State Action on Appeal: Parker Immunity and the Collateral Order Doctrine in Antitrust Litigation

• Publication year: 2015

SEATTLE UNIVERSITY LAW REVIEW Volume 39, No. 1, FALL 2015

State Action on Appeal: Parker Immunity and the Collateral Order Doctrine in Antitrust Litigation

Jason Kornmehl(fn*)

ABSTRACT

The collateral order doctrine is perhaps the most significant exception to the general rule that only final judgments are appealable. The doctrine is particularly important in antitrust litigation when a defendant asserts state action immunity, often referred to as Parker immunity. However, the circuit courts have struggled with the question of whether a denial of Parker immunity is immediately appealable as a collateral order. This unsettled procedural issue is further complicated by the fact that the substantive law on Parker immunity differs depending on the entity asserting state action.

This Article argues that a governmental entity that is deemed part of a state should be able to use the interlocutory appeal process to obtain review of an order denying Parker immunity. On the other hand, government defendants deemed not part of the state, as well as private entities, should not be able to immediately appeal an adverse state action determination under the collateral order doctrine. In addition, this Article explores the collateral order doctrine's applicability in FTC adjudicatory proceedings. Cases such as North Carolina State Board of Dental Examiners v. FTC and FTC v. Phoebe Putney Health System, Inc. demonstrate the Supreme Court's renewed interest in the scope of state action immunity. However, the question of whether a denial of Parker immunity is immediately appealable under the collateral order doctrine is also an important issue and is addressed in this Article.

CONTENTS

INTRODUCTION ......................................................................................... 2

I. OVERVIEW OF THE STATE ACTION DOCTRINE ................................. 6

II. THE FINAL JUDGMENT RULE AND COLLATERAL ORDER DOCTRINE ... 9

III. GOVERNMENTAL ENTITIES DEEMED PART OF THE STATE ......12.

A. Unreviewability ..................................................................... 13

1. State Sovereignty and Federalism as Evidence of Immunity ...... 15

2. Challenges to Characterizing the State Action Doctrine as Something Other than an Immunity ................................................ 18

B. Separability ........................................................................... 20

C. Conclusiveness ................................................................... 22

D. Preserving Judicial Economy........................................... 23

IV. DEFENDANTS NEEDING TO SATISFY ONE OR BOTH OF THE MIDCAL PRONGS................................................................................................... 24

A. Governmental Entities Not Deemed Part of the State .................... 24

1. Unreviewability .......................................................................... 25

2. Separability ................................................................................. 27

B. Private Parties ................................................................................ 27

V. PARKER IMMUNITY AND THE COLLATERAL ORDER DOCTRINE IN APPEALS FROM FTC ADMINISTRATIVE PROCEEDINGS

CONCLUSION ........................................................................................... 31

INTRODUCTION

The state action doctrine(fn1) immunizes certain conduct that is the intentional or foreseeable result of state or local government policy from the federal antitrust laws.(fn2) Although it may seem obscure,(fn3) the state action doctrine is a critical part of antitrust law.(fn4) The doctrine is important because it implicates two key constitutional principles-federalism and state sovereignty.(fn5) In addition, the doctrine has a significant impact when state or local governments adopt economic or social policies that conflict with open competition.(fn6)

After remaining largely dormant, the state action doctrine has seen a resurgence in recent years.(fn7) For example, in 2013, the United States Supreme Court ruled on the applicability of the state action doctrine to a hospital merger in FTC v. Phoebe Putney Health System, Inc. (fn8) It was the first time in twenty years that the Supreme Court heard a case on the state action doctrine.(fn9) In 2015, the Supreme Court decided North Carolina State Board of Dental Examiners v. FTC, (fn10) another prominent case involving the state action doctrine.(fn11) Despite an extended period during which few state action cases were heard by the Supreme Court, the occasions for considering the state action doctrine in antitrust litigation "are numerous and diverse."(fn12) Accordingly, the Federal Trade Commission (FTC) has recently increased enforcement actions involving the state action doctrine.(fn13) Although many Supreme Court decisions have defined the meaning and limits of the state action doctrine,(fn14) these decisions have left "a great deal of confusion about the source and the scope" of the doctrine.(fn15)

One area of confusion regarding the scope of the state action doctrine is whether an order denying a motion to dismiss an antitrust claim under the doctrine is immediately appealable as a collateral order.(fn16) Federal courts of appeals have grappled with this issue in a variety of ways, and a circuit split has emerged. The Fourth(fn17) and Sixth(fn18) Circuits held that a ruling denying a motion to dismiss an antitrust claim under the state action doctrine is not immediately appealable as a collateral order. On the other hand, the Fifth(fn19) and Eleventh(fn20) Circuits held that such a ruling is immediately appealable as a collateral order. However, the Fifth Circuit held that only governmental defendants asserting the state action doctrine can take advantage of an immediate appeal and that private defendants cannot immediately appeal an order denying a motion to dismiss under the state action doctrine.(fn21) Likewise, the Tenth Circuit, in the most recent decision on the issue of interlocutory appeals of state action rulings, held that a private defendant is not entitled to an immediate appeal of a trial court order on the state action doctrine.(fn22) The Third(fn23) and Seventh(fn24) Circuits have also contributed to this circuit split, albeit in dicta, suggesting that the denial of a governmental defendant's state action immunity is subject to immediate appeal. The fact that seven of the thirteen federal courts of appeals have addressed the immediate appealability of an order denying a motion to dismiss under the state action doctrine demonstrates the significance and complexity of this procedural issue in antitrust litigation.(fn25)

This Article attempts to resolve the question of immediate appealability by applying the Supreme Court's test for the availability of interlocutory appeals to orders denying a motion to dismiss under the state action doctrine. This Article asserts that a governmental entity that is deemed part of a state should be able to use the interlocutory appeal process to obtain review of an order denying a motion to dismiss under the state action doctrine. However, governmental defendants deemed not part of the state itself and private entities should not be able to immediately appeal an adverse state action determination under the collateral order doctrine.

Part I of this Article provides a historical overview of the state action doctrine and presents background information on how the doctrine is applied to different entities. Part II outlines the requirements for appellate jurisdiction, discussing both the final judgment rule and the collateral order doctrine. Part III explains the Article's finding that those governmental defendants that are deemed part of the state are entitled to an immediate appeal. Next, Part IV examines the immediate appealability of rulings on the state action doctrine when the defendant is a governmental entity not part of the state itself or a private party, and analyzes why these defendants should not be entitled to an immediate appeal. Finally, Part V explores the immediate appealability of state action orders in the context of FTC adjudicative proceedings.

I. OVERVIEW OF THE STATE ACTION DOCTRINE

The federal antitrust laws have been described as the "Magna Carta of free enterprise."(fn26) As a result, the Supreme Court has asserted that these laws "are as important to the preservation of economic freedom and our free-enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms."(fn27) Although the federal antitrust laws are integral to competition and free enterprise, Congress has adopted many exemptions. For example, the McCarran-Ferguson Act affords insurers an exemption from the federal antitrust laws,(fn28) the Norris-LaGuardia Act immunizes certain activities involving organized labor from the federal antitrust laws,(fn29) and the Shipping Act of 1984 exempts from antitrust liability any agreement between ocean common carriers that is filed with the Federal Maritime Commission.(fn30) In the absence of a specific statutory exemption, federal courts have developed exemptions and immunities to federal antitrust laws as well. One such "judicially created exemption" is the state action doctrine.(fn31)

The state action doctrine was first recognized in 1943 when the Supreme Court decided Parker v....