U.S. v. Southern Motor Carriers Rate Conference, Inc.

• Decision Date: 05 April 1982
• Docket Number: No. 79-3741,79-3741
• Citation: 672 F.2d 469
• Parties: 1982-1 Trade Cases 64,659 UNITED STATES of America, Plaintiff-Appellee, v. SOUTHERN MOTOR CARRIERS RATE CONFERENCE, INC. and North Carolina Motor Carriers Association, Inc., Defendants-Appellants, National Association of Regulatory Utility Commissioners, Intervenor-Appellant. . Unit B *
• Court: U.S. Court of Appeals — Fifth Circuit

Page 469

672 F.2d 469

1982-1 Trade Cases 64,659

UNITED STATES of America, Plaintiff-Appellee, v. SOUTHERN MOTOR CARRIERS RATE CONFERENCE, INC. and North

Carolina Motor Carriers Association, Inc.,

Defendants-Appellants,

National Association of Regulatory Utility Commissioners,

Intervenor-Appellant.

No. 79-3741.

United States Court of Appeals, Fifth Circuit.

Unit B ^*

April 5, 1982.

Arnall, Golden & Gregory, Allen I. Hirsch, Simon A. Miller, Jeffrey C. Baxter, Atlanta, Ga., for Southern Motor Carriers.

Rea, Cross & Auchincloss, Bryce Rea, Jr., David Hyler Coburn, Washington, D.C., for North Carolina Motor and amicus Nat. Motor Freight Traffic Assoc.

Robert P. Gruber, Gen. Counsel, Wilson B. Partin, Jr., Deputy Gen. Counsel, David Gordon, Associate Atty. Gen., Raleigh, N.C., for amicus curiae.

Barry Grossman, Atty., Nancy C. Garrison, Robert Lewis Thompson, Antitrust Div., Appellate Section, Dept. of Justice, Washington, D.C., for plaintiff-appellee.

Paul Rodgers, Gen. Counsel, Charles D. Gray and Pamela R. Melton, Washington, D.C., for intervenor-appellant.

Appeals from the United States District Court for the Northern District of Georgia.

Before HILL and FRANK M. JOHNSON, Jr., Circuit Judges and SCOTT ^**, District Judge.

FRANK M. JOHNSON, Jr., Circuit Judge:

In 1976 the United States instituted this action under Section 4 of the Sherman Act, 15 U.S.C. § 4, to enjoin the continuing violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, by three rate bureaus. These defendants, Southern Motor Carriers Rate Conference, Inc. (SMCRC), North Carolina Motor Carriers Association, Inc. (NCMCA), and Motor Carriers Traffic Association, Inc. (MCTA), represent common carriers before the regulatory commissions of the states of Alabama, Georgia, Mississippi, North Carolina, and Tennessee. These rate bureaus perform three basic functions: (1) they provide a forum for competing member carriers to discuss and agree on rates for intrastate transportation of general commodities to be proposed to state public service commissions for approval; (2) they publish tariffs and supplements containing the rates on which the carriers agree; and (3) they provide counsel, staff experts, and facilities for the preparation of cost studies and other exhibits and testimony for use in support of proposed rates at hearings held by the regulatory commissions. ¹ The government challenged the first of these functions as price fixing in violation of Section 1 of the Sherman Act. ²

Deciding the case on cross-motions for summary judgment, the district court held defendants in violation of Section 1 and granted the government's motion. In so doing, the judge rejected defendants' arguments that their activities were immune under the state action doctrine or under the Noerr-Pennington doctrine and that their activities did not constitute an antitrust violation.

Two of the defendants, SMCRC and NCMCA, and the intervenor, The National Association of Regulatory Utility Commissioners, have filed this appeal. We affirm.

State Action Immunity

Appellants vigorously argue that their collective ratemaking falls within the "state action" exception to the antitrust laws. The Supreme Court first clearly articulated this exception in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). At issue in Parker, a suit against state officials, was an agricultural proration system established by a state statute authorizing a commission to impose marketing programs for raisins after petition by raisin growers and imposing penalties for failure to follow the programs. Federal antitrust law, the Court held, did not prohibit this system, for the Sherman Act was not intended to alter a state's action supplanting competition. The program at issue, established by "state command", was adopted and enforced by the state acting as sovereign. See id. at 352, 63 S.Ct. at 314. The Court explicitly noted that a state's mere authorization of parties to violate the Sherman Act or a state's participation with private parties in an agreement in restraint of trade would not insulate actions from the federal antitrust laws. Id. at 351, 63 S.Ct. at 313.

The particular issue regarding the state action exception that is crucial here is whether a private party may avail itself of the exception only if the state compels it to perform the disputed actions. Appellants assert that 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 Supreme Court eliminated any state compulsion prerequisite for private party invocation of the exception. We disagree with that assertion. Before we address the holding of Midcal itself, however, we believe that it would be worthwhile to elaborate on certain aspects of the exception that the Supreme Court has announced in cases since Parker that interpret what constitutes an act of the state as sovereign.

First, we believe that in cases prior to Midcal the Supreme Court has made clear that private parties can invoke the state action exception only if the state compels their actions. ³ In Goldfarb v. Virginia State Bar Ass'n, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975), the Court struck down a minimum fee schedule the habitual violation of which would, according to the state bar association, raise a presumption of unethical conduct. Noting that the bar association was not a state agency for the purposes at issue, the Court asserted that "(t)he threshold inquiry in determining if an anticompetitive activity is state action of the type the Sherman Act was not meant to proscribe is whether the activity is required by the state acting as sovereign." Id. at 790, 95 S.Ct. at 2014. Similarly, in Bates v. State Bar of Arizona, 433 U.S. 350, 359-60, 97 S.Ct. 2691, 2696-97, 53 L.Ed.2d 810 (1977), the Court, though striking down a ban on lawyer advertising on First Amendment grounds, distinguished Goldfarb by finding that the challenged restraint was the "affirmative command" of the Arizona Supreme Court, the body wielding the state's power over the practice of law, and so was " 'compelled by direction of the State as sovereign.' " Id. at 360, 97 S.Ct. at 2697 (quoting Goldfarb, 421 U.S. at 791, 95 S.Ct. at 2015). See also Litton Sys., Inc. v. Southwestern Bell Tel. Co., 539 F.2d 418, 423 (5th Cir. 1976).

Second, the Supreme Court has not required that the state compel action of public institutions. In Parker, the state did not require a state commission to issue a mandatory program. Rather, it gave the commission the option of establishing the program after the petition of raisin growers. In Bates the Court specifically noted that its analysis differs substantially depending on whether the defendant is a public or private official or institution. See also Community Communications Co. v. City of Boulder, --- U.S. ----, ----, 102 S.Ct. 835, 840, 70 L.Ed.2d 810 (1982) (suggesting mere state "sanction" of municipal action sufficient for invoking exception); Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 410 n.40, 98 S.Ct. 1123, 1135 n.40, 55 L.Ed.2d 364 (1978) (plurality opinion) (same).

Third, an action purporting to be by the state as sovereign must further a clear state policy. The Supreme Court explored this requirement, which for private parties is in addition to the threshold state compulsion requirement, in Cantor v. Detroit Edison Co., 428 U.S. 579, 592-98, 96 S.Ct. 3110, 3118-21, 49 L.Ed.2d 1141 (1976). At issue was a program of the Detroit Edison Co., a private defendant, approved by a state commission. Under the program, the company provided light bulbs without a charge separate from a customer's billings for electricity. The Court held that the program was not state action immune from the Sherman Act's purview. The Court found no necessary conflict between the state's regulation of the distribution of electricity and the federal interest in the competitive market for light bulbs. Moreover, noting that it would not find an exception unless required for the state regulatory program to function and then only to the minimum extent necessary, the Court found that Michigan's policy interest in regulating electricity would not be affected by the inapplicability of the state action exception to the free light bulb program. ⁴ This consideration is equally applicable in suits against public defendants. In Bates, the Court, stating that for the purposes at issue the state bar was an agent of the state in enforcing a ban on advertising, specifically held Cantor inapplicable because "the regulation of the activities of the bar is at the core of the State's power to protect the public", 433 U.S. at 361, 97 S.Ct. at 2697, and the state policy was "clearly and affirmatively expressed". Id. at 362, 97 S.Ct. at 2698. See also New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96, 109, 99 S.Ct. 403, 411, 58 L.Ed.2d 361 (1978); City of Lafayette, 435 U.S. at 410, 98 S.Ct. at 1135 (plurality opinion).

Keeping in mind the three considerations present in the Supreme Court cases outlined above-the need for state compulsion of private defendants, for some lesser state directive for public defendants, and for a clear expression of state policy-we proceed to an analysis of Midcal itself. The statute at issue in Midcal required wine producers and wholesalers to file fair trade contracts or price schedules with the state. Wholesalers could not resell wine to retailers at prices below those on the contracts or schedules. The Supreme Court reviewed prior cases on state action immunity and held that they established a two-pronged standard. "First, the challenged restraint must be 'one clearly articulated and affirmatively expressed as state policy'; second, the policy must be 'actively supervised' by the State itself." 445 U.S. at 105, 100 S.Ct. at 943 (quoting City of Lafayette, 435 U.S. at 410, 98 S.Ct. at 1135 (plurality opinion)). California's regulatory system, the Court ruled,...