Snake River Valley Elec. Assoc. v. State

Decision Date29 January 2001
Docket NumberNo. 99-35204,99-35204
Citation238 F.3d 1189
Parties(9th Cir. 2001) SNAKE RIVER VALLEY ELECTRIC ASSOCIATION, Plaintiff-Appellant, v. PACIFICORP, (including Utah Power and Light Company, a Division), Defendant-Appellee, and STATE OF IDAHO, Defendant-intervenor Appellee
CourtU.S. Court of Appeals — Ninth Circuit

Charles F. Wheatley, Jr., Wheatley & Ranquist, Annapolis, Maryland, Peter J. Richardson, Richardson & O'Leary, Eagle, Idaho, for the plaintiff-appellant.

David J. Jordan and John M. Eriksson, Stoel Rives, Salt Lake City, Utah, for the defendants-appellees.

Brett T. DeLange, Deputy Attorney General, Civil Litigation Division, Boise, Idaho, for the defendant-intervenor-appellee.

Appeal from the United States District Court for the District of Idaho B. Lynn Winmill, District Judge, Presiding. D.C. No.CV-96-00308-BLW

Before: Donald P. Lay,1 A. Wallace Tashima and M. Margaret McKeown, Circuit Judges.

ORDER

The opinion filed on October 3, 2000, and reported as Snake River Valley Elec. Assoc. v. PacifiCorp, 228 F.3d 972 (9th Cir. 2000), is withdrawn and the Amended Opinion filed concurrently with this order is substituted in its place.

With the filing of the amended opinion, the panel has voted to deny the petitions for panel rehearing. Judges Tashima and McKeown have voted to deny the petitions for rehearing en banc and Judge Lay so recommends. The full court has been advised of the petitions for rehearing en banc and no judge of the court has requested a vote on en banc rehearing. Fed. R. App. P. 35(b).

The petitions for panel rehearing and the petitions for rehearing en banc are denied.

OPINION

LAY, Circuit Judge:

Snake River Valley Electric Association ("SRVEA") brought this action against PacifiCorp and its division, Utah Power and Light Company,2 alleging a violation of the federal antitrust laws. SRVEA challenges PacifiCorp's refusal to allow SRVEA to "wheel"3 and supply power to PacifiCorp's customers through PacifiCorp's electric transmission facilities, arguing such refusal violates 1 andS 2 of the Sherman Antitrust Act, 15 U.S.C. 1-2 (1997), andS 3 of the Clayton Act, 15 U.S.C. 14 (1997).4 In moving for summary judgment, PacifiCorp argues that Idaho law expressly permits such anticompetitive conduct, thereby immunizing PacifiCorp from antitrust liability under the state action immunity doctrine. See Parker v. Brown, 317 U.S. 341, 350-51 (1943). The district court granted summary judgment to PacifiCorp, agreeing that the Electric Supplier Stabilization Act ("ESSA"), Idaho Code 61-332 et seq. (1999), expressly authorizes PacifiCorp's refusal, and, as such, the state action immunity doctrine bars SRVEA from recovering under the federal antitrust statutes. We reverse.5

I. Background

The Idaho Legislature passed the ESSA in 1970 to regulate electric service providers. See Idaho CodeS 61-332 et seq. (1999). The acknowledged purpose of this statute was to "promote harmony among and between electric suppliers furnishing electricity within the state of Idaho, prohibit the `pirating' of customers of another supplier, discourage duplication of electric facilities, and stabilize the territories and customers served with electricity by such suppliers." Idaho Code 61332 Subsection B (1999). To fulfill these goals, the ESSA restricted competition for existing utility customers.6

SRVEA is a non-profit cooperative organized to buy electric power at wholesale rates for its members. SRVEA's members reside in eastern Idaho, and most of them presently purchase their power from Utah Power and Light Company, a subsidiary of PacifiCorp. PacifiCorp owns the vast majority of nearby electric transmission facilities and controls over ninety percent of the market for electricity in the Idaho Falls area.

SRVEA seeks to provide electricity to its members at a lower cost. As SRVEA owns no electric transmission facilities, it sought access to PacifiCorp's facilities to wheel power to its members as well as PacifiCorp's permission to serve PacifiCorp customers. PacifiCorp refused to grant consent, however, believing the ESSA authorized such refusal. As a result, SRVEA brought this antitrust action in the Idaho federal district court.

II. Discussion

SRVEA first argues that PacifiCorp's anticompetitive actions are not authorized by the ESSA, as ESSA does not authorize PacifiCorp's refusal to wheel SRVEA's power. This may be true, but SRVEA not only asks PacifiCorp to wheel power, but also seeks PacifiCorp's consent to provide power to PacifiCorp's customers. This conduct is covered by the ESSA, which forbids a utility from "supply[ing ] . . . electric service to any electric service entrance that is then . . . connected for electric service to facilities of another electric supplier" absent the consent of such other supplier. Idaho Code 61-332B (1999).7 As the ESSA authorizes PacifiCorp's behavior, the question becomes whether the ESSA cloaks PacifiCorp's refusal with state action immunity.

The Supreme Court first announced the state action immunity doctrine in Parker, where the Court held that principles of federalism immunize anticompetitive conduct pursuant to state laws restricting competition from federal antitrust scrutiny. "In a dual system of government . . . an unexpressed purpose to nullify a state's control over its officers and agents is not lightly to be attributed to Congress." Parker, 317 U.S. at 351. The Court found no such Congressional intent in the antitrust statutes. Id. At the same time, the Supreme Court has made clear that a state may not thwart "the national policy in favor of competition . . . by casting . . . a gauzy cloak of state involvement over what is essentially a private price-fixing arrangement." California Retail Liquor Dealers Ass'n. v. Midcal Aluminum, Inc., 445 U.S. 97, 106 (1980) (Midcal). The state action immunity test thus ensures that a state "imposed the [competitive] restraint as an act of government" rather than merely "authorizing [a party] to violate [antitrust laws],or . . . declaring that their action is lawful." 8 Parker, 317 U.S. at 351-52.

In Midcal, the Court created the contemporary two-step test for determining whether an alleged state-sponsored restraint of competition is immune from federal antitrust scrutiny. The Midcal Court held that the challenged restraint must be (1) clearly articulated, and (2) actively supervised by the state. 445 U.S. at 105. As applied to the present case, the district court held (1) through the enactment of ESSA, the State of Idaho has affirmatively expressed a state policy restraining competition among electrical suppliers, and (2) the ESSA satisfies the requirement that the State of Idaho actively supervise its anticompetitive policy.

A. Clearly Articulated State Policy

The first prong of the Midcal test is satisfied when the state manifests an intent to exclude an industry from federal antitrust scrutiny. SRVEA urges that such intent is missing because the ESSA does not mandate or compel the prohibition of competition. However, the Supreme Court has held that this prong is satisfied when a state's policy permits but does not compel anticompetitive conduct. See Southern Motor Carriers Rate Conference v. United States, 471 U.S. 48, 60 (1985) ("[T]he federal antitrust laws do not forbid the States to adopt policies that permit, but do not compel, anticompetitive conduct by regulated private parties."). In A-1 AmbulanceServ. Inc. v. County of Monterey, 90 F.3d 333 (9th Cir.1996), this circuit noted the modern test for clear articulation: "[t]o meet the `clearly articulated' requirement it is not necessary for the State to expressly permit the displacement of competition. Instead, it is only required that `suppression of competition is the foreseeable result of what the statute authorizes.' " Id. at 336 (quoting City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 372-73 (1991)). We must, therefore, determine whether PacifiCorp's refusal to allow SRVEA to service PacifiCorp customers is a foreseeable result of the ESSA.

There is no question that Idaho Code 61-332B contemplates the suppression of competition at issue. The code section forbids "furnish[ing] electric service" to the "electric service entrance" of another electric supplier's customer without "the written consent of such other electric supplier." Idaho Code 61-332B (1999). The legislature would not grant such power to an electric supplier without foreseeing that such supplier would normally refuse consent. The restraint of trade at issue -PacifiCorp's refusal to allow SRVEA to supply PacifiCorp customers with electricity -is clearly a foreseeable result of the Idaho Code.

SRVEA's arguments to the contrary are without merit. SRVEA relies on the earlier case of Goldfarb v. Virginia State Bar, 421 U.S. 773, 791 (1975), and urges that anticompetitive conduct must be compelled by the state, rather than merely permitted. In Southern Motor, however, the Supreme Court expressly repudiated the notion that Goldfarb demanded a state expressly authorize an anticompetitive act, stating "[t]he federal antitrust laws do not forbid the States to adopt policies that permit, but do not compel, anticompetitive conduct by regulated private parties. As long as the State clearly articulates its intent to adopt a permissive policy, the first prong of the Midcal test is satisfied."9 SRVEA also argues that nothing in the ESSA expressly prohibits PacifiCorp from wheeling power to SRVEA customers. As mentioned above, this may be true, but it is irrelevant. PacifiCorp's refusal to grant SRVEA consent to serve PacifiCorp customers is a foreseeable result of the ESSA. Finally, SRVEA urges that for a foreseeable result to satisfy the clear articulation prong, it must be based on a system of state regulation. This argument fails as it conflates the two prongs...

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