Israel v. Baxter Laboratories, Inc.

• Decision Date: 17 May 1972
• Docket Number: No. 24622.,24622.
• Citation: 466 F.2d 272
• Parties: Murray ISRAEL, M.D., et al., Appellants, v. BAXTER LABORATORIES, INC., et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

466 F.2d 272 (1972)

Murray ISRAEL, M.D., et al., Appellants, v. BAXTER LABORATORIES, INC., et al.

No. 24622.

United States Court of Appeals, District of Columbia Circuit.

Argued January 25, 1972.

Decided May 17, 1972.

As Amended August 9, 1972.

Mr. Howard F. Cerny, New York City, of the bar of the Court of Appeals of New York, pro hac vice, by special leave of court, with whom Mr. Matthew J. Faerber, Washington, D. C., was on the brief, for appellants.

Mr. Max O. Truitt, Jr., Washington, D. C., with whom Messrs. Henry T. Rathbun and Raymond C. Clevenger, III, Washington, D. C., were on the brief, for appellees Baxter Laboratories Inc. and Travenol Laboratories, Inc.

Mr. Julius A. Johnson, Asst. U. S. Atty., with whom Messrs. Thomas A. Flannery, U. S. Atty., at the time the brief was filed, John A. Terry, Joseph M. Hannon and Robert S. Rankin, Jr., Asst. U. S. Attys., were on the brief, for appellee Finkel.

Before MacKINNON and WILKEY, Circuit Judges, and MATTHEWS,^* Senior Judge, United States District Court for the District of Columbia.

WILKEY, Circuit Judge:

Plaintiffs seek damages and injunctive relief based on an alleged conspiracy by defendants in violation of federal and state antitrust laws. Essentially, they assert that the defendants conspired to keep plaintiffs' drug Cothyrobal off the interstate market and out of competition with Choloxin, a similar drug sold by defendants Baxter and Travenol, by influencing the Food and Drug Administration to deny fair consideration of the new drug applications filed by plaintiffs for Cothyrobal. The plaintiffs allege that defendants (who include an official of the FDA) carried out this conspiracy by suppressing, concealing and misconstruing information concerning the two drugs before the FDA; by arranging for the employment as a consultant to the FDA of a medical doctor who had a financial interest in Baxter, which was seeking approval of its own cholesterol-lowering drug Choloxin; by applying an unfair standard in judging Cothyrobal; and by misrepresenting the safety and efficacy of Cothyrobal.

I. Procedural Background

The plaintiff Vascular Pharmaceutical Company filed with the FDA a series of new drug applications for approval of interstate sale of Cothyrobal, followed either by withdrawal or abandonment of such applications before final agency action had taken place.

The first new drug application (No. 11-311) for Cothyrobal was filed by Vascular in 1960, but was withdrawn without prejudice to subsequent application. The next such filing (No. 13-118) in 1961 was found by the FDA to be incomplete. In rejoinder, Vascular requested a filing over protest and demanded a hearing, which the FDA granted. During the course of the hearing commencing 18 November 1963, Vascular agreed to provide certain minor information clarifying statements in the application, while the FDA promised to cooperate and consult on the application in order to expedite the clarification it had requested of Vascular. The hearing was thereupon terminated and Vascular withdrew its application. Shortly afterwards, Vascular submitted another new drug application (No. 15-497), containing what plaintiffs considered was the information the FDA had requested. In September 1964, however, the FDA revoked the investigational new drug exemption it had earlier granted Cothyrobal on the grounds that the drug was not clinically safe.

It was not until 8 January 1969 that the FDA finally announced that it proposed to disapprove the new drug application for Cothyrobal.¹ Plaintiffs protested this action and demanded a hearing. A pre-hearing conference was scheduled for 23 April 1969, with the hearing itself set for 19 May. However, on 22 April the plaintiffs withdrew their new drug application for Cothyrobal without prejudice to a subsequent filing. The Department of Health, Education and Welfare hearing examiner then entered an order dismissing the proceedings as moot on the basis of plaintiffs' withdrawal of their application.

Plaintiffs brought suit 6 July 1970 in United States District Court, charging the defendants with conspiring in violation of federal and state antitrust laws to keep Cothyrobal from being approved by the FDA for interstate sale, thereby favoring Choloxin, and seeking damages and injunctive relief. On motion of defendants to dismiss or, in the alternative, for summary judgment^1a, the District Court dismissed the complaint, holding, first, that this case fell within the exemption from the antitrust laws enunciated in Eastern Railroad Presidents' Conference v. Noerr Motor Freight, Inc.,² and, second, that plaintiffs had not exhausted their administrative remedies. From this ruling plaintiffs appeal.

II. Antitrust Exemption

The defendants contend that the Noerr-Pennington doctrine,³ which exempts from the antitrust laws joint efforts to influence legislative or executive action, even when such efforts are designed to injure or eliminate competition, is applicable to the case at bar. They point out that the only conduct complained of is the defendants' alleged efforts to induce the FDA to withhold approval of a new drug application for Cothyrobal. This they submit is "restraining competition by inducing governmental action," protected by Noerr-Pennington, and not action effecting restraint "by defendants' own conduct," which is not protected.

It is clear that the protection from the antitrust laws afforded joint activity by the Noerr-Pennington doctrine is not unlimited. In Noerr the Supreme Court legitimatized under the Sherman Act joint efforts by businessmen to influence legislative or executive action, even if such efforts are designed to injure their competitors:

A construction of the Sherman Act that would disqualify people from taking a public position on matters in which they are financially interested would thus deprive the government of a valuable source of information and, at the same time, deprive the people of their right to petition in the very instances in which that right may be of the most importance to them.⁴

In Pennington, involving a suit by a small mining company against larger ones and labor unions, alleging a conspiracy to influence the Secretary of Labor to set such high rates as to force the small company out of business, the Court followed its holding in Noerr. It found that "joint efforts to influence public officials do not violate the antitrust laws even though intended to eliminate competition."⁵

The Noerr-Pennington doctrine was given its widest scope in United States v. Johns Manville Corporation.⁶ The District Court for the Eastern District of Pennsylvania held that joint activities to influence the decisions of public procurement officials on product specifications in order to eliminate the products of competitors "are constitutionally protected and cannot be the basis of a finding of violation of the antitrust laws, . . . regardless of the intent with which they were undertaken."⁷ The Noerr-Pennington doctrine was thus expanded to protect joint efforts to influence governmental actions as a purchaser in the market, not merely when acting in a sovereign legislative or regulatory capacity.

Thereafter, judicial encounters with Noerr-Pennington resulted in a narrowing of the doctrine's applicability. In George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc.,⁸ presenting the same issue as in Johns Manville, supra, the First Circuit reached the opposite result. It held that joint efforts by the defendant Paddock and others to write the specifications for pipeless swimming pools bought by public agencies in such a way as to exclude competitors was not protected by Noerr-Pennington:

The entire thrust of Noerr is aimed at insuring uninhibited access to government policy makers. . . . By "enforcement of laws" we understand some significant policy determination in the application of a statute, not a technical decision about the best kind of weld to use in a swimming pool gutter.⁹

This court, in Hecht v. Pro-Football, Inc.,¹⁰ took a similar approach to Noerr-Pennington's reach. We held the validity of a thirty-year exclusive lease between the District of Columbia Armory Board, an unincorporated instrumentality of the District of Columbia which operates Robert F. Kennedy Stadium, and Pro-Football, Inc., the corporate name of the Washington Redskins, was subject to the federal antitrust laws, and thus remanded the case for trial on the merits. The appellee Armory Board had asserted that the lease constituted "valid governmental action which is immune from the application of the antitrust laws." Relying on the First Circuit's decision in Paddock Pool, supra, and the Ninth Circuit's decision in Trucking Unlimited v. California Motor Transport Co., infra, we enunciated, at least partially, the limitations of Noerr:

The court of appeals in Trucking Unlimited apparently considered that an adjudicative agency was in a position similar to a governmental agency charged with procurement, as in Paddock Pool. In neither case was the governmental agency in a position to make governmental policy, it was obligated to carry out the policy as already made, hence the rationale of Noerr-Pennington, guaranteeing access of private parties in combinations which would otherwise be illegal under the antitrust laws to influence such agency simply did not apply.

Trucking Unlimited illustrates again that the determination that a state agency and state action are involved "is only the beginning of the inquiry." In this category of joint efforts to secure governmental action . . . belongs, of course, Woods Exploration and Producing Co., Inc. v. Aluminum Company of America infra. . . .¹¹

Perhaps the case involving an issue most similar to the one at bar is Woods Exploration and Producing Co., Inc. v. Aluminum Company of America,¹² in which plaintiffs alleged that two largetract natural gas producers violated the antitrust laws by filing false nomination forecasts with...