Appendix — Deak-Perera Hawaii, Inc. v. Department of Transportation

Supreme Court brief1985

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Office-Supreme Court, U.S.

FILED x]

No. &4- JAN 24 1985

IN THE ~~ *

Supreme Court of the United States

OCTOBER TERM, 1984

DEAK-PERERA HAWAII, INC.,

Petitioner,

Vv.

DEPARTMENT OF TRANSPORTATION,

STATE OF HAWAII, et al.,

Respondents,

and

CiTIcoRP (USA), INC.,

Respondent-Intervenor.

APPENDIX TO

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ROBERT F’. MILLER

SUSAN M. ICHINOSE

(Counsel of Record)

Suite 800, 345 Queen Street

Honolulu, Hawaii 96813

Tel. No. (808) 531-6277

Of Counsel: Counsel for Petitioner

MILLER & ICHINOSE Deak-Perera Hawaii, Inc.

January 24, 1985

WILSON - EPES PRINTING Co.. INC. - 789-0096 - WASHINGTON, D.C. 20001

TABLE OF CONTENTS

DECISIONS OF THE COURTS Page

Deak-Perera Hawaii, Inc. v. Department of Trans-

portation, State of Hawaii, et al., 745 F.2d 1281

a eeeniiahmienlinion la

Deak-Perera Hawaii, Inc. v. Department of Trans-

portation, State of Hawaii, et al., 553 F. Supp.

suai 6a

RELATED STATUTES

Sherman Act, 15 U.S.C. §§ 1 and 2 (1982) 00... 33a

HAW. REv. STAT. §§ 261-4, 261-5, 261-7, 261-9,

I 34a

Act 243, 1981 Hawaii Sess. Laws ..-...-0022.0.....2.----- 44a

Act 90, 1982 Hawaii Sess. Laws .........2.............222--- 48a

HAWAII CONSTITUTION

Ree 54a

RECORD MATERIALS

Statement of Facts Taken from Deak-Perera’s Mo-

tion for Partial Summary Judgment, CR 51 at

SPIE sis tics danesedbiaciidibahatartedeadaiaachiere Na eabasiedn gaa Records pete 57a

APPENDIX

UNITED STATES COURT OF APPEALS

NINTH CIRCUIT

No. 83-1552

DEAK-PERERA HAWAII, INC.,

Plaintiff-Appellant,

DEPARTMENT OF TRANSPORTATION,

STATE OF HAWAII, et al.,

Defendants-A ppellees,

and

CITICORP (USA), ING.,

Intervenor-appellee.

Argued and Submitted March 29, 1984

Decided Oct. 26, 1984

Appeal from the United States District Court

for the District of Hawaii

Robert F. Miller, Honolulu, Hawaii, for plaintiff-

appellant.

Gerald Y.Y. Chang, Robert A. Rowan, Susan O. Moll-

way, Cades Schutte Fleming & Wright, Honolulu, Hawaii,

for defendants-appellees.

Before GOODWIN and KENNEDY, Circuit Judges,

and CURTIS,* District Judge.

* The Honorable Jesse W. Curtis, Senior United States District

Judge for the Central District of California, sitting by designation.

GOODWIN, Circuit Judge.

Deak-Perera lost its bid to retain the currency exchange

concession at Honolulu International Airport when the

Hawaii Department of Transportation awarded a five-

year exclusive concession to Citicorp, the highest bidder.

Alleging violation of federal and state antitrust laws and

state bidding laws, Deak-Perera sued the state agency

and two of its officials. We affirm the district court’s

finding that the defendants were entitled to state action

immunity from federal antitrust laws. Deak-Perera

Hawaii, Inc. v. Department of Transportation, 553 F.

Supp. 976 (D. Haw. 1983).

I. Antitrust immunity

Actions by “ ‘the State acting as sovereign,’” Hoover

v. Ronwin, —— US. , 104 S.Ct. 1989, 1998, 80

L.Ed.2d 590 (1984), quoting Bates v. State Bar of Ari-

zona, 483 U.S. 350, 360, 97 S.Ct. 2691, 2697, 53 L.Ed.2d

810 (1977), are immune from the federal antitrust laws.

If the State of Hawaii was acting in its sovereign ca-

pacity when it granted Citicorp the exclusive lease, it is

immune from Deak-Perera’s antitrust challenge.

The Department of Transportation, which granted the

lease, is part of the executive branch of Hawaii state

government. Although Hoover v. Ronwin declares that

state legislatures and state supreme courts exercising

legislative powers have antitrust immunity without fur-

ther investigation, it expressly leaves open the circum-

stances under which the activities of a state executive

branch are entitled to antitrust immunity. 104 S.Ct. at

1995 n.17.

We hold that the Department’s grant of the lease was

an action of the State of Hawaii “acting as sovereign”

and thus entitled to immunity from the antitrust laws.

As the Hoover Court notes, the reasoning of Parker v.

Brown, 317 U.S. 341, 68 S.Ct. 307, 87 L.Ed. 315 (1943),

lays the foundation of the doctrine of state-action anti-

trust immunity. Parker refused to construe the Sherman

Act as prohibiting a raisin marketing program carried

out by state officials pursuant to a statute enacted by the

California legislature:

We find nothing in the language of the Sherman

Act or in its history which suggests that its purpose

was to restrain a state or its officers or agents from

activities directed by its legislature. In a dual sys-

tem of government in which, under the Constitution,

the states are sovereign, save only as Congress may

constitutionally subtract from their authority, an

unexpressed purpose to nullify a state’s control over

its officers and agents is not lightly to be attributed

to Congress.

317 U.S. at 350-351, 63 S.Ct. at 313-314.

As Hoover puts it, the rationale of Parker rests on

“principles of federalism and state sovereignty.” 104

S.Ct. at 1995. These principles entitle the executive

branch of the State of Hawaii to state action immunity.

The Hawaii Constitution creates the executive as a co-

equal branch of the state government and provides for

the establishment of departments under the supervision

of the governor, Haw. Const. Art. V § 6; the Department

of Transportation is one such department. Haw. Rev.

Stat. § 26-19. The Hawaii Constitution charges the gov-

ernor with “the faithful execution of the laws.” Haw.

Const. Art. V, $5. In granting Citicorp the challenged

lease, the Department of Transportation, as the gov-

ernor’s subordinate, was fulfilling its constitutional duty

to execute Haw. Rev. Stat. § 261-4, which permits the De-

partment of Transportation to establish and operate air-

ports. Haw. Rev. Stat. §§ 261-4(a) and 261-7(a) pro-

vide the Department with implied authority to enter into

the challenged exclusive lease. That the legislature con-

templated an exclusive lease is emphasized by the non-

inclusion of foreign exchange concessions in Haw. Rev.

Stat. § 102-2. That statute exempts certain other busi-

nesses from bidding requirements for public concessions

because of the “danger that such a system of awarding

all concessions or concession spaces by bid could result in

a monopoly.” Act of May 10, 1960, No. 14, §1, 1960

Hawaii Sess. Laws 16. Here, the required competitive

bidding was invited and Citicorp won the competition and

obtained a monopoly.

We see no reason why a state executive branch, when

operating within its constitutional and statutory author-

ity, should be deemed any less sovereign than a state

legislature, or less entitled to deference under principles

of federalism. In City of Lafayette v. Louisiana Power &

Light Co., 485 U.S. 389, 98 S.Ct. 1128, 55 L.Ed.2d 364

(1978), the Supreme Court emphasized the importance of

a “clear!y articulated and affirmatively expressed” state

policy, id. at 410, 98 S.Ct. at 1135, and specifically

rejected the argument that “all governmental entities,

whether state agencies or subdivisions of a State, are,

simply by reason of their status as such, exempt from

antitrust laws.” Jd. at 408, 98 S.Ct. at 1134. However,

Lafayette involved a governmental delegation of authority

to private parties. We note that this is not a case of

private parties imposing competitive restraints in con-

junction with state authorities. In such a case the in-

quiry would be different. See California Retail Liquor

Dealers Association v. Midcal Aluminum, Inc., 445 US.

97, 105, 100 S.Ct. 987, 948, 638 L.Ed.2d 233 (1980) ;

Benson v. Arizona State Board of Dental Examiners, 673

F.2d 272, 274-76 (9th Cir. 1982).

1 Part of.the board of dental examiners involved in Benson was

appointed by the governor on recommendations of the state dental

association. Arizona Rev. Statutes § 32-1203.

II. Dismissal of state claim

There is no federal jurisdiction over Deak-Perera’s

claim that the state and its officials violated state law.

Penhurst State School & Hospital v. Halderman, ——

US. , 104 S.Ct. 900, 911, 79 L.Ed.2d 67 (1984).

Conclusion

Because of our holding on state action immunity, we

do not reach the state’s constitutional defenses. The dis-

trict court’s grant of summary judgment for the Depart-

ment is affirmed.

UNITED STATES DISTRICT COURT

D. HAWAII

Civ. No. 82-0334

DEAK-PERERA HAWAII, INC., a Hawaii corporation,

“ Plaintiff,

DEPARTMENT OF TRANSPORTATION, STATE OF HAWAII;

RYOKICHI HIGASHIONNA, in his official capacity as the

Director of the Department of Transportation for the

State of Hawaii; OWEN MIYAMOTO, in his official ca-

pacity as Chief of the Airport Division of the Depart-

ment of Transportation of the State of Hawaii,

aan Defendants,

CITICORP (U.S.A.), INC.,

Intervenor.

Jan. 3, 1983

As Amended March 7, 1983

Don Gelber and Stephen Gelber, Gelber & Wagner,

Wayne Pitluck and Robert Miller, Honolulu, Hawaii, for

plaintiff.

Tany S. Hong, Atty. Gen. of Hawaii, Randall Young,

Honolulu, Hawaii, for defendants.

Robert A. Rowan, Terry Day, Susan Moilway, Cades

Schutte Fleming & Wright, Hono.ulu, Hawaii, for inter-

venor.

DECISION

PENCE, Senior District Judge.

This matter came before the court on cross motions for

summary judgment pursuant to Rule 56 of the Federal

Rules of Civil Procedure. The arguments were heard on

September 1, 1982.

The motions sought to determine the legal issues of

whether or not defendants, the State of Hawaii’s Depart-

ment of Transportation, its director Ryokichi Higashionna

and Airport Chief Owin Miyamoto (collectively the DOT),

were entitlea to “state-action immunity” under Parker v.

Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943),

or were entitled to Eleventh Amendment immunity; or

whether plaintiff, Deak-Perera Hawaii, Inc. (“Deak”)

was entitled to a permanent injunction and judgments as

to violations of state and federal antitrust statutes.

An order was entered on September 2, 1982, granting

defendants’ motion on the basis of Parker v. Brown im-

munity and denying plaintiff’s motion.1 For the reasons

herein given, it was unnecessary for the court to reach

the Eleventh Amendment issue or the alleged violation of

state and federal antitrust statutes.

FACTUAL BACKGROUND

Hawaii, as an island state, has always been especially

dependent upon ships and, more recently, planes for inter-

island and mainland communication and transportation.?

ven before commercial aviation came to the islands, the

Territorial legislature had appropriated funds for what

has become today the state’s commercial airport system

for each and all of the Hawaiian islands.’

1 Order Granting and Denying Motions for Summary Judgment

was amended on September 3, 1982, to accelerate dissolving the

temporary restraining order when Deak abandoned the premises

earlier than expected. The order was further amended by order

filed December 1, 1982, after a hearing on plaintiff’s motion to alter

the previous orders concerning payment of rents due to State.

2 Horvat, Above the Pacific (1966) at 68. Commercial aviation

did not begin until 1929. See Hawaiian Aeronautics Commission,

First Annual Report, 1947-48 (1948) at 10.

3 Act 176, Session Laws of Hawaii 1925. See n. 2, supra.

The importance of the airport system is further em-

phasized by the expansion of tourism as a mainstay of

the State economy.* The nearly four million tourists com-

ing to Hawaii each year from the continental United

States, Canada, Japan, Australia, and literally all parts

of the globe, depend almost entirely upon the availability

of efficient and dependable airport facilities.® The de-

velopment, managment, and financing of the airport sys-

tem is governed by an enabling Act of the Hawaiian

Legislature.* In effect, the support of this airport system,

under the Legislative mandate, must be met by the Air-

port Revenue Fund. This is made up of rents, conces-

sions, aircraft landing fees, and the aviation fuel tax.

For the last few years, the concession fees have provided

the lion’s share of the Fund’s revenues.”

The concession activities at Honolulu International Air-

port (HIA) encompass the full range of facilities one

might find at a large airport. At HIA, the duty-free con-

cession is the largest revenue producer.* Other conces-

sions include bars, restaurants, and snack bars; news-

stands, fruit and packaged-food stands; barber shop,

shoeshine stand, telegrams and flight insurance, and the

* Besides tourism, the other three largest revenue sources for

the state are federal government defense spending, sugar, and

pineapple growing. Respectfully, the four sources, in 1980, earned:

$3.0 billion for tourism; $1.3 billion for defense spending; $594

million for sugar production; and $233 million for pineapple. See

The State of Hawaii Data Book (1981) at 1738.

5 See generally Hawaii Business (Jan. 1982); Hawaii Business

(Mar. 1982) ; and Hawaii Business (July 1982).

® Haw. Rev. Stat. Ch. 261 (Supp. 1981). See nn. 32-35, 44, 45,

and 48, infra.

TIn fiscal year 1981, the concession fees amounts to 76% of oper-

ating revenues. See DOT Annual Report (1982) at 30.

8 See Defendant State of Hawaii’s Pre-Trial Brief, filed Aug. 20,

1982, at 7.

parking lot.® Also, the Bank of Hawaii maintains a

branch at HIA.”°

Most of these concessions are “exclusive”, including the

ground transportation for rent-a-car, airport shuttle bus,

and airport taxi! The lei stands are about the only

“non-exclusive” concessions at HIA.”

For the past twenty years, Deak has operated foreign

exchange concessions at HIA. For the last ten years,

Deak has enjoyed exclusive contracts between itself and

the Department of Transportation for the HIA foreign

exchange concession.* In the 1982 bids, Deak lost the

bid to Citicorp (USA), Inc.,* which bid almost two and

one-half (214) times as much as Deak for the five-year

exclusive concession.

* Ibid.

10 Bank of Hawaii, Airport Branch, also provides some limited

foreign currency exchange. However, the amount may be considered

as de minimus relative to the whole market at HIA.

11 Bach of the “exclusive” ground transportation contracts at

HIA is involved in an antitrust suit: Civ. No. 79-0146, Pacific

Auto Rental Corp. dba Dollar Rent-A-Car Systems v. State of

Hawaii, et al., filed April 2, 1979; Civ. No. 79-0883, Charley’s Taxi

Radio Dispatch Corp. v. SIDA of Hawaii, Inc., et al., filed August

81, 1979; and Civ. No. 80-0060, Charley’s Tour & Transportation,

Inc. v. Interisland Resorts, Ltd., et al., filed February 2, 1980. The

Pacific Auto case has been consolidated in M.D.L. No. 338, Airport

Car Rental Antitrust Litigation and is assigned to District Judge

William W. Schwarzer in the Northern District of California.

12 See n. 8, supra.

18 Deak was the “sole bidder” in both 1972 and 1977 for five-year

exclusive contracts. Three bids were received by June 17, 1982,

for the exclusive five-year contract to commence July Ist. At the

opening it appeared Citicorp (USA), Inc. was the high bidder at

$1.25 million for the five years. Deak was second high bidder at

$505,000 for the same period. Deak immediately filed the present

action.

14 Citicorp (USA), Inc. is a Delaware corporation and a subsidi-

ary of Citibank International. Citibank International originally

10a

The foreign exchange concession at HIA consists of

five physical locations. Only one of these locations is

sufficiently large enough for office space and a secure area,

as well as counter; all others are merely counter space.”

Deak has also maintained a sixth location at the Japan

Airlines lounge servicing passengers under a private con-

tractual agreement with that airline.**

DECISION

The gravamen of plaintiff’s action is that defendants

have violated federal antitrust law by the issuance of an

exclusive lease for the foreign exchange concession at

HIA."* Defendants have responded that they are shielded

from such a suit under the Parker v. Brown, 317 U.S.

341, 63 S.Ct. 307, 87 L.Ed. 315 (1943), state-action im-

attempted to intervene. Such was denied after a finding that

Citicorp (USA), Inc. was the proper party in interest. Eventually,

Citicorp (USA), Inc. did intervene in its own right and has sub-

mitted briefs and argued to this court on behalf of the state’s

motions.

15 The locations are designated as Space No. 346-118 comprising

counter area of 121 square feet; Space No. 346-111A comprising

counter area of 196 square feet; Space No. 344-237 comprising

counter area of 25 square feet; Space No. 344-210 comprising

counter space of 68 square feet (soon to be replaced by Space No.

344-222A under construction) ; and Space No. 342-262 comprising

counter and office area of 690 square feet.

16 This was apparently a portable booth arrangement used only

for the “package tour” groups arriving on Japan Airlines.

17The antitrust claims are brought under both the Sherman

Act, 15 U.S.C. §§1 & 2; and the Clayton Act, 15 U.S.C. § 16.

Plaintiff also alleges violations of state antitrust laws and violations

of state bidding procedures. The latter count, on bidding pro-

cedures, has been dismissed by a previous order (Order Granting

Intervenor’s Motions for Dismissal of Count V and for Protective

Order, filed September 2, 1982). The other counts need not be

reached unless plaintiff hurdles the defenses to the alleged Sherman

Act violations.

lla

munity doctrine. For the DOT to have state-action im-

munity in its grant of the exclusive concession here in

question, it must either show that (1) it is an agent or

instrumentality of the state acting as sovereign and as

such is entitled to state-action immunity; or (2) as an

independent political subdivision, it meets the criteria of

the California Retail Liquor Dealers’ Ass’n v. Midcal

Aluminum, Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d

233 (1980) two-prong analysis (the Midcal Test), viz:

a clearly articulated and affirmatively expressed state

policy with adequate review and supervision by the state.

PART I: PARKER v. BROWN STATE-ACTION IM-

MUNITY

Here, as in all decisions on claims of state-action im-

munity, the perimeters of state-action immunity as de-

fined in Parker v. Brown and refined in its progeny must

be clearly understood.** Actually, it is a misconception to

say that the state-action doctrine was “defined” in Parker

v. Brown, the doctrine has always existed in our federal-

ist system, and Parker v. Brown merely restated and

applied that doctrine to the antitrust laws:

In a dual system of government in which, under the

Constitution states are sovereign, save only as Con-

gress may constitutionally subtract from their au-

thority, an unexpressed purpose to nullify a state’s

18 Community Communications Co., Inc. v. City of Boulder, Colo-

rado, 455 U.S. 40, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982) ; California

Retail Liquor Dealers’ Assn. v. Midcal Aluminum, Inc., 445 U.S. 97,

100 S.Ct. 987, 63 L.Ed.2d 233 (1980) ; City of Lafayette v. Louisiana

Power & Light Co., 485 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364

(1978) ; Cantor v. Detroit Edison Co., 428 U.S. 579, 96 S.Ct. 3110,

49 L.Ed.2d 1141 (1976) ; Goldfarb v. Virginia State Bar, 421 USS.

778, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975), reh. denied 423 U.S. 886,

96 S.Ct. 162, 46 L.Ed.2d 118 (1975), and New Motor Vehicle Bd.

of Calif. v. Orrin W. Fox Co., 489 U.S. 96, 99 S.Ct. 403, 58 L.Ed.2d

861 (1978) to cite but a few.

12a

control over its officers and agents is not lightly to

be attributed to Congress.

317 U.S. at 351, 63 S.Ct. at 313.

The United States Supreme Court has not decided a

State-action case based on the state acting as sovereign

since Parker.” In the Parker decision, Mr. Chief Justice

Stone approvingly cited Lowenstein v. Evans, 69 F. 908

(C.C.D.S.C. 1895),?° which held that South Carolina’s

regulation of the liquor trade was the act of a state as

sovereign. The fact that the law was administered by

certain state agents did not create a monopoly for and

in those individuals and thus preclude immunity from

the federal antitrust laws.

In Parker, the Court had to decide the further question

of whether state-action immunity could be extended to

give protection to “private” individuals—the raisin

growers. To that end, the Court examined the state’s

involvement in the regulation of raisin price setting. The

Court determined that the state involvement was suffi-

19 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1948). See also n. 18.

All of these cases address the extension of state-action immunity

to persons or corporations claiming immunity under state authority.

None of the cases suggest that the state is acting as sovereign and

that such action is being questioned.

20 Chief Justice Stone cited Lowenstein to compare it with Olsen

v. Smith, 195 U.S. 332, 25 S.Ct. 52, 49 L.Ed. 224 (1904). Olsen held

that a state may regulate pilotage, even though such regulates

commerce, until such time as federal laws should override or pre-

empt the area. The comparison was that in Lowenstein the lower

court held that a state was neither a “person” nor a “corporation”

within the meaning of the Act of Congress dealing with monopolies

and trusts. Therefore, the South Carolina law regulating the liquor

trade was a state monopoly enforced by the governor, secretary of

state, and controller. The law did not create a monopoly in those in-

dividuals; rather, they were mere instrumentalities of the state

acting as and for the state. As such, the monopoly was immune from

antitrust prosecution as an action of the state as sovereign.

21 Ibid.

13a

cient since the regulation was mandated by state law;

the recommended prices were reviewed by the state com-

mission; and the final decision rested with the state act-

ing through the State Agriculture Proration Advisory

Commission. 317 U.S. at 346-350, 63 S.Ct. at 311-13.

In short, the Parker Court found that the raisin pro-

rate program derived its authority from the legislative

command of the state and was not designed to create a

monopoly by force of individual agreement or combina-

tion. The Court concludes that:

We find nothing in the language of the Sherman Act

or its history which suggests that its purpose was to

restrain a state or its officers or agents from activi-

ties directed by its legislature.

317 U.S. at 350-351, 63 S.Ct. at 313.

The Court noted that while a state may be considered

a “person” for purposes of suing under the antitrust laws,

the State of California was not in that category of “per-

sons” that the Sherman Act intended to restrain. 317

U.S. at 351, 63 S.Ct. at 313, (citing Georgia v. Evans,

316 U.S. 159, 62 S.Ct. 972, 86 L.Ed. 13846 (1942) ).

Parker v. Brown, and most of its progeny, have never

denied nor even suggested that Congress intended to sub-

ject states, as sovereigns, to federal antitrust laws.

Rather, all have denied immunity to “private parties” or

“political subdivisions” seeking to cloak their alleged

monopolistic actions under the “gauzy cloak of state in-

volvement”. In each recent case before the Supreme

Court, the question has been whether some entity other

than the state may claim state-action immunity. None

of those cases has held that a state acting in its sovereign

capacity should be denied immunity from federal anti-

trust laws.

22 See generally n. 18, supra. See specifically Midcal, 445 US.

at 106, 100 S.Ct. at 943.

l4a

All of those decisions are perfectly consistent with our

federalist system and the purpose of the federal antitrust

laws viz., to protect the public from unreasonable inter-

ference with competition in interstate and foreign com-

merce. Where private parties are attempting to monopo-

lize an area of trade, the public has every right to expect

protection; with governmental bodies, the people have a

more direct recourse—the vote.

While federal laws can override state laws which are

inconsistent with national law,” the Sherman Act has not

been interpreted to override all state laws which impinge

on competition. In the latter situation, when it is not

clear the state is acting as a sovereign, the crucial ques-

tions are whether there has been a “clearly articulated

and affirmatively expressed” state policy, and if that

policy is being “actively supervised” by the state. Midcal,

445 US. at 105, 100 S.Ct. at 943 (quoting City of La-

fayette v. Louisiana Power & Light Co., 485 U.S. 389

at 410, 98 S.Ct. 1123 at 1135, 55 L.Ed.2d 364).* The

Midcal test was neither new nor unexpected when ap-

plied to “private individuals” seeking state-action im-

munity,” but the application of the Midcal test to “public

officials, agencies and treasuries” has created substantial

*3 Cf. Bates v. State Bar, 433 U.S. 350, 97 S.Ct. 2691, 58 L.Ed.2d

810 (1977) and Toomer v. Witsell, 334 U.S. 385, 68 S.Ct. 1156, 92

L.Ed. 1460 (1948). See also Gibson v. Berryhill, 411 U.S. 564, 93

S.Ct. 1689, 36 L.Ed.2d 488 (1978).

24 Actually one may argue that this test was applied in Parker v.

Brown, 317 U.S. 341, 68 S.Ct. 307, 87 L.Ed. 315 (1943). In that

case, the court sought to determine whether or not the state was

the controlling force behind the raisin subsidy. In effeci, the court

was looking for adequate state authority to fix the price and suffi-

cient state involvement in review of the price set by the private

raisin growers. Chief Justice Stone did se find.

25 See Goldfarb, 421 U.S. 7738, 95 S.Ct. 2004, 44 L.Ed.2d 572

(1975) ; Cantor, 428 U.S. 579, 96 S.Ct. 3110, 49 L.Ed.2d 1141

(1976); and Bates v. State Bar, 483 U.S. 350, 97 S.Ct. 2691, 53

L.Ed.2d 810 (1977).

15a

confusion and apprehension both in the courts and in

public officials generally.”

Nevertheless, even after Lafayette and Midcal, and

even after Community Communications Co., Inc. v. City

of Boulder, Colorado, 455 U.S. 40, 102 S.Ct. 835, 70 L.Ed.

2d 810 (1982), it is still clear that a state acting as

sovereign, is immune from federal antitrust laws unless

such laws are overridden by specific national laws.*’

Therefore, this court must initially determine whether

or not the DOT was acting as “the state” or as some

independent “political subdivision”. If DOT acted “as the

state”, then obviously it can be afforded state-action im-

munity; if it was acting independently and was merely

seeking to protect itself under some “gauzy cloak of state

involvement”, then the court must continue on to the

Midcal test.

The cases of E.W. Wiggins Airways, Inc. v. Massa-

chusetts Port Authority, 362 F.2d 52 (1st Cir. 1966),

and New Mexico v. American Petrofina, Inc., 501 F.2d

363 (9th Cir. 1974), underscore the need for this court

to examine the threshold question of whether or not the

challenged acts are done by the state in its sovereign

capacity, before considering a secondary examination

under Midcal.

Wiggins dealt with the authority of the Massachusetts

Port Authority (MPA) to enter into exclusive contracts

in the operation of Logan and Butler-Boston Airports.

26 Areeda, Antitrust Immunity for “State Action” After Lafay-

ette, 95 Harv. L. Rev. 435, 488-439. See also Lafayette, 435 U.S. at

440-441 and 441 n. 32, 98 S.Ct. at 1150 and 1151 n. 32 (dissenting

opinion of Stevens, J.).

27 See nn. 18 and 23, supra. An examination of these cases indi-

cates none dealt with a state acting as sovereign. Rather, all con-

cerned attempts by private individuals or independent political sub-

divisions seeking immunity for their actions under the “gauzy

cloak of state involvement.”

16a

The court held that the MPA was an “instrumentality or

agency” of the Commonwealth of Massachusetts and, as

such, was acting in an official capacity for and as the

state. 362 F.2d at 55-56. In essence, the court found the

MPA was acting for the state in the exercise of a valid

state governmental function and, therefore, was entitled

to state-action immunity under Parker. Id. at 55.

In Petrofina, the State of New Mexico brought suit for

alleged antitrust violations by various asphalt suppliers.

The defendants counterclaimed that the state and some of

its political subdivisions had conspired in violation of the

Sherman Act. After discussing the meaning of the word

“person” in the Sherman Act,?* and examining the pur-

pose of the Sherman Act in relation to the acts of a state

as sovereign, the court stated:

Since the suit here is directly against the state, there

can be no such question [as to whether or not the

conduct was committed by the state], and the Whit-

ten [George R. Whitten, Jr., Inc. v. Paddock Pool

Builders, Inc., 424 F.2d 25, 30 (1st Cir. 1970)]

analysis is inapplicable. [Footnote omitted.] The

“legislative mandate” test is useful, indeed possibly

necessary, when there is doubt if the defendant or

the regulatory scheme is really an instrument of

the state. But when there is no doubt that the de-

28 The appellate court distinguished the definition of “person” in

Georgia v. Evans, 316 U.S. 159, 62 S.Ct. 972, 86 L.Ed. 13846 (1942)

as permitting a state to bring suit as a “person” under the Sherman

Act with the definition in Parker v. Brown, 317 U.S. 341, 68 S.Ct.

307, 87 L.Ed. 315 (1943) as not permitting a state to be sued as a

“person” under the same act.

29 The Whitten test was a precursor to the Midcal analysis of

whether or not there has been a “clearly articulated and affirma-

tively expressed” state policy and, if so, whether it was being

“actively supervised” by the state. In the omitted footnote in

Petrofina, the court opined that there could not be any valid argu-

ment that a county was a private party masquerading under the

umbrella of state authority. 501 F.2d at 370, n. 15.

17a

fendant is the state, the “legislative mandate” anal-

ysis is unnecessary.

501 F.2d at 370.

More recent Ninth Circuit cases and the United States

Supreme Court cases since 1974 have indicated that there

now is even more than a “valid argument” against “auto-

matically” giving counties and cities state-action im-

munity.” Such political subdivisions may be subjected to

the Midcal analysis. However, nothing since Petrofina

has eroded its central theme that when it is the state

itself being sued or acting, then it is entitled to Parker

immunity against the Sherman Act and the Midcal anal-

ysis is “unnecessary ’.™

The DOT is legally an instrumentality of the State of

Hawaii. It is clearly to be distinguished from an inde-

30 Ronwin v. State Bar of Arizona, 686 F.2d 692 (9th Cir. 1982)

(amended opinion) citing Lafayette, 485 U.S. at 408; and City of

Boulder, 455 U.S. 40, 102 S.Ct. at 842, state that the Court has

rejected such automatic extension of Parker immunity to gov-

ernment entities “simply by reason of their status as such.” See

also, Benson v. Arizona State Board of Dental Examiners, 673 F.2d

272 (9th Cir. March 29, 1982); Miller v. Oregon Liquor Control

Commission, 688 F.2d 1222 (9th Cir. 1982) ; and Knudsen v. Nevada

State Dairy Commission, 676 F.2d 374 (9th Cir. 1982).

Because of the rather unclear and incorrect analysis as to what

sort of “government entities” might require Midcal analysis other

than a “state commission, state board, and a state department”

mentioned in Ronwin, this court has performed a Midcal analysis

for this case, infra, Part II.

31 As has been suggested earlier, Parker, 317 U.S. 341, 63 S.Ct.

307, 87 L.Ed. 315 (1943) and all of its progeny, including City of

Boulder, 455 U.S. 40, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982), have

dealt only with political subdivisions seeking to assume the immunity

granted to a state as sovereign. None of the United States Su-

preme Court decisions hold or suggest that the states acting as

sovereigns through their officers and agents are to be denied state-

action immunity. The section on Midcal analysis as applied to the

present case, infra, demonstrates why such a holding would be

logically superfluous.

18a

pendent “political subdivision” of a state, such as a city

or county and their administrative instrumentalities.

Obviously, the latter fall under the Lafayette-Midcal

rubric and would be subject to Midcal’s additional two-

prong test. For the purposes of this case, it is manifest

that the DOT has been delegated the responsibility for

the construction, operation and maintenance of all the

state-operated commercial airports in Hawaii.*? The

32‘Haw. Const. Art. V, §6 provides for not more than twenty

principal departments under the supervision of the governor. Haw.

Rev. Stat. Ch. 26 creates seventeen executive departments; Haw.

Rev. Stat. § 26-19 provides for a department of transportation,

headed by a director which “shall establish, maintain, and operate

transportation facilities of the State, including highways, airports,

harbors... .”

Haw. Rev. Stat. § 261-4:

§ 261-4 Airports, general. (a) Establishment, operation,

maintenance. The department of transportation may on behalf

of and in the name of the State, out of appropriations and other

moneys available or made available for such purposes, plan, ac-

quire, and establish, construct, enlarge, and improve in the

manner herein provided, maintain, equip, operate, regulate, and

protect, airports and air navigation facilities, including the

construction, installation, equipment, maintenance, and opera-

tion at airports of buildings and other facilities for the servic-

ing of aircraft or for the comfort, accommodation, and con-

venience of air travelers, and including protection against air-

port hazards. For such purposes the department may, by pur-

chase, gift, devise, lease, condemnation in accordance with

chapter 101, or otherwise, acquire property, real or personal,

or any interest therein, including the property, rights, estates,

and interests mentioned in section 262-11. The department may

acquire rights and interests in airports owned or controlled by

others, for the purpose of meeting a civilian need which is

within the scope of its functions, even though it does not have

the exclusive control and operation of such airports. No officer,

board, or department of the State, or municipality, shall per-

form any function which is within the jurisdiction of the

department without its approval, except for military purposes.

(b) Acquisition of real property. In the acquisition of real

property and interests therein, the department of accounting

19a

operations of the state’s airports are expressly recognized

as “public and governmental functions, exercised for a

public purpose, and matters of public necessity.” * Under

and general services shall assist the department of transporta-

tion at its request, and assign thereto state officers and employ-

ees under its supervision for the making of surveys, abstracts,

and otherwise as may be of assistance, for which services the

department of transportation shall pay out of the appropria-

tions available to it, unless the department of accounting and

general services has a general fund appropriation for such

services.

provements to land shall be initiated by the department of

transportation and shall be constructed or made by or under

the comptroller, in conformity with plans and specifications ap-

proved by the department of transportation, for which purpose

the department of transportation shall make allotments of the

funds under its control for expenditure by the comptroller and

for services of the department of accounting and general serv-

ices for which the department has no general fund appropri-

ation.

(d) Use of state and municipal facilities and services. In

carrying out this chapter, the department of transportation

may use the facilities and services of other agencies of the

State and of the municipalities of the State to the utmost

extent possible, and the agencies and municipalities shall make

available their facilities and services. This subsection shall

apply to the department of accounting and general services with

respect to services and facilities in addition to those specified

by subsections (b) and (c). [L 1947, c 32, pt of §1; RL 1955,

§ 15-9; am L Sp 1959 2d, c 1, §§$ 12, 26]

33 Haw. Rev. Stat. § 261-11:

§ 261-11 Public purpose of activities. The acquisition of

any lands or interests therein pursuant to this chapter, the

planning, acquisition, establishment, construction, improvement,

maintenance, equipment, and operation of airports and air navi-

gation facilities; and the exercise of any other powers granted

by this chapter to the department of transportation are de-

clared to be public and governmental functions, exercised for a

public purpose, and matters of public necessity. All lands and

other property and privileges acquired and used by or on behalf

of the State in the manner and for the purposes enumerated in

20a

other sections of Hawaii Revised Statutes, the DOT is

authorized to enter into contracts to provide for goods

and services at the airports,* and is required to “gen-

this chapter shall and are declared to be acquired and used for

public and governmental purposes and as a matter of public

necessity. [L 1947, c 32, pt. of §1; RL 1955, § 15-17; am L Sp

1959 2d, c 1, § 26]

4 Haw. Rev. Stat. § 261-7:

§ 261-7 Operation and use privileges. (a) Under depart-

ment operation. In operating an airport or air navigation

facility owned or controlled by the department of transporta-

tion, or in which it has a right or interest, the department may

enter into contracts, leases, licenses, and other arrangements

with any person:

(1) Granting the privilege of using or improving the air-

port or air navigaticn facility or any portion or facility thereof

or space therein for commercial purposes;

(2) Conferring the privilege of supplying goods commodi-

ties, things, services, or facilities at the airport or air naviga-

tion facility;

(3) Making available services, facilities, goods, commodities,

or other things to be furnishd by the department or its agents

at the airport or air navigation facility; or

(4) Granting the use and occupancy on a temporary basis

by license or otherwise any portion of the land under its

jurisdiction which for the time being may not be required by

the department so that it may put the area to economic use and

thereby derive revenue therefrom.

All the arrangements shall contain a clause that the land

may be repossessed by the department when needed for aero-

nautics purposes upon giving the tenant temporarily occupying

the same not less than thirty days’ notice in writing of inten-

tion to repossess.

Except as otherwise provided in this section, in each case

mentioned in paragraphs (1), (2), (3) and (4), the depart-

ment may establish the terms and conditions of the contract,

lease, license, or other arrangement, and may fix the charges,

rentals, or fees for the privileges, services, or things granted,

conferred, or made available, for the purpose of meeting the

expenditures of the statewide system of airports set forth in

2la

section 261-5(a), which includes expenditures for capital im-

provement projects approved by the legislature. Such charges

shall be reasonable and uniform for the same class of privilege,

service, or thing.

The department shall enter into separate contracts with no

more than two persons (“contractors”) for the sale and de-

livery of in-bond merchandise at Honolulu International Air-

port, ia the manner provided by law. Each such contract shall

confer the right to operate and maintain commercial facilities

within the airport for the sale of in-bond merchandise and the

right to deliver to the airport in-bond merchandise for sale to

departing foreign-bound passengers.

The department shall grant such contracts pursuant to the

laws of this State and may take into consideration:

(1) The payments to be made on in-bond merchandise sold

at Honolulu International Airport and on in-bond merchandise

displayed or sold elsewhere in the State and delivered to the

airport;

(2) The ability of the applicant to comply with alli federal

and state rules and regulations concerning the sale and delivery

of in-bond merchandise; and

(3) The reputation, experience, and financial capability of

the applicant.

The department shall actively supervise the operation of the

contractors to insure its effectiveness. The department shall

develop and implement such guidelines as it may find necessary

and proper to actively supervise the operations of such contrac-

tors, and shall include guidelines relating to the department’s

review of the reasonableness of contractors’ price schedules,

quality of merchandise, merchandise assortment, operations,

and service to customers.

Apart from the contracts described above, during the period

ending June 30, 1982, the department skall confer no right

upon any person to offer to sell, sell, or deliver in-bond mer-

chandise at Honolulu International Airport.

(b) Under other operation. The department may, by con-

tract, lease, or other arrangem2nt, upon a consideration fixed

by it, grant to any qualified person the privilege of operating,

as agent of the State or otherwise, any airport owned or con-

trolled by the department; provided that no such person shall

be granted any authority tc operate the airport other than as

22a

erate sufficient revenues from its airport properties to

meet all of the expenditures of the statewide system of

airports.” *

a public airport or to enter into any contracts, leases, or other

arrangements in connection with the operation of the airport

which the department might not have undertaken under sub-

section (a) of this section.

fix and regulate, from time to time, reasonable landing fees for

aircraft and other reasonable charges for the use and enjoy-

ment of the airports and the services and facilities furnished

by the department in connection therewith, including the estab-

lishment of a statewide landing fee which may vary among

different classes of users such as foreign carriers, domestic

carriers, inter-island carriers, air taxi operators and such other

classes as may be determined by the director of transportation,

for the purpose of meeting the expenditures of the statewide

system of airports set forth in section 261-5(a), which includes

expenditures for capital improvement proiects approved by the

legislature.

(d) Liens. To enforce the payment of any charges for re-

pairs or improvements to, or storage or care of any personal

property made or furnished by the department or its agent in

connection with the operation of an airport or air navigation

facility owned or operated by the department, the department

shall have liens on the property, which shall be enforceable by

it as provided by sections 507-18 to 507-22.

(e) Buildings and land areas for general aviation activities;

developmental rates. The department may from time to time

establish developmental rates for buildings and land areas used

exclusively for general aviation activities at rates not less than

fifty per cent of the fair market rentals of the buildings and

land areas and may restrict the extent of buildings and land

areas to be utilized. [L 1947, c 32, pt of §1; am L 1949, c 374,

§ 1; am L 1953, JR 14; § 1; RL 1955, § 15-12; am L Sp 1959 2d,

c 1, §26; am L 1962, c 24, §§ 4, 5; HRS § 261-7; am L 1968,

c 20, §§ 3, 4; am L 1972, c 14, §1; am L 1976, c 235, § 2; am L

1981, c 248, § 2]

35 Haw. Rev. Stat. § 261-5:

§ 261-5 Disposition of airport revenue fund. (a) All moneys

received by the department of transportation from rents, fees

23a

The function of the airport system in Hawaii must be

viewed as a fundamental government function.** Much

as schools, police services, and fire protection, the airport

system is vital to the State of Hawaii from both func-

tional and economic points of view. As such, actions

taken to manage and develop the airport system must

initially be viewed as acts of the state in its sovereign

capacity for the public good. Under these circumstances,

and other charges pursuant to this chapter as well as all avia-

tion fuel taxes paid pursuant to section 243-4(a) (2) shall be

paid into the airport revenue fund created by section 248-8.

All such moneys paid into the airport revenue fund shall be

expended by the department for the statewide system of air-

ports, including the construction of airports and air navigation

facilities approved by the legislature, including acquisition of

real property and interests therein; and for operation and

maintenance of airports and air navigation facilities; and for

the payment of indebtedness heretofore or hereafter incurred

by the department, or its predecessor, the Hawaii aeronautics

commission, for any of the purposes of this chapter. The de-

partment shall generate sufficient revenues from its airport

properties to meet all of the expenditures of the statewide sys-

tem of airports and to comply with section 39-59; provided that

as long as sufficient revenues are generated to meet such ex-

penditures, the director of transportation may, in his discre-

tion, grant a rebate of the aviation fuel taxes paid into the

airport revenue fund during a fiscal year pursuant to sections

243-4(a) (2) and 248-8 to any person who has paid airport use

chages or landing fees during such fiscal year. Such rebate

may be granted during the next succeeding fiscal year but

shall not exceed one-half cent per gallon per person, and shall

be computed on the total number of gallons for which the tax

was paid by such person, for such fiscal year.

(b) All expenditures by the department shall be made on

vouchers duly approved by the director of transportation or

such other officer as may be designated by the director. [L

1947, c 32, pt of §1; RL 1955, § 15-10; am L Sp 1959 2d, c 1,

§ 26; am L 1962, c 24, §§ 2, 3; HRS § 261-5; am L 1968, c 20,

§ 2; am L 1969, c 10, §6 and c 99, $1]

36 See n. 33, supra.

37 See nn. 1-5, supra.

24a

a court must be most cautious about attempting to im-

pose a hindrance or unnecessary burden upon the public

officials in the execution of this public duty.**

The DOT, therefore, acts as the state in matters con-

cerning the management of HIA. The DOT, as an in-

strumentality of the state, has full power to enter into

contracts for concessions at HIA, even though mono-

polistic in nature, to fulfill its mandate to generate suf-

ficient funds to support the statewide airport system.

In all of this, the DOT is authorized and required to act

and to act in the name of the State of Hawaii. This

court can only conclude, therefore, that when the DOT

acts, it is the same, in full part and parcel, as if the

State of Hawaii were acting. Therefore, the actions of

the DOT, whether they concern contracts or management

of Hawaii’s airport system, are entitled to state-action

immunity as the acts of the State of Hawaii as sovereign.

PART II: THE MIDCAL ANALYSIS

Were it not for what Judge Ferguson, in dissent, in

Ronwin v. State Bar of Arizona, 686 F.2d 692 (9th Cir.

1982), characterized as the application of “erroneous

standards” **® by the majority in determining whether

the state agency there in question was exempt from anti-

trust laws, this court would not feel compelled to apply

the Midcal analysis to this case. However, while this

court agrees with Judge Ferguson that “[t]he majority

incorrectly applies a test of compulsion by asking whether

the action of the Committee [on Examinations and Ad-

missions] was required by the state supreme court”

(emphasis in original), thereby applying a Midcal anal-

ysis to “public” as well as “private” conduct, such an

analysis has been made. Having made the analysis, this

court finds that even if it were assumed that the DOT

88 See n. 26, supra.

39 Ronwin v. State Bar of Arizona, 686 F.2d 692 (9th Cir. 1982).

25a

is merely a “political subdivision” of the state, there is

ample authority from and supervision by the state to

satisfy the Midcal test.

The Midcal case dealt with the necessity of filing fair

trade contracts or price schedules with the State of Cali-

fornia. California Liquor Dealers Assn. v. Midcal Alumi-

num, Ine., 445 U.S. 97, 99, 100 S.Ct. 937, 940, 63 L.Ed.2d

233 (1980). Wholesalers had to post a resale price sched-

ule and no state-licensed wine merchant could sell wine

to a retailer at other than the posted effective price.

Mideal Aluminum, Inc., a southern California distributor

of wine, challenged the wine pricing system as a restraint

on trade in violation of the Sherman Act.

The Midcal Court initially noted, in its review of the

state court’s decision, that “[t]he State [had] no direct

control over wine prices, and it [did] not review the rea-

sonableness of the prices set by the wine dealers.” Mid-

cal, 445 U.S. at 100, 100 S.Ct. at 940.° The Court then

continued on to decide whether or not Parker immunity

should apply absent direct control of an activity which

appeared to violate the policies of the Sherman Act. /d.

at 103-104, 100 S.Ct. at 942. -

40 Cf. Lowenstein v. Evans, 69 F. 908 (C.C.D. S.C. 1895). In

Lowenstein, a state also sought to control the liquor trade. How-

ever, South Carolina exercised direct control and management over

the pricing and sale of all liquors. Cf. Rice v. Alcoholic Beverage

Control Appeals Bd., 21 Cal.38d 431, 146 Cal. Rptr. 585, 579 P.2d

476 (1978) in which the prices were established by the producers

with the state exercising no control or pointed re-examination of

those prices to insure that policies of the Sherman Act are not

unnecessarily subordinated. 21 Cal.3d at 445, 146 Cal. Rptr. at 594,

579 P.2d at 486. While the Court indicates that the threshold ques-

tion is whether the action violates the Sherman Act, Midcal, 445

U.S. at 102, 100 S.Ct. at 941, the threshold question in that inquiry

is the extent of direct control and supervision of the activity by the

state, such as to provide Parker immunity. 445 U.S. at 103-104, 100

S.Ct. at 942. It is only after a failure at this hurdle that the Court

must continue on to examine the extent of the state’s mandate and

review of the activity. Obviously if the Court had found direct

state action and control there is no need for further examination.

26a

Reviewing its recent cases,*! the Midcal Court outlined

the analysis which must be followed where it is not evi-

dent at the threshold that the state is exercising direct

control as a sovereign over the activity. The analysis was

first stated in Lafayette, 435 U.S. 389, 98 S.Ct. 1123, 55

L.Ed. 364 (1978), and consists of a two-prong test:

First, the challenged restraint must be “one clearly

articulated and affirmatively expressed as state pol-

icy”; second, the policy must be “actively super-

vised” by the state itself. City of Lafayette v. Lou-

isiana Power & Light Co., 4385 U.S. 389, 410 [98

S.Ct. 1123, 1135, 55 L.Ed.2d 364] (1978) (opinion

of Brennan, J.). [Footnote omitted. ]

445 US. at 105, 100 S.Ct. at 943.

Examining the legislative enactment to determine if it

satisfied the first prong, the Court held that it did forth-

rightly state a clear purpose to mandate resale price

maintenance. Midcal, 445 U.S. at 105, 100 S.Ct. at 943.

However, the Court found that the program failed to

satisfy the second prong—the state failed to regulate

prices or monitor market conditions or engage in any

“pointed re-examination” of the program. Z/d. at 105-

106, 100 S.Ct. at 943. The Court then stated that Parker

teaches “ ‘a state does not give immunity to those who

violate the Sherman Act by authorizing them to violate

it, or by declaring that their action is lawful... .’

317 U.S. at 351 [63 S.Ct. at 313].” Jd. at 106, 100 S.Ct.

at 943. The question in Midcal concerned the state’s par-

ticipation in and control of the legislatively authorized

activity violating the Sherman Act.

41 See n. 18, supra. This two-prong analysis was reaffirmed in

the recent Community Communications Co., Inc. v. City of Boulder,

455 U.S. 40, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982). City of Boulder

also reaffirmed the state’s powers and immunity as a sovereign

under the Constitution. 455 U.S. at 53, 102 S.Ct. at 842. In advanc-

ing the Midcal analysis, the High Court merely declined to “auto-

matically” extend the state sovereign’s right to Parker immunity to

“cities, counties, and other orge sized bodies.” Ibid.

27a

In this case, the state authorization for the DOT’s

action on the concession contracts at HIA can be found

in the Hawaii Revised Statutes under Title 15—Trans-

portation and Utilities, Chapter 261 Aeronauties. Section

261-4(a) directs the DOT to

maintain, equip, operate, regulate, and protect, air-

ports and air navigation facilities, including...

maintenance, and operation at airports of buildings

and other facilities . . . for the comfort, accommo-

dation, and convenience of air travelers... .®

To these ends, § 261-7 permits the DOT to

enter into contracts, leases, licenses, and other ar-

rangements with any person:

* * * *

(2) Conferring the privilege of supplying goods,

commodities, things, services, or facilities at the air-

port or air navigation facility ... .*

Further, per § 261-7, the DOT may establish the “terms

and conditions of the contract’’.**

This language is reiterated in H.R.S. § 261-9—Con-

tracts, law governing; * and H.R.S. § 261-10—Exclusive

42 See n. 32, supra, for full text of § 261-4.

43 See n. 34, supra, for full text of § 261-7.

44 Tbid.

45 Haw. Rev. Stat. § 261-9:

§ 261-9 Contracts, law governing. The department of trans-

portation may enter into any contracts necessary to the execu-

tion of the powers granted it by this chapter. All contracts

made by the department shall be made pursuant to the laws of

the State governing the making of like contracts; provided,

that where the planning, acquisition, construction, improve-

ment, maintenance, or operation of any airport, or air naviga-

tion facility is financed wholly or partially with federal moneys,

the department may let contracts in the manner prescribed by

the federal authorities acting under the laws of the United

28a

rights prohibited.** In the latter, while the state forbids

exclusive contracts as to the “use of an airway, landing

area, or air navigation facility,” the section also specifi-

cally says “[t]his section shall not prevent the making

of contracts, leases, and other arrangements pursuant to

section 261-7.” *’ This broad grant of authority to the

DOT is limited only by directives to manage the airport

system in the best interest of the public and to generate

sufficient revenue to support the statewide airport sys-

tem. There can be no reasonable doubt that the state

has authorized the DOT to act as its agent in the manag-

ing and financing its airport system.

Additionally, the expressed goals of this legislation,

as stated in H.R.S. § 261-11, are that the airport system

States and any rules or regulations made thereunder. [L

1947, c 32, pt of §1; RL 1955, § 15-15; am L Sp 1959 2d, ¢ 1,

§ 26]

46 Haw. }). v. Stat. § 261-10:

§ 261-10 Exclusive vights prohibited. The department of

transportation shall grant no exclusive right for the use of an

airway, landing area, or air navigation facility under its juris-

diction. This section shall not prevent the making of contracts,

leases, and other arrangements pursuant to section 261-7. [L

1947, c 32, pt of §1; RL 1955, § 15-16; am L Sp 1959, 2d, c 1,

§ 26]

47 Read in conjunction with the broad powers enunciated in § 261-

7, it is clear that the legislature has considered and condones the

use of exclusive contracts by DOT and its various concessicners.

Indeed in one case the legislature experimented in 1981 (H.B. 1470,

Act 243 of the 1981 Session Laws) with specifically requiring the

DOT to provide at least two duty-free in-bond concessions at the

airport and then finding that unacceptable, not only returned the

statute to the status quo, but mandated a sole source duty-free in-

bond concession at the airport. (Act 90, S.B. 2261-82 S.D.2 of the

1982 Session Laws.) This approval of exclusive contracts by the

legislature emphasizes the already clear mandate by the state that

DOT has the power and authority to enter such contracts with

such parties as will best serve the public’s interest and provide

adequate funds for the airport system. See also nn. 32, 88 & 35,

supra. :

29a

is to be “used for public and governmental purposes and

as a matter of public necessity”’.** The exercise of these

powers is considered to be “public and governmental

functions.” * This clearly satisfies the first prong of the

Midcal test.

48 See n. 33, supra, for full text of § 261-11.

49 Tbid. See also Haw. Rev. Stat. § 261-12:

§ 261-12 Rules, standards. (a) Powers to adopt. The direc-

tor of transportation may perform such acts, issue and amend

such orders, adopt such reasonable general or special rules and

procedures, and establish such minimum standards, consistent

with this chapter, as the director deems necessary to carry out

this chapter and to perform the duties assigned thereunder, all

commensurate with and for the purpose of protecting and

insuring the general public interest and safety, the safety of

persons operating, using, or traveling in aircraft, and the

safety of persons and property on land or water, and develop-

ing and promoting aeronautics in the State. No rule of the

director shall apply to airports or air navigation facilities

owned or operated by the United States.

In furtherance of the duties assigned under this chapter, the

director may adopt rules relating to:

(1) Safety measures, requirements and practices in or about

the airport premises;

(2) The licensing and regulation of persons engaged in com-

mercial activities in or about the airport premises;

(3) The regulation of equipment and motor vehicles oper-

ated in or about the airport operational area;

(4) Airport security measures or requirements, and desig-

nation of sterile passenger holding areas and operational areas;

(5) The regulation of motor vehicles and traffic;

(6) Any other matter relating to the health, safety and

welfare of the general public and persons operating, using, or

traveling in aircraft.

(b) Definitions. For the purpose of this section, if not

inconsistent with the context:

“Sterile passenger holding area” means any portion of a

public airport designated by the director and identified by

appropriate signs as an area into which access is conditioned

30a

The second prong of the Midcal analysis compels this

court to determine if the DOT, in its contracting and

management of the airport system, is actively supervised

and subjected to “pointed re-examination” of its policies

by the state.”

upon the prior inspection of persons and property in accord-

ance with the approved Federal Aviation Administration air

carrier screening program.

“Operational area’ means any portion of a public airport,

from which access by the public is prohibited by fences or

appropriate signs, and which is not leased or demised to any-

one for exclusive use and includes runways, taxiways, all

ramps, cargo ramps and apron areas, aircraft parking and

storage areas, fuel storage areas, maintenance areas, and any

other area of a public airport used or intended to be used for

landing, takeoff or surface maneuvering of aircraft or used for

embarkation or debarkation of passengers.

Notwithstanding the restriction on access by the public into

operational areas, entry may be authorized for airport opera-

tional area related purposes with the prior permission of the

director or his duly authorized representative.

orders, or standards prescribed by the director shall be incon-

sistent with, or contrary to, any act of the Congress of the

United States or any regulation promulgated or standard

established pursuant thereto.

(d) How made. All rules having the force and effect of law,

shall be adopted by the director pursuant to chapter 91.

(e) Distribution. The director shall provide for the publica-

tion and general distribution of all of its rules and procedures

having general effect. [L 1947, c 32, pt of §1; RL 1955, § 15-

18; am L Sp 1959 2d, c 1, § 26; am L 1965, c 96, §11; HRS

§ 261-12; am L 1980, c 155, § 1]

50 Of course when one considers that the DOT is composed of

officers and agents of the state, the question becomes facetious. But

for the sake of argument and in the hopes of exposing exactly why

a Midcal analysis is unnecessary in such cases as this one, the court

will overlook this obvious discontinuity. Especially since at least one

other judge, sitting by designation in this district, overlooked this

relationship and failed to grant the DOT state-action immunity for

3la

Since the DOT is a state agency," which must submit

budgets and is funded by the state,** and whose director

holds his office at the whim of the governor,® it is abun-

dantly clear that the actions of the DOT are subjected

to “pointed re-examination” by the state. By statute as

well, H.R.S. § 261-7, the DOT is mandated to “actively

supervise the operation of the contractors to insure its

effectiveness. The department shall develop and imple-

ment such guidelines as it may find necessary and proper

to actively supervise the operations ... [and review]

the reasonableness of contractors’ price schedules... .” ™

From the above, it is manifest that the DOT is, from

every aspect, an instrumentality of the state. To ask if

the state controls and reviews the DOT is to simply ask

if the state exercises control over and governs its own

actions.

The tautology is complete. The DOT, as an agent and

instrumentality of the state, is controlled and reviewed

constantly by the state. Since the DOT accounts directly

to the state, and the state is merely acting through its

agent, which performs and controls the action, this court

can hardly imagine how the Midcal analysis could fail to

a similar exclusive concession contract at HIA, this court wishes to

spell out quite clearly this symbiosis. Cf. Lei, Inc. v. Photo Man-

agement, Inc., Civ. No. 78-0263 (Opinion & Order filed February 4,

1980, by Judge Stanley Weigel). In short, the DOT is but an instru-

mentality created by the state to conduct certain specific state

policies. The DOT exists only because of the state’s grant of author-

ity and only to perform the specific mandates outlined in its Organic

Act. See nn. 51 & 53, infra, and accompanying text.

51 The Department of Transportation was created by Haw. Rev.

Stat. § 26-4(15) (1976); and is a unit within the office of the

governor.

52 Tbid.

53 Haw. Const. Art. V, § 6.

54 See n. 34, supra, for full text of § 261-7.

32a

be satisfied. As indicated above, in such situations as

the present case, the Midcal test is simply not necessary

to be made. But if made, as here done, it will almost

certainly be met.

CONCLUSION

This court finds that the DOT is an instrumentality of

the State of Hawaii. As such, the DOT’s acts in regard

to certain exclusive contracts at HIA are the acts of the

state. Further, those acts relate to a fundamental govern-

mental function, that is, the building, maintaining, man-

aging and financing of a necessary statewide airport

system for an island state. In so operating, the acts of

the DOT are entitled to Parker v. Brown immunity

against any claims of alleged violations of the Sherman

Act.

For reasons heretofore stated, this court has considered

and applied a Midcal analysis. The application of this

superfluous analysis confirms this court’s earlier conclu-

sion. When the state is acting through one of its instru-

mentalities, the Midcal analysis logically should be satis-

fied automatically. The Midcal two-prong test having

been met, the DOT’s actions are entitled to the same

Parker v. Brown immunity to antitrust suits as the state.

This court finds it unnecessary to consider the remain-

ing claims of the plaintiff’s complaint.

IT IS HEREBY ORDERED that plaintiff’s motion for

summary judgment is DENIED; and defendants’ motion

for summary judgment is GRANTED.™

55 Perhaps it is logically possible to postulate the ultimate “right

hand in ignorance of the left hand’s acts’ sort of situation. But

then the courts would be forced to decide which “hand” was the

state.

56 See Order Granting and Denying Motions for Summary Judg-

ment, filed on September 2, 1982. See also n. 1, supra.

83a

SHERMAN ACT

Section 1. Every contract, combination in the form of

trust or otherwise, or conspiracy, in restraint of trade

or commerce among the several States, or with foreign

nations, is declared to be illegal. Every person who shall

make any contract or engage in any combination or

conspiracy hereby declared to be illegal shall be deemed

guilty of a felony, and, on conviction thereof, shall be

punished by fine not exceeding one million dollars if a

corporation, or, if any other person, one hundred thou-

sand dollars, or by imprisonment not exceeding three

years, or by both said punishments, in the discretion of

the court. 15 U.S.C. § 1.

Section 2. Every person who shall monopolize, or at-

tempt to monopolize, or combine or conspire with any

other person or persons, to monopolize any part of the

trade or commerce among the several States, or with for-

eign nations, shall be deemed guilty of a felony, and, on

conviction thereof, shall be punished by fine not exceed-

ing one million dollars if a corporation, or, if any other

person, one hundred thousand dollars, or by imprison-

ment not exceeding three years, or by both said punish-

ments, in the discretion of the court. 15 U.S.C. § 2.

84a

HAWAII REVISED STATUTES

COMPRISING THE STATUTES

OF THE STATUTES OF HAWAII,

CONSOLIDATED, REVISED, AND ANNOTATED

§ 261-4 Airports, general. (a) Establishment, opera-

tion, maintenance. The department of transportation may

on behalf of and in the name of the State, out of appro-

priations and other moneys available or made available

for such purposes, plan, acquire, and establish, construct,

enlarge, and improve in the manner herein provided,

maintain, equip, operate, regulate, and protect, airports

and air navigation facilities, including the construction,

installation, equipment, maintenance, and operation at

airports of buildings and other facilities for the servicing

of aircraft or for the comfort, accommodation, and con-

venience of air travelers, and including protection against

airport hazards. For such purposes the department may,

by purchase, gift, devise, lease, condemnation in accord-

ance with chapter 101, or otherwise, acquire property,

real or personal, or any interest therein, including the

property, rights, estates, and interests mentioned in sec-

tion 262-11. The department may acquire rights and

interests in airports owned or controlled by others, for the

purpose of meeting a civilian need which is within the

scope of its functions, even though it does not have the ex-

clusive control and operation of such airports. No officer,

board, or department of the State, or municipality, shall

perform any function which is within the jurisdiction of

the department without its approval, except for military

purposes.

(b) Acquisition of real property. In the acquisition of

real property and interests therein, the department of ac-

counting and general services shall assist the departiment

of transportation at its request, and assign thereto state

officers and employees under its supervision for the mak-

ing of surveys, abstracts, and otherwise as may be of

35a

assistance, for which services the department of trans-

portation shall pay out of the appropriations available

to it, unless the department of accounting and general

services has a general fund appropriation for such serv-

ices.

(ec) Structures and improvements. All structures and

improvements to land shal! be initiated by the department

of transportation and shall be constructed or made by

or under the comptrolier, in conformity with plans and

specifications approved by the department of transporta-

tion, for which purpose the department of transportation

shall make allotments of the funds under its control for

expenditure by the comptroller and for services of the

department of accounting and general services for which

the department has no general fund appropriation.

(d) Use of state and municipal facilities and services.

In carrying out this chapter, the department of transpor-

tation may use the facilities and services of other agen-

cies of the State and of the municipalities of the State to

the utmost extent possible, and the agencies and munici-

palities shall make available their facilities and services.

This subsection shall apply to the department of account-

ing and general services with respect to services and facil-

ities in addition to those specified by subsections (b) and

(ec). [L 1947, e 32, pt of §1; RL 1955, § 15-9; am L Sp

1959 2d, ¢ 1, §§ 12, 26]

§ 261-5 Disposition of airport revenue fund. (a) All

moneys received by the department of transportation from

rents, fees and other charges pursuant to this chapter as

well as all aviation fuel taxes paid pursuant to section

243-4(a) (2) shall be paid into the airport revenue fund

created by section 248-8. All such moneys paid into the

airport revenue fund shall be expended by the department

for the statewide system of airports, including the con-

struction of airports and air navigation facilities ap-

proved by the legislature, including acquisition of real

36a

property and interests therein; and for operation and

maintenance of airports and air navigation facilities; and

for the payment of indebtedness heretofore or hereafter

incurred by the department, or its predecessor, the Hawaii

aeronautics commission, for any of the purposes of this

chapter. The department shall generate sufficient reve-

nues from its airport properties to meet all of the ex-

penditures of the statewide system of airports and to

comply with section 39-59; provided that as long as suffi-

cient revenues are generated to meet such expenditures,

the director of transportation may, in his discretion,

grant a rebate of the aviation fuel taxes paid into the

airport revenue fund during a fiscal year pursuant to

sections 248-4(a) (2) and 248-8 to any person who has

paid airport use charges or landing fees during such fiscal

year. Such rebate may be granted during the next suc-

ceeding fiscal year but shall not exceed one-half cent per

gallon per person, and shall be computed on the total

number of gallons for which the tax was paid by such

person, for such fiscal year.

(b) All expenditures by the department shall be made

on vouchers duly approved by the director of transporta-

tion or such other officer as may be designated by the di-

rector. [L 1947, ¢ 32, pt of §1; RL 1955, § 15-10; am

L Sp 1959 2d, ¢ 1, § 26; am L 1962, c 24, §§ 2, 8; HRS

§ 261-5; am L 1968, ce 20, § 2; am L 1969, c 10, § 6 and

ec 99, § 1]

§ 261-7 Operation and use privileges. (a) Under de-

partment operation. In operating an airport or air navi-

gation facility owned or controlled by the department of

transportation, or in which it has a right or interest, the

department may enter into contracts, leases, licenses, and

other arrangements with any person:

(1) Granting the privilege of using or improving the

airport or air navigation facility or any portion or

facility thereof or sface therein for commercial

purposes ;

—E

37a

(2) Conferring the privilege of supplying goods, com-

modities, things, services, or facilities at the air-

port or air navigation facility;

(8) Making available services, facilities, goods, com-

modities, or other things to be furnished by the

department or its agents at the airport or air

navigation facility; or

(4) Granting the use and occupancy on a temporary

basis by license or otherwise any portion of the

land under its jurisdiction which for the time being

may not be required by the department so that it

may put the area to economic use and thereby de-

rive revenue therefrom.

All the arrangements shall contain a clause that the

land may be repossessed by the department when needed

for aeronautics purposes upon giving the tenant tempo-

rarily occupying the same not less than thirty days’ notice

in writing of intention to repossess.

Except as otherwise provided in this section, in each

case mentioned in paragraph (1), (2), (3) and (4), the

department may establish the terms and conditions of the

contract, lease, license, or other arrangement, and may

fix the charges, rentals, or fees for the privileges, serv-

ices, or things granted, conferred, or made available, for

the purpose of meeting the expenditures of the statewide

system of airports set forth in section 261-5(a), which

includes expenditures for capital improvement projects

approved by the legislature. Such charges shall be rea-

sonable and uniform for the same class of privilege, serv-

ice or thing.

(b) Under other operation. The department may, by

contract, lease, or other arrangement, upon a considera-

tion fixed by it, grant to any qualified person the privi-

lege of operating, as agent of the State or otherwise, any

airport owned or controlled by the department; provided

that no such person shall be granted any authority to op-

38a

erate the airport other than as a public airport or to

enter into any contracts, leases, or other arrangements in

connection with the cperation of the airport which the

department might not have undertaken under subsection

(a) of this section.

may fix and regulate, from time to time, reasonable land-

ing fees for aircraft and other reasonable charges for the

use and enjoyment of the airports and the services and

facilities furnished by the department in connection there-

with, including the establishment of a statewide landing

fee which may vary among different classes of users such

as foreign carriers, domestic carriers, inter-island car-

riers, air taxi operators and such other classes as may be

determined by the director of transportation, for the

purpose of meeting the expenditures of the statewide sys-

tem of airports set forth in section 261-5(a), which in-

cludes expenditures for capital improvement projects ap-

proved by the legislature.

(d) Liens. To enforce the payment of any charges for

repairs or improvements to, or storage or care of any

personal property made or furnished by the department

or its agent in connection with the operation of an airport

or air navigation facility owned or operated by the de-

partment, the department shall have liens on the property,

which shall be enforceable by it as provided by sections

507-18 to 507-22.

(e) Buildings and land areas for general aviation ac-

tivities; developmental rates. The department may from

time to time establish developmental rates for buildings

and land areas used exclusively for general aviation ac-

tivities at rates not less than fifty per cent of the fair

market rentals of the buildings and land areas and may

restrict the extent of buildings and land areas to be

utilized. [L 1947, ¢ 32, pt of §1; am L 1949, c 374 §1;

am L 1953; JR 14, §1; RL 1955, § 15-12; am L Sp

1959 2d, ¢ 1, § 26; am L 1962, c 24, §§ 4,5; HRS § 261-7;

ip tl i

39a

am L 1968, c 20, §§ 8, 4; am L 1972, ¢ 14, §1; am L

1976, ¢ 235, § 2]

Haw. Rev. Stat. § 261-7, as amended by Act 90, 1982

Hawaii Sess. Laws

§ 261-7 Operation and use privileges. (a) Under de-

partment operation. In operating an airport or air navi-

gation facility owned or controlled by the department of

transportation, or in which it has a right or interest, the

department may enter into contracts, leases, licenses, and

other arrangements with any person:

(1) Granting the privilege of using or improving the

airport or air navigation facility or any portion or

facility thereof or space therein for commercial

purposes;

(2) Conferring the privilege of supplying goods, com-

modities, things, services, or facilities at the air-

port or air navigation facility;

(3) Making available services, facilities, goods, com-

modities, or other things to be furnished by the

department or its agents at the airport or air

navigation facility; or

(4) Granting the use and occupancy on a temporary

basis by license or otherwise any portion of the

land under its jurisdiction which for the time being

may not be required by the department so that it

may put the area to economic use and thereby de-

rive revenue therefrom.

All the arrangements shall contain a clause that the

land may be repossessed by the department when needed

for aeronautics purposes upon giving the tenant tempo-

rarily occupying the same not less than thirty days’ notice

in writing of intention to repossess.

Except as otherwise provided in this section, in each

case mentioned in paragraphs (1), (2), (3), and (4),

40a

the department may establish the terms and conditions of

the contract, lease, license, or other arrangement, and may

fix the charges, rentals, or fees for the privileges, serv-

ices, or things granted, conferred, or made available, for

the purpose of meeting the expenditures of the statewide

system of airports set forth in section 261-5(a), which

includes expenditures for capital improvement projects

approved by the legislature. Such charges shall be reason-

able and uniform for the same class of privilege, service,

or thing.

The department shall enter into a contract with no

more than one person (“contractor”) for the sale and

delivery of in-bond merchandise at Honolulu International

Airport, in the manner provided by law. The contract

shall confer the right to operate and maintain commercial

facilities within the airport for the sale of in-bond mer-

chandise and the right to deliver to the airport in-bond

merchandise for sale to departing foreign-bound passen-

gers.

The department shall grant the contract pursuant to

the laws of this State and may take into consideration:

(1) The payment to be made on in-bond merchandise

sold at Honolulu International Airport and on in-

bond merchandise displayed or sold elsewhere in

the State and delivered to the airport.

(2) The ability of the applicant to comply with all fed-

eral and state rules and regulations concerning

the sale and delivery of in-bond merchandise; and

(3) The reputation, experience, and financial capability

of the applicant.

The department shall actively supervise the operation

of the contractor to insure its effectiveness. The depart-

ment shall develop and implement such guidelines as it

may find necessary and proper to actively supervise the

operations of the contractor, and shall include guidelines

8 LE ee SAS tS Os ec san.

sy PR Rin «Sete hhny

4la

relating to the department’s review of the reasonableness

of contractor’s price schedules, quality of merchandise,

merchandise assortment, operations, and service to cus-

tomers.

Apart from the contract described above, the depart-

ment shall confer no right upon nor suffer nor allow any

person to offer to sell, sell, or deliver in-bond merchandise

at Honolulu International Airport; provided that this

section shall not prohibit the delivery of in-bond mer-

chandise as cargo to the Honolulu International Airport.

> = ©

[am L 1981, c 243, § 2; am L 1982, c 90, § 2]

§ 261-9 Contracts, law governing. The department of

transportation may enter into any contracts necessary to

the execution of the powers granted it by this chapter.

All contracts made by the department shall be made pur-

suant to the laws of the State governing the making of

like contracts; provided, that where the planning, acquisi-

tion, construction, improvement, maintenance, or opera-

tion of any airport, or air navigation facility is financed

wholly or partially with federal moneys, the department

may let contracts in the manner prescribed by the federal

authorities acting under the laws of the United States

and any rules or regulations made thereunder. [L 1947,

ce 32, pt of §1; RL 1955, § 15-15; am L Sp 1959 2d, c 1,

§ 26]

§ 261-12 Rules, standards. (a) Powers to adopt. The

director of transportation may perform such acts, issue

and amend such orders, adopt such reasonable general or

special rules and procedures, and establish such minimum

standards, consistent with this chapter, as the director

deems necessary to carry out this chapter and to perform

the duties assigned thereunder, all commensurate with

and for the purpose of protecting and insuring the gen-

eral public interest and safety, the safety of persons

42a

operating, using, or traveling in aircraft, and the safety

of persons and property on land or water, and developing

and promoting aeronautics in the State. No rule of the

director shall apply to airports or air navigation facilities

owned or operated by the United States.

In furtherance of the duties assigned under this chap-

ter, the director may adopt rules relating to:

(1) Safety measures, requirements and practices in or

about the airport premises ;

(2) The licensing and regulation of persons engaged

in commercial activities in or abou: the airport

premises ;

(3) The regulation of equipment and motor vehicles

operated in or about the airport operational area;

(4) Airport security measures or requirements, and

designation of sterile passenger holding areas and

operational areas;

(5) The regulation of motor vehicles and traffic;

(6) Any other matter relating to the health, safety

and welfare of the general public and persons

operating, using, or traveling in aircraft.

(b) Definitions. For the purpose of this section, if not

inconsistent with the context:

“Sterile passenger holding area” means any portion of

a public airport designated by the director identified by

appropriate signs as an area into which access is con-

ditioned upon the prior inspection of persons and prop-

erty in accordance with the approved Federal Aviation

Administration air carrier screening program.

“Operational area” means any portion of a public air-

port, from which access by the public is prohibited by

fences or appropriate signs, and which is not leased or

demised to anyone for exclusive use and includes run-

43a

ways, taxiways, all ramps, cargo ramps and apron areas,

aircraft parking and storage areas, fuel storage areas,

maintenance areas, and any other area of a public air-

port used or intended to be used for landing, takeoff or

surface maneuvering of aircraft or used for embarkation

or debarkation of passengers.

Notwithstanding the restriction on access by the public

into operational areas, entry may be authorized for air-

port operational area related purposes with the prior

permission of the director or his duly authorized

representative.

(ec) Conformity to federal legislation and rules. No

rules, orders, or standards prescribed by the director

shall be inconsistent with, or contrary to, any act of the

Congress of the United States or any regulation promul-

gated or standard established pursuant thereto.

(d) How made. All rules having the force and effect

of law, shall be adopted by the director pursuant to

chapter 91.

(e) Distribution. The director shall provide for the

publication and general distribution of all of its rules

and procedures having general effect. [L 1947, ¢ 32, pt

of §1; RL 1955, § 15-18; am L Sp 1959 2d, ¢ 1, § 26;

am L 1965, ec 96, § 11; HRS § 261-12; am L 1980, ec 155,

$1]

§ 480-12 Contracts void. Any contract or agreement

in violation of this chapter is void and is not enforceable

at law or in equity. [L 1961, ec 190, § 10; Supp, § 205A-

10] .

44a

SESS"ON LAWS

HAWAII

ACT 243

A Bill for an Act Relating to Transportation.

Be It Enacted by the Legislature of the State of Hawaii:

SECTION 1. The legislature finds and declares that:

(a) The State of Hawaii receives substantial revenues

from the sale and delivery of in-bond merchandise to for-

eign-bound travelers departing from the Honolulu Inter-

national Airport. In 1980 the State’s airport special fund

received over $30 million from such sales.

(b) Presently there are two competing businesses serv-

ing the duty-free market under contracts with the de-

partment of transportation. These contractors have guar-

anteed the airport special fund a minimum of $395,700,007

over the seven and one-half year life of the contracts.

the contracts are expected to provide forty per cent of

the income of the airport special fund which supports all

capital improvement programs and operating expenses

and secures the revenue bonds for the state airport sys-

tem.

(d) The addition of any more competition into this

line of commerce may jeopardize these revenues and det-

rimentally affect the airport special fund.

(e) Tourism is, and will continue to be, one of the

State’s major industries. The economic welfare of the

State and its citizens will depend in part upon the future

of tourism in the State.

* Except as to Section 6, the text has been edited pursuant to

HRS § 23G-16.5, authorizing omission of the brackets, bracketed

material, and underscoring.

45a

(f) Tourism in Hawaii is heavily dependent upon the

national and international airline industry. If the reve-

nues received by the airport special fund from the duty-

free contractors are reduced, the airline industry landing

fees will be increased correspondingly. There will be a

detrimental effect on Hawaii’s tourism industry if the

airlines pass the additional cost on to the tourists through

increased airline fares. Local consumers, of course, will

also be paying higher air fares.

(g) Another important aspect of the State’s tourism

industry is the selling and delivering of in-bond mer-

chandise to foreign-bound travelers.

(h) It is in the interest of the State and the State’s

tourism industry to insure that quality merchandise and

excellent service at reasonable prices to departing foreign-

bound travelers be established and maintained in the in-

bond merchandise marketplace, taking into consideratio~

the available physical facilities, personnel, logistical para-

meters, and competing interests at the Honolulu Inter-

national Airport and within the State.

(i) Foremost among the concerns related to the addi-

tion of other competitors into the duty-free market are

(1) whether the orderly administration of the airport

and its facilities can be maintained and (2) the amount

which can be assessed against additional ‘competitors by

the State for the privilege of delivering duty-free mer-

chandise to the Honolulu International Airport.

(j) It is the policy of this State to protect the duty-

free marketplace and thereby the tourist industry by

limiting the number of duty-free operations to two and

requiring that the State actively supervise their opera-

tions as a substitute for the competitive discipline of a

free market economy. This Act will expire on June 30,

1982. It is intended that the Legislature will reexamine

this Act during the 1982 Regular Session.

46a

SECTION 2. Section 261-7, Hawaii Revised Statutes,

is amended by amending subsection (a) to read as fol-

lows:

“(a) Under department operation. In operating an

airport or air navigation facility owned or controlled by

the department of transportation, or in which it has a

right or interest, the department may enter into con-

tracts, leases, licenses, and other arrangements with any

person :

(1) Granting the privilege of using or improving the

airport or air navigation facility or any portion

or facility thereof or space therein for commercial

purposes;

(2) Conferring the privilege of supply goods, com-

modities, things, services, or facilities at the air-

port or air navigation facility;

(3) Making available services, facilities, goods, com-

modoties, or other things to be furnished by the

department or its agents at the airport or air

navigation facility; or

(4) Granting the use and occupancy on a temporary

basis by license or otherwise any portion of the

land under its jurisdiction which for the time

being may not be required by the department so

that it may put the area to economic use and

thereby derive revenue therefrom.

All the arrangements shall contain a clause that the

land may be repossessed by the department when needed

for aeronautics purposes upon giving the tenant tem-

porarily occupying the same not less than thirty days’

notice in writing of intention to repossess.

Except as otherwise provided in this section, in each

case mentioned in paragraphs (1), (2), (3) and (4), the

department may establish the terms and conditions of

the contract, lease, license, or other arrangement, and

On Deets ts rebate we

47a

may fix the charges, rentals, or fees for the privileges,

services, or things granted, conferred, or made available,

for the purpose of meeting the expenditures of the state-

wide system of airports set forth in section 261-5(a),

which includes expenditures for capital improvement proj-

ects approved by the legislature. Such charges shall be

reasonable and uniform for the same class of privilege,

service, or thing.

The department shall enter into separate contracts with

no more than two persons (“contractors”) for the sale

and delivery of in-bond merchandise at Honolulu Inter-

national Airport, in the manner provided by law. Each

such contract shall confer the right to operate and main-

tain commercial facilities within the airport for the sale

of in-bond merchandise and the right to deliver to the

airport in-bond merchandise for sale to departing foreign-

bound passengers.

The department shall grant such contracts pursuant to

the laws of this State and may take into consideration:

(1) The payments to be made on in-bond merchandise

sold at Honolulu International Airport and on in-

bond merchandise displayed or sold elsewhere in

the State and delivered to the airport.

(2) The ability of the applicant to comply with all fed-

eral and state rules and regulations concerning

the sale and delivery of in-bond merchandise; and

(3) The reputation, experience, and financial capabil-

ity of the applicant.

The department shall actively supervise the “operation

of the contractors to insure its effectiveness. The depart-

ment shall develop and implement such guidelines as it

may find necessary and proper to actively supervise the

operations of such contractors, and shall include guidelines

relating to the department’s review of the reasonableness

48a

of contractors’ price schedules, quality of merchandise,

merchandise assortment, operations, and service to cus-

tomers.

Apart from the contracts described above, during the

period ending June 30, 1982, the department shall confer

no right upon any person to offer to sell, sell, or deliver

in-bond merchandise at Honolulu International Airport.”

SECTION 3. The provisions of this Act are declared

to be severable and if any portion thereof is held to be

invalid for any reason, the validity of the remainder of

this Act shall not be affected.

SECTION 4. Statutory material to be repealed is

bracketed. New material is underscored.*

SECTION 5. This Act shall take effect upon its ap-

proval and shall expire on June 30, 1982.

The foregoing became law on July 7, 1981, without

the Governor’s signature, pursuant to Art. III, § 16, State

Constitution.

ACT 90

A Bill for an Act Relating to Transportation.

Be It Enacted by the Legislature of the State of Hawaii:

SECTION 1. The legislature finds that tourism is the

leading source of jobs and income for the people of the

State of Hawaii. Therefore, tourism directly and indi-

rectly provides a leading source of all state revenues.

The present decline in the sugar and pineapple industries

foreshadows an even greater importance of tourism to the

State in the near future.

Today, virtually all of Hawaii’s visitors arrive by air

and make use of the Honolulu International Airport.

The legislature finds that the operation of a functional,

well-planned, and properly maintained Honolulu Inter-

* The text has been edited pursuant to HRS § 23G-16.5, authoriz-

ing omission of the brackets, bracketed material, and underscoring.

Leiria

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}

;

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}

;

49a

national Airport is therefore a matter of compelling in-

terest.

The State of Hawaii receives substantial revenues from

the sales of in-bond merchandise to foreign-bound trav-

elers departing from Honolulu International Airport, rev-

enues that go to the administration of the facility and

that are vital to its well-being. Additionally, a high-

quality, duty-free operation at the Honolulu International

Airport can in itself be an attraction of some magnitude

to foreign visitors.

Therefore, the legislature finds that the necessity and

importance of maintaining a healthy and high-quality,

duty-free operation in the State cannot be understated.

However, the legislature also finds that the duty-free

industry is as fragile as it is lucrative, subject to great

potential harm by the forces and strains of unfettered

competition.

Prior to January 1, 1981, the right to sell and deliver

in-bond merchandise to foreign-bound travelers departing

from Honolulu International Airport was an exclusive one

which was granted pursuant to a competitive bid. On Jan-

uary 1, 1981, two competing contractors began to sell and

deliver in-bond merchandise to Honolulu International

Airport under separate seven and one-half year contracts

with the department of transportation.

On September 12, 1981, approximately eight and one-

half months after the two contractors had commenced op-

erations, one of the contractors withdrew from the con-

tract because of difficulty meeting its financial guarantee

to the State. The recent withdrawal of one of the con-

tractors is a serious concern of the legislature in that the

State receives substantial revenues from the sale and de-

livery of in-bond merchandise at Honolulu International

Airport.

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The legislature has reexamined Act 243-81 and finds

it to be in the best interest of the State to allow the

in-bond marketplace to continue to operate under the pro-

tectiun of anti-trust immunity legislation.

Therefore, the legislature finds it is a matter of com-

pelling state interest to displace unfettered business com-

petition in the in-bond merchandise marketplace in order

to maintain the health and quality of the industry and

the ultimate health of the economy of the entire State.

The purpose of this bill is to provide a means to dis-

place unfettered business competition in the duty-free in-

dustry in Hawaii and to effectuate the above-articulated

state interests by limiting the number in-bond operations

to only contractor, [sic] by providing that the department

confer no right nor suffer nor allow any person to offer to

sell, sell or deliver in-bond merchandise at Honolulu In-

ternational Airport except as cargo, and by requiring that

the State actively supervise the operations as a substitute

for the competitive discipline of a free market economy.

SECTION 2. Section 261-7, Hawaii Revised Statutes,

is amended by amending subsection (a) to read:

“(a) Under department operation. In operating an

airport or air navigation facility owned or controlled by

the department of transportation, or in which it has a

right or interest, the department may enter into con-

tracts, leases, licenses, and other arrangements with any

person:

(1) Granting the privilege of using or improving the

airport or air navigation facility or any portion

or facility thereof or space therein for commercial

purposes ;

(2) Conferring the privilege of supplying goods, com-

modities, things, services, or facilities at the air-

port or air navigation facility;

i ia te DARN A CN Ae CL Rta mo cn ir Ce

is eiticecitinvisn

5la

(3) Making available services, facilities, goods, com-

modities, or other things to be furnished by the

department or its agents at the airport or air

navigation facility; or

(4) Granting the use and occupancy on a temporary

basis by license or otherwise any portion of the

land under its jurisdiction which for the time being

may not be required by the department so that it

may put the area to economic use and thereby

derive revenue therefrom.

All the arrangements shall contain a clause that the

land may be repossessed by the department when needed

for aeronautics purposes upon giving the tenant tempo-

rarily occupying the same not less than thirty days’ notice

in writing of intention to repossess.

Except as otherwise provided in this section, in each

case mentioned in paragraphs (1), (2), (3), and (4),

the department may establish the terms and conditions of

the contract, lease, license, or other arrangement, and

may fix the charges, rentals, or fees for the privileges,

services, or things granted, conferred, or made available,

for the purpose of meeting the expenditures of the state-

wide system of airports set forth in section 261-5(a),

which includes expenditures for capital improvement pro-

jects approved by the legislature. Such charges shall be

reasonable and uniform for the same class of privilege,

service, or thing.

The department shall enter into [separate contracts]

a contract with no more than [two persons (“contrac-

tors”) ] one person (“contractor”) for the sale and de-

livery of in-bond merchandise at Honolulu International

Airport, in the manner provided by law. [Each such]

The contract shall confer the right to operate and mair-

tain commercial facilities within the airport for the sale

of in-bond merchandise and the right to deliver to the

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airport in-bond merchandise for sale to departing foreign-

-bound passengers.

The department shall grant [such contracts] the con-

tract pursuant to the laws of this State and may take

into consideration:

(1) The payment? to be made on in-bond merchandise

sold at Honolulu International Airport and on in-

bond merchandise displayed or sold elsewhere in

the State and delivered to the airport;

(2) The ability of the applicant to comply with all fed-

eral and state rules and regulations concerning the

sale and delivery of in-bond merchandise; and

(3) The reputation, experience, and financial capability

of the applicant.

The department shall actively supervise the operation

of the [contractors] contractor to insure its effectiveness.

The department shall develop and implement such guide-

lines as it may find necessary and proper to actively su-

pervise the operations of [such contractors], the contrac-

tor, and shall include guidelines relating to the depart-

ment’s review of the reasonableness of [contractors’] con-

tractor’s price schedules, quality of merchandise, mer-

chandisé assortment, operations, and service to customers.

Apart from the [contracts] contract described above,

[during the period ending June 30, 1982,] the department

shall confer no right upon nor suffer nor allow any person

to offer to sell, sell, or deliver in-bond merchandise at

Honolulu International Airport[.]; provided that this

section shall not prohibit the delivery of in-bond mer-

chandise as cargo to the Honolulu Internationa! Airport.”

SECTION 3. Section 5, 243, Session Laws of Hawaii

1981, is amended to read as follows:

Notes

1 Formerly read “payments”.

53a

“SECTION 5. This Act shall take effect upon its ap-

proval [and shall expire on June 30, 1982].”

SECTION 4. Statutory material to be repealed is

bracketed. New material is underscored.

SECTION 5. This Act shall take effect upon its ap-

proval.

(Approved May 15, 1982.)

54a

HAWAII CONSTITUTION

Article V

EXECUTIVE POWERS

Section 5. The governor shall be responsible for the

faithful execution of the laws. The governor shall be

commander in chief of the armed forces of the State and

may call out such forces to execute the laws, suppress or

prevent insurrection or lawless violence or repel invasion.

The governor shall, at the beginning of each session, and

may, at other times, give to the legislature information

concerning the affairs of the State and recommend to its

consideration such measures as the governor shall deem

expedient.

The governor may grant reprieves, commutations and

pardons, after conviction, for all offenses, subject to regu-

lation by law as to the manner of applying for the same.

The legislature may, by general law, authorize the gover-

nor to grant pardons before conviction, to grant pardons

for impeachment and to restore civil rights denied by rea-

son of conviction of offenses by tribunals other than

those of this State.

The governor shall appoint an administrative director

to serve at the governor’s pleasure. [Ren and am Const

Con 1978 and election Nov. 7, 1978]

HAWAII CONSTITUTION

Article V

EXECUTIVE AND ADMINISTRATIVE OFFICES AND

DEPARTMENTS

Section 6. All executive and administrative offices, de-

partments and instrumentalities of the state government

and their respective powers and duties shall be allocated

by law among and within not more than twenty principal

departments in such a manner as to group the same ac-

a i el

55a

cording to common purposes and related functions. Tem-

porary commissions or agencies for special purposes may

be established by law and need not be allocated within

a principal department.

Each principal department shall be under the super-

vision of the governor and, unless otherwise provided

in this constitution or by law, shall be headed by a sin-

gle executive. Such single executive shall be nominated

and, by and with the advice and consent of the senate,

appointed by the governor. That person shall hold office

for a term to expire at the end of the term for which

the governor was elected, unless sooner removed by the

governor; except that the removal of the chief legal officer

of the State shall be subject to the advice and consent of

the senate.

Except as otherwise provided in this constitution,

whenever a board, commission or other body shall be the

head of a principal department of the state government,

the members thereof shall be nominated and, by and with

the advice and consent of the senate, appointed by the

governor. The term of office and removal of such mem-

bers shall be as provided by law. Such board, commis-

sion or other body may appoint a principal executive

officer who, when authorized by law, may be an ex officio,

voting member thereof, and who may be removed by a

majority vote of the members appointed by the governor.

The governor shall nominate and, by and with the ad-

vice and consent of the Senate, appoint all officers for

whose election or appointment provision is not otherwise

provided for by this constitution or by law. If the man-

ner or removal of an officer is not prescribed in this con-

stitution, removal shall be as provided by law.

When the senate is not in session anid a vacancy occurs in

any office, appointment to which requires the confirmation

of the senate, the governor may fill the office by granting

a commission which shall expire, unless such appointment

56a

is confirmed, at the end of the next session of the senate.

The person so appointed shall not be eligible for another

interim appointment to such office if the appointment

failed to be confirmed by the senate.

No person who has been nominated for appointment to

any office and whose appointment has not received the

consent of the senate shall be eligible to an interim ap-

pointment thereafter to such office.

Every officer appointed under the provisions of this sec-

tion shall be a citizen of the United States and shall have

been a resident of this State for at least one year im-

mediately preceding that person’s appointment, except

that this residency requirement shall not apply to the

president of the University of Hawaii. [Am Const Con

1968 and election Nov 5, 1968; ren and am Const Con

1978 and election Nov 7, 1978]

57a

STATEMENT OF FACTS TAKEN FROM DEAK-

PERERA’S MOTION FOR PARTIAL SUMMARY

JUDGMENT, CR 51 AT 9-138

For partial summary judgment purposes, the material

facts necessary to decide the issue of whether Defendants

DOT, HIGASHIONNA, MIYAMOTO and CITICORP-

USA are shielded from antitrust liability are relatively

simple and uncontroverted. These facts have been admit-

ted by Defendants in both their answers to the Complaint

and/or in sworn testimony at deposition:

1. Plaintiff provides retail foreign exchange services at

the HIA. (Admitted in Defendants’ Answer to Complaint

and in deposition of Ryokichi Higashionna at 16.)

2. Defendant DOT is the agency in charge of the HIA.

Pursuant to statute and within the bounds of statutory

authority, said Defendant has supervisory and admin-

istrative control over the HIA, and has responsibility for

entering into contracts, leases, licenses and other arrange-

ments relating to the supplying of goods, commodities,

and services at the HIA. The HIA services both inter-

state and foreign carriers, and Defendant DOT is, and

at all material times has been, engaged in interstate and

foreign commerce. (Admitted in Paragraph 8 of Defend-

ants’ Answer to Complaint; deposition transcripts of

Higashionna at 10-11; Shimada at 18-19; Toyama at 5-

6; and Fukunaga at 7-12).

3. In his capacity as Director of the Department of

Transportation, Defendant HIGASHIONNA caused to be

published a Notice To Bidders on May 26, 27 and 28,

1982, soliciting bids for a five (5) year lease to operate

the five (5) retail foreign exchange service locations at

the HIA. In accordance with the Notice To Bidders, in-

terested parties were required to submit their bid pro-

posals by June 17, 1982, to Defendant MIYAMOTO in

his capacity as Chief, Airports Division, Department of

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Transportation, State of Hawaii. (Admitted in Paragraph

8 of Defendants’ Answer to Complaint. )

4, The Notice To Bidders and the additional documents

referred to therein solicited blanket bids for all five (5)

foreign exchange locations situated throughout the HIA,

rather than separate and individua! bids in respect of

each foreign exchange concession. (Admitted in Para-

graph 8 of Defendants’ Answer to Complaint. )

5. Under the terms of the Netice To Bidders and the

accompanying documents, the successful bidder would be

given a five (5) year lease, commencing on July 1, 1982,

for the exclusive operation of all foreign exchange serv-

ices at the HIA. Despite the availability of five (5) sepa-

rate locations for foreign exchange services at the HIA,

the general terms and conditions of the Notice To Bid-

ders and the lease documents for the foreign exchange

concessions provide in pertinent part that the successful

bidder will have the “exclusive right” to use all five (5)

foreign exchange locations in the HIA, and that the De-

fendant DOT will not grant or permit any other person

during the terms of the lease to provide competitive for-

eign exchange services anywhere within the HIA. In

this regard, the Notice To Bidders and the lease docu-

ments provide as follows:

C. Exclusiveness of Use. The Lessee shall have the

exclusive right to use the Premises as hereinabove in-

dicated and the Lessor hereby covenants not to grant

to any other person during the term of this Lease,

the right to perform at the Airport any of the serv-

ices enumerated in Paragraph A of this Article [i.e.,

foreign exchange services]. The Lessor’s covenant

shall also not be the basis for any action against the

Lessor for any claims for diminution in rent or for

any other damages, it being understood that the

convenant is merely against an affirmative grant by

the Lessor to any other person of rights or privileges

59a

to have retail shop at the Airport similar to the con-

cession granted hereby.

(Admitted in Paragraph 8 of Defendants’ Answer to

Complaint. )

6. Defendants intend to award an exclusive lease to

the alleged successful bidder, Citicorp-USA. (Admitted in

Paragraph 11 of Defendants’ Answer to Complaint.)

7. The State legislature has not enacted any legisla-

tion regarding exclusive contracts for retail foreign ex-

change services. (Admitted in Paragraph 11 of Defend-

ants’ Answer to Complaint; deposition transcripts of

Higashionna at 39-41; and Shimada at 38-40.) *

8. There are no comprehensive regulations passed pur-

suant to Chapter 91 of the Hawaii Revised Statutes gov-

erning the supervision of retail foreign exchange services

at the HIA. (Admitted in depositions of Higashionna at

72; Miyamoto at Vol. II at 33; and Shimada at 62-64.)

9. Defendant DOT does not set any prices or commis-

sion rates in the area of retail foreign exchange, nor has

DOT the expertise to conduct such activity. (See deposi-

tion transcripts of Shimada at 90; Miyamoto at Vol. II,

at 34-36; Toyama at 29, 78; and Fukunaga at 39, 55-

56.)

10. Although Defendant DOT, through its Airport

Property Management Division, does somewhat generally

monitor the exclusive leases at the HIA for violations of

their provisions by examination of financial statements,

these examinations are primarily for the purpose of en-

suring that concessionaires are complying with the per-

centage rental financial arrangements, inapplicable to the

Note: Subsequent to this filing, the State legislature enacted

legislation enabling the Director of the DOT to grant an exclusive

airport concession to Duty-Free Shops. See Haw. Rev. Stat. § 261-7,

as amended by Act 90, 1982 Hawaii Sess. Laws.

60a

present situation. (See depositions of Higasionna at 70;

Toyama at 72; and Fukunaga at 14.)

11. The only other monitoring of the businesses of con-

cessionaires is concerned with whether or not lessees are

complying with other provisions of the lease, such as sell-

ing only designated items and operating their respective

businesses within the space designated. (See depositions

of Higasionna at 71; Toyama at 82; and Fukunaga at

12.)

12. Enforcement of the provisions of the current lease

with Plaintiff at the HIA does not require DOT to ac-

tively supervise the retail foreign exchange business,

e.g., by setting prices. At most, DOT may review the

Plaintiff’s rates if a consumer complaint is filed. How-

ever, no such incident was recalled by any State witness.

(See depositions of Higasionna at 70; Miyamoto, Vol. II

at 34, 36-40; Shimada at 99; and Toyama at 78-79.)

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.