Bona Law Argues to U.S. Supreme Court that State-Action Immunity from Antitrust Should Not Be Immediately Appealable

Bona Law attorneys Jarod Bona and Aaron Gott filed an amicus curiae brief with the U.S. Supreme Court on behalf of the National Federation of Independent Business Small Business Legal Center in Salt River Agricultural Improvement and Power District v. Tesla Energy Operation, Inc. February 20, 2018. You can read our antitrust news alert and commentary about the case at The Antitrust Attorney Blog.

Tesla (formerly SolarCity) sued an Arizona power district under Sherman Act Sections 1 and 2 for excluding competition in the market for residential and commercial electricity by adopting a new pricing structure that was designed to make it cost-prohibitive for electric consumers to install solar roof panels. As a result, Tesla saw new applications for solar installations drop by 96% and could no longer justify competing in that geographic market.

The power district moved to dismiss under the state-action immunity. Under that limited and disfavored doctrine, an antitrust defendant is not liable under the Sherman Act if it shows that it (1) acted pursuant to a clearly articulated policy to displace competition, and (2) that the state actively supervised its anticompetitive conduct. The district court denied the motion to dismiss, and the power district requested leave to file an interlocutory appeal, which was also denied, so the power district appealed that decision to the Ninth Circuit.

The power district’s appeal argued that its denial of state-action immunity should be immediately appealable under the collateral order exception to the final-order rule. Under that rule, federal appellate courts have jurisdiction only to hear final orders, with one small exception: “collateral” orders that (1) conclusively determine the disputed question, (2) concern a question completely separate from the merits, and (3) raise an important public interest value that would be effectively unreviewable if not reviewed immediately. To apply, the whole category of orders must meet all three requirements—meaning every state-action immunity denial would have to pass the test.

The Federal Court of Appeals for the Ninth Circuit affirmed the district court, holding that a denial of the state-action immunity does not meet the third requirement: the state-action immunity is merely an exemption from liability, not an immunity from suit like sovereign immunity or qualified immunity for public officials.

The power district petitioned the U.S. Supreme Court for a writ of certiori, arguing that it should review the case because of a disagreement among the federal appeals courts—the Eleventh and Fifth Circuits had held that state-action immunity denials were immediately appealable in cases from 1986 and 1996, respectively. The Supreme Court granted the writ.

The NFIB Small Business Center amicus curiae brief focuses on a different issue than those asserted by the district court, the Ninth Circuit, and Tesla (although it agrees with those points as well): the power district, like many antitrust defendants who assert the state-action immunity, is a commercial market participant with its own self-interests whose litigation inconvenience does not implicate an important value. In fact, allowing them to pause antitrust litigation with a virtually automatic year-long stay during the interlocutory appeal would imperil the fundamental values underlying the state-action immunity by delaying and deterring antitrust enforcement.

The brief makes the following key points:

  • The state-action immunity is a limited and disfavored exemption that is a careful balance recognizing the supremacy of federal antitrust laws while respecting the states’ residual power to regulate. The collateral order analysis necessarily must consider whether interlocutory review serves that singular value.
  • The state-action immunity respects state power to regulate as an act of government, but it should not exempt anticompetitive conduct by a commercial market participant, whether public or private. All market participants are inherently self-interested. The state-action immunity test is designed to ensure they cannot abuse state law authority for their own interests and to the detriment of consumers and competition.
  • Allowing interlocutory appeals of state-action immunity would require the federal antitrust laws to yield in the face of doubtful and even dubious claims of immunity by self-interested market participants. The collateral order doctrine should not elevate these private interests above the congressional policy of rigorous antitrust enforcement.
  • Interlocutory review would imperil the fundamental value of federal antitrust policy by delaying and deterring private antitrust litigation that Congress relies upon for antitrust enforcement. It would substantially increase the duration and cost of antitrust litigation, during which some competitors—especially small businesses—will either go out of business or run out of money. Only large, well-funded companies like Tesla will sue to enforce the antitrust laws.

You can read the full brief here.

Jarod Bona previously argued for a market-participant exception to the state-action immunity in an amicus curiae brief on behalf of NFIB Small Business Legal Center before the U.S. Supreme Court in FTC v. Phoebe Putney Health System, Inc. and has also published a law review article on the subject with Luke Wake of NFIB Small Business Legal Center.

Oral argument at the Supreme Court is set for March 19. You can view briefs submitted in the case, read commentary, and track new developments at SCOTUSblog.

You can read the NFIB Small Business Legal Center article about this case here.

Bona Law attorneys have substantial experience with both appellate and antitrust litigation. If you are interested in consulting with us for an appeal or antitrust issue, please contact us in either New York or California.