955 F.2d 641 (10th Cir. 1992), 90-3273, City of Chanute, Kan. v. Williams Natural Gas Co.

Docket Nº:90-3273, 90-3313, and 90-3369.
Citation:955 F.2d 641
Party Name:CITY OF CHANUTE, KANSAS; City of Auburn, Kansas; City of Cleveland, Oklahoma; City of Garnett, Kansas; City of Humboldt, Kansas; City of Iola, Kansas; City of Neodesha, Kansas; City of Osage, Kansas, Plaintiffs-Appellants, v. WILLIAMS NATURAL GAS COMPANY, Defendant-Appellee.
Case Date:January 30, 1992
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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955 F.2d 641 (10th Cir. 1992)

CITY OF CHANUTE, KANSAS; City of Auburn, Kansas; City of

Cleveland, Oklahoma; City of Garnett, Kansas; City of

Humboldt, Kansas; City of Iola, Kansas; City of Neodesha,

Kansas; City of Osage, Kansas, Plaintiffs-Appellants,

v.

WILLIAMS NATURAL GAS COMPANY, Defendant-Appellee.

Nos. 90-3273, 90-3313, and 90-3369.

United States Court of Appeals, Tenth Circuit

January 30, 1992

Rehearing Denied March 27, 1992.

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Charles F. Wheatley, Jr. (Don Charles Uthus, Peter A. Goldsmith, Timothy P. Ingram, Pace J. McConkie, and Allen D. Freemyer of Wheatley & Ranquist, Annapolis, Md., Larry D. Hendricks and Ronald Greg Wright of Stumbo, Stumbo, Hanson & Hendricks, Topeka, Kan., Robert Pennington of Henshall, Pennington & Brake, Chanute, Kan., with him on the briefs) of Wheatley & Ranquist, Annapolis, Md., for plaintiffs-appellants.

John T. Schmidt (Mary J. Rounds of Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., Tulsa, Okl., and C. Kevin Morrison of Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., Washington, D.C., Donald W. Bostwick and Teresa James of Adams, Jones, Robinson & Malone, Chartered, Wichita, Kan., Lewis A. Posekany, Gen. Counsel, Williams Natural Gas Co., Tulsa, Okl., Bobby E. Potts, Associate Gen. Counsel, and William J. Sears, Chief Regulatory Counsel, The Williams Companies, Inc., Tulsa, Okl., with him on the briefs) of Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., Tulsa, Okl., for defendant-appellee.

Before SEYMOUR, BARRETT and BRORBY, Circuit Judges.

BRORBY, Circuit Judge.

In this antitrust case, eight cities ("the Cities"), sued Williams Natural Gas Company ("Williams") asserting Sherman Antitrust Act ("Sherman Act") violations. Specifically, the Cities protest Williams' decision to terminate a temporary program whereby the Cities could purchase gas from third party suppliers which Williams would transport over its pipeline. The district court granted summary judgment in favor of Williams. We affirm.

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BACKGROUND 1

The Cities purchase natural gas at wholesale and then resell it to customers located in the cities and surrounding areas. Williams owns and operates the only interstate pipeline serving the Cities. Each of the Cities has had a "full requirements" contract with Williams. These contracts require the Cities to purchase all their natural gas from Williams and Williams agrees to have a sufficient supply of natural gas to meet the Cities' demands. In December 1986, Williams sought regulatory approval to allow it to transport gas from third party suppliers on a permanent basis. 2 At the time, under the full requirements contracts, Williams only transported its own gas over the pipeline. While awaiting approval, Williams initiated a temporary program to transport third party gas for the Cities. 3 FERC granted Williams approval to waive the full requirements provisions in existing contracts with the Cities to effectuate this temporary program. Otherwise, these full requirement provisions would have precluded the Cities from being able to purchase gas from third party suppliers even though Williams would transport the gas over its pipeline. This waiver did not relieve Williams from its obligation to serve the Cities' full requirements on demand. The Cities began to negotiate and enter into agreements for gas from other suppliers. During the time the temporary program was in effect, while the Cities were purchasing third party gas, Williams experienced difficulty paying its suppliers. 4

Originally, the temporary program was to run from December 1986 until May 1987. Williams was able to extend it until August 1, 1987, when Williams ended its temporary program and closed its pipeline to those alternate suppliers ("closed period"). However, FERC regulation obligated Williams to transport certain third party gas ("approved third party suppliers") that was still available to the Cities. 5 In July 1988, FERC approved Williams' permanent plan, which enabled the Cities to once again purchase gas from any third party supplier. Thereafter, the Cities negotiated with other third party suppliers to obtain gas which Williams would transport over its pipeline.

The Cities brought suit alleging Williams violated §§ 1 and 2 of the Sherman Act. The Cities sought antitrust damages for the time period Williams closed its pipeline to the transportation of third party gas, August 1987 until July 1988. The district court granted summary judgment for Williams. The Cities appeal asserting seven errors, which we address separately.

I. SUMMARY JUDGMENT

We recognize the prevailing sentiment that summary judgment should be used sparingly in antitrust cases. See Poller v. Columbia Broadcasting Sys., Inc., 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962). Summary judgment should be granted only if "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Thus, when the moving party identifies evidence that

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demonstrates no genuine issue of material fact remains, the nonmoving party must go beyond the pleadings and present to the court the specific evidence that indicates a genuine factual issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986). The existence of some disputed facts does not automatically preclude granting summary judgment. Anderson, 477 U.S. at 247-48, 106 S.Ct. at 2509-10. If the nonmoving party does not make a sufficient showing of a material fact, all other facts are rendered immaterial and summary judgment is appropriate. Celotex, 477 U.S. at 322-23, 106 S.Ct. at 2552. We remain mindful that summary judgment in antitrust cases is disfavored. Fortner Enters., Inc. v. United States Steel Corp., 394 U.S. 495, 505, 89 S.Ct. 1252, 1259, 22 L.Ed.2d 495 (1969).

Reviewing a grant of summary judgment on appeal, "[w]e apply a de novo standard of review to the court's conclusions of law," and view the "record liberally in favor of the party opposing the motion for summary judgment." McKenzie v. Mercy Hosp., 854 F.2d 365, 367 (10th Cir.1988). See also Anderson v. Health & Human Servs., 907 F.2d 936, 946-47 (10th Cir.1990). We are not limited to the grounds upon which the trial court relied but may base summary judgment on any proper grounds found in the record to permit conclusions of law. United States v. Colorado, 872 F.2d 338, 339 (10th Cir.1989). The trial judge must deny a summary judgment motion when reasonable jurors might disagree, even if the judge would find for the moving party. Dreiling v. Peugeot Motors of America, Inc., 850 F.2d 1373, 1377 (10th Cir.1988). Thus, where the reviewing judge may properly draw different ultimate inferences, summary judgment cannot be entered. Instructional Sys. Dev. Corp. v. Aetna Cas. & Sur. Co., 817 F.2d 639, 644 (10th Cir.1987). Because summary judgment involves purely legal determinations, we review the district court's decision to grant summary judgment de novo. Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir.1991).

II. ESSENTIAL FACILITIES DOCTRINE

The Cities allege Williams' decision to close the pipeline violated § 2 of the Sherman Act which prohibits monopolies in interstate trade or commerce. 15 U.S.C. § 2. One way federal courts enforce this prohibition is through the use of the essential facilities doctrine. McKenzie, 854 F.2d at 368-69. The essential facilities doctrine is a test courts can apply to alleged monopolistic conduct to determine whether the conduct violates the antitrust laws. Federal courts of appeals have adopted a four-part test to determine if a monopolist's conduct violates § 2 under this doctrine. Id. at 369. To prevail under the essential facilities doctrine the Cities must show: (1) Williams is a monopolist in control of the pipeline that is essential to competition in the retail natural gas market; (2) the Cities' inability to duplicate, practically or reasonably, the pipeline access; (3) Williams has denied the Cities use of the pipeline; and (4) the feasibility of Williams providing the pipeline to the Cities. See MCI Communications Corp. v. American Tel. & Tel. Co., 708 F.2d 1081, 1132-33 (7th Cir.), cert. denied, 464 U.S. 891, 104 S.Ct. 234, 78 L.Ed.2d 226 (1983).

The Cities presented evidence they competed with Williams at the retail level for new users and larger commercial and industrial users. The undisputed facts show Williams operated the only natural gas pipeline in the area of the Cities. Economically, it was not feasible for the Cities to physically duplicate the pipeline. Chanute I, 678 F.Supp. at 1533. Williams temporarily closed its pipeline to the transportation of third party gas even though the Cities either had long term contracts or were negotiating long term contracts for that third party gas. Id. at 1521. Williams did not close the pipeline because of FERC regulations. Once Williams closed its pipeline, it entered into new five-year contracts with the Cities which required the Cities to pay demand charges year-round even if

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they purchased no gas from Williams. Williams' gas was more expensive than the other third party suppliers' gas. The approved third party suppliers' gas that Williams continued to transport was short-term and interruptible, 6 whereas the other third party suppliers provided long term, firm and much cheaper gas. 7 Id. at 1521.

Williams moved for summary judgment bringing evidence that as an interstate pipeline, it is subject to "pervasive regulation" by FERC. Id. at 1522. During the closed period, Williams provided all the Cities' natural gas...

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