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February 25, 2000


The opinion of the court was delivered by: Siragusa, District Judge.



This is an action in which plaintiff, Bath Petroleum Storage, Inc. ("BPSI"), a company which was attempting to create an underground natural gas storage facility, claims that its business was unlawfully damaged by a competitor. Essentially, plaintiff alleges that defendants made fraudulent statements to several administrative agencies which were regulating plaintiff, and that as a result, plaintiff's attempt to create the gas storage facility failed. Plaintiff contends that defendants conspired to violate and did in fact violate Civil Rico 18 U.S.C. § 1961 et seq., that they violated Section 349 of New York's General Business Law, that they tortiously interfered with plaintiff's contractual relationships, and that they perpetrated common law fraud. In addition, plaintiff alleges that defendants Market Hub Partners and TPC violated the anti-trust laws of the United States and the State of New York, including § 2 of the Sherman Act, 15 U.S.C. § 2 and § 340 of New York General Business Law. Now before the Court are three separate motions to dismiss [# 13] [# 19] [# 26] filed by defendants, pursuant to Federal Rules of Civil Procedure 9 and 12. For the reasons that follow, those motions to dismiss are granted.


The facts as set forth below are taken from the complaint and various documents submitted by defendants in support of their motions. On a motion to dismiss pursuant to Rule 12(b)(6), the Court's "consideration is limited to the factual allegations in plaintiff['s] . . . complaint, which are accepted as true, to documents attached to the complaint as an exhibit or incorporated in it by reference, to matters of which judicial notice may be taken, or to documents either in plaintiffs' possession or of which plaintiffs had knowledge and relied on in bringing suit." Brass v. American Film Technologies, Inc., 987 F.2d 142, 150 (2d Cir. 1993) (citing Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47-48 (2d Cir. 1991), cert. denied, 503 U.S. 960, 112 S.Ct. 1561, 118 L.Ed.2d 208 (1992)). The Court may also consider facts stated in plaintiff's RICO case statement. McLaughlin v. Anderson, 962 F.2d 187, 189 (2d Cir. 1992). However, "[i]f a district court wishes to consider additional material, Rule 12(b) requires it to treat the motion as one for summary judgment under Rule 56, giving the party opposing the motion notice and an opportunity to conduct necessary discovery and to submit pertinent material." Kramer v. Time Warner, Inc., 937 F.2d 767, 773 (2d Cir. 1991). In support of their motions to dismiss, defendants have submitted various documents related to the administrative actions before the FERC, DEC, and EPA, upon which plaintiff's action is based. These include the documents which plaintiff and defendants filed with the various agencies, certain correspondence between them and the agencies, and the decisions of these agencies. Plaintiff, which was a party to these administrative proceedings, does not deny that it had notice of these documents. Although these documents were not attached to plaintiff's complaint, the Court finds that these are documents of which plaintiff had notice, and upon which plaintiff relied in bringing this action. Accordingly, the Court finds that it may properly consider these documents on a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), pursuant to Cortec Industries, Inc. v. Sum Holding L.P., 949 F.2d 42, 47-8 (2d Cir. 1991), cert. denied, 503 U.S. 960, 112 S.Ct. 1561, 118 L.Ed.2d 208 (1992) (Noting that "[w]here plaintiff has actual notice of all the information in the movant's papers and has relied upon these documents in framing the complaint the necessity of translating a Rule 12(b)(6) motion into one under Rule 56 is largely dissipated."); see also, Novo Nordisk of North America, Inc. v. Genentech, Inc., 885 F. Supp. 522, 526 (S.D.N Y 1995) (holding that pursuant to Cortec, on a motion to dismiss pursuant to Rule 12(b)(6), court may consider findings of administrative law judge in a related administrative proceeding, where plaintiff had notice of exhibit, and exhibit was integral to plaintiff's claim); Envirosource, Inc. v. Horsehead Resource Dev. Co., Inc., No. 95 CIV. 5106(AGS) 1996 WL 363091 at *5 (S.D.N.Y. July 1, 1996). In the Cortec decision, the Second Circuit stated, in relevant part:

[W]e have held that when a plaintiff chooses not to attach to the complaint or incorporate by reference [documents] upon which it solely relies and which [are] integral to the complaint, the defendant may produce [the documents] when attacking the complaint for its failure to state a claim, because plaintiff should not so easily be allowed to escape the consequences of his own failure.

Cortec Industries Inc. v. Sum Holding, L.P., 949 F.2d at 47. Thus, a plaintiff should not be permitted to survive a motion to dismiss and put a defendant to the trouble and expense of discovery simply by excluding highly relevant facts and documents from its complaint.

Since 1983, plaintiff has operated a natural gas storage business in Bath, New York, at a facility which has been in existence since the early 1950's. Plaintiff stores natural gas in underground salt caverns, which are created by drilling holes through the surface of the earth, through bedrock and other geological formations, until the salt layer is reached. Plaintiff next pumps fresh water into the salt layer, thereby dissolving the salt and creating a cavern. Plaintiff then pumps the saltwater brine out of the caverns, and stores it in brine ponds on its land. Finally, plaintiff disposes of some of this brine by discharging regulated amounts of the brine into the Cohocton River, which is adjacent to the facility. At all times relevant to the lawsuit, defendants, through one of their subsidiaries, N.E. Hub Partners, were creating their own salt-cavern natural gas storage facility in Tioga, Pennsylvania. Defendant TPC Corporation (TPC) is the United State's largest owner of natural gas salt cavern storage facilities, and plaintiff claims that TPC essentially owns and controls defendants Market Hub Partners, L.P., and Market Hub Partners, Inc. ("MHP")*fn1.

In 1995, MHP sought to purchase plaintiff's natural gas storage facility, however, the parties never reached agreement. Instead, in 1996, plaintiff entered into a lease agreement with another company known as CNG Transmission Corporation (CNGT), an inter-state natural gas pipeline company providing natural gas transportation and storage service principally in the northeastern and mid-Atlantic regions of the United States. Pursuant to this agreement, plaintiff agreed to provide CNGT with natural gas storage capacity from plaintiff's existing caverns by late 1997 and from new caverns under construction in 1999.

a. The Proceeding before FERC

As part of the agreement between plaintiff and CNGT, plaintiff needed to convert a portion of its facility previously used to store liquid propane gas into a storage facility for natural gas, a move which required the approval of the Federal Energy Regulatory Commission (FERC). CNGT was required, under the lease, to obtain a Certificate of Public Convenience and Necessity from FERC. On May 6, 1996, CNGT filed an application requesting such approval from FERC. On July 10, 1996, the New York Department of Environmental Conservation (DEC) sent a letter to FERC, noting that it had "several technical and environmental concerns on the feasibility of [CNGT's] proposed project." (Declaration of John P. Quinn [# 16], Exhibit 3) The DEC stated that since CNGT's application had not addressed the feasibility of storing natural gas in underground caverns at the Bath site, FERC should conduct "a comprehensive technical review" of the proposed project, and DEC listed a number of specific areas for FERC to review. (Id.) The DEC stated that "at a bare minimum," FERC should evaluate eleven specific concerns, including whether there were any geological faults at the project site. The DEC also described a number of environmental concerns, including the fact that solution mining would likely increase the amount of saltwater brine that plaintiff would want to discharge into the Cohocton River. Accordingly, the DEC indicated that it would require plaintiff to obtain a new State Pollution Discharge Elimination System (SPDES) permit to regulate plaintiff's discharge of saltwater brine. (Id.)

On August 15, 1996, in response to a public notice filed by FERC, MHP filed with FERC a 46-page motion to intervene in CNGT's proceeding and for a cease and desist order against plaintiff.*fn2 ([# 40], Exhibit A). The motion alleged that plaintiff was at that time already engaged in construction, drilling, solution mining and site preparation of natural gas storage caverns without the necessary approval from FERC. Most of that motion, 33 pages of it, was legal argument explaining why plaintiff and its mining activities should be subject to FERC's jurisdiction. A portion of MHP's motion also described potential problems with using the Bath site as a natural gas storage facility. It described past problems that plaintiff had reported, including a tubing failure and fire which had occurred in number 2 and 2a wells. MHP asked FERC to issue a cease and desist order against BPSI's allegedly unauthorized mining activities. On August 28, 1996, MHP filed another motion in opposition to CNGT's application with FERC. That motion was 31 pages long and dealt exclusively with rates that CNGT had proposed to charge its customers if FERC approved its application. (Declaration of Drew J. Fossum [#15], Exhibit B). On September 10, 1996, FERC issued a determination that plaintiff was subject to FERC's jurisdiction, and that plaintiff could not develop its salt caverns for gas storage any further without obtaining FERC approval. (Declaration of John P. Quinn [# 16], Exhibit 5). On October 23, 1996, FERC informed CNGT that since it had not received an application from either CNGT or BPSI for permission to develop the salt caverns, that it considered CNGT's application incomplete, and that it would not be able to process CNGT's application in a timely fashion. (Id., Exhibit 6). Some time thereafter, CNGT amended its application, and on December 26, 1996, MHP filed with FERC a protest to CNGT's amended application. (Attachment to MHP Memorandum [# 40], Exhibit B). In its protest, MHP alleged that it had discovered evidence of a geological fault at plaintiff's site. It also raised environmental concerns relating to plaintiff's disposal of the saltwater brine solution. However, at least half of the protest dealt only with issues relating to the project's proposed cost and rates to be charged by CNGT. On October 10, 1997, FERC requested additional information from CNGT. (Declaration of John P. Quinn [# 16], Exhibit 11). On January 28, 1998, FERC informed CNGT that it was dismissing its application without prejudice, because of CNGT's failure to provide requested information. (Id. Exhibit 12).

Plaintiff's complaint alleges that MHP's filings with FERC were fraudulent. The complaint states, in relevant part, that "[t]he primary thrust of these objections was focused on the geological conditions present at the Bath Storage Facility and its appropriateness for the storage of natural gas. MHP also alleged that the BPSI facility was unsafe and constituted an environmental hazard."*fn3 (Complaint [# 1], ¶ 72). Plaintiff contends that MHP made the following statements to FERC:

a. A geological fault exists at the Bath Storage Facility. . . .; b. BPSI's cavern design and construction practices deviate materially from established guidelines promulgated by an subcommittee of the The Interstate Oil and Gas Compact Commission ("IOGC"). . . .; c. There is evidence of structural failures at the BPSI site; d. The existing caverns at the BPSI site are structurally and mechanically unstable for high pressure natural gas storage and, given the potential for migration and release of explosive product from the wells across and possibly off site including the Cohocton River, the potential for devastating environmental impacts is high; e. there is a potential for full scale collapse of the underground salt cavern storage facilities which would jeopardize the health and safety of area residents; f. BPSI has a history of releasing high concentration of chlorides into the Cohocton River in violation of its . . . [SPDES] permit which resulted in crop damage in downstream areas and will continue to result in significant potential for the degradation of downstream aquatic environments; and g. BPSI cannot maintain pressure at levels required to use the caverns for the storage of natural gas.

The Court notes that the complaint does not specifically allege that FERC was misled or defrauded by MHP's allegations. Rather, it states only that MHP's filing caused CNGT to amend its application:

MHP's effort was met with initial success when CNGT filed on April 18, 1997, an amendment to its year-old application for the Seasonal Service Expansion Project, and sought phased consideration of the project out of concern that all of the authorizations requested would not be granted in time for the 1997-1998 winter heating season. Under the amendment consideration of the BPSI proposal was to be deferred. Thus, it was clear that MHP and the other Defendants had been successful in delaying consideration by FERC of the use by CNGT of the Bath Storage Facility for the storage of natural gas.

(Complaint [# 1], ¶ 85). However, plaintiff claims that MHP's actions ultimately caused CNGT to breach its lease with plaintiff. The complaint states that in January of 1998, CNGT informed plaintiff that "as a direct result of MHP's and CREST's*fn4 actions to thwart regulatory approval, it had determined to terminate the Lease Agreement with BPSI, which was finally accomplished in January 1998." Plaintiff admits, however, that on January 28, 1998, FERC dismissed CNGT's application, without prejudice, because of "serious data deficiencies" with CNGT's application, and because of CNGT's failure to respond to "FERC inquiries." (Complaint [# 1], ¶ 87; Declaration of John P. Quinn [# 16], Exhibit 12)

b. The Proceeding Before New York's DEC

At the same time that the aforementioned proceedings were taking place before FERC, in November of 1996, the New York State DEC proposed to modify plaintiff's existing SPDES permit.*fn5 The proposed modification used the "mass balance" formula, a different formula than was previously used in calculating concentration levels of chlorides and other wastes that plaintiff was discharging into the Cohocton River, which restricted plaintiff's ability to discharge salt-water brine into the river. Plaintiff alleges that the "mass balance" formula had never before been utilized by the New York DEC to measure compliance with water pollution standards, and that the formula made it virtually impossible for BPSI to discharge salt brine into the Cohocton River without subjecting itself to enforcement actions by the DEC for violation of the permit. Plaintiff alleges, upon information and belief, that this modification of its permit came about because MHP "induced" the DEC to make the modification. (Complaint, ¶ 91) The complaint does not specifically say that MHP defrauded the DEC, or that MHP made misstatements to the DEC, thus it is unclear how MHP allegedly "induced" the DEC to do this. The complaint also states that MHP urged DEC to use the "mass balance" formula for plaintiff's permit, but it does not allege that MHP in any way defrauded DEC into doing this. (See, Complaint, ¶ 109). In any event, plaintiff objected to the modification of its permit, causing DEC to conduct a modification proceeding. In February of 1997, two weeks after it was formed, a non-profit corporation named Coalition For Resources and Environment in the Southern Tier, Inc. ("CREST") filed a petition to intervene in plaintiff's modification proceeding before the DEC. Plaintiff contends that CREST was and is a sham corporation created by MHP and TPC, for the purpose of intervening in the modification proceeding, since "[i]t is unlikely that MHP, as a competitor, would have been granted party status in the administrative proceeding." (Complaint [# 1], ¶ 98). The complaint alleges that CREST made the following statements to the DEC:

a. BPSI was guilty of having violated the terms of its existing SPDES permit by discharging huge quantities of brine into the Cohocton River; b. These discharges have caused a significant negative impact on the fish population down-stream in the Cohocton River; c. The BPSI proposal would likely result in harm to the habitat of the timber rattlesnake, an endangered species; d. As a consequence, a more thorough environmental impact study should be required; e. The planned conversion to natural gas would create an increased threat of catastrophic explosion; f. As a result of years of uncontrolled solutioning, BPSI's storage cavern facility has become dangerously unstable. . . . . g. The environmentally unsafe use of the caverns could result in the release of explosive product into the prolific fresh water aquifers of the Cohocton River underlying the facility; Subsurface subsidence could result in full scale collapse of the underground salt cavern storage facilities resulting in uncontrolled release of the gas product; i. Substantial geological faulting exists on the site creating an environmental hazard; During the period of 1994 to 1996, BPSI substantially exceeded the level of effluents permitted in its discharge into the Cohocton River under its SPDES permit. This has resulted in poor plant growth downstream; and k. The design of the underground injection wells for brine disposal is scientifically flawed given the volume of brine which would be required to be discharged each day.

(Complaint, par. 93). Plaintiff states that these statements were "fraudulent, false, and misleading," because:

a. BPSI explicitly followed the effluent limitations and monitoring requirements set forth in its SPDES permit. . . . .; b. CREST has provided no evidence of any damage to fish in the Cohocton River. Rather, studies commissioned by BPSI prove that there has been no damage and, in fact, the only deterioration in river quality has been the result of other point sources; c. studies and surveys have yet to reveal the existence of the timber rattlesnake at the property in question; d. Adequate and complete environmental studies were conducted and there is no rational basis for requiring additional tests or studies; e. The planned conversion to natural gas would not in any manner create an increased threat of catastrophic explosion and in fact, natural gas is safer to handle than LPG. . . .; f. There is no evidence of uncontrolled solutioning of caverns which would permit the migration of gases. In fact, all studies demonstrate the continued integrity of the individual caverns which have not expanded to any significant degree in the entire time the facility has been utilized. . . .; g. There is no rational basis for contending that BPSI caverns pose any danger to fresh water aquifers which are located approximately one-half mile above the storage caverns. Moreover, LPG and natural gas are not even considered potential pollutants to water by the EPA and [is] not included on its list of pollutants; h. Testing unequivocally demonstrates that significant surface subsidence at this location is a practical impossibility; i. There is no evidence of geological faulting. . . .; j. BPSI ...

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