Plaintiff Richard Hoffman Corporation ("Hoffman") sued Integrated
Building Systems, Inc. ("Integrated") and the Village of Glendale Heights
("Village") for violations of the Sherman Antitrust Act, 15 U.S.C. § 1
et seq., the Illinois Antitrust Act, Ill.Rev.Stat. ch. 38 § 60-3, and
for breach of the duty of good faith. Presently before the Court are
Integrated's motion to dismiss and the Village's motion to dismiss. For
reasons set forth below, Integrated's motion is denied; the Village's
motion is granted.
In any event, jurisdiction must be determined on a case-by-case basis,
examining the relevant economic facts presented by a particular case.
Heille v. City of St. Paul, Minnesota, 671 F.2d 1134, 1136 (8th Cir.
1982). In affirming the district court's holding that a plaintiff failed
to demonstrate an interstate commerce nexus, the court in Heille noted
that neither party purchased nor sold a service or product in interstate
commerce. Id. at 1137. The present case is clearly distinguishable, since
Hoffman asserts that specifications for the recreation building call for
products manufactured outside of Illinois. There can be no doubt that the
allegations involving interstate commerce in Hoffman's complaint are
perfunctory. But in refusing to adopt a particular view of McLain, the
Seventh Circuit clearly cautioned against the dismissal of antitrust
Bunker Ramo, 713 F.2d at 1282 (citations omitted). Therefore, we cannot
conclude at the present stage of this litigation that Hoffman will be
unable to prove any set of facts in support of its claim entitling it to
relief with respect to the interstate commerce nexus.
The Village also asserts that, pursuant to the state action immunity
doctrine, it may engage in the construction of a municipal recreation
building even though its conduct may have anticompetitive effects.
Hoffman contends that the Village has not acted pursuant to a clearly
articulated and affirmatively expressed state policy and therefore is not
entitled to antitrust immunity.
The Supreme Court discussed the state action immunity doctrine in
Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). A
marketing program adopted by the State of California prevented raisin
producers from freely marketing their crop in interstate commerce. The
Court nevertheless held that the program was exempt from the antitrust
Id. at 350-51, 63 S.Ct. at 313. Later, in City of Lafayette v. Louisiana
Power and Light, 435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978), a
majority of the Court rejected the argument that Congress did not intend
the Sherman Act to apply to local governments. But the Court recognized
that a state might sanction anti-competitive conduct by municipalities
and immunize such activity from antitrust liability. Id. at 413, 98
S.Ct. at 1137.
The issue of state action immunity for municipalities reappeared
recently in Community Communications Co. v. City of Boulder, 455 U.S. 40,
102 S.Ct. 835, 70 L.Ed.2d 810 (1982). The Court held that a
municipality's moratorium on the expansion of cable television could not
be exempt from antitrust scrutiny unless it constituted the action of the
state itself in its sovereign capacity, or unless it constituted
municipal action in furtherance or implementation of clearly articulated
and affirmatively expressed state policy. Id. at 52, 102 S.Ct. at 841.
The Village's conduct is clearly not action of the State of Illinois in
its sovereign capacity; we must therefore consider whether the Village
may be said to have acted "in furtherance or implementation of clearly
articulated and affirmatively expressed state policy."
The crux of Hoffman's allegations is that the Village engaged in a
public works project without competitive bidding. Ill.Rev.Stat. ch. 24
§ 11-95-1 authorizes municipalities to construct playgrounds and
recreation centers.*fn1 Moreover, Ill.Rev.Stat. ch. 24 § 8-9-1
authorizes municipalities to waive competitive bidding on projects such
as recreation centers:
Hoffman claims that these sections do not constitute a "clearly
articulated and affirmatively expressed policy" entitling the Village to
the State action exemption. We disagree. In Town of Hallie v. City of Eau
(7th Cir. 1983), four towns sued a city for refusing
to provide them with sewerage treatment services unless they agreed to
become annexed to the city. In holding that the city
was entitled to state action antitrust immunity, the Seventh Circuit
concluded that Wisconsin policy authorized cities to refuse sewerage
treatment services absent annexation. Id. at 383. In support of this
conclusion, the court cited statutes which provided that cities may fix
the limits of their utility services, and that they need not extend
sewerage systems to towns if the towns refused to become annexed to the
city. We believe that Ill.Rev.Stat. ch. 24 § 8-9-1 is evidence of a
state policy not to require competitive bidding in municipal construction
projects, and that the Village is entitled to state action immunity.
Another Illinois statute, Ill.Rev.Stat. ch. 24 § 1-1-10, was recently
amended to provide that
[i]t is the policy of this State that all powers
granted, either expressly or by necessary
implication, by this Code, other Illinois statute, or
the Illinois Constitution to non-home rule
municipalities may be exercised by those
municipalities notwithstanding effects on
It is further the policy of this State that home-rule
municipalities may (1) exercise any power and perform
any function pertaining to their government and
affairs or (2) exercise those powers within
traditional areas of municipal activity, except as
limited by the Illinois Constitution or a proper
limiting statute, notwithstanding effects on
It is the intention of the General Assembly that the
"State action exemption" to the application of federal
antitrust statutes be fully available to
municipalities to the extent their activities are
authorized by law as stated herein.
This statute further supports our conclusion that the Village is entitled
to state action immunity. Accordingly, the Village's motion to dismiss is
Restraint of Trade
Both the Village and Integrated claim that the complaint does not
adequately allege an unlawful restraint of trade under the antitrust
laws. In essence, Hoffman asserts that the Village's conduct in asking
Integrated to prepare bid specifications amounts to a restraint of trade
because it gave Integrated more time to prepare its bids than other
bidders, because the specifications required use of a product whose local
distributor is Integrated, and because defendants concealed Integrated's
status as a bidder until a few days before the bids were due.
Additionally, Hoffman claims that defendants violated an Anti-Collusion
affidavit when Integrated received the contract to prepare specifications
despite the fact that it had no employer capable of preparing the
specifications. Hoffman claims that allowing a firm to both prepare
specifications and bid on a project violated local custom and usage, as
did the failure to publish Integrated's status as a bidder in an industry
A complaint fails to state a cause of action under the antitrust laws
if the alleged conduct is not the type of activity that the antitrust
laws were intended to prevent. Brunswick Corp. v. Pueblo Bowl-O-Mat,
429 U.S. 477, 489, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977). Section 1 of
the Sherman Act is broadly worded to prohibit "[e]very combination . . .
or conspiracy, in restraint of trade or commerce." 15 U.S.C. § 1. But
the courts have construed section 1 to prohibit only those combinations
which unreasonably restrain competition. Northern Pacific Railway v.
United States, 356 U.S. 1, 4-5, 78 S.Ct. 514, 517-18, 2 L.Ed.2d 545
(1958); Bunker Ramo Corp. v. United Business Forms, Inc., 713 F.2d 1272,
1283 (7th Cir. 1983).
Some conduct is so destructive of competition that it is considered per
se violations of the Sherman Act, United States v. Topco Associates,
Inc., 405 U.S. 596, 607-08, 92 S.Ct. 1126, 1133-34, 31 L.Ed.2d 515
(1972).*fn2 When a per se offense
is alleged, a showing of anticompetitive effect is not required to
establish a Sherman Act violation. Continental T.V., Inc. v. GTE
Sylvania, Inc., 433 U.S. 36, 49-50, 97 S.Ct. 2549, 2557 53 L.Ed.2d 568
(1977). But the "rule of reason" is the general test for determining
whether an antitrust violation has been stated. Standard Oil v. United
States, 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911). A finder of fact
must weigh all circumstances presented by a particular case to decide
whether a restrictive practice is an unreasonable restraint on
competition which must be prohibited. Continental T.V., Inc. v. GTE
Sylvania, Inc., 433 U.S. 36, 49, 97 S.Ct. 2549, 2557, 53 L.Ed.2d 568
(1977). In contrast to a per se violation, under the rule of reason
anticompetitive effects or actual harm to competition must be shown to
establish an antitrust cause of action. Independence Tube Corp. v.
Copperweld Corp., 691 F.2d 310, 322 (7th Cir. 1982). In the present
case, the parties agree that the rule of reason provides the analytical
framework for resolution of the pending motions.
The key to our present inquiry under the rule of reason is whether
Hoffman has alleged any anticompetitive effect arising from defendants'
conduct or whether we are able to infer such an effect. Bunker Ramo
Corp. v. United Business Forms, Inc., 713 F.2d 1272, 1285 (7th Cir.
1983). While industry customs and usages may indeed become part of a
contract and bind the parties, e.g., Ill.Rev.Stat. ch. 26 § 2-202
(a), we have found no support in case law for the proposition that
violations of industry customs and usages constitute violations of
federal antitrust law. Additionally, allegations that through a dominant
position a defendant has caused users of its product to select its product
to the detriment of other manufacturers fail to state a claim under the
Sherman Act absent assertions of coercion or improper selling methods.
Eutectic Corp. v. Metco, Inc., 505 F. Supp. 73, 76 (E.D.N.Y. 1980).
Defendants emphasize two cases in support of their arguments that
Hoffman's complaint fails to state a claim, Security Fire Door Co. v.
County of Los Angeles, 484 F.2d 1028 (9th Cir. 1973), and George R.
Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., 508 F.2d 547 (1st
Cir. 1974), cert. denied, 421 U.S. 1004, 95 S.Ct. 2407, 44 L.Ed.2d 673
(1975). In George R. Whitten, the Court held that a defendant's efforts
to induce buyers to draw up specifications that only the defendant could
meet was merely a "matter of salesmanship," and not actionable under the
antitrust laws. Id. at 558. In George R. Whitten, however, a trial had
been held, and the lower court concluded that the attempt to persuade
architects to adopt a supplier's proprietary specifications was a common
local practice. There was neither evidence of a conspiracy with the
parties adopting the specifications, nor of coercion by the defendant, nor
of an absence of available prespecification competition. Id. In the
instant case, of course, there has been no trial. We do not know whether
evidence exists of a conspiracy, coercion or an absence of
prespecification competition. Integrated, moreover, allegedly arranged for
another firm to prepare the specifications, which called for a product
that Integrated distributes locally.
In Security Fire Door, the court held that allegations that architects
and county representatives drew up specifications to exclude all
dumbwaiters manufactured by firms other than one of the defendants did
not state a claim under the Sherman Act. As the Court observed,
the choice of product by the purchaser, Los Angeles
County, was expressed in the specifications. There is
nothing alleged in the complaint to suggest that this
choice was made other than in an atmosphere of free
competition among suppliers. So far as the complaint
alleges, each supplier was perfectly free to tout the
virtues of his particular dumbwaiter system in an
effort to secure favorable specifications. It would
appear that the architects simply favored the Guilbert
system. In doing so they and
their principals can hardly be charged with an
484 F.2d at 1031. In the present case, the choice of product is alleged
to have been made by Integrated, the successful bidder, rather than the
customer. Whether other bidders were free to "tout the virtues" of other
products, or have input into the choice of product, is unclear.
We therefore believe that allegations of an anticompetitive effect may
be inferred from Hoffman's complaint: a firm which prepares
specifications and specifies the use of a particular product which it
distributes may indeed be able to tailor the specifications to its
advantage for purposes of subsequent bidding, which might in turn
discourage competitive bidding by other parties. At present, we are
unprepared to hold that Hoffman will be unable to present evidence that
there was collusion with respect to the bidding process between
Integrated and the Village. Integrated's motion to dismiss for failure to
state a claim is therefore denied.
The Noerr-Pennington Doctrine
Integrated also contends that it is entitled to immunity under a
doctrine announced in Eastern Railroad Presidents Conference v. Noerr
Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961),
and refined in United Mine Workers of America v. Pennington, 381 U.S. 657,
85 S.Ct. 1585, 14 L.Ed.2d 626 (1965). In Noerr, the Court held that the
Sherman Act does not prohibit persons from associating together to
influence a governmental body to take an action that would lead to a
restraint or monopoly. 365 U.S. at 136, 81 S.Ct. at 529. In Pennington,
the Court declared that a concerted attempt to influence public officials
is not actionable under the Sherman Act regardless of the intent of the
parties. 881 U.S. at 670, 85 S.Ct. at 1593.
The Noerr-Pennington doctrine does not, however, apply to cases where
governmental officials are alleged to have participated with private
parties in a scheme to restrain trade. Duke & Co. v. Foerster, 521 F.2d 1277
(3d Cir. 1975); Czajkowski v. State of Illinois, 460 F. Supp. 1265, 1281
(N.D.Ill. 1977), aff'd, 588 F.2d 839 (7th Cir. 1978).*fn3 In the present
case, Hoffman has alleged collusion on the part of village officials with
respect to the award of the recreational center bid. Therefore, the
Noerr-Pennington doctrine is inapplicable.
Accordingly, Integrated's motion to dismiss is denied; the Village's
motion to dismiss is granted.*fn4 It is so ordered.