Attorneys for Appellant Attorney for Appellee
James S. Stephenson Thomas A. Pastore
Wayne E. Uhl Indianapolis, Indiana
Indianapolis, Indiana
____________________________________________________________________________
_
In the
Indiana Supreme Court
_________________________________
No. 49S02-0409-CV-406
Brownsburg Community School
Corporation,
Appellant (Defendant below),
v.
Natare Corporation,
Appellee (Plaintiff below).
_________________________________
Appeal from the Marion Superior Court, No. 49D05-0305-PL-906
The Honorable Gary L. Miller, Judge
_________________________________
On Petition To Transfer from the Indiana Court of Appeals, No. 49A02-0310-
CV-871
_________________________________
March 17, 2005
Boehm, Justice.
We hold that the Indiana Antitrust Act does not create a civil treble
damage remedy against an arm of government.
Factual and Procedural Background
The following facts are alleged in the complaint. We take them as
true for purposes of this interlocutory appeal of the denial of a motion by
a defendant for judgment on the pleadings.[1]
The School Corporation undertook a building project for Brownsburg
High School that included a fine arts addition and a swimming pool. The
School Corporation hired Schmidt Associates as its architect, and Schmidt
retained Spear Corporation as a pool consultant. Spear is a distributor
for Myrtha Pools USA, which manufactures prefabricated pools.
Specifications were published for general contractors to bid on the entire
project. Included were specifications derived from language provided by
Spear calling for a concrete and tile cast-in-place pool and alternate
specifications for a prefabricated pool tank. Plaintiff, Natare
Corporation, a supplier of prefabricated pools based in Indianapolis,
claims that the specifications included language that only a Myrtha
prefabricated pool could meet. In addition to the pool tank, the
specifications also called for a moveable bulkhead. Natare claims that the
bulkhead specifications were based on a Myrtha design and excluded Natare’s
product from consideration. The School Corporation responds that its
specifications were drawn to get the best product at the lowest cost. We
of course express no opinion on the validity of either party’s allegations.
The bid documents contemplated submission of proposals that did not
meet the specifications, but only if any variations from specifications
were approved by the architect.[2] Natare attempted to gain approval of
its products, including its prefabricated pool tank and moveable bulkhead,
as meeting this “or equal” requirement. Schmidt responded that Natare’s
prefabricated pool tank with a PVC liner system was not equal to the
specified panelized heat bonded PVC laminated system. Schmidt also noted
that Natare had not identified any completed projects using Natare’s
proposed system. Schmidt ultimately also rejected the Natare bulkhead
design, which utilized foam materials in the buoyancy chambers, as not
equal to the specified stainless steel movable bulkhead. After this
exchange, three general contractors submitted bids for the entire project.
Each relied on bids for the pool from either a local contractor or Spear.
In March 2003 Natare sued the School Corporation, Schmidt, and Spear,
alleging that the three had conspired to exclude Natare from consideration
as a supplier for the pool and bulkhead in violation of the provision of
the Indiana Antitrust Act prohibiting combinations in restraint of trade,
Indiana Code section 24-1-2-3 (2004). Natare alleged that the wording of
the specifications unreasonably limited competition by requiring bidding
contractors to use Myrtha Pool materials and equipment supplied by Spear,
and that Spear had a significant role in determining whether other products
were “equal.” Pursuant to Indiana Code section 24-1-2-7, the complaint
sought treble damages, costs, and attorney fees for violations of the
Indiana Antitrust Act.
The School Corporation answered the complaint and moved for judgment
on the pleadings under Indiana Trial Rule 12(C), alleging that it was not a
“person” as that term is used in the Indiana Antitrust Act, and, therefore,
was not an entity subject to the civil treble damages remedy provided by
that statute. The trial court denied the motion but granted the School
Corporation’s petition to certify the order for interlocutory appeal. The
Court of Appeals affirmed, holding that a school corporation is a “person”
who can sue and be sued under the Indiana Antitrust Act. Brownsburg Cmty.
Sch. Corp. v. Natare Corp., 808 N.E.2d 148, 154 (Ind. Ct. App. 2004). We
granted transfer. Brownsburg Cmty. Sch. Corp. v. Natare Corp., 2004 Ind.
LEXIS 786 (Ind. Sept. 9, 2004).
I. Public Purchasing
The Public Purchasing laws include provisions addressing contracts by
school corporations, and requiring, inter alia, that the contract be
awarded to “the lowest responsible and responsive bidder.”[3] Ind. Code §
5-22-7-8 (2004). Only a citizen or a taxpayer of a municipality may
challenge the award of a government contract under Indiana’s Public
Purchasing Statute. See All-Star Constr. & Excavating, Inc. v. Bd. of Pub.
Works, 640 N.E.2d 369, 370 (Ind. 1994); Shook Heavy & Envtl. Constr. Group
v. City of Kokomo, 632 N.E.2d 355, 358 (Ind. 1994). Natare is neither a
citizen nor a taxpayer of Brownsburg, and therefore has no claim under that
statute. However, this Court has observed that “[o]ne need not be a
citizen or a taxpayer of the municipality . . . to maintain an action for
fraud or collusion in the award of a contract. Ind. Code § 24-1-2-7.” All-
Star, 640 N.E.2d at 370. Accord Shook, 632 N.E.2d at 358. The statutory
reference is to the treble damages provision in the Indiana Antitrust Act.
II. Indiana Antitrust Act
Because Natare has no claim for damages under the Public Purchasing
Statute, it seeks to bring its claim under the Indiana Antitrust Act. Ind.
Code § 24-1-2-1—12 (2004). The principal issue is whether a governmental
entity is subject to the private treble damages remedy provided for
violation of the antitrust act.
A. The Statutory Framework
Sections 1 and 2 of the Indiana Antitrust Act, I.C. § 24-1-2-1, et
seq., are comparable to the federal Sherman Act, 15 U.S.C. sections 1 and
2, respectively. Like section 1 of the Sherman Act, Indiana Code section
24-1-2-1 addresses combinations in restraint of trade. Similarly, section
2 of the Sherman Act and Indiana Code section 24-1-2-2 both deal with
monopolization. Indiana has two additional provisions for which there is
no federal counterpart. Section 3, I.C. § 24-1-2-3, prohibits the
restraint of bidding for letting of contracts whether public or private,
and Section 4, I.C. § 24-1-2-4, addresses remedies for “collusion or fraud”
among contract bidders. Specifically, Section 4 of the Indiana Antitrust
Act provides that in cases of “collusion or fraud . . . among the bidders
at the letting of any contract or work as provided in [Section 3] . . . the
principal who lets the contract . . . shall not be liable for such letting
or on account of said contract . . .” Section 4 thus frees the principal
who lets a contract tainted by “collusion or fraud” among bidders from
liability on the contract. By its terms, Section 4 applies only if there
is “collusion or fraud . . . as provided in [Section 3].” It thus does not
prohibit any conduct. Rather, it deals with remedies for violations of
Section 3.
Section 3 of the Indiana Antitrust Act does not use the term
“collusion or fraud,” but does prohibit certain conduct. It provides:
A person who engages in any scheme, contract, or combination to
restrain or restrict bidding for the letting of any contract for
private or public work, or restricts free competition for the letting
of any contract for private or public work, commits a Class A
misdemeanor.
I.C. § 24-1-2-3. Natare alleges that the defendants violated Section 3 by
denying Natare’s products “equal” status under the specifications and
thereby restraining Natare’s ability to bid. The School Corporation
responds that because it is a governmental entity it not subject to the
Indiana Antitrust Act’s criminal and civil penalties.
B. Indiana Case Law
Three appellate decisions have referred to the treble civil damage
provision of the Indiana Antitrust Act in the context of a claim against a
governmental entity, but none was faced with the question whether or not a
remedy existed against the entity itself.
In City of Auburn v. Mavis, 468 N.E.2d 584, 585 (Ind. Ct. App. 1984),
the Court of Appeals affirmed a jury award of treble damages and attorney
fees against the City of Auburn. Mavis was a losing bidder for a public
contract to provide radio communications equipment to the Auburn Fire
Department and brought an action against the City and D & L Communications,
Inc. for violation of Section 3, which makes unlawful acts which operate to
restrain open and free competition in bidding to obtain contracts for
private or public work. Id. At trial the City of Auburn and D & L
conceded that they violated this statute when they contrived to develop
specifications favoring equipment sold by D & L before the City solicited
bids. Id. at 586. On appeal, the City did not contend that it was immune
from treble damages under the Indiana Antitrust Act. The issue, though
assumed, was not debated in either the trial court or the Court of Appeals.
In Shook Heavy & Environmental Construction Group v. City of Kokomo,
632 N.E.2d 355 (Ind. 1994), an unsuccessful bidder claimed that the City of
Kokomo violated Indiana’s Public Purchasing Statute by failing to award the
contract to the lowest bidder. Kokomo had solicited bids for the
construction of a municipal sludge composting facility. When the bids were
opened, Kokomo awarded the contract to the lowest responsible and
responsive bidder. Shook Heavy & Environmental Construction Group, a
losing bidder, filed suit in federal court seeking an injunction against
the award of the contract on the basis that deficiencies in the bid of the
apparent low bidder caused that bidder’s bid to not be lower than Shook’s.
Id. at 357. In response to a certified question from the federal district
court, we held that because Shook was not a citizen or taxpayer of Kokomo,
Shook could not challenge the award under the Public Purchasing Statute.
Id. at 358. Citing Auburn, we noted that Section 7 of the Indiana
Antitrust Act allows an unsuccessful bidder to challenge the award of a
contract by the city if the plaintiff alleges “collusion or fraud.” Id.
The unsuccessful bidder in Shook sought only an injunction and
asserted its claims under the Public Purchasing Act. In making this
passing reference to remedies under Section 7, we were not faced with the
question of who among the potential defendants might be subject to a
“challenge” under this section. Nor were we concerned with precisely what
form that challenge might take. A combination in restraint of trade
necessarily involves at least two parties. Lawrence Anthony Sullivan,
Antitrust 323 (West 1976). And an entity cannot combine with its own
employees or subsidiaries. See Schwimmer v. Sony Corp. Am., 677 F.2d 946,
953 (2d Cir. 1982) (“collaborative action between a corporation and its
employees, or among employees within a corporation, is not regarded as
joint action within the meaning of § 1” of the Sherman Act); Univ. Life
Ins. Co. v. Unimarc Ltd., 699 F.2d 846, 852 (7th Cir. 1983) (conspiracy
between a corporation and its officers not actionable under Section 1 of
the Sherman Act). Cf. Copperweld Corp. v. Independence Tube Corp., 467
U.S. 752, 778 (1984) (A parent corporation and its wholly owned subsidiary
are incapable of conspiring with each other for purposes of § 1 of the
Sherman Act.); Rep. of the Attorney General’s Nat’l Comm. to Study the
Antitrust Laws, 30-36 (1955). Accordingly, at least one nongovernmental
entity will ordinarily be a party to a combination in which a governmental
entity is also a player. In short, Shook was not faced with, and did not
consider, whether all parties, including the governmental entity, could be
held liable for treble damages under the antitrust law.
Shook took its reference to Section 7 remedies directly from All-Star
Construction & Excavating, Inc. v. Board of Public Works, 640 N.E.2d 369
(Ind. 1994). Like Shook, All-Star merely observed that some remedy
existed, without exploring precisely what remedy was available against
which entities. In All-Star, the lowest bidder for construction of a
city’s economic development project sued when the city awarded the contract
to a competitor because it was “a local contractor and a minority
contractor.” 640 N.E.2d at 370. We held that there was no evidence that
the City was engaged in “collusion or fraud,” and the constructive fraud
claim failed for that reason. Id.
In sum, the issue in this case, whether a local or municipal
government is susceptible to a claim for treble damages under Indiana Code
section 24-1-2-7, is a matter of first impression.
C. Criminal Liability of Governmental Entities
By their terms, the only portions of the Indiana Antitrust Act that
contain substantive prohibitions are Sections 1, 2, and 3. These sections
are framed similarly to provisions of the Criminal Code and provide that it
is a Class A Misdemeanor to engage in the actions prohibited. We think the
legislature, when writing this statute in 1907, did not contemplate a
governmental entity as a potential violator of its prohibitions. First, on
the only occasion where the issue has been addressed by an Indiana
appellate court, the Court of Appeals held that the State could not be
criminally responsible, even where the statute prohibited acts by “persons”
and defined “person” to include “governmental entities.” In State v.
Ziliak, 464 N.E.2d 929 (Ind. Ct. App. 1984), landowners alleged that state
employees committed criminal property offenses when the state employees
entered upon the landowners’ property and removed certain Indian artifacts
without permission. The landowners sought damages under Indiana Code
section 34-4-30-1, which provides civil remedies to crime victims.[4] The
Court of Appeals held: “A criminal offense is an offense against a
sovereign state.” Id. at 930 (citing Reed v. Carrigan, 190 Ind. 29, 129
N.E. 8 (1920)); 8 I.L.E. Criminal Law § 2 (1971); 21 Am. Jur. 2d Criminal
Law § 1 (1981); 22 C.J.S. Criminal Law § 1 (1961). “A crime is said to be
an offense against the sovereignty.” 21 Am. Jur. 2d Criminal Law § 1
(1981). “Because a crime is an offense against the sovereign, it is
axiomatic that the sovereign cannot commit a crime.” Ziliak, 464 N.E.2d at
930. The court noted that the criminal code, I.C. § 35-41-1-22, defined
“person” as “a human being, corporation, partnership, unincorporated
association, or governmental entity.” Id. (emphasis in original). Despite
this definition, the Court of Appeals concluded that the State was a
“person” as that term is used in the Indiana Criminal Code only for
purposes of its status as a victim.
Natare argues, and the Court of Appeals agreed, that Ziliak is
inapposite here because it dealt with a claimed crime by the State itself,
and did not address whether a subdivision of the State could commit a
crime. Brownsburg Cmty. Sch. Corp. v. Natare Corp., 808 N.E.2d 148 153
(Ind. Ct. App. 2003). We find no authority supporting such a distinction.
For the reasons expressed below we believe neither the State nor any other
governmental entity is subject to criminal provisions of Indiana statutes
without the legislation making that result absolutely clear.
Indiana law as reflected in Ziliak is consistent with other United
States jurisdictions in rejecting the possibility of a crime by the
government. Relevant federal cases and statutory authority are sparse.
One federal statute carrying criminal penalties (regulating prices and
profits for commodities in emergencies) defines “person” as “an individual,
corporation, partnership, association, or any other organized group of
persons . . . and includes the United States or any agency thereof, or any
other government, or any of its political subdivisions, or any agency of
the foregoing.” Emergency Price Control Act of 1942, c. 26, Title III, §
302(h), c. 26, 56 Stat. 36. Section 205 of the Act provides for injunctive
remedies and criminal fines and imprisonment for convictions. However, the
definition of person also explicitly states that: “no punishment provided
by this Act shall apply to the United States, or to any [federal, state, or
local] government, political subdivision, or agency.” Id. This definition
has been interpreted to mean that governmental agencies are exempt from the
act’s criminal liabilities, but not necessarily its remedial sanctions.
See 1 Working Papers of the Nat’l Comm. on Reform of Fed. Criminal Laws 175
(1970), typically known as the Brown Commission. The Brown Commission also
noted that though the Emergency Price Control Act specifically extended its
prohibitions to governmental entities, “no case has been found in which a
court has held such an agency subject to the Act.” Id. The Brown
Commission concluded by recognizing that although “there is nothing in the
nature of a municipal corporation which would make it inherently incapable
of committing a crime, there does not appear to be a Federal case holding a
governmental entity as such criminally liable.” Id. at 176.
State law also finds the concept of a crime by the sovereign to be an
alien notion. We have found no criminal code in this country that imposes
criminal liability on the sovereign and only one that would permit a fine
on an arm of the government.[5] The Model Penal Code specifically excludes
from its definition of “corporation” any entity “organized as or by a
governmental agency for the execution of a governmental program.” American
Law Institute, Model Penal Code § 2.07(4)(a) (P.O.D. 1962). The commentary
to section 207(4)(a) observes that “[l]iability in such cases would seem
entirely pointless, although of course the liability of individuals
involved in criminal activity is preserved.” 1 American Law Institute,
Model Penal Code § 207(5)(a), at 345 (1985). At least five states have
adopted a version of 2.07(4)(a).[6] Most states, however, like Indiana,
contain no express treatment of the issue in their general criminal laws.
In the absence of specific legislative direction, we think the Court of
Appeals correctly concluded in Ziliak that the legislature did not
contemplate a violation of a criminal prohibition by a governmental entity.
D. Specific Provisions of the Indiana Antitrust Act
Natare claims a violation of Section 3, and seeks treble damages for
its lost time in preparing a useless bid and attorney fees, under Section 7
of the Indiana Antitrust Act.[7] That section, tracking section 15 of the
Clayton Act, provides treble damages and attorneys fees for those injured
in their “business or property” by a violation of the Indiana Antitrust
Act. This section purports to give a right to treble damages to any
“person” injured by any “person” doing “any thing forbidden or declared to
be unlawful” by any of the first three sections of the Indiana Antitrust
Act.[8] Consistent with the usual legislative silence on the application
of criminal laws to governmental entities, the Indiana Antitrust Act
neither defines “person” to include a governmental entity nor specifically
excludes the possibility of a crime by such an entity.
The School Corporation argues that it is not a “person” as that term
is defined in the antitrust act. Indiana Code section 24-1-2-10 provides
definitions similar to those found in the Sherman Act, 15 U.S.C. § 7
(2000):
The words “person” or “persons” whenever used in this chapter shall be
deemed to include corporations, associations, limited liability
companies, joint stock companies, partnerships, limited or otherwise,
existing under or authorized by the laws of the state of Indiana, or
of the United States, or of any state, territory, or district of the
United States, or of any foreign country.
I.C. § 24-1-2-10. Natare argues that the School Corporation can be liable
for treble damages and attorney fees because “person” is defined by the
statute to include “corporations,” and school corporations are not
explicitly exempt from this definition. School corporations, like general
business corporations, are creatures of statute. In the case of school
corporations, they are created pursuant to Indiana Code section 20-4-1.
Reflecting that statute, the Brownsburg School Corporation uses the term
“corporation” as a part of its legal name. The Court of Appeals found this
persuasive and agreed with Natare that a school corporation is a “person”
subject to the treble damages remedy provided by the antitrust act. We
disagree for reasons grounded in the text of the Antitrust Act as well as
the general assumption that criminal laws are not applicable to
governmental entities.
The School Corporation first argues that the term “corporation” is
ambiguous and that the General Assembly did not intend the term to include
governmental entities. As originally enacted in 1907, the antitrust law’s
definition of “person” included, “corporations,” “associations,”
“companies” and “partnerships.” The School Corporation points out that the
other entities included in this definition as “persons” are all private
business entities, and argues that this implies all “persons” are from the
private sector. Moreover, in contrast to the silence of the Antitrust Act
on this point, the School Corporation offers a number of statutes where the
General Assembly has treated political subdivisions as distinct from
“corporations” and subjected public bodies to the same treatment as private
corporations by express language.[9]
We do not believe the definition of person is the central issue in
determining whether the School Corporation, or any arm of government, is
susceptible to a claim for treble damages. Although we recognize the
maxims of statutory construction involved here, we find them at best
suggestions, and not directives. It would be anomalous indeed if a private
business overcharged as a result of price fixing can recover treble damages
but a school corporation cannot. We agree that municipal corporations are
“persons” as that term is used in the Indiana Antitrust Act. They
therefore can sue under Section 7 if injured in their “business or
property” by an antitrust violation. But it does not follow that they are
also potential treble damage defendants. In order to be sued under Section
7, a “person” must have done something “forbidden by” the Indiana antitrust
law. The substantive prohibitions of the antitrust laws are criminal in
nature. Accordingly, we think the legislation did not contemplate the
possibility of a governmental entity engaging in an action forbidden by the
statute. Rather, as Section 4 reflects, the statute views governmental
entities as victims, not perpetrators, and explicitly relieves them of
liability from a contract that was the result of collusive bidding.
Natare also asserts that when the General Assembly first enacted the
statute that created school corporations, I.C. § 20-4-1-26.1 (formerly I.C.
§ 20-4-1-26), it expressly included a provision that school corporations
could sue and be sued. We think this is of no relevance to the issue
before us. The power to sue and be sued simply confers general legal
capacity on the entity. It says nothing about what kinds of suits the
entity may bring or what liabilities it may incur. Natare also points out
that the Antitrust Act was amended by the General Assembly in 1986 and in
1993 and did not exempt municipal corporations form the act.[10] From
this, Natare reasons that the General Assembly legislatively acquiesced in
the municipal corporation’s liability to suit. These amendments merely
provided updated and uniform terms. They do not suggest that the General
Assembly revisited the liability of municipal or local government entities.
E. Governmental Immunity
Rejecting a treble damage remedy against a governmental entity is
fortified by the fact that at the time the Indiana Antitrust Act was
enacted there was no prospect of civil liability on the part of a
governmental entity. Indiana recognized the common law doctrine of
sovereign immunity until 1972, when this Court abolished sovereign immunity
in most areas. Campbell v. State, 259 Ind. 55, 61-62, 284 N.E.2d 733, 736-
37 (1972). In response to Campbell, in 1974, the Indiana legislature
enacted the Indiana Tort Claims Act, which identified a list of
governmental activities that are immunized by statute from tort liability.
See I.C. § 34-13-3-3.
Natare argues that the Court of Appeals correctly concluded that
because the General Assembly has “increasingly allowed the government to be
sued for wrongdoing” the 1907 presumption of immunity has been eroded.
Brownsburg Comty. Sch. Corp., 808 N.E.2d at 152-53. The Court of Appeals
noted that since 1974, the Tort Claims Act permits public entities to be
held liable for negligence, I.C. §§ 34-13-3-1—25 (formerly I.C. § 34-4-
16.5-1). The School Corporation points out that in the late nineteenth
century it was presumed that school corporations were immune from suit.
Freel v. Sch. City of Crawfordsville, 142 Ind. 27, 28, 41 N.E. 312, 312
(1895) (“where subdivisions of the state are organized solely for a public
purpose, by a general law, no action lies against them for an injury
received by a person on account of the negligence of the officers of such
subdivision, unless a right of action is expressly given by statute”). “A
statute in derogation of the common law is presumed to be enacted with
awareness of the common law.” Cook v. Whitsell-Sherman, 796 N.E.2d 271,
275 (Ind. 2003). In the legal environment of 1907 there was no need to
provide explicitly that governmental entities could not be subjected to
treble damages. It was assumed they were immune from suit. And, as
explained by Part G, at that time the federal antitrust laws, which served
as the prototype for the Indiana law, made the same assumption.
F. Public Policy
Public policy considerations support our reading of the statute.
This Court has recognized that treble damages are punitive in nature.
Obremski v. Henderson, 497 N.E.2d 909, 911 (Ind. 1986) (referring to the
treble damages remedy for crime victims provided by Indiana Code section 34-
4-30-1 (now I.C. § 34-24-3-1)). The Tort Claims Act prohibits an award of
punitive damages against a governmental entity. I.C. § 34-13-3-4(b).
Courts have also been reluctant to impose punitive damages on government
entities in part because the penalty falls ultimately on innocent
taxpayers. See State v. Carter, 658 N.E.2d 618, 624 (Ind. Ct. App. 1995)
(sanction of attorney fees against State disfavored “because it is the
citizen taxpayers who would bear the burden of this punitive award”); City
of Gary v. Falcone, 169 Ind. App. 295, 297, 348 N.E.2d 41, 42 (1976) (“if
punitive damages were allowed against municipalities, the group for whose
protection such damages were purportedly awarded, the citizens and
taxpayers, would be the identical group who would bear the burden of the
award. Such a result is anomalous, indeed.”). Moreover, “it is far from
clear that municipal officials . . . would be deterred from wrongdoing by
the knowledge that large punitive awards could be assessed based on the
wealth of their municipality.” City of Newport v. Fact Concerts, Inc., 453
U.S. 247, 268 (1981); see also Gares v. Willingboro Township, 90 F.3d 720,
736 (3d Cir. 1996) (“the reasoning that punitive damages serve as a
deterrent becomes less sensible when applied to a municipality”).
It is one thing to visit civil penalties on individuals who violate
the law. And if a private organization employs persons who transgress,
imposing penalties on the organization places the loss on those who
voluntarily associated themselves with it. In the case of a for-profit
organization, those individuals within the organization ordinarily stood to
gain from the illegal activity. But imposing treble damages on a
governmental entity visits the loss on wholly innocent taxpayers.
Moreover, the treble damages remedy under the antitrust law is designed to
deter unlawful competitive activity presumably undertaken to enhance the
profits of the violators. But in this case of a violation of the antitrust
laws by a governmental entity, the government will typically be a victim,
not a beneficiary. That is the situation presented here if Natare’s
allegations are correct. For these reasons as well, we conclude that a
governmental entity was not contemplated as a defendant under Section 7,
and hold that the School Corporation cannot be held liable for treble
damages.
G. Federal Antitrust Liability of Governmental Entities
We also find instructive the history of government liability under the
federal antitrust laws. It too points in the direction of nonliability.
The Clayton Act allows any “person” to be a plaintiff. The term is
defined to include “corporations and associations existing under or
authorized by” federal, state or foreign law. 15 U.S.C. § 12. As early as
1906 it was held that a municipality could be a plaintiff. Chattanooga
Foundry & Pipe Works v. City of Atlanta, 203 U.S. 390, 396 (1906) (a
municipality is a “person” entitled to sue under § 7 of the Sherman Act).
Chattanooga did not address, and apparently was not presented with any of
the issues discussed in Parts C, E, and F of this opinion. Similar rulings
as to states and foreign nations followed. See Pfizer, Inc. v. Gov’t of
India, 434 U.S. 308, 320 (1978) (“a foreign nation otherwise entitled to
sue in our courts is entitled to sue for treble damages under the antitrust
laws to the same extent as any other plaintiff”); Georgia v. Pa. R.R. Co.,
324 U.S. 439, 447 (1945) (State of Georgia was a “person” within provision
of § 26 of the Clayton Act authorizing any person to sue for injunctive
relief and to recover damages).
Whether an entity of local government could be sued for damages under
the Sherman Act did not arise until many years later. In 1978, a four-
Justice plurality of the Supreme Court held that a municipal utility, which
had brought a treble damage claim against a competitor, could be subject to
a counterclaim for treble damages. City of Lafayette v. La. Power & Light
Co., 435 U.S. 389, 412-13 (1978). The plurality concluded that “the Parker
doctrine exempts only anticompetitive conduct engaged in as an act of
government by the State as sovereign or, by its subdivisions, pursuant to a
state policy to displace competition with regulation or monopoly public
service.” Id. at 413. Chief Justice Burger agreed that the municipal
utility could be sued for treble damages but based his opinion on the
nature of the entity as a competitor in a market place, not on its status
as an arm of government. Id. at 419. Four Justices dissented specifically
complaining that exposure to treble damages could be ruinous to local
governments. Id. at 440. The dissenters took the view that a state can
authorize its arms of government as it chooses, and the “state action”
doctrine announced in Parker v. Brown[11] should exempt any government
actor from the antitrust law. Shortly after City of Lafayette, the Court
held that Parker immunity extended to a municipality only if its actions
were in furtherance of a “clearly articulated and affirmatively expressed”
state policy. Cmty. Communications Co. v. City of Boulder, 455 U.S. 40, 51
(1982). The general grant of authority under Home Rule legislation, such
as Indiana’s, codified at Indiana Code section 36-1-3-1—9, was not a
sufficiently articulated state policy to guarantee immunity.
Although no treble damage award had yet been entered against a
governmental entity, after City of Lafayette and City of Boulder, that
result was seen as a realistic possibility. Congress promptly responded to
these decisions by enacting the Local Government Antitrust Act of 1984,
codified at 15 U.S.C. §§ 34-36. That statute left governmental entities
subject to injunctive or declaratory relief but prohibited recovery of
antitrust damages “from any local government, or official or employee
thereof acting in an official capacity.”[12] 15 U.S.C. § 35(a). A “local
government” within the meaning of the Act includes any “city, county,
parish, town, township, village or any other general function governmental
unit established by state law,” and also “a school district, sanitary
district, or any other special function governmental unit established by
State law.” 15 U.S.C. § 34(1)(A)-(B). The House Judiciary Committee
pointed out that City of Lafayette and City of Boulder “appear to have
limited the extent that antitrust immunity applicable to States will be
accorded to local governments” and these decisions “could undermine a local
government’s ability to govern in the public interest. Most of the suits
instituted by private parties have sought treble damages from local
governments.” 5 U.S. Code Congressional & Administrative News 98 Cong. 2d
1984 at 4603 (1985). The purpose of the Act was to “clarify” the
application of the Clayton Act to the official conduct of local governments
and eliminate “antitrust damage liability for official conduct of a local
government and its officials.” Id. Congress was also concerned that local
taxpayers, the very persons the antitrust laws are designed to protect, are
called upon to pay treble damage judgments rendered against local
governments. Irving Scher, Antitrust Adviser § 7.09 at 43 (Vol. 2, 4th ed.
2003).
Indiana courts have generally followed federal precedent in
interpreting the Indiana Antitrust Act. E.g. Berghausen v. Microsoft
Corp., 765 N.E.2d 592, 594-96 (Ind. Ct. App. 2002); Mavis, 468 N.E.2d 584,
585-86; Rumple v. Bloomington Hosp., 422 N.E.2d 1309, 1313-14 (Ind. Ct.
App. 1981); Citizens Nat’l Bank of Grant County v. First Nat’l Bank in
Marion, 165 Ind. App. 117, 125, 331 N.E.2d 471, 476 (1975). Consistent
with that approach, a few states have followed City of Lafayette and City
of Boulder.[13] We do not join them. Where the government activity is not
competition with private enterprise, even the City of Lafayette Court
lacked a majority for subjecting the municipality to treble damages. In
any event, we think the rapid congressional removal of exposure of
potential liability of municipalities under the antitrust laws also
indicates that liability was simply not contemplated by federal antitrust
legislation. When the implications of this potential liability were
explored, it was promptly and soundly rejected.
We do not agree that federal precedent is appropriate in considering
whether governmental immunity is available to municipal and local
government units under state antitrust laws. Parker and its progeny turned
significantly on the relationship between the federal government and the
states as dual sovereignties. Municipal and local government units, on the
other hand, are creatures of the State. As such there is no consideration
of comity or deference. The only issue is the intention of the state
legislature to impose or withhold liability. See Freitas v. City and
County of San Francisco, 92 Cal. App. 3d 913, 917 (1979); Fine Airport
Parking, Inc. v. City of Tulsa, 71 P.3d 5, 11 (Ok. 2003) (“The principles
of federalism that govern the relationship between the two sovereigns, the
federal and state governments, do not apply to the relationship between a
state and a municipality acting pursuant to state law . . . . The
principles of federalism supporting the Parker doctrine are meaningless in
an analysis of municipal liability”); Town of Hallie v. City of Chippewa
Falls, 314 N.W.2d 321, 324 (Wis. 1982) (“The relationship between the
federal government and the states is not parallel to the relationship
between the state government and the cities.”). For the reasons already
given, we do not read our statute to provide liability of governmental
agencies. In this conclusion we join Massachusetts, New Jersey, Oklahoma
and New York in rejecting the federal state action immunity doctrine under
state antitrust law. Monsanto Co. v. Dept. of Pub. Utils., 586 N.E.2d 982,
983 (Mass. 1992); Fanelli v. City of Trenton, 641 A.2d 541, 547-49 (N.J.
1994); City of Tulsa, 71 P.3d at 12; Capital Tel. Comp. v. New York Tel.
Comp., 540 N.Y.S.2d 895, 896-99 (1989).
Conclusion
The order of the trial court denying the motion of Brownsburg
Community School Corporation for judgment on the pleadings is reversed.
This case is remanded with direction to grant the School Corporation’s
motion for judgment on the pleadings.
Shepard, C.J., and Dickson, Sullivan, and Rucker, JJ. concur.
-----------------------
[1] Under Trial Rule 12(C), motion for judgment on the pleadings is to be
granted ‘“only where it is clear from the face of the complaint that under
no circumstances could relief be granted.”’ Forte v. Connerwood
Healthcare, Inc., 745 N.E.2d 796, 801 (Ind. 2001) (quoting Culver-Union
Township Ambulance Serv. v. Steindler, 629 N.E.2d 1231, 1235 (Ind. 1994)).
When reviewing a 12(C) motion, the reviewing court accepts as true the well-
pleaded material facts alleged in the complaint, and bases its ruling
solely on the pleadings. Noblesville Redevelopment Comm’n v. Noblesville
Assocs. Ltd. P’ship, 674 N.E.2d 558, 562 (Ind. 1996).
[2] Paragraph 3.3.1 of AIA Document A701-1997, Instructions to Bidders
provided:
The materials, products and equipment described in the bidding
documents establish a standard of required function, dimension,
appearance and quality to be met by any proposed substitution.
Whenever possible and without prejudice to price, quality, or other
considerations, local sources of labor, materials and services shall
be given preference. Generally, where words “or equal” appear, a
product of another manufacturer will be acceptable, but only if
approved in writing by the Architect prior to bidding in accordance
with the provisions stated in the Contract Documents and these
Instructions to Bidders.
[3] The public bidding statute, as applied to school corporations, provides
the school corporation the discretionary power to determine “the
responsible offeror” that is “most advantageous to the governmental body,
taking into consideration price and the other evaluation factors set forth
in the request for proposals.” Ind. Code § 5-22-9-7(a) (2004). The school
corporation must have its purchase or lease available for the public. I.C.
§ 5-22-18-5(b)(3). A citizen or taxpayer of that school district may then
seek to enjoin a contract attempted to be entered into pursuant to
competitive bidding where the award is arbitrary, corrupt, or fraudulent.
Budd v. Bd. of County Comm’rs of St. Joseph County, 216 Ind. 35, 37, 22
N.E.2d 973, 975 (1939); Bd. of Comm’rs of Henry County v. Gillies, 138 Ind.
667, 673, 38 N.E. 40, 42 (1894).
[4] In Ziliak it was agreed that the acts of state employees constituted
violations of Indiana Code section 35-43-2-2 (criminal trespass), and
Indiana Code section 35-43-1-2 (criminal mischief). 464 N.E.2d at 930.
The Ziliaks sought damages provided in the section now codified at Indiana
Code section 34-24-3-1 (2004), which provided for a civil action for treble
damages and attorneys fees for violations ofIndiana Code section 35-43
among others.
[5] See City of Ludlow v. Commonwealth, 56 S.W.2d 958 (Ky. 1933), where the
city built an allegedly defective sewer that, when it rained, caused
backups in the basements of several residences, “producing an odor so
noisome, offensive, and sickening that the occupants of the houses could
not eat or sleep.” Id. at 958. The state prosecuted and the City was
convicted of maintaining a common nuisance and fined $1,500. Id. It
appealed. The court of appeals cited three earlier Kentucky cases in which
cities had been held criminally liable for maintaining a public nuisance.
The court reversed and remanded for a new trial on the grounds that the
$1,500 fine imposed on the City violated Kentucky’s constitutional
prohibition of excessive fines. Id. at 968-69.
[6] See Haw. Rev. Stat. § 702-229(1) (2003); N.J. Stat. § 2C:2-7(b)(1)
(2004); N.D. Cent. Code § 51-08.1-01 (2003); Ohio Rev. Code Ann. §
2901.23(D) (2004); 18 Pa. Cons. Stat. § 307(F) (2004).
[7] Unlike the federal antitrust laws and those of most states, the Indiana
Antitrust Act does not explicitly provide an injunctive remedy. Whether an
injunctive remedy is available under the Indiana Antitrust Act, and if so
whether it lies against a unit of local government are issues not presented
in this case and we express no opinion on them.
[8] “Any person who shall be injured in his business or property by any
person or corporation by reason of the doing by any person or persons of
anything forbidden or declared to be unlawful by this chapter may sue
therefor . . . and shall recover a penalty of threefold the damages which
may be sustained, together with the costs of suit, including a reasonable
attorney’s fee.” I.C. § 24-1-2-7.
[9] The minimum wage law defines an employer as “any . . . corporation, . .
. the state, or other governmental agency or political subdivision.” I.C.
§ 22-2-2-3. The Health provisions of the Code define “person” as “. . . a
governmental entity, or a corporation.” I.C. § 16-18-2-274(a). The
School Corporation also refers to a number of schemes where different
definitions of “person” expressly include or exclude government entities.
E.g., I.C. § 4-2-6-1(11) (Ethics & Conflicts of Interest for State
Officers) (‘“person’ means any . . . corporation, . . . or a governmental
agency or political subdivision”); I.C. § 5-14-1.5-2(k) (Public Records &
Meetings) (‘“person’ means . . . a corporation, . . . or a governmental
entity”); I.C. § 5-16-8-1 (Steel Procurement for Public Works) (separately
defining “persons” as including a corporation and “public agency” as
including local government units); I.C. § 8-1-22.5-1(e)-(f) (Utilities: Gas
Pipeline Safety) (defining “person” to include corporations and
“municipality” as a city, county, “or any political subdivision of the
state”); I.C. § 8-21-3-1(12) (Aeronautics: Aircraft Finance) (‘“person’
means . . . corporation, . . . or body politic”); I.C. § 9-13-2-124 (Motor
Vehicles); I.C. § 13-29-1-2(p) (Environment: Low-Level Radioactive Waste)
(defining “person” to include a corporation and “any other legal entity
either public or private,” and separately stating, “Person also includes
the United States, states, political subdivisions of the state, and any
department, agency, or instrumentality of the United States or a state”);
I.C. § 14-8-2-202(d) (Natural Resources Dept.) (“person” means “. . . a
corporation, or a governmental entity”); I.C. § 22-9-1-3 (Labor &
Industrial Safety: Civil Rights) (separate definitions); I.C. § 22-12-1-18
(Labor and Industrial Safety: Fire Safety & Building Equipment) (defining
person to include a “corporation . . . or governmental entity”).
[10] In 1986 the General Assembly amended the Indiana Antitrust Act’s
internal references to refer to “chapters” rather than “acts”. Pub. Law
No. 152-1986, Sec. 12. In 1993 the General Assembly amended the definition
of “person” to include limited liability companies, a then novel form of
organization. Pub. Law No. 8-1993, Sec. 335. Neither of these amendments
effected any substantive change relevant here.
[11] Parker v. Brown, 317 U.S. 341 (1943), dealt with a complaint for
injunctive relief against enforcement of a state statute regulating
agricultural output. Actions pursuant to a state regulatory scheme were
held to be exempt from federal antitrust laws as “state action.” The
Supreme Court found “nothing in the language of the Sherman Act or in its
history which suggests that its purpose was to restrain a state or its
officers or its agents from activities directed by its legislature.” Id.
at 350. As a result of this holding, “state action” was expressly declared
to be a defense for a wide variety of acts by governmental regulators and
private citizens if done pursuant to state law, even if they might
otherwise have violated federal antitrust laws.
[12] It has been noted that the statutory immunity of the nonsovereign
“local governments” exceeds the nonstatutory immunity of the sovereigns
that created them. ABA Antitrust Section: Monograph No. 15, Antitrust
Federalism: The Role of State Law at 72 n. 508 (1988). “The immunity from
damages granted to local governments under the Act is absolute. The Act,
however, does not immunize local governments from injunctive,” enforcement
procedures by the Department of Justice, or actions by the Federal Trade
Commission. Id. at 72.
[13] See Neyens v. Roth, 326 N.W.2d 294, 298 (Iowa 1982); Byre v. City of
Chamberlain, 362 N.W.2d 69, 74 (S.D. 1985). Those jurisdictions afford
immunity only if the municipal action is “clearly articulated and
affirmatively expressed as state policy.”