City of Chanute, Kan. v. Williams Natural Gas Co., 87-1463-K.

• Decision Date: 27 July 1990
• Docket Number: No. 87-1463-K.,87-1463-K.
• Citation: 743 F. Supp. 1437
• Court: U.S. District Court — District of Kansas
• Parties: CITY OF CHANUTE, KANSAS; City of Auburn, Kansas; City of Cleveland, Oklahoma; City of Garnett, Kansas; City of Humboldt, Kansas; City of Iola, Kansas; City of Neodesha, Kansas; and City of Osage City, Kansas, Plaintiffs, v. WILLIAMS NATURAL GAS COMPANY, Defendant.

743 F. Supp. 1437

CITY OF CHANUTE, KANSAS; City of Auburn, Kansas; City of Cleveland, Oklahoma; City of Garnett, Kansas; City of Humboldt, Kansas; City of Iola, Kansas; City of Neodesha, Kansas; and City of Osage City, Kansas, Plaintiffs, v. WILLIAMS NATURAL GAS COMPANY, Defendant.

No. 87-1463-K.

United States District Court, D. Kansas.

July 27, 1990.

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Charles F. Wheatley, Jr., Don Charles Uthus, Peter A. Goldsmith, Wheatley and Wollesen, Annapolis, Md., Larry D. Hendricks, Ronald Greg Wright, Stumbo, Stumbo, Hanson & Hendricks, Topeka, Kan., for plaintiffs.

Donald W. Bostwick, Adams, Jones, Robinson and Malone, Wichita, Kan., John T. Schmidt, Mary Rounds, Kevin Morrison, Hall, Estill, Hardwick, Gable, Golden & Nelson, Tulsa, Okl., for defendant.

MEMORANDUM AND ORDER

PATRICK F. KELLY, District Judge.

This is an antitrust case in which the plaintiffs (the Cities)¹ claim they are entitled to treble damages under Section 4 of the Clayton Act, 15 U.S.C. § 15, because defendant Williams Natural Gas Co. (WNG or Williams)² reversed its policy of interim open access. The Cities assert that Williams' conduct in closing its pipeline was an exercise of its monopoly power which injured the Cities by preventing them from receiving transportation of a long-term, dependable supply of low cost natural gas from a third party supplier over Williams' natural gas pipeline. This case is now before the court on motions by Williams for summary judgment on the Cities' remaining antitrust claims and to strike some of the Cities' affidavits filed in opposition to Williams' motion for summary judgment.

In its motion for summary judgment, Williams argues that the record in this case demonstrates WNG has not abused its monopoly power, that the Cities cannot prove their essential facility claim, and that since WNG had the right to sell gas under its FERC tariff and certificates, an exercise of that right is not actionable under the essential facilities doctrine. As a result, Williams argues that the Cities cannot establish a violation of Section 2 of the Sherman Act, 15 U.S.C. § 2, and thus, it is entitled to summary judgment pursuant to Fed.R.Civ.P. 56(d).

As is more fully developed herein, the court finds that Williams' motion to strike some of the Cities' affidavits should be denied in part and granted in part. In addition, the court finds that Williams' motion for summary judgment on the Cities' remaining antitrust claims should be granted.

The current motions are not ruled on from a clear slate. This case has already been before the court on two separate occasions for findings of fact and conclusions of law. City of Chanute, Kan. v. Williams Natural Gas Co., 678 F.Supp. 1517 (D.Kan.1988) (hereinafter, Chanute I); and City of Chanute, et al. v. Williams Natural Gas Co., Case No. 87-1463-K, 1990 WL 20019 (D.Kan. Feb. 19, 1990) (hereinafter, Chanute II). Since those cases have already set forth the factual background of this case, the court will not reiterate such for purposes of the present motions. The court will set forth a summary of the findings in those cases, however, to clarify the context from which the present motions arise.

In Chanute I this court addressed the Cities' request for a preliminary injunction. In regard to the prerequisites for a preliminary injunction, the court found that the Cities had: (1) shown that they would suffer irreparable injury unless an injunction was issued, (2) proved that their threatened injury outweighed the damages which a preliminary injunction may cause to Williams, and (3) shown that issuing an injunction would not be adverse to the public interest. Chanute I, 678 F.Supp. at 1526-30. Since the first three prerequisites for a preliminary injunction were found to be present, the court applied a "lessened" burden of proof on the fourth requirement. Chanute I, 678 F.Supp. at 1525-26. In other words, the Cities were only required to prove that they had "raised questions going to the merits so serious, substantial, difficult and doubtful as to make them a fair ground for litigation and thus for more deliberate investigation." Id.

With that standard in mind, the court addressed the merits of the Cities' claim that Williams' failure to open access to its pipeline to alternate suppliers of natural gas constituted an intentional monopoly in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. The Cities sought to prove liability under Section 2 of the Sherman Act by utilizing the "essential facilities" or "bottleneck" doctrine. Chanute I, 678 F.Supp. at 1531. This court ultimately found that, as the facts then appeared before the court, and given the fact that the lesser standard was applicable, the Cities had sufficiently established the likelihood they would prevail on their essential facilities claim. Id. at 1534. As a result, it was determined that the Cities had established each of the necessary requirements for the issuance of a preliminary injunction.

In Chanute II, the court addressed Williams' three separate motions for partial summary judgment. In the first motion, Williams argued that some of the Cities could not show they suffered an "antitrust injury" because of certain contractual obligations between such Cities and itself, and thus did not have standing to recover treble damages under Section 4 of the Clayton Act. 15 U.S.C. § 15. In its second motion, Williams sought a summary judgment on the Cities' tying claims brought pursuant to Section 1 of the Sherman Act. 15 U.S.C. § 1. In its third motion, Williams sought a summary judgment on the Cities' claims for "extended period damages" (consequential damages covering the period August, 1988 through August, 1993) included within the treble damages claim. Chanute II, slip op. at 2-3.

In Chanute II, the court granted Williams' first motion for summary judgment to the extent that such Cities were contractually obligated to purchase their gas requirements from Williams during the period Williams' pipeline was closed to transportation of third party gas. More specifically, the court found that the Cities of Auburn, Iola, and Osage City were contractually obligated to purchase their requirements from Williams during the entire closed period (August 1, 1987 through August 5, 1988), and that the Cities of Chanute, Neodesha, and Humboldt were contractually obligated to purchase their requirements from Williams prior to April 22, 1988. The court ultimately found that to the extent such contractual obligations were enforceable, such Cities could not have suffered any antitrust injury and thus lacked standing to recover treble damages under Section 4 of the Clayton Act. Chanute II, slip op. at 35.

The court also found that Williams' motions for summary judgment on the Cities' tying claims brought pursuant to Section 1 of the Sherman Act should be granted. Chanute II, slip op. at 41. However, the court denied in substantial part Williams' request for summary judgment on the Cities' claims for extended period damages. Chanute II, slip op. at 43.

As a result of such findings, only a few of the Cities' original claims remain. For instance, the claims of the Cities of Cleveland and Garnett remain to the extent those Cities can show they sustained injury as a result of an antitrust violation by Williams under Section 2 of the Sherman Act. In addition, the claims of the Cities of Chanute, Neodesha, and Humboldt remain only to the extent such Cities can show an antitrust violation by Williams under Section 2 of the Sherman Act which injured such Cities and occurred after April 22, 1988.³

In the January 29, 1990 oral arguments for Chanute II, the court noted the limited number of remaining claims and suggested that Williams stand ready to file a summary judgment motion on the remaining Sherman Act Section 2 claims after the court issued its findings of facts and conclusions of law in Chanute II. (Docket No. 248, pp. 73-74.) Since the essential facilities doctrine is a Sherman Act Section 2 claim, the court noted that such a motion would likely address the propriety of such doctrine. In addition, the court indicated that even though this court relied on the essential facilities doctrine for issuance of the temporary restraining order in Chanute I, to grant summary judgment now on such theory in favor of Williams would not necessarily be in conflict with Chanute I, given the fact that a different standard applied to granting a preliminary injunction and that the facts now appear much differently since the parties have had an opportunity to conduct extensive discovery. The court also noted that the extent of the regulatory turmoil and its effect on Williams' conduct is much clearer now than it was in Chanute I. (See Docket No. 248, pp. 74-76.)

In a telephone conference held on March 20, 1990, the court addressed the Cities' request for an interlocutory appeal from Chanute II. (Docket No. 256.) The parties were informed that the court agreed the Cities were deserving of an interlocutory appeal, but that the court faced a dilemma in currently granting such a request. The court felt that this whole case was deserving of timely review by the Tenth Circuit, including the Cities' essential facility claim as well as their other Sherman Act Section 2 claims. (Id. at 3.) However, if the court immediately granted the interlocutory appeal, it would lose jurisdiction and the Tenth Circuit would not have before it the remaining claims. (Id.) Thus, the court suggested it may be better to suspend the interlocutory appeal until after the court had ruled on Williams' current motion for summary judgment against the Cities' Sherman Act Section 2 claims. (Id. at 4.)

Counsel for Williams concurred that this was a sensible procedure and agreed not to argue that the Cities' appeal from Chanute II was untimely if the court allowed the Cities' request for an interlocutory appeal to be suspended until after ...