Sessions Tank Liners, Inc. v. Joor Manufacturing, Inc.Sessions Tank Liners, Inc. v. Joor Manufacturing, Inc.
Lead Opinion
Appellant Joor Manufacturing, Inc. (“Joor”), challenges the district court’s decision holding Joor liable for anticompetitive conduct in violation of federal antitrust laws and for the California tort of intentional interference with prospective economic advantage. Through deliberate misrepresentation, Joor caused a prominent standard-setting organization to amend its influential model fire code to the disadvantage of Joor’s competitor, appellee Sessions Tank Liners, Inc. (“Sessions”).
Because Sessions has failed to prove that its injuries result from anything other than governmental action, we reverse the district court’s judgment on the antitrust claims. We also conclude that Joor is shielded from liability on the California commercial tort claim. We therefore reverse the district court’s judgment on that claim as well.
BACKGROUND
The parties in this case are commercial competitors. Joor is in the business of manufacturing steel tanks designed for the underground storage of hazardous fluids. Sessions repairs leaking storage tanks in place by cutting them open, lining their interiors with a protective coating of epoxy, and resealing them.
The cost of lining a tank is about the same as the cost of a new tank. Tank lining is cheaper than tank replacement, however, because lining does not entail the additional costs of removing and discarding the leaking tank and installing a new one. Tank lining, moreover, does not require the lengthy interruption of business that tank replacement often involves.
In most of the localities in which Sessions did business prior to bringing this suit, tank lining required a permit. Authority to issue a tank lining permit usually rested with the local fire marshal or fire chief. Before the events that precipitated this law suit, fire authorities granted tank lining permits to Sessions without reluctance, and Sessions’s business grew continually.
The Western Fire Chiefs Association (WFCA) is a private, nonprofit organization whose voting membership comprises fire chiefs and other governmental employees. The WFCA periodically promulgates a revised Uniform Fire Code (UFC), a model safety code prescribing safety standards and procedures. Many local governments formally adopt each successive UFC revision as municipal law. In some cities and towns where the UFC has not been formally enacted into law, local officials enforce the UFC by refusing to issue permits for structures or activities that are not in conformance with the code.
During the time of Joor’s involvement with the WFCA, revision of the UFC was a three-phase process. In the first phase, designat
In the final phase of the UFC revision process, the UFC Committee published in trade journals the proposed code changes and accompanying UFC Committee recommendations. At its annual meeting, the full body of the WFCA voted on the proposed revisions. Members of the public could attend this meeting and express support for or opposition to any proposal under consideration. The WFCA usually adopted proposed revisions to which no objections were made. If a majority of the WFCA approved a proposed revision, the revision was incorporated into the UFC.
Unlike the UFC Committee and the WFCA, whose memberships were limited to public officials, UFC subcommittees included industry representatives and members of the public. The conduct at issue in this case arises from appellant Joor’s involvement— through its president, Howard Robbins— with the UFC subcommittee charged with revising UFC Article 79, the section of the code that prescribes guidelines for the handling and storage of flammable liquids. Robbins volunteered to work on the subcommittee and took part in revising the provisions relating to underground storage tanks. Robbins was assigned the task of reviewing the parts of Article 79 that dealt with depth and location specifications for underground storage tanks. At the time he became involved with the subcommittee, Article 79 did not address tank lining or require that leaking tanks be removed.
Alarmed at the news of Robbins’s participation in the code revision process, representatives from Sessions provided the subcommittee with materials about the tank lining process and were granted an opportunity to make a presentation on the subject, but the presentation was scheduled for the subcommittee’s final meeting. Prior to the meeting, Robbins circulated among subcommittee members a letter in which he raised concerns about the safety of tank lining and stated that the WFCA might incur liability for sanctioning the process because it would void a tank’s Underwriters Laboratories (UL) certification.
After the Sessions representatives made their presentation and left the meeting, Robbins rallied the subcommittee to amend Article 79 to include a provision requiring that leaking storage tanks be removed from the ground. Robbins reasserted that the lining process was unsafe and would void the UL label, subjecting the WFCA to liability. In spite of their awareness of Robbins’s economic interest in a tank lining ban, the subcommittee unanimously approved Robbins’s suggestion, incorporating the amendment in UFC § 79.601(d). In effect, the amendment was tantamount to a ban on tank lining.
With little or no discussion of the leaking tank removal provision, the UFC Committee approved the revised version of Article 79. The full body of the WFCA gave the revised article final approval.
Before the WFCA officially adopted the tank removal provision, Robbins sent letters to public entities, fire officials, standard-setting organizations and customer groups informing them of the proposed amendment. Fire officials in many localities began denying Sessions’s requests for permits and Sessions’s business declined sharply. In the years following, Sessions’s business continued to suffer.
Sessions filed a complaint in district court alleging that Joor had violated federal antitrust laws and California unfair competition laws. Ruling that Joor was shielded by Noerr-Pennington immunity from antitrust liability, the district court granted- partial summary judgment in favor of Joor. On interlocutory review, this court substantially
After a bench trial the district court ruled that Noerr immunity does not protect Joor from antitrust liability. The district court focused its analysis on whether Joor’s machinations in the Article 79 subcommittee constituted a “valid effort to influence government action.” Sessions,
The court found Joor liable for a violation of section 1 of the Sherman Act, 15 U.S.C. § 1, and for the California tort of intentional interference with prospective advantage. Sessions Tank Liners, Inc. v. Joor Mfg., Inc.,
ISSUES ON APPEAL
In this case we are called upon to decide whether a private party can be held liable, under federal antitrust laws and the California common law, for anticompetitive restraints resulting from valid governmental action.
DISCUSSION
I. The Antitrust Claim
Joor contends that the district court erred in ruling that Joor is not shielded by Noerr-Pennington immunity from liability on the antitrust claim.
Antitrust petitioning immunity has its roots in the Supreme Court’s decision in Parker v. Brown,
In Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc.,
Hearkening to the same principles underlying the Parker doctrine, the Noerr Court ruled that the railroads could not be held
Insofar as [the Sherman] Act sets up a code of ethics at all, it is a code that condemns trade restraints, not political activity, and, as we have already pointed out, a publicity campaign to influence governmental action falls clearly into the category of political activity. The proscriptions of the Act, tailored as they are for the business world, are not at all appropriate for application in the political arena.
Noerr,
The Noerr Court also rejected the proposition that petitioning immunity was limited to injuries flowing directly from governmental action. It held that the railroads were also shielded from liability for the harm the truckers suffered in their relationships with their customers. In the Court’s view, that injury was “incidental” to the defendants’ campaign to influence legislation. To impose liability for such incidental effects would “be tantamount to outlawing” the petitioning activity itself. Id. at 143-44,
The Court further defined the Noerr immunity doctrine in Allied Tube & Conduit Corp. v. Indian Head, Inc., the case on which the district court relied in holding Joor liable for violating the Sherman Act. The Allied court recognized that, if carried to its extreme, antitrust petitioning immunity could be used to shield defendants from liability for all manner of anticompetitive conduct as long as the injury claimed could be characterized as incidental to an effort to influence governmental action. The Court addressed this problem by ruling that immunity attaches only when the anticompetitive conduct at issue constitutes a valid effort to petition the government.
In applying Allied to Joor’s conduct, the district court overlooked a key distinction between Allied and this case. The plaintiff in Allied was awarded damages only on the theory that the stigma of banning the plaintiffs product from a uniform code caused independent marketplace harm to the plaintiff in jurisdictions that permitted the use of the plaintiffs products. Id. at 498 n. 2,
Because the injuries Sessions complains of are the result of governmental action, Joor is shielded by petitioning immunity from liability under the antitrust laws. Our
To rule otherwise and hold Joor liable for injuries flowing from governmental decision-makers’ imposition of an anticompetitive restraint, we would have to find that the restraint was imposed because of Joor’s petitioning efforts. Proof of causation would entail deconstructing the decision-making process to ascertain what factors prompted the various governmental bodies to erect the anticompetitive barriers at issue. This inquiry runs afoul of the principles guiding the Parker and Noerr decisions. See Omni,
The district court’s holding illustrates the problems that arise when private parties are held liable under the antitrust laws for injuries flowing from governmental action. In the district court’s view, the fact that Sessions’s injuries flowed from local officials’ refusal to grant tank lining permits did not relieve Joor of antitrust liability. Joor’s actions would be shielded by Noerr immunity, the court reasoned, only if the permit denials could be characterized as “an ‘intervening cause’ breaking the link between a private party’s pursuit of an anticompetitive objective and a plaintiffs injury.” Sessions,
In addition to its dependence on deconstruction, the “intervening cause” analysis presents other difficulties. We cannot accept an interpretation of the Noerr doctrine that grants immunity only when the defendant’s efforts to persuade government officials to impose anticompetitive restraints were not the cause of the governmental restraints actually imposed. So interpreted, the immunity shields nothing that would otherwise cause liability. Joor would be protected from antitrust liability only if the court found that the permit denials were motivated by factors wholly unrelated to Robbins’ activities in the Article 79 subcommittee and his subsequent campaign to notify public officials of the tank lining ban. See id.
Because the only anticompetitive injuries that Sessions complains of are the direct result of governmental action, we conclude that Joor is shielded from liability for these injuries by petitioning immunity.
II. The State Law Claim
Joor asserts that the district court erred in ruling that Sessions was entitled to judgment on its claim that Joor had committed the common-law tort of intentional interference with prospective economic advantage.
We need not decide whether antitrust petitioning immunity and immunity under state tort law are perfectly coextensive. See Blank v. Kirwan,
The California Supreme Court has carefully considered the relationship of antitrust petitioning immunity to the tort of interference with prospective economic advantage. In Pacific Gas & Elec. Co. v. Bear Stearns & Co.,
It is true that this latter statement in PG & E is expressly rested on the First Amendment, and Joor’s entitlement under that Amendment is limited in the present case. Joor made deliberate misrepresentations in securing the amendment to the UFC; he falsely represented that the lining process would void a tank’s UL certification, and he made unfounded assertions regarding the safety of tank lining and its effect on a tank’s structural integrity. Those statements, of themselves, have no real claim to First Amendment protection. See Clipper Exxpress v. Rocky Mountain Motor Tariff Bureau,
PG & E recognizes, however, that the very existence of a tort action for the seeking of valid governmental action exerts an undesirable chilling effect on the access of others to government, regardless of the motives of the particular party before the court. PG & E,
The only tort involving inducement of litigation that the California Court was willing to recognize in PG & E was the tort of malicious prosecution, with its dual protective requirements of a lack of probable cause and a lack of success in the litigation. Id.,
Finally, we believe that the California courts, if presented with the policy considerations against deconstruction of public deci-sionmaking that we discussed in Part I, would find them as compelling in the tort law context as they are in the antitrust context. To impose tort liability for damages resulting from valid governmental decisions by public officials requires an examination of the motives of those officials that judges, federal or state, are reluctant to undertake. In the present case, for example, the district court found that the fire officials “relied on [Joor’s] misrepresentation in denying permits to Sessions to engage in tank lining.” Sessions,
We conclude, therefore, that the California courts would not permit recovery in this case for tortious interference with prospective economic advantage, where the damages all flow from governmental decisions of disinterested public officials. We accordingly reverse the judgment of the district court awarding such damages.
The judgment of the district court awarding damages to Sessions under federal and state law is
REVERSED.
Notes
. In later cases, the Court recognized that Noerr immunity applies to attempts to influence administrative, executive and judicial action. Otter Tail Power Co. v. United States,
. Sessions concedes as much in its brief when it states, "[TJhe Noerr doctrine and its progeny rest on the premise that the Sherman Act regulates business activity, but not political activity. Pure political activity is beyond the reach of the Sherman Act.” Appellee's Brief at 3.
. We re-emphasize that the liability that Allied attached to "invalid” efforts to petition the government was liability for damages flowing from the non-governmental, independent market-place harm that the defendants’ activities caused.
. Joor raises other points of error concerning the district court’s decision holding Joor liable to Sessions under the Sherman Act. Because we determine that Joor is immune from the antitrust claims, we do not reach these arguments.
. To prevail on a claim of intentional interference with prospective economic advantage the plaintiff must demonstrate: "(1) an economic relationship between the plaintiff and some third person containing the probability of future economic benefit to the plaintiff; (2) knowledge by the defendant of the existence of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) damages to the plaintiff proximately caused by the acts of the defendant.” Bland v. Kirwan,
Dissenting Opinion
dissenting.
I believe the district court properly applied the facts of this case to the law as set forth in Allied Tube & Conduit Corp. v. Indian Head, Inc.,