Opinion
Cause No. NA02-0090-C-B/H
January 9, 2003
ENTRY DENYING DEFENDANT'S MOTION TO DISMISS AND DEFENDANT'S MOTION FOR ORAL ARGUMENT
This matter comes before the court on Defendant Indianapolis Power and Light's ("IPL") Motion to Dismiss and corresponding Motion for Oral Argument on the Motion to Dismiss. Plaintiff John W. Wasson filed suit against IPL and Defendant Peabody Coal Company, alleging violations of §§ 1 and 2 of the Sherman Act and §§ 2(e) and 3 of the Clayton Act as well as certain breach of contract claims. Pursuant to Federal Rule of Civil Procedure 12(b)(6), IPL moved to dismiss the action as against it for failure to state a claim upon which relief may be granted. For the reasons set forth below, we DENY IPL's Motion to Dismiss and Motion for Oral Argument.
Factual Background Plaintiff, John W. Wasson ("Plaintiff"), is an Indiana resident. Compl. ¶ 1. Defendant Peabody Coal Company ("Peabody") is a Delaware corporation with its principal place of business in St. Louis, Missouri; it also mines coal in Warrick County, Indiana. Compl. ¶ 2; Answer ¶ 2. Peabody sells approximately 21% of all coal sold in the United States, Compl. ¶ 15; however, the percentage of the Indiana coal market under Peabody's control is not alleged. Defendant Indianapolis Power and Light Company ("IPL") is an Indiana Corporation with its principal place of business in Indianapolis, Indiana. It is a utility, a producer of electricity, and either a current or former customer of Peabody. Compl. ¶ 3; Answer ¶ 3.
Plaintiff is the successor-in-interest to various rights, including coal royalty payments, provided under coal lease contracts and agreements with Tecumseh Coal Company ("Tecumseh") and with Sentry Royalty Company ("Sentry"). Tecumseh is jointly owned by Peabody and IPL. Compl. ¶ 5.
Sentry merged into Peabody on or about February 5, 1968. Answer ¶ 5. Under the above-referenced coal lease contracts and agreements, Peabody, the coal lessee, must pay Plaintiff, the coal lessor, royalty payments based, at least in part, on the "gross average invoice sales price," or roughly speaking, the market price of coal. Compl. ¶¶ 11-13.
Plaintiff filed his complaint in this court on May 10, 2002, alleging various antitrust and breach of contract claims against Peabody and IPL. Defendant IPL moved to dismiss this action as against it on July 3, 2002.
Legal Analysis Motion to Dismiss IPL moves to dismiss this action pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that Wasson alleges facts insufficient to state a claim under §§ 1 and 2 of the Sherman Act and §§ 2(e) and 3 of the Clayton Act. A pleading is sufficient if it contains (1) a short and plain statement of the grounds upon which the court's jurisdiction depends, (2) a short and plain statement of the claim showing that the pleader is entitled to relief, and (3) a demand for judgment for the relief the pleader seeks. Fed.R.Civ.P. 8(a); South Austin Coalition Cmty. Council v. SBC Communications Inc., 274 F.3d 1168, 1171 (7th Cir. 2001). These statements must simply "give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957).
Such notice pleading is applicable in all but a handful of federal cases. It "relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002). In evaluating the motion to dismiss, we treat all well-pleaded factual allegations as true, and we construe all inferences that reasonably may be drawn from those facts in a light most favorable to the nonmoving party. Fed.R.Civ.P. 12(b)(6); Szumny v. Am. Gen. Fin., 246 F.3d 1065, 1067 (7th Cir. 2001). In addition, the burden rests upon the moving party, IPL in this case, to show that the plaintiff cannot prove any facts that would support his claim for relief. Northern Ind. Gun Outdoor Shows, Inc. v. City of South Bend, 163 F.3d 449, 452 (7th Cir. 1998); Gustafson v. Jones, 117 F.3d 1015, 1017 (7th Cir. 1997).
Rule 9 sets out special pleading requirements for some matters, such as fraud and admiralty, but it does not require extra detail for antitrust suits — and the Supreme Court insists that courts not add to the requirements of Rule 8. See, e.g., Leatherman v. Tarrant County, 507 U.S. 163 (1993); Gomez v. Toledo, 446 U.S. 635, 640 (1980); cf. Crawford-El v. Britton, 523 U.S. 574 (1998).
We find that Plaintiff satisfies the three criteria set forth above with respect to all four antitrust claims it makes against IPL in Count I of the Complaint. First, this court has jurisdiction over this case pursuant to 15 U.S.C. § 15 (suits by persons injured), § 22 (district in which to sue corporation), and § 26 (injunctive relief for private parties). Second, as detailed below, the Complaint makes a short and plain statement of Plaintiff's claims. Plaintiff need not set out in detail all of the facts upon which he bases his claim. Rule 8(a) requires only that the complaint give the defendants fair notice of what the claim is and the grounds upon which it rests. Walker v. Benjamin, 293 F.3d 1030, 1039 (7th Cir. 2002). To provide notice, a complaint need not spell out every element of a legal theory. Scott v. City of Chicago, 195 F.3d 950, 951 (7th Cir. 1999). Third, Plaintiff demands judgment in his favor and specifies the relief he seeks. Compl. p. 14. § 1 Sherman Act Claim With regard to the § 1 Sherman Act claim, Plaintiff has exceeded the pleading minimum by alleging all the elements of the claim: (a) a contract, combination or conspiracy, (b) a resultant unreasonable restraint of trade in the relevant market; and (c) an accompanying injury. See MCM Partners, Inc. v. Andrews-Bartlett Assoc., Inc., 161 F.3d 443, 448 (7th Cir. 1998). Specifically, Plaintiff alleges that IPL conspired with Peabody to: establish price limits and caps for the price of coal in Indiana and in interstate markets, engage in SWAPS, create and maintain a "capped price physical" as a risk management service for IPL, and trade in the derivatives market. Compl. ¶¶ 18(a)-(d). Plaintiff further claims that this conspiracy injured him by "limiting competition in the market for coal by other producers." Compl. ¶ 18.
As defined in the Complaint, a SWAP is the following: (1) when the delivered, market price of coal was within an agreed, fixed range, Peabody kept a premium payment from IPL, separate of the invoice price; and (2) when the delivered, market price of coal was outside the agreed, fixed range, Peabody supplied future deliveries of coal at a reduced price. Compl. ¶ 18(b).
IPL counters that Plaintiff lacks antitrust standing. See Serfecz v. Jewel Food Stores, 67 F.3d 591, 595 (7th Cir. 1995) citing Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977) (Because "Congress did not intend the antitrust laws to provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation," the Supreme Court has construed the language of § 4 to limit the parties who may bring an antitrust action to (1) those who have suffered the type of injury that the antitrust laws were intended to prevent and (2) those whose injuries are a result of defendant's unlawful conduct); Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 530 (1983) (finding that Congress enacted the antitrust laws in order to protect market competition and to provide consumers forced to pay excessive prices with an effective remedy against monopolists).
IPL's arguments against standing consist predominately of challenges to Plaintiff's characterization of the relationships between the parties, such as the question of whether Plaintiff is a coal producer in competition with Defendants (as he claims in Pl.'s Resp. at p. 7, 10-11) or whether Plaintiff is simply a coal lessor and thus a supplier to Defendants. See, e.g., Serfecz, 67 F.3d at 595 ("Suppliers to direct market participants typically cannot seek recovery under the antitrust laws because their injuries are too secondary and indirect to be considered 'antitrust injuries'"). These issues, however, require evidentiary support and the resolution of factual disputes, which cannot be appropriately decided on a motion to dismiss. Int'l Marketing, Ltd. v. Archer-Daniels-Midland Co., Inc., 192 F.3d 724, 729 (7th Cir. 1999) ("[I]t is a truism that fact-finding has no part in resolving a Rule 12(b)(6) motion . . ."). § 2 Sherman Act Claim With regard to the § 2 Sherman Act claim, it may be properly dismissed if the plaintiff fails to identify any facts from which the court can infer that defendants had sufficient market power to have been able to create a monopoly. Endsley v. City of Chicago, 230 F.3d 276, 282 (7th Cir. 2000).
Monopoly power is the power to control prices or exclude competition in the relevant market. See Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, 481 (1992). Citing Indiana Grocery, Inc. v. Super Valu Stores, Inc., 864 F.2d 1409, 1413 (7th Cir. 1989), IPL argues that Plaintiff faces a "stiff burden" in any § 2 case. We note, however, that IPL's argument is a bit premature, as this "stiff burden" is one of proof, not pleading.
Paragraph 18 of the Complaint states that the relevant market is the "market for coal by other producers," and one could infer from the pleadings, as Plaintiff urges, that the relevant market is the market for coal by other producers in Indiana. Pl.'s Resp. at p. 6, 9. IPL is part-owner, with Peabody, of Tecumseh Coal Company, a coal producer in Indiana. Compl. ¶ 17. Although Plaintiff has "not . . . cited a specific percentage of this market for IPL," Pl.'s Resp. at p. 9, such specific factual allegations are not required at this stage of litigation. See Hammes v. Aamco Transmissions, Inc., 33 F.3d 774, 782 (7th Cir. 1994) (stating that plaintiff is not required to plead the particulars of his claim). IPL is also a utility company in Indiana and a customer of Peabody's. Compl. ¶ 3. Although it is unclear from the Complaint in what capacity Plaintiff believes IPL to be a monopolist, as a producer of coal or as a demand-controlling consumer of coal, or both, Plaintiff does allege that IPL has the market power to cap the physical price of coal in Indiana, and this allegation is sufficient to satisfy the pleading requirement.
IPL spends considerable time in its briefs arguing that the coal market in Indiana is an inappropriate relevant market. "After a factual inquiry into the 'commercial realities' faced by consumers in that market," see Eastman Kodak Co., 504 U.S. at 482, IPL may have the evidence to prove its argument on a motion for summary judgment. At this stage of the litigation, however, "it is not inconceivable to us that [Plaintiff] could prove a set of facts supporting the relevant market definition alleged in its complaint." MCM Partners, Inc., 62 F.3d at 977.
In addition, IPL argues that "Plaintiff has failed to allege that any of IPL's actions were anticompetitive and not supportive of IPL's legitimate business interests." Def.'s Br. in Supp. of Mot. to Dismiss at p. 10; see Endsley, 230 F.3d at 283 ("Under § 2, intent to obtain a monopoly is unlawful only where an entity seeks to maintain or achieve monopoly power by anticompetitive means"). We disagree. In the Complaint, Plaintiff alleged generally that "Peabody and IPL (through their various agreements) has (sic) unlawfully attempted to monopolize and restrain interstate trade and commerce," Compl. ¶ 18, and specifically, that SWAPS are anticompetitive because they consist of payments made outside the boundaries set by contract, and that they result in the artificial depression of coal prices. Compl. ¶ 18(b). The question of whether the agreements between IPL and Peabody, including SWAPS, are, in fact, anticompetitive is impossible to determine on the basis of the pleadings alone.
The factual assertions of both parties require evidentiary support, and as such, are more appropriately evaluated in a motion for summary judgment. § 2(e) Clayton Act Claim IPL moves to dismiss Plaintiff's § 2(e) Clayton Act claim, arguing that Plaintiff does not have standing as a competitor to raise the claim. Section 2(e) of the Clayton Act states:
In addition to the elements of a § 2 monopolization claim, a § 2 attempted monopolization claim includes the following element: whether a dangerous probability exists that the attempt will succeed in the relevant market. See Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993). As discussed above, Plaintiff has alleged that IPL has monopoly power in the Indiana coal market. Therefore, we find that Plaintiff has also made the lesser included allegation, that IPL's attempted monopolization of the Indiana coal market is likely to succeed.
It shall be unlawful for any person to discriminate in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale, with or without processing, by contracting to furnish or furnishing, or by contributing to the furnishing of, any services or facilities connected with the processing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms.15 U.S.C. § 13 (2002). The Seventh Circuit has expressly held, "For (2(e)) to be applicable, the favored customers must be competitors of the (disfavored) plaintiff." Kirby v. P.R. Mallory Co., Inc., 489 F.2d 904, 910 (7th Cir. 1973). IPL argues that Plaintiff is not its competitor, but its supplier. We deny IPL's motion to dismiss Plaintiff's § 2(e) Clayton Act claim, however, for the same reasons we denied IPL's challenge to Plaintiff's § 1 Sherman Act claim: disputes over Plaintiff's characterization of the relationships between the parties require evidentiary support and the resolution of factual disputes, which cannot be appropriately decided in a motion to dismiss. See U.S. v. Rochester Gas and Elec. Corp., 4 F. Supp.2d 172, 177 (W.D.N.Y. 1998) (finding that a question of fact as to whether or not the defendant was a potential competitor of a third party precluded summary judgment). § 3 Clayton Act Claim IPL next moves to dismiss Plaintiff's § 3 Clayton Act claim on the grounds that § 3 does not apply to Plaintiff. Section 3 of the Clayton Act provides in pertinent part:
IPL also argues that § 2(e) applies only to "promotion, advertising or similar activities connected with the resale of goods." Def.'s Reply at 15. Cautioned as we are by Centex-Winston Corp. v. Edward Hines Lumber Co., 447 F.2d 585 (7th Cir. 1971), not to apply § 2(e) too narrowly, we reserve decision on the question of whether Peabody's alleged management of IPL's risk constitutes a "service" for purposes of § 2(e) as the parties have not briefed it. In addition, such a question is moot unless we find that IPL is a reseller of Peabody's (or perhaps Tecumseh's) "product of like grade or quality," a question of fact that the parties did not address and that we decline to reach on a motion to dismiss. See Centex-Winston Corp., 447 F.2d at 588.
It shall be unlawful for any person engaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale of goods, wares, merchandise, machinery, supplies, or other commodities . . . for use, consumption, or resale within the United States . . . or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce.15 U.S.C. § 14 (2002). Technically, § 3 of the Clayton Act is written to cover exclusive dealing contracts (contracts requiring the purchaser not to deal in the goods of a competitor of the seller), but Congress also intended it to cover tying arrangements, agreements where one party agrees "to sell one product but only on the condition that the buyer also purchases a different (or tied) product." Town Sound and Custom Tops, Inc. v. Chrysler Motor Corp., 959 F.2d 468, 474 n. 2 (3rd Cir. 1992); see also Eastman Kodak Co., 504 U.S. at 461. Plaintiff's Complaint states that ". . . Peabody supplied the subject coal to IPL for the production of electricity." Compl. ¶ 16. It does not elaborate on the term "subject coal" to indicate whether IPL bought all of its coal from Peabody, i.e., whether the contract between Peabody and IPL was an exclusive dealing contract. Therefore, cognizant of our duty to construe all inferences that reasonably may be drawn from the facts in a light most favorable to the Plaintiff, we deny IPL's motion to dismiss Plaintiff's § 3 Clayton Act claim.
We find that no tying agreement may be inferred from Plaintiff's Complaint. Plaintiff does not allege that IPL bought any product other than coal from Peabody.
IPL argues that § 3 of the Clayton Act does not apply to Plaintiff because, once again, he is not IPL's competitor. We reiterate our conclusion that disputes over Plaintiff's characterization of the relationships between the parties require evidentiary support and the resolution of factual disputes, which cannot be appropriately decided in a motion to dismiss.
We are mindful of the expense of antitrust litigation. Congress, however, has not responded to this expense with extra pleading requirements. Rather, a complaint is sufficient if any state of the world consistent with the complaint could support relief. It is not necessary that facts or the theory of relief be elaborated. South Austin Coalition Cmty. Council, 274 F.3d at 1171 (citations omitted). Therefore, for the foregoing reasons, IPL's Motion to Dismiss is DENIED.
In addition to the antitrust claims Plaintiff makes against IPL in Count I of the Complaint, Plaintiff makes reference to IPL again in Count III (paragraphs 29, 32 and 33). Count III appears to set forth a breach of contract claim against Peabody, involving IPL only to the extent that its alleged anticompetitive agreements with Peabody (described in Count I) resulted in a miscalculation of Peabody's payment of royalties to Plaintiff. Plaintiff does not allege that IPL has a contractual obligation to pay royalties to him, see Compl. ¶¶ 7-13, nor does he seek to recover from IPL any loss resulting from a miscalculation of royalty payments, Compl. p. 14. Therefore, to the extent that Plaintiff argues in his brief that he has asserted claims against IPL in Count III separate from those asserted in Count I, we DISMISS those claims, as no allegations suggesting such claims exist in the Complaint.
Motion for Oral Argument In addition, IPL moves for oral argument on its Motion to Dismiss. Hearings are most helpful for resolving factual disputes. IPL, however, moves for a hearing to discuss the legal issues raised by the parties. Any legal arguments IPL wished to make on its behalf should have been raised in its Brief in Support of Its Motion to Dismiss. Therefore, IPL's Motion for Oral Argument is also DENIED.
Conclusion Defendant IPL moved to dismiss this action as against it, arguing that Plaintiff John W. Wasson failed to state a claim under §§ 1 and 2 of the Sherman Act and §§ 2(e) and 3 of the Clayton Act. For the reasons explained above, IPL's Motion to Dismiss, as well as its Motion for Oral Argument, is DENIED. Count III, as a separate claim, is DISMISSED as explained in footnote 8.