North Carolina Elec. Membership Corp. v. Carolina Power & Light Co.
| Decision Date | 07 December 1981 |
| Docket Number | No. 81-1057,81-1057 |
| Citation | 666 F.2d 50 |
| Parties | 1981-2 Trade Cases 64,391, 1982-1 Trade Cases 64,559 NORTH CAROLINA ELECTRIC MEMBERSHIP CORPORATION; Haywood Electric Membership Corporation; Pitt & Greene Electric Membership Corporation; Four County Electric Membership Corporation; Piedmont Electric Membership Corporation; Halifax Electric Membership Corporation; Randolph Electric Membership Corporation; Harkers Island Electric Membership Corporation; Brunswick Electric Membership Corporation; Jones-Onslow Electric Membership Corporation; French Broad Electric Membership Corporation; Wake Electric Membership Corporation; Tri-County Electric Membership Corporation; Lumbee River Electric Membership Corporation; South River Electric Membership Corporation; Carteret-Craven Electric Membership Corporation; Central Electric Membership Corporation, Appellants, v. CAROLINA POWER & LIGHT COMPANY; South Carolina Electric & Gas Co., Appellees. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Edward E. Hall, Washington, D. C. (Wallace E. Brand, Sean T. Beeny, Brand & Hall, Washington, D. C., Thomas Bolch, Raleigh, N. C., on brief) for appellants.
Robert S. Medvecky, Washington, D. C. (Michael B. Early, New York City, Stephen G. Kozey, Reid & Priest, Washington, D. C., James T. Williams, Jr., Reid L. Phillips Brooks, Pierce, McLendon, Humphrey & Leonard, Greensboro, N. C., on brief), for appellee South Carolina Electric & Gas Co.
Robert C. Howison, Jr., Edward S. Finley, Jr., Hunton & Williams, Raleigh, N. C., William Warfield Ross, Toni G. Allen, Lewis M. Popper, Wald, Harkrader & Ross, Washington, D. C., on brief, for appellee Carolina Power & Light Co.
Before HAYNSWORTH, Senior Circuit Judge, and BUTZNER and HALL, Circuit Judges.
Sixteen rural electrical cooperatives and the North Carolina Electric Membership Corporation (NCEMC) sued two utility companies, Carolina Power & Light Company (Carolina Power) and South Carolina Electric & Gas (S.C. Electric), charging monopolization of electric power markets in violation of the Sherman Act, 15 U.S.C. §§ 1, 2. During discovery, the district court ruled that defendants would not be required to produce any documents relating to legislative lobbying activities because such documents were protected by the Noerr-Pennington doctrine. At plaintiffs' request, the court certified its ruling for interlocutory appeal pursuant to 28 U.S.C. § 1292(b). We hold that the Noerr-Pennington exemption from anti-trust liability does not extend to discovery of evidence, and therefore we reverse.
Plaintiff cooperatives distribute electrical power to retail customers in rural areas throughout North Carolina. The cooperatives obtain most of their wholesale or "bulk power" from generating facilities owned by S.C. Electric and Carolina Power. 1 Because of their dependence upon the two large utilities, the plaintiffs are unable to control the costs of purchasing bulk power. Thus they formed the NCEMC to investigate the possibilities of reducing costs by building separate generating facilities or purchasing bulk power elsewhere. Despite years of investigation, the NCEMC has been unable to develop alternative sources of power. Blaming this failure upon the utilities, the plaintiffs filed an anti-trust action in 1977 alleging that S.C. Electric and Carolina Power illegally blocked their attempts to generate or purchase power elsewhere. 2
During discovery, plaintiffs requested production of "each document relating to existing, contemplated or proposed state legislation affecting the area in which an electric utility may market electric power and each document relating to contemplated or proposed federal legislation regulating the supply of electric power in bulk or power exchange services." The defendants objected on the grounds that the information was "constitutionally protected and absolutely privileged." In an order dated October 18, 1979, the district court ruled that the defendants did not have to produce the legislative material.
Plaintiffs then subpoenaed a nonparty, requesting similar political materials. The defendants filed a motion for a protective order based upon the October 18 ruling. 3 On April 30, 1980, the district judge issued a protective order encompassing (1) any documents which "directly concern the passage or implementation of proposed or existing state or federal legislation;" (2) proposed drafts of legislation; (3) letters and documents from publicity campaigns waged by the utilities to secure passage of legislation, and (4) memoranda of negotiations and discussions directly related to petitioning activities.
The district court based its decision upon the Noerr-Pennington doctrine. The court held that "unbridled discovery" would "chill" the exercise of defendant's first amendment rights, and such a chilling effect would be reason enough to prevent discovery. However, the court acknowledged that its application of Noerr-Pennington was broad, and that there was a serious question about the scope of the doctrine. Thus the court certified the order for interlocutory appeal on the issue of whether the Noerr-Pennington exemption from anti-trust violations prevents discovery of material relating to legislative activity.
The Noerr-Pennington doctrine is an outgrowth of two anti-trust cases in the 1960s, Eastern Railroad Conference v. Noerr Freight Co., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961) and United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965). The Noerr case came about when the railroads attempted to beat back the competition of the trucking companies in Pennsylvania by conducting adverse publicity campaigns and by petitioning the legislature for anti-trucking statutes. Forty-one trucking companies brought suit, alleging that the railroad association was violating the monopoly provisions of the Sherman Act. The Supreme Court held that activities designed to influence legislation, including publicity campaigns, are protected by the first amendment right to petition.
Five years later the Supreme Court decided Pennington. In that case the United Mine Workers (UMW) sued a small mine operator for royalty payments and the operator cross claimed, alleging that the UMW and the large operators conspired to force small operators out of business in violation of federal anti-trust laws. At trial, Pennington presented evidence that the UMW and the large mine operators had jointly approached the Secretary of Labor and the Tennessee Valley Authority in furtherance of their scheme. The Supreme Court held that the district court should have instructed the jury that this legislative petitioning was not illegal. Significantly, the court stated in a footnote that the evidence may be admitted as proof of prior or subsequent transactions, if not unduly prejudicial, as long as the jury was...
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