Cardtoons v. Major League Baseball Ass'n

• Decision Date: 29 June 1999
• Docket Number: No. 98-5061,98-5061
• Parties: (10th Cir. 1999) CARDTOONS, L.C., AN OKLAHOMA LIMITED LIABILITY COMPANY, PLAINTIFF - APPELLANT, v. MAJOR LEAGUE BASEBALL PLAYERS ASSOCIATION, AN UNINCORPORATED ASSOCIATION, DEFENDANT - APPELLEE
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1132

182 F.3d 1132 (10th Cir. 1999)

CARDTOONS, L.C., AN OKLAHOMA LIMITED LIABILITY COMPANY, PLAINTIFF - APPELLANT, v. MAJOR LEAGUE BASEBALL PLAYERS ASSOCIATION, AN UNINCORPORATED ASSOCIATION, DEFENDANT - APPELLEE.

No. 98-5061

U.S. Court of Appeals, Tenth Circuit

June 29, 1999

Appeal from the United States District Court for the Northern District of Oklahoma (D.C. No. 93-CV-576-E) James W. Tilly (Craig A. Fitzgerald with him on the briefs), Tilly & Associates, Tulsa, Oklahoma, for Plaintiff-Appellant.

Russell S. Jones, Jr. (William E. Quirk and Leslie A. Greathouse of Shughart Thomson & Kilroy, Kansas City, Missouri and James E. Weger of Jones, Givens, Gotcher & Bogan, Tulsa, Oklahoma, with him on the brief), Shughart Thomson & Kilroy, Kansas City, Missouri, for Defendant-Appellee.

Before Ebel, McWILLIAMS and Lucero, Circuit Judges.

Lucero, Circuit Judge.

This case requires us to decide whether Noerr-Pennington immunity can attach to threats of litigation made with probable cause. Applying the "objectively baseless" test articulated in Professional Real Estate Investors, Inc. v. Columbia Pictures, Inc., 508 U.S. 49 (1993), the district court concluded that the non-consummated threats of a lawsuit made by the Major League Baseball Players Association to Cardtoons and Champs Marketing, Inc., enjoys Noerr-Pennington protection. We exercise jurisdiction pursuant to 28 U.S.C. § 1291, and affirm.

I.

Cardtoons, L.C. ("Cardtoons"), produces parody trading cards that feature caricatures of active major league baseball players.¹ Cardtoons contracted with Champs Marketing, Inc. ("Champs"), an Ohio corporation, to print the cards. Major League Baseball Players Association ("MLBPA"), the exclusive collective bargaining agent for all active major league baseball players, is the assignee of the publicity rights of current players and handles licensing agreements authorizing the use of their identities.

In a letter to Cardtoons dated June 18, 1993 ("Cardtoons letter"), MLBPA claimed that by producing and selling the cards, Cardtoons was "violat[ing] the valuable property rights of MLBPA and the players." The MLBPA threatened to "pursue its full legal remedies" if Cardtoons refused to cease production and sale of the cards. Appellant's App. at 8-9. In a similar letter dated the same day ("Champs letter"), MLBPA also threatened Champs with litigation if it did not stop "participating in Cardtoons's illegal activities." Appellant's App. at 10. Upon receipt of the letter, Champs notified Cardtoons that it intended to stop printing the cards.

Four days later, Cardtoons filed suit in federal district court for a declaratory judgment on the issue of whether its cards violated MLBPA's publicity and intellectual property rights. Also seeking injunctive relief,² Cardtoons asked the court to bar MLBPA from interfering with Champs and other third parties involved in the production and sale of the cards. Additionally, the suit alleged that MLBPA had tortiously interfered with Cardtoons's contractual relations with Champs. MLBPA moved to dismiss the complaint for lack of subject matter jurisdiction, and filed counterclaims seeking declaratory judgment, injunctive relief, and damages under Oklahoma's publicity rights statute, Okla. Stat. tit. 21 § 839.1 and 839.2 (1993).

Unless Cardtoons was entitled to produce and sell the cards, as alleged in the claim for declaratory judgment, it could not recover damages on the tortious interference claims. Therefore, the parties agreed that before the adjudication of Cardtoons's tort claim, a magistrate Judge should conduct an evidentiary hearing and issue a report limited to Cardtoons's declaratory judgment claim and MLBPA's counterclaims.

Concluding that Cardtoons's activities violated the baseball players' rights of publicity under Oklahoma law, the magistrate recommended judgment on these claims in favor of MLBPA. The district court initially adopted the recommendation. See Cardtoons, L.C. v. Major League Baseball Players Ass'n, 838 F. Supp. 1510 (N.D. Okla. 1993). Following the Supreme Court's decision in Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569 (1994), however, the district court concluded that the parody cards enjoyed First Amendment protection against MLBPA's infringement claims. Accordingly, the court vacated its initial decision and entered judgment for Cardtoons. See Cardtoons, L.C. v. Major League Baseball Players Ass'n, 868 F. Supp. 1266 (N.D. Okla 1994) ("Cardtoons I"). We affirmed, holding that the parody cards are "an important form of entertainment and social commentary that deserve First Amendment protection." Cardtoons, L.C. v. Major League Baseball Players Assoc., 95 F.3d 959, 976 (10th Cir. 1996) ("Cardtoons II").

Having prevailed on the declaratory judgment claim, Cardtoons returned to the district court to pursue its claims for damages against MLBPA. In addition to the claim for tortious interference with contract, Cardtoons asserted new claims for prima facie tort, libel, and negligence, all stemming from the allegations contained in the Cardtoons and Champs letters. Concluding that both letters were immune from liability under the "Noerr-Pennington" doctrine, the district court granted summary judgment for MLBPA and dismissed all of Cardtoons's state law claims. See Cardtoons, L.C., v. Major League Baseball Players Ass'n, No. 93-C-576-E (N.D. Okla. Mar. 12, 1998) ("Cardtoons III"). Cardtoons challenges the court's application of the Noerr-Pennington doctrine and appeals the grant of summary judgment.³ Cardtoons also appeals the court's decision to stay discovery pending its ruling on MLBPA's motion for summary judgment.

II.

As originally articulated, the Noerr-Pennington doctrine provides general immunity from antitrust liability to private parties who petition the government for redress, notwithstanding the anticompetitive purpose or consequences of their petitions. See Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 135-38 (1961) (establishing immunity for petitions to state legislature); see also United Mine Workers of America v. Pennington, 381 U.S. 657, 670 (1965) (extending Noerr immunity to petitions of public officials). The Court later extended Noerr-Pennington immunity to the right of access to courts. See California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 510 (1972) (citations omitted). Moreover, because it emanates from the First Amendment right of petition, see Bright v. Moss Ambulance Service, Inc., 824 F.2d 819, 821 n.1 (10th Cir. 1987) (quoting City of Lafayette, La. v. Louisiana Power & Light Co., 435 U.S. 389, 399 (1978)), Noerr-Pennington immunity stands independent of its aborigine roots in antitrust, see, e.g., Bill Johnson's Restaurants, Inc. v. NLRB, 461 U.S. 731, 742-43 (1983) (immunizing employer from prosecution for unfair labor practice even if an otherwise valid suit against employee is driven by a retaliatory motive); NAACP v. Claiborne Hardware Co., 458 U.S. 886, 913-14 (1982) (immunizing a nonviolent business boycott seeking to vindicate economic and equal rights); South Dakota v. Kansas City Southern Indus., Inc., 880 F.2d 40, 50 (8th Cir. 1989) (immunizing defendant from claim of interference with contractual relations).

Although broad and extensive, Noerr-Pennington immunity is not a shield for a petitioner whose conduct, although "ostensibly directed toward influencing governmental action, is a mere sham to cover what is actually nothing more than an attempt to interfere with the business relationships of a competitor." Noerr, 365 U.S. at 144. The Supreme Court has established a two-part definition of sham litigation:

First, the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits. If an objective litigant could conclude that the suit is reasonably calculated to elicit a favorable outcome, the suit is immunized under Noerr, and an antitrust claim premised on the sham exception must fail. Only if challenged litigation is objectively meritless may a court examine the litigant's subjective motivation. Under this second part of our definition of sham, the court should focus on whether the baseless lawsuit conceals "an attempt to interfere directly with the business relationships of a competitor," Noerr, 365 U.S. at 144, through the "use [of] the governmental process-as opposed to the outcome of that process-as an anticompetitive weapon," Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. 365, 380 (1991). This two-tiered process requires the plaintiff to disprove the challenged lawsuit's legal viability before the court will entertain evidence of the suit's economic viability.

Professional Real Estate Investors, Inc. v. Columbia Pictures, Inc., 508 U.S. 49, 60-61 (1993).

To ascertain "baselessness," a court must consider whether the litigant had "probable cause" to initiate the legal action. Id. at 62. If there is probable cause, the defendant automatically enjoys Noerr-Pennington immunity, and the second, subjective motivation prong of the Professional Real Estate test becomes irrelevant. See id. at 63. Probable cause to sue may exist when the law is unsettled or when an "action [is] arguably `warranted by existing law' or at the very least [is] based on an objectively `good faith argument for the extension... of existing law.'" Id. at 65 (quoting Fed. R. Civ. P. 11).

Neither the Supreme Court nor this circuit has directly addressed the issue of whether Noerr-Pennington immunity attaches to the mere threat of a law suit. Confronted with this issue, however, three other circuits have concluded that prelitigation threats of suit enjoy the same immunity as litigation itself, so long as the threats are not shams. See McGuire Oil Co. v. Mapco, Inc., 958 F.2d 1552, 1558-60 (11th Cir. 1992); CVD, Inc. v. Raytheon Co., 769 F.2d 842, 850-51 (1st Cir. 1985); Coastal States Mktg., Inc. v....