Antitrust - Michael Eric Ross and Jeffrey S. Cashdan

• Publication year: 1997

Antitrustby Michael Eric Ross^* and Jeffrey S. Cashdan^**

The Eleventh Circuit Court of Appeals issued seven antitrust decisions in 1996.¹ Only one opinion addressed substantive antitrust issues.² The others turned on procedural³ or immunity grounds.⁴ Antitrust defendants continued their dominance on appeal, prevailing in all but one action.⁵

I. Survey

A. Government-Related Immunities: The State-Action and Noerr-Pennington Doctrines

1. Summary of the Law. The Eleventh Circuit issued two opinions in 1996 involving government-related immunities, specifically the state-action and Noerr-Pennington doctrines. These immunity doctrines, at their core, are based upon the identity of the source of the alleged injury to competition:

If the injury is caused by persuading the government, then the antitrust laws do not apply to the squelching {Parker v. Brown [state-action immunity]) or the persuasion (Noerr-Pennington). If the injury flows directly from the "petitioning"—if the injury occurs no matter how the government responds to the request for aid—then we have an antitrust case.⁶

The state-action doctrine immunizes states from federal antitrust law for their actions as sovereigns.⁷ This doctrine similarly protects political subdivisions of a state that act pursuant to a '"clearly articulated and affirmatively expressed'" state policy to replace competition with regulation.⁸ Private conduct also may benefit from state-action immunity if, in addition to being undertaken pursuant to a clearly articulated and affirmatively expressed state policy to replace competition with regulation, it is "actively supervised" by the state.⁹

The Noerr-Pennington doctrine is a logical "corollary" to the state-action immunity doctrine.¹⁰ The Noerr-Pennington doctrine generally immunizes from antitrust liability private persons and entities who, unilaterally or collectively, petition the government for legislation or other favorable action.¹¹ "'[Wjhere a restraint upon trade or monopolization is the result of valid governmental action, as opposed to private action,' those urging the governmental action enjoy absolute immunity from antitrust liability for the anticompetitive restraint."¹² Moreover, even where the restraint results directly from private action, immunity exists if the restraint is "'incidental' to a valid effort to influence governmental action."¹³

2. The Eleventh Circuit Decisions. In Crosby v. Hospital Authority of Valdosta & Lowndes County,¹⁴ the Eleventh Circuit considered application of the state-action doctrine to a denial of hospital staff privileges. Plaintiff, Dr. Crosby, applied for staff privileges at the Georgia Medical Center, a hospital owned and operated by the defendant hospital authority.¹⁵ After review by several committees of the medical staff of the Center and the appellate review committee of the hospital authority, plaintiff's application was denied on the ground that he failed to meet the criteria (i.e., training, experience, and performance) for privileges established by the hospital authority's bylaws.¹⁶ The hospital authority's appellate review committee conducted hearings concerning Dr. Crosby's application, examined it in light of the recommendations of the various staff committees, and affirmed the denial of staff privileges.¹⁷ Dr. Crosby then brought suit contending that the hospital authority and the doctors who served on the peer review committees that made the recommendations on his application conspired to deprive him of staff privileges in violation of federal antitrust law.¹⁸ The district court held on summary judgment that all of the defendants were immune from liability under the state-action doctrine.¹⁹ The district court further held, alternatively, that defendants were immune from damages under the Local Government Antitrust Act.²⁰

The Eleventh Circuit affirmed.²¹ The court first grappled with whether the hospital authority is a political subdivision of Georgia or a private actor. The Georgia statute that created the hospital authority provides that such authorities are public bodies.²² The Georgia Supreme Court has held, however, that hospital authorities created under Georgia law are not political subdivisions of the state for sovereign immunity purposes.²³ Despite this state precedent, the Eleventh Circuit concluded that the hospital authority is a "political subdivision" for purposes of state-action immunity under federal antitrust law.²⁴ The court explained that

the definition of "political subdivisions" for purposes of state sovereign immunity does not control its definition for purposes of antitrust state action immunity .... [W]e focus instead on whether the nexus between the State and the [hospital authority] is sufficiently strong that there is little real danger that the [hospital authority] is involved in a private price-fixing arrangement.²⁵

The court concluded that the nature and purpose of the hospital authority under Georgia law warranted treating the hospital authority as a political subdivision of Georgia for purposes of state-action immunity under federal antitrust law.²⁶

The Eleventh Circuit next considered whether the physician members of the peer review committees also could take advantage of state-action immunity. The court first noted that, pursuant to Eleventh Circuit precedent, staff physicians and their hospital are viewed as separate economic actors capable of conspiring in violation of Section 1 of the

Sherman Act.²⁷ Nonetheless, the court held that the staff physicians were "agents" of the hospital authority for state-action immunity purposes because the challenged conduct "consisted exclusively of official actions taken as members of the hospital's peer review committees."²⁸ The court reasoned that

the fact that a hospital and its staff are separate economic [actors] or legal entities does not mean that a staff physician cannot be the agent of a hospital for certain purposes and in certain circumstances .... In short, a hospital and its staff can be separate entities for purposes of intraenterprise immunity, but the staff physicians may in certain contexts be agents of the hospital for purposes of state action immunity.²⁹

Because the hospital authority had the ultimate decision making power and exercised plenary review over all credentialing decisions, the court concluded that there was little or no danger of a private price-fixing arrangement between the peer-review physicians and the hospital authority as to credentialing.³⁰ Accordingly, the court held that the individual peer review committee members were agents of the hospital authority and, like the hospital authority, did not have to show that their actions were actively supervised by the state to qualify for state-action immunity.³¹ In finding that the physicians were agents of the hospital authority for credentialing, the court essentially demonstrated that their challenged activities were actively supervised by the state through the hospital authority. Thus, the court's result is sound.

Finally, the court held that the hospital authority and its agents were acting pursuant to clearly articulated state policy in denying plaintiff's application for staff privileges.³² Indeed, after reviewing the Georgia statute delineating the hospital authority's powers, the court held that the "clear articulation question is not a close one .... [T]he statute explicitly provides for precisely the anticompetitive conduct about which

[plaintiff] complains."³³ Accordingly, the court held that defendants were immune from plaintiff's antitrust claims.³⁴

TEC Cogeneration Inc. v. Florida Power & Light Co.³⁵ involved application of the state-action and Noerr-Pennington doctrines to the electric utility industry in Florida. Plaintiffs were engaged in the business of developing cogeneration projects and supplying turbines and services for use in cogeneration projects.³⁶ Plaintiffs successfully bid to construct and service a large cogeneration facility in Metropolitan Dade County, Florida ("Dade") for purposes of supplying electrical and thermal power to a new Miami government center. The contract allowed plaintiffs to dispense any excess power to Dade facilities outside of the new government center.³⁷ The cogeneration facility became fully operational in late 1986.³⁸ Because of the substantial surplus of unused generating capacity, the cogeneration facility quickly became unprofitable.³⁹

To reduce their losses, plaintiffs sought a logical use for the excess power—plaintiffs asked defendant Florida Power & Light Company ("FPL")⁴⁰ to wheel their surplus power to other Dade facilities, most notably to a Dade hospital complex.⁴¹ Believing that plaintiffs' request would violate the Florida Public Service Commission's ("PSC") self-service wheeling rules, FPL declined to wheel.⁴² Plaintiffs then directed Dade, pursuant to the terms of the contract, to petition the PSC for an order compelling FPL to wheel.⁴³ Following a lengthy administrative proceeding, the PSC denied Dade's petition.⁴⁴ Finally, plaintiffs and Dade sought approval from the Dade County Board of Commissioners ("Commission") to construct a separate transmission line from the

Miami government center to a Dade hospital facility.⁴⁵ Plaintiffs lobbied the Commission for its approval; FPL lobbied against.⁴⁶ The Commission voted against construction of the separate transmission line.⁴⁷

Within weeks, plaintiffs filed an antitrust action allegating that FPL acted anticompetitively by: (1) refusing to wheel plaintiffs' excess power; (2) manipulating its rate structure to the detriment of cogenerators and their customers; and (3) interfering with interconnection between FPL's system and the Miami government center.⁴⁸ Following discovery, the district court denied defendant's motion for summary judgment, holding that state-action and Noerr-Pennington immunity were unavailable because FPL acted solely in its economic self-interest without active supervision by...