Louisiana Power and Light Co. v. United Gas Pipe Line Co.

• Decision Date: 08 September 1986
• Docket Number: No. 86-C-0132,86-C-0132
• Parties: , 1986-2 Trade Cases P 67,272 LOUISIANA POWER AND LIGHT COMPANY v. UNITED GAS PIPE LINE COMPANY and Pennzoil Company.
• Court: Louisiana Supreme Court

Page 1149

493 So.2d 1149

55 USLW 2214, 1986-2 Trade Cases P 67,272

LOUISIANA POWER AND LIGHT COMPANY v. UNITED GAS PIPE LINE COMPANY and Pennzoil Company.

No. 86-C-0132.

Supreme Court of Louisiana.

Sept. 8, 1986.

On Application for Rehearing Nov. 6, 1986.

Andrew P. Carter, Kenneth P. Carter, Terrence G. O'Brian, Monroe & Lemann, W.T. Tete, Mars, Medo & Tete, for applicant.

C. Murphy Moss, Jr., James Petersen, Lemle, Kelleher, et al., David J. Hill, Scott P. Klurfeld, Timothy S. Buehrer, Pierson, Semmes & Finley, Gene Lafitte, Frederick Bradley, Liskow & Lewis, Stephen M. Hackerman, B. Baryl Bristow, Baker & Botts, Michael R. Fontham, Wayne J. Lee, Stephen G. Bullock, Stone, Pigman, et al., Marshall B. Brinkley, for respondent.

CALOGERO, Justice.

Louisiana Power and Light Company asserts that United Gas Pipe Line Company and Pennzoil Company violated the antitrust laws of Louisiana during the period 1965 to 1974, a time when Pennzoil owned an interest in United Gas Pipe Line Company (hereinafter sometimes referred to as UGPL). ¹ Specifically, LP & L alleges that Pennzoil and United engaged in a course of conduct which amounted to a combination or conspiracy in restraint of trade in violation of La.Rev.Stat.Ann. § 51:122, and that such conduct also constituted monopolization, or an attempt or conspiracy to monopolize, in violation of La.Rev.Stat.Ann. § 51:123. As discussed hereinafter, the Court of Appeal concluded that a conspiracy between these subsidiary and parent corporations (UGPL and Pennzoil, respectively) was legally impossible, and thus found no violation of La.Rev.Stat.Ann. § 51:122. The Court of Appeal also considered and rejected claims of a violation of § 51:123's monopoly prohibition. Our writ grant was prompted chiefly by relator's contention that the Court of Appeal erred in finding that § 51:122 does not prohibit a conspiracy in restraint of trade between parent and subsidiary corporations. Relative to this case, however, we address both sections of Title 51, Section 122's prohibition of conspiracy in restraint of trade and Section 123's monopoly prohibition.

Until the mid-1960's, UGPL was a wholly owned subsidiary of United Gas Corporation, a publicly traded enterprise engaged in mineral and energy-related pursuits. UGPL, formed in 1937, was the corporate branch which transported and sold gas in the Gulf South area, including that used at LP & L's generating stations in both north Louisiana (Sterlington) and south Louisiana (Ninemile Point). In late 1965, Pennzoil Company, which engaged in oil and gas exploration and production, as well as processing, refining and marketing, made a tender offer for the stock of United Gas Corporation. Despite the recommendation of United Gas Corporation's management that shares not be tendered, Pennzoil acquired 42% of the common stock of United Gas Corporation in December 1965. Then, in April 1968, Pennzoil and United Gas Corporation merged to form Pennzoil-United, Inc. Thus, Pennzoil, as the 42% owner of United Gas Corporation, was by virtue of that stock ownership the corporate "parent" of United Gas Corporation's wholly owned subsidiary UGPL as of December, 1965, and Pennzoil wholly owned the subsidiary after the April 1968 merger with United Gas Corporation (Pennzoil-United, later changed simply to Pennzoil), until March 14, 1974, when it "spun-off" United Gas Pipe Line by distributing as a dividend to Pennzoil shareholders the shares in United Gas Pipe Line.

Without elaboration, the trial judge concluded that LP & L failed to prove the elements necessary to support an antitrust action under Louisiana law. The Court of Appeal, relying on the recent United States Supreme Court decision of Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984), with regard to the conspiracy in restraint of trade claim, agreed. La. Power & Light Co. v. United Gas Pipe Line Co. and Pennzoil Co., 478 So.2d 1240 (La.App. 4th Cir.1985). The Copperweld majority held that a parent corporation and its wholly owned subsidiary are not legally capable of conspiring with each other under § 1 of the Sherman Act, a provision almost identical to our own La.Rev.Stat.Ann. § 51:122. The Court of Appeal here expanded that holding to conclude that the Copperweld reasoning was also applicable to a partially owned subsidiary. Upon reviewing the record and finding the element of control, the significant factor regarding whether a parent and a wholly owned subsidiary constitute a "single entity," the Court of Appeal found that Pennzoil and its subsidiary, UGPL, lacked conspiratorial capacity. Although pointing out that LP & L's allegations were based on conspiracy, the court nevertheless addressed "the [additional] issue of whether the Pennzoil-United enterprise, viewed as a single economic unit, either monopolized or attempted to monopolize trade" under § 51:123. In this latter respect the court concluded that monopoly, or attempted monopoly, had not been proven.

In reviewing the decision of the Court of Appeal, it is therefore incumbent upon us first to consider the conspiratorial capacity of both the wholly owned and partially owned subsidiary with a parent company; and whether the latter difference, wholly owned versus partially owned, distinguishes this case, in part, from Copperweld; and independently of the foregoing whether this Court will embrace the Copperweld reasoning and apply it in interpreting Louisiana's antitrust statute.

History of Antitrust Legislation

This country's system of laws against combinations and restraints of trade in commerce and industry, and its history of enforcement, is considered unique in terms of thoroughness. Nonetheless, its precedents date back to medieval times in English history. ² Here in this country, state (or colonial) prohibitions against monopolies began as early as 1641 in the Massachusetts Bay Colony, and, in the nineteenth century, American courts enforced the common law rule against trade conspiracies. However, it was after the Civil War that the course of American industrialization created significant public opposition to monopolies. During this period, larger business units were formed, affecting virtually every aspect of American life. A system of railroads and telephone and telegraph networks crossed the nation. In 1879, Standard Oil Company of Ohio adopted the legal trust form, whereby shareholders surrendered their shares and voting power to managing trustees in return for dividend paying trust certificates. Subsequently, sugar, whiskey and other combinations imitated this business form, and the name "trusts" was applied to all of the giant business forms. Even after the trust device as such was abandoned as a means of operating large corporations, the name stuck. ³ Organizations like the National Grange and the National Farmers' Alliance demanded some governmental control of the monopolies in general, with particular emphasis on the railroads. In fact, by 1888, both major political parties had anti-monopoly planks in their presidential platforms, and the 1890 enactment of the Sherman Antitrust Act was aimed primarily at meeting the public demand for action against trusts. ⁴

The Sherman Act has been described as:

a comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade. It rests on the premise that the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material progress, while at the same time providing an environment conducive to the preservation of our democratic political and social institutions.... [T]he policy unequivocally laid down by the Act is competition. Northern Pacific Railway Co. v. United States, 356 U.S. 1, 4, 78 S.Ct. 514, 517, 2 L.Ed.2d 545 (1958).

Although "allocative efficiency" has been viewed by one school of economic thought as the sole concern of Congress in enacting the Sherman Act, the courts have traditionally taken a much broader view of the underlying objectives. ⁵ Thus, the United States Supreme Court has endorsed the view that

possession of unchallenged economic power deadens initiative, discourages thrift and depresses energy; that immunity from competition is a narcotic, and rivalry is a stimulant, to industrial progress; that the spur of constant stress is necessary to counteract an inevitable disposition to let well enough alone

and has suggested that these considerations inspired the Act. ⁶ Therefore, it is argued persuasively that antitrust legislation is founded on basic American conservatism, which seeks ways to divide, limit and diffuse power, whether it be governmental or not. ⁷

Louisiana Antitrust Legislation

At precisely the same time, furthermore, the Louisiana Legislature acted to prohibit trusts and conspiracies which restrain trade or commerce, and to prohibit monopolies. ⁸ In 1892, the Legislature passed another antitrust statute. This one specifically enumerated prohibited trade practices, ⁹ and excluded agricultural products and organizations of laborers from its provisions. 1892 La. Acts No. 90. 1890 La. Acts No. 86 was superceded by the provisions of 1915 La. Acts No. 11, which likewise purported to protect trade and commerce against unlawful restraints, but which made the crime a relative felony as opposed to a misdemeanor. State v. McClellan, 155 La. 37, 98 So. 748 (1924). Section 8 of the 1892 enactment, excluding agricultural products and labor organizations from the provisions of the Act, was retained in the statutes as § 51:142, since no similar provision appeared in the 1915 statute, ¹⁰ according to the Reporter's Notes which precede the present statutory provisions entitled Monopolies, La.Rev.Stat.Ann. § 51:121 et seq.

1915 La. Acts No. 11 was re-arranged and incorporated into Part IV, Monopolies, of Title 51, Trade and Commerce, of the Louisiana...