Breiding v. Eversource Energy

• Decision Date: 18 September 2019
• Docket Number: No. 18-1995,18-1995
• Citation: 939 F.3d 47
• Parties: Scott BREIDING; Amy Pollutro; Mikaela Ortstein-otero; Benjamin Rose; Margaret Lewis; Richard Lewis; Eric Long; Peter Steers; Bradford Keith ; John Odum; David Leighton; Donna Cordeiro; Janice Angelillo; Anna Maria Fornino; Michele Cassetta; Judy Cennami, on behalf of themselves and others similarly situated, Plaintiffs, Appellants, Erik Allen; Nicholas Correia; Janice Brady; Opal Ash; Roberto Prats; Mark Lejeune, Plaintiffs, v. EVERSOURCE ENERGY, a Massachusetts voluntary association; Avangrid, Inc., a New York corporation, Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

939 F.3d 47

Scott BREIDING; Amy Pollutro; Mikaela Ortstein-otero; Benjamin Rose; Margaret Lewis; Richard Lewis; Eric Long; Peter Steers; Bradford Keith ; John Odum; David Leighton; Donna Cordeiro; Janice Angelillo; Anna Maria Fornino; Michele Cassetta; Judy Cennami, on behalf of themselves and others similarly situated, Plaintiffs, Appellants,

Erik Allen; Nicholas Correia; Janice Brady; Opal Ash; Roberto Prats; Mark Lejeune, Plaintiffs,
v.
EVERSOURCE ENERGY, a Massachusetts voluntary association; Avangrid, Inc., a New York corporation, Defendants, Appellees.

No. 18-1995

United States Court of Appeals, First Circuit.

September 18, 2019

Thomas M. Sobol, Cambridge, MA, with whom Kristie A. LaSalle, Cambridge, MA, Bradley Vettraino, Boston, MA, Steve W. Berman, Seattle, WA, Hagens Berman Sobol Shapiro LLP, David F. Sorensen, Philadelphia, PA, Michael Dell'Angelo, Philadelphia, PA, Glen L. Abramson, Philadelphia, PA, and Berger Montague PC were on brief, for appellants.

Whitney E. Street, Block & Leviton LLP, Boston, MA, Sandeep Vaheesan, and Open Markets Institute on brief for Open Markets Institute as amicus curiae.

Richard P. Bress, Washington, DC, and John D. Donovan, Jr., Boston, MA, with whom Shannen W. Coffin, Washington, DC, Douglas G. Green, Washington, DC, Steptoe & Johnson LLP, Chong S. Park, Washington, DC, Ropes & Gray LLP, Marguerite M. Sullivan, Washington, DC, Allyson M. Maltas, Washington, DC, Caroline A. Flynn, and Latham & Watkins LLP were on brief, for appellees.

Before Torruella, Selya, and Kayatta, Circuit Judges.

KAYATTA, Circuit Judge.

939 F.3d 49

Eversource Energy and Avangrid, Inc. ("the defendants") are two large energy companies that purchase natural gas directly from producers and then resell that gas to retail natural gas consumers throughout New England. In order to transport the natural gas that the defendants purchase from far-away producers to their own, localized system of pipeline infrastructure for delivery to their customers, the defendants reserve transportation capacity along the interstate Algonquin Gas pipeline. The plaintiffs, a putative class of retail electricity customers in New England, allege that the defendants strategically reserved excess capacity along the Algonquin Gas pipeline without using or reselling it. This conduct, they claim, unduly constrained the volume of natural gas flowing through New England, thereby raising wholesale natural gas prices, which in turn resulted in higher retail electricity rates paid by New England electricity consumers.

The plaintiffs brought this lawsuit in the U.S. District Court for the District of Massachusetts, asserting that the defendants' conduct violated section 2 of the Sherman Act, 15 U.S.C. § 2, and various state antitrust and consumer-protection laws. The district court dismissed the plaintiffs' claims as being barred by the filed-rate doctrine and, alternatively, for lack of antitrust standing and the plaintiffs' failure to plausibly allege a monopolization claim under the Sherman Act. Although our reasoning differs from that of the district court in several respects, we agree that the filed-rate doctrine presents an insurmountable hurdle for the plaintiffs' federal and state-law claims. We therefore find no need to reach the district court's alternative grounds for dismissal.

I.

Because the district court disposed of the plaintiffs' claims on a motion to dismiss for failure to state a claim, Fed. R. Civ. P. 12(b)(6), "we take as true all well-pleaded facts in [their] complaint[ ], scrutinize them in the light most hospitable to [their] theory of liability, and draw all reasonable inferences therefrom in [their] favor." Fothergill v. United States, 566 F.3d 248, 251 (1st Cir. 2009). In so doing, we may also consider "facts subject to judicial notice, implications from documents incorporated into the complaint, and concessions in the complainant's response to the motion to dismiss." Arturet-Vélez v. R.J. Reynolds Tobacco Co., 429 F.3d 10, 13 n.2 (1st Cir. 2005).

We first trace the regulatory contours of the relevant markets for natural gas and electricity before turning to the details of the plaintiffs' antitrust and unfair competition claims.

A.

"Wellhead" sales comprise the first step in the chain of market transactions that readies extracted natural gas for consumption in the form of retail electricity. At this initial stage, natural gas producers sell natural gas to direct purchasers through gas futures contracts, in which the producer agrees to sell a specific quantity of natural gas at some fixed time in the future to the direct purchaser. Load-distribution companies (LDCs) -- those entities that locally distribute natural gas, primarily to retail consumers who use the gas for heating and cooking -- have a relatively predictable need for natural gas and, thus, often make use of this type of contract.¹

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Consumers with more variable demand for natural gas, such as power generators, often purchase gas on the secondary wholesale "spot market." The spot market for natural gas allows direct purchasers that find themselves with rights to excess, unneeded natural gas to resell those rights in the immediate or near future.

The Federal Energy Regulatory Commission (FERC) is the agency charged with implementing and executing the Natural Gas Act (NGA), "a comprehensive scheme of federal regulation of ‘all wholesales of natural gas in interstate commerce.’ " N. Nat. Gas Co. v. State Corp. Comm'n, 372 U.S. 84, 91, 83 S.Ct. 646, 9 L.Ed.2d 601 (1963) (quoting Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672, 682, 74 S.Ct. 794, 98 L.Ed. 1035 (1954) ); see also 15 U.S.C. § 717c(a) (tasking FERC with ensuring that rates charged for sales of natural gas within FERC's jurisdiction are "just and reasonable"). Notwithstanding the comprehensiveness of this regulatory scheme, Congress also exempted wellhead sales from FERC's regulatory jurisdiction. See 15 U.S.C. § 3431(a)(1)(A). Accordingly, market forces dictate the wellhead price of natural gas. Id. § 3431(b)(1)(A) ("[A]ny amount paid in any first sale of natural gas shall be deemed to be just and reasonable."). And while the NGA grants FERC regulatory authority over "sale[s] ... for resale" in the spot market for natural gas, see 15 U.S.C. § 717(b), FERC has issued a "blanket certificate of public convenience and necessity" that allows such transactions to proceed at market rates, see 18 C.F.R. § 284.402.

Direct purchasers of natural gas also pay for the transmission of natural gas from the wellhead. The Algonquin Gas pipeline serves as the primary interstate artery through which natural gas is transported in New England. Direct purchasers in New England must reserve transmission capacity -- that is, the physical space in the pipeline needed to transport the natural gas purchased from the producer -- along the Algonquin pipeline commensurate with their transportation needs. FERC also has "exclusive jurisdiction over the transportation ... of natural gas in interstate commerce for resale" and is charged with "determin[ing] a ‘just and reasonable’ rate for [its] transportation." Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 300–01, 108 S.Ct. 1145, 99 L.Ed.2d 316 (1988). Pursuant to this exclusive authority, FERC requires interstate pipeline operators like Algonquin to allow LDCs to purchase capacity using "no-notice" contracts. See Order No. 636, 57 Fed. Reg. 13,267 (Apr. 16, 1992). Such contracts allow LDCs to adjust capacity reservations downward or upward (up to their daily "firm entitlements") at any time without incurring penalties. Id. at 13,286. Importantly, FERC regulations allow, but do not require, LDCs to resell unneeded transportation capacity to other natural gas purchasers when they downwardly adjust their capacity reservations. See 18 C.F.R. § 284.8 ; Tenn. Gas Pipeline Co., 102 FERC ¶ 61,075, 61,119 (2003) ("[N]othing requires a shipper to release its capacity: it does so by choice.").

In the wholesale market for electricity, load-serving entities (LSEs) that sell and deliver electricity to consumers for retail consumption purchase electricity from power generators. The Federal Power Act (FPA) charges FERC with regulating these wholesale sales² of electricity in interstate commerce and ensuring that rates

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in that market are "just and reasonable." See 16 U.S.C. §§ 824(b)(1), 824d(a). In executing that charge, FERC has delegated authority to nonprofit organizations, including independent system operators (ISOs), to manage auctions for wholesale electricity in the various regional markets across the country. Hughes v. Talen Energy Mktg., LLC, ––– U.S. ––––, 136 S. Ct. 1288, 1292, 194 L.Ed.2d 414 (2016). ISO New England (ISO-NE) oversees the markets for wholesale electricity in the New England region and administers two auctions for wholesale electricity that are relevant to this appeal: a same-day auction and a next-day auction to satisfy LSEs' short-term and near-term demand for electricity. In both auctions, ISO-NE accepts orders from LSEs designating the amount of energy they need at a given time. Power generators then submit bids indicating the amount of electricity they can produce at those times and the price they are...