ML19317F530

DOJ Memorandum in Response to Applicants' Individual Motions to Dismiss.Certificate of Svc Encl

ML19317F530
Person / Time
Site:	Davis Besse, Perry
Issue date:	05/17/1976
From:	Charno S, Kauper T, Saunders J JUSTICE, DEPT. OF
To:	Atomic Safety and Licensing Board Panel
References
NUDOCS 8001150844
Download: ML19317F530 (49)

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• e'b" '4 UNITED STnTES OF AMERICA NUCLEAR REGULATORY con:!ISSION EEESEE_EEE_612 ELE _SEEEEl_6EE hlEEEELEE_EEEEE ,

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In the Matter of )

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The Toledo Edison. Company )

The Cleveland Electric Illuminating ) Dochet Nos. 50-346tt Company ) 50-500A (Davis-Besse Nuclear Power Station, ) 50-501A Units 1, 2 and 3) )

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The Cleveland Electric Illuminating ) Docket Nos. 50-440A Company, et al. ) 50-441A (Perry Nuclear Power Plant, )

Units 1 and 2) )

- MEMORAND;1M OF THE DEPART;1D:1T OF JU3TICE IN RESPONSE TO APPLICANT 3' INDIVIDUAL MOTIONS TO DISt!ISS THO AS E. KAUPER Assistant Attorney General

• Antitrust Division JOSEPfl J. SAUNDERS Attorney, Department STEVEN M. CHARNO of Justice MELVIN G. BERGER JANET R. URBAN Attorneys, Department of Justice May 17, 1976

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UNITED SIATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE ATOMIC SAFETY AND LICE" SING BOAPD In the Matter of )

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The Toledo Edison Company and ) <

The Cleveland Electric Illuminating ) Docket Nos. 50-34CA Company ) 50-500A (Davis-Besse Nuclear Powcr Station, ) 50-501A Units 1, 2 and 3) )

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The Cleveland Electric Illuminating ) Docket Hos. 50-440A Company, et al. ) 50-441A (Perry Nuclear Power Plant, )

Units 1 and 2) )

HENORANDU;i OF THE DEPARTMENT OF JUSTICE IN RF.S POUSE TO APPLICANTS' IdDIVIDUAL IiCTIOH3 TO DISH 1SS l

The individual Applicants in this proceeding have filed five separate motions seeking the dismissal of certain portions of the direct case presented by the Department of Justice

(" Department") and the other parties opposing the Applicants.

Prior to taking up the specific subject matter of Applicants' individual motions, the Department will set forth the general legal standards which should govern the determination of such motions.

I. MOTIONS FOR DISMISSAL OF FACTUAL ALLEGATIONS Since - all of Applicants' motions relating to factual allegations appear to be argued by analogy to Rule 41(b) of the Federal Rules of Civil Procedure, the Department will P

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-< e address itself to the standards associated with dismissal under that Rule. Rule 41(b) provides in pertinent part:

For failure of - the plaintif f to prosecute . . .,

defendant may move for dismissal of an action or of any claim against him. Af ter the plaintif f has completed the presentation of his evidence, the defendant, without waiving his right to offer evidence in the event the motion is not granted, may move for a dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief.

In an action tried by the court without a jury the court as trier of the facts may then determine i them and render judgment against the plaintif f or mag _ decline to render _anv_1udgment until the close of_aII tne evloence Temphasis suppliea).

Initially, the Department would note that action by this Board under the standard set by Rule 41(b) is wholly discre-tionary. He would urge the Board not to exercise its discre-tion in the manner requested by the Applicants for the follow-ing reason. Rule 41(b) is direct ed to the dismissal of an

" action" or " claim" concerning which the " plaintiff has shown no right to relief . " In the instant proceeding, the clearly analogous target for such a motion vould be one of the Issues and Matters in Controversy established by Prehearing Conference Order No. 2. As this Board has repeatedly pointed out, the f actual descriptions of anticompetitive activity contained in the September 5 filings do not themselves constitute the issues in this proceeding (e.g., Tr. 2080-2081, 2085). Even if the Applicants were successful in all of their individual motions, their motions relate to only a portion of the f acts in this t

l record and would not eliminate a single Issue or Matter in I

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• o e Controversy, nor would they resolve the question of whether a situation inconsistent with the antitrust laus exists. 1/ In actuality, Applicants are again seeking specific evidentiary.

rulings from the Board, since 'their individual motions are not directed to the dismisscl of a claim upon which relief could be granted in the context of this proceeding. 2/ Applicants' attempt to secure anticipatory findings and conclusions ,

should be rejected and their individual motions should be 1 *

. denied.

1 The remainder of this memorandum discusses the subject matter of Applicants' individual motions and demonstrates

that Applicants' arguments are without rcrit.

A. The Duquesne Light Company

) On April 20, 1976, the " Motion of Applicant Luquesne r

Light Company For an Order Dismissing Specific Allegaticns Made Against It By The NRC Staf f , The Department of Justice i And The City of Cleveland" was filed. For the reasons hereinaf ter set forth, the Department submits that it has 1/ The sole exception would be Duquesne Light Company which Eas challenged every f actual situation which might be relevant to the Matters in Controversy or consti tute conduct which is part of a situation inconsistent with the antitrust law 3.

2/ In order to defeat a motion under Rule 41(b), the Depart-ment must have established the f acts upon which it relies by a preponderance of the evidence, which the trier of fact should 3 weigh after resolving any evidentiary conflicts. 9 Wright &

i Miller, Federal Practice & Procedure S2371.

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e e met the burden ci proof under Rule 41(b) 3/ and that th e Duquesne Light Company (DL) Motion should be denied. DL's arguments will be answered in the order in uhich they appear in the flotion.

1. The Borough Of Ellwood City

a. The Evidence The record establishes that Ellwood City's Solicitor made a request to three DL representatives that DL sell power at wholesale to Pllwood City (Tr. 6403-6406, 6418). This re-quest was made, probably in June of 1966 (Tr. 6060). in a hotel room maintained by DL (Tr. 6413-14) at a conventio.n of all of the boroughs of the State of Pennsylvania (Tr. 6405)

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in Pittsburgh (Tr. 6413-14). F u r the r rac r e , it was made in the presence of Ellwood City's borough manager and one or two r

councilmen (Tr. 6414). DL's representatives gave an unequiv-ocal rcfusal in response to the request (Tr. 6403-06, 6418).

DL has argued that this request was made in a social setting and was not made to of ficers of the company. In fact, 1

3/ With respect to DL's acquisitions of the municipal system of Etns and Sharpsburg which took place prior to September 1, -

1965, the Department will assert th a t the Licensing Board has committed reversible error by excluding evidence of anticom-petitive activities occurring prior to 1965. since the record demonstrates that such activities have contributed to a presently existing situation inconsistent with the antitrust laws, and evidence there'of is clearly relevant and probative in this proceeding. l l

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e the request was made to middle management personnel (Tr.

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th: ' representatives DL selected to deal with borough officials at the convention. DL's own doc,uments clearly show that the company considered such conventions to be a time for conducting negotiations and generally dealing with

municipal systems (DJ 251). The record further shows that such conventions "are in(ormative, they are educational, there is l some for sales, and certainly there is the social aspect" I

(Tr. 641'5).

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, DL's argument that an unequivocal refusal was not followed 1

1 up is without substance (Tr. 6416). Similarly, DL's argument that Mr. Luxenburg was not " authorized" by Ellwood City to make the request is meaningless without evidence tl. ,t such an authoriza-tion was needed. The presence of the borough maneger and council-non (Tr. 6414) eliminates any inference of caprice.

Thus, the record demonstrates that Ellwood City made a clear request that DL sell it wholesale power. and DL unequiv-ocally refused,

b. Anticompetitive Effect DL has argued a business justification exists for its re-fusal because it allegedly did not have transmission lines in the vicinity cf Ellwood City. Whatever the truth of this unsub-stantiated assertion, the record is clear that a transmission-line which ' connects the Pennsylvania Power Company system and the l DL system is located in close proximity to Ellwood City (Tr. 6403).

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In codition, the request made of DL went solely to the sale of power; the question of a need for wheeling by any third party i

was not raised.

The subject request and refusal are relevant to market definition. Dr. Uein defined the geographic market for whole-sale firm power sales as coincident with the area served by each of the companies at retail ( DJ 587. pp. 130-31, 136).

The fact that Ellwood City was unable to secure bulk pewer from a supplier located outside the crea served by Pennsylvania Power Company supports this mar ket definition.

DL's argument that i ts refusal is irrelevant because state law defines exclusive service areas for clectric utilities is equally without substance. As support for its proposition, LL cited pages 33-34 of the Prehearing Drief of the Department of Justice. This wholly misrepresents the Department's position

-- Pennsylvania utilities have defined retail service areas.

Sales of electric power at wholesale are subject to federal, not state, regulatory jurisdiction. FPC v. Southern California Edison Company, 376 U.S. 705 (1964). Indeed, the Pre-Hearing Fact Brief of Dug'esne Light Company, filed on December 1, 1976, at page 49, clearly admits that the FPC, not a state agency, regulates wholesale sales. 4/

4/ State jurisdiction over wholesale sales is also refuted by the fact that Pennsylvania Power Company was making such sales pursuant to FPC filed rates at approximately the time of DL's refusal (NRC 106-110).

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2. The Borough of Aspinwall

a. The Evidence DL's argument that it did not ref use .to sell Aspinwall power for resale is directly contrary to the record. From the time Aspinwall first informally requested that DL sell 1 it power at wholesale (DJ 168), the company took the posi-tion that it would not do so (DJ 169, 171, 172. 173, 174),

b. Anticompetitive Effect DL has argued that a refusal to sell to Aspinuall has no antitrust significance because of the state law context in which it was made. As noted in Section I.B.1.b. supra, state law could not prohibit such sales because it was the FPC, not the state, which had regulatory jurisdiction over such sales. <

DL also contends that Rule 18 of i ts 2ariff prohibited the sale of bulk power at wholesale for resale. Assuming arguendo that this tariff could prevent wholesale sales, there is no reason why DL c'ould not have filed anotner tarif f with the Pennsylvania Public Utility Commission which would have permit-ted such sales.

It is clear from Exhibits DJ 321, 175, 195 and 201 that DL's refusals resulted, not f rom state law prohibitions, but from the company's desire to acquire the Aspinwall system.

c. Relevance DL argues that whatever it did to Aspinwall is not relevant 7

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to the present proceeding, because DL's present policy is to sell power at. wholesale. 5/

First, there is nothing to prevent DL f rom refusing to sell power at wholesale to any system in its service area.

Its dominance of transmission (NRC 133, p. 28), which gives it unlimited power to foreclose any attempt by a system in its service area to obtain wholesale power, coupled with its history of never willingly selling power at wholesale, provide no basis f or a belief that DL will ref rain from anticompetitive behavior in the future. There is no evidence of DL's alleged present policy.

Further, DL's proven past policy of refusing to sell at wholesale was part of a course of conduct constituting monopoli-zation -- DL effectively put its competitor Aspinwall out of business ( DJ '321) . Thus, the effect of this conduct is still

] being felt. To argue that acts in furtherance of monopolization t become irrelevant once that monopolization has been comp.leted (these acts having been stopped because there is no longer a need for them) is preposterous. DL's quotations from Consumers Power opinion concerning mootness are plainly inapposite in this context.

5/ DL contends that "the Record discloses absolutely no re-quest since 1966 for wholesale power which has not eventually been satisfied" (Motion, p. 10). The attempts of the Borough of Pitcairn, the only remaining municipal system in DL's service area after DL's acquisition of Aspinwall, to obtain power at whole-sale are discussed in Section I.C., infra.

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3. The Borough of Pitcairn

-j , a. Wholesale Power DL argues that the allegation that it refused to provide w'holesale power when asked by Pitcairn was unsupported by the record. Their argument deals exclusively with the request by Pitcairn for the sale of emergency power contained in Exhibit DJ l -- this argument completely ignores Pitcairn's numerous requests for the sale of other types of power at wholesale.

. In'1966, Pitcairn asked DL to sell it power at wholesale and suggested three different alternate plans for such a sale (Tr. 1619; see also NRC 13). DL's own notes (NRC 13), as well as Mr.'McCabe's testimony (Tr. 1616, 1654), establish that DL refused each of these requests. 6/.

It is obvious from Mr. McCabe's testimony that Pitcairn requested emergenci service because it was not able to. obtain any other type of wholesale power from DL (Tr. 1641-42, 1824-25). Thus, DL's argued willingness to supply emergency power under its Rate M cannot legitimate the company's repeated refusals to sell power to Pitc,airn at wholesale.

6/ Such refusals by DL were repeated during the period from 1966 through 1968 (Tr. 1616, 1619, 1625, 1654; NRC 14, 15, 16 and 19).

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b. Interconnection DL appears to argue that its refusal to offer emergency service on terms and cc~ ditions other than those of Rate M refutes the Department's allegation that DL refused to enter an interconnection agreement with Pitcairn.

DL's overall argument that it was legally prohibited from selling power at wholesale has been discussed previously (see Sections I.A.l.b and I.A.2.b., supra).

DL's additional argument tha t if Pitcairn did not think the Rate M tariff was fair, modification should have been sought before the Pennsylvania P.U.C. is somewhat less than candid.

Aside from the fact that.the Pennsylvania Commission had no jurisdiction over wholesale rates, Pitcairn would, have been required to expend large sums of money in such a challenge.

As was true with Aspinwall, DL knew that a small munici-pality did not have the fiscal ability to mount a challenge to these rates. 7/

DL's refusal to sell emergency power on terms and con-ditions other t'han those of Rate M, when viewed in the con-text of DL's market position and other' anticompetitive conduct, 7/ DL has also argued that changes in the Rate M tariff might result in charges of discrimination by other classes of cus-tomers. In this regard, it need only be noted that Pitcairn was the only municipal wholesale customer in DL's service area, so there is no possibility that a change in the Rate M tarif f could discriminate against any other wholesale customer.

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is another element in a situation inconsistent with the anti-trust laws.

c. .Anticompetitive Effect DL's refusals must be examined in light of the knowledge that the company wanted to acquire the Pitcairn system and that the plan for acquisition which DL's chief executive approved (DJ 246) sp'ecified denying wholesale power to the target utility

( nJ 321). Other company documents clearly show that DL wanted d

,to elean up" the last remaining municipal system in its service area and believed that it could do so with " careful handling" (DJ 245). See also Exhibits NRC 13, 57, DJ 238, 242-43, 248, I

.251, 254-55. It is clear that the refusal of DL, the dominant owner of transmission in its service area, to sell emergency power to Pitcairn at anything but an outrageous rate (Tr. 1826), with the intent of driving the Borough out of business is prc'erly included as part of a situation inconsistent with the antitrust laws. 8/

DL's argument tha t it's ref usal to sell wholesale power is not relevant to this proceeding because there can be no competition between a private system and a municipal system confuses competition at wholesale and competition at retail.

In fact, at page 49 of its Pre-Hearing Brief, DL specifically 8/ DL's arguments that its conduct was required by state law has already been discussed and will not be addressed further here.

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. admits that today state law is not applicable to wholesale

. competition. There is no legal prohibition 'of competition between d.ifferent utilities in the sale of power at wholesale .

in Pennsylvania.

Even the absence of actual competition at wholesale or retail at the present time does not mean that there are no competitive pressures at work. Th'ere is always the presence of potential competition. If alternative sources of bulk power supply are available in DL's service area, either by direct sale or wheeling, the effect of competition will be felt even if no actual competitors materialize. This is not idle speculation. DL has recognized that the possibility of competition continues to exist (DJ 251, 255). Furthermore, with regard to retail sales, DL's presence at the edge of Pitcairn makes the company a potential competitor of Pitcairn.

This point was established by Dr. Wein (Tr. 6998). 9/

DL's argument that Pitcairn is an unregulated monopoly is untrue since the Borough's. customers (i.e. , the citizens) have

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the power to raise or lower their own rates. Since the customers directly control the utility which is serving them, there is no monopoly power. DL's customers, on the other hand, do not have any comparable power over the utility which serves them.

9/ The presence of two utilities in the same geogrpahic area provides for yardstick competition as discussed by Dr. Wein

( DJ 58 7, p. 134; Tr. 6986-6987).

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d. Access to Beaver Valley The pertinent part of the Department's allegation which has .been challenged by DL reads as follows': -

In 1968, Duquesne refused the request of Pitcairn for participation in a nuclear unit. -

The record demonstrates that the request in question was made at a February"21, 1968, meeting between Mr. McCabe, representing Pitcairn, and Messrs. Munsch and Dempler, the individuhls designated by DL to represent the company. (NRC 17, Tr. 1636-1638, 1839-1840). DL's notes of the meeting clearly indicate that the company's representatives under-stood Mr. McCabe to be making a request (NRC 17, pp. 5-6) and Mr. McCabe testified that he made such a request (Tr.

1636-7). There is no evidence to the contrary.10/

DL f urth'er argues that there is no evidence of an earlier or later inquiry. DL's unequivocal negative manifestly did not invite renewed requests for nuclear access. In addition, Exhibit DJ 247, p. 2, clearly states that Pitcairn's Mr. McCabe had pre-viously " indicated a desire to explore the possibility of Pitcairn ,

participating in the recently announced joint generation program 10/ DL's arguments that the request was oral and not directed to a company officer are, in context, the merest quibbles.

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of the company. " Clearly, Pitcairn's position with respect to access to generation was known to DL. 11/

DL also argues that Pitcairn made the request for access knowing that DL was short of capacity and needed to construct all capacity possible to satisfy its own needs. DL_then argues that if it had sold Pitcairn generating capacity, it would have violated the duty imposed by state law to provide electricity at the lowest possible cost. This dialectic is laughab1'e at best. If DL could not spare capacity to sell to Pitcairn for resale at retail, then how could DL intend to purchase the Pitcairn system and to serve the same customers at retail. (The evidence of DL's desire to acquire the Pitcairn system is overwhelming, NRC 13, 57, DJ 238, 242, 243, 245, 246; 11/ DL's argument that Mr. McCabe was referring to a fossil, rather than a nuclear unit is without substance. At page 4 of Exhibit NRC 17, Mr. Dempler is reported as referring to "the Beaver Valley unit" and again on page 5, Mr. McCabe is reported to specifically request access to "the new Beaver Valley unit."

(Emphasis supplied.) Since Mr. Munsch, DL's attorney, and Mr. Dempler, DL's System Planning Engineer, were thoroughly familiar with the nomenclature of both the company and CAPCO (e.g., the " Beaver Valley" units and the "Mansfield" units),

there can be little doubt that they understood Mr. McCabe's reference to be to a Beaver Valley nuclear unit and to no other.

Furthermore, Mr. McCabe specifically mentioned the Beaver Valley generating facility a.13 that it was being built in the DL service area (Tr. 1839). Pinally, Mr. McCabe clearly referred to "their initial units at Beaver Valley" (Tr. 1638). In any event, this denial of access clearly demonstrates DL's utiliza-tion of dominance in generation and transmission to prevent Pitcairn from receiving the benefits of coordinated develop-ment.

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Tr. 1684-86.) 12/ Clearly, DL is talking out of both sides of its mouth.

There is no indication d at DL has ch'anged its policy with regard to access. Mr. McCa be testified that Pitcairn is currently interested in nuclear units (Tr. 1716), but that he has not requested access to any specific plants since his request for access to Beaver Valley, because Pitcairn is unwilling to commit itself to the extensive litigation that would be necessary to obtain access (Tr. 1717-18). If DL has changed its access policy, it is a well-kept secret.

e. Mootness After repeating the argument that DL's purported present policies render its past activities irrelevant, the company argues that Pitcairn's settlement of a private damage action against the company resolved all questions concerning DL's conduct and that it is unf air for another party to now raise any issue which involves Pitcairn.

12/ If DL was in dire need of capacity as it suggests, then why did it not look more f avorably on Pitcairn's requests to interconnect with the company and to join CAPCO, since Pitcairn

• had informed DL at the February 21, 1968, meeting that the Borough had excess capacity (NRC 17 p. 3). If Pitcairn's capacity was too small to be helpf ul, its purchase of capacity would be too small to be harmful to DL.

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k If DL is arguing that something analogous to collateral estopped exists, it is submitted that none of the required e _1_3/

elements of that doctrine can be shown h' re.

Further, there is a world of difference bet' ween a private damage suit intended to compensate a single plaintiff for past wrongs and the present proceeding which is addressed to numerous relationships between DL and large.and small utilities in two states and which has the objective of pro-tecting the public interest on a scale impossible and unnecessary for a single private litigant.

f. CAPCO and Interchange DL appears to argue that its acknowledged refusals to grant Pitcairn access to the benefits 'of coordinated opera-tion and development through an interchange agreement or CAPCO membership cannot constitute an element in a situa-tion inconsistent with the antitrust laws solely because those refusals were justified by " legitimate business reasons." Its legal analysis and conclusion are completely unfounded.

It is a well recognized principle in antitrust law that

"[t] he promotion of self-interest alone does not invoke the rule of reason to immunize otherwise illegal conduct."

13/ For a discussion of the doctrine of collateral estoppel, see Section II, infra.

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United States'v. Arnold, Schwinn_& Co., 388 U.S. 365, 375 (1967). 14/ This antitrust principle has.been specifically applied to the electric utility industry. Otter Tail Power Co. v. United States, 410 U.S. 366, 380 (1973).

In addition, the record clearly demonstrates that DL's refusals were motivated by its desire to acquire the Pitcairn system, thereby eliminating the last remaining competitor in its service area (DJ 245-46, 321). 15/

B. Ohio Edison Company - Pennsylvania Power Company on April 20, 1976, " Ohio Edison Company's and Pennsylvania Power Company's Motion For Dismissal of Certain Allegations" was filed. As previously indicated, the Department does not believe it is necessary or appropriate for the Board to rule on specific evidence in the piecemeal fashion requested by Ohio Edison Company (OE) and Pennsylvania Power Company (PPC).

14/ He note that DL presents no other argument for the proposition that its exclusionary conduct wa.s lega). For a full discussion of the law concerning such refusals, see Prehearing Brief of the Department of Justice, pp. 38-54.

. 15/ See also Exhibits NRC 13, 57; DJ 238, 242-43, 248, 251, Y54-55; Tr. 1684.

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The Department will, however, answer Applicants' arguments concerning specific f actual allegations.16/

The Department acknowledges that it has presented only limited evidence going to prove that OE has refused or delayed providing new delivery points to rural electric cooperatives; we do not believe that the evidence presently of record meets our bur' den under Rule 41(b). Whil'e the evidence of record does not demonstrate OE's 1966 offet to or the existence of

,its' terri torial agreement with Firelands Rural Electric Cooperative as described in our September 5 fi'cag, the record does demonstrate the existence of such an agreement be tween i

OE and Holmes-Wayne Rural Electric Cooperative (DJ 522). This latter agreement was only brought to light through examination of documents which were produced by OE af ter the close of discovery; the Department has been informed that the agreement itself, as well as any other documentary evidence relating thereto, are no longer in OE's possession.

16/ With respect to those anticompetitive activities which took place prior to September 1, 1965 (i.e., OE and PPC's refusals to sell power at wholesale and 657s offer of sub-sidy in furtherance of the acquisition of a municipal system),

the Department will assert that the Licensing Board has com-mitted reversible error by excluding testimony and docu-mentary evidence of anticompetitive activities occurring prior to 19 65, since the record demonstrates that such activities have contributed to a presently existing situation incon-sistent with the antitrust laws, and evidence thereof is clearly relevant and probative in this proceeding.

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t1 Similarly, the Department does not believe it has met the burden of proving a 1971 refusal by OE to wheel power from Buckeye Power, Inc. to Norwalk. We do believe, however , that i

the evidence relating to this allegation (DJ 425, 426 and 427) clearly indicates interest by municipal electric systems located within OE's retail service area in becoming customers of Buckeye Power, Inc. Access to this alternative bulk power supply f rom municipal systems was anticompetitively impeded by the Buckeye agreements to which OE is a party (NRC 190) .

On 'the other hand, the Department believes that it has met the burden of proof under Rule 41(b) with respect to the remaining f actual situations challenged by OE and PPC.

As noted by Applicants ' Motion. OE's 1970 bid ,on the Norwalk system is documented by Exhibit DJ 422; it is further supported by Exhibits DJ 429, 433 and 434 which show OE's later refusals to bid on any of Norwalk's generating equipment. 17/

Contrary to OE's characterization of this situation as a poten-tial tying arrangement, the Department alleged that OE's offer was a device to eliminate a municipal system's ability to com-pete. While the Department does not believe OE's of fer standing alone constitutes a situation inconsistent with the antitrust 17/ The Board's ruling vith respect ta the Department's offer of proof goes simply to tf,e weight which will be accorded Exhibit DJ 422 standing alene (Tr. 6191-32).

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1 laws, we do believe the offer to be relevant in the context of OE's overall campaign to eliminate competition f rom and to acquire the system of Norwalk.

With respect to the term of OE's wholesale contracts.

the company has acknowledged as " undisputed" its numerous contracts w'ith municipalities for ten year terms (Motion,

p. 10). OE attempts to argue that such a term is reasonable on the basis of Mr. Mayben's testimony that for "certain" con-tracts, ten years might be an " appropriate" term. It has ignored Mr. Mayben's tectimony that, even though ten years might protect OE's investment, such a term would be "appro-priate" only where the municipal system had an opportunity to shif t from full to partial requirements on one to two years' nocice; Mr. Mayben also noted that a five-year term would be reas' enable wi th respect to a municipal system which might wish to purchase from an alternative bulk power rupplier (Tr. 7807-09). Mr. Kampmeier testified that a five-year contract term might be reasonable for a good size load (Tr.

5827-28), but that the term need not be long if t'he load is small (Tr. 5972-73). Mr. Kampmeier also testified that, in Ohio, Applicants have agreed upon contract terms of as little as one to two years with industrial retail customers which have greater loads than Applicants' municipal wholesale customers (Tr. 5972).

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PPC apparently attacks the Department's allegation concerning PPC's 1965 refusal to supply ma'intenance power to Grove City by noting that the only evidence of record concerned a request by Grove City for " partial requirements" power. The record.shows that Grove City's generation in 1965 was in poor condition and needed to be repaired (Tr. 4767).

The reco,rd also demonstrates that Grove City sought partial requirements power from PPC in order to conduct maintenance of the city's generating units in 1965 or 1966 (Tr. 4768). Grove City received a negative response (Tr. 4774) and was told such a purchase would not be to its advantage (Tr. 4775).

The Ci ty felt that it had no alternative but to purchase all T of its power,from PPC (Tr. 4786). PPC's attempt to charac-terize Grove City's request for partial requirements power to perform repairs as something other than maintenance power poses a distinction without difference. l l

The Department's allegation of a territorial agreement '

between OE and CEI with respect to new customers was demon-l strated on the record in this proceeding. Initially, it should be noted that it was not the intention of the Depart-

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anticompetitive conduct; the Department believes tha t the restraint upon competition flowing from this agreement is attributable to both OE and CBI. While the Department believes Exhibit DJ 488, standing alone, is probative of this allegation, there is other evidentiary support in the record.

While denying the existence of an agreement, Mr. Rudolph of CEI testified upon deposition:

. My understanding is that the company that is closest and can serve at the least cost, they get the business.

Now, there may be a little bit of conflict between those two, and I can't speak to that conflict, but I think that is the situation.

( DJ 558, p. 53).

OE's 1965 territorial agreement with Ohio Power Company with respect to rural electric cooperatives is also documented on the record. The inference the Department has drawn from Exhibit DJ 490 is substantiated by other evidence of record proving that an overall territorial agreement was in existence between OE and Ohio Power at that time (DJ 200, p.18000030; DJ 518-31). The inference which OE attempts to draw from Exhibit DJ 490 is wholly unwarranted, even if one completely accepts Mr. Frederickson's self-serving statements upon deposition

( DJ 573, pp. 225-26).

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The Applicants' challenge of the Department's allegations that OE has eliminated competing municipal systems by acquiring them assumes that the existence of such acquisitions, standing along, constitute a Matter in Controversy in this proceeding.

As the Department has pointed out at length on numerous occasions, such acquisitions are not alleged to constitute a situation inconsistent with the antitrust laws, but merely to be elements of such a situation when viewed in the overall context of Appli-cants' market power and anticompetitive activities. We must no te in' passing that the standards employed by the Securities and Exchange Commission under the Public Utilities Holding Company Act of 1935, 15 U.S.C. S797 et seq., hardly amount to the " rigorous antitrust analysis" which OE asserts (Motion.

pp. 15-16). None of the standards. set forth by OE in its Motion remotely approximate those which the Nuclear Regulatory Commission must employ under Section 105c.

Finally, the Department has clearly proven the factual

. allegations relating to OE's refusals to file rates for 138 kv service and PPC's similar refusals to file rates' for 69 kv service. This anticompetitive technique -- like rate squeeze, etc. -- appears to be part of an overall pattern of conduct which prevents competition.for industrial customers at retail and which is employed by both companies. The Applicants' ottempt to shield their refusals behind the absence of an 23 l

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affirmative duty under Federal Power Commission regulations

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to file a. rate does not succeed in making such refusals one whit less anticompetitive. It is the antitrust laws, not the Federal Power Act, which provide the standard against which Applicants' conduct should be measured. The record demonstrates that Applicants' municipal customers were unable to determine the amount of any high voltage discount rate which OE or PPC might ultimately file (DJ 419, 421, Tr. 5002-03, 6410). The record is equally clear that a municipal customer could not build facilities or contract to take high voltage service without advance knowledge of the rate level (Tr. 4979-80, 5000-Oi). This refusal to state the amount of any high voltage discount rate deterred municipal systems from requesting and securing high voltage service which would allow them to compete more ef fectively with the Applicants for industrial customers.

C. The Toledo Edison Company On April 20, 1976, the " Motion of Applicant Toledo Edison Company For an Order Dismissing Allegations Nade Against It" was filed. As heretofore noted, the Department does not believe it is necessary or appropriate for the Board to make evidentiary rulings in the piecemeal fashion requested by The Toledo Edison Company (TE). The Department will answer Applicant's arguments concerning specific factual allegations.

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1. Waterville TE argues that the Department's allegation that the company ref used to sell power to Waterville in order to acquire the system is unsuppor ted by the record.18/ TE is mistaken.

Waterville's request for wholesale power is clear upon the record. TE challenges the written request of Waterville's acknowledged consultant (DJ 505) as an " informal and unofficial inquiry." TE does not enlighten us as to what an " official" inquiry must consist of. We would merely note that TE's refusal ( n7 506) is not based on the consultant's lack of authority to request the transaction or on the form of the request.

The basis for TE's refusal is clear on the record.

Exhibit DJ 504 gives a full, concise and clear picture of TE's conduct relating to Waterville. This TE memorandum (DJ 138) from Mr. Cloer (District Manager) 19/ to Mr. Schwalbert (then Assistant to the Senior Vice President and General Manager) states that it was TE's intent to refrain from selling 18/ TE's objection that the Department's evidence consisted solely of documents and depositions is unique, but without substance.

19/ Mr. Cloer was TE's spokesman in the companys dealings with Waterville (DJ 582, p. 7). Similarly, Mr. Schwalbert was deputy to TE's second in command ( DJ 138 ) .

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wholesale power to Waterville in an attempt to force the sale of the system and that, as a political tactic, TE would pub-licly announce other reasons for its conduct.

We note in passing that Mr. Cloer's statements are wholly consistent with TE's policy of trying to acquire municipal systems (DJ 577, p. 7). Indeed, TE had made an offer to acquire the Waterville system in' the past '(NRC 158, p. TE-34; DJ 577, pp. 22-24) and did acquire the system in 1968 (NRC 158, p.

.TE-37).

Finally, TE argues that the Waterville system was sold after a public election. The existence of such an election,

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if established in the record, would be irrelevant since TE's ref usal to sell wholesale power to Waterville denied the muni-cipal system a bulk power supply alternative whic'h would have allowed it to remain in business as a competitor. In the circumstances, the Waterville system was doomed. The election simply permitted the city's voters to set the date for the funeral.

2. Price Squeeze TE has also argued that there is insuf ficient evidence to establish the existence of a price squeeze. The record, however, clearly establishes that it was and is TE's policy to attempt to equalize the rates of its wholesale municipal and retail industrial customers (NRC 47, 127, 150; DJ 583 ,

26

p. 52). This evidence clearly confirms Dr. Wein's (DJ 587,

p. 96) and Mr. Kampmeier 's ( DJ 450, p. 35) conclusions with respect to a price squeeze. 20/ .

TE's attempt to focus attention on the fact that the com-pany is outcompeted at retail by some of its municipal wholeLale customers is simple misdirection. The proper focus is on the differences, if any, between the wholesale rate TE charges its municipal customers and the cctail rate the company charges its industrial customers. 21/ .The fact that TE is underpriced and outcompeted by its municipal customers can result solely from the fact.that the municipals are mobe efficient dis-tributors of electric power than TE and can , therefore, offer a lower industrial rate despite the discriminatory wholesale prices they pay TE (Tr. 6135-36). TE's argument that in 1971 Napoleon managed to capture a TE industrial customer by offer-ing lower rates than TE ignores the fact that Napoleon was 20/ TE's argument that Mr . Kampmeier did not make a detailed study to determine the precise relationships between TE's rate to Bowling Green and its rate to industrial customers of a similar size overlooks the fact that such a study was not necessary or relevant to Mr. Kampmeier's analysis (Tr. 6056).

21/ See Dr. Wein's definition of price squeeze (DJ 587, pp. 29-30). -

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generating 75 per cent of its power requirements at the time (Tr. 5250). 22/

TE also points to the fact that its rates are regulated by both the FPC and the PUCO,'but as pointed out by Dr. Wein (Tr. 6661-63), separate regulation by two separate agencies does not necessarily prevent a price squeera. As pointed out by Mr. Kampmeier , cost of servi,ce studies are not an exact science and almost always give different results so the f act

. that both retail and wholesale rates are regulated does not prevent a price squeeze (Tr. 6126-30; DJ 455). Indeed, it is this dual system of regulation which allows the development i

of a price squeeze. I

3. Bryan TE has also urged that the Department's allegation con-cerning Bryan is not supported by the record. While the Department's original allegation has not been proven on the record, the Department submits that the evidence presented clearly establishes that Bryan had an interest in obtaining bulk power f rom Buckeye Power, Inc. (Tr. 5455-56; DJ 3.16-20 ) . 23/

22/ TE has misstated Mr. Dorsey's testimony in that he testified to a 20% rate dif ferential at retail between TE and Napoleon with respect to residential, not industrial. customers (Tr. 5254).  ;

23/ TE admits the fact in its Motion at p. 12.

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Purthermore, the evidence proves that TE is a party to the Buckeye Power Delivery Agreement (NRC 188). That agreement specifically prohibits municipal systems from becoming members of Buckeye. Further, the Buckeye agreements , provide that a municipality which purchases power from an investor-owned party to the agreements cannot purchase power from a Buckeye member cooperative, nor have that power wheeled to the municipal system, without first disconnecting its system f rom that of its present supplier for a 90-day period (NRC 188, p. 3, definition of Buckeye Power section requirement, and 4-1). Thus, before Bryan could purchase Buckeye power and have TE deliver it, Bryan would have to disconnect and run as an isolated system for 90 days. 24/

Mr. Schwalbert, a TE officer, stated that the reason for including the 90-day provision in the Buckeye agreements was to prevent Buckeye from competing with TE and other investor-owned utilities at wholesale for municipal customers (DJ 577, pp. 44-46). In this context, TE's argument that it did not insist on the enforcement of an outstanding restrictive con-tract provision in disingenuous. The mere existence of such an anticompetitive restraint is itself sufficient to stop municipal 24/ Mr. Schwalbert acknowledged tha t such a 90-day disconnect requirement was " impractical" ( DJ 577, p. 46).

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1 systems from turning to Buckeye as an alternative source of bulk power supply.

4. Coordinated Development TE has argued that the Department's allegation that TE refused to consider joint ownership of large-scale generating facilities with the City of Napoleon in 1971 and 1972 is not supported by the evidence. On 'the contrary, this allegation is completely established by the uncontradicted evidence con-

' tained in the Lewis af fidavit (NRC 127).

TE.apparently argues that evidence of its policies in 1974 (specifically, DJ 151) , during a period af ter this proceeding had commenced in response to adverse antitrust advice from the Attorney General, somehow legitimates its earlier _ refusals to engage in coordinated development.

Such refusals are directly within the scope of the Issues and Matters in Controversy f ramed by this Board. Further, they are element: in a situation inconsistent with the antitrust laws which wi.11 be maintained by Applicants' activities under the licenses sought herein. 25/ Thus, TE's contention that no " nexus" exists because the joint ownership arrangements 25/ See Prehearing Brief of the Department of Justice, at pp. 114-19, for a full statement of the basis for " nexus" in this context.

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envisioned b" Mr. Lewis did not specifically involve nuclear units is f atally' defective. 26/

5. Wholesale Contracts

• TE argues that the Department's allegations with respect to restrictive provisions in the company's wholesale contracts should be dismissed because these contracts are expiring. There appears to be no dispute that, at one time, there were thirteen such restrictive wholesale contracts, and that some are still in

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effect today. Notwithstanding TE's protestations that the com-pany " voluntarily" deleted restrictive provisions f rom more recent contracts, the evidence indicates such restrictions were omitted only at the insistence of TE's wholesale cLstomers (NRC 46, 47; DJ ~

147, 3131; Tr. 5278-80).

The Department is mystified by TE's assertion that "a com-plete and adequate remedy has alteady been prescribed by the FPC" (Motion, p. 16). Certainly, the filing of such contracts wi th the FPC, including those presently in effect, has not pre-vented TE from including such restrictive privisions. 27/

26/ In fact, Mr. Lewis did not exclude nuclear generation when Ee spoke of large-scale generation; the only qualification he placed on the use of that term was tha t it applied to units of a size larger than 300 to 400 mw (Tr. . 5628).

27/ TE's assertion that all other allegations shrald be dis-missed is not accompanied by any statement of grounds or basis therefor. The Department does not believe it would advance this proceeding t further address this type of argument.

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II. MOTIONS BASED ON COLLATERAL ESTOPPEL On April- 20, 1976, two motions were filed urging this Board to hold that evidence of certain of Applicants' anti-competitive activi, ties should be excluded f rom this proceeding by virtue of the doctrine of collateral estoppel: 28/

" Dismissal Motion of Tne Cleveland Electric Illuminating Company With Respect to the Allegations Fully Litigated Before and Finally Decided by the FPC"; and " Motion of Applicant , ,

Toledo E'dison Company for an Order Dismissing an Issue Which flas Been Fully and Fairly Litigated Before the Nuclear Regulatory Commission In a Prior Proceeding." As will be shown below, neither The Cleveland Electric Illuminating Company (CEI) nor Toledo Edison Company has met the burden of proving that the elements of collateral estoppel exist with regard to their

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respective claims.

A.- The Doctrine of Collateral Estoppel Although comparable in many respects, the doctrines of res judicata and collaterci estoppel differ in their precise application and ef fect. Briefly, res judicata prevents the relitigation of an entire claim or cause of action, while 28/ To the extent that Applicants urge that, in addition to such evidence being striken from the record, certain "allega-tions" should be " dismissed," their arguments have been dis-cussed previously. Clearly, even if all such allegations were eliminated. Applicants would not meet the test established by Rule 41(b).

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collateral estoppel prevents the relitigation cf a single issue, even though that issue may have been originally litigated as part of a cause of action different from that I of the subsequent proceeding.' The classic st'atement of the doctrines of res iudicata and collateral estoppel and the way in which those doctrines diff er is contained in Cromwell v. County of Sac, 94 U.S. 351, 352-353 (1876):

There is a difference between the effect of a .

judgment as a bar or estoppel against prosecu-tion of a second action upon the same claim or demand, and its effect as an estoppel in another action between the same parties upon a different claim or cause of action. In the former case, the judgment, if rendered upon the merits, con-stitutes an absolute bar to a subsequent action.

It is a finality as to the claim or demand in controversy, concluding parties and those in privity with them, not only as to every matter which was offered and received to s.ustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose. . . . But where the second action between the same parties is upon a dif ferent claim or demand, the judgment in the prior action operates as an estoppel only as to those matters in issue or 'Doints controverted, upon the determina-tion of whica the finding or verdict was rendered.

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In all cases, therefore, where It is sought to apply the estoppel of a judgment rendered upon one cause of action to matters arising in a suit upon a different cause of action, the inquiry must always be as to the point or question actually litigated and determined in the original action, not what might have been thus litigated and determined.

Only upon such matters is the judgment con-clusive in another action. [Empha513 supplied.]

Thus, to apply the doctrine of collHE ra - eatoppel to a con-troverted f act, the party pleadins aci. 3eral estoppel must show that there exists an identity of partiec and issues 33

between the prior and subsequent actions, and that the prior action resulted in a final judgment to which determination of the controverted fact was essential. These elements will be discussed in detail as they apply to Applicants ' claims of collateral estoppel here.

While it is clear th a t the doctrines of res judicata and collateral estoppel may be , applied in administrative hearings, the courts have held that their application should,

. be less strict than would be the case in the federal district courts. Thus, in United States v. Smith, 482 F.2d 1120, 1123 (8th Cir. 1973), the Court held:

Although application of the doctrine of res judicata to administrative decisions does, indeed, serve a useful purpose in preventing the relitigation of issues properly determined administratively it is no t , where applicable, applied with the same rigidity as its judicial counterpart. " [P] ractical reasons may exist for refusing to apply it ," held the court in Grose v. Cohen, 406 F.2d 823 (4th Cir. 1969),

and, continuing, "[I]n any event, where tradi-tional concepts of res judicata do not work well, they should be relaxed or qualified to prevent injustice. 2 Davis, Administrative Law, S18.03 (1958)."

See also: Title v. Immigration and Naturalization Service, 322 F.2d 21 (9th Cir. 1963); Grose v. Cohen, 406 F.2d 823 (4th Cir. 1969); Tipler v. E. I. du Pont de Nemours and Co.,

443 F.2d 125 (6th Cir. 1971); Gordon Co. Broadcasting Co. v.

FCC, 446 F.2d 1335 (D.C. Cir. 1971); Retail Clerks Union, Local 1401 v. NLRB, 463 F.2d 316 (D.C. Cir. 1972); United 34

. i States v. Smith, 428 F.2d 1120 (8th Cir. 1973); and United l 1

States v. Cappaert, 508 F.2d 313 (9th Cir. 1974).

Finally, the party pleading collateral estoppel has the burden of proving that all the requirements of that doctrine are present. 1B Moore, Federal Practice and Procedure 54.08 [1]

at 954 (2d Ed. 1974) (hereinafter cited as " Moore"). -

B. The Cleveland Electric Illuminating Company

1. Identity of Issues .

. As noted above, an essential element of the doctrine of collateral estoppel is the existence of an identity of issues between the prior and subsequent proceedings.

t Collateral estoppel is confined, however, to

" situations where the matter raised in the second proceeding is identical in all respects with that decided in the first proceeding and where the controlling f acts and applicable i

legal rules remain unchanged." Commissioner of Internal Revenue v. Sunnen, 33 U.S. 591, 599-600, 68 S. Ct. 715, 720, 92 L. Ed. 898 (1948). Even if the issue is identical and the facts remain constant; the adjudication in the first case does not estop the parties in the second, unless the matter raised in the second case involves substantially "the same bundle of legal principals that contributed to the rendering of the first judgment" --Id. at 602, 68 S. Ct. at 721.

Neaderland v. Commissioner, 424 F.2d 639, 642 (2d Cir.), cert. denied, 400 U.S. 827 (1970).

Thus, issues may dif fer between proceedings, even where the proceedings concern substantially identical facts, because of the application of dif f erent statutory standards to those 35 O

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facts. Where, as here, the prior and present proceedings arose under dif ferent ' statutes, the Board should be especially careful in applying collateral estoppel. As stated by the Court in Tepler v. E.I. duPont de Numous and Co., 443 F.2d 125, 128 .29 (6th Cir. 1971):

Absent a special consideration, a determination arising solely under one statute should not automatically be binding when a similar ques-tion arises under another statue. [ Citations omitted.] This is because the purposes, '

requirements, perspective and configuration of dif'ferent statutes ordinarily vary.

See also: United Shoe Machinery _ Corp. v. United States, 258 U.S. 451 (1922); Title v. Immigration and Naturalization Service, 322 F.2d 21 (9th Cir. 1963); and Pacific Seafarers.

Inc. v. Pacific Far East Line Inc., 404 F.2d 804 (D.C. Cir.

. 1968); cert. denied, 393 U.S. 1093 (1969).

Because 'of the dif fering treatment of antitrust considera-tions under Section 202(b) of the Federal Power Act and Section 105c. of the Atomic Energy Act, an identity of issues cannot exist between the prior Federal Power Commission (FPC) proceed-ing and the instant proceeding. The FPC proceedin,g was litigated under Section 202'b) Of the Federal Power Act, 16 U.S.C. S824(b) (App. 20). That section gives the FPC authority to order an interconnection between utilities when, af ter opportunity f or a hearing, it " finds such action necessary or appropriate in the public interest. " This general public interest standard differs substantially from the specific 36 O

antitrust standard of Section 105c. While Section 105c. deals entirely with antitrust questions, antitrust considerations have little overall impact under Section 202(b). The extent to which antitrust considerations impact on decisions under Section 202(b) was discussed by the Supreme Court in Otter Tail Power Co. v.

United States, 410 U.S. 366, 373 (1973):

Otter Tail mai'ntains here that its refusals to '

deal should be immune from antitrust prosecution because the Federal Power Commission has the authority to compel involuntary interconnections -

of power pursuant to S202(b) of the Federal Power Act. The essential thrust of S202, however, is to encourage voluntary interconnections of power. [ legislative citations omitted] Only if a power company refuses to interconnect voluntarily may the Federal Power Commission, subject to limitations unrelated to antitrust considerations, order the interconnection. The standard which governs its decision is whether such action is "necessary or appropriate in the public interest." Although antitrust considera-

, tions may be relevant, they are not determinative.

[ Emphasis suppliea.]

An examination of Exhibits App.18-24 shows that antitrust considerations in fact played a very minor part in the prior FPC proceeding. The City's allegations of anticompetitive activities were not discussed in the FPC's " Order Directing Immediate Temporary Emergency Interconnection and Standby Service.

. Consolidating Hearing, Setting Expedited Hearing, and Denying Motion for Oral Argument" (App.19). Nor did that order include those allegations in its statement of issues to be considered in the subsequent hearing (App. 19, p. 8), although those al.lega-l tions were in issue prior to the order (see App. 20, p. 13). '

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The City's allegations were considered and discussed as one of seven issues in the " Presiding Examiner's Initial Decision In Consolidated Proceeding" (App. 20). However, an examination of that Decision shows that, while findings concerning the City's allegations of anticompetitive conduct were made, they had little or no bearing on the decision of the presiding examiner. 29/

After stating that the City's claims of antitrust activities by CEI were unsupported by the record, the presiding examiner ,

nevertheless went on to grant the relief requested by the City:

The relief provided in this proceeding should eliminate any continuing threat to MELP 's ability to provide dependable service, if the City moves ef fectively to restore its 206 megawatts of installed capacity to full pro-duction on a dependable operating basis.

(App. 20, pp. 16-17).

This was the only statement concerning the ef fect of the anti-trust findings on the ordered relief, although the presiding examiner discussed at length the relationship between the relief and the other issues litigated. 30/

29/ A clear example of how the dif ferent statutory standards of Section 202(b) and Section 105c. destroy the claimed identity of issues between the prior FPC proceeding and this proceeding is found in the statement by the presiding examiner in the FPC proceeding that wheeling, the factual basis for several important issues in this case, is "outside the scope of this proceeding" (App. 20, p. 15).

30/ In its appeal to the Commission , the City took exception to the examiner's findings concerning the allegations o' anti-competitive conduct. Those findings were not discussed in the Commission's Opinion (App'. 21), presumably because they were dieta.

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It is clear th a t because of the statutory standard of 202(b), the City's allegations of anticompeetitive activities were' examined by the FPC from a perspective entirely dif ferent than that employed under Section 105c. This difference in perspective, arising because similar factual questions were litigated under dif f erent statutes, eliminates the identity of issues necessary for the application of collateral estoppel.

2. Facts Not Necessary to the Prior Decision ,

Collateral estoppel may only be applied where there has been a final judgment in the prior suit and where the issue in question was actually litigated and essential to the judgment rendered. As the Court in Fibreboard Paper Prod. Corp. v. East Bay Union of Machinists, Local 1304, 344 F.2d 300, 306 (9th Cir.),

cert. denied, 382 U.S. 826 (1965), stated:

It is also the rule that where estoppel by judgment is asserted, the earlier determina-tion must have been of a question of fact essential to the earlier judgment. As noted in the Restatement of the Law of Judgments ,

S68, the problem of collateral estoppel by judgment only arises "[w]here a question of fact essential to the judgment is actually litigated and determined by a valid and final judgment" (emphasis added). See comment "o" under that section. "The rules stated in this section are applicable only where the facts determined are essential to the judgment.

Where the jury or court makes findings of fact but the judgment is not dependent upon these findings, they are not conclusive between the parties in a subsequent action based upon a different cause of action."

The fact th a t , as discussed above, antitrust considerations are not determinative in a proceeding under Section 202(b), and in 39

f act were not essential to the determination in the FPC proceed-ing in question, shows that CEI has failed to prove this element of collateral estoppel.

C. Toledo Edison Company

1. Facts Not Necessary to the Prior Decision The necessity that the f actual finding, for which collateral estoppel is claimed,"be essential to the final decision in the prior proceeding has been discussed above. The findings of fact concerning the alleged territorial agreement between TE and Consumers Power Company were not essential to the decision in the Consumers Power proceeding before this agency. While making findings concerning that allegation, the Licensing Board, at page 149 of its decision, characterized those findings as follows:

During the hearing, evidence was presented con-

_ cerning situations which were not within the relevant matters in controversy and n'ot within the relevant market. While rulings on such situations are deemed neither essential or necessary to the disposition of the case, for

'the sake of completeness, several of them will be dis' ussed. [ Emphasis supplied.] -

This was admitted by TE in its Motion at page 9: 31/

It is tr ue , as stated by the Board in this proceeding, that the portion of the Consumer's 31/ TE's argument that materiality grows from an appeal by the Department is absurd. The standard is not whether one or both of the parties to the action felt the factual question to be material but whether the finding was necessary to the judgment' actually rendered.

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opinion which sets forth the Board's ruling on the alleged understanding or agreement between Toledo Edison and the Consumers Power Company was characterized as unnecessary to the final disposition of the case because the Board viewed

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that issue as technically being neither within the relevant matters in controversy or within the relevant market area.

Thus, TE has fail ~ed to prove this element necessary for the application of collateral estoppel.

2. Identity of Issues The, fact'that the f acts and issue in question were not -

within the matters in controversy in the prior proceeding is also important in that it demonstrates t<1at an identity of issues could not exist between this proceeding and the Consumers Power proceeding. Other f acts which destroy any claim of identity of issues are that the Board in Consumers Power limited the relevant matters in controversy to whether Consumers Power Company had the power to grant or deny access to coordination (Opinion, p. 9),

and that the relevant market differed from the market in this proceeding. 32/

3. Final Decision The final decision aspect of collateral estoppel is strictly applied in the federal courts:

The Federal rule is that the pendency of an appeal does not suspend the operation of an otherwise final judgment as res judiciata or collateral estoppel, unless the appeal removes 32/ We would note that the question here concerns the sale of power in Ohio for use in Michigan, as well as sales by Consumers in Ohio. These f acts are relevant to market defini-tion, as well as generation and transmission dominance and their exercise.

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the entire case to the appellate court and constitutes a proceeding de novo. Moore, 10.416[3'] at 2252 Outside the courts , however , this rule should be relaxed.

Professor Davis urges that an initial decision in an administra-tive proceeding should not be given estoppel ef fect:

Even though under S557 of the APA an initial decision of an examiner may become final in absence of either an appeal to the agency or review upon the Agency's own motion, giving res judiciata effect to such an initial deicsion that may, be later reversed by the agency seems clearly -

undesirable, for it would compel a lack of

. uniformity, might produce gross injustice, and would cause dismaying confusion. Davis, Administrative Law Text at 365 (3d. Ed. 1972). 33/

An even stronger case is presented here, where the prior initial decision is actually on appeal. It is clearly appropriate for the Board in this proceeding to exercise its discretion and

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to apply the doctrine of collateral estoppel less strictly then would be the case in a federal court.

33/ See also Maxwell Co. v. NLRB, 414 F.2d 477 (6th Cir. 1969),

wEere the Court held that a prior unappealed decision by an NLRB Regional Director did not prevent a later opposite decision by the Board in a proceeding involving the same f acts and the same parties. In that case , the Court said:

The right to make such changes is essential.

Without it agency law could never be improved as a result of experience but would be forever burdened with its encrusted errors. 414 F.2d at 479.

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4. Identity of Parties Finally, TE urges that, although it was not a party to the Consumers Power proceeding,,it should nevertheless be permitted to collaterally estop the Department from litigating the question of a territorial agreement. TE argues that, because of an erosion of

. the requirement of mutuality of estoppel, it should be permitted to defensively plead collateral estoppel. While the Department concedes that the requirement of mutuality has been modified in .

recent years, we do not believe that this Board is required to appply the doctrine of collateral estoppel in this proceeding.

Af ter stating the reasons why mutuality of estoppel no longer need be strictly adhered to, the Court in Blonder - Tongue v.

University Foundation, 402 U.S. 313, 349 (1971), added: 34/

It is clear that judicial decisions have tended to depart from the rigid requirements of mutuality. In accordance with this trend. there has been a corresponding development of the lower courts' ability and facility in dealing with questions of when it is appropriate and f air to 34/ It should also be noted that Blonder - Tongue dealt with the limited issue of the application of estoppel in patent litigation. After a lengthy discussion of mutuality, the Court stated:

Obviously, these mutations in estoppel doctrine are not before us for wholesale approval or rejection. But at the very least, they counsel us to re-examine whether mutuality of estoppel is a viable rule where a patentee seeks to relitigate the validity of a patent once a federal court has declared it to be ' invalid.

402 U.S. at 327.

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impose an estoppel against a party who has already litigated an issue once and lost.

It is thus clear that although mutuality of estoppel is no longer required, it may be applied where the Board, in its discretion, believes it equitable to do so.

The requirement of mutuality should be applied in this proceeding. First, the Board in Consumers Power characterized the evidence concerning the alleged territorial agreement as

" hearsay" 10 pinion, p. 159), presumably because the evidence was based on statements made by a person not a party to that proceeding. Since TE is a pa r ty to this proceeding, it is clear that. the evidence in this' proceeding, testimony and government reports detailing conversations between the authors and a managing agent of TE, do not constitute hearsay with respect to TE, but rather an admission of a party.

Second, as discussed in Blonder - Tongue, supra at 328-329, the purpose behind modification of the requirement of mutuality is to prevent the misallocation of resources which occurs where litigation of the same issue is per.nitted "as long as the supply of unrelated defendants holds out." Such is not the case in this proceeding. The allegation of a territorial agreement between TE and Consumers Power is only one of a number of activities by TE which contribute to a situation inconsistent with the antitrust laws. Elimination of that allegation will not substantially lessen TE's defensive burden nor allow it to withdraw from the 44 6

f .. .

proceeding. Thus, we do not have a situation where refusal to apply collateral estoppel will result in unnecessary and bu.densome litigation. Here, the necessity of insuring that the record contains all evidence which reClects on a " situation inconsistent" clearly outweighs those considerations which led to modification of the doctrine of mutuality.

III. CONCLUSION For the reasons set out above. the Department urges the .

l Atomic Safety and Licensing Board to deny each of Applicants' 1 individual motions to dismiss.

Respectfully submitted,

[ t x  ?<!f. . -,

STEVEN M. CHARNO (f _ _ _ ,

7 % ,f e MELVIN G. BERGER

,_- . /A JpET R. URBAN Attorneys, Antitrust Division Department of Justice Washing ton , D.C. 20530 May 17, 1976 1

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UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION i

BEFORE_THE ATOMIC __ SAFETY _AND LICENSING BOARD In the Matter of )

) .

The Toledo Edison Company and ) -

The Cleveland Electric Illuminating ) Docket Nos. 50-346A Company ) 50-500A (Davis-Besse Nuclear Power Station, ) 50-501A .

Units 1, 2 and 3) )

)

The Cleveland Electric Illuminating ) Docket Nos. 50-440A Company, et al. ) 50-441A (Perry Nuclear Power Plant, )

Units 1 and 2) )

CERTIFICATE OF SERVICE I hereby certify that copies of MEMORANDUM OF THE DEPARTMENT OF JUSTICE IN RESPONSE TO APPLICANTS' INDIVIDUAL MOTIONS TO DISMISS have been served upon all of the parties listed on the attachment hereto by deposit in the United States mail

, first class, airmail or by hand this 17th day of May 1976.

m 5TE V5LI~5~~CH AfiNO Attorney, Antitrust Division Department of Justice e

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ATTACHMENT Douglas V. Rigler, Esq. Gerald Charnoff, Esq.

Chairman, Atomic Safety and Wm. Bradford Reynolds, Esq.

Licensing Board Robert E. Zahler, Esq.

F.oley, Lardner, Hollabaugh Jay H. Bernstein, Esq. .

and Jacobs Shaw, Pittman, Potts &

815 Connecticut Avenue, N.W. Trowbridge Washington, D.C. 20006 1800 M Street, N.W.

Washington, D.C. 20036 Ivan'd. Smith, Esq.

Atomic Safety and Licensing Egank R. Clokey, Esq.

Board Special Assistant, Attorney

. Nuclear Regulatory-Commission General Washington, D.C. 20555 Room 219 Towne House Apartme,nts -

John M. Frysiak, Esquire Harrisburg, Pennsylvania 17105 Atomic Safety and Licensing Board Donald H. Hauser, Esq.

Nuclear Regulatory Commission Victor A. Greenslade, Jr., Esq.

Washington, D.C. 20555 The Cleveland Electric Illuminating Company Atomic Safety and Licensing 55 Public Square Board Panel Cleveland, Ohio 44101 Nuclear Regulatory Commission

• Washington, D.C. 20555 Leslie Henry, Esq.

Michael M. Briley, Esq.

L Docketing and Service Section Roger P. Klee, Esq.

Office of the Secretary Paul M. Smart, Esq.

Nuclear Regulatory Commission Fuller, Henry, Hodge & Snyder Washington, D.C. 20555 Post Office Box 2088 Toledo, Ohio 43604 Reuben Goldberg, Esq.

David C. Hjelmfelt, Esq. Russell J. Spetrino, Esq.

Goldberg, Fieldman & '

Thomas A. Kayuha, Esq.

Hjelmfelt Ohio Edison Company

'1700 Pennsylvania Avenue, N.W. 47 North Main Street Suite 550 Akron, Ohio 44308 Washington, D.C. 20006 Steven B. Peri, Es .

Terence H. Benbow, Esq.

James B. Davis, Director of A. Edward Grashof, Esq.

Law _

Steven A. Berger, Esq.

-Robert D. Hart, 1st Assistant Winthrop, Stimson, Putnam Director of Law & Roberts City of Cleveland 40 Wall Street 213 City Hall New York, New York 10005 Cleveland, Ohio 44114 Thomas J. Munsch, Esq.

General ~ Attorney Duquesne Light Company

, 435 Sixth Avenue Pittsburgh, Pennsylvania 15219

4 ..

David Olds, Esq.

William S. Lerach Esq, Joseph Rutberg, 1 squire Union Box 2009 Trust BuildingReed, Smith, Office Shaw,&

LegalofDirector McClay the Ex>cutive Pittsburgh, Pennsylvania Washington, D.C. Nuclear 15230 20555

.n Regu Lee A. Rau, Esq. .

Joseph A. William J.

Office of Kerner, Esquire Reed, Smith, Shaw & McClayRieser, Jr., Esq.

The Cleveland Electricthe General A Madison Building - Room 404 1155 15th Street, N.W. Post Office Box 5000 Illuminatin Washington, D.C.

20005 Cleveland, Ohio 44101 Edward A. Matto, Esq.

Karen H..Adkins, Esq. Richard M. Firestone, Esq Antitrust 30 E. Section 15th FloorBroad Street Columbus, Ohio 43215 Christopher R. Schraff

, Esq.

Environmental 361 E. Law SectionAssistant Attorney General 8th FloorBroad Street Columbus, Ohio 43215 i

James R. Edgerly, Esq.

Secretary and General Counsel l One East Washington StreetPennsylvania Power Comp New Castle, Pennsylvania i 16103 i

John Lansdale, Esq. j Cox, Langford & Brown  ;

21 Dupont Circle, N.W.  !

Washington, D.C.

20036  !

Michael R. Gallag  !

Gallagher, Sharp, her, Esq. }

Norman & MollisonFulton, 630 Bulkley Building Cleveland, Ohio 44115 i

Benjamin H.Jcck R. Goldberg, Esq. i Roy P. Vogler, Esq.

Lessy, Jr., Esq.

Nuclear Regulatoryon Washington, D.C.

e CommissiOffice of the General Coun 20555

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