The State of Texas, as Parens Patriae on Behalf of Natural Persons Residing in Texas v. The Scott & Fetzer Company and the Kirby Sales Company, Inc.

709 F.2d 1024, 1983 U.S. App. LEXIS 25593

• Court: Court of Appeals for the Fifth Circuit
• Decided: July 22, 1983
• Docket: 82-1404
• Status: Published

Opinions

EDWIN F. HUNTER, Jr., District Judge:

In this ease, the State of Texas (acting through its Attorney General) seeks to bring suit in its capacity as parens patriae against defendants for their alleged violations of federal antitrust laws. Defendants moved to dismiss the complaint, insisting had no State authority to maintain the action. The district court denied the motion, but certified the issue for appeal. The question presented is whether the Attorney General of Texas has authority to maintain this suit.

The action was instituted in October of 1980 against Scott & Fetzer Company and its wholly owned subsidiary, Kirby Sales Company, Inc. It is brought pursuant to Section 4C of the Clayton Act, which is often referred to as the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 90 Stat. 1394, 15 U.S.C. [15 U.S.C. §§ 15c-15h]. As is true in every case involving the construction of a statute, our starting point must be the language utilized by Congress. Section 4C provides:

Any Attorney General of a State may bring a civil action in the name of such State, as parens patriae on behalf of natural persons residing in such state in any district court of the United States having jurisdiction of the defendant, to secure monetary relief as provided in this section for injury sustained by such natural persons to their property by reason of any violation of sections 1 to 7 of this title

15 U.S.C. § 15c (1976). Section 15h provides that the Act

“shall apply in any state, unless such state provides for its non-applicability in such state.”

15 U.S.C. § 15h.

As the legislative history makes apparent, the Act was aimed primarily at enlarging the potential for consumer recovery for antitrust violations by effectively bypassing the burdensome requirements of Rule 23, Fed.R.Civ.P., that might tend to dissuade private litigants from pursuing consumer class actions for antitrust injury.¹ It involved no change in the substantive basis for antitrust liability. It simply created a new procedural device — parens patriae actions by States on behalf of their citizens— to enforce existing rights of recovery. See H.R.Rep. No. 499, 94th Congress, 2nd Sess. 6-8, reprinted in 1976 U.S.Cong. and Adm. News 2572, 2575-78. Columbia ex rel. Rogers v. Mid-Atlantic Toyota Distributors, et al., 704 F.2d 125 (4th Cir.1983).

Defendants argue that the clear import of the Act is that Congress opened the doors of the federal district courts only to state attorneys general who independently possess state law authorization to institute parens patriae actions, and then insists that Texas has never authorized its Attorney General to institute such a lawsuit. Texas suggests that there are at least four different sources of authority which permit its Attorney General to institute a parens pat-riae action under federal antitrust laws. Alternatively, Texas insists that its authority to sue became effective upon Section 4C’s enactment and continued in each state unless the state revoked it under Section 4H.² Accepting arguendo defendants’ assertion that Congress could not expand the state-defined power of its Attorney General,³ we hold that a suit such as the instant one, brought by the Texas Attorney General on behalf of the State, falls squarely and unambiguously within the grant of authority in Section 15.40 of the Texas Business and Commerce Code.

The Texas statute which authorizes antitrust actions to be brought by the attorney general antedates the federal legislation. It reads in pertinent part:

The attorney general may bring an action on behalf of the state or of any of its political subdivisions or tax supported institutions to recover the damages provided for by the federal antitrust laws, Title 15, United States Code ...

Tex.Bus. & Com.Code § 15.40(a) (Vernon Supp.1981).

Defendants argue that 15.40(a) does not authorize a statutory parens patriae damage action under the Hart-Scott-Rodino Antitrust Improvements Act; they insist that it authorizes only an action to recover damages for injury to the state in its proprietary capacity. We disagree. There is simply nothing to justify the judicial engraft-ing of such a limitation. The statute clearly does not confine the authority of the Attorney General to the prosecutions of common law parens patriae actions or actions to vindicate quasi-sovereign and proprietary state interests. Contrariwise, it fully authorizes the maintenance of the statutory right of action here in issue, which concededly is of neither type.

The United States Court of Appeals for the Fourth Circuit issued its decision in the Mid-Atlantic Toyota Distributors, Inc. cases on the very day that the instant case was argued (704 F.2d 125, 1983). The question there was whether the state attorneys general of Maryland, Delaware and Pennsylvania, and the Corporation Counsel of the District of Columbia, were authorized to maintain statutory parens patriae damage actions under Hart-Scott-Rodino (the Act), in the names of their respective jurisdictions on behalf of their natural-person residents injured by an alleged price-fixing conspiracy in violation of the Sherman Act. The language and reasoning of the Fourth Circuit is incisive and pertinent:

“While the statutory and constitutional definitions of the powers of the several plaintiff-attorneys general differ significantly, a common thread runs throughout. The Maryland Constitution provides that the Attorney General shall ‘commence, and prosecute ... any civil ... action ... on the part of the State or in which the State may be interested,’ Md. Const, art. V, § 3(a)(2); the Delaware Antitrust Act empowers the Attorney General to institute proceedings ‘on behalf of the State and its public bodies’ for suspected antitrust violations, Del.Code Ann. Tit. 6, § 2105 (Supp.1980); District of Columbia law provides that the Corporation Counsel shall ‘have charge and conduct of all law business’ of the District, D.C.Code Ann. § 1-361 (1981); and Pennsylvania’s Commonwealth Attorneys Act specifies that the Attorney General ‘shall represent the Commonwealth and its citizens in any action brought for violation of the antitrust laws, ... ’

“While the language differs, each provision allocates to the attorney general power and authority to represent the jurisdiction and its interests in litigation. In at least two ways, we find the present actions to fall clearly within the ambit of each of the attorneys general’s state-derived authority.

“First, these attorneys general have brought suits in the names of their respective states to enforce causes of action created by federal law. Whether the state is a real party in interest or merely a representative party, this cause of action exists in favor of the state. See New Mexico v. Scott & Fetzer Co., 1981-2 Trade Cas. (CCH) ¶ 64,439, at 75,149 (D.N.M. Dec. 22, 1981). Because the attorneys general are suing to enforce their jurisdictions’ causes of action, these lawsuits indeed are ‘on the part of’ Maryland, on ‘on behalf of’ Delaware, and representative of the Commonwealth of Pennsylvania and the ‘law business’ of the District of Columbia...

“In addition to their authority to sue to enforce their jurisdictions’ statutory causes of action, these attorneys general have undoubted authority to pursue litigation that advances or vindicates public interests. See Brown v. Stanton, 617 F.2d 1224, 1232 n. 14 (7th Cir.1980) (‘In general, a state Attorney General may institute such suits as he deems necessary for ... the protection of public rights.’), vacated and remanded on other grounds, 453 U.S. 917 [101 S.Ct. 3151, 69 L.Ed.2d 999] (1981) .. . Indeed, the notion that these attorneys general may institute actions to remedy invasions of the public interest appears implicit in the statutory and constitutional schemes defining their powers.

“As Congress fully recognized in enacting the Antitrust Improvements Act, see H.R.Rep. No. 499, 94th Cong., 2d Sess. 6-8, reprinted in 1976 U.S.Code Cong. & Ad.News 2572, 2575-78; S.Rep. No. 803, 94th Cong., 2d Sess. 39-40 (1976), this statutory cause of action promotes enforcement of the federal antitrust laws, which promotes at the same time a state’s public interest in protecting its citizens from violations of these laws, see New Mexico v. Scott & Fetzer Co., 1981-2 Trade Cas. (CCH) ¶ 69,439, at 75,149 (D.N.M. Dec. 22, 1981); Clark Oil & Refining Corp. v. Ashcroft, 639 S.W.2d 594, 596-97 (Mo.1982); see also Iowa v. Scott & Fetzer Co., 1982-2 Trade Cas. (CCH) ¶ 64,873, at 72,359 (S.D. Iowa July 8, 1982). We reject the defendants’ contention that a state has an ‘interest,’ under the various provisions involved here, only in those suits which vindicate quasi-sovereign or proprietary interests. Undoubtedly, a state can have a legitimate public interest in ensuring the economic well-being of its citizens — and in indirectly promoting a smoothly functioning economy freed of antitrust violations — even though the most obvious beneficiaries may be individual consumers who ultimately recoup money damages.”

We are in perfect accord with the conclusions reached by the Fourth Circuit and the rationale utilized in reaching those conclusions. The opinion is particularly cogent because of the remarkable similarity between the statutes there under scrutiny⁴ and the Texas statute.

Defendants’ attack upon the authority of the Attorney General to institute this suit follows naturally from their premise that the phrase “on behalf of the state” does not include parens patriae actions. The argument like the premise is incorrect and has been decisively rejected by the Fourth Circuit in Mid-Atlantic Toyota Distributors, Inc., and the Missouri Supreme Court in Clark Oil and Refining Corporation v. Ashcroft, 639 S.W.2d 594 (Mo.1982). This premise runs directly contrary to the central thesis of the Fourth Circuit and the Supreme Court of Missouri, which is that a parens patriae action is not merely a suit on behalf of individual citizens; it is an action on behalf of the state in which the attorney general seeks to vindicate the rights of Texas citizens injured by alleged actions in restraint of trade.

By instituting a suit of this nature the attorney general exercises his statutory authority to protect citizen consumers against antitrust violations. Clark Oil and Refining Corporation v. Ashcroft, 639 S.W.2d 594 (Mo.1982). We reach the inescapable conclusion that the instant suit, as filed, falls squarely and unambiguously within the grant of authority contained in Section 15.-40.⁵

We, of course, do not pass on the merits of the complaint. There is nothing in the record to indicate the truth or falsity of the allegations. We only hold that the Attorney General of Texas has standing and authority to maintain this action in a parens patriae capacity.

The District Court properly denied defendants’ motion to dismiss the complaint. We affirm his decision and remand for further proceedings that may be appropriate.

REMANDED.

1 . The House Report on the Bill ultimately enacted into law states that the thrust of the legislation is to overturn the decision in California v. Frito-Lay, Inc., 474 F.2d 774 (9th Cir.), cert. denied 412 U.S. 908, 93 S.Ct. 2291, 36 L.Ed.2d 974 (1973). The Court in Frito-Lay had held that the State of California lacked standing to sue to recover treble damages as parens patriae on behalf of its citizens for antitrust injuries. The House Report, after quoting from Frito-Lay, went on to say:

H.R. 8532 is a response to the judicial invitation extended in Frito-Lay. The thrust of the bill is to overturn Frito-Lay by allowing State attorneys general to act as consumer advocates in the enforcement process, while at the same time avoiding the problems of manageability which some courts have found under Rule 23 [of the Federal Rules of Civil Procedure],

Id. at 8, U.S.Code Cong. & Admin.News 1976, p. 2578.

2 . Senate debate confirms that Section 4C was intended to affirmatively authorize state attorneys general to bring parens patriae damage actions. It reveals that this authority was to become effective upon Section 4C’s enactment and to remain so in each state until that state decided to revoke it under Section 4H. 22 Cong.Rec. 15853 (1976). During the 1977 session of the Texas Legislature, H.B. 592 was introduced for this purpose but was not enacted into law. See H.B. 592 65th Leg. (Texas 1977).

3 . The nature of defendants’ Tenth Amendment argument is of the type that courts have avoided until another day. So we have done today, but it must be noted that Section 4C does not impose any duties on the Attorney General. It merely provides that he way bring parens pat-riae actions. Congress has revealed its respect for state sovereignty by giving the state the option to withdraw the attorney general’s permissive authority.

4 . The wording of the statutes of Maryland, Delaware, District of Columbia and Pennsylvania appears in the opinion.

5 . Texas cites Section 22 of Article IV of its Constitution and Article 4409 of its Civil Statutes as additional sources of authority. The Interpretive Commentary to Section 22 and cases construing the section establish that these two provisions confer broad responsibility to oversee private corporations to safeguard the public interest. The Attorney General argues that by bringing this action to prevent and deter alleged violations of the antitrust laws, he is acting precisely in conformity with Section 22 and Article 4409. We need not address this contention because of our holding that the instant action falls precisely within the grant of authority of Section 15.40.