Antitrust Immunity for Utah's Political Subdivisions: the Utah Supreme Court's Opinion in Summit Water v. Summit County
| Publication year | 2006 |
| Pages | 40 |
Vol. 19, No. 5, Pg. 40. Antitrust Immunity for Utah's Political Subdivisions: The Utah Supreme Court's Opinion in Summit Water v. Summit County
Vol. 19, No. 5, Pg. 40
September/October 2006
The Utah Supreme Court's November 4, 2005 opinion in Summit Water v. Summit County, 2005 UT 73, clarifies the circumstances under which Utah's local governments are immune from liability under the provisions of the Utah Antitrust Act, Utah Code Ann. § 76-10-911, et seq. (the "Utah Act"). The Court held that under the plain language of Section 76-10-915(1)(f) of the Utah Act, a municipality is exempt from antitrust liability only if its actions were "authorized or directed" by state law. Adopting the standard for state action immunity under federal law, the Court interpreted the "authorized and directed" language of Section 76-10-915(1)(f) to mean that, for immunity to apply, the municipality's alleged anticompetitive conduct must have been a foreseeable result of action authorized by a state statute. Stated differently, this means that if the activities of a municipality are a foreseeable result of a state statute, such activities are immune from antitrust liability. Only where such conduct is not foreseeable, and it harms the competitive process, is the municipality's activity subject to liability under the Utah Act.
This holding places Utah State law on the issue of state action immunity firmly in the mainstream of antitrust jurisprudence, and renders analysis of such immunity under State law congruent with long held principles of federal antitrust law. Despite concerns raised by some, and as set forth below, the Supreme Court's opinion is based on sound reasoning, establishes good public policy, and will have little or no impact on the legitimate activities of Utah's political subdivisions.1
BACKGROUND
Summit Water filed a lawsuit in September 2001 alleging antitrust violations against Summit County (the "County") and the Mountain Regional Water Special Service District ("Mountain Regional") (collectively, the "County Defendants"). Summit Water is a non-profit private mutual water company that sells culinary grade water in the Snyderville Basin. Mountain Regional, a Special District, is a competing provider of culinary water controlled and operated by the County. Developers must have a source of culinary water to obtain necessary approvals from Summit County. Summit Water alleges that the County Defendants attempted to monopolize the relevant water market by passing a series of ordinances designed to competitively disadvantage Summit Water and advantage Mountain Regional, and leveraged the County's planning and development process to force developers to purchase water from Mountain Regional. In particular, Summit Water claims that the County provided advantageous zoning concessions to developers who chose Mountain Regional as its water provider instead of a private competitor such as Summit Water, resulting in a per se unlawful tie between water and zoning.
Summit Water brought its antitrust claims under the Utah Antitrust Act. The Utah Antitrust Act is similar to the federal Sherman Act,2 and prohibits conspiracies in restraint of trade and attempts to monopolize.3 In its first amended complaint, Summit Water also asserted additional claims under Article XII, Section 20 of the Utah Constitution. That section, added to Utah's Constitution in 1992, is based on language from the Sherman Act itself. It states:
It is the policy of the State of Utah that a free market system shall govern trade and commerce in this state to promote the dispersion of economic and political power and the general welfare of all the people. Each contract, combination in the form or otherwise, of conspiracy in restraint of trade or commerce is prohibited. Except as otherwise provided by statute, it is also prohibited for any person to monopolize, attempt to monopolize, or combine or conspire with any other person or persons to monopolize any part of trade or commerce.4
In response to Summit Water's antitrust claims, the County Defendants brought a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted. Summit County contended, among other things, that Article XII, Section 20 of the Utah Constitution was not self executing, and that in any event, state action immunity prevented antitrust scrutiny of the activities of a County. The County Defendants also argued that their activities were immune under Section 76-10-915(1)(f) of the Utah Antitrust Act, and that any claim against the County Defendants under that statute must fail as a matter of law.5
JUDGE HILDER'S FIRST OPINION
Judge Robert K. Hilder, the trial Court Judge, rendered his first opinion in the case on March 4, 2002, ruling that Summit Water could go forward with its claims under Article XII, Section 20 of the Utah Constitution. The court held that the constitutional provision was indeed self-executing. He further held that the state action immunity doctrine applied only to a state, not to political subdivisions of a state, and that Section 76-10-916(1)(f) of the Utah Antitrust Act did not apply because the County was not a municipality. The County Defendants filed a motion for reconsideration in January 2003. In their papers, the County Defendants argued that Section 76-10-915(1)(f) was added to the Utah Antitrust Act to assure "that all units of government would be immune from the Utah Antitrust Act,"6 and that Article XII, Section 20 of the Utah Constitution was intended only as a general statement of policy, and not as a self-executing provision creating a private right of action. The County Defendants also contended that the term "municipality" in Section 76-10-915(1)(f) has the meaning that term has acquired under federal case law applying the Sherman Act, not the meaning given it under other provisions of the Utah Code. According to the County Defendants, the term "municipality" is defined under federal law to mean all political subdivisions, and that a county and its special service districts therefore constitute municipalities that are exempt from antitrust scrutiny under Section 76-10-915(1)(f) of the Utah Act.
JUDGE HILDER'S SECOND OPINION
On May 27, 2003, Judge Hilder reversed his prior ruling. In his second opinion, Judge Hilder held that Article XII, Section 20 of the Utah Constitution was merely a statement of policy, and was not self-executing after all. This finding was based on Judge Hilder's view that the legislative history of Article XII, Section 20 lacked any evidence of an intent to craft a self-executing provision, even though the language of the provision, when considered alone, suggests that it is self-executing and prohibitive. Turning to the scope of immunity under Section 76-10-915(1)(f), Judge Hilder concluded that while the plain meaning of the term "municipality" is a city or town, the legislative intent of the word "municipality" trumps that plain meaning. Judge Hilder based his analysis on the following floor debate statement from Senator Thorpe Waddingham, the bill's sponsor:
One of the reasons is the legislation we passed two years ago dealing with IPP. And a recent federal case [City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389 (1978)], that I have not read, but which has been called to my attention, that in some cases makes municipalities comply with certain sections of the federal antitrust legislation. This - one of the purposes, which I hope that this particular amendment would accomplish was to remove any question as to whether or not its' [sic] a[t] variance with the Interlocal Cooperation Act that we passed two years ago.7
According to Judge Hilder, because the United States Supreme Court in City of Lafayette used the word "municipalities" in some instances to refer to "units of local government," Senator Waddingham must have intended the word "municipality" in Section 76-10-915(1)(f) to include all units of local government, including a county and its special service districts.8
Summit Water moved Judge Hilder to reconsider his second opinion. In their papers, Summit Water argued that Judge Hilder's second opinion was insufficient to dismiss Summit Water's case. Summit Water took issue first with Judge Hilder's conclusion that City of Lafayette interpreted the word "municipality" to mean all units of local government rather than just cities and towns. Summit Water pointed specifically to passages in City of Lafayette where the word "municipality" was used in distinction from the term "county." Summit Water also submitted an affidavit from Senator Waddingham stating that he intended the term municipality to refer only to cities and towns.
Summit Water also argued that even if the term "municipality" did include all political subdivisions, including the County and Mountain Regional, Judge Hilder's ruling entirely ignored the second prong of the exemption requiring the alleged anticompetitive conduct to be "authorized or directed by state law."
In response to the latter argument, the County Defendants cited to general zoning and authorizing statutes, arguing that these statutes "authorized or directed" their conduct, and that they were therefore exempt from liability under the Utah Antitrust Act. Summit Water argued that such general grants of authority were insufficient to immunize per se tying of water and planning. Moreover, Summit Water contended that if all political subdivisions were immune from the Antitrust Act, it would not make sense for the Legislature to include in the statute, Section 76-10-919, immunizing political subdivisions from monetary damages. Why, Summit Water asked, would the statute limit...
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