The opinion of the court was delivered by: BY THE COURT; JOHN R. PADOVA
This consolidated action concerns a dispute over who will supply the heat to Pennsylvania homeowners when they reach for their thermostats -- fuel oil dealers or an electric utility. Plaintiffs, fuel oil dealers and related heating equipment suppliers, claim that defendant, an electric utility, has been increasing its share of the home heating market within its service area through methods that violate federal antitrust and racketeering laws and state laws. Moving for summary judgment of plaintiffs' federal claims, defendant responds that the conduct challenged by plaintiffs is part and parcel of the Commonwealth of Pennsylvania's energy conservation policies; hence plaintiff is immune from federal antitrust and racketeering liability under Parker v. Brown, 317 U.S. 341, 87 L. Ed. 315, 63 S. Ct. 307 (1943).
Because I have determined that defendant's alleged anti-competitive conduct has been conducted pursuant to a clearly articulated state policy and under active state supervision, I will grant defendant's motion for summary judgment under Parker as to plaintiffs' federal antitrust claims. Because plaintiffs have failed to state a cause of action under the federal racketeering statute, I will grant defendant's motion on that claim as well. Finally, because I will discharge each of plaintiffs' federal claims, I will dismiss plaintiffs' pendent state law claims for lack of subject matter jurisdiction.
Defendant Pennsylvania Power & Light Company ("PP&L") is essentially the sole source of electric power for residences in Allentown, Pennsylvania and the surrounding area. Yeager Amended Complaint at P 24; Losch Complaint at PP 7, 14. Plaintiffs sell heating oil and related heating equipment primarily to homeowners living within PP&L's service area. Yeager Amended Complaint at PP 3-24; Losch Complaint at PP 6, 9. Some time after 1978, PP&L began promoting the use of electric heat pumps as energy conservation devices for use in new residential construction throughout its service area. Yeager Amended Complaint at P 26. To encourage the use of electric heat pumps in new homes, PP&L offers "cash incentives" or "rebates" to builders and developers who install electric heat pumps (approximately $ 1,000 per heat pump) and reduced electric rates for a limited time to those who purchase homes equipped with these devices. Yeager Amended Complaint at PP 28-29, 31; Losch Complaint at PP 15-16, 18.
PP&L approaches builders and developers with its electric heat pump cash incentive offer early in the building process, when arrangements are made to supply electricity during construction. Losch Complaint at P 15. To receive the cash incentive, builders or developers must order the electric heat pumps and have them installed by heat pump manufacturing and installation firms selected by PP&L. Yeager Amended Complaint at P 29; Losch Complaint at P 16.
PP&L approaches new homeowners with its reduced electric rate offer through the builders and developers as well. PP&L offers to designate new homes that utilize electric heat pumps installed through the cash incentive program as "Four Star" homes, entitling the new homeowners to reduced electric rates. Yeager Amended Complaint at P 31; Losch Complaint at P 18. This rate discount is termed the "RTS Rate." Id. Apart from their obvious attraction to homeowners, the "Four Star" designation and the RTS Rate are presumably added incentives to builders and developers, who can number among the selling points of their homes discounts on electric utility bills. Yeager Amended Complaint at P 31; Losch Complaint at P 18.
The apparent success of PP&L's programs, plaintiffs contend, has had a severe anti-competitive impact on the markets for heating fuel and related heating equipment in new residential construction within PP&L's service area. Yeager Amended Complaint at P 33; Losch Complaint at P 28. Plaintiffs claim that PP&L's programs have foreclosed competition in these markets and that consequently they have been injured in their business and property. Yeager Amended Complaint at P 33; Losch Complaint at PP 28, 30. Plaintiffs ultimately attribute the anti-competitive impact of PP&L's electric heat pump incentive programs to PP&L's misuse of
(a) its status as the sole provider of electricity in its geographical area; (b) its advance knowledge of all new construction in its geographical area; (c) general ratepayer revenues to pay subsidies to contractors, builders and developers to purchase electric heat pumps; and (d) its payment from general ratepayer revenues to pay subsidies to new homeowners in "Four Star" homes . . . .
II. Pertinent Procedural History
In August 1991, twenty-one fuel oil and/or fuel oil heating equipment dealers filed a complaint, subsequently amended, in this Court against PP &L based upon the above factual allegations. This civil action is docketed as No. 91-5176 and will be referred to as the Yeager case. The Yeager amended complaint alleges violations of section 1 of the Sherman Act, 15 U.S.C.A. § 1 (West Supp. 1992) (unlawful restraint of trade); section 2 of the Sherman Act, 15 U.S.C.A. § 2 (West Supp. 1992)(unlawful monopolization); section 2(c) of the Robinson-Patman Act, 15 U.S.C.A. § 13(c)(West 1973) (unlawful payment of commission, brokerage or other compensation); section 3 of the Clayton Act, 15 U.S.C.A. § 14 (West 1973)(unlawful product tying arrangement); and section 1962(c) of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C.A. § 1962(c)(West 1984) (unlawful racketeering activity).
In November 1991, PP&L moved to dismiss this amended complaint pursuant to Fed. R. Civ. P. 12(b)(6), asserting immunity from antitrust and RICO liability under the so-called state action doctrine, set forth in Parker v. Brown, 317 U.S. 341, 87 L. Ed. 315, 63 S. Ct. 307 (1943), and challenging each of plaintiffs' causes of action for failure to state a claim. Because PP&L submitted with its motion a number of materials outside of the pleadings, particularly with regard to state action immunity, the Honorable Franklin S. Van Antwerpen of this Court ordered that PP&L's motion to dismiss be converted into a motion for summary judgment and granted plaintiffs an additional ninety days to take discovery and respond to the motion.
In April 1992, plaintiff Losch Boiler Sales & Service Co., a fuel oil and related heating equipment dealer, filed a complaint against PP &L in this Court on behalf of itself and all persons similarly situated. This civil action is docketed at No. 92-2359 and will be referred to as the Losch case.
Like Yeager, Losch is based upon the above factual allegations. With respect to specific causes of action, the Losch complaint is virtually identical to the Yeager amended complaint, except as follows: (1) the Losch complaint alleges violations of sections 2 and 3 of the Robinson-Patman Act, 15 U.S.C.A. §§ 13 and 13a (West 1973) (unlawful price, rebate and discount discrimination); (2) the Losch complaint does not allege a RICO violation; and (3) the Losch complaint contains a claim of civil conspiracy and unfair competition under Pennsylvania state law.
On May 12, 1992, the Losch plaintiff filed a motion for class determination, which remains undecided. In response, PP&L moved to stay Losch, pending a decision on its motion for summary judgment in Yeager. Opposed to a stay, the Losch plaintiff in turn filed a motion to consolidate and coordinate this action with Yeager. Following oral argument on both the motion to stay and the motion to consolidate, during which counsel for all parties in both Yeager and Losch participated, I entered an order on June 11, 1992, with the consent of the parties, consolidating Yeager and Losch for purposes of the pending motion for summary judgment in Yeager. The effect of that order is to treat the summary judgment motion and all responses filed in Yeager as if they were also filed in Losch, binding all parties in both cases to the Court's ruling.
I. Summary Judgment Standard
Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). Whether a fact is material will be determined by reference to the "substantive evidentiary standards that apply to the case." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). Whether a genuine issue of material fact is presented will be determined by asking if "a reasonable jury could return a verdict for the non-moving party." Id.
Rule 56 requires opposition to a proper motion for summary judgment to be made by submission "of the kinds of evidentiary materials listed in Rule 56(c), except the mere pleadings themselves." Celotex Corp. v. Catrett, 477 U.S. 317, 324, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Such evidence and all justifiable inferences that can be drawn from it are to be taken as true. Anderson, 477 U.S. at 255. Such evidence need not be presented in a form admissible at trial. Id. My analysis of PP&L's motion will be guided by these standards.
II. State Action Immunity
Under the doctrine set forth by the United States Supreme Court in Parker v. Brown, 317 U.S. 341, 87 L. Ed. 315, 63 S. Ct. 307 (1943), those who engage in otherwise unlawful anti-competitive conduct are exempt from federal antitrust liability if "first, the State has articulated a clear and affirmative policy to allow the anti-competitive conduct, and second, the State provides active supervision of anti-competitive conduct undertaken by private actors." Federal Trade Comm'n v. Ticor Title Ins. Co., 119 L. Ed. 2d 410, 112 S. Ct. 2169, 2175 (1992). This two-part test of so-called state action immunity first crystallized in ...