NewPage Wisconsin System Inc. v. CMS Energy Resource Management Company et al

Filing 46

ORDER Granting in Part and Denying in Part Motion to Dismiss (Document # 39-15) and Granting Motion for Leave to File Surreply in Opposition to Motion to Dismiss (Doc. # 1756 in 2:03-cv-01431-PMP-PAL). CMS Energy Corp. and Cantera Gas Company, LLC are hereby dismissed. Signed by Judge Philip M. Pro on 6/4/10. (Copies have been distributed pursuant to the NEF - ASB)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 P re se n tly before this Court is Defendants CMS Energy Corp., CMS Energy R e so u rc e s Management Co., and Cantera Gas Company, LLC's Motion to Dismiss (Doc. # 3 9 -1 5 in 2:09-CV-00915-PMP-PAL), filed in this Court on May 22, 2009. Plaintiff filed a n Opposition (Doc. #1672) on June 26, 2009. Defendants filed a Reply (Doc. #1703) on J u ly 17, 2009. A ls o before the Court is Plaintiff's Motion to Allow Surreply in Opposition to D e f e n d a n t CMS Energy Corp., CMS Energy Resources Management Co., and Cantera Gas C o m p a n y, LLC's Motion to Dismiss (Doc. #1756), filed on August 21, 2009. Defendants f ile d an Opposition (Doc. #1788) on September 8, 2009. I. BACKGROUND T h is case is one of many in a consolidated Multidistrict Litigation ("MDL") a risin g out of the energy crisis of 2000-2001. Plaintiff originally filed this action in the 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 ) ___________________________________ ) ) N E W P A G E WISCONSIN SYSTEM INC., ) ) Plaintiff, ) ) v. ) ) C M S ENERGY CORPORATION, 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 9 -C V -0 0 9 1 5 -P M P -P A L

O R D E R RE: DEFENDANTS' MOTION T O DISMISS (Doc. #39-15 in 2:09-CV0 0 9 1 5 -P M P -P A L )

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c irc u it court, Wood County, Wisconsin on March 25, 2009. (Notice of Removal (Doc. #392 in 2:09-CV-00915-PMP-PAL).) Defendants removed the case to the United States D is tric t Court for the District of Wisconsin. (Id.) The Judicial Panel on Multidistrict L itig a tio n entered a Transfer Order centralizing the foregoing action in this Court for c o o rd in a te d or consolidated pretrial proceedings. (Conditional Transfer Order (Doc. #40 in 2 :0 9 - C V - 0 0 9 1 5 - P M P - P A L ) .) P la in tif f NewPage Wisconsin System ("NewPage"), known as Stora Enso North A m e ric a n Corp. during the Relevant Time Period, is a Wisconsin corporation. (Notice of R e m o v a l, Compl. at 8.) According to the Complaint, Defendants are natural gas companies th a t buy, 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 9-55.) In this litig a tio n , Plaintiff alleges 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, Plaintiff alleges 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 Complaint 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 a llo w s recovery of payments made pursuant to such a contract. (Id. at 59-60.) 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 60-61.) T h e Complaint's allegations are directed generally at two types of Defendants: th e natural gas companies that actually engaged in natural gas sales and the related re p o rtin g of allegedly manipulated gas prices to the trade indices, and those companies' p a re n t corporations. The Complaint does not allege the parent company Defendants 2

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th e m s e lv e s engaged in natural gas trading and price reporting. Rather, the Complaint a lle g e s these Defendants are the parent companies of subsidiaries which engaged in such a c tiv ity generally, and which also made natural gas sales in Wisconsin during the relevant tim e period. D e f e n d a n ts CMS Energy Corp. ("CMS"), CMS Energy Resources Management C o . ("MST"), and Cantera Gas Company, LLC ("Cantera") now move to dismiss for lack of p e rs o n a l jurisdiction. Defendants contend this Court already has resolved the question of D e f e n d a n ts' amenability to personal jurisdiction in Wisconsin in Arandell Corporation v. X c e l Energy, Inc., 2:09-CV-01019-PMP-PAL, and that decision has preclusive effect in this c a s e . Defendants also argue they have no contacts with Wisconsin that support personal ju ris d ic tio n .1 Plaintiff responds that under this Court's prior Order (Doc. #1528 in A ra n d e ll), specific personal jurisdiction exists because MST made direct sales of natural g a s to NewPage and the exercise of personal jurisdiction in this matter is reasonable b e c a u s e Defendants engaged in solicitation in Wisconsin and sold millions of dollars worth o f natural gas in the state. Plaintiff also contends the Arandell decision has no preclusive e f f e c t in this action. II. DISCUSSION A . Preclusion D e f e n d a n ts argue this Court already has decided they are not amenable to general o r specific personal jurisdiction in Wisconsin for similar claims brought in the Arandell a c tio n . Defendants contend the plaintiffs in the Arandell action cited to NewPage's p u rc h a s e s of natural gas in support of that motion, and thus this Court already has c o n s id e re d that fact. Plaintiff responds preclusion is not appropriate because it is not a

Defendants also move to dismiss under the Credit Suisse doctrine. This Court already has rejected the applicability of that doctrine to the allegations in the various MDL complaints. (See Order (Doc. #1815).) 3

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n a m e d Plaintiff in the Arandell action, the issues between the two cases are different b e c a u s e Arandell did not involve a plaintiff like NewPage that bought directly from MST, a n d this Court specifically precluded consideration of non-named putative class members' c la im s to determine whether the named plaintiffs' claims in Arandell satisfied the specific p e rs o n a l jurisdiction test. " Is s u e preclusion bars the relitigation of issues actually adjudicated in previous litig a tio n between the same parties." Littlejohn v. U.S., 321 F.3d 915, 923 (9th Cir. 2003). For issue preclusion to apply, the party invoking preclusion must show: 1 ) the issue at stake is identical to an issue raised in the prior litigation; 2 ) the issue was actually litigated in the prior litigation; and 3 ) the determination of the issue in the prior litigation must have been a critical and necessary part of the judgment in the earlier action. Id . (quotation omitted). A "person who was not a party to a suit generally has not had a `f u ll and fair opportunity to litigate' the claims and issues settled in that suit," and therefore is not precluded from re-litigating the issue. Taylor v. Sturgell, 128 S. Ct. 2161, 2171 (2 0 0 8 ). However, in some limited circumstances, a nonparty may be bound by a judgment b e c a u s e it adequately was represented by a party to the suit with the same interests. Id. at 2 1 7 2 . A "properly conducted class action[]" may fall within this category. Id. P la in tif f NewPage's attempt to obtain personal jurisdiction over Defendants is n o t precluded. Although both cases generally involve attempts to assert personal ju ris d ic tio n over Defendants in Wisconsin, because of the nature of specific personal ju ris d ic tio n , the issues at stake in the two cases are not identical. In Arandell, the named p la in tif f s initially presented no evidence they purchased natural gas from Defendants.2 That f a ilin g was critical to this Court's conclusion that the Arandell plaintiffs had failed to

As set forth in an Order filed concurrently herewith, the Arandell plaintiffs since have presented new evidence that Defendant MST in fact made sales to a named plaintiffs' agent during the relevant time period. 4

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e s ta b lis h Defendant MST's forum-related contacts were the "but for" cause of the Arandell p la in tif f s ' injuries. Here, in contrast, Plaintiff NewPage contends it purchased natural gas d ire c tly from MST. Further, because NewPage was not a named plaintiff in the Arandell a c tio n , the issue of whether NewPage could establish its injuries arose out of Defendants' f o ru m -re la te d contacts was not actually litigated in the Arandell action. Defendants claim NewPage adequately was represented in the Arandell action as a member of the putative class. However, the class in Arandell has not been certified. In A ra n d e ll, the Court specifically precluded the named plaintiffs from relying on the unnamed p u ta tiv e class members to establish specific personal jurisdiction over Defendants. (Order (D o c . #1528) at 22.) To now hold that NewPage is precluded from asserting it can establish s p e c if ic personal jurisdiction over Defendants would deprive NewPage of its full and fair o p p o rtu n ity to litigate the issue. B. Merits D e f e n d a n ts contend they are not subject to personal jurisdiction in Wisconsin b e c a u s e they have no offices, telephone numbers, mailing addresses, bank accounts, e m p lo ye e s , or property in Wisconsin. Defendants also argue they did not conduct business in Wisconsin, and were never qualified to do business in Wisconsin. NewPage responds th a t this Court already has found that Defendant MST purposefully availed itself of W is c o n s in . NewPage also argues that because it purchased natural gas from MST, it has s a tis f ie d the specific personal jurisdiction test set forth in the Court's prior Order in A ra n d e ll. NewPage also argues that MST's forum-related contacts are attributable to CMS. NewPage does not attempt to establish personal jurisdiction over Defendant Cantera, and s u g g e s ts the parties were going to stipulate to Cantera's dismissal. "When 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 5

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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 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. 6

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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. Wash., 326 U.S. 310, 315 (1945)). A federal district court m a y exercise either general or specific personal jurisdiction.3 See Helicopteros Nacionales d e Colombia, S.A. v. Hall, 466 U.S. 408, 414-15 (1984). 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 Court previously ruled Defendants are not subject to general personal jurisdiction in Wisconsin. NewPage has not presented any new evidence to suggest a different result. 7

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T h e 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) 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). Under this last prong of the specific jurisdiction te s t, courts generally consider a variety of factors to determine whether exercising ju ris d ic tio n would be reasonable: (1 ) the extent of the defendant's purposeful interjection into the forum s ta te , (2) the burden on the defendant in defending in the forum, (3) the e x te n t of the conflict with the sovereignty of the defendant's state, (4) th e forum state's interest in adjudicating the dispute, (5) the most e f f ic ie n t judicial resolution of the controversy, (6) the importance of th e forum to the plaintiff's interest in convenient and effective relief, a n d (7) the existence of an alternative forum. Bancroft, 223 F.3d at 1087. A court must balance all seven factors and no factor is d e te rm in a tiv e . Core-Vent Corp. v. Nobel Indus., 11 F.3d 1482, 1488 (9th Cir. 1993). /// /// /// 8

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A s set forth in this Court's prior Order in Arandell, Defendant MST has p u rp o s e f u lly availed itself of Wisconsin: M S T entered into long term supply contracts with several W is c o n s in -b a s e d entities which listed a Wisconsin address for the c o m p a n y, a Wisconsin address for notices and invoices, and a W is c o n s in bank for wire transfers. MST made millions of dollars in s a le s pursuant to these contracts. Plaintiffs have presented unrebutted e v id e n c e that two MST employees, Marsalese and Skarb, regularly s o lic ite d business from Wisconsin companies at their Wisconsin o f f ic e s , either in person or by telephone. Marsalese and Skarb are id e n tif ie d in MST's internal documents as having sales responsibility in th e state of Wisconsin. MST identified Wisconsin as a target for n a tu ra l gas sales with reference to specific customers. Having s p e c if ic a lly targeted Wisconsin for sales, and having been successful in th a t effort, MST purposefully directed activity at Wisconsin. (O rd e r (Doc. #1528) at 21.) NewPage also has satisfied the second prong of the specific jurisdiction test. NewPage, formerly known as Stora Enso North America Corp. ("Stora Enso"), presents e v id e n c e that it purchased natural gas from Defendant MST. Thomas Riemer ("Riemer"), f o rm e r purchasing agent for Stora Enso, avers that MST entered into a master supply a g re e m e n t with Stora Enso in November 2000. (Decl. of Thomas Riemer (Doc. #1093) at 1 .) The agreement lists a Wisconsin address for Stora Enso, including a Wisconsin address to send invoices and payments. (Id., Ex. 1.) Trade confirmations pursuant to this a g re e m e n t list a Wisconsin address for Stora Enso as the buyer, and identifies the delivery p o in t as "ANR Pipeline Co. ­ Alliance ­ Chicago Alliance/ANR Interconnect." (Id.) The tra d e confirmations state as a special condition that the "Gas to be nominated into ANR T & E . . . for delivery to Wisconsin Gas Company service territory." (Id.) According to Wayne Krolikowski ("Krolikowski"), Energy manager for Stora E n so , Stora Enso purchased approximately $9 million worth of natural gas pursuant to the c o n tra c t with MST. (Decl. of Wayne Krolikowski (Doc. #1094) at 1-2.) The gas purchased p u rs u a n t to this agreement was consumed at Stora Enso's Wisconsin facilities. (Decl. of T h o m a s Riemer at 1.) According to Riemer, from January 2000 through March 2002, MST 9

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e m p lo ye e Phil Marsalese ("Marsalese") regularly contacted Riemer at his office in W is c o n s in regarding the purchase of natural gas from MST. (Id. at 2.) Krolikowski states th a t Marsalese also contacted him approximately every three months regarding purchasing n a tu ra l gas from MST. (Decl. of Wayne Krolikowski at 2.) An internal MST market re v ie w in 2000 identified Marsalese as sales manager for the midwest region, including W is c o n s in . (Notice of Filing of Docs. Under Seal (Doc. #1184) at CMS-WI-021362.) NewPage thus has presented evidence supporting a prima facie case that it would not have b e e n harmed but for Defendant MST's sales to it at prices which NewPage alleges were m a n ip u la te d through MST's participation in a price-fixing conspiracy. MST has not set forth a compelling case that the exercise of personal jurisdiction o v e r it in Wisconsin would be unreasonable. MST purposefully injected itself into W is c o n s in by entering into long term supply contracts with several Wisconsin-based entities f ro m which MST reaped millions of dollars in sales. MST identified Wisconsin as a target f o r natural gas sales with reference to specific customers. NewPage presented unrebutted e v id e n c e that MST employees who had sales responsibility for Wisconsin regularly s o lic ite d business from Wisconsin companies at their Wisconsin offices, either in person or b y telephone. The burden on MST of litigating this action in Wisconsin is minimal. MST is a M ic h ig a n corporation, and thus geographically is near Wisconsin. Moreover, modern te c h n o lo g y and ease of travel lessen the burden. There is no conflict with the sovereignty of M ic h ig a n . Wisconsin, on the other hand, has a significant interest in ensuring its citizens a re protected from collusive price-fixing behavior, and in providing its citizens with a f o ru m in which to seek redress. Resolution in Wisconsin is efficient, as the claim can be a d ju d ic a te d with many of MST's alleged co-conspirators who remain Defendants in this a c tio n . Because Wisconsin courts will be more familiar with the Wisconsin law under w h ic h NewPage brings its claims, NewPage's interest in convenient and effective relief is 10

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s e rv e d by Wisconsin exercising jurisdiction over MST. Finally, while an alternative forum e x is ts in Michigan, that factor alone does not outweigh the other factors which weigh in f a v o r of finding the exercise of personal jurisdiction over MST reasonable. Having directed s a le s efforts at Wisconsin and being successful in those efforts by making millions of d o lla rs worth of sales, MST reasonably could foresee being haled into Wisconsin courts by o n e of its Wisconsin-based customers for an alleged price-fixing conspiracy arising out of th o s e sales. NewPage therefore has presented evidence sufficient to support a prima facie c a s e that this Court has personal jurisdiction over MST. The Court will deny the motion to d is m is s as to Defendant MST. H o w e v e r, as set forth thoroughly in this Court's prior Orders, MST's contacts w ith Wisconsin are not attributable to CMS. (See Orders (Doc. #1515, #1517, #1518, # 1 5 2 0 , and Order on motion for reconsideration filed concurrently herewith).) NewPage p re s e n ts no new evidence to alter this conclusion. Further, the Court previously has found C a n te ra is not amenable to personal jurisdiction in Wisconsin. (Order (Doc. #1528) at 222 3 .) NewPage has presented no new evidence to alter this conclusion, and has made no a tte m p t to argue personal jurisdiction exists over Cantera in this action. The Court th e re f o re will grant the motion to dismiss as to Defendants CMS and Cantera. III. CONCLUSION IT IS THEREFORE ORDERED that Defendants CMS Energy Corp., CMS E n e rg y Resources Management Co., and Cantera Gas Company, LLC's Motion to Dismiss (D o c . #39-15 in 2:09-CV-00915-PMP-PAL) is hereby GRANTED in part and DENIED in p a rt. Defendants CMS Energy Corp. and Cantera Gas Company, LLC are hereby dismissed f o r lack of personal jurisdiction. The motion is denied with respect to Defendant CMS E n e rg y Resources Management Co. /// /// 11

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IT IS FURTHER ORDERED that Plaintiff's Motion to Allow Surreply in O p p o s itio n to Defendant CMS Energy Corp., CMS Energy Resources Management Co., a n d Cantera Gas Company, LLC's Motion to Dismiss (Doc. #1756) is hereby GRANTED.

D A T E D : June 4, 2010

_______________________________ PHILIP M. PRO United States District Judge

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