Opinion ID: 3010999
Heading Depth: 2
Heading Rank: 1

Heading: Courts Have Distinguished Between

Text: Misrepresentations Made In The Political Context As Opposed to the Administrative or Adjudicative Context The majority's reliance on City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365 (1991), for the proposition that there is no misrepresentation exception to Noerr-Pennington immunity is misplaced. In Omni, one defendant sought to persuade the city of Columbia to create zoning ordinances, which had a detrimental effect on the plaintiff, who was a competitor of that defendant. The Supreme Court held that the defendant was not liable for antitrust violations for statements made to the city. 499 U.S. at 382. Omni reaffirmed that deliberate misrepresentations in the legislative arena, reprehensible as [they are], can be of no consequence so far as the Sherman Act is concerned. Id. at 384. The majority's reliance on Omni is not persuasive because here, the setting is an adjudicatory arena, not a lobbying or legislative one as in Omni. The majority cites Omni for the proposition that there is no misrepresentation exception. PRE, which was decided two years after Omni, suggests that the issue of whether there is a misrepresentation exception to Noerr-Pennington remains an open question. 508 U.S. at 61 n.6. While PRE cited California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 512-13 (1972), with approval, the Supreme Court in PRE declined to decide whether Noerr permits 24 antitrust liability for a litigant's fraud or other misrepresentations. 508 U.S. at 61 n.6. The Supreme Court has stated, not once, but twice, that [m]isrepresentations, condoned in the political arena, are not immunized when used in the adjudicatory process. California Motor Transp., 404 U.S. at 513. Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 499-500 (1988), stated that unethical and deceptive practices in less political arenas, such as administrative or adjudicatory settings, could violate antitrust laws. Thus, the Supreme Court has broadly hinted Noerr-Pennington immunity is not intended to shield petitioning activities that do not further, but rather distort, the decision-making process in the non-legislative context. Several Circuit Courts of Appeal also have distinguished between the level of immunity afforded to misrepresentations made in different forums. In Potters Medical Center v. City Hospital Ass'n, 800 F.2d 568, 571 (6th Cir. 1986), the plaintiff alleged that the defendant hospital's certificate of need application contained materially false statements about the plaintiff. The court stated that the knowing and willful submission of false facts to a government agency falls within the sham exception to the Noerr-Pennington doctrine. Id. at 580. The Fifth Circuit in Woods Exploration & Producing Co. v. Aluminum Co. of America, 438 F.2d 1286, 1296-98 (5th Cir. 1971), cert. denied, 404 U.S. 1047 (1972), held that Noerr did not protect, inter alia, the filing of false production forecasts with a state regulatory commission. The court stated that the Noerr-Pennington doctrine seeks to protect attempts to influence policies and held that the abuse of the administrative process here alleged does not justify antitrust immunity. Id. at 1298. Other cases have held the Noerr-Pennington doctrine does not immunize misrepresentations made in the administrative or adjudicative context. See, e.g., Cheminor Drugs, Ltd. v. Ethyl Corp., 168 F.3d 119, 124 (3d Cir. 1999) (holding that material misrepresentations in an adjudicative arena are not protected by Noerr-Pennington immunity); Whelan v. Abell, 48 F.3d 1247, 1255 (D.C. Cir. 1995) (finding that if sham claim involves administrative agencies, 25 then Noerr does not protect petitions based on known falsehoods); St. Joseph's Hosp., Inc. v. Hospital Corp. of Am., 795 F.2d 948, 955, reh'g denied en banc , 801 F.2d 404 (11th Cir. 1986), see infra; Ottensmeyer v. Chesapeake & Potomac Tel. Co., 756 F.2d 986, 994 (4th Cir. 1985) (suggesting that knowing submission of false information to police -- communications which do not constitute the type of `political activity' protected by the Noerr-Pennington doctrine -- would fall within the sham exception); Clipper Exxpress v. Rocky Mountain Motor Tariff Bureau, Inc., 690 F.2d 1240, 1261 (9th Cir. 1982) (stating that Noerr does not immunize false information given to an administrative or adjudicatory body), cert. denied, 459 U.S. 1227 (1983); Israel v. Baxter Labs., Inc., 466 F.2d 272, 278 (D.C. Cir. 1972) (No actions [efforts to deceive the Food and Drug Administration] which impair the fair and impartial functioning of an administrative agency should be able to hide behind the cloak of an antitrust exemption.). The rationale for limiting immunity for private actors' efforts to mislead adjudicatory or administrative officials is that these entities, as compared to legislative bodies, rely on information supplied by the parties to a greater extent than legislative bodies. Allied Tube, 486 U.S. at 499-500. The Ninth Circuit in Clipper Exxpress, 690 F.2d at 1261, explained: 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 supplied by the parties is relied on as accurate for decision making and dispute resolving. The supplying of fraudulent information thus threatens the fair and impartial functioning of these agencies and does not deserve immunity from the antitrust laws. The majority recognizes the decision by the Department to deny the CON involved an individualized application of established criteria. However, it attempts to reconcile the difference between the adjudicative context and legislative context by arguing that the Department's decision to deny the certificate of need was essential to the execution of the sovereign's regulatory policy regarding health care facilities. [Majority opinion at page 16]. This distinction is 26 unpersuasive. Although the government agency's decision on the certificate of need application could be viewed as essential to regulating health care facilities, St. Joseph's Hospital, 795 F.2d at 955, and Kottle v. Northwest Kidney Centers, 146 F.3d. 1056, 1063 (9th Cir. 1998), cert. denied, 119 S.Ct. 1031 (1999), both held that misrepresentations in this context do not have Noerr immunity. Every adjudicative decision could be viewed as essential to a sovereign's regulatory policy and thus, the majority would nullify the distinction the Supreme Court and other appellate courts have made between misrepresentations made in the legislative context as opposed to the administrative or adjudicative context. The majority appears to argue that the process employed by the Department could uncover misrepresentations because the Department conducted its own investigation. However, in Cheminor, the governmental bodies -- the Department of Commerce (DOC) and the International Trade Commission (ITC) -- also conducted their own investigation, but another panel of this Court still held material misrepresentations that affect the core of the defendant's petition will preclude Noerr-Pennington immunity. 168 F.3d at 121, 124 (stating that the DOC and ITC make final determinations after they have conducted their own investigations . . . and after they have heard further arguments from the parties involved); see Clipper Exxpress, 690 F.2d at 1261-62 (stating that submitting false information in an adjudicatory proceeding can be the basis for antitrust liability even if the agency was not misled by the information). The majority's view, carried to its logical extreme, would allow the more skillful liar to avoid antitrust liability so long as the decision maker conducts its own investigation. Moreover, it is not clear the Department conducted an independent investigation. Rather, the Department relied on the Hospital defendants to give truthful information so that it could make a fully informed decision. The majority's opinion recognizes the Board was misled because the Board made a credibility determination that the project ha[d] not been abandoned. [Majority opinion at page 17]. However, the majority refuses to acknowledge that the 27 Board opinion demonstrates that the denial of the CON was based on the false belief, nurtured by the Hospital defendants, that the Hospital would build its ASC. B. Similar Cases Have Held That Misrepresentations Relating to a CON Application Do Not Enjoy Noerr Immunity The facts in St. Joseph's Hospital closely parallel those alleged by the plaintiff. The defendant, Memorial Medical Center (MMC), was the sole provider of cardiac surgery services in the relevant market area. 795 F.2d at 952. It opposed St. Joseph's CON application, claiming it already had the capacity to perform more heart procedures in the region than required, thus making its competitor's services unnecessary. Id. The Board relied upon this information in denying St. Joseph's request for a CON. Id. St. Joseph's sued, asserting MMC provided false information to the Board. Id. at 953. The court found that the misrepresentations were not made in the political arena and held that parties furnishing false information to a government agency passing on specific certificate applications are not entitled to Noerr-Pennington petitioning immunity. The court held: When a governmental agency such as [the State Health Planning Agency] is passing on specific certificate applications it is acting judicially. Misrepresentations under these circumstances do no not enjoy Noerr immunity. Id. at 955. Accordingly, the court reversed the district court's decision granting the defendant's motion to dismiss. Id. at 957. The Ninth Circuit, like the Eleventh Circuit in St. Joseph's Hospital, also held Noerr-Pennington immunity does not protect a party's intentional misrepresentations in similar circumstances. Kottle v. Northwest Kidney Centers, 146 F.3d. 1056 (9th Cir. 1998), cert. denied, 119 S.Ct. 1031 (1999). As in this case, the district court in Kottle granted the defendant's motion to dismiss. Id. at 1058-59. The Kottle court also examined allegedly false information relating to a CON application. Id. at 1058. The court stated that if misrepresentations made by a defendant were of 28 such magnitude that the entire CON proceeding was deprived of its legitimacy, then the sham exception to Noerr-Pennington immunity would apply. Id. at 1063. The misrepresentations in Kottle were made in an administrative or adjudicatory arena because the Department of Health, the decision maker, conducted public hearings, accepted written and oral arguments, permitted representation by counsel, issued written findings, and its decision was appealable. Id. at 1062. In this case, the Department also conducted public hearings, accepted evidence and argument from interested parties, made findings, and its decision was appealable. Since the court in Kottle found that the misrepresentations were not made in the political or lobbying context, the court applied a different standard than the one set forth in Omni. Id. (stating that intentional misrepresentation to government officials is treated differently outside of the political realm). The court found, however, that the plaintiff 's complaint fell short of invoking the sham exception because the plaintiff 's vague allegations of misrepresentation were insufficient to overcome the defendant's Noerr-Pennington immunity. Id. at 1064. The court could not ascertain what representations [the defendant] made, or to whom; with whom [the defendant] conspired . . . or what other testimony the Department may have had that could have influenced its decision to deny [plaintiff]'s CON application. Id. In contrast, the plaintiff 's complaint in this case details the alleged misrepresentations made by the defendants, and the Board decision demonstrates that such material misrepresentations influenced its decision, as well as that of the Commonwealth Court. See infra. C. The Defendants' Actions Nullify Their Noerr- Pennington Immunity Our recent decision in Cheminor Drugs, Ltd. v. Ethyl Corp., 168 F.3d 119 (3d Cir. 1999), does not support the majority's position. In Cheminor, the defendant Ethyl Corporation complained to the ITC and the DOC that plaintiff Cheminor was dumping and selling ibuprofen at less than fair value. Id. at 120. Cheminor brought antitrust claims in which it alleged that Ethyl's statements to the ITC were baseless, made in bad faith, contained false 29 statements, and were brought only for anti-competitive reasons. Id. The issue decided by this Court was whether alleged misrepresentations by Ethyl vitiated its NoerrPennington immunity. The Court in Cheminor found the alleged misrepresentations were neither material, nor affected the core of the defendant's petition because the misrepresentations relating to the defendant's profitability were only a small proportion of the numerous factors the ITC must consider when making a determination of material injury. Id. at 126. Therefore, we affirmed the decision to grant summary judgment in favor of Ethyl because Cheminor did not satisfy the first step of PRE's sham exception to the Noerr-Pennington doctrine. Id. at 127. Cheminor held material misrepresentations that infect the core of the defendant's claim and the government's resulting actions are not entitled to Noerr-Pennington immunity under the objectively baseless prong of PRE. Id. at 123. Cheminor requires evaluation of misrepresentations in determining whether a defendant is entitled to NoerrPennington immunity. The majority relies on the following language in Cheminor to assert Cheminor stands for the proposition that this Circuit has held the misrepresentation exception is not part of its jurisprudence. We decline to carve out a new exception to the broad immunity that Noerr-Pennington provides. Rather, we will determine whether [defendant]'s petition was objectively baseless under the Supreme Court's test in PRE, without regard to those facts that [plaintiff] alleges [defendant] misrepresented. Id. There are three answers to the majority position. First, it ignores the immediately succeeding sentence in the opinion: If the alleged misrepresented facts do not infect the core of Ethyl's claim and the government's resulting actions, then the petition had an objective basis and will receive Noerr-Pennington immunity under the first step of PRE. Id. I read this language as meaning that prior to determining whether the petition had an objective basis the Court must determine [i]f the alleged misrepresented 30 facts do . . . infect the core of Ethyl's claim. Id. If they do, the misrepresentation exception applies and there can be no objective basis for the defendant's position. If, on the other hand, the misrepresentation exception is not applicable, the defendant's petition could well have an objective basis. Second, the majority has not explained why, if the Cheminor court held there was no misrepresentation exception to the Noerr-Pennington doctrine, it formulated a test for the misrepresentation exception and then painstakingly applied the test analyzing whether the misrepresented facts affected the core of Ethyl's claim and the government's resulting action. . . . Id. Third, the court in Cheminor relied on a district court case, Music Center S.N.C. Di Luciano Pisoni & C. v. Prestini Musical Instruments Corp., 874 F. Supp. 543, 549 (E.D.N.Y. 1995). The specific language cited with approval by Cheminor reads: [A] determination [of objective basis] requires consideration, inter alia, of . . . the nature of the particular allegations of the petition or actions before the administrative agency claimed to be fraudulent or improper, and whether these claimed misrepresentations or improper actions would have been significant to the ultimate outcome or continuation of the proceeding. Cheminor, 169 F.3d at 124 (citing Music Center, 874 F. Supp. at 549) (emphasis added). If there were any doubts regarding the court's reliance on Music Center and its approval of the misrepresentation exception to NoerrPennington immunity, the Cheminor court set them to rest: If the government's action was not dependent upon the misrepresented information, the misrepresented information was not material and did not go to the core of Ethyl's petition. In sum, a material misrepresentation that affects the very core of a litigant's . . . case will preclude Noerr-Pennington immunity, but not every misrepresentation is material to the question of whether a petition such as Ethyl's had an objective basis. Id. at 124 (second emphasis added and footnote omitted). I am simply unable to accept the majority's reading of Cheminor. 31 Further, the test set forth in Cheminor is applicable here because the alleged misrepresentations in Cheminor were made in the adjudicative context. Omni is not applicable because the alleged misrepresentations in that case were made in a legislative context. In a factually similar case, the 11th Circuit found that [w]hen a government agency . . . is passing on specific certificate [of need] applications it is acting judicially. St. Joseph's Hospital, 795 F.2d at 955. Misrepresentations made under these circumstances do not enjoy Noerr immunity. Id. There is a final troubling aspect of the majority's opinion. Assuming this dissent's position is correct that Cheminor recognizes a misrepresentation exception as part of this Circuit's jurisprudence and that the majority holds there is no misrepresentation exception to the Noerr-Pennington immunity doctrine, the majority has done something it cannot do. Under Rule 9.1 of the Internal Operating Procedures of this Court, no subsequent panel overrules the holding in a published opinion of a previous panel.
Were Material And Infected The Core Of The Defendants' Statements To The Department The legitimacy of the Board's decision is in question because it relied upon materially false information and was influenced by threats of an illegal boycott. As stated previously, at this stage of the litigation, the plaintiff is entitled to all favorable inferences and resolution of factual disputes in its favor. Therefore, the court must examine whether Armstrong Surgical is entitled, at a minimum, to an inference that the misrepresentations were not only material, but also affected the core of the defendant's claims. The majority concluded the Board would have denied the CON application regardless of whether the Hospital ASC would be completed. However, the Board's opinion clearly shows that it premised the denial of the CON upon the Hospital's misrepresentation that it would complete and operate a Hospital ASC. In successive Findings of Fact the Board found: 32 25. The Hospital has partially completed construction of a building on its premises that would house a dedicated outpatient surgical facility. 26. Upon completion of the Hospital's outpatie nt surgical facility, three of its existing operating rooms would be moved into the new building. 27. The proposed ambulatory surgery center and the one which has been partially constructed by the Hospital would serve the same population and would provide essentially the same surgical services. 28. The Applicant's proposed ambulatory surger y center would needlessly duplicate existing facilities and health care services in Armstrong County. Board Op. at 6 (citations omitted). Taken in context the phrase needlessly duplicate existing facilities, supra, can only mean that Armstrong's proposed ASC would duplicate the proposed Hospital ASC. In addition, the letters from the 19 physicians stated that the proposed facility duplicated the services already being provided. As previously rehearsed, the Hospital parties knew there was no commitment or intent to complete a functioning Hospital ASC. Not only the Findings of Fact, but also the Board opinion make clear that the Board, relying upon the misrepresentations of the Hospital parties, premised its denial of the CON and its entire discussion of needprojection upon there being no need for two ASCs-- the Hospital's ASC and Armstrong's ASC: Although outpatient surgery at the Hospital is now performed in the same operating room as inpatient surgery, the Hospital has partially9 completed construction of a building on its premises to house a dedicated outpatient surgery facility. Upon completing construction, the Hospital would move three existing operating rooms into the new building. With regard to the population to be served and the surgical services to be offered, there would be little difference between the Applicant's ambulatory surgical center and the one that the Hospital has partially 33 completed, except that the Applicant's project would raise the number of operating rooms in Armstrong County above the limit set by the SHP. We conclude that approval of the instant CON application would result in needless duplication of existing facilities and health care services. We believe that the factors set forth above, in themselves, are sufficient to support a finding that the Applicant has failed to establish need for the proposed facility by the population to be served. . . . _________________ 9. Apparently, after construction of the building and some of the interior walls had been completed, staff physicians at the Hospital began to question whether a separate outpatient facility was necessary. Although the building is currently being used as a storage facility, there was credible evidence that the project has not been abandoned. Board Op. at 14 (citations omitted). It is noteworthy that the three Commonwealth Court judges, conducting judicial review, were of the belief that the Hospital ASC would be completed: The hospital has partially completed construction of a building on its premises that would house a dedicated outpatient surgical facility. Upon completion of the hospital's outpatient surgical facility, three of its existing operating rooms would be moved into the new building. The proposed ambulatory surgery center and the one which has been partially constructed by the hospital would serve the same population and would provide essentially the same surgical services. Armstrong's proposed ambulatory surgery center would needlessly duplicate existing facilities and health care services in Armstrong county. Commonwealth Court Op. p. 5. At the very least four judges -- three Commonwealth judges and this judge -- read the Board opinion as indicating that the Department believed the Hospital ASC would be completed. 34 The presence or absence of a Hospital ASC was significant. A CON is granted if a proposed health care expenditure will meet medical needs of the target population in an effective and cost efficient manner. See Pa. Stat. Ann. tit. 35 S 448.707. There is no question that an ASC was more cost efficient than the continued use of the six hospital operating rooms. The Hospital's own accountant documented projected average cost savings of $400 per case if an ASC were used relative to the current Hospital operating rooms. The issue before the Board was whether there would be overcapacity of ASCs if a CON were issued to Armstrong. Because the misrepresentations led the Board to believe there would be a Hospital ASC, it never reached the issue of delivering effective and cost efficient medical services under the scenario in which there was no Hospital ASC. There is simply no way for the District Court or this Court to determine whether the Board would have granted the CON had it known the true facts. With the Court having to accept all well-pleaded facts as true and resolve them in the light most favorable to the nonmovant, see Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998), the plaintiff is surely entitled to the reasonable inference that the Board predicated its decision, in major part, on the belief that a Hospital ASC would be completed. Therefore, I would hold the alleged misrepresentations deprive the Hospital parties of NoerrPennington immunity because their misrepresentations were material and infected the very essence or core of the administrative proceeding and consequent denial of the CON by the Board and affirmance of the Board's decision by the Commonwealth Court. Where as here, the misrepresentations caused the Board and Commonwealth Court to make their determinations based upon the existence of a fictional Hospital ASC, the administrative proceeding and Commonwealth Court review have been deprived of their legitimacy.
Threats of an Illegal Boycott While an issue of first impression, the question of whether Noerr-Pennington petitioning immunity protects 35 threats of an illegal boycott must also be answered in the negative. The Supreme Court has stated, [t]here are many other forms of illegal and reprehensible practice which may corrupt the administrative or judicial processes and which may result in antitrust violations. California Motor Transp., 404 U.S. at 513. If the Supreme Court would not immunize misrepresentations in the judicial or administrative context, it surely would not immunize threats of illegal activity when they corrupt the administrative adjudication process. Where a threat of illegal activity plays such a strong role in the administrative decision-making process and forms part of the basis for an administrative decision, it is impossible to say that the process has not been corrupted. Denying Noerr-Pennington immunity to those who provide false information to the government in its deliberative decisionmaking process can only improve the information flowing to the government. Attention is now turned to whether the Hospital parties are protected by state action immunity as urged by the majority.