D'Augusta v. American Petroleum Institute

Opinion

ROSEMARY D'AUGUSTA, et al., Case No. 22-cv-01979-JSW

Plaintiffs, ORDER GRANTING MOTIONS TO v. DISMISS AND DENYING MOTIONS FOR LEAVE TO SUPPLEMENT THE et al., RECONSIDERATION Defendants. Re: Dkt. Nos. 85, 86, 108, 109 Now before the Court are the motion to dismiss filed by defendants American Petroleum Institute, Chevron Texaco Capital Corporation, Continental Resources Inc., Devon Energy Corporation, Energy Transfer LP, Exxon Mobil Corporation, Occidental Petroleum Corporation, Phillips 66 Company (collectively, “Defendants”) and the motion to dismiss filed separately by defendant Energy Transfer LP (“Energy Transfer”). Also before the Court are the motions filed by Plaintiffs for leave to supplement their complaint and for reconsideration of this Court’s order dated August 22, 2022, denying Plaintiffs’ request for leave to depose third-party witness, Jared Kushner. The omnibus motion to dismiss filed by Defendants is GRANTED without leave to amend and the motion to dismiss filed by Energy Transfer is GRANTED. Plaintiffs’ motion for leave to Plaintiffs, consumers of gasoline in the four years prior to filing suit, allege an antitrust conspiracy between the United States, Saudi Arabia, Russia, and Defendants. Plaintiffs allege that Defendants “agreed among themselves, and with Saudi Arabia and Russia, to cut the production of oil, to remove and store excess oil supply, to limit future exploration and production of oil, and to stop the price war that had erupted between Saudi Arabia and Russia, all for the purpose and with the intended effect to raise the price of oil and gasoline and other fuels in the United States and elsewhere.” (Complaint at ¶ 43.) Plaintiffs assert that the sovereign nations and Defendants formed their conspiracy as an integral part of a global settlement of a price war between Saudi Arabia and Russia. (Id. at ¶¶ 1, 7-9.) Omitting any reference to the onset of the Covid-19 global pandemic, Plaintiffs assert that the price war started in March 2020 after Russia repudiated a prior agreement with OPEC to limit oil production, Saudi Arabia retaliated by announcing plans to increase production, and Russia responded by also increasing production. (Id. at ¶¶ 7-9.) Plaintiffs allege that as prices for oil and gasoline continued to fall, Defendants agreed to cut their production and reduce new investment in exploration and production in an attempt to stem the price reductions. (Id. at ¶¶ 16, 18.) Plaintiffs allege that then-President Trump heralded the free market and praised the reduction in oil prices and then, after contact with some of the Defendant oil companies, agreed to meet with them to discuss the price war. (Id. at ¶¶ 20-22.) Plaintiffs allege that discussion with some Defendants, Trump sought agreement with Saudi Arabia and Russia to stop the price war and then met with the Defendants’ CEOs on Friday, April 3, 2020. (Id. at ¶¶ 22-25.) Although the meeting itself was held in secret, allegedly, as “a condition of calling off the price war,” Saudi Arabia and Russia required that the United States, Canada, and Mexico “agree to cut production.” (Id. at ¶ 29.) As a result of political maneuvering, Plaintiffs allege that “the American oil companies agreed to cut production by 2 million barrels per day (or 3 million barrels per day) by the end of the year as a quid pro quo for the cessation of the price war, just as Russia and Saudi Arabia had demanded.” (Id. at ¶ 37.) As a result of capitulating to foreign demand, [c]ompetition in the oil industry was Plaintiffs further allege that by “reason of these agreements, the price of oil and gasoline was substantially increased … [and] the price of oil and the price of gasoline would be substantially less than what they have become as a result of these agreements, and inflation would have been far less, if non-existent.” (Id. at ¶ 44.) Plaintiffs assert that, as consumers of gasoline, they “have been harmed and continue to be threatened with harm and damage in that they have been deprived of price competition that they otherwise would have enjoyed but for the Defendants’ anticompetitive agreement to reduce the production of oil in order to raise the price of oil and gasoline.” (Id. at ¶ 67.) Based on these allegations, Plaintiffs assert claims under Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act. The Defendants moved to dismiss in an omnibus motion as well as defendant Energy Transfer moving to dismiss separately. In addition, Plaintiffs move for leave to supplement their complaint and for reconsideration of the Court’s order denying leave to depose Kushner. The Court shall address other relevant facts in the remainder of its order. A. Motion to Dismiss filed by All Defendants. 1. Legal Standard Pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendants move to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Under Rule 12(b)(6), a court generally “is limited to the allegations in the complaint, which are accepted as true and construed in the light most favorable to the plaintiff.” Lazy Y Ranch LTD v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008). Even under the liberal pleadings standard of Federal Rule of Civil Procedure 8(a)(2), “a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a claim for relief will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). Pursuant to Twombly, a plaintiff must not allege conduct that is conceivable but must allege “enough facts to state a claim to relief that is plausible on its face.” Id. at 570. “A claim has facial inference that the Defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). If a plaintiff fails to state a claim, a court should grant leave to amend, unless amendment would be futile. See, e.g., Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir. 1990); Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv., Inc., 911 F.2d 242, 246-47 (9th Cir. 1990). However, if a plaintiff has previously amended a complaint, a court has “broad” discretion to deny leave to amend. Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990) (quoting Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989)). 2. Legal Standard Pursuant to Federal Rule of Civil Procedure 12(b)(1). Defendants also move to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1). The Court evaluates challenges to Article III standing under Federal Rule of Civil Procedure 12(b)(1). Maya v. Centex Corp., 658 F.3d 1060, 1067 (9th Cir. 2011) (motion to dismiss for lack of standing governed by Rule 12(b)(1)). Where, as here, a defendant makes a facial attack on jurisdiction, the factual allegations of the complaint are taken as true. Fed’n of African Am. Contractors v. City of Oakland, 96 F.3d 1204, 1207 (9th Cir. 1996). Plaintiffs are then entitled to have those facts construed in the light most favorable to them. Id. The “irreducible constitutional minimum” of standing consists of three elements: an injury- in-fact, causation, and redressability. Spokeo v. Robins, 136 S. Ct. 1540, 1547 (2016) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992)). Plaintiffs must prove each element with the same manner and degree of evidence required at each stage of the litigation. Lujan, 504 U.S. at 561. “At the pleading stage, general factual allegations of injury resulting from the defendant’s conduct may suffice, for on a motion to dismiss we ‘presum[e] that general allegations embrace those specific facts that are necessary to support the claim.’” Id. at 561 (quoting Lujan v. Nat’l Wildlife Fed’n, 497 U.S. 871, 889 (1990)). Because Plaintiffs are the parties invoking federal jurisdiction, they “bear[] the burden of establishing these elements.” Id. Defendants argue that, under several doctrines, Plaintiffs lack standing to file suit. Thus, they move to dismiss pursuant to Rule 12(b)(1). In addition, Defendants contend that even if the claim upon which relief can be granted pursuant to Rule 12(b)(6). 3. Political Question Doctrine. The political question doctrine bars courts from making any determination of issues that the Constitution commits to the political branches of government. Adjudication of those claims is jurisdictionally barred. Under the political question doctrine, a court “lacks authority to decide the dispute before it” when a case involves a “textually demonstrable constitutional commitment of the issue to a coordinate political department; or lack of judicially discoverable and manageable standards for resolving it.” Zivotofsky ex rel. Zivotofsky v. Clinton, 566 U.S. 189, 195 (2012) (quoting Nixon v. United States, 506 U.S. 224, 228 (1993)). Courts lack jurisdiction to adjudicate “those controversies which revolve around policy choices and value determinations constitutionally committed for resolution to the halls of Congress or the confines of the Executive Branch.” Japan Whaling Ass’n v. Am. Cetacean Soc’y, 478 U.S. 221, 203 (1986). Here, Plaintiffs contend that the former President of the United States and his administration were instrumental in negotiating an end to an international price war over the cost of petroleum products. It is well-established that allegations of a conspiracy among American corporations and foreign sovereigns raise non-justiciable political questions. See, e.g., Spectrum Stores, Inc. v. Citgo Petroleum Corp., 632 F3d. 938, 950 (5th Cir. 2011) (holding that matters relating to the conduct of foreign relations is committed exclusively to the political branches of government and largely immune from judicial inquiry or interference) (citing Haig v. Agee, 453 U.S. 280, 292 (1981)). Plaintiffs here are barred by the political question doctrine from questioning foreign policy decisions of the coordinate branches of government. The complaint alleges that President Trump, in negotiating a fix to the international price war, sought an agreement among the American oil companies together with Saudi Arabia and Russia to agree to limit production and exploration of oil. (See Complaint at ¶ 1 (“Plaintiffs allege that the Defendants combined and conspired between and among themselves and with Saudi Arabia and Russia to raise the price of oil and gasoline.”); ¶ 34 (“The American oil companies had agreed to the demands of Saudi Arabia and Russia. The cartel now included the Americans.”); ¶ 37 (“Thus, price war, just as Russia and Saudi Arabia had demanded.”)). Plaintiffs allege that [f]rom the beginning of the conspiracy and as an integral part of its success, the plan of the Defendant oil companies and API was to cajole and persuade former President Trump into abandoning any notion of the free enterprise principles, and, instead, to convince his “friends” Vladimir Putin of Russia and the Crown Price of Saudi Arabia to end their price war, and to commit to a substantial reduction of their production so that the prices for oil and gasoline could increase to the substantial benefit of all producers, and to the substantial and catastrophic detriment of all consumers, and others who rely on oil and gasoline in their businesses, including, commuters, vacationers, and citizens just driving to the store. (Id. at ¶ 40.) The facts proffered by Plaintiffs clearly include Russia and Saudi Arabia as indispensable members of the alleged conspiracy and include questioning the foreign policy decisions of President Trump and his administration. Although in opposition, Plaintiffs argue that they have alleged an independent and completely domestic conspiracy, the actual allegations in the complaint confirm a purported global, not just private or domestic agreement, between Saudi Arabia, Russia, and the United States to cut production of oil. The allegations include specific foreign policy decisions allegedly made by the Trump administration in furtherance of the alleged conspiracy. The court lacks jurisdiction over a complaint that “requires and inquiry into” whether foreign nations entered an agreement with Defendants at the behest of the President of the United States. See Spectrum Stores, 632 F.3d at 951 (holding that adjudicating the legality of the actions of foreign states would trench on “delicate foreign policy questions” and would also require the Court to “reexamin[e] critical foreign policy decisions, including the Executive Branch’s longstanding approach of managing foreign relations with foreign oil-producing states through diplomacy rather than private litigation.”). Accordingly, the Court finds that the claims not justiciable and barred by the political question doctrine. 4. Act of State Doctrine. The act of state doctrine declares that a United States court will not adjudicate a politically sensitive dispute which would require the court to judge the legality of the sovereign act of a Petroleum Exporting Countries (OPEC), 648 F.2d 1354, 1358 (9th Cir. 1981). The doctrine “recognizes the institutional limitations of the courts and the peculiar requirements of successful foreign relations.” Id. The political branches of government are uniquely suited “to consider the competing economic and political considerations and respond to the public will in order to carry on foreign relationships in accordance with the best interests of the country as a whole. The courts, in contrast, focus on single disputes and make decisions on the basis of legal principles.” Id. Like the political question doctrine and similarly derived from the respect of the separation of powers, the act of state doctrine “requires that the courts defer to the legislative and executive branches when those branches are better equipped to resolve a politically sensitive question.” Id. Here, the act of state doctrine bars this suit as Plaintiffs explicitly involve the sovereign countries – Russia and Saudi Arabia – and their management of their own respective petroleum resources. As pled, these countries are indispensable co-conspirators in the alleged scheme to cut production and they demanded Defendants’ cooperation in the conspiracy as a “quid pro quo” for ending the price war. (See Complaint at ¶¶ 37-39.) The Court finds that Plaintiffs’ direct challenge to the official acts of foreign nations to limit their oil production and demand that Defendants do the same, are acts of state beyond the jurisprudential scope of this Court’s authority. Accordingly, the Court finds that the claims are independently barred by the act of state doctrine. 5. Noerr-Pennington Doctrine. The First Amendment guarantees the “right of the people … to petition the Government for a redress of grievances.” U.S. Const. amend. I. The Noerr-Pennington doctrine derives from this constitutional guarantee. Generally, it holds that an individual who petitions the government for redress will be immune from any statutory liability for their petitioning conduct. See Sosa v. DIRECTV, Inc., 437 F.3d 923, 929, 934 (9th Cir. 2006) (citing Empress LLC v. City & County of S.F., 419 F.3d 1052, 1056 (9th Cir. 2005)). The doctrine “immunizes petitions directed at any branch of government, including the executive, legislative, judicial and administrative agencies.” Manistee Town Center v. City of Glendale, 227 F.3d 1090, 1092 (9th Cir. 2000). Under the government officials are protected from antitrust liability.” Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 499 (1988). The allegations in the complaint, taken as true at this procedural posture, amount to Defendants advocating to the former President and his administration for a diplomatic solution to the global price war over petroleum products. Petitioning the President to use diplomacy to end a price war among sovereign states is constitutionally protected activity and “federal antitrust laws … do not regulate the conduct of private individuals in seeking anticompetitive action from the government.” City of Columbia v. Omni Outdoor Advert., Inc., 499 U.S. 365, 379-80 (1991). The complaint describes a conspiracy relating to the United States government’s action in response to Defendants’ alleged petitioning. Plaintiffs allege that Defendants publicly advocated for a solution to the price war and suggested methods for stabilizing the global oil market to the President and his administration. (Complaint at ¶¶ 14, 15, 22-23, 25-26, 34.) This lobbying effort is “protected petitioning activity [under] … Noerr-Pennington.” See B&G Foods N. Am., Inc. v. Embry, 29 F.4th 527, 540 (9th Cir. 2022). Taken as true, the complaint alleges that Defendants sought to have the President engage in diplomatic negotiations to end the price war. This conduct is protected by the Noerr-Pennington doctrine from antitrust liability. Accordingly, the Court finds that the motion to dismiss filed by all defendants can be granted on the basis that the claims are barred by the political question doctrine, the act of state doctrine, and the Noerr-Pennington doctrine. These jurisprudential bars to this litigation are each sufficient to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(1). However, the Court also finds that Plaintiffs have failed plausibly to state a claim by which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiffs have failed to allege sufficient facts to demonstrate the basis for any claim for antitrust violation, that is, they have failed to allege facts to support a plausible inference of an unlawful agreement among Defendants, including the “who, did what, to whom (or with whom), where, and when.” In re Musical Instruments & Equip. Antitrust Litig., 798 F.3d 1186, 1194 n.6 (9th Cir. 2015). The bare assertion that Defendants “agreed to take any surplus oil off the market, cut their production, and support the claim of an unlawful agreement. (Complaint at ¶ 16.) The complaint simply does not allege sufficient plausible facts detailing any such agreement. In addition, during the same time period when oil and gasoline prices increased, the world faced the Covid-19 pandemic, which gave rise to stay-at-home orders, economic collapse, and plunging demand for gasoline and other fuels. This provides another explanation, omitted entirely from the complaint, for a significant drop in demand and consequent production cuts by oil companies. Although if given leave, the Plaintiffs might ostensibly plead additional facts giving rise to an inference of an unlawful agreement, because the Court finds the antitrust claims are barred by several applicable jurisprudential doctrines, the Court GRANTS Defendants’ omnibus motion to dismiss without leave to amend. B. Motion to Dismiss Filed by Defendant Energy Transfer. Defendant Energy Transfer joins in the omnibus motion to dismiss filed on behalf of all Defendants and also files a motion separately to dismiss on the basis that the Court lacks personal jurisdiction over the company. First, Energy Transfer argues that Plaintiffs fail to allege that the defendant produces or sells oil or gasoline or that it specifically took any action that affected oil and gasoline prices. In fact, the Complaint states that the defendant transports only natural gas and propane. (Complaint at ¶ 79.) Second, Energy Transfer contends that there are no specific allegations that Plaintiffs purchased anything from the company. Third, Plaintiffs do not identify any merger or acquisition by Energy Transfer in the relevant time frame or any transaction that may have affected gasoline purchased by Plaintiffs. Lastly, although Energy Transfer concedes that it may be served in California, there are no allegations supporting the contention that this Court has personal jurisdiction over the company as it is not incorporated or have its principal place of business in the State and there are no allegations of the company doing business in the State or specific targeting activity in the jurisdiction. See 15 U.S.C. ¶ 22. Accordingly, the Court lacks personal jurisdiction over defendant Energy Transfer.1 Although the Court would grant leave to amend to allege specific facts which may give rise to the exercise of personal jurisdiction, the Court has already found that the claims are barred. C. Motion for Leave to Supplement the Complaint. 1. Legal Standard. Plaintiffs seek leave to file a supplemental pleading under Federal Rule of Civil Procedure 15(d) to add Hess Corporation as a defendants and to add detailed representations made by Kusher. Under Rule 15(d), “[o]n motion and reasonable notice, the court may, on just terms, permit a party to serve a supplemental pleading setting out any transaction, occurrence, or event that happened after the date of the pleading to be supplemented.” Fed. R. Civ. P. 15(d); see also Eid v. Alaska Airlines, Inc., 621 F.3d 858, 874 (9th Cir. 2010) (“Rule 15(d) provides a mechanism for parties to file additional causes of action based on facts that didn’t exist when the original complaint was filed.”). Supplementation is generally favored as “a tool of judicial economy and convenience.” Keith v. Volpe, 858 F.2d 467, 473 (9th Cir. 1988). “To determine if efficiency might be achieved, courts assess ‘whether the entire controversy between the parties could be settled in one action.’” Id. (citation and ellipses omitted). “The clear weight of authority ... in both the cases and the commentary, permits the bringing of new claims in a supplemental complaint to promote the economical and speedy disposition of the controversy.” Id. “The legal standard for granting or denying a motion to supplement under Rule 15(d) is the same as for amending one under 15(a).” Paralyzed Veterans of America v. McPherson, No. C 06- 4670 SBA, 2008 WL 4183981, at *26 (N.D. Cal. Sept. 9, 2008). The five factors commonly used to evaluate the propriety of a motion for leave to amend (and thus, a motion to supplement) are: (1) undue delay, (2) bad faith or dilatory motive on the part of the movant, (3) repeated failure of previous amendments, (4) undue prejudice to the opposing party, and (5) futility of the amendment. See Foman v. Davis, 371 U.S. 178, 182 (1962). “[T]he consideration of prejudice to the opposing party … carries the greatest weight.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir.2003). Absent prejudice or a “strong showing” of any other Foman factor, there is a presumption in favor of granting leave to supplement. Id. 2. Leave Denied. to supplement factual statements made by Kushner in a presentation by his new company, Affinity Partners. Plaintiffs allege that Kushner identified one of his most significant accomplishments while in his father-in-law’s administration to be “leading negotiations on the historic OPEC+ oil agreement in April 2020 among the United States, Saudi Arabia and Russia, which led to the largest oil production reductions in history.” (Dkt. No. 109-1, Motion at 3.) Plaintiffs also allege that Kushner specifically referred to Hess Corporation’s participation in the “deal to raise oil prices” in his nearly released memoir. (Id. at 4.) Because the Court has already determined that Plaintiffs’ claims are barred by the political question, act of state, and Noerr-Pennington doctrines, the Court finds the proposed addition of the Hess Corporation and Kushner’s purported participation in the Trump administration still present non-justiciable political questions regarding the United States’ foreign policy with respect to other oil-producing countries and public acts of foreign states and Defendants’ possible efforts to petition the government for redress. The adjudication of these threshold questions requires dismissal of this action. Further supplementation of the complaint would be futile. Accordingly, Plaintiffs’ motion for leave to supplement the complaint is DENIED. D. Motion for Leave to File Motion for Reconsideration. 1. Legal Standard. A motion for reconsideration may be made on one of three grounds: (1) a material difference in fact or law exists from that which was presented to the Court, which, in the exercise of reasonable diligence, the party applying for reconsideration did not know at the time of the order; (2) the emergence of new material facts or a change of law; or (3) a manifest failure by the Court to consider material facts or dispositive legal arguments presented before entry of judgment. N.D. Civ. L.R. 7-9(b)(1)-(3). The moving party may not reargue any written or oral argument previously asserted to the Court. Id., 7-9(c). 2. Leave Denied. Plaintiffs seek leave to file a motion for this Court to reconsider its ruling disallowing the deposition of Jared Kushner based on alleged disclosures in his recently-published memoir. For 1 Court finds the addition of Kushner as a witness futile and DENIES Plaintiffs lead to file a motion 2 for reconsideration of its earlier order. 4 For the foregoing reasons, the omnibus motion to dismiss filed by all defendants is 5 GRANTED without leave to amend and the motion to dismiss filed by Energy Transfer is 6 GRANTED. Plaintiffs’ motion for leave to supplement the complaint and for leave to file a 7 motion for reconsideration are DENIED. 9 Dated: January 9, 2023 \ | he / nt 10 foe i i / JEREVEY S. WKATE 1] i /Unit 1 States Pustrict Judge 12

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