DOE v. EDINBORO UNIVERSITY
United States Court of Appeals, Third Circuit
853 F.3d 567
We come to our final inquiry—what to do about Doe‘s state law claims. The District Court declined supplemental jurisdiction of them after dismissing her Title IX claims. A court may do so under
IV
For the reasons above, we will affirm in part and reverse in part the District Court‘s order and remand for further proceedings consistent with this opinion.
EDINBORO COLLEGE PARK APARTMENTS; Darrow Place Partnership; Darrow Place Partnership II; James Manor of Edinboro, LLC, Appellants v. EDINBORO UNIVERSITY FOUNDATION; *H. Fred Walker, Ph.D *(Pursuant to Rule 43(c)(2), Fed. R. App. P.)
No. 16-1746
United States Court of Appeals, Third Circuit.
Argued November 9, 2016 (Filed: March 9, 2017)
853 F.3d 570
Joseph S.D. Christof, II, Dickie McCamey & Chilcote, Two PPG Place, Suite 400, Pittsburgh, PA 15222, Mаtthew W. McCullough [ARGUED], Mark T. Pavkov, James R. Walczak, MacDonald Illig Jones & Britton, 100 State Street, Suite 700, Erie, PA 16507, Counsel for Appellee, Edinboro University Foundation
Thomas L. Donahoe, Kemal A. Mericli [ARGUED], Office of Attorney General of Pennsylvania, 564 Forbes Avenue, 6th Floor, Manor Complex, Pittsburgh, PA 15219, Counsel for Appellee Julie E. Wollman & H. Fred Walker
Before: SMITH, Chief Judge, McKEE and RESTREPO, Circuit Judges
OPINION
SMITH, Chief Judge.
Under Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), state action is immune from Sherman Act antitrust liability. This case presents the question of whether a public university, Edinboro University of Pennsylvania of the State System of Higher Education (“the University“), and its nonprofit collaborator, Edinboro University Foundation (“the Foundation“), are entitled to such immunity. On defendants’ motions to dismiss, the District Court held that Parker immunity automatically applies to the University because thе University is an arm of the state.
Although dismissal was appropriate, the District Court painted with too broad a brush. The University‘s actions are not categorically “sovereign” for purposes of Parker immunity. Because of that, we are required to apply heightened scrutiny. We conclude that the appropriate standard is derived from the Supreme Court‘s decision in Town of Hallie v. City of Eau Claire, 471 U.S. 34, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985), which requires anticompetitive conduct to conform to a clearly articulated state policy. We further conclude that, taking the allegations in the Amended Complaint in the light most favorable to plaintiffs, the University‘s conduct withstands Hallie scrutiny. Furthermore, because the Foundation‘s actions were directed by the University, the Foundation is also immune. We will аffirm in part on those alternative grounds and remand with the instruction that the Amended Complaint be dismissed without prejudice.
I
This case arises out of the need for student housing at Edinboro University, a public university located in Edinboro, Pennsylvania. Plaintiffs are private business entities that provide off-campus residential housing near the University. According to plaintiffs, the University conspired with Edinboro University Foundation, a nonprofit entity that conducts fundraising on behalf of the University, to monopolize the student-housing market.
Public higher education in Pennsylvania operates under a series of constitutional, legislative, and administrative mandates.1 The Pennsylvania Constitution requires the General Assembly to “provide for the maintenance and support of a thorough and efficient system of public education to serve the needs of the Commonwealth.”
At issue in this case is the University‘s decision to collaborate with the Foundation in order to construct new dormitories called the Highlands. In January 2008, the Foundation amended its Articles of Incorporation to authorize borrowing funds “to acquire, lease, construct, develop and/or manage real or personal property.” Am. Compl. ¶ 19. The Foundation then signed a “Cooperation Agreement” with the University: the University would lease certain property to the Foundation in a favorable location, and in turn the Foundation would finance, construct, and manage the Highlands dormitories. The Foundation issued bonds to raise the funds and began construction.
Plaintiffs aver that, after construction was completed, the University took anticompetitive measures to ensure that the Foundation recouped its investment. Since 1989, the University maintained a “parietal rule” requiring non-commuting first-year and transfer students to reside on-campus for two consecutive semesters. On May 6, 2011, two and one-half years after the first phase of the Highlands dormitories opened, the University amended its policy to require certain students to reside oncampus for four consecutive semesters or until they complete at least 59 credit hours.
Plaintiffs brought suit, asserting that the University and the Foundation conspired to monopolize the student-housing market in violation of Section 2 of the Sherman Act,
Plaintiffs did not sue the University, conceding that the University is an arm of the state subject to immunity under the Eleventh Amendment.2 Instead, plaintiffs sued the Foundation and the University‘s president in her official cаpacity for prospective relief pursuant to Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908).3
By Order dated March 1, 2016, the District Court dismissed plaintiffs’ Amended Complaint with prejudice on the ground that defendants’ conduct constitutes state action immune from Sherman Act antitrust liability under the Parker doctrine. See Edinboro Coll. Park Apartments v. Edinboro Univ. Found., No. 15-cv-121, 2016 WL 6883295 (W.D. Pa. Mar. 1, 2016). This timely appeal followed.
The District Court had jurisdiction pursuant to
III
We begin with an overview of the applicable law. In Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), the Supreme Court held that the Sherman Act does not prohibit anticompetitive state action. That ruling embodies “the federalism principle that the States possess a significant measure of sovereignty under our Constitution.” Cmty. Cmmc‘ns Co. v. City of Boulder, 455 U.S. 40, 53, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982). States may “impose restrictions on occupations, confer exclusive or shared rights to dominate a market, or otherwise limit competition to achieve public objectives.” N.C. State Bd. of Dental Exam‘rs v. FTC, — U.S. —, 135 S.Ct. 1101, 1109, 191 L.Ed.2d 35 (2015). Without Parker immunity, “federal antitrust law would impose an impermissible burden on the States’ power” to subordinate market competition to “other values a State may deem fundamental.” Id.
Then nearly half a century after Parker, the Supreme Court clarified that “state-action immunity is disfavored.” FTC v. Ticor Title Ins. Co., 504 U.S. 621, 636, 112 S.Ct. 2169, 119 L.Ed.2d 410 (1992). To ensure that the doctrine is appropriately limited, the Supreme Court hаs devised three approaches to analyzing a state-action defense: (1) ipso facto immunity, (2) Midcal scrutiny, and (3) Hallie scrutiny. Which test applies depends on whether the relevant actor is comparable to a sovereign power, a private business, or something in between.
The doctrine of ipso facto immunity is the least searching. Once it is determined that the relevant action is “an undoubted exercise of state sovereign authority” undertaken by an actor “whose conduct ... automatically qualifies] as that of the sovereign state itself,” that conduct is immune without the need for any further analysis. Dental Exam‘rs, 135 S.Ct. at 1110-11; see A.D. Bedell Wholesale Co. v. Philip Morris Inc., 263 F.3d 239, 258 (3d Cir. 2001) (immunity for “direct state action” applies “only when the allegedly anticompetitive behavior was the direct result of acts within the traditional sovereign powers of thе state“). The Supreme Court has recognized only two such contexts: (1) acts of state legislatures, and (2) “decisions of a state supreme court, acting legislatively rather than judicially.” Hoover v. Ronwin, 466 U.S. 558, 568, 104 S.Ct. 1989, 80 L.Ed.2d 590 (1984); see Parker, 317 U.S. at 350-51 (“We find 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 agents from activities directed by its legislature.“). The Supreme Court has rejected ipso facto immunity for entities
The most searching level of scrutiny derives from the Supreme Court‘s decision in California Retail Liquor Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980). There, a private party sought Parker immunity on the ground that it acted in accordance with state policy. To prevent a private party from “casting ... a gauzy cloak of state involvement over what is essentially a privatе price-fixing arrangement,” Midcal, 445 U.S. at 106, the conduct must pass a rigorous two-part test. First, the state must enact a “clearly articulated and affirmatively expressed” policy permitting anticompetitive conduct; and second, the State must “actively supervise[]” that conduct. Id. at 105, 100 S.Ct. 937 (citation omitted). Midcal analysis applies where private actors seek to immunize their anticompetitive conduct under the Parker doctrine, see, e.g., id. at 106, 100 S.Ct. 937, or where a state agency is deemed functionally private because it is controlled by active market participants, Dental Exam‘rs, 135 S.Ct. at 1114.
Finally, the Supreme Court announced an intermediate standard of review in Town of Hallie v. City of Eau Claire, 471 U.S. 34, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985). There, it determined that municipalities are exempt from Midcal‘s second prong—active supervision—but must still comply with the first prong—conformity with a clearly articulated state policy. Id. at 40, 105 S.Ct. 1713. The Supreme Court observed that the municipality was an “arm of the State” entitled to a presumption that it “acts in the public interest,” id. at 45, 105 S.Ct. 1713, the municipality is politically accountable for its anticompetitive policies, id. at 45 n.9, 105 S.Ct. 1713, and there is thus “little or no danger” that the municipality would become “involved in a private price-fixing arrangement,” id. at 47, 105 S.Ct. 1713. In dicta, the Supreme Court has suggested that “prototypical” state agencies may be subjected to the same degree of scrutiny as a municipality. See id. at 46 n.10, 105 S.Ct. 1713 (“In cases in which the actor is a state agency, it is likely that active state supervision [Midcal‘s second prong] would also not be required, although we do not here decide that issue.“); Dental Exam‘rs, 135 S.Ct. at 1114 (“[T]he municipality [in Hallie] was more like prototypical state agencies, not specialized boards dominated by active market participants.“).
In sum, the Supreme Court has established the following principles: ipso facto immunity applies to state legislatures and state supreme courts, but not to entities that are state agencies for limited purposes; Midcal scrutiny applies to private parties and state agencies controlled by active market participants; and Hallie scrutiny applies to municipalities, and perhaps state agencies. Applying those principles to the facts alleged in the Amended Complaint resolves this appeal.
IV
Because the level of scrutiny for state-action immunity turns on the character of the relevant actor, the first step of any Parker analysis is to identify the actor that performed the alleged anticompetitive conduct. We conclude that plaintiffs’ alleged antitrust injury stems entirely from the conduct of the University, and we focus our analysis accordingly.
When beginning a Parker analysis that involves a private defendant, it is critically important to determine whether the private defendant caused the
In this case, plaintiffs allege that the public University and the private Foundation conspired to monopolizе the student-housing market. But the only alleged actions of the Foundation—amending its charter, issuing bonds, building the dormitories, and managing the property—are consistent with participation in a competitive market. The Foundation‘s advantage derived entirely from the University‘s decision to expand its on-campus residency rule, which required more students to live in dormitories like the Highlands. Plaintiffs have not identified any independent conduct of the Foundation that conceivably restricted competition. See Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334, 110 S.Ct. 1884, 109 L.Ed.2d 333 (1990) (“[I]njury ... will not qualify as ‘antitrust injury’ unless it is attributable to an anticompetitive aspect of the practice under scrutiny....“).
Nor is this a case of “hybrid” anticompetitive conduct. See Bedell, 263 F.3d at 258.5 Bedell involved a Multistate Settlement Agreement brokered between the governments of several states and сertain tobacco manufacturers. The plaintiffs alleged that the Agreement established a cartel whereby private tobacco companies would be permitted to restrict output. This Court observed that the alleged anticompetitive conduct was neither “purely private” nor “entirely attributable to the state.” Id. Rather, the alleged antitrust injury derived from a “hybrid restraint,” which “involve[d] a degree of private ac-
We conclude that the Foundation was merely “acting under the direction of” the University. Zimomra, 111 F.3d at 1500. Therefore, if the University is immune, the Foundation must be as well. Motor Carriers, 471 U.S. at 56-57, 105 S.Ct. 1721; Mass. Sch. of Law, 107 F.3d at 1036. Given that understanding of the Foundation‘s role in the challenged conduct, we proceed to analyze how the state-action doctrine applies to the University.6
V
The fundamental question we must decide is which tier of scrutiny applies to the University‘s conduct: no further review (if the University is ipso facto immune), Midcal review, or Hallie review. The District Court held that the University is ipso facto immune because it is an arm of the state. We disagree. Instead, we conclude that Hallie review is appropriate because the University is more analogous to a municipality than to a private market participant.
A
The District Court held that the University is ipso facto immune because the University is an arm of the state under the Eleventh Amendment. But those two immunity doctrines are not coextensive. Even if the University were an arm of the state, the University is not “soverеign” for purposes of Parker. Unlike the General Assembly or the Supreme Court of Pennsylvania, the University cannot legislate anticompetitive policies on behalf of the Commonwealth. Thus, the University‘s decision to expand its on-campus residency requirement is not entitled to ipso facto immunity.
1
Sovereign action for purposes of direct Parker immunity is “qualitatively different” from state action in more familiar contexts. Bedell, 263 F.3d at 254. While traditional state action can cover
inadvertent or unilateral acts of state officials not acting pursuant to state policy ... the term “state action” in antitrust adjudication refers only to government policies that are articulated with sufficient clarity that it can be said that these are in fact the state‘s policies, and not simply happenstance, mistakes, or acts reflecting the discretion оf individual officials.
Id. (quoting 1 Philip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 221 (Rev. ed. 1997)). Thus, conduct might be deemed nonsovereign for purposes of Parker immunity “even if sectors of state government are involved.” Id.; see Dental Exam‘rs, 135 S.Ct. at 1113 (recognizing that nonsovereign entities can be “public or private“). In accordance with those principles, the Supreme Court has recognized ipso facto immunity in two limited contexts: state legislation and the decisions of state supreme courts, acting legislative-
Recently in North Carolina State Board of Dental Examiners v. FTC, the Supreme Court addressed the status of an “agency of the state” with the authority to regulate the practice of dentistry in North Carolina. 135 S.Ct. at 1107. The dissenting Justices would have found ipso facto immunity, providing a simple resolution. See id. at 1117-18 (Alito, J., dissenting) (“Under Parker, the Sherman Act ... do[es] not apply to state agencies; the North Carolina Board of Dental Examiners is a state agency; and that is the end of the matter.“).
But instead, the Court treated the regulatory board as a nonsovereign actor. It began with the familiar principle that “[s]tate legislation” and “decision[s] of a state supreme court, acting legislatively” are entitled to ipso facto immunity because “they are an undoubted exercise of state sovereign authority.” Id. at 1110 (majority opinion). But the Court declined to apply ipso facto immunity to the agency:
For purposes of Parker, a nonsovereign actor is one whose conduct does not automatically qualify as that of the sovereign State itself. State agencies are not simply by their governmental character sovereign аctors for purposes of state-action immunity. Immunity for state agencies, therefore, requires more than a mere facade of state involvement....
Id. at 1111 (citations omitted).
The Supreme Court‘s treatment of state agencies in Dental Examiners continues a long line of similar precedents. As we noted above, the Court found that a state bar—a “state agency by law“—did not receive ipso facto immunity. Goldfarb, 421 U.S. at 789-91, 95 S.Ct. 2004. “The fact that the State Bar is a state agency for some limited purposes does not create an antitrust shield that allows it to foster anticompetitive practices for the benefit of its members.” Id.;7 see also, e.g., Motor Carriers, 471 U.S. at 57, 105 S.Ct. 1721 (“The circumstances in which Parker immunity is available to ... state agencies or officials regulating the conduct of private parties[] are defined most specifically by our decision in [Midcal].“); City of Lafayette v. La. Power & Light Co., 435 U.S. 389, 410, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978) (plurality opinion) (“[F]or purposes of the Parker doctrine, not every act of a state agency is that of the State as sovereign.“); cf. Hallie, 471 U.S. at 46 n.10, 105 S.Ct. 1713.
2
Applying those principles, we conclude that the University is not entitled to ipso facto immunity. The University is not a sovereign decisionmaker analogous to a state legislature or state supreme court.
The University, in fact, presents an easier case than prototypical state agencies. At most, the University is comparable to “a state agency for some limited purposes.” Goldfarb, 421 U.S. at 791, 95 S.Ct. 2004 (emphasis added). Unlike prototypical state agencies, the University‘s authority is limited to managing its own affairs and the affairs of its students, who voluntarily attend. It does not wield regulatory power. Thus, by comparison to other divisions of state government that might prеsent closer cases, the University is clearly not sovereign for purposes of Parker immunity.9
Because the University is not a sovereign actor analogous to a state legislature or state supreme court, its pronouncements are not entitled to ipso facto immunity. Defendants are “[p]lainly ... in error in arguing that Parker held that all governmental entities, whether state agencies or subdivisions of a State, are, simply by reason of their status as such, exempt from the antitrust laws.” Lafayette, 435 U.S. at 408, 98 S.Ct. 1123.
3
Defendants argue that several of our sister circuits have recognized broad ipso facto immunity for the states’ executive branches. Those cases are distinguishable.
In Neo Gen Screening, Inc. v. New England Newborn Screening Program, 187 F.3d 24 (1st Cir. 1999), the First Circuit conferred ipso facto Parker immunity on the Massachusetts Department of Public Health. In doing so, the Court recognized
Because we hold that the University is analogous to a “state agency for some limited purposes,” Goldfarb, 421 U.S. at 791, 95 S.Ct. 2004, rather than a “full-fledged department,” Neo Gen, 187 F.3d at 29, our decision does not conflict with those rulings. We continue to reserve the question addressed by those courts—whether ipso facto immunity applies to prototypical state agencies or high-ranking executive officials acting within their lawfully delegated authority. Cf. Bedell, 263 F.3d at 256 (“We have yet to address whether the acts of executive officials constitute state action that avoids Midcal analysis.“).
Finally, defendants rely on Saenz v. University Interscholastic League, 487 F.2d 1026 (5th Cir. 1973). There, the Fifth Circuit found Parker immunity because the defendant was “an integral part of the University of Texas at Austin,” and therefore “constitute[d] a governmental entity outside the ambit of the Sherman Act.” Id. at 1028. But Saenz predates every development to the Parker doctrine we have discussed in this decision. Not only does it predate Midcal and Hallie, but also it predates Goldfarb, the first case where the Supreme Court held that a state agency is not ipso facto immune. Simply put, the analysis we are required to apply did not exist at the time Saenz was decided. Accordingly, we join those courts that have applied modern state-action principles to deny ipso facto immunity to public universities. See, e.g., Auraria Student Hous. at the Regency, LLC v. Campus Vill. Apartments, LLC, 843 F.3d 1225, 1250 (10th Cir. 2016); Porter Testing Lab. v. Bd. of Regents for Okla. Agric. & Mech. Colls., 993 F.2d 768, 772 (10th Cir. 1993); Seaman v. Duke Univ., No. 1:15-cv-462, 2016 WL 1043473, at *1 (M.D.N.C. Feb. 12, 2016); Humana of Ill., Inc. v. Bd. of Trustees of S. Ill. Univ., No. 84-2373, 1986 WL 962, at *5 (C.D. Ill. June 3, 1986); Am. Nat‘l Bank & Trust Co. of Chi. v. Bd. of Regents for Regency Univs., 607 F.Supp. 845, 849-50 (N.D. Ill. 1984); see also Daniel v. Am. Bd. of Emergency Med., 988 F.Supp. 127, 183 (W.D.N.Y. 1997) (university hospitals).
We conclude that the University‘s conduct does not constitute direct sovereign action under the Parker doctrine. While the University is a governmental entity, “[а]cting alone,” it is not empowered with the sovereign authority to legislate the “policy of the State itself.” Motor Carriers, 471 U.S. at 62-63, 105 S.Ct. 1721.
B
Having concluded that ipso facto immunity is inappropriate, “closer analysis is required.” Hoover, 466 U.S. at 568, 104 S.Ct. 1989. Ordinarily that entails applying Midcal‘s rigorous two-part test. But “there are instances in which an actor can be excused from Midcal‘s active-supervision requirement.” Dental Exam‘rs, 135 S.Ct. at 1112. We conclude that this is such an instance because the University is more closely analogous to the municipality in Hallie than to a private market participant.
1
The University is exempt from Midcal‘s active-supervision requirement in
In Hallie, the Court contrasted the incentives of municipalities and private parties. It observed that, because the municipality was “an arm of the State ... [, w]e may presume, absent a showing to the contrary, that the municipality acts in the public interest. A private party, on the other hand, may be presumed to be acting primarily on its own behalf.” Hallie, 471 U.S. at 45, 105 S.Ct. 1713. The Court then reasoned:
Where a private party is engaging in the anticompetitive activity, there is a real danger that he is acting to further his own interests, rather than the governmental interests of the State. Where the actor is a municipality, there is little or no danger that it is involved in a private price-fixing arrangement. The only real danger is that it will seek to further purely parochial public interests at the expense of more overriding state goals. This danger is minimal, however, because of the requirement that the municipality act pursuant to a clearly articulated state policy. Once it is clear that state authorization exists, there is no need to require the State to supervise actively the municipality‘s execution of what is a properly delegated functiоn.
Id. at 47, 105 S.Ct. 1713.
We conclude that this reasoning applies squarely to the University. Like the municipality in Hallie, the University is not a sovereign actor, but is still an “arm of the State” presumed to “act[] in the public interest.” Id. at 45, 105 S.Ct. 1713. Unlike a private business, the University‘s self-interest is more closely aligned with certain “governmental interests of the State.” Id. By advancing the project of higher education—a project blessed by the Pennsylvania legislature as a valuable public function—the University is primarily at risk that “it will seek to further purely parochial public interests at the expense of more overriding state goals.” Id.
Therefore, meeting Midcal‘s first requirement—acting “pursuant to a clearly articulated state policy“—is sufficient to ensure that a PASSHE university is executing its “properly delеgated function.” Id. We thus join with the Tenth Circuit, which similarly held that, for “a state created and funded university, ... a showing of active supervision is unnecessary to qualify for state action antitrust immunity.” Porter, 993 F.2d at 772; see also Auraria, 843 F.3d at 1250; Humana, 1986 WL 962, at *5; Am. Nat. Bank & Tr., 607 F.Supp. at 849-50.
2
The only Supreme Court decision explicitly requiring full Midcal scrutiny for the independent actions of a state agency, Dental Examiners, is distinguishable.
In Dental Examiners, the North Carolina Board of Dental Examiners sought a similar exemption from the active-supervision requirement in light of its status as a state agency. But the Court held that “the need for supervision turns not on the formal designation given by States to regulators but on the risk that active market participants will pursue private interests in restraining trade.” 135 S.Ct. at 1114. Because the Board was “controlled by active market participants, who possess singularly strong private interests,” the Court treated the Board as “similar to [a] private trade association,” necessitating full Midcal scrutiny. Id.
The analogous situation in this case would be if the Foundation—a private, active participant in the real estate market—dominated and controlled the University. In such a case, there would be a risk of self-dealing; the active market participant
Plaintiffs did not plead any facts that plausibly give rise to such an inference. We thus conclude that Dental Examiners does not mandate full Midcal scrutiny for the University. But as we describe below, the cоmplaint may be amended to include such facts if they exist. See infra Section VI.B.
We conclude that Hallie scrutiny is appropriate for PASSHE universities. Absent any special circumstances that necessitate full Midcal review, PASSHE universities, like municipalities, can be presumed to act in the public interest. Ordinarily, therefore, they need only comply with Midcal‘s first prong—conformity with a clearly articulated state policy.
VI
We now apply the Hallie test to the University and to the Foundation. We conclude that the University‘s conduct is immune under that standard, and that the University‘s immunity passes through to the Foundation. We will therefore affirm in part on those alternative grounds.10 See, e.g., Oss Nokalva, Inc. v. European Space Agency, 617 F.3d 756, 761 (3d Cir. 2010) (“[W]e may affirm a judgment on any ground apparent from the record, even if the district court did not reach it.” (internal quotation marks and citation omitted)).
But bеcause further amendment may not be futile, we will remand with instructions to dismiss the Amended Complaint without prejudice.
A
The University‘s conduct complies with a clearly articulated state policy because mandating on-campus residency is a foreseeable consequence of the legislative mandate to provide appropriate student living facilities.
Because “[n]o legislature ... can be expected to catalog all of the anticipated effects of a statute delegating authority to a substate governmental entity,” the Supreme Court has “approached the cleararticulation inquiry more practically.” F.T.C. v. Phoebe Putney Health Sys., Inc., — U.S. —, 133 S.Ct. 1003, 1012, 185 L.Ed.2d 43 (2013) (quoting Hallie, 471 U.S. at 43, 105 S.Ct. 1713). The clear-articulation test is met if an anticomрetitive effect is the “foreseeable result” of the state‘s authorization. Hallie, 471 U.S. at 42, 105 S.Ct. 1713; see Lafayette, 435 U.S. at 415, 98 S.Ct. 1123 (a political subdivision need not “point to a specific, detailed legislative authorization“).
Where a state delegates generic contracting powers, the clear-articulation test is not met. See Phoebe Putney, 133 S.Ct. at 1012 (holding that “general corporate power” to enter into acquisitions does not clearly authorize anticompetitive consolidation of hospital ownership); Cmty. Commc‘ns Co., 455 U.S. at 55-56, 102 S.Ct. 835 (holding that a “neutral” grant of power to enact municipal ordinances does not “impl[y] state authorization to enact specific anticompetitive ordinances“). But clear articulation may be established where “displaсement of competition was the inherent,
In this case, the Pennsylvania General Assembly enacted the policy that “[e]ach institution shall рrovide appropriate ... student living facilities.”
The intention to displace competition is evident when the mandate is read in light of common practice and the University‘s educational mission. See
It is clear that the General Assembly “must have foreseen and implicitly endorsed” such policies. Phoebe Putney, 133 S.Ct. at 1013. In fact, according to plaintiffs, the University‘s on-campus residency rule was first enacted in 1989. Am. Compl. ¶ 43. We seе no reason why the expansion of that requirement from two semesters to four would exceed what the General Assembly might have reasonably foreseen.11
After this case was argued, the Tenth Circuit decided a similar case, Auraria
Nor are we influenced by plaintiffs’ allegation that the University acted ultra vires by failing to engage in a competitive bidding process,
Accordingly, we conclude that the University‘s conduct conformed to a clearly articulated state policy, and therefore constituted immune state action under Hallie. Because plaintiffs’ alleged antitrust injury derives solely from the University‘s conduct, we further conclude that the University‘s immunity also shields the Foundation. See supra Section IV.
B
Plaintiffs have not pled that members of the Foundation constituted a “controlling number of decisionmakers” within the University. Dental Exam‘rs, 135 S.Ct. at 1114. It could be the case, for example, that members of the Foundation‘s board of directors constituted a majority of the University‘s Council of Trustees. If such facts exist, Midcal‘s active-supervision requirement could be applicable. Id. Given that possibility, amendment may not be futile and we will remand with instructions that the Amended Complaint be dismissed without prejudice to plaintiffs’ right to file a second amended cоmplaint. See, e.g., Estate of Lagano v. Bergen Cty. Prosecutor‘s Office, 769 F.3d 850, 861 (3d Cir. 2014).
We need not resolve this issue here. And even assuming that such an exception exists, it would not apply to this case. A market-participant exception would only apply where “[t]he government entity ... was involved in the market as a buyer or seller.” Bedell, 263 F.3d at 265 n.55 (citing Union Pac. R.R. Co. v. United States, 313 U.S. 450, 61 S.Ct. 1064, 85 L.Ed. 1453 (1941)). While the University leased certain property to the Foundation, the Complaint only alleges that the Foundation‘s transactions in the student-housing market are part of an anticompetitive scheme. Applying a market-participant exception to these circumstances would swallow the rule that “the state does not forfeit Parker immunity simply because it acts with a private party.” Id.
We will affirm in part on the alternative grounds set forth above and reverse and remand with instructions that the Amended Complaint be dismissed without prejudice.
D. BROOKS SMITH
CHIEF JUDGE, UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT