Golden State Transit Corp. v. City of Los Angeles

• Decision Date: 28 February 1984
• Docket Number: No. 83-5903,83-5903
• Citation: 726 F.2d 1430
• Parties: 1984-1 Trade Cases 65,878 GOLDEN STATE TRANSIT CORPORATION, Plaintiff-Appellant, v. CITY OF LOS ANGELES, Defendant-Appellee. CA
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1430

726 F.2d 1430

1984-1 Trade Cases 65,878

GOLDEN STATE TRANSIT CORPORATION, Plaintiff-Appellant, v. CITY OF LOS ANGELES, Defendant-Appellee.

CA No. 83-5903.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Nov. 7, 1983.

Decided Feb. 28, 1984.

Joseph M. Alioto, San Francisco, Cal., for plaintiff-appellant.

John F. Haggerty, Asst. City Atty., Los Angeles, Cal., for defendant-appellee.

Appeal from the United States District Court for the Central District of California.

Before BROWNING and NORRIS, Circuit Judges, and SOLOMON, ^* district judge.

SOLOMON, Judge:

Introduction

Golden State Transit Corporation d/b/a Yellow Cab of Los Angeles (Yellow Cab) brought this action against the City of Los Angeles (City) when the City refused to renew Yellow Cab's taxicab franchise. Yellow Cab sought a preliminary injunction and moved for partial summary judgment contending that the City committed a per se violation of section 1 of the Sherman Act, 15 U.S.C. Sec. 1. The district court denied both requests and instead granted the City a partial summary judgment dismissing Yellow Cab's antitrust claim. ¹ The district court based both decisions on its conclusion that the City was protected from antitrust liability by the Parker doctrine. Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943).

Procedural History

In 1981, when Yellow Cab filed this action against the City, it did not allege antitrust violations. Instead, it alleged that the City's refusal to renew its taxicab franchise violated the Supremacy Clause and also deprived it of due process and equal protection of the law in violation of 42 U.S.C. Sec. 1983. In that proceeding, the district court granted a preliminary injunction which prevented the City from terminating Yellow Cab's franchise, 520 F.Supp. 191. This court reversed. Golden State Transit v. City of Los Angeles, 686 F.2d 758 (9th Cir.1982), cert. denied, --- U.S. ----, 103 S.Ct. 729, 74 L.Ed.2d 954 (1983). We held that Yellow Cab had little likelihood of success on the merits.

On remand, Yellow Cab amended its complaint to include a cause of action alleging that the City violated section 1 of the Sherman Act, 15 U.S.C. Sec. 1. Yellow Cab again moved for a preliminary injunction. It also requested a partial summary judgment on its contention that the City's regulations constituted a per se violation of section 1 of the Sherman Act.

The district court, 563 F.Supp. 169, denied the request for a preliminary injunction. It held that Yellow Cab was not likely to succeed on the merits of its antitrust cause of action because the City was not subject to federal antitrust laws under the Parker doctrine. Based on the Parker doctrine, the district court also denied Yellow Cab's motion for partial summary judgment. Instead, the court granted the City partial summary judgment. ²

Facts

Yellow Cab operates a taxicab company in Los Angeles. Taxicab operators must have a franchise which may only be granted by the City. Los Angeles Administrative Code Secs. 13.4, 71.02(b). Applications for a franchise are first reviewed by the City's Board of Public Utilities and Transportation. The Board then makes recommendations to the City Counsel. Los Angeles City Charter Sec. 211. The City Council ultimately decides whether to grant an application.

All thirteen of the taxicab franchises in Los Angeles expired in 1980, and all of the franchise holders applied to the City for renewal. The City temporarily extended all of the franchises for five months to give it time to evaluate the applications. The franchise of Yellow Cab permitted it to operate 363 cabs, approximately 30% of the total in the City. The Board recommended that the City Council renew Yellow Cab's franchise. Before the Council acted, the Teamsters struck the company and requested the City Council members and other city officials to withhold Yellow Cab's franchise until Yellow Cab entered into a new collective bargaining agreement with the Teamsters. After a hearing, the City Council voted 11-1 to deny Yellow Cab's application for renewal. ³

In addition to controlling the number of taxicab franchises, the City sets the rates charged by all of the taxicabs in the City. It refused to approve Yellow Cab's requested increase, but it approved all of the increases requested by Yellow Cab's competitors. The City contends that it did not grant the increase because Yellow Cab failed to submit the required financial information.

Yellow Cab has not operated in the City since May, 1983.

Discussion

The parties agree that whether federal antitrust restrictions apply to the City is a question of law to be reviewed de novo.

In Parker v. Brown, supra, the Supreme Court held that federal antitrust laws do not apply to a restraint of trade imposed as 'an act of government' by the state 'as sovereign.' 317 U.S. at 352, 63 S.Ct. at 314. In that case, the State of California adopted a program to regulate the state's raisin crop which kept the price of raisins artificially high and which prevented the appellee from freely marketing his crop in interstate commerce.

Thereafter, the Court analyzed the application of Parker to states and state agencies. In City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978), the issue was whether the Parker doctrine applied to cities. The City of Lafayette brought an action against utility companies, and the companies counterclaimed alleging antitrust violations. The plurality opinion held that cities, "simply by their status as such, are not within the Parker doctrine," but that anticompetitive conduct may be exempt from antitrust regulation when a city acts "pursuant to state policy to displace competition with regulation or monopoly public service." 435 U.S. at 413, 98 S.Ct. at 1137. The plurality opinion emphasized that state policy pursued by the city must be "clearly articulated and affirmatively expressed." Id. at 410, 98 S.Ct. at 1135.

In Community Communications Co., Inc. v. City of Boulder, 455 U.S. 40, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982), a majority of the Court adopted this standard. The city was organized as a "home rule" municipality under the state constitution which gave it "extensive powers of self-government in local and municipal matters ...." 455 U.S. at 43, 102 S.Ct. at 837. The city granted the petitioner a non-exclusive contract to provide cable television service to a limited section of the city. The state constitution placed no restrictions on what the City could do in its regulation of cable television, and the state did not regulate the field. The city later enacted a temporary moratorium on cable services that prohibited the petitioner from expanding to other parts of the city. The petitioner sought to enjoin the moratorium on the ground that it violated section 1 of the Sherman Act. The city contended that under the Parker doctrine it was not subject to antitrust restraints.

The Court held that the city could not avail itself of the Parker doctrine because the state's "mere neutrality respecting the municipal actions challenged as anticompetitive," 455 U.S. at 55, 102 S.Ct. at 843, did not satisfy the requirement of a clearly articulated and affirmatively expressed state policy. The state, when it gave the city home rule powers which permitted it to do as it pleased, was merely neutral.

To prove that a policy is clearly articulated and affirmatively expressed, the City must demonstrate not only the existence of a state policy to displace competition with regulation, but also that the legislature contemplated the kind of actions alleged to be anticompetitive. Parks v. Watson, 716 F.2d 646, 663 (9th Cir.1983) (per curiam). Both tests are satisfied here.

The district court relied on the California Constitution and on the Public Utility Code as evidence of a state policy to displace competition with regulation.

Under the state constitution, taxicabs and their owners are classified as public utilities which may be controlled by the state legislature. Cal. Const., art. XII, Sec. 3. In addition, the Public Utilities Commission "may fix rates and establish rules for transportation of passengers and property by transportation companies...." Cal. Const., art. XII, Sec. 4.

The legislature has exercised control over taxicabs in the Passenger Charter-Party Carriers' Act, Cal.Pub.Util.Code Secs. 5351 et seq. Under the Act, a carrier (which includes taxicabs) must obtain a certificate of public convenience and necessity. Id. Sec. 5371. To obtain a certificate, a carrier must pay a filing fee and an application fee, Secs. 5373, 5373.1, and must establish its fitness and financial responsibility, Secs. 5374, 5391. An application to operate in an area already served by a certificate holder is available only if the applicant proves that the existing service is not satisfactory and adequate. Sec. 5375.1. The Act contains detailed provisions for cancellation, revocation or suspension of a certificate. Sec. 5378. It specifies the methods a carrier may use to compute its charges to a customer. Sec. 5401. It sets forth fines and penalties for violation of the Act. Secs. 5411-5419.

Appellant argues that the California Court of Appeal in People v. City and County of San Francisco, 92 Cal.App.3d 913, 155 Cal.Rptr. 319 (1979), precludes the conclusion that the Passenger Charter-Party Carriers' Act articulates a clear state policy in favor of taxicab regulation. City and County of San Francisco held that a municipality has the authority to set taxicab fares. We agree with the holding but do not agree with the reasoning of the state court of appeals. The court found that the statute did not grant the state commission any authority over taxicabs and that cities could determine whether to regulate taxicabs. See City and County of San Francisco, 92 Cal.App.3d at 924, 155 Cal.Rptr. at 326. Relying on these court of appeal decisions, appellants argue that the...