Duke Energy Carolinas, LLC v. NTE Carolinas II, LLC

• Docket Number: 22-2168
• Decision Date: 05 August 2024
• Citation: Duke Energy Carolinas, LLC v. NTE Carolinas II, LLC, 111 F.4th 337 (4th Cir. 2024)
• Parties: DUKE ENERGY CAROLINAS, LLC, Plaintiff-Appellee, and Duke Energy Corporation; Duke Energy Progress, LLC, Counter-Defendants-Appellees, v. NTE CAROLINAS II, LLC; NTE Carolinas II Holdings, LLC; NTE Energy, LLC; NTE Southeast Electric Company, LLC; NTE Energy Services Company, LLC; Castillo Investment Holdings II, LLC, Defendants-Appellants. American Antitrust Institute, Amicus Supporting Appellants. Chamber of Commerce of the United States of America; North Carolina Chamber Legal Institute; Dr. Benjamin Zycher; Geoffrey A. Manne; Professor Richard A. Epstein; Professor Donald J. Boudreaux. Amici Supporting Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

111 F.4th 337

DUKE ENERGY CAROLINAS, LLC, Plaintiff-Appellee, and Duke Energy Corporation; Duke Energy Progress, LLC, Counter-Defendants-Appellees, v.NTE CAROLINAS II, LLC; NTE Carolinas II Holdings, LLC; NTE Energy, LLC; NTE Southeast Electric Company, LLC; NTE Energy Services Company, LLC; Castillo Investment Holdings II, LLC, Defendants-AppellantsAmerican Antitrust Institute, Amicus SupportingAppellantsChamber of Commerce of the United States of America; North Carolina Chamber Legal Institute; Dr. Benjamin Zycher; Geoffrey A. Manne; Professor Richard A. Epstein; Professor Donald J. Boudreaux. Amici SupportingAppellees.

No. 22-2168

United States Court of Appeals, Fourth Circuit

Argued: May 7, 2024

Decided: August 5, 2024

Appeal from the United States District Court for the Western District of North Carolina, at Charlotte.Kenneth D. Bell, District Judge(3:19-cv-00515-KDB-DSC)

ARGUED: Derek T. Ho, KELLOGG, HANSEN, TODD, FIGEL & FREDERICK PLLC, Washington, D.C., for Appellants.Morgan L. Ratner, SULLIVAN & CROMWELL LLP, Washington, D.C., for Appellee.ON BRIEF: Matthew J. Wilkins, Caroline A. Schechinger, Jonathan I. Liebman, KELLOGG, HANSEN, TODD, FIGEL & FREDERICK, P.L.L.C., Washington, D.C., for Appellants.Jason D. Evans, TROUTMAN PEPPER HAMILTON SANDERS LLP, Charlotte, North Carolina; Douglas Green, STEPTOE & JOHNSON LLP, Washington, D.C.; Jeffrey B. Wall, Daniel J. Richardson, SULLIVAN & CROMWELL LLP, Washington, D.C., for Appellees.Kathleen W. Bradish, AMERICAN ANTITRUST INSTITUTE, Washington, D.C., for Amicus The American Antitrust Institute.Andrew R. Varcoe, Tyler S. Badgley, UNITED STATES CHAMBER LITIGATION CENTER, Washington, D.C., for Amicus Chamber of Commerce of the United States of America.Michael F. Murray, Mary Walser, PAUL HASTINGS LLP, Washington, D.C., for Amici Chamber of Commerce of the United States of America and North Carolina Chamber Legal Institute.Sean E. Andrussier, WOMBLE BOND DICKINSON (US) LLP, Raleigh, North Carolina, for Amici Dr. Benjamin Zycher, Geoffrey A. Manne, Professor Richard A. Epstein, and Professor Donald J. Boudreaux.

Before NIEMEYER and THACKER, Circuit Judges, and MOTZ, Senior Circuit Judge.

Vacated and remanded by published opinion.Judge Niemeyer wrote the opinion, in which Judge Thacker and Senior Judge Motz joined.

NIEMEYER, Circuit Judge:

NTE Carolinas II, LLC("NTE"¹), a power company based in St. Augustine, Florida, sued Duke Energy Corporation("Duke"²), a power company based in Charlotte, North Carolina, alleging that Duke had monopoly power in the wholesale power market in the Carolinas and willfully maintained that power through anticompetitive conduct to exclude NTE from the market, in violation of § 2 of the Sherman Act.See15 U.S.C. §§ 2,15.In particular, NTE presented evidence in the district court that Duke devised a plan to ensure that NTE, its only serious competitor, would not have the opportunity to compete for the business of Fayetteville, North Carolina, the only major wholesale customer whose long-term contract with Duke was expiring soon enough to allow NTE to compete for its business.

The district court granted Duke's motion for summary judgment, in which Duke argued that the conduct that NTE imputed to Duke constituted legitimate competition in seeking to retain Fayetteville's business and that none of the actions on which NTE relied was unlawful.While the court concluded that there was a question of fact on whether Duke had monopoly power, it also concluded as a matter of law that Duke did not engage in anticompetitive conduct but rather legitimate competition to retain Fayetteville's business.

The record in this case is large, and it contains much evidence related to Duke's conduct in response to NTE's competitive efforts.While we recognize that much of Duke's conduct can be understood to be legitimate competitive conduct, as well explained by very able counsel, we also have found much from which a jury could conclude that Duke's actions were illegitimate anticompetitive conduct that violated § 2 of the Sherman Act, also as well explained by very able counsel.Because genuine disputes of material fact exist, we vacate the district court's summary judgment and remand for further proceedings.

We also order that, on remand, the case be assigned to a different judge.In an act of caution, the district judge in this case initially recused himself because of the appearance of one of his former law partners on behalf of Duke.But he was reassigned the case a couple of years later after the "conflict" abated, and he then declined to recuse himself on NTE's motion, determining that his earlier recusal had not been necessary.We conclude, as most courts have, that once a judge recuses himself from a case, he should remain recused from that case, even though his recusal may not have originally been required.

I

After Duke filed an answer to NTE's operative antitrust complaint, the parties engaged in extensive discovery, creating a substantial record, which included detailed and complex expert witness reports.Duke then filed a motion for summary judgment based on that record.While the district court concluded that genuine questions of material fact remained on whether Duke had monopoly power, it concluded that NTE failed to show that Duke had engaged in "improper exclusionary conduct harming competition."Duke Energy Carolinas, LLC v. NTE Carolinas II, LLC,608 F. Supp. 3d 298, 317(W.D.N.C.2022).Identifying five distinct courses of conduct claimed by NTE to have been part of Duke's anticompetitive scheme, the district court addressed each course independently, found that each was not unlawful by itself, and concluded that "[a]dding up several instances of lawful conduct [could not] total unlawful conduct."Id. at 319;see alsoid. at 319-28.The court accordingly granted summary judgment to Duke.

Because one issue raised is whether the record reveals genuine issues of material fact, we find it appropriate to recite the record in some detail.

A

The summary judgment record shows the following:

NTE, as an independent power producer ("IPP"), generates power at power plants, but it does not own transmission lines and therefore cannot, with its own resources, transmit the energy it produces to wholesale customers.Thus, NTE must rely on the transmission networks owned by other energy companies to transmit electricity over power lines to its wholesale customers, typically municipalities.J.A. 4455; FERC, Energy Primer: A Handbook of Energy Market Basics 47 (2020).To facilitate such access, the Federal Energy Regulatory Commission("FERC") requires utilities to share their transmission networks with competitors.See generallyPromoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities,61 Fed. Reg. 21540(May 10, 1996).

In 2014, NTE began construction of a new combined-cycle natural gas facility in Kings Mountain, North Carolina.SeeJ.A. 4616.To transmit electricity in the Carolinas, however, it needed to use the transmission lines of Duke, a longtime monopolist holding more than 90% of the wholesale power market in the region.J.A. 4481.Duke is a vertically integrated power company, meaning that it owns both power plants and transmission lines and serves both wholesale and retail customers.In accordance with FERC regulations requiring interconnection, Duke and NTE entered into a standard interconnection agreement, with Duke providing NTE access to its transmission network so that NTE could sell power from its Kings Mountain plant.While NTE thus entered Duke's service area, Duke at first had little concern about its presence as a competitor, inasmuch as NTE's Kings Mountain plant was a relatively small generator.Duke's Vice President of Wholesale Power Sales remarked at the time that he"[thought] it [was] very doubtful that the threat [of Duke customers switching to NTE][was] real."J.A. 4830.

Duke's view of NTE changed over the following year, however, as Duke began to realize that NTE was successfully attracting Duke customers.SeeJ.A. 5047(Duke email stating that NTE winning Winterville was a "total surprise").In October 2014, Duke executives asked their subordinates to keep them briefed on NTE's development plans.J.A. 4832-33.In January 2015, Duke's internal briefing reports showed that "[s]tand-alone combined cycle plants" like NTE's "offer less expensive energy than Duke Energy system average rates for the foreseeable future, along with lower capacity prices."J.A. 4881.In short, the combined-cycle plants that NTE was in the business of building were more cost-efficient than Duke's own plants.SeeJ.A. 4471-72.Duke then recognized that it "[couldn't] chase the price competition and earn a reasonable return."J.A. 4888.

When NTE opened its Kings Mountain plant, Duke customers, too, took note of NTE's new offerings.For example, in October 2015, a representative of a wholesale customer informed Duke that it was signing a Letter of Intent to buy electricity from NTE due to the savings that NTE offered, explaining:

The issue with my towns is cost.We are in an area of the state where wages have stagnated and making ends meet is incredibly difficult for many folks.Duke's offer, over the long term, was simply uneconomic.

J.A. 5060.Eventually, Duke lost a total of nine of its customers to NTE selling electricity from its Kings Mountain plant.J.A. 4618.Yet, during that same time, it lost only one customer to a competitor other than NTE.SeeJ.A. 4659.

Despite NTE's cleaner, more efficient power generators, Duke recognized that it had an advantage by reason of its long-term wholesale power supply contracts with its customers, which spanned 20 years and required several years' notice of termination.See, e.g.,J.A. 2545(10-year notice period);J.A. 5235(7-year notice period).These long-term contracts, which were common in the Southeast energy markets,...