Appeal from the United States District Court for the District of South Carolina, at Columbia. Matthew J. Perry, Jr., United States District Judge. CA-82-2872.
Sprouse and Wilkins, Circuit Judges, and Haden, Chief United States District Judge for the Southern District of West Virginia, sitting by designation.
The underlying action involves a claim by a billboard company that a rival billboard company and a city government successfully conspired to keep it out of the city. Suit was initiated in 1982 by appellant Omni Outdoor Advertising, Inc. (Omni) against the alleged conspirators, Columbia Outdoor Advertising, Inc. (COA), J. Willis Cantey, and the City of Columbia, South Carolina (City), for violation of sections 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1-2, as well as pendent state claims. Omni sought treble damages under section 4 of the Clayton Act, 15 U.S.C. § 15, and damages under various state laws, including the South Carolina Unfair Trade Practice Act (UTPA), S.C.Code Ann. § 39-3-30 (Law. Co-op. 1985). In addition to monetary damages, Omni sought injunctive relief, costs and attorneys' fees.
The case went to trial on an issue of Sherman Act section 1 restraint of trade, multiple issues of section 2 monopolization and an issue of unfair trade practices under the South Carolina UTPA. The jury, after a three-week trial in 1986, returned a verdict in favor of Omni, finding both the City of Columbia and COA liable for violations of sections 1 and 2 of the Sherman Act and finding COA had violated the South Carolina Unfair Trade Practices Act.
The district court awarded damages against COA in the amounts of $600,000 for violation of section 1 of the Sherman Act, $400,000 for violation of section 2 of the Sherman Act, and $11,000 for violation of the South Carolina Unfair Trade Practices Act. Judgment was entered for Omni on February 7, 1986, for those amounts. Because the district court had earlier granted the City a Local Government Antitrust Act, 15 U.S.C. §§ 34-36, exclusion from damages liability, the verdict against the City awarded no monetary damages. The trial court did not then act on Omni's motion for injunctive relief against the City. The defendants timely moved for a judgment notwithstanding the verdict or for a new trial. Some two-and-a-half years later, in November 1988, the district court granted the City's and COA's motions for judgment notwithstanding the verdict and denied Omni's motions for injunctive relief and for an order trebling the damages and attorneys' fees. Omni now appeals the grant of the JNOV and the denial of its motions.
We consider the evidence bearing on the resolution of the issues on appeal in a light most favorable to support the jury verdict. Foster v. Tandy Corp., 828 F.2d 1052, 1055 (4th Cir. 1987). Our expression of the evidence is, of course, shaped by the requirements of that rule.
For a period of more than forty years, COA had conducted its outdoor advertising business in the Columbia market.*fn1 It enjoyed a dominant position, owning more than ninety-five percent of the off-premises billboards in the area. Omni first tried to enter the outdoor advertising market in Columbia in 1981. It surveyed the Columbia market and determined that, COA's dominant position notwithstanding, local regulations and market gaps favored Omni's entry into the market. When informed of Omni's entry, officials of COA became alarmed and attempted to insure continuation of COA's dominant position. They investigated Omni's background of performance in other communities. COA's chairman traveled to other communities and acquired and studied copies of ordinances from other cities that imposed restrictions on outdoor advertising.
Omni's evidence showed the personal and political influence of COA's owners with state and city officials, COA threats to use that influence to block Omni from the Columbia billboard market, private meetings between COA owners and city officials, and open hostility expressed towards Omni by city officials. Representatives of both Omni and COA met with Columbia administrators and attended meetings of the Columbia City Council, presenting their views concerning provisions of the billboard ordinances then under consideration.
On March 24, 1982, the City Council passed an ordinance which placed a moratorium on all billboard construction unless the Council expressly consented to construction, effectively blocking Omni from entering the market. A state court declared that ordinance unconstitutional. The Council passed a new ordinance on September 22, 1982, which favored COA's dominant position in the Columbia market and restricted Omni's ability to compete.
Omni, at trial and on this appeal, complained that the ordinances injured it and benefited COA by preventing Omni from constructing billboards in areas where COA already had boards. Omni alleged that COA and officials of the City of Columbia brought about passage of the ordinance in furtherance of a conspiracy to "restrain, hinder and suppress competition" between Omni and COA in the marketing of off-premises outdoor advertising space in interstate commerce. Omni also alleged that the defendants conspired to maintain a monopoly in the relevant market area to the detriment of competition, and that the City and COA did monopolize.
The district court granted the City judgment notwithstanding the verdict on the ground that the City was entitled to immunity from Sherman Act liability as established for states by the Supreme Court's decision in Parker v. Brown, 317 U.S. 341, 87 L. Ed. 315, 63 S. Ct. 307 (1943) and applied to municipalities by Parker's progeny, e.g., Community Communications Co. v. City of Boulder, 455 U.S. 40, 70 L. Ed. 2d 810, 102 S. Ct. 835 (1982); Town of Hallie v. City of Eau Claire, 471 U.S. 34, 85 L. Ed. 2d 24, 105 S. Ct. 1713 (1985).
Omni, on appeal, contends that the City is not entitled to Parker immunity because South Carolina's authorization for the City's billboard regulation did not extend to utilizing such regulation for anticompetitive purposes. Omni contends alternatively that the City is not entitled to Parker immunity because it was not acting pursuant to statutory purpose (i.e., for the public good) but solely in conspiracy with COA to drive Omni out of the billboard business and thereby restrain competition in the industry. The City, of course, disagrees with both of Omni's contentions. It argues that it is protected by Parker's "state action" exemption, that there is no "conspirator" exception to Parker immunity, and that even if there were, the evidence in this case was not sufficient to have submitted that issue to the jury.
In Parker, the Supreme Court found California's anticompetitive agricultural marketing program immune from scrutiny under the Sherman Act, holding that Congress did not intend to include official state actions in the Sherman Act's prohibitory ambit. Parker, 317 U.S. at 350-52. In subsequent decisions, however, the Court concluded that municipal action was not necessarily the equivalent of state action for the purposes of the Parker doctrine and developed criteria for determining when municipalities come under the doctrine's protective umbrella. City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 55 L. Ed. 2d 364, 98 S. Ct. 1123 (1978), Community Communications Co. v. City of Boulder, 455 U.S. 40, 70 L. Ed. 2d 810, 102 S. Ct. 835 (1982); and Town of Hallie v. City of Eau Claire, 471 U.S. 34, 85 L. Ed. 2d 24, 105 S. Ct. 1713 (1985). See generally Cantor v. Detroit Edison Co., 428 U.S. 579, 49 L. Ed. 2d 1141, 96 S. Ct. 3110 (1976); California Retail Liquor Dealers Ass'n v. Midcal Aluminum, 445 U.S. 97, 63 L. Ed. 2d 233, 100 S. Ct. 937 (1980).
The rules governing the initial determination of whether a municipality was engaged in state actions for Parker purposes have crystallized in Town of Hallie. There, the Supreme Court held that the defendant City of Eau Claire was protected by the Parker doctrine because its conduct was adequately authorized by state policy even though the state did not actively supervise implementation of the policy. The plaintiff town alleged that the city used its monopoly over sewage treatment to gain an additional unlawful monopoly over sewage collection and transportation services in adjacent unincorporated towns. Wisconsin statutes granted authority to cities to construct, add to, alter, and repair sewage systems, and this authority included the power to "describe with reasonable particularity the district to be [served]." 471 U.S. at 41. The statutes, moreover, granted cities governing public utilities the right to fix by ordinance "the limits of such service in unincorporated areas" and stated that these municipal utilities "shall have no obligation to serve beyond the area so delineated." Id. These authorizations to regulate, the Court concluded, were sufficient to satisfy the clear articulation requirement of the state action test. Id. at 44.
Municipalities . . . are not beyond the reach of the antitrust laws by virtue of their status because they are not themselves sovereign. Rather, to obtain exemption, municipalities must demonstrate that their anticompetitive activities were authorized by the State pursuant to state policy to displace competition with regulation or monopoly public service.
[The] municipality need not be able to point to a specific, detailed legislative authorization in order to assert a successful Parker defense to an antitrust suit. Rather, . . . it would be sufficient to obtain Parker immunity for a municipality to show that it acted pursuant to a clearly articulated and affirmatively expressed state policy. . . .
Id. at 38-39 (citations and internal quotes and ellipses omitted).
To avail itself of the Parker exemption then, a municipality must show only that it is adhering to a state policy to replace competition with regulation. It need not demonstrate that it acts under legislative compulsion or that the state actively supervises the involved activity. Neither need it show that the state expressly authorizes it to engage in anticompetitive conduct so long as anticompetitive effects are a foreseeable result of the authorized actions. Id. at 43-47.
We look therefore to the authorizing South Carolina statutes to determine if the City regulated billboards pursuant to a "clearly articulated and affirmatively expressed state policy" which "clearly [contemplates]" that the City may effect anticompetitive conduct, and conclude that Town of Hallie's requirements are satisfied. South Carolina's expression of policy regarding the City's object of regulation is less focused and not as clearly articulated as that in Town of Hallie, but more so than that in the Home Rule Amendment in Boulder. The only such statutes effective at the time of the City's actions were the general zoning statutes, which did not refer specifically to billboards but did include regulation of buildings and structures within their ambit.*fn2 Billboards are, of course, a common feature of urban life, and we think it a proper assumption that the South Carolina legislature envisioned their regulation as a "structure" and as a "use of land." Proceeding from that assumption, our analysis leads us to conclude that the statutory language discussing the grant of power and setting out its purposes is evidence of the requisite legislative policy to authorize municipalities freely to regulate the billboard industry in their area. Cf. Pendleton Constr. Corp. v. Rockbridge County, 652 F. Supp. 312 (W.D.Va. 1987), aff'd on its reasoning, 837 F.2d 178 (4th Cir. 1988); Racetrac Petroleum, Inc. v. Prince George's County, 601 F. Supp. 892, 906-910 (D.Md. 1985), aff'd, 786 F.2d 202, 318 (4th Cir. 1986).
The second prong of the Town of Hallie test requires that the policy "clearly contemplate" that the City may effect anticompetitive conduct. We dealt leniently with the question of legislative contemplation of an anticompetitive effect in Coastal Neuro-Psychiatric Assocs. v. Onslow Memorial Hosp., 795 F.2d 340 (4th Cir. 1986), which involved local restrictions on hospital staff privileges pursuant to state statute, stating:
[The] restrictions . . . may reduce the supply or variety of medical services to the surrounding community. The North Carolina legislature must have foreseen this anticompetitive consequence and decided that the regulatory benefits conferred by the statute simply outweighed it.
Id. at 342. We think that authority to regulate billboards, like authority to regulate hospital staff privileges, makes an anticompetitive effect of regulation substantially foreseeable and conclude that the second prong is satisfied. That, however, is not the end of our inquiry.
Denial of Immunity to Municipalities
By Conspiracy Exception to Parker
Although we conclude that the authorization granted by the State of South Carolina to its municipalities to regulate the billboard industry normally would be sufficient to clothe the municipalities with Parker immunity in exercising that authority, we agree with Omni's contention that the Parker exemption is unavailable here. Implicit in the jury verdict was a finding that the City was not acting pursuant to the direction or purposes of the South Carolina statutes but conspired solely to further COA's commercial purposes to the detriment of competition in the billboard industry.
In Parker, the Supreme Court enunciated its oft-quoted dictum, "[We] have no question [in this case] of the state or its municipality becoming a participant in a private agreement or combination by others for restraint of trade." 317 U.S. at 351-52. With specific reference to the facts of Parker, the Court stated:
The state in adopting and enforcing the . . . program made no contract or agreement and entered into no conspiracy in restraint of trade or to establish monopoly but, as sovereign, imposed the restraint as an act of government which the Sherman Act did not undertake to prohibit.
In Westborough Mall, Inc. v. City of Cape Girardeau, 693 F.2d 733 (8th Cir. 1982), cert. denied, 461 U.S. 945, 77 L. Ed. 2d 1303, 103 S. Ct. 2122 (1983), and Whitworth v. Perkins, 559 F.2d 378 (5th Cir. 1977), vacated, 435 U.S. 992, 56 L. Ed. 2d 81, 98 S. Ct. 1642, aff'd on rehearing, 576 F.2d 696 (1978), the courts concluded that Parker immunity was unavailable to municipalities that acted solely to further the anticompetitive commercial purposes of private parties. In Girardeau, the court said:
We also disagree with the district court's holding that the state action exemption established in Parker v. Brown precludes any liability by the defendants as a matter of law. Parker immunity is intended to exempt from the antitrust laws state actions that are anticompetitive in nature. Where a restraint upon trade or monopolization is the result of valid governmental action no violation of the Sherman Act can be made out. The Parker doctrine applies to municipal action in furtherance or implementation of clearly articulated and affirmatively expressed state policy. Even if zoning in general can be characterized as state action, a conspiracy to thwart normal zoning procedures and to directly injure the plaintiffs by illegally depriving them of their property is not in furtherance of any clearly articulated state policy.
Id. at 746 (citations and internal quotation marks, brackets, and ellipses omitted).
Similarly, in Whitworth, the Fifth Circuit said:
The mere presence of the zoning ordinance does not necessarily insulate the defendants from antitrust liability where, as here, the plaintiff asserts that the enactment of the ordinance was itself a part of the alleged conspiracy to restrain trade.
Plaintiff clearly alleges that the defendants enacted the ordinance for the precise purpose of excluding him from the liquor business in furtherance of their conspiracy. . . .
[This] case appears to fall precisely within a category that the Parker Court specifically refrained from dealing with. As the Supreme Court put it, that case involved "no question of the state or its municipality becoming a participant in a private agreement or combination by others for restraint of trade." That is the question here.
It is not every governmental act that points a path to an antitrust shelter. We reject the facile conclusion that action by any public official automatically confers exemption. In Asheville Tobacco Board of Trade, Inc. v. FTC, 4 Cir. 1959, 263 F.2d 502, 509, the court stated: ". . . such action must be state action, not individual action masquerading as state action. A state can neither authorize individuals to perform acts which violate the antitrust laws nor declare that such action is lawful."
559 F.2d at 379-81 (some citations, internal quotation marks and brackets omitted); see also Affiliated Capital Corp. v. City of Houston, 735 F.2d 1555 (5th Cir. 1984) (en banc), cert. denied, 474 U.S. 1053, 88 L. Ed. 2d 766, 106 S. Ct. 788 (1986). But see Boone v. Redevelopment Agency of City of San Jose, 841 F.2d 886 (9th Cir.), cert. denied, 488 U.S. 965, 109 S. Ct. 489, 102 L. Ed. 2d 526 (1988).
In view of the overriding economic thrust of Sherman Act concerns, it is tempting to consider all political activity as beyond the Act's purpose or reach. Certainly, Congress did not contemplate imposing economic oversight of political abuses per se. Yet the language of the Sherman Act is broad enough to include the proscription of actions where politicians or political entities are involved as conspirators. Moreover, we are constrained by established interpretation from excluding from Sherman Act consideration all conspiracies which have some political coloration. If it were otherwise, the Supreme Court in post-Parker decisions would have given municipalities the same blanket protection it had awarded states in Parker. Even so, we must be very careful in these cases to assure that any political abuse has so completely metamorphosed into an economic abuse that it properly can be regulated by application of Sherman Act legal-economic procedures. In view of the jury verdict, we think that is what is involved here.
We do not have mere allegations of economic improprieties. We deal with a jury verdict which established the alleged improper acts. So viewed, the City's actions must be scrutinized under Sherman Act principles. Clearly this would not preclude permissible and even desirable private meetings by concerned private persons with legislators and public administrators. See Eastern R.R. Presidents Conference v. Noerr Motor Freight, 365 U.S. 127, 137-41, 5 L. Ed. 2d 464, 81 S. Ct. 523 (1961); California Motor Transport v. Trucking Unlimited, 404 U.S. 508, 510-11, 30 L. Ed. 2d 642, 92 S. Ct. 609 (1972). What is not permissible in the Parker immunity context, however, is that such private contacts and agreements relate not to the purpose of attaining governmental action but solely to forcing competitors from a particular market. We must assume that is what the jury found in this case.
Evidence Concerning Conspiracy
The City argues, however, that there was not sufficient evidence of a conspiracy to have submitted that question to a jury. The evidence, viewed with appropriate deference to the jury verdict, reflects the following pattern and sequence of events.
COA was half-owned by J. Willis Cantey from 1947 to 1974 and has been fully owned by the Cantey family since 1974. James W. Cantey, Jr., is chief executive officer. J. Willis Cantey was a life-long personal friend of Columbia's mayor, Kirkman Finlay. The Cantey family always had an excellent relationship with Mayor Finlay and the City Council, all four of whom were very good friends of the Canteys. Mayor Finlay viewed his friendship with Cantey as a political asset.
J. Willis Cantey apparently viewed his friendship with the Mayor and councilmen as a business asset. In December 1980, he wrote to Robert O. Naegele, another outdoor advertising merchant who wanted to purchase COA and who had suggested that COA upgrade its plant and seek certain ordinances:
The Mayor of Columbia and the four councilmen are very good friends of ours. I discussed your suggestion with the Mayor about reworking our existing sign ordinances and he promptly said, "no problem". My son Jim has begun a study to determine exactly what restrictive measures we should request.
Cantey testified that he sought these assurances from the Mayor regarding the desired ordinances in order to keep Naegele out of Columbia.
In January 1982, after Omni had entered the market, J. Willis Cantey again discussed billboards and ordinances with the Mayor. Then, on February 10, 1982, James W. Cantey, Jr., wrote to William Dooner, Omni's owner:
Saturday night my father and mother had dinner with the Mayor of Columbia and his wife. They are life long friends and the Mayor expressed concern as to the increasing number of billboards in the Columbia area. We have always had an excellent relationship with the Mayor and Council and he was speaking off the record. It has always been our policy to be civic minded but low key trying to prevent any public opposition to our business. At some point, I think City Council will be forced to place some type of stringent restrictions on our industry.
The City began the process of formulating a comprehensive ordinance. In the meantime, it moved quickly to enact a moratorium that would remain in effect until the comprehensive ordinance was enacted. On March 10, 1982, an ordinance first drafted earlier that day was given its first reading and was passed by the Council. It banned construction of new billboards in certain specified downtown areas without the express prior permission of City Council. On the previous day, March 9, COA had obtained permits for billboards in locations covered by the March 10 ordinance. The City Manager testified that it was unusual to adopt an ordinance prior to having the City Attorney draft it, and admitted that the Council's action was a "drastic step."
On March 23, a meeting was scheduled between the Mayor and J. Willis Cantey. The meeting was apparently arranged at the last minute, as it was handwritten in the Mayor's handwriting on the Mayor's otherwise-typewritten schedule. On the following day, March 24, the date of the second reading of the ordinance, the City Council altered the amendment of Columbia's Off Premises Commercial Advertising ordinance, with the result that it restricted competition by banning construction of billboards anywhere in the city without the Council's express consent. That provision froze the status quo, COA's dominant position in the market. After March 10 but before March 24, COA had obtained billboard permits for locations that would be included in the March 24 ban. COA contends these merely represented prudent preemptive steps. Omni argues that these actions, like those that preceded the March 10 enactment, permit an inference either of advance knowledge or of confidence that the City would act to close the door once COA had topped off its needs.
In any event, the evidence presented to the jury was probative to some degree on the issue of conspiracy. The Council passed the moratorium despite the City Attorney's earlier advice that it was unconstitutional. When Omni brought suit in state court to nullify the ordinance, the Council instructed the City Attorney to defend the suit and effect delay until a new ordinance could be enacted. On June 22, 1982, that action was heard in state court. On July 14 the Council requested that the City Manager prepare a new ordinance as quickly as possible. A preliminary version, which was reviewed by the Mayor, was prepared on July 20. In the meantime, on July 21, having received word that the state court was going to rule against the city, the Council gave first reading to a stopgap ordinance that simply banned new billboards. It would have had the effect of terminating Omni's efforts to obtain sites and erect billboards. The ordinance was not approved on second reading. On July 23, the state court declared the original March 24 ordinance unconstitutional.
The new billboard control ordinance prepared by the City Manager evolved over time. The final version was introduced on September 8, 1982 and finally enacted on September 22. It provided, inter alia, for a minimum spacing of 1,000 feet between billboards on the same side of a street and 500 feet between billboards on opposite sides of a street.*fn3 The effect of this provision, given the existing COA billboards, was to block Omni from large areas of the city.
Before the new ordinance was introduced and enacted, COA submitted a proposed ordinance to the city that specified size of billboards and same-side-of-the street and opposite-side-of-the street distances between billboards in different areas of the city. The first draft of the ordinance prepared by the City tracked these provisions exactly. It and subsequent early versions of the new ordinance provided for 750-foot spacing in some areas of the City. Earlier, on October 5, 1981, in a conversation intended to convince Omni to stay out of Columbia, J. Willis Cantey had asked Omni's Dooner, "Do you think I should talk to my good friend, the Mayor, and get 1,000 foot spacing?" In a March 17, 1982, meeting between Omni, COA, and a representative of the City, the City representative had suggested 750-foot spacing. At one point during that meeting, J. Willis Cantey, irate and upset, stated that he wanted 1,000-foot spacing and was going to get it from the City Council. In the final version, the 750-foot spacing became 1,000 feet.
Cantey Heath of COA, while denying that he expected any favors, testified that COA gave free advertisement to politicians. With reference to one politician at the state level, Heath testified that, having made a friend by providing free billboard space, he would remind that friend of the free advertisement when asking him for help; with reference to another, he testified that discounted advertising rates were provided with the expectation of receiving favors in return.
COA had given the Mayor six free billboards during his first race for mayor in 1978. At trial, immediately after J. Willis Cantey had denied knowledge of those gifts to the Mayor, he was asked about billing some politicians more than the standard rates:
Q. That's not very fair, charging one [not necessarily the Mayor] nothing and other ones more ...