Opinion ID: 770594
Heading Depth: 4
Heading Rank: 3

Heading: The Plaintiffs' Lawsuit as a Justification

Text: 58 In attempting to justify their eight-month investigation, the HUD officials rely mainly on the lawsuit filed by the plaintiffs' neighborhood coalition in April 1993. An unsuccessful state-court lawsuit, the officials argue, can violate the FHA if it is filed with a discriminatory motive; their theory is essentially that the First Amendment does not protect litigants who lose. Because the state court denied the plaintiffs their requested relief in February 1994, the HUD officials maintain that, after HRI filed its complaint in November 1993, they were entitled to investigate the plaintiffs' speech in opposition to the Bel Air project to determine whether they had filed their suit with an unlawful discriminatory motive. Cf. Wisconsin v. Mitchell, 508 U.S. 476, 489 (1993). In making this argument, the officials rely principally on Bill Johnson's Restaurants, Inc. v. NLRB, 461 U.S. 731 (1983), and Diamond Walnut Growers, Inc. v. NLRB, 53 F.3d 1085 (9th Cir. 1995), two cases we discuss below. 59 In dissecting the serious flaws in the officials' argument, it is necessary to examine carefully the protection that the First Amendment affords to individuals who petition the government for redress of grievances through the courts. In the end, however, we conclude that whether or not the HUD officials had the right to conduct a limited investigation at the outset, and whether or not in some circumstances a lawsuit may be stripped of its First Amendment protection simply because the plaintiffs fail to prevail on the merits, the investigation that the HUD officials conducted exceeded the bounds of reasonable governmental action and violated the plaintiffs' First Amendment rights. 60
61 The Supreme Court has described the right to petition as among the most precious of the liberties safeguarded by the Bill of Rights and intimately connected, both in origin and in purpose, with the other First Amendment rights of free speech and free press. United Mine Workers, Dist. 12 v. Illinois State Bar Ass'n, 389 U.S. 217, 222 (1967). It is cut from the same cloth as the other guarantees of [the First] Amendment, and is an assurance of a particular freedom of expression. McDonald v. Smith, 472 U.S. at 482. 62 The Court has further established that the right to petition extends to all departments of the government, including the executive department, the legislature, agencies, and the courts. California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 510 (1972). California Motor Transport involved Noerr-Pennington immunity, a doctrine initially promulgated to protect efforts to influence legislative or executive action from liability under the Sherman Act.  Oregon Natural Resources Council v. Mohla, 944 F.2d 531, 533 (9th Cir. 1991) (citing Noerr, 365 U.S. 127; United Mine Workers v. Pennington, 381 U.S. 657 (1965)). While the NoerrPennington doctrine originally arose in the antitrust context, it is based on and implements the First Amendment right to petition and therefore, with one exception we discuss infra (see Section I.B.3.b), applies equally in all contexts. See Manistee Town Ctr., 227 F.3d. at 1092 (The immunity is no longer limited to the antitrust context . . . .) (citing Boulware v. Nevada Dep't of Human Resources, 960 F.2d 793, 800 (9th Cir. 1992); Evers v. County of Custer, 745 F.2d at 1204)); ONRC v. Mohla, 944 F.2d at 533-34 (The protection has been expanded to apply to petitions to courts and administrative agencies, as well as to preclude claims other than those brought under the antitrust laws.) (citations omitted). 63 The Noerr-Pennington doctrine ensures that those who petition the government for redress of grievances remain immune from liability for statutory violations, notwithstanding the fact that their activity might otherwise be proscribed by the statute involved. See Professional Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 56 (1993). Noerr-Pennington is a label for a form of First Amendment protection; to say that one does not have NoerrPennington immunity is to conclude that one's petitioning activity is unprotected by the First Amendment. 14 With respect to petitions brought in the courts, the Supreme Court has held that a lawsuit is unprotected only if it is a sham -i.e., objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits. Id. at 60. See also California Motor Transp., 404 U.S. at 513 (stating that First Amendment protection would not extend to a pattern of baseless, repetitive claims . . . [that lead] the factfinder to conclude that the administrative and judicial processes have been abused). 64 In Professional Real Estate Investors, the Supreme Court rejected the contention that regardless of a lawsuit's objective merit an antitrust defendant can be found liable if the plaintiff showed that it brought the suit for a predatory motive. See 508 U.S. at 55-56. Both requirements must be met to establish antitrust liability: an objectively reasonable effort to litigate cannot be sham regardless of subjective intent. Id. at 57. Furthermore, proof of a lawsuit's objective base-less-ness is the threshold prerequisite: a court may not even consider the defendant's allegedly illegal objective unless it first determines that his lawsuit was objectively baseless. Id. at 55, 60-61. 65 The fact that a litigant loses his case does not show that his lawsuit was objectively baseless for purposes of Noerr-Pennington immunity: 66 A winning lawsuit is by definition a reasonable effort at petitioning for redress and therefore not a sham. On the other hand, when the antitrust defendant has lost the underlying litigation, a court must resist the understandable temptation to engage in post hoc reasoning by concluding that an ultimately unsuccessful action must have been unreasonable or without foundation. Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421-22 (1978)). Accord Hughes v. Rowe, 449 U.S. 5, 14-15 (1980) (per curiam). The court must remember that [e]ven when the law or the facts appear questionable or unfavorable at the outset, a party may have an entirely reasonable ground for bringing suit. Christiansburg, supra, 434 U.S. at 422. 67 508 U.S. at 60 n.5 (citations modified). Professional Real Estate Investors itself involved a copyright action that had been defeated on summary judgment. See id. at 52-53. Because this action was arguably `warranted by existing law' or at the very least was based on an objectively`good faith argument for the extension, modification, or reversal of existing law,'  the Supreme Court affirmed the lower court's decision rejecting the antitrust counterclaim. Id. at 65 (quoting Fed. R. Civ. P. 11). See also Liberty Lake Invs., Inc. v. Magnuson, 12 F.3d 155, 157-58 (9th Cir. 1993). We do not lightly conclude in any Noerr-Pennington case that the litigation in question is objectively baseless, as doing so would leave that action without the ordinary protections afforded by the First Amendment, a result we would reach only with great reluctance. 15 68 Applying these principles to the present case, it follows that the plaintiffs' state-court lawsuit could have amounted to a discriminatory housing practice only in the event that (1) no reasonable litigant could have realistically expected success on the merits, and (2) the plaintiffs filed the suit for the purpose of coercing, intimidating, threatening, or interfering with a person's exercise of rights protected by the FHA. Because, in the present case, the first requirement cannot be sustained, we need not even consider the second. Objective baselessness is the sine qua non of any claim that a particular lawsuit is not deserving of First Amendment protection. 16 The lawsuit filed by the plaintiffs was unquestionably not objectively baseless. Far from it: it challenged a rather egregious conflict of interest by a person who was simultaneously a member of both the Zoning Adjustment Board and the board for the developer seeking the Bel Air use permit. As the director of HUD's Office of Investigations ultimately concluded, the plaintiffs' action would have constituted a successful legal claim but for the court's application of the good faith exception under California law. 69 The HUD officials protest that they could not ascertain from the face of HRI's administrative complaint whether the plaintiffs' lawsuit in fact had an objective basis. The complaint did not mention the conflict of interest that lay at the heart of the litigation. Instead, the complaint simply stated that (1) the plaintiffs had filed a lawsuit seeking to stop RCD from receiving a use permit for the Bel Air project, (2) they had failed in their efforts to obtain a preliminary injunction, and (3) HRI believed that the plaintiffs were blocking the Bel Air project because they perceive the primary residents of the facility will be the mentally disabled or the disabled through substance abuse. The officials argue that while it did not say so explicitly, HRI's complaint at least raised the possibility that the plaintiffs' lawsuit was objectively baseless, that its sole purpose was to cripple the Bel Air project by causing undue delay and the imposition of substantial legal costs on its supporters, and therefore that the state-court action constituted a discriminatory housing practice under the FHA. 17 The officials contend that on that basis they were entitled, and indeed required by 3610(a)(1)(B) of the FHA, to investigate this matter. 70 We agree that the San Francisco Office was justified in accepting HRI's complaint. Furthermore, the mere fact that the officials provided the plaintiffs with a copy of HRI's complaint and informed them of their rights and duties under the FHA, pursuant to 3610(a)(1)(B)(ii), did not in itself violate the plaintiffs' rights under the First Amendment. As we have explained earlier, however, the critical issue is not whether the HUD officials were justified in accepting HRI's complaint and initiating some form of limited investigation, but whether the manner in which they actually conducted their eight month investigation violated the plaintiffs' First Amendment rights. 71 This court has held that when an action involves the right to petition governmental bodies under Noerr-Pennington, it is necessary to apply a heightened level of protection . . . to avoid `a chilling effect on the exercise of this fundamental First Amendment right.'  ONRC v. Mohla, 944 F.2d at 533 (quoting Franchise Realty Interstate Corp. v. San Francisco Local Joint Executive Bd., 542 F.2d 1076, 1082 (9th Cir. 1976)). Because the plaintiffs' lawsuit could have been actionable under the FHA if and only if it were a sham, the officials were obligated to first determine that the suit was objectively baseless before proceeding with any potentially chilling investigation into the plaintiffs' protected speech and other petitioning activity -even for the stated purpose of determining whether the plaintiffs had filed the suit with an unlawful discriminatory intent. As with the methodology mandated by the Supreme Court for judicial review of lawsuits, see Professional Real Estate Investors , 508 U.S. at 6061, a determination of objective baselessness of the litigation is a constitutionally required precondition to any investigation into the nature of the plaintiffs' advocacy. 72 The HUD officials completely failed to satisfy this threshold requirement. From the time they initiated their investigation until the time they submitted their final report to the Washington office, the officials made little or no effort to investigate the basis for the plaintiffs' suit. Instead, their investigation focused almost exclusively on what the officials considered to be the plaintiffs' discriminatory speech. Director Gillespie's two-page, single-spaced letter of July 1994 broadly asserted HUD's purported jurisdiction to investigate speech advocating illegal acts and cited reprovingly the plaintiffs' news articles which referenced the mental disability of the Bel Air project's intended residents; it did not, however, mention the plaintiffs' lawsuit once. Likewise, investigator Smith did not ask the plaintiffs any questions about the lawsuit during his interviews. Most striking, the officials completed and submitted to HUD headquarters a final investigative report that failed to include any information about the plaintiffs' lawsuit more substantial than what was set forth in HRI's complaint. After receiving the San Francisco Office's investigative materials, and analysis, and its finding of reasonable cause to believe that the plaintiffs had violated the FHA, Director Pratt in the Office of Investigations felt compelled to direct the San Francisco Office to supplement the report with information and documents on the lawsuit. This is in spite of the fact that on February 8, 1994, the plaintiffs' attorney had sent investigator Lee a memorandum from the Berkeley City Manager acknowledging the conflict of interest that was the subject of the plaintiffs' action. 73 These undisputed facts show that the San Francisco HUD officials conducted their eight-month investigation, primarily if not exclusively, into and in response to the plaintiffs' purportedly unlawful speech and not in connection with their state-court lawsuit. Having ignored the factual and legal basis for that litigation throughout, and instead having taken a course certain to chill the exercise of the plaintiffs' First Amendment rights, the officials may not now argue that their investigation was justified as a means of determining whether the plaintiffs had violated the FHA by filing a sham lawsuit. 74
75 The HUD officials strongly argue, however, that most of the investigatory period occurred after the state court entered judgment against the plaintiffs, and because of that adverse judgment there was no need for the officials to inquire into the lawsuit's objective basis. This argument is based on the theory that the Noerr-Pennington sham rule that protects all but frivolous suits applies in antitrust cases only and therefore does not apply to the plaintiffs' lawsuit. The officials assert that a decision from the realm of labor law, Bill Johnson's Restaurants, Inc. v. NLRB, 461 U.S. 731 (1983), rather than Noerr-Pennington, sets forth the appropriate rule for the case before us. Under Bill Johnson's, according to the HUD officials, if a plaintiff loses its lawsuit, all that it is necessary to show is that the suit was filed with a discriminatory motive; whether or not there was an objective basis for the legal action is immaterial. 76 In Bill Johnson's a waitress filed unfair labor practice charges with the National Labor Relations Board (NLRB), alleging that she had been fired for her efforts to organize a union. 461 U.S. at 733. The restaurant sued her in state court, alleging that while picketing she had harassed customers, blocked access to the restaurant, threatened public safety, and libeled the restaurant in her leaflets. Id. at 734. The waitress then filed a second charge with the NLRB, alleging that the restaurant had violated 29 U.S.C. 158(a)(1) of the National Labor Relations Act (NLRA), which makes it an unfair labor practice for an employer to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed under that act. See 461 U.S. at 734-35. The NLRB found that the restaurant's lawsuit lacked a reasonable basis in fact and was filed to penalize the waitress for engaging in protected activity, and it ordered the restaurant to withdraw its state-court complaint and undertake a number of additional remedial measures. Id. at 737. 77 The Supreme Court vacated and remanded. It observed that 158(a)(1) was a broad, remedial provision intended to guarantee employees the ability to enjoy their rights under the NLRA, and that [a] lawsuit no doubt may be used by an employer as a powerful instrument of coercion or retaliation. Id. at 740. On the other hand, the Court wrote, the right of access to the courts is an aspect of the First Amendment right to petition the Government for redress of grievances. Id. at 741 (citing California Motor Transp., 404 U.S. at 510). It cited its construction of the antitrust laws as not prohibiting the filing of a lawsuit, regardless of the plaintiff's anticompetitive intent or purpose in doing so, unless the suit was a `mere sham' filed for harassment purposes. Id. (citing California Motor Transp., 404 U.S. at 511). The NLRA had to be construed with a similar sensitivity to these First Amendment values, the Court said. Id. It therefore concluded that the California Motor Transport rule for sham litigation applied to the NLRA as well. The NLRB could enjoin a statecourt lawsuit as an unfair labor practice only if the employer was prosecut[ing] a baseless lawsuit with the intent of retaliating against an employee for the exercise of rights protected by [S 158]. Id. at 744. An injunction would be improper if there was any realistic chance that the plaintiff's legal theory might be adopted. Id. at 747. 78 Notwithstanding the foregoing analysis and its affirmance of the principles set forth in California Motor Transport, the Court in Bill Johnson's then went on to draw a distinction with respect to the NLRB's right to impose remedies for the filing of state-court lawsuits that were pending and those that had concluded in a judgment adverse to the plaintiffs. The latter lawsuits, the Court stated, did not receive the same broad immunity from NLRB action as the former. Once the plaintiff lost its lawsuit, the NLRB could consider the matter further and, if it is found that the lawsuit was filed with retaliatory intent, . . . find a violation and order appropriate relief. Id. at 749. Such NLRB action was permissible because at that point the employer has had its day in court,[and] the interest of the state in providing a forum for its citizens has been vindicated. Id. at 747. We would ordinarily be tempted to treat these statements in Bill Johnson's as dicta, because they were not pertinent to the case before the Court and because in Professional Real Estate Investors, decided ten years later, the Court did not even mention the Bill Johnson's statements when holding that unsuccessful lawsuits receive the traditional protection described in California Motor Transport, specifically including the requirement of objective baselessness. 18 Whatever we might otherwise make of the apparently contradictory positions announced by the Court, however, this circuit is not free to ignore the Bill Johnson's statements. On the basis of those statements, we have rejected an employer's argument that the NLRB erred in failing to determine whether a libel suit, which did not survive a demurrer in state court, was baseless. See Diamond Walnut Growers, Inc. v. NLRB, 53 F.3d 1085, 1088 (9th Cir. 1995). In that case we held that bringing an action that proves unmeritorious may constitute an unfair labor practice, even though the suit did not lack a reasonable basis in law or fact at the time it was filed. Id. We are bound by Diamond Walnut and therefore by the Bill Johnson's statements. 79 Citing Bill Johnson's and Diamond Walnut , the HUD officials argue that a person would violate the FHA if he brought an unsuccessful state court action to deter another person, or group of persons, from exercising their federally protected rights -e.g. to keep them from moving into the neighborhood. Because the plaintiffs ultimately lost their state-court lawsuit, the officials argue that they acted properly in investigating the plaintiffs' opposition to the Bel Air project to determine whether they had filed that action with a discriminatory motive. 19 80 The HUD officials do not adequately explain why the Bill Johnson's and Diamond Walnut rule which is applicable in NLRA cases should apply with respect to the FHA or to other statutes generally. They contend that the holding in Professional Real Estate Investors is limited to the antitrust context, whereas the statements in Bill Johnson's establish the rule for meritless state court suits in other contexts. The officials get the point exactly backwards. As we have discussed, this court has applied the First Amendment rationale of the Noerr-Pennington doctrine broadly to claims not involving antitrust law. See Manistee Town Ctr., 227 F.3d. at 1092 ; Boulware, 960 F.2d at 800; ONRC v. Mohla, 944 F.2d at 533-Indeed, in Evans v. County of Custer we cited Noerr in holding that the first amendment's protection of the right to petition the government for redress of grievances encompasses the right of homeowners to challenge such property-related decisions by local government as road access rules. 745 F.2d at 1204. Adopting the theory advanced by the HUD officials would thus conflict with our prior case law which protects the First Amendment right of citizens to engage in petitioning activity, including the filing of lawsuits with an objective basis in fact or law, even if they ultimately prove unsuccessful. Restricting the basic Noerr-Pennington principles to antitrust cases, as the HUD officials urge, would contravene our cases applying the Noerr-Pennington sham rule in all but the NLRA context. 20 81 Indeed, it is the NLRA cases that we treat differently from all others with respect to the Noerr-Pennington sham exception. The reason is simple. The First Amendment rights of employers in the context of [the] labor relations setting are limited to an extent that would rarely, if ever, be tolerated in other contexts. See NLRB v. Gissel Packing Co. , 395 U.S. 575, 617 (1969). In Gissel Packing the Supreme Court held that employer speech that constitutes an unfair labor practice under the NLRA does not receive full First Amendment protection. 21 The employer's right of expression has to be balanced against the equal rights of the employees to associate freely, giving special consideration to the economic dependence of the employees on their employers. Id. at 617. See also NLRB v. Associated Gen. Contractors, Inc., 633 F.2d 766, 772 n.9 (9th Cir. 1980) (Any attempt to reconcile an asserted governmental interest in disclosure with First Amendment rights must be made in the context of the labor relations setting. Association that would otherwise be protected may be regulated if necessary to protect substantial rights of employees or to preserve harmonious labor relations in the public interest.) (citation omitted). The NLRB is an agency charged with the regulation of union elections, the debate between employers and employees, and other related speech and conduct. Regulations controlling such expressive activity would almost certainly be invalid outside the labor relations setting. 82 In sum, the HUD officials would transform an exception that applies only to NLRB regulation of unfair labor practices into a rule of general applicability. They cite no cases that have so extended the Bill Johnson's rule, and we have found none through our own research. Moreover, despite the present argument of the officials made for purposes of litigation, the director of HUD's Office of Investigations in Washington acknowledged, in finding no reasonable cause to proceed, that when a lawsuit is premised on a reasonable basis in fact or in law, it is protected by the First Amendment. We therefore conclude, as we have concluded in other contexts (including in the context of the petitioning activity of homeowners), that the principles embodied in the NoerrPennington doctrine apply to this case. That doctrine protects losing as well as winning lawsuits, so long as they are not objectively baseless. Thus, for the reasons explained earlier, the HUD officials' failure to investigate the objective basis for the plaintiffs' lawsuit rendered its investigation into the plaintiffs' advocacy unconstitutional. 83