Efforts to Influence Government Action: The Noerr-Pennington Doctrine - ABA YLD 101 Practice Series

By Kara Kuritz

"Congress shall make no law...abridging the right of the people...to petition the government for a redress of grievances."

Lobbying, public relations campaigns, participation in administrative proceedings, and litigation are all tools that one might use to influence government. The Bill of Rights recognizes the right of petition, and any restriction of political activities threatens to impinge on this right. Just as these activities represent valid participation in government; however, firms might use these methods to deter or reduce competition. While these activities impose costs on the firms that undertake such action, they hold the promise of imposing even more significant costs on existing or potential rivals. How far does the Sherman Act go in condemning such activity? Under the Noerr-Pennington doctrine, efforts by individuals or groups to petition the government are not illegal, even if the motivation is an anticompetitive purpose. E. R.R. Presidents Conference v. Noerr Motor Freight, 365 U.S. 127, 136 (1961).

In Eastern Railroad Presidents Conference v. Noerr Motor Freight, the Supreme Court found no violation of the Sherman Act where the defendants had engaged in a public relations campaign to promote laws that would harm the plaintiff's business. Id.at 136. Competition between the trucking and railroad industries led the defendants, a group of railroads and a public relations firm, to campaign against truckers. Id. at 129. The campaign, which disguised that its sentiments were coming from the competing railroad industry, persuaded Pennsylvania's governor to veto the "Fair Truck Bill," which would have allowed truckers to carry heavier loads over Pennsylvania roads. Id. at 130. In essence, the bill would have allowed the trucking industry to compete more significantly with the railroad industry.

The plaintiffs, a group of truckers, challenged the campaign as an antitrust offense. The Court in Noerr reasoned that to hold the campaign violated antitrust laws would deter people from informing and petitioning their representatives, thereby limiting the power of the legislature and executive to restrain trade. Id. at 137-8. Furthermore, it made no difference that the defendants deliberately disguised the sponsorship of the campaign because the Sherman Act is not a code of ethics for political activities. Id. at 139-40. Nonetheless, the Court did state that if the campaign was nothing more than a mere sham to interfere with the business relationships of a competitor, the Sherman Act would apply. Id. at 144. Thus, the firms' public relations campaign to influence public opinion and secure government action, even though undertaken to harm competitors under disguised sponsorship, did not run afoul of the antitrust laws.

While the Noerr case involved a public relations campaign to influence the legislature, the scope of the doctrine was extended to attempts to influence administrative agencies and courts as well. In California Motor Transport Co. v. Trucking Unlimited, one group of truckers claimed that a rival group had violated the antitrust laws by instituting agency proceedings and lawsuits to delay and defeat its applications for competitive operating rights. Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 509 (1972). The Supreme Court observed that the same rationale that applied in Noerr also applied to citizens or groups attempting to influence administrative agencies or courts. Id. at 510. What about attempts to influence private associations? An important follow-up case, Allied Tube & Conduit Corp. v. Indian Head, Inc.,addresses this issue.

In Allied Tube, the Court held that Noerr immunity did not shield efforts to influence a product standard for a private association comprised of market participants. 486 U.S. 492, 509-10 (1988). When the plaintiff began producing plastic rather than steel electric conduit, it sought code approval for its conduit through the National Fire Protection Association (NFPA). Id. at 492. The defendants organized the nation's other steel conduit producers to block code approval by packing the NFPA annual meeting in which the members would vote on acceptance of the plaintiff's plastic conduit. Id. at 493. The plaintiff sued, alleging a violation of Section 1 of the Sherman Act. In determining the applicability of Noerr, the court reasoned that the NFPA is a private, standard-setting body, and, while its standards were routinely adopted by legislatures in their codes, it has no official government authority. Id. at 493. Rather, economically interested parties comprised the NFPA and had an economic incentive to restrain trade. Id. Because the activity did not occur in the open political arena, and because the defendants were not merely attempting to persuade an independent decision-maker (the defendants actually voted and exercised authority as members of the NFPA), Noerr immunity did not apply. Id.

Other cases have also defined the scope of the Noerr-Pennington doctrine. For example, in Coastal States Marketing, Inc. v. Hunt, the Fifth Circuit held that the doctrine extended to efforts to influence foreign government (but see Occidental Petroleum Corp. v. Buttes Gas Oil Co.). 694 F.2d 1358 (5th Cir. 1983). Coercion is also not within the scope of Noerr. In FTC v. Superior Court Trial Lawyers Association, a horizontal agreement intended to actually coerce the government into paying higher prices to the defendants was not shielded by Noerr immunity. 493 U.S. 411 (1990).

Although the scope of the doctrine applies to various types of political activity to influence government, there is an important limitation to Noerr immunity known as the "sham exception." While the Court in Noerr stated that a campaign that was nothing more than a pretext would fall within the sham exception and violate the antitrust law, it did not clarify what other activities might fall within the exception. In California Motor Transport, the Court found that the defendants were not genuinely seeking to influence public officials, but rather "to bar their competitors from meaningful access to adjudicatory tribunals and to usurp the decision-making process." Cal. Motor Transp. Co., at 512. Thus, interference with the right of access to the agencies and courts was not protected by Noerr-Pennington.

The Court further defined the sham exception in Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc. In that case, the defendants were operators of a resort hotel and installed videodisc players in the rooms for videos it rented to guests. 508 U.S. 49, 51-52 (1993). Columbia Pictures and seven other major motion picture studios sued for infringement of their copyrights. The defendants counterclaimed under the Sherman Act that the plaintiffs' suit was a "sham" within the meaning of Noerr because it was brought to monopolize or restrain trade in the market for in-room entertainment services. Id. at 54. The court reasoned that standard for the "sham" exception to Noerr could not be subjective intent. Id. at 60-61. Instead, the Court stated that to be a "sham," the litigation must be objectively baseless, and went on to define an objectively baseless suit as one in which no reasonable litigant could realistically expect success on the merits. Id. at 60. Once the Court determined that the litigation was objectively baseless, only then should it consider the subjective intent. Id. As a second part of the test, the Court would examine whether the litigant was attempting to use the process itself rather than the outcome of the judicial process to restrain competition. Id. at 61. In a concurring opinion, Justices Stephens and O'Connor agreed that an objectively reasonable effort to litigate was not a sham within the meaning of Noerr regardless of subjective intent, but disagreed with the majority's definition of "objectively baseless." Instead, the concurring Justices suggested that courts should distinguish between abusing the judicial process to restrain competition and bringing a lawsuit that, if successful, will restrain competition. Id. at 68. Although a lawsuit might bring success on the merits, it might not be objectively reasonable to bring it because the result of success on the merits was insignificant, while the cost of litigation was great. According to Justices Stevens and O'Connor, such suits should also be shams under Noerr. Id.

In summary, the cases from Noerr through Professional Real Estate Investors create a framework by which the courts evaluate cases invoking the Noerr-Pennington doctrine. In practice, such cases begin when the plaintiff can show that the defendant's actions have an anticompetitive effect. If the plaintiff can meet this burden, it shifts to the defendant to show he has a Noerr-Pennington defense, such as petitioning the government. If the defendant is successful, the burden shifts back to the plaintiff to show that the actions are a sham. To show litigation is a sham, the plaintiff must show the case is objectively baseless, meaning that no reasonable plaintiff could expect success on the merits and that the plaintiff was attempting to use the litigation itself, rather than the outcome of the case, to restrain trade. If the plaintiff can meet this final burden, the Noerr-Pennington defense does not apply and the plaintiff wins. Thus, the Noerr-Pennington doctrine offers a defense for anticompetitive action by individuals or groups when those actions are to petition the government, unless the actions are a sham under Noerr.


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About the Author

Kara Kuritz is a third year law student at George Mason University School of Law. She is currently working as a law clerk for the Federal Trade Commission Bureau of Competition.

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