Trucking Unlimited v. California Motor Transport Co.

• Citation: 432 F.2d 755
• Decision Date: 05 October 1970
• Docket Number: No. 22462.,22462.
• Parties: TRUCKING UNLIMITED et al., Plaintiffs-Appellants, v. CALIFORNIA MOTOR TRANSPORT CO. et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

432 F.2d 755 (1970)

TRUCKING UNLIMITED et al., Plaintiffs-Appellants, v. CALIFORNIA MOTOR TRANSPORT CO. et al., Defendants-Appellees.

No. 22462.

United States Court of Appeals, Ninth Circuit.

October 5, 1970.

Michael N. Khourie (argued), J. Stanley Pottinger, Broad, Busterud & Khourie, San Francisco, Cal., for plaintiffs-appellants.

Boris H. Lakusta (argued), E. Myron Bull, Jr., David J. Marchant, Graham & James, Heller, Ehrman, White & McAuliffe, San Francisco, Cal., for Pacific Intermountain Express.

John MacDonald Smith, San Francisco, Cal. for Pacific Motor Trucking Co.

W. D. Bensen, Jr., Lubbock, Tex., for T.I.M.E. Freight, Inc.

Before HAMLIN and BROWNING, Circuit Judges, and PREGERSON,^* District Judge.

BROWNING, Circuit Judge:

This is an action by one group of trucking companies against another seeking treble damages and injunctive relief under the Sherman and Clayton Acts, 15 U.S.C. §§ 1-27. All are common carriers regulated by the California Public Utilities Commission (PUC) and the Interstate Commerce Commission (ICC) and require licenses from these agencies to operate.

The complaint alleges a conspiracy among defendants to restrain and monopolize the highway common carriage business in California and elsewhere by a jointly financed, widely publicized program of opposing, before the two commissions and the courts, all applications by actual or potential competitors for the issuance, transfer, or registration of operating rights. The district court dismissed the action on the ground that the complaint failed to state a claim upon which relief could be granted. Fed.R. Civ.P. 12(b) (6).¹ For purposes of this appeal, we must accept all the allegations of the complaint as true, 2A Moore, Federal Practice ¶ 12.08, at 2266-67; and we can affirm only if "it appears beyond doubt that the plaintiffs can prove no set of facts in support of their claim which would entitle them to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). See Harman v. Valley National Bank, 339 F.2d 564, 565 (9th Cir. 1964); Corsican Productions v. Pitchess, 338 F.2d 441, 442 (9th Cir. 1964).

The district court held that relief was barred by Eastern Railroad Presidents Conference v. Noerr Motor Freight Inc., 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), which hold that the Sherman Act does not forbid attempts to influence the passage or enforcement of laws. We disagree for two reasons. First, concerted employment of judicial and administrative adjudicative processes as part of a scheme to restrain trade, as alleged in this complaint, is not excluded from the Sherman Act by the Noerr-Pennington doctrine. Second, even if the Noerr-Pennington rule does apply to the use of judicial and administrative adjudicative processes in a scheme to restrain trade, relief is not barred if, as alleged in this complaint, the real purpose of defendants' joint activity was to restrain competitors directly, rather than to restrain them indirectly by inducing restrictive governmental action.

I

The Noerr-Pennington principle is a judicially implied exception to the general rule that an unlawful purpose may bring otherwise lawful means within the proscription of the Sherman Act. See American Tobacco Co. v. United States, 328 U.S. 781, 809, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946). The exception's premise is that the responsibility for enacting or not enacting laws concerning trade restraints rests with the legislative branch of government; and, similarly, responsibility for enforcing or not enforcing those laws rests with the executive branch. Noerr, supra, 365 U.S. at 135-136, 81 S.Ct. 523. Hence, valid legislative or executive action that results in the restraint or monopolization of trade does not violate the Sherman Act. United States v. Rock Royal Co-operative, Inc., 307 U.S. 533, 560, 59 S.Ct. 993, 83 L.Ed. 1446 (1939).²

Attempts to influence the legislative and executive branches are also excluded from the Sherman Act because prohibiting such activity "would substantially impair the power of government to take actions 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 the 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." Noerr, supra, 365 U.S. at 137, 81 S.Ct. at 529.³

And the Sherman Act does not apply to efforts to influence the enactment or enforcement of laws even when those efforts are motivated by an anti-competitive purpose because "it is quite probably people with just such a hope of personal advantage who provide much of the information upon which governments must act. 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." Id. at 139, 81 S.Ct. at 530.

This is a powerful argument for holding that joint efforts to influence legislative and executive action are excluded from Sherman Act liability regardless of purpose, but it does not justify immunizing agreements to utilize judicial and administrative adjudicative processes in a scheme to restrain trade. The fundamental reason for the Noerr-Pennington exception does not apply. It is not the function of the courts to determine whether laws restraining trade will be adopted or, having been adopted, whether they will be enforced; nor is this the function of an administrative agency engaged in adjudication, as the PUC and the ICC are here.⁴ It would be pointless to limit the reach of the Sherman Act in order to protect the access of courts and agencies engaged in adjudicative functions to information and opinion relevant to determinations they have no power to make.⁵

Accordingly, the general rule is applicable — the Sherman Act is violated by a conspiracy to unreasonably restrain or monopolize trade through the use of judicial and administrative adjudicative proceedings. Walker Process Equipment, Inc. v. Food Machinery & Chemical Corp., 382 U.S. 172, 86 S.Ct. 347, 15 L. Ed.2d 247 (1965); United States v. Singer Manufacturing Co., 374 U.S. 174, 83 S.Ct. 1773, 10 L.Ed.2d 823 (1963); Kobe, Inc. v. Dempsey Pump Co., 198 F. 2d 416, 424-425 (10th Cir. 1952); Lynch v. Magnavox Co., 94 F.2d 883 (9th Cir. 1938); Slick Airways, Inc. v. American Airlines, Inc., 107 F.Supp. 199, 213-14 (D.N.J.1951), appeal dismissed, 204 F. 2d 230 (3d Cir. 1953).⁶See also Note, The Brakes Fail on the Noerr Doctrine, 57 Calif.L.Rev. 518 (1969). But see Bracken's Shopping Center, Inc. v. Ruwe, 273 F.Supp. 606 (S.D.Ill.1967).⁷

The district court considered Singer and the other patent cases inapposite because they involved patent litigation⁸ and because litigation was only one of several means employed in the scheme to restrain trade. The court did not explain the significance of either factor, and we do not see any.

Because the legal monopoly conferred by a patent lends itself to misuse as a means to illegally monopolize and restrain trade, it is often a significant factor in determining whether a particular course of conduct violates the Sherman Act that a patent is involved. This fact, however, has no bearing at all upon whether the Noerr-Pennington defense applies. That doctrine is concerned with protecting joint efforts to influence governmental action as such — the subject matter of the governmental action is beside the point. The significance of the cases cited is not that they involve the use of patent litigation to restrain trade, but that they involve the use of litigation for that purpose. They demonstrate that litigation can be an integral part of a scheme prohibited by the Sherman Act.

Pennington disposes of the second basis for distinction relied upon by the district court. If the Noerr-Pennington defense had applied to the use of litigation for the purpose of restraining trade, the defense would have been available whether this means was employed as part of a larger scheme or stood alone. Pennington, supra, 381 U.S. at 670, 85 S.Ct. 1585. Furthermore, litigation and threats of litigation were the only means used to exclude competitors in Walker Process.

We conclude, therefore, that the Noerr-Pennington defense does not bar relief when a conspiracy to employ judicial and adjudicative processes in a scheme to restrain trade is alleged.

II

Dismissal was improper for another reason. Plaintiffs have alleged that defendants' real purpose was to restrain trade directly, rather than indirectly through the medium of governmental action. If this is true, plaintiffs may prevail under the "sham" exception to the Noerr-Pennington rule regardless of the status of joint approaches to adjudicative bodies under that defense.

The plaintiffs in Noerr contended, and the trial court found, that the defendants sought to injure plaintiffs directly by destroying their good will with the public and with their customers, thus weakening their competitive position and causing them to lose business. The Supreme Court noted that "the apparent effect of these findings is to take this case out of the category of those that involve restraints through governmental action and thus render inapplicable" the principle that efforts to induce such governmental action do not violate the Sherman Act, 365 U.S. at 142, 81 S.Ct. at 532. The Supreme Court held, however, that plaintiffs' attempt to exclude their case from the latter category failed for want of evidence.

The Court pointed out that there was no finding that the defendants attempted directly to persuade anyone not to deal...