Columbia Steel Casting Co., Inc. v. Portland Gen. Elec. Co.

• Decision Date: 20 July 1995
• Docket Number: 93-35958,Nos. 93-35902,s. 93-35902
• Citation: 60 F.3d 1390
• Parties: 1995-2 Trade Cases P 71,067, Util. L. Rep. P 14,060, 95 Cal. Daily Op. Serv. 5642, 95 Daily Journal D.A.R. 9617 COLUMBIA STEEL CASTING CO., INC., an Oregon corporation, Plaintiff-Appellee, v. PORTLAND GENERAL ELECTRIC COMPANY, an Oregon corporation, Defendant-Appellant. COLUMBIA STEEL CASTING CO., INC., an Oregon corporation, Plaintiff-Appellant, v. PORTLAND GENERAL ELECTRIC COMPANY, an Oregon corporation; Public Utility Commission of the State of Oregon, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1390

60 F.3d 1390

1995-2 Trade Cases P 71,067, Util. L. Rep. P 14,060,

95 Cal. Daily Op. Serv. 5642,

95 Daily Journal D.A.R. 9617

COLUMBIA STEEL CASTING CO., INC., an Oregon corporation, Plaintiff-Appellee, v. PORTLAND GENERAL ELECTRIC COMPANY, an Oregon corporation,

Defendant-Appellant.

COLUMBIA STEEL CASTING CO., INC., an Oregon corporation, Plaintiff-Appellant, v. PORTLAND GENERAL ELECTRIC COMPANY, an Oregon corporation;

Public Utility Commission of the State of Oregon,

Defendants-Appellees.

Nos. 93-35902, 93-35958.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 3, 1995.

Decided July 20, 1995.

Allan M. Garten and Barbee B. Lyon, Tonkon, Torp, Galen, Marmaduke & Booth, Portland, OR, for Portland Gen. Elec. Co.

Michael C. Dotten, Heller, Ehrman, White & McAuliffe, Portland, OR, for Columbia Steel Casting Co., Inc.

Jas J. Adams, Asst. Atty. Gen., Salem, OR, for the Public Utility Com'n of Oregon.

Appeals from the United States District Court for the District of Oregon.

Before BROWNING, REAVLEY ^*, and NORRIS, Circuit Judges.

WILLIAM A. NORRIS, Circuit Judge:

This case involves the antitrust doctrine of state action immunity. Appellee Columbia Steel (Columbia) sued appellant Portland General Electric (PGE) in district court, alleging that PGE had conspired with Pacific Power and Light (PP & L) to divide the market for electricity in Portland, Oregon. The district court granted summary judgment for Columbia, rejecting PGE's claim that a 1972 order of the Public Utility Commission of Oregon (PUC) had authorized the market division, thereby conferring federal antitrust immunity under the state action doctrine created in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). PGE appeals the summary judgment in favor of Columbia and the denial of its own motion for summary judgment. We now reverse.

I

Until the early 1970s, Portland General Electric and Pacific Power & Light competed with one another to provide electricity to the residents and businesses of Portland. This competition resulted in duplicate transmission lines and poles, substations and transformers throughout the City. In 1961, the Oregon legislature enacted a statute empowering the PUC to authorize division of markets into exclusive service territories in order to promote "[t]he elimination and future prevention of duplication of utility facilities." Or.Rev.Stat. Sec. 758.405. The statute provides that under certain circumstances, the PUC may approve a contract between competitors that divides a market into exclusive service territories. Or.Rev.Stat. Secs. 758.410-758.450. Once the PUC has issued an order creating exclusive service territories, Or.Rev.Stat. Sec. 758.465 prohibits any competition within those territories.

In 1972, PGE and PP & L entered into an agreement to exchange properties and customer accounts throughout the City of Portland (the Agreement). In simplified form, the Agreement divided the City and transferred properties and customers, thereby creating separate territories in which one utility or the other owned all the facilities and serviced all the customer accounts. ¹ Before presenting this Agreement to the PUC, the parties sought the approval of the City. The City consented to the Agreement by ordinance on April 26, 1972. ² The Agreement was subsequently approved by the PUC through Order 72-870, which provides, in part:

The Commissioner's approval is needed prior to the sale, lease, assignment or other disposition of public utility property pursuant to ORS Sec. 757.480. The Commissioner's approval is also needed prior to the assignment of any allocated utility service territory pursuant to ORS Sec. 758.460.

On July 18, 1972, Pacific and Portland General entered into an agreement whereby an exchange of property and utility facilities would be made.... This exchange and transfer also involves the transfer of customers from one party to the other.

....

ORDERED that the application of [PP & L] to transfer certain of its exclusively served area allocated to it and lying in and around Rainier, Oregon, to [PGE] is approved....

ORDERED that [PP & L] may transfer to [PGE] all electric distribution plant ... situated within or used for providing utility service within the boundaries of Parcel A ... [and] Parcel B.... ³

ORDERED that [PGE] may transfer to [PP & L] all electric distribution plant ... used for providing utility service within the boundaries of [Parcel C]....

....

ORDERED that the manner and method of accomplishing the transfer and exchange of property, facilities and customers, and the terms and conditions governing this transfer shall be provided by that agreement between the companies herein, dated July 18, 1972....

Pub.Util.Comm'n of Or., Order 72-870 (Dec. 15, 1972) (the 1972 Order).

In the years that followed, PGE and PP & L did not compete with each other in their respective territories. During this time, Columbia Steel was served by PGE. However, in 1989, reacting to the difference in industrial rates charged by PP & L and PGE, Columbia requested PP & L to provide electrical service to its Portland plant. After considering Columbia's request, PP & L informed both PGE and Columbia that it would offer to provide electricity to Columbia. PGE objected that PP & L was forbidden from selling power to Columbia by the 1972 Agreement and the 1972 Order, which, PGE claimed, had created exclusive service territories in Portland.

In June, 1990, Columbia filed an action in federal court against PGE, PP & L and the PUC, requesting a declaration that any purported division of Portland into exclusive territories was beyond the scope of the 1972 Order and a violation of Secs. 1 and 2 of the Sherman Act, 15 U.S.C. Secs. 1-2. Columbia also asked for treble damages. In its answer, PGE raised a defense of state action immunity, claiming that the 1972 Order had authorized exclusive service territories in Portland pursuant to state law.

While this action was pending in federal district court, PGE filed an application with the PUC, requesting a declaration that the 1972 Order allocated exclusive service territories in Portland. The district court denied PGE's subsequent motion to stay the federal case pending the PUC's ruling on this application, and proceeded to consider cross-motions for summary judgment on the immunity issue.

In July, 1991, the district court granted partial summary judgment to Columbia, holding that the 1972 Order did not confer antitrust immunity on PGE's attempts to divide the Portland market. The court reasoned that the 1972 Order did not "clearly articulate" the intention of the PUC to divide Portland into exclusive service territories, but instead was limited to the exchange of property and facilities and a one-time transfer of customer accounts. Pacificorp v. Portland Gen. Elec. Co., 770 F.Supp. 562, 571 (D.Or.1991).

Nine months later, in April, 1992, the PUC issued its ruling on PGE's application for a declaratory order, stating that while "perhaps [the 1972 Order] did not unambiguously allocate exclusive service territories to PGE and PP & L," it was the PUC's intent to approve such an allocation. Pub.Util.Comm'n of Or., Order 92-557 (Apr. 16, 1992). The PUC therefore amended its 1972 Order, nunc pro tunc, to make this intention clear. In response to this ruling, PGE requested that the district court reconsider its summary judgment decision and afford full faith and credit to the PUC's decision. The district court denied the motion.

Subsequently, the court entered summary judgment on the remaining issues, holding that PGE had violated Sec. 1 of the Sherman Act and awarding Columbia $508,425 in treble damages and $901,671.62 in attorney's fees and costs.

II

Our discussion of the state action doctrine begins with Parker v. Brown, 317 U.S. 341, 350-51, 63 S.Ct. 307, 313, 87 L.Ed. 315 (1943), in which the Supreme Court reasoned that Congress did not intend the Sherman Act "to restrain a state or its officers or agents from activities directed by its legislature." The Court held, therefore, that acts of a state are immune from antitrust liability. This basic premise has evolved into a multitiered analysis for determining when an anticompetitive act may be cloaked with antitrust immunity because it implements state policy. Immunity is automatically granted to any action taken by a state legislature or by a state court in its legislative capacity. See Hoover v. Ronwin, 466 U.S. 558, 567-68, 104 S.Ct. 1989, 1994-95, 80 L.Ed.2d 590 (1984). However, "when the activity at issue is not directly that of the legislature or supreme court, but is carried out by others pursuant to state authorization," closer analysis is required to assure that the challenged action represents an implementation of state policy rather than private or parochial interests. Id. at 568, 104 S.Ct. at 1995. Thus, immunity is granted to the acts of state agencies or municipalities only if "the conduct is pursuant to a 'clearly articulated and affirmatively expressed state policy' to replace competition with regulation." See Hoover, 466 U.S. at 568-69, 104 S.Ct. at 1995.

The acts of private parties, such as those at issue in this case, are scrutinized even more carefully to assure that the "private party's anticompetitive conduct promotes state policy, rather than merely the party's individual interests." Patrick v. Burget, 486 U.S. 94, 101, 108 S.Ct. 1658, 1663, 100 L.Ed.2d 83 (1988). To that end, the actions of a private party are immunized only after passing a two-pronged test: "First, the challenged restraint must be one clearly articulated and affirmatively expressed as state policy; second, the policy must be actively supervised by the State itself." Federal Trade Commission v. Ticor Title Ins. Co., 504 U.S. 621, 633, 112 S.Ct. 2169, 2176, 119 L.Ed.2d 410 (1992).

There is no question that the Oregon legislature has clearly and expressly chosen to replace competition with...