Appendix — Colorado Interstate Gas Co. v. Natural Gas Pipe Line Co. of America

Supreme Court brief1990

Ask Donna

What actually matters in this document.

Text

San~ jf oguve

No. 89--——

IN THE Josh ¢, SPANIOL,

Suprenve Court of the United Sit chan

OCTOBER TERM, 1989 3

COLORADO INTERSTATE GAS COMPANY,

Petitioner,

Vv.

NATURAL GAS PIPE LINE COMPANY OF AMERICA and

NGPL-TRAILBLAZER, INC..,

Respondents,

APPENDICES TO

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

MICHAEL L. BEATTY REX E. LEE *

REBECCA H. NOECKER CARTER G. PHILLIPS

Colorado Interstate MARK D. HOPSON

Gas Company MARK E. HADDAD

Post Office Box 1087 SIDLEY & AUSTIN

Colorado Springs, CO 80944 1722 Eye Street, N.W.

Washington, D.C. 20006

WILLIAM C. MCCLEARN

(202) 429-4000

ELIZABETH A. PHELAN

HOLLAND & HART WILLIAM F. BAXTER

Post Office Box 8749 SHEARMAN & STERLING

Denver. CO 80201 Stanford Law School

Post Office Box 8610

Stanford, CA 94305

ROBERT H. BORK

1150 Seventeenth St., N.W.

Washington, D.C. 20036

Counsel for Petitioner

March 26, 1999 * Counsel of Record

WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

TABLE OF CONTENTS

APPENDIX A

Decision of the United States Court of Appeals for

the Tenth Circuit, Sept. 11, 1989 ..............................

APPENDIX B

Decision of the United States District Court for

the District of Wyoming, May 29, 1987 ..................

APPENDIX C

Order of the United States Court of Appeals for

the Tenth Circuit, Dec. 12, 1968 ......:2...-20c...........

APPENDIX D

Southern Co. Services, Inc., 37 FERC (CCH)

7 61,256 (Dec. 15, 1986) .................. Se... He

APPENDIX E

Transcontinental Gas Pipe Line Corp., 35 FERC

(CCH) 4 61,340 (June 16, 1986) .....................<......

APPENDIX F _

Transcontinental Gas Pipe Line Corp., 35 FERC

(COR) 7 61,066 CARCI Fy BOGE): ci cceiccvscceviesscccsieninec

APPENDIX G

United Gas Pipe Line Co., 4 FERC (CCH)

ee OR, OE ne hea

APPENDIX H

Map of Pipeline Routes and Rates .~.........................

Page

29a

87a

23b

30b

75b

APPENDIX A

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

Nos. 87-2109, 87-2123

COLORADO INTERSTATE GAS COMPANY,

Plaintiff /Counterclaim-Defendant/A ppellee,

V .

NATURAL GAS PIPELINE COMPANY OF AMERICA;

NGPL-TRAILBLAZER, INC.,

Defendants Counter-claimants/Appellants,

WYOMING INTERSTATE COMPANY, LTD.;

the COASTAL CORPORATION,

Counterclaim-Defendants/A ppellees.

MIDCON VENTURES, INC.,

Counterclaimant.

FEDERAL ENERGY REGULATORY COMMISSION,

Amicus Curiae.

Sept. 11, 1989

Michael L. Beatty of Colorado Interstate Gas Co., Colo-

rado Springs, Colo., (Rebecca H. Noecker of Colorado

Interstate Gas Company, Colorado Springs, Colo., Wil-

liam F. Baxter of Shearman & Sterling, Stanford, Cal.,

William C. McClearn, James E. Hartley, Joseph W. Hal-

pern, Elizabeth A. Phelan, and Timothy M. Rastello of

Holland & Hart, Denver, Colo., J. Kent Rutledge of

Lathrop & Uchner, F.C., Cheyenne, Wyo., with him on

the briefs), for plaintiff /counterclaim-defendants/appel-

lees.

Phillip Areeda, Cambridge, Mass., (William H. Brown

of Brown & Drew, Casper, Wyo., Paul J. Hickey of

Rooney, Bagley, Hickey, Evans & Statkus, Cheyenne,

Wyo., Gerald M. Stern and Charles E. Foster, Los An-

geles, Cal., Joseph M. Wells and Paul E. Goldstein, Lom-

bard, Ill., John T. Cusack and Michael P. Padden of

Gardner, Carton & Douglas, Chicago, Illinois; J. Curtis

Moffatt and Paul Korman of Gardner, Carton & Douglas,

Washington, D.C., Harvey I. Saferstein and Steven A.

Marenberg of Irell & Manella, Los Angeles, Cal., and

Louis Nizer and Paul Martinson of Phillips, Nizer, Ben-

jamin, Krim & Ballon, New York City, with him on the

brief), for defendants /counterclaimants /appellants.

Catherine C. Cook, Gen. Counsel, Jerome M. Feit,

Sol., and Joshua Z. Rokach, Atty., of the F.E.R.C., Wash-

ington, D.C., for amicus curiae.

Before MOORE, ANDERSON, and BALDOCK, Circuit

Judges.

JOHN P. MOORE, Circuit Judge.

This is an appeal from an order of the district court

refusing to grant judgment notwithstanding the verdict

or a new trial for the defendants, Natural Gas Pipeline

Company of America (Natural) and NGPL-Trailblazer.

661 F.Supp. 1448. The jury awarded the plaintiff, Colo-

rado Interstate Gas Company (CIG), $724,033,361 in

damages based on CIG’s claim that Natural attempted to

monopolize the market for long distance transportation

of Wyoming gas, breached its contract with CIG, and

tortiously interfered with CIG’s contractual relations.

While the district court reduced the jury award to

$412,237,972, Natural argues that the district court failed

to rectify the underlying legal errors on which the judg-

ment was based.

Natural deploys a two-pronged attack against each of

CIQ’s claims. First, it asserts that the award of damages

for conduct approved by the Federal Energy Regulatory

Commission (FERC) impermissibly interferes with

FERC’s authority to regulate gas sales and transporta-

tion markets. Second, Natural argues, in the alternative,

that the substantive law of contracts, torts, and antitrust,

requires the reversal of the jury’s verdict on each claim.

We hold that in light of FERC’s orders corcerning the

basic issues underlying the breach of contract dispute,

deference to FERC authority requires that we reverse

the breach of contract verdit. We further hold that CIG

failed to establish there was a dangerous probability that

Natural would monopolize the long distance transporta-

tion market. Therefore, we reverse the antitrust verdict.

The claim for tortious interference with contractual rela-

tions neither interferes with FERC’s authority nor is

substantively flawed; thus, the jury’s verdict on that

claim will stand.

I. Introduction

CIG and Natural are owners of pipelines which trans-

port natural gas. For many years, Natural has purchased

gas from CIG and transported that gas to markets in the

Midwest and East. In July 1982, CIG and Natural en-

tered into a new contract (the Service Agreement or

Argeement) which obliged CIG to deliver and Natural

to purchase specified quantities of natural gas. CIG sold

two types of gas to Natural. Field gas was suold at a

lower rate (F-1 rate) than gas which was delivered from

CIG’s main transmission line (H-1 rate). The contract

set forth how much gas Natural was required to pur-

chase, both on a annual and on a daily basis. Like pre-

vious service agreements between Natural and CIG, the

1982 Service Agreement also contained a minimum bill

provision which allowed CIG to bill Natural at a pre-

determined rate for gas which Natural reserved but did

not purchase.

Because CIG’s Service Agreement with Natural in-

volved the interstate sale of natural gas, the rates and

terms specified in the Agreement required approval by

FERC. When, in 1982, CIG sought FERC approval, Nat-

ural intervened to protest both the rate increase and its

contractual obligation to pay CIG for gas it did not

purchase. In response to Natural’s intervention, FERC

modified the terms of the Service Agreement to reduce

the price Natural was required to pay for unpurchased

gas.

In July 1983, Natural sharply reduced its gas pur-

chases from CIG. Natural paid CIG what Natural deter-

mined to be the FERC modified rate for unpurchased

gas. Natural’s decrease in purchases forced CIG to stop

purchasing gas from some of its suppliers: One of those

suppliers, Champlin Petroleum, supplied gas to CIG from

the Whitney Canyon gas fields in southern Wyoming.

Although Natural claimed that it quit purchasing gas

from CIG because it had an oversupply of gas, the evi-

dence made this claim problematical. As soon as CIG

ceased purchasing Whitney Canyon gas, Natural made

arrangements to purchase that gas directly from Champ-

lin. Indeed, CIG presented evidence that Natural pur-

chased gas from many sources to replace lost volumes

from CIG. This substitute gas was often more expensive

than CIG’s gas. On occasion, Natural resumed purchases

of gas from CIG when CIG was attempting to sell gas to

new customers. Natural’s decision to stop purchasing gas

and the losses CIG experienced as a result of that deci-

sion form the basis of this litigation.

II. CIG’s Common Law Claims

A. Breach of Contract

The district court instructed the jury that it could

find Natural breached the Service Agreement only if

Natural failed to purchase gas and refused to pay CIG

the rate that FERC decided was appropriate for volumes

not purchased. Neither party disputes that Natural re-

fused to purchase gas. The parties dispute the rate

FERC determined to be appropriate for gas not taken.

Natural argues that the district court should have di-

rected a verdict on the breach of contract claim in its

favor because it paid CIG the FERC determined rate for

gas not purchased. We agree.

In order to apprehend the parties’ arguments on this

issue, it is necessary to examine the long history of the

dispute over Natural’s minimum purchase obligation be-

fore FERC.’ For many years the service agreements

between CIG and Natural contained two provisions which,

together, defined Natural’s minimum purchase obliga-

tion.” Section 2 of the Service Agreement the “minimum

daily take provision,” required Natural to accept each

day 90% of its General Daily Entitlement.? Section 4

1The difficulty that CIG and Natural faced with the minimum

purchase obligation was not unique. Minimum purchase obligations

in gas contracts became a problem for the industry in the early

1980’s, as a nationwide gas surplus forced many purchasers to

curtail their takes. The huge liability incurred by purchasers

forced FERC to take action on two procedural levels. First, FERC

considered purchasers’ objections to minimum purchase require-

ments on a case by case basis and modified service agreement pro-

visions where necessary. Second, because minimum purchase obliga-

tions were widespread in the natural gas industry, FERC issued

general orders that modified certain provisions in all gas contracts.

thus, the conflict between CIG and Natural was just a small part

of a significant problem which required FERC’s continued attention.

2 For purposes of this opinion we are using the term “minimum

purchase obligation” to refer to contract terms which seek to insure

that gas buyers purchase a minimum volume of gas. These pro-

visions are sometimes called “take or pay,” “minimum bill,” or

“minimum take” provisions. Although the precise details or mecha-

nisms of these provisions might differ, they have similar effects.

3 Section 2 of the Service Agreement entitled “POINTS OF DE-

LIVERY, MAXIMUM DAILY VOLUME OBLIGATIONS, AND

of the Service Agreement, the “minimum annual bill,”

required Natural to purchase each year 90% of its Total

Annual Entitlement, or pay CIG a predetermined rate

for gas not purchased.*

Natural first objected to the minimum purchase obliga-

tion in the Service Agreement when CIG sought approval

of the rates and terms of the Agreement from FERC in

1982. The reasonableness of the minimum purchase obli-

gation was considered in administrative proceedings be-

fore an administrative law judge in 1983. The judge

found the “minimum bill provisions” to be unreasonable

and ordered CIG to modify the Service Agreement so

that CIG could collect from Natural only the fixed costs °

associated with the sale of gas. This decision was ap-

pealed to FERC, which, in response, modified the precise

mechanism by which CIG could collect money for unpur-

_ PRESSURES” includes Natural’s daily purchase obligation. It

states:

Variations in daily takes may be made at Buyer’s election at

H-1 delivery points to meet its varying load conditions, however,

Buyer shall not request total daily volumes on any day here-

under less than 90 percent of the General Daily Entitlement.

4 Section 4 entitled “MINIsIUM BILL” states, in relevant part:

The minimum bill shall be .. . determined by multiplying the

Total Annual Entitlement by a factor of 90 percent, such volume

hereinafter referred to as “Minimum Volume.” ... Jn the

event the Buyer’s actual purchases for the fiscal year are less

than the Minimum Volume, then any deficiency shall be billed

at the unit fixed cost component under Rate Schedule F-1....

(Emphasis added.)

5 Fixed costs are costs which CIG must incur regardless of the

volume of gas it sells. The fixed cost component of the commodity

charge also includes a sum representing profits on CIG’s operations.

The major nonfixed (variable) cost, which CIG was forced to elim-

inate from the rate it could charge Natural, was the cost of gas.

chased gas but left unchanged the basic ruling that CIG

could collect only fixed costs for unpurchased gas.°

In response to FERC’s ruling, CIG submitted to FERC

a modification of its Service Agreement by which it

sought to collect F-1 fixed costs for F-1 gas which Nat-

ural did not purchase and H-1 fixed costs for unpur-

chased H-1 gas. Since the fixed cost component of gas

rates included profits on the sale of gas, CIG’s submitted

rate would have insured full profits on unsold gas. How-

ever, FERC did not approve this rate for unpurchased

gas.’ It ruled that CIG could collect only F-1 fixed costs

for whichever type of gas Natural did not purchase.

CIG appealed FERC’s order to this court asserting that

it should collect full profits on unsold gas. We rejected

this appeal. Colorado Interstate Gas Co. v. FERC, 791

F.2d 803 (10th Cir.1986), cert. denied, 479 U.S. 1043,

107 S.Ct. 907, 93 L.Ed.2d 857 (1987).

CIG now argues that these extensive proceedings only

considered one aspect of the minimum purchase obliga-

tion, namely, the minimum annual bill provision (Section

4) of the Service Agreement. It insists FERC simply

overlooked the minimum daily take requirement (Section

2) in the individual proceedings. CIG asserts that the

minimum daily take requirement was later modified by

FERC’s Order No. 380-C which ruled that minimum take

provisions were meant to be governed by Order No. 380.

Although FERC’s general orders treated minimum bill

provisions identically with minimum take provisions, CIG

argues that because FERC Order No. 380-C states sellers

6 On the same day, FERC issued Order No. 380 which required

gas sellers to modify their minimum bill provisions to collect only

fixed costs for unpurchased gas.

7FERC explained that allowing CIG to collect only F-1 fixed

costs for the more expensive H-1 gas would give CIG a strong in-

centive to sell H-1 gas instead of merely collecting fees for unde-

livered gas.

may collect fixed costs,* CIG may collect F-1 fixed costs

for unsold F-1 gas and H-1 fixed costs for unsold H-1

gas. If we were to accept CIG’s argument, CIG could

collect a higher rate for each year that Natural failed

to purchase gas by adding up its compensation for Nat-

ural’s daily failure to take gas than it could by using

the individually tailored FERC formula for determining

CIG’s compensation for Natural’s annual failure to pur-

chase gas. Aside from the irrationality of this result,

we think it ignores the fact that FERC has plainly ex-

amined both the minimum annual bill and the minimum

daily take requirements in the Service Agreement since

the original ALJ decision.

As noted earlier, the ALJ stated that he found that

minimum bill provisions to be unjust and unreasonable.

CIG apparently assumes this reference to the minimum

bill provisions meant that the ALJ only considered the

minimum annual bill (Section 4) of the contract. Yet,

the rest of the opinion makes clear that the ALJ consid-

ered both Sections 2 and 4 of the Service Agreement.

For instance, in describing the Service Agreement the

ALJ stated, “CIG’s mode of billing to Natural under the

F-1 and H-1 Rate Schedules is explained for the situation

when the minimum bill provisions operate because Nat-

ural failed to take 90 percent of its daily or annual volu-

metric entitlements.” Colorado Interstate Gas Co., 25

F.E.R.C. 9 63,012, 65,015 (Oct. 18, 1983) (emphasis

added). The ALJ clearly understood that the Service

Agreement provided a single rate of compensation for

failure to purchase gas on a daily or annual basis and

that he was modifying that rate.

This conclusion is confirmed by subsequent FERC

orders. In its order of June 1985, FERC surveyed the

entire history of CIG’s proceedings before the agency on

8 Since Order No. 380-C was a general order, it did not specify

the precise value of the fixed cost CIG, or any other sellers, could

collect for unsold gas.

OO OO ae

the minimum purchase issue. FERC stated the ALJ.

found “both the minimum annual volume and the mini-

mum daily take requirement in CIG’s Service Agree-

ment”? to be unreasonable. Colorado Interstate Gas Co.,

3i F.E.R.C. {61,325 (June 19, 1985). FERC further

noted that the individualized proceedings required CIG to

modify both the minimum annual bill and the minimum

daily take provisions to eliminate various costs. Jd. The

only formula for the elimination of variable costs ap-

proved in the individualized proceedings required CIG to

charge F-1 fixed costs for failure to purchase either F-1

or H-1 gas. The inescapable conclusion is that FERC

regarded this as the sole remedy for failure to purchase

gas under either contractual provision.

Finally, FERC’s amicus brief explains its current in-

terpretation of the FERC proceedings on the minimum

purchase issue. The amicus brief states:

[T]he district court erred in holding that the Com-

mission did not deal with the minimum purchase

obligation and that therefore CIG may litigate that

issue in this case . . . the Commission treated the

minimum bill as the remedy for Natural’s failure to

live up to its minimum purchase obligation . . . there-

fore, the district court erred in its perception that

the minimum bill and take provisions were separate

and discrete matters establishing distinct remedies.

In light of the deference we owe to FERC’s interpreta-

tions of its own order, Colorado Interstate Gas, 791 F.2d

at 810; Distrigas of Massachusetts Corp. v. Boston Gas

Co., 693 F.2d 1113, 1119 (1st Cir.1982), and the plain

meaning of the orders themselves, there is simply no room

for CIG’s assertion that FERC’s individualized proceed-

ings left the minimum daily take provision (Section 2)

of the Service Agreement unaffected.

B. Breach of Duty of Good Faith and Fair Dealing

Natural argues the jury’s verdict on bad faith

breach of contract must be reversed because FERC’s

10a

modification of the rate Natural was required to pay

CIG for unpurchased gas gave Natural the unqualified

right to stop purchasing gas, provided it paid CIG the

FERC established price for unpurzhased gas. Natural

insists that by awarding CIG damages for bad faith

failure to purchase gas that were greater than FERC’s

established rate for failure to purchase, the district court

allowed state common law to impinge upon FERC’s regu-

latory authority. CIG asserts that Natural’s bad faith

alters the character of Natural’s conduct so that the

FERC rate for unpurchased gas does not apply. While

we are unwilling to embrace Natural’s claim that

FERC’s orders shield it from all liability for failure to

purchase gas, we do agree that Natural is free from lia-

bility for failure to purchase gas based upon the implied

duty of good faith and fair dealing in the Service Agree-

ment.

The Supreme Court is wary of attempts by parties,

dissatisfied with determinations of federal agencies, to

neutralize the effect of those determinations through

common-law actions for damages. Chicago & N.W.

Transp. Co. v. Kaic Brick & Tile Co., 450 U.S. 311, 324,

101 S.Ct. 1124, 1133, 67 L.Ed.2d 258 (1981); Arkansas

Louisiana Gas Co. v. Hall, 453 U.S. 571, 577 n. 6, 101

S.Ct. 2925, 2930 n. 6, 69 L.Ed.2d 856 (1981). These

cases are bottomed on the principle that the Supremacy

Clause requires state regulation not thwart federal policy.

Kalo Brick & Tile, 450 U.S. at 326, 101 S.Ct. at 1134.

Common-law claims that seek to litigate matters- already

decided by a federal agency are therefore preempted.

For instance, in Kalo Brick & Tile, 450 U.S. at 311,

101 S.Ct. at 1127, a shipper of goods by rail, sought to

assert a state, common-law tort action for damages

caused by a regulated rail carrier’s decision to eliminate

service on a rail line. The Supreme Court unanimously

held that because the Interstate Commerce Commission

had, in approving the cessation of service in administra-

lla

tive proceedings, ruled on all the issues underlying the

shippers state-court suit, the common-law action was

preempted. The Court stated: “It is difficult to escape

the conclusion that the instant litigation represents little

more than an attempt by a disappointed shipper to gain

from the Iowa courts the relief it was denied by the

commission.” Jd. at 324, 101 S.Ct. at 1133.

Through its common-law claim of breach of the con-

tractual duty of good faith and fair dealing, CIG ob-

tained an award of damages that allowed it to collect

H-1 fixed costs for unpurchased H-1 gas. FERC and this

court have repeatedly denied CIG’s request to modify the

minimum purchase obligation of the Service Agreement

to allow it to collect this rate for failure to purchase gas.

Colorado Interstate Gas, 791 F.2d at 808-09. By allowing

CIG to press this claim, the district court gave CIG a

second chance to which it was not entitled.

Nevertheless, CIG argues that this case is distinguish-

able from Kalo Brick & Tile® and is not a collateral

attack upon FERC’s decision because FERC denied CIG

H-1 fixed costs for unpurchased H-1 gas only if Natural

decided not to purchase gas in good faith. CIG contends,

once Natural decided to “shut in’ CIG’s gas in order to

harm CIG, FERC’s remedy for failure to purchase gas,

a remedy which did not allow collection of H-1 fixed costs,

was no longer intended by FERC to apply. Essentially,

CIG is asking us to imply a good faith limitation upon

the scope of FERC’s remedy for failure to purchase gas.

While we find CIG’s argument forceful, we cannot

® The Court in Kalo Brick & Tile emphasized that the “commis-

sion has actually addressed the matters [the customer] wishes to

raise in state court.” 450 U.S. at 327, 101 S.Ct. at 1135. The Court

reserved the question of whether “a state court suit is barred when

the commission is empowered to rule on the underlying issues.”

Id. In this case, FERC was not explicitly confronted with the ques-

tion of whether Natural’s motive for not purchasing gas would be

relevant to the rate CIG could collect for that gas.

12a

ignore the Supreme Court’s vigorous effort to insure

agency action is not blunted by state regulation. See,

e.g., Nantahala Power and Light Co. v. Thornburg, 476

U.S. 9538, 106 S.Ct. 2349, 90 L.Ed.2d 943 (1986) (state

regulated rate for retail sale of gas did not give enough

weight to FERC determined rate for wholesale gas sales) ;

Kalo Brick & Tile, 450 U.S. at 326, 101 S.Ct. at 1134.

We think that limiting the scope of the FERC developed

remedy for failure to purchase gas in the manner sug-

gested by CIG would permit circumvention of FERC

authority through state contract law. In order for

FERC’s remedy to be effective, it must have room to

breathe. As the Supreme Court has stated, “Responderts’

theory of the case would give inordinate importance to

the role of contracts between buyers and sellers in the

federal scheme for regulating the sale of natural gas.”

Arkansas Louisiana Gas, 453 U.S. at 582, 101 S.Ct. at

2932. We think this statement applies with equal force

to this case.

Further, the limited evidence we have suggests FERC

intended the collection of F-1 fixed costs to be the exclu-

sive contract remedy for failure to purchase gas. FERC’s

amicus brief notes the jury awarded damages for anti-

trust, tort, and breach of contract claims. Nevertheless,

FERC only sought to have the damages for breach of

contract reversed. FERC did not distinguish between the

breach of contract damages awarded for bad faith fail-

ure to purchase gas and those awarded for failure to

purchase gas under Section 2 of the Service Agreement.’®

10 The district court did not ask the jury to award damages sep-

arately for breach of Section 2 of the Service Agreement and breach

of the contractual obligation of good faith and fair dealing. This

is troubling because we cannot determine what damages, if any,

the jury intended to award for each breach.

Further, the jury incorrectly found that Natural breached its

obligation to purchase gas under Section 2 of the Service Agree-

ment. Having found that Natural deliberately breached the Service

Agreement by deciding not to purchase gas, it is difficult to see

13a

This interpretation of FERC’s intent mirrors FERC’s

interpretation of the scope of its actions in a closely

analogous context. During the gas shortage of the early

1970’s, FERC permitted sellers of gas to curtail their

contractually agreed upon deliveries of gas, if the cur-

tailment was carried out in accordance with plans on

file with FERC. See, e.g., United Gas Pipe Line Co. v.

FERC, 824 F.2d 417, 421 (5th Cir.1987). Buyers who

did not receive gas they contracted for sued sellers based

upon breach of contract and various tort theories. I/d.;

see also CF Industries v. Transcontinental Gas Pipe Line,

614 F.2d 33 (4th Cir.1980). In response, sellers sought

to have FERC modify their service agreements to ex-

culpate them from liability for failure to deliver gas to

buyers curtailed under curtailment plans. FERC declined

to deny the purchasers all remedies for the sellers’ fail-

ure to deliver gas stating:

Claims that are essentially “breach of contract” in

nature and arise because of curtailments initiated

and conducted in accordance with effective curtail-

ment tariffs are preempted by federal law, which

nullifies them. But claims that require a finding of

negligence to permit recovery remain unaffected.

Transcontinental Gas Pipe Line, 35 F.E.R.C. 9 61,043,

61,080 (April 7, 1986) (emphasis added) ."

how the jury could objectively consider the question of whether

Natural acted in good faith.

Thus, even if we were to find that the bad faith claim was not

preempted, we would have to order a new trial. First, the jury

would have to evaluate CIG’s bad faith claim in light of the fact

that Natural did not breach Section 2 of the Service Agreement.

Second, even if the jury still found that Natural breached its con-

tractual obligation of good faith and fair dealing, it would have

to determine the appropriate damages for this breach.

11 Significantly, one scller challenged FERC’s decision alleging

that if buyers were pernitted to sue based upon a seller’s negligent

or willful misconduct, some state courts might conclude that actions ~

for “breach of a good faith duty”’ were not preempted. United Gas

l4a

We believe FERC intended to draw the same line for

failure to take gas as it drew for failure to purchase.

Actions based upon tort were not meant to be preempted

by FERC’s modification of the contract, while actions

based upon breach of contract were. Any other distinc-

tion would impermissibly undermine the effectiveness of

FERC orders. Thus, the jury’s verdict for bad faith

breach of contract must be reversed.

C. Tortious Interference with Contract

The gravamen of CIG’s tortious interference with con-

tract claim is that Natural intentionally stopped taking

gas from CIG in order to force CIG to relinquish its con-

tractual right to purchase Whitney Canyon gas from

Champlin Petroleum. CIG alleged Natural was moti-

vated by a desire to acquire the rights to purchase Whit-

ney Canyon gas. After CIG gave up its rights to the

Whitney Canyon reserves, Natural did, in fact, acquire

the gas.

Natural argues that the jury’s verdict, awarding dam-

ages for tortious conduct, must be reversed because CIG’s

claim is preempted by FERC’s modification of the mini-

mum purchase provisions. Natural also asserts that be-

cause the Service Agreement allowed it to stop purchas-

ing gas, it may not be held liable for tortious interference

based on that conduct. We disagree.

FERC’s modification of the contract remedy for fail-

ure to purchase gus does not limit CIG’s right to seek

damages for tortious interference with contract. As

noted above, in an analogous situation, FERC decided

Pipe Line, 824 F.2d at 428. The Fifth Circuit rejected the sug-

gestion that state courts could interpret FERC orders which allowed

actions based upon negligence to permit actions for “breach of a

good faith duty.” Thus, at least one other court has interpreted

FERC orders prohibiting suits based upon breach of contract to also

forbid suits based upon breach of the contractual obligation of good

faith and fair dealing.

15a

that although it eliminated a gas seller’s contractual lia-

bility for failure to sell gas to curtailed customers, buy-

ers who did not receive contractually agreed upon vol-

umes of gas could maintain suits based upon a seller’s

negligent or willful misconduct. United Gas Pipe Line,

824 F.2d at 430. By not contesting tortious interference

damages, FERC apparently made the same distinction

in this case. Although Kalo Brick & Tile requires pre-

emption of tort actions which conflict with agency orders,

450 U.S. at 326-27, 101 S.Ct. at 1134-35, we decline to

find preemption where FERC currently perceives no con-

flict.

More difficult to evaluate is Natural’s assertion that

its contractual right to choose between purchasing gas

or paying CIG for gas not purchased immunized it

from a tortious interference claim based upon a failure

to purchase. There is some support for the proposition

that conduct which is otherwise lawful ought not form

the basis of a tortious interference claim simply because

the alleged tort-feasor is motivated by a desire to inter-

fere with the plaintiff’s contractual relations. See Circo

v. Spanish Gardens Food Mfq. Co., 643 F.Supp. 51, 56

(W.D.Mo.1985); Perlman, Interference with Contract

and Other Economic Expectancies: A Clash of Tort and

Contract Doctrine, 49 U.Chi.L.Rev. 61, 128 (1982). Ad-

vocates of this position are reluctant to impose limita-

tions on conduct which is otherwise permitted in an econ-

omy based upon vigorous competition. Perlman, supra

at 78.

While we are sympathetic to this view and recognize

that the law of tortious interference is evolving, see Re-

statement (Second) of Torts, ch. 37, introductory note

at 5 (1977), we believe that the better position is that

taken by the Restatement and followed by many courts.

This line of authority holds that motive can be a de-

terminative factor in converting otherwise lawful be-

havior into “improper” conduct for which the defendant

will be liable. Restatement (Second) of Torts § 767 com-

16a

ment d (1977); Alyeska Pipeline Serv. Co. v. Aurora Air

Serv., Inc., 604 P.2d 1090, 1093 (Alaska 1979); see also

Perlman, Interference with Contract, 49 U.Chi.L.Rev.

61, 78 (1982). Indeed, Professor Prosser has described

the contours of the tort stating that ‘no specific conduct

is prohibited . . . and liability turns on the purpose for

which the defendant acts.” W. Prosser, Law of Torts

§ 129, at 979 (5th ed. 1984).

Natural’s interest in being free to adjust its purchases

of gas is not so strong that it cannot be limited by a re-

quirement not to exercise its discretion for the purpose

of interfering with CIG’s contractual relationships. Alye-

ska Pipeline, 604 P.2d at 1093 (right to terminate con-

tract at will did not prevent liability for tortious inter-

ference based upon termination of that contract). The

tortious interference verdict will stand.”

Ill. CIG’s Antitrust Claim

CIG claims that in addition to being a violation of the

Service Agreement and a means of stealing CIG’s cus-

tomers, Natural’s decision to stop purchasing gas was

also the cornerstone of an attempt by Natural to monopo-

lize the market for the long distance transportation of

natural gas.’* Since an attempt to monopolize typically

12 Natural also asserts the award of $8,000,839 in restitutionary

damages was inappropriate. It argues that restitutionary damages

are unavailable for tortious interference claims under Section 766A

of the Restatement. While it cites one case to this effect, Marcus,

Stowell & Beye Gov't Secs., Inc. v. Jefferson Inv. Corp., 797 F.2d

227, 231-32 (5th Cir. 1986), the weight of authority holds that

restitutionary damages are available for tortious interference with

contract. See Zippertubing Co. v. Teleflex, Inc., 757 F.2d 1401, 1411-

12 (3d Cir. 1985); Federal Sugar Ref. Co. v. United States Sugar

Equalization Bd., 268 F. 575, 582 (D.C.N.Y. 1920); National Mer

chandising Corp. v. Leyden, 370 Mass. 425, 348 N.E.2d 771, 775-76

(1976); D. Dobbs, Remedies § 6, at 465 (1973).

13 Natural also asserted an antitrust counterclaim against CIG.

Natural alleged that CIG monopolized or attempted to monopolize

17a

involves an attempt by a firm which does not possess

monopolistic control over a market to become a monopolist

in that market, CIG’s claim is unusual because it does

not allege that Natural was attempting to gain control

of the transportation market for itself. Rather, CIG al-

leges Natural stopped purchasing gas in order to give

CIG’s chief competitor, the Trailblazer System ', a mo-

nopoly in the long distance gas transportation market.

Natural asserts that a party may not be held liable for

attempting toe give monopoly power to another party

which it does not control. This is especially true, it as-

serts, when the intended beneficiary of the monopolist is

the purchase of Wyoming natural gas by intervening and threaten-

ing to intervene in FERC proceedings in which CIG’s competitors

proposed building new pipelines leading out of Wyoming. The

district court ruled that the Noerr-Pennington doctrine barred

evidence of CIG’s activities before FERC.

The Noerr-Pennington doctrine requires that attempts to influ-

ence the government, including attempts to influence administrative

agencies, be exempt from attack under the Sherman Act. California

Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 511-12,

92 S.Ct. 609, 612-13, 30 L.Ed.2d 642 (1972); Bright v. Moss Am-

bulance Serv., Inc., 824 F.2d 819 (10th Cir. 1987). We agree with

the district court that nothing in CIG’s activities before FERC so

corrupts the judicial or administrative process that those activities

amount to a sham and therefore are exempt from the Noerr-

Pennington doctrine. Hydro-Tech Corp. v. Sundstrand Corp., 673

F.2d 1171, 1176-77 & n. 7 (10th Cir. 1982).

14J7t is important to distinguish between NGPL-Trailblazer, one

of the defendants, and the Trailblazer System. The Trailblazer Sys-

tem is a series of three separately owned and operated pipelines

joined end-to-end which stretches from Wyoming to Nebraska.

When built in 1982, the Trailblazer System greatly expanded the

capacity of producers to move their gas from Wyoming to eastern

markets. The westernmost segment of the Trailblazer System,

Overthrust, is owned by CIG and Natural, as well as four other

companies. The middle segment, WIC, is owned by CIG alone.

The easternmost and longest segment of the system, Trailblazer, is

owned jointly by NGPL-Trailblazer and two other companies. The

Trailblazer System, the alleged beneficiary of Natural’s predatory

conduct, is not even a party to this case.

ae ia ia ti ell

18a

not a single entry but three separately operated entities

owned in significant part by the alleged victim of the

monopolistic scheme.

Nevertheless, Section 2 of the Sherman Act does not

explicitly state that a party can only monopolize for it-

self. We need not decide this thorny issue because even

if we assume that it is possible to create a monopoly for

the benefit of a third party, CIG did not establish each of

the elements of an attempted monopolization claim.’

CIG alleges that Natural attempted to monopolize the

market by preventing CIG from offering gas transporta-

tion services to customers who might choose between CIG

and the Trailblazer System. Because CIG was required

to maintain capacity in its pipeline for the volume of

gas Natural chose to reserve under the Service Agree-

ment, CIG was not able to replace lost income from Nat-

ural’s reduction purchases by offering “firm” '® transpor-

tation services to new customers. In the summer of 1984,

after Natural had stopped taking gas from CIG, CIG

offered Natural the opportunity to reduce the capacity it

15 The difficulty with punishing a firm for attempting to create

a monopoly for a third party which does not act as a single entity,

is that the threat to competition after the monopoly is achieved

is obscure. In a more typical case in which a firm is attempting,

through unfair means, to gain control of a market for itself, one

can be quite certain the firm will not hesitate to exercise its newly

acquired monopoly power. In this case, the alleged monopolist’s

(Natural’s) conduct says little about its intended beneficiary’s (the

Trailblazer System’s) proclivity or ability to monopolize. Section

2 of the Sherman Act does not punish the mere possession of

monopoly power. Standard Oil Co. of New Jersey v. United States,

221 U.S. 1, 62, 31 S.Ct. 502, 516, 55 L.Ed. 619 (1911).

16 Gas can be sold on either a firm or interruptible basis. Firm

sales guarantee the purchaser that he will receive the volumes of

gas he reserves, while interruptible sales only guarantee deliveries

if customers with higher priority do not demand the gas. Since

CIG had a firm obligation to sell gas to Natural, CIG could only

offer to sell interruptible service to new customers.

19a

reserved on the CIG system. Instead of reducing its res-

ervation, Natural chose to increase it. Thus, Natural con-

tinued to tie up CIG’s capacity, while refusing to pur-

chase gas.

Further, CIG attempted to offer interruptible service

to new customers to utilize the capacity left vacant by

Natural’s decreased purchases. Soon after CIG began to

service the new customers, Natural resumed purchases of

gas, forcing CIG to interrupt its service to the new cus-

tomers. Because the Trailblazer System could offer in-

expensive, uninterrupted service, CIG’s new customers

switched to the Trailblazer System.

While Natural’s alleged manipulation of its gas pur-

chases in an effort to disrupt CIG’s ability to service new

customers may be reprehensible conduct, the antitrust

laws cannot be invoked to punish all forms of unseemly

business activity. If a party does not have monopolistic

control over a market, its unfair business conduct impli-

cates the attempt provision of the antitrust laws only if

that conduct threatens to create a monopoly. IJndiana

Grocery, Inc. v. Super Valu Stores, Inc., 864 F.2d 1409,

1413 (7th Cir.1989); cf. Continental T.V., Inc. v. GTE

Sylvania, Inc., 433 U.S. 36, 54, 97 S.Ct. 2549, 2559, 53

L.Ed.2d 568 (1977) (‘an antitrust policy divorced from

market considerations would lack any objective bench-

marks”). The defendant need face the added sanction of

antitrust triple damages only if the plaintiff can estab-

lish each element of an antitrust offense.

In this circuit, four elements must be proven to estab-

lish an attempt to monopolize under Section 2 of the

Sherman Act: (1) relevant market (including geo-

graphic market and relevant product market) in which

the alleged attempt occurred; (2) dangerous probability

of success in monopolizing the relevant market; (3) spe-

cific intent to monopolize; and (4) conduct in furtherance

of such an attempt. Shoppin’ Bag of Pueblo, Inc. v. Dil-

lon Companies, 783 F.2d 159, 161 (10th Cir.1986). In

20a

addition, any private plaintiff seeking treble damages

under Section 4 of the Clayton Act must show antitrust

injury. Brunswick Corp..v. Pueblo Bowl-O-Mat, Inc.,

429 U.S. 477, 488, 97 S.Ct. 690, 697, 50 L.Ed.2d 701,

cert. denied, 429 U.S. 1090, 97 S.Ct. 1099, 51 L.Ed.2d

535 (1977). While Natural argues that CIG has failed

to establish each element of the attempted monopolization

claim, CIG’s failure to show a dangerous probability of

successful monopolization reveals the fundamental diffi-

culty in CIQ’s claim."

In order to satisfy the dangerous probability of suc-

cess element of an attempt claim, the plaintiff must

17 Several commentators have noted approvingly that the dan-

gerous probability of success element of the attempt to monopolize

offense prevents courts from expanding the Sherman Act into a

broad unfair competition statute. For instance, Handler & Steuer

state:

[T]here is ample reason for excluding single-firm behavior

from the serious penalties of the antitrust laws when no dan-

gerous probability of monopolization exists. When one firm

monopolizes an economically significant market or threatens

such a monopoly, competition is immediately and _ seriously

jeopardized. It was largely to combat this peril that section

2 of the Sherman Act was passed, fortified with the formidable

deterrent of treble damages and criminal penalties. Short of

this situation, however, single firm behavior does not present so

significant a threat to competition as to warrant such harsh

consequences.

Handler & Steuer, Attempts to Monopolize and No Fault Monopoli-

zation, 129 U.Pa.L.Rev. 125, 175 (1980) (footnote omitted): see

also 3 P. Areeda & D. Turner, Antitrust Law © 833 (1978) (here-

inafter Areeda & Turner); cf. Cooper, Attempts and Monopoliza-

tion: A Mildly Expansionary Answer to the Prophylactic Riddle

of Section Two, 72 Mich.L.Rev. 373, 454-55 (1974) (warning

against expansion of the attempt provision into an unfair competi-

tion statute) ; but see Blecher, Attempt to Monopolize Under Section

2 of the Sherman Act: “Dangerous Probability” of Monopoliza-

tion Within the “Relevant Market,” 38 Geo.Wash.L.Rev. 215, 222

(1969); Note, Attempt to Monopolize Under the Sherman Act:

Defendant’s Market Power as a Requisite to a Prima Facie Case,

73 Colum.L.Rev. 1451, 1459-61 (1973).

2la

show that there was a dangerous probability the defend-

ant would achieve monopoly status as the result of the

predatory conduct alleged by the plaintiff. Shoppin’ Bag,

783 F.2d at 162; Lektro-Vend Corp. v. Vendo Co., 660

F.2d 255, 271 (7th Cir.1981), cert. denied, 455 U.S. 921,

102 S.Ct. 1277, 71 L.Ed.2d 461 (1982). The likelihood

of successful monopolization is typically evaluated by ex-

amining the defendant’s share of the relevant market.

Shoppin’ Bag, 783 F.2d at 161. Reformulated in terms of

market share, the plaintiff must show that there was a

dangerous probability that the defendant’s conduct would

propel it from a non-monopolistic share of the market to

a share that would be large enough to constitute a mo-

nopoly for purposes of the monopolization offense.'* The

higher the firm’s intial market share, the greater the like-

lihood that it will eventually gain monopolistic control

over the market. Jd. at 162.

CIG asserts the fact that the Trailblazer System’s

market share rose from 41% to 53% is_ sufficient

evidence to support the jury’s finding that there was a

dangerous probability that the Trailblazer System would

attain a monopoly. If this were a typical attempted

monopolization case in which the defendant was attempt-

ing to acquire a monopoly for itself through the use of

economic coercion, we would have little difficulty in affirm-

ing the jury’s finding of dangerous probability. First, a

market share at the commencement of the defendant’s

predatory conduct of 41% would show that the defendant

would not have to acquire much additional market share

in order to attain monopoly control over the market.

More importantly, however, a 41% market share typi-

cally indicates that a firm has substantial economic power

18 While the Supreme Court has refused to specify a minimum

market share necessary to indicate a defendant has monopoly power,

lower courts generally require a minimum market share of be-

tween 70% and 80%. 2 E. Kintner, Federal Antitrust Laws § 12.6

(1980) ; Areeda & Turner, {| 803.

22a

in the market, and, therefore, has the tools at its dis-

posal to elevate its market share to monopolistic levels.

In other words, a high market share indicates that the

defendant has the economic capacity to monopolize the

market. Jd. However, proximity to monopolistic status

is not enough; the defendant must also have the ability

to propel itself to monopolistic control over the market.

Indiana Grocery, Inc. v. Super Valu Stores, Inc., 864

F.2d 1409 (7th Cir.1989) (50% market share insuffi-

cient to show dangerous probability of successful monop-

olization); Richter Concrete Corp. v. Hilltop Concrete

Corp., 691 F.2d 818, 827 (6th Cir.1982) (‘the real test

is whether [the defendant] possessed sufficient market

power to achieve its aims”); United States v. Empire

Gas Corp., 537 F.2d 296, 305 (8th Cir.1976), cert. denied,

429 U.S. 1122, 97 S.Ct. 1158, 51 L.Ed.2d 572 (1977)

(50° market share insufficient to show dangerous prob-

ability of successful monopolization). While the Trail-

blazer System’s substantial market share demonstrates

its proximity to monopoly status, it does not indicate Nat-

ural’s capacity to raise the Trailblazer System’s market

share to a monopolistic level.

CIG did not attempt to offer evidence of Natural’s

share of the transportation market. One might initially

imagine that evidence of a firm’s market share would be

required in order to assess that firm’s ability to obtain or

confer market power, but this is not necessarily true.

In this case, Natural’s capacity to create a monopcly for

the Trailblazer System cannot be measured by Natural’s

market share because Natural did not use economic coer-

cion in its attempt to monopolize. Rather, Natural took

advantage of its contractual right to stop purchasing

gas from CIG to magnify the Trailblazer System’s posi-

tion in the market.'’ In evaluating the probability of suc-

19 The record does not clearly disclose how much of the Trail-

blazer System’s market share gain reflected increased transporta-

tion volumes because CIG was unavailable as a competitor, and

23a

cessful monopolization “we must consider the firm’s ca-

pacity to commit the offense, the scope of its objective,

and the character of’ its conduct.” Kearney & Trecker

Corp. v. Giddings & Lewis, Inc., 452 F.2d 579, 598 (7th

Cir.1971), cert. denied, 405 U.S. 1066, 92 S.Ct. 1500, 31

L.Ed.2d 796 (1972). In this case each of these factors is

strictly determined and ultimately limited by the Service

Agreement between Natural and CIG.

Natural’s predatory conduct consisted of exercising its

contract rights with CIG to prevent CIG from offering

transportation services to long distance customers. Be-

cause Natural reserved a certain amount of space in

CIG’s pipeline, CIG could not offer that space to others.

By continuing to reserve large amounts of gas and tak-

ing gas when CIG threatened to sell Natural’s reserved

capacity, Natural insured that CIG could not offer Na-

tural’s reserved capacity to the market. Yet, Natural’s

ability to exclude CIG was strictly limited by Natural’s

ability to insure its reserved capacity went empty. By

exercising all its rights under the Service Agreement to

tie up the entire capacity it had reserved, Natural was

still only able to raise the Trailblazer System’s market

share to 54%.

Thus, from the beginning, Natural’s decision to quit

purchasing gas presented no danger that Natural could

do anything more than shift 13% of the market to the

Trailblazer System. The necessarily limited scope of Na-

tural’s objective leaves no room for speculation about the

probability that the Trailblazer System would gain a

monopoly. There was simply no reasonable chance, let

alone a dangerous probability, that Natural, through the

exercise of its contractual rights, could imbue the Trail-

——

how much the market share gain simply resulted from the Trail-

blazer System’s constant sales level in comparison with CIG’s

sales losses.

24a

blazer System with sufficient market share to be a mo-

nopolist.*°

Further, market share statistics sometimes overesti-

mate a firm’s market power. See, e.g., Ball Memorial

Hosp., Inc. v. Mutual Hosp. Ins., Inc., 784 F.2d 1325,

1335 (7th Cir.1986) ; Landes & Posner, Market Power in

Antitrust Cases, 94 Harv.L.Rev. 937, 950 (1981). In

this ease, if we look beyond market share statistics, we

are further convinced that Natural’s conduct did not

threaten to give the Trailblazer System the degree of

market power that would constitute a monopoly for pur-

20 We agree with the proposition that it is no defense to an at-

tempted monopolization charge that the defendant’s attempt to

monopolize proved to be unsuccessful. United States v. American

Airlines, Inc., 743 F.2d 1114, 1119 (5th Cir.1984). Simply because

a plan fails to succeed does not mean there was no probability that

it could have succeeded. A flipped coin which lands heads still had

a 50% chance of landing tails before it was flipped. The capacity

of the defendant to monopolize must be evaluated at the commence-

ment of the predatory scheme.

We also note our holding in this case does not require that in

every instance where a party intends to eliminate a competitor

through unfair means, the elimination of the competitor must give

the predator a monopolistic market share. For instance, when a

party with a substantial market share eliminates a smaller com-

petitor through economic coercion, increased market power will

give it even greater coercive power to eliminate other competitors.

There is no reason to wait until the predator attacks a competitor

that would put it just over the brink of monopolization before it

can be stopped. See Note, Attempt to Monopolize Under the Sher-

man Act: Defendants Market Power as a Requisite to a Prima

Facie Case, 73 Colum.L.Rev. 1451, 1462-63 (1973).

In this case, Natural sought to take advantage of a unique op-

portunity its contract afforded to temporarily harm a competitor

of an entity in which it had an economic stake. Unlike the ordi-

nary situation in which a firm’s market share is crucial to the

firm’s ability to engage in predatory conduct and every predatory

act makes future predation easier, Natural’s ability to engage in

predatory conduct would not be enhanced by conferring market

share upon the Trailblazer System.

25a

poses of the monopolization offense. One measure of the

degree of market power is the persistence of a firm’s

ability to profitably charge monopoly prices.*! If the evi-

dence demonstrates that a firm’s ability to charge monop-

oly prices will necessarily be temporary, the firm will not

possess the degree of market power required for the mo-

nopolization offense.” 3 P. Areeda & D. Turner, Anti-

21 Although most courts do not explicitly discuss the persistence

of a firm’s ability to charge supracompetitive prices as a measure

of a firm’s market power, courts indirectly consider the potential

longevity of supracompetitive pricing whenever they use market

share to evaluate the degree of market power. Market share sta-

tistics are a useful measure of market power, in large part, be-

cause they indicate the relative durability of supracompetitive pric-

ing capacity. The greater a firm’s market share, the longer it will

be able to charge monopoly prices because it will take longer for

its small competitors to increase their output enough to discipline

prices. See H. Hovencamp, Economics and Federal Antitrust Law

§ 3.1, at 58 (1985).

The durability of a firm’s ability to charge supracompetitive

prices also underlies another factor used to evaluate the degree

of market power. Barriers to entry are often used by courts to

determine whether an alleged monopolist has sufficient market

power for purposes of the monopolization offense. 2 E. Kintner,

Federal Antitrust Laws § 12.9 (1980). Barriers to entry are market

characteristics which make it difficult or time-consuming for new

firms to enter a market. For instance, if market entry requires

the construction of large manufacturing plants, Cargill, Inc. v.

Monfort of Colorado, Inc., 479 U.S. 104, 119, 107 S.Ct. 484, 494,

93 L.Ed.2d 427 (1986), or obtaining governmental approval to

enter the market, United States v. Marine Bancorporation, Inc., 418

U.S. 602, 628-29, 94 S.Ct. 2856, 2873-74, 41 L.Ed.2d 978 (1974),

the market is said to have high barriers to entry. Often courts re-

fuse to find a sufficient degree of market power for the monopoliza-

tion offense when they determine that a market has low barriers

to entry. See, e.g., Ball Memorial Hosp., 784 F.2d at 1335. While

a firm may have the capacity to charge supracompetitive prices in

a market with low barriers to entry, that capacity is likely to be

temporary.

22 Some courts and commentators label the degree of market power

necessary for the monopolization offense as “monopoly power.” See

L. Sullivan, Antitrust § 22, at 75 (1977) (“‘Monopo!y power can

—————————

26a

trust Law, at © 807; Williamsburg Wax Museum, Ine. ».

Historic Figures, Inc., 810 F.2d 248, 252 (D.C.Cir.1987) ;

Dimmitt Agri Indus., Inc. v. CPC Int'l, Inc., 679 F.2d

516, 530 (5th Cir.1982), cert. denied, 460 U.S. 1082, 103

S.Ct. 1770 76 L.Ed.2d 344 (1983); Metro Mobile CTS,

Inc. v. Newvector Communications, Inc., 661 F.Supp.

1504, 1523-24 (1987); cf. Copperweld v. Independence

Tube Corp., 467 U.S. 752, 767-68, 104 S.Ct. 2731, 2739-

40, 81 L.Ed.2d 628 (1984) (antitrust laws are only

meant to condemn conduct with long-run anticompetitive

effects ) .**

be distinguished from a lesser amount of market power only in

degree.”); Dimmitt Agri Indus., Inc. v. CPC Int'l, Inc., 679 F.2d

516, 529 (5th Cir.1982), cert. denied, 460 U.S. 1082, 103 S.Ct. 1770,

76 L.Ed.2d 344 (1983). One commentator has suggested that in

the future courts might more precisely define monopoly power by

“focus[ing] on the permanence of market power, with mere market

power suggesting that supranormal profits will be quickly eroded

by new entry, and monopoly power suggesting significantly greater

insulation from the long-run forces of entry.” G. Hay, Single Firm

Conduct, 57 Antitrust L.J. 75, 81 (1988) (emphasis added). While

we do not adopt this commentato:’s nomenclature, we do agree with

his assertion that market power must be persistent to make a firm

a monopolist for purposes of the antitrust laws.

23 A suggestion that unidentified market forces will eventually

correct supracompetitive pricing will not suffice to show that market

power will be temporary. Only when an alleged monopolist faces

substantial competition from a known competitor who will enter

the market in a definite period of time, ought courts to decline to

find sufficient market power to satisfy the requirement for the

monopolization offense, Williamsburg Wax Museum, 810 F.2d at 252

(defendant did not have monopoly in the wax figure market be-

cause a known competitor could, within a year, begin to deliver

wax figures); Metro Mobile CTS, 661 F.Supp. at 1523-24 (defend-

ant did not possess monopoly power for purposes of the monopoliza-

tion or attempted monopolization offense even though it controlled

100% of the market because a known competitor had both the

plans and capacity to enter the market within three years). Cf.

Landes & Posner, Market Power in Antitrust Cases, 94 Harv.L.Rev.

937, 950, n. 28 (1981) (difficulty in identifying potential competitors

forces courts to assume that a firm’s ability to charge monopoly

prices will be persistent).

27a

In this case, the Trailblazer System’s ability to charge

supracompetitive prices could last only as long as Natural

had the contractual right to tie up CIG’s pipeline ca-

pacity. This right was strictly limited by the duration

of the Service Agreement ** Once Natural’s control over

CIG’s capacity ended, the market would return to the

status quo~ since the Trailblazer System would be help-

less to compete against the unused and inexpensive ca-

pacity of CIG’s system.

This analysis, which requires a plaintiff to show that

an attempted monopolist’s conduct ** threatened to create

substantial and persistent changes in the marketplace,

may allow some unfair and potentially harmful methods

of competition to go unpunished by the antitrust laws.

But the Supreme Court, in a now oft quoted phrase, has

stated “the antitrust laws . . . were enacted for ‘the pro-

24 The Service Agreement was to expire in 1989. Thus, the Trail-

blazer System would be free from competition for a longer period

of time than the defendants in either Williamsburg Wax Museum

(1 year) or Metro Mobile CTS (3 years). Yet, the actual number

of years that the Trailblazer System would be free from competition

from CIG is not the deciding factor in this case. Rather the cer-

tainty that the market will return to the status quo at a predeter-

mined date and the fact that the Trailblazer System has no power

to prevent the erosion of its market share, convince us that the

market implications of Natural’s conduct are not the subject of

the antitrust laws.

25 There is no suggestion in the record that Natural was in

danger of driving CIG completely out of the transportation business

before the expiration of the Service Agreement. Indeed, consider-

ing CIG’s financial resources and record profitability during Nat-

ural’s tie-up, it is unlikely that Natural could have completely

excluded CIG. By attacking CIG, Natural could not alter the com-

petitive structure of the industry which is based on a permanent

superstructure. See Cargill v. Monfort, 479 U.S. at 119, n. 15, 107

S.Ct. at 494, n. 15.

26 One treatise has stressed that courts ought to take a long-run

view when evaluating allegedly anticompetitive conduct. In at-

tempting to distinguish between conduct that should be addressed

28a

tection of competition not competitors.’” Brunswick

Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488, 97

S.Ct. 690, 697, 50 L.Ed.2d 701 (quoting Brown Shoe Co.

v. United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 1521,

8 L.Ed.2d 510 (1962)), cert. denied, 429 U.S. 1090, 97

S.Ct. 1099, 51 L.Ed.2d 585 (1977). The Court has long

recognized that the Sherman Act ‘does not purport to

afford remedies for all torts committed by or against per-

scns engaged in interstate commerce.” Hunt v. Crumboch,

325 U.S. 821, 826, 65 S.Ct. 1545, 1548, 89 L.Ed. 1954

(1945). We believe the triple damage sanction of the

Clayton Act is too harsh a remecy for unfair methods of

competition that only threaten to have a _ transitory

impact on the marketplace. Since there was no danger-

ous probability that Natural would bestow upon the

Trailblazer System the degree of market power either in

terms of market share or persistence, necessary for the

monopolization offense, the jury’s antitrust verdict must

be reversed.

IV. Conclusion

In conclusion, we hold that because FERC has already

determined the appropriate contractual rate for failure

to purchase gas, and Natural has paid CIG that rate,

the verdicts for breach of contract and bad faith breach

of contract awarding a different rate are reversed. The

antitrust verdict is reversed because CIG failed to pre-

sent sufficient evidence for a jury to find a dangerous

probability of successful monopolization. The verdict for

tortious interference with contract is affirmed.

by the antitrust laws and conduct which should be regulated by

tort law, Professors Areeda and Turner state:

[M]ost important, is our doubt that the torts and other activi-

ties considered in this Paragraph would very often seriously

impair the competitive opportunities of rivals in any significant

or permanent way. We must beware of the inclination to con-

demn a monopolist on the basis of antisocial behavior that

could possibly give him an improper advantage in the market.

.. The antitrust court must, therefore, insist on .. . signifi-

cant and more-than-temporary harmful effects on competition.

Areeda & Turner, { 737b (emphasis added).

29a

APPENDIX B

UNITED STATES DISTRICT COURT

D. WYOMING

No. C84-139-B

COLORADO INTERSTATE GAS COMPANY,

Plaintiff,

NATURAL GAS PIPELINE COMPANY OF AMERICA

and NGPL-TRAILBLAZER, INC.,

Defendants.

NATURAL GAS PIPELINE COMPANY OF AMERICA, MIDCON

VENTURES, INC., and NGPL-TRAILBLAZER, INC.,

Counterclaim-Plaintiffs,

COLORADO INTERSTATE GAS COMPANY, WYOMING INTER-

STATE COMPANY, LTD., and the COASTAL CORPORATION,

Counterclaim-Defendants.

May 29, 1987

J. Kent Rutledge, Arthur Kline Lathrop & Uchner,

Cheyenne, Wyo., Gary L. Cowan, P. Michael Koenig,

Michael L. Beatty, Michael L. Williams, Rebecca H.

Noecker, Colorado Springs, Colo., William C. McClearn,

James E. Hartley, Marilyn S. Kite, Holland & Hart,

Denver, Colo., for plaintiff.

80a

John T. Cusack, Thomas Campbell, Gordon Nash,

Gardner, Carton & Douglas Chicago, Il., Paul J. Hickey,

Rooney, Bagley, Hickey, Evans & Statkus, Cheyenne,

Wyo., Louis Nizer, Phillips, Nizer, Benjamin, Krim &

Ballon, New York City, William Brown, Brown, Drew,

Apostolos, Massey & Sullivan, Casper, Wyo., Joseph M.

Wells, Neil J. Maloney, Paul E. Goldstein, Lombard, IIl.,

Paul Korman, Gardner, Carton and Douglas, Washing-

ton, D.C., Roy R. Robertson, Jr., Midcon Corp., Lombard,

Ill., for defendants; Phillip Areeda, Langdell Hall, Cam-

bridge, Mass., of counsel.

Thomas A. Nicholas III, Hirst & Applegate, P.C., Chey-

enne, Wyo., Michael L. Betty, The Coastal Corp., Houston,

Tex., for Coastal Corp.

Gerald M. Sterns, Charles Foster, Occidental Petroleum

Co., Los Angeles, Cal., for Occidental.

ORDER ON POST-TRIAL MOTIONS

BRIMMER, Chief Judge.

This matter came before the Court on defendants’ mo-

tion, pursuant to Fed. R. Civ. P. 50(b) and 59, for judg-

ment notwithstanding the verdict, for new trial, or for a

remittitur. The Court, having heard the arguments of

counsel, having reviewed the pleading, and being fully

aavised in the premises, FINDS and ORDERS as follows:

Plaintiff Colorado Interstate Gas Company (CIG) and

defendants, Natural Gas Pipeline Company of America

and NGPL-Trailblazer, Inc. (hereinafter collectively re-

ferred to as “NGPL’’), compete to transport natural

gas. In July 1982, NGPL and CIG entered a contract

(the Service Agreement) obligating CIG to deliver and

requiring NGPL to purchase specified quantities of nat-

ural gas. The Service Agreement requires CIG to main-

tain sufficient gas reserves and pipeline transportation

capacity to ensure delivery of NGPL’s entitlements. Sec-

tion 2 of the Service Agreement commits NGPL to pur-

sla

chase a minimum daily volume of gas or to pay the fixed

costs of the volumes not taken.

In 1981-1982 a new pipeline, the Trailblazer System,

was constructed to transport natural gas out of the Over-

thrust region of Wyoming. Three pipeline segments form

the Trailblazer System: the Overthrust Pipeline, the

Wyoming Interstate Company or WIC Pipeline, and the

Trailblazer Pipeline. NGPL-Trailblazer owns the Trail-

blazer Pipeline in partnership with two other companies.

NGPL-Trailblazer is the operator. Trailblazer competes

with CIG to transport natural gas from the Overthrust.

In July 1988, NGPL refused to accept gas from CIG.

The Natural Gas Act nevertheless obligated CIG to be

ready to deliver any volumes requested by NGPL. CIG

could not use the pipeline capacity reserved for NGPL

to ship natural gas for other customers.

CIG was consequently unable to purchase gas from its

own suppliers, so it shut-in gas owned by Champlin

Petroleum in the Whitney Canyon area of Wyoming.

Champlin and CIG began renegotiating their contract.

Champlin insisted that CIG release its rights to purchase

Whitney Canyon gas. CIG acceded. The next day, NGPL

bought Champlin’s Whitney Canyon gas, although NGPL

still refused deliveries from CIG. NGPL shipped the

Whitney Canyon gas through the Trailblazer Pipeline.

In addition to acquiring Champlin’s Whitney Canyon

reserves, NGPL purchased gas from new suppliers and

increased its takes from existing gas suppliers.

CIG brought this action alleging that NGPL attempted

to monopolize the market for the long-distance transpor-

tation of Wyoming natural gas, that NGPL conspired to

monopolize that market, that NGPL breached the Service

Agreement and its duty of good faith and fair dealing,

and that NGPL tortiously interfered with CIG’s business

relationship with Champlin. NGPL asserted counter-

claims alleging that CIG’s parent, the Coastal Corpora-

82a

tion (together with CIG and WIC), monopolized, at-

tempted to monopolize and conspired to monopolize the

purchase, transportation and sale of natural gas in the

Overthrust area. NGPL also alleged that Coastal ac-

quired and attempted to acquire competitors in violation

of §$ 1 and 2 of the Sherman Act and § 7 of the Clayton

Act.

At trial CIG abandoned its antitrust conspiracy claim

against NGPL. The Court directed a verdict for CIG on

NGPL’s conspiracy counterclaim. A directed verdict was

also rendered against NGPL on its claims that CIG

monopolized and attempted to monopolize the sale of nat-

ural gas and that Coastal unlawfully acquired competi-

tors. After an eight week trial, the jury retired to con-

sider:

1. whether NGPL breached the Service Agreement,

tortiously interfered with CIG’s business or contrac-

tual relationships, and attempted to monopolize the

long-distance transportation of Wyoming gas; and

2. whether Coastal, CIG and WIC monopolized and

attempted to monopolize the purchase and transpor-

tation of natural gas.

The jury rejected NGPL’s counterclaims and found in

favor of CIG on each cause of action. CIG was awarded

$159,797,156 on its breach of contract claim, $175,001,711

on its antitrust claim and $39,231,072 on its tortious

interference claim. The total award reached $724,033,361

- after trebling the antitrust damages. The Court, how-

ever, determined that the damages were duplicative and

reduced the judgment to $549,031,650 by deleting the

damage award for breach of contract. NGPL now seeks

judgment notwithstanding the verdict on each of CIG’s

successful claims. In the alternative NGPL moves for a

new trial or for a remittitur.

Substantial evidence supports the jury’s verdict, and

NGPL’s motions for judgment notwithstanding the ver-

33a

dict or new trial are denied. The Court concludes, how-

ever, that the jury erroneously awarded CIG $16,017,678

as damages for tortious interference with contract, and

the Court will grant a remittitur in this amount. The

jury also awarded CIG its future F-1 lost profits as anti-

trust damages. The total amount of future lost profits

was $60,388,000, which was trebled to $181,164,000. The

jury erred in awarding CIG its future F-1 lost profits

as antitrust damages but correctly included them as dam-

ages for breach of contract. Therefore, the Court will

grant a remittitur in the amount of $181,164,000 but

reinstate the breach of contract damage award in the

amount of $60,388,000. The total amount of the remit-

titur is $197,181,678.

I. JUDGMENT NOTWITHSTANDING

THE VERDICT

Caution must. be exercised in granting judgment not-

withstanding the verdict because it deprives the prevail-

ing party of the jury’s factual determination. Joyce v.

Atlantic Richfield Co., 651 F.2d 676, 680 (10th Cir.

1981). Granting the motion is appropriate only when the

evidence points one way and no reasonable inferences

support the position of the opposing party. Equal Em-

ployment Opportunity Comm’n v. Prudential Fed. Sav.

and Loan Ass’n, 763 F.2d 1166, 1171 (10th Cir. 1985)

(citing Symons v. Mueller Co., 493 F.2d 972, 976 (10th

Cir. 1974) ), cert. denied, U.S. , 106 S.Ct. 312,

88 L.Ed.2d 289 (1985). The evidence and accompanying

inferences must be viewed in a light most favorable to

the prevailing party. The court may not weigh the evi-

dence, consider the credibility of witnesses or substitute

its judgment for the jury’s. Joyce v. Atlantic Richfield

Co., 651 F.2d at 680 n. 2. The proof favoring the

movant must be so overwhelming that judgment notwith-

standing the verdict is the only option available to the

court. Acree v. Minolta Corp., 748 F.2d 13882, 1387 (10th

Cir. 1984). If fair-minded people may differ as to the

— — ——

84a

conclusions or if there is substantial conflicting evidence,

judgment notwithstanding the verdict must be denied.

Ryder v. City of Topeka, 814 F.2d 1412, 1418 (10th Cir.

1987) (citing Wylie v. Ford Motor Co., 502 F.2d 1292

(10th Cir. 1974) ).

The jury’s determination must nevertheless be sup-

ported by substantial evidence. White v. Conoco, Inc.,

710 F.2d 1442, 1443 (10th Cir.1983). Substantial evi-

dence is relevant evidence found in the record as a

whole which reasonable minds might accept as adequate

to support the conclusion. Allstate Ins. Co. v. Hiseley, 465

F.2d 12438, 1247 (10th Cir.1972). The court must de-

termine whether a rational jury could conclude that each

required element of the claim was met. Downie v. Abex

Corp., 741 F.2d 1235, 1238 (10th Cir. 1984). The jury’s

findings on sharply conflicting evidence, however, are

conclusively binding, for the jury is charged with the

exclusive duty of assessing the credibility of witnesses

and determining the weight to be given their testimony.

Ryder v. City of Topeka, At 1420-21 (quoting White v.

Conoco, Inc., 710 F.2d 1442 (10th Cir.1983) ).

A. Attempt to Monopolize

An attempt to monopolize requires proof of four ele-

ments: (1) a relevant market; (2) a dangerous prob-

ability of success; (3) specific intent to monopolize; and

(4) conduct in furtherance of the attempt. Shoppin’ Bag

of Pueblo, Inc. v. Dillon Companies, Inc., 783 F.2d 159,

161 (10th Cir.1986). Private plaintiffs must also show

antitrust injury. Brunswick Corp. v. Pueblo Bowl-O-

Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 697, 50

L.Ed.2d 701 (1977). NGPL urges that the evidence was

insufficient to permit a reasonable jury to conclude that

CIG established the essential elements of an attempt to

monopolize. BRIEF OF NATURAL GAS PIPELINE

COMPANY OF AMERICA IN SUPPORT OF MO-

TIONS FOR JUDGMENT NOTWITHSTANDING THE

85a

VERDICT, NEW TRIAL AND/OR REMITTITUR at 9

(hereinafter cited as “NGPL Brief’’).

1. Antitrust Injury

Private plaintiffs must prove antitrust injury to re-

cover treble damages. Brunswick, 429 U.S. at 489, 97

S.Ct. at 697. CIG failed to prove antitrust injury, NGPL

contends, because CIG’s injury does not flow from di-

minished competition in the market for the transporta-

tion of natural gas and because the damages awarded by

the jury do not reflect any anticompetitive effect of the

violation. NGPL characterizes CIG’s claim of antitrust

injury as one for lost profits under the Service Agree-

ment, a loss for which the antitrust laws do not afford

relief. Even if such losses were cognizable, NGPL ar-

gues, CIG failed to connect its lost profits to its antitrust

claim.

CIG claims that NGPL’s conduct injured competition.

The shut-in, tie-up and manipulation of takes was de-

signed to establish control of the market and to achieve

monopoly. Competition was injured, CIG argues, be-

cause the marketplace was deprived of a low-cost trans-

portation alternative. The shut-in precluded CIG from

competing with the Trailblazer System to transport

NGPL’s gas and prevented CIG from providing nonin-

terruptible transportation services to other pipelines.

Consumers and producers, CIG concludes, thus had to

pay higher prices to transport Wyoming gas.

The United States Supreme Court defines antitrust

injury as “injury of the type the antitrust laws were

intended to prevent and that flows from that which

makes the defendants’ acts unlawful.” Brunswick, 429

U.S. at 489, 97 S.Ct. at 697. The injury should reflect

the anticompetitive effect either of the violation or of

the anticompetitive acts made possible by the violation.

Id. It should be the type of loss that the claimed viola-

tion would be likely to cause. Jd. (quoting Zenith Radio

36a

Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 125, 89

S.Ct. 1562, 1577, 23 L.Ed.2d 129 (1969) ).

The antitrust injury test is ambiguous. Page, Anti-

trust Damages and Economic Efficiency: An Approach

to Antitrust Injury, 47 U.Chi.L.Rev. 467 (1980). Two

recent United States Supreme Court cases help to clarify

the concept of antitrust injury.

Plaintiff in Blue Shield of Virginia v. McReady, 457

U.S. 465, 102 S.Ct. 2540, 73 L.Ed.2d 149 (1982), was

a health insurance subscriber whose benefits included

reimbursement for psychiatrists’ fees but not psycholo-

gists’ fees. Plaintiff alleged that Blue Shield conspired

with psychiatrists to drive psychologists from the health

care market. The district court dismissed the case, hold-

ing that plaintiff lacked standing because she was not a

competitor in the health care market. The court of ap-

peals reversed. It held that treble damages are available

to any person whose injury is directly or proximately

caused by a violation of the antitrust laws. Jd. at 468-72,

102 S.Ct. at 2542-44.

On appeal the Supreme Court addressed the doctrines

of standing and antitrust injury. With regard to the

latter, the Court embraced the view that recovery of

treble damages should be linked to the procompetitive

policy of the antitrust laws. /d. at 482, 102 S.Ct. at

2550. At the same time, it rejected the claim that

Brunswick limits recovery to those plaintiffs who show

that their injuries reflect the anticompetitive effect of

the violation. Jd. The Court held that plaintiffs demon-

strate antitrust injury where their injuries are “inex-

tricably intertwined with the injury the conspirators

sought to inflict on ... the market.” Jd. at 483-84, 102

S.Ct. at 2550-51. The Court also said that a plaintiff

need not prove an actual lessening of competition or that

it was driven from the market. /d. at 482, 102 S.Ct. at

2550 ‘quoting Brunswick, 429 U.S. at 490 n. 14, 97

S.Ct. at 698). Two facts distinguished McCready from

37a

Brunswick. First, plaintiff alleged a purposefully anti-

competitive scheme. Second, plaintiff did not label in-

creased competition as a harm to her. Blue Shield of

Virginia v. McCready, 457 U.S. at 483 & n. 19, 102 S.Ct.

at 2550 and n. 19. The Court finally noted that “the

relationship between the claimed injury and that which

is unlawful in the defendant’s conduct, as analyzed in

Brunswick, is one factor to be considered in determining

the redressability of a particular form of injury under

§ 4.” Id. at 483 n. 19, 102 S.Ct. at 2550 n. 19 (emphasis

added).

The additional factors to be considered became clear

in Associated Gen. Contractors of California, Inc. v. Cal-

tfornia State Council of Carpenters, 459 U.S. 579, 103

S.Ct. 897, 74 L.Ed.2d 723 (1983). In that case, a car-

penters’ union sued an association of general contractors,

alleging that the association influenced its members and

third parties to withhold their business from unionized

firms in order to restrain the union’s business activities.

Id. at 521-23, 103 S.Ct. at 899-900. The question pre-

sented was whether the union could recover for injuries

resulting from the association’s coercion of third parties.

Id. at 535, 103 S.Ct. at 907. The Court held that the

union lacked standing to seek treble damage. Jd. at 545-

46, 103 S.Ct. at 912.

The Court evaluated plaintiff's harm, the alleged

wrongdoing and the relationship between them. Jd. at

535, 103 S.Ct. at 907. Several factors were examined:

the causal connection between the violation and the in-

jury, defendant’s intent to cause the harm, whether

Congress intended to redress the injury, the existence

of a class of persons more directly injured by the viola-

tion, the directness of the causation between the viola-

tion and the injury, the degree to which the claim was

speculative, the availability of other more appropriate

remedies, and the judicial interest in managing complex

38a

litigation and avoiding double recovery. Jd. at 537-44,

103 S.Ct. at 908-11.!

_ McCready and Associated General Contractors thus

suggest that many factors must be considered in a proper

analysis of antitrust injury. In this case, CIG alleged

that NGPL attempted to monopolize the long-distance

transportation of natural gas by excluding CIG from the

market. Three issues are raised: whether a reasonable

jury could conclude that CIG was excluded from the

market, whether the alleged injury is redressable under

the antitrust laws, and whether a reasonable jury could

conclude that the violation and the injury were connected.

The Court must view the evidence as a whole and

follow the admonition that an antitrust plaintiff ‘should

be given the full benefit of [its] proof without tightly

compartmentalizing the various factual components and

wiping the slate clean after scrutiny of each.” Aspen

Highlands Skiing Corp. v. Aspen Skiing Co., 738 F.2d

1509, 1522 n. 18 (10th Cir.1984) (quoting Continental

Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 699,

699, 82 S.Ct. 1404, 1410, 8 L.Ed.2d 777 (1962), aff'd,

472 U.S. 585, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985).

Viewed as a whole and in a light most favorable to

CIG, ample evidence supports the jury’s determination

that CIG was excluded from the market. CIG’s theory

of attempted monopolization is built on several related

acts. The first step was the shut-in of CIG gas at the

H-1 delivery point. This closed off the southern outlet

for Wyoming gas. CIG, to cut back its own supplies,

1 While Associated General Contractors is a standing case, it aids

in analyzing CIG’s claims. The concepts of standing and antitrust

injury are similar, and many courts have incorporated Brunswick

into their standing tests. See, e.g., John Lenore & Co, v. Olympic

Brewing Co., 550 F.2d 495 (9th Cir.1977). Justice Marshall, the

author of Brunswick, described that opinion as one denying stand-

ing. Associated General Contractors, 459 U.S. at 549 (Marshall, J.,

dissenting). ‘

39a

reduced takes from Northwest Pipeline, which was buy-

ing substantial amounts of natural gas in Wyoming and

transporting it to the south and east through CIG’s sys-

tem. Northwest Pipeline sent the gas to the Seattle mar-

ket to avoid transporting it through the Trailblazer Sys-

tem at a higher cost or breaching its contracts with its

own suppliers. This in turn saturated the Seattle market,

where Canadian natural gas was plentiful. The shut-in

thus closed off the outlet for Wyoming gas in the North-

west. Because the Northwest Central and Kansas-

Nebraska pipelines stop short of the Overthrust, closing

the northwest and southeast outlets left one transporta-

tion alternative for Wyoming natural gas: the Trail-

blazer System. Tr. at 1550-55; 1693-94. CIG had diffi-

culty obtaining new business, because the Service Agree-

ment compelled CIG to stand ready to deliver if NGPL

resumed takes. When CIG found new customers, the

ANR and Tennessee pipeline companies, NGPL resumed

takes, forcing CIG to interrupt its service and ta lose its

new customers. Then NGPL again suspended its takes.

Tr. at 1511-20. Although NGPL vigorously disputed this

theory at trial, the jury could have concluded that CIG

was excluded from the market for the long-distance

transportation of Wyoming natural gas.

An attempted monopolization need not cause actual

market damage, but must simply threaten to produce the

type of market damage contemplated by the antitrust

laws. Multifler, Inc. v. Samuel Moore & Co., 709 F.2d

980, 994 (5th Cir.1983), cert. denied, 465 U.S. 1100, 104

S.Ct. 1594, 80 L.Ed.2d 126 (1984) ; Lektro-Vend Corp. v.

Vendo Co., 660 F.2d 255, 270 (7th Cir.1981), cert. de-

nied, 455 U.S. 921, 102 S.Ct. 1277, 71 L.Ed.2d 461

(1982). The jury could have concluded that competition

actually diminished. Evidence was presented showing

that, following the shut-in, NGPL’s market share for the

long-distance transportation of Wyoming natural gas

rose from approximately forty-two percent to fifty-five

percent, while CIG’s share dropped from twenty-three

“<

40a

percent to thirteen percent. Tr. at 1505-09; Plaintiff’s

Exhibit 1758.

The next question is whether lost profits caused by

exclusion from the market is an injury which the anti-

trust laws are intended to prevent. Brunswick, 429 U.S.

at 489, 97 S.Ct. at 697. Congress intended to preserve

competition by enacting the antitrust laws. Id. at 488,

97 S.Ct. at 697. Preserving competition in turn promotes

maximum consumer economic welfare through efficient

use and allocation of scarce resources. I P. Areeda & D.

Turner, Antitrust Law § 108, at 7 (1978). Antitrust in-

jury narrows the standard for recoverable damages to

those actually flowing from antitrust violations that

cause market inefficiency. Page, supra, 47 U.Chi.L.Rev.

at 471. Firms may exclude competitors and yet increase

efficiency. The mere fact that a firm has been foreclosed

from selling does not, in an economic sense, necessarily

mean that it suffered antitrust injury. Jd. at 484, 97

S.Ct. at 695. One principle Brunswick may support is

that reductions in profit attributable to conduct preserv-

ing allocative efficiency or increasing productive efficiency

cannot be recovered as damages. /d. at 485, 97 S.Ct. at

695.

Evidence was presented in this case that the Trail-

blazer System’s transportation costs substantially ex-

ceeded those of the CIG system. Tr. at 1569-78. The evi-

dence thus supports an inference that a lower-priced com-

petitor was excluded in favor of a higher-priced competi-

tor without a corresponding increase in allocative or pro-

ductive efficiency. The jury could thus conclude that

NGPL’s conduct was anti-competitive and redressable

under the antitrust laws.

CIG’s injury flows from that which makes the de-

fendant’s acts unlawful and reflects the anticompetitive

effects of the violation. Brunswick, 429 U.S. at 489, 97

S.Ct. at 697. Competition was injured by the exclusion

of a low-cost competitor from the market. CIG’s ex-

4la

clusion resulted in higher prices to producers, shippers,

and consumers of natural gas. An increase in price re-

sulting from dampened competitive market forces is re-

dressable under § 4. Blue Shield of Virginia v. Mc-

Cready, 457 U.S. at 482-83, 102 S.Ct. at 2550. CIG also

experienced lost profits. Increased prices and lost profits

are likely to be caused by the exclusion of a lower-

priced competitor. CIG thus proved the type of loss that

the claimed violation would be likely to produce. Bruns-

wick, 429 U.S. at 489, 97 S.Ct. at 697.

The third issue is whether the jury reasonably could

have concluded that CIG’s injury flowed from NGPL’s

violation. NGPL argues that CIG failed to connect its

lost profits to its antitrust claim. NGPL purchased nat-

ural gas from CIG, not transportation services. It thus

argues that CIG’s lost profits resulted from lost sales

to NGPL (as opposed to lost opportunities to transport

Wyoming natural gas) and that CIG failed to prove

that it lost profits on the transportation of Wyoming

natural gas. NGPL therefore reasons that CIG failed

to prove that it lost profits in the market for the long-

distance transportation of Wyoming natural gas.

The testimony of CIG’s damage expert, Dr. Rhodes,

belies NGPL’s assertion that CIG’s lost profits are un-

connected to the long-distance transportation of natu-

ral gas. Dr. Rhodes testified that he examined CIG’s

variable costs, fixed costs and return on investment.

Variable costs are the costs of acquiring and selling gas

to other companies. Fixed costs are the costs of build-

ing and maintaining a pipeline. Return on investment

is the owner’s return of equity. Dr. Rhodes excluded

variable costs from the calculation of lost profits. Tr. at

2556-58. Excluding variable costs eliminated lost sales

of natural gas from the damage calculation. Dr. Rhoces

calculated past lost profits by subtracting F-1 fixed

costs from H-1 fixed costs and multiplying the difference

by the volumes not taken. Tr. at 2561. Subttacting F-1

42a

from H-1 excludes field natural gas from the damage

calculation and thus only measures CIG’s transportation

costs. CIG’s past lost profits measure the profits its

assets would have generated but for the antitrust viola-

tion. They are therefore related to the expected gain

resulting from the attempt to monopolize. Because they

represent the potential return on output of a competitor

excluded from the market, lost profits are an appro-

priate measure of antitrust injury. Page, supra, 47

U.Chi.L.Rev. at 486-87. The jury therefore could reason-

ably conclude that CIG’s past lost profits were connected

to the long-distance transportation market. But see infra

text at 1479-80 for a discussion of future lost profits.

Turning to the contention that CIG failed to show

that it suffered lost profits from the transportation of

Wyoming natural gas, evidence was presented that the

movement of Wyoming gas through the CIG system to

the H-1 delivery point depended on NGPL accepting de-

livery of that gas. All movement of Wyoming gas stopped

when NGPL refused to take natural gas at the H-l

delivery point. The transportation of Wyoming natural

gas is thus inextricably tied to the injury NGPL sought

to inflict on CIG and the market. The jury could have

concluded that CIG established that it lost profits on the

sale of Wyoming natural gas and that CIG’s injury

flowed from the defendant’s unlawful act. Blue Shield of

Virginia v. McCready, 457 U.S. at 484, 102 S.Ct. at

484, 102 S.Ct. at 2551.

NGPL argues that the shut-in and tie-up of CIG’s pipe-

line capacity did not injure competition because CIG was

not driven out of business. As the Court in Brunswick

noted, however, plaintiffs seeking treble damages need not

“ prove an actual lessening of competition in order to

recover. . . . [C]ompetitors may be able to prove anti-

trust injury before they actually are driven from the

market and competition is thereby lessened.” Jd. at 489

n. 14, 97 S.Ct. at 698 n. 14.

43a

Associated General Contractors further bolsters the

jury’s verdict. Substantial evidence supports the jury’s

conclusion that the antitrust violation and CIG’s injury

were causally related and that Congress intended to rem-

edy the type of injury CIG suffered. CIG alleged, and

the jury found, that NGPL specifically intended to harm

CIG. No other class of persons was more directly in-

jured and thus in a bettg» position to enforce the anti-

trust laws. The claim is not speculative as that term was

used in Associated Generai Contractors.2 CIG presented

evidence that its share of the market declined because of

the shut-in, resulting in lost profits. Unlike Associated

General Contractors, where the union could resort to the

labor laws for redress, CIG lacked an alternative remedy.

The jury’s verdict is thus consistent with Associated

General Contractors.

The verdict is also consistent with Brunswick. At issue

in Brunswick was whether damages are recoverable for

lost profits incurred when a competitor remains in busi-

ness. Id. at 484, 97 S.Ct. at 695. The Court observed

that the injury claimed was inimical to the purpose of

the antitrust laws. Jd. at 488, 97 S.Ct. at 697. Central

to this conclusion was that plaintiff sought damages for

increased competition. 7d. In contrast, CIG claimed that

its lost profits flowed from a purposeful scheme to dimin-

ish competition. Further, CIG established actual injury

in fact, whereas the plaintiff in Brunswick merely

showed the loss of an expected windfall]. /d. Finally,

unlike the situation in Brunswick, damages are not an

anticompetitive remedy. The jury’s award of damages

warns firms against excluding lower-priced competitors

from the market by predatory conduct and thereby en-

2In Associated General Contractors, the union failed to allege

that any bargaining agreement was broken as a result of the viola-

tion, that the share of the market controlled by unionized firms

had diminished, that union membership declined, or that its reve-

nues decreased. Associated General Contractors, 459 U.S. at 542.

44a

courages stronger cumpetition. See II P. Areeda & D.

Turner, Antitrust Law { 346, at 246-47 (1978).

The jury was instructed that CIG was required to

prove a causal connection between the antitrust violation

and injury to its business. Jury Instruction No. 42. The

instruction also required the jury to find that the type

of injury was one which the antitrust laws were intended

to prevent and that the injury was attributable to some

harm to competition. Jd. The jury is presumed to fol-

low the instructions given by the trial court. United

States v. Hall, 805 F.2d 1410, 1417 (10th Cir. 1986).

Substantial evidence supports the jury’s finding that CIG

proved antitrust injury, and judgment notwithstanding

the verdiet eannot be granted on this ground.

2. Relevant Market

NGPL contends that CIG incorrectly defined the rele-

vant market. The relevant market consists of the rele-

vant product market and the relevant geographic market.

Brown Shoe Co. v. United States, 370 U.S. 294, 324, 82

S.Ct. 1502, 8 L.Ed.2d 510 (1962); Aspen Highlands

Skiing Corp. v. Aspen Skiing Co., 738 F.2d 1509, 1528

(10th Cir. 1984), aff'd, 472 U.S. 585, 105 S.Ct. 2847,

86 L.Ed.2d 467 (1985). NGPL apparently concedes that

Wyoming natural gas is the relevant product but disputes

CIG’s definition of the relevant market as the long-

distance market for the transportation of that gas.

NGPL also argues that the Court erred by instructing

the jury on CIG’s theory of the relevant market.

The relevant geographic market is the geographic area

in which sellers and buyers of products or services do

business. Tampa Elec. Co. v. Nashville Coal Co., 365

U.S. 320, 327, 81 S.Ct. 628, 628, 5 L.Ed.2d 580 (1961) ;

United States v. Grinnell Corp., 384 U.S. 563, 588-89,

86 S.Ct. 1698, 1712-13, 16 L.Ed.2d 778 (1966) (Fortas,

J., dissenting). The boundaries of the relevant market

must correspond to the commercial realities of the indus-

45a

try and be economically significant. Brown Shoe Co. v.

United States, 370 U.S. at 336-37, 82 S.Ct. at 1529-30.

CIG claimed that the relevant market was the long-

distance market for transportation of Wyoming gas from

producing areas within Wyoming and the Overthrust to

points of interconnection with major interstate trunk-

lines. NGPL contends that the relevant market must in-

clude local transportation to cities such as Denver and

Salt Lake City. NGPL submitted data showing that

substantial volumes- of gas produced in the Overthrust

were consumed in Wyoming, Colorado and Utah. Tr. at

7453; Defendants’ Ex. 2060. CIG offered evidence that,

by the early 1980s, production of natural gas in the

Overthrust outstripped local consumption. Tr. at 1453-67;

Plainitff’s Ex. 1754, 1755, 1756. Although NGPL’s ex-

pert, Dr. George R. Hall, challenged CIG’s definition of

the relevant market, he testified that by 1983 production

exceeded local consumption by 266 billion cubic feet. Tr.

at 7454. CIG thus argued that transporation to local

markets did not afford a real choice to producers and

shippers of Wyoming gas, because demand was greater in

midwestern and eastern markets.

In Urited States v. Grinnell Corp., 384 U.S. 563, 575,

86 §.Ct. 1698, 1706, 16 L.Ed.2d 778 (1966), the Supreme

Court determined that the relevant geographic market

for fire and burglary protection services provided by

defendants’ central stations was a national market, al-

though the individual stations only served areas within a

twenty-five mile radius. The Court reasoned that “the

business of providing such services is operated on a na-

tional level” and that the “national market . . . reflects

the reality of the way .. . [defendants] built and conr-

duct their services.” Jd. at 575, 576, 86 S.Ct. at 1706.

In reaching this conclusion, the Court looked to the exist-

ence of national planning, agreements covering activities

in many States, the multistate nature of the business,

46a

and the existence of nationwide inspection, certification

and rate-making. Jd. at 575, 86 S.Ct. at 1706.

In this case, the jury heard evidence that natural gas

pipeline companies conduct interstate business subject to

national setting of prices, rates and terms by the Federal

Energy Regulatory Commission (FERC). The Service

Agreement covered activities in many States. NGPL’s

stated objective for the Trailblazer System was to “move

natural gas from the Overthrust Area of Wyoming to

interconnections with existing major interstate pipeline

systems for delivery of substantial quantities of Rocky

Mountain gas to eastern and mid-western markets.” As

in Grinnell, the jury could reasonably conclude that CIG’s

definition of the relevant market corresponded to the

commercial realities of the industry and was economically

significant.

The determination of the relevant market is normally

a question of fact. Telex Corp. v. International Business

Mach. Corp. 510 F.2d 894, 915 (10th Cir.) (per curiam),

cert, dismissed, 423 U.S. 802, 96 S.Ct. 8, 46 L.Ed.2d 244

(1975). Where each party presents substantial evidence

concerning the appropriate relevant market, the issue

becomes a jury question. Cackling Acres, Inc. v. Olson

Farms, Inc., 541 F.2d 242, 246 (10th Cir.1976), cert.

denied, 429 U.S. 1122, 97 S.Ct. 1158, 51 L.Ed.2d 572

(1977). NGPL contends, however, that the relevant mar-

ket instruction tainted the jury’s finding. NGPL Brief

at 20-21.

This argument is without merit. Counsel failed to

apprise the Court of its objection before the jury retired.

Further, NGPL’s proposed instruction on the relevant

market included language almost identical to that which

it now describes as erroneous. *

Error may not be assigned to the giving of an instruc-

tion unless, before the jury retires, the objecting party

raises an objection and distinctly states “the matter to

47a

which he objects and the grounds of his objection.” Fed.

R.Civ.P. 51. The objection must be sufficiently specific to

bring into focus the precise nature of the alleged error.

Rogers v. Northern Rio Arriba Elec. Coop., Inc., 580

F.2d 1039, 1042 (10th Cir.1978). At the instruction

conference, NGPL objected to the organization of the rele-

vant market instruction and recommended moving one of

the paragraphs in the instruction. The Court accepted

this suggestion, and counsel indicated that the instruction

was acceptable. Tr. at 8468-70. NGPL now asserts that

the instruction invited the jury to define the relevant

market as the long-distance transportation of natural gas.

NGPL Brief at 20. Under these circumstances, the Court

was not apprised of NGPL’s present position before in-

structing the jury.

NGPL’s present objections also overlooks it earlier

representations to the Court. The instruction given to

the jury said that “Colorado Interstate claims that the

relevant service market is the transportation of natural

gas from producing areas to interconnections with major

interstate trunklines.” Jury Instruction No. 30. NGPL’s

proposed instruction stated that “Colorado Interstate

claims that the relevant market is the long-distance trans-

portation of natural gas from producing areas within the

state of Wyoming and the Overthrust region.” DE-

FENDANTS’ AND COUNTER-CLAIM PLAINTIFFS’

THIRD SET OF REVISED AND SUPPLEMENTAL

JURY INSTRUCTIONS, NATURAL’S FIRST PRO-

POSED INSTRUCTION NO. 25 [Relevant Market].

NGPUL’s proposed instruction is virtually identical to the

charge to the jury.

Finally, the instruction is not patently erroneous or

prejudicial. See Moe v. Avions Marcel Dassault-Brequet

Aviation, 727 F.2d°917, 925 (10th Cir.), cert. denied, 469

U.S. 853, 105 S.Ct. 176, 83 L.Ed.2d 110 (1984) (jury

instruction reviewed under a plainly erroneous standard

where objection not tendered before jury retires). The

48a

instruction incorporates the applicable legal standards.

Substantial evidence supports the jury’s conclusion that

CIG proved the existence of a relevant market. Judg-

ment notwithstanding the verdict is inappropriate in

these circumstances.

3. Dangerous Probability of Success

A dangerous probability of success is the probability of

attaining the power to control prices and exclude com-

petition in the relevant market. Shoppin’ Bag of Pueblo,

Inc. v. Dillon Companies, Inc., 783 F.2d 159, 162 (10th

Cir.1986). NGPL contends that FERC’s regulation of -

natural gas pipelines precludes a dangerous probability

of success as a matter of law. It also claims that the

jury’s finding of a dangerous probability of success is

against the weight of the evidence.

FERC’s control of prices and market entry, NGPL

argues, prevents any pipeline from controlling prices and

excluding competition. The Natural Gas Act, however,

does not insulate companies within its purview from the

antitrust laws. California v. Federal Power Comm’n, 369

U.S. 482, 485-86, 82 S.Ct. 901, 903-04, 8 L.Ed.2d 54

(1962). Antitrust liability may arise despite the exist-

ence of pervasive regulatory control. Otter Tail Power

Co. v. United States, 410 U.S. 366, 374, 93 S.Ct. 1022,

1028, 35 L.Ed.2d 359 (1973).

Two cases suggest that agency regulations may fore-

close a probability of successful monopolization. In AI-

meda Mall, Inc. v. Houston Lighting & Power Co., 615

F.2d 3438, 354 (5th Cir.), cert. denied, 449 U.S. 870, 101

S.Ct. 208, 66 L.Ed.2d 90 (1980), the court determined

that a municipal power company lacked the power to con-

trol prices and exclude competition. The defendant power

company was the only franchised electiic utility in the

Houston area and constituted a “natural monopoly for

the distribution of electric power.” /d. at 345. In con-

‘

49a

trast, CIG and NGPL compete within the same market.

As the court noted, violations of the antitrust laws can

occur when regulated industries actually compete and

anticompetitive activity surfaces. Jd. at 354-55. Because

neither CIG nor NGPL holds the sole franchise for trans-

portation of natural gas from the Overthrust, the jury’s

finding of dangerous probability of success is consistent

with Almeda Mall.

Mid-Texas Communications Systems, Inc. v. American

Tel. & Tel. Co., 615 F.2d 1372, 1875-76 (5th Cir.), cert.

denied, 449 U.S. 912, 101 S.Ct. 286, 66 L.Ed.2d 140

(1980), arose from the defendant’s refusal to provide

interconnections to a smaller local competitor. The court

said that the existence of regulatory control is relevant

to the existence of monopoly power and “may even pro-

hibit a finding of such power as a matter of law.” Id.

at 1386-87. The court held, however, that the regulatory

scheme is relevant evidence of monopoly power. Jd. at

1386. Whether the defendant possessed such power is a

jury question. /d. The mere fact of extensive federal

regulation thus does not immunize NGPL from antitrust

liability.

Regulation of the industry is nevertheless relevant evi-

dence of the power to control prices and exclude competi-

tion. MCI Communications Corp. v. American Tel. & Tel.

Co., 708 F.2d 1081, 1105-06 (7th Cir.), cert. denied, 464

464 U.S. 891, 104 S.Ct. 234, 78 L.Ed.2d 226 (1983).

FERC’s role in this case surfaced early in the trial. The

first witness, Mr. O’Connell, indicated that FERC regu-

lates the industry. Tr. at 211-12. He was extensively

cross-examined on the course and outcome of FERC pro-

ceedings. Tr. at 578-97. The record is replete with testi-

mony concerning FERC orders. Witnesses were per-

mitted to explain their understanding of FERC orders to

the extent they relied on those orders in taking action or

forming opinions. See, e.g., testimony of Dr. Leitzinger,

Mr. Morgan, Dr. Rhodes, Mr. Grubb, Mr. Kitchens, Mr.

50a

McElligott, Mr. Morrow, Mr. Oxford, Mr. Lawrence, Dr.

Hall. NGPL thoroughly explored FERC Regulations and

FERC Order 380 during its cross-examination of Mr.

Morgan. Tr. 2328-34, 2391-94. Testimony about FERC

was excluded only when unduly prejudicial or barred by

Fed.R.Evid. 201. The existence of the regulatory scheme

was thus presented to the jury.

NGPL did not request, or object to the absence of, jury

instructions stating that FERC’s regulatory authority

should be considered in determining the existence of a

dangerous probability of success. See Castleberry v.

NRM Corp., 470 F.2d 1113, 1120 (10th Cir.1972) (plain-

tiff’s failure to request jury instruction on one theory

of liability, coupled with the statement that counsel did

not object to defendant’s instructions, precluded appeal of

court’s failure to instruct jury on omitted theory of lia-

bility). NGPL objected to the instruction given on the

ground that NGPL’s market share was insufficient to

permit a finding of dangerous probability of success. Tr.

at 8476-81. NGPL sought a directed verdict on the

ground that CIG failed to prove a dangerous probability

of success. The reasoning was that NGPL possessed an

insufficient market share. Regulatory control by FERC

was not mentioned. Tr. 8381-84. NGPL did not assert

its present position at trial.

FERC’s authority over CIG and NGPL does not, as a

matter of law, preclude a finding that NGPL possessed

the power to control prices and exclude competition. Even

if it did, NGPL failed to raise the issue during trial.

See Glasscock v. Wilson Constructors, Inc., 627 F.2d

1065, 1068 (10th Cir.1980) (a party may not complain

of error which it induced or invited); Rogers v. North-

ern Rio Arriba Elec. Coop., Inc., 580 F.2d 1039, 1042

(10th Cir.1978) (the purpose of Fed.R.Civ.P. 51 is to

clarify the objecting party’s position and give the trial

court an opportunity to make changes). The remaining

5la

issue is whether the jury’s finding of a dangerous prob-

ability of success is against the weight of the evidence.

A dangerous probability of success may be shown by

market power which in turn may be demonstrated

through market share, expressed as a percent of the rele-

vant market. Shoppin’ Bag, 783 F.2d at 161. Deter-

mining market power also requires an examination of the

defendant's market strength as measured by the number

and strength of its competitors, ease of market entry,

consumer sensitivity to changes in price, innovations in

the market and whether the defendant is a multimarket

firm. Jd. at 162. Some proof of overt predatory conduct

is also required. Jd. at 163.

CIG calculated market shares based on capacity con-

trol of the Trailblazer System (but excluded the WIC

pipeline). The owners of the three pipeline segments con-

tributed to the project’s construction. In return each re-

ceived ownership shares. They also received a share of

the Trailblazer System’s total pipeline capacity in propor-

tion to the amount of debt assumed. Capacity control,

factored for the system’s different pipeline sizes, con-

stituted each party’s market share. Using this method,

NGPL’s market share was over 50 percent. Tr. at 1479-

95. NGPL argued that CIG’s methodology skews the par-

ties’ positions in the market. It calculated market share

based on each partner’s ownership of the Trailblazer Sys-

tem. By this method, NGPL’s market share is only 33

percent.

The central issue is the defendant’s economic power in

the relevant market. E./J. Delaney Corp. v. Boone Bell,

Inc., 525 F.2d 296, 306 (10th Cir.1975), cert. denied,

425 U.S. 907, 96 S.Ct. 1501, 47 L.Ed.2d 758 (1976). Ac-

tual ownership of the Trailblaz:r System is one measure

of economic power in the market for the long-distance

transportation of Wyoming natural gas. Control of the

system’s overall transportation capacity is an equally

valid indicator, especially when coupled with evidence

52a

showing that volumes passing through the Trailblazer

System increased substantially following the shut-in. 7

at 1585-87; Plaintiff’s Ex. 1763. Sufficient evidence was

thus presented from which the jury could conclude that

NGPL possessed more than a 50 percent share of the

relevant market. -

Factors besides market share must be considered.

Shoppin’ Bag, 783 F.2d at 162. CIG’s evidence of the

parties’ strength showed that, prior to the shut-in, NGPL

controlled 41 percent of the market compared with CIG’s

23 percent share. After the shut-in, CIG controlled 13

percent while NGPL’s share rose to 54 percent. Plain-

tiff’s Ex. 1758. NGPL’s studies showed that CIG con-

trolled nearly 81 percent of the pipeline capacity coming

out of Wyoming. Tr. at 6468-69; Defendants’ Ex. 3094.

The evidence also showed that FERC regulations made

market entry difficult. Finally, at the time of the shut-in,

demand for natural gas was declining. One of Champlin

Petroleum’s gas contract managers, Mr. Gordon Daty,

testified that NGPL was the only firm interested in

Champlin’s Whitney Canyon reserves following CIG’s

release. As a consequence, Champlin received a lower

price for Whitney Canyon gas. NGPL then increased its

transportation charges for that gas. Tr. at 4328-35. The

jury thus could have concluded that the relevant market

was vulnerable to control of prices. Evidence was also

presented that CIG was excluded from the market by

NGPL’s aggressive conduct. See supra text at 1460-61.—~

The existence of a dangerous probability of success is

a jury question. Mid-Texas Communications Systems,

Ine. v. American Tel. & Tel. Co., 615 F.2d at 1387. The

jury apparently rejected NGPL’s market share data and

accepted CIG’s. The weight of the evidence supports the

jury’s finding that NGPL possessed the power to control

prices and exclude competition. That evidence showed

NGPL’s aggressive conduct, CIG’s exclusion from the

market, the market’s vulnerability to increases in trans-

58a

portation prices and that prices actually increased. This

constitutes sufficient evidence from which the jury could

conclude that CIG proved a dangerous probability of suc-

cess by a preponderance of the evidence.

4. Specific Intent to Monopolize and Anticompetitive

Conduct

A violation of § 2 of the Sherman Act requires a spe-

cific intent to monopolize. United States Steel Corp. v.

Foriner Enter. Inc., 429 U.S. 610, 612 n. 1, 97 S.Ct.

861, 863 n. 1, 51 L.Ed.2d 80 (1977): Shoppin’ Bag, 783

F.2d at 161. A desire to increase market share is insuf-

ficient. United States Steel Corp. v. Fortner Enter. Ine.,

429 U.S. at 612 n. 1, 97 S.Ct. 863 n. 1. A defendant

must act with specific intent to destroy competition or

build a monopoly. Times-Picayune Publishing Co. v.

United States, 345 U.S. 594, 626, 73 S.Ct. 872, 890, 97

L.Ed. 1277 (1958). Specific intent to monopolize is de-

fined as an intent to acquire market power and exelude

others from competition. F.J. Delaney Corp. v. Bonne

Bell, Inc., 525 F.2d at 306 (quoting Union Carbide &

Carbon Corp. v. Nisley, 300 F.2d 561, 586 (10th Cir.

1961) ).

Proof of exclusionary intent requires evidence that a

business intends to use or does use unfair weapons. Pa-

cific Eng’g & Prod. Co. of Nevada v. Kerr-McGee Corp.,

551 F.2d 790, 795 (10th Cir. 1977). Specific intent may

be proved by direct evidence or inferred from a firm's

anticompetitive conduct. Aspen Skiing Co. v. Aspen

Highlands Skiing, 472 U.S. 585, 608 n. 39, 105 S.Ct.

2847, 2860 n. 39, 86 L.Ed.2d 467, 484 n. 39 (1985)

(quoting R. Bork, The Antitrust Paradox 157 (1978) ).

Absent direct evidence of specific intent to monopolize,

defendant’s conduct must substantially restrain trade,

clearly threaten competition or be clearly exclusionary.

Cascade Cabinet Co. v. Western Cabinet & Millwork, Inc.,

710 F.2d 1366, 1374 (9th Cir. 1983) (quoting William

54a

Inglis & Sons Baking Co. v. ITT Continental Baking Co.,

668 F.2d 1014, 1028 (9th Cir. 1981), cert. denied, 459

U.S. 825, 103 S.Ct. 57, 74 L.Ed.2d 61 (1982) ). Specific

intent may not be inferred from activities motivated

solely by legitimate business considerations. 16B Business

Organizations, J. von Kalinowski, Antitrust Laws and

Trade Regulation § 9.02[5] (1986).

The issues are whether a jury could reasonably find

that NGPL specifically intended to monopolize the rele-

vant market and, if so, whether NGPL’s activities were

motivated solely by legitimate business considerations.

The relevant factors in examining these questions are

whether the acts are ordinary business practices typical

of those used in a competitive market and whether the

acts constitute an attempt to acquire monopoly power.

Telex Corp. v. International Business Mach. Corp., 510

F.2d 894, 925-26 (10th Cir.) (per curiam), cert. dis-

missed, 423 U.S. 802, 96 S.Ct. 8, 46 L.Ed.2d 244 (1975).

CIG’s evidence of specific intent to monopolize came

partly from internal NGPL memoranda. In June 1983,

CIG proposed to change the H-1 delivery point from

Texas to the entry point of the Trailblazer Pipeline. The

change would have freed the southern part of CIG’s sys-

tem from the effects of the shut-in. Tr. at 1540-41. Mr.

Hannig, a project analyst for NGPL, observed that

“'t|here are many implications involved in making this

switch,” including whether “this |would| free-up capac-

ity on CIG’s system so they could transport for others.”

Plaintiff’s Ex. 1325. In August 1984, CIG invited NGPL

to change or “renominate” the volumes of natural gas

NGPL was entitled to receive under the Service Agree-

ment. A smaller nomination by NGPL would have re-

duced CIG’s obligation to deliver natural gas to NGPL

and thus increased CIG’s capacity to serve cther cus-

tomers. Tr. at 1544. In a memorandum to Mr. Eberst,

NGPL’s Vice-President for Marketing ard Rates, Mr.

Wozbut, NGPL’s Rate Coordinator, recognized that “nom-

_ 55a

inations of entitlements determine whether CIG’s sys-

tem can satisfy customer requirements on a supply and

capacity basis.” Plaintiff’s Ex. 763. The renomination

proposal forced NGPL to “determine the status of CIG

as a continuing supply source and possibly as a major

competitor for Rocky Mountain gas. Management must

determine whether .. . freeing up CIG capacity may

hinder Natural in any of its endeavors.” Id. NGPL nom-

inated its full capacity under the Service Agreement yet

refused to accept delivery of natural gas when the nomi-

nation became effective. Tr. at 8260; Plaintiff’s Ex.

1769.

The evidence also showed that NGPL singled out CIG

from other NGPL suppliers and ignored its own gas

scheduling policies. NGPL scheduled its natural gas re-

quirements by using a priority list of suppliers. Begin-

ning with the last source on the priority list, NGPL

would turn each supplier up to its daily contract quantity

or DCQ, progressing up the list to each successive source.

CIG, however, was not assigned a DCQ level on the pri-

ority list. Each time NGPL went through its priority

list, CIG was skipped until all other sources had been

turned up to their maximum levels. Tr. at 2202-37.

CIG argued that NGPL’s motive for the shut-in was

to eliminate lower-priced competition from CIG. The

Trailblazer System was operating at only 60 percent of

planned levels and at approximately 50 percent of ca-

pacity. Tr. at 1569, 1571-78; Plaintiff’s Ex. 1333, 483,

399, 500. The evidence shows that NGPL viewed CIG

as a major competitor and intended to hinder CIG’s abil-

ity to compete by controlling its pipeline capacity. The

jury could have concluded that NGPL’s conduct threat-

ened competition by excluding CIG as a competitor and

thus inferred that NGPL specifically intended to monop-

olize the relevant market. The question is whether the

jury could properly make that inference or whether

NGPL’s conduct was motivated solely by legitimate busi-

ness concerns.

56a

NGPL defended the shut-in by claiming that CIG’s

prices were too high, that it needed to reduce its own

rates and its take or pay liabilities to protect itself from

potential liability under the United Gas Pipeline case, and

that it simply had an oversupply of natural gas. The

evidence contradicts the first assertion. After the shut-in,

NGPL repeatedly purchased gas from other suppliers

that was more expensive than CIG’s F-1 or H-1 gas. Tr.

at 1649-51, 2436-39; Plaintiff’s Ex. 1433, 1590. Further,

a memorandum from Mr. Pasteris to Mr. Grubb written

in August 1984 noted that “CIG’s sales to Natural are

currently priced at $3.18/Mcf for F-1 and $3.63/Mcf for

H-1 gas. Given that this is the price delivered to Nat-

ural’s mainline the costs are not unreasonable.” Plain-

tiff’s Ex. 765. NGPL in fact thought that CIG was an

attractive, low-cost supplier. Plaintiff’s Ex. 757.

NGPL also contended that it needed to reduce a po

tential take or pay liability of $215 million in 1983. Tr.

at 3515-16; Defendants’ Ex. 363. CIG experts challenged

that evidence. Tr. at 2396. NGPL studies showed “a

significant decrease in projected take-or-pay exposure” of

$130 million through fiscal 1983. Plaintiff’s Ex. 902-A.

In addition, “(Canadian sources accounted for $111 mil-

lion of the total, with Great Lakes projected at $77 mil-

lion and... Pro-Gas at $34 million.” Jd. Companies

other than CIG thus contributed substantially to NGPL’s

take-or-pay problems.

The decision in United Gas Pipeline was also used to

justify the shut-in. The administrative law judge in the

United Gas Pipeline case invalidated minimum bill pro-

visions similar to the provision in the Service Agreement.

NGPL feared that it might be found to have acted im-

prudently if it continued to purchase CIG’s H-1 gas and

decided to reduce purchases of H-1 gas. Tr. at 5292-97.

NGPL also claimed that it needed to reduce its own rates

to jurisdictional customers. CIG pointed out that, after

the shut-in, NGPL repeatedly purchased more expensive

57a

gas from other suppliers. Tr. at 1649-51, 2436-39; Plain-

tiff’s Ex. 1433, 1590.

NGPL finally asserted that it shut-in 107 million cubic

feet per day of H-1 gas to reduce an oversupply of nat-

ural gas. On the day after the shut-in, however, NGPL’s

takes from other suppliers increased by 93 million cubic

feet per day. Tr. at 2271; Plaintiff’s Ex. 1986. Assum-

ing that NGPL wanted to decrease its oversupply, to re-

duce its potential take-or-pay liability, or to avoid pay-

ing for costly gas, it could have done so by nominating

smaller volumes in 1984. NGPL instead chose to renomi-

nate the same volumes but not to take any gas from CIG.

Evidence of specific intent alone cannot sustain a claim

of attempted monopolization without corroborating evi-

dence of conduct. William Inglis & Sons Baking Co. v.

ITT Continental Baking Co., Inc., 668 F.2d 1014, 1028

(9th Cir. 1981), cert. denied, 459 U.S. 825, 103 S.Ct.

57, 74 L.Ed.2d 61 (1982). Ordinary business practices

typical of those used in a competitive market are not

anticompetitive. Telex Corp. v. International Business

Mach. Corp., 510 F.2d at 925-26. The conclusion that

conduct is predatory must be based not on its effect on a

competitor but on its effect on competition. Pacific Eng’g

& Prod. Co. of Nevada v. Kerr-McGee Corp., 551 F.2d

at 795.

The jury rejected NGPL’s justification for its conduct

and apparently decided that NGPL was not predomi-

nantly motivated by legitimate business objectives. This

conclusion is based on sharply conflicting evidence and

cannot be ignored simply because the Court’s view might

be different. Ryder v. City of Topeka, 814 F.2d 1412,

1418, 1420-21 (10th Cir. 1987). The evidence supports

a finding that NGPL acted to destroy competition and

create a monopoly. NGPL’s acts are not ordinary busi-

ness practices typical of those used in a competitive mar-

ket. Telex Corp. v. International Business Mach. Corp.,

510. F.2d at 925-26. NGPL did more than merely refuse

58a

to do business with a rival. Given an opportunity to re-

nominate entitlements and avoid the cost and supply

problems caused by the Service Agreement, NGPL instead

chose to nominate the same volumes and thus to prevent

CIG from offering a low-cost transportation alternative.

The antitrust laws are as much violated by the preven-

tion of competition as by its destruction. United States

v. Griffith, 334 U.S. 100, 107, 68 S.Ct. 941, 945, 92 L.Ed.

1236 (1948). The jury could therefore conclude that

NGPL’s conduct was anticompetitive and that NGPL

specifically intended to monopolize the long-distance trans-

portation market for Wyoming natural gas.

B. Tortious Interference With Contract

CIG shut-in Champlin Petroleum’s Whitney Canyon

reserves because NGPL’s shut-in created an oversupply

of natural gas in CIG’s system. Tr. 265-68; 994-1003;

276-77. NGPL negotiated with Champlin to acquire the

-Whitney Canyon reserves. A letter from NGPL to Champ-

lin summarized their eventual agreement. The letter

stated that the sale was subject to a contract between

Champlin and CIG. NGPL agreed to increase the pur-

chase price, however, if CIG released its rights to the gas.

Plaintiff’s Ex. 1476. When CIG attempted to negotiate

revisions in the Whitney Canyon contract, Champlin in-

sisted that CIG release its rights. CIG did so, and NGPL

immediately acquired the rights to the Whitney Canyon

reserves.

The jury found that NGPL tortiously interfered with

CIG’s contract with Champlin based upon the Restate-

ment (Second) of Torts § T66A (1979). NGPL contends

that neither Colorado nor Wyoming recognize § 766A.

Assuming that the courts would recognize a cause of ac-

tion under § 766A, NGPL argues that the Service Agree-

ment conferred an absolute right not to buy CIG’s gas

and that its conduct was therefore proper. NGPL finally

urges that CIG did not suffer cognizable damages under

§ 774A of the Restatement.

59a

Wyoming would recognize a cause of action under

§ 766A. The tort of intentional interference with con-

tract is accepted in Wyoming. Basin Elec. Power Co-op.

v. Howton, 603 P.2d 402, 403 (Wyo. 1979). The Re-

statement guided the Wyoming Supreme Court in de-

fining the tort. See, e.g., Martin v. Wing, 667 P.2d 1159,

1162 (Wyo. 1983) (recognizing cause of action under

Restatement (Second) of Torts § 766B); Wartensleben

v. Willey, 415 P.2d 613, 614 (Wyo. 1966) (recognizing

cause of action under Restatement of Torts § 766). Hay-

ing accepted sections 766 and 766B, the Wyoming Su-

preme Court would recognize a cause of action under

§ 766A.

The Restatement provides that:

[o]ne who intentionally and improperly interferes

with the performance of a contract .. . between

another and a third person, by preventing the other

from performing the contract or causing his per-

formance to be more expensive or burdensome, is

subject to liability to the other for the pecuniary

loss resulting to him.

Restatement (Second) of Torts $ 766A (1979). The ele-

ments of the tort include the existence of a valid con-

tractual relationship or business expectancy, knowledge

of the relationship on the part of the interferor, inten-

tional and improper interference causing a breach or

termination of the relationship, and resultant damage.

Texas West Oil and Gas Corp. v. Fitzgerald, 726 P.2d

1056, 1062 (Wyo. 1986).

CIG and Champlin unquestionably had a valid con-

tractual relationship. The evidence shows that NGPL

knew of the existence of the contract. Plaintiff’s Ex.

1476. The salient issues are whether NGPL intentionally

and improperly interfered with that relationship and

whether the interference damaged CIG.

60a

NGPL argues that its conduct was justified. The

Service Agreement permits NGPL to refuse delivery of

CIG’s gas and pay for volumes not taken. NGPL con-

strues the take-or-pay option as an absolute right to

shut-in CIG’s gas. Exercising this contractual right,

NGPL urges, cannot constitute an improper interference

with contract.

This argument misapprehends CIG’s claim. NGPL’s

tortious act was not the shut-in of CIG’s gas. Instead

CIG claimed that NGPL used the shut-in to force CIG

to release the Whitney Canyon reserves so that NGPL

could appropriate the rights to that gas. The argument

that CIG consented to this conduct is specious. To be

effective, consent must be given to the particular conduct.

Action exceeding the scope of the consent is not privileged.

Restatement (Second) of Torts § 892A & comment c.

No showing was made that CIG consented to NGPL’s

acquisition of the Whitney Canyon reserves. NGPL’s

rights under the Service Agreement do not permit an

interference with CIG’s contractual relations with third

parties.

The cases cited by NGPL to support its position are

inapposite. In J.C. Penney Co., Inc. v. Davis & Davis,

Inc., 158 Ga. App. 169, 279 S.E.2d 461 (1981), ABS

contracted to repair the defendant’s buildings. ABS sub-

contracted with the plaintiff. Defendant rejected plain-

tiff’s work. Although conceding that its work was de-

fective, plaintiff brought an action for tortious interfer-

ence with its contract with ABS. The court, noting that

the defendant had a right to reject nonconforming work,

held that plaintiff failed to show that defendant’s actions

were wrongful. -In Mac Enter., Inc. v. Del. E. Webb

Dev. Co., 132 Ariz. 331, 645 P.2d 1245 (Ariz. App. 1982),

the defendant leased its golf shops to ProShops which in

turn sublet a concession to the plaintiff. The lease en-

titled the defendant to terminate the lease at any time

by giving written notice. When the defendant cancelled

6la

its lease with ProShops, the plaintiff sued for tortious

interference with plaintiff’s contract with ProShops. The

court held that the defendant’s right to cancel the lease

entitled it to judgment as a matter of law. Neither case

is relevant. Each simply affirms the settled rule that an

action for tortious interference will not lie against a

party to the contract. See Kvenild v. Taylor, 594 P.2d

972, 977 (Wyo. 1979). NGPL was a stranger to the con-

tract between CIG and Champlin. An action is maintain-

able in these circumstances. Id.

The propriety of an actor’s interference with another’s

contractual relationship depends on several factors. These

include the nature of the conduct, the defendant’s motive,

the plaintiff’s interests, the interests sought to be ad-

vanced by the defendant, the social interest in protecting

each party’s interests, the proximity or remoteness of the

conduct to the interference, and the relations between the

parties. Toltec Watershed Improvement Dist. v. John-

ston, 717 P.2d 808, 814 (Wyo. 1986) (quoting Restate-

ment (Second) of Torts § 767). Whether the conduct is

justified is a question of fact for the jury. Basin Elec.

Power Co-op.—Missouri Basin Power Project v. Howton,

603 P.2d 402, 403 (Wyo. 1979). Defendant bears the

burden of proof on this issue. Jd. at 405. If the defend-

ant had no desire to interfere and merely knew that

interference would be an incident of its conduct, the

interference may be found to be proper. Restatement

(Second) of Torts § 766A comment e. NGPL did not

merely shut-in CIG’s gas knowing that the shut-in might

disrupt CIG’s relationship with Champlin. NGPL instead

acted purposefully to acquire the rights’ to the Whitney

Canyon reserves. Ample evidence supports the jury’s

finding that NGPL’s conduct was improper.

Similarly, the jury could rationally conclude that

NGPL intentionally interfered with CIG’s contract in

order to acquire the Whitney Canyon reserves. Malice

is not required to establish intent. Toltee Watershed Im-

62a

provement Dist. v. Johnston, 717 P.2d at 814. Inter-

ference is intentional if the actor desires the result or

knows that the interference is substantially certain to

result. Restatement (Second) of Torts § 766A comment

e. The evidence showed that Champlin took the initiative

in opening negotiations with NGPL. Tr. at 4026. Never-

theless Champlin demanded that CIG release its rights to

the Whitney Canyon reserves and NGPL immediately

snatched up those rights after CIG released them. The

jury could have concluded that NGPL desired this result

or knew that it was substantially certain to occur. The

element of intent consequently was met.

NGPL finally argues that CIG failed to prove damages

resulting from NGPL’s conduct. NGPL argues that such

damage requires evidence that NGPL’s acts made CIG’s

performance of the Champlin contract more expensive or

burdensome.

The tort of intentional interference with contract is

aimed at conduct preventing the plaintiff from perform-

ing his own contract or making performance rhore ex-

pensive or burdensome. Restatement (Second) of Torts

$767 comment a. The cause of action protects plaintiffs

from losing the benefit of a third party’s performance. /d.

$ 766A -comment c. Plaintiffs may consequently recover

damages in an amount compensating for all of the detri-

ment proximately caused by the breach of duty. Texas

West Oil and Gas Corp. v. Fitzgerald, 726 P.2d at 1064.

Damages may include the pecuniary loss of the benefits

of the contract, consequential losses for which the inter-

ference is a legal cause, or other pecuniary losses. Re-

statement (Second) of Torts § 774A & comment b. Sec-

tion 766A is phrased in the alternative: conduct is tor-

tious if it makes performance more expensive or burden-

some or if it prevents the plaintiff from performing its

contractual obligations. Jd. § 766A. A showing that the

defendant’s acts made performance more expensive or

burdensome is not required to recover damages.

63a

CIG presented evidence showing $15,204,555 in dam-

ages resulting from demand charges paid to Canyon

Compression and Overthrust Pipeline Company. Tr. at

2623-25; Plaintiff’s Ex. 1777. CIG also sought restitution

of lost benefits under its contract with Champlin. These

damages totaled $24,026,517. Tr. at 2623-25, 2638;

Plaintiff’s Ex. 1777, 1775. Whether the jury erred in

awarding these sums as damages will be considered later.

Nevertheless, substantial evidence supports the jury’s

finding that CIG was damaged as a result of NGPL’s

intentional and improper interference with CIG’s contract

with Champlin Petroleum. The motion for judgment not-

withstanding the verdict must therefore be denied.

C. Breach of Contract

The Service Agreement defines CIG’s duties as a seller

and NGPL’s obligations as a buyer of natural gas. The

minimum daily take provision of Section 2 states that

“Buyer shall not request total daily volumes on any day

hereunder less than 90 percent of the General Daily

Entitlement.” Section 4 contains a minimum annual bill

requirement providing that:

The minimum bill shall be on a fiscal year basis

and shall be determined by multiplying the Total

Annual Entitlement by a factor of 90 percent, such

volume hereinafter referred to as “Minimum Vol-

ume”....

In the event Buyer’s actual purchases for the fiscal

year are less than the Minimum Volume, then any

deficiency shall be billed at the unit rate under Rate

Schedule F-1....

The jury found that NGPL was in breach of the Serv-

ice Agreement. NGPL contends that the lack of a filed

rate with the Federal Energy Regulatory Commission

(“FERC” or “the Commission”) and the res judicata

effect of the Commission’s actions bar recovery of H-1

64a

fixed costs under Section 2. NGPL further argues that

Section 4 is the exclusive remedy for a breach of Sec-

tion 2. NGPL finally argues that CIG’s course of per-

formance vitiates any breach of contract claim.

1. FERC Orders and Regulations

On October 18, 1983, a FERC Administrative Law

Judge found the minimum bill provisions of Sections 2

and 4 to be unjust and unreasonable. Colorado Interstate

Gas Co., No. RP82-54-000, 25 FERC { 63,012 (1983).

The Commission affirmed the ALJ on May 25, 1984, and

ordered CIG to eliminate variable costs from its mini-

mum bill to NGPL. 7d. § 61,315 at 61,583, 61,584 (1984).

The Commission said, however, that “our conclusion that

CIG’s minimum bill to Natural is not just and reasonable

does not mean that CIG may not employ a minimum bill

in serving that customer.” Jd. at 61,583.

CIG filed amended tariffs in an attempt to comply with

the May 25, 1984 order. CIG dropped variable costs from

the minimum bill but also sought to amend the Service

Agreement to permit collection of minimum bill deficiency

payments using the H-1 rate for H-1 deficiences and the

F-1 rate for F-1 deficiencies. The compliance filings were

rejected, and CIG appealed to the Commission. Colorado

Interstate Gas Co., Ne. RP82-54-014, 29 FERC { 61,124

at 61,243 (1984). CIG argued before the Commission

that the May 25, 1984 order permitted recovery of fixed

costs allocable to NGPL under the H-1 and F-1 rates. On

October 31, 1984, FERC rejected the appeal, reasoning

that:

... the May 25, 1984 order did not definitively rule

on the prover level of fixed cost recovery in CIG’s

minimum bill. Instead, the Commission found that

the record was insufficient to determine whether the

existing level of fixed cost recovery ... in the mini-

mum bill is just and reasonable. We therefore did

65a

not order any changes in the existing level of fixed

cost recovery.

... [Order No. 380-C] removed variable costs from

minimum commodity bills and did not address what

level of fixed costs should be included. Jn fact, the

Commission expressly declined to rule on whether

any fixed costs should be recovered through a mini-

mum. bill.

Id. at 61,244 (emphasis added). CIG appealed this deci-

sion. The United States Tenth Circuit Court of Appeals

affirmed, holding that the Commission’s decision was ra-

tional and supported by substantial evidence. Colorado

Interstate Gas Co. v. FERC, 791 F.2d 803, 811 (10th

Cir.1986). A subsequent compliance filing was accepted

by FERC. 30 FERC { 61,073 (1985).

NGPL concludes that FERC’s actions preclude recov-

ery of damages predicated upon H-1 fixed costs. It argues

that FERC allowed CIG to charge only the F-1 fixed cost

of gas not taken, that CIG thus has no H-1 tariff on file

with FERC, and that damages based on H-1 fixed costs

are consequently barred by the filed rate doctrine and

principles of res judicata. See Arkansas Louisiana Gas

Co. v. Hall, 453 U.S. 571, 584, 101 S.Ct. 2925, 2933, 69

L.Ed.2d 856 (1981) (courts may not award damages

based on rates other than those approved by FERC).

The Commission’s orders of May 25 and October 31,

1984 do not bar recovery of damages which are calculated

from H-1 fixed costs. The emphasized portion of the

October 31 order states that FERC had not decided

whether fixed costs were recoverable. CIG’s compliance

filings were rejected not because FERC determined that

H-1 fixed costs were not recoverable but rather because

CIG’s compliance filings exceeded the scope of the May

25 order, which did not specifically permit modification

of the minimum bill to recover fixed costs. See Colorado

Interstate Gas Co. v. FERC, 791 F.2d at 810.

66a

Other FERC orders reinforce this view. FERC Order

No. 380 precludes recovery of the variable costs of gas

not taken. FERC Statutes and Regulations { 30,571

(1984) (codified at 18 C.F.R. § 154.111 (1986)). Order

No. 380-C applied Order No. 380 to minimum bill pro-

visions. Jd. § 30,607 at 31,197. The Commission noted

however, that “[b]y making the rule applicable to...

minimum take provisions, no additional refiling require-

ments are imposed on the pipeline.” Id. at 31,196 (em-

phasis added). Rate schedules must be refiled only if they

fail to state purchase gas costs separately. 18 C.F.R.

§ 154.111(a) (3) (ii). CIG’s commodity rate subsumed

H-1 and F-1 fixed costs. This tariff remained effective to

the extent it excluded recovery of variable costs. Order

No. 380-D, 29 FERC { 61,332 at 61,692 (1984). CIG

therefore had a filed H-1 rate.

The Commission’s order of June 19, 1985 demonstrates

that FERC did not abrogate the minimum daily take

requirement of Section 2. In February 1987, NGPL filed

a motion before FERC to eliminate the minimum take

provision. The Commission denied the motion, concluding

that the relief sought by NGPL was “not consistent with

our prior orders in this case or with our regulations.”

Colorado Interstate Gas Co., No. RP&2-54-017, 31 FERC

761,325 at 61,743 (1985). The Commission, quoting

Order No. 380-D, pointed out that:

[m]inimum take provisions remain currently effec-

tive except to the extent that they operate to recover

variable costs for gas not taken by the buyer. The

Commission in Order No. 380-C only eliminated the

recovery of variable costs under a pipeline’s mini-

mum take provision. In other words, minimum take

provisions are treated in the same manner as mini-

mum commodity bills. The fixed cost component in-

cluded in a selling pipeline’s commodity rate may

stili be recovered by that seller for the number of

units of gas specified in the minimum take provision

67a

even where the buyer does not take that specified

minimum amount.

Id. (emphasis in original). The Commission’s determina-

tion that “the prior orders in Docket No. RP8z-54 [do]

not require CIG to eliminate the minimum take provision

from its service agreement,” id., defeats NGPL’s argu-

ment. FERC exercised its power to modify Section 2 but

expressly affirmed CIG’s right to recover fixed costs under

the minimum take provision. The Commission’s actions

do not require the Court to set aside the jury’s verdict.

2. Exclusive Remedy and Course of Performance

NGPL urges that Section 4 creates an exclusive rem-

edy for breach of the Service Agreement. As NGPL

reads it, the Service Agreement requires that NGPL pay

the minimum bill as provided in Section 4 if NGPL

chooses not to purchase or receive 90 percent of the Gen-

eral Daily Entitlement. Section 4 must therefore be ‘‘the

only remedy contained in the Service Agreement.”

NGPL Brief at 46. This argument ignores the basic

principle that contractual remedies are optional unless

“expressly agreed to be exclusive.”’ U.C.C. § 2-719(1)

(b). This subsection creates a presumption that clauses

prescribing remedies are cumulative rather than exclu-

sive. Parties who intend a contractual provision to con-

stitute a sole remedy must clearly express that intention.

Id. comment 2. NGPL contends, however, that the rec-

ord rebuts the U.C.C.’s presumption of nonexclusive

remedies.

Every contract should be construed as a whole, giving

effect to each portion of the instrument. Colorado Mill-

ing & Elevator Co. v. Chicago, Rock Island & Pacific

R.R. Co., 382 F.2d 834, 836 (10th Cir.1967). NGPL ar-

gues that construing Section 2 as an independent obliga-

tion makes Section 4 irrelevant, because a failure to

take the General Daily Entitlement under Section 2

68a

would produce a larger minimum annual bil! than Sec-

tion 4, which averages daily takes over a year.

This reading has two flaws. First, Section 4 does not

provide that daily takes will be averaged in arriving at

the annual minimum bill. It instead states that the mini-

mum annual bill is determined by multiplying 90 percent~

times the “Total Annual Entitlement” (defined in Sec-

tion 1 as 78,150,000 Mcf). This calculation preduces the

“Minimum Volume.” The Minimum Volume is deter-

mined ‘on the basis of the average of several General

Daily Entitlements” only “[i|f the specified General

Daily Entitlement is revised during the fiscal year.” The

language of the Service Agreement does not support

NGPL’s argument. Second, construing Section 4 as an

exclusive remedy reads Section 2 out of the Service

Agreement. Sections 2 and 4 can be harmonized without

eviscerating Section 2. The Service Agreement was exe-

cuted in 1982, a time when natural gas was in relatively

short supply and when costs were generally high. Section

2 assures NGPL of a minimum daily volume of 170,000

Mef during the winter (the “Swing Period”). NGPL is

thus ensured a supply of natural gas during periods of

high demand and short supply. In return, NGPL agreed

to take 90 percent of the General Daily Entitlement,

thereby assuring CIG’s recovery of the high costs of pur-

chasing and shipping the gas. Section 4 then sets forth

the billing mechanism for the transaction. The two pro-

visions can thus be given independent yet consistent

content.

NGPL next argues that the jury ignored the parties’

course of performance. The core of the argument is that

CIG only tendered annual bills under Section 4. When-

ever reasonable, a contract’s express provisions and any

course of performance should be given a consistent con-

struction. U.C.C. § 2-208(2). The express terms of the

contract govern in a conflict with the parties’ course of

performance. Id.; KN Energy, Inc. v. Great Western

69a

Sugar Co., 698 P.2d 769, 770 (Colo.1985) (en banc).

Nothing in Section 4 requires CIG to submit a claim un-

der Section 4 for a breach of Section 2. CIG’s course of

performance is thus consistent with the express terms ol

the Service Agreement.

The terms of the U.C.C., a consistent construction of

Sections 2 and 4, and the parties’ course of performance

support a conclusion that Section 4 is not an exclusive

remedy for breach of the Service Agreement. CIG was

accordingly entitled to resort to the remedies specified in

the U.C.C. FERC exercised its statutory powers to mod-

ify Section 2 but did not preclude recovery of H-1 costs

as damages in this action. Presented with this very is-

sue, the Commission in its order of June 19, 1985, de-

clined to challenge this suit as a collateral attack on its

prior orders. See Colorado Interstate Gas Co., No. RP82-

54-017, 31 FERC {§ 61,325 at n. 2. NGPL’s motion for

judgment notwithstanding the verdict on CIG’s breach of

contract claim must therefore be denied.

D. Breach of the Duty of Good Faith and Fair Dealing

The Uniform Commercial Code and the common law

each impose on the parties to a contract the duty to per-

form in good faith. U.C.C. § 1-203; Restatement (Sece-

ond) of Contracts § 205 (1981). Good faith normally

requires “honesty in fact in the conduct or transaction

concerned.” U.C.C. § 1-201(19). In the case of mer-

chants, good faith demands both “honesty in fact and the

observance of reasonable commercial standards of fair

dealing in the trade.” Jd. § 2-103(1)(b). The implied

covenant enjoins each party to “do nothing destructive

of the other party’s right to enjoy the fruits of the con-

tract and to do everything that the contract presupposes

they will do to accomplish its purpose.” Conoco, Inc. v.

Inman Oil Co., Inc., 774 F.2d 895, 908 (8th Cir.1985).

The jury found that NGPL violated its duty of good

faith and fair dealing under the Service Agreement.

70a

NGPL advances four reasons to set aside the verdict. It

first contends that the duty of good faith and fair dealing

does not afford an independent cause of action. Even if

a cause of action does exist, the exercise of valid contrac-

tual rights cannot violate the duty. NGPL further ar-

gues that no evidence supports the jury’s verdict and,

finally, that CIG failed to prove the reasonable commer-

cial standards of fair dealing within the natural gas

industry.

A majority of jurisdictions recognize the duty to per-

form a contract in good faith. Burton, Breach of Con-

tract and the Common Law Duty to Perform in Good

Faith, 94 Harv.L.Rev. 369 (1980). As one court has ob-

served, “it is unnecessary to speculate upon . . . accep-

tance or rejection {by the applicable state supreme court]

of the modern doctrine of ‘obligation to perform in good

faith.’ The doctrine . . . is simply a rechristening of

fundamental principles of contract law.” Tymshare, Ine.

v. Covell, 727 F.2d 1145, 1152 (D.C.Cir.1984). The Colo-

rado and Wyoming legislatures adopted the U.C.C.’s defi-

nition of good faith. Colo.Rev.Stat. § 4-1-203 (1973) ;

Wyo.Stat. § 34-21-122 (1977). Although the parties have

not cited any relevant decision by the Colorado Supreme

Court, the lower courts in that State seem inclined to rec-

ognize a cause of action for breach of the duty. Layne

v. Fort Carson Nat’l Bank, 655 P.2d 856, 857 (Colo.App.

1982) (affirming summary judgment in favor of a lender

on claim that lender violated the good faith requirements

of the U.C.C.); Ruff v. Yuma County Transp. Co., 690

P.2d 1296, 1298 (Colo.App. 1984) (recognizing applica-

bility of Restatement (Second) of Contracts § 205).

Wyoming’s Supreme Court has implicitly recognized a

cause of action for breach of the duty. Wendling v. Cun-

dall, 568 P.2d 888, 890 (Wyo.1977) (‘applying U.C.C.

good faith standard to contract for the sale of real

estate). See also Garner v. Hickman, 709 P.2d 407, 411

(Wyo.1985) (discussing lender’s duty of good faith and

fair dealing in action for defective construction of a mod-

T1la

ular home). An independent cause of action exists for

breach of the duty of good faith and fair dealing.

NGPL argues that, even if a cause of action is avail-

able, exercise of express contractual rights cannot con-

stitute a breach of the duty. Section 1 of the Service

Agreement permits NGPL to “pay for or to purchase and

receive . . . [specified] quantities of natural gas.’’ The

Service Agreement does not obligate NGPL to accept de-

liveries of H-1 gas, NGPL argues, and thus it cannot

breach the duty of good ‘aith by refusing to do so.

In support of its argument, NGPL cites V/R, Inc. v.

Goodyear Tire & Rubber Co., 303 F. Supp. 773 (S.D.N.Y.

1969),* where plaintiff was to receive commission pay-

ments for a specified term, but the contract also provided

that Goodyear could terminate the payments at any time

with or without cause. Jd. at 775. Plaintiff alleged that

Goodyear failed to operate the business in good faith by

willfully causing the business to deteriorate, thus depriv-

ing plaintiff of part of its consideration. The District

Court granted Goodyear’s motion for summary judgment,

reasoning that a party cannot breach the duty of good

faith and fair dealing by conduct expressly permitted by

the contract. Jd. at 778. .

This view was rejected in Tyms/are. The court ac-

knowledged that when a contract is drawn to leave deci-

sions absolutely to the uncontrolled discretion of one of

the parties the issue of good faith is irrelevant. Tym-

share, Inc. v. Covell, 727 F.2d at 1153. The Court noted,

however, that “to say that every expressly conferred con-

3 NGPL also cites the decision in Bill’s Coal Co., Inc. v. Board of

Pub. Util., 682 F.2d 883 (10th Cir.1982). That case is inapposite.

The court held that, absent some effect on either party’s perform-

ance, urging an interpretation of a contract which does not reflect

the parties’ intent is not a breach or repudiation of a contract.

Id. at 885. NGPL did not merely espouse a particular interpreta-

tion of the Service Agreement. Its actions clearly affected both

parties’ performance.

72a

tractual power is of this nature is virtually to read the

doctrine of good faith . .. out of existence.” Jd. at 1153-

54,

In contrast to the facts in V/R, the Service Agreement

limits NGPL’s discretion. Section 2 states that “[v]aria-

tions in daily takes may be made at Buyer’s election at

H-1 delivery points to meet its varying load conditions.”

This requirement limits NGPL’s right to refuse deliveries

of H-1 gas. NGPL may not refuse deliveries for any

reason; it can do so only “to meet its varying load condi-

tions.” If NGPL’s discretion was unbounded, its promise

to take or pay would be illusory.

Any rights NGPL possessed had to be exercised in good

faith to effectuate the parties’ intent. Boone v. Kerr-

McGee Oil Indus., Inc., 217 F.2d 68, 65 (10th Cir. 1954).

The question is whether substantial evidence supports a

finding that NGPL failed to exercise its contractual rights

in good faith.

Wyoming’s Supreme Court, discussing the U.C.C. stand-

ard of good faith, said that good faith consists of “an

honest intention to abstain from taking any unconscien-

tious advantage of another, even through the forms of

technicalities of law, together with an absence of all in-

formation or belief of facts which would render the trans-

action unconscientious.” Wendling v. Cundall, 568 P.2d

888, 890 (Wyo. 1977) (quoting Cone v. Ivinson, 4 Wyo.

203, 33 P. 31 (1893)). The test requires honesty of in-

tent rather than diligence or nonnegligence. Id.

From the evidence presented at trial, the jury could

have reasonably concluded that NGPL failed this test.

For example, NGPL renominated its full capacity under

the Service Agreement, yet refused to accept delivery of

those volumes when the renomination became effective.

NGPL also singled out CIG for minimal or zero takes and

failed to follow its own gas scheduling policies. CIG ad-

duced evidence from which the jury could have concluded

73a

that NGPL lied to CIG about the shut-in. See supra text

at 1467-68; see also Tr. at 2274. This alone would show

that NGPL failed to act with the “honesty of intent”

required by § 1-201.

NGPL argues, however, that CIG failed to prove the

reasonable commercial standards of fair dealing within

the natural gas industry. CIG’s expert, Mr. Morgan,

pointed out that reasonable standards in the industry

originate in the need for long-term stability due to the

high cost of pipeline construction. Mr. Morgan testified

that reasonable commercial standards are incapable of

precise definition and instead must be determined from

the facts of each case. Tr. at 3197-98. The courts support

this approach. See Tymshare, Inc. v. Covell, 727 F.2d at

1152 (quoting Summers, “Good Faith” in General Con-

tract Law and the Sales Provisions of the Uniform Com-

mercial Code, 54 Va.L.Rev. 195, 201 (1968) (good faith

is a concept without general meaning) ). Instead of pro-

viding a formula, Mr. Morgan gave specific examples of

conduct which would not comport with reasonable stand-

ards within the industry. This evidence sufficiently de-

fined industry standards of fair dealing.

An opposite conclusion does not assist NGPL. The

U.C.C. requires observance of reasonable commercial

standards of fair dealing and honesty in fact in the

transaction. U.C.C. § 2-103(1)(b). Both requirements

must be satisfied to meet the duty of good faith. Here,

evidence showed that NGPL did not act honestly in fact in

its transactions with CIG. The jury could reasonably find

a breach of the duty of good faith and fair dealing on

NGPL’s part. See Neumiller Farms, Inc. v. Cornett, 368

So.2d 272 (Ala. 1979) (a party rejecting another’s per-

formance for feigned reasons does not exercise discretion

within the parties’ contemplation). The verdict thus can-

not be set aside.

74a

E. Conclusion

Despite its forceful arguments, NGPL failed to meet

the demanding standards required to upset a jury ver-

dict. The jury found in favor of CIG after considering

sharply conflicting testimony from which reasonable minds

could draw different conclusions. In these circumstances,

the Court must defer to the jury. A highly distinguished

practitioner articulated the reason for the courts’ defer-

ence to jury verdicts:

It is possible to take the record of any trial and by

minute dissection and post-facto reasoning demon-

strate that witnesses for either side made egregious

errors or lied. Then by ascribing critical weight to

the exposed facts, the conclusion is reached that the

verdict was fraudulently obtained.

The fallacy in this approach is that it assumes

that all the evidence for the winning side must be

believed by the jury, or it would not decide as it did.

It ignores the jury’s right to be selective of a wit-

ness’ story and also the reality of conflict of testi-

mony, which the jury must resolve by applying its

common sense and keen observation of the witnesses.

. The jury may choose to believe one witness, and

often does, against five witnesses who testified to the

contrary.

Nor does it follow that because there is alloy in

some pieces of gold on one side of the scales that the

jury’s recognition of its meretricious nature requires

it to ignore the decisive tipping of the scales from

other weights on the same scale. The opposite scale

might be lighter, too. .

The point is that it is the composite effect which

is determinative, not a dissection of each fact as if it

were the whole.

L. Nizer, The Implosion Conspiracy 6-7 (19738).

ee |

75a

The standards for judgment notwithstanding the ver-

dict require the Court to uphold the jury’s action if it

finds rational support in the evidence. See supra text at

1457-58. Substantial conflicting evidence supports the

jury’s verdict in favor of CIG. NGPL’s motion for judg-

ment notwithstanding the verdict must therefore be

denied.

II. DAMAGES

NGPL attacks CIG’s proof of damages. At a minimum,

NGPL contends, a remittitur must be granted as to

$117,000,000 awarded to CIG as future damages,

$53,000,000 in Northwest Pipeline Company minimum

bill payments, and $24,000,000 in restitutionary damages

for tortious interference with contract. NGPL urges in

the alternative that judgment notwithstanding the ver-

dict or new trial is required because:

(1) Future fixed costs cannot be recovered as dam-

ages for breach of the Service Agreement;

(2) Minimum bill payments CIG owes to Northwest

Pipeline Company are nonrecoverable consequen-

tial damages;

(3) CIG’s proof of damages was impermissibly spec-

ulative;

(4) The jury ignored offsetting benefits accruing to

CIG as a result of NGPL’s actions;

(5) The jury awarded improper damages for tortious

interference with contract; and

(6) CIG failed to prove antitrust damages.

Each contention will be examined in turn.

A. Breach of Contract Damages

The jury found that CIG suffered $159,797,156 in

damages as a result of NGPL’s breach of contract. This

is the sum of CIG’s lost profits ($106,580,792) plus mini-

76a

mum bill payments CIG owes to Northwest Pipeline Com-

pany ($53,216,364). The Court deleted the award from

the judgment because recovery of contract damages would

have duplicated recovery under the antitrust claim.

NGPL nevertheless challenges the award on two grounds.

Its first argument is that future fixed costs due under

the Service Agreement cannot be recovered as damages for

breach of contract. NGPL also argues that CIG’s mini-

mum bill payments are nonrecoverable consequential dam-

ages. Both elements of damage, however, are recoverable

under the provisions of the Uniform Commercial Code.

NGPL argues that future damages cannot be recovered

when a contract is still being performed. The Service

Agreement continues in force until FERC permits the

parties to abandon it. NGPL therefore concludes that,

absent a total breach of contract, CIG may not recover

future damages based on fixed cost payments not yet

due under the Service Agreement.

When a buyer wrongfully rejects goods or repudiates

with respect to a part or the whole, the seller may recover

damages for nonacceptance. U.C.C. § 2-703. The measure

of damages for the buyer’s nonacceptance or repudiation

is the difference between the market price at the time

and place of tender and the unpaid contract price, plus

any incidental damages, but less expenses saved in conse-

quence of the buyer’s breach. Jd. § 2-708(1). Lost

profits are available as an alternative measure of dam-

ages if the market-contract price differential in 2-708(1)

is inadequate to put the seller in as good a position as if

the buyer had fully performed. Jd. § 2-708(1).

A market must exist in order to recover market based

damages under § 2-708(1). Absent a market for the

goods, § 2-708(1) is an inadequate measure of damages.

Autonumerics, Inc. v. Bayer Indus., Inc., 144 Ariz. 181,

696 P.2d 1330, 1340 (Ariz.App.1984). Accord Copy-

mate Marketing Ltd. v. Modern Merchandising, Inc., 34

Wash. App. 300, 660 P.2d 332 (1983); Neumiller Farms,

77a

Inc. v. Cornett, 368 So.2d 272 (Ala.1979) ; Timber Access

Indus. Co. v. U.S. Plywood-Champion Papers, Inc., 2638

Or. 509, 503 P.2d 482 (1972); Anchorage Centennial Dev.

Co. v. Van Wormer & Rodrigues, Inc., 443 P.2d 596

(Alaska 1968). In this case, the shut-in effectively pre-

vented CIG from transporting natural gas. No market

existed for CIG’s gas so long as NGPL refused to take.

The market-contract price measure of damages in § 2-708

(1) does not adequately measure CIG’s damages. CIG

can be made whole only by receiving its lost profits under

the Service Agreement and consequently is entitled to re-

cover future fixed costs pursuant to § 2-708 (2).

Similarly, CIG’s minimum bill payments to Northwest

Pipeline Company are recoverable as reasonable overhead

under § 2-708(2) or as incidental damages under § 2-710.

In order to supply NGPL with the volumes required under

the Service Agreement, CIG purchased natural gas from

Northwest Pipeline Company. CIG has incurred substan-

tial minimum bill payments to Northwest Pipeline Com-

pany for the gas CIG is unable to take because of the

shut-in. The minimum bill payments were awarded to

CIG as damages for breach of the Service Agreement.

NGPL urges that these payments are nonrecoverable

consequential damages.

Consequential damages are generally nonrecoverable.

U.C.C. § 1-106(1). Sellers may, however, recover inci-

dental damages. A seller’s incidental damages include

“any commercially reasonable charges, expenses or com-

missions incurred in stopping delivery, in the transporta-

tion, care and custody of goods after the buyer’s breach,

in connection with return or resale of the goods or other-

wise resulting from the breach.” /d. § 2-710. The goal is

to put the seller in the same position as if the buyer had

performed. Bulk Oil (U.S.A.), Ine. v. Sun Oil Trading

Co., 697 F.2d 481, 483 (2d Cir.1983). CIG’s minimum

bill payments can be viewed as commercially reasonable

charges incurred in stopping delivery as a result of

78a

NGPL’s breach. These expenses are recoverable under

§ 2-710, and the jury properly awarded them as damages

to CIG.

B. CIG’s Proof of Damages and Offsetting Benefits Re-

ceived by CIG

NGPL contends that the testimony of CIG’s damage

expert, Dr. Rhodes, was based on erroneous assumptions.

Especially in antitrust litigation, the burden of proving

the amount of damages is less than that required to prove

the fact of damage. Aspen Highlands Skiing Corp. v.

Aspen Skiing Co., 738 F.2d 1509, 1526 (10th Cir.1984),

aff'd, 472 U.S. 585, 105 S.Ct. 2847, 86 L.Ed.2d 467

(1985). If the caleulations upon which damages, includ-

ing lost profits, are reasonably estimated and if the record

supports the expert’s assumptions, the calculations are a

valid measurement of damage. Jd. (quoting King & King

Enter. v. Champlin Petroleum Co., 657 F.2d 1147 (10th

Cir.1981).

NGPL’s objections go to the weight and credibility of

Dr. Rhodes’ testimony. Dr. Rhodes explained his assump-

tions and their inadequacies to the jury. Counsel for

NGPL cross-examined Dr. Rhodes at length in an attempt

to discredit his testimony. Dr. Rhodes grounded his cal-

culations on CIG’s accounting records and tariff filings.

Tr. at 2845-46; 2848-51; 2853-54. The calculations were

reasonably estimated and were supported by the record.

The weight to be accorded Dr. Rhodes’ testimony was con-

sequently a question for the jury. State Office Systems,

Inc. v. Olivetti Corp. of America, 762 F.2d 843, 846

(10th Cir.1985); Brown v. McGraw-Edison Co., 736 F.2d

609, 616 (10th Cir.1984). The jury believed Dr. Rhodes’

testimony and rejected NGPL’s contention that CIG

benefitted from the release of Champlin’s Whitney Canyon

gas. CIG presented evidence that a reasonable possibility

existed of renegotiating the price of the Whitney Canyon

gas. The jury’s verdict was not against the weight of the

evidence.

79a

C. Tortious Interference with Contract

NGPL challenges the jury’s damage award for tortious

interference with contract. That award included damages

incurred as a result of demand charges payable to Over-

thrust and Canyon Compression to ship the Whitney

Canyon gas, plus $24,026,517 in restitution for profits

received by Trailblazer Pipeline Company for transport-

ing Whitney Canyon gas.

NGPL would limit damages for tortious interference

with contract to extra expenses incurred by CIG in per-

forming its contract with Champlin. The measure of

damages for tortious interference with contract, however,

is “the amount which will compensate for all the detri-

ment proximately caused by the breach of duty.” Martin

v. Wing, 667 P.2d 1159, 1163 (Wyo.1983). Substantial

evidence supports the conclusion that the demand charges

payable to Overthrust and Canyon Compression were in-

curred as a proximate result of NGPL’s wrongful inter-

ference.

NGPL next claims that restitution is not an appropri-

ate remedy for tortious interference with contract. Dam-

ages for tortious interference are based in tort, not in

contract. Restatement (Second) of Torts § 774A com-

ment d. Restitution has long been an accepted remedy

for tortious interference with contract. See, e.g., Zip-

pertuding Co. v. Teleflex, Inc., 757 F.2d 1401 (8rd Cir.

1985); National Merchandising Corp. v. Leyden, 379

Mass. 425, 348 N.E.2d 771 (1976); Automatic Laundry

Serv. v. Demas, 216 Md. 544, 141 A.2d 497 (1958);

Schechter v. Friedman, 141 N.J.Eq. 318, 57 A.2d 251

(Ct.Err. & App. 1948); Caskie v. Philadelphia Rapid

Transit Co., 321 Pa. 157, 184 A. 17 (1936); Second Nat’l

Bank v. M. Samuel & Sons, Inc., 12 F.2d 963 (2d Cir.),

cert. denied, 273 U.S. 720, 47 S.Ct. 110, 71 L.Ed. 857

(1926); Federal Sugar Refining Co. v. United States

Sugar Equalization Bd., 268 F. 575 (S.D.N.Y.1920).

Restitution is available as a remedy, and C!IG@ was en-

80a

titled to restitution of profits for NGPL’s tortious inter-

ference with contract.

Care must be taken, however, ‘“‘to avoid gouging even

the consciously wrong defendant.” D. Dobbs, Law of

Remedies $6.4 at 465 (1973). Only one-third of the

Trailblazer Pipeline Company is owned by NGPL. Forc-

ing it to disgorge funds it did not receive would un-

fairly penalize NGPL. A remittitur of two-thirds of

$24,026,517, the amount awarded as restitution for profits

received by Trailblazer Pipeline, is appropriate. The sum

owed by NGPL totals $8,008,839. The Court will there-

fore grant a remittitur in the amount of $16,017,678.

D. Antitrust Damages

Recovery of treble damages requires proof of antitrust

injury. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429

U.S. 477, 489, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977).

Antitrust injury is “injury of the type the antitrust

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.