Lease Lights, Inc. v. Public Service Co. of Oklahoma

Decision Date27 June 1988
Docket NumberNo. 86-1797,86-1797
Citation849 F.2d 1330
Parties, 1988-1 Trade Cases 68,112 LEASE LIGHTS, INC.; Jack R. Seay, d/b/a Seay Electric Company; Knight Lights Company, Inc.; and Protective Lighting, Inc., Plaintiffs-Appellees, v. PUBLIC SERVICE COMPANY OF OKLAHOMA, a corporation, Defendant-Appellant Oklahoma Corporation Commission, Amicus Curiae.
CourtU.S. Court of Appeals — Tenth Circuit

Jack I. Gaither (Bruce D. Gaither with him on the brief), Tulsa, Okl., for plaintiffs-appellees.

Jeffrey H. Howard of Davis, Graham & Stubbs (Floyd L. Walker and James F. Bullock of Pray, Walker, Jackman, Williamson & Marlar, Tulsa, Okl.; and Robert H. Harry, Denver, Colo., with him on the briefs), Washington, D.C., for defendant-appellant.

Lindil Fowler, Gen. Counsel, Oklahoma City, Okl., on the brief, for amicus curiae.

Before LOGAN, MOORE, and BALDOCK, Circuit Judges.

JOHN P. MOORE, Circuit Judge.

The Public Service Company of Oklahoma (PSO) appeals from the jury verdict that it monopolized a sector of the leased outdoor lighting market in Tulsa, Oklahoma. PSO argues its conduct was controlled and supervised by the Oklahoma Corporation Commission (the Commission) until 1985 and may not be the subject of an antitrust action under the state action doctrine. PSO further urges that plaintiffs fail to prove sufficient non-immune conduct to support the claim of attempted monopolization. We hold that the state action doctrine protects those actions by PSO which were actively supervised by the Commission. In addition, we believe plaintiffs have failed to present adequate evidence of non-immune behavior by PSO to show an attempt to illegally monopolize the market for leased outdoor lighting in Tulsa. We therefore reverse the judgment of the district court.

I.

PSO is a public utility engaged in the generation, transmission, and delivery of electricity in parts of eastern and southwestern Oklahoma. 1 PSO also sells and leases 175 and 400 watt outdoor lights in Tulsa, Oklahoma. The Commission, a state agency, supervises the rates charged by PSO for leasing outdoor lights to the public and for providing electricity to competing light services. In 1975, the Commission ordered PSO both to reduce the rates charged to the public for its outdoor lighting service and to restructure its rate system for providing electricity by replacing the flat annual fee with an outdoor metered rate. As a result, PSO reduced its leasing rates in Tulsa by about four percent (from $4.00 to $3.85 for 175 watt lights), while substantially increasing the rates charged to contractors for electricity used in their competing light services.

Four electrical contractors brought this action in 1977, alleging that this order was the economic equivalent of an "atomic bomb." They claimed PSO sought to drive them out of business in order to monopolize the outdoor lighting market in the Tulsa area. PSO unsuccessfully moved for summary judgment, asserting its challenged conduct was immune from antitrust attack under the state action doctrine. The district court held that the state action immunity doctrine was still developing and no consistent test had emerged. In 1981, the action proceeded to a two-week jury trial during which the court directed a verdict against the plaintiffs for failing to satisfy the jurisdictional requirement of a Sherman Act violation by showing PSO's activities had a substantial impact on interstate commerce. This court reversed, holding that plaintiffs had made a prima facie showing of a sufficient nexus between PSO's actions and interstate commerce. See Lease Lights v. Public Serv. Co. of Okla., 701 F.2d 794 (10th Cir.1983). In a second trial in 1984, the jury awarded plaintiffs trebled damages exceeding $2 million. The court added over $500,000 in attorney fees and costs. PSO appeals from this judgment.

II.
A.

PSO's main argument is that its rate changes should be immune from antitrust attack. As first conceived by the Supreme Court in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), the state action doctrine allowed state legislatures to formally command that certain areas of commerce be exempt from the provisions of the Sherman Act. The Court subsequently developed the requirement that state legislatures compel the immune behavior. In Goldfarb v. Virginia State Bar Ass'n, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975), for example, the Court struck down a minimum fee schedule enforced by the state bar, holding that there existed neither a state law nor a state supreme court decision requiring the establishment of a rigid price floor in the fees attorneys could charge their clients. Similarly, in Cantor v. Detroit Edison Co., 428 U.S. 579, 96 S.Ct. 3110, 49 L.Ed.2d 1141 (1976), the Court decided that state regulation of Detroit Edison's distribution of electricity did not confer state action immunity on its anticompetitive actions in the market for the sale of light bulbs. State regulation alone, according to the Court, was insufficient to show that a party's anticompetitive conduct is being commanded by the state government. As in Goldfarb, the Court in Cantor required a state to compel, rather than merely prompt or allow, anticompetitive conduct for state action immunity to be conferred.

Plaintiffs now urge us to adhere to the compulsion requirement set forth in these decisions. They ignore, however, that the Supreme Court has explicitly softened the previously stringent requirements for state action immunity. In Southern Motor Carriers Rate Conference v. United States, 471 U.S. 48, 105 S.Ct. 1721, 85 L.Ed.2d 36 (1985), the United States challenged a joint ratemaking procedure used by three motor carrier rate bureaus, arguing that the procedure could not be immune under the state action doctrine because it was not compelled by the four states in which the bureaus operated. The Court refused to adhere to the compulsion requirement. While compulsion by the state is the best evidence of a state policy to displace competition, according to the Court, immunity is justified if a state merely permits the conduct to occur. This test is satisfied by showing 1) the challenged behavior is sanctioned by a clearly articulated and affirmatively expressed state policy, and 2) the state actively supervises the private anticompetitive conduct at issue. 471 U.S. at 57, 105 S.Ct. at 1726 (citing California Retail Liquor Dealers Ass'n v. Midcal Aluminum, 445 U.S. 97, 105, 100 S.Ct. 937, 943, 63 L.Ed.2d 233 (1980)). The first element of the test does not require legislation explicitly authorizing the challenged conduct, but only an indication by the state that it intends to displace competition with regulation in the particular area of commerce. Id. at 64, 105 S.Ct. at 1730.

The Court held the rate bureaus met these requirements. Both parties agreed that the regulatory agencies in the four states actively supervised the collective ratemaking activities. Furthermore, three of the four states had statutes permitting collective ratemaking by common carriers. The fourth state, Mississippi, gave the regulatory agency authority to regulate common carriers by granting it the power to prescribe "just and reasonable rates" for the intrastate transportation of general commodities. This language, the Court stated, expressed the legislature's intent that intrastate trucking rates be determined by a regulatory agency, rather than by the market. Therefore, plaintiffs' collective ratemaking in each of the four states was protected by state action immunity.

The test employed in Southern Motor Carriers to replace the compulsion requirement has received consistent recognition by the Court as the proper standard to determine the applicability of state action immunity. 2 Indeed, on every occasion that the Court has considered state action immunity during the past three years, it has invoked the Southern Motor Carriers test rather than the compulsion test. See, e.g., 324 Liquor Corp. v. Duffy, 479 U.S. 335, 107 S.Ct. 720, 93 L.Ed.2d 667 (1987) (New York's liquor pricing system does not fall within state action exemption to antitrust laws because the statute, even though "clearly articulated and affirmatively expressed as state policy," does not provide for active supervision by the state). Recently, for example, the Court held that the state action doctrine did not protect Oregon physicians from antitrust liability for their activities on hospital peer-review committees because state officials did not have the power to review the findings of these committees, and therefore the "active supervision" prong of the Southern Motor Carriers test was not satisfied. See Patrick v. Burget, --- U.S. ----, 108 S.Ct. 1658, 100 L.Ed.2d 83 (1988).

We have dwelled on Southern Motor Carriers and its progeny because these decisions are dispositive of the instant case. First, we believe there exists a clearly articulated state policy to regulate the market for leased outdoor lights. The Oklahoma Constitution gives the Commission the power to regulate public utilities, which it defines as "all gas, electric, heat, light, and power companies...." Okla. Const. art. IX, Sec. 34 (emphasis added). Pursuant to this authority, the legislature has given the Commission general supervision over all public utilities that supply "the production, transmission, delivery, or furnishing of heat or light with gas [and the] ... electric current for light, heat or power." See Okla.Stat.tit. 17, Sec. 151 (1981) (emphasis added).

Within this domain, the Commission has the power to prescribe "rules, requirements and regulations, affecting [the utilities'] services, operation, and the management and conduct of their business." Okla.Stat. tit. 17, Sec. 152. The Commission also establishes and enforces rates "as may be reasonable and just." Okla. Const. art. IX, Sec. 18. The constitution states that the authority of the Commission to prescribe these rates is paramount;...

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