Westmac, Inc. v. Smith

• Citation: 797 F.2d 313
• Decision Date: 30 July 1986
• Docket Number: No. 85-1475,85-1475
• Parties: 1986-2 Trade Cases 67,205 WESTMAC, INC., a Michigan corporation, Plaintiff-Appellant, v. Lon SMITH; Individually; Smith Bros. Velte & Co., a Michigan corporation; Smith Bros. Velte & Company, d/b/a Sunfield Farmers Elevator Co.; Bert Post, Ind., Minor Walton Bean Co., a Michigan corporation; Frank E. Bowles, Ind.; Potterville Elevator Co.; Mid-Michigan Farm & Grain Assc., Inc., and all members, stockholders and officers of Mid-Michigan Farm & Grain Association, Inc., Ind., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 313

797 F.2d 313

1986-2 Trade Cases 67,205

WESTMAC, INC., a Michigan corporation, Plaintiff-Appellant, v. Lon SMITH; Individually; Smith Bros. Velte & Co., a Michigan corporation; Smith Bros. Velte & Company, d/b/a Sunfield Farmers Elevator Co.; Bert Post, Ind., Minor Walton Bean Co., a Michigan corporation; Frank E. Bowles Ind.; Potterville Elevator Co.; Mid-Michigan Farm & Grain Assc., Inc., and all members, stockholders and officers of Mid-Michigan Farm & Grain Association, Inc., Ind. Defendants-Appellees.

No. 85-1475.

United States Court of Appeals Sixth Circuit.

Argued March 7, 1986.

Decided July 30, 1986.

Gary P. Schnek, Dan E. Bylenga, Jr., Gregory G. Prasher (argued), Schenk, Boncher & Prasher, Grand Rapids, Mich., for plaintiff-appellant.

Frederick M. Baker, Jr. (argued), Honigman, Miller, Schwartz & Cohn, Richard A. Gilford, Lansing, Mich., Douglas R. Inglis, Charlotte, Mich., for defendants-appellees.

Before MERRITT and WELLFORD, Circuit Judges, and PECK, Senior Circuit Judge.

WELLFORD, Circuit Judge.

Plaintiff, Westmac, Inc., has sued the defendants charging antitrust violations. The focus of this appeal concerns defendants' opposition to plaintiff's effort to obtain special tax benefit bond financing of a grain elevator facility in Clinton County, Michigan. ¹ Plaintiff appeals from a grant of summary judgment to defendants based on a claimed exemption from plaintiff's antitrust claim known as the Noerr-Pennington doctrine. Plaintiff charged defendants with pursuing and conducting lobbying and litigation activities for the express purpose of forcing plaintiff to join an anticompetitive price maintenance conspiracy or, if that failed, to damage plaintiff economically by reducing or destroying its ability to compete. The district court held no genuine issue of material fact existed respecting whether defendants' lobbying and litigation activities were "a genuine attempt to influence official decision making" protected by the Noerr-Pennington doctrine. We affirm.

I.

In 1974 the state legislature of Michigan enacted the Economic Development Corporations Act. Mich.Comp.Laws Ann. Sec. 125.1601-125.1636. The statute permits municipalities to form local Economic Development Corporations (EDCs) for the purpose of issuing revenue bonds. The proceeds are used for the construction of privately owned and operated businesses. In February 1981 Westmac approached the Clinton County Economic Development Corporation in order to obtain EDC bonding to assist in the financing of construction of a high speed grain elevator and railroad loading facility in that county. Westmac obtained initial approval of the project by the Clinton County EDC on February 26, 1981.

On April 3, 1981, defendant Lon Smith wrote other grain elevator operators in the area and urged them to communicate their concerns about the method of financing the new grain terminal to the Clinton County officials and to attend and voice their concerns at public hearings. On May 20, 1981, the Mid-Michigan Farm and Grain Association was established for the stated purpose of promoting the economic welfare and stability of the agricultural industries of Central Michigan. The Clinton County EDC gave final approval of Westmac's project on July 28, 1981. Westmac proceeded to arrange for issuance of the tax benefit bonds.

On August 5, 1981, Mid-Michigan filed suit against the Clinton County EDC in the Clinton County Circuit Court, challenging the constitutionality of the EDC Act. Westmac intervened in that suit as a party defendant. The court upheld the constitutionality of the statute. Mid-Michigan Farm & Grain Association, Inc. v. Henning, No. 81-3038-AN (Clinton Co.Cir.Ct. Dec. 10, 1981). The Michigan Court of Appeals affirmed. Mid-Michigan Farm & Grain Association, Inc. v. Henning, 127 Mich.App. 735, 339 N.W.2d 243 (1983). Plaintiff filed its antitrust complaint in the district court on December 30, 1981.

II.

Under the Noerr-Pennington doctrine, genuine attempts to influence passage or enforcement of laws are immune from antitrust scrutiny, regardless of the anticompetitive purpose behind such attempts. United Mine Workers v. Pennington, 381 U.S. 657, 669-71, 85 S.Ct. 1585, 1592-94, 14 L.Ed.2d 626 (1965); Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 137-39, 81 S.Ct. 523, 529-30, 5 L.Ed.2d 464 (1961). As the Court stated in Pennington:

The legality of the conduct [in Noerr ] "was not at all affected by any anticompetitive purpose it may have had," ... [365 U.S.] at 140 [81 S.Ct. at 531]--even though the "sole purpose in seeking to influence the passage and enforcement of laws was to destroy the truckers as competitors ...," id., at 138 . Nothing could be clearer from the Court's opinion than that anticompetitive purpose did not illegalize the conduct there involved.

381 U.S. at 669, 85 S.Ct. at 1593. The right to petition, upon which the doctrine is based, see Noerr, 365 U.S. at 138, 81 S.Ct. at 530, ² extends to all departments of government, and therefore governs the access of citizens to courts and administrative agencies. California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 510, 92 S.Ct. 609, 611, 30 L.Ed.2d 642 (1972).

On the other hand, the Noerr-Pennington doctrine does not protect against improper attempts to influence the government or the courts that are a "mere sham to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor." California Motor Transport, 404 U.S. at 511, 92 S.Ct. at 612 (quoting Noerr, 365 U.S. at 144, 81 S.Ct. at 533). In California Motor Transport the respondents sued petitioners on the grounds they conspired to monopolize trade and commerce in the trucking industry in violation of the antitrust laws. The respondents alleged petitioners conspired to institute repeated state and federal proceedings to defeat respondents' applications to acquire operating rights or to transfer or register those rights. Id. 404 U.S. at 509, 92 S.Ct. at 611 . The respondents' sham theory in California Motor Transport was that petitioners on a number of occasions used their resources to harass and deter respondents in their access to administrative and judicial proceedings. The Court distinguished petitioners' activity from the activity in Noerr. Id. at 508, 92 S.Ct. at 609. In Pennington the Court had stated that "Noerr shields from the Sherman Act a concerted effort to influence public officials regardless of intent or purpose." 381 U.S. at 670, 85 S.Ct. at 1593. The California Transport Motor Court contrasted attempts to influence public officials from repeated efforts to block competitors from access to adjudicating tribunals, as allegedly occurred in California Motor Transport. Id. 404 U.S. at 511-12, 92 S.Ct. at 612. In this latter situation the Justices endorsed examining the purpose or intent of the alleged anticompetitive activities. Id. ³ The Court reiterated that when the exercise of first amendment rights is an integral part of conduct that violates a valid statute or constitutes an abuse of process it is not immunized from regulation. Id. at 514-15, 92 S.Ct. at 613-14. The Court elaborated that "First Amendment rights may not be used as the means or the pretext for achieving 'substantive evils.' " Id. at 515, 92 S.Ct. at 614 (citation omitted).

Subsequent cases have attempted to clarify the scope of the sham exception to the Noerr-Pennington doctrine. In Winterland Concessions Co. v. Trela, 735 F.2d 257, 263 (7th Cir.1984), the plaintiff alleged that defendant employed various tactics to deny plaintiff a judicial determination or definition of defendant's property rights. The court, in attempting to define the parameters of the sham exception, noted that litigation may be used for improper purposes, such as suppressing competition. The panel defined sham litigation as litigation filed by an individual solely to harass and not to win a favorable judgment. Id. (quoting Grip-Pak, Inc. v. Illinois Tool Works, Inc., 694 F.2d 466, 472 (7th Cir.1982), cert. denied, 461 U.S. 958, 103 S.Ct. 2430, 77 L.Ed.2d 1317 (1983)). The court carefully distinguished between an anticompetitive purpose, which the Noerr doctrine does protect, and the purpose to harm competitors "not by the result of the litigation, but by the simple fact of the institution of the litigation." Id. at 264 (quoting Gainesville v. Florida Power & Light Co., 488 F.Supp. 1258, 1265-66 (S.D.Fla.1980)). Since plaintiff alleged defendant's purpose was to eliminate plaintiff and not to obtain a judgment, the court reversed the district court's dismissal of plaintiff's antitrust claim.

In Omni Resource Development Corp. v. Conoco, Inc., 739 F.2d 1412 (9th Cir.1984), the defendant successfully obtained a preliminary injunction against plaintiff in a state trespass suit. Id. at 1413. The plaintiff alleged that defendant used false and fraudulent affidavits in the suit in a scheme to restrain trade. The court assumed this activity was at least tortious under state law, but nevertheless determined it to be protected under the first amendment unless "undertaken solely to interfere with free competition and without the legitimate expectation that such efforts will in fact induce lawful government action." Id. at 1413 (citing Noerr, 365 U.S. at 144, 81 S.Ct. at 533). The Ninth Circuit further noted that when the antitrust activity concerns only a single baseless suit, ⁴ rather than a pattern of repeated filings, the sham exception does not apply unless the baseless suit has other characteristics of grave abuse. Id. at 1414. ⁵ The court affirmed the trial court's judgment on the pleadings in favor of defendants. ⁶ See also Cleveland v. Cleveland Electric Illuminating, 734 F.2d 1157 (6th Cir.), cert. denied, --- U.S. ----, 105 S.Ct. 253, 83 L.Ed.2d 190 (1984).

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