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JOHNSON v. SOUNDVIEW APTS. HOUS. DEV. FUND CO.

November 17, 1986

JEAN JOHNSON, SEYMOUR JOHNSON, ANNE HIRSCH and JOSEPH TIEGER, individually and on behalf of all other persons similarly situated, Plaintiffs,
v.
SOUNDVIEW APARTMENTS HOUSING DEVELOPMENT FUND CO., INC. and UNITED HOME FOR AGED HEBREWS and GEORGE M. FRIEDLAND, HERBERT PLATZNER, SAUNDERS T. PREISS and CHARLES H. SINGER, individually and as officers of defendants Soundview Apartments Housing Development Fund Co., Inc. and United Home for Aged Hebrews, Defendants and Third-Party Plaintiffs, v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, SAMUEL R. PIERCE, SECRETARY, UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, and JOSEPH D. MONTICCIOLO, REGIONAL ADMINISTRATOR, UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Third-Party Defendants and Defendants



The opinion of the court was delivered by: SPRIZZO

OPINION AND ORDER

SPRIZZO, D.J.:

Plaintiffs brought an action alleging inter alia that a mandatory meal plan established by defendants in connection with certain government subsidized housing units constituted an illegal tying arrangement in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. See Third Amended Complaint ("Complaint") at PP 49-56. *fn1" Defendants moved to dismiss or, in the alternative, for summary judgment contending that the mandatory meal plan at issue did not constitute an illegal tying arrangement. The defendants further contended that, in any event, they were entitled to an immunity for any alleged antitrust violation because its mandatory meal plan had been approved by an agency of the federal government.

 In an Opinion and Order rendered from the bench, the Court rejected defendants' argument that the mandatory meal plan did not, as a matter of law, constitute an illegal tying arrangement within the meaning of the antitrust laws. See July 23, 1982 Transcript ("Tr.") at 33. *fn2" In denying defendants' motion, the Court concluded that the plaintiffs adequately pleaded all of the requirements for an illegal tying arrangement. See Tr. at 31-34. *fn3" Thus, plaintiffs alleged that the defendants have substantial market power in the tying product's market, i.e. the market for rental housing in Southern Westchester County, New York. *fn4" In addition, the plaintiffs alleged that this market power enabled defendants to coerce those who sought the tying product, rental housing, to purchase the tied product, the mandatory meal plan. See Complaint at PP 52-53. The Court further concluded that the plaintiffs adequately pleaded that there were anticompetitive effects in the tied product market, i.e., the market for foodstuffs in the Soundview area, and that the effects upon interstate commerce were not de minimis or insubstantial. See id. at 54. Moreover, the Court held that it could not conclude as a matter of law, as it must on a motion for summary judgment, that the plaintiffs could not prove their alleged antitrust claim at trial. Therefore, the defendant's motion to dismiss or for summary judgment was denied.

 The Court also rejected the defendants' contention that their conduct was exempt from the antitrust laws on the grounds of implied immunity. See Tr. at 34-38. Specificially, defendants argued that their conduct was exempt from the antitrust laws because a handbook of the Department of Housing and Urban Development ("HUD") permitted mandatory meal plans and because HUD approved the plan at issue in this case. See Defendants' Memorandum of Law in Support of Motion to Dismiss and/or for Summary Judgment ("Def. Mem.") at 24-29. The Court found that the defendants had not carried their burden of showing that the mandatory meal plan was specifically authorized or required by an act of Congress or lawful government regulation and that the mere approval of such a meal plan in a HUD handbook was not sufficient to make out the immunity defense. See Tr. at 38; cf. National Gerimedical Hospital v. Blue Cross, 452 U.S. 378, 388-89, 69 L. Ed. 2d 89, 101 S. Ct. 2415 (1980).

 Subsequently, the defendants moved for reconsideration of their motion to dismiss or, in the alternative, for summary judgment based upon the decision of the Supreme Court in Jefferson Parish Hospital District No. 2 v. Hyde, 466 U.S. 2, 80 L. Ed. 2d 2, 104 S. Ct. 1551 (1984). See Johnson v. Soundview Apts. Housing Development Fund, 585 F. Supp. 559, 561 (S.D.N.Y. 1984). The Court denied this motion, rejecting defendants' contention that that case required a change in the Court's initial determination. See Johnson v. Soundview Apts. Housing Development Fund, 588 F. Supp. 1381 (S.D.N.Y. 1984). Specifically, the Court reaffirmed its earlier holding that "the Court cannot conclude as a matter of law . . . that plaintiffs' claims of impact on the tied market are insubstantial." See id. at 1383. The Court further noted that the Jefferson Parish case, while possibly representing a trend towards narrowing the scope of the illegal tying arrangement concept, cited with approval prior Supreme Court precedents upon which the Court had previously relied in denying defendants' initial motion. See e.g., United States Steel Corp. v. Fortner Enterprises, 429 U.S. 610, 620, 51 L. Ed. 2d 80, 97 S. Ct. 861 (1977); Fortner Enterprises v. United States Steel Corp., 394 U.S. 495, 22 L. Ed. 2d 495, 89 S. Ct. 1252 (1969).

 On March 27, 1985, the Supreme Court decided the cases of Town of Hallie v. City of Eau Claire, 471 U.S. 34, 85 L. Ed. 2d 24, 105 S. Ct. 1713 and Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 85 L. Ed. 2d 36, 105 S. Ct. 1721 . In light of those cases the Court requested the parties to address the issue of whether those decisions warranted a reconsideration of the Court's ruling with respect to the defendant's antitrust immunity defense. *fn5" Both parties addressed that issue in papers subsequently filed with the Court.

 The Court has reviewed those papers and carefully analyzed the cases referred to above. The Court concludes that those cases do not require a change in the Court's initial ruling and that the defendants' immunity defense is legally insufficient.

 As plaintiffs' papers correctly reflect, there are two distinct and separate theories of antitrust immunity which reflect substantially different policy considerations. The state action exemption, which exempts from the antitrust laws anticompetitive conduct pursuant to a clearly articulated state policy, is based upon principles of federalism and state sovereignty. See Hallie, supra, 471 U.S. at 38; Parker v. Brown, 317 U.S. 341, 350-51, 87 L. Ed. 315, 63 S. Ct. 307 (1943). While Hallie and Southern Motor Carriers liberalize and clarify the scope of the state action immunity doctrine, they have no applicability to the question raised in this case, whether immunity should exist as a matter of Congressional intent. Indeed, the Supreme Court in Southern Motor Carriers, supra, explicitly distinguished between the two theories of antitrust immunity, noting that a less stringent test is appropriate for state action immunity than for immunity based on a federal law to avoid the "kind of interference with state sovereignty . . . that . . . Parker was intended to prevent." See 471 U.S. at 57-58 n.21 (ellipsis in original)(quoting P. Areeda & D. Turner, Antitrust Law P 214, p. 88 (1978)).

 The doctrine of implied immunity under federal law immunizes conduct from the scrutiny of the antitrust laws only when Congress clearly intended that such conduct be exempted from the federal antitrust laws. See National Hospital, supra, 452 U.S. at 389. Implied immunity under federal law is not favored and therefore can be justified only when the application of the antitrust laws is clearly repugnant to the federal regulatory system involved. See id., at 388; United States v. National Ass'n of Securities Dealers, 422 U.S. 694, 719-20, 45 L. Ed. 2d 486, 95 S. Ct. 2427 (1975); Northeastern Telephone Co. v. American Telephone and Telegraph Co., 651 F.2d 76, 82-83 (2d Cir. 1981), cert. denied, 455 U.S. 943, 71 L. Ed. 2d 654, 102 S. Ct. 1438 (1982). Moreover, immunity "is to be regarded as implied only if necessary to make the [regulatory scheme] work, and even then only to the minimum extent necessary." See Northeastern, supra, 651 f.2d at 83 (brackets in original, citations omitted).

 Thus, implied immunity may not be found unless a federal agency, acting pursuant to a specific congressional directive, actively regulates the particular conduct challenged or when the regulatory scheme is so pervasive that Congress must be assumed to have forsworn competition to effect the regulatory scheme at issue. See id. at 82 (and cases cited therein). The undisputed facts in this case do not meet those stringent standards. See Stipulation of Facts P 22 (wherein the parties stipulate to the facts relevant to this issue).

 No specific congressional directive purports to regulate or expressly authorize mandatory meal plans. *fn6" Moreover, there is no regulation of mandatory meal plans which is so pervasive as to warrant the inference that Congress intended that the antitrust laws be repealed with respect to such conduct. Certainly, the defendants have made no showing that the application of the antitrust laws to mandatory meal plans would be clearly repugnant to and unduly interfere with the operation of the low income housing laws. In this respect, this case is factually distinguishable from the cases relied upon by the defendants to establish immunity. Compare Gordon v. New York Stock Exchange, 422 U.S. 659, 685-86, 45 L. Ed. 2d 463, 95 S. Ct. 2598 (1974). It follows that defendants' renewed motion for summary judgment based upon a federal antitrust immunity must be denied. Cf. Northeastern, supra, 651 F.2d at 83-84.

 The Court and the parties have considered very carefully the need for prompt appellate review of the Court's Order denying the defendants' motion to dismiss or, in the alternative, for summary judgment. The Court has concluded that such review pursuant to 28 U.S.C. 1292(b) is appropriate. The Court sets forth below the reasons why it concludes that the denial of defendants' motion involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the Order may materially advance the ultimate termination of the litigation. See 28 U.S.C. § 1292(b); see also Isra Fruit Ltd. v. Agrexco Agricultural Export Company Ltd., 804 F.2d 24, slip op. at 214 (2d Cir. 1986).

 First, the Court notes that the parties have stipulated to an agreed set of facts. In addition, the Court believes that there is substantial ground for a difference of opinion with respect to the controlling questions of law in this case. Although the plaintiffs' complaint adequately pleads the elements of an illegal tying arrangement, certainly the undisputed facts set forth a scenario which is very different from those in which Courts have traditionally found illegal tying arrangements. Thus, it is arguable that a violation of the antitrust laws ...


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