The United States Court of Appeals for the Tenth Circuit recently affirmed a summary judgment in favor of Gunnison Energy Corporation and another oil and gas company, in a case brought under Sections 1 and 2 of the Sherman Antitrust Act. Denver partners Tim Beyer and Peter Korneffel led the defense team on behalf of Gunnison Energy. Mr. Korneffel argued the summary judgment motion in the district court, and Mr. Beyer presented the oral argument on appeal.
The case involved claims by a start-up oil and gas producer, Buccaneer Energy (USA) Inc., that Gunnison Energy and its co-owner of a natural gas pipeline conspired to exclude Buccaneer from access to the pipeline, thereby precluding Buccaneer from competing to sell gas from leases it had acquired in the area, which is in the Piceance Basin in Western Colorado. The claims were for conspiring to restrain trade under Section 1 in the form of a concerted refusal to deal, and for conspiracy to monopolize under Section 2. Buccaneer sought $77.4 million in actual damages before trebling.
The decision turned on Buccaneer’s inability to demonstrate a relevant market in either its alleged upstream market for the acquisition of oil and gas “production rights” or in a downstream market for the sale of natural gas during certain “constrained” time periods. The Court held the plaintiff failed to establish that production rights constituted a relevant product market, which was fatal to the plaintiff’s ability to prove that the defendants possessed market power in a relevant upstream market. The Court also held that the plaintiff had failed to demonstrate the defendants’ market power in the downstream gas sales market, where their combined market share never exceeded 31%. These failures to establish relevant product and geographic markets and to demonstrate that the defendants had market power in them, resulted in Buccaneer being unable to carry its burden to establish harm to competition in a defined market, as required under Section 1.
On the Section 2 claim for conspiracy to monopolize, the Court noted that proof of a relevant antitrust market is necessary in a Section 2 conspiracy case, and held that Buccaneer’s failure to establish a relevant antitrust market was fatal to that claim.
The decision brings to an end more than 7 years of antitrust litigation between Buccaneer and its principals and the defendants. The opinion can be found at Buccaneer Energy (USA) Inc., v. Gunnison Energy Corporation, et. al., 2017 WL 460969(10th Cir. Feb. 3 2017).