SolarCity Corporation v. Salt River Project Agricultural Improvement and Power District

Filing 102

ORDER denying the District's 82 Motion for Certification under 28 U.S.C. § 1292(b), and 83 Motion to Stay. (See Order for details.) Signed by Judge Douglas L Rayes on 12/21/2015. (MMO)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 SolarCity Corporation, No. CV-15-00374-PHX-DLR Plaintiff, 10 ORDER 11 v. 12 Salt River Project Agricultural Improvement and Power District, et al., 13 14 Defendants. 15 16 Before the Court are Defendant Salt River Agricultural Improvement and Power 17 District’s (the “District”) Motion for Certification under 28 U.S.C. § 1292(b), (Doc. 82), 18 and Motion to Stay, (Doc. 83). The motions are fully briefed, and neither party requested 19 oral argument. For the reasons below, both motions are denied. BACKGROUND 20 21 Plaintiff SolarCity Corporation, a manufacturer and distributor of solar panels, 22 filed suit against the District and the Salt River Valley Water Users’ Association (the 23 “Association”) alleging violations of federal and state antitrust laws. 24 SolarCity alleges that the District and the Association, operating as the Salt River Project 25 (“SRP”), exercise monopoly power over the sale of retail electricity in the greater 26 Phoenix-metro area. 27 economically infeasible for customers to obtain some of their electricity from solar 28 systems and that the fee has the effect of eliminating competition from SolarCity and (Id., ¶¶ 1-2.) (Doc. 39.) It claims SRP imposed a fee that makes it 1 other solar companies in the market. (Id., ¶¶ 4, 13.) 2 The District and the Association both filed motions to dismiss, which raised 3 several immunities based on the District’s status as a political subdivision of the State of 4 Arizona. (Docs. 52, 53.) On October 27, 2015, the Court dismissed the Association and 5 several of SolarCity’s antitrust claims. 6 Government Antitrust Act (“LGAA”) barred SolarCity’s claims for damages under 7 federal antitrust law because the District is a political subdivision of Arizona, but denied 8 the District’s motion with respect to the remaining immunity defenses. (Id. at 22-26.) 9 SolarCity’s claims for equitable relief under § 2 of the Sherman Act (monopolization and 10 attempted monopolization) and damages claims under state antitrust and tort law 11 survived. The District now moves for the Court to certify three issues for interlocutory 12 appeal pursuant to 28 U.S.C. § 1292(b): (1) whether it is immune from all remaining 13 claims under the state action doctrine, (2) whether it is immune from all damages claims 14 under Arizona Revised Statute (“A.R.S.”) § 12-820.01, and (3) whether it immune from 15 all remaining claims under the filed-rate doctrine. (Doc. 82.) The District also requests 16 that the Court stay the case pending its appeal. (Doc. 83.) 17 (Doc. 77.) It also found that the Local LEGAL STANDARD 18 Under § 1292(b), the district court shall state in a non-appealable order if the court 19 is of the “opinion that such order involves a controlling question of law as to which there 20 is substantial ground for difference of opinion and that an immediate appeal from the 21 order may materially advance the ultimate termination of the litigation[.]” 28 U.S.C. § 22 1292(b). The “requirements of § 1292(b) are jurisdictional,” and the procedure is a 23 “narrow exception to the final judgment rule[.]” Couch v. Telescope Inc., 611 F.3d 629, 24 633 (9th Cir. 2010) (internal quotations omitted). “The party seeking certification has the 25 burden of showing that exceptional circumstances justify a departure from the ‘basic rule 26 of postponing appellate review until after the entry of a final judgment.’” Fukuda v. L.A. 27 Cty., 630 F. Supp. 228, 229 (C.D. Cal. 1986) (quoting Coopers & Lybrand v. Livesay, 28 437 U.S. 463, 475 (1978)). “[A] party’s strong disagreement with the Court’s ruling is -2- 1 not sufficient for there to be a ‘substantial ground for difference.’ [In addition,] [t]hat 2 settled law might be applied differently does not establish a substantial ground for 3 difference of opinion.” Couch, 611 F.3d at 633. 4 5 ANALYSIS I. Motion for § 1292(b) Certification 6 The District argues that each immunity issue satisfies the requirements of § 7 1292(b). It claims that resolution of these issues would avoid the risk of piecemeal 8 litigation and multiple appeals, which would lower the costs and burden for both the 9 parties and the Court. (Doc. 82 at 2.) The Court disagrees. 10 A. State-Action Immunity 11 State-action immunity “exempts qualifying state and local government regulation 12 from federal antitrust, even if the regulation at issue compels an otherwise clear violation 13 of the federal antitrust laws.” Cost Mgmt. Servs. v. Wash. Nat. Gas Co., 99 F.3d 937, 941 14 (9th Cir. 1996) (internal quotation marks omitted). The doctrine originated in Parker v. 15 Brown, 317 U.S. 341 (1943), in which the Supreme Court found that the “Sherman Act 16 was not intended to apply to acts of the States ‘as sovereigns.’” Springs Ambulance 17 Serv., Inc. v. City of Rancho Mirage, Cal., 745 F.2d 1270, 1272 (9th Cir. 1984). But “this 18 state-action immunity does not apply automatically to the state’s political subdivisions.” 19 Id. 20 governmental entities if they are undertaken pursuant to a ‘clearly articulated and 21 affirmatively expressed’ state policy to displace competition.” F.T.C. v. Phoebe Putney 22 Health Sys., Inc., 133 S. Ct. 1003, 1011 (2013). “[G]iven the fundamental national 23 values of free enterprise and economic competition that are embodied in the federal 24 antitrust laws, ‘state-action immunity is disfavored[.]’” Id. at 1010 (quoting F.T.C. v. 25 Ticor Title Ins. Co., 504 U.S. 621, 636 (1992)). “As with private parties, immunity will only attach to the activities of local 26 The District argues that the question of state-action immunity is a controlling 27 question of law because, if it applies, it bars all of SolarCity’s antitrust claims.1 An issue 28 1 It would not bar SolarCity’s remaining state law tort claims. -3- 1 is “controlling” if its resolution on appeal “could materially affect the outcome of 2 litigation in the district court.” In re Cement Antitrust Litig., 673 F.2d 1020, 1026 (9th 3 Cir. 1982). Because equitable relief under the federal antitrust laws is the crux of 4 SolarCity’s case, the Court concludes that application of state-action immunity is a 5 controlling question of law under § 1292(b). See Springs Ambulance, 745 F.2d at 1272 6 (granting permission for interlocutory appeal of district court’s order denying state-action 7 immunity on motion to dismiss after district court found that it is a controlling issue of 8 law). However, the Court finds that the District has failed to demonstrate a substantial 9 ground for difference of opinion on this issue. 10 In ruling on the motion to dismiss, the Court concluded that whether Arizona has 11 articulated a clear policy permitting the District’s conduct is a question of fact and noted 12 that SolarCity had adequately alleged that Arizona has no such policy. (Doc. 77 at 25.) 13 The District argues that the “clear articulation” prong is a question of law that the Court 14 should have decided in its Order. The Court agrees with the District. “[T]he state-action 15 immunity question is one of law that turns on whether the displacement of competition 16 with monopolies in the [relevant] market was ‘clearly articulated and affirmatively 17 expressed as state policy.’” Columbia Steel Casting Co. v. Portland Gen. Elec. Co., 111 18 F.3d 1427, 1442 (9th Cir. 1996). 19 However, correction of this error on appeal would not materially advance the 20 ultimate termination of the litigation because there is no substantial ground for difference 21 of opinion that the District’s alleged conduct is not protected by state-action immunity. 22 Had the Court decided the issue as a matter of law, it would have found that Arizona has 23 not expressly articulated a clear policy authorizing the conduct of the District. See Cost 24 Mgmt., 99 F.3d at 942 (“the relevant question is whether the regulatory structure which 25 has been adopted by the state has specifically authorized the conduct alleged to violate 26 the Sherman Act”). In fact, the opposite is true. A.R.S. § 40-202(B), cited by SolarCity 27 in its response to the District’s motion to dismiss, provides that “[i]t is the public policy 28 of this state that a competitive market shall exist in the sale of electric generation -4- 1 service.” The District did not address this statute in its reply brief, even though, as the 2 moving party, it had the burden of demonstrating that state-action immunity protects its 3 conduct. In light of the statute, there are no substantial grounds for disagreement that 4 Arizona has no clearly expressed and affirmative policy displacing competition in the 5 retail electricity market.2 6 Nonetheless, the District argued that “Arizona’s clearly articulated policy, which 7 is expressed in the Arizona Constitution and statutes, has been to displace unfettered 8 competition with an elaborate regulatory structure.” (Doc. 53 at 10.) It claimed “[r]etail 9 electric rates in Arizona are not determined by competition,” and cited a litany of statutes 10 and regulations pertaining to the Arizona Corporation Commission’s (“ACC”) authority 11 to prescribe rates for public service corporations and the ratemaking process in general. 12 (Id. at 10-11.); see also Ariz. Const. Art. 15 § 3 (mandating that the ACC “shall, 13 prescribe just and reasonable rates and charges to be made and collected, by public 14 service corporations”). In essence, the District argued that its conduct is a foreseeable 15 result of Arizona’s regulatory scheme pertaining to electricity rates because the retail 16 electric market is heavily regulated, no other companies are certified to provide retail 17 electricity, and electricity rates are set by the ACC, not the market. See Hallie v. Eau 18 Claire, 471 U.S. 34, 43 (1985) (finding that state-action immunity applies if 19 “anticompetitive effects logically would result from [the State’s] authority to regulate”). 20 At most, the District demonstrated that Arizona does not permit retail electricity 21 rates to be determined in the open market. This is the function of the ACC. But the fact 22 that electricity rates are heavily regulated does not mean that the District is free to act 23 anticompetitively when setting its own prices for distribution of electricity, which 24 incorporates those rates. See Phoebe, 133 S. Ct. at 1012 (“Our case law makes clear that 25 state-law authority to act is insufficient to establish state-action immunity; the substate 26 27 28 2 The District presents no additional arguments on the merits of its state-action immunity defense. Instead, it only takes issue with the Court’s finding that whether Arizona has a clearly expressed and articulated policy displacing competition in the retail electricity market was a question of fact. -5- 1 governmental entity must also show that it has been delegated authority to act or regulate 2 anticompetitively.”). Nor is the District’s anticompetitive conduct a foreseeable result of 3 fixed electricity rates. The District adheres to an administrative scheme when setting its 4 “terms and conditions for customer selection, complaint resolution, consumer protection, 5 stranded costs, distribution service rates and charges, system benefit charges and other 6 related matters[.]” A.R.S. § 30-802(B). But this hardly indicates that the District is free 7 to act anticompetitively. Rather, the purpose of the administrative process governing the 8 District’s prices is to “promote consistent statewide application of [the public power 9 entities’] respective rules, procedures and orders.” Id. § 3-802(A). 10 In summary, had the Court reached the issue as a matter of law, it would have 11 concluded that Arizona does not have a clearly articulated policy to displace competition 12 in the retail electricity market. 13 competition. Although the Court erroneously concluded that application of state-action 14 immunity presented questions of fact, correction of this error on appeal would not 15 materially advance the ultimate termination of this case because, given the undisputed 16 language of A.R.S. § 40-202(B), it is beyond substantial dispute that the District’s alleged 17 conduct is not protected by state-action immunity. Therefore, the Court declines to 18 certify this issue for interlocutory appeal. The clearly articulated policy in Arizona favors 19 B. Absolute Immunity Under Arizona Law 20 A.R.S. § 12-820.01 provides “absolute immunity” for a public entity’s “exercise 21 of a judicial or legislative function.” As a political subdivision of the state, the District is 22 a “public entity” under Arizona law. See A.R.S. § 12-820(7) (“‘Public entity’ includes 23 this state and any political subdivision of this state.”). This immunity applies to damages 24 only, not equitable relief. See AlliedSignal, Inc. v. City of Phx., 182 F.3d 692, 697 (9th 25 Cir. 1999) (citing Zeigler v. Kirschner, 781 P.2d 54, 61 (Ariz. Ct. App. 1989)). Because 26 this issue turns on questions of fact and would only bar damages, not SolarCity’s claims 27 for equitable relief under the federal antitrust laws, it is not a controlling question of law. 28 See In re Cement Antitrust Litig., 673 F.2d at 1026. -6- 1 In addition, there are no substantial grounds for difference of opinion regarding 2 the Court’s decision. The Court found that whether the District’s alleged ratemaking 3 ability is a legislative function is a question of fact. (Doc. 77 at 23.) The District argues 4 this is a question of law. (Doc. 82 at 8.) Absolute immunity is generally a question of 5 law for the court to decide; however, “[b]ecause absolute immunity is related to a 6 defendant’s status, usually there are limited factual determinations necessary to resolve 7 the issue.” Link v. Pima Cty., 972 P.2d 669, 674 (Ariz. Ct. App. 1998) (internal citations 8 omitted). “If an absolute immunity defense is raised and related factual issues exist, 9 those issues should be resolved by the jury as in qualified immunity cases.” Id. 10 The District labels its conduct as ratemaking, but there is no authority holding that 11 the District’s adoption of prices for sale of retail electricity is ratemaking, let alone that it 12 is a legislative function. The cases cited by the District in its motion applied to the 13 ACC’s ratemaking ability, not the District’s. See Arizona Corp. Comm’n v. State ex rel. 14 Woods, 830 P.2d 807, 812 (Ariz. 1992) (noting ratemaking is a legislative power of the 15 ACC); Arizona Corp. Comm’n v. Superior Court, 480 P.2d 988, 991 (Ariz. 1971) (same). 16 The prices set by the District for its distribution of electricity are wholly separate from 17 the ACC’s process for setting the rate of a commodity sold by a public utility. 18 The District claims “it is the substance of the public function at issue that 19 determines whether it is legislative in character and that if ratemaking is legislative in 20 character for the ACC, it is legislative in character for the District as well.” (Doc. 83 at 21 13.) But when ruling on a motion to dismiss, the Court is limited to the allegations in the 22 complaint. Here, the allegations of the complaint do not allow the Court to make any 23 determination about the District’s price setting function, i.e., whether this function has the 24 same features that make the ACC’s rate setting functions legislative in character. Instead, 25 SolarCity alleges that the District acts more like a private corporation because its Board 26 approves the prices after it receives comment from interested parties, it is not subject to 27 any regulation by any state agency with respect to determining its prices, it refused to 28 release information about the process, and it never released a final decision stating the -7- 1 factual and legal bases for the prices. (Doc. 39, ¶¶ 42, 91-102.) Whether the District 2 engages in ratemaking at all, let alone any legislative functions as a traditional branch of 3 government, remains to be determined on a fully-developed factual record. The Court 4 will not certify this issue for interlocutory appeal. 5 C. Filed-Rate Doctrine 6 The filed-rate doctrine “precludes interference with the rate setting authority of an 7 administrative agency[.]” Wah Chang v. Duke Energy Trading & Mktg., 507 F.3d 1222, 8 1225 (9th Cir. 2007). Rates that are deemed reasonable by a regulatory agency are 9 insulated from challenge. See Ark. La. Gas Co. v. Hall, 453 U.S. 571, 577 (1981).3 10 Originally, the doctrine applied to rates reviewed and filed by federal agencies. See id. at 11 578. Several states have adopted the doctrine, see Qwest Corp. v. Kelly, 59 P.3d 789, 800 12 (Ariz. Ct. App. 2002) (listing cases), but Arizona has not, see id.; see also Johnson v. 13 First Am. Title Ins. Co., No. CV-08-01184-PHX-DGC, 2008 WL 4850198, at *4 (D. 14 Ariz. 2008) (Arizona “has never adopted the filed-rate doctrine”). 15 concluded that the doctrine did not apply because, even assuming the prices set by the 16 District are “rates,” “SolarCity does not challenge the District’s electricity rates as 17 unreasonable, but instead alleges the District imposed the rates to exclude it from the 18 market.” (Doc. 77 at 25.) Here, the Court 19 Assuming arguendo that this is a controlling question of law, there are no 20 substantial grounds for difference of opinion regarding the Court’s finding. The filed- 21 rate doctrine is one of deference for a regulatory agency’s conclusion that a rate for some 22 type of public good or service is reasonable. See Hall, 453 U.S. at 577. The purpose of 23 the doctrine is to prevent “price discrimination among rate payers” and preserve “the role 24 of regulatory agencies in deciding reasonable rates for public utilities and services.” 25 Qwest, 59 P.3d at 799. Federal courts “apply the filed rate doctrine out of deference to a 26 ‘congressional scheme of uniform . . . regulation.’ Otherwise [courts] would 27 3 28 Although refined in Hall, the doctrine originated in Keogh v. Chicago & Northwestern Railway, Co., 260 U.S. 156 (1922), and has been criticized and narrowed by the Ninth Circuit in Cost Management, 99 F.3d at 943-48. -8- 1 impermissibly ‘usurp[ ] a function that Congress has assigned to a federal regulatory 2 body.’” Cty. of Stanislaus v. Pac. Gas & Elec. Co., 114 F.3d 858, 862 (9th Cir. 1997) 3 (quoting Hall, 453 U.S. at 579, 582) (internal citations omitted). 4 SolarCity does not challenge the reasonableness of any “filed rate” set by any 5 regulatory agency. It does not claim the District’s prices are too high, too low, or that 6 they are artificially inflated to increase profit. Rather, they challenge the District’s 7 discriminatory pricing directed at restricting competition. The result would be the same 8 had the District decided to refuse electric service to customers who purchase some of 9 their electricity from SolarCity. 10 The District also conflates the rate for electricity, which is determined by the 11 ACC, and the prices set by the District for distributing that electricity via the grid. The 12 District does not claim to be a regulatory authority, it does not argue that Arizona grants 13 it any authority to set uniform prices for distributing electricity, and it does not file the 14 prices with any other governmental unit but itself.4 No regulatory authority, such as the 15 ACC, approved the District’s electricity prices, and thus there is no reason to assume the 16 prices are reasonable as a matter of law.5 17 Furthermore, the doctrine does not bar antitrust suits by competitors alleging that 18 “the rates which were adopted were adopted in part because of an antitrust violation on 19 the part of the defendant.” Cost Mgmt., 99 F.3d at 947. The District argues SolarCity 20 brings this action “in the shoes” of electric customers. (Doc. 99 at 11.) But the Court has 21 concluded that SolarCity is a competitor of the District, and SolarCity alleges the District 22 violated antitrust laws when it changed its pricing structure. The doctrine simply does 23 not apply to this case, and the Court declines to certify this issue for interlocutory appeal. 24 D. Conclusion 25 26 27 4 If, for instance, SolarCity filed suit challenging the rates for electricity set by the ACC, the doctrine would apply and bar the suit. See Hall, 453 U.S. 5 28 The District argues that its Board approved the prices, and thus they are entitled to deference. But the District cannot self-police its own rates, especially given the Board is elected by its “shareholders,” much like a for-profit corporation. (Doc. 39, ¶¶ 24, 25). -9- 1 The District has failed to establish exceptional circumstances that would justify 2 immediate appeal of these issues. See Livesay, 437 U.S. at 475. The motion is denied. 3 II. Motion to Stay 4 The District requests that the Court stay this action pending resolution of its 5 appeal on two issues: state-action immunity and absolute immunity under Arizona law. 6 (Doc. 83.) The District appealed the Court’s ruling on these issues on November 20, 7 2015. (Doc. 81.) It argues these two immunities are immediately appealable at this 8 stage, and thus the Court should stay the case.6 9 appealable as of right, it “is firmly established that an appeal from an interlocutory order 10 does not divest the trial court of jurisdiction to continue with other phases of the case.” 11 Plotkin v. Pac. Tel. & Tel. Co., 688 F.2d 1291, 1293 (9th Cir. 1982).7 Although the 12 Court must wait for the Ninth Circuit’s determination before proceeding on those issues, 13 the Court is not required to stay the entire case. See Britton v. Co-op Banking Grp., 916 14 F.2d 1405, 1412 (9th Cir. 1990) (“Absent a stay, an appeal seeking review of collateral 15 orders does not deprive the trial court of jurisdiction over other proceedings in the case, 16 and an appeal of an interlocutory order does not ordinarily deprive the district court of Even assuming these issues are 17 18 19 20 21 22 23 24 25 26 27 28 6 The cases cited by the District in support of immediate appeal are not Ninth Circuit authority, and each case dealt with a trial court’s denial of an immunity at the summary judgment stage, not the 12(b) stage. See Commuter Transp. Sys., Inc. v. Hillsborough Cty. Aviation Auth., 801 F.2d 1286, 1289 (11th Cir. 1986) (finding district court’s order denying summary judgment on state-action immunity grounds a final appealable decision); Tucson Unified Sch. Dist. v. Borek, 322 P.3d 181, 184 (Ariz. Ct. App. 2014) (accepting special action jurisdiction of trial court order denying summary judgment on absolute immunity under A.R.S. § 12-820.01); Pinal Cty. v. Cooper, 2015 WL 6157397, at *2 (Ariz. Ct. App. Oct. 20, 2015) (allowing appeal of immunity claims denied on motion for summary judgment). 7 The Court has serious doubts as to whether the two immunity issues are immediately appealable. “Federal appellate jurisdiction is generally limited to review of ‘final decisions of the district courts of the United States.’” DC Comics v. Pac. Pictures Corp., 706 F.3d 1009, 1012 (9th Cir. 2013) (quoting 28 U.S.C. § 1291)). The Court did not make a final decision on the state-action doctrine or absolute immunity under Arizona law. The District is free to raise these immunities at summary judgment. - 10 - 1 jurisdiction except with regard to the matters that are the subject of the appeal.”). As 2 stated above, the Court declines to certify the three immunity issues for direct appeal, and 3 it sees no reason to further delay the case. 4 The District asks the Court to use its discretion and stay the case because the 5 District is likely to succeed on its immunity claims, and it will suffer irreparable injury if 6 the Court denies the stay. (Doc. 83 at 9.) “A stay is not a matter of right, even if 7 irreparable injury might otherwise result.” Nken v. Holder, 556 U.S. 418, 433 (2009). 8 Whether to impose a stay is an exercise of judicial discretion guided by four factors: “(1) 9 whether the stay applicant has made a strong showing that he is likely to succeed on the 10 merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether 11 issuance of the stay will substantially injure the other [parties]; and (4) where the public 12 interest lies.” Id. at 434. 13 The Court has already concluded that the District is unlikely to succeed on its 14 state-action immunity defense and that questions of fact preclude a determination that the 15 District is absolutely immune under Arizona law. In addition, were the Court inclined to 16 grant the stay, the harm suffered by SolarCity would likely outweigh the harm suffered 17 by the District. SolarCity has allegedly been ousted from the market by the District. Not 18 only does it lose sales, it loses customer goodwill and market share. The District, 19 meanwhile, suffers only monetary harm as a result of litigation, i.e., the money it spends 20 defending itself. Monetary harm is not irreparable. See Sampson v. Murray, 415 U.S. 61, 21 90 (1974) (“Mere injuries, however substantial, in terms of money, time and energy 22 necessarily expended in the absence of a stay, are not enough.”). As such, the Court will 23 not exercise its discretion to stay this case. 24 Because the Court declines to certify these issues for appeal, and because the 25 Court finds that the District failed to present “a substantial case for relief on the merits,” 26 see Lair v. Bullock, 697 F.3d 1200, 1204 (9th Cir. 2012), the District’s motion to stay is 27 denied. 28 - 11 - 1 2 3 IT IS ORDERED that the District’s motion for certification pursuant to 28 U.S.C. § 1292(b), (Doc. 82), and motion to stay, (Doc. 83), are DENIED. Dated this 21st day of December, 2015. 4 5 6 7 8 Douglas L. Rayes United States District Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 12 -

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