COMMENTS THOMAS W. KELTY, Chief Counsel, Illinois Municipal League

In the April 1985 issue of the Illinois Municipal Review, a summary was provided of the case of Town of Hallie, et al. v. City of Eau Claire, 105 S. Ct. 1713 (1985). This case, dealing with municipal anti-trust immunity, expanded municipal immunity to federal antitrust laws. The clear extension of immunity to municipalities by the United States Supreme Court is considered to be a victory for municipalities. In light of this court action, the Illinois Legislature has enacted legislation to codify the principals set forth in Hallie to the benefit of Illinois municipalities.

House Bill 521, now awaiting final action by the Governor clearly provides an extension of the "state action exemption" of federal anti-trust laws to municipalities. The Bill amends the "Illinois Municipal Code," the "Illinois Anti-trust Act" and an "Act to make explicit the authorization for units of local government and certain other governmental bodies to act as permitted by statute or the Illinois Constitution, notwithstanding affects on competition."

To fully understand the impact of the legislation, a review of the facts and decision in Hallie is necessary.

The City of Eau Claire, Wisconsin refused to supply sewage treatment services to surrounding plaintiff towns. The City does supply services to individual land owners of the towns if, by referendum, they have their homes annexed by the City. The sewage treatment facility operated by Eau Claire was the only treatment facility available to the petitioners. The towns contended that Eau Claire had used its facility to gain an unlawful monopoly over the provision and transportation services in violation of Federal Anti-trust laws. The District Court ruled that the conduct of the City of Eau Claire was within the "state action" exemption to Federal Anti-trust Laws, as defined in the case of Community Communications Company v. City of Boulder, 455 U.S. 40 (1982), and Parker v. Brown, 317 U.S. 341 (1943). On appeal to the United States Court of Appeals for the Seventh Circuit, the decision was affirmed. In a unanimous decision, the United States Supreme Court agreed with the lower courts. Justice Paul Stevens, writing for the Court, restated the general doctrine involving municipal immunity to Federal Anti-trust Laws. However, the Justice noted that the Supreme Court had not clearly addressed two central issues to any claim of state action exemption. First, how clearly should a state policy be articulated for a municipality to establish that its activity constitutes state action? Secondly, must action by a municipality, like action by a private party, satisfy the "active state supervision" requirement? The Court, in its opinion, provides clear guidance to states and municipalities on both questions. While noting that compulsion of cities to act, affirmatively expressed in a statute, may be the best evidence of state policy,

"It is by no means a pre-requisite to a finding that a municipality acted pursuant to clearly articulated state policy."

In disposing of the second issue, the Court holds that,

"Once it is clear that the state authorization exists, there is no need to require the state to supervise actively the municipality's execution of what is a properly delegated function."

The Illinois Legislature has heeded the advice of the Supreme Court and provided the "best evidence" suggested in the opinion in the form of House Bill 521.

This Bill, introduced March 6,1985, amends various statutes as set forth above. Section 1-1-10 of the Illinois Municipal Code (Ill. Rev. Stat. Ch. 24. § 1-1-10) has been amended to encompass not only Illinois

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municipalities but also the officers, employees and agents of those municipalities. The General Assembly has stated its intention to extend the state action exemption to all municipalities of the state in the exercise of their authority and has specifically named certain acts and constitutional provisions as well as divisions of the Illinois Municipal Code. The specific enumerations are included in the following listing:

LISTING OF PROVISIONS AFFECTED

Illinois Constitution, S 6, 7, and 10 of Article 7

The Illinois Library Act

An Act to provide the matter of levying or imposing taxes for special services to areas within the boundaries of home rule units and non-home rule municipalities and counties.

An act to facilitate the development and construction of housing

The Housing Authorities Act
The Housing Cooperation Law
The Blighted Areas Redevelopment Act of 1947
The Blighted Vacant Areas Development Act of 1949
The Urban Community Conservation Act
The Illinois Enterprise Zone Act
Divisions 1-6 of Article VII of the Illinois Municipal Code
Divisions 9, 10 and 11 of Article VIII of the Illinois Municipal Code
Divisions 1-5 of Article IX of the Illinois Municipal Code
Articles X and XI of the Illinois Municipal Code

The Bill also provides that the state action exemption is to be liberally construed in favor of the municipalities, agents, employees, and officers invoking its protection. The only limitation placed upon the exemption by the legislature is that the exemption will not apply when the alleged violation of anti-trust law exceeds either, (1) "powers granted either expressly or by necessary implication, by Illinois statute or the Illinois Constitution" or (2) "powers granted to a home rule municipality to perform any function pertaining to its government and affairs or to act within the traditional areas of municipal activity, except as limited by the Illinois Constitution or a proper limiting statute."

The Local Government Powers section of the Local Government chapter (Ill. Rev. Stat. 85, § 2901) has been similarly amended and includes specific extensions of the state action exemption to library districts, sanitary districts and park districts.

Section 5 of the Illinois Anti-Trust Act (Ill. Rev. Stat. Ch. 28, par. 60-5) has been amended to specifically exempt the activities of a local government or school district and activity of its employees, agents, and officers.

The legislation passed easily through the legislature. However, on September 22,1985, the Governor, at the request of the League, returned the legislation to the General Assembly with an amendatory veto. The subject of the amendatory veto was the limitation of recovery by plaintiffs who allege that an action is ultra vires. Ultra vires acts are those acts which are beyond the scope of power of the unit of government. Under existing Illinois law, the plaintiff would be eligible to receive treble (triple) damages if a local government were found to have acted outside the scope of its authority. In the veto message, the Governor recommends amendments to the Bill that would limit the relief to an injunction barring the complained of activity. As of October 30, 1985, both Houses of the General Assembly had accepted the amendatory veto and returned the legislation to the Governor for final action.

House Bill 521 provides the "best evidence" of state policy that the United States Supreme Court suggests in its opinion in Hallie. Additionally, the potential financial burden of triple monetary damages against a municipality has been removed. This act has made it clear that adequate state authorization for the acts of local government exist in all legitimate activities of local units of government.

By providing this clear and conclusive evidence of state policy, the legislature has aleviated any potential necessity to demonstrate active state supervision. The Court has clearly held that after the authorization by the states exists, "there is no need to require the state to supervise actively the municipality's execution of what is a properly delegated function."

This legislation, when coupled with the decision in Hallie, eliminates potential concerns of local government officials regarding anti-trust actions. Any action taken, within the scope of the governmental authority pursuant to statute or home rule power, has been determined to be within the "state action" exemption. In addition, the legislation has provided for the elimination of monetary damages against a unit of local government, its employees, officers and agents thereby removing a potentially large source of liability to the local government.

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