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.
(Id.). Plaintiff contends that these statements were false
because, in fact, there
was no geologic fault, its cavern design was superior to MHP's
Tioga cavern, there was no evidence of structural failures, that
based on testing, there was "very little possibility" of a
catastrophe, it had fully complied with its SPDES permit, and
tests showed that its caverns could withstand pressure so as to
allow storage of natural gas. (Id. ¶ 73). In response to MHP's
filings, CNGT notified FERC that it believed MHP's allegations
regarding the safety and feasibility of the project were false.
(See, "Motion for Leave to Answer and Answer of CNG Transmission
Corporation to the Protest of Market Hub Partners, L.P.",
Declaration of John P. Quinn [# 16], Exhibit 18).
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: