Antitrust Law Daily Antitrust and tort claims against PSEG in lawsuit over power project cancellation failpower project cancellation fail
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Thursday, October 10, 2019

Antitrust and tort claims against PSEG in lawsuit over power project cancellation failpower project cancellation fail

By Nicole D. Prysby, J.D.

The allegations that one party had tricked the other into the project cancellation, was not sufficient to demonstrate a conspiracy between the parties.

Antitrust and tort claims brought by a power producer failed, where the plaintiff failed to adequately allege a conspiracy to cancel a new electrical generating project that had been awarded to the plaintiff, held the federal district court in Central Islip, New York . The plaintiff claimed that a rival power producer conspired with the local electric service provider to cancel the project. But the antitrust claims failed because the complaint showed that the defendants and the electric service provider could not have had a conscious commitment to a common scheme, because it alleged that the defendants misled the provider into cancelling the project. Even if the complaint adequately alleged a conspiracy, it did not sufficiently allege antitrust injury; the only stated injury was to the plaintiff, not competition as a whole. The tort claims failed because the plaintiff alleged that the defendant was the electrical service provider’s agent. Therefore, the defendant could be held liable for inducing the provider to breach a potential business relationship with the plaintiff (Caithness Long Island II, LLC v. PSEG Long Island LLC, September 30, 2019, Seybert, J.).

Alleged conspiracy. Plaintiff Caithness Long Island II, LLC is a power producer. Long Island Power Authority (LIPA) provides electric service. Long Island Lighting Company (LILCO) is LIPA’s subsidiary. LILCO has a contractual service provider to manage and operate its transmission and distribution (T&D) system.

In 2011, LILCO entered into a ten-year contract with defendant PSEG Long Island LLC (PSEG LI) to operate LIPA’s T&D system. PSEG LI’s subsidiary, PSE&G (together, PSEG or the defendants), provides electric and gas transmission and distribution services. In 2010, before the contract with PSEG LI, LIPA issued a request for proposals (RFP) for the addition of new generating capacity for Long Island. LIPA received 45 proposals from 16 firms, including Caithness. In 2013, LIPA selected Caithness’ proposal.

LIPA and Caithness began to negotiate a power purchase agreement but no agreement was reached and no contract was formed. In 2014, after the passage of the LIPA Reform Act that reorganized LIPA and gave PSEG LI an increased role in day-to-day operations, PSEG LI issued a review projecting that Long Island would not need new capacity until 2019-2022 and recommending a delay on all current RFPs. According to Caithness, PSEG LI used its influence over LIPA and false and misleading statements to LIPA, to induce LIPA to participate in PSEG LI’s anti-competitive efforts to derail the Caithness plant, and to agree to cancel the 2010 RFP. Specifically, Caithness claimed that the defendants and LIPA conspired to terminate the 2010 RFP, which was an unreasonable and unlawful restraint of trade in violation of the Sherman Act and the Donnelly Act, and that the defendants tortiously interfered with the prospective business relations between Caithness and LIPA.

Antitrust claims. The federal and state antitrust claims failed, because Caithness failed to demonstrate a meeting of the minds as required for a conspiracy, the court decided. The complaint showed that LIPA and the defendants could not have had a conscious commitment to a common scheme, because it alleged that the defendants misled LIPA.

LIPA could not have united with PSEG toward a common unlawful goal if LIPA was unaware of that purported goal, the court observed. Caithness also failed to allege meetings, communications, or people who allegedly discussed the decision. And a strong alternative explanation for cancelling the RFP was that the defendants, newly given more authority under the LIPA Reform Act, undertook a review of all existing projects and concluded that the plant was not necessary at that time.

But even if Caithness adequately alleged a conspiracy, it did not sufficiently allege an unreasonable restraint of trade. Although Caithness alleged a relevant product and geographic market, it failed to adequately allege antitrust injury. Even if LIPA and PSEG together agreed not to act on the 2010 RFP, allegations that LIPA refused to contract with Caithness stated only an injury to Caithness, not an injury to competition as a whole. Caithness’ claim that cancelling the RFP had an adverse impact on the electricity market on Long Island was not supported by sufficient facts to plausibly allege injury, especially in view of the fact that Caithness already operates another plant in the relevant market.

Tort claim. Caithness adequately alleged that PSEG interfered with the RFP through fraudulent conduct, but failed to establish interference with a relationship between Caithness and a third party. LIPA was not a third party because the complaint clearly alleged that PSEG LI was acting as an agent on principal LIPA’s behalf and that PSEG’s recommendations were within the scope of its authority as LIPA’s agent. Because Caithness alleged PSEG LI was LIPA’s agent, PSEG LI could not be held liable for inducing LIPA to breach a potential business relationship with Caithness.

This case is No. 18-CV-4555(JS)(AYS).

Attorneys: Philip C. Korologos (Boies Schiller Flexner LLP) for Caithness Long Island II, LLC. Lawrence Edward Buterman (Latham & Watkins LLP) for PSEG Long Island LLC and Public Service Enterprise Group Inc.

Companies: Caithness Long Island, LLC; PSEG Long Island LLC; Public Service Enterprise Group Inc.

MainStory: TopStory Antitrust NewYorkNews

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