Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Tex.: City and municipal energy provider cleared of antitrust allegations, (Mar 25, 2026)

By Steven D. Cole, J.D.

None of the conduct alleged by the entity representing the energy consumers amounted to a violation of the antitrust laws.

The federal district court in Beaumont, Texas declined to alter or amend the dismissal of antitrust claims filed by RecoveryX Livingston L.L.C. against the City of Livingston, Texas. RecoveryX represented individuals and entities who claimed to have been overcharged for electrical services in violation of federal and state laws, including the Sherman Act and Clayton Act. RecoveryX, however, lacked antitrust standing to assert the claims. RecoveryX failed to allege anticompetitive conduct connected to high price service, as the charging of supracompetitive prices alone is insufficient to show an injury. Furthermore, all of the claims failed on numerous grounds (RecoveryX Livingston LLC v. City of Livingston, No. 9:24-cv-00193-MJT (E.D. Tex. Mar. 24, 2026)).

Background. The Sam Rayburn Municipal Power Agency (SRMPA) supplies wholesale electricity to the City of Livingston, Texas, as well as non-party cities Jasper and Liberty. Livingston then sells this power at retail rates to its residents. The three cities share ownership over SRMPA, and their city council members serve as board members. Individuals and entities who receive electrical services at purportedly supracompetitive rates assigned RecoveryX to represent them in this matter.

RecoveryX asserted that three contracts at issue contravened federal and state law. The first obligates the three cities to purchase power and various services from only EWO Marketing, Inc. (Entergy). The second references a wholesale power enterprise called the Cambridge Project (Cambridge). Cambridge “collects the profits from the three large industrial sales (Conoco, CITCO and Sasol) and then distributes the money to the cities of Livingston, Jasper and Liberty from those sales through [SRMPA] and a series of ‘trust accounts.’” Livingston’s receipt of trust account distributions is conditioned on its purchasing electricity exclusively through Entergy. The third agreement controls the overall rate that Livingston pays SRMPA for wholesale electrical power. RecoveryX alleged that its members pay, on average, 15 percent more for electricity than others similarly situated. RecoveryX posited that Livingston and SRMPA agreed to these higher rates in order to continue receiving the trust account distributions, which “pads the profits of Entergy as well as the Cities’ general slush funds.” According to RecoveryX, Livingston uses this slush fund to waive property taxes, and since only their wealthier residents own property, the higher electrical rates tend to penalize the poorer ones.

The Third Amended Complaint (TAC), which was “frequently unclear in its statements of how the contracts connect and what actions can be attributed to which parties,” alleged that SRMPA and Livingston committed violations of the Sherman Act and Clayton Act. The TAC also alleged constitutional takings claims and several violations of Texas statutory and common law. SRMPA and Livingston filed separate motions to dismiss, which the court granted as to the federal claims (and remanded the state claims to state court) on August 11, 2025. RecoveryX then filed a motion under Rule 59(e) of the Federal Rules of Civil Procedure, requesting that the court alter its rulings on the federal antitrust claims.

Availability of relief. At the outset, the court pointed out that the TAC’s prayer for relief sought only monetary relief and did not distinguish between the defendants. This posed a problem, since local governments are not liable for antitrust damages.

Antitrust injury. RecoveryX did not adequately allege an antitrust injury, rendering it without standing. This alone was sufficient to justify dismissal of its claims. RecoveryX asserted that its members suffered antitrust injury because they were “paying artificially high rates that they wouldn’t have otherwise incurred as a result of the antitrust conduct.” Yet, it failed to allege anticompetitive conduct connected to those high prices, as a defendant’s charging of supracompetitive prices alone is insufficient to make this showing.

Indirect purchaser rule. The indirect purchaser rule acted independently to bar RecoveryX’s claims against SRMPA. In Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977), the Supreme Court endorsed a straightforward rule prohibiting indirect purchasers from suing an upstream antitrust violator. RecoveryX argued that its claims could proceed under the conspiracy exception to this rule—whereby indirect purchasers can pursue an antitrust claim against any defendant involved in a common scheme of monopolistic conduct. This exception, however, undermines much of the indirect purchaser rule’s foundation, and has never been endorsed by the Fifth Circuit.

State action doctrine. RecoveryX also argued that the court erred in finding that the state action doctrine, or “Parker immunity,” barred its antitrust claims against Livingston. This doctrine holds that municipalities are immune from federal antitrust law liability when they act “pursuant to a clearly articulated and affirmatively expressed state policy to displace competition.” FTC v. Phoebe Putney Health Sys., 568 U.S. 216, 226 (2013) (internal citations omitted). The court conceded that the state action doctrine might not apply in this instance, but the antitrust claims would still fail because the alleged conduct did not amount to an antitrust violation. Even if Livingston’s alleged practice of charging supracompetitive prices for electrical services in order to make up for not collecting property taxes could be construed as anticompetitive conduct, this was permissible under Texas law, which allows cities to operate a regulated regime in which they set their own rates. See Tex. Util. Code § 33.001. Resident are not without recourse, however, as those unhappy with their electric bills may petition their municipality to enter the free market. See Tex. Util. Code § 40.051(a).

Tying arrangements. RecoveryX’s allegations of unlawful tying arrangements under Section 1 of the Sherman Act and Section 3 of the Clayton Act failed for the simple reason that tying claims require the tying together of two separate products, and the TAC refenced only one—electricity. Moreover, this claim could not proceed under the Clayton Act because the Clayton Act covers commodities, not services.

Monopolization. Finally, interpreting the TAC as attempting to set forth a claim of actual monopolization under Section 2 of the Sherman Act, the court held that none of the factual allegations described conduct of an anticompetitive nature. Even if RecoveryX did clear this hurdle, an additional consideration was the fact that Texas law prevents market entry: “Because Texas law declares monopoly by fiat in electricity provision, and Livingston has not opted out of that arrangement, no competitors can enter the market regardless of what Livingston and SRMPA do.” Under these circumstances, RecoveryX could not show that any of the alleged forms of anticompetitive conduct would tend “to foreclose competition, to gain a competitive advantage, or to destroy a competitor.” BRFHH Shreveport, LLC v. Willis-Knighton Med. Ctr., 49 F.4th 520, 529 (5th Cir. 2022) (internal citation omitted).

The Case is No. 9:24-cv-00193-MJT.

Judge: Truncale, M.

Attorneys: Michael T. Gallagher (The Gallagher Law Firm PLC) for RecoveryX Livingston LLC. Thomas L. Dyer (Lewis Brisbois Bisgaard & Smith LLP) for City of Livingston.

Companies: RecoveryX Livingston LLC

Cases: Antitrust TexasNews