United States District Court, D. South Carolina, Charleston Division
ORDER AND OPINION
RICHARD MARK GERGE, UNITED STATES DISTRICT COURT JUDGE.
matter is before the Court on Defendant South Carolina Public
Service Authority's ("Santee Cooper") motion to
dismiss the complaint. The motion has been fully briefed and,
on September 1, 2017, the Court heard oral argument on the
motion. After full consideration of the parties' briefs
and oral arguments, the Court grants the motion to dismiss
for the reasons set forth below.
1934, the South Carolina General Assembly established Santee
Cooper as a non-profit corporation "to manufacture,
produce, generate, transmit, distribute, and sell water
power, steam electric power, hydroelectric power, or
mechanical power within and without the State of South
Carolina." S.C. Code § 58-31-30(A)(8). Santee
Cooper sells electricity directly to customers and wholesale
to South Carolina's twenty retail electric cooperatives
through the Central Electric Power Cooperative
("Central"). See Santee Cooper, 2016
Annual Report 14, 17 (2016),
A twelve-person board of directors governs Santee Cooper.
Each director is appointed for a term of seven years by the
Governor, with the advice and consent of the Senate. S.C.
Code § 58-31-20. Santee Cooper distributes any excess
revenue from its operations to the general funds of the South
Carolina treasury. S.C. Code § 58-31-110. Otherwise,
Santee Cooper is financially independent of the state. (Dkt.
No. 1 ¶¶ 29-30.) Its budget and the rates it
charges customers are not subject to the approval of any
state agency. (Id.)
1974, the General Assembly established a service area for
Santee Cooper comprised of portions of Horry County,
Georgetown County, and Berkeley County. S.C. Code §
58-31-330. In 1979, an aluminum smelting facility, now owned
by Plaintiff Century Aluminum of South Carolina
("Century"), opened in Mount Holly, South Carolina,
which is in Berkeley County and within Santee Cooper's
service area. (Dkt. No. 1 ¶¶ 1, 18, 32.) An
electrolytic process is used to smelt aluminum and
electricity is the most costly input for aluminum production.
(See Id. ¶¶ 1, 34.) Then, in 1984, the
General Assembly granted the Santee Cooper a monopoly in its
service territory, mandating that Santee Cooper's service
area "must be exclusively served by the Public Service
Authority" (with certain exceptions). S.C. Code §
58-31-430. The rates Santee Cooper charges in its service
area are exempt from the oversight of the South Carolina
Public Service Commission, which regulates rates charged by
investor-owned South Carolina electricity providers. (Dkt.
No. 1 ¶ 31.) Additionally, Santee Cooper owns the
electricity transmission lines in its service area.
(Id. ¶ 2.) Other electricity providers cannot
provide electricity to customers in the Santee Cooper service
area without use of Santee Cooper's transmission lines.
(Id. ¶ 4.)
alleges Santee Cooper leverages its statutory monopoly to
force Century to purchase 25% of its electricity from Santee
Cooper at supra-competitive prices, even though many
third-party suppliers are able and willing to supply that
electricity at a lower cost. (Id. ¶¶ 37,
52, 64.) Century also alleges Santee Cooper's
transmission lines have existing, unreserved import capacity
adequate for Century to purchase all of its electricity from
third-party providers without additional construction of
transmission lines and without disruption of electric service
to other customers. (Id. ¶¶ 5, 10.)
According to Century, the supra-competitive prices Santee
Cooper forces Century to pay are the highest electricity
costs for any aluminum smelter in the United States, forcing
Century to cut production at the Mount Holly facility by 50%
and threatening the facility's complete closure. (See
Id. ¶¶ 6, 7, 9.)
January 27, 2017, Century filed the present suit, asserting
various antitrust claims against Santee Cooper. (Dkt. No. 1.)
Century alleges Santee Cooper has unlawfully tied
transmission services for non-Santee Cooper electric power to
the purchase of electricity from Santee Cooper at
supra-competitive rates, in violation of Sections 1 and 2 of
the Sherman Act and Section 3 of the Clayton Act.
See 15 U.S.C. §1, 2, 14. Century alleges Santee
Cooper illegally uses its transmission grid as an essential
facility to maintain monopoly power in violation of Section 2
of the Sherman Act. Century also alleges Santee Cooper's
conduct violates the South Carolina Unfair Trade Practices
Act and the South Carolina Antitrust Act
March 14, 2017, Santee Cooper moved to dismiss the complaint,
arguing that it is immune from antitrust claims under the
state-action immunity doctrine. (Dkt. No. 11.) Santee Cooper
also argues that sale of electricity to end-users and the
transmission of electricity to end-users are not distinct
antitrust markets in South Carolina, foreclosing any claim of
illegal tying, and that the South Carolina Unfair Trade
Practice Act does not apply to public entities. Century
responded on April 11, 2017 and the Court heard oral argument
on the motion on September 1, 2017.
12(b)(6) of the Federal Rules of Civil Procedure permits the
dismissal of an action if the complaint fails "to state
a claim upon which relief can be granted." Such a motion
tests the legal sufficiency of the complaint and "does
not resolve contests surrounding the facts, the merits of the
claim, or the applicability of defenses. . . . Our inquiry
then is limited to whether the allegations constitute 'a
short and plain statement of the claim showing that the
pleader is entitled to relief.'" Republican
Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir.
1992) (quotation marks and citation omitted). In a Rule
12(b)(6) motion, the Court is obligated to "assume the
truth of all facts alleged in the complaint and the existence
of any fact that can be proved, consistent with the
complaint's allegations." E. Shore Mkts., Inc.
v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th
Cir. 2000). However, while the Court must accept the facts in
a light most favorable to the non-moving party, it "need
not accept as true unwarranted inferences, unreasonable
conclusions, or arguments." Id.
survive a motion to dismiss, the complaint must state
"enough facts to state a claim to relief that is
plausible on its face." Bell Ail. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). Although the
requirement of plausibility does not impose a probability
requirement at this stage, the complaint must show more than
a "sheer possibility that a defendant has acted
unlawfully." Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009). A complaint has "facial plausibility"
where the pleading "allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged." Id.
Federal Antitrust Claims
1 of the Sherman Act prohibits agreements in restraint of
trade. It has two elements. First, a Section 1 violation is
an agreement or concerted action by multiple parties. A
single party cannot violate Section 1 through unilateral
action. Second, the restraint of trade must be illegal. Not
all agreements in restraint of trade are illegal. Courts
distinguish between legal and illegal restraints of trade
using the "Rule of Reason." Standard Oil Co. v.
United States, 221 U.S. 1, 58 (1911). Illegal restraints
are those that are "unreasonably restrictive of
2 prohibits unilateral anticompetitive conduct. It does not
prohibit monopolies, but rather prohibits achieving or
maintaining a monopoly through wrongful conduct. Attempted
achievement or maintenance of a monopoly through wrongful
conduct is also prohibited if done with a specific intent to
monopolize and there is a dangerous probability of success.
The elements of a Section 2 claim are (1) possession of
monopoly power in the relevant market and (2) willful
acquisition or maintenance of that power as distinguished
from growth or development because of superior product,
business acumen, or historical accident (i.e.,
through wrongful conduct). See United States v. Grinnel
Corp., 384 U.S. 563, 570-71 (1966). The relevant market
is the scope of products and services included in the market
(typically, products and services that are market
substitutes) and the geographic area in which competition
occurs. Monopoly power is the power to control prices or
exclude competition in the relevant market.
alleges two types of antitrust claims: tying and essential
facilities. A tying arrangement is "an agreement by a
party to sell one product but only on the condition that the
buyer also purchases a different product." N. Pac.
Ry Co., 356 U.S. at 5-6. A tying claim requires at least
two separate products. Jefferson Par. Hosp. Dist. No. 2
v. Hyde,466 U.S. 2, 20-21 (1984), abrogated on
other grounds by Illinois Tool Works Inc. v. Indep. Ink,
Inc.,547 U.S. 28 (2006). Tying arrangements are
forbidden by Section 3 of the Clayton Act, and they may
violate Section 1 or Section 2 of the Sherman Act. 15 U.S.C.
§ 14. The elements of a tying claim are (1) two separate
products or services, (2) the sale of one product (the tying
product) is conditioned on the purchase of the other (the
tied product), (3) the seller has sufficient market power to
restrain trade in the tied product, and (4) a not
insubstantial amount of interstate commerce is affected.
Fortner Enters., Inc. v. U.S. Steel Corp., 394 U.S.
495, 498-99 (1969). The tying alleged here is transmission
service or "wheeling" and electric service.
"Wheeling" refers to transfer of electric power
through transmission and distribution lines from one
utility's service area to another. Century alleges ...