Montauk-Caribbean Airways, Inc. v. Hope

• Decision Date: 14 February 1986
• Docket Number: MONTAUK-CARIBBEAN,D,No. 578,578
• Citation: 784 F.2d 91
• Parties: , 1986-1 Trade Cases 66,961 AIRWAYS, INC., d/b/a Long Island Airlines, Plaintiff- Appellant, v. Judith HOPE, Randall Parsons, Anthony Bullock, Michael J. Finazzo, and Hugh King, Individually and as the Town Board of the Town of East Hampton, Charles T. Smith, Russell Stein, East Hampton Aire, Inc., and Frank LaVigna, Defendants-Appellees. ocket 85-7752.
• Court: U.S. Court of Appeals — Second Circuit

Page 91

784 F.2d 91

54 USLW 2466, 1986-1 Trade Cases 66,961

MONTAUK-CARIBBEAN AIRWAYS, INC., d/b/a Long Island Airlines Plaintiff- Appellant, v. Judith HOPE, Randall Parsons, Anthony Bullock, Michael J Finazzo, and Hugh King, Individually and as the Town Board of the Town of East Hampton, Charles T. Smith, Russell Stein, East Hampton Aire, Inc., and Frank LaVigna Defendants-Appellees.

No. 578, Docket 85-7752.

United States Court of Appeals Second Circuit.

Argued Nov. 25, 1985.

Decided Feb. 14, 1986.

I. Leonard Feigenbaum, Melville, for appellant.

Eric J. Lobenfeld, New York City (Sanford M. Litvack, Valerie A. Cohen, and Donovan, Leisure, Newton & Irvine, New York City, on the brief), for appellees Hope, Parsons, Bullock, Finazzo, King, Smith and Stein.

Thomas A. Hickey, New York City (Joseph J. Ceccarelli, and Plunkett & Jaffe, New York City, on the brief), for appellees East Hampton Aire, Inc. and Frank La Vigna.

Before TIMBERS, PIERCE and MINER, Circuit Judges.

TIMBERS, Circuit Judge:

Appellant Montauk-Caribbean Airways, Inc., d/b/a Long Island Airlines, appeals from a judgment entered October 1, 1985 in the Eastern District of New York, Henry Bramwell, District Judge, dismissing, pursuant to Fed.R.Civ.P. 12(b)(6), federal claims and pendent state claims.

Appellant commenced this action on February 8, 1985 against members of the Town Board of East Hampton, New York; the Town's attorney; the manager of the Town's airport; East Hampton Aire, Inc. ("EHA"), a competitor airline; and the latter's chief executive officer. The complaint alleged violations of the Sherman Act, 15 U.S.C. Secs. 1, 2 (1982); the Clayton Act, 15 U.S.C. Secs. 15, 26 (1982); the Federal Aviation Act, 49 U.S.C. Secs. 1305(a), 1349(a), 2210(a) (1982); and the Federal Civil Rights Act, 42 U.S.C. Sec. 1983 (1982). The complaint also alleged pendent state claims for breach of contract and conspiracy. The action was based on the Town's refusal to allow appellant to serve as an air carrier and fixed-base operator at the East Hampton Airport on a year-round basis. Appellant alleged that the Town and EHA conspired to create a monopoly during the off-season months for the benefit of EHA.

In an order dated May 28, 1985, the district court, pursuant to Fed.R.Civ.P. 12(b)(6), dismissed the Clayton Act, Sec. 1983 and Federal Aviation Act claims. After the Supreme Court's decision in Town of Hallie v. City of Eau Claire, --- U.S. ----, 105 S.Ct. 1713 (1985), and after reargument before the district court, Judge Bramwell dismissed appellant's Sherman Act claim for injunctive relief and the pendent state law claims, and reaffirmed dismissal of the Sec. 1983 claim.

We entered an injunction prohibiting interference with appellant's operations pending this appeal. For the reasons set forth below, we dissolve the injunction which we entered pending appeal and we affirm the judgment of the district court dismissing appellant's claims.

I.

This dispute arises from appellant's desire to obtain a lease permitting it to serve as a year-round fixed-base air carrier operator at the East Hampton Airport owned and operated by the Town of East Hampton. In 1978, appellant and the Town entered into a lease under which appellant was to operate as a fixed-base operator and air carrier at the airport. In December 1979, appellant and the Town entered into a ten-year lease which did not require appellant to provide year-round services. Appellant thereafter operated on a seasonal basis between May 1 and September 30 of each year. In 1983 and 1984, apparently after the arrival of new management, appellant sought permission to operate after September 30. The Town Board informed appellant that the lease did not authorize such post-seasonal operations.

In the Fall of 1984, appellant filed a complaint with the Federal Aviation Administration (FAA) under 49 U.S.C. Sec. 1349, claiming that the Town of East Hampton unjustly discriminated against appellant. The FAA concluded that the failure to grant a full-year lease was discriminatory. The Town, however, did not act on the FAA decision in favor of appellant.

On February 8, 1985, appellant commenced the instant action, seeking the relief set forth above. Appellees, pursuant to Fed.R.Civ.P. 12(b)(6), moved to dismiss the claims. On May 28, 1985 the district court dismissed the Clayton Act claims for damages on the basis of the Local Government Antitrust Act of 1984, 15 U.S.C. Sec. 35 (Supp. II 1984) (the Act). ¹ The court also dismissed the claims asserted under the Federal Aviation Act and Sec. 1983. The court thereafter granted the appellees' motion for written reargument pursuant to Local Rule 3(j). In its decision of September 4, 1985, the court, applying the Supreme Court's recent decision in Town of Hallie v. City of Eau Claire, --- U.S. ----, 105 S.Ct. 1713 (1985), dismissed the remaining antitrust claims under the state action doctrine. The court also reaffirmed its decision to dismiss the Sec. 1983 claims; and, finding no private cause of action under the Federal Aviation Act, dismissed those claims as well.

II.

The principal issue raised on appeal is whether the Act or the state action doctrine, or both, bar appellant's antitrust action against a municipality which owns and operates a local airport. In determining whether the district court, pursuant to Rule 12(b)(6), properly dismissed appellant's federal claims, we must view the factual allegations in the complaint as true. Jones-Bey v. Caso, 535 F.2d 1360, 1362 (2 Cir.1976).

The complaint alleged that appellees Town and EHA conspired to restrain trade and create a monopoly in favor of EHA in violation of the Clayton and Sherman Acts. Appellant submitted to the Town Board a proposed lease amendment which provided for the elimination of any seasonal restriction on appellant's operation. The Board held a public hearing but reached no formal decision. The lease has not been modified. Appellant argues that EHA has usurped a significant share of appellant's air carrier business.

Judge Bramwell held that the Act barred appellant's antitrust claim for treble damages under the Clayton Act. The Act insulates municipalities and their representatives from monetary claims arising under the antitrust laws. This recently enacted statute provides:

"No damages, interest on damages, costs, or attorney's fees may be recovered under section 15, 15a, or 15c of this title from any local government, or official or employee thereof acting in an official capacity."

15 U.S.C. Sec. 35.

Congress enacted this statute prior to the Supreme Court's decision in Hallie. Its legislative history reflects the desire of Congress to broaden the shield protecting municipalities from antitrust claims for damages. The statute was enacted, in part, "in response to concern with Supreme Court decisions over the past few years that appear to have limited the extent that antitrust immunity applicable to States will be accorded to local governments." H.R.Rep. No. 98-965, 98th Cong., 2d Sess. 2, reprinted in 1984 U.S.Code Cong. & Ad. News 4602, 4603. Thus, it is fair to assume that Congress intended greater protection for municipalities than the parameters of the pre-Hallie state action doctrine provided.

Appellant argues, however, that, in the absence of an articulated state authorization for the town board members' conduct, appellees were not acting "in an official capacity", and therefore fall outside the protection of the Act. This narrow interpretation, which would provide no greater protection than that which the federal common law afforded, is not what Congress intended.

The legislative history of the Act indicates that Congress, concerned with the number of antitrust actions brought against municipalities and the limited immunity available under the then-existing state action exemption, intended that the phrase "acting in an official capacity" be given broad meaning. An affirmative grant of authority is not required.

"The definition of official local conduct is intended to be as broad as the local government's authority--encompassing 'legislative, regulatory, executive, administrative, or judicial authority' of a local government. The Committee assumes that this authority will most often stem from broad home rule grants, or from more specific State grants of authority to the local entity. The definition thus removes any requirement imposed by the Supreme Court in Community Communications Co. v. City of Boulder, [455 U.S. 389 (1978) ] that there be a specific and affirmative grant of a State's authority to the local government in every instance."

H.R.Rep. No. 98-965, 98th Cong., 2d Sess. 20-21, reprinted in 1984 U.S.Code Cong. & Ad. News 4602, 4621-22.

In light of the desire of Congress to grant broad immunity from damages for noncriminal acts by local officials and the authority which New York law grants to municipalities in the operation of local airports, ² we believe that the district court was correct in holding that appellant failed to state a claim upon which relief can be granted under the Clayton Act for damages against the Town of East Hampton. The Act bars such a claim.

The Act, however, does not apply to claims for injunctive relief under the Sherman Act. See 15 U.S.C. Sec. 35; H.R.Rep. No. 98-965, supra, reprinted in 1984 U.S.Code Cong. & Ad. News 4602, 4603.

The question therefore of whether the court properly dismissed the instant claims must be examined in light of the Supreme Court's decision in Hallie. There, certain townships sought injunctive relief, alleging that the City of Eau Claire violated the Sherman Act by acquiring a monopoly over the provision of sewage treatment services and by tying such services to sewage collection and transportation services. In holding that the municipality was immune from such antitrust actions, the Court reexamined the line of cases which established the state action immunity doctrine. Parker v. Brown, 317 U.S. 341 (1943...