Southern Disposal, Inc. v. Texas Waste Management, a Div. of Waste Management of Texas, Inc., 97-7098

• Decision Date: 02 December 1998
• Docket Number: No. 97-7098,97-7098
• Citation: 161 F.3d 1259
• Parties: 1998-2 Trade Cases P 72,356, 1999 CJ C.A.R. 481 SOUTHERN DISPOSAL, INC., an Oklahoma corporation, Plaintiff-Appellant, v. TEXAS WASTE MANAGEMENT, A DIVISION OF WASTE MANAGEMENT OF TEXAS, INC., a Texas corporation; City of Hugo, a Municipal corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1259

161 F.3d 1259

1998-2 Trade Cases P 72,356, 1999 CJ C.A.R. 481

SOUTHERN DISPOSAL, INC., an Oklahoma corporation, Plaintiff-Appellant, v. TEXAS WASTE MANAGEMENT, A DIVISION OF WASTE MANAGEMENT OF TEXAS, INC., a Texas corporation; City of Hugo, a Municipal corporation, Defendants-Appellees.

No. 97-7098.

United States Court of Appeals Tenth Circuit.

Dec. 2, 1998.

Eric S. Gray (Thomas P. Goresen with him on the briefs) of Gray & Goresen, P.C., Oklahoma City, Oklahoma, for Plaintiff-Appellant.

Rodney C. Ramsey of Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., Oklahoma City, Oklahoma, for Defendant-Appellee City of Hugo.

Stratton Taylor of Taylor, Burrage, Foster, Singhal & Mallett, Claremore, Oklahoma, for Defendant-Appellee Texas Waste Management.

Before BRORBY and MURPHY, Circuit Judges, and MARTEN, ¹ District Judge.

BRORBY, Circuit Judge.

Southern Disposal sued the City of Hugo, Oklahoma ("Hugo" or "the City") and Texas Waste Management (collectively "Defendants") alleging violations of the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2, the Commerce Clause, Due Process and Equal Protection violations under 42 U.S.C. § 1983, and various state law provisions. The district court granted the Defendants' motion to dismiss for failure to state a claim with regard to the federal questions, and refused to exercise jurisdiction over the remaining state law claims. Southern Disposal appeals, claiming the district court erred in dismissing the suit. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and affirm.

BACKGROUND

In late 1995, the City of Hugo decided to change the way it handled trash collection. Instead of providing the service as a government function, the City sought competitive bids from private companies for an exclusive contract to provide waste disposal services for the City. Southern Disposal, a company previously under contract with the City to provide commercial waste disposal, and Texas Waste Management, both submitted bids to the City Council. On December 19, 1995, at a City Council meeting, a selection committee recommended Texas Waste Management receive the contract. Southern Disposal objected, and the City Council tabled the recommendation. The City then issued another written request for bids for the exclusive waste disposal contract. Both Southern Disposal and Texas Waste Management again submitted sealed bids and made oral presentations of their bid proposals to the selection committee. On January 16, 1996, the Hugo City Council awarded the contract to Texas Waste Management and later signed an exclusive contract with Texas Waste Management for a period of ten years, effective April 1, 1996. The contract provided for the hauling, collection, and disposal of solid waste of any residential, commercial, or industrial customer located within the city limits of Hugo. It also provided for an extension of the contract for an additional year at the end of each year. After signing the new contract, the City notified Southern Disposal it was no longer authorized to collect trash within the city limits after March 31, 1996. Following these events, Southern Disposal filed suit.

The district court first addressed the federal questions involved to determine if federal jurisdiction was appropriate. It dismissed the federal antitrust claims, relying on both the immunity protections of the state action doctrine and Southern Disposal's failure to articulate a relevant geographic market for an antitrust claim under the Sherman Act. ² It also ruled Southern Disposal failed to state a Commerce Clause claim because the burden on interstate commerce, if any, did not outweigh the local benefit. ³ Finally, the district court decided Southern Disposal made no valid claim of Due Process or Equal Protection violations by either Defendant, because no property right was implicated and both parties were granted fair and equal opportunity to participate in the competitive bidding process.

Appellant argues on appeal: (1) the district court erroneously ruled that Southern Disposal's complaint fails to state any antitrust violation pertaining to the solid waste disposal market for Choctaw County, Oklahoma; (2) the actions of the Defendants are not exempt from antitrust scrutiny because the Oklahoma legislature is constitutionally prohibited from articulating a state policy to permit displacement of all competition in the solid waste management business, and (3) the City's arbitrary and irrational actions denied Southern Disposal due process and equal protection.

DISCUSSION

Southern Disposal appeals the district court's grant of the Defendants' Fed.R.Civ.P. 12(b)(6) motion to dismiss. The standard of review is de novo. See Chemical Weapons Working Group, Inc. v. United States Dep't of the Army, 111 F.3d 1485, 1490 (10th Cir.1997)

. We will uphold a dismissal on this basis "only when it appears that the plaintiff can prove no set of facts in support of the claims that would entitle him to relief, accepting the well-pleaded allegations of the complaint as true and construing them in the light most favorable to the plaintiff." Yoder v. Honeywell, Inc., 104 F.3d 1215, 1224 (10th Cir.) (internal citations omitted), cert. denied, --- U.S. ----, 118 S.Ct. 55, 139 L.Ed.2d 19 (1997). However, we need not accept Appellant's conclusory allegations as true. Swanson v. Bixler, 750 F.2d 810, 813 (10th Cir.1984).

A. Applicability of State Action Immunity

We first address whether Southern Disposal alleges a federal antitrust violation sufficient to survive a motion to dismiss. Section 1 of the Sherman Act states "[e]very contract ... in restraint of trade or commerce among the several States ... is hereby declared to be illegal." Similarly, 15 U.S.C. § 2 makes unlawful any act 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." This general rule against monopolies and restraints of trade is inapplicable to certain state action. Consequently, before deciding if Appellant sufficiently alleges the waste disposal contract invalidly restrains trade and monopolizes the City's waste disposal service, we must determine whether the state action immunity doctrine applies and shields Defendants from the application of federal antitrust laws altogether.

1. State Action Immunity Overview

The concept of state action immunity was first articulated in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). Parker established a rule of immunity for acts of the state legislature in its sovereign capacity which ostensibly violate provisions of federal antitrust law. In Parker, a California statute authorized state officials to establish a marketing program for the state's raisin crop. This program effectively restricted competition and maintained higher prices. Id. at 346, 63 S.Ct. 307. The state law was subsequently challenged as a violation of the Sherman Act. Relying on fundamental principles of federalism, the Supreme Court held federal antitrust law did not apply because the state "as sovereign, imposed the restraint as an act of government which the Sherman Act did not undertake to prohibit." Id. at 352, 63 S.Ct. 307. The Court recognized "nothing in the language of the Sherman Act or in its history ... suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature." Id. at 350-51, 63 S.Ct. 307.

Parker clearly sets out the rule of state action immunity for the state as sovereign. However, in the present case, the challenged conduct is not directly attributable to the state legislature. Consequently, we must determine whether this state action antitrust immunity is available for parties to municipal contracts entered pursuant to state legislative authorization. In California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980), the Court reaffirmed a two-part test for determining whether state action immunity is available to municipalities or entities other than state legislatures. "First, the challenged restraint must be 'one clearly articulated and affirmatively expressed as state policy' " to displace competition with regulation; "second, the policy must be 'actively supervised' by the State itself." Id. at 105, 100 S.Ct. 937 (quoting Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 410, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978)). In cases of municipal action, the second prong of active supervision is satisfied if the municipality itself supervises the conduct. See Town of Hallie v. City of Eau Claire, 471 U.S. 34, 46, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985); Porter Testing Lab. v. Board of Regents, 993 F.2d 768, 772 (10th Cir.), cert. denied, 510 U.S. 932, 114 S.Ct. 344, 126 L.Ed.2d 309 (1993); Gold Cross Ambulance & Transfer v. City of Kansas City, 705 F.2d 1005, 1014-15 (8th Cir.1983), cert. denied, 471 U.S. 1003, 105 S.Ct. 1864, 85 L.Ed.2d 158 (1985).

2. The Present Case

The district court concluded the Oklahoma legislature authorized the contract entered All incorporated cities and towns may directly or through a public trust of which it is a beneficiary develop a plan, subject to the approval of the Department, to provide a solid waste management system and shall adequately provide for the collection and disposal of solid waste generated or existing within the incorporated limits of such city or town or in the area to be served thereby at one or more disposal sites. The governing body of the city or town may enter into agreements with a county or counties, with one or more other incorporated towns or cities, with persons or trusts, or with any combination thereof, to provide a disposal site or implement a solid waste management system for the incorporated city or town.

between the City and Texas Waste Management under a "clearly articulated and affirmatively expressed"...