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

• Citation: 702 F.2d 532
• Decision Date: 11 April 1983
• Docket Number: No. 79-3741,79-3741
• Parties: 1983-1 Trade Cases 65,320 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: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 532

702 F.2d 532

1983-1 Trade Cases 65,320

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 11, 1983.

Allen I. Hirsch, Simon A. Miller, Atlanta, Ga., for Southern Motor carriers.

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

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

Robert P. Gruber, Gen. Counsel, Wilson B. Partin, Jr., Deputy Gen. Counsel, Raleigh, N.C., for amicus curiae State of N.C. and N.C. Utilities Comm.

Barry Grossman, Nancy C. Garrison, Appellate Sec., Dept. of Justice, Washington, D.C., for plaintiff-appellee.

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

Before GODBOLD, Chief Judge, RONEY, TJOFLAT, HILL, FAY, VANCE, KRAVITCH, FRANK M. JOHNSON, Jr., HENDERSON, HATCHETT, ANDERSON and THOMAS A. CLARK, Circuit Judges.

FRANK M. JOHNSON, Jr., Circuit Judge:

In November 1976 the United States instituted this action under Section 4 of the Sherman Act, 15 U.S.C.A. Sec. 4, to enjoin the continuing violation of Section 1 of the Sherman Act, 15 U.S.C.A. Sec. 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. The 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.

The district court granted the government's motion for summary judgment and held that defendants were in violation of Section 1. The court rejected arguments ² that defendants' activities were immune under the state action doctrine or under the Noerr-Pennington doctrine. Defendants SMCRC and NCMCA and intervenor NARUC appealed, and a panel of the former Fifth Circuit affirmed. United States v. Southern Motor Carriers Rate Conference, Inc., 672 F.2d 469 (5th Cir. Unit B 1982). The Court en banc voted to rehear the case to consider two issues: first, whether a private party may avail itself of the state action exception to federal antitrust laws only if the state compels it to perform the disputed actions; and second, whether, if state compulsion is not necessary, the state policies here at issue were sufficiently clearly articulated and affirmatively expressed for the state action exception to apply. We hold that compulsion is required of private parties and thus do not reach the second issue. Accordingly, we affirm the judgment of the district court.

The Supreme Court first clearly articulated the "state action" exception to the antitrust laws 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 the applicability of the Sherman Act to an agricultural proration system established by a California statute authorizing a commission to impose marketing programs for raisins upon the petition of raisin growers. Once the program was approved and instituted by the commission, participation by the growers was mandatory; under the statute, growers who refused to follow a program once instituted were subject to fines and imprisonment. Id. at 347, 63 S.Ct. at 311-312. ³ Analyzing the intent of Congress in enacting the Sherman Act, the Court concluded that, insofar as the Act applied only to "persons," Congress intended application of the Act to the "business combinations" of "individuals and corporations." Id. at 351, 63 S.Ct. at 313-314. The Act was not, therefore, intended to "restrain a state or its officers or agents from activities directed by its legislature." Id. at 350-51, 63 S.Ct. at 313. Congress made no mention of states, and "[i]n 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." Id. at 351, 63 S.Ct. at 313. ⁴ Applying this analysis to the California program, the Court reasoned that the Sherman Act was not intended to apply to the state of California in its establishment of a program operating under "state command." "The state in adopting and enforcing the prorate program," the Court concluded, "made no contract or agreement and entered into no conspiracy in restraint of trade or to establish monopoly but, 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. at 314. The Court's opinion in Parker therefore established the state action issue as a question of whether the challenged acts could be attributed to the state as sovereign.

The fact that the Court in Parker concluded that Congress did not intend to restrain anticompetitive acts attributable to states of course did not mean that only states could assert a state action defense. Thus, while Parker's holding applied to state party defendants, the Supreme Court in Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975), suggested that a defense of state action may also be available to private parties under certain limited circumstances. Goldfarb was a class action against the Virginia State Bar and a Virginia county bar association in which the Court considered the validity under the Sherman Act of a minimum fee schedule for lawyers published by the county bar association. After determining that the county bar association was not a state agency, ⁵ the Court addressed the "threshold inquiry" of whether the bar association's "activity is required by the State acting as sovereign." Id. at 790, 95 S.Ct. at 2015. The county bar association had argued that its action was "prompted" by the state, but a unanimous Court held that this was not enough for a state action defense. Rather, the action must be "compelled by direction of the State acting as a sovereign." Id. at 791, 95 S.Ct. at 2015. Deciding that the state of Virginia did not require the publication of minimum fee schedules, the Court stated that it "need not inquire further into the state-action question," id. at 790, 95 S.Ct. at 2015, and held that the challenged action was not state action for Sherman Act purposes.

After Goldfarb, the question remained as to what would be required in addition to the threshold compulsion requirement for a finding of state action for private parties. This question was partially answered the next term in Cantor v. Detroit Edison Co., 428 U.S. 579, 96 S.Ct. 3110, 49 L.Ed.2d 1141 (1976). At issue in Cantor was a program in which Detroit Edison--a private defendant--provided light bulbs to its electricity customers without a separate charge. Detroit Edison could not discontinue its program, the Court stated, without the approval of a Michigan state commission, and in this sense the threshold compulsion requirement was at least formally satisfied. See id. at 592, 96 S.Ct. at 3118 ("In this case we are asked to hold that private conduct required by state law is exempt from the Sherman Act." (emphasis added)); id. at 594, 96 S.Ct. at 3119. ⁶ As Goldfarb had hinted, however, compulsion alone was not enough, particularly in Cantor, where "there can be no doubt that the option to have, or not to have, such a program is primarily [Detroit Edison's], not the [State's]," id. at 594, 96 S.Ct. at 3119, and where the state was neutral as to the desirability of providing the light bulbs. Noting that it would not find an exception to federal antitrust law unless one was required for the state regulatory program to function, a majority of the Court concluded that Michigan's policy interest in regulating electricity would not be affected by the inapplicability of the state action doctrine. ⁷ Thus, although Detroit Edison's action was formally commanded by the state, the Court declined to grant the company state action immunity where no significant state interest would be undermined by enforcement of federal antitrust law. This discussion as to the factors necessary for private party invocation of the state action doctrine is, however, for the most part not at issue in the present case. It is enough for our purposes that the Court premised its discussion on the fact that Detroit Edison's action was "required" by the state. Id. at 592, 96 S.Ct. at 3118. In fact, although there were four separate opinions in Cantor, none of the Justices questioned the continued validity of Goldfarb 's requirement--which had been imposed by a unanimous Court--that a private party must first meet the compulsion requirement as a threshold matter. ⁸

In our view, the analytical basis for Goldfarb 's compulsion requirement for private parties traces its roots directly to the analysis in Parker. The lesson of Parker is that the legislative history and wording of the Sherman Act point to the conclusion that Congress wished to restrain the...