Mason City Ctr. Assoc. v. City of Mason City

• Citation: 468 F. Supp. 737
• Decision Date: 05 April 1979
• Docket Number: No. C 78-106.,C 78-106.
• Parties: MASON CITY CENTER ASSOCIATES and Beaver Farms, Inc., Plaintiffs, v. The CITY OF MASON CITY, IOWA, Kenneth Kew, Virgil DeVary, Dr. Stanley Romans, Marlys Shima, Roger Pedelty, Larry Jarvill, Harlan Johnson, Holmen Development Company and the Ericson Development Co., Inc., Defendants.
• Court: U.S. District Court — Northern District of Iowa

468 F. Supp. 737

MASON CITY CENTER ASSOCIATES and Beaver Farms, Inc., Plaintiffs, v. The CITY OF MASON CITY, IOWA, Kenneth Kew, Virgil DeVary, Dr. Stanley Romans, Marlys Shima, Roger Pedelty, Larry Jarvill, Harlan Johnson, Holmen Development Company and the Ericson Development Co., Inc., Defendants.

No. C 78-106.

United States District Court, N. D. Iowa, Cedar Rapids Division.

April 5, 1979.

COPYRIGHT MATERIAL OMITTED

Stephen J. Holtman, Simmons, Perrine, Albright & Ellwood, Cedar Rapids, Iowa, George F. Karch, Jr., Thomas J. Collin, Thompson, Hine & Flory, Cleveland, Ohio, for plaintiffs.

B. Michael Dunn, Mason City, Iowa, Stuart L. Finney, Minneapolis, Minn., for defendants; H. Richard Smith, Paul F. Ahlers, Edward W. Remsburg, James E. Cooney, Des Moines, Iowa, of counsel.

ORDER

McMANUS, Chief Judge.

This matter is before the court on defendants' resisted joint motion to dismiss for failure to state a claim, filed January 15, 1979. Denied.

This action for injunctive relief and damages is predicated upon alleged antitrust violations.¹ Plaintiffs are Mason City Center Associates (Center Associates), an Ohio limited partnership engaged in the organization and planning of a regional shopping center on the west side of Mason City, Cerro Gordo County, Iowa (West Side Center); and Beaver Farms, Inc. (Beaver Farms), an Iowa corporation owning title to the land upon which Center Associates plans to construct the aforementioned West Side Center. Defendants are the City of Mason City, a municipal corporation existing under the laws of the State of Iowa; Kew, DeVary, Romans, Shima, Pedelty, Jarvill, and Johnson — each members of the Mason City City Council (Council); Holmen Development Co. (Holmen) and The Ericson Development Co., Inc. (Ericson), both Minnesota corporations engaged in the organization and planning of a regional shopping center in downtown Mason City (Downtown Center).

A motion to dismiss for failure to state a claim is the proper method for testing the legal sufficiency of a complaint. 2A Moore's Federal Practice, ¶ 12.08 at 2265-66 (2d ed. 1975). The motion should not be granted unless it appears beyond doubt that the plaintiffs could prove no set of facts in support of their claim which would entitle them to relief. Cruz v. Beto, 405 U.S. 319, 322, 92 S.Ct. 1079, 31 L.Ed.2d 263 (1972); Haines v. Kerner, 404 U.S. 519, 520-21, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); Stifel, Nicolaus & Co. v. Dain, Kalman & Quail, Inc., 578 F.2d 1256, 1260 (8th Cir. 1978); Bramlet v. Wilson, 495 F.2d 714, 716 (8th Cir. 1974). In ruling on the motion the court must construe the complaint liberally, taking the alleged facts as true and entitling the plaintiffs to all reasonable inferences in their favor that may be drawn from the alleged facts. Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975); Stifel, Nicolaus & Co. v. Dain, Kalman & Quail, Inc., supra.

Plaintiffs' complaint alleges the following specifically relevant facts. Holmen and Ericson have entered into an agreement with the City to organize and plan the Downtown Center upon the express condition that the City prevent any person or firm from planning or constructing a regional shopping center that would compete with the Downtown Center. Plaintiff Center Associates seeks to construct its West Side Center on a 35-acre tract located on the west side and within the limits of Mason City. This tract is owned by Beaver Farms and is presently zoned "A-Agriculture and Mining."

The West Side Center development cannot be undertaken unless the Beaver Farms tract is rezoned to "G-Business." Beaver Farms applied for such a rezoning, which was denied by the Mason City Planning and Zoning Commission. The rezoning denial was affirmed by the City Council. Plaintiffs further allege that the Council members denied the rezoning pursuant to and in furtherance of their agreement with Holmen and Ericson to exclude competitive shopping center developments from Mason City, and that the agreement has effectively granted Holmen and Ericson "a perpetual veto power over all applications for rezoning of property in Mason City . . . intended to be used for a regional shopping center . . . in competition with the Downtown Center." As a result of these actions plaintiffs have been effectively prevented from pursuing their plan to build the West Side Center. Upon these and other allegations,² plaintiffs base their contentions that defendants have violated federal and state antitrust statutes, and the Iowa common law relating to zoning.³

In moving for dismissal for failure to state a claim, defendants contend that their action in refusing to rezone is protected as a matter of law by the "state action" exemption to the federal antitrust laws, which the United States Supreme Court delineated in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943) and its progeny. Additionally, they contend that to the extent the complaint alleges concerted efforts to induce governmental action resulting in a restraint of trade or in a monopoly, it nonetheless fails to state an actionable violation of the antitrust laws because of the "Noerr-Pennington" political-speech immunity doctrine. See, United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965); Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961). Finally, defendants seek dismissal of the pendent state law counts on grounds that the Iowa Competition Law must be construed in harmony with the federal antitrust laws and that the court should exercise its discretion under pendent jurisdiction and dismiss counts 5 and 6, citing United Mine Workers v. Gibbs, 383 U.S. 715, 725-26, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966) in support.

The court may assume for present purposes that defendants' actions as alleged would be sufficient to support a claimed violation of the antitrust laws if they were done by virtue of an agreement, combination or conspiracy involving solely private parties.⁴ See, Parker v. Brown, 317 U.S. 341, 350, 63 S.Ct. 307, 87 L.Ed. 315 (1943). Thus, the issue to be decided on defendants' motion is the legal one whether defendants are exempted or immune from any antitrust liability by virtue of the Parker "state action" doctrine or the Noerr-Pennington political activity doctrine. Upon the facts alleged the court finds that they are not and the motion will therefore be denied.

State Action

Parker v. Brown involved the validity of a California statute specifically authorizing the establishment of agricultural marketing programs expressly restricting competition among raisin growers and fixing the prices at which the growers could sell their product. The stated purpose of the statute was to conserve California's agricultural wealth and prevent economic waste in marketing the state's agricultural goods. See, Parker v. Brown, 317 U.S., at 346, 63 S.Ct. 307.

The United States Supreme Court assumed that the program would violate the Sherman Act if it had been the product of private agreement. Id., at 350, 63 S.Ct. 307. In upholding the statute, and thereby delineating the so-called "state action" exemption to the Sherman Act, the Court stressed the fact that the program had been established under state legislation and was administered and supervised by a Commission, appointed by the governor and confirmed by the state senate, and of which a state official — the Director of Agriculture — was an ex-officio member. Id., at 346, 63 S.Ct. 307. Thus, the State of California directly involved itself as sovereign in what the Court construed was the state's legitimate sphere of regulation. See id., at 350-52, 63 S.Ct. 307. Indeed, the Court emphasized that it was not faced with a question "of the state or its municipality becoming a participant in a private agreement or combination by others for restraint of trade." Id., at 351-52, 63 S.Ct., at 314 (emphasis added).⁵

As one United States Circuit Court of Appeals noted about the Parker decision, "the Supreme Court's emphasis on the extent of the state's involvement precludes the facile conclusion that action by any public official automatically confers exemption." George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., 424 F.2d 25, 30 (1st Cir.), cert. denied, 400 U.S. 850, 91 S.Ct. 54, 27 L.Ed.2d 88 (1970). This point — that a state's subdivisions and agencies are not automatically exempt from application of the federal antitrust laws — seems to have been seconded in subsequent Supreme Court opinions interpreting Parker. See City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 408, 411-13 & n.41, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978). Compare Goldfarb v. Virginia State Bar, 421 U.S. 773, 790-91, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975) with Bates v. State Bar of Arizona, 433 U.S. 350, 359-62, 97 S.Ct. 2691, 53 L.Ed.2d 810 (1977).

This is not to say, however, that municipalities may not at any time avail themselves, as agents of the state, of the "state action" exemption set forth in Parker. They may do so when their anticompetitive conduct is engaged in "pursuant to state policy to displace competition with regulation or monopoly public service" and merely reflects such state policy. City of Lafayette v. Louisiana Power & Light Co., supra, 435 U.S., at 413, 98 S.Ct. 1123. In addressing this more-limited "state policy" consideration, however, the Supreme Court cases make it clear that:

The threshold inquiry in determining if an anticompetitive activity is state action of the type the Sherman Act was not meant to proscribe is whether the activity is required by the State acting as sovereign. . . . It is not enough that . . . anticompetitive conduct is "prompted" by state action; rather, anticompetitive activities must be compelled by direction of the State acting as a sovereign.

Goldfarb v....