Cheminor Drugs, Ltd. v. Ethyl Corp.

Decision Date01 March 1999
Docket NumberNo. 98-6004,98-6004
Parties1999-1 Trade Cases P 72,456 CHEMINOR DRUGS, LTD.; Reddy-Cheminor, Inc., Appellants v. ETHYL CORPORATION; JOHN DOES 1 THROUGH 10.
CourtU.S. Court of Appeals — Third Circuit

Andrew J. Miller (Argued), Budd Larner Gross Rosenbaum Greenberg & Sade, P.C., Short Hills, New Jersey, for Appellants.

Douglas S. Eakeley (Argued), Timothy G. Hansen, Lowenstein Sandler PC, Roseland, New Jersey, for Appellee.

Before: SLOVITER, GARTH, and MAGILL, * Circuit Judges.

OPINION OF THE COURT

GARTH, Circuit Judge:

This appeal requires us to analyze whether alleged misrepresentations by the defendant Ethyl Corp. ("Ethyl") 1 vitiates application of the immunity afforded by the Noerr-Pennington doctrine and thus defeats Ethyl's "objective basis" for petitioning the government for protection of its bulk ibuprofen industry from imports of bulk ibuprofen by plaintiffs Cheminor Drugs, Ltd. and Reddy-Cheminor, Inc. (collectively, "Cheminor").

Cheminor's ibuprofen exports to the United States were found to be heavily subsidized by the Government of India ("India"), and Cheminor was found to sell its imported ibuprofen in the United States at substantially less than fair value. The District Court granted summary judgment in favor of Ethyl, holding that Ethyl's petition was not a "sham" and was thus protected activity pursuant to the First Amendment of the United States Constitution. We affirm.

I.

Cheminor and Ethyl are both manufacturers of bulk ibuprofen for sale to tableters; Cheminor is an Indian company, and Ethyl is a United States company. On July 31, 1991, Ethyl complained to the United States International Trade Commission ("ITC") and the Department of Commerce ("DOC") about Cheminor's dumping of ibuprofen and its sale at less than fair value, and Ethyl alleged that India was subsidizing the manufacture of the ibuprofen. After receiving information from Ethyl through its petition and a detailed questionnaire, the ITC and DOC made preliminary determinations that Cheminor would be taxed on its imports because it was receiving subsidies from India, it was dumping ibuprofen at less than fair value in the United States, and the domestic industry suffered material injury as a result. Before final determinations could be made, however, Cheminor withdrew from the U.S. market--its sole distributor, Flavine International, Inc., canceled its orders for ibuprofen because the cost to be charged by Cheminor was prohibitive. Ethyl then withdrew its complaint from the ITC and DOC on March 4, 1992, stating that it would refile if necessary.

Cheminor then brought federal and state antitrust claims and various state common law claims against Ethyl by a complaint filed in the District Court for the District of New Jersey. Cheminor moved for summary judgment, claiming that Ethyl's administrative complaints to the ITC about Cheminor's below-market pricing and the resultant injuries to Ethyl were baseless, made in bad faith, contained false statements, and were brought only for anti-competitive reasons. In response, Ethyl asserted that its administrative complaints had a legal basis, were made in good faith, and were truthful. As such, Ethyl argued that the Noerr-Pennington doctrine, which protects the right of citizens and corporations to petition the government for grievances and is based on the First Amendment of the United States Constitution, prohibits Cheminor's antitrust and unfair trade claims.

The District Court granted Ethyl's motion for summary judgment, holding that Ethyl was protected from Cheminor's federal and state antitrust claims by Noerr-Pennington immunity. Specifically, the District Court held that no genuine issues of fact existed on the question of whether Ethyl had an objective basis to file a petition with the ITC and the DOC. In addition, the District Court, in its discretion, declined to exercise supplemental jurisdiction, 28 U.S.C. § 1367(c), over Cheminor's tort claims brought under state law. The District Court did not consider whether it had diversity jurisdiction under 28 U.S.C. § 1332.

Summary judgment was entered on behalf of defendant Ethyl on February 5, 1998, disposing of all claims against all parties. 2 Plaintiff Cheminor filed its notice of appeal on March 3, 1998. The District Court had subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1332. We exercise jurisdiction pursuant to 28 U.S.C. § 1291.

Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). We give the grant of summary judgment plenary review.

II.

If a United States business or industry believes that it is being injured by foreign-made subsidized products that are imported into the United States and sold at less than fair value, the business or industry may seek relief from the ITC by filing an antidumping ("AD") and countervailing duty ("CVD") petition ("AD/CVD petition") 3 with the ITC and the DOC 4 to obtain relief in the way of extra duties to offset alleged subsidies.

An AD/CVD petition receives consideration at two levels. First, preliminary determinations of subsidies and antidumping are made by DOC and a preliminary determination of "material injury" or "threat of material injury" to the domestic industry is made by the ITC. The DOC and the ITC base their preliminary determinations upon the complaining firm's petition and questionnaire, the respondent firm's questionnaire, if available, and argument from all interested parties' counsel. Second, once the preliminary determinations have been made in petitioner's (here, Ethyl's) favor, the DOC imposes duties upon the imported product. The DOC and ITC make final determinations after they have conducted their own investigations (collecting information apart from the complainant's petition and questionnaire) and after they have heard further arguments from the parties involved. 5

On September 16, 1991, based upon the "best information available," 6 the ITC made a preliminary determination that there was material injury to the domestic market 7 caused by Cheminor's receipt of subsidies from the Indian government and dumping of bulk ibuprofen into the United States market at less than fair value. App.2077-2147 (ITC report). On December 13, 1991, the DOC made a preliminary determination of countervailing duty (CVD). DOC determined that India had subsidized Cheminor in the amount of 43.71%, and thus DOC imposed a 43.71% ad valorem duty on Cheminor's ibuprofen. App. 1471. 8 On January 13, 1992, Cheminor informed the ITC and DOC that it would be withdrawing from the United States market.

On February 27, 1992, DOC made a preliminary determination on the antidumping (AD) petition. DOC found that imports of ibuprofen from India were being sold in the United States at less than fair value and that there was an estimated dumping margin of 115.94%.App. 1472. 9 Ethyl withdrew its AD/CVD petition on March 4, 1992, stating that it no longer believed it could succeed in a final determination based on its then new profit figures and Cheminor's decision to exit the United States market.

III.

A party who petitions the government for redress generally is immune from antitrust liability. Eastern R.R. Presidents Conference v. Noerr Motor Freight, 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961); United Mine Workers of Am. v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965) ("Noerr-Pennington doctrine"). This immunity extends to persons who petition all types of government entities--legislatures, administrative agencies, and courts. California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 510, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972) ("The right of access to the courts is indeed but one aspect of the right of petition."). "[W]here restraint upon trade or monopolization is the result of valid governmental action, as opposed to private action, no violation of the [Sherman] Act can be made out." Noerr, 365 U.S. at 136, 81 S.Ct. 523 (citations omitted).

Noerr-Pennington immunity does not apply, however, to petitions or lawsuits 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." Noerr, 365 U.S. at 144, 81 S.Ct. 523. Often, a petition to the government causes an anti-competitive effect, but "evidence of anticompetitive intent or purpose alone cannot transform otherwise legitimate activity into a sham." Professional Real Estate Investors v. Columbia Pictures Indus., Inc., 508 U.S. 49, 57-58, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993) ("PRE ").

In PRE, the Supreme Court held that litigation is a sham if the lawsuit is "objectively baseless." But "[t]he existence of probable cause to institute legal proceedings precludes a finding that an antitrust defendant has engaged in sham litigation." Id. at 62, 113 S.Ct. 1920. The Court then stated, "Probable cause to institute civil proceedings requires no more than a reasonable belief that there is a chance that a claim may be held valid upon adjudication .... the existence of probable cause is an absolute defense." Id. at 62-63, 113 S.Ct. 1920 (internal quotation marks, brackets, and citations omitted). The Court concluded its discussion by stating "a proper probable-cause determination irrefutably demonstrates that an antitrust plaintiff [here, Cheminor] has not proved the objective prong of the sham exception and that the defendant [here, Ethyl] is accordingly entitled to Noerr immunity." Id. at 63, 113 S.Ct. 1920.

It was in this context that the Court announced a two-step test:

First, the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the...

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