Appeal from a judgment entered in the United States District Court for the Northern District of New York, Foley, J., finding that state action immunity protected New York Telephone Company from liability under the federal antitrust laws. Affirmed. Judge Pierce dissents in a separate opinion.
Before KAUFMAN, MESKILL and PIERCE, Circuit Judges.
This is an appeal from a judgment entered in the United States District Court for the Northern District of New York, Foley, J., granting defendant's motion for judgment on the pleadings and dismissing plaintiffs' claims. Because we conclude that defendant's actions are protected from antitrust liability by state action immunity according to the standards set forth by the Supreme Court in California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 63 L. Ed. 2d 233, 100 S. Ct. 937 (1980), we affirm.
The plaintiffs are a number of Radio Common Carriers (RCCs) or Radio Telephone Utilities (RTUs) which provide radio-telephone and paging services in upstate New York. Capital Telephone Company, Inc. (Capital) and Peter A. Bakal (Bakal), both RCCs, offer one-way paging and two-way radio services in Albany, Schenectady and Troy, New York. Tri-Cities Telephone Co., Inc. (Tri-Cities or Tri-City)*fn1 provides two-way marine mobile radio services on the Hudson and Mohawk Rivers and Lake George, New York. Capital District Answering Service, Inc. (Capital District) offers telephone answering services in the Albany region. Plaintiffs Capital, Bakal and Tri-Cities are subject to the jurisdiction of the Federal Communications Commission (FCC) and the Public Service Commission of the State of New York (PSC). See 47 U.S.C. § 151 et seq.; N.Y. Pub. Serv. Law §§ 90-101-a Capital District is unregulated. All four plaintiff companies are owned and operated by Peter A. Bakal.
Defendant New York Telephone Company (N.Y. Tel.) is a corporation organized under the laws of the State of New York. As a "telephone corporation," N.Y. Pub. Serv. Law § 2(17), N.Y. Tel. is regulated by the PSC, N.Y. Pub. Serv. Law § 94.2, as well as by the FCC, 47 U.S.C. §§ 201-24.
The history of this conflict is a long one. Throughout a variety of administrative and judicial actions, detailed below, plaintiffs have charged that N.Y. Tel. has discriminated against them by performing a number of anti-competitive acts. Among plaintiffs' specific allegations are that they are charged for incoming and outgoing circuits and for circuit installations while their competitors are not; that plaintiffs are charged for radio tie lines, paging numbers and mobile numbers while their competitors are not; that their competitors receive free outpulsing and phone book listings while plaintiffs must pay; and that plaintiffs have no toll call investigation or credit card services while their competitors do receive these services. Ex. D, Plaintiffs' Partial Responses to Defendant's First Set of Interrogatories, J. App. at 154.
Capital and Bakal were granted certificates of public convenience by the PSC in 1962 and 1963 respectively. The record indicates that the administrative and judicial action concerning the dispute between the RCCs and N.Y. Tel. began in 1968 and has continued through the intervening years. The details of these actions are set out in the margin.*fn2
In July 1982, after the FCC dismissed their complaint, the RCCs filed this action with the district court. Plaintiffs alleged that the activities on which their prior complaints had been based constitute violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2 and of Section 2 of the Clayton Act, 15 U.S.C. § 13.
C. District Court Decision
Defendant moved for judgment on the pleadings under Fed. R. Civ. P. 12(c), claiming that its actions are immune from antitrust liability under the state action exemption. After determining that state action immunity is available to private parties, Capital Telephone Co., Inc. v. New York Telephone Co., No. 82-CV-789 (N.D.N.Y. Jan. 24, 1984), J. App. at 436, the court applied the facts of this case to the Supreme Court's two part test in California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 63 L. Ed. 2d 233, 100 S. Ct. 937 (1980) (Midcal). Although in Midcal the Court considered the threshold question of whether there was a violation of the Sherman Act, see infra, the district court did not address this issue below. Because the question was not considered, we will assume for purposes of our analysis that violations of federal antitrust laws are present.
The court determined that New York's Public Service Law and decisions of the state courts demonstrated that the state's "policy . . . articulates and expresses a clear intent to displace unfettered competition with regulated market activity," J. App. at 442, thus satisfying the first part of the test; see also Midcal, 445 U.S. at 105. The court also believed that the Public Service Law demonstrated the "active supervision" exercised by the state over telephone corporations. J. App. at 443. Therefore, the court concluded that both requirements for state action immunity had been fulfilled. J. App. at 442-43. Because the court found the state action immunity issue dispositive, it did not consider N.Y. Tel.'s additional claims of defenses under theories of implied immunity, primary jurisdiction and the filed tariff doctrine. The court granted the defendant's Fed. R. Civ. P. 12(c) motion. Id. at 445. Plaintiffs filed Notice of Appeal with this Court on February 14, 1984. J. App. at 447.
1. Development of Standard
The antitrust laws represent a national policy favoring competition. Midcal, 445 U.S. at 110-11. In certain situations that policy is set aside to permit states to exercise control of competition through regulation. Where challenged actions are taken pursuant to a state's legislative determination to displace competition with regulation, a court considering antitrust claims will not interfere with the state's decision. This "state action immunity" from antitrust liability, first recognized in Olsen v. Smith, 195 U.S. 332, 344-45, 49 L. Ed. 224, 25 S. Ct. 52 (1904) was fully explained by the Supreme Court in Parker v. Brown, 317 U.S. 341, 87 L. Ed. 315, 63 S. Ct. 307 (1943). In Parker the Court held that California's Agricultural Prorate Act did not violate the Sherman Act. Id. at 352. The Prorate Act provided for the institution of prorate marketing programs for agricultural commodities in order to "conserve the agricultural wealth of the State" and "prevent economic waste." Id. at 346. The program designed for the raisin industry allowed producers to sell only thirty percent of their crops on the open market. Of the remainder, fifty percent was to be placed into a stabilization pool and twenty percent into a surplus pool, both of which were to be marketed by the authorities according to prescribed guidelines. A producer and packer of raisins sued, claiming inter alia that the Prorate Act violated national antitrust laws. The Court disagreed, holding that sovereign acts of states were not within the intended scope of the Sherman Act. Id. at 351-52. "The state in adopting and enforcing the prorate program 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.
More than thirty years passed before the Court again considered the question of state action immunity. In Goldfarb v. Virginia State Bar, 421 U.S. 773, 44 L. Ed. 2d 572, 95 S. Ct. 2004 (1975), the Court found that a minimum fee schedule issued by the county bar association and enforced by the Virginia State Bar violated the Sherman Act. Because the state had voluntarily joined in the private anticompetitive activity of the bar association, no immunity applied. Id. at 791-92. In Goldfarb the Court first used language of compulsion, which has created substantial confusion in succeeding years. "It is not enough that . . . anticompetitive conduct is 'prompted' by state action; rather, anticompetitive activities must be compelled by direction of the State acting as a sovereign." Id. at 791.
The following year the Court decided Cantor v. Detroit Edison Co., 428 U.S. 579, 49 L. Ed. 2d 1141, 96 S. Ct. 3110 (1976). Here, too, state action immunity provided no protection. A private utility, subject to regulation by the state public service commission, issued "free" lightbulbs to residential customers. The bulb exchange program, although initiated by the utility, was included in the tariffs filed with the PSC. The existence of the tariff was not enough to immunize the utility from antitrust liability because the light bulb exchange program was not essential to the effective functioning of the state's utilities regulation. Id. at 598. The Court stated, "there is no logical inconsistency between requiring such a firm to meet regulatory criteria insofar as it is exercising its natural monopoly powers and also to comply with antitrust standards to the extent that it engages in business activity in competitive areas of the economy." Id. at 596.
The following year in Bates v. State Bar of Arizona, 433 U.S. 350, 53 L. Ed. 2d 810, 97 S. Ct. 2691 (1977), state action immunity was held to apply to enforcement by the state supreme court of disciplinary rules against attorney advertising. The Court noted, "we deem it significant that the state policy is so clearly and affirmatively expressed and that the State's supervision is so active." Id. at 362.
In 1978 the Court upheld the possibility of immunity for acts pursuant to state policy in two cases. In City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 55 L. Ed. 2d 364, 98 S. Ct. 1123 (1978), the Court found that state action immunity would apply to acts of municipalities if those acts were undertaken according to clear state policy. "[T]he 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." Id. at 413 (plurality opinion). See also New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co., 439 U.S. 96, 58 L. Ed. 2d 361, 99 S. Ct. 403 ...