United States: 9th Circuit: State Action Immunity Protects Convention Center From Exclusive Dealing Claim

In United National Maintenance, Inc. v. San Diego Convention Center, Inc., No. 12-56809, 2014 WL 2094545 (9th Cir. May 14, 2014), the 9th U.S. Circuit Court of Appeals held that the San Diego Convention center enjoyed state action immunity from antitrust claims brought by a supplier of cleaning services whose business was negatively impacted by the convention center's decision to be the exclusive supplier of cleaning services.

The California Legislature specifically authorized San Diego (and other cities) not only to build a convention center, but also to create a commission that would "manage the use" of the convention center. This type of managerial authorization, the court held, was sufficient to make any anticompetitive effects the result of a clearly articulated and affirmatively expressed state policy—the first prong of the test for state action immunity. The 9th Circuit also held that the center did not need to meet the second state action immunity requirement (that its actions were "actively supervised" by the state), because 1) the City of San Diego appoints all of the center's board members; 2) upon dissolution, the center's assets revert back to San Diego; and 3) the center must publicly account for its operations. Overall, the court held, the center acts as an agent that operates the convention center for the benefit of its principal, the city of San Diego. It is an extension of the municipality of San Diego and thus does not require active supervision by the state in order to retain its immunity from antitrust liability. Furthermore, the court noted, the specific facts indicate there is no need for the evidentiary function of active supervision.

Although the center's actions may reflect the pursuit of parochial interests, there is no evidence that it entered into any kind of private price-fixing arrangement with other convention center operators. This fact, the court held, distinguishes the center from other cases where groups of private actors, entrusted with state regulatory authority over a profession, may have taken actions to further their own private interests.

The decision is available here.

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