Ellis v. Salt River Project Agricultural Improvement and Power District

• Court: District Court, D. Arizona
• Decided: August 18, 2022
• Docket: 2:19-cv-01228
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 William Ellis, et al., No. CV-19-01228-PHX-SMB

10 Plaintiffs, ORDER

11 v.

12 Salt River Project Agricultural Improvement and Power District, 13 Defendant. 14 15 Pending before the Court is Defendant Salt River Project Agricultural Improvement 16 and Power District’s (“SRP’s”) Renewed Motion to Dismiss (“Renewed MTD”). (Doc. 17 48.) The Motion is fully briefed, (see Docs. 49; 51), and the Court held oral argument on 18 July 26, 2022. After considering the parties’ briefing and arguments, as well as the relevant 19 caselaw, the Court will grant SRP’s Renewed MTD for reasons explained below. 20 I. BACKGROUND 21 The Court’s original dismissal of this case contains a lengthier background section, 22 (Doc. 29 at 1–4), which is incorporated by reference. Relevant here, Plaintiffs1 are 23 customers of SRP, a utility company that provides power to much of metropolitan Phoenix. 24 (Doc. 48-1 at 6; Doc. 49 at 6.) Plaintiffs also have home solar installations that allow them 25 to generate some of their own power. (Doc. 12 at ¶¶ 20–27.) 26 In 2014, SRP adopted a new rate structure (“Standard Electric Price Plans” or 27

28 1 Plaintiffs include William Ellis, Robert Dill, Edward Rupprecht, and Robert Gustavis. (Doc. 49 at 6.) 1 “SEPPs”) that included a new E-27 Plan—applicable to solar customers who began self- 2 generating electricity after December 8, 2014—which charged certain customers additional 3 fees and different rates for self-generating some of their own electricity through solar 4 energy systems. (Id. at ¶¶ 6, 72–76.) Plaintiffs installed solar panels sometime after the 5 E-27 Plan took effect, (id. at 7–8), and they initiated this lawsuit in 2019, (Doc. 1). At that 6 time, Plaintiffs alleged violations of the Equal Protection Clause and the Sherman Act, 15. 7 U.S.C. § 1 et seq., as well as various state law claims. (See generally id.) On January 10, 8 2020, this Court granted SRP dismissal of all the claims against them. (Doc. 29.) 9 Plaintiffs appealed, and the Ninth Circuit affirmed the Court’s dismissal of the state 10 law claims but reversed its dismissal of the federal law claims. Ellis v. Salt River Project 11 Agric. Improvement & Power Dist., 24 F.4th 1262, 1266 (9th Cir. 2022). Notably, on the 12 equal protection claim, the Ninth Circuit refused to address Defendant’s argument that its 13 adoption of the SEPPs passed rational basis review. Id. at 1273. Because this Court had 14 not considered the argument, the Ninth Circuit declined “to do so in the first instance” and, 15 instead, left “it to the district court to consider on remand.” Id. Moreover, regarding 16 Plaintiffs’ federal antitrust claims, the Ninth Circuit found that Plaintiffs had sufficiently 17 alleged an antitrust injury. Id. at 1275. However, it affirmed this Court’s finding that the 18 Local Government Antitrust Act (“LGAA”), 15 U.S.C. §§ 34–36, shielded SRP from 19 federal antitrust damages. Ellis, 24 F.4th at 1277–78. But because Plaintiffs also sought 20 declaratory and injunctive relief, the Ninth Circuit remanded the federal antitrust claims 21 for further proceedings. Id. at 1278. 22 Consequently, three of the Claims in Plaintiffs’ First Amended Complaint (“FAC”) 23 are still pending before the Court—their equal protection claim (Count VII), as well as 24 their claims for monopolization (Count I) and attempted monopolization (Count II). SRP 25 has renewed its MTD on Counts II and VII for failure to state a claim. (Doc. 48-1 at 6.) 26 II. LEGAL STANDARD 27 To survive a Rule 12(b)(6) motion for failure to state a claim, a complaint must meet 28 the requirements of Rule 8(a)(2). Rule 8(a)(2) requires a “short and plain statement of the 1 claim showing that the pleader is entitled to relief,” so that the defendant has “fair notice 2 of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 3 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Dismissal 4 under Rule 12(b)(6) “can be based on the lack of a cognizable legal theory or the absence 5 of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police 6 Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). A complaint that sets forth a cognizable legal 7 theory will survive a motion to dismiss if it contains sufficient factual matter, which, if 8 accepted as true, states a claim to relief that is “plausible on its face.” Ashcroft v. Iqbal, 9 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). Facial plausibility exists if 10 the pleader sets forth “factual content that allows the court to draw the reasonable inference 11 that the defendant is liable for the misconduct alleged.” Id. 12 In ruling on a Rule 12(b)(6) motion to dismiss, the well-pled factual allegations are 13 taken as true and construed in the light most favorable to the non-moving party. Cousins 14 v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). However, legal conclusions couched as 15 factual allegations are not given a presumption of truthfulness, and “conclusory allegations 16 of law and unwarranted inferences are not sufficient to defeat a motion to dismiss.” Pareto 17 v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). A court ordinarily may not consider evidence 18 outside the pleadings in ruling on a Rule 12(b)(6) motion to dismiss. See United States v. 19 Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). “A court may, however, consider materials— 20 documents attached to the complaint, documents incorporated by reference in the 21 complaint, or matters of judicial notice—without converting the motion to dismiss into a 22 motion for summary judgment.” Id. at 908. 23 III. DISCUSSION 24 In their Renewed MTD, SRP moves for dismissal of Plaintiffs’ equal protection 25 claims (Count IV), as well as their attempted monopolization claim (Count II). (Doc. 48-1 26 at 1.) The Court will address each claim in turn. 27 A. Equal Protection 28 The parties all advance arguments under the assumption that SRP’s allegedly 1 discriminatory ratemaking is subject to rational basis review. (Doc. 12 at ¶ 114(d), 174; 2 Doc. 48 at 10; Doc. 49 at 6, 11–13.) The Court agrees. “When those who appear similarly 3 situated are nevertheless treated differently, the Equal Protection Clause requires at least a 4 rational reason for the difference, to ensure that all persons subject to legislation or 5 regulation are indeed being ‘treated alike, under like circumstances and conditions.’” 6 Engquist v. Oregon Dep't of Agr., 553 U.S. 591, 602 (2008) (quoting Hayes v. Missouri, 7 120 U.S. 68, 71–72 (1887)). Under equal protection rational review, “a law must bear a 8 rational relationship to a legitimate governmental purpose.” Romer v. Evans, 517 U.S. 620, 9 635, 116 S. Ct. 1620, 1629, 134 L. Ed. 2d 855 (1996). 10 Moreover, “[i]n areas of social and economic policy, a statutory classification that 11 neither proceeds along suspect lines nor infringes fundamental constitutional rights must 12 be upheld against equal protection challenge if there is any reasonably conceivable state of 13 facts that could provide a rational basis for the classification.” F.C.C. v. Beach Commc'ns, 14 Inc., 508 U.S. 307, 313 (1993). The instant case is one of economic policy, and Plaintiffs 15 neither allege a suspect classification, nor a violation of a fundamental constitutional right; 16 thus, this heightened burden is theirs to bear. See id. at 315 (“[T]hose attacking the 17 rationality of the legislative classification have the burden ‘to negative every conceivable 18 basis which might support it.’” (quoting Lehnhausen v. Lake Shore Auto Parts Co., 410 19 U.S. 356, 364 (1973))). 20 SRP argues that Plaintiffs’ equal protection claim should be dismissed because (1) 21 Plaintiffs have not identified similarly situated individuals who were treated differently, 22 and (2) there is a rational basis for SRP’s enactment of the E-27 Plan. (Doc. 48-1 at 10.) 23 Plaintiffs respond that SRP lacks a legitimate governmental interest in “increasing its 24 electricity rates for self-generating customers in order to recoup alleged stranded costs of 25 serving them.” (Doc. 49 at 13.) Plaintiffs also assert that there is no rational basis for 26 SRP’s actions, and that Plaintiffs have identified similarly situated individuals who were 27 treated differently. (Id. at 17, 19.) 28 Thus, the Court is tasked with determining if, as a matter of law, SRP’s enactment 1 of the E-27 Plan (1) treated similarly situated individuals differently; (2) served a legitimate 2 governmental interest; and (3) was rationally related to accomplishing that governmental 3 interest. 4 1. Similarly Situated Individuals 5 “The Equal Protection Clause of the Fourteenth Amendment commands that no 6 State shall deny to any person within its jurisdiction the equal protection of the laws, which 7 is essentially a direction that all persons similarly situated should be treated alike.” Arizona 8 Dream Act Coal. v. Brewer, 855 F.3d 957, 966 (9th Cir. 2017) (quoting City of Cleburne 9 v. Cleburne Living Ctr., 473 U.S. 432, 439 (1985)) (internal quotation marks omitted). 10 Thus, to prevail on their equal protection claim, Plaintiffs must show “that a class that is 11 similarly situated has been treated disparately.” Id. (quoting Christian Gospel Church, Inc. 12 v. City & Cty. of S.F., 896 F.2d 1221, 1225 (9th Cir. 1990), superseded on other grounds 13 by 42 U.S.C. § 2000e). 14 “The first step in equal protection analysis is to identify the state's classification of 15 groups.” Country Classic Dairies, Inc. v. State of Mont., Dep't of Com. Milk Control 16 Bureau, 847 F.2d 593, 596 (9th Cir. 1988). The next step is to “look for a control group” 17 that is “composed of individuals who are similarly situated to those in the classified group 18 in respects that are relevant to the state's challenged policy.” Gallinger v. Becerra, 898 19 F.3d 1012, 1016 (9th Cir. 2018). “Parties allegedly treated differently in violation of the 20 Equal Protection Clause are similarly situated only when they are ‘arguably 21 indistinguishable.’” Erickson v. Cnty. of Nevada ex rel. Bd. of Supervisors, 607 F. App'x 22 711, 712 (9th Cir. 2015) (quoting Engquist, 553 U.S. at 601 (2008)). 23 SRP has distinguished between three groups, which it claims are not similar in all 24 relevant respects: (1) those who do not use any solar energy system to supplement their 25 electricity (“Non-Solar Customers”); (2) those who started self-generating solar power 26 before the SEPPs were adopted (“Grandfathered-Solar Customers”); and (3) those who 27 started self-generating solar power after the SEPPs were adopted (“Solar Customers”). 28 (See Doc. 48-1 at 13.) Plaintiffs claim that these three categories are identical in all relevant 1 respects and, therefore, should be treated this same. (Doc. 49 at 17–18.) The Court 2 disagrees with Plaintiffs. 3 First, the Solar Customers are distinguishable from the Non-Solar Customers. SRP 4 correctly highlights that the FAC contains numerous differences between these two classes, 5 including (1) energy usage: Solar Customers use less energy than Non-Solar Customers; 6 (2) grid demands: sometimes Solar Customers draw energy from the grid and sometimes 7 they generate excess energy, which the grid must absorb; and (3) the nature of their 8 commercial relationship: Solar Custers buy energy from and sell energy to SRP, but Non- 9 Solar Customers only buy. (Doc. 51 at 10–11.) The Court finds that these differences 10 readily distinguish between Solar and Non-Solar Customers. 11 Yet, Plaintiffs argue that—under A.R.S. § 30-805(A) and (D), which has since been 12 repealed—Arizona law prohibited distinctions between Solar and Non-Solar customers for 13 the purpose of calculating or recovering “stranded costs.” (Doc. 49 at 18.) Indeed, Arizona 14 law provides that “[a]ny reduction in electricity purchases from a public power entity 15 resulting from self-generation . . . or other demand reduction attributable to any cause other 16 than the retail access provisions of this chapter shall not be used to calculate or recover any 17 stranded cost from a customer.” A.R.S. § 30-805(D). But SRP responds that “stranded 18 cost” is a term of art that is inapplicable here because the SEPPs were not adopted to 19 “calculate or recover any stranded costs.” (Doc. 51 at 8 (citations omitted)). The Court 20 agrees. 21 The Ninth Circuit has opined that “stranded costs are those costs an electrical 22 supplier incurs in anticipation of serving customers that later become unrecoverable 23 because the supplier either cannot charge a rate that allows cost recovery or is unable to 24 sell sufficient power.” S. California Edison Co. v. Lynch, 307 F.3d 794, 801 (9th Cir. 25 2002). Or, put differently, “[s]tranded costs are historic investments and contractual 26 obligations of the utilities that exceed the value of the underlying assets in a competitive 27 environment.” Pac. Gas & Elec. Co. v. Lynch, 216 F. Supp. 2d 1016, 1021 (N.D. Cal. 28 2002). “This most typically occurs when there is a shift in utility rate philosophy from a 1 ‘cost plus rate of return’ design to a market-driven rate.” S. California Edison Co., 307 2 F.3d at 801 (quoting Ass'n of Pub. Agency Customers, Inc. v. Bonneville Power Admin., 3 126 F.3d 1158, 1180 (9th Cir.1997)). And such philosophical changes usually happen in 4 a “transition from a regulated environment to a competitive market.” Id. “Examples of 5 stranded costs are the expenses of certain generating plants or long-term power supply 6 contracts that cannot be recovered from customers through competitive electrical prices.” 7 Pac. Gas & Elec. Co., 216 F. Supp. 2d at 1021. 8 As SRP correctly explains, “[t]his case has nothing to do with stranded costs.” (Doc. 9 51 at 9.) SRP never proffered stranded costs as a reason for adopting the SEPPs or the 10 E-27 Plan. The FAC itself does not allege that the E-27 Plan was a surcharge meant to 11 recover the expenses of certain generating plants or long-term power supply contracts. 12 Rather, as the FAC acknowledges, SRP’s proffered explanations for the distinction is that 13 “[S]olar [C]ustomers are ‘subsidized’ by [Non-Solar Customers] because the payments 14 solar customers make to SRP do not allow it to recover a sufficient portion of the fixed 15 costs of offering service to those customers.” (Doc. 12 ¶ 100 (emphasis added)). Simply 16 put, SRP’s justification was related to fixed costs, not stranded costs, and the FAC 17 recognizes as much. Thus, the Court is unpersuaded that Arizona law prohibits the 18 classification that SRP has made. 19 Second, the Solar Customers are distinguishable from the Grandfathered-Solar 20 Customers. The FAC concedes that Grandfathered-Solar Customers—unlike Solar 21 Customers—installed their solar energy systems, and thereby incurred their costs, before 22 the adoption of the SEPPs and the E-27 Plan. (Id. ¶ 16.) Plaintiffs mischaracterize SRP’s 23 reliance on this fact as an argument for “permitting discrimination merely because the 24 target of discrimination allegedly acquiesced to it.” (Doc. 49 at 18.) This is incorrect. SRP 25 actually argues that (1) Grandfathered-Solar Customers “have legitimate reliance interests 26 in the previous rate,” which Solar Customers do not; and (2) subjecting Grandfathered- 27 Solar Customers to E-27 could result in “rate shock.” (Doc. 51 at 12 (emphasis added)). 28 A customer’s reliance interests and a desire to avoid rate shock are permissible distinctions 1 under Arizona and federal law. See Nordlinger v. Hahn, 505 U.S. 1, 13 (1992) (“This 2 Court previously has acknowledged that classifications serving to protect legitimate 3 expectation and reliance interests do not deny equal protection of the laws.”); Freeport 4 Mins. Corp. v. Arizona Corp. Comm'n, 419 P.3d 942, 947 (Ariz. Ct. App. 2018) (explaining 5 that “gradualism,” which is the avoidance of “rate shock,” is a “well-recognized tenet of, 6 and generally accepted as a legitimate concern in, utility ratemaking”).2 7 Therefore, the Court finds that Plaintiffs have failed to make prima facie showing 8 that similarly situated individuals were treated differently because they have not provided 9 the Court with similarly situated individuals to compare to SRP’s Solar Customers. This 10 alone warrants dismissal of Plaintiffs’ equal protection claim. See Arizona Dream Act 11 Coal., 855 F.3d at 966 (“To prevail on an Equal Protection claim, plaintiffs must show that 12 a class that is similarly situated has been treated disparately.” (internal quotation marks and 13 citation omitted)). However, given that this case has already been appealed and remanded 14 once, and given that part of the reason for that remand was this Court’s unaddressed 15 arguments in the alternative, Ellis, 24 F.4th at 1273, the Court will address the parties’ 16 additional arguments about rational basis review. 17 2. Legitimate Governmental Interest 18 Plaintiffs argue that SRP lacks a legitimate governmental interest in increasing its 19 electricity rates for Solar Customers to recoup the cost of serving them. (Doc. 49 at 13.) 20 To bolster this claim, Plaintiffs point to Arizona law that purportedly prohibits “charging 21 different rates” to different customers. (Id.) SRP argues that it has a legitimate interest in 22 ensuring that Solar Customers “pay their fair share,” and that the E-27 Plan’s furtherance 23 of that interest is consistent with Arizona law. (Doc. 51 at 6.) SRP also contends that, 24 given the economic nature of the regulation, it is owed extreme deference on the legitimacy 25

26 2 The Court notes that the arguments about rate shock and reliance interests are more fitting in a discussion of the regulation’s legitimacy. See, e.g., Nordlinger, 505 U.S. at 13. 27 However, the parties advanced these arguments in their discussions of similarly situated 28 individuals, and the Court maintains this framework for the sake of clarity in ruling on the parties’ arguments. 1 of its interests. (Doc. 48-1 at 14.) The Court agrees with SRP. 2 As an initial matter, “[t]he general rule is that legislation is presumed to be valid.” 3 City of Cleburne, 473 U.S. at 440. That presumption is stronger “[w]hen social or 4 economic legislation is at issue,” id., as is the case here. Moreover, “it is entirely irrelevant 5 for constitutional purposes whether the conceived reason for the challenged distinction 6 actually motivated the legislature.” Beach Commc'ns, Inc., 508 U.S. at 315. “These 7 restraints on judicial review have added force ‘where the legislature must necessarily 8 engage in a process of line-drawing.’” Id. (quoting U.S. R.R. Ret. Bd. v. Fritz, 449 U.S. 9 166, 179 (1980)). This is because “[d]efining the class of persons subject to a regulatory 10 requirement . . . inevitably requires that some persons who have an almost equally strong 11 claim to favored treatment be placed on different sides of the line”; thus, “the fact that the 12 line might have been drawn differently at some points is a matter for legislative, rather than 13 judicial, consideration.” Id. at 315–16 (citation omitted) (cleaned up). “This necessity 14 renders the precise coordinates of the resulting legislative judgment virtually unreviewable, 15 since the legislature must be allowed leeway to approach a perceived problem 16 incrementally.” Id. at 316 (emphasis added). Given this framework of extreme deference 17 to regulatory economic line-drawing, the Court turns to the Arizona laws that—according 18 to Plaintiffs—render illegitimate SRP’s governmental interest. 19 First, as explained above, Plaintiffs’ reliance on A.R.S. § 30-805(D) is misplaced. 20 See supra Section III.A.1. To reiterate, Section 30-805(D) addresses the calculation and 21 recovery of stranded costs, but SRP never proffered recovery or calculation of stranded 22 costs as the justification for its regulation. Thus, Section 30-805(D) is inapplicable here. 23 Second, Plaintiffs’ reliance on Arizona anti-discrimination laws—specifically 24 Arizona Constitution, article 15, section 12, and A.R.S. § 30-805(A) and (E)—is also 25 misplaced. Section 12 of article 15 applies to “public service corporations,” which SRP is 26 not. Ariz. Const. art. XV, § 12. Plaintiffs already conceded that SRP is not a public service 27 corporation (see Doc. 49 at 14 (“SRP is a public power entity, as opposed to a public 28 service corporation like APS.”)). Similarly, A.R.S. § 30-805(E) does not apply to 1 Plaintiffs. That section requires that SRP “allow any provider of electric generation 2 service” access to SRP’s facilitates “under rates and terms and conditions of service that 3 are nondiscriminatory, cost based, just and reasonable and comparable to the rates charged 4 for the public power entity's own use of the same facilities.” Plaintiffs are not providers of 5 an “electric generation service,” which is statutorily defined as “the provision of electricity 6 for sale to retail electric customers,” A.R.S. § 30-801(10). 7 Thus, the Court finds that Plaintiffs’ challenges to the legitimacy of SRP’s 8 governmental interest fail as a matter of law, and that the strong presumption of the 9 regulation’s validity commands this outcome.3 10 3. Rational Relation 11 Plaintiffs contend that, “even if charging [Solar Customers] a higher rate in an 12 attempt to recoup stranded costs of serving them were a legitimate state interest, Plaintiffs 13 have adequately alleged that SRP’s E-27 rate cannot achieve that goal because no such 14 costs exist.” (Doc. 49 at 19.) Put differently, Plaintiffs challenge that factual veracity of 15 SRP’s claim that enacting the E-27 Plan saves SRP money. SRP responds that (1) Plaintiffs 16 misconstrue SRP’s justification for enacting the E-27 plan, and (2) whether the plan 17 actually achieved that goal is not, as a matter of law, relevant to the current inquiry. (Doc. 18 51 at 12.) Plaintiffs’ arguments fail for at least three reasons. 19 First, SRP’s rationale for adopting the new SEPPS does not depend on “increased 20 costs caused by [S]olar [Customers],” as Plaintiffs contend. (Doc. 49 at 19.) Rather, SRP’s 21 rationale—as plead in the FAC—is that Solar Customers’ lower electricity usage means 22 that “the payments [S]olar [C]ustomers make to SRP do not allow it to recover a sufficient 23

24 3 Although the Court need not address the argument to resolve this matter, it agrees with Defendants that the anti-discrimination doctrine embodied in the above state law provisions 25 is functionally identical to that provided by the U.S. Constitution’s Equal Protection 26 Clause. Compare Town of Wickenburg v. Sabin, 200 P.2d 342, 343 (Ariz. 1948) (“All patrons of the same class are entitled to the same service on equal terms.”), with Arizona 27 Dream Act Coal., 855 F.3d at 966 (“To prevail on an Equal Protection claim, plaintiffs 28 must show ‘that a class that is similarly situated has been treated disparately.’” (citation omitted)). 1 portion of the fixed costs of offering service to those customers.” (Doc. 12 at ¶ 100.) It 2 was about equalizing the costs to prevent subsidies. Thus, Plaintiffs misconstrue, in their 3 brief, the rationale they alleged in their FAC. 4 Second, Plaintiffs’ argument rests on the faulty premise that SRP was factually 5 wrong to conclude that the SEPPs and the E-27 Plan were necessary to address SRP’s 6 recovery of fixed costs and prevent the subsidy of Solar Customers. Indeed, whether SRP’s 7 regulation “in fact” achieves its objective is not the question; the question is what SRP 8 “could rationally have decided,” regardless of whether the actual objective is achieved. See 9 Minnesota v. Clover Leaf Creamery Co., 449 U.S. 456, 466 (1981) (“Whether in fact the 10 Act will promote [it’s purported objective] is not the question: the Equal Protection Clause 11 is satisfied by our conclusion that the Minnesota Legislature could rationally have decided 12 that its [legislation] might foster [its purported objective].”). Here, SRP certainly “could 13 rationally have decided” that different rates for Solar Customers were needed to eliminate 14 a subsidy for those customers at the expense of others. 15 Third, it is irrelevant whether SRP’s ratemaking was factually supported when they 16 made their decision. As the Supreme Court has opined, “a legislative choice is not subject 17 to courtroom fact-finding and may be based on rational speculation unsupported by 18 evidence or empirical data.” F.C.C. v. Beach Commc'ns, Inc., 508 U.S. 307, 315 (1993). 19 Thus, Plaintiffs’ factual dispute about SRP’s rationale does not allow them to survive 20 dismissal. 21 Plaintiffs have fallen far short of their burden to allege facts that plausibly “negative 22 every conceivable basis which might support” SRP’s differentiated rates for Solar 23 Customers. See Beach, 508 U.S. at 314–315 (quoting Lehnhausen, 410 U.S. at 364). 24 Consequently, the Court must conclude that SRP’s regulation is rationally related to 25 achieving its legitimate governmental interests. 26 In sum, SRP’s adoption of the SEPPS and the E-27 Plan does not treat similarly 27 situated individuals differently and, even if it did, the regulation is rationally related to a 28 legitimate governmental interest. Therefore, the regulation passes constitutional muster 1 under rational basis review, and Plaintiffs’ equal protection claim will be dismissed. 2 B. Attempted Monopolization 3 SRP argues that Plaintiffs—who are consumers, not competitors—lack standing to 4 bring an attempted monopolization claim, even though the Ninth Circuit held there is an 5 antitrust injury here. (Doc. 48-1 at 19.) Plaintiffs content that the Ninth Circuit’s holding 6 regarding antitrust injury settles the matter of standing.4 (Doc. 49 at 20.) Plaintiffs are 7 mistaken. “In fact, the Supreme Court has noted that ‘[a] showing of antitrust injury is 8 necessary, but not always sufficient, to establish [antitrust] standing.’” Am. Ad Mgmt., Inc. 9 v. Gen. Tel. Co. of California, 190 F.3d 1051, 1055 (9th Cir. 1999) (quoting Cargill, Inc. 10 v. Monfort of Colorado, Inc., 479 U.S. 104, 110 n. 5 (1986)) (first alteration original). 11 Thus, although the Ninth’s Circuit’s determination that Plaintiffs have an antitrust injury 12 is instructive to this Court, it does not settle the issue before it. 13 The Supreme Court has “identified certain factors for determining whether a 14 plaintiff who has borne an injury has antitrust standing.” Id. at 1054 (emphasis added). 15 These factors are: (1) “the nature of the plaintiff's alleged injury; that is, whether it was the 16 type the antitrust laws were intended to forestall”; (2) “the directness of the injury”; (3) 17 “the speculative measure of the harm”; (4) “the risk of duplicative recovery”; and (5) “the 18 complexity in apportioning damages.” Amarel v. Connell, 102 F.3d 1494, 1507 (9th Cir. 19 1996) (citing Associated Gen. Contractors of California, Inc. v. California State Council 20 of Carpenters, 459 U.S. 519, 534–35 (1983)). Here, the Court agrees with Plaintiffs that 21 the Ninth’s Circuits holding—that Plaintiffs may not obtain antitrust damages here—moots 22 the third and fourth factors. Thus, the Court need only consider factors one, two, and five. 23 4 Plaintiffs argue that SRP’s distinctions between customers and consumer is factually 24 wrong here because, “[a]s alleged in the Complaint, Plaintiffs are both consumers and competitors of SRP because they generate power that decreases demand for SRP’s own 25 generated power.” (Doc. 49 at 22.) The Court agrees with SRP that this argument was 26 never raised in the FAC, nor is it logical. To say that Plaintiffs are consumers and customers because they generate some of their own power is like saying that everyone who 27 cooks at home is a competitor of major restaurant chains, or that anyone who uses public 28 transit is a competitor of fossil fuel companies. The argument is non-sensical, and the Court will not entertain it. 1 Moreover, “[t]o conclude that there is antitrust standing, a court need not find in 2 favor of the plaintiff on each factor.” Am. Ad Mgmt., Inc., 190 F.3d at 1055. Indeed, “[n]o 3 single factor is decisive,” but the Court “must balance the factors.” Amarel, 102 F.3d at 4 1507 (quoting R.C. Dick Geothermal Corp. v. Thermogenics, Inc., 890 F.2d 139, 146 (9th 5 Cir. 1989)). However, the Ninth Circuit has instructed that “the nature of the plaintiff's 6 alleged injury is of ‘tremendous significance’ in determining whether a plaintiff has 7 antitrust standing.” Id. (quoting Bhan v. NME Hospitals, Inc., 772 F.2d 1467, 1470 n.3 8 (9th Cir.1985)). 9 Turning to the first factor, the nature of Plaintiffs’ injury for their attempted 10 monopolization claim is that they were charged high than normal—or supracompetitive— 11 rates for their electricity. This is problematic for Plaintiffs. One of our sister courts 12 cogently explained the problem as follows: “As a matter of economic theory, 13 supracompetitive rates are the result of monopoly, not attempted monopoly. A company 14 which charges higher than competitive fees before it achieves monopoly power is merely 15 creating an incentive for entry into that market by new competitors, not committing an 16 exclusionary act.” In re Air Passenger Computer Rsrv. Sys., 727 F. Supp. 564, 569 (C.D. 17 Cal. 1989) (emphasis added and internal citations omitted). Put differently, “higher prices 18 paid by consumers in an attempted monopolization, as [the Plaintiff] alleges here, are not 19 injuries the antitrust laws were designed to prevent.” Neagle v. Goldman Sachs Grp., Inc, 20 No. 6:18-CV-00754-MC, 2019 WL 1102199, at *12 (D. Or. Mar. 1, 2019), aff'd sub nom. 21 Neagle v. Altisource Sols., Inc., 820 F. App'x 606 (9th Cir. 2020). 22 The proverbial catch-22 is this: if SRP charged higher rates after achieving 23 monopoly, there is antirust claim for monopolization but not attempted monopolization 24 because they monopoly has already been accomplished. If SRP charged higher rates before 25 achieving a monopoly, there still no claim for attempted monopolization because charging 26 higher than competitive rates in an open market is not monopolistic—in fact, it makes 27 achieving a monopoly harder. Thus, bringing an attempted monopolization claim for 28 supracompetitive rates is inherently flawed. 1 Consequently, other Courts have concluded that “[t]he competitor, not the 2|| consumer, is the party with antitrust standing to bring a claim of attempted monopolization.” Id.; see also Simpson v. US W. Commc'ns, Inc., 957 F. Supp. 201, 205 (D. Or. 1997) ([P]laintiffs, as consumers, lack standing to bring a claim for attempted monopolization.’’); Davis v. S. Bell Tel. & Tel. Co., No. 89-2839-CIV-NESBITT, 1994 WL || 912242, at *16 (S.D. Fla. Feb. 1, 1994) (“[Customer] Plaintiffs lack standing as a matter || of law to bring a claim for attempted monopolization.”). Indeed, this Court noted as much 8 || in its previous order, (Doc. 29 at 27 n.17), and still finds that to be the case. 9 Even weighing factors two and four in Plaintiffs’ favor, the Court finds that a || balance of the factors weighs against Plaintiffs. Thus, Plaintiffs lack standing, and their 11 |} attempted monopoly claim will be dismissed. 12 IV. CONCLUSION 13 Therefore, 14 IT IS ORDERED granting SRP’s Renewed MTD, (Doc. 48). 15 Dated this 18th day of August, 2022. 16 _ 17 fe 18 > fonorable Susan M. Brovich 19 United States District Judge 20 21 22 23 24 25 26 27 28

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