Opinion ID: 374813
Heading Depth: 1
Heading Rank: 2

Heading: the hahn complaint

Text: 4 Hahn's amended complaint alleged claims for relief against Codding for violation of the Sherman Act and the California antitrust laws, as well as under common law theories of defamation and intentional interference with contractual relations. Since jurisdiction of the state law claims is pendent to the Sherman Act claims, it is only the Sherman Act claims which concern this court. In a detailed complaint, 3 Hahn describes the history of the urban renewal project in Santa Rosa, his selection as developer of the shopping center, and Codding's successful efforts at blocking the development. 5 In 1961, Santa Rosa adopted its urban renewal plan. Under Phase I of the plan several public buildings, including a new city hall, library, post office, and Federal Building, were constructed. After two major earthquakes in 1969, the plan was changed to include those downtown areas which had been damaged the most severely. The changes were referred to as Phase II. With Phase II, an additional thirty acres of land was acquired and cleared for redevelopment. Some ten acres of this land was sold to private businesses for construction of office and commercial buildings. In 1971, the Agency decided to use the remainder of the land for a regional shopping center. In March of 1972, Hahn was selected to develop the plan for the shopping center (over Codding). 6 After considerable planning, it was decided that the shopping center needed to be expanded and more land acquired. This is Phase III of the urban renewal plan. While Phase II was financed to a large extent by federal funds, no comparable financial assistance was available for Phase III. 7 Under the agreement between the Agency and Hahn for development of the shopping center, the Agency is responsible for clearing and preparing the land. The Agency needs approximately fifteen million dollars to finance this acquisition and preparation prior to transferring the shopping center site to Hahn. Since federal money is, on the most part, unavailable, the Agency must issue bonds to raise the necessary financing. 8 The Agency is authorized to issue parking lease revenue bonds, tax allocation bonds, or a combination thereof. The issuance of such bonds and their successful sale is dependent upon an unqualified opinion of bond counsel that the proposed bonds would be valid and enforceable. If there is any litigation challenging the Agency action or the security for repayment, regardless of how frivolous or baseless, then bond counsel cannot give an unqualified opinion and the bonds cannot be issued. 9 As previously explained, both Hahn and Codding are commercial real estate developers who are involved with the planning, development, construction, and management of commercial shopping centers. Hahn claims that the relevant market for purposes of this suit is the planning, development, construction, and management of commercial regional shopping centers in Sonoma County, California. 4 Hahn claims that Codding possesses dominant power within this market through its operation and control of the only major shopping centers, several smaller neighborhood or community centers, and two of the three sites suitable for the construction of a regional shopping center in close vicinity to Santa Rosa. 5 10 Hahn alleges that Codding has acted in concert with several others 6 for the purpose of maintaining its monopoly and eliminating the actual and potential competition of Hahn's proposed regional shopping center. The primary thrust of Hahn's action is contained in the allegation that Codding and the other conspirators have filed and prosecuted a series of overlapping, repetitive and baseless lawsuits against the City of Santa Rosa, the Agency, HUD, and plaintiff, with or without probable cause, and regardless of the merits of the claims asserted. . . . This has been done with knowledge that Hahn's proposed shopping center could only proceed if necessary financing was secured by the issuance of bonds. And also with knowledge that the mere pendency of a lawsuit would preclude approval by bond counsel which is necessary before the bonds could be issued. Hahn states that Codding has filed nine, as well as covertly financing and underwriting four more, lawsuits, challenging various aspects of the downtown shopping center. 7 11 Hahn's complaint contains further allegations charging that Codding has usurped to itself the sole power to determine the future of downtown Santa Rosa. By filing the series of lawsuits, Codding has expropriated the authority which formerly rested in the Agency and the City Council to determine the nature and scope of the urban renewal plan. Codding has publicized his intent to file lawsuits challenging every significant step in the renewal process, and that his trial strategy was to delay or postpone judicial resolution of the claims. And, Codding has assertedly made known the fact that the lawsuits and his opposition would be withdrawn if Hahn's shopping center were eliminated from the downtown plan.
12 The court below concluded that Codding's involvement in the lawsuits was protected activity under the Noerr-Pennington doctrine. See n.1, supra. Moreover, the court found that Hahn had failed to state a claim for relief which would come within the sham exception 8 to the broad immunity afforded by the doctrine. To understand the scope of the Noerr-Pennington doctrine and the sham exception, it is necessary to trace the doctrine's evolution through the Supreme court cases which have developed it. 9 13 In Eastern Railroad Conference v. Noerr Motor Freight, 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961), a group of trucking companies sued a group of railroads, claiming that the railroads had conspired to restrain trade and monopolize the long-distance freight business. The conspiracy claim was based on the allegation that the railroads had conducted a publicity campaign against the trucking industry designed to foster the adoption and retention of laws and law enforcement practices destructive of the trucking business. 365 U.S. at 129, 81 S.Ct. at 525. More particularly, it was claimed that the railroads had attempted to influence legislation and had even persuaded the Governor of Pennsylvania to veto a bill which was favorable to the trucking industry. The Supreme Court found it clear that 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 a monopoly. 10 365 U.S. at 136, 81 S.Ct. at 529. Moreover, the Court said that the legality of the publicity campaign was not affected by any anticompetitive purpose the railroads may have had. While laying out this exemption from the antitrust laws, the Court also noted that there was an exception where the activities were a mere sham to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor. 365 U.S. at 144, 81 S.Ct. at 533. 14 The basic antitrust immunity established by Noerr was reaffirmed in United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965). In cooperation with union officials, several large coal companies attempted to eliminate the competition of smaller coal companies by persuading the Secretary of Labor to set a higher minimum wage for companies selling to the TVA. In reversing a jury verdict which had been, in part, based on this, the Court stated: 15 Joint efforts to influence public officials do not violate the antitrust laws even though intended to eliminate competition. Such conduct is not illegal, either standing alone or as part of a broader scheme itself violative of the Sherman Act. 16 381 U.S. at 670, 85 S.Ct. at 1593. 17 Seven years later, in California Motor Transport v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972), the Supreme Court held that the Noerr-Pennington doctrine applied to attempts to influence adjudicative bodies. A group of truckers had allegedly conspired together to deter competitors from obtaining new or expanded operating rights from the California Public Utilities Commission and the Interstate Commerce Commission by opposing every such application, regardless of the merits. Writing for the Court, Justice Douglas made clear that the immunity afforded by Noerr-Pennington was grounded in the First Amendment rights of association and petition. Although the antitrust exemption was extended in Trucking Unlimited, the Court found that the plaintiff's complaint was improperly dismissed since a cause of action had been stated under the sham exception. Justice Douglas did not attempt to define the parameters of the sham exception, but instead listed several examples of activity which may come within it. 11 The most important example for our purposes was a pattern of baseless, repetitive claims. 404 U.S. at 513, 92 S.Ct. at 613. The critical allegation in Trucking Unlimited was that the conspirator-truckers had used their power, strategy, and resources to harass and deter (their competitors) in their use of administrative and judicial proceedings so as to deny them 'free and unlimited access' to those tribunals. 404 U.S. at 511, 92 S.Ct. at 612. 18 In Otter Tail Power Co. v. United States, 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359 (1973), Otter Tail, an electric utility, had attempted to monopolize, and had monopolized, the retail distribution of power by preventing communities where its retail distribution franchise had expired from replacing it with a municipal distribution system. One of the means which Otter Tail had utilized was to institute and support litigation designed to prevent or delay the establishment of municipal systems. The district court had held that the Noerr-Pennington immunity did not protect Otter Tail's litigation efforts because the doctrine only applied to efforts of influencing the legislative or executive branches of government. The Supreme Court remanded this part of the district court's decision with the following observation: 19 That was written before we decided California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 513 (92 S.Ct. 609, 613, 30 L.Ed.2d 642) where we held that the principle of Noerr may also apply to the use of administrative or judicial processes where the purpose to suppress competition is evidenced by repetitive lawsuits carrying the hallmark of insubstantial claims and thus is within the 'mere sham' exception announced in Noerr. 20 410 U.S. at 380, 93 S.Ct. at 1030-1031. On remand, the district court made the following findings: 21 . . . the repetitive use of litigation by Otter Tail was timed and designed principally to prevent the establishment of municipal electric systems and thereby to preserve defendant's monopoly . . . the litigation comes within the sham exception to the Noerr doctrine as defined by the Supreme Court in California Transport . . .. 22 United States v. Otter Tail Power Company, 360 F.Supp. 451 (D.Minn.1973). This was summarily affirmed by the Supreme Court. 417 U.S. 901, 94 S.Ct. 2594, 41 L.Ed.2d 207 (1974). 23 The Supreme Court decision which is most directly applicable to the present case is Vendo Co. v. Lektro-Vend Corp., 433 U.S. 623, 97 S.Ct. 2881, 53 L.Ed.2d 1009 (1977), where the Court interpreted how the sham exception applied to the judicial process. Unfortunately, neither this court, when it decided Franchise Realty, nor the court below, when it dismissed the present case, 12 had the benefit of the Court's decision in Vendo. Although there was no majority in Vendo, all three of the opinions discussed the sham exception in a manner which mandates its application to the present case. 24 In Vendo the plaintiff in an antitrust action in federal district court sought to enjoin the defendant's collection of a state court judgment. It was alleged that this judgment and the state court action which had awarded it, was part of the defendant's scheme to monopolize the relevant market. The precise issue confronting the Court was whether section 16 of the Clayton Act (15 U.S.C. § 26) was an expressly authorized exception to the Anti-Injunction Act. In addressing this question, it was necessary to also examine when court proceedings could form the basis of an antitrust suit. Justice Rehnquist, in the plurality opinion joined by two other justices, concluded that the Clayton Act was not an exception to the Anti-Injunction Act and, therefore, a federal court could not enjoin a state proceeding after it had been commenced. However, Justice Rehnquist did recognize that Otter Tail and Trucking Unlimited may be cited for the proposition that repetitive, sham litigation in state courts may constitute an antitrust violation and that an injunction may lie to enjoin future state-court litigation. 433 U.S. 635 n.6, 97 S.Ct. at 2889 n.6. Justice Blackmun wrote an opinion in which The Chief Justice joined, concurring in the result reached in the plurality's opinion but on totally different grounds. Section 16 of the Clayton Act was viewed by Justice Blackmun as an expressly authorized exception to the Anti-Injunction Act. However, relying upon Trucking Unlimited, Justice Blackmun reasoned that no injunction may issue against currently pending state-court proceedings unless those proceedings are themselves part of a 'pattern of baseless, repetitive claims' that are being used as an anticompetitive device. 433 U.S. at 644, 97 S.Ct. at 2894. Justice Blackmun did not believe that the single state court proceeding in Vendo came within the pattern of baseless, repetitive claims of Trucking Unlimited, or some equivalent showing of grave abuse of the state courts . . .. 433 U.S. at 644 n., 97 S.Ct. 2894, n.. Justice Stevens, dissenting, in an opinion joined in by the remaining three justices, felt that the state court proceeding had been properly enjoined. According to Justice Stevens, the Clayton Act was an exception to the Anti-Injunction Act. Moreover, Justice Stevens felt that a single state court proceeding was sufficient to come within the sham litigation exception of Trucking Unlimited. 433 U.S. at 661-662, 97 S.Ct. at 2902-2903. And so, despite the lack of unanimity on when an injunction should issue, Vendo does make it clear that repetitive sham litigation may constitute an antitrust violation. See Blair Foods, Inc. v. Ranchers Cotton Oil, 610 F.2d 665, 670 (9th Cir., 1980). 25 Keeping the Supreme Court's development and interpretation of the Noerr-Pennington doctrine and the sham exception in mind, we return to Hahn's complaint. The antitrust claim is based on Codding's filing or underwriting of thirteen lawsuits challenging the downtown shopping center. Now, it is abundantly clear that Codding's action in invoking the judicial process is protected activity under the Noerr-Pennington doctrine. Our inquiry must then turn to whether Hahn has stated a claim for relief under the sham exception to this broad immunity. That is, has Hahn alleged sufficient facts to show that Codding's activities were a mere sham to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor. Noerr, 365 U.S. at 144, 81 S.Ct. at 533. 26 As previously pointed out, we must accept the allegations in Hahn's complaint as true and draw all reasonable inferences in its favor. The complaint says that, for purposes of maintaining its monopoly in the relevant market and eliminating Hahn as a competitor, Codding has filed or underwritten thirteen overlapping, repetitive, and baseless lawsuits against Hahn and the proposed shopping center. The Supreme court has firmly established the rule, in Trucking Unlimited, Otter Tail, and Vendo, that a pattern of baseless, repetitive claims can come within the sham exception. Trucking Unlimited, 404 U.S. at 513, 92 S.Ct. at 613; Otter Tail, 410 U.S. at 379-380, 93 S.Ct. at 1030-1031; Vendo, 433 U.S. at 635 n.6, 644, 662, 97 S.Ct. at 2889 n.6, 2894, 2903. 27 Moreover, the complaint contains sufficient allegations that Codding's purpose in bringing the court proceedings has been little else than to interfere directly with Hahn as a potential competitor. Codding has knowledge that Hahn's shopping center is dependent upon financing secured by issuing bonds. Codding likewise has knowledge that these bonds cannot be marketed if there are lawsuits pending. Therefore, according to the complaint, the thirteen lawsuits have been used, thus far successfully, as a means to halt development of the downtown shopping center and prevent Hahn's entrance into the market as a competitor to Codding. Another factor we rely upon is that each one of the various lawsuits has been decided against Codding. This certainly is the hallmark of insubstantial claims referred to by Justice Douglas in Trucking Unlimited. 13 28 And so, construing the complaint in Hahn's favor, the injury to Hahn has not been an indirect one resulting from Codding's genuine efforts to have his claims heard in court. See Noerr, 365 U.S. at 142-143, 81 S.Ct. at 532-533. Codding has stated that he would withdraw his lawsuits when the Agency agreed to drop Hahn and the regional shopping center from the urban renewal project. From this statement and the fact that none of the lawsuits has met with any other success than to delay the shopping center, it can be inferred that Codding's efforts in the courts have been something less than genuine. Thus, a reasonable construction of the complaint is that Codding has used the courts as a means of directly interfering with the business relations of a competitor by preventing Hahn from entering the market. 29 We hold that these allegations are sufficient to state a claim for relief under the sham exception. Nevertheless, we will proceed to address some of the arguments made by Codding in support of the dismissal. 30 Initially, Codding asks this court to resolve several disputed factual issues. Codding claims that some of the lawsuits have successfully obtained the requested relief. Additionally, Codding asserts that several of the others are taxpayer lawsuits which are privileged under California state law. However, this court only has a motion to dismiss before it, and, as such, we must confine our review to the allegations contained in the complaint, and a determination of whether Hahn can prove any set of facts in support of his claim for relief. While it may be possible to resolve this type of question in pre-trial proceedings by a summary judgment motion (see Blair Foods, Inc. v. Ranchers Cotton Oil, 610 F.2d 665 (9th Cir., 1980)), it is not possible to do so with a dismissal for failure to state a claim. 31 Codding's major argument in support of dismissal is that the present case is controlled by Franchise Realty. Interstate Corp. v. San Francisco Local Joint Executive Board, 542 F.2d 1076 (9th Cir. 1976), cert. denied, 430 U.S. 940, 97 S.Ct. 1571, 51 L.Ed.2d 787. We reject Codding's suggestion that we blindly follow Franchise Realty. 14 The rules of decisions in antitrust cases must not be construed too literally, but should be viewed within the context of the particular factual situations presented. See GTE Sylvania Inc. v. Continental T.V., Inc., 537 F.2d 980, 989 (9th Cir. 1976) (en banc), aff'd, Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 97 S.Ct. 2549, 53 L.Ed.2d 568 (1977). 32 In the Franchise Realty case this court affirmed the dismissal of an antitrust complaint. In that case McDonald's had brought a Sherman Act Section One (15 U.S.C. § 1) case against two associations of restaurant and hotel employers and a labor union. McDonald's charged that the defendant associations and union had repeatedly, baselessly and in bad faith, opposed the granting of building permits to McDonald's (for the construction of new McDonald's restaurants) by the San Francisco Board of Permit Appeals (Board). Judge Duniway, writing for this court, found that the defendants' activities in opposing the issuance of building permits were protected by the Noerr-Pennington immunity. 33 Although Codding argues that Franchise Realty supports the dismissal in the present case, we find Franchise Realty distinguishable. McDonald's failed to offer any support for its conclusory allegation that the defendants' opposition before the Board was sham or frivolous. 542 F.2d at 1079. Here, Hahn's complaint alleges that each one of Codding's thirteen lawsuits was baseless, and that each one of the lawsuits has been decided against Codding summarily. Moreover, in Franchise Realty the defendants were successful in their efforts before the Board. Hahn's complaint alleges that Codding has not been successful on the merits of even one of the lawsuits. Additionally, the Board in Franchise Realty was as much a political as an adjudicatory body. 542 F.2d at 1079. Activity which is acceptable in the political area does not necessarily retain its Noerr-Pennington immunity when it is used in the judicial process. See Trucking Unlimited, 404 U.S. at 513, 92 S.Ct. at 613. Here, Codding has invoked the judicial process not once, but thirteen times, in what the Hahn complaint describes as a thus far successful effort to prevent a competitor from entering the marketplace. 34 And, more importantly, Judge Duniway's interpretation of Otter Tail in Franchise Realty is fully consistent with our interpretation and application of it to the present case. 15 Here, Codding has allegedly used its threat of litigation as a bludgeon in its attempts to retain a monopoly in the regional shopping center market. The mere filing of a lawsuit was enough to prevent Hahn from entering the market as a competitor of Codding. The present case is a through the looking glass version of Franchise Realty and thus controlled by Otter Tail. 35 Codding also argues that Hahn is misusing the antitrust laws in an attempt to chill Codding's First Amendment rights. We acknowledge the First Amendment underpinnings of the Noerr-Pennington doctrine and the interests it is designed to protect. Trucking Unlimited, 404 U.S. at 510, 514-515, 92 S.Ct. at 611, 613-614; Franchise Realty, 542 F.2d at 1082. Nevertheless, this court should not underestimate the importance of the Sherman Act and the interests which it protects. United States v. Topco Associates, 405 U.S. 596, 610, 92 S.Ct. 1126, 1134, 31 L.Ed.2d 575 (1972). 16 By reversing the dismissal in the present case we do not intend to elevate Sherman Act interests over First Amendment interests. Our review was limited to the allegations contained in Hahn's complaint. In striking the balance in favor of the antitrust interests in this decision, we do not decide, nor should this opinion be read as deciding, how that balance should be struck at a later stage of the proceedings in this case.
36 In summary, we hold that Hahn's complaint was improperly dismissed. Based on the preceding discussion, we cannot say that it appears beyond doubt that Hahn can prove no set of facts in support of his antitrust claim under the sham exception.