Warren E. Burger: We will hear arguments next in 76-864, City of Lafayette against Louisiana Power & Light. Mr. Hochberg, I think you can proceed when you are ready.
Jerome A. Hochberg: Mr. Chief Justice and may it please the Court. The question presented by this case is whether cities, political sub-divisions of states are subject to causes of action in trouble-damage liability under the Federal Antitrust Laws. We are here on a writ of certiorari and the case arises out of a complaint filed by the petitioners, the City of Lafayette and Plaquemine charging the respondent, the Louisiana Power & Light Company, two other investor owned utilities and a parent of LP&L with violations of the Antitrust Laws in the generation, transmission and distribution of electric power and energy. LP&L in turn filed a counter claim charging the cities with antitrust violations in the conduct of the city electric utility systems. Cities moved to dismiss in the district court on the grounds of Parker v. Brown barred any action under the Federal Antitrust Laws against them and the district court relying on Parker dismissed the grant of the motion and entered judgment pursuant to Rule 54 (b) of the Federal Rules of Civil Procedure against LP&L. LP&L then appealed to the Fifth Circuit and during the dependency of that appeal this Court came down with the Goldfarb ruling. The Fifth Circuit then reversed the district court relying on Goldfarb and said that the cities were not automatically outside the scope of antitrust laws and that in order to come within the state action doctrine, they would have to have had legislative approval for this specific conduct under challenge. Certiorari was granted by this Court after a petition by the cities. The cities operate their electric utility systems, they own and operate and pursuant to broad statutory authority from the Louisiana legislature. What is involved here is not whether cities are beyond the law, but simply whether cities as governmental bodies, wholly governmental bodies are subject to the antitrust laws and they travel down to the judgments that come with them for conduct engaged in by city officials in the official performance of their duties. In addition, we are not here just talking about electric utility service for the city, we are talking about the myriad of services in operation that the cities engage in. In order to make this determination it seems to me, this Court has said in Parker v. Brown that because the statute itself does not answer the question in specific words that we must look to the statutory purpose to legislative history, the subject matter and the context of the statute. I think we should also look to the adverse effects, a weird adverse effects from enforcement of these laws against city officials and city governments and the impingement that it will create on a fundamental policy in this country, the policy of local choice in ordering social and economic needs, in providing local choice on matters, on governmental matters closest to the people. In Parker, this Court unequivocally stated in broad language that the statutory purpose in the passage of the Sherman Act was to curb concentrations of private economic power. The Court stated that it was clear through pages of legislative history that the Congress was aiming at private individuals and business corporations and of course at that time there were the Great Sugar Trust, the Oil Trust and the railroads running rampant and that was the basis for the legislation. The Court further said that there was not a hint in the legislative history of the purpose or effect to apply these laws to state government, state officials or agents of states. 34 years have gone by since that decision and that clear message, and Congress has not seen fit to alter the decision or the principles that underlie. I submit that cities as well as state agents and state officials come within the purview of that decision, for cities are but political subdivisions of states to whom the state delegates power, its power that it gets from the people as a state for the more convenient and effective governance of the people at a level closer to them. In addition, cities like states only act for public purposes, not for private gang.
Warren E. Burger: Well, suppose a city or make it more comprehensive a state, the state of Louisiana organized an airline with 50 or 75 airplanes, the usual pattern of airline operations and then engaged in monopolistic or price fixing or other statutory violations, what would be your view of that?
Jerome A. Hochberg: I would say that that would not be subject to antitrust attack. However, it might be subject to other remedies under the constitution and the commerce power and Congress of course to the commerce power could enact the legislation to perhaps deal with it.
Warren E. Burger: If it was entirely intrastate, do you think they could do?
Jerome A. Hochberg: If it effected intrastate commerce, I believe they could yes.
Harry A. Blackmun: Let me change the question a little bit. Suppose a city conspired with a private entity, is not there a language Parker itself that suggests that a city is then liable under antitrust Laws?
Jerome A. Hochberg: I know the language you refer to Mr. Justice Blackmun and I think just the opposite. I think that that language appears in a list of three kinds of conduct in which the Court in Parker was saying the state could not immunize persons from -- they could not authorize illegal activity by individuals and corporations. They could not endorse it and a private person who conspires with a governmental body would not be immune from antitrust prosecution. And I say that because those three items are mentioned in a discussion in the opinion dealing with the defendants who are private members, who are private individuals, the growers and the handlers who were operating the raising program under the supervision of the State Prorate Commission. The defendants who were the Prorate Committee, I suppose the commission were private persons and those comments by the Court were made in the context of what was being described that the private parties were engaging in under State supervision. So I think it is just the opposite. I might add that at that point the Court in Parker also seem to equate a state with a city in that statement. Now, there are severe consequences it seems to me from applying laws which were aimed at private enterprise to governments.
Harry A. Blackmun: Are you going; is your submission that there may be, there is absolute antitrust immunity for all municipal governments in respect of municipal conduct by the officials in the municipality?
Jerome A. Hochberg: Well, my position is that there is – that the law absolutely does not apply to cities. It is not a question of immunity, but the Congress never intended to apply to.
Harry A. Blackmun: Alright, in any event that the Parker v. Brown principle applies to municipalities as it would to state governments, is that it?
Jerome A. Hochberg: That is correct Your Honor.
Harry A. Blackmun: And no exceptions of any kind?
Jerome A. Hochberg: No exceptions unless Congress sees fit to change that. Applying these laws would have --
William J. Brennan, Jr.: Well, may I just ask? For example I know in my – the city in which I was born a very substantial public parking operation, under ground parking areas and around cities and much complained by competitors, private parking operations framed in as antitrust charges, you do not suppose is any exception for that sort of thing?
Jerome A. Hochberg: There is a remedy for those private parkings.
William J. Brennan, Jr.: Well, though – you still think Parker v. Brown applies to --
Jerome A. Hochberg: I believe it does, that is correct Your Honor and rather then use the antitrust laws, there are political remedies and state law remedies, if the public feels that what the city is doing, what government is doing at their behest is not appropriate, not consistent with public --
Speaker: And you would not inspire whether what the city did is authorized by a state statute or by the state constitution or anything else, just as long as the city is doing it?
Jerome A. Hochberg: That is correct, but of course if they were not doing it pursuant to constitution or state statute, there would be a remedy at state law.
Speaker: I know, I understand that, but your answer still goes whether legal or illegal under state laws it is the antitrust law does not apply?
Jerome A. Hochberg: That is right, but right here we have authorization to public --
Speaker: Well, I know, but your position is whether it is legal or illegal under state law, the antitrust law does not apply?
William H. Rehnquist: Well, that is a rather hypothetical question, is not it, whether it is legal or illegal under state law because if you were to say that Parker against Brown did not operate in that situation, what you have is a Federal District Court in a antitrust suit, deciding a matter of state municipal corporation law?
Jerome A. Hochberg: Well, I am not sure whether he would be deciding that, but he would certainly be intruding on the operation of municipal government, make and second guessing the city and thereby also second guessing the state legislature which could certainly do something about it.
William H. Rehnquist: Well, but I suppose the argument would be that the state legislature did not give the city the authority to do that?
Jerome A. Hochberg: Well, then it seems to me, if you are talking about antitrust prosecution it would not matter under our position. For the trouble-damage liability to be hanging over the heads of city officials and city government would have the effect of making every city official fearful and timid in conducting the business of the city and precisely what we need right now in city government and in any local government is decisiveness and not inhibition and timidity. Indeed, if judgments were rendered it could bankrupt some cities and most important of all whether it bankrupted them or not, it would have to be paid, the judgment would have to be paid by the tax paying citizens of the city, not from risk bearing equity owners as the case in private corporations.
Thurgood Marshall: How many of the cities are running institutions like this?
Jerome A. Hochberg: Somewhere between 1700 and 2000 Your Honor. It is a very prevalent mode of delivering electric service through municipal owned systems. In addition, of course cities own many other things in operation --
Thurgood Marshall: There are 1700?
Jerome A. Hochberg: Somewhere close to 2000, between 1700 and 2000 is my understanding.
Thurgood Marshall: Any big cities?
Jerome A. Hochberg: Los Angeles for one, San Antonio I believe, part of Cleveland, many small towns, however too.
Thurgood Marshall: Yeah, I thought it was most of smaller towns?
Jerome A. Hochberg: Cities engage in a wide range of activities and deliver a wider array of services in this day and age. Cities do not just deliver electric service. They operate hospitals. They collect garbage. They deliver water. They provide police protection. They provide schools. They operate sports authorities and public parks and their creation. They do numerous things and in all of these things, they operate being governments in a, often in a non-competitive model. They do not structure their operations and their services along competitive models as private enterprise as required to do and that has long been the case. By it is nature, government acts in a non-competitive matter. For example, they issue zoning rules and variances which could effect the competitive ability of businesses to function properly in their location. They grant franchisees for delivery of some services and may grant more then one or they may choose to grant one and exclude all other competitors or they may choose --
John Paul Stevens: Talk about franchisees, how about athletic franchisees? When a city tries to get a ball club to move to its community, is it acting in a competitive way a non-competitive way?
Jerome A. Hochberg: Well, I do not believe a city owns or franchises that ball club.
John Paul Stevens: But suppose it did, sometimes I think they do?
Jerome A. Hochberg: Well, I would suppose if they actually franchise it like they franchise a garbage collection company to collect garbage in the city then my principle would apply equally.
John Paul Stevens: I realize your principle would apply, but would you still say they are not engage in any kind of competitive activity when they seek to persuade a ball club to move to one city rather then another, as an example?
Jerome A. Hochberg: Well, they may be competing with sister cities, but I do not think that subject to antitrust laws. If they choose to deliver the services themselves instead of franchising it, they may exclude all competition if they so desire or they may leave some competition in the city, perhaps mass transit competition rather then just the exclusive operation by the governmental authority or for example cities can combine with their brother cities to induce lower prices from suppliers and indeed that was precisely what was charged in New Mexico v, American Petrofina, the Ninth Circuit case which supports my position completely and there may be public purposes for all of these things and indeed in New Mexico it was. All of these approaches differ from antitrust concepts.
William H. Rehnquist: What if the states sets up a power district which is a municipal corporation, but does not have any of the governing power that a city ordinarily has, would your principle exempt it too?
Jerome A. Hochberg: My principle is Mr. Justice Rehnquist that it if it is a wholly governmental body as opposed to a private party or a private party given some self regulatory functions, but private primarily because it is engaged in operations for a pecuniary benefit, for example, the Virginia State Bar. Those lawyers had private interest at stake and they were just delegated limited functions by the state of a self-regulatory nature. So I would draw the line at exclusively governmental bodies. If antitrust laws were to apply, given the way in which city operates in franchising, in delivering services I just described, there could be a flood of new litigations in the courts, particularly a flood of anti trouble-damage litigation by every disgruntled franchisee applicant who thought he was the victim of a conspiracy between the city and the winning franchise owner.
Potter Stewart: It is not only a franchise owner, the winning vendor of any commodity such as parking meters, would that not be true?
Jerome A. Hochberg: That is correct or as in the Duke case in the Third Circuit which went against us, it was a beer company who wanted to sell beer in Three River Stadium and apparently did not get the franchise, someone else did.
Byron R. White: Well, suppose in one city there is a municipal electric company supplying the power, in the neighboring city there is a city franchise who is a private company and it is the only company they franchise, let into the city, though it is not effecting the monopoly and then the private company in the one city and the adjoining city conspired together to exclude competition. They are doing something that everybody would conceive would violate the antitrust laws and they get sued for. One of them you would say would not be exempt and the other one is?
Jerome A. Hochberg: That is correct Mr. Justice White. If as I say every disgruntled franchise applicant is going to be a potential trouble-damage plaintiff and indeed every private business that covets the market, that the city now occupies in delivering services would also be a potential trouble-damage plaintiff and it would not matter whether their claim was valid or not, the threat of the litigation or the actual filing and then having to fight it would be severe and all done by the lure of trouble-damages I would suspect. Now, even the respondent here and the various amici, in particular the Justice Department's amici have recognized it seems that there are some problems when you are talking about city government and applying laws like the antitrust laws to them for they all try and draw lines to exclude certain conduct from the reach of the antitrust laws and include others. For example, all of them seem to want to draw a line between proprietary and governmental functions, a line that has been discredited in the past and rejected by this Court in numerous cases, most recently in the Indian Towing case in 1950 I believe and a line which the lower court, the court below the Fifth Circuit equally rejected. The problem there is well described by Mr. Justice Frankfurter in his opinion in the Indian Towing. In addition, the Justice Department proposes a regulatory non-regulatory line and that line seems to me just like proprietary and governmental (Inaudible) wash because to give you an example, if the city has franchised someone else to deliver a service and instructed it, the private entity to conduct itself anti competitively. The city would not be under the Justice Department test, the city would not be subject to prosecution under the antitrust laws, but if the citizens of the city decide they would rather deliver the service themselves because they feel it is more effective that way, more responsive to their needs and did the same thing they had told the private entity to do, the Justice Department would want to sue the city for that and I submit that makes no sense in the long run.
Thurgood Marshall: But you still could go against a franchise in your first prompt, would you not?
Jerome A. Hochberg: That might or might not be. It would depend on whether it came within the test in Cantor or in Goldfarb, that is correct Your Honor.
Potter Stewart: Would you run that bias again, give an example of what your point --
Jerome A. Hochberg: If the city instruct -- had a private franchisee --
Potter Stewart: What would be an example of what you are talking about?
Jerome A. Hochberg: Transit.
Potter Stewart: Alright.
Jerome A. Hochberg: And instructed the transit company, the bus company to operate in a manner inconsistent with the antitrust laws.
Potter Stewart: i.e. as a monopoly within the city?
John Paul Stevens: Why is that inconsistent with the antitrust laws, to that one transit company operate in the city?
Jerome A. Hochberg: Well, whether that would be or not, perhaps they would instruct the city, the bus company to conduct itself, to do certain things that would be considered a violation of Section 2.
John Paul Stevens: And I submit that for a example to be persuasive, you have to think of something that would violate the antitrust laws and you have not done that yet?
Jerome A. Hochberg: Well, if they instructed the bus company to make arrangements with a another bus company on the border for that served the city, metropolitan area to come up with the same price for bus service, so that citizens in the adjoining suburb would not howl at the higher price in the city for example.
John Paul Stevens: Your example is the city says that each of you to agree on the price, we do not care what it is, but you agree on a price and charge the same price as opposed to saying the price in this city for bus fair shall be 10 cents, we are talking about the first example?
Jerome A. Hochberg: If the city --
John Paul Stevens: And you think that should be okay?
Jerome A. Hochberg: No, not for the -- I think the city under the government's test would not be subject to prosecution, but if the city did that, the government rather than have a private bus system, the city would be subject to antitrust prosecution.
John Paul Stevens: Your example is if the city operates a bus company and agrees with the private bus company in a neighboring community that we will both charge a dollar a ride, then the city should be immune and the other company should be subject to --
Jerome A. Hochberg: That is correct.
John Paul Stevens: That is your example?
Jerome A. Hochberg: That is correct.
Potter Stewart: Or if the city says to outlying suburbs, if you do not ride our bus as you cannot get city water, that sort of candors the facts of this case?
Jerome A. Hochberg: Well, one of the charges, there are other charges in the counter claim, that is just one of them.
Potter Stewart: (Voice Overlap) arrangement?
Jerome A. Hochberg: Right, that is right. If under the government's test the city told the private entity to engage in that type the government would not be subject to suit, but if the government did it then it would be subject to suit.
Speaker: You mean the company that did it would be subject to suit?
Jerome A. Hochberg: Right, something like Cantor. In Cantor the Public Service Commission was not going to be sued or was not sued and I doubt that this -- my feeling is that I do not think this Court would hold that Public Service Commission is subject to the antitrust laws for endorsing that tie. All of these lines that the city and the respond -- the Justice Department and the respondent in the various amici proposed are it seems to me totally inconsistent with the Parker language, with the statutory purpose of the Sherman Act and with the legislative history of Congress in enacting that Act. The only line I submit that is consistent with that legislative history and statutory purpose is when wholly governmental bodies are excluded from the antitrust laws and private parties or private parties with self regulatory functions granted by the state would be subject to those antitrust laws. And the reason I say that is that there is not a hint in the legislative history that Congress intended to apply the antitrust laws to some levels of government and not to other levels of government or to some conduct of government and not to other conduct of government. In point of fact Congress said, we are passing these antitrust laws to aim them and curb private economic power and there was not a hint that they were aiming them at government at any level.
William H. Rehnquist: Is there as bright a line as you suggest between governmental bodies and non-governmental bodies? Let me go back to my example of a power district that is authorized to be formed by the land owners within a particular geographic area and to govern itself and to supply power itself by the state legislature and it is a non-profit type of thing. Now, I would think of that as a governmental function in many senses and your answer was I think that, that would probably be subject to the antitrust laws?
Jerome A. Hochberg: I think that would -- that is not the issue here today because there is no question but these are cities and they are totally governmental. In that situation it seems to me this Court would have or any federal court would have to make a determination whether it was truly, a wholly governmental body just as this court did and in NLRB v. Natural Gas Utility District where it had to determine whether the district was a political sub-division of the state so that it came within the exemption of the labor laws and there the Court rejecting of course local law, state law as a means of governing whether a federal statute applies decided that, that district was indeed a political sub-division by looking through various factors like was it responsible to an elected official or to the legislature ultimately and things like that. Again, I say that in order to hold city subject to the antitrust laws here and after all they are criminal statutes and I doubt that, it seems to me very doubtful that the Congress would have enacted the Sherman Law to apply the city governments in criminal as they were, without some indication in the legislative history that was what they were intending. In order to subject cities to antitrust laws, I think this Court would have to repudiate the message of Parker and impute the Congress and intention it never expressed and to then go about rationalizing the important public policy of local choice and local governance with the antitrust policy and throw into that nix in addition a weighing of the severe consequences that might occur from application of these laws and put them altogether and try and divine a line or several lines with caveats and sub caveats for holding antitrust -- city subject to antitrust laws. I submit that --
Thurgood Marshall: On the hand you might win on the trial of this case?
Jerome A. Hochberg: Well, of course, we certainly hope we will and we think that we very well might, but that is not really why we are here today.[Laughter]
Thurgood Marshall: All these hobbles you are talking about, this case would just sit back, would it not?
Jerome A. Hochberg: A number of cases Your Honor had just come up through the Courts, since Goldfarb, misapplying Goldfarb, we have about Five Circuit Courts going against this now.
Thurgood Marshall: But the point is that this has been sent back?
Jerome A. Hochberg: My feeling is that if this Court were to put together that mix of rationalizing the various policy conflicts that exist here and the consequences that that is the kind of a procedure which Court requires careful investigation and review and analysis most appropriate to a legislature and not to this Court. Thank you, I would like reserve my --
Lewis F. Powell, Jr.: May I ask you a question before you sit down? What do we the language in Cantor and Goldfarb that requires a command or a direction from the state?
Jerome A. Hochberg: That language is perfectly appropriate Mr. Justice Powell when a private entity is being sued as that was the case in Goldfarb and in Cantor because the antitrust laws were clearly aimed at private enterprise and private economic power, therefore, a careful scrutiny is necessary it seems to me to make sure that the state has indeed instructed those private entities to do what they are doing and absent that state instruction it seems to me the antitrust laws apply across the board.
Byron R. White: But then you say that here it is just as all the city as the state had done it because the city is the state?
Jerome A. Hochberg: The equivalent of the state in terms of the fact that they are a political sub-division to which the state grants its powers and in addition because there is no legislative history that the Congress intended to treat them differently.
Byron R. White: Of course there had been and there are instances in the federal law where cities were treated differently than the states?
Jerome A. Hochberg: There are in the Eleventh Amendment they are treated differently and in the Fourteenth Amendment they have treated the same in terms of state action. The fact of the matter is in each situation, constitutional or statutory, they have to look at the statutory purpose or the constitutional purpose and the context as Parker said and when you examine that it seems to me that the statutory purpose here was aimed at private economic power and not government of any sort and I will treat them the same here.
Byron R. White: What do you suppose Congress' purpose was, as you interpret the statute what do you suppose Congress' purpose was?
Jerome A. Hochberg: To curb private economic power, that was what was going on in 1890 when the Sherman Law was passed.
Byron R. White: What was -- what do you suppose the intention was in excluding, implicitly excluding states and cities?
Jerome A. Hochberg: I think they probably never even thought of it Justice White, but because they were not even thinking about going after governments, they were concerned with private entities and given the fact that they were so definitely concerned with private economic power and that was the purpose of their law, with absent a clear intention to include government, it seems to me it is up to Congress to remedy that after the Parker case and given the situation in 1890.
Byron R. White: So, you just say it was an example of ordinary rule of construction, you just do not apply statutes to a sovereign unless there is some clear indication of it, is that it?
Jerome A. Hochberg: That is correct.
Thurgood Marshall: Well, in the Louisiana would this apply to the police juries of the parishes?
Jerome A. Hochberg: I believe so Your Honor. Parishes of course are governmental bodies, wholly governmental bodies.
Thurgood Marshall: Well, I said the police jury of the parish?
Jerome A. Hochberg: I am not really familiar with the full details of it, but it might be or might not, I just do not know.
William H. Rehnquist: Well, back in the 1890 was it not the municipal ownership thought of as one of the safeguards against monopoly
Jerome A. Hochberg: I believe electric utilities got started in many ways when municipalities provided it for their citizens before private power got into the picture.
Warren E. Burger: Was it not the philosophy that was thought to (Inaudible) development?
Jerome A. Hochberg: That is correct. Government is always got to be eventually answerable to the people and they can -- the check of the political process is available and that is a remedy which is far preferable than applying antitrust laws aimed at private parties to the cities, thank Your Honor.
Warren E. Burger: Mr. Carter?
Andrew P. Carter: Mr. Chief Justice and may it please the Court. I am Andrew Carter from New Orleans, Louisiana here representing Louisiana Power & Light Company, often referred to as LP&L. I have deeded five minutes of time to one of the amicus and hope I will not regret it with my slow talk. I will try my best to make it through own time. If it pleases the court, the city's counsel here has glossed over the four allegations of antitrust conduct and I believe that taking up one of those examples might furnish the Court a little understanding with why LP&L is bothered here. LP&L is primarily a rural electric utility company, engaged in furnishing service in 46 of the 64 county areas which we call parishes. In those parish areas, there are some cities and towns and in some of those cities and towns they have electric, gas and water systems. In recent years they have been going into the outlying areas with their water and gas and electric service and we run into the proposition now more often increasingly where the cities will tell customers or potential customers that in order for them to get water and gas, they will have to take their electricity. This is done sometimes with a new customer just moving into the area, sometimes with one that LP&L is already serving or a rural electric co-op, like our friends here on our side of the case. So this is a practice it seems to us to be a classic tie and arrangement and it is one of the things we are after here to see if we can stop it. Now, I have read the city's briefs of course and I have listened the counsel today and it seems to me that counsel is in due deference to an adding a great deal to what he is advancing to call it a principle, what he is saying here is simply a superficial preposition that if the courts look at the actor involved and they find out that the actor is a state agency or political sub-division then the inquiry stops right there and you are through right at that point. Now, that makes it quite obvious why counsel did not talk about any of the full pertinent cases in this line of jurisprudence. It started with Parker because every last one of them shoot down that preposition.
Byron R. White: I think he did not talk about this case?
Andrew P. Carter: Well, he mentioned [Laughter] Your Honor. He gave them his blessing as he passed, but he did not analyze them and of course since they are on my side I want to analyze them and --
Byron R. White: He analyzed them his way and now you will analyze it your way?
Andrew P. Carter: [Laughter] Well, you could look at it that way. I think mine is actually an analysis, however, because what I want to do is go into each one with the basic content of what happened in that case. Now, the first one I am sure this Court has heard so much about it, it is (Inaudible) and Parker v. Brown, but in that case you will recall that the actors there were your state officials and some private individuals who had been made state agents for the purpose of this Raisin Proration program. And the activity there was the administration of that Raisin Proration program and what did this Court do? This Court looked right at what was going on as to the activity. It found out that the activity had been mandated, had been compelled by the state through its sovereign exercise of the legislature and so it held that there was a state exemption and I think one sentence is the key to the holding in Parker v. Brown and it reads this way. The state in adopting and enforcing the Prorate program made no contract or agreement and ended into no conspiracy and restrain of trade or to establish monopoly, but as sovereign, as sovereign imposed the restraint as an act of government which the Sherman Act did not undertake to prohibit. So what did they do? They looked at the activity and they said that is a sovereign act mandated activity. Now, we would go along for a number of years and we come on to 1975 in Goldfarb and in Goldfarb what did we have? We had the state bar and a county bar that were the actors, and the activity was a minimum fee schedule for lawyers and what did this Court do there? It did not just stop with the actor. The state bar which was found by the Court to be a state agency by law. It went beyond that and looked at the activity and it found that the activity was not state compelled.
Warren E. Burger: You get an implication out of the Goldfarb case that if the Supreme Court of Virginia had ordered that action, it would have been exempt?
Andrew P. Carter: Mr. Chief Justice, I think we would have a Bates case in that situation, probably. I do not know all of the underlying circumstances in either case, but it would very likely have been a Bates case and you would have had a Sovereign Act of one of the three sovereign branches of government in the Bates case of Supreme Court. So it could have worked that way, but the fact is that Your Honor, as I recall was the organ of the Court and wrote the very words that we rely on principle here, and we think really they resolve this whole matter and I believe that the Court stood firmly behind those words and I would just take the liberty of one sentence sir, actually is two sentences. “To threshold the inquiry in determining if an anti competitive activity, a state action of the type the Sherman Act was not meant to proscribe is whether the activity, the activity is required by the State acting as sovereig.
William H. Rehnquist: Well, in Parker against Brown, the legislature did not mandate the imposition of these Raisin Quarters, the Quota Board did, did it not, and the legislature simply authorized it?
Andrew P. Carter: Your Honor, I think that the legislature mandated the whole program and it in fact I believe went into a pretty good detail with it, naturally they could not go under detail as to the particular price on a given day or anything like that, but they --
William H. Rehnquist: But they had to be approved by the growers, did they not?
Andrew P. Carter: Had to be approved by the growers, I do not think that program had to be Your Honor. I think that perhaps prices at one point and another would have to be --
William H. Rehnquist: Well, I thought the very existence of, in other words, if a majority Raisin growers voted against that sort of a thing, there would not be any prorating?
Andrew P. Carter: Oh! No, I do not believe. [Laughter] You must be right Your Honor, but that is not my recollection of it, but the Chief Justice went on in Goldfarb to say one more thing. “Here we need not inquire further in to the state action question because it cannot fairly be said that the State of Virginia through its Supreme Court rules require the anti competitive activities to be the respondent,” and to us that is so plain and so clear that if it is really a bright line rule. And we come to Cantor which happened shortly after that and what do we see in Cantor? We see what I believe was a State action, but not a State action case. Now, what do I mean by that? I mean that as the Court pointed out, you did not have a State agency or political sub-division that was a party so to that extent it was not a State action case. On the other hand, the Court reaffirmed Goldfarb and applied the rule that I just read and determined that the activity and by the way the actors there if you recall, the actor was a private utility company, Detroit Edison and the activity was a light bulb replacement program. This Court looked at that and it determined that was an activity that was not State compelled, and therefore, even though there was no State body involved as authority, it applied the Goldfarb, Parker rule and said Detroit Edison is responsible under the Sherman Act.
Potter Stewart: Of course all of your analysis so far is based up on the premise that the city here, the municipality here is the equivalent of the bar association in the Goldfarb case of the utility in the Michigan case and of the marketing association of the California (Voice Overlap). If on the other hand, one takes the view of your brother that the city is the equivalent of the State itself, then your analysis collapses?
Andrew P. Carter: Well, it surely would Your Honor, but so would a whole bunch of law cases, all standing for the proposition that the city is not be equated with the States.
Potter Stewart: Well, there are a whole bunch of law cases if I may induce your phrase the other way to all the cases under the Fourteenth Amendment Rights?
Andrew P. Carter: Well, that is right Your Honor, but I have in mind the commerce clause and antitrust cases and I think that the State and the city are not to be equated, at least that is our position.
Potter Stewart: Well, that is the important part of your argument, you have to begin with that hypothesis?
Andrew P. Carter: Indeed, you are entirely correct. If you say that the city is the sovereign then you do not have to get any further than that, under the very rules of that I have been talking.
Potter Stewart: In other words, in other words Mr. Carter, if the defendant in this case had been the state of Louisiana which was in the electric power business, you would concede that they would not be within the coverage and that if the State would not be within the coverage at all of the antitrust law?
Andrew P. Carter: If it was in that business as a result of exercise of its sovereign power and yes --
Potter Stewart: Well, if it was in that business, that is a sovereign State to the extent the States are sovereign and if it was in the electric business then you would concede that you could not make any defendant in your antitrust law suit?
Andrew P. Carter: I would as an antitrust matter, yes, I would say they would get grabbed on the U.S. v. California under the commerce clause.
William J. Brennan, Jr.: Well, Mr. Carter, do I get your submission is that unless the particular municipal activity has been what compelled by State legislation, the Parker and Brown does not apply to that activity when performed by the municipality?
Andrew P. Carter: Mr. Justice Brennan, I would not restrict it to just legislative mandate. I think --
William J. Brennan, Jr.: But in any event there has to be some state mandate, you used the word mandate --
Andrew P. Carter: Correct.
William J. Brennan, Jr.: A particular activity has to be mandated --
Andrew P. Carter: Correct.
William J. Brennan, Jr.: Carried on by the municipality, it has to be mandate by the state --
Andrew P. Carter: That is right.
William J. Brennan, Jr.: Tell me about this, my home state is a home rule state. It has broadest kind of governmental powers. Now, it carries on great a many of the – O mentioned one earlier the parking lot activity, that sort of thing.
Andrew P. Carter: Yes sir.
William J. Brennan, Jr.: That is not mandated by any state legislation or by -- except that it has home rule powers which gives it the broadest possible governmental power. Now, what about that?
Andrew P. Carter: Your Honor I think that --
William J. Brennan, Jr.: Suppose for example that city entered into an agreement with the private parking lot operators to fix the price uniformly at both municipally operated and privately operated parking lots?
Andrew P. Carter: Your Honor as I read Parker, Goldfarb, Cantor and Bates, the answer is that if that parking lot were not the result of some mandate of the sovereign --
William J. Brennan, Jr.: Well, it is not more than what I told you. It is just that it is home rule city and has a broadest possible home rule power?
Andrew P. Carter: Then Your Honor they would have to abide by the Anti Trust Law in my opinion.
William H. Rehnquist: Mr. Carter, let me read you this sentence out of Parker against Brown, at Page 347 of 317 U.S. and it says if the proposed program is approved by the commission is consented to by 65% in number of producers in the zone owning 51% of the acreage devoted to production of the regulated crops, the director is required to declare the program instituted. Now, do you consider that to be a state mandated program or requires the consent of private individuals?
Andrew P. Carter: Yes sir because I think that the state directed him on that 65%, legislative act. I think what you just read, that if they got the 65% under the legislation he was directed not to act.
William H. Rehnquist: Well, so if -- in other words, authorizing legislation really can be mandatory in your view, so long as the terms of the authorization are complied?
Andrew P. Carter: Oh! I think authorizing legislation Your Honor, could contain a mandate, but I think on the other hand you can have authorizing legislation that does not contain a mandate and I think that you have to look at what the legislative act did. I do not think in every instance, for example in Louisiana, our legislative Acts permit and authorize municipalities to engage in the electric business and they can run their own systems either within the city limits or without. So they are authorized, but the question here and I think it will be the question on remand if this Court favors us is going to be whether that the operation of the electric business in the manner we have charged them with was a State compelled activity.
William H. Rehnquist: Then if the State statute said in any city in Louisiana where by referendum 60% of the voters of the city vote in favor of a municipal electric company, the city shall establish one, that would meet your definition of mandate?
Andrew P. Carter: Yes it would. I think the legislature can act and --
Potter Stewart: But you would demand that the legislature go further than that, would you not, under my brother Rehnquist's example, then that authorizes the city to, when 65% electric solo to go under the electric power business. You would require as I understand your argument, that the State legislature also authorize them to engage in conduct which except for this authorization would violate the Antitrust laws?
Andrew P. Carter: Your Honor, that --
Potter Stewart: Would you not?
Andrew P. Carter: Those two things --
Potter Stewart: They are not clearly authorized to be in the electric business, are not they, by the State legislature?
Andrew P. Carter: Exactly, so --
Potter Stewart: So you would demand something more than that?
Andrew P. Carter: Oh! Indeed, to violate the Antitrust laws that means they are exempt --
Potter Stewart: Specific authorization to violate the Antitrust laws, to engage in conduct which otherwise would violate the Antitrust laws?
Andrew P. Carter: Absolutely, I do not think they should just go around making tie in arrangements.
Potter Stewart: But that is your test, is it not?
Andrew P. Carter: My test is the Goldfarb test Your Honor. I think you look at the activity and then you determine whether the State as sovereign compelled or directed that activity. That is not my test. It is the Goldfarb test that I believe is sound as a dollar. It follows Parker. It accommodates the Tenth Amendment argument that was made by Attorney General Warren, later Chief Justice. It does all that is necessary to have a fair and sound rule under which we can live with the Antitrust statute.
Lewis F. Powell, Jr.: Mr. Carter, in Cantor a public utility commission in Michigan was an agency of estate, was it not?
Andrew P. Carter: The public service commission was an agent of the State, yes sir.
Lewis F. Powell, Jr.: And it was argued in that case that by virtue of that fact that was State action that argument was rejected by the court?
Andrew P. Carter: Detroit Edison argued that Your Honor and I think it was obvious from the decision of the Court that the Court considered that the mere filing of a great tariff of that time was not State compelled action by the Public Service Commission.
Lewis F. Powell, Jr.: The city in this case has authority to make rates to enter contract or in general operated utility or independently, the Public Service Commission of the State, does it not?
Andrew P. Carter: Your Honor, if I caught your question correctly you are asking about the city’s authority?
Lewis F. Powell, Jr.: I am asking about the city’s authority to operate an electric under the State law?
Andrew P. Carter: They can set their own rates. They are not regulated by the State Public Service commission.
Lewis F. Powell, Jr.: That they are independent of the State utility commission, because the city has authority to operate the utility that is substantially consistent with the authority conveyed to the Public Service Commission to operate or to supervise the operation of private utilities. I am trying to see whether there is analogy between the power conferred on the Public Service Commission of the State, than that is conferred on the city?
Andrew P. Carter: Mr. Justice Powell, in the Louisiana the power of the Public Service Commission to regulate, invest on utility companies and co-opt is what is known as plainary. Our power about commission is plainary, so without trying to be semantical I would say would say that the cities would have certainly no more power than that and possibly less.
Lewis F. Powell, Jr.: (Inaudible)
Andrew P. Carter: Yes that is right. I see a time signal that causes me to desist from going further with the Bates case. I think the Court has already absorbed my point about these four cases. The Bates case just stands right on the same ground with the others. The Court looked at the act of being the State bar and the activity restraining law, your advertising in the holding was found to be mandated by the sovereign, the Supreme Court of Arizona. So I think that what you have here and I want to state it my own way though it is really the Goldfarb rule.
Speaker: (Voice Overlap) five minutes for your colleague.
Andrew P. Carter: Am I into his time?
Warren E. Burger: You are not quite into it yet, you are going close.
Andrew P. Carter: I think I can do something about a minute here Your Honor that I would like to do very much because city’s counsel has pitched the whole case on policy and I want to throw some policy considerations out to the Court. What does a consumer outside the City of Plaquemine do when he could get his electrics the cheaper from LP&L or a co-op then he could from the city, but he is forced to take it from the city because that is only way he can get water and gas. So --
John Paul Stevens: Mr. Carter on that point.
Andrew P. Carter: That does not seem to me a good policy.
John Paul Stevens: Mr. Carter does your counter claim allege this practice? I did not find --
Andrew P. Carter: Oh yes!
John Paul Stevens: It does.
Andrew P. Carter: Yes sir, we allege a tie in and we have --
John Paul Stevens: Of the water, so they get the water and the electricity and the gas?
Andrew P. Carter: Yes sir, the affidavit reflects --
John Paul Stevens: It is not in the counter claim itself, is it?
Andrew P. Carter: Oh! Yeah, it is in the counter claim, in the second amended counter claim. Now, for another policy question, what happens to the utility facilities that the power company has placed there to serve a customer, cost to merge and long terms this city and takes the customers. Your Honors all know that the facilities or what goes in to the rate base and that is the basic proposition for setting rates until – to make this brief, you know that the rate payers are customers end up picking up useless facilities in a rate base. I do not think that is a very good consideration and I think I will finalize this by saying that when you look at the policy considerations that counsel has been talking about today, he is giving a bunch of dire consequences that would derive from violations of the Antitrust Act, but he has not address a bit of what would be the dire consequences of a body right like all the rest of us have to do. Thank you Your Honors.
Warren E. Burger: Thank you Mr. Carter. Mr. Chrisp?
William T. Crisp: Mr. Chief Justice and may it please the Court. First I want to thank you for indulging me this time as well as Mr. Carter. I know you do not look with favor on friends of yours coming up and arguing before you. This will be my first time and I would not respond to begin with to the question put by Mr. Justice Marshall. I alluded to Volume 1 of the first federal power of survey in my brief and the answer to your question about the number of different types of entities in the industry, in 1962 according to that Volume 1 and I am referring to page 17 of it, there were 480 investor owned companies. There were 2001 in 24 cities and PUDs. There were 969 cooperatives and 44 federal distributors of power. Since that time there has been some diminution of the municipalities and some addition to the electric cooperatives.
Warren E. Burger: In terms of the volume to the 485 it is – you have about half of the total or three quarters or one quarter?
William T. Crisp: There are about 200, I have used Chief Justice Burger, who distributed about 90% of the power that is attributable to the investor owned part of that segment. I hope I am being responsive to your question. An event took place in 1890 without which we would not be here in this case today. This Court of course is familiar with one of them which was the enactment of Sherman. The other is one that at that time foretold or perhaps foretold easily some of the facts that have emerged to give rise to this proceeding. For in that year, a line, an electric line, operating on alternating current was opened to carry 480 kilo watts of single phase power at 4000 volts and a 125 cycles per second, 14 miles from Klamath Falls, Oregon to the city of Portland and it was the first time when it was demonstrated that there would be economic feasibility for large unit central station power in this nation. It was over 50 years, however, before the rural segment of our society became accessible to that great technology and that came about in the years immediately after World War II. As a result of the fact, that the Congress in 1936 enacted the Rural Electrification Act. Its purpose was to make feasible, electric power accessible to every rural American and for all practical purposes, that objective has been accomplished. I bring you in the name of those co-operatives, what I think is a unique situation both legally and factually that has a bearing upon how this Court should rule in this case. In fact, I say to you and perhaps this is too strong to start with, that unless you resolve the issue in our favor, there will remain an untenable, legal dichotomy because of these particular facts and this particular law that I want to talk about. Throughout this country in most states, the municipalities have the power to expropriate, going electric business properties in most cases co-operatives and in some states of electric power company's, in Louisiana they may do it with respect to both the co-operatives and the power companies and they have done so many times. This of course affords a due process, just compensation proceeding whereby there is remuneration for resulting damage. On the other hand, not even in states, where such powers maybe statutorily exercised by either a municipality or a public utility district, may that power be exercised lawfully is do so is to substantially impair the national objective of rural electrification because to do so would be to frustrate federal's premise of power. Now, what I am praying for you here is this dichotomy, if Louisiana city is permitted to prevail in this case. On the one hand, even having the power to expropriate our properties through due process and pursuant to the Fifth Amendment, they cannot go so far as to destroy our properties if the result is to impair the remainder of what we do. Under that theory in this case, they may piecemeal and in certain instances (Inaudible) and large spread for sub division purposes, come out and commit acts which we would be held not only civilly, but criminally accountable for piecemeal or large spread and accomplish precisely the same result without being redressable under the Sherman Act. Now, we say just this to you in conclusion, that is dirty ball. That is unfair and one tenant, I think all of us would agree is a fundamental attempt of construction is separate is that you do not construe a statute if the result is to be probably injust, absurd and unfair and that is what we say to you will be the case if you rule as the cities have asked you to here. In part may I say whether we can agree that this is a statutory construction or not, if what the cities are doing in there tie in arrangements which is a per se violation of Sherman and Clayton for us is it is not Marilyn in say, surely if its not, it ought to be Marilyn prohibitin.
Warren E. Burger: Thank you gentlemen, the case is submitted. Excuse me. You do have one minute left, I am sorry.
Andrew P. Carter: I have nothing further, unless the Court has a question.
Warren E. Burger: No. Thank you gentlemen.