City Communications, Inc. v. City of Detroit

• Decision Date: 28 May 1987
• Docket Number: No. 86-CV-71087-DT.,86-CV-71087-DT.
• Citation: 660 F. Supp. 932
• Parties: CITY COMMUNICATIONS, INC., a Michigan corporation, Plaintiff, v. CITY OF DETROIT, a Municipal corporation; Barden Cablevision of Detroit, Inc., a Michigan corporation; and Maclean-Hunter Cable TV, Inc., a Canadian corporation, Defendants.
• Court: U.S. District Court — Western District of Michigan

660 F. Supp. 932

CITY COMMUNICATIONS, INC., a Michigan corporation, Plaintiff, v. CITY OF DETROIT, a Municipal corporation; Barden Cablevision of Detroit, Inc., a Michigan corporation; and Maclean-Hunter Cable TV, Inc., a Canadian corporation, Defendants.

No. 86-CV-71087-DT.

United States District Court, E.D. Michigan, S.D.

May 28, 1987.

Schnader, Harrison, Segal & Lewis by Peter S. Greenberg, Louis W. David, Philadelphia, Pa., Butzel, Long, Gust, Klein & Van Zile by William M. Saxton, Edward Kronk, Detroit, Mich., for plaintiff; Hyde & Mercer by William R. Hyde, Jr., Washington, D.C., of counsel.

Dickinson, Wright, Moon, Van Dusen & Freeman by Fred W. Greeman, W. Gerlad Warren, Elizabeth Trickey, Detroit, Mich., for Barden Cablevision of Detroit, Inc. Honigman, Miller, Schwartz & Cohn by David A. Ettinger, I.W. Winsten, H.C. Goplerud, Detroit, Mich., for City of Detroit.

William J. DeBiasi, Taylor, Mich., for MacLean-Hunter Cable TV, Inc.

MEMORANDUM OPINION

GILMORE, District Judge.

On January 22, 1987, this Court issued an opinion in this case granting the defendants' joint motion for summary judgment in part. City Communications, Inc. v. City of Detroit, 650 F.Supp. 1570 (E.D. Mich.1987). On March 2, 1987, the private defendants Barden and MacLean-Hunter filed a motion for reconsideration and/or for certification of certain issues for immediate appeal pursuant to 28 U.S.C. § 1292(b). The City of Detroit also filed a motion to certify or reconsider. Those motions are the subject of this opinion.

This suit challenges the legality of the City of Detroit's award to the defendants of an exclusive cable television franchise for Detroit. The facts of this case are set forth in some detail in this Court's opinion of January 22, 1987. The plaintiff is a disappointed bidder for the cable television contract. The claim relevant to this motion is that the City and the successful defendants conspired to violate Sections One and Two of the Sherman Anti-Trust Act, 15 U.S.C. §§ 1, 2. In its January 22 opinion, this Court found that the City of Detroit was immune from any antitrust liability under the "state action doctrine," but that the private defendants, Barden and MacLean-Hunter, could not benefit from the doctrine. It is the latter ruling that the private defendants wish the Court to reconsider.

In Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), the Supreme Court held that the Sherman Act does not apply to the anticompetitive conduct of a state acting through its legislature. The state action immunity doctrine is based on principles of federalism and state sovereignty, which will not lightly attribute to Congress an intent to "nullify a state's control over its officers and agents." Parker, 317 U.S. at 351, 63 S.Ct. at 313; See Garland, Antitrust and State Action: Economic Efficiency and the Political Process, 96 Yale L.J. 486 (1987). Twenty-five years later, the doctrine was extended to protect municipalities insofar as the municipality acted pursuant to a state policy. Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978). The Supreme Court added a second prong to the state immunity doctrine as applied to non-state defendants when it held that the challenged restraint must be "`actively supervised' by the State itself." California Retail Liquor Dealers Assn v. Midcal Aluminum Inc., 445 U.S. 97, 105, 100 S.Ct. 937, 943, 63 L.Ed.2d 233 (1980). Recently, the Court held that a municipality does not have to satisfy the "active supervision" requirement as it is presumed that a municipality acts in the public interest. Town of Hallie v. City of Eau Claire, 471 U.S. 34, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985); Southern Motor Carriers Rate Conference Inc. v. United States, 471 U.S. 48, 105 S.Ct. 1721, 85 L.Ed.2d 36 (1985).¹ The City of Detroit was dismissed pursuant to this line of cases as the Court found that Detroit acted pursuant to an articulated state policy when it awarded the cable television contract to the defendants.

Where the conduct of a private party is challenged, the private party is presumed to act on its own behalf, Haillie, 471 U.S. at 45, 105 S.Ct. at 1722, hence must show that its conduct was actively supervised by the state in order to be protected by the state action doctrine. Southern Motor, 471 U.S. at 57, 105 S.Ct. at 1723. Accordingly, this court denied the private defendants' motion for summary judgment, finding that they had not shown active supervision by the State of Michigan. City Communications, 650 F.Supp. at 1578-79.

The defendants argue that the active state supervision requirement should not be applied to them. They assert that, where a private party is simply regulated by a municipality that is itself immune from antitrust liability and is not the "anticompetitive decision maker," the private party need not be supervised by the state and should benefit from the state action immunity doctrine.

The Court agrees that the state supervision requirement should not be mechanically applied to all private defendants in municipal antitrust actions. However, there are disputed issues of fact as to whether the City of Detroit or the private defendants were the effective decision makers in this case.

The supervision requirement prevents the State from frustrating the national policy in favor of competition by "casting ... a gauzy cloak of state involvement over what is essentially a private price-fixing arrangement." Midcal, 455 U.S. at 106, 100 S.Ct. at 943. Midcal affirmed a state court injunction prohibiting officials from enforcing a statute requiring wine producers to establish resale price schedules. The Court found that the state had simply authorized a price setting and market control mechanism established and operated by private parties, without any regulation of the private anticompetitive behavior by the state. Recently, the Supreme Court again struck down a private price maintenance system that operated with state authorization but without state supervision. 324 Liquor Corp. v. Duffy, ___ U.S. ___, 107 S.Ct. 720, 93 L.Ed.2d 667 (1987).

Both Midcal and Duffy involved what have become known as "hybrid" restraints on competition where "nonmarket mechanisms merely enforce private marketing decisions" in which private actors were granted "a degree of private regulatory power." Fisher v. City of Berkeley, California, 475 U.S. 260, ___, 106 S.Ct. 1045, 1050, 89 L.Ed.2d 206, 213 (1986). In Fisher, the Court held that, where there are no private marketing decisions and the municipality unilaterally imposed noncompetitive rent control measures upon the private sector, the Sherman Act is not even implicated so as to activate the state action immunity doctrine. Rejecting the argument that the rent control ordinance formed a combination between the property owners and the City, the Court held that there was no concerted action within the meaning of the statute simply because the private sector obeyed the regulatory commands of the municipality. Fisher, 89 L.Ed.2d at 212-13. Fisher distinguished two cases involving "hybrid" regulation, Midcal, supra, and Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 71 S.Ct. 745, 95 L.Ed. 1035 (1951), stating that those cases involved a large amount of "free participation by private economic actors." Fisher, 89 L.Ed.2d at 1050. The Court concluded:

There may be cases in which what appears to be a state or municipality administered price stabilization scheme is really a private price-fixing conspiracy, concealed under a "gauzy cloak of state involvement." Midcal, supra, at 106, 100 S.Ct. at 943. This might occur even where prices are ostensibly under the absolute control of government officials. However, we have been given no indication that such corruption has tainted the rent controls imposed by Berkeley's Ordinance. Adopted by popular initiative, the Ordinance can hardly be viewed as a cloak for any conspiracy among landlords or between the landlords and the municipality.

Id. 89 L.Ed.2d at 214.

Once it is determined that the municipality is protected by the state action doctrine, a private party who is merely the beneficiary of the municipality's exercise of power should also be protected. To hold otherwise would allow the Parker doctrine to be circumvented by artful pleading: "A plaintiff could frustrate any protected plan merely by filing suit against the regulated private parties, rather than the state officials who implement the plan." Southern Motor Carriers, 471 U.S. at 56-57, 105 S.Ct. at 1727.

The Sixth Circuit shares this restrictive application of the state supervision requirement. In remanding a case to the district court for determination of whether the defendants' conduct fell within the state action doctrine, the Sixth Circuit held that, if the municipality made the "effective decision" resulting in the challenged conduct, the municipality was protected by the state action doctrine since it acted pursuant to a state policy, and the entire action must be dismissed. Riverview Investments, Inc. v. Ottawa Community Improvement Corp., 769 F.2d 324, rev'd, 774 F.2d 162 (6th Cir. 1985). Riverview then ruled that the claim against the private party could be maintained only if the private party made the "effective decision" that distressed the plaintiff. Only upon a determination that the private party made the effective decision could evidence be taken as to whether the private party was actively supervised by the state. Id., 769 F.2d at 330, 774 F.2d at 163. Other Circuits have also declined to allow plaintiffs to attack municipal decisions through the "back door," holding that private parties are entitled to immunity once the municipality is held to be immune:

When the municipal entity accomplishes its goal in a protected manner, and the participation of private third parties was reasonably contemplated by the legislature, allowing successful tangential attacks on the

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