Atlantigas Corp. v. Nisource, Inc.
| Decision Date | 10 October 2003 |
| Docket Number | No. CIV.A. 02-1078(PLF).,CIV.A. 02-1078(PLF). |
| Citation | 290 F.Supp.2d 34 |
| Parties | ATLANTIGAS CORP., Plaintiff, v. NISOURCE, INC., et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
Robert C. Sanders, Upper Marlboro, MD, for Plaintiff.
Mark H. Lynch, Covington & Burling, Washington, DC, for Defendants.
This matter is before the Court for consideration of the defendants' motions to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure. Plaintiff Atlantigas Corp. originally filed this suit against three groups of related corporate entities and one partnership, charging violations of the Sherman and Clayton Antitrust Acts and the Racketeer Influenced and Corrupt Organizations Act ("RICO"); it also made various state tort claims. Plaintiff earlier dismissed with prejudice two of the corporate group defendants (the "PEPCO" and "Shell" defendants). As a result, four corporate defendants remain (collectively, the "Columbia Defendants"), as does Cove Point LNG LLP ("Cove Point").
The Columbia Defendants filed motions to dismiss under Rule 12(b)(2), asserting that the amended complaint fails to allege facts sufficient to support personal jurisdiction over any of the Columbia Defendants and that no personal jurisdiction in fact exists, and under Rule 12(b)(6) for failure to state a claim. Cove Point filed its own Rule 12(b)(2) motion, joined the Columbia Defendants' Rule 12(b)(6) motion, and made the additional claim that because the amended complaint does not seek relief or a determination of liability with respect to Cove Point, the partnership should be dismissed from the suit under Rule 12(b)(6). After briefing on these motions was complete, the Court denied plaintiff's motion for leave to file a second amended complaint based on the prejudice to the defendants that would result. See Order of March 5, 2003.
The Court heard oral argument on defendants' Rule 12(b)(2) motions on April 8, 2003. Because plaintiff raised several new arguments at oral argument, the Court directed the parties to file supplemental briefs on the newly-raised issues. After carefully considering the briefs and supplemental briefs and the oral arguments presented by counsel, the Court granted the Rule 12(b)(2) motions to dismiss for lack of personal jurisdiction in an Order dated September 29, 2003.1 This Opinion explains the reasons for that decision.
This case concerns the highly regulated natural gas storage and transportation industry, which is distinct from the industry involved in the sale of natural gas to the consumer. Among other things, plaintiff is a purchaser, marketer and shipper of natural gas on interstate pipelines. See Amended Complaint ( ) ¶ 1. Plaintiff alleges that the defendants (two interstate pipelines and their subsidiaries and a partnership of those subsidiaries) provided illegally discounted gas supply, storage and transportation services on interstate natural gas pipelines for approximately nine interstate shippers ("Select Shippers") in exchange for percentages of the illegal profits obtained by those Select Shippers from the eventual sale of the gas to end-users, to the detriment of plaintiff and other similarly situated competitors of the Select Shippers (the "Gas Scheme"). See id. ¶¶ 2-3.
According to the amended complaint, the storage and transportation of natural gas in the United States functions in the following way: Most of the natural gas in the United States originates in the southern Gulf states (Louisiana, Oklahoma and Texas) and is delivered from its source to local distribution companies ("LDCs") that then transport the gas to consumers. See Amm. Cplt. ¶ 41. The capacity of the pipelines used to transport natural gas is limited and, during the peak use season, winter and its surrounding months, demand outweighs the supply available from the pipelines. To respond to this problem, the pipeline owners have built storage facilities at specific points along the pipelines in which gas is stored in the off-peak months for use during the winter. See id. ¶¶ 42-44. Pipeline companies do not ship natural gas directly to LDCs, but instead only provide storage and transportation services to other shippers that in turn market the gas to their LDC customers. See id. ¶ 47.
The Federal Energy Regulatory Commission ("FERC") regulates the natural gas transportation and storage industry, including regulation of the process by which the agreements between pipeline owners and natural gas shippers and wholesalers ("transportation capacity agreements") are made. See Amm. Cplt. ¶ 48. There are two types of transportation capacity agreements: "firm" agreements, under which pipeline capacity is always available to the contracting shipper at a fixed rate, and "interruptible" agreements, under which supply may be preempted by firm agreement requirements. See id. Certain LDCs own most of the firm pipeline capacity available, and competing shippers must negotiate with those LDCs for the release and assignment of any surplus firm capacity rights. See id. ¶ 49. Plaintiff alleges that this system provides those LDCs that have firm agreements a quasi-monopoly during the peak season that allows those LDCs (1) to demand low purchase prices from natural gas suppliers, because only the LDCs with firm capacity can deliver natural gas to end-users, (2) to take accounts away from suppliers with no firm capacity rights, and (3) to render interruptible agreements useless. See id. ¶ 53.2
FERC regulates through a tariff system most other aspects of the storage and transportation of natural gas, a system developed in response to early regulatory failures to adapt to the ever-changing non-regulated aspects of the markets. See Amm. Cplt. ¶¶ 65-80. In the 1990's, FERC reduced its own responsibilities so it no longer micro-managed each storage and transportation agreement. It promulgated new regulations intended to "level the playing field" by requiring interstate pipeline companies to allow firm transportation customers to release or assign their excess firm capacity to other market participants only by auction to the highest bidder on an equal access basis. It further required the pipelines to execute the release and award of their own capacity on public, regulated electronic bulletin boards. See id. ¶¶ 73-80.
In the amended complaint, the Columbia Defendants are described as follows: Nisource Inc. is the parent corporation that owns the rest of the Columbia Defendants. Columbia Gas Transmission Co. ("Columbia Gas") and Columbia Gulf Transmission Co. ("Columbia Gulf") are regulated interstate pipeline owners, and Columbia LNG Corp. and CLNG Corp. are a general and limited partner, respectively, in Cove Point. See Amm. Cplt. ¶¶ 25-29. Plaintiff alleges that Cove Point is a partnership comprised of several defendant entities that manages and operates shipping and storage facilities in Maryland ("Cove Point Facilities") and an 87-mile pipeline running between Maryland and Virginia. Plaintiff claims that the Columbia Defendants, through Columbia LNG Corp. and CLNG Corp. (along with the two additional groups no longer part of this action), function as the general partners of Cove Point. See id. ¶¶ 34-37; see also Cove Point LNG Limited Partnership Chart, Amm Cplt. at 10.
Plaintiff alleges that the Columbia Defendants own and control vast natural gas storage facilities and pipelines, and that Columbia Gas is authorized to offer interruptible storage services when it can deliver storage capacity in excess of its own commitments, so long as the storage capacity is offered on an electronic bulletin board accessible to the public under FERC regulations. See Amm. Cplt. ¶¶ 83, 85-86. Plaintiff alleges that the Gas Scheme began in 1995 when several officers of Columbia Gas agreed to, and Columbia Gas subsequently began to, provide greater capacity and transportation flexibility to its own unregulated marketing affiliate, Columbia Energy Services, Inc. ("CES"), despite FERC requirements that providers treat their affiliates on an equal level with other shippers. See id. ¶¶ 92-93.
From that point, the scheme allegedly grew. First, plaintiff alleges that certain Columbia Gas employees relocated to other gas marketing and shipping companies and that these shipping companies then joined the Gas Scheme as Select Shippers. See Amm. Cplt. ¶¶ 95-102. Then two additional shippers joined the group of Select Shippers as a result of personal relationships between various officers of the companies involved. See id. ¶¶ 103-104. Finally, Washington Gas Light Co. ("WGL"), a Washington, D.C. public utility, entered into the scheme and became a crucial actor in the alleged conspiracy. See id. ¶¶ 105-110. Specifically, plaintiff charges that WGL hired a Select Shipper, Dynegy, Inc. ("Dynegy"), to manage its gas distribution assets, including WGL's existing Columbia Gas and Cove Point storage and transportation contracts. At the same time, Washington Gas Energy Services, Inc. ("WGES"), WGL's own unregulated affiliate, entered into a joint marketing arrangement with CES, Columbia Gas's own unregulated marketing affiliate. Dynegy, as manager of WGL's assets, then relinquished WGL's firm storage rights in Columbia Gas, thereby freeing up Columbia Gas firm capacity. WGL in turn obtained replacement storage capacity from Cove Point. See id. ¶¶ 107-110.
Plaintiff asserts that the significance of these transactions is revealed when placed in the context of the history of the industry. Plaintiff explains that since deregulation, shippers often have requested additional firm transportation and storage services from Columbia Gas in order to deliver gas to the East Coast market, and into "Operating Area 10" in particular ...
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