Opinion ID: 8407613
Heading Depth: 3
Heading Rank: 2

Heading: The New York Act and the Village Ordinance

Text: The Village argues that its actions effectively excluding the plaintiff from the market for electrical inspections within its boundaries were authorized by the Act and related regulations issued by the New York Secretary of State. To evaluate the Village’s defense, we follow the two-step inquiry set forth and applied in Omni Outdoor and Cine. 1. Step One: Authority to Regulate. The Village cites two provisions of the Act for its authority to regulate: § 381, which provides that “every local government shall administer and enforce the uniform fire prevention and building code”; and § 371, which states that “it shall be the public policy of the state of New York” to “[ejncourage local governments to exercise their full powers to administer and enforce the uniform code.” N.Y. Exec. Law §§ 381(2), 371(2)(d). The Village also cites for support the regulations issued pursuant to the Act by New York’s Secretary of State. The plaintiff disagrees that the Act confers any new powers on New York municipalities that they do not already have, and argues that the statutory language cited by the Village merely directs local governments to apply to a particular purpose powers arising from other statutory sources. If the plaintiffs interpretation of the Act is correct, then the state-action immunity defense is unavailable because the Village has not identified any other specific statutory source of regulatory power, and the principle is well established that a municipality may not fall back on its general police or “home-rule” powers to immunize anticompetitive regulations. See Cmty. Communications Co. v. City of Boulder, 455 U.S. 40, 56, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982); Hertz, 1 F.3d at 128. If the Village had only the language of the Act to rely upon, its authority for purposes of the Parker doctrine might be subject to doubt. The cited provisions can be read as no more than a direction to New York State municipalities as to how to act, in contrast with statutory language relied on by municipalities in cases in which they have been held to be immune where a similar direction was coupled with an explicit conferral of regulatory power. See Omni Outdoor, 499 U.S. at 370-71 n. 3, 111 S.Ct. 1344 (South Carolina statute providing that “the legislative bod[ies] of cities and incorporated towns may by ordinance regulate ... buildings and other structures”); Cine, 790 F.2d at 1045 (New York statute empowering the UDC “to acquire ... real, personal or mixed property[,] and to sell ... [or] lease ... the same”). We conclude, however, that the regulations issued by the Secretary soon after the passage of the state statute make clear that even if the Village’s ordinance was not actually authorized by the state statute itself, it was within the broad grant of state authority. The Secretary’s regulations authorized municipalities to condition occupation and use of a building on the result of an electrical inspection, and “by resolution provide that such inspection shall be performed by [an] inspector, designated or approved by the ... town.” N.Y. Comp.Codes R. & Regs. tit. 19, § 429(b) (repealed 1996). The regulations appeared to interpret the statute to authorize the Village, or at least to authorize the Secretary to authorize the Village, to do precisely that which the Village has done. 6 We think that the Act, combined with the Secretary’s apparent interpretation of it, sufficiently demonstrates the Village’s broad “authority to regulate” for purposes of state-action immunity. The Village has cited statutory language that, although perhaps ambiguous on the question, can be interpreted as delegating a power to regulate, and it has cited regulations issued by the agency charged with enforcing the statute that confer a power to regulate in plain language. Even though those regulations were subsequently withdrawn, they establish the Village’s contention that its action was within the broad authority to regulate granted by the state statute itself. Under the broad concept of authority that principles of federalism compel us to apply, we conclude that these sources are sufficient for purposes of Parker state-action immunity analysis. 2. Stef Two: Authority to Suppress Competition. We also conclude that the Act and the Secretary’s regulations establish the second component of authority that municipalities must show under Parker. The specific anticompetitive harm that the plaintiff alleges results from the Village’s actions is the plaintiffs complete exclusion from the market for required electrical inspection services. We think that such exclusion is a foreseeable result of a statute that requires municipalities to enforce a uniform fire code and administrative regulations that condition the issuance of certificates of occupancy upon inspections by town-designated agents. “[CJommon sense,” Cine, 790 F.2d at 1047, indicates that a municipality in the course of enforcing a fire code is likely, for quality control purposes, to limit the set of persons who may issue certificates of compliance, “even though some competitors would be adversely impacted,” id. And common experience indicates that municipalities often use their own employees to enforce a variety of public codes, such as food preparation or building codes, thereby effectively conferring upon themselves exclusivity in the market for required inspection services at a cost to private entities that would perform the same services. The Secretary specifically authorized such town-operated monopolies. N.Y. Comp. R. & Regs. tit. 19, § 429.2(b)(1) (repealed 1996). Such a regime also appears to be contemplated by the section of the Act that provides that “[l]oeal governments or counties may charge fees to defray the costs of administration and enforcement,” N.Y. Exec. Law § 381(2). Thus, complete exclusion of a potential competitor in the market was foreseeable. The plaintiff argues that even if a town-operated monopoly was foreseeable, the designation of a private party as the party enjoying exclusivity was not. We think, however, that the plaintiffs argument misunderstands the nature of the foreseeability inquiry. Our task in assessing the second component of authority identified in Omni Outdoor is to determine whether the state intended or at least could have contemplated that its policy would result in “suppression of competition.” 499 U.S. at 373, 111 S.Ct. 1344; accord Cine, 790 F.2d at 1047. Whom the municipality selected as the party exercising exclusivity is at best tangential to the inquiry into the foreseeability of suppression of 'competition. By definition, the creation of a-, monopoly suppresses'—indeed eliminates—all competition in that locality, and in this sense the degree of suppression is the same whether the party exercising the power arising out of exclusivity is public or private. The foreseeability inquiry requires us to go no further. See Cine, 790 F.2d at 1045-46 (identifying the relevant question as whether the UDC’s entry into leases with private parties was foreseeable, and not inquiring into the foreseeability of its selection of any party in particular). We therefore conclude that the suppression of competition resulting from the Village’s actions was a foreseeable consequence of what the state authorized.