Town of Concord, Mass. v. Boston Edison Co.

• Decision Date: 30 August 1989
• Docket Number: Civ. A. No. 87-1881-C.
• Citation: 721 F. Supp. 1456
• Parties: TOWN OF CONCORD, MASSACHUSETTS and Town of Wellesley, Massachusetts, Plaintiffs, v. BOSTON EDISON COMPANY, Defendant.
• Court: U.S. District Court — District of Massachusetts

721 F. Supp. 1456

TOWN OF CONCORD, MASSACHUSETTS and Town of Wellesley, Massachusetts, Plaintiffs, v. BOSTON EDISON COMPANY, Defendant.

Civ. A. No. 87-1881-C.

United States District Court, D. Massachusetts.

August 30, 1989.

Charles F. Wheatley, Jr., Wheatley & Ranquist, Annapolis, Md., Neil Motenko, Charles R. Parrott, Nutter, McClennen & Fish, Boston, Mass., Albert S. Robinson (Town Counsel), Grindle, Robinson & Kertzman, Wellesley, Mass., for plaintiffs.

Robert J. Stillman, William G. Meserve, William L. Patton, Ropes and Gray, Boston, Mass., John Desmond, Wayne R. Frigard, Boston Edison Co., Boston, Mass., for defendant.

MEMORANDUM

CAFFREY, Senior District Judge.

This antitrust matter was tried before a jury during April and May 1989. After thirteen days of testimony, including that of expert witnesses for both the plaintiff Towns and the defendant Boston Edison, the jury deliberated for three days and, on special interrogatories, returned a verdict of $13.1 million for the plaintiffs.¹ Boston Edison now moves for judgment notwithstanding the verdict or, in the alternative, for a new trial. Although this case raises novel issues of law in this circuit, under the well-established criteria governing consideration of j.n.o.v. and new trial motions, the jury's verdict should not be disturbed.

I. Background

As briefly as possible, we begin by summarizing the relevant facts. The plaintiff Towns of Concord and Wellesley ("Towns") are municipal corporations which own and operate electric distribution systems and engage in the retail distribution of electric power. Defendant Boston Edison Company ("BE") is a vertically-integrated power company which generates, transmits, and sells electric power at both wholesale and retail. BE's retail rates are regulated by Massachusetts law and the Massachusetts Department of Public Utilities, while its wholesale rates are regulated by federal law and the Federal Energy Regulatory Commission ("FERC").

BE currently supplies approximately 95% of the Town's power needs. The remaining 5% is "wheeled" to the Towns by BE from the Power Authority of the State of New York ("PASNY"), also known as the New York Power Authority. Concord constructed its power plant in the late 1890s and Wellesley acquired its plant from a BE predecessor in 1906. Throughout most of this century the Towns negotiated what is known as "firm requirements power" contracts with BE. This type of contract provides that the utility company will meet all of the customer's electricity needs during the life of the contract. The Towns have no generating facilities or power lines of their own linking them to other generating facilities and have always relied on BE's transmission lines to bring electricity to their power plants.

In 1980, after the Towns had commenced litigation concerning an earlier disagreement regarding wholesale rates, BE and the Towns entered into a settlement agreement that provided, inter alia, that the Town's wholesale rates would increase only when BE also increased its retail rates. See Towns of Wellesley, Concord and Norwood v. Federal Energy Regulatory Comm'n, 786 F.2d 463 (1st Cir.1986). See also 829 F.2d 275 (1st Cir.1987). This "sequencing" provision was contained in Article 3.4 of the settlement agreement. In January 1984, BE notified the Towns that it was cancelling Article 3.4. In February 1984, BE also announced it was cancelling Article 5.1 of the same agreement, which provided that the Towns' rates would remain constant so long as their "load factor" was 54% or greater. At about this same time, the Towns initiated negotiations with PASNY in order to take advantage of low-cost PASNY hydro-electric power that would become available in mid-1985. On July 1, 1985, the Towns began to receive approximately 5% of their power from PASNY, wheeled by BE through its transmission facilities.

In late 1984, BE filed a wholesale rate increase with FERC. The "S-8" increase, as it became known, contained two steps, A and B, and increased the Towns' wholesale rate a total of 8.5%. FERC permits wholesale rate increases to go into effect immediately, subject to later review and possible reduction and refund, if necessary. BE filed no corresponding retail rate increase, as the cancelled Article 3.4 had required. In January 1987, BE filed another wholesale rate increase, S8-PR, which raised wholesale rates an additional 4.4%. Meanwhile, the Tax Reform Act of 1986 had reduced BE's federal corporate tax rate. As part of this tax package, Congress mandated rate relief and, in 1987, BE reduced its retail rates — but not its wholesale rates — to reflect these tax savings.

After July 1, 1985, when the Towns began receiving 5% of their power from PASNY, BE continued to charge them as if they were receiving 100% of their power from BE. In 1986, BE sent the Towns a letter explaining that because the Towns had not given BE five years notice concerning their decision to take PASNY power, BE would assess an "adverse financial impact" charge of almost $1 million against the Towns. Additionally, in late 1986 BE completed the construction of Transformer 110-C at Station 292 in Newton, which serves Wellesley, and sought FERC approval to charge Wellesley $761,000 for this new equipment. Eventually an administrative law judge determined that Wellesley was not responsible for any part of the cost of Transformer 110-C.

At trial, the Towns argued that these actions by BE constituted anti-competitive conduct in violation of section 2 of the Sherman Act and section 2(a) of the Clayton Act, codified at 15 U.S.C. § 2 and § 13(a), respectively. Specifically, the Towns charged that BE's wholesale rate increases created a "price squeeze" which forced the Towns to raise their retail rates, reduced the profit margin the Towns historically enjoyed, led to the delay of plant improvements and wage increases for employees, and generally reduced the Towns' ability to be competitive in attracting new, and retaining existing businesses and customers. The Towns also asserted that the wholesale rates BE charges them are effectively higher than what BE charges some of its larger retail customers. The Towns sought damages totalling at least $15 million.

BE now seeks a judgment notwithstanding the verdict or a new trial, arguing primarily that the Towns failed to prove that BE has monopoly power in a relevant market or the existence of a price squeeze, that BE's wholesale rate filings are protected by the Noerr-Pennington doctrine, and that there is no actual competition between the Towns and BE. For the reasons stated below, BE's motions should be denied.

II. The J.N.O.V. and New Trial Motion Standards

The principles governing consideration of a motion j.n.o.v. are by now familiar

and well-settled in this circuit. The evidence must be viewed in the light most favorable to the plaintiff, giving him the benefit of every favorable inference that may be fairly drawn. If fair minded men may draw different inferences and reasonably disagree as to what the verdict should be, the matter is for the jury.

Borras v. Sea-Land Service, Inc., 586 F.2d 881, 885 (1st Cir.1978) (quoting Dumas v. MacLean, 404 F.2d 1062, 1064 (1st Cir. 1968)). If, after reviewing the evidence and without weighing the credibility of the witnesses, "there is any substantial evidence supporting the verdict, judgment n.o.v. is improper." Id. (citing C. Wright, Law of Federal Courts § 95, at 473 (3d ed.1976)). "A jury verdict supported by the evidence may not be set aside simply because the judge would have reached a different result." Ocean State Physicians Health Plan v. Blue Cross & Blue Shield, 692 F.Supp. 52, 65 (D.R.I.1988), aff'd, 883 F.2d 1101 (1st Cir.1989).

In Freeman v. Package Machinery Co., 865 F.2d 1331 (1st Cir.1988), the court reviewed the principles governing consideration of a motion for a new trial:

The judge's prerogative to set aside a verdict crystallizes only if "it is quite clear that the jury has reached a seriously erroneous result." Borras v. Sea-Land Service, Inc., 586 F.2d 881, 887 (1st Cir.1978) (citations omitted). In our litany of cases, we have come to refer to this criterion as the "manifest miscarriage of justice" standard ...

Milone v. Moceri Family, Inc., 847 F.2d 35, 37 (1st Cir.1988). Put another way, the district court may order a new trial only if it is convinced that the jury's verdict is "against the clear weight of the evidence, or is based upon evidence which is false, or will result in a clear miscarriage of justice ...."

Id. at 1333 (citing Coffran v. Hitchcock Clinic, Inc., 683 F.2d 5, 6 (1st Cir.), cert. denied, 459 U.S. 1087, 103 S.Ct. 571, 74 L.Ed.2d 933 (1982); other citations omitted). Setting aside a jury verdict is thus an extraordinary remedy, as it invades "the jury's constitutionally sanctioned role as finder of fact." Mayo v. Schooner Capital Corp., 825 F.2d 566, 570 (1st Cir.1987). It is not enough that "a contrary verdict may have been equally — or even more easily — supportable ... If the weight of the evidence is not grotesquely lopsided, it is irrelevant that the judge, were he sitting jury-waived, would likely have found the other way." Freeman, 865 F.2d at 1333-34. The jury's verdict against Boston Edison is not so grotesquely lopsided or unsupported by the evidence that it should be set aside.

III. The Substantive Issues

1. The Relevant Market. Defining the relevant market is key to establishing an antitrust violation under section 2 of the Sherman Act. A recent decision of the District Court of Rhode Island offers this succinct definition of the term:

The terms "monopoly power" and "market power" are generally used interchangeably. "Monopoly power" is the power to control prices or exclude competition in a relevant market. The relevant market is the "area of effective competition" where the defendant operates. Relevant market is identified by the product and its interchangeability plus the

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