Opinion ID: 623239
Heading Depth: 3
Heading Rank: 2

Heading: State-Action Immunity

Text: Although we find that Manufacturer Defendants are protected from Plaintiff’s antitrust claims by Noerr-Pennington immunity, we also find that they are protected by the extension of state-action immunity, in the alternative. As the Supreme Court decided in Parker v. Brown, principles of federalism and state sovereignty prevent state governments’ liability under the Sherman Act for their allegedly anticompetitive action. 317 U.S. 341, 352 (1943); see Omni Outdoor Adver., 499 U.S. at 370; First Am. Title Co. v. Devaugh, 480 F.3d 438, 444 (6th Cir. 2007). This doctrine is known as state-action, or Parker, immunity. First Am. Title Co., 480 F.3d at 444. Where a state enters into an agreement with private entities and is protected by state-action immunity, that immunity extends to the private entities with whom the state deals. S. Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 56–57 (1985); Jackson Tenn. Hosp. Co., LLC v. W. Tenn. Healthcare, Inc., 414 F.3d 608, 612 n.4 (6th Cir. 2005). Although Plaintiff does not raise its antitrust claims against Attorneys General Defendants, we must first determine whether Attorneys General Defendants would have immunity against such claims in order to decide whether that immunity extends to Manufacturer Defendants.6 1. State-Action Doctrine as Applied to Attorneys General Defendants The Sherman Act does not apply to states or state officials when acting in their sovereign capacities. Parker, 317 U.S. at 352. Even where the states act in conjunction with private parties, they remain entitled to immunity so long as they acted within their official capacity. Omni Outdoor Advert., 499 U.S. at 374 (noting that there is also no conspiracy exception to the state-action doctrine). However, if a state acts as a “commercial participant in a given market,” action taken in a market capacity is not 6 When the district court ruled on the parties’ motions, it was uncertain whether Plaintiff had also raised a Sherman Act violation claim against Attorneys General Defendants. The court found that, to the extent a claim was brought against the states, the states were immunized. During appellate argument, however, Plaintiff’s counsel clarified that it had not brought antitrust claims against Attorneys General Defendants. Our analysis of the state-action doctrine as applied to Manufacturer Defendants requires that we consider whether the states are entitled to state-action immunity, but we do so only to adjudicate the antitrust claims against Manufacturer Defendants. No. 10-5043 VIBO Corp., Inc. v. Conway, et al. Page 13 protected. Thus, “with the possible market participant exception, any action that qualifies as state action is ‘ipso facto exempt from the operation of the antitrust laws.’” Id. at 379 (quoting Hoover v. Ronwin, 466 U.S. 558, 568 (1984)) (internal alterations omitted). Plaintiff alleges that Attorneys General Defendants were acting in a market participant capacity—not a sovereign capacity—in executing and enforcing the MSA and in refusing to execute the AAA. A state is a market participant when it acts “in a proprietary capacity as a purchaser or seller with regard to the challenged action” or its actions “constitute[] direct state participation in the market.” Huish Detergents, Inc. v. Warren Cnty., 214 F.3d 707, 714–15 (6th Cir. 2000) (quoting White v. Mass. Council of Constr. Emp’rs, Inc., 460 U.S. 204, 208 (1983)) (internal citation marks omitted). A state does not become a market participant “simply because . . . [it] labels its actions as an ‘agreement.’” Huish Detergents, 214 F.3d at 715 (examining a state’s market participant status in the dormant commerce clause context); see A.D. Bedell Wholesale Co., Inc. v. Philip Morris Inc., 263 F.3d 239, 265 n.55 (3rd Cir. 2001) (explaining the relationship of the market participant exception in dormant commerce clause jurisprudence to an assertion of state-action immunity against a claim related to the MSA). Plaintiff does not allege any facts necessary to show that Attorneys General Defendants were acting as market participants. Plaintiff’s allegation that Attorneys General Defendants were using their contractual powers when executing and enforcing the MSA is unhelpful to its claim. See Huish Detergents, 214 F.3d at 715. The Third Circuit considered this limited issue in a related circumstance, and noted in dicta that “[i]n joining the Multistate Settlement Agreement, the States did not enter the tobacco market as a buyer or seller, nor did they assume control or ownership of any entity within the market. . . . [T]he States’ actions would not fall under the market participant exception to Parker immunity.” A.D. Bedell Wholesale Co., 263 F.3d at 265 n.55. We agree. No. 10-5043 VIBO Corp., Inc. v. Conway, et al. Page 14 We hold that Attorneys General Defendants acted in their sovereign capacities, and not their market participant capacities, in enacting and enforcing the MSA and in deciding to forgo the AAA. Therefore, they are protected by state-action immunity. 2. State-Action Doctrine as Applied to Manufacturer Defendants Where a state is protected by state-action immunity, that immunity extends to private entities involved in the same course of dealing. S. Motor Carriers Rate Conference, 471 U.S. at 56–57; Jackson Tenn. Hosp. Co., 414 F.3d at 612 n.4 (noting that state-action immunity would be worthless if the private parties dealing with the immunized states were also not protected). Because we have determined that Attorneys General Defendants are clearly protected by state-action immunity in relation to the MSA, such immunity extends to Manufacturer Defendants. Plaintiff, however, points to a refinement of the state-action doctrine articulated by the Supreme Court in California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980). The Court held in Midcal that even where the challenged restraint is “clearly articulated and affirmatively expressed as state policy[,] . . . the policy must be actively supervised by the [s]tate itself” for state-action immunity to apply. Id. at 105 (internal quotation marks and citation omitted); see also Hoover, 466 U.S. at 568–69. In other words, even if the state authorized private parties to engage in anticompetitive behavior, immunity does not extend to the private actors unless the state retains active supervision over the private actors. Midcal, 445 U.S. at 105. The district court found that it need not apply the Midcal test, because (1) Plaintiff did not allege that the MSA was a law or regulatory scheme arising from a clear state policy; and (2) even if the MSA was characterized as a state regulatory scheme, Plaintiff did not allege that the MSA authorizes Manufacturer Defendants to violate antitrust law. We agree. Even in its subsequent briefing, Plaintiff fails to argue the threshold issue that the MSA is a regulatory scheme that permits Manufacturer Defendants to violate antitrust law. It instead argues that Manufacturer Defendants violated antitrust law when they misinterpreted the MSA and their rights under the LMFN clause and acted contrary to or in conflict with state supervision. Regardless of No. 10-5043 VIBO Corp., Inc. v. Conway, et al. Page 15 whether that assertion has merit, Plaintiff has confused the threshold inquiry of whether the state took action—such as passing a law, regulation, program, or other form of authorization—permitting the private actors to violate antitrust law, with the subsequent inquiry as to whether Defendants were acting within the proper scope of state supervision. Furthermore, we have already found that Attorneys General Defendants, and not Manufacturer Defendants, were the direct cause of the failed execution of the AAA. Thus, Plaintiff has not demonstrated the applicability of the Midcal test. Because Manufacturer Defendants are protected by Noerr-Pennington immunity and state-action immunity, we find that the district court did not err in dismissing Plaintiff’s Sherman Act claims for failure to state a claim upon which relief can be granted.