In Re: Western States Wholesale Natural Gas Antitrust Litigation (MDL 1566)

Filing 1549

ORDER: Dynegy Illinios Inc.'s 929 Motion to Dismiss for Lack of Jurisdiction is Denied. Plaintiffs' 1495 Motion to Supplement Record is Granted. Plaintiffs' 1496 Motion to Seal is Denied as moot. The 1497 Motion to Withdraw is Granted. Signed by Judge Philip M. Pro on 03/09/09. (Copies have been distributed pursuant to the NEF - SRK)

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UNITED STATES DISTRICT COURT D IS T R IC T OF NEVADA *** IN RE: WESTERN STATES ) W H O L E S A L E NATURAL GAS ) A N T IT R U S T LITIGATION ) ___________________________________ ) ) A R A N D E L L CORP., et al., ) ) Plaintiffs, ) ) v. ) ) X C E L ENERGY, INC., et al., ) ) Defendants. ) ) M D L 1566 2 :0 3 -C V -0 1 4 3 1 -P M P -P A L B A S E FILE

2 :0 7 -C V -0 1 0 1 9 -P M P -P A L

O R D E R RE: DEFENDANT'S MOTION T O DISMISS (Doc. #929)

P re se n tly before this Court is Defendant Dynegy Illinois Inc.'s Motion to Dismiss (D o c . #929).1 Plaintiffs filed an Opposition (Doc. #1245) and supporting exhibits (Doc. # 1 0 8 9 , #1092, #1097, #1131, #1180, #1246, #1498). Plaintiffs also filed a supplement to th e ir opposition (Doc. #1271). Defendant Dynegy Illinois Inc. filed a Reply (Doc. #1281) w ith supporting declarations (Doc. #1282, #1284). A ls o before the Court is Plaintiffs' Motion to Supplement Record in Response to D yn e g y Inc.'s Motion to Dismiss for Lack of Personal Jurisdiction (Doc. #1495). Defendant Dynegy Illinois Inc. filed an Opposition (Doc. #1507). Plaintiffs filed a Reply (D o c . #1516). /// ///

Document numbers refer to the base file, 2:03-CV-01431-PMP-PAL, unless otherwise noted.

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I.

BACKGROUND A . Procedural Background T h is case is one of many in consolidated Multidistrict Litigation arising out of the

e n e rg y crisis of 2000-2001. Plaintiffs originally filed this action in the Circuit Court, Dane C o u n ty, Wisconsin. (Notice of Removal [Doc. #2 in 2:07-CV-01019-PMP-PAL], Compl.) Defendants removed the case to the United States District Court for the District of W is c o n s in . (Id.) The Judicial Panel on Multidistrict Litigation entered a Transfer Order p u rs u a n t to 28 U.S.C. § 1407 centralizing the foregoing action in this Court for coordinated o r consolidated pretrial proceedings. P la in tif f s Arandell Corporation, Merrick's, Inc., Safety-Kleen Systems, Inc., S a rg e n to Foods, Inc., and Ladish Co., Inc. are Wisconsin corporations. (Corrected Second A m . Compl. [Doc. #190 in 2:07-CV-01019-PMP-PAL]2 at 5-6.) According to the C o rre c te d Second Amended Complaint ("SAC"), Defendants are natural gas companies that b u y, sell, transport, and store natural gas, including their own and their affiliates' p ro d u c tio n , in the United States and in the State of Wisconsin. (Id. at 6-51.) In this litig a tio n , Plaintiffs allege Defendants conspired to engage in anti-competitive activities w ith the intent to manipulate and artificially increase the price of natural gas for consumers. (Id.) Specifically, Plaintiffs allege Defendants, directly and through their affiliates, c o n s p ire d to manipulate the natural gas market by knowingly delivering false reports c o n c e rn in g trade information to trade indices and engaging in wash trades, in violation of W is c o n s in Statutes chapter 133. (Id.) The SAC asserts two causes of action. Count one arises under Wisconsin S ta tu te s § 133.14, which voids contracts to which an antitrust conspirator is a party and

Plaintiffs' Second Amended Complaint is located at docket number 847 in the base file. Plaintiffs filed the Corrected Second Amended Complaint only in the individual case file. 2

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a llo w s recovery of payments made pursuant to such a contract. (Id. at 54-56.) Count two s e e k s trebled actual damages under Wisconsin Statutes § 133.18 for Defendants' alleged a n titru s t violations. (Id. at 56-57.) T h e SAC's allegations are directed generally at two types of Defendants: the n a tu ra l gas companies that actually engaged in natural gas sales and the related reporting of a lle g e d ly manipulated gas prices to the trade indices, and those companies' parent c o rp o ra tio n s . The SAC does not allege the parent company Defendants themselves engaged in natural gas trading and price reporting. Rather, the SAC alleges these Defendants are the p a re n t companies of subsidiaries which engage in such activity generally, and which also m a d e natural gas sales in Wisconsin during the relevant time period. Plaintiffs seek to establish personal jurisdiction over the parent company D e f e n d a n ts based on their out-of-forum activities directed at Wisconsin along with their s u b s id ia rie s ' and affiliates' contacts within Wisconsin. According to the SAC, the parent c o m p a n y Defendants dominated and controlled their respective subsidiaries and the parent c o m p a n y Defendants "entered into a combination and conspiracy . . . which tended to p re v e n t full and free competition in the trading and sale of natural gas, or which tended to a d v a n c e or control the market prices of natural gas." (Id. at 6-7, 9, 14-15, 18-19, 23, 26-27, 3 0 -3 1 , 35-36.) Plaintiffs allege the parent company Defendants intended their actions to h a v e a direct, substantial, and foreseeable effect on commerce in the State of Wisconsin. (Id. at 7, 10, 15, 19, 23-24, 27, 31, 36.) According to the SAC, the parent company D e f e n d a n ts "made strategic marketing policies and decisions concerning natural gas and the re p o rtin g of natural gas trade information to reporting firms for use in the calculation of n a tu ra l gas price indices that affected the market prices of natural gas, and those policies a n d decisions were implemented on an operational level by affiliates . . . in the United S ta te s and in Wisconsin." (Id. at 8, 10, 15, 19, 24, 27-28, 32, 36.) /// 3

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D e f e n d a n t Dynegy Illinois Inc. ("Dynegy") now moves to dismiss, arguing this C o u rt lacks personal jurisdiction over Dynegy. According to Dynegy, it conducts no b u s in e s s in Wisconsin and has no other contacts supporting general or specific jurisdiction. Dynegy also argues it cannot be subject to jurisdiction in Wisconsin based on its s u b s id ia ry's contacts with the forum because its subsidiary is not its agent or alter ego, and W is c o n s in would not support the conspiracy theory of jurisdiction. Dynegy thus argues p e rs o n a l jurisdiction does not exist under the Wisconsin long-arm statute, and even if it did, e x e rc isin g personal jurisdiction in this case would violate constitutional due process re q u ire m e n ts. Plaintiffs respond that Dynegy's subsidiary has submitted to jurisdiction in W is c o n s in and Dynegy is subject to personal jurisdiction based on agency and alter ego p rin c ip le s based on its subsidiary's contacts. Additionally, Plaintiffs argue that because W is c o n s in 's antitrust statutes contemplate imposing liability on an antitrust conspirator who p e rf o rm s acts outside of Wisconsin that have an impact in Wisconsin, the Court has p e rs o n a l jurisdiction over Dynegy under Wisconsin's long-arm statute. B. Facts Related to Personal Jurisdiction D yn e g y is an Illinois corporation with its principal place of business in Texas. (Mot. to Dismiss (Doc. #929), Decl. of Amy E. Jolley at 2.) Dynegy formerly was known a s Dynegy Inc. until it changed to its current name in April 2007. (Id.) Dynegy is a holding c o m p a n y which does not itself engage in business operations. (Id.) Rather, it owns direct a n d indirect subsidiaries which operate in various sectors of the energy industry. (Id.) Dynegy has never been qualified to do business in Wisconsin, has never paid ta x e s in Wisconsin, and has never itself engaged in natural gas trading, marketing, p ro d u c tio n , sales, or transportation in the state. (Id.) Dynegy has never reported natural gas p ric e or volume data to any price reporting index anywhere, including Wisconsin. (Id. at 3.) Dynegy does not have an office, mailing address, telephone number, bank account, 4

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e m p lo ye e s , or property in Wisconsin. (Id. at 2.) Dynegy indirectly wholly owns Dynegy Marketing and Trade ("DMT"), a C o lo ra d o partnership. (Decl. of William E. Fischer (Doc. #1246) ["Fischer Decl."], Ex. 1 at 2 7 , 39.) DMT's current partners are indirect wholly owned subsidiaries of Dynegy. (Id. at 3 8 , 49-50.) During the relevant time period, DMT engaged in natural gas trading and price re p o rtin g activity. (Fischer Decl., Ex. 5 at DYN-ARAN000486.) D yn e g y and DMT share overlapping officers. (Fischer Decl., Ex. 1 at 10.) The p e rs o n n e l who perform functions for Dynegy are employed by DMT, including Dynegy's o f f ic e rs and directors. (Id. at 34.) DMT provides accounting, legal, tax, human resources, a n d information technology services to Dynegy and to other Dynegy subsidiaries. (Id. at 36, 1 1 0 -1 1 .) Dynegy and DMT also share offices. (Id. at 33.) Employees are not segregated in th e offices based on the legal entity for which they are performing services. (Id. at 109.) DMT used to charge the various business segments for these services but ceased doing so in 2 0 0 6 when Dynegy focused on one industry, power generation. (Id. at 111-12.) In terms of financial dealings between DMT and Dynegy, DMT's financial data is included in consolidated reporting for Dynegy. (Id. at 98.) Dynegy issued two g u a ra n te e s to third parties on DMT's behalf, neither of which related to DMT's activities in W is c o n s in . (Id. at 27; Fischer Decl., Ex. 2, attachs. 7, 8.) The guarantees were designed to in d u c e the third parties to do business with DMT. (Fischer Decl., Ex. 2, attachs. 7, 8.) DMT typically used its own cash to fund its operations as an ongoing commercial o p e ra tio n a l entity. (Fischer Decl., Ex. 1 at 101.) To the extent DMT had excess cash, it w o u ld issue a distribution to its general partners or send that money up the corporate chain to Dynegy Holdings, Inc. (Id. at 101, 106.) Dynegy Holdings, Inc. is the primary holder of e x te rn a l debt for Dynegy-related entities and is subject to certain limitations in credit f a c ility agreements with third party lenders. (Id. at 107.) DMT employees in the treasury g ro u p perform a daily cash sweep of each subsidiary, including DMT, and deposit it into a 5

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c o n s o lid a te d account where it is invested on a daily basis. (Id. at 108.) DMT's general partners do not dispute personal jurisdiction in Wisconsin in this a c tio n .3 DMT sold millions of dollars worth of natural gas to entities with Wisconsin a d d re s s e s during the 2000 to 2002 time frame. For example, Wisconsin-based Integrys E n e rg y Services ("Integrys") purchased millions of dollars worth of natural gas from DMT f ro m 2000 to 2002. (Decl. of Sandy Roder (Doc. #1092); Notice of Filing of Docs. Under S e a l (Doc. #1184) at INTSUB000004-5.) DMT also had a long term natural gas supply a g re e m e n t with Wisconsin Gas LLC pursuant to which Wisconsin Gas LLC purchased m illio n s of dollars worth of natural gas from 2000 to 2002. (Decl. of William E. Fischer (D o c . #1097), Second Decl. of James H. Voss at 2 & attach. 2.) W is c o n s in Public Service Corporation ("WPSC") also purchased over a million d o lla rs worth of natural gas from DMT between 2000 and 2002. (Notice of Filing of R e v is e d Decls. of Kristie J. Wiegand and Julie A. Baumgart (Doc. #1131), Decl. of Kristie J . Wiegand at 3; Notice of Filing of Docs. Under Seal (Doc. #1180) at W P S S U B 0 0 0 0 0 1 -3 8 .) In 1997, WPSC entered into a long term natural gas supply a g re e m e n t with a company called Natural Gas Clearinghouse. (Notice of Filing of Docs. U n d e r Seal (Doc. #1180) at WPSSUB000039-46.) In 1998, Natural Gas Clearinghouse s e n t a letter to WPSC announcing that it had changed its name to "Dynegy." (Id. at W P S S U B 0 0 0 0 4 7 .) An undated letter on Dynegy, Inc. letterhead also announced the name

Dynegy suggests Plaintiffs have not sued DMT, but instead sued only DMT's partners, Dynegy GP, Inc. and DMT Holding LP. Plaintiffs' Corrected Second Amended Complaint asserts claims against the Dynegy Defendants, described as Dynegy, Inc. and Dynegy GP Inc. DMT Holding LP (d/b/a Dynegy Marketing and Trade). (Corrected Second Am. Compl. (Doc. #190 in 2:07-CV01019-PMP-PAL) at 38.) According to filings with the Colorado Secretary of State for statement of a trade name, Dynegy Marketing and Trade is the trade name for the "true name" of "Dynegy GP Inc. DMT Holding LP." (Fischer Decl., Ex. 2, attachs. 2, 3.) Dynegy GP Inc. and DMT G.P., LLC (successor to DMT Holdings, LP) filed Answers in this action admitting they are the general partners of DMT and that DMT conducted business in Wisconsin during the relevant time period, defined as January 1, 2000 through October 31, 2002. (Answer (Doc. #930) at 9; Answer (Doc. #931) at 9.) 6

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c h a n g e . (Id. at WPSSUB000048.) In 1999, WPSC entered into a net-out agreement with D yn e g y. (Id. at WPSSUB000049-50.) Dynegy sent back to WPSC the executed original c o p y of the agreement under Dynegy, Inc. letterhead. (Id. at WPSSUB000051.) In May 2 0 0 0 , the net-out agreement was changed to reflect DMT as the counterparty rather than D yn e g y. (Id. at WPSSUB000054-58.) A May 30, 2000 letter on Dynegy, Inc. letterhead s ta te d that "our records show that we sold natural gas to you in the following states: IL, LA, M I, WI." (Id. at WPSSUB000059.) WPSC sent payment for the natural gas sales to DMT. (Fischer Decl., Ex. 1 at 215.) In filings with the Securities and Exchange Commission ("SEC"), Dynegy d e s c rib e d itself as "a leading provider of energy and communications solutions to customers in North America, the United Kingdom and Continental Europe." (Fischer Decl., Ex. 5 at D Y N -A R A N 0 0 0 4 8 6 .) Dynegy stated it is "a holding company that principally conducts all o f its business through its subsidiaries." (Id. at DYN-ARAN000582.) Dynegy set forth its b u s in e s s in four business segments, with DMT being one of them. (Id. at D Y N -A R A N 0 0 0 5 7 4 .) In a 2001 SEC filing, Dynegy stated that it "sells natural gas under s a le s agreements that have varying terms and conditions intended to match seasonal and o th e r changes in demand." (Fischer Decl., Ex. 6 at DYN-ARAN00611.) In its SEC filings, Dynegy stated that it was subject to various risks including c o m m o d ity price variability related to its marketing and trading businesses. (Fischer Decl., E x . 5 at DYN-ARAN000486.) Dynegy managed these and other risks through various risk c o n tro l structures. (Fischer Decl., Ex. 6 at DYN-ARAN000653.) An overview of D yn e g y's risk management structure in a 2001 SEC filing placed at the top of this structure th e Dynegy board of directors, which had "[u]ltimate responsibility for ensuring that risks a re appropriately identified and managed." (Id. at DYN-ARAN000654.) The board was s o le ly responsible for approving the risk policy, and it delegated that authority to the Audit C o m m itte e of Dynegy's board. (Id.) The Audit Committee performed its tasks primarily 7

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th ro u g h two committees: the Audit and Compliance Committee, which was responsible for p la n n in g and executing internal financial and operational audits, and the Executive Risk C o m m itte e , which set limits for investment, commodity, and financial risks. (Id.) The E x e c u tiv e Risk Committee was comprised of Dynegy's Chief Executive Officer, Chief O p e ra tin g Officer, Chief Financial Officer, and Chief Risk Officer. (Id.) D yn e g y also had a Risk Committee which reviewed activities of existing b u s in e s s e s , new businesses and products, divisional market risk limits, business unit market risk limits, and currency and interest rate risk limits. (Id. at DYN-ARAN000655.) Dynegy p la c e d limits on a segment and business unit basis. (Id.) Business unit managers then a llo c a te d that business unit's limits among individual traders or desks. (Id.) The Risk C o m m itte e reported to the Executive Risk Committee. (Id.) The Risk Committee was c o m p ris e d of Dynegy officers and various business unit officers. (Decl. of William E. F is c h e r (Doc. #1498) ["Supp. Fischer Decl."], Ex. A at DYN-ARAN017592.) D yn e g y also had a Chief Risk Officer who headed an enterprise-wide risk control d e p a rtm e n t. (Fischer Decl., Ex. 6 at DYN-ARAN000655.) This department assured a d h e re n c e to the risk policy, monitored risk limits on a daily basis, and reported its results to th e appropriate risk committees. (Id.; Supp. Fischer Decl., Ex. A at DYN-ARAN017594, D Y N -A R A N 0 1 7 6 3 8 .) The department also reported limit violations to the appropriate b o a rd and management committees as well as to business unit managers. (Fischer Decl., E x . 6 at DYN-ARAN000655.) The department verified compliance through daily m o n ito rin g . (Supp. Fischer Decl., Ex. A at DYN-ARAN017638.) The department then p ro d u c e d its own daily Consolidated Report. (Id. at DYN-ARAN017639.) Limit violations w e re reported immediately to the Chief Risk Officer. (Id.) The business units operated within the trading limits. (Id. at D Y N -A R A N 0 1 7 5 9 8 .) Dynegy's Risk Management and Control Policy from 1998 ("1998 P o lic y" ) stated that "[i]t is the effectiveness of the business units in developing, 8

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im p le m e n tin g , measuring and adjusting risk management strategies that dictates the p ro f ita b ility of the unit." (Id. at DYN-ARAN017599.) The 1998 Policy gave business unit h e a d s the authority to set and review individual trader limits. (Id.) "The heads of the b u s in e s s units are responsible for the risks undertaken within the confines of the risk control f ra m e w o rk ." (Id.; see also id. at DYN-ARAN017607 ("The Business Unit Leaders are re s p o n s ib le for the risks undertaken within the limits that have been authorized.").) Business unit leaders reviewed daily results and were "responsible for explanations of limit v io la tio n s . Limits violations will require the next tiered level to produce a written response a c c e p tin g the risk, otherwise the position which is violated, will be liquidated." (Id. at D Y N -A R A N 0 1 9 6 0 3 .) Business units prepared a Daily Position Report and submitted it to th e risk control department. (Id. at DYN-ARAN017626.) Under the 1998 Policy, the "Dynegy Board grant[ed] authorization, subject to the a p p ro v e d transaction limits, to negotiate, enter into and execute, for and on behalf of the C o m p a n y, any and all contracts, agreements or other instruments in writing for or relating to th e purchase, sale, transmission or capacity acquisition and the purchase and sale of: N a tu ra l Gas . . . ." (Id. at DYN-ARAN017598; see also id. at DYN-ARAN017601 ("The R is k Committee grants trading authorization to Dynegy traders.").) The 1998 Policy in c lu d e d a "Trader Authorization Form" which stated that the individual trader "has been a u th o riz e d to act as a trader on behalf of Dynegy Inc., subject to all limitations and q u a lif ic a tio n s " set forth in the 1998 Policy. (Id. at DYN-ARAN017612.) All trading p e rs o n n e l had to acknowledge acceptance of the policy and violations could result in d is c ip lin e , including termination. (Id. at DYN-ARAN017589.) In July 2002, Dynegy approved a Risk Policy Statement ("2002 Policy S ta te m e n t" ). (Supp. Fischer Decl., Ex. D.) Under the 2002 Policy Statement, the Executive R is k Committee was responsible for determining overall risk exposure, including m o n ito rin g markets and business risks and allocating risk capital among business units. (Id. 9

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a t DYN-ARAN017744.) The Executive Risk Committee consisted of Dynegy and s u b s id ia ry officers, including DMT's president. (Id.) The Executive Risk Committee was to meet at least quarterly. (Id. at DYN-ARAN017745.) Business units were responsible for e f f e c tu a tin g daily reporting to the risk control department. (Id.) Under the 2002 Policy Statement, the Risk Committee had oversight re s p o n s ib ility for market risk exposure, risk management, and trading activities. (Id. at D Y N -A R A N 0 1 7 7 4 6 .) The Risk Committee was comprised of Dynegy officers and s u b s id ia ry officers, including DMT's president. (Id.) The Risk Committee met twice m o n th ly. (Id.) The Dynegy board of directors was responsible for appointing a Chief Risk O f f ic e r who reported to the Dynegy Board's Audit Committee. (Id. at D Y N -A R A N 0 1 7 7 4 7 .) The Chief Risk Officer monitored the risk tolerance standards, re p o rte d to the Audit Committee, set appropriate limits, assured compliance with the policy, p e rf o rm e d independent risk analyses, performed independent risk and performance m e a s u re m e n ts , and communicated daily results to the Executive Risk Committee. (Id.) Like the 1998 Policy, the 2002 Policy Statement required daily reporting of certain risk m a n a g e m e n t metrics. (Id. at DYN-ARAN017754-55.) U n d e r the 2002 Policy Statement, Dynegy "grant[ed] authorization, subject to the a p p ro v e d risk exposure and transaction limits, to negotiate, enter into and execute, for and o n behalf of the Company, any and all contracts, agreements or other instruments in writing f o r or relating to the purchase, sale, transmission or capacity acquisition and the purchase a n d sale of: Natural Gas . . . ." (Id. at DYN-ARAN017750.) The 2002 Policy Statement re q u ire d personnel with transaction authority to execute a Letter of Authorization "to reflect a written understanding of granted risk exposure as authorized under the guidelines of the R is k Policy Statement." (Id. at DYN-ARAN017758.) /// 10

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In 2002, DMT entered into a settlement with the Commodity Futures Trading C o m m is s io n ("CFTC") to settle charges that DMT violated the Commodity Exchange Act. (Fischer Decl., Ex. 2, attach. 4.) According to the CFTC, DMT submitted fictitious price re p o rts to price reporting firms. (Id. at 2.) Pursuant to the settlement, DMT agreed to cease a n d desist from further violations, and agreed to pay a $5 million penalty in conjunction w ith an affiliated entity. (Id. at 6.) DMT also agreed to cooperate with the CFTC's in v e s tig a tio n and agreed not to publicly deny the CFTC's findings. (Id. at 7.) In October 2002, Dynegy announced that it had dismissed six employees and w o u ld discipline seven others for violations of company policy relating to inaccurate price re p o rtin g to price indices. (Fischer Decl., Ex. 8.) One DMT employee was indicted in f e d e ra l court in Texas on charges of conspiracy, false reporting, and wire fraud. (Fischer D e c l., Ex. 2, attachs. 5, 6.) In October 2002, a press release on Dynegy, Inc. letterhead a n n o u n c e d it was exiting the marketing and trading business. (Fischer Decl., Ex. 7.) DMT th e re a f te r ceased natural gas trading activities and currently purchases natural gas only to ru n operations. (Fischer Decl., Ex. 1 at 144.) T h e parties now dispute the significance of these contacts under the Wisconsin lo n g -a rm statute. The parties also dispute whether this Court's exercise of personal ju ris d ic tio n over Dynegy would violate constitutional due process requirements. II. M O T I O N TO SUPPLEMENT RECORD P la in tif f s move to supplement the record to include exhibits produced by Dynegy a s a result of this Court granting Plaintiffs' motion to compel further production of personal ju ris d ic tio n discovery materials from Dynegy. Plaintiffs argue that because these d o c u m e n ts were not available during briefing on the motion to dismiss, Plaintiffs should be p e rm itte d to supplement the record. Dynegy responds that Plaintiffs unduly delayed their re q u e s t to supplement the record, as Plaintiffs did not move to supplement the record until th re e months after Dynegy produced the documents. Dynegy also argues the documents 11

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p re s e n t nothing new because Plaintiffs already argued Dynegy exercised day-to-day control o v e r DMT through risk control procedures. Dynegy contends the supplemental materials s h o w Dynegy was not involved in DMT's day-to-day affairs as Plaintiffs claim. Alternatively, Dynegy requests additional briefing for Dynegy to address the merits of P la in tif f s ' supplemental factual argument. T h e Court will grant Plaintiffs' motion to supplement the record. The Court g ra n te d Plaintiffs' motion to compel and Plaintiffs should be given the opportunity to p re s e n t the produced evidence. Although Plaintiffs delayed in filing the supplement, D yn e g y has not established prejudice as a result. Dynegy contends the documents add n o th in g new and presents responsive arguments in its opposition to the motion to s u p p le m e n t. The Court will not grant additional briefing. III. PERSONAL JURISDICTION " W h e n a defendant moves to dismiss for lack of personal jurisdiction, the p la in tif f bears the burden of demonstrating that the court has jurisdiction over the d e f e n d a n t." Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006). To meet this b u rd e n , a plaintiff must demonstrate that personal jurisdiction over a defendant is (1) p e rm itte d under the applicable state's long-arm statute and (2) that the exercise of ju ris d ic tio n does not violate federal due process. Id. The Court must analyze whether p e rs o n a l jurisdiction exists over each defendant separately. Harris Rutsky & Co. Ins. S e rv s ., Inc. v. Bell & Clements Ltd., 328 F.3d 1122, 1130 (9th Cir. 2003). Where the issue is before the Court on a motion to dismiss based on affidavits a n d discovery materials without an evidentiary hearing, the plaintiff must make "a prima f a c ie showing of facts supporting jurisdiction through its pleadings and affidavits to avoid d is m is s a l." Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarain Co., 284 F.3d 1114, 1 1 1 9 (9th Cir. 2002). The Court accepts as true any uncontroverted allegations in the c o m p la in t and resolves any conflicts between the facts contained in the parties' evidence in 12

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th e plaintiff's favor. Id. However, for personal jurisdiction purposes, a court "may not a s s u m e the truth of allegations in a pleading which are contradicted by affidavit." Alexander v. Circus Circus Enters., Inc., 972 F.2d 261, 262 (9th Cir. 1992) (quotation o m itte d ). In diversity cases such as this, "a federal court applies the personal jurisdiction ru le s of the forum state provided the exercise of jurisdiction comports with due process." Scott v. Breeland, 792 F.2d 925, 927 (9th Cir. 1986). However, "federal law is controlling o n the issue of due process under the United States Constitution." Data Disc, Inc. v. Sys. T e c h . Assoc., Inc., 557 F.2d 1280, 1286 n.3 (9th Cir. 1977); see also Dole Food Co., Inc. v. W a tts , 303 F.3d 1104, 1110 (9th Cir. 2002). Therefore, the Court will apply law from the U n ite d States Court of Appeals for the Ninth Circuit in deciding whether jurisdiction is a p p ro p ria te under the Due Process Clause. See In re Korean Air Lines Disaster of Sept. 1, 1 9 8 3 , 829 F.2d 1171, 1174 (D.C. Cir. 1987) (concluding that "the transferee court [should] b e free to decide a federal claim in the manner it views as correct without deferring to the in te rp re ta tio n of the transferor circuit"); Menowitz v. Brown, 991 F.2d 36, 40 (2d Cir. 1 9 9 3 ) (holding that "a transferee federal court should apply its interpretations of federal la w , not the constructions of federal law of the transferor circuit"). To satisfy federal due process standards, a nonresident defendant must have " m in im u m contacts" with the forum state so that the assertion of jurisdiction does not o f f e n d traditional notions of fair play and substantial justice. Pebble Beach Co., 453 F.3d at 1 1 5 5 (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 315 (1945)). A federal district c o u rt may exercise either general or specific personal jurisdiction. See Helicopteros N a c io n a le s de Colombia, S.A. v. Hall, 466 U.S. 408, 414-15 (1984). T o establish general personal jurisdiction, the plaintiff must demonstrate the d e f e n d a n t has sufficient contacts to "constitute the kind of continuous and systematic g e n e ra l business contacts that `approximate physical presence.'" Glencore Grain, 284 F.3d 13

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a t 1124 (quoting Bancroft & Masters, Inc. v. Augusta Nat'l Inc., 223 F.3d 1082, 1086 (9th C ir. 2000), modified, Yahoo! Inc. v. La Ligue Contre Le Racisme Et L'Antisemitisme, 433 F .3 d 1199, 1207 (9th Cir. 2006)). Courts consider such factors as whether the defendant m a k e s sales, solicits or engages in business in the state, serves the state's markets, d e s ig n a te s an agent for service of process, holds a license, or is incorporated there. Bancroft, 223 F.3d at 1086. "[A] defendant whose contacts are substantial, continuous, and s ys te m a tic is subject to a court's general jurisdiction even if the suit concerns matters not a risin g out of his contacts with the forum." Glencore Grain, 284 F.3d at 1123 (citing H e lic o p te ro s , 466 U.S. at 415 n.9). A nonresident defendant's contacts with the forum state may permit the exercise o f specific jurisdiction if: (1) the defendant has performed some act or transaction within th e forum or purposefully availed himself of the privileges of conducting activities within th e forum, (2) the plaintiff's claim arises out of or results from the defendant's forumre la te d activities, and (3) the exercise of jurisdiction over the defendant is reasonable. Pebble Beach Co., 453 F.3d at 1155-56. "If any of the three requirements is not satisfied, ju ris d ic tio n in the forum would deprive the defendant of due process of law." Omeluk v. L a n g ste n Slip & Batbyggeri A/S, 52 F.3d 267, 270 (9th Cir. 1995). Under the first prong of the "minimum contacts test," the plaintiff must establish e ith e r that the defendant "(1) purposefully availed himself of the privilege of conducting his a c tiv itie s in the forum, or (2) purposefully directed his activities toward the forum." Pebble B e a c h Co., 453 F.3d at 1155. "Evidence of availment is typically action taking place in the f o ru m that invokes the benefits and protections of the laws in the forum." Id. Evidence of d ire c tio n usually consists of conduct taking place outside the forum that the defendant d ire c ts at the forum. Id. at 1155-56. The purposeful direction aspect of the first prong is satisfied when a foreign act is b o th aimed at and has effect in the forum. Id. In other words, the defendant "must have (1) 14

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c o m m itte d an intentional act, which was (2) expressly aimed at the forum state, and (3) c a u s e d harm, the brunt of which is suffered and which the defendant knows is likely to be s u f f e re d in the forum state." Id. To satisfy the third element of this test, the plaintiff must e s ta b lis h the defendant's conduct was "expressly aimed" at the forum; a "mere foreseeable e f f e c t" in the forum state is insufficient. Id. The "express aiming" requirement is satisfied w h e n the defendant is alleged to have engaged in wrongful conduct "individually targeting a known forum resident." Bancroft, 223 F.3d at 1087. T h e second prong of the specific jurisdiction test requiring that the contacts c o n s titu tin g purposeful availment or purposeful direction give rise to the current action is m e a s u re d in terms of "but for" causation. Id. at 1088. "If the plaintiff establishes both p ro n g s one and two, the defendant must come forward with a `compelling case' that the e x e rc ise of jurisdiction would not be reasonable." Boschetto v. Hansing, 539 F.3d 1011, 1 0 1 6 (9th Cir. 2008) (quotation omitted). A subsidiary's contacts may be imputed to its parent for personal jurisdiction p u rp o s e s where the subsidiary is the parent's general agent in the forum. Harris Rutsky & C o . Ins. Servs., Inc., 328 F.3d at 1134. A subsidiary is its parent's agent for purposes of a ttrib u tin g its forum-related contacts to the parent if the subsidiary "performs services that a re `sufficiently important to the foreign corporation that if it did not have a representative to perform them, the corporation's own officials would undertake to perform substantially s im ila r services.'" Doe, 248 F.3d at 928 (quoting Chan v. Society Expeditions, Inc., 39 F .3 d 1398, 1405 (9th Cir. 1994)). The ultimate inquiry is whether the subsidiary's presence in the forum "substitutes" for its parent's presence. Id. at 928-29 (quotation omitted). Where the parent is merely a holding company, the subsidiary's forum-related c o n ta c ts are not done as the parent's agent because the holding company "could simply hold a n o th e r type of subsidiary" as an investment and thus the subsidiary conducts business not a s the parent's agent but as its investment. Id. at 929. "Where, on the other hand, the 15

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s u b s id ia rie s are created by the parent, for tax or corporate finance purposes, there is no b a s is for distinguishing between the business of the parent and the business of the s u b s id ia rie s ." Id. (quotation omitted). The inquiry as to whether a subsidiary is its parent's g e n e ra l agent in the forum is "a pragmatic one." Gallagher v. Mazda Motor of Am., Inc., 7 8 1 F. Supp. 1079, 1085 n.10 (E.D. Pa. 1992). For example, where a Japanese parent company was engaged in the manufacture o f watches, its subsidiaries that acted as its sole sales agents in America were "almost by d e f in itio n . . . doing for their parent what their parent would otherwise have to do on its o w n ." Bulova Watch Co., Inc. v. K. Hattori & Co., Ltd., 508 F. Supp. 1322, 1342 (E .D .N .Y . 1981). The Bulova court thus attributed the subsidiaries' contacts to the parent c o m p a n y. Id.; see also Chan, 39 F.3d at 1405-06 (remanding to the district court for a d d itio n a l findings of fact regarding agency where the German parent corporation owned a n d operated cruise ships and its local subsidiary marketed cruises and chartered cruise s h ip s and sold the cruise ticket to the plaintiffs out of which the claims arose); Modesto City S c h s . v. Riso Kagaku Corp., 157 F. Supp. 2d 1128, 1135 (E.D. Cal. 2001) (holding s u b s id ia ry was parent's agent for personal jurisdiction purposes where subsidiary acted as s o le conduit for marketing and selling parent's products in the United States). In contrast, where the parent company owned a subsidiary mining company's s to c k but did not itself engage in the business of gold mining, imputing the subsidiary's f o ru m contacts to the parent was not appropriate. Sonora Diamond Corp. v. Superior Court, 9 9 Cal. Rptr. 2d 824, 840-41 (Ct. App. 2000). As the Sonora Diamond court explained, had th e parent company owned "the rights to the gold and used Sonora Mining as the operating a n d marketing entity," then perhaps general jurisdiction over the parent company would be a p p ro p ria te because under those circumstances the parent company "could not reap the b e n e f its of its rights unless it or someone else removed and sold the ore." Id. But where th e parent simply held the mining company as an investment, the subsidiary's forum-related 16

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c o n ta c ts could not be imputed to the parent company. Id. L ik e w is e , in Doe, the Ninth Circuit concluded a foreign company's subsidiaries w e re not its general agents in California because the plaintiffs presented no evidence that in th e absence of the California subsidiaries' involvement in petrochemical and chemical o p e ra tio n s , the parent would have conducted and controlled those operations. Doe, 248 F .3 d at 929. The Court reached this conclusion even though the parent company issued c o n s o lid a te d reporting, referred to a subsidiary in an annual report as its "US unit," and s ta te d that use of the subsidiary "would enable it to expand its marketing network and p ro d u c e higher value-added specialty products in the United States." Id. Plaintiffs have established a prima facie case of personal jurisdiction over D yn e g y. Plaintiffs have presented evidence that Dynegy authorized DMT to act as its agent f o r natural gas sales. The 1998 Policy and the 2002 Policy Statement each stated that D yn e g y's board of directors granted authorization to traders to negotiate, enter into, and e x e c u te natural gas sales and purchases on Dynegy's behalf. The 1998 Policy contained a " T ra d e r Authorization Form" which stated that the individual trader "has been authorized to a c t as a trader on behalf of Dynegy, Inc., subject to all limitations and qualifications" set f o rth in the 1998 Policy. (Supp. Fischer Decl., Ex. A at DYN-ARAN017612 (emphasis a d d e d ).) Dynegy sent a letter to WPSC on its own letterhead to confirm that Dynegy made s a le s to WPSC in several states, including Wisconsin. This letter is further evidence that D M T engaged in natural gas sales in Wisconsin and elsewhere on Dynegy's behalf. Dynegy's express authorization for DMT traders to make natural gas transactions on its b e h a lf is prima facie evidence that DMT's services, at least during the relevant period, were s u f f ic ie n tly important to Dynegy that if it did not have a representative to perform them, it w o u ld have done so itself. While DMT's subsequent cessation of natural gas trading suggests the business lin e was not sufficiently important to Dynegy that it would have performed the activity 17

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w ith o u t DMT's assistance, Plaintiffs need present only a prima facie case of personal ju ris d ic tio n at this juncture. Dynegy's decision to compel each trader to acknowledge an e x p re s s grant of trading authorization on behalf of Dynegy, rather than on behalf of DMT, s u g g e s ts that at least during the relevant period, Dynegy considered natural gas trading s u f f ic ie n tly important to its "`organizational life'" to require an explicitly authorized agent to conduct the activity on its behalf. Bulova Watch Co., Inc., 508 F. Supp. at 1344. Having g ra n te d DMT traders agency authority to conduct natural gas sales on Dynegy's behalf, its a g e n t's in-forum contacts are attributable to Dynegy. Dynegy does not dispute that if D M T 's contacts are attributable to Dynegy, that it is subject to personal jurisdiction in the f o ru m . DMT and its general partners have stipulated they are subject to general jurisdiction in Wisconsin. (Fischer Decl., Ex. 1 at 26.) The Court therefore will deny Dynegy's motion to dismiss for lack of personal jurisdiction. IV . CONCLUSION IT IS THEREFORE ORDERED that Dynegy Illinois Inc.'s Motion to Dismiss (D o c . #929) is hereby DENIED. IT IS FURTHER ORDERED that Plaintiffs' Motion to Supplement Record in R e sp o n s e to Dynegy Inc.'s Motion to Dismiss for Lack of Personal Jurisdiction (Doc. # 1 4 9 5 ) is hereby GRANTED. IT IS FURTHER ORDERED that Plaintiffs' Motion for Leave to File Under Seal (D o c . #1496) is hereby DENIED as moot. IT IS FURTHER ORDERED that Plaintiffs' Withdrawal of Motion for Leave to F ile Under Seal (Doc. #1497) is hereby GRANTED. DATED: March 9, 2009

_______________________________ PHILIP M. PRO United States District Judge 18