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Solarcity Corporation v. Salt River Project Agricultural Improvement and Power District

United States District Court, D. Arizona

October 27, 2015

SolarCity Corporation, Plaintiff,
v.
Salt River Project Agricultural Improvement and Power District, et al., Defendants.

ORDER

DOUGLAS L. RAYES, District Judge.

In December 2014, the Salt River Project ("SRP") announced a new rate structure for sale of retail electricity, which included additional fees for consumers who obtain part of their electricity from rooftop solar energy systems. Solar energy companies, environmentalists, and other interest groups opposed the rate change, arguing the new fee would dissuade consumers from installing solar energy systems. SRP approved the new rates in February 2015. Plaintiff SolarCity Corporation brings this action challenging the new rate structure under federal and state antitrust laws.

Before the Court are Defendant Salt River Project Agricultural Improvement and Power District's (the "District") motion to dismiss, (Doc. 53), and Defendant Salt River Valley Water Users' Association's (the "Association") motion to dismiss, (Doc. 52). The District has also filed a request for judicial notice. (Doc. 54.) The Court held oral argument on October 14, 2015. For the reasons stated below, the District's motion to dismiss is granted in part, the Association's motion to dismiss is granted, and the District's motion for judicial notice is granted in part.

BACKGROUND

I. The Parties

SolarCity is the country's "largest installer of distributed solar energy systems." (Doc. 39, ¶ 15.) It sells and leases solar energy systems to residential and commercial customers "who then use the systems to generate electricity and thereby displace a portion of their electricity purchases from an electric utility." ( Id., ¶ 16.) Prior to the rate change, SolarCity "averaged almost 400 installations per month in SRP's service area." ( Id., ¶ 17.)[1]

SRP is a power-and-water utility comprised of two separate entities: the District and the Association (collectively referred to as "SRP"). ( Id., ¶¶ 18-19.) "The Association is a private, for-profit corporation that files reports with the state listing its Board members as directors' of the corporation." ( Id., ¶ 26.) It was formed in 1903 by private Salt River Valley landowners in order to "enter into contracts with the federal government for the irrigation of their land." ( Id., ¶ 27.) It continues to operate as a private corporation for the benefit of private landowners. ( Id., ¶ 29.)

The District was created in 1937 "for the purpose of refinancing the Association's debts by issuing interest-free bonds, thereby saving the private landowners very large sums of money each year." ( Id., ¶ 28.) The District is responsible for power and water storage work, and the Association manages "water delivery as an agent of the District." ( Id. ) The revenues generated from the District's sale of electricity subsidize the Association's "money-losing water operations, by [$100 million] per year." ( Id., ¶ 35(b).) The District "cannot impose ad valorem property taxes or sales taxes, enact any laws governing the conduct of citizens, or administer [other] such normal functions of government[.]" ( Id., ¶ 40.) The Arizona Corporation Commission ("ACC"), Arizona's public utility regulatory authority, "has no rate-setting or review authority over the District or its retail operations." ( Id., ¶ 42.)

II. Industry Allegations

SRP operates in the Phoenix-metro area. It provides electricity to residential and commercial customers through a variety of plans: (1) a Standard Plan based on per-kilowatt usage, (2) a Time-of-Use Plan where rates vary according to the time of day, (3) a Community Solar Plan where customers purchase power generated by solar power plants at different rates, and (4) other governmental and commercial plans. ( Id., ¶ 56.)

SolarCity participates in this market, which it defines as "the provision of electric power to end-use residential, governmental, and businesses consumers[.]" ( Id., ¶¶ 48-49.) It alleges it "directly competes with SRP because it offers equipment and services that provide electricity - specifically solar-generated electricity - to customers." ( Id., ¶ 50.) When customers purchase SolarCity's equipment and services, it reduces the amount of electricity they must purchase from SRP. ( Id. )

SolarCity alleges "SRP has monopoly power in the retail market within the geographic market, currently providing more than 95% of the electricity used by retail customers in SRP territory." ( Id., ¶ 53.) This is evidenced by SRP's ability to "extract supra-competitive profits from its electrical operations and use them to fund its money-losing water operations, " as well as the high-barriers to entry in the market. ( Id., ¶¶ 54-55.) Moreover, "[w]hether SRP customers self-generate power... or not, all or virtually all of them still need to purchase both retail electric power and grid access from SRP to have access to power at times that alternative sources of power... cannot meet the customers' needs." ( Id., ¶ 63.)

III. The Dispute

For several years, SRP provided incentives for customers to install distributed solar systems. ( Id., ¶ 72.) In 2011, however, "distributed solar increased in popularity and efficiency [and] SRP began to recognize that distributed solar could become a competitive threat in the longer term." ( Id., ¶ 78.) In response, "SRP developed its Community Solar' program, where customers purchase solar-generated electricity." ( Id., ¶ 79.) SolarCity alleges SRP implemented this program in part to ensure its ability to perform under several output requirement contracts with privately-owned solar farms. ( Id., ¶ 80.) However, it could not compete with distributed solar.

In December 2013, SRP lowered pricing for the Community Solar program, and shortly thereafter, "eliminated incentives to install distributed solar." ( Id., ¶¶ 82, 85.) One year later, in December 2014, "SRP announced its intent to adopt new [Standard Electric Price Plans ("SEPPs")] to apply new service terms and rates to its customers." ( Id., ¶ 89.) Around the same time, SRP held several hearings and disclosed information relating to the SEPPs. ( Id., ¶ 91.) SolarCity participated in this process and voiced its opposition to the SEPPs. ( Id. )

On February 26, 2015, the District's Board of Directors approved the SEPPs. ( Id., ¶¶ 97, 100.) The SEPPs retain the normal rate structure for customers that purchase all of their electricity from SRP. ( Id., ¶ 105.) These customers are charged a specific rate per kilowatt usage along with a fixed monthly service charge. ( Id. ) But for customers that purchase electricity from SRP and also generate their own electricity, the SEPPs impose a nearly 65% rate increase from the previous rate structure. ( Id., ¶ 107.) This increase appears as several additional charges applicable only to self-generating customers, as well as "reduced bill credits for the power that distributed solar customers send back into SRP's grid for SRP to re-sell to other customers." ( Id., ¶ 108(c) (emphasis in original).)

On March 2, 2015, SolarCity filed this action seeking damages and injunctive relief under federal and state antitrust laws. (Doc. 1.) On May 20, 2015, SolarCity filed an amended complaint alleging nine counts: (1) Monopoly Maintenance in violation of § 2 of the Sherman Act; (2) Attempted Monopolization in violation of § 2 of the Sherman Act; (3) Unreasonable Restraint of Trade in violation of § 1 of the Sherman Act, (4) Exclusive Dealing in violation of § 3 of the Clayton Act; (5) Monopoly Maintenance in violation of the Arizona Uniform State Antitrust Act ("AUSAA"); (6) Attempted Monopolization in violation of AUSAA; (7) Unreasonable Restraint of Trade in violation of AUSAA; (8) Intentional Interference with Prospective Economic Advantage; and (9) Intentional Interference with Contract. (Doc. 39.) The District and the Association both move to dismiss all counts.

REQUEST FOR JUDICIAL NOTICE

The District requests the Court to take judicial notice of eleven exhibits, (Docs. 54-1 through 54-11). It asserts each exhibit contains information that is publicly available and directly related to allegations in the amended complaint. SolarCity objects to each of these documents except Exhibit 10, which is a copy of SolarCity's Notice of Claims sent to SRP in March 2015, (Doc. 54-10).

Rule 201 permits courts to take judicial notice of a fact "not subject to reasonable dispute because it... can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Fed. R. Ev. 201(b)(2). The advisory committee notes accompanying Rule 201 "explain that [a] high degree of indisputability is the essential prerequisite' to taking judicial notice of adjudicative facts and that the tradition [of taking judicial notice] has been one of caution in requiring that the matter be beyond reasonable controversy.'" Rivera v. Philip Morris, Inc., 395 F.3d 1142, 1151 (9th Cir. 2005) (quoting Fed. R. Ev. 201(a) & (b) advisory committee's notes). In addition, "[b]ecause the effect of judicial notice is to deprive a party of an opportunity to use rebuttal evidence, cross-examination, and argument to attack contrary evidence, caution must be used in determining that a fact is beyond controversy under Rule 201(b)." Id. (internal quotation marks and citation omitted).

SolarCity does not dispute the accuracy of Exhibit 10, nor does it object to the Court taking judicial notice of this document. Because the document is publicly available and not subject to reasonable dispute, the Court will take judicial notice of Exhibit 10.

The District argues Exhibits 1-4 are necessary for the Court to apply judicial estoppel and preclude SolarCity from taking a position inconsistent from one taken before a different tribunal. It asserts Exhibits 1 and 2, which contain 153 pages from the record of a tax case SolarCity filed against the Arizona Department of Revenue and purportedly contain statements relating to SolarCity's lack of "competition" with public utilities, should be noticed by the Court. It also asserts Exhibits 3 and 4 contain additional evidence that SolarCity does not "compete" with SRP in the antitrust context. But SolarCity disputes the relevancy of the statements given the context in which they were made. It claims the District mischaracterizes the statements, and thus they should be narrowly interpreted to apply only to the issues considered during each proceeding. The Court agrees. Taking judicial notice of the documents would require analysis of the context in which the statements were made and may give rise to factual issues. Such an inquiry is not appropriate at the 12(b)(6) stage.

The District also requests judicial notice of Exhibits 5-7, which are documents from an administrative proceeding that purportedly indicate "the ACC has declined to certify any retail electricity competitor in Arizona and that, as a result, the State of Arizona has a policy in favor of regulation, not competition." (Doc. 63 at 7.)[2] But again, SolarCity disputes the context in which the documents were produced. The documents contain hearsay and opinions of non-experts that are subject to reasonable dispute. Taking judicial notice is not appropriate where the Court would be required to weigh evidence without providing SolarCity an opportunity to rebut. See Rivera, 395 F.3d at 1151.

Last, the District seeks judicial notice of three self-created documents, two of which are posted on the District's website and contain information related to the SEPPs, and one prepared in response to SolarCity's Notice of Claims submitted in March 2015. (Docs. 54-8, 54-9, 54-11.) SolarCity argues the documents are irrelevant to this case and disputes the accuracy of the statements contained therein. It also challenges the authenticity of the documents posted on the District's website as they contain no information as to when they were prepared and when they were posted online. Because these documents were prepared by the District, and because SolarCity challenges their content, the Court cannot conclude they are beyond reasonable dispute.

Accordingly, the Court will only take judicial notice of Exhibit 10. The remaining exhibits lack the "high degree of indisputability" necessary under Rule 201, and taking notice of the documents for the purposes suggested by the District would require the Court to engage in evidentiary and factual analysis inappropriate at this stage. The District's motion is therefore granted only with respect to Exhibit 10 and denied as to the remaining exhibits.

MOTIONS TO DISMISS

I. Legal Standard

When analyzing a complaint for failure to state a claim under Rule 12(b)(6), the well-pled factual allegations are taken as true and construed in the light most favorable to the nonmoving party. Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). Legal conclusions couched as factual allegations are not entitled to the assumption of truth, Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and therefore are insufficient to defeat a motion to dismiss for failure to state a claim, In re Cutera Sec. Litig., 610 F.3d 1103, 1108 (9th Cir. 2008). To avoid a Rule 12(b)(6) dismissal, the complaint "must plead enough facts to state a claim to relief that is plausible on its face.'" Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir. 2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Dismissal is appropriate when the complaint lacks a cognizable legal theory, lacks sufficient facts alleged under a cognizable legal theory, or contains allegations disclosing some absolute defense or bar to recovery. See Weisbuch v. Cty. of L.A., 119 F.3d 778, 783 n.1 (9th Cir. 1997); Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988).

II. Analysis

Both the District and the Association move to dismiss SolarCity's amended complaint. The District argues: (1) it is absolutely immune from antitrust damages claims under federal and state law, (2) it is immune from antitrust liability under the state action immunity doctrine, (3) the filed-rate doctrine bars SolarCity's claims, (4) the Noerr-Pennington doctrine bars SolarCity's claims, (5) SolarCity lacks standing because it fails to adequately plead an antitrust injury, (6) SolarCity fails to state a claim under federal or state antitrust law, (7) SolarCity's state law claims are barred because it failed to comply with administrative procedures, and (8) SolarCity fails to adequately plead its tortious interference claims. The Association's motion raises similar arguments and differs only in that it argues (1) the amended complaint fails to implicate it in any wrongdoing, and (2) it and the District are not alter egos. The Court will address the Association's motion first.

A. Allegations Against the Association

The Association argues SolarCity fails to directly implicate it in any wrongful conduct. It claims it has nothing to do with setting electricity rates and that the District ...


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