direct competitors in the sale of wholesale electric power, but
were not competitors with respect to the retail sale of electric
power. FAC, at ¶ 15.
Because DESTEC was prohibited from selling electric power at
retail under the CATSA, it determined that it could service the
needs of retail power consumers and sell its low-cost electric
power only if two critical elements could be satisfied. First,
DESTEC would have to persuade a utility company permitted under
state and federal law to sell electricity to retail consumers to
purchase a substation. FAC, at ¶ 16. DESTEC could then supply its
low-cost electric power on a wholesale basis to the utility
company, which could then resell the electric power to retail
electricity consumers via the substation. Id. at ¶¶ 16-17.
Second, DESTEC would have to obtain PG & E's approval to allow
DESTEC to deliver wholesale electric power to the substation
under the terms of the CATSA. See id. at ¶ 23.
To put its plan into motion, DESTEC approached MID with a
proposal that MID buy the Praxair substation and supply retail
electric power consumers, such as Praxair and other residential
and commercial consumers in the Pittsburg area, with low-cost
DESTEC-supplied electric power via the Praxair substation. FAC,
at ¶ 17. On March 21, 1996, DESTEC entered into a written Power
Sales Agreement with MID, in which MID agreed to purchase the
Praxair substation and DESTEC agreed to deliver power to MID at
the substation. Id. At the same time, MID and the City of
Pittsburg ("Pittsburg") entered into a "Permission Agreement"
under which Pittsburg agreed to allow MID to provide retail
electric power to its residents and "to offer City residents an
alternative for obtaining electricity at more competitive
rates."*fn2 Id. MID and Praxair also entered into a "Equipment
Sales Agreement" for the purchase of the Praxair substation that
was expressly conditioned upon PG & E's approval of the
substation as a valid "output point" for DESTEC under the CATSA.
Id. at ¶ 18.
By letter dated January 30, 1996, DESTEC sought PG & E's
approval to provide the necessary transmission services needed to
allow DESTEC to deliver wholesale electric power to the Praxair
substation under the terms of the CATSA. FAC, at ¶¶ 23-24. MID
also sought to enter into an "interconnection agreement" with PG
& E setting forth the conditions under which PG & E would provide
transmission services to MID at the Praxair substation. Id. at
24. On February 26, 1996, PG & E denied DESTEC's request that PG
& E deliver power to the Praxair substation. Id. at ¶ 24. In
its opposition, MID also asserts that PG & E refused to grant
MID's request to enter into an interconnection agreement as well.
P's Opp. at 4. MID alleges that PG & E agreed to an identical
request for the provision of transmission service by DESTEC in
order to sell electric power wholesale to the Port of Oakland for
later resale to Port tenants at retail. FAC, at ¶ 24.
Thereafter, DESTEC and PG & E commenced proceedings in several
forums to resolve their dispute. DESTEC initiated an arbitration
proceeding under the terms of the CATSA to compel PG & E to
provide transmission service to the Praxair substation. FAC, at ¶
25. PG & E filed suit in federal district court seeking to enjoin
the arbitration, but no order issued. Id. PG & E also filed a
petition with FERC to disallow the Praxair scheme, which was
opposed by MID and DESTEC. See RJN, Exh. 3 [Petition for
Declaratory Order filed September 28, 1996]; RJN, Exhs. 4-6.
Prior to any resolution of these proceedings, DESTEC and PG & E
entered into a settlement of their dispute, which included an
amendment of the CATSA
which, in effect, prohibits DESTEC from supplying energy
transmitted through PG & E to "substations."*fn3 FAC, at ¶ 26.
MID alleges that in particular PG & E and DESTEC jointly agreed
that DESTEC would not supply wholesale electric power to MID via
the Praxair substation using PG & E's transmission services.
Id. To induce DESTEC to agree to the CATSA amendment, PG & E
agreed to "functionally assign" to DESTEC certain wholesale power
contracts permitting DESTEC to market its low-cost electric power
at much higher rates negotiated and contracted for by PG & E.
On November 1, 1996, PG & E subsequently submitted the proposed
amendment to the CATSA for approval and filing by FERC. FAC, at ¶
27; RJN, Exh. 9 [PG & E's Application for Approval of Second
Amendment to CATSA]. However, on December 12, 1996, PG & E and
DESTEC jointly requested that FERC suspend consideration of the
proposed amendment. Id.; RJN, Exh. 10 [Joint Req. of PG & E and
DESTEC]. Although FERC has taken no action on either the
application for approval or the subsequent request to suspend
consideration, MID asserts that PG & E and DESTEC have abided by
their agreement not to provide MID with electric power to the
Praxair substation at wholesale prices. Id. As a result, MID
alleges that as a result of the CATSA amendment PG & E has
thwarted both the Power Sales Agreement between MID and DESTEC
and the Equipment Sales Agreement between MID and Praxair. Id.
Similarly, although the Power Sales Agreement required that both
MID and DESTEC "use their respective good faith best efforts to
timely negotiate and obtain the agreements and the regulatory
approvals" necessary to implement the agreement, MID alleges that
DESTEC abrogated the Power Sales Agreement. Id. at ¶ 28. These
actions, taken together, frustrated its plans to sell electric
power to Praxair and to numerous commercial and residential
electricity consumers in Pittsburg. Id. at ¶¶ 27-28.
MID first alleges that DESTEC and PG & E engaged in a
"contract, combination and/or conspiracy" to unreasonably
restrain competition in the wholesale and retail sale of electric
power in PG & E's service area in northern and central California
in violation of section I of the Sherman Act. FAC, at ¶ 29.
According to MID, DESTEC and PG & E have entered into an
agreement under which DESTEC will not sell electric power at
wholesale for delivery to substations and will abandon its
arbitration proceeding against PG & E in exchange for the
assignment by PG & E of certain wholesale power contracts. Id.
at ¶¶ 29-30. MID also alleges two claims based on section 2 of
the Sherman Act: actual or attempted monopolization and
conspiracy to monopolize. In Count Two, MID alleges that PG & E
has attempted to monopolize and/or has monopolized the market for
the retail distribution of electric power to Praxair and
Pittsburg's electricity consumers. Id. at ¶ 36. Specifically,
MID alleges that PG & E has refused to permit its transmission
lines to be used by MID or DESTEC to supply wholesale electric
power to the Praxair substation by improperly invoking various
provisions of the CATSA agreement. Id. at ¶ 38. In doing so,
MID asserts that PG & E has unlawfully exercised its monopoly
power over its transmission lines. FAC at ¶ 40. In Count Three,
MID also asserts that PG & E and DESTEC engaged in a conspiracy
to monopolize the retail electric power market in the Pittsburg
area. Id. at ¶ 48.
A motion to dismiss for failure to state a claim will be denied
unless it appears that the plaintiff can prove no set of facts
which would entitle him or her to relief. Conley
v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80
(1957); Fidelity Financial Corp. v. Federal Home Loan Bank of
San Francisco, 792 F.2d 1432, 1435 (9th Cir. 1986), cert.
denied, 479 U.S. 1064, 107 S.Ct. 949, 93 L.Ed.2d 998 (1987). All
material allegations in the complaint will be taken as true and
construed in the light most favorable to the plaintiff. NL
Industries, Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986).
Although the court is generally confined to consideration of the
allegations in the pleadings, when the complaint is accompanied
by attached documents, such documents are deemed part of the
complaint and may be considered in evaluating the merits of a
Rule 12(b)(6) motion. Durning v. First Boston Corp.,
815 F.2d 1265, 1267 (9th Cir. 1987), cert. denied sub. nom., Wyoming
Community Dev. Auth. v. Durning, 484 U.S. 944, 108 S.Ct. 330, 98
L.Ed.2d 358 (1987).
In the Ninth Circuit, "antitrust pleadings need not contain
great factual specificity." Portland Retail Druggists Ass'n v.
Kaiser Found. Health Plan, 662 F.2d 641, 648 (9th Cir. 1981),
cert. denied, 469 U.S. 1229, 105 S.Ct. 1230, 84 L.Ed.2d 368
(1985). "There is no special rule requiring more factual
specificity in antitrust pleadings." Hunt-Wesson Foods, Inc. v.
Ragu Foods, Inc., 627 F.2d 919, 924 (9th Cir. 1980) (citing
Franchise Realty Interstate Corp. v. San Francisco Local Joint
Executive Bd. of Culinary Workers, 542 F.2d 1076, 1082 (9th Cir.
1976), cert. denied, 430 U.S. 940, 97 S.Ct. 1571, 51 L.Ed.2d
787 (1977)). However, as noted by many courts, the court need not
accept legal conclusions asserted in the complaint even if pled
as "facts" or conclusory allegations without more. JM Computer
Srvcs. Inc. v. Schlumberger Technologies, Inc., 1996 WL 241607,
*2 (N.D.Cal. May 3, 1996) (citing Papasan v. Allain,
478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986)).
I. Analytical Framework for the Sherman Act, Section 1
Section 1 of the Sherman Act makes unlawful "[e]very contract,
combination . . ., or conspiracy, in restraint of trade or
commerce among the States." 15 U.S.C. § 1. To state a claim for a
violation of section 1 of the Sherman Act, a plaintiff must
establish (1) an agreement, conspiracy, or combination among two
or more persons or distinct business entities; (2) which is
intended to harm or unreasonably restrain competition under a
per se or rule of reason analysis; and (3) which actually
causes injury to competition, beyond the impact on the claimant,
within a field of commerce in which the claimant is engaged (i.e.
"antitrust injury"). McGlinchy v. Shell Chem. Co.,
845 F.2d 802, 811 (9th Cir. 1988); see also Rickards v. Canine Eye
Registration Found., Inc., 704 F.2d 1449, 1453 (9th Cir. 1983),
cert. denied, 464 U.S. 994, 104 S.Ct. 488, 78 L.Ed.2d 683
(1983) (plaintiff must show "contract, combination or conspiracy"
under section 1 of the Sherman Act). "[M]ost antitrust claims are
analyzed under a `rule of reason,' according to which the finder
of fact must decide whether the questioned practice imposes an
unreasonable restraint on competition, taking into account a
variety of factors, including specific information about the
relevant business, its condition before and after the restraint
was imposed, and the restraint's history, nature, and effect."
State Oil Co. v. Khan, 522 U.S. 3, 118 S.Ct. 275, 279, 139
L.Ed.2d 199 (1997). However, some types of restraints are deemed
unlawful per se if they have a "predictable and pernicious
anticompetitive effect." Id.
In noting that section 1 of the Sherman Act requires that there
be a "contract, combination, . . . or conspiracy," the Supreme
Court observed that a business "generally has a right to deal, or
refuse to deal, with whomever it likes, as long as it does so
independently." Monsanto Co. v. Spray-Rite Service Corp.,
465 U.S. 752, 761, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984); Aspen
Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 601 n.
27, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985). Thus, section 1 does
not proscribe "independent action." Id. However, "agreements
compete, with the aim of preserving or extending a monopoly," are
unlawful under the Sherman Act. Cf. Otter Tail Power Co. v.
United States, 410 U.S. 366, 376, 93 S.Ct. 1022, 35 L.Ed.2d 359
(1973) (citing Schine Chain Theatres v. U.S., 334 U.S. 110,
119, 68 S.Ct. 947, 92 L.Ed. 1245 (1948), overruled on other
grounds Copperweld Corp. v. Independence Tube Corp.,
467 U.S. 752, 771-72, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984)). "A § 1
agreement may be found when `the conspirators had a unity of
purpose or a common design and understanding, or a meeting of
minds in an unlawful arrangement.'" Copperweld, 467 U.S. at
771, 104 S.Ct. 2731 (quoting American Tobacco Co. v. U.S.,
328 U.S. 781, 810, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946)).
II. Analytical Framework for the Sherman Act, Section 2
In contrast to section I of the Sherman Act, "[s]ection 2
claims tend to encompass a narrower range of anticompetitive
behaviors specifically defined as monopolization and attempts to
monopolize." Amarel v. Connell, 102 F.3d 1494, 1521 (9th Cir.
1996). Section 2 of the Sherman Act provides that "[e]very person
who shall monopolize, or attempt to monopolize, or combine or
conspire with any person or persons, to monopolize . . . trade
shall be guilty" of an antitrust violation. 15 U.S.C. § 2. In
essence, section 2 of the Sherman Act prohibits a monopolist's
unilateral action, such as a unilateral refusal to deal, "if that
conduct harms the competitive process in the absence of a
legitimate business justification." Image Technical Servs., Inc.
v. Eastman Kodak Co., 125 F.3d 1195, 1209-10 (9th Cir. 1997)
(citations omitted), cert. denied, ___ U.S. ___, 118 S.Ct.
1560, 140 L.Ed.2d 792 (1998). To state a claim for a section 2
monopolization violation MID must allege that PG & E: "(1)
possessed monopoly power in the relevant market and (2) willfully
acquired or maintained that power." See Image Tech., 125 F.3d
at 1202. "`Willful acquisition' or `maintenance of monopoly
power' involves `exclusionary conduct,' not power gained `from
growth or development as a consequence of a superior product,
business acumen, or historic accident.'" Id. at 1208 (quoting
United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct.
1698, 16 L.Ed.2d 778 (1966)). In the case "of a regulated utility
struggling with dual regulation, bearing in mind that the utility
is entitled to recover its costs of service and to provide its
investors with a reasonable rate of return," an antitrust
plaintiff must also establish a specific intent by the monopoly
to engage in monopolistic conduct through "the actions of the
utility, taken as a whole." City of Anaheim v. Southern
California Edison Co., 955 F.2d 1373, 1378 (9th Cir. 1992) ("the
requirement of specific intent is an appropriate way to erect a
dike which is sufficient to prevent an untoward invasion of the
land of legal monopolies by the sea of antitrust") (citing City
of Mishawaka v. American Elec. Power Co., Inc., 616 F.2d 976,
985-86 (7th Cir. 1980), cert. denied, 449 U.S. 1096, 101 S.Ct.
892, 66 L.Ed.2d 824 (1981)).
"The traditional claim for attempted monopolization arises when
the danger of monopolization is clear and present, but before a
full-blown monopolization has necessarily been accomplished."
Alaska Airlines, Inc. v. United Airlines, Inc., 948 F.2d 536,
541 (9th Cir. 1991), cert. denied, 503 U.S. 977, 112 S.Ct.
1603, 118 L.Ed.2d 316 (1992). To prevail on a section 2 attempt
claim, MID must establish: "`(1) a specific intent to control
prices or destroy competition; (2) predatory or anticompetitive
conduct directed at accomplishing that purpose; (3) a dangerous
probability of achieving `monopoly power,' and (4) causal
antitrust injury.'" See Image Tech., 125 F.3d at 1202 (quoting
Rebel Oil Co., Inc. v. Atlantic Richfield, Co., 51 F.3d 1421,
1434 (9th Cir.)), cert. denied, 516 U.S. 987, 116 S.Ct. 515,
133 L.Ed.2d 424 (1995). "The requirements of a § 2 monopolization
claim are similar, differing primarily in the requisite intent
and the necessary level of monopoly power." Id. (citing
California Computer Products, Inc.
v. International Business Machines Corp., 613 F.2d 727, 736-37
(9th Cir. 1979)).
Common to both the monopolization and attempt to monopolize
claims, "[s]ection 2 plaintiffs must also establish antitrust
injury." Id. (citing Cost Management Services, Inc. v.
Washington Natural Gas Co., 99 F.3d 937, 949 (9th Cir. 1996)).
In order to survive a motion to dismiss under Rule 12(b)(6), an
antitrust complaint "need only allege sufficient facts from which
the court can discern the elements of an injury resulting from an
act forbidden by the antitrust laws." Newman v. Universal
Pictures, 813 F.2d 1519, 1522 (9th Cir. 1987), cert. denied,
486 U.S. 1059, 108 S.Ct. 2831, 100 L.Ed.2d 931 (1988).
In support of its second motion to dismiss, defendants contend
that (1) PG & E's unilateral refusal to provide transmission
service to the Praxair substation is necessarily incidental to a
valid petition to a federal agency immune from antitrust
liability under the Noerr-Pennington*fn4 doctrine; (2) MID has
failed to allege a sufficient "contract, combination or
conspiracy" to state a claim for a section I of the Sherman Act
violation or for a conspiracy to violate section 2 of the Sherman
Act; (3) MID has failed to point to a cognizable theory under
which to impose section 2 monopolization liability upon PG & E;
and (4) that MID lacks standing because it has failed to plead a
sufficient antitrust injury as a result of defendants' actions.
Defendants finally ask the court to decline to exercise
supplemental jurisdiction over MID's state law claims if MID's
federal antitrust claims are dismissed.
A. Judicial Notice
Defendants again ask the court to take judicial notice of
numerous documents which relate to either the CATSA or subsequent
amendments to the CATSA and regulations and other regulatory
decisions promulgated by FERC. "`[D]ocuments whose contents are
alleged in a complaint and whose authenticity no party questions,
but which are not physically attached to the pleading, may be
considered in ruling on a Rule 12(b)(6) motion to dismiss.'"
Fecht v. The Price Co., 70 F.3d 1078, 1080 n. 1 (9th Cir.
1995), cert. denied, 517 U.S. 1136, 116 S.Ct. 1422, 134 L.Ed.2d
547 (1996) (quoting Branch v. Tunnell, 14 F.3d 449, 454 (9th
Cir.), cert. denied, 512 U.S. 1219, 114 S.Ct. 2704, 129 L.Ed.2d
832 (1994)); Emrich v. Touche Ross & Co., 846 F.2d 1190, 1198
(9th Cir. 1988) (holding that a district court's taking notice of
the "proceedings and determinations" of prior related litigation
does not necessitate treating the Rule 12(b)(6) motion as one for
summary judgment). The court can take judicial notice of facts
beyond the complaint and matters of public records such as
pleadings in another action and records and reports of
administrative bodies. Anderson v. Calif. Republican Party,
1991 WL 472928, *2 (N.D.Cal., Nov.26, 1991), aff'd,
977 F.2d 587 (9th Cir. 1992) (table).
The court again finds that several of the documents submitted
as part of PG & E's request for judicial notice are of the type
capable of ready determination by resort to sources whose
accuracy cannot be reasonably questioned. See Fed. R.Evid.
201(b). Of note is the "Joint Request of Pacific Gas and Electric
Company and DESTEC Power Services, Inc. to Suspend Commission
Consideration of Second Amendment to the Control Area and
Transmission Service Agreement," RJN, Exh. 10 ["Joint Request"],
and the PG & E Petition for Declaratory Order, RJN, Exh. 3. Both
documents clearly show the datestamp of FERC and refers to the
docket number under which the request is filed, and is readily
accessible through the Internet. See RJN, Exhs. 3, 10. Finally,
the court takes judicial notice of PG & E's submission to FERC
for filing and acceptance of its "Second Amendment to the
Control Area and Transmission Services Agreement" between DESTEC
and PG & E for the same reasons as stated above. RJN, Exh. 9.
B. Section 1 of the Sherman Act and Section 2 Conspiracy to
In its prior order, the court held that although MID attempted
the events following PG & E's unilateral refusal to
permit DESTEC to use its lines to supply wholesale
electricity to the Praxair substation as some sort of
"agreement" to engage in anticompetitive activity, it
became clear at the hearing that defendants continue
to operate under the CATSA and not as part of a
speculative "agreement" intended to restrain trade.
The court therefore finds that MID's allegations of
an "agreement" fail to sufficiently describe an
actionable "contract, combination, . . ., or
conspiracy" under section 1.
February order, at 12. In giving MID leave to amend its
complaint, the court in essence asked MID "to articulate with . .
. clarity the nature of [the alleged] agreement." Id. at 11.