716 F.2d 646 (9th Cir. 1983), 80-3416, Parks v. Watson

Docket Nº:80-3416, 80-3458.
Citation:716 F.2d 646
Party Name:Gary R. PARKS, and Max Ansola, Jr., a partnership, dba Klamath Valley Company, Plaintiffs-Appellants-Cross-Appellees, v. James WATSON, personally and in his official capacity as City Manager for the City of Klamath Falls; and the City of Klamath Falls, an Oregon municipal corporation, Defendants-Appellees-Cross-Appellants.
Case Date:September 22, 1983
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

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716 F.2d 646 (9th Cir. 1983)

Gary R. PARKS, and Max Ansola, Jr., a partnership, dba

Klamath Valley Company,



James WATSON, personally and in his official capacity as

City Manager for the City of Klamath Falls; and the City of

Klamath Falls, an Oregon municipal corporation,


Nos. 80-3416, 80-3458.

United States Court of Appeals, Ninth Circuit

September 22, 1983

        Argued and Submitted Jan. 7, 1982.

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        Timothy J. Sercombe, Johnson, Harrang, Swanson & Long, Eugene, Or., for plaintiffs-appellants-cross-appellees.

        Charles F. Hinkle, Stoel, Rives, Boley, Fraser & Wyse, Portland, Or., for defendants-appellees-cross-appellants.

        Appeal from the United States District Court for the District of Oregon.

        Before BROWNING, Chief Judge, and WALLACE and BOOCHEVER, Circuit Judges.

        PER CURIAM:

        Gary R. Parks and Max Ansola, Jr., partners in Klamath Valley Company (hereinafter referred to as "Klamath"), appeal from a summary judgment for the City of Klamath Falls, Oregon and its manager Watson (hereinafter collectively referred to as "the City"), in an action under the Civil Rights Act, 42 U.S.C. Sec. 1983 (Supp. V 1981), and the Sherman Act, 15 U.S.C. Secs. 1, 2 (1976). In a cross-appeal, the City challenges the district court's denial of its motion for an award of attorneys' fees under 42 U.S.C. Sec. 1988 (1976). Klamath's section 1983 and antitrust claims both arose from the City's denial of a request to vacate certain platted City streets unless Klamath dedicated to the City land containing geothermal wells. Klamath's section 1983 claim raises issues involving an alleged taking of property without just compensation and the denial of due process and equal protection under the fifth and fourteenth amendments. Its antitrust action raises issues involving standing under sections 4 and 16 of the Clayton Act, 15 U.S.C. Secs. 15 (Supp. V 1981), 26 (1976), as well as questions of antitrust immunity and jurisdiction. We affirm in part and reverse and remand in part.


Factual Background

        In 1978, Klamath acquired two tracts of property located adjacent to Old Fort Road in the city of Klamath Falls. There are four geothermal wells located on the property--two in the northern tract and two in the southern tract. One of the wells in the southern tract is currently operational, providing heat for ten homes located on the tract. Klamath planned to construct 214 apartment units on the northern tract and to heat them with the main geothermal well on the northern tract. Klamath pursued this plan by hiring geothermal heating consultants, developing economic projections and engineering plans, securing a commitment of venture capital, and obtaining a geothermal water permit from the State of Oregon. Klamath also investigated possible uses of the surplus energy produced by the wells which would be available after providing for the existing residences and projected apartment units. Klamath attempted to apply to the City for a utility franchise but was refused an application.

        In order to develop its apartment complex, Klamath needed both a zoning change and the vacation of platted City streets on the property. After the City Planning Commission recommended approval of the proposed street vacations and zoning change, the City Council voted to rezone the apartment parcel to allow more dense residential uses.

        Things did not go smoothly with Klamath's vacation petition. The City charter provides that when the City vacates a street, the party to whom the property reverts must pay the City just compensation. Negotiations on compensation for the requested vacation occurred between December 1978 and July 1979. Although the parties' description of the preliminary negotiations differ somewhat, the ultimate disagreement between the City and Klamath is quite clear. Klamath was willing to pay $1.00 for each square foot of street that was vacated, and to convey to the City an easement for a 20-foot strip of property near Old Fort Road. However, the City wanted the dedication of that property, because fee

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ownership of this 20-foot strip of property would give the City rights to the geothermal wells on the northern tract. Klamath did not agree to the dedication. On July 16, 1979, the City Council voted unanimously to deny Klamath's vacation petition. Consequently, Klamath was unable to construct its apartment complex as planned.

        Klamath brought suit against the City for conspiracy to restrain competition in and to monopolize the Klamath Falls geothermal heating market. Specifically, Klamath's complaint alleged that by refusing to permit the street vacation for reasonable compensation, the City and others combined to restrain unreasonably the marketing of residential heating by Klamath to potential purchasers in violation of section 1 of the Sherman Act, 15 U.S.C. Sec. 1 (1976). Klamath further alleged that the City denied its vacation request with the intent to create a monopoly in the geothermal heating market in violation of section 2 of the Sherman Act, 15 U.S.C. Sec. 2 (1976), and that the City violated its constitutional rights by denying the vacation petition.

        After the pleadings were filed, the City took the deposition of Parks. Klamath then served a set of interrogatories and a request for production of documents. Thereafter, the City moved for partial summary judgment on the antitrust claims and for a stay of discovery. The motion was granted. The City then moved for summary judgment on the section 1983 claims. Klamath filed a motion under rule 56(f) claiming an inability to obtain discovery. The district court concluded that discovery would not aid Klamath in establishing a violation of its civil rights and granted the City's motion. The City then moved for an award of attorney's fees on the civil rights portion of the case pursuant to 42 U.S.C. Sec. 1988 (1976), asserting that Klamath's suit was "without foundation." The district court denied the motion.


The Fifth Amendment Claims--Unconstitutional Condition

        Klamath's first taking claim is based on the doctrine of unconstitutional conditions which the Supreme Court reaffirmed in Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972). The Court held that "even though a person has no 'right' to a valuable governmental benefit", and even though the government may deny the benefit at its discretion, the government may not impose a choice between the government benefit and the exercise of a constitutionally guaranteed right. Id. at 597, 92 S.Ct. at 2697. "Such interference with constitutional rights is impermissible." Id. Klamath argues that the City's action has required it to choose between the street vacation and its right under the fifth amendment to just compensation for its geothermal wells. The City does not dispute that the value of the land it sought in exchange for the street vacations greatly exceeds the value of the platted streets. Rather, the City argues that Klamath has no right to just compensation since Klamath's property was never taken.

        The City, as well as the district court, relies on our decision in Portland General Electric Co. v. Federal Power Commission, 328 F.2d 165 (9th Cir.1964). There we held that licenses issued by the federal government containing conditions whereby the licensee was required to convey certain property or furnish services to the United States free of charge, did not constitute a taking of property without due process of law. We reasoned that "[i]t is not a taking for the Government to withhold a benefit it is not contractually or constitutionally obliged to confer[, n]or is it a taking for the Government to impose financial obligations upon the recipient of a benefit if, as here, the benefit may be declined." Id. at 173. Unlike the condition imposed on Klamath, however, those required in Portland General were directly related to the subject of the requested license, navigational rights. Without that distinction, Portland General appears to be in conflict with Perry. Under Perry, the government cannot avoid the application of the unconstitutional conditions doctrine by defining a taking to exclude those situations where the government

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benefit can be withheld at the discretion of the government.

        Even though Perry must be read as limiting the government's ability to impose conditions, financial or otherwise, on the granting of its largess, such limitations only arise when the condition attached infringes on a constitutionally protected interest. Thus, in order for Klamath to establish that an unconstitutional condition was demanded, the City's condition must amount to a taking of property without due process of law. The City concludes that under the reasoning of Honolulu Rapid Transit Co. v. Dolim, 459 F.2d 551 (9th Cir.), cert. denied, 409 U.S. 875, 93 S.Ct. 124, 34 L.Ed.2d 128 (1972), which we decided before Perry, a taking of property is not involved when the City negotiates the price for vacating its streets.

        In Honolulu, the Honolulu Rapid Transit Company received a franchise from the City of Honolulu in 1921 to provide public transportation. A section of that franchise permitted the City of Honolulu to purchase the company's property for an amount, excluding the value of goodwill and other intangibles, to be determined by the Public Utilities Commission. In 1970, the City of Honolulu attempted to purchase the property of the company pursuant to the franchise terms. The company claimed that even though the government had an absolute power to grant or withhold the franchise, the City could not exact a waiver of the company's...

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