TRUCKING UNLIMITED et al., Plaintiffs-Appellants, v. CALIFORNIA MOTOR TRANSPORT CO. et al., Defendants-Appellees.
No. 22462
United States Court of Appeals, Ninth Circuit
Oct. 5, 1970
432 F.2d 755
Unquestionably, the application for the bridge permits was vigorously opposed, and there was evidence to show that theoretical navigation of the Hackensack River upstream from the contemplated bridges would be impaired. But there was substantial evidence to show that this navigation was more theoretical than real and that no existing or foreseeable future maritime development would be impaired.
In pertinent part, the Commandant‘s general conclusions, summarizing his detailed, specific findings of fact, were:
The construction of a port for ocean going vessels as proposed [plaintiffs’ proposed Port Bergen] appears to be an unrealistic projection. Approximately 4.5 miles of the Hackensack River would require dredging to a depth of 25 or more feet from the existing 12-foot channel, and two railroad bridges would require replacement to afford vessels adequate horizontal clearance. These facts tend to preclude the development of a port for ocean going vessels in the location envisioned by developers.
Berry Creek Canal is a tributary of the Hackensack River, an important commercial waterway in the State of New Jersey. The Hackensack River empties into Newark Bay, Kill Van Kull, New York Bay and Atlantic Ocean. Ocean going vessels navigate the Hackensack River to a turning basin located at mile 4. Beyond the turning basin, the majority of river traffic is limited to barge and tug traffic. While there is no commercial traffic along the Berry Creek Canal at the present time, the Canal may at some future date service terminals along its banks. The land adjacent to the Canal is mostly marshland and is theoretically developable for a variety of commerical purposes. The types of facilities which could be erected on this type of land are numerous; therefore, it is not possible at this time to predict the actual maritime requirements for the proposed bridges, since non-marine development is a possibility.
Coupled with these conclusions as to potential future use was the legislative determination that the public interest and use required an extension of the turnpike and the judicial determination that the taking was for the public good and that the locating of the extension was not arbitrary, oppressive or in bad faith. New Jersey Turnpike Authority v. Sisselman, supra. As found by the Commandant, judicial approval of the location of the roadway “will permit the New Jersey Turnpike Authority to construct a section of the Turnpike parallel to the Hackensack River thus eliminating that parcel of land fronting on the Hackensack River for port purposes.” Thus, we find neither arbitrariness, capriciousness, abuse of discretion, or lack of substantial evidence.
Because of our views concerning the merits of the controversy, we do not consider the defense of sovereign immunity advanced by the Coast Guard. The judgment of the district court will be affirmed.
Michael N. Khourie (argued), J. Stanley Pottinger, Broad, Busterud & Khourie, San Francisco, Cal., for plaintiffs-appellants.
John MacDonald Smith, San Francisco, Cal. for Pacific Motor Trucking Co.
W. D. Benson, Jr., Lubbock, Tex., for T.I.M.E. Freight, Inc.
Before HAMLIN and BROWNING, Circuit Judges, and PREGERSON,* District Judge.
This is an action by one group of trucking companies against another seeking treble damages and injunctive relief under the Sherman and Clayton Acts,
The complaint alleges a conspiracy among defendants to restrain and monopolize the highway common carriage business in California and elsewhere by a jointly financed, widely publicized program of opposing, before the two commissions and the courts, all applications by actual or potential competitors for the issuance, transfer, or registration of operating rights. The district court dismissed the action on the ground that the complaint failed to state a claim upon which relief could be granted.
The district court held that relief was barred by Eastern Railroad Presidents Conference v. Noerr Motor Freight Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961), and United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965), which hold that the Sherman Act does not forbid attempts to influence the passage or enforcement of laws. We disagree for two reasons. First, concerted employment of judicial and administrative adjudicative processes as part of a scheme to restrain trade, as alleged in this complaint, is not excluded from the Sherman Act by the Noerr-Pennington doctrine. Second, even if the Noerr-Pennington rule does apply to the use of judicial and administrative adjudicative processes in a scheme to restrain trade, relief is not barred if, as alleged in this complaint, the real purpose of defendants’ joint activity was to restrain competitors directly, rather than to restrain them indirectly by inducing restrictive governmental action.
I
The Noerr-Pennington principle is a judicially implied exception to the general rule that an unlawful purpose may bring otherwise lawful means within the proscription of the Sherman Act. See American Tobacco Co. v. United States, 328 U.S. 781, 809, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946). The exception‘s premise is that the responsibility for enacting or not enacting laws concerning trade restraints rests with the legislative branch of government; and, similarly, responsibility for enforcing or not enforcing those laws rests with the executive branch. Noerr, supra, 365 U.S. at 135-136, 81 S.Ct. 523. Hence, valid legislative or executive action that results in the restraint or monopolization of trade does not violate the Sherman Act. United States v. Rock Royal Co-operative, Inc., 307 U.S. 533, 560, 59 S.Ct. 993, 83 L.Ed. 1446 (1939).2
And the Sherman Act does not apply to efforts to influence the enactment or enforcement of laws even when those efforts are motivated by an anti-competitive purpose because “it is quite probably people with just such a hope of personal advantage who provide much of the information upon which governments must act. A construction of the Sherman Act that would disqualify people from taking a public position on matters in which they are financially interested would thus deprive the government of a valuable source of information and, at the same time, deprive the people of their right to petition in the very instances in which that right may be of the most importance to them.” Id. at 139, 81 S.Ct. at 530.
This is a powerful argument for holding that joint efforts to influence legislative and executive action are excluded from Sherman Act liability regardless of purpose, but it does not justify immunizing agreements to utilize judicial and administrative adjudicative processes in a scheme to restrain trade. The fundamental reason for the Noerr-Pennington exception does not apply. It is not the function of the courts to determine whether laws restraining trade will be adopted or, having been adopted, whether they will be enforced; nor is this the function of an administrative agency engaged in adjudication, as the PUC and the ICC are here.4 It would be pointless to limit the reach of the Sherman Act in order to protect the access of courts and agencies engaged in adjudicative functions to information and opinion relevant to determinations they have no power to make.5
Because the legal monopoly conferred by a patent lends itself to misuse as a means to illegally monopolize and restrain trade, it is often a significant factor in determining whether a particular course of conduct violates the Sherman Act that a patent is involved. This fact, however, has no bearing at all upon whether the Noerr-Pennington defense applies. That doctrine is concerned with protecting joint efforts to influence governmental action as such—the subject matter of the governmental action is beside the point. The significance of the cases cited is not that they involve the use of patent litigation to restrain trade, but that they involve the use of litigation for that purpose. They demonstrate that litigation can be an integral part of a scheme prohibited by the Sherman Act.
Pennington disposes of the second basis for distinction relied upon by the district court. If the Noerr-Pennington defense had applied to the use of litigation for the purpose of restraining trade, the defense would have been available whether this means was employed as part of a larger scheme or stood alone. Pennington, supra, 381 U.S. at 670, 85 S.Ct. 1585. Furthermore, litigation and threats of litigation were the only means used to exclude competitors in Walker Process.
We conclude, therefore, that the Noerr-Pennington defense does not bar relief when a conspiracy to employ judicial and administrative adjudicative processes in a scheme to restrain trade is alleged.
II
Dismissal was improper for another reason. Plaintiffs have alleged that defendants’ real purpose was to restrain
The plaintiffs in Noerr contended, and the trial court found, that the defendants sought to injure plaintiffs directly by destroying their good will with the public and with their customers, thus weakening their competitive position and causing them to lose business. The Supreme Court noted that “the apparent effect of these findings is to take this case out of the category of those that involve restraints through governmental action and thus render inapplicable” the principle that efforts to induce such governmental action do not violate the Sherman Act. 365 U.S. at 142, 81 S.Ct. at 532. The Supreme Court held, however, that plaintiffs’ attempt to exclude their case from the latter category failed for want of evidence.
The Court pointed out that there was no finding that the defendants attempted directly to persuade anyone not to deal with the plaintiffs. On the contrary, the evidence reflected only efforts by the defendants to influence the passage and enforcement of laws. The Supreme Court concluded, therefore, that “the findings of the District Court that the [defendants‘] campaign was intended to and did in fact injure the [plaintiffs] in their relationships with the public and with their customers can mean no more than that the [plaintiffs] sustained some direct injury as an incidental effect of the [defendants‘] campaign to influence governmental action and that the [defendants] were hopeful that this might happen.” Id. at 143, 81 S.Ct. at 532.
This was not enough to render defendants’ publicity campaign actionable. The Court noted that whenever an attempt is made to influence legislation by such a campaign it is inevitable that some incidental injury will be visited upon the opponents and equally inevitable that those conducting the campaign will be aware of this possibility.
On the other hand:
“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 [defendants] were making a genuine effort to influence legislation and law enforcement practices. Indeed, if the version of the facts set forth in the [plaintiffs‘] complaint is fully credited, as it was by the courts below, that effort was not only genuine but also highly successful. Under these circumstances, we conclude that no attempt to interfere with business relationships in a manner proscribed by the Sherman Act is involved in this case.” Id. at 144, 81 S.Ct. at 533.
The “sham” exception is derived from the basic rationale of the Noerr-Pennington defense: The Act does not bar legislation or law enforcement restraining trade and therefore does not bar the solicitation of such action. Conversely, if joint action is not for the purpose of restraining competition by inducing governmental action, but is rather for the purpose of imposing a direct restraint by the defendants’ own conduct, the Sherman Act applies. Cf. Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 706-707, 82 S.Ct. 1404, 8 L.Ed.2d 777 (1962).
Plaintiffs assert that their proof9 would establish such a conspiracy to impose a direct restraint under the guise of a program to induce governmental ac-
It was and is the policy of the PUC to encourage competition in the trucking industry by freely granting, and approving the transfer of, certificates of public convenience and necessity. Until 1963 it was the policy of the ICC to register any certificate issued by the PUC automatically, without further hearing.
In 1961 defendant trucking companies, the largest highway common carriers in California and the western states, undertook to lessen competition from smaller companies resulting from the relatively easy access to operating rights. They decided to accomplish this objective, not by seeking to induce the PUC to change its policy, but rather by discouraging the filing of applications with the PUC and the ICC. To that end they agreed to take, and took, the following steps.
They 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.
As a direct result of defendants’ joint activities, the financial resources of plaintiffs and other competitors of the defendants were depleted; applications by plaintiffs and other competitors for the issuance, transfer, or registration of operating rights were defeated, delayed, or restricted; and plaintiffs and other competitors were deterred from instituting or pursuing such applications. Defendants’ joint activities effectively foreclosed plaintiffs and other competitors from access to the PUC, the ICC, and to the courts in review proceedings; it denied those agencies and the courts the benefit of facts and information required for the making of competent decisions; and it severely curtailed competition.
The rationale underlying the Noerr-Pennington defense does not dictate immunity for this alleged conspiracy. The purpose of defendants’ joint activity was not to induce action by the affected governmental agencies, but to preclude it. That is hardly a “genuine” effort to influence governmental action in the Noerr sense. Prohibiting such joint activity under the Sherman Act would not “impair the power of government to take actions * * * that operate to restrain trade.” Noerr, supra, 365 U.S. at 137, 81 S.Ct. at 529. It would not impede “the ability of the people to make their wishes known to their representatives” in any legitimate sense, id.; nor “deprive the government of a valuable source of information.” Id. at 139, 81 S.Ct. at 531.
Nonetheless, the district court held the “sham” exception inapplicable because plaintiffs 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. But the question is whether the defendants sought to restrain competition by inducing restrictive governmental action, on the one when hand; or, on the other, sought to restrain competition by the deterrent effect of their own joint activity.
That their joint activity took the form, in part, of solicitation of governmental action and that they made a genuine effort to support all protests as effectively as possible would not negate a primary purpose to restrain competition directly. The means allegedly adopted by defendants to deter agency action was to discourage the filing of requests for such action by a jointly financed, well publicized program of opposing every application filed. Since all applications were to be opposed, it is irrelevant that a valid
The purpose of this alleged conspiracy was to inflict injury upon competition directly by defendants’ own joint activity. Inevitably, given the nature of the means employed, defendants’ activity would also injure competitors indirectly by influencing rulings of the agencies and the courts. Here, however, that indirect injury is merely incidental; and its occurrence cannot justify application of the Noerr-Pennington defense. As a practical matter, to hold otherwise would make the “sham” exception inapplicable to any conspiracy to restrain trade cloaked with the mantle of a campaign to influence governmental action. Cf. Noerr, supra, 365 U.S. at 143-144, 81 S.Ct. 523.
Reversed and remanded for further proceedings.
HAMLIN, Circuit Judge (dissenting):
I respectfully dissent.
Section 1063 of the
In my view, the activities of the Public Utilities Commission in the implementation of the broad statutory standard is one akin to policy making. The participation of the defendants in this policy making process, through their opposition to the grant of certificates or transfers of certificates is in my opinion protected from Sherman Act liability by the decisions of the United States Supreme Court in Noerr and Pennington, despite the assumption, arising from the posture of this case, that defendants have an anti-competitive motive. The Public Utilities Commission has the power and ability to correct any abuses flowing from the activities of defendants through their opposition to the grant or transfer of certificates, see
For these reasons, and for the reasons stated by Judge Sweigert in his United States District Court decision, reported in 1967 Trade Cases ¶ 72,298 (N.D.Cal.1967), I would affirm.