Town of Indian River Shores v. City of Vero Beach

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

FORT PIERCE DIVISION

CASE NO. 21-14354-CIV-CANNON/McCabe

TOWN OF INDIAN RIVER SHORES,

Plaintiff,

v.

CITY OF VERO BEACH,

Defendant.

/

ORDER DENYING DEFENDANT’S MOTION TO DISMISS

THIS CAUSE comes before the Court upon Defendant’s Motion to Dismiss

(the “Motion”) [ECF No. 19]. The Court has reviewed the Complaint [ECF No. 1], the Motion

[ECF No. 19], Plaintiff’s Response in Opposition [ECF No. 25], Defendant’s Reply [ECF No. 27],

Indian River County’s Statement of No Interest [ECF No. 35], and the full record. The Court also

held a hearing on the Motion [ECF Nos. 34, 36]. For the reasons set forth below, Defendant’s

Motion to Dismiss [ECF No. 19] is DENIED.

FACTUAL BACKGROUND

In this antitrust action, the Town of Indian River Shores (the “Town”) is suing the City of

Vero Beach (the “City”) seeking declaratory and injunctive relief based on alleged anticompetitive

harm arising from a 1989 service territory agreement between the City and Indian River County

(the “County”) [ECF No. 1 p. 2]. The Town alleges that the 1989 Service Territory Agreement

(the “1989 Agreement”) [ECF No. 1-3 pp. 3–10] forecloses it from obtaining water, wastewater,

and reuse water services (“Essential Water Services”) from the County in the future

[ECF No. 1 p. 2; ECF No. 1 ¶¶ 18, 21].

Currently, the Town has agreed with the City, pursuant to the 2012 Water, Wastewater,

and Reuse Water Franchise Agreement (the “2012 Franchise Agreement”) [ECF No. 1-2], to have

the City provide the Town’s residents with Essential Water Services for a limited period of time

[ECF No. 1 ¶ 12]. The 2012 Franchise Agreement contemplates possible termination or

renegotiation so long as the Town gives notice within four years prior to the fifteenth anniversary

date: “Indian River Shores, should it desire to renegotiate or terminate, shall give Four (4) years

notice before the fifteenth (15th) anniversary date, otherwise the Franchise will continue

uninterrupted under the terms and conditions of this Agreement” [ECF No. 1-2 § 4]. In other

words, if the Town wants to terminate the 2012 Franchise Agreement before the end of the

agreement’s thirty-year term, it must give notice by October 1, 2023—four years prior to the

Fifteenth Anniversary of the Franchise, which is October 1, 2027 [ECF No. 1 ¶ 13;

see ECF No. 1-2 p. 1].

As alleged in the Complaint, the Town believes that it could get higher quality services at

a lower cost from the County rather than from the City [ECF No. 1 ¶ 14]. However, the City has

asserted in a letter, dated March 24, 2021, that the 1989 Agreement prevents the County from

providing services to the Town without the City’s written approval [ECF No. 1 ¶¶ 18–20;

see ECF No. 1-3 p. 2 (March 24, 2021, letter)]. According to the Complaint, the City is asserting

that the 1989 Agreement survives in perpetuity and therefore permanently deprives the Town of

competitive service offerings [ECF No. 1 ¶ 24].

Based on this factual backdrop, the Town alleges that the 1989 Agreement between the

City and the County constitutes a “horizontal market allocation” and thus a per se violation of the

Sherman Act, 15 U.S.C. § 1, citing United States v. Topco Assocs., Inc., 405 U.S. 596, 608 (1972)

[ECF No. 1 ¶ 22]. The Town’s Complaint asserts a single claim seeking declaratory and injunctive

relief (“Count I”) [ECF No. 1 ¶¶ 39–42]. Specifically, the Town seeks a judgment declaring the

1989 Agreement unlawful and void under the Sherman Act, 15 U.S.C. § 1 [ECF No. 1 ¶ 41]. The

Town also seeks to permanently enjoin the City “from asserting any rights to an alleged territorial

allocation based on the Market Allocation Agreement [the 1989 Agreement], or engaging in any

other anticompetitive conduct, that would prevent the Town and its residents from obtaining

Essential Water Services from the County or otherwise” [ECF No. 1 ¶ 42].

The City now moves to dismiss the Complaint under Federal Rules of Civil Procedure

12(b)(1), 12(b)(6), and 12(b)(7) [ECF No. 19 p. 1]. The City’s Motion is ripe for adjudication

[ECF No. 25 (Response); ECF No. 27 (Reply)].

LEGAL STANDARDS

A. Dismissal for Lack of Subject Matter Jurisdiction Under Rule 12(b)(1)

A Rule 12(b)(1) motion challenges the district court’s subject matter jurisdiction and takes

one of two forms: a “facial attack” or a “factual attack.” Lawrence v. Dunbar, 919 F.2d 1525,

1529 (11th Cir. 1990). A facial attack on the complaint requires the court merely look to see if the

plaintiff has sufficiently alleged a basis of subject matter jurisdiction, taking as true the allegations

in the plaintiff’s complaint. Id. “By contrast, a factual attack on a complaint challenges the

existence of subject matter jurisdiction using material extrinsic from the pleadings, such as

affidavits or testimony.” Stalley ex rel. U.S. v. Orlando Reg’l Healthcare Sys., Inc., 524 F.3d 1229,

1233 (11th Cir. 2008).

“Article III of the United States Constitution limits the jurisdiction of the federal courts to

cases and controversies of sufficient concreteness to evidence a ripeness for review.” Dig. Props,

Inc. v. City of Plantation, 121 F.3d 586, 589 (11th Cir. 1997). An attack on the ripeness of a claim

is a form of factual attack on subject matter jurisdiction. See Emery v. Allied Pilots Ass’n, No.

16-80243-CIV, 2017 WL 1047029, at *1 (S.D. Fla. Mar. 20, 2017). “In the face of a factual

challenge to subject matter jurisdiction, the burden is on the plaintiff to prove that jurisdiction

exists.” OSI, Inc. v. United States, 285 F.3d 947, 951 (11th Cir. 2002). If a court determines that

it lacks subject matter jurisdiction, the court must dismiss the action. See Fed. R. Civ. P. 12(h)(3).

B. Dismissal for Failure to State a Claim Under Rule 12(b)(6)

Rule 8(a)(2) of the Federal Rules of Civil Procedure requires the complaint to provide “a

short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ.

P. 8(a)(2). To avoid dismissal under Rule 12(b)(6), a complaint must allege facts that, if accepted

as true, “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.

544, 570 (2007); see Fed. R. Civ. P. 12(b)(6). A claim for relief is plausible if the complaint

contains factual allegations that allow “the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The

plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer

possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 545).

Conclusory allegations, unwarranted deductions of facts or legal conclusions masquerading as

facts will not prevent dismissal. Oxford Asset Mgmt., Ltd. v. Jaharis, 297 F.3d 1182, 1188

(11th Cir. 2002).

C. Dismissal for Failure to Join a Party Under Rule 12(b)(7)

Pursuant to Federal Rule of Civil Procedure 12(b)(7), an action may be dismissed for

“failure to join a party under Rule 19.” Fed. R. Civ. P. 12(b)(7). Rule 19 sets forth a two-part test

to determine whether a party is indispensable. Focus on the Fam. v. Pinellas Suncoast Transit

Auth., 344 F.3d 1263, 1279 (11th Cir. 2003). First, the court must examine, using the standards of

Rule 19(a), whether the person in question is “required.” Fed. R. Civ. P. 19(a)(1). If a court

determines that an absent party does satisfy the Rule 19(a) criteria, i.e., that the party is a required

party, “the court must order that the person be made a party.” Fed. R. Civ. P. 19(a)(2). If the party

is “required” under Rule 19(a) but joinder is not feasible because, for example, doing so would

divest the court of jurisdiction, then the court must inquire whether, applying the factors in Rule

19(b), the litigation should continue among the existing parties or should be dismissed. See

Molinos Valle Del Cibao, C. por A. v. Lama, 633 F.3d 1330, 1347 (11th Cir. 2011).

DISCUSSION

The City argues that the Town’s claim for declaratory and injunctive relief should be

dismissed on three separate grounds. First, the City argues that the case is not ripe and thus should

be dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) [ECF No. 19 pp. 13–15].

As determined below, this argument fails; Plaintiff’s claim sounds in antitrust law rather than in

breach of contract and presents an actual controversy over whether the 1989 Agreement is a

horizontal market allocation. Second, the City argues that the 1989 Agreement is not an

anticompetitive restraint on trade and that, even if it were, the state action immunity doctrine

shields the City from federal antitrust liability [ECF No. 19 pp. 7–11]. For the reasons that follow,

the Court disagrees; the 1989 Agreement plausibly constitutes an anticompetitive restraint on

trade, and the state action immunity doctrine does not apply. Third, the City argues that dismissal

is warranted under Rule 12(b)(7) because Plaintiff failed to join the County, which the City

contends is a necessary party to this action under Rule 19 [ECF No. 19 pp. 12–13]. The County

since has filed a Statement of No Interest in which it “takes no position” with respect to any of the

arguments raised by either party and disclaims any interest “in being a party in this litigation”

[ECF No. 35 p. 1]. Upon consideration of the full record, including the described Statement of No

Interest, the Court determines at this juncture that the County is not a required party under Rule

19(a)(1). The Court offers a full analysis of these arguments in turn.

I. Ripeness

The City contends that the case is not ripe for adjudication under both Article III and the

Declaratory Judgment Act, 28 U.S.C. § 2201, because Plaintiff’s claim “alleges a hypothetical

situation” that, at some point in the future, the City could withhold its approval for the County to

provide water services to the Town [ECF No. 19 pp. 13–15]. This situation, according to the City,

“may or may not occur” [ECF No. 19 p. 15]. In other words, because the City has not yet exercised

any “veto right” under the 1989 Agreement, the Town has not been harmed, and a substantial

controversy does not yet exist [ECF No. 27 pp. 6–7]. The Town disagrees, arguing in response

that the harm it alleges—its effective inability to negotiate with the County to consummate an

essential services supply contract—already has occurred and is continuing because “the Town and

County’s immediate future conduct turns on whether the City legally has this veto right”

[ECF No. 25 pp. 17–20].

Article III of the Constitution limits federal courts to adjudicating actual “cases” and

“controversies.” See, e.g., Allen v. Wright, 468 U.S. 737, 750 (1984), abrogated on other grounds

by Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014). Echoing the “case

or controversy” requirement of Article III, the federal Declaratory Judgment Act “provides that a

declaratory judgment may only be issued in the case of an actual controversy.” See Emory v.

Peeler, 756 F.2d 1547, 1551–52 (11th Cir. 1985) (citing 28 U.S.C. § 2201). “That is, under the

facts alleged, there must be a substantial continuing controversy between parties having adverse

legal interests.” Emory, 756 F.2d at 1552.

In deciding whether a claim is ripe for adjudication or review, the Court “look[s] primarily

at two considerations: 1) the fitness of the issues for judicial decision, and 2) the hardship to the

parties of withholding court consideration.” Temple B’Nai Zion, Inc. v. City of Sunny Isles Beach,

Fla., 727 F.3d 1349, 1356 (11th Cir. 2013). As to the fitness prong, the Court asks whether the

parties raise an issue that can be decided “without further factual development” and also “whether

the institutional interests of the court and agency favor immediate review.” Club Madonna, Inc.

v. City of Mia. Beach, 924 F.3d 1370, 1380 (11th Cir. 2019) (first citing Harrell v. The Fla. Bar,

608 F.3d 1241, 1258 (11th Cir. 2010); and then citing Cheffer v. Reno, 55 F.3d 1517, 1524

(11th Cir. 1995)). “If a claim is fit for judicial decision, that is end of the inquiry, and the matter

is ripe, given that the absence of a ‘hardship’ ‘cannot tip the balance against judicial review’ under

those circumstances.” Club Madonna, Inc., 924 F.3d at 1380 (quoting Harrell, 608 F.3d at 1259).

But if the hardship prong merits evaluation, the focus there is on the “costs to the complaining

party of delaying review until conditions for deciding the controversy are ideal.” Harrel, 608 F.3d

at 1258.

Applying these factors, the Court finds that a ripe controversy exists in this case. Although

the City contends that this issue is hypothetical because the City has not yet withheld approval

under the 1989 Agreement, the Court disagrees. The Town’s allegations, which sound in antitrust

rather than in breach of contract, present a concrete and current dispute that does not depend on

what the City eventually may elect to do in the future vis-à-vis the 1989 Agreement. Specifically,

as alleged, the City’s ongoing “monopolistic abuse of the Town and its residents reduces

competition for the Essential Water Services, which in turn will lead to higher prices and lower

quality services, the harms that the antitrust laws are designed to protect consumers against”

[ECF No. 1 ¶ 29]. The Town further alleges that, at present, “the Town is being harmed by its

inability to make an effective long-term plan for its citizens regarding the need for Essential Water

Services,” and that “[t]he City’s unlawful position is thus harming the Town’s ability to exercise

its powers and fulfill its duties under its Charter to address the needs of its residents for Essential

Water Services” [ECF No. 1 ¶¶ 32–33]. In other words, the Town is alleging that the very

existence of a veto right implicates antitrust liability as an anticompetitive trade restraint,

regardless of whether the City chooses to exercise it in the future [ECF No. 25 pp. 19–20

(“The Town and County’s immediate future conduct turns on whether the City legally has this veto

right.”)].

In the Court’s view, Plaintiff’s allegations are sufficient to show a present controversy that

is both actual and not hypothetical, irrespective of whether the City ultimately decides to tangibly

withhold its approval for a services contract between the Town and the County. Moreover,

although the City argues that the parties’ positions with respect to the 1989 Agreement are not

sufficiently adverse because the City has not yet withheld its approval,1 this argument minimizes

the reality of the parties’ positions. The City itself affirmatively raised the issue by sending the

March 24, 2021, letter to the County, and that letter explicitly relied on the terms of the 1989

Agreement, including the subject approval provision [ECF No. 1-3 (“Paragraph 3 of the

Agreement states, ‘the County shall not provide water or sewer service within the Service Area

without the written approval of the City.’”)]. What is more, the parties already have exhausted

extensive dispute resolution procedures pursuant to Chapter 164 of the Florida Statutes—including

a conflict assessment meeting conducted on October 14, 2021, a joint public meeting conducted

on November 19, 2021, and a mediation conducted on January 20, 2022—all of which keenly

1 At the hearing, the City declined to comment on whether it would grant approval for the County

to provide water services to the Town, stating: “I cannot tell you today what the City’s position

would be because we have not been asked” [ECF No. 36 p. 12:14–16].

demonstrate the parties’ enduring disagreement [ECF No. 28 p. 1]. Against this backdrop, the

Court finds the parties’ legal interests are sufficiently adverse to establish a substantial, ripe

controversy that is fit for judicial decision.

Although the Court’s ripeness analysis could end there,2 the Court also finds that the Town

has made a sufficient showing that withholding court consideration pending further action by the

City will cause hardship. The deadline for the Town to provide notice to the City to renegotiate

or terminate the 2012 Franchise Agreement is October 1, 2023 [ECF No. 1 ¶ 13; see ECF No. 36

pp. 21–23]. In anticipation of that deadline, the Town alleges that it needs to prepare for a

transition to the County’s Water Services, alleging further that simply terminating its agreement

with the City without first solidifying an alternative could be “harmful and contrary to the public

interest” [ECF No. 1 ¶ 33]. On these allegations, the Court is satisfied that putting this case on

hold pending some future action by the City could cause hardship to the Town by forcing it to

choose either between continuing to receive its Essential Water Services from the City or

potentially leaving its residents without service.

For these reasons, the case presents a substantial, ripe controversy that it is justiciable under

Article III and the Declaratory Judgment Act.

II. Merits

Turning to the merits of Plaintiff’s claim, the Town asserts that the 1989 Agreement

violates the Sherman Act, 15 U.S.C. § 1, because it is a “horizontal market allocation” under the

holding of United States v. Topco Assocs., Inc., 405 U.S. 596, 608 (1972). The 1989 Agreement

between the City and Indian River County provides that the City will be responsible for providing

2 “If a claim is fit for judicial decision, that is end of the inquiry, and the matter is ripe, given that

the absence of a hardship cannot tip the balance against judicial review under those

circumstances.” Club Madonna, Inc., 924 F.3d at 1380.

Essential Water Services to a designated service area (which includes the Town)

[see ECF No. 1-3]. As relevant here, the 1989 Agreement provides that “[t]he County shall not

provide water or sewer service within the City service area approval of the City”

[ECF No. 1-3 ¶ 3]. This provision, the Town alleges, particularly as asserted in the City’s

March 24, 2021 Letter [ECF No. 1-3 p. 2], “constitutes an unreasonable and unlawful restraint on

trade, which deprives the Town and its residents from obtaining the benefits of competitive service

offerings forevermore” [ECF No. 1 ¶ 24].

A. Horizontal Market Allocation

The Sherman Act provides that “[e]very contract, combination in the form of trust or

otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with

foreign nations, is declared to be illegal.” 15 U.S.C. § 1. In Topco, the Supreme Court held that

horizontal market allocations are per se violations of the Sherman Act, stating as follows:

One of the classic examples of a per se violation of § 1 is an agreement between

competitors at the same level of the market structure to allocate territories in order

to minimize competition. Such concerted action is usually termed a ‘horizontal’

restraint, in contradistinction to combinations of persons at different levels of the

market structure, e.g., manufacturers and distributors, which are termed ‘vertical’

restraints. This Court has reiterated time and time again that ‘(h)orizontal territorial

limitations . . . are naked restraints of trade with no purpose except stifling of

competition.’

Topco Assocs., Inc., 405 U.S. at 608. “Such limitations are per se violations of the Sherman Act.”

Id. Moreover, horizontal market agreements “are anticompetitive regardless of whether the parties

split a market within which both do business or whether they merely reserve one market for one

and another for the other.” Palmer v. BRG of Ga., Inc., 498 U.S. 46, 49–50 (1990).

The City does not meaningfully dispute that the 1989 Agreement constitutes a horizontal

restraint on trade as alleged by the Town [ECF No. 19 p. 7]. Instead, the City focuses on its

principal alternative argument—that any such monopolistic restraint on trade is permissible by

virtue of the state action immunity doctrine to federal antitrust law [ECF No. 19 pp. 7–11]. In

Opposition, the Town says that state action immunity does not apply, because the requisite state

statutory authorization does not extend beyond the boundaries of other incorporated and co-equal

municipalities [ECF No. 25 pp. 3–13]. And then in Reply, the City for the first time attempts to

offer a substantive rejoinder to the notion of a horizonal trade restraint, arguing that the 1989

Agreement is not a per se violation, because it does not include “price fixing,” and that, to the

extent the delineation of service territories is a horizontal market allocation, such market allocation

was included by necessity [ECF No. 27 pp. 3–4].

Taking these arguments together, the Court finds that the Town plausibly has alleged the

existence of a horizontal market allocation in violation of the Sherman Act, 15 U.S.C. § 1. The

Town has alleged that the 1989 Agreement provides as follows: “the County shall not provide

water or sewer service within the City Service Area without the written approval of the City”

[ECF No. 1 ¶ 19; ECF No. 1-3 p. 4]. The Town further alleges that the City construes the 1989

Agreement as creating a “permanent territorial allocation” for water services that “forecloses the

City’s existing customers including the Town from ever obtaining competing Essential Water

Services from the County without the City’s consent” [ECF No. 1 ¶ 21]. These allegations are

plausible and further factually supported by the City’s March 24, 2021, letter to the County

asserting the City’s rights under the 1989 Agreement [ECF No. 1-3 p. 2]. Accordingly, the Court

finds the Town’s complaint plausibly alleges that the 1989 Agreement constitutes a “horizontal

market allocation” and thus is a per se antitrust violation under the holding of Topco.

Having found that the 1989 Agreement plausibly constitutes a per se antitrust violation,

the Court now turns to the City’s state action immunity doctrine argument.

B. State Action Immunity Doctrine

“The doctrine of state-action immunity insulates states from suit under the federal antitrust

laws.” Diverse Power, Inc. v. City of LaGrange, Ga., 934 F.3d 1270, 1273 (11th Cir. 2019). “In

Parker v. Brown, 317 U.S. 341 (1943), the Supreme Court held that the Sherman Act does not

apply to the anticompetitive conduct of states acting as sovereigns.” Askew v. DCH Reg’l Health

Care Auth., 995 F.2d 1033, 1037 (11th Cir. 1993). But because municipalities “are not themselves

sovereign[,] they do not receive all the federal deference of the States that create them.” City of

Lafayette v. La. Power & Light Co., 435 U.S. 389, 412 (1978). For local governments to be

immune based on state authorization, they must satisfy the “clear articulation requirement”—i.e.,

they must point to a specific state statute that plainly shows that the legislature contemplated that

anticompetitive behavior would result from the authority. See Town of Hallie v. City of Eau Claire,

471 U.S. 34, 40 (1985). In other words, “state-action immunity applies when a municipality’s

anticompetitive conduct is the ‘foreseeable result’ of state legislation.” Diverse Power, Inc., 934

F.3d at 1273 (quoting Town of Hallie, 471 U.S. at 42). Moreover, the Supreme Court has clarified

that such a result is foreseeable “where the displacement of competition was the inherent, logical,

or ordinary result of the exercise of authority delegated by the state legislature.” F.T.C. v. Phoebe

Putney Health Sys., Inc., 568 U.S. 216, 229 (2013).

In support of its argument that the “clear articulation requirement” is satisfied for purposes

of state action immunity, the City points to several separate sources of statutory authority for the

1989 Agreement, focusing on Fla. Stat. §§ 180.02, 180.03, 180.06 (“Chapter 180”)

[see ECF No. 19 p. 10]. Chapter 180 grants Florida municipalities the authorization to establish

public utilities for water services, stating in pertinent part as follows:

Any municipality or private company organized for the purposes contained in this

chapter, is authorized: (1) To clean and improve street channels or other bodies of

water for sanitary purposes; (2) To provide means for the regulation of the flow of

streams for sanitary purposes; (3) To provide water and alternative water supplies,

including, but not limited to, reclaimed water, and water from aquifer storage and

recovery and desalination systems for domestic, municipal or industrial uses; (4) To

provide for the collection and disposal of sewage, including wastewater reuse, and

other liquid wastes.

Fla. Stat. § 180.06. The City also points to two Eleventh Circuit cases, Auton v. Dade City, Fla.,

783 F.2d 1009 (11th Cir. 1986), and Falls Chase Spec. Taxing Dist. v. City of Tallahassee, 788

F.2d 711 (11th Cir. 1986), for the proposition that Chapter 180 of Florida Statutes meets the “clear

articulation requirement” by authorizing municipalities to establish municipal public works. See

Auton, 783 F.2d at 1011 (“The cumulative effect of [Chapter 180] is to grant Florida municipalities

broad power to provide water to their inhabitants. . . . [I]t is clear that anticompetitive effects

logically would result from this broad authority to regulate.”); Falls Chase Spec. Taxing Dist., 788

F.2d at 714 (“We similarly hold that these statutory provisions evidence a clearly expressed state

policy favoring the City’s actions in our case.” (citing Auton, 783 F.2d at 1011)).

The Town disputes that Chapter 180 satisfies the clear articulation requirement. According

to the Town, although Chapter 180 authorizes public utilities related to water services, the very

same law also restricts a municipality from, as here, extending this power within the boundaries of

another municipality without its consent [ECF No. 25 p. 5 (“[A municipality’s] corporate powers

shall not extend or apply within the corporate limits of another municipality.” (quoting Fla. Stat.

§ 180.02))]. The Town further observes that the Falls Chase and Auton decisions explicitly

recognize this limitation, stating that “[t]o engage in one of the authorized public works, a

municipality may exercise its corporate powers within its corporate limits and extend outside its

corporate limits up to another municipality’s boundary.” Falls Chase, 788 F.2d at 713 (quoting

Auton, 783 F.2d at 1011).

In Reply, the City does not dispute that a municipality cannot assert extraterritorial power

in the boundaries of another co-equal municipality without its consent, arguing instead that any

such concern is immaterial here because the Town did consent by entering into the 2012 Franchise

Agreement with the City [ECF No. 27 p. 5]. The City also notes that the Town has been receiving

water services from the City for over thirty years without any concern [ECF No. 27 p. 5]. The

City thus argues that the Town should be prevented, under the doctrine of estoppel by silence,

from objecting to that arrangement now because it reaped the benefit of those services for years

without any complaint [ECF No. 27 pp. 5–6].

Upon review, the Court agrees with the Town that state action immunity does not insulate

the City from potential federal antitrust liability arising out of the 1989 Agreement as alleged in

the Town’s well-pleaded complaint. As noted above, the Town’s Complaint plausibly alleges a

per se antitrust violation by alleging that the 1989 Agreement forecloses the Town from obtaining

Essential Water Services from the County without the City’s consent. The narrow question then

is whether such alleged anticompetitive conduct was an inherent, logical, or ordinary result—and

thus a foreseeable result—of state law authorizing municipalities to establish public utilities for

water services under Chapter 180. The answer to that question is no; Florida law authorizes

municipalities to develop public utilities for water services, but that same source of law also limits

a municipality from encroaching upon the boundaries of another municipality in the development

of such services. Yet that is what is happening here. Chapter 180 “grant[s] Florida municipalities

broad power to provide water to their inhabitants” such that “anticompetitive effects logically

would result from this broad authority to regulate.” Falls Chase, 788 F.2d at 714 (quoting Auton,

783 F.2d at 1011). But Chapter 180’s authorization, and therefore its clearly articulated policy to

displace competition, extends only “up to another municipality’s boundary.” Falls Chase, 788

F.2d at 713 (quoting Auton, 783 F.2d at 1011). In short, it cannot be said that the Florida

legislature, by authorizing municipalities to develop public utilities for water services,

contemplated the anticompetitive conduct alleged here—a horizontal market allocation between

two local government entities, effectively granting one municipality exclusive market control over

the services of another incorporated municipality, where the same statute limits the exercise of

municipal corporate powers within the corporate limits of another municipality. Accordingly, the

City’s alleged anticompetitive conduct based on the 1989 Agreement was not clearly authorized

by the state of Florida sufficient to pass the “clear articulation requirement” for state action

immunity from federal antitrust law.3

The Court’s conclusion is guided by the Eleventh Circuit’s decision in Diverse Power, Inc.

v. City of LaGrange, Ga., 934 F.3d 1270 (11th Cir. 2019). In Diverse Power, Inc., the Eleventh

Circuit examined an ordinance by a Georgia municipality that used its water services monopoly to

gain leverage and increase its energy market share. Id. at 1277. The Eleventh Circuit found that

such anticompetitive conduct was not the “inherent, logical, or ordinary result of the legislative

scheme” at issue—which, like the relevant Florida statutes here, authorized municipalities to

operate and maintain water and sewage services. Id. In so doing, the Eleventh Circuit noted that

“whatever the outer limits of Phoebe Putney’s ‘inherent, logical, or ordinary’ gloss, we think it is

safe to say that the tying of an unrelated service in a different market to the provision of water

service falls outside the statutes’ grant of immunity.” Id. at 1278. Likewise here, the alleged

3 In passing, Defendant cites other sources of state statutory authority relating to the City of Vero

Beach’s corporate charter [ECF No. 19 p. 10 (citing 1941 Fla. Laws Chapter 21612, section 41;

1943 Fla. Laws 1113; 1951 Fla. Laws 2803)]. Defendant does not explain, however, how the

anticompetitive conduct alleged here was a foreseeable result of those provisions. And in any

event, those provisions still face Chapter 180’s limitation on the exercise of extraterritorial

municipal corporate power. See Fla. Stat. § 180.02.

anticompetitive conduct at issue—foreclosing the Town’s ability to receive water services from

the County—extends beyond any inherent, logical, or ordinary result of what the state authorized

in Chapter 180. See Fla. Stat. § 180.02 (“[A municipality’s] corporate powers shall not extend or

apply within the corporate limits of another municipality.”).

C. Consent and Course of Dealing

As a last resort, the City says it remains immune from antitrust liability on the theory that

the Town “consented” to the City’s extraterritorial provision of services by entering into the 2012

Franchise Agreement with the City, and more generally, by receiving water from the City for more

than thirty years [ECF No. 27 pp. 4–6 (referencing “estoppel by silence”)]. This argument, raised

for the first time in the Reply,4 finds no place in the state action immunity caselaw and

misconstrues the nature of the Town’s claim. The Town is not seeking to invalidate the 2012

Franchise Agreement or to argue that the City is precluded from providing service to the Town;

rather, the Town is seeking to invalidate the 1989 Agreement between the City and the County to

ensure a competitive market for services. That the Town has obtained water from the City for

many years without apparent objection might provide context for the parties’ relationship and

current dispute. But the City has made no showing that such history precludes the Town from

seeking legal redress now for what it has plausibly alleged is anticompetitive conduct in violation

of federal antitrust law.

In sum, taking Plaintiff’s allegations as true, Plaintiff has adequately alleged that the

1989 Agreement qualifies as a per se antitrust violation. Further, because the alleged

anticompetitive conduct at issue does not meet the “clear articulation requirement,” the state action

4 See Herring v. Sec’y, Dep’t of Corr., 397 F.3d 1338, 1342 (11th Cir. 2005).

immunity doctrine does not apply, Defendant’s counterarguments fail, and dismissal on this basis

is not warranted.

III. Required Parties under Rule 19

Finally, the City argues that the County is a required party under Rule 19, requiring

dismissal of the case for failure to join the County [ECF No. 19 pp. 13–15].

Rule 19 governs the joinder of required persons to an action and outlines a “two-part test.”

Focus on the Fam. v. Pinellas Suncoast Transit Auth., 344 F.3d 1263, 1279 (11th Cir. 2003).

Under that test, the Court first determines whether the nonparties are “required” persons. Fed. R.

Civ. P. 19(a)(1); see Winn-Dixie Stores, Inc. v. Dolgencorp, LLC, 746 F.3d 1008, 1039 (11th Cir.

2014). A person is required where:

(A) in that person’s absence, the court cannot accord complete relief among existing

parties; or

(B) that person claims an interest relating to the subject action and is so situated

that disposing of the action in the person’s absence may:

(i) as a practical matter impair or impede the person’s ability to protect the

interest; or

(ii) leave an existing party subject to a substantial risk of incurring double,

multiple, or otherwise inconsistent obligations because of the interest.

Fed. R. Civ. P. 19(a)(1). If joinder of a required person is not feasible—if, for instance, the

person’s joinder destroys the parties’ diversity, the person is not subject to personal jurisdiction,

or the person objects to venue—the Court must determine “whether the Rule 19(b) factors permit

the litigation to continue if the party cannot be joined, or instead whether they are indispensable”

and the case must be dismissed. Winn-Dixie Stores, Inc., 746 F.3d at 1039.

The Town argues that the County need not be joined because it is not a required party under

Rule 19(a) [ECF No. 25 pp. 14–16]. This is so, the Town argues, because antitrust co-conspirators

are not typically deemed to be required and also because the County has not affirmatively claimed

an interest in the case [ECF No. 25 pp. 14–16]. The County subsequently filed a Statement of

No Interest, which acknowledges that it is a party to the 1989 Agreement but states that it “has no

interest in being a party in this litigation and sees this matter as a dispute between the Town and

the City” [ECF No. 35]. The City did not seek to contest or otherwise respond to the County’s

statement, arguing more generally that the County is a required party because the Town’s claim

seeks to invalidate an agreement to which the County is a party [ECF No. 27 p. 2].

Upon review of the parties’ arguments and the County’s Statement of No Interest, the Court

is satisfied that the County is not a required party within the meaning of Rule 19. While it is true

that the County is a party to the 1989 Agreement, the County has specifically disclaimed any

interest in the litigation [ECF No. 35]. Moreover, neither party has identified any other reason,

practical or otherwise, that would require the presence of the County in this litigation. The Court

therefore determines that, barring some further showing or material change in circumstances, the

County is not so situated that its absence in this case either would impair the County’s interest as

a practical matter or subject the City to any substantial risk of inconsistent obligations. See Fed.

R. Civ. P. 19(a)(1)(B). Neither dismissal nor joinder is warranted under Rule 19.

CONCLUSION

For the foregoing reasons, it is hereby ORDERED AND ADJUDGED as follows:

1. Defendant’s Motion to Dismiss [ECF No. 19] is DENIED.

2. Defendant shall file its answer to the Complaint [ECF No. 1], on or before

September 9, 2022.

CASE NO. 21-14354-CIV-CANNON/McCabe

DONE AND ORDERED in Chambers at Fort Pierce, Florida, this 23rd day of August

2022.

CZ, CANNON

UNITED STATES DISTRICT JUDGE

ce: counsel of record

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