Praxair, Inc. v. FL Power & Light

United States Court of Appeals,

Eleventh Circuit.

No. 94-2165.

PRAXAIR, INC., Plaintiff-Appellee, Cross-Appellant,

v.

FLORIDA POWER & LIGHT; Florida Power Corp., Defendants-
Appellants, Cross-Appellees.

Sept. 19, 1995.

Appeals from the United States District Court for the Middle
District of Florida. (No. 88-1622-CIV-T-21C), Ralph W. Nimmons,
Jr., Judge.

Before COX, Circuit Judge, RONEY and WOOD*, Senior Circuit Judges.

RONEY, Senior Circuit Judge:

Florida Power Corp. and Florida Power & Light Co. appeal the

district court's denial of summary judgment in which the utilities

asserted state action immunity from Praxair, Inc.'s claim of

federal antitrust liability. Praxair cross-appeals the denial of

its partial summary judgment motion. At issue is whether state

action can be inferred from the manner in which the State conducts

itself in relation to the parties' attempts at competition. Since

there was sufficient state action so that the utilities should have

been granted immunity on summary judgment, we reverse the contrary

decision of the district court.

Although neither party raised a question of jurisdiction,

each filed briefs in response to a jurisdictional question raised

by this Court. It is not necessary to discuss the jurisdictional

issues. The district court granted Praxair's motion to certify for

*
Honorable Harlington Wood, Jr., Senior U.S. Circuit Judge
for the Seventh Circuit, sitting by designation.
immediate appeal the court's denial of its cross-motion for summary

judgment. 28 U.S.C. § 1292(b). Although a prior panel of this

Court denied permission, in order to remove any doubt about the

jurisdiction of this panel to hear these fully argued appeals, we

vacate the previous order and grant § 1292(b) jurisdiction of

Praxair's appeal. There is collateral order appellate jurisdiction

of the appeals of Florida Power and Florida Power & Light. Cohen

v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546-47, 69 S.Ct.

1221, 1225-26, 93 L.Ed. 1528 (1949). Denial of state action

immunity from antitrust liability by summary judgment is

immediately appealable. Commuter Transportation Systems, Inc. v.

Hillsborough County, 801 F.2d 1286, 1289 (11th Cir.1986); see also

Askew v. DCH Regional Health Care Authority, 995 F.2d 1033, 1036

(11th Cir.), cert. denied, --- U.S. ----, 114 S.Ct. 603, 126

L.Ed.2d 568 (1993).

This lawsuit stems from Florida Power & Light's (FPL) refusal

to negotiate a lower rate for Praxair and Florida Power Corp.'s

(FPC) refusal to provide service because of a 1965 territorial

agreement. Praxair, and its predecessor Union Carbide, is located

in Mims in Brevard County, Florida, an area historically served by

Florida Power & Light and, according to the utilities, specifically

allocated to FPL in the territorial agreement. Praxair contends

Brevard County was never included in the agreement which the

Commission approved. The question presented is whether, in the

order approving the territorial agreement or in events since that

time, there has been sufficient "state action" by the Florida

Public Service Commission which would allow FPC and FPL to divide
service territories in Brevard County without violating section 1

of the Sherman Act, 15 U.S.C. § 1. We hold there has been

appropriate state action.

If a territorial agreement is made effective "solely by

virtue of a contract, combination or conspiracy of private persons,

individual or corporate," it would violate the Sherman Act. Parker

v. Brown, 317 U.S. 341, 350, 63 S.Ct. 307, 313, 87 L.Ed. 315

(1942); 15 U.S.C. §§ 1, 2. Conduct that otherwise would violate

federal antitrust laws may nevertheless be permissible when done

under the aegis of the State. 317 U.S. at 350, 63 S.Ct. at 313;

Municipal Utilities Board of Albertville v. Alabama Power Co., 934

F.2d 1493 (11th Cir.1991).

For private conduct to qualify for immunity under the state

action doctrine, the challenged restraint must meet a two-pronged

test. First, it must be "clearly articulated and affirmatively

expressed as state policy." Second, "the policy must be actively

supervised by the State itself." California Retail Liquor Dealers

Ass'n v. Midcal Aluminum, 445 U.S. 97, 105, 100 S.Ct. 937, 943, 63

L.Ed.2d 233 (1980). These two requirements operate hand-in-hand to

ensure that the displacement of competition occurs only as a result

of deliberate and intentional state policy. Federal Trade

Commission v. Ticor Title Insurance Co., 504 U.S. 621, 112 S.Ct.

2169, 119 L.Ed.2d 410 (1992). A clearly articulated policy can be

established if a state statute authorizes an agency to regulate the

area and "provides" for a regulatory scheme that inherently

displaces unfettered business freedom. Executive Town & Country

Services, Inc. v. City of Atlanta, 789 F.2d 1523, 1529 (11th
Cir.1986).

As to the first prong of Midcal, the district court at first

noted that "Florida case law and ... Florida's current statutory

and regulatory provisions ... has effectively displaced competition

between electric utilities in the retail market" and indicates a

"clearly articulated and affirmatively expressed state policy" to

regulate retail electric service areas. Order at 9-11. See Storey

v. Mayo, 217 So.2d 304, 307 (Fla.1968) (noting that "the powers of

the Commission over these privately-owned utilities is omnipotent

within the confines of [Chapter 366] and the limits of organic

law), cert. denied, 395 U.S. 909, 89 S.Ct. 1751, 23 L.Ed.2d 222

(1969); City Gas Co. v. Peoples Gas System, Inc., 182 So.2d 429,

435 (Fla.1965) (Chapter 366 of Florida Statutes "add up to what can

be considered a very extensive authority over the fortunes and

operation of the regulated entities"); Fla.Stat. § 366.04(3)

(directing the Commission to exercise its powers to avoid

"uneconomic duplication of generation, transmission, and

distribution facilities"); see also PW Ventures, Inc. v. Nichols,

533 So.2d 281, 283 (Fla.1988) (holding that "the regulation of the

production and sale of electricity [under Chapter 366] necessarily

contemplates the granting of monopolies in the public interest").

As to the second element of Midcal, the district court

concluded that generally "the Commission's extensive control over

the validity and effect of such agreements negates any inference

that the privately initiated agreements lack state supervision."

Order at 18. The Florida Supreme Court has held that the effect of

the Commission's approval of territorial agreements between public
utilities "is to make the approved contract an order of the

commission, binding as such upon the parties. City Gas, 182 So.2d

at 436.

Having said that, however, the district court then denied the

parties' cross-motions for summary judgment on the ground there was

a disputed issue of material fact concerning whether Mims was

located in the area covered by the approved agreement. Praxair had

argued that the Commission had never approved an agreement between

the utilities that included Brevard County.

In our judgment, the district court erroneously focused

primarily on the utilities' and Commission's intent in the original

proceedings which culminated in the 1965 approval order, and did

not give proper consideration to the parties' conduct and the

Commission activity since that time.

The validity of a territorial agreement under Florida's

noncompetition policy is premised on Commission approval. See City

Gas, 182 So.2d at 436; Fla.Stat. §§ 366.04(2), .05(7)-(8). If

Florida Power denied service to Praxair presumably because of a

territorial agreement, but the area in question was never approved

by the Commission, the utilities' actions would not merit state

action immunity because of the lack of "active state supervision."

Ticor, 504 U.S. at 636, 112 S.Ct. at 2178. If however the

Commission has allocated Brevard County to Florida Power & Light,

then the utilities should be accorded state action immunity and

summary judgment is appropriate. Menuel v. City of Atlanta, 25

F.3d 990, 994 (11th Cir.1994).

Whether the particular anticompetitive conduct was approved by
the State turns on two factual inquiries. The first concerns

events surrounding the Commission's approval of the territorial

agreements that resulted in Order No. 3799 in 1965. The second

relates to the parties' actions since the 1965 order which

culminated in the Commission's 1989 declaratory statement

interpreting that order.

In its 1965 Order, the Commission expressly approved several

territorial agreements involving FPL and FPC, including the

agreement at issue. The purpose of the agreement was to avoid

duplication of service in areas of the state where there was

significant population growth and where the utilities' service

areas were converging. According to the Commission, unrestrained

competition in those areas would be inefficient and uneconomical

both for the utilities and its customers. The Commission's

approval "allow[ed the utilities] to agree not to serve within

certain areas when requested to do so by a person applying for

electrical service, if that area is already served by another

utility." Neither utility could deviate from the order without

prior approval from the Commission. In re: Proposed Territorial

Agreement Between Florida Power & Light Co. and Florida Power

Corp., No. 7420-EU, Order No. 3799 (Apr. 28, 1965).

The territorial agreements which were the basis of the order

originally were agreed upon by the utilities in 1958 and expanded

in 1962. The 1958 letter agreement said that neither company would

serve or offer to serve a customer outside the service area "shown

on the following maps." Attached were highway maps of Volusia

County and Seminole County with red pencil lines to distinguish
between the respective service areas. The 1962 agreement expanded

the territory to the south and included maps for Orange and Osceola

Counties. No map was submitted specifically for Brevard County.

Brevard County was shown on both maps however, and the border line

ran along the entire Brevard County line.

Attached to the utilities' application to the Commission, and

later incorporated by reference into Order No. 3799, was a

composite map which similarly depicted a red line demarcating the

entire proposed geographic boundary. The line commenced at the

northwestern corner of Volusia County at Lake George, meandered

eastward between Volusia and Seminole Counties, and continued

southward along the border between Orange, Osceola, and Brevard

Counties. The line terminated at the southernmost point of Brevard

County. In public hearings held before the Commission, witnesses

testified that areas to the east or right of the red boundary line

were to be served by FPL, and those to the west or left of the line

would be served by FPC. Brevard County is located in the area east

of the line, in FPL's service area. During the hearing, witnesses

discussed the need for the agreement due to growth in areas between

Volusia and Seminole Counties and between Orange and Osceola

Counties. The witnesses stated there was competition to a lesser,

but still important, degree in the Orange-Brevard County and

Osceola-Brevard County areas. Brevard County was mentioned only

one other time during the hearing. Testimony indicated that the

boundary line had not been extended further to the north because

that area was served by a rural electric cooperative. Similarly,

it was not extended south of Brevard County because those areas
were not developed to the extent the utilities anticipated

competition for the same customers.

Nearly twenty-five years later, during which time Florida

Power & Light solely provided electricity to Brevard County, FPL

asked the Commission to issue a declaratory statement whether the

utilities would violate Order No. 3799 if they complied with

Praxair's request for Florida Power to sell Praxair electricity and

for Florida Power & Light to "wheel" the FPC-generated electricity

to Praxair's plant. Wheeling is a process whereby a utility

transfers power generated by a second utility over the first

utility's power lines. The Commission's statement, issued in

February 1989, concluded that Florida Power & Light's wheeling

power to the Mims plant would be in contravention of its earlier

order.

A logical interpretation of the Commission's 1965 order is

that Brevard County was included. In the 1958 letter agreement,

the territorial boundary was a two-sided, east-west division: the

area east of the line, Volusia County, was allocated to FPL and the

area west of the line, Seminole County was given to FPC. The 1962

agreement took the boundary further south. It is undisputed that

the area west of the boundary, Orange and Osceola Counties, was

allocated to FPC. It is entirely plausible and a reasonable

explanation that the area east of the boundary, which encompassed

only Brevard County, belonged to FPL. Testimony during the public

hearings confirm that view.

Even if it was not clearly intended in the original

agreements to include Brevard County, however, the way the parties
and particularly the Commission have conducted themselves since

that time indicates that Brevard County has been allocated to FPL's

service area. An agency's interpretation of its own regulations

must be given controlling weight unless that interpretation is

plainly erroneous or inconsistent with the regulation. Stinson v.

United States, --- U.S. ----, ----, 113 S.Ct. 1913, 1919, 123

L.Ed.2d 598 (1993); Florida Gas Transmission v. FERC, 741 F.2d

1307, 1309 (11th Cir.1984); PW Ventures, 533 So.2d at 281.

Florida Power & Light was already serving Mims and Brevard County

when the agreement was approved. For 30 years since that time, the

Commission and the utilities have treated Mims as part of Florida

Power & Light's service territory. During its 1981 to 1987

comprehensive review of approved territorial agreements, the

Commission developed maps which depicted Brevard County in FPL's

service area. Thereafter, the Commission denied its request to

sell electricity to Praxair at a special rate. Finally, in its

1989 declaratory statement, the Commission specifically found that

"pursuant to the applicable Florida Statutes and case law," Florida

Power & Light could not wheel power to Praxair because it would be

in contravention of the approved territorial agreement. Order No.

20808 at 5. In view of the evidence before it, the Commission

reasonably interpreted the prior agreement to allocate Brevard

County to Florida Power & Light.

Florida's regulatory scheme met the two-pronged Midcal test so

that the utilities are immune from Sherman Act challenges. The

court's denial of Florida Power's and Florida Power & Light's joint

motion for summary judgment is reversed. Praxair's cross-appeal of
the denial of its motion for summary judgment, which is based on

the premise that Brevard County was not included in the approved

territory agreement, is affirmed.

APPEAL: REVERSED.

CROSS-APPEAL: AFFIRMED.