Aaron Gott Argues to Ninth Circuit: State Action Immunity Inapplicable in Ambulance Antitrust Cases Against California Cities

On August 7, 2018, Bona Law PC attorney Aaron Gott argued to the U.S. Court of Appeals for the Ninth Circuit that the state action immunity doctrine does not shield the California municipalities and a private ambulance provider who monopolized a dozen markets for ambulance services.

You can read about the antitrust Complaint that Bona Law filed here (which the trial court dismissed) and you can read about our Ninth Circuit briefing in the case here.

Bona Law PC represents AmeriCare MedServices, Inc. in twelve antitrust cases against Orange County, California municipalities for monopolizing the market for prehospital emergency medical services. The cases were originally filed in the U.S. District Court for the Central District of California, where the cities and CARE moved to dismiss, arguing that their anticompetitive conduct was shielded from liability under the state-action immunity. Their argument turned on a provision of 40-year-old California law that allows certain eligible cities to continue to provide EMS services during a transition to a county- and state-coordinated EMS system. But the state agency administering the scheme had specifically determined these cities were not among those cities authorized to provide service under the statute. It had also issued administrative guidance stating that the provision allowed eligible cities to continue to provide service, not to exclude competing providers. Nevertheless, the district court agreed with the cities, holding that even if the cities in question were not eligible under the statute, they were still entitled to immunity under a deferential standard.

AmeriCare appealed the district court’s decision to the Ninth Circuit. AmeriCare argued in its briefing that the state-action immunity is not so broad: the state must clearly articulate a policy to displace competition in the relevant markets. The statute itself did not clearly articulate a policy to displace competition in the geographic markets in question, and ongoing state regulatory scheme unambiguously prohibited the defendants’ actions. Moreover, AmeriCare argued, the cities were acting as commercial market participants rather than government regulators and thus were required to also show the second step of the state-action immunity test: active supervision by the state itself. Finally, it urged the court to recognize a market participant exception to the state-action immunity because the immunity is only concerned with protecting state regulatory conduct, not proprietary conduct.

In a rare move, the State of California’s Office of the Attorney General filed an amicus curiae brief on behalf of the California Emergency Medical Services Authority in support of AmeriCare. It argued the cities were not authorized to displace competition but instead ignored the state’s policy and its consistent regulatory determinations that the geographic markets in question were to be open to competition.

During oral argument, the panel focused its questions to Mr. Gott on whether the federal courts should decide whether cities are in compliance with state law—a key component of the district court’s reasoning. Mr. Gott argued that the question is not whether the cities complied with state law, but whether state law authorized them to displace competition in the first place. That is, only a federal court can decide whether the state has clearly articulated a policy that allowed the defendants to displace competition in the relevant markets. Moreover, Mr. Gott explained that the court should look to the entire state regulatory policy rather than focus on one statutory provision; here, the state’s ongoing regulation clearly shows the cities were not authorized to displace competition.

Mr. Gott also pointed out why active supervision is necessary despite involving municipalities: the state-action immunity exists only to protect the state regulatory interest. Here, the state has made clear—both through its ongoing regulation and in its intervention at the Ninth Circuit—that it did not intend for the cities to displace competition. In other words, it has actively supervised the scheme and disapproved of the anticompetitive conduct. That result is incongruent with the fundamental principle that the state-action immunity is narrowly construed such that the antitrust laws yield only where the state regulatory interest actually conflicts with the federal interest in antitrust enforcement.

Mr. Gott agreed to split his allotted argument time with the California Attorney General’s Office, which focused primarily on explaining the state’s true intent: a statewide, coordinated EMS scheme that relies upon competition under most circumstances, rather than a disjointed approach that allows cities to capture monopoly profits at the expense of responsive and affordable emergency transport for consumers.

The case is AmeriCare MedServices, Inc. v. City of Anaheim et. al, No. 17-55565. You can watch a video of the argument here.