KMK Continues Its Litigation Victories in Federal Appeals in Major Natural Gas Price-Fixing Cases
For more than a decade, Kohner, Mann & Kailas, S.C. (KMK) has been representing Wisconsin businesses in massive antitrust litigation brought against eleven large energy companies accused of fixing natural gas prices. These efforts resulted in a settlement with four of the energy groups for $20.5 million, the proceeds of which were distributed to Wisconsin industrial and commercial clients earlier this year. Litigation against the remaining seven energy companies continues. In August of this year, KMK secured two important victories in the Federal Ninth Circuit Court of Appeals in San Francisco that enhance the interests of KMK’s Wisconsin clients and advance the cases towards trial and further recovery for KMK’s clients.
The first appeal addressed the District Court’s denial of KMK’s motion for class certification. KMK seeks to certify a Wisconsin class so that it can represent all Wisconsin industrial and commercial purchasers of natural gas during the price-fixing period (2000-2002). The District Court initially denied KMK’s certification motion, but KMK appealed to the Ninth Circuit, arguing that the District Court had erred. The Ninth Circuit agreed with KMK and reversed the District Court’s decision and ruled in favor of KMK’s clients. The Court of Appeals also suggested that it might now be time to return the cases to Wisconsin for trial and KMK has filed motions to return the cases to Wisconsin for conclusion.
The decision means that KMK is able to renew its certification motion, with a fresh chance to argue that the Wisconsin cases need to proceed as a class action, so that all Wisconsin industrial and commercial purchasers of natural gas can jointly seek redress for the substantial damages caused by Defendants’ alleged price-fixing.
The second appeal addressed the District Court’s decision to grant defendant CenterPoint Energy Services, Inc.’s motion for summary judgment, dismissing that energy company from the case. KMK again argued to the Ninth Circuit that the District Court had erred, and in particular that the District Court had failed to properly apply binding precedent of the United States Supreme Court.
The Ninth Circuit again sided with KMK after considering its arguments and reversed the District Court. Adopting KMK’s arguments, the Court of Appeals explained that CenterPoint was formerly owned by the Reliant family of companies (another defendant group in the litigation). CenterPoint admitted for purposes of its summary judgment motion that the other Reliant companies had intentionally fixed natural gas prices to profit from retail sales at inflated rates to Wisconsin businesses. KMK argued that CenterPoint played an essential role in the Reliant companies’ price-fixing, by buying overpriced gas from another Reliant subsidiary, reselling it to Wisconsin companies, collecting the profits from sales at inflated rates, and distributing those profits to its Reliant parent. Under binding Supreme Court holdings, KMK argued, CenterPoint shares the intent of the Reliant companies who participated in wrongdoing, and it is undisputed that the other Reliant companies intended to fix prices.
The Ninth Circuit agreed with KMK’s arguments. It explained that the Supreme Court held, in Copperweld v. Independence Tube Corp., that a parent company and commonly-owned subsidiaries who participate in antitrust violations are considered to be a single unit. This is because companies are controlled by their owners, and since commonly-owned companies share the same owners, there is really only one decision-maker for a group of commonly-owned companies. In analyzing intent to violate antitrust laws, the parent and its subsidiaries are considered to be a single unit because the parent controls all its subsidiaries. Here, because the Reliant parent and other subsidiaries intended to fix prices to profit from sales of natural gas at inflated rates to Wisconsin businesses, the Reliant company CenterPoint is deemed to share that nefarious intent of its Reliant parent and the other Reliant companies who participated in the price-fixing scheme.
This decision means that KMK has materially improved prospects for recovery and can continue to litigate against CenterPoint, a company which sold more than $200 million in natural gas to Wisconsin companies during the relevant period. The clear and lucid explanation of Copperweld that the Ninth Circuit made in the decision (adopting KMK’s position), will also likely assist other courts in deciding similar matters, and helps reaffirm that companies cannot evade antitrust laws by spreading the wrongdoing out among several subsidiaries, each of them contributing only one piece of the puzzle necessary to accomplish the illegal price-fixing. This decision has prospects for becoming an important legal precedent.
If you have any questions about antitrust litigation or would like further insights into the judgements outlined in this article, please contact KMK Attorneys Bob Gegios (firstname.lastname@example.org), Ryan Billings (email@example.com) or Melinda Bialzik (firstname.lastname@example.org) via email or call (414) 962-5110.
Kohner, Mann & Kailas, S.C., (KMK) is a leading business transactions, commercial finance, and litigation law firm that provides clients with cost-effective legal support for their business operations. Formed in 1937, KMK blends demonstrable business know-how with the legal issues that arise from doing business in the United States and elsewhere. KMK offers an experienced and sophisticated team able to adapt its services to the particular business issues of its clients. Based in Milwaukee, Wisconsin, KMK has a reputation for achieving results in local, national, and transnational business disputes and transactions. For more information, visit www.kmksc.com.