Shames v. California Travel & Tourism Commission

607 F.3d 611, 2010 U.S. App. LEXIS 11597, 2010 WL 2267107
CourtCourt of Appeals for the Ninth Circuit
DecidedJune 8, 2010
DocketNo. 08-56750
StatusPublished
Cited by2 cases

This text of 607 F.3d 611 (Shames v. California Travel & Tourism Commission) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Shames v. California Travel & Tourism Commission, 607 F.3d 611, 2010 U.S. App. LEXIS 11597, 2010 WL 2267107 (9th Cir. 2010).

Opinion

MICHAEL DALY HAWKINS, Senior Circuit Judge:

Plaintiffs Michael Shames and Gary Gramkow (“Plaintiffs”) appeal the dismissal of their claims against the California Travel and Tourism Commission (“CTTC”) alleging the CTTC engaged in antitrust price-fixing in violation of the Sherman Act § 1, 15 U.S.C. § 1, and improper meeting practices in violation of California’s Bagley-Keene Open Meeting Act, Cal. Gov’t Code §§ 11120-11132. The district court held the CTTC was shielded from antitrust liability under the “state action immunity” doctrine, and declined to exercise supplemental jurisdiction over the Bagley-Keene claim. We affirm.

FACTS AND PROCEDURAL HISTORY

The CTTC is a “nonprofit mutual benefit corporation” created by state legislation in order to expand and develop California’s tourism industry. Cal. Gov’t Code § 13995.40(a). The CTTC is governed by thirty-seven commissioners, who simultaneously serve as directors. § 13995.40(a)-[613]*613(b).1 The Secretary of the Business, Transportation and Housing Agency (“Secretary”) chairs the CTTC. §§ 13995.20(k), 13995.40(b)(1). Twelve commissioners are appointed by the governor, while the remaining twenty-four are elected by the tourism industry itself.2 § 13995.40(b)(2)-(3).

In 2006, the passenger rental car industry proposed changes to state bill A.B. 2592 which were subsequently enacted. See Cal. Civil Code § 1936.01. Under the bill, the passenger rental car industry became the fifth tourism industry category under the CTTC scheme and agreed to pay a high assessment fee, greatly increasing the CTTC’s budget. In exchange for this increased funding, the passenger rental car industry was allowed to “unbundle” fees charged to customers and itemize such fees separately from the base rental rate. Significantly, the adopted changes allowed the companies to “pass on some or all of the assessment to customers.” § 13995.65(f).

Plaintiffs allege this led to the imposition of two specific fees on rental car customers. First, pursuant to an agreement between the passenger rental car industry and the CTTC, a 2.5% tourism assessment fee was added to the cost of a car rental which, in turn, helped fund the CTTC. Plaintiffs allege that the CTTC then colluded with the passenger rental car industry, fixing rental car prices by passing on the 2.5% tourism assessment fee to customers. Second, the passenger rental car industry “unbundled” the already-existing airport concession fee charged to customers to pay airports for the right to conduct business on airport premises; this fee has traditionally amounted to 9% of the rental price. The bill permitted the passenger rental ear industry to charge this concession fee separately from the base rental rate. According to Plaintiffs, the CTTC also colluded with the passenger rental car industry in passing the 9% concession fee on to customers as an uniform add-on charge. Plaintiffs allege that these agreements between the rental car companies and the CTTC constituted price-fixing of rental car rates in violation of the Sherman Act § 1. Plaintiffs also claim the CTTC committed a host of Bagley-Keene Open Meeting Act violations, specifically, failing to adhere to detailed notice requirements and impermissibly holding closed session meetings.

Granting the CTTC’s Rule 12(b)(6) motion to dismiss, the district court dismissed all claims against the CTTC, finding it was entitled to state action immunity from antitrust liability and declining to exercise supplemental jurisdiction over the remaining Bagley-Keene Act state law claim. The district court also held that the dismissed claims against the CTTC were adequately severable from the pending claims against the passenger rental car companies and entered final judgment for the CTTC.

STANDARD OF REVIEW

We review the dismissal of the antitrust claim against the CTTC de novo. Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979, 984 (9th Cir.2000). Because [614]*614the appeal is from an order granting a motion to dismiss, we assume the factual allegations of the complaint to be true. Id. We review a district court’s decision whether to retain jurisdiction over supplemental claims when the original federal claims are dismissed for an abuse of discretion. Tritchler v. County of Lake, 358 F.3d 1150, 1153 (9th Cir.2004).

DISCUSSION

I. State Action Immunity from Antitrust Liability

We assume without deciding that the Plaintiffs’ allegations that the CTTC conspired with the passenger rental car companies to pass on CTTC tourism assessments, enforcing the agreement against non-complying rental car companies, and turning the 9% airport concession fee into a rate hike, sufficiently allege an antitrust violation under the Sherman Act § 1. We need not consider the legality of the alleged conduct; we are instead called to determine whether the district court nonetheless properly dismissed the Plaintiffs’ claim against the CTTC because the agency’s alleged conduct qualifies for “state action immunity.”

The Supreme Court introduced the doctrine of “state action immunity” in Parker v. Brown, when it held that the Sherman Act did not apply to state anticompetitive conduct. 317 U.S. 341, 350-52, 63 S.Ct. 307, 87 L.Ed. 315 (1943). The Court reasoned that the Sherman Act was primarily concerned with individual anticompetitive action, not states acting in their sovereign capacity. Id.

The Court revisited the doctrine in California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980) (“Midcal ”), when a wholesale wine distributor challenged California’s wine resale statutes. The statutes required wine producers to file price schedules with the state; however, the wine dealers themselves set the prices without any state oversight or control. Id. at 99-101, 100 S.Ct. 937. The Court established a two-pronged test to determine when state involvement in anticompetitive conduct can render a party eligible for immunity: (1) the challenged restraint must be “one clearly articulated and affirmatively expressed as state policy”; and (2) the policy must be “actively supervised” by the state itself. Id. at 105, 100 S.Ct. 937 (internal quotation marks omitted). The Court held that although California’s legislative policy clearly stated and allowed resale price maintenance, satisfying the first prong of the test, the price maintenance system failed the second prong because the State did not “actively supervise” the conduct of the wine dealers. Id. at 105-06, 100 S.Ct. 937. With these principles in mind, we turn to their application in this case.

A. Midcal’s First Prong: “Clearly Articulated and Affirmatively Expressed as State Policy”

1. Specific Authorization vs. Reasonably Foreseeable

As a preliminary matter, we must first resolve a dispute among the parties over the proper standard in evaluating Midcal’s first prong.

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Related

Shames v. CALIFORNIA TRAVEL AND TOURISM COM'N
626 F.3d 1079 (Ninth Circuit, 2010)
Shames v. California Travel & Tourism Commission
626 F.3d 1079 (Ninth Circuit, 2010)

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Bluebook (online)
607 F.3d 611, 2010 U.S. App. LEXIS 11597, 2010 WL 2267107, Counsel Stack Legal Research, https://law.counselstack.com/opinion/shames-v-california-travel-tourism-commission-ca9-2010.