Court Opinion

ID: 6981835
Source: CourtListenerOpinion
Date Created: 2022-07-24 02:21:45.428639+00
Date Added: 2024-06-11T16:09:12.821570
License: Public Domain

SLOVITER, Circuit Judge,
dissenting.
I dissent from the decision of the majority for two reasons. First, I believe the majority errs as a matter of law in its reading of the sham exception to the Noerr-Pennington doctrine, and thereby diminishes by judicial interpretation the scope of the Sherman Act, a seminal congressional enactment. Second, I believe the .facts of record are sufficient to withstand summary judgment.
I will not repeat in detail the historical facts outlined by the majority. For our purposes, it is sufficient to recognize that appellant Cheminor, an Indian manufacturing company, began exporting bulk ibuprofen for sale in the United States in 1988, which would have created competition for appellee Ethyl, who was at that time the only U.S. manufacturer of bulk ibuprofen.
Ethyl began taking steps to impede Che-minor’s entry into the U.S. market. In addition to filing a petition with the U.S. Trade Representative (USTR), seeking to remove Indian ibuprofen from the list of eligible articles, which was ultimately successful effective July 1, 1991, it also filed an anti-dumping (AD) and countervailing duty (CVD) petition with the United States International Trade Commission (USITC) and the United States Department of Commerce (USDOC) accusing Cheminor of receiving generous subsidies from the Indian government and selling bulk ibuprofen on the U.S. market at below market prices. The USITC, which has only 45 days to make a preliminary determination whether, based on the best information available at the time, there is a reasonable indication of material injury to a domestic industry, or threat thereof, by reason of the imports under investigation, see 19 U.S.C. § 1671b(a), made a preliminary determination on September 16, 1991, that there was sufficient evidence of material injury to the domestic market to justify taking corrective action against Cheminor. On December 13, 1991, the USDOC preliminarily determined that the Indian government had been subsidizing Cheminor in the amount of 43.71%. As a result of these two determinations, the USITC and/or USDOC required Cheminor’s exclusive distributor, Flavine International (“Flavine”), to pay 43.71% duties on any Cheminor ibuprofen imported.
In response to this significant additional cost, Flavine canceled all orders for bulk ibuprofen. This effectively forced Cheminor out of the U.S. ibuprofen market. Cheminor notified the USITC that it would be withdrawing from the market. Only after Che-minor withdrew did Ethyl voluntarily withdraw its USITC petition.
Cheminor then filed this lawsuit against Ethyl. The District Court granted Ethyl’s motion for summary judgment on the antitrust claims on the ground that Ethyl was immune from suit under the First Amendment and the Noerr-Pennington doctrine. It dismissed Cheminor’s state law claims under 28 U.S.C. § 1367(e), refusing to exercise supplemental jurisdiction as a matter of discretion.
I

LEGAL ISSUE: TREATMENT OF FRAUD UNDER NOERR-PENNINGTON

Under the majority’s decision, even a party who has committed blatant and intentional *130fraud and misrepresentation in a judicial or administrative proceeding is entitled to the protection that the Noerr-Pennington doctrine affords from suit under the antitrust laws. I do not believe that Noeir-Penning-ton goes as far as to cover abuse of process; I do not believe that it should.
The rationale given by the Supreme Court for its holding in Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 135, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961), that “no violation of the [Sherman] Act can be predicated upon mere attempts to influence the passage or enforcement of laws,” was the dissimilarity between an agreement to lobby for legislation and an agreement to price-fix or boycott, id. at 137, 81 S.Ct. 523, the concern about impairing the ability of persons to make known their wishes to their legislators, id., the unwillingness to apply the Sherman Act to political activity, id., and the First Amendment protection of the right to petition, id. at 137-38, 81 S.Ct. 523. This holding was extended to attempts to influence the executive branch, specifically the Secretary of Labor, in United Mine Workers of America v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965). Yet another extension was added in California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 510-11, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972), when the Court ruled that citizens’ attempts to influence administrative agenciés or courts similarly may not engender antitrust liability. The majority relies upon this doctrine in holding that Cheminor cannot base its antitrust claims on Ethyl’s attempts to influence the USITC and USDOC.
However, the Noerr-Pennington exception to the antitrust laws is not unlimited. The Court in Noerr made that clear when it stated, “There may be situations in which a publicity campaign, 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 relationship of a competitor and the application of the Sherman Act would be justified,” thereby describing what has come to be known as the “sham” exception. 365 U.S. at 144, 81 S.Ct. 523.
Thereafter, in holding that because of the sham exception the antitrust laws applied to the conduct of highway carriers who allegedly engaged in concerted action to institute state and federal proceedings to resist and defeat applications by competitive highway carriers to acquire, transfer or register those rights, the Supreme Court held that “[m]is-representations, condoned in the political arena, are not immunized when used in the adjudicatory process.” California Motor Transport, 404 U.S. at 513, 92 S.Ct. 609. If the activity were proven, the antitrust laws would apply.
Thus, I believe, and there are cases so holding, that the “sham” exception to Noerr-Pennington immunity from the antitrust laws includes at least two separate and independent grounds for holding that a particular litigant is not immune from antitrust liability: (1) that the litigation was objectively baseless, and (2) that the litigation was based on knowing and material misrepresentations. The District Court never considered whether Ethyl’s AD/CVD petition might be a sham based on the second ground. The majority holds this was not error, and in doing so relies on the Supreme Court’s most recent decision on this subject.
In Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993) (PRE), the Court, in “defin[ing] the ‘sham’ exception to the doctrine of antitrust immunity first identified in [Noerr] as that doctrine applies in the litigation context,” held that “litigation cannot be deprived of immunity as a sham unless the litigation is objectively baseless.” Id. at 51, 113 S.Ct. 1920. The majority reads that as holding that “objective baselessness” is the only exception to Noerr-Pennington. However, nothing in PRE repudiated the holding in California Motor Transport. Rather, the PRE Court expressly reserved the question whether and to what extent the test it announced would apply in the event that the litigation involved misrepresentations or other highly disfavored conduct. It stated:
In surveying the “forms of illegal and reprehensible practice which may corrupt the administrative or judicial processes and *131which may result in antitrust violations,” we have noted that “unethical conduct in the setting of the adjudicatory process often results in sanctions” and that “[m]is-representations, condoned in the political arena, are not immunized when used in the adjudicatory process.” California Motor Transport, 404 U.S., at 512-513 [92 S.Ct. 609]. We need not decide here whether and, if so, to what extent Noerr permits the imposition of antitrust liability for a litigant’s fraud or other misrepresentations.
PRE, 508 U.S. at 61 n. 6, 113 S.Ct. 1920 (citations omitted).
The majority’s decision to disregard the facts that Cheminor alleges Ethyl misrepresented is contrary to the position of the two other courts of appeals that have considered this issue. Both of these courts read PRE to preserve a fraud exception to antitrust immunity, although they vary in their interpretation of that exception. See Whelan v. Abell, 48 F.3d 1247, 1254-55 (D.C.Cir.1995); Kottle v. Northwest Kidney Centers, 146 F.3d 1056, 1060 (9th Cir.1998), cert. denied, — U.S.-, 119 S.Ct. 1031, — L.Ed.2d-(1999).
For example, the Court of Appeals for the District of Columbia has held that litigation that is based on misrepresentations does not enjoy immunity either under Noerr-Pen-nington or under the First Amendment. In Whelan, the district court had dismissed the antitrust complaint on the grounds that the defendants were immune from liability under Noerr-Pennington because the litigation they pursued was not objectively baseless. See 48 F.3d at 1253. In reversing that decision, the appellate court agreed with the plaintiffs that, even if the litigation was not baseless, the defendants were not entitled to immunity if they made deliberately false and material representations in the course of that litigation. The court reasoned that because Noerr-Pennington immunity is based, at least in part, on respect for the First Amendment right to petition for redress of grievances, and because “[h]owever broad the First Amendment right to petition may be, it cannot be stretched to cover petitions based on known falsehoods,” it followed that Noerr-Pennington did not immunize the defendants from liability based on their misrepresentations. Id. at 1254-55.
A fraud exception to Noerr-Pennington in the litigation context was also recognized in Kottle, where the Ninth Circuit stated, “[I]n the context of a judicial proceeding, if the alleged anticompetitive behavior consists of making intentional misrepresentations to the court, litigation can be deemed a sham if ‘a party’s knowing fraud upon, or its intentional misrepresentations to, the court deprive the litigation of its legitimacy.’ ” 146 F.3d at 1060 (quoting Liberty Lake Inv., Inc. v. Magnuson, 12 F.3d 155, 158-59 (9th Cir.1993)).
The majority relegates these eases to a footnote for the proposition that the misrepresentation must be material, without acknowledging that the Ninth and District of Columbia Courts of Appeals, unlike it, accept misrepresentation as an independent prong of the sham exception to Noerr-Pennington. By thus conflating the concepts of “material” and “objectively baseless,” the majority ignores the risk that a party will intentionally use fraud and misrepresentation to transform a claim that is otherwise weak and unlikely to prevail, although not “objectively baseless,” into one that succeeds.
Given the cited appellate authority, it is inexplicable to me why the majority has chosen to rely for its precedent on the district court decision in Music Center S.N.C. DiLuciano Pisoni & C. v. Prestini Musical Instruments Corp., 874 F.Supp. 543 (E.D.N.Y. 1995). In that case, the court refused to permit plaintiffs to proceed to discovery in an antitrust claim based on material misrepresentations without first establishing a color-able claim that the challenged litigation was objectively baseless.
Many of the arguments made by the majority are effectively answered in Clipper Exxpress v. Rocky Mountain Motor Tariff Bureau, Inc., 690 F.2d 1240 (9th Cir.1982), a case in which the court reversed the summary judgment granted to defendant trucking companies and their rate bureau, who had filed protests with the Interstate Commerce Commission with regard to the plaintiffs shipping rates. The Court of Appeals rejected the defendants’ attempts to cloak *132themselves with the mantle of Noerr-Pen-nington immunity, noting that, unlike in the political arena, immunizing defendants from liability based on misrepresentations made in an adjudicatory context could undercut the effectiveness of the adjudicatory body. It 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.
Id. at 1261.
To follow further the Clipper court’s distinction between petitioning the legislature and petitioning a court, I quote from other pertinent language in the opinion:
Adjudicatory procedures will not always ferret out misrepresentations. Administrative bodies and courts ... rely on the information presented by the parties before them. They seldom, if ever, have the time or resources to conduct independent investigations. The recognition, however, of a private right of action based on the fraudulent misrepresentation, might be sufficient incentive to induce parties not to fraudulently misrepresent facts.
Id. at 1262. Moreover, the Clipper court, like the court in Whelan, noted that the First Amendment does not protect such false petitioning:
There is no first amendment protection for furnishing with predatory intent false information to an administrative or adjudicatory body. The first amendment has not been interpreted to preclude liability for false statements.
Id. at 1261.
Unlike the majority, I conclude that the District Court erred in recognizing only a single exception to Noem-Pennington immunity based on “objective baselessness,” and would remand to that court for further consideration.
II

IS THERE SUFFICIENT FACTUAL BASIS OF FRAUD AND MISREPRESENTATION TO WITHSTAND SUMMARY JUDGMENT?

Cheminor has , raised sufficient questions of fact to survive summary judgment under the “sham” exception as I have delineated it. Cheminor alleges that when Ethyl filed the AD/CVD petition, it knew it would not be able to establish all of the elements of an antidumping or countervailing duty claim, and intentionally and materially misrepresented its financial condition in order to overcome this difficulty. It alleges that Ethyl misrepresented, inter alia, (1) Ethyl’s profits and costs,1 (2) the customers Ethyl allegedly lost to Cheminor, and (3) specific sales Ethyl allegedly lost to Cheminor. Because Chemi-nor has submitted some evidence to support these allegations, I, like the majority, must assume that the statements Cheminor alleges were false are, in fact, false. I conclude that •these misrepresentations were sufficiently material to bring them within the sham exception to Noerr-Pennington immunity.
To prevail in the AD/CVD case, Ethyl had to show that Cheminor received government subsidies, it sold the product at less than fair value, there was material injury to the domestic industry, and this injury was by reason of Cheminor’s exports. A failure to show any one of these elements would have defeated Ethyl’s claim. A misrepresentation was thus material • to the extent that the truth would have tended to disprove the existence of any one of the elements.
Cheminor contends that Ethyl’s misrepresentations were material to the USITC’s determination that material injury to the domestic industry probably had occurred. In making that determination, the USITC must *133by statute consider “(I) the volume of the imports of the subject merchandise, (II) the effect of the imports of that merchandise on prices in the United States for domestic like products, and (III) the impact of imports of such merchandise on domestic producers of domestic like products_” 19 U.S.C. § 1677(7)(B)(I). Further, in assessing the impact imports have had on domestic producers, the USITC must consider “all relevant economic factors which have a bearing on the state of the industry in the United States,” which in this case was Ethyl. 19 U.S.C. § 1677(7)(C)(iii). The USITC was specifically directed to consider:
(I) actual and potential decline in [Ethyl’s] ... sales [and] profits, ...
(II) factors affecting [Ethyl’s] prices,
(III) actual and potential negative effects on [Ethyl’s] cash flow, ...
(IV) actual and potential negative effects on [Ethyl’s] existing development and production efforts ..., and
(V) ... the magnitude of the margin of dumping.
Id. The misrepresentations Cheminor alleges Ethyl made directly concern Ethyl’s sales, profitability, prices, and cash flow — three of the five statutorily-mandated indicia of injury. By law, they were thus material to the USITC’s decision making.
Moreover, as even the majority admits, the USITC actually “relied ... in part on Ethyl’s representations of its financial condition” in determining that Ethyl’s application justified imposing punitive tariffs on Cheminor. The USITC stated in its “Views of the Commission”:
The financial trends provide a reasonable indication of present material injury. For example ... the industry [Ethyl’s] profitability (as measured by profit-to-sales ratio) declined substantially from the beginning to the end of the investigatory period, despite an increase in 1989 from the 1988 level.
Confidential information concerning other factors, such as apparent domestic consumption and market share, further provide a reasonable indication of present injury. ■
App. at JA 2097 (footnote omitted).
The fact that the USITC also relied on other factors, such as Cheminor’s market share, in reaching its determination cannot disprove the materiality of the misrepresentations. Neither Ethyl nor the majority have suggested any reason to believe that the USITC would not have reconsidered its decision had it known that Cheminor’s financial condition was improving. The USITC might have decided that strong evidence of a financially healthy domestic industry outweighed any data suggesting that Cheminor’s market share was increasing. Ethyl’s misrepresentations deprived the USITC of that opportunity, undermining the legitimacy of its decision making process.
Nor can Ethyl refute the materiality of the alleged misrepreséntations by claiming that the USITC could have based its determinations on the threat of material injury. Ethyl admits that neither the District Court nor the USITC considered whether the evidence it submitted established a colorable claim of threat of harm. The fact that the misrepresentations might not have been material to a determination the USITC concededly did not make says little about whether the same misrepresentations affected the determination it concededly did make. Similarly, the USTR’s decision to remove Indian ibuprofen from the GSP in 1990 is irrelevant to the determination whether Ethyl’s alleged misrepresentations affected the USITC’s decision.
The majority, apparently in an attempt to negate materiality, notes that Acting Chairman Anne Brunsdale, writing separately, “did not rely on Ethyl’s assertions of decreased profits” in reaching her decision. An individual Commissioner’s views do not in any way indicate that the misrepresented facts were not material to the other Commissioners or to the Commission’s decision. In any event, even Acting Chairman Brunsdale said she found Ethyl’s financial information “useful in determining whether the injury resulting from any dumping and subsidization is material.” App. at JA 2105.
*134The majority’s suggestion that the alleged misrepresentations are not material because “they were deemed to be not material by the ITC” is even less persuasive. The Commissioners had not learned of the falsity of Ethyl’s representations at the time they reached their decision and thus they had no opportunity to judge them materiality. I can only assume that the majority means to say that the Commissioners did not deem Ethyl’s profitability figures to be material in reaching a decision. As I explain above, I find this interpretation of the Commissioners’ actions untenable.
Of more concern is the majority’s apparent belief that the issue turns on whether Ethyl had probable cause to file its petition. As I have explained, a party’s use of material misrepresentations in filing an action is a separate and independent ground for denying Noerr-Pennington immunity.
Finally, I note that the majority extends Noerr-Pennington immunity beyond the antitrust context, and holds it also governs Cheminor’s state common law claims. This court has not previously so held, and I believe we should not expand the scope of Noerr-Pennington immunity to cover claims of any variety — common law or statutory, federal or state — without significantly more consideration than the majority devotes to this issue. See Whelan, 48 F.3d at 1253-55 (identifying concerns raised by the application of Noerr-Pennington defense to common law claims without deciding whether such application is mandated by the First Amendment).
I see no need to engage in a monologue on that issue in the posture of this case. I do note that the case the majority refers to for its expansion of the Noerr-Pennington doctrine, Brownsville Golden Age Nursing Home, Inc. v. Wells, 839 F.2d 155, (3d Cir.1988), which (perhaps not coincidentally) I authored, did not purport to extend the Noerr-Pennington doctrine to state or common law claims; it merely held that “action designed to bring a facility’s noncomplianee with applicable regulations to the attention of the appropriate authorities” cannot form the basis of a damage action, and drew analogies to cases rejecting claims based on petitioning activity. That can hardly be used as support for the majority’s very different determination that fraudulent action, designed to elicit administrative, action, is immune from any liability, whether under federal, state, statutory or common law.
Whether Cheminor’s state law claims fall within an exception to the Noerr-Pennington doctrine turns on precisely the same considerations as the determination whether its federal claims fall within that exception. Because I disagree with the majority’s conclusion that Ethyl is entitled to immunity from Cheminor’s antitrust claims and its state law claims, I respectfully dissent.

. In addition to its contention that Ethyl misrepresented data for the first six months of 1991, Cheminor also contends that Ethyl "intentionally and wrongfully underreported its profits to the ITC by $1.5 million dollars (over three years)” and that Ethyl misrepresented its 1990 profits. Appellants' Br. at 14, 16.