United States District Court, D. Arizona
Honorable Susan M. Brnovich United States District Judge.
the Court are Defendant Salt River Project Agricultural
Improvement and Power District's (“District”)
Motion to Dismiss and Request for Judicial
Notice. (Doc. 14, “Mot.”; Doc. 15,
“Req.”). Plaintiff customers William Ellis,
Robert Dill, Edward Rupprecht, and Robert Gustavis responded
to the Motion and the District replied. (Doc. 21,
“Resp.”; Doc. 22, “Repl.”).
Plaintiffs also responded to the Request. (Doc. 20,
“R.Resp.”). The Court heard oral argument
November 18, 2019. (Doc. 28.) Accepting the allegations as
true, the Motion and Request are each granted in part as
case arises out of the District's adoption of a new rate
structure for its sale of electricity, which includes
additional fees and different rates for residential
customers, like Plaintiffs, who self-generate some of their
electricity through solar energy systems. (Doc. 12,
“FAC” ¶¶ 6, 28, 75-76.) In 2014, the
District proposed the new rate structure (“Standard
Electric Price Plans” or “SEPPs”), which
includes a new E-27 price plan required for self-generating
solar customers, that its Board of Directors
(“Board”) approved in 2015. (Id.
¶¶ 72-73.) The E-27 price plan applies to customers
who began self-generating solar power after December 8, 2014.
(Id. ¶ 81.) Plaintiffs' claims relate to
their financial injuries caused by the SEPPs. (Id.
¶¶ 1, 5, 73.)
are four District residential customers who live in Arizona
and self-generate some of their electricity through personal
solar energy systems. (Id. ¶¶ 20-27.)
Three Plaintiffs installed their solar energy systems after
the District adopted the SEPPs. (Id. ¶¶
21, 23, 25.) Specifically, Ellis, Dill, and Rupprecht
installed solar energy systems in May 2018, July 2018, and
November 2016, respectively. (Id.) Rupprecht bought
his home equipped with a solar energy system at an unknown
date. (Id. ¶ 27.)
District and the “Association” are two distinct
entities comprising the Salt River Project Agricultural
Improvement and Power District (“SRP”), a
power-and-water utility company in central Phoenix,
Arizona. (Id. ¶ 28.) Although the
District is a political subdivision of Arizona, it (1)
“is not recognized by the State of Arizona or by any
law as a regulator or regulatory authority in the retail
[electricity] market;” (2) “cannot impose ad
valorem property taxes or sales taxes or enact laws governing
citizens' conduct;” (3) “cannot administer
normal governmental functions such as the maintenance of
streets, the operation of schools, or sanitation, health or
welfare services;” (4) “is not exempt from a
city's exercise of eminent domain, nor it is immune from
tort liability;” and (5) can only levy taxes against
its landowners. (Id. ¶¶ 35-36.) Unlike
other utility providers, the District's rates, rules, and
regulations are exempt from the control of Arizona's
public utility regulator, the Arizona Corporation Commission
(“ACC”). (Id. ¶ 37.)
The Retail Electricity Market
District provides electricity to around two million
residential and commercial customers including Plaintiffs in
central Phoenix (“Market”). (Id.
¶¶ 2, 28, 32, 42.) As Plaintiffs allege, the
District provides over 95% of retail customers'
electricity in the Market through a variety of plans and
sources. (Id. ¶¶ 48-49.) Individuals in
the Market can either purchase electricity from the District
or self-generate electricity through purchased or leased
solar energy systems. (Id. ¶ 43.) By investing
in solar energy systems, customers “significantly
reduce the amount of electricity that they need to purchase
from [the District].” (Id. ¶ 44.)
However, “[s]ince technologies that would allow
consumers to completely remain off the grid are not yet
economically viable, ” “all customers within [the
Market] generally must purchase some retail electricity from
[the District].” (Id. ¶ 52.) The District
competes with solar energy system installers in the Market to
provide electricity and one of its executives allegedly
referred to solar energy systems, installers, and advocates
as ‘the enemy.'” (Id. ¶¶
District's monopolization is allegedly not caused by any
state policy to prevent competition, especially since
Arizona's legislature encouraged competition in the
retail electricity market through the Electric Power
Competition Act of 1998 (“the Act”).
(Id. ¶¶ 53-54.) The District acknowledges
the legislature's transition to promote competition in
the Market in its 2010 rules and regulations, which state
“[the District's] service territory is open to
competition . . . in accordance with the . . . Act.”
(Id. ¶ 55.) The Act also allegedly subjects
public power entities to antitrust liability. (Id.
¶ 59 (citing A.R.S. § 30-813)).
SEPPs are “aimed at maintaining [the District's]
monopoly power; impeding solar development despite its
recognized benefits; quashing competition for electricity
from self-generating customers with solar energy systems; and
generating additional revenues for [the District] through
exploitation of its monopoly power.” (Id.)
More explicitly, the SEPPs make self-generating solar energy
uneconomical and force Market consumers to exclusively
purchase the District's electricity. (Id. ¶
87.) Because the District previously encouraged and even
incentivized consumer investment in solar energy systems
until 2014, (id. ¶¶ 63, 71-72), Plaintiffs
claim the District adopted and advertised the SEPPs to deter
individuals from investing in solar energy systems and
fortify its monopoly. (Id. ¶¶ 5-10, 46,
SEPPs differentiate between three types of customers.
(Id. ¶ 81.) The first category is non-solar
customers, who purchase all of their electricity from the
District, follow the traditional rate structure, and pay per
kilowatt-hour of electric usage, a $20.00 monthly service
charge, and a $4.20 distribution charge. (Id.
¶¶ 74-75.) The second category is solar-customers,
like Plaintiffs, who began self-generating solar energy after
2014 (“post-2014 solar customers”). (Id.
¶ 80.) Post-2014 solar-customers are subject to the E-27
plan, which is a “demand based rate plan” that
includes a $32.44 or $45.44 monthly service charge, $16.64 or
$29.64 distribution charge, and additional “demand
charge” that is not applied to non-solar customers.
(Id. ¶¶ 75-76.) The District charges
post-2014 solar customers roughly $600 more per year than
other customers. (Id. ¶ 89.) The third category
is solar-customers who self-generated solar energy before
December 8, 2014 (“pre-2014 solar customers”).
(Id. ¶ 81.) Pre-2014 solar customers are exempt
from the E-27 plan and treated like non-solar customers.
allege the SEPPs “made it economically unfeasible for
customers to install solar energy systems.”
(Id. ¶ 92.) Plaintiffs further allege
“[t]here is no rational basis” for adopting the
SEPPs and the District's reason of recouping fixed
expenses required to service post-2014 solar customers is
pretextual. (Id. ¶¶ 96, 100.) Beyond
“public policy and logic” warranting relief,
Plaintiffs claim the District's “anticompetitive,
discriminatory, and unconstitutional conduct” warrants
“monetary, injunctive, and declaratory relief”
under a variety of federal, state, and constitutional
remedies. (Id. ¶ 1.) Plaintiffs allege the
SEPPs violate (1) federal and state antitrust law; (2)
state-law price discrimination; (3) federal and state equal
protection; and (4) Arizona's Consumer Fraud Act.
(Id. ¶¶ 120-195.) The District requests
judicial notice and moves to dismiss under Federal Rule of
Civil Procedure 12(b)(6). The Court begins with the
REQUEST FOR JUDICIAL NOTICE
complaint is challenged under Rule 12(b)(6), “[r]eview
is limited to the complaint.” Cervantes v. City of
San Diego, 5 F.3d 1273, 1274 (9th Cir. 1993). However,
courts may “consider certain [other]
materials-documents attached to the complaint, documents
incorporated by reference in the complaint, or
matters of judicial notice- without converting the
motion to dismiss into a motion for summary judgment.”
United States v. Ritchie, 342 F.3d 903, 908 (9th
Cir. 2003) (emphasis added).
the incorporation-by-reference doctrine, a court may consider
“certain documents as though they are part of the
complaint itself, ” Khoja v. Orexigen Therapeutics,
Inc., 899 F.3d 988, 1002 (9th Cir. 2018), “if the
plaintiff refers extensively to the document or the document
forms the basis of the plaintiff's claim[s].”
Ritchie, 342 F.3d at 907. “The doctrine
prevents plaintiffs from selecting only portions of documents
that support their claims, while omitting portions of those
very documents that weaken-or doom-their claims.”
Khoja, 899 F.3d at 1002 (citing Parrino v. FHP,
Inc., 146 F.3d 699, 706 (9th Cir. 1998), superseded by
statute on other grounds as recognized in Abrego Abrego
v. Dow Chem. Co., 443 F.3d 676, 681-82 (9th Cir. 2006)).
But “if the document merely creates a defense to the
well-pled allegations in the complaint, then that document
did not necessarily form the basis of the complaint.”
Khoja, 899 F.3d at 1002.
a court may also consider certain documents satisfying
Federal Rule of Evidence 201. Under Rule 201, a court may
judicially notice a fact “not subject to reasonable
dispute because it (1) is generally known within the trial
court's territorial jurisdiction; or (2) can be
accurately and readily determined from sources whose accuracy
cannot reasonably be questioned.” Fed. R. Ev. 201(b).
“A court may take judicial notice of matters of public
record.” Khoja, 899 F.3d at 999. But
“[j]ust because the document itself is susceptible to
judicial notice does not mean that every assertion of fact
within that document is judicially noticeable for its
truth.” Id. In cautioning against taking
judicial notice, Rule 201's advisory committee notes
emphasize that “taking evidence, subject to
cross-examination and rebuttal, is the best way to resolve
controversies involving disputes of adjudicative facts, that
is, facts pertaining to the parties.” Fed. R. Ev. 201.
Dispensing with these traditional methods should only be done
so in clear cases of “[a] high degree of
indisputability.” Rivera v. Philip Morris,
Inc., 395 F.3d 1142, 1151 (9th Cir. 2005) (citing Fed.
R. Ev. 201). Here, the District requests consideration of ten
exhibits under the incorporation-by-reference doctrine and
Rule 201. (Req. at 4.)
Notice of Claims (Exhibit 1)
1 is Plaintiffs' notice of claims pursuant to A.R.S.
§ 12-821.01. (Doc. 15-2 at 2-45, “Notice.”)
The District requests the Court judicially notice it because
its deficiencies compel dismissal of Plaintiffs' state
law claims. (Req. at 5.) Plaintiffs claim the request should
be denied because “Arizona's notice of claim
requirement is procedural [and] does not apply in federal
court.” (R.Resp. at 3.) Alternatively, Plaintiffs do
not object if the notice of claim requirement applies.
(Id.) Plaintiffs' Notice applies in federal
court. See Mothershed v. Thomson, No.
CV-04-2266-PHX-JAT, 2006 WL 381679, *7 (D. Ariz. Feb. 16,
2006) (“federal courts entertaining state-law claims
against state entities are obligated to apply the state law
notice-of-claim provision”); see also Payne v.
Arpaio, No. CV-09-1195-PHX-NVW, 2009 WL 3756679, *11 (D.
Ariz. Nov. 4, 2009) (“§ 12-821.01 applies to all
state law claims.”). Accordingly, the Court judicially
notices Exhibit 1.
Arizona Corporation Commission Staff Report; 2013 Docket
Request; 2018 Docket Request (Exhibits 2-4)
2 is a 2010 ACC internal memorandum containing an attachment
titled “staff report for generic proceedings concerning
electric restructuring issues.” (Doc. 15-2 at 47-77,
“Staff Report.”) Exhibit 3 is a 2013 ACC internal
memorandum docket opening request related to the ACC's
“inquiry into retail electric commission.”
(Id. at 79, “2013 Docket Request.”)
Exhibit 4 is a 2018 ACC internal memorandum docket opening
request for “possible modifications to the [ACC's]
energy rules” related to at least fourteen different
energy and energy-related topics. (Id. at 81-85,
“2018 Docket Request.”) The District argues
judicial notice is appropriate because Exhibits 2-4 are
“public records that directly implicate Plaintiffs'
federal and state antitrust [claims] [sic] regarding the
Arizona Legislature's intent regarding competition”
and relate to the District's state-action immunity
defense. (Req. at 5.) The District also cites a case that
previously took notice of ACC documents. (Id.
(citing Robinson v. Heritage Elementary Sch., No.
CV-09-0541-PHX-LOA, 2009 WL 1578313, at *1 n. 3 (D. Ariz.
June 3, 2009)). Plaintiffs argue judicial notice is
inappropriate for each Exhibit. They argue the Staff Report
was “created as part of proceedings that do not apply
to the parties in this case, and contains hearsay and
nonexpert opinions.” (R.Resp. at 6.) Second, they argue
the 2013 and 2018 Docket Requests “lack any substance
and only reflect the opening of a regulatory
docket.” (Id.) Plaintiffs also cite a
court order from this District not judicially
noticing an ACC staff report and administrative memoranda.
(Id. at 5) (citing SolarCity Corp. v. Salt River
Project Agric. Improvement & Power Dist., No.
CV-15-00374-PHX-DLR, 2015 WL 6503439, at *3 (D. Ariz. Oct.
27, 2015)). In general, Plaintiffs dispute the District's
characterization of what each Exhibit represents.”
(R.Resp. at 7.) Considering these Exhibits is inappropriate
as they are reasonably disputed by the parties.
2014 Price Proposal Notice; Proposed SEPP Adjustments;
Executive Summary; 2018 Price Proposal Notice; Third-Party
Report (Exhibits 5-9)
5 is a 2014 self-created SRP price proposal notice. (Doc.
15-2 at 87-88, “2014 Price Proposal Notice.”)
Exhibit 6 is a 2014 self-created SRP report titled
“Proposed Adjustments to SRP's [SEPPs] Effective
with the April 2015 Billing Cycle.” (Id. at
90-276, “Proposed SEPP Adjustments.”) Exhibit 7
is a 2015 self-created SRP executive summary related to
SRP's price proposal. (Doc. 15-3 at 2-13,
“Executive Summary.”) Exhibit 8 is a 2018
self-created SRP pricing proposal notice. (Id. at
15-16, “2018 Price Proposal Notice.”) Exhibit 9
is a 2014 report prepared by Sussex Economic Advisors titled
“Review of Proposed Adjustments to [SRP's
SEPPs].” (Id. at 18-114, “Third-Party
Report.”) The District requests judicial notice that
Exhibits 5-9 “were part of the record during the public
ratemaking proceeding.” (Req. at 6.). It argues these
self-created “public documents . . . have procedural
significance to the ratemaking proceeding” and
“directly relate to Plaintiffs' allegations
regarding the District's justifications for adopting the
challenged E-27 rate.” (Id.) Plaintiffs again
dispute the truth of the matters asserted in these documents,
particularly because SRP created these documents and the
District has “cherry-picked” them from the
ratemaking proceeding. (R.Resp. at 7-9.) Exhibits 5-8 are
self-created documents, Exhibit 9 is a third-party report,
and each Exhibit is reasonably disputed. Even noticing them
for the fact that they were “part of the record during
the public ratemaking proceeding” is improper because,
as Plaintiffs assert, these documents are not the complete
record. Accordingly, judicial notice is inappropriate here.
Auditor General Report (Exhibit 10)
10 is a 2008 Arizona Auditor General Office report:
“Review of Arizona Revised Statutes (A.R.S.)
§§30-806(1), and 40-202(B)(3) and (5) related to
electric competition.” (Doc. 15-3 116-120,
“Auditor General Report.”) The District argues
judicial notice is appropriate because the Auditor General
Report “is (1) a public record prepared in the official
capacity of the Auditor General at the direction of the
legislature, (2) directly relates to Plaintiffs'
allegations and the District's defenses, (3) is publicly
available through the Auditor General's website, and (4)
is not subject to reasonable dispute.” (Req. at 7-8.)
Plaintiffs argue judicial notice is inappropriate because the
Auditor General Report “does not directly relate to the
matters at issue, and because the truth of the matters
asserted [(the status of electric competition)] is
disputed.” (R.Resp. at 3, 8.) Because the status of
electric competition is at issue, judicially noticing a
document on the topic is inappropriate.
of each Exhibit (except Exhibit 1) under the
incorporation-by-reference doctrine and Rule 201 reveals
their consideration at this stage is inappropriate. For the
most part, the Exhibits “merely create a
defense” for the District. Khoja, 899 F.3d at
1002. Further, they lack Rule 201's “high degree of
indisputability, ” Rivera, 395 F.3d at 1151,
necessary to dispense with the traditional methods of
introducing evidence at trial. Notably, we are currently at
the motion to dismiss stage. Accordingly, the Court only
judicially notices Exhibit 1.
analyzing a complaint under Rule 12(b)(6), well-pled factual
allegations are presumed true and construed in the light most
favorable to the nonmoving party. Cousins v.
Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). Dismissal
under Rule 12(b)(6) “can be based on the lack of a
cognizable legal theory or the absence of sufficient facts
alleged under a cognizable legal theory.”
Balistreri v. Pacifica Police Dep't, 901 F.2d
696, 699 (9th Cir. 1988). To survive a Rule 12(b)(6) motion
to dismiss for failure to state a claim, a complaint must
meet Rule 8(a)(2)'s minimum requirements. Rule 8(a)(2)
requires a “short and plain statement of the claim
showing that the pleader is entitled to relief, ” so
that the defendant has “fair notice of what the . . .
claim is and the grounds upon which it rests.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting
Conley v. Gibson, 355 U.S. 41, 47 (1957)). A
complaint setting forth a cognizable legal theory will
survive a motion to dismiss if it contains sufficient factual
matter stating a claim to relief that is “plausible on
its face.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Twombly, 550 U.S. at 570).
Facial plausibility only exists if the pleader sets forth
“factual content that allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.” Id. “Threadbare
recitals of the elements of a cause of action, supported by
mere conclusory statements, do not suffice.”
Id. Plausibility does not equal “probability,
” but instead requires “more than a sheer
possibility that a defendant has acted unlawfully.”
Id. “Where a complaint pleads facts that are
‘merely consistent' with a defendant's
liability, it ‘stops short of the line between
possibility and plausibility of entitlement to
relief.'” Id. (quoting Twombly,
550 U.S. at 557).
alleges nine causes of action against the District. (FAC
¶¶ 120-195.) These include: (1) monopolization and
attempted monopolization in violation of the Sherman
Antitrust Act and the Arizona Uniform State Antitrust Act
(“AUSAA”); (2) price discrimination in violation
of Arizona's constitution and statutes; (3) violation of
equal protection under 42 U.S.C. § 1983 and
Arizona's constitution; and (4) violation of
Arizona's Consumer Fraud Act. (Id.) Plaintiffs
request compensatory damages, class certification,
appointment as class representatives and class counsel,
treble damages, attorney fees, injunctive relief, and
declaratory relief. (Id.)
District moves to dismiss primarily on seven grounds: (A) the
action is barred as an improper collateral attack on retail
electricity rates; (B) state-action immunity bars the
antitrust claims; (C) the equal protection claims are
untimely; (D) Arizona's Actions Against Public Entities
and Public Employees Act bars the state-law claims; (E) state
law bars Plaintiffs' state antitrust claims; (F) the
Local Government Antitrust Act (“LGAA”) and
Arizona statutory immunity bar damages against the District;
and (G) the FAC fails to state a claim. (Memo. at 15-16.) The
Court begins with the District's defenses before
discussing the FAC's sufficiency.
THE DISTRICT'S DEFENSES
further explained below, this action is not barred as an
improper collateral attack under the federal or state
filed-rate doctrines, nor does state-action immunity bar
Plaintiffs' antitrust claims. Further, Plaintiffs'
state law claims are barred under A.R.S. § 12-821 and
§ 12-821.01 and their Fourteenth Amendment equal
protection claims are untimely. Lastly, the LGAA bars
Plaintiffs' potential entitlement to antitrust damages
arising out of ...