Federal Appeals Court will not reconsider ruling against Duke Energy in Fayetteville case

The full 4th US Circuit Court of Appeals has voted not to hold a rehearing in a case that produced a recent ruling against Duke Energy. The court announced Tuesday that it had voted 11-2 against considering the case en banc.

A three-judge 4th Circuit panel threw out a lower court order in August and ruled against Duke in a dispute over providing electricity to customers in Fayetteville. A competitor argued that Duke had engaged in illegal anticompetitive practices to keep its current business with the North Carolina city.

The appellate panel ordered the case sent back to a trial court. Appeals Court judges also ruled that US District Judge Kenneth Bell could no longer oversee the case.

“A requested poll of the court failed to produce a majority of judges in regular active service and not disqualified who voted in favor of rehearing en banc,” according to an order issued Tuesday.

Only Judges Julius Richardson and Marvin Quattlebaum voted in favor of an en banc hearing. Chief Judge Albert Diaz and Judge Harvie Wilkinson “were disqualified” from voting.

“NTE Carolinas II, … a power company based in St. Augustine, Florida, sued Duke Energy Corporation, a power company based in Charlotte, North Carolina, alleging that Duke had monopoly power in the wholesale power market in the Carolinas and willfully maintained that power through anticompetitive conduct to exclude NTE from the market, in violation of § 2 of the Sherman Act,” according to the original 4th Circuit opnion this summer.

The Sherman Act, approved in 1890, marked Congress’ first antitrust law.

“In particular, NTE presented evidence in the district court that Duke devised a plan to ensure that NTE, its only serious competitor, would not have the opportunity to compete for the business of Fayetteville, North Carolina, the only major wholesale customer whose long-term contract with Duke was expiring soon enough to allow NTE to compete for its business,” wrote 4th Circuit Judge Paul Niemeyer.

“The district court granted Duke’s motion for summary judgment, in which Duke argued that the conduct that NTE imputed to Duke constituted legitimate competition in seeking to retain Fayetteville’s business and that none of the actions on which NTE relied was unlawful,” Niemeyer added. “While the court concluded that there was a question of fact on whether Duke had monopoly power, it also concluded as a matter of law that Duke did not engage in anticompetitive conduct but rather legitimate competition to retain Fayetteville’s business.”

“While we recognize that much of Duke’s conduct can be understood to be legitimate competitive conduct, … we also have found much from which a jury could conclude that Duke’s actions were illegitimate anticompetitive conduct that violated § 2 of the Sherman Act,” the 4th Circuit opinion continued. “Because genuine disputes of material fact exist, we vacate the district court’s summary judgment and remand for further proceedings.”

“We also order that, on remand, the case be assigned to a different judge,” Niemeyer explained. “In an act of caution, the district judge in this case initially recused himself because of the appearance of one of his former law partners on behalf of Duke. But he was reassigned the case a couple of years later after the ‘conflict’ abated, and he then declined to recuse himself on NTE’s motion, determining that his earlier recusal had not been necessary.”

“We conclude, as most courts have, that once a judge recuses himself from a case, he should remain recused from that case, even though his recusal may not have originally been required,” Niemeyer wrote.

NTE started construction of a “combined-cycle natural gas facility” in Kings Mountain in 2014, the court opinion explained. It needed to use Duke’s transmission lines to provide electricity in the Carolinas. Duke first had “little concern” about NTE as a competitor.

“Duke’s view of NTE changed over the following year, however, as Duke began to realize that NTE was successfully attracting Duke customers,” Niemeyer wrote.

“In January 2015, Duke’s internal briefing reports showed that ‘[s]tand-alone combined cycle plants’ like NTE’s ‘offer less expensive energy than Duke Energy system average rates for the foreseeable future, along with lower capacity prices,’” the court opinion continued. “In short, the combined-cycle plants that NTE was in the business of building were more cost-efficient than Duke’s own plants. Duke then recognized that it ‘[couldn’t] chase the price competition and earn a reasonable return.’”

“Despite NTE’s cleaner, more efficient power generators, Duke recognized that it had an advantage by reason of its long-term wholesale power supply contracts with its customers, which spanned 20 years and required several years’ notice of termination,” Niemeyer wrote. “But Duke identified one contract that was set to expire soon enough for Duke to worry about losing a major customer’s business to NTE — the City of Fayetteville, which provided a peak demand load for electricity of approximately 500 [megawatts].”

Competition for Fayetteville’s business ended up affecting an agreement between Duke ant NTE involving the smaller company’s energy plant in Reidsville. Initially reaching an agreement in 2017 for Duke transmission lines to serve the plant, Duke canceled the agreement in 2019.

That decision prompted court disputes.

“At bottom, the facts of record support a potential finding that Duke timed its unilateral termination of the Reidsville Interconnection Agreement to achieve anticompetitive ends,” Niemeyer wrote. “And we need not determine, as a matter of law, whether, if those facts are believed, such conduct in isolation amounted to a § 2 violation under a refusal-to-deal theory of liability. Rather, we recognize NTE’s claim that this conduct was but a part of a larger scheme.”

“As NTE has shown, the interconnection dispute occurred during the very same time that Duke designed its retroactive rebate for Fayetteville to keep it from issuing” a request for proposals for its business. “NTE could not compete to secure an anchor customer for its Reidsville plant, thus depriving it of any practical ability to bring the more efficient plant to market. Such foreclosure to competition is precisely what § 2 seeks to proscribe.”

Facts of the case still need to be resolved by a trial, appellate judges concluded.

“Upon resolution of those disputed facts, a jury might well conclude that Duke’s conduct was simply good, old-fashioned competition, which, in the end, favors the consumers of electric power in the relevant market,” Niemeyer wrote. “On the other hand, the factfinder might just as well conclude that Duke saw a more efficient competitor in NTE and acted, through a broad range of anticompetitive conduct in various contexts, to eliminate that competition, to the detriment of consumers.”

Judges Stephanie Thacker and Diana Gribbon Motz joined Niemeyer’s opinion.

The post Federal Appeals Court will not reconsider ruling against Duke Energy in Fayetteville case first appeared on Carolina Journal.

 

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