Praxair, Inc. v. FL Power & Light

United States Court of Appeals,
Eleventh Circuit.
No. 94-2165.
PRAXAIR, INC., Plaintiff-Appellee, Cross-Appellant,
v.
FLORIDA POWER & LIGHT; Florida Power Corp., Defendants-
Appellants, Cross-Appellees.
Sept. 19, 1995.
Appeals from the United States District Court for the Middle
District of Florida. (No. 88-1622-CIV-T-21C), Ralph W. Nimmons,
Jr., Judge.
Before COX, Circuit Judge, RONEY and WOOD*, Senior Circuit Judges.
RONEY, Senior Circuit Judge:
Florida Power Corp. and Florida Power & Light Co. appeal the
district court's denial of summary judgment in which the utilities
asserted state action immunity from Praxair, Inc.'s claim of
federal antitrust liability. Praxair cross-appeals the denial of
its partial summary judgment motion. At issue is whether state
action can be inferred from the manner in which the State conducts
itself in relation to the parties' attempts at competition. Since
there was sufficient state action so that the utilities should have
been granted immunity on summary judgment, we reverse the contrary
decision of the district court.
Although neither party raised a question of jurisdiction,
each filed briefs in response to a jurisdictional question raised
by this Court. It is not necessary to discuss the jurisdictional
issues. The district court granted Praxair's motion to certify for
*
Honorable Harlington Wood, Jr., Senior U.S. Circuit Judge
for the Seventh Circuit, sitting by designation.
immediate appeal the court's denial of its cross-motion for summary
judgment. 28 U.S.C. § 1292(b). Although a prior panel of this
Court denied permission, in order to remove any doubt about the
jurisdiction of this panel to hear these fully argued appeals, we
vacate the previous order and grant § 1292(b) jurisdiction of
Praxair's appeal. There is collateral order appellate jurisdiction
of the appeals of Florida Power and Florida Power & Light. Cohen
v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546-47, 69 S. Ct.
1221, 1225-26, 93 L. Ed. 1528 (1949). Denial of state action
immunity from antitrust liability by summary judgment is
immediately appealable. Commuter Transportation Systems, Inc. v.
Hillsborough County, 801 F.2d 1286, 1289 (11th Cir.1986); see also
Askew v. DCH Regional Health Care Authority, 995 F.2d 1033, 1036
(11th Cir.), cert. denied, --- U.S. ----, 114 S. Ct. 603, 126
L. Ed. 2d 568 (1993).
This lawsuit stems from Florida Power & Light's (FPL) refusal
to negotiate a lower rate for Praxair and Florida Power Corp.'s
(FPC) refusal to provide service because of a 1965 territorial
agreement. Praxair, and its predecessor Union Carbide, is located
in Mims in Brevard County, Florida, an area historically served by
Florida Power & Light and, according to the utilities, specifically
allocated to FPL in the territorial agreement. Praxair contends
Brevard County was never included in the agreement which the
Commission approved. The question presented is whether, in the
order approving the territorial agreement or in events since that
time, there has been sufficient "state action" by the Florida
Public Service Commission which would allow FPC and FPL to divide
service territories in Brevard County without violating section 1
of the Sherman Act, 15 U.S.C. § 1. We hold there has been
appropriate state action.
If a territorial agreement is made effective "solely by
virtue of a contract, combination or conspiracy of private persons,
individual or corporate," it would violate the Sherman Act. Parker
v. Brown, 317 U.S. 341, 350, 63 S. Ct. 307, 313, 87 L. Ed. 315
(1942); 15 U.S.C. §§ 1, 2. Conduct that otherwise would violate
federal antitrust laws may nevertheless be permissible when done
under the aegis of the State. 317 U.S. at 350, 63 S.Ct. at 313;
Municipal Utilities Board of Albertville v. Alabama Power Co., 934
F.2d 1493 (11th Cir.1991).
For private conduct to qualify for immunity under the state
action doctrine, the challenged restraint must meet a two-pronged
test. First, it must be "clearly articulated and affirmatively
expressed as state policy." Second, "the policy must be actively
supervised by the State itself." California Retail Liquor Dealers
Ass'n v. Midcal Aluminum, 445 U.S. 97, 105, 100 S. Ct. 937, 943, 63
L. Ed. 2d 233 (1980). These two requirements operate hand-in-hand to
ensure that the displacement of competition occurs only as a result
of deliberate and intentional state policy. Federal Trade
Commission v. Ticor Title Insurance Co., 504 U.S. 621, 112 S. Ct.
2169, 119 L. Ed. 2d 410 (1992). A clearly articulated policy can be
established if a state statute authorizes an agency to regulate the
area and "provides" for a regulatory scheme that inherently
displaces unfettered business freedom. Executive Town & Country
Services, Inc. v. City of Atlanta, 789 F.2d 1523, 1529 (11th
Cir.1986).
As to the first prong of Midcal, the district court at first
noted that "Florida case law and ... Florida's current statutory
and regulatory provisions ... has effectively displaced competition
between electric utilities in the retail market" and indicates a
"clearly articulated and affirmatively expressed state policy" to
regulate retail electric service areas. Order at 9-11. See Storey
v. Mayo, 217 So. 2d 304, 307 (Fla.1968) (noting that "the powers of
the Commission over these privately-owned utilities is omnipotent
within the confines of [Chapter 366] and the limits of organic
law), cert. denied, 395 U.S. 909, 89 S. Ct. 1751, 23 L. Ed. 2d 222
(1969); City Gas Co. v. Peoples Gas System, Inc., 182 So. 2d 429,
435 (Fla.1965) (Chapter 366 of Florida Statutes "add up to what can
be considered a very extensive authority over the fortunes and
operation of the regulated entities"); Fla.Stat. § 366.04(3)
(directing the Commission to exercise its powers to avoid
"uneconomic duplication of generation, transmission, and
distribution facilities"); see also PW Ventures, Inc. v. Nichols,
533 So. 2d 281, 283 (Fla.1988) (holding that "the regulation of the
production and sale of electricity [under Chapter 366] necessarily
contemplates the granting of monopolies in the public interest").
As to the second element of Midcal, the district court
concluded that generally "the Commission's extensive control over
the validity and effect of such agreements negates any inference
that the privately initiated agreements lack state supervision."
Order at 18. The Florida Supreme Court has held that the effect of
the Commission's approval of territorial agreements between public
utilities "is to make the approved contract an order of the
commission, binding as such upon the parties. City Gas, 182 So. 2d
at 436.
Having said that, however, the district court then denied the
parties' cross-motions for summary judgment on the ground there was
a disputed issue of material fact concerning whether Mims was
located in the area covered by the approved agreement. Praxair had
argued that the Commission had never approved an agreement between
the utilities that included Brevard County.
In our judgment, the district court erroneously focused
primarily on the utilities' and Commission's intent in the original
proceedings which culminated in the 1965 approval order, and did
not give proper consideration to the parties' conduct and the
Commission activity since that time.
The validity of a territorial agreement under Florida's
noncompetition policy is premised on Commission approval. See City
Gas, 182 So. 2d at 436; Fla.Stat. §§ 366.04(2), .05(7)-(8). If
Florida Power denied service to Praxair presumably because of a
territorial agreement, but the area in question was never approved
by the Commission, the utilities' actions would not merit state
action immunity because of the lack of "active state supervision."
Ticor, 504 U.S. at 636, 112 S.Ct. at 2178. If however the
Commission has allocated Brevard County to Florida Power & Light,
then the utilities should be accorded state action immunity and
summary judgment is appropriate. Menuel v. City of Atlanta, 25
F.3d 990, 994 (11th Cir.1994).
Whether the particular anticompetitive conduct was approved by
the State turns on two factual inquiries. The first concerns
events surrounding the Commission's approval of the territorial
agreements that resulted in Order No. 3799 in 1965. The second
relates to the parties' actions since the 1965 order which
culminated in the Commission's 1989 declaratory statement
interpreting that order.
In its 1965 Order, the Commission expressly approved several
territorial agreements involving FPL and FPC, including the
agreement at issue. The purpose of the agreement was to avoid
duplication of service in areas of the state where there was
significant population growth and where the utilities' service
areas were converging. According to the Commission, unrestrained
competition in those areas would be inefficient and uneconomical
both for the utilities and its customers. The Commission's
approval "allow[ed the utilities] to agree not to serve within
certain areas when requested to do so by a person applying for
electrical service, if that area is already served by another
utility." Neither utility could deviate from the order without
prior approval from the Commission. In re: Proposed Territorial
Agreement Between Florida Power & Light Co. and Florida Power
Corp., No. 7420-EU, Order No. 3799 (Apr. 28, 1965).
The territorial agreements which were the basis of the order
originally were agreed upon by the utilities in 1958 and expanded
in 1962. The 1958 letter agreement said that neither company would
serve or offer to serve a customer outside the service area "shown
on the following maps." Attached were highway maps of Volusia
County and Seminole County with red pencil lines to distinguish
between the respective service areas. The 1962 agreement expanded
the territory to the south and included maps for Orange and Osceola
Counties. No map was submitted specifically for Brevard County.
Brevard County was shown on both maps however, and the border line
ran along the entire Brevard County line.
Attached to the utilities' application to the Commission, and
later incorporated by reference into Order No. 3799, was a
composite map which similarly depicted a red line demarcating the
entire proposed geographic boundary. The line commenced at the
northwestern corner of Volusia County at Lake George, meandered
eastward between Volusia and Seminole Counties, and continued
southward along the border between Orange, Osceola, and Brevard
Counties. The line terminated at the southernmost point of Brevard
County. In public hearings held before the Commission, witnesses
testified that areas to the east or right of the red boundary line
were to be served by FPL, and those to the west or left of the line
would be served by FPC. Brevard County is located in the area east
of the line, in FPL's service area. During the hearing, witnesses
discussed the need for the agreement due to growth in areas between
Volusia and Seminole Counties and between Orange and Osceola
Counties. The witnesses stated there was competition to a lesser,
but still important, degree in the Orange-Brevard County and
Osceola-Brevard County areas. Brevard County was mentioned only
one other time during the hearing. Testimony indicated that the
boundary line had not been extended further to the north because
that area was served by a rural electric cooperative. Similarly,
it was not extended south of Brevard County because those areas
were not developed to the extent the utilities anticipated
competition for the same customers.
Nearly twenty-five years later, during which time Florida
Power & Light solely provided electricity to Brevard County, FPL
asked the Commission to issue a declaratory statement whether the
utilities would violate Order No. 3799 if they complied with
Praxair's request for Florida Power to sell Praxair electricity and
for Florida Power & Light to "wheel" the FPC-generated electricity
to Praxair's plant. Wheeling is a process whereby a utility
transfers power generated by a second utility over the first
utility's power lines. The Commission's statement, issued in
February 1989, concluded that Florida Power & Light's wheeling
power to the Mims plant would be in contravention of its earlier
order.
A logical interpretation of the Commission's 1965 order is
that Brevard County was included. In the 1958 letter agreement,
the territorial boundary was a two-sided, east-west division: the
area east of the line, Volusia County, was allocated to FPL and the
area west of the line, Seminole County was given to FPC. The 1962
agreement took the boundary further south. It is undisputed that
the area west of the boundary, Orange and Osceola Counties, was
allocated to FPC. It is entirely plausible and a reasonable
explanation that the area east of the boundary, which encompassed
only Brevard County, belonged to FPL. Testimony during the public
hearings confirm that view.
Even if it was not clearly intended in the original
agreements to include Brevard County, however, the way the parties
and particularly the Commission have conducted themselves since
that time indicates that Brevard County has been allocated to FPL's
service area. An agency's interpretation of its own regulations
must be given controlling weight unless that interpretation is
plainly erroneous or inconsistent with the regulation. Stinson v.
United States, --- U.S. ----, ----, 113 S. Ct. 1913, 1919, 123
L. Ed. 2d 598 (1993); Florida Gas Transmission v. FERC, 741 F.2d
1307, 1309 (11th Cir.1984); PW Ventures, 533 So. 2d at 281.
Florida Power & Light was already serving Mims and Brevard County
when the agreement was approved. For 30 years since that time, the
Commission and the utilities have treated Mims as part of Florida
Power & Light's service territory. During its 1981 to 1987
comprehensive review of approved territorial agreements, the
Commission developed maps which depicted Brevard County in FPL's
service area. Thereafter, the Commission denied its request to
sell electricity to Praxair at a special rate. Finally, in its
1989 declaratory statement, the Commission specifically found that
"pursuant to the applicable Florida Statutes and case law," Florida
Power & Light could not wheel power to Praxair because it would be
in contravention of the approved territorial agreement. Order No.
20808 at 5. In view of the evidence before it, the Commission
reasonably interpreted the prior agreement to allocate Brevard
County to Florida Power & Light.
Florida's regulatory scheme met the two-pronged Midcal test so
that the utilities are immune from Sherman Act challenges. The
court's denial of Florida Power's and Florida Power & Light's joint
motion for summary judgment is reversed. Praxair's cross-appeal of
the denial of its motion for summary judgment, which is based on
the premise that Brevard County was not included in the approved
territory agreement, is affirmed.
APPEAL: REVERSED.
CROSS-APPEAL: AFFIRMED.