Freeman v. Lasky, Haas & Cohler , 410 F.3d 1180 ( 2005 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ARLEEN FREEMAN, individually and 
on behalf of all others similarly
situated; JAMES ALEXANDER,
individually and on behalf of all
others similarly situated,
Plaintiffs-Appellants,
v.
LASKY, HAAS & COHLER, a
professional corporation; CHARLES No. 03-56588
B. COHLER; LUCE, FORWARD, D.C. No.
HAMILTON & SCRIPPS; CHRISTOPHER  CV-03-00715
J. HEALEY; WHITE AND BRIGHT, a MJL/JAH
professional corporation; DAVID S.
OPINION
BRIGHT; MUSICK, PEELER &
GARRETT LLP; MICHAEL J.
HICKMAN; JON F. MCKINLEY;
CALIFORNIA ASSOCIATION OF
REALTORS, INC.; JOHN LOMAC;
MARK MARCHAND; DIANNE
MCMILLAN; SHARE JACKSON; SCOTT
HUBAL; JUNE BARLOW,
Defendants-Appellees.

Appeal from the United States District Court
for the Southern District of California
M. James Lorenz, District Judge, Presiding
Argued and Submitted
February 16, 2005—Pasadena, California
Filed June 14, 2005
7057
7058 FREEMAN v. LASKY, HAAS & COHLER
Before: Alex Kozinski, Stephen S. Trott and
Richard R. Clifton, Circuit Judges.
Opinion by Judge Kozinski
7060 FREEMAN v. LASKY, HAAS & COHLER
COUNSEL
David Barry, Barry & Associates, San Francisco, California,
for the plaintiffs-appellants.
Jeffrey M. Shohet and Stanley J. Panikowski, Gray Cary
Ware & Freidenrich LLP, San Diego, California; Charles A.
Bird, Luce, Forward, Hamilton & Scripps LLP, San Diego,
California; Robert F. Semmer, Coughlan, Semmer & Lipman,
LLP, San Diego, California; Cheryl A. Orr, Musick, Peeler &
Garrett LLP, Los Angeles, California, for the defendants-
appellees.
OPINION
KOZINSKI, Circuit Judge:
We consider the applicability of Noerr-Pennington immu-
nity to discovery misconduct.
Facts
Realtor Arleen Freeman subscribes to a regional real-estate
Multiple Listing Service (MLS) run by Sandicor, a corpora-
tion owned and managed by various local realtors’ associa-
tions. Charging that Sandicor’s MLS subscription fees were
fixed at artificially high levels, Freeman sued Sandicor, the
realtors’ associations, and some of their officers and directors
under the Sherman Act, 15 U.S.C. §§ 1, 2. The defendants in
that litigation wrongfully withheld information in discovery.
After the misconduct came to light, the district court granted
new discovery and sanctioned the defendants, but it nonethe-
FREEMAN v. LASKY, HAAS & COHLER 7061
less granted their motion for summary judgment. On appeal,
we affirmed in part and reversed in part. Freeman v. San
Diego Ass’n of Realtors, 322 F.3d 1133 (9th Cir. 2003).
Freeman now brings a new antitrust action against some of
the executives, lawyers and law firms of the associations
involved in the previous litigation, and against the state real-
tors’ association directly, based on the discovery misconduct
that, she claims, involved subornation of perjury and intimida-
tion of witnesses. Freeman argues that, by stretching out the
litigation, the discovery misconduct postponed the day of
judgment and thus extended Sandicor’s price fixing. The dis-
trict court dismissed the complaint with prejudice for failure
to state a claim, based (among other grounds) on the Noerr-
Pennington doctrine. Freeman appeals.1
Analysis
[1] 1. The First Amendment aspect of antitrust law, the
Noerr-Pennington doctrine, was first announced in Eastern
Railroad Presidents Conference v. Noerr Motor Freight, Inc.,
365 U.S. 127 (1961), where the Supreme Court interpreted the
Sherman Act, in view of “the right of the people . . . to peti-
tion the Government for a redress of grievances,” U.S. Const.
amend. I, to not cover political lobbying:
To hold that the government retains the power to act
in [its] representative capacity [to make laws that
operate to restrain trade] and yet hold, at the same
time, that the people cannot freely inform the gov-
1
The complaint was filed as a separate action because the statute of lim-
itations was about to run out and our mandate in the original case, which
would have officially remanded the action, hadn’t yet issued. Freeman
requested that the district court classify the complaint as supplemental to
the original case when it regained jurisdiction. The district court, however,
did not consolidate the action with the original lawsuit, but continued to
treat it as a separate lawsuit. Its dismissal is therefore a final judgment
subject to appeal pursuant to 28 U.S.C. § 1291.
7062 FREEMAN v. LASKY, HAAS & COHLER
ernment of their wishes would impute to the Sher-
man Act a purpose to regulate, not business activity,
but political activity, a purpose which would have no
basis whatever in the legislative history of that Act.
. . . [S]uch a construction of the Sherman Act would
[also] raise important constitutional questions. The
right of petition is one of the freedoms protected by
the Bill of Rights, and we cannot, of course, lightly
impute to Congress an intent to invade these free-
doms.
365 U.S. at 137-38 (footnote omitted); see also United Mine
Workers v. Pennington, 381 U.S. 657, 669-70 (1965). The
doctrine extends to all three branches of government, and thus
also exempts bringing a lawsuit—that is, petitioning a court—
from antitrust liability. See Cal. Motor Transp. Co. v. Truck-
ing Unlimited, 404 U.S. 508, 510 (1972).
[2] While Noerr-Pennington immunity is broad, it is not so
broad as to cover all litigation: “Sham” petitions don’t fall
within the protection of the doctrine. See Noerr, 365 U.S. at
144; Cal. Motor Transp., 404 U.S. at 511; Prof’l Real Estate
Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49,
56-57 (1993). We have recognized three circumstances when
litigation might be sham:
First, if the alleged anticompetitive behavior consists
of bringing a single sham lawsuit (or a small number
of such suits), the antitrust plaintiff must demon-
strate that the lawsuit was (1) objectively baseless,
and (2) a concealed attempt to interfere with the
plaintiff’s business relationships.
Second, if the alleged anticompetitive behavior is
the filing of a series of lawsuits, “the question is not
whether any one of them has merit—some may turn
out to, just as a matter of chance—but whether they
are brought pursuant to a policy of starting legal pro-
FREEMAN v. LASKY, HAAS & COHLER 7063
ceedings without regard to the merits and for the
purpose of injuring a market rival.”
Finally, in 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 know-
ing fraud upon, or its intentional misrepresentations
to, the court deprive the litigation of its legitimacy.”
Kottle v. Northwest Kidney Ctrs., 146 F.3d 1056, 1060 (9th
Cir. 1998) (citations omitted) (quoting USS-POSCO Indus. v.
Contra Costa County Bldg. & Constr. Trades Council, 31
F.3d 800, 811 (9th Cir. 1994); Liberty Lake Invs., Inc. v.
Magnuson, 12 F.3d 155, 159 (9th Cir. 1993)).
[3] Noerr-Pennington immunity, and the sham exception,
also apply to defensive pleadings, see In re Burlington N.,
Inc., 822 F.2d 518, 532-33 (5th Cir. 1987), because asking a
court to deny one’s opponent’s petition is also a form of peti-
tion; thus, we may speak of a “sham defense” as well as a
“sham lawsuit.”
[4] 2. Because the Noerr-Pennington doctrine grows out of
the Petition Clause, its reach extends only so far as necessary
to steer the Sherman Act clear of violating the First Amend-
ment. Immunity thus applies only to what may fairly be
described as petitions, not to litigation conduct generally. A
complaint, an answer, a counterclaim and other assorted docu-
ments and pleadings, in which plaintiffs or defendants make
representations and present arguments to support their request
that the court do or not do something, can be described as
petitions without doing violence to the concept. But discovery
is merely communication between parties as an aid to litiga-
tion. It is not in any sense a communication to the court and
is therefore not a petition. See Theofel v. Farey-Jones, 359
F.3d 1066, 1078-79 (9th Cir. 2004) (noting that
“[s]ubpoenaing private parties in . . . private . . . litigation” is
7064 FREEMAN v. LASKY, HAAS & COHLER
hardly petitioning). Nevertheless, “conduct incidental to” a
petition is protected by Noerr-Pennington if the petition itself
is protected. Id. at 1078 (internal quotation mark omitted); cf.
Noerr, 365 U.S. at 143-44.
[5] In Columbia Pictures Industries, Inc. v. Professional
Real Estate Investors, Inc., 944 F.2d 1525 (9th Cir. 1991),
aff’d on other grounds, 508 U.S. 49 (1993), we considered
whether a refusal to settle a lawsuit could be actionable under
the Sherman Act. We held:
A decision to accept or reject an offer of settle-
ment is conduct incidental to the prosecution of the
suit and not a separate and distinct activity which
might form the basis for antitrust liability. Conse-
quently, [defendant’s] ability to establish that [plain-
tiffs’] refusal to [settle] violated the Sherman Act
depends on its success or failure in showing that the
[underlying lawsuit] is actionable under the federal
antitrust laws.
Id. at 1528-29. Because the underlying lawsuit was not a
sham, plaintiffs’ refusal to settle could not support antitrust
liability. Discovery, like settlement talks, is “conduct inciden-
tal to” a petition—in this case, incidental to the realtors’ asso-
ciations’ defense against Freeman’s lawsuit. Thus, whether
this particular misconduct violates the Sherman Act depends
on whether the defense as a whole would be actionable.
Discovery misconduct, subornation of perjury and witness
intimidation are, of course, serious matters. Had they not been
brought to light in time, it is entirely possible that they would
so have infected the defense of the lawsuit as to make it a
sham. But we need not decide that question today because it
is clear that the defense here was not a sham.
[6] To apply the sham exception in the context of a defense,
we look to the test for a sham lawsuit spelled out in the first
FREEMAN v. LASKY, HAAS & COHLER 7065
Kottle exception. See page 7062 supra. This two-part test con-
tains both an objective and a subjective component. On the
first prong, the defense was not “objectively baseless.” “The
existence of probable cause to institute legal proceedings”—a
notion drawn from the common-law tort of wrongful civil
proceedings—“precludes a finding that an antitrust defendant
has engaged in sham litigation.” Prof’l Real Estate Investors,
508 U.S. at 62. And here, there was probable cause, because
defendants prevailed on their defense in the district court after
the discovery misconduct was discovered, undone and sanc-
tioned. Cf. Prosser and Keeton on the Law of Torts 894 (W.
Page Keeton ed., 5th ed. 1984) (“A recovery by the plaintiff
in the original action usually is regarded as conclusive evi-
dence of the existence of probable cause, even though it is
subsequently reversed, unless it can be shown to have been
obtained by fraud or other imposition upon the court.” (foot-
notes omitted)).
[7] On the second prong, there is no evidence that the
defense as a whole was “a concealed attempt to interfere with
the plaintiff’s business relations.” See also Prof’l Real Estate
Investors, 508 U.S. at 60-61 (“Under this second part of our
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] the governmental process—as opposed to the outcome of
that process—as an anticompetitive weapon.’ ” (quoting
Noerr, 365 U.S. at 144 (emphasis added); City of Columbia
v. Omni Outdoor Adver., Inc., 499 U.S. 365, 380 (1991))
(alteration in original). For a defense of a lawsuit to be a sham
for purposes of the first Kottle exception, plaintiffs would
have to show that the defense was not merely baseless, but
aimed at interfering with their business by, for example, sap-
ping their financial resources or distracting their attention.
[8] There was enough objective merit and subjective good
faith in the defense of the original antitrust suit to cover it,
7066 FREEMAN v. LASKY, HAAS & COHLER
and the conduct incidental to it, with the Noerr-Pennington
cloak.2
[9] 3. The district court used Noerr-Pennington immunity
(among other grounds) to dismiss the complaint as to the
attorney defendants only; the complaint was dismissed as to
the other defendants based on other theories. However, Noerr-
Pennington immunity is not limited to lawyers: The First
Amendment petition right belongs to the defendants in the
original case, though their employees, law firms and lawyers,
as their agents in that litigation, get to benefit as well. Indeed,
a Noerr-Pennington case, such as Professional Real Estate
Investors, need not involve claims against lawyers at all.
Noerr-Pennington immunity is a sufficient ground to dismiss
the complaint as to all defendants. We therefore affirm the
district court’s ruling as to the non-lawyer defendants on this
alternative ground. See New Kids on the Block v. News Am.
Publ’g, 971 F.2d 302, 305 (9th Cir. 1992) (we may affirm the
district court’s judgment on any ground fairly presented by
the record before us).
AFFIRMED.
2
Freeman further alleges that, on one occasion, the attorney defendants
made false factual representations to the court. Compl. ¶ 37. Unlike Free-
man’s other allegations, which concern out-of-court misconduct, this one
falls within the third Kottle exception, under which misrepresentations to
the court make a petition a sham if they “deprive the litigation of its legiti-
macy.” See page 7063 supra. Our conclusion that the defense as a whole
was not a sham also establishes that this isolated instance of litigation mis-
conduct would not, if proven, deprive the defense as a whole of its legiti-
macy.