Opinion ID: 2634847
Heading Depth: 3
Heading Rank: 2

Heading: Whether the County Appellees' Activities Are Authorized or Directed by State Law

Text: ¶ 31 Section 76-10-915(1)(f) exempts municipalities from operation of the Antitrust Act only insofar as their activities are authorized or directed by state law. Utah Code Ann. § 76-10-915(1)(f). As described above, the district court concluded that a municipality satisfies this condition as long as it acts pursuant to general state statutes. The Summit Water appellants argue that this broad interpretation of the authorized or directed language is contrary to the City of Lafayette line of cases and that the requirement is not satisfied here by general laws that give no indication that the state authorizes counties to monopolize a private water market. The County appellees, in turn, maintaining their position regarding the purpose of the municipality exemption, argue that to interpret section 76-10-915(1)(f) in accord with City of Lafayette is to incorporate[] into the Utah Antitrust Act precisely what the legislative history indicates that section was intended to keep out of the Act  the narrow City of Lafayette reading of local government immunity from antitrust [claims]. They further argue that their activities would be exempt under current federal law, as it has developed in the twenty-seven years since City of Lafayette. ¶ 32 In accord with Utah Code section 76-10-926, we first examine federal law on this issue. Again, the principle first set forth by the City of Lafayette plurality and subsequently adopted by a majority of the United States Supreme Court is that a unit of local government is exempt from federal antitrust laws only if its anticompetitive conduct [is] engaged in as an act of government by the State as sovereign, ... pursuant to state policy to displace competition with regulation or monopoly public service. City of Lafayette, 435 U.S. at 413, 98 S.Ct. 1123 (plurality). The basis for this holding was the doctrine of dual sovereignty, under which, according to the plurality, state action is exempt from federal antitrust laws. Id. at 412, 98 S.Ct. 1123. The plurality stated that, in order for a state's subdivision to enjoy the state action exemption, there must be an indication that its action is authorized or directed by the state, so that the subdivision is in fact acting on behalf of the state rather than its own parochial interests. Id. at 414-15, 98 S.Ct. 1123. The plurality then concluded that an adequate state mandate for anticompetitive activities of ... subordinate governmental units exists when it is found from the authority given a governmental entity to operate in a particular area, that the legislature contemplated the kind of action complained of. Id. at 415, 98 S.Ct. 1123 (internal quotation omitted). ¶ 33 As an initial matter, we point out that, were we facing the same question considered by the Court in City of Lafayette and its successor  namely, whether to read an implicit exemption into antitrust law  we might well conclude that the Court's analysis in those cases was inapplicable because the dual sovereignty considerations that motivated the Court's reasoning in those cases are entirely absent when a state court is considering state antitrust laws. See Fine Airport Parking, Inc. v. City of Tulsa, 2003 OK 27, ¶ 19, 71 P.3d 5; Town of Hallie v. City of Chippewa Falls, 105 Wis.2d 533, 314 N.W.2d 321, 324 (1982). The latter situation involves a potential conflict `between the state laws dealing with municipalities and the state antitrust law,' Fine Airport Parking, Inc., 2003 OK 27 at ¶ 19, 71 P.3d 5 (quoting Town of Hallie, 314 N.W.2d at 324); in other words, the laws at issue in our case are those of a single sovereign  the state. ¶ 34 Unlike the state antitrust statutes involved in these Oklahoma and Wisconsin cases, section 76-10-915 of the Utah Antitrust Act includes an explicit statutory exemption for municipalities. Utah Code Ann. § 76-10-915(1)(f). A number of other state antitrust laws also contain statutory exemptions, leading courts in those states simply to apply the plain language of these exemptions. See, e.g., Miller's Pond Co. v. City of New London, 273 Conn. 786, 873 A.2d 965, 979-80 (2005) (reaffirming that its statutory antitrust exemption for actions specifically directed or required by a state statute was intended to be more stringent than the federal authorized or directed standard and therefore holding that the federal standard was inapplicable); Alarm Detection Sys., Inc. v. Village of Hinsdale, 326 Ill.App.3d 372, 260 Ill.Dec. 599, 761 N.E.2d 782, 793 (2001) (relying on the plain language of [the statutory exemption in] the [Illinois] Antitrust Act in determining whether the Village was immune from liability). ¶ 35 Here, Utah's statutory exemption is, as far as we are aware, unique in that it is defined using language  authorized or directed  identical to that used by the City of Lafayette plurality. Utah Code Ann. § 76-10-915(1)(f) (exempting a municipality to the extent authorized or directed by state law); City of Lafayette, 435 U.S. at 414, 98 S.Ct. 1123 (concluding that a municipality engages in state action when the State authorized or directed [it] to act as it did). This identical language, together with the mandate set forth in section 76-10-926 that our interpretations be guided by federal caselaw, indicate to us that the Legislature intended the authorized or directed standard in section 76-10-915(1)(f) to coincide with federal courts' interpretation of authorized or directed when delineating the municipality exemption to federal antitrust laws. [6] The conclusion indicated by the plain language of these provisions is further supported by the fact that the Court's observations in City of Lafayette, in regard to the tendency of local governments to act in their own parochial interests rather than in the interest of the state as a whole, see 435 U.S. at 408, 98 S.Ct. 1123 would appear of equal concern to the state itself. See Evans, 963 P.2d at 185 (recognizing the legislative intent that those anticompetitive activities that have been approved by the state or federal government should not be punished by the [Utah Antitrust] Act); see also Reppond v. City of Denham Springs, 572 So.2d 224, 228 (La.Ct.App.1990) (Because municipalities perform many functions in both a private and a public sense, it would be imprudent to categorically reject the applicability of the anti-trust statutes to every act of such governmental entities.). It is thus not unreasonable for the legislature to have intended us to follow federal antitrust law on this issue even though the federal analysis originates in inapplicable notions of dual sovereignty. [7] Consequently, while we would hesitate to infer a state action exemption from our state antitrust law where no such exemption is expressly provided, here we conclude that the legislature has in fact expressly included such an exemption in the state antitrust laws, and we therefore analyze the exemption's applicability relying on federal caselaw for guidance. ¶ 36 Following City of Lafayette, the United States Supreme Court in Town of Hallie reaffirmed that, in order to be eligible for the state action exemption, a municipality must show that it acted pursuant to a `clearly articulated and affirmatively expressed... state policy' to displace competition. 471 U.S. at 39, 105 S.Ct. 1713 (quoting City of Lafayette, 435 U.S. at 410, 98 S.Ct. 1123). The standard is satisfied when the anticompetitive conduct alleged by the plaintiff is a foreseeable result of a state's grant of authority in a particular area. Id. at 42, 105 S.Ct. 1713. Thus, in Town of Hallie, the Court held that state statutes authorizing a city to provide sewage services outside the city limits and to determine which areas it would serve sufficiently articulated a state policy that would allow the city to refuse sewage service in a particular area unless the landowners in that area voted in favor of annexation to the city. Id. at 37, 42-43, 105 S.Ct. 1713. The Court in City of Columbia later held that state zoning laws that authorize[d] municipalities to regulate the use of land and the construction of buildings and other structures within their boundaries, including their size, location, and spacing, were sufficient to immunize a city's ordinances limiting billboard placement. 499 U.S. at 370-73 & n. 3, 111 S.Ct. 1344. Adhering to the foreseeable result standard, the Court reasoned that [a] municipal ordinance restricting the size, location, and spacing of billboards ... necessarily protects existing billboards against some competition from newcomers, and that the anticompetitive conduct complained of by a newcomer billboard company was thus foreseeable. Id. at 373, 111 S.Ct. 1344. ¶ 37 The County appellees make much of the idea that City of Columbia substantially broadened the scope of federal antitrust immunity for municipalities, reversing the aggressive narrowing of such immunity that, in their view, was imposed by City of Lafayette. They thus argue that we should follow the same broad interpretation that, they maintain, the Court has now adopted. The Summit Water appellants disagree with the County appellees in regard to whether municipalities were altogether exempt from federal antitrust laws before the Court's ruling in City of Lafayette. They further contend that City of Columbia adhered to the same standard for construing the municipality exemption that was originated in City of Lafayette and followed in Town of Hallie. ¶ 38 Having reviewed the line of federal Supreme Court cases from City of Lafayette to City of Columbia and the opinions of lower courts construing them, we see no clear indication that the Court in City of Columbia intended to broaden its previously-adopted standard. The Court's primary concern in its discussion of the municipality exemption standard in that case was to clarify that a federal court applying the exemption need not determine whether a municipal act is substantively and procedurally correct under state law in order to conclude that the act was taken pursuant to a state policy to displace competition. City of Columbia, 499 U.S. at 371-72, 111 S.Ct. 1344 (internal quotation omitted). To require federal courts to engage in such scrutiny of state law would, the Court explained, undermin[e] the very interests of federalism [the state action immunity doctrine] is designed to protect. Id. at 372, 111 S.Ct. 1344. ¶ 39 This clarification thus did nothing to alter the range of state authorization that suffices to immunize anticompetitive municipal actions from antitrust laws. The outer boundaries of that range are found in two basic principles that the Court has consistently acknowledged. First, the requirement of `clear articulation and affirmative expression' is not satisfied when the State's position is one of mere neutrality respecting the municipal actions challenged as anticompetitive. 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. City of Boulder, 455 U.S. at 55, 102 S.Ct. 835 (holding that a neutral grant of home rule authority to municipalities could not constitute a state policy to displace competition in the provision of cable television services); see also Town of Hallie, 471 U.S. at 43, 105 S.Ct. 1713 (concluding that specific statutory authorization to municipalities to provide sewage services outside city boundaries was not neutral on state policy). Second, however, the municipality need not show a specific, detailed legislative authorization to engage in the particular anticompetitive conduct at issue. City of Lafayette, 435 U.S. at 415, 98 S.Ct. 1123 (plurality); see also City of Columbia, 499 U.S. at 372, 111 S.Ct. 1344 (We have rejected the contention that th[e] [clear articulation] requirement can be met only if the delegating statute explicitly permits the displacement of competition.); Town of Hallie, 471 U.S. at 43-44, 105 S.Ct. 1713 (rejecting the idea that a legislature must expressly state in a statute or its legislative history that the legislature intends for the delegated action to have anticompetitive effects); id. at 45, 105 S.Ct. 1713 (rejecting the idea that the municipality must show that the State `compelled' it to act). ¶ 40 The foreseeability inquiry that the Court settled on in Town of Hallie, 471 U.S. at 42, 105 S.Ct. 1713 and in City of Columbia, 499 U.S. at 373, 111 S.Ct. 1344 ensures that the required state authorization falls somewhere between these two poles. Subsequent decisions of lower federal courts have thus focused on whether the anticompetitive action alleged is a foreseeable result of state statutes. See Elec. Inspectors, Inc. v. Vill. of E. Hills, 320 F.3d 110, 121 (2d Cir.2002) (concluding that the plaintiff's complete exclusion from the market for required electrical inspection services .... is a foreseeable result of a statute that requires municipalities to enforce a uniform fire code and administrative regulations that condition the issuance of certificates of occupancy upon inspections by town-designated agents); Mich. Paytel Joint Venture v. City of Detroit, 287 F.3d 527, 536 (6th Cir.2002) (concluding that a city's facilitation of a private telephone company's monopoly by accepting its bid to install and service pay telephones in city prisons was the logical and foreseeable result of the City's broad authority under state law and the Michigan Constitution to bid out public contracts for the maintenance of City prisons); Surgical Care Ctr. v. Hosp. Serv. Dist. No. 1, 171 F.3d 231, 235 (5th Cir.1999) (en banc) (concluding that a hospital service district's alleged exclusivity and tying agreements that aimed to exclude a private hospital from the market for outpatient surgical care were not the foreseeable result of allowing a hospital service district to form joint ventures). ¶ 41 We therefore hold that the district court erred in concluding that for an activity to satisfy the `authorized or directed' requirement in section 76-10-915(1)(f) of the Utah Code it is necessary only that a political subdivision act pursuant to general state statutes. Rather, a court must examine the particular statutes at issue and then engage in the foreseeability analysis set forth above. Here, the question is thus whether the alleged price-fixing, agreements tying Mountain Regional water distribution to the grant of building permits and planning approvals, and other anticompetitive activities are the foreseeable result of the authority granted the County appellees under state law. ¶ 42 We first set forth the provisions that, according to the County appellees, grant the necessary authority. The County appellees cite provisions in the County Land Use, Development, and Management Act (CLUDMA) [8] and the Utah Special Service District Act, Utah Code Ann. §§ 17A-2-1301 to -1332 (2004), as providing the County appellees with authority to act and articulating a state policy to displace competition in the area of culinary water distribution. The CLUDMA provisions that, according to the County appellees, are comparable to those found sufficient in City of Columbia are as follows. Section 17-27a-102 provides that counties may enact all ordinances, resolutions, and rules and may enter into other forms of land use controls and development agreements that they consider necessary or appropriate for the use and development of land within the unincorporated area of the county, including ordinances, resolutions, rules, restrictive covenants, easements, and development agreements governing uses, density, open spaces, structures, buildings, energy-efficiency, light and air, air quality, transportation and public or alternative transportation, infrastructure, street and building orientation and width requirements, public facilities, and height and location of vegetation, trees, and landscaping, unless expressly prohibited by law. Utah Code Ann. § 17-27a-102(1)(b) (Supp.2005). Section 17-27a-301 requires that every county enact an ordinance establishing a countywide planning commission. Id. § 17-27a-301(1)(a). Section 17-27a-401 requires that every county prepare and adopt a comprehensive, long-range general plan that may provide for ... the efficient and economical use, conservation, and production of the supply of ... water. Id. § 17-27a-401(1), (2)(c)(i). ¶ 43 The provisions of the Special Service District Act that the County appellees assert are relevant authorize a county to establish a special service district for the purpose of providing [water] within the area of the special service district. Id. § 17A-2-1304(1)(a)(i) (2004). The area within any special service district may include all or any part of the county ... that established it except that ... a special service district may not include any area not directly benefitted by the services provided under this section without the consent of the nonbenefitted landowner. Id. § 17A-2-1304(2)(a)(iii). The scope of the service district's authority then includes, among other things, [t]he power to exercise all powers of eminent domain possessed by the county ... which established it, [t]he power to enter into contracts ... to carry out [its] functions, and [t]he power to acquire or construct facilities. Id. § 17A-2-1314(1)(b), (c), (d). ¶ 44 Although these provisions clearly contemplate a county's establishment of a water service district, such as Mountain Regional, and grant both counties and special service districts certain powers, lacking from the statutes is any suggestion that a county might use its planning or zoning authority to facilitate the operation or growth of special service districts once they are created. In particular, the general grant of authority to counties contained in section 17-27a-102 allows counties to enter into development agreements in a number of areas but does not mention the provision of water or other utility services. Id. § 17-27a-102(1)(b) (Supp.2005). Unlike in Town of Hallie, where a town's requirement that unincorporated areas annex themselves to the town was a prerequisite to supplying sewage services, 471 U.S. at 43, 105 S.Ct. 1713 the allegation here is that developers are precluded from proceeding with their development unless they accept Mountain Regional water services; in Town of Hallie, desired services were tied to acceptance of incorporation within the governmental entity that provided those services while in our case, developers are allegedly forced to accept services they may or may not desire. The Special Service District Act itself appears to prohibit a service district from incorporating a nonbenefitted landowner's property without the landowner's consent. Utah Code Ann. § 17A-2-1304(2)(a)(iii) (2004). ¶ 45 We can find no other statute within either of these Acts that contemplates any connection between a county's development activities and its favoring of special service districts that it has established. The statutory scheme does not reveal a state policy of allowing counties to displace competition with a special service district unless the special service district is successful through its own competitive efforts in acquiring an exclusive market share within its area. Other courts have similarly noted that a state's grant of authority to a government entity or utility to provide a natural resource does not necessarily indicate an intent to immunize the entity or utility from antitrust laws. See Cantor v. Detroit Edison Co., 428 U.S. 579, 595-96, 96 S.Ct. 3110, 49 L.Ed.2d 1141 (1976) (There is no logical inconsistency between requiring [a private utility] to meet regulatory criteria insofar as it is exercising its natural monopoly powers and also to comply with antitrust standards to the extent that it engages in business activity in competitive areas of the economy.); Parks v. Watson, 716 F.2d 646, 663 (9th Cir.1983) ([M]erely because the state may authorize a city to be the sole supplier of a natural resource and to set prices for that resource, it does not necessarily follow that the city is immunized from antitrust liability when it attempts to tie the purchase of a non-monopolized product or service to the sale of that natural resource.). We therefore conclude that the anticompetitive activities alleged by the Summit Water appellants, including the act of tying building permit and planning approvals for developers and others to acceptance of Mountain Regional as the development's water provider, are not a foreseeable result of the statutory scheme. [9] ¶ 46 Accordingly, even assuming without deciding that the County appellees qualify as municipalities under Utah Code section 76-10-915(1)(f), they would not be entitled to the municipality exemption contained in that subsection because their alleged anticompetitive conduct is not authorized or directed by state law. We therefore reverse the district court's dismissal of the Summit Water appellants' complaint on that basis. [10]