Hu Honua Bioenergy, LLC v. Hawaiian Electric Industries, Inc.

Filing 137

AMENDED ORDER GRANTING IN PART DEFENDANTS NEXTERA ENERGY, INC.'S AND HAMAKUA ENERGY PARTNERS, L.P.'S MOTIONS TO DISMISS, ECF NOS. 73 & 95 , WITH LEAVE TO AMEND. Signed by CHIEF JUDGE J. MICHAEL SEABRIGHT on 1/19/2018. (afc) WRITTEN ORDER amends the Court's Order filed 12/19/2017 as ECF no. 131 . Related: Order, ECF 136 . CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII

HU HONUA BIOENERGY, LLC, a
Delaware Limited Liability Company,

Civ. No. 16-00634 JMS-KJM
AMENDED ORDER GRANTING IN
PART DEFENDANTS NEXTERA
ENERGY, INC.’S AND HAMAKUA
ENERGY PARTNERS, L.P.’S
MOTIONS TO DISMISS, ECF NOS.
73 & 95, WITH LEAVE TO AMEND

Plaintiff,
vs.
HAWAIIAN ELECTRIC
INDUSTRIES, INC., a Hawaii
Corporation; HAWAIIAN ELECTRIC
COMPANY, a Hawaii Corporation;
HAWAII ELECTRIC LIGHT
COMPANY, INC., a Hawaii
Corporation; NEXTERA ENERGY,
INC., a Florida Corporation;
HAMAKUA ENERGY PARTNERS,
L.P., a Hawaii Limited Partnership,
Defendants.

AMENDED ORDER GRANTING IN PART DEFENDANTS NEXTERA
ENERGY, INC.’S AND HAMAKUA ENERGY PARTNERS, L.P.’S
MOTIONS TO DISMISS, ECF NOS. 73 & 95, WITH LEAVE TO AMEND
I. INTRODUCTION
Plaintiff Hu Honua Bioenergy, LLC (“Hu Honua”) contracted with
Defendant Hawaii Electric Light Company, Inc. (“HELCO”) to build an
independent power plant run on biomass to supply energy to HELCO on the Big

1

Island of Hawaii. Given problems with the construction contractor and other labor
issues, Hu Honua was unable to complete the facility on time. After unsuccessful
negotiations to extend deadlines, HELCO cancelled the contract.
Hu Honua filed this suit contending that HELCO’s cancellation was,
among other things, the result of an illegal conspiracy in violation of antitrust laws.
The suit alleges federal antitrust and related state-law claims against HELCO;
Hawaiian Electric Company, Inc. (“HECO”); Hawaiian Electric Industries, Inc.
(“HEI”); NextEra Energy, Inc. (“NextEra”); and Hamakua Energy Partners, L.P.
(“HEP”). It also alleges that HELCO breached the contract by refusing to extend
deadlines under the contract’s terms.
The court now addresses Motions to Dismiss brought by NextEra and
HEP under Federal Rule of Civil Procedure 12(b)(6). ECF Nos. 73, 95. Based on
the following, the Motions are GRANTED in part. The federal antitrust claims are
DISMISSED as to NextEra and HEP, with leave to amend. The Motions are
DENIED without prejudice as to the state-law claims against NextEra and HEP.
Hu Honua may file a Second Amended Complaint by January 29, 2018.1
1

This Order amends and supersedes the court’s December 19, 2017 Order regarding
NextEra’s and HEP’s Motions to Dismiss to add minor changes as reflected in the court’s
concurrently-filed Order (1) Granting In Limited Part Plaintiff Hu Honua Bioenergy, LLC’s First
Amended Motion for Reconsideration or Clarification, ECF No.133; and (2) Amending
December 19, 2017 Order.

2

II. BACKGROUND
A.

Factual Background
Hu Honua’s 96-page First Amended Complaint (“FAC”), ECF No.

27, describes the structure of the electric utility market in Hawaii — in particular,
on the island of Hawaii (the Big Island) — and alleges in detail a scheme (although
ultimately deficiently, at least as to its antitrust claims) whereby HELCO’s
cancellation of the contract not only breached certain of its terms but was also part
of a conspiracy or conspiracies among NextEra, HEP and the other Hawaiian
Electric Defendants2 to monopolize or restrain trade in violation of antitrust laws.
After suit was filed, Hu Honua and the Hawaiian Electric Defendants
reached a settlement in conjunction with a renegotiated contract for Hu Honua to
complete its biomass power plant. ECF No. 122. Consummation of that
settlement is awaiting final completion of the approval process involving the
Hawaii Public Utilities Commission (“PUC”). 3 Perhaps because of that settlement,
the Hawaiian Electric Defendants have not moved to dismiss the FAC. (Earlier,
they filed a motion seeking to compel arbitration, but asked the court to hold that
2

The court sometimes refers to HELCO, HECO, and HEI collectively as the “Hawaiian
Electric Defendants.”
3

The PUC has approved the renegotiated contract, and construction of the facility is
ongoing, although the final settlement with the Hawaiian Electric Defendants is awaiting
disposition of a related state-court appeal of the PUC-approval. See ECF No. 122.

3

motion in abeyance, pending consummation of the settlement, ECF No. 126).
Because only NextEra and HEP have moved to dismiss, the court focuses on
setting forth the essential factual allegations against them. That is, the court need
not (and does not) reiterate all the details alleged in the lengthy FAC as to the
Hawaiian Electric Defendants, but describes those facts necessary to put the claims
against NextEra and HEP into proper context. And some of the relevant factual
allegations are set forth later, in the appropriate discussion sections analyzing
particular claims. For present purposes, the court assumes as true any well-pleaded
factual allegations set forth in the FAC.
1.

The Basic Structure of the Electric Utility Market in Hawaii
Unlike on the continental United States — where states and utilities

may utilize large interconnected, interstate power grids comprised of high-voltage
transmission lines — each island in the State of Hawaii has its own isolated grid
and power supplies. FAC ¶¶ 14-16. HECO is such an electric utility providing
electricity to consumers on the island of Oahu; likewise, HELCO is the electric
utility providing electricity to the Big Island. Id. ¶ 17. (Although not a defendant,
Maui Electric Company (“MECO”) powers the islands of Maui, Lanai, and

4

Molokai. Id. 4) HEI is a holding company, with HECO as one of its subsidiaries.
In turn, HELCO and MECO are subsidiaries of HECO. Id. ¶¶ 3-5.
Power supplied to electric utilities (which utilities then provide to
retail consumers) is divided into two basic categories: “firm power” and
“intermittent power.” Id. ¶ 18. “Firm power” (generated by fossil fuels,
geothermal, biomass, and similar sources) is power that is intended always to be
available during “the period covered by a guaranteed commitment to deliver.” Id.
In contrast, “intermittent” power consists of sources such as wind or solar that are
not always available, “with output controlled by the natural variability of the
energy resource rather than power dispatched based on system requirements.” Id.
Much of Hawaii’s power currently comes from fossil fuels. “77% of
Hawaii’s electricity is generated by petroleum, making the State’s utility the most
oil dependent in the country. All of the petroleum consumed in the State is
generated from crude oil imported from South East Asia and other off-shore
locations.” Id. ¶ 11. And so, “[t]o mitigate the risk of dependence on foreign fuel
sources, the Hawaii state government policies and legislation have sought to place
greater emphasis on the development of renewable energy resources[.]” Id. ¶ 13.

4

The island of Kauai is served by Kauai Island Utility Cooperative, which is an entity not
related to any of the Defendants.

5

“[I]n June 2015, the Hawaii Legislature amended Hawaii’s Renewable Portfolio
Standard statute to require Hawaii to move towards achievement of 100%
renewable energy by 2045.” Id.
HELCO serves approximately 85,000 customers on the Big Island.
Id. ¶ 21. “HELCO currently owns fossil fuel plants that generate in excess of 65%
of the [Big] Island’s dispatchable firm electrical capacity.” Id. Specifically, it
“owns and operates six oil-fired power generation plants, accounting for 184 MW
[(megawatts)] of firm power capacity[.]” Id. ¶ 28. “In addition to its own fossil
fuel plants, HELCO purchases firm power generation capacity [and electrical
energy] from HEP, which owns a 60 MW fossil-fuel combined cycle power plant,
pursuant to a 1997 Power Purchase Agreement.” Id. ¶ 22. “HEP is one of only
two independent power producers (‘IPPs’) on the Island of Hawaii that provides
firm power generating capacity.” Id. ¶ 23. The other is Puna Geothermal Venture
“whose power capacity is 34.6 MW, only part of which is firm.” Id.
“HELCO is compensated differently for the power that it generates
itself through the power plants that it owns versus the power that it purchases from
IPPs.” Id. ¶ 32. “In fact, as a result of HELCO’s ability to recover its capital costs,
and an annual fixed rate of return on those costs, HELCO receives more revenue

6

through the rates paid by its customers for the sale of power that HELCO generates
from running its own units than from the power it purchases from IPPs.” Id.
“In Hawaii, IPPs must sell power to a public utility because Hawaii’s
utilities have not permitted the use of their grids for the ‘wheeling’ or transmission
of power to power purchasers, and because it would be economically impractical
for IPPs to build their own transmission and distribution system.” Id. ¶ 24. “As a
result, HELCO is not only the monopoly retail seller of electricity on the Island of
Hawaii, but also the monopoly owner of electricity transmission and distribution
infrastructure and monopoly purchaser of wholesale electricity.” Id.
2.

The Hu Honua Power Purchase Agreement
In May 2012, Hu Honua entered into a Power Purchase Agreement for

Renewable Dispatchable Firm Energy and Capacity (“the Hu Honua PPA” or “the
Contract”) with HELCO under which Hu Honua would develop an independent
power plant on the Hamakua Coast of the Big Island, with a renewable biomass
fuel source (e.g., eucalyptus trees) of firm power. Id. ¶¶ 1, 34, 38. “The trees were
to be 100% locally grown and harvested on a sustainable rotational basis and
would have provided an important means to reduce Hawaii’s dependence on
imported fossil fuels.” Id. ¶ 34.

7

Hu Honua’s power plant would supply HELCO with “no less than 10
MW of electricity capacity at all times,” with the facility having a “maximum
‘Available Capacity’ of approximately 30 net MW.” Id. ¶ 46. Hu Honua began
construction in late October 2012, but was unable to complete the facility by the
end of 2015, as contemplated by the Hu Honua PPA, because of disputes with its
construction contractor, labor union issues, and related litigation. Id. ¶ 51, 58. 5
After unsuccessful negotiations between Hu Honua and HELCO to extend
milestone dates as provided in the Hu Honua PPA (where milestone-date extension
requests “shall not be unreasonably withheld,” id. ¶ 42), HELCO cancelled the
Contract on March 1, 2016. Id. ¶ 60.
3.

NextEra’s Proposed Merger with HEI, and HELCO’s Proposed
Purchase of HEP’s Power Plant
Meanwhile, two other relevant things happened: First, “the proposed

merger” — on December 3, 2014, NextEra, which is a large Florida-based utility
holding company, and HEI entered into an Agreement and Plan of Merger (the
5

HEP provides a listing from Hawaii state court records of “28 different legal actions
against Hu Honua during this time period, including one that resulted in Hu Honua losing control
of the facility until it paid a stipulated judgment.” ECF No. 95-1, Mem. at 8-9 (citing Egesdal
Decl., Ex. D, ECF No. 95-6). Although the court has not reviewed the substance of these
actions, the court takes judicial notice of the existence and number of state court actions. Lee v.
City of L.A., 250 F.3d 668, 689 (9th Cir. 2001). And, according to the FAC, “Hu Honua’s
disputes with its former construction contractor and the labor union jurisdiction dispute caused
an irretrievable loss of time . . . [such that] Hu Honua realized that it would not be able to
achieve two milestone[] dates set forth in the PPA[.]” FAC ¶ 58.

8

“NextEra/HEI Merger Agreement” or “Merger Agreement”) under which HEI
subsidiaries HELCO and HECO would become wholly-owned subsidiaries of
NextEra. Id. ¶¶ 6, 52. 6 And second, “the proposed purchase” — on December 23,
2015, HECO and HELCO publicly disclosed that HELCO would purchase HEP’s
60 MW fossil-fuel power plant for over $88 million. Id. ¶¶ 22, 91.7
“Article V of the Merger Agreement addresses certain issues relating
to HECO’s conduct of its and its subsidiaries’ business during the pendency of the
merger. Among other things, Article V prohibited HECO from engaging in several
activities without NextEra’s prior consent.” Id. ¶ 56. Specifically, “§ 5.01(a)(xii)
provides that HECO/HELCO shall not:

6

The Merger Agreement required approval by the PUC. But after several months of
hearings, the PUC rejected the Merger Agreement on July 15, 2016. See, e.g., Kathryn
Mykleseth, PUC Rejects NextEra’s Purchase of Hawaiian Electric, Honolulu Star-Advertiser,
July 15, 2016 (available at http://www.staradvertiser.com/2016/07/15/business/businessbreaking/puc-rejects-nexteras-purchase-of-hawaiian-electric/(last visited Dec. 15, 2017).
7

On May 4, 2017, the PUC rejected HELCO and HECO’s application to approve the
purchase of HEP’s facility. See Egesdal Decl., Ex. B., ECF No. 95-4 (In re Hawaiian Electric
Co. (Hawaii P.U.C. May 4, 2017) (Decision and Order No. 34536)). The court takes judicial
notice of publicly-available decisions of the PUC. See, e.g., Bartolotti v. Maui Mem’l Med. Ctr.,
2015 WL 4545818, at *3 (D. Haw. July 28, 2015) (“The court may ‘take judicial notice of
‘matters of public record[,]’ ‘as long as the facts noticed are not ‘subject to reasonable dispute.’”)
(quoting Intri–Plex Techs., Inc. v. Crest Grp., Inc., 499 F.3d 1048, 1052 (9th Cir. 2007)); id.
(“‘Matters of public record that may be judicially noticed include records and reports of
administrative bodies,’ and documents filed with courts, ‘both within and without the federal
judicial system, if those proceedings have a direct relation to the matters at issue.’”) (quoting
Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994) & United States v. Borneo, Inc., 971 F.2d
244, 248 (9th Cir. 1992)).

9

(1) enter into, terminate or amend in any material respect any
material Contract,
(2) consent to any extension or continuation of any material
Contract . . . or
(3) waive any material right on any material Contract[.]”
FAC ¶ 56.8 Based on this consent provision, Hu Honua alleges that NextEra
“exercised total control over HECO’s/HELCO’s conduct of their important
business actions and material agreements, including the fate of Hu Honua’s PPA.”
Id.
As for HELCO’s proposed purchase of the HEP power plant, Hu
Honua alleges that its biomass facility “would have been a direct competitor to the
HEP Power Plant in the supply of wholesale electricity capacity to HELCO.” Id.
¶ 90. Hu Honua alleged “[o]n information and belief, HELCO planned to acquire
the HEP Power Plant in order to further HELCO’s strategy to increase its

8

Paragraph 5.01(a) of the Merger Agreement also provides that such consent “shall not
be unreasonably withheld, conditioned or delayed.” ECF No. 73-3 at 5, Merger Agreement at
38. And Paragraph 5.01(c) reads in part:
No Control of [HEI’s] Business. [NextEra] acknowledges and
agrees that (i) nothing contained in this Agreement is intended to
give [NextEra], directly or indirectly, the right to control or direct
the operations of [HEI] or an [HEI] Subsidiary prior to the
Effective Time and . . . prior to the Effective Time, [HEI] shall
exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision over its and [HEI’s]
Subsidiaries’ respective operations.
ECF No. 73-3 at 10, Merger Agreement at 43.

10

monopoly over power generation on the Island of Hawaii.” Id. ¶ 92. “On
information and belief, HELCO favors its own power generation instead of
purchasing power from Hu Honua, because HELCO generates more profit by
owning its own power generation.” Id. And, as for HEP’s motivation, it alleges
that
HEP had its own reasons for wanting the Hu Honua PPA
terminated. As early as 2012, HEP recognized that the
proposed Hu Honua Facility was a direct competitive
threat. On September 19, 2012, it filed a motion to
intervene in the Commission’s docket for HELCO’s
Application for Approval of the Hu Honua PPA, which it
vigorously opposed on the grounds that “[t]he
introduction of the proposed Hu Honua plant would,
according to [the] HELCO plan outlined in its
application, reduce the HEP Plant’s dispatch.” In sum,
HEP, as the operator of the largest power plant on the
Island, attempted unsuccessfully to exclude Hu Honua as
a competitor in the power generation market. It was
presented with another opportunity three years later to
accomplish that objective. Hu Honua is informed and
believes, and on that basis alleges, that HEP participated
in and supported the termination of Hu Honua’s PPA, as
alleged [in the FAC].
Id. ¶ 99. 9

9

HEP challenges the FAC’s allegation that it “vigorously opposed” Hu Honua’s
application, pointing to a public document (a 2012 “Statement of Position” before the Hawaii
PUC) stating in part: “HEP does not take a position as to the prudence of approving the power
purchase agreement. . . . Rather, HEP’s position is that if the Commission does approve the Hu
Honua PPA, it should not do so without requiring that HELCO adequate[ly] consider and plan to
(continued . . .)
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4.

Hu Honua Files This Action
After HELCO cancelled the Hu Honua PPA in March of 2016 (and

after the PUC rejected the proposed NextEra/HEI Merger Agreement in July
2016), Hu Honua filed the original Complaint in this action on November 30,
2016, ECF No. 1. It filed the FAC on January 27, 2017, ECF No. 27, alleging the
following counts:
•

Count One — Violation of Section Two of the Sherman Act, 15
U.S.C. § 2 (attempted monopolization, conspiracy to monopolize, and
monopolization) against the Hawaiian Electric Defendants and
NextEra;

•

Count Two — Violation of Section One of the Sherman Act, 15
U.S.C. § 1 (conspiracy to restrain trade) against all Defendants;

•

Count Three — Breach of Contract against HELCO;

•

Count Four — Promissory Estoppel against HELCO;

•

Count Five — Breach of the Covenant of Good Faith and Fair Dealing
against HELCO;

•

Count Six — Breach of Fiduciary Duty against HELCO;

•

Count Seven — Tortious Interference with Contract against NextEra;

•

Count Eight — Unfair Competition in Violation of HRS Chapter 480
against All Defendants;

(. . . continued)
deal with the excess generating capacity that the Hu Honua asset would add[.]” Egesdal Decl.
Ex. D at 2, ECF No. 95-3 at 3.

12

•

Count Nine — Declaratory Relief against HELCO; and

•

Count Ten — Conversion against HELCO.

FAC at 69-93. Hu Honua claims it was damaged “in the amount of its investment
of $120 million in the plant, plus lost profits of $435 million.” Id. ¶ 1. It seeks
treble damages and attorney fees, among other injunctive relief. Id. at 94-95.
Hu Honua alleges that HELCO’s cancellation of the Hu Honua PPA
was illegal under the Sherman Act in two ways. First, it alleges that, in
conjunction with the proposed Merger Agreement, NextEra conspired with
Hawaiian Electric Defendants to monopolize the market for wholesale firm power
on the Island of Hawaii, in violation of 15 U.S.C. § 2. FAC ¶¶ 135-55. Second, it
alleges that HEP (with the proposed purchase by HELCO of HEP’s power plant),
NextEra and the Hawaiian Electric Defendants conspired to restrain trade in the
market for wholesale firm power on the Big Island, in violation of 15 U.S.C. § 1.
Id. ¶¶ 156-65.
B.

Procedural History
On February 16, 2017, the Hawaiian Electric Defendants filed a

Motion to Compel Arbitration, ECF No. 33, which was set for hearing on May 22,
2017. But on May 12, 2017, the Hawaiian Electric Defendants notified the court
of the preliminary settlement between them and Hu Honua, and the hearing was

13

continued until August 7, 2017, to allow the Hawaii PUC to consider the
renegotiated Hu Honua PPA. ECF No. 76, 77.
NextEra filed its Motion to Dismiss on May 3, 2017, ECF No. 73, and
HEP filed its Motion on June 2, 2017, ECF No. 95. The Motions were also set for
hearing on August 7, 2017. (Discovery has been stayed pending a ruling on these
Motions. ECF Nos. 59, 105.) Hu Honua filed its Oppositions on July 17, 2017,
ECF Nos. 108-09, and Replies were filed on July 24, 2017, ECF Nos. 112-13. On
July 17, 2017, the Hawaiian Electric Defendants filed short joinders in both
Motions to Dismiss. ECF Nos. 106-07.
The August 7, 2017 hearing was continued to allow further time for
PUC approval of the renegotiated Hu Honua/HELCO PPA, ECF Nos. 115, 117,
and was later rescheduled for November 6, 2017, upon request by the parties. ECF
No. 119. The court then granted a request to hold the Hawaiian Electric
Defendants’ Motion to Compel Arbitration in abeyance, pending finalization of the
settlement, ECF No. 126.10 The court, however, proceeded to hear the Motions to
Dismiss on November 6, 2017.

10

Given the pending settlement between Hu Honua and the Hawaiian Electric
Defendants, the court is likewise deferring ruling on the joinders by Hawaiian Electric
Defendants. For administrative purposes, as discussed at the November 6, 2017 hearing, the
joinders are DENIED as MOOT without prejudice. ECF No. 127.

14

III. STANDARD OF REVIEW
A.

Rule 12(b)(6)’s Plausibility Standard
Federal Rule of Civil Procedure 12(b)(6) allows a court to dismiss a

complaint for “failure to state a claim upon which relief can be granted.” Such a
dismissal is proper “‘based on the lack of a cognizable legal theory or the absence
of sufficient facts alleged.’” UMG Recordings, Inc. v. Shelter Capital Partners,
LLC, 718 F.3d 1006, 1014 (9th Cir. 2013) (quoting Balistreri v. Pacifica Police
Dep’t, 901 F.2d 696, 699 (9th Cir. 1988)).
In resolving a Rule 12(b)(6) motion, the court “accept[s] as true all
well-pleaded allegations of material fact, and construe[s] them in the light most
favorable to the non-moving party.” Sateriale v. R.J. Reynolds Tobacco Co., 697
F.3d 777, 784 (9th Cir. 2012) (quoting Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d
992, 998 (9th Cir. 2010)). But a “formulaic recitation of the elements of a cause of
action” will not defeat a motion to dismiss. Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007). The complaint “must contain sufficient factual matter, accepted
as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). This tenet — that
the court must accept as true all of the allegations contained in the complaint — “is
inapplicable to legal conclusions.” Id. Accordingly, “[t]hreadbare recitals of the

15

elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Id. (citing Twombly, 550 U.S. at 555).
B.

The Antitrust Context
“The plausibility standard . . . asks for more than a sheer possibility

that a defendant has acted unlawfully.” Id. “Where a complaint pleads facts that
are ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line
between possibility and plausibility of entitlement to relief.’” Id. (quoting
Twombly, 550 U.S. at 557). Determining plausibility is “a context-specific task
that requires the reviewing court to draw on its judicial experience and common
sense.” Id. at 679 (citation omitted). And in analyzing these principles in the
antitrust context, Twombly recognized that “proceeding to antitrust discovery can
be expensive,” 550 U.S. at 558, and reiterated that “a district court must retain the
power to insist upon some specificity in pleading before allowing a potentially
massive factual controversy to proceed.” Id. (quoting Associated Gen. Contractors
of Cal., Inc. v. Carpenters, 459 U.S. 519, 528 n.17 (1983)).
Thus, although Twombly did not impose a heightened pleading
standard for antitrust conspiracy cases, 550 U.S. at 569 n.14, in this context
“[a]llegations of facts that could just as easily suggest rational, legal business
behavior by the defendants as they could suggest an illegal conspiracy are

16

insufficient to plead a violation of the antitrust laws.” Kendall v. Visa U.S.A., Inc.,
518 F.3d 1042, 1049 (9th Cir. 2008) (citing Twombly, 550 U.S. at 553-58 & n.5);
see also Name.Space, Inc. v. Internet Corp. for Assigned Names & Numbers, 795
F.3d 1124, 1130 (9th Cir. 2015) (“We cannot, however, infer an anticompetitive
agreement when factual allegations ‘just as easily suggest rational, legal business
behavior.’” (quoting Kendall, 518 F.3d at 1049)). “[C]onduct that is as consistent
with permissible competition as with illegal conspiracy does not, without more,
support even an inference of conspiracy.” Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 597 n.21 (1986) (citations omitted). And so, “[w]hen
considering plausibility, courts must also consider an ‘obvious alternative
explanation,’ for defendant’s behavior.” Eclectic Props. E., LLC v. Marcus &
Millichap Co., 751 F.3d 990, 996 (9th Cir. 2014) (quoting Iqbal, 556 U.S. at 682).
C.

General Principles
Rule 12(b)(6) review is generally limited to the contents of the

complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).
Nevertheless, courts may “consider certain materials — documents attached to the
complaint, documents incorporated by reference in the complaint, or matters of
judicial notice — without converting the motion to dismiss into a motion for
summary judgment.” United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).

17

Courts may also “take into account ‘documents whose contents are alleged in a
complaint and whose authenticity no party questions, but which are not physically
attached to the plaintiff’s pleading.’” Davis v. HSBC Bank Nev., N.A., 691 F.3d
1152, 1160 (9th Cir. 2012) (quoting Knievel v. ESPN, 393 F.3d 1068, 1076 (9th
Cir. 2005) (brackets omitted)).
When a complaint is dismissed, the court “‘should grant leave to
amend even if no request to amend the pleading was made, unless it determines
that the pleading could not be cured by the allegation of other facts.’” Lopez v.
Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (en banc) (quoting Doe v. United
States, 58 F.3d 494, 497 (9th Cir. 1995)). Leave to amend “is properly denied,
however, if amendment would be futile.” Carrico v. City & Cty. of S.F., 656 F.3d
1002, 1008 (9th Cir. 2011).
IV. DISCUSSION
A.

Count One (Monopolization) Fails to State a Plausible Claim Against
NextEra
Section 4 of the Clayton Act allows “any person who shall be injured

in his business or property by reason of anything forbidden in the antitrust laws” to
sue for treble damages and costs of suit. 15 U.S.C. § 15(a). Count One asserts
such a claim against each of the Hawaiian Electric Defendants and NextEra based
upon alleged violations of § 2 of the Sherman Act, which makes it illegal for a
18

person to “monopolize, or attempt to monopolize, or combine or conspire with any
other person or persons, to monopolize any part of the trade or commerce among
the several States[.]” 15 U.S.C. § 2. Hu Honua claims that “HELCO’s, along with
HECO’s and HEI’s, conduct and practices as described [in the FAC], and as
controlled by NextEra, were undertaken for the purpose and have had the effect of
monopolizing the market for firm generation of electricity on the Island of
Hawaii.” FAC ¶ 137. It alleges that “NextEra entered into a contract,
combination, or conspiracy with HELCO in furtherance of HELCO’s unlawful
monopolizing and attempting to monopolize the relevant market in violation of
Section 2,” FAC ¶ 138, where “the relevant market” is “the market for wholesale
firm baseload power generation on the Island of Hawaii.” FAC ¶ 139.11
A § 2 monopolization claim has three essential elements: “‘(a) the
possession of monopoly power in the relevant market; (b) the willful acquisition or
maintenance of that power; and (c) causal antitrust injury.’” Name.Space, Inc., 795
F.3d at 1131 (quoting Allied Orthopedic Appliances Inc. v. Tyco Health Care Grp.

11

As set forth previously, the Hawaiian Electric Defendants did not file a motion to
dismiss (having instead filed joinders in NextEra’s and HEP’s Motions). Again — because the
court has held any motions by the Hawaiian Electric Defendants in abeyance pending the
settlement between Hu Honua and the Hawaiian Electric Defendants — this Order focuses on the
FAC’s allegations against NextEra and HEP. That is, the court is not specifically ruling on
whether any claims (antitrust or otherwise) are stated (or not) as to the Hawaiian Electric
Defendants.

19

LP, 592 F.3d 991, 998 (9th Cir. 2010)). “Similarly, to state a claim for attempted
monopolization, the plaintiff must allege facts that, if true, will prove: ‘(1) that the
defendant has engaged in predatory or anticompetitive conduct with (2) a specific
intent to monopolize and (3) a dangerous probability of achieving monopoly
power.’” Coalition for ICANN Transparency, Inc. v. VeriSign, Inc., 611 F.3d 495,
506 (9th Cir. 2010) (quoting Cascade Health Sols. v. PeaceHealth, 515 F.3d 883,
893 (9th Cir. 2008)). And “[t]o prove a conspiracy to monopolize in violation of §
2, [a plaintiff] must show four elements: (1) the existence of a combination or
conspiracy to monopolize; (2) an overt act in furtherance of the conspiracy; (3) the
specific intent to monopolize; and (4) causal antitrust injury.” Paladin Assocs.,
Inc. v. Montana Power Co., 328 F.3d 1145, 1158 (9th Cir. 2003) (citation omitted).
1.

The FAC Fails to State a Claim for Monopolization and Attempted
Monopolization Against NextEra
NextEra argues that any monopolization and attempted

monopolization claims against it fail at the outset because — as a power producer
in Florida — it was never a competitor with Hu Honua in the wholesale firm
baseload power generation market on the island of Hawaii. See, e.g., Name.Space,
Inc., 795 F.3d at 1131 (“Because [defendant] is not a competitor in any of the three
markets, they cannot serve as the basis for a § 2 monopoly claim.”) (citing MercyPeninsula Ambulance, Inc. v. San Mateo Cty., 791 F.2d 755, 759 (9th Cir. 1986)
20

(“The gravamen of a section 2 claim is the deliberate use of market power by a
competitor[.]”) (other citation omitted)); Glen Holly Entm’t, Inc. v. Tektronix, Inc.,
352 F.3d 367, 372 (9th Cir. 2003) (“‘[T]he party alleging the injury must be either
a consumer of the alleged violator’s goods or services or a competitor of the
alleged violator[.]’”) (quoting Eagle v. Star-Kist Foods, Inc., 812 F.2d 538 (9th
Cir. 1987)); Spanish Broad. Sys. of Fla., Inc. v. Clear Channel Commc’ns, Inc.,
376 F.3d 1065, 1075 (11th Cir. 2004) (“There is no question that [defendant] does
not participate in the Spanish-language radio market. Thus, [defendant] cannot
attempt to monopolize that market.”) (emphasis added) (cited with approval in
Name.Space, Inc., 795 F.3d at 1131).
In response, Hu Honua clarifies that it “only asserts a claim for
conspiracy to monopolize against NextEra.” ECF No. 109, Opp’n at 34-35 n.8
(emphasis added). In any event, the FAC fails to allege a prerequisite (competitor
in the same market) to a § 2 monopolization or attempted monopolization claim
against NextEra. Accordingly, Count One, to the extent it alleges § 2 claims for
monopolization or attempted monopolization against NextEra, is DISMISSED

21

with prejudice.12 The court thus focuses on whether the FAC adequately alleges a
conspiracy to monopolize as to NextEra.
2.

Allegations of Conspiracy to Monopolize Against NextEra Also Fail
a.

No specific intent to monopolize

NextEra initially challenges the conspiracy to monopolize claim by
focusing on the third element of a § 2 conspiracy — “the specific intent to
monopolize.” Paladin Assocs., Inc., 328 F.3d at 1158. NextEra argues that, just
because it agreed to merge with HEI and then approved HELCO’s termination of
Hu Honua’s PPA, the conspiracy claim fails because the FAC lacks any facts that,
even if true, would plausibly establish that NextEra specifically intended to
monopolize the wholesale firm power generation market on the Island of Hawaii.
See Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1437 n.8 (9th Cir. 1995) (“To
prove a conspiracy to monopolize, Rebel must show that the independent dealers
had the specific intent to conspire to monopolize; it is not enough to show that the
dealers merely agreed to go along with ARCO’s pricing.”); see also, e.g., Syufy
Enters. v. Am. Multicinema, Inc., 793 F.2d 990, 1000 (9th Cir. 1986) (“Nor is there

12

To be clear, this dismissal is only as to monopolization or attempted monopolization
claims against NextEra; the court is not reaching to any extent whether such claims are, or could
be, properly stated against any other Defendant.

22

any showing that any of the distributors shared with Syufy a common purpose in
monopolizing the hardtop theater market in the San Jose area.”).
In response, Hu Honua contends that NextEra’s specific intent to
monopolize can be inferred from the FAC’s allegations that HELCO “has an
incentive to favor its own generation over that of competitor power generation,”
FAC ¶ 142, and that incentive is shared by NextEra as part of its own business
strategy. ECF No. 109, Opp’n at 33. Hu Honua emphasizes the FAC’s allegations
that, during the same time-frame as the proposed NextEra/HEI Merger Agreement,
HECO (1) terminated three pending solar power purchase agreements on Oahu
(similarly to HELCO’s cancellation of Hu Honua’s PPA), and (2) submitted plans
to the Hawaii PUC to convert some power plants on Oahu to liquefied natural gas,
FAC ¶¶ 128, 131, where NextEra also has natural gas assets, and planned to “help
HECO execute on plans to bring liquid natural gas to Hawaii” with the merger.
FAC ¶ 55 (citation omitted).
But even assuming the FAC adequately alleges that the Hawaiian
Electric Defendants possessed or sought a monopoly in the relevant power
production market, there are no facts pled that would suggest NextEra specifically
intended to monopolize that market, merely by consenting to HELCO’s
termination of the Hu Honua PPA. See Rebel Oil Co., 51 F.3d at 1438 n.8 (“[I]t is

23

not enough to show that [a defendant] merely agreed to go along.”); Syufy Enters.,
793 F.2d at 1000 (“[A] supplier who licenses a product to another does not join the
licensee in a conspiracy to monopolize merely because the licensee turns around
and exploits the license for its own monopolistic purposes.”).
In this regard, it is not enough to suggest — as Hu Honua does — that
NextEra shared a motive to increase prices or profits with a similar strategy. See,
e.g., In re Baby Food Antitrust Litig., 166 F.3d 112, 133 (3d Cir. 1999) (rejecting
argument, in a price-fixing context, that a motive to achieve higher prices could
demonstrate conspiracy because if that were true “every company in every industry
would have such a ‘motive.’”). “Motivation to enter a conspiracy is never enough
to establish a traditional conspiracy.” VI Philip E. Areeda & Herbert Hovenkamp,
Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 1411
(4th ed. 2017).13
b.

No antitrust injury

More important, even if the FAC alleged enough factual content to
support an inference that NextEra specifically intended to monopolize the market
for wholesale firm power on the Big Island, the § 2 conspiracy claim nevertheless
13

Furthermore, as analyzed in detail when the court considers Count Two to follow in
discussion section B.2.a, the FAC’s allegations that NextEra totally controlled HELCO’s
decisions after the Merger Agreement lack plausibility and thus cannot form the basis of
NextEra’s specific intent to monopolize.

24

fails for lack of the fourth element — “causal antitrust injury.” Paladin Assocs.,
Inc., 328 F.3d at 1158. To establish such injury, Hu Honua must allege facts that
show “(1) unlawful conduct, (2) causing an injury to [Hu Honua], (3) that flows
from that which makes the conduct unlawful, and (4) that is of the type the
antitrust laws were intended to prevent.” Somers v. Apple, Inc., 729 F.3d 953, 963
(9th Cir. 2013) (quoting Am. Ad Mgmt., Inc. v. Gen. Tel. Co. of Cal., 190 F.3d
1051, 1055 (9th Cir. 1999)). The inquiry focuses on injury to “competition not
competitors.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488
(1977) (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962)); see
also Paladin Assocs., Inc., 328 F.3d at 1158 (“Where the defendant’s conduct
harms the plaintiff without adversely affecting competition generally, there is no
antitrust injury.”). This requirement stems from “the principle that the antitrust
laws’ prohibitions focus on protecting the competitive process and not on the
success or failure of individual competitors.” Cascade Health Sols., 515 F.3d at
902 (citations omitted).
Applying these principles, the FAC’s allegations of harm to the
“competitive process” in the market for wholesale firm power on the Big Island are
implausible. Notably, as alleged in the FAC, Hu Honua’s biomass power plant
was a “Qualifying Facility under the federal Public Utility Regulatory Policies Act

25

(“PURPA”)[.]” FAC ¶ 45. As such a facility, “Hu Honua was entitled to receive
special rate and regulatory treatment.” Id. (Indeed, the Hu Honua PPA was
negotiated under a waiver by the PUC from its competitive bidding framework.
FAC ¶ 49).
PURPA was enacted in 1978, among other reasons, to “ensure
sustained long-term economic growth by shifting the nation’s reliance on oil and
gas to more abundant domestically produced fuels.” Greensboro Lumber Co. v.
Georgia Power Co., 643 F. Supp. 1345, 1371 (N.D. Ga. 1986) (citation omitted).
To support development of non-traditional generating facilities, PURPA and its
implementing regulations
require electric utilities (a) to sell electric energy and
capacity to qualifying facilities upon request, (b) to
purchase electric energy and capacity from qualifying
facilities and (c) to make all necessary interconnections
with any qualifying facility in order to accomplish the
aforementioned purchases and sales provided that each
qualifying facility pay its share of the interconnection
costs.
Id. at 1372 (footnotes omitted). PURPA’s “regulations mandate that an electric
utility offer a qualifying facility built after the enactment of PURPA a purchase
rate equal to, but no more than, the utility’s ‘full avoided costs.’” Id. (citations and
footnote omitted); see also Schuylkill Energy Res., Inc. v. Penn. Power & Light
Co., 113 F.3d 405, 411 (3d Cir. 1997) (“Pursuant to regulations promulgated . . .
26

under the authority of PURPA, PP&L is required to purchase electric energy from
SER.”). The Hu Honua PPA contained such power-purchase provisions. See FAC
¶ 46.
Effectively, then, Hu Honua does not (or would not) “compete” in the
power production market with its qualifying facility, and thus competition could
not be harmed by termination of its PPA (even if the FAC otherwise states a claim
for breach of contract against HELCO). As Greensboro Lumber Co. explained
In establishing PURPA . . . Congress did not intend to
place qualifying facilities in competition with public
utilities. To the contrary, Congress has sought to
encourage the development of qualifying facilities by
insulating them from competition. Qualifying facilities
are not authorized under PURPA to sell at retail.
643 F. Supp. at 1373 (citation omitted); see also Schuylkill Energy Res., 113 F.3d
at 415 (finding no antitrust injury for PURPA power-producer, primarily because
“state and federal laws prohibit [plaintiff] from competing in the relevant market”);
Kamine/Besicorp Allegany L.P. v. Rochester Gas & Elec. Corp., 908 F. Supp.
1194, 1207 (W.D.N.Y. 1995) (finding no likelihood of an antitrust injury at a
preliminary injunction stage, reasoning in part that “[t]he PPA, which [PURPAproducer] Kamine is attempting to enforce, was not created as a result of market
forces or a competitive process; it is a creature of a statutory scheme [(PURPA)]
set up for reasons that have nothing to do with competition per se”); Crossroads
27

Cogeneration Corp. v. Orange & Rockland Utils., Inc., 969 F. Supp. 907, 915
(D.N.J. 1997) (finding no antitrust injury in action brought by PURPA-producer,
reasoning that “Defendant’s actions may have caused injury to plaintiff, but they
did not cause injury to competition in a defined market [and was] not the sort of
injury the antitrust laws were meant to prevent”), rev’d on other grounds, 159 F.3d
129 (3d Cir. 1998)). “PURPA was created as a vehicle to reduce the nation’s
dependency on foreign oil and to conserve energy, not to foster competition.”
Kamine/Besicorp Allegany L.P., 908 F. Supp. at 1204.14
Hu Honua attempts to distinguish this authority by arguing that it is
not claiming harm to competition in the retail market (i.e., energy to consumers
who pay HELCO for electricity), but rather harm to competition in the wholesale
market for firm power to HELCO. 15 But Hu Honua is largely not a competitor

14

The court is not suggesting that, just because Hu Honua’s facility was a qualifying
facility under PURPA, the antitrust laws can never apply. See 16 U.S.C. § 2603(1) (“Nothing in
this Act or in any amendment made by this Act affects — (1) the applicability of the antitrust
laws to any electric utility[.]”). Rather, “while PURPA was not intended to protect utilities from
the reach of the antitrust laws, neither was it meant to create antitrust liability where none
existed previously. In short, PURPA was designed to be antitrust-neutral.” Kamine/Besicorp
Allegany L.P., 908 F. Supp. at 1204. And, in this instance, “[h]owever consonant with PURPA’s
aims it may be to shield a [qualifying facility] like [plaintiff’s] from price competition, that end
is not something that the antitrust laws were designed to protect.” Id. at 1205.
15

Nevertheless, the FAC’s allegations of antitrust injury rely in significant part on harm
to retail consumers. Specifically, the FAC alleges that:
(continued . . .)
28

with HELCO in that market either — Hu Honua would have been HELCO’s
supplier, with HELCO in turn providing electricity to retail rate-paying consumers.
See Schuylkill Energy Res., 113 F.3d at 415 (rejecting argument that defendant’s
policy of favoring its owned-power producers over an independent producer could
harm competition because “[plaintiff] is not [defendant’s] competitor — it is
[defendant’s] supplier”).
The court also recognizes that HELCO is also a supplier to itself
(through HELCO-owned power plants). But it is difficult to find plausible harm to
competition from Hu Honua in that limited “market,” even considering that HEP
also provides wholesale power with its independent fossil-fuel power plant.
(. . . continued)
HELCO’s anticompetitive acts have caused substantial economic
injury to Hu Honua and have also injured competition in the
relevant markets by, inter alia, foreclosing, lessening, and
eliminating potential competition and depriving consumers from
securing lower rates paid for power.
FAC ¶ 151 (emphasis added).
The aforesaid conduct of HELCO has produced antitrust injury to
Hu Honua, competition, and consumers, and unless enjoined by
this Court, will continue to produce at least the following
anticompetitive, exclusionary and injurious effects upon
competition in interstate commerce:
(a) competition for the wholesale generation of power on
the Island of Hawaii has been substantially and unreasonably
restricted, lessened, foreclosed, and eliminated, and consumers will
be forced to pay supra-competitive prices for power as a result;
FAC ¶ 152 (emphasis added).

29

Indeed, the cases cited previously also found no antitrust injury where independent
power producers also claimed harm in wholesale markets. Greensboro Lumber
Co. reasoned that,
[I]n the wholesale market, PURPA establishes a
guaranteed price which is equal to, or greater than, the
price that would be received in a competitive market. In
addition to providing a guaranteed price to qualifying
facilities, PURPA also provides a guaranteed market for
the power generated by qualifying facilities by making it
a requirement that utilities purchase available energy and
capacity from qualifying facilities before buying power
from anywhere else; no amount of price cutting or other
competition can change this result.
643 F. Supp. at 1373 (emphasis added). “In general, qualifying facilities produce a
component which is used by public utilities and consume utility service; but, they
are not competitors of public utilities.” Id.; see also Schuylkill Energy Res., 113
F.3d at 416-17; Kamine/Besicorp Allegany, 908 F. Supp. at 1203-05. But cf. Long
Lake Energy Corp. v. Niagara Mohawk Power Corp., 700 F. Supp. 186, 188
(S.D.N.Y. 1988).
Additionally, the primary “antitrust injury” that Hu Honua alleges
from the purported loss of competition for wholesale generation of power —
“consumers will be forced to pay supra-competitive prices for power as a result,”
FAC ¶ 152(a) — is not only speculative (depending upon an assumption, for
example, that “fossil fuel costs on the Island of Hawaii could exceed $250 per
30

barrel by 2037 and over $300 per barrel by 2045,” FAC ¶ 122) but is also largely
controlled by the Hawaii PUC. See HRS § 269-16(a) (“All rates, fares, charges,
classifications, schedules, rules, and practices made, charged, or observed by any
public utility or by two or more public utilities jointly shall be just and reasonable
and shall be filed with the public utilities commission.”); HRS § 269-16.22 (“All
power purchase costs, including costs related to capacity, operations and
maintenance, and other costs that are incurred by an electric utility company,
arising out of power purchase agreements that have been approved by the public
utilities commission and are binding obligations on the electric utility company,
shall be allowed to be recovered by the utility from the customer base of the
electric utility company through one or more adjustable surcharges, which shall be
established by the public utilities commission.”). This alleged injury “is simply
too speculative to permit relief under the antitrust laws.” City of Pittsburgh v. W.
Penn Power Co., 147 F.3d 256, 269 (3d Cir. 1998); see also Schuylkill Energy
Res., 113 F.3d at 414 (“[W]hether and to what extent [the utility] maintains an
artificially high rate base [by favoring its own facilities] is not within the purview
of the antitrust laws,” and “[d]epriving consumers of ‘energy sources’ is not,
however, cognizable antitrust injury.”).

31

“[T]he Sherman Act does not attack every monopoly.” Alaska
Airlines, Inc. v. United Airlines, Inc., 948 F.2d 536, 547 (9th Cir. 1991) (citations
omitted). That is, “[t]he antitrust laws tolerate both efficient monopolies and
natural monopolies.” Id. at 548 (citation omitted). “Government regulation, as
opposed to treble damages and criminal liability under the Sherman Act, is
generally thought to be the appropriate remedy for difficulties posed by natural
monopolies.” Id. (citations omitted). And here, Hu Honua has alleged
anticompetitive behavior in a highly regulated industry. This context is important.
The court is not suggesting that PUC involvement necessarily
immunizes any of the Defendants from antitrust laws, but “the structure of [a]
regulated industry” may create a “lack of antitrust standing.” West Penn Power
Co., 147 F.3d at 269 (acknowledging that regulated industries such as utilities are
not exempt from antitrust laws under Otter Tail Power Co. v. United States, 410
U.S. 366 (1973), but finding no antitrust injury in a suit challenging aspects of a
merger between two electric utilities controlled by the Pennsylvania Public Utility
Commission). West Penn Power Co. reasoned in part that “the comprehensive
regulatory framework significantly restricts the nature of the competition which is
permitted.” Id. at 263.

32

In actuality, then — as most of the FAC alleges, see, e.g., FAC ¶¶ 3851, 58-89, 101-126, 166-184 — this is little if anything more than a breach of
contract action between Hu Honua and HELCO. The fundamental dispute
revolves around HELCO’s alleged breach of the Hu Honua PPA by unreasonably
withholding milestone-date extensions, or otherwise wrongfully terminating that
contract. FAC ¶¶ 60, 65, 110-11, 168-71. “As the First Circuit has observed,
‘[s]ome antitrust cases are intrinsically hopeless because . . . they merely dress up
in antitrust garb what is, at best, a business tort or contract violation.’” Procaps
S.A. v. Patheon, Inc., 845 F.3d 1072, 1087 (11th Cir. 2016) (quoting Stop & Shop
Supermarket Co. v. Blue Cross & Blue Shield of R.I., 373 F.3d 57, 69 (1st Cir.
2004)). And this is such a case.
Like Schuylkill Energy Resources, “[t]he fundamental dispute
between [Hu Honua] and [HELCO] concerns the interpretation of the Power
Purchase Agreement . . . and should be resolved pursuant to common-law contract
principles,” not through the antitrust laws. 113 F.3d at 418. Like Kamine/Besicorp
Allegany L.P., “whether [HELCO] has breached the PPA or not, [Hu Honua] has
not sufficiently demonstrated an antitrust injury[.]” 908 F. Supp. at 1208. And
like Crossroads Cogeneration, “[HELCO’s] actions may have caused injury to
plaintiff, but they did not cause injury to competition in a defined market. This is

33

not the sort of injury the antitrust laws were meant to prevent.” 969 F. Supp. at
915.
Moreover, outside the utility context, Ninth Circuit authority is also
on point — Hu Honua “has [at best] suffered a breach of contract, not an antitrust
injury.” Orion Pictures Distrib. Corp. v. Syufy Enters., 829 F.2d 946, 949 (9th Cir.
1987) (reasoning that, where duties were fixed by “contractual commitment” prior
to the alleged anticompetitive behavior, “competition was no longer a factor in
determining [defendant’s] obligation,” such that “[plaintiff’s] injury does not
reflect the anticompetitive effect of [defendant’s] alleged monopolization.”)
(internal quotation marks omitted). As NextEra points out, ECF No. 73-1, Mot. at
24, the “antitrust” damages Hu Honua seeks (“the loss of revenue and profits that
would otherwise have been earned from wholesale power generation on the Island
of Hawaii,” “the loss of market share,” loss of “invested capital in its 50%
completed Facility,” FAC ¶¶ 154-55) appear to be the same damages it seeks in
Count Three for breach of contract. See FAC ¶ 172.
In short, the claim fails for lack of antitrust injury. Count One is
dismissed as to NextEra.

34

B.

Count Two (Restraint of Trade) Fails to State a Plausible Claim Under
15 U.S.C. § 1 Against Either NextEra or HEP
Count Two seeks treble damages under 15 U.S.C. § 15(a) against all

Defendants based on alleged violations of § 1 of Sherman Act, 15 U.S.C. § 1,
which prohibits conspiracies “in restraint of trade or commerce.” To state such a
claim, “[a plaintiff] must plead not just ultimate facts (such as a conspiracy), but
evidentiary facts which, if true, will prove: (1) a contract, combination or
conspiracy among two or more persons or distinct business entities; (2) by which
the persons or entities intended to harm or restrain trade or commerce among the
several States, or with foreign nations; (3) which actually injures competition.”
Kendall, 518 F.3d at 1047 (citation omitted). And, to reiterate, “[a]llegations of
facts that could just as easily suggest rational, legal business behavior by the
defendants as they could suggest an illegal conspiracy are insufficient to plead a
violation of the antitrust laws.” Id. at 1049.
Count Two alleges, in pertinent part, that “the coordinated and
collective actions of Defendants HELCO, HECO, HEI, NextEra, and HEP have
had the purpose and effect of eliminating or substantially restricting competition in
the market for wholesale firm power generation and raising the price of power
above competitive levels by eliminating sources of less expensive power where
HELCO is required to dispatch lower cost sources.” FAC ¶ 159. “These
35

arrangements have had, and continue to have, the effect of unreasonably
restraining competition in the market for wholesale firm power generation on the
Island of Hawaii.” Id. ¶ 160.
1.

No Antitrust Injury
Count Two fails (against both NextEra and HEP) for the same

primary reason that Count One fails — lack of antitrust injury (the third element
reiterated in Kendall, a conspiracy that “actually injures competition”). See, e.g.,
Am. Ad Mgmt., Inc., 190 F.3d at 1055 (requiring antitrust injury in a § 1 action).
That is, antitrust injury is required for both a § 1 claim and a § 2 claim. See, e.g.,
Glen Holly Entm’t, Inc., 343 F.3d at 1007-08. Stated differently, “causal antitrust
injury . . . is an element of all antitrust suits brought by private parties seeking
damages under Section 4 of the Clayton Act.” Rebel Oil, 51 F.3d at 1433 (citation
omitted). The previous analysis explaining the lack of such injury for a § 2 claim
applies equally to the § 1 claim here, which alleges the same “antitrust injury” as
Count One, FAC ¶ 162, including “inflated prices for power, and consumers
[being] forced to pay supra-competitive prices for power.”
In this regard, HEP adds another persuasive reason for lack of the
requisite harmful effect on competition. The FAC alleges facts indicating that the
Hu Honua PPA offered higher prices than other “competition,” and was terminated

36

by HELCO after Hu Honua failed to meet HELCO’s demand for sufficient price
reductions when seeking contract-deadline extensions. FAC ¶¶ 64, 67-71.
Termination of a higher priced supplier, without more, is not antitrust injury.
According to the FAC, because Hu Honua’s PPA was cancelled, Hu Honua stands
to lose profits of $435 million over a 20-year PPA term. FAC ¶ 165. But “the
threat of loss of profits due to possible price competition following a merger does
not constitute a threat of antitrust injury.” Cargill, Inc. v. Monfort of Colo., Inc.,
479 U.S. 104, 117 (1986). And if Hu Honua did not present a “lower-cost
alternative,” damage from cancellation of its contract for nonperformance is not
antitrust injury. See, e.g., Indeck Energy Servs., Inc. v. Consumers Energy Co.,
250 F.3d 972, 977 (6th Cir. 2000) (finding no antitrust injury, reasoning in part that
marketplace competitors “must at least allege that exclusion of the competitor from
the marketplace results in the elimination of a superior product or a lower-cost
alternative”).
2.

A Lack of Plausibility
Count Two is deficient for another reason as well — fundamentally, it

fails to allege a plausible illegal “contract, combination, or conspiracy” to restrain
trade.

37

a.

The § 1 claim against NextEra

As to NextEra, Hu Honua bases its conspiracy theory on allegations
that NextEra controlled the HEI Defendants after the NextEra/HEI Merger
Agreement. Specifically, the FAC alleges that, after the Merger Agreement was
signed, NextEra controlled HELCO’s decision regarding termination of the Hu
Honua PPA, and HECO’s termination of three solar power projects on Oahu. See,
e.g., FAC ¶¶ 63, 132-34.
These allegations of control, however, are insufficient to establish a
§ 1 conspiracy claim as to NextEra. Hu Honua relies on the Merger Agreement
itself. FAC ¶ 56; See Pl.’s NextEra Opp’n at 26-27; ECF No. 109 at 35-36
(arguing that “Hu Honua unquestionably connects NextEra to Defendants’
scheme. . . . The Merger Agreement alone connects NextEra”). In particular, it
bases the control allegation on express language in the Merger Agreement that
required NextEra’s “prior written consent” before HEI, HECO, or HELCO could,
among other things, “(1) enter into, terminate or amend in any material respect any
material Contract, [or] (2) consent to any extension or continuation or any material
Contract[.]” FAC ¶ 56; NextEra Mot., Ex.A, ECF No. 73-3 at 5, 9. But that
Merger Agreement also specifically precludes such control by NextEra. See ECF
No. 73-3 at 10 (paragraph 5.01(c) (“No Control of [HEI’s] Business. [NextEra]

38

acknowledges and agrees that (i) nothing contained in this Agreement is intended
to give [NextEra], directly or indirectly, the right to control or direct the operations
of [HEI] or an [HEI] Subsidiary prior to the Effective Time and . . . prior to the
Effective Time, [HEI] shall exercise, consistent with the terms and conditions of
this Agreement, complete control and supervision over its and [HEI’s]
Subsidiaries’ respective operations.”). And the FAC fails to allege facts indicating
that NextEra violated that preclusive language.16
Moreover, NextEra could not have withheld consent to HELCO’s
actions without good reason because, under § 5.01(a), NextEra’s prior written
consent “shall not be unreasonably withheld, conditioned or delayed.” ECF No.
73-3 at 5. Rather than establishing unbridled control by NextEra (and its joinder in
an illegal conspiracy), the contract itself establishes no more than NextEra’s
routine consent in HELCO’s decision. That is, the FAC “just as easily suggests
rational, legal business behavior” by NextEra, rather than an illegal conspiracy to
restrain trade. See Kendall, 518 F.3d at 1049 (“Allegations of facts that could just
as easily suggest rational, legal business behavior by the defendants as they could

16

NextEra explains that these types of material-change provisions (which prevent a
company from making significant changes to material contracts during the pendency of a
merger) are standard terms which protect the parties’ legitimate interests in a pre-merger context.
See NextEra Mot. at 16-17, ECF No. 73-1.

39

suggest an illegal conspiracy are insufficient to plead a violation of the antitrust
laws.”).
The FAC’s allegations of control by NextEra also lack plausibility
given the “obvious alternative explanation” in the FAC that HELCO cancelled the
Hu Honua PPA because of Hu Honua’s own nonperformance. See Eclectic Props.
E., LLC, 751 F.3d at 996 (requiring a court to consider an “obvious alternative
explanation,” when assessing plausibility). The FAC itself details such obvious
reasons for HELCO’s termination. FAC ¶ 51. Specifically, “[d]uring the
construction [of its facility], disputes arose with the Facility construction contractor
that became insoluble.” Id. Hu Honua became involved in extensive litigation
with its contractor and vendors, and a separate labor union dispute. Id. “[T]he
construction contract and labor disputes, together with corresponding financing
interruptions, caused an extended loss of time and delayed the completion of
construction of the Hu Honua facility[.]” Id. “Hu Honua’s disputes with its
former construction contractor and the labor union jurisdiction dispute caused an
irretrievable loss of time in the construction of the Hu Honua Facility. As a result,
Hu Honua realized that it would not be able to achieve two milestone[] dates set
forth in the PPA[.]” FAC ¶ 58.

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Also unavailing is Hu Honua’s argument that the FAC’s allegations
are sufficient under Starr v. Baca, 652 F.3d 1202 (9th Cir. 2011). Starr held that
“[i]f there are two alternative explanations, one advanced by defendant and the
other advanced by plaintiff, both of which are plausible, plaintiff’s complaint
survives a motion to dismiss under Rule 12(b)(6).” Id. at 1216 (emphasis added).
Although Hu Honua’s theories are not impossible (at least at this stage of the
litigation), they are not plausible, which is what Twombly/Iqbal requires. See, e.g.,
In re Century Aluminum Co. Secs. Litig., 729 F.3d 1104, 1108 (9th Cir. 2013)
(distinguishing Starr because “[h]ere, [unlike in Starr,] plaintiffs’ explanation is
merely possible rather than plausible. To render their explanation plausible,
plaintiffs must do more than allege facts that are merely consistent with both their
explanation and defendants’ competing explanation.”) (citing Iqbal, 556 U.S. at
678); Eclectic Props E., LLC, 751 F.3d at 997 (“Applying Twombly, Iqbal, Starr,
and Century . . . Plaintiffs have not made the kind of factual allegations that
‘nudg[e] their claims across the line from conceivable to plausible.’”) (citing
Twombly, 550 U.S. at 570)).
b.

The § 1 claim against HEP

Similarly, the FAC lacks a plausible conspiracy theory as to HEP.
The FAC alleges that “[a]s early as 2012, HEP recognized that the proposed Hu

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Honua facility was a direct competitive threat” and that “as the operator of the
largest power plant on [Hawaii] Island . . . [HEP] attempted unsuccessfully to
exclude Hu Honua as a competitor in the power generation market [when HELCO
applied to the PUC for the approval of the original Hu Honua PPA in 2012].” FAC
¶ 99. “Hu Honua is informed and believes, and on that basis alleges, that HEP
participated in and supported the termination of Hu Honua’s PPA [in 2015.]” Id.
But this allegation is deficient as it offers no facts indicating what HEP might have
done to “participate[] in and support[] the termination.” See Kendall, 518 F.3d at
1047 (“[T]o allege an agreement between antitrust co-conspirators, the complaint
must allege facts such as a ‘specific time, place, or person involved in the alleged
conspiracies’ to give a defendant seeking to respond to allegations of a conspiracy
an idea of where to begin.”) (quoting Twombly, 550 U.S. at 565 n.10).
What’s more, the FAC also alleges — in support of its
monopolization claim against HELCO — that in 2015 HELCO and HEP agreed
for HELCO to acquire HEP’s fossil fuel plant for some $88 million. FAC ¶¶ 9197. That is, HEP was exiting the very wholesale power market from which it
allegedly sought to eliminate Hu Honua. Whatever these allegations might mean
as to HELCO, they are inconsistent as to HEP’s participation in a conspiracy to
restrain trade as to Hu Honua. As HEP argues, “HEP’s decision to sell [its]

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Hamakua Facility in 2015 and exit the relevant market removes any economic
incentive for HEP to conspire to terminate the Hu Honua PPA [in 2016.]” HEP
Opp’n at 20, ECF No. 95-1 at 27. That is, the FAC’s conspiracy theory as to HEP
makes no “economic sense.” Adaptive Power Sols., LLC v. Hughes Missile Sys.
Co., 141 F.3d 947, 952 (9th Cir. 1998) (“Antitrust claims must make economic
sense”) (citing Eastman Kodak Co. v. Image Tech. Servs. Inc., 504 U.S. 451, 468
(1992)).
In response, Hu Honua offers an implausible explanation that is not
pled in the FAC. It claims that HEP wanted to remove Hu Honua from the
wholesale firm power market so that HEP’s power plant would become more
valuable when selling it. Opp’n at 12-13, ECF No. 108 at 20-21. But nothing in
the FAC indicates HEP knew, when it entered into the agreement for HELCO to
acquire HEP’s facility (in 2015), that HELCO would later (in 2016) terminate the
Hu Honua PPA. And, even assuming HEP would want to increase its facility’s
selling price, why would HELCO be part of that conspiracy to pay more for HEP’s
facility? Again, the theory makes no economic sense. See Adaptive Power Sols.,
LLC, 141 F.3d at 952.
And, as with the § 1 claim as to NextEra, the claim as to HEP lacks
plausibility when considering the “obvious alternative explanation” pled in the

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FAC that HELCO terminated the Hu Honua PPA for lack of performance by Hu
Honua, and Hu Honua’s subsequent refusal to meet HELCO’s terms in
renegotiating the PPA. See Eclectic Props. E., LLC, 751 F.3d at 996. Whether or
not the FAC adequately alleges that HELCO breached the PPA in unreasonably
refusing to approve Hu Honua’s requests to extend milestones, there is no plausible
antitrust conspiracy theory pled as to HEP. There are no facts in the FAC
suggesting that HEP’s decision to sell to HELCO was anything but a rational
business decision. See Kendall, 518 F.3d at 1049.17
C.

State Law Counts Against NextEra and HEP
Count Seven asserts state-law antitrust or unfair competition claims

against all Defendants under HRS chapter 480. Similarly, Count Eight asserts a
state-law claim for Tortious Interference with Contract against NextEra. But
because the court has dismissed the federal antitrust claims as to NextEra and HEP
(and the suit was not based on diversity jurisdiction), the court intends to dismiss
both of the state-law claims without prejudice under 28 U.S.C. § 1367(c)(3) (“The
district courts may decline to exercise supplemental jurisdiction over a claim under
subsection (a) [regarding Article III jurisdiction] if — . . . the district court has
17

Given that Count Two fails as to HEP for lack of antitrust injury and lack of a plausible
conspiracy theory, the court need not reach HEP’s alternative argument that its acts are shielded
from antitrust scrutiny by the Noerr-Pennington or State Action Doctrines.

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dismissed all claims over which it has original jurisdiction[.]”). See Acri v. Varian
Assocs., Inc., 114 F.3d 999, 1001 (9th Cir. 1997) (en banc) (“[I]n the usual case in
which all federal-law claims are eliminated before trial, the balance of factors . . .
will point toward declining to exercise jurisdiction over the remaining state-law
claims.”). 18
But it is premature to dismiss these state-law claims because, under
the present procedural posture (where all claims as to the Hawaiian Electric
Defendants have been held in abeyance), the Hawaiian Electric Defendants still
remain in the action with federal claims against them. That is, the court cannot
exercise its discretion under § 1367(c) until it “has dismissed all claims over which
it has original jurisdiction.” Accordingly, the court DEFERS ruling on Counts
Seven and Eight until the conditional settlement as to the Hawaiian Electric
Defendants is completely finalized. For administrative purposes, the court
DENIES — without prejudice — NextEra’s and HEP’s Motions to Dismiss as to
Counts Seven and Eight.
18

It is unlikely that the chapter 480 antitrust claims could otherwise survive. See HRS
§ 480-3 (“This chapter shall be construed in accordance with judicial interpretations of similar
federal antitrust statutes[.]”); Int’l Healthcare Mgmt. v. Haw. Coalition for Health, 332 F.3d 600,
609 (9th Cir. 2003) (“[Plaintiff’s] state antitrust claims fail for the same reasons as their federal
claims because Hawaii antitrust statutes are interpreted ‘in accordance with judicial
interpretations of similar federal antitrust statutes.’”) (quoting HRS § 480-3). Nevertheless, the
court has not fully analyzed the state-law allegations to determine whether the FAC states a
claim under chapter 480.

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V. CONCLUSION
Hu Honua’s federal antitrust claims lack plausibility as to both
NextEra and HEP. The Motions to Dismiss are GRANTED as to Counts One and
Two, and those claims are DISMISSED without prejudice. Because the court
DEFERS ruling on the state-law claims, the Motions as to Counts Seven and Eight
are DENIED without prejudice. The court will allow Hu Honua an opportunity to
file a Second Amended Complaint that cures the FAC’s deficiencies, if it believes
it can do so. See Lopez, 203 F.3d at 1130. A Second Amended Complaint (or a
statement indicating that a Second Amended Complaint will not be filed) is due by
January 29, 2018.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, January 19, 2018.

/s/ J. Michael Seabright
J. Michael Seabright
Chief United States District Judge

Hu Honua Bioenergy, LLC v. Hawaiian Electric Industries, Inc., et al., Civ. No. 16-00634 JMSKJM, Amended Order Granting In Part Defendants Nextera Energy, Inc.’s and Hamakua Energy
Partners, L.P.’s Motions to Dismiss, ECF Nos. 73 & 95, With Leave to Amend

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