and commercial
purchasers of natural gas for consumption in Wisconsin
between January 1, 2000 and October 21, 2002. Their
complaint alleged that during the relevant time period, the
Defendants conspired to restrain trade or commerce relating
to natural gas.
The Heartland Plaintiffs filed a class action in Missouri
pursuant to the Missouri Antitrust Laws, Missouri Statutes
§ 416.010 et seq., brought by and on behalf of a class
consisting of all Missouri industrial and commercial
17
The “AEP Defendants” are American Electric Power Company
(“AEP”) and its subsidiary, AEP Energy Services, Inc (“AEPES”).
46 IN RE: WESTERN STATES ANTITRUST LITIG.
purchasers of natural gas for consumption in Missouri
between January 1, 2000 and October 21, 2002. Their
complaint alleged that during the relevant time period, the
Defendants conspired to restrain trade or commerce relating
to natural gas.
None of the following basic facts about AEP’s corporate
structure are in dispute. AEP is a New York corporation with
its principal place of business in Columbus, Ohio. During the
relevant time period in each case, AEP wholly owned and
controlled its subsidiary, AEP Energy Services, Inc.
(AEPES), an Ohio corporation with a principal place of
business in Columbus, Ohio. AEP is a holding company that
derives its income from dividends on its subsidiaries’ stocks;
the AEP Defendants have no office, bank accounts, property,
or employees in either Wisconsin or Missouri; the AEP
Defendants have not qualified to do business in either
Wisconsin or Missouri and have not appointed a registered
agent for service of process in either of those states; the AEP
Defendants have not paid taxes, manufactured products, or
performed services in either Wisconsin or Missouri; and the
AEP Defendants have not directed advertising specifically at
Wisconsin or Missouri residents.
In the Arandell case, the Plaintiffs claim specific personal
jurisdiction18 over the AEP Defendants because their actions
pursuant to the alleged conspiracy “were intended to have,
and did have, a direct, substantial, and reasonably foreseeable
effect on commerce in Wisconsin during the Relevant Time
Period.” Plaintiffs alleged that personal jurisdiction existed
over AEP based on the activities of its corporate affiliates,
18
The Arandell Plaintiffs do not argue that the district court could
exercise general personal jurisdiction over AEP or AEPES.
IN RE: WESTERN STATES ANTITRUST LITIG. 47
namely AEPES, which entered into a long-term “natural gas
supply agreement with Wisconsin Electric Power Company
during the Relevant Time Period, and sold natural gas to
Wisconsin Electric Power Company pursuant to that
agreement.”
The district court found that from 1998–2003, AEPES
entered into natural gas supply agreements with various
Wisconsin companies, and that trade confirmations evince
numerous sales made to companies with Wisconsin addresses
throughout 2001–2003. AEP acted as a guarantor for AEPES
during the relevant time period to facilitate AEPES’s
business, including issuing guarantees on AEPES’s behalf to
several Wisconsin-based entities. However, AEPES has
never entered into a contract or delivered gas to any of the
named plaintiffs in the case.
The Heartland case presents substantially similar facts.
The Heartland Plaintiffs claim specific personal jurisdiction19
over the AEP Defendants because their actions pursuant to
the alleged conspiracy “were intended to have, and did have,
a direct, substantial, and reasonably foreseeable effect on
commerce in Missouri during the Relevant Time Period.”
Plaintiffs allege that personal jurisdiction existed over AEP
based on the activities of its corporate affiliates, namely
AEPES, which sold natural gas to Missouri entities during the
relevant time period. The Plaintiffs also allege that one of the
primary Missouri entities that AEP traded with, Aquila
Merchant Services, was “an active member of the conspiracy
to manipulate natural gas prices.”
19
The Heartland Plaintiffs do not argue that the district court could
exercise general personal jurisdiction over AEP or AEPES.
48 IN RE: WESTERN STATES ANTITRUST LITIG.
The district court found that from 1997–2001, AEPES
entered into natural gas supply agreements with various
Missouri companies. From 2000–2002, AEPES sold billions
of dollars worth of natural gas to Missouri-based entities.
AEP acted as a guarantor for AEPES during the relevant time
period to facilitate AEP Energy Services’s business, including
issuing guarantees on AEPES’s behalf to several Missouri-
based entities. However, AEPES has never entered into a
contract with either of the named Plaintiffs in this case.
B. Analysis
When a defendant moves to dismiss for lack of personal
jurisdiction, the plaintiff bears the burden of demonstrating
that the court has jurisdiction. Harris Rutsky & Co. Ins.
Servs., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1128–29
(9th Cir. 2003). However, the plaintiff must make “only a
prima facie showing of jurisdictional facts to withstand the
motion to dismiss.” Doe v. Unocal Corp., 248 F.3d 915, 922
(9th Cir. 2001). For the purposes of deciding whether a
prima facie showing has been made, “the court resolves all
disputed facts in favor of the plaintiff.” Pebble Beach Co. v.
Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006).
Personal jurisdiction over a nonresident defendant is
proper if permitted by a state’s long-arm statute20 and if the
20
The Wisconsin Supreme Court has held that Wisconsin’s long-arm
statute, Wis. Stat. § 801.05, allows for the exercise of jurisdiction to the
full extent allowed by the due process clause. See Rasmussen v. General
Motors Corp., 803 N.W.2d 623, 630 (Wis. 2011) (stating that Ҥ 801.05
was intended to provide for the exercise of jurisdiction over nonresident
defendants to the full extent consistent with the requisites of due process
of law”) (internal citations omitted). The “jurisdictional inquiries under
state law and federal due process merge into one analysis” when, as here,
IN RE: WESTERN STATES ANTITRUST LITIG. 49
exercise of that jurisdiction does not violate federal due
process. Fireman’s Fund Ins. Co. v. Nat’l Bank of Coops.,
103 F.3d 888, 893 (9th Cir. 1996). For the exercise of
jurisdiction to satisfy due process, a nonresident defendant, if
not present in the forum, must have “minimum contacts” with
the forum such that the assertion of jurisdiction “does not
offend traditional notions of fair play and substantial justice.”
Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)
(internal quotation marks omitted). A federal district court
may exercise either general or specific personal jurisdiction.
See Helicopteros Nacionales de Colombia, S.A. v. Hall,
466 U.S. 408, 414–15 (1984). To establish general
jurisdiction, the plaintiff must demonstrate that the defendant
has sufficient contacts to “constitute the kind of continuous
and systematic general business contacts that approximate
physical presence.” Glencore Grain Rotterdam B.V. v.
Shivnath Rai Harnarain Co., 284 F.3d 1114, 1124 (9th Cir.
2002) (internal quotation marks omitted). However, because
the Plaintiffs do not claim that the district court could
exercise general jurisdiction in either Wisconsin or Missouri
over the AEP Defendants in this case, the only relevant
question on appeal is whether the district court could exercise
specific personal jurisdiction over the AEP Defendants.
the state’s long-arm statute is “coextensive with federal due process
requirements.” Roth v. Garcia Marquez, 942 F.2d 617, 620 (9th Cir.
1991). In Missouri, however, the Missouri Supreme Court has held that
there are two separate inquiries: “one inquiry to establish if a defendant’s
conduct was covered by the long-arm statute, and a second inquiry to
analyze whether the exercise of jurisdiction comports with due process
requirements.” Myers v. Casino Queen, Inc., 689 F.3d 904, 909 (8th Cir.
2012) (citing Bryant v. Smith Interior Design Grp., Inc., 310 S.W.3d 227,
231 (Mo. 2010)).
50 IN RE: WESTERN STATES ANTITRUST LITIG.
This court uses the following three-part test to analyze
whether a party’s “minimum contacts” meet the due process
standard for the exercise of specific personal jurisdiction:
(1) The non-resident defendant must
purposefully direct his activities or
consummate some transaction with the forum
or resident thereof; or perform some act by
which he purposefully avails himself of the
privilege of conducting activities in the forum,
thereby invoking the benefits and protections
of its laws; (2) the claim must be one which
arises out of or relates to the defendant's
forum-related activities; and (3) the exercise
of jurisdiction must comport with fair play
and substantial justice, i.e. it must be
reasonable
Schwarzenegger, 374 F.3d at 802. “If any of the three
requirements is not satisfied, jurisdiction in the forum would
deprive the defendant of due process of law.” Omeluk v.
Langsten Slip & Batbyggeri A/S, 52 F.3d 267, 270 (9th Cir.
1995). While all three requirements must be met, this court
has stated that in its consideration of the first two prongs, “[a]
strong showing on one axis will permit a lesser showing on
the other.” Yahoo! Inc. v. La Ligue Contre Le Racisme Et
L’Antisemitisme, 433 F.3d 1199, 1210 (9th Cir. 2006) (en
banc). That means that a single forum state contact can
support jurisdiction if the cause of action arises out of that
particular purposeful contact of the defendant with the forum
state. Id. (citing Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir.
1987)). The district court in the Arandell and Heartland
cases focused its analysis on the allegations that AEPES
made sales to Wisconsin- and Missouri-based entities and
IN RE: WESTERN STATES ANTITRUST LITIG. 51
found that the Plaintiffs had not met their burden of proving
the second requirement for specific jurisdiction.21 This court
has referred to the second prong of the specific jurisdiction
test as a “but for” test. See Shute v. Carnival Cruise Lines,
897 F.2d 377, 385 (9th Cir. 1988), rev’d on other grounds,
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991).22
Under the “but for” test, “a lawsuit arises out of a defendant’s
contacts with the forum state if a direct nexus exists between
those contacts and the cause of action.” Fireman’s Fund Ins.
Co., 103 F.3d at 894. The district court found that there was
no causal nexus between AEP Defendants’ activities in the
forum states (selling natural gas to non-Plaintiff third parties)
and the harm allegedly suffered by the Plaintiffs (buying gas
at inflated prices from third party sellers).
We need not decide whether personal jurisdiction could
be grounded on the AEP Defendants’ sales of natural gas in
the forum states to third parties. The Arandell and Heartland
Plaintiffs also predicated their antitrust claims on the AEP
Defendants’ manipulation of the price indices pursuant to a
conspiracy to inflate natural gas prices. The district court
conducted the personal jurisdiction analysis based on the
21
The district court assumed, without expressly deciding, that AEPES’s
sales to Wisconsin- and Missouri-based entities and delivery of natural gas
to the forum were sufficient to satisfy the “purposeful availment” prong
of the specific jurisdiction inquiry. Because it found that Plaintiffs failed
to show that their claims arose out of AEPES’s contacts with Wisconsin
and Missouri, it did not address the third prong of the specific jurisdiction
inquiry (whether the exercise of jurisdiction would be reasonable).
22
See Doe v. American Nat’l Red Cross, 112 F.3d 1048, 1051 n.7 (9th
Cir. 1997) (noting that even after the Supreme Court’s decision in Shute,
“the ‘but for’ test is still employed in determining whether a plaintiff’s
injuries arose out of the defendant’s forum-related activities.”).
52 IN RE: WESTERN STATES ANTITRUST LITIG.
natural gas sales only. We find that the district court erred in
failing to analyze whether Plaintiffs’ allegations of
anticompetitive behavior directed at the forum states are
sufficient to support the exercise of specific personal
jurisdiction.
There is no question that the Plaintiffs’ state antitrust
claims arise out of the AEP Defendants’ collusive
manipulation of the gas price indices.23 In other words, their
claims “arise[] out of or relate[] to” the Defendants’ alleged
forum-related activities. Schwarzenegger, 374 F.3d at 802.
The second prong of the test for specific personal jurisdiction
is therefore satisfied. The key issue in this analysis is
therefore whether the AEP Defendants’ price manipulation
satisfies the first prong of the specific personal jurisdiction
inquiry, i.e., whether “[t]he non-resident defendant . . .
purposefully direct[ed] his activities or consummat[ed] some
transaction with the forum or resident thereof; or perform[ed]
some act by which he purposefully avail[ed] himself of the
privilege of conducting activities in the forum, thereby
invoking the benefits and protections of its laws.” Id. This
first prong is satisfied by showing either purposeful availment
or purposeful direction, which are two distinct concepts. See
Washington Shoe Co. v. A-Z Sporting Goods, Inc., 704 F.3d
668, 672 (9th Cir. 2012).
23
For example, the Arandell Plaintiffs allege, “The actions of the
defendants resulted in the plaintiffs paying inflated prices for natural gas
during the Relevant Time Period. During the Relevant Time Period,
natural gas prices in Wisconsin more than doubled. The plaintiffs paid
higher prices for natural gas than they otherwise would have paid if the
defendants’ conspiracy had not existed.”
IN RE: WESTERN STATES ANTITRUST LITIG. 53
“Purposeful direction” requires that the defendant
allegedly must have “(1) committed an intentional act,
(2) expressly aimed at the forum state, (3) causing harm that
the defendant knows is likely to be suffered in the forum
state.” Washington Shoe, 704 F.3d at 673 (quoting Mavrix
Photo, Inc. v. Brand Techs, Inc., 647 F.3d 1218, 1228 (9th
Cir. 2011)). This test for “purposeful direction” is based on
the Supreme Court’s test in Calder v. Jones, 465 U.S. 783(1984).24
The facts alleged in these causes of action present a
compelling case for finding that the AEP Defendants
“purposefully directed” their anticompetitive behavior at the
forum states. The first two prongs of the “purposeful
direction” test ask whether there was an “intentional act”25
24
The plaintiff in Calder was an entertainer who lived and worked in
California. 465 U.S. at 785. She brought suit in California state court
against the National Enquirer after the tabloid published a story alleging
that the plaintiff had an alcohol problem. Id. at 784, 788 n.9. The article
was written in Florida, and the National Enquirer was published in Florida
with a large circulation in California. Id. at 785. The California courts
“concluded that a valid basis for jurisdiction existed on the theory that [the
defendants] intended to, and did, cause tortious injury to [the plaintiff] in
California.” Id. at 787. The Supreme Court affirmed, holding that
jurisdiction in California was proper because the defendants’ intentional
conduct in Florida was calculated to cause injury to the plaintiff in
California. Id. at 791.
25
This court has recently defined “intentional act” as “an external
manifestation of the actor’s intent to perform an actual, physical act in the
real world, not including any of its actual or intended results.”
Washington Shoe, 704 F.3d at 674.
54 IN RE: WESTERN STATES ANTITRUST LITIG.
that was “expressly aimed at the forum state.”26 Here, the
pleadings contain allegations of “intentional acts” in the form
of anticompetitive behavior expressly aimed at the forum
states. The Wisconsin Arandell Plaintiffs alleged, for
example, that AEP “either directly or indirectly through one
of its controlled affiliates, engaged in the practice of wash
sales, and manipulated market indices through the reporting
of false trading information,” actions which were “intended
to have, and did have, a direct, substantial and reasonably
foreseeable effect on commerce in Wisconsin.” By alleging
acts “intended to have” an effect in Wisconsin, the Plaintiffs
went beyond alleging acts with a “mere foreseeable effect” in
the forum. See Pebble Beach, 453 F.3d 1156 (citing Bancroft
& Masters, Inc. v. Augusta Nat’l Inc., 223 F.3d 1082, 1087
(9th Cir. 2000)). They alleged intentional acts by the AEP
Defendants that were “directed at the forum state” itself. Id.
at 1158.
The Arandell Plaintiffs further alleged that AEP’s officers
or directors made agreements “which tended to advance or
control the market prices of natural gas that its affiliates sold
in the United States or in Wisconsin” and that these officers
or directors made “strategic marketing policies and decisions”
to report prices to natural gas price indices “that affected the
market prices of natural gas.” The policies and decisions,
alleged the Arandell Plaintiffs, were “implemented on an
operational level by affiliates, such as [AEPES].” The
Arandell Plaintiffs also claimed that all Defendants (including
26
“We have repeatedly stated that the ‘express aiming’ requirement is
satisfied, and specific jurisdiction exists, when the defendant is alleged to
have engaged in wrongful conduct targeted at a plaintiff whom the
defendant knows to be a resident of the forum state.” Washington Shoe,
704 F.3d at 675 (internal quotation marks omitted).
IN RE: WESTERN STATES ANTITRUST LITIG. 55
the AEP Defendants) “worked together to fraudulently
increase the retail price of natural gas paid by commercial
entities in Wisconsin.” This conspiracy was allegedly carried
out through unlawful acts that were “ordered and performed
by their officers, directors, agents, employees or
representatives while actively engaged in the management,
direction, control or transaction of defendants’ business or
affairs.” For example, the Plaintiffs alleged that “American
Electric Power Company and AEP Energy Services, Inc.
traders were instructed by their superiors to adjust the prices
and volumes of trades they had made and, in some cases, to
report trades that never occurred.” The “purpose and effect”
of this was to “collusively and artificially inflate the price of
natural gas paid by commercial entities in Wisconsin.” These
alleged facts, taken as true, establish that the AEP
Defendants’ price manipulation was “expressly aimed” at
Wisconsin, because the AEP Defendants knew and intended
that the consequences of their price manipulation would be
felt in Wisconsin. Ibrahim v. Dep’t of Homeland Sec.,
538 F.3d 1250, 1258 (9th Cir. 2008).
The third prong of the “purposeful direction” test asks
whether the intentional acts caused harm that the defendant
knows is likely to be suffered in the forum state. In the
present case, the Arandell Plaintiffs further alleged that each
defendant “committed one or more acts or omissions outside
of Wisconsin, which caused an injury to person or property
within Wisconsin.” Such injury included increases in the
price of gas, which was specifically alleged in the complaint
– for example, the Plaintiffs alleged that the city gate price
for natural gas in Wisconsin nearly quadrupled in the span of
a year, while the price for commercial consumers more than
doubled. The harm was magnified by increased price
volatility, which “caused commercial entities in Wisconsin to
56 IN RE: WESTERN STATES ANTITRUST LITIG.
incur greater expenses associated with hedging natural gas
costs,” further injuring the Plaintiffs by “depriving them of
the right and ability to make risk management, resource
allocation and other financial decisions relating to natural gas,
in a full and free competitive market.”
In this case, the amount of harm in Wisconsin, and the
specificity with which it was alleged, is sufficient to satisfy
the third prong of the “purposeful direction” test. Our case
law does not require that the “brunt” of the harm be suffered
in the forum state; as long as “a jurisdictionally sufficient
amount of harm is suffered in the forum state, it does not
matter that even more harm might have been suffered in
another state.” La Ligue, 433 F.3d at 1207. For these
reasons, we find that the Arandell Plaintiffs have alleged
sufficient facts to support the exercise of specific personal
jurisdiction over the AEP Defendants on the theory that the
AEP Defendants “purposefully directed” their
anticompetitive conduct at the forum state of Wisconsin.
The district court did not address the third prong of the
personal jurisdiction inquiry, whether the exercise of
jurisdiction would “comport with fair play and substantial
justice” – in other words, whether the exercise of jurisdiction
would be reasonable. Schwarzenegger, 374 F.3d at 802.
Once the Plaintiffs have shown that the exercise of personal
jurisdiction satisfies the first two prongs of the personal
jurisdiction test, the burden shifts to the defendant to make a
“compelling case” that the exercise of jurisdiction would be
unreasonable. Burger King Corp. v. Rudzewicz, 471 U.S.
462, 476-77 (1985). This court considers the following seven
factors in determining whether the exercise of jurisdiction
would be reasonable:
IN RE: WESTERN STATES ANTITRUST LITIG. 57
(1) the extent of the defendant’s purposeful
interjection into the forum state, (2) the
burden on the defendant in defending in the
forum, (3) the extent of the conflict with the
sovereignty of the defendant’s state, (4) the
forum state’s interest in adjudicating the
dispute, (5) the most efficient judicial
resolution of the controversy, (6) the
importance of the forum to the plaintiff’s
interest in convenient and effective relief, and
(7) the existence of an alternative forum.
Bancroft, 223 F.3d at 1088. We find that the AEP
Defendants have not made a “compelling case” based upon
any of these factors that the exercise of personal jurisdiction
in Wisconsin would be unreasonable.
For these reasons, we reverse the district court’s order
dismissing the AEP Defendants from the Wisconsin Arandell
case for lack of personal jurisdiction. The Missouri
Heartland Plaintiffs alleged similar facts as the Wisconsin
Arandell Plaintiffs, and therefore our analysis applies with
equal force to the Heartland case. We note, however, that the
Heartland Plaintiffs appeal the district court’s dismissal of
AEPES for lack of personal jurisdiction, but do not challenge
the district court’s dismissal of AEP, the parent company.27
The Heartland Plaintiffs thus appear to have waived any
argument for personal jurisdiction over AEP and we reverse
the district court’s order in Heartland dismissing the AEP
27
The Heartland Plaintiffs’ opening brief states, “the Heartland
plaintiffs are appealing the District Court’s dismissal of one defendant –
AEP Energy Services, Inc. – from that case for lack of personal
jurisdiction.”
58 IN RE: WESTERN STATES ANTITRUST LITIG.
Defendants for lack of jurisdiction in Heartland as to AEPES
only.
VI. Order Granting Duke Energy Trading and
Marketing’s Motion for Partial Summary
Judgment
Several Plaintiffs in Arandell Corp. v. Xcel Energy, Inc.
appeal the district court’s order granting Defendant Duke
Energy Trading and Marketing, LLC’s (“DETM”) motion for
partial summary judgment based on the district court’s
interpretation of Wisconsin Statutes § 133.14.28 This court
reviews de novo a district court’s interpretation of state law.
See Hauk v. J.P. Morgan Chase Bank USA, 552 F.3d 1114,
1118 (9th Cir. 2009).
Several Wisconsin corporations (Arandell Corp.,
Merrick’s, Inc., Safety-Kleen Systems, Inc., and Sargento
Foods) brought suit against natural gas sellers in Wisconsin
state court, alleging two causes of action under Wisconsin
state law. Count One arose under Wisconsin Statutes
§ 133.14, which voids contracts to which an antitrust
conspirator is a party and allows recovery of payments made
pursuant to such a contract. Count Two sought treble
damages under Wisconsin Statutes § 133.18, which provides
that “any person” injured, directly or indirectly, by a violation
of the Wisconsin Antitrust Act may recover treble damages.
28
The Plaintiffs have filed a Motion to Certify Question of Wisconsin
State Law to the Wisconsin Supreme Court. Because we find that the
plain text of Wisconsin Statutes § 133.14 is clear, we do not believe that
certification is necessary as a “means to obtain authoritative answers to
unclear questions of state law,” and we therefore deny the motion. Toner
v. Lederle Labs., Div. of Amer. Cyanamid Co., 779 F.2d 1429, 1432 (9th
Cir. 1986).
IN RE: WESTERN STATES ANTITRUST LITIG. 59
All but one of the named Defendants moved to dismiss or
for summary judgment on Count One of Plaintiffs’ Amended
Complaint. They argued that the Plaintiffs lacked standing to
assert a claim against them under Wisconsin Statutes
§ 133.14 because none of the named Plaintiffs purchased
natural gas directly from any of the moving defendants.
Wisconsin Statutes § 133.14 provides:
All contracts or agreements made by any
person while a member of any combination or
conspiracy prohibited by [§] 133.03, and
which contract or agreement is founded upon,
is the result of, grows out of or is connected
with any violation of such section, either
directly or indirectly, shall be void and no
recovery thereon or benefit therefrom may be
had by or for such person. Any payment made
upon, under or pursuant to such contract or
agreement to or for the benefit of any person
may be recovered from any person who
received or benefitted from such payment in
an action by the party making any such
payment or the heirs, personal representative
or assigns of the party.
Wis. Stat. § 133.14 (emphasis added). In interpreting a state
statute, a federal court applies the relevant state’s rules of
statutory construction. See In re Lieberman, 245 F.3d 1090,
1092 (9th Cir. 2001). In Wisconsin, to determine the
meaning of a statutory provision, courts begin with the
statute’s plain language, “taking into consideration the
context in which the provision under consideration is used,”
and furthermore, “[s]tatutory language is given its common,
60 IN RE: WESTERN STATES ANTITRUST LITIG.
ordinary, and accepted meaning.” Burbank Grease Servs.,
LLC v. Sokolowsi, 717 N.W.2d 781, 788 (Wis. 2006).
We agree with the district court’s conclusion that the
statutory text at issue is unambiguous. Section 133.03 makes
illegal every contract, combination, or conspiracy in restraint
of trade or commerce. See Wis. Stat. § 133.03(1). The first
sentence of Section 133.14 therefore provides that any
contract made by a member of an antitrust conspiracy is void,
and no conspirator who is a party to that contract may recover
or benefit therefrom. The second sentence of Section 133.14
permits the party making a payment “upon, under or pursuant
to such contract” to recover those payments. There is no
provision authorizing recovery by indirect purchasers or other
non-parties to the voided contract.29
Plaintiffs argue that the Wisconsin legislature intended for
the Wisconsin Antitrust Act to be interpreted as broadly as
possible. For example, they quote Wisconsin Statutes
§ 133.01, which provides, “It is the intent of the legislature
that this chapter be interpreted in a manner which gives the
most liberal construction to achieve the aim of competition.”
However, evidence that the legislature intended the Act to be
applied broadly cannot overcome the plain text of Section
133.14, which does not provide for recovery for indirect
purchasers or other non-parties to the contract.
29
This is in contrast to Section 133.18, which does permit indirect
purchasers to recover treble damages. See Wis. Stat. § 133.18 (providing,
in relevant part, that “any person injured, directly or indirectly, by reason
of anything prohibited buy this chapter may sue therefor and shall recover
threefold the damages sustained by the person”) (emphasis added).
IN RE: WESTERN STATES ANTITRUST LITIG. 61
After the district court held on February 19, 2008, that
“the party seeking the recovery [under Section 133.14] must
have been a party to the void contract, or at least have made
payments based on the contractual obligation set forth in the
conspirator’s contract,” Plaintiffs Sargento, Merrick’s, and
Ladish admitted that they had no direct purchase agreements
with DETM. Therefore, the district court concluded, “No
genuine issue of material fact remains that Sargento,
Merrick’s, and Ladish did not purchase natural gas directly or
through an agent from DETM,” and granted summary
judgment on Count One of Plaintiffs’ Amended Complaint as
to these three Plaintiffs. Because we agree with the district
court’s conclusion that the plain text of Wisconsin Statutes
§ 133.14 allows recovery only by plaintiffs who were direct
purchasers under the voided contract, we affirm the district
court’s order granting partial summary judgment to DETM.
VII. Conclusion
We REVERSE the district court’s order granting
summary judgment to Defendants on preemption grounds,
REVERSE in part the district court’s orders dismissing the
AEP Defendants from the Wisconsin Arandell and Missouri
Heartland suits, and AFFIRM all other orders at issue in this
appeal. We REMAND to the district court for further
proceedings consistent with this opinion.30
REVERSED IN PART, AFFIRMED IN PART, AND
REMANDED.
30
The parties shall bear their own costs on appeal.