United States District Court, D. Arizona
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M. Abdi, Pro Hac Vice; David M. Cialkowski, Pro Hac Vice;
Zimmerman Reed LLP, Daniel E. Gustafson, Pro Hac Vice; Daniel
C. Hedlund, Pro Hac Vice; Daniel J. Nordin, Pro Hac Vice;
Gustafson Gluek PLLC, Minneapolis, MN, Hart Lawrence
Robinovitch, Zimmerman Reed PLLP, Scottsdale, AZ, for
Christopher E. Babbitt, Pro Hac Vice; Daniel S. Volchok, Pro
Hac Vice; David Gringer, Pro Hac Vice; Wilmer Cutler
Pickering Hale & Dorr LLP, Washington, DC, Eric Dell
Gere, Jennings Strouss & Salmon PLC, Phoenix, AZ, for
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 explained below.
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.)
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
12(b)(6). The Court begins with the District's Request.
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
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.)
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.
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 non-expert
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 ...