Opinion ID: 6927119
Heading Depth: 3
Heading Rank: 2

Heading: State-Action Immunity from Antitrust Liability for Municipality.

Text: Having determined that the Hertz law is a contract, combination, or conspiracy in restraint of trade, we now turn to the issue of whether New York State has cloaked the City of New York with immunity for any antitrust violations created by the Hertz law. Fisher, 475 U.S. at 264, 106 S.Ct. at 1047 (consideration of state-action immunity unnecessary unless actual conflict with antitrust laws is established). The Supreme Court in Parker v. Brown, held that the Sherman Act does not apply when anticompetitive restraints are imposed by the states “as an act of government”. 317 U.S. 341, 352, 63 S.Ct. 307, 314, 87 L.Ed. 315 (1943). Under principles of federalism and state sovereignty, a state actor is accorded absolute immunity from antitrust liability. See City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 111 S.Ct. 1344, 113 L.Ed.2d 382 (1991). Local governments may be entitled to state-action immunity. While Parker state-action immunity does not apply directly to local governments, a municipality’s restriction of competition may sometimes be an authorized implementation of state policy; if it is, then the municipality may share in the immunity accorded to state actions. City of Lafayette, 435 U.S. at 413, 98 S.Ct. at 1136 (municipal government shares in Parker immunity if its activity was pursuant to state policy to displace competition with regulation or monopoly public service). The Supreme Court in FTC v. Ticor Title Insurance Co. reiterated the “two-part test applicable to instances where private parties participate in a [local government’s] price fixing regime. ‘First, the challenged restraint must be one clearly articulated and affirmatively expressed as state policy; second, the policy must be actively supervised by the State itself.’” — U.S. -, -, 112 S.Ct. 2169, 2176, 119 L.Ed.2d 410 (1992) (quoting Midcal, 445 U.S. at 105, 100 S.Ct. at 943). Thus, a municipality may benefit from the “state action” exemption only if it has acted pursuant to a clearly articulated state policy. Community Communications Co. v. City of Boulder, 455 U.S. 40, 52, 102 S.Ct. 835, 841, 70 L.Ed.2d 810 (1982) (plurality); 324 Liquor Corp., 479 U.S. at 343-45, 107 S.Ct. at 724-26. As we held in an analogous Clayton Act context: The clarity of such [articulated state] policy is often a function of how broadly the legislation is drawn, with the existence of such policy being more readily discernible in narrowly drawn legislation. The legislation must contain an affirmative showing of intent, though it need do -no more than authorize the challenged conduct. So long as the resulting anti-competitive activities are a foreseeable consequence of the state delegation, the “clear articulation” standard has been met. To meet this requirement the party claiming the state action defense must show that the “legislature contemplated the action complained of.” “[A]ctive state supervision”—is no longer required in the case of a municipality. Cine 42nd St. Theater Corp. v. Nederlander Org., 790 F.2d 1032, 1043 (2d Cir.1986) (citations omitted). The State of New York has not granted New York City any particular authority over the car-rental field; instead the Hertz law represents an exercise of the city’s home-rule powers granted by the state constitution and statutes. See N.Y. Const, art. IX, § 2(c)(i) (McKinney 1987) (“[E]very local government shall have power to adopt and amend local laws not inconsistent with the provisions of this constitution or any general law relating to its property, affairs or government”); Municipal Home Rule Law § 10 (McKinney 1969). The Supreme Court has held that a similar home-rule provision in the Colorado state constitution reflected the state’s position of “mere neutrality” regarding local activities undertaken pursuant to that provision. Community Communications Co., 455 U.S. at 55, 102 S.Ct. at 842 (“A State that allows its municipalities to do as they please can hardly be said to have ‘contemplated’ the specific anticompetitive actions for which municipal liability is sought.”). Thus, local government actions that are grounded in home-rule authority are not carried out pursuant to a clearly articulated state policy. See also Town of Hallie v. City of Eau Claire, 471 U.S. 34, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985); Cine 42nd St, 790 F.2d 1032. In adopting Local Law No. 21 the City of New York did not operate from any clearly articulated state policy that encourages or foresees anti-competitive activity in the rental-car field. Cf. Cine 42nd St., 790 F.2d at 1043-44; see also Montauk-Caribbean Airways, Inc. v. Hope, 784 F.2d 91, 95 (2d Cir.) (citing Town of Hallie, 471 U.S. at 38, 105 S.Ct. at 1716), cert. denied, 479 U.S. 872, 107 S.Ct. 248, 93 L.Ed.2d 172 (1986). We conclude, therefore, that in this challenge to Local Law No. 21, New York City is not protected by state-action immunity from antitrust liability. We recognize that when a state or local governmental action compels private anticompetitive behavior, state-action immunity would additionally require a showing that the state actively supervised that private conduct. Midcal, 445 U.S. at 105, 100 S.Ct. at 943. However, because we have determined that the lack of a clear state policy directing the city’s legislative efforts prevents the city from enjoying state-action immunity here, we need not further address the active-supervision question. Having determined, based on the allegations of the complaint, that the Hertz law comes closest to being a “hybrid” restraint, ie., a contract, combination, or conspiracy in restraint of trade, involving the city and the car-rental industry, and that the city has no state-action immunity, we must reverse the district court’s dismissal of the complaint and remand for further analysis of the remaining antitrust issues. To assist the parties and the district court on the remand, we set forth some guidance for some of the problems that remain in this difficult case.