Diverse Power, Inc. v. City of LaGrange, Georgia

Case: 18-11014 Date Filed: 08/20/2019 Page: 1 of 19

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT
________________________

No. 18-11014
________________________

D.C. Docket No. 3:17-cv-00003-TCB

DIVERSE POWER, INC.,
Plaintiff-Appellee,

versus

CITY OF LAGRANGE, GEORGIA,
Defendant-Appellant.

________________________

Appeal from the United States District Court
for the Northern District of Georgia
________________________

(August 20, 2019)

Before TJOFLAT, JORDAN and ANDERSON, Circuit Judges.

TJOFLAT, Circuit Judge:
 Case: 18-11014 Date Filed: 08/20/2019 Page: 2 of 19

This interlocutory appeal asks us to determine whether the City of

LaGrange, Georgia, enjoys state-action immunity when it ties its water-utility

service to its natural-gas service for customers in unincorporated Troup County,

Georgia. The District Court held that LaGrange was not entitled to state-action

immunity and, for the reasons explained below, we affirm.

I.

LaGrange owns and operates a water-utility system that serves customers

within LaGrange’s city limits as well as customers beyond its city limits in

unincorporated Troup County. For much of unincorporated Troup County,

LaGrange is the only provider of water-utility service. LaGrange maintains this

monopoly through explicit, market-dividing agreements with other municipalities

in the area. In addition to water, LaGrange provides natural gas to customers

inside and outside its city limits. As with water, LaGrange’s gas is the only game

in town for much of unincorporated Troup County.

Diverse Power is a Georgia corporation that provides electric service

throughout much of unincorporated Troup County. While LaGrange also provides

electric service, it does so primarily within its city limits. Where Diverse Power’s

electric service and LaGrange’s gas service overlap—in much of unincorporated

Troup County—the two entities are in direct competition for retail energy

customers.

2
 Case: 18-11014 Date Filed: 08/20/2019 Page: 3 of 19

In 2004, the LaGrange City Council enacted Ordinance No. 4-29 (the

“Ordinance”), now codified at § 20-15-6 of the LaGrange Code of Ordinances.

Titled “Water service outside city limits,” the Ordinance provides:

For all new construction outside of the corporate limits of the
city, . . . water service as set forth in this chapter shall be available
only to those customers who install at least one (1) natural gas
furnace, one (1) natural gas water heater, and at least one (1)
additional natural gas outlet sufficient for potential future use for a
clothes dryer, range, grill, pool heater or outdoor lighting fixture.

LaGrange, Ga. Code § 20-15-6 (2004). LaGrange enforces the Ordinance by

sending form letters to prospective builders and developers in the area informing

them of the Ordinance’s conditions. The letter, headed “IMPORTANT NOTICE

CONCERNING WATER SERVICE OUTSIDE THE CITY LIMITS,” states:

This letter is to inform you of a utility policy that applies to all new
water connections outside of the city limits of LaGrange. In areas
where natural gas service is available, new homes or businesses must
install gas appliances in order to receive water service from the City.
Specifically, at least one gas furnace, one gas water heater, and one
gas outlet for a future appliance such as a dryer or stove must be
installed. Builders that do not comply with this policy will be denied
permanent water service.

The purpose of the Ordinance is clear. As LaGrange’s utility director stated

in a 2008 email, “[LaGrange] decided to use water as leverage to require gas” in

developments outside LaGrange’s city limits. But for subdivisions within

LaGrange’s city limits, the utility director explained that LaGrange “can’t use

water as leverage to require gas.” For these intracity developments, the director

3
 Case: 18-11014 Date Filed: 08/20/2019 Page: 4 of 19

continued, LaGrange uses a combination of rebates and incentives to encourage

developers to install gas appliances.

The effect of the Ordinance is equally clear. Consider the Cameron Pointe

subdivision, which sits on the north and south sides of Cameron Mill Road in

unincorporated Troup County. The houses on the south side of the road were built

before the enactment of the Ordinance, and the houses on the north side were built

afterward. Predictably, the houses on the south side of the road were built to use

electricity for all appliances, while the houses on the north side of the road were

built for natural-gas appliances. To be sure, this temporal relationship doesn’t

prove that developers switched to natural gas because of the Ordinance.

But lest one suspect that market forces drove this strange arrangement, the

developer told Diverse Power that, but for the Ordinance, it would have built the

houses on the north side of the road to use electric rather than natural-gas

appliances.

On March 3, 2017, Diverse Power filed suit against LaGrange for violations

of the Sherman and Clayton Antitrust Acts. Specifically, Diverse Power alleged

that LaGrange’s practice of conditioning water service on the installation of natural

gas appliances constituted an unlawful tying arrangement. LaGrange moved to

dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) on several

bases, including immunity under the state-action doctrine. The District Court

4
 Case: 18-11014 Date Filed: 08/20/2019 Page: 5 of 19

denied LaGrange’s motion. Diverse Power, Inc. v. City of LaGrange, No. 3:17-v-

00003-TCB, slip op. at 25 (N.D. Ga. Feb. 21, 2018). LaGrange timely appealed

the District Court’s order denying state-action immunity, which we have

jurisdiction to review under the collateral order doctrine. See Commuter Transp.

Sys., Inc. v. Hillsborough Cty. Aviation Auth., 801 F.2d 1286, 1289–90 (11th Cir.

1986) (holding that denial of state-action immunity is an appealable collateral

order under Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S. Ct.

1221 (1949)). 1

1
Diverse Power argued in response to LaGrange’s civil appeal statement that the District
Court’s order denying state-action immunity was not an appealable collateral order under Cohen
v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S. Ct. 1221 (1949). See Diverse Power’s
Resp. to Civil App. Statement at 4 (filed April 16, 2018). Specifically, Diverse Power suggested
that Commuter Transportation Systems, Inc. v. Hillsborough County Aviation Authority—where
we initially extended Cohen to denials of state-action immunity—was either “wrongly decided”
and/or “abrogated by more recent decisions of the Supreme Court emphasizing the narrowness of
[the collateral order] doctrine.” Id.
We happen to think that Commuter Transportation was correctly decided. For the
reasons articulated in that opinion and more, we think it’s clear that state-action immunity is a
form of immunity from suit, not merely from liability. And denials of immunity from suit—like
denials of sovereign and qualified immunities—are immediately appealable under the collateral
order doctrine. P.R. Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 147, 113 S.
Ct. 684, 689 (1993) (sovereign immunity); Mitchell v. Forsyth, 472 U.S. 511, 536, 105 S. Ct.
2806, 2820 (1985) (qualified immunity). But even if we agreed with Diverse Power on this
point, we’d be powerless to do anything: Commuter Transportation is a decision of this Court
that has not been overturned en banc.
That we haven’t overturned Commuter Transportation wouldn’t matter if the Supreme
Court had abrogated Commuter Transportation or another case presenting the same issue. This
brings us to Diverse Power’s second argument: that Commuter Transportation has been
abrogated by more recent Supreme Court decisions narrowing the collateral order doctrine.
Though Diverse Power confidently stated this conclusion in its response, none of the cases it
cited has anything to do with the state-action doctrine. See Mohawk Indus., Inc. v. Carpenter,
558 U.S. 100, 130 S. Ct. 599 (2009) (attorney-client privilege); Will v. Hallock¸ 546 U.S. 345,
126 S. Ct. 952 (2006) (Federal Tort Claims Act’s judgment bar); Cunningham v. Hamilton
5
 Case: 18-11014 Date Filed: 08/20/2019 Page: 6 of 19

II.

We review de novo the denial of a motion to dismiss based on state-action

immunity. Danner Constr. Co. v. Hillsborough County, 608 F.3d 809, 812 (11th

Cir. 2010). “On a motion to dismiss, the factual allegations in the complaint are

taken as true, even if they are subject to dispute.” Devengoechea v. Bolivarian

Republic of Venezuela, 889 F.3d 1213, 1220 (11th Cir. 2018). But we are not

“bound to accept as true a legal conclusion couched as a factual allegation.” Bell

Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 1965 (2007) (citation

omitted).

III.

A.

The doctrine of state-action immunity insulates states from suit under the

federal antitrust laws. In Parker v. Brown, 317 U.S. 341, 62 S. Ct. 307 (1943), the

Supreme Court held that because “nothing in the language of the Sherman Act or

in its history” suggested that Congress meant to restrict the states’ sovereign

prerogative to regulate their economies, the Act shouldn’t be read to bar states

County, 527 U.S. 198, 119 S. Ct. 1915 (1999) (order imposing sanctions for discovery abuses);
Dig. Equip. Corp. v. Desktop Direct, Inc., 511 U.S. 863, 114 S. Ct. 1992 (1994) (order vacating
dismissal and rescinding a settlement agreement); P.R. Aqueduct, 506 U.S. 139, 113 S. Ct. 684
(Eleventh Amendment immunity); Van Cauwenberghe v. Biard, 486 U.S. 517, 108 S. Ct. 1945
(1988) (immunity from civil process).
So Diverse Power must be inferring from refusals to extend Cohen in completely different
areas of substantive law that the Supreme Court will eventually declare denials of state-action
immunity to be outside of Cohen. Suffice it to say, that’s a far cry from an abrogation.
6
 Case: 18-11014 Date Filed: 08/20/2019 Page: 7 of 19

from engaging in anticompetitive conduct “as an act of government.” Id. at 350,

352, 63 S. Ct. at 313–14. But because political subdivisions—like the City of

LaGrange—“are not themselves sovereign[,] they do not receive all the federal

deference of the States that create them.” City of Lafayette v. La. Power & Light

Co., 435 U.S. 389, 412, 98 S. Ct. 1123, 1136 (1978) (plurality opinion). Instead,

political subdivisions enjoy state-action immunity when they undertake activities

“pursuant to a ‘clearly articulated and affirmatively expressed’ state policy to

displace competition.” FTC v. Phoebe Putney Health Sys., Inc., 568 U.S. 216, 226,

133 S. Ct. 1003, 1011 (2013) (quoting Cmty. Commc’ns Co. v. Boulder, 455 U.S.

40, 52, 102 S. Ct. 835, 841 (1982)). This is commonly known as the clear-

articulation requirement.

The clear-articulation requirement is itself anything but pellucid. And unlike

clear-statement requirements in other domains of law, 2 the clear-articulation

requirement is often satisfied by articulations that are admittedly less than clear.

The Supreme Court has “rejected the contention that [the clear-articulation]

requirement can be met only if the delegating statute explicitly permits the

displacement of competition.” City of Columbia v. Omni Outdoor Advert., Inc.,

499 U.S. 365, 372, 111 S. Ct. 1344, 1350 (1991). Instead, state-action immunity

2
See generally John F. Manning, Clear Statement Rules and the Constitution, 110
Colum. L. Rev. 399 (2010).
7
 Case: 18-11014 Date Filed: 08/20/2019 Page: 8 of 19

applies when a municipality’s anticompetitive conduct is the “foreseeable result”

of state legislation. Town of Hallie v. City of Eau Claire, 471 U.S. 34, 42, 105 S.

Ct. 1713, 1718 (1985).

For example, in City of Columbia v. Omni Outdoor Advertising, Inc., 499

U.S. 365, 111 S. Ct. 1344 (1991), the City of Columbia, South Carolina used its

zoning power to protect an entrenched billboard provider—who had 95% market

share—against outside competition. Id. at 367–68, 111 S. Ct. at 1347–48. Even

though the state zoning statute under which the city promulgated the zoning

restrictions had nothing to do with the suppression of competition—much less in

the commercial billboard industry—the Supreme Court held that the city’s actions

were immune from federal antitrust liability. As the Court explained,

The very purpose of zoning regulation is to displace unfettered
business freedom in a manner that regularly has the effect of
preventing normal acts of competition, particularly on the part of new
entrants. A municipal ordinance restricting the size, location, and
spacing of billboards (surely a common form of zoning) necessarily
protects existing billboards against some competition from
newcomers.

Id. at 373, 111 S. Ct. at 1350.

And Omni isn’t an outlier. In the earlier Hallie case, the Supreme Court

held that the City of Eau Claire was immune from federal antitrust liability based

on similarly broad state statutes that were facially unrelated to the suppression of

competition. In Hallie, a Wisconsin statute authorized cities to construct sewage

8
 Case: 18-11014 Date Filed: 08/20/2019 Page: 9 of 19

systems and provided that municipal utilities had no obligation to serve areas

outside their corporate limits. 471 U.S. at 41, 105 S. Ct. at 1717. Under these

statutes, Eau Claire offered sewage-treatment services (over which it had a local

monopoly) to adjacent towns, but only on the condition that the towns accepted

sewage-collection and -transportation services from Eau Claire. Id. at 36–37, 105

S. Ct. at 1715. Several neighboring towns sued, alleging that Eau Claire had

impermissibly used its monopoly over sewage-treatment services to increase its

share of the sewage-collection and -transportation markets. Id. Eau Claire raised

the defense of state-action immunity, and the towns responded that the state laws

authorizing Eau Claire to refuse service to unincorporated towns did “not evidence

a state policy to displace competition in the provision of sewage services because

they ma[d]e no express mention of anticompetitive conduct.” Id. at 41–42, 105 S.

Ct. at 1718.

The Court disagreed. Rejecting the towns’ clear-articulation argument, the

Supreme Court explained that Eau Claire’s anticompetitive conduct logically

resulted from the city’s authority under Wisconsin law:

[T]he statutes clearly contemplate that a city may engage in
anticompetitive conduct. Such conduct is a foreseeable result of
empowering the City to refuse to serve unannexed areas. . . . [I]t is
sufficient that the statutes authorized the City to provide sewage
services and also to determine the areas to be served. We think it is
clear that anticompetitive effects logically would result from this
broad authority to regulate.

9
 Case: 18-11014 Date Filed: 08/20/2019 Page: 10 of 19

Id. at 42, 105 S. Ct. at 1718.

It was against this legal backdrop that we decided FTC v. Phoebe Putney

Health System, Inc., 663 F.3d 1369 (11th Cir. 2011), rev’d, 568 U.S. 216, 133 S.

Ct. 1003 (2013).

B.

In Phoebe Putney, two Georgia laws—a provision of the state constitution

and a concurrently enacted statute—gave municipally created hospital authorities

27 enumerated powers, including “the power ‘[t]o acquire by purchase, lease, or

otherwise and to operate projects [i.e., hospitals and other public health

facilities].’” Phoebe Putney, 568 U.S. at 221, 133 S. Ct. at 1007–08 (first

alteration in original). Under these laws, the Hospital Authority of Albany-

Dougherty County—which already owned one major regional hospital—sought to

acquire another hospital. Id. at 221–22, 133 S. Ct. at 1008. Together, the two

hospitals accounted for 86 percent of the market for acute-care hospital services in

the six surrounding counties. Id. As such, the transaction raised the regulatory

eyebrows of the FTC, which ultimately filed suit (along with the State of Georgia)

to enjoin the transaction.

When the case came before us, we acknowledged that the transaction would

“substantially lessen competition or tend to create, if not create, a monopoly.” Id.

at 222–23, 133 S. Ct. at 1009. But we also acknowledged that Georgia law gave

10
 Case: 18-11014 Date Filed: 08/20/2019 Page: 11 of 19

hospital authorities the prerogative to purchase hospitals and other health facilities,

a grant of authority that might foreseeably produce anticompetitive results. Id.

This was especially true given that many of Georgia’s more rural healthcare

markets were at the time of the authorizing laws’ passage so sparsely populated as

to support only a few regional hospitals. Id. at 231, 133 S. Ct. at 1014. As a result,

most state-law-authorized purchases of a hospital by a hospital authority would

substantially lessen competition in a given market. Accordingly, because it

appeared clear that the power to acquire hospitals in markets with few hospitals

reasonably anticipated the power to anticompetitively consolidate the hospital-

services market, we affirmed the District Court’s order granting state-action

immunity. Phoebe Putney, 663 F.3d at 1378.

We got reversed, nine-zip. While the Supreme Court reaffirmed

foreseeability as the touchstone of the clear-articulation test, id. at 226–27, 113 S.

Ct. at 1011, the Court placed narrower bounds on the meaning of foreseeability.

Under the reformulated test, “state policy to displace federal antitrust law [is]

sufficiently expressed where the displacement of competition [is] the inherent,

logical, or ordinary result of the exercise of authority delegated by the state

legislature.” Id. at 229, 113 S. Ct. at 1012–13. “[T]he ultimate requirement [is]

that the State must have affirmatively contemplated the displacement of

11
 Case: 18-11014 Date Filed: 08/20/2019 Page: 12 of 19

competition such that the challenged anticompetitive effects can be attributed to

the ‘state itself.’” Id. at 229, 113 S. Ct. at 1012 (citation omitted).

How did this rearticulated test apply to the facts of Phoebe Putney?

According to the Court, the state-conferred power of hospital authorities to acquire

hospitals did not “inherent[ly], logical[ly], or ordinar[ily] result” in the

displacement of competition for two reasons. First, the Georgia law allowing

hospital authorities to acquire hospitals, O.C.G.A. § 31-7-75(4), “is not principally

concerned with hospital authorities’ ability to acquire multiple hospitals and

consolidate their operations” because it allows them to acquire other healthcare

facilities as well. Id. at 232, 113 S. Ct. at 1014. So presumably many of the

actions taken under § 31-7-75(4) would not relate to hospitals, let alone reduce

competition in the market for hospital services. Second, “the power to acquire

hospitals still does not ordinarily produce anticompetitive effects.” Id. at 232, 113

S. Ct. at 1014. This is because the acquisition of a hospital by a hospital authority

would significantly decrease competition “only in markets that are large enough to

support more than one hospital but sufficiently small that the merger of

competitors would lead to a significant increase in market concentration.” Id. In

other contexts—e.g., the acquisition of a hospital authority’s initial hospital or of

one in a large hospital-services market like Atlanta—the acquisition of a new

hospital doesn’t significantly decrease competition.

12
 Case: 18-11014 Date Filed: 08/20/2019 Page: 13 of 19

Whatever the merits of the Court’s new and improved clear-articulation

requirement, it’s hard to argue that the result in Phoebe Putney naturally follows

from Hallie and Omni. 3 To illustrate the point, consider the facts of Hallie. Was

the anticompetitive tying arrangement there the “inherent, logical, or ordinary

result” of a pair of statutes authorizing the construction of sewage treatment

facilities and the withholding of services from areas outside cities’ limits?

Probably not—most cities likely just constructed sewage-treatment facilities and

limited their services to city residents. There’s nothing “inherent[ly], logical[ly],

or ordinar[ily]” anticompetitive about giving cities the ability to construct sewage

facilities and the right to deny service to out-of-towners. But it was still

foreseeable—albeit not in the sense that Phoebe Putney uses the term—that Eu

Claire would use its sewage-services monopoly to gain leverage in another market.

See Hallie, 471 U.S. at 42, 105 S. Ct. at 1718 (“[T]he statutes clearly contemplate

that a city may engage in anticompetitive conduct. Such conduct is a foreseeable

result of empowering the City to refuse to serve unannexed areas.” (emphasis

added)).

Nevertheless, Phoebe Putney is the law, and our job is to apply it to the facts

of this case. Turning to those facts, it’s hard to see much legally relevant daylight

3
See, e.g., Rebecca Haw Allensworth, The New Antitrust Federalism, 102 Va. L. Rev.
1387, 1406 (2016) (noting that “[t]he Phoebe Putney Court articulated a higher [clear-
articulation] standard” than the Court had in previous cases).
13
 Case: 18-11014 Date Filed: 08/20/2019 Page: 14 of 19

between the conduct described in Diverse Power’s complaint and the facts of

Hallie. By state statute and constitution, Georgia municipal corporations have the

power “[t]o acquire . . ., to construct, to reconstruct, to improve, to better, and to

extend any water system or sewage system, or both, within the municipal

corporation.” O.C.G.A. § 36-34-5(a)(1).4 Also by state constitution, Georgia

cities may choose to deny water and sewer services to areas outside their corporate

limits.5 Georgia statutes even provide that “in the exercise of powers specifically

granted to them by law, local governing authorities of cities and counties are acting

pursuant to state policy,” O.C.G.A. § 36-65-1, meaning that “in the exercise of

such powers, such local governing authorities shall be immune from antitrust

liability to the same degree and extent as enjoyed by the State of Georgia,”

O.C.G.A. § 36-65-2.

So for those keeping score at home, in both Hallie and the instant case a

state law empowered municipalities to develop a certain utility. In both cases,

4
See also Ga. Const. art. IX, § 2, para. 3(a)(7) (“[A]ny county, municipality, or any
combination thereof may exercise the following powers and provide the following services: . . .
[d]evelopment, storage, treatment, purification, and distribution of water.”).
5
See Ga. Const. art. IX, § 2, para. 3(b)(2) (“Unless otherwise provided by law, ... [n]o
municipality may exercise any of the powers listed in subparagraph (a) of this Paragraph or
provide any service listed therein [including “treatment, purification, and distribution of water,”
see supra note 4] outside its own boundaries except by contract with the county or municipality
affected.”); Zepp v. Mayor of Athens, 339 S.E.2d 576, 577 (Ga. 1986) (“A municipal corporation
may not compel any person outside its territorial limits to accept water service which it
undertakes to furnish, nor may the municipal authorities be compelled to render such service.”
(quoting Barr v. City Council of Augusta, 58 S.E.2d 823, 824–25 (Ga. 1950))).
14
 Case: 18-11014 Date Filed: 08/20/2019 Page: 15 of 19

another state law gave municipalities the right to refuse service to unannexed areas.

And in both cases, the municipality foreseeably used those two powers to gain

leverage in another market. 6

There are two potential differences between Hallie and the instant case, but

we don’t think either difference is especially salient under these circumstances.

First, the tied service here (natural gas) is arguably less related to water service

than sewage-collection and -transportation services were to sewage treatment in

Hallie. But monopolists tie products and services in unrelated markets all the

time—that’s kind of the point of a tying arrangement. So it would seem

foreseeable that a monopolist would seek to leverage his monopoly in one market

to increase his share of another.

Second, the statute in Hallie authorized the city to operate the typing service

(sewage treatment) and the tied service (sewage collection and transportation). See

Wis. Stat. § 66.076.7 Here, in contrast, the relevant statute authorizes the city to

operate the tying service (water), but is silent as to the tied service (natural gas).

But this distinction does not affect the foreseeability of the anticompetitive

6
The case for immunity is arguably stronger than in Hallie because O.C.G.A. § 36-65-1
and § 36-65-2 clearly express the legislature’s intent that municipalities receive immunity when
performing enumerated functions.
7
Although that statutory provision has been amended and renumbered since Hallie was
decided, the Wisconsin State Legislature website contains the text of the provision as it was then.
See https://docs.legis.wisconsin.gov/1995/statutes/statutes/66/076; see also Br. for Petitioners,
Hallie, 471 U.S. 34, 1984 WL 564126, at *30–31.
15
 Case: 18-11014 Date Filed: 08/20/2019 Page: 16 of 19

conduct. What makes the anticompetitive conduct foreseeable is the ability to

deny services to unincorporated areas—not the number of services tied together.

Besides, the Supreme Court did not rely on the fact that the statute authorized both

services in its foreseeability analysis in Hallie, so it would be odd for us to endow

that fact with dispositive impact now.

In any event, we’re in a post-Phoebe Putney world. And in that world we

have to ask not only whether the Georgia legislature could have foreseen that cities

would use their water monopoly to increase their share of an unrelated market. We

also have to ask if such an anticompetitive move is the “inherent, logical, or

ordinary result” of the legislative scheme.

The answer to that question is no.

O.C.G.A. § 36-65-2 provides that “in the exercise of such powers [i.e., the

“powers specifically granted to them by law,” O.C.G.A. § 36-65-1], . . . local

governing authorities shall be immune from antitrust liability to the same degree

and extent as enjoyed by the State of Georgia.” If LaGrange is immune from

federal antitrust liability, it is by virtue of this statute. The “power[] specifically

granted to [LaGrange] by law” here is the power authorized by O.C.G.A. § 36-34-

5(a)(3), which is the authority to operate water or sewage systems. LaGrange

argues that so long as it’s exercising a power granted by state law, its related

anticompetitive actions are beyond federal antitrust liability. So it doesn’t matter if

16
 Case: 18-11014 Date Filed: 08/20/2019 Page: 17 of 19

LaGrange conditions water service on the installation of natural-gas fixtures or the

purchase of Goodyear tires. So long as the condition is connected to the “power

specifically granted . . . by law,” the entire arrangement is above board, immunity-

wise.

We don’t think this is the best reading of O.C.G.A. § 36-65-2, especially

after Phoebe Putney. As the District Court recognized, the “exercise of such

powers” referred to in O.C.G.A. § 36-65-2 (the immunity statute) refers here to the

powers authorized in O.C.G.A. § 36-34-5(a)(3), the authority to operate water or

sewage systems. And the immunity granted by O.C.G.A. § 36-34-5(a)(3)—in

conjunction with O.C.G.A. § 36-65-2—is only immunity “[t]o operate and

maintain any such systems,” which is a reference to “water and sewage systems.”

Read together, these statute suggest that the Georgia legislature expressly

“contemplate[ed] . . . municipal anticompetitive conduct” in the provision of water

and sewage services. McCallum v. City of Athens, 976 F.3d 649, 655 (11th Cir.

1992). Accordingly, some actions directly connected to the provision of water and

sewage services—e.g., LaGrange’s dividing up water-service territory with

neighboring municipalities in Troup County, see supra page 2—are protected. See

McCallum, 976 F.3d at 655. This is because market division and similar

anticompetitive actions are the “inherent, logical, or ordinary result” of O.C.G.A.

§§ 36-34-5(a)(3). But whatever the outer limits of Phoebe Putney’s “inherent,

17
 Case: 18-11014 Date Filed: 08/20/2019 Page: 18 of 19

logical, or ordinary” gloss, we think it is safe to say that the tying of an unrelated

service in a different market to the provision of water service falls outside the

statutes’ grant of immunity.

Buttressing this interpretation is the astonishingly vast power LaGrange

would have if we adopted its read of Georgia law. In its briefing and at oral

argument, LaGrange contended that its actions are blanketed in state-action

immunity whenever it exercises its water-utility power. The District Court rightly

observed that there is “no limiting principle to this assertion” which, if true,

“would [give LaGrange] immunity to take anticompetitive actions affecting any

industry so long as the demand were made as a condition of refusing water

service.” Diverse Power, slip op. at 11–12. And our attempts to ferret out a

limiting principle fared no better. See Oral Argument at 2:42–7:48, Diverse

Power, Inc. v. City of LaGrange, ___ F.3d ___ (2019) (No. 18-11014),

http://bit.ly/2YOksqM. We have a hard time believing that the Georgia legislature

could have foreseen granting LaGrange powers so unlimited.

IV.

The District Court correctly denied LaGrange’s motion to dismiss for state-

action immunity, the only issue we review in this interlocutory appeal. We

accordingly affirm the District Court’s judgment and remand the case for further

proceedings.

18
 Case: 18-11014 Date Filed: 08/20/2019 Page: 19 of 19

AFFIRMED and REMANDED.

19