PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 19-1977
WESTERN STAR HOSPITAL AUTHORITY INC., d/b/a Metro Health EMS,
Plaintiff – Appellant,
v.
CITY OF RICHMOND, VIRGINIA; RICHMOND AMBULANCE AUTHORITY,
Defendants – Appellees.
Appeal from the United States District Court for the Eastern District of Virginia, at
Richmond. John A. Gibney, Jr., District Judge. (3:18-cv-00647-JAG)
Argued: December 10, 2020 Decided: January 19, 2021
Before MOTZ, THACKER, and QUATTLEBAUM, Circuit Judges.
Affirmed by published opinion. Judge Motz wrote the opinion, in which Judge Thacker
and Judge Quattlebaum joined.
ARGUED: Luke Andrew Hasskamp, BONA LAW PC, La Jolla, California, for
Appellant. Craig Thomas Merritt, CHRISTIAN & BARTON, LLP, Richmond, Virginia;
Wirt Peebles Marks, IV, RICHMOND CITY ATTORNEY’S OFFICE, Richmond,
Virginia, for Appellees. ON BRIEF: Aaron R. Gott, Jarod M. Bona, BONA LAW PC,
La Jolla, California, for Appellant. David P. Corrigan, Melissa Y. York, HARMAN
CLAYTOR CORRIGAN & WELLMAN, Glen Allen, Virginia; David B. Lacy,
CHRISTIAN & BARTON, LLP, Richmond, Virginia, for Appellees.
DIANA GRIBBON MOTZ, Circuit Judge:
For almost thirty years, the Richmond Ambulance Authority (“RAA”), a public
body created by the Commonwealth of Virginia and governed by the City of Richmond
(“the City”), has provided nonemergency medical transportation services to the Hunter
Holmes McGuire Veteran’s Administration Medical Center (“the VA Medical Center”).
In 2018, however, the VA Medical Center requested quotes from other service providers.
One quote came from Western Star Hospital Authority, Inc., doing business as Metro
Health EMS (“Metro Health”). The VA Medical Center selected Metro Health’s bid on
the condition that Metro Health could obtain a permit from the City to operate emergency
medical services (“EMS”) vehicles. When the City refused to grant Metro Health a permit,
it brought this action against the City and the RAA, alleging violations of the Sherman
Antitrust Act and the Supremacy Clause of the United States Constitution. The district
court dismissed the case with prejudice, concluding that the defendants enjoy immunity
from federal antitrust liability and that federal law does not preempt their actions. We
agree and so affirm.
I.
Like many municipalities, the City operates its EMS system through a public utility
model. Under this model, the City contracts with a single provider to manage all EMS
vehicle operations in the City. This ensures that the City’s EMS system does not neglect
costly, but essential emergency response services in favor of more profitable
nonemergency services. Critically, however, the economic feasibility of the public utility
model depends on the EMS provider’s exclusivity in the marketplace. This is so because
revenues generated by profitable, nonemergency transports are needed to offset the cost of
providing emergency services to all, including those without health insurance.
In Richmond, this model owes its existence and governance to two state laws. First,
in 1979, the Virginia General Assembly passed a statute granting “governing bodies” of
municipalities wide berth to regulate EMS vehicle services. Va. Code Ann. § 32.1-111.14.
Such “governing bodies” are empowered to: prohibit the operation of EMS vehicles
without a city-issued franchise, license, or permit; limit the number of EMS vehicles
allowed to operate in the city; fix the charges for EMS vehicle services; and establish other
necessary regulations relating to the operation of EMS vehicles. Id. § 32.1-111.14(A). The
legislature stated that these powers were “necessary to assure the provision of adequate and
continuing emergency medical services and to preserve, protect and promote the public
health, safety and general welfare.” Id. § 32.1-111.14.
Subsequently, in 1991, the General Assembly enacted the Richmond Ambulance
Authority Act, creating the RAA as a “public instrumentality exercising public and
essential governmental functions.” 1991 Va. Acts 645. The legislature granted the RAA
authority to “[p]rovide emergency ambulance service originating in the City,” as well as
“nonemergency service within the Commonwealth.” Id. This act further provided that the
RAA be governed by eleven members: the Richmond City Manager, the Richmond
Director of Finance, and nine persons appointed by the Richmond City Council for two-
year terms. Id. The Richmond City Council subsequently organized the RAA and granted
it an indefinite franchise to operate EMS vehicles in the City.
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Since its inception in 1991, the RAA has held the City’s sole EMS vehicle franchise.
Thus, the RAA has provided all services in the City that utilize EMS vehicles, including
nonemergency interfacility medical transport services for VA Medical Center patients. In
2018, the VA Medical Center considered contracting with other service providers and
opened a bidding process to receive competing quotes. In its request for quotes, the VA
Medical Center conditioned any resulting contract on “conformance with . . . all applicable
Federal, State and Local laws,” and specified that “[b]efore award of a contract, the Service
Provider must provide an official City Franchise Permit required to operate patient
transport services in the City of Richmond.” J.A. 249, 252. Notwithstanding its lack of
the necessary permit, Metro Health submitted a bid.
In June 2018, the VA Medical Center conditionally selected Metro Health’s bid but
simultaneously reiterated that no contract would result unless Metro Health first obtained
a permit from the City. Metro Health pressed the City to create a process for entertaining
permit applications from private firms. In response, the City posted a permit application
on the Richmond Fire Department website. Metro Health perceived the application as
unfair and deliberately engineered to prevent it from obtaining a permit. Accordingly,
rather than submitting an application, Metro Health immediately filed this suit, seeking a
temporary restraining order to prevent interference with its prospective contract. After a
hearing, the district court stayed the litigation so that Metro Health could apply for a permit
and receive a determination from the City.
Metro Health did so and the Richmond Fire Department initially recommended that
Metro Health be granted a permit. But the City Council disagreed; indeed, the Council
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voted unanimously to strike a proposed ordinance that would have granted Metro Health a
permit.
Metro Health then filed an amended complaint against the City and the RAA,
alleging numerous violations of federal and state law. The district court granted the
defendants’ motion to dismiss, concluding, in relevant part, that the state action immunity
doctrine shields the City and the RAA from federal antitrust liability and that their conduct
does not offend the Supremacy Clause. Metro Health timely noted this appeal. We review
the district court’s dismissal of Metro Health’s complaint de novo, accepting all well-
pleaded allegations as true and construing the facts in the light most favorable to Metro
Health. In re Willis Towers Watson PLC Proxy Litig., 937 F.3d 297, 302 (4th Cir. 2019).
II.
Metro Health primarily contends that the City and the RAA have run afoul of the
Sherman Act prohibition on monopolization and attempted monopolization. See 15 U.S.C.
§ 2. If, as the defendants assert and the district court found, the state action immunity
doctrine shields them from federal antitrust liability, Metro Health cannot succeed on these
claims.
Under the state action immunity, or Parker, doctrine, federal antitrust laws do “not
apply to anticompetitive restraints imposed by the States ‘as an act of government.’” City
of Columbia v. Omni Outdoor Adver., Inc., 499 U.S. 365, 370 (1991) (quoting Parker v.
Brown, 317 U.S. 341, 352 (1943)). At bottom, the Parker doctrine embodies “the
federalism principle that the States possess a significant measure of sovereignty under our
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Constitution.” Cmty. Commc’ns Co. v. City of Boulder, 455 U.S. 40, 53 (1982). Thus,
sovereign states may “confer exclusive or shared rights to dominate a market, or otherwise
limit competition to achieve public objectives.” N.C. State Bd. of Dental Examiners v.
F.T.C., 574 U.S. 494, 503 (2015) [hereinafter N.C. Dental]. Were it otherwise, “federal
antitrust law would impose an impermissible burden on the States’ power to regulate,”
strong-arming states into “promoting competition at the expense of other values a State
may deem fundamental.” Id.
“Because municipalities and other political subdivisions are not themselves
sovereign,” the Parker doctrine “does not apply to them directly.” F.T.C. v. Phoebe Putney
Health Sys., Inc., 568 U.S. 216, 225 (2013). Rather, municipalities and “substate
governmental entities” are immune from federal antitrust claims only “when they act
‘pursuant to state policy to displace competition with regulation or monopoly public
service.’” Id. (quoting City of Lafayette v. La. Power & Light Co., 435 U.S. 389, 413
(1978)). The Supreme Court has long held that such a state policy must be “clearly
articulated and affirmatively expressed.” City of Boulder, 455 U.S. at 54.
In Town of Hallie v. City of Eau Claire, the Court explained just “how clearly a state
policy must be articulated for a municipality to be able to establish that its anticompetitive
activity constitutes state action.” 471 U.S. 34, 40 (1985). There, the Court clarified that
state action immunity will lie where anticompetitive activity is the “foreseeable result” of
a state policy — that is, where it is “clear that anticompetitive effects logically would
result” from a given policy or where a regulatory structure inherently displaces unfettered
business freedom. Id. at 42. A legislature need not, however, “expressly state in a statute
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or its legislative history that the legislature intends for the delegated action to have
anticompetitive effects.” Id. at 43.
Here, the City and the RAA easily satisfy Hallie’s clear-articulation test. The
Virginia legislature has expressly conferred broad authority on local governing bodies to
engage in anticompetitive conduct in the EMS vehicle services market. See Va. Code Ann.
§ 32.1-111.14(A). A local government may make it unlawful to operate EMS vehicles
without a permit, control the issuance of permits, determine where EMS vehicles can and
cannot operate, and fix the prices of EMS vehicle services. Id. As one court observed over
two decades ago, these provisions “expressly authorize anticompetitive conduct.” Forest
Ambulance Serv., Inc. v. Mercy Ambulance of Richmond, Inc., 952 F. Supp. 296, 300 (E.D.
Va. 1997). Far from granting localities “simple permission to play in a market,” Phoebe
Putney, 568 U.S. at 231 (internal citation omitted), the Virginia statute greenlights
regulation and service provision that necessarily supplants unrestrained market
competition. In these circumstances, anticompetitive conduct is the “foreseeable result” of
the state’s policy. Hallie, 471 U.S. at 42. Accordingly, the City and the RAA are entitled
to state action immunity.
Metro Health offers several arguments in an attempt to avoid this straightforward
conclusion. First, Metro Health argues that § 32.1-111.14 only authorizes localities to
regulate “emergency medical services,” not “non-emergency service[s]” like pre-
scheduled interfacility transports. Opening Br. at 25–27. Not so. In fact, multiple
provisions of the statute make clear that localities may regulate “emergency medical
services vehicles,” irrespective of whether the vehicles are engaged in emergency or non-
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emergency services. See, e.g., Va. Code Ann. § 32.1-111.14(A)(3) (conferring power to
limit the number of vehicles that may be operated within the city); § 32.1-111.14(A)(8)
(granting power to establish necessary regulations relating to the operation of such
vehicles); see also Forest Ambulance, 952 F. Supp. at 300 (“It is the vehicle, rather than
the use, which is being regulated.”).
Second, Metro Health contends that Phoebe Putney announced a heightened clear-
articulation test that the defendants cannot meet. This argument also fails. To be sure, the
Phoebe Putney Court warned against applying “the concept of foreseeability from [the]
clear-articulation test too loosely.” 568 U.S. at 229 (quotation marks omitted). But there,
the Court considered a Georgia law that merely granted hospital authorities “general
corporate powers,” not “permission to use those powers anticompetitively.” Id. at 220.
Here, by contrast, the Virginia General Assembly not only empowered the RAA to provide
emergency and nonemergency services, see 1991 Va. Acts 644, it also expressly authorized
the RAA to fix prices and control entry into the EMS vehicle services market, see Va. Code
Ann. § 32.1-111.14(A). Thus, the defendants’ invocation of the Parker doctrine fits
comfortably within Phoebe Putney’s reiteration of Hallie’s clear-articulation test. See
Phoebe Putney, 568 U.S. at 229.
Third, Metro Health maintains that both the City and the RAA must, and cannot,
demonstrate that their conduct was “actively supervised by the State.” N.C. Dental, 574
U.S. at 504 (quoting Cal. Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U.S.
97, 105 (1980)). But courts only demand this additional showing from “nonsovereign
actor[s] controlled by active market participants,” like “private trade associations vested
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by States with regulatory authority.” Id. at 503, 511 (emphasis added). In N.C. Dental, for
example, the Court required this heightened showing from a state board dominated by
active private dentists who, in their role as board members, excluded nondentists from the
teeth whitening market. Id. at 501.
Municipalities — like the City — and “substate governmental entities” — like the
RAA — “are not subject to the ‘active state supervision requirement’ because they have
less of an incentive to pursue their own self-interest under the guise of implementing state
policies.” Phoebe Putney, 568 U.S. at 225–26 (quoting Hallie, 471 U.S. at 46–47). As the
Supreme Court has long recognized, these entities — unlike private parties — are “exposed
to public scrutiny” and “checked” by “the electoral process.” Hallie, 471 U.S. at 45 n.9.
Moreover, as “arm[s] of the State,” they are entitled to the presumption “that [they] act[]
in the public interest.” Id. at 45. While Metro Health insinuates that the RAA has
improperly “pursue[d] its own interests” by adhering to the City’s public utility model,
Opening Br. at 35, it provides no evidence that the RAA is involved in “a private price-
fixing arrangement,” Midcal, 445 U.S. at 106, or that its actions are motivated by anything
other than “governmental interests,” Hallie, 471 U.S. at 47. Thus, the concerns that
animate the active state supervision requirement are wholly absent from this case.
Finally, in a last-ditch attempt to thwart the defendants’ invocation of the Parker
doctrine, Metro Health proposes that we adopt a novel “market participant” exception to
state action immunity. The Supreme Court has never recognized such an exception; in
fact, it has suggested only that it might possibly exist. See Omni, 499 U.S. at 379 (“We
reiterate that, with the possible market participant exception, any action that qualifies as
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state action is ipso facto [] exempt from the operation of the antitrust laws.”) (emphasis
added); see also Phoebe Putney, 568 U.S. at 226 n.4 (explicitly declining to consider
whether a market participant exception exists). Nor have any of the Courts of Appeals ever
concluded that this proposed exception frustrates the invocation of state action immunity,
though some have noted that it would, if recognized, introduce considerable tension into
federal antitrust law. See, e.g., Automated Salvage Transp., Inc. v. Wheelabrator Envtl.
Sys., Inc., 155 F.3d 59, 81 (2d Cir. 1998). Indeed, as Metro Health’s counsel conceded at
oral argument, the municipality at issue in the seminal Hallie case successfully invoked the
Parker doctrine notwithstanding its status as a “market participant.” See Oral Arg. at 5:21–
6:12. Given this unmistakable friction with longstanding Supreme Court precedent, we
decline Metro Health’s invitation to steer federal antitrust law into uncharted waters.
Accordingly, we conclude that the City and the RAA acted pursuant to a clearly
articulated state policy and are therefore entitled to immunity from federal antitrust
liability.
III.
Metro Health also contends that by “thwart[ing] the [VA Medical Center’s]
competitive bidding process,” Opening Br. at 44, the City and the RAA have violated the
Supremacy Clause. In Metro Health’s telling, the defendants’ conduct conflicted with the
Competition in Contracting Act (“CICA”), 41 U.S.C. § 3301(a), which provides that “an
executive agency in conducting a procurement for property or services shall obtain full and
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open competition through the use of competitive procedures.” We must reject this
argument.
The Supremacy Clause renders federal law “the supreme Law of the Land.” U.S.
Const. art. VI, cl. 2. Federal law may preempt state law in three ways: by “express
preemption,” “field preemption,” and “conflict preemption.” H & R Block E. Enterprises,
Inc. v. Raskin, 591 F.3d 718, 722 (4th Cir. 2010). For its contention that the CICA preempts
defendants’ conduct, Metro Health invokes “conflict preemption,” which can occur when
“‘state law stands as an obstacle to the accomplishment of the full purposes and objectives’
of federal law.” Anderson v. Sara Lee Corp., 508 F.3d 181, 191–92 (4th Cir. 2007)
(quoting Worm v. Am. Cyanamid Co., 970 F.2d 1301, 1305 (4th Cir. 1992)). But here,
state law posed no obstacle at all.
Rather, as the VA Medical Center repeatedly made clear — both when it initially
requested quotes and when it conditionally selected Metro Health’s bid — there would be
no contract unless Metro Health first obtained a permit from the City. In an almost identical
situation, the U.S. Comptroller General determined that “[e]ven under [CICA’s] full and
open competition standard,” the VA Medical Center may require a vendor to obtain “a
franchise or permit from the City of Richmond granting authority to provide emergency
ambulance services.” Lifeline Ambulance Servs., Inc., B-277415, 97-2 CPD ¶ 83 (Comp.
Gen. Sept. 22, 1997); see also Pac. Legal Found. v. Goyan, 664 F.2d 1221, 1227 (4th Cir.
1981) (noting that “[t]he opinion of the Comptroller General is . . . entitled to weight as he
is the auditing agent of Congress”). The Comptroller General reasoned that “the
requirement is necessary to ensure timely performance of the emergency ambulance
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services by precluding the possibility that the services will be interrupted by the city’s
enforcement attempts against an unlicensed contractor.” Lifeline Ambulance Servs., 97-2
CPD ¶ 83. Where, as here, a federal agency, of its own volition, imposes a contract
condition consistent with federal law, the Supremacy Clause is not implicated.
IV.
For these reasons, the judgment of the district court is
AFFIRMED.
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