City of Malden v. Union Electric Co.

887 F.2d 157
CourtCourt of Appeals for the Eighth Circuit
DecidedOctober 6, 1989
DocketNos. 88-2129, 88-2399
StatusPublished
Cited by3 cases

This text of 887 F.2d 157 (City of Malden v. Union Electric Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
City of Malden v. Union Electric Co., 887 F.2d 157 (8th Cir. 1989).

Opinion

LARSON, Senior District Judge.

Plaintiff, the City of Malden, Missouri, appeals from the district court's 1 entry of judgment in favor of defendants Union Electric Company and its wholly-owned subsidiary, Missouri Utilities Company, in this antitrust action challenging defendants’ refusal to transmit power to plaintiff under a favorable tariff the city had negotiated with Missouri Utilities. Plaintiff claims the jury’s verdict in favor of defendants is against the great weight of the evidence, the trial court’s instructions to the jury were erroneous, and defense counsel’s prejudicial remarks in closing argument require a new trial. Plaintiff further contends it should have been awarded its attorney’s fees in connection with a motion for preliminary relief filed at the beginning of the litigation. We affirm.

I. FACTUAL BACKGROUND

Malden owns and operates its own electric generation system and distributes electricity to industrial, commercial, and residential customers in its southeastern Missouri service area. Malden does not have the generating capacity to meet all of its electrical needs. In 1969, Malden entered into an agreement to purchase electricity at a wholesale rate from Missouri Utilities to supplement its own generation facilities. [159]*159Missouri Utilities and Union Electric at that time owned the only transmission line which directly connected to the city of Mal-den, although Malden was surrounded by the service territories of rural electrical cooperatives and other municipal utilities.

Prior to October 1, 1979, the expiration date of Malden’s contract with Missouri Utilities, Malden inquired about the possibility of Missouri Utilities “wheeling” or transmitting power to Malden from another generation source.2 At that time, Missouri Utilities had never wheeled power to anyone and had no wheeling rate or billing provisions, but suggested wheeling would be a proper subject of negotiations.

While the parties attempted to agree to a new contract, Missouri Utilities continued to supply power to Malden under a “sales for resale” tariff known as the SFR-1. The SFR-1 rate included a “demand charge” to recover Union Electric’s demand charge to Missouri Utilities,3 a charge for recovering Missouri Utilities’ investments in transmission, and an energy charge for recovering the cost of purchased power and electrical losses. Malden incurred the demand charge only if it took power during peak periods. It could avoid the charge by generating its own power or by obtaining power from a different source during peak times. Malden’s contract with Missouri Utilities contained a “ratchet” feature, so that any demand charge remained in effect for the month in which it was incurred as well as for the eleven succeeding months.

In the negotiations for a new contract, Malden stated that it wanted off-peak power under the SFR-1 rate and wheeling service from SWPA to Malden. Missouri Utilities contended that wheeling in conjunction with the SFR-1 rate would not allow it to recover its costs, and in 1981 provided Mal-den with a proposed wheeling rate and two firm power prices. Malden chose to negotiate for continued service under the SFR-1 tariff, and requested an agreement which provided for an initial term of one year and which was terminable by either party with six months’ written notice. This agreement was signed in December, 1981, and was approved by the Federal Energy Regulatory Commission (FERC) on February. 16, 1982.

In 1983, Union Electric announced a proposed merger with its wholly-owned subsidiaries, including Missouri Utilities. In April, Malden again requested that SWPA power be wheeled as of January 1, 1984. Missouri Utilities responded that it would provide wheeling service, but not in conjunction with the SFR-1 rate. Negotiations continued, and in October, 1983, Union Electric sent Malden a draft agreement contemplating interruptible power and wheeling at rates for both pre- and post-merger services.

After receiving comments from counsel for Malden, a revised agreement was sent to Malden on November 4, 1983. That same day, Malden filed suit against Missouri Utilities and Union Electric, alleging the utilities’ refusal to wheel violated sections 1 and 2 of the Sherman Act and section 3 of the Clayton Act. On November 17, Malden filed a motion for a preliminary injunction requiring defendants to wheel electric power to Malden effective January 1, 1984. In late November, the parties agreed to file the proposed Novem[160]*160ber 4 agreement with FERC to allow the contract to go into effect as of January 1, 1984, subject to the city’s right to challenge the proposed interruptible rates. Because of this agreement, Malden’s motion for preliminary relief was neither heard nor ruled upon by the district court.

On December 19, FERC approved the merger of Union Electric and its subsidiaries effective January 1,1984, rejecting Mal-den’s challenge to the merger and noting the city could raise its concerns about rates when Union Electric proposed a rate change. In response to Malden’s request that approval of the merger be conditioned on Union Electric filing a general wheeling rate for the city, the agency stated simply that appropriate procedures and standards for requesting a compulsory wheeling order existed under sections 211 and 212 of the Federal Power Act, should such an order become necessary. Shortly after the merger became effective, Malden paid Union Electric for power based on an interrup-tible W-4 rate. At the time of trial, Mal-den was constructing its own interchange with the SWPA.

II. PLAINTIFF’S BOTTLENECK THEORY OF LIABILITY

The case went to trial based on Malden’s claim that the city was entitled to damages under section 2 of the Sherman Act4 for Missouri Utilities’ refusal to wheel power to Malden. Malden claimed Missouri Utilities had a “bottleneck” monopoly on transmission facilities and had refused to wheel power to Malden from Springfield, Missouri, from 1979 to 1983.

Under the “bottleneck” or essential facilities doctrine, those in possession of facilities which cannot practically be duplicated must share the facilities with their competitors on fair terms. Aspen Highlands Skiing Corp. v. Aspen Skiing Co., 738 F.2d 1509, 1519 (10th Cir.1984), aff'd on other grounds, 472 U.S. 585, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985); MCI Communications v. AT & T, 708 F.2d 1081, 1132 (7th Cir.), cert. denied, 464 U.S. 891, 104 S.Ct. 234, 78 L.Ed.2d 226 (1983); Hecht v. Pro-Football, Inc., 570 F.2d 982, 992-93 (D.C.Cir.1977), cert. denied, 436 U.S. 956, 98 S.Ct. 3069, 57 L.Ed.2d 1121 (1978); United States v. Otter Tail Power Co., 331 F.Supp. 54, 61 (D.Minn.1971), aff'd, 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359 (1973).

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887 F.2d 157, Counsel Stack Legal Research, https://law.counselstack.com/opinion/city-of-malden-v-union-electric-co-ca8-1989.