Buccaneer Energy (USA) Inc. v. Gunnison Energy Corp.

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS February 3, 2017
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
BUCCANEER ENERGY (USA) INC.,
Plaintiff - Appellant,
v. No. 15-1396
GUNNISON ENERGY CORPORATION;
SG INTERESTS I, LTD.; SG INTERESTS
VII, LTD.,
Defendants - Appellees.
_________________________________
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 1:12-CV-01618-RPM)
_________________________________
Ronald L. Wilcox, Wilcox Law Firm, LLC, Denver, Colorado, for Plaintiff-Appellant.
L. Poe Leggette (Mark S. Barron with him on the briefs), Baker & Hostetler LLP,
Denver, Colorado, for Defendants-Appellees SG Interests I, Ltd. and SG Interests VII,
Ltd.
Timothy R. Beyer (Peter J. Korneffel, Jr., with him on the brief), Bryan Cave LLP,
Denver, Colorado, for Defendant-Appellee Gunnison Energy Corporation.
_________________________________
Before PHILLIPS, McHUGH, and MORITZ, Circuit Judges.
_________________________________
McHUGH, Circuit Judge.
_________________________________
I. INTRODUCTION
This antitrust case arises from a series of interactions among one incipient and two
established natural gas producers in a portion of western Colorado known, at least in this
litigation, as the Ragged Mountain Area. Buccaneer Energy (USA) Inc. (“Buccaneer”)
sued SG Interests I, Ltd., SG Interests VII, Ltd. (together, “SG”), and Gunnison Energy
Corporation (“GEC”) (collectively, “Defendants”) after unsuccessfully seeking an
agreement to transport natural gas on Defendants’ jointly owned pipeline system at a
price Buccaneer considered reasonable. Specifically, Buccaneer alleged that by refusing
to provide reasonable access to the system, Defendants had conspired in restraint of trade
and conspired to monopolize in violation of § 1 and § 2 of the Sherman Act, respectively.
See 15 U.S.C. §§ 1–2.
The district court granted summary judgment to Defendants, concluding that
Buccaneer could not establish either of its antitrust claims and that, in any event,
Buccaneer lacked antitrust standing. We agree that Buccaneer failed to present sufficient
evidence to create a genuine issue of fact on one or more elements of each of its claims,
and we therefore affirm on that dispositive basis alone.1
1
Accordingly, we need not, and so do not, reach Defendants’ alternative
arguments that Buccaneer’s claims are barred by res judicata, the statute of limitations,
and release.
2
II. BACKGROUND2
A. Factual History
The Ragged Mountain Area (“RM Area”) is a section of oil- and gas-producing
land located in Delta and Gunnison Counties, Colorado. The precise boundaries of the
RM Area are unclear. At all times relevant to this case, natural gas produced in the RM
Area was collected and transported to market through a gas-gathering system, processing
facility, and six-inch diameter pipeline collectively referred to here as the Ragged
Mountain Gathering System (“RM System”). The RM System carried this gas 20 miles to
an interconnection on the Rocky Mountain Natural Gas Pipeline (“Rocky Mountain
Pipeline”), a larger intrastate pipeline owned and operated by a regulated gas utility
called SourceGas.
In 2000 or 2001, Defendants separately began acquiring mineral leases in the RM
Area and competed with each other in doing so. They drilled wells on their lease
properties and began producing gas. Before and during this time, Riviera Drilling and
Exploration Company (“Riviera”) also owned mineral leases in the RM Area, and gas
produced from Riviera’s wells was transported on the RM System. Riviera had eleven
wells on its substantial leasehold acreage: eight that were producing and three that were
considered proved but not producing. Two other entities—Petrox Resources, Inc.
2
We include as background only the facts and procedural history relevant to the
issues we address.
3
(“Petrox”) and WillSource Enterprise, LLC (“WillSource”)—also held mineral leases in
the RM Area.3
In June 2005, Defendants entered into an Area of Mutual Interest Agreement,
granting each other an option to purchase a 50 percent interest in any leases or other
mineral interests acquired by either party within an “Area of Mutual Interest” that
encompassed certain “lands located in Delta, Mesa and Gunnison counties, Colorado.”
Defendants also granted each other the option to participate equally “in the planning,
permitting, construction, operation and ownership” of any pipeline project initiated by the
other party, including the Bull Mountain Pipeline, which SG had begun in 2003. The Bull
Mountain Pipeline would be a 20-inch diameter pipeline that would travel 25.5 miles
from the RM Area to an interconnection with the Questar interstate pipeline, rather than
the intrastate Rocky Mountain Pipeline. GEC eventually exercised its option under the
Area of Mutual Interest Agreement to participate equally with SG in constructing,
operating, and owning the Bull Mountain Pipeline.
Also in June 2005, Defendants jointly acquired the RM System, plus some nearby
mineral leases, from the RM System’s former owner. Defendants entered into a Pipeline
Operating Agreement, designating GEC as the operator of the RM System but giving
ultimate control over pipeline operations to GEC and SG equally. As the operator, GEC
3
Petrox purchased 5,750 leasehold acres in 2000. The extent of WillSource’s
holdings is not readily apparent, but the parties agree that WillSource owned leases
during the relevant time period.
4
was authorized to negotiate transportation agreements with third parties, subject to SG’s
approval.4
In September 2005, GEC entered into a gas purchase agreement with Riviera,
whereby GEC purchased gas from Riviera’s wells at a price GEC received for reselling
it, less $0.785 per MMBtu for transporting the gas through the RM System (in other
words, Riviera paid the transportation rate only). Beginning in early 2006 and continuing
into 2007, Defendants expressed and sporadically discussed a mutual interest in buying
Riviera’s holdings. On September 17, 2007, GEC informed Riviera that GEC was
increasing the transportation rate in their purchase agreement from $0.785 per MMBtu to
$1.52 per MMBtu and that it would be adjusting the rate quarterly through 2008. If
Riviera did not agree to the new rate by October 1, 2007, Riviera’s wells would be shut in
on October 6, 2007. Riviera decided the new rate made its operation “uneconomic” and
therefore did not agree to GEC’s new terms. Its wells were then shut in.
Buccaneer was incorporated in February 2008 for the purpose of acquiring
Riviera’s leases in the RM Area. Tony Gale, a petroleum engineer and former vice
president of oil and gas development at GEC, was appointed Buccaneer’s president. In
March 2008, Buccaneer and Riviera entered into a Lease and Purchase Agreement
(“LPA”), whereby Buccaneer agreed to (1) pay $45,000 per month for 24 months in
exchange for the right to operate and produce gas from Riviera’s leases; (2) drill four new
gas wells, contingent on its securing a reasonable transportation agreement for gas from
4
Sometime later, GEC and SG each built a lateral gas-gathering pipeline off of the
RM System—known as the Sheep Park Gas Lateral Pipeline and the Henderson gathering
line, respectively. GEC and SG owned and operated these lines independently.
5
the new wells; and (3) use diligent efforts to obtain the transportation agreement, acquire
rights of way, and lay pipeline to connect three wells to the RM System. The LPA also
gave Buccaneer an option to purchase Riviera’s leases, wells, and related assets within
the 24-month period for $32 million.
Buccaneer immediately began pursuing a means for transporting its expected gas
production. On March 3, 2008, Mr. Gale sent GEC a formal request for a transportation
agreement on the RM System. Mr. Gale followed up on the request several times. He also
contacted SG to express Buccaneer’s interest in buying into, or securing a transportation
agreement on, the Bull Mountain Pipeline, which was expected to be finished in 2009.
On June 30, 2008, GEC sent Buccaneer a draft transportation agreement that
provided for a transportation rate of $1.52 per MMBtu for interruptible service. On
July 12, 2008, Buccaneer returned a revised draft that kept GEC’s rate but altered the
interruptible-service provision such that GEC could interrupt service only if it could not
gather Buccaneer’s gas using commercially reasonable efforts, rather than at its sole
discretion. Buccaneer also added language requiring GEC to comply with the common-
carrier obligations of its pipeline operating permit and the Mineral Leasing Act of 1920.
GEC responded with another draft on August 5, 2008, this time raising the transportation
rate to $3.92 per MMBtu, reinserting the discretionary interruptible-service provision,
and removing the common carrier provision. Buccaneer did not counteroffer again.5
5
Evidence in the record shows that, throughout its course of dealing with
Buccaneer, GEC was consulting with SG or otherwise keeping SG informed.
6
In September 2008, Buccaneer sent SG an offer to pay for 15 percent of the cost of
constructing the Bull Mountain Pipeline in exchange for a 10 percent ownership interest.
SG sent a counteroffer, indicating it would sell a 10 percent interest for 20 percent of the
cost, but Buccaneer did not respond.6
From March to October 2008, Buccaneer used much of its investors’ capital
contributions and loans—which totaled $558,000—to make its monthly $45,000 lease
payments to Riviera. All told, Buccaneer incurred over $1.2 million in start-up costs.
Buccaneer’s investors pulled out in late-fall 2008. At the time, Buccaneer had failed to
secure a transportation agreement, the country was in the midst of an economic collapse,
and natural gas prices had fallen dramatically in recent months. Buccaneer failed to make
its November payment to Riviera, and on December 1, 2008, Riviera terminated the LPA.
Buccaneer never produced gas from Riviera’s leases.
Riviera filed its own lawsuit against Defendants on November 14, 2008, alleging
antitrust and other claims. See Riviera Drilling & Expl. Co. v. Gunnison Energy Corp.,
No. 08-cv-02486-REB-CBS, 2010 WL 582159, at *1 (D. Colo. Feb. 12, 2010)
(unpublished). Buccaneer was not a party to that case. In February 2010, Riviera filed for
Chapter 11 bankruptcy, and shortly thereafter, its lawsuit against Defendants was
6
Petrox and WillSource each has its own history of transportation negotiations
with Defendants. WillSource entered into an agreement on July 30, 2008, to transport gas
on the RM System at a rate of $2 per MMBtu; however, WillSource never actually
transported gas under that agreement. WillSource also reached an agreement to transport
gas on the Bull Mountain Pipeline but has not transported gas under that agreement
either. Petrox sought a transportation agreement on the RM System throughout the
summer of 2013 but never entered into one. Instead, Petrox eventually secured an
agreement to transport gas on the Bull Mountain Pipeline.
7
dismissed with prejudice for failure to prosecute. Id. at *3–4.7 As part of an April 2014
settlement agreement resolving an adversary proceeding connected to Riviera’s
bankruptcy, GEC obtained all of Riviera’s leasehold interests in the RM Area.
In July 2014, following years of post-construction disputes and delays, the Bull
Mountain Pipeline became fully operational. The RM System was decommissioned soon
thereafter.
B. Procedural History
Buccaneer filed this case on June 21, 2012. Buccaneer asserted that the RM
System “was essential to effective competition for production rights and the sale of
natural gas from the Ragged Mountain Area” and claimed that, by refusing to provide
Buccaneer access to the RM System on reasonable terms, Defendants had engaged in a
conspiracy in restraint of trade and a conspiracy to monopolize in violation of § 1 and § 2
of the Sherman Act, respectively.8
Defendants separately moved for summary judgment before discovery was
complete, but the district court denied their motions. After discovery concluded,
Defendants again separately moved for summary judgment. Each argued, among other
things, that Buccaneer (1) lacked antitrust standing and (2) had not presented sufficient
evidence of a conspiracy or of harm to competition in a relevant antitrust market and thus
could not establish its antitrust claims.
7
A panel of this court later affirmed the dismissal. Riviera Drilling & Expl. Co. v.
Gunnison Energy Corp., 412 F. App’x 89 (10th Cir. 2011) (unpublished).
8
Buccaneer brought three additional claims—tortious interference with contract,
and attempted monopolization and monopolization under § 2 of the Sherman Act—but
those claims have since been dismissed or withdrawn and are not at issue on appeal.
8
Buccaneer filed separate responses in opposition to Defendants’ motions and
submitted with them several expert reports, including the joint report of Drs. Mark Dwyer
and Michael Harris. This joint report corroborated Buccaneer’s claims of concerted
anticompetitive conduct and alleged two distinct harms to competition flowing from that
conduct: harm to the market for upstream production rights and harm to the market for
downstream sales of natural gas. Dr. Dwyer addressed the former, Dr. Harris the latter.
Based on the contents of this report, Buccaneer maintained that it had, at the very least,
demonstrated genuine issues of fact on both of its antitrust claims and thus was entitled to
a trial. Buccaneer also argued it had antitrust standing, focusing principally on the
question of its preparedness to begin gas production operations at the time it allegedly
was excluded from the RM System.
After holding a hearing on the motions, the district court issued a written order
granting summary judgment for Defendants on each of Buccaneer’s antitrust claims. The
district court first found that reasonable jurors could conclude Defendants conspired to
deny Buccaneer reasonable access to the RM System and “intentionally blocked
Buccaneer from entering into competition with them as producers of gas in the Ragged
Mountain Area.” Nonetheless, the court concluded Defendants were entitled to judgment
“because Buccaneer lacks evidence showing that the defendants caused or were capable
of causing injury to competition in a defined market, as opposed to simply harm to
Buccaneer, and because Buccaneer has not established antitrust standing.” The district
court’s latter conclusion was based primarily on its finding that Buccaneer, as a nascent
9
competitor, had not carried its burden of demonstrating preparedness to enter the market.
Buccaneer timely appealed. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.
III. DISCUSSION
Buccaneer challenges both of the district court’s alternative bases for granting
summary judgment in Defendants’ favor. First, Buccaneer argues the district court erred
in concluding Buccaneer presented insufficient evidence of harm to competition in a
relevant market, and for that reason, failed to establish its claims under § 1 and § 2 of the
Sherman Act. To the contrary, Buccaneer asserts it did show harm to competition in a
relevant market and that, with respect to its § 2 conspiracy claim, it was not required to
make that showing. Second, Buccaneer argues the district court erred in concluding
Buccaneer was not prepared to enter the market from which it allegedly was excluded
and therefore lacked antitrust standing under § 4 of the Clayton Act. See 15 U.S.C. § 15.
Like Buccaneer (and the district court), we begin with the ultimate issue of
whether Buccaneer can survive summary judgment on its antitrust claims. We review the
district court’s grant of summary judgment on these claims de novo. Ben Ezra, Weinstein,
& Co. v. Am. Online Inc., 206 F.3d 980, 984 (10th Cir. 2000). Addressing each of
Buccaneer’s claims in turn, we conclude Buccaneer failed to present sufficient evidence
to survive summary judgment on either one of them, and we therefore affirm the district
court’s judgment on that basis.9
9
In light of our conclusion on the merits, we need not and therefore do not address
the separate issue of antitrust standing, which despite the name is not a jurisdictional
requirement. See Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540
U.S. 398, 416 n.5 (2004) (stating, after having rejected a § 2 claim on the merits, that it
10
A. Buccaneer’s § 1 Claim
Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form
of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several
States.” 15 U.S.C. § 1. Despite its semantic breadth, § 1 has long been construed to
outlaw only concerted conduct by two or more separate entities that unreasonably
restrains trade. See Nw. Wholesale Stationers, Inc. v. Pac. Stationery & Printing Co., 472
U.S. 284, 289 (1985) (citing Chicago Bd. of Trade v. United States, 246 U.S. 231, 238
(1918)) (only unreasonable restraints); Copperweld Corp. v. Indep. Tube Corp., 467 U.S.
752, 767–68 (1984) (only multilateral conduct). Thus, a plaintiff asserting a claim under
§ 1 must prove not only the existence of an agreement or conspiracy between two or
more competitors to restrain trade, but also that the restraint is unreasonable. See
Systemcare, Inc. v. Wang Labs. Corp., 117 F.3d 1137, 1139 (10th Cir. 1997). Our focus
here is limited to this latter requirement.10
There are “two main analytical approaches for determining whether a defendant’s
conduct unreasonably restrains trade: the per se rule and the rule of reason.” Gregory v.
was “unnecessary to consider [defendant]’s alternative contention that [plaintiff] lacks
antitrust standing”); 2A Phillip E. Areeda et al., Antitrust Law ¶ 335f, at 89 (4th ed. 2014)
(“When a court concludes that no violation [of the antitrust laws] has occurred, it has no
occasion to consider [antitrust] standing.”); cf. Sullivan v. DB Invs., Inc., 667 F.3d 273,
307 (3d Cir. 2011) (“[S]tatutory standing is simply another element of proof for an
antitrust claim, rather than a predicate for asserting a claim in the first place.”). For
purposes of our analysis here, we assume Buccaneer has antitrust standing.
10
Although Defendants argued below that Buccaneer could not prove an
agreement or conspiracy to restrain trade, the district court found otherwise and
Defendants do not challenge that determination here. We therefore assume the existence
of an agreement and consider only whether that agreement restrained trade unreasonably.
See Nw. Wholesale, 472 U.S. at 290 & n.4 (assuming existence of § 1 agreement where
defendant did not challenge lower court’s finding of one).
11
Fort Bridger Rendezvous Ass’n, 448 F.3d 1195, 1203 (10th Cir. 2006) (internal quotation
marks omitted). The rule of reason is the default approach, and there is a presumption in
favor of its application. Id. Under rule-of-reason analysis, courts seek to ascertain the
extent to which challenged conduct harms competition and to then determine whether any
such harm is nonetheless justified by countervailing procompetitive benefits. See SCFC
ILC, Inc. v. Visa USA, Inc., 36 F.3d 958, 963 (10th Cir. 1994). The per se rule, on the
other hand, is reserved for “agreements or practices which because of their pernicious
effect on competition and lack of any redeeming virtue are conclusively presumed to be
unreasonable and therefore illegal without elaborate inquiry as to the precise harm they
have caused or the business excuse for their use.” Nw. Wholesale, 472 U.S. at 289(internal quotation marks omitted). Per se treatment “is appropriate only in ‘relat[ion] to
conduct that is manifestly anticompetitive.’” Gregory, 448 F.3d at 1203 (alteration in
original) (quoting Cont’l T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 50 (1977)). Absent
a showing that per se treatment is warranted, “courts should apply a rule-of-reason
analysis.” Nw. Wholesale, 472 U.S. at 296–97.
Here, Buccaneer contends Defendants’ agreement to deny it reasonable access to
the RM System was a concerted refusal to deal that violated § 1 of the Sherman Act.
Although concerted refusals to deal are among the types of agreements to which either
the per se rule or the rule of reason may apply, depending on the circumstances of the
case, see Gregory, 448 F.3d at 1203–04, Buccaneer does not specifically state by name
which rule it sees as applicable here. But Buccaneer has not pursued a per se theory at the
12
summary judgment stage or on appeal,11 and instead has advanced what is, not in name
but in substance, a fundamentally rule-of-reason argument. Thus, because Buccaneer
11
To be sure, the terms Buccaneer uses to describe Defendants’ actions—i.e.,
“concerted refusal to deal” and “group boycott”—are labels the courts long have attached
to conduct meriting per se invalidation under § 1 in certain circumstances. See, e.g., Nw.
Wholesale, 472 U.S. at 289 (“This Court has long held that certain concerted refusals to
deal or group boycotts are so likely to restrict competition without any offsetting
efficiency gains that they should be condemned as per se violations of § 1 of the Sherman
Act.”). And Buccaneer’s allegations—that Defendants conspired to deny Buccaneer
reasonable access to the RM System and that the RM System is “essential” to
Buccaneer’s ability to compete—do track in part what Northwest Wholesale identified as
the typical characteristics of forbidden group boycotts. See id. at 294 (explaining that the
boycotts to which the Court has applied the per se rule “often cut off access to a supply,
facility, or market necessary to enable the boycotted firm to compete,” among other
things). But Buccaneer has failed to assert, let alone argue, that Defendants’ conduct
amounts to a per se violation of § 1. Cf. Orson, Inc. v. Miramax Film Corp., 79 F.3d
1358, 1367 n.9 (3d Cir. 1996) (“Although Orson contended in the district court that
Miramax’s relationship with the Ritz was illegal per se, and occasionally speaks of the
relationship as a ‘boycott,’ it does not contend in this appeal that the per se rule applies.”
(emphasis added)). Not once is the term “per se” used in Buccaneer’s opening or reply
brief; and the single reference to “per se” in Buccaneer’s summary judgment filings
appears in an explanatory parenthetical appended to a case citation.
And even if Buccaneer subjectively equated its group-boycott allegation to an
allegation of per se illegality, we still would conclude that this oblique assertion does not
suffice as the “threshold case” needed to justify application of the per se rule. See Nw.
Wholesale, 472 U.S. at 298 (“A plaintiff seeking application of the per se rule must
present a threshold case that the challenged activity falls into a category likely to have
predominantly anticompetitive effects.”); see also Levine v. Cent. Fla. Med. Affiliates,
Inc., 72 F.3d 1538, 1550 (11th Cir. 1996) (“[T]he attachment of the group boycott label
does not necessarily require as a consequence an application of the per se approach.”
(internal quotation marks omitted)). Although boycotts involving elements essential to
competition may sometimes be per se illegal, the Supreme Court has clearly stated that
application of the per se rule “must be based upon demonstrable economic effect rather
than . . . upon formalistic line drawing.” See State Oil Co. v. Khan, 522 U.S. 3, 14 (1997)
(internal quotation marks omitted); cf. Levine, 72 F.3d at 1550 (“The labeling of a
restraint as a group boycott does not eliminate the necessity of determining whether it is a
naked restraint of trade with no purpose except stifling competition.” (internal quotation
marks omitted)). Buccaneer has not attempted to make this threshold demonstration.
Under these circumstances, we cannot conclude that application of the per se rule is
warranted. See Nw. Wholesale, 472 U.S. at 298; cf. Law v. NCAA, 134 F.3d 1010, 1019
13
“does not contend that defendants’ action was illegal per se, but instead advances an
argument under the rule of reason,” we confine our inquiry to the latter approach. See
Tops Mkts., Inc. v. Quality Mkts., Inc., 142 F.3d 90, 96 (2d Cir. 1998); see also, e.g.,
Warrior Sports, Inc. v. NCAA, 623 F.3d 281, 285–86 (6th Cir. 2010) (“Warrior’s failure
to challenge the rule as per se unlawful in proceedings below leaves it with only a rule-
of-reason argument.”); Apani Sw., Inc. v. Coca-Cola Enters., Inc., 300 F.3d 620, 627 (5th
Cir. 2002) (“Apani does not contend on appeal that CCE’s actions were per se illegal.
Thus, the rule of reason analysis [applies] to Apani’s claim.”); Christofferson Dairy, Inc.
v. MMM Sales, Inc., 849 F.2d 1168, 1172 n.5 (9th Cir. 1988) (similar); Quality Mercury,
Inc. v. Ford Motor Co., 542 F.2d 466, 469 n.2 (8th Cir. 1976) (similar); but cf. Datagate,
Inc. v. Hewlett-Packard Co., 941 F.2d 864, 870 (9th Cir. 1991) (noting, in context of
appeal from dismissal for failure to state a claim, that plaintiff “did not specify whether it
based its [tying] claim on a per se theory or on a rule of reason theory,” and considering
whether a claim was stated under either theory).
Before turning to our analysis under the rule of reason, however, we pause briefly
to address a set of arguments that fall outside the framework of that rule.
1. Arguments Concerning Trinko and the Essential Facilities Doctrine
Defendants have argued throughout this case that Buccaneer’s allegations—i.e.,
that Defendants unreasonably denied it access to the RM System, which is “essential” to
Buccaneer’s ability to compete—boil down to a claim under the “essential facilities”
(10th Cir. 1998) (“[T]he Supreme Court has made it clear that the per se rule is a
‘demanding’ standard that should be applied only in clear cut cases.”).
14
doctrine. See generally City of Chanute v. Williams Nat. Gas Co., 955 F.2d 641, 647–49
(10th Cir. 1992) (discussing essential facilities doctrine), overruled in part on other
grounds by Systemcare, Inc. v. Wang Labs. Corp., 117 F.3d 1137 (10th Cir. 1997).
Defendants further assert that, because in their view Buccaneer cannot establish the
elements of such a claim, see Pittsburg Cty. Rural Water Dist. No. 7 v. City of McAlester,
358 F.3d 694, 721 (10th Cir. 2004) (listing elements of essential facilities claim), the
Supreme Court’s decision in Verizon Communications Inc. v. Law Offices of Curtis V.
Trinko, LLP (Trinko), 540 U.S. 398 (2004), dictates that they cannot be held liable for
refusing to deal with Buccaneer.
Stated succinctly, Defendants’ reasoning proceeds as follows: (1) Buccaneer’s
description of the RM System as “essential” is an invocation of the essential facilities
doctrine; (2) the essential facilities doctrine applies to both § 1 and § 2 claims, and has
the same elements under both; (3) Trinko recognizes the essential facilities doctrine as an
exception to private businesses’ presumptive right to refuse to deal with a competitor;
(4) Buccaneer cannot establish the elements of a claim under the essential facilities
doctrine; (5) Defendants therefore were free to reject Buccaneer’s request for access to
the RM system, unless another exception applies; (6) Trinko recognizes only one other
exception, and it does not apply here; (7) thus, Trinko dictates that Defendants cannot be
liable to Buccaneer under the antitrust laws; and finally, (8) Buccaneer’s argument that
Trinko does not apply to concerted conduct under § 1 is illogical because the essential
facilities doctrine originated in the context of § 1 claims.
15
But the central premise on which this argument rests—that Trinko immunizes
Defendants’ conduct absent some exception—is false. At issue in Trinko was the
question of whether a plaintiff could bring a § 2 monopolization or attempted
monopolization claim against Verizon based on Verizon’s alleged unilateral refusal to
provide competitors reasonable access to its telephone service infrastructure. 540 U.S. at402–05, 407. In concluding the plaintiff could not, the Supreme Court relied on the
established notion that, “as a general matter, the Sherman Act ‘does not restrict the long
recognized right of [a] trader or manufacturer engaged in an entirely private business,
freely to exercise his own independent discretion as to parties with whom he will deal.’”
Id. at 408 (alteration in original) (quoting United States v. Colgate & Co., 250 U.S. 300,
307 (1919)). While acknowledging that “the right to refuse to deal with other firms [is
not] unqualified,” id. (internal quotation marks omitted), the Court nonetheless concluded
that the exceptions are limited and that Verizon’s conduct in that case did not fall within
one. Id. at 408–16.12
As Buccaneer has argued all along, however, this general right to refuse to deal
with competitors applies only to single, not multiple, actors—to unilateral, not concerted
action. See generally Copperweld, 467 U.S. at 761–77 (discussing at length the
fundamental differences between the Sherman Act’s treatment of unilateral conduct and
12
We take issue with Defendants’ characterization of Trinko as an essential
facilities case. The Court merely acknowledged that the Second Circuit had relied on the
doctrine in the underlying appeal and concluded that its decision “would be unchanged
even if we considered to be established law the ‘essential facilities’ doctrine crafted by
some lower courts.” Id. at 410–11. The Court disclaimed ever having recognized the
essential facilities doctrine and found “no need either to recognize it or to repudiate it” in
that case. Id. at 411.
16
its treatment of concerted conduct). The Trinko Court acknowledged that distinction
when it rejected the plaintiff’s reliance on two early concerted-refusal-to-deal cases—
Associated Press v. United States, 326 U.S. 1 (1945), and United States v. Terminal
Railroad Ass’n of St. Louis, 224 U.S. 383 (1912)—because “[t]hese cases involved
concerted action, which presents greater anticompetitive concerns.” Trinko, 540 U.S. at410 n.3. So, contrary to Defendants’ insistence, Trinko simply does not speak to claims,
like those here, alleging concerted refusals to deal.13
Having disposed of the Trinko issues,14 we still are left with an assortment of
competing arguments concerning the essential facilities doctrine. The parties’ contentions
on this point indirectly raise a legitimate question as to the doctrine’s application in the
context of § 1 claims.15 But we need not reach that question here. Even assuming the
13
Consistent with this conclusion, each of the five cases in which we have
referenced Trinko involved § 2 claims alleging anticompetitive conduct by a single actor.
See SOLIDFX, LLC v. Jeppesen Sanderson, Inc., 841 F.3d 827 (10th Cir. 2016); JetAway
Aviation, LLC v. Bd. of Cty. Comm’rs, 754 F.3d 824 (10th Cir. 2014) (per curiam);
Novell, Inc. v. Microsoft Corp., 731 F.3d 1064 (10th Cir. 2013); Four Corners
Nephrology Assocs., P.C. v. Mercy Med. Ctr. of Durango, 582 F.3d 1216 (10th Cir.
2009); Christy Sports, LLC v. Deer Valley Resort Co., 555 F.3d 1188 (10th Cir. 2009).
14
Buccaneer also argues that the district court erroneously relied on Trinko, but
we conclude that this reliance, if erroneous, is immaterial. To the extent the district court
applied Trinko’s “right to refuse to deal” rule, it did so in deeming lawful Defendants’
alleged decision to exclude Buccaneer from the Bull Mountain Pipeline. But Defendants’
actions toward Buccaneer vis-à-vis the Bull Mountain Pipeline are not at issue here. As
Buccaneer concedes, its “claims [a]re based on Defendant’s [sic] refusal to allow
Buccaneer reasonable access to the Ragged Mountain Gathering System.” Thus,
exclusion from the RM System, not the Bull Mountain Pipeline, is the conduct that
matters. And in addressing that conduct, the district court does not appear to have
invoked Trinko. As a result, any alleged error by the district court in applying Trinko is
inconsequential to Buccaneer’s claims on appeal.
15
For example, although the essential facilities doctrine is most often applied in
the context of a claim under § 2, see generally 3B Phillip E. Areeda & Herbert
17
possibility of § 1 liability for a concerted-refusal-to-deal premised on the essential
facilities doctrine, and assuming Buccaneer has correctly identified the contours of such a
claim, we reject Buccaneer’s claim on the record here. Buccaneer concedes that to prevail
on such a claim, it must prove the second traditional element of the essential facilities
doctrine: “a competitor’s inability to duplicate the facility.” Pittsburg Cty., 358 F.3d at
721 (internal quotation marks omitted). And here, despite its strenuous arguments to the
contrary, Buccaneer has plainly failed to do so. Buccaneer relies exclusively on evidence
of the costs and other difficulties associated with constructing the Bull Mountain
Pipeline; however, the relevant facility in this case is the significantly smaller RM
System. While duplicating even the lesser RM System may have been difficult, we
cannot conclude, in the absence of any evidence on the matter, that Buccaneer proved its
inability to do so.
With these issues resolved, we turn now to the central question of whether
Buccaneer has adequately established its § 1 claim under the rule of reason.
Hovenkamp, Antitrust Law ¶¶ 770–74, at 195–295 (4th ed. 2015); 13 Phillip E. Areeda &
Herbert Hovenkamp, Antitrust Law ¶ 2221c–d, at 407–11 (3d ed. 2012); see also, e.g.,
Pittsburg Cty., 358 F.3d at 721; Aspen Highlands Skiing Corp. v. Aspen Skiing Co., 738
F.2d 1509, 1519–21 (10th Cir. 1984), aff’d 472 U.S. 585 (1985), and although its
elements are more consistent with § 2, see Pittsburg Cty., 358 F.3d at 721 (listing the first
element as “control of the essential facility by a monopolist” (emphasis added)), we have
stated that the doctrine originated under § 1, McKenzie v. Mercy Hosp., 854 F.2d 365,
369 (10th Cir. 1988), overruled in part on other grounds by Systemcare, Inc. v. Wang
Labs. Corp., 117 F.3d 1137 (10th Cir. 1997), and on one occasion have applied it in the
context of a § 1 claim, Gregory, 448 F.3d at 1204.
18
2. Buccaneer Has Not Adequately Established Its Claim Under the Rule of Reason
The rule of reason calls for a holistic assessment of the parties’ evidence aimed,
ultimately, at discerning whether a challenged practice restrains trade unreasonably and
so should be prohibited under § 1 of the Sherman Act. See Leegin Creative Leather
Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 885 (2007). “Courts have imposed a consistent
structure on [this] analysis by casting it in terms of shifting burdens of proof.” Law v.
NCAA, 134 F.3d 1010, 1019 (10th Cir. 1998). Thus, under the rule of reason:
The plaintiff bears the initial burden of showing that an agreement had a
substantially adverse effect on competition. If the plaintiff meets this
burden, the burden shifts to the defendant to come forward with evidence of
the procompetitive virtues of the alleged wrongful conduct. If the defendant
is able to demonstrate procompetitive effects, the plaintiff then must prove
that the challenged conduct is not reasonably necessary to achieve the
legitimate objectives or that those objectives can be achieved in a
substantially less restrictive manner. Ultimately, if these steps are met, the
harms and benefits must be weighed against each other in order to judge
whether the challenged behavior is, on balance, reasonable.
Gregory, 448 F.3d at 1205 (quoting Law, 134 F.3d at 1019). To carry its initial burden, a
plaintiff “cannot simply show that the challenged action adversely affected [its]
business.” Id. Instead, because the antitrust laws are concerned with effects on consumers
rather than competitors, the plaintiff must show “an adverse effect on competition in
general.” Id.; see also SCFC ILC, 36 F.3d at 963 (“[A] practice ultimately judged
anticompetitive is one which harms competition, not a particular competitor.”).
There are several ways to establish that an alleged restraint has or is likely to have
a significant anticompetitive effect. See Law, 134 F.3d at 1019; Reazin v. Blue Cross &
Blue Shield of Kansas, Inc., 899 F.2d 951, 966, 968 & n.24 (10th Cir. 1990). First, under
19
an abbreviated, “quick look” rule-of-reason analysis, courts sometimes simply assume the
existence of anticompetitive effect where the conduct at issue amounts to a “naked” and
effective restraint on price or output that carries “obvious” anticompetitive
consequences.16 Cal. Dental Ass’n v. FTC, 526 U.S. 756, 769–70 (1999); Law, 134 F.3d
at 1019–20. Under quick-look analysis, the burden in effect immediately shifts to the
defendant to demonstrate countervailing procompetitive effects. See N. Tex. Specialty
Physicians v. FTC, 528 F.3d 346, 362 (5th Cir. 2008) (citing Cal. Dental, 526 U.S. at 775
n.12). Second, a plaintiff may directly establish anticompetitive effect by showing, for
example, that the defendant has actually reduced output or raised prices. See FTC v. Ind.
Fed’n of Dentists, 476 U.S. 447, 460–61 (1986); Law, 134 F.3d at 1019. And third, a
plaintiff may attempt to indirectly establish anticompetitive effect “by defining a relevant
product and geographic market” and showing the defendant possesses market power in
that market. Novell, Inc. v. Microsoft Corp., 731 F.3d 1064, 1071 (10th Cir. 2013)
(addressing § 2 claim); cf. SCFC ILC, 36 F.3d at 965–66 (assessing market power as
indirect proof of anticompetitive effect under § 1 rule-of-reason inquiry and noting
similarities between § 1 and § 2 market-power analyses).
16
Although the Supreme Court traditionally has framed quick-look analysis as one
of the several possible methods for applying the rule of reason, see, e.g., Cal. Dental
Ass’n v. FTC, 526 U.S. 756, 770 (1999); see also Am. Needle, Inc. v. Nat’l Football
League, 560 U.S. 183, 203 (2010) (stating that the rule of reason “may not require a
detailed analysis; it can sometimes be applied in the twinkling of an eye,” which is
language used synonymously with “quick look” (internal quotation marks omitted)), it
occasionally has spoken of quick-look analysis and rule-of-reason analysis as distinct
concepts, see, e.g., FTC v. Actavis, Inc., 133 S. Ct. 2223, 2237 (2013). While we are not
convinced the latter instances signal a departure from the traditional framing, even if they
do, it would not affect the outcome of our analysis here.
20
In its opening brief, Buccaneer begins its analysis by referencing each of these
three methods and claims it sufficiently established that Defendants’ conduct harmed
competition in two separate spheres: the market for upstream production rights, and the
market for downstream gas sales. But Buccaneer has failed to meet its burden under any
of these methods.
As an initial matter, the quick-look method can easily be dismissed. Although
Buccaneer references quick-look analysis as one way in which harm to competition can
be established, it does not rely on or further analyze this method in its argument. This
implicit forfeiture makes sense, given that the market effects of Buccaneer’s inability to
access the RM System are far from “obvious.” See Cal. Dental Ass’n, 526 U.S. at 771.
Indeed, as we discuss in more detail below, there is no evidence of any effect on either of
the “markets” Buccaneer has identified, let alone an anticompetitive one. This case
therefore stands in stark contrast to the only case in which this court has found a quick-
look analysis appropriate: where a horizontal price-fixing agreement patently aimed at
reducing the salaries paid to college basketball coaches actually succeeded in reducing
salaries. Law, 134 F.3d at 1019–20. By contrast, Defendants’ conduct here “might
plausibly be thought to have . . . no effect at all on competition,” thus rendering quick-
look analysis inappropriate. See Cal. Dental Ass’n, 526 U.S at 771; cf. Craftsmen
Limousine, Inc. v. Ford Motor Co., 491 F.3d 380, 387 (8th Cir. 2007) (describing quick-
21
look analysis as “exceptional” and “reserved for the most patently anticompetitive
restraints”).17
Next, we can just as quickly reject Buccaneer’s claim that it presented direct
evidence of actual anticompetitive effects. As for the supposed production rights market,
and assuming for the moment that this is a legally sufficient antitrust market, Buccaneer
has not presented any evidence that fewer production rights have been acquired in the
RM Area or that Defendants’ alleged monopsonist position has allowed them to pay less-
than-competitive prices for such rights. Similarly, as for the gas-sales market, Buccaneer
has shown neither an actual increase in the price SourceGas paid for natural gas nor an
actual reduction in the amount of natural gas sold. To the contrary, Buccaneer’s own
expert report shows that gas output through the RM System actually increased in the
years following Buccaneer’s exclusion in 2008. Thus, Buccaneer has not directly
established the requisite harm to competition. See Levine v. Cent. Fla. Med. Affiliates,
Inc., 72 F.3d 1538, 1551 (11th Cir. 1996) (rejecting plaintiff’s claim that defendants’
concerted refusal to deal had actual anticompetitive effects where plaintiff “failed to
17
Furthermore, we agree with our Sixth Circuit colleagues’ reasoning in
Worldwide Baseball & Sport Tours, Inc. v. NCAA, that quick-look analysis is generally
unsuited for cases in which the relevant market is “neither obvious nor undisputed.” 388
F.3d 955, 961 (6th Cir. 2004); see also id. (“Far from being a case in which ‘an observer
with even a rudimentary understanding of economics could conclude that the
arrangements in question would have an anticompetitive effect on consumers and
markets,’ [Cal. Dental Ass’n, 526 U.S. at 770] (emphasis added), here the relevant
market is not readily apparent and the Plaintiffs have failed to adequately define a
relevant market, thereby making it impossible to assess the effect of [the challenged
practice] on customers rather than merely on competitors.”). As we explain below, this is
precisely such a case.
22
support with any evidence his conclusory assertion that the defendants’ behavior actually
had the effect of restricting competition”).
That leaves us to consider whether Buccaneer has indirectly shown harm to
competition by establishing that Defendants “possess[] market power in the relevant
market where the alleged anticompetitive activity occurs.” SCFC ILC, 36 F.3d at 965.
Before a plaintiff can demonstrate market power, it must satisfy its burden of identifying
a relevant market in terms of both product and geographic area. Campfield v. State Farm
Mut. Auto. Ins. Co., 532 F.3d 1111, 1118 (10th Cir. 2008) (“Because the relevant market
provides the framework against which economic power can be measured, defining the
product and geographic markets is a threshold requirement.” (internal quotation marks
omitted)). The product market consists of products “found to be sufficiently
substitutable,” and the geographic market encompasses “the terrain in which competition
takes place.” Novell, 731 F.3d at 1071. Once a legally sufficient market has been
identified, the plaintiff must then show market power, which entails demonstrating that
the defendant has “either power to control prices or the power to exclude competition.”
Reazin, 899 F.2d at 966 (internal quotation marks omitted). This the plaintiff can do by
“pointing to the defendant’s share of [the relevant] market and perhaps barriers to entry.”
See Novell, 731 F.3d at 1071.
Applying this framework here, we assess Buccaneer’s proposed markets
separately.
23
a. Market for Upstream Production Rights
i. The Relevant Market
Buccaneer asserts that, within its so-called market for upstream production rights,
the relevant product is “production rights” and the relevant geographic area is the RM
Area. We conclude Buccaneer has not adequately defined either one.
1) Product Market
The relevant product market in any given case “is composed of products that have
reasonable interchangeability for the purposes for which they are produced—price, use
and qualities considered.” SCFC ILC, 36 F.3d at 966 (internal quotation marks omitted).
A plaintiff cannot arbitrarily choose the product market relevant to its claims; instead, the
plaintiff must justify any proposed market by defining it “with reference to the rule of
reasonable interchangeability and cross-elasticity of demand.” Campfield, 532 F.3d at
1118 (internal quotation marks omitted). Interchangeability and cross-elasticity are
“substantially synonymous.” Telecor Commc’ns, Inc. v. Sw. Bell Tel. Co., 305 F.3d 1124,
1131 (10th Cir. 2002). If two products share a high cross-elasticity of demand—in that an
increase in the price of one product causes consumers to switch to the other, and vice
versa—then those products likely are interchangeable and may properly be considered
part of the same product market. See Lenox MacLaren Surgical Corp. v. Medtronic, Inc.,
762 F.3d 1114, 1120 (10th Cir. 2014).
Here, Buccaneer has never clearly defined “production rights,” and Defendants
assert the term has no uniform meaning. Buccaneer’s expert, Dr. Dwyer, similarly failed
to define “production rights” in the joint expert report and could not provide a clear
24
definition when asked to do so at his deposition. Neither could Buccaneer’s CEO, Tony
Gale. Indeed, Mr. Gale thought the term might include “[1] a working interest or [2] a
net-revenue interest, possibly [3] a net profits or [4] an override interest, [5] an option to
buy. [6] Anything that would give you the right to produce that well. [7] A lease. You
know, [8] fee ownership of minerals I would think would be a production right.” The
district court, despite its efforts, was able to discern no meaningful definition other than
“mineral leases (or mineral interests) that provide the right to extract gas production.”
In its brief, Buccaneer focuses exclusively on the district court’s decision to divide
production rights into two separate markets—one for new leases, one for existing
leases—and argues this segregation was erroneous. But Buccaneer still does not offer its
own definition of the product market for production rights. Regardless of any potential
error on the district court’s part in its bifurcated treatment of new and existing leases, the
fact remains that Buccaneer bore the burden of defining a product market in terms of
reasonable interchangeability and cross-elasticity of demand. Lenox, 762 F.3d at 1120.
Buccaneer plainly understands this burden, as the central thrust of its argument is that the
district court’s definition cannot stand because it was not explained in those terms.
Critically, however, Buccaneer does not argue new and existing leases are substitute
products or conduct its own cross-elasticity analysis to demonstrate the district court’s
approach is wrong. It merely asserts the court’s definition was inadequately supported
and thus cannot stand. But this issue was for Buccaneer to resolve in the first instance,
and the district court’s independent foray into market definition does not absolve
Buccaneer of that burden. See Campfield, 532 F.3d at 1118. And the cases Buccaneer
25
relies upon, in which this court reversed trial courts’ market definitions as inadequately
supported by interchangeability and cross-elasticity principles, do not suggest otherwise.
See Telecor, 305 F.3d at 1131–32; Westman Comm’n Co. v. Hobart Int’l, Inc., 796 F.2d
1216, 1221 (10th Cir. 1986). In fact, Telecor squarely cuts against Buccaneer’s position.
See 305 F.3d at 1131–32 (holding district court erred in granting summary judgment for
plaintiff as to scope of relevant product market because plaintiff had not alleged sufficient
facts to satisfy its burden of showing products were interchangeable).
Finally, even if we could infer from the record that Buccaneer considers all leases
to be “production rights,” there is still the question of whether “mineral interests”
(presumably, fee ownership of minerals) are also included, to say nothing of the
multifarious other items Mr. Gale listed in his deposition testimony. By arguing only that
the district court’s definition is wrong, but never offering a definition it considers to be
right, Buccaneer left that question open and, as a result, impermissibly shirked its
“obligat[ion] to make an affirmative showing of [its] proposed relevant market.” Telecor,
305 F.3d at 1131.
2) Geographic Market
We also conclude that Buccaneer failed to adequately establish the relevant
geographic market. “The geographic market is the narrowest market which is wide
enough so that products from adjacent areas cannot compete on substantial parity with
those included in the market.” Westman, 796 F.2d at 1222 (ellipsis and internal quotation
marks omitted). Buccaneer asserts the RM Area is the relevant geographic market; but as
26
the district court noted, “[t]he Ragged Mountain Area has not been defined
geographically with any precision.”
In Buccaneer’s initial complaint, the RM Area was “the Ragged Mountain Field
and adjacent areas in Delta and Gunnison Counties, Colorado”; in its amended complaint,
the RM Area was “that area encompassed within Townships 10 South to 12 South and
Ranges 89 West to 91 West”; at the hearing below, the RM Area was “essentially
Gunnison County and part of Delta County, Colorado”; and in its reply brief, the RM
Area is an area that “coincide[s] with the area served by Defendants’ pipelines.”
Although the record contains a map entitled “Ragged Mountain Area,” it does not include
any semblance of a geographic boundary line. Rather, it simply depicts the relative
locations of the RM System, the Bull Mountain Pipeline and its gathering system, and
several other gathering systems. But the record demonstrates that producers in the area
construct connector lines from their wells to these gathering systems in order to transport
gas; so, arguably the geographic “production rights” market could include all of the
surrounding land on which viable “production rights” exist and from which gas wells
reasonably could be interconnected to the RM System. Neither the map nor any other
evidence cited by Buccaneer even loosely specifies the outer boundaries of such land.
In short, even if Buccaneer had established a relevant product market for
“production rights,” it failed to adequately define the RM Area and thus failed to carry its
burden of establishing the relevant geographic market for such production rights. See
SCFC ILC, 36 F.3d at 966. Buccaneer offered no definition of the RM Area in its
opening brief and, in its reply brief, merely asserted that the RM Area “coincided with
27
the area served by Defendants’ pipelines”—the larger of which, as noted already, is not
relevant to Buccaneer’s claims—and pointed to a map from which no boundaries can be
discerned. This does not suffice.
Because Buccaneer failed to establish the product and geographic boundaries of its
supposed upstream market for production rights, the district court did not err in granting
summary judgment for Defendants on Buccaneer’s § 1 claim to the extent that claim was
based on harm to competition for production rights. See Campfield, 532 F.3d at 1118(“Failure to allege a legally sufficient market is cause for dismissal of the claim.”).
ii. Market Power
Moreover, even if Buccaneer had established a relevant market for upstream
production rights in the RM Area, it has not shown Defendants possessed market power
there.
To properly frame our inquiry, it is important to note initially that the harm
Buccaneer alleges in this market implicates a monopsony scenario. As we have
explained,
A monopsony is different from the usual form of monopolistic control in
which suppliers utilize market power to restrict output and thereby raise
prices. In a monopsony, the buyers have market power to decrease market
demand for a product and thereby lower prices. Monopsonistic practices by
buyers are included within the practices prohibited by the Sherman Act.
When considering market power in a monopsony situation, the market is
not the market of competing sellers but of competing buyers.
Campfield, 532 F.3d at 1118 (citations and internal quotation marks omitted). The same
general framework for assessing market power applies to monopsony and monopoly
situations alike. See Todd v. Exxon Corp., 275 F.3d 191, 199–201, 206–08 (2d Cir. 2001);
28
see also Telecor, 305 F.3d at 1134–35 (discussing Todd favorably). Here, Buccaneer
alleges Defendants’ restraint on transportation allows them to exercise monopsonistic
power in the market for production rights—that is, reduce the number of competing
buyers of production rights to such a level that Defendants can insist on less-than-
competitive prices when purchasing such rights. Thus, the market in which Defendants
allegedly exercise market power is the market of competing buyers of production rights.
See Campfield, 532 F.3d at 1118.
“To demonstrate ‘market power,’ a plaintiff may show evidence of either ‘power
to control prices’ or ‘the power to exclude competition.’” Reazin, 899 F.2d at 966(quoting Westman, 796 F.2d at 1225 n.3). “Power over price and power over competition
may, in turn, depend on various market characteristics . . . .” Id. at 967. As a result,
appraising market power typically necessitates an examination of market share, barriers
to entry, the number of competitors in the market, market trends, and other relevant
considerations. See Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 894 (10th
Cir. 1991). Of these pertinent factors, market share—i.e., percentage of the relevant
market—is a focal point. See id. Although we have long recognized that “market share
alone is insufficient to establish market power,” Bright v. Moss Ambulance Serv., Inc.,
824 F.2d 819, 824 (10th Cir. 1987) (emphasis added), we have also noted that “it must be
shown how much of the relevant market a defendant controls if market power is to be
evaluated,” Bacchus, 939 F.2d at 894 (citation omitted), and that “the absence of market
share may give rise to a presumption that market power does not exist,” Cohlmia v. St.
John Med. Ctr., 693 F.3d 1269, 1282 (10th Cir. 2012).
29
Applying these considerations here, it is evident Buccaneer has not presented
evidence from which a jury could find that Defendants possessed market power in the
market for production rights. First and foremost, Buccaneer did not demonstrate
Defendants’ market share. Although Buccaneer asserts that “Defendants achieved a
significant concentration of production rights in the Ragged Mountain Area, and no other
producer permanently entered the market for production rights in the Area since
Defendants acquired the Ragged Mountain Gathering System,” it neither expresses
Defendants’ alleged “significant concentration” as a percentage of the market, nor, for
that matter, supports this assertion with any relevant evidence. Buccaneer’s expert based
its conclusion that Defendants dominate the market for production rights on statistical
evidence showing that, from 2008 to 2013, Defendants’ wells accounted for almost all of
the natural gas production in Gunnison County. This may be true, and it may even be the
result of some underlying competitive defect. At bottom, however, Defendants’ share of
production tells us nothing definitive about Defendants’ share of production rights.
As far as the market for the latter product is concerned, Buccaneer presented no
evidence from which Defendants’ market share reasonably can be discerned. Buccaneer
failed to investigate the purchase and sale of leases in the RM Area—not to mention
other mineral interests—since Defendants took over the RM System in 2005, and thus
painted no picture of the relevant players in the market for purchasing production rights.
There is no evidence, for example, of the total number of production rights in the RM
Area or Defendants’ proportionate share of them; nor is there evidence showing the
number of production rights put on the market since Defendants took over the RM
30
System and the percentage of those rights that were purchased by Defendants. In fact, the
evidence shows that other entities competed with, and even twice outbid, Defendants in
the purchase of lease rights in 2010. It may very well be, as Buccaneer claims, that
Defendants’ evidence of “[o]ne entrant to a market fails to establish lack of injury to
competition.” But, under the first prong of the rule of reason, Defendants were not
responsible for showing a “lack of injury”; rather, Buccaneer was responsible for
showing the presence of it. Reazin, 899 F.2d at 960. Simply put, Buccaneer did not
adequately examine the market in which it asserts Defendants harmed competition and
therefore cannot establish Defendants’ share of that market.
Moreover, Buccaneer did not present evidence on “the number and strength of
other competitors” in the market for purchasing production rights in the RM Area.
Bacchus, 939 F.2d at 894. Nor did it reference pertinent evidence of “market trends.” Id.And the question of whether it established the existence of barriers to entry is debatable.
On the one hand, it arguably can be inferred that Defendants’ alleged refusal to share the
only transportation infrastructure in the RM Area presented a significant barrier to entry
into the market for production rights. Buccaneer set forth evidence of the high cost,
numerous regulatory permits and approvals, and delays involved in building a separate
pipeline system. While these facts related to the larger Bull Mountain Pipeline, rather
than the RM System, they likely support an inference that a new entrant would face an
entry barrier consisting of the cost of constructing a viable transportation system of its
own. And Buccaneer is correct that in this context, the fact that Defendants were outbid
31
in 2010 is not necessarily significant. See Lenox, 762 F.3d at 1125 (“A single
competitor’s breakthrough does not preclude a finding of significant barriers to entry.”)
But on the other hand, casting the need to build a pipeline system as a barrier to
entry assumes that a lack of transportation would keep companies from buying
production rights in the RM Area. While that assumption may make sense in theory, it is
by no means guaranteed in reality. It is possible, for instance, that a company might
compete to purchase such production rights, intending to defer any decision on pipeline-
construction and actual production until it could properly evaluate the reserves covered
by the rights, the company’s other capital needs, market conditions, and myriad other
factors that weigh on whether and when to move forward with production. And while
evidence that only one firm entered the production rights market might weigh against this
possibility, see id., that is not what we have here. Although Defendants pointed to only
one example of entry, Buccaneer did not show there were no others, and it was
Buccaneer that bore the burden of proof. Without some evidence of transactions for
production rights on a market-wide basis, it is not possible to meaningfully assess
whether other companies’ lack of transportation infrastructure should be considered a
barrier to entry into the production rights market. And in any event, even assuming
Buccaneer established significant barriers to entry, Buccaneer cites no case (and we have
not found one) in which a court found sufficient market power on the basis of barriers
alone.
For these reasons, we conclude that Buccaneer failed to carry its burden of
demonstrating market power and therefore also failed to establish anticompetitive effect
32
in the alleged market for production rights. See SCFC ILC, 36 F.3d at 965. It follows that,
at least to the extent Buccaneer’s § 1 claim was predicated on harm to competition in the
market for production rights, the district court did not err in granting summary judgment
for Defendants.
We now apply this same analytical framework to assess Buccaneer’s additional
allegation of harm to competition in the market for downstream gas sales.
b. Market for Downstream Gas Sales
i. The Relevant Market
The relevant product here—natural gas—is straightforward and undisputed. But
Buccaneer’s proposed geographic market is byzantine and contested. The district court
devoted little time to the issue of anticompetitive effect in the market for gas sales and
appears to have assumed the relevant geographic market was the Rocky Mountain
Natural Gas Pipeline (“Rocky Mountain Pipeline”) generally. Buccaneer, for its part,
simply characterizes the relevant market as “the market for downstream sales of gas” and
does not specifically address the contours of that market in terms of the considerations
relevant to rule-of-reason analysis.
Treating the Rocky Mountain Pipeline as the relevant geographic market seems
logical enough, as it was the pipeline to which the RM System was connected and the
place where gas from the RM System was sold. But that is not how Buccaneer’s expert,
Dr. Harris, chose to define it. Rather, Dr. Harris’s portion of the joint report—and,
importantly, the market-share figure Buccaneer derives from it—was based on a
substantially narrower definition of the relevant market. Dr. Harris’s market definition is
33
limited in place to a comparatively small segment of the Rocky Mountain Pipeline, and in
time to “peak” winter periods when capacity on the Rocky Mountain Pipeline is
constrained. Defendants take issue with this narrow definition, alleging various lapses in
Dr. Harris’s analysis and characterizing “peak periods” as “undefined.”
To be sure, the evidence suggests the gas-sales market on the Rocky Mountain
Pipeline differed between on-peak (constrained) conditions and off-peak (unconstrained)
conditions. It is undisputed that, in off-peak conditions, gas from the RM System
competed with gas from numerous other sellers throughout the Rocky Mountain Pipeline
and even in broader interstate markets. But Buccaneer’s evidence shows that during on-
peak conditions, RM System gas was captive to a relatively small stretch of the Rocky
Mountain Pipeline located between the Collbran compressor station (to the west of the
RM System input) and the Crystal River compressor station (to the east of the RM
System input). This captivity occurred because capacity constraints forced gas to flow
only from west to east from the Collbran station, meaning that RM System gas
necessarily flowed east and could serve only two specific demand areas. The evidence
further indicates that SourceGas, the dominant gas purchaser on the Rocky Mountain
Pipeline, was unable to meet its peak demand in these two areas using gas from the
Collbran station and the nearby Wolf Creek storage facility (which was the only storage
facility able to serve this confined segment during peak periods), and that from 2006 to
2014, RM System gas supplied 14–31 percent of that peak demand. And while
Defendants claim Buccaneer has not defined the “peak period,” Dr. Harris testified it is
the winter, specifically December through February and “perhaps” March.
34
But focusing on this narrow glimpse of the market is inadequate. First, a
“constrained Rocky Mountain Pipeline” and an “unconstrained Rocky Mountain
Pipeline” do not represent two separate “geographic markets” for the sale of gas
transported through the RM System. The Rocky Mountain Pipeline is a single immovable
structure, and RM System gas was sold there year-round through one interconnection—in
other words, the same product was transported to the same place at all times. Moreover,
Buccaneer admits that, during most of the year (i.e., off-peak periods), the Rocky
Mountain Pipeline was unconstrained and gas from the RM System competed pipeline-
wide. Buccaneer cites no legal (or other) authority to support the notion that a fragment
of a geographic market can amount to a distinct geographic market in the presence of
certain ephemeral (if recurrent) economic conditions, much less authority that supports
focusing on that narrower market to the exclusion of the broader, prevailing market. To
the contrary, authority from another federal circuit suggests the relevant geographic
market is the market in which a defendant most often operates. See Little Rock
Cardiology Clinic PA v. Baptist Health, 591 F.3d 591, 599 (8th Cir. 2009) (“An antitrust
plaintiff must allege a geographic market in which the defendant supplier draws a
sufficiently large percentage of its business. This . . . prevent[s] antitrust plaintiffs from
delineating arbitrarily narrow geographic markets.”).
Although we disapprove of Dr. Harris’s artificially narrow market definition, we
would reject Buccaneer’s claim of competitive harm to the downstream market in any
event. That is, even if we accept Dr. Harris’s constrained segment as the relevant
geographic market for downstream gas sales, we nevertheless conclude Buccaneer did
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not set forth facts from which a jury could find that Defendants possessed market power
in that market.
ii. Market Power
Buccaneer’s only evidence of market power in the narrowly-defined constrained
market is market share. As noted already, however, “market share alone is insufficient to
establish market power.” Bacchus, 939 F.2d at 894 (emphasis added) (citation omitted).
Buccaneer points to no evidence concerning the other considerations relevant to market
power—for example, barriers to entry and other competitors. Id. And Dr. Harris did not
discuss these other considerations in the joint expert report. Buccaneer presented no
evidence of the difficulties (or lack thereof) that other gas producers would have faced in
interconnecting with the supposedly relevant segment of the Rocky Mountain Pipeline or
otherwise getting gas to the two demand areas Defendants allegedly supplied during the
peak winter months. Nor did Buccaneer actually assert (let alone substantiate) that no
other gas sellers operated in that segment. It was Buccaneer’s burden to present evidence
on these points. Reazin, 899 F.2d at 966–67.
Furthermore, Buccaneer (and Dr. Harris) failed to address the issue of market-
power durability. See Lenox, 762 F.3d at 1124; Reazin, 899 F.2d at 968 (“[M]arket
power, to be meaningful for antitrust purposes, must be durable.”). Here, Defendants
were captive to SourceGas in a constrained market. Although this is likely not enough to
conclusively establish Defendants had no control over the price at which they sold their
gas, it significantly diminishes the possibility that they could maintain market power even
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were it initially obtained. If Defendants raised their prices and SourceGas balked,
Defendants had nowhere else to turn.
Finally, Buccaneer’s market-share figure is itself questionable. Dr. Harris arrived
at his 14–31 percent calculation by combining GEC’s and SG’s gas sales and thus
necessarily assumed that these entities do not compete in the market for downstream gas
sales. But Dr. Harris offered no justification for that critical assumption, and Defendants’
evidence suggests it is invalid. Under these circumstances, it is likely that each
defendant’s share of the constrained market actually was significantly less than the 14–31
percent indicated by Dr. Harris and that Defendants competed with each other on price.
For these reasons, even if Buccaneer had adequately established the relevant
market for downstream gas sales, it did not carry its burden of showing Defendants
possessed market power in that market. Buccaneer therefore cannot satisfy its related
burden of demonstrating significant anticompetitive effect under the rule of reason, and
the district court did not err in granting summary judgment in Defendants’ favor. In light
of this disposition, Buccaneer’s remaining arguments are irrelevant and we do not
address them.18
18
Buccaneer contends, for example, that Defendants mischaracterize our
precedent discussing the minimum market-share percentage necessary to establish market
power and that, contrary to the district court’s conclusion, there is a disputed issue of
material fact as to whether Defendants were “price takers” in the market for downstream
gas sales and for that reason lacked any ability to raise gas prices. Even if we agreed on
both points, it would not change our conclusion that Buccaneer failed to carry its burden
of coming forward with evidence from which a jury could find Defendants possessed
market power in the gas-sales market.
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In summary, to satisfy its initial burden of showing anticompetitive effect under
the rule of reason, Buccaneer needed to establish that Defendants possessed market
power in a relevant market. Buccaneer failed to carry that subsidiary burden with respect
to both of its asserted anticompetitive effects. First, it failed to adequately identify the
product market and geographic market for upstream production rights. And without that
definition, it is impossible to determine whether Defendants possessed the requisite
market power. Second, Buccaneer has inappropriately narrowed the geographic market
for downstream gas sales to a three-to-four-month period in a small segment of the Rocky
Mountain Pipeline under capacity constraints. It also has made no effort to identify
barriers to entry into that market or to discuss any other market-power-related
considerations besides market share, and it has assumed without evidentiary support that
GEC and SG do not compete with each other for gas sales. Accordingly, Buccaneer has
not presented facts from which a jury could find harm to competition in a defined market
and therefore has not established its § 1 claim. The district court’s disposal of that claim
on summary judgment was proper.
B. Buccaneer’s § 2 Conspiracy Claim
Section 2 of the Sherman Act makes it illegal to “monopolize, or attempt to
monopolize, or combine or conspire with any other person or persons, to monopolize any
part of the trade or commerce among the several States.” 15 U.S.C. § 2. We clarified
recently in Auraria Student Housing at the Regency, LLC v. Campus Village Apartments,
LLC that a claim of conspiracy to monopolize under § 2, like a claim under § 1, requires
proof of a relevant antitrust market. 843 F.3d 1225, 1232–33 (10th Cir. 2016). As the
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foregoing discussion demonstrates, Buccaneer has not adequately established a relevant
market in this case. Buccaneer’s § 2 conspiracy claim therefore fails for the same reasons
as its § 1 claim. See id.; see also Campfield v. State Farm Mut. Auto. Ins. Co., 532 F.3d
1111, 1119 (10th Cir. 2008) (“By failing to allege an appropriate market, [the plaintiff]
has failed to state a claim under § 2 of the Sherman Act.”).
IV. CONCLUSION
Because Buccaneer did not present evidence from which a jury could conclude
that Defendants’ conduct actually or potentially harmed competition in a relevant
antitrust market, Buccaneer’s claims under § 1 and § 2 of the Sherman Act must fail.
Accordingly, we AFFIRM the district court’s order granting summary judgment in favor
of Defendants on that basis.
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