The opinion of the court was delivered by: TELESCA
Plaintiff the United States of America brings this action against defendant Rochester Gas and Electric Corporation, ("RG&E"), pursuant to Section 1 of the Sherman Act, codified at 15 U.S.C. § 1, alleging that RG&E has engaged in anticompetitive acts. Specifically, plaintiff alleges that RG&E illegally engaged in anticompetitive activities by entering into a contract with the University of Rochester, ("University" or "U of R") whereby, inter alia, RG&E promised to provide electricity to the U of R at reduced rates in return for, inter alia, the University's promise not to compete against RG&E in the sale of electricity to consumers. Complaint at P 15. According to the United States, RG&E entered into its agreement with the U of R for the purpose of preventing the University from constructing a competing power producing facility. The United States alleges that as a result of the agreement between the U of R and RG&E, the University discontinued its plans to produce a power generating facility, thereby preventing a potential competitor from entering the market. The Government contends that RG&E's actions in preventing a potential competitor from entering the market were harmful to consumers in that RG&E denied consumers an alternative source from which to buy electricity, and increased costs for other RG&E customers who were required to pay more for electricity to offset the discounts that were given to the U of R.
Defendant RG&E moves pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment on grounds that it is immune from antitrust liability under the state action doctrine, and in the alternative, that it has not engaged in any anticompetitive behavior. The United States cross-moves for summary judgment claiming that RG&E is subject to antitrust liability, and that as a matter of law, defendant engaged in anticompetitive activity prohibited by the Sherman Act. Plaintiff also moves to strike portions of an affidavit submitted in support of defendant's motion for summary judgment.
The New York State Attorney General's office submits an amicus curiae brief contending that RG&E should not be immune from antitrust liability under the state action doctrine.
The following facts are uncontested except where noted. Sometime in the late 1980's or early 1990's, in an effort to reduce energy costs, the University of Rochester began to consider generating its own power using a "cogeneration" facility. A cogeneration facility is a powerplant that burns fuel to produce two types of energy: electricity and steam. The U of R used electricity throughout its campus, and used steam to heat and cool its buildings.
In early 1993, University President Dennis O'Brien convened a special task group to study the feasibility of constructing and operating a cogeneration facility. After months of study, the task group determined that a cogeneration facility would be a viable source of energy for the University. The group concluded that a 23 megawatt plant would be required, and that the cost of such a plant would be approximately $ 36 million. The task group determined that because the plant would generate more electricity than required by the University, approximately one-third of the electricity produced could be sold. According to the United States, the U of R considered selling this electricity to other consumers, including the Rochester Institute of Technology. RG&E contends that the University planed to sell the electricity back to RG&E.
On July 20, 1993, the Executive Committee of the Board of Trustees of the University of Rochester voted to authorize officers of the University to proceed with development of a 23 megawatt cogeneration facility, and allocated $ 1.3 million to initiate that development. Soon thereafter, RG&E approached the University with a proposal to sell electricity to the University at a discounted rate, and to provide other financial incentives that would negate any savings that would have been realized through the school's production of its own steam and electricity. The University negotiated the proposal with RG&E, and on October 27, 1993, the parties entered into a "Memorandum of Understanding," ("MOU"), which served as the basis for a contract which followed. The MOU explicitly acknowledged that the University had alternative sources of energy that might be available to it including "the installation of a cogeneration power plant . . . ." Given those circumstances, the parties agreed that, inter alia: (1) the University would remain an RG&E customer until December 31, 2000; (2) the University would pay a specified discounted rate for electricity; (3) RG&E would make yearly grants to the University of at least $ 163,000 to be used by the school to pay for energy efficiency projects; (4) RG&E would continue to make yearly research and development grants to the University averaging $ 400,000 per year; (5) the University would enter into an contract with an RG&E sponsored contractor under which RG&E would fund energy efficiency projects recommended by the contractor; and, (6) the University would be allowed to continue to study alternative sources of energy, but the studies would be "confined to the service of the University's own needs." See Memorandum of Understanding, Attached as Exhibit 4 to Plaintiff's Statement of Uncontested Facts.
Based on the MOU, RG&E and the University entered into an Individual Service Agreement, ("ISA"), on March 31, 1994. Under the ISA, the University agreed to remain a customer of RG&E until December 31, 2000. Additionally, in return for: (1) reduced rates on electricity service; (2) an "inducement" payment to induce the University to forego other electric supply options; (3) payments to the University for implementing energy-saving projects; and (4) payments to the University for entering into a contract with an energy service company and implementing energy-saving projects recommended by the company, (guaranteed to be at least $ 1,743,000), the University agreed, during the term of the agreement, "not to solicit or join with other customers of RG&E to participate in any plan designed to provide them with electric power and/or thermal energy from any source other than RG&E." See Individual Service Agreement, attached as Exhibit 5 to Plaintiff's Statement of Uncontested Facts at P 6.3.
I. Motions for Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure provides that 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 judgment as a matter of law." When considering a motion for summary judgment, all inferences and ambiguities must be resolved in favor of the party against whom summary judgment is sought. Gallo v. Prudential Residential Services, 22 F.3d 1219, 1223 (2d Circ. 1994). If, after considering the evidence in the light most favorable to the nonmoving party, the court finds that no rational jury could find in favor of that party, a grant of summary judgment is appropriate. Id. at 1224.
Defendant moves for summary judgment on two grounds. First, defendant claims that it is immune from antitrust liability under the state action doctrine, and therefore is entitled to judgment as a matter of law. Second, RG&E argues that even if it is not immune from antitrust liability, it can not be held liable under the Sherman Act because its actions did not violate antitrust law. The Government moves for summary judgment on grounds that the contract between RG&E and the U of R is a per ...