A federal court allowed certain antitrust and state law claims brought by an installer of distributed solar energy systems against Arizona’s Salt River Project Agricultural Improvement and Power District (SRP) to move forward in litigation. As reported in a recent Sutherland Legal Alert, SolarCity Corporation asserted that SRP’s new pricing plans violated the antitrust laws in creating an effective penalty on home solar users. In an opinion issued on October 27, 2015, the U.S. District Court for the District of Arizona denied SRP’s motion to dismiss several of SolarCity’s claims.
The court dismissed claims of restraint of trade, exclusive dealing, and tying under the Sherman Act and the Clayton Act. First, the court found that SolarCity failed to plead an agreement or conspiracy to restrain trade, rejecting SolarCity’s argument that such an agreement could exist between a company and an “unwitting customer.” Second, the court rejected SolarCity’s argument that the agreement between SRP and its customers constituted an agreement to deal exclusively with SRP. The court said that “charging a higher rate to customers who use distributed solar systems is not the same as an agreement to exclusively deal.” Finally, the court agreed with SRP that SolarCity had not alleged a tying arrangement linking two separate markets. Based on these findings, the court dismissed two counts of SolarCity’s complaint.
SolarCity’s federal and state law monopolization claims, however, survived. The court summarized SolarCity’s allegations as claiming that SRP imposed new pricing plans to exclude SolarCity from a market that had previously supported competition, and that the pricing plans would limit consumer choice. These allegations adequately supported SolarCity’s causes of action under Section 2 of the Sherman Act and the Arizona Uniform State Antitrust Act insofar as they were based on monopolization. The court also upheld SolarCity’s state law tort claims as adequately pled.
The court dismissed all the claims against SRP’s co-defendant, the Salt River Valley Water Users’ Association. It found that SolarCity failed to plead any allegations that would implicate the Association, as opposed to SRP itself, in any wrongdoing. It also found that the Association was not an alter ego of SRP.
The court also analyzed several affirmative defenses raised by SRP. Most notably, it concluded that SRP was entitled to immunity from federal antitrust treble damages claims under the Local Government Antitrust Act because SRP is, as a matter of law, a “political subdivision of the state created by state law and the state constitution.” Thus, SRP’s sole exposure under the federal antitrust laws is to a claim for injunctive relief plus attorneys’ fees under section 16 of the Clayton Act. The court, however, ruled that SRP was not entitled to immunity from state law damages claims, including claims for damages for monopolization under the Arizona state antitrust laws (which may be trebled if the trier of fact finds the conduct sufficiently “flagrant”).
Obviously, partial survival of a motion to dismiss is only one of many barriers SolarCity must surmount if it is to recover on its claims. For example, SRP’s state action defense was rejected on the basis that it raised issues of fact and not of law, and the rejected filed rate doctrine defense might yet become relevant at a later stage. Moreover, the Supreme Court has been noticeably unreceptive in recent years to monopolization actions brought by competitors. See, e.g., Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004). Nevertheless, the case warrants continued monitoring. SolarCity’s success on this motion may encourage similar claims in other jurisdictions.