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Auraria Student Housing At Regency, LLC v. Campus Village Apartments, LLC

United States Court of Appeals, Tenth Circuit

December 15, 2016

AURARIA STUDENT HOUSING AT THE REGENCY, LLC, a Colorado limited liability company, Plaintiff - Appellee,
v.
CAMPUS VILLAGE APARTMENTS, LLC, a Delaware limited liability company, Defendant-Appellant. NATIONAL ASSOCIATION OF COLLEGE AND UNIVERSITY BUSINESS OFFICERS; BOARD OF GOVERNORS FOR THE COLORADO STATE UNIVERSITY SYSTEM; BOARD OF TRUSTEES FOR COLORADO MESA UNIVERSITY; BOARD OF TRUSTEES FOR THE COLORADO SCHOOL OF MINES; BOARD OF TRUSTEES FOR WESTERN STATE COLORADO UNIVERSITY, Amici-Curiae.

         Appeal from the United States District Court for the District of Colorado (D.C. No. 1:10-CV-02516-WJM-KLM)

          Daniel D. Domenico, Kittredge LLC, Denver, Colorado (Michael J. Hofmann, Bryan Cave, LLP, Denver, Colorado, on the briefs), for Defendant-Appellant.

          Thomas P. McMahon (G. Stephen Long with him on the briefs), Jones & Keller, P.C., Denver, Colorado, for Plaintiff-Appellee.

          Cynthia H. Coffman, Attorney General, Frederick R. Yarger, Solicitor General, Glenn E. Roper, Deputy Solicitor General, Jonathan P. Fero, Assistant Solicitor General, Office of the Attorney General for the State of Colorado, Denver, Colorado, and Marc L. Fleischaker and Brian D. Schneider, Arent Fox LLP, Washington, D.C., filed an amicus brief on behalf of National Association of College and University Business Officers.

          Before KELLY, McKAY, and McHUGH, Circuit Judges.

          McHUGH, Circuit Judge.

         I. INTRODUCTION

         This appeal is from a jury verdict finding Campus Village Apartments, LLC (Campus Village) in violation of § 2 of the Sherman Antitrust Act based on its participation in a conspiracy with the University of Colorado-Denver (UCD) to monopolize commerce. Auraria Student Housing at the Regency, LLC (Regency) sued Campus Village after UCD instituted a residency requirement which forced a significant portion of its freshmen and international students to live at Campus Village. Like Regency, Campus Village is an apartment complex located outside the boundaries of the UCD Campus. But the University of Colorado Real Estate Foundation (CUREF) is the sole member of Campus Village, and CUREF operates Campus Village for the benefit of the University of Colorado system. Although Regency alleges that UCD participated in the conspiracy, it named only Campus Village as a defendant in this litigation.

         On appeal, Campus Village argues principally that the district court erred by not requiring Regency to define the "relevant market" Campus Village allegedly conspired to monopolize. Specifically, it claims recent Supreme Court and Tenth Circuit authority mandate that plaintiffs identify both the relevant geographic and product markets to recover under § 2, including for conspiracy-to-monopolize claims. We agree.

         Decades ago, this court determined-based on its reading of the Supreme Court's decision in United States v. Yellow Cab Co., 332 U.S. 218 (1947)-that § 2 conspiracy claims did not require proof of a relevant market. Salco Corp. v. Gen. Motors Corp., 517 F.2d 567, 576 (10th Cir. 1975) (Salco). Intervening Supreme Court precedent, however, including Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993) (Spectrum Sports), provides new guidance for reading Yellow Cab and its progeny. With the benefit of this direction, we depart from our decision in Salco, and instead hold that plaintiffs must define the relevant market in every § 2 claim. This is true even though a showing of the defendants' power in that market may not be required in some instances.

         Regency failed to identify the relevant market here, and Campus Village moved for summary judgment on that basis, among others. Constrained by our decision in Salco, the district court held that § 2 conspiracy claims do not require proof of a relevant market, and it denied Campus Village's motion. Ultimately, the case went to the jury and it rendered a verdict in Regency's favor. Because Regency failed to define the relevant market, we vacate the jury verdict. However, in light of our departure from Salco, and with the additional guidance provided herein, we remand to the district court to provide Regency with an opportunity to prove the relevant market. We also affirm the district court's rulings on Campus Village's statute of limitations and state action immunity arguments.

         II. BACKGROUND

         A. Factual History

         The facts in this case are largely undisputed. On September 27, 2004, CUREF developed a list of "areas of responsibility" in connection with the planned development of student housing for UCD students. One of the "Expectations of the University" was that it would "[e]nact[] a residency requirement for international students and freshmen from outside the Denver metro area." Two months later, CUREF and UCD entered into a Letter Agreement in which UCD agreed, in more concrete terms, to "institute a residency requirement for all full-time enrolled freshmen at the [UCD] downtown Denver, Colorado campus who reside outside of a radius of 50 miles from the [UCD] downtown Denver, Colorado campus." This residency requirement provided security for the bond offering used to fund the construction of Campus Village, thereby making the offering more appealing to investors. And the parties agree the requirement increased out-of-state student enrollment. It is disputed, however, whether the residency requirement was instituted for the purpose of increasing out-of-state freshmen enrollment, retention rates, and student quality of life, or whether it was done purely to assist in the issuance of the bonds.

         The residency requirement was officially approved on November 22, 2005, to be instituted in Fall 2006.[1] Although the Letter Agreement made mention of a 50-mile exemption for freshmen students, the requirement as promulgated was slightly different. It instead stated: "[UCD] requires all first time [UCD] freshmen under the age of 21 not living with their parent(s) or legal guardian(s), to live in the Campus Village Apartments." But it provided a few exemptions, including for "undergraduate student[s] enrolled for less than 10 credit hours per semester." UCD continued to enforce this requirement and in a 2008 Operating Agreement, "[UCD] agree[d] to continue the implementation and enforcement of its policy requiring first time freshman and international students to reside in the Apartments, subject to the agreed upon exceptions." And UCD specifically advertised that "students may NOT live at the Inn at Auraria or the Regency, " two apartment complexes within close proximity to Campus Village.

         In 2010, UCD made some changes to the residency requirement. In particular, there was no longer an exemption for students enrolled in fewer than 10 course hours, thereby increasing the number of freshmen students required to live at Campus Village.

         B. Procedural History

         Regency filed its complaint on October 14, 2010, alleging Campus Village conspired with UCD to monopolize commerce, in violation of § 2 of the Sherman Antitrust Act. Regency also raised other claims for relief under Colorado state law, including civil conspiracy and interference with business relations. In turn, Campus Village filed a motion to dismiss under Fed.R.Civ.P. 12(b)(6), arguing among other things that Regency's § 2 claim was barred by state action immunity due to UCD's involvement in the project. The district court denied Campus Village's motion to dismiss. Campus Village filed an immediate appeal, which this court dismissed for lack of jurisdiction because it was not from a final order. Auraria Student Hous. at the Regency, LLC v. Campus Vill. Apartments, LLC, 703 F.3d 1147 (10th Cir. 2013).

         Campus Village then filed a motion for summary judgment, characterizing the residency requirement as "simply a tying arrangement, " whereby certain consumers of college education at UCD also were required to purchase housing from Campus Village. Campus Village also argued that Regency failed to show harm to competition, as required under § 2, because it had "no evidence that UCD . . . has market power [in the higher education market] or operates in a non-competitive market." Regency denied the challenged conduct was a tying arrangement, arguing that "[a] key difference is that tying requires a relevant market; conspiracy to monopolize does not." The district court denied the motion, treating Campus Village's tying arrangement argument as an unsupported "affirmative defense." Campus Village filed a motion to reconsider, stressing again that the focus of § 2 is on harm to competition, regardless of the nature of the conduct, and that it had "met its burden on summary judgment by pointing out that the plaintiff has no evidence of market power." The district court denied this motion as well, and the case proceeded to trial.

         After the close of Regency's case, Campus Village submitted an oral motion under Rule 50(a) for judgment as a matter of law. The district court granted the motion as to Regency's state-law claims, but it denied the motion as to Regency's § 2 claim. In particular, the court found Regency had submitted sufficient evidence of Campus Village's intent to monopolize. It also ruled Regency's § 2 claim was not barred by the four-year statute of limitations, as the "continuing conspiracy" exception applied to reset the limitations period at the beginning of each school year. The court then submitted the case to the jury and it returned a verdict against Campus Village, awarding Regency $3, 261, 000.00 in damages, which were trebled under 15 U.S.C. § 15(a). Campus Village then filed a motion under Rule 50(b), raising sufficiency of the evidence arguments and renewing its argument that the suit was barred by state action immunity and the statute of limitations. After the district court denied this motion, Campus Village appealed. Exercising jurisdiction under 28 U.S.C. § 1291, we vacate the jury verdict and remand.

         III. RELEVANT MARKET REQUIREMENT

         The district court denied Campus Village's motion for summary judgment despite Regency's failure to define the relevant market in which Campus Village's conduct allegedly harmed competition, and it did so based on this court's prior precedent in Salco. We now conclude that the rationale supporting the decision in Salco has been undermined by intervening authority from the Supreme Court. We next determine that Regency was required to identify the relevant market to pursue its § 2 conspiracy claim.

         In providing our reasoning for this decision, we proceed in two parts. In part one, we determine that identification of the relevant market is required in a conspiracy-to-monopolize claim under § 2. We begin with an overview of the Sherman Act and the evolution of the legal decisions implementing § 2 of that statute. Our discussion explores Supreme Court precedent interpreting what it means under § 2 to monopolize "any part" of commerce, as well as this circuit's attempt to implement those decisions. In particular, we examine the impact of the Supreme Court's opinion in Spectrum Sports on our reading of prior authority from the Court, including its decision in Yellow Cab. Examining these cases through the lens provided by Spectrum Sports, we conclude first that Yellow Cab did not dispense with the market requirement in § 2 conspiracy cases. We then pause to examine the treatment of relevant market evidence by other federal circuits in the § 2 context, including their implementation of the Spectrum Sports analysis. That review indicates that our interpretation of Spectrum Sports is consistent with decisions from the majority of federal circuits to have considered the issue. We then conclude that the requirement of market identification in conspiracy-to-monopolize cases is consistent with the language of § 2 generally, as well as the goals of the Sherman Act. Ultimately, we hold that, after Spectrum Sports, the proper reading of § 2 is that plaintiffs must always identify the relevant market, including for conspiracy-to-monopolize claims. Having reached that conclusion, we next consider whether this panel can depart from the circuit's contrary holding in Salco. Because the Supreme Court has now adopted reasoning that requires a different result than we reached there, we determine that this panel is not bound by Salco.

         Proceeding next to part two of this opinion, we conclude that Regency has not properly defined a relevant market. To begin our analysis of this issue, we discuss the method for defining the relevant market under the antitrust laws. We then review the "any part" of commerce identified by Regency and conclude that it does not properly identify the relevant market. However, given our new departure from Salco, we remand the case to provide Regency with an opportunity to properly define the relevant market. We also provide further guidance to the district court on remand, including direction on the significance of the nature of the conduct at issue to the § 2 analysis. Accordingly, we vacate the jury verdict and remand for further proceedings consistent with this decision.

         PART ONE: Identification of the Relevant Market is Required in all § 2 Claims

         A. The Sherman Act

         Section 1 of the Sherman Act declares illegal "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce." 15 U.S.C. § 1. Section 2 makes it unlawful for any person to "monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce." Id. § 2. Importantly, both sections of the Act prohibit only conduct that is harmful to competition. Section 1 does so by examining the particular conduct involved to determine whether it is "manifestly anticompetitive, " and therefore, per se illegal, or whether, through a rule of reason analysis, it imposes an "unreasonable restraint on competition." Cont'l T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49, 50 (1977); Gregory v. Fort Bridger Rendezvous Ass'n, 448 F.3d 1195, 1203 (10th Cir. 2006). By contrast, § 2 focuses on a narrower class of anticompetitive conduct-that which is monopolistic. And it does so for monopolization and attempt-to-monopolize claims by requiring a showing that a defendant's conduct "actually monopolizes or dangerously threatens to do so." Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 459 (1993). With respect to attempt-to-monopolize and conspiracy claims, the statute requires a plaintiff to show that the defendant(s) engaged in conduct with the specific intent "to monopolize any part of the trade or commerce." 15 U.S.C. § 2 (emphasis added). And as to conspiracy claims specifically, while the defendants generally must hold some power in the relevant market, the plaintiff need not prove that the conspiracy resulted in a dangerous threat of achieving monopoly power. See U.S. Steel Corp. v. Fortner Enters., Inc., 429 U.S. 610, 612 n.1 (1977) ("No inference of intent to monopolize [on a § 2 conspiracy claim] can be drawn from the fact that a firm with a small market share has engaged in nonpredatory competitive conduct in the hope of increasing sales.").

         In sum, plaintiffs raising conspiracy-to-monopolize claims under § 2 must show the existence of a conspiracy, an overt act in furtherance of the conspiracy, and the specific intent to monopolize. And as we demonstrate below, plaintiffs must identify the relevant market they allege the defendants conspired to monopolize- both as a function of the "any part" language of the statute and to show that the aim of the defendants' conduct was "to monopolize." Id. If the defendants jointly possess monopoly power within that market, it may be that the "necessary and direct result" of the conduct was monopolization, even if the conduct considered in isolation is not predatory or otherwise competitively unreasonable. United States v. Griffith, 334 U.S. 100, 106 (1948), disapproved of on other grounds by Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752 (1984); William C. Holmes, Conspiracies to Monopolize: A Decisional Model, 42 Ohio St. L. J. 733, 740-41 (1981). But if the defendants possessed little to no power within the relevant market, the specific nature of their conduct takes on heightened importance and must be considered jointly with the defendants' proposed competitive justifications. But before turning to this issue, we first explain in some detail the Supreme Court's past and present interpretation of the "any part" language from § 2, as it will help contextualize our necessary departure from Salco.

         B. From Yellow Cab to Spectrum Sports: The Development of Supreme Court and Tenth Circuit Precedent on the Relevant Market Requirement

         1. Yellow Cab

         To begin, we must reach back to the Supreme Court's early interpretation of the "any part of . . . commerce" language of § 2 in United States v. Yellow Cab Co., a case in which the government filed suit against several taxicab companies, claiming they had conspired to monopolize the markets for (1) the sale, and (2) the operation of taxicabs. 332 U.S. 218, 225-26 (1947), overruled on other grounds by Copperweld, 467 U.S. 752. The Court made two relevant observations of the "any part" language from § 2. First, it noted that § 2 does not "specify[] how large a part [of the trade or commerce] must be affected, " and it then concluded that a plaintiff need only allege that "some appreciable part of interstate commerce is the subject of a monopoly, a restraint or a conspiracy." Id. at 225. Second, the Court found to be "irrelevant" the "importance of the interstate commerce affected in relation to the entire amount of that type of commerce in the United States." Id. at 226. In light of these observations, especially the Supreme Court's conclusion that a party need only allege an impact on "some appreciable part of interstate commerce, " id. at 225 (emphasis added), a number of courts questioned whether plaintiffs raising § 2 conspiracy claims must define a relevant market, as opposed to simply alleging an impact on a quantifiable amount of interstate commerce.

         2. Salco and its Progeny

         In 1975, this court answered that question in the negative. Salco Corp. v. Gen. Motors Corp., 517 F.2d 567 (10th Cir. 1975). In Salco, we interpreted Yellow Cab to specifically dispense with a relevant market requirement for § 2 conspiracy claims. Like the Supreme Court in Yellow Cab, we focused on the scope of the "any part" language and explained:

Section 2 makes it unlawful to conspire to monopolize "any part" of interstate commerce. Specific intent to monopolize is the heart of a conspiracy charge, and a plaintiff is not required to prove what is the "relevant market." It is enough if "'some appreciable part of interstate ...

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