A competitor looking at the same project — whether a grocery store, a hospital, a mixed use office and residential complex — will calculate the impact on its business, its profit margins and market share and search for ways to protect its business interests. The First Amendment’s right-to-petition clause — the right of any citizen to ask government at any level for relief — has expanded ways that the competitor can block such a project to protect its own market share.
Four U.S. Supreme Court decisions since 1961 have evolved into what is known as the Noerr-Pennington Doctrine, increasing protections of the First Amendment petitioning clause and expanding the boundaries of competitive engagement.
These decisions have upheld the right of competitors, motivated by a desire to protect their market share, to either fund opposition to development projects, or outright lead efforts to block competitors from successfully permitting their projects. By exploring the underpinnings of the First Amendment’s right-to-petition clause, and the seminal case authority that has expanded its application to competitors’ efforts to protect market share, this article will provide a comprehensive analysis of the current state of the law as applied to development disputes and permitting.
The First Amendment’s right-to-petition clause guarantees citizens the right to ask government at any level for relief. “Petitioning” is any legal means of supporting or opposing government action by the judicial, executive or legislative branch. Lobbying, letter writing campaigns, filing lawsuits, supporting or opposing referenda, and collecting signatures on petitions for ballot initiatives are all examples of protected petitioning activity under the First Amendment. The U.S. Supreme Court has affirmed that the right to engage in such activity is constitutionally protected from interference by federal, state and local governments.
The Noerr-Pennington Doctrine
The Noerr-Pennington doctrine was set forth by the United States Supreme Court in Eastern Railroad Presidents Conference v. Noerr Motor Freight Inc., 365 U.S. 127 (1961), and United Mine Workers v. Pennington, 381 U.S. 657 (1965), which are covered in this article. The court later clarified and expanded the doctrine in California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508 (1972) and PREI v. Columbia Pictures, 508 U.S. 49 (1993).
In Noerr, the court held that no violation of the federal antitrust laws can be predicated upon mere attempts to influence the passage or enforcement of laws. Similarly, the court wrote in Pennington that joint efforts to influence public officials do not violate the antitrust laws even though intended to eliminate competition.
In California Motor Transport, as we will see in part 3, the court added that the right-to-petition extends to all departments of the government and the right of access to the courts is indeed but one aspect of the right of petition. Pursuant to this doctrine, immunity extends to attempts to petition all departments of the government. If conduct constitutes valid petitioning, the petitioner is immune from antitrust liability whether or not the injuries are caused by the act of petitioning or are caused by government action which results from the petitioning. A series of meritless lawsuits that are intended solely to delay projects are not protected by the Noerr-Pennington doctrine.
Finally, the PREI case provided a detailed definition of the “sham” exception to the doctrine of antitrust immunity first identified in Eastern Railroad Presidents Conference v. Noerr Motor Freight, as that doctrine applies in the litigation context.
Eastern R.R. Presidents Conference et al. v. Noerr Motor Freight Inc., et al., 365 U.S. 127 (1961)
Competition between the U.S. trucking industry and the railroads for long distance heavy freight business became increasingly intense at the end of World War II. Both competing groups saw the struggle as one of economic life or death for their method of transportation. This litigation is an outgrowth of that struggle.
The case was filed in U.S. District Court in Pennsylvania on behalf of 41 Pennsylvania truck operators and their trade association, the Pennsylvania Motor Truck Association. They named as defendants 24 Eastern railroads, an association of the Presidents of those railroads known as the Eastern Railroad Presidents Conference, and a public relations firm, Carl Byoir & Associates Inc.
The railroads, they alleged, had conspired to restrain trade in and monopolize the long-distance freight business in violation of the Sherman Antitrust Act. The railroads had engaged Byoir to conduct a publicity campaign against truckers to foster adoption of laws and law enforcement practices destructive of the trucking business, to create an atmosphere of distaste for the truckers among the general public, and to impair relationships existing between truckers and their customers, they alleged.
The complaint called the campaign “vicious, corrupt, and fraudulent,” saying it was prompted first by the railroads’ desire to injure the truckers and eventually to destroy truckers as competitors in the long-distance freight business. Secondly, they charged the defendants used the so-called third-party technique, making the campaign appear as spontaneously expressed views of independent persons and civic groups when, in fact, it was largely prepared and produced by Byoir and paid for by the railroads. The railroads attempted to influence legislation with this campaign, the truckers charged, including the defendants persuading the governor of Pennsylvania to veto a measure called the “Fair Truck Bill,” to allow truckers to carry heavier loads over Pennsylvania roads.
The truckers sought damages under the Clayton Act and an injunction restraining the railroads from further acts in pursuance of the conspiracy. A stipulation was entered that the only damages suffered by the truckers was the loss of business resulting from the governor’s veto of the “Fair Truck Bill,” and the damage claim was limited to loss of profits due to this veto and expenses incurred by the truckers’ trade association to combat the railroads’ publicity campaign.
The prayer for injunctive relief was much broader, however, seeking to restrain railroads from disseminating disparaging information about the truckers without disclosing railroad participation, from attempting to exert any pressure upon the legislature or governor of Pennsylvania through front organizations, from paying any private or public organizations to propagate arguments of railroads against truckers or their business, and from doing any other act to further the purposes of the alleged conspiracy.
In reply, the railroads said their publicity campaign sought to influence the passage of state laws on truck weight limits and tax rates on heavy trucks, and to encourage more rigid enforcement of state laws penalizing trucks for overweight loads and other traffic violations. They did not want to destroy the trucking business as a competitor nor interfere with relationships between truckers and their customers.
Rather, they insisted, they had the right to inform the public and the legislatures about damage done to roads by heavy and overweight trucks; about repeated, deliberate violations of law limiting weight and speed of big trucks; about their failure to pay a fair share of the cost of constructing, maintaining and repairing the roads, and about the driving hazards they create.
Such a campaign, the railroads maintained, did not violate the Sherman Act, because that act could not properly be interpreted to apply either to restraints of trade or monopolizations that result from the passage or enforcement of laws or to efforts of individuals to bring about the passage or enfold enforcement of laws.
The railroads also counterclaimed that the truckers had themselves violated the Sherman Act by conspiring to destroy the railroads’ competition in the long-distance freight business and to monopolize that business for heavy trucks. Echoing the truckers’ charge in the original complaint, they alleged conduct of a malicious publicity campaign designed to destroy the railroads’ business by law, to create an atmosphere hostile to the railroads among the general public, and to interfere with relationships existing between the railroads and their customers. The prayer for relief of the counterclaim, like that of the truckers’ original complaint, was for damages and an injunction restraining continuance of the allegedly unlawful practices.
After hearings, the trial court ruled that the railroads’ publicity campaign had violated the Sherman Act while that of the truckers had not. It found, first, that the railroads’ publicity campaign, insofar as it was actually directed at lawmaking and law enforcement authorities, was malicious and fraudulent — malicious in its purpose to destroy the truckers as competitors, and fraudulent deceiving those authorities through the use of the third-party technique; and, secondly, that the railroads’ campaign also had as an important, if not overriding purpose: the destruction of the truckers’ goodwill, among both the general public and the truckers’ existing customers, and thus injured the truckers in ways unrelated to the passage or enforcement of law.
The trial court awarded only nominal damages to the individual truckers, holding that no damages were recoverable for loss of business due to the veto of the Pennsylvania “Fair Truck Bill.” The judgment did, however, award substantial damages to the truckers’ trade association as well as the broad injunction asked for in the complaint.
The court concluded that the truckers’ publicity campaign had not violated the Sherman Act although they also had led a publicity campaign to influence legislation and used the same third-party technique. The court found that the truckers were trying to get legislation passed that was beneficial to them rather than harmful to the railroads. The truckers’ campaign was purely defensive in purpose and differed from that of the railroads in that the truckers were not trying to destroy a competitor. Accordingly, the truckers’ campaign, though technically a restraint of trade, was well within the rule of reason which governs the interpretation of the Sherman Act and the court consequently dismissed the counterclaim.
The railroads appealed from this judgment, both as to the conclusion that they had violated the Sherman Act and as to the conclusion that the truckers had not violated the Act as charged in the counterclaim. The Court of Appeals for the Third Circuit upheld the judgment of the district court. This was followed by a petition for certiorari filed on behalf of the railroads as to the question of the correctness of the judgment insofar as it held that they had violated the Sherman Act. The U.S. Supreme Court granted the petition, and ultimately the judgment was reversed.
The U.S. Supreme Court ruled that no violation of the Sherman Act can be predicated upon mere attempts to influence the passage or enforcement of laws: 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 monopoly; and it does not apply to the activities of these railroads, as far as mere solicitation of governmental action with respect to the passage and enforcement of laws.
Insofar as the railroads’ campaign was directed toward obtaining governmental action, it did not violate the Sherman Act by any anti-competitive purpose it may have had, such as a purpose to destroy the truckers as competitors for the long-distance freight business. Nor did the railroads’ campaign violate the Sherman Act by their use of the so-called third-party technique, whereby propaganda actually circulated by a party in interest is given the appearance of being the spontaneously expressed views of independent persons and civic groups.
Nor can a surreptitious purpose or bad motive alter the result, as both are irrelevant. As the court said in Noerr, “The right of the people to inform their representatives in government of their desires with respect to the passage or enforcement of laws cannot 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.”
Significantly, the court’s ruling included dicta to the effect that 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 in such a situation, application of the Sherman Act might be justified.
But here, no one denied that the railroads were making a genuine effort to influence legislation and law enforcement practices. Indeed, that effort was not only genuine but also highly successful. Under these circumstances, the court concluded that no attempt to interfere with business relationships in a manner proscribed by the Sherman Act was involved.
United Mine Workers v. Pennington et al., 381 U.S. 657 (1965)
Trustees of the United Mine Workers of America Welfare and Retirement Fund sued Phillips Brothers Coal Company, a partnership, to recover royalty payments alleged due and payable under trust provisions of the National Bituminous Coal Wage Agreement of 1950, executed by Phillips and the United Mine Workers of America (“UMW”) on Oct. 1, 1953.
Phillips filed an answer and a cross claim against UMW, alleging in both that the trustees, the UMW, and certain large coal operators had conspired to restrain and to monopolize interstate commerce in violation of the Sherman Antitrust Act, as amended, 26 Stat. 209, 15 U.S.C. 1, 2 (1958 ed.). Actual damages for $100,000 were claimed for the period beginning Feb. 14, 1954, and ending Dec. 31, 1958.
The cross claim alleged that prior to the 1950 wage agreement between the operators and the union, severe controversy had existed in the industry, particularly over wages, the welfare fund and union efforts to control working time of its members. Since 1950, however, relative peace has existed in the industry, due to the 1950 wage agreement, its amendments and other agreements between UMW and large operators. Allegedly, the parties considered coal overproduction to be the critical industry problem. The agreed solution was to eliminate smaller companies, giving larger companies control of the market.
The union abandoned efforts to control its miners’ working time, agreed not to oppose rapid mechanization of mines that substantially reduce mine employment, agreed to help finance such mechanization and to impose terms of the 1950 agreement and higher wages it required on all operators without regard to their ability to pay. The union would benefit by increased wages as productivity increased with mechanization, with these increases to be demanded of the smaller companies whether mechanized or not.
Royalty payments into the welfare fund would also increase, and the union would have effective control over the fund’s expenditures. The union and large companies agreed upon other steps to exclude the marketing, production, and sale of nonunion coal. For example, the companies agreed not to lease coal lands to nonunion operators and in 1958 agreed not to sell or buy coal from such companies.
The companies and the union jointly and successfully approached the Secretary of Labor to obtain establishment under the Walsh-Healey Act, as amended, 49 Stat. 2036. 41 U.S.C. 35 et seq. (1958 ed.), of a minimum wage for employees of contractors selling coal to the Tennessee Valley Authority (“TVA”). This wage was much higher than in other industries, making it difficult for small companies to compete in the TVA term contract market.
Later the TVA was urged to curtail its spot market purchases, a substantial portion of which were exempt from the Walsh-Healey order. Thereafter, four of the larger companies waged a destructive and collusive price-cutting campaign in the TVA spot market for coal, in an effort to corner the market for West Kentucky Coal Co. and its subsidiary Nashville Coal Co., where the union had large investments and was in position to exercise control.
A trial jury found in favor of Phillips and against the trustees and the union, with damages against the union of $90,000, to be trebled under 15 U.S.C. 15 (1958 ed.). The trial court set aside the verdict against the trustees but overruled the union’s motion for judgment or for a new trial. The court of appeals affirmed, 325 F. 2d 804, ruling that the union was not exempt from liability under the Sherman Act on the facts of this case, the instructions to the jury were adequate, and the evidence generally was sufficient to support the verdict. The U.S. Supreme Court granted certiorari, and ultimately reversed and remanded the case for proceedings consistent with its opinion.
The Supreme Court held that an agreement in union-employer bargaining is not automatically exempt from Sherman Act scrutiny merely because negotiations covered wage standards or any other compulsory subject of bargaining. A union may make wage agreements with a multi-employer bargaining unit and may seek the same terms from other employers, but it forfeits its antitrust exemption when it agrees with a group of employers to impose a wage scale on other bargaining units and thus joins a conspiracy to curtail competition.
A union and employers in one bargaining unit cannot bargain about wages or working conditions of other bargaining units or settle these matters for the whole industry, nor can an employer condition signing an agreement on the union’s imposition of a similar contract on his competitors. The Supreme Court said antitrust policy clearly restricts employer-union agreements seeking to set labor standards outside the bargaining unit, in view of the anti-competitive potential and the surrender by the union of its freedom of action with respect to bargaining policy.
The significance of the Supreme Court ruling in Pennington is that joint efforts to influence public officials — even the U.S. Secretary of Labor — do not violate the antitrust laws even though the actions are intended to eliminate competition. Here, large coal-mine owners and the employees’ union agreed on wages they attempted to impose on smaller employers they knew could not compete.
They successfully approached the Secretary of Labor to impose a minimum wage for the entire industry, even though that made it extremely difficult for smaller employers to compete. The Supreme Court held that the right-to-petition protected their efforts to influence the Secretary of Labor, even if resulting government action brought about a restraint of trade. The crux of the Pennington case is that if the petitioning activity is valid, the petitioner is immune from antitrust liability, whether the injuries were caused by the petitioning itself, or the government action that resulted.
—By Jeffrey R. Gould, The Saint Consulting Group