Anti-trust law-Municipal Liability

You asked for a summary of a recent state Supreme Court decision that allowed a damages lawsuit against a municipality under the state's antitrust law.

In Cheryl Terry Enterprises, Ltd. v. City of Hartford, the Connecticut Supreme Court unanimously held that a municipality can be sued for damages under the state antitrust act. The Court decided the case on statutory construction grounds. It found that the antitrust statute's language was broad enough to include municipalities and that the specific statutory exemptions in the act did not include municipalities. The Court concluded that the legislature conferred standing in the antitrust act to a broad class of persons that includes a municipality, and the court could not limit that standing in a manner contrary to the act's plain language. The Court acknowledged that there were policy issues involved in allowing such suits, but stated that the legislature was the appropriate body to resolve such issues.

Two Justices (Norcott and Vertefeuille) dissented from the damage award because they concluded the plaintiff did not present sufficient proof of damages.

The federal antitrust law was amended in 1984 to explicitly exclude federal antitrust damage suits against municipalities. It continues to allow injunctive relief.

We are in the process of determining whether other states allow damages against municipalities under their antitrust laws. We will provide you with this information as soon we have it.

The legislative history of the Connecticut antitrust act indicates that it was intentionally patterned after the federal antitrust act. Our courts look to judicial decisions interpreting the federal act when construing the Connecticut act. They follow federal precedent when interpreting the state act unless the text of the state act, or other relevant state law, require a different interpretation (Westport Taxi Service, Inc. v. Westport Transit District, 235 Conn. 1 (1995)).

In 1992, the legislature in effect, codified this approach by explicitly incorporating into our law its intent that the Courts be guided by interpretations of the federal act (PA 92-248, CGS § 35-44b). This law provides in part: “it is the intent of the General Assembly that in construing sections 35-24 to 35-46, inclusive, the courts of this state shall be guided by the interpretations given by the federal courts to federal antitrust statutes.”

Before 1984, municipalities were liable for triple damages under the federal antitrust laws. In 1984, Congress passed the Local Government Antitrust Act, which exempts local government from federal antitrust damages law suits (15 USCA § 34-46). This act did not exempt municipalities from legal proceedings seeking injunctive relief.

In Westport Taxi Service, Inc. v. Westport Transit District (235 Conn. 1 (1995)), a taxi service brought an action against the Westport Transit District, claiming that the district had intentionally engaged in monopolistic practices in violation the state antitrust act. The plaintiff sought triple damages, attorney's fees, and costs.

The trial court imposed liability on the district and awarded the plaintiff triple damages, including lost profits, business value, and prejudgment interest, of $1,048,260.96.

The Connecticut Supreme Court affirmed the trial court's decision. The court declined to decide whether the district was entitled to governmental immunity because the district failed to plead governmental immunity as a special defense, it did not raise that defense at trial, and the record was insufficient to make such a determination. In footnote 26, the Court pointed out that unlike federal law, the state antitrust law did not explicitly exempt municipalities.

CHERYL TERRY ENTERPRISES, LTD. V. CITY OF HARTFORD (270 CONN. 619, AUGUST 31, 2004)

The plaintiff is a school bus company based in Hartford. Its president had more than 30 years of experience in the school transportation business. The plaintiff was one of three vendors who submitted sealed bids to the defendant in response to an invitation to bid for a proposed five year contract to provide bus transportation services for the Hartford public schools, commencing with the 1998-1999 school year. The plaintiff's bid was lower than either of the other vendors, Laidlaw Transit, Inc., and Dattco, Inc.

Despite being the highest bidder, Laidlaw was awarded the five-year contract. Subsequently, the plaintiff filed a lawsuit against the city of Hartford claiming violations of its equal protection rights and state antitrust law. The plaintiff also claimed that, by awarding the contract to an entity other than the lowest responsible bidder, the defendant violated of the Hartford municipal code.

The plaintiff's complaint alleged a violation of the Connecticut Antitrust Act (CGS § 35-24 et. seq.), in that it was not awarded the contract due to a conspiracy between a labor union and the city, with the purpose of obtaining a union contract. The plaintiff sought temporary and permanent injunctive relief relating to the contract, monetary damages, and equitable relief.

At trial, the defendant admitted that the plaintiff's bid was the lowest submitted. But it maintained that the plaintiff was not awarded the contract because it had been informed that the plaintiff had a pending labor case with the National Labor Relations Board, and because its bid did not conform to the specifications of the bid request. The plaintiff maintained that it had fully complied with every material term of the defendant's bid specifications.

After a trial on the plaintiff's equal protection and state antitrust claims, the trial court granted the defendant's motion for a directed verdict as to the plaintiff's equal protection claims, and submitted to the jury only the claim alleging an antitrust violation.

The jury returned a verdict for the plaintiff in the amount of $500,000 on the antitrust claim. The court then granted the defendant's motion to set aside the verdict. The trial court granted this motion and set aside the verdict. The trial court reserved the question as to whether Laidlaw was a necessary party on the injunction portion of the claim and noted that it would hold a hearing on the plaintiff's request for permanent injunctive relief if it were to decide that Laidlaw was indeed a necessary party. The court ultimately determined that Laidlaw was a necessary party and that it should be joined as a party within thirty days of that order.

Before the court resolved the claim for permanent injunctive relief, the plaintiff appealed from the judgment of the trial court setting aside the verdict on its antitrust claim (Cheryl Terry Enterprises, Ltd. v. Hartford, 262 Conn. 243).

The court dismissed the plaintiff's first appeal, concluding that the plaintiff had not appealed from a final judgment because the claim for injunctive relief had not been determined. The trial court subsequently denied the plaintiff's claim for injunctive relief.

The Connecticut Supreme Court held that municipalities can be sued for damages under the state antitrust act in connection with the municipal bidding process.

1. The antitrust's act's language is broad enough to cover municipalities. The act provides, in part, that "every contract, combination, or conspiracy in restraint of any part of trade or commerce is unlawful."(CGS § 35-26). The act defines person as "any individual, proprietorship, corporation, limited liability company, firm, partnership, incorporated and unincorporated association, or any other legal or commercial entity....”(CGS § 35-25(b)). The court has consistently held that a municipality is a legal entity that can sue and be sued (See, e.g., Murphy v. Ives, 151 Conn. 259, 264, 196 A.2d 596 (1963)) Therefore, the plain language of the statutory definition of "person" is broad enough to include municipalities, such as the defendant in the present case.

2. The legislature used that same broad definition to define both who may be liable and who may recover damages under the antitrust act.

3. Although the act excludes certain organizations and activities from liability, it does not exclude municipalities, or the municipal bidding process. The court pointed out that unless there is evidence to the contrary, statutory itemization indicates that the legislature intended a list to be exclusive.

4. The court acknowledged that there may be public policy reasons to exclude the municipal bidding process from the act, but the legislature must make that decision.

5. A case relied on by the city, is not controlling. That case, Lawrence Brunoli, Inc. v. Branford, 247 Conn. 40, was limited to actions based on common-law breach of contract claims and the municipal bidding statutes. The Supreme Court was not called upon in Brunoli to address whether an unsuccessful lowest bidder had standing to bring an action under the antitrust act. In Brunoli, the court stated "if an unsuccessful bidder has standing to bring a claim against a municipality ... such standing must be derived from a source other than its bid submitted in response to the invitation to bid.”


October 12, 2004		2004-R-0780
ANTITRUST LAW—MUNICIPAL LIABILITY

By: George Coppolo, Chief Attorney