Outboard Marine Corp. v. Pezetel, Civ. A. No. 77-51.

• Decision Date: 22 June 1979
• Docket Number: Civ. A. No. 77-51.
• Citation: 474 F. Supp. 168
• Parties: OUTBOARD MARINE CORP., a Delaware Corporation, Plaintiff, v. PEZETEL, a Foreign Trade Organization of the People's Republic of Poland, Melex USA, Inc., a Delaware Corporation, Fern Clo Golf Car Co., Inc., a Pennsylvania Corporation, Ross Products, Inc., a Delaware Corporation, Defendants.
• Court: U.S. District Court — District of Delaware

474 F. Supp. 168

OUTBOARD MARINE CORP., a Delaware Corporation, Plaintiff, v. PEZETEL, a Foreign Trade Organization of the People's Republic of Poland, Melex USA, Inc., a Delaware Corporation, Fern Clo Golf Car Co., Inc., a Pennsylvania Corporation, Ross Products, Inc., a Delaware Corporation, Defendants.

Civ. A. No. 77-51.

United States District Court, D. Delaware.

June 22, 1979.

COPYRIGHT MATERIAL OMITTED

William O. LaMotte, III, Morris, Nichols, Arsht & Tunnell, Wilmington, Del., for plaintiff; Charles Owen Verrill, Jr., and Donald A. Lofty, Patton, Boggs & Blow, Washington, D. C., of counsel.

James T. McKinstry, Richards, Layton & Finger, Wilmington, Del., for defendants Pezetel and Melex, USA, Inc.; Henry W. Sawyer, III, Stewart Dalzell, John Chesney, and Mark M. Wilcox, Drinker, Biddle & Reath, Louis B. Schwartz, Philadelphia, Pa., of counsel.

James T. McKinstry, Richards, Layton & Finger, Wilmington, Del., for Ross Products, Inc.; Gerald J. Brown, Cahill, Gordon & Reindel, Washington, D. C., of counsel.

Paul H. Spiller, Kimmel & Spiller, Wilmington, Del., for Fern Clo Golf Car, Inc.

OPINION

MURRAY M. SCHWARTZ, District Judge.

In this civil antitrust action, the plaintiff Outboard Marine Corporation ("OMC") has moved for the dismissal of the defendants' Counterclaim for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The Counterclaim has been asserted by Pezetel and Melex, Inc., two of the three remaining defendants in this litigation.¹ Pezetel is a trade organization of the People's Republic of Poland and a manufacturer and exporter of electric golf carts to the United States. Melex USA, Inc., is its wholly owned subsidiary and as such, it functions as a domestic distributor of Pezetel's golf carts in those territories where Pezetel has not established a relationship with a domestic distributor.² The plaintiff, Outboard Marine Corporation, is an American manufacturer whose subsidiary, Cushman, formerly manufactured gas and electric golf carts and has now been dissolved.

A detailed description of the American golf-cart market has already been set forth in this Court's prior opinion on defendants' motion to dismiss. See Outboard Marine Corporation v. Pezetel, 461 F.Supp. 384 (D.Del.1978), and will only be repeated here to the extent necessary to provide a background for an illustration of the bases upon which the defendants' Counterclaim rests. In 1970 a predecessor of Pezetel, Electrim Foreign Trade Company for Electrical Equipment, Ltd., commenced manufacturing of an electric golf cart duplicative of one sold in the American market. Three years later, Pezetel succeeded Electrim as a Polish manufacturer and it then brought Melex into existence, a wholly owned subsidiary incorporated in Delaware, and at about the same time established agreements with several American distributors. In that year Polish-made golf carts constituted seventeen percent of the United States electric golf cart market and by 1975, Melex carts allegedly represented thirty-five percent of sales in the electric golf cart market in the United States. Meanwhile, OMC, unable to meet Pezetel's low prices, gave up the manufacture of electric and gas golf carts in 1975. In 1977, it filed this suit seeking treble damages resulting from its declining sales and eventual departure from the market place.

All defendants moved to dismiss the complaint for failure to state a claim on a number of grounds, none of which are particularly relevant to the present motion. Suffice it to say that as a result of their motion, several of plaintiff's counts and claims against two defendants were dismissed.

On a motion to dismiss for failure to state a claim, this Court is of course bound to construe the Counterclaim in the light most favorable to the defendants, taking all facts stated therein and all reasonable inferences therefrom as admitted. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). Defendants' Counterclaim contains four operative paragraphs, paraphrased below: (1) Counterclaim ¶ 16: OMC, in conspiracy with other manufacturers of golf carts, has "misused and abused" governmental processes by submitting complaints, petitions, testimony and other information to federal governmental agencies and offices including but not limited to the Treasury Department and United States Customs Service, the International Trade Commission, the Congress of the United States, and the federal court. (2) Counterclaim ¶ 17: OMC and its coconspirators submitted to the Treasury Department and the United States Customs Service "knowingly false information" respecting the prices of electric golf carts built in Canada, in the course of agency proceedings that resulted in the imposition of dumping duties against Pezetel's distributors and eventually against Melex. (3) Counterclaim ¶ 18: OMC conspired with other American manufacturers of golf carts to engage in "a joint program of threatened litigation and publicity." (4) Counterclaim ¶ 19: OMC joined with other manufacturers in order to falsely convey to potential Melex customers that Melex "was about to go out of business." Although the Counterclaim is not crystal clear with respect to the precise impact of each of these challenged practices upon the financial well-being of Pezetel in the market place, the Counterclaim alleges that all four courses of action were undertaken with the intent "to arouse fear among Pezetel's distributors that they would be required to pay dumping duties or post bonds for the payment of such duties, and by arousing fear among customers of the prospective discontinuance of service and spare parts by Melex."

As to the first two charges above, the plaintiff invokes the immunity of the Noerr-Pennington doctrine, discussed more fully below. Both the claim of disparagement and the charge relating to the publicity campaign, ¶¶ 18, 19, do not implicate that doctrine and thus will be discussed separately.

I. SHERMAN ACT CLAIMS

A. APPLICATION OF THE NOERR-PENNINGTON DOCTRINE TO THE ALLEGATIONS OF THE COUNTERCLAIM

In Eastern Railroad Presidents Conference v. Noerr Motor Freight, 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 Supreme Court held that collaborative efforts by competitors to influence the legislative or executive branch of the government were immune from antitrust scrutiny even though undertaken with anticompetitive intent. "No violation of the Sherman Act can be predicated upon mere attempts to influence the passage or enforcement of laws." Eastern Railroad Conference v. Noerr Motor Freight, supra, 365 U.S. at 135, 81 S.Ct. at 528. The Supreme Court founded its decision in Noerr upon two considerations:

In the first place, such a holding that the Sherman Act applied to efforts to influence the passage or enforcement of laws would substantially impair the power of government to take action through its legislature and executive that operate to restrain trade. In a representative democracy such as this, these branches of government act on behalf of people and, to a very large extent, the whole concept of representation depends upon the ability of the people to make their wishes known to their representatives. . . . Secondly, and of at least equal significance, such a construction of the Sherman Act would raise important constitutional questions. The right of petition is one of the freedoms protected by the Bill of Rights, and we cannot, of course, lightly impute to Congress an intent to invade these freedoms.

365 U.S. at 137-38, 81 S.Ct. at 529-530.

The antitrust immunity conferred by the Noerr-Pennington Doctrine is not absolute, however. The Supreme Court recognized in Noerr that a case could arise in which the conspiracy involving political activity was "a mere sham to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor and in such a case the application of the Sherman Act would be justified." Id. at 144, 81 S.Ct. at 533. Until the Supreme Court's decision in California Motor Transport v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972), the scope of the so-called "sham" exception remained unexplored. In California Motor Transport, several trucking firms brought suit against some of their competitors alleging that the latter had conspired "to institute state and federal proceedings to resist and defeat applications by plaintiffs to acquire operating rights or to transfer or register those rights." Id. at 509, 92 S.Ct. at 611. The Supreme Court held that a claim had been stated under the Sherman Act. What provoked the invocation of the "sham" exception were allegations in the complaint:

that the power, strategy, and resources of the petitioners defendants were used to harass and deter respondents in their use of administrative and judicial proceedings so as to deny them "free and unlimited access" to those tribunals. The result, . . ., was that the machinery of the agencies and the courts was effectively closed to plaintiffs, and petitioners indeed became "the regulators of the grants of rights, transfers and registrations" to respondents—thereby depleting and diminishing the value of the businesses of respondents and aggrandizing petitioners' economic and monopoly power.

Id. at 511, 92 S.Ct. at 612 (citation omitted). Most troublesome to the Supreme Court were allegations that the concerted efforts of the defendants to bar the plaintiffs from any and all access to administrative and judicial tribunals "with or without probable cause, and regardless of the merits of the cases" resulted in a deprivation of meaningful access to the agencies and courts. Although the Court painstakingly emphasized that the Noerr-Pennington immunity extended to the adjudicatory setting, it distinguished...