Ray v. Indiana & Michigan Elec. Co.
| Decision Date | 19 February 1985 |
| Docket Number | No. 84-1990,84-1990 |
| Citation | 758 F.2d 1148 |
| Parties | 1985-1 Trade Cases 66,524 John F. RAY, Sr., et al., Plaintiffs-Appellants, v. INDIANA & MICHIGAN ELECTRIC COMPANY, an Indiana Corporation, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Carl D. Overman, Dutton, Kappes & Overman, Douglas B. McFadden, Indianapolis, Ind., for plaintiffs-appellants.
Thomas W. Yoder, Livingston, Dildine, Haynie & Yoder, Fort Wayne, Ind., for defendant-appellee.
Before BAUER, COFFEY and FLAUM, Circuit Judges.
Plaintiffs, residential purchasers of electric power in the Fort Wayne, Indiana area, brought suit against the defendant, Indiana & Michigan Electric Company (I&M), alleging that I&M's acquisition of the City of Fort Wayne's municipal utility (City Light) and subsequent actions by I&M violated the Sherman Anti-Trust Act, 15 U.S.C. Sec. 1 et seq. (1975). After a bench trial, the district court entered judgment for the defendant, and plaintiffs now appeal that judgment. We affirm.
The lengthy facts in this case are cogently and thoroughly addressed by the trial judge, whose findings we adopt. See Mem.Op., May 11, 1984. --- F.Supp. ----. We will only briefly summarize them here for the purposes of this appeal. City Light, owned and operated by the City of Fort Wayne, began supplying electricity to the city and its surrounding area in 1909. In 1948, I&M became a competing supplier of electricity in the Fort Wayne area through its purchase of an existing utility. In 1953, City Light began purchasing wholesale electric power from I&M pursuant to a series of requirement contracts. The amount of wholesale electric power which City Light purchased from I&M through these contracts steadily increased as the city and the demand for electricity grew and City Light's physical plant remained at its original size. By 1974, City Light generated only 11% of its requirements, purchasing the balance wholesale from I&M.
In the mid-1960's, the city commissioned studies to determine the feasibility of expanding and modernizing City Light. One study favored and another opposed expansion. I&M opposed expansion of City Light and offered to increase the amount of wholesale electric power available to City Light at a rate as low as any available to I&M's other municipal or large industrial customers. At least one public meeting was held to discuss the issue. The Fort Wayne Common Council then approved contracts for the construction of two new generators for the City Light plant. The Common Council later voted, however, to reject issuing bonds to raise the money to build the generators, and instead entered into a new contract with I&M to purchase more wholesale electric power.
On September 13, 1974, the city leased City Light's entire physical plant to I&M for a period of 35 years. Pursuant to the lease all retail customers of City Light became customers of I&M. The lease was approved by the Indiana Public Service Commission and became effective on March 1, 1975. At about this time I&M also began construction of a new headquarters in downtown Fort Wayne.
Before the signing of the lease, the rates I&M charged in the Fort Wayne area were different from the rates I&M charged elsewhere. Residential customers in Fort Wayne who used less than 1000 kilowatt hours per month were charged at a lower rate than similar customers outside Fort Wayne. Residential customers outside Fort Wayne who used more than 1000 kilowatt hours per month, however, were charged at a lower rate than residents of Fort Wayne who used over 1000 kilowatt hours per month. The lease with City Light did not change this relationship between I&M's rates. In 1977, however, the Indiana Public Service Commission found that the rate differential was unfair and ordered I&M to file a uniform rate for all its residential customers regardless of their geographic location. I&M had also filed for two rate increases with the Indiana Public Service Commission after the lease was signed. These rate increases were approved and resulted in substantially higher rates for all I&M's customers.
At trial, plaintiffs argued that I&M had engaged in "predatory activity" in violation of the Sherman Act in order to eliminate its only competitor in the Fort Wayne area, City Light, and that its success in doing so damaged the plaintiffs by resulting in higher rates for electricity in the Fort Wayne area. Specifically, plaintiffs alleged that I&M prevented the expansion of City Light to create a greater dependency on I&M for electric power, charged excessive rates for the wholesale electric power it sold to City Light, threatened to remove its headquarters from Fort Wayne if the lease was not executed, and obtained rate increases not included in the lease.
The trial judge found that City Light did not expand because of the city's long-standing failure to invest in the utility's physical plant and that I&M's opposition to the expansion proposed in the 1960's was "fair and above board." Mem.Op. at 11, para. 23. Similarly, the trial judge found that City Light's increasing dependence on I&M resulted from the city's policy of allowing the physical plant to deteriorate and the fact that by 1970 or 1971 it...
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