RC Dick Geothermal Corp. v. Thermogenics, Inc.

• Decision Date: 16 June 1983
• Docket Number: No. C-79-3814 EFL.,C-79-3814 EFL.
• Citation: 566 F. Supp. 1104
• Parties: R.C. DICK GEOTHERMAL CORPORATION, Plaintiff, v. THERMOGENICS, INC., a corporation, Pacific Energy Corporation, a corporation, Resources Investment Company, a corporation, Hughes Aircraft Company (Inc.), a corporation, Callon Petroleum Company, a corporation, Geothermal Resources International Inc., a corporation, L.A. Hyland, Robert S. Reed and John S. Callon, Defendants and related counterclaims.
• Court: U.S. District Court — Northern District of California

566 F. Supp. 1104

R.C. DICK GEOTHERMAL CORPORATION, Plaintiff, v. THERMOGENICS, INC., a corporation, Pacific Energy Corporation, a corporation, Resources Investment Company, a corporation, Hughes Aircraft Company (Inc.), a corporation, Callon Petroleum Company, a corporation, Geothermal Resources International Inc., a corporation, L.A. Hyland, Robert S. Reed and John S. Callon, Defendants and related counterclaims.

No. C-79-3814 EFL.

United States District Court, N.D. California.

June 16, 1983.

COPYRIGHT MATERIAL OMITTED

Allan N. Littman, Bruce A. Ericson, Pillsbury, Madison & Sutro, San Francisco, Cal., for plaintiff.

James L. Hunt, Donn P. Pickett, Randall J. Litteneker, McCutchen, Doyle, Brown & Enersen, San Francisco, Cal., for defendants Thermogenics, Inc., Hughes Aircraft and Robert S. Reed.

George A. Manfredi, Andrew S. Rotter, Johnson, Manfredi & Thorpe, Los Angeles, Cal., for defendant Geothermal Resources Intern., Inc.

Stephen A. Million, Brobeck, Phleger & Harrison, San Francisco, Cal., for defendants Pacific Energy Corp. and John S. Callon.

ORDER

LYNCH, District Judge.

This order discusses defendants' motion for summary judgment regarding plaintiff's claims of antitrust violations only. As will be more fully discussed, plaintiff's motion for partial summary judgment will be decided at a later time if it remains relevant. Upon review of the voluminous materials filed in this case and the argument of counsel, this Court grants defendants' motion in part and denies the motion in part.

The Court finds that, as a matter of law, plaintiff cannot establish a per se violation of section 1 of the Sherman Act. The issue of whether defendants' conduct violates section 1 under the rule of reason analysis is severed for prompt trial by this Court. The outcome of the trial on this sole issue will then determine whether the conspiracy and section 2 allegations will be tried. The Court has set a status conference for Tuesday, June 21, 1983 at 9:15 a.m. so that a date can be set for the trial of this severed issue.

The case concerns a factual situation involving a complicated relationship among the parties. Plaintiff is a corporation controlled by Ronald C. Dick (Dick). In 1964, Dick acquired a lease with an option to purchase 1,100 acres of land in Sonoma County. In 1979, plaintiff exercised its option to purchase the property and is now the sole owner.

The facts will be discussed more fully throughout the Order as they become relevant. At this point, it is sufficient to note that since 1966 five different entities have, through sublease or assignment, controlled the steam development of the property. All are named as defendants along with Hughes Aircraft Co. and three individuals.

At issue is plaintiff's private antitrust action seeking treble damages arising from an alleged conspiracy to suppress the production of geothermal steam on plaintiff's property.¹ Plaintiff contends that this alleged conspiracy effected the unit and total price of steam; the price for steam lands; and the competitive process for the exploration, development and production of steam on plaintiff's property, within one and one-half miles of plaintiff's property, and in the Geyser Area generally. Plaintiff further argues that the objectives of this alleged conspiracy were to effect the price of steam lands in the Geyser Area, to limit the development of steam on plaintiff's property in an attempt to gain control of production in the Area and to force plaintiff to sell his land at substantially below its true market value.

Plaintiff contends that its numerous allegations set forth an unreasonable restraint of trade in violation of section 1 of the Sherman Act. Plaintiff further argues that this same conduct constitutes monopolization, an attempt to monopolize, and a conspiracy to monopolize, in violation of section 2 of the Sherman Act.

Summary Judgment

It is axiomatic that summary judgment should be used sparingly in antitrust cases. Poller v. Columbia Broadcasting System, 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962); Blair Foods, Inc. v. Ranchers Cotton Oil, 610 F.2d 665, 668 (9th Cir.1980). Summary judgment, however, does have a place in antitrust litigation and, if the moving party meets its burden, the opposing party cannot defeat a summary judgment motion without significant probative evidence supporting the complaint. Mutual Fund Investors, Inc. v. Putnam Management Co., Inc., 553 F.2d 620, 624 (9th Cir.1977). See also Ron Tonkin Gran Turismo v. Fiat Distributors, 637 F.2d 1376, 1381 (9th Cir.), cert. denied, 454 U.S. 831, 102 S.Ct. 128, 70 L.Ed.2d 109 (1981). As this circuit has explained,

To hold otherwise would give free rein to any plaintiff who can draft an antitrust complaint capable of withstanding a motion to dismiss to go to trial with only a wing and a prayer supporting his well drafted complaint.

Mutual Fund, supra, 553 F.2d at 624.

It is within this context that this Court evaluates plaintiff's antitrust allegations and defendants' summary judgment motion thereto.

SECTION ONE

Per Se

Through experience it has been shown "that there are certain agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue ... can be conclusively presumed to be unreasonable and therefore illegal...." Northern Pacific Railway Co. v. United States, 356 U.S. 1, 5, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958). Such limited situations are deemed to constitute per se violations of the Sherman Act; once the conduct is proved, an anticompetitive effect on competition is presumed. Ron Tonkin, supra, 637 F.2d at 1387; see United States v. National Ass'n of Broadcasters, 536 F.Supp. 149, 155 (D.D.C.1982).

Plaintiff contends that the per se rule should be applied in this case alleging refusal to deal, limitation of production and price-fixing.

This Court believes that the per se rule cannot be applied properly in this case. Plaintiff's allegations do not fit into any recognized per se category. See Gough v. Rossmoor Corp., 585 F.2d 381, 386 (9th Cir. 1978), cert. denied, 440 U.S. 936, 99 S.Ct. 1280, 59 L.Ed.2d 494 (1979). This Court would be required to expand and contort the per se rule for it to be applied in this case where the existence of a pernicious effect on competition is, at best, open to dispute. The Supreme Court has counselled against liberally expanding the several recognized categories noting that "departure from the rule-of-reason standard must be based upon demonstrable economic effect rather than ... upon formalistic line drawing." Continental T.V., Inc. v. G.T.E. Sylvania, Inc., 433 U.S. 36, 58-59, 97 S.Ct. 2549, 2561-2562, 53 L.Ed.2d 568 (1977). See also Gough, supra, 585 F.2d at 388. Accordingly, application of the per se rule is only proper where "the challenged conduct had, or was likely to have, a pernicious effect on competition or lacked any redeeming virtue." Ron Tonkin, supra, 637 F.2d at 1388. The Court finds that this is clearly not the situation in the instant case.

Refusal to Deal

Plaintiff alleges that it has been boycotted because defendants have prevented production of steam by defendants, plaintiff or anyone else and because defendants have made it difficult for plaintiff to acquire or develop any other property in the Geyser Area. Plaintiff further contends that "a concerted limitation of production is simply a form of boycott" (Plaintiff's Response to the Court's Request of September 15, 1981, p. 3), thus constituting a per se violation of section 1.

While certain predominantly horizontal boycotts are treated as per se violations of section 1 (see, e.g., Com-tel, Inc. v. Dukane Corp., 669 F.2d 404, 409 (6th Cir. 1982)), this instant situation differs since it entails a predominantly vertical relationship. Although two defendants have an interest in the adjoining Filley property, most of the defendants are connected to plaintiff through a vertical title chain to Dick's land. Where a relationship is predominantly vertical, rule of reason analysis is proper. Ron Tonkin, supra, 637 F.2d at 1383 (citing Oreck Corporation v. Whirlpool Corp., 579 F.2d 126, 131 (2d Cir.) (en banc), cert. denied, 439 U.S. 946, 99 S.Ct. 340, 58 L.Ed.2d 338 (1978)).

Plaintiff's argument that Klor's v. Broadway-Hale Stores, Inc., 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741 (1959), should control is not persuasive. The Court cannot say that the alleged boycott had by its "`nature' and `character' a `monopolistic tendency.'" Id. at 213, 79 S.Ct. at 710. Further, the seemingly broad holding of Klor's has been criticized by this circuit. Ron Tonkin, supra, 637 F.2d at 1382-83. As that court noted,

The term `group boycott' can be applied to divergent types of concerted activity, not all of which necessarily have a pernicious effect on competition or lack any redeeming virtue. The simple use of labels cannot suffice, because this would create the possibility that reasonable concerted activity would be proscribed.

Id. at 1383. Here, where plaintiff's claim is basically that defendants are not dealing enough, application of the per se rule should be avoided. Even though there may be a horizontal element to the boycott, a pernicious effect on competition cannot be presumed in this factual context.

Limitation of Production and Price-Fixing

Plaintiff contends that defendants' alleged agreement to limit production constitutes in itself a per se section 1 violation. In essence, plaintiff is requesting this Court to form a new per se category, an action the Court refuses to take in light of the Supreme Court's admonition in Continental T.V., Inc. v. G.T.E. Sylvania, Inc., supra, 433 U.S. at 58, 97 S.Ct. at 2561. Plaintiff has cited no authority, nor has this Court found any such case, holding that a limitation of production in itself is a per se violation. The authorities cited by plaintiff all involve either price-fixing or horizontal market divisions, each a...