City of Lafayette, Louisiana v. Louisiana Power & Light Co., 75-1909

• Decision Date: 27 May 1976
• Docket Number: No. 75-1909,75-1909
• Citation: 532 F.2d 431
• Parties: 1976-1 Trade Cases 60,897 CITY OF LAFAYETTE, LOUISIANA, and City of Plaquemine, Louisiana, Plaintiffs-Appellees, v. LOUSIANA POWER & LIGHT COMPANY et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 431

532 F.2d 431

1976-1 Trade Cases 60,897

CITY OF LAFAYETTE, LOUISIANA, and City of Plaquemine, Louisiana, Plaintiffs-Appellees, v. LOUSIANA POWER & LIGHT COMPANY et al., Defendants-Appellants.

No. 75-1909.

United States Court of Appeals, Fifth Circuit.

May 27, 1976.

Andrew P. Carter, William T. Tete, New Orleans, La., for defendants-appellants.

Tom F. Phillips, Baton Rouge, La., for Gulf States Utilities Co.

Jerome A. Hochberg, Robert C. McDiarmid, Washington, D. C., Robert E. Winn, New Orleans, La., for plaintiffs-appellees.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before MORGAN, CLARK and TJOFLAT, Circuit Judges.

TJOFLAT, Circuit Judge.

The sole question in this appeal is whether the actions of a city are automatically outside the scope of the federal antitrust laws. Answering in the negative, we reverse the decision below and remand for further proceedings.

I

A complaint filed on July 24, 1973, by the cities of Lafayette and Plaquemine, Louisiana (the Cities), alleged that appellant Louisiana Power & Light Company (Power & Light) and three other privately owned utilities had violated Sections 1 and 2 of the Sherman Act. ¹ The allegations of this complaint are not involved in the present appeal. In its amended counterclaim, Power & Light charged the Cities with having themselves violated the federal antitrust laws in several respects. These allegations can be summarized as follows: (a) that the Cities were conducting sham litigation in order to delay or prevent Power & Light's construction of a nuclear power plant; (b) that anticompetitive covenants were included in the Cities' debentures; ² (c) that the Cities had conspired with other parties to extend the provision of power to certain service areas beyond the time periods allowed by state law; (d) that the city of Plaquemine was requiring customers outside its city limits to purchase electricity from the city in order to obtain gas and water. All of these actions were alleged to violate Sections 1 and 2 of the Sherman Act. The "tie-in" of electricity to gas and water was alleged to violate Section 3 of the Clayton Act, ³ as well. In its order of February 28, 1975, the trial court dismissed the entire counterclaim. While noting its reluctance to exempt an enterprise which was "clearly a business activity" from the antitrust laws, the court held that the plaintiffs' status as cities was sufficient to bring all their conduct within the "state action" exemption as announced in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), and as interpreted by this Court in Saenz v. University Interscholastic League, 487 F.2d 1026 (5th Cir. 1973). Following the entry of final judgment dismissing Power & Light's counterclaim on March 13, 1975, this appeal was taken.

II

In Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), and in Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975), the Supreme Court has defined the extent to which state governmental entities are exempt from the antitrust laws. The earlier case was a suit to enjoin the enforcement of an agricultural marketing program which had been established by a California statute. Noting that the program "derived its authority and its efficacy from the legislative command of the state . . . ", 317 U.S. at 350, 63 S.Ct. at 313, 87 L.Ed. at 326, the Court held that the defendants' conduct was beyond the reach of the Sherman Act. ⁴ The Court could "find nothing in the language of the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature," id. at 350-51, 63 S.Ct. at 313, 87 L.Ed. at 326. By legislative command, the state had adopted an anticompetitive program and prescribed the terms of its operation. Violations were punishable under the state's penal code. In the Court's view, a restraint which the state, "as sovereign, imposed . . . as an act of government . . . ", could not be made the basis for Sherman Act liability. Id. 317 U.S. at 352, 63 S.Ct. at 314, 87 L.Ed. at 327.

The trial court in the present case acted without the benefit of the Supreme Court's only major post-Parker explication of the "state action" doctrine. In Goldfarb, supra, the High Court was faced with a Sherman Act challenge to minimum fee schedules published by a county bar association and enforced by the Virginia State Bar. The state bar was a state agency by law, id. 421 U.S. at 789-90, 95 S.Ct. at 2014-2015, 44 L.Ed.2d at 586-587, and both lower courts in Goldfarb had held that the bar qualified for the "state action" exemption. ⁵ Without dissent, the Supreme Court rejected this contention. Although the state legislature had authorized the Supreme Court of Virginia to regulate the practice of law, id., at 788, 95 S.Ct. at 2014, 44 L.Ed.2d at 585, that court had taken no action to fix lawyers' fees, id. 421 U.S. at 789, 95 S.Ct. at 2014, 44 L.Ed.2d at 586. Nor was there any state statute which directed members of the bar to establish minimum fee schedules. Therefore, the state bar's participation in price fixing failed to satisfy the "threshold inquiry" under Parker, i. e., "whether the activity is required by the State acting as sovereign", id. at 790, 95 S.Ct. at 2015, 44 L.Ed.2d at 587.

Taken together, these two controlling precedents require the following analysis. A subordinate state governmental body ⁶ is not ipso facto exempt from the operation of the antitrust laws. Rather, a district court must ask whether the state legislature contemplated a certain type of anticompetitive restraint. In our opinion, though, it is not necessary to point to an express statutory mandate for each act which is alleged to violate the antitrust laws. It will suffice if the challenged activity was clearly within the legislative intent. ⁷ Thus, a trial judge may ascertain, from the authority given a governmental entity to operate in a particular area, that the legislature contemplated the kind of action complained of. On the other hand, as in Goldfarb, the connection between a legislative grant of power and the subordinate entity's asserted use of that power may be too tenuous to permit the conclusion that the entity's intended scope of activity encompassed such conduct. Whether a governmental body's actions are comprehended within the powers granted to it by the legislature is, of course, a determination which can be made only under the specific facts in each case. ⁸ A district judge's inquiry on this point should be broad enough to include all evidence which might show the scope of legislative intent. ⁹

III

The Cities argue that a decision adverse to them would necessarily overrule this Court's prior opinion in Saenz v. University Interscholastic League, 487 F.2d 1026 (5th Cir. 1973). We are reminded of the general rule that one panel cannot overrule the holding of a previous panel of the same court. See United States v. Automobile Club Ins. Co., 522 F.2d 1, 3 (5th Cir. 1975). However, we do not regard our decision as irreconcilably inconsistent with that in Saenz. The complaint in that case alleged that the director of a state slide rule contest induced a state agency to define its regulations so as to exclude the plaintiff's slide rules from use in the contest. This action allegedly resulted from an unspecified economic tie between the director and a slide rule manufacturer which competed with plaintiff. As the panel noted, id. at 1028, the charge of an economic relationship between the director and the rival manufacturer was entitled to no weight, since plaintiff could not simply rely on his pleadings in the face of opposing affidavits. Stripped of the unsupported charge of financial influence, the allegations in Saenz must be seen as having stated no more than that (a) the director, "clearly acting within the scope of his duties", id at 1028, determined that plaintiff's slide rule was not a "standard slide rule" which could be employed in the contest, and (b) the agency ratified that decision. It can scarcely be doubted that the agency's actions were within the contemplated scope of the powers conferred upon the state university system (of which the agency was a part) by the Texas legislature. The Parker-Goldfarb principle, as we have interpreted it, would clearly exempt such actions from the Sherman Act. We are, therefore, unpersuaded that there is any necessary conflict between our decision and the panel opinion in Saenz.

Even accepting arguendo the contention that Saenz automatically excludes subordinate state governmental bodies from the antitrust laws, we must still reject the notion that only an en banc Court could reach the result which we reach today. It is settled that the rule against inconsistent panel decisions has no application when intervening Supreme Court precedent dictates a departure from a prior panel's holding. See Davis v. Estelle, 5th Cir.,529 F.2d 437, at p. 441 (1976). This is precisely the situation here. The argument that lower state entities are automatically exempt from the Sherman Act has been laid to rest by the Supreme Court in Goldfarb. The test now is whether the challenged action is the type of activity which the legislature intended the governmental body to perform. This principle has already been tacitly recognized by one post-Goldfarb panel of this Court. Faced with an antitrust challenge to a city council's rate-making practices, the panel in Jeffrey v. Southwestern Bell, 518 F.2d 1129 (5th Cir. 1975) was not content merely to note that the actor was a municipal body. Rather, the Court went on to ascertain that the state legislature had expressly delegated rate-making authority to municipalities, id. at 1133. The legislature had also specifically charged municipalities with the duty of insuring a fair rate structure. The Jeffrey panel was unwilling to assume that the city council was doing...