Opinion ID: 171009
Heading Depth: 3
Heading Rank: 2

Heading: Hybrid restraint

Text: Plaintiffs next allege that the Allocable Share Amendment creates a hybrid restraint of trade that conflicts with the Sherman Act. Again our starting point is the premise that a state statute should be struck down on pre-emption grounds `only if it mandates or authorizes conduct that necessarily constitutes a violation of the antitrust laws in all cases, or if it places irresistible pressure on a private party to violate the antitrust laws in order to comply with the statute.' Fisher, 475 U.S. at 265, 106 S.Ct. 1045 (quoting Rice, 458 U.S. at 661, 102 S.Ct. 3294). A hybrid restraint is [another] form of state law that is per se illegal under the Sherman Act. Sanders v. Brown, 504 F.3d 903, 918 (9th Cir.2007) (citing Fisher, 475 U.S. at 267-70, 106 S.Ct. 1045). Certain restraints may be characterized as `hybrid,' in that nonmarket mechanisms merely enforce private marketing decisions. Where private actors are thus granted a degree of private regulatory power, the regulatory scheme may be attacked under § 1 of the Sherman Act. Fisher, 475 U.S. at 267-68, 106 S.Ct. 1045 (citations, quotations omitted). A hybrid restraint, thus, exists when the state passes laws that enforce companies' decisions to collude on prices, to dictate prices by which other companies must abide, or to otherwise violate the Sherman Act. Sanders, 504 F.3d at 918. In support of their hybrid-restraint theory, Plaintiffs again assert that the Allocable Share Amendment implements the MSA, which is an agreement among private cigarette manufacturers to limit their cigarette production output and which penalizes participating manufacturers who do not do so. This, according to Plaintiffs, permits manufacturers participating in the MSA to increase prices without fear of competition. [10] The Allocable Share Amendment, however, does not authorize or permit private parties to make anticompetitive decisions that will then be enforced by the state. Rather, it is the state legislatures that set the per-cigarette amount, which is multiplied by the number of cigarettes that NPM sells in the state in a given year to calculate an NPM's annual escrow payment. It is true that an NPM's annual escrow payment is capped by the amount the NPM would have to pay under the MSA. And calculating the amount an NPM would have to pay each year under the MSA will vary depending upon a number of factors, including the cigarette sales and market shares of those manufacturers participating in the MSA. That connection, however, to the conduct of private entities is too attenuated for this court to conclude that Kansas and Oklahoma have delegated regulatory power to these private individuals. Our conclusion is bolstered by considering the cases in which the Supreme Court has previously found a hybrid restraint to exist. In Schwegmann Brothers v. Calvert Distillers Corp., 341 U.S. 384, 71 S.Ct. 745, 95 L.Ed. 1035 (1951), the Court considered a Louisiana statute that authorized a distributor to enforce agreements fixing minimum retail prices not only against parties to such contracts, but also against retailers who sold the distributor's products without having agreed to the price restrictions. Fisher, 475 U.S. at 268, 106 S.Ct. 1045 (describing Schwegmann ). In Schwegmann, the Court held that two liquor distributors had violated [the Sherman Act's] § 1 when they attempted to hold a retailer to the price-fixing terms of a contract it had refused to sign. In so holding, the Court noted that when a state compels retailers to follow a parallel price policy, it demands private conduct which the Sherman Act forbids. 341 U.S. at 389, 71 S.Ct. 745.... However, under the Louisiana statute, both the selection of minimum price levels and the exclusive power to enforce those levels were left to the discretion of distributors. While the petitioner-retailer in that case may have been required to adhere to the levels so selected, the involvement of his suppliers in setting those prices made it impossible to characterize the regulation as unilateral action by the State of Louisiana. Fisher, 475 U.S. at 268, 106 S.Ct. 1045. Likewise, in Midcal, the state regulatory scheme entailed a similar degree of free participation by private economic actors. Fisher, 475 U.S. at 268, 106 S.Ct. 1045. Midcal addressed a Sherman Act challenge to a California law, discussed above, that required wine producers, or wholesalers in their stead, to set retail prices for the producer's product. See Midcal, 445 U.S. at 99, 100 S.Ct. 937. The state had no control over the prices set by the wine producers and did not review the prices for reasonableness, but the state did enforce the prices set by the wine producers. See id. at 99-100, 100 S.Ct. 937. The Supreme Court noted that the New York liquor distribution statute in 324 Liquor was also a hybrid restraint. See 379 U.S. at 345 n. 8, 85 S.Ct. 419. As in Midcal, the New York statute at issue there required private parties, liquor wholesalers, to set the prices retailers would pay for the liquor they purchased and then the state enforced those prices. See id. at 337-40, 85 S.Ct. 419. The state statutes at issue in these three cases, which the Supreme Court held created hybrid restraints on competition, expressly delegated regulatory authority to private actors. See Sanders, 504 F.3d at 918-19. That is simply not the case here. The Allocable Share Amendment is, instead, more analogous to the municipal ordinance the Supreme Court addressed in Fisher. There, the electorate of the City of Berkeley, California, enacted a rent control ordinance. See 475 U.S. at 261-62, 106 S.Ct. 1045. That Ordinance establishe[d] a base rent ceiling reflecting the rents in effect at the end of May 1980. A landlord may raise his rents from these levels only pursuant to an annual general adjustment of rent ceilings by a Rent Stabilization Board of appointed commissioners or after he is successful in petitioning the Board for an individual adjustment. A landlord... who fails to adhere to the maximum allowable rent set under the Ordinance may be fined by the Board, sued by his tenants, or have rent legally withheld from him. If his violations are willful, he may face criminal penalties. Id. at 262-63, 106 S.Ct. 1045. The Supreme Court held that this ordinance did not amount to a hybrid restraint: The hybrid restraints condemned in Schwegmann and Midcal were ... quite different from the pure regulatory scheme imposed by Berkeley's Ordinance. While the Ordinance does give tenantscertainly a group of interested private partiessome power to trigger the enforcement of its provisions, it places complete control over maximum rent levels exclusively in the hands of the Rent Stabilization Board. Not just the controls themselves but also the rent ceilings they mandate have been unilaterally imposed on the landlords by the city. Id. at 269, 106 S.Ct. 1045. Similarly, in this case, the state legislatures require NPMs to make annual escrow payments, calculated by multiplying the number of cigarettes the NPM sells in that state by a legislatively-created per-cigarette amount. The fact that the payments are capped by reference to the MSA does not amount to delegating regulatory authority to private parties. See Int'l Tobacco Partners, Ltd., 420 F.Supp.2d at 994-97; Grand River Enters. Six Nations, Ltd., 418 F.Supp.2d at 1089-91; Dos Santos, 418 F.Supp.2d at 1072-73 (W.D.Ark. 2006); S & M Brands, 393 F.Supp.2d at 630 (holding neither Tennessee's Allocable Share Amendment or the MSA was a hybrid restraint); cf. Grand River Enters. Six Nations, 2006 WL 1517603, at  (denying request for preliminary injunction, after concluding plaintiff had not established likelihood of success on Sherman Act claim challenging New York's Allocable Share Amendment because plaintiff had failed to establish a per se violation; rejecting argument that Allocable Share Amendment was a hybrid restraint). Moreover, Plaintiffs have failed to assert evidence, sufficient to survive summary judgment, in support of their allegations that the Allocable Share Amendment's referencing the MSA to cap an NPM's annual escrow payments enables private actors to manipulate the amount of escrow payments an NPM must make. Nor did Plaintiffs present any evidence that the manufacturers participating in the MSA have otherwise been wielding regulatory power granted them by the Allocable Share Amendment. In particular, Plaintiffs' allegations that the participating manufacturers were actively involved in drafting this legislation and in getting it enacted are not sufficient to establish that the Allocable Share Amendment then grants these manufacturers private regulatory power. Furthermore, Plaintiffs' evidence supporting their assertion that the Allocable Share Amendment is anti-competitive because it implements the MSA, which is itself anti-competitive, is insufficient to survive summary judgment. Other than their own allegations, Plaintiffs have produced no evidence that the MSA itself penalizes manufacturers for increasing their market share to such a degree that those manufacturers will refrain from unilaterally making their own pricing and production decisions. Instead, the evidence indicates that the OPMs, SPMs, and NPMs all pay roughly the same amount for each cigarette sold. The exempt SPMs, too, will pay roughly this same amount when their sales exceed their protected market share. In light of the fact that these manufacturers all face roughly the same per-cigarette cost under either the MSA or the allocable share amendment, there is no indication that they will avoid increasing their own market share, nor is there any suggestion that they will not unilaterally make their own pricing and output decisions. Both Plaintiffs' and the States' experts appear to agree on this point. Plaintiffs, therefore, have failed to assert evidence to the contrary sufficient for their claim to survive summary judgment. Finally, Xcaliber argues that the Oklahoma district court erred in refusing to consider the additional evidence it asserted in its motion for reconsideration. Xcaliber moved for reconsideration under both Fed. R.Civ.P. 59(e) and 60(b). The district court did not abuse its discretion in denying that motion. See Manning v. Astrue, 510 F.3d 1246, 1249 (10th Cir.2007) (reviewing denial of Rule 60(b) motion for an abuse of discretion), petition for cert. filed, 76 U.S.L.W. 3637 (U.S. May 22, 2008) (No. 07-1468); Ogden v. San Juan County, 32 F.3d 452, 455 (10th Cir.1994) (reviewing denial of Rule 59(e) motions for an abuse of discretion).