Whelan v. Abell

• Decision Date: 17 May 1995
• Docket Number: Nos. 93-7138,93-7139,s. 93-7138
• Citation: 310 U.S.App. D.C. 396,48 F.3d 1247
• Parties: , 31 Fed.R.Serv.3d 461 Andrew WHELAN, et al., Appellants, v. Tyler ABELL, et al., Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1247

48 F.3d 1247

310 U.S.App.D.C. 396, 31 Fed.R.Serv.3d 461

Andrew WHELAN, et al., Appellants, v. Tyler ABELL, et al., Appellees.

Nos. 93-7138, 93-7139.

United States Court of Appeals District of Columbia Circuit.

Argued Oct. 3, 1994.

Decided March 10, 1995.

Rehearings and Suggestions for Rehearing

In Banc Denied May 17, 1995.

Appeal from the United States District Court for the District of Columbia (87cv01763).

Loren Kieve, Washington, DC, argued the cause for appellants. With him on the briefs was Lothar A. Kneifel, Washington, DC.

Michael E. Jaffe, Washington, DC, argued the cause for appellee John B. Toomey. With him on the brief were George R. Kucik and Theodore D. Frank, Washington, DC.

William A. Hylton, Jr., Baltimore, MD, argued the cause and filed the brief for appellee Estate of Anthony G. Chase.

Before: WALD, WILLIAMS and ROGERS, Circuit Judges.

STEPHEN F. WILLIAMS, Circuit Judge:

Appellants, who are plaintiffs in this action and were defendants in related prior litigation, challenge rulings in which the district court held as a matter of law that their claims of malicious prosecution, abuse of process, and tortious interference with prospective business advantage are barred by the Noerr-Pennington doctrine. See Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 132 n. 6, 81 S.Ct. 523, 526 n. 6, 5 L.Ed.2d 464 (1961); United Mine Workers v. Pennington, 381 U.S. 657, 85 S.Ct. 1585, 14 L.Ed.2d 626 (1965). Because we find that neither Noerr-Pennington nor the First Amendment protects the conduct plaintiffs have alleged--namely, knowing misrepresentations to state securities administrators and a federal court--we reverse these rulings. Appellants also challenge the district court's decision on remand to set aside an entry of default against one of the appellees. We affirm the district court's decision to set aside the default on most of the claims for "good cause shown", but vacate that decision as to the claim of tortious interference.

* * *

This case comes to us on appeal for the second time, and a full statement of the background is provided in the opinion deciding the first appeal. See Whelan v. Abell, 953 F.2d 663 (D.C.Cir.1992) ("Whelan I"). We confine ourselves here to facts relevant to this appeal.

Plaintiffs, Andrew J. and Edward T. Whelan, were officers and shareholders of the now-defunct Animated Playhouses Corporation ("APC" or the "company"), a corporation they set up in 1981 in order to create and hold a nationwide chain of "Captain Andy's River Towne" family restaurants, featuring shows by three-dimensional animated characters. Two of the three defendants, Tyler Abell and Anthony Chase (since deceased, now represented by the Chase Estate), invested in the venture in 1982 by buying the company's first restaurant, located in the Putty Hill Plaza in Baltimore County, Maryland, and entering into agreements relating to the use of APC's animations. A few months later the third defendant, James Toomey, purchased a one-third interest from Abell and Chase. Soon after making the investment the defendants lost faith in its prospects. Relations between them and the Whelans soured.

In 1984 defendants fired the first salvo of an extended legal battle, filing a letter of complaint with the Maryland Division of Securities ("MDS") and a lawsuit in federal district court (the "Putty Hill lawsuit"). In both actions, Abell, Chase, and Toomey asserted that various misrepresentations had been made to them in the course of negotiating the Putty Hill transaction. The letter accused APC of having violated the Maryland Franchise Registration and Disclosure Act, while the lawsuit accused the Whelans, APC, and others of having committed mail, wire, and securities fraud, racketeering, and franchise law violations.

The letter of complaint inspired the Maryland Securities Commissioner to issue an order to show cause against Andrew Whelan. In late 1984, Andrew signed a one-year undertaking with the Commissioner (vacated in 1985 in accordance with its terms), in which he asserted that he had complied with the law as he understood it from counsel but agreed to notify the Commissioner in advance of any offers of sales of franchises he intended to make, and to make any such offers in compliance with Maryland law. For a short time, the Putty Hill lawsuit marched on. In due course, however, the district court dismissed all of the claims with prejudice (including counterclaims by the Whelans). Thus, by 1986 both of the actions against the Whelans had concluded, and Abell, Chase, and Toomey had come up empty-handed.

Meanwhile, the Whelans' company, having failed to obtain crucial financing, fell into bankruptcy; in early 1987 they launched their counter-offensive. Returning to federal district court, they accused Abell, Chase, and Toomey of having completely fabricated the charges in the 1984 letter to MDS and the Putty Hill lawsuit and of having then publicized the frivolous charges to APC's investors, all in a calculated effort to coerce appellants to alter the terms of the original Putty Hill investment agreement. This effort, they argued, constituted a bad faith use of legal processes and directly caused harm to the Whelans' investments in APC and in other ventures. The Whelans sought damages under the common law torts of malicious prosecution, abuse of process, wrongful involvement in litigation, breach of fiduciary duty, and tortious interference with prospective business advantage.

The Chase Estate failed to file any answer to the complaint, and an order of default was entered against it on all counts.

The litigation continued against Abell and Toomey. The district court granted the two defendants summary judgment on the abuse of process and malicious prosecution claims, based on its view of the scope of those common law torts. Only the claims for tortious interference and breach of fiduciary duty went to a jury, which found Abell and Toomey liable to Andrew Whelan but not to Edward. The district court, however, granted the defendants' motion for judgment notwithstanding the verdict against Andrew, again based on the court's understanding of the necessary elements of the torts in question. The Whelans' victory against the Chase Estate, seemingly assured by the earlier entry of default, also slipped out of their hands: On January 18, 1990, the court vacated the order of default and dismissed the charges against the Estate in light of the Whelans' failure to establish their claims against the other defendants.

On appeal the Whelans secured reversal of many of the trial court's adverse rulings. Although affirming the j.n.o.v. on breach of fiduciary duty, we reversed the summary judgment orders on abuse of process and malicious prosecution, the j.n.o.v. on tortious interference, and the decision to set aside the default against the Chase Estate. We then remanded the case, noting that alternative arguments supporting these decisions had been raised but not addressed below. See Whelan I. On remand, the district court once again decided in favor of defendants. First it set aside the default against the Chase Estate. Whelan v. Abell, Nos. 87-0442, 87-1763, 1993 WL 141073 (D.D.C. Apr. 21, 1993). Then it granted judgment as a matter of law in favor of defendants on the tortious interference claim (thus overturning the verdict in favor of Andrew Whelan) and granted summary judgment against both plaintiffs on the remaining claims, all on the basis of the Noerr-Pennington defense. Whelan v. Abell, 827 F.Supp. 801 (D.D.C.1993).

I. The Noerr-Pennington Defense

A. Rule 50(b)

Before considering the merits of defendants' Noerr-Pennington defense, we turn to a purported procedural error in Andrew Whelan's tortious interference trial. We address this first because it might require us to reverse the court's grant of judgment as a matter of law on this claim regardless of the defense's merits.

Andrew Whelan maintains that defendants failed to assert Noerr-Pennington as a ground for their motion for a directed verdict and that this failure constitutes a waiver of that ground as the basis for j.n.o.v. Thus, he says, it was error for the district court to rely on that ground to grant the motion for j.n.o.v.; and it is our duty, regardless of the merits of defendants' Noerr-Pennington theory, to set aside the court's judgment and reinstate his jury verdict. ¹ While seeming to acknowledge that he in turn did not file a timely objection to the defendants' expansion of the grounds of their pre-verdict motion, Whelan argues that the rule limiting the judgment n.o.v. is jurisdictional, so that we must enforce it even in the absence of objection.

To give our bottom line at the outset: We agree with Andrew Whelan that the defendants failed to raise Noerr-Pennington in their pre-verdict motion. And, as Rule 50(b) limits a post-verdict motion for judgment as a matter of law to a "renewal" of the pre-verdict motion, we agree that defendants thereby waived that theory as a basis for judgment as a matter of law. But when defendants renewed the motion after verdict and added the Noerr-Pennington theory, Andrew Whelan failed to assert the violation of Rule 50(b), and thus he, in turn, waived that objection. Finally, Whelan's waiver was valid; the limitation in Rule 50(b) is waivable.

Rule 50(a)(2), which governs the pre-verdict motion for judgment as a matter of law, requires the motion to "specify the judgment sought and the law and the facts on which the moving party is entitled to the judgment." Rule 50(b) states that when the judge either denies or does not initially grant such a motion, the case is deemed submitted to the jury subject to the judge's later determination of the legal issues raised in the motion. The motion "may be renewed" later, under Rule 50(b). We have understood this to mean, and it seems indisputable, that "[t]he precise claim made in the motion for judgment n.o.v. must...