Michigan Paytel Joint Venture v. City of Detroit

• Decision Date: 23 April 2002
• Docket Number: No. 00-1516.,00-1516.
• Citation: 287 F.3d 527
• Parties: MICHIGAN PAYTEL JOINT VENTURE; Michigan Paytel, Inc.; Noah, Inc., Plaintiffs-Appellants, v. CITY OF DETROIT; Michigan Bell Telephone Co. d/b/a Ameritech; Charles Boyce d/b/a U and M Communications, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

287 F.3d 527

MICHIGAN PAYTEL JOINT VENTURE; Michigan Paytel, Inc.; Noah, Inc., Plaintiffs-Appellants, v. CITY OF DETROIT; Michigan Bell Telephone Co. d/b/a Ameritech; Charles Boyce d/b/a U and M Communications, Defendants-Appellees.

No. 00-1516.

United States Court of Appeals, Sixth Circuit.

Argued: September 21, 2001.

Decided and Filed: April 23, 2002.

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Gordon S. Gold (argued and briefed), Tova Shaban (briefed), Seyburn, Kahn, Ginn, Bess & Serlin, Southfield, MI, Alan C. Harnisch (briefed), Harnish & Gadd, Bingham Farms, MI, for Appellants.

Morley Witus (argued and briefed), James D. VandeWyngearde, Barris, Sott, Denn & Driker, Detroit, MI, Kenneth J. McIntyre (argued and briefed), Scott T. Seabolt (briefed), Dickinson Wright, Detroit, MI, James W. McGinnis (argued and briefed), Detroit, MI, for Appellees.

Before NELSON and MOORE, Circuit Judges; KATZ, District Judge.^*

OPINION

MOORE, Circuit Judge.

In this dispute concerning the bidding process for the provision of pay telephone service in the lock-up facilities of the City of Detroit ("City"), Plaintiffs Appellants Michigan Paytel Joint Venture ("MPJV"), Michigan Paytel, Inc. ("MP"), and Noah, Inc. ("Noah") appeal the district court's dismissal of their antitrust and civil rights claims and grant of summary judgment in favor of the City, Michigan Bell Telephone Company d/b/a Ameritech ("Ameritech"), and Charles Boyce ("Boyce"). For the reasons that follow, we AFFIRM the decision of the district court.

I. BACKGROUND

On March 2, 1995, the City of Detroit Police Department ("DPD") issued a Request for Proposal ("1995 RFP") and began to solicit bids for an in-cell telephone contract. The project involved installing and servicing pay telephones in the DPD's lock-up facilities. The 1995 RFP explicitly stated that the City made no final commitments in soliciting bids.¹ On April 26 1995, MPJV submitted a bid in response to the 1995 RFP, which incorporated a new telephone that MP had developed for use in jail cells.² Three additional vendors, including Ameritech, submitted their own bids for the project. MPJV noticed defects in Ameritech's bid related to the design of the telephone³ and the proposed charge for collect calls⁴ and so informed the City.

In a January 24, 1996, memo to Benny Napoleon, then-DPD Executive Deputy Chief ("Napoleon"), Alan L. Miller, then-Second Deputy Chief of Financial Operations ("Miller"), concluded that each of the four bids failed to comply with at least one aspect of the requirements in the 1995 RFP and recommended that the DPD reissue the bid.⁵ In particular, Miller claimed that MPJV "`failed to submit annual reports or audited financial statements,' pursuant to the directives of the RFP" and that Ameritech's proposal had equipment and legal flaws. Joint Appendix ("J.A.") at 73. However, Napoleon advised in a department memo dated February 20, 1996, that the 1995 RFP only required "information relative to a company's `Financial Standing,'" which MPJV had provided. J.A. at 74. Napoleon warned that "simply rejecting all bids without a solid rationale could leave the DPD open to a charge of `arbitrariness.'" J.A. at 75. MPJV subsequently received the highest score when a DPD evaluation committee reviewed the four bids on April 4, 1996.

On April 16, 1996, Miller sent a memo to then-Chief of Police Isaiah McKinnon that contained the DPD evaluation committee's recommendation that the DPD "enter into negotiations with [MPJV]." J.A. at 78. According to MPJV, Miller then contacted MPJV counsel Melvin J. Hollowell, Jr., on July 30, 1996, with the news "that MP had been selected by the DPD as the winning bidder," and that negotiations would commence after Miller sent a form copy of the contract to MPJV. J.A. at 547 (Hollowell Aff. Ex. 1).

The DPD, however, exercised its right to reject all of the proposals received as a result of the 1995 RFP. On December 26, 1996, it issued a second Request for Proposal ("1996 RFP"), to which MP and Ameritech responded. The plaintiffs contend that MP's response to the 1996 RFP was "virtually the same" as MPJV's response to the 1995 RFP, J.A. at 17 (Compl. at ¶ 42), in contrast to Ameritech's 1996 bid:

When Ameritech submitted its response to the 1996 RFP, [it] substantially revised [its] bid from 1995 by substituting a recessed phone application substantially similar to the one originally submitted by MPJV in response to the 1995 RFP. In addition, [it] submitted a different tariff rate than the one submitted in 1995, which did not conflict with the [Michigan Telecommunications Act].

J.A. at 17 (Comp. at ¶ 41). According to the plaintiffs, Ameritech, through Boyce as its representative, publicly announced before the conclusion of the rebidding process that Ameritech had won the DPD contract. The plaintiffs also allege that they submitted an appeal and protest to the City but that the City failed to grant them a hearing to address their claims. On July 22, 1998, the City Council passed a resolution that awarded the DPD in-cell telephone contract to Ameritech.

On May 28, 1999, the plaintiffs filed a complaint in the district court alleging (1) violations of federal and state antitrust law, (2) interference with civil rights, (3) violations of state tort and contract law, and (4) conspiracy, and asking for taxpayer relief. The plaintiffs sought specific performance of the 1995 RFP, a preliminary and permanent injunction against performance of the 1995 and 1996 RFPs by Ameritech and the City, and damages and costs. On July 14, 1999, the City and Ameritech filed motions to dismiss and for summary judgment. Boyce later filed his own motion to dismiss and for summary judgment.

On July 30, 1999, two weeks after moving for summary judgment, the City filed a motion for a protective order to stay discovery. The matter was referred to a magistrate judge, who denied the City's motion. On March 28, 2000, the district court granted summary judgment in favor of the defendants, dismissing the plaintiffs' federal claims and declining to exercise supplemental jurisdiction over their state claims. This timely appeal followed.

II. ANALYSIS

We review de novo a district court's grant of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) and/or for summary judgment under Federal Rule of Civil Procedure 56. Patmon v. Mich. Supreme Court, 224 F.3d 504, 508 (6th Cir.2000). In reviewing a motion to dismiss for failure to state a claim, we construe the complaint in the light most favorable to the plaintiffs and determine whether the plaintiffs undoubtedly can prove no set of facts in support of the claims that would entitle them to relief. Jackson v. City of Columbus, 194 F.3d 737, 745 (6th Cir.1999). We accept all of the complaint's factual allegations as true, id., but "need not accept as true legal conclusions or unwarranted factual inferences." Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir.1987). "[I]f the district court considered matters outside the pleading when ruling on a motion to dismiss, [we] will treat the motion as one for summary judgment." Soper v. Hoben, 195 F.3d 845, 850 (6th Cir.1999), cert. denied, 530 U.S. 1262, 120 S.Ct. 2719, 147 L.Ed.2d 984 (2000).

Summary judgment is appropriate when the record "show[s] that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c). The moving party has the burden of establishing the "absence of evidence to support the nonmoving party's case." Patmon, 224 F.3d at 508 (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). No genuine issue of material fact exists when the "record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). In reviewing a grant of summary judgment, we "must view all [of the] evidence in the light most favorable to the nonmoving party." Darrah v. City of Oak Park, 255 F.3d 301, 305 (6th Cir.2001).

A. Antitrust Claim

1. Municipal Action

The Sherman Antitrust Act declares illegal "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations." 15 U.S.C. § 1. The Act also makes it a felony to "monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations." Id. § 2. In this case, the plaintiffs claim that the defendants violated the Act by trying to maintain Ameritech's dominance in the pay telephone service market in the Detroit metropolitan area.

The defendants contend that they are exempt from federal antitrust laws under the state action doctrine. In the landmark case of Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), the Supreme Court, relying on principles of federalism and state sovereignty, held that states as sovereigns are exempt from antitrust liability under the Sherman Antitrust Act. Id. at 352, 63 S.Ct. 307. Because municipalities are not sovereign entities, they are not automatically exempt from the antitrust laws under Parker. Town of Hallie v. City of Eau Claire, 471 U.S. 34, 38, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985); Community Communications Co. v. City of Boulder, 455 U.S. 40, 50-51, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982); City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 412-13, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978). However, a state acting in its sovereign capacity can immunize municipalities from antitrust liability by authorizing anticompetitive municipal activities. In Boulder, the Supreme Court adopted in the context of municipal action the two-prong test for antitrust...