Topic:
ANTI-TRUST LAW; MUNICIPALITIES; LIABILITY (LAW);
Location:
ANTITRUST; MUNICIPALITIES;

OLR Research Report


October 27, 2004

 

2004-R-0810

STATE ANTITRUST LAWSUITS AGAINST MUNICIPALITIES IN OTHER STATES

 

By: George Coppolo, Chief Attorney

Kevin McCarthy, Principal Analyst

You asked whether other states exempt or authorize damage lawsuits against municipalities under their state antitrust laws. Our office is not authorized to give legal opinions and this report should not be considered one.

SUMMARY

Based on an examination of materials in an American Bar Association publication entitled State Antitrust Practice and Statutes (Third), we identified 17 states that grant immunity to municipalities from damage lawsuits under their state antitrust laws (California, Colorado, Florida, Illinois, Iowa, Kansas, Maine, Maryland, Nevada, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Utah, Washington, and West Virginia). In addition, Delaware does not allow any private damage lawsuit under its state antitrust law.

Ten states provide qualified immunity to municipalities from damage lawsuits based on their state antitrust laws (Arkansas, Idaho, Louisiana, Massachusetts, Michigan, Minnesota, New Jersey, Oklahoma, South Dakota, and Tennessee.)

Some of the states that grant broad or qualified immunity do so explicitly by statute. In others, the immunity is based on court interpretations of state law.

In 17 states, it is unclear whether damage lawsuits are permitted against municipalities because the statutes are not explicit in this regard and the courts have not yet decided the issue (Alabama, Alaska, Arizona, Indiana, Kentucky, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New York, Rhode Island, South Carolina, Texas, Virginia, Wisconsin, and Wyoming).

We identified only one state (Hawaii) where municipalities may be sued for damages under the state antitrust law. But, the court case recognizing this right determined that triple damages are not allowed when the defendant is a municipality.

Finally, we found three states that apparently do not have broad state antitrust laws (Georgia, Pennsylvania, and Vermont).

We have enclosed a copy of an OLR Report (2004-R-0780) that summarized a recent Connecticut Supreme Court decision that allowed a damage lawsuit against a municipality under the state's antitrust law.

ANTITRUST LAWS IN OTHER STATES

In Table 1, we have indicated which states provide broad immunity against municipalities, qualified immunity, or no immunity. It also indicates which laws are unclear and which states do not have a state antitrust law. Following the table is a brief summary of each state's law arranged alphabetically.

Table 1: Immunity from Antitrust Damage Lawsuits in Other States

State

Broad Immunity

Qualified Immunity

No Immunity

Unclear

No State Antitrust Law

Alabama

     

X

 

Alaska

     

X

 

Arizona

     

X

 

Arkansas

 

X

     

California

X

       

Colorado

X

       

Delaware

X*

       

Florida

X

       

Georgia

       

X

Hawaii

   

X

   

Idaho

 

X

     

Illinois

X

       

Indiana

     

X

 

Iowa

X

       

Kansas

X

       

Kentucky

     

X

 

Louisiana

 

X

     

Maine

X

       

Maryland

X

       

Massachusetts

 

X

     

Michigan

 

X

     

Minnesota

 

X

     

Mississippi

     

X

 

Missouri

     

X

 

Montana

     

X

 

Nebraska

     

X

 

Nevada

X

       

New Hampshire

     

X

 

New Jersey

 

X

     

New Mexico

X

       

New York

     

X

 

North Carolina

X

       

North Dakota

X

       

Ohio

X

       

Oklahoma

 

X

     

Oregon

X

       

Pennsylvania

       

X

Rhode Island

     

X

 

South Carolina

     

X

 

South Dakota

 

X

     

Tennessee

 

X

     

Texas

     

X

 

Utah

X

       

Vermont

       

X

Virginia

     

X

 

Washington

X

       

West Virginia

X

       

Wisconsin

     

X

 

Wyoming

     

X

 

* Delaware does not allow private damage lawsuits under its state antitrust law.

LAW IN OTHER STATES

Alabama

Alabama has no explicit statutory exemption for municipalities and the courts have not ruled on whether a damage lawsuit may be filed against a municipality.

Alaska

Alaska has no explicit statutory exception and apparently the courts have not ruled as to whether municipalities are exempt from damages lawsuits.

Arizona

Arizona has no explicit statutory exemption for municipalities.

In one case, the superior court concluded that state action exemption was inapplicable to a state antitrust claim against a city for refusal to sanction taxicab operators who chose not to participate in the city's competitive bidding process. The court held that the state action doctrine addresses the application of the federal antitrust laws to state and municipal conduct, and not the application of state antitrust laws to municipal conduct. But, the court held that the city's conduct was exempt because it was specifically authorized by another state statute.

Arkansas

A federal district court held that although municipalities are not wholly beyond the reach of the antitrust laws, they are immune from antitrust liability if they can demonstrate that their anticompetitive activities were authorized by the state pursuant to state policy to displace competition with regulation or monopoly public service. To prove the existence of such a state policy, a municipality need not point to a specific, detailed legislative authorization, or prove active state supervision. Instead, the municipality is required to show a clearly expressed state policy, sanctioning anticompetitive conduct (Laidlaw Waste System v. City of Fort Smith, 742 F.Sup. 540 (1990)).

California

California courts have held that municipalities and other political subdivisions are excluded from the definition of “person” in the state antitrust act and thus are exempt from its provisions (Penn v. City of San Diego, 188 Cal. App 3d 636 (1987); People ex. rel. Freitas v. City of San Francisco, 92 Cal. App. 3d 913 (1979); Cal. Bus. & Prof. Code 16702).

Colorado

Colorado law provides that damages, costs, expert fees, costs of investigation, civil penalties, and attorney's fees may not be awarded against a public or government entity. This exemption also applies to any official, agents, or employee acting in an official capacity or any other person based on an official action directed by a public or government entity. This exclusion applies to a damage action and not an injunctive action (Colo. Rev. Stat. 6-4-1143(3)).

Delaware

The Delaware Antitrust Act closely parallels the federal law. It prohibits contracts, combinations, and conspiracies in restraint of trade or commerce. The state act provides no private right of action (Del. Code Ann. Tit. 6, 2107 and 2108; Maddock v. Greenvill Ret. Cmty., L.P. Civil Action No. 12564).

Florida

Under Florida Law, no civil penalties, damages, interest on damages, costs, or attorneys' fees may be recovered from any local government (Fla. Stat. 542.235(2); Sebring Utils. Comm'n, 508 So. 2d at page 28). Florida law also exempts local government officials and employees from civil liability as long as they are acting within the scope of their lawful authority (Fla. Stat. 542.235(4)).

Georgia

Georgia has no state antitrust act.

Hawaii

In Daly v. Harris (215 F. supp. 2d 1098), the court held that, unlike the state, which is protected by sovereign immunity, the city and county of Honolulu were subject to suit. The dicta suggest that courts should determine whether a municipality is engaged in “trade or commerce” or is simply fulfilling a government function in deciding liability. The court also held that the provision of triple damages was not applicable to a city. The court reasoned that triple damages are similar to punitive damages, for which municipal corporations cannot be held liable (Haw. Rev. Stat. 480-16(b)).

Idaho

Idaho exempts the activities of a municipality to the extent authorized or directed by state law (Idaho Code 48-107(1)(c)).

In 1990, the supreme court held in Alpert v. Boise Water Corp., that a city's granting of gas and water utilities franchises did not constitute an unlawful and unreasonable restraint of trade as long as they acted “pursuant to an affirmatively expressed 'state policy to displace competition with regulation or monopoly public service'” (795 P. 2d 298 (1990)). The court found such a state policy in the legislative enactments specifically delegating and authorizing Idaho cities to provide utility services directly to residents or to contract with other entities to provide the necessary services. The court also noted that the extensive regulation of privately owned public utilities by the Idaho Public Utilities Commission illustrates the intent of the legislature “to replace competition by regulation.”

Illinois

State law exempts the activities of a unit of local government or school district and the activities of its employees, agents, and officials (740 Ill. Comp. Stat. 10/5(15)). The courts have construed this exemption broadly (DuPage Aviation Corp. v. DuPage Airport Authority, 594 N.E. 2d 1334 (1992); Alarm Detection Systems v. Village of Hinsdale, 761 N.E. 2d 782 (2001)).

Indiana

There does not appear to be any case law determining whether, or to what extent, municipalities are immune from damages action under state law.

Iowa

State law exempts the activities of a city or county when acting within its statutory or constitutional home rule powers to the same extent that the activities would not be prohibited if undertaken by the state (Iowa Code 553.6(5); see Water Development Co. v. Board of Water Works, 488 N.W. 2d 158 (1992)).

Kansas

In Kansas, municipalities and their officers and employees that provide and regulate specified services and activities are immune from civil liability under the antitrust law. But they are not immune from injunctive relief, and the attorney general or district attorney can bring an action against a municipality for violation of the antitrust laws.

The federal courts have ruled that the common law state action exemption announced n Parker did not apply to antitrust claims brought under state antitrust law, because the policies of federalism and comity underlying that decision were not implicated in cases brought under the state law (Classic Communications v. Rural Tel. Serv. Co. 956 F. Supp. 910, 919 (D. Kans. 1997)).

The U.S. Supreme Court established an exemption from the federal Sherman antitrust act for state action or official action directed by a state (Parker v. Brown, 63 S. Ct. 307(1943)). 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. This exemption is also referred to as the state action exemption.

Kentucky

The antitrust laws do not apply to activities authorized or approved under any state or federal law or regulation (Ky. Rev. Stat. Ann. 367.176(2)). Apparently no court has decided whether this applies to municipalities.

Louisiana

The appellate court has held that the state action immunity under the state's antitrust law only extends to those actions “performed pursuant to a state policy to displace competition with regulation or monopolistic services” (Reppond v. City of Denham Springs, 572 So. 2d 224 (La. App. 1st Cir. 1990). In this case, the court found that the enabling statute in question only allowed cities to regulate towing services, and not to enter into agreements with them under its police powers. It therefore allowed the plaintiff towing company to sue the city, which had signed an exclusive service contract with one of the company's competitors, under the antitrust statutes. In coming to its decision, the court followed federal jurisprudence following Parker. On the other hand, federal courts have on several occasions have held governments immune from liability under the state antitrust laws when their actions were authorized by state law.

Maine

The provisions of the law barring monopolies and profiteering do not allow for damages, interest, or attorney's fees to be collected against a political subdivision, its employees and officials acting in an official capacity, and persons whose conduct was undertaken at their direction (Me. Rev. Stat. Ann. tit. 10, Sec. 1104). In addition, the unfair trade practices laws do not apply to transactions or actions permitted under laws administered by any regulatory board operating under state or federal law (Me. Rev. Stat. Ann. tit. 5. sec. 208).

Maryland

The antitrust law does not apply to activities of political subdivisions in furnishing services or commodities (Md. Code Ann. Comm. Law. Sec. 11-203(12). The Supreme Court has held that the exemption covered a county's practice of designating towing companies to remove wrecked or abandoned cars (ANA Towing v. Prince George's County, 552 A.2d 1295, 1297 n.2 (Md. 1989)).

Massachusetts

The antitrust law does not apply to activities that are (1) exempt from federal antitrust laws, (2) subject to regulation or supervision by state or federal agencies, or (3) authorized or approved under federal, state, or local law (Mass. Gen. Laws. Ch. 93 sec.7).

On the other hand, a trial court has held that a town was not immune from liability from an antitrust claim regarding its requirement that all grave boxes used in a town cemetery be purchased from the town (Brown v. Town of Lexington, CA No. 93-7511, Mass. Super. LEXIS 716 (Mass. Super. Ct. Feb. 9, 1998). In this case, while the court found that the

town was authorized to operate cemeteries, the statute did not give the town the authority to take anticompetitive actions with regard to grave boxes.

Two federal court decisions have followed precedent in federal antitrust law in interpreting state antitrust law. In Fisichelli v. Methuen (653 F. Supp. 1494 (D. Mass. 1987)), the court held that the state action exemption would not apply to conduct that restricted competition for personal gain and financial interest. In this case, the plaintiffs alleged that the town barred the construction of a mall because it would contain a pharmacy that would compete with a pharmacy owned by a town official. On the other hand, the court, in (Interface Group v. Massachusetts Port Authority 631 F. Supp. 483 (D. Mass. 1986)), found that the authority was akin to a municipality and immune under the state action exemption with regard to its alleged restrictions on the plaintiff air carrier's use of terminal facilities at Logan Airport.

Michigan

The antitrust law does not prohibit, invalidate or make unlawful any act of government when the unit of government is acting in a subject matter area where it is authorized to act (Mich. Com. Laws Ann. Sec. 445.774(3)). And it does not apply to transactions or conduct specifically authorized by state or federal law (Mich. Com. Laws Ann. Sec. 445.774(4).

Accordingly, the appellate court has held that if a plaintiff suing a city council does not allege that the council acted outside of its scope of authority, it could not file a claim under the antitrust law (Manning v. City of East Tawas, (1999 Mich. App. LEXIS 1837 (Mich. Ct. App. Jan. 22, 1999).

Minnesota

The antitrust law has a provision that parallels the federal action provision of federal law. The state Supreme Court has held that to come under this exemption, the arrangement or action must be either required or specifically permitted by the government. Thus a statute allowing county medical centers to contract for medical services was held to bar antitrust claims based on an exclusive contract between a center and physician group. On the other hand, the statute would not exempt the county from liability for participating in a market allocation scheme (Bloom v. Hennepin County, 867 F. Supp. 1430, 1436 (D. Minn. 1994)).

Mississippi

The antitrust laws do not apply to state agencies (B.F. Johnson Publ'g Co. v. Mills, 31 So. 101,102 (19091)). It is not clear whether the exemption applies to municipalities.

Missouri

The antitrust law does not apply to activities or arrangements expressly approved or regulated by any regulatory body or officer acting under state or federal law. The state supreme court has held that this provision codifies the state action doctrine of Parker. It has held that the exemption only applies to anticompetitive activities compelled by state law or regulation or necessary to make a regulatory scheme work (Fischer, Spuhl, Herzwurm & Assocs. V. Forrest T. Jones & Co. 586 S.W. 2d 310, 314 (Mo. 1979)).

Montana

There is no state action exemption under the antitrust law, but state courts have generally followed federal antitrust precedent in interpreting the state law.

Nebraska

While the antitrust law does not apply with regard to criminal actions under the antitrust laws when the behavior is pursuant to and under the authority of state or federal law, it is not clear whether municipalities are subject to civil liability for anticompetitive behavior.

Nevada

The antitrust law does not apply to conduct that is expressly authorized, regulated, or approved by (1) federal or state law, (2) city or county ordinances, or (3) an administrative agency having jurisdiction over the subject matter.

New Hampshire

The antitrust law has a broad state action exemption covering activities that are permitted by a regulatory body acting under the law or authorized, approved, required, or regulated under the jurisdiction of a federal or state regulatory agency. However, it is unclear how the exemption applies to municipalities, and there appears to be no case law on point.

New Jersey

The antitrust law does not apply to any activity directed, authorized, or permitted by any state or federal law (N.J. Stat. Ann. Sec. 56.9-5.c). State courts have held that this exemption applies to municipal ordinances that conform to state law. But, antitrust liability may occur if the municipality engages in conduct that is not authorized by its governing statutes. The appellate court held that when a borough awarded an exclusive contract to a towing company without competitive bidding, as required by applicable procurement law, the plaintiff could establish that the municipality and the company created an actionable monopoly and restraint of trade (G&W, Inc. v. East Rutherford Borough, 656 A. 2d 11 (N.J. Super. Ct. App. Div. 1995)).

New Mexico

The state has a separate Local Government Antitrust Act (N.M Stat. Ann. 57-117), modeled on federal law. The act bars damages or interest being collected under the generic antitrust law against (1) a local government, its officials or employees acting in an official capacity or (2) a person based on any official action directed by the government, official, or employee acting in an official capacity. But, in an action for a permanent injunction against the government, official, or employee, costs and reasonable attorney's fees may be granted to the prevailing party. Separate provisions apply to state agencies.

New York

There is no statutory exemption for municipalities, and the courts have generally focused on a municipality's police powers in determining whether specific conduct is allowed. The appellate division struck down a franchise agreement in which New York city gave a company exclusive rights to distribute ice to vendors at the city's Hunt's Point Market, finding that the city had not established that doing so was a valid exercise of its police powers (American Consumer Industries v. City of New York, 281 N.Y.S. 2d 467 (N.Y. App. Div. 1st Dep't 1967). In another case, the court found that creating a “monopoly or restraint of trade may, upon occasion, be warranted in the exercise of police power” but that the restraint “must be reasonable, necessary and appropriate” (Professional Ambulance Service v. Abramovitz, (Sup. Court Niagara County, aff'd. 335 N.Y.S. 2d 256 (N.Y. App. Div. 4th Dep't 1972)).

North Carolina

The court of appeals has held that a city may not be sued under the antitrust law (Rea Constr. Co. v. City of Charlotte, 465 S.E.2d 342,343 (N.C, App. 1996)). And the Supreme Court held that conduct clearly authorized by other statutes could not give rise to antitrust liability (Madison Cablevision v. City of Morgantown, 386 S.E. 2d 200 (n. C. 1989)).

North Dakota

It appears that municipalities are exempt from the state's antitrust law. The law provides that “[a]ll immunity of the state from the provisions of the Sherman Antitrust Act…is…extended to any city or city governing body acting within the scope of their authority (N.D. Cent. Code Sec. 40-01-22). In Burke v. North Dakota Department of Corrections and Rehabilitation 609 N.W.2d 729 (N.D. 2000), the state supreme court held that state agencies are not subject to money damages or injunctive relief under the act.

Ohio

Ohio does not statutorily immunize municipalities from liability under its antitrust law. But the state supreme court has held that governmental entities are not “persons” as that term is defined in statute and thus not subject to the antitrust laws (Thaxton v. Medina County Bd. Of Education, 488 N.E. 2d 136, 137 (Ohio 1986)). The appellate court has held that local governments exercising their home rule powers as provided under the state constitution are immune from state regulation and that this immunity extends to liability under the antitrust laws (Board of County Comm'rs of Wood County v. Toledo, 1993 Ohio App. LEXIS 4478 (Ohio Ct. App. Sept. 24, 1993)).

Oklahoma

The state Supreme Court has held that while municipalities are not exempt from the antitrust laws, they may be found immune if they are acting as “an arm of the state” (Fine Airport Parking v. City of Tulsa, 2003 OK 27 (2003)).

Oregon

The antitrust laws exempt any “activity specifically authorized under state law or local ordinance” (Or. Rev. Stat. Sec. 646.740). There is no case law on this exemption.

Pennsylvania

Pennsylvania does not have a broad based state antitrust law.

Rhode Island

The antitrust law exempt activities or arrangements approved by any regulatory body or officer acting under authority of state or federal law (R.I. Gen. Laws Sec. 6-36-23).

South Carolina

The antitrust law exempts state actions. The state supreme court interpreted this provision narrowly, holding that it only applies to actions “that are allowed or authorized by regulatory agencies or [by] other statutes” (Ward v. Dick Dyer & Associates, 403 S.E. 2d 310, 312 (S.C. 1991)).

South Dakota

In Burne v. City of Chamberlain, the city of Chamberlain was charged with unlawful restraint of trade by monopolizing the waste collection and disposal services in the city (362 N.W. 2d 69 (S.D. 1985)). The state Supreme Court held that the city has immune from liability under the state action exemption because the city's furthered or implemented clearly articulated and affirmatively expressed state policy.

Tennessee

By law, municipalities are exempt from liability under the antitrust law when they regulate passenger transportation (Tenn. Code Ann. Sec. 7-51-1001 et seq.) and energy production and waste facilities (Tenn. Code Ann. Sec. 7-54-101 et seq.)

Texas

Texas' antitrust law does not have any provisions specific to municipalities, and we found no cases on the applicability of the law to them. However, state courts have directed that it be interpreted in harmony with federal judicial interpretation of comparable federal antitrust law to the extent consistent with the consumer protection purposes of the state law.

Utah

The antitrust law exempts the activity of a municipality to the extent authorized or directed by state law (Utah Code Ann. Sec. 76-10-915(1)(f)). In addition, the antitrust law precludes the recovery of damages against (1) political subdivisions of the state, (2) their employees and officials acting in an official capacity, and (3) any person acting at the direction of an official or employee of a subdivision (Utah Code Ann. Sec. 76-10-919(4)).

Vermont

Vermont does not have a broad state antitrust law.

Virginia

The antitrust law immunizes from suit any conduct that is authorized, regulated, or approved by (1) state law or (2) a state or federal agency having subject matter jurisdiction and having authority to consider the anticompetitive effects of the conduct (Va. Code Ann. Sec. 59-1-9.4(b)).

Washington

While the state's antitrust law gives political subdivision standing to sue under its provisions (Wash. Rev. Code Ann. Sec. 19.86.090), the state supreme court has held that it does not apply to their own conduct (Washington Natural Gas Co. Public Utility Dist. No. 1 of Snohomish County, 459 P.2d 633 (Wash. 1969)). In addition, while the state constitution prohibits monopolies, the court has held that this provision does not apply to municipal corporations (Washington State Sch. Dires. Ass'n. v. Department of Labor and Indus., 510 P. 2d 818, 823 (Wash. 1973)).

West Virginia

Conduct regulated by law or by a state or federal agency is exempt from the state's antitrust law (W. Va. Code Sec. 47-18-5(b)). In addition, the state appellate court held that governmental entities were entitled to immunity under the state's Governmental Tort Claims Act for claims by a wrecker service that the methods used by a county to select a wrecker violated the antitrust act (Allstate Wrecker Service v. Kanawha County Sheriffs Department, 569 S.E. 2d 473 (W.Va. 2003 (the supreme court affirmed the ruling on other grounds)).

Wisconsin

The state law does not have a generic exemption for state actions, but the courts have authorized selected exemptions. For example, the state supreme court has allowed a city's attempt to tie the provision of two types of services, notwithstanding the state's antitrust laws (Town of Hallie v. City of Chippewa Falls, 452 N.W. 2d 575 (Wis. 1990)). The test is whether the legislature intended to allow municipalities to undertake such actions.

Wyoming

State law is silent on municipal liability under the antitrust laws. The Supreme Court has held, however, that they are not “persons” under the provisions barring below cost sales (Kautza v. City of Cody, 812 P. 2d 143).

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