District Court Dismisses Michigan’s Hail Mary Antitrust Suit Against Fossil Fuel Companies

Yesterday, in Michigan v. BP, a federal district court in Michigan dismissed the state’s ambitious antitrust suit against fossil fuel companies alleging that they had conspired to suppress alternative energy sources resulting, among other things, in higher prices for Michigan consumers. While the same court had previously rejected the Trump Administration’s attempt to preempt Michigan’s suit, once confronted with the merits of the suit it found Michigan’s claims wanting.

Both decisions seem correct to me. There was no legal basis upon which to prevent Michigan from filing suit against fossil fuel companies, but the suit that Michigan ultimately filed deserved to fail on its own terms. Michigan’s theory was clever, but perhaps too clever to survive any meaningful legal scrutiny. As the Court explained, “Michigan seeks an antitrust remedy for many harms that do not qualify as
antitrust injuries,” and that’s not something the antitrust laws allow.

Here is a summary from yesterday’s decision:

Defendants BP, Chevron, Exxon, and Shell (collectively, the Fossil Fuel Defendants) are four of the largest energy companies in the world. Defendant American Petroleum Institute (API) is the energy industry’s largest trade association. The People of the State of Michigan (Michigan) filed this antitrust action alleging that in the 1970s, the Fossil Fuel Defendants realized that renewable energies would replace fossil fuels under normal market conditions. So, Michigan claims, the Fossil Fuel Defendants agreed, through API, to suppress renewable energies to maintain supra-competitive prices in the transportation and primary energy markets. According to Michigan, this conspiracy manifested itself in many ways, from suppressing renewable energy technology to hacking nonprofit climate activism organizations. And the conspiracy allegedly culminated in many harms to Michigan and its residents: among others, overpriced energy, a lack of options in the energy market, increased insurance premiums for households and depressing home values, and increased costs to implement measures mitigating the negative externalities of fossil fuel use. Michigan asks for treble damages for these injuries and an injunction to prevent future injuries. Michigan additionally requests the Court to impose civil penalties on Defendants and order them to disgorge the profits they earned from the alleged conspiracy.

Now pending before the Court are Defendants’ Joint Motion to Dismiss (ECF No. 30) and API’s Motion to Dismiss (ECF No. 32). The Court concludes that even if Michigan has adequately pled a conspiracy, the antitrust laws protect against none of the injuries for which Michigan seeks a remedy, except for overcharges for energy. Moreover, the distance is too great between the alleged conspiracy and Michigan’s and its residents’ overcharges to find that the conspiracy proximately caused the overcharges. The Court therefore holds that Michigan lacks antitrust standing to pursue its federal antitrust claims.

And from later in the opinion:

Michigan has alleged just one antitrust injury—overcharges for transportation and primary energy—and Illinois Brick bars Michigan from recovering damages as indirect purchasers under federal law. Nor can Michigan recover damages for the direct purchases it and its residents made from Defendants or enjoin them from continuing any alleged conspiracy because Michigan fails to plausibly plead that this conspiracy proximately caused and continues to cause overcharges. Because Michigan lacks antitrust standing to pursue any remedy under federal antitrust law, the Court dismisses Count I in Michigan’s Complaint for failure to state a claim for relief

And having dismissed the federal claim (with prejudice), the court declined to exercise supplemental jurisdiction over Michigan’s state-law claims.

It is worth noting that Michigan’s claim in this suit is quite distinct from the claims made in various tort suits filed by state and local governments against fossil fuel companies, and this decision does not implicate or address the issues before the U.S. Supreme Court later this month in Suncor Energy v. Boulder County. For my posts on the Suncor case, see here.