Ray v. Indiana & Michigan Elec. Co.

Citation: 606 F. Supp. 757Docket: Civ. No. F 78-148

Court: District Court, N.D. Indiana; May 11, 1984; Federal District Court

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Plaintiffs John F. Ray, Sr. and others filed a Motion for Summary Judgment against Indiana Michigan Electric Company, citing the potential offensive collateral estoppel from the case City of Mishawaka v. American Electric Power Co. The motion was submitted shortly before trial, and, due to procedural timelines, could not be fully briefed prior to trial commencement. Following a pre-trial conference, the court agreed to hold the trial and rule on the motion afterward, allowing the defendant to respond. 

While some issues in the motion were based on collateral estoppel from the Mishawaka case, others required an evaluation of the facts specific to the current case. The court determined that certain issues, such as the relevant geographic market and the defendant's monopoly over wholesale power sales, could not be resolved through summary judgment and would instead be addressed in the court's findings of fact after reviewing all evidence presented during the trial. The plaintiffs attempted to use Mishawaka to establish the relevant market and monopoly claims but these arguments necessitated a factual analysis beyond mere legal precedent, leading the court to deny the summary judgment on those specific issues.

Ten municipal corporations from northern Indiana and southern Michigan filed a lawsuit against American Electric Power Company, Inc. (AEP), American Electric Power Service Corporation (AEPSC), and Indiana, Michigan Electric Company (I. M), alleging violations of the Sherman Act. The plaintiffs claimed that the defendants exploited I. M's monopoly on wholesale electricity to expand their service area, engaging in anti-competitive actions that monopolized the retail electricity market. 

Key allegations included a "price squeeze" since January 13, 1973, where plaintiffs paid higher wholesale prices than retail rates. The plaintiffs also faced threats from defendants of discontinuing their electricity supply. After the plaintiffs presented their evidence, the defendants moved to dismiss the case, but the court denied this motion and the defendants chose not to present evidence.

The court determined that I. M's pricing structure had created an illegal price squeeze and that the defendants exhibited intent to monopolize, warranting antitrust liability. Although individual actions by the defendants might not have been illegal, their combined anti-competitive behavior constituted a violation. 

The court identified two types of monopolistic overcharges affecting plaintiffs from 1972 to 1976, leading to a settlement for a refund based on an earlier ruling by an Administrative Law Judge. However, no damages were awarded for this period. For the period from August 1976 to August 1978, the court found overcharges exceeding $4 million and awarded treble damages to the plaintiffs. A permanent injunction was also granted against future anti-competitive practices. 

On appeal, the liability finding was upheld, but the injunction and damage remedies were vacated, with instructions to the district court to consider damages from the full complaint period. Ultimately, the case was dismissed following a settlement agreement, preventing a final judgment on damages. The current case involves I. M's alleged violations related to leasing the electric facilities of Fort Wayne Municipal Light Company, with a plaintiff class of approximately 27,000 residential customers who transitioned to I. M on March 1, 1975.

Plaintiffs' complaint includes two theories of liability, with the first regarding the abuse of monopoly power by the defendant, which was dismissed. The remaining claim asserts that I. M violated antitrust laws by acquiring a monopoly in the Fort Wayne retail electricity market through several anti-competitive actions: acquiring municipal electric facilities, opposing Fort Wayne's generation expansion in 1963, charging unjust wholesale rates from 1972 to 1975, and threatening not to build a headquarters in Fort Wayne unless it acquired City Light's assets. Before the lease, City Light and I. M competed in retail electricity sales with similar rates for residential customers. However, following the abolition of the Fort Wayne rate area in February 1977, rates for plaintiffs increased to match those charged by I. M outside the area. Plaintiffs seek compensation for the loss of this favorable rate differential.

To apply collateral estoppel, plaintiffs must demonstrate: 1) a final determination on the merits in the prior action; 2) that the issues were necessary and essential to that outcome; 3) that the issues were actually litigated with a full opportunity for the opposing party; and 4) that the issues decided are identical to those sought to be estopped. If invoking collateral estoppel offensively, plaintiffs face additional hurdles established by Parklane Hosiery Co. Inc. v. Shore, which allows for its use but emphasizes the trial court's discretion in determining its appropriateness based on factors such as the plaintiff's ability to join the prior action, the defendant's incentive to defend, consistency with previous judgments, and any new procedural opportunities in the second action. Should the application of offensive collateral estoppel appear unfair to the defendant, the court may deny its use without needing to address the fulfillment of the standard requirements.

Plaintiffs provide two main justifications for not joining the Mishawaka action: they argue that joining would have created an unmanageable case and that they could not join due to uncertainties regarding their standing as consumers to bring an antitrust suit. The court rejects these arguments, noting that before the Reiter decision, the law allowed for consumer suits despite ambiguities. Additionally, the plaintiffs initiated their current action prior to the Reiter ruling, undermining their claim that standing uncertainty prevented their joinder in Mishawaka.

The court emphasizes that manageability determinations should be made by the presiding judge rather than the non-joining party. The plaintiffs' comparison to GAF Corp. v. Eastman Kodak Co. is deemed inappropriate, as that case involved a judicial finding on manageability, which is absent here. The court notes that the Mishawaka case had ample opportunity for the plaintiffs to join, given that the consolidated complaint was filed over a year after their alleged injury and just after the defendants rested their case.

Moreover, the court points out that offensive collateral estoppel would be unfair because the defendant had limited motivation to defend against issues not pertinent to the Mishawaka judgment, particularly those related to Fort Wayne, which was not a party in the original case.

Defendant lacked a strong incentive to actively engage in the prior case, Mishawaka, which is critical in assessing the applicability of offensive collateral estoppel. Judge Learned Hand's observation in The Evergreens v. Nunan highlights the unpredictability of future legal relevance of facts. In this instance, it was improbable for I. M to anticipate that findings from Mishawaka would be used against it in a subsequent consumer action in Fort Wayne, particularly since the new action was filed immediately after I. M rested its case in Mishawaka.

Contrastingly, in GAF, the defendant was aware of the pending litigation, which justified the use of collateral estoppel. Here, I. M had no indication that such an action would arise, as the City of Fort Wayne had supported the lease, and consumer lawsuits of this nature were virtually nonexistent at the time. Additionally, the legal framework surrounding offensive collateral estoppel was unclear due to the lack of precedent set by Parklane Hosiery.

I. M argued that Mishawaka was the first trial concerning a price squeeze against a regulated utility and believed the plaintiff failed to meet necessary liability elements, leading them to rest without presenting evidence. The court referenced Bonsignore v. City of New York, noting that a lack of defense can render a record one-sided and incomplete, making it unsuitable for establishing collateral estoppel.

While individually, the outlined factors might not conclusively indicate unfairness, collectively they demonstrate that applying offensive collateral estoppel would be unjust. Consequently, the court decided against allowing its use in this case, resulting in the denial of the plaintiffs' Motion for Summary Judgment.

The court is addressing a case concerning alleged violations of the Sherman Act, following a bench trial. The plaintiff class, certified on July 25, 1979, consists of current residential electricity purchasers in the Fort Wayne area who were former customers of the Fort Wayne Municipal Light Company and transitioned to Indiana, Michigan Electric Company (I.M) on March 1, 1975, due to a lease agreement. 

I.M, a corporation based in Indiana, operates as a public utility, generating and selling electric power both wholesale and retail in Indiana and Michigan. It is a wholly owned subsidiary of American Electric Power Company, Inc. (AEP), which oversees multiple electric utility companies and operates a coordinated system across several states.

The American Electric Power Service Corporation, based in New York, provides various management and technical services to I.M and other AEP subsidiaries. Notably, AEP's top executives frequently hold leadership positions within I.M and the Service Corporation, indicating a close operational integration between these entities.

William A. Black serves as President of I. M and has previously held the position of Vice President at the Service Corporation. Gerald P. Maloney, as Financial Vice President and director of I. M, also holds the title of Senior Vice President for the Service Corporation. Richard E. Disbrow, Vice Chairman of the Service Corporation, is also a director and Vice President at I. M. These interconnected roles allow AEP to exert control over the Service Corporation and I. M, with subsidiaries consistently adhering to AEP's Board of Directors' recommendations.

AEP positions itself as the parent of a unified electric utility system known as the American Electric Power System, which includes I. M, asserting that customers benefit from the integration of these companies. 

Historically, in 1898, the City of Fort Wayne established a municipally owned electric utility, City Light, in response to dissatisfaction with existing utility rates. In 1974, Fort Wayne leased its electric properties to I. M for 35 years, which transitioned all City Light customers to I. M, effective March 1, 1975, following approval by the Indiana Public Service Commission.

Since the late 1940s, I. M and City Light have competed in the retail electric service market within the Fort Wayne Rate Area, with overlapping service areas. Customers could easily switch between the two utilities. In 1972, City Light had 34,488 retail customers, while I. M served 45,554, reflecting a competitive landscape where I. M sought to dominate the market, influencing its pricing strategies. The case pertains to the former Fort Wayne rate area as the relevant geographic market.

Prior to March 1, 1975, the defendant served 57% of the retail electric customers in the Fort Wayne rate area, while City Light served 43%. After this date, the defendant held a complete monopoly over retail electric service in the area. Neither party provided evidence on the substitutability of electric power with other energy forms, and the court determined that the relevant product market is retail electric power and energy within the Fort Wayne rate area.

From 1935 until March 1, 1975, City Light's residential rates closely mirrored those of I. M. The rates differed based on consumption levels, with lower rates for those consuming less than 1000 kilowatt hours per month in Fort Wayne compared to other areas. City Light consistently sought to match I. M’s rates, applying for rate increases in line with I. M’s changes. The court concluded that had City Light continued to operate after February 4, 1977, when the Public Service Commission eliminated I. M’s rate differentials, its rates would have aligned with I. M’s, resulting in no injury to plaintiffs who remained customers.

After the lease effective date, the relationship between I. M’s residential rates in Fort Wayne and outside remained consistent. However, the Indiana Public Service Commission found the lower rates for Fort Wayne customers to be unfair and discriminatory, mandating a uniform rate for all residential customers. Despite a 27.52% rate increase after the lease, I. M maintained the existing differential, which faced its first challenge in 1977 due to protests from intervenors, marking a significant moment in the assessment of rate differentials.

The court determined that the removal of the differential in I. M's residential electric rates stemmed from a Public Service Commission ruling that deemed such rates "patently unfair and discriminatory," mandating their elimination. In 1952, City Light, facing peak demand at its generating limit, began purchasing maintenance power from I. M. As demand grew and City Light's generating capacity declined, by 1963, nearly half of City Light's power was sourced from I. M. City Light's facilities were outdated and inefficient, prompting the hiring of Commonwealth Associates, Inc. to recommend modernization, specifically the addition of two 22,000 kilowatt generators. Although the Common Council initially approved contracts for this expansion, the necessary bond ordinance was ultimately rejected due to a change of vote by Councilman Edward Rousseau, leading to the abandonment of the project. Both sides of the expansion debate were given equal opportunity to present their views to the Common Council and the public, including a public debate. A second study, the Solberg Study, recommended against the Commonwealth Associates proposal. Fred Fuestel noted that C.V. Sorenson from I. M played a significant role in influencing Rousseau's vote against the bond.

Mr. Fuestel, a proponent of the Commonwealth Associates proposal, expressed that City Light viewed the proposal as fair. Evidence presented indicates that I. M did not engage in anti-competitive practices and acted fairly in its opposition to the proposal. Following the rejection of funding for the Commonwealth Associates proposal by the Common Council, City Light entered into a second purchased power agreement with I. M on May 19, 1966. This agreement allowed I. M to provide City Light with firm capacity of up to 55,000 KWH and additional capacity under specific conditions, and included the formation of an Operating Committee for cooperation on matters not explicitly covered in the agreement. The agreement was set to last until June 30, 1977, with possible extensions.

City Light and I. M cooperated effectively under this agreement, with no recorded instances of I. M refusing assistance to City Light. I. M provided emergency support and additional power when needed. Despite the rejection of funding for new generators in 1965, City Light's generation facilities deteriorated significantly, leading to the municipal power plant going out of service in October 1974. Fuestel noted that City Light would have been better off shutting down its plant in the early 1970s, as it would have been cheaper to purchase power than to maintain the failing generation facilities. By the time of the lease's effective date, City Light was only viable as a distribution utility.

Technical challenges arose if City Light were to purchase all its power from I. M, as the differing voltage levels would necessitate costly investment in new substations to accommodate the higher voltage. Additionally, City Light faced issues with its outdated distribution system, complicating meter reading and billing processes. There were difficulties in disconnecting non-paying customers without affecting paying ones, and significant investment was needed for improvements, which had not been prioritized.

City Light's generation facilities deteriorated following the Common Council's rejection of funding for the Commonwealth Associates proposal, leading to an increased reliance on purchased power. Under a 1966 contract, the City of Fort Wayne was obligated to purchase all necessary electric energy beyond its own generation. From 1970 to 1974, City Light sourced over 80% of its power from I. M, with the purchase percentages increasing each year, peaking at 89% in 1974. City Light had no viable alternatives to fulfill its power needs due to the outdated and inefficient state of its generation facilities, which suffered from neglect. Modernization would have required significant capital investment, which the Common Council deemed unfeasible. 

Electric power distribution is characterized as a natural monopoly, where economies of scale favor a single provider, as competing entities would incur duplicative costs. The court determined that if City Light and I. M had operated in a competitive market, only one would remain. I. M monitored City Light's pricing and financial health closely to strategically position itself in the market, aiming to become the sole electricity supplier in the Fort Wayne area since the early 1960s. This competitive observation was not intended to create a price squeeze or engage in anti-competitive behavior.

A memorandum dated July 30, 1965, authored by Paul Emler, Vice President of the Commercial Department for the Service Corporation, analyzed the Fort Wayne situation and recommended strategies for I. M to achieve its goal of becoming the exclusive utility provider in the area. Other AEP system management also addressed the "Fort Wayne Dilemma," which was even used as a case study at the University of Michigan to generate new ideas. Despite I. M's long-standing ambition to dominate the Fort Wayne retail power market, there is no evidence of unlawful or anticompetitive behavior in their pursuit.

The first discussion regarding the acquisition of City Light's assets occurred in August 1972 during a meeting between Fort Wayne Mayor Ivan Lebamoff and I. M's Executive Vice President Robert Kopper. Lebamoff proposed selling City Light, but Kopper suggested a lease instead, noting I. M's policy of requiring a formal municipal request before considering such acquisitions. Following this policy, Mayor Lebamoff formally requested a lease proposal from I. M on August 24, 1972.

Subsequent to this request, I. M conducted a feasibility study for leasing City Light's electric properties, resulting in a proposed lease that led to extensive negotiations between I. M and the City of Fort Wayne. After overcoming significant negotiation hurdles, particularly regarding the "rate" clause, a mutually acceptable lease was reached. This lease received approval from the City’s Board of Public Works and the Indiana Public Service Commission, and it was ultimately ratified by voters in a May 7, 1974 referendum, becoming effective on March 1, 1975.

Additionally, during the lease negotiations, Mayor Lebamoff commissioned financial consultant Bernard T. Perry to evaluate the lease. Perry concluded, in a report dated March 21, 1974, that the lease would significantly improve Fort Wayne’s financial outlook, increasing the rate of return on its electric properties from below 0.27% to over 13.47%.

Perry concluded that leasing was more advantageous for City Light than transitioning to a distribution utility model, which would involve purchasing power from I. M at wholesale. His engineering department indicated that operating solely on purchased power would necessitate significant capital investments in the transmission and distribution system, including new substations and improvements in voltage regulation. Perry identified several negative factors, such as the competitive electric rate structure, high costs of purchased power, inflation, and City Light's inefficiencies, which would hinder its ability to remain a profitable enterprise in the long term.

Former Mayor Lebamoff asserted that the report was commissioned to support the lease; however, Perry countered that he was not instructed to bias the report. The court deemed Perry's report a fair and objective analysis favoring the lease. Concurrently, two additional favorable reports emerged, one from an ad hoc citizens group and another from the Taxpayers Research Association.

During the lease negotiations, neither Lebamoff nor any city officials raised concerns about I. M imposing a "price squeeze" or engaging in anticompetitive behavior to pressure the city. Lebamoff's primary motivation for the lease was to advance his downtown rejuvenation plans, particularly regarding a crucial downtown parcel owned by I. M. He requested a commitment for its development as a condition for continuing lease negotiations. I. M had communicated its need for new office facilities to support the anticipated influx of customers from City Light, necessitating a larger and more suitable location in Fort Wayne.

I. M committed to building a new office headquarters in downtown Fort Wayne, contingent upon the execution of the City Light facilities lease. This commitment was fulfilled with the construction of "One Summit Square" at a cost exceeding $50 million. I. M's negotiations regarding their headquarters did not constitute coercive or improper behavior, nor did they involve a threat to relocate from Fort Wayne if the City Light lease was not secured.

On June 13, 1972, I. M petitioned the Federal Power Commission (FPC) for a revised rate structure for municipal and wholesale customers. Although there was conflicting evidence regarding the effective date of the new rates, the court found that they were ordered by the Commission to be collected subject to refund starting December 14, 1972, before the FPC determined their justness or reasonableness.

The City of Fort Wayne participated in the FPC proceedings concerning I. M's wholesale electric rates. On August 19, 1976, Administrative Law Judge George P. Lewnes issued an Initial Decision stating that I. M's proposed rates were excessive and not shown to be just and reasonable, citing flaws in the petition unrelated to any alleged price squeeze. The judge noted that the price squeeze evidence was only admitted as potentially relevant to other issues and prohibited cross-examination on this topic to ensure due process.

Following this decision, I. M settled with affected parties, resulting in an $800,184.09 refund to City Light. Additionally, it was noted that in the electric power industry, suppliers must generate enough power to meet maximum demand, which can vary over time, leading to the load diversity effect that allows wholesale suppliers to sell more power than they purchase.

A supplier with four customers having maximum demands of 12 KW, 6 KW, 4 KW, and 4 KW can charge for a total of 26 KW based on individual maximum demands, but only needs to purchase 20 KW due to the maximum coincidental demand. This allows a utility like City Light to set retail prices below wholesale costs while remaining profitable. A simple comparison of billing rates between wholesale consumers and similar industrial consumers fails to reflect true competitive positioning, as it does not account for load diversity.

Mr. Jahn testified that the coincidental demand peak dictates how much power a supplier must produce, influencing cost-based pricing. The charge to a customer is based on the ratio of their peak demand to their coincident demand (the "diversity ratio"). A customer whose maximum demand is four times greater than their coincident demand can be charged a quarter of the rate compared to a customer whose maximum demand coincides with the supplier's peak.

Jahn's study from July 1973 to June 1974 revealed that industrial consumers had a diversity ratio of 1.29, surpassing City Light's ratio of 1.03 by 25%. Therefore, he concluded that City Light's rates should have been 25% higher than those charged to industrial customers. Jahn's billing analysis indicated that City Light was underbilled by over $400,000 based on industrial rates, a discrepancy that worsened when considering settlement refunds. His analyses showed that the rate structure prior to the lease did not create a price squeeze on City Light.

Mr. Dennis Crill conducted a study analyzing the rate of return for I. M's wholesale and retail services for the year ending June 30, 1974, just before the lease agreement on September 13, 1974. The findings revealed that I. M earned a significantly lower return on its investment from City Light services (1.17%) compared to its retail services (6.55% in Fort Wayne and 5.33% elsewhere in Indiana). Crill's additional analysis indicated that I. M would have benefitted more by purchasing power at the WS wholesale rate, earning a potential return of 14.64% on retail sales, and even higher (16.92%) if all customers were charged under Fort Wayne’s tariffs. 

Mr. Jahn further evaluated the average revenue per kilowatt-hour from different customer classes from 1967 to 1975 and found that the revenue from the City of Fort Wayne was consistently lower than from industrial, residential, and commercial customers. Both Jahn and Landon concluded that I. M's pricing structure did not hinder City Light's profitability nor resulted in a "price squeeze." The court determined that City Light's operational difficulties were due to its inefficiencies rather than any pricing strategies from I. M.

Additionally, I. M’s acquisition of City Light significantly impacted interstate commerce. Before the lease, City Light sourced coal from Kentucky and West Virginia, but post-lease, it ceased such purchases. By March 1, 1975, I. M faced energy shortages and had to buy power from outside Indiana due to an increase in retail customers. 

To succeed in a monopolization claim under Section 2 of the Sherman Act, plaintiffs must establish the relevant market and the defendant's monopoly power within that market.

Defendant's misuse of monopoly power through anti-competitive behavior and the resulting injury to plaintiffs must be established for the court to adjudicate the case. Jurisdiction under the Sherman Act necessitates that the defendant's actions significantly impact interstate commerce. Precedent from *Hospital Building Co. v. Trustees of Rex Hospital* confirms that a local operation affecting interstate commerce suffices for jurisdiction. In this instance, evidence indicated that before the lease, City Light procured substantial out-of-state coal, and after I. M acquired City Light's customers, it increased out-of-state power purchases to serve them. Consequently, the court determined that jurisdiction was established due to the substantial effect on interstate commerce.

The relevant market for antitrust analysis is defined as the retail sale of electric power and energy in the Fort Wayne rate area. The court observed that the defendant did not propose any substitute products for electric power, affirming the market definition. Following I. M's acquisition of City Light's customers, it gained a 100% market share, indicating a monopoly in retail electric power within that area. Additionally, I. M held significant monopoly power in the wholesale supply, supplying 80% of City Light's needs from 1970-1974, with that figure rising to 89% in 1974.

City Light was compelled to purchase all its bulk power from I. M. due to the impracticality of obtaining power from other utilities and the poor condition of its own facilities, establishing I. M.'s monopoly over City Light's electric power supply. Plaintiffs allege that I. M. abused this monopoly through a price squeeze, defined as a situation where a wholesale supplier charges wholesale customers rates high enough to prevent them from competing with the supplier's retail rates. To demonstrate this price squeeze, plaintiffs intend to show that City Light's wholesale billing from December 1972 to March 1975 exceeded the applicable retail rates for industrial customers. 

I. M. contends that a simple billing comparison is inappropriate for the electric utility industry, advocating for alternative methodologies such as transfer price analysis and comparative rate of return analysis. In transfer price analysis, the focus is on whether I. M. could profit by selling at retail rates if it purchased at its wholesale rates. Comparative rate of return analysis examines whether the wholesale profit margin significantly exceeded the retail margin, indicating a possible illegal price squeeze. 

The court recognizes that load diversity complicates direct billing comparisons in the electric utility sector, as utilities can profit with retail rates lower than wholesale rates due to varying demands. Therefore, the court concludes that transfer price and comparative rate of return analyses offer more reliable indicators of whether City Light's profit difficulties stemmed from a price squeeze or other inefficiencies. The precedent set in City of Mishawaka v. American Electric Power Co. does not mandate the exclusive use of billing comparisons, as alternative tests were not considered in that case.

Defendant did not contest the price squeeze test and provided no alternative evidence, leading to the conclusion that a price squeeze existed. The court reviewed three tests, determining that the transfer price test and comparative rate of return test were most effective in assessing the existence of a price squeeze. Both tests indicated that I. M's rates did not constitute a price squeeze, resulting in the rejection of plaintiffs' claims of monopolistic abuse regarding electric power supply. Additional claims of abuse were also dismissed, as the court found no factual basis to categorize defendant's statements about new headquarters as threats or economic coercion. I. M's expressions regarding City Light's expansion plans were protected under the First Amendment, citing the Noerr-Pennington doctrine, which shields efforts to influence public officials from Sherman Act scrutiny. The "mere sham" exception to this doctrine was deemed inapplicable, as the evidence did not suggest that defendant's advocacy aimed to disrupt its business relationship with City Light. The court referenced California Motor Transport Co. v. Trucking Unlimited to clarify that an exception exists if judicial processes are abused to yield illegal results; however, this was not applicable here as the debate over the expansion was fair and did not restrict City Light's advocacy. Consequently, plaintiffs failed to demonstrate that defendant's monopoly acquisition in the Fort Wayne area resulted from an abuse of power. Furthermore, even if an abuse was established, plaintiffs did not prove they suffered direct injury from defendant's alleged illegal actions.

Concrete evidence is required to establish that the plaintiff suffered actual damages due to the defendant's antitrust violations, along with a demonstrated causal connection between the violation and the injury. The plaintiffs failed to provide sufficient proof of injury. They claimed to have been harmed by losing a favorable rate differential that existed before a lease took effect, alleging that without the lease, their electric rates would have remained lower than those of similar customers outside Fort Wayne. However, evidence showed that City Light consistently matched rate increases of I. M, and the expert witness Dr. Sands assumed that this trend would continue without substantiating the actual occurrence of injury. The court noted that the viability of City Light was in doubt and did not consider the anticipated costs of both utilities. Consequently, the plaintiffs did not demonstrate injury by a preponderance of the evidence, nor did they establish a direct causal link between the alleged antitrust violation and the injury, as the loss of the rate differential was mandated by an order from the Indiana Public Service Commission. Furthermore, the defendant was shielded by the state action doctrine. Although the court previously rejected the defendant's state action defense concerning illegal monopolization, it acknowledged that antitrust liability could coexist with Indiana's regulatory framework. The court suggested that damages for illegal monopolization might reflect the difference in rates that would have been charged absent the monopoly, but found that such differences were likely due to the Commission's order. The precedent set in Cantor v. Detroit Edison Co. emphasized that private parties could still bear responsibility for their decisions, even with state involvement in the process.

In Cantor, the Supreme Court addressed a private utility's claim for immunity based on state approval of its light bulb exchange program. The Court determined that the utility, not the state public service commission, bore responsibility for continuing the program. It asserted that the utility's significant role in the decision necessitated compliance with federal law, emphasizing that mere state approval does not absolve private parties from liability. In contrast, the current case involved a defendant whose actions were directly mandated by the Indiana Public Service Commission, which had ordered the elimination of a rate differential. The court ruled that it would be unjust to hold the defendant liable for complying with this directive. Consequently, the court found that the plaintiffs failed to prove essential elements of their Sherman Act claim, leading to judgment in favor of the defendant. The plaintiffs' requests for injunctive and declaratory relief were denied, and they were ordered to take nothing from the defendant, with costs taxed against them. Additionally, the court noted that it would consider collateral estoppel related to the Mishawaka decision only after evaluating the specific evidence in this case, while taking judicial notice of its own records and prior litigation relevant to the issues at hand.

Collateral estoppel can be applied offensively by a plaintiff to prevent a defendant from relitigating an issue that the defendant lost in a prior case with a different party, although it is more commonly applied defensively to bar a plaintiff from relitigating an issue previously lost against another defendant. In this instance, claims under section 1 were dismissed from the current suit as of May 31, 1979, and plaintiffs recognized this by focusing solely on the section 2 claim in their trial brief. The current suit does not involve section 1 claims. Defendants previously contended that the court misapplied the rates in the comparative billing test but did not propose an alternative test. The trial addressed only liability, yet the fact of injury is relevant for the plaintiffs' standing to sue. The extent of damages will not be examined at this stage.