United States: When Are Universities And Executive Agencies "State Actors" For Antitrust Immunity?

More than fifty years ago, the Supreme Court formalized the "state-action antitrust immunity" doctrine ─ a judge-made rule that certain state governmental conduct is immune from challenge under the federal antitrust laws. Since then, the courts have had a love-hate relationship with "Parker" immunity. The difficulties of that relationship are particularly important to public colleges and universities, which face antitrust claims in a variety of contexts, from trademark licensing to bar exam preparation to "no poaching" arrangements.

A little background illustrates the problem.

On the one hand, "Parker" immunity is grounded in principles of federalism and the recognition that "nothing in the language of the Sherman Act . . . suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature."[1] Thus, otherwise anticompetitive actions are deemed "immune" from challenge under the antitrust laws when those actions constitute "an act of government."[2] The enactment of legislation that mandates an anticompetitive restraint, for example, is ipso facto immune from antitrust scrutiny.[3]

On the other hand, the Supreme Court also is driven by the view that the "[a]ntitrust laws in general, and the Sherman Act in particular, are the Magna Carta of free enterprise."[4] As such, "state action immunity is disfavored"[5] and a state cannot confer immunity on non-sovereign actors by "authorizing them to violate it, or by declaring that their action is lawful."[6]

The easiest case for state-action immunity is when a state legislature (or a court acting in a legislative capacity[7]) enacts legislation that, on its face, specifically and directly seeks to restrain competition. Thus, in Parker, the Court granted immunity to a state-mandated "prorate program" that limited the sale of raisins by individual farmers to prop up prices.[8] State legislative schemes are thus ipso facto immune from antitrust challenge.[9]

Where the courts have struggled is how to define when officials, agencies, or entities other than a state legislature (or courts acting in a "legislative" capacity) are "acting as a sovereign" and entitled to state-action immunity. The principal concern is to prevent the "national policy in favor of competition" from being subverted by "private price-fixing arrangement[s]" covered in the "gauzy cloak of state involvement"[10] while still preserving the categorical immunity for true state action.

In a series of cases dealing with private actors or "substate" governments, the Court has held that immunity requires that the challenged restraint be "clearly articulated and affirmatively expressed as state policy" and, in the case of private parties, "'actively supervised' by the State itself."[11] And in 2015, the Supreme Court stepped in once again, holding that a legislatively-created board "controlled by active market participants" should be deemed a "non-sovereign actor" for purposes of Parker immunity.[12] The Court stated that the "governmental character" of such an entity (denominated a "state agency" by the legislature) did not necessarily render the agency a "sovereign" entitled ipso facto to Parker immunity.[13] But that still begs the question of when state executive agencies—such as state universities—are treated as "the State" and entitled to Parker immunity ipso facto. Some lower court decisions held or suggested that state-level executive agencies, including universities, are immune,[14] although at least one argued that the Supreme Court's decisions on local government apply.[15]

Against this background, the District Court for the Middle District of North Carolina recently denied a motion by the University of North Carolina seeking dismissal of antitrust claims on the ground of Parker immunity.[16] In Seaman v. Duke Univ., the plaintiff alleged that officials at UNC and Duke unlawfully agreed not to "poach" each other's faculty. UNC moved to dismiss, arguing that, as a matter of North Carolina law, it is a constitutional, executive-level agency and, therefore, "the State" for purposes of Parker immunity.[17] Plaintiffs countered that ipso facto immunity applies only to legislative action and that all other state actors must satisfy the more factually intensive scrutiny under Cal. Retail Liquor Dealers.

The District Court held, without any detailed explanation, that UNC's status as a "constitutionally-established entity" was not enough to give rise to ipso facto immunity.[18] Confusingly, it went on to hold that "the question of ipso facto immunity" required "development of a factual record" and, therefore, could be renewed on summary judgment.[19]

The Court did not explain what "facts" could be needed for an ipso facto status. And the suggestion may itself reflect the confusion in the case law as to when a state agency is somehow not "sovereign." Indeed, the Court in Seaman acknowledged that "there is a substantial ground for difference of opinion" on the "controlling question" of how UNC's constitutional status affects its potential liability under the Sherman Act and, therefore, it certified the question to the Fourth Circuit.[20] The Circuit, however, declined to take the interlocutory appeal.[21]

As things stand now, UNC may be subject to lengthy, expensive, and potentially unnecessary antitrust litigation. As other courts have noted, the burden of antitrust litigation is enormous and can have its own harmful, chilling effect on lawful conduct.[22] It remains to be seen whether the District Court will ameliorate the potential burden by, for example, limiting initial discovery to whatever "facts" are deemed relevant to a renewed analysis of Parker immunity on summary judgment.


[1] Parker v. Brown, 117 U.S. 341, 351 (1943).

[2] Id. at 350. Although discussed as an "immunity," there is no affirmative carve-out for state action. Rather, the "immunity" arises from the statutory language, which the Court construed not to reach state governmental action.

[3] Id.

[4] U.S. v. Topco Assocs., Inc., 405 U.S. 596, 610 (1972).

[5] FTC v. Phoebe Putney Health Sys., Inc., 133 S.Ct. 1003, 1010 (2013).

[6] Parker, 117 U.S. at 351.

[7] Bates v. State Bar of Arizona, 433 U.S. 350 (1977).

[8] Id. at 350.

[9] Hoover v. Ronwin, 466 U.S. 558, 567-68 (1984).

[10] Cal. Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 106 (1980).

[11] Id. at 105; FTC v. Phoebe Putney Health Sys., Inc., 133 S.Ct. 1003, 1011 (2013).

[12] N. Carolina State Bd. of Dental Examiners v. F.T.C., 135 S.Ct. 1101, 1110 (2015).

[13] Id. at 1111.

[14] E.g., Saenz v. Univ. Interscholastic League, 487 F.2d 1026, 1027 (5th Cir. 1973); Neo Gen Screening, Inc. v. New England Newborn Screening Program, 187 F.3d 24, 29 (1st Cir.1999); Charley's Taxi Radio Dispatch Corp. v. SIDA of Hawaii, Inc., 810 F.2d 869, 876 (9th Cir.1987); Deak–Perera Hawaii, Inc. v. Dep't of Transp., 745 F.2d 1281, 1283 (9th Cir.1984); S. Carolina State Bd. of Dentistry v. F.T.C., 455 F.3d 436, 442 n. 6 (4th Cir.2006); Pharm. & Diagnostic Servs., Inc. v. Univ. of Utah, 801 F.Supp. 508, 513 (D .Utah 1990); Bd. of Governors of Univ. of N. Carolina v. Helpingstine, 714 F.Supp. 167, 176 (M.D.N.C.1989).

[15] Builders Flooring Connection, LLC v. Brown Chambless Architects, Inc. 2014 WL 197679, at *4 (M.D. Ala. 2014).

[16] Seaman v. Duke Univ., 2016 WL 1043473 (2016).

[17] It also argued, under Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365 (1991) that it did not lose that immunity by allegedly conspiring with Duke, a non-state actor. That case holds that there is no "conspiracy" exception to Parker immunity. Id. at 382-84.

[18] Id. at *1.

[19] Id.

[20] Id.

[21] Roper v. Seaman, 16-182 (4th Cir.), Dkt. No. 14 (June 3, 2016).

[22] Race Tires of Am., Inc. v. Hoosier Racing Tires Corp., 614 F.3d 57, 73 (3d Cir. 2010).

When Are Universities And Executive Agencies "State Actors" For Antitrust Immunity?

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