Simon v. KEYSPAN CORP.
2011 U.S. Dist. LEXIS 29252
S.D.N.Y.2011Background
- Simon sues KeySpan and Morgan Stanley under the Clayton Act for alleged antitrust injury from the NYC Installed Capacity Market and the KeySpan Swap; the market operates under FERC/FPA oversight with NYC capacity set via NYISO auctions and FERC-approved tariffs.
- KeySpan supplied installed capacity (capacity market) in NYC; capacity is a regulatory construct used to ensure reliability, not actual energy, and is procured by Load Serving Entities like Con Ed.
- FERC approved KeySpan’s market-based rate authority and bid caps; FERC permitted capacity pricing through NYISO Tariff auctions and guided market power mitigation.
- KeySpan and Morgan Stanley entered the KeySpan Swap and an Astoria Hedge; the agreements allegedly boosted KeySpan’s revenue and maintained capacity prices at or near bid caps.
- FERC reviewed the KeySpan Swap and found it lawful; DOJ later settled in a separate action, with a final judgment requiring KeySpan to pay a civil fine, and the court noting restitution to consumers would be unlikely.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing/antitrust injury under §4 | Simon is an indirect purchaser with cognizable injury | Simon lacks antitrust standing as an indirect purchaser | Dismissed for lack of antitrust standing |
| Filed rate doctrine applicability | Rates challenged were not filed rates | Rates were filed and approved by FERC | Dismissed under filed rate doctrine as to all claims |
| Preemption of state law claims | State claims are not preempted | FERC exclusive regulation preempts state claims | Dismissed due to field and conflict preemption |
| Leave to amend the complaint | Amendment could salvage claims | Amendment would be futile | Denied; amendment would be futile |
Key Cases Cited
- Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (U.S. 1968) (direct purchaser rule and injury in antitrust damages)
- Illinois Brick Co. v. Illinois, 431 U.S. 720 (U.S. 1977) (limits standing of indirect purchasers under §4)
- Kansas v. UtiliCorp United, Inc., 497 U.S. 199 (U.S. 1990) (confirms indirect purchaser limitations and potential exceptions)
- Wegoland Ltd. v. NYNEX Corp., 27 F.3d 17 (2d Cir. 1994) (filed rate doctrine and reasonableness of filed rates)
- Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953 (U.S. 1986) (FERC’s exclusive jurisdiction over wholesale rates)
- AT&T Co. v. Central Office Tel., Inc., 524 U.S. 214 (U.S. 1998) (application of filed rate doctrine to regulations and contracts)