Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-88-02158/USCOURTS-ca10-88-02158-0/pdf.json

Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

'l'ENTB CIRCUIT 

In re WYOMING TIGHT SANDS ANTITRUST ) 

CASES. ) 

) 

STATE OF KANSAS, as parens patriae on ) 

behalf of natural person residing in ) 

Kansas, ROBERT T. STEPHAN, Attorney ) 

General of the State of Kansas, ) 

) 

and } 

) 

STATE OF MISSOURI, ) 

) 

Plaintiffs-Appellants, } 

) 

KANSAS POWER & LIGHT COMPANY, a Kansas } 

Corporation; KANSAS GAS & ELECTRIC ) 

COMPANY, ) 

) 

Plaintiffs-Appellees, ) 

) 

UTILI CORP UNITED INC., ) 

.} 

Plaintiff-intervenor-Appellee~) 

v .. ) Nos. 

) 

AMOCO PRODUCTION CO.; CITIES SERVICE ) 

OIL AND GAS CORPORATION, f/k/a Cities ) 

Service Company~ CSG EXPLORATION ) 

COMPANY; WILLIAMS NATURAL GAS COMPANY, ) 

f/k/a Northwest Central Pipeline ) 

Corporation: THE WAMSUTTER LIMITED ) 

PARTNERSHIP; THE MOXA LIMITED ) 

PARTNERSHIP, ) 

) 

Defendants-Appellees. ) 

FILED 

United Statea Court of Appeals Tenth Circuit 

JAN 311999 

ROBERT L. HOECKER 

· Clerk 

88-2158 

88-2159 

ON APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF KANSAS 

(D.C. Lead No. CIV~ 85-2349-S) 

Appellate Case: 88-2158 Document: 01019723988 Date Filed: 01/31/1989 Page: 1 
Thomas J. Greenan of Ferguson & Burdell, Seattle, Washington 

{Robert T. Stephan, Attorney General for the State of Kansas; 

William L. Webster, Attorney General for the ~tate of Missouri; 

Donald D. Barry and Deborah Farrar of Donald D. Barry, Chtd., 

T6peka, Kansas; James E. Burt of Ferguson & Burdell, Seattle, 

Washington; Jack C. Chestnut of Chestnut & Brooks, P.C., 

Minneapolis, Minnesota; Thomas H. Brill, Kansas City, Missouri-; R. 

Lawrence Ward, Jennifer Gille Bacon, Russells. Jones, Jr., and 

Ann E. Carlson of Shughart, Thomson & Kilroy, P.C., Kansas City, 

Missouri, with him on the briefs), for Plaintiffs-Appellants State 

of Kansas and State of Missouri. 

Michael F. Saunders of Spencer· Fane Britt & Browne, Kansas City, 

Missouri (Basil W. Kelsey and ~rank B.W. McCollum of Spencer Fane 

Britt & Browne, Overland Park, Kansas: Curtis E. Woods and Teresa 

A. Woody of Spencer Fane Britt & Browne, Kansas City, Missouri; 

John K. Rosenberg and David P. Mudrick, Topeka, Kansas; Ralph 

Foster and John P. DeCoursey, Wichita, Kansas, with him on the 

brief), for · Plaintiff-Appellees Kansas Power & Light Company and 

Kansas Gas & Electric Company. 

Sally R. Burger (William H. Sanders, Sr., Floyd R. Finch, Jr., and 

Katharine Bunn of Blackwell Sanders Matheny Weary & Lombardi, 

Kansas City, Missouri; James D. Griffin of Blackwell Sanders 

Matheny Weary & Lombardi, Overland Park, Kansas; Randall B. Palmer 

of UtiliCorp United Inc., Kansas City, Missouri, with her on the 

brief), for Plaintiff-Intervenor-Appellee UtiliCorp United Inc. 

Kirkland & Ellis, Chicago, Illinois; Watson, Ess, Marshall & 

Enggas, Olathe, Kansas, on the brief for Defendant-Appellee Amoco 

Production Co. 

Skadden, Arps, Slate, Meagher & Flom, 

Mag & Fizzell, Kansas City, Missouri, 

Appellees Cities Service Oil and 

Exploration Company. 

Washington, D.C.; Stinson, 

on the brief for DefendantsGas Corporation and CSG 

Before SEYMOUR, MOORE, and BRORBY, Circuit Judges. 

BRORBY, Circuit Judge. 

This appeal involves a single issue: May residential 

consumers who are indirect purchasers of natural gas maintain an 

antitrust suit against the alleged antitrust violators? 

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Appellate Case: 88-2158 Document: 01019723988 Date Filed: 01/31/1989 Page: 2 
I. 

Three investor-owned public utilities, the Kansas Power & 

Light Company, Kansas Gas & Electric Company, and UtiliCorp United 

Inc., filed separate complaints _against defendants Amoco 

Production Co., Cities Service Oil and Gas Corporation, CSG 

Exploration Company,- The Moxa Limited Partnership, and The . Wamsutter Limited Partnership, alleging, inter alia, that all 

defendants illegally conspired to artificially inflate the price 

of natural gas produced from various natural gas fields in 

Wyoming. The gas was then transported and sold to the public 

utilities by the conspiring defendant, Williams Natural Gas 

Company, an interstate pipeline company. 

The states of Kansas and Missouri {the States) filed similar 

suits wherein basically they asserted two types of claims against 

the same defendants: (1) on behalf of residential consumers who 

purchased natural gas from the public utilities, the States acting 

in a parens patriae capacity~ and (2) on behalf of state agencies, 

municipalities, and other political subdivisions that purchased 

gas directly from Williams Natural Gas Company. These suits were 

consolidated. 

The de£endants asserted various defenses, including 

allegations that the public utility plaintiffs lack standing under 

§ 4 of the Clayton Act, 15 U.S.C. § 15 {1982), in that plaintiffs 

had not been injured in their QUsiness or property because the 

public utilities had passed on illegal increases in the price of 

natural gas to the ultimate consumer who paid the entire cost of 

antitrust injuries. The public utilities then filed motions for 

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Appellate Case: 88-2158 Document: 01019723988 Date Filed: 01/31/1989 Page: 3 
summary judgment to prohibit these pass-on defenses under Hanover 

Shoe, Inc. v. United Shoe Mach~nery Corp., 392 u.s. 481 (1968). 

The trial court granted partial summary judgment in favor of 

the public utilities prohibiting the use by th~ defendants of the 

pass-on defense. The trial court characte·rized the motions as "in 

reality, motions to dismiss the States of Kansas and Missouri in 

their parens patriae capacity," and sua SEonte dismissed the 

parens patriae claims asserted by the States. 

The trial court's thorough and analytical Memorandum and 

Order may be found in In re Wyoming Tight Sands Antitrust Cases, 

695 F. Supp. 1109 (D. Kan. 1988). 

The States sought and obtained interlocutory appellate review 

of a certified question. The public utilities are the appellees. 

The defendants are not involved in this appeal. At the request of 

the States, the question certified to the court pursuant to 28 

u.s.c. § 1292(b} is as follows: 

In a private antitrust action under 15 u.s.c. § 15 

involving claims of price fixing against the producers of natural gas, is a State a proper plaintiff as parens 

Qatriae for its citizens who paid inflated prices for 

natural gas, when the lawsuit already includes as 

plaintiffs those public utilities who paid the inflated 

prices upon direct purchase from the producers and who ~ubsequently passed on most or all of the price increase 

to the citizens of the State? 

Wyoming Tight Sands, 695 F. Supp. at 1120. 

The States now quarrel with the certified question. The 

States point out that all of the utilities that purchased the 

alleged price-fixed gas are not present as plaintiffs and assert 

that all of the illegal overcharges were passed on to residential 

consumers. The utili ties- assert the proposed modifications to the 

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Appellate Case: 88-2158 Document: 01019723988 Date Filed: 01/31/1989 Page: 4 
question are irrelevant to the issues in this appeal, and ask us 

to disregard the proposed factual allegations and consider the 

question certified by the district court. 

This court will answer the question certified to us by the 

district court for the reasons contained in the body of this 

opinion. 

II. 

The defendant Williams Natural Gas Company is alleged to have 

transported natural gas from gas fields in Wyoming and sold it to 

the public utilities. The remaining defendants, being the 

producers of the natural gas, are alleged to have conspired with 

Williams Natural Gas Company, the pipeline company, to 

artificially inflate the price of the natural gas. 

· The public utilities have sold or used the natural gas 

purchased from the pipeline company in different ways and 

therefore occupy different levels in the distribution chain. 

Kansas Gas & Electric Company purchased gas directly from the 

pipeline company for use in generating electricity, and the 

electricity was then sold and delivered to commercial, industrial 

and residential customers. Kansas Power & Light Company and 

; UtiliCorp United Inc. purchased natural gas directly from the 

pipeline company for their own industrial use and for delivery to 

commercial, industrial and residential consumers. All three of 

the public utilities operate as regulated monopolies within 

defined service areas. 

The trial court made no findings of fact concerning how much 

of the natural gas overcharges were passed· on to the commercial, 

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Appellate Case: 88-2158 Document: 01019723988 Date Filed: 01/31/1989 Page: 5 
industrial and residential consumerso The .States offered evidence 

that all the .ove~charges were passed on to the ultimate consumers. 

The trial. court apparently based its partial summary judgment upon 

the theory that there was no need to decide whether the allegedly 

illegal overcharges were passed on in whole or part. The question 

certified to us states that "most or all" of the price increase 

was passed on to the consumers. 

The states of Kansas and Missouri are bringing two claims·. 

The first relates to direct purchases of natural gas made by the 

States and its various instrumentalities. This claim is not now 

before this court. The States' second claim is in its capacity as 

parens patriae on behalf of natural persons residing therein who 

are residential indirect purchasers of natural gas. 1 This is the 

claim we now decide. 

III. 

The States acknowledge the basic rule as set forth in Hanover 

Shoe, 392 U.S~ 481, and as expanded in Illinois Brick Co. v. 

Illinois, 431 UoS. 720 (1977)o These cases hold that only the 

direct purchaser, and no other in the distribution chain, is the 

"party injured" within the meaning of § 4 of the Clayton Antitrust 

Act, 15 u.s.c. § 15. Stated differently, only the direct 

1 It should be noted that §§ 4C through 4H of the Clayton Act, 15 

u.s.c. §§ 15c through 15h, which is sometimes described as the 

Hart-Scott-Rodino Antitrust Improvements Act of 1976, empowers 

state attorneys ge~eral to bring treble-damage actions as parens 

patriae on behalf of resident natural persons "for injury 

sustained to their property" by reason of any Sherman Act 

violations. The parties have not argued that this 1~w e1iminat,s 

the basic rule that only a direct purchaser may sue. We assume 

that this statutory provision comes into play when the individual 

consumers are the direct purchasers. 

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Appellate Case: 88-2158 Document: 01019723988 Date Filed: 01/31/1989 Page: 6 
purchaser may sue for and recover the full amount of the illegal 

overcharge. 

All rules have exceptions, and.the basic rule set forth above 

has at least two, the cost-plus exception and the control 

exception. The States contend they fall squarely into either or 

both of these exceptions and should therefore be allowed to 

proceed with their suits on behalf of the residential consumers. 

The States, in their joint reply brief, concede the utilities' 

right to sue for and recover the alleged damages on behalf of the 

commercial and industrial customers of the utilities. 

The first exception to the basic rule is what we have labeled 

as the cost-plus exception. The genesis of this exception may be 

found in Hanover Shoe. There the Supreme Court recognized that 

"there might be" an exception to the rule "for instance, when an 

overcharged buyer has a pre-existing 'cost-plus' contract, thus 

making it easy to prove that he has not been damaged~" Id. at 

494. The Supreme Court further elaborated on this exception in 

Illinois Brick when it said: 

Hanover Shoe indicated the narrow scope it intended for 

any exception •.••. by citing, as the only example a 

pre-existing cost-plus contract. In such a situation, 

the purchaser is insulate~ from any decrease in its 

sales as a result of attempting to pass on the 

overcharge, because its customer is committed to buying 

a fixed quantity regardless of price. 

rd. at 735-36. We interpret this exception as requiring a preexisting cost-plus contract for a fixed quantity. We also note 

the Supreme Court did not say this would constitute an exception 

but rather that it "might be," and for this reason we have 

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Appellate Case: 88-2158 Document: 01019723988 Date Filed: 01/31/1989 Page: 7 
narrowly construed the exception as also requiring a fixed 

qbantity. 

The States now assert that their system of price regulation 

of natural gas utilities creates a cost-plus pricing arrangement 

that, coupled with the residential consumers' need to purchase 

their full requirements of natural gas from the utilities, places 

the residential consumers squarely within the cost-plus exception. 

In making this assertion, the States place great reliance on State 

ex. rel. Hartigan v. Panhandle Eastern Pipe Line Co., 852 F.2d 891 

(7th Cirq), cert. denied, 109 s.ct. 543 (1988). 

Prior to analyzing the States' contentions, we must delve 

deeper into Hanover Shoe and then into Illinois Brick, as we can 

glean several principles therefrom to guide us in deciding this 

case. The direct purchaser is entitled to damages if he raises 

the price for his own product. Hanover Shoe, 392 u.s. at 489. 

Considerations of stare decisis weigh heavily in the area of 

statutory construction where Congress is free to change the 

Supreme Court's interpretation of ~ts language. Illinois Brick, 

431 u.s. at 736. New dimensions of complexity would be added to 

treble-damage suits and seriously undermine their effectiveness if 

massive efforts were made to apportion the recovery among all 

potential plaintiffs. Id. at 737. There exists a serious problem 

of measuring the change in quantities of the natural gas purchased 

by consumers in response to a change in price. Id. at 742. There 

should be no exceptions to the basic rule for particular types of 

markets. Id. at 744. The increase in complexity.of treble-damage 

suits will result in a reduction in the effectiveness of thes~ 

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Appellate Case: 88-2158 Document: 01019723988 Date Filed: 01/31/1989 Page: 8 
suits. Id. at 745. There is a long-standing policy of 

encouraging vigorous · private enforcement of the antitrust laws. 

Id. at 745. 

We may distill these principles and summarize them by stating 

that the reasons given by the ·supreme Court to justify its 

interpretation of the statute in Hanover Shoe and Illinois Brick 

are: (1)' stare decisis; (2) encoura9e vigorous enforcement of the 

antitrust laws by reducing the expense of trial by eliminating 

unnecessary complications; (3) give to the direct purchaser an 

incentive to discover and prosecute antitrust violations; (4) 

avoid the problems of apportionment of damages; and (5) exceptions 

to the basic rule are to be narrow in scope. 

First, as to stare decisis. Illinois Brick contains a 

message to Congress as well as to students of the law. That 

message is simple. The phrase "[a]ny person who shall be injured" 

as used in § 4 of the Clayton Act means only a direct purchaser 

from the antitrust violator. In short, stare decisis requires 

that when a decision of the Supreme Court is made, it is binding 

on courts of appeals. In this case, the rule is clear, and the 

Supreme Court has cautioned us concerning expansions to the 

exception* Were we to broadly construe the exceptions, we would 

also be diluting the clear message given to Congress concerning 

the Supreme Court's construction of § 4 of the Clayton Act. 

Second, as to avoiding adding complexity and expense to 

antitrust suits. Were we to construe the law to allow the States 

to pursue their parens patriae claims, then unnecessary issues 

would be added to the trial, including the unresolved factual 

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Appellate Case: 88-2158 Document: 01019723988 Date Filed: 01/31/1989 Page: 9 
issue of how·mQch of the alleged illegal overcharge was passed on 

to the residential consumers of each utility. If all overcharges 

were passed on, then allowing the consumers to prove and collect 

the damages could result in the antitrust violators escaping the 

payment of damages relating to decreased demand by residential 

consumers due to the higher price. Complex issues of proof will 

grow geometrically if the States press their consumers' demands, 

unless we should rule as a matter of law that the utilities' share 

of the alleged damages are likewise passed on to the consumers. 

This we are not prepared to do, given the factual record before 

us. The question certified to us provides that ,.most or all" of 

the illegal price increase was passed on. 

Third, as to giving the direct purchaser an incentive to 

discover and prosecute the antitrust violator. It can be argued 

that enforcement of the antitrust laws would not be imperiled by 

allowing the States to pursue their claims in this case. But what 

of the next case? By removing an incentive for a utility to 

discover and enfo~ce antitrust violations, would we not be 

shifting the incentive to an indirect purchaser? Would we not be 

shifting the cost of policing and enforcing the antitrust laws to 

the states? Would we not be undercutting the basic rationale for 

the Supreme Court's decisions in Hanover Shoe and Illinois Brick? 

As stated by the Supreme Court in Hanover Shoe: 

[AJntitrust laws will be more effectively enforced by concentrating the full recovery for the overcharge in 

the direct purchasers rather than by allowing every 

plaintiff potentiilly affected by the overcharge to sue 

orily for the amount it could show was absorbed by" it. 

rd. at 735. 

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Appellate Case: 88-2158 Document: 01019723988 Date Filed: 01/31/1989 Page: 10 
.· 

The argument can be made that the utility really has no 

incentive to sue because the public utility regulatory. commission 

of the state.may force the utility to pass on to the consumers all 

damages the utility may recover. This is a question we do not 

answer. It is sufficient to state that a utility filed first in 

this case. It should also be noted that the utilities• motions to 

strike the pass-an ~defense asserted by the gas suppliers and 

transporters was characterized by the trial court as being in 

reality a motion to strike the States' parens patriae claim. It 

is reasonable to assume that the public utilities must believe 

there is something for their benefit in pursuing these actions. 

Allowing the States to press the claims of the indirect purchasers 

will result in the probability that direct purchasers will fail to 

discover and aggressively assert antitrust claims. 

Fourth, as to apportioning damages. The States assert there 

is no problem in apportioning the hoped-for damages in this case. 

They contend that it is a simple matter of proving how much 

natural gas went to the residential consumers and multiplying this 

by the unit illegal overcharge. The States may have an overly 

simplistic view of this problem and may not have considered the 

nature of the defenses which will probably be asserted at trial. 

Any allocation of illegal overcharges to the residential consumers 

may require tracing the sale from the wellhead through each level 

of distribution in order to establish the amount of illegal gas 

costs actually paid by the consumers in each state, probably 

resulting in exactly that which the Supreme Court prohibited, 

·i.e., adding new dimensions of complexity to antitrust suits. 

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Appellate Case: 88-2158 Document: 01019723988 Date Filed: 01/31/1989 Page: 11 
There is no way this court could or would instruct the parties-on 

proof of damages prior to trial as there are too many facts not 

now known. Suffice it to say that apportioning damages will 

probably not be as simple as contended by the States. 

Looking at the rationales underlying the basic rule, we are 

of the opinion that to allow the cost-plus exception urged upon us 

by the States would undercut the very reasons for the basic rule. 

Fifth, as to the words of the exception itself. To say that 

the utilities have a cost-plus fixed fee contract for a fixed 

quantity with their residential consumers would amount to fitting 

a square peg into a round hole. There exists no contract between 

the utilities and their residential consumers for any particular 

quantity. Obviously a residential consumer could stop using 

natural gas and convert to an alternative source of energy such as 

wood or coal, or a consumer could decrease the quantity of natural 

gas used. The apparent reason for the fixed-quantity requirement 

to the cost-plus exception is simply that there would exist no 

prob~em of apportionment between the direct and indirect 

purchasers. In this case, the problem of apportionment would 

.. exist even if all of the overcharge was passed on, because there 

still exists the issue of decreased residential demand caused by 

the higher price. we hold that suit by residential consumers of 

natural gas who are not direct purchasers does not lie within the 

cost-plus exception to the basic rule. 

The States urge us to apply the law as enunciated in 

Panhandle Eastern, 852 F.2d 891. This we decline to do • 

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Appellate Case: 88-2158 Document: 01019723988 Date Filed: 01/31/1989 Page: 12 
Panhandle Eastern . held, in e.ffect,. that the purchased gas 

adjustment component of gas utility regulation, coupled with the 

fact that residential consumers are obligated to purchase their 

full _requirements of natural gas from monopolistic utili ties, 

placed· the residential consumer squarely within the cost-plus 

exception o~ Hanover Shoe and Illinois Brick. 

We"distinguish the facts of this case from those in Panhandle 

Eastern. In Panhandle Eastern, there was formal cost-plus pricing 

{as we may have here); a contract that required 100 percent 

passing on (as we may or may not have here); 2 and an 

acknowledgment of 100 percent pass-on in every kilowatt-hour 

resold to the utilities' residential consumers (which we may or 

may not have here). In Panhandle Eastern the utility had delayed 

in filing suit, and there was a serious question as to whether or 

not the statute of limitations had expired. In Panhandle Eastern 

the court was dealing with the residential consumers of a single 

utility; here we are dealing with utilities that occupy different 

levels on the distribution chain within two states, and with two 

states and their attendant public utility rate regulation schemes. 

In this case we have yet another unresolved factual issue: 

UtiliCorp asserts in its brief that more of the allegedly illegal 

overcharges could be recovered if the utilities were allowed to 

press the claims of the residential consumers, an assertion which 

2 In this case, there is a purchaseq-gas adjustment clause in the 

rate tariffs of Kansas Power & Light. There is an energy-cost adjustment clause, which operates in a similar manner, in Kansas 

Gas· & Electric's operating tariff in Kansas. In Lawrence, Kansas, 

the Kansas Public Service Company, a division of UtiliCorp, did 

not resell natural gas by way of a purchased-gas adjustment clause 

mechanism. 

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the court in Panhandle Eastern apparently did not face. The 

Seventh Circuit itself stated in Panhandle Eastern that this case 

{Wyoming Tight Sands, 695 F. Supp. 1109) was distinguishable from 

Panhandle Eastern. 852 u.s. at 893. The most imp~rtant 

difference between Panhandle Eastern and this case may be that 

there was apparently no doubt in Panhandle Eastern that the entire 

ov·ercharge was passed on, and there was no need to apportion 

damages between the direct and indirect purchasers. In this case, 

the amount of the overcharge passed on may be an unresolved 

question of fact. However, even if we assume, as we do for the 

purpose of deciding the issues before us, that there was a perfect 

and provable pass-on of the allegedly illegal overcharge, we are 

not persuaded that the facts of this case would place this case 

into the narrow exception to the rule. At the most, a perfect 

pass-en might solve the problem of apportioning damages between 

the direct and indirect purchaser but for the issue of decreased 

demand due to higher prices. This does not justify shifting the 

incentive to prosecute alleged antitrust violations from the 

direct purchaser, who is the closest to the violator and who 

. . presumably has the better knowledge, to the indirect purchaser. A 

perfect pass-on of all illegal overcharges may exist in a model 

worid but probably does not exist in the real world~ A perfect 

pass-on, standing alone, is not sufficient reason to allow an 

indirect purchaser to sue an alleged antitrust violation. We 

narrowly construe the cost-plus exception as to do otherwise would 

be ta do that which the Supreme Court has cautioned against. We 

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hold the controlling cases are Hanover Shoe and Illinois Brick, 

and not Panhandle Eastern. 

The States also rely upon In re New Mexico Natural Gas 

Antitrust Litig., 1982-1 Trade Cases" 64,685 (D.N.M. 1982). we 

distinguish this case, as the direct purchasers were billing their 

consumers monthly and separately for a 11Cost of gas component," 

and perhaps more importantly, the residential consumers 

constituted the first direct purchasers from the conspiring 

defendants. 

We are not persuaded that the cost-plus contract exception of 

Hanover Shoe is applicable to the facts of this case. If we were 

to adopt the reasoning of Panhandle Eastern, we would in reality 

be carving out yet another exception (regulation of public 

utilities) to the basic rule that only a direct purchaser may sue 

for the antitrust violation, and this we are unwilling to do. 

IV. 

In Illinois Brick, the Supreme Court set forth another 

situation where the pass-on defense "might be" permitted, and that 

is where the direct purchaser is owned or controlled by its 

customer. Id. at 736 n.l6. 

The States argue that as they exercise plenary authority over 

the utilities, particularly with regard to rates, this fact 

equates to placing the States within the control exception. We do 

not agree. As the trial court stated: "The utilities are forprofit, publicly held corporations and simply do not fit within 

this exception.". Wyoming Tight Sands, 695 F. Supp. at 1117. 

Calling a cow a horse does not make it so. State regulation of 

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utility rates does not give to the states or its citizens 

ownership or control of the public utilities. We hold that the 

public utilities in this case are neither owned nor controlled by 

its customers, and we therefore conclude ·that the 11 control 

exception" does not apply to this controversy. 

v .. 

The States next assert that allowing residential consumers to 

sue is fully consistent with the prior decisions of this court, 

citing Central Nat'l Bank v. Rainbolt, 720 F.2d 1183 (lOth Cir. 

1983}; Zinser v. Continental Grain Co., 660 F.2d 754 (lOth Cir. 

1981), cert. denied, 455 u.s. 941 {1982); and Jones v. Ford Motor 

Co., 599 F.2d 394 (lOth Cir. 1979). These cases are inapposite. 

None involves pass-en or cost-plus contracts. 

The States next urge that Illinois Brick should not be read 

as a rigid bar to recovery on the part of all indirect purchasers 

and cite Blue Shield of Virginia v. McCready, 457 u.s. 465 (1982), 

wherein plaintiff was allowed to maintain an antitrust suit as she 

was the person who was "out of pocket" by paying her psychologist 

when Blue Shield was exerting coercive pressure to induce its 

subscribers into selecting psychiatrists over psychologists, and 

Associated Gen. Contractors of California, Inc. v. California 

State Council of Carpenters, 459 u.s. 519 (1983), wherein the 

Supreme Court held that a decision as to antitrust standing 

requires a case-by-case analysis of at least six factors. 

These cases are distinguishable. In Blue Shield, the Supreme 

Court held that plaintiff was in essence the direct purchaser when 

it stated "it is not the employer as purchaser, but its employees 

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. ' 

as subscribers, who are out of pocket as a consequence of the 

plan's failure to pay benefits.~ Id. at 475. The Court held that 

McCready had paid her psychologist; Blue Shield failed to pay her; 

and McCready's psychologist could link no 

himself arising from his treatment of McCready. 

claim of injury to 

In the instant 

case, the residential user of gas paid the utility and the utility 

can assert a claim of injury for decreased consumer demand. In 

Associated Gen. Contractors, the Supreme Court applied the 

policies underlying Illinois Brick, and dismissed the claims of a 

labor union for indirect damages, holding that the union's claim 

of consequential harm was insufficient as a matter of law. Id. at 

545. 

The States assert that the trial court should not have 

granted partial summary judgment as there may exist a genuine 

issue of material fact, i.e., did the utilities pass on all of the 

overcharges. In Illinois Brick, the Supreme Court stated, "[T]he 

process of classifying various market situations according to the 

amount of pass-on likely to be involved and its susceptibility of 

proof in a judicial forum would entail the very problems that the 

Hanover Shoe rule was meant to avoid." Id. at 744-45. We 

therefore hold that the amount of illegal overcharges actually 

passed on by the utilities to its customers is not an issue of 

material fact necessary to a resolution of the narrow issue before 

this court. 

We conclude that residential indirect purchasers of natural 

gas are not entitled to sue the alleged violators under either 

Hanover Shoe or Illinois Brick. The question certified to us is 

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Appellate Case: 88-2158 Document: 01019723988 Date Filed: 01/31/1989 Page: 17 
answered in the negative, 

insofar as .is necessary to 

AFFIRMED. 

and the judgment of the trial .court, 

answer the question certified, is' 

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