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AMERICAN NAT. BK. & TR. v. BD. OF REGENTS

United States District Court, Northern District of Illinois, E.D


November 20, 1984

AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, AS TRUSTEE UNDER TRUST AGREEMENT DATED FEBRUARY 9, 1965, AND KNOWN AS TRUST NO. 21314, MORTON J. CRANE, JOSEPH L. KATZ AND RALPH R. MICHELSON, PLAINTIFFS,
v.
BOARD OF REGENTS FOR REGENCY UNIVERSITIES, A BODY CORPORATE AND POLITIC, DEFENDANT.

The opinion of the court was delivered by: Roszkowski, District Judge.

ORDER

Before the court is defendant's motion to dismiss and/or for summary judgment. The court's subject matter jurisdiction is asserted to rest upon 28 U.S.C. § 1331 (1982). For the reasons set forth herein, defendant's motion to dismiss is denied and defendant's motion for summary judgment is granted, in part, and denied, in part.

BACKGROUND

Plaintiffs are the owners of a private dormitory adjacent to the campus of Northern Illinois University ("University"). Plaintiffs bring this action pursuant to Sections 4 and 16 of the Clayton Act seeking damages and injunctive relief. Plaintiffs allege the implementation of certain University housing policies are in violation of Sections 1 and 2 of the Sherman Act.

Defendant, Board of Regents For Regency Universities, a body corporate and politic, is a public entity responsible for the ownership, operation and management of University-owned residence halls. The defendant is also responsible for the promulgation of policies and regulations regarding places of residence on and off campus where students may live.

At issue in the present case is the implementation of a certain parietal rule promulgated by the defendant. The subject rule requires that single, freshmen students under the age of 21 not residing with their parents must reside in one of the University residence halls so long as space remains available.

Plaintiffs do not challenge the defendant's authority to make such parietal rules. (Plaintiffs' Memo. p. 23) Instead, plaintiffs merely challenge certain "temporary housing practices" followed by the defendant in implementing the subject rule.

The challenged temporary housing practices are alleged to include: (1) "the implementation of `temporary' housing, whereby students are housed in non-dormitory rooms indefinitely," and (2) the delaying of "advice to applicants as to whether or when they can be assured a permanent assignment, until so shortly before the commencement of the school year as to preclude plaintiffs from a realistic entry into the market." (Plaintiff's Memo. p. 2) As a result, plaintiffs contend the "[d]efendant has admittedly commenced and pursued a practice of violating its own `parietal' policies by continuing to impose the requirement [that single, freshmen students under the age of 21 must reside in the University residence halls so long as space remains available] when space is not available." (Plaintiffs' Memo. p. 24)

Defendant stresses that its so-called "temporary housing practices" merely present freshmen students with the option of residing in temporary housing until a permanent University residence hall assignment becomes available. The letter directed to incoming freshmen concerning temporary University housing merely provides, "[i]f you do NOT accept this assignment you are free to move off campus. . . ." Defendant contends it offers this option to incoming freshmen because experience has shown "that each year there will inevitably be a number of students for whom University housing has been reserved that will either decide not to attend the University or leave early in the semester." (Defendant's Reply p. 12) Thus, defendant contends it has adopted the challenged housing policy "[i]n order to account for this attrition factor and to provide University housing to all those who desire it. . . ." (Id.)

Defendant has moved to dismiss and/or for summary judgment on three grounds: (1) that plaintiff's claim is barred by laches; (2) that plaintiffs' action for monetary damages is barred under the doctrine of sovereign immunity; and (3) that defendant's actions are "state actions" exempt from federal antitrust laws.

I. Laches

Defendant initially argues that plaintiffs' action is barred under the doctrine of laches.*fn1 Laches bars an equitable action where a party's unexcused or unreasonable delay has prejudiced his adversary. Boone v. Mechanical Specialties, 609 F.2d 956, 958 (9th Cir. 1979). Defendant contends the plaintiffs knew or should have known of its parietal rule prior to commencing the construction of their private dormitory in 1965. In addition to the length of the delay, defendant contends it has been prejudiced by the loss, through resignation, retirement and death, of many of the individuals involved in formulating its housing policies since that time. Thus, defendant contends laches should bar plaintiffs' action.

Defendant's argument mischaracterizes the nature of the plaintiffs' action. Plaintiffs are not challenging the parietal rule requiring that single, freshmen students under the age of 21 not residing with their parents reside in University residence halls so long as space remains available. Instead, plaintiffs are challenging the implementation of that parietal rule through defendant's temporary housing practices. The latter practices were not commenced until the Fall of 1981.*fn2 Thus, in view of the brief passage of time and the defendant's failure to show any specific prejudice, defendant's motion to dismiss on the basis of laches is denied.

II. Sovereign Immunity

Defendant next asserts that plaintiffs' claim for monetary damages must be dismissed on the grounds of the Eleventh Amendment's sovereign immunity doctrine. Quern v. Jordan, 440 U.S. 332, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979). The parties agree that the application of the sovereign immunity doctrine depends upon whether the defendant is considered to be an "arm of the state" or merely a "political subdivision of the state." If the defendant is a mere "political subdivision" of the state, then its actions are not protected by the doctrine of sovereign immunity. Id. at 341 n. 12, 99 S.Ct. at 1145 n. 12, 59 L.Ed.2d at 367 n. 12. In determining whether the defendant is an arm of the state, the single most important inquiry is whether or not any judgment against the defendant would be paid from public funds in the State treasury. Ranyard v. Board of Regents, 708 F.2d 1235, 1238 (7th Cir. 1983).

In McGuire v. Board of Regents of Northern Illinois University, 71 Ill. App.3d 998, 28 Ill.Dec. 465, 390 N.E.2d 632 (4th Cir. 1979), the Illinois Appellate Court was called upon to decide whether the Illinois Court of Claims has exclusive jurisdiction over breach of contract actions brought against the defendant Board of Regents. The Illinois State Immunity Act provides, in relevant part, that "the State of Illinois shall not be made a defendant or party in any court." ILL. REV. STAT. ch. 127, ¶ 801. A limited waiver of this immunity is provided for certain actions brought against the State in the Illinois Court of Claims. Specifically, the Court of Claims is granted exclusive jurisdiction to hear "[a]ll claims against the state founded upon any contract entered into with the State of Illinois." ILL. REV. STAT. ch. 37, ¶ 439.8(b).

In determining whether or not the Court of Claims had exclusive jurisdiction over the breach of contract action against the defendant, the court applied a test strikingly similar to the test imposed for Eleventh Amendment sovereign immunity. The court recognized that ". . . if the relief sought could operate to control the action of the state or subject it to liability, the suit is deemed to be against the state." (emphasis added) 390 N.E.2d at 634. Applying that test to the defendant, the court concluded, "[w]ithout recitation of detail, examination of the statutory provisions creating the Regency Universities and granting their powers disclose that such provisions meet the criteria of an arm or agency of the state. . . ." Id. Thus, the court held the Illinois Court of Claims has exclusive jurisdiction over any breach of contract action against the defendant. 390 N.E.2d at 635.

This court's own independent review of the relevant Illinois statutes reveals a more than adequate basis exists for concurring with the Illinois Appellate Court's express finding that the defendant is an arm or agency of the State. The nine individual members of the defendant Board of Regents are appointed by the Governor by and with the advice and consent of the State Senate. (ILL. REV. STAT. ch. 144, ¶ 302) The statutory powers of the defendant are subject to the powers and duties of the Illinois Board of Higher Education. (ILL. REV. STAT. ch. 144, ¶ 309) Much of the "revenue" received by the defendant must "be paid into the state treasury without delay and . . . covered into a special fund to be known as the Board of Regents Income Fund." (ILL. REV. STAT. ch. 127, ¶ 142a4) Once in the Regents Income Fund, the funds are payable by General Assembly appropriations and are subject to audit by the Illinois Auditor General. Id. These revenues include "tuition, laboratory, library fees, and any interest that may be earned thereon. . . ." as well as any excess "revenues" derived by Regency Universities from the operation of student or staff residence facilities, student and staff medical and health programs, Union Buildings, bookstores, farms and other auxiliary enterprises or activities. Id. Finally, the defendant's title to all other property, real and personal, is "held for the People of the State of Illinois." (ILL. REV. STAT. ch. 144, ¶ 306, 307) As such, the property's control and disposition is governed by the State Property Control Act. (ILL. REV. STAT. ch. 127, ¶ 133b1-133b13)*fn3

In view of this court's own examination of the applicable Illinois statutes and the Illinois Appellate Court's decision in McGuire, it is clear that the defendant is considered to be "an arm of the State" and not a mere "political subdivision." Any monetary judgment against the defendant, therefore, would subject the State to liability.*fn4 As a result, the Eleventh Amendment bars the plaintiffs' claim for monetary damages against the defendant.*fn5 Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974). Plaintiffs' claim for injunctive relief, however, continues to be viable. Id. at 664-65, 94 S.Ct. at 1356-57.

III. State Action

The single remaining issue before the court is whether the defendant is immunized from liability based upon the "state action" doctrine recognized in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). In Parker, the Supreme Court held that the Federal antitrust laws do not prohibit a state "as sovereign" from imposing certain anticompetitive restraints as an act of government. In subsequent decisions, the Court has struggled with the application of state action immunity to sovereign governmental entities such as state legislatures and supreme courts, non-sovereign governmental units such as state agencies and municipalities, and non-sovereign private organizations. See Hoover v. Ronwin, ___ U.S. ___, 104 S.Ct. 1989, 80 L.Ed.2d 590 (1984) (application to the Arizona Supreme Court); Community Communications Co. v. City of Boulder, 455 U.S. 40, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982) (application to a home rule municipality); California Liquor Dealers v. Midcal Aluminum, 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980) (application to a private association authorized to administer a state price maintenance program); City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364 (1978) (application to municipalities); and Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975) (application to a "state agency.").

In determining whether or not "state action" immunity is available to the defendant in the present case, the parties have focused their arguments upon the two-pronged test set forth by the Supreme Court in California Retail Liquor Dealers v. Midcal Aluminum, 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980). For "state action" immunity to apply, the court in Midcal held: (1) the challenged conduct must be one clearly articulated and affirmatively expressed as a state policy, and (2) it must be actively supervised by the state. In Midcal, the party accused of anticompetitive conduct was a private association.

Subsequent lower court decisions, including a recent decision in this Circuit, have ignored the requirement of active supervision, however, when the party accused of anticompetitive conduct is a governmental agency or municipality. Town of Hallie v. City of Eau Claire, 700 F.2d 376, 383-85 (7th Cir. 1983) cert. granted, ___ U.S. ___, 104 S.Ct. 3508, 82 L.Ed.2d 818 (1984); see also Hybud Equipment Corp. v. City of Akron, Ohio, 742 F.2d 949, 957 (6th Cir. 1984); Central Iowa Refuse Systems, Inc. v. Des Moines Metropolitan Solid Waste Agency, 715 F.2d 419, 425 (8th Cir. 1983). In the view of this court, therefore, only the first prong of the Midcal test is applicable here.

In determining whether or not the challenged conduct was clearly articulated and affirmatively expressed as a state policy, courts have applied various tests. In Hybud Equipment Corp. v. City of Akron, Ohio, 742 F.2d 949 (6th Cir. 1984), the Court concluded:

  If the challenged restraints are reasonably
  related to an agency's express powers and
  reasonably designed to promote the state aims
  within a designated field of regulation, they can
  be found to result from a `clearly and
  affirmatively expressed state policy' to displace
  competition. Id. at 960-61.

Similarly, the Seventh Circuit recently held:

  If the state authorizes certain conduct, we can
  infer that it condones the anticompetitive effect
  that is a reasonable or reasonably foreseeable
  consequence of engaging in the authorized
  activity. * * * . . . [s]tate compulsion [to
  engage in anticompetitive activity] is not
  required.

Town of Hallie v. City of Eau Claire, 700 F.2d 376, 381 (7th Cir. 1983) cert. granted, ___ U.S. ___, 104 S.Ct. 3508, 82 L.Ed.2d 818 (1984).

In the present case, §§ 5.5 and 5.8 of the Board of Regents Revenue Bond Act, ILL. REV. STAT. ch. 144, ¶ 355.5 and 355.8 (1982), grant the defendant the power:

  To make and enforce and agree to make and enforce
  parietal rules that shall insure the use of any
  project to the maximum extent to which such project
  is capable of serving students, staff members and
  others using or being served by, or having the
  right to use or the right to be served by, or to
  operate, any project.

  To covenant to perform any and all acts and to do
  any and all such things as may be necessary or
  convenient or desirable in order to secure its
  bonds, or as may in the judgment of the Board tend
  to make the bonds more marketable, notwithstanding
  that such acts or things may not be enumerated
  herein, it being the intention thereof to give the
  Board issuing bonds pursuant to this Act power to
  make all covenants, to perform all acts and to do
  all things not inconsistent with the constitution
  of the State of Illinois. (emphasis added)

If the defendant's parietal rule requiring single, freshmen students under the age of 21 not residing with their parents to reside in University residence halls so long as space remains available was the source of the plaintiffs' complaint, the court would have little difficulty in resolving the present motion. The subject rule is reasonably designed to further Illinois' express state policy of ". . . insur[ing] the use of [University residence halls] to the maximum extent to which such [residence halls] [are] capable of serving students, staff members and others. ILL. REV. STAT. ch. 144, ¶ 355.5 (1982). Moreover, the subject rule is a reasonably foreseeable consequence of the Board's statutorily required efforts ". . . to secure its bonds . . . [and] make the bonds more marketable. . . ." ILL. REV. STAT. ch. 144, ¶ 355.8 (1982).

At issue in the present case, however, is the defendant's implementation of the subject parietal rule. From the limited record before the court, it appears the defendant continues to assign incoming freshmen "temporary housing" after space is no longer available. Although incoming freshmen are informed that they are not required to accept their temporary assignments, some question remains concerning the nature and timing of the information provided to them. Plaintiffs allege the defendant delays advising applicants as to whether or when they can be assured of receiving a permanent assignment. As a result, incoming freshmen are allegedly housed in non-dormitory rooms on an indefinite basis and plaintiffs are precluded from a realistic entry into the market.

While a policy allowing incoming freshmen to voluntarily accept temporary housing assignments with the expectation that normal attrition will result in their receiving permanent assignments within a reasonable time would appear to be reasonably designed to further the same interests previously discussed, it is not clear that any intentional delay or misrepresentation aimed at inducing incoming freshmen to pay University residence hall room and board without any realistic expectation of receiving a permanent assignment would be reasonably related to the defendant's express powers or reasonably designed to promote the State's economic or educational aims. Absent evidence relating to the length of the alleged delays, the information given to students concerning the likely duration of their temporary housing assignments and the information given to students concerning the likelihood of their obtaining a permanent housing assignment, it is, therefore, difficult to determine whether the defendant's implementation of its parietal rules is in furtherance of a clearly articulated and affirmatively expressed state policy.*fn6 The parties have failed to specifically address any of these factual issues and the court is not prepared to rule based upon the present state of the record.*fn7 Thus, defendant's motion for summary judgment based upon the state action immunity doctrine is denied.

CONCLUSION.

For all of the reasons set forth herein, defendant's motion to dismiss based upon the doctrine of laches is denied an defendant's motion for summary judgment based upon sovereign immunity and "state action" immunity and "state action" immunity is granted, in part, and denied, in part. Plaintiffs will be allowed to seek only injunctive relief.

Due to limited factual issues remaining and the unavailability of monetary damages, this court believes a pretrial conference may be helpful in voluntarily resolving the remaining issues in this case. Thus, the parties are ordered to appear for a pre-trial settlement conference on Thursday, December 20, 1984 at 11:00 a.m. in Chicago, Illinois. The parties are instructed to have some individual in attendance with authority to settle this matter.


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