Micah Uetricht v. Chicago Parking Meters, LLC

In the

United States Court of Appeals

For the Seventh Circuit

____________________

No. 22-1166

MICAH UETRICHT and JOHN KADERBEK,

Plaintiffs-Appellants,

v.

CHICAGO PARKING METERS, LLC,

Defendant-Appellee.

____________________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 21 C 3364 — Matthew F. Kennelly, Judge.

____________________

ARGUED SEPTEMBER 22, 2022 — DECIDED APRIL 7, 2023

____________________

Before WOOD, HAMILTON, and ST. EVE, Circuit Judges.

WOOD, Circuit Judge. Desperate to find untapped sources

of funds during the recession of 2008, the City of Chicago re-

alized that it would need to think outside the box. It faced a

$150 million shortfall in revenue, see Office of the Inspector

General of the City of Chicago, An Analysis of the Lease of the

City’s Parking Meters 13–14 (2009), available at

http://dig.abclocal.go.com/wls/documents/060209parking-

meter.pdf, and it emphatically did not want to bridge the gap

2 No. 22-1166

with a large and deeply unpopular tax increase. As it looked

around for an alternative way to find the necessary money, its

eyes fell on city-controlled metered street parking. Realizing

that this was an asset it could monetize, it ended up awarding

a 75-year Concession over designated parking spaces to the

private firm Chicago Parking Meters, LLC (“CPM”), which

agreed to give the City an upfront cash payment of more than

a billion dollars in exchange.

After the City Council approved the new arrangement and

CPM took over, the price of parking in the areas covered by

the Concession shot upward, quickly more than doubling. Lit-

igation in both state court and federal court followed. Alt-

hough it is of no direct relevance to our case, we note that the

Illinois Appellate Court has upheld the arrangement. See In-

dep. Voters of Illinois Indep. Precinct Org. v. Ahmad, 2014 IL App

(1st) 123629. On the federal side, the plaintiffs now before us

filed an action against CPM both for themselves and on behalf

of a class. Describing themselves as two car drivers who live

in Chicago, they assert that CPM has violated the federal an-

titrust laws, as well as the Illinois Consumer Fraud and De-

ceptive Practices Act. See 15 U.S.C. §§ 1, 2; 815 ILCS 805. They

did not name the City as a codefendant. The district court

never ruled on the class allegations. Instead, it dismissed

plaintiffs’ antitrust theories for failure to state a claim, on the

ground that they were barred by the state-action immunity

doctrine of Parker v. Brown, 317 U.S. 341 (1943); it then relin-

quished jurisdiction over the supplemental state-law count.

We affirm. The Concession represents no more or less than

a use of municipal authority to substitute, during the term of

the lease, exclusive private operation for direct city operation

of specified areas of Chicago’s on-street parking facilities. Put

No. 22-1166 3

differently, it swaps one “monopolist” (the City) for another

(CPM). We’re not so sure, by the way, that there is anything

here that the antitrust laws would recognize as a monopoly.

The Illinois Secretary of State reports that there are more than

a million passenger vehicles in the City, see Active Registration

Counts – City of Chicago County, Ill. Sec’y of State (last visited

Mar. 3, 2023), https://www.ilsos.gov/departments/vehi-

cles/statistics/lpcountycounts/COUNTY103.PDF, and those

cars can be found in apartment building parking garages, pri-

vate residential garages, private lots, public lots, unregulated

streets, and, of course, metered parking. Nonetheless, for pre-

sent purposes we will assume that plaintiffs are correct and

that the metered spaces at issue fall into a distinct market that

has been monopolized. The critical point is that the City had

the necessary authority to enter into this arrangement. Our

independent review of the Concession Agreement (which is

attached to the complaint, see Fed. R. Civ. P. 10(c)) satisfies us

that the City has reserved meaningful powers to oversee and

regulate CPM’s performance. The deal itself might have been

foolish, short-sighted, or worse, and if one is to believe news

reports, it may have saddled Chicago with the most expensive

street parking in the country, see Tania Babich, Chicago parking

most expensive in U.S., ABC7 Chicago (July 12, 2017), but that

is not enough to state a claim for a violation of the antitrust

laws.

I

There is not much to add about the events underlying this

litigation. After the City decided to privatize certain on-street

metered parking through a long-term lease, it put out a re-

quest for bids. Ten applicants responded, of which eight were

deemed qualified. See An Analysis of the Lease of the Cityʹs

4 No. 22-1166

Parking Meters, supra, at 12 (2009). CPM was the winning bid-

der. It offered to pay the City $1,156,500,000 in cash in ex-

change for the exclusive right to operate and collect revenue

from the City’s network of metered parking. This represented

approximately 36,000 parking spots located in business and

commercial areas. The term of the Agreement, as we said, is

75 years. Plaintiffs assert that just 14 years into that term, CPM

has already recouped its initial investment, and that it is now

looking forward to another 60 years or so of monopoly profits.

On December 4, 2008, the City Council passed an ordi-

nance authorizing the Mayor and the Chief Financial Officer

to execute the Agreement. The ordinance stated that the Con-

cession was “in the best interest of the residents of the City

and desirable for the welfare of its government and affairs.”

Chicago, IL, Authorization for Execution of Concession and

Lease Agreement and Amendment of Titles 2, 3, 9 and 10 of

Municipal Code of Chicago in Connection with Chicago Me-

tered Parking System (Dec. 14, 2008), available at

https://www.chicago.gov/content/dam/city/depts/rev/supp_i

nfo/ParkingMeter/MeteredParkingSystemOrdinance.pdf.

Plaintiffs do not challenge the process by which the

Agreement was adopted.

Although the Agreement has been amended a couple of

times since it took effect (most recently in 2013), the key pro-

visions have not changed. We review them briefly and rely on

them in our de novo assessment of the complaint. The Agree-

ment gives CPM “the right to operate, maintain and improve

the Metered Parking System, to retain the revenues to be de-

rived from the operation of the Concession Metered Parking

Spaces and to be compensated for the operation of Reserve

Metered Parking Spaces for the Term of the Agreement,

No. 22-1166 5

subject to the reserved police powers and regulatory powers

of the City with respect to the Metered Parking System … .”

Note that there are two kinds of parking spaces covered

by the Agreement: the “Concession” spaces and the “Re-

serve” spaces. Those terms are defined (along with many

more) in Article I, section 1.1, of the Agreement. The two types

of spaces are described as follows:

“Concession Metered Parking Spaces” means (i) those

Metered Parking Spaces so designated by the City

from time to time and included in the Metered Parking

System operated and maintained by the Concession-

aire pursuant to this Agreement, (ii) … the Metered

Parking Spaces listed in Amended Schedule 10 and

designated thereon as Concession Metered Parking

Spaces, and (iii) … the Metered Parking Spaces located

in the Parking Lots listed on Revised Schedule 10A.

…

“Reserve Metered Parking Spaces” means those Me-

tered Parking Spaces so designated by the City that the

Concessionaire operates and maintains on behalf of the

City pursuant to this Agreement and with respect to

which the City is paid the net Metered Parking Reve-

nues.

CPM is entitled to all of the revenue generated by the Conces-

sion Spaces, while the City is entitled to 85% of the net reve-

nue attributable to the Reserve Spaces. CPM operates and

maintains both types of parking spaces. The City is entitled to

designate, add, and remove any kind of metered space, but if

the average daily number of Concession Spaces falls below

30,000 for a reporting year, the City must pay CPM an amount

6 No. 22-1166

equal to the reduction in the fair market value of CPM’s inter-

est in the Concession.

Section 1.1 defines the City’s “Reserved Powers” as fol-

lows:

[T]he exercise by the City of those police and regula-

tory powers with respect to Metered Parking Spaces,

including Concession Metered Parking Spaces and Re-

serve Metered Parking Spaces, and the regulation of

traffic, traffic control and the use of the public way in-

cluding the exclusive and reserved rights of the City to

(i) designate the number and location of Metered Park-

ing Spaces and to add and remove Metered Parking

Spaces; (ii) establish and revise from time to time the

schedule of Metered Parking Fees for the use of Me-

tered Parking Spaces; (iii) establish and revise from

time to time the Periods of Operation and Periods of

Stay of Metered Parking Spaces; (iv) establish a sched-

ule of fines for parking violations; (v) administer a sys-

tem for the adjudication and enforcement of parking

violations and the collection of parking violation fines

and (vi) establish and administer peak period pricing,

congestion pricing or other similar plans.

See also Concession Agreement § 7.2. The City did not, how-

ever, have the right to take those steps without financial con-

sequences. The Agreement designates a number of “compen-

sation events” that trigger an obligation on the City’s part to

pay CPM. (The parties refer to these as “true-up payments.”)

The list includes a reduction in fees, a failure to adjust fees for

inflation, a reduction in the number of Concession Spaces, the

addition of competing public parking facilities within a cer-

tain distance, or broadly speaking any exercise of the City’s

No. 22-1166 7

reserved powers that “may have a material adverse effect on

the fair market value of the Concessionaire Interest.” If the

City exercises its right to terminate the Agreement, it must

pay CPM for any loss in value that ensues. Plaintiffs assert

that these financial consequences are so draconian that they

mean, in effect, that the City’s reserved powers are illusory.

Insofar as plaintiffs are saying that there are robust protec-

tions in the Agreement designed to protect the deal CPM

struck, they are not wrong. Nonetheless, the record shows

that the City has exercised its reserved powers on several oc-

casions, and it has made the required payments to CPM. Me-

dia sources indicate that in 2016, the City added 752 metered

spaces in the central area during Mayor Emmanuel’s term,

and an article published in 2022 asserted that 1,800 parking

meters had been added since Mayor Lightfoot took office. See

John Byrne, 1,800 parking meters added since Chicago Mayor

Lightfoot took office, THE PANTAGRAPH (Aug. 15, 2022); Fran

Spielman, Emanuel adding 752 metered parking spaces in central

area, CHICAGO SUN TIMES (Nov. 4, 2016). More significantly,

from plaintiffs’ perspective, are the yearly true-up payments

that Chicago has made to CPM over the years. Based on pub-

licly filed audited financial statements, it appears that CPM

has recognized $151,660,810 in true-up revenue since 2009:

YEAR PAYMENT

2009 $533,330

2010 $1,658,036

2011 $14,134,842

2012 $26,738,664

2013 $14,617,084

8 No. 22-1166

2014 $6,481,150

2015 $8,637,891

2016 $15,740,662

2017 $21,736,219

2018 $17,371,527

2019 $11,037,684

2020 $6,250,836

2021 $6,722,885

These are not trivial amounts, and so we accept plaintiffs’ con-

tention that the City must think twice, or three times, before

it exercises reserved powers that give rise to compensation for

CPM.

There is much more to the Agreement, which as amended

runs more than 230 pages, but most of it is not pertinent to

our case. The central issue is whether, as the district court be-

lieved, this arrangement is categorically outside the reach of

the federal antitrust laws because it represents state action, or

if it fails to satisfy the criteria for state-action immunity and

thus must be returned to the district court for further proceed-

ings. We begin by reviewing the state-action doctrine, espe-

cially as applied to actions taken by municipalities, and we

then examine its application to this Agreement.

II

At the time Congress passed the Sherman Act in 1890, the

Supreme Court had a narrow view of Congress’s power un-

der the Commerce Clause of Article I. “Commerce” did not

cover intrastate activity, such as manufacturing, see United

States v. E.C. Knight Co., 156 U.S. 1 (1895), and it did not

No. 22-1166 9

include purely internal transactions, see Gibbons v. Ogden, 22

U.S. 1 (1824). But as the Supreme Court’s understanding of

the scope of the commerce power expanded during the 1930s,

the substantive reach of the Sherman Act followed suit. By

1942, the Court had repudiated the narrow view of Congress’s

power to regulate interstate commerce reflected in E.C. Knight

and had adopted the position that anything affecting inter-

state commerce was also “a proper subject of federal regula-

tion.” Wickard v. Filburn, 317 U.S. 111, 122 (1942). Two years

later, the Court confirmed that the Sherman Act has expanded

along with the Commerce Clause:

We have been shown not one piece of reliable evidence

that the Congress of 1890 intended to freeze the pro-

scription of the Sherman Act within the mold of then

current judicial decisions defining the commerce

power. On the contrary, all the acceptable evidence

points the other way. That Congress wanted to go to

the utmost extent of its Constitutional power in re-

straining trust and monopoly agreements … .

United States v. South-Eastern Underwriters Ass’n, 322 U.S. 533,

557 (1944) (addressing whether the Sherman Act reaches in-

terstate insurance transactions; later superseded by the

McCarran-Ferguson Act on the specific question whether con-

tracts of insurance fell within the Sherman Act).

In the midst of these developments in the general scope of

the Sherman Act came a case posing questions of federalism:

Parker v. Brown. The state of California had adopted a market-

ing program for the 1940 raisin crop pursuant to a state law

designed to restrict competition and prop up the price of rai-

sins. The vast majority of California’s raisins—90 to 95 per-

cent—were shipped outside the state. All raisins were subject

10 No. 22-1166

to an elaborate allocation system, under which the producers

classified them, allocated 50 percent of the crop to a “stabili-

zation pool,” held back another 20 percent in a “surplus

pool,” and sold the remaining 30 percent. Violations of the

system were punished as misdemeanors.

One grower, who wanted to sell more than the system

would permit, sued California’s Director of Agriculture and

other responsible officials. He asserted violations of the Sher-

man Act, the Agricultural Marketing Agreement Act of 1937,

and the Commerce Clause. He prevailed before a three-judge

court on his Commerce-Clause theory, but the Supreme Court

reversed. The part of the Court’s opinion of interest for our

purposes is its analysis of the “validity of the prorate program

under the Sherman Act.” Parker, 317 U.S. at 350. The Court be-

gan with two critical points:

We may assume for present purposes that the Califor-

nia prorate program would violate the Sherman Act if

it were organized and made effective solely by virtue

of a contract, combination or conspiracy of private per-

sons, individual or corporate. We may assume also,

without deciding, that Congress could, in the exercise

of its commerce power, prohibit a state from maintain-

ing a stabilization program like the present because of

its effect on interstate commerce.

Id. The first assumption introduced the idea that state action

is not subject to the same rules as private action. The second

assumption accepted that Congress could, if it wished, over-

ride state legislation that is inconsistent with the Sherman Act.

The question before the Court was whether Congress had

done so.

No. 22-1166 11

In reaching its ultimate conclusion, the Court relied in part

on the fact that the Sherman Act has nothing to say on the

question whether states fall within the definition of the “per-

sons” who are subject to the law. It found significance in this

silence, on the theory that such an important intrusion on the

states’ power to regulate their own economies would have

been addressed expressly. Looking to “the purpose, the sub-

ject matter, the context and the legislative history of the stat-

ute,” the Court was persuaded that the Sherman Act was not

intended to, and did not, reach state action. Id. at 351. It found

instead that “the state command to the Commission and to

the program committee of the California Prorate Act is not

rendered unlawful by the Sherman Act since, in view of the

latter’s words and history, it must be taken to be a prohibition

of individual and not state action.” Id. at 352. Such a restraint

was simply one “which the Sherman Act did not undertake to

prohibit.” Id. Indeed, given the contemporary understanding

of the Commerce Clause in 1890, and the fact that Congress

passed the Sherman Act pursuant to that power, it is possible

that the drafters would have thought that state laws limited

to intrastate matters were outside the scope of the Commerce

Clause, and for that reason alone were not preempted.

The next important development in the state-action ex-

emption recognized by Parker came in California Retail Liquor

Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97 (1980).

Ever since Parker, it had been understood that a state could

not simply announce that the Sherman Act did not apply

within its borders, but it was not clear what a state needed to

do in order to obtain Parker protection for a local economic

program. In Midcal, a wine distributor brought an antitrust

challenge to California’s state-imposed system of resale price

maintenance and price posting for the wholesale wine trade.

12 No. 22-1166

The state court of appeal enjoined the pricing arrangement on

the ground that it violated the Sherman Act and was not enti-

tled to Parker immunity.

The Supreme Court affirmed. In so doing, it introduced a

two-part test for state-action immunity: “First, the challenged

restraint must be one clearly articulated and affirmatively ex-

pressed as state policy; second, the policy must be actively su-

pervised by the State itself.” Midcal, 445 U.S. at 105 (quota-

tions omitted). Although the California system satisfied the

first of those criteria, it flunked the second one. It was not

enough, the Court held, for the state simply to authorize

price-fixing on the part of private parties and to enforce the

resulting prices. An express state policy substituting regula-

tion for competition was required instead, coupled with ac-

tive state supervision of the regulated party.

The next question to arise related to the way in which

these principles apply if the “state” actor is a municipality, not

the state itself. In City of Lafayette v. Louisiana Power & Light Co.,

435 U.S. 389 (1978), and Community Communications Co. v. City

of Boulder, 455 U.S. 40 (1982), the Supreme Court held that mu-

nicipalities acting alone do not qualify as the requisite source

of state law. Lafayette involved a municipal corporation acting

pursuant to general powers delegated by the state legislature,

while Community Communications presented the case of a city

with broad home-rule powers under state law. In either in-

stance, the Court held, only if the local action “constitutes the

action of the State [ ] itself in its sovereign capacity … or unless

it constitutes municipal action in furtherance or implementa-

tion of clearly articulated and affirmatively expressed state

policy” is Parker immunity available. Community Communica-

tions, 455 U.S. at 52.

No. 22-1166 13

It soon turned out that municipalities, while not the same

as states, are also not the equivalent of private actors for Parker

purposes. In Town of Hallie v. City of Eau Claire, 471 U.S. 34

(1985), the question was how to apply the Midcal test—clear

articulation and affirmative expression at the state-law level,

coupled with active supervision—to municipalities. The

Town of Hallie, Wisconsin, and three other small towns, lay

just outside the borders of the City of Eau Claire. They sued

the City under the antitrust laws, claiming that it was monop-

olizing the provision of sewage treatment services and unlaw-

fully tying those services to the related activities of sewage

collection and transportation. The district court dismissed the

complaint, and this court affirmed. We held that Wisconsin

law adequately conferred the right on the City either to fur-

nish or to refuse to furnish the sewage services. The active-

supervision element, however, did not follow the Midcal

script. We reasoned that active state supervision over the mu-

nicipality’s actions “would erode traditional concepts of local

autonomy and home rule.” Town of Hallie, 471 U.S. at 38. This

led us to conclude that active supervision is not necessary if

the state regulatory scheme relies on a municipality.

The Supreme Court affirmed. It regarded this as a question

of first impression—one that had been unnecessary to explore

in Lafayette and Community Communications. Its ruling was un-

ambiguous: “We now conclude that the active state supervi-

sion requirement should not be imposed in cases in which the

actor is a municipality.” Id. at 46. In so doing, it explained that

the active-supervision requirement plays only an evidentiary

role: it offers a way to ensure that the actor is actually engag-

ing in the conduct at issue pursuant to state policy. Id. It went

on to explain that

14 No. 22-1166

[w]here the actor is a municipality, there is little or no

danger that it is involved in a private price-fixing ar-

rangement. 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 munici-

pality 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 dele-

gated function.

Id. at 47.

The last case in this line that deserves a quick look is Fed-

eral Trade Commission v. Phoebe Putney Health System, Inc., 568

U.S. 216 (2013). There, the Court had to decide “whether a

Georgia law that creates special-purpose public entities called

hospital authorities and gives those entities general corporate

powers, including the power to acquire hospitals, clearly ar-

ticulates and affirmatively expresses a state policy to permit

acquisitions that substantially lessen competition.” Phoebe

Putney, 568 U.S. at 219. The Court found that the Georgia law

did not adequately state such a policy, and so it held that the

state-action immunity from the antitrust laws (in that case, the

Clayton Act § 7) did not apply. It emphasized that it “recog-

nize[d] state-action immunity only when it is clear that the

challenged anticompetitive conduct is undertaken pursuant

to a regulatory scheme that is the State’s own.” Id. at 225 (quo-

tations omitted). Nothing indicated that the State of Georgia

“affirmatively contemplated that the hospital authorities

would displace competition by consolidating hospital owner-

ship,” id., and so the first part of the Midcal test was not

No. 22-1166 15

satisfied. The Court had no occasion to consider the question

of active supervision.

III

This brief review reveals that there are several issues be-

fore us. First, we address the question whether the City would

be entitled to state-action immunity if it had been the party

sued by the plaintiffs. Second, we consider whether plaintiffs’

decision to sue Chicago’s lessee, CPM, makes any difference

to the outcome. Third, we look at plaintiffs’ argument that the

City has retained such minimal control over CPM’s operation

of the Metered Parking System that the link between any state

action and private action has been broken in a way that de-

prives CPM of the right to take advantage of the state-action

shield. Finally, we touch on plaintiffs’ complaint about the

duration of the Agreement.

A

As our review of the Parker doctrine as applied to munici-

palities indicates, the first question is whether the action at is-

sue—the 75-year Concession—rested on clearly articulated

and affirmatively expressed state policy. Even though Chi-

cago is a home-rule city, see About City Government & the Chi-

cago City Council, Office of the City Clerk, City of Chicago (last

visited Mar. 9, 2023), https://www.chicityclerk.com/about-

city-government-chicago-city-council, we know from

Community Communications that the regulation in question

must come directly from the State of Illinois, not the City.

Several Illinois laws, taken together, provide the authority

for the state’s municipalities to regulate parking. (We note

that the state need not compel the allegedly anticompetitive

activity; it is enough for the state policy expressly to permit

16 No. 22-1166

the conduct. See So. Motor Carriers Rate Conference v. United

States, 471 U.S. 48, 61–62 (1985).) We begin with a simple law,

65 ILCS 5/11-80-2, which states that “[t]he corporate authori-

ties of each municipality may regulate the use of the streets

and other municipal property.” The Metered Parking Spaces

addressed by the Agreement are all on Chicago streets or

other municipal property. Under this statute, the City has the

power to dictate how those streets may be used—for parking,

for loading zones, for bus lanes, and so forth. Similarly, Illi-

nois law gives the City the authority to regulate the use of

sidewalks, 65 ILCS 5/11-80-13, to the extent the sidewalks are

relevant to street parking.

Most importantly, the City has broad authority to regulate

parking pursuant to 65 ILCS 5/11-71-1. That statute appears

under the heading “Off-Street Parking,” but its language is

not so limited. See Michigan Ave. Nat’l Bank v. County of Cook,

191 Ill.2d 493, 505–06 (2000) (“When the legislature enacts an

official title or heading to accompany a statutory provision,

that title or heading is considered only as a short-hand refer-

ence to the general subject matter involved in that statutory

section, and cannot limit the plain meaning of the text.”) (quo-

tations omitted). Subpart (a) provides as follows in relevant

part:

Any municipality is hereby authorized to:

(a) Acquire by purchase or otherwise, own, construct,

equip, manage, control, erect, improve, extend, main-

tain and operate motor vehicle parking lot or lots, gar-

age or garages constructed on, above and/or below

ground level, public off-street parking facilities for mo-

tor vehicles, parking meters, and any other revenue pro-

ducing facilities, hereafter referred to as parking

No. 22-1166 17

facilities, necessary or incidental to the regulation, con-

trol and parking of motor vehicles, as the corporate au-

thorities may from time to time find the necessity

therefor exists, and for that purpose may acquire prop-

erty of any and every kind or description, whether real,

personal or mixed, by gift, purchase or otherwise.

65 ILCS 11-71-1(a) (emphases added). Nothing in this lan-

guage indicates that the parking meters must be located in an

off-street lot or garage. The meters are simply one device for

producing revenue and controlling the parking of motor ve-

hicles.

Subpart (b) of the same statute confirms the City’s author-

ity to “[m]aintain, improve, extend and operate any such

parking facilities and charge for the use thereof.” Id.

§ 11-71-1(b). Finally, subpart (c) states that municipalities may

“[e]nter into contracts dealing in any manner with the objects

and purposes of this [part of the Municipal Code], including

the leasing of space on, or in connection with, parking meters

for advertising purposes.” Id. § 11-71-1(c).

But leases may exist for more than advertising purposes.

Lest there be any doubt about the ability of the City to dele-

gate its power to own and operate parking spaces to another

entity, two more statutes answer any final questions. The first

is 65 ILCS 5/11-71-8, which provides as follows:

The corporate authorities of any such municipality

availing of the provisions of this [part of the Illinois

Municipal Code] are hereby given the authority to

lease all or any part of any such parking facilities, and

to fix and collect the rentals therefor, and to fix, charge

and collect rentals, fees and charges to be paid for the

18 No. 22-1166

use of the whole or any part of any such parking facil-

ities, and to make contracts for the operation and man-

agement of the same, and to provide for the use, man-

agement and operation of such lots through lease or by

its own employees, or otherwise.

The only limitation on this authority is the requirement,

spelled out in the statute, for a competitive bidding process

and segregation of funds for leases with a term greater than

one year. As noted earlier, the City did follow the prescribed

procedures, and that aspect of the Concession is not at issue

here.

Lastly, Illinois has a statute expressly directed at the Parker

state-action exemption from the antitrust laws: 65 ILCS

5/1-1-10. It states broadly that it is the policy of the state that

all powers granted to municipalities “may be exercised …

notwithstanding effects on competition.” Id. Included in the

laws singled out by this statute is article 11 of the Illinois Mu-

nicipal Code, which addresses corporate powers and func-

tions of municipalities, including the parking rules. Id.

§ 1-1-10(b) (“ … all of Divisions of Articles 10 and 11 of the

Illinois Municipal Code … .”). Although the state obviously

cannot obtain Parker protection simply by declaring that its

system meets the Supreme Court’s criteria for immunity, the

state may take whatever steps it wishes to clarify that it is

“clearly articulating and affirmatively expressing” its inten-

tion to regulate a certain area.

Plaintiffs argue that these laws do no more than the provi-

sions of Georgia law regarding hospital acquisitions at issue

in Phoebe Putney. As we noted, the Court there held that laws

authorizing a special-purpose entity called a hospital author-

ity to “acquire by purchase, lease, or otherwise” other

No. 22-1166 19

hospitals or medical facilities did not express any intent to

displace competition in the market with state regulation.

Phoebe Putney, 568 U.S. at 224, 227. But that is because it is easy

to contemplate acquisitions or other property transfers that

have no anticompetitive effect, and so there is nothing about

that power that inevitably leads to anticompetitive outcomes.

Moreover, nothing in the Georgia laws purported to confer

exclusive ownership over the area’s hospitals on the authori-

ties. Thus, the fact pattern before the Court was not one in

which “the displacement of competition was the inherent,

logical, or ordinary result of the exercise of authority dele-

gated by the state legislature.” Id. at 229.

Chicago’s metered parking places stand in an entirely dif-

ferent position. The City does not share the authority to regu-

late the use of the streets with anyone. See 65 ILCS 5/11-80-2.

It thus may decide what to do with the streets: keep them

open, carve out bike or bus lanes, establish zones exclusively

for area residents, or provide metered parking. Illinois law

gives the City a monopoly, to use plaintiffs’ word, over those

spaces. And plaintiffs seem to concede that if they had sued

Chicago under the antitrust laws for its part in the Conces-

sion, they would have failed. The Illinois statutes we have dis-

cussed represent an affirmative decision at the state level to

replace competition with regulation. There is no market in

street parking places, and so there is no competition to be pre-

served.

B

Our reasoning does not change simply because plaintiffs

named CPM rather than the City as the defendant. The Su-

preme Court held as much in Southern Motor Carriers, when it

said that “[t]he success of an antitrust action should depend

20 No. 22-1166

upon the activity challenged rather than the identity of the

defendant.” 471 U.S. at 58–59 (citation omitted). The Court

specifically disapproved drawing any distinction between a

case against a state agency and one against a private party as

a named defendant. Id. at 58. Illinois law permits the City to

exercise its powers through a lessee, and that is what Chicago

has done. Or at least that is what Chicago says it has done.

Plaintiffs counter that Chicago gave away so much authority

in the Agreement that CPM is no longer acting under munic-

ipal supervision, and so it has lost the right to rely on Parker

immunity. We now address that argument.

C

This issue—active supervision in the context of municipal

regulation—did not arise in Phoebe Putney. We know from

Town of Hallie that municipalities are not subject to the active

supervision requirement. 471 U.S. at 45, 47. But that does not

mean that anything goes when the state confers this kind of

power on a municipality. The arrangement will be protected

by Hallie if and only if the entity exercising the delegated state

power is in fact the municipality itself. (Naturally, the munic-

ipality must do this through some kind of agent—employees,

independent contractors, lessees, or the like.). If the munici-

pality is only the nominal market regulator while a private

entity actually exercises the power conferred by state law,

Hallie immunity is not available. That follows from the Su-

preme Court’s recognition that “where a private party is en-

gaging in anticompetitive activity, there is a real danger that

he is acting to further his own interests, rather than the gov-

ernmental interests of the State.” N. Carolina Bd. of Dental Ex-

aminers v. FTC, 574 U.S. 494, 507 (2015) (quotation omitted). In

other words, window dressing will not do.

No. 22-1166 21

FTC v. Ticor Title Insurance Co., 504 U.S. 621 (1992), exem-

plifies this limit on state-action immunity. The Supreme Court

examined whether title insurance companies in four states

(Connecticut, Wisconsin, Arizona, and Montana) were enti-

tled to state-action immunity in connection with the fixing of

rates for search and examination services. Id. at 628. In each

state, “the title insurance rating bureau was licensed by the

State and authorized to establish joint rates for its members.”

Id. at 629. But the states used a “negative option” to approve

those rate filings. They allowed rates that were established

through agreements among private companies (that is, pri-

vate price-fixing) to become effective if the state took no action

within a specified time. The Court found that this system,

which was used in Wisconsin and Montana, flunked the test

for “active supervision” for Parker purposes. It held that

“[a]ctual state involvement, not deference to private pricefix-

ing arrangements under the general auspices of state law, is

the precondition for immunity from federal law.” Id. at 633.

With this in mind, we must ascertain whether the City is

the entity determining the way the Metered Parking System

will be operated, or if instead it ceded its authority to CPM, a

private party, leaving CPM with the unfettered ability to pur-

sue its own private ends. If the City is the true operator of the

system, acting through CPM as an agent subject to City regu-

lation and control, then the prerequisites for Hallie treatment

exist. On the other hand, if, as in Ticor, the City gives away

meaningful regulatory power to a private actor, then we do

not have a case of municipal action, and Parker immunity will

fail. As the Sixth Circuit put it, “the basic question in antitrust

cases that involve municipal and private actors is whether the

municipality or the private party made the effective decision

that resulted in the challenged anticompetitive conduct.”

22 No. 22-1166

Michigan Paytel Joint Venture v. City of Detroit, 287 F.3d 527,

537–38 (6th Cir. 2002). It explained how this relates to the

Midcal analysis as follows:

If the municipality or a municipal agent was the effec-

tive decision maker, then the private actor is entitled to

state action immunity, regardless of state supervision.

If the private actor was the effective decision maker,

due to corruption of the decision-making process or

delegation of decision-making authority, then it is not

immune, unless it can show that it was actively super-

vised by the state.

Id. at 538; see also Chamber of Commerce of the United States v.

City of Seattle, 890 F.3d 769, 788–89 (9th Cir. 2018) (Hallie

framework not available in “a scenario in which the City au-

thorizes collective price-fixing by private parties” who exer-

cise discretion that is “far from trivial”); LaFaro v. New York

Cardiothoracic Group, PLLC, 570 F.3d 471, 477, 480 (2d Cir.

2009) (entity that is equivalent to a municipality must “main-

tain[] ‘ultimate control’ over the partial monopoly it created”

in order for private parties to a contract to share in state action

immunity).

The Ninth Circuit faced a similar problem in Chamber of

Commerce of the United States v. City of Seattle. The court was

asked to decide whether a Seattle ordinance authorizing

rideshare drivers collectively to fix the prices for their services

was immune from the antitrust laws. The district court dis-

missed a suit by the Chamber of Commerce and others that

asserted that the ordinance violated federal antitrust and la-

bor laws. In so doing, it relied on Parker immunity, and it held

that the labor laws did not preempt the local ordinance. On

appeal, the Ninth Circuit reversed the antitrust ruling. It held

No. 22-1166 23

that Seattle’s ordinance did not rest on a state policy clearly

articulating and affirmatively authorizing private parties to

fix the prices for ride-referral services. Chamber of Commerce,

890 F.3d at 783, 787.

Although that would have been enough to dispose of the

case, the court went on to address the active-supervision re-

quirement imposed by Midcal, as modified by Town of Hallie

for municipalities. Seattle’s involvement, it reasoned, was too

attenuated to qualify for the Hallie rule. As the court put it,

“where, as here, state or municipal regulation by a private

party is involved, active state supervision must be shown,

even where a clearly articulated state policy exists.” Id. at 788

(cleaned up) (emphasis added). It adopted this gloss on the

Hallie rule in light of the concern that private parties—as op-

posed to municipalities—are likely to be motivated by self-

interest, not the public interest. Significant delegation of reg-

ulatory powers to private parties carries with it the risk of

abuse of market power, in the form of price-fixing, monopo-

listic pricing, or output restriction. The active supervision re-

quirement, by requiring the state or municipality to bear final

regulatory responsibility, assures that whatever impairment

of competition occurs is done as a matter of conscious state

policy.

It follows that if the municipality effectively regulates the

monopoly and the private party is not free to pursue its own

self-interest, the action qualifies as that of the municipality it-

self: it is the municipality, not the private actor, that is per-

forming the functions delegated to it by state law. The policies

and rules that are needed to further the relevant policy are in

the control of the municipality.

24 No. 22-1166

Plaintiffs contend that their complaint portrays an ar-

rangement under which the City of Chicago has entirely

ceded its regulatory authority to the private entity CPM—that

the City is nothing but CPM’s puppet. If that were true, then

just as in the Seattle case, the defendants would not qualify

for state-action immunity, and we would need to reverse for

further proceedings. But, as we now outline, our independent

review of the Agreement satisfies us that Chicago has the

power to regulate CPM’s administration of the Metered Park-

ing Spaces covered by the Concession.

The Agreement was itself an act of the City, pursuant to its

powers to lease parking spaces and its authority to use a long-

term instrument for that purpose. As required, the City in-

vited private parties to bid; it indicated that it would not ac-

cept any bid under $1 billion; and it received bids from eight

qualified entities. It negotiated the terms of the Concession

with CPM, the winning bidder, and the City Council issued

an ordinance approving the Agreement. See An Analysis of

the Lease of the Cityʹs Parking Meters, supra, at 13–14. In

short, the City chose to regulate by contract rather than by or-

dinance.

The Agreement is replete with provisions under which the

City has reserved its police and regulatory powers. They in-

clude the following:

 Add or remove metered parking spaces, whether

they are Concession Spaces or Reserve Spaces

 Collect revenue from newly added Reserve Spaces

 Set meter hours of operation and periods of stay

 Establish and revise parking fees

No. 22-1166 25

 Set all standards and policies applicable to the me-

tered parking system

 Close streets for any reason

 Set amounts of fines for metered-parking viola-

tions; administer the adjudication system; and keep

fine revenues

Although, as noted earlier, the City must compensate

CPM for exercises of regulatory power that undermine the ba-

sis of the bargain, the Agreement has an internal mechanism

that allows the City to mitigate the economic effects of the

true-up payments. Specifically, it is entitled to add Reserve

Spaces and collect 85% of the revenue they generate, and it

can raise parking fees. The resulting revenue can be, and has

been, used to support the true-up payments.

The breadth of the City’s regulatory powers sets this case

apart from Ticor. As noted, the Ticor Court deemed the state’s

“negative option” scheme insufficient for state involvement

because the key question is “whether the State has exercised

sufficient independent judgment and control so that the de-

tails of the rates or prices have been established as a product

of deliberate state intervention, not simply by agreement

among private parties.” 504 U.S. at 634–35. The Agreement

here shows that the key actor is the City. Take meter rates for

example, the focal point of plaintiffs’ grievances. At the incep-

tion of the bidding process, the City gave “the qualified bid-

ders a Confidential Information Memorandum … that among

other things set out a proposed schedule of meter rate in-

creases that would be enacted as part of the lease. This meter

rate schedule is nearly identical to the meter rates that were

eventually approved by the City Council.” An Analysis of the

26 No. 22-1166

Lease of the Cityʹs Parking Meters, supra, at 13–14. Critically,

the City retained “the Reserved Power to establish and revise

from time to time the Metered Parking Fees.” Agreement §

7.1. Unlike the situation in Ticor, then, the City has the sole

power to set the rates on its own initiative without regard to

CPM.

Plaintiffs insist that these powers are essentially toothless

because the financial impact of their exercise deters the City

from using them. (They speak of the City’s “paralysis” and

the “impossibility” of meaningful regulation.) But, as the Illi-

nois Appellate Court also recognized, “the City has, in fact,

exercised its regulatory powers for the benefit of the public

notwithstanding the Concession Agreement’s compensation

provisions.” Independent Voters, 2014 IL App (1st) 123629 ¶ 81.

For instance, the City increased the parking fees in 2020

through approval of that year’s Revenue Ordinance. Parking

Meter Rate Increase, City of Chicago (Feb. 24, 2021), available

at https://311.chicago.gov/s/article/Parking-Meter-Rate-In-

crease?language=en_US.

The fact that the City pays a price for certain actions can-

not be enough to undermine the whole Concession. No one

would have wanted to sign an agreement that the City could

gut the next day by (for example) cutting in half the number

of covered parking spaces and trying at the same time to keep

the full up-front payment. Regulation is possible even if the

City must conduct a cost-benefit analysis before it takes a

given step. If we were to accept plaintiffs’ argument, we

would essentially be making Parker immunity depend on

whether the City increases or decreases its revenues over the

lifespan of the Agreement. We cannot have a situation in

which the antitrust laws are not violated if the City has

No. 22-1166 27

enough money to compensate CPM and decides to lower the

metered rates, but they are violated if the City decides that the

cost of compensation is too high and so refrains from taking a

certain step.

We are satisfied that meaningful regulation exists under

the Agreement and thus that nothing more in the way of ac-

tive state supervision is necessary for Parker immunity. We

conclude with a few words about one more argument plain-

tiffs raise.

D

Plaintiffs are disturbed about the fact that the Agreement

will run for 75 years, and that, as they calculate things, CPM

has already recouped all of its start-up costs and stands to

reap billions in “monopoly” profits for the next 60 years or so.

But, aside from the fact that the Illinois Appellate Court has

already found the 75-year term to be legal, see Independent

Voters, 2014 IL App (1st) 123629, it is worth pointing out that

there is nothing unique or suspicious about a long-term con-

tract. Exclusive contracts for a long duration with private par-

ties are nothing new in Chicago. Examples include water sup-

ply contracts authorized for a period not exceeding 101 years,

65 ILCS 5/11-135.5-25, and certain real estate leases that are

permitted for a period not to exceed 99 years, 65 ILCS 5/11-

135-6. They are permissible, so long as the City retains mean-

ingful regulatory authority.

***

It is easy to overlook the fact that the City derives benefits

from these agreements, just as it pays a price. Although the

metered parking spaces may be very expensive, the City also

has a company that is maintaining them, upgrading them to

28 No. 22-1166

take advantage of cellphone and other technology, and han-

dling payments. Parker immunity does not turn on whether,

on balance, this was a good or a bad deal. All that matters is

that it was one that was authorized by state law and that re-

mains under the regulatory power of the City. We agree with

the district court that state-action immunity applies here, and

so we AFFIRM its judgment.