California Anti-SLAPP Project

Franchise Realty Interstate Corp.
v.
San Francisco Local Joint Executive Board of Culinary Workers

(concluded)


BROWNING, Circuit Judge (dissenting):

As the majority succinctly puts it, McDonald's alleged that defendants combined "to oppose, repeatedly, baselessly and in bad faith, the granting of building permits by the San Francisco Board of Permit Appeals (Board) for the construction of McDonald's restaurants." McDonald's also alleged that defendants, by their repeated and baseless opposition to every McDonald's application, intended to and did foreclose McDonald's from "free and unlimited access" to the Board and "thereby interfere(d) directly with the business activities and relationships of a competitor." Complaint, paragraph 18.

These allegations, together with averments of anticompetitive purposes and effect, state an antitrust claim under California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972): "A combination of entrepreneurs to harass and deter their competitors from having 'free and unlimited access' to the agencies and courts, to defeat that right by massive, concerted, and purposeful activities of the group are ways of building one empire and destroying another. . . . If these facts are proved, a violation of the antitrust laws has been established." Id. at 515, 92 S.Ct. at 614.

The majority finds this result unpalatable, and, to avoid it, distorts the substantive rule announced in Trucking Unlimited and applied in Otter Tail Power Co. v. United States, 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359 (1973), on remand, 360 F.Supp. 451 (D.Minn.1973), aff'd mem., 417 U.S. 901, 94 S.Ct. 2594, 41 L.Ed.2d 207 (1974). The majority also creates an unwarranted exception to the standard for pleading laid down in the Federal Rules of Civil Procedure and forcefully restated in Conley v. Gibson, 355 U.S. 41, 45-48, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

I

The majority assumes, though reluctantly, that defendants opposed the granting of building permits to McDonald's repeatedly, baselessly, and in bad faith, as alleged, and holds that, though deceptive, unethical, and undertaken to impose competitive injury, such conduct is immunized from the Sherman Act because it involves only the exercise of the First Amendment right of petition. The majority asserts that Trucking Unlimited applies only to defendants who have engaged in activities "external" to the administrative or judicial process (majority opinion note 4); and distinguishes Otter Tail on the ground that there the "gravamen" of the government's case was conduct by the defendants other than the instigation of litigation, a right guaranteed by the First Amendment. The majority's premise is that the Sherman Act cannot be violated by the exercise, in any manner or with any intent, of the First Amendment right to petition an administrative or judicial tribunal; some additional conduct is required, external to the proceedings before the tribunal.

Not only does the majority cite no authority for this rule, but Trucking Unlimited and Otter Tail are exactly to the contrary.

Trucking Unlimited holds as clearly as language can put it that the fact that defendants' conduct is protected by the First Amendment does not necessarily give them immunity under the antitrust laws, and that Sherman Act liability may be based upon no more than an abuse of the defendants' own First Amendment right of access to an administrative tribunal. California Motor Transport Co. v. Trucking Unlimited, supra, 404 U.S. at 513-15, 92 S.Ct. 609. The Court expressly holds that institution of baseless, repetitive claims, although an exercise of the First Amendment right of petition, is an abuse of the administrative or judicial process that may evidence an intention to eliminate competition by barring competitors from meaningful access to adjudicatory tribunals, and thus violate the Sherman Act. Id. at 512-13, 515, 92 S.Ct. 609. The complaint in this case alleges precisely what Trucking Unlimited holds to be an antitrust violation. If there were any doubt as to the majority's meaning in Trucking Unlimited, it would be dispelled by the opinion of Justice Stewart who, with Justice Brennan, concurred in the judgment but declined to join the majority opinion specifically because the majority held that Sherman Act liability may be based upon the manner in which defendants exercise their First Amendment right of access to an adjudicatory tribunal. Id. at 517, 92 S.Ct. 609.[FN1]

[FN1] The complaint alleges that the Board's function is adjudicatory. The majority suggests that it may in fact be legislative. The distinction is critical. See California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 512-13, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972). See also Rodgers v. FTC, 492 F.2d 228, 232 n. 3 (9th Cir. 1974). The question cannot be resolved on the present record. The majority assumes, as it must, that the Board is an adjudicatory body.
In the Otter Tail litigation, the Supreme Court reaffirmed the doctrine that repetitious institution of proceedings before an adjudicatory tribunal may violate the Sherman Act if it reflects an intention to restrain competition by denying competitors meaningful access to the tribunal.

The case was before the Supreme Court twice. On the first occasion, as the majority notes, the Supreme Court simply remanded for reconsideration in light of Trucking Unlimited. In doing so, however, the Court stated without qualification that Trucking Unlimited had held that the Sherman Act "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 . . . ." Otter Tail Power Co. v. United States, supra, 410 U.S. at 380, 93 S.Ct. at 1031. This language contains no suggestion that conduct external to the litigation itself is also required to make out an antitrust violation.

The majority asserts that the Supreme Court's decision on the first appeal in the Otter Tail litigation is not a holding that the facts established an antitrust violation. This is literally true. It is also misleading. On remand, the district court held that the facts did make out a violation of the Sherman Act.[FN2] The defendant again appealed. In a second decision, not mentioned by the majority, the Supreme Court affirmed this holding. Otter Tail Power Co. v. United States, 417 U.S. 901, 94 S.Ct. 2594, 41 L.Ed.2d 207 (1974).

[FN2] On remand the district court found as follows:
I find that 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. I find the litigation comes within the sham exception to the Noerr doctrine as defined by the Supreme Court in California Transport . . . .

United States v. Otter Tail Power Co., 360 F.Supp. 451, 451-52 (D.Minn.1973).
The majority contends that Otter Tail involved not only actual litigation, but also threats of litigation, and thus satisfied the majority's dictum that conduct external to the exercise of the First Amendment right must be involved to forfeit antitrust immunity. Nothing in any of the opinions in the Otter Tail litigation suggests that the result reached depended upon the fact that threats were used. The opinions refer only to a pattern of unsubstantial litigation employed to maintain a monopoly. An examination of the briefs filed in the Supreme Court for both appeals demonstrates that this was the crux of the charge. The government neither alleged nor proved that defendant employed threats of litigation as a planned part of defendant's program to maintain its monopoly, and the district court made no such finding.[FN3]
[FN3] The only reference to threatened litigation in the briefs submitted to the Supreme Court in the first Otter Tail appeal is found in a footnote in the Statement of Facts of the government's brief, in which two incidents that might be interpreted as involving such threats are described. Brief for the United States at 27 n. 23. The same summary appears as footnote 9 at pages 11-12 of the Statement of Facts in the government's Motion to Affirm on the second appeal. It is frivolous to suggest that these incidental and ambiguous references formed the basis of the Court's ruling.
The defendants in Trucking Unlimited and Otter Tail did not lose antitrust immunity because they did anything in addition to participating in administrative and judicial processes. Immunity was lost because the defendants abused those processes by a pattern of conduct designed to eliminate competition by harassing and deterring competitors in their use of such processes and thus deny them meaningful access to such processes.

To repeat, there is no authority to support the majority's holding that abuse of administrative proceedings, although accompanied by the requisite intent, cannot alone constitute a violation of the Sherman Act; and Trucking Unlimited and Otter Tail hold to the contrary.[FN4]

[FN4] It was unnecessary for appellants to allege that they were in fact foreclosed from access to the Board. It was neither alleged in the complaint in Trucking Unlimited nor proven in the trial in Otter Tail that the ability of competitors to present their views was actually foreclosed or that competitors were either prevented from filing applications with the tribunal or from obtaining a hearing. It is enough to allege a denial of meaningful access.

It was also unnecessary for appellants to allege that the defendants' submissions were baseless or that defendants did not seek favorable action by the adjudicatory body. The complaint in Trucking Unlimited "did not allege that the presentations defendants made to the agencies and the courts were in themselves false, misleading, or lacking in evidentiary or legal support," and the district court held that the "sham" exception was inapplicable for this very reason. Trucking Unlimited v. California Motor Transport Co., 432 F.2d 755, 762 (9th Cir. 1970). The antitrust defendants in both Trucking Unlimited and Otter Tail sought the favorable action of the tribunal when and if they could get it. The Trucking Unlimited complaint alleged that the antitrust defendants "instituted the proceedings and actions . . . with or without probable cause, and regardless of the merits of the cases." California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 512, 92 S.Ct. 609, 612, 30 L.Ed.2d 642 (1972) (emphasis added). "Under this approach, the abusiveness of the petitioning practices is the key. The fact that in engaging in these practices the petitioner is actively seeking to influence the government decision-making is irrelevant." Note, Antitrust and the Constitution, 42 U.Cinn.L.Rev. 281, 304 (1973). As the court said in Semke v. Enid Automobile Dealers Ass'n, 456 F.2d 1361, 1366 (10th Cir. 1972), "Thus, the term 'sham' in this context would appear to mean misuse or corruption of the legal process." See also Rodgers v. FTC, 492 F.2d 228, 232 n.3 (9th Cir. 1974).

Even if it were relevant, the majority's assertion that "it is clear" that defendants were seeking official action is an unwarranted and premature factual determination. The district court made no such finding and there is no record to support it. As the Chief Justice warned in Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974):

When a federal court reviews the sufficiency of a complaint, before the reception of any evidence either by affidavit or admissions, its task is necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims. Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test.


II

The second rule announced by the majority is procedural. "What we do hold," the majority states, "is that in any case, whether antitrust or something else, where a plaintiff seeks damages or injunctive relief, or both, for conduct which is prima facie protected by the First Amendment, the danger that the mere pendency of the action will chill the exercise of First Amendment rights requires more specific allegations than would otherwise be required."

Until the majority spoke, no complaint was subject to dismissal under Rule 12(b)(6) unless it failed to meet the liberal pleading standard of Rule 8(a). 5 C. Wright & A. Miller, Federal Practice & Procedure s 1356, at 590 (1969). See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Conley v. Gibson, supra, 355 U.S. at 45-46, 78 S.Ct. 99; Bodine Produce, Inc. v. United Farm Workers Organizing Committee, 494 F.2d 541, 556 (9th Cir. 1974). This standard was applicable to all actions in federal courts, except those identified in Rule 9(b). 5 C. Wright & A. Miller, supra, s 1221, at 149. "(T)he rules reject the notion that certain actions inherently carry a different pleading burden than others." Id. at 151. Rule 9(b) requires greater particularity only in alleging fraud; and this exception to the general rule of notice pleading was to be "construed narrowly and not extended to other legal theories or defenses." 5 C. Wright & A. Miller, supra, s 1297, at 405.

The majority's exception to the general rule would apply to any case involving "conduct which is prima facie protected by the First Amendment." The number of cases within the exception is undoubtedly large, including most antitrust litigation. "(T)he Sherman Act punishes the conspiracies at which it is aimed on the common law footing that is to say, it does not make the doing of any act other than the act of conspiring a condition of liability." Nash v. United States, 229 U.S. 373, 378, 33 S.Ct. 780, 782, 57 L.Ed. 1232 (1913). Thus the crux of an offense under section 1 of the Sherman Act is an agreement or meeting of minds, usually arising out of associations and communication among businessmen. See Giboney v. Empire Storage Co., 336 U.S. 490, 502, 69 S.Ct. 684, 93 L.Ed. 834 (1949); quoted in California Motor Transport Co. v. Trucking Unlimited, supra, 404 U.S. at 514, 92 S.Ct. 609. Yet we have recognized that no special rules apply to the pleading of antitrust cases and have specifically rejected the notion that it is necessary to plead "facts" rather than "conclusions" in such cases.[FN5] Walker v. Lucky Lager Brewing Co., 323 F.2d 1, 3-4 (9th Cir. 1963); see Nagler v. Admiral Corp., 248 F.2d 319, 322-23 (2d Cir. 1957); 5 C. Wright & A. Miller, supra, s 1228, at 167.

[FN5] The Supreme Court recently reversed the dismissal of an antitrust complaint for failure to state a claim upon which relief could be granted because the "concededly rigorous standard" for such a dismissal was not met. Justice Marshall, speaking for a unanimous Court, explained that "in antitrust cases, where 'the proof is largely in the hands of the alleged conspirators,' Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458, 464 (1962), dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly." Hospital Bldg. Co. v. Trustees of the Rex Hospital, --- U.S. ----, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1976).
The majority cites no authority to support its new rule. Three cases are referred to for the general proposition that the Supreme Court has "recognized the sensitivity of First Amendment guarantees to the threat of harassing litigation, and has erected barriers to safeguard those guarantees." [FN6] But none of these is a pleading case, and none suggests that the problem of protecting First Amendment rights from the chilling effect of harassing litigation should be solved by the creation of a judicial exception to the federal rules of pleading.
[FN6] Time, Inc. v. Hill, 385 U.S. 374, 87 S.Ct. 534, 17 L.Ed.2d 456 (1967); New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964); and NAACP v. Button, 371 U.S. 415, 83 S.Ct. 328, 9 L.Ed.2d 405 (1963).
The majority quotes the discussion in Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 95 S.Ct. 1917, 44 L.Ed.2d 539 (1975), of the danger of vexatious litigation under Rule 10b-5, particularly because of the potential for abuse of the discovery provisions of the Federal Rules of Civil Procedure in this type of case. But again, the Supreme Court's opinion offers no support for the creation by judicial fiat of an exception to the Federal Rules of Civil Procedure as a means of dealing with the problem.

The power to prescribe general rules of civil procedure for the district courts is vested in the Supreme Court; rules promulgated pursuant to this authority must be reported to Congress before becoming effective. 28 U.S.C. s 2072.

It is of course necessary that courts interpret and apply the rules in particular cases, but this court has no authority to announce what is in effect a substantial modification of the rules.


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