Denial of state action immunity-based dismissal not immediately appealable


June 13, 2017

An Arizona power district could not seek interlocutory appeal of a federal district court order denying its motion to dismiss monopolization charges asserted against it on state action immunity grounds, the U.S. Court of Appeals in San Francisco has ruled. The collateral order doctrine did not allow immediate appeal of such an order because it was not considered a final decision, the appellate court held. Therefore, the appeal was dismissed for lack of jurisdiction (SolarCity Corp. v. Salt River Project Agricultural Improvement and Power District, June 12, 2017, Friedland, M.).

SolarCity alleged that the Salt River Project Agricultural Improvement and Power District, which serves much of the area surrounding Phoenix, attempted to maintain a monopoly over the supply of electrical power in its territory by instituting a new pricing structure that assessed prohibitively large penalties to customers who obtained power from their own systems. According to SolarCity, this cut applications for new solar panel systems in the territory by 96 percent. The complaint charged that the power district’s monopolistic conduct violated both the Sherman and the Clayton Acts.

The power district countered that it was exempt from SolarCity’s federal antitrust claims under the state action immunity doctrine. The doctrine protects local governmental entities from antitrust liability if they act pursuant to a clearly articulated and affirmatively expressed state policy to displace competition. As a political subdivision of Arizona, Salt River Project argued, it had authority to set prices under state law. This argument failed, as the district court denied the power district’s motion for dismissal, citing uncertainties about the specifics of its state law authority and business.

Interlocutory appeal. Although the court also declined to certify an interlocutory appeal, the power district sought such an appeal of the decision anyway. The power district contends it is entitled to raise its appeal on the state action issue immediately, despite the lack of a "final decision" by the court over the litigation, because that piece of the case had effectively become final under the collateral order doctrine, even though the case as a whole had not ended.

Collateral order doctrine. The collateral order doctrine, the appellate court pointed out, requires that: (1) an interlocutory order can be appealed only if it is "conclusive;" (2) the order address a question "separate from the merits" of the underlying case; and (3) that separate question would have to raise "some particular value of a high order" and evade effective review if not considered immediately. The appellate court noted that the Supreme Court has repeatedly stressed that the requirements were deliberately stringent, as the doctrine was intended to remain a narrow exception.

Viewing the doctrine in that light, and mindful that it allowed interlocutory appeals "in only a limited category of cases," the appellate court evaluated whether the state-action doctrine was sufficiently akin to the category that included interlocutory denials of certain particularly important immunities from suit. It was not, in the appellate court’s view. The instant matter did not concern immunity from suit, as those in the permitted category did. State action immunity was a mere immunity from liability, the appellate court said. Unlike immunity from suit, immunity from liability could be protected by a post-judgment appeal. A denial of a motion to dismiss based on state action immunity was no different from other denials of dismissal under Rule 12(b)(6) that could not ordinarily be appealed immediately, the court observed.

According to the court, state action immunity is analogous to Noerr-Pennington immunity, another immunity from liability, and the Ninth Circuit has held that decisions about Noerr-Pennington immunity are not immediately appealable. Similarly, it has been held that defendants cannot immediately appeal an order rejecting their reliance on statutory preemption. Thus, because the state action doctrine was a defense to liability rather than an immunity from suit, the collateral order doctrine did not give the appellate court jurisdiction over the matter.

The court found several counterarguments raised by the power district unavailing. The collateral order doctrine did not embrace interlocutory orders denying assertions of state action immunity" on the basis that the immunity had "constitutional origins." In addition, immediate appeal was not "necessary to avoid litigation that would distract government officials."

Appellate split. The holding comports with decisions of the Fourth and Sixth Circuits, the court observed. Although the Fifth and Eleventh Circuits have held the opposite on the issue, the instant court found the Fourth and Sixth Circuit’s rulings "more persuasively and thoroughly reasoned." This conclusion was "further bolstered" by the Supreme Court’s recent decisions, which have placed a stronger emphasis on the narrowness of the collateral order doctrine.

The case is No. 15-17203.

Attorneys: Richard J. Pocker (Boies Schiller & Flexner LLP) and Keith Beauchamp (Coppersmith Brockelman, PLC) for Solarcity Corp. Christopher Thomas Casamassima (Wilmer Cutler Pickering Hale and Dorr LLP) and Paul Kipp Charlton (Steptoe & Johnson LLP) for Salt River Project Agricultural Improvement and Power District.

Companies: Solarcity Corp.; Salt River Project Agricultural Improvement and Power District

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