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City of Moundridge v. Exxon Mobil Corp.

April 16, 2008

CITY OF MOUNDRIDGE, ET AL., PLAINTIFFS,
v.
EXXON MOBIL CORP. ET AL., DEFENDANTS.



The opinion of the court was delivered by: Richard W. Roberts United States District Judge

MEMORANDUM OPINION

Eighteen municipalities*fn1 sued Exxon Mobil Corporation, BP America, Inc., and ConocoPhillips Corporation for violating federal antitrust laws by agreeing to fix prices. The plaintiffs have moved for leave to amend the second supplemental complaint to add Shell Oil Company ("Shell") as a defendant, to add five municipalities as plaintiffs,*fn2 to clarify their allegation regarding the defendants' control of natural gas production, and to delete unnecessary allegations. In response, the defendants moved for reconsideration of the January 9, 2007 Order which denied their motion to dismiss the price fixing conspiracy claim in Count One, and opposed the plaintiffs' motion arguing that the amendment is futile after Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955 (2007), and claiming undue prejudice and delay. Because the second supplemental complaint sufficiently pled a cause of action, the defendants' motion for reconsideration has been denied. Because filing an amended conspiracy complaint would not be futile, or cause undue prejudice or undue delay, but the proposed amended complaint realleges without authorization dismissed counts, the plaintiffs' motion for leave to amend has been denied without prejudice.

BACKGROUND

The background of this case is fully discussed in City of Moundridge v. Exxon Mobil Corp., 471 F. Supp. 2d 20, 27-29 (D.D.C. 2007). Briefly, the plaintiffs alleged that the defendants, producers of natural gas used in the United States, agreed to artificially raise natural gas prices and committed other antitrust violations. Id.; City of Moundridge v. Exxon Mobil Corp., 244 F.R.D. 10, 11 (D.D.C. 2007). Despite the defendants' claims of a dwindling natural gas supply, plaintiffs maintain that no natural gas shortage exists and that the defendants have reaped substantial profits due to their artificial price increases. City of Moundridge, 244 F.R.D. at 11. On January 9, 2007, Coral Energy Resources, L.P.'s ("Coral's") motion to dismiss was granted and all claims against Exxon Mobil Corporation, BP America, Inc., and ConocoPhillips were dismissed except for the conspiracy claim in Count One. City of Moundridge, 471 F. Supp. 2d at 46.

Before the scheduling order's deadline of May 24, 2007, the plaintiffs moved for leave to amend the second supplemental complaint to add Shell as a defendant, to add five municipalities as plaintiffs, to clarify their allegation regarding the defendants' control of natural gas production, and to delete unnecessary allegations. (Pls.' Stmt. of P. & A. in Support of Mot. for Leave to Am. ("Pls.' Br.") at 1-2.) The plaintiffs moved to add Shell in response to Coral's dismissal, and asserted that the five new cities are similarly situated and raise common legal or factual questions. (Id. at 3.) The plaintiffs allege that like the other defendants, Shell both explores for and produces natural gas. (Pls.' Mot. for Leave to Am. Second Supplemental Compl. ("Pls.' Mot.") at 2.) At the time the plaintiffs moved to amend, fact discovery was in progress and did not close until December 14, 2007. Expert discovery had not started because the parties have been engaged in mediation which just concluded. The defendants moved for reconsideration of the January 9, 2007 order after Twombly was decided arguing that under Twombly, the complaint fails to sufficiently allege an agreement among the defendants. (Defs.' Mot. for Reconsideration & Opp'n to Pls.' Mot. for Leave to Amend ("Defs.' Opp'n") at 9.)

The defendants also oppose leave to amend because it would be futile and prejudicial, and would cause undue delay. (Id. at 10-12.)

DISCUSSION

I. RECONSIDERATION DUE TO TWOMBLY

Under Rule 54(b) of the Federal Rules of Civil Procedure, "any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities." Fed. R. Civ. P. 54(b). Rule 54(b) permits reconsideration of an order that does not constitute a final judgment, or is interlocutory, "as justice requires." Cobell v. Norton, 224 F.R.D. 266, 272-73 (D.D.C. 2004) (stating that the court has broad discretion when considering a motion for reconsideration); Campbell v. U.S. Dep't of Justice, 231 F. Supp. 2d 1, 7 (D.D.C. 2002). The "as justice requires" standard requires "'determining, within the Court's discretion, whether reconsideration is necessary under the relevant circumstances.'" In Def. of Animals v. Nat'l Insts. of Health, 527 F. Supp. 2d 23, 28 (D.D.C. 2007) (quoting Cobell v. Norton, 355 F. Supp. 2d 531, 539 (D.D.C. 2005)). The discretion is "subject to the caveat that where litigants have once battled for the court's decision, they should neither be required, nor without good reason permitted, to battle for it again." Singh v. George Washington Univ., 383 F. Supp. 2d 99, 101 (D.D.C. 2005) (internal quotation marks omitted) (quoting In re Ski Train Fire in Kaprun, Austria, on Nov. 11, 2004, 224 F.R.D. 543, 546 (S.D.N.Y. 2004)). Reconsideration may be warranted if there was a patent misunderstanding of parties, a decision made beyond the issues presented, a failure to consider controlling law, or a significant change in the law. Singh, 383 F. Supp. 2d at 101. The moving party has the burden of showing that some harm or injustice would result if reconsideration is denied. In Def. of Animals, 527 F. Supp. 2d at 29.

The defendants imply that Twombly changed the Rule 8 pleading standard for claims under § 1 of the Sherman Act, rendering plaintiffs' amended complaint insufficient. (Defs.' Opp'n at 7-8.) However, Twombly did not purport to require a "heightened fact pleading of specifics[.]" 127 S.Ct. at 1974. See also Hyland v. HomeServices of Am., Inc., No. 05-612, 2007 WL 2407233, at *3 (W.D. Ky. Aug. 17, 2007) (stating that Twombly's pleading standard looked to "what information has been provided by a plaintiff, not the amount"). What Twombly certainly did do is jettison the "no set of facts" formulation found in Conley v. Gibson, 355 U.S. 41, 45-46 (1957) ("[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."). Twombly requires "a complaint with enough factual matter (taken as true) to suggest that an agreement was made." 127 S.Ct. at 1965. The requirement of plausible grounds to "infer an agreement does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of [an] illegal agreement." Id. A complaint is sufficient even if actual proof is "improbable" and "'recovery is very remote and unlikely.'" Id. Twombly stated that the allegations "must be placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action." Id. at 1966. The Court found this standard to be consistent with Rule 8's threshold pleading requirements. The conduct alleged needs "some setting suggesting . . . agreement[,]" or otherwise put, some "further circumstance pointing toward a meeting of the minds" that "nudge[s] [the claim] across the line from conceivable to plausible[.]" Id. at 1966, 1974.

The defendants argue that the complaint does not provide factual allegations to suggest an actual agreement among the defendants. (Defs.' Opp'n at 9.) In Twombly, the plaintiffs attempted to show an agreement based on parallel conduct expressed by the absence of competition or resistance to enter other territories, but did not show a basis for how or why the defendants may have conspired. Twombly, 127 S.Ct. at 1970-72. See also Aktieselskabet AF 21. Nov. 2001 v. Fame Jeans, Inc., 511 F. Supp. 2d 1, 17 (D.D.C. 2007) (stating that the Twombly plaintiffs did not present any facts to "compel an inference as to the motive for [anticompetitive] conduct").

Unlike in Twombly, the plaintiffs here do not rely on only bare allegations of parallel behavior, or assume that there is a conspiracy because there is an "'absence of any meaningful competition.'" See Twombly, 127 S.Ct. at 1970. The complaint alleges facts providing circumstantial evidence of a price fixing agreement. It alleges that the natural gas total resource base had not decreased, that the prices had risen and never fallen below an agreed-upon price, that the defendants had reported high profits, City of Moundridge, 471 F. Supp. 2d at 40-41, and that Hurricanes Katrina and Rita should not have affected the market as the defendants claimed and they were only a pretextual reason to justify withholding market supply to create an artificial shortage. (Second Supplemental Compl. ¶¶ 36, 37.) It also identifies the years and locations where the agreement was reached and the defendants who participated. (Second Supplemental Compl. ¶¶ 15, 17, 18.) These facts support an inference that the "defendants conspired to raise prices to reap the enormous benefits described by plaintiffs" and that the "defendants falsified their statement about the shortage of natural gas to increase their profits." City of Moundridge, 471 F. Supp. 2d at 41.

The defendants also argue that "there are no facts alleged suggesting that higher natural gas prices were the result of an agreement amongst Defendants as opposed to each Defendant's independent business decision[,]" because "it is always in a company's independent self-interest . . . to increase its profits." (Defs.' Reply Br. in Support of Mot. for Reconsideration & Opp'n to Pls.' Mot. for Leave ("Defs.' Reply Br.") at 5, 7.) The Twombly district court examined whether the plaintiff had adequately pled the "plus factors," which involved economic interests and motives, believing that the plaintiffs must "allege additional facts that 'ten[d] to exclude independent self-interested conduct as an explanation for defendants' parallel behavior.'" Twombly, 127 S.Ct. at 1963. The Supreme Court stated that the sufficiency of Twombly's complaint "turn[ed] on the suggestions raised by this [parallel] conduct when viewed in light of common economic experience[,]" id. at 1971, but did not explicitly require that plaintiffs prove the plus factors at the pleading stage. The Supreme Court stated that heightened pleading was not required, id. at 1973 n.14, and differentiated between the summary judgment and motion to dismiss standards, noting that "a § 1 plaintiff's offer of conspiracy evidence must tend to rule out the possibility that the defendants were acting independently" at the summary judgment stage. Id. at 1964, 1973 n.14 (noting that at the pleading stage, the concern was not with the particularity of the factual allegations, but with whether the complaint "in toto . . . render[ed] plaintiffs' entitlement to relief plausible"). See also Iqbal v. Hasty, 490 F.3d 143, 155, 157-58 (2d Cir. 2007) (noting the confusion over Twombly's standard and concluding that Twombly does not require heightened pleading, but rather implemented a "flexible 'plausibility standard,' which obliges a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible").

Economic interests and motivations can be relevant to evaluate plausibility, and price increases can be the result of an independent business decision. But, a complaint need not be dismissed where it does not "exclude the possibility of independent business action." (Defs.' Reply Br. at 7.) Such a requirement at this stage in the litigation would be counter to Rule 8's requirement of a short, plain statement with "enough heft to 'sho[w] that the pleader is entitled to relief.'" Twombly, 127 S.Ct. at 1966.*fn3 To evaluate a complaint's sufficiency, Twombly requires allegations to be "placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action."*fn4 Id. The plaintiffs provided some circumstantial facts, including historical supply and consumption levels, market prices, profit levels, and the use the industry ...


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