Antitrust Law Daily Wrap Up, ANTITRUST—9th Cir.: Convention center's immunity from antitrust, punitive damages claims reaffirmed, (Aug 18, 2014)

By Jeffrey May, J.D.

The U.S. Court of Appeals in San Francisco has reiterated its position that the San Diego convention center is immune from antitrust and punitive damages claims in an action brought by a vendor of trade show cleaning services. The vendor was, however, entitled to pursue a claim for intentional interference with contractual relationship. The latest ruling follows the court’s withdrawal of a May 14 decision after the vendor—United National Maintenance, Inc. (UNM)—petitioned the court for rehearing on the disposition of its punitive damages claim (United National Maintenance, Inc. v. San Diego Convention Center Corp., August 15, 2014, Farris, J.).

Punitive damages. In its petition for panel rehearing, UNM had questioned the court's determination that the convention center operator could not be held liable for punitive damages because it was “a public corporation that functions as the instrument or agent of San Diego.” According to UNM, the convention center operator was a “public benefit corporation,” not a “public corporation,” and public benefit corporations can be liable for punitive damages under California law.

In its latest opinion, the panel clarified its holding that the convention center operator was shielded from punitive damages. It deleted a reference to the convention center operator as a “public corporation.” The court explained that the defendant was entitled to escape liability for punitive damages as “a public entity” because it is “a wholly owned subsidiary and instrumentality of San Diego formed for governmental purposes and vested with governmental powers.”

State action immunity. The convention center operator's challenged conduct was immune from antitrust attack under the state action doctrine, the court ruled. UNM had questioned the convention center operator's decision to act as the “exclusive provider of cleaning services staffing” for the facility. The center’s policy also required companies that provided decorator services for the events held at the center (providers that contracted with the complaining cleaning service) to pay one half of all booth cleaning revenue that they received as well as a $17 per hour wage for the center employees that provided cleaning services. The cleaning service complained that the convention center’s new requirements significantly increased the costs of performance on contracts, even though it continued to perform on its contracts with decorators using convention center personnel.

The challenged conduct flowed from a clearly articulated and affirmatively expressed state policy to warrant state action immunity, the court decided. Moreover, because the convention center operator was an extension of the municipality of San Diego, its conduct did not have to be actively supervised for the doctrine to apply, as UNM had alleged.

Intentional interference with contractual relations. The appellate court also reiterated its holding that a new trial was warranted on UNM's claim for intentional interference with contractual relationship. The appellate court reversed the lower court's judgment in favor of the defendant on the cleaning service's claim that the convention center operator, in implementing its new policy, interfered with contracts the cleaning service and providers of trade show decorator services. The lower court's decision to add an additional requirement to the claim—that the tort of intentional interference only applied to parties that lack any “legitimate interest . . . in the underlying contract”—was not justified.

The case is No. 12-56809.

Attorneys: Leonard J. Feldman (Stoel Rives LLP) and James R. Lance (Kirby Noonan Lance & Hoge LLP) for United National Maintenance, Inc. Joseph T. Ergastolo (Wright & L’Estrange) for San Diego Convention Center Corp.

Companies: United National Maintenance, Inc.; San Diego Convention Center Corp.

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