Opinion ID: 771936
Heading Depth: 3
Heading Rank: 2

Heading: Active State Supervision10

Text: 15 The second prong of the Midcal test requires that the state exercise ultimate control over the challenged [private] anticompetitive conduct. FTC v. Ticor Title Ins. Co., 504 U.S. 621, 634 (1992) (quotations omitted). This prong ensures that the state-action doctrine will shelter only the particular anticompetitive acts of private parties that, in the judgment of the State, actually further state regulatory policies. Patrick v. Burget, 486 U.S. 94, 101 (1988). In the absence of such review, there is no realistic assurance that a private party's anticompetitive conduct promotes state policy, rather than merely the party's individual interests. Id. 16 PacifiCorp urges (1) that the statute is written such that no state regulation or supervision is necessary, and, alternatively (2) there is sufficient state oversight to satisfy this prong of Midcal. The district court agreed with PacifiCorp, and held that the statute was self-policing such that the second prong of Midcal was satisfied and there was sufficient actual state oversight to satisfy Midcal. 17 As to PacifiCorp's first argument, it is true that the Supreme Court has suggested in dicta that a state statute might be written such that a state need not actually review individual price-setting decisions. See 324 Liquor Corp. v. Duffy, 479 U.S. 335, 344 n.6 (1987) (suggesting that a statute that specifies the price margin between wholesale and retail prices may amount to active supervision, despite the lack of actual state supervision over the individual price-setting decisions); see also Ticor, 504 U.S. at 640 (citing Duffy dicta with approval). The logic behind this exception to the active supervision requirement is that some state statutes may be so comprehensive, or their application so mechanical, that actual state review would be pointless. There is no reason, for example, to require state supervision of law that prescribes the percentage over wholesale that an alcohol retailer can charge. The amount is a simple calculation that the retailer has no discretion to alter. 18 The present situation, however, is significantly different. Under the ESSA, PacifiCorp has the power to grant written consent for another utility to serve its customers. See Idaho Code 332B. PacifiCorp can, consistent with ESSA, avoid competition for its customers simply by declining to consent -an act undertaken without review by any state agency. By providing an option for competition, and then an opt out that is wholly within the utility's control and without state supervision, the state has, in effect, given the utility partial control over the no competition policy. This is the type of private regulatory power that the active supervision prong of Midcal is supposed to prevent. See Ticor, 504 U.S. at 63435 (holding the purpose of the state action immunity doctrine is to determine whether the State has exercised sufficient independent judgment and control so that the details of the rates or prices have been established as a product of deliberate state intervention, not simply by agreement among private parties). We do not believe, therefore, that the ESSA is sufficiently self-policing to satisfy the second prong of Midcal. 19 PacifiCorp believes that the Eleventh Circuit, in Municipal Utilities Bd. v. Alabama Power Co., 934 F.2d 1493 (11th Cir. 1991), faced the same issue as in the present case, and found that Midcal was satisfied despite the lack of active state supervision. Alabama Power, however, is distinguishable. The Alabama Power court faced a challenge to an Alabama statutory scheme that was similar to Idaho's challenged scheme: the Alabama statute limited utilities' competition for customers by granting exclusive service areas. See id. at 1503. While the court held that the general provisions of the Act satisfied Midcal without any actual state supervision, see id. at 1504, the court remanded the active supervision issue to the district court because the Alabama Acts included a series of private agreements dividing service territories. Since the terms of these agreements were not in the Act, nor a part of the record of the case, the court was unable to determine whether the private agreements met the active supervision requirement. Id. On remand, the Eleventh Circuit agreed with the district court that the private agreements at issue in the case were actually approved by the Alabama Legislature, and further, under the provisions of the Act in question, the Alabama Legislature had to give explicit approval to any territorial exchanges private utilities agreed to. See Municipal Utilities Bd. v. Alabama Power Co., 21 F.3d 384, 387 (11th Cir. 1994) (Under the 1985 Act, therefore, the Alabama Legislature must explicitly approve any customer allocations the parties might wish to make.) The existence of legislative review of private agreements to exchange customers distinguishes the Alabama Power cases from the present case. It should be clear that Idaho's situation, like Alabama, could be addressed by legislative action providing for supervision. 20 Nor does the state actually exercise sufficient control to satisfy the active supervision requirement. PacifiCorp and Idaho cite four Idaho cases applying and enforcing the ESSA, 11 and argue that this amounts to active supervision under this circuit's decision in Nugget Hydroelectric, L.P. v. Pacific Gas and Elec. Co. 981 F.2d 429 (9th Cir. 1992). While Nugget does hold that an equivalent number of cases act as active supervision, see id at 435, those cases all involved reviews of the specific conduct at issue in Nugget. Idaho courts, in contrast, have no authority under the ESSA to review or strike down private divisions of customers. See Idaho Code 61333C (Any contract validly entered pursuant to this section shall be binding and shall be legally enforceable pursuant to this act . . . .). The mere presence of cases reviewing general violations of the ESSA does not amount to active supervision in this case when Idaho courts lack all power to review the specific conduct at issue. 21 For these reasons, we believe that the active supervision requirement from Midcal is not met.