Ernest W. Hahn, Inc. v. Codding

• Decision Date: 20 March 1980
• Docket Number: Nos. 77-2474,77-2465,s. 77-2474
• Citation: 615 F.2d 830
• Parties: 1980-1 Trade Cases 63,240 ERNEST W. HAHN, INC., Plaintiff-Appellant, v. Hugh B. CODDING et al., Defendant-Appellee. CODDING ENTERPRISES, Plaintiff-Appellant, v. ERNEST W. HAHN, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 830

615 F.2d 830

1980-1 Trade Cases 63,240

ERNEST W. HAHN, INC., Plaintiff-Appellant, v. Hugh B. CODDING et al., Defendant-Appellee.

CODDING ENTERPRISES, Plaintiff-Appellant, v. ERNEST W. HAHN, INC., Defendant-Appellee.

Nos. 77-2474, 77-2465.

United States Court of Appeals, Ninth Circuit.

March 20, 1980.

Richard J. Archer, Shovlin & Babin, San Francisco, Cal., for Codding Enterprises.

Michael N. Khourie and Thomas Paine, Broad, Khourie & Schulz, San Francisco, Cal. (argued), William N. Williams, San Francisco, Cal., Jack R. Stearns, Barrett, Stearns, Collins, Gleason, & Kinney, Torrance, Cal., on brief, for Ernest W. Hahn, Inc.

Appeal from the United States District Court for the Northern District of California.

Before ELY and ANDERSON, Circuit Judges, and JAMESON, ^* District Judge.

J. BLAINE ANDERSON, Circuit Judge:

Hahn (Ernest W. Hahn, Inc.) and Codding (Hugh B. Codding and his company, Codding Enterprises) are developers and operators of shopping centers. Both attempted to obtain the right to develop a regional shopping center in downtown Santa Rosa, California. In 1972, the Urban Renewal Agency of Santa Rosa (Agency) selected Hahn as the developer and agreed to negotiate with him exclusively. As the losing suitor in the contest for the Agency's affections, Codding became involved with several lawsuits challenging the proposed shopping center. In 1975, Hahn filed an antitrust action against Codding based on his involvement with the various lawsuits which had allegedly frustrated the development of the Santa Rosa shopping center (the Hahn complaint). In turn, Codding filed an antitrust action against Hahn, claiming actual and attempted monopolization of the regional shopping center market in California and the United States (the Codding complaint). On its own motion, the district court issued an order to show cause why both actions should not be dismissed after this court's decision in Franchise Realty Interstate Corp. v. San Francisco Local Joint Executive Board, 542 F.2d 1076 (9th Cir. 1976), cert. denied, 430 U.S. 940, 97 S.Ct. 1571, 51 L.Ed.2d 787. On December 22, 1976, an order of dismissal with leave to file amended complaints was entered in both cases. Ernest W. Hahn, Inc. v. Codding, 423 F.Supp. 913 (N.D.Cal.1976). After the complaints were amended, the court entered judgment on May 18, 1977, dismissing both complaints without leave to amend.

The district court had jurisdiction under 28 U.S.C. § 1337. Both parties filed their notices of appeal within thirty days from the entry of the final judgment. This court has jurisdiction under 28 U.S.C. § 1291. The primary issue raised by the dismissal of the Hahn complaint involves the scope of the Noerr-Pennington doctrine under the antitrust laws. ¹ With the Codding complaint the central issue on appeal is the more general inquiry of whether a claim for relief was stated. Both issues present close questions. However, because we must accept the allegations of the complaints as true, and because of the policy disfavoring summary dismissals in antitrust cases, we conclude that the court below erred when it dismissed the Hahn and the Codding complaints. We will first examine our scope of review in this type of case before turning to the individual complaints.

I. SCOPE OF REVIEW

On appeal, this court must employ a "concededly rigorous standard" of scrutiny over the district court's dismissal of these cases. See Hospital Building Co. v. Rex Hospital Trustees, 425 U.S. 738, 746, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1976). Initially, we note that there is a policy disfavoring the pre-trial dismissal of antitrust actions because the proof lies largely in the hands of the defendants. See Poller v. Columbia Broadcasting, 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962); cf. California Computer Products v. International Business Machines, 613 F.2d 727, 733-734 (9th Cir. 1979) (where this court found the policy inapplicable to directed verdicts). In its dismissal, the court below did not rely on any materials other than the pleadings. 423 F.Supp. at 916 n.3. Although not denominated as such, this was clearly a dismissal for failure to state a claim for relief under Fed.R.Civ.P. 12(b)(6). The Supreme Court has said that a complaint should not be dismissed under this rule "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). Since we are reviewing a dismissal for failure to state a claim, we must take as true all material facts alleged in the respective complaints. Hospital Building, supra, 425 U.S. at 740, 96 S.Ct. at 1850; see California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 515, 92 S.Ct. 609, 614, 30 L.Ed.2d 642 (1972). Moreover, a complaint is construed and all doubts are resolved, in favor of the pleader. Amfac Mortgage Corp. v. Arizona Mall of Tempe, 583 F.2d 426, 430 (9th Cir. 1978). It also should be remembered in Sherman Act cases that each case must be reviewed in light of its own facts, and prior cases must be read in light of their facts. Maple Flooring Mfrs. Ass'n v. United States, 268 U.S. 563, 579, 45 S.Ct. 578, 583, 69 L.Ed. 1104 (1925). ² Keeping these considerations in mind, we now turn to the respective complaints.

II. THE HAHN COMPLAINT

A. Facts

Hahn's amended complaint alleged claims for relief against Codding for violation of the Sherman Act and the California antitrust laws, as well as under common law theories of defamation and intentional interference with contractual relations. Since jurisdiction of the state law claims is pendent to the Sherman Act claims, it is only the Sherman Act claims which concern this court. In a detailed complaint, ³ Hahn describes the history of the urban renewal project in Santa Rosa, his selection as developer of the shopping center, and Codding's successful efforts at blocking the development.

In 1961, Santa Rosa adopted its urban renewal plan. Under Phase I of the plan several public buildings, including a new city hall, library, post office, and Federal Building, were constructed. After two major earthquakes in 1969, the plan was changed to include those downtown areas which had been damaged the most severely. The changes were referred to as Phase II. With Phase II, an additional thirty acres of land was acquired and cleared for redevelopment. Some ten acres of this land was sold to private businesses for construction of office and commercial buildings. In 1971, the Agency decided to use the remainder of the land for a regional shopping center. In March of 1972, Hahn was selected to develop the plan for the shopping center (over Codding).

After considerable planning, it was decided that the shopping center needed to be expanded and more land acquired. This is Phase III of the urban renewal plan. While Phase II was financed to a large extent by federal funds, no comparable financial assistance was available for Phase III.

Under the agreement between the Agency and Hahn for development of the shopping center, the Agency is responsible for clearing and preparing the land. The Agency needs approximately fifteen million dollars to finance this acquisition and preparation prior to transferring the shopping center site to Hahn. Since federal money is, on the most part, unavailable, the Agency must issue bonds to raise the necessary financing.

The Agency is authorized to issue parking lease revenue bonds, tax allocation bonds, or a combination thereof. The issuance of such bonds and their successful sale is dependent upon an unqualified opinion of bond counsel that the proposed bonds would be valid and enforceable. If there is any litigation challenging the Agency action or the security for repayment, regardless of how frivolous or baseless, then bond counsel cannot give an unqualified opinion and the bonds cannot be issued.

As previously explained, both Hahn and Codding are commercial real estate developers who are involved with the planning, development, construction, and management of commercial shopping centers. Hahn claims that the relevant market for purposes of this suit is the planning, development, construction, and management of commercial regional shopping centers in Sonoma County, California. ⁴ Hahn claims that Codding possesses dominant power within this market through its operation and control of the only major shopping centers, several smaller neighborhood or community centers, and two of the three sites suitable for the construction of a regional shopping center in close vicinity to Santa Rosa. ⁵

Hahn alleges that Codding has acted in concert with several others ⁶ for the purpose of maintaining its monopoly and eliminating the actual and potential competition of Hahn's proposed regional shopping center. The primary thrust of Hahn's action is contained in the allegation that Codding and the other conspirators have filed and prosecuted "a series of overlapping, repetitive and baseless lawsuits against the City of Santa Rosa, the Agency, HUD, and plaintiff, with or without probable cause, and regardless of the merits of the claims asserted. . . ." This has been done with knowledge that Hahn's proposed shopping center could only proceed if necessary financing was secured by the issuance of bonds. And also with knowledge that the mere pendency of a lawsuit would preclude approval by bond counsel which is necessary before the bonds could be issued. Hahn states that Codding has filed nine, as well as covertly financing and underwriting four more, lawsuits, challenging various aspects of the downtown shopping center. ⁷

Hahn's complaint contains further allegations charging that Codding has usurped to itself the sole power to determine the future of downtown Santa Rosa. By filing the series of lawsuits, Codding has expropriated the authority which formerly rested in the Agency and the City Council...