BEA, Circuit Judge:
These cases arise out of the energy crisis of 2000-2002. Plaintiffs (retail buyers of natural gas) allege that Defendants (natural gas traders) manipulated the price of natural gas by reporting false information to price indices published by trade publications and engaging in wash sales.
We have jurisdiction pursuant to 28 U.S.C. § 1291. We reverse the district court's order granting summary judgment to the Defendants, reverse in part the district court's orders dismissing the AEP Defendants from the Wisconsin Arandell and Missouri Heartland suits, and affirm all of the other orders at issue in this appeal. We remand to the district court for further proceedings consistent with this opinion.
A brief recitation of the background of this litigation, as well as a description of the regulatory framework governing this case, is useful to set the stage for our holding. These cases arise out of claims that the Defendants violated antitrust laws by manipulating the natural gas market and selling natural gas at artificially inflated prices, leading to the energy crisis of 2000-2002. The Federal Energy Regulatory Commission ("FERC") conducted a fact-finding investigation of the energy crisis, and concluded that "[s]pot gas prices rose to extraordinary levels, facilitating the unprecedented price increase in the electricity market." This market distortion stemmed in part from efforts of energy trading companies to manipulate price indices compiled by trade publications.
The natural gas industry relied on two trade publications, Gas Daily and Inside FERC, which published the most widely-used price indices. Gas Daily published a daily gas price index, while Inside FERC published a monthly gas price index. Gas Daily relied on telephone interviews with natural gas market participants (traders, end users,
After the energy crisis of 2000-2002, a number of energy trading companies admitted that their employees provided false pricing data to Gas Daily and Inside FERC. Government investigations revealed that the companies had few, if any, internal controls in place to ensure the accuracy of the data reported to the trade publications. A 2003 FERC report described the process as follows:
In addition to reporting false data to the price indices, traders also manipulated the market by engaging in "wash sales," or prearranged sales in which traders "agreed to execute a buy or a sell on an electronic trading platform ... and then to immediately reverse or offset the first trade by bilaterally executing over the telephone an equal and opposite buy or sell."
Whether Plaintiffs' state law antitrust claims are cognizable depends, for one thing, on whether the field of natural gas regulation has been preempted by federal regulation. This court's preemption analysis is governed by the framework of natural gas regulation, and more importantly, the distinction between categories of sales that fall within FERC's jurisdiction ("jurisdictional sales") and the categories of sales that fall outside of FERC's jurisdiction ("non jurisdictional sales").
Individual states were originally responsible for the regulation of the production, sale, and transportation of natural gas. However, as the volume of gas sold and transported along interstate pipelines increased, state regulations became regarded by Congress as ineffective. See Panhandle Eastern Pipe Line Co. v. Pub. Serv. Comm'n of Ind., 332 U.S. 507, 515, 68 S.Ct. 190, 92 L.Ed. 128 (1947). In 1938, Congress enacted the Natural Gas Act ("NGA") in response to the demand for federal regulation and to curb the market power of interstate pipelines. Id. at 516, 68 S.Ct. 190; see also E. & J. Gallo Winery v. Encana Corp., 503 F.3d 1027, 1036 (9th Cir.2007). FERC is the agency charged with the administration of the NGA, and its jurisdiction is laid out in Section 1(b) of the Act as follows:
15 U.S.C. § 717(b). Put simply, the NGA applies to: (1) transportation of natural gas in interstate commerce, (2) natural gas sales in interstate commerce for resale (i.e., wholesale sales), and (3) natural gas companies
Since the passage of the NGA, Congress has removed other categories of sales from the scope of FERC's jurisdiction as part of a general effort to reduce federal regulation of the natural gas industry. In 1989, Congress passed the Natural Gas Wellhead Decontrol Act of 1989, Pub.L. No. 101-60, which removed "first sales"
The final aspect of the natural gas regulatory scheme relevant to this appeal is FERC's practice of issuing "blanket marketing certificates."
Beginning in 2001, a series of class action lawsuits were filed around the country and were eventually consolidated into a multi-district litigation in the District of Nevada. Two of the earliest cases, Texas-Ohio Energy, Inc. v. AEP Energy Services, Inc., et al. ("Texas-Ohio") and Abelman v. AEP Energy Services, Inc., et al. ("Abelman") alleged both Sherman Act and parallel state antitrust claims. See In re Western States Wholesale Natural Gas Antitrust Litig., 368 F.Supp.2d 1110 (D.Nev.2005); In re Western States Wholesale Natural Gas Antitrust Litig., 408 F.Supp.2d 1055 (D.Nev.2005). The core allegations in Texas-Ohio and Abelman — that the defendant energy companies conspired to manipulate the price indices — were similar to the allegations in the present case.
The defendants in Texas-Ohio and Abelman moved to dismiss the complaints in those cases on the grounds that all claims were barred by the filed-rate doctrine
Shortly after the judgments in Texas-Ohio and Abelman, plaintiffs in Farmland,
Defendants in the present case filed a number of motions for summary judgment, alleging that the Plaintiffs' claims were barred by the filed-rate doctrine, or that their state claims were preempted by the NGA. In 2006, the District Court granted the Defendants' motion to dismiss in Farmland, finding that the NGA preempted the Plaintiffs' claims under Kansas antitrust statutes. The District Court reasoned that because the Defendants possessed blanket marketing certificates that subjected Defendants and their conduct to FERC's jurisdiction under the NGA, FERC had exclusive jurisdiction over the alleged anti-competitive misconduct at issue. In July 2007, the District Court reconsidered and vacated its prior ruling granting Defendants' motion to dismiss after Plaintiffs clarified that they did not concede the factual question of whether Defendants possessed blanket marketing certificates.
In September 2007, this court issued its decision in E. & J. Gallo Winery v. Encana Corp., holding that the filed-rate doctrine does not bar state or federal antitrust claims arising out of manipulation of the price indices because the challenged price indices were compiled using transactions outside of FERC's jurisdiction as well as transactions within FERC's jurisdiction. 503 F.3d at 1048.
In November 2007, Defendants filed a new motion for summary judgment in all of the present cases, arguing that Plaintiffs' state claims were preempted by the NGA. In May 2008, the District Court denied the motion, relying in part on this court's decision in Gallo.
In July 2008, Defendants filed a motion for reconsideration of the District Court's May 2008 order, arguing that FERC had jurisdiction during the relevant time period to regulate "any practice" affecting a rate subject to the jurisdiction of the Commission (i.e., a "jurisdictional rate"). In November 2009, the District Court held that because the same price indices are used to set the prices in transactions falling within and outside FERC's jurisdiction, any manipulation of these indices falls within FERC's exclusive jurisdiction under Section 5(a) of the NGA. Section 5(a) provides:
15 U.S.C. § 717d (emphases added). The District Court reasoned that pursuant to Section 5(a) of the NGA, FERC has jurisdiction to regulate any "practice" by a jurisdictional seller that affects a jurisdictional rate. The court ordered Defendants to re-file their motion for summary judgment, and in July 2011, the court granted the Defendants' motion for summary judgment as applied to all Plaintiffs. This appeal followed.
This court reviews a district court's grant of summary judgment de novo. See Lee v. Gregory, 363 F.3d 931, 932 (9th Cir.2004). Summary judgment is
The "touchstone in every pre-emption case" is expressed congressional intent. Wyeth v. Levine, 555 U.S. 555, 565, 129 S.Ct. 1187, 173 L.Ed.2d 51 (2009). The Supreme Court recently emphasized that in preemption cases, courts should "start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress." Id. In the present case, the presumption against preemption applies with particular force in light of Congress's deliberate efforts to preserve traditional areas of state regulation of the natural gas industry.
The question presented by this appeal is as follows: does Section 5(a) of the NGA, which provides FERC with jurisdiction over any "practice" affecting jurisdictional rates, preempt state antitrust claims arising out of price manipulation associated with transactions falling outside of FERC's jurisdiction? We conclude that such an expansive reading of Section 5(a) conflicts with Congress's express intent to delineate carefully the scope of federal jurisdiction through the express jurisdictional provisions of Section 1(b) of the Act. Our analysis is guided by several circuit court decisions counseling in favor of a narrow reading of Section 5(a). As a result, we hold that the NGA does not preempt the Plaintiffs' state antitrust claims, and reverse the district court's order granting summary judgment to the Defendants.
Panhandle Eastern Pipe Line Co. v. Pub. Serv. Comm'n of Ind., 332 U.S. 507, 516, 68 S.Ct. 190, 92 L.Ed. 128 (1947). A later Supreme Court decision further emphasized Congress's intent to limit the reach of the NGA:
Nw. Cent. Pipeline Corp. v. State Corp. Comm'n of Kan., 489 U.S. 493, 510, 109 S.Ct. 1262, 103 L.Ed.2d 509 (1989). Since the passage of the NGA, Congress has further demonstrated its intent to limit the scope of federal regulation by enacting statutes removing first sales from FERC's jurisdiction. See Natural Gas Wellhead Decontrol Act of 1989, Pub.L. No. 101-60, 103 Stat. 157.
We noted in Gallo that although FERC did not set the rates charged by the natural gas companies, it did engage in market oversight by granting blanket market certificates after determining that the seller lacked market power. Id. at 1041. As a result of FERC's market oversight, the court found "that the market-based rate for natural gas transactions under FERC's jurisdiction are FERC-authorized rates, and cannot be the basis of a federal antitrust or state damage action" because of the filed-rate doctrine. Id. at 1043 (emphasis added).
Although this court found that the filed-rate doctrine barred claims based on FERC-authorized rates, it distinguished claims based on FERC-authorized rates from claims based on the rates reported in the price indices. Id. at 1045. It stated that the record reflected that "the indices potentially include transactions that are under FERC's jurisdiction as well as transactions outside FERC's jurisdiction." Id. There were two relevant categories of non-FERC-authorized rates included in the challenged price indices:
Id. at 1045 (internal citations omitted). The non-jurisdictional transactions included
We explained in depth why the removal of certain transactions from FERC's jurisdiction meant that claims arising out of those transactions were not preempted by the NGA. Id. at 1046. Most importantly, we assumed that Congress was aware of the existing context of state and federal antitrust law when it enacted the Wellhead Decontrol Act and other statutes limiting FERC's jurisdiction. Id. State and federal antitrust laws complement Congress's intent to move to a less regulated market, because such laws support fair competition. Id. ("By enabling private parties to combat market manipulation and other anti-competitive actions, the laws under which Gallo brought its claim support Congress's determination that the supply, the demand, and the price of high-cost first sale gas be determined by market forces.") (internal quotations omitted). For these reasons, we concluded that "Congress did not preclude plaintiffs from basing damage claims on rates associated with first sales." Id. Our reasoning in Gallo applies with equal force to the question presented by this case: federal preemption doctrines do not preclude state law claims arising out of transactions outside of FERC's jurisdiction.
The district court in the present case acknowledged this court's holding in Gallo, but distinguished that case on the grounds that "Gallo did not address whether FERC's exclusive jurisdiction over natural gas companies and their practices which affect jurisdictional rates preempts state jurisdiction over the same subject matter." It reasoned that Defendants' status as FERC-regulated entities, combined with FERC's authority under Section 5(a) of the NGA to regulate "any rule, regulation, practice, or contract" affecting a jurisdictional rate, conferred exclusive jurisdiction on FERC to regulate the conduct at issue in this case.
The district court read the word "practices" in Section 5(a) of the NGA to preempt impliedly the application of state laws to the same transactions (first sales and retail sales) that Congress expressly exempted from the scope of FERC's jurisdiction in Section 1(b) of the Act. However, this reading runs afoul of the canon of statutory construction that statutory provisions should not be read in isolation, and the meaning of a statutory provision must be consistent with the structure of the statute of which it is a part. See, e.g., Waggoner v. Gonzales, 488 F.3d 632, 636 (5th Cir.2007) ("When interpreting statutes... each part or section of a statute should be construed in connection with every other part or section to produce a harmonious whole."). The district court's reading is also inconsistent with case law interpreting the provisions of Section 5(a) of the NGA narrowly to comport with the jurisdictional limitations established by Section 1(b) of the Act. While the Ninth Circuit has not had the opportunity to define the scope of Section 5(a), the Supreme Court and other circuits have read Section 5(a) narrowly to define the scope of FERC's jurisdiction within the limitations imposed by Section 1(b).
The Supreme Court rejected Northwest Central's argument, relying on the fact that Section 1(b) of the NGA "expressly carve[d] out a regulatory role for the States" and provided that states would retain jurisdiction over the production of natural gas. Id. at 507, 109 S.Ct. 1262. It also rejected the pipeline's claim that federal regulations preempted all state regulations that may affect rates within federal control, stating:
Id. at 514, 109 S.Ct. 1262.
In American Gas Association v. Federal Energy Regulatory Commission, the D.C. Circuit examined FERC's refusal to use its authority under Section 5 of the NGA to modify "take-or-pay" contracts
The petitioners in American Gas Association had offered an argument similar to the one offered by the Defendants in the present case: they isolated the phrase "contract affecting such rates" and argued that FERC had jurisdiction to assess the justness and reasonableness of the provisions of any contract that would likely influence a pipeline's end-of-pipelines prices. Id. FERC, on the other hand, interpreted "contract affecting such rates" as being limited to contracts involving a jurisdictional seller and directly governing the rate in a jurisdictional sale. Id. at 1506. The D.C. Circuit agreed with FERC, stating that "petitioners' theory is, more generally, an oxymoron — Commission jurisdiction over nonjurisdictional contracts." Id. The court also noted that the petitioners' expansive reading of Section 5 had no "conceptual core" because under their interpretation, Section 5 would reach "pipelines' contracts for every other possible factor of production — even legal services." Id. at 1507.
We find the analysis of these cases persuasive, and apply them here. Interpreting the jurisdictional provision in Section 5(a) broadly to find FERC jurisdiction
The D.C. Circuit began its analysis with the "plain language" of the statutory text. Id. at 400. It found that the word "practices" is a word of sufficiently diverse meanings that the proper method for determining Congressional intent was to apply the canon of statutory construction "noscitur a sociis."
The Supreme Court reversed. The Court stated that FERC's exclusive jurisdiction over wholesale rates also encompassed "power allocations that affect wholesale rates." Id. at 371, 108 S.Ct. 2428. Because the "prudence inquiry" mandated by the Mississippi Supreme Court required the state commission to review the prudence of the FERC order determining the allocation of costs associated with the nuclear power plant, the inquiry was preempted by FERC's exclusive jurisdiction. Id. The Court concluded, "FERC-mandated allocations of power are binding on the States, and States must treat those allocations as fair and reasonable when determining retail rates." Id. at 371, 108 S.Ct. 2428.
We do not find Defendants' reliance on Mississippi Power & Light Co. to be persuasive. Mississippi Power & Light Co. stands for the proposition that states cannot use their jurisdiction over retail rates to second-guess or review FERC-authorized rates that may affect retail rates. See Gallo, 503 F.3d at 1044 (relying on Mississippi Power & Light Co. to "support EnCana's position that wholesale sellers such as EnCana may raise the filed rate doctrine as a defense to actions putatively attacking retail rates, but having the effect of disallowing FERC-approved wholesale rates."). However, Mississippi Power & Light Co. does not support Defendants' broad reading of the phrase "practice ... affecting [jurisdictional] rates." In Mississippi Power & Light Co., FERC had used its jurisdiction over practices affecting wholesale rates to determine an equitable allocation of nuclear power costs. Defendants attempt to analogize the power
One final issue dividing the parties in this appeal is the extent to which FERC had authority to regulate the market manipulation that gave rise to the energy crisis in 2000-2001. The Defendants point to the Code of Conduct promulgated by FERC in 2003 as evidence that FERC had regulatory authority over the anticompetitive conduct at issue, including the false price reporting and wash sales. FERC promulgated the Code of Conduct by amending the blanket market certificates governing jurisdictional sellers. See Amendments to Blanket Sales Certificates, 68 Fed.Reg. 66,323 (Nov. 26, 2003). The Commission stated that the need for the Code of Conduct "was informed by the types of behavior that occurred in the Western markets during 2000 and 2001." Id. ¶ 2. The Code prohibited jurisdictional sellers
While Defendants rely on the promulgation of the Code of Conduct as evidence that FERC had jurisdiction over the market manipulation at issue, there are two significant flaws in their argument. First, two years after the promulgation of the Code, Congress enacted the Energy Policy Act of 2005 ("EPA"),
The second flaw in Defendants' argument is more relevant to our jurisdictional analysis. Even if FERC did have the statutory authority to promulgate the 2003 Code of Conduct and to make it applicable to "first sales" and other nonjurisdictional sales, a close reading of the Code reveals that FERC limited the application of the Code to sales within its jurisdiction. FERC acknowledged that because of acts deregulating first sales of natural gas, such sales were outside the
The Farmland, Breckenridge, Learjet, and Heartland Plaintiffs appeal the district court's October 29, 2010, order denying them leave to amend their complaints to add federal antitrust claims. Their motions for leave to amend their complaints were filed nine months after the March 2, 2009, scheduling deadline to amend pleadings. The Breckenridge Plaintiffs also appeal the district court's April 21, 2008, order denying them leave to amend their complaint to add a state law treble damages remedy.
We review a district court's decision denying leave to amend pleadings for abuse of discretion. See Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 607 (9th Cir.1992). We hold that in the present case, the district court did not abuse its discretion in denying either of the two motions for leave to amend complaints, and therefore affirm both the October 29, 2010, order denying the Farmland, Breckenridge, Learjet, and Heartland Plaintiffs leave to amend their complaints to add federal antitrust claims, as well as the April 21, 2008, order denying the Breckenridge Plaintiffs leave to amend their complaint to add a state law treble damages claim.
We summarize briefly the procedural history of this case to provide context for our decision to affirm the district court's October 29, 2010, order.
On April 8, 2005, the district court granted summary judgment to the defendants in the Texas-Ohio and Abelman cases on the ground that the plaintiffs' claims in those cases were barred by the filed-rate doctrine. See In re Western States Wholesale Natural Gas Antitrust Litig., 368 F.Supp.2d 1110 (D.Nev.2005), rev'd by 243 Fed.Appx. 328 (9th Cir.2007) and In re Western States Wholesale Natural Gas Antitrust Litig., 408 F.Supp.2d 1055 (D.Nev.2005), rev'd by 248 Fed.Appx. 821 (9th Cir.2007). Four months later, the first of these present actions was filed. In September 2007, this court issued its decision in Gallo and simultaneously reversed Texas-Ohio and Abelman, holding that the filed-rate doctrine does not bar state or federal antitrust claims arising out of the allegations that energy traders manipulated the price index. See E. & J. Gallo Winery v. Encana Corp., 503 F.3d 1027 (9th Cir.2007); In re Western States
The deadline to amend pleadings in this case was March 2, 2009. On December 15, 2009 (approximately one month after the District Court agreed to reconsider its May 2008 order denying summary judgment), Plaintiffs filed motions to modify the scheduling order and for leave to amend their complaints to add claims under the federal Sherman Antitrust Act.
The district court denied the Plaintiffs' motions to amend their pleadings, noting that when a party seeks to amend a pleading after the pretrial scheduling order's deadline for amending the pleadings has expired, the moving party must satisfy the "good cause" standard of Federal Rule of Civil Procedure 16(b)(4), which provides that "[a] schedule may be modified only for good cause and with the judge's consent," rather than the liberal standard of Federal Rule of Civil Procedure 15(a).
The district court in the present case noted, "The good cause standard typically will not be met where the party seeking to modify the scheduling order has been aware of the facts and theories supporting amendment since the inception of the action." The district court found that Plaintiffs were not diligent in seeking the amendment to add federal Sherman Antitrust Act claims, because they had known since 2007 (after this court held in Gallo that federal antitrust claims were not barred by the filed-rate doctrine) that federal antitrust claims may be viable.
We hold that the district court did not abuse its discretion in concluding that the Plaintiffs were not diligent in seeking to amend their complaints to add federal antitrust claims. Our analysis is guided by this court's decision in Johnson v. Mammoth Recreations, Inc., 975 F.2d 604 (9th Cir.1992). In Johnson, Dairl Johnson was injured while skiing at Mammoth Mountain ski resort. Id. at 606. He filed a diversity action against the ski lift manufacturer and Mammoth Recreations, Inc., a holding company that owned a majority of the stock in Mammoth Mountain Ski Area, Inc., the entity that actually owned and operated the ski resort. Id. The district court filed a scheduling order which established a cut-off date of October 17, 1989, for joining additional parties. Id. Four
On March 4, 2008, the Heartland Plaintiffs filed a motion for leave to amend their complaint to add a treble damages claim under the Colorado state antitrust statute. Previously, their complaint had sought only a full refund. The district court denied the motion, stating, "Plaintiffs have been aware of the availability of an actual damages claim under the Colorado antitrust statutes since the inception of the case, but chose to plead under the full refund provision only." The district court found that Plaintiffs' failure to seek leave to add an actual damages claim was explicable during the time between the district court's 2005 ruling in Texas-Ohio and Abelman that such claims were barred by the filed-rate doctrine and this court's decision in Gallo holding that such claims were not barred. However, this court decided Gallo in September 2007, and Plaintiffs did not move to amend their complaint to add an actual damages claim until March 4, 2008.
The district court considered it relevant that Plaintiffs had requested leave to amend to add an additional defendant on October 12, 2007, but did not make a request to add the treble damages claim at that time. The court denied the Plaintiffs' March 4, 2008, motion for leave to amend to add a treble damages claims, finding that Plaintiffs unduly delayed amendment by waiting "until after this Court granted summary judgment on the full consideration claim, several months after Gallo, to seek leave to amend to add a new theory of liability of which Plaintiffs have been aware since the inception of this suit."
Although Federal Rule of Civil Procedure 15(a) provides that leave to amend "shall be freely given when justice so requires," it "is not to be granted automatically." Jackson v. Bank of Hawaii, 902 F.2d 1385, 1387 (9th Cir.1990). This court considers the following five factors to assess whether to grant leave to amend: "(1) bad faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of amendment; and (5) whether plaintiff has previously amended his complaint." Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir.1990).
The district court in the present case relied heavily on the fifth factor. It noted that a "district court's discretion [whether to grant leave to amend] is `particularly broad' in deciding subsequent motions to amend where the court previously granted leave to amend." This court's decision in Royal Insurance Company of America v. Southwest Marine, 194 F.3d 1009 (9th Cir. 1999) is instructive. Royal Insurance Company sued Southwest for breach of contract, breach of warranty, and negligence after Southwest allegedly caused $900,000 of damage to a boat insured by Royal Insurance. Id. at 1013. Royal Insurance amended its complaint twice —
On appeal, this court stated, "Late amendments to assert new theories are not reviewed favorably when the facts and the theory have been known to the party seeking amendment since the inception of the cause of action." Id. at 1016-17 (internal quotation marks omitted). We relied on the fact that Royal Insurance had knowledge of the relevant facts from the inception of the lawsuit, and also the fact that Royal had twice before amended its complaint, to hold that the district court did not abuse its discretion by denying Royal's motion for leave to file a third amended complaint. Id. at 1017 ("Considering that Royal had twice before amended its complaint and moved to amend a third time only after the district court dismissed its claims on summary judgment, the district court did not abuse its discretion by denying Royal's motion to amend.").
In the present case, we find that the district court did not abuse its discretion in denying the Heartland Plaintiffs' motion for leave to amend to add a treble damages state law claim. We therefore affirm the district court's order denying that motion.
The district court entered separate orders dismissing the AEP Defendants
The operative facts alleged in each case are substantially similar. The Arandell Plaintiffs filed a class action in Wisconsin pursuant to the Wisconsin Antitrust Act, Wisconsin Statutes ch. 133, brought by and on behalf of a class consisting of all Wisconsin industrial and commercial purchasers of natural gas for consumption in Wisconsin between January 1, 2000 and October 21, 2002. Their complaint alleged that during the relevant time period, the Defendants conspired to restrain trade or commerce relating to natural gas.
The Heartland Plaintiffs filed a class action in Missouri pursuant to the Missouri Antitrust Laws, Missouri Statutes § 416.010 et seq., brought by and on behalf of a class consisting of all Missouri industrial and commercial purchasers of natural gas for consumption in Missouri between January 1, 2000 and October 21, 2002. Their complaint alleged that during the relevant time period, the Defendants conspired to restrain trade or commerce relating to natural gas.
None of the following basic facts about AEP's corporate structure are in dispute.
In the Arandell case, the Plaintiffs claim specific personal jurisdiction
The district court found that from 1998-2003, AEPES entered into natural gas supply agreements with various Wisconsin companies, and that trade confirmations evince numerous sales made to companies with Wisconsin addresses throughout 2001-2003. AEP acted as a guarantor for AEPES during the relevant time period to facilitate AEPES's business, including issuing guarantees on AEPES's behalf to several Wisconsin-based entities. However, AEPES has never entered into a contract or delivered gas to any of the named plaintiffs in the case.
The Heartland case presents substantially similar facts. The Heartland Plaintiffs claim specific personal jurisdiction
The district court found that from 1997-2001, AEPES entered into natural gas supply agreements with various Missouri companies. From 2000-2002, AEPES sold billions of dollars worth of natural gas to Missouri-based entities. AEP acted as a guarantor for AEPES during the relevant time period to facilitate AEP Energy Services's business, including issuing guarantees on AEPES's behalf to several Missouri-based entities. However, AEPES
When a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating that the court has jurisdiction. Harris Rutsky & Co. Ins. Servs., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1128-29 (9th Cir.2003). However, the plaintiff must make "only a prima facie showing of jurisdictional facts to withstand the motion to dismiss." Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir.2001). For the purposes of deciding whether a prima facie showing has been made, "the court resolves all disputed facts in favor of the plaintiff." Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir.2006).
Personal jurisdiction over a nonresident defendant is proper if permitted by a state's long-arm statute
This court uses the following three-part test to analyze whether a party's "minimum contacts" meet the due process standard for the exercise of specific personal jurisdiction:
Schwarzenegger, 374 F.3d at 802. "If any of the three requirements is not satisfied, jurisdiction in the forum would deprive the defendant of due process of law." Omeluk v. Langsten Slip & Batbyggeri A/S, 52 F.3d 267, 270 (9th Cir.1995). While all three requirements must be met, this court has stated that in its consideration of the first two prongs, "[a] strong showing on one axis will permit a lesser showing on the other." Yahoo! Inc. v. La Ligue Contre Le Racisme Et L'Antisemitisme, 433 F.3d 1199, 1210 (9th Cir.2006) (en banc). That means that a single forum state contact can support jurisdiction if the cause of action arises out of that particular purposeful contact of the defendant with the forum state. Id. (citing Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir.1987)). The district court in the Arandell and Heartland cases focused its analysis on the allegations that AEPES made sales to Wisconsin- and Missouri-based entities and found that the Plaintiffs had not met their burden of proving the second requirement for specific jurisdiction.
We need not decide whether personal jurisdiction could be grounded on the AEP Defendants' sales of natural gas in the forum states to third parties. The Arandell and Heartland Plaintiffs also predicated their antitrust claims on the AEP Defendants' manipulation of the price indices pursuant to a conspiracy to inflate natural gas prices. The district court conducted the personal jurisdiction analysis based on the natural gas sales only. We find that the district court erred in failing to analyze whether Plaintiffs' allegations of anticompetitive behavior directed at the forum states are sufficient to support the exercise of specific personal jurisdiction.
There is no question that the Plaintiffs' state antitrust claims arise out of the AEP Defendants' collusive manipulation of the gas price indices.
"Purposeful direction" requires that the defendant allegedly must have "(1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state." Washington Shoe, 704 F.3d at 673 (quoting Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1228 (9th Cir.2011)). This test for "purposeful direction" is based on the Supreme Court's test in Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984).
The facts alleged in these causes of action present a compelling case for finding that the AEP Defendants "purposefully directed" their anticompetitive behavior at the forum states. The first two prongs of the "purposeful direction" test ask whether there was an "intentional act"
The Arandell Plaintiffs further alleged that AEP's officers or directors made agreements "which tended to advance or control the market prices of natural gas that its affiliates sold in the United States or in Wisconsin" and that these officers or directors made "strategic marketing policies and decisions" to report prices to natural gas price indices "that affected the market prices of natural gas." The policies and decisions, alleged the Arandell Plaintiffs, were "implemented on an operational level by affiliates, such as [AEPES]." The Arandell Plaintiffs also claimed that all Defendants (including the AEP Defendants) "worked together to fraudulently increase the retail price of natural gas paid by commercial entities in Wisconsin." This conspiracy was allegedly carried out through unlawful acts that were "ordered and performed by their officers, directors, agents, employees or representatives while actively engaged in the management, direction, control or transaction of defendants' business or affairs." For example, the Plaintiffs alleged that "American Electric Power Company and AEP Energy Services, Inc. traders were instructed by their superiors to adjust the prices and volumes of trades they had made and, in some cases, to report trades that never occurred." The "purpose and effect" of this was to "collusively and artificially inflate the price of natural gas paid by commercial entities in Wisconsin." These alleged facts, taken as true, establish that the AEP Defendants' price manipulation was "expressly aimed" at Wisconsin, because the AEP Defendants knew and intended that the consequences of their price manipulation would be felt in Wisconsin. Ibrahim v. Dep't of Homeland Sec., 538 F.3d 1250, 1258 (9th Cir.2008).
The third prong of the "purposeful direction" test asks whether the intentional acts caused harm that the defendant knows is likely to be suffered in the forum state. In the present case, the Arandell Plaintiffs further alleged that each defendant "committed one or more acts or omissions outside of Wisconsin, which caused an injury to person or property within Wisconsin." Such injury included increases in the price of gas, which was specifically alleged in the complaint — for example, the Plaintiffs alleged that the city gate price for natural gas in Wisconsin nearly quadrupled in the span of a year, while the price for commercial consumers more than doubled. The harm was magnified by increased price volatility, which "caused commercial entities in Wisconsin to incur greater expenses associated with hedging natural gas costs," further injuring the Plaintiffs by "depriving them of the right and ability to make risk management, resource allocation and other financial decisions relating to natural gas, in a full and free competitive market."
In this case, the amount of harm in Wisconsin, and the specificity with which it was alleged, is sufficient to satisfy the third prong of the "purposeful direction" test. Our case law does not require that the "brunt" of the harm be suffered in the forum state; as long as "a jurisdictionally sufficient amount of harm is suffered in the forum state, it does not matter that even more harm might have been suffered in another state." La Ligue, 433 F.3d at 1207. For these reasons, we find that the Arandell Plaintiffs have alleged sufficient
The district court did not address the third prong of the personal jurisdiction inquiry, whether the exercise of jurisdiction would "comport with fair play and substantial justice" — in other words, whether the exercise of jurisdiction would be reasonable. Schwarzenegger, 374 F.3d at 802. Once the Plaintiffs have shown that the exercise of personal jurisdiction satisfies the first two prongs of the personal jurisdiction test, the burden shifts to the defendant to make a "compelling case" that the exercise of jurisdiction would be unreasonable. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476-77, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). This court considers the following seven factors in determining whether the exercise of jurisdiction would be reasonable:
Bancroft, 223 F.3d at 1088. We find that the AEP Defendants have not made a "compelling case" based upon any of these factors that the exercise of personal jurisdiction in Wisconsin would be unreasonable.
For these reasons, we reverse the district court's order dismissing the AEP Defendants from the Wisconsin Arandell case for lack of personal jurisdiction. The Missouri Heartland Plaintiffs alleged similar facts as the Wisconsin Arandell Plaintiffs, and therefore our analysis applies with equal force to the Heartland case. We note, however, that the Heartland Plaintiffs appeal the district court's dismissal of AEPES for lack of personal jurisdiction, but do not challenge the district court's dismissal of AEP, the parent company.
Several Plaintiffs in Arandell Corp. v. Xcel Energy, Inc. appeal the district court's order granting Defendant Duke Energy Trading and Marketing, LLC's ("DETM") motion for partial summary judgment based on the district court's interpretation of Wisconsin Statutes § 133.14.
Several Wisconsin corporations (Arandell Corp., Merrick's, Inc., Safety-Kleen Systems, Inc., and Sargento Foods) brought suit against natural gas sellers in Wisconsin state court, alleging two causes of action under Wisconsin state law. Count One arose under Wisconsin Statutes § 133.14, which voids contracts to which an antitrust conspirator is a party and allows recovery of payments made pursuant to such a contract. Count Two sought treble damages under Wisconsin Statutes § 133.18, which provides that "any person" injured, directly or indirectly, by a violation of the Wisconsin Antitrust Act may recover treble damages.
All but one of the named Defendants moved to dismiss or for summary judgment on Count One of Plaintiffs' Amended Complaint. They argued that the Plaintiffs lacked standing to assert a claim against them under Wisconsin Statutes § 133.14 because none of the named Plaintiffs purchased natural gas directly from any of the moving defendants. Wisconsin Statutes § 133.14 provides:
Wis. Stat. § 133.14 (emphasis added). In interpreting a state statute, a federal court applies the relevant state's rules of statutory construction. See In re Lieberman, 245 F.3d 1090, 1092 (9th Cir.2001). In Wisconsin, to determine the meaning of a statutory provision, courts begin with the statute's plain language, "taking into consideration the context in which the provision under consideration is used," and furthermore, "[s]tatutory language is given its common, ordinary, and accepted meaning." Burbank Grease Servs., LLC v. Sokolowski, 294 Wis.2d 274, 717 N.W.2d 781, 788 (2006).
We agree with the district court's conclusion that the statutory text at issue is unambiguous. Section 133.03 makes illegal every contract, combination, or conspiracy in restraint of trade or commerce. See Wis. Stat. § 133.03(1). The first sentence of Section 133.14 therefore provides that any contract made by a member of an antitrust conspiracy is void, and no conspirator who is a party to that contract may recover or benefit therefrom. The second sentence of Section 133.14 permits the party making a payment "upon, under or pursuant to such contract" to recover those payments. There is no provision authorizing recovery by indirect purchasers or other non-parties to the voided contract.
Plaintiffs argue that the Wisconsin legislature intended for the Wisconsin Antitrust Act to be interpreted as broadly as possible.
After the district court held on February 19, 2008, that "the party seeking the recovery [under Section 133.14] must have been a party to the void contract, or at least have made payments based on the contractual obligation set forth in the conspirator's contract," Plaintiffs Sargento, Merrick's, and Ladish admitted that they had no direct purchase agreements with DETM. Therefore, the district court concluded, "No genuine issue of material fact remains that Sargento, Merrick's, and Ladish did not purchase natural gas directly or through an agent from DETM," and granted summary judgment on Count One of Plaintiffs' Amended Complaint as to these three Plaintiffs. Because we agree with the district court's conclusion that the plain text of Wisconsin Statutes § 133.14 allows recovery only by plaintiffs who were direct purchasers under the voided contract, we affirm the district court's order granting partial summary judgment to DETM.
We
Pub.L. No. 109-58 tit. III, § 315 (codified at 15 U.S.C. § 717c-1).