TEC Cogeneration Inc. v. Florida Power & Light Co.

United States Court of Appeals,

Eleventh Circuit.

Nos. 94-4323, 94-4496.

TEC COGENERATION INC., RRD Corporation, as they are partners in

South Florida Cogeneration Associates, Thermo Electron Corporation,

Rolls-Royce, Inc., Plaintiffs-Appellees,

v.

FLORIDA POWER & LIGHT COMPANY, FPL Group, Inc., FPL Energy

Services, Inc., Defendants-Appellants,

Wayne H. Brunetti, Larry T. Atkinson, Joe C. Collier, Jr., Clark

Cook, et al., Defendants.

March 8, 1996.

Appeals from the United States District Court for the Southern

District of Florida. (No. 88-2145-CIV-Atkins), C. Clyde Atkins,

Judge.

Before EDMONDSON, Circuit Judge, HILL, Senior Circuit Judge, and

MILLS*, District Judge.

HILL, Senior Circuit Judge:

This is an appeal from the denial of a motion for summary

1

judgment by the district court. Two questions are presented:

first, whether a public utility is immune from antitrust liability

under the state-action doctrine of Parker v. Brown, 317 U.S. 341,

*

Honorable Richard Mills, U.S. District Judge for the

Central District of Illinois, sitting by designation.

1

We exercise dual jurisdiction in this case. 28 U.S.C. §§

1291, 1292(b). The denial of a motion for summary judgment under

the state-action immunity doctrine is immediately appealable

under the collateral order exception to the final judgment rule.

See Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 69 S.Ct.

1221, 93 L.Ed. 1528 (1949); Praxair, Inc. v. Florida Power &

Light Co., 64 F.3d 609, 611 (11th Cir.1995). In addition, the

district court certified its summary judgment order for immediate

appeal and this court granted Appellants' protective petition for

permission to appeal pursuant to 28 U.S.C. § 1292(b). The

appeals were then consolidated by order of this court as they

both involve the same parties and the same issues, and are taken

from the same summary judgment order.

63 S.Ct. 307, 87 L.Ed. 315 (1943), for its allegedly

anti-competitive conduct concerning a cogenerator2 in the areas of

wheeling,3 rates, and interconnection; and second, whether

lobbying of a county legislative body by the utility is protected

from antitrust liability under the Noerr/Pennington doctrine.

Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc.,

365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961); United Mine

Workers of America v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14

L.Ed.2d 626 (1965). The district court found that the utility was

not entitled to immunity from antitrust sanctions for its actions.

We disagree. The denial by the district court of the utility's

2

Cogeneration is the production of electricity and useful

thermal energy at a single facility. The Public Utility

Regulatory Policies Act of 1978 (PURPA), Pub.L. No. 95-617, 92

Stat. 3117 (1978), defines a cogeneration facility as a facility

that produces electric energy and steam, or other forms of useful

energy, such as heat, for industrial, commercial, heating, or

cooling purposes. 16 U.S.C. § 796(18)(A). Cogeneration can be

an efficient use of fuel because a cogeneration facility (unlike

some more traditional power plants) can utilize thermal energy

that might otherwise be a wasted by-product in the production of

electricity. For example, the Miami downtown cogeneration

facility that is the subject of this case has the capability to

produce both electricity for the Downtown Government Center and

chilled water for air conditioning. PURPA directs the Federal

Energy Regulatory Commission (FERC) to promulgate rules to

facilitate cogeneration and to purchase electricity from

cogeneration and small power production facilities at a rate that

does not exceed the incremental cost to the electric utility of

alternative electric energy; state utility commissions are then

directed to implement and expand FERC rules at the state level.

16 U.S.C. § 824a-3.

3

Wheeling electric power means to transfer, by direct

transmission or displacement, electric power from one utility to

another over the facilities of an intermediate utility. See

Otter Tail Power Co. v. U.S., 410 U.S. 366, 368, 93 S.Ct. 1022,

1025, 35 L.Ed.2d 359 (1973).

motion for summary judgment is reversed.4

I. FACTUAL BACKGROUND

Shortly after Congress enacted the Public Utility Regulatory

Policies Act of 1978 (PURPA),5 Metropolitan Dade County, Florida

(Dade) began to consider a cogeneration facility as part of its

Miami Downtown Government Center (Center), then in the planning

6

stages. At the time, Appellees (Cogenerators) were engaged in the

business of developing cogeneration projects nationwide. They also

4

Although not styled as such, we note that the motion for

summary judgment ruled upon by the district court was really a

motion for partial summary judgment. Our determination here does

not entirely resolve the dispute between these parties as other

claims remain to be resolved on remand.

5

Prior to PURPA, and for most of the twentieth century,

electric utilities were given monopoly franchises to take

advantage of the cost benefits of centralized production.

Douglas Gegax & Kenneth Nowotny, Competition and the Electric

Utility Industry: An Evaluation, 10 Yale J. on Reg. 63 (1993).

In return, the utility gave the state the right to regulate price

and service quality, restrict profit rates, and veto investment

decisions. It vested the state with the authority to balance

consumer and stockholder interests. Id. Following the 1973 Arab

oil embargo, the public began to perceive a worldwide energy

crisis and, in the late 1970's, the practice of monopolist

utilities was disrupted as Congress and the executive branch took

a number of steps to respond to this problem. Id. at 64. PURPA

was one such Congressional response. Its passage marked the

beginning of a radical change in the status quo for utilities.

PURPA encouraged fuel conservation and efficient pricing by

relaxing restrictions on entry into the (former monopolist's)

service area. It also encouraged the development of

cogeneration. Id.; see American Paper Institute, Inc. v.

American Elec. Power Service Corp., 461 U.S. 402, 404-05, 103

S.Ct. 1921, 1923-24, 76 L.Ed.2d 22 (1983). Historically,

utilities were reluctant to purchase power from and to sell power

to the nontraditional cogeneration facility. F.E.R.C. v.

Mississippi, 456 U.S. 742, 750-51, 102 S.Ct. 2126, 2132-33, 72

L.Ed.2d 532 (1982); supra n. 2.

6

TEC Cogeneration, Inc. (TEC) is a subsidiary of Appellee

Thermo Electron Corporation (Thermo). RRD Corp. (RRD) is a

subsidiary of Appellee Rolls-Royce, Inc. (Rolls-Royce). TEC and

RRD are joint venture partners in the partnership South Florida

Cogeneration Associates, also an Appellee.

supplied turbines and related services for use in cogeneration

projects. The Cogenerators encouraged Dade to construct such a

facility using their equipment and services.

Appellant Florida Power & Light Company (FPL)7 is an

investor-owned public electric utility engaged in three functions:

generation, transmission, and distribution and sale of electric

energy.8 It services southern and eastern Florida, including most

of Dade. FPL is regulated by the Florida Public Service Commission

(PSC).9 It owns and controls ninety percent of the total

7

Appellant FPL Group, Inc., is a public utility holding

company, subject to the provisions of the Public Utility Holding

Company Act of 1935 (PUHCA). As FPL's parent corporation, it

owns all its capital stock. Appellant FPL Energy Services, Inc.,

itself a cogeneration project developer, is a one hundred

percent-owned subsidiary of FPL Group Capital, Inc., which in

turn is a one hundred percent-owned subsidiary of FPL Group, Inc.

8

FPL is the fifth largest electric utility in the United

States. It is an integrated electric utility that performs three

functions (generation, transmission, distribution and sale) via a

transmission system integrated within an interstate power grid.

FPL generates electricity by transforming heat, moving water, or

other forms of energy into electric power. In so doing, it uses

large quantities of oil, natural gas, and bituminous coal. These

substances are transported into Florida through interstate

commerce. Within Florida, FPL generates electricity at licensed

nuclear power plants. FPL transports electric power from

generating plants through electric transmission facilities to

distribution points. From there, delivery and sales are made to

ultimate consumers.

9

In 1981, the Florida Legislature authorized and directed

the Florida Public Service Commission (PSC) to develop state

regulations on the relationship between cogenerators and

Florida's electric utility companies. 1981 Fla.Laws. ch. 81-131,

§ 1 (codified as amended at Fla.Stat. § 366.05 (1994)). The PSC

is charged with exclusive legislative authority under Chapter

366, Florida Statutes, to regulate electric utilities, including

investor-owned electric utilities, municipal electric utilities,

and rural electric cooperatives in the state. The PSC exercises

the state's police power by ensuring safe, adequate, and reliable

electric service at fair, just, and reasonable rates. Pursuant

to Chapter 366 and PURPA, the PSC also exercises extensive

electrical generating capacity in its service area and the

electrical grid with which Center can interconnect. FPL has

monopoly power within its service area both as to the purchase of

wholesale power and the sale of retail power.

In 1981, Dade issued requests to bid on the Center

cogeneration facility. Cogenerators' proposal was selected and in

late 1983, Dade and the Cogenerators entered into contracts

providing for the construction and operation of a twenty-seven

megawatt cogeneration facility at Center and for the supply of

cogeneration equipment for the project. The Cogenerators agreed to

operate Center for Dade for sixteen years. The Cogenerators also

contracted to supply electrical and thermal power to Dade.10 Dade

and the Cogenerators were to share in the profits, if any, from

11

operating the Center; the Cogenerators were to absorb the losses.

The final contract allowed for excess power, if any, from Center,

to be dispensed to Dade facilities outside Center, such as to the

12

Jackson Memorial Hospital/Civic Center complex (Hospital).

authority over the relationship between electric utilities and

cogenerators. It seeks to balance competing interests: the

encouragement of cost-effective cogeneration on one hand and the

avoidance of its subsidization by utility ratepayers on the

other.

10

The generation facilities themselves are owned by an

investment group, Florida Energy Partners, that has no ownership

affiliation with the Cogenerators.

11

For the initial sixteen-year period of operation, Center

was projected to generate cumulative profits of approximately

seventy-five million dollars.

12

Although FPL was not a party to the final contract, it

participated in its negotiation. An early draft contained a best

efforts clause that provided that, if electrical demand at Center

proved inadequate to absorb output, Dade would use Center power

at other Dade facilities, municipal buildings, and state

Practically speaking, excess power could be dispensed only one of

two ways, either via a wheeling arrangement with FPL or by

constructing a separate transmission line. A separate line would

require the approval of the local legislative body, i.e., the Dade

County Board of Commissioners (Commission). With these parameters

in place, construction of the cogeneration facility commenced in

mid-1984 and the facility became fully operational at the end of

1986.13

Center, armed with the capability to produce twenty-seven

megawatts of electrical power, actually needed only ten megawatts

with which to operate. With seventeen surplus megawatts of

generating capacity, Center quickly proved to be unprofitable. By

14

then, however, the die was cast; the project was in place.

Fingers began to point as the Cogenerators and Dade each blamed the

other for a projection miscalculation of this magnitude.15

buildings. FPL objected to the provisions concerning municipal

and state buildings, claiming they were in violation of Florida

law prohibiting retail sales of electricity to unrelated third

parties. E.g., PW Ventures, Inc. v. Nichols, 533 So.2d 281

(Fla.1988) (a cogenerator may consume the electricity it

generates itself or sell it wholesale to utilities; it may not

make retail sales to third parties). Dade and the Cogenerators

agreed to make the contract changes.

13

About this time, with the help of a consulting firm, FPL

began conducting an eighteen-month study about the effects

(including the potential threat) of cogeneration on it and its

ratepayers, entitled "Strategic Energy Business Study" (SEBS).

14

During the initial sixteen-year period of operation,

Cogenerators sustained estimated losses of several thousand

dollars per month. When the record was closed in 1989,

Cogenerators calculated cumulative losses of over sixty million

dollars.

15

Cogenerators filed separate suit in Florida state court

charging Dade with fraudulently overstating Center's projected

electrical demands. This litigation was settled in 1994.

To reduce their losses, the Cogenerators sought a logical use

for the excess power. Under rules promulgated by the PSC, two

options were immediately available: (1) the Cogenerators could

either sell the surplus electricity to FPL at a rate equal to FPL's

avoided cost;16 or (2) the Cogenerators could force FPL to transmit

or wheel the excess power to another Florida utility, who in turn

would purchase it at its own avoided cost rate.

At avoided cost rates, it appeared that the Cogenerators

could not break even with either option. FPL alleges that the

Cogenerators deliberately ignored their two legitimate options and

pursued a third, allegedly illegitimate, alternative in order to

obtain higher prices for their power: the Cogenerators approached

FPL to wheel their surplus power to other Dade facilities outside

Center, most notably, to Hospital, two miles northwest. Believing

that the Cogenerators' request violated the PSC's self-service

wheeling rules,17 FPL declined to wheel.

Rebuffed by FPL, the Cogenerators then turned to the best

efforts clause in its contract with Dade. They directed Dade, in

effect, to petition the PSC for an order compelling FPL to wheel

16

Under PURPA and implementing federal and state

regulations, utilities are required, upon request, to purchase

the power output of cogeneration facilities at a price equal to

what it would have cost the utility to generate that power, or

its avoided cost rate.

17

Under PSC regulations, the Cogenerators can ask FPL to

wheel electricity from Center to Hospital only if they qualify

under the self-service wheeling rules: (1) there must be an

exact identity of ownership between the generator and the

consumer of the electricity; and (2) wheeling will not increase

rates to utility, i.e., FPL ratepayers. Fla.Admin.Code R. 25-

17.0882. Under Florida law, a cogenerator may not sell

electricity at retail. PW Ventures, 533 So.2d at 281.

power from Center to other Dade facilities, including Hospital.

After an eleven-month administrative proceeding, the PSC

denied Dade's petition. The PSC found that Dade could not comply

with the PSC's self-service wheeling rules because Dade did not

actually own the generating equipment that produced the power to be

wheeled; did not generate the power to be wheeled; and was

contractually bound to purchase the electricity from the

Cogenerators.18 Hence, the PSC found, by definition, that Dade

could not "serve oneself." Petition of Metropolitan Dade County

for Expedited Consideration of Request for Provision of Self-

Service Transmission, Order No. 17510, Docket No. 860786-EI, 87

FPSC 5:32, 35-37 (May 5, 1987).19

After the PSC wheeling disallowance, the Cogenerators played

their fourth and final card: what can't be sent indirectly, send

directly. They approached Dade with a proposal to construct a

separate transmission line from Center to Hospital. A separate

line would reduce surplus electricity without being dependent upon

wheeling by FPL at avoided cost rates. A joint submission was made

by the Cogenerators and Dade to Commission for its approval. The

Cogenerators lobbied Commission for approval; FPL lobbied against.

The Commission voted five-to-one against the construction of the

separate transmission line.

18

The fact that Dade had legal title to the building in

which the electrical generating equipment was housed was not

controlling. The PSC also saw no merit to Dade's argument that

its option to purchase the cogeneration equipment was the

equivalent of equitable title.

19

The PSC did not address the impact, if any, of the

wheeling request upon other FPL customers.

Within weeks, the Cogenerators filed this suit.

II. PROCEDURAL BACKGROUND

The Cogenerators contend they suffered losses at Center due to

FPL's anti-competitive conduct in three areas: (1) by FPL's

refusal to wheel, when FPL allegedly prevented Cogenerators from

providing service to Hospital; (2) by FPL's manipulation of its

rate structure (when FPL allegedly offered lower rates to customers

considering cogeneration; paid cogenerators too little for their

excess power; and proposed higher rates for backup power sold to

cogenerators); and (3) by FPL's interference with interconnection

(when FPL allegedly imposed unreasonable terms in the

interconnection agreement governing the manner in which Center is

physically connected to FPL's system).20

After discovery, FPL filed a motion for summary judgment. The

district court heard oral argument in 1989 and 1993. In 1994, the

district court denied summary judgment.

This appeal follows.

III. STANDARD OF REVIEW

Application of the state-action and Noerr/Pennington immunity

20

The Cogenerators' complaint, asserting antitrust and

tortious-interference claims, was filed in November 1988. An

amended complaint was filed in March 1989. Count One of the

amended complaint claims that FPL's actions constituted an

unlawful monopoly and unlawful attempts to monopolize trade in

violation of Section 2 of the Sherman Act, 15 U.S.C. § 2; Count

Two claims that the conduct constituted an unlawful conspiracy in

restraint of trade in violation of Section 1 of the Sherman Act,

15 U.S.C. § 1; Count Three claims that FPL's actions constituted

unlawful discrimination in price or services or facilities

furnished to customers, in violation of Section 2 of the Clayton

Act, as amended by the Robinson Patman Act, 15 U.S.C. § 13;

Count Four claims that FPL tortiously interfered with the

Cogenerators' contractual relations in violation of common law.

doctrines is a question of law. See F.T.C. v. Hospital Bd. of

Directors of Lee County, 38 F.3d 1184, 1187 (11th Cir.1994). As

the question of immunity is strictly one of law, this court makes

a de novo determination of whether the district court erred in

denying summary judgment. Bolt v. Halifax Hosp. Medical Center,

980 F.2d 1381, 1384 (11th Cir.1993).

IV. DISCUSSION

A. Introduction

FPL's motion for summary judgment relies principally on two

immunity doctrines: the state action immunity doctrine and the

Noerr/Pennington immunity doctrine. The district court denied

summary judgment under both.

We review each of these findings de novo.

B. The State Action Immunity Doctrine

The Supreme Court first articulated the state-action immunity

doctrine in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed.

315 (1943). In Parker, the Court grappled with the applicability

of the Sherman Act to a California agricultural statutory program

intended to restrict competition among private producers of raisins

in order to stabilize prices and prevent economic waste. Relying

on principles of federalism and state sovereignty, the Court

refused to find that the Sherman Act was "intended to restrain

state action or official action directed by a state" and determined

that "[t]here is no suggestion of a purpose to restrain state

action in the Act's legislative history." Id. at 351, 63 S.Ct. at

313. The Court held, therefore, that federal antitrust laws were

not intended to reach state-regulated anticompetitive activities.

Id. at 350-52, 63 S.Ct. at 313-14; City of Columbia v. Omni

Outdoor Advertising, Inc., 499 U.S. 365, 370, 111 S.Ct. 1344, 1348,

113 L.Ed.2d 382 (1991).21

Thirty-seven years later, in California Retail Liquor Dealers

Ass'n. v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S.Ct. 937, 63

L.Ed.2d 233 (1980), a unanimous Court established a two-pronged

test to determine when private party anticompetitive conduct is

entitled to state action immunity from antitrust liability: (1)

the conduct had to be performed pursuant to a clearly articulated

policy of the state to displace competition with regulation; and

(2) the conduct had to be closely supervised by the state. Id. at

105, 100 S.Ct. at 943; see also F.T.C. v. Ticor Title Ins. Co.,

504 U.S. 621, 112 S.Ct. 2169, 119 L.Ed.2d 410 (1992).22 These two

prongs are addressed below.

1. Clearly Articulated Policy of the State.

The Court set out the first element of state action immunity

in Southern Motor Carriers Rate Conference, Inc. v. U.S., 471 U.S.

48, 105 S.Ct. 1721, 85 L.Ed.2d 36 (1985). There, the Court

21

The Parker Court held that the purpose of the Sherman Act

"was to suppress combinations to restrain competition and

attempts to monopolize by individuals and corporations." The Act

did not prohibit anticompetitive restraints prescribed by the

states "as an act of government." 317 U.S. at 352, 63 S.Ct. at

314.

22

The clear articulation requirement ensures that antitrust

law will not be set aside unless the state does in fact intend to

displace competition, i.e., the challenged scheme does not simply

represent unsanctioned private conduct. See generally 1 P.

Areeda & D. Turner, Antitrust Law 207, 214 (1978). The active

supervision requirement ensures that even where there is state

authorization, such authorization constitutes more than mere

permission to violate the Sherman Act. A state may displace the

Act, but in doing so it must replace it with a scheme of state

regulation. Id. at 213.

determined that a private party acting pursuant to an

anticompetitive regulatory program need not "point to a specific,

detailed legislative authorization" for its challenged conduct.

Id. at 57, 105 S.Ct. at 1726. As long as the State as sovereign

clearly intends to displace competition in a particular field with

a regulatory structure, the first prong of the Midcal test is

satisfied. Id. at 64, 105 S.Ct. at 1730.

In this case, the district court found that Florida has two

statutory policies regarding power generation and transmission: a

policy favoring monopoly power in Florida electric utilities, and

a policy of encouraging development of Florida cogeneration

facilities, complemented by the implementation of PSC regulatory

guidelines. Fla.Stat. § 366.051 (1991). The district court found

that these statutes set out clearly articulated policies regarding

utilities and cogenerators. Accordingly, the district court found

that FPL had satisfied the first prong of the Midcal test, except

as to its Strategic Energy Business Study or SEBS. See supra n.

14.

We agree with the district court that Florida has an obvious

and clearly articulated policy to displace competition with

regulation in the area of power generation and transmission and

that FPL's conduct has been performed pursuant to that policy. The

Florida legislature gave the PSC broad authority to regulate FPL.

See Ch. 366, Fla.Stat. Further, the relationship between Florida

utilities and cogenerators has been subject to pervasive state

regulation through statute and regulatory rules. Fla.Stat. §

366.05(1), .04(1), (5), .06(1), .051 (1994); Fla.Admin.Code R. 25-

17.080-.091 (1988). A myriad of agency proceedings have

transpired.23 The field has not been left to the parties'

unfettered business discretion. In addition, the Florida Supreme

Court has been active in its role of judicial review. See C.F.

Industries, Inc. v. Nichols, 536 So.2d 234 (Fla.1988) (standby

rates for qualifying facilities); PW Ventures, Inc. v. Nichols,

533 So.2d 281 (Fla.1988) (third-party sales by qualifying

facilities); Storey v. Mayo, 217 So.2d 304, 307 (Fla.1968), cert.

denied, 395 U.S. 909, 89 S.Ct. 1751, 23 L.Ed.2d 222 (1969) ("The

powers of the Commission over ... privately-owned utilities [are]

omnipotent within the confines of the statute and the limits of

organic law.").

We disagree, however, with the district court's exclusion of

SEBS from its finding. It is clear that Florida intended to

displace competition in the utility industry with a regulatory

structure, Southern Motor Carriers, 471 U.S. at 64, 105 S.Ct. at

1730, and FPL's internal SEBS study has no relevance to the issue

of Florida's clearly articulated policy of regulation. Contrary to

the district court's ruling, we conclude that the first prong of

the state action defense is satisfied here, without qualification,

that is, including SEBS.24

23

The summary judgment record includes more than fifty PSC

orders dealing with issues germane to the utility/cogenerator

relationship.

24

SEBS examine alternatives in preparing for the future and

provide, for example, a good business plan for the possibility

that interest rates may fall, or the population growth rate of

Florida may rise. When FPL has finished its good business

planning, the reaction it takes to this planning will then be

subject to state regulation. If the end product of the SEBS is

illegal, the conduct will be struck down when the action is taken

2. Conduct Actively Supervised by the State.

This second prong of the state action defense applies when

the challenged conduct is by a private party rather than a

government official. Ticor, 504 U.S. at 630, 112 S.Ct. at 2175.

Active state involvement is the second precondition for antitrust

immunity; the conduct by the private party has to be closely

supervised by the state. Midcal, 445 U.S. at 105-06, 100 S.Ct. at

943-44. The active supervision requirement is designed to ensure

that the state has "ultimate control" over the private party's

conduct, with the power to review and disapprove, if necessary,

particular anticompetitive acts that may offend state policy.

Patrick v. Burget, 486 U.S. 94, 101, 108 S.Ct. 1658, 1663, 100

L.Ed.2d 83 (1988).

The district court considered FPL's conduct in three areas

alleged to be anticompetitive by the Cogenerators: (1) FPL's

refusal to wheel; (2) its use of rates; and (3) its alleged

interference with interconnection. It determined that for FPL to

meet the second prong of the state action defense, Florida, through

the PSC, must have "actively supervised, substantially reviewed, or

independently exercised judgment and control" over FPL's "overall

anti-competitive campaign."

In each of the three areas, the district court found that,

while the PSC had the power to review FPL's conduct, it was not

given the opportunity to exercise its power to review FPL's

conduct. Therefore, the district court determined that the PSC's

or proposed to the PSC. See City of Columbia, 499 U.S. at 376-

77, 111 S.Ct. at 1352.

regulatory authority (in application or as applied) did not satisfy

the second prong of the state action immunity standard.

As we conclude that the PSC did in fact exercise active

supervision over FPL, we do not discuss these areas separately, as

the same rationale applies to each.

3. The Active Supervision in this Case.

In 1987, the PSC denied Dade's petition to allow the

Cogenerators to wheel power to Hospital because they could not

satisfy the PSC self-service wheeling rules. In re: Petition of

Metropolitan Date County, Order No. 17510 (1987).25

The district court notes that FPL stands behind this PSC

ruling as conclusive evidence of active state supervision. The

district court finds this reliance misplaced. It focuses instead

on the circumstances leading up to the PSC hearing: FPL's acts

that have their genesis in the embryonic stages of Center when FPL

participated in the early negotiations of the Cogenerator-Dade

agreement. That is, under an estoppel-like analysis, the district

court found that, when FPL ostensibly gave its blessing to the

contract (with full knowledge that it contemplated: (1) the

wheeling of excess power by FPL to other Dade locations; (2) the

conveyance of power to other Dade facilities through a direct

transmission line; or (3) the sale of excess power to FPL at

avoided cost rates), it can't be heard to complain now. The

district court's determination is based, not on whether the PSC had

25

As Dade did not own the generating equipment, there was

not an exact identity of ownership between the generator of the

electricity on the one hand, and the ultimate consumer of the

electricity, on the other. Fla.Admin.Code, Rule 25-17.0882; PW

Nichols, 533 So.2d at 281.

the power to actively supervise and review FPL's conduct, but on

whether it was ever given the opportunity to exercise its power to

supervise and review (and possibly disapprove), these early acts of

FPL.26

That is not the issue. The issue is this: Has the State of

Florida, through its state regulatory agency, the PSC, actively

supervised FPL in the areas of wheeling, rates and interconnection?

The answer is clearly yes, as to each. The fact that FPL didn't

complain about wheeling or rates or interconnection when it first

reviewed the Center contract is not material as to whether or not

the PSC had the power to actively supervise FPL. That power is

insulated. FPL's failure to object does not take away from the PSC

its opportunity to exercise the power of active supervision.

Failure by the parties to commence an action or proceeding (at the

time when the district court apparently thought they should have

objected), does not constitute the nullification of the PSC's power

to act.

The PSC exercises its powers only when called upon to do so.

No call was made. For example, the decisions of this circuit

govern or control a plethora of legal issues—but if a particular

issue is never brought before us—it doesn't mean we don't have

control. We don't have opportunity—but we still have control. We

still have active supervision.

26

It is clear that the district court is pondering why FPL

was not heard to complain, from a legal standpoint, about this

cogeneration project when it was on the drawing board. We, too,

have wondered in amazement as to how this project, structured as

it was, made it this far. We can do no more than ponder,

however, as that is not the question before us.

The record is clear—the doors to the PSC were open to all with

standing to complain. Being met with a complaint, the PSC had the

full power to actively supervise. Whether or not the State,

through the PSC, exercises its control sua sponte is not material,

unless, of course, there is an apparent devious design to abdicate

or obstruct control, and that is not the case here. The record

shows that, when the PSC was called upon, they acted. We, the

judiciary, do not have to take a walk with the PSC members to see

if they visit FPL's offices every morning.

In sum, Florida has clearly articulated policies regarding the

relationship between FPL and the Cogenerators. In addition, the

record is clear that the PSC actively supervised all aspects of

FPL's alleged anti-competitive conduct. We conclude, therefore,

that both prongs of the state action immunity doctrine are

satisfied here and FPL's conduct is immune from antitrust liability

in each of the three areas of wheeling, rates and interconnection.

C. The Noerr/Pennington Doctrine of Immunity

Noerr/Pennington follows naturally from the state action

doctrine. While the state action doctrine protects private actions

authorized by the state, the Noerr/Pennington doctrine protects

private efforts to influence government officials in creating or

implementing legislation that has anticompetitive effects. This

so-called political action doctrine protects First Amendment rights

to assemble and petition government. It springs less from the

traditional power of the sovereign than from the rights of

individuals to petition the sovereign.27

In Eastern Railroad Presidents Conference v. Noerr Motor

Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961),

and United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585,

14 L.Ed.2d 626 (1965), the Supreme Court held that concerted

efforts to restrain or monopolize trade by petitioning government

officials are protected from antitrust liability under the Sherman

Act. California Motor Transport Co. v. Trucking Unlimited, 404

U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972).28 The litigation in

Noerr grew out of an "economic life or death" struggle between

railroads and the trucking industry for the lucrative long-distance

hauling of heavy freight. Noerr, 365 U.S. at 129, 81 S.Ct. at 525.

The truckers alleged that the railroads were behind a publicity

campaign designed to procure legislation that would hurt the

trucking industry. Id. The Noerr Court found that attempts by the

railroads to secure the passage and enforcement of anticompetitive

27

There are two main differences between the state action

doctrine and the Noerr/Pennington doctrine. When the government

chooses to displace competition without being petitioned to do so

by private parties, state action applies but Noerr/Pennington

does not. When private parties petition the government to

displace competition, but the government refuses to take such

action, Noerr/Pennington applies but state action does not.

Matthew R. Gutwein, The Commercial Exception: A Necessary

Limitation to the Noerr-Pennington Doctrine, 63 Ind.L.J. 401, 411

n. 68 (1987); see generally Daniel R. Fischel, Antitrust

Liability for Attempts to Influence Government Action: The Basis

and Limits of the Noerr-Pennington Doctrine, 45 U.Chi.L.Rev. 80,

82-88 (1977); (first name) Calkins, Developments in Antitrust

and the First Amendment: The Disaggregation of Noerr, 57

Antitrust L.J. 327 (1988).

28

In California Motor Transport, the Supreme Court extended

Noerr to attempts to petition administrative agencies and the

judiciary but limited Noerr protection in actions designed to

deny plaintiffs access to the courts and administrative agencies.

404 U.S. at 511-12, 92 S.Ct. at 612-13.

laws cannot form the basis for antitrust liability regardless of

any injury to truckers:

It is inevitable, whenever an attempt is made to influence

legislation by a campaign of publicity, that an incidental

effect of that campaign may be the infliction of some direct

injury upon the interests of the party against whom the

campaign is directed.... To hold that the knowing infliction

of such injury renders the campaign itself illegal would thus

be tantamount to outlawing all such campaigns.

Id. at 143-44, 81 S.Ct. at 532-33.29

The Supreme Court gave two reasons for its decision. First,

to the extent that state government has the power to restrain

trade, a contrary holding would be in direct conflict with the

state action doctrine. Id. at 137 and n. 17, 81 S.Ct. at 529 and

n. 17. Second, allowing such conduct to establish Sherman Act

liability might substantially impair First Amendment rights to

assemble and to petition the government. Id. at 137-38, 81 S.Ct.

at 529-30.

When the Supreme Court decided Pennington four years later,

it expanded Noerr to include efforts to petition the executive

branch and broadened the scope of protected behavior. 381 U.S. at

669, 85 S.Ct. at 1593. The Noerr doctrine, said the Pennington

Court, "shields from the Sherman Act a concerted effort to

influence public officials regardless of intent or purpose." Id.

at 670, 85 S.Ct. at 1593 (emphasis added). Furthermore, the Court

29

Private action that is a sham (not genuinely aimed at

procuring favorable government action) is not protected,

regardless of the forum. Noerr, 365 U.S. at 144, 81 S.Ct. at 533

("There may be situations in which a publicity campaign,

ostensibly directed toward governmental action, is a mere sham to

cover what is actually nothing more than an attempt to interfere

directly with the business relationships of a competitor and the

application of the Sherman Act would be justified.").

held that "[j]oint efforts to influence public officials do not

violate the antitrust laws even though intended to eliminate

competition. Such conduct is not illegal, either standing alone or

as part of a broader scheme itself violative of the Sherman Act."

Id. (emphasis added). This immunity doctrine extends to the

lobbying of local legislators. City of Columbia, 499 U.S. at 379-

84, 111 S.Ct. at 1353-56. "[T]hat a private party's political

motives are selfish is irrelevant: "Noerr shields from the Sherman

Act a concerted effort to influence public officials regardless of

intent or purpose.' " Id. at 380, 111 S.Ct. at 1354, quoting

Pennington, 381 U.S. at 670, 85 S.Ct. at 1593.30

In Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S.

492, 108 S.Ct. 1931, 100 L.Ed.2d 497 (1988), the Supreme Court

began to differentiate between degrees of antitrust immunity for

acts of petitioning the government.31 It noted that the scope of

30

See also McGuire Oil Co. v. Mapco, Inc., 958 F.2d 1552,

1560 (11th Cir.1992) ("[I]t is axiomatic that actions taken with

an anti-competitive purpose or intent remain insulated from

antitrust liability under the Noerr-Pennington doctrine.")

(emphasis added).

31

Allied Tube involved the National Fire Protection

Association, a private standard-setting organization. It set

product standards and published fire protection codes that were

routinely adopted into law by state and local government. The

code permitted electrical conduits made of steel but not of

plastic. A plastics manufacturer proposed the adoption of

plastic conduits into the code as well. The proposal was

approved in committee. It could then be adopted by a simple

majority of association members at their annual meeting. Before

the vote, the nation's largest steel producer packed the annual

meeting with sympathetic no-voting members and the plastics

proposal was defeated. A jury found the steel manufacturer

liable for its actions. The district court granted a judgment

notwithstanding the verdict, reasoning that the steel

manufacturer was entitled to antitrust immunity under Noerr. The

Second Circuit reversed, refusing to extend Noerr immunity and

the Supreme Court agreed. Id.

the protection depends upon the source, context, and nature of the

anticompetitive restraint at issue. Id. at 499, 108 S.Ct. at 1936.

Absolute immunity from antitrust liability results where the

restraint upon trade or monopolization is the result of valid

governmental action as opposed to private action. Id. Further,

where, independent of any government action, the anticompetitive

restraint results directly from private action, the restraint

cannot form the basis for antitrust liability if it is "incidental"

to a valid effort to influence governmental action. Id.

The Court found that Allied's efforts were not immune from

liability because they were essentially commercial in nature and

their political aspects were secondary. 32 It stated that "[w]hat

distinguishes this case from Noerr and its progeny is that the

context and nature of petitioner's activity make it the type of

commercial activity that has traditionally had its validity

determined by the antitrust laws themselves." Id. at 505, 108

S.Ct. at 1939.

Citing Allied Tube, Todorov v. DCH Healthcare Authority, 921

F.2d 1438 (11th Cir.1991) and Hill Aircraft & Leasing Corp. v.

Fulton County, 561 F.Supp. 667 (N.D.Ga.1982), aff'd, 729 F.2d 1467

(11th Cir.1984), the district court in this case found that when

FPL lobbied the Commission to vote against construction of the

32

"[W]e think that, given the context and nature of the

conduct, it can more aptly be characterized as commercial

activity with a political impact. Just as the antitrust laws

should not regulate political activities "simply because those

activities have a commercial impact," [Noerr,] 365 U.S. at 141,

81 S.Ct. at 531, so the antitrust laws should not necessarily

immunize what are in essence commercial activities simply because

they have a political impact." 486 U.S. at 507, 108 S.Ct. at

1940.

Center-to-Hospital transmission line, its conduct fell within the

so-called commercial exception to Noerr because FPL didn't want to

lose Hospital as a valued customer. The district court reasoned

that FPL's legislative lobbying was not for political reasons but

for economic reasons; it violated state policies as it was in

direct contravention to Florida's policies promoting cogeneration;

it was aimed at a commercial purchasing decision by Dade; and it

was not a political or "policy" decision but a commercial or

pecuniary one. The district court also found that FPL's

participation in the negotiation of the Cogenerator-Dade contract

was not protected by Noerr immunity.33

We conclude that the district court's reliance in this case

on Allied Tube, Todorov and Hill Aircraft to formulate a commercial

exception to Noerr/Pennington as the law of this circuit is

misplaced. The district court has misreadAllied Tube and extended

it in an inappropriate way; in addition, neitherTodorov34 nor Hill

Aircraft35 expressly discuss Noerr in more than dicta.

33

The district court accepted the Noerr defense, however,

with respect to FPL's lobbying of the PSC to deny the

Cogenerators' self-service wheeling claim, apparently on the

basis that the Cogenerators had conceded that FPL's lobbying

efforts during the PSC hearings were immune from antitrust

liability.

34

Todorov is distinguishable as it did not involve

legislative lobbying but rather the lobbying of a hospital peer

group committee. Furthermore, the Todorov panel limited its

discussion of Noerr to a footnote, 921 F.2d at 1446 n. 14,

declined to rule on the Noerr issue, and affirmed the district

court on other grounds, id.

35

The district court decision in Hill Aircraft was affirmed

by this court without discussion. Moreover, the district court

in Hill Aircraft expressly distinguished the facts before it from

those involving legislative lobbying. 561 F.Supp. at 675.

Allied Tube involved a private standard-setting association

and not a governmental entity or legislative body. And, while it

is true that the fire code standards in Allied Tube were routinely

adopted into law by a substantial number of state and local

governments, that does not transform the private association into

a legislative body or even a "quasi-legislative" body. In

addition, Allied Tube did not involve any governmental lobbying.

While it is true under Allied Tube that one must look not only to

the activity's "impact, but also [to] the context and nature of the

activity," Order at 44, quoting 486 U.S. at 504, 108 S.Ct. at 1939,

the Supreme Court continues on to state that "[lobbying] in the

open political arena, where partisanship is the hallmark of

decisionmaking," is immune, whereas lobbying "within the confines

of a private [i.e., non-governmental] standard-setting process" may

not be immune. Id.36

The Supreme Court and this circuit have never expressly

considered the validity of what has been referred to as the

commercial exception to the Noerr/Pennington doctrine and we are

not required to do so now. We conclude that FPL's conduct is

protected under Noerr/Pennington and does not fall under any

exception, commercial or otherwise. The district court's rejection

of Noerr/Pennington immunity because of a perceived commercial

exception was in error.

Second, FPL has a constitutional right to petition its

36

Allied Tube actually supports FPL's position, that is,

they were immune from antitrust liability when they lobbied

Commission, an "open political arena," or Dade's legislative

body.

governing legislative bodies. FPL lobbied Commission to vote

against constructing the separate transmission line; the

Cogenerators lobbied Commission to vote for construction. FPL's

motivation to speak out against building the line is irrelevant.37

It is obvious that FPL had a self-interest in protecting its energy

customer base; to lose Hospital as a customer would have cost FPL

thousands of dollars a year in lost revenues. The fact that this

lobbying was in FPL's commercial best interest is beside the point.

City of Columbia, 499 U.S. at 380, 111 S.Ct. at 1354 (that a

private party's political motives are selfish is irrelevant).

The district court found it significant that FPL lobbied a

legislative body for a specific purpose—construction of a

transmission line—rather than passage of favorable legislation in

general. That is not significant. The First Amendment protections

of Noerr do not turn on whether one petitions for governmental

action in general or for specific legislative action. Legislative

lobbying is protected, "either standing alone or as part of a

broader scheme itself violative of the Sherman Act." Pennington,

381 U.S. at 670, 85 S.Ct. at 1593; see also City of Columbia, 499

U.S. at 381, 111 S.Ct. at 1354.

In sum, we look to the conduct, not the intent or motivation

behind the conduct. The fact that FPL had a pecuniary interest in

the outcome of the lobbying or that the lobbying was for a specific

purpose does not matter, it merely begs the question. And, suffice

37

In reality, FPL should be expected to speak out;

otherwise, the PSC could find that FPL wasn't protecting its

energy customer base, and, subject FPL to serious penalty if, as

a result, electric rates to consumers were driven up.

it to say that a circumstance might one day present itself that

could amount to conduct not protected under Noerr/Pennington as

some sort of commercial exception. That is not the case here. We

conclude that FPL's conduct in lobbying the Commission against the

construction of a separate transmission line is constitutionally

protected under the Noerr/Pennington doctrine of immunity.

V. CONCLUSION

For the reasons stated above, under both the state-action and

the Noerr/Pennington immunity doctrines, we conclude that FPL's

conduct concerning the Cogenerators is immune from antitrust

liability in each of the areas of wheeling, rates, interconnection,

and lobbying. We reverse the district court's denial of FPL's

motion for summary judgment in these four areas. As this ruling

does not entirely resolve the dispute before us, however, we leave

all remaining issues for determination upon remand.

The decision of the district court is reversed. The case is

remanded for further proceedings consistent with this opinion.

REVERSED and REMANDED.