Fisher v. City of Berkeley, California

• Decision Date: 26 February 1986
• Docket Number: No. 84-1538,84-1538
• Citation: 475 U.S. 260,106 S.Ct. 1045,89 L.Ed.2d 206
• Parties: Alexandra FISHER, et al., Appellants v. CITY OF BERKELEY, CALIFORNIA, et al
• Court: U.S. Supreme Court

475 U.S. 260

106 S.Ct. 1045

89 L.Ed.2d 206

Alexandra FISHER, et al., Appellants

v CITY OF BERKELEY, CALIFORNIA, et al.

No. 84-1538.

Argued Nov. 12, 1985.

Decided Feb. 26, 1986.

Rehearing Denied April 28, 1986.

See 475 U.S. 1150, 106 S.Ct. 1806.

Syllabus

A Berkeley, California, ordinance, enacted pursuant to popular initiative, imposes rent ceilings on residential real property in the city. The rent ceilings are under the control of a Rent Stabilization Board. Appellant landlords brought suit in California Superior Court challenging the constitutionality of the ordinance on Fourteenth Amendment grounds and seeking declaratory and injunctive relief. The Superior Court upheld the ordinance but was reversed by the California Court of Appeal. In the meantime, based on the intervening decision in Community Communications Co. v. Boulder, 455 U.S. 40, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982), the question arose as to whether the ordinance was unconstitutional because it was pre-empted by the Sherman Act. The California Supreme Court held that there was no conflict between the ordinance and the Sherman Act.

Held: The ordinance is not unconstitutional as being pre-empted by the Sherman Act. Pp. 264-270.

(a) The rent ceilings established by the ordinance and maintained by the Rent Stabilization Board were unilaterally imposed by the city upon landlords to the exclusion of private control. Thus, the rent ceilings lack the element of concerted action needed before they can be characterized as a per se violation of § 1 of the Sherman Act. A restraint imposed unilaterally by government does not become concerted action within the meaning of § 1 simply because it has a coercive effect upon parties who must obey the law. And the mere fact that all competing landlords must comply with the ordinance is not enough to establish a conspiracy among landlords. Pp. 265-267.

(b) While the ordinance gives tenants some power to trigger its enforcement, it places complete control over maximum rent levels exclusively in the Rent Stabilization Board's hands. Schwegmann Bros. v. Calvert Distillers Corp., 341 U.S. 384, 71 S.Ct. 745, 95 L.Ed. 1035 (1951), and California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980), distinguished. Pp. 267-270.

37 Cal.3d 644, 209 Cal.Rptr. 682, 693 P.2d 261 (1984), affirmed.

MARSHALL, J., delivered the opinion of the Court, in which BURGER, C.J., and WHITE, BLACKMUN, REHNQUIST, STEVENS, and O'CONNOR JJ., joined. POWELL, J., filed an opinion concurring in the judgment, post, p. 270. BRENNAN, J., filed a dissenting opinion, post, p. 274.

Jon Smock, Sacramento, Cal., for appellants.

Laurence H. Tribe, Cambridge, Mass., for appellees.

Justice MARSHALL delivered the opinion of the Court.

The question presented here is whether a rent control ordinance enacted by a municipality pursuant to popular initiative is unconstitutional because pre-empted by the Sherman Act.

I

In June 1980, the electorate of the city of Berkeley, California, enacted an initiative entitled "Ordinance 5261-N.S., Rent Stabilization and Eviction for Good Cause Ordinance" (hereafter Ordinance). Section 3 of the Ordinance stated the measure's purposes.¹

"The purposes of this Ordinance are to regulate residential rent increases in the City of Berkeley and to protect tenants from unwarranted rent increases and arbitrary, discriminatory, or retaliatory evictions, in order to help maintain the diversity of the Berkeley community and to ensure compliance with legal obligations relating to the rental of housing. This legislation is designed to address the City of Berkeley's housing crisis, preserve the public peace, health and safety, and advance the housing policies of the City with regard to low and fixed income persons, minorities, students, handicapped, and the aged." App. to Juris. Statement A-111.

To accomplish these goals, the Ordinance places strict rent controls on all real property that "is being rented or is available for rent for residential use in whole or in part," § 5, id., at A-113. Excepted are government-owned units, transient units, cooperatives, hospitals, certain small owner-occupied buildings, and all newly constructed buildings. For the remaining units, numbering approximately 23,000, 37 Cal.3d 644, 678, 209 Cal.Rptr. 682, 699, 693 P.2d 261, 288 (1984), the Ordinance establishes a base rent ceiling reflecting the rents in effect at the end of May 1980. A landlord may raise his rents from these levels only pursuant to an annual general adjustment of rent ceilings by a Rent Stabilization Board of appointed commissioners or after he is successful in petitioning the Board for an individual adjustment. A landlord who fails to register with the Board units covered by the Ordinance or who fails to ad- here to the maximum allowable rent set under the Ordinance may be fined by the Board, sued by his tenants, or have rent legally withheld from him. If his violations are willful, he may face criminal penalties.

Shortly after the passage of the initiative, appellants, a group of landlords owning rental property in Berkeley, brought this suit in California Superior Court, claiming, inter alia, that the Ordinance violates their rights under the Due Process and Equal Protection Clauses of the Fourteenth Amendment, and seeking declaratory and injunctive relief. The Superior Court upheld the Ordinance on its face, but was reversed by the Court of Appeal. While that appeal was pending, however, this Court's decision in Community Communications Co. v. Boulder, 455 U.S. 40, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982), led certain amici to raise the question whether the Ordinance was unconstitutional because pre-empted by the federal antitrust laws. When the California Supreme Court heard the appeal from the Court of Appeal's decision, it therefore chose to consider plaintiffs' pre-emption claim along with their Fourteenth Amendment challenge.

Although fully briefed on the question whether the Berkeley Ordinance constitutes state action exempt from antitrust scrutiny under the standard established in Boulder, supra, the California Supreme Court noted that consideration of this issue would become necessary only were there to be " 'truly a conflict between the Sherman Act and the challenged regulatory scheme,' " 37 Cal.3d, at 660, 209 Cal.Rptr., at 696, 693 P.2d, at 275 (quoting First American Title Co. v. South Dakota Land Title Assn., 714 F.2d 1439, 1452 (CA8 1983), cert. denied, 464 U.S. 1042, 104 S.Ct. 709, 79 L.Ed.2d 173 (1984)). Such a conflict would exist, the Supreme Court concluded, only if the Ordinance on its face mandated conduct prohibited by either § 1 or § 2 of the Sherman Act. See Rice v. Norman Williams Co., 458 U.S. 654, 661, 102 S.Ct. 3294, 3299, 73 L.Ed.2d 1042 (1982). After reviewing the two "traditional standards" that have consistently been used to determine whether conduct violates § 1 of the Sherman Act—the per se rules and the rule of reason, see National Society of Professional Engineers v. United States, 435 U.S. 679, 692, 98 S.Ct. 1355, 1365, 55 L.Ed.2d 637 (1978)—the court concluded that both standards, with their exclusive focus on competition and concern for the selfish motives of private actors, failed to give due deference to a municipality's legitimate interest in promoting public health, safety, and welfare. 37 Cal.3d, at 667-673, 209 Cal Rptr., at 701-706, 693 P.2d, at 280-285. The Supreme Court therefore found both standards inappropriate and proceeded to apply a standard of its own devising, based upon this Court's Commerce Clause cases. Applying this test, the court found no conflict between the Ordinance and either § 1 or § 2 of the Sherman Act.

We noted probable jurisdiction limited to the antitrust preemption question, 471 U.S. 1124, 105 S.Ct. 2653, 86 L.Ed.2d 270 (1985), and now affirm, although on grounds different from those relied on by the California Supreme Court. While that court was correct in noting that consideration of state action is not necessary unless an actual conflict with the antitrust laws is established, we find traditional antitrust analysis adequate to resolve the issue presented here.

II

We begin by noting that appellants make no claim under either § 4 or § 16 of the Clayton Act, 15 U.S.C. §§ 15 and 26, that the process by which the Rent Stabilization Ordinance was passed renders the Ordinance the product of an illegal "contract, combination . . ., or conspiracy." Appellants instead claim that, regardless of the manner of its enactment, the regulatory scheme established by the Ordinance, on its face, conflicts with the Sherman Act and therefore is preempted.

Recognizing that the function of government may often be to tamper with free markets, correcting their failures and aiding their victims, this Court noted in Rice v. Norman Williams Co., supra, that a "state statute is not pre-empted by the federal antitrust laws simply because the state scheme may have an anticompetitive effect," id., 458 U.S., at 659, 102 S.Ct., at 3298. See Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 133, 98 S.Ct. 2207, 2217, 57 L.Ed.2d 91 (1978). We have therefore held that a state statute should be struck down on pre-emption grounds "only if it mandates or authorizes conduct that necessarily constitutes a violation of the antitrust laws in all cases, or if it places irresistible pressure on a private party to violate the antitrust laws in order to comply with the statute." 458 U.S., at 661, 102 S.Ct., at 3300.

While Rice involved a state statute rather than a municipal ordinance, the rule it established does not distinguish between the two. As in other pre-emption cases, the analysis is the same for the acts of both levels of government. See, e.g., White v. Massachusetts Council of Construction Employers, Inc., 460 U.S. 204, 103 S.Ct. 1042, 75 L.Ed.2d 1 (1983). Only where legislation is found to conflict "irreconcilably" with the...