Ashley Creek Phosphate Co. v. Chevron Usa, Inc.

Decision Date02 January 2003
Docket NumberNo. 01-4031.,No. 01-4017.,No. 01-4066.,01-4017.,01-4031.,01-4066.
Citation315 F.3d 1245
PartiesASHLEY CREEK PHOSPHATE COMPANY, Plaintiff-Counter-Defendant-Appellant, and State of Utah, Plaintiff-Counter-Defendant, v. CHEVRON USA, INC.; SF Pipeline Limited Company; SF Phosphates Limited Company; J.R. Simplot Company; Farmland Industries, Inc.; FS, Inc., a Utah corporation; Chevron Industries, Inc., a Delaware corporation; Chevron Chemical Company, a Delaware corporation; Chevron Pipe Line Company, a Delaware corporation; Chevron Corporation, a Delaware corporation, Defendants-Counter-Claimants-Appellees. Ashley Creek Phosphate Company, Plaintiff-Counter-Defendant, and State of Utah, Plaintiff-Counter-Defendant-Appellant, v. Chevron Usa, Inc.; SF Pipeline Limited Company; SF Phosphates Limited Company; J.R. Simplot Company; Farmland Industries, Inc.; FS, Inc., a Utah corporation; Chevron Industries, Inc., a Delaware corporation; Chevron Chemical Company, a Delaware corporation; Chevron Pipe Line Company, a Delaware corporation; Chevron Corporation, a Delaware corporation, Defendants-Counter-Claimants-Appellees. Ashley Creek Phosphate Company, Plaintiff-Counter-Defendant-Appellant, and State of Utah, Plaintiff-Counter-Defendant. v. Chevron Usa, Inc.; SF Pipeline Limited Company; SF Phosphates Limited Company; J.R. Simplot Company; Farmland Industries, Inc.; FS, Inc., a Utah corporation; Chevron Industries, Inc., a Delaware corporation; Chevron Chemical Company, a Delaware corporation; Chevron Pipe Line Company, a Delaware corporation; Chevron Corporation, a Delaware corporation, Defendants-Counter-Claimants-Appellees.
CourtU.S. Court of Appeals — Tenth Circuit

E. Craig Smay, Salt Lake City, UT, (Philip Pugsley, Assistant Attorney General, State of Utah, Salt Lake City, UT, with him on the briefs), for Ashley Creek Phosphate Company and State of Utah, Plaintiffs-Counter-Defendants-Appellants.

Peter W. Billings, Fabian & Clendenin, Salt Lake City, UT, (Douglas B. Cannon, Fabian & Clendenin, Salt Lake City, UT; James S. Jardine, Jonathan A. Dibble, and Cameron M. Hancock, of Ray, Quinney & Nebeker, Salt Lake City, UT, with him on the briefs), for SF Pipeline Limited Company; SF Phosphates Limited Company, J.R. Simplot Company; Farmland Industries, Inc.; and FS, Inc., Defendants-Counter-Claimants-Appellees.

E. Scott Savage, (Stephen R. Waldron, with him on the briefs), Berman, Gaufin, Tomsic & Savage, Salt Lake City, UT, for Chevron USA, Inc.; Chevron Industries, Inc.; Chevron Chemical Company; Chevron Pipe Line Company; and Chevron Corporation, Defendants-Counter-Claimants-Appellees.

Before KELLY, Circuit Judge, BRORBY, Senior Circuit Judge, and MURPHY, Circuit Judge.

MURPHY, Circuit Judge.

INTRODUCTION

Ashley Creek Phosphate Company ("Ashley Creek") brought suit against Chevron Corporation and several related entities (collectively "Chevron") and J.R. Simplot Company, Farmland Industries, Inc., and three entities owned by, or operated as joint ventures between, Simplot and Farmland (collectively "SF"). Ashley Creek alleged, inter alia, that Chevron and SF violated various provisions of the Sherman and Clayton Acts by refusing to set reasonable tariffs for a pipeline utilized to transport phosphate concentrate slurry. The State of Utah brought claims against Chevron identical to and derivative of Ashley Creek's claims. Chevron and SF responded by filing state-law counterclaims against Ashley Creek, asserting that it had filed its complaint and initiated other proceedings in bad faith and without a justifiable basis.

The district court granted summary judgment in favor of Chevron and SF on the antitrust claims, concluding that: (1) Ashley Creek lacked standing to bring its antitrust claims; and (2) in the alternative, the tariffs announced by Chevron and SF for the use of the pipeline were reasonable. Because Utah conceded that its claims were "entirely derivative" of Ashley Creek's claims, the district court dismissed Utah's claims against Chevron on the same bases. The district court dismissed Chevron's and SF's state-law counterclaims without prejudice after disposing of all of the federal claims.

Ashley Creek appeals, contending that the district court erred in granting summary judgment in favor of Chevron and SF on the antitrust claims (No. 01-4017) and in refusing to dismiss Chevron's and SF's state-law counterclaims with prejudice (No. 01-4066). Utah appeals the district court's grant of summary judgment to Chevron (No. 01-4031). This court exercises jurisdiction pursuant to 28 U.S.C. § 1291 and, for the reasons set out below, affirms in part, dismisses in part, reverses in part, and remands to the district court for further proceedings consistent with this opinion.

Appeal Nos. 01-4017, -4031

I. BACKGROUND

The factual and procedural background of this case is lengthy and complex. We set forth only those very limited background facts necessary to put the legal dispute and this court's decision in context.

A. Factual/Procedural Background

In the 1980's, Chevron built an integrated phosphate fertilizer project. The purpose of the project was to utilize sulfur by-product from Chevron's natural gas operations in Carter Creek, Wyoming. Rather than attempt to sell the sulfur to existing phosphate fertilizer producers, Chevron chose to produce phosphate fertilizer itself. Entry into the phosphate fertilizer business was consistent with Chevron's preexisting nitrogen fertilizer business and fertilizer distribution system.

In furtherance of this plan, Chevron purchased an operating phosphate mine located near Vernal, Utah. Because it was roughly equidistant between Carter Creek and Vernal, and because it was a railhead, Chevron chose to construct its fertilizer plant in Rock Springs, Wyoming. Chevron built a pipeline to transport phosphate concentrate slurry from the Vernal mine to the fertilizer plant in Rock Springs. This pipeline runs over lands owned by the United States, including environmentally sensitive lands, pursuant to a right-of-way issued by the Bureau of Land Management ("BLM"). The project became operational with the first shipments of phosphate concentrate through the pipeline sometime after May of 1986.1

The state of Utah also owns phosphate deposits in Vernal within a reasonable proximity to the phosphate mine purchased by Chevron. Utah has leased some or all of its phosphate holdings in Vernal to Ashley Creek.2 When Ashley Creek learned that Chevron intended to construct a pipeline to transport phosphate from Vernal to Rock Springs, it approached Chevron about the possibility of constructing the pipeline as a joint venture. In fact, Ashley Creek requested that the BLM condition the granting of any right-of-way "upon requirements that operators of nearby properties which may be benefitted by a pipeline be given reasonable opportunity to participate in the line upon payment of an appropriate share of expenses." The BLM denied this request on the grounds that it understood the proposed pipeline would be subject to the jurisdiction of the Interstate Commerce Commission ("ICC") and that Ashley Creek would be able to ship its phosphate through the pipeline under tariffs set by the ICC.

In November of 1986, Ashley Creek approached Chevron requesting rate information for the shipment of phosphate slurry through the pipeline. Although Chevron provided Ashley Creek with preliminary rate estimates, it refused to publish a tariff. In response, Ashley Creek filed a complaint with the ICC alleging that Chevron was a common carrier by pipeline unlawfully operating without a tariff. In a decision issued in 1989, the ICC determined that Chevron was a common carrier and ordered it to establish rates and file a tariff for the transportation of phosphate slurry through the pipeline. Ashley Creek Phosphate Co. v. Chevron Pipe Line Co., 5 I.C.C.2d 303 (1989).

In response to the order, Chevron published a tariff. On June 19, 1989, the day before the tariff became effective, Ashley Creek and Utah filed suit against Chevron, asserting that Chevron's actions with regard to the pipeline violated the antitrust laws of the United States. Shortly thereafter, the ICC, Ashley Creek, Utah, and Chevron all agreed and stipulated as follows: "[t]he determination of whether the rates which [Chevron has] established in its tariff for transporting phosphate through the Chevron slurry pipeline from Vernal, Utah, to Rock Springs, Wyoming, are unjust, discriminatory or unreasonable, is hereby referred to the [ICC]." The district court stayed resolution of Ashley Creek's and Utah's antitrust claims against Chevron pending the resolution of the issues referred to the ICC.

For the next seven years, the reasonableness of the published tariffs on the phosphate pipeline was litigated before the ICC and its successor agency, the Surface Transportation Board ("STB").3 While the matter was pending before the ICC, Chevron published a revised tariff in August of 1991 and a second revised tariff in February of 1992. Each revised tariff reduced the rates of the prior tariff. In April of 1992, Chevron sold its entire integrated phosphate fertilizer project to SF. SF immediately adopted the Chevron tariff then in effect. In response to this transaction, Ashley Creek filed a complaint with the ICC naming SF as a defendant and repeating the allegations regarding the pipeline set out in its original ICC filing. The ICC consolidated the two complaints and indicated that it would apply the identical ratemaking methodology in both cases.

In October of 1996, the STB issued a decision on Ashley Creek's consolidated administrative complaints (the "1996 Order"). Ashley Creek Phosphate Co. v. Chevron Pipe Line Co., Nos. 40131, 40810, 1996 WL 625471 (S.T.B.1996). The STB found that the published tariffs were "unreasonable for shipments at many volume levels." Id. at *19. It nevertheless concluded that "there may be certain shipping...

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