Crossroads v. Orange & Rockland

Opinions of the United

1998 Decisions States Court of Appeals

for the Third Circuit

10-27-1998

Crossroads v. Orange & Rockland

Precedential or Non-Precedential:

Docket 97-5470

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Recommended Citation

"Crossroads v. Orange & Rockland" (1998). 1998 Decisions. Paper 252.

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Filed October 27, 1998

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

NO. 97-5470

CROSSROADS COGENERATION CORPORATION

Appellant

v.

ORANGE & ROCKLAND UTILITIES, INC.

On Appeal From the United States District Court

For the District of New Jersey

(D.C. Civil Action No. 96-cv-05287)

Argued April 23, 1998

BEFORE: STAPLETON and NYGAARD, Circuit Judges,

and SCHWARTZ,* District Judge

(Opinion Filed October 27, 1998)

William Harla (Argued)

DeCotiis, FitzPatrick & Gluck

500 Frank W. Burr Boulevard

Glenpointe Centre West

Teaneck, NJ 07666

Attorney for Appellant

_________________________________________________________________

* Hon. Murray M. Schwartz, Senior United States District Judge for the

District of Delaware, sitting by designation.

Glen R. Stuart (Argued)

Morgan, Lewis & Bockius

2000 One Logan Square

Philadelphia, PA 19103

Attorneys for Appellee

OPINION OF THE COURT

STAPLETON, Circuit Judge:

This appeal is from the dismissal of all counts of a

complaint filed by Crossroads Cogeneration Corporation

("Crossroads") against Orange and Rockland Utilities, Inc.

("O&R"). The district court dismissed Crossroads' breach of

contract claim and related claims on the ground that they

were barred by issue and claim preclusion, and dismissed

Crossroads' antitrust claims for failure to state a claim

upon which relief could be granted. We will reverse in part

and affirm in part.

I.

Crossroads, a Delaware company, is an independent

producer of electric power that owns and operates a

cogeneration facility in Mahwah, New Jersey, its principal

place of business. O&R is a New York corporation that

operates as a public utility in four counties in New York,

New Jersey, and Pennsylvania. In each county in which

O&R operates, it is virtually the sole retail provider of

electric power to residential, commercial, and industrial

customers. Most of the energy O&R provides to customers

is purchased from relatively small, independent generators

of energy, such as Crossroads. This dispute arises from a

power purchase agreement governing the sale to O&R of

electricity generated by Crossroads. Before examining the

dispute in any detail, however, it is first necessary to review

the regulatory context of the agreement.

A.

Under the Federal Power Act, 16 U.S.C. S 791a et seq.,

the Federal Energy Regulatory Commission ("FERC") is

2

responsible for regulating "public utilities" that offer electric

power in interstate commerce. In the midst of a national

energy crisis in 1978, Congress modified the Federal Power

Act by enacting the Public Utility Regulatory Policies Act

("PURPA"), 16 U.S.C. S 823a et seq. Congress' overall

strategy was to "control power generation costs and ensure

long-term economic growth by reducing the nation's

reliance on oil and gas and increasing the use of more

abundant, domestically produced fuels." Freehold

Cogeneration Associates, L.P. v. Board of Regulatory

Comm'rs of New Jersey, 44 F.3d 1178, 1182 (3d Cir. 1995).

One chosen means to this broad end was to encourage the

development of cogeneration facilities, which produce both

electric and thermal energy from a single fuel source.

Developing a market for cogeneration facilities required

overcoming both the reluctance of traditional electric

utilities to purchase power from independent providers and

the financial burden of state and federal regulation on

nontraditional facilities. See FERC v. Mississippi, 456 U.S.

742, 750-51 (1982). To address the first barrier, PURPA

creates incentives by requiring FERC to prescribe "such

rules as it determines necessary to encourage cogeneration

and small power production," including rules to"require

electric utilities to offer to . . . purchase electric energy from

[cogeneration] facilities." 16 U.S.C. S 824a-3(a). At the same

time, to address the burden of regulation, PURPA requires

FERC to prescribe rules to exempt small production

facilities from many provisions of the Federal Power Act and

"from State laws and regulations respecting the rates, or

respecting the financial or organizational regulation, of

electric utilities." 16 U.S.C. S 824a-3(e).

Acting pursuant to its authority under PURPA, FERC has

promulgated regulations governing transactions between

cogeneration facilities and electric utilities, including

provisions requiring electric utilities to purchase energy

from qualifying facilities ("QFs") at a rate up to the utility's

full avoided cost.1 In addition, FERC has also promulgated

regulations exempting QFs from state regulatory

_________________________________________________________________

1. In order to qualify as a QF, a cogeneration facility must meet

requirements established by FERC. See 18 C.F.R. S 292.101 et seq.

3

requirements. Those regulations provide, in relevant part,

that:

Any qualifying facility shall be exempted . . . from State

law or regulation respecting:

(i) The rates of electric utilities; and

(ii) The financial and organizational regulation of

electric utilities.

18 C.F.R. S 292.602(c)(1).

Despite the existence of FERC regulations governing QFs

and the exemption of QFs from certain federal and state

regulations applicable to traditional electric utilities, state

regulatory authorities are required to implement FERC

rules. See 16 U.S.C. S 824a-3(f). Thus state agencies are

actively involved in the formation and performance of

contracts between traditional utilities and QFs; in

particular, state authorities must review and approve power

purchase agreements before they take effect.

B.

In October 1987, O&R entered into a contract with a QF

for the purchase of electric energy for a period of twenty

years. In 1990, Crossroads purchased the QF 's facility and

it assigned the agreement to Crossroads.2 Pursuant to

FERC regulations, the agreement required approval by the

New York Public Service Commission ("NYPSC"), the state

agency responsible for regulating electric utilities. After

several changes were made at the NYPSC's request, the

required approval was granted in December of 1988. The

agreement provided that Crossroads' predecessor would

supply energy to O&R from a cogeneration facility that

"initially will be designed to generate nominally 3.3 MW of

capacity and to generate approximately 26,300 MWH of

electric energy annually." App. at 65. The facility was

initially constructed with three combustion engines, each of

which had a generating capacity of approximately 1.1 MW.

However, the agreement anticipated that the plant might

_________________________________________________________________

2. It is undisputed that Crossroads is a "qualifying facility."

4

eventually grow in size, and the parties accordingly agreed

upon the disposition of any capacity in excess of 3.3 MW:

[Crossroads] shall deliver and sell to [O&R] and [O&R]

shall accept and purchase from [Crossroads], subject

to the terms and conditions of this agreement, all the

capacity produced by the Plant, up to a maximum of 4

MW, and all energy associated with such capacity, net

of that capacity and energy used from time to time to

operate the Plant. No change in the amount of capacity

committed hereunder shall be permitted without the

written consent of [O&R] and [Crossroads].

[Crossroads] shall have the right to sell to third parties

or make alternate dispositions of all the capacity

produced by the Plant in excess of 4 MW and all energy

associated with such excess capacity; provided,

however, that [O&R] shall have a right offirst refusal to

purchase such excess capacity and energy for the price

set forth herein.

App. at 70.

Thus, despite the 3.3 MW initial capacity, the agreement

(1) requires O&R to purchase at the contract price all

energy produced up to 4 MW; (2) reserves to O&R a right of

first refusal in allocating any energy in excess of 4 MW; and

(3) provides that Crossroads may sell on the open market

any energy above 4 MW that O&R refuses.

This dispute arose in May 1996, when Crossroads

constructed and began operating a new gas turbine at the

facility, capable of generating 5 MW of power. O&R refused

to pay the contract price for energy generated by the new

turbine, while Crossroads claimed that O&R was obligated

under the agreement to purchase all energy generated by

the original or new equipment up to a capacity of 4 MW.

O&R filed a petition with the NYPSC asking for a

declaratory ruling that it was not obligated to"purchase

energy produced by the [new] Turbine at the prices set forth

in the Agreement." App. at 63. Though acknowledging that

the terms of the agreement required it to purchase "all the

capacity produced by the Plant up to a maximum of 4 MW,"

App. at 57, O&R argued that it would nonetheless be unfair

to require it to purchase energy from the new turbine.

5

O&R's petition contended that the rates set forth in the

agreement are substantially higher than the market would

bear today, a result of policies in the 1980s that provided

subsidies to cogeneration facilities. Since the plant's

capacity was 3.3 before addition of the new turbine, O&R

had not been paying for the full 4 MW of energy prior to

addition of the new turbine. With the new turbine,

Crossroads would easily fulfill the 4 MW that O&R was

obliged to purchase under the agreement. Because O&R is

locked into what it perceives is above-market rates, it

charged that Crossroads was "seek[ing] to circumvent the

terms and spirit of the Agreement by supplementing the

availability of the Original Generators with the output from

the Turbine." App. at 61. O&R estimated that it would be

required to pay an additional $4.2 million to Crossroads for

the additional energy over the life of the contract,

concluding that "[r]equiring [its] ratepayers to subsidize

Crossroads [was] simply inappropriate." App. at 61.

Crossroads opposed O&R's petition before the NYPSC.

Citing a decision of this Circuit, Freehold Cogeneration

Associates v. Board of Regulatory Comm'rs of New Jersey,

44 F.3d 1178 (3d Cir. 1995), Crossroads argued that once

a state utility commission approves the terms of a power

purchase agreement, "any action . . . to reconsider its

approval" is preempted by PURPA. 44 F.3d at 1194.

Crossroads also cited NYPSC precedent suggesting that the

agency usually refused to get involved in contract disputes

between utilities and their suppliers. Finally, Crossroads

contended that the issue was more complex than O&R's

petition made it out to be, and requested an opportunity to

supplement the record should the Commission decide to

exercise jurisdiction.

The NYPSC granted O&R's petition. The Commission

determined that it had authority to review the petition

because of its power to "interpret [its] power purchase

contract approvals." App. at 172. The NYPSC found that

O&R's petition could be read as a request for it to explain

and interpret whether the earlier approval of the contract

included the additional capacity created by the new

turbine. The Commission concluded that "[u]nder the

approval . . . Crossroads may not supplement electricity

6

produced by its [original] engine capacity with electricity

produced from its new turbine capacity." App. at 173.

Thus, the Commission ordered that electricity generated by

the new turbine could not be priced at the contract rate.

Crossroads then filed this action, seeking recovery for

breach of contract and antitrust violations.3 O&R moved to

dismiss Crossroads' claims under Fed. R. Civ. P. 12(b)(6) for

failure to state a claim. Crossroads cross-moved for

summary judgment on all claims. The district court granted

O&R's motion and denied Crossroads' motion. The district

court determined that: (1) the contract claims4 all are

"premised on [Crossroads'] contention that[O&R] breached

its obligations under the terms of the Agreement by

refusing to pay the contract price for energy generated by

the new gas turbine," Op. at 15; (2) Crossroads is barred by

principles of issue and claim preclusion from litigating the

issue of whether the agreement requires purchase of energy

from the new turbine because that issue was litigated and

determined before the NYPSC; (3) Crossroads' argument

that the NYPSC did not have jurisdiction to construe the

contract is also barred by operation of the "jurisdictional

finality" rule of issue preclusion; and (4) Crossroads failed

to sufficiently allege antitrust violations. After dismissing all

Crossroads' claims, the district court then denied its cross-

motion for summary judgment as moot. This appeal followed.5

II.

We will reverse the judgment of the district court with

respect to Crossroads' contract claims.

_________________________________________________________________

3. Crossroads has preserved its right to appeal the NYPSC's

determination by filing an appeal in the appropriate New York state

court. The parties have by stipulation stayed that proceeding pending

the outcome of this case.

4. The claims involved are Crossroads' First, Second, Third, and Fourth

causes of action, for breach of contract, breach of the covenant of good

faith and fair dealing, anticipatory repudiation, and declaratory

judgment.

5. The district court had jurisdiction pursuant to 28 U.S.C. SS 1332 &

1337. We have jurisdiction from the district court'sfinal order pursuant

to 28 U.S.C. S 1291.

7

A.

Issue preclusion, also known as collateral estoppel, bars

relitigation of issues adjudicated in a prior action. Federal

courts are required to give preclusive effect to state court

judgments by virtue of the Full Faith and Credit Act, which

provides that "Acts, records and judicial proceedings . . .

shall have the same full faith and credit in every [federal]

court . . . as they have by law or usage in the courts of

such State . . . from where they are taken." 28 U.S.C.

S 1738; see Swineford v. Snyder County, 15 F.3d 1258,

1266 (3d Cir. 1994). By its terms, S 1738 applies only to

state court decisions, and the Supreme Court has

determined that the statute does not apply to

administrative agency decisions that have not beenfirst

reviewed by a state court. See University of Tennessee v.

Elliott, 478 U.S. 788, 794 (1986). However, the Court has

"frequently fashioned federal common-law rules of

preclusion in the absence of a governing statute." Id. Thus,

we must determine whether an unreviewed decision of the

NYPSC should be given preclusive effect.

Though the Supreme Court has not yet addressed the

preclusive effect of decisions of state agencies responsible

for utility regulation, we are guided by several generally

applicable criteria. The Court has determined that, unless

a federal statute specifically indicates that state agency

decisions should not be considered conclusive, as in the

context of Title VII, Elliott, 478 U.S. at 795-96, and the Age

Discrimination Act, Astoria Fed. Sav. & Loan Ass'n v.

Solimino, 501 U.S. 104, 110-11 (1991), factualfindings of

state agencies should be given the same preclusive effect

they would be accorded in the courts of that state. See

Elliott, 478 U.S. at 797; Edmundson v. Borough of Kennett

Square, 4 F.3d 186, 192 (3d Cir. 1993). In addition,

applying preclusive effect to legal conclusions made by

state agencies "is favored as a matter of general policy,

[though] its suitability may vary according to the specific

context of the rights at stake, the power of the agency, and

the relative adequacy of agency procedures." Astoria, 501

U.S. at 109-10.

In this case, we determine that the factual findings and

legal conclusions of the NYPSC should be given preclusive

8

effect to the extent afforded under New York law. Unlike

Astoria or Elliott, we find no provision of PURPA that seeks

to limit common law rules of preclusion from applying to

state agency decisions relating to utility regulation. Though

PURPA does limit the authority of state agencies in some

respects, e.g., by exempting cogeneration facilities from

some regulation, PURPA still provides a substantial role to

state agencies in regulating energy contracts between

utilities and cogenerators. Indeed, state agencies are

specifically required by federal law to implement FERC

regulations. Given the substantial role given state utility

agencies by Congress in enacting PURPA, we conclude

Congress did not intend to prevent application of common

law rules of preclusion. Thus, we will give preclusive effect

to the NYPSC decision to the same extent as would the New

York courts. Accord Long Island Lighting Co. v. IMO

Industries, Inc., 6 F.3d 876, 885 (2d Cir. 1993) (decision of

NYPSC given preclusive effect).

Crossroads also contends that, in particular, the NYPSC's

determination that it had jurisdiction over O&R's petition

should not be given preclusive effect in this action. Though

recognizing that, generally speaking, a tribunal's

determination of its own jurisdiction is accorded the same

status for issue preclusion purposes as the merits of a

dispute, see Durfee v. Duke, 375 U.S. 106, 114 (1963),

Crossroads contends an exception to the rule applies in a

case like this where a federal statute, PURPA, preempts the

state agency from acting altogether. This more limited

argument of Crossroads presents, in our judgment, a close

question. We conclude that we need not resolve it, however,

in light of our determination in subsection C below that the

NYPSC decided an issue distinct from that to be decided in

this case, and our determination in subsection D below

that Crossroads' contract claims are not barred by claim

preclusion. Accordingly, we assume, without deciding, that

the Commission had the jurisdiction it purported to

exercise with respect to O&R's petition.

B.

Under New York law, an issue adjudicated in a prior

proceeding will have preclusive effect where (1) the "issue in

9

the present proceeding [is] identical to that necessarily

decided in a prior proceeding" and (2) "in the prior

proceeding the party against whom preclusion is sought

was accorded a full and fair opportunity to contest the

issue." Allied Chemical v. Niagara Mohawk Power Corp.,

528 N.E.2d 153, 155 (N.Y. 1988).6 The district court, after

examining the NYPSC decision, determined that these

requirements were met and concluded that Crossroads'

claims were precluded by the prior determination. See Op.

at 19. On appeal, Crossroads challenges the determination

that they were provided a "full and fair" opportunity to

litigate before the NYPSC. See Appellant's Br. at 26, 33-35.

Under New York law:

A determination whether the first action or proceeding

genuinely provided a full and fair opportunity requires

consideration of "the `realities of the [prior] litigation',

including the context and other circumstances which

. . . may have had the practical effect of discouraging

or deterring a party from fully litigating the

determination which is now asserted against him".

(People v. Plevy, 52 N.Y.2d 58, 65, 436 N.Y.S.2d 224,

417 N.E.2d 518.) Among the specific factors to be

considered are the nature of the forum and the

importance of the claim in the prior litigation, the

incentive and initiative to litigate and the actual extent

of litigation, the competence and expertise of counsel,

the availability of new evidence, the differences in the

applicable law and the foreseeability of future litigation.

(Gilberg v. Barbieri, 53 N.Y.2d 285, 292, 441 N.Y.S.2d

49, 423 N.E.2d 807; Schwartz v. Public Administrator,

24 N.Y.2d 65, 72, 298 N.Y.S.2d 955, 246 N.E.2d 725.)

_________________________________________________________________

6. In addition, when applying issue preclusion to an administrative

agency, New York courts are required to ascertain that the agency

proceeding was "quasi-judicial" in nature; i.e., whether (1) the agency

has the power to act adjudicatively, (2) the agency follows adequate fact-

finding procedures, (3) the issue was fully aired, and (4) the parties

expect to be bound by the decision. See Allied, 528 N.E.2d at 155. In

Allied, New York's highest court determined that, judged by these

criteria, a decision of the NYPSC was "quasi-judicial." The district court

in this case agreed, and Crossroads provides no persuasive reason on

appeal to conclude differently.

10

Ryan v. New York Telephone Co., 467 N.E.2d 487, 491 (N.Y.

1984). These requirements are intended to make certain

that the first tribunal carefully considered the issues

litigated, and that the party against whom preclusion is

sought had a chance to offer vigorous argument for its

position. In this case, two issues of "full and fair"

opportunity arise from the litigation before the NYPSC: (1)

whether Crossroads was given a "full and fair" chance to

argue the issue of the NYPSC's jurisdiction to address

O&R's petition; and (2) whether Crossroads was given a

"full and fair" opportunity to litigate the merits of the

petition.

The issue of whether Crossroads had a "full and fair"

opportunity to argue, before the NYPSC, the issue of the

NYPSC's own jurisdiction is straightforward. The parties

both submitted briefs before the NYPSC outlining their view

of the jurisdictional issue, including Crossroads'

contentions that PURPA, FERC regulations, and the

NYPSC's own practice prohibited jurisdiction over the

interpretation of the contract. Crossroads' brief before the

NYPSC mirrors the arguments made before us on appeal.

The NYPSC opinion deciding the issue carefully considered

each of Crossroads' arguments and reflects a considered

analysis of its jurisdictional predicate. Reading the parties'

submissions before the NYPSC, and the resulting decision,

we believe, leads to the conclusion that Crossroads had a

full and fair opportunity to litigate the issue of the agency's

jurisdiction.

The more debatable issue is whether Crossroads had a

full and fair opportunity to litigate the merits of O&R's

petition. In addition to determining that it had jurisdiction

over O&R's petition, the NYPSC also proceeded to grant the

petition, holding that "[u]nder [its] approval of the contract

for the Crossroads site, [Crossroads] may not expand the

generation production entitled to the contract pricing. . . .

As a result, the expanded production made possible by

Crossroads' new turbine is beyond the terms and

conditions approved for this contract." App. at 173.

In this appeal, Crossroads briefly argues that the

NYPSC's consideration of the merits of O&R's petition did

not offer Crossroads a "full and fair" opportunity to contest

11

the issue. Crossroads contends that it did not seek relief

from the NYPSC or participate voluntarily in the agency's

proceedings, that it solely contested the jurisdictional issue,

and that it requested, and was denied, an opportunity to

supplement the record before the NYPSC. Despite these

arguments, we believe that Crossroads had a full and fair

opportunity to litigate the merits of O&R's petition for

declaratory relief before the NYPSC.

Crossroads' argument that it did not seek relief before the

NYPSC and did not voluntarily participate before the agency

is not legally relevant to whether it had a full and fair

opportunity to litigate the merits issue. Moreover, contrary

to its assertion in its brief, Crossroads' submission before

the NYPSC did argue the merits of the petition. Crossroads

contended that the agreement could not be read to suggest

that the original set of three 1.1 MW generators was the

only capacity assumed by the parties, pointing to language

in the agreement and exhibits demonstrating the intent of

the parties at the time the contract was signed. That these

arguments were not accepted by the NYPSC does not mean

that Crossroads had an inadequate opportunity to present

them.

Crossroads also argues that the NYPSC did not heed its

request to file additional materials before it rendered its

decision on the merits of the petition. In its submission to

the agency, Crossroads requested that "[s]hould the

Commission determine that it will entertain O&R's request

for a declaratory ruling, CROSSROADS respectively

reserves its right to make a further submission that more

fully describes the matters in dispute . . . ." App. at 120.

However, the fact that Crossroads asked for a second

opportunity to argue the issue does not establish that it did

not have a "full and fair" first opportunity. Moreover,

Crossroads has not pointed to any additional materials or

arguments that it would have made before the NYPSC.

Since Crossroads has not suggested that it would have

made any additional arguments before the NYPSC, it is

difficult to conclude that it did not have a full and fair

opportunity to litigate on this ground.

More importantly, looking only to Crossroads' opportunity

to litigate before the NYPSC is not the legally relevant

12

perspective. The issue of a "full and fair" opportunity to

litigate includes the possibility of a chain of appellate

review. See, e.g., Kremer v. Chemical Construction Corp.,

456 U.S. 461, 484 (1982); Reubens v. New York City Dep't

of Juvenile Justice, 930 F. Supp. 887, 892 (S.D.N.Y. 1996).

Crossroads has an opportunity to appeal the NYPSC's

decision through the state court system, and Crossroads

will presumably have an opportunity in those proceedings

to raise its claims regarding the merits of O&R's petition, as

well as its contention that the NYPSC improperly denied its

application to supplement the record. In short, in

determining whether a litigant has been given a"full and

fair" opportunity to litigate a claim, we must take into

account the possibility of appellate review. Since such

review is available in this case, and there is no allegation

that it would be inadequate to consider Crossroads'

arguments,7 Crossroads has been given a full and fair

opportunity for preclusion purposes.

C.

In addition to the requirement of an opportunity to argue

the merits, issue preclusion applies only when the issue in

the present proceeding is "identical" to that decided in the

prior proceeding. Allied, 528 N.E.2d at 155. Thus,

application of claim preclusion is appropriate here only if it

can be said that the issue decided by the NYPSC is the

same issue that Crossroads, by filing its contract claims,

has asked the district court to decide. Resolution of this

issue requires that we examine with some care the law

applicable to those claims and the specific grounds upon

which the NYPSC rested its decision on the jurisdictional

and merits issues.

As we noted above, under PURPA and the regulations

_________________________________________________________________

7. At oral argument Crossroads suggested that a restrictive standard of

review in the New York state courts might limit its ability to litigate

its

position. However, these comments were not raised before oral

argument. Moreover, we find no reason to believe that the standard of

review applied by an appellate court would impair the ability of

Crossroads to meaningfully make the arguments it has advanced before

us.

13

adopted by the FERC, qualifying facilities like Crossroads

are exempt from state utility-type regulation, including

regulation of "rates of electric utilities." 18 C.F.R.

S 292.602(c)(1). We have interpreted these regulations to

prevent state regulatory commissions from modifying the

terms of a power purchase agreement between a utility and

cogeneration facility after it has been approved by the state.

In other words, while PURPA allows the appropriate state

regulatory agency to approve a power purchasing

agreement, once such an agreement is approved, the state

agency is not permitted to modify the terms of the

agreement. To do so would be to engage in the utility-type

regulation from which PURPA exempts QFs.

This principle was recently articulated in Freehold

Cogeneration Associates, L.P. v. Board of Regulatory

Comm'rs of New Jersey, 44 F.3d 1178 (3d Cir. 1995).

Freehold involved facts similar to those before us. A utility

and cogenerator reached a twenty-year power purchase

agreement at certain specified rates. The agreement was

approved by the New Jersey regulatory board responsible

for reviewing such agreements. After a year had passed

under the contract, the utility, in response to lower costs

for obtaining electrical power, notified the state board that

it wished to modify the pricing structure of the agreement.

The cogenerator rejected suggestions to renegotiate or agree

to a buy-out offer to end the contract. The regulatory board

then directed the cogenerator to renegotiate the rates under

the agreement or agree to a buy-out. The cogeneratorfiled

a complaint in the district court, seeking a declaratory

judgment exempting it from the board's attempts to modify

the agreement. The district court denied relief. On appeal,

after determining jurisdiction, ripeness, and other

challenges, we proceeded to discuss whether PURPA

preempted the state regulatory board's order requiring

renegotiation of the agreement.

Noting that "PURPA and the implementing regulations

establish an extensive federal system to encourage and

regulate the sale of electrical energy by QFs," we

determined that FERC, and not state regulatory agencies,

were responsible for establishing the parameters governing

power purchase agreements between utilities and qualifying

14

facilities. 44 F.3d at 1191. Though FERC did allow state

agencies to approve such agreements, the implementation

authority of state agencies end once an agreement is

approved. After approval has been granted, "attempt[s] to

either modify the [agreement] or revoke [state agency]

approval is `utility-type' regulation -- exactly the type of

regulation from which [a qualifying facility] is immune

under [PURPA]." Id. at 1192. Thus, unless the qualifying

authority waives its PURPA rights in the agreement, the

federal law prevents the state from "reconsideration of its

prior approval." Id.

Not surprisingly, Crossroads cited our Freehold decision

to the NYPSC in support of its contention that the

Commission lacked jurisdiction to interpret the power

purchase agreement. In response, the NYPSC expressly

recognized the "contract non-interference policy" inherent

in PURPA and acknowledged that it lacked jurisdiction to

interpret the agreement. It carefully drew a distinction,

however, between interpreting the agreement between the

parties and interpreting its approval of that agreement,

holding that it possessed jurisdiction to do the latter:

As was recently reaffirmed, it is within our authority

to interpret our power purchase contract approvals,

and that jurisdiction has been upheld by the courts.

The precedents involving interpretation of past policies

and approvals, and not the contract non-interference

policy that Crossroads cites, control here. As a result,

the approval of the original contract for the Crossroads

site may be explained and interpreted, and O&R's

petition may be construed as requesting that relief.

That approval was limited to a project consisting of

three reciprocating engines, sized at a net capacity of

3.3 MW, with an estimated annual electrical output of

26,300 MWh. Under the approval, therefore,

Crossroads may not supplement electricity produced

by its reciprocating engine capacity with electricity

produced from its new turbine capacity.

App. at 172-73 (footnotes omitted) (emphasis supplied).

The opinion of the NYPSC is devoid of any reference to

the text of the agreement. In reaching its conclusion that its

15

"approval was limited to a project consisting of three

reciprocating engines, sized at a net capacity of 3.3 MW,"

the Commission cites solely to a memorandum from its

staff that describes the then existing cogeneration plant as

"consist[ing] of three dual fuel engine-generator sets." App.

at 137, 173. Consistent with its ruling on jurisdiction, the

Commission's holding was carefully circumscribed to reflect

only an interpretation of its approval:

Accordingly, we find and declare that the petition of

Orange and Rockland Utilities, Inc. is granted in part,

to the extent that the December 2, 1988 approval of

Contract No. E-139 between O&R and Onsite

(Crossroads' predecessor) is construed as limiting the

contract pricing to electric production from the three

reciprocating engine facility that was installed in 1987,

and does not extend to production from the gas-fired

turbine that was installed in 1996.

App. at 174. The referenced "December 2, 1988 approval" is

a Commission letter to the parties informing them that it

had "accepted the contract and supplement" thereto

"contingent upon . . . the contract being amended" in two

detailed respects not relevant here. Neither side maintains

before us that the required amendments were not made.

It is thus apparent that the NYPSC, because of the

limitations it perceived on its own jurisdiction, deliberately

excluded from its deliberation any interpretation of the

contract it approved on December 2, 1988. As a result, we

conclude that it did not decide the issue presented by the

contract claim in this case.

As we understand the federal law applicable here,

although a PURPA-governed agreement is unenforceable

prior to approval by the relevant state agency, the rights of

the parties, once their agreement receives such approval,

are to be determined by applying normal principles of

contract interpretation to their agreement. Thus, the

district court in this case is being asked to determine from

the approved agreement of the parties their intention with

respect to O&R duty to purchase new capacity. This is an

issue that the NYPSC expressly declined to address.

16

We do not suggest that a court asked to enforce a state

approved PURPA governed agreement will never have

occasion to consider the terms of the agency's approval. In

some cases, those terms may be highly relevant in

determining the parties' understanding of their respective

rights and duties under the contract. Nothing in the

approval granted here is helpful in that respect, however.

Moreover, when those terms have relevance, they are

relevant only in the context of the understanding of the

parties as reflected in an objective reading of the agreement

and its approval. An inquiry into the issues focused on by

the Commission and its staff as reflected in its internal

records is not relevant.

Accordingly, we conclude that the issue decided by the

NYPSC does not have preclusive effect with respect to the

issues presented by Crossroads' contract claims.

D.

In addition to issue preclusion, the district court also

determined that Crossroads' contract claims were barred by

claim preclusion. Operation of claim preclusion, or res

judicata, enforces the principle that a final judgment of a

claim on the merits between the same parties resolves both

that claim and all others arising out of the same

transaction. See Ryan v. New York Telephone Co., 467

N.E.2d 487, 489-90 (N.Y. 1984). Applying this doctrine, the

district court concluded that Crossroads' contract claims

"were already litigated between these parties before the

NYPSC, which reached a final determination of those claims

on the merits." Op. at 18. We disagree.

New York courts have adopted a "transactional" approach

to res judicata, meaning that "once a claim is brought to a

final conclusion, all other claims arising out of the same

transaction or series of transactions are barred, even if

based upon different theories or if seeking a different

remedy." O'Brien v. City of Syracuse, 429 N.E.2d 1158,

1159 (N.Y. 1981); see also Schuylkill Fuel Corp. v. B. & C.

Nieberg Realty Corp., 165 N.E. 456, 457 (N.Y. 1929)

(Cardozo, C.J.) ("A judgment in one action is conclusive in

a later one, not only as to any matters actually litigated

17

therein, but also as to any that might have been so litigated

. . . ."). This principle has been applied by New York courts

in cases where a defense or counterclaim used in one

action is asserted in a later action. See, e.g. , Board of

Managers of Windridge Condominiums One v. Horn, 651

N.Y.S.2d 326 (N.Y. App. Div. 1996); Lippman v. Lippman,

612 N.Y.S.2d 532 (N.Y. App. Div. 1994). Thus, if O&R had

brought its declaratory judgment action in a New York

court of general jurisdiction, rather than the NYPSC, asking

for a declaration that it had no duty to buy additional

power under the agreement, Crossroads would have to

come forward with any and all grounds it might have to

assert that this duty exists. If so, then under traditional

claim preclusion principles Crossroads would be bound by

an adverse declaratory judgment whether or not the court

expressly ruled on the meaning of the contract.

Nevertheless, we predict that New York courts would not

apply claim preclusion in the circumstances now before us.

Crossroads was taken involuntarily before the NYPSC, and

it asserted a jurisdictional argument there. The

Commission, as we have read its opinion above, accepted

that defense to the extent that O&R was asking for a

contract interpretation. It went out of its way to hold that

it was without jurisdiction to grant such relief but that it

did have jurisdiction to interpret its approval. Accordingly,

we think this is a situation of the kind described in the

Restatement (Second) of Judgments:

S 26. Exceptions to the General Rule Concern ing

Splitting

(1) When any of the following circumstances exists, the

general rule of S 24 does not apply to extinguish the

claim, and part or all of the claim subsists as a

possible basis for a second action by the plaintiff

against the defendant: . . .

(c) The plaintiff was unable to rely on a cert ain

theory of the case or to seek a certain remedy or form

of relief in the first action because of the limitations on

the subject matter jurisdiction of the courts or

restrictions on their authority to entertain multiple

theories or demands for multiple remedies or forms of

18

relief in a single action, and the plaintiff desires in the

second action to rely on that theory or to seek that

remedy or form of relief . . . .

New York courts, applying this provision, have created an

exception to claim preclusion in situations where the first

tribunal lacks jurisdiction to offer the relief sought in the

second proceeding. Compare Handy v. Westbury Teachers

Ass'n, 104 A.D.2d 923, 925-26 (N.Y. App. Div. 1984) (state

agency that "declined to adjudicate [plaintiffs] contentions

on these issues . . . holding that it lacked . . . jurisdiction

leaves plaintiffs free to raise those same contentions in

[later] action") with Pauk v. Board of Trustees of the City

Univ. of N.Y., 111 A.D.2d 17, 21 (N.Y. App. Div. 1985) (res

judicata applies where grounds for recovery "was entirely

available to plaintiff as a basis for relief " in the prior

proceeding). Because the contract claims were unavailable

to Crossroads before the NYPSC, we hold that claim

preclusion was improperly applied in this case.

E.

In reaching the conclusion that the district court is free

to decide Crossroads' contract claims on their merits, we

are mindful of the fact that the NYPSC's opinion ultimately

declared that O&R owes no duty to purchase at the

contract rate energy generated by Crossroads in excess of

3.3 MW but less than 4 MW. This can be, and in most

circumstances would properly be, viewed as a declaration

on the same issue presented to the district court by

Crossroads' contract claims. Had the Commission regarded

itself as having jurisdiction to consider the terms of the

contract, the district court would clearly be barred from

proceeding on the contract claims by both issue and claim

preclusion. But the Commission's opinion makes it

indisputably clear that it drew a careful distinction between

interpreting the intent of the parties as reflected in their

approved agreement and interpreting the intent of the

Commission and then concluded that it had no jurisdiction

to do the former. Given that Crossroads' contract claims

rest solely on the intent of the parties as reflected in the

contract, we can remain faithful to the principles

underlying S 26 of the Restatement and the New York cases

19

embracing it only by looking beneath the Commission's

ultimate conclusion to its foundation., i.e., its

determination that in 1988 it had considered and

subjectively approved only the sale of energy from the

existing facilities at the contract price. Because the

Commission considered itself without jurisdiction to

consider the argument that Crossroads was making,

Crossroads remains entitled to its day in the district court.

III.

In its fifth cause of action, Crossroads accuses O&R of

monopolization and attempted monopolization, in violation

of S 2 of the Sherman Act, 15 U.S.C. S 2, and price

discrimination, in violation of S 2 of the Clayton Act, as

amended by the Robinson-Patman Act, 15 U.S.C. S 13.

Crossroads alleges that O&R's refusal to purchase energy

from Crossroads pursuant to the agreement has helped

unfairly solidify O&R's monopoly position in its service

area. In addition, Crossroads alleges that O&R has impeded

its attempts to sell its excess energy to customers in O&R's

service area by offering those customers lower prices. The

district court dismissed Crossroads cause of action on both

theories for failure to state a claim. On appeal, Crossroads

contends that its complaint is sufficient to survive

dismissal. We agree with this aspect of the district court's

decision.

The district court correctly determined that Crossroads'

Sherman Act claims should be dismissed. Section 2 of the

Sherman Act provides that "[e]very person who shall

monopolize, or attempt to monopolize . . . any part of the

trade or commerce among the several States . . . shall be

deemed guilty of a felony . . . ." 15 U.S.C.S 2. To state a

claim for monopolization, a plaintiff must allege "(1) the

possession of monopoly power in the relevant market and

(2) the willful acquisition or maintenance of that power as

distinguished from growth or development as a

consequence of a superior product, business acumen, or

historical accident." Schuylkill Energy Resources v.

Pennsylvania Power & Light Co., 113 F.3d 405, 412-13 (3d

Cir.) (quotations omitted), cert. denied, 118 S. Ct. 435

(1997). To state a claim for attempted monopolization, a

20

plaintiff must allege "(1) that the defendant has engaged in

predatory or anticompetitive conduct with (2) a specific

intent to monopolize and (3) a dangerous probability of

achieving monopoly power." Schuylkill, 113 F.3d at 413.

The district court determined that Crossroads had failed

to allege a relevant market or sufficient monopoly power to

state a claim under the Sherman Act. The court held that:

[P]laintiff fails, as a matter of law, to sufficiently allege

monopoly power. Plaintiff merely states that defendant

is the sole provider of electricity to certain customers in

the counties it services. . . . Plaintiff fails to allege such

necessary facts as defendant's market share in the

markets in which plaintiff is a competitor or that

barriers that exist which prevent plaintiff 's entry into

such markets. These deficiencies in the Complaint

mandate dismissal of plaintiff 's Sherman Act claims.

See Barr Lab, Inc. v. Abbott Lab, 978 F.2d 98, 112-13

(3d Cir. 1992).

Op. at 9. We agree with the district court's reasoning.

Alleging market share alone is not sufficient to state a

claim under the Sherman Act. Monopolization or threatened

monopolization requires something more, which may

include "the strength of competition, probable development

of the industry, the barriers to entry, the nature of the anti-

competitive conduct, and the elasticity of consumer

demand." Barr Labs, 978 F.2d at 112. Crossroads has not

alleged any of these factors. Nor is it likely that it could

have done so. Crossroads admits that it acts as a

competitor to O&R in selling its excess capacity in O&R's

service area, and it provides no reason why it is prevented

from doing so in the future. The complaint simply fails to

allege anything to suggest monopolization by O&R

cognizable by the Sherman Act.

The district court also did not err in dismissing

Crossroads' price discrimination claim under the Robinson-

Patman Act. Crossroads alleges that O&R approached its

excess capacity customer and offered to sell it electricity at

a lower price than that offered by Crossroads, that the

reduced price was not offered to all customers, and that

such action constitutes a violation of the Robinson-Patman

21

Act. The Robinson-Patman Act, which amended the Clayton

Act, prohibits price discrimination "where the effect of such

discrimination may be substantially to lessen competition

or tend to create a monopoly." 15 U.S.C. S 13(a). In order to

state a claim under the Robinson-Patman Act, a plaintiff

must allege facts to demonstrate that (1) the defendant

made at least two contemporary sales of the same

commodity at different prices to different purchasers; and

(2) the effect of such discrimination was to injure

competition. See Brooke Group Ltd. v. Brown & Williamson

Tobacco Corp., 509 U.S. 209, 219-27 (1993).

The district court dismissed Crossroads' claim because it

failed to allege that O&R made any sales of energy at

different prices. The complaint merely alleges that O&R has

"offered" to sell electricity at a rate lower than that charged

by Crossroads. Crossroads does not deny this infirmity, but

contends that since O&R is virtually the sole provider of

electricity in its service area that there is "danger" that O&R

will abuse its market power in competing with smaller

suppliers like Crossroads. See Appellant's Br. at 47. This

position is not supported by any citation to authority and

suggests that Crossroads' claim is based on at a speculative

threat of future competitive injury, which would not be ripe

for determination in any event. Merely offering lower prices

to a customer does not state at a price discrimination claim.8

Even if the offer of lower prices were sufficient to survive

dismissal, Crossroads has failed to sufficiently plead the

second element of a price discrimination claim: injury to

competition. Crossroads has made no allegation of

predatory conduct in any offers to customers that O&R has

made, nor has it alleged any other competitive effect of

O&R's offer. The mere fact of O&R's market share does not

mean that approaching Crossroads' customer is an

antitrust violation, so something additional must be alleged

in order to survive dismissal. See Barr Labs, 978 F.2d at

106-07. Crossroads has not alleged any anticompetitive

_________________________________________________________________

8. As the district court noted, at least two other circuits have required

dismissal when two sales are not alleged. See Terry's Floor Fashions, Inc.

v. Burlington Indus., 763 F.2d 604, 615 (4th Cir. 1985); Fusco v. Xerox

Corp., 676 F.2d 332, 337 (8th Cir. 1982).

22

effect, such as below-market prices, or any other indicia of

anticompetitive behavior. Crossroads' monopolization and

price discrimination claims simply come up short.

IV.

The judgment of the district court will be reversed, and

the matter will be remanded for further proceedings

consistent with this opinion.9

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

_________________________________________________________________

9. As we noted above, the district court denied Crossroads' cross-motion

for summary judgment as moot. In light of our decision, the motion is no

longer moot, but we decline to reach its merits since it has not been

briefed before us nor first addressed by the district court.

23