The opinion of the court was delivered by: Richard W. Roberts United States District Judge
MEMORANDUM OPINION AND ORDER
Eighteen municipalities*fn1 sued Exxon Mobil Corporation, BP America, Inc., Coral Energy Resources, L.P., ChevronTexaco Corporation, and ConocoPhillips Corporation for violating the antitrust laws by agreeing to artificially inflate the price of natural gas; monopolizing, attempting to monopolize, and conspiring to monopolize; and engaging in price discrimination. The defendants moved to dismiss the amended complaint for lack of standing, for lack of personal jurisdiction, for failure to state a claim as to all claims, and because defendants are protected under the Noerr/Pennington doctrine. The plaintiffs have moved to file a first and a second supplemental complaint.
The plaintiffs' motions will be granted, and because the supplemental complaints reallege the principal claims set forth in the amended complaint, the defendants' motions to dismiss will be treated as directed at the second supplemental complaint. Plaintiffs have sufficiently pled standing. Because the plaintiffs failed to make out a prima facie case of personal jurisdiction as to defendant ChevronTexaco, though, ChevronTexaco's motion to dismiss will be granted. Plaintiffs have stated a claim for conspiracy to fix prices, but have failed to state a claim for actual or attempted monopolization, conspiracy to monopolize and price discrimination. Accordingly, the motions to dismiss by BP America, ConocoPhillips and Exxon Mobil will be denied in part and granted in part. Because defendant Coral is subject to the exclusive jurisdiction of the Federal Energy Regulatory Commission ("FERC"), Coral's motion to dismiss for failure to state a claim will be granted.
Natural gas is sold at three general levels. First, producers who gather and produce the natural gas sell it to transmitters, such as pipeline operators. (2d Supp. Compl. ¶ 6.) Pipelines or transmission lines then transport the natural gas from the producers' sites (known as "wellheads") to retail distribution systems, like municipal or other utilities, or to large direct users. Municipal distribution systems and other-utilities then sell the natural gas directly to consumers. (Id.) The plaintiffs, municipalities who own and operate natural gas distribution systems, supply their residents with natural gas. (Id. ¶ 3.) For a number of years, their efforts to provide their residents' requirements of natural gas at "reasonable prices" were frustrated by the high price of natural gas. (Id. ¶ 5.) Together, the defendants constitute the five major producers of natural gas in the United States, who control over 70% of the natural gas consumed in the United States. (Id. ¶ 7.)
In December of 1999, the National Petroleum Council ("NPC")*fn2 released Natural Gas: Meeting the Challenges of the Nation's Growing Natural Gas Demand ("the 1999 Report"). (ConocoPhillips Mem. of P. & A. in Supp. of Mot. to Dismiss ("Mot. to Dismiss") at 3.) The 1999 Report stated that the supply of natural gas in the United States had increased since 1992, that natural gas usage in the U.S. would increase between 1999 and 2010, and that this increase in demand could be met by the industry at "an average production weighted U.S. wellhead gas price through 2010 of approximately $2.74 per million British thermal units ('MMBtu')." (Pls.' Mem. in Opp'n to Defs.' Mot. Dismiss ("Pls.' Opp'n") at 5.) The price of natural gas, however, began to exceed the estimate projected in the 1999 Report in early 2000 and has continued to increase since then. (Id. at 6.)
On March 13, 2002, Secretary of Energy Spencer Abraham "requested a new study on natural gas that would provide insights on energy market dynamics, including price volatility ... and natural gas supplies." (ConocoPhillips Mot. to Dismiss at 4 (internal quotations omitted).) The NPC formed a new subcommittee and several "Task Groups," one of which all defendants participated in and one defendant chaired, to undertake the inquiry. (Pls.' Opp'n at 6.) In September of 2003, the NPC adopted and released one of the "Task Force" reports, Balancing Natural Gas Policy: Fueling the Demands of a Growing Economy ("the 2003 Report"). (Id.; ConocoPhillips Mot. to Dismiss at 3.) The 2003 Report concluded that there was a shortage of natural gas in the United States and that higher gas prices were required to meet increasing demand. (Pls.' Opp'n at 7.) According to the 2003 Report, the price of natural gas would continue to rise unless the United States government adopted a series of legislative policies recommended by the NPC. (Id.) The 2003 report projected a steady increase in price over the period of 2003 through 2010. Since the NPC issued the 2003 report, the price of natural gas in the U.S. has not fallen below the level projected in the report. (Id. at 7.) In fact, the average wellhead price for 2004 increased to $5.49 per thousand cubic feet ("Mcf") and then increased to $6.26 per Mcf in August 2005.*fn3 (2d Supp. Compl. ¶ 20.) The average wellhead price of natural gas in 2006 was $7.05 per Mcf, an increase over the $2.00 per Mcf average price from 1992 to 1999. (Id. ¶ 26.)
After Hurricanes Rita and Katrina made landfall on the Gulf Coast in the fall of 2005, the price of natural gas was expected to average $14.00 per MMBtu between December 2005 and March 2006. (1st Supp. Compl. ¶ 26.) In December 2005, New York Mercantile Exchange ("NYMEX") futures prices for the 2005-2006 winter reached $15.42 per MMBtu, which was $7.61 per MMBtu higher than the average wellhead price for the 2004-2005 winter months. (2d Supp. Compl. ¶ 23.) Similar increases for natural gas futures prices occurred at the Henry Hub futures market*fn4 at the same time. (Id. ¶ 24.)
Plaintiffs assert that no legitimate justification exists for raising the price of natural gas because there is no shortage in the United States. (2d Supp. Compl. ¶ 27.) Technically recoverable natural gas resources are currently 1,769.6 trillion cubic feet ("Tcf"), representing a 80.9-year supply of natural gas. (Id. ¶ 30.) Working gas, or gas available in the marketplace, in storage was 3.177 Tcf as of September 21, 2006. (Id. ¶ 31.) The amount of natural gas "shut-in," or temporarily unavailable, as a result of Hurricanes Katrina and Rita between August 26, 2005 and December 9, 2005 was only 0.519 Tcf. (Id. ¶ 32.) When compared to the total consumption of natural gas in the United States in 2005 - - 21.87 - - the plaintiffs allege that no shortage of natural gas exists. (Id. ¶ 28.) Additionally, plaintiffs do not receive their natural gas from the Gulf of Mexico or any other areas that were affected by the 2005 hurricane season. (Id. ¶ 36.)
The defendants, in turn, have reaped substantial profits in the first half of 2006. (Id. ¶ 35.) These profits greatly exceeded the defendants' reported profits for the first half of 2005. (Id.) The defendants have moved to dismiss, raising as issues standing, personal jurisdiction, the Noerr-Pennington doctrine, and failure to state a claim. The plaintiffs have sought leave to supplement their amended complaint.
I. SUPPLEMENTAL COMPLAINT
"Upon motion of a party the court may, upon reasonable notice and upon such terms as are just, permit the party to serve a supplemental pleading setting forth transactions or occurrences or events which have happened since the date of the pleading sought to be supplemented." Fed. R. Civ. P. 15(d). A court should liberally grant a party's request to file a supplemental pleading if those supplemental facts connect to the facts asserted in the original pleading. See Quaratino v. Tiffany & Co., 71 F.3d 58, 66 (2d Cir. 1995). However, leave to file a supplemental complaint should be granted only where supplementation "will not cause undue delay of trial, inconvenience and will not prejudice the rights of any other party." Wells v. Harris, 185 F.R.D. 128, 132 (D. Conn. 1999); see Foman v. Davis, 371 U.S. 178, 182 (1962) (holding that in the absence of an "apparent or declared reason" such as bad faith, prejudice to opposing party or futility, leave to file should be "freely given"). Cf. Health Ins. Ass'n v. Goddard Claussen Porter Novelli, 213 F.R.D. 63, 67 (D.D.C. 2003) (holding that the supplemental complaint prejudiced defendants because it raised issues that did not pertain to the original action).
Here, plaintiffs request leave to supplement the amended complaint they filed in 2004. The first supplemental complaint provides information related to the rise in natural gas prices on the futures market in 2005, the effects of Hurricanes Rita and Katrina in 2005 on gas reserves, and defendants' large profits for the third quarter of 2005. (Supp. Compl. ¶¶ 20-36.) The second supplemental complaint updates the first supplemental complaint with the most recent data from 2006 to substantiate plaintiffs' allegations. Otherwise, the supplemental claims substantially mirror those in the amended complaint. (Am. Compl. ¶¶ 13-25.) They do not unfairly prejudice the defendants or unduly delay the proceedings. There is no showing that the supplements were added in bad faith. The claims would be subject to the same legal analysis as would those in the amended complaint in regard to defendants' motions to dismiss. Therefore, the plaintiffs' motions for leave to file a first and a second supplemental complaint will be granted and the motions to dismiss will be treated as directed at the second supplemental complaint.
In order to establish antitrust standing, "[a]n antitrust plaintiff must establish an injury-in-fact or a threatened injury-in-fact caused by the defendant's alleged wrongdoing." Andrx Pharm., Inc. v. Biovail Corp. Int'l., 256 F.3d 799, 806 (D.C. Cir. 2001) (citing Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 535 (1983)). Plaintiffs must also prove an antitrust injury, which must be of the type that "the antitrust laws were intended to prevent; it must 'flow from that which makes defendants' acts unlawful.'" Id. at 806 (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)) (emphasis removed). In assessing antitrust standing, a court must also consider "the directness of the injury, whether the claim for damages is 'speculative,' the existence of more direct victims, the potential for duplicative recovery and the complexity of apportioning damages." Id. (citing Associated Gen. Contractors of Cal., Inc., 459 U.S. at 542-45).
A plaintiff must plead an injury-in-fact to its property or business. See Hecht v. Pro-Football, Inc., 570 F.2d 982, 993 (D.C. Cir. 1977). Business or property refers to "commercial interests or enterprises." Hawaii v. Standard Oil Co., 405 U.S. 251, 264 (1972). An alleged loss of market share constitutes an injury-in-fact to business or property. See Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 116 (1969).
Here, the cities allege that defendants have undermined the cities' effort to provide natural gas at affordable prices to users in their markets because the defendants have conspired to restrain trade or commerce and have acted to monopolize and increase the price of natural gas. (2d Supp. Compl. ¶ 5.)-Plaintiffs allege that because of defendants' behavior, the plaintiffs have been "denied the benefit of . . . an expanded revenue base [and] . . . revenues and potential profits from customers not served." (Id. ¶ 44(c), (d).) Because the loss of revenue and profits is a measure of the injury done to business comparable to the loss of market share, plaintiffs have sufficiently pled an injury-in-fact to their business or property.
The injury a plaintiff alleges should "reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation." Brunswick, 429 U.S. at 489. Competitors cannot suffer an antitrust injury from a conspiracy to raise prices. See id. at 488-89; Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 582-83 (1986). Artificially raising prices does not harm competition among competitors because "[e]xisting firms know that if they collude or exercise market power to charge supracompetitive prices, entry by firms currently not competing in the market becomes likely, thereby increasing the pressure on them to act competitively." Fed. Trade Comm'n v. H.J. Heinz Co., 246 F.3d 708, 717 n.13 (D.C. Cir. 2001).
The cities have alleged that they are forced to pay higher prices for natural gas than a competitive market would allow. (2d Supp. Compl. ¶ 44(c).) Plaintiffs' allegation that defendants have violated the antitrust laws, through a conspiracy to monopolize and price-fixing, could cause the alleged injury suffered by plaintiffs. Plaintiffs claim that prices above market price are precisely the anticompetitive effect that the antitrust laws are designed to prevent. (2d Supp. Compl. ¶ 17.)
Defendants argue that because plaintiffs are their competitors on the retail market, plaintiffs have not suffered an antitrust injury because they cannot, as a matter of law, be injured by a conspiracy to raise market prices. (ChevronTexaco Corp.'s Mem. of P. & A. in Supp. of Mot. to Dismiss ("Mot. to Dismiss") at 10-11.) ChevronTexaco asserts that unlawfully increased gas prices form "the basis of plaintiffs' Sherman Act Claims." (Id. at 10.) Although it is true that plaintiffs' Sherman Act claims are grounded in defendants' alleged price inflation, plaintiffs do not claim that they compete with defendants in the wholesale market, where defendants allegedly raised prices. Rather, plaintiffs claim they compete with defendants in the retail market, where defendants allegedly sold natural gas at a reduced price. (2d Supp. Compl. ¶ 11.) Because plaintiffs do not claim they compete with defendants in the wholesale market, where defendants allegedly inflated prices, their alleged antitrust injury is not barred as a matter of law.
C. The Directness of the Injury
The antitrust laws have never been interpreted "to allow suit by every party affected by an antitrust violation's 'ripple of harm.'" Adams v. Pan Am. World Airways, Inc., 828 F.2d 24, 26 (D.C. Cir. 1987) (quoting Blue Shield of Va. v. McCready, 457 U.S. 465, 476-77 (1982)). Indirect purchasers are barred "from asserting claims for damages based on any overcharges they may have paid as an indirect purchaser of defendants." In re Vitamins Antitrust Litig., No. 99-197, 2001 WL 855463, at *1 (D.D.C. July 2, 2001); see also Stern v. Lucy Webb Hayes Nat'l Training School for Deaconesses & Missionaries, 367 F. Supp. 536, 538 (D.D.C. 1973).
It is inappropriate, however, to deny indirect purchasers antitrust standing where "the direct purchaser is owned or controlled by its customer." Ill. Brick Co. v. Illinois, 431 U.S. 720, 737 n.16 (1977). Control is a "functional economic or other unity between the direct purchaser and either the defendant or the indirect purchaser [such that] there effectively has been only one sale." Jewish Hosp. Ass'n of Louisville, Ky., Inc., v. Stewart Mech. Enters., 628 F.2d 971, 975 (6th Cir. 1980). This type of economic unity can exist "through the contractual relationship of agency." In re Mercedes-Benz Anti-trust Litig., 157 F. Supp. 2d 355, 366 (D.N.J. 2001).
Although plaintiffs concede they are not direct purchasers from defendants, they allege that "[d]efendants own or control a number of transmission lines, as well as natural gas marketing entities for the sale and transportation of natural gas produced by them in interstate commerce, and [p]laintiffs believe this will be supported by additional evidence after a reasonable opportunity for further investigation or discovery." (2d Supp. Compl. ¶ 10). If plaintiffs can establish they purchased natural gas from entities under defendants' control, plaintiffs would fall under the exception delineated in Illinois Brick. See 431 U.S. at 737 n.16. At this stage of the lawsuit, the cities have sufficiently pled control even though they have failed to specify the nature of the alleged control. See, e.g., In re Mercedes-Benz Anti-trust Litig., 157 F. Supp. 2d at 365-66 (declining to grant defendants motion to dismiss where it was unclear what role the intermediary played in the transactions).
Because plaintiffs have alleged defendants controlled intermediaries in the natural gas market that may have sold to plaintiffs, plaintiffs' indirect ...