Antitrust Law Daily Settlement releases did not bar later claims in gas price fixing suit
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Wednesday, March 28, 2018

Settlement releases did not bar later claims in gas price fixing suit

By J. Preston Carter, J.D., LL.M.

Claims that defendant natural gas traders accused of manipulating the price of gas violated a state antitrust law were not barred by settlement releases in a prior class action under the "identical factual predicate" rule," the U.S. Court of Appeals for the Ninth Circuit has held in a not-for-publication opinion The ruling reverses a grant of summary judgment to the defendants on the basis of release by the federal district court in Reno last year (In re Western States Wholesale Natural Gas Antitrust Litigation, March 27, 2018, Lasnik, R.).

The lower court had ruled on several motions for summary judgment in a natural gas price fixing suit involving a number of consolidated cases. The cases arose out of the energy crisis of 2000-2002, in which retail buyers of natural gas alleged that natural gas traders manipulated the price of natural gas by reporting false information to price indices published by trade publications and by engaging in "wash sales." The ruling at issue before the appellate court was based on a previous determination by the lower court that releases under a settlement agreement reached in a consolidated class action, the NYMEX case, were broad enough to cover the claims of the plaintiff, Appellant Reorganized FLI, Inc. (RFLI).

Although the appellate court agreed that the "language of the NYMEX releases is broad enough to encompass RFLI’s instant claims," it found on another ground that the releases "are nonetheless not enforceable against RFLI under the so-called ‘identical factual predicate’ rule." Under that rule, a settlement agreement may preclude a party from bringing a related claim in the future even though the claim was not presented and might not have been presentable in the class action, but only where the released claim is based on the identical factual predicate as that underlying the claims in the settled class action.

Here, the court concluded that whether the NYMEX claims and the instant claims share an "identical factual predicate" is a purely legal question. "[W]e need not look beyond the complaints in each action to determine that they do not." The court stated in a footnote that "Here, there are no facts in dispute. The interpretation of a release—a form of contract—is a pure legal matter."

RFLI’s claims depend on a different cause of action (the Kansas Restraint of Trade Act) and on proof of different facts to establish a different injury than was alleged in the previous determination, the appellate court determined. Therefore, the court concluded, the defendants were not entitled to judgment as a matter of law on their affirmative defense of release.

The case is No. 16-17279.

Attorneys: Thomas J. Brill (Law Office of Thomas H. Brill) for Reorganized Fli, Inc. Craig A. Fitzgerald (Gable & Gotwals) for ONEOK, Inc. and ONEOK Energy Marketing & Trading Co., L.P. Tristan L. Duncan (Shook, Hardy & Bacon LLP) for The Williams Companies, Inc.

Companies: Reorganized Fli, Inc.; ONEOK, Inc.; ONEOK Energy Marketing & Trading Co., L.P.; The Williams Companies, Inc.

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