912 F.2d 1262 (11th Cir. 1990), 87-6108, Consolidated Gas Co. of Florida, Inc. v. City Gas Co. of Florida

Docket Nº:87-6108.
Citation:912 F.2d 1262
Party Name:CONSOLIDATED GAS COMPANY OF FLORIDA, INC., Plaintiff-Appellee, v. CITY GAS COMPANY OF FLORIDA, A Florida Corporation, Defendant-Appellant.
Case Date:September 19, 1990
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit

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912 F.2d 1262 (11th Cir. 1990)





No. 87-6108.

United States Court of Appeals, Eleventh Circuit

September 19, 1990

James J. Kenny, Scott E. Perwin, Michael Nachwalter, Miami, Fla., for defendant-appellant.

Philip A. Allen, III, Edward T. O'Donnell, William J. Dunaj, Teresa Ragatz, Miami, Fla., for plaintiff-appellee.

Sylvia H. Walbolt, Tampa, Fla., for amicus curiae Florida Power.

William H. Harrold, Tallahassee, Fla., for amicus curiae Florida Public Service Com'n.

James R. Atwood, Washington, D.C., for amicus curiae Florida Power & Light.

Dulaney L. O'Roark, James R. McGibbon, Sutherland, Asbill & Brennan, Atlanta, Ga. and Washington, D.C., for amicus curiae Union Carbide.

Appeal from the United States District Court for the Southern District of Florida.

Before TJOFLAT, Chief Judge, FAY, KRAVITCH, JOHNSON, HATCHETT, ANDERSON, EDMONDSON, COX, Circuit Judges, MORGAN and RONEY, Senior Circuit Judges. [*]


City Gas Company of Florida appealed from a $4.76 million dollar judgment entered against it after the district court found that City Gas had violated federal antitrust laws. Consolidated Gas Co. of Fla. v. City Gas Co. of Fla., 665 F.Supp. 1493 (S.D.Fla.1987). A panel of this court affirmed. Consolidated Gas Co. of Fla. v. City Gas Co. of Fla., 880 F.2d 297 (11th Cir.1989). A majority of the active judges in regular active service ordered that the appeal be reheard by the court of appeals en banc. This order vacated the panel opinion. Consolidated Gas Co. of Fla. v. City Gas Co. of Fla., 889 F.2d 264 (11th Cir.1989).

Having considered the briefs and heard oral argument in the case en banc, the court now reinstates the panel's opinion reported at 880 F.2d 297, affirming the judgment of the district court. [**]


JOHNSON, Circuit Judge, concurring in part and dissenting in part in which KRAVITCH, Circuit Judge, joins:

While I concur in the Court's opinion that City Gas Company of Florida refused to deal in violation of section 2 of the Sherman Act, 15 U.S.C.A. Sec. 2 ("section 2"), I am constrained to dissent from the Court's holding that the territorial agreement between City Gas and Peoples Gas Systems, Inc. ("Peoples") is not immune from section 2 liability under the state action doctrine.


  1. Background

    City Gas is a major distributor of natural gas in southern Florida. City Gas purchases natural gas from Florida Gas Transmission Company ("FGT"). 1 City Gas then distributes the gas to its approximately 100,000 customers through a network of pipes. City Gas and Peoples are the two largest natural gas utilities in Florida. Both entered the natural gas business in 1960, when they applied for and received

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    allocations (i.e., permits) from the Federal Energy Regulatory Commission ("FERC") to purchase and resell natural gas from FGT. 2

    After a brief period of competition for customers, City Gas and Peoples entered into an agreement not to compete ("the territorial agreement"). The territorial agreement provided each party with a service area where the other would not solicit customers. City Gas and Peoples submitted the territorial agreement to the Florida Public Service Commission ("FPSC"), 3 and on November 9, 1960, the FPSC entered an order stating:

    It is our opinion that territorial agreements which will minimize, and perhaps even eliminate, unnecessary and uneconomical duplication of plant and facilities which invariably accompany expansion into areas already served by a competing utility, are definitely in the public interest and should be encouraged and approved by an agency such as this, which is charged with the duty of regulating public utilities in the public interest.

    Florida Railroad and Public Utilities Commission, Order No. 3051 (November 9, 1960) [hereinafter "Order"].

    Chapter 366 of the Florida Statutes ("chapter 366") empowers the FPSC "to regulate and supervise each public utility with respect to its rates and service and the issuance and sale of its securities." Fla.Stat.Ann. Sec. 366.04. 4 In fixing rates, the FPSC is authorized to consider "the efficiency, sufficiency, and adequacy of the facilities provided and the services rendered; the cost of providing such service and the value of such service to the public; [and] the ability of the utility to improve such service and facilities...." Id. at Sec. 366.041. The FPSC may also "require repairs, improvements, additions, and extensions to the plant and equipment of any public utility when reasonably necessary to promote the convenience and welfare of the public...." Id. at Sec. 366.05.

    After 1974, the Florida statute expressly provided the FPSC with the power to authorize territorial agreements between electric utilities. Section 366.04(2) provided: "In the exercise of its jurisdiction, the [FPSC] shall have power over rural electric cooperatives and municipal electric utilities for the following purposes: ... (d) To approve territorial agreements between and among rural electric cooperatives, municipal electric utilities, and other electric utilities under its jurisdiction." Id. at Sec. 366.04(2) (West Supp.1989). The statute said nothing about territorial agreements among natural gas utilities such as City Gas and Peoples. 5 In 1965, however, the Florida Supreme Court held that the FPSC had implied authority under chapter 366 to approve or forbid the territorial agreement between Peoples and City Gas. City Gas Co. v. Peoples Gas System, Inc., 182 So.2d 429, 436 (Fla.1965). 6

  2. Procedural History

    1. District Court

    On April 23, 1983, Consolidated filed its complaint in the present action. The

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    amended complaint alleged that City Gas's actions constituted an attempt to monopolize and monopolization in violation of section 2. Consolidated asked for treble damages under 15 U.S.C.A. Sec. 15 and injunctive relief under 15 U.S.C.A. Sec. 26. City Gas counterclaimed that Consolidated's restrictive covenants and easements in Bel Aire precluded City Gas from competing for Consolidated's customers in violation of 15 U.S.C.A. Secs. 1, 2, and 14.

    The district court held a nine-day bench trial in October 1985. The court determined that the territorial agreement violated section 2 and rejected City Gas's defense that because the FPSC approved the agreement the territorial agreement was exempt from antitrust liability under the state action doctrine of Parker v. Brown, 317 U.S. 341, 351, 63 S.Ct. 307, 313, 87 L.Ed. 315 (1943). Consolidated Gas Co. v. City Gas Co., 665 F.Supp. 1493 (S.D.Fla.1987).

    2. Panel Opinion

    On appeal, City Gas argued that it was immune from antitrust liability for the territorial agreement and the refusal to deal with Consolidated under the state action doctrine. The panel unanimously rejected these arguments and affirmed the district court. The panel held that because chapter 366 explicitly authorized territorial agreements between electric utilities without mentioning gas utilities, the statute did not clearly articulate a state policy favoring territorial agreements among gas utilities and, therefore, state action immunity could not apply. Consolidated Gas Co. v. City Gas Co., 880 F.2d 297, 301-02 (11th Cir.1989). The panel rejected City Gas's argument that the Florida Supreme Court decision in City Gas Co., holding that chapter 366 impliedly authorized territorial agreements among gas companies, was sufficient to invoke the state action doctrine. Id. at 303.


    A person (or corporation) violates section 2 when he (1) possesses monopoly power in the relevant market and (2) willfully acquires or maintains that power through means other than growth or development as a consequence of superior products, business acumen, or historical accident. United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1703-04, 16 L.Ed.2d 778 (1966). In Parker, however, the Supreme Court recognized that in passing the Sherman Act Congress did not intend to restrain state action or official action directed by a state to restrain competition. Parker, 317 U.S. at 351, 63 S.Ct. at 313.

    In California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980), the Supreme Court found that the Parker doctrine applied to private parties who restrain competition in violation of the Sherman Act if (1) the challenged restraint was implemented pursuant to a clearly articulated and affirmatively expressed state policy, and (2) the policy was actively supervised by the state. Id. at 105, 100 S.Ct. at 943. In Southern Motor Carriers Rate Conference v. United States, 471 U.S. 48, 105 S.Ct. 1721, 85 L.Ed.2d 36 (1985), the Supreme Court reaffirmed the applicability of the Midcal two-pronged test to private parties' claims of state action immunity and held that a state policy that permits but does not compel anticompetitive conduct may be clearly articulated for purposes of the first prong of Midcal. Id., 471 U.S. at 61, 105 S.Ct. at 1729.

    City Gas argues that the territorial agreement is immune from antitrust liability under Midcal and Southern Motor Carriers. Consolidated argues that the territorial agreement is not entitled to immunity because chapter 366 does not constitute a clearly articulated state policy authorizing such agreements and the state does not actively supervise such a policy.

    1. Clearly Articulated State Policy

    In Southern Motor Carriers, the United States sued two rate bureaus--groups of private carriers that jointly set rates--for violations of the antitrust laws. Southern Motor Carriers, 471 U.S. at 50, 105 S.Ct. at 1723. The rate bureaus submitted their

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    rate proposals to the public service commissions in each state for approval or rejection. Id. Of the four states involved, three had statutes...

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