900 F.3d 623
9th Cir.2018Background
- Class action by Wisconsin commercial/industrial natural gas purchasers (Jan 1, 2000–Oct 31, 2002) alleging Reliant entities and others manipulated market indices and fixed retail gas prices.
- CenterPoint Energy Services, Inc. (CES) was a wholly owned Reliant subsidiary for most of the Class Period; CES bought gas (often from Reliant trading arm RES) and sold to Wisconsin customers.
- FERC and related litigation found manipulatory practices (wash trades, false reporting, churning) by energy traders, including Reliant affiliates.
- Plaintiffs allege an inter-enterprise conspiracy: Reliant traders rigged upstream prices and CES passed inflated prices to Wisconsin customers, remitting profits up the corporate chain.
- District court granted summary judgment for CES, finding no evidence CES knowingly conspired or intentionally participated in anticompetitive acts in Wisconsin.
- Ninth Circuit reversed, holding (inter alia) that under Copperweld a wholly owned subsidiary that engages in coordinated activity with its parent can be treated as part of a single enterprise and may be liable for its own coordinated acts.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a wholly owned subsidiary can be held liable for antitrust conspiracy when it engaged in coordinated activity with its parent | Copperweld means the parent and subsidiary form a single enterprise; the subsidiary shares the enterprise's intent so liability can attach for the subsidiary’s coordinated acts | Copperweld prevents finding a conspiracy between parent and wholly owned subsidiary; subsidiary cannot be treated as having the illegal purpose of its affiliates absent direct evidence | Court: Copperweld implies a unity of purpose; a subsidiary that engages in coordinated activity may be treated as part of the single enterprise and its conduct can be attributed to the enterprise for liability purposes |
| Whether Plaintiffs needed to show CES independently intended to restrain trade | No; enterprise intent is imputed to CES when CES engages in coordinated activity, so separate proof of independent illicit purpose is unnecessary | Yes; Plaintiffs must show CES had the requisite anticompetitive purpose or knowledge to survive summary judgment | Court: Enterprise’s illegal purpose is imputed to CES for coordinated acts; separate proof of CES’s independent intent was not required to raise a triable issue |
| Whether Plaintiffs raised a triable issue that CES had knowledge of the scheme | Evidence of overlapping officers/directors and common management practices makes knowledge imputable to CES | CES lacks direct evidence of knowledge and did not participate in upstream manipulative trading | Court: Overlap of personnel and imputation doctrine create a genuine factual dispute about CES’s knowledge |
| Whether Plaintiffs showed CES acted to further the conspiracy (i.e., engaged in coordinated anticompetitive acts) | CES sold rigged-priced gas to Wisconsin customers and funneled proceeds to the parent—acts essential to passing inflated prices to outsiders | Sales to CES were sufficient for RES to profit; CES’s downstream sales were not necessary for the conspiracy and thus do not prove coordinated activity | Court: CES’s sales and remittances were essential to effectuate the scheme and create a triable issue that CES participated in coordinated activity in furtherance of the conspiracy |
Key Cases Cited
- Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752 (Supreme Court) (parent and wholly owned subsidiary treated as single enterprise for §1 purposes)
- Lenox MacLaren Surgical Corp. v. Medtronic, Inc., 847 F.3d 1221 (10th Cir. 2017) (applied Copperweld corollary to hold enterprise conduct can satisfy claims against affiliated defendants)
- United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (Supreme Court) (price-fixing conspiracy requires sales to outsiders to realize the conspiracy’s benefit)