No sham, agreed; but as to why …..

One area of law I find of interest, given its First Amendment grounding, is the Noerr-Pennington doctrine – the protection of the right to petition from antitrust liability.  There’s a new First Circuit decision discussing the sham exception to that doctrine, under which an antitrust suit is allowed to go forward based on the defendant’s petitioning activities.  Puerto Rico Telephone Co., Inc. v. San Juan Cable LLC, No. 16-2132 (1st. Cir. 2017).  While, as the caption reflects, the case involved Puerto Rican parties, the trial court decision was issued by Maine’s own Judge Woodcock, sitting by designation.  His decision that the exception did not apply was affirmed in an opinion written by another Mainer, Judge Kayatta (on a panel with Judges Torruella and Barron).

The facts are simple – “not eager to face competition,” the defendant filed a gazillion petitions in Puerto Rican and federal courts and other tribunals to fend off an internet company from invading its cable turf.  The parties quibbled about how many petitions were filed and how many of them the cable company lost, but there were a lot, and it lost either all or most of them. 

The most recent big Supreme Court case on the sham exception is Prof’l Real Estate Inv’rs, Inc. v. Columbia Pictures Indus., Inc. (PREI), 508 U.S. 49 (1993).  There, the Court held that the sham exception applies when petition(s) are baseless.  In the First Circuit case, the plaintiff waived the argument that any of the defendant’s petitions met that standard.  Instead, it argued that a court can find the sham exception applies even when petitions aren’t baseless when there are a slew of them, citing a concurrence in PREI by Justice Stevens.

In response to this argument, Judge Kayatta noted that there are four circuits that have addressed this question directly and suggest (apparently in dicta) that not all of the petitions in a pile have to be baseless.  But at least in the instant situation, where none of the petitions were baseless, the Court affirmed Judge Woodcock’s conclusion that the exception didn’t apply:

“Of course the absence of any outright victory in so many forays similarly makes it quite clear that the likelihood of prevailing was not paramount in OneLink’s calculus when deciding whether to petition. But the task here is to identify sham litigation, not probable winners. And while we can see the logic inherent in reasoning that a nonfrivolous suit might be viewed differently when flown in a flock of frivolous suits, we see little logic in concluding that an exercise of the right to file an objectively reasonable petition loses its protection merely because it is accompanied by other exercises of that right.” 

Judge Kayatta then noted that this case didn’t present a situation where (1) the petitioner wouldn’t receive a benefit apart from inflicting costs on the plaintiff had it prevailed (the benefit of delaying or restricting entry into the market); or (2) the petitioner had threatened to file suits without regard to merit.  The Court stated:  “We therefore need not decide how we would rule in either of those sorts of cases.”

At this point, things get more complicated.

Judges Barron, joined by Judge Torruella, added a concurrence, stating that the Court was not ruling that the exception doesn’t apply in every case where the defendant files multiple petitions and none of them are baseless.  Instead, he wrote, there needs to be a “more record-based, case-specific” analysis that leaves open the possibility that a monopolist might be liable under the antitrust laws for engaging in a pattern of petitioning, “even though no single filing in that pattern is objectively baseless.”

The concurrence states:  “it is important not to view the sham exception as a rigid rule.”  Instead, like much of antitrust law, in its view, the Court applies a rule of reason.  In this instance, it said, not enough was presented to show sham petitioning, citing the two possibilities Judge Kayatta noted regarding benefits and threats.

But the concurrence felt the need to go beyond these examples to explain why the sham exception wasn’t met in this instance, suggesting that these two examples weren’t necessarily the only ways to show a sham with non-baseless petitioning.  The concurrence stated that, unlike in a Supreme Court decision applying the exception, there was no direct evidence of an attempt to destroy the plaintiffs right to seek a license to compete.  Instead, there was only circumstantial evidence from which the plaintiff alleged a jury could infer that the petitioner filed its petitioners without regard to merit, such as the poor win-loss record; the petitioner abandoning its efforts to intervene and challenge the license once it got it; the licensing board’s observations about the petitioner’s litigiousness; and the possibility that the petitioner financed half of another market incumbent’s lawsuit seeking to enjoin the plaintiff from developing the infrastructure to enter the market.  In response to this argument, the concurrence said, “But, no circuit has actually permitted a suit to go forward in which the underlying petitions were not baseless and there was no clear and convincing evidence that an alleged monopolist sought to ‘use the governmental process. . . as an anticompetitive weapon.’”   “For these reasons,” the concurrence said, if the suit were left to proceed, “it would tilt the balance too far” against the right to petition.  Hence, the concurring judges joined in the opinion, which affirmed the grant of summary judgment “but reserves for future cases a fuller accounting of whether and when a series of non-baseless petitions might constitute a sham[.]”

So what now is the law in the First Circuit on this issue?  Is a “clear and convincing” standard applied when not all the petitions are baseless?  What part of this is precedential and the holding, and what part is dicta?  Why was Judge Kayatta’s opinion the Court’s opinion, and Judge Barron’s, joined by Judge Torruella, the concurrence?    

I wonder how many drafts of opinions were circulated by the panel before it settled on what issued.