Cheminor Drugs v. Ethyl Corp ( 1999 )

Opinions of the United
1999 Decisions States Court of Appeals
for the Third Circuit
3-1-1999
Cheminor Drugs v. Ethyl Corp
Precedential or Non-Precedential:
Docket 98-6004
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Filed March 1, 1999
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 98-6004
CHEMINOR DRUGS, LTD.;
REDDY-CHEMINOR, INC.,
Appellants
v.
ETHYL CORPORATION;
JOHN DOES 1 THROUGH 10
On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 94-cv-04371)
District Judge: Honorable Joseph A. Greenaway, Jr.
Argued Friday, October 30, 1998
BEFORE: SLOVITER, GARTH, and MAGILL,*
Circuit Judges
(Opinion filed March 1, 1999)
Andrew J. Miller (Argued)
Budd Larner Gross Rosenbaum
Greenberg & Sade, P.C.
150 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Attorneys for Appellants
_________________________________________________________________
*Hon. Frank J. Magill, Senior United States Circuit Judge for the Eighth
Circuit, sitting by designation.
Douglas S. Eakeley (Argued)
Timothy G. Hansen, Esq.
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Attorneys for Appellee
OPINION OF THE COURT
GARTH, Circuit Judge:
This appeal requires us to analyze whether alleged
misrepresentations by the defendant Ethyl Corp. ("Ethyl")1
vitiates application of the immunity afforded by the Noerr-
Pennington doctrine and thus defeats Ethyl's "objective
basis" for petitioning the government for protection of its
bulk ibuprofen industry from imports of bulk ibuprofen by
plaintiffs Cheminor Drugs, Ltd. and Reddy-Cheminor, Inc.
(collectively, "Cheminor").
Cheminor's ibuprofen exports to the United States were
found to be heavily subsidized by the Government of India
("India"), and Cheminor was found to sell its imported
ibuprofen in the United States at substantially less than
fair value. The District Court granted summary judgment in
favor of Ethyl, holding that Ethyl's petition was not a
"sham" and was thus protected activity pursuant to the
First Amendment of the United States Constitution. We
affirm.
I.
Cheminor and Ethyl are both manufacturers of bulk
ibuprofen for sale to tableters; Cheminor is an Indian
_________________________________________________________________
1. The Amended Complaint lists the defendants as "Ethyl Corporation
and John Does 1-10." It describes the "Doe" defendants as "individuals
and corporate entities including Ethyl's employees, agents, and
unrelated corporate entities which conspired with Ethyl in the
misconduct alleged in the complaint." For ease in reference, we will refer
throughout this opinion to all defendants as "Ethyl."
2
company, and Ethyl is a United States company. On July
31, 1991, Ethyl complained to the United States
International Trade Commission ("ITC") and the Department
of Commerce ("DOC") about Cheminor's dumping of
ibuprofen and its sale at less than fair value, and Ethyl
alleged that India was subsidizing the manufacture of the
ibuprofen. After receiving information from Ethyl through
its petition and a detailed questionnaire, the ITC and DOC
made preliminary determinations that Cheminor would be
taxed on its imports because it was receiving subsidies
from India, it was dumping ibuprofen at less than fair value
in the United States, and the domestic industry suffered
material injury as a result. Before final determinations
could be made, however, Cheminor withdrew from the U.S.
market -- its sole distributor, Flavine International, Inc.,
canceled its orders for ibuprofen because the cost to be
charged by Cheminor was prohibitive. Ethyl then withdrew
its complaint from the ITC and DOC on March 4, 1992,
stating that it would refile if necessary.
Cheminor then brought federal and state antitrust claims
and various state common law claims against Ethyl by a
complaint filed in the District Court for the District of New
Jersey. Cheminor moved for summary judgment, claiming
that Ethyl's administrative complaints to the ITC about
Cheminor's below-market pricing and the resultant injuries
to Ethyl were baseless, made in bad faith, contained false
statements, and were brought only for anti-competitive
reasons. In response, Ethyl asserted that its administrative
complaints had a legal basis, were made in good faith, and
were truthful. As such, Ethyl argued that the Noerr-
Pennington doctrine, which protects the right of citizens and
corporations to petition the government for grievances and
is based on the First Amendment of the United States
Constitution, prohibits Cheminor's antitrust and unfair
trade claims.
The District Court granted Ethyl's motion for summary
judgment, holding that Ethyl was protected from
Cheminor's federal and state antitrust claims by Noerr-
Pennington immunity. Specifically, the District Court held
that no genuine issues of fact existed on the question of
whether Ethyl had an objective basis to file a petition with
3
the ITC and the DOC. In addition, the District Court, in its
discretion, declined to exercise supplemental jurisdiction,
28 U.S.C. S 1367(c), over Cheminor's tort claims brought
under state law. The District Court did not consider
whether it had diversity jurisdiction under 28 U.S.C.
S 1332.
Summary judgment was entered on behalf of defendant
Ethyl on February 5, 1998, disposing of all claims against
all parties.2 Plaintiff Cheminorfiled its notice of appeal on
March 3, 1998. The District Court had subject matter
jurisdiction pursuant to 28 U.S.C. SS 1331 and 1332. We
exercise jurisdiction pursuant to 28 U.S.C. S 1291.
Summary judgment is appropriate if "the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is
no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law."
Fed. R. Civ. P. 56(c). We give the grant of summary
judgment plenary review.
II.
If a United States business or industry believes that it is
being injured by foreign-made subsidized products that are
imported into the United States and sold at less than fair
value, the business or industry may seek relief from the ITC
by filing an antidumping ("AD") and countervailing duty
("CVD") petition ("AD/CVD petition")3 with the ITC and the
DOC4 to obtain relief in the way of extra duties to offset
alleged subsidies.
_________________________________________________________________
2. The District Court's order of February 5, 1998 granted Ethyl's motion
for summary judgment pursuant to Federal Rule of Civil Procedure 56(c)
"for an Order of dismissal of the Complaint." App. 3088. Because the
grant of summary judgment and the dismissal of the complaint are
inconsistent, we will disregard reference to the"dismissal" of Cheminor's
complaint and treat the record as a summary judgment record.
3. The CounterVailing Duty investigation inquires whether the foreign
company received subsidies from its government. The AntiDumping
investigation deals with the question of whether the foreign company
actually brought the subsidized goods into the United States and sold
them for less than fair value.
4. The ITC and the DOC divide up the investigation. The ITC determines
whether the domestic industry has suffered material injury; the DOC
4
An AD/CVD petition receives consideration at two levels.
First, preliminary determinations of subsidies and
antidumping are made by DOC and a preliminary
determination of "material injury" or "threat of material
injury" to the domestic industry is made by the ITC. The
DOC and the ITC base their preliminary determinations
upon the complaining firm's petition and questionnaire, the
respondent firm's questionnaire, if available, and argument
from all interested parties' counsel. Second, once the
preliminary determinations have been made in petitioner's
(here, Ethyl's) favor, the DOC imposes duties upon the
imported product. The DOC and ITC make final
determinations after they have conducted their own
investigations (collecting information apart from the
complainant's petition and questionnaire) and after they
have heard further arguments from the parties involved.5
On September 16, 1991, based upon the "best
information available,"6 the ITC made a preliminary
determination that there was material injury to the
domestic market7 caused by Cheminor's receipt of subsidies
from the Indian government and dumping of bulk ibuprofen
into the United States market at less than fair value. App.
2077-2147 (ITC report). On December 13, 1991, the DOC
made a preliminary determination of countervailing duty
(CVD). DOC determined that India had subsidized
_________________________________________________________________
determines whether the foreign company has received foreign
government subsidies and whether the foreign company has been
dumping product at less than fair value.
5. In a preliminary determination, the ITC must determine whether there
is a reasonable indication of material injury or the threat thereof to the
domestic industry "by reason of" the imports under investigation. In its
final determination, the ITC must determine that there is a material
injury or threat thereof to the domestic industry by reason of the imports
under investigation.
6. The best information available comprised Ethyl's petition and
questionnaire and arguments from the parties' counsel -- Cheminor
refused to submit verified information to the ITC.
7. Ethyl's ibuprofen constituted the entire domestic market because it
was the only domestic manufacturer of ibuprofen at the time the petition
was filed.
5
Cheminor in the amount of 43.71%, and thus DOC
imposed a 43.71% ad valorem duty on Cheminor's
ibuprofen. App. 1471.8 On January 13, 1992, Cheminor
informed the ITC and DOC that it would be withdrawing
from the United States market.
On February 27, 1992, DOC made a preliminary
determination on the antidumping (AD) petition. DOC
found that imports of ibuprofen from India were being sold
in the United States at less than fair value and that there
was an estimated dumping margin of 115.94%. App. 1472.9
Ethyl withdrew its AD/CVD petition on March 4, 1992,
stating that it no longer believed it could succeed in a final
determination based on its then new profit figures and
Cheminor's decision to exit the United States market.
III.
A party who petitions the government for redress
generally is immune from antitrust liability. Eastern R.R.
Presidents Conference v. Noerr Motor Freight, 365 U.S. 127(1961); United Mine Workers of Am. v. Pennington, 381 U.S.
657 (1965) ("Noerr-Pennington doctrine"). This immunity
extends to persons who petition all types of government
entities -- legislatures, administrative agencies, and courts.
California Motor Transport Co. v. Trucking Unlimited, 404
U.S. 508, 510 (1972) ("The right of access to the courts is
indeed but one aspect of the right of petition."). "[W]here
restraint upon trade or monopolization is the result of valid
_________________________________________________________________
8. The Government of India subsidized the production of bulk ibuprofen
for export by establishing: (1) below interest rate loans for exporters,
(2)
post-shipment financing loans to enable exporters to extend credit to
foreign buyers, (3) tax deductions for foreign sales, (4) a rebate of
indirect taxes on exported merchandise, and (5) duty-free importation of
raw materials used in exported products (Advance licenses). App. 2172-
82.
9. The basic formula for determining a dumping margin is defined as
"the amount by which the normal value exceeds the export price or
constructed export price of the subject merchandise." 19 U.S.C.
S 1677(35). The actual determination of the dumping margin requires
substantial economic analyses. See, e.g., Raj Bhala, Rethinking
Antidumping Law, 29 Geo. Wash. J. Int'l L. & Econ. 1, 30-50 (1995).
6
governmental action, as opposed to private action, no
violation of the [Sherman] Act can be made out." Noerr, 365
U.S. at 136 (citations omitted).
Noerr-Pennington immunity does not apply, however, to
petitions or lawsuits that are a "mere sham to cover what
is actually nothing more than an attempt to interfere
directly with the business relationships of a competitor."
Noerr, 365 U.S. at 144. Often, a petition to the government
causes an anti-competitive effect, but "evidence of
anticompetitive intent or purpose alone cannot transform
otherwise legitimate activity into a sham." Professional Real
Estate Investors v. Columbia Pictures Indus., Inc., 508 U.S.
49, 57-58 (1993) ("PRE").
In PRE, the Supreme Court held that litigation is a sham
if the lawsuit is "objectively baseless." But"[t]he existence
of probable cause to institute legal proceedings precludes a
finding that an antitrust defendant has engaged in sham
litigation." Id. at 62. The Court then stated, "Probable cause
to institute civil proceedings requires no more than a
reasonable belief that there is a chance that a claim may be
held valid upon adjudication. . . . the existence of probable
cause is an absolute defense." Id. at 62-63 (internal
quotation marks, brackets, and citations omitted). The
Court concluded its discussion by stating "a proper
probable-cause determination irrefutably demonstrates that
an antitrust plaintiff [here, Cheminor] has not proved the
objective prong of the sham exception and that the
defendant [here, Ethyl] is accordingly entitled to Noerr
immunity." Id. at 63.
It was in this context that the Court announced a two-
step test:
First, the lawsuit must be objectively baseless in the
sense that no reasonable litigant could realistically
expect success on the merits. If an objective litigant
could conclude that the suit is reasonably calculated to
elicit a favorable outcome, the suit is immunized under
Noerr, and an antitrust claim premised on the sham
exception must fail. Only if challenged litigation is
objectively meritless may a court examine the litigant's
subjective motivation. Under this second part of our
7
definition of sham, the court should focus on whether
the baseless lawsuit conceals an attempt to interfere
directly with the business relationships of a competitor,
through the use of governmental process-- as opposed
to the outcome of that process -- as an anticompetitive
weapon. This two-tiered process requires the plaintiff to
disprove the challenged lawsuit's legal viability before
the court will entertain evidence of the suit's economic
viability.
508 U.S. at 60-61 (1993) (citations omitted) (emphasis in
original). Accordingly, applying the Court's Noerr-Pennington
immunity test to Ethyl's petition, we must determine
whether Ethyl had probable cause to file its petition, and in
making that determination, we must be satisfied that the
petition filed was not objectively baseless in the sense that
Ethyl could not reasonably expect success on the merits.10
The Supreme Court has not addressed how alleged
misrepresentations affect Noerr-Pennington immunity or the
sham exception to Noerr-Pennington immunity. In PRE, the
Court explicitly declined to decide whether the sham
exception to immunity would include situations where the
litigant had perpetrated "fraud" or had made "other
misrepresentations." Id. at 61 n.6.11 Cheminor argues either
that Noerr-Pennington immunity does not apply at all to
petitions containing misrepresentations or that Ethyl's
_________________________________________________________________
10. We recognize that the second step of the Supreme Court's test comes
into play only if the petition is objectively baseless and therefore
without
probable cause. Because, as discussed infra, we are satisfied that Ethyl's
petition was not "objectively baseless," and that Ethyl had probable
cause to file its petition, we have no need to discuss Ethyl's subjective
intent, which is the subject of the second part of the Supreme Court's
definition of sham.
11. In footnote six of PRE, the Court cited Fed. R. Civ. P. 60(b)(3),
which
allows a federal court to "relieve a party . . . from a final judgment"
for
"fraud . . . misrepresentation, or other misconduct of an adverse party."
The Court also cited Walker Process Equip., Inc. v. Food Machinery &
Chem. Corp., 382 U.S. 172, 176-77 (1965); id. at 179-80 (Harlan, J.,
concurring), in which the Court held that a purported patent-holder
could not avoid antitrust liability for his suit against an alleged
infringer
if the purported patent-holder's patent was based upon material
misrepresentations.
8
alleged misrepresentations led to the conclusion that the
Ethyl's AD/CVD petition to the ITC and DOC was
objectively baseless.
We decline to carve out a new exception to the broad
immunity that Noerr-Pennington provides. Rather, we will
determine whether Ethyl's petition was objectively baseless
under the Supreme Court's test in PRE, without regard to
those facts that Cheminor alleges Ethyl misrepresented. If
the alleged misrepresented facts do not infect the core of
Ethyl's claim and the government's resulting actions, then
the petition had an objective basis and will receive Noerr-
Pennington immunity under the first step of PRE. While we
do not condone misrepresentations in a judicial setting,
neither will we deprive litigants of immunity derived from
the First Amendment's right to petition the government if
the alleged misrepresentations do not affect the core of the
litigant's (here, Ethyl's) case. We note that other remedies
such as provided by under Federal Rules of Civil Procedure
11 and 60(b)(3), exist for alleged misrepresentations that do
not taint the core of the litigant's case. See supra note 11.
In Music Center S.N.C. De Luciano Pisoni & C. v. Prestini
Musical Instruments Corp., 874 F. Supp. 543, 549 (E.D.N.Y.
1995), the court was faced with circumstances similar to
the circumstances we face here. Because we agree with the
matters noted for consideration by the Music Center court,
we will evaluate the information upon which the instant
petition was based as the court in Music Center evaluated
the circumstances there:
[A] determination [of objective basis] requires
consideration, inter alia, of the outcome of the
proceedings, including the findings made by the
relevant administrative tribunals, the nature of the
particular allegations of the petition or actions before
the administrative agency claimed to be fraudulent or
improper, and whether these claimed
misrepresentations or improper actions would have
been significant to the ultimate outcome or
continuation of the proceeding.
Music Center, 874 F. Supp. at 549 (holding that defendants
were entitled to Noerr-Pennington immunity for filing
9
AD/CVD petition despite allegations of misrepresentations
in the petitions because the defendants had an objective
basis for filing the petitions). If the government's action was
not dependent upon the misrepresented information, the
misrepresented information was not material and did not go
to the core of Ethyl's petition. In sum, a material
misrepresentation that affects the very core of a litigant's
(here, Ethyl's) case will preclude Noerr-Pennington
immunity, but not every misrepresentation is material to
the question of whether a petition such as Ethyl's had an
objective basis.12
IV.
We will assume, for the purposes of determining whether
Ethyl had an objective basis to file its AD/CVD petition,
that the statements that Ethyl made in its petition and
questionnaire and are alleged by Cheminor to be false were,
in fact, false. We note, however, that if this case were to
proceed to trial, Cheminor might not be able to prove that
they were false, as Ethyl has articulated reasonable
explanations for the truth of their statements, or at least,
that the representations made as to its financial condition
were reasonable estimates of the profits Ethyl would
sustain based upon predictions of various research and
development costs and capital expenditures.
_________________________________________________________________
12. Our approach in requiring that misrepresentations must be material
to bar Noerr-Pennington immunity is consistent with the two other circuit
courts of appeals that have considered this issue. The Ninth Circuit held
that Noerr-Pennington immunity does not extend to parties who make
knowing material misrepresentations in the course of a litigative
proceeding. See Kottle v. Northwest Kidney Ctrs., 146 F.3d 1056 (9th Cir.
1998) (citing Clipper Exxpress v. Rocky Mountain Motor Tariff, 690 F.2d
1240, 1260 (9th Cir. 1980)). The District of Columbia Circuit disallowed
a Noerr-Pennington defense in an action for common law torts because
the defendants had made material misrepresentations to state securities
regulators. Whelan v. Abell, 48 F.3d 1247 (D.C. Cir. 1995). Moreover,
misrepresentations made to procure a patent must rise to the level of
fraud in order to cause a patent infringement action to fail -- unethical
behavior alone is insufficient. Nobelpharma AB v. Implant Innovations,
Inc., 141 F.3d 1059, 1070-71 (Fed. Cir. 1998) (discussing Walker Process
Equip., Inc. v. Food Machinery & Chem. Corp., 382 U.S. 172 (1965)).
10
To have an objective basis to file a AD/CVD petition with
the ITC and DOC, Ethyl must have had a reasonable belief
that Cheminor was dumping ibuprofen that was subsidized
by India in the United States at less than fair value, and
that the dumping caused material injury or threat of
material injury to the domestic market.13 We are satisfied
that Ethyl had such an objective basis because (1) India
was subsidizing at a rate of 43.71% Cheminor's production
of ibuprofen; (2) Cheminor was dumping the subsidized
ibuprofen in the United States at a 115.42% margin; and
(3) Ethyl was suffering material injury or was threatened
with material injury as a result of the dumping.
Cheminor takes issue with only one of these three
conclusions -- that Ethyl was suffering material injury or
that it was threatened with material injury. 19 U.S.C.
S 1677(7). Under the statute, the ITC must make three
determinations before it can find "material injury:"
(I) the volume of the imports of the subject
merchandise, (II) the effect of the imports of that
merchandise on prices in the United States for
domestic like products, and (III) the impact of imports
of such merchandise on domestic producers of domestic
like products, but only in the context of production
operations within the United States.
19 U.S.C. S 1677(7)(B)(i)(I)-(III) (emphasis added). In
addition, the ITC "may" consider other "relevant" economic
factors. 19 U.S.C. S 1677(7)(B)(ii). The statute goes on to
expand upon and define each of the three required
determinations of 19 U.S.C. S 1677(7)(B)(i)(I)-(III). Of
concern here is the third (III) required determination for
material injury, i.e., the impact of the imports on the
domestic producers (underlined above).
This third determination is further defined by reference to
factors in 19 U.S.C. S 1677(7)(C)(iii)(I)-(V):
_________________________________________________________________
13. See Gerald Metals, Inc. v. United States, 132 F.3d 716, 719-20 (Fed.
Cir. 1997); American Spring Wire Corp. v. United States, 590 F. Supp.
1273, 1276 (C.I.T. 1984); SMC Corp. v. United States, 544 F. Supp. 194,
199-200 (C.I.T. 1982).
11
(iii) Impact on affected domestic industry
In examining the impact required to be considered
under subparagraph (B)(i)(III), the Commission shall
evaluate all relevant economic factors which have a
bearing on the state of the industry in the United
States, including, but not limited to --
(I) actual and potential decline in output, sales,
market share, profits, productivity, return on
investments, and utilization of capacity,
(II) factors affecting domestic prices,
(III) actual and potential negative effects on cash
flow, inventories, employment, wages, growth, ability
to raise capital, and investment,
(IV) actual and potential negative effects on the
existing development and production efforts in the
domestic industry, including efforts to develop a
derivative or more advanced version of the domestic
like product, and
(V) in a proceeding under Part II of this subtitle, the
magnitude of the margin of dumping.
The Commission shall evaluate all relevant economic
factors described in this clause within the context of
the business cycle and conditions of competition that
are distinctive to the affected industry.
19 U.S.C. S 1677(7)(C)(iii)(I)-(V). The ITC has discretion to
give these factors found in S 1677(7)(C)(iii)(I)-(V) of the trade
statute varying degrees of weight in making its
determination of material injury. SMC Corp. v. United
States, 544 F. Supp. 194, 199-200 (C.I.T. 1982). A court
reviews the ITC's (and DOC's) discretionary determinations
by "evaluating whether they are ``unsupported by
substantial evidence on the record, or otherwise not in
accordance with law.' " Gerald Metals, Inc. v. United States,
132 F.3d 716, 719 (Fed. Cir. 1997) (quoting 19 U.S.C.
S 1516a(b)(1)(B)(i) (1994)). No one single fact about the
domestic industry, the market, or the imported product is
dispositive to the issue of material injury: the record as a
whole requires evaluation. Music Center, 874 F. Supp. at
549.
12
Cheminor alleges that Ethyl gave the ITC inaccurate
information regarding its profitability during the first half of
1991,14 which caused the ITC to determine erroneously that
Ethyl had suffered material injury. Cheminor cites three
alleged misrepresentations made by Ethyl that masked
Ethyl's true profitability: (1) research and development
costs and capital expenditures were allocated to thefirst
half of 1991 but were not expected to be charged on Ethyl's
books until the second half of 1991; (2) research and
development costs for S+ ibuprofen should not have been
included at all because S+ ibuprofen was not at issue in the
AD/CVD petition; and (3) Ethyl falsified its lost sales
resulting from Cheminor's imported product.15 All of these
"false" statements, Cheminor alleges, resulted in the ITC's
erroneous conclusion that Ethyl's profits were down while
Cheminor's market share was up in the first half of 1991,
which in turn caused the ITC to make a finding of material
injury to Ethyl.
The statements in Ethyl's petition and questionnaire
relating to Ethyl's profitability in the first half of 1991 bear
on only a small proportion of the numerous factors the ITC
must consider when making a determination of material
injury. In the instant case, the ITC found that the domestic
market had sustained material injury. The ITC issued a
report explaining its decision to preliminarily grant Ethyl's
AC/CVD petition. The ITC's finding set forth in the "Views
of the Commission" that the domestic industry incurred
injury, relied only in part on Ethyl's representations of its
financial condition:
_________________________________________________________________
14. Ethyl provided profitability data for the period 1988 through the
first
six months of 1991. Among other charges, Cheminor alleges that the
data for the first six months of 1991 was misrepresented. However, of
the charges made by Cheminor, each was refuted by Ethyl in its brief to
the Court, and in any event, each of Cheminor's charges were deemed to
be not material by the ITC. See Appellee's Br. at 15-16; infra pp. 13-14
(discussing the views of the ITC).
15. Cheminor also alleges that Ethyl made misrepresentations regarding
Cheminor's market share that made Cheminor's market share look larger
than it really was. However, Cheminor was in a better position to inform
the ITC and the DOC about its own market share, but, as we have noted
previously, see supra note 6, Cheminor chose not to furnish the ITC or
DOC with its market share information.
13
The financial trends provide reasonable indication of
present material injury. For example, as illustrated by
the public exhibit introduced by Ethyl at the
conference, the industry's [Ethyl's] profitability (as
measured by the profit-to-sales ratio) declined
substantially from the beginning to the end of the
investigatory period, despite an increase in 1989 from
the 1988 level.
Confidential information concerning other factors,
such as [Cheminor's] apparent domestic consumption
and market share, further provide a reasonable
indication of present injury. Accordingly, on the basis
of the information gathered in these preliminary
investigations, we find a reasonable indication of
material injury to the domestic industry producing
bulk ibuprofen.
App. 2097 (footnote omitted). As demonstrated by this
finding, the ITC relied upon a number of reasons for its
determination that the domestic industry had been affected
and thus that Ethyl had suffered material injury. The
record reflects that the ITC was aware that Ethyl's research
costs were high during the first six months of 1991. App.
2048 (Redacted Post Conference brief of Cheminor before
the ITC).16 Moreover, the ITC found that the market share
and domestic consumption of Cheminor's ibuprofen
contributed to its determination that there was material
injury to the domestic industry.
The Acting Chairman of the ITC, Anne Brunsdale, did not
join the reasoning in the "Views of the Commission" on the
issue of material injury to the domestic industry. Brunsdale
thus filed "Additional Views," in essence, a concurring
opinion to the "Views of the Commission." Brunsdale also
found that there was material injury to the domestic
industry, but she did not rely upon Ethyl's assertions of
decreased profits that Cheminor has alleged to be false.
_________________________________________________________________
16. Ethyl noted in its brief that despite attempts to obtain an unredacted
version of the Post Conference brief, Cheminor did not produce it.
Nevertheless, it appears from the redacted version that Cheminor argued
to the ITC that it should consider that Ethyl's research costs were higher
than normal during the first six months of 1991.
14
Instead, she gave three reasons for her material injury
determination: (1) the Indian imports are a suitable
substitute for domestic ibuprofen; (2) "the alleged dumping
and subsidy margins in these investigations are quite high;"
and (3) the share of the U.S. market held by Indian
ibuprofen "was not small enough, when combined with
other factors, to ensure that there is no material injury [to
the domestic market] by reason of the ``unfair' imports."
App. 2105-08. Brunsdale had knowledge of Ethyl's financial
condition, but she did not find it to be determinative in
light of the other factors indicating that the domestic
industry was affected by Cheminor imports of ibuprofen.17
Thus, all ITC Commissioners, albeit in separatefindings,
determined that Ethyl had suffered material injury by
Cheminor's imports based on factors other than Ethyl's
profitability.18
_________________________________________________________________
17. We note here that the dissent, in referring to the view of Acting
Chairman Anne Brunsdale, does not refute the fact that Brunsdale did
not rely on Ethyl's assertions of decreased profits. Commissioner
Brunsdale's separate opinion itself provides evidence of Ethyl's probable
cause to file its ITC petition. Indeed, the dissent nowhere even
acknowledges that the standard of probable cause as announced by the
Supreme Court in PRE, 508 U.S. at 62-63, is the crucial test in the
determination of the applicability of Noerr-Pennington immunity, as we
have pointed out. See supra pp. 7-8. Rather, the attempt by the dissent
to structure a wholly separate exception to Noerr-Pennington for fraud or
misrepresentation, which is nowhere found in the jurisprudence, cannot
take the place of PRE's required probable cause standard. Thus, the
question to be answered in this case under the controlling standard is
whether by reason of Ethyl's success in having the USTR remove Indian
ibuprofen from the General System of Preferences list, Cheminor's
receipt of subsidies from India, Cheminor's dumping of ibuprofen in the
United States at less than fair value, and the harm and threat of harm
to Ethyl by reason of Cheminor's dumping, Ethyl had probable cause to
file an AD/CVD petition.
18. The dissent has not recognized that misrepresentations, if indeed
they occurred, must be material to be acknowledged in the Noerr-
Pennington context, as we have established. See supra pp. 9-10. Even if
misrepresentations had been made such that Ethyl's allegations
regarding its January through June 1991 profitability were unsupported,
they were not deemed material in the opinions of the Commissioners.
15
Our review of the ITC and Brunsdale's analyses, in
conjunction with the uncontested DOC preliminary
determinations of 43.71% subsidization and 115.42%
dumping margin, leads us to the conclusion that not only
did Ethyl have probable cause to file its petition, but that
substantial record evidence supported the ITC's preliminary
determination of material injury. Thus, Ethyl's AD/CVD
petition was not objectively baseless and the alleged
misrepresentations, even if made, did not taint the"core" of
Ethyl's AD/CVD petition. Accordingly, the sham exception
to the Noerr-Pennington doctrine has no application to
Ethyl's petition, and Ethyl is entitled to First Amendment
immunity from antitrust liability for its petition to the ITC
and DOC.
Moreover, the record reveals that in 1988, Ethyl had
made a request to United States Trade Representative
("USTR") that the USTR remove Indian ibuprofen from the
General System of Preferences ("GSP") list-- a list that
contains products that are not charged duties upon arrival
in the United States. USTR declined to do so in 1988
because Cheminor's impact on the U.S. market was slight
in 1988. App. 1316. Ethyl renewed its request in 1990
asking then that the USTR remove Indian ibuprofen from
the GSP. At that time, USTR granted Ethyl's request
because of Indian ibuprofen's "potential impact on U.S.
producers." App. 1445. This latter action by USTR might
well be inferred to have given Ethyl probable cause to seek
further remedies available by petition from the United
States Government to support Ethyl's continued concern
about Indian ibuprofen.19
In determining Ethyl's "objective basis for filing its
petition," we also cannot ignore the fact that Ethyl posited
a "threat" of material injury in addition to its present
material injury. The ITC, as we have discussed, considered
only Ethyl's present material injury, which we have held
provided Ethyl with a sufficient objective basis for its
AD/CVD petition, satisfying the Supreme Court's test. We
recognize, however, that had the ITC made a contrary
_________________________________________________________________
19. Again, the dissent fails to recognize that the USTR's actions gave
Ethyl probable cause to file its AD/CVD petition.
16
finding as to actual material injury, it would have been
obliged to address Ethyl's claimed "threat" to its ibuprofen
sales. If that endeavor had been necessary, the ITC
determination of "threat" would not have required any
consideration by the ITC of the domestic industry's (i.e.,
Ethyl's) present profitability, 19 U.S.C. S 1677(7)(F)(i)(I)-(F)
-- the one issue to which Cheminor has called attention.
Hence, even if the ITC had not found present material
injury based upon Ethyl's claims, the threat of material
injury stemming from Indian subsidization and dumping at
less than fair value in the future would have more than
sufficed to justify Ethyl's petition. Significantly, Cheminor
failed to adequately rebut Ethyl's threatened injury.
V.
Because we hold that Cheminor has not satisfied the first
step of PRE's sham exception to the Noerr-Pennington
doctrine, we have no need to address the question of
whether Ethyl had a subjective intent to abuse government
process.20
VI.
While the district court did not err in granting Noerr-
Pennington immunity to Ethyl, it did err in dismissing
Cheminor's state law claims on the ground that the court
lacked subject matter jurisdiction. Both Ethyl and
Cheminor agree that the District Court had subject matter
jurisdiction over Cheminor's state law claims under 28
U.S.C. S 1332 because the parties are diverse 21 and the
amount in controversy exceeded $75,000. However, Ethyl
_________________________________________________________________
20. Cheminor requested discovery from Ethyl regarding issues of Ethyl's
intent. Discovery motions were pending at the time the district court
granted Ethyl's motion for summary judgment. In light of our affirmance
of the District Court's opinion on the ground that Ethyl had an objective
basis to file its petition, discovery issues as to Ethyl's subjective
intent
are neither relevant nor material.
21. The complaint states that Cheminor Drugs is an Indian company;
that Reddy-Cheminor is a New Jersey corporation; and that Ethyl is a
Virginia corporation.
17
urges us to affirm dismissal of Cheminor's state law claims
on another ground, namely, that Ethyl is entitled to Noerr-
Pennington immunity for the state claims that Cheminor
has asserted, in the same fashion as Noerr-Pennington
applies to the federal antitrust claims.
Specifically, Cheminor has alleged tort claims under New
Jersey common law for malicious prosecution, tortious
interference with contract, tortious interference with
prospective economic advantage, and unfair competition.
Although New Jersey has not yet decided whether the
Noerr-Pennington doctrine "extends beyond antitrust law to
tort liability," Snyder v. American Ass'n of Blood Banks, 144
N.J. 269, 296 (1996), we have been presented with no
persuasive reason why these state tort claims, based on the
same petitioning activity as the federal claims, would not be
barred by the Noerr-Pennington doctrine.
Indeed, at least two New Jersey District Courts have held
that entry of summary judgment for a defendant on federal
antitrust claims requires that summary judgment be
entered for the defendant on state antitrust claims. Inter-
City Tire & Auto Ctr., Inc. v. Uniroyal, Inc., 701 F. Supp.
1120, 1124-25 (D.N.J. 1988), aff'd, 888 F.2d 1380 (3d Cir.
1989); Regency Oldsmobile, Inc. v. General Motors Corp.,
723 F. Supp. 250, 270 (D.N.J. 1989). We are persuaded
that the same First Amendment principles on which Noerr-
Pennington immunity is based apply to the New Jersey tort
claims. See Brownsville Golden Age Nursing Home, Inc. v.
Wells, 839 F.2d 155, 1159-60 (3d Cir. 1988) (Sloviter, J.)
(holding that Noerr-Pennington immunity precludes tort
liability for reporting nursing home violations to
government authorities under Pennsylvania law); 22 see also
_________________________________________________________________
22. Although the dissent argues that Brownsville did not "extend the
Noerr-Pennington doctrine to state or common law claims," Dissent at 31,
the court in Brownsville did in fact rely on several Noerr doctrine cases
to support its holding rejecting a cause of action for malicious
interference with business relations. In Brownsville, the court stated:
Two lines of cases support the Sierra Club decision and that which
we uphold here: the defamation cases . . . and the Noerr-Pennington
cases teaching that the collusive use by competitors of
legislative,
administrative, or judicial process does not, without more, give
rise
18
Whelan v. Abell, 48 F.3d 1247, 1254 (D.C. Cir. 1995) ("[I]t
is hard to see any reason why, as an abstract matter, the
common law torts of malicious prosecution and abuse of
process might not in some of their applications be found to
violate the First Amendment") (District of Columbia law);
Kottle v. Northwest Kidney Ctrs., 146 F.3d 1056, 1059 (9th
Cir. 1998) (Washington state antitrust law covered by Noerr-
Pennington). We thus will affirm summary judgment for
Ethyl on those claims as well as on the federal claims.23
_________________________________________________________________
to an anti-trust violation, see Eastern R.R. Conference v. Noerr
Motor
Freight, 365 U.S. 127 (1961); California Motor Transport Co. v.
Trucking Unlimited, 404 U.S. 508 (1972).
Brownsville, 839 F.2d at 160 (underlining added). The court went on to
cite to several relevant Noerr cases:
In numerous cases, the courts have rejected claims seeking
damages for injuries allegedly caused by the defendants' actions
directed to influencing government action. See, e.g., State of
Missouri
v. National Organization of Women, 620 F.2d 1301, 1317 (8th Cir.),
cert. denied, 449 U.S. 842 (1980) (boycott campaign of NOW against
states not ratifying the ERA was neither tortious nor prohibited by
the Sherman Act because ``the right to petition is of such
importance
that it is not an improper interference even where exercised by way
of a boycott'); Protect our Mountain Environment, Inc. v. District
Court,
677 P.2d 1361, 1369 (Colo. 1984) (Noerr-Pennington analysis
applicable to suit for abuse of process and civil conspiracy);
Rudoff
v. Huntington Symphony Orchestra, Inc., 91 Misc.2d 264 (N.Y. Sup.
1977) (``public policy dictates that the tort of interference not be
extended to those situations where a citizen petitions an agency of
his government'); Bledsoe v. Watson, 106 Cal. Rptr. 197 (Ct. App.
1973) (``the benefit to the public interest in allowing free
challenges
to public expenditures that may circumvent the electoral process
outweighs any detriment that may result to private contracting
parties from such challenges'). Brownsville has neither
distinguished
these cases nor cited any authority to support its underlying
action.
. . .
Id.
23. After the district court improperly dismissed the state claims in this
action, Cheminor refiled its common law state claims in New Jersey state
court. Ethyl removed that case to federal court. The District Court
administratively dismissed this second-filed case pending the outcome of
this appeal. Because we are affirming the District Court's judgment in
the instant case and are holding that Noerr-Pennington applies to the
state law claims, those claims would be subject to a res judicata defense.
Fed. R. Civ. P. 8(b).
19
VII.
We will affirm the District Court's judgment of February
5, 1998, which granted Ethyl's motion for summary
judgment.
20
SLOVITER, Circuit Judge, dissenting.
I dissent from the decision of the majority for two
reasons. First, I believe the majority errs as a matter of law
in its reading of the sham exception to the Noerr-Pennington
doctrine, and thereby diminishes by judicial interpretation
the scope of the Sherman Act, a seminal congressional
enactment. Second, I believe the facts of record are
sufficient to withstand summary judgment.
I will not repeat in detail the historical facts outlined by
the majority. For our purposes, it is sufficient to recognize
that appellant Cheminor, an Indian manufacturing
company, began exporting bulk ibuprofen for sale in the
United States in 1988, which would have created
competition for appellee Ethyl, who was at that time the
only U.S. manufacturer of bulk ibuprofen.
Ethyl began taking steps to impede Cheminor's entry into
the U.S. market. In addition to filing a petition with the
U.S. Trade Representative (USTR), seeking to remove Indian
ibuprofen from the list of eligible articles, which was
ultimately successful effective July 1, 1991, it also filed an
anti-dumping (AD) and countervailing duty (CVD) petition
with the United States International Trade Commission
(USITC) and the United States Department of Commerce
(USDOC) accusing Cheminor of receiving generous
subsidies from the Indian government and selling bulk
ibuprofen on the U.S. market at below market prices. The
USITC, which has only 45 days to make a preliminary
determination whether, based on the best information
available at the time, there is a reasonable indication of
material injury to a domestic industry, or threat thereof, by
reason of the imports under investigation, see 19 U.S.C.
S 1671b(a), made a preliminary determination on September
16, 1991, that there was sufficient evidence of material
injury to the domestic market to justify taking corrective
action against Cheminor. On December 13, 1991, the
USDOC preliminarily determined that the Indian
government had been subsidizing Cheminor in the amount
of 43.71%. As a result of these two determinations, the
USITC and/or USDOC required Cheminor's exclusive
distributor, Flavine International ("Flavine"), to pay 43.71%
duties on any Cheminor ibuprofen imported.
21
In response to this significant additional cost, Flavine
canceled all orders for bulk ibuprofen. This effectively
forced Cheminor out of the U.S. ibuprofen market.
Cheminor notified the USITC that it would be withdrawing
from the market. Only after Cheminor withdrew did Ethyl
voluntarily withdraw its USITC petition.
Cheminor then filed this lawsuit against Ethyl. The
District Court granted Ethyl's motion for summary
judgment on the antitrust claims on the ground that Ethyl
was immune from suit under the First Amendment and the
Noerr-Pennington doctrine. It dismissed Cheminor's state
law claims under 28 U.S.C. S 1367 (c), refusing to exercise
supplemental jurisdiction as a matter of discretion.
I
LEGAL ISSUE: TREATMENT OF FRAUD UNDER
NOERR-PENNINGTON
Under the majority's decision, even a party who has
committed blatant and intentional fraud and
misrepresentation in a judicial or administrative proceeding
is entitled to the protection that the Noerr-Pennington
doctrine affords from suit under the antitrust laws. I do not
believe that Noerr-Pennington goes as far as to cover abuse
of process; I do not believe that it should.
The rationale given by the Supreme Court for its holding
in Eastern Railroad Presidents Conference v. Noerr Motor
Freight, Inc., 365 U.S. 127, 135 (1961), that"no violation of
the [Sherman] Act can be predicated upon mere attempts to
influence the passage or enforcement of laws," was the
dissimilarity between an agreement to lobby for legislation
and an agreement to price-fix or boycott, id. at 137, the
concern about impairing the ability of persons to make
known their wishes to their legislators, id., the
unwillingness to apply the Sherman Act to political activity,
id., and the First Amendment protection of the right to
petition, id. at 137-38. This holding was extended to
attempts to influence the executive branch, specifically the
Secretary of Labor, in United Mine Workers of America v.
Pennington, 381 U.S. 657 (1965). Yet another extension was
22
added in California Motor Transport Co. v. Trucking
Unlimited, 404 U.S. 508, 510-11 (1972), when the Court
ruled that citizens' attempts to influence administrative
agencies or courts similarly may not engender antitrust
liability. The majority relies upon this doctrine in holding
that Cheminor cannot base its antitrust claims on Ethyl's
attempts to influence the USITC and USDOC.
However, the Noerr-Pennington exception to the antitrust
laws is not unlimited. The Court in Noerr made that clear
when it stated, "There may be situations in which a
publicity campaign, 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 relationship of a competitor and the
application of the Sherman Act would be justified," thereby
describing what has come to be known as the "sham"
exception. 365 U.S. at 144.
Thereafter, in holding that because of the sham exception
the antitrust laws applied to the conduct of highway
carriers who allegedly engaged in concerted action to
institute state and federal proceedings to resist and defeat
applications by competitive highway carriers to acquire,
transfer or register those rights, the Supreme Court held
that "[m]isrepresentations, condoned in the political arena,
are not immunized when used in the adjudicatory process."
California Motor Transport, 404 U.S. at 513. If the activity
were proven, the antitrust laws would apply.
Thus, I believe, and there are cases so holding, that the
"sham" exception to Noerr-Pennington immunity from the
antitrust laws includes at least two separate and
independent grounds for holding that a particular litigant is
not immune from antitrust liability: (1) that the litigation
was objectively baseless, and (2) that the litigation was
based on knowing and material misrepresentations. The
District Court never considered whether Ethyl's AD/CVD
petition might be a sham based on the second ground. The
majority holds this was not error, and in doing so relies on
the Supreme Court's most recent decision on this subject.
In Professional Real Estate Investors, Inc. v. Columbia
Pictures Industries, Inc., 508 U.S. 49 (1993) (PRE), the
23
Court, in "defin[ing] the ``sham' exception to the doctrine of
antitrust immunity first identified in [Noerr] as that doctrine
applies in the litigation context," held that "litigation cannot
be deprived of immunity as a sham unless the litigation is
objectively baseless." Id. at 51. The majority reads that as
holding that "objective baselessness" is the only exception
to Noerr-Pennington. However, nothing in PRE repudiated
the holding in California Motor Transport. Rather, the PRE
Court expressly reserved the question whether and to what
extent the test it announced would apply in the event that
the litigation involved misrepresentations or other highly
disfavored conduct. It stated:
In surveying the "forms of illegal and reprehensible
practice which may corrupt the administrative or
judicial processes and which may result in antitrust
violations," we have noted that "unethical conduct in
the setting of the adjudicatory process often results in
sanctions" and that "[m]isrepresentations, condoned in
the political arena, are not immunized when used in
the adjudicatory process." California Motor Transport,
404 U.S., at 512-513. We need not decide here whether
and, if so, to what extent Noerr permits the imposition
of antitrust liability for a litigant's fraud or other
misrepresentations.
PRE, 508 U.S. at 61 n.6 (citations omitted).
The majority's decision to disregard the facts that
Cheminor alleges Ethyl misrepresented is contrary to the
position of the two other courts of appeals that have
considered this issue. Both of these courts read PRE to
preserve a fraud exception to antitrust immunity, although
they vary in their interpretation of that exception. See
Whelan v. Abell, 48 F.3d 1247, 1254-55 (D.C. Cir. 1995);
Kottle v. Northwest Kidney Centers, 146 F.3d 1056, 1060
(9th Cir. 1998), petition for cert. filed 67 U.S.L.W. 3364(U.S. Nov. 17, 1998) (No. 98-810).
For example, the Court of Appeals for the District of
Columbia has held that litigation that is based on
misrepresentations does not enjoy immunity either under
Noerr-Pennington or under the First Amendment. In
Whelan, the district court had dismissed the antitrust
24
complaint on the grounds that the defendants were
immune from liability under Noerr-Pennington because the
litigation they pursued was not objectively baseless. See 48
F.3d at 1253. In reversing that decision, the appellate court
agreed with the plaintiffs that, even if the litigation was not
baseless, the defendants were not entitled to immunity if
they made deliberately false and material representations in
the course of that litigation. The court reasoned that
because Noerr-Pennington immunity is based, at least in
part, on respect for the First Amendment right to petition
for redress of grievances, and because "[h]owever broad the
First Amendment right to petition may be, it cannot be
stretched to cover petitions based on known falsehoods," it
followed that Noerr-Pennington did not immunize the
defendants from liability based on their misrepresentations.
Id. at 1254-55.
A fraud exception to Noerr-Pennington in the litigation
context was also recognized in Kottle, where the Ninth
Circuit stated, "[I]n the context of a judicial proceeding, if
the alleged anticompetitive behavior consists of making
intentional misrepresentations to the court, litigation can
be deemed a sham if ``a party's knowing fraud upon, or its
intentional misrepresentations to, the court deprive the
litigation of its legitimacy.' " 146 F.3d at 1060 (quoting
Liberty Lake Inv., Inc. v. Magnuson, 12 F.3d 155, 158-59
(9th Cir. 1993)).
The majority relegates these cases to a footnote for the
proposition that the misrepresentation must be material,
without acknowledging that the Ninth and District of
Columbia Courts of Appeals, unlike it, accept
misrepresentation as an independent prong of the sham
exception to Noerr-Pennington. By thus conflating the
concepts of "material" and "objectively baseless," the
majority ignores the risk that a party will intentionally use
fraud and misrepresentation to transform a claim that is
otherwise weak and unlikely to prevail, although not
"objectively baseless," into one that succeeds.
Given the cited appellate authority, it is inexplicable to
me why the majority has chosen to rely for its precedent on
the district court decision in Music Center S.N.C. DiLuciano
Pisoni & C. v. Prestini Musical Instruments Corp., 874 F.
25Supp. 543 (E.D.N.Y. 1995). In that case, the court refused
to permit plaintiffs to proceed to discovery in an antitrust
claim based on material misrepresentations without first
establishing a colorable claim that the challenged litigation
was objectively baseless.
Many of the arguments made by the majority are
effectively answered in Clipper Exxpress v. Rocky Mountain
Motor Tariff Bureau, Inc., 690 F.2d 1240 (9th Cir. 1982), a
case in which the court reversed the summary judgment
granted to defendant trucking companies and their rate
bureau, who had filed protests with the Interstate
Commerce Commission with regard to the plaintiff 's
shipping rates. The Court of Appeals rejected the
defendants' attempts to cloak themselves with the mantle of
Noerr-Pennington immunity, noting that, unlike in the
political arena, immunizing defendants from liability based
on misrepresentations made in an adjudicatory context
could undercut the effectiveness of the adjudicatory body.
It explained:
There is an emphasis on debate in the political sphere,
which could accommodate false statements and reveal
their falsity. In the adjudicatory sphere, however,
information supplied by the parties is relied on as
accurate for decision making and dispute resolving.
The supplying of fraudulent information thus threatens
the fair and impartial functioning of these agencies and
does not deserve immunity from the antitrust laws.
Id. at 1261.
To follow further the Clipper court's distinction between
petitioning the legislature and petitioning a court, I quote
from other pertinent language in the opinion:
Adjudicatory procedures will not always ferret out
misrepresentations. Administrative bodies and courts
. . . rely on the information presented by the parties
before them. They seldom, if ever, have the time or
resources to conduct independent investigations. The
recognition, however, of a private right of action based
on the fraudulent misrepresentation, might be
sufficient incentive to induce parties not to
fraudulently misrepresent facts.
26
Id. at 1262. Moreover, the Clipper court, like the court in
Whelan, noted that the First Amendment does not protect
such false petitioning:
There is no first amendment protection for furnishing
with predatory intent false information to an
administrative or adjudicatory body. The first
amendment has not been interpreted to preclude
liability for false statements.
Id. at 1261.
Unlike the majority, I conclude that the District Court
erred in recognizing only a single exception to Noerr-
Pennington immunity based on "objective baselessness,"
and would remand to that court for further consideration.
II
IS THERE SUFFICIENT FACTUAL BASIS OF FRAUD
AND MISREPRESENTATION TO WITHSTAND
SUMMARY JUDGMENT?
Cheminor has raised sufficient questions of fact to
survive summary judgment under the "sham" exception as
I have delineated it. Cheminor alleges that when Ethyl filed
the AD/CVD petition, it knew it would not be able to
establish all of the elements of an antidumping or
countervailing duty claim, and intentionally and materially
misrepresented its financial condition in order to overcome
this difficulty. It alleges that Ethyl misrepresented, inter
alia, (1) Ethyl's profits and costs,1 (2) the customers Ethyl
allegedly lost to Cheminor, and (3) specific sales Ethyl
allegedly lost to Cheminor. Because Cheminor has
submitted some evidence to support these allegations, I,
like the majority, must assume that the statements
Cheminor alleges were false are, in fact, false. I conclude
_________________________________________________________________
1. In addition to its contention that Ethyl misrepresented data for the
first six months of 1991, Cheminor also contends that Ethyl
"intentionally and wrongfully underreported its profits to the ITC by $1.5
million dollars (over three years)" and that Ethyl misrepresented its 1990
profits. Appellants' Br. at 14, 16.
27
that these misrepresentations were sufficiently material to
bring them within the sham exception to Noerr-Pennington
immunity.
To prevail in the AD/CVD case, Ethyl had to show that
Cheminor received government subsidies, it sold the
product at less than fair value, there was material injury to
the domestic industry, and this injury was by reason of
Cheminor's exports. A failure to show any one of these
elements would have defeated Ethyl's claim. A
misrepresentation was thus material to the extent that the
truth would have tended to disprove the existence of any
one of the elements.
Cheminor contends that Ethyl's misrepresentations were
material to the USITC's determination that material injury
to the domestic industry probably had occurred. In making
that determination, the USITC must by statute consider "(I)
the volume of the imports of the subject merchandise, (II)
the effect of the imports of that merchandise on prices in
the United States for domestic like products, and (III) the
impact of imports of such merchandise on domestic
producers of domestic like products . . . ." 19 U.S.C.
S 1677(7)(B)(I). Further, in assessing the impact imports
have had on domestic producers, the USITC must consider
"all relevant economic factors which have a bearing on the
state of the industry in the United States," which in this
case was Ethyl. 19 U.S.C. S 1677(7)(C)(iii). The USITC was
specifically directed to consider:
(I) actual and potential decline in [Ethyl's] . . . sales
[and] profits, . . .
(II) factors affecting [Ethyl's] prices,
(III) actual and potential negative effects on [Ethyl's]
cash flow, . . .
(IV) actual and potential negative effects on [Ethyl's]
existing development and production efforts . . ., and
(V) . . . the magnitude of the margin of dumping.
Id. The misrepresentations Cheminor alleges Ethyl made
directly concern Ethyl's sales, profitability, prices, and
cashflow -- three of the five statutorily-mandated indicia of
28
injury. By law, they were thus material to the USITC's
decision making.
Moreover, as even the majority admits, the USITC
actually "relied . . . in part on Ethyl's representations of its
financial condition" in determining that Ethyl's application
justified imposing punitive tariffs on Cheminor. The USITC
stated in its "Views of the Commission":
The financial trends provide a reasonable indication
of present material injury. For example . . . the
industry [Ethyl's] profitability (as measured by profit-
to-sales ratio) declined substantially from the
beginning to the end of the investigatory period, despite
an increase in 1989 from the 1988 level.
Confidential information concerning other factors,
such as apparent domestic consumption and market
share, further provide a reasonable indication of
present injury.
App. at JA 2097 (footnote omitted).
The fact that the USITC also relied on other factors, such
as Cheminor's market share, in reaching its determination
cannot disprove the materiality of the misrepresentations.
Neither Ethyl nor the majority have suggested any reason
to believe that the USITC would not have reconsidered its
decision had it known that Cheminor's financial condition
was improving. The USITC might have decided that strong
evidence of a financially healthy domestic industry
outweighed any data suggesting that Cheminor's market
share was increasing. Ethyl's misrepresentations deprived
the USITC of that opportunity, undermining the legitimacy
of its decision making process.
Nor can Ethyl refute the materiality of the alleged
misrepresentations by claiming that the USITC could have
based its determinations on the threat of material injury.
Ethyl admits that neither the District Court nor the USITC
considered whether the evidence it submitted established a
colorable claim of threat of harm. The fact that the
misrepresentations might not have been material to a
determination the USITC concededly did not make says
little about whether the same misrepresentations affected
29
the determination it concededly did make. Similarly, the
USTR's decision to remove Indian ibuprofen from the GSP
in 1990 is irrelevant to the determination whether Ethyl's
alleged misrepresentations affected the USITC's decision.
The majority, apparently in an attempt to negate
materiality, notes that Acting Chairman Anne Brunsdale,
writing separately, "did not rely on Ethyl's assertions of
decreased profits" in reaching her decision. An individual
Commissioner's views do not in any way indicate that the
misrepresented facts were not material to the other
Commissioners or to the Commission's decision. In any
event, even Acting Chairman Brunsdale said she found
Ethyl's financial information "useful in determining whether
the injury resulting from any dumping and subsidization is
material." App. at JA 2105.
The majority's suggestion that the alleged
misrepresentations are not material because "they were
deemed to be not material by the ITC" is even less
persuasive. The Commissioners had not learned of the
falsity of Ethyl's representations at the time they reached
their decision and thus they had no opportunity to judge
their materiality. I can only assume that the majority
means to say that the Commissioners did not deem Ethyl's
profitability figures to be material in reaching a decision.
As I explain above, I find this interpretation of the
Commissioners' actions untenable.
Of more concern is the majority's apparent belief that the
issue turns on whether Ethyl had probable cause tofile its
petition. As I have explained, a party's use of material
misrepresentations in filing an action is a separate and
independent ground for denying Noerr-Pennington
immunity.
Finally, I note that the majority extends Noerr-Pennington
immunity beyond the antitrust context, and holds it also
governs Cheminor's state common law claims. This court
has not previously so held, and I believe we should not
expand the scope of Noerr-Pennington immunity to cover
claims of any variety -- common law or statutory, federal or
state -- without significantly more consideration than the
majority devotes to this issue. See Whelan, 48 F.3d at
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1253-55 (identifying concerns raised by the application of
Noerr-Pennington defense to common law claims without
deciding whether such application is mandated by the First
Amendment).
I see no need to engage in a monologue on that issue in
the posture of this case. I do note that the case the majority
refers to for its expansion of the Noerr-Pennington doctrine,
Brownsville Golden Age Nursing Home, Inc. v. Wells , 839
F.2d 155, (3d Cir. 1988), which (perhaps not coincidentally)
I authored, did not purport to extend the Noerr-Pennington
doctrine to state or common law claims; it merely held that
"action designed to bring a facility's noncompliance with
applicable regulations to the attention of the appropriate
authorities" cannot form the basis of a damage action, and
drew analogies to cases rejecting claims based on
petitioning activity. That can hardly be used as support for
the majority's very different determination that fraudulent
action, designed to elicit administrative action, is immune
from any liability, whether under federal, state, statutory or
common law.
Whether Cheminor's state law claims fall within an
exception to the Noerr-Pennington doctrine turns on
precisely the same considerations as the determination
whether its federal claims fall within that exception.
Because I disagree with the majority's conclusion that Ethyl
is entitled to immunity from Cheminor's antitrust claims
and its state law claims, I respectfully dissent.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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