Town of Hallie v. City of Eau Claire, 82-1715

• Decision Date: 17 February 1983
• Docket Number: No. 82-1715,82-1715
• Citation: 700 F.2d 376
• Parties: 1983-1 Trade Cases 65,227 TOWN OF HALLIE, Town of Seymour, Town of Union and Town of Washington, Wisconsin townships, Plaintiffs-Appellants, v. CITY OF EAU CLAIRE, a Wisconsin municipal corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 376

700 F.2d 376

1983-1 Trade Cases 65,227

TOWN OF HALLIE, Town of Seymour, Town of Union and Town of Washington, Wisconsin townships, Plaintiffs-Appellants, v. CITY OF EAU CLAIRE, a Wisconsin municipal corporation Defendant-Appellee.

No. 82-1715.

United States Court of Appeals Seventh Circuit.

Argued Oct. 29, 1982.

Decided Feb. 17, 1983.

Claude J. Covelli, Boardman, Suhr, Curry & Field, Madison, Wis., for plaintiffs-appellants.

Frederick W. Fischer, Eau Claire, Wis., for defendant-appellee.

Before ESCHBACH, Circuit Judge, COFFEY, Circuit Judge, and WISDOM, Senior Circuit Judge. ^*

WISDOM, Senior Circuit Judge.

Four towns allege that a city is using a monopoly over sewage treatment services in the relevant geographic market to gain a monopoly in the markets for sewage collection and sewage transportation in violation of the Sherman Act, 15 U.S.C. Sec. 1 et seq. (1973), the Federal Water Pollution Control Act, 33 U.S.C. Sec. 1251 et seq. (1978), and a state common law duty of a utility to serve. On appeal, the towns contend that the district court erred in dismissing their claims under the Sherman Act on the ground that the conduct in question falls within the state action immunity doctrine of Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). We conclude that the conduct in question is exempt from the antitrust laws under Parker and Community Communications Company v. City of Boulder, 455 U.S. 40, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982), and we affirm the district court's decision.

I.

The plaintiffs-appellants--Town of Hallie, Town of Seymour, Town of Union, and Town of Washington ("Towns")--are four Wisconsin townships that are adjacent to the City of Eau Claire ("City"). The City used federal funds to build a sewage treatment facility within the city limits, and this sewage treatment facility is the only such facility in the market available to the Towns. As a result, the City enjoys a monopoly in the market for sewage treatment services. ¹

The City has refused to supply sewage treatment services to the Towns. The district court found that the City has provided sewage treatment services to individual landowners in the Towns only if they will agree to become annexed by the City and thereby obtain sewage collection and transportation services from the City. Town of Hallie v. City of Eau Claire, No. 80-C-527, slip op. at 1 (W.D.Wisc. April 5, 1982). By refusing to provide treatment services to the Towns, the City has prevented the Towns from competing in the markets for sewage collection and transportation. The Towns simply have no means of disposing of the sewage once they collect and transport it, so they do not collect it at all.

In their complaint seeking injunctive relief, the Towns alleged that the City's denial of sewage treatment services to them violated the Sherman Act, the Federal Water Pollution Control Act, and a common law duty of a utility to serve. The City moved to dismiss the complaint pursuant to Fed.R.Civ.Pro. 12(b), and the district court granted the motion. The district court dismissed the antitrust claims on the grounds that the City's conduct was exempt from the Sherman Act under Parker v. Brown. ² The district court dismissed the Federal Water Pollution Control Act claim, holding that the Act does not provide a right to sue, that the Towns failed to pursue administrative remedies, and that the Act does not mandate the action that the Towns seek. After dismissing the federal claims, the district court dismissed the pendent state claim.

On appeal, the Towns contest only the denial of their antitrust claims. The Towns contend that the City's conduct is exempt from the Sherman Act only if it is in furtherance of clearly articulated and affirmatively expressed state policy and it is actively supervised by the State of Wisconsin. The Towns contend that state action immunity is unavailable to the City because it has met neither of these two requirements. The City contends that its denial of services to the Towns is authorized by clearly articulated state policy and that state action immunity protects its conduct.

II.

In Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), the Supreme Court addressed the issue whether the federal antitrust laws prohibited the State of California from adopting a program that prevented raisin producers from freely marketing their crop in interstate commerce. The Court held that the marketing program was exempt from the antitrust laws by virtue of limitations in the Sherman Act and concepts of federalism:

We find nothing in the language of the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature. In a dual system of government in which, under the Constitution, the states are sovereign, save only as Congress may constitutionally subtract from their authority, an unexpressed purpose to nullify a state's control over its officers and agents is not lightly to be attributed to Congress.

317 U.S. at 350-51, 63 S.Ct. at 313, 87 L.Ed. at 326.

The Supreme Court later addressed the question whether the "state action" immunity exemption of Parker v. Brown was available to a state's municipalities. ³ In City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978), ⁴ a private utility company brought suit under the Sherman Act against several Louisiana cities empowered to own and operate electric utility systems and alleged that they had committed various antitrust offenses in their operation of their utility systems. A majority of the Court rejected the contention that Congress did not intend the Sherman Act to apply to local governments, and a plurality of the Court stated:

Cities are not themselves sovereign; they do not receive all the federal deference of the states that create them. Parker's limitation of the exemption to 'official action directed by a state,' is consistent with the fact that the States' subdivisions generally have been treated as equivalents of the States themselves. In light of the serious economic dislocation which could result if cities were free to place their own parochial interests above the Nation's economic goals reflected in the antitrust laws, we are especially unwilling to presume that Congress intended to exclude anticompetitive municipal action from their reach.

435 U.S. at 412-413, 98 S.Ct. at 1136, 55 L.Ed.2d at 382-83. The Court recognized, however, that the state as sovereign might sanction anticompetitive activity by the municipalities and immunize this activity from antitrust liability. ⁵ The Court concluded that "the Parker doctrine exempts only anticompetitive conduct engaged in as an act of government by the State as sovereign, or, by its subdivisions, pursuant to state policy to displace competition with regulation or monopoly public service." Id. at 413, 98 S.Ct. at 1137, 55 L.Ed.2d at 383. ⁶

The Supreme Court returned to the issue of state action immunity for municipalities in Community Communications Co. v. City of Boulder, 455 U.S. 40, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982). ⁷ The Court addressed the question whether the Parker immunity extended to a "home rule" municipality that was granted extensive powers in local and municipal matters by the state constitution. The Court concluded that the restraint in question, a moratorium on the expansion of cable television enacted by the City Council of Boulder, ⁸ could not be exempt from antitrust scrutiny unless it constituted the action of the State of Colorado itself in its sovereign capacity or municipal action in furtherance of clearly articulated and affirmatively expressed state policy. The Court held that the guarantee of local autonomy to municipalities through the Home Rule Amendment to the Colorado Constitution did not constitute the "clear articulation and affirmative expression" of state policy necessary for anticompetitive conduct to be protected under Parker. The Court found that the Home Rule Amendment was neutral with respect to the challenged activity and rejected the City's contention that the general grant of power to enact ordinances necessarily implies state authorization to enact specific anticompetitive ordinances.

III.

The issue before the Court is to determine if the refusal of the City of Eau Claire to provide sewage treatment facilities to the Towns falls within the protection of Parker v. Brown as interpreted in City of Lafayette and City of Boulder. The holdings of these cases require that municipalities act pursuant to a clearly articulated and affirmatively expressed state policy. Before determining if such a state policy exists, we must resolve two preliminary issues.

First, the Towns contend that the conduct which must be pursuant to state policy is the City's use of monopoly power in sewage treatment services to monopolize sewage collection and transportation. The Towns argue that the district court erred in characterizing the anticompetitive conduct which must be pursuant to state policy as "the City's decision to provide sewage treatment services to the Towns if and only if they also permit the City to provide sewage collection and transportation services via annexation." According to the Towns, the City must point to a state policy authorizing the City's use of monopoly power over sewage treatment to gain monopolies in sewage collection and transportation.

We reject the Towns' argument that the authorization of the anticompetitive conduct complained of must be as specific as they request. In City of Lafayette, the Court rejected the position "that a political subdivision necessarily must be able to point to a specific, detailed legislative authorization before it may properly assert a Parker defense to an antitrust suit," and the Court went on to state that an adequate state mandate exists when it is found "from the authority given a city to operate...