DUKE & COMPANY INC., A Corporation, Appellant, v. Thomas J. FOERSTER, Individually and As Commissioners of The County of Allegheny, Et Al
DUKE & COMPANY INC., A Corporation, Appellant, v. Thomas J. FOERSTER, Individually and As Commissioners of The County of Allegheny, Et Al
2d 1277
1975-2 Trade Cases 60,433
The complaint by Duke & Company, Inc. names seven defendants: three
municipal corporations,1 three private corporations,2 and one individual,3
named both in his official capacity as elected Commissioner of Allegheny
County and as a private person. The district court granted a motion to dismiss
The complaint alleges that around November 1972 the defendants "entered into
an agreement, contract and/or conspiracy in restraint of trade," which violated
section 1 of the Sherman Act, 15 U.S.C. 1 (1970). The purpose of the alleged
agreement was to boycott malt beverages manufactured by plaintiff in the
municipal facilities operated by defendants.
The district court based its dismissal of the complaint against the governmental
defendants on the Supreme Court's decisions in Parker v. Brown, 317 U.S. 341,
63 S.Ct. 307, 87 L.Ed. 315 (1943), Eastern Railroad Presidents Conference v.
Noerr Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961), Reh.
den. 365 U.S. 875, 81 S.Ct. 899, 5 L.Ed.2d 864 and United Mine Workers v.
Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965). The court
held that the three municipal defendants were immune5 under the antitrust laws.
On appeal, plaintiff contends that Parker may be distinguished from the case at
bar. The essence of plaintiff's argument is that Parker shields state
governmental agencies with immunity from antitrust liability only when (1) any
actions undertaken by the agencies that result in a restraint of trade are directed
by a specific state legislative mandate, and (2) the state's purpose is sufficiently
significant so as to override the federal antitrust laws or is consistent with a
federal policy that overrides the antitrust laws. Plaintiff also contends that
Parker precludes extension of immunity to municipal entities that conspire with
private parties to violate the antitrust laws.
In rebuttal, defendants make two substantial arguments. First, they contend that
In rebuttal, defendants make two substantial arguments. First, they contend that
under Parker they are exempt from antitrust liability when acting within the
scope of their authority and exercising the powers delegated to them by law and
that plaintiff's bare allegations of a combination in restraint of trade are
insufficient to state a cause of action against them. Second, they contend that a
government agency's response to even anti-competitive lobbying is insufficient,
under Noerr and Pennington, to bring with it antitrust liability.
In reviewing the district court's dismissal of plaintiff's complaint against the
governmental defendants we must construe all the allegations of the complaint
in a manner most favorable to plaintiff. The sole issue for us on appeal is
whether under the allegations the governmental defendants (hereinafter
"defendants") are immune under the federal antitrust laws.
10
However, the Court found that California's program "derived its authority and
its efficacy from the legislative command of the state and was not intended to
operate or become effective without that command." Id. Thus, the anticompetitive effect of the program was unquestionably the result of a conscious
decision by the state legislature that such a result was in the best interest of the
state. The measures that restricted competition were adopted pursuant to the
explicit directive of the state legislature. In this context, where the state "as
sovereign, imposed the restraint as an act of government," Id. at 352, 63 S.Ct. at
314, the Court held that the Sherman Act was inapplicable. Defendants argue
for a broad construction of Parker, contending that so long as they were
performing governmental functions or were acting within the scope of their
authority, they are shielded from antitrust liability under Parker.
11
The Supreme Court was recently provided with the opportunity to review its
decision in Parker. In Goldfarb v. Virginia State Bar, --- U.S. ---, 95 S.Ct. 2004,
44 L.Ed.2d 572 (1975), decided after the district court's judgment in the case at
bar, the Court was confronted with the question of whether a minimum fee
schedule published by the Fairfax County Bar Association and enforced by the
Virginia State Bar constituted price fixing in violation of section 1 of the
Sherman Act, 15 U.S.C. 1 (1970). Both the district court and the Court of
Appeals had held that the State Bar was immune from antitrust liability under
Parker.
12
The Supreme Court noted that the State Bar was a state agency by law. Id. at --, 95 S.Ct. 2014. However, the Court stated that the Bar's status as a state agency
for "limited purposes" did not shield it from antitrust liability when it engaged
in monopolistic activity for the benefit of its members. The Court indicated that
under Parker, "(t)he threshold inquiry in determining if an anticompetitive
activity is state action of the type the Sherman Act was not meant to proscribe
is whether the activity is required by the State acting as sovereign." Id. at ---, 95
S.Ct. at 2015.
13
The Court found that the Commonwealth of Virginia could not be said to have
directed the State Bar's anticompetitive activities. The State Bar was unable to
point to any state statute requiring the activities in question or even mentioning
fees, advisory fee schedules or the kind of minimum price schedule enforced by
the State Bar. The Court concluded:
14is not enough that, as the County Bar puts it, anticompetitive conduct is
It
"prompted" by state action; rather, anticompetitive activities must be compelled by
direction of the State acting as a sovereign. Id.
15
5408 (1956). In particular the County is given the power, in 5404, to:
.17. . enter into agreements in the form of a lease, permit, license, concession or
otherwise for the use of the (airport or terminal facilities) or part thereof, for any
adequate consideration, with any person or corporation desiring to use the same for
any navigation and terminal purpose or of any air navigation and terminal facility . .
..
18
19
20
Defendants contend that under the foregoing statutory provisions they are
granted broad powers to manage the public facilities under their control, that
they were acting within the scope of these powers when any of the alleged acts
took place and that their conduct was shielded from antitrust liability under
Parker. In particular, defendants Auditorium Authority and Stadium Authority
cite 53 P.S. 23845, claiming that the alleged agreement not to buy plaintiff's
products came within the grant of all powers "necessary and convenient" to run
the public facilities. Alternatively, they argue that under the above provisions
the selection of products must be made in such a fashion as "to benefit the
people of the Commonwealth" and thus they had the implied power to exclude
plaintiff's products.
21
Under the standards enunciated in Parker and Goldfarb, we conclude that this is
not a case where Parker-type immunity should be extended to state
governmental entities. We see no basis in the relevant provisions of the
Pennsylvania Statutes for concluding that the anti-competitive activities alleged
by plaintiff were "compelled by direction of the State acting as a sovereign."
Goldfarb, supra --- U.S. at ---, 95 S.Ct. at 2015. As in Goldfarb, defendants here
have pointed to no statute which would compel or even permit the boycott that
plaintiff alleges took place. Certain of the defendants undoubtedly had the
statutory power to choose products to be sold through the concessions in the
public facilities which they own and operate as a function of their authority to
manage the facilities. However, nothing explicit or implicit in their statutory
authority mandates or permits discrimination against certain suppliers. We
therefore conclude that the district court erred in holding that plaintiff's
complaint failed to state a claim because the defendants' alleged activities were
exempt from antitrust scrutiny under the state action exception of Parker.
III. NOERR-PENNINGTON IMMUNITY
22
Defendants also contend that they are entitled to immunity under the doctrine
announced in Eastern Railroad Presidents Conference v. Noerr Motor Freight,
Inc., supra, and refined in United Mine Workers v. Pennington, supra. Both
Noerr and Pennington involved instances of private lobbying to influence
official action. In Noerr the plaintiffs alleged that the defendants had conducted
a publicity campaign with the intent of fostering legislative action destructive of
plaintiffs' businesses. The Court held:
23 think it . . . clear that the Sherman Act does not prohibit two or more persons
We
from associating together in an attempt to persuade the legislature or the executive to
take particular action with respect to a law that would produce a restraint or a
monopoly. 365 U.S. at 136, 81 S.Ct. at 529.
24
25
26
Both Noerr And Pennington involved suits against Private parties who had
allegedly conspired to influence governmental action. In neither case was it
28
29
The judgment of the district court will be reversed and the case remanded for
further proceedings consistent with this opinion.
The individual defendant is Thomas J. Foerster, who was at all pertinent times
a publicly-elected Commissioner of Allegheny County
The district court did not direct the entry of final judgment with respect to
We shall also employ the term "immunity" although we are aware its
preciseness in our context may be open to question because it smacks of an
affirmative defense while the thrust of Parker is that the Sherman Act is simply
inapplicable to activity mandated by state authority