City of Cleveland v. The Cleveland Electric Illuminating Company

734 F.2d 1157, 1984 U.S. App. LEXIS 22190
CourtCourt of Appeals for the Sixth Circuit
DecidedMay 24, 1984
Docket82-3053
StatusPublished
Cited by27 cases

This text of 734 F.2d 1157 (City of Cleveland v. The Cleveland Electric Illuminating Company) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
City of Cleveland v. The Cleveland Electric Illuminating Company, 734 F.2d 1157, 1984 U.S. App. LEXIS 22190 (6th Cir. 1984).

Opinions

WELLFORD, Circuit Judge.

The City of Cleveland appeals a jury verdict for Cleveland Electric Illuminating (“Cleveland Electric”) in this antitrust case. On July 1, 1975, the City sued Cleveland Electric and several other utilities, alleging that they combined to restrain trade, to monopolize and attempt to monopolize the electric power market in Cleveland and surrounding service areas in violation of sections one and two of the Sherman Act. 15 U.S.C. §§ 1, 2. After the other defendants settled out of the case, the City amended its complaint to charge Cleveland Electric with a section two violation only — monopolization and attempt to monopolize in the relevant market. The first trial ended in a hung jury, the re-trial resulted in a jury verdict for Cleveland Electric, and is the subject of this appeal, wherein the City alleges prejudicial and erroneous rulings by the trial court.

A complete recitation of the facts is unnecessary because this court has already published three decisions on interlocutory appeals in this case with ample factual discussion.1 A limited history will suffice. Municipal Electric Light Plant (Muny Light), the City’s utility company, and Cleveland Electric have long been competitors in the electric power business. Cleveland Electric began generating and distributing electric power in the Cleveland area in 1892. In 1906, the City entered the electricity business by purchasing small generating facilities in neighborhoods newly annexed to the City.

Direct competition between the utilities was sparked by the City’s construction of a power plant in 1911 and its offer of lower electric rates than Cleveland Electric’s. Until the 1930’s, Muny Light expanded rapidly, absorbing many of Cleveland Electric’s customers, because of its lower rates.

During the following two decades of coexistence, Cleveland Electric adopted and began to implement a policy of eliminating competition within its service area, generally by acquisition. Muny Light became a special target of its attention. In the mid-1960’s Muny began actively soliciting Cleveland Electric’s customers because its new, 85 megawatt generator gave it the capacity to absorb new business. In response to Muny’s expansion efforts, Cleveland Electric developed the “Muny Displacement Program,” a corporate policy of providing free rewiring services to customers who switched from Muny to Cleveland Electric service. Cleveland Electric also endeavored to reach a “coexistence” agreement with Muny, whereby Cleveland Electric would supply Muny with a dependable interconnection to Cleveland Electric’s power if Muny would raise its rates to Cleveland Electric’s level.

At this same time, Muny began to develop problems with its generators which prevented it from supplying reliable service to its customers. Muny’s generators, many of which were 25 to 50 years old, needed maintenance service, but no generator could be shut down for service because of the demand for power. Therefore, Muny sought Cleveland Electric’s cooperation to construct an interconnection enabling Muny to draw on Cleveland Electric’s generators. Muny needed the interconnection because its transmission system was completely surrounded by Cleveland Electric’s and because it would need to build 75 miles of high-voltage transmission lines just to [1161]*1161reach the other nearest available significant source of power. The utilities negotiated to establish an interconnection, either on a permanent basis or standby, from 1969 to 1972. In early 1973, Cleveland Electric received a direct order from the Federal Power Commission to interconnect, by means of a 138 kilovolt permanent interconnection. Even after the order, the parties disagreed over the type of the interconnection, as well as the costs for engineering and construction. Muny became seriously indebted to Cleveland Electric for past services, and by 1975 it owed almost $6,000,000.00.2 These disagreements further delayed the interconnection necessary to Muny’s survival as a power-generating utility. In the spring of 1972, a lawsuit by a third party, subsidized by Cleveland Electric, was filed challenging several aspects of the proposed interconnection.

Simultaneous with the interconnection negotiations, Muny was negotiating with the Power Authority of the State of New York (PASNY). Muny intended to purchase low-cost power from PASNY for distribution to its customers. To do this, Muny needed Cleveland Electric to “wheel” the power along its lines from the Pennsylvania border to Cleveland. Cleveland Electric refused. To add to Muny’s troubles and its desperate need for PASNY power, the boiler for its 85 megawatt generator exploded in 1974. The explosion was the culmination of a series of malfunctions due to poor maintenance.3 Muny attempted to repair the generator, but after spending several million dollars, it abandoned the effort. Muny ceased its power generating operations altogether in 1977.

At the time of the first trial, Muny’s service area was a thirty square-mile area in the City of Cleveland. Cleveland Electric’s transmission system completely overlapped with Muny’s and extended well beyond the borders of Cleveland. Within the overlapping service area, Muny served 43% of the customers and Cleveland Electric served 57%. Muny’s rates to private customers throughout its history have been lower than Cleveland Electric’s, while Cleveland Electric’s service has generally been better.

The City’s arguments on appeal, and Cleveland Electric’s responses, are complex and varied. In its first, and most significant complaint, the City charges that the trial judge erred when he refused to admit into evidence information about Cleveland Electric’s secret sponsorship of a lawsuit challenging the FPC’s 1972 order requiring Cleveland Electric to interconnect with Muny Light. Before the first trial, the parties stipulated that Cleveland Electric had, by means of an unnamed Cleveland law firm, induced one Charles Miller to file a taxpayer’s suit in the state court system to enjoin the FPC-ordered interconnection between Cleveland Electric and Muny Light. Cleveland Electric never revealed its sponsorship of this litigation, but paid Miller for his troubles and provided him with expert opinion testimony to back his claim. The state court initially granted a temporary restraining order to keep the City from making any payments on work in progress for the interconnection but did not enjoin the work itself. Two weeks later, after holding hearings on the matter, the court dissolved the restraining order and declined to issue a permanent injunction.

The City attempted to introduce the “Miller Stipulations” into evidence at the second trial to demonstrate Cleveland Electric’s anticompetitive intent to exclude Muny Light from the retail electric power market.4 The trial judge ruled the stipula[1162]*1162tions inadmissible on the basis of the Noerr-Pennington Doctrine. See Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961); United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965).

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Cite This Page — Counsel Stack

Bluebook (online)
734 F.2d 1157, 1984 U.S. App. LEXIS 22190, Counsel Stack Legal Research, https://law.counselstack.com/opinion/city-of-cleveland-v-the-cleveland-electric-illuminating-company-ca6-1984.