Reno, Nevada Escapes Shearman Section 1 Antitrust Suit
On May 14, 2020, the United States Court of Appeals for the Ninth Circuit affirmed the summary judgement against a private recycling company, which had alleged the city of Reno, Nevada had violated Section 1 of the Sherman Act by granting a competing recycling firm, Reno Disposal, an exclusive franchise over certain recycling services in the city. Green Solutions Recycling, LLC v. Reno Disposal Company Inc., 3:16-cv-00334-MMD-CBC (9th Cir. May 14, 2020).
The Ninth Circuit agreed with the district court that Reno was immune from suit based on the state-action immunity doctrine, as articulated in Parker v. Brown, 317 U.S. 341 (1943) and its progeny. That judicially created Parker doctrine applies federalism principles to prohibit antitrust suits against local governments where (1) the state legislature has authorized the challenged conduct and (2) the legislature intended to displace competition with regulation.
The Ninth Circuit held that the Nevada legislation in question “plainly intended to displace competition” when by statute it authorized municipalities to “displace or limit competition” as to waste removal. Plaintiffs challenged Reno’s classification of recycling as “other waste” under the statute to contend that Reno acted outside the scope of the regulatory grant, but the court observed that the question about the proper classification of recycling was the subject of ongoing state court litigation. The Ninth Circuit emphasized that it was not necessary to resolve that issue to decide whether to apply the state-action immunity doctrine. Instead, the Court was satisfied that the city’s inclusion of recycling services was at worst “ordinary error that should be left for state tribunals to control.”
Plaintiff also argued that the state-immunity doctrine should not apply because Reno Disposal company was a private contractor that was not “actively supervised” by the city. The Court disagreed and found that, since the city had not delegated Reno Disposal any discretion under its contract, there was no requirement for Reno to “actively supervise” Reno Disposal for state-action immunity to apply. Expanding upon the district court’s ruling, the Ninth Circuit reasoned that plaintiff was “essentially challeng[ing] nothing more than the agreement” and there was no allegation Reno and Reno Disposal were conspiring with one another to justify any exception to these principles.
Antitrust challenges to municipal activities are often complicated by federalism concerns. Green Solutions Recycling shows the added complexity antitrust plaintiffs face in challenging municipal contracts with private parties. While the antitrust laws exist to protect competition, municipalities, when acting within the scope of a state’s grant of regulatory power, are permitted to replace competition with regulation. In those circumstances, federal courts will not impose antitrust liability even where a plaintiff contends that the municipality has blocked the plaintiff from competing.