Rectrix Aerodome Ctrs. v. Barnstable Mun. Airport

• Decision Date: 15 February 2008
• Docket Number: Civil Action No. 06-11246-RGS.
• Citation: 534 F.Supp.2d 201
• Parties: RECTRIX AERODOME CENTERS, INC. v. BARNSTABLE MUNICIPAL AIRPORT COMMISSION, et al.
• Court: U.S. District Court — District of Massachusetts

Page 201

534 F.Supp.2d 201

RECTRIX AERODOME CENTERS, INC. v. BARNSTABLE MUNICIPAL AIRPORT COMMISSION, et al.

Civil Action No. 06-11246-RGS.

United States District Court, D. Massachusetts.

February 15, 2008.

Melissa C. Allison, Kevin D. Batt, William L. Lahey, Scott P. Lewis, Anderson & Kreiger LLP, Cambridge, MA, for Defendants.

Christian T. Becker, Daniel J. Fetterman, Kara H. Headley, Marc E. Kasowitz, Kasowitz, Benson, Torres & Friedman LLP, New York, NY, Anne Robbins, Steven L. Schreckinger, Lynch, Brewer, Hoffman & Fink, LLP, Boston, MA, for Plaintiffs.

MEMORANDUM AND ORDER ON DEFENDANTS' MOTION TO DISMISS

STEARNS, District Judge.

On July 20, 2006, plaintiff Rectrix Aerodome Centers, Inc. (Rectrix), filed a thirteen-count Complaint against the Barnstable Municipal Airport Commission (BMAC or Airport), and five of its Commissioners.¹ On September 18, 2006, defendants filed a motion to stay the proceedings, asserting that the Federal Aviation Administration (FAA) had primary jurisdiction over plaintiff's principal claims. The court denied the motion to stay, holding that any referral to the FAA would be premature. On August 27, 2007, defendants filed a motion to dismiss Counts IV and V, which allege anticompetitive conduct in violation of section 2 of the Sherman Act (count IV), and the Massachusetts Antitrust Act, Mass. Gen. Laws ch. 93, § 4 (Count V).² Defendants claim that they are immune from antitrust liability under the state action and implied immunity doctrines. The court heard oral argument on February 11, 2008.

BACKGROUND

The Airport, which opened in 1928, is the third busiest in the Commonwealth of Massachusetts. The essence of Rectrix's antitrust claims is that defendants are exploiting their authority over Airport operations to monopolize the sale of jet fuel. According to Rectrix, defendants' conduct not only violates federal and state antitrust laws, but also the BMAC's own rules and regulations. Rectrix further contends that the Airport illegally funnels revenues from jet fuel Sales to the Barnstable Town treasury in violation of FAA regulations.

The material facts, viewed in the light most favorable to Rectrix as the nonmoving party, are as follows. In 2002, Rectrix entered into a long-term lease with the BMAC to build and operate a private jet hangar at the Airport. The lease permitted Rectrix to apply to become a fixed-base operator (FBO) as it expanded its business.³ The Airport is governed by longstanding rules and regulations (Minimum Standards), which specifically authorize an FBO to offer a fueling service and to sell jet fuel. Rectrix contends that defendants intentionally concealed the existence of the Minimum Standards, and promulgated instead a set of "Self-Service Standards," in which defendants reserved for themselves the exclusive right to sell jet fuel at the Airport. Under the terms of the Self-Service Standards, which defendants represented as binding, FBOs are not permitted to sell jet fuel. Rectrix argues that the prohibition forces it to purchase jet fuel for its aircraft from the BMAC at a higher price than it would pay in a truly competitive market.

DISCUSSION

1. State Action Immunity

In Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), the Supreme Court held that the Sherman Act did not apply to anticompetitive restraints imposed by States "as an act of government." Id. at 352, 63 S.Ct. 307. Because municipalities are not sovereign entities, they do riot automatically qualify for the exemption. Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 412-413, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978) (plurality opinion). See also Owen v. City of Independence, 445 U.S. 622, 638, 100 S.Ct. 1398, 63 L.Ed.2d 673 (1980); Monell v. Dep't of Social Servs., 436 U.S. 658, 664, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978). To be entitled to the exemption, a municipal agency must show that it acted "pursuant to state policy to displace competition with regulation or monopoly public service." Lafayette, 435 U.S. at 413, 98 S.Ct. 1123. The state policy must be "clearly articulated and affirmatively expressed." Id. at 410, 98 S.Ct. 1123. This standard, however, does not require a "state legislature to have stated explicitly that it expected [defendants] to engage in conduct that would have anticompetitive effects." Town of Hallie v. Eau Claire, 471 U.S. 34, 42, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985). The State need only delegate to the municipality "the express authority that foreseeably will result in anticompetitive effects." Id. at 43, 105 S.Ct. 1713. This expansive view of the delegation power recognizes that "[n]o legislature can be expected to catalog all of the anticipated effects of [a statute]." Id. Where immunity attaches, it shields not only the municipality as a body corporate and politic, but also municipal officials who are responsible for implementation of the anticompetitive policy. See Fisichelli v. Town of Methuen, 956 F.2d 12, 15-16 (1st Cir.1992).

A. Clearly Articulated Policy

To determine whether state action immunity applies, the court must first consider whether the Airport's enabling legislation sets forth a clearly articulated policy of displacing competition. The statutory authority to operate a municipal airport m Massachusetts is provided by Mass. Gen. Laws ch. 90, §§ 51D-51N. The statute authorizes an airport commission to "adopt rules and regulations for the use of municipal airports" that comply with the rules and regulations of the Massachusetts Aeronautics Commission and federal aviation law. Id. § 51J. These include the ability to

determine the charges or rentals for the use of any properties, facilities, installations, landing fees, concessions, uses and services and [to] determine the terms and conditions under which contracts may be executed by the commission on behalf of such city or town.... In all such contracts as may be executed for the foregoing privileges or licenses or any of them the public shall not be deprived of its rightful, legal and uniform use of such properties, facilities, and installations.

Id. § 51H. A municipal airport commission is further authorized to enter into leases of airport property for periods of up to twenty years

under such terms and conditions as it may prescribe, for hangars, shops, storage, industrial purposes, offices and other space rental, and for concessions, and may lease any other areas at such an airport for any purpose.

Id. § 51F.

To support its argument that no clearly articulated state policy authorizes the BMAC's "conduct, Rectrix relies on Scott Aviation, Inc. v. DuPage Airport Auth., 393 F.Supp.2d 638 (N.D.Ill.2005), where plaintiff alleged, as in this case, that an airport's monopoly over the sale of aviation fuel violated the Sherman Act. The Scott court rejected defendant's claim of state action immunity because "there [was] no clearly articulated policy by a state entity authorizing [the airport] to engage in the alleged misconduct...." Id. at 647. Rectrix argues that the statutes at issue in Scott were "very similar" to the Massachusetts enabling statute. However, the Scott decision does not cite to, or even paraphrase, the relevant Illinois statutes. (Nor has Rectrix provided the court with a copy). Defendants argue that Scott is an aberration. They note that the same court issued a contrary decision nearly twenty years earlier in Wellwoods Dev. Co. v. City of Aurora, 631 F.Supp. 221 (N.D.Ill.1986), where a City's claim to an unfettered right to "grant concessions or privileges" to airport operators and to "regulate the use of" the airport, was held to fall within state action immunity. Id. at 224, 225.

Plaintiff additionally relies on Cedarhurst Air Charter, Inc. v. Waukesha County, 110 F.Supp.2d 891 (E.D.Wis.2000). In that case, the plaintiff airline sued the County for conspiring with a FBO to give the FBO an exclusive right to sell jet fuel at the airport. The FBO in question managed and operated the airport under a contract with the County. See id. at 892. The court ruled that there was no clearly articulated Wisconsin state policy authorizing anticompetitive conduct by an airport commission. Id. at 893. Cedarhurst, however, is distinguishable as there is no allegation in this case that the BMAC conspired with a private party to Rectrix's detriment.

More on point is the decision in Interface Group, Inc. v. Massachusetts Port Auth., 816 F.2d 9 (1st. Cir.1987). In that case, a charter airline brought an antitrust action against Massport for requiring the exclusive use of terminal and ground services provided by two existing FBOs at Logan Airport. The First Circuit ruled that Massport was immune from antitrust liability because of the state action doctrine. See id. at 12. Citing to Massport's enabling statute, Mass. Gen. Laws ch. 91, §§ 1-14, the Court noted that the Legislature had authorized Massport to "fix the terms, conditions, rents and rates or charges for [use of the airport] ...," and to "establish rules and regulations for the use of [Logan]." Id. at 13. The Court reasoned that "[s]etting policies that govern which airlines are to use which terminals, where and how they are to be serviced, and whether or when they can taxi from one terminal to another, lies close to the heart of Massport's basic purpose. Thus, the state has clearly indicated that Massport may engage in the activities here in question." Id. (emphasis in original).

The enabling language in Interface is virtually indistinguishable from the statutory language at issue in this case. Like Massport, the BMAC is permitted to "adopt rules and regulations for the use of [the Airport]." Mass. Gen. Laws 90, § 51J. Like Massport, the BMAC is authorized to "determine charges or rentals for the use of any properties, facilities, installations, landing fees, concessions, uses and services," and to "determine the terms and conditions under which contracts may be executed by the commission." Id. § 51H....