Sproul v. City of Wooster

• Citation: 840 F.2d 1267
• Decision Date: 26 February 1988
• Docket Number: No. 86-3781,86-3781
• Parties: , 1988-1 Trade Cases 67,900 Robert G. SPROUL, Plaintiff-Appellant, v. CITY OF WOOSTER, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 1267

840 F.2d 1267

56 USLW 2538, 1988-1 Trade Cases 67,900

Robert G. SPROUL, Plaintiff-Appellant, v. CITY OF WOOSTER, Defendant-Appellee.

No. 86-3781.

United States Court of Appeals, Sixth Circuit.

Argued June 18, 1987.

Decided Feb. 26, 1988.

Michael T. Gavin, Eli Manos (argued), Mansour, Gavin, Gerlack & Manos, Cleveland, Ohio, for plaintiff-appellant.

Daniel J. O'Loughlin (argued), Maria Codinach, Squire, Sanders & Dempsey, Cleveland, Ohio, H. Lloyd Cornelius, Director of Law, City of Wooster, Wooster, Ohio, for defendant-appellee.

Before MERRITT, MARTIN and WELLFORD, Circuit Judges.

WELLFORD, Circuit Judge.

Plaintiff Sproul is a real estate developer who obtained an option on substantial acreage located primarily in Wayne Township, Ohio. Most of the acreage adjoins the defendant City of Wooster city limits, but two acres under option were actually in Wooster. Sproul acquired these options intending to construct a shopping center and residential development on the site. Before the project could come to fruition, however, it was necessary to secure water and sewer service from the City of Wooster for the entire development. Approval was from Wooster for expansion of its water and sewer services to serve that part of the land outside the Wooster city limits.

In July of 1983, Sproul made an informal presentation to the Wooster City Council and the Planning Commission. After that presentation, he met privately with Mayor Margaret Demorest, Director of Administration Thomas Spitler, and City Council On September 21, 1983, after filing the annexation petition and after the petition became irrevocable, Sproul requested and received estimates from the City detailing the cost of providing water and sewer service to the site. Pursuant to these estimates, Sproul paid a total of $10,000.75 to the City: $2,500 to cover anticipated water connections, $7,300.75 for an "availability charge" on sewer service, and another $200 to cover inspection of the tap-in lines. Extensions to the water and sewer lines necessary to service the mall were then constructed, costing Sproul an additional $20,000. These lines were inspected and approved by the City.

President Clyde Breneman. During the private meeting, Sproul contends that Mayor Demorest agreed that it was the City's policy to extend the services if a petition to annex the property were filed for approval. Filing of a petition for annexation, not its ultimate approval by the Wayne County Commission, was alleged to be the necessary step to secure the services. According to the official in charge of Wooster's water and sewage system, this procedure had been followed in three previous cases.

On February 1, 1984, however, the Commissioners of Wayne County voted 2-1 to deny the petition for annexation. The new mayor of Wooster, who had replaced Demorest, former Council President Clyde Breneman, informed Sproul that City services could not be extended to the proposed development unless annexation was reconsidered and approved by the Wayne County Commission, or the City Council specifically approved an extra-territorial expansion of the services in question. Mayor Breneman stated in his letter to Sproul that "[i]n the absence of Council approval the Administration is without authority to allow the extension of water and sewer beyond the corporate limits." The City refunded the $2,500 paid for anticipated water connections, but did not refund the $7,300.75 paid for sewer connections since that money had already been paid over to the landowner who constructed the lines into which the mall was to tap. ¹ After it became obvious to Sproul that he was not going to secure approval for the extension from the City Council, the present suit was filed.

PROCEDURAL BACKGROUND

Sproul now appeals from the summary judgment granted defendant on all counts. Count one of the complaint alleged a breach of contract under Ohio law based on the City's repudiation of an agreement allegedly reached during the July 1983 meeting with Demorest, Spitler, and Breneman. Count two alleged a deprivation of due process and equal protection in violation of 42 U.S.C. Sec. 1983. Count three alleged a conspiracy between City officials and the plaintiff's commercial competitors, presumably the owners of commercial property located within the city limits, to deprive plaintiff of his right to equal protection in violation of 42 U.S.C. Sec. 1985(3). The fourth count alleged that the City used its monopoly power over water and sewer service to benefit plaintiff's competitors in violation of the Sherman Act.

The district court disposed of plaintiff's claims in three stages. In the first opinion, issued on June 5, 1985, the court dismissed the due process and equal protection claims brought under 42 U.S.C. Secs. 1983, 1985(3). The procedural due process claim was dismissed because the plaintiff failed to show that state remedies were inadequate under Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981), and Campbell v. Shearer, 732 F.2d 531 (6th Cir.1984). The equal protection claims were dismissed because the plaintiff failed to show that the alleged deprivation was the result of any class-based antagonism. With regard to the Sec. 1985(3) claim in particular, the court The district court granted summary judgment to the City on the Sherman Act antitrust claims in its second opinion issued July 19, 1985. In dismissing this claim, the court relied on the state action exemption enunciated in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), as interpreted to cover municipalities in Town of Hallie v. City of Eau Claire, 471 U.S. 34, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985). The district court looked to Ohio law and found that the state authorized the City to engage in anticompetitive conduct in operating its water and sewer system. The court then held under Town of Hallie that this was sufficient to exempt the City from antitrust liability.

interpreted United Brotherhood of Carpenters and Joiners of America, Local 610, AFL-CIO v. Scott, 463 U.S. 825, 103 S.Ct. 3352, 77 L.Ed.2d 1049 (1983), to hold that the statute was not intended to protect the "class" of nonresident real estate developers from economic discrimination.

On July 8, 1986, the district court finally granted summary judgment to the City on the state law contract claims. The principal issue raised by that claim was whether Mayor Demorest had the authority to enter into a contract for the extension of services beyond the city limits. The district court found that the Mayor did not have the authority to make such a contract, since control over extraterritorial expansion of City services rests in the City Council under Ohio law. Therefore, the plaintiff could not bind the City to the alleged contract even if it was shown to exist.

In the present appeal, plaintiff assigns error as to each of the judgments granted to the City on each separate claim. Plaintiff, however, no longer presses the equal protection aspect of his claims under 42 U.S.C. Secs. 1983, 1985(3).

THE ANTITRUST CLAIM

The principle that anticompetitive state action is exempt from the Sherman Act was first established by the Supreme Court in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). The state action exemption is implied under the Sherman Act. It is based on the absence of legislative history indicating that Congress intended the statute to regulate the governmental activities of the states. As observed by the Court in Parker, "We 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." 317 U.S. at 350-51, 63 S.Ct. 313-14. Under the Parker rule, therefore, the Sherman Act does not reach restraints on trade imposed as an "act of government." Id. at 352, 63 S.Ct. at 314.

The Supreme Court recently clarified the application of the state action doctrine to municipalities in a case which, interestingly, also involved the extra-territorial expansion of sewage service. In Town of Hallie v. City of Eau Claire, 471 U.S. 34, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985), the Court reaffirmed that municipalities are entitled to the exemption where they "demonstrate that their anticompetitive activities were authorized by the State 'pursuant to state policy to displace competition with regulation or monopoly public service.' " Id. at 38-39, 105 S.Ct. at 1716-17 (quoting City of Lafayette, La. v. Louisiana Power & Light Co., 435 U.S. 389, 413, 98 S.Ct. 1123, 1137, 55 L.Ed.2d 364 (1978) (Brennan, J., concurring)). To determine whether the City acts pursuant to a state policy, it is necessary to examine the statutory scheme under which it acts. Explicit legislative authorization for anticompetitive acts is not necessary: it is sufficient that the state bestows "broad regulatory authority" from which anticompetitive effects would logically result. Town of Hallie, 471 U.S. at 41-43, 105 S.Ct. at 1717-19.

We find similarity between the statutes considered in Town of Hallie and those involved in the present case. The Ohio statutes confer the same type of "broad regulatory authority" that was considered anticompetitive in Town of Hallie. Under Ohio law, a municipality has very wide discretion over city services. A city may choose to serve only its inhabitants, or can provide extraterritorial service subject to any constitutionally permissible restriction.

                See State ex rel. Indian Hill Acres, Inc. v. Kellogg, 149 Ohio St. 461, 79 N.E.2d 319 (1948).  A city also has the power to exclude competing suppliers from serving its inhabitants.    See Village of Lucas v. Lucas Local School District, 2 Ohio St.3d 13, 442 N.E.2d 449 (1982).  Like the statutes at issue in Town of Hallie, these broad grants of authority from the State of Ohio to the City of Wooster are foreseeably anticompetitive.  As a result, the City enjoys a

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