Allright Colorado, Inc. Continental Airport Parking, Inc. Ennis, Inc., Dba Monaco Parking Phchodaux Howdy International Group, Inc., Dba Premier Parking Inc., Cross-Appellees v. The City and County of Denver, a Governmental Subdivision of State of Colorado Dba Smart John Mrozek, in His Capacity as Manager of Public Works George Doughty, in His Capacity as Director of Aviation of Stapleton, Cross-Appellants

Citations: 937 F.2d 1502; 1991 U.S. App. LEXIS 13557Docket: 90-1003

Court: Court of Appeals for the Tenth Circuit; July 1, 1991; Federal Appellate Court

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Plaintiffs, four corporations providing remote parking and shuttle services at Stapleton International Airport, appeal the dismissal of their antitrust and civil rights claims against the City and County of Denver and two city employees. They allege that Denver's proposed new regulations imposing fees and operational restrictions violated the Sherman Act, constitutional protections, and provisions of Denver's City Charter. The district court dismissed the case under Fed. R. Civ. P. 41(b) after the plaintiffs presented their evidence. The plaintiffs, engaged in business since the late 1970s and mid-1980s, contend that Denver's operation of shuttle services and parking lots at the airport has unfairly restricted their business. Initially, plaintiffs operated without restrictions but later faced imposed limitations requiring the use of designated lanes and pick-up points. The appellate court affirmed the lower court's dismissal and the defendants' claimed immunity from antitrust laws.

In late 1984 or early 1985, permit fees were imposed on plaintiffs' activities at the Airport, while SMART buses were exempt from these fees. Denver mandated that plaintiffs use different access routes and less favorable pick-up locations compared to those assigned to SMART buses. By 1988, access gates were installed requiring electronic cards for commercial operators. SMART buses received exclusive advertising rights on Airport property and better representation in Airport directories, contributing to a decline in plaintiffs' market share. In 1989, Denver announced new Rules and Regulations that would impose access fees on commercial operators, including plaintiffs, while exempting SMART, which could maintain a waiting bus at no additional cost. The fees for plaintiffs were approximately 50% higher than those for other shuttle bus operators. The permit agreements required plaintiffs to disclose sensitive financial information and imposed additional burdens. Plaintiffs filed a lawsuit on June 20, 1989, claiming that Denver’s actions unlawfully favored SMART, violating the Sherman Act and the Fourteenth Amendment's due process and equal protection clauses, as well as alleging the fees constituted unauthorized taxes and the agreements were adhesion contracts. They sought injunctive relief, damages, and attorney fees. The defendants moved to dismiss and for summary judgment, and at the close of plaintiffs' case, the court dismissed the case for lack of right to relief.

Plaintiffs' claims of attempted monopolization were dismissed due to insufficient evidence of a dangerous probability of success in monopolizing the market and a lack of specific intent from defendants. Additionally, the court found that plaintiffs did not establish monopoly power, leading to the failure of their monopolization claim. Plaintiffs' due process and equal protection claims were also rejected, as the court determined defendants' classification of commercial operators was rationally based. Plaintiffs did not contest the dismissal of their interstate commerce or state law claims. However, the court ruled against defendants on their state action immunity claim, which was based on Parker v. Brown, asserting that municipalities are exempt from antitrust liability for acts authorized by the state to replace competition with regulation or monopoly. Defendants cross-appealed this ruling. The court applies a two-part test for municipal state action immunity: the state legislature must authorize the challenged action and intend to displace competition. Explicit authorization of anticompetitive acts is not necessary if such conduct is a foreseeable outcome of the legislative policy. Recent Supreme Court cases outline the framework for this immunity, indicating that broad regulatory authority may imply permissible anticompetitive effects. In a related case, the Court upheld the immunity of a city for refusing sewage services to unincorporated areas, emphasizing the authorized control over local services.

The statutes empower municipalities to engage in anticompetitive conduct, particularly by permitting cities to refuse service to unannexed areas and to regulate the provision of sewage services. This authority is seen as inherently leading to anticompetitive effects. In contrast, the Colorado Supreme Court's decision in Boulder highlighted that the Home Rule Amendment merely indicates state neutrality regarding municipal governance, lacking a clear policy to displace competition. The state’s neutral stance means it did not contemplate specific anticompetitive actions, and thus, an ordinance by Boulder imposing a moratorium on a cable television company’s expansion was not shielded from antitrust scrutiny under the state action doctrine. 

To determine the legality of municipal actions regarding off-airport shuttle bus parking, a review of relevant statutes is necessary. These statutes affirm that operating airports and related facilities is a public governmental function, granting counties and cities the authority to regulate airport operations, including fees and rules governing transport. Sections 41-4-101, 41-4-106, and others provide municipalities with explicit powers to manage airports and public parking facilities. The defendants argue that these statutes clearly articulate a state policy intended to displace competition in airport operations and related activities, including shuttle bus parking, a view the court concurs with.

Section 41-4-106 grants counties extensive authority to regulate airport activities, encompassing the management of passenger and property embarkation, fee imposition, leasing of operational space, and establishing rules for airport usage. This authority allows the City to effectively regulate shuttle bus services between the Airport Terminal and off-airport parking, resulting in potential competition displacement. Citing Hallie, it is noted that the Supreme Court recognized that such regulatory authority could lead to anticompetitive effects. The case of Sterling Beef v. City of Fort Morgan further illustrates this point, where a city's ordinance creating a natural gas monopoly was deemed protected state action due to the broad statutory powers granted to municipalities. The court found that the ordinance was a foreseeable outcome of the city's authority over gas distribution, paralleling the situation with Denver's regulations for shuttle bus services at the airport. Additional cases support the conclusion that similar statutory powers enable airports to establish rules and contracts that govern service provisions and operational conditions.

The Authority's limitation on contracts with limousine operators is supported by state legislative intent, providing it with immunity under the Parker doctrine. The relevant statutes, while not explicitly mentioning ground transportation, suggest a legislative desire to allow municipal control over airport management. The plaintiffs argue that the City’s competitive status and potential overreach of statutory authority indicate anticompetitive behavior, but these claims do not establish antitrust liability. The City's dual role as a competitor does not negate its regulatory authority or the existence of a state policy favoring regulation over competition. Furthermore, allegations of improper motivation or exceeding authority are insufficient to challenge the City's state action immunity, which relies on objective criteria rather than subjective intentions. The courts emphasize that any inquiry into the motivations of municipal actors should not undermine the established principles of federalism and state sovereignty, nor should procedural errors in state law application lead to antitrust exposure.

The constitutional invalidity of state regulation does not negate state action immunity in antitrust cases, leading to the reversal of the district court's ruling against the defendants' immunity from antitrust challenges. The court found no need to address the merits of the antitrust claims. 

Regarding equal protection and due process claims, plaintiffs argued that the City unfairly classified shuttle bus services into three groups, imposing a 50% higher fee on their service compared to hotel and ski resort services, while SMART buses incurred no fee. The district court concluded that the City's differentiation was based on a rational basis, which was affirmed by the appellate court. 

For economic or commercial legislation, a state or municipal defendant must only demonstrate that the regulation is rationally related to a legitimate state interest. The courts maintain a deferential stance on government legislation, focusing on whether a rational basis exists for the classifications, rather than the effectiveness of the regulations. Classifications can only be invalidated if they are unrelated to legitimate state objectives and cannot be justified in any conceivable way.

The challenged classifications in the regulations aim to ensure efficient and orderly ground transportation at the Denver Municipal Airport, manage roadway and parking capacity, and support the financial obligations of the Airport, including operational and construction expenses. These objectives are deemed legitimate governmental purposes. 

The analysis involves comparing the treatment of plaintiffs, who operate shuttle services, against hotel, motel, and ski resort shuttle bus operators. Plaintiffs argue that a fee charged to them that is 50% higher than that imposed on the other operators lacks a rational basis, claiming their services are identical. However, the district court found that plaintiffs benefit more from the Airport than the hotel/motel/ski resort shuttles. 

The court references a similar case, Alamo Rent-A-Car, where higher fees imposed on off-airport rental companies compared to hotel vehicles were upheld. It concludes that differences in business types can justify unequal treatment under equal protection analysis. Even if the services were not materially different, the Airport Authority's classifications were based on its assessment of the relative benefits and usage of each vehicle category, which does not require perfection. 

The district court's factual findings are reviewed under the clearly erroneous standard, and the court found no error in determining that plaintiffs engage in a different service and derive greater benefits from the Airport. Therefore, the differing treatment of plaintiffs compared to other shuttle services is rationally related to the legitimate interests of the City in apportioning airport expenses and ensuring efficient transportation access.

Plaintiffs challenged the imposition of fees on their shuttle services, arguing it was unfair compared to the City's SMART vehicles, which were exempt from such fees. The district court found a rational basis for this distinction, noting that SMART buses provide additional services by transporting passengers between airport concourses, thus engaging in a different business model. The court affirmed that a governmental entity like the City can be treated differently from private entities for equal protection purposes. Additionally, the City’s substantial revenue from airport parking operations justified the exemption for SMART buses, negating claims of equal protection violations.

The court upheld the district court's dismissal of the case under Rule 41(b). Testimony indicated the City had operated a remote overflow parking lot. The court noted that the plaintiffs faced increased operational costs and inconveniences due to changes in shuttle routes. Market analysis from plaintiffs' expert indicated a significant decline in their market share in favor of SMART between 1984 and 1989, projecting that by 1994, SMART would hold over 50% of the market. Plaintiffs had also initially alleged violations of Colorado state antitrust laws but dropped that claim before trial. A temporary restraining order was sought but an interim agreement allowed fees to accrue without immediate payment obligations until January 1990. The court's reasoning for rejecting the plaintiffs' monopolization claim was not entirely clear.

The court found that the evidence does not support the claim that Denver operates as a monopolist regarding shuttle parking services at Stapleton International Airport. It noted that Denver, as a government entity, is constrained by legal limitations that prevent it from excluding plaintiffs from accessing the airport or from claiming exclusive rights to shuttle services. The court acknowledged the plaintiffs' argument that these limitations indicate a convergence of legal principles that prevent Denver from monopolizing the market. Furthermore, the court stated that Denver cannot impose unreasonable charges for access, reinforcing the argument against its monopolistic capabilities.

The ruling also referenced the precedent established in Oberndorf, which introduced a two-part test for applying the state action exception to municipal actions, requiring a "clearly articulated and affirmatively expressed policy" to displace competition. The court cited the Supreme Court's decision in City of Columbia v. Omni Outdoor Advertising, emphasizing that determining municipal authority to regulate does not require an exacting standard.

Lastly, the court rejected the plaintiffs' claim that Denver’s authority to operate the airport stems from the Colorado constitution’s "home rule" provision, asserting that more specific statutory provisions related to airports should govern such authority.

The court addressed the home rule provision in the constitution, stating that it supplements the statutory authority granted to Fort Morgan as a home rule city to engage in alleged anticompetitive acts. The opinion emphasized that the focus was primarily on the specific statutes rather than the home rule provision itself. Citing Boulder, the court noted that home rule authority alone does not sufficiently express state policy to override competition laws. It identified Denver as a "county" under the Public Airport Authority Law and referenced the case of Pueblo Aircraft Serv. v. City of Pueblo, where it was determined that the city was immune from antitrust liability in its airport dealings based on Colo.Rev.Stat. Sec. 41-4-101, which recognizes airport operations as public governmental functions. The court distinguished between proprietary activities and governmental functions, a distinction relevant for determining immunity, but indicated that their current finding of immunity did not rely solely on that statute or the Pueblo Aircraft rationale. The court also noted that the distinction between these functions has been less emphasized in recent Supreme Court rulings, which have focused more on whether statutes provide clear authorization. The commentary from legal scholars suggested that the proprietary vs. governmental distinction has been largely overlooked in subsequent decisions.

The opinions in Lafayette reveal that eight of the nine Court members found the distinction made in the case unacceptable. The case affirmed the absence of a conspiracy exception to state action immunity, except potentially when the state acts as a commercial participant rather than in a regulatory capacity. The district court noted that the plaintiffs' shuttle buses and the City’s SMART buses do not provide identical services; SMART buses additionally transport passengers between concourses. The Airport Authority rationally concluded that raising fees could lead hotel and motel operators to discontinue their services, as airport courtesy vehicles are not essential to their operations. The court highlighted that the plaintiffs’ business relies entirely on the airport, while shuttle services to hotels or resorts could continue from alternative locations, even if banned from the airport. Furthermore, airport officials indicated that charging SMART buses a user fee would not yield any net financial gain, as it would merely transfer funds within the City’s operations. Thus, exempting SMART buses aligns with the legitimate governmental goal of revenue generation.