Opinion ID: 521935
Heading Depth: 2
Heading Rank: 3

Heading: Price Controls and Legal Injury

Text: 38 The district court barred the Long Beach claims because during all but a few months of the damage period, it found that federal price control programs, and not the companies' actions, were the legal cause of the alleged injury--underpriced crude oil. Because Long Beach had no right to receive prices greater than the federal ceiling price for its oil, the court found that it had suffered no legal injury and therefore had no claim for relief. 39 Long Beach argues that the companies conspired to set an artificially low price for crude oil, and in the absence of that conspiracy, the price controls imposed by the federal government after the conspiracy began would have had a higher ceiling. The companies respond that the crude oil prices were limited by the federal government with full knowledge of the allegation that they were too low, and therefore the federal government, and not the companies, was the supervening legal cause of any injury suffered by Long Beach. The companies make the ambitious claim that, as a matter of law, they should be shielded from antitrust liability because the low prices of which Long Beach complains were set by a government agency. 40 The district court made detailed findings of fact on the relationship between the price control program and the companies' prices for crude oil. The court found that price control administrators had rejected, at several points beginning on April 12, 1972, the arguments of California producers that crude oil prices were too low. The court concluded that even if Long Beach could prove a price-fixing conspiracy, as a result of the actions of federal price control administrators from April 12, 1972, until October 1, 1976, Long Beach had no right to any damages. The court reasoned that the city suffered no legal injury because the companies paid the city all that the law allowed, and therefore should not be liable for any additional amounts. We understand but reject the argument. 41 The establishment of price ceilings by the federal government, after the alleged conspiracy began, does not in itself mean that the companies' conduct could not have caused the injuries. If unlawful underpricing did occur, the harmful effects continued. If historical prices had been higher, the ceiling prices might have been higher but for the alleged conspiracy. See Woods Exploration and Production Co. v. Aluminum Co. of America, 438 F.2d 1286, 1292-98 (5th Cir.1971), cert. denied, 404 U.S. 1047, 92 S.Ct. 701, 30 L.Ed.2d 736 (1972). Woods was a federal antitrust action in which the plaintiffs charged that the defendants filed false natural gas production forecasts with the Texas Railroad Commission in order to reduce the production allowances for the plaintiffs. The district court granted partial summary judgment for the defendants on the ground that the plaintiffs were not entitled to recover damages, because the Texas Railroad Commission, and not the defendants, set the allowances. The Fifth Circuit reversed and remanded for trial, stating that because the Commission's actions were based on false information, liability existed. Id. at 1295-98; see also City of New Orleans v. United Gas Pipe Line Co., 517 So.2d 145, 156 (La.App.1987), cert. denied, --- U.S. ----, 109 S.Ct. 273, 102 L.Ed.2d 262 (1988) (holding delivery obligations under gas contract not superceded by federal orders because company's earlier failures to obtain supplies caused problem). In this case, if the price ceilings were based on prices set artificially low as a result of an unlawful conspiracy, liability should still exist. 42 The companies incorrectly characterize the price control program as a supervening or superceding cause of the injury to the city. The city does not argue that the companies conspired to influence the price control program or that the price control program was the cause of its injury. Cf. United Mine Workers v. Pennington, 381 U.S. 657, 670-71, 85 S.Ct. 1585, 1593-94, 14 L.Ed.2d 626 (1965) (no antitrust liability for joint efforts to influence government officials or for injuries resulting from related action by government official); Okenfenokee Rural Electric Membership Corp. v. Florida Power & Light Co., 214 F.2d 413, 418 (5th Cir.1954) (no antitrust liability for injuries resulting from valid government action denying construction permit). Mere ratification by government officials does not absolve an otherwise illegal conspiracy. See Woods, 438 F.2d at 1298. If Long Beach can persuade a fact-finder that the price of crude oil would have been set at a different level but for the allegedly illegal agreement, it is entitled to damages. It overcomes summary judgment in presenting sufficient evidence to raise a genuine issue of material fact as to whether price controls would have been set at a different level in the absence of the alleged conspiracy. 43 A related question is whether the setting of price ceilings under the authority of the Economic Stabilization Act effectively should shelter the companies from antitrust liability for conduct not specifically approved by the act. See Petroleum Products Antitrust Litigation, 830 F.2d 198, 201 (Em.App.), cert. denied, --- U.S. ----, 108 S.Ct. 466, 98 L.Ed.2d 405 (1987). In other words, does federal price regulation displace private antitrust regulation? If a substantive, comprehensive regulatory scheme exists, the Court has found that the private damages provisions of the antitrust laws are not an available remedy. See Square D Co. v. Niagra Frontier Tariff Bureau, 476 U.S. 409, 422, 106 S.Ct. 1922, 1930, 90 L.Ed.2d 413 (1986) (citing Keogh v. Chicago and N.W. Ry. Co., 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183 (1922)). 44 The district court's analysis implies that during a period of price controls, antitrust claims involving conspiracies to underprice, such as predatory pricing or the alleged agreement in this case, may not be pursued in the courts. For a regulatory program, such as price controls, to displace an antitrust claim the relief desired must be available from the regulatory agency. Barnes v. Arden Mayfair, Inc., 759 F.2d 676, 679 (9th Cir.1985) (citing Keogh ). An exemption will be implied if necessary to give the regulatory statute full effect. Barnes, 759 F.2d at 679; Foremost International Tours v. Quantas Airways Ltd., 525 F.2d 281, 284 (9th Cir.1975), cert. denied, 429 U.S. 816, 97 S.Ct. 57, 50 L.Ed.2d 75 (1976); see Areeda & Turner, Antitrust Law, p 224 (1978). Unless the conflict between the regulatory decision and antitrust liability is obvious, as with comprehensive ICC regulation of railroad rates and practices, the Court will not find an implied repeal of the antitrust laws. See Von Kalinowski, Antitrust Laws & Trade Regulation Sec. 44A.02 (1988). If the challenged activity is beyond the scope of the regulatory body, no exemption will be found. Barnes, 759 F.2d at 679. 45 Implied repeals of the antitrust statutes are disfavored, and require a convincing showing that the antitrust laws and the regulatory program cannot coexist. National Gerimedical Hospital and Gerontology Center v. Blue Cross of Kansas City, 452 U.S. 378, 388-89, 101 S.Ct. 2415, 2421-22, 69 L.Ed.2d 89 (1981). Long Beach points to substantial administrative and legislative history that tends to show that the price control statutes were not intended to supplant the antitrust statutes. Additionally, the 1973 Emergency Petroleum Allocation Act, which continued price controls on crude oil, contained a provision prohibiting any construction of its provisions that would create any defenses to antitrust actions. Pub.L. No. 93-159, Sec. 6 (1973), 15 U.S.C. Sec. 755(c) (provision effective from 1973-1975, repealed by Sec. 453, Energy Policy and Conservation Act, Pub.L. No. 94-163 (1975)); see Typhoon Car Wash, Inc. v. Mobil Oil Corp., 770 F.2d 1085, 1089-90 (Em.App.), cert. denied, 474 U.S. 981, 106 S.Ct. 386, 88 L.Ed.2d 339 (1985). 46 The price ceilings set by the government were based on prices in effect at the time controls were imposed. The price control administrators did not examine the antitrust claims of the city. No independent analysis, comparable to the ratemaking in Keogh, was performed. Without such an independent analysis, the government's actions do not immunize the companies from civil antitrust liability. See Foremost International Tours, 525 F.2d at 285-87; Areeda,supra, at paragraphs 224, 225. The existence of price controls will affect the determination of potential damages but does not absolve the companies of antitrust liability.