The opinion of the court was delivered by: William Alsup, United States District Judge
In this antitrust and RICO case with supplemental state claims for
relief, this is the final order in a series of orders addressing the
federal claims. This order GRANTS defendant's motion for partial summary
judgment and eliminates plaintiffs' claims under the Sherman Act. The
state claims held in abeyance until now are all DISMISSED without
prejudice to re-file in state court.
On October 25, 2001, plaintiffs Raymon Tate, Liberty Fuels, Inc., Dale
Sobek and 6000 S Corporation filed this action. They sued nine
defendants, including various utilities, their respective holding
companies, a retailer of natural gas for refueling natural-gas vehicles,
and a vehicle manufacturer. The only defendant now left is Pacific Gas
and Electric Company, a provider of natural gas and electricity in
The complaint included eleven claims for relief. On November 30,
plaintiffs filed the first amended complaint. The same claims were
reasserted. In brief, plaintiffs alleged that defendants engaged in an
unlawful monopolization, restraint of trade and conspiracy to quash
competition in the natural-gas vehicles industry to prevent them from
successfully going to market with the Liberty Station 2000, a
small-scale, natural-gas liquefier and refueling station used for
dispensing liquefied natural gas (LNG) to vehicles.
On February 11, 2002, defendants moved to dismiss the first amended
complaint. Since that complaint was disorganized, the Court withheld
immediate ruling on the merits of the motions to dismiss, giving
plaintiffs a choice of standing on their pleading or taking one more
opportunity to plead their best case on the federal antitrust and RICO
claims, taking into account the many arguments made to dismiss.
Plaintiffs chose to amend. The state claims were held in abeyance.
On April 18, plaintiffs filed the second amended complaint. On May 8,
the parties stipulated to the dismissal of all defendants without
prejudice, except for PG&E, Southern California Gas Company, and San Diego
Gas & Electric Company. The three utilities then collectively moved
to dismiss the federal claims. On June 17, an order issued granting in
part and denying in part that motion. All claims against Southern
California Gas and San Diego Gas & Electric were dismissed. The
second amended complaint failed to state any claim against them. Only
bald and conclusory allegations were directed their way.
With respect to PG&E, the outcome was different. Well-pled facts were
levied. Indulging all reasonable inferences and assuming true all
well-pled facts, that order held that plaintiffs adequately pled a
relevant market and monopoly power. The order eliminated, however, all
alleged predation based on false grant applications for public funding
and based on product disparagement. The only cognizable predation, a
necessary element of a Section 2 claim, was based on alleged refusals to
deal. Thus, the only antitrust claims that survived were the
monopolization or attempted-monopolization claims based on alleged
refusals to deal. The order stated:
Additionally, the order held that plaintiffs had failed to allege any
proper RICO claims. One fatal flaw was the lapse in pleading the predicate
acts of mail and wire fraud with specificity. Concurrently, another order
directed discovery on the issue of gas supply, the supposed subject of
the refusal to deal. The order gave priority to discovery on the federal
claims. Milestones where set for the parties to complete discovery on the
gas-supply issue. That completed, PG&E now moves for partial summary
judgment on the remaining federal issue.
Now defunct and in bankruptcy, plaintiff Liberty Fuels was formed in
1998 to market and manufacture the Liberty Station 2000 and other
natural-gas vehicle equipment. The Liberty Station 2000 is a
small-scale, natural-gas liquefier and refueling station used for
dispensing LNG to natural-gas vehicles. It is a large and mobile unit
about the size of a train locomotive that connects to a dispenser that
looks like an ordinary gas pump at a service station. Plaintiff Raymon
Tate is the co-founder and chairman of Liberty Fuels. Plaintiff 6000 S
Corporation is a real-estate management and holding company and an
investor in Liberty Fuels. Plaintiff Dale Sobek is the founder and
controlling shareholder of 6000 S Corporation.
The idea was that the Liberty Station 2000 could be moved to and
operated at, for example, various yards servicing commercial and municipal
fleets. The Liberty Station 2000 required a supply of natural gas.
Specifically, the Liberty Station 2000 needed 50 pounds per-square-inch
gauge ("psig") of inlet pressure to operate properly and efficiently.
Liberty Fuels contacted PG&E to obtain the necessary gas supply. To avoid
repetition, the relevant facts surrounding their dealings will appear in
the analysis below. Distilled to its essence, the allegation is that
PG&E, anticipating its own entry into the natural-gas refueling market,
refused to supply gas to Liberty Fuels as a way to destroy it before it
emerged as a successful competitor.
With a utility monopoly over its territorial-service region in Northern
California, PG&E is regulated by the California Public Utilities
Commission ("CPUC"). To service its customers, PG&E imports gas through
transmission pipelines. These transmission lines operate at pressures of
60 to over 2,100 psig. To actually deliver gas to customers'
point-of-service, PG&E uses distribution lines. Different lines within the
distribution system operate at different pressures. Certain high-pressure
distribution lines operate between ten to sixty psig.
1. LEGAL STANDARD.
Summary judgment shall be rendered if "there is no genuine issue as to
any material fact and the moving party is entitled to judgment as a
matter of law." FRCP 56(c). Summary judgment is not granted if the
dispute about a material fact is "genuine" — that is, if the
evidence is such that a reasonable trier of fact could return a verdict
for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986). "The evidence, and all reasonable inferences therefrom must
be viewed in the light most favorable to the non-moving party." T.W.
Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626,
630-31 (9th Cir. 1987).
"[A] moving party without the ultimate burden of persuasion at trial
thus may carry its initial burden of production by either of two
methods. The moving party may produce evidence negating an essential
element of the nonmoving party's case or, after suitable discovery, the
moving party may show that the nonmoving party does not have enough
evidence of an essential element of its claim or defense to carry its
ultimate burden of persuasion at trial." Nissan Fire & Marine Ins.
Co., Ltd. v. Fritz Companies, Inc., 210 F.3d 1099, 1106 (9th Cir. 2000).
Once the moving party meets its burden, the nonmoving party must "go
beyond the pleadings and by her own affidavits, or by depositions,
answers to interrogatories and admissions on file, designate specific
facts showing there is a genuine issue for trial." Celotex Corp. v.
Catrett, 477 U.S. 317, 323-24 (1986) (internal quotations omitted).
2. THE INADEQUACY OF PROOF ON PREDATION.
Here, the fatal gap in plaintiffs' proof is the failure to show that
PG&E refused to deal. The evidence boils down to conversations over the
telephone about two sites, both potential locations for the Liberty
Station 2000. On this record, the most that a reasonable jury could
conclude is that the brief and causal telephone calls between the two
companies were preliminary discussions. They did not constitute specific
requests for service. They did not amount to any refusal to supply gas.
There was no letter from plaintiffs requesting supply. Nor was there any
written application for supply. There was no letter wherein PG&E refused
to supply gas. Nor was there any telephone call wherein PG&E refused to
supply gas. Plaintiffs have not demonstrated that it would have been
futile to follow-up with a specific demand to PG&E for gas or at least a
request for clarification. Here are the details.
A. Santa Cruz Site.
Thereafter, another PG&E representative forwarded a cover letter and
the standard package of application materials to Lee on November 18
(Zeller Decl. ¶ 10). Lee received both. In relevant part, the cover
letter stated (Zeller Decl. Exh. C):
Within the package were: (1) a two-page application for service for new
construction, (2) a two-page service planning sheet for new
construction, (3) a one-page installation option selection and (4) a
one-page design selection. The remainder were reading materials (ibid.).
Neither Lee nor anyone at Liberty Fuels ever contacted PG&E with any
questions on the application materials. Nor did Liberty Fuels
ever return the necessary paperwork even though it knew from past
experience in obtaining elevated gas-pressure service at Santa Cruz that a
completed application was necessary before PG&E could give a firm cost
estimate, let alone initiate service (Zeller Dec. ¶ 12; Ornelas Decl.
¶ 13; Thomas Tate Dep. 191; Snowden Dep. 162). Plaintiffs do not
dispute that they never returned the application.
Instead, plaintiffs contend that a sufficient "refusal" occurred merely
because Ornelas had said PG&E could only "guarantee" 20 psig at that site
and that a high-pressure line was nearby (Opp. 13). Put differently,
plaintiffs argue PG&E refused to deal when it failed to tell Lee that 40
psig was available at the distribution line and omitted specifics on a
transmission line about 1000 feet away from the DeSoto site (Chall. Exh.
46). Plaintiffs' proffer is insufficient to create a triable issue for
First, the dispute on whether Liberty Fuels was informed by PG&E of the
40 psig distribution line is immaterial. Plaintiffs needed and requested
50 psig, not 40 psig. Twenty psig versus forty psig was and remains
beside the point.*fn3
Second, plaintiffs fail to raise a triable issue on whether PG&E
actually refused to convey specific information about the transmission
line. Their best evidence is the testimony of Lee whose testimony about
the telephone call is now quoted at length (Dep. 148-50) (emphasis
Q. Did you have any discussion with anyone from PG&E
regarding the provision of gas service to the
DeSoto site in San Francisco?
A. Somebody called me on the phone, and I had a verbal
conversation with them.
Q. And that was someone from PG&E?
Q. Do you recall the name of that person?
A. I don't remember the name of the person. But he
told me, "Yes, we have high pressure lines, but on
that location, we can't guarantee that you will get
more than 20 pounds per square inch."
Q. How long did that conversation last?
A. Most of my conversations with them were relatively
Q. How long did your conversation that you just
referred to last?
A. Maybe a minute or two.
Q. Do you recall when that conversation was?
A. It was during the time that we were preparing the
site at DeSoto Cab to put a liquefier there.
Q. Did you respond to the PG&E person who told you that
PG&E couldn't guarantee more than 20 pounds of
pressure per square inch?
A. I couldn't figure out whether the guy just didn't
know what he was talking about or whether he was
kidding or what; but one way or the other, we would
have trenched to the nearest 50-pound line. And
this is a very commercial section of San
Francisco; so there's 50 pounds out there.
Q. Did you ask this person whether he was kidding?
A. No, I didn't.
Q. Did you ask him whether he knew what he was talking
A. No, I didn't.
Q. Did you tell him that PG&E could always provide
50 pounds of pressure per square inch?
A. I just told him, "We want 50 pounds on this site.
Give us 50 pounds. Where do we have to go to get
it? How far do we have to trench?"
Q. And — and this person —
A. It's somewhere.
Q. — this person told you that there was a high
pressure line available?
A. There is, yes.
Q. And — and by "high pressure line," you
understood that had to mean a — a — a
line that had 50 pounds of pressure; is that
A. Could be 50. Could be 150 pounds.
Q. But more than 50?
Q. 50 or more?
Q. Is that correct?
A. Yes. And I still believe that there is a high
pressure line out there.
It is clear from this testimony that PG&E told Liberty Fuels about the
high-pressure line. It may be that in this brief phone call PG&E was
indefinite about its location. No one, however, could have reasonably
expected more precision in such a preliminary call about a line about
1000 feet away. Plaintiffs point to the transcript phrase "[i]t's
somewhere" and assert that PG&E lied about the location of the
high-pressure line. This is very thin. To begin with, the transcript is
broken up, making it hard to ascribe any meaning to the phrase. Deponent
Lee interjected "[i]t's somewhere" midway through a question. There was
no follow-up by any counsel to clarify. Plaintiffs could have but failed
to straighten out this problem in their opposition declarations. (While
they submitted a declaration from Mr. Lee, it addressed only other
points.) Placing as much weight on this scrambled passage as a jury could
reasonably place, the most it shows is that PG&E was indefinite in a
single and causal phone call about the location of a transmission line
that turned out to be 1000 feet away. This was not a refusal to deal.
Anderson, supra, 477 U.S. at 252 ("The mere existence of a scintilla of
evidence in support of the [nonmoving party's] position will be
insufficient; there must be evidence on which the jury could reasonably
find for" the nonmoving party).
Plaintiffs also point to Lee's testimony, quoted above, that PG&E
stated that it could "guarantee" no more than 20 psig (while also telling
plaintiffs that a high-pressure line was in the vicinity). This was not a
clear-cut refusal. It may well have been that while more than 20 psig was
available, it could not be "guaranteed" on a consistent basis, given
competing and varying load demands on the system line in question.*fn4
But even if this were not so (and plaintiffs show no evidence on this
point), the fact is that plaintiffs admit they were not misled by this
Lee stated (Dep. 149-51):
Q. Did — did you ask this PG&E person why PG&E
couldn't guarantee more than 50-20 pounds of
pressure per square inch?
A. No, I didn't because I didn't believe the
statement. I said, "Well, we will work around this
Q. And what did you do to work around that person?
A. By the time we put in a gas line across the
— DeSoto Cab and — my — my
biggest project at that time was to get the first
liquefier assembled because we didn't have one
completed at the time. I didn't look at this as a
problem. I had a lot of very large problems to
solve. Some guy from PG&E telling me he can only
give me 20 pounds was not a problem to me.
Q. It wasn't a problem because you didn't believe him;
A. I didn't believe him. And I still don't.
Q. Did you tell Mr. Tate that you didn't believe the PG&E
guy who told you that —
A. I'm sure I did.
Rather than "work around" the PG&E employee, however, Liberty Fuels
simply did no follow-up at all with PG&E on the DeSoto site. Even though
plaintiffs did not believe the information, plaintiffs did not seek any
clarification whatsoever to clear up the extent to which 50 psig could be
delivered via a connection to the high-pressure line. The necessary
application materials that Lee received were never returned, even though
Liberty Fuels was told and knew from recent past experience that the
paperwork was required before PG&E could give a firm cost estimate, let
alone initiate service (Zeller Decl. ¶ 12; Ornelas Del. ¶ 13;
Thomas Tate Dep. 191; Snowden Dep. 162).
Liberty Fuels knew that a follow-up inquiry might have yielded more
information on the high-pressure line. A year earlier, Liberty Fuels had
obtained elevated gas-pressure service from PG&E for the Mission Street
site. of this process, the Liberty Fuels employee stated (Snowden 160-61)
Q. Looking at your declaration — I just want to
make sure that I have this sequence of events
correct — am I correct in understanding that
you made initial inquiry as to available gas
pressure for the Mission Street site and were told
that the closest distribution line did not have 50
Q. Okay. And then after that, you made — you
made some additional inquiries to find out if there
were any sites that were —
Q. — any other sites where Liberty Fuels could
obtain gas pressure near the Mission Street site
— that's a terrible question. Strike that.
And then after that, did — why don't you tell
me what you did.
A. Okay. My recollection — and again I haven't
seen the records that is there — we did
further inquiries. And there was a higher pressure
line available, but it was a distance — a
little bit of a distance. There was a transmission
line that was available up off of Highway 1, and
that's the one I'm out — I'm — I'm
going off of pure memory. Nobody has — I'm
not sure on that one but — and that was
physically closer, but the cost to tap into the
transmission line would have been greater than the
price to bring it in at a greater distance from
Q. Okay. So do you know whether you checked —
A. Now, I'm —
Q. — whether or not you accessed the
A. I'm sure that we didn't access the transmission line.
In short, the most that a jury could reasonably conclude on this record
PG&E called Lee and, in a brief preliminary conversation, Lee
obtained some information that was arguably wrong, that plaintiffs
believed was wrong, and about which plaintiffs sought no clarification.
These preliminary discussions never got to the point of a request for
service, much less a refusal to provide service on substantially equal
C. Reed Street Site (San Jose).
Plaintiffs next inquired about elevated gas-pressure service for a site
on Reed Street in San Jose. On December 6, l999, Thomas Tate of Liberty
Fuels telephoned Spence Erickson of PG&E in its San Jose division
(Erickson Decl. ¶ 7). Tate asked about elevated gas-pressure
service. A few days later, Erickson told Tate that PG&E could accommodate
a maximum delivery pressure of 20 psig (id. at ¶ 10). The Tates did
not believe Erickson, just as they had not believed Ornelas' information
on the DeSoto site (Raymon Tate Dep. 179-81; Lee Dep. 150). Shortly
thereafter, Raymon and Thomas Tate visited PG&E's mapping department to
determine whether Erickson's information was true. At the mapping
department, the Tates learned that the distribution line operated at 65
psig, and there was a 1 70-psig transmission line at an unspecified
intersection on Reed Street (Raymon Tate Dep. 180). Again, they did not
follow-up and ask for clarification. Again, plaintiffs did not submit the
Nonetheless, plaintiffs contend that PG&E refused to deal in two ways.
First, they argue that PG&E should have volunteered that a transmission
line was located at an unspecified corner of Reed Street "nearby" the
proposed site. This now turns out to have been 1400 feet away. Second,
plaintiffs contend that the 20 psig figure PG&E conveyed was false because
50 psig or more was available via a local distribution line.
First, as to the transmission line, plaintiffs' proffer fails to show
that PG&E refused to tell how far away the transmission line was from the
Reed Street site. The best evidence plaintiffs cite is the testimony of
Thomas Tate. He stated (Dep. 113-15, 116) (emphasis added):
Q. So you contacted Mr. Erickson in connection with a
number of sites in San Jose, and at each of those sites
Mr. Erickson told you there was only 20 pounds of
pressure available; correct?
A. Correct. Yeah, he said we — they didn't have
what we were asking for, and that was — that
was what we were asking for. The two things was
[sic] volume and pressure.
Q. You never discussed volume with Mr. Erickson, did you?
A. Yes, I did. On the very first time I talked to
him, I had to be — explain my intent and I
— like I say, we — we had an agenda we
followed for the site criteria. And I told him what
we needed. And I explained that one machine puts
out 1,500 gallons, needed 50 pounds of pressure. It
shouldn't be a problem. We have it in both
locations where we — out in — you
know, right across in Santa Cruz; and so I
explained the same scenario, "We need the
throughput that we have in you know, just like we
have in — on Mission Street."
And he — "Okay. I get it," you know; so he
needed to ask somebody, you know, in the
engineering, I don't know, in the mapping or
whatever, whoever he talks to; and so I did.
Then after that, I got to where I need to check
another location [Reed Street], and he knew
— he knew what I was checking about, I was
going to say, you know, pressure and volumes, and
how far. You know, I want to
know how far the pipe
was, too. Not just pressure and volume, but if it
was five blocks down the street, I needed the
— I needed the location. There was a couple
other things, but I needed the pressure, volume
location of the pipe; so I needed a fax, and
— but he never gave me a description of where
the pipes were.
Q. What volume did he say was available?
A. He just said it was — it was — he
said it was — he didn't give me the
volume. He didn't give me the specifics.
Q. Did you ask him what volume was available —
This testimony simply boils down to saying that from the earlier Santa
Cruz or other experiences, Liberty Fuels assumed that PG&E must have
known what Liberty Fuels "wanted to know" and should have volunteered it
in subsequent conversations relating to other sites. "Needing to know"
something or "wanting to know" something is not the same as actually
asking for the information. Fully credited, the testimony does not show
that Liberty Fuels actually requested information on where the closest
transmission line to the Reed Street site was located. It turns out to
have been 1400 feet away, and it is far from obvious that any reasonable
person in PG&E's position would have tracked down and volunteered the
information (Morgan Decl. ¶ 11).
At all events, Liberty Fuels knew about transmission lines. It knew,
from recent past experience, that further specific inquiry or submission
of the required paperwork would have yielded information on how far a
transmission line was located from the proposed site (Snowden Dep.
160-61). Indeed, plaintiffs obtained this very information shortly
thereafter from PG&E's mapping department (Raymon Tate Dep. 179-82).
Nonetheless, plaintiffs failed to submit the required application (id. at
Second, as to the distribution line, the proffer also falls short.
Plaintiffs contend PG&E lied about the pressure available on the nearby
distribution line, saying it could only provide 20 psig when it was
really 50 psig or more (Opp. 11-12). Plaintiffs call attention to two
PG&E documents. The first document indicated in a stand-alone table that
with different loads at 125, 200 and 600 standard cubic feet of gas per
minute, the resulting pressure would respectively be 47 psig, 46 psig and
42 psig (Chall Exh. 42). This document is immaterial because an alleged
refusal to inform of these exact figures — all below 50 psig
— would not have made a difference one way or another. (To repeat,
Liberty Fuels needed at least 50 psig.)
The second document was entitled "Gas Pressure Request Results," dated
June 27, 2002. It stated that for the Reed Street site, "[t]he average
pressure that is to be expected at the above location is between 45-50
psig according to the gas planning model, Santa Clara Industrial" (Chall
Exh. 41) (emphasis added). At first blush, this arguable contradiction
might suggest a fact issue on whether PG&E misled plaintiffs. PG&E's
evidence, however, stands undisputed that elevated gas-pressure service
available from distribution lines in PG&E's San Jose division was capped
for sustainable-growth reasons at a maximum of 20 psig for CNG stations
during 1999, the time period at issue (Erickson Decl. ¶ 5; Morgan
Decl. ¶ 5; Castro ¶ 5).*fn5 This policy was memorialized in a
PG&E newsletter dated September 24, 1999, before the inquiry at issue. It
was authored by Spence Erickson, the same PG&E employee who spoke with
Liberty Fuels on the Reed Street site. The newsletter stated (Erickson
Decl. Exh. A) (emphasis added):
San Jose Gas Department is now providing 20 PSI as the
CNG station pressure if available. Prior to this
project, 5 PSI was the standard answer for San Jose/De
Anza. An inter company group is working on compiling a
standard that will meet the needs of CNG station
installation requiring higher pressures. In San Jose,
more work needs to be done to raise the 20 PSI cap if
more pressure can be accessed.
There was no lie and no refusal to deal.
At all events, plaintiffs knew the pressures available for Reed Street
from their visit to the mapping department. Notwithstanding this
information, plaintiffs did not go back to PG&E and clarify the supposed
discrepancy. Nor did they submit the required application materials
(Raymon Tate Dep. 183-85). They did not move the discussion beyond
Here, no reasonable jury could find — on this summary-judgment
record — that PG&E ever refused to sell to plaintiffs. At most, the
record shows preliminary telephone conversations with no follow-up to
request services. Nor have plaintiffs provided sufficient evidence of
futility. The Santa Cruz story demonstrates that PG&E was willing to sell
gas to plaintiffs.*fn6
3. THE ESSENTIAL-FACILITIES DOCTRINE.
In circumstances where a monopolist must share its essential facility,
the elements of an antitrust claim under the essential-facilities
(1) a monopolist who competes with the plaintiff
controls an 18 essential facility, (2) the plaintiff
cannot duplicate that facility, (3) the monopolist
denied the plaintiffs [sic] use of the facility, and
(4) the monopolist could feasibly have granted the
plaintiff use of the facility.
Caribbean Broadcasting Sys. v. Cable & Wireless,
(D.C. Cir. 1998); see City of Anaheim v. Southern California Edison Co.,
, 1380 (9th Cir. 1992). For the reasons stated above,
plaintiffs have not proffered sufficient evidence on the critical third
element. No reasonable jury could find that PG&E denied them gas
It is true that in an antitrust case the various factual components
"tightly compartmentalized." Continental Ore Co. v. Union
Carbide & Carbon Corp., 370 U.S. 690, 699 (1962). Their overall
potential anticompetitive effect and intent must be assessed. The Court,
however, has already taken this into account and provided plaintiffs with
many benefits from this assessment, such as the presumption of a viable
product market and monopoly power in that market (Order filed June 17,
2002 at 5-8). That having been done, PG&E would be answerable to
monopolization offenses if it engaged in predation. The only predatory
acts alleged that can possibly satisfy the Sherman Act are alleged
refusals to supply gas at the requisite pressure. Accordingly, the
analysis above focused on whether the evidence would support a verdict
based on refusals to deal. On this, plaintiffs' proffer falls short.*fn7
No reasonable jury could conclude that PG&E committed federal antitrust
Defendant's motion for partial summary judgment is GRANTED.
Subject-matter jurisdiction has been sustained by the thread of the
federal antitrust claims. Those claims are now DISMISSED with prejudice.
In turn, plaintiffs' supplemental state claims are all DISMISSED without
prejudice to re-file in state court. All pending evidentiary and discovery
motions are DENIED as moot.*fn9 The Clerk shall CLOSE the file.
IT IS SO ORDERED.