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DM_US 52536670-1.T10085.

0010
#2207118v.1
State Action Doctrine Shields San Diego Convention Center Corporation from Antitrust
Claims
United National Maintenance Inc. v. San Diego Convention Center, Inc., No. 12-56809, slip
copy (9th Cir. May 14, 2014).
On May 14, the Ninth Circuit Court of Appeals held that a corporation had state action immunity
from antitrust claims in United Natl Maint., Inc. v. San Diego Convention Ctr., Inc. The court
held that the legislation establishing the corporation met the clear articulation test and that the
corporation was a municipality and therefore did not need active supervision.
The plaintiff, United National Maintenance, Inc. (UNM), is a trade show cleaning company. It
had contracted with trade show decorators to provide cleaning services at the San Diego
Convention Center. The San Diego City Counsel established the defendant, San Diego
Convention Center, Inc. (SDC) to manage the San Diego Convention Center. SDC is a
nonprofit public benefit corporation that is wholly owned by the city of San Diego. The San
Diego City Council gave SDC the exclusive authority to operate, market, and promote the
Center.
Among other allegations, UNM alleged that SDC violated the antitrust laws because SDC
instituted a policy that required that any decorator, such as SNM, must use SDC employees to
provide cleaning services for the convention center. The policy also required that the trade show
decorators pay SDC one half of all booth cleaning revenue and $17 per hour for SDC cleaning
employees, thus significantly increasing UNMs costs of performing under its contracts with the
trade show decorating companies. SDC asserted that it was protected from UNMs antitrust
claims by the state action doctrine.
On appeal to the Ninth Circuit, the court agreed with the district court that SDC enjoyed state
action immunity from UNMs antitrust claims. The court described the clear articulation test,
which is the first test a non-state actor must pass in order to receive state action immunity. The
court cited FTC v. Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003 (2013) several times to
describe the limits of the clear articulation test. The court concluded that the clear articulation
test thus requires both a specific delegation of authority by the state and some indication that the
state has affirmatively contemplated the displacement of competition. (citing Phoebe Putney,
133 S. Ct. at 1006) (internal quotation marks omitted). But the court also acknowledged that an
express statement of an intention to displace competition was not necessary, stating that the
indication must be more than mere neutrality but need not rise to the level of explicit
authorization.
Using this test, the court found that Californias delegation of authority to the SDC met the clear
articulation test, even though there was no explicit authorization to displace competition.
Specifically, the court found that because the California code establishing the SDC gave it the
power to manage the use of the convention center it was distinguishable from a general grant
of corporate authority. The court found that there was also substantial evidence that the
California legislature contemplated that SDC need not hire outside contractors to clean the
convention center. Because the statutory grant to SDC stated that the funds raised by the
convention center would first be used to pay for the center, then for the benefit of the

DM_US 52536670-1.T10085.0010
#2207118v.1
municipality, the legislature contemplated that the convention center would be operated to
generate profits for the city. The court concluded: it is foreseeable that an operator of the
convention center may exclusively provide cleaning staff to ensure the success of that financial
commitment to the city. Thus, the court held that the states legislation establishing the SDC
went beyond the mere neutrality and general corporate powers that the Supreme Court found
insufficient in Phoebe Putney.
Furthermore, the court held that there was no need to apply the active supervision test because
the SDC is a municipality by statute because the citys municipal code defines the city itself as
including SDC. Moreover, the court held, that SDC acts as an instrument of San Diego because
(1) San Diego appoints all of SDCs board members; (2) upon dissolution, SDCs assets revert
back to San Diego; [and] (3) SDC must publicly account for its operations. The court also held
that active supervision was not necessary because [a]lthough SDCs actions may reflect the
pursuit of parochial interests, there is no evidence that it entered into any kind of private price-
fixing arrangement with other convention center operators. The court distinguished this from
the situation N.C. State Bd. Of Dental Examrs v. FTC, 717 F.3d 359 (4
th
Cir. 2013), cert.
granted, 134 S. Ct. 1491 (2014), where the Fourth Circuit held that active supervision was
necessary when a state dental association that was primarily composed of competing dentists
took action against non-dentists for teeth whitening services. Accordingly, because SDC enjoyed
state action immunity, the court affirmed the dismissal of all antitrust claims without addressing
the merits of those claims.

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