ANTITRUST CLAIM REINSTATED AT HAMILTON COLLEGE

Robert E. Manley, Manley & Burke

Four fraternities won a day in court in their antitrust lawsuit against Hamilton College.

Hamilton College ruled that all students must live in college housing and sign college dining contracts, effective with the opening of school in the Fall of 1995. Four fraternities sued claiming it was unfair competition under the Sherman Antitrust Act.

Historically, many students at Hamilton College had lived in fraternity houses starting in their sophomore year. Other students lived in private housing off campus.

The four fraternities who sued claim that the purpose of the Hamilton College regulation was not educational but a commercial purpose to eliminate competition in the provision of “residential services” to Hamilton students in order to raise revenues. The fraternities claim that having announced that students would not be allowed to live in the private fraternity houses, the college “has attempted to exercise monopoly power as the sole available buyer by attempting to purchase the fraternity houses at artificially low prices, intending to use them to provide housing for its students.”

[An important lesson of this case is that the courts do not look at the nature of the institution that is accused of restraining trade, but the nature of the conduct.]

The United States District Court dismissed the case claiming that it lacked jurisdiction because the activity of Hamilton College in this regard was not “trade or commerce” within the meaning of the Sherman Act. In addition, the trial court found that there was an insufficient nexus to interstate commerce. The trial court granted a motion to dismiss the complaint. Under this procedure, it was obligated to assume all facts alleged in the complaint were true.

The fraternities appealed and the United States Court of Appeals for the Second Circuit ruled that the trial court had made a finding of fact against the fraternities without giving the fraternities an opportunity for an evidentiary hearing. The case was reversed and sent back to the trial court for the fraternities to have an opportunity to explore the records of the college, to take depositions of college officials, and to proceed to a trial on the facts and the law.

An important lesson of this case is that the courts do not look at the nature of the institution that is accused of restraining trade, but the nature of the conduct. Many colleges and many fraternities overlook the fact that they can commit offenses under the antitrust laws. The fact that they are not for profit and may have noble motives will not protect them against the harshness of the remedies available under the antitrust laws. The court notes “there is no blanket exemption from antitrust laws based upon an organization’s non-profit status or public service orientation.”

The Court of Appeals found facts to support interstate commerce including:

• 51% of the Hamilton College students for a recent year came from states other than the State of New York or from foreign
• Hamilton College had received $7,000,000.00 in a recent year for residential services (room, board, and related fees) and approximately $4,000,000.00 of that was collected annually from students who come to live at Hamilton College from outside the State of New York.
• The court observed that the fraternities claim that “as a result of the new residential policies, the fraternities and other private landlords in Clinton, New York, will lose approximately $1,000,000.00 a year, a substantial portion of which would have been collected from out-of-state residents.”

The plaintiffs in the case were Hamilton Chapter of Alpha Delta Phi, Inc.; Alumni Association of Psi Chapter of Psi Upsilon, Inc.; Beta of Sigma Phi Society, Inc.; and Delta Kappa Upsilon Society of Hamilton College. The case was argued in January of 1997 and decided on October 10, 1997, (Lexis 27945).

Unless the case reaches an out-of-court settlement, the plaintiffs will now have the opportunity to proceed towards trial. After the trial, the losing party has the right to appeal back to the United States Court of Appeals for the Second Circuit. The party who loses there would normally have the opportunity to ask the United States Supreme Court to review the Second Circuit decision.

In recent cases, the courts have been applying antitrust laws to non-profit and academic organizations.

If the four fraternities win their case, the court will:

• Determine actual damages suffered by each fraternity;
• Multiply the damages by three and award triple damages to each fraternity;
• Order Hamilton College to stop anti-competitive conduct; and
• Award attorney fees to be paid by Hamilton College to each fraternity.