Opinion ID: 4529387
Heading Depth: 3
Heading Rank: 1

Heading: The Proper Test

Text: Because it presents a question of constitutional law, we review de novo the proper test for determining what constitutes sham petitioning. See, e.g., Biodiversity Assocs. v. Cables, 357 F.3d 1152, 1160 (10th Cir. 2004). CSMN contends that Petition Clause immunity is improper for objectively reasonable “lawsuits that are unsuccessful and filed with the subjective purpose of interfering with legallyprotected rights or imposing litigation costs regardless of the outcome.” Opening Br. 26 (citing Cardtoons, 208 F.3d at 889 n.4; Bill Johnson’s Rests., Inc. v. NLRB, 461 U.S. 731, 742–43 (1983); BE & K, 536 U.S. at 532; id. at 538 (Breyer, J., concurring)). Because these three cases form the basis of CSMN’s argument, we begin there. In Bill Johnson’s, the Supreme Court considered whether the National Labor Relations Board (NLRB) could enjoin a state-court proceeding “brought by an employer to retaliate against employees for exercising federally-protected labor rights, without also finding that the suit lacks a reasonable basis in fact or law.” 461 U.S. at 733. In resolving this issue, the Court held that the NLRB “may not halt the 13 prosecution of a state-court lawsuit, regardless of the plaintiff’s motive, unless the suit lacks a reasonable basis in fact or law.” Id. at 748. But the Court also commented—even though the issue was not before it—that if the plaintiff lost the suit, the NLRB could consider the suit’s “retaliatory intent” and order relief. Id. at 748–49. And because unsuccessful suits can still have been objectively reasonable, this Bill Johnson’s dicta contemplates liability even for objectively reasonable suits if brought with an improper purpose. In Cardtoons, we noted, in dicta,9 the tension between this result and the result later prescribed by Professional Real Estate— subjective motivation matters only if the petitioning is objectively unreasonable. See Cardtoons, 208 F.3d at 889 n.4. Given this tension, we offered this way of reconciling the two cases: The only way to reconcile [Professional Real Estate and Bill Johnson’s] is to limit them to the contexts in which they arose. [Professional Real Estate] is an antitrust case; Bill Johnson’s is not. . . . [Thus, Professional Real Estate] must be limited to the antitrust context. Outside of that context, the Petition Clause protects objectively reasonable lawsuits from being enjoined, but requires a court to look at the underlying statute to determine whether the initiator of the suit can be held liable. 9 “Dicta are statements and comments in an opinion concerning some rule of law or legal proposition not necessarily involved nor essential to determination of the case in hand.” Thompson v. Weyerhaeuser Co., 582 F.3d 1125, 1129 (10th Cir. 2009) (citation and internal quotation marks omitted). In Cardtoons, the issue before the court was whether Petition Clause immunity applies to “purely private threats” “of litigation between purely private parties in a non-antitrust setting.” 208 F.3d at 886. The sham exception was not at issue. 14 Id. Thus, the Cardtoons dicta favors the Bill Johnson’s dicta over Professional Real Estate for determining what constitutes sham petitioning for all non-antitrust contexts. But two years after Cardtoons, the Supreme Court decided BE & K, which undercut the basis on which the Cardtoons dicta rested. First, in BE & K, the Supreme Court identified the Bill Johnson’s language as dicta (the language relied on in Cardtoons to differentiate between what was required to show that petitioning was a sham in antitrust cases versus all other case types). See BE & K, 536 U.S. at 527–28 (explaining that Bill Johnson’s concerned whether the NLRB could enjoin an ongoing suit without finding that it was reasonably based, meaning the Court “had no actual need to decide whether the [NLRB] could declare unlawful reasonably based suits that were ultimately unsuccessful”). And in BE & K, the Supreme Court rejected the Bill Johnson’s dicta, choosing to “exercis[e] [its] ‘customary refusal to be bound by dicta.’” Id. at 528 (quoting U.S. Bancorp Mortg. Co. v. Bonner Mall P’ship, 513 U.S. 18, 24 (1994)). Thus, though we take special heed of dicta from our en banc decisions, the Supreme Court’s later words steer us elsewhere here. In addition to rejecting the Bill Johnson’s dicta, BE & K provided three reasons for why it would be desirable for the Petition Clause to immunize unsuccessful but reasonably based lawsuits.10 First, the Court noted that refusing immunity simply 10 BE & K concluded that by imposing liability on “all reasonably based but unsuccessful suits filed with a retaliatory purpose,” the NLRB ran afoul of the National Labor Relations Act (NLRA) by ensnaring “petitioning that is objectively and subjectively genuine.” 536 U.S. at 534–36. But because the issue was 15 because the petitioning ultimately fails would ignore that “the genuineness of a grievance does not turn on whether it succeeds.” 536 U.S. at 532. Given this, Supreme Court doctrine has “protected petitioning whenever it is genuine, not simply when it triumphs.” Id. (citing Prof’l Real Estate, 508 U.S. at 58–61; Pennington, 381 U.S. at 670). In fact, the framers recognized this in the First Amendment’s text: “[T]he text of the First Amendment [does not] speak in terms of successful petitioning—it speaks simply of ‘the right of the people . . . to petition the Government for a redress of grievances.’” Id. (omission in original) (quoting U.S. Const. amend. I). Thus, we see, in both the Petition Clause’s text and in Supreme Court cases, a preference for immunizing unsuccessful, reasonably based petitioning. Second, good reasons support this preference because “even unsuccessful but reasonably based suits advance some First Amendment interests.” Id. For example, extending First Amendment protection to such suits allows for “the public airing of disputed facts” and “rais[ing] matters of public concern.” Id. (internal quotation marks and citation omitted). This allows parties to “promote the evolution of the law by supporting the development of legal theories that may not gain acceptance the first time around.” Id. “Moreover, the ability to lawfully prosecute even unsuccessful suits unpresented, the Court “d[id] not decide whether the [NLRB] may declare unlawful any unsuccessful but reasonably based suits that would not have been filed but for a motive to impose the costs of the litigation process, regardless of the outcome, in retaliation for NLRA protected activity[.]” Id. at 536–37. But a concurring opinion argued that the effect of the decision was to impose the Professional Real Estate test on NLRA cases. See id. at 537 (Scalia, J., concurring). We agree with Justice Scalia’s statement and conclude that BE & K supersedes anything to the contrary in Cardtoons. 16 adds legitimacy to the court system as a designated alternative to force.” Id. Again, these reasons weigh heavily in favor of broad immunity for petitioning activities, so long as the petitioning has a legitimate basis in the law. Third, the Court recognized that some speech is unprotected, including false statements. Id. And though baseless suits are “analogous to false statements,” reasonably based, unsuccessful suits are not. Id. “For even if a suit could be seen as a kind of provable statement, the fact that it loses does not mean it is false.” Id. at 532– 33. These considerations weigh heavily in favor of protecting objectively reasonable petitioning. And these interests still exist when petitioning may have been brought with improper motives, provided it was commenced with an objectively reasonable basis. Asking courts to divine the subjective mindset motivating a lawsuit is a big ask. Litigants may have mixed reasons for suing, some proper, others not. Thus, without looking to objective reasonableness first, courts may need to balance improper motives against proper ones. Doing so would be difficult, requiring courts to peer inside the petitioning parties’ minds to make a judgment about their intentions. If the petitioning is objectively reasonable, a court risks chilling legitimate litigation by withholding immunity for parties with legitimate grievances.11 11 We recognize valid concerns over whether reasonably based petitioning could be so abusive as to be a sham and discuss that infra regarding California Motors’s test for sham petitioning. 17 These interests do not weigh as heavily in favor of immunity if the petitioning is objectively unreasonable. After all, such unreasonableness might evince improper motivation. Parties with legitimate grievances can realistically expect some success. Absent that, courts can reasonably question whether the subjective intent is to harass, discriminate, or interfere with legally protected rights. The sham-petitioning exception was created to stop this sort of behavior. We agree that CSMN raises a valid concern about courts becoming an avenue for discrimination, but the Professional Real Estate test guards against that outcome, by requiring that the petitioning be objectively reasonable.12 So, for these reasons, we adopt Professional Real Estate’s sham-petitioning test for determining whether conduct is a sham, such that it loses Petition Clause immunity.13 12 We also recognize that by adopting the Professional Real Estate test, immunity may be extended to lawsuits brought to interfere with an opponent’s legally protected rights, provided such suits are reasonably based. But the First Amendment often extends its protection to activity we may not like. See, e.g., Matal v. Tam, 137 S. Ct. 1744, 1751 (2017) (recognizing First Amendment protection for “ideas that offend”); R.A.V. v. City of St. Paul, 505 U.S. 377, 391 (1992) (“The First Amendment does not permit [the government] to impose special prohibitions on those speakers who express views on disfavored subjects.” (citations omitted)). 13 Further, Professional Real Estate says that its sham-petitioning test applies outside antitrust situations. 508 U.S. at 59 (“Whether applying Noerr as an antitrust doctrine or invoking it in other contexts, we have repeatedly reaffirmed that evidence of anticompetitive intent or purpose alone cannot transform otherwise legitimate activity into a sham.” (emphasis added)). And other federal circuit courts have recognized this, adopting Professional Real Estate’s test outside of antitrust cases. See, e.g., Real Estate Bar Ass’n for Mass., Inc. v. Nat’l Real Estate Info. Servs., 608 F.3d 110, 124–25 (1st Cir. 2010) (granting Petition Clause immunity from § 1983 litigation to a “nonfrivolous” but unsuccessful suit); Bryant v. Military Dep’t of Miss., 597 F.3d 678, 691–94 (5th Cir. 2010) (same with various civil-rights suits); White v. Lee, 227 F.3d 1214, 1233 (9th Cir. 2000) (same with FHA litigation). 18 B. Applying Professional Real Estate’s Sham-Petitioning Test We review de novo the district court’s decision to grant Appellees’ motion to dismiss. See Albers v. Bd. of Cty. Comm’rs, 771 F.3d 697, 700 (10th Cir. 2014). On a motion to dismiss, courts “must accept all the well-pleaded allegations of the complaint as true and . . . construe them in the light most favorable to the plaintiff.” Id. (quoting Cressman v. Thompson, 719 F.3d 1139, 1152 (10th Cir. 2013)) (internal quotation mark omitted). Under this standard, we conclude that Appellees’ petitioning was objectively reasonable. At the outset, we note that Appellees’ losing in the Colorado district court and the Colorado Court of Appeals does not make their petitioning objectively unreasonable. As the Court discussed in BE & K, Petition Clause immunity applies “whenever [the petitioning] is genuine, not simply when it triumphs.” 536 U.S. at 532. So in determining whether Petition Clause immunity applies, we review the merits of the petitioning and, in doing so, look for litigation “so baseless that no reasonable litigant could realistically expect to secure favorable relief.” Prof’l Real Estate, 508 U.S. at 62. We do not find that here. First, Appellees were partially successful in their appeal to the Board. On review, the Board agreed with Appellees that the PUD restricted CSMN’s clinical use to “outpatient,” not “inpatient.” CSMN tries to mitigate the importance of this ruling by claiming that it had always planned to provide only outpatient treatment and, thus, the Board’s limitation was meaningless. Though CSMN’s plans identified only outpatient treatment, the fact remains that CSMN sought a PUD interpretation 19 allowing for inpatient treatment. Whether this was on accident or purposeful, had the Board not limited care to outpatient services, CSMN could have operated an inpatient-treatment center in the future. This alone shows that Appellees’ petitioning had some merit. Next, the history of the 2009 PUD amendment supported Appellees’ arguments to the Board and Colorado court, showing their arguments were reasonable, though unsuccessful. With the 2009 amendments, Cordillera homeowners tried to clarify that new uses would not substantively change the PUD. So in 2009, when then-owner BHC proposed changing the PUD’s language to allow a “Medical Offices/Facility” on the Village and Lodge parcels, CPOA objected that the proposed use was “overbroad.” App. vol. 4 at 602. CPOA helped rewrite the provision, resulting in language finally adopted in the 2009 PUD—language that the homeowners believed was consistent with the PUD’s earlier-allowed uses. Thus, when CSMN bought the property in 2016 and proposed closing the Lodge and Village parcels to the public and opening an addiction-treatment center, we can understand why the Cordillera homeowners would be surprised. In light of all their input leading to the 2009 PUD, Appellees’ arguments that the new PUD interpretation improperly restricted the formerly public Lodge and Village parcels to private use make some sense. And while we agree with the state courts’ interpretation of the PUD, we conclude that Appellees’ contrary arguments in the Colorado courts were reasonable. The homeowners had a right to be concerned about a change to the properties’ uses—especially one that restricted public access to a traditionally-open 20 community amenity—and to press for an interpretation that would preserve public access. Finally, we consider the state-court rulings in determining whether the suits were objectively reasonable. The state district court opinion is thorough and wellreasoned. Though the court criticized some of Appellees’ legal arguments as making “little sense,” the court certainly did not deem them frivolous. Id. at 610–11. Rather, both the district and appellate courts submitted lengthy opinions containing in-depth analysis, treating Appellees’ arguments as time-worthy though ultimately unpersuasive. In sum, we find that Appellees’ appeals of the Director’s PUD interpretation were objectively reasonable, meaning the sham exception does not apply. And because the appeals were objectively reasonable,14 we need not consider Professional Real Estate’s second step. C. The California Motor Sham Test CSMN presents an alternative basis for deeming Appellees’ petitioning a “sham”: it argues that Appellees filed a “series of petitions without regard to merit[s] and for the purpose of harming [CSMN’s] legal interest.” Opening Br. 31. Under California Motor, “a slew of ‘state and federal proceedings to resist and defeat applications by respondents to acquire operating rights or to transfer or register those 14 CSMN argues that it should be allowed further discovery about the objective reasonableness of the appeals. But we can determine the objective reasonableness of the appeals by examining the court filings and court rulings. 21 rights’” constituted a “sham.” Waugh Chapel S., LLC v. United Food & Commercial Workers Union Local 27, 728 F.3d 354, 363 (4th Cir. 2013) (quoting Cal. Motor, 404 U.S. at 509). Thus, “sham litigation occurs where ‘a pattern of baseless, repetitive claims . . . emerge[s] which leads the factfinder to conclude that the administrative and judicial processes have been abused.’” Id. (omission and alteration in original) (quoting Cal. Motor, 404 U.S. at 513). We do not find this to be the case here. Appellees appeared before three tribunals: (1) the Board, (2) the Colorado district court, and (3) the Colorado Court of Appeals (CPOA only). Each of these appeals originated from the same case, meaning multiple suits were not brought on the same issue—instead, the Appellees simply appealed. In fact, CMD did not even continue its appeal after losing in state district court. In contrast, the petitioners in California Motor repeatedly brought claims in both state and federal courts, trying to prevent competitors from obtaining operating licenses. 404 U.S. at 509. Unlike in that case, Appellees here pursued only a straight line of appeals. Given these considerations, we do not find that Appellees engaged in a series of lawsuits that were intended to abuse judicial processes. And thus, Appellees’ conduct does not qualify for the California Motor sham exception and Petition Clause immunity applies.