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Modesto Irrigation District v. Pacific Gas & Electric Co.
Citation: 54 F. App'x 882Docket: No. 99-17069; D.C. No. CV-98-03009-MHP
Court: Court of Appeals for the Ninth Circuit; December 5, 2002; Federal Appellate Court
The memorandum addresses the de novo review of a 12(b)(6) dismissal of a complaint without leave to amend. PG&E's motion to take judicial notice of various regulatory documents related to Modesto's application to FERC is granted. PG&E claims that federal jurisdiction over Modesto's claims is precluded by FERC’s comprehensive regulatory authority, particularly due to the 1992 amendments that allow FERC to order wholesale wheeling. However, statutory language explicitly states that these provisions do not modify or supersede antitrust laws. The argument fails to distinguish relevant case law, including Cost Management Services and Otter Tail Power Co., which remain applicable despite statutory changes. PG&E further argues for dismissal under the Noerr-Pennington doctrine, asserting that its litigation position before FERC regarding Modesto’s proposal as a sham transaction protects it from liability. PG&E contends that its refusal to provide service was incidental to its petitioning activity. However, the record does not support the claim that Modesto's request amounted to an offer to settle, nor does it establish that refusal was incidental to protected petitioning. The memorandum suggests that PG&E could have provided service while reserving its rights, akin to a liability insurer's defense under reservation of rights. Lastly, PG&E argues that its conduct was unilateral, not collusive, thus not violating section 1 of the Sherman Act. This claim is contradicted by the complaint, which explicitly alleges a contract with Destec to deny service to Modesto as a restraint of trade. PG&E is alleged to have reached an agreement with Destec for Destec to abandon its efforts to serve Modesto, potentially under duress from PG&E's market power. The court does not assert that Destec was obligated to continue litigation with PG&E but indicates that more factual development is needed to evaluate the claims, including potential conspiracy under antitrust laws. PG&E contends that Modesto failed to allege 'antitrust injury' since, without FERC approval, PG&E claims it could not supply power to Modesto, regardless of its preferences. However, the statutes cited by PG&E do not conclusively support this claim; they allow for the potential establishment of connections without prior FERC orders and do not preclude voluntary service provision by utilities. PG&E's argument regarding the necessity for local approval under state laws is also unsubstantiated at this stage, as the defined service area remains unclear from the complaint. The court’s decision is reversed, and the ruling is not to be published or cited in this circuit per Ninth Circuit Rule 36-3.