Breiding v. Eversource Energy

• Decision Date: 11 September 2018
• Docket Number: Civil Action No. 17-12274
• Citation: 344 F.Supp.3d 433
• Parties: Scott BREIDING, Amy Pollutro Mikaela Orstein-Otero, Benjamin Rose, Margaret Lewis and Richard Lewis, Eric Long, Peter Steers, Erik Allen, Bradford Keith, John Odum, David Leighton, Donna Cordeiro, Janice Angelillo, Anna Maria Fornino, Michele Casetta, Judy Cennami, Janice Brady, Opal Ash, Mark LeJeune, and Roberto Prats, on behalf of themselves and others similarly situated, Plaintiffs, v. EVERSOURCE ENERGY and Avangrid, Inc., Defendants.
• Court: U.S. District Court — District of Massachusetts

344 F.Supp.3d 433

Scott BREIDING, Amy Pollutro Mikaela Orstein-Otero, Benjamin Rose, Margaret Lewis and Richard Lewis, Eric Long, Peter Steers, Erik Allen, Bradford Keith, John Odum, David Leighton, Donna Cordeiro, Janice Angelillo, Anna Maria Fornino, Michele Casetta, Judy Cennami, Janice Brady, Opal Ash, Mark LeJeune, and Roberto Prats, on behalf of themselves and others similarly situated, Plaintiffs,

v.EVERSOURCE ENERGY and Avangrid, Inc., Defendants.

Civil Action No. 17-12274

United States District Court, D. Massachusetts.

Signed September 11, 2018

Emerson Hilton, Pro Hac Vice, Jeff D. Friedman, Pro Hac Vice, Steve W. Berman, Pro Hac Vice, Hagens Berman Sobol Shapiro LLP, Seattle, WA, Kristie A. LaSalle, Thomas M. Sobol, Hagens Berman Sobol Shapiro LLP, Cambridge, MA, Bradley J. Vettraino, Block & Leviton LLP, Boston, MA, for Plaintiffs.

John D. Donovan, Jr., Ropes & Gray LLP, U. Gwyn Williams, Latham & Watkins LLP, Boston, MA, Chong S. Park, Ropes & Gray LLP, Douglas Green, Pro Hac Vice, Shannen Coffin, Pro Hac Vice, Steptoe & Johnson LLP, Allyson M. Maltas, Pro Hac Vice, Marguerite M. Sullivan, Pro Hac Vice, Latham & Watkins LLP, Washington, DC, for Defendants.

MEMORANDUM AND ORDER

CASPER, District Judge.

I. Introduction

A putative class of retail electricity consumers residing in New England (collectively, "Plaintiffs") have filed this lawsuit against Eversource Energy ("Eversource") and Avangrid, Inc. ("Avangrid") (collectively, "Defendants"), alleging violations of the Sherman Act, 15 U.S.C. § 2, and various state consumer protection and antitrust laws. D. 33. Plaintiffs assert that Defendants restricted New England's supply of natural gas, a key component in the generation of over half the electricity in New England, and, as a result, caused New Englanders to pay nearly $3.6 billion dollars more for retail electricity. D. 33 ¶¶ 1-2. Plaintiffs seek damages and injunctive relief, including under the Clayton Act, 15 U.S.C. § 26. Defendants have moved to dismiss the amended complaint. D. 41; D. 42. For the reasons set forth below, the Court ALLOWS Defendants' motions to dismiss.

II. Standard of Review

In considering a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6), the Court will dismiss a pleading that fails to allege plausible claims. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). "This standard is ‘not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.’ " Saldivar v. Racine, 818 F.3d 14, 18 (1st Cir. 2016) (quoting Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 ). A claim must contain sufficient factual matter that, accepted as true, would allow the Court "to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly, 550 U.S. at 557, 127 S.Ct. 1955 ).

There is no special pleading requirement for motions to dismiss in the context of an antitrust action. In re Carbon Black Antitrust Litig., No. CIV.A.03-10191-DPW, 2005 WL 102966, at *5 (D. Mass. Jan. 18, 2005). Nevertheless, "it is not enough merely to allege a[n] [antitrust] violation in conclusory terms." E. Food Servs., Inc. v. Pontifical Catholic Univ. Servs. Ass'n, Inc., 357 F.3d 1, 9 (1st Cir. 2004). Instead, the "complaint must make out the rudiments of a valid claim." Id. Therefore, "[w]hen the requisite elements are lacking, the costs of modern federal antitrust litigation and the increasing caseload of the federal courts counsel against sending the parties into discovery when there is no reasonable likelihood that the plaintiffs can construct a claim from the events related in the complaint." In re Carbon Black Antitrust Litig., 2005 WL 102966, at *5 (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984) ). "With that said, a complaint should be dismissed only if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Id. (internal quotation marks and citations omitted).

III. Factual Background

Unless otherwise noted, the following facts are drawn from the amended complaint, D. 33, and are accepted as true for the consideration of the Defendants' motions to dismiss.

A. Regulatory Framework for the Interstate Transmission and Sale of Natural Gas and Electricity

1. FERC's Authority to Regulate the Transmission and Price of Natural Gas

Between the 1950s through the 1970s, the Federal Power Commission ("FPC") strictly regulated both the wellhead price¹ of natural gas and the interstate transmission of natural gas pursuant to the Natural Gas Act. D. 33 ¶ 72; see E. & J. Gallo Winery v. EnCana Corp., 503 F.3d 1027, 1036 (9th Cir. 2007) (" Gallo II"). Beginning in 1978, however, Congress enacted legislation to reduce regulatory oversight of the price of natural gas. Id. ¶ 74. Congress further deregulated the price of natural gas through the enactment of the Natural Gas Wellhead Decontrol Act of 1989, which prohibited FPC's successor, the Federal Energy Regulatory Commission ("FERC"), from imposing any price regulations on "first sales" of natural gas at the wellhead. Id. ¶¶ 74-75. "First sales" include sales by a natural gas producer to a pipeline or a direct purchaser. Id. ¶ 75. In 1992, FERC issued Order No. 636, which permanently severed the sale of natural gas as a commodity from the sale of natural gas transmission as a service. Id. ¶ 76. Following Order 636, FERC allowed "natural-gas companies subject to [its] jurisdiction to charge rates for gas determined by market demand." Gallo II, 503 F.3d at 1038. In short, FERC replaced regulated rates for natural gas with market-based rates. Id. at 1039.

FERC still retained authority to oversee rates charged for the transmission of natural gas. Id. ¶¶ 77, 80, 85. Because natural gas transmission is often a "natural monopoly," (i.e. , where a single pipeline infrastructure is the only source of natural gas transportation in a given area), FERC is charged with ensuring that the transmission monopoly is not abused and that prices are "just and reasonable." Id. ¶¶ 80, 85. FERC does not regulate the local, retail sale of natural gas after it leaves interstate pipelines. See id. ¶ 54.

2. FERC's Authority to Regulate the Transmission and Price of Electricity

The Federal Power Act ("FPA"), 16 U.S.C. § 791a et seq. , authorizes FERC to regulate the "transmission of electric energy in interstate commerce" and the "sale of electric energy at wholesale in interstate commerce." Id. ¶ 49 (quoting 16 U.S.C. § 824(b)(1) ). In particular, the FPA obligates FERC to "oversee all prices for those interstate transactions and all rules and practices affecting such prices." F.E.R.C. v. Elec. Power Supply Ass'n, ––– U.S. ––––, 136 S.Ct. 760, 782, 193 L.Ed.2d 661 (2016). However, FPA places beyond FERC's power, leaving to the states alone, the regulation of any other electricity sale, including the retail sale of electricity. D. 33 ¶ 49 (citing Elec. Power Supply Ass'n., 136 S.Ct. at 768 ).

B. Natural Gas and Electricity Markets

Plaintiffs allege that Defendants' anticompetitive conduct in the natural gas transmission market artificially inflated the commodity market price of natural gas and the wholesale price of electricity, resulting in higher retail electricity prices for New Englanders. See, e.g., D. 33 ¶ 165. Defendants' conduct in the upstream natural gas transmission market allegedly impacted downstream retail electricity prices due to the relationship and connection between the markets at issue in this litigation. For example, Plaintiffs assert that the price of natural gas is the most significant factor in determining the price of wholesale electricity because natural gas-fired power plants are the primary generators of electricity in New England. Id. ¶ 68. An increase in the price of natural gas due to a shortage in natural gas supply, therefore, will directly impact the price of wholesale electricity. Id. ¶ 121. In that same vein, artificially inflated wholesale electricity prices result in artificially inflated retail electricity prices. Id. ¶ 63. Accordingly, where, as alleged here, Defendants restricted the natural gas supply to New England, Defendants allegedly caused the market price of natural gas to increase, resulting in an increase in wholesale and retail electricity prices. Id.

With the regulatory framework and Plaintiffs' allegations in mind, the Court now turns to the New England energy markets at issue in this litigation: (1) the commodity market for natural gas, (2) the natural gas transmission market, (3) the wholesale electricity market and (4) the retail electricity market.

1. Natural Gas Commodity Market

The natural gas market encompasses two transactions: (1) the purchase of natural gas; and (2) the transmission of natural gas from seller to purchaser. Id. ¶ 76. With respect to sales of the commodity itself, natural gas is sold to consumers either directly from gas producers via contracts called "gas futures" or through the "spot market." Id. ¶ 86. Futures contracts allow gas producers to sell a specific quantify of gas at some predetermined future time. Id. ¶ 87. Purchasers with a steady natural gas demand, such as load distribution companies ("LDCs"), which distribute gas to retail customers, typically utilize futures contracts. Id. ¶¶ 84, 87. By contrast, entities with variable or less predictable natural gas demand, including natural gas-fired electricity generators, purchase gas on the "spot" market. Id. ¶ 88. The spot market allows LDCs and other direct purchasers to resell excess amounts...