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From Antitrust Law Daily, July 29, 2014

Antitrust claims not too “feeble” to support federal jurisdiction

By Jeffrey May, J.D.

In a dispute between wind turbine maker Gamesa and Outland Renewable Energy—a provider of operation and maintenance (O&M) services for Gamesa’s wind turbines, Outland's federal antitrust counterclaims supported federal court jurisdiction over its state law claims, the U.S. Court of Appeals in Chicago has ruled. The appellate court rejected Outland’s “effort to salvage part of its case” by arguing that its dismissed federal antitrust counterclaims were too “feeble” to support federal question jurisdiction and alternatively that its state law counterlcaims fell outside the scope of supplemental jurisdiction (McCoy v. Iberdrola Renewables, Inc., July 28, 2014, Hamilton, D.).

The lawsuit began as a personal injury case brought by an Outland employee against Gamesa and Iberdrola Renewables, Inc., which operated Gamesa-made turbines at a wind farm in Illinois. When Outland was brought into the action by the defendants, it asserted 22 counterclaims, including federal and state antitrust claims, as well as commercial tort claims. The litigation expanded to encompass disputes over the entire business relationship between Gamesa and Outland.

In 2012, Gamesa was granted judgment on the pleadings with respect to Outland’s claims. In 2013, the district court denied Outland’s motion for leave to amend its complaint (2013-1 Trade Cases ¶78,440).

After the district court entered a judgment under Federal Rule of Civil Procedure 54(b) on Outland’s counterclaims against Gamesa, Outland questioned—for the first time—the federal district court's jurisdiction. Outland moved to alter or amend the judgment under Rule 59(e), arguing that the district court lacked subject matter jurisdiction over the original counterclaims because its federal antitrust claims were too weak to invoke federal question jurisdiction under 28 U.S.C. § 1331 and alternatively that its state claims did not fall within the scope of supplemental jurisdiction under 28 U.S.C. § 1367(a). The district court denied the motion, and the appeal followed.

Outland's claims under the Sherman and Clayton Acts were sufficient to invoke the district court’s subject matter jurisdiction, the appellate court ruled. The federal antitrust claims were the only “jurisdictional anchors” for Outland's third-party counterclaims, the appellate court explained. The court rejected Outland's contentions that the federal antitrust claims were too feeble to invoke federal question jurisdiction.

Even though the federal antitrust claims failed to state a cause of action, the bar was low for invoking federal question jurisdiction, according to the court. Outland’s first federal antitrust claim alleged that Gamesa conspired with its Spanish parent company and Iberdrola. Although Outland's defense of this claim in the face of the Copperweld intraenterprise conspiracy doctrine was questionable, this did not deprive the court of jurisdiction.

The second claim that Gamesa unlawfully tied maintenance services to the sales of its wind turbines and had disproportionate market power in a market for maintenance services for Gamesa turbines was rejected by the district court based on the insufficiency of Gamesa’s alleged market power. However, because there was at least some room for argument about market power, the tying claim was not “utterly frivolous.” Thus, Outland could not argue that its theory was so vacuous as to fail to invoke federal question jurisdiction.

Supplemental jurisdiction over all of Outland's counterlcaims was proper because the tortious interference, contract, and defamation claims formed part of the “same case or controversy” as the anchoring federal antitrust claims. “The federal antitrust claims had a large ‘nucleus of operative facts,’ and the other original state law claims all had a basis in at least a portion of those facts,” the appellate court explained. Also rejected was Outland's appeal of the district court’s denial of leave to amend its non-antitrust counterclaims, alleging—among other things—that Gamesa interfered with Outland’s acquisition by Duke and misled Outland about Gamesa's plans to develop in-house maintenance services.

Potential for sanctions. Outland’s strategy on appeal could expose it to sanctions under Rule 11 or otherwise, the appellate court noted. Since Outland “essentially confessed to sanctionable conduct,” the appellate court left it to Gamesa's discretion whether to take the issue up with the district court.

The case is No. 13-3350.

Attorneys: Julie Negovan (Kutak Rock LLP) for Gamesa Technology Corp., Inc. Matthew M. Enenbach (Kutak Rock LLP) for Gamesa Wind US, LLC. Thomas Melone for Outland Renewable Energy, LLC, and Outland Energy Services, LLC. Howard J. Roin (Mayer Brown LLP) for Iberdrola Renewables, Inc.

Companies: Gamesa Technology Corp., Inc.; Gamesa Wind US, LLC; Outland Renewable Energy, LLC; Outland Energy Services, LLC; Iberdrola Renewables, Inc.

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