California Anti-SLAPP Project

Mark Aero, Inc. v. Trans World Airlines, Inc. (concluded)


The "Noerr-Pennington " doctrine refers to the teachings of Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961), (Noerr) and United Mine Workers of America v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965), (Pennington). In the Noerr case a group of trucking companies and their trade association brought suit against, primarily, a group of railroads, for violations of ss 1 and 2 of the Sherman Act. It was charged in the complaint that the defendants had conducted a deceptive publicity campaign against the trucking industry in order to foster the "adoption and retention of law and enforcement practices destructive of the trucking business * * * and to impair the relationships existing between the truckers and their customers." [FN18]

[FN18] Noerr, supra 365 U.S. at 129, 81 S.Ct. at 525.
The district court found that the railroads' publicity campaign was malicious, fraudulent, and violative of the Sherman Act. The Court of Appeals for the Third Circuit affirmed. A unanimous Supreme Court reversed, the Court holding in part that:
We accept, as the starting point for our consideration of the case, the same basic construction of the Sherman Act adopted by the courts below that no violation of the Act can be predicated upon mere attempts to influence the passage or enforcement of laws. It has been recognized, at least since the landmark decision of this Court in Standard Oil Co. v. United States, (362 U.S. 947, 80 S.Ct. 862, 4 L.Ed.2d 866), that the Sherman Act forbids only those trade restraints and monopolizations that are created, or attempted, by the acts of "individuals or combinations of individuals or corporations." Accordingly, it has been held that where a restraint upon trade or monopolization is the result of valid governmental action, as opposed to private action, no violation of the Act can be made out. These decisions rest upon the fact that under our form of government the question whether a law of that kind should pass, or if passed be enforced, is the responsibility of the appropriate legislative or executive branch of government so long as the law itself does not violate some provision of the Constitution.

We think it equally clear that the Sherman Act does not prohibit two or more persons from associating together in an attempt to persuade the legislature or the executive to take particular action with respect to a law that would produce a restraint or a monopoly. [FN19]

[FN19] Id., at 135-36, 81 S.Ct. at 528 (footnotes omitted).

In Pennington the Court reiterated the holding of Noerr and clarified the scope of its application. Pennington alleged that certain coal companies and the U.M.W. had lobbied before the Secretary of Labor to obtain adjustments to the TVA wage and purchasing policies as part of a conspiracy to drive small coal companies out of business.
The Court held that such lobbying before the Secretary of Labor was immune under the Sherman Act, stating that Noerr shields from the Sherman Act a concerted effort to influence public officials regardless of intent or purpose.

* * * Joint efforts to influence public officials do not violate the antitrust laws even though intended to eliminate competition. Such conduct is not illegal, either standing alone or as part of a broader scheme itself violative of the Sherman Act. [FN20]

[FN20] Pennington, supra 381 U.S. at 670, 85 S.Ct. at 1593.

The use of the term public official clearly expanded the Noerr decision, which had referred only to legislative or executive action. Noerr and Pennington read together, have been correctly summarized by a commentator [FN21] as holding that "joint efforts to influence government action are outside the scope of the Sherman Act, even if the combination is formed for the sole purpose of eliminating competitors." [FN22]
[FN21] Note, Trade Regulation: Noerr Antitrust Immunity Defining the Sham Exception, 29 Okla.L.Rev. 512 (1976).

[FN22] Id., at 514.

The Court in California Motor described the dual underpinnings of the Noerr and Pennington decisions:
(1) In a representative democracy such as this, these branches of government act on behalf of the people and, to a very large extent, the whole concept of representation depends upon the ability of the people to make their wishes known to their representatives. To hold that the government retains the power to act in this representative capacity and yet hold, at the same time, that the people cannot freely inform the government of their wishes would impute to the Sherman Act a purpose to regulate, not business activity, but political activity, a purpose which would have no basis whatever in the legislative history of that Act.

(2) The right of petition is one of the freedoms protected by the Bill of Rights, and we cannot, of course, lightly impute to Congress an intent to invade these freedoms. [FN23]

[FN23] California Motor, supra 404 U.S. at 510, 92 S.Ct. at 611 (citations omitted).

At the doctrine's inception, the Supreme Court carefully observed that resort to governmental processes may be employed unscrupulously as a pretext to abuse a competitor. The Noerr decision included a caveat, the so-called sham exception, stating:
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 relationships of a competitor and the application of the Sherman Act would be justified. But this certainly is not the case here. No one denies that the railroads were making a genuine effort to influence legislation and law enforcement practices. [FN24]

[FN24] Noerr, supra 365 U.S. at 144, 81 S.Ct. at 533.

Application of the sham exception was first confirmed by the Supreme Court in California Motor. The court of appeals summarized the facts of that case as follows:
[The defendants] agreed to and did establish and maintain a joint trust fund by monthly contributions based upon each defendant's gross income. They informed their competitors that they would use this trust fund to finance opposition to all applications then pending or thereafter filed by their competitors with the PUC or the ICC; that each and every application would be opposed with or without probable cause, and regardless of its merits; and that in every case defendants would pursue their opposition through all stages of administrative and judicial review. Defendants told their competitors that they could avoid the expense and delay resulting from defendants' opposition only by abandoning pending applications and severely limiting or refraining entirely from filing further applications. [FN25]

[FN25] Trucking Unlimited v. California Motor Transport Co., 432 F.2d 755, 762 (9th Cir. 1970).

It was, in short, "[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." [FN26]
[FN26] California Motor, supra 404 U.S. at 515, 92 S.Ct. at 614.
In the light of this background it was held that "[o]n their face the above-quoted allegations come within the 'sham' exception to the Noerr case, as adapted to the adjudicatory process." [FN27] Disclosed was the essential element of the sham exception, whether employed in an adjudicative or nonadjudicative setting, namely, an absence of a genuine effort to influence government but, rather, an intent to injure a competitor directly. [FN28]
[FN27] Id., at 516, 92 S.Ct. at 614.

[FN28] As Professor Handler has observed,

(T)he California Motor Transport Co. plaintiffs carefully refrained from basing their cause of action upon any actual attempt to influence the course of administrative action. When the defendants met in February of 1961 they had no knowledge of the merits of any future application. All they knew was that the California PUC had traditionally adopted a liberal approach with respect to granting new operating rights, but according to plaintiffs' assertions, defendants specifically eschewed any attempt to change this agency attitude. The plan was not to influence government, but rather to deter competitors from making applications that would set the public decision-making apparatus into motion. Such a scheme, if proven, would be embraced by the sham exception since * * * it involved nothing more than a direct restraint on competitors.

Handler, M., Twenty-Five Years of Antitrust (Twenty-Fifth Annual Antitrust Review ), 73 Colum.L.Rev. 413, 436-37 (1973) (footnotes omitted).

See also, Fischel, D., Antitrust Liability for Attempts to Influence Government Action: The Basis and Limits of the Noerr-Pennington Doctrine, 45 U.Chi.L.Rev. 80, 105 (1977) ("Construing the sham exception as enunciated in Noerr to include all activity not genuinely designed to influence the government is more consonant with the Court's central ruling"); Note, Antitrust -- Noerr-Pennington Doctrine -- Metro Cable Co. v. CATV of Rockford, Inc., 17 B.C.Indus. & Com.L.Rev. 511, 523-24 (1976).

This perspective was reinforced in Otter Tail Power Co. v. United States, 410 U.S. 366, 93 S.Ct. 1022, 35 L.Ed.2d 359 (1973), where the Court summarized California Motor as a case "where we held that the principle of Noerr 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 and thus is within the 'mere sham' exception announced in Noerr." [FN29]
[FN29] 410 U.S. at 380, 93 S.Ct. at 1031. In Otter Tail the Court vacated the district court's judgment which had held that Noerr-Pennington immunity was inapplicable to the institution of judicial proceedings. The case was remanded for reconsideration in light of California Motor.
Turning now to the specific allegations before us, we observe at the outset that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957) (footnote omitted). [FN30] Even when tested by this standard, none of the defendants' alleged wrongful acts constitute more than joint efforts to influence the City officials' decision in the airport controversy. Paragraph 14(a) alleges a publicity campaign undertaken to restrict plaintiff's access to City officials. Paragraph 14(b) charges that defendants induced the Aviation Department to refuse to take action favorable to plaintiff's position. Paragraph 14(c) alleges that defendants made misrepresentations to and " economically coerced" the City Council. All of these actions are joint efforts to influence governmental action. As such they fall within the Noerr umbrella and cannot give rise to Sherman Act liability.
[FN30] Quoted in Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 746, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1975), in which Mr. Justice Marshall, speaking for a unanimous Court, stated that "in antitrust cases, where the proof is largely in the hands of the alleged conspirators, . . . dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly." Id.

However, "(i)n testing the legal sufficiency of the complaint the well-pleaded allegations are taken as admitted by conclusions of law and unreasonable inferences or unwarranted deductions of fact are not admitted." Hiland Dairy, Inc. v. Kroger Co., 402 F.2d 968, 973 (8th Cir. 1968), Cert. denied, 395 U.S. 961, 89 S.Ct. 2096, 23 L.Ed.2d 748 (1969).

It matters not that the sole purpose alleged to underlie the attempt to influence governmental action was to hamper a competitor's business activities. The plaintiffs in Noerr relied upon
the fact * * * that the railroads' sole purpose in seeking to influence the passage and enforcement of laws was to destroy the truckers as competitors for the long distance freight business. But we do not see how this fact * * * could transform conduct otherwise lawful into a violation of the Sherman Act. All of the considerations that have led us to the conclusion that the Act does not apply to mere group solicitation of governmental action are equally applicable in spite of the addition of this factor. The right of the people to inform their representatives in government of their desires with respect to the passage or enforcement of laws can not properly be made to depend upon their intent in doing so. It is neither unusual nor illegal for people to seek action on laws in the hope that they may bring about an advantage to themselves and a disadvantage to their competitors. [FN31]

[FN31] Noerr, supra 365 U.S. at 138-139, 81 S.Ct. at 530 (footnote omitted); See also Pennington, supra 381 U.S. at 670, 85 S.Ct. 1585.

Moreover, these principles apply regardless of the fact that the conduct "falls far short of the ethical standards generally approved in this country." [FN32]
[FN32] Noerr, supra 365 U.S. at 140, 81 S.Ct. at 531. See also Metro Cable Co. v. CATV of Rockford, Inc., 516 F.2d 220, 228 (7th Cir. 1975).
It follows, a fortiori, that any incidental damage resulting from the City's legislative inaction is not actionable.

Mark Aero maintains that its averments of prevention of "free and meaningful access" to the organs of City government state a valid claim under the sham exception.

The fundamental question presented in each case involving the "sham" exception, whether argued in a nonadjudicative or an adjudicative setting, is the question of intent. Normally, in a nonadjudicative setting, such as the legislative arena, it presents no particular problem. But in the adjudicative setting the question can become more complex. As always in deciding questions of intent, the court considers all of the surrounding circumstances and assigns to each circumstance an appropriate weight, dependent upon the function and significance of each. Thus in California Motor the Court considered the "manner of exercise of the right of association and petition," the defendants' other activities against competitors, and the adamant stand taken in defendants' opposition to other applications, all to ascertain whether there was a true intent to injure competitors directly rather than to influence governmental action. The distillation of all of the applicable factors in each case governs the decision as to true intent, whether it is to directly injure competitors rather than to influence governmental action. In California Motor a consideration of all of the factors led the Court to conclude that the allegations came within the sham exception in the Noerr case, "as adapted to the adjudicatory process" [FN33] in that the defendants' purpose was to deny a competitor "free and meaningful access to the agencies and courts." [FN34]

[FN33] California Motor, supra 404 U.S. at 516, 92 S.Ct. at 614.

[FN34] Id., at 515, 92 S.Ct. at 614.

The insurmountable difficulty with attempting to utilize that case as precedent here lies in the difference in the specific factual allegations relied on. We have heretofore summarized those of California Motor. In the case before us it is alleged that the defendants have engaged in a publicity campaign involving the media and various citizens groups, that they have induced the Aviation Department of the City to refuse to make application to the FAA for approval of a master security plan, that they have made and induced others to make false and misleading statements to, and used "economic coercion" on, the City Council. These actions may all be admitted, and we take them as true, but what is being complained about is genuine political activity, protected by the first amendment rights of free speech and freedom of petition. [FN35] Such activity cannot provide the basis for a Sherman Act claim, nor does it "bar access" in the sense employed in California Motor. The construction of the Act contended for by the defendants would extend the Sherman Act into regulation of political activity contrary to the Noerr case.
FN35. Franchise Realty Interstate Corp. v. San Francisco Local Joint Exec. Bd., 542 F.2d 1076, 1082 (9th Cir. 1976), Cert. denied, 430 U.S. 940, 97 S.Ct. 1571, 51 L.Ed.2d 787 (1977).
Accepting as true all properly pleaded allegations, the order of the District Court denying appellants' motions to dismiss is reversed, and the cause is remanded with instructions to dismiss the second amended complaint.


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