United States District Court, D. Hawaii
HU HONUA BIOENERGY, LLC, a Delaware Limited Liability Company, Plaintiff,
HAWAIIAN ELECTRIC INDUSTRIES, INC., a Hawaii Corporation; HAWAIIAN ELECTRIC COMPANY, a Hawaii Corporation; HAWAII ELECTRIC LIGHT COMPANY, INC., a Hawaii Corporation; NEXTERA ENERGY, INC., a Florida Corporation; and HAMAKUA ENERGY PARTNERS, L.P., a Hawaii Limited Partnership, Defendants.
ORDER GRANTING IN PART AND DENYING WITHOUT PREJUDICE
IN PART DEFENDANT NEXTERA ENERGY, INC.'S MOTION TO
DISMISS SECOND AMENDED COMPLAINT, ECF NO. 148
MICHAEL SEABRIGHT CHIEF UNITED STATES DISTRICT JUDGE.
NextEra Energy, Inc. (“NextEra”) moves to dismiss
the Second Amended Complaint (“SAC”) in this
antitrust and breach-of-contract action arising out of the
cancellation of Plaintiff Hu Honua Bioenergy, LLC's
(“Plaintiff” or “Hu Honua”) power
purchase agreement (“PPA”) with co-Defendant
Hawaii Electric Light Company, Inc. (“HELCO”).
HELCO had agreed to purchase wholesale power from Hu Honua,
which was building an independent power plant run on biomass
on the Big Island of Hawaii. HELCO cancelled the PPA,
allegedly as part of an illegal antitrust conspiracy with
NextEra and others, after problems arose with Hu Honua's
construction of the power plant (although HELCO and Hu Honua
have since renegotiated the PPA).
Honua filed the SAC after the court's January 19, 2018
Amended Order (the “January 19th Order”), which
granted in part motions by NextEra and former co-Defendant
Hamakua Energy Partners, L.P. (“HEP”) to dismiss
the First Amended Complaint
(“FAC”). See ECF No. 137; Hu Honua
Bioenergy, LLC v. Hawaiian Electric Indus., Inc., 2018
WL 491780 (D. Haw. Jan. 19, 2018). The January 19th Order,
among other matters, dismissed federal antitrust claims - two
counts alleging violations of sections 1 and 2 of the Sherman
Antitrust Act, 15 U.S.C. §§ 1 & 2 - against
NextEra and HEP, with leave to amend to attempt to rectify
the identified deficiencies. Accordingly, Hu Honua filed the
SAC on January 29, 2018. ECF No. 138. On March 13, 2018,
NextEra moved to dismiss those realleged claims with
prejudice. ECF No. 148. Hu Honua filed an Opposition on April
13, 2018, and NextEra filed its Reply on April 27, 2018. ECF
Nos. 156, 157. The court heard the Motion on July 9, 2018.
ECF No. 180. Based on the following, NextEra's Motion is
GRANTED as to the federal claims. It is DENIED without
prejudice as to the state claims - claims over which the
court intends to decline supplemental jurisdiction under 28
U.S.C. § 1367(c)(3).
January 19th Order comprehensively set forth the factual and
legal background of this complicated action involving
Hawaii's electric utility market, NextEra's proposed
2014 merger with HECO, HELCO's 2015 termination (and
subsequent renegotiation) of the PPA, and HELCO's
proposed purchase of a HEP facility. The instant Order does
not repeat that background, and the court presumes a detailed
familiarity with its prior Order. The court discusses new
allegations in the SAC only as necessary to address
NextEra's present motion, and otherwise relies on the
January 19th Order for the context. The court proceeds
directly to NextEra's arguments.
Count One - Conspiracy to Monopolize
One of the SAC realleges a claim for conspiracy to monopolize
under 15 U.S.C. § 2, which makes it illegal for someone
to “monopolize, or attempt to monopolize, or combine or
conspire with any other person or persons, to monopolize any
part of the trade or commerce among the several
States[.]” “To prove a conspiracy to monopolize
in violation of § 2, [a plaintiff] must show four
elements: (1) the existence of a combination or conspiracy to
monopolize; (2) an overt act in furtherance of the
conspiracy; (3) the specific intent to monopolize; and (4)
causal antitrust injury.” Paladin Assocs., Inc. v.
Montana Power Co., 328 F.3d 1145, 1158 (9th Cir. 2003)
January 19th Order dismissed the conspiracy to monopolize
claim (the FAC's Count One) for two primary reasons: (1)
a lack of plausible factual allegations of a “specific
intent to monopolize” the market for wholesale firm
power generation on the Big Island; and (2) a lack of
“causal antitrust injury.” Hu Honua
Bioenergy, 2018 WL 491780, at *8-9. Relatedly, the court
also dismissed the FAC's Count Two, alleging conspiracy
to restrain trade in violation of 15 U.S.C. § 1 because
the FAC did not plausibly allege an illegal conspiracy,
id. at *14-15 - and that reasoning was also
sufficient to dismiss Count One for conspiracy to monopolize
as well. See, e.g., Seagood Trading Corp. v.
Jerrico, Inc., 924 F.2d 1555, 1576 (11th Cir. 1991)
(“[A] section 1 claim and a section 2 conspiracy to
monopolize claim require the same threshold showing - the
existence of an agreement to restrain trade.”); IIIB
Philip E. Areeda & Herbert Hovenkamp, Antitrust Law:
An Analysis of Antitrust Principles and Their
Application ¶ 809 (4th ed. 2015) (hereinafter
“Areeda & Hovenkamp”) (“Any arrangement
that could be considered a ‘conspiracy' to
monopolize [under § 2] must necessarily also be an
unreasonable ‘contract,' ‘combination,'
or ‘conspiracy' in restraint of trade offending
SAC's conspiracy to monopolize claim fails for the same
fundamental reasons. That is, the SAC has not cured the
An Implausible Conspiracy
the SAC still alleges an implausible illegal antitrust
conspiracy. Despite the SAC's amendments, two crucial
facts remain that are inconsistent with Hu Honua's
antitrust theory: Hu Honua's own failure to complete its
power plant under the PPA's terms; and the NextEra/HEI
Merger Agreement's prohibition of NextEra's
“control” of decisions like HELCO's
cancellation of the PPA or proposed purchase of HEP's
Hu Honua's Initial Breach of the PPA
fact that Hu Honua failed to complete its power plant under
the PPA's terms provides an “obvious alternative
explanation” (i.e., besides an illegal conspiracy) for
HELCO's cancellation of the PPA. See, e.g.,
Eclectic Props. E., LLC, 751 F.3d 990, 996 (9th Cir.
2014) (“When considering plausibility, courts must also
consider an ‘obvious alternative explanation,' for
defendant's behavior.”) (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 682 (2009)); Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 567 (2007) (“[I]t was not
suggestive of conspiracy . . . [where] we have an obvious
alternative explanation.”). The SAC continues to
acknowledge that Hu Honua was unable to complete its biomass
power plant as required by the express terms of the PPA. As
with the FAC, the SAC explains that labor disputes, financing
problems, and litigation with its construction contractors -
all completely independent of NextEra, and its proposed
merger with HECO - “caused an extended loss of time and
delayed the completion of construction of the Hu Honua
Facility, setting in motion the chain of events leading to
this Complaint.” SAC ¶ 75. These events
“caused an irretrievable loss of time in the
construction of the Hu Honua Facility, ” such that Hu
Honua “would not be able to achieve two milestone
dates set forth in the PPA.” Id. ¶ 126.
Thus, rather than inferring an illegal antitrust conspiracy
from the timing of the proposed merger, the SAC itself
explains the obvious alternative explanation for HELCO's
termination of the PPA - Hu Honua's own nonperformance -
rendering Hu Honua's conspiracy allegations implausible.
Twombly, 550 U.S. at 567.
also explained in the January 19th Order) if HELCO
unreasonably refused to extend milestone construction dates
in accordance with the PPA, this might form the basis for a
breach of contract claim against the Hawaiian Electric
Defendants, but not for an antitrust conspiracy claim.
See, e.g., Schuylkill Energy Res., Inc.
v. Penn. Power & Light Co., 113 F.3d 405, 418 (3d
Cir. 1997) (“The fundamental dispute . . . concerns the
interpretation of the Power Purchase Agreement. This dispute
should be resolved pursuant to common-law contract
principles” not through antitrust laws); Orion
Pictures Distrib. Corp. v. Syufy Enters., 829
F.2d 946, 949 (9th Cir. 1987) (“Orion has suffered a
breach of contract, not an antitrust injury.”).
The Merger Agreement's Consent Provisions
as with the FAC, the consent provisions of the NextEra/HEI
Merger Agreement (whereby HELCO/HECO needed NextEra's
prior consent before “enter[ing] into, terminat[ing] or
amend[ing] in any material respect any material Contract,
” SAC ¶ 84) cannot alone constitute the necessary
“combination or conspiracy” to monopolize.
Paladin Assocs., Inc., 328 F.3d at 1158. This is
because the Merger Agreement also provides that such consent
“shall not be unreasonably withheld, conditioned or
delayed, ” ECF No. 73-3 at 5, Merger Agreement at 38,
and it specifies:
No Control of [HEI's] Business. [NextEra]
acknowledges and agrees that (i) nothing contained in this
Agreement is intended to give [NextEra], directly or
indirectly, the right to control or direct the operations of
[HEI] or an [HEI] Subsidiary prior to the Effective Time and
. . . prior to the Effective Time, [HEI] shall exercise,
consistent with the terms and conditions of this Agreement,
complete control and supervision over its and [HEI's]
Subsidiaries' respective operations.
ECF No. 73-3 at 10, Merger Agreement at 43. That is, the
Merger Agreement itself precludes control, and so - without
more - it cannot form the basis of an illegal agreement in
violation of antitrust laws.
remains true, as the court previously explained, that:
Rather than establishing unbridled control by NextEra (and
its joinder in an illegal conspiracy), the [Merger Agreement]
itself establishes no more than NextEra's routine consent
in HELCO's decision. That is, the [SAC]
“just as easily suggests rational, legal business
behavior” by NextEra, rather than an illegal conspiracy
to restrain trade. See Kendall [v. Visa U.S.A.,
Inc., 518 F.3d 1042, 1049 (9th Cir. 2008)]
(“Allegations of facts that could just as easily
suggest rational, legal business behavior by the defendants
as they could suggest an illegal conspiracy are insufficient
to plead a violation of the antitrust laws.”).
Hu Honua Bioenergy, 2018 WL 491780, at *14. See
also Name.Space, Inc. v. Internet Corp. for Assigned Names
& Numbers, 795 F.3d 1124, 1130 (9th Cir. 2015).
No. Specific Intent to Monopolize
even accepting that NextEra and the Hawaiian Electric
Defendants had some sort of an agreement regarding
termination of the PPA, the SAC still fails to allege
plausibly that NextEra had the “specific intent to
monopolize” such that an agreement could have been part
of an illegal antitrust conspiracy. See Paladin Assocs.,
Inc., 328 F.3d at 1158 (“To prove a conspiracy to
monopolize in violation of § 2, [a plaintiff] must show
. . . the specific intent to monopolize”).
the FAC, Hu Honua argued that HECO terminated other
independent power purchase agreements on Oahu (in the same
time frame that HELCO terminated the Hu Honua PPA and sought
to acquire HEP's facility on the Big Island) as part of a
larger strategy - shared with NextEra - to plan for liquid
natural gas sources of power after the proposed merger. The
January 19th Order concluded, however, that such a common
motive to increase profits did not indicate that NextEra had
a “specific intent to monopolize” the wholesale
power market on the Big Island. See Hu Honua
Bioenergy, 2018 WL 491780, at *9 (“[T]here are no
facts pled that would suggest NextEra specifically
intended to monopolize that market merely by consenting to
HELCO's termination of the Hu Honua PPA.”) (citing
Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421
(9th Cir. 1995), and Syufy Enters. v. Am. Multicinema,
Inc., 793 F.2d 990 (9th Cir. 1986)). This court reasoned
that “[i]t is not enough to show that [a defendant]
merely agreed to go along.” Id. (quoting
Rebel Oil Co., 51 F.3d at 1438 n.8). “[I]t is
not enough to suggest - as Hu Honua does - that NextEra
shared a motive to increase prices or profits with a similar
strategy.” Id. (citation omitted).
“Motivation to enter a conspiracy is never enough to
establish a traditional conspiracy.” Id.
(quoting VI Areeda & Hovenkamp ¶ 1411 (4th ed.
adds further allegations detailing HEI's liquid natural
gas strategy, purportedly in conjunction with the proposed
merger and at the direction of NextEra. See, e.g.,
SAC ¶¶ 87, 88, 92, 94, 99, 103, 105, 107, 117, 119,
120, 122. But, as NextEra argues, these allegations continue
to relate to other markets (Oahu), other products (liquid
natural gas), and are largely directed at other Defendants
(the Hawaiian Electric Defendants). And although these new
allegations, like those in the FAC, might further indicate a
motivation for why NextEra would agree to actions of HELCO
(cancellation of the PPA, purchase of HEP's facility)
during the relevant time period, they still do not indicate a
specific intent on NextEra's part to monopolize the
wholesale power market on the Big Island. Again, motivation
is not enough. Rebel Oil Co., 51 F.3d at 1438 n.8;
Hu Honua Bioenergy, LLC, 2018 WL 491780, at *9.
is nothing inherently wrong (at least for the alleged
antitrust purposes) with this alleged liquid natural gas
strategy. It is a legitimate ...