The opinion of the court was delivered by: MINER
Memorandum-Decision and Order
This action is brought pursuant to the provisions of Sections 1 and 2 of the Sherman Anti-Trust Act, 15 U.S.C. §§ 1 and 2, and Section 1 of the Civil Rights Act of 1871, 42 U.S.C. § 1983. Plaintiff's claims arise out of the denial by defendants of plaintiff's application for a franchise to provide line telephone service in the City of Schenectady. The jurisdiction of this Court is invoked pursuant to the provisions of 15 U.S.C. §§ 15 and 26, and the provisions of 28 U.S.C. § 1343. Before the Court is plaintiff's motion pursuant to Fed. R. Civ. P. 12(f) to strike defendants' affirmative defenses from the answer, and defendant's motion pursuant to Fed. R. Civ. P. 56(b) for summary judgment.
Under New York State's statutory scheme,
any enterprise seeking to establish a telephone service must first obtain the consent of the municipality in which it intends to operate. Having done so, the enterprise must then obtain a certificate of "public convenience and necessity"
from New York's Public Service Commission.
Pursuant to this statutory scheme, Dr. Peter A. Bakal, representing Capital Telephone Company, Inc. (hereinafter "Capital"), appeared before the Public Service and Utilities Committee of the Schenectady City Council on February 13, 1979 to request a franchise for the establishment of a "second landline telephone company" in Schenectady (hereinafter "City"). After this initial hearing, Dr. Bakal attended four subsequent hearings at which he presented additional information requested by the Committee.
maintain that the information provided by Dr. Bakal was not sufficient for the City to determine that Capital was, in fact, capable of providing the proposed telephone services. Defendants claim that Capital failed to specify how many, or even which, streets it intended to excavate to lay its proposed telephone lines. The City also entertained doubts concerning Capital's financial ability to provide the line telephone service. In this regard, it is conceded that Dr. Bakal is Capital's sole stock owner, and that "the company would have to go public," (Exhibit Folder to Defendants' Memorandum in Support of Motion for Summary Judgment, p.2) (hereinafter "EF"), to raise sufficient capital to provide the proposed telephone services. Apparently, it was not until the fifth meeting between the parties that Dr. Bakal provided a proposed financial plan. This proposal essentially outlined plaintiff's intention to raise public funds if the franchise were granted. Dr. Bakal's reluctance to provide detailed financial information apparently was prompted, in part, by a desire to avoid the cost of preparing a detailed financial statement unless he could be assured that Capital would receive the requested franchise. (EF, p. 21.) Moreover, some of the information requested by the City was not capable of being provided before the granting of a franchise. (EF, p. 76). However, in light of the information furnished to the Committee, Capital's application for a franchise never was granted.
Capital's complaint alleges violations of Sections 1 and 2 of the Sherman Act, and Section 1 of the Civil Rights Act of 1871. Plaintiff also seeks attorneys' fees pursuant to the provisions of 42 U.S.C. § 1988. In their answer, defendants assert that plaintiff has not stated a claim upon which relief can be granted, and in any event, defendants are immune from any liability under the antitrust laws in accordance with the "state action" exemption thereto first enunciated by the Supreme Court in Parker v. Brown, 317 U.S. 341, 87 L. Ed. 315, 63 S. Ct. 307 (1943). Defendants also contend that they are entitled to a good faith immunity from any potential liability under either of plaintiff's claims, and that plaintiff's claims are barred by the tenth and eleventh amendments of the United States Constitution. Finally, defendants maintain that this suit is barred by plaintiff's failure to comply with the notice provisions contained in the New York General Municipal Law.
There can be no doubt, in our society, of the important role played by the antitrust laws. As the Supreme Court has said:
Antitrust laws in general, and the Sherman Act in particular, are the Magna Carta of free enterprise. They are as important to the preservation of economic freedom and our free enterprise-system as the Bill of Rights is to the protection of our fundamental personal freedoms. And the freedom guaranteed each and every business, no matter how small, is the freedom to compete -- to assert with vigor, imagination, devotion and ingenuity whatever economic muscle it can muster.
United States v. Topco Associates, Inc., 405 U.S. 596, 610, 31 L. Ed. 2d 515, 92 S. Ct. 1126 (1972). However, "in 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." Parker v. Brown, supra, 317 U.S. at 351. In this regard, the Supreme Court has found "nothing in the language of the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature." Id. at 350-351. This deference to the states has come to be known as the "state action" exemption to the federal antitrust laws. Under this exemption doctrine, when a state directs, or acts in some noncompetitive activity, the state and its officers are nonetheless exempt from the operation of the antitrust laws.
Unlike the several states, cities are not automatically within the Parker doctrine, i.e., exempt from the operation of the antitrust laws. Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 55 L. Ed. 2d 364, 98 S. Ct. 1123 (1978). To invoke the protection afforded by the Parker doctrine, a municipality must show that its anticompetitive conduct was taken "pursuant to state policy to displace competition with regulation or monopoly public service." Id. at 413. This state policy must be one that is "clearly articulated and affirmatively expressed." Id. at 410. An additional requirement that the state policy be "actively supervised" also has been imposed by the Supreme Court. However, defendants question the application to municipalities of this additional requirement for a finding of state action.
This additional requirement was imposed by the Court in Bates v. State Bar of Arizona, 433 U.S. 350, 53 L. Ed. 2d 810, 97 S. Ct. 2691 (1977), where the state bar was found exempt from the federal antitrust laws while enforcing a state ban on advertising by lawyers. The requirement of active supervision was more recently applied in California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97, 63 L. Ed. 2d 233, 100 S. Ct. 937 (1980), with respect to private parties who claimed a state action exemption from the federal antitrust laws. Whether this additional showing must be made by a municipality purporting to implement a state policy is still open to some doubt, since the Court has indicated that private parties and municipalities are not necessarily to be insulated from antitrust laws under the same circumstances. Lafayette v. Louisiana Power & Light Co., supra, 435 U.S. at 410, n.40. Moreover, in Community Communications Co., Inc. v. City of Boulder, 455 U.S. 40, 51 n. 14, 102 S. Ct. 835, 841, 70 L. Ed. 2d 810, 50 U.S.L.W. 4144, 4146, n. 14 (1982), the Supreme Court stated, "because we conclude in the present case that Boulder's moratorium ordinance does not satisfy the 'clear articulation and affirmative expression' criterion, we do not reach the question whether that ordinance must or could satisfy the 'active supervision,' test focused upon in ...