Century Aluminum of South Carolina Inc v. South Carolina Public Service Authority

Filing 31

ORDER AND OPINION granting 11 Defendant South Carolina Public Service Authority's ("Santee Cooper") Motion to Dismiss. AND IT IS SO ORDERED. Signed by Honorable Richard M Gergel on 10/4/2017.(sshe, )

IN THE UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION

Century Aluminum of South Carolina, Inc. , )
)
Plaintiff,
)

Civil Action No. 2:17-274-RMG

)
V.

ORDER AND OPINION

)

South Carolina Public Service Authority,
Defendant.

)
)
)
)

This matter is before the Court on Defendant South Carolina Public Service Authority' s
("Santee Cooper") motion to dismiss the complaint. The motion has been fully briefed and, on
September 1, 2017, the Court heard oral argument on the motion. After full consideration of the
parties' briefs and oral arguments, the Court grants the motion to dismiss for the reasons set forth
below.
I.

Background

In 1934, the South Carolina General Assembly established Santee Cooper as a non-profit
corporation "to manufacture, produce, generate, transmit, distribute, and sell water power, steam
electric power, hydroelectric power, or mechanical power within and without the State of South
Carolina." S.C. Code§ 58-31-30(A)(8). Santee Cooper sells electricity directly to customers and
wholesale to South Carolina' s twenty retail electric cooperatives through the Central Electric
Power Cooperative ("Central").

See Santee Cooper, 2016 Annual Report 14, 17 (2016),

https ://www.santeecooper.com/About-Santee-Cooper/Communications/2016Annua1Report.aspx.
A twelve-person board of directors governs Santee Cooper. Each director is appointed for a term
of seven years by the Governor, with the advice and consent of the Senate. S.C. Code§ 58-31-20.
Santee Cooper distributes any excess revenue from its operations to the general funds of the South

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Carolina treasury. S.C. Code § 58-31-110. Otherwise, Santee Cooper is financially independent
of the state. (Dkt. No. 1 ~~ 29-30.) Its budget and the rates it charges customers are not subject
to the approval of any state agency. (Id.)
In 1974, the General Assembly established a service area for Santee Cooper comprised of
portions of Horry County, Georgetown County, and Berkeley County. S.C. Code§ 58-31-330. In
1979, an aluminum smelting facility, now owned by Plaintiff Century Aluminum of South
Carolina ("Century"), opened in Mount Holly, South Carolina, which is in Berkeley County and
within Santee Cooper's service area. (Dkt. No. 1~~1, 18, 32.) An electrolytic process is used to
smelt aluminum and electricity is the most costly input for aluminum production. (See id.

~~

1,

34.) Then, in 1984, the General Assembly granted the Santee Cooper a monopoly in its service
territory, mandating that Santee Cooper' s service area "must be exclusively served by the Public
Service Authority" (with certain exceptions). S.C. Code § 58-31-430. The rates Santee Cooper
charges in its service area are exempt from the oversight of the South Carolina Public Service
Commission, which regulates rates charged by investor-owned South Carolina electricity
providers. (Dkt. No. 1 ~ 31.) Additionally, Santee Cooper owns the electricity transmission lines
in its service area. (Id.

~

2.) Other electricity providers cannot provide electricity to customers in

the Santee Cooper service area without use of Santee Cooper' s transmission lines. (Id.

~

4.)

Century alleges Santee Cooper leverages its statutory monopoly to force Century to
purchase 25% of its electricity from Santee Cooper at supra-competitive prices, even though many
third-party suppliers are able and willing to supply that electricity at a lower cost. (Id.

~~

37, 52,

64.) Century also alleges Santee Cooper' s transmission lines have existing, unreserved import
capacity adequate for Century to purchase all of its electricity from third-party providers without
additional construction of transmission lines and without disruption of electric service to other

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customers. (Id. ~~ 5, 10.) According to Century, the supra-competitive prices Santee Cooper
forces Century to pay are the highest electricity costs for any aluminum smelter in the United
States, forcing Century to cut production at the Mount Holly facility by 50% and threatening the
facility' s complete closure. (See id.

~~

6, 7, 9.)

On January 27, 2017, Century filed the present suit, asserting various antitrust claims
against Santee Cooper.

(Dkt. No. 1.)

Century alleges Santee Cooper has unlawfully tied

transmission services for non-Santee Cooper electric power to the purchase of electricity from
Santee Cooper at supra-competitive rates, in violation of Sections 1 and 2 of the Sherman Act and
Section 3 of the Clayton Act. See 15 U.S.C. § 1, 2, 14. Century alleges Santee Cooper illegally
uses its transmission grid as an essential facility to maintain monopoly power in violation of
Section 2 of the Sherman Act. Century also alleges Santee Cooper's conduct violates the South
Carolina Unfair Trade Practices Act and the South Carolina Antitrust Act (" SCUPTA").
On March 14, 2017, Santee Cooper moved to dismiss the complaint, arguing that it is
immune from antitrust claims under the state-action immunity doctrine. (Dkt. No. 11.) Santee
Cooper also argues that sale of electricity to end-users and the transmission of electricity to endusers are not distinct antitrust markets in South Carolina, foreclosing any claim of illegal tying,
and that the South Carolina Unfair Trade Practice Act does not apply to public entities. Century
responded on April 11 , 2017 and the Court heard oral argument on the motion on September 1,
2017.

II.

Legal Standard
Rule 12(b)( 6) of the Federal Rules of Civil Procedure permits the dismissal of an action if

the complaint fails "to state a claim upon which relief can be granted." Such a motion tests the
legal sufficiency of the complaint and "does not resolve contests surrounding the facts, the merits
of the claim, or the applicability of defenses. . . . Our inquiry then is limited to whether the
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allegations constitute ' a short and plain statement of the claim showing that the pleader is entitled
to relief. "' Republican Party ofN. C. v. Martin , 980 F.2d 943, 952 (4th Cir. 1992) (quotation marks
and citation omitted). In a Rule 12(b)(6) motion, the Court is obligated to "assume the truth of all
facts alleged in the complaint and the existence of any fact that can be proved, consistent with the
complaint' s allegations." E. Shore Mkts., Inc. v. JD. Assocs. Ltd. P 'ship, 213 F.3d 175, 180 (4th
Cir. 2000). However, while the Court must accept the facts in a light most favorable to the nonmoving party, it "need not accept as true unwarranted inferences, unreasonable conclusions, or
arguments. " Id.
To survive a motion to dismiss, the complaint must state "enough facts to state a claim to
relief that is plausible on its face. " Bell At!. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Although
the requirement of plausibility does not impose a probability requirement at this stage, the
complaint must show more than a "sheer possibility that a defendant has acted unlawfully. "
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint has "facial plausibility" where the

pleading "allows the court to draw the reasonable inference that 'the defendant is liable for the
misconduct alleged." Id.
III.

Discussion

A.

Federal Antitrust Claims
Section 1 of the Sherman Act prohibits agreements in restraint of trade.

It has two

elements. First, a Section 1 violation is an agreement or concerted action by multiple parties. A
single party cannot violate Section 1 through unilateral action. Second, the restraint of trade must
be illegal. Not all agreements in restraint of trade are illegal. Courts distinguish between legal
and illegal restraints of trade using the " Rule of Reason." Standard Oil Co. v. United States, 221

U.S. 1, 58 (1911 ). Illegal restraints are those that are "unreasonably restrictive of competitive
conditions."
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Section 2 prohibits unilateral anticompetitive conduct. It does not prohibit monopolies,
but rather prohibits achieving or maintaining a monopoly through wrongful conduct. Attempted
achievement or maintenance of a monopoly through wrongful conduct is also prohibited if done
with a specific intent to monopolize and there is a dangerous probability of success. The elements
of a Section 2 claim are ( 1) possession of monopoly power in the relevant market and (2) willful
acquisition or maintenance of that power as distinguished from growth or development because of
superior product, business acumen, or historical accident (i.e., through wrongful conduct). See

United States v. Grinnel Corp., 384 U.S. 563, 570-71 (1966). The relevant market is the scope of
products and services included in the market (typically, products and services that are market
substitutes) and the geographic area in which competition occurs. Monopoly power is the power
to control prices or exclude competition in the relevant market.
Century alleges two types of antitrust claims: tying and essential facilities.

A tying

arrangement is "an agreement by a party to sell one product but only on the condition that the
buyer also purchases a different product." N Pac. Ry. Co., 356 U.S. at 5-6. A tying claim requires
at least two separate products. Jefferson Par. Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 20-21 (1984),

abrogated on other grounds by Illinois Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006).
Tying arrangements are forbidden by Section 3 of the Clayton Act, and they may violate Section
1 or Section 2 of the Sherman Act. 15 U.S.C. § 14. The elements of a tying claim are (1) two
separate products or services, (2) the sale of one product (the tying product) is conditioned on the
purchase of the other (the tied product), (3) the seller has sufficient market power to restrain trade
in the tied product, and (4) a not insubstantial amount of interstate commerce is affected. Fortner

Enters., Inc. v. US. Steel Corp., 394 U.S. 495, 498-99 (1969).

The tying alleged here is

transmission service or "wheeling" and electric service. "Wheeling" refers to transfer of electric

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power through transmission and distribution lines from one utility's service area to another.
Century alleges Santee Cooper requires it to purchase electric service at a supra-competitive rate
as a condition for purchasing the service of wheeling power from out-of-state utilities-that access
to the Santee Cooper transmission grid is a service "tied" to the sale of Santee Cooper-supplied
electricity.
Century also asserts an essential facility claim. A monopolist's refusal to provide access
to an essential facility may violate the Sherman Act. See Otter Tail Power Co. v. United States,
410 U.S. 366 (1973) (holding an electrical utility which sold electricity at both the retail level and
the wholesale level had monopolized in violation of the Sherman Act by refusing to supply
electricity at wholesale so that it could instead service customers directly itself); Lorain Journal

Co. v. United States, 342 U.S . 143 (1951) (holding the only local business circulating news and
advertisements in the town violated the Sherman Act by refusing to accept advertising from
businesses that placed advertisements with a small radio station); Associated Press v. United

States, 326 U.S. 1 (1945) (holding the Associated Press bylaws violated the Sherman Act by
limiting membership in the organization and thereby access to its copyrighted news services);

United States v. Terminal R. R. Ass 'n of St. Louis, 224 U.S. 383 (1912) (holding denial of use of
all railway bridges and switching yards into and out of St. Louis was an illegal restraint of trade
and attempt to monopolize). The elements of an essential facilities claim are (1) control of the
essential facility by the monopolist, (2) inability practically to duplicate the essential facility, (3)
denial of use of the essential facility, and (4) feasibility of providing the facility. Advanced Health-

Care Servs., Inc. v. Radford Cmty. Hosp., 910 F.2d 139, 150 (4th Cir. 1990) (quoting MCI
Commc 'ns Corp. v. Am. Tel. & Tel. Co., 708 F.2d 1081, 1132 (7th Cir. 1983)). Century alleges
the transmission and distribution lines surrounding its Mount Holly facility are an essential facility

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controlled by the monopolist Santee Cooper, that Century cannot practically duplicate that facility,
and that it is feasible for Santee Cooper to provide the facility (i.e., it has the necessary unreserved
transmission capacity).
Santee Cooper contests the legal sufficiency of Century's antitrust claims on the merits.
But the principal issue before the Court is Santee Cooper's claim of immunity under the stateaction immunity doctrine. Because the Court holds Santee Cooper does enjoy immunity under
that doctrine, it does not reach the merits of Century's antitrust claims.
1.

State-action immunity doctrine

The state-action immunity doctrine was first recognized in Parker v. Brown, 317 U.S. 341
(1943). In Parker, California devised a program to regulate the quantity and price ofraisins sold.
317 U.S. at 346-47. The scheme was challenged as an antitrust violation by a farmer who would
have lost money under the scheme. Id. at 348-48. The Supreme Court held California immune
from federal antitrust laws, reasoning that states should be able to regulate in the public interest
and that the political process is the place to challenge state action. Id. at 352.
Parker established the well-settled rule that purely private action is subject to antitrust laws

and that purely governmental action is immune, but in the subsequent 74 years, the gray area
between the two has been heavily litigated. In California Retail Liquor Dealers Association v.
Midcal Aluminum, Inc., the Supreme Court held a California statute allowing wine producers to

set minimum wine prices was not immune from antitrust scrutiny, even though the basic policy of
price maintenance was a clearly articulated state policy. 445 U.S. 97 (1980). The Court held that
for state-action immunity to apply to private parties, two conditions had to be met: (1) the
challenged restraint must be one clearly articulated and affirmatively expressed as state policy, and
(2) the policy must be actively supervised by the state itself. Id. at 105. The purpose of the second
prong is to make sure private parties are not acting in their own interest rather than the state's
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interest. See Town of Hallie v. City of Eau Claire, 471 U.S. 34, 45-46 (1985). State-action
immunity was unavailable in Midcal because prices were set by a private party, the wine producers,
and because the state did not review the reasonableness of those prices. The Court pointedly noted,
'"a state does not give immunity to those who violate the Sherman Act by authorizing them to
violate it, or by declaring that their action is lawful."' Midcal, 445 U.S. at l 06 (quoting Parker,
317 U.S. at 351); see also Goldfarb v. Va. State Bar, 421 U.S. 773, 791 (1975) (holding a state
bar's minimum fee schedule violated antitrust laws because "[t]he fact that the State Bar is a state
agency for some limited purposes does not create an antitrust shield that allows it to foster
anticompetitive practices for the benefit of its members").
In Hallie, the Supreme Court held the second Midcal prong generally does not apply to
municipalities, because public bodies are presumed to act in the public interest rather than in a
private interest. 471 U.S. at 46-47. Municipalities do not require active state supervision because
they are electorally accountable, have general regulatory powers, and have no private price-fixing
agenda. See N. C. State Bd. of Dental Examiners v. FTC, 135 S. Ct. 1101, 1112-13 (2015) (citing

Hallie, 471 U.S. at 45-47). Acts of those entities therefore are immune if the acts are clearly
articulated and affirmatively expressed as state policy. Anticompetitive behavior of municipal
actors is clearly articulated and affirmatively expressed as state policy if the anticompetitive effects
are foreseeable or "logically would result" from a clearly expressed state policy. FTC v. Phoebe

Putney Health Sys., Inc., 568 U.S. 216, 226, 230 (2013). In Phoebe Putney, the Supreme Court
clarified that granting a public entity the "general powers routinely conferred by state law upon
private corporations" is insufficient to articulate a state policy against competition. Id. at 227. In
that case, a Georgia law allowing a hospital authority to acquire other hospitals did not permit the
authority to make purchases that would violate antitrust laws, because antitrust violations were not

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foreseeable or the logical result of a law that merely allowed the hospital authority to "acquire
[hospitals] by purchase, lease, or otherwise." FTC v. Phoebe Putney Health Sys., Inc., 663 F.3d
1369, 1377 (11th Cir. 2011), rev 'd, 568 U.S. 216 (2013).
The Supreme Court' s state-action immunity doctrine cases thus create a three-part doctrine:
sovereign actors are immune from antitrust laws, public agencies and municipalities created by a
sovereign state but not themselves sovereign are subject to the first Midcal prong, and private
actors acting in the name of the state are subject to both Midcal prongs. Until recently, however,
there was a circuit split on how to sort entities into those categories by determining whether the
entity requires active state supervision. The Second, Fifth, and Tenth Circuits looked to state law,
holding that entities are public agencies for antitrust purposes if they are classified as public
agencies under state law. See, e.g., Earles v. State Bd. of CPAs of La., 139 F.3d 1033 (5th Cir.
1998); Porter Testing Lab. v. Bd. of Regents for Okla. Agric. & Mech. Calls., 993 F.2d 768 (10th
Cir. 1993); Cine 42nd St. Theater Corp. v. Nederlander Org., Inc., 790 F.2d 1032 (2d Cir. 1986).
The First, Seventh, Ninth, and Eleventh Circuits conducted an analysis of the government-like
attributes of the defendant entity, considering a wide range of factors, including open records, tax
exemption, lack of possibility of private profit, exercise of governmental functions, rulemaking
authority, bonding authority, and composition of the entity' s governance structure. See, e.g. ,
Bankers Ins. Co. v. Fla. Residential Prop. & Cas. Joint Underwriting Ass 'n, 137 F.3d 1293 (11th
Cir. 1998); Hass v. Oregon State Bar, 883 F.2d 1453 (9th Cir. 1989); Fuchs v. Rural Elec.
Convenience Coop., Inc., 858 F.2d 1210 (7th Cir. 1988); FTC v. Monahan, 832 F.2d 688 (1st Cir.
1987). The Fourth Circuit adopted the view preferred by the FTC, which was to look at the extent
to which the entity is driven by private self-interest. See N. C. Bd. of Dental Examiners v. FTC,
717 F.3d 3 59 (4th Cir. 2013 ). That approach considers whether the agency has a financial interest

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in the restraint that it seeks to enforce and whether the agency is controlled by private market
participants who stand to benefit from the restraint. See id. at 369. When both factors are
present-domination by and accountability to market participants-then both Midcal prongs
apply.
The Supreme Court granted certiorari in N. C. Dental and affirmed the Fourth Circuit's
decision, resolving the circuit split. The Court noted,
In Ticor the Court affirmed that Midcal' s limits on delegation must ensure that
"[a]ctual state involvement, not deference to private price-fixing arrangements
under the general auspices of state law, is the precondition for immunity from
federal law." 504 U.S. [621, ]633, 112 S. Ct. 2169. And in Phoebe Putney the
Court observed that Midcal's active supervision requirement, in particular, is an
essential condition of state-action immunity when a nonsovereign actor has "an
incentive to pursue [its] own self-interest under the guise of implementing state
policies." 568 U.S. [216], 133 S. Ct., at 1011 (quoting Hallie, supra, at 46-47, 105
S. Ct. 1713 ). The lesson is clear: Midcal' s active supervision test is an essential
prerequisite of Parker immunity for any nonsovereign entity-public or privatecontrolled by active market participants.
NC Dental, 135 S. Ct. at 1113. The Court also explicitly rejected the argument that entities have

immunity simply because they are classified as public agencies under state law: "The Board argues
entities designated by the States as agencies are exempt from Midcal's second requirement. That
premise, however, cannot be reconciled with the Court's repeated conclusion that the need for
supervision turns not on the formal designation given by States to regulators but on the risk that
active market participants will pursue private interests in restraining trade." Id. at 1113-14. The
Court then clarified that "[w]hile Hallie stated 'it is likely that active state supervision would also
not be required' for agencies, 471 U.S. at 46, n.10, 105 S. Ct. 1713, the entity there, as was later
the case in Omni, was an electorally accountable municipality with general regulatory powers and
no private price-fixing agenda." Id. at 1114.
On the question of whether existing state supervision is adequate supervision, the Court
provided,
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The Court ~as identified ?nly a few constant requirements of active supervision:
The supervisor must review the substance of the anticompetitive decision, not
merely the pro~edures. followed .t~ produce it; the supervisor must have the power
:o .veto or modify particular decis10ns to ensure they accord with state policy, see
zbzd ;. a~d the "mere potential for state supervision is not an adequate substitute for
a decis10n by the State[.]" Further, the state supervisor may not itself be an active
m~rket participant. In general, however, the adequacy of supervision otherwise
will depend on all the circumstances of a case.
Id. at 1116-17 (citations omitted).

Finally, it must be noted that the Supreme Court has repeatedly stated that state-action
immunity is disfavored "given the antitrust laws' values of free enterprise and economic
competition" and as a repeal by implication. Ticor, 504 U.S. at 636; see also N C Dental, 135 S.
Ct. at 111 O; Phoebe Putney, 568 U.S . at 225.

2.

Santee Cooper's immunity claim
There is no colorable argument that Santee Cooper is a sovereign entity not subject to either

Midcal prong. In its reply brief, Santee Cooper makes the strained argument that it has "ipso facto"

immunity from antitrust laws because it is a fully sovereign actor, like a state legislature or a
supreme court.

(Dkt. No. 18 at 3.) Santee Cooper argues it is fully sovereign because the

legislature delegated to Santee Cooper "the sovereign power to make rules to govern the use of its
facilities and to set the rates, terms, and conditions of electric service." (Id. at 4.) Santee Cooper
also argues gubernatorial appointment of its directors, with Senate consent, demonstrates its
sovereignty.
Santee Cooper, however, is chartered as a public corporation, like a municipality. S.C.
Code§ 58-31-10. Municipalities are not fully sovereign actors for antitrust purposes, even though
municipalities are granted powers far more closely associated with sovereignty than merely setting
the price of one' s own products (i.e., police power to keep the peace, power to enact ordinances
having criminal penalties, power to impose taxes) and even though they typically are led by

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officers selected through popular election. See N. C. Dental, 135 S. Ct. at 1114 (noting the logic
of Hallie applies to "an electorally accountable municipality with general regulatory powers").
Because Santee Cooper is not fully sovereign, it either is (1) a public agency created by a sovereign
state but not itself sovereign, subject to the first Midcal prong, or (2) it is a publicly owned entity
that for antitrust purposes is a private actor in the marketplace, subject to both Midcal prongs.
First, the Court must determine whether the South Carolina legislature has a clearly
articulated policy to displace competition. See Phoebe Putney, 133 S. Ct. at 1011. If so, the Court
must then determine whether Midcal's active supervision prong applies to Santee Cooper (and, if
so, whether that prong is satisfied). NC Dental, 135 S. Ct. at 1113. For the reasons set forth
below, the Court holds that South Carolina has a clearly articulated policy to displace competition
in Santee Cooper's exclusive service area and that Midcal's active supervision requirement is
inapplicable because active market participants do not control Santee Cooper.

a.

Clearly Articulated Policy
South Carolina law provides that "[t]he Public Service Commission may not assign any

portion of the present service area of the Public Service Authority to any electrical utility or electric
cooperative and this service area must be exclusively served by the Public Service Authority." S.C.
Code § 58-31-430 (emphasis added). Despite that clear statutory text, Century argues Santee
Cooper's pricing decisions concerning Century are not part of a clearly articulated state policy
because the exact restrictions Santee Cooper imposes on Century are not expressly authorized by
statute. But "to pass the 'clear articulation' test," a state legislature need not 'expressly state in a
statute or its legislative history that the legislature intends for the delegated action to have
anticompetitive effects.' Rather ... state-action immunity applies if the anticompetitive effect was
the "foreseeable result" of what the State authorized." Phoebe Putney, 568 U.S. at 226-27 (citation
omitted). Here, Century merely complains that Santee Cooper prevents Century from purchasing
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power from cheaper providers. That result must be a foreseeable result of giving Santee Cooper a
monopoly over the area in which Century is located.
Century relies on then-Judge Gorsuch's opinion in Kay Electric Co-operative v. City of
Newkirk, Oklahoma, 647 F.3d 1039 (10th Cir. 2011), but that case is inapposite.

There, a

municipality refused to provide sewage service unless the customer also purchased its electricity
from the municipality. Kay Elec. Coop., 647 F.3d at 1041. The Tenth Circuit held Oklahoma
statutes did not clearly articulate a state policy permitting that species of antitrust violation. Id. at
1044. If Santee Cooper had required Century to purchase water in order to get electricity, Kay
would be relevant, but Santee Cooper merely required Century to purchase some (but not all) of
its electricity from Santee Cooper.
Century further argues that Santee Cooper's "exclusive service area" is exclusive only in
that "the Public Service Authority shall have the right to furnish electrical service to the exclusion
of other electrical utilities" in that area, S.C. Code § 58-31-310(2), but the statute defines
"electrical utilities" as entities owning or operating electrical generation or transmission equipment
in South Carolina, S.C. Code§ 58-31-310(1 ). Century argues that definition of"electrical utilities"
permits Century to purchase electricity from out-of-state utilities. Long-established doctrines of
statutory interpretation prevent courts from construing an isolated statutory definition to thwart the
purpose of a larger legislative enactment. "When 'interpreting a statute, the court will not look
merely to a particular clause in which general words may be used, but will take in connection with
it the whole statute (or statutes on the same subject) and the objects and policy of the law, as
indicated by its various provisions, and give to it such a construction as will carry into execution
the will of the Legislature .... " ' Kokoszka v. Belford, 417 U.S. 642, 650 (1974) (quoting Brown
v. Duchesne, 60 U.S. 183, 194 (1856)). It is implausible the South Carolina legislature meant to

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permit unqualified service from out-of-state commercial utilities (including out-of-state
subsidiaries of South Carolina utilities) in Santee Cooper's service area when it said, "this service
area must be exclusively served by the Public Service Authority."
Certainly, courts do not read language out of statutes. "It is a cardinal principle of statutory
construction that a statute ought, upon the whole, to be so construed that, if it can be prevented, no
clause, sentence, or word shall be superfluous, void, or insignificant." TRW Inc. v. Andrews, 534
U.S . 19, 31 (2001) (internal quotation marks omitted). But a more reasonable explanation for
including "in South Carolina" in the definition of an electrical utility for purposes of article 3 of
chapter 31 of title 58 of the South Carolina Code is that the purpose of that article is to divide
South Carolina into areas Santee Cooper serves and areas other South Carolina utilities serve. The
Court declines to read that phrase as an affirmative decision to allow out-of-state utilities the right
to compete in Santee Cooper' s exclusive service area. Cf Letter from Thomas Jefferson to Judge
William Johnson (June 12, 1823), in 15 The Writings of Thomas Jefferson, at 449-50 ("On every
question of construction ... instead of trying what meaning may be squeezed out of the text, or
invented against it, conform to the probable one in which it was passed.").
Century yet still further argues electricity purchased from out-of-state providers is in a
sense self-provided and therefore counts as self-furnished power beyond the scope of Santee
Cooper's monopoly. See S.C. § 58-31-310 (exempting from the monopoly "a person, corporation
furnishing electricity only to himself or itself, their residents, employees or tenants when such
electricity is not resold or used by others"). Century argues that if it is in an area that "must be
exclusively served by the Public Service Authority" then Santee Cooper should not be able to tie
the ability to obtain power from other suppliers to purchases of power from Santee Cooper, because
it should not be possible to purchase power from other suppliers at all. (Dkt. No. 17 at 25.)

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Whether Santee Cooper has complied with state statutory requirements about electricity
provided from out-of-state sources is not an issue before this Court. The issue before this Court
is, for purposes of Midcal' s clear articulation test, whether the exemption of self-furnished
electricity refers only to a customer's own generation capacity, or whether it includes electricity
generated by a competing utility company and transmitted over Santee Cooper' s transmission
lines. The Court concludes the statute by its plain text exempts only customer self-generation,
e.g. , backup generators, solar panels, or captive power plants. To "furnish" is to provide or supply
with something. Furnish, Oxford English Dictionary (2d ed. 1989). If "furnishing electricity" in
"a person, corporation furnishing electricity only to himself or itself, their residents, employees or
tenants when such electricity is not resold or used by others" is taken to include the purchase of
electricity from an electric utility, then every entity that purchases electricity would be "furnishing
electricity" for itself, so that the self-furnished power exemption from Santee Cooper's monopoly
would entirely swallow the monopoly. Of course, Century maintains that for present purposes
"electric utility" means only utilities with generation or transmission lines in South Carolina, so
that an entity is "furnishing electricity" for itself only if it purchases from an out-of-state utility.
But this Court finds it obvious that "furnishing electricity only to himself or itself ... when such
electricity is not resold or used by others" was not meant to require Santee Cooper to make its
transmission lines available for retail wheeling within Santee Cooper' s exclusive service area.
The only reasonable construction of the South Carolina law providing that Santee Cooper' s
service area "must be exclusively served by" Santee Cooper is that it is South Carolina' s policy
for Santee Cooper to have monopoly power in that service area. Santee Cooper' s monopoly power
in its exclusive service area therefore is the clearly articulated and affirmatively expressed policy
of South Carolina.

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b.

Active Supervision
Santee Cooper is a corporation "completely owned by and to be operated for the benefit of

the people of this State." S.C. Code § 58-31-110. Santee Cooper was created "for the benefit of
all the people of the State, for the improvement of their health and welfare and material prosperity,
and are public purposes." S.C. Code§ 58-31-80. It is governed by a board of directors appointed
for fixed seven-year terms and who are removable only for cause. See S.C. Code § 58-31-20. One
member is appointed from each congressional district. Id. One member each must reside in the
service counties of Horry, Berkeley and Georgetown Counties and must be customers of Santee
Cooper. Id. Two members, including the chair, are selected at large. Id. No more than two
residents of any county can serve on the board at any one time. Id. Two of the board members
must have substantial experience with electric cooperatives and one of those must be from an
elective cooperative that transmits or generates electricity. However, no employee or board
member of an elective cooperative can serve on the board of Santee Cooper. Id. Board members '
compensation is set by an advisory board comprised of the Governor, Attorney General, State
Treasurer, Comptroller General, and Secretary of State. S.C. Code § 58-31-20(D).
The board of directors governs Santee Cooper's business operations without supervision
from any electorally accountable person or body. The board members are required by statute to
balance the preservation of the financial integrity of the agency, the economic development and
job attraction and retention within Santee Cooper's service area, and "good business practices."
S.C. Code§ 58-31-55. The only restriction on the board of directors' authority to conduct Santee
Cooper' s business is that the board may not wind up Santee Cooper' s business or dispose of its
core assets without legislative approval.

S.C. Code § 58-31-20(B).

responsible for Santee Cooper' s debts. See S.C. Code § 58-31-30(A).

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South Carolina is not

The purpose of the second Midcal prong "is to determine whether the State has exercised
sufficient independent judgment and control so that the details of the rates or prices have been
established as product of deliberate state intervention, not simply by agreement among private
parties." Ticor, 504 U.S. at 634-35. A regulatory board controlled by persons with a private
interest in the market being regulated is subject to the second prong of Midcal. NC Dental, 135
S. Ct. at 1113- 14. But where the actor is a municipality, "the active state supervision requirement
should not be imposed" because "there is little or no danger that it is involved in a private pricefixing arrangement." Hallie , 471 U.S. at 46-47.
Thus, as a public corporation or municipality, Santee Cooper requires active state
supervision for antitrust immunity only if it is controlled by active market participants. See N. C.

Dental, 135 S. Ct. at 1113 ; Phoebe Putney, 133 S. Ct. at 2256. The complaint fails to allege that
Santee Cooper is controlled by active market participants. Moreover, the statutes governing Santee
Cooper' s board of directors prevent board members from having private interests in the electric
utility marketplace. Board members are political appointees chosen from across South Carolina.
S.C. Code § 58-31-20.

Candidates must be screened by the South Carolina Senate's State

Regulation of Public Utilities Review Committee before they may be appointed. Id.

Board

members ' compensation is set by senior elected state officials, not by marketplace actors, and
board members have no equity interest in Santee Cooper. Id.
Perhaps most importantly, Santee Cooper board members are subject to a statutory best
interest test that requires them to balance Santee Cooper' s proprietary interests with the public's
interest in economic development and job retention.

Century alleges there is "no relevant

difference between Santee Cooper's structure and governance and other private entities governed
by a board of directors. " (Dkt. No . 1 if 31.) But a director of a private corporation exclusively acts

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"in a manner he reasonably believes to be in the best interests of the corporation and its
shareholders." See S.C. Code§ 33-8-300. Santee Cooper directors, on the other hand, are required
to balance Santee Cooper's financial interests against economic development and job retention in
the service area, S.C. Code § 58-31-55, a point Century itself acknowledges in its complaint. (See
Dkt. No. 1ii14 ("Santee Cooper's Board of Directors is expressly directed by S.C. Code Ann.§
58-3 l-55(A) to consider the effect its decisions would have on 'job attraction and retention' in
Santee Cooper's service area").)
Instead of alleging that active market participants control Santee Cooper, Century
complains that Santee Cooper's board has "limited expertise," "no internal Santee Cooper staff or
outside experts directly advis[ing] the Board," and that the board "relies wholly on management."
(Id. ii 31). But the effectiveness of Santee Cooper's board of directors is not an issue before this

Court. The issue is the legal standard controlling federal antitrust claims against state entities,
which requires Century to show Santee Cooper is controlled by active participants in the electricity
market yet is not subject to active state supervision. See NC Dental, 135 S. Ct. at 1112-14.
Century does not allege that Santee Cooper is controlled by active market participants, and, as a
matter of law, active market participants do not control Santee Cooper. The Court therefore holds
that Santee Cooper enjoys state-action immunity from antitrust claims without satisfying Midcal's
active state supervision test, and grants Santee Cooper' s motion to dismiss Century's federal
antitrust claims. Because the Court holds Santee Cooper is immune from antitrust claims, it does
not reach arguments about the merits of Century's antitrust claims.
B.

South Carolina Antitrust Claims
Analysis of South Carolina antitrust claims is inseparable from analysis of federal antitrust

claims. "Because South Carolina has long adhered to a policy of following federal precedents in
matters relating to state trade regulation enforcement ... analysis of ... claims under federal
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antitrust law is equally dispositive of state law claims." Drs. Steuer & Latham, P.A. v. Nat 'l Med.
Enters., Inc., 672 F. Supp. 1489, 1521(D.S.C.1987) (internal quotation marks omitted); see also
We/chin v. Tenet Healthcare Corp., 366 F. Supp. 2d 338, 342 (D.S.C. 2005) ("[A F]inding with

respect to liability on Plaintiff's federal antitrust claims will be dispositive of the state law antitrust
claim.").

Because the Court dismisses Century's federal antitrust claims, it also dismisses

Century's South Carolina antitrust claims.
C.

South Carolina Unfair Trade Practices Act Claims
"To recover in an action under the [SC]UTPA, the plaintiff must show: (1) the defendant

engaged in an unfair or deceptive act in the conduct of trade or commerce; (2) the unfair or
deceptive act affected [the] public interest; and (3) the plaintiff suffered monetary or property loss
as a result of the defendant's unfair or deceptive act(s). An act is 'unfair' when it is offensive to
public policy or when it is immoral, unethical, or oppressive. An act is 'deceptive' when it has a
tendency to deceive." Health Promotion Specialists, LLC v. SC Bd. ofDentistry, 743 S.E.2d 808,
816 (S.C. 2013) (citations omitted). SCUTPA parties must be persons, defined as "natural persons,
corporations, trusts, partnerships, incorporated or unincorporated associations and any other legal
entity." S.C. Cod § 39-5-IO(a). The statute has a regulatory exemption that provides "the
SCUTP A does not apply to [a]ctions or transactions permitted under laws administered by any
regulatory body or officer acting under statutory authority of this State or the United States or
actions or transactions permitted by any other South Carolina State law." Id. at 816 n.13 (internal
quotation marks omitted).
Santee Cooper argues, among other arguments, that the regulatory exemption bars Century'
SCUTP A claims. The Court agrees. The regulatory exemption applies to transactions "allowed
or authorized by regulatory agencies or other statutes." State law requires Santee Cooper to
provide exclusive electric service to Century and to set the rates for that service. See S.C. Code
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§§ 58-31-30(A)(13), 58-31-80, 58-31-55(A)(3)(a), 58-31-430.

The South Carolina Court of

Appeals rejected a claim against the City of Columbia that the city' s policy of charging nonresidents a higher rate for water violated SCUTP A because state statutes allowed the city to set
rates for services provided outside its corporate limits. Calcaterra, 432 S.E.2d at 499-500.
Similarly, here, Century challenges the price a public corporation charges for services where a
statute allows that corporation to provide exclusive services and to set rates. The only thing
allegedly unfair about the rates charged is that they are higher than rates offered by other utilities.
"An act is ' unfair' when it is offensive to public policy or when it is immoral, unethical, or
oppressive." Health Promotion Specialists, 743 S.E.2d at 816. Santee Cooper's rates are not
"immoral, unethical, or oppressive" because they are higher than some other utility' s rates and
because Century must pay those rates as it is within Santee Cooper's statutory area of exclusive
service. The SCUTP A claims therefore are dismissed.
IV.

Conclusion

For the foregoing reasons, the Court GRANTS Santee Cooper' s motion to dismiss (Dkt.
No. 11).
AND IT IS SO ORDERED.

Richard Mark Gerge
United States Distric Court Judge

October }:{_, 2017
Charleston, South Carolina

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