Appendix — Otter Tail Power Co. v. United States
Supreme Court brief1973
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Index
APPENDIX—VOLUMES I AND II
Index for Volume III of Appendix (Exhibits)
is found in Volume III.
I :
The Revelant Docket Entries in the Proceeding Below...
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Memorandum and Order of the United States District
Court, District of Minnesota, Sixth Division, dated
— Z) »»
District Court Findings of Fact and Conclusions of Law,
,, ũ¶oͤ ͥ ͤłͤ rr pee ceme yet
Original Judgment of the Distriet Court, dated
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pellant's Alternative Motions for a New Trial or for
Amended and/or Additional Findings of Fact and for
Amended and/or Additional Conclusions of Law, and
to Amend the Judgment Accordingly ...............
Order of the District Court ruling on Appellant’s said
Post-Trial Alternative Motions, dated November 10,
WE. Shes 4040s / Pad ue oa ] . Lins .
Amended Judgment, dated November 10, 1971
Notice of Appeal to the Supreme Court of the United
OTT Teer Tere - ee ere ee
Index
TRANSCRIPT OF TESTIMONY
AND PROCEEDINGS*
OPENING STATEMENTS
—
GOVERNMENT’S WITNESSES
Harland Martinson:
Elaine Waples:
in the following form—(T.II,2).
SESE OE eR ay A.218 [T.1,2]
EG GS REE (( IS ESE A.220 [T.1,12]
Harland Martinson:
—% ee A:286 [T.1,109]
Cross-examination ................ A. 299 [T.1,127]
Edward C. Spethmann: a
—. ̃— U —! ! ee A. 312 [CT. II, 21]
Cross- examination (cont’d) ............ A. 321 [œT.II, 14]
Redirect examination ................. A.329 [ôT. II, 27]
Hubert Lewis, Jr.:
—! — 8 A. 331 [T. II, 29]
Cross- examination A. 332 [TT. II, 32]
Ernest Woytassek: ,
Direct examination ................... A.344 [T.II1,49]
Cross-examination ............./..... A.351 [T. II, 60]
Redirect examination A. 357 [T. II, 681
Direct examination „ A. 359 [æT. II. 711
— // c ͤ ĩᷣͤ 8 A. 362 [TT. II. 75]
The Transcript of the Proceedings is contained in 10 volumes, one
volume for each day of trial, each of which starts over with page 1.
As a result, the Transcript page numbers must be related to the
volume number. The pagination of the transcript references Will be
an
: Index
.
Frank J. Belinskey:
Direct examination A. 373 [CT. II. 92]
— 0 oe A. 375 [T. II. 94]
Joseph O. Perino: f
Direct examination eres A.378 [T. II, 100]
John S. Holten: a g
— 2 A. 394 [T. III, 2]
Cross- examination A. 404 [T. III, 15]
James L. Grahl:
Direct examination A. 430 [T. IV, 2]
Cross- examination 4.440 [T. IV, 15]
Redirect examination ................ A.475 [T.IV,63]
William E. Trommershausen :
Direct examination ................... A.491 [T.V,2]
Cross-examination .................... A.550 [T.V,85]
Redirect examination ................ A.633 [T.VI,83]
Recross-examination .............. 4.640 [T.VI,93]
OPENING STATEMENT
MN oie este dascrcss K. A.651 [T.V1,110]
DEFENDANT’S. WITNESSES
Albert V. Hartl: ;
Direct examination A.656 [T. VI, 119]
Cross- examination A. 752 [T. VII, 116]
Redirect examination A. 823 [T. VIII, 95]
Recross- examination A. 844 [CT. IX, 10]
Redirect examination ................ A.849 [T.IX,16]
Warren Nye:
Direct examination A.851 [T.IX,20]
Goomiemeeinstion. ................... A.893 [T.IX,80]
Redirect examination A.912 [T.IX,107]
Recross-examination ................ A.917 [T,IX,113]
Walter A. Morton:
. ee en ce eee A.919 [T.X,2]
ee See 8 A.965 [T.X,66]
GOVERNMENT’S EXHIBITS*
GX Exhibits 1 through 294 were all offered and received on
page A.285 [T.I,108] and are described on the Government
Exhibit list.
GX Offered Received Description
206-A A.534 A.534 Map indicating Han-
LT. V. 63] [T. V, 63] 8 kinson and Elbow
N Lake.
206-B A.903 A.904 Map.
[T. IX, 95] [T. IX, 95
295 A.288 A.288 Elbow Lake Council
(T.1,111] (T.1,112] Minutes, 9/8/62.
296 A289 A.291 Various Elbow Lake
(T.1,113] (T.1,116] Council Minutes
from 6/6/60 to
5/7/65.
297 4.294 A. 295 Letter, Martinson to
[T. I. 1201 [T.I. 1211 Wolter, 7/8/65.
298 4.294 A. 295 Letter, Wolter to
LT. I. 120] ILT. I, 1211 Martinson, 8/10/65.
This list of Exhibits and their descriptions is compiled from the
introductory pages of each volume of the Transcript prepared by
the Court Reporter.
Index
GOVERNMENT’S EXHIBITS
GX Offered Received Description
N DSS A.298 fectric power case
(T.1,126] (T.1,126] ~ study for Village
of Elbow Lake.
300, XII AAN Letters Re: Colman.
301 [T. 1,4] LT. I, 41
302, NIN ASS Letters Re: Alexan-
303 = [T.II,4] CT. II, 4 dria.
304, ~A3IS — ASI Letters between
305, [T. II, 13] [T. II, 13] Elbow Lake and
and Basin Electric.
306 ‘
307 N32 A332 Contract for electric
(T.11,32] LT. II. 32] service, Bureau of
Reclamation and
Colman.
308 32 32 Re: Litigation
(T.11,32] (T.II,32]
3090 ASS A332 Report of Buell &
(T.11,32] [T. II, 32] Winter, Minutes
of City Council
N of Colman.
311 A IIA Exhibits Re: Woytas-
thru [T.II,49] [T. II, 49] sek's testimony.
317
318 81 A361 Exhibits Re: Waples
thru [T.II,75] [T. II. 78] testimony.
Index
GOVERNMENT'S EXHIBITS
GX Offered Received Description
330 A376 A.376 Letter from Bartel.
{T.I1,97] [T. II.971]
WI Ase A.376 Waples, Minutes.
[T. II. 97] [T. II. 971]
332 Le A316 Waples, Letters. |
thru [T. II. 97] [T. II. 97] |
338
339 Withdrawn
340 NN “A376 Waples, Letter.
{T.I1,97] {T.I1,97]
341 A376 A376 Waples, Agreement. |
[T.11,97] [T.11,97]
342 e A.376 Waples, Letter.
(T.II,97] ILT. II, 97]
343 Ae A316 Waples, Contract.
{T.I1,97] {T.11,97]
344. 579 A379 Perino, Letters.
thru (T.11,101) LT. II, 1011]
348
349 Assi A.381 Hickerson, Letter.
ILT. II, 104] LT. II, 104]
350 A.d83 A.384 Re: George Danforth.
thru [T.II,107] (T.11,110]
356
357, A.400 A.404 Letters by Holten to
358 II. III, 10] LT. III, 14] Woytassek and
Healey.
vi
Index
GOVERNMENT’S EXHIBITS
GX Offered Received Deseription
359 A400 A404 Letters by Holten
thru [T. III, 10] LT. III, 14] Re: City of Colman.
371 i
72 A A.404 “Signature Certifi- _
LT. III, 10] LT. III, 14] cate”.
373 A400 A.404 “Faegre and Benson”
: LT. III, 10] LT. III, 14] “$95,000 Electric Rev-
enue Bonds of 1964,
City of Colman.”
374 A.414 — —
thru [T. III, 28] —
426
374 479
thru [T.IV,69]
434
374 A.487 Exhibits 374 thru
thru LT. IV, 82] 434 described on
378 Government's
Exhibit list.
419 A. 487
thru LT. IV, 82]
426
428 A. 487
LT. IV, 82]
431 A.487
thru : [T.IV,82]
434
vii
Index
GOVERNMENT’S EXHIBITS
GX Offered Received Description
8 X85 A.496 Systems Map Central
LT. V. 71] LT. V. 71 Power Coop.
736 8 X95 Systems Map UPA.
[T. V. 7] LT. V. 7] .
7 A496 XA Systems Map CPA.
IT. V. 71] [T. V. 7]
438 95 A.496 Systems Map East
[T. V. 71] [T. V. 7] River Cooperative.
1898 Id A.508 Transmissions Map
[T. V. 111 [T. V. 271] Otter Tail Service
Area.
440 A. 512 4.512 Transmissions Map
LT. V. 321] [T. V. 32 Otter Tail Service
Area.
441 A. 512 A. 513 Otter Tail Report
[T. V. 32] ILT. V. 331 Filed 1970 with
FPC.
442 XI X5I8 Otter Tail Report
IT. V. 32] [T. V. 33] Filed 1960 with
N FPC.
3 514 A515 Bureau of Reclamation
[T.V,35] LT. V, 36] Map 1970, Missouri
River Basin Power
System.
444 A. 769 A. 769 Statement of
[T. VIII, 16] [T. VIII, 16] A. V. Hartl.
viii
Index
GOVERNMENT'S EXHIBITS
GX Offered Received Description
S NF 7 Speech by A. V. Harti
(T.VIII,86] [T. VIII, 86] 11-18-70.
446 A.975 A.975 Government Exhibit
[T.X,80] [T.X,80] List, Exhibits
1 thru 294.
27 A975 A.975 Government Exhibit
[T.X,80] LT. X, 80] List, Exhibits
374 thru 434.
DEFENDANT’S EXHIBITS
DX Offered Received Description
1 291 I Elbow Lake Council
(T.1,116] (T.1,416] Minutes, 8/7/61.
2 A291 A291 Elbow Lake Council
[T. I. 116] [T. I. 116] Minutes, 8/17/61.
8 291 A.291 Elbow Lake Council
[T.1,117] (T.1,117] Minutes, 6/4/62.
4 A.291 A291 Elbow Lake Council
[T.I. 117] [T. I. 117] Minutes, 8/6/62.
5 4.292 . 292 Elbow Lake Council
(T.1,117] (T.1,117] Minutes, 6/7/65.
ix
Index
DEFENDANT’S EXHIBITS
DX Offered Received Description
ä A320 Letter by Nye to Vil-
(T.11,14] | (T.I1,14] lage of Elbow Lake.
TES A325 2 Letters to Martinson.
(T.11,21] (T.11,21] vs
>? ASS A.359 Letter by Woytassek.
(T.11,71] [T.II. 711
UX II A366 IU Letters.
ILT. II. 66] LT. II, 66]
Tz 886 X58 Minutes.
[T. II. 66] [T. II. 66]
Ts” 356 A.356 Letter, 2-14-64.
(T.11,66] (T.11,66]
17 A3s6o A.356 Articles of Incor-
LT. II, 66] [T. II, 66] poration.
I A3d6 XU Bylaws.
(T.11,66] [T. II, 66]
je NN N Contract.
{T.11,83] (T.II,83]
TTT TNT 87 Agreements.
[T. II. 83] [T. II. 83]
19 TNS A. 368 Letter.
[T. II. 84] LT. II. 84]
20 — — Same as GX 242
11 — — Same as GX247
2 A. 416 4.417
[T. III. 32] [T. III. 32]
22 Withdrawn on A. 429 [T. III, 50] Same as GX237
X
Index
DEFENDANT’S EXHIBITS
DX Offered Received Description
2 A460 > A460 July, 1970, Booklet
[T. IV, 48] LT. IV, 43] published by
Missouri Basin
Systems Group.
24 NAU A.460 North Central Power
LT. IV, 43] LT. IV, 48] Study.
25 NASN A8 Campaign material.
thru [T. IV, 85] LT. IV,. 86]
37 s
38 Marked for Identification A. VI]
38 0 XII Source Map.
[T. VI. 51] LT. VI. 52]
39 A. 610 A. 611 Source Map.
ILT. VI. 521 LT. VI. 52]
40 A726 A727 Otter Tail Chart.
(T.VII,81] (T.VII,81]
41 A738 A.739_ Otter Tail Chart.
(T.VII,97] LT. VII. 97]
88 328 X82 Engineering Study.
LT. VIII, 98] LT. VIII, 98]
(See A. 826
LT. VIII, 99].)
22 2850 50 Documentation
thru [T. IX, 18] LT. IX. 18] of cases in area
87 of litigation.
89. A.840 A.840 List of REA
[T. IX, 4] LT. IX, 4] cooperatives.
xi
Index
DEFENDANT’S EXHIBITS
DX Offered Received Description
30 X51 A851 1969 REA Statistical
ILT. IX. 19] [T. IX, 19] Report.
Si ASST A.858 Excerpts from
(T.1X,28] LT. IX, 30] Exhibit GX-2.
81 TGA Map.
[T. IX, 35] [T. IX, 39]
93 A. 861 A. 864 Map.
ILT. IX, 35] [T. IX, 39]
94 A.873 A.873 Study of Power
[T. IX. 52] [T. IX. 52] Supply, Area 26.
95 A. 933 A. 938 Study and schedules
[T. X. 21] [T. X. 28] of Dr. Morton.
96 A.952 A.952 Study and schedules
[T. X, 47] [T. X, 48] of Dr. Morton.
97 A. 958 A. 958 Study and schedules
[T. X, 56] T. X. 56] of Dr. Morton.
98 A.975 A.976 List of towns served
[T. X, 81] [T. X,. 82] by Co-operatives
at retail.
Dx99—Letter from East River to Elbow Lake. Added to
record by Order dated Nov. 8, 1971
A.1211
Otter Tail Dep. bx. Army Engineers’ study. Offered and
received in evidence at A.315 [T.II,6,7]
A. 1214
Chart Submitted by the United States—Ineluded in Record
by Order dated July 5, 1972
A.1219
is
Docket Entries 1
IN THE
Supreme Court of the United States
OCTOBER TERM, 1971
No. 71-991
OTTER TAIL POWER COMPANY, APPELLANT
v.
UNITED STATES OF AMERICA, APPELLEE
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MINNESOTA
THE RELEVANT DOCKET ENTRIES
IN THE PROCEEDING BELOW
7-14-69 — Filed Complaint.
' Issued Summons.
Case assigned to J. Devitt.
7-22-69 — Filed Summons, returned served 7-15-69.
8-4 — Filed Answer with aff. of serv. by mail 8-1-69.
8-19-69 — Filed Motion To Associate Counsel Kenneth C.
Anderson and Keith I. Clearwaters of U. S. Dept. of Justice,
Washington D.C., and entered Order therein that Kenneth
C. Anderson and Keith I. Clearwaters be and are, recog-
—
2 Docket Entries
nized as co-counsel for U.S. in entitled and numbered pro-
ceeding. (Devitt-J 8-14-69) |
9-29-69 — Filed Plaintiff's Interrogatories To Defendant
with Cert. of Service by mail 9-26-69.
10-81-69 — Filed Answers of Deft to Plaintiff's Interroga-
tories. Cert. of Serv. by Mail 10-30-69 attached.
128-69 — Filed Plaintiff's Notice of Motion For The Produc.
tion of Documents and Motion For Production of Docu- |
ments. Affidavit of Kenneth C. Anderson attached. Certifi-
cate of Service by mail 12-38-69 attached. Noticed for hearing
at St. Paul on 12-22-69 at 9:00 A.M. or as soon thereafter
as counsel can be heard, for an order granting Motion for
Production of Documents.
Filed Memorandum of Points and Authorities In Support
of Plaintiff's Motion For The Production of Documents
Pursuant to Rule 34 of the Federal Rules of Civil Procedure.
Cert. of Serv. by Mail 12-3-69 attached.
12-16-69 — Filed Defendant’s Response To Motion For The
Production of Documents. Aff. of serv. by Mail 12-15-69
attached.
Filed Defendant’s Brief In Support of Defendant’s Response
To Motion For Production of Documents.
5-26-70 — Entered record of pretrial conference, during which
the case is set for trial in November of 1970 at St. Paul.
(Devitt, J.)
6-30-70 — Filed Deft’s Motion for Continuance together with
Notice of hearing on the Foregoing Motion at St. Paul Aug.
10, 1970 at 9:00 A.M. or as soon thereafter as counsel can
be heard, or at such other time and place as may be deter-
mined by the Court. Cert. of Service by mail 6-4-70 attached.
Docket Entries 3
8-24 — Entered record of hearing on deft’s motion for cont. :
argued, denied. Order to be submitted. (Devitt, J.; Lind-
berg, reporter)
8-31 — Filed and entered Order denying continuance. (Devitt,
J.) Mailed notice to counsel.
9-14 — Filed reporter's notes of proceedings had 8-24-70.
(Lindberg, reporter)
Filed reporter’s transcript of proceedings of 8-24-70.
9-16 — Filed defendant’s interrogatories 1 and 2, with aff.
of serv. by mail 9-11-70.
9-21-70 — Filed plaintiff’s notice to take depositions of War-
ren K. Nye, Albert C. Hartl, P. J. Brewer, R. W. Nygard,
J. J. Seashore, with certificate of service by mail on 9-18-70.
9-29-70 — Filed Plaintiff’s Notice of Motion For the Produc-
tion of Documents and Motion For Production of Docu-
ments. Noticed for hearing Oct. 12, 1970 at 9:00 A.M. or
as soon thereafter as counsel can be heard for an order. Aff.
of serv. by mail 9-25-70, attached.
9-29-70 — Filed pretrial order no. 1, setting pretrial confer-
ence 12-21-70 at 9:00 a.m. (Devitt, J.) Order bears approval
of counsel for the respective parties,
10-1-70 — Filed plaintiff’s answers to interrogatories, with
aff. of serv. by mail 9-30-70.
10-6 — Filed and entered order granting plaintiff’s ex part
Motion to associate counsel. (Devitt, J.) The order is on the
Same page as the Motion itself.
10-7 — Filed defendant’s response to plaintiff’s second motion
for production of documents. Cert. of personal service 10-
5-70 attached.
10-12-70 — Filed Partial Stipulation of Facts.
8
nennen
4
11-19-70 — Filed Plaintiff's Supplemental Answers to Inter-
rogatories Proposed by Deft. Cert. of Serv. by Mail 11-17-
70 attached.
12-14-70 — Filed Defendant’s Statement re Defendant’s Wit-
nesses. Cert. of serv. by mail 12-11-70.
12-21 — Filed Additional Stipulation of Facts, with exhibits
“A” through “KK” inclusive.
Entered Record of pretrial conference. Further pretrial
2-16-71 with briefs to be submitted prior to that date. Trial
set tentatively 5-24-71. (Devitt, J.; Anderson, reporter)
1-15-71 — Filed and entered Pretrial order No. 2, setting a
second pretrial conference at St. Paul 2-16-71, and tentative
trial date of 5-24-71 in St. Paul. (Devitt, J.; 1-12-71) Docu-
ment bears approval of counsel for both parties. Mailed
conformed copy of the order to counsel for the respective
parties.
2-1-71 — Filed Defendant’s Response To Plaintiff's Proposed
Stipulation of Facts Supplement, No. 1, and Proposed Addi-
tional Stipulation of Facts as To Documentary Evidence.
Aff. of Serv. by mail 1-29-71 attached.
2-8-71 — Filed Copy of Pre-trial Brief by U. S. Department
of Justice.
2-16-71 — Entered Minutes of Proceedings of record of pre-
trial conference (Devitt, J.) (Lindberg, Reporter)
3-971 — Filed Reporter’s Notes of hearing 2-16-71 (No. 139)
Lindberg, Reporter.
3-15-71 — Filed and entered Pretrial Order No. 3 (Devitt, J.
3-15-71)
Mailed Notice to Counsel
5-3-71 — Filed deft. Otter Tail’s compliance with paragraph
4 Docket Entries
Docket Entries 5
3(a) of pretrial order No. 3, with eight exhibits, five of them
received this date, the rest en route. Aff. of serv. 4-30-71
attached. .
Filed Deft. Otter Tail’s compliance with paragraph 3(b)
of pretrial order no. 3, with aff. of serv. 4-30-71.
3 large plats received and are now in exhibit room.
5-4 — Filed additional stipulation of facts, supplement no. 1,
with exhibits listed on letter attached to the stip.
5-10-71 — Filed Otter Tail’s Compliance with Paragraph 2
of Pretrial Order No. 3. Aff. of Serv. by Mail 5-7-71 at-
tached.
5-17-71 — Filed defendant’s compliance with paragraphs 4
(a) and (b) of pretrial order no. 3. Aff. of Serv. on 5-14-
71 attached. .
6-4-71 — Entered further record of trial ( Devitt, J.) (Ander-
son-Sutfin, Reporter)
8-2-71 — Lodged Plaintiff’s Post-Trial Reply Brief and de-
livered same to Judge Devitt.
5-17-71 — Filed plaintiff’s compliance with paragraph 4 of
pretrial order no. 3.
Lodged plaintiff’s reply to defendant’s pretrial brief.
Lodged plaintiff’s pretrial findings of fact and conclusions
of law.
Delivered above reply and pretrial findings to Judge Devitt.
Filed cert. of service of foregoing three items by mail on
5-16-71.
61-71 — Entered record of trial (Devitt, J.) (Anderson-Sut-
fin, Reporters)
6271 — Filed Deposition of Albert C. Harti taken October
5, 1970.
Filed Deposition of P. J. Brewer taken October 9, 1970.
6 Docket Entries
Filed Deposition of Warren K. Nye, taken October 8, 1970.
Filed Deposition of Robert W. Nygard, taken October 9,
1970.
Filed Deposition of James J. Seashore, taken October 9,
1970.
6-83-71 — Filed Reporter’s Deposition of Frederick William
Muller, taken 5-24-71, Vol. I.
Filed Deposition of Frederick William Muller, taken 5-25-
71, Vol. II
Filed Deposition of Frederick William Muller, taken 5-25-
71, Vol. III
Filed Deposition of Frederick William Muller, taken 5-25-
71, Vol. IV
Filed Deposition of Frederick William Muller, taken 5-26-
71, Vol. V.
6-2-71 — Entered record of further trial (Devitt, J.) (Ander-
son-Sutfin, Reporters)
~ 6-3-71 — Entered record of further trial (Devitt, J.) (Ander-
son-Sutfin, Reporters)
6-4-71 — Entered record of further trial (Devitt, J.) (Ander-
son-Sutfin, Reporters)
6-7-71 — Entered record of further trial (Devitt, J.) (Ander-
son-Sutfin, Reporters) ö
68-71 — Entered record of further trial (Devitt, J.) (Ander-
son-Sutfin, Reporters)
6-9-71 — Entered record of further trial (Devitt, J.) (Ander-
son-Sutfin, Reporters)
6-10-71 — Entered record of forther trial (Devitt, J.) (Ander-
son-Sutfin, Reporters)
6-11-71 — Entered record of further trial (Devitt, J.) (Ander-
son-Sutfin, Reporters)
Docket Entries 7
6-14-71 — Entered record of further trial; matter taken under
advisement. Counsel are to submit briefs and proposed
findings simultaneously July 14, 1971 and reply briefs by
July 30, 1971.
Filed list of exhibits,
Filed reporter’s transcript of testimony of trial from June
1 thru June 11, 1971, in 9 volumes. (Anderson-Sutfin)
9-9-71 — Filed and entered Memorandum and Order finding
that deft. has attempted to, and has, monopolized interstate
commerce in the retail distribution of electric power in vio-
lation of Section 2 of the Sherman Act; order enjoins deft.
from continuing the violations herein found to exist. Coun-
sel for plaintiff is directed to submit findings of fact, con-
clusions of law and order for judgment, together with a
proposed form of judgment. (Devitt, J.) ö
9-971 — Mailed conformed copy of the foregoing Memo and
Order to counsel for the respective parties, as listed on these
docket sheets.
Filed reporter’s transcript of proceedings 6-14-71. (Ander-
son-Sutfin, Reporters)
Filed reporter’s transcript of trial of 6-14-71 (Anderson-
Sutfin, Reporters)
9-9-71 — Filed one document entitled: Transcript directing
suggestions by deft. in re: Vol. 1-10.
9-27-71 — Filed Praecipe of John W. Wright, Operations
Attorney, Rural Electrification Division, U.S. Dept. of Ag-
riculture, Office of the General Counsel, Washington, D.C.
20250. Copy issued and mailed 9-13-71 pursuant to telephone
order.
8 Docket Entries
Filed Praecipe of Mrs. Ruth H. Jacobson, Secretary of
Judicial Panel on Multidistrict Litigation for copy of opin-
ion dated 9-9-71. Issued and mailed.
10-22-71 — Filed and entered Findings of Fact, Conclusions
of Law in favor of the plaintiff. (Devitt, J.)
Filed and entered Judgment enjoining and restraining deft.
from violating the Sherman Act. Copy attached. (Devitt, J.)
Mailed notice to counsel.
10-28-71 — Filed defendant’s alternative motions for a new
trial or for amended and/or additional findings of fact and
for amended and/or additional conclusions of law, and to
amend the judgment accordingly, with notice of hearing,
returnable at St. Paul at 11:00 a.m. Nov. 8, 1971, and
certificate of service by mail on 10-27-71.
Filed and entered order staying enforcement of judgment
pending disposition of motions filed this date, directing that
deft. furnish bond. (Devitt, J.)
Filed defendant’s bond in the sum of $50,000.00.
Mailed notice to counsel of the foregoing order and of filing
of the bond.
11-8-71 — Entered record of hearing of Deft’s Motion for
New Trial and/or for amended Findings of Fact, Conclu-
sions of Law and to amend Judgment accordingly: Argued,
submitted to and by the Court denied as to a new trial. Mr.
Field to submit an Amended Judgment for the Court’s sig-
nature and the Court stays the entry of Judgment. (Devitt,
J.) (Anderson, Reporter)
Filed and entered Order re Transcript corrections and DX
99.
Docket Entries 9
11-10-71 — Filed and entered order amending judgment here-
in. (Devitt, J.; 11-10-71)
Filed and entered amended judgment. (Devitt, J.)
Mailed conformed copies of the foregoing order and amend-
ed judgment to Mr. Field and to Kenneth C. Anderson.
Mailed notice to counsel.
12-7-71 — Filed defendant’s notice of appeal to U. S. Supreme
Court,
Filed and entered order suspending injunction during ap-
peal. (Devitt, J.)
Mailed copy of conformed notice of appeal to United States
Attorney, 596 U.S. Courthouse, 110 South 4th St., Mpls.,
Minn. 55401, to Kenneth C. Anderson, Keith C. Anderson,
and Herbert D. Miller, Jr., each individually, addressed as
follows: U. S. Department of J ustice, Washington, D. C.
Filed request by defendant for certification and transmis-
sion of record to the Supreme Court of the U. 8.
Mailed notice to counsel of the foregoing order filed this
date. :
12-9 — Filed and entered order for transmission of original
record and original exhibits to U. S. Supreme Court. (Dev-
itt, J.) Conformed copy of this order mailed to counsel for
the respective parties.
1-13-72 —Mailed certificate with original files and copies of
docket sheets and notice of appeal, certified, to Clerk, Su-
preme Court of the United States, Supreme Court Building,
Washington, D. C. 20544, with copy of cover letter to counsel
whose names: and addresses are on the first page of the
docket sheet.
14 — Mailed exhibits to Clerk, Supreme Court of the U. S.
addressed as above.
10 Plaintiff's Complaint
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MINNESOTA
SIXTH DIVISION
(Title Omitted in Printing)
COMPLAINT
The United States of America, by its attorneys, acting under
the direction of the Attorney General of the United States,
brings this action against the defendant named herein and
complains and alleges as follows:
i
JURISDICTION AND VENUE ~
1. This complaint is filed and this action is instituted
against the defendant under Section 4 of the Act of Congress
of July 2, 1890, as amended (15 U.S.C. §4), commonly known
as the Sherman Act, in order to prevent and restrain the
continuing violation by the defendant, as hereinafter alleged,
of Section 2 of the Sherman Act (15 U.S.C. §2).
2. The alleged violation of law hereinafter described has
been and is being carried out in part within the Sixth Division
of the District of Minnesota where the defendant has offices,
transacts business and is found.
II.
THE DEFENDANT
3. Otter Tail Power Company (hereinafter Otter Tail“)
is made a defendant herein. Otter Tail is a corporation orga-
nized and existing under the laws of the State of Minnesota
with its principal place of business in Fergus Falls, Minnesota.
It generates, transmits and sells electric power at retail and
wholesale.
Plaintiff's Complaint 11
III.
TRADE AND COMMERCE
4. The electric power industry is comprised generally of
three functional levels: production, transmission and distribu-
tion. Production encompasses the conversion into @ectric pow-
er of energy obtained from combustion of fossil fuels, from
moving water, or more recently, from atomic reaction. Trans-
mission refers to the transportation of electric energy via a
network of high voltage lines from points of generation to
distribution areas. Distribution involves the delivery and sale
of electric current to ultimate consumers. Although most large
electric utilities, including Otter Tail, perform all three func-
tions, some companies perform only one or two of such func-
tions. For example, the Bureau of Reclamation of the Depart-
ment of the Interior (hereinafter “the Bureau”) and many
electric cooperatives restrict their activities to the production
and transmission of electric power. Also, many municipal
power systems and electric cooperatives engage solely in dis-
tribution of electric energy to ultimate consumers.
5. Otter Tail operates an integrated electric power system
in western Minnesota, northeastern South Dakota and eastern
North Dakota. It maintains generation facilities having a
capacity of approximately 280,000 kilowatts. In addition, the
company purchases substantial amounts of electric power
produced by the Bureau.
6. Otter Tail has 5,900 miles of transmission lines which
blanket its tri-state area of operations. These lines cross state
boundaries and carry power produced both by Otter Tail and
the Bureau. Although various electric cooperatives have
transmission lines within the tri-state Otter Tail area, Otter
12 Plaintiff's Complaint
Tail’s network of high voltage lines is the dominant factor in
the transmission of power in the area. Bureau-generated elec-
tric power is transmitted (“wheeled”) by Otter Tail to certain
Bureau customers pursuant to an agreement between the
Bureau and Otter Tail. In addition, Otter Tail has agreements
with various electric cooperatives under which each party
agrees to wheel electric power over its lines for the other. In
1966, Otter Tail wheeled a total volume of 523,704,610 kilowatt
hours of electric power, from which it derived revenues of
$508,613.
7. The statutes of the States of Minnesota, South Dakota
and North Dakota give to each municipality the option of
awarding a distribution franchise for a term of years to an
electric utility company or of establishing and operating a
municipally-owned electric power distribution system. Selec-
tion of the method by which electric power distribution is to
be performed is made by the electorates of the respective
towns. Changes in the method of distribution are authorized
by the respective state statutes.
8. Otter Tail distributes electric power at retail in approxi-
mately 464 towns, which constitute the vast majority of towns
in its service area. (Electric power distribution in rural areas
within Otter Tail’s service area is performed principally by
electric cooperatives; however, the latter are restricted by
law from distributing electric power within towns.) In 1967
Otter Tail sold 867,621,740 kilowatts of electric energy in the
464 towns, from which it derived revenues of $25,179,979.
9. In 1966 the municipal electric power systems of 18
towns located within the Otter Tail service area purchased
all or part of their electric power requirements at wholesale
from the Bureau. 122,864,314 kilowatt hours of electric energy
Plaintiffs Complaint 13
were wheeled over Otter Tail transmission lines part of the
distance between Bureau generation facilities and the munic-
ipal systems.
10. Otter Tail is a member of the Upper Mississippi Val-
ley Power Pool and sells to and buys from its fellow members
electric power for resale. The members of the pool are located
in several different states, and the power exchanged among
them crosses state lines. In 1967 Otter Tail sold 166,107,600
kilowatt hours to pool members, from which it derived reve-
nues of $1,607,616.
IV.
OFFENSES CHARGED
11. Beginning in or about 1955 and continuing thereafter
up to and including the date of filing of this complaint, defen-
dant Otter Tail has attempted to monopolize and has monopo-
lized the aforesaid trade and commerce in the sale of electric
power in or to towns located in the areas of Minnesota, North
Dakota and South Dakota which it serves, in violation of Sec-
tion 2 of the Sherman Act (15 U.S.C. §2). These offenses are
continuing and will continue unless the relief hereinafter
prayed for is granted.
12. Pursuant to and in furtherance of the aforesaid at-
tempt to monopolize and monopolization, defendant Otter Tail
has sought to prevent municipalities from shifting local elec-
tric service from Otter Tail to another electric power system,
supplied either by Otter Tail or another supplier of power, by
doing among other acts, the following:
1. refusing and threatening to refuse to sell power at
wholesale to the proposed alternative local electric power sys-
tems;
i |
2. refusing and threatening to refuse to wheel electric
power from other wholesale power suppliers to the proposed
alternative local electric power system; and
8. engaging in other activities designed to obstruct and
defeat the attempt by municipalities to establish alternative
local electric power system.
14 Plaintiff's Complaint
V.
EFFECTS
18. The aforesaid offenses have had, among other things,
the following effects:
(a) Otter Tail has been able to preserve a monopoly of
retail distribution in towns in its service area;
(b) Competition for local electric power distribution
franchises has been eliminated ; i
(c) Yardstick competition in the retail distribution of
electric power has been lessened;
(d) Competition in the wholesale sale of electric power
has been restrained.
PRAYER
WHEREFORE, the plaintiff prays:
1. That the Court adjudge and decree that defendant Otter
Tail has attempted to monopolize and has monopolized inter-
state trade and commerce in the retail distribution of electric
power in violation of Section 2 of the Sherman Act.
2. That defendant Otter Tail and all persons, firms, and
corporations acting in its behalf or under its direction or con-
trol be permanently enjoined from engaging in, carrying out,
or renewing any contracts, agreements, policies, practices, or
understandings, or claiming any rights thereunder having the
purpose or effect of continuing, reviving, or renewing the
aforesaid violation of the Sherman Act or any contract, agree-
Plaintiff's Complaint 15
ment, policy, Practice, or understanding having like or similar
purpose or effect.
3. That the plaintiff have such other and further relief
as the nature of the case may require and the Court may deem
just and proper.
4. That the plaintiff may recover the costs of this action.
Dated :
KENNETH C. ANDERSON
Attorney, Department of
Justice
JOHN N. MITCHELL
Attorney General
RICHARD W. McLAREN
Assistant Attorney General
BADDIA J. RASHID
JOSEPH J. SAUNDERS
Attorneys, Department of Justice
16 Defendant’s Answer
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MINNESOTA
SIXTH DIVISION
(Title Omitted in Printing)
ANSWER
Defendant Otter Tail Power Company (Otter Tail) for its
Answer to the Complaint herein, respectfully alleges:
I,
GENERAL
Otter Tail admits that it is a corporation organized and
existing under the laws of the State of Minnesota with its
principal place of business in Fergus Falls, Minnesota. Otter
Tail further admits and alleges that it owns and operates an
integrated electric system, which includes transmission lines
which interconnect generating stations located at strategic
points on the system and which system furnishes adequate and
reliable retail electric service at reasonable rates to approxi-
mately 464 communities, and also to a substantial number of
rural customers, located generally in western Minnesota, east-
ern North Dakota, and northeastern South Dakota. Otter
Tail’s system is connected with other major electric suppliers
in the area pursuant to the provisions of special agreements
which have been voluntarily negotiated and entered into.
Otter Tail denies that its high voltage lines are the dominant
factor in the transmission of power in the area. The statistics
alleged in the Complaint are approximately correct, but, in
connection with any statistics for wheeling, or pool transac-
tions, or any transactions with other suppliers, the particular
Defendant’s Answer 17
special agreements under which they are performed must be
referred to in order to understand their meaning, context, and
limitations.
Paragraph 7 of the Complaint contains allegations regard-
ing the laws of the three States of Minnesota, North Dakota,
and South Dakota, the details of which the Court can take
judicial notice of.
II.
OTTER TAIL’S GENERAL STATUS AND POLICY
Otter Tail is an investor-owned electric company which has,
through its initiative and efficient management, put together
its integrated electric system over the past 60 years, and
whfth has been a leader in adopting modern technological
advances, and in voluntarily negotiating and entering into
interconnection agreements with other suppliers, and, as a
consequence, has succeeded in bringing the advantages of
scale to its retail electric consumers in a widespread and pre-
dominantly rural area. Of the 464 communities which it serves
at retail only 28 have a population of 1,500 or greater, and only
2 have a population in excess of 10,000. This action, and its
companion cases, the Village of Elbow Lake’s Complaint be-
fore the Federal Power Commission, 1 and Elbow Lake’s suit
for treble damages and an injunction under the Sherman Act
1 Village of Elbow Lake, Minnesota vs. Otter Tail Power Company,
FPC Docket No. E-7278, which proceeding was commenced on
March 16, 1966, and is presently being processed at the administra-
tive level before the Federal Power Commission. There is also an
appeal to the Circuit Court of Appeals of the Eighth Circuit from
an interim order of the Federal Power Commission, which appeal
is now pending. This appeal bears No. 19,628 in the Court of Ap-
peals for the Eighth Circuit and is entitled “Otter Tail Power Com-
pany vs. Federal Power Commission and Village of Elbow Lake.
Minnesota”.
—
in this Court,? seek to compel Otter Tail to use its own facili-
ties to support or subsidize a new municipal system that puts
Otter Tail out of the retail business in that community. It is
Otter Tail's position in this action, as well as in the companion
cases mentioned, that to do so would create a precedent and
situation which would subject its integrated system to erosion
and would impair its credit in the money markets of the coun-
try. Otter Tail resists being compelled to use its own prop-
erties to destroy itself. Otter Tail denies that this position and
policy of Otter Tail in any way violates the Sherman Act. On
the contrary, Otter Tail alleges that it is not in the public
interest, either from the standpoint of public utility regula-
tion, or the antitrust laws, or the effect on both the customers
and shareholders of Otter Tail, to create a situation or prece-
dent tending toward that result. N
III.
WHOLESALE SERVICE
Otter Tail has never held itself out generally to furnish
electric service at wholesale, and its properties have not been
dedicated to wholesale service. The consistent and historic
policy of Otter Tail is to furnish service at retail to the ulti-
mate consumer. This basic policy of Otter Tail was stated as
early as 1947, as a part of Otter Tail’s Electric Schedule filings
with the Federal Power Commission. A copy of this Statement
of Company’s Policies and Practices as so filed with the Fed-
eral Power Commission in 1947 is attached hereto as Exhibit
18 Defendant’s Answer
2 The Village of Elbow Lake, Minnesota vs. Otter Tail Power Com-
pany, being Civil Action File No. 667-244 in the United States Dis-
trict Court for the District of Minnesota, Sixth Division. The trial
of this case in this Court has been continued until the completion
of the administrative proceedings before the Federal Power Com-
mission and of judicial review of its orders, by the Order of Hon-
— * Edward J. Devitt, Chief Judge of this Court, dated June 20,
Defendant’s Answer 19
A. The few wholesale accounts Otter Tail once had were cov-
ered by special contracts and within the limitations of those
contracts. With the availability of underpriced government
power, the wholesale accounts covered by those special con-
tracts have left Otter Tail to become preference customers of
the Bureau of Reclamation. At the present time there is only
one wholesale contract left, and that has been taken over by
the Cass County Electric Cooperative, and expires by its terms
in 1970. When this one remaining contract expires in 1970,
the policy of the Company which has been followed down
through the years will result in a complete divorcement of
wholesale customers.
IV.
WHEELING SERVICE
One of the agreements which Otter Tail has voluntarily
negotiated and entered into providing for interconnection with
other suppliers is a contract between the Bureau of Reclama-
tion of the Department of Interior (Bureau) and Otter Tail,
dated June 14, 1955 (Bureau-Otter Tail Contract). The Bu-
reau-Otter Tail Contract provides for the exchange of use of
the facilities of the two parties as therein described, which
includes the use of Otter Tail’s transmission system by the
Bureau to “wheel” Bureau power to its preference customers
in the marketing area of the Bureau. A provision in the Bu-
reau-Otter Tail Contract specifically provides that Otter
Tail’s transmission system is not to be used to wheel electric
power to a municipality already receiving retail service from
Otter Tail as of the date of that Contract in 1955. The Bureau-
Otter Tail Contract also provides that Otter Tail does not
dedicate or intend to dedicate its facilities to the common
fe ON ee
20 Defendant’s Answer
carrying of electric energy for the account and use of the
United States or anyone else. Excerpts from the Bureau-Otter
Tail Contract containing these provisions are attached hereto
as Exhibit B. The Bureau itself has thousands of miles of
transmission lines throughout the area. What “wheeling”
Otter Tail has done of Bureau power over Otter Tail’s lines,
as well as any other transactions between the Bureau and
Otter Tail, have been done pursuant to the provisions of the
Bureau-Otter Tail Contract.
V.
UPPER MISSISSIPPI VALLEY POWER POOL
Otter Tail admits and alleges that it is a charter member
of the Upper Mississippi Valley Power Pool under the terms
and provisions of an agreement which was voluntarily nego-
tiated and entered into. Any transactions between Pool mem-
bers are pursuant to the provisions of this agreement.
VI.
DENIAL OF OFFENSES CHARGED
Otter Tail specifically denies that it has done anything in
violation of Section 2 of the Sherman Act (15 U.S.C. Sec. 2).
Otter Tail admits and alleges that it has refused to permit the
use of Otter Tail’s facilities (by furnishing either wholesale
or wheeling service) to subsidize or support a new municipal
electric system which is constructed for the purpose of ousting
Otter Tail from the retail electric business in that municipal-
ity. Otter Tail also admits and alleges that it attemps to use
all reasonable means to continue in business, and to continue
to furnish adequate and reliable service at reasonable rates
at retail in the municipalities which are served by its inte-
grated system, and in attempting to present its case that it
Defendant’s Answer 21
is to their advantage not to severe their connection with Otter
Tail’s system and service.
VII.
DENIAL OF ALLEGED EFFECTS
Otter Tail denies the existence of the alleged effects set
forth in Paragraph V of the Complaint. On the contrary, Ot-
ter Tail alleges that it is subject to competition at all levels
of its operations, and particularly in the area of retail distri-
bution. Hence, Otter Tail’s efforts to attempt to stay in busi-
ness, and its policy not to furnish its own facilities to assist
in putting itself out of business.
VIII.
CONSTITUTIONAL RIGHTS
Otter Tail alleges that to order Otter Tail to use its own
facilities to support or subsidize a new municipal system
which puts Otter Tail out of the retail business in that munic-
ipality, and establishes a precedent which will erode Otter
Tail’s integrated system and impair its credit, constitutes the
taking of Otter Tail’s property without due process of law or
just compensation in violation of its constitutional rights
(Article V of the Amendments to the Unitéd States Constitu-
tion).
IX.
GENERAL DENIAL
Further answering the Complaint, defendant denies each
and every allegation therein contained, except as is herein-
before admitted, alleged or otherwise stated.
PRAYER
WHEREFORE, the defendant prays the Judgment of this
Court determining that Otter Tail has not violated Section 2
of the Sherman Act, and that this action be dismissed on its
22 Defendant’s Answer
merits, and that the defendant recover its costs and disburse-
ments of this action.
Dated August 1, 1969.
CYRUS A. FIELD
Of the firm of
FIELD, ARVESEN, DONOHO,
LUNDEEN & HOFF
Fergus Falls National
Bank Building
Fergus Falls, Minnesota 56537
Attorneys for the Defendant
EXHIBIT A
Otter Tail Power Company
FPC Electric Schedules
Original Sheet No. 2
PRELIMINARY STATEMENT AND GENERAL
EXPLANATION OF COMPANY’S POLICIES
AND PRACTICES
Otter Tail Power Company is an integrated operating elec-
tric utility engaged in the business of generation, transmis-
sion, distribution and sale of electric energy within portions
of the States of Minnesota, North Dakota and South Dakota.
The major source of generation is steam generating plants.
The Company’s general policy and practice is to serve custom-
ers at retail within the area served by it. The furnishing of
electric service at wholesale is incidental and limited to those
wholesale purchasers with whom the Company has contracted
for such service. The Company has never held itself out gen-
erally to serve wholesale purchasers.
Issued By: C. G. Wright, Vice President
Effective: November 1, 1947
Defendant’s Answer 23
EXHIBIT B
Contract No. I79r-1592
Supplement No. 2
UNITED STATES
DEPARTMENT OF THE INTERIOR
BUREAU OF RECLAMATION
Missouri River Basin Project—Eastern Division
Minnesota, North Dakota, and South Dakota
CONTRACT FOR ELECTRIC SERVICE TO
OTTER TAIL POWER COMPANY
1. This Supplemental Contract made this 14th day of June
1955, in pursuance of the Act of Congress approved June 17,
1902, (32 Stat. 388), the Act of Congress approved December
22, 1944 (58 Stat. 887), and acts amendatory thereof or sup-
plementary thereto, between the UNITED STATES OF
AMERICA, hereinafter called the United States, represented
by the officer executing this contract, his duly appointed suc-
cessor, or his duly authorized representative, hereinafter
called the contracting officer, and OTTER TAIL POWER
COMPANY, a corporation duly organized, created, and exist-
ing under and by virtue of the laws of the State of Minnesota,
hereinafter called the Contractor, its successors and assigns;
WITNESSETH
2. WHEREAS, the parties hereto have entered into that
certain Contract No. I79r-1592, dated March 14, 1950, and
Supplement Number 1 thereto, dated February 28, 1952, to-
gether hereinafter called the original contract, and it is the
desire of the parties hereto to codify, and in certain respects
to modify, the arrangements provided in said contract and its
supplement, to the extent that these arrangements have not
already terminated; and * * *
RAPT PY SR AIR TAO Rat eR eRe) rr NN
r
2
12
4
7
13
*
f
5
3
i
4
ty
3
24 Defendant’s Answer (Ex. B)
specified by the Contractor not less than four (4) years from
the date such notice is received by the contracting officer;
Provided, That the United States, at any time after receipt of
said notice from the Contractor terminating the application
of PART FOUR hereof, in whole or in part, may terminate
this PART FOUR on not less than thirty (30) days’ written
notice to the Contractor.
(e) If any public regulatory body or commission has
or asserts jurisdiction over this PART FOUR or any part
thereof, the Contractor shall promptly apply to such body or
commission for an order authorizing the Contractor to carry
out the terms thereof, and will, in such event, prosecute the
application and any proceedings thereon with due diligence.
If such application be denied, then the United States may
terminate this PART FOUR on not less than thirty/(30) days’
written notice to the Contractor. Unless and until so termi-
nated, this PART FOUR shall be inoperative only to the extent
the order denying the application provides.
(f) It is understood and agreed that the Contractor, by
entering into this contract, does not dedicate or intend to dedi-
cate its facilities to the common carrying of electric energy
for the account and use of the United States or anyone else.
DELIVERIES OF ELECTRIC POWER AND ENERGY
27. (a) The United States, under the terms and condi-
tions stipulated in this PART FOUR, will furnish the electric
power and energy required for the United States and/or its
customers at the points of interconnection and nominal volt-
ages specified in Article 10 hereof, and at the point or points
of interconnection between the systems of the Contractor and
Northern States Power Company, and at the nominal voltages
of such interconnections, pursuant to the provisions of the
contract between the United States and Northern States Pow-
er Company hereinbefore referred to; Provided, That delivery
—
to Northern States Power Company for redelivery to the Con-
tractor shall be deemed delivery to the Contractor hereunder.
(b) The electric power and energy will be furnished and
delivered hereunder as three-phase, alternating current, at
a nominal frequency of 60 cycles per second in such amounts
and at such rates of delivery as are from time to time required
by the United States for redelivery to itself, Northern States
Power Company, and/or its customers, plus losses in trans-
mission equal to seven percent ( 7%) of maximum coincidental
demand and seven percent (7%) of the energy deliveries to
loads of the United States and/or its customers served by the
United States directly from the system of the Contractor;
Provided, That except for the deliveries (i) to the Village of
Badger, South Dakota, and (ii) to the one existing delivery
to Central Power Electric Cooperative at less than 34,500
volts, whenever pursuant to paragraph (1) of the proviso in
Article 31(a) delivery is made from the system of the Con-
tractor at less than 34,500 volts, the losses in transmission for
which the United States shall supply power and energy pursu-
ant to this Article shall be 10% in lieu of the 7% allowed for
above; and Provided further, That except as otherwise speci-
fied in Article 26(c) the electrical load thus added plus the
then existing load on the Contractor’s facilities will not exceed
the normal capacity thereof, as determined by the Contractor.
Deliveries that are inadvertently greater or less than require-
ments to serve the loads and customers of the United States
shall be corrected in later deliveries pursuant to Article 11.
(c) The electric power and energy to be delivered by the
Contractor to the United States and/or its customers pursuant
to this PART FOUR shall be limited to such electric power
and energy as is necessary for preference customers (as de-
fined in the Reclamation Law) and Federal establishments:
Defendant’s Answer (Ex. B) 25
1
i
26 Defendant’s Answer (Ex. B)
(1). Which have had monthly maximum demands of
100 kilowatts or more each for three consecutive months
in the twelve months immediately preceding the date on
which the Contractor is requested to commence service;
Provided, That reductions in the monthly maximum sys-
tem demand of any customer after delivery to such cus-
tomer commences hereunder shall not affect the obliga-
tion of the Contractor to continue delivery, and
(2) Which are located and use such power and energy
outside the corporate boundaries of municipalities where-
in the Contractor now serves at retail.
In view of the difficulty of anticipating future facts and con-
ditions, it is understood that if additional loads of the United
States or customers of the United States become prospective,
the parties hereto will then consider the problem of serving
such loads, and the Contractor will advise the United States
within ninety (90) days after request whether or not service
to such additional loads or customers shall be made available
hereunder.
PAYMENT FOR TRANSMISSION SERVICE
28. (a) The United States will compensate the Contrac-
tor for the transmission and delivery of electric power and
energy to the United States as provided in this PART FOUR,
subject to additional compensation as provided in Article 29,
in the amount of one mill ($0.001) per * * *
(Certificate of Service Omitted in Printing)
District Court Decision
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
SIXTH DIVISION
(Title Omitted in Printing)
MEMORANDUM & ORDER
Kenneth C. Anderson, William Jaeger and Barry McNeil,
Washington, D. C., attorneys for plaintiff.
Cyrus Field and David Lundeen, Fergus Falls, Minnesota,
attorneys for defendant.
In this action brought under Section 2 of the Sherman Act
the basic issue is whether the acts of Otter Tail Power Com-
pany, a Minnesota public utility, in refusing to sell electric
power at wholesale, and refusing to wheel electric power to
municipalitigs it formerly served at retail, constitute a monop-
olization of commerce in violation of the Act.
The Sherman Act, Section 2, provides:
Every person who shall monopolize, or attempt to
monopolize * * * any part of the trade or commerce
among the several states * * * shall be guilty of a mis-
demeanor * * *, 15 U.S.C. §2.
Under Section 4 of the Act the United States District Court
is vested with jurisdiction to restrain violations of the law.
15 U.S.C. §4. Plaintiff seeks such an injunction.
Defendant Otter Tail Power Company with headquarters
at Fergus Falls, Minnesota, is an investor-owned utility pri-
28 District Court Decision
marily serving small towns in western Minnesota and eastern
North and South Dakota. Its business is almost exclusively
retail. Its operation consists of an integrated power system
running the full gamut from initial production to final sale
of electrical power combined with pool arrangements which
supply emergency power reserves.
From time to time citizens of some of the municipalities
served by defendant have worked for the establishment of
municipally owned electric facilities. Otter Tail has opposed
such movements and has refused to sell power at wholesale,
or to “wheel”! power, to its former municipal customers who
have converted or who seek to convert to municipal systems.
Plaintiff claims this violates the Sherman Act. Defendant
asserts this is but the exercise of proper business judgment
aimed at protecting the integrity of its business.
The pleadings more particularly shape the issue. The gov-
ernment alleges that Otter Tail has sought to prevent the mu-
nicipalities from shifting local electric service from defendant
to other electric power systems, supplied either by Otter Tail
or another supplier of power, by the following acts:
1. By refusing and threatening to refuse to sell power at
wholesale to the proposed alternative local electric power
system;
2. By refusing and threatening to refuse to wheel electric
power from other wholesale suppliers to the proposed alterna-
tive local electric power system; and
3. By engaging in other activities designed to obstruct and
defeat the attempt by municipalities to establish alternative
local electric power system.
1 Wheel means to transport power for another supplier.
District Court Decision 29
Otter Tail specifically denies that it has done anything in
violation of Section 2 of the Sherman Act. In its Answer, para-
graph IV, it
“admits and alleges that it has refused to permit the
use of Otter Tail’s facilities (by furnishing either whole-
sale or wheeling service) to subsidize or support a new
municipal electric system which is constructed for the
purpose of ousting Otter Tail from the retail electric
business in that municipality. Otter Tail also admits and
alleges that it has attempted to use all reasonable means
to continue in business, and to continue to furnish ade-
quate and reliable service at reasonable rates at retail in
the municipalities which are served by its integrated
system, and in attempting to present its case that it is to
their advantage not to sever their connection with Otter
Tail’s system and service.”
The case was tried to the court June 1 through June 14,
1971. The parties stipulated to many of the facts. Plaintiff
called eleven witnesses, the defendant three. Several extensive
pretrial conferences preceded trial.
A summary of the facts essential to an understanding of
the issue follows:
Otter Tail was incorporated in Minnesota in 1910. Its ser-
vice area encempasses western Minnesota, northeastern South
Dakota and eastern North Dakota. The company’s integrated
system consists of approximately 5,900 miles of interstate
transmission lines which serve at retail, approximately 465
towns, mostly small communities of under 1,500 population.
In 1969 Otter Tail sold 1,158,329 kilowatts (Kw.) of power
to 103,829 customers, deriving a total operating revenue of
$31,191,000. Otter Tail had a net generation capacity of
271,145 Kw. in 1969.
30 District Court Decision
Otter Tail has entered into interconnection contracts with
other electric systems. These contracts provide means by
which the company can obtain power to supplement that pro- |
vided by its own generation and sell excess power to others.
One of Otter Tail’s interconnections is with the United States
Bureau of Reclamation. The relationship between the Bureau
and Otter Tail is reflected in a comprehensive agreement
which dates back to 1950. Pursuant to this contract, Otter Tail
purchases a considerable volume of dump and secondary
power from the Bureau.
Otter Tail is also directly interconnected with Minnesota
Power and Light, Northern States Power Company, North-
western Public Service Company, Montana-Dakota Utilities
Company, Minnkota Power Cooperative, Central Power Asso-
ciation, United Power Association and several smaller rural
electric cooperatives.
Generally speaking, Otter Tail provides retail service to
‘municipalities pursuant to franchise agreements awarded to
it by the city or town. By state law in each of the three states
the franchises are non-exclusive and, depending upon the
state, the franchise terms are limited to periods ranging from
ten to twenty years. The franchises customarily grant Otter
Tail the right to construct and maintain electric distribution
systems and necessary transmission lines, and operate these
within the regulations and provisions imposed by the munici-
pal government.
Otter Tail also regularly engages in the business of wheel-
ing power. A large proportion of Otter Tail’s wheeling activity
is done pursuant to its contractual relationship with the Bu-
reau of Reclamation. Beginning in the 1930’s Congress ap-
propriated funds for the construction of a series of hydro-
electric generation facilities along the Missouri River in
District Court Decision 81
Montana, North Dakota and South Dakota. The Bureau of
Reclamation of the Department of the Interior handles the
marketing of the power generated by the facilities. Congress
. mandated that public bodies, REA electric cooperatives and
municipal electric systems be designated as preference custom-
ers for this power; that is, that they be given first option to
purchase the power.
The Congress also appropriated funds for the construction
of high voltage transmission lines to transport Bureau power
from the hydroelectric sites to the areas where the power was
to be marketed.
In 1950 Otter Tail and the Bureau entered into the detailed
contract which provided, inter alia, for the sale of dump power
to Otter Tail and for the wheeling of Bureau power across
Otter Tail transmission lines to preference customers. The
Bureau pays a set. wheeling fee to Otter Tail for this service.
At the request of Otter Tail, a renewal contract dated June
14, 1955 contained language which, in the defendant’s view,
exempted it from any obligation to wheel power to towns
which it previously had served at retail. Otter Tail does wheel
power to 18 municipal preference customers which it has not
previously seryed at retail. More background facts will be
recited in connection with the court's consideration of the
issues.
The principal thrust of the government's case is that Otter
Tail has a monopoly on the retail distribution and sale of
power to towns in its operating area. It is not contended that
defendant acted illegally or improperly in achieving this
claimed monopoly position but rather in its actions seeking
to preserve this position. Specifically, it is urged that Otter
Tail's refusal to sell or wheel power to towns desiring to estab-
lish municipal systems, and its actions participating in local
32 District Court Decision
municipal power political campaigns, and sponsoring, encour-
aging, and financially supporting court litigation are all in-
tended to impede and frustrate attempts to establish indepen-
dent municipal electric systems.
Otter Tail does not deny its refusal to sell or wheel power
to municipalities which it formerly served at retail but argues
that to supply power to these municipalities would aid in its
own demise. It admits its participation in local municipal
political campaigns and in litigation surrounding attempts
to establish municipal systems but contends this is proper and
legal conduct. Such actions were taken, defendant argues, to
preserve the electric power free enterprise system for the
benefit of its customers, shareholders and employees.
Otter Tail denies that it has a monopoly, is attempting to
preserve a monopoly, or that it possesses a dominant share of
the pertinent market under Sherman Act principles. Defen-
dant points to the many other electric power entities operat-
ing in the same area, particularly the United States Bureau
of Reclamation, many electric cooperatives, Northern States
Power Company, and other private power sources, from one
or more of which electric power and the means of transmitting
this power are readily available to those municipalities which
defendant does not choose to serve.
Otter Tail finally urges a “Rule of Reason” and argues that
its conduct is fully justified by its legitimate right to fight for
its corporate life, remain viable in serving the public and pre-
vent the erosion of its integrated system and the impairment
of its credit.
A monopoly condemned by the Sherman Act is the power
to fix prices or exclude competition coupled with policies de-
signed to use or preserve that power. The United States Su-
preme Court in its most recent decision on the question, United
—
District Court Decision 33
States v. Grinnell Corp., 384 U.S. 568, 570, 86 S. Ct. 1698,
(1966), said:
The offence of monopoly under §2 of the Sherman Act
has two elements: (1) the possession of monopoly power
in the relevant market and (2) the willful acquisition or
maintenance of that power as distinguished from the
growth or development of a superior product, business
acumen or historic accident. 5
The two principal questions involved are: (1) Does Otter
Tail possess monopoly power, and (2) Has it sought to main-
tain that power?
The term relevant market consists of both a produet market
and a geographic market. Grinnell, supra. It is not disputed
here that the product market is the sale of electric power at
retail. Indeed more than 90% of Otter Tail’s income is from
retail sales.
There is dispute as to the definition of the geographic mar-
ket. The government contends that each of the 465 towns
served by Otter Tail constitutes a separate geographic market.
If this not be accepted, the government urges that the geo-
graphic market is, at least, the towns in the Otter Tail service
area.
There is some logical basis for considering each town a sep-
arate geographie market; but viewing it in a broader light,
there are, in the Otter Tail service area, 465 towns served by
Otter Tail and 45 towns served by municipal electric systems.
On this basis it may be concluded that Otter Tail services
approximately 91% of the relevant geographical market, cer-
tainly enough to justify the inference that the defendant
possesses monopoly power in the area.
| —
—
34 District Court Decision
There are also 105 towns served by rural cooperatives in
the Otter Tail service area. Because of congressional restric-
tions upon REA loans to cooperatives seeking to serve urban
areas, it is doubtful that the 105 towns could be viewed as
competitive and hence considered in determining Otter Tail’s
share of the total relevant market. But even if these 105 are
considered as part of the market, the result still has Otter Tail
serving 465 of the 615 towns in the area. This is 75.6 percent
of the relevant market. In our view this percentage is suffi-
cient to justify the inference that Otter Tail possesses monop-
oly power in the area.“
Having found that Otter Tail does possess monopoly power,
the second question is whether Otter Tail has sought to main-
tain that. power. A principal contention of the government is
that the defendant has been able to maintain this power be-
cause of its strategic dominance of transmission capacity in
most of the Otter Tail area.
Several map exhibits in evidence reflect a maze of electric
power lines covering, almost blanketing it would seem, the
entire Otter Tail service area. Defendant urges that its trans-
mission lines represent only 8% of the transmission lines of
all power suppliers in the area.
Evidence at trial showed that electric power lines fall into
three general categories:
(1) Bulk power supply lines, usually of a voltage of 115
Kv. or greater, which are intended to move large blocks of
power from generating facilities to load centers.
2(1) American Tobacco Co. v. United States, 328 U.S. 781, 66 S. Ct.
1125 (1946); (2) United States v. United Shoe Machinery Corp.,
563, 86 S. Ct. 1699 (1966); (4) United States v. E. I. du Pont de
Nemours & Co. (Cellophane), 351 U.S. 377, 76 S. Ct. 994 (1956).
District Court Decision 35
(2) Subtransmission lines, usually of a voltage from 34.5
Kv. to 69 Kv. These are utilized to move power from the bulk
power source to local retail distribution systems.
(3) Distribution lines, usually of a voltage of 12.5 Kv. or
less, which move the power from the subtransmission network
station to the ultimate consumer.
Most of the bulk supply lines in the Otter Tail area are
owned and operated by the Bureau of Reclamation. The Bu-
reau does not main its own subtransmission system but con-
tracts with Otter Tail, and others, to transmit the power from
bulk supply stations over their subtransmission lines to local
retail distribution systems whence it is stepped down for
delivery via distribution lines to customers.
About two-thirds of Otter Tail’s total electric line mileage,
or 4,036 miles, consists of 41.6 Kv. subtransmission lines. It
appears that Otter Tail is dominate in operation of subtrans-
mission lines in the area.
The contract between Otter Tail and the Bureau contains
a provision [Para. 27 (e) (2)] which Otter Tail interprets as
meaning that it need not wheel Bureau power over its sub-
transmission lines to its former retail customers. Otter Tail
refuses to do so, the Bureau does not have its own subtrans-
mission lines to use for that purpose and the transmission
lines of others are not readily available in the area sought to
be served. Hence many potential preference customers of the
Bureau, including municipalities, are unable to obtain Bureau
power because of the absence of available subtransmission
lines and the refusal of Otter Tail to wheel that power over
its lines. It is not economically feasible or practical for a
municipality to construct its own subtransmission lines.
In support of its argument that Otter Tail does not have a
dominance of transmission facilities, defendant showed at
36 District Court Decision
trial that 87,000 miles of electric power lines in the Otter Tail
service area are owned by various rural distribution electric
cooperatives. This testimony and other evidence established,
however, that most of these lines are of a voltage of 12.5 Kv.
and hence suitable only for distribution to the customer and
not for transmission, which requires a heavier voltage, in the
range of 34 to 69 Kv.
One of defendant’s witnesses at trial, Mr. Nye, testified that
the 12.5 Kv. cooperative lines in the vicinity of Elbow Lake
and Hankinson, (two municipalities here involved and con-
cerning which more will be said later) were not capable of
transmitting power to these towns.
Northern States Power Company (NSP) does distribute
retail power in some towns near ‘the Otter Tail service area
but it refuses to supply power to towns not in its own service
area. For this reason NSP refused to supply Alexandria, Min-
nesota, and Coleman, South Dakota. Hence NSP is not an
available power source for municipalities refused service by
Otter Tail and desiring to convert to municipal ownership.
We conclude that Otter Tail has a strategic dominance in
the transmission of power in most of its service area.
Much of the evidence at trial was directed to the claimed
employment of this dominance in transmission to prevent
municipalities in the area from obtaining power to operate
municipally owned systems. The testimony dealt principally
with five towns, Elbow Lake, Minnesota, Hankinson and Fin-
ley, North Dakota, and Colman and Aurora, South Dakota,
with the emphasis on happenings at Elbow Lake and Hankin-
son. A summary of events at each of these towns follows:
Elbow Lake, Minnesota, is a small county seat town near
Fergus Falls. Elbow Lake was served at retail by Otter Tail
until 1966 when the citizens voted for a municipally owned
District Court Decision 37
system. The defendant refused to furnish power at wholesale.
Elbow Lake acquired its own generating plant. It sought
stand-by power from Otter Tail which was refused. Litigation
ensued. The Federal Power Commission ordered the defendant
to furnish stand-by power. The Court of Appeals of the Eighth
Circuit affirmed. Otter Tail Power Co. v. Federal Power
Commission, 429 F. 2d 232 (8th Cir. 1970).
When Otter Tail refused to sell power to Elbow Lake, the
town sought power, either as a sole source or on a stand-by
basis, from the Bureau of Reclamation, the United Power
Association, the Basin Electric Power Cooperative and the
Runestone Electric Association.
Each of these sources was willing and able to furnish the
power, but could not, as the power could only be delivered to
Elbow Lake over Otter Tail’s transmission lines, because of
the restrictive provisions contained in the contracts between
Otter Tail and the suppliers previously discussed, and because
of Otter Tail’s refusal to wheel the power. It was, and is
economically unfeasible, for either Elbow Lake or the sup-
pliers to build the required transmission facilities from the
power source to Elbow Lake.
From all of the evidence, of which this is a short precis, the
court concludes that Otter Tail employed its dominance in
transmission in the Elbow Lake area to prevent Elbow Lake
from obtaining electric power from outside sources of supply.
Otter Tail served Hankinson, North Dakota, with electric
power under a 20-year franchise dated February 16, 1931. In
1947 the voters of Hankinson approved the establishment of
a municipal electric system. Otter Tail refused to sell power
at wholesale to Hankinson. The town sought power from the
United States Bureau of Reclamation, the Basin Electric
Power Cooperative and the RSR Electric Cooperatives. All
38 District Court Decision
three of these suppliers were dependent on the use of Otter
Tail’s transmission lines in transporting power from the near-
est Bureau substation at Forman, North Dakota, some 39
miles from Hankinson. Otter Tail refused to wheel power over
its lines to Hankinson. Again, it was not feasible for Hankin-
son to construct its own transmission lines 89 miles to Forman.
The Bureau was unable to do so for the same reason, with the
result that Otter Tail’s conduct prevented Hankinson from
obtaining needed power to service a municipally owned sys-
tem. The town abandoned its efforts and granted a new retail
franchise to the defendant.
On the basis of the above the court finds that defendant has
a monopoly in the relevant market and has consistently re-
fused to deal with municipalities which desired to establish
municipally owned systems on the alleged justification that
to do so would impair its position of dominance in selling
power at retail to towns in its service area. The court con-
cludes that this conduct is prohibited by the Sherman Act. It
is well established that the unilateral refusal to deal with an-
other, motivated by a purpose to preserve a monopoly position,
is illegal. Eastman Kodak Co. v. Southern Photo Materials Co.,
273 U.S. 359, 47 S. Ct. 400 (1927); Lorain Journal Co. v.
United States, 342 U.S. 148, 72 S. Ct. 181 (1951).
Here the defendant does not dispute that its purpose in
refusing to deal with municipalities desiring to establish
municipally owned systems is to protect itself in the position
it now enjoys in the area. Such is a monopoly position, and the
law prohibits conduct such as this when such is intended to
preserve the monopoly.
A similar “refusal to deal” case was decided in this district
in 1945, United States v. Klearflax Linen Looms, Inc., 63 F.
Supp. 32, 89 (D. Minn. 1945). There J udge Nordbye capsulized
‘ J
District Court Decision 39
the legal principle involved when he held that “A refusal to
sell, while it may be lawful per se, cannot be used in order to
achieve an illegal result.”
Here Otter Tail refuses to sell power to municipalities
which would thereby take retail power business from defen-
dant and refuses to wheel power for others willing to sell to
these municipalities. Because of its dominant position Otter
Tail is able to deprive towns of the benefits of competition
which would result from municipally owned facilities.
Pertinent to an examination of the law is a reference to
cases expressive of the “bottleneck theory” of antitrust law.
This theory reflects in essence that it is an illegal restraint
of trade for a party to foreclose others from the use of a scarce
facility. Here the theory finds application in Otter Tail’s use
of its subtransmission lines. One authority believes:
“The Sherman Act requires that where facilities cannot
practically be duplicated by would-be competitors, those
in possession of them must allow them to be shared on
fair terms.”*
This statement epitomizes the holdings in federal cases
which have established the principle: United States v. Termi-
nal Railroad Assoc., 224 U.S. 388, 32 S. Ct. 507 (1912); Gam-
co, Inc. v. Providence Fruit & Produce Building Inc., 194 F.
20 484 (1st Cir. 1952); Packaged Programs, Inc. v. Westing-
house Broadcasting Co., 255 F. 2d 708 (3rd Cir. 1958); Six
Twenty-Nine Productions, Inc. v. Rollins Telecasting, Inc.,
365 F. 2d 478 (5th Cir. 1966).
The bottleneck principle is applicable to Otter Tail. Its con-
trol over transmission facilities in much of its service area
‘A. D. Neale, The Antitrust Laws of the U.S.A., Cambridge Univer-
sity Press at 67 (1960).
40 District Court Decision
gives it substantial effective control over potential competition
from municipal ownership. By its refusal to sell or wheel
power, defendant prevents that competition from surfacing.
COURT LITIGATION
The efforts of Elbow Lake, Hankinson, Aurora and Colman,
South Dakota, to establish municipal power systems were
opposed by the defendant in court proceedings. Otter Tail
either instituted or sponsored and financially supported court
litigation which had the effect of frustrating the sale of reve-
nue bonds to finance the municipal systems. A “no-litigation
certificate,” reflecting the absence of litigation which might
impair the salability of revenue bonds, is essential to a suc-
cessful sale of municipal bonds. The pendency of litigation has
the effect of preventing the marketing of the necessary bonds
thus preventing the establishment of a municipal system.
Most of the litigation sponsored by the defendant was car-
ried to the highest available appellate court and although all
of it was unsuccessful on the merits,* the institution and main-
tenance of it had the effect of halting, or appreciably slowing,
efforts for municipal ownership. The delay thus occasioned
and the large financial burden imposed on the town’s limited
treasury dampened local enthusiasm for public ownership.
In some instances, Otter Tail made offers to the towns to ab-
sorb the towns’ costs and expenses, and enhance the quality
of its service in exchange for a new franchise. Hankinson,
after several years of abortive effort, accepted this type of
offer and renewed defendant’s franchise.
While every person has the right to resort to the courts to
redress claimed wrongs, the right is not without limitation.
One who enjoys a monopoly may not resort to litigation for
With the possible exception of litigation in Aurora where the court
held that Otter Tail had no standing to sue.
District Court Decision 5
the purpose of illegally maintaining the monopoly. The Nint
Circuit has observed that “* * * litigation can be an integr:
part of a scheme prohibited by the Sherman Act.” Truckin
Unlimited v. California Motor Transport Co., 432 F. 2d 75:
760 (9th Cir. 1970).
This legal principle is well established and has been ex
pressed in patent cases particularly in connection with th
institution of infringement suits. See Walker Process Equi
ment Inc. v. Food Machinery & Chemical Co., 382 U.S. 172
86 S. Ct. 347 (1965); Plastic Contact Lens Co. v. Butterfiela
366 F. 2d 388 (9th Cir. 1966); Kobe, Inc. v. Dempsey Pum;
Co., 198 F. 2d 416, 424 (10th Cir. 1952).
In Kobe, supra, the court said:
we must not permit the courts to be a vehi
cle for maintaining and carrying out an unlawful monop
oly which has for its purpose the elimination and preven
tion of competition.”
The court finds that the litigation sponsored by defendan
was instituted for the purpose of delaying and preventing th.
establishment of municipal electric systems with the expecta
tion that this would preserve its predominant position in th.
sale and transmission of electric power in the area.
Defendant urges that the so-called Noerr doctrine, Faster
Railroad Presidents Conference v. Noerr Motor Freight, Inc.
365 U.S. 127, 81 S. Ct. 523 (1961), exempts its conduct in the
field of court litigation from antitrust attack.
But the Noerr principle is applicable only to efforts aimed
at influencing the legislative and executive branches of the
government. It only immunizes political activity directed
toward the enactment and enforcement of the laws from anti-
trust attack. See Woods Exploration & Producing Co. v.
Aluminum Co. of America, 488 F. 2d 1286 (5th Cir. 1971), and
42 District Court Decision
Trucking Unlimited v. California Motor Transport Co., supra.
Noerr does not free from antitrust sanctions the institution
of court litigation.
From all of the evidence it appears that defendant, by refus-
ing to deal with municipalities and by conducting or sponsor-
ing court litigation, has violated Section 2 of the Sherman Act
and monopolized or attempted to monopolize the sale of elec-
trict power in its service area.
IMMUNITY AS A RESULT OF “VALID
GOVERNMENT ACTION” P
But Otter Tail takes the position that since it contrałted
with government agencies with reference to the delivery of
power, it is thereby immune from antitrust sanctions.
It will be recalled that Otter Tail’s agreement with the Bu-
reau of Reclamation contains a provision which defendant
interprets as freeing it from any obligation to wheel power
from the Bureau to any municipality which received retail
service from Otter Tail as of the date of the contract, that is,
June 14, 1955. Further, Otter Tail’s transmission agreements
with certain cooperatives (Cooperative Power Association,
Lyon-Lincoln Electric Cooperative, Inc. and Traverse Electric
Cooperative, Inc., RSR Electric Cooperative, Inc. and East
River Cooperative, Inc.) contain provisions which prohibit
the use of defendant’s transmission system to supply power
from the cooperatives to a retail customer served by Otter
Tail. These contracts also extend the same prohibition with
respect to customers served by the cooperatives.
It is urged by Otter Tail that these restrictive provisions
are immune from antitrust attack. The gist of this contention
seems to be that since the Bureau is a government instrumen-
tality and the REA administrator approved the contracts with
the cooperatives, the contracts are the result of “valid govern-
—
District Court Decision 43
mental action,” thus falling within the scope of Alabama
Power Co. v. Alabama Electric Cooperative, Inc., 394 F. 2d
672 (5th Cir. 1968).
In my view there is no merit in this contention. The Ala-
bama Power case is inapposite. The restrictive provisions
here are, in reality, territorial allocation schemes. Agreements
among competitors to allocate customers or territories are
per se violations of the Sherman Antitrust Act. Northern
Pacific Railroad v. United States, 356 U.S. 1, 78 S. Ct. 514
(1958). Our Eighth Circuit has held to the same effect. Mon-
tana-Dakota Utilities Co. v. Williams Electric Cooperative,
Inc., 263 F. 2d 481 (8th Cir. 1959). There the court condemned
a contract provision between an investor-owned utility and
a rural electric cooperative allocating marketing territories
as a per se antitrust violation. The court said:
By the great weight of authority in this country, the
rule has been promulgated and consistently applied that
contracts between quasi-public corporations, having for
their object the division of territory between such com-
panies, are against public policy, and being so, are abso-
lutely void, untempered by any application of the ‘rule
of reason.’ Montana-Dakota Utilities at 434.
A recent decision of the Court of Appeals for the District
of Columbia Circuit, Hecht v. Pro Football, Inc.,. F. 2d
—— (D.C. Cir. 1971) held that a public armory board, in
leasing a public stadium to a professional football team exclu-
sively for a period of 30 years, was not immune from the anti-
trust laws. rok
In Hecht, the court held that in order for antitrust immu-
nity to attach to action by à governmental body there must
be specific and unequivocal language to this effect in the en-
abling statute.
44 District Court Decision
“The basic philosophy of our antitrust policy has been
so long established, is of such recognized economic im-
portance, and has assumed in the statutory scheme of
things such high, dignity that a contrary Congressional
intent of ‘immunity from antitrust laws is not lightly
implied. Hecht at ——.
There is nothing in any of the legislation under which
either the Bureau of Reclamation markets its power or the
rural electric cooperatives operate which either expressly or
impliedly confers immunity from antitrust laws upon the
actions of the Bureau in negotiating contracts for sale of
power or upon the action of the REA administrator in approv-
ing contracts between a cooperative and a private power com-
pany.
The record reflects it was reluctantly, and only after a
‘determination that no other transmission facilities were avail-
able, that the Bureau signed the contract with defendant
which contained the restrictive provision in question. In addi-
tion, the Bureau interpretation of the contract varies from
that of the defendant. The Bureau officials were and are of
the view that the provision is not a blanket restriction but
requires the defendant to give separate consideration and to
reach separate judgment as to each applicant for transmission
service over defendant’s lines.
In order for antitrust immunity to attach in situations of
this kind there must be a clear indication that Congress, in
enacting the law, considered the competing interests of anti-
trust policies and whatever policy is best served by the other
competing interest, and expressed a clear judgment that the
antitrust policy should be suspended. There is no such showing
here. No antitrust immunity attached to the contracts or to
the parties executing them.
— —
District Court Decision 46
That which defendant refers to as the “heart of the case”
is its argument that if Otter Tail is required to sell power at
wholesale or wheel power to its former retail customers, it
will be contributing to its own corporate death because more
and more municipalities would then change to municipal own-
ership to obtain the cheaper Bureau power. Eventually, de-
fendant claims, most of its customers would convert and the
Otter Tail system would be eroded to the detriment of its cus-
tomers, stockholders and employees. This argument was
pressed hard by defendant and its president, Albert Hartl, who
testified vigorously and eloquently in defense of privately
owned utilities vis-a-vis public power interests.
Of course, it should be remembered that a public utility
which operates without exclusive franchises from its custom-
ers does not have a right to be free of competition. Rural
Electrification Administration v. Central Louisiana Electric
Company, 354 F. 2d 859 (5th Cir. 1966). This has long been
the law and extends to competition from municipally owned
facilities. Alabama Power Co. v. Ickes, 302 U.S. 464, 58 S. Ct.
300 (1938).
One principal purpose of the Sherman Act is to insure com-
pegtion. Otter Tail cannot violate the law albeit its avowed
purpose is to protect the integrity of its business.
The Supreme Court recently held that the Schwinn Bicycle
Company could not employ anti-competitive methods in order
to preserve its business which was gradually but markedly
going downhill. United States v. Arnold Schwinn and Co., 388
U.S. 365, 375, 87 S. Ct. 1856 (1967). The court said:
“The promotion of self-interest alone does not invoke
the rule of reason to immunize otherwise illegal conduct.”
So here there appears to be no legal justification for conduct
which violates the Sherman Act.
A so-called “erosion study” (DX 41) offered by defendant
* 7
46 District Court Decision
sought to fortell its financial disaster if it is required to serve
its former customers which convert to municipal operation.
The pessimistic view of the matter suggested by the defen-
dant is not supported by the record. The Bureau of Reclama-
tion now furnishes power to only two towns previously served
by Otter Tail, to wit, Colman and Aurora, South Dakota. El-
bow Lake also has an allocation of power for future use. The
Bureau’s generating capacity is now fully committed, it has
denied requests for allocation of power from several appli-
cants, including Sioux City and Aurelia, Iowa, and no new
generating capacity is scheduled to be activated. It is not un-
likely that some present Bureau customers will have to find
a continued power source elsewhere. All in all, it does not
appear that Bureau of Reclamation power is a serious threat
to the defendant nor that it will be in the foreseeable future.
But regardless, as stated, even the threat of losing business
does not justify or excuse violating the law.
The court finds from a preponderance of the evidence that
the defendant has attempted to monopolize, and has monop-
olized, interstate commerce in the retail distribution of elec-
tric power in violation of Section 2 of the Sherman Act.
NOW THEREFORE, the defendant and its agents are en-
joined from any and all conduct, whether expressed in terms
of contracts, policies, or practices, having the effect of contin-
uing the violations of the Sherman Act herein found to exist.
Plaintiffs’ counsel shall promptly present suggested detailed
Findings of Fact, Conclusions of Law and Order for Judgment
reflective of these expressions together with a form of Judg-
ment.
Dated: September 9, 1971.
EDWARD J. DEVITT
Chief Judge
United States District Court
District Court Findings and Conclusions 47
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
SIXTH DIVISION
(Title Omitted in Printing)
Kenneth C. Anderson, William Jaeger and Barry McNeil,
Washington, D. C., attorneys for plaintiff.
Cyrus Field and David Lundeen, Fergus Falls, Minnesota,
attorneys for defendant.
In this Section 2 Sherman Act case, tried to the Court June
1, 1971 through June 14, 1971, the Court makes Findings of
Fact and Conclusions of Law in supplement of its Memoran-
dum and Order of September 9, 1971, as follows:
I. JURISDICTION
1. This is an action brought by the United States under
Section 4 and Section 2 of the Sherman Antitrust Act (15
U.S.C. 88 4, 2).
2. Otter Tail Power Company (hereinafter “Otter Tail’),
an investor-owned electric utility, is a corporation organized
and existing under the laws of the State of Minnesota, with
its principal place of business in Fergus Falls, Minnesota.
[Ans., part I]. It maintains offices, transacts business and
may be found within the District of Minnesota, Sixth Division
[Ans., part I].
3. Otter Tail is engaged in interstate commerce within the
meaning of Section 2 of the Sherman Act. Otter Tail engages
in the generation, transmission and distribution of electric
power and energy for municipalities, rural customers, rural
electric cooperatives and investor-owned utilities located gen-
48 District Court Findings and Conclusions
erally in western Minnesota, eastern North Dakota, and north-
eastern South Dakota. Otter Tail, an integrated transmission
system, delivers power across state lines to customers through-
out this tri-state area. [Ans., part I]. 44% of Otter Tail’s
customers are located in Minnesota, 46% in North Dakota and
10% in South Dakota. [DX 95, Schedule 2].
II. DESCRIPTION OF OTTER TAIL
POWER COMPANY
4. Otter Tail operates an integrated electric system. Its
generating stations are linked together and connected to its
customers by an extensive network of transmission lines over
which power is delivered to its customers. [Ans., part I; Hartl
Tr. VI; p. 123]. In 1970 Otter Tail operated generating units
with a net generation capacity of 272,245 kilowatts; its 1969
capacity was 271,145 kilowatts. [GX 426, p. 23]. In 1970 Otter
Tail’s transmission system consisted of 5,992 miles of line of
varying voltages. [GX 426, p. 22].
5. In 1970 Otter Tail sold 1,321,998,594 kilowatt-hours
(kwh) of electric power to 104,316 customers, for which it
received total electric revenue of $34,153,292. [DX 95, Sched-
ule 1]. In 1969 Otter Tail sold 1,158,379 kwh of electric power
to 103,829 customers from which it received total electric
revenue of $31,191,000. (GX 426, p. 22]. Otter Tail’s electric
revenues have steadily increased since the company’s incep-
tion in 1907. During the decade 1960-1970 Otter Tail’s reve-
nue from the sale of electric power and energy increased from
$19,945,762 to $34,153,192, an increase of approximately 70%
[DX 95, Schedule 1].
6. Otter Tail’s electric system is physically interconnected
with other electric suppliers, including privately owned utili-
ties, rural electric cooperatives, the Bureau of Reclamation
—
District Court Findings and Conclusions 49
é
(hereinafter “Bureau”) and municipal electric systems. These
interconnections permit Otter Tail to purchase electric power
to supplement that provided by its own generation as well as
to sell and wheel power to the other electric systems, and they
provide à means to increase reliability of service. [Hartl Tr.
VI; pp. 123-125].
7. There are 14 interconnections between Otter Tail’s elec-
tric system and that of the Bureau. [GX 443]. The Otter Tail-
Bureau interconnections provide a means for Otter Tail to
purchase electric power and energy from the Bureau. Otter
Tail has purchased substantial amounts of electric power and
energy from the Bureau each year beginning in 1955. In 1970
Otter Tail purchased 274,042,381 kilowatt-hours of electric
energy from the Bureau at a total cost of $1,242,533.49. [GX
2, p. 4; GX 211, p. 24].
8. Otter Tailisa chartgg member of the Upper Mississippi
Valley Power Pool which consists of 18 electric power sup-
pliers located in several different states. The pool coordinates
the planning of new generation and transmission and provides
a means for the members to sell power to each other [GX 23
through GX 37]. Otter Tail is also a charter member of Mid-
Continent Area Power Planners (MAPP), an organization
consisting of 54 utilities operating in ten states in the Upper
Midwest. The purpose of MAPP is to plan and coordinate the
scheduling and construction of production and transmission
facilities in the ten-state area. [Hartl Tr. VII; pp. 8-9]. Otter
Tail has willingly coordinated and interconnected its electric
facilities with those of other electric utilities through separate
agreements with other electric suppliers. [Hartl Tr. VII; p.
9].
50 District Court Findings and Conclusions
III. CHRONOLOGY OF EVENTS IN TOWNS
WHICH ATTEMPTED TO ESTABLISH
MUNICIPAL ELECTRIC SYSTEMS
A. Elbow Lake, Minnesota
9. Elbow Lake renewed Otter Tail’s franchise to serve the
village on July 30, 1940 for a twenty year term. [GX 85).
10. At a special election on September 2, 1949 the voters
of Elbow Lake approved establishment of a municipal electric
system by a vote of 452 Yes and 180 No. [GX 2, p. 2].
11. On March 1, 1950, the Village Council accepted the
bids of several companies to supply the equipment for and
eonstruet the municipal electric system, including the bid of
Fairbanks, Morse & Company to supply the diese] generators
which would supply the power for the proposed municipal
electric system. [GX 87, p. 9].
12. On March 29, 1950, Otter Tail advised Elbow Lake
that it would not sell its distribution system in the village.
[GX 86].
13. On April 24, 1950, the Village Council passed a resolu-
tion approving the issuance and sale of $275,000 in revenue
certificates to finance construction of the municipal electric
system, and set May 16, 1950 as the deadline by which interest-
ed parties had to submit bids to purchase them. [GX 87, p.
12].
14. On May 12, 1950, Otter Tail, and three Elbow Lake
residents filed a suit against Elbow Lake seeking to enjoin
the sale of the revenue certificates and the construction of the
municipal electric system. The complaint alleged, inter alia,
(1) that the engineer’s proposal for construction of the mu-
nicipal system contained specifications and designs which
were too vague, indefinite and restricted as to preclude compe-
titive bidding; (2) that the bids accepted and the contracts
District Court Findings and Conclusions 51
* negotiated pursuant to the engineer’s proposal were therefore
null and void; (8) that Elbow Lake acted illegally in negotiat-.
ing a contract covering the purchase of a watt-meter because
the lowest responsible bidder was not chosen; (4) that El
Lake acted illegally in accepting the bid for the generating
equipment inasmuch as only one company submitted a bid; x
and (5) that the revenue certificates did not contain language
sufficient to protect Elbow Lake from general liability in the
event the Village failed to perform acts agreed upon under
the terms of the certificate. [GX 87].
15. On May 13, 1950, the court issued a temporary re-
straining order against Elbow Lake. [GX 88].
16. On September 11, 1950, the trial court ruled in favor
of Elbow Lake and dissolved the temporary restraining order.
The court specifically ruled that (1) the engineer’s specifica-
tions did not limit competitive bidding, (2) all contracts en-
tered into were proper and legal, and (3) the revenue certifi-
cates contained protective language sufficient to shield the
Village from general liability on the certificates. [GX 89].
17. Otter Tail appealed the trial court’s decision, and on
June 22, 1951 the Supreme Court of Minnesota unanimously
affirmed the trial court’s decision. The Court specifically re-
jected Otter Tail’s argument, holding that (1) a municipality
is not bound under state law to accept the lowest bid sub-
mitted, but rather is bound to accept the lowest responsible
bid which involves considerations of quality, suitability and
price; (2) there was ample evidence supporting Elbow Lake’s
contention that the engineer’s specifications were drawn 80
as to allow competitive bidding; (3) the Village did not act
improperly in accepting the only submitted bid for generating
equipment; and (4) the revenue certificates did not create a
general liability of the Village. [GX 90].
if
$2 District Court Findings and Conclusions
18. On September 8, 1952, Otter Tail offered to pay Elbow
Lake $14,000 to reimburse the Village for the expenses in-
curred in its effort to establish a municipal system, on condi-
tion that Elbow Lake abandon its efforts to establish a munic-
ipal system and sign a new street light contract. The same day
the Village Council accepted this settlement offer. [GX 295].
19. On June 6, 1960, Otter Tail requested the Village Coun-
cil to grant Otter Tail a new franchise and sign a new munici-
pal service contract. The Council refused to approve the new
franchise and Otter Tail’s franchise to serve Elbow Lake ex-
pired on July 30, 1960. [GX 296, p. 1; GX 2, Schedule A, p.
231.
20. On September 5, 1961, the Village Council retained
K. B. Mac Kichan & Associates (MacKichan) to prepare an
engineering feasibility study of a municipal electric system
in Elbow Lake. [GX 296, p. 4]. On November 24, 1961, Mac- ö
Kichan submitted its engineering report to the Village Coun-
cil. The report concluded that a municipal electric system
would be feasible and economical and analyzed eight possible
power supply arrangements, seven of which involved either
buying the Otter Tail distribution system in the village or
purchasing power at wholesale from Otter Tail or having
Otter Tail wheel power from the Bureau of Reclamation to
the village. The eighth alternative was that the Village con-
struct its own generation and build a new distribution system.
[GX 299].
21. Warren Nye, Vice President of Otter Tail, analyzed
the MacKichan report and informed the company’s district
manager in Elbow Lake’s area that the first seven power sup-
ply arrangements need not be considered because they re-
quired the cooperation of Otter Tail, thus leaving only the
eighth alternative of construction of both a generating plant
and a new distribution system by Elbow Lake. [GX 101].
District Court Findings and Conclusions 53
22. On December 4, 1961, Otter Tail distributed a circular
to the residents of Elbow Lake which criticized the MacKichan
report. The circular further stated that Otter Tail would not
sell power at wholesale to the town, that the town would have
to construct a transmission line and other facilities costing
up to $1,000,000 to receive power from the Bureau of Reclama-
tion and that the only way Elbow Lake could get power for
a municipal electric system would be to build a generating
plant. [GX 111].
23. On December 22, 1961, the Village Council scheduled
a special election for January 23, 1962 to decide whether to
issue $715,000 of electric revenue certificates to finance con-
struction of a municipal generation and distribution system.
[GX 296, p. 5]. At the special election on January 28, 1962,
the citizens of Elbow Lake approved a municipal electric sys-
tem by a vote of 538 to 160. [GX 296, p. 7; GX 2, p. 2].
24. On February 17, 1962, Elbow Lake asked Otter Tail
whether the company would discuss the sale of its distribution
system in Elbow Lake and discuss the sale of power at whole-
sale to the Village. On February 26, 1962, Otter Tail responded
that it had no interest in selling its distribution system to the
Village nor would it sell power to Elbow Lake on a wholesale
basis. [GX 91, GX 92].
25. On September 4, 1962, the Village Council approved
the plans and specifications for the municipal power plant and
the electrical distribution system prepared by K. B. Mac-
Kichan & Associates, and set October 1, 1962 as the date for
receipt of construction bids. [GX 296, p. 15].
26. On October 1, 1962, three companies submitted bids
to construct the electric distribution system and two com-
panies submitted bids to construct the municipal power plant.
On October 5, 1962, the Village Council awarded the contract
54 District Court Findings and Conclusions
to construct the electric distribution system to Northolt Elec-
tric Company and awarded the contract to construct the mu-
nicipal power plant to en Morse & Company. [GX
296, pp. 17-19].
27. On October 10, 1908, the ne Counsll ned a
resolution calling for the issuance and sale of $670,000 of
electric revenue certificates, and setting October 30, 1962 as
the date for receipt of bids on the bonds. [GX 296, p. 20; GX
106, p. 61.
28. On Oetober 29, 1962, Otter Tail and A. L. Anderson
filed a lawsuit against the Village of Elbow Lake, the mem-
bers of the Village Council, K. B. MacKichan & Company,
Fairbanks, Morse & Company, and Northolt Electric Company
seeking to enjoin the constructidn' of the municipal electric
system and the issuance and sale of the electric revenue cer-
tificates. The complaint alleged, inter alia, that (1) the plans
and specifications for the municipal electric system were il-
legal because they restricted competitive bidding, (2) certain
bids accepted by the Village did not conform with the plans
and specifications, and (3) the prospectus for the sale of the
bonds contained material misrepresentations. [GX 105].
29. Asa result of Otter Tail’s lawsuit filed the day before,
no bidders appeared before the Village Council on October 30,
1962 to bid for the revenue certificates. [GX 296, p. 21].
30. On August 8, 1963, the trial court dismissed Otter
Tail’s lawsuit against Elbow Lake. The court held, inter alia,
that (1) the contracts negotiated by Elbow Lake were in all
respects proper and ſegal; (2) Elbow Lake exercised proper
business judgment in accepting and awarding bids and (3)
the plans and specifications were sufficiently precise to afford
a proper basis for competitive bidding and were in all respects
reasonable and proper. [GX 106].
District Court Findings and Conclusions *
31. On February 20, 1964, the trial court entered a jude
ment dismissing Otter Tail’s complaint against Elbow Lalhe
On March 7, 1964, Otter Tail filed notice of appeal with t
Minnesota Supreme Court. [DX 48, p. 1]. al,
82. On May 4, 1964, during the pendency of the appeor
Mr. Hartl of Otter Tail made a settlement offer to the Mayn
and Village Council to the effect that Otter Tail would rein,
burse the Village for all expenses incurred by it in connect
with the municipal power project, install a new white w
system, improve all other street lighting, make available t 3
most favorable municipal pumping rate, and withdraw fro *
litigation pending with the Village on condition that Elbe sal
Lake grant Otter Tail a new franchise and sign a municip
services contract. [GX 98]. The Village rejected the offer.
33. On July 8, 1964, the Bureau of Reclamation allocat:
205 KW of firm power to Elbow Lake. Elbow Lake had a?”
plied to the Bureau for an allocation on August 5, 1963. [G
t
259; GX 214]. On August 5, 1964, Elbow Lake requested th
the Bureau allot the Village more power, but on Septemb |
18, 1964, the Bureau advised the Village that the Bureau h:
no additional firm power available. [GX 260; GX 2611.
34. On December 14, 1964, the Mayor of Elbow Lake ask
the Bureau whether the Village could compel either Ott“
Tail or Runestone Electric Cooperative to wheel power fro”
the Bureau to the Village and whether the Bureau would
at its expense, a transmission line to deliver Bureau pow”
to the Village. [GX 262]. On December 28, 1964, the Bure?”
responded and advised the Mayor that the Bureau would ack
Otter Tail to wheel Bureau power to the Village once the pla as
for the municipal electric system were firmed up. The Bureau
also advised the Village that the Bureau had no wheeling con
tract with Runestone Electric Cooperative. Finally, the Bu-
56 District Court Findings and Conclusions
reau stated that to provide loop service to Elbow Lake would
require construction of 113 miles of transmission line and
that the Village would have to pay a major part of the costs
to construct the line and associated facilities. [GX 263].
85. On February 5, 1965, the Minnesota Supreme Court
unanimously affirmed the trial court’s dismissal of Otter
Tail’s lawsuit against Elbow Lake. The court specifically held
that (1) a municipality has the right to tailor engineering
specifications to fit the community’s needs and there was no
evidence that the specifications were based on favoritism or
fraud; (2) the evidence indicated that several manufacturers
produced equipment meeting the specifications, and if they
did not bid, it had to be presumed that they could not meet the
competitive price; (3) the bid submitted by Fairbanks, Morse
& Company embodied a sufficient warranty so that the bid
complied with the plans and specifications; (4) the plans and
specifications were sufficiently definite to permit competitive
bidding and were legal and proper, and (5) there were no
material misrepresentations in the prospectus. [GX 106A—
Decision reported in 270 Minn. 262, 133 N. W. 2d 5111].
36. The lawsuit filed by Otter Tail against Elbow Lake
on October 29, 1962, delayed establishment of the municipal
electric system in the village by two and one-half years.
37. At the Village Council meeting on February 9, 1965,
Otter Tail’s district manager presented a settlement proposal
to the Council similar to the offer made by Mr. Hartl to the
Village on May 4, 1964. The Village Council rejected the offer.
He also advised the Council that Otter Tail would take no fur-
ther legal action against the proposed municipal electric sys-
tem. He further stated that Otter Tail would not sell power
at wholesale or wheel power to the Village. [GX 296, p. 33].
District Court Findings and Conclusions 57
38. On February 25, 1965, the Bureau advised Otter Tail
that it had allocated power to Elbow Lake and was exploring
ways of delivering power to the Village. The Bureau asked
whether Otter Tail had sufficient excess capacity in its trans-
mission system to permit it to wheel Bureau power to Elbow
Lake. [GX 264].
39. On February 26, 1965, Mr. Hartl of Otter Tail repeated
his settlement offer to the Mayor and Village Council. The
offer was identical to the one Otter Tail had made on May 4,
1964 with the addition of an offer to place a three man area
line crew in Elbow Lake and to construct an area service build-
ing in the Village. [GX 95].
40. On March 8, 1965, Ulteig Engineers, a consulting en-
gineering company, submitted, at the request of Otter Tail,
a report to the Village Council which recommended that the
Village reconsider its decision to proceed with a municipal
electric system and examine the benefits of continued retail-
service from Otter Tail. Otter Tail paid Ulteig for the prepara-
tion of the report. [GX 434; Hartl Depo. GX 287, pp. 280-81].
41. On April 6, 1965, the Village Council received bids for
the purchase of $670,000 of revenue bonds to finance construc-
tion of the municipal electric system. The bid of E. J. Prescott
& Co. was accepted. Otter Tail representatives at the meeting
were asked whether Otter Tail would file any more lawsuits
against the Village and they responded that Otter Tail would
use any legal means to protect its investment in the Village.
[GX 296, p. 26; GX 104].
42. On April 14, 1965, Otter Tail responded to the Bureau’s
request to wheel power to Elbow Lake. Otter Tail asserted
that Section 27 of the Bureau-Otter Tail contract prohibited
the use of Otter Tail’s transmission facilities to wheel power
to a town served at retail by Otter Tail. [GX 265].
58 District Court Findings and Conclusions
48. On May 5, 1965, Elbow Lake informed the Bureau
that it would soon start construction of its municipal electric
system and asked what needed to be done to deliver the Vil-
lage’s allocation of Bureau power. [GX 267]. On May 27, 1965,
the Bureau informed Elbow Lake that Otter Tail had refused
to wheel Bureau power to the Village and thus the Bureau
could not enter into a power service contract with Elbow Lake
because no method of delivering the power to the Village had
been found. [GX 268; GX 269].
44. On July 8, 1965, Elbow Lake asked United Power Asso-
ciation, (UPA), a generation and transmission cooperative
located in Elk River, Minnesota to furnish electric service to
Elbow Lake. [GX 297]. On July 16, 1965, UPA informed Otter
Tail of Elbow Lake’s request for power, and stated that UPA
would not serve Elbow Lake without Otter Tail’s consent and
help in delivering the power because UPA had no transmis-
sion lines in the Elbow Lake area. [GX 107]. On July 23, 1965,
Otter Tail advised UPA that it would not be in the best inter-
ests of the electric power industry to use Otter Tail’s trans-
mission facilities to wheel power to Elbow Lake. [GX 108].
On August 10, 1965, UPA advised Elbow Lake that it was un-
able to make the arrangements with other parties necessary
to deliver power to the Village. [GX 298].
45. On March 16, 1966, Elbow Lake filed an application
with the Federal Power Commission for an interconnection
with the Otter Tail system. [GX 84, p. 6—Stipulation # 13].
46. In June 1966 construction of the municipal electric
system in Elbow Lake was completed. The system was sup-
plied with power from an isolated generating plant in Elbow
Lake which has no interconnection with Otter Tail’s system.
[GX 84, pp. 5-6—Stipulations + 10 and 11].
7
District Court Findings and Conclusions 59
47. On June 17, 1966, Elbow Lake advised the Bureau
that the municipal electric system was operational and re-
quested an extension of its allocation of Bureau power. On
November 25, 1966, Elbow Lake again asked the Bureau for
an extension of time to enter into a power contract with the
Bureau. The Bureau granted an extension to June 30, 1967.
[GX 271, 278, GX 274].
48. On December 7, 1966, Elbow Lake, at the suggestion
of the Federal Power Commission staff trying to settle the
FPC litigation between Elbow Lake and Otter Tail, again
asked Otter Tail whether the company would negotiate to sell
power at wholesale to the Village. On December 18, 1966, Ot-
ter Tail repeated its refusal to sell power at wholesale or wheel
Bureau power to Elbow Lake. [GX 96; 97].
49. On April 28, 1967, Basin Electric Power Cooperative,
in response to a request for power from Elbow Lake, advised
the Village that Basin would sell power at wholesale to Elbow
Lake. Basin stated that it could only deliver power at the near-
est Bureau substation from which point Elbow Lake would
have to arrange to have the power wheeled to its system. [GR
304]. On May 3, 1967, Elbow Lake informed Otter Tail of
Basin’s wholesale sale offer and requested Otter Tail to wheel
the power to the Village. On May 11, 1969, Otter Tail again re-
fused to wheel any power to Elbow Lake. [GX 305; GX 98].
50. On April 26, 1968, Elbow Lake asked the Department
of Interior to request Runestone Electric Cooperative (Rune-
stone) of Alexandria, Minnesota, which had a substation near ;
Elbow Lake, to wheel Bureau power to the Village. On May
17, 1968, the Department of Interior advised Elbow Lake that
the Bureau would investigate the possibility of delivering pow-
er to Elbow Lake through the Runestone system. [GX 276,
GX 277]. a
60 District Court Findings and Conclusions
51. On June 5, 1968, the Bureau again asked Otter Tail
whether it would wheel power to Elbow Lake. On August 28,
1968, Otter Tail again notified the Bureau that it would not
wheel power to Elbow Lake. [GX 278, GX 279].
52. On June 18, 1968,,the Bureau informed Elbow Lake
that Otter Tail’s consent was necessary before Runestone
could wheel Bureau power to Elbow Lake, because Runestone
purchased its power from Cooperative Power Association
(CPA) which in turn bought a large block of power from the
Bureau. The Bureau emphasized that Bureau power delivered
to CPA for Runestone had to be wheeled over Otter Tail's
transmission lines. [GX 282].
53. On June 18, 1969, the Bureau asked Runestone whether
it could arrange to wheel Bureau power to Elbow Lake. On
July 22, 1968 Runestone advised the Bureau that a provision
of the integrated transmission agreement between Otter Tail
and Cooperative Power Association [GX 22] required that
Otter Tail had to give its consent before Otter Tail’s transmis-
sion facilities could be used to wheel power to a customer
which Otter Tail served at retail on or after January 13, 1966.
Runestone conveyed the same information to Elbow Lake on
August 19, 1968. [GX 281, GX 344, GX 345].
54. On September 24, 1968, the Bureau advised Elbow
Lake that the Bureau was unable to secure a means to deliver
Bureau power to the Village, and that Otter Tail still refused
to wheel. [GX 284].
55. On November 22, 1968, Runestone advised Elbow Lake
that the only impediment preventing Runestone from wheeling
Bureau power to Elbow Lake was the provision in the trans-
mission agreement between Otter Tail and Cooperative Power
Association, Runestone’s supplier, which required Otter Tail’s
consent before Otter Tail’s transmission facilities could be
se
District Court Findings and Conclusions 61
used to serve a customer which had been served by Otter Tail
on or after January 13, 1966. [GX 346].
56. On October 1, 1970, Elbow Lake again asked Rune-
stone to discuss possible delivery of power to the Village. On
October 6, 1970, Runestone informed Otter Tail of Elbow
Lake’s request and asked whether Runestone could negotiate
to deliver power to Elbow Lake despite the fact that previous
requests had been turned down on the basis of the provision
in the Otter Tail-Cooperative Power Association contract. Mr.
Hartl orally notified Runestone that Otter Tail would not
answer its request. [GX 347, GX 348; Perino Tr. II, p. 1021].
57. On March 29, 1971, Basin Electric Power Cooperative
renewed its offer to sell power at wholesale to Elbow Lake at
a rate higher than that offered in 1967. Basin also told Elbow
Lake first to attempt to secure power at wholesale from the
utility which would have to wheel Basin’s power to the Village,
namely Otter Tail. [GX 306].
58. Elbow Lake did not intend to build its own generating
plant unless it was unable to obtain power from any other
source. [Martinson Tr. I, pp. 118-119].
59. The proceeding before the Federal Power Commission
commenced by Elbow Lake on March 16, 1966 to obtain an
interconnection with Otter Tail is still continuing. The Com-
mission has completed phase 1 of the proceeding and has or-
dered an emergency interconnection between Otter Tail and
Elbow Lake’s municipal electric system. Otter Tail appealed
the Commission’s ruling which was affirmed by the Eighth
Circuit Court of Appeals in Otter Tail Power Company v.
Federal Power Commission, 429 F. 2d 232 (8th Cir. 1970),
cert. denied, 91 S. Ct. 923. On September 13, 1971, the Com-
mission Ordered Otter Tail to make a permanent interconnec-
tion with Elbow Lake.
62 District Court Findings and Conclusions
B. Hankinson, North Dakota
60. Otter Tail obtained a 20 year franchise to distribute
electric power at retail in Hankinson on February 16, 1931.
[GX 115].
61. On May 19, 1947 the voters in Hankinson approved
the establishment of a municipal electric system. [GX 2, p.
2]. No municipal system was developed and Otter Tail con-
tinued to serve the town at retail.
62. Hankinson did not renew Otter Tail's franchise when
it expired on February 16, 1951. [GX 84, p. 7, Stipulation
# 16).
63. On January 7, 1963 the City Council appointed a com-
mittee to investigate the feasibility of establishing a municipal
electric system to serve Hankinson. [GX 311, pp. 9-10]. On
August 12, 1963 the City Council retained North Central
Engineers to prepare an engineering feasibility study of a
municipal electric system. The report was submitted to the
City Council on September 26, 1963 and concluded that a
municipal electric system in Hankinson was economically
feasible. [GX 315-316; GX 311, pp. 13-15; GX 84, p. 7, Stip-
ulation # 19]. * f
64. On September 30, 1963 Hankinson applied for an al-
location of power from the Bureau of Reclamation. [GX 248,
pp. 2-3].
65. On October 7, 1963 the City Council passed a resolu-
tion to schedule an election for October 22, 1968 to vote on the
question of whether the City should issue $190,000 of electric
revenue bonds to finance construction of a municipal electric
system. [GX 314, pp. 2-4]. a
66. On October 11, 1963 Otter Tail informed the mayor
of Hankinson that Otter Tail would not under any circum-
stances wheel power for Hankinson, for Central Power Elec-
tric Cooperative or for the Bureau of Reclamation for delivery
to Hankinson, that Otter Tail would not supply wholesale or
standby or supplemental power to Hankinson, and that Otter
Tail would not sell its distribution system in Hankinson under
any circumstances, [GX 117]. On October 15, 1968 Otter Tail
told the mayor of Hankinson that the engineering feasibility
report had several erroneous assumptions, including one that
Otter Tail would sell power at wholesale. [GX 119].
67. On October 22, 1968 the residents of Hankinson ap-
proved the establishment of a municipal electric system by
a vote of 442 to 211, and approved the issuance of $190,000
of electric revenue bonds to finance it by a vote of 440 to 213.
[GX 311, pp. 16-18; GX 2, p. 21.
68. In 1963 Otter Tail owned the only subtransmission
lines near Hankinson. The Bureau had a high voltage 230 kv
bulk power supply transmission line approximately 39 miles
from Hankinson at Forman, North Dakota. Otter Tail had a
substation at Forman and two subtransmission lines running
from Forman eastward past Hankinson. One of these was a
41.6 subtransmisison line which was connected to another sub-
station adjacent to Hankinson which stepped the voltage down
for retail distribution in Hankinson. [GX 206; GX 316, pp.
6.9].
69. RSR Electric Cooperative is a distribution cooperative
and a member of Central Power Electric Cooperative, a gen-
eration and transmission cooperative. In 1968 RSR had a sub-
station located on Otter Tail’s transmission line about two
miles from Hankinson to which Otter Tail wheeled power
pursuant to a wheeling contract between Otter Tail and Cen-
tral. RSR Electric Cooperative could not supply wholesale
power or wheel power to Hankinson without using Otter Tail’s
64 District Court Findings and Conclusions
transmission lines. [GX 206; GX 348; GX 816, p. 7; GX 41-47;
Belinsky Tr. II, pp. 97-98].
70. In October 1963 Hankinson applied for an allocation of
power from the Bureau. On November 5, 1968 the Bureau
advised Hankinson that it would study possible methods of
delivering power to the city. [GX 248-249].
71. On October 28, 1963 Hankinson asked RSR Electric
Cooperative to supply power to the proposed municipal electric
system. On November 19, 1963 RSR offered to deliver power
to Hankinson if the town were successful in establishing its
own municipal distribution system. [GX 335].
72. On November 27, 1963 Hankinson asked Otter Tail
whether it would discuss the possible sale of its distribution
system to the city and the termination of its existing street
lighting contract with the city, and whether it would wheel
power to the city. On December 4, 1963 Otter Tail advised
Hankinson that it would not sell its distribution system in
Hankinson, would not wheel power, and saw no reason to
terminate the street lighting contract. [GX 120, GX 121].
78. On January 24, 1964 Central Power Electric Coopera-
tive completed a study of possible methods for RSR Electric
Cooperative to supply power at wholesale to Hankinson. The
study concluded that the best method was to have power
wheeled over Otter Tail’s lines to RSR’s substation near Han-
kinson, because construction of a 39 mile radial line to connect
with the Bureau’s transmission line at Forman, North Dakota
would result in poor service reliability, and because the con-
struction of transmission lines to connect with any other power
supplier was not economically feasible. [GX 334].
74. On February 17, 1964 the City Council passed a reso-
lution to hire Maeir & Tompt Engineers to design a municipal
electric system. [GX 311, pp. 23-26].
District Court Findings and Conclusions 65
75. On April 20, 1964 Allison-Williams Company, an in-
vestment banking company hired by Hankinson in connection
with the expected sale of the electric revenue bonds, advised
Hankinson that the bonds could not be sold until the city
entered into a firm contract with a supplier of wholesale
power. [GX 336].
76. On May 14, 1964 Hankinson asked RSR Electric Co-
operative to serve the town at wholesale and furnish the city
with a proposed contract for such service. [GX 336].
77. On May 19, 1964 RSR requested Central Power Electric
Cooperative to increase its power delivery to RSR so it could
supply power at wholesale at Hankinson. On May 28, 1964
Central advised RSR that it would ask Otter Tail to increase
the capacity of RSR’s substation near Hankinson, but that
Otter Tail probably would not wheel power for RSR if it was
to be used to supply power at wholesale to Hankinson. [GX
337, GX 333]. .
78. On May 28, 1964 Central advised Otter Tail that RSR
desired Lo increase the capacity of its Hankinson substation
and asked if this was permissible under the wheeling contract
between Central and Otter Tail. [GX 122].
79. On June 8, 1964 Otter Tail asked Central whether the
proposed increase in substation capacity would be used to serve
Hankinson. On June 10, 1964 Central notified RSR of Otter
Tail’s question. [GX 123-124].
80. On June 24, 1964 RSR notified Central that the increase
in substation capacity related to long range plans for service
in the area and was necessary because RSR’s system was
overloaded. On July 14, 1964 Central forwarded this explana-
tion to Otter Tail. [GX 338, GX 124].
81. On July 24, 1964 Otter Tail advised Central that the
company suspected that RSR intended to supply power to
66 District Court Findings and Conclusions
Hankinson, and since Otter Tail served the city it would not
agree to the increase in substation capacity. [GX 125].
82. On July $1, 1964 Central advised RSR that Otter Tail
would not agree to increase the substation capacity if RSR
used it to supply power to Hankinson, so RSR would have to
make other transmission arrangements if it wanted to supply
power at wholesale to Hankinson. [GX 332].
88. On July 8, 1964 the Bureau made an allocation of
power to Hankinson. [GX 250; GX 214, p. 3].
84. On August 7, 1964 the Bureau asked Otter Tail to add
the Hankinson load to the wheeling notice which the Bureau
had sent to Otter Tail with service to Hankinson expected to
commence in July 1965. [GX 2511.
85. On September 30, 1964 Otter Tail advised the Bureau
that Otter Tail would not wheel Bureau power to Hankinson,
and that Article 27 (e) (2) of the transmission agreement be-
tween the Bureau and Otter Tail limited Otter Tail’s obliga-
tion to wheel only to towns which were not served at retail
when the contract was signed. [GX 253].
86. On December 16, 1964 the Bureau advised Otter Tail
that Article 27 specifically provided that the parties would
attempt to negotiate a wheeling arrangement for any prospec-
tive Bureau preference customers, and again requested Otter
Tail to wheel power to Hankinson. On March 5, 1965 Otter Tail
responded to this request by repeating its refusal to use its
transaction lines to serve a town already receiving service
from Otter Tail. [GX 254-255).
87. On January 6, 1965 Hankinson’s City Attorney met
with Otter Tail officials and Otter Tail’s attorney to discuss
the methods of delivering power to the proposed municipal
system in Hankinson then being considered by the city. Otter
Tail indicated that the Bureau-Otter Tail transmission con-
———
j
/
District Court Findings and Conclusions 67
tract limited Otter Tail’s obligation to wheel only to towns
which were not served at retail when the contract was signed
in 1955, and that the transmission agreement between Otter
Tail and Central Power Electric Cooperative was not intended
to permit Central to take away an existing customer of Otter
Tail. Otter Tail’s attorney stated that the fact that Hankinson
had become a member of Basin Electric Power Cooperative
had no significance because there was no way to transmit
power from Basin to the town. He further noted that the
Bureau could not build a transmission line to serve Hankinson
because it would require a congressional appropriation and
was economically impractical, and that the Rural Electrifica-
tion Administration was prohibited by law from loaning money
to a cooperative to build a line to serve a town already receiv-
ing central station service. [GX 126-127].
88. On February 23, 1965 Hankinson’s Bond Counsel ad-
vised the mayor that he could not issue a legal opinion neces-
sary to sell the revenue bonds, because Otter Tail’s refusal to
wheel prevented the town from obtaining power which would
be the source of revenue for the municipal system. He also
noted the possibility of litigation with Otter Tail esos would
prevent sale of the bonds. [GX 357].
89. On March 29, 1965 Central Power Electric Cooperative
advised Otter Tail that RSR Electric Cooperative had entered
into a contract to sell power at wholesale to Hankinson, and
asked whether Otter Tail would wheel the additional amount of
power to RSR’s substation near Hankinson. Central noted
that Otter Tail had previously stated that it had sufficient
transmission capacity in its lines to transmit the power to
RSR’s substation. [GX 331, p. 2; GX 128].
90. On April 14, 1965 Otter Tail advised Central that Otter
68 District Court Findings and Conclusions
Tail would not wheel power to enable RSR to take away a
town being served by Otter Tail. [GX 294].
91. On April 30, 1965 Central’s manager notified his board
of directors that the Rural Electrification Administration
would not approve a long term contract for RSR to supply
power at wholesale to Hankinson. On November 26, 1965 the
Rural Electrification Administration informed RSR that it
could not approve the proposed wholesale contract with Han-
kinson because there was no way to deliver power to the town.
[GX 330; GX 342].
92. On August 2, 1965 the City Council unanimously
passed a resolution to purchase from the Bureau the power
allocated to the city, to request the Bureau to build a 39 mile
transmission line from its nearest substation at Forman,
North Dakota, and to request the Bureau to increase the allo-
cation of power to the city. The resolution noted that Otter
Tail had refused to wheel power to the city and that the REA
had disapproved the proposed contract for RSR Electric Co-
operative to sell power at wholesale to Hankinson. {GX 311,
pp. 27-28; GX 312].
93. On August 12, 1965 Hankinson asked Otter Tail to
provide information as to wholesale sales by Otter Tail to
municipal systems, and asked whether Otter Tail would nego-
tiate with the city regarding a wholesale sale. On August 16,
1965 Otter Tail advised Hankinson that it would not negotiate
to make a wholesale sale to the city. [GX 129-130].
94. On October 14, 1965 the Bureau advised Hankinson
that it was impractical for the Bureau to build a 39 mile trans-
mission line from Forman to Hankinson, and that the Bureau’s
power commitment to the city was contingent upon arranging
transmission of the power to the city. [GX 256].
—
Distriet Court Findings and Conclusions 69
95. On January 5, 1966 Hankinson filed a complaint with
the North Dakota Public Service Commission seeking to com-
pel Otter Tail to provide wholesale service and to wheel power
to the city. On December 30, 1966 the Commission ruled that
it lacked jurisdiction to grant the relief requested. [GX 181;
GX 140]. a
96. On February 1, 1966 Hankinson filed a complaint with
the Federal Power Commission seeking an order to compel
Otter Tail to wheel power to the town. [GX 1321.
97. On July 25, 1966 Roy P. Anderson, and others, filed a
complaint in the state court against Hankinson and the City
Council to enjoin the Council from spending city funds for the
proposed municipal electric system (hereinafter referred to as
the “Taxpayers Suit”). The complaint alleged, inter alia, that
(1) expenditure of funds by the City Council to establish a :
municipal electric system was illegal, because state law bro-
hibited a municipality from paying for a municipal electric :
system with funds obtained by taxation, and (2) expendityre 4
of funds by the City Council to compel Otter Tail to sell POwer :
at wholesale or wheel power to Hankinson was illegal, becauge
state law prohibited a municipality from leasing transmission q
facilities without first obtaining the permission of the ele. to.
rate. [GX 133].
98. Otter Tail employees met with the Taxpayers Com1, jt_
tee which brought the aforesaid lawsuit against Hankin, on
and stated that Otter Tail would absorb legal expenses incur red ;
by the Committee. Otter Tail paid approximately $1,500 of ine :
attorneys’ fees for the lawsuit against Hankinson and the s sub-
sequent appeal to higher courts. [Hartl Tr. VIII: pp. 9001;
Nygard Depo. GX 289, pp. 34-35]. :
99. The court in the Taxpayers Suit issued a tempor, ;
restraining order against Hankinson but this was vacated 4
70 District Court Findings and Conclusions
August 25, 1966, because plaintiffs had not presented the
requisite bond. On October 14, 1966 the court issued a tempo-
rary injunction and on January 27, 1967 the court issued a
permanent injunction enjoining the city from spending any
city funds for a municipal electric system. [GX 134-138].
100. Hankinson appealed the trial court’s ruling, and on
April 8, 1968, the North Dakota Supreme Court reversed the
trial court, dissolved the permanent injunction and dismissed
the action. [GX 189].
101. The Taxpayers Suit delayed establishment of the pro-
posed municipal electric system over a year and a half.
102. On July 15, 1968, by a 4-8 vote, the Hankinson City
Council voted to dismiss the city’s complaint against Otter
Tail filed with the Federal Power Commission and to dismiss
the civil antitrust suit the City had filed against Otter Tail
in federal district court in North Dakota. [GX 311, p. 40;
GX 84, Stipulation #29].
108. On August 5, 1968 Otter Tail made an offer of settle-
ment to the Hankinson City Council. Otter Tail offered to pay
Hankinson for all unpaid attorney’s fees owed by the city, all
electrical engineering fees incurred by the city relating to the
municipal electric system, and any litigation expense the city
might incur in determining the amount of these fees, on con-
dition that the City grant Otter Tail a ten year franchise to
serve the City. [GX 141; GX 84, Stipulation #28].
104. Hankinson accepted Otter Tail’s settlement offer,
awarded Otter Tail a 10 year franchise effective on Septem-
ber 4, 1968, and notified the Bureau that the City no longer
needed its allocation of power. [GX 311, pp. 42-43; GX 84,
Stipulation #29; GX 257].
District Court Findings and Conclusions 71
C. Colman, South Dakota ;
105. Otter Tail had distributed electric power at retail in
Colman since 1941 when Otter Tail acquired the distribution
system by merger with another company. [GX 84, p. 12—
Stipulation #30].
106. Otter Tail's franchise to distribute electric power at
retail in Colman expired on October 31, 1959 and was not re-
newed by the town. [GX 144; GX 84, p. 12—Stipulation #31).
107. In 1959 Colman applied for and received an allocation
of 500 kilowatts of power from the Bureau of Reclamation.
[GX 214, p. 5; GX 810, p. 5). .
108. On December 11, 1959, Colman retained Buell & Win-
ter Engineering Company to prepare an engineering feasibility
study of a municipal electric system in Colman. [GX 309, p. 1;
GX 84, p. 12—Stipulation #34].
109. On January 29, 1960, Buell & Winter asked Otter
Tail's local district manager whether Otter Tail would sell its
retail distribution system to Colman and would sell power at
wholesale to the city. After discussing the request with the
general office, the district manager on February 5, 1960
advised the Mayor of Colman that Otter Tail would not sell its
distribution system, and that Otter Tail was primarily in the
retail distribution business, but did make some wholesale
sales of power. [GX 145, GX 146, GX 147].
110. On March 15, 1960, Buell & Winter asked Northern
States Power Company (NSP), whether it would sell power at
wholesale to Colman. NSP had a transmission line some 4 or 5
miles from Colman. On March 25, 1960, NSP informed the
Mayor of Colman tliat it could not offer to sell power at
wholesale to Colman, because the city was outside of NSP’s
service area and was being supplied with electric power at
—
72 District Court Findings and Conclusions
retail by Otter Tail. [GX 800; GX 301; Spethmann Tr. II,
p. 51.
111. On April 5, 1960 Buell & Winter submitted its engi-
neering report which concluded that a municipal electric sys-
tem in Colman was economically feasible. [GX 809].
12. On August 2, 1960, Colman’s City Attorney asked
Otter Tail whether it would sell its local distribution system
to Colman. On August 3, 1960, Otter Tail declined to sell its
distribution system to Colman. [GX 148; GX 149].
113. On November 21, 1960, the City Council passed Ordi-
nance #48 which provided for the construction of a municipal
electric system and the issuance of $95,000 of electric revenue
bonds to finance it, and scheduled a special election to vote on
the Ordinance for December 13, 1960. [GX 310, p. 14]. At the
special election the voters approved Ordinance #48 to estab-
lish a municipal electric system by a vote of 229 to 53. [GX
310, p. 15; GX 84, p. 18—Stipulation #39].
114. On May 1, 1961, the City Council passed a resolution
authorizing sale and delivery of the $95,000 of electric revenue
bonds and set June 1 1961 as the date for receipt of bids on
the bonds. [GX 310, p. 17].
115. On May 8, 1961, the City Council set June 15, 1961
as the date for receipt of bids to construct the municipal
electric system. [GX 310, p. 18].
116. On May 29, 1961, Otter Tail and Eugene Fritz, a
resident of Colman and an employee of Otter Tail, filed a
lawsuit in the local circuit court against Colman seeking to
enjoin the city from negotiating and selling the electric reve-
nue bonds, from establishing a municipal electric system, and
from awarding any contracts for the construction of the munic-
ipal electric system. [GX 150; Hartl Depo. GX 287, pp. 180-81].
be
District Court Findings and Conclusions 73
117. On June 1, 1961 two investment banking institutions
submitted bids to purchase the electric revenue bonds, but
Otter Tail’s lawsuit made it impossible to accept a bid and
consummate the sale. [GX 310, p. 19]. On June 15, 1961, six
construction companies submitted bids to construct the munic-
ipal electric system and the City Council accepted the lowest
bid of Knox Construction Company. On June 24, 1961, Colman
notified Knox Construction Company that it had to reject the
company’s bid because of the pending lawsuit brought by
Otter Tail. [GX 310, p. 20; Gx 308].
118. On June 15, 1961, Otter Tail and Eugene Fritz filed
an amended complaint in the lawsuit against Colman alleging,
inter alia, that (1) Ordinance #48 was void because certain
pre-election requirements had been disregarded; i.e., suffi-
cient notice of the election; (2) the sale of revenue bonds
would be illegal, because there was no assurance that the mu-
nicipal system could be constructed and operated within the
authorized amount of $95,000; (3) the sale of bonds would
be illegal due to material variances between the language of
Ordinance #48 and the language of the bond resolution; and
(4) the engineer’s plans and specifications did not form a
proper basis for competitive bidding. [GX 151].
119. October 21, 1961, the trial court dismissed Otter
Tail’s complaint against Colman and on J anuary 15, 1962 Otter
Tail filed notice of appeal to the Supreme Court of South
Dakota/ [GX 152; 153].
120. On November 27, 1962, the Mayor of Colman advised
the Bureau that Colman expected to utilize its allocation of
firm power within 12 months, and on February 11, 1963 the
bureau advised Colman that its allocation of 500 kilowatts was
being held for the town. [GX 287].
121. On May 9, 1963, the Supreme Court of South Dakota
74 District Court Findings and Conclusions
unanimously ruled in favor of Colman and specifically ruled
that the election approving Ordinance #48 was not invalid,
and held that a validating act passed by the South Dakota
Legislature in 1961 cured whatever procedural irregularities,
if any, had occurred. The 1961 Validating Act had been passed
by the South Dakota Legislature before Otter Tail filed its
complaint on May 29, 1961 although the Act actually went into
effect on July 1, 1961. [GX 154; Holten Tr. III, 18-19; the
decision is reported in 121 NW 2d 488 (1963)]. Otter Tail’s
lawsuit against Colman delayed the establishment of the mu-
nicipal electric system in Colman for two years.
122. On June 14, 1968, Colman’s bond counsel advised the
City Attorney that before the revenue bonds could be sold,
Colman would have to furnish a certificate stating that no
litigation was pending. [GX 365].
123. On July 11, 1963, a group of Colman citizens filed
with the City Council an initiative petition calling for an elec-
tion to repeal Ordinance #48 which authorized issuance of
revenue bonds and construction of the municipal electric sys-
tem. [GX 160, GX 310, p. 26].
124. On or about July 18, 1963, Otter Tail began to replace
many of its existing poles in the city with taller poles. Otter
Tail did not consult with or notify the city officials in Colman
prior to installation of the taller poles in the town. Since the
new municipal electric distribution system had to be con-
structed next to Otter Tail’s existing distribution system
which it refused to sell to the town, the new distribution system
would either have to be put underground or built higher than
Otter Tail’s existing system in order to meet the clearance
requirements of the Electrical Safety Code. [Nye Depo. Gx
288, pp. 16-17, 21-22]. This would increase the cost of con-
structing the new system. On July 20, 1963 Colman filed a
District Court Findings and Conclusions 75
lawsuit against Otter Tail seeking to enjoin Otter Tail from
continuing with its pole replacement program in Colman. At
the time of the court hearing, Otter Tail discontinued installa-
tion of the taller poles so no written injunction was granted.
[GX 155; Nye Depo. GX 288, pp. 23-24].
125. On July 30, 1968, the City Council passed a resolution
refusing to act on the initiative petition, and approved the new
plans and specifications prepared by Buell & Winter Engineer-
ing Company. [GX 310, pp. 26-27].
126. On August 6, 1963, three of the citizens who signed
the initiative petition filed an application in the local circuit
court for a writ of mandamus against the City Council of
Colman, seeking to compel the Council to schedule an election
on an ordinance to repeal the approval of the municipal elec-
tric system. [GX 161]. Employees of Otter Tail suggested the
initiative petition procedure to the citizens in Colman who
signed it. Otter Tail drafted the initiative petition and the
subsequent action for a writ of mandamus. Otter Tail’s attor-
neys actively participated in the legal proceedings involved
including ‘the subsequent appeal to the Supreme Court of
South Dakota, and Otter Tail absorbed all the legal expenses
incurred in the proceedings. [GX 161-162; Brewer Depo. GX
291, pp. 15-16].
126. On August 18, 1963, Colman’s bond counsel advised
the city attorney that even though the mandamus proceeding
was not, in his opinion, meritorious, the litigation made it
impossible for the city to deliver the no-litigation certificate
which was required before the bonds could be sold. [GX 367].
127. On September 3, 1963, three companies submitted
bids to construct the municipal electric system, but the pend-
ing mandamus proceeding prevented the city from awarding
76 District Court Findings and Conclusions
the construction contract and selling the electric revenue bonds.
[GX 810, pp. 29-31].
128. On September 9, 1963, the circuit court denied the
application for a writ of mandamus, holding that the power
to initiate an ordinance rescinding a previous bond election
was created by legislation passed subsequently to the election
wherein Ordinance #48 was approved and, since the general
rule is that legislation operates only prospectively, the City
Council of Colman had no power to submit the proposed ordi-
nance to a vote of the electors. [GX 162-63].
129. On September 14, 1963, Colman’s city attorney noti-
fied Colman’s bond counsel that the writ of mandamus had
been denied and that two of the three petitioners had asked to
be withdrawn from the mandamus proceeding. He noted that
there was a four month period within which to appeal the
trial court’s decision and asked whether the revenue bonds
could be sold during this period. Bond counsel advised him
that the bonds could not be sold until the litigation had finally
ended. [GX 368, 369].
130. On November 13, 1963, petitioners filed an appeal to
the South Dakota Supreme Court in the mandamus proceeding.
[GX 164].
181. On September 8, 1964, the Supreme Court of South
Dakota unanimously affirmed the circuit court and denied the
writ of mandamus. The Court ruled that the election wherein
the Colman electors “emphatically and irrevocably” approved
Ordinance #48 was “valid and non-rescindable”, since it oc-
curred more than six months prior to the passage of the legisla-
tion enabling, under certain instances, municipalities to re-
scind previous bond elections. [GX 165—Decision reported
in 180 NW 2d 109 (S.D. 1964)]. The initiative petition and
the subsequent mandamus proceeding delayed establishment
District Court Findings and Conclusions 77
of the municipal electric system in Colman for over a year.
132. On September 14, 1964, Otter Tail’s Division Man-
ager-East proposed to the. City Council that, in exchange for a
new franchise to distribute electric power to Colman, Otter
Tail would absorb all the costs which the city had incurred in
connection with the proposed municipal system, including engi-
neering, legal and advertising expenses, would establish a
three man area line crew in Colman, would build a new garage
in Colman, and would rebuild and modernize the Otter Tail
distribution system in Colman. [GX 171; Gx 179-G]. In Octo-
ber, 1964, the Council rejected the proposal. [GX 310, p. 34].
133. On September 21, 1964 a petition for rehearing was
filed with the South Dakota Supreme Court in the mandamus
proceeding, but it was denied by the Court on October 9, 1964.
[GX 166-167].
134. On September 21, 1964 the City Council passed a reso-
lution accepting the bid of Gefke & Co. to purchase the $95,000
of electric revenue bonds and passed a resolution approving
the plans and specifications for construction of the municipal
electric system and set October 22, 1964 as the date for receipt
of construction bids. [GX 310, pp. 82-33].
135. On October 22, 1964 the City Council received bids
from three companies to construct the municipal electric sys-
tem and accepted the low bid of E. A. Pedersen Company.
[GX 310, pp. 35-36].
136. On or about June of 1965 the construction of the mu-
nicipal electric system had been completed and was in opera-
tion. Otter Tail dismantled and removed its retail distribution
system in Colman. [GX 84, p. 15, Stipulation #465].
137. The Colman municipal electric system receives power
at wholesale from the Bureau of Reclamation and the power is
wheeled to the town by East River Electric Cooperative and
78 District Court Findings and Conclusions
Sioux Valley Empire Electric Association. [GX 84, p. 15—
Stipulation #44].
D. Aurora, South Dakota
138. Otter Tail obtained a renewal of its franchise to sup-
ply electric power at retail in Aurora, South Dakota on Novem-
ber 28, 1951 for a 10 year term. [GX 180; GX 2, Schedule A,
p. 2]. Aurora did not renew Otter Tail’s franchise when it
expired on November 28, 1961. [GX 2, Schedule A, p. 2].
189. On March 26, 1963 Aurora retained the consulting
engineering firm of Smith & Sheen in Watertown, South Da-
kota to conduct a study of the feasibility of a municipal elec-
tric system in Aurora. [GX 139, p. 1].
140. On April 18, 1963, Mr. P. N. La Tourette, the local
District Manager of Otter Tail, informed Smith & Sheen that
Otter Tail would not sell its distribution system to Aurora,
would not sell power at wholesale and would not wheel Bureau
power to the town. [GX 182].
141. On August 12, 1963 the Town Board adopted Ordi-
nance #40 calling for the establishment of a municipal electric
system and the issuance of revenue bonds to finance it and
scheduled a special election on the Ordinance for September
10, 1963. [GX 318, pp. 21-24]. At the special election on Sep-
tember 10, 1963 the citizens of Aurora voted against the mu-
nicipal electric system by a vote of 56 “Yes” and 57 No.“ [GX
218, pp. 25-26; GX 2, p. 1]. “i
142. Aurora applied for and received an allocation of
power from the Bureau of Reclamation on July 8, 1964. [GX
214]. <A
143. In April, 1965, Smith & Sheen submitted a revised
feasibility report which concluded that a municipal electric
system was feasible in Aurora. [GX 320].
District Court Findings and Conclusions 79
144. On April 12, 1965, the Town Board of Aurora adopted
Ordinance #44 for the establishment of a municipal electric
system and the issuance of $40,000 of revenue bonds to finance
it and scheduled a special election for May 18, 1965. [GX 318,
pp. 32-35]. At the special election on May 18, 1965, the citizens
of Aurora approved a municipal electric system by a vote of
86 to 36. [GX 318, pp. 36-37; GX 2, p. 1].
145. On June 4, 1965, the Town Board passed resolution
#9 for sale of the $40,000 of revenue bonds to finance con-
struction of the municipal electric system, and authorized the
town Clerk to publish notices for bids on the sale of bonds to
be received by the Board on June 28, 1965 and for bids for
construction of the system to be received by the Board on
July 6, 1965. [GX 318, pp. 38-45].
146. On June 25, 1965, Otter Tail and three Aurora resi-
dents jointly filed a complaint seeking to enjoin the Town
Board from selling the bonds or proceeding with construction
of the proposed municipal system. [GX 186]. The complaint
alleged that the proceedings relating to construction of a
municipal system and sale of revenue bonds were illegal for
the following reasons: (1) there were material variances be-
tween Ordinance #44 approving construction of the municipal
system and the resolution passed by the town board which
described the terms for the sale of the revenue bonds; (2) the
“Anti-Competition Clause“ required to be contained in the
revenue bonds could not be fully complied with because Aurora
was required by contract to purchase its municipal electric
services from Otter Tail until December 5, 1970; (3) the elec-
tion approving Ordinance #44 was invalid in that the date of
the election was not in accord with the State statutes and
constitution; (4) sale of the revenue bonds. would be illegal
until it could be determined whether the municipal system
.
80 District Court Findings and Conclusions
could be constracted vithin the authorized amount of the
proposed revenue bo ; and (5) the specifications for con-
struction of the municipal system were improper and illegal
and did not furnish a proper legal basis for competitive bid-
ding. [GX 186].
147. On June 28, 1965, the Town Board received one bid
from the Brookings International Life and Casualty Company
for $17,500 of the revenue bonds. The Board rejected this bid
because it included only part of the proposed $40,000 issue.
[GX 318, p. 46].
148. On July 6, 1965, the Board passed resolution +10
which rescinded resolution #9, resolution #11 which pre-
scribed new terms and covenants for the sale of revenue bonds,
resolution #12 which provided for the sale of $40,000 of
revenue bonds and resolution #13 which authorized Aurora
to bid on its own revenue bonds. [GX 318, pp. 47-49]. “a
449. On July 6, 1965, the Board opened the two bids re-
ceived for construction of the municipal electric system:
Stake Construction Co. in Lennox, South Dakota for $41,001.65
and Lund Line Construction Co. in Gey, South Dakota for
$29,925.75. On August 2, 1965, the Town Board awarded the
construction contract to Lund Line Construction Company.
[GX 318, pp. 59-60, 62].
150. On August 2, 1965, the Town Board received two bids
on the new resolution for sale of the $40,000 of revenue bonds:
one from The Brookings International Life and Casualty Com-
pany for $20,000 and one from the Town of Aurora itself for
the remaining $20,000 to be purchased from its own surplus
funds. The Town Board accepted both bids and authorized the
Town Clerk to have the revenue bonds printed and prepared
for issuance. [GX 318, pp. 61-64]. :
District Court Findings and Conclusions 31
151. On August 10, 1965, Otter Tail and three Aurora
residents jointly filed an amended complaint seeking to enjoin
sale of the bonds and commencement of construction. The com-
plaint alleged additional grounds for invalidating the proceed -
ings relating to construction of the municipal system and sale
of revenue bonds, including allegations that (1) Resolution
No. 18 authorizing the Town to bid on its own revenue bonds
was invalid because it washultru vires and contrary to the
terms of Ordinance No. 44; (2) there were factual variances
between Resolution No. 12 which provided for sale of $40,000
of revenue bonds and Resolution No. 11 which specified the
terms of sale of the bonds; and (3) the Town Board was legally
required to reject certain received bids relating to the con-
struction of the system. [GX 188].
152. On August 19, 1965, Otter Tail was granted an inter-
locutory injunction, thereby halting proceedings to establish
the municipal electric system. [GX 189 and GX 1911.
153. On January 16, 1967, the trial court held that (1)
Otter Tail had no standing to sue in the aforesaid proceeding,
(2) that the election wherein Ordinance No. 44 was approved
was valid and legal and (3) that the Town of Aurora could not
buy its own revenue bonds. [GX 192 and GX 193].
154. On September 6, 1967, the Town Board retained
Ehlers and Associates, a financial consultant firm, to assist
in marketing the $40,000 of revenue bonds. [GX 318, p. 64].
On December 29, 1967 Ehlers informed Aurora that several
. factors, including the threat of another lawsuit by Otter Tail,
prevented sale of the electric revenue bonds. [GX 325].
155. On January 29, 1968, Aurora accepted the bid of
D & G Investment Company to purchase the $40,000 of revenue
ee
bonds. [GX 318, p. 71].
82 District Court Findings and Conclusions
156. On February 5, 1968, the Town Board directed the
town Clerk to publish a notice for construction bids to be
received on March 4, 1968. [GX 318, p. 76].
157. On February 28, 1968, eight residents of Aurora
filed with the Town Board an initiative petition asking for a
referendum to repeal Ordinance #44 which authorized the
issuance of revenue bonds and construction of the municipal
electric system which had been previously approved by the
voters on May 18, 1965. [GX 195].
158. On March 4, 1968 the Town Board rejected the initia-
tive petition and accepted the bid of Lund Line Company to
construct the municipal electric system. [GX 318, pp. 77-791.
159. On March 7, 1968 the signers of the initiative petition
requested a writ of mandamus from the local circuit court to
require the Town Board to show cause why they shoyld not
submit the referendum sought by the initiative petition to a
vote of the citizens. On March 8, 1968, the Circuit Court issued
a show cause order. [GX 196, GX 197].
160. Representatives of Otter Tail suggested the initiative
petition procedure to the citizens in Aurora who signed it.
Otter Tail attorneys drafted the initiative petition and the
subsequent action for a writ of mandamus. Otter Tail’s attor-
neys actively participated in the legal proceedings involved,
and Otter Tail absorbed all the legal expenses incurred in the
proceedings. [GX 196; GX 197; Brewer Depo. GX 291, pp. 5-8;
Hartl Depo. GX 287, p. 167). ,
161. On March 25, 1968, the Town Board, after it was
served with the writ of mandamus, scheduled a special election
for April 16, 1968 on the referendum to repeal approval of the
municipal electric system. [GX 318, p. 83]. At the election on
April 16, 1968, the referendum to repeal approval of the mu-
District Court Findings and Conclusions 63
nicipal electric system was defeated by a vote of 36 Yes and
105 No. [GX 318, pp. 84-85; GX 2, p. 1].
162. On April 19, 1968, the Town Board executed a con-
struction contract with Lund Line Company which proceeded
to build the municipal distribution system. [GX 818, pp. 84-
85].
163. On or about June 1, 1967, George Danforth, bond
counsel for the Town of Aurora, informed W. R. McCann,
attorney for Aurora, that the revenue bonds could not be sold
until all litigation and appeals were over because a no-litigation-
certificate was necessary in order to market the bonds. [GX
$52).
164. The municipal electric system in Aurora began opera-
tion in July 1968. [GX 318, p. 87; GX 2, Schedule A, p. 4].
165. Aurora’s municipal electric system purchases power
at wholesale from the Bureau of Reclamation. The power is
wheeled to the town by East River Electric Cooperative and
Sioux Valley Empire Electric Association. [Waples II: pp. 79-
81; GX 245; GX 246; GX 84, Stipulation 59].
166. The lawsuit brought by Otter Tail on June 25, 1965
and the subsequent initiative petition and mandamus proceed-
ing sponsored and paid for by Otter Tail delayed establishment
of the municipal electric system in Aurora for approximately
three years. [GX 244, GX 323, GX 326, GX 328].
E. Finley, North Dakota
167. r Tail’s franchise from the City of Finley expired
in 1958 and was not renewed. [GX 84, Stipulation +62].
168. On April 4, 1960 the voters approved the construction
of a new municipal electric system by a vote of 189 to 166. The
ballot in this election, however, did not contain a submission
of the question of issuing revenue bonds to finance construc-
RA District Court Findings and Conclusions
tion of the proposed municipal system. [GX 84, Stipulation
#69; GX 2, p. 21.
169. In June 1964 the City Council retained an engineer
to prepare a feasibility study of a municipal electric system;
and in September 1964 the engineer submitted a report to the
City Council which concluded that a municipal electric system
in Finley was economically feasible. [GX 84, Stipulation #65;
GX 292-J ; 292-K]. ‘
170. Finley is located in an area where electric suppliers
other than Otter Tail could economically wheel power to a
municipal system in the town. [GX 292-K; GX 206].
171. On November 17, 1964 the voters of Finley voted
against the establishment of a municipal electric system, and
Otter Tail continues to serve the town at retail. [GX 84, Stip-
ulation #69; GX 2, p. 2].
172. Prior to the election on November 17, 1964 Otter Tail
stationed a new three man area line crew in Finley to improve
service in the town. [GX 378, p. 5; Nygard Depo. GX 289,
pp. 25-26].
F. Velva, North Dakota
173. On March 8, 1967 Velva informed Otter Tail that the
city would not renew Otter Tail’s franchise when it expired on
June 3, 1967. [GX 419].
174. In January 1968 an engineering report was submitted
to the town which concluded that a municipal electric system
would be economically feasible in Velva. [DX 88].
175. Velva is located in an area where electric suppliers
other than Otter Tail could economically wheel power to a
municipal electric system in the town. [DX 93].
176. A group of Velva citizens in favor of a municpal
electric system petitioned the city council to submit the ques-
tion of whether Otter Tail should be granted a new franchise
—
Distriet Court Findings and Conclusions 85
to a vote and the question was put on the ballot for the regular
city election scheduled for April 2, 1968. [GX 184].
177. Prior to the election Otter Tail stationed a new area
line crew in Velva to improve service in the town. [GX 421,
p. 3], and agreed to enter into a new municipal service con-
tract with Velva which reduced the number of hours during
which Otter Tail charged the highest rate for municipal pump-
ing and other incidental uses. [GX 428, par. 111.
178. At the election on April 2, 1968 the electorate voted to
grant Otter Tail a new franchise by a vote of 346 to 215.
[GX 184].
179. In August 1968, Otter Tail installed new mercury
vapor lights in Velva for which Otter Tail charged the town
a rate lower than Otter Tail’s existing rate for a one year
trial period. [GX 424].
G. Municipal Power Elections in Other Towns Served at
Retail by Otter Tail. .
180. From 1945 through 1970 there have been elections on ;
the question of establishing a municipal electric system in 12 3
towns served at retail by Otter Tail, including Aurora, Col-
man, Elbow Lake, Hankinson, Finley and Velva. {GX 2,
pp. 1-3]. : .
181. The other six towns in which there were municipal .
power eleetions were Britton, South Dakota; Crookston, Min- 5
nesota; Milbank, South Dakota; Minneota, Minnesota; Wal- ;
‘ halla, North Dakota; and Wheaton, Minnesota. There were a
total of 11 elections on the municipal power issue in these six
towns at various times, all prior to 1955, and Otter Tail won
at least five of them. None of these towns established munici-
pal electric systems. [GX 2, pp. 1-3].
H. Towns Which Have Discontinued Receiving Electric Pow-
er at Retail from Otter Tail.
P
1
A — —
*
—
86 District Court Findings and Conclusions
a
182. Since 1945 nine towns have discontinued receiving
electric power at retail from Otter Tail. [GX 2, p. 3]. Three
towns—Georgetown, Minnesota, White Spur and Woodworth,
North Dakota—were sold voluntarily by Otter Tail to rural
electric cooperatives who were able to provide better service
to the towns. [GX 84, Stipulations #84-106]. Three towns
Dakota City, Sanish and Van Hook, North Dakota—went out
of existence. [GX 84, Stipulations # 73-76, 81-83]. Three
towns—Colman, Aurora and Elbow Lake—established munic-
ipal electric systems. [GX 84, Stipulations # 1-14, 30-45,
46-60].
IV. RELEVANT MARKET
A. Product Market
183. The relevant product market is the sale of electric
power at retail.
B. Geographic Market
184. Otter Tail sells electric power at retail in 465 towns
in its three-state service area. [DX 95, Schedule 1]. Otter Tail
provides retail service in these 465 towns pursuant to non-
exclusive franchises awarded by the towns to Otter Tail which
grant Otter Tail the right to construct, install and maintain
an electric distribution system in the towns for periods vary-
ing from 10 to 20 years. [Hartl Dep. GX 287, p. 19] Otter
Tail also distributes electric power at retail to certain farms
and other rural loads located outside the corporate limits of
these 465 towns, but these rural customers comprise less than
10% of the total retail customers served by Otter Tail. [GX
2, p. 8]. The sale and distribution of electric power at retail
in the 465 towns is Otter Tail’s principal source of electric
revenue. In 1970 Otter Tail received $31,065,517 from the
distribution of electric power at retail in these towns and lim-
ited rural areas. This comprised approximately 91% of Otter
__
District Court Findings and Conclusions 87
Tail’s total electric revenues of $34,158,292. [DX 95, Schedules
1 and 5].
185. Each town served at retail by Otter Tail constitutes
a separate relevant geographic market.
(a) Otter Tail distributes electric power at retail in
each municipality pursuant to a franchise granted by the
municipality for a limited period of time. Otter Tail operates
and maintains a separate distribution system in each mu-
nicipality in which it distributes electric power at retail.
[GX 85, GX 115, GX 144, GX 180; Hartl Dep., GX 287
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