Opinion ID: 160953
Heading Depth: 2
Heading Rank: 1

Heading: The State Action Doctrine

Text: 10 OG&E contends that the state action doctrine immunizes its conduct from federal antitrust scrutiny in three ways: (1) all of Trigen's claims are based on OG&E's efforts to sell electricity, and OG&E's electricity sales are immune from antitrust actions because the State has chosen to regulate them; (2) OG&E's offer to the City to participate in OG&E's pilot RTP program falls within the state action doctrine because the OCC expressly approved the RTP tariffs; and (3) the decisions of the City and County on whether or not to contract with Trigen are immune from antitrust actions, and this immunity extends to OG&E. Aplt. Br. at 32-33. 11 We see no significant legal difference between OG&E's first two grounds for state action immunity. The RTP program in which OG&E offered to enroll the City is just another state-regulated electricity sale. Therefore, we will treat OG&E simply as arguing that all of its regulated electricity sales are protected by the state action doctrine. This argument, standing alone, is enough to mandate dismissal of the federal antitrust claims. Accordingly, we need not address OG&E's third contention, that the City's and County's immunity under the state action doctrine should extend to OG&E. 12 At the outset, we must deal with the issue of waiver. Based on arguments that OG&E made at trial, Trigen argues that OG&E has waived state action immunity except with respect to OG&E's offer of the RTP rate to the city. See XI Aplt. App. at 3031; VI Aplt. App. at 1246. We disagree. Based on our review of the entire record, we find the issue of state action immunity to be pervasive throughout the litigation. OG&E clearly raised the issue of state action immunity as applying to all of its regulated electricity sales in its answer, I Aplt. App. Doc. 3, 84, in the final pre-trial order, III Aplt. App. Doc. 26, 4G, 5B1, 5B6, and 5B11, and in its final motion for a judgment as a matter of law. IV Aplt. App. Doc. 35, 1. Significantly, in its order denying OG&E's motion, the district court did not hold that OG&E had waived state action immunity but denied the motion on the merits, albeit without analysis. V Aplt. App. Doc. 47 at 2. When first confronted with this issue during trial, the district court recognized that it could be dispositive of the entire case and queried why it was not raised in a motion for summary judgment. VI Aplt. App. at 1246. Although we agree that it is difficult to understand why OG&E did not file a dispositive motion prior to trial based on state action immunity, OG&E was not required to do so. Finally, state action immunity is a purely legal issue and Trigen has shown no prejudice due to OG&E's alleged waiver. Therefore, under these specific circumstances, we hold that OG&E did not waive its state action immunity. 13 We turn to the merits of OG&E's state action immunity claim. Because Oklahoma has clearly articulated a policy to displace competition with the regulation of electric utilities and because Oklahoma actively supervises any allegedly anticompetitive conduct, the state action doctrine immunizes OG&E's regulated electricity sales from federal antitrust scrutiny. State action immunity is a question of law, which the court reviews de novo. In re Overland Park Fin. Corp., 236 F.3d 1246, 1251 (10th Cir. 2001). The state action doctrine arises from Parker v. Brown, 317 U.S. 341, 350-52 (1943), in which the Supreme Court relied on principles of federalism and state sovereignty to hold that the Sherman Act was not intended to prohibit states from imposing restraints on competition. In California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980), the Supreme Court set forth a two-pronged test for determining when private parties regulated by the state are shielded from the federal antitrust laws. First, the challenged restraint must be one clearly articulated and affirmatively expressed as state policy, id. at 105 (internal quotations and citation omitted), and second, the policy must be 'actively supervised' by the State itself. Id. 14 In order to meet the first prong of the Midcal test, a private party does not have to point to a specific, detailed legislative authorization for its challenged conduct; the State need only have made clear its intent to replace competition with a regulatory program in a particular field. Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 64 (1985) (internal quotations and citation omitted). In addition, the state policy does not have to compel the private party to engage in anticompetitive conduct. If the state policy expressly permits, but does not compel, anticompetitive conduct, the private party may still qualify for state action immunity. Id. at 61-62. 15 The second prong of the Midcal test, the active supervision requirement, is designed to ensure 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, 100-01 (1988) (citation omitted). The active supervision requirement mandates that the State exercise ultimate control over the challenged anticompetitive conduct. Id. at 101. 16 As a state-regulated electric utility, OG&E has clearly met the two-prong test for state action immunity. The Oklahoma Constitution manifests the State's intent to displace competition with regulation over electric utilities. The Oklahoma Constitution creates the OCC, Okla. Const. art. IX, 15, and provides that the OCC shall have the power and authority and be charged with the duty of supervising, regulating and controlling all . . . transmission companies doing business in this State, [and] in all matters relating to the performance of their public duties and their charges therefor . . . . Okla. Const. art. IX, 18. To that end, the OCC shall . . . prescribe and enforce against such companies . . . such rates, charges, . . . and rules and regulations, and shall require them to establish and maintain all such public service, facilities, and conveniences as may be reasonable and just . . . . Id. Any rates, charges, or rules and regulations that are inconsistent with those mandated by the OCC are unlawful and void. Id. We have previously recognized Oklahoma's intent to displace competition with the regulation of public utilities, holding that the state action doctrine immunized an Oklahoma electric utility from antitrust scrutiny in the market for leased outdoor lighting. Lease Lights, Inc. v. Public Service Co. of Okla., 849 F.2d 1330, 1333 (10th Cir. 1988) (The Oklahoma Constitution gives the [OCC] the power to regulate public utilities . . . .). 17 The OCC also actively supervises OG&E, meeting the second part of the test for state action immunity. The OCC has general supervision over OG&E, including the power to fix all of OG&E's rates for electricity and to promulgate all the rules and regulations that affect OG&E's services, operation, and management. Okla. Stat. tit. 17, 152(A). The OCC has full visitorial and inquisitorial power to examine such public utilities, 152(C), as well as the powers and authority of a court of record, Okla. Const. art. IX, 19, with exclusive jurisdiction over claims challenging any of the OCC's actions. Okla. Const. art. IX, 24. In Lease Lights, we found that the use of similar authority over an electric utility satisfied the active supervision requirement. 849 F.2d at 1334. 18 Although Trigen never directly addresses OG&E's argument that all of its regulated electricity sales are protected by the state action doctrine, Trigen does offer several reasons why the state action doctrine should not apply in this case. Trigen argues: (1) that OG&E made improper payments to public officials, offered to provide discounted loans and construction-cost guarantees, disparaged Trigen, and lavishly entertained Trigen customers while sticking OG&E ratepayers with the bill, Aplee. Br. at 28; (2) that OG&E is competing in the cooling services market, which is unregulated, id. at 31; and (3) that OG&E misrepresented the RTP tariff, discriminated between customers in deciding who to enroll in the RTP pilot program, and has flexibility in setting RTP rates. Id. at 32-34. We will address each argument in turn. 19
20 Trigen alleges OG&E used improper payments, undue influence, and lavish entertainment to gain business. Trigen does not spell out its legal argument here and cites to no legal authority, but we construe Trigen as arguing that OG&E's alleged bad acts somehow destroy OG&E's state action immunity. However, the Supreme Court has expressly rejected this notion, holding that there is no conspiracy or bribery exception to state action immunity. City of Columbia v. Omni Outdoor Adver., Inc., 499 U.S. 365, 378-79 (1991) (stating that Congress has passed other laws aimed at combating corruption in state and local governments, and that any action that qualifies as state action is ipso facto . . . exempt from the operation of the antitrust laws) (internal quotations and citation omitted, alteration in original). We can find no legal authority, and Trigen points us to none, that dictates that OG&E's alleged lavish entertainment of customers causes OG&E to forfeit state action immunity. Therefore, even if OG&E had committed these alleged bad acts, its state action immunity would remain intact. 21
22 Trigen contends that OG&E is not entitled to state action immunity because OG&E is not participating in the regulated electricity market but in the unregulated cooling services market. We disagree. First, OG&E is selling only one thingelectricity at state-regulated rates. It does not sell the electric chillers that are necessary for cooling. According to Trigen's logic, OG&E must be deemed a competitor, and a potential monopolist, in every single product market that uses electricity to the exclusion of the suppliers of that market. Clearly, this is an unreasonable result. 23 Second, the case Trigen relies on, Cantor v. Detroit Edison Co., 428 U.S. 579 (1976), is distinguishable. In Cantor, the Court held that a Michigan electric utility's program distributing free light bulbs was not immune from the Sherman Act, even though the light-bulb-distribution program was included in the state-approved tariff, because there was no evidence that the state intended to regulate the electric light bulb market. Id. at 598. Cantor involved an electric utility that was distributing an unregulated productlight bulbs. OG&E has done no such thing. OG&E only sells electricityat state-regulated rates. 1
24 Finally, Trigen argues that OG&E has flexibility in setting its RTP rate and that this flexibility leads to abuse by OG&E, including misrepresentations and discriminatory withholding of the RTP rate. Aplee. Br. at 34-36. Specifically, Trigen argues that OG&E misrepresented the tariff to the City, and that OG&E unlawfully discriminated against its customers in deciding who to enroll in the pilot program. Aplee. Br. at 33. Trigen contends that OG&E's flexibility in determining the RTP rate means that the RTP rate is not actively supervised by the State and, therefore, outside the scope of state action. Id. at 33-34. 25 We disagree with Trigen's premise. OG&E has no discretion in setting its electricity rates. The RTP rate is governed by strict formulas defined in the OCC-approved tariff. Aplt. Reply Br. at 7. Under the RTP program, the customer is given discretion in determining his electricity rate by determining at what times of the day to use electricity. Accordingly, OG&E could only offer the City an estimate put together by an outside consulting firm, based on certain assumed usage patterns. 26 Trigen's discrimination claim clearly is barred by the state action doctrine. In its approval of the RTP tariffs and pilot program, the OCC explicitly stated in its Final Order that the proposed Day-Ahead and Week-Ahead Pricing Tariffs will not result in unjust or undue discrimination. III Aplt. Sep. Add. Ex. DX318 at 4. Even if the RTP program did result in discrimination, it would still be at the heart of the state action doctrine. The state action doctrine applies to immunize anticompetitive conduct from the federal antitrust laws when that conduct is undertaken pursuant to a clearly-articulated state policy that is actively supervised by the State. If Oklahoma wants to allow OG&E to discriminate in order to pursue a state policy and Oklahoma actively supervises the conduct at issue, than OG&E may discriminate and still fall within the bounds of the state action doctrine. 27 In sum, Trigen's arguments that OG&E's regulated electricity sales fall outside of state action immunity are unpersuasive. Therefore, because OG&E is acting in accordance with a clearly-articulated state regulatory program and because it is actively supervised by the OCC, we hold that OG&E's conduct falls within the heart of the state action doctrine and that the federal antitrust claims must be dismissed. 28