In re Wholesale Elec. Anttrust Cases, No. D047697.

CourtCalifornia Court of Appeals
Writing for the CourtHuffman
Citation55 Cal.Rptr.3d 253,147 Cal.App.4th 1293
PartiesWHOLESALE ELECTRICITY ANTI-TRUST CASES I & II.
Docket NumberNo. D047697.
Decision Date26 February 2007
55 Cal.Rptr.3d 253
147 Cal.App.4th 1293
WHOLESALE ELECTRICITY ANTI-TRUST CASES I & II.
No. D047697.
Court of Appeal, Fourth District, Division 1.
February 26, 2007.

[55 Cal.Rptr.3d 255]

Lerach, Coughlin, Stoia, Geller, Rudman & Robbins, Leonard B. Simon, Pamela M. Parker and Frank J. Janecek Jr., San Diego, for Plaintiffs and Appellants Ruth Hendricks, People of the City and County of San Francisco, City of Oakland and County of Santa Clara.

Best, Best & Krieger, C. Michael Cowett, Robert J. Hanna, Mary E. Coburn, James P. Gilpin and William C. Pate, San Diego, for Plaintiffs and Appellants Borrego Water District, Fallbrook Public Utility District, Helix Water District, Padre Dam Municipal Water District, Ramona Municipal Water District, Sweetwater Authority, Valley Center Municipal Water District, Vista Irrigation District, Yuma Municipal Water District, Metropolitan Transit Development Board, San Diego Trolley, Inc. and San Diego Transit Corporation.

Levine, Steinberg, Miller & Huver, Harvey R. Levine, Richard A. Huver; Patricia A. Meyer & Associates, Patricia A. Meyer, Marisa Janine-Page, and Matthew T.

[55 Cal.Rptr.3d 256]

Poelstra, San Diego, for Plaintiffs and Appellants Cruz Bustamante, Ruth Hendricks and Barbara Matthews.

Kiesel, Boucher & Larson and Raymond P. Boucher, Beverly Hills, for Plaintiffs and Appellants Cruz Bustamante and Barbara Matthews.

Krause, Kalfayan, Benink & Slavens, James C. Krause, Ralph B. Kalfayan, David B. Zlotniek, San Diego; Keegan, Macaluso & Baker, Patrick N. Keegan, La Jolla; and Hoyt E. Hart II for Plaintiff and Appellant Pamela Gordon.

Lieff, Cabrase'r, Heimann & Bernstein, William Bernstein, Joseph R. Saveri and Barry Himmelstein, San Francisco, for Plaintiffs and Appellants Bill Lockyer, Oscars Photo Lab, Pier 23 Restaurant and Mary L. Davis.

Office of City Attorney, Dennis J. Herrera and Theresa L. Mueller for Plaintiff and Appellant City and County of San Francisco.

Office of Oakland City Attorney, John A. Russo, Barbara Parker, Oakland, and Izetta C.R. Jackson, San Francisco, for Plaintiff and Appellant City of Oakland.

Office of Santa Clara County Counsel, Ann Miller Ravel and Cheryl A. Stevens, San Jose, for Plaintiff and Appellant County of Santa Clara.

Pillsbury, Winthrop, Shaw & Pittman, Douglas R. Tribble, Connie J. Wolfe, San Diego, John M. Grenfell and Michael J. Kass, San Francisco, for. Defendants and Respondents Cabrillo Power I, LLC, Cabrillo Power II. LLC, Louis J. Dorey, Dynegy, Inc., Dynegy Marketing & Trading, Dynegy Power Marketing, Inc., El Segundo Power, LLC, Long Beach Generation, LLC, Matt K. Schatzman and Charles Watson.

Latham & Watkins, Daniel Murray Wall, San Francisco, Michael J. Weaver and Kimberly A. Hicks, San Diego, for Defendants and Respondents Sempra Energy, Inc., Sempra Generation and Sempra Energy Trading Corporation.

Coughlan, Semmer & Lipman, R.J. Coughlan, Jr.; Williams & Connolly, Stephen D. Raber, for Defendant and Respondent AES Corporation.

Kirkland & Ellis, Tony L. Richardson, Jeffrey S. Davidson, and James B. Ransom, Los Angeles, for Defendant and Respondent Morgan Stanley Capital Group, Inc.

HUFFMAN, J.


Plaintiffs and appellants Borrego Water District, et al. (Borrego), a group of public entities and retail purchasers of electricity, filed this action' for damages and other relief against defendants and respondents AES Corporation, et al. (AES), a number of companies and their subsidiaries who are generators, sellers, or traders of electricity at wholesale (defendants). In their master complaint filed in 2002 in these coordinated actions, plaintiffs allege violations of California's antitrust laws (Bus. & Prof.Code,1 § 16720, hereafter the Cartwright Act), as well as violations of California's unfair competition law (§ 17200 et seq., hereafter the UCL).2 These allegations all arise out of market conditions and events during the California energy crisis of 2000 and onward, relating to claims for damages and injunctive relief for anticompetitive activity and/or unfair

55 Cal.Rptr.3d 257

competition in the wholesale electricity market.

In response to the filing of this action, and after a delay of several years due to removal to federal court and remand to state court, all defendants brought and renewed a joint demurrer to the master complaint, on the grounds of lack of jurisdiction. Defendants argued the subject matter of the master complaint was preempted by federal law that had occupied the field of wholesale electricity market control and regulation, because plaintiffs' theories of recovery would inevitably require the superior court to determine reasonable rates for wholesale power sales. Defendants further argued that a regulatory doctrine, the filed rate doctrine, barred the filing of this action for damages. (See Public Utility Dist. No. 1 of Snohomish County v. Dynegy Power Marketing, Inc. (9th Cir.2004) 384 F.3d 756 (Snohomish); Public Utility Dist. No. 1 of Grays Harbor County Washington v. Idacorp Inc. (9th Cir.2004) 379 F.3d 641, 647 (Grays Harbor).) The trial court agreed and sustained the demurrer without leave to amend.

Plaintiffs appeal, contending the ruling was erroneous because California case law, Younger v. Jensen (1980) 26 Cal.3d 397, 161 Cal.Rptr. 905, 605 P.2d 813 (Younger) and Spielholz v. Superior Court (2001) 86 Cal.App.4th 1366, 104 Cal.Rptr.2d 197 (Spielholz), should support a finding that state law can provide an independent ground for regulation of the anticompetitive or unfair conduct of defendants, through an award of antitrust damages, such that there should be no finding of federal preemption. Plaintiffs found further support for their theory of general applicability of state antitrust laws in the context of electricity market disputes in the United States Supreme Court case of Otter Tail Power Co. v. United States (1973) 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359 (Otter Tail Power).

Our analysis of the master complaint and pertinent case law convinces us that the trial court correctly applied the doctrines of field and conflict preemption in sustaining the demurrer without leave to amend. We find additional support for that conclusion in the filed rate doctrine, relied on by the trial court as an alternate ground for its ruling on demurrer. (California ex rel. Lockyer v. Dynegy, Inc. (9th Cir.2004) 375 F.3d 831, 852-853 (Dynegy ).) We affirm the judgment of dismissal.

FACTUAL AND PROCEDURAL
BACKGROUND
A
Master Complaint; Coordinated Proceedings

Since 2001, these coordinated proceedings have included a total of six actions originating both in San Diego and in other counties. Plaintiffs, the People of the State of California (suing through city attorneys) and 21 retail purchasers of electricity, filed their master complaint in 2002. These plaintiffs did not purchase power directly from defendants, who are wholesalers, but rather from several investor-owned utilities, including San Diego Gas & Electric and Southern California Edison. Although several of the plaintiffs originally sought class certification, those matters were apparently stayed pending the demurrer proceedings and are not before us on this appeal.3

55 Cal.Rptr.3d 258

A number of major named defendant groups have settled this case and are not participants in this appeal (Reliant Energy, Duke Energy, Williams Energy Marketing & Trading, and Mirant Americas Energy etc.).4 The remaining defendants, and their subsidiaries for whose activities they are sued, are four groups of generators, sellers, or traders of electricity at wholesale (Dynegy, Inc.; Morgan Stanley Capital Group, Inc.; AES Corporation; and Sempra Energy, Inc.).5

Plaintiffs assert a number of alleged violations of the Cartwright Act (first cause of action) and the unfair and/or unlawful prongs of the UCL statute (second and third causes of action), occurring around 2000, during a period of intense governmental and commercial activity to deregulate the electricity markets pursuant to 1996 state legislation, Public Utilities Code section 330 et seq. (Dynegy, supra, 375 F.3d 831, 835 ["Noting the energy industry restructuring already underway, the California Legislature decided that reshaping the market for California energy could help provide competitive, lower cost and reliable electricity service, while preserving the state's commitment to developing diverse, environmentally sensitive electricity resources. [Citation.] Assembly Bill 1890 (AB 1890) established the legal structure for the deregulation and restructuring plan"].)

In the introductory allegations of the master complaint, plaintiffs allege that they are entitled to recover damages and other equitable and injunctive relief, based on injuries incurred during this period and "arising from defendants' manipulation, distortion, and corruption of California's deregulated wholesale electricity market. Defendants' unfair and unlawful business practices and illegal restraints of trade included combining to withhold supply from electricity markets and colluding to fix electricity prices. This conduct forced electricity users to pay electricity prices based not on competitive market forces, but prices which were grossly inflated due to defendants' conduct. [¶] This action seeks to remedy that conduct, which caused widespread electricity shortages and astronomical prices. Defendants' manipulation of what was supposed to be a competitive market for wholesale electricity harmed all Californians and destabilized the California economy, which depends on a reliable supply of competitively priced energy. The total harm caused by defendants' conduct is, at this point, unknown . . . ."

Plaintiffs' master complaint cites to several examples of the defendants' alleged exploitation of the changes since 1996 in the energy market's new regulatory and economic structure. These include practices of "conspiring to withhold the supply of energy into the PX and ISO [power exchange and "...

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21 practice notes
  • Licudine v. Cedars-Sinai Med. Ctr., B268130
    • United States
    • California Court of Appeals
    • September 29, 2016
    ...Town of Mammoth Lakes (2010) 191 Cal.App.4th 435, 470, 120 Cal.Rptr.3d 797 ; Wholesale Electricity Anti – T rust Cases I & II (2007) 147 Cal.App.4th 1293, 1309–1310, 55 Cal.Rptr.3d 253 ; see also Sanchez–Corea v. Bank of America (1985) 38 Cal.3d 892, 907, 215 Cal.Rptr. 679, 701 P.2d 826 [lo......
  • People v. Burlington N. Santa FE R.R., No. A133559.
    • United States
    • California Court of Appeals
    • October 16, 2012
    ...fn. 10, 72 Cal.Rptr.3d 112, 175 P.3d 1170 [preemption resolved on demurrer]; Wholesale Electricity Anti–Trust Cases I & II (2007) 147 Cal.App.4th 1293, 1304, 55 Cal.Rptr.3d 253 [same].) We conclude that general order No. 135 is preempted by the ICCTA.A. General Preemption Principles The Sup......
  • People v. Burlington N. Santa Fe Railroad, No. A133559.
    • United States
    • California Court of Appeals
    • October 16, 2012
    ...fn. 10, 72 Cal.Rptr.3d 112, 175 P.3d 1170 [preemption resolved on demurrer]; Wholesale Electricity Anti–Trust Cases I & II (2007) 147 Cal.App.4th 1293, 1304, 55 Cal.Rptr.3d 253 [same].) We conclude that general order No. 135 is preempted by the ICCTA.A. General Preemption Principles The Sup......
  • Paduano v. American Honda Motor Co., Inc., No. D050112.
    • United States
    • California Court of Appeals
    • January 12, 2009
    ...Cases (2008) 42 Cal.4th 1077, 1089, fn. 10 [72 Cal.Rptr.3d 112, 175 P.3d 1170]; Wholesale Electricity Antitrust Cases I & II (2007) 147 Cal.App.4th 1293, 1304 [55 Cal.Rptr.3d 253].) "`As to each state law claim, the central inquiry is whether the legal duty that is the predicate of the [cla......
  • Request a trial to view additional results
21 cases
  • Licudine v. Cedars-Sinai Med. Ctr., B268130
    • United States
    • California Court of Appeals
    • September 29, 2016
    ...Town of Mammoth Lakes (2010) 191 Cal.App.4th 435, 470, 120 Cal.Rptr.3d 797 ; Wholesale Electricity Anti – T rust Cases I & II (2007) 147 Cal.App.4th 1293, 1309–1310, 55 Cal.Rptr.3d 253 ; see also Sanchez–Corea v. Bank of America (1985) 38 Cal.3d 892, 907, 215 Cal.Rptr. 679, 701 P.2d 826 [lo......
  • People v. Burlington N. Santa FE R.R., No. A133559.
    • United States
    • California Court of Appeals
    • October 16, 2012
    ...fn. 10, 72 Cal.Rptr.3d 112, 175 P.3d 1170 [preemption resolved on demurrer]; Wholesale Electricity Anti–Trust Cases I & II (2007) 147 Cal.App.4th 1293, 1304, 55 Cal.Rptr.3d 253 [same].) We conclude that general order No. 135 is preempted by the ICCTA.A. General Preemption Principles The Sup......
  • People v. Burlington N. Santa Fe Railroad, No. A133559.
    • United States
    • California Court of Appeals
    • October 16, 2012
    ...fn. 10, 72 Cal.Rptr.3d 112, 175 P.3d 1170 [preemption resolved on demurrer]; Wholesale Electricity Anti–Trust Cases I & II (2007) 147 Cal.App.4th 1293, 1304, 55 Cal.Rptr.3d 253 [same].) We conclude that general order No. 135 is preempted by the ICCTA.A. General Preemption Principles The Sup......
  • Paduano v. American Honda Motor Co., Inc., No. D050112.
    • United States
    • California Court of Appeals
    • January 12, 2009
    ...Cases (2008) 42 Cal.4th 1077, 1089, fn. 10 [72 Cal.Rptr.3d 112, 175 P.3d 1170]; Wholesale Electricity Antitrust Cases I & II (2007) 147 Cal.App.4th 1293, 1304 [55 Cal.Rptr.3d 253].) "`As to each state law claim, the central inquiry is whether the legal duty that is the predicate of the [cla......
  • Request a trial to view additional results

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