Campbell v. City of Chicago

• Decision Date: 15 July 1987
• Docket Number: No. 86-2415,86-2415
• Citation: 823 F.2d 1182
• Parties: , 1987-1 Trade Cases 67,633 John H. CAMPBELL, Isadore Head, and Cornelius E. Scott, individually and on behalf of all others similarly situated, Plaintiffs-Appellants, v. The CITY OF CHICAGO, Yellow Cab Company, and Checker Taxi Company, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1182

823 F.2d 1182

56 USLW 2098, 1987-1 Trade Cases 67,633

John H. CAMPBELL, Isadore Head, and Cornelius E. Scott,

individually and on behalf of all others similarly

situated, Plaintiffs-Appellants, v. The CITY OF CHICAGO, Yellow Cab Company, and Checker Taxi

Company, Inc., Defendants-Appellees.

No. 86-2415.

United States Court of Appeals, Seventh Circuit.

Argued June 4, 1987.

Decided July 15, 1987.

Michael T. Hannafan, Michael T. Hannafan & Assoc., Ltd., Chicago, Ill., for plaintiffs-appellants.

Harold C. Hirshman, Sonnenschein, Carlin, Nath & Rosenthal, Joseph A. Moore, Asst. Corp. Counsel, Judson Minor-Acting Corp. Counsel, Chicago, Ill., for defendants-appellees.

Before FLAUM and MANION, Circuit Judges, and GORDON, Senior District Judge. ^*

FLAUM, Circuit Judge.

The plaintiffs sued the City of Chicago ("the City"), Yellow Cab Company ("Yellow"), and Checker Taxi Company ("Checker"), alleging that the defendants had violated Sec. 1 and Sec. 2 of the Sherman Act, 15 U.S.C. Secs. 1 & 2 (1982). The City argued, inter alia, that it was immune from liability under the "state action" exception to the antitrust laws, and the cab companies asserted that they were immune under the Noerr-Pennington doctrine. The district court, in a well-reasoned opinion, agreed with the defendants, and granted their motion for summary judgment. See Campbell v. City of Chicago, 639 F.Supp. 1501 (N.D.Ill.1986). We agree with the district court that the defendants in this case are immune from liability under the antitrust laws, and affirm its judgment.

I.

The facts of this case have been reported several times. See Campbell v. City of Chicago (Campbell II), 639 F.Supp. 1501 (N.D.Ill.1986); Campbell v. City of Chicago (Campbell I), 577 F.Supp. 1166 (N.D.Ill.1983). Briefly stated, the "central focus of this litigation is the City's enactment in 1963 of an ordinance regulating the manner of acquiring and holding taxicab licenses and their number. Chicago Municipal Code, Public Passenger Vehicles Sec. 28-22.1(a) et seq. This ordinance arose out of a settlement among the City and Yellow and Checker over damage claims [by the cab companies] in 1963." Campbell II, 639 F.Supp. at 1502.

The plaintiffs allege that the ordinance erected a barrier to entry into the taxicab market. ¹ As a result, according to the plaintiffs, Yellow and Checker have been able to charge artificially inflated lease rates for cab licenses to the plaintiffs. The plaintiffs request an injunction to prohibit the City from enforcing the license number limit, and to issue a taxi license to any qualified applicant. Campbell I, 577 F.Supp. at 1171. The plaintiffs also seek damages of $106,802,000, which they request to be trebled, for alleged past cab license rental overcharges. Id.

The challenged ordinance, Chicago, Ill., Public Passenger Vehicle Code Sec. 28-22.1, did several things. First, it limited the number of cabs in Chicago to 4,600 (although this ceiling was originally implemented in 1959). In 1963, as in 1987, Checker and Yellow had 80% of the 4,600 licenses. Second, either the Chicago City Council Committee on Local Transportation or a majority of the license holders could request a hearing on whether more licenses were needed. Third, if more licenses were issued, they would have to be issued in proportion to the existing licenses (this is the so-called "percentage guarantee" provision). This meant that Yellow and Checker would receive 80% of any newly issued licenses. Finally, Sec. 28-31.1 provided that if Sec. 28-22.1 were amended, any amended ordinance would have to conform with the above requirements.

On April 1, 1987, the Chicago City Council repealed all of ordinance Sec. 28-22.1, except the 4,600 ceiling on the number of cabs. This development moots the plaintiffs' request for an injunction to prevent the City from enforcing the percentage guarantee provision, although not the request to enjoin the 4,600 cab license limit. However, because we conclude that the defendants are immune from liability in this case, we need not reach the merits of the plaintiffs' claims.

II.

The City of Chicago defended this suit on the basis that it was immune from liability under Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). The district court agreed with the City, finding that the City's actions fell within Parker's "state action" exception to the antitrust laws. We agree with the district court, and hold that, in this case, the City is immune from liability.

In Parker v. Brown, the Supreme Court, "relying on policies of federalism and state sovereignty, narrowly construed the Sherman Act to exempt a state, acting through its legislature, from antitrust liability arising from anticompetitive conduct," LaSalle National Bank v. Dupage County, 777 F.2d 377, 380 (7th Cir.1985), cert. denied, --- U.S. ----, 106 S.Ct. 2892, 90 L.Ed.2d 979 (1986) (citing Parker, 317 U.S. at 350-52, 63 S.Ct. at 313-14). In City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978), the Court refused to extend Parker immunity to municipalities, because municipalities are not themselves sovereign. See id. at 412, 98 S.Ct. at 1136. However, 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 held that a municipality could obtain the exemption, if its challenged conduct was authorized by the state legislature, and if the anticompetitive effects were a foreseeable result of the authorization. See LaSalle National Bank, 777 F.2d at 381 (interpreting Town of Hallie ). The state legislature does not have to explicitly authorize the anticompetitive conduct, see Town of Hallie, 471 U.S. at 42, 105 S.Ct. at 1718, so long as the anticompetitive effects would logically result from the authority to regulate, id.

In this case, the City's action in passing the 1963 ordinance was clearly authorized by the State of Illinois. The authorizing statute provides that:

The corporate authorities of each municipality may license, tax, and regulate hackmen, dragmen, omnibus drivers, carters, cabmen, porters, expressmen, and all others pursuing like occupations, and may prescribe their compensation.

Ill.Ann.Stat. ch. 24, p 11-42-6 (Smith-Hurd 1962). As the district court noted:

This provision was enacted as part of a general grant to municipalities of the power to regulate certain, defined areas of commerce in the exercise of their police powers to protect the health and safety of its residents. See generally Ill.Rev.Stat. ch. 24, paragraphs 11-42-1 to 11-42-10 (including regulation of auctioneers, brokers, barbers, ice-cream parlors, detective agencies, bowling alleys, junk yards, pawnbrokers, packing houses, tanneries, blacksmiths and other "unwholesome" businesses).

Campbell II, 639 F.Supp. at 1503 (footnote omitted). Moreover, unlike the other sections of the statute that the district court referred to, the section authorizing municipalities to regulate cabmen (among others) expressly authorizes municipalities to "prescribe compensation." Thus, the language in p 11-42-6 clearly authorizes municipalities in Illinois to regulate the number of cab licenses and the conditions under which the licenses are issued.

Even if we look beyond the face of the statute, it is clear that the challenged activity was authorized by the legislature. The Illinois Supreme Court has interpreted p 11-42-6, although not in an antitrust situation, to permit the City to regulate the number of cab licenses that may be issued. See Yellow Cab Co. v. City of Chicago, 396 Ill. 388, 397, 71 N.E.2d 652, 657 (1947); see also Campbell II, 639 F.Supp. 1503-04 (discussing Illinois cases that have construed p 11-42-6). These state court decisions do not, of course, decide the issue of the City's immunity under the federal antitrust laws. See Town of Hallie, 471 U.S. at 44 n. 8, 105 S.Ct. at 1719 n. 8. However, these decisions are instructive on the question of whether the state legislature authorized the challenged activity. Thus, the Illinois cases that have determined the legislature's intent in enacting p 11-42-6 further convince us that the City's actions were authorized. Moreover, municipalities in Illinois have the power to regulate taxicabs for the general welfare and the safety of their citizens, see Yellow Cab Co., 396 Ill. at 398, 71 N.E.2d at 657. It is logical that this power would include the ability to regulate the number of taxicabs, because taxicabs present potential safety hazards. Id. ²

Even if the actions taken by the municipality are authorized, the anticompetitive effects of its action must also be foreseeable. LaSalle, 777 F.2d at 381. In this case, we believe that the anticompetitive effects of the ordinance are a foreseeable consequence of the City's action in regulating the taxicab industry. See id. (citing Town of Hallie, 471 U.S. at 41-44, 105 S.Ct. at 1718-19).

The fact that the Illinois courts have determined that p 11-42-6 authorizes municipalities to regulate the number of cabs is clearly an important factor in determining that the conduct was foreseeable, and thus immune from antitrust liability. Another factor supporting the foreseeability of the City's action is the fact that, in 1963, the City had been regulating the number of licenses and the conditions of their issuance for over twenty-five years. Therefore, the Illinois legislature had been on notice as to how p 11-42-6 had been implemented by the City. Moreover, the Illinois General Assembly has recently stated, in its "[p]olicy concerning [the] exercise of powers by local governments," that the "[s]tate action exemption to the application of [the] federal antitrust statutes [should] be fully available to all municipalities." Ill.Ann.Stat. ch. 24, p 1-1-10 (Smith-Hurd 1987 Supp.). "Statutes enacted after allegedly anticompetitive conduct [may] express pre-existing state policies to displace competition". California Aviation, Inc. v....