Woolen v. Surtran Taxicabs, Inc.

• Decision Date: 29 November 1978
• Docket Number: Civ. A. No. CA-3-78-1609-G.
• Citation: 461 F. Supp. 1025
• Parties: John WOOLEN, Jack T. Stephens, and John D. Campisi, Individually and as Class Action Plaintiffs, v. SURTRAN TAXICABS, INC., City of Dallas, Texas, City of Fort Worth, Texas, City of Irving, Texas, and City of Grapevine, Texas.
• Court: U.S. District Court — Northern District of Texas

461 F. Supp. 1025

John WOOLEN, Jack T. Stephens, and John D. Campisi, Individually and as Class Action Plaintiffs, v. SURTRAN TAXICABS, INC., City of Dallas, Texas, City of Fort Worth, Texas, City of Irving, Texas, and City of Grapevine, Texas.

Civ. A. No. CA-3-78-1609-G.

United States District Court, N. D. Texas, Dallas Division.

November 29, 1978.

Tom Thomas and Robert F. Maris of Kolodey & Thomas, Dallas, Tex., for plaintiffs.

B. Thomas McElroy of White, McElroy & White, Dallas, Tex., for Surtran Taxicabs, Inc.

Lee E. Holt, City Atty., Joseph G. Werner, Kent S. Hofmeister, Asst. City Attys., Dallas, Tex., for City of Dallas, Tex Arthur Petersen, City Atty., David Williams, Jim Lollar, Asst. City Attys., Richard Henderson, City of Fort Worth, Fort Worth, Tex., for City of Fort Worth, Tex.

Don J. Rorschach, City Atty., City of Irving, Irving, Tex., for City of Irving, Tex.

John F. Boyle, Jr., of Hutchison, Price, Boyle & Brooks, Dallas, Tex., for City of Grapevine, Tex.

MEMORANDUM ORDER AND OPINION

PATRICK E. HIGGINBOTHAM, District Judge.

Nature of the Case

Before the opening of the Dallas-Fort Worth Regional Airport in 1974, the cities of Dallas and Fort Worth, as owners of the airport, established by contract the D/FW Surtran System for the purpose of providing ground transportation for the airport. The system, apparently a joint venture, then implemented its responsibility to provide taxi service to the airport by accepting competitive bids for the privilege of picking up passengers at the airport. The winning bid was submitted jointly by Yellow Cab of Dallas, Inc. and the Fort Worth Cab and Baggage Company. These corporations formed Surtran Taxicabs, Inc., which, on August 27, 1973, contracted with the Surtran System for the privilege of picking up taxicab passengers at the airport for transport to points in the ten counties surrounding the airport. The contract set the rates to be charged, and provided that the System would be paid 75¢ per trip plus 50% of all profits above a 5% operating profit.

Dallas and Fort Worth adopted ordinances setting forth a Code of Rules and Regulations for the airport, and the code was later adopted by the cities of Grapevine and Irving. This code provides, inter alia, that only holders of permits issued by the airport board may provide ground transportation from the airport. As Surtran Taxicabs, Inc. holds the sole permit for soliciting taxicab passengers at the airport, the effect of the Code and of the August 27, 1973, contract is that only Surtran Taxicabs, Inc. may pick up taxi passengers at the airport.

This suit challenges the arrangement among the cities of Dallas and Fort Worth and Surtran Taxicabs as a violation of the Sherman Act, 15 U.S.C. § 1 et seq. Plaintiffs seek to represent a class composed of taxicab drivers who hold, or have held since January 13, 1974 (the date of the opening of the airport) permits to operate taxicabs issued by municipalities within the ten county region surrounding the airport. Named as defendants are the cities of Dallas, Fort Worth, Irving, and Grapevine (the cities of Coppell and Euless, named as defendants in the original complaint, have been dismissed), and Surtran Taxicabs, Inc.

The complaint alleges that the cities and Surtran have participated, and continue to participate in a combination in restraint of trade in violation of section 1 of the Sherman Act, 15 U.S.C. § 1 (1976); and that they have created a monopoly in violation of section 2 of the Act, 15 U.S.C. § 2 (1976).¹ The cab drivers seek both injunctive relief and treble damages pursuant to section 4 of the Clayton Act, 15 U.S.C. § 15 (1976).

The cities and Surtran have filed motions to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted. Their contentions will be separately considered.

Discussion

Legal challenge is not new to the transportation arrangement at issue here, see, e. g., Continental Bus System v. City of Dallas, 386 F.Supp. 359 (N.D.Tex.1974); Airport Coach Service v. Fort Worth, 518 S.W.2d 566 (Tex.Civ.App. — Tyler 1975, writ ref'd n. r. e.), or to others like it. See, e. g., Walker v. Houston, No. 73-H-648 (S.D.Tex. November 29, 1976); Park 'N Fly of Texas, Inc. v. Houston, 327 F.Supp. 910 (S.D.Texas 1971); Bellew v. Houston, 456 S.W.2d 185 (Tex.Civ.App. — Houston 1st Dist. 1970, writ ref'd n. r. e.). This history of this airport and its development has been described in other cases. See, City of Dallas, Texas v. Southwest Airlines Co., 371 F.Supp. 1015 (N.D.Tex.1973) and Continental Bus System, Inc. v. City of Dallas, supra. But the landscape has been so changed by recent decisions of the United States Supreme Court that the light of these decisions now fails to illuminate the corners of the presented legal issues.

I. The State Action Exemption.

Defendants argue that the antitrust laws have no application to the activities at issue here because of the operation of the so-called state action exemption of Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). That case held that certain anticompetitive activities imposed by the state "as sovereign" are not subject to the federal antitrust laws. A few short years ago this case might have succumbed at this stage to the force of Parker. But if recent decisions of the Supreme Court have not narrowed the scope of its state action exemption they at least have recast the analytical construct for resolution of Parker issues.

A. Lafayette v. Louisiana Power & Light.

The starting point for analysis of the applicability of the federal antitrust laws to activity by state and local government must now be the Supreme Court decision in Lafayette v. Louisiana Power & Light, 435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978). In that case the Supreme Court refused to extend antitrust immunity to cities that were alleged to have committed antitrust violations in the operation of electric utility systems.

The cities of Lafayette and Plaquemine were authorized by Louisiana law to operate electric utility systems both within and beyond their city limits. The cities sued LP&L for alleged anticompetitive practices, and LP&L counterclaimed, alleging various antitrust offenses including illegal tying arrangements. The cities then moved to dismiss the counterclaim on the ground that the activity fell within the protection of Parker v. Brown.

The district court granted the motion, but the Fifth Circuit reversed and remanded the case for further proceedings to determine whether the anticompetitive activity alleged was of a type contemplated by the state legislature. 535 F.2d 431 (5th Cir. 1976). The Supreme Court affirmed the decision of the Fifth Circuit.

In the only part of the opinion that received the support of a majority of justices, Justice Brennan considered whether, wholly apart from their relationships with the states, municipalities should be shielded from the operation of the antitrust laws. He reasoned that the state action exemption from the antitrust laws has its roots in federalism; that is, the Parker decision was the result of a balancing of antitrust policy against the principles of a dual system of government under which the states are sovereign except insofar as Congress may constitutionally limit their authority. Government activity should be exempt from the antitrust laws, then, only if their application would "severely impinge" upon the system of federalism. Justice Brennan rejected the cities' argument that federal antitrust law should be generally inapplicable to municipalities by virtue of the fact that municipal activities are intended to serve the public weal. Brennan noted that municipalities might make shortsighted economic decisions that could benefit their constituents but disserve others, and might cause severe economic hardship outside of the local government boundaries. Furthermore, he argued, municipalities do not occupy the same status in the system of federalism as the states; application of antitrust sanctions to their activities would not be nearly so injurious to federalism as would their application to activities of a state. For these reasons, Justice Brennan (joined by a majority of the court) concluded that, viewed in isolation from their relationship with the state, the activities of municipalities do not merit exemption from the antitrust laws.

In Part II of his opinion, which was joined by only three other justices, Justice Brennan considered the impact of the relationship between the municipality and the state upon the question of local government amenability to antitrust actions. He concluded that municipalities should be shielded from antitrust attack only when their actions reflect state policy to displace competition.

We therefore conclude 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. 435 U.S. at 413, 98 S.Ct. at 1137.

Under this view, a state retains broad power to shield activities from antitrust attack. That conclusion apparently stems from deference to the system of federalism, a policy that outweighs the federal policies expressed in the antitrust laws. In this regard, the Parker doctrine is not significantly upset by the decision in Lafayette. At the same time, though, Justice Brennan's conclusion sharply limits the antitrust immunity of municipalities and other state subdivisions. Such entities are within the exemption only if the state law under which they act expresses a "state policy to displace competition with regulation or monopoly public service." In Part III of his opinion, Justice Brennan explained this new standard:

This does not mean, however, that a political subdivision necessarily must be able to point to a specific, detailed legislative authorization before it

...