Opinion ID: 305485
Heading Depth: 1
Heading Rank: 2

Heading: Antitrust Exemption

Text: 6 The defendants contend that the Noerr-Pennington doctrine, 3 which exempts from the antitrust laws joint efforts to influence legislative or executive action, even when such efforts are designed to injure or eliminate competition, is applicable to the case at bar. They point out that the only conduct complained of is the defendants' alleged efforts to induce the FDA to withhold approval of a new drug application for Cothyrobal. This they submit is restraining competition by inducing governmental action, protected by Noerr-Pennington, and not action effecting restraint by defendants' own conduct, which is not protected. 7 It is clear that the protection from the antitrust laws afforded joint activity by the Noerr-Pennington doctrine is not unlimited. In Noerr the Supreme Court legitimatized under the Sherman Act joint efforts by businessmen to influence legislative or executive action, even if such efforts are designed to injure their competitors: 8 A construction of the Sherman Act that would disqualify people from taking a public position on matters in which they are financially interested would thus deprive the government of a valuable source of information and, at the same time, deprive the people of their right to petition in the very instances in which that right may be of the most importance to them. 4 9 In Pennington, involving a suit by a small mining company against larger ones and labor unions, alleging a conspiracy to influence the Secretary of Labor to set such high rates as to force the small company out of business, the Court followed its holding in Noerr. It found that joint efforts to influence public officials do not violate the antitrust laws even though intended to eliminate competition. 5 10 The Noerr-Pennington doctrine was given its widest scope in United States v. Johns Manville Corporation. 6 The District Court for the Eastern District of Pennsylvania held that joint activities to influence the decisions of public procurement officials on product specifications in order to eliminate the products of competitors are constitutionally protected and cannot be the basis of a finding of violation of the antitrust laws, . . . regardless of the intent with which they were undertaken. 7 The Noerr-Pennington doctrine was thus expanded to protect joint efforts to influence governmental actions as a purchaser in the market, not merely when acting in a sovereign legislative or regulatory capacity. 11 Thereafter, judicial encounters with Noerr-Pennington resulted in a narrowing of the doctrine's applicability. In George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc., 8 presenting the same issue as in Johns Manville, supra, the First Circuit reached the opposite result. It held that joint efforts by the defendant Paddock and others to write the specifications for pipeless swimming pools bought by public agencies in such a way as to exclude competitors was not protected by Noerr-Pennington: 12 The entire thrust of Noerr is aimed at insuring uninhibited access to government policy makers. . . . By enforcement of laws we understand some significant policy determination in the application of a statute, not a technical decision about the best kind of weld to use in a swimming pool gutter. 9 13 This court, in Hecht v. Pro-Football, Inc., 10 took a similar approach to Noerr-Pennington's reach. We held the validity of a thirty-year exclusive lease between the District of Columbia Armory Board, an unincorporated instrumentality of the District of Columbia which operates Robert F. Kennedy Stadium, and Pro-Football, Inc., the corporate name of the Washington Redskins, was subject to the federal antitrust laws, and thus remanded the case for trial on the merits. The appellee Armory Board had asserted that the lease constituted valid governmental action which is immune from the application of the antitrust laws. Relying on the First Circuit's decision in Paddock Pool, supra, and the Ninth Circuit's decision in Trucking Unlimited v. California Motor Transport Co., infra, we enunciated, at least partially, the limitations of Noerr: 14 The court [of appeals] in Trucking Unlimited apparently considered that an adjudicative agency was in a position similar to a governmental agency charged with procurement, as in Paddock Pool. In neither case was the governmental agency in a position to make governmental policy, it was obligated to carry out the policy as already made, hence the rationale of Noerr-Pennington, guaranteeing access of private parties in combinations which would otherwise be illegal under the antitrust laws to influence such agency simply did not apply. 15 Trucking Unlimited illustrates again that the determination that a state agency and state action are involved is only the beginning of the inquiry. In this category of joint efforts to secure governmental action . . . belongs, of course, Woods Exploration and Producing Co., Inc. v. Aluminum Company of America [infra] . . . . 11 16 Perhaps the case involving an issue most similar to the one at bar is Woods Exploration and Producing Co., Inc. v. Aluminum Company of America, 12 in which plaintiffs alleged that two largetract natural gas producers violated the antitrust laws by filing false nomination forecasts with the Texas Railroad Commission, which regulates the available amount of gas to be produced from each well or unitized tract, in order to reduce the production allowed others, especially small-tract producers. 17 This case is relied on by the defendants here for the result reached by the District Court on the merits, a grant of summary judgment for the defendants on the grounds that even wilful and fraudulent joint efforts to induce a governmental agency to arrive at an erroneous result cannot provide the basis for an antitrust action. 13 The District Court's judgment on the merits, however, was preceded by then District Judge Ingraham's denial in the same action 14 of defendants' motion, raising the Noerr-Pennington defense, to dismiss for failure to state a claim and in the alternative for summary judgment. 15 18 Furthermore, the Fifth Circuit, in reviewing the decision of the District Court on the merits, reversed and carefully circumscribed the Noerr-Pennington doctrine: 19 Basic to Noerr is a belief that regulation of competition by the political process is legitimate and not proscribed by the Sherman Act, an enactment which is itself a political decision. For the political process itself to be effective there must be freedom of access, regardless of motive, to ensure the right of the people to inform their representatives in government of their desires with respect to the passage or enforcement of laws. . . . Where these political considerations are absent the Noerr doctrine is inapplicable. . . . The policies of the Sherman Act should not be sacrificed simply because defendants empoly governmental processes to accomplish anti-competitive purposes. Otherwise, with governmental activities abounding about us, government could engineer many to antitrust havens. 16 20 The Fifth Circuit went on to find Noerr-Pennington inapplicable to the alleged filing of false nominations [since] this conduct was not action designed to influence policy, which is all the Noerr-Pennington rule seeks to protect. 17 It found that the abuse of the administrative process alleged by plaintiffs did not justify antitrust immunity. 21 The basic concern of the courts of appeal (and one District Judge) in both Woods and Trucking Unlimited may be deemed the integrity of the regulatory process. 18 No actions which impair the fair and impartial functioning of an administrative agency should be able to hide behind the cloak of an antitrust exemption. 19 22 The coup de grace to defendants' arguments in the case at bar was administered 13 January 1972 by California Motor Transport Co. v. Trucking Unlimited, 20 in which the Supreme Court affirmed the Ninth Circuit's remand of the case for trial on plaintiffs' complaint of violations of the Sherman and Clayton Acts. The case involved joint efforts by certain large trucking firms to limit competition, resulting from relatively easy access to operating rights, by opposing the requests of smaller companies for certification by the California Public Utilities Commission and the Interstate Commerce Commission. The larger companies established a joint trust fund, sustained by monthly contributions based on each firm's gross income, to finance resistance to all applications filed by their competitors. The District Court dismissed the plaintiffs' complaint, but the Ninth Circuit reversed. 23 In agreeing with the result reached by the Ninth Circuit, the Supreme Court found that on their face plaintiffs' allegations came within the sham exception in Noerr. The Court recognized on the one hand that it would be destructive of rights of association and of petition to hold that groups with common interests may not, without violating the antitrust laws, use the channels and procedures of . . . federal agencies . . . to advocate their causes . . . respecting resolution of their business and economic interests vis-a-vis their competitors. 21 On the other hand, the Court pointed to its earlier holding in Noerr to the effect that there may be situations in which an alleged conspiracy, 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 the application of the Sherman Act would be justified. 22 The Court found the latter to characterize the situation presented in California Transport and ordered the case remanded to the District Court for trial. 23 24 Plaintiffs in the case at bar allege that the real purpose of defendants' joint efforts is to preclude, not induce, fair FDA consideration of the safety and efficacy of plaintiffs' drug Cothyrobal for interstate sale, and as such should be viewed as falling within the sham exception to Noerr-Pennington. As the Court noted in California Transport, supra, [w]hat the proof will show is not known, for the District Court granted the motion to dismiss the complaint. We must, of course, take the allegations of the complaint at face value for the purposes of that motion. 24 25 Therefore, in a manner similar to the Fifth Circuit in Woods Exploration, supra, 25 we remand all issues to the District Court, with directions that it retain jurisdiction over the subject matter, but in turn, subject to plaintiffs reactivating their last-filed application for FDA approval of Cothyrobal, 26 remand the original question of the safety and efficacy of Cothyrobal for interstate sale to the Secretary of Health, Education and Welfare for initial determination on the merits. 27 This will provide the FDA with the opportunity of passing on plaintiffs' application first, which is appropriate in view of its primary jurisdiction over the approval of drugs for interstate sale, as discussed infra. It will not, however, deprive plaintiffs of the opportunity, if necessary, of attempting to prove their allegations of antitrust law violations and all matters related thereto at trial de novo before the District Court, as we explain infra. This is an opportunity they might not possess if the only review of an adverse FDA decision afforded them was that under Section 355(h) of the Federal Food, Drug and Cosmetic Act 28 or under Section 706(1) of the Administrative Procedure Act, 29 both of which permit appeals court review only to the extent of ascertaining whether the agency decision is supported by substantial evidence and not characterized by arbitrariness. Under the procedure we follow here there will be only one appellate review, on a complete record, and, if necessary, on both issues. 26