Town of Hallie v. City of Chippewa Falls

• Decision Date: 18 January 1982
• Docket Number: No. 80-1406,80-1406
• Citation: 314 N.W.2d 321,105 Wis.2d 533
• Parties: , 1982-1 Trade Cases P 64,474 TOWN OF HALLIE, a Wisconsin town, Plaintiff-Appellant, v. CITY OF CHIPPEWA FALLS, a Wisconsin municipal corporation, Defendant-Respondent-Petitioner.
• Court: Wisconsin Supreme Court

Page 321

314 N.W.2d 321

105 Wis.2d 533, 1982-1 Trade Cases P 64,474

TOWN OF HALLIE, a Wisconsin town, Plaintiff-Appellant, v. CITY OF CHIPPEWA FALLS, a Wisconsin municipal corporation Defendant-Respondent-Petitioner.

No. 80-1406.

Supreme Court of Wisconsin.

Argued Nov. 30, 1981.

Decided Jan. 18, 1982.

B. James Colbert, Chippewa Falls, argued for defendant-respondent-petitioner; Wiley, Rasmus, Colbert, Frasch & Norseng, S.C., Chippewa Falls, on brief.

Claude J. Coveilli, Madison, argued, for plaintiff-appellant; Walter Kuhlmann and Boardman, Suhr, Curry & Field, Madison, on brief and David H. Raihle, Chippewa Falls, of counsel.

BEILFUSS, Chief Justice.

This is a review of a decision of the court of appeals, 102 Wis.2d 722, 308 N.W.2d 420 which reversed part of a judgment of the Circuit Court for Chippewa County, ROBERT F. PFIFFNER, Judge. The part of the judgment reversed by the court of appeals dismissed the plaintiff's second cause of action for failure to state facts upon which relief may be granted.

Both the plaintiff and the defendant are municipalities located in Chippewa County, Wisconsin. The plaintiff, Town of Hallie, is adjacent to the defendant, City of Chippewa Falls. Chippewa Falls owns and maintains a sewage treatment plant capable of treating more sewage than is presently generated within the city. The town has no sewage treatment or collection facilities. The residents of at least a part of the town want to utilize the city's sewer system.

The town proposed to construct its own sewage collection system and connect it to the city system for treatment. The city rejected the proposal and, in turn, offered to allow the town to use its treatment facility only if the town agreed to allow the city to provide for the collection of sewage and other municipal services. The town would not agree. A portion of the town was then annexed to the city.

The plaintiff's complaint stated two claims against the defendant city. The first claim alleged that the ordinance enacted by the city which annexed a portion of the town was arbitrary, capricious and constituted an abuse of discretion. The trial court upheld the validity of the city's annexation ordinance. This determination was affirmed by the court of appeals and this court denied the town's cross-petition for further review.

In its second claim the town alleged that the city had conditioned provision of waste treatment service on the acceptance of other services such as fire and police protection and street services. This anti-competitive tie-in behavior was alleged to violate sec. 133.03, Stats.1979-80, the Wisconsin Antitrust Law. The city moved to dismiss this second claim and the trial court granted the motion, without leave to replead. The town drafted an amended complaint and filed a motion for leave to replead. ¹ In the amended complaint the town alleged that sewage treatment was composed of three functional levels-collection, transportation, and treatment of sewage. The city allegedly has a monopoly on the actual sewage treatment services, not only within the city limits but within the geographic area constituting the town as well. The town alleges it is a potential competitor with the city to provide sewage collection and transportation services in the town. The city refused to negotiate with the town for treatment services and attempted to monopolize collection and transportation services within the annexed portion of the town. The town further alleged that the city had offered to provide sewage treatment services to the town, but only on the condition that the users also accept the city's collection services and other city services such as fire, police, and street services. The town claims this tying of services prevented it from being able to compete with the city in the market for sewage collection services. As a result, a not insubstantial amount of commerce had been restrained.

The court of appeals reversed the dismissal of the plaintiff's second claim, holding that the allegations of the amended complaint did state a cause of action under the Wisconsin Antitrust Act, ch. 133, Stats.1979-80. The court of appeals concluded that tying the provision of one type of service to the purchase of other services is illegal under the federal Sherman Act and that because Wisconsin's antitrust law is based on the Sherman Act, the town's allegations of such tying behavior did state a cause of action under state antitrust law. The court rejected the argument that a city should be exempt from the antitrust law because its actions were authorized by the state. The court of appeals further concluded the legislature did not create such an exemption and it declined to establish one. This court granted review of the portion of the court of appeal opinion dealing with the antitrust allegations by the town.

For purposes of this review, we must assume that the plaintiff would be able to prove facts in support of its allegations. As we stated in Grams v. Boss, 97 Wis.2d 332, 351-52, 294 N.W.2d 473 (1980), "the complaint should be dismissed as legally insufficient only if 'it is quite clear that under no conditions can the plaintiff recover.' A claim should not be dismissed 'unless it appears to a certainty that no relief can be granted under any set of facts that plaintiff can prove in support of his allegations.' " Thus we assume that the town is a potential competitor with the city in the provision of sewage collection services in the area of the town and that the city is tying the provision of treatment services to the acceptance of other city services. The implication in this action seems that, in effect, the city refused to provide sewage treatment services to the portions of the town unless the inhabitants of the portions agreed to become annexed to the city. We now hold that such tie-in behavior by the city would not be illegal under the state antitrust law and, therefore, the town's amended complaint fails to state a cause of action.

Sec. 133.03(1), Stats.1979-80, is Wisconsin's version of the Sherman Act. It provides:

"133.03 Unlawful contracts; conspiracies. (1) Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce is illegal. Every person who makes any contract or engages in any combination or conspiracy in restraint of trade or commerce may be fined not more than $100,000 if a corporation, or, if any other person, $50,000, or be imprisoned for not more than 5 years, or both."

Cities are "persons" covered by sec. 133.03(1). Formerly it was unclear whether cities were covered, but sec. 133.02(3) specifically states that cities are included in the term "person" in sec. 133.03(1).

The city argues that it should be exempt from the state antitrust law under the doctrine of Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). This case arose under the Sherman Act and established an exemption from federal antitrust law for "state action or official action directed by a state...." 317 U.S. at 351, 63 S.Ct. at 313. The Parker decision rested on general principles of federalism involving the relationship of the federal government to the sovereign states, and on the specific constitutional limits on federal power contained in the tenth and eleventh amendments. ² These principles are not present in this case. The relationship between the federal government and the states is not parallel to the relationship between the state government and the cities. Cities are creatures of the state, derive their power from it, and are not recognized as independent sovereigns. Madison v. Hyland, Hall & Co., 73 Wis.2d 364, 372, 243 N.W.2d 422 (1976). The concern in Parker and recent United States Supreme Court cases applying it ³ has to do with potential conflicts between the laws of two different sovereigns-federal and state governments.

By contrast, the present case involves a conflict between the state laws dealing with municipalities and the state antitrust law. The rationale behind the Parker exemption is not applicable to this type of case. As explained by Milton Handler in the Columbia Law Review, the overriding issue in cases like this one is "the reconciliation of two ostensibly conflicting enactments of a single sovereign ... The job quite simply is to ascertain, as best as can be, the intent of the legislators." ⁴

This court has dealt with conflicts between the state antitrust law and other state statutes in Reese v. Associated Hospital Service, 45 Wis.2d 526, 173 N.W.2d 661 (1970), and in Grams v. Boss, 97 Wis.2d 332, 294 N.W.2d 473 (1980). These cases established the rule that an entity cannot be exempted from the state antitrust statute unless the conduct of the entity is within the express provisions of the conflicting statute and then only if its conduct is in furtherance of the conflicting statute's legislatively stated purpose. Reese, 45 Wis.2d at 532-33, 173 N.W.2d 661, and Grams, 97 Wis.2d at 342, 294 N.W.2d 473. We reiterate this rule for private entities, but we believe this rule may be overly restrictive if applied to municipalities. When dealing with actions by municipalities, we hold that the test as to the applicability of the state antitrust law is whether the legislature intended to allow municipalities to undertake such actions. Such a determination involves an analysis of the home rule powers of cities, the type of conduct undertaken by a city in a particular instance, and the general statutory framework set up by the legislature in the particular field. In this case we conclude that the legislature intended to allow a city to tie the provision of sewage services to an area outside the city to the acceptance by the area's inhabitants of the city's other services.

In reaching this conclusion we initially note that cities are given broad home rule powers by the state constitution and by the statutes. Sec. 62.11(5), Stats.1979-80, provides:

"(5) Powers. ...