Protecting Market Share 11.20.14 REVISED

Protecting Market Share The Boundaries of Competitive Engagement

Protecting market share through lobbying, political organizing, and strategic litigation is highly effective

and legally protected when done correctly. This white paper provides an expert overview of the legal

foundation for market defense by the world leader in land use politics.

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Protecting Market Share: The Boundaries of Competitive Engagement

Contact: Ramsin Canon

Senior Vice President & Director of Legal Services The Saint Consulting Group

11/2014

Contents

EXECUTIVE SUMMARY .......................................................................................................................... 5

INTRODUCTION ........................................................................................................................................ 8

THE NOERR-PENNINGTON DOCTRINE ............................................................................................. 9

Eastern R.R. Presidents Conference et al. v. Noerr Motor Freight ............................................ 9

United Mine Workers v. Pennington .............................................................................................. 15

California Motor Transport Co. v. Trucking Unlimited ................................................................. 18

PREI v. Columbia Pictures.............................................................................................................. 21

RECENT EXPANSION OF NOERR-PENNINGTON .......................................................................... 25

Mercatus Group v. Lake Forest Hospital ...................................................................................... 25

Rubloff Development Group v. SuperValu ................................................................................... 28

SLAPP LAWSUITS .................................................................................................................................. 33

LEGAL AUTHORITY ............................................................................................................................... 35

Cases ..................................................................................................................................................... 35

Statutes .................................................................................................................................................. 35

Other ...................................................................................................................................................... 35







EXECUTIVE SUMMARY

The courts have sanctioned the right to organize community opposition that urges government officials and agencies to deny land use permits to applicants, even when the underlying motive of the opposition is protecting market share and eliminating competition. What’s more, the courts are protecting third-party funding sources, in many cases anonymous funding sources, which support the opposition efforts in order to block potential competition. The courts have found that the First Amendment provides immunity for certain governmental petitioning activities as provided for by the Noerr-Pennington doctrine. The courts have specifically found the doctrine protects petitioning of various village boards and administrative agencies in regard to land use development. There are two main exceptions to such immunity, sham lawsuits and fraudulent misrepresentations, where such misrepresentations are material to the government’s (i.e., the judge’s) action in the litigation, and the litigation is objectively meritless. The courts have also ruled that the accompanying public relations campaigns related to those activities are similarly protected. The doctrine provides absolute immunity for petitioning legislative and executive bodies, as well as the accompanying public relations campaigns. Further, even where the opposition to development is supported by anonymous third parties with anti-competitive motives, the petitioning activity is protected. State legislatures are providing additional support for constitutionally-protected petitioning activity by adopting anti-SLAPP statutes. These statutory laws provide expedited mechanisms for dismissing lawsuits aimed at First Amendment petitioning activity, and coercive penalties for violating these statutes through mandatory awards of legal fees to the defendants who must defend against SLAPP lawsuits. The Noerr-Pennington doctrine and its progeny of cases, together with anti-SLAPP legislation across the nation,

“It is neither unusual

nor illegal for people

to seek action on

laws in the hope that

they may bring about

an advantage to

themselves and a

disadvantage to their

competitors.”

U.S. Supreme Court




provide clear guidelines for protecting market share within the boundaries of competitive engagement. Key Points • The U.S. Constitution guarantees all citizens the right to

petition – the right to ask government to take action, or not to take action – regarding any matter.

• The federal Sherman Anti-Trust Act prohibits anti-

competitive business activities that would cause a “restraint” in interstate trade and commerce, adversely affecting the consumer by causing shortages and higher prices. The Supreme Court has long held that the Sherman Act is intended to protect competition, not competitors.

• In the Noerr case, the Supreme Court ruled that

promoting the adoption and enforcement of laws harmful to a competitor is protected as petitioning under the First Amendment to the Constitution. The right to petition does not rest upon the intentions of the petitioner, nor upon the methods he uses, even if they are devious, deceptive, unethical, or even reprehensible.

• In the case of United Mine Workers v. Pennington, the

Supreme Court ruled that joint efforts to influence public officials do not violate antitrust laws even if the actions are intended to eliminate competition. The right to petition protected their efforts. If the petitioning activity is valid, the petitioner is immune from anti-trust liability.

• Meritless lawsuits that are intended solely to delay projects are not protected and are characterized by the Supreme Court as “sham” litigation.

• The Supreme Court ruled that litigation is not a sham

unless (1) it is objectively baseless—such that no reasonable litigant could expect to win and (2) the baseless lawsuit seeks to interfere directly with the competitor’s business relationships by the use of government process.

The Supreme Court ruled that

joint efforts to influence public

officials do not violate the

antitrust laws even though the

actions are intended to eliminate

competition.




• In the case of Rubloff Development Group v. SuperValu, Inc. and Saint Consulting Group, a developer sued a grocery chain and its land use consultant for opposing the developer’s plans to build a shopping center that would include a competing store. The federal court ruled that the defendants’ activities were protected petitioning under the Noerr-Pennington Doctrine, even where the opposition to the development project was supported by anonymous third parties with anti-competitive motives.

• Individuals and community groups are sometimes sued

for exercising their constitutional rights through “Strategic Lawsuits Against Public Participation” (SLAPP), which seek to intimidate citizens into silence by “slapping” them with expensive litigation. To protect against SLAPP lawsuits, the legislatures in many states have adopted anti-SLAPP statutory laws that provide expedited mechanisms for dismissing such lawsuits and recovering the legal fees associated with the effort to dismiss.

Petitioning government is a protected activity even when opposition to a development project is supported by anonymous third parties with anti-competitive motives.




INTRODUCTION

Starting in 1961, common law case authority across the U.S. has increased the protections of the First Amendment’s petitioning clause and expanded the boundaries of competitive engagement. Motivated by a desire to protect their market share, competitors either funded opposition to development projects, or outright led the efforts to block competitors from successfully permitting their projects. By exploring the underpinnings of the First Amendment’s right to petition clause, and the seminal case authority that has expanded its application to competitors’ efforts to protect market share, this article will provide a comprehensive analysis of the current state of the law as applied to development disputes and permitting. The First Amendment’s right to petition clause guarantees citizens the right to ask government at any level for relief. “Petitioning” is any legal means of supporting or opposing government action by the judicial, executive or legislative branch. Lobbying, letter writing campaigns, filing lawsuits, supporting or opposing referenda, and collecting signatures on petitions for ballot initiatives are all examples of protected petitioning activity under the First Amendment. The U.S. Supreme Court has affirmed that the right to engage in such activity is constitutionally protected from interference by federal, state and local governments. Analysis of the current state of the law begins with a review of the U.S. Supreme Court’s Noerr and Pennington decisions in 1961 and 1965 respectively (which collectively gave rise to the “Noerr-Pennington Doctrine”), along with key explanatory cases entitled California Motor Transport Co. v. Trucking Unlimited (U.S. 1972) and PREI v. Columbia Pictures, 508 U.S. 49 (1993). These four decisions from the U.S. Supreme Court, and two recent decisions from the Seventh Circuit entitled Mercatus Group v. Lake Forest Hospital (7th Cir. 2011) and Rubloff Development v. Supervalu and the Saint Consulting Group, 2013 U.S. Dist. LEXIS 15239

(D. Ill. 2013), track the development of the Noerr-Pennington Doctrine and provide new insight into the expanded protections of the First Amendment’s right to petition clause.




THE NOERR-PENNINGTON DOCTRINE

The Noerr-Pennington doctrine was set forth by the United States Supreme Court in Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) and United Mine Workers v. Pennington, 381 U.S. 657 (1965). The Court later clarified and expanded the doctrine in California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508 (1972) and PREI v. Columbia Pictures, 508 U.S. 49 (1993).

In Noerr, the Court held that no violation of the federal anti-trust laws can be predicated upon mere attempts to influence the passage or enforcement of laws. Similarly, the Court wrote in Pennington that joint efforts to influence public officials do not violate the antitrust laws even though intended to eliminate competition.

In California Motor Transport, the Court added that the right to petition extends to all departments of the government and the right of access to the courts is indeed but one aspect of the right of petition. Pursuant to this doctrine, immunity extends to attempts to petition all departments of the government. If conduct constitutes valid petitioning, the petitioner is immune from antitrust liability whether or not the injuries are caused by the act of petitioning or are caused by government action which results from the petitioning. A series of meritless lawsuits that are intended solely to delay projects are not protected by the Noerr-Pennington doctrine.

Finally, the PREI case provided a detailed definition of the "sham" exception to the doctrine of antitrust immunity first identified in Eastern Railroad Presidents Conference v. Noerr Motor Freight, as that doctrine applies in the litigation context.

Eastern R.R. Presidents Conference et al. v. Noerr Motor

Freight, Inc., et al., 365 U.S. 127 (1961)

The competition between the U.S. trucking industry and the railroads for long distance heavy freight business became increasingly intense following the conclusion of World War II.

The courts have

sanctioned the right to

organize community

opposition even when

the underlying motive

of the opposition is

protecting market

share and eliminating

competition.


http://en.wikipedia.org/wiki/United_States_Supreme_Court

http://en.wikipedia.org/wiki/United_States_Supreme_Court

http://en.wikipedia.org/wiki/Eastern_Railroad_Presidents_Conference_v._Noerr_Motor_Freight,_Inc.

http://en.wikipedia.org/wiki/Eastern_Railroad_Presidents_Conference_v._Noerr_Motor_Freight,_Inc.

http://en.wikipedia.org/wiki/Case_citation

http://en.wikipedia.org/wiki/United_Mine_Workers_v._Pennington


http://en.wikipedia.org/w/index.php?title=California_Motor_Transport_Co._v._Trucking_Unlimited&action=edit&redlink=1





Both of the competing groups came to view the struggle as one of economic life or death for their method of transportation. This litigation is an outgrowth of that struggle.

The case was filed in the United States District Court in

Pennsylvania on behalf of 41 Pennsylvania truck operators

and their trade association, the Pennsylvania Motor Truck

Association. They named as defendants 24 Eastern

railroads, an association of the Presidents of those railroads

known as the Eastern Railroad Presidents Conference, and

a public relations firm, Carl Byoir & Associates, Inc. The

truckers charged that the railroads had conspired to restrain

trade in and monopolize the long-distance freight business in

violation of the Sherman Anti-trust Act. The gist of the

conspiracy alleged was that the railroads had engaged Byoir

to conduct a publicity campaign against the truckers

designed to foster the adoption and retention of laws and law

enforcement practices destructive of the trucking business,

to create an atmosphere of distaste for the truckers among

the general public, and to impair the relationships existing

between the truckers and their customers.

The campaign so conducted was described in the complaint

as "vicious, corrupt, and fraudulent," first, in that the sole

motivation behind it was the desire on the part of the

railroads to injure the truckers and eventually to destroy

them as competitors in the long-distance freight business,

and, secondly, in that the defendants utilized the so-called

third-party technique, that is, the publicity matter circulated in

the campaign was made to appear as spontaneously

expressed views of independent persons and civic groups

when, in fact, it was largely prepared and produced by Byoir

and paid for by the railroads. The truckers also included

charges as to particular instances in which the railroads had

attempted to influence legislation by means of their publicity

campaign. One of several such charges was that the

defendants had succeeded in persuading the Governor of

Pennsylvania to veto a measure known as the "Fair Truck




Bill," which would have permitted truckers to carry heavier

loads over Pennsylvania roads.

The truckers sought damages under the Clayton Act and an

injunction restraining the railroads from further acts in

pursuance of the conspiracy. A stipulation was entered that

the only damages suffered by the truckers was the loss of

business that resulted from the veto of the "Fair Truck Bill"

by the Governor of Pennsylvania, and accordingly the claim

for damages was limited to an amount based upon the loss

of profits as a result of this veto plus the expenses incurred

by the truckers' trade association for the purpose of

combating the railroads' publicity campaign. The prayer for

injunctive relief was much broader, however, asking that the

railroads be restrained from disseminating any disparaging

information about the truckers without disclosing railroad

participation, from attempting to exert any pressure upon the

legislature or Governor of Pennsylvania through the medium

of front organizations, from paying any private or public

organizations to propagate the arguments of the railroads

against the truckers or their business, and from doing any

other act to further the purposes of the alleged conspiracy.

In their answer to this complaint, the railroads acknowledged

that they had conducted a publicity campaign designed to

influence the passage of state laws relating to truck weight

limits and tax rates on heavy trucks, and to encourage a

more rigid enforcement of state laws penalizing trucks for

overweight loads and other traffic violations, but they denied

that their campaign was motivated either by a desire to

destroy the trucking business as a competitor or to interfere

with the relationships between the truckers and their

customers. Rather, they insisted, the campaign was

conducted in furtherance of their rights "to inform the public

and the legislatures of the several states of the truth with

regard to the enormous damage done to the roads by the

operators of heavy and especially of overweight trucks, with

regard to their repeated and deliberate violations of the law

The Sherman Act is intended to protect competition, not competitors.




limiting the weight and speed of big trucks, with regard to

their failure to pay their fair share of the cost of constructing,

maintaining and repairing the roads, and with regard to the

driving hazards they create." Such a campaign, the railroads

maintained, did not constitute a violation of the Sherman Act,

because that Act could not properly be interpreted to apply

either to restraints of trade or monopolizations that result

from the passage or enforcement of laws or to efforts of

individuals to bring about the passage or enforcement of

laws.

The railroads also filed a counterclaim in which they charged

that the truckers had themselves violated the Sherman Act

by conspiring to destroy the railroads' competition in the

long-distance freight business and to monopolize that

business for heavy trucks. The means of the conspiracy

alleged in the counterclaim were much the same as those

with which the truckers had charged the railroads in the

original complaint, including allegations of the conduct of a

malicious publicity campaign designed to destroy the

railroads' business by law, to create an atmosphere hostile

to the railroads among the general public, and to interfere

with relationships existing between the railroads and their

customers. The prayer for relief of the counterclaim, like that

of the truckers' original complaint, was for damages and an

injunction restraining continuance of the allegedly unlawful

practices.

After hearings, the trial court ruled that the railroads' publicity

campaign had violated the Sherman Act while that of the

truckers had not. In reaching this conclusion, the trial court

expressly disclaimed any purpose to condemn as illegal

mere efforts on the part of the railroads to influence the

passage of new legislation or the enforcement of existing

law. Instead, it rested its judgment upon findings, first, that

the railroads' publicity campaign, insofar as it was actually

directed at lawmaking and law enforcement authorities, was

malicious and fraudulent - malicious in that its only purpose




was to destroy the truckers as competitors, and fraudulent in

that it was predicated upon the deceiving of those authorities

through the use of the third-party technique; and, secondly,

that the railroads' campaign also had as an important, if not

overriding purpose: the destruction of the truckers' goodwill,

among both the general public and the truckers' existing

customers, and thus injured the truckers in ways unrelated to

the passage or enforcement of law. In line with its theory that

restraints of trade and monopolizations resulting from valid

laws are not actionable under the Sherman Act, however,

the trial court awarded only nominal damages to the

individual truckers, holding that no damages were

recoverable for loss of business due to the veto of the

Pennsylvania "Fair Truck Bill." The judgment did, however,

award substantial damages to the truckers' trade association

as well as the broad injunction asked for in the complaint.

The conclusion that the truckers' publicity campaign had not

violated the Sherman Act was reached despite findings that

the truckers also had engaged in a publicity campaign

designed to influence legislation, as charged in the

counterclaim, and despite findings that the truckers had

utilized the third-party technique in this campaign. Resting

largely upon the fact that the efforts of the truckers were

directed, at least for the most part, at trying to get legislation

passed that was beneficial to them rather than harmful to the

railroads, the trial court found that the truckers' campaign

was purely defensive in purpose and concluded that the

truckers' campaign differed from that of the railroads in that

the truckers were not trying to destroy a competitor.

Accordingly, it held that the truckers' campaign, though

technically a restraint of trade, was well within the rule of

reason which governs the interpretation of the Sherman Act

and consequently dismissed the counterclaim.

The railroads appealed from this judgment, both as to the

conclusion that they had violated the Sherman Act as

charged in the original complaint and as to the conclusion

The U.S. Constitution guarantees all citizens the right to petition – the right to ask government to take action or not to take action – regarding any matter.




that the truckers had not violated the Act as charged in the

counterclaim. The Court of Appeals for the Third Circuit

upheld the judgment of the District Court. This was followed

by a petition for certiorari filed on behalf of the railroads as to

the question of the correctness of the judgment insofar as it

held that they had violated the Sherman Act. The U.S.

Supreme Court granted the petition, and ultimately the

judgment was reversed.

The U.S. Supreme Court ruled that no violation of the

Sherman Act can be predicated upon mere attempts to

influence the passage or enforcement of laws: the Sherman

Act does not prohibit two or more persons from associating

together in an attempt to persuade the legislature or the

executive to take particular action with respect to a law that

would produce a restraint or monopoly; and it does not apply

to the activities of these railroads, at least insofar as those

activities comprised mere solicitation of governmental action

with respect to the passage and enforcement of laws. Insofar

as the railroads' campaign was directed toward obtaining

governmental action, it did not violate the Sherman Act by

any anticompetitive purpose it may have had, such as a

purpose to destroy the truckers as competitors for the long-

distance freight business. Nor did the railroads' campaign

violate the Sherman Act by their use of the so-called third-

party technique, whereby propaganda actually circulated by

a party in interest is given the appearance of being the

spontaneously expressed views of independent persons and

civic groups. Nor can a surreptitious purpose or bad motive

alter the result, as both are irrelevant. As the court said in

Noerr, “The right of the people to inform their representatives

in government of their desires with respect to the passage or

enforcement of laws cannot properly be made to depend

upon their intent in doing so. It is neither unusual nor illegal

for people to seek action on laws in the hope that they may

bring about an advantage to themselves and a disadvantage

to their competitors.”




Significantly, the Court’s ruling included dicta to the effect

that there may be situations in which a publicity campaign,

ostensibly directed toward influencing governmental action,

is a mere sham to cover what is actually nothing more than

an attempt to interfere directly with the business

relationships of a competitor; and in such a situation,

application of the Sherman Act might be justified. But here,

no one denied that the railroads were making a genuine

effort to influence legislation and law enforcement practices.

Indeed, that effort was not only genuine but also highly

successful. Under these circumstances, the Court concluded

that no attempt to interfere with business relationships in a

manner proscribed by the Sherman Act was involved.

United Mine Workers v. Pennington et al., 381 U.S. 657

(1965)

This lawsuit was brought by the trustees of the United Mine

Workers of America Welfare and Retirement Fund against

the respondents, individually and as owners of Phillips

Brothers Coal Company, a partnership, seeking to recover

royalty payments alleged to be due and payable under the

trust provisions of the National Bituminous Coal Wage

Agreement of 1950, executed by Phillips and the United

Mine Workers of America (“UMW”) on October 1, 1953.

Phillips filed an answer and a cross claim against UMW,

alleging in both that the trustees, the UMW, and certain large

coal operators had conspired to restrain and to monopolize

interstate commerce in violation of the Sherman Antitrust

Act, as amended, 26 Stat. 209, 15 U.S.C. 1, 2 (1958 ed.).

Actual damages in the amount of $100,000 were claimed for

the period beginning February 14, 1954, and ending

December 31, 1958.

The cross claim alleged that prior to the 1950 Wage

Agreement between the operators and the union, severe

controversy had existed in the industry, particularly over

wages, the welfare fund and the union's efforts to control the

Attempts to influence the passage or enforcement of laws—even laws that would bring about a restraint in trade—do not violate the Sherman Act even when those exercising that right have ulterior motives, such as destroying their competition.




working time of its members. Since 1950, however, relative

peace has existed in the industry, all as the result of the

1950 Wage Agreement and its amendments and the

additional understandings entered into between UMW and

the large operators. Allegedly, the parties considered

overproduction to be the critical problem of the coal industry.

The agreed solution was to be the elimination of the smaller

companies, thereby giving the larger companies control of

the market. As part of this plan, the union abandoned its

efforts to control the working time of the miners, agreed not

to oppose the rapid mechanization of the mines which would

substantially reduce mine employment, agreed to help

finance such mechanization and agreed to impose the terms

of the 1950 agreement and the higher wages it required on

all operators without regard to their ability to pay. The benefit

to the union was to be increased wages as productivity

increased with mechanization, these increases to be

demanded of the smaller companies whether mechanized or

not. Royalty payments into the welfare fund were also to be

increased, and the union was to have effective control over

the fund's expenditures. The union and large companies

agreed upon other steps to exclude the marketing,

production, and sale of nonunion coal. For example, the

companies agreed not to lease coal lands to nonunion

operators and in 1958 agreed not to sell or buy coal from

such companies.

The companies and the union jointly and successfully

approached the Secretary of Labor to obtain establishment

under the Walsh-Healey Act, as amended, 49 Stat. 2036. 41

U.S.C. 35 et seq. (1958 ed.), of a minimum wage for

employees of contractors selling coal to the Tennessee

Valley Authority (“TVA”), such minimum wage being much

higher than in other industries and making it difficult for small

companies to compete in the TVA term contract market. At a

later time, at a meeting attended by both union and company

representatives, the TVA was urged to curtail its spot market

purchases, a substantial portion of which were exempt from




the Walsh-Healey order. Thereafter four of the larger

companies waged a destructive and collusive price-cutting

campaign in the TVA spot market for coal, in an effort to

corner the market for West Kentucky Coal Co. and its

subsidiary Nashville Coal Co., in which the union had large

investments and over which it was in position to exercise

control.

After a jury trial, a verdict was returned in favor of Phillips

and against the trustees and the union, with damages

against the union of $90,000, to be trebled under 15 U.S.C.

15 (1958 ed.). The trial court set aside the verdict against the

trustees but overruled the union's motion for judgment

notwithstanding the verdict or in the alternative for a new

trial. The Court of Appeals affirmed, 325 F. 2d 804, ruling

that the union was not exempt from liability under the

Sherman Act on the facts of this case, the instructions to the

jury were adequate, and the evidence generally was

sufficient to support the verdict. The U.S. Supreme Court

granted certiorari, and ultimately reversed and remanded the

case for proceedings consistent with its opinion.

In so ruling, the Supreme Court held that an agreement

resulting from union-employer bargaining is not automatically

exempt from Sherman Act scrutiny merely because the

negotiations covered wage standards or any other

compulsory subject of bargaining. A union may make wage

agreements with a multi-employer bargaining unit and may,

in pursuance of its own self-interests, seek to obtain the

same terms from other employers, but it forfeits its antitrust

exemption when it agrees with a group of employers to

impose a wage scale on other bargaining units and thus

joins a conspiracy to curtail competition. Nothing in the

national labor policy indicates that a union and employers in

one bargaining unit are free to bargain about wages or

working conditions of other bargaining units or to settle these

matters for the whole industry, nor does it allow an employer

to condition the signing of an agreement on the union's

No violation of the

Sherman Act can be

predicated upon

mere attempts to

influence the

passage or

enforcement of

laws




imposition of a similar contract on his competitors. The

Supreme Court went on to say that antitrust policy clearly

restricts employer-union agreements seeking to set labor

standards outside the bargaining unit, in view of the

anticompetitive potential and the surrender by the union of

its freedom of action with respect to bargaining policy.

The significance of the Supreme Court ruling in Pennington

is that joint efforts to influence public officials—even the U.S.

Secretary of Labor—do not violate the antitrust laws even

though the actions are intended to eliminate competition.

Here, large coalmine owners and the employees’ union

reached a wage agreement that they then attempted to

impose on smaller employers they knew could not compete.

They successfully approached the Secretary of Labor to

impose a minimum wage for the entire industry, even though

that made it extremely difficult for smaller employers to

compete. The Supreme Court held that the right to petition

protected their efforts to influence the Secretary of Labor,

even though the resulting government action brought about

a restraint of trade. The crux of the Pennington case is that if

the petitioning activity is valid, the petitioner is immune from

anti-trust liability, whether the injuries were caused by the

petitioning itself, or the government action that resulted.

California Motor Transport Co. et al. v. Trucking

Unlimited et al. 404 U.S. 508 (1972)

This lawsuit was brought under the Clayton Act in the United

States District Court for the Northern District of California,

alleging that the defendant highway carriers had conspired

to put the plaintiff highway carriers out of business as

competitors by instituting repeated objections in state and

federal proceedings to resist and oppose the plaintiffs'

applications concerning operating rights. More critical are

other allegations, which elaborate on the "sham" theory first

mentioned in the Noerr decision, by asserting that the power,

strategy, and resources of the petitioners were used to




harass and deter respondents in their use of administrative

and judicial proceedings so as to deny them "free and

unlimited access" to those tribunals. The result, it is alleged,

was that the machinery of the agencies and the courts was

effectively closed to respondents, and petitioners indeed

became the regulators of the grants of rights, transfers and

registrations to respondents - thereby depleting and

diminishing the value of the businesses of respondents and

aggrandizing petitioners' economic and monopoly power. It

is alleged that petitioners "instituted the proceedings and

actions . . . with or without probable cause, and regardless of

the merits of the cases."

This case is similar to Eastern Railroad Presidents

Conference v. Noerr Motor Freight, 365 U.S. 127, where a

group of trucking companies sued a group of railroads to

restrain them from an alleged conspiracy to monopolize the

long-distance freight business in violation of the antitrust

laws and to obtain damages. There the Court held that no

cause of action was alleged insofar as it was predicated

upon mere attempts to influence the Legislative Branch for

the passage of laws or the Executive Branch for their

enforcement. The Court followed that view in United Mine

Workers v. Pennington, 381 U.S. 657, 669 -671. Based on

the foregoing authority, the District Court dismissed

California Motor Transport’s complaint for failure to state a

cause of action, but the United States Court of Appeals for

the Ninth Circuit reversed (432 F2d 755).

On certiorari, the United States Supreme Court affirmed the

Court of Appeals' judgment and remanded the case for trial.

In an opinion by Justice Douglas, expressing the majority

view, the Court ruled that the same philosophy governs the

approach of citizens or groups of them to administrative

agencies (which are both creatures of the legislature, and

arms of the executive) and to courts, the third branch of

Government. Certainly the right to petition extends to all

departments of the Government. The right of access to the

Lobbying, letter writing campaigns, filing lawsuits, supporting or opposing referenda, and collecting signatures on petitions for ballot initiatives are all examples of protected petitioning activity under the First Amendment.




courts is indeed but one aspect of the right of petition. See

Johnson v. Avery, 393 U.S. 483, 485; Ex parte Hull, 312

U.S. 546, 549. The nature of the views pressed does not

determine whether First Amendment rights may be invoked;

but they may bear upon a purpose to deprive the

competitors of meaningful access to the agencies and

courts. As stated in the opinion concurring in the judgment,

such a purpose or intent, if shown, would be "to discourage

and ultimately to prevent the respondents from invoking" the

processes of the administrative agencies and courts and

thus fall within the “sham” exception to Noerr.

Accordingly, the Court held that (1) although highway

carriers, as part of the right of petition protected by the First

Amendment, had the right of access to agencies and courts

to be heard on applications sought by competitive highway

carriers, they were not thereby given immunity from the

antitrust laws, and (2) a violation of the antitrust laws would

be established in the case if the plaintiffs' allegations were

proved as facts, particularly the allegations that the

defendants, through massive, concerted, and purposeful

group activities, had combined to deter the plaintiffs from

having "free and unlimited access" to the agencies and

courts, whether the means used by the defendants might

have been lawful was immaterial.

Justice Stewart and Justice Brennan concurred in the result,

stating that (1) absent the defendants' involvement in

perjury, fraud, bribery, or misrepresentations to the tribunals

involved, none of which conduct was alleged, their joint

exercise of the constitutional right of access to the tribunals

was immune from the antitrust laws, but (2) the case should

be remanded for trial, since under certain allegations,

liberally construed, the plaintiffs were entitled to prove that

the defendants' real intent was not to invoke the processes

of the administrative agencies and courts, but to discourage

and prevent the plaintiffs from invoking those processes,

which intent would make the conspiracy an attempt to




interfere directly with the business relationships of a

competitor, justifying application of the Sherman Act.

PREI, Inc., et al. v. Columbia Pictures, Inc., et al. 508 U.S.

49 (1993)

This case best defines the "sham" exception to the doctrine

of antitrust immunity first identified in Eastern Railroad

Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S.

127 (1961). Under the sham exception, activity "ostensibly

directed toward influencing governmental action" does not

qualify for Noerr immunity if it "is a mere sham to cover . . .

an attempt to interfere directly with the business

relationships of a competitor." Id. at 144.

Petitioner PREI operated a resort hotel in Palm Springs,

California, where they installed videodisc players in the hotel

rooms and assembled a library of more than 200 motion

picture titles that guests could rent. PREI also sought to

develop a market for the sale of videodisc players to other

hotels wishing to offer in-room viewing of prerecorded

material. Respondent Columbia held copyrights to the

motion pictures recorded on the videodiscs that PREI

purchased. Columbia also licensed the transmission of

copyrighted motion pictures to hotel rooms through a wired

cable system called Spectradyne. PREI therefore competed

with Columbia not only for the viewing market at its hotel, but

also for the broader market for in-room entertainment

services in hotels.

In 1983, Columbia sued PREI for copyright infringement

through the rental of videodiscs for viewing in hotel rooms.

PREI counterclaimed, charging Columbia with violations of

the Sherman Act, 26 Stat. 209, as amended, 15 U.S.C. 1-2,

and various state law infractions. In particular, PREI alleged

that Columbia's copyright action was a mere sham that

Meritless lawsuits that are intended solely to delay projects are not protected and are characterized by the Supreme Court as “sham” litigation.




covered up its acts of monopolization and conspiracy to

restrain trade.

The parties filed cross-motions for summary judgment on

Columbia's copyright claim and postponed further discovery

on PREI's antitrust counterclaims. Columbia did not dispute

that PREI could freely sell or lease lawfully purchased

videodiscs under the Copyright Act's "first sale" doctrine, see

17 U.S.C. 109(a), and PREI conceded that the playing of

videodiscs constituted "performance" of motion pictures, see

17 U.S.C. 101 (1988 ed. and Supp. III). As a result,

summary judgment depended solely on whether rental of

videodiscs for in-room viewing infringed Columbia's

exclusive right to "perform the copyrighted works publicly."

Ruling that such rental did not constitute public performance,

the District Court entered summary judgment for PREI. The

Court of Appeals affirmed on the grounds that a hotel room

was not a "public place," and that PREI did not "transmit or

otherwise communicate" Columbia's motion pictures.

On remand, Columbia sought summary judgment on PREI's

antitrust claims, arguing that the original copyright

infringement action was no sham, and was therefore entitled

to immunity under Eastern Railroad Presidents Conference

v. Noerr Motor Freight, Inc., supra. Reasoning that the

infringement action "was clearly a legitimate effort and

therefore not a sham," the District Court granted the motion.

The Court of Appeals affirmed, characterizing "sham"

litigation as one of two types of "abuse of . . . judicial

processes," either "misrepresentations . . . in the

adjudicatory process" or the pursuit of "a pattern of baseless,

repetitive claims" instituted "without probable cause, and

regardless of the merits." 944 F.2d at 1529 (quoting

California Motor Transport Co. v. Trucking Unlimited, 404

U.S. 508, 513 , 512 (1972)). PREI neither "alleged that the

copyright lawsuit involved misrepresentations" nor

"challenged the district court's finding that the infringement

action was brought with probable cause, i.e., that the suit




was not baseless." 944 F.2d, at 1530. Rather, PREI opposed

summary judgment by arguing that "the copyright

infringement lawsuit was a sham because Columbia did not

honestly believe that the infringement claim was

meritorious." Ibid.

The Court of Appeals rejected PREI's argument that

"subjective intent in bringing the suit was a question of fact

precluding entry of summary judgment." Ibid. Instead, the

court reasoned that the existence of probable cause

"precluded the application of the sham exception as a matter

of law" because "a suit brought with probable cause does

not fall within the sham exception to the Noerr-Pennington

doctrine." Id. at 1531, 1532. Finally, the court observed that

PREI's failure to show that "the copyright infringement action

was baseless" rendered irrelevant any "evidence of

Columbia's subjective intent." Id. at 1533, and rejected

PREI's request for further discovery on Columbia's intent.

The Supreme Court ruled that the Court of Appeals properly

affirmed summary judgment for Columbia on PREI's antitrust

counterclaim. Under the objective prong of the sham

exception, the Court agreed with the Court of Appeals that

sham litigation must constitute the pursuit of claims so

baseless that no reasonable litigant could realistically expect

to secure favorable relief. See 944 F.2d, at 1529. The

existence of probable cause to institute legal proceedings

precludes a finding that an antitrust defendant has engaged

in sham litigation. When a court has found that an antitrust

defendant claiming Noerr immunity had probable cause to

sue, that finding compels the conclusion that a reasonable

litigant in the defendant's position could realistically expect

success on the merits of the challenged lawsuit. Therefore, a

proper probable cause determination irrefutably

demonstrates that an antitrust plaintiff has not proved the

objective prong of the sham exception, and that the

defendant is accordingly entitled to Noerr immunity. A court

could reasonably conclude that Columbia's infringement

The Supreme Court ruled that joint efforts to influence public officials do not violate antitrust laws even if the actions are intended to eliminate competition.




action was an objectively plausible effort to enforce rights,

and therefore, the Court concluded that PREI failed to

establish the objective prong of Noerr's sham exception, and

affirmed the judgment of the Court of Appeals.

Significantly, PREI established that to be a "sham," litigation

must meet a two-part definition. First, the lawsuit must be

objectively baseless in the sense that no reasonable litigant

could realistically expect success on the merits. Only if

challenged litigation is objectively meritless may a court

examine the litigant's subjective motivation. Under this

second part of the definition, a court should focus on

whether the baseless suit conceals "an attempt to interfere

directly" with a competitor's business relationships, Noerr,

supra, at 144, through the "use of the governmental process

- as opposed to the outcome of that process - as an

anticompetitive weapon," Columbia v. Omni Outdoor

Advertising, Inc., 499 U.S. 365, 380 (1991). This two-tiered

process requires a plaintiff to disprove the challenged

lawsuit's legal viability before the court will entertain

evidence of the suit's economic viability.

It is unclear whether PREI distinguished or displaced the

sham litigation test first propounded in California Motor. Two

of our sister circuits, however, “reconcile” the two cases “by

reading them as applying to different situations. Professional

Real Estate Investors provides a strict two-step analysis to

assess whether a single action constitutes sham petitioning .

. . California Motor Transport deals with the case where the

defendant is accused of bringing a whole series of legal

proceedings.” USS–POSCO Indus. v. Contra Costa Cnty.

Bldg. & Const. Trades Council, AFL–CIO (“POSCO ”), 31

F.3d 800, 810–11 (9th Cir.1994); accord Primetime 24 Joint

Vent. v. Nat’l Broad. Co., 219 F.3d 92, 101 (2d Cir.2000).




RECENT EXPANSION OF NOERR-PENNINGTON

Two recent cases from the Seventh Circuit, Mercatus Group, LLC v. Lake Forest Hospital, 641 F.3d 834 (7th Cir. 2011) and Rubloff Development Group v. SuperValu, Inc. and Saint Consulting Group, 2013 U.S. Dist. LEXIS 15239 (D. Ill. 2013), illustrate the expansion of the Noerr-Pennington Doctrine.

Mercatus Group, LLC v. Lake Forest Hospital, 641 F.3d

834 (7th Cir. 2011)

In 2004, plaintiff-appellant Mercatus Group, LLC, began plans to construct a medical office center from which physicians could provide medical services in the Village of Lake Bluff, Illinois. Defendant-appellee Lake Forest Hospital (the "Hospital") is located in nearby Lake Forest. Mercatus' partner in the venture was Evanston Northwestern Healthcare ("ENH"), with which Mercatus planned to construct a number of such physician centers. The Hospital considered the proposed Mercatus Lake Bluff center a threat to its ability to compete in the local market for medical services. To protect itself from this threat, the Hospital launched a multi-pronged campaign designed to prevent Mercatus from opening the physician center. The Hospital lobbied members of the Lake Bluff Board of Village Trustees to deny Mercatus the approvals necessary to begin construction, launched a public relations campaign encouraging Hospital employees, donors and the local community to put political pressure on the Village Board to oppose the Mercatus center, told ENH to stay out of Lake Bluff, and made a number of derogatory statements about Mercatus to ENH and other healthcare providers. Further, the Hospital identified two Hospital-affiliated physician practice groups that planned to move their practices to the new Mercatus physician center and offered those groups various incentives not to do so. The Hospital's efforts were successful. Both physician practice groups pulled out of their conditional agreements with Mercatus, the Village Board denied Mercatus the approvals necessary to develop the physician center, and ENH terminated its business relationship with Mercatus. Mercatus never opened a physician center in Lake Bluff.

Noerr-Pennington

protects petitioning of

various village boards

and administrative

agencies in regard to

land use

development.




Mercatus brought this suit in federal district court, alleging that the Hospital had monopolized or attempted to monopolize alleged markets for "comprehensive physician services" and "diagnostic imaging services" in Eastern Lake County, Illinois, in violation of the Sherman Act, 15 U.S.C. § 2. 1 On the Hospital's motion, the district court dismissed some of Mercatus' claims against the Hospital for failure to state a claim. Mercatus Group LLC v. Lake Forest Hosp., 528 F. Supp. 2d 797 (N.D. Ill. 2007) ("Mercatus I"). Mercatus filed an amended complaint and, following extensive discovery, the district court granted the Hospital's motion for summary judgment on that amended complaint. Mercatus Group LLC v. Lake Forest Hosp., 695 F. Supp. 2d 811 (N.D. Ill. 2010) ("Mercatus II"). The district court concluded that the Hospital's efforts before the Village Board were protected from antitrust liability by the First Amendment right to petition the government for the redress of grievances. Id. at 818-21. As for the Hospital's other conduct, the court held that what it characterized as mere misrepresentations and disparaging comments were, as a matter of law, insufficient to give rise to antitrust liability. Id. at 823; see also Mercatus I, 528 F. Supp. 2d at 810 (dismissing part of original complaint on similar grounds). Mercatus' primary argument on appeal was that the Hospital's conduct in the Village Board proceedings was not protected by the First Amendment. Mercatus argued that this was because the Hospital allegedly made numerous misrepresentations and material omissions of fact to the Village Board that ultimately caused the Board to deny Mercatus permission to begin construction of the physician center. The Supreme Court has not yet explicitly spoken as to "whether and, if so, to what extent Noerr-Pennington permits the imposition of antitrust liability for a litigant's fraud or other misrepresentations." Professional Real Estate Investors, 508 U.S. at 61 n.6. Nevertheless, both of the sources cited in that footnote, Fed. R. Civ. P. 60(b)(3) and Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 86 S. Ct. 347, 15 L. Ed. 2d 247 (1965), support this formulation of the fraud exception. See Id. at 177 (concluding that proof that a party "obtained a patent by knowingly and willfully misrepresenting facts . . . would be




sufficient to strip that party of protection from the antitrust laws"); Id. at 179-80 (Harlan, J., concurring) (agreeing that antitrust liability may lie when a "patent is shown to have been procured by knowing and willful fraud" and when "monopolization is knowingly practiced under the guise of a patent procured by deliberate fraud"); Walsh v. McCain Foods Ltd., 81 F.3d 722, 726 (7th Cir. 1996) (to obtain relief from a judgment under Rule 60(b)(3), moving party must show, among other elements, that because of fraud or misrepresentation "it was prevented from fully and fairly presenting its case at trial"). The fraud exception is based on the Supreme Court's desire to protect the integrity of non-political governmental proceedings. For that reason, the fraud exception contains, in addition to its substantive components, a threshold procedural component: the exception does not apply at all outside of adjudicatory proceedings. See Allied Tube & Conduit Corp. v. Indian Head, 486 U.S. at 499-500 ("A publicity campaign directed at the general public, seeking legislation or executive action, enjoys antitrust immunity even when the campaign employs unethical and deceptive methods."); California Motor Transp. v. Trucking, 404 U.S. at 513 (noting that speech, even when it contains misrepresentations, is protected in the political arena"). "There is an emphasis on debate in the political sphere, which could accommodate false statements and reveal their falsity. In the adjudicatory sphere, however, information . . . is relied on as accurate for decision making and dispute resolving." Clipper Express v. Rocky Mountain Motor Tariff Bureau, Inc., 690 F.2d 1240, 1261 (9th Cir. 1982). As a result, fraudulent statements in the adjudicatory context "threaten the fair and impartial functioning of these agencies and do not deserve immunity from the antitrust laws." Id. Recognizing this threshold procedural requirement, the district court in this case concluded that the fraud exception did not apply because the proceedings before the Village Board were legislative (i.e., political) in nature. Mercatus II, 695 F. Supp. 2d at 821. The appeals court affirmed the district court decision, reasoning that even if the court assumed that the Hospital made material misrepresentations during and relating to the

A publicity

campaign directed

at the general

public, seeking

legislation or

executive action,

enjoys antitrust

immunity even when

the campaign

employs unethical

and deceptive

methods.




Village Board proceedings concerning Mercatus' physician center, such misrepresentations were legally irrelevant because those meetings were inherently political in nature. The same is true of the Hospital's public relations campaign, which was inextricably intertwined with the Hospital's efforts before the Board. As for the Hospital's contacts with ENH and other healthcare providers, those contacts constituted mere speech that were not actionable under the Sherman Act. Finally, the appeals court ruled that no reasonable trier of fact could conclude from this record that the Hospital's successful effort to convince physicians not to relocate their practices to Mercatus' proposed physician center constituted predatory conduct forbidden by the antitrust laws. Significantly, most of the conduct of which Mercatus complained was ruled a legitimate exercise of the Hospital's right to petition the government for redress, regardless of how dishonest or distasteful that conduct might have been. None of the remaining complained-of conduct, competition for key physicians, empty territorial statements to a competitor, and false derogatory statements about Mercatus, gives rise to liability under the antitrust laws, whether considered in isolation or taken together as a whole. In affirming the judgment of the district court, the appeals court said that to the extent Mercatus was harmed by the Hospital's actions, any remedies might arise under Illinois tort law, not federal antitrust law.

Rubloff Development Group, Inc. v. SuperValu, Inc. and

Saint Consulting Group, Inc., 2013 U.S. Dist. LEXIS

15239 (D. Ill. 2013)

In August of 2007, two groups of Mundelein residents who owned properties contiguous to the proposed shopping center filed suit against the Village of Mundelein and the members of the Plan Commission and the Board of Trustees in the Lake County Circuit Court. The plaintiffs were individual homeowners whose land bordered the proposed development to the north and two groups whose property bordered the development to the west. The lawsuits alleged violations of the property owners’ due process rights during




the Plan Commission and Board of Trustees public hearings, and other failures of these bodies to follow the law. These lawsuits were ultimately consolidated, and proceeded to a bench trial that lasted 11 days and continued through post-trial briefing requested by both parties. None of the defendants challenged the suit under Illinois Supreme Court Rule 137 as baseless, frivolous, or as interposed to cause unnecessary delay. In a 27-page decision, the court ruled that while perhaps a different group of elected officials would have reached a different conclusion, the Mundelein Board’s decision was not “irrational, arbitrary, or capricious.” Plaintiffs appealed. Rubloff then settled the consolidated lawsuit, explicitly acknowledging the risks of continued litigation. Rubloff made substantial concessions to adjoining landowners by reducing the size of the proposed Walmart, agreeing to construct berms to screen the homes, relocating the road bisecting the development, eliminating a loading dock, building a tall masonry wall to shield Walmart’s back-of-the-store operations, and paying each of the plaintiffs tens of thousands of dollars. In July, 2011, Rubloff sued Supervalu and Saint alleging antitrust violations, Racketeer Influenced and Corrupt Organizations Act (RICO) violations, tortious interference, fraud, abuse of process, and conspiracy to commit tortious and unlawful acts. In this lawsuit, plaintiff alleged that Saint, at the behest of SuperValu, “directed,” “orchestrated,” “spurred,” “funded” and “backed” citizen petitions in opposition to its developments in Mundelein and New Lenox, Illinois, which would have provided lease-hold space for Walmart. Further, plaintiff alleged that outside of two locations, the defendants operate in various states, including Illinois, and injure developers like plaintiffs in order to defeat the establishment of new Walmart stores that compete with SuperValu. After considering the defendants’ arguments in their respective motions to dismiss, the court dismissed Rubloff’s claims in their entirety. In its February 5, 2013 ruling, the court found that the First Amendment provided defendants

The Supreme Court

ruled that promoting

the adoption and

enforcement of laws

harmful to a

competitor is

protected as

petitioning under the

First Amendment to

the Constitution.




with immunity from certain governmental petitioning activities as described in the Noerr-Pennington doctrine. See Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961); United Mine Workers of Am. v. Pennington, 381 U.S. 657 (1965). The Court found the doctrine protected defendants for their admittedly misleading petitioning of various villages and administrative agencies regarding the development. It also found the accompanying public relations campaign regarding those activities similarly protected, citing Mercatus Group, LLC v. Lake Forest Hosp., 641 F.3d 834, 841, 844 (7th Cir. 2011) (noting that the doctrine provides absolute immunity for petitioning legislative and executive bodies, as well as the accompanying public relations campaigns, even if the campaigns employ unethical and deceptive methods). The Court also recognized, however, that fraudulent representations could destroy such immunity in adjudicative proceedings. Id. at 641 F.3d at 842. The Court examined the two main exceptions to such immunity (sham lawsuits and fraudulent misrepresentation) and determined that neither applied in this case because (1) any misrepresentations alleged in the Complaint were not material to the government’s (i.e., the judge’s) action in the litigation and, (2) since Rubloff had paid a substantial sum to settle the litigation, the litigation could not be objectively meritless as required by Professional Real Estate Investors, Inc. v Columbia, 508 U.S. 49, 60 (1993); see also New West, L.P. v. City of Joliet, 491 F.3d 717, 722 (7th Cir. 2007) (ruling that a lawsuit settled for a significant amount could not form the basis for the sham litigation exception). Rubloff’s chief argument was that California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508 (1972), provided the framework under which its case could succeed. That case, Rubloff argued, outlines an exception to Noerr-Pennington where there is a pattern of baseless, repetitive litigation made without respect to merit. California Motor Transport, 404 U.S. at 513, 515-516. The strictures of PREI (which was issued 21 years after California Motor Transport) require that to invoke the Noerr-Pennington “sham” litigation exception, legal claims filed by a competitor must be objectively meritless, and this requirement foreclosed such an exception




in this case. 1 Because Rubloff settled the lawsuits at issue for a substantial sum, the Court said the lawsuits could not be objectively meritless. See PREI, 508 U.S. 49, 60 n.5 (1993) (“A winning lawsuit is by definition a reasonable effort at petitioning for redress and therefore not a sham.”). The court believed the lawsuits at issue were additionally problematic for Rubloff because the Ninth Circuit, which Rubloff cited to for the “pattern” exception, does not see a “pattern” in so few lawsuits. See Amarel v. Connell, 102 F.3d 1494, 1519 (9th Cir. 1996) (ruling two lawsuits did not qualify as “a whole series of legal proceedings” which could potentially qualify for the California Motor Transport sham litigation exception, whereas the 29 lawsuits of USS-POSCO did constitute a “series” or “pattern”). The court agreed and did not find the lawsuits filed against Rubloff’s interests to constitute a whole series of legal proceedings for the purposes of the “pattern” exception. Rubloff argued that the court’s lens was too small: it should consider the litigation against Walmart that defendants conducted nationwide rather than just the two lawsuits it funded against the Rubloff Development, even though Rubloff was not involved in or affected by those other lawsuits. The court believed it more appropriate to refer directly to California Motor Transport, which noted that a successfully pled pattern exception would allege “not that competitors sought ‘to influence public officials,’ but that they sought to bar their competitors from meaningful access to adjudicatory tribunals and so to usurp that decision making

1 It is noteworthy that in Waugh Chapel South v. UFCW Local 27; 2013 WL 4505288 (4th Cir.,

August 26, 2013), the Appeals Court ruled that the UFCW's funding and directing of lawsuits

and administrative complaints against a developer of Wegman's (non-union) groceries was not

protected by First Amendment right to petition under the Noerr-Pennington Doctrine. The

Appeals Court found that the union had an illegal objective (engaging in a "secondary boycott,"

illegal under the Labor-Management Relations Act) and the litigation constituted a "sham"

under an analysis that considered the totality of circumstances. The Fourth Circuit held that the

totality of circumstances surrounding a pattern of litigation should be considered when a union

raises a Noerr-Pennington defense to accusations of illegal restraint of trade. In determining

whether petitioning activity (including lawsuits) constitute a "sham," the court considered (1) the

union's subjective motivation (i.e., to conduct an illegal secondary boycott); (2) the number of

lawsuits; (3) the frequency of the failure of the lawsuits; (4) the "objectively baseless" nature of

the lawsuits; and (5) the "suspicious circumstances" under which the lawsuits were withdrawn.

Litigation must be

objectively

baseless in order to

provide an

exception to the

Noerr-Pennington

protections.




process.” California Motor Transport, 404 U.S. at 511-512. Rubloff had not alleged it was a competitor of either defendant. Quite the opposite: it had steadfastly asserted that defendants’ intended target in all of this was its competitor, Walmart. In light of antitrust law’s strict insistence on the proper plaintiff in terms of antitrust standing and injury, the court thought it incongruous to expand the possible Noerr-Pennington exception (if it even exists in the Seventh Circuit) of California Motor Transport beyond the target of the anticompetitive behavior to collaterally affected victims like Rubloff. See Serfecz v. Jewel Food Stores, No. 92-C-4171, 1994 U.S. Dist. LEXIS 12239, at 27-28 (N.D. Ill. August 31, 1994) (“Where a more directly injured class of potential plaintiffs exists, we are left with very little leeway to address the likelihood of whether any members of that class would actually bring suit. While the result may be somewhat frustrating in this particular case, it does provide a straightforward rule of law.”) The court also believed that California Motor Transport must be read in the light of more recent U.S. Supreme Court precedent. Rubloff insisted that undertaking litigation without regard to merit is enough to invoke the exception, but that is precisely what PREI declined to do. See PREI, 508 U.S. at 56 (Plaintiff “invites us to adopt an approach under which . . . indifference to outcome . . . would expose a defendant to antitrust liability under the sham exception. We decline plaintiff’s invitation.”). Defendants’ “pattern” of sham litigation consisted of two lawsuits that plaintiffs paid handsomely to settle, and were therefore not meritless. The court found that the remainder of defendants’ petitioning activity involved petitioning legislative and executive bodies, and its accompanying public relations campaign, which is protected by Noerr-Pennington. Mercatus, 641 F.3d at 841, 844. The court ultimately dismissed Rubloff’s claims against Supervalu and Saint, upholding the defendants’ right to engage in petitioning activity under the First Amendment and the Noerr-Pennington Doctrine. Thereafter, Rubloff waived its right to appeal and the case officially ended.




SLAPP LAWSUITS

The Rubloff and Mercatus cases expanded the constitutional right to participate in government and civic affairs, speak freely on public issues, and petition government officials for redress of grievances. Yet individuals and community groups are sued for exercising these constitutional rights through “Strategic Lawsuits Against Public Participation” (SLAPP), which seek to intimidate citizens into silence by “slapping” them with expensive litigation. Generally, a SLAPP is a civil complaint or counterclaim filed against individuals or organizations, arising from communications to government or speech on an issue of public interest or concern. SLAPPs are often brought by corporations, real estate developers, government officials and others against individuals and community groups who oppose them on issues of public concern. SLAPP filers frequently use lawsuits based on ordinary civil claims such as defamation, conspiracy, malicious prosecution, nuisance, interference with contract and/or economic advantage, as a means of transforming public debate into lawsuits, in order to frighten or intimidate citizens who lack the resources to defend against such litigation. Ultimately, most SLAPPs are not legally successful. Nevertheless, while most SLAPPs do not succeed in court, they "succeed" in the public arena. This is because defending a SLAPP, even when the legal defense is strong, requires a substantial investment of money, time, and resources. The resulting effect "chills" public participation in, and open debate on, important public issues. This chilling effect is not limited to the SLAPP defendants -- other people refrain from speaking out on issues of public concern because they fear being sued for what they say. The filing of a SLAPP also impedes resolution of the public matter at issue by removing the parties from the public decision-making forum, where both the cause and resolution of the dispute can be determined, and placing them before a court, where only the alleged "effects" of the public controversy may be determined. For example, imagine that a company asks for a zoning variance to place an incinerator

“Strategic Lawsuits

Against Public

Participation”

(SLAPP), seek to

intimidate citizens

into silence by

“slapping” them

with expensive

litigation.




in a residential area. When local residents object to the city council, the company sues them for "interference with contract." The judge hearing the suit cannot decide the real issues -- the location of the incinerator -- but will have to spend considerable judicial resources to decide the side issues of the alleged "damages" or other consequences of the public debate on the real issues. Every year, thousands of people are sued for participating in government or for speaking out on public issues. SLAPP targets have been sued for engaging in a wide variety of protected speech and protected expression activities, including writing a letter to the editor, circulating petitions, telephoning a public official, reporting police misconduct, erecting a sign or displaying a banner on their property, complaining to school officials about teacher misconduct or unsafe conditions in the school, speaking at a public meeting, reporting unlawful activities, testifying before Congress or state legislatures, speaking as an officer of an active public interest group, and filing a public interest lawsuit. To protect against SLAPP lawsuits, the legislatures in many states have adopted anti-SLAPP statutory laws that provide expedited mechanisms for dismissing such lawsuits and recovering the legal fees associated with the effort to dismiss. The intent of the legislatures in adopting such statutes is to dissuade people from filing SLAPP suits in the first place, by fast-tracking their dismissal and creating the prospect of an award to the defendants of their legal fees incurred in defending against such suits. Indeed, in many states payment by the plaintiffs of legal fees incurred by the defendants is required if the defendants prevail in dismissing the SLAPP suit. At present, there are twenty-five states with anti-SLAPP statutes in place, and ten states with legislative bills pending to create anti-SLAPP statutes. In addition, there are two states where the equivalent of anti-SLAPP protection has been created by the judiciary in common law case authority. Clearly, the trend across the nation is to continue to advance anti-SLAPP protection and penalties for violation of such laws.




Legal Authority

Cases

Eastern Railroad Presidents Conference et al. v. Noerr Motor Freight, Inc., et al., 365 U.S. 127 (1961).

United Mine Workers v. Pennington et al., 381 U.S. 657 (1965).

California Motor Transport Co. et al. v. Trucking Unlimited et al., 404 U.S. 508, 513 , 512 (1972).

Professional Real Estate Investors, Inc., and Kenneth F. Irwin (collectively, PREI) v. Columbia Pictures Industries, Inc., and seven other major motion picture studios (collectively, Columbia), 508 U.S. 49 (1993).

Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 380 (1991).

Mercatus Group, LLC v. Lake Forest Hospital, 641 F.3d 834 (7th Cir. 2011).

Rubloff Development Group v. SuperValu, Inc. and Saint Consulting Group, Inc., 2013 U.S. Dist. LEXIS 15239 (D. Ill. 2013).

Johnson v. Avery, 393 U.S. 483, 485; Ex parte Hull, 312 U.S. 546, 549 (1969).

USS–POSCO Industries and BE&K Construction Company v. Contra Costa County Building & Construction Trades Council, AFL–CIO, 31 F.3d 800, 810–11 (9th Cir.1994)

Primetime 24 Joint Venture v. National Broadcasting Co., 219 F.3d 92, 101 (2d Cir.2000).

Mercatus Group LLC v. Lake Forest Hospital, 528 F. Supp. 2d 797 (N.D. Ill. 2007).

Mercatus Group LLC v. Lake Forest Hospital, 695 F. Supp. 2d 811 (N.D. Ill. 2010).

Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 86 S. Ct. 347, 15 L. Ed. 2d 247 (1965).

Walsh v. McCain Foods Ltd., 81 F.3d 722, 726 (7th Cir. 1996).

Allied Tube & Conduit Corp. v. Indian Head, 486 U.S. at 499-500 (1988).

Clipper Express v. Rocky Mountain Motor Tariff Bureau, Inc., 690 F.2d 1240, 1261 (9th Cir. 1982).

New West, L.P. v. City of Joliet, 491 F.3d 717, 722 (7th Cir. 2007).

Waugh Chapel South LLC v. United Food & Commercial Workers Union Local 27, 855 F.Supp.2d 476, 488 n.18 (N.D. Md. 2012).

Waugh Chapel South v. UFCW Local 27; 2013 WL 4505288 (4th Cir., August 26, 2013).

Amarel v. Connell, 102 F.3d 1494, 1519 (9th Cir. 1996).

Serfecz v. Jewel Food Stores, No. 92-C-4171, 1994 U.S. Dist. LEXIS 12239, at 27-28 (N.D. Ill. August 31, 1994).

Statutes

Sherman Antitrust Act, as amended, 26 Stat. 209, 15 U.S.C. 1, 2 (1958 ed.).

Walsh-Healey Act, as amended, 49 Stat. 2036. 41 U.S.C. 35 et seq. (1958 ed.).

Other

National Bituminous Coal Wage Agreement of 1950, executed by Phillips and the United Mine Workers of America on October 1, 1953, as amended, 26 Stat. 209, 15 U.S.C. 1, 2 (1958 ed.).

Fed. R. Civ. P. 60(b)(3).


Documents

Protecting Market Share 11.20.14 REVISED