Gregg H. Levy, Mitchell F. Dolin, Covington & Burling,
Washington, D.C., and B.J. Bradshaw, Richard N. Carrell,
Fulbright & Jaworski, Houston, Tex., for Union Pacific
Corp., Union Pacific R. Co. and Missouri Pacific R. Co.
Mark F. Horning, John R. Labovitz, Washington, D.C., and W.T.
Womble, Patricia Hair, Houston, Tex., for Burlington Northern,
Inc. and Burlington Northern R. Co.
John H. Shenefield, Morgan, Lewis & Bockius, Washington,
D.C., for Kansas City Southern Inc. and Kansas City Southern R.
Co.
Gary Senner, Steven H. Frankel, Sonnenschein, Carlin, Nath &
Rosenthal, Chicago, Ill., for Chicago & North Western
Transp. Co.
John L. Murchison, Jr., Harry M. Reasoner, Vinson & Elkins,
Houston, Texas, Michael J. Henke, C. Michael Buxton, Vinson
& Elkins, Washington, D.C., Gilbert I. Low, Orgain, Bell
& Tucker, Beaumont, Texas for ETSI.
Charles W. Lane, III, Howard E. Sinor, Jr., Jones, Walker,
Waechter, Poitevent, Carrere & Denegre, New Orleans, La.,
for Arkansas Power & Light Co. and Utility Fuels, Inc.
Ralph S. Carrigan, Rufus W. Oliver, III, Baker & Botts,
Houston, Tex., for Houston Lighting & Power Company.
Harold P. Degenhardt, Gibson, Dunn & Crutcher, Dallas, Tex.,
for Atchison, Topeka & Santa Fe.
Robert M. Spire, Atty. Gen., State of Neb., and Leroy W.
Sievers, Asst. Atty. Gen., Lincoln, Neb., for State of Neb.
(Dept. of Justice).
Eliza Ovrom, Asst. Atty. Gen., Des Moines, Iowa, for State of
Iowa.
Curtis Thompson, Asst. Atty. Gen., Jefferson City, Mo., for
State of Mo.
Before BROWN, REAVLEY and JOLLY, Circuit Judges.
REAVLEY, Circuit Judge:
The plaintiffs in this antitrust suit claim that the defendant
railroads conspired to prevent construction of a coal slurry
pipeline. Contending, among other things, that the railroads
accomplished their anticompetitive goal through filing and
defending certain lawsuits, the plaintiffs seek discovery of
documents relating to those lawsuits. The railroads resist
discovery on the grounds of attorney/client privilege and work
product immunity. The district court rejected this claim of
privilege, holding that because the documents were prepared in
furtherance of an illegal conspiracy they fall within the
crime/fraud exception to the privilege. The railroads claim
the protection of Noerr-Pennington for their litigation
activities and seek a writ of mandamus. We conclude that the
district court erred in allowing discovery without considering
whether the litigation activities themselves were
significantly motivated by a genuine desire for judicial
relief. We reject, however, the railroads' contention that the
district court is precluded from finding sham by the
railroads' partial success in one of the lawsuits and their
defensive posture in the other lawsuits.
The underlying antitrust claim here arises from Energy
Transportation Systems, Inc., and ETSI Pipeline Project's
(collectively ETSI) unsuccessful attempt to build a coal
slurry pipeline from Wyoming to Arkansas. ETSI claims the defendant railroads, afraid of losing
business to the pipeline, unlawfully conspired to prevent, or
at least delay and make more expensive, the pipeline's
construction by denying permission for it to cross their
rights-of-way and by engaging in sham administrative and
judicial challenges to ETSI attempts to secure crossing
rights, water rights, and administrative permits. After more
than ten years of trying to obtain all of the necessary
rights, permits, and financing, ETSI abandoned the project in
1984. It now alleges that the project's failure was caused by
the railroads' illegal conspiracy and seeks a judgment against
the railroads of $4.2 billion in damages after trebling. This
mandamus petition arises from ETSI's desire to obtain
documents prepared in connection with the railroads' allegedly
sham litigation activities. Specifically at issue here are
documents from two groups of lawsuits.
The first group consists of consolidated lawsuits that the
parties refer to as the Andrews litigation. The Andrews
lawsuits were brought to invalidate a water contract between
ETSI and the United States Department of the Interior that
would allow ETSI to purchase water from the federal Oahe
Reservoir in South Dakota for use in its pipeline. The
plaintiffs in the lawsuits included three states--Missouri,
Iowa, and Nebraska--several environmental and farmers' groups,
and one of the defendant railroads--Kansas City Southern.
Another railroad--Union Pacific--provided legal assistance
through its attorneys to the state of Nebraska. The Andrews
plaintiffs asserted numerous grounds for invalidating the
contract; they have thus far been successful in their position
that the Secretary of the Interior did not have statutory
authority to execute the contract without the participation of
the Army Corps of Engineers. See Missouri v. Andrews,
586 F. Supp. 1268 (D. Neb. 1984), aff'd, 787 F.2d 270 (8th Cir. 1986),
cert. granted, --- U.S. ----, 107 S. Ct. 1346, 94 L. Ed. 2d
517 (1987).
The second group of lawsuits from which ETSI seeks documents
consists of a series of suits ETSI brought to establish rights
to cross the railroads' rights of way. In the very early
stages of the pipeline project, ETSI attempted to negotiate
the purchase of these crossing rights. When these efforts
proved unavailing, allegedly because of an unlawful agreement
between the railroads to jointly withhold crossing rights,
ETSI began locating places along the railroads' property where
the railroads owned only an easement rather than a fee title.
It then purchased easements from the underlying landowner and
brought suit to establish that these easements were sufficient
to allow it to cross under the railroads' tracks without the
railroads' consent. The parties refer to these easements as
windows and to ETSI's lawsuits as the window litigation.
Apparently, ETSI was essentially successful in every one of
these window suits, all of which involved virtually identical
issues.
The railroads have refused to turn over many of the documents
ETSI seeks on the ground of attorney/client privilege or
attorney work product immunity. ETSI filed a motion to compel
production of these withheld documents on the ground they were
prepared in connection with a violation of the antitrust laws.
The railroads argued in response that to obtain discovery ETSI
had to show that their litigation activities were sham
activities and thus not protected by the Noerr-Pennington
doctrine. A special master agreed with the railroads and
concluded that ETSI had not made the requisite showing. The
district court, however, disagreed and granted ETSI's motion.
The railroads filed this petition for a writ of mandamus.
Justification For Mandamus Relief
Before reaching the merits, we must address ETSI's contention
that a writ of mandamus is not an appropriate mechanism to
review this discovery ruling. ETSI correctly points out that
"mandamus has historically been a drastic remedy generally
reserved for really 'extraordinary' cases." In re Equal
Employment Opportunity Commission, 709 F.2d 392, 394 (5th Cir.
1983) (citing Kerr v. United States District Court,
426 U.S. 394, 402, 96 S. Ct. 2119, 2123, 48 L. Ed. 2d 725 (1976). It
argues that because the district court's ruling was neither a
"usurpation of judicial power" nor a "clear abuse of
discretion," see Bankers Life & Casualty Co. v.
Holland,
346 U.S. 379, 383, 74 S. Ct. 145, 148, 98 L. Ed. 106 (1953), we should
dismiss the petition without reaching the merits.
In recent years, several courts have concluded that mandamus
is an appropriate method of review of orders compelling
discovery against a claim of privilege. See United States
Department of Energy v. Brimmer, 776 F.2d 1554, 1559
(Temp.Emer. Ct. App. 1985), cert. denied, --- U.S. ----, 106
S. Ct. 1261, 89 L. Ed. 2d 571 (1986); Sporck v. Peil, 759 F.2d
312, 314-15 (3d Cir.), cert. denied, 474 U.S. 903, 106 S. Ct.
232, 88 L. Ed. 2d 230 (1985); Bogosian v. Gulf Oil Corp., 738
F.2d 587, 591-92 (3d Cir. 1984); Diversified Industries, Inc.
v. Meredith, 572 F.2d 596, 599 (8th Cir. 1977); Heathman v.
United States District Court, 503 F.2d 1032, 1033 (9th Cir.
1974); Pfizer Inc. v. Lord, 456 F.2d 545, 547-48 (8th Cir.
1972); Harper & Row Publishers v. Decker, 423 F.2d 487,
492 (7th Cir. 1970), aff'd by an equally divided
court,
400 U.S. 348, 91 S. Ct. 479, 27 L. Ed. 2d 433 (1971); see also 16 C.
Wright, A. Miller, E. Cooper & E. Gressman, Federal
Practice and Procedure Sec. 3935, at 247-48 (1977). These
cases have recognized the importance of the asserted privilege
and the absence of an adequate alternative method of obtaining
review. They also have relied on the seriousness and novelty
of the privilege issue in the particular case. Respected
commentators have similarly noted that the difficulty of
obtaining effective review of discovery orders, the serious
injury that sometimes results from such orders, and the often
recurring nature of discovery issues support use of mandamus
in exceptional cases. 15 C. Wright, A. Miller & E. Cooper,
Federal Practice and Procedure Sec. 3914, at 576-77 (1976); 9
J. Moore, B. Ward & J. Lucas, Moore's Federal Practice p
110.28, at 313 (2d ed. 1987).
We believe this case presents the exceptional circumstances
making mandamus review appropriate. The district court's order
directs production of several thousand documents for which
attorney/client privilege and work product immunity have been
asserted. These documents go to the heart of the controversy
between the parties, and disposition of this petition not only
implicates the important policies protecting privileged
documents but will likely have a determinative impact on the
course of the case. Erroneous disclosure of these documents
could be irreparable. It is also significant that, unlike the
typical discovery order, the district court's order was not a
mere discretionary one but rather turns on legal questions
appropriate for appellate review. The issues here also have
importance beyond the immediate lawsuit. The interrelationship
of the attorney/client privilege's crime/fraud exception and
the Noerr-Pennington doctrine with its sham limitation is a
question which we do not find addressed in the decisions but
which is likely to recur in future cases. Given the nature of
the analysis required in an antitrust case in which a
Noerr-Pennington defense is asserted and a question of sham is
raised, communication between the attorney directing the
petitioning activity and his client will be highly relevant.
Under the district court's ruling, such communications could
be discovered upon a showing that the petitioning was part of
a larger conspiracy even though the petition itself might be
protected from antitrust scrutiny. Such an important and
potentially far-reaching decision, which we hold below to be
erroneous, is an appropriate one for our immediate review.
Litigation That Serves A Larger Conspiracy
Turning to the merits, we first address the primary ground on
which the district court concluded that discovery of the
documents was proper. Although recognizing that
Noerr-Pennington might ultimately immunize the railroads'
petitioning activities from antitrust liability, the district
court determined that documents relating to such activity are
nonetheless not immune from discovery when they relate to a
larger conspiracy that is actionable. The court found that
ETSI's evidence established a prima facie case that such a
larger conspiracy in fact existed--a conspiracy to defeat the
pipeline by a strategy of delaying and interfering with its
construction--and that the railroads had consulted and used
their attorneys to further this conspiracy. In particular, the
court found that the railroads' administrative and judicial
challenges to ETSI permits and contracts and their defense of
the window lawsuits were in furtherance of this conspiracy.
Based on these findings alone, the court concluded that it
could order discovery of the documents relating to the
litigation. The court was thus able to order discovery without
ever reaching the question whether the Andrews litigation and
the defense of the window lawsuits were sham. In making this
ruling, the district court relied on cases from other circuits
holding that Noerr-Pennington is not a bar to discovery. See,
e.g., Associated Container Transportation (Australia) Ltd. v.
United States, 705 F.2d 53 (2d Cir. 1983); North Carolina
Electric Membership Corp. v. Carolina Power & Light Co.,
666 F.2d 50 (4th Cir. 1981). In those cases, however, no claim
of attorney/client privilege was asserted and the sole
question was whether Noerr-Pennington alone barred discovery.
The issue here is whether the attorney/client privilege bars
discovery in the face of a claim that the communications
relate to a crime or fraud. Noerr-Pennington is relevant only
to the extent it determines whether a crime or fraud has been
shown.
The broad-brush approach of the district court gives too
little attention to the policies behind both the
Noerr-Pennington doctrine and the privileges at stake
here. The basis for Noerr-Pennington immunity has been well
documented. In Noerr, the Supreme Court was presented with a
claim that an association of railroads had violated the
antitrust laws by engaging in a massive publicity campaign
designed to influence legislative and executive action against
the trucking industry. The Court determined that the
railroads' activity did not fall within the ambit of the
antitrust laws. It stressed the importance in a representative
democracy of the right of persons to "freely inform the
government of their wishes." 365 U.S. at 137, 81 S. Ct. at
529. The Court also felt that construing the antitrust laws to
reach the railroads' activity would raise "important
constitutional questions" regarding the right to petition
government and that it could not "lightly impute to Congress
an intent to invade these freedoms." Id. at 138, 81 S. Ct. at
530. Pennington reaffirmed Noerr, holding that " [j]oint
efforts to influence public officials do not violate the
antitrust laws even though intended to eliminate competition.
Such conduct is not illegal, either standing alone or as part
of a broader scheme itself violative of the Sherman Act." 381
U.S. at 670, 85 S. Ct. at 1593.
The Court in Noerr acknowledged, in a statement that is the
genesis of the current "sham" doctrine, that some petitions,
"ostensibly directed toward influencing governmental action,
[may be] a mere sham to cover what is actually nothing more
than an attempt to interfere directly with the business
relationships of a competitor and the application of the
Sherman Act would be justified." Id. at 144, 81 S. Ct. at 533.
The railroads were protected, however, because they "were
making a genuine effort to influence legislation." Id. The
principle thus emerging from these decisions is that genuine
efforts to influence governmental decisionmaking are to be
encouraged, not penalized through application of the antitrust
laws. Protection exists even though the petitioner's avowed
purpose is to eliminate a competitor and even though the
petitioner may be engaged in a larger unprotected scheme
designed to do just that. Despite the potential
anti-competitive effects of petitioning so motivated and
occurring in such a context, the Supreme Court has made the
policy choice to "assure 'uninhibited access to government
policy makers.' " Coastal States Marketing, Inc. v. Hunt, 694
F.2d 1358, 1363 (5th Cir. 1983) (quoting George R. Whitten
Jr., Inc. v. Paddock Pool Builders, Inc., 424 F.2d 25, 32 (1st
Cir.), cert. denied, 400 U.S. 850, 91 S. Ct. 54, 27 L. Ed. 2d
88 (1967)).
A similar policy choice underlies the attorney/client
privilege and work product immunity. The attorney/client
privilege rests on the need to "encourage full and frank
communication between attorneys and their clients and thereby
promote broader public interests in the observance of law and
administration of justice." Upjohn Co. v. United
States,
449 U.S. 383, 389, 101 S. Ct. 677, 682, 66 L. Ed. 2d 584 (1981). The
privilege's "benefits are all indirect and speculative; its
obstruction is plain and concrete." 8 J. Wigmore, Evidence
Sec. 2291 (McNaughton rev. 1961). Yet the privilege survives,
based on the recognition that "sound legal advice or advocacy
serves public ends and that such advice or advocacy depends
upon the lawyer's being fully informed by the client." Upjohn,
449 U.S. at 389, 101 S. Ct. at 682. The privilege, of course,
is subject to several exceptions, notably the crime/fraud
exception asserted here. The crime/fraud exception recognizes
that because the "client has no legitimate interest in seeking
legal advice in planning future criminal activities," In re
International Systems & Controls Corporation Securities
Litigation, 693 F.2d 1235, 1242 (5th Cir. 1982), society has
no interest in facilitating such communications. Thus the
exception demonstrates the policy: persons should be free to
consult their attorney for legitimate purposes.
Work product immunity similarly derives from the desire to
facilitate effective advocacy. Despite a broad policy in favor
of liberal discovery, immunity exists for a lawyer's work
product to protect the lawyer's ability to "work for the
advancement of justice while faithfully protecting the
rightful interests of his clients." Hickman v. Taylor,
329 U.S. 495, 510, 67 S. Ct. 385, 393, 91 L. Ed. 451 (1947). Just as with
disclosure of communications between attorney and client,
discovery of the attorney's "written statements, private
memoranda and personal recollections," id., would inhibit the
attorney's effort to fully explore and develop the position he
has been asked to advocate. Indeed, recognition of this degree
of similarity between the attorney/client privilege and work
product immunity has led this court and others to hold that
both are subject to the same crime/fraud exception.
International Systems, 693 F.2d at 1242; In re Antitrust Grand
Jury, 805 F.2d 155, 164 (6th Cir. 1986); In re Sealed Case,
676 F.2d 793, 812 (D.C. Cir. 1982); In re John Doe Corp., 675
F.2d 482, 492 (2d Cir. 1982); In re Grand Jury Proceedings,
604 F.2d 798, 803 (3d Cir. 1979).
The district court erred in ordering discovery without
considering whether the specific litigation activities were
illegitimate. The attorney/client privilege and work product
immunity protect communications and papers generated when a
client engages his attorney for legitimate purposes. To the
extent the railroads sought out their attorneys to bring
lawful suits and consulted with them in connection with such
suits, they were within the scope of this protection. That the
railroads might also have consulted and received the help of
their attorneys in connection with other activities that are
not lawful does not change this conclusion. The focus must be
narrowed to the specific purpose of the particular
communication or document. To the extent the document deals
with a protected activity, it is immune from discovery.
To hold otherwise would unduly infringe on the protection
Noerr-Pennington extends to petitioning activities genuinely
intended to influence governmental action, even though part of
a larger scheme of anticompetitive conduct. The Supreme Court
has recognized that such activities are desirable, and the
attorney/client privilege and work product immunity further
the policy behind this recognition by facilitating petitioning
activity that, as in this case, requires the assistance of
attorneys. To permit discovery of the documents withheld in
this case on the basis of a larger conspiracy by the railroads
would undermine the effectiveness of the very type of
petitioning the Supreme Court's decisions have protected.
Therefore to the extent ETSI seeks material directly connected
with the railroads' litigation activities, the district court
cannot order discovery without first determining that the
litigation activity was itself in violation of the antitrust
laws. In the context of this case, that determination will
require resolution of the question whether the litigation was
a sham. We now turn to that question.
District Court's Failure to Find Sham
ETSI argues that the district court, aside from its reasoning
discussed in the preceding section of this opinion, made a
factual determination that the railroads' litigation
activities were sham. It attempts to show that this
determination was correct and urges this court to deny the
writ of mandamus on this basis. The railroads deny that the
district court made any factual determination of sham.
We agree with the railroads that the district court failed to
make an adequate finding that the railroads' litigation
activities were sham. It is true, as ETSI contends, that the
district court's memorandum opinion states that the railroads
"were not engaged in a bona fide effort to secure governmental
action." As we discuss below, this is essentially the
conclusion that must be reached to decide that petitioning
activities are not protected by Noerr-Pennington. Reading the
opinion as a whole, however, it is apparent that the district
court did not make the detailed factual inquiry necessary to
support this conclusion. Instead, the district court relied on
its conclusion that ETSI had made a prima facie showing that
the railroads had engaged in an overall conspiracy to defeat
the pipeline and that the petitioning was connected with this
conspiracy. The court concluded that " [t]his connection ...
taints the entire petitioning process with sham."
We have already rejected the district court's attempt to rely
on the alleged overall conspiracy to directly abrogate the
railroads' privilege. For similar reasons, we now reject
reliance on the overall scheme in connection with finding
sham. As we discussed earlier, the Supreme Court held in
Pennington that genuine petitioning activities are "not
illegal, either standing alone or as part of a broader scheme
itself violative of the Sherman Act." 381 U.S. at 670, 85 S.
Ct. at 1593. Based on this language, this court has held that
antitrust liability cannot be predicated on otherwise
protected litigation activity merely because the activity was
part of a broader conspiracy. Feminist Women's Health Center,
Inc. v. Mohammad, 586 F.2d 530, 543 (5th Cir. 1978), cert.
denied, 444 U.S. 924, 100 S. Ct. 262, 62 L. Ed. 2d 180 (1979);
see also Hospital Building Co. v. Trustees of Rex Hospital,
691 F.2d 678, 688 (4th Cir. 1982), cert. denied, 464 U.S. 890,
104 S. Ct. 231, 78 L. Ed. 2d 224 (1983); Alexander v. National
Farmers Organization, 687 F.2d 1173, 1195 (8th Cir. 1982). The
holding in Pennington requires attention to the narrow
petitioning activity at issue. The fact finder must determine,
as to the particular petition, whether the petitioner was
engaged in a genuine effort to influence governmental
decisionmaking. If so, then antitrust liability cannot be
based on that activity and the attorney/client privilege and
work product immunity for documents directly related to the
activity remain intact.
In relying on the overall scheme theory to find sham, the
district court relied primarily on the Ninth Circuit's
decision in Clipper Exxpress v. Rocky Mountain Motor Tariff
Bureau, Inc., 690 F.2d 1240 (9th Cir. 1982), cert. denied, 459
U.S. 1227, 103 S. Ct. 1234, 75 L. Ed. 2d 468 (1983). That
decision, however, does not support the district court's
ruling. The court there reversed a grant of summary judgment
to the defendants in an antitrust case in which the alleged
anticompetitive conduct consisted of petitioning and other
unlawful activity. The Ninth Circuit held that summary
judgment was improper even if Noerr-Pennington protected the
petitioning because if "Clipper can prove that the defendants
engaged in activities which violated the antitrust laws, those
violations do not become immune simply because the defendants
used legal means--protests before the ICC--as a means to
enforce the violations." Id. at 1264. The court's holding was
that Noerr-Pennington "provides immunity only for the narrow
petitioning activity," id. at 1265, and that this immunity
does not provide "overall immunity" to other violations, id.
at 1263. The court did not hold, and could not hold
consistently with Pennington, that the overall scheme makes
the otherwise protected petitioning a sham.
In their petition for mandamus, the railroads ask that we
direct the district court to adopt the special master's
tentative ruling that the railroads' litigation activities
were not sham as a matter of law. The railroads assert that
the Andrews lawsuits cannot be found to be a sham because the
railroads were successful. As to the window lawsuits, they
assert no sham can be found because of the railroads'
defensive posture. We disagree.
The argument that successful petitioning can never be a sham
and thus subject to antitrust scrutiny is an appealing one. As
this court has recognized, it is "difficult to conclude that
the filing of a complaint constitutes a sham where the party
seeking relief actually prevails." Mid-Texas Communications
Systems, Inc. v. AT & T, 615 F.2d 1372, 1383 (5th Cir.),
cert. denied, 449 U.S. 912, 101 S. Ct. 286, 66 L. Ed. 2d 140
(1980); see also Coca-Cola Co. v. Overland, Inc., 692 F.2d
1250, 1257 & n. 17 (9th Cir. 1982). As we discuss below,
this is because success on the merits is forceful evidence
that the petitioner did in fact wish to influence the
governmental decision and obtain the relief prayed for.
We cannot, however, lay down a categorical rule that
successful petitioning can never be a sham. In Coastal States Marketing, Inc. v. Hunt, 694 F.2d
1358 (5th Cir. 1983), we considered the circumstances under
which litigation activities can be held to be a sham. We held
that a "litigant should enjoy immunity from the antitrust laws
so long as a genuine desire for judicial relief is a
significant motivating factor underlying the suit." Id. at
1372. Our statement of this test flowed from Noerr 's teaching
that sham petitioning is that which, although "ostensibly
directed toward influencing governmental action, is a mere
sham to cover what is actually nothing more than an attempt to
interfere directly with the business relationships of a
competitor." 365 U.S. at 144, 81 S. Ct. at 533. Coastal States
recognized that the key to extending Noerr-Pennington
protection is whether the antitrust defendant genuinely was
attempting to influence governmental decisionmaking. If the
defendant's intent was not to influence the government and
obtain relief, but rather to harm a competitor through the
mere invocation and maintenance of the process, he is not
entitled to protection because he is not exercising the right
of petition that formed the basis for the decision in Noerr.
See Clipper Exxpress, 690 F.2d at 1255; see also Litton
Systems, Inc. v. AT & T, 700 F.2d 785, 810 (2d Cir. 1983),
cert. denied, 464 U.S. 1073, 104 S. Ct. 984, 79 L. Ed. 2d 220
(1984); Grip-Pak, Inc. v. Illinois Tool Works, Inc., 694 F.2d
466, 472 (7th Cir. 1982), cert. denied, 461 U.S. 958, 103 S.
Ct. 2430, 77 L. Ed. 2d 1317 (1983); City of Gainesville v.
Florida Power & Light Co.,
488 F. Supp. 1258, 1265-66 (S.D. Fla. 1980); P. Areeda & H. Hovenkamp,
Antitrust Law 7 (Supp.1986) (hereinafter Areeda) ("When the
antitrust defendant had not truly sought to influence a
governmental decision, his invocation of governmental
machinery is a sham.").
The Coastal States test for determining when petitioning
activities are a sham recognizes that the "usual litigant will
base its decision to sue on a number of factors." Coastal
States, 694 F.2d at 1371. It focuses attention on the factors
motivating the initiation and prosecution of the suit. Thus,
it is not dispositive that the ultimate relief will be
beneficial to the petitioner and will serve his purposes. It
must be shown that the desire for relief was a significant
factor underlying the actual bringing and prosecution of the
suit. This requires an examination of the litigant's intent.
Cf. Greenwood Utilities Commission v. Mississippi Power Co.,
751 F.2d 1484, 1498 n. 9 (5th Cir. 1985) (" [D]etermining
whether the petitioning conduct was a sham often involves
questions of motive or subjective intent."). It is important
to note, however, that this inquiry is limited to the
immediate purpose for the litigation. Noerr and Pennington
hold that anticompetitive intent does not make petitioning a
sham. Noerr, 365 U.S. at 138-40, 81 S. Ct. at 530-31;
Pennington, 381 U.S. at 669-70, 85 S. Ct. at 1593. Thus, the
entire effort may be part of an antitrust conspiracy, without
which there would have been no litigation. The issue of intent
that controls is whether the litigant wished to obtain his
anticompetitive end through obtaining court-ordered relief or
simply through the filing and maintenance of the lawsuits.
Our interpretation of the sham doctrine in Coastal States
makes clear that success on the merits does not necessarily
preclude an antitrust plaintiff from proving that the
defendant's earlier litigation activities were sham. The
determinative inquiry is not whether the suit was won or lost,
but whether it was significantly motivated by a genuine desire
for judicial relief. Of course, the success of the claim
presented is persuasive evidence that the litigant in fact
wanted the relief. It is highly unlikely that a party with a
meritorious claim will not be significantly motivated by a
desire to obtain relief on that claim. Thus, an antitrust
plaintiff attempting to base liability on successful
petitioning must overcome a strong inference that
Noerr-Pennington applies and in many cases may be unable to do
so. But reliance on the success of the earlier claim cannot
substitute for proper consideration of any evidence the
plaintiff might provide of the petitioner's motivation.
To be sure, " [d]etermining what efforts are not bona fide
petitions to the government ... is a difficult task."
Greenwood Utilities, 751 F.2d at 1498. Drawing the line at
successful petitions--or at petitions that had a reasonable
basis--would simplify this task somewhat. But we cannot say
that important cases will not exist in which the evidence
establishes that, despite having a meritorious claim, a party
was motivated not by a desire to obtain relief but to harass
and interfere with the activities of a competitor through the
process itself. Accord Grip-Pak, 694 F.2d at 472. In this
case, for example, ETSI claims the railroads were not
interested in obtaining relief from the court in Andrews
because the railroads realized their goal of defeating the
pipeline depended primarily on delaying the project to the
point it became so expensive to be infeasible as a competitive
enterprise. It presents evidence that railroads made the
decision to participate in the litigation without
consideration of the possible merit of the suit. Of course,
that the railroads realized that the delaying value of their
lawsuit would aid their goal does not necessarily mean they
did not in fact want relief from the court. But if ETSI can
sustain its burden to show that the railroads were not
significantly motivated by a "genuine desire for judicial
relief," Coastal States, 694 F.2d at 1372, the railroads
should not be able to invoke Noerr-Pennington as a shield to
discovery of documents relating to that litigation.
The preceding discussion should not be taken as a suggestion
that the reasonableness of a suit is irrelevant for all
purposes. We have concluded that objective reasonableness--as
manifested by the court's grant of relief on the claim--should
not protect a person who was not genuinely exercising his
right to petition. However, as our discussion below of
standing indicates, we believe that a complete lack of
reasonableness necessarily must deprive a person of
protection. A party who invokes the governmental
decisionmaking process must have a reasonable basis for
believing his claim might prevail. In other words, the
requirement in Noerr and Coastal States that petitioning be
motivated by a genuine desire for relief means that the desire
for relief must be both honest and reasonable. This
requirement serves the purpose of withholding protection from
those persons who are not entitled to it, while at the same
time recognizing the "wise policy [of] hold [ing] business
actors to a standard of reasonable care in using governmental
machinery." Areeda, at 11; see also id. at 7 ("To be sure, [a
petitioner] would always be pleased to obtain a governmental
decision against his rival. But where he had no reasonable
expectation of obtaining the favorable ruling, his effort to
do so was a sham."); Litton Systems, Inc. v. AT & T, 700
F.2d 785, 811-12 (2d Cir. 1983), cert. denied, 464 U.S. 1073,
104 S. Ct. 984, 79 L. Ed. 2d 220 (1984).
The requirement of reasonableness raises a second, albeit
related, reason why we decline to adopt the railroads'
argument that the result in the Andrews lawsuits precludes
finding a sham. The one railroad who joined the Andrews
litigation as a party--Kansas City Southern (KCS)--was
initially dismissed for lack of standing. The court later
vacated that ruling as to some of KCS's claims when KCS filed
an amended complaint and additional affidavits as to its
interest in the case. However, because the court had already
ruled on the merits and granted an injunction in favor of the
plaintiffs who had standing, it declined to finally resolve
KCS's standing. On appeal, the Eighth Circuit also found it
unnecessary to resolve KCS's standing, as it agreed with the
district court's ruling that the state plaintiffs had standing
and affirmed the injunction on that basis. Missouri v.
Andrews, 787 F.2d 270, 274 (8th Cir. 1986), cert. granted, ---
U.S. ----, 107 S. Ct. 1346, 94 L. Ed. 2d 517 (1987).
We do not believe Noerr-Pennington extends to a litigant who
has not properly invoked a court's power to act in a case,
even though the petitioner may otherwise genuinely desire
relief on a meritorious claim. Unlike the legislative arena,
substantial limits exist on the ability of persons to pursue
claims in the courts. In particular, a person whose interest
in a controversy is not sufficient to confer standing has no
right to petition the court as a party and obtain relief.
Thus, a person cannot reasonably claim that his participation
in a lawsuit in which he has no standing is a genuine attempt
to influence governmental decisionmaking. Of course, a person
has a right to assert his claim of standing along with his
claim on the merits and seek to influence the court to
recognize his interest in the controversy. Thus, to the extent
the litigant has a reasonable basis for believing that his
claim of standing might be accepted by the court, and thus
that he will have the right to participate in the litigation
process and obtain relief, he will be protected by
Noerr-Pennington even though he ultimately loses. But a bystander to a controversy who either knows he
has no standing or who has no reasonable basis for asserting
standing but who nonetheless files or joins in a lawsuit
cannot claim the protection Noerr-Pennington extends to
genuine attempts to influence judicial decisionmaking. See
Landmarks Holding Corp. v. Bermant, 664 F.2d 891, 896 (2d Cir.
1981) (defendants appealed from zoning commission decisions
"knowing that they lacked standing to do so"); cf. MCI
Communications Corp. v. AT & T, 708 F.2d 1081, 1156 (7th
Cir. 1983) ("There can be no genuine attempt to petition the
government when the petitioners know in advance that the
governmental body lacks the authority to take the action
desired."), cert. denied, 464 U.S. 891, 104 S. Ct. 234, 78 L.
Ed. 2d 226 (1983).
The participation of the only other railroad actively involved
in the Andrews litigation--Union Pacific--raises similar
difficulties. Unlike KCS, Union Pacific never attempted to
join the litigation as a party. Instead, it provided legal
assistance through its attorneys to the state of Nebraska, a
named plaintiff in one of the suits. Union Pacific paid the
fees of its attorneys for this assistance, which apparently
involved extensive research assistance and document drafting.
The parties dispute the precise role Union Pacific played in
Nebraska's decision to seek its assistance and to file suit.
The parties also dispute the degree to which others in the
litigation were aware of Union Pacific's involvement, but it
appears to be largely agreed that most parties, as well as the
district court itself, were unaware that Nebraska was being
assisted.
Union Pacific's activity presents difficult questions
regarding the scope of Noerr-Pennington 's protection and the
constitutional right to petition. The railroads have argued
that Noerr itself answers these questions in favor of
protecting Union Pacific's activities. In Noerr, the railroad
industry hired a public relations firm to conduct their
publicity campaign against the trucking industry. Much of the
campaign was carried out through a "third-party technique,
that is, the publicity matter circulated in the campaign was
made to appear as spontaneously expressed views of independent
persons and civic groups, when, in fact, it was largely
prepared and produced by [the public relations firm] and paid
for by the railroads." 365 U.S. at 130, 81 S. Ct. at 525. The
Supreme Court rejected the lower court's view that this aspect
of the railroads' activity justified application of the
antitrust laws.
The railroads here argue that the holding in Noerr dictates
that Union Pacific's assistance to Nebraska, which they assert
was more benign than the misleading conduct in Noerr, be
protected. We disagree. As the Court's subsequent decision in
California Motor Transport Co. v. Trucking Unlimited,
404 U.S. 508, 92 S. Ct. 609, 30 L. Ed. 2d 642 (1972), makes clear,
significant differences exist between attempts to influence
legislative decisionmaking and attempts to influence the
judiciary. Noerr emphasized the highly political nature of the
railroads' petitioning activities and Congress's traditional
caution "in legislating with respect to problems relating to
the conduct of political activities." Noerr, 365 U.S. at 141,
81 S. Ct. at 531. In contrast, as we noted above, the right to
petition the courts and the methods that properly may be used
in such petitioning have been carefully circumscribed. Cf. 1
P. Areeda & D. Turner, Antitrust Law 48 (1978) (" [T]he
legislative and judicial reluctance to regulate political
activities has never affected litigation."). We do not believe
that Noerr 's extension of protection to the railroads'
publicity campaign controls the disposition of the issue of
protection for Union Pacific's activities.
Indeed, we believe it would be an unwarranted extension of
Noerr-Pennington 's protection to hold that a party without an
interest in a case sufficient to allow it to directly petition
the courts may nonetheless indirectly seek its anticompetitive
goals through encouraging and assisting the lawsuits of
others. Noerr was based largely on the principle that
government relies to a large degree on the "ability of persons
to make their wishes known to government." 365 U.S. at 137, 81
S. Ct. at 529. It further recognized that prohibiting those
with a competitive interest in governmental action from
petitioning the government as to that action would "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 531. In this
case, however, our holding subjects to antitrust scrutiny only
those persons whose interests are such that Congress or the
courts have independently determined not to be the proper
parties to assert the claim in court. To the extent a party
has an interest in a case sufficient to support a reasonable
claim of standing, his efforts to directly or indirectly
participate in the litigation are protected. We do not believe
that the policies behind Noerr-Pennington dictate any greater
protection than this.
We recognize the constitutional underpinnings of the
Noerr-Pennington doctrine and that Union Pacific's activities
to some degree implicate constitutional protections. See NAACP
v. Button,
371 U.S. 415, 83 S. Ct. 328, 9 L. Ed. 2d 405 (1963) (protecting the
NAACP's right to advise persons of their legal rights and
solicit their involvement in racial discrimination suits); In
re Primus,
436 U.S. 412, 98 S. Ct. 1893, 56 L. Ed. 2d 417 (1978) (protecting the
ACLU's right to give legal advice and solicit involvements in
lawsuits). The First Amendment, however, does not extend
blanket protection to all activities involving association
together to pursue goals through litigation. In Ohralik v.
Ohio State Bar Association,
436 U.S. 447, 98 S. Ct. 1912, 56 L. Ed. 2d 444 (1978), for example, the
Court held that a state may prohibit lawyer solicitation in
circumstances that are conducive to fraud, undue influence,
and other forms of vexatious conduct. The Court has also
"recognized the strong governmental interest in certain forms
of economic regulation, even though such regulation may have
an incidental effect on rights of speech and association."
NAACP v. Claiborne Hardware Co.,
458 U.S. 886, 912, 102 S. Ct. 3409, 3425, 73 L. Ed. 2d 1215 (1982).
We believe that the interests supporting application of the
antitrust laws to prohibit and penalize anticompetitive
conduct are sufficiently strong to dispel any constitutional
difficulties in withholding Noerr-Pennington protection from
persons who, without the right to petition the courts
directly, seek to further their anticompetitive goals through
funding, encouraging, and assisting the lawsuits of
others. We do not believe the First Amendment protects a
competitor's right to accomplish economic predation through
such means. Unlike the regulations struck down in Button and
Primus, which broadly prohibited all solicitation activities
of the NAACP and ACLU without a showing of any substantive
evil flowing from such activity, withholding Noerr-Pennington
protection here simply opens the door for ETSI to show that
Union Pacific's activity was harmful anticompetitive conduct.
The governmental interest in allowing this showing to be made,
coupled with the weak claim to protection for such activity,
amply justifies our holding here.
The railroads also argue that their participation in the
window lawsuits cannot be a sham as a matter of law because
they were defendants in those lawsuits. This point need not
detain us long. We certainly agree with the Seventh Circuit's
observation that one "cannot start a suit ... and then sue the
defendant for refusing to default." Brunswick Corp. v. Riegel
Textile Corp., 752 F.2d 261, 272 (7th Cir. 1984), cert.
denied, 472 U.S. 1018, 105 S. Ct. 3480, 87 L. Ed. 2d 615
(1985). But the allegations made and evidence presented by
ETSI go beyond that. ETSI claims the railroads knew that they
had no viable defense in those suits but that they nonetheless
filed defensive pleadings and sought discovery for the purpose
of further delaying the pipeline project and obtaining
information that could be used in other forums to hinder the
project. ETSI points out that it was successful in obtaining
the relief it sought in each of the window lawsuits it filed
and that the railroads continued to litigate each case long
after their arguments had been repeatedly rejected by the
courts.
We believe that ETSI's claims, if found by the district court
to be supported by prima facie evidence, are sufficient to
deprive the railroads' defense of the window litigation of
Noerr-Pennington protection. We perceive no reason to apply
any different standard to defending lawsuits than to
initiating them. Therefore, to the extent the railroads'
activities in the window lawsuits were not significantly
motivated by an honest and reasonable desire to influence the
court's decision and affect the outcome of the case they are
not entitled to protections from antitrust scrutiny.
The final issue we must address is ETSI's contention that an
independent ground exists for leaving undisturbed the district
court's ruling. ETSI claims that the railroads waived their
asserted privileges by relying on a defense that puts their
attorney/client communications and work product at issue. It
argues that an antitrust defendant who relies on
Noerr-Pennington bears the burden of proving the genuineness
of his petitioning activities, and, having thus injected his
good faith into the case, waives any privilege to documents
bearing on that issue. We disagree.
We cannot accept the proposition that a defendant in an
antitrust suit who relies on the protection afforded by
Noerr-Pennington necessarily gives up the right to keep his
communications with his attorney confidential. Such a rule
certainly cannot be justified on the basis of waiver. This is
not a case in which a party has asserted a claim or defense
that explicitly relies on the existence or absence of the very
communications for which he claims a privilege. See, e.g.,
United States v. Woodall, 438 F.2d 1317, 1324-26 (5th Cir.
1970), cert. denied, 403 U.S. 933, 91 S. Ct. 2262, 29 L. Ed.
2d 712 (1971). A defendant who relies on Noerr-Pennington
merely denies the existence of an antitrust violation. Cf.
Areeda, at 4 (The "doctrine is in part an 'exception' or
'immunity' from normal antitrust principles ... but it
principally reflects the absence of any antitrust violation to
start with."). Accordingly, a plaintiff attempting to make an
antitrust case based on conduct that involves lobbying or
litigation bears the burden to show that such activity is not
protected petitioning but a sham. Coastal States, 694 F.2d at
1372 n. 46; Mohammad, 586 F.2d 543. We do not see how it can
be said that the railroads waived their privilege when it is
ETSI who filed this lawsuit and who seeks to rely on
attorney/client communications and work product to prove its
claim.
Nor do we perceive any other basis for abrogating the
railroads' privilege. Noerr-Pennington is based on the
principles that individuals have a right to petition
government and that government has a need for the information
provided by such petitioning. As we noted earlier in this
opinion, the protection afforded by the attorney/client
privilege furthers these principles. Under the rule ETSI
suggests, whenever a competitor files a lawsuit alleging that
some earlier petitioning was a sham and the defendant denies
the allegation, the defendant would lose his privilege. This
result would be inconsistent with both Noerr-Pennington and
the attorney/client privilege. Attorney/client documents may
be quite helpful in making out a claim of sham, but this is
not a sufficient basis for abrogating the privilege.
To recapitulate, we hold:
1. Even if prior litigation was part of an overall conspiracy
which itself violated antitrust law, Noerr-Pennington requires
a prima facie finding that the particular litigation was a
sham to warrant discovery of documents initially protected by
the attorney/clientrivilege or work product immunity.
2. The litigation was a sham, and the documents subject to
discovery, if the litigation was undertaken without a genuine
desire for judicial relief as a significant motivating factor,
or if there was no reasonable expectation of judicial relief,
or if there was no reasonable basis for party standing.
3. It is possible for litigation which ultimately succeeds to
have been sham.
4. Defensive litigation can be sham.
5. The antitrust suit defendant who raises the
Noerr-Pennington claim to protect its conduct in prior
litigation does not thereby waive the attorney/client
privilege or work product immunity.
We conclude that the district court acted improperly in
granting ETSI's motion to compel discovery without making a
proper factual determination that the individual petitioning
activities in which the railroads were engaged were sham.
Should ETSI renew its motion to discover the documents for
which the railroads have asserted privilege, and if the
district court should then conclude that ETSI has made a prima
facie showing that the litigation--affirmative or
defensive--is or was a sham, then at that moment the
attorney/client and work product privileges will evaporate so
that all material in the litigation will be subject to
discovery bearing on further proof or establishment that the
litigation is sham. While the material is not available
initially to establish a prima facie case, once that point is
reached, there is nothing in Noerr-Pennington, much less in
attorney/client or work product, to shield such dramatic
evidence from the finder of fact. Any different rule would
permit one or all of the testimonial privileges to shield
forever dramatic, perhaps even conclusive, proof of exactly
what sets aside those privileges under the law.
Upon receipt of this opinion the district judge will,
undoubtedly without order from us, promptly vacate his order.
Writ Conditionally GRANTED.
E. GRADY JOLLY, Circuit Judge, concurring in result:
I am pleased to concur in the result reached by the majority
in Judge Reavley's very thoughtful opinion. I respectfully
dissent to the extent that the majority holds that a lawsuit,
reasonably based on fact and law, if improperly motivated, may
constitute a sham under the Noerr-Pennington doctrine. When we
speak of the right to file a lawsuit, we are speaking of
rights guaranteed by the Constitution. As is made clear by
California Motor Transport Co. v. Trucking Unlimited,
404 U.S. 508, 92 S. Ct. 609, 30 L. Ed. 2d 642 (1972), the Supreme Court's
holding that antitrust laws cannot punish the legitimate use
of the courts is grounded upon the first amendment right to
petition the government for redress of grievances. Id. at 510,
92 S. Ct. at 611. As a general rule, once the right is found
to be protected, i.e., a reasonable legal and factual basis
for the lawsuit, improper motivation for asserting the right
will not defeat constitutional protection, as is illustrated
by the Supreme Court's holding that motivation to violate
antitrust laws does not vitiate the first amendment right to
use the courts for that purpose; only when the assertion is a
"sham" is constitutional protection lost. A successful lawsuit
is not, and cannot be, constitutionally speaking, a sham upon
the courts; neither can any lawsuit unless it is baseless.
For confirmation of this principle, we need only turn to the
Supreme Court's most recent pronouncement on the
constitutional right of access to the courts. In Bill
Johnson's Restaurants, Inc. v. NLRB,
461 U.S. 731, 103 S. Ct. 2161, 76 L. Ed. 2d 277 (1983), an employer used
the state courts to sue his lawfully picketing employees for
injunctive relief and monetary damages. The National Labor
Relations Board issued a cease and desist order against the
employer on grounds that the sole purpose of using the courts
was to retaliate against the employees for exercising their
protected statutory rights.
Noting that baseless litigation is not immunized by the first
amendment right to petition, the Court stated that such
considerations "led us in the antitrust context to adopt the
'mere sham' exception in California Motor Transport Co. v.
Trucking Unlimited,
404 U.S. 508, 92 S. Ct. 609, 30 L. Ed. 2d 642 (1972). We should follow a
similar course under the NLRA." The Court then proceeded to
make absolutely clear that the finding of a sham, in order to
defeat constitutional protection to use the courts, is
two-pronged: first, the lawsuit must be baseless, and, second,
it must be prosecuted with the intent of retaliating against
the employee. This specific two-pronged holding, requiring
both improper motivation and a baseless lawsuit, was
reiterated throughout the opinion ("improperly motivated suit
lacking a reasonable basis, ... baseless lawsuit with intent
of retaliating," 461 U.S. at 744, 103 S. Ct. at 2170; "
[r]etaliatory motive and lack of reasonable basis are both
essential prerequisites," id. at 748, 103 S. Ct. at 2173;
"unmeritorious lawsuit for a retaliatory purpose," id. at 749,
103 S. Ct. at 2173).
Addressing specifically whether a meritorious lawsuit can be a
sham, the Court stated: " [I]f the employer's case in the
state court ultimately proves meritorious and he has a
judgment against the employees, the employer should also
prevail before the Board, for the filing of a meritorious
lawsuit, even for retaliatory motive, is not an unfair labor
practice." Id. at 747, 103 S. Ct. at 2172.
After a determination has been made that a lawsuit is
baseless, the subjective intent of the parties will become
relevant in determining whether the initial filing and
prosecution of the lawsuit enjoys constitutional protection.
In Bill Johnson's Restaurants, Inc., for example, Justice
White observed that if the judgment went against the employer
in that case, " [t]he employer's suit having proved
unmeritorious, the Board would be warranted in taking that
fact into account in determining whether the suit had been
filed in retaliation for the exercise of the employees' Sec. 7
rights." Id.
Therefore, because I believe that the issue of whether a
lawsuit may constitute a sham is controlled by Bill Johnson's
Restaurants, Inc., I respectfully dissent from the majority's
holding that a lawsuit, grounded upon a reasonable basis in
fact and law, may constitute a sham.
