Beckenstein v. Hartford Elec. Light Co.

Decision Date26 October 1979
Docket NumberCiv. No. H78-222.
Citation479 F. Supp. 417
CourtU.S. District Court — District of Connecticut
PartiesHenry BECKENSTEIN, d/b/a Beckenstein Brothers and Tolland Enterprises; Hartford Federal Savings and Loan Association; Park Avenue Pharmacy Incorporated; Harvest Hill Package Store, Inc.; Hy Berson and Isadore Berson, d/b/a Youth Centre; Essex Motor Inn Corporation; Standard Educators, Inc.; ECLC Learning Centers, Inc.; Kelly Totonis d/b/a Coronado Club Apartments; the Theodore D. Bross Line Construction Corp.; Universal Design, Incorporated; Seymour D. Sard, Inc.; Town & Country Liquors, Inc.; Mickey's DriveIn, Inc.; Robert Drywall Company, Inc.; the 477 Corporation; Dart's Dairy, Inc.; Pre-Designed Structures, Inc.; William Vonachen, d/b/a Ivy Hill Launderette; Eastern Equipment Sales, Inc.; Brightview Convalescent Home, Inc.; Leonard Berg, d/b/a Berg & Dejohn; the DSD Company; Kimberly Hall Nursing Home, Inc.; Friendly Ice Cream Corporation, Plaintiffs, v. The HARTFORD ELECTRIC LIGHT COMPANY and Northeast Utilities, Defendants.

William R. Moller, Hartford, Conn., for plaintiffs.

Palmer S. McGee, Jr., Day, Berry & Howard, Hartford, Conn., for defendants.


CLARIE, Chief Judge.

The defendants have moved pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss this complaint for failure to state a claim upon which relief can be granted. The parties have submitted, and the Court has considered, matters outside the pleading in deciding this motion. Therefore, the motion shall be treated as one for summary judgment and disposed of as provided in Fed.R. Civ.P. 56. Drawing every reasonable inference in favor of the plaintiffs (see Heyman v. Commerce and Industry Insurance Company, 524 F.2d 1317, 1320 (2d Cir. 1975)), the Court finds that no issue of material fact remains to be resolved. The Court finds further that the plaintiffs have failed to state a claim over which this Court has independent, federal subject matter jurisdiction, upon which relief can be granted, and it declines to exercise pendent jurisdiction over plaintiffs' state law claims. Summary judgment shall therefore enter in favor of the defendants.

Statement of Facts

The plaintiffs are customers of the defendant Hartford Electric Light Company ("HELCO"), a public service company supplying electricity within the greater Hartford Metropolitan area. The defendant Northeast Utilities is a public utility holding company which owns all of the outstanding shares of HELCO common stock. The plaintiffs have brought this class action seeking monetary and injunctive relief for alleged violations of 15 U.S.C. §§ 1 and 2, commonly known as sections 1 and 2 of the Sherman Act; 15 U.S.C. § 14, commonly known as section 3 of the Clayton Act; 15 U.S.C. § 13, commonly known as the Robinson-Patman Act; 15 U.S.C. §§ 41-51, commonly known as the Federal Trade Commission Act, particularly section 5 thereof; Conn.Gen.Stat. §§ 35-26, 35-27, and 35-29, commonly known as sections 3, 4, and 6 of the Connecticut Anti-Trust Act; and the common law.

In 1972, the plaintiffs were customers of HELCO under a billing classification known as Rate 30 (All Purpose General Service Electric). Rate 30, which became effective on July 1, 1965, was available to commercial customers qualifying under the following conditions:

"(a) Electricity supplied by the Company shall be the only source of energy for heating the structure through a permanently installed electric heating system, thermostatically controlled, sufficient to meet accepted comfort heating standards and where the electric heating load is at least 25% of the total load.
(b) Electricity supplied by the Company also shall be the only source of energy for lighting, cooling, cooking, water heating and power." See Complaint at ¶¶ 18, 19.

In 1972, HELCO applied to the Connecticut Public Utilities Commission ("Commission") for a rate increase in Docket No. 11253. HELCO proposed a substantially equal percentage increase in all rates (including Rate 30) except street lighting. See Finding and Order of the Commission, Docket No. 11253 (July 28, 1972) (Defendants' Exhibit 1) pp. 1, 9, 10, 11. In passing upon HELCO's petition for an overall rate increase, however, the Commission found (after a hearing) that offering lower rates for customers who used only electric energy for their heating needs was improperly preferential and directed HELCO to eliminate such rates:

"In this Finding we are directing the elimination of preferential and exclusive rates, which require that the energy supplied be used entirely for the customer's space heating needs.
. . . . .
Rate schedules bearing clauses requiring electricity to be the sole use of energy for space heating shall be amended to eliminate such provisions." Finding and Order of the Commission, Docket No. 11253 (July 28, 1972) pp. 14, 23.

In a supplemental order to Docket No. 11253, the Commission found that the immediate elimination of Rate 30 would cause undue hardship to the customers of that billing classification and therefore directed HELCO to phase out Rate 30 over a two year period.

"It has been determined that the `exclusive use' clause of Rate No. 30 `All-Purpose General Service Electric' cannot be eliminated at this time since it would result in unduly burdensome increases to such customers at one time by transferring them to other commercial or industrial rates. The company, therefore, has refiled this rate as a closed rate which would not be available to new customers. This rate would reflect the increase authorized by the Commission for one year. At the beginning of the second year the billing under this rate will be one-half the difference between closed Rate # 30 and new Rate # 22. At the beginning of the third year the rate would be phased out completely and the billing henceforth will be on Rate # 22." Supplemental Finding and Order of the Commission, Docket No. 11253 SP (2) (September 29, 1972) (Plaintiffs' Exhibit 1) p. 2.

Pursuant to the Commission's order in Docket No. 11253, HELCO terminated Rate 30 and as of October 20, 1974, the plaintiffs were billed under Rate 22. The plaintiffs consequently incurred higher costs for electricity under Rate 22 then they did under the former Rate 30. By application filed March 31, 1975, Docket No. 11718, the plaintiff Beckenstein Brothers requested that the Commission either restore commercial electric heating Rate 30 or order a rate design that would be substantially similar to the former Rate 30. After a hearing, the Commission denied this application. In denying the application of Beckenstein Brothers, the Commission made the following findings:

"Rate 30, as it existed at the time of construction by Beckenstein Brothers, was an exceptionally reasonable rate designed to offer the all-electric customer a somewhat better rate than that available to customers who were not all-electric. Rate 30 and other such rates were deemed preferential and exclusive and the Commission, in Docket No. 11253, directed that all such rates be eliminated. This then necessitated the transfer of these customers on such rates to the same rates as all other customers of the same class.
In the Commission's opinion, such rates are promotional at a time when the use of electric energy should not be promoted and, further, are discriminatory, since the only valid reason for a reduced rate is if the load characteristics are beneficial to the company and, thus, to all ratepayers.
Further, the Commission denied a similar objection to the elimination of Rate 30 in Docket No. 11400 (1973). The Commission responded then in its Finding and Order that, `(T)he Commission took this action (elimination of Rate 30) through its previous Docket No. 11253 relating to the Company because it considered that rates based on the exclusive use of electricity were preferential and thus improper.'" Decision and Order of the Commission, Docket No. 11718 (October 28, 1975) (Defendants' Exhibit 4) p. 2.

The plaintiffs appealed this decision of the Commission to the Connecticut Court of Common Pleas for Hartford County and the court sustained their appeal on October 12, 1977. On October 14, 1977, the defendants filed a motion to set aside the court's judgment and order a new trial. That motion is currently pending before the state court. Thereafter on May 4, 1978, the plaintiffs filed the present action in federal court.1

Discussion of the Law
I. Claims Under The Federal Antitrust Laws
A. Sherman Act: The "State Action" Defense

Plaintiffs claim that the conduct of the defendants constitutes "a contract, combination, or conspiracy in restraint of trade in violation of . . . section 1 of the Sherman Act" as well as a "combination or conspiracy to monopolize trade in the energy market . . . in violation of . . section 2 of the Sherman Act." In Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), the Supreme Court ruled that Congress did not intend the proscriptions of the Sherman Act to apply to certain "state action." In a line of recent decisions, the Supreme Court has attempted to define the contours of this state action defense. See City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978); Bates v. State Bar of Arizona, 433 U.S. 350, 97 S.Ct. 2691, 53 L.Ed.2d 810 (1977); Cantor v. Detroit Edison Company, 428 U.S. 579, 96 S.Ct. 3110, 49 L.Ed.2d 1141 (1976); Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975). The Supreme Court, however, has failed to provide clear guidelines, and the parameters of the state action doctrine remain murky at best. See generally M. Handler, Antitrust—1978, 78 Colum.L.Rev. 1363, 1374-88 (1978).

Despite this unsettled state of the law, most lower courts and legal commentators recognize at the core of the state action doctrine a tripartite test for immunity from the provisions of the Sherman Act:

1. The activity must be required, commanded, or

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