North Star Steel v. Midamerican Energy Hold.

• Decision Date: 22 April 1999
• Docket Number: No. 98-2987,98-2987
• Parties: (8th Cir. 1999) NORTH STAR STEEL COMPANY, APPELLANT, v. MIDAMERICAN ENERGY HOLDINGS COMPANY; MIDAMERICAN ENERGY COMPANY, APPELLEES. Submitted:
• Court: U.S. Court of Appeals — Eighth Circuit

Page 732

184 F.3d 732 (8th Cir. 1999)

NORTH STAR STEEL COMPANY, APPELLANT, v. MIDAMERICAN ENERGY HOLDINGS COMPANY; MIDAMERICAN ENERGY COMPANY, APPELLEES.

No. 98-2987

U.S. Court of Appeals, Eighth Circuit

Submitted: April 22, 1999

Filed: July 07, 1999

Appeal from the United States District Court for the Southern District of Iowa

Philip L. Chabot, Jr., Washington, DC, argued, for Appellant.

J.A. Bouknight, Jr., Washington, DC, argued, for Appellee.

Before McMILLIAN, Loken and Murphy, Circuit Judges.

McMILLIAN, Circuit Judge.

North Star Steel Co. (North Star) appeals from a final order of the United States District Court¹ for the Southern District of Iowa granting summary judgment in favor of MidAmerican Energy Co. and its parent corporation MidAmerican Energy Holdings Co. (collectively referred to as MidAmerican). The district court held as a matter of law that MidAmerican was immune from federal antitrust liability under the state action immunity doctrine. See North Star Steel Co. v. MidAmerican Energy Holdings Co., No. 4-97-CV-80782 (S. D. Iowa June 23, 1998) (North Star). For reversal, North Star argues that the district court erred in finding that: (1) Iowa has a clearly articulated and affirmatively expressed policy displacing competition with regulation in the provision of retail electric service; (2) the regulatory policy is actively supervised by the state; and (3) there exists no genuine issue of material fact. For the reasons discussed below, we affirm the judgment of the district court.

Jurisdiction

Jurisdiction was proper in the district court based upon 28 U.S.C. §§ 1331, 1337. Jurisdiction in this court is proper based upon 28 U.S.C. § 1291. The notice of appeal was timely filed pursuant to Fed R. App. P. 4(a).

Background

Although the parties basically agree on the relevant facts, they strongly dispute the nature and characteristics of the electric power industry. North Star, a wholly owned subsidiary of Cargill, Inc., operates a steel mill located near Wilton, Iowa. North Star uses a significant amount of electric energy to melt, refine, and shape scrap steel at its Wilton facility. The mill has a peak electric load of 48 megawatts.

MidAmerican is the largest electric utility in Iowa. In fact, MidAmerican owns the only transmission lines capable of supplying the North Star plant, which is located in the area designated under Iowa Code §§ 476.22-.26 (1997) as the exclusive electric service territory of MidAmerican. The company purchases, generates, transmits, and sells electric energy in significant portions of Iowa as well as in several neighboring states. MidAmerican generates approximately 75% of the electricity sold in its exclusive service area, while it purchases the remaining 25% from third party generators. All of the electric energy, however, is sold by MidAmerican under its own "brand name."

In 1979, the Iowa General Assembly enacted legislation authorizing the Iowa Utilities Board (Board) to establish exclusive service territories in which specific electric utilities would provide the sole means of service to customers. See I OWA C ODE § 476.25 (1997). The legislature found it "in the public interest to encourage the development of co-ordinated statewide electric service at retail, to eliminate or avoid unnecessary duplication of electric utility facilities, and to promote economical, efficient, and adequate electric service to the public." Id. The Board implemented this legislation by promulgating regulations, beginning in June of 1979. See Establishment of Exclusive Service Areas for Electric Utilities by the Iowa State Commerce Comm'n, Docket No. RMU 78-11 (I. C. C. June 29, 1979) (Order Adopting Rules).² In doing so, the state effectively replaced the prior system under which utilities had competed for customers with one in which designated utilities have exclusive service territories.

Even under this regulatory framework, North Star sought to purchase competitively-priced electric energy. North Star, while recognizing MidAmerican as the exclusive distributor of electricity in its territory, wanted either to purchase directly power produced by a third party generator or to have MidAmerican itself purchase power from a third party expressly for transmission to North Star's mill. Under either "retail wheeling"³ scenario, MidAmerican would remain the sole distributor of electricity to North Star but would not be transmitting power that it had itself generated. MidAmerican rejected North Star's request. North Star brought the present action in federal district court claiming violations of the Sherman Act and Clayton Act by MidAmerican. North Star alleged that MidAmerican violated federal antitrust laws by refusing to allow it access over the transmission lines to alternate sources of electricity, thus preventing North Star from purchasing competitively-priced electricity for its steel mill. North Star alleged that MidAmerican's refusal to allow North Star access to alternate sources of electricity constituted a refusal to deal, monopolization, and an illegal tie-in.

MidAmerican filed a motion to dismiss which later became a motion for summary judgment.⁴ However, before the district court ruled on the motion, MidAmerican requested a declaratory ruling from the Board. MidAmerican presented the Board with questions related to MidAmerican's rights and obligations pursuant to the Iowa Code provisions concerning the supply of retail electric service.⁵ The Board held that "Iowa's exclusive service territory laws apply to the provision of electricity, and the provision of electricity includes generation, distribution, and transmission." In re MidAmerican Energy Co., Docket No. DRU-98-1, slip op. at 5 (I. U. B. May 29, 1998), aff'd sub nom. North Star Steel Co. v. Iowa Utils. Bd., No. AA3127 (Iowa Dist. Ct. Polk County Jan. 29 1999), appeal docketed, No. 99-342 (Iowa Feb. 25, 1999). The Board stated that MidAmerican has a statutory duty to provide electric service to customers in its exclusive service area. See id. at 7. The Board found that the statutes concerning the supply of retail electric service do not distinguish between the distribution, transmission, and generation of electricity. See id. at 6-7. Rather, the IUB interpreted the words "electric service" to include the actual supply of electricity. See id. The Board finally noted that there was no substantive difference between a customer directly buying the electricity generated by a third party or making MidAmerican buy the electricity and then distributing it to the customer. See id. at 8. Thus, the Board decided that both means of retail wheeling would violate MidAmerican's rights under the exclusive service territory state law and regulations.

Less than a month after the Board issued its declaratory ruling, the district court granted summary judgment in favor of MidAmerican. Referring to the Iowa Code provisions concerning retail electric service, the district court found that "Iowa has clearly articulated a state policy to prevent electricity suppliers from competing for retail customers." North Star, slip op. at 4. The district court further found that the Board has actively implemented the regulatory scheme enunciated by the Iowa General Assembly. See id. Having found that MidAmerican had satisfied both requirements for the state action immunity doctrine, the district court held that MidAmerican was accordingly immune from North Star's claim of antitrust violations. See id. at 4-5. The district court further held that there was no genuine issue of material fact and that MidAmerican was entitled to judgment as a matter of law. See id. at 3.

The day after the district court granted summary judgment in favor of MidAmerican, North Star filed a petition for judicial review of the Board's declaratory ruling in the Iowa District Court for Polk County.⁶ The state court held that the Board had the authority to issue the declaratory ruling on the questions presented by MidAmerican. See North Star Steel Co. v. Iowa Utils. Bd., slip op. at 8-9. The court affirmed the Board's interpretation of the Iowa statutes, holding that the Iowa state exclusive service territory law and regulations include the generation of electricity. See id. at 8-9.

The Board subsequently approved a pilot program that allowed MidAmerican to sell electricity it purchased from third party generators directly to retail customers, with MidAmerican providing only transmission and distribution service. See In re MidAmerican Energy Co., Docket No. TF-97-229 (I. U. B. Aug. 21, 1998). The pilot program is unavailable to North Star, however, because the program's 10 megawatt limit per customer makes it uneconomical for large-load customers like North Star. In part based upon these recent developments, North Star appealed the district court's order granting summary judgment.

Discussion

We review the district court's grant of summary judgment de novo. Summary judgment is proper if, assuming all reasonable inferences favorable to the non-moving party, there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(c); see, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986). Summary judgment is particularly appropriate when the unresolved issues are legal rather than factual. See Crain v. Board of Police Comm'rs, 920 F.2d 1402, 1405-06 (8th Cir. 1990).

North Star first argues that the district court erred in finding that the Iowa statutory provisions concerning assigned exclusive service areas include the generation of electricity. Rather, North Star argues that these regulations apply only to the distribution of electricity, and not the generation of electricity.⁷ That is, North Star argues that the Iowa General Assembly may have displaced competition in the distribution of electricity, but not the market for the...