# Petition — Indiana & Michigan Electric Co. v. City of Mishawaka > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_0047%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1978 - **Citation:** 436 U.S. 922 ## Text Supreme Court, U. S. a NOV 14 1977 IN THE Supreme Court of the United Beaty ve. cccen October Term, 1977 Nog 7-689 INDIANA & MICHIGAN ELECTRIC COMPANY, Petitioner, CITY OF MISHAWAKA, INDIANA, CITY OF NILES, MICHIGAN, CITY OF COLUMBIA CITY, INDIANA, CITY OF BLUFFTON, INDIANA, CITY OF GARRETT, INDIANA, CITY OF GAS CITY, INDIANA, TOWN OF FRANKTON, INDIANA, TOWN OF WARREN, INDIANA, TOWN OF NEW CARLISLE, INDIANA, and TOWN OF AVILLA, INDIANA, municipal corporations, Respondents. —— — = ——————_ ————-- ~~ —_— — -—— = PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT —-— —— WauitNey NortH SEYMOUR Counsel for Petitioner One Battery Park Plaza New York, New York 10004 (212) 483-9000 Of Counsel: RicHarD M. DIcKE PETER J. SCHLESINGER Dennis G. JACOBS Simpson THACHER & BARTLETT Tuomas W. YODER LAWRENCE A. LEvy LIVINGSTON, DiILpDINE, HAYNIE & YODER November 14, 1977 TABLE OF CONTENTS PAGE Opinions and Orders Below ................ siiadliuadthapsindscaonenactaiion 2 I i ll eee | 2 FEET et ENE LE I ON 2 ESI. SUCP o0eAs Eee REA TORS OR 3 I oo disteaabcaaseauiklie 3 ek Te I prehiiscittietiisdctcinnnsibidndabtirnains, 4 B. I&M’s Motion to Dismiss ..............0.00...0000000..... 5 ©. FPPC ¥. Comamaay COOP. .......r.cceccccsvscscescscscscsessssccees. 6 D. Court of Appeals Decision ..........0.00.0.0..00000.... 8 Reasons for Granting the Writ .........0.00....00.000.0000000. 10 Point I—The decision below disregards the natural implications of Conway and will encourage the growing practice of filing dual claims of price squeeze with both FPC and the district court...... 10 Point II—The decision below conflicts with the prin- ciples of implied repeal of the antitrust laws set forth in Silver v. New York Stock Exchange, 373 U.S. 341 (1963); Gordon v. New York Stock Ex- change, 422 U.S. 659 (1975) ; and United States v. National Association of Securities Dealers, Inc., a chemi 16 Point I1I—The decision below relies on an over-ex- pansive reading of Cantor v. Detroit Edison Co., 428 U.S. 579 (1976), as this Court’s opinion in Bates v. State Bar of Arizona, —— U.S. » 97 S.Ct. 2691 (1977) demonstrates .......00000.............. 20 II PAGE Point IV—Judicial economy requires that FPC exer- cise primary jurisdiction over price squeeze alle- (FRIESE 9 elie ri ore costes ev OSes 24 APR IN SE ae 28 ERENCE SSK A EO re la Text of Statutes Relied On 0... la Federal Power Act §205, 16 U.S.C. §824d a Federal Power Act §206(a), 16 U.S.C. (824e(a)... 3a Sherman Act §2, 15 U.S.C. §2 0 oo0oooocooocococococeeococeccscees 4a Clayton Act §4, 15 U.S.C. §15 ooo. 4a Clayton Act §16, 15 U.S.C. §26 ooo. 5a Order and Judgment of the Court of Appeals __... 6a Opinion of the Court of Appeals 0.0... 7a Order and Memorandum of the District Court, race EIR vase 3la Order of the District Court, October 22,1976... d4a I a 55a Amendment to the Complaint 63a Iil TABLE OF AUTHORITIES PAGE Cases: Bates v. State Bar of Arizona, —— U.S. ——, 97 S.Ct. 2691 (1977) .........0..... "REA CRERE Weert? A oA L OER SDT eT OOTT 21 Bluefield Water Works & Improvement Co. v. Public Service Commission, 262 U.S. 679 (1923) ............., 13, 23 Borough of Elwood v. Pennsylvania Power & Light Co., Civil No. 77-1145 (W.D. Pa.) ................::::ccs00e 11-12 Boston Edison Co., FPC Op. No. 809, Docket Nos. E- 7738 and E-7784, 12 F.P.S. 5-577 (July 6,1977) ... 10 Cantor v. Detroit Edison Co., 428 U.S. 579 (1976) ....8, 9, 10, 20, 22 Carolina Power & Light Co., FPC Docket No. ER76- 495 (Phase II), Initial Decision of the Adminis- trative Law Judge (Sept. 7, 1977) 0... 13, 27 Central Power & Light Co., FPC Order, Docket No. ER77-514 (October 14, 1977) .................:.:ccscssssoees 11 Cities of Batavia v. FPC, 548 F.2d 1056 (D.C. Cir. ads 0 acc sa eaasincee lot iaaceesiaopiansodiienininnie 24 Cities of Batavia v. Commonwealth Edison Co., Civil I a cess veliepeteenoiiloe 11 Cities and Villages of Plymouth v. Wisconsin Power & Light Co., Civil No. 770223 (W.D. Wis.) .......... 11 City of Groton v. Connecticut Light & Power Co., Civil a ee ceinseansioniaiaes 11 City of Kirkwood v. Union Electric Co., Civil No. 77- ID I FN ooo scnssccsccccoresisernnsenines ie itis 11 City of Newark v. DelMarVa Power & Light Co., Civil Nee aaedaliaebildas 11 City of Shakopee v. Northern States Power Co., Civil a acesaniles 11 Columbus & Southern Ohio Electric Co., FPC Order, Aug. 26, 1977, Docket No. ER77-529, 42 Fed. Reg. I CS hy BUD iccteiceiniesecsncechicededinssnitinetinin 11 IV PAGE Commonwealth of Pennsylvania v. State of West Vir- ginia, 263 U.S. S68 (19Z3) ...................ccessesseresereeee. 14 Conneeticut Power & Light Co., FPC Op. No. 761-A, Docket No. E-7743, 12 F.P. Ss. 5-746 (July 20,1977) 11 Dayton Power & Light Co., FPC Order, Docket No. EXB76-887 (October 13, 1977) ...............cccccceseeseeeees 11 Federal Power Commission v. Conway Corp., 510 F.2d 1264 (D.C. Cir. 1975), aff’d 426 U.S. 271 (1976) .... 7 Federal Power Commission v. Conway Corp., 426 U.S. tee all 2, 6, 8, 10, 12, passim Federal Power Commission v. Natural Gas Pipeline Co., 315 U.S. 575 (1942) oon ccceccecceeee cere 13 Federal Power Commission v. United Gas Pipe Line Co., 393 U.S. 71 (1968) o.oo eeeeeeeees 29 Gordon v. New York Stock Exchange, 422 U.S. 659 EEE ECC Cae ee 12, 17, 28 Gulf Power Co., FPC Docket No. ER77- +: ye 11 Louisiana Power & Light Co., FPC Order, Aug. 26, 1977, Docket No. ER77-533, 42 Fed. Reg. 44583- 585 (Sept. 6, 1977) 0 eecccccccceceeeeees 11 Minnesota Power & Light Co., FPC | nn Docket No. ER77-427 (Sept. 26, 1977) veorseovesesceseesse Parker v. Brown, 317 U.S. 341 (1943) 0... 9, 20, 21 Pennsylvania Power & Light Co., FPC Docket No. E- 8927, Order Affirming Initial Decision (March 24, SI dilintiivisissuiinonsivsgsiieseimssvessnasvnpencvepeumnemaiandhmibszsasmmen 27 Philadelphia Electric Co., FPC Order No. 791, Docket Nos. E-7795 and E-7989, 11 F.P.S. 5-906 (April 6, BID scssecscccsesorncssrssossoncsusescsersesserenvesncsesvecsonersevsessavenareede 11 Public Service Commission v. F.P.C., 487 F.2d 1043 (D.C. Cir. 1973)... | Coe 18 Vv PAGE Richmond Power & Light v. Indiana & Michigan Elec- tric Co., Civil No. 8 77-173 (N.D. Ind.) .................. 11 Silver v. New York Stock Exchange, 373 U.S. 341 I even sccisinicsuoesersesenscdammaameaaieaaae 16, 17, 28 Town of Norwood v. Boston Edison Co., Civil No. 74- GEG CO TID ceceivccsscstincievscvtttsasntenmnananainns 11 Towns of Concord v. Boston Edison Co., Civil No. 76- GED CRA TRIS « necsveisssessssissetsrcesvninscainiicaiaaennan 11 Union Electric Co., FPC Order, October 25, 1977, Docket No. ER77-614, 42 Fed. Reg. 57515-516 Cae, BBG De . snsesvtsssscscrisercsnisittiensesenmencsiadahatmaan 11 United States v. National Association of Securities Dealers, Inc., 422 U.S. 694 (1975) oo... 18, 28 United States v. Philadelphia National Bank, 374 U.S. SE. GE schescaccvnitsictimnsiccseieecsmseiaiiaeeaan 18 Statutes and Regulations: Sherman Act §2, 15 U.S.C. §2 0000... cceeteeeteeeeteees 3, 4 Clayton Act §4, 15 U.S.C. §15 oo... cccecceeeeseeeeteeeee 3 Clayton Act §16, 15 U.S.C. §26 20000. 3 Federal Power Act §205, 16 U.S.C. §824d - OER 25. 3, 23 Federal Power Act §206, 16 U.S.C. §824e ...................... 3, 23 Federal Power Act §313, 16 U.S.C. §825/ 2.0000... 6, 15 OD WB, GD vccscccctncirecccncininescictntescteanniadataiaens 2 St 1. C= EERE Eeee Remsen nin ne > 6 18 O.F.B. $35.13(b) (1) (1977) ...........ccccccsecsessscsssesseesees 26 Burns Ind. Stat. Ann., Title 8, §8-1-1-5 oo. 22 Mich. Stat. Ann., Title 22, §22.13(6) .................. headiamee 22 Miscellaneous Material: FPC Order No. 563, issued March 21, 1977, 42 Fed. Reg. 16131 (March 25, 1977), rehearing denied, May 20, 1977, 42 Fed. Reg. 27574 (May 31,1977) 27 \ IN THE Supreme Court of the United States October Term, 1977 No. rr INDIANA & MICHIGAN ELECTRIC COMPANY, Petitioner, v. CITY OF MISHAWAKA, INDIANA, CITY OF NILES, MICHIGAN, CITY OF COLUMBIA CITY, INDIANA, CITY OF BLUFFTON, INDIANA, CITY OF GARRETT, INDIANA, CITY OF GAS CITY, INDIANA, TOWN OF FRANKTON, INDIANA, TOWN OF WARREN, INDIANA, TOWN OF NEW CARLISLE, INDIANA, and TOWN OF AVILLA, INDIANA, municipal corporations, Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT Petitioner, Indiana & Michigan Electric Company, re- spectfully prays that a writ of certiorari issue to review the order and judgment and the opinion of the United States Court of Appeals for the Seventh Circuit, entered in this preceeding on August 16, 1977. bo Opinions and Orders Below The order and judgment and the opinion of the Court of Appeals, not yet officially reported, are reproduced in the Appendix’ at 6a and 7a, respectively ; its opinion appears at 1977-2 CCH Trade Cas. §61,587. The May 1, 1975 order and opinion of the district court, not officially reported, are reproduced at 3le; its opinion appears at 1975-1 CCH Trade Cas. {60,318 and at 18 P.U.R. 4th 175. The Octo- ber 22, 1976 order of the district court, not otherwise re- ported, is reproduced at 54a. Jurisdiction The order and judgment and the opinion (6a and 7a, respectively) of the Court of Appeals were entered on August 16, 1977. This petition for a writ of certiorari is filed within 90 days of that date. This Court’s jurisdiction is invoked pursuant to 28 U.S.C. §1254(1). Questions Presented Whether the United States Court of Appeals for the Seventh Circuit erred in deciding that this Court’s de- cision in Federal Power Commission v. Conway Corp., 426 U.S. 271 (1976), holding as it does: 1. that the Federal Power Commission has juris- diction to consider allegations of an anticompetitive ‘price squeeze’’; and 2. that the Federal Power Commission must con- sider allegations of an anticompetitive ‘price squeeze’’ in setting wholesale electric rates; 1. Citations with the suffix “a” are to the Appendix hereto. 3 does not vest in the Federal Power Commission? exclusive or, alternatively, primary jurisdiction to hear and rule upon plaintiffs’ ‘‘price squeeze’’ allegations. Statutes Involved This petition involves issues which require an accom- modation between Sections 205 and 206(a) of the Federal Power Act, on the one hand, and Section 2 of the Sherman Act and Sections 4 and 16 of the Clayton Act, on the other hand. These statutes are set out in the Appendix hereto at la through 5a. Statement of the Case The jurisdiction of the district court was invoked by a Complaint which purports to raise alleged violations of the Sherman Act, §2, 15 U.S.C. §2, and of the Clayton Act, §§4 and 16, 15 U.S.C., §§15 and 26 (1970). At issue on this petition is whether or not there is an implied repeal of antitrust jurisdiction in a district court, such repeal being predicated upon the determination by this Court that a regulatory agency must accept and exercise jurisdiction over the identical allegations of specific antitrust violations _ On October 1, 1977, pursuant to the provisions of the Depart- wil of Energy Deseiadion Act, Public Law 95-91, 91 Stat. 565 (August 4, 1977) and Executive Order No. 12009, 42 Fed. Reg. 46267 (September 13, 1977), the Federal Power Commission ceased to exist and its functions and regulatory responsibilities were trans- ferred to the Secretary of Energy and the Federal Energy Regulatory Commission which, as an independent commission within the Depart- ment of Energy, was activated on October 1, 1977. We have, for purposes of convenience, used the designation FPC” herein wherever it is intended to re‘ cr to either the Federal Power Commission or the Federal Energy Regulatory Commission. 4 in a regulated industry which are presented for determina- tion by the Complaint filed in a district court. Indiana & Michigan Electric Company (‘‘I&M’’) is an electric utility engaged in the generation, transmission and distribution of electric energy for sale both at retail and at wholesale for resale. This antitrust action was com- menced on March 25, 1974 in the United States District Court for the Northern District of Indiana, South Bend Division, against 1&M by ten of its municipal wholesale- for-resale customers, which are located in the States of Indiana and Michigan (‘‘ Municipalities’’).® Municipalities instituted this action during the pendency of lengthy proceedings before FPC, and the Complaint and the Amendment to the Complaint allege matters which were and which, in part, are still the subject of proceedings be- fore FPC. In addition, the Complaint alleges matters which were, and are, subject to the }urisdiction of the Public Serv- ice Commissions ef Indiana and Michigan (‘‘Indiana Com- mission’’ and ‘‘ Michigan Commission,’’ respectively). A. The Complaint The Complaint seeks declaratory and injunctive relief and treble damages for alleged violations of Section 2 of the Sherman Act. 61a. The Complaint alleges that I&M mo- nopolized and attempted to monopolize interstate trade and commerce in the retail distribution and sale of clectric power. Specifically, it is charged that I&M sought to elim- inate Municipalities as competitors in the sale of electric 3. I&M has other wholesale-for-resale customers—municipalities, rural electric cooperatives and investor-owned utilities—which are not plaintiffs here. 5 power at retail by creating a difference, i.e., a ‘‘price squeeze,’’ between (a) the wholesale price I&M charges Municipalities for the sale of electric power and (b) the retail price I&M charges its direct industrial customers for electric power.* 58a-60a. Municipalities allege that the price squeeze prevents them from competing effectively with I&M for industrial customers. The Complaint charges that the price squeeze is reflected in a rate increase made effective by FPC, sub- ject to refund, on January 13, 1973, which affected the rates charged Municipalities by I&M. 58a-59a. On May 28, 1976, I&M made a further filing with FPC for an increase in its wholesale rates to Municipalities, and an Amendment to the Complaint alleges that a further price squeeze was created when that increase became effective, subject to refund, on July 27, 1976. 63a-64a.° B. I1&M’s Motion to Dismiss On May 1, 1974, I&M moved the district court to dismiss or, in the alternative, to stay the instant proceedings. On May 1, 1975, the district court, per District Judge Grant, issued an Order and Memorandum denying I&M’s motion. dla. 4. I&M has approximately 31 retail Tariffs on file with the Indi- ana Commission, five of which I&M would concede are industrial Tariffs ; I&M likewise has approximately 14 retail Tariffs on file with the Michigan Commission, two of which I&M would concede are industrial Tariffs. The complaint does not specify which of I&M’s retail Tariffs create the alleged price squeeze. 5. I&M’s answer to the Complaint was served on June 27, 1975 and I&M’s answer to the amendment of the Complaint was served on November 5, 1976. 6 On May 12, 1975, I&M filed a motion to reconsider, vacate, set aside and amend the district court’s May 1, 1975 Order, and to certify for appellate review, pursuant to 28 U.S.C. §1292(b), the questions of law which are raised in this Petition. On October 22, 1976, District Judge Sharp adhered to District Judge Grant’s May 1, 1975 Order and Memorandum, but certified the issue to the United States Court of Appeals of the Seventh Circuit. 54a. The Court of Appeals thereafter accepted the certification. C. FPC v. Conway Corp. In the early stages of the proceedings before FPC in- volving I&M’s June 13, 1972 filing for upward revisions in its wholesale rates (FPC Docket No. E-7740), FPC ruled, in an Order issued November 27, 1973 and affirmed on rehearing on January 17, 1974, that the claim of Municipal- ities, among others, of a wholesale-retail price squeeze would not be considered in the pending proceeding.® On March 7, 1974, Municipalities, among others, filed a Petition for Review, pursuant to Section 313 of the Federal Power Act with the United States Court of Appeals for the Dis- trict of Columbia Circuit to review FPC’s Orders of No- vember 27, 1973 and January 17, 1974 and three weeks later, on March 28, 1974 the Complaint herein was filed with the district court. On June 7, 1976, this Court issued its decision in Fed- eral Power Commission v. Conway Corp., 426 U.S. 271 6. On January 31, 1974, the Presiding Administrative Law Judge assigned to FPC Docket No. E-7740 granted an FPC Staff Counsel’s motion to eliminate all price squeeze testimony and exhibits from FPC Docket No. E-7740. 7 (1976), holding that FPC has jurisdiction, which it must exercise, to consider allegations of an anticompetitive price squeeze in setting wholesale electric rates. All parties recognize the impact of Conway on the issues in this action.” Following this Court’s decision in Conway, Municipalities and the other members of the Indiana and Michigan Municipal Distributors Association (‘‘IMMDA’’)® re- quested FPC to ‘‘confess error’’ before the District of Columbia Court of Appeals for FPC’s prior refusal to con- sider IMMDA’s price squeeze allegations in connection with IMMDA’s challenge to I&M’s 1972 rate increase filing. In August, 1976, a suecessor FPC Presiding Administra- tive Law Judge ruled on the issues involving I&M’s 1972 rate increase filing, and, among other things, he recom- mended that the price squeeze issues raised by Municipal- ities through IMMDA be resolved by FPC in further pro- ceedings.° 7. 1&M’s motion for reconsideration of District Judge Grant's Order and Memorandum of May 1, 1975 was predicated upon the Court of Appeals decision in Conway, 510 F.2d 1264 (D.C. Cir. 1975), subsequently affirmed by this Court. 8. IMMDA is an ad hoc association of twelve of I&M’s municipal wholesale-for-resale customers, ten of which are the plaintiffs here. 9. Initial Decision, issued August 19, 1976 in FPC Docket No. E-7740. Issues raised in Docket No. E-7740 were the subject of an Agreement of Settlement and Compromise entered inio between IMMDA and I&M, and that Agreement was approved by FPC in its Order issued June 1, 1977. Municipalities contended before the Court of Appeals that that Agreement did not bear upon their ability to prosecute antitrust claims arising out of I&M’s 1972 rate filing, and the Court of Appeals has directed the district court to determine whether that Agreement has mooted any of the antitrust claims in this case. As the Court of Appeals has noted, however, the claims premised upon 1&M’s Juiy 27, 1976 wholesale rate filing with the FPC are still “active.” 30a. 8 D. Court of Appeals Decision In its opinion dated August 16, 1977, the Court of Ap- peals affirmed both the May 1, 1975 and October 22, 1976 orders of the district court and held that FPC’s jurisdic- tion, under Conway, to hear and determine price squeeze allegations is neither exclusive nor primary, and that the district court may proceed to determine the antitrust al- legations raised in this action. The Court of Appeals ruled that FPC’s price squeeze jurisdiction is not exclusive because its remedial powers are not coextensive with those of the district court. Rely- ing upon this Court’s observation in Conway, that FPC’s power to remedy an anticompetitive price squeeze is limited to a wholesale rate adjustment ‘‘at the very least’’ to the lower range of the zone of reasonableness for the recovery of fully allocated costs (426 U.S. at 279), the Court of Appeals found that the powers of the district court, includ- ing the power to grant treble damages and injunctive relief, are required to supplement those of FPC. 14a-16a, 20a, 26a. Thus, the decision below turned on an erroneous as- sumption that exclusive jurisdiction in a regulatory agency can only be found when it has remedial powers that are co- extensive with the remedial powers of a district court. Moreover, the Court of Appeals erroneously analyzed this Court’s decision in Cantor v. Detroit Edison Co., 428 U.S. 579 (1976), which held that that utility’s light bulb ex- change program was not exempted from the federal anti- trust laws by virtue of that program’s inclusion in a rate tariff filed with, and approved by, a State public service 9 commission. Applying the language of Cantor to the in- stant case, the Court of Appeals ruled that ‘‘[t]he state utility commissions have only put the imprimatur of their sanction on the retail rates charged by the defendant’’ (17a), and that the state action’® exception to the federal antitrust laws was therefore inapplicable. The decision below declared that FPC’s regulatory process would not be disturbed by an award of damages for past anticompetitive conduct or by a district court injuns- tion regulating I&M’s conduct ‘‘in making and promoting its rate applications’’ prior to their submission to varie’ regulatory agencies. Any conflict between deterininat*« in the district court and FPC would be avoided, the Couir of Appeals held, because ‘‘the district court would presum- ably order [I&M] to file a new wholesale rate application that would remove the disparity between the rates charged plaintiffs and defendant’s industrial customers.’’ 26a. The Court below therefore held that FPC’s jurisdiction to hear and determine price squeeze claims is not exclusive and, therefore does not oust the district court of its juris- diction, under the federal antitrust laws, to determine the same claims. Further, the Court of Appeals rejected I&M’s argu- ments that FPC’s jurisdiction to hear and determine price squeeze claims is at least primary and that the district court proceedings should be stayed pending a determina- tion by FPC. 10. Parker v. Brown, 317 U.S. 341 (1943) 10 Reasons for Granting the Writ The argument that follows demonstrates that the Court of Appeals decision has so far departed from the accepted and usual course of judicial proceedings and has so far sanctioned such a departure by the district courts, as to call for an exercise of this Court’s power of supervision. The decision of the Court of Appeals will disrupt the or- derly regulatory process because (1) the decision below will encourage the growing practice of filing dual price squeeze claims with FPC and with the district courts; (2) the ruling of the court below directly conflicts with the principles of antitrust repealer set forth in decisions of this Court; (3) the decision below relies upon an over- expansive reading of this Court’s ruling in Cantor; and (4) judicial economy requires that FPC exercise primary jurisdiction, at least, over price squeeze claims. POINT I The decision below disregards the natural implica- tions of Conway and will encourage the growing prac- tice of filing dual claims of price squeeze with both FPC and the district court. This Court’s decision in Conway directs FPC to resolve claims of an anticompetitive price squeeze arising from differing wholesale and retail rates, and to alleviate any anticompetitive price squeeze found to exist to the extent of its jurisdiction. Numerous price squeeze claims of the kind at issue herein have been filed with FPC. E.g., Bos- ton Edison Co., FPC Op. No. 809, Docket Nos. E-7738 and 11 E-7784, 12 F.P.S. 5-577 (July 6, 1977) ; Connecticut Power dé Light Co., FPC Op. No. 761-A, Docket No. E-7743, 12 F.P.S. 5-746 (July 20, 1977); Dayton Power & Light Co., FPC Order, Docket No. ER76-887 (October 13, 1977); Minnesota Power & Light Co., FPC Ruling, Docket No. ER77-427 (Sept. 26, 1977); Central Power & Light Co., FPC Order, Docket No. ER77-514 (October 14, 1977) ; Gulf Power Co., FPC Docket No. ER77-532; Lowisiana Power & Light Co., FPC Order, Aug. 26, 1977, Docket No. ER77- 533, 42 Fed. Reg. 44583-585 (Sept. 6, 1977) ; Columbus & Southern Ohio Electric Co., FPC Order, Aug. 26, 1977, Docket No. ER77-529, 42 Fed. Reg. 44026-027 (Sept. 1, 1977); Union Electric Co., FPC Order, October 25, 1977, Docket No. ER77-614, 42 Fed. Reg. 57515-516 (Nov. 3, 1977). See also Philadelphia Electric Co., FPC Order No. 791, Docket Nos. E-7795 and E-7989, 11 F.P.S. 5-906 (April 6, 1977) (reverse price squeeze asserted by utility). Simi- larly, numerous price squeeze claims of the kind at issue herein have been filed in the district courts across the coun- try. E.g., Cities of Batavia v. Commonwealth Edison Co., Civil No. 76 C 4388 (N.D. Ill.) ; City of Newark v. DelMar- Va Power & Light Co., Civil No. 77-234 (D. Del.) ; City of Shakopee v. Northern States Power Co., Civil No. atin (D. Minn.) ; City of Kirkwood v. Umon Electric Co., Civil No. 77-0947-C(2) (E.D. Mo.) ; Town of Norwood v. Boston Edison Co., Civil No. 74-4104T (D. Mass.) ; City of Groton v. Connecticut Light & Power Co., Civil No. 15609 (D. Conn.) ; Towns of Concord v. Boston Edison Co., Civil No. 76-4556 (D. Mass.) ; Richmond Power & Light vy. Indiana & Michigan Electric Co., Civil No. S 77-173 (N.D. Ind.) ; Cities and Villages of Plymouth v. Wisconsin Power & Light Co., Civil No. 770223 (W.D. Wis.) ; Borough of El- 12 wood v. Pennsylvania Power & Light Co., Civil No. 77-1145 (W.D. Pa.).™ The Court of Appeals’ decision encourages the practice of dual proceedings, administrative and judicial, and re- quires the federal courts to hear and determine the same issues that are being heard and determined by FPC. While a district court’s determination in a price squeeze case might appear to have the virtue of operating upon whole- sale and retail rates, it has the concomitant and fatal dis- advantage of interfering with all levels of the rate-making process previously entrusted to FPC and to the State com- missions. A second regulatory system for wholesale and retail rate-making is thus being created in the federal courts, whose background in the field does not commend them to be preferred over the natural and specially chosen regulatory agencies, federal and State. I&M does not believe that this Court entertained and decided the Conway case, mandating FPC to exercise its jurisdiction to resolve antitrust price squeeze allegations in the electric utility industry, in the expectation that the district courts would coxduct parallel proceedings on pre- cisely the same issue. The orderly distribution of juris- diction, related both to convenience and natural compe- tency, contemplated by Conway, is disrupted by the invi- tation to multiple proceedings which is inherent in the decision below. The logical corollary to this Court’s hold- ing in Conway is that the district court is not expected to exercise jurisdiction over the identical subject matter, since existence of district court jurisdiction over these issues would have obviated any necessity for this Court to re- 11. Clearly, the liminal jurisdiction issues raised by this petition, and directly involved in each of the cited cases, can and should be resolved at the outset of the litigation. Gordon v. New York Stock Exchange, 422 U.S. 659, 686 (1975). 13 quire FPC, with its jurisdictionally limited ability to pro- vide a remedy, to hear them as well. The Court of Appeals indicates that the district court is a necessary forum for allegations of anticompetitive price squeezes because, under Conway, FPC’s ability to remedy the squeeze is limited, ‘‘at the very least,’’ to the setting of the wholesale rate in the lower range of the zone of reasonableness. 14a-16a. That power may indeed be quite sufficient. See Carolina Power & Light Co., FPC Docket No. ER76-495 (Phase II), Initial Decision of the Administrative Law Judge at 82 (Sept. 7, 1977). The right course would seem to be to allow FPC to exercise its jurisdiction as this Court has required, without pro- ceeding on the assumption that it will administer relief improperly and require a district court to be constantly looking over its shoulder. Should FPC fail in its duty, there is an obvious remedy without need for a perennial monitor, for a rate set below the zone of reasonableness would be confiscatory and therefore unconstitutional. Federal Power Commission v. Natural Gas Pipeline Co., 315 U.S. 575, 585 (1942); Bluefield Water Works & Improve- ment Co. v. Public Service Commission, 262 U.S. 679 (1923) ; Public Service Commission v. F'.P.C., 487 F.2d 1043, 1092 (D.C. Cir. 1973). The Court of Appeals’ rationale for rejecting the prin- ciple of exclusive jurisdiction in FPC is that its remedial power is limited by Conway to its jurisdictional power to set rates within the zone of reasonableness. However, a wholesale rate level set below the zone of reasonableness would be confiscatory and therefore unconstitutional 14 whether imposed by FPC or by the district court. Thus any district court injunction affecting I&M’s rate submis- sions to FPC and to the State Commissions would have to consider the justness and reasonableness of the rate, in- cluding the rate of return, a concept reflecting the public interest in the financial soundness of essential private util- ities, as well as all of the other public interest considera- tions that animate the administration of the Federal Power Act and the several State public utility regulatory stat- utes. Under the procedure envisioned by the Court of Appeals below, the district courts would be conducting parallel and duplicative reviews of I&M’s submissions to FPC and to the Indiana and Michigan Commissions, and the district courts would have the power and obligation to make parallel determinations in matters of regulatory mechanics that have been delegated to administrative agencies. In Commonwealth of Pennsylvania v. State of West Virginia, 262 U.S. 553 (1923), Justice Brandeis, in dissent, viewed as unacceptable the assumption by this Court, and impliedly by the federal court system, of suits requiring the exercise of regulatory judgments in an area of com- merce over which the Commission would later exercise jurisdiction: **Clearly, this Court could not undertake such de- terminations. To make equitable distribution [of gas] would be a task of such complexity and difficulty that even an interstate public service commission with broad powers, perfected administrative machinery, ample re- sources, practical experience and no other duties, might fail to perform it satisfactorily. As this Court would be powerless to frame a deeree and provide machinery 15 by means of which such equitable distribution of the available supply could be effected, it should, according to settled practice, refuse to entertain the suits. Com- pare Marble Co. v. Ripley, 10 Wall. 339, 358; Texas & Pacific Ry. Co. v. Marshall, 136 U.S. 393, 406; Giles v. Harris, 189 U.S. 475, 487, 488.’’ 262 U.S. at 623. The duplication of judicial administrative effort would, of course, have its counterpart in parallel and duplicative review mechanisms. If FPC concludes that I&M’s whole- sale rate is ‘‘just and reasonable’’ and that it does not create an anticompetitive price squeeze, the appropriate judicial forum for reconsideration of FPC’s determination, as provided by statute, would be the court of appeals em- powered to review FPC’s decisions under Section 313 of the Federal Power Act, 16 U.S.C. §825/ (1971). If the dis- trict court is not required to dismiss this action, as IGM contends it is, or does not choose to stay this action for any reason, the appellate procedure available in antitrust cases would result in the delivery of a second complete record, incorporating perhaps inconsistent findings of fact, to a second court of appeals. One court of appeals might sit in review of the district court’s action while another sits in review of FPC proceedings; alternatively, a single court of appeals might sit in review of two determinations on the same issue, based upon two separate records, and would be governed by disparate standards of review. In neither event would judicial economy be served; inevitably there would be duplication of effort on the part of courts, liti- gants and witnesses. The danger of conflicting results is patent. 16 POINT II The decision below conflicts with the principles of implied repeal of the antitrust laws set forth in Silver v. New York Stock Exchange, 373 U.S. 341 (1963); Gordon v. New_York Stock Exchange, 422 U.S. 659 (1975), and United States v. National Association of Securities Dealers, Inc., 422 U.S. 694 (1975). The Court of Appeals’ decision virtually assures that complex issues of ratemaking will be made su}ject to con- flicting and duplicative fact-finding and review and creates a grave potential for irreconcilable collision between regu- latory and judicial resolutions of price squeeze allegations involving the electric utility industry. Oe Municipal Corporations, Plaintiffs, Vv. Inpiana & Micuican Exectric Company, a Corporation, Defendant. rl > ee ORDER The defendant, Indiana & Michigan Electric Company, filed a motion to dismiss the above entitled action pursuant 32a Order and Memorandum of the District Court to Rule 12, F.R.C.P., or, in the alternative, that the pro- ceeding be stayed in the event that defendant’s motion to dismiss be denied. The defendant seeks to dismiss on the grounds that this Court lacks jurisdiction over the subject matter of this action and that the complaint fails to state a claim upon which relief may be granted. The defendant has also filed a motion for leave to file a supplementary affidavit in support of its motion to dis- miss or in the alternative to stay, which motion is DENIED for the reasons slated in the toilowing Memorandum. After reviewing defendant’s motion, the parties’ briefs, and oral argument having been held, Ir Is THe Orper or THE Court that defendant’s motion to dismiss or in the alternative to stay be, and the same is, hereby DENIED. Rosert A. Grant District Judge Enter: May 1, 1975 MEMORANDUM The plantiffs, City of Mishawaka, Indiana; City of Niles, Michigan; Cities of Columbia City, Bluffton, Garrett, and Gas City, Indiana; and the Towns of Frankton, Warren, New Carlisle, and Avilla, Indiana, filed the present action on March 25, 1975, against Indiana & Michigan Electric Company (hereinafter I & M). Plaintiffs have based juris- diction of this action on Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§15 and 26, and allege that the defendant, I & M, has monopolized and attempted to monopolize inter- 33a Order and Memorandum of the District Court state trade and commerce in the distribution and sale of electric power at retail, in violation of Section 2 of the Sherman Act, 15 U.S.C. §2. Plaintiffs in their complaint state that they are munic- ipalities which operate their own electric distribution sys- tems; that they are within the service area of the defendant, I & M; and that they sell and distribute the electric power at retail to industrial, commercial, and residential cus- tomers within their corporate limits and in nearby areas. Plaintiffs describe I & M as a vertically integrated electric power company which generates electric power, transmits the power throughout its service area, and deliv- ers the power to its wholesale customers, including the plaintiffs, and also directly to its retail customers. Plaintiffs allege that the defendant company is the only firm within their service area engaged in the business of transmitting and selling electric power at wholesale and, thus, the only outside source of supply for wholesale electric power available to them. The complaint states that plain- tiffs, Mishawaka, Indiana; Columbia City, Indiana; Gar- rett, Indiana; Gas City, Indiana; Frankton, Indiana; War- ren, Indiana; New Carlisle, Indiana; and Avilla, Indiana, depend on the defendant for all of their requirements of wholesale electric power. Plaintiffs Niles, Michigan, and Bluffton, Indiana, which operate generating facilities, al- lege that they depend on the defendant for more than 90% of their requirements of electric power. The plaintiffs further contend that the defendant domi- nates and controls the distribution and sale of retail electric power within its service area. They contend that the de- | 34a Order and Memorandum of the District Court fendant has increased its control of the retail market by acquiring municipal electric utilities. It is stated in their complaint that since 1957 the defendant has purchased the assets of four of the twenty (20) municipal utilities within its service area, has absorbed their retail distribution into the I & M system, and has taken over their retail industrial, commercial and residential customers, as follows: Kendall- ville, Indiana (1957), Decatur, Indiana (1959), Portland, Indiana (1963), and Albion, Indiana (1966). Because of this, the plaintiffs contend that the defendant company now controls the distribution and sale of retail electric power in more than 90% of the communities within its service area, while municipally owned and operated systems serve retail customers in fewer than 10%. Plaintiffs allege that the defendant, I & M has monopol- ized and attempted to monopolize interstate trade and com- merce in the distribution and sale of electric power at retail, in violation of Section 2 of the Sherman Act, 15 U.S.C. §2, in the following ways: (1) Since January 13, 1973, the defendant has required municipalities to pay a new wholesale price for electric power. The new wholesale price is substantially higher than the retail price the defendant company charges its own industrial customers. This causes the municipalities to be unable to buy power at the defendant’s wholesale price and sell it at competitive prices. (2) On March 8, 1974, after fourteen months of requir- ing the city of Fort Wayne to pay more for wholesale elec- tric power than the defendant’s own retail industrial cus- Pq eens os owe 35a Order and Memorandum of the District Court tomers pay, and after more than twenty (20) years of sell- ing retail electric power to its own customers in the Fort Wayne area for less than it sells retail power elsewhere, the defendant obtained the agreement of the city officials that the city of Fort Wayne will lease its entire electric utility system to the defendant for thirty-five (35) years. Under the lease agrement to be submitted to the voters, I & M will take possession of all the property and facilities of the city’s electric utility and will operate the electric distribution system. The defendant will take over the city’s retail customers and will sell electric power directly to them. The plaintiffs further contend that the adoption of a wholesale price to municipalities in excess of the retail prices at which it sells electric power has caused and threat- ens to cause, the following consequences : (1) It impairs the plaintiffs’ ability to compete against the defendant. (2) In municipalities that have absorbed the difference between the defendant’s higher wholesale price and lower retail price, the electric utility’s loss of earning exerts pres- sure on the citizens and officials of the municipality to dis- continue operating the utility and to offer to sell or lease it to the defendant. (3) In the municipalities that increase their own in- dustrial retail prices to the level of the defendant’s higher wholesale price, and above the level of the defendant’s lower retail industrial prices, this situation threatens to cause the municipalities’ industrial customers to exert pres- 36a Order and Memorandum of the District Court sure on the municipalities to sell or lease its utility to the defendant so they can purchase electric power at the de- fendant’s lower price. It is the plaintiffs’ contention that these alleged prac- tices have been done with the intent, and have the effect, of monopolizing part of the trade and commerce among the several states in the distribution and sale of electric power at retail in violation of Section 2 of the Sherman Act and have injured the municipalities in their business and prop- erty. Plaintiffs thus seek declaratory and injunctive relief and treble damages. The defendant, I & M, has responded to plaintiffs’ com- plaint by filing a motion to dismiss or in the alternative to stay, pursuant to Rule 12 of the F.R.C.P. The defendant’s motion to dismiss is based upon the following grounds: The Court lacks jurisdiction over the subject matter of the action and the plaintiffs’ complaint fails to state a claim upon which relief may be granted. In the motion to stay, defendant contends that in the event the Court does not dismiss this action, the Court should order this proceeding stayed until the conclusion of the regulatory proceedings before the Federal Power Com- mission involving defendant’s rates charges to wholesale customers, including plaintiffs, to which proceedings de- fendant and the Indiana & Michigan Distributors Associa- tion (of which plaintiffs are members) are parties. Subsequent to a hearing on defendant’s motion to dis- miss, or in the alternative to stay, and while defendant’s motion was under advisement by the Court, the defendant filed a motion for leave to file supplementary affidavit and -~~ 37a Order and Memorandum of the District Court exhibits in support of its motion to dismiss or in the alterna- tive to stay. The Court finds from reviewing defendant’s supplementary aftidavit and exhibits that they are sub- mitted in support of the proposition that the dual pricing structure of which plaintiffs complain does not exist and that plaintiffs are in fact paying less under the present wholesale rates than they would pay under the applicable retail tariff and, therefore, there is no basis upon which the plaintiffs can claim injury. The Court finds that the mate- rial which defendant seeks to file, by way of supplementary affidavit and exhibits, is not material in support of its mo- tion to dismiss or in the al. _rnative to stay but, in fact, is material in opposition to the substantive issue of plaintiffs complaint, which issue is presently not before this Court. The present motion before the Court and the motion de- fendant seeks to supplement, involves the jurisdiction of this Court and not the merits of plaintiffs’ complaint. If and when the merits of plaintiffs’ complaint are at issue, the defendant will be allowed to present its opposition to plain- tiffs’ claim and the Court will then consider such material. The Court finding defendant’s supplementary material to be irrelevant to the present motion, it is the Order of the Court that defendant’s motion for leave to file supplemen- tary affidavit and exhibits be denied. In considering defendant’s motion to dismiss or in the alternative to stay, the Court has had to become familiar with some of the proceedings that have gone on and are going on in the Public Service Commissions of Indiana and Michigan (‘‘Indiana Commission’’ and ‘‘Michigan Com- 38a Order and Memorandum of the District Court mission’’, respectively), and the Federal Power Commis- sion (‘‘Commission’’) with respect to the approval of retail and wholesale rates submitted by I & M since 1971. The following is a summary of what has occurred in the respec- tive Commissions : Reta Rates Dates Action Taken July 30, 1971 I & M filed petition requesting the. Indiana Commission to make an in- vestigation and hold public hear- ings in regard to I & M’s proposed new rates. March 24, 1972 Indiana Commission issued an or- der setting I & M’s retail rates for the State of Indiana. The rates were effective March 29, 1972. July 30, 1971 I & M filed a petition with the Mich- igan Commission asking them to in- vestigate and hold hearings on the proposed rate increase for Michi- gan. March 20, 1973 The Michigan Commission granted an increase in the rates. The rates were effective March, 1973. WHo.esaLeE Rates June 13, 1972 Pursuant to 16 U.S.C. §824(d), I & M submitted proposed rate in- creases in the rates charged to wholesale customers to the Federal Power Commission. 39a Order and Memorandum of the District Court Dates _ August 11, 1972 August 13, 1972 December 5, 1972 February 14, 1973 Action Taken Public hearings were ordered and the Indiana and Michigan Municipal Distributors Association (IMMDA) request to intervene in the proceed- ing was granted. The Commission designated this date as the effective date for I & M’s new rates and suspended the effective date of the new rates for five months thereafter, until Janu- ary 13, 1973. I & M appealed to the United States Court of Appeals in the District of Columbia Circuit, on the grounds that the effective rate date should be July 14, 1972. While it was sub judice, the Commission on January 31, 1974, commenced its hearings on the lawfulness of the proposed rates. The Court of Appeals ruled favor- ably on I & M’s petition, vacated the Commission’s suspension order and remanded the proceeding to the Commission, with instructions that I & M’s rates be made effective ret- roactive to July 14, 1972. A peti- tion for rehearing was filed. 40a Order and Memorandum of the District Court Dates Action Taken August 14, 1974 The rehearing was granted and the Court modified its order as follows: I & M may not collect retroactive rate increases for the five-month period from the effective date of its rate filing, July 14, 1972, through December 13, 1972; I & M may col- lect the difference between its old and new rates for the period from December 14, 1972, through Janu- ary 13, 1973. If the Commission determines that I & M’s filed rates are unjust or unreasonable, it may order I & M to refund the amounts collected after December 13, 1972, in excess of the just and reasonable rates. Indiana & Michigan Electric Company v. Federal Power Com- mission, No. 72-2168 (D.C.Cir. 1974). April 16, 1974 The hearings on the lawfulness of I & M’s rates were concluded and a briefing schedule established, final briefs being due on September 3, 1974. It is expected that the final decision of the Administrative Law Judge will be appealed. I—Subject Matter Jurisdiction Defendant I & M contends that its retail rates which have been set by the Indiana Commission and the Michigan Commission are immune from attack under the Sherman 4la Order and Memorandum of the District Court Act. It argues that it is a well settled principle of antitrust law that conduct which violates the Sherman Act, if under- taken by a private.individual, is immune from attack under the Sherman Act if undertaken by the state or its agents acting in the scope of their authority, Parker v. Brown, 317 U.S. 341 (1943). I & M alleges that nothing in the Sherman Act is intended to restrain a state or its officers or agents from activities directed by its legislature. It is defendant’s position that congress has pre-empted the authority over wholesale rates of electric utilities but has left the states sovereign with respect to the rates and regulations concern- ing retail sales within the states’ borders. Therefore, the retail rates in Indiana and Michigan are subject exclusively to regulation by the Indiana and Michigan Commissions. Defendant states that because I & M’s retail rates derive their authority and efficacy from the legislative commands of Indiana and Michigan and cannot operate or be effective without that command, they are immune from attack under the Sherman Act. It is also the defendant’s position that the Court cannot issue an order affecting the wholesale rates since they are within the exclusive or, alternatively, the primary jurisdic- tion of the Commission. Defendant contends that should the present proceedings not be terminated, they will result in an order determining the just and reasonable rates for I & M’s wholesale customers, inciuding the plaintiffs herein, and these wholesale rates will be subject to the Commis- sion’s approval as just and reasonable. I & M assert that the rates which plaintiffs attack are clearly within the Com- mission’s regulatory domain. The defendant also acknowl- edges that anti-competitive conduct may be raised and con- 42a Order and Memorandum of the District Court sidered by the Commission in its rate determination, but it may only deal with allegations of anti-competitive conduct that are specifically articulated and that are within its jurisdiction to remedy. I & M further agrees that the Commission has no power over the retail rates which are left to the regulatory power of the State Commissions. Because the Commission has no power over the retail rates, I & M is aware of the Commission’s inability to remedy a claim of anti-competitive behavior, premised on the differ- ence in rates charged by I & M to its wholesale and retail customers, by raising the retail rates to the level of the wholesale rates. The Commission also finds that its juris- diction over wholesale rates is clear and that it cannot be limited by the state’s action with respect to retail rates. It is the defendant’s contention that the Commission cannot set wholesale rates at a level equal to or lower than the retail rates if the lower rate would not be adequate to cover the utilities’ allocated cost-of-service or would result in an inadequate rate of return. To do so would result in an ab- dication of the Commission’s statutory responsibility to set only just and reasonable rates. The defendant sees the problem as one of inter-relation- ship of two separate statutory schemes. The Sherman Act has as its goal the determination of prices and services by the working of a free market. The Federal Power Act substitutes for competition the authority of a regulatory agency to supervise the rates and prices charged by electric companies on the grounds that the concept of prices set by free market competition has no place in industries which are monopolies because of public grant, the exigencies of na- ture, or legislative preference for a particular way of doing eT . SS SS RR ET PE PE TT FT Et YET 43a Order and Memorandum of the District Court business. Thus the defendant contends that the antitrust laws may only be applied to the extent that the matter in question is not within the reach of tne regulatory agency’s supervision. The plaintiffs in response to defendant’s argument con- . tend that the Court does have jurisdiction of the subject matter of this case. If is plantiffs’ position that the use of monopoly power to prevent competition is a violation of the anti-trust laws over which this Court has jurisdiction. They rely on Section 2 of the Sherman Act, 15 U.S.C. §2. They further assert that Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§15 and 26, provide a right of action and remedies to private parties who are injured by violation of the Sherman Act. The plaintiffs contend that the defendant’s motion ignores the fact that this anti-trust action does not challenge the defendant’s wholesale or retail prices, but challenges the defendant’s act of allegedly monopolizing and attempt- irig to monopolize the business of selling electric power at retail. Plaintiffs contend it does so by abusing its dis- cretion to file wholesale and retail prices and by instituting a dual price structure that prevents competition and ex- tends the monopoly control. It is the plaintiffs’ position that this Court will not be required either to issue an order raising the retail rates, or issue an order lowering the wholesale rates. Plaintiffs as- sert that the power to establish prices rests with the defend- ant utility, subject only to the requirement that it be within a zone of reasonableness and that they undergo agency review. It is the plaintiffs’ position that the defendant it- | 44a Order and Memorandum of the District Court self has the power to eliminate the dual price system by changing its own price-setting practices and by making such new filings before one or more of the state or federal regulatory agencies as the defendant sees fit which will remove the allegedly unlawful disparity between the price at which the defendant sells electric power to its customers and the price the defendant requires its competitors to pay. Plaintiffs claim that the Federal Power Act does not immunize the defendant’s alleged monoply from coverage of the anti-trust laws, and that the defendant itself concedes in its brief on Page 25 that the anti-trust laws may be ap- plied ‘‘to the extent that the matter in question is not within the reach of the regulatory agency’s supervision.’’ It is argued by the plaintiffs that the Federal Power Act, as interpreted by the Commission, does not itself provide a pervasive regulatory scheme to control the defendant’s practice of instituting a dual price system and requiring its competitors to pay more for electric power than its retail customers. Plaintiffs state that the Commission has held that dual price systems and their anti-competitive effects are beyond the Commission’s jurisdiction. Thus, the Federal Power Act fails to replace tke anti-trust laws with provisions that would regulate the defendant’s monop- olization or immunize the defendant from the coverage of the anti-trust laws. After reviewing both parties’ arguments as to whether the Court lacks jurisdiction over the subject matter of this action, the Court finds that it does have jurisdiction over the ease before it. The defendant has attempted to send the Court down two paths of exclusive jurisdiction and then inform it that because the Court has no control over the 7" —— _ 45a Order and Memorandum of the District Court exclusive areas, it has no jurisdiction over the present ac- tion. I & M first argues that the retail rates in dispute are the products of approval by the Indiana and Michigan Public Service Commissions and, as such, are protected from the Sherman Act under the reasoning set out in Parker v. Brown, supra. Next, I & M points out how the Federal Power Act, 16 U.S.C. §824(d)(a) 1970 has granted the Commission the power to decide if the rates and charges made, demanded, or received by a public utility for or in connection with the sale at wholesale of electric energy are just and reasonable and therefore lawful. The Court agrees with the defendant and the principles set forth in Parker v. Brown. The Court in this case does not have any authority under the Sherman Act to attack the Indiana and Michigan Public Service Commissions’ findings that the retail rates implemented by I & M were lawful. The respective state commissions are empowered to determine whether the elec- trie retailers’ rates are just and reasonable in relation to cost and rate of return, and the Court in no way intends to intrude upon that particular decision. Further, the Court reeognizes that Congress has pre-empted the authority over wholesale rates. There is no dispute but that the Federal Power Commission has been given the task of reviewing the lawfulness of the wholesale rates charged by the de- fendant company. However, the plaintiffs themselves are not attacking the action of the state commissions, nor the role of the Federal Power Commission. What is really at issue in this case is the action of the defendant, I & M. I & M deals in both wholesale and retail electric power and, therefore, has to init'ate vates which are subject to the scrutiny of the state commissions on one level and the Federal Commission when wholesale rates are put into effect. The Commissions operate independently of one ee are cers 46a Order and Memorandum of the District Court another and in no way rely on the other’s actions when deciding upon the lawfulness of the respective rates. The defendant in this case is also the plaintiffs’ only outside source of wholesale electric power, which position makes the Federal Power Commission the only control over the defendant’s price for wholesale power since competition with other wholesalers does not exist in the area. A great portion of the defendant’s argument focused on a regulatory agency’s exclusive or primary jurisdiction over the rates charged by the defendant. I & M cites the eases of Ricci v. Chicago Mercantile Exchange, 409 U.S. 289 (1973), and Pennsylvania Power Company v. F.P.C., 193 F.2d 230 (D.C.Cir. 1951), aff’d., 343 U.S. 414 (1952), to support the position that anti-trust laws have no applica- tion upon an issue which has been placed under the control of a regulatory agency. Here the defendant contends that Congress has given the power over wholesale rates to the Commission and that anti-trust criteria are not to be the governing factor. In both Ricci and Pennsylvania Power Company the Court was concerned with conduct covered by the respective regulatory statutes. In Ricci the issue be- fore the Court involved whether the defendant had violated the rules of the Chicago Mercantile Exchange, an issue the Supreme Court decided was with:n the jurisdiction of the Commodities Exchange Commission. In Pennsylvania Pow- er Company the Court would not allow anti-trust criteria to be forced upon the Commission in its decision of what rate was just and reasonable. The case before us is distinct from both Ricci and Penn- sylvania Power Company. Here, the alleged monopolistic practice not only involves ra‘es which are subject to review by the Federal Power Commission but also separate rates 47a Order and Memorandum of the District Court reviewed by state commissions. Further, it is not the deci- sion by the commission, nor the criteria used in the com- mission’s decision, that is under attack by the plaintiffs. Instead, what is sought to be enjoined is beyond the reach of both state and federal commissions and within the power of the defendant; that is, the initiation of a dual rate struc- ture whereby plaintiffs are allegedly being forced out of the retail electric business by the defendant. The Federal Power Commission itself has indicated that the alleged dual price system and its anti-competitive effects are beyond the Commission’s jurisdiction (Order Denying Motion to Reject, Granting Petition to Intervene in Part and Amending Prior Order, Indiana and Michigan Electric Co., FPC Docket No. 7740, November 27, 1973 [Appendix 4] Plaintiff’s Brief in Opposition to Defendant’s Motion to Dismiss or Stay). The dilemma caused by the seemingly contrary purposes of the regulatory agencies and the anti-trust laws is not a new issue in anti-trust litigation. Although they are dif- ferent forms of control, they have the same goal and that goal is to serve the public interest. In the Supreme Court case of Georgia v. Pennsylvania R.R., 324 U.S. 439 (1944), the State of Georgia, as plaintiff, filed suit against twenty railroad companies alleging that the companies conspired to fix their rates in such a manner as to prefer the ports of other states over the ports of Georgia in violation of the anti-trust laws. The Court in Georgia stated that ‘‘[r]Jegu- lated industries are not per se exempt from the Sherman Act.’’ The Court in the Georgia case also cited Justice Bran- deis’ words in Keogh v. Chicago & N.W. Ry., 260 U.S. 156 (1922) wherein he stated as fellows: 48a Order and Memorandum of the District Court All the rates fixed were reasonable and nondiscrim- inatory. That was settled by the proceeding before the Commission .... But under the Antitrust Act, a combination of carriers to fix reasonable and nondis- criminatory rates may be illegal; and if so, the Govern- ment may have redress. The Court further stated: The fact that these rates had been approved by the Commission would not, it seems, bar proceedings by the Government... The type of regulation which Con- gress chose did not eliminate the emphasis on com- petition and individual freedom of action in rate mak- ing.... The Act was designed to preserve private initiative in rate-making as indicated by the duty of each common carrier to initiate its own rates. Although the Georgia case involved the Interstate Com- merece Commission and not the Federal Power Commission, it has many similarities with the present case. Here, as in Georgia, the rates are not within the discretion of the Court. It is also a fact that in the present case, the Federal Power Commission has no power over the alleged anti-trust viola- tion that is asserted here because it involves retail rates over which it has no control. 16 U.S.C. §824. Because the alleged dual structure is outside the juris- diction of both the federal and state commissions, there is actually no conflict between the anti-trust laws and the regulatory agency. Georgia, supra. The defendant has at- tempted to present the plaintiffs’ claim as one attacking the rates themselves and not one attacking their effect. The Court in Otter Tail Power Co. v. United States, 410 U.S. 366 (1972), faced a similar defense and stated as follows : 49a Order and Memorandum of the District Court The anti-trust charge against Otter Tail does not in- volve the lawfulness of its retail outlets, but only its methods of preventing the towns served from establish- ing their own municipal systems when Otter Tail’s francise expired. The Supreme Court in Ottter Tail further stated the following with respect to the Federal Power Act, 16 U.S.C. §824: There is nothing in the legislative history which reveals a purpose to insulate electric power companies from the operation of the antitrust laws. To the contrary, the history of Part IT of the Federal Power Act indi- eates an overriding policy of maintaining competition to the maximum extent possible consistent with the public interest. Just as the Court in Otter Tail was hesitant to conclude that the authority of the Federal Power Commission to order inter-connections was intended to ‘‘be a substitute for, or to immunize Otter Tail from, anti-trust regulation for refusing to deal with municipal cerporations’’, this Court cannot conclude tiat the Federal Power Commis- sion’s authority to review rates was an intended substitute for the anti-trust laws in a situation involving the alleged monopolizing effect of a dual price structure. Because regulated industries are not immune from anti- trust laws and because the present case concerns an issue over which the regulatory agency uas no jurisdiction, the Court finds that it has jurisdiction over the subject matter of this action, and the defendant’s motion to dismiss for lack of jurisdiction is denied. 50a Order and Memorandum of the District Court Il—Failure to State a Claim The defendant also argues that the plaintiffs’ complaint should be dismissed for failure to state a claim upon which relief may be granted because their claim is premature and because if defendant’s wholesale rates have been too high, plaintiffs will not be injured because of a possible refund. I & M contends that plaintiffs’ claim assumes the existence of two established rates, one for I & M’s retail industrial customers and one for the plaintiff municipalities, and that, in fact, there is only one established rate, that being the retail rate. It cites the United States Court of Appeals for the District of Columbia Circuit on rehearing in India & Michigan Electric Co. v. FPC, Docket No. 72-2168 (D.C. Cir. Aug. 14, 1972), in which the Court altered the effective date of I & M’s proposed wholesale rates for electric power and permiited the rates to become effective subject to refund based upon the Commission’s decision. It is the de- fendant’s position that although I & M may collect the dif- ference between its old and new rates from December 14, 1972, the rate has not yet been approved by the Commission and thus is subject to being reduced by the Commission. The facts of this case show that the state commissions have established retail rates and that there is presently pending before the Federal Power Commission the issue of the lawfulness of I & M’s wholesale rates. The Court notes that although the question of the rates’ lawfulness has not been rescived by the Commission, the rates them- selves are in effect and have been for collection purposes since December 14, 1972. It is true that if the Commission finds the rates to be unlawful, the defendant will have to -— +e a ee en — 5la Order and Memorandum of the District Court refund that portion of the rate found to be excessive. On the other hand, if the rates are just in relation to cost and fair rate of r turn, they will no doubt be upheld by the Commission. In either situation, we are discussing a future result which is in no way based on any of the anti-trust considerations set forth in plaintiffs’ complaint. The Court finds that there are presently in effect two rates: one an established rate for retail electric power, and one a rate for wholesale power, the latter being subject to change by the Commission although it is presently being collected. It would be notably different in this case if the practice of the Commission was to not allow a rate increase to go into effect until after approval by the Commission. For if that were the situation, the plaintiffs would be com- plaining about a future harm that might never come to pass. Whether the rate presently being charged by the defendant as wholesaler will be upheld by the Commission is not the ultimate concern of the plaintiffs in this case. The real concern here is the defendant’s present and future ability to set up a dual price structure by going through two reviewing commissions which have no control over the dual structure. The fact that the defendant has legally set both its wholesale and retail prices is no ground to immunize it from the anti-trust laws. Georgia, supra. The Court finds that although the present wholesale rate is subject to change by the Commission, the Commission has no power over the alleged dual rate structure which is allegedly in effect at this time. Thus, it has no jurisdiction over the issue in this suit. The plaintiffs are not attacking the actual rates charged by the defendant and, therefore, whether the eerbheews pe oo o2a Order and Memorandum of the District Court Commission finds the rate fair is irrelevant to the substan- tive issue before the Court. The defendant has the right to initiate a given rate, and the Commission has the author- ity to make sure the rate is fair in relation to cost and rate of return. The initiation of new rate schedules is a con- tinuing process carried on by the defendant. It is also the point over which this Court has the power to provide relief if the plaintiffs can prove their allegation. Because the Court is in reality focusing on the dual price structure and not the actual prices charged for either retail or wholesale, the results of the Commission’s decision would only affect whether defendant would have to initiate new rates if the plaintiffs can prove that defendant is violating the Sherman Act, §2. That is, if the Commission finds the defendant’s rates to be just, the Court would be forced to order defend- ant to initiate a new rate structure which eliminated the dual price system of higher wholesale prices. However, if the Commission finds the present rate to be unjust, then the Court would only enjoin the defendant from any future dual system. The defendant also contends that if the Commission declares the present wholesale rates to be unlawful, the defendant will have to refund the excessive amount and, therefore, there will have been no damage. Whether the plaintiffs are entitled to damages, although not clear at this point, is no reason to deny the Court jurisdiction over this action which seeks injunctive, declaratory and damage relief. If, in fact, the plaintiffs can recover damages in this action, the amount of those damages will have to be proved by the plaintiffs at trial. It is, therefore, the Order of the Court that defendant’s motion to dismiss for failure to state a claim be denied. 53a Order and Memorandum of the District Court IlI—Stay the Proceeding The defendant also asks that if the Court does find that it has jurisdiction over the present action, the action be stayed until a final decision is handed down by the Commis- sion. As stated above, the Commission’s decision on the lawfulness of the defendant’s wholesale rate is not deter- minative of the issue before this Court. The issue of the lawfulness of the defendant’s rate is in the exclusive juris- diction of the Commission and is not for this Court to decide. If that were the issue before the Court, the case would have to be dismissed. Staying the present action will not aid this Court in deciding the matter before it as it did the Court in Ricci. In this action the alleged wrong is occurring at this time, and although there is a possibility that agency action may change the situation, the same possibility exists that no change will take place. The agency acts as a review agency after the rate is initiated by the utility company. Since it is the initiation of a monopciistic structure that the Court is asked to prohibit and not the rate itself, final action by the agency will not by itself prohibit the problem although it may alleviate it for a time. Furthermore, if the Court found that damages were recoverable in this case and that in determining the damages the final decision of the Commis- sion was necessary and the Commission has not yet ruleu on the lawfulness of the wholesale rate the present action could at that time be stayed by the Court for the purpose of awaiting the Commission result. It is, therefore, the Order of the Court that defendant’s motion to stay be 4 nied. o4a Order of the District Court, October 22, 1976 UNITED STATES DISTRICT COURT NortTHERN District or INDIANA Sout Benp Drvision Case No. 874-72 Date 10/22/76 Time—From: 1:30 To: 2:30 Deputy R. Timmons Reporter—Gail Judge—Allen Sharp Crry or Misuawaka, Inp1ana et al. vs. Inprana & Micuican ELEctric ComMPANY a x Plaintiff(s) Represented By Thomas R. Ewald and R. Wyatt Mick Jr. Defendant(s) Represented By Peter J. Schlesinger and Lawrence Levy Proceedings : Hearing had on pending motions. Court hears argument of counsel. Defendant, Indiana & Michigan Electric Com- pany’s motion to recosider, vacate, set aside and amend this Court’s Order of May 1, 1975, is overruled. On verbal mo- tion of counsel, Defendant is granted leave to file an appeal from this Order, pursuant to Title 28 USC, Section 1292(b). Court reserves its ruling on Pitfs.’ motions to dismiss Deft’s. counterclaims and to strike parts of Deft’s. answer. Deft. is given to November 8, 1976, within which to answer the amendment to the Complaint. Srarp, J. / 55a Complaint IN THE UNITED STATES DISTRICT COURT For tHe NortHern District or INDIANA Soutu Benp Drvision Civil Action No. S 74-72 Ee Crry or Mishawaka, InpIANA, Ciry or Nims, Micuican, City or Cotumsia City, Inpiana, City or Buurrton, Inprana, Crry or Garrett, Inprana, Crry or Gas Crry, Inpiana, Town or Frankton, Inprana, Town or Warren, Inpiana, Town or New Caruiste, Inprana, and Town or Aviiua, Inprana, municipal corporations, Plaintiffs, v. Ivpiana & Micuican Exectric Company, a corporation, Defendant. 56a COMPLAINT Plaintiffs allege as follows: L. Jurisdiction and Venue 1. This is an action by ten municipalities that operate their own electric distribution systems against the electric power company that controls their supply of wholesale electric power and also competes against them for retail sales. The plaintiffs request relief against the defendant’s monopolization of and attempt to monopolize the distribu- tion and sale of electric power at retail within the area in which it does business, in violation of Section 2 of the Sher- man Act, 15 U.S.C. §2. The plaintiffs seek declaratory and injunctive relief and treble damages. 2. This Court has jurisdiction of this case by virtue of Sections 4 and 16 of the Clayton Act, 5 U.S.C. §4 15, 26. The defendant company transacts business within the South Bend Division of the Northern District of Indiana. II. Parties 3. Plaintiffs, City of Mishawaka, Indiana; City of Niles, Michigan; City of Columbia City, Indiana; City of Bluffton, Indiana; City of Garrett, Indiana; City of Gas City, Indi- ana; Town of Frankton, Indiana; Town of Warren, Indi- ana; Town of New Carlisle, Indiana; aud Town of Avilla, Indiana, are municipal corporations located within the serv- ice area of the defendant Indiana & Michigan Electric /-rowe es er d7a Complaint Company. Each of the plaintiffs operates its own electric utility, through which it purchases wholesale electric power from the defendant Indiana & Michigan Electric Company and sells and distributes the electric power at retail to industrial, commercial, and residential customers within its corporate limits and in nearby areas. 4. Defendant Indiana & Michigan Electric Company (sometimes referred to herein as ‘‘I&M’’ or ‘‘the com- pany’’) is incorporated under the laws of the State of Indiana and is doing business in the plaintiff municipalities and elsewhere in the States of Indiana and Michigan. The defendant I&M is a vertically integrated electric power com- pany, which generates electric power, transmits the power throughout its service area, and delivers the power both to its wholesale customers, including the plaintiffs, and di- rectly to its own retail customers. Ii, Nature of Trade and Commerce 5. The defendant company is the only firm within its service area engaged in the business of transmitting and selling electric power at wholesale. The defendant com- pany is the plaintiffs’ only outside source of supply for wholesale electric power. Plaintiffs Mishawaka, Indiana; Columbia City, Indiana; Garrett, Indiana; Gas City, Indi- ana; Frankton, Indiana; Warren, Indiana; New Carlisle, Indiana; and Avilla, Indiana, depend on the defendant for all of their requirements of wholesale electric power for distribution and sale to their retail customers. Plaintiffs Niles, Michigan, and Bluffton, 'ndiana, which operate gen- erating facilities, nevertheless depend on the defendant for Ska Complaint more than 90% of their requirements of electric power for distribution and sale to their retail customers, 6. The defendant I&M also dominates and controls the distribution and sale of retail electric power within its service area, The defendant company has increased its control of the retail market by acquiring municipal electric utilities, Since 1957, the defendant has purchased the assets of four of the 20 municipal utilities within its service area, has absorbed their retail distribution facilities into the I&M system, and has taken over their retail industrial, commercial, and residential customers, as follows; Kendall- ville, Indiana (1957), Decatur, Indiana (1959), Portland, Indiana (1963), and Albion, Indiana (1966), In 1964, the defendant attempted to acquire the municipal electric utility of the City of South Haven, Michigan, but the sale was re- jected by the voters of the City in three successive elections, The defendant company now controls the distribution and sale of retail electric power in more than 90% of the com- munities within its service area, while municipally owned and operated electric systems serve retail customers in fewer than 10%. IV, Violations of Law 7. The defendant I8M has monopolized and has at- tempted to monopolize interstate trade and commerce in the distribution and sale of electric power at retail, in violation of Section 2 of the Sherman Act, as follows: (a) Since January 13, 1973, the defendant IGM has required municipalities, including the plaintiffs, to pay a 59a Complaint new wholesale price for electric power, In contrast to its previous practice, the defendant company’s new wholesale price to municipalities is substantially higher than the retail price the defendant company charges its own industrial customers. As a result, the municipalities have become financially unable to buy power at the defendant's new wholesale price and sell it to their own industrial customers at prices that are competitive with the defendant's present retail prices ; (b) On March 8, 1974, after fourteen months of requiring the City of Fort Wayne, Indiana, to pay more for wholesale electric power than the defendant I&M’s own retail in- dustrial customers pay and after more than twenty years of selling retail electric power to its own customers in the Fort Wayne area for less than it sells retail power else- where, the defendant I8M obtained the agreement of City officials that the City of Fort Wayne will lease its entire electric utility system to the defendant I&M for thirty-five years. Under the lease agreement to be submitted to the voters the defendant I&M will take possession of all of the property and facilities of the City's electric utility and will operate the electric distribution system, The defend- ant company will take over the City’s retail customers and will sell electric power to them directly, Fort Wayne is the largest City within the defendant company's service area which still operates its own electric utility. & The defendant company's adoption of a wholesale price to municipalities in excess of the retail prices at which it sells electric power to its own industrial customers has caused and threatens to cause the following consequences : ee a ee 60a Complaint (a) The defendant company has impaired the plaintiffs’ ability to compete against the defendant for retail indus- trial customers ; (b) In those municipalities that have absorbed the differ- ence between the defendant's higher wholesale price and the defendant's lower retail industrial prices, the electric utility’s loss of earnings exerts pressure on the citizens and officials of the municipality to discontinue operating the utility and to offer to sell or lease it to the defendant; (c) In those municipalities that increase their own in- dustrial retail prices to the level of the defendant’s higher wholesale price, which they must pay for electric power, and above the level of the defendant's lower retail industrial prices, the disparity between the municipalities’ higher retail industrial prices and the defendant [&M's lower retail industrial prices threatens to cause the municipal- ities’ industrial customers to exert pressure on the munic- ipality to sell or lease its utility to the defendant I8M so they can purchase electric power at the defendant's lower prices. 9. The acts and practices of the defendant I&M alleged herein have been done with the intent, and have had the effect, of monopolizing part of the trade and commerce among the several states in the distribution and sale of electric power at retail and have injured the plaintiff munic- ipalities in their business and property in an amount ex- ceeding $1,000,000 before trebling. The plaintiffs’ losses are continuing. - Ea 6la Complaint 10, Unless the relief requested by this Complaint is granted, the defendant company will continue to violate 15 U.S.C, §2, V. Relief Wuenerons, plaintiffs pray as follows: 1, For a declaratory judgment that the defendant com- pany has violated 15 U.S.C. §2 by monopolizing and at- tempting to monopolize the distribution and sale of electric power at retail within its service area, 2. For an order enjoining the defendant company, its officers, agents, employees, successors, and all persons in active concert or participation with them, from violating 15 U.S.C, §2. 3. For an order enjoining the defendant I&M from maintaining a disparity between the prices at which it sells electric power and under which it requires the plaintiff municipalities to pay a higher wholesale price than the retail prices at which it sells and distributes power to its own industrial customers. 4. For an order awarding the plaintiffs treble the amount of damages they have sustained as a result of the defendant's violations of 15 U.S.C, §2. 5. For an order awarding the plaintiffs reasonable at- torney's fees, together with the costs and disbursements of this action. Complaint 6. For such other and additional relief as the interests Amendment to the Complaint of justice may require. | IN THE s/ Tromas R, Ewan Michacl Nussbaum = ana = UNITED STATES DISTRICT COURT Ronald G. Preeup omas 5. HW For rue Nontuean Disraicr or Iwona Karasik & M 1156 15th Street, N.W. Burrey, Kar a Washington, D, C, 20005 Sovurn Benv Division 1156 15th Street, N.W. (202) 872-8686 Washington, D, C, 20005 (202) 331-4000 s/ BR. Wvarr Mick, Ja. Civil Action No, 8 74-72 Of Counsel R. Wyatt Mick, Jr. Bingham, Loughlin, Means, a Mick & M 400 Lincoln Way West Crry or Misnawaka, Lypiana, et al, Mishawaka, Indiana 46544 Plaintiffs, (219) 255-9616 v. s/ James J. Ovson James J, Olson 122 South Mill Street Defendant. Mishawaka, Indiana 46544 (219) 259-5461 Attorneys for Plaintiffs Inpiawa & Micnios» Exeornic Company, AMENDMENT TO THE COMPLAINT The plantiffs allege as follows : 7. (c) Sinee July 27, 1976, the defendant I & M has re- quired municipalities, including the plaintiffs, to pay a new, higher wholesale price for electric power. As a result, the municipalities have become financially unable to buy power at the defendant's new wholesale price and sell it to indus- ee, 64a Amendment to the Complaint trial customers at prices competitive with the defendant's present retail prices. 8/ Thomas R, Ewald 1156—15th Street, N. W. Washington, D, C, 20005 * (212) 331-4053 R. Wyatt Mick, Jr. Bingham, Loughlin, Means, Mick & Myers 400 Lincoln Way East Mishawaka, Indiana 46544 (219) 259-9616 James J, Olson 122 South Mill Streei Mishawaka, Indiana 46544 (219) 259-5461 Attorneys for Plaintiffs 307 BAR PRESS, Inc., 132 Lafayette St., New York 10013 — 966-3906 (6517) --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385005_0047%3A1. Public record. Not legal advice.