CSMN Investments v. Cordillera Metropolitan

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS April 28, 2020
Christopher M. Wolpert
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
CSMN INVESTMENTS, LLC, a Colorado
limited liability company; CSMN
OPERATIONS, LLC, a Colorado limited
liability company,
Plaintiffs - Appellants,
v. 19-1094
CORDILLERA METROPOLITAN
DISTRICT, a political subdivision of the
State of Colorado; CORDILLERA
PROPERTY OWNERS ASSOCIATION,
INC., a Colorado nonprofit corporation;
DAVID BENTLEY; DAVID DAVIES;
ROBERT EGAN; KITTY GEORGE;
LARRY KYTE; JUDITH G. MCBRIDE;
RACHEL OYS; ED SHRINER; BRUCE
SMATHERS; PATRICK WILHELM;
TOM WILNER,
Defendants - Appellees.
_________________________________
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 1:17-CV-02512-RM-GPG)
_________________________________
Brian J. Connolly (Andrew L.W. Peters, Bill E. Kyriagis, J. Thomas Macdonald, and
Thomas J. Ragonetti with him on the briefs), Otten, Johnson, Robinson, Neff &
Ragonetti, P.C., Denver, Colorado, for Plaintiffs-Appellants.
Debra J. Oppenheimer (Jeffrey B. Smith with her on the brief), of Altitude Community
Law P.C., Lakewood, Colorado, for Defendant-Appellees, Larry Kyte, Bruce Smathers,
Patrick Wilhelm, and Tom Wilner.
Lisa F. Mickley and Gillian Dale of Hall & Evans, L.L.C., Denver, Colorado (Miles L.
Buckingham and Ronald H. Nemirow, Nemirow Perez, Lakewood, Colorado with them
on the brief), for Defendants-Appellees, Cordillera Metropolitan District, Cordillera
Property Owners Association, David Bentley, David Davies, Robert Egan, Kitty George,
Judith G. McBride, Rachel Oys, and Ed Shriner.
_________________________________
Before PHILLIPS, McHUGH, and MORITZ, Circuit Judges.
_________________________________
PHILLIPS, Circuit Judge.
_________________________________
The First Amendment guarantees the people a right “to petition the
Government for a redress of grievances.” The right immunizes litigants from liability
for their petitioning activities, unless the petitioning is a sham. In this appeal, we
consider the exception for sham petitioning. Applying the Noerr-Pennington
doctrine, the district court concluded that Appellees’ petitioning was entitled to
immunity because it was objectively reasonable and, thus, not a sham. We agree that
Appellees are immune. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm the
district court’s dismissal of this case.
BACKGROUND
Nestled in the Rocky Mountains of Eagle County, Colorado is the residential
community of Cordillera, which features a private lodge and spa (the “Lodge”) and a
village center (the “Village”). For many years, the Lodge offered its dues-paying
members certain amenities, including a golf course and spa. In addition, it offered the
public a restaurant and lodge. And the Village offered “open space, tennis courts and
hiking paths, which all residents and their guests . . . enjoy[ed].” App. vol. 3 at 601.
2
But in 2013, after years of monetary losses, the owner of both parcels, Behringer
Harvard Cordillera, LLC (BHC), listed them for sale. In 2016, CSMN Investments,
LLC (CSMN) contracted with BHC to purchase both properties. CSMN planned to
open a private addiction-treatment center—its plan would close the properties to
other uses. Patients would stay in the Lodge while receiving treatment at nearby
facilities located on both the Lodge and Village parcels. The treatment center would
serve people with conditions ranging from eating disorders to chemical dependency.
Before closing on the sale, CSMN sought confirmation from Eagle County’s
Planning Director (the “Director”) that its planned use—operating an inpatient
addiction-treatment center—was an allowed use under the “Cordillera Subdivision
Eleventh Amended and Restated Planned Unit Development Control Document”
(PUD). App. vol. 1 at 155. Most recently amended in December 2009, the PUD “sets
forth the land uses and development standards for all properties of Cordillera.” App.
vol. 3 at 457. For the Lodge and Village, the PUD lists thirty-four uses-by-right,
including a “Clubhouse and Lodge”; “Professional Offices”; “Lodging and
Accommodations”; various residential uses; and “Medical Offices/Facilities, limited
to clinic and outpatient facilities for non-critical care, including, without limitation,
for outpatient plastic surgery and other cosmetic procedures.” App. vol. 3 at 467–68
(Lodge), 473–74 (Village) (emphasis added).
3
On June 1, 2016,1 the Director issued his written interpretation of the PUD,
concluding that CSMN could operate “a clinic including inpatient, non-critical care,
for treatment of a variety of conditions including, but not limited to, eating disorders,
alcoholism, chemical dependency, and behavioral health conditions with a focus on
health and fitness, including fitness facilities, yoga, nutrition and recreation.” App.
vol. 1 at 155 (emphasis added). He based his interpretation on the PUD’s approved
use for “Medical Offices/Facilities, limited to clinic and outpatient facilities for non-
critical care, including, without limitation, for outpatient plastic surgery and other
cosmetic procedures.” Id. (emphasis omitted). He concluded that CSMN’s use fit this
description because it excluded critical care and required treatment in a clinical
setting. Further, he concluded that an addiction-treatment center qualified because the
PUD allowed clinical care “without limitation,” notwithstanding its specific reference
to “plastic surgery and other cosmetic procedures.” Id. (emphasis omitted).
I. Challenging the Director’s Interpretation
In response to the Director’s interpretation, community members expressed
dismay and outrage at the opening of an addiction-treatment center2 in Cordillera and
the closure of the Lodge and Village parcels to the public. Illustrative of the local
sentiment, one community member labeled CSMN’s plans a “[c]atastrophe for the
1
To correct a procedural issue, this interpretation was re-issued on July 1,
2016.
2
The CSMN addiction-treatment center was high-scale, with planned monthly
patient charges of $60,000.
4
community[,]” believing the center’s opening “should be stopped at all costs,” while
another labeled “[t]he presence of such a facility in our community . . . poisonous to
the essential values of the community by introducing a population destructive to our
neighborhood’s peace of mind, real estate values, and carefully cultivated
reputation.” App. vol. 3 at 566, 581. Other members voiced concern for the safety of
their children and grandchildren: “I . . . don’t feel comfortable with the idea of my
grandchildren playing outside or hiking in the neighborhood where persons with
addictions could be as well as ‘dealers’ who might be trying to reach the ‘patients’
inside!” Id. at 587. Yet others, who were club members at the Lodge, were
“devastated” by the sale, because the Lodge was the main reason that they moved to
Cordillera in the first place. Id. at 584. They could not believe that it would now be
closed to paying community members.
In view of the overwhelming community response, Cordillera Property Owners
Association (CPOA) and Cordillera Metropolitan District (CMD) jointly appealed the
Director’s PUD interpretation to the Board of County Commissioners (the “Board”).3
To assist in this appeal, CMD created the Legal Committee, which was comprised of
Larry Kyte, Ed Shriner, Bruce Smathers, Patrick Wilhelm, and Tom Wilner. The
appeal raised four challenges to the Director’s interpretation: (1) allowing a use
inconsistent with the PUD’s purpose of serving a resort, residential community;
3
CMD is a local-government entity providing services to the Cordillera
community and is governed by a board of directors. The CPOA is the property
owners’ association for the community.
5
(2) failing to “give effect to the legislative intent governing the use of the [Lodge and
Village] requiring [the parcels] to be used as a focal point and social gathering place
for the residents and guests of Cordillera”; (3) failing “to apply the actual language of
the PUD which would preclude inpatient treatment and the proposed uses are
something other than a clinic”; and (4) allowing a use of the Lodge and Village so far
beyond what PUD allows as to amount to a “wrongful Major Modification,” which
would require “approval” from the CPOA “and formal amendment to the PUD.” App.
vol. 3 at 594.
After a hearing, the Board affirmed the Director’s interpretation on all but one
point. Addressing CMD and CPOA’s third basis for appeal, the Board reversed the
Director’s interpretation that CSMN could use the property as an inpatient-treatment
center, concluding that the PUD permitted only outpatient clinical uses. So in a
modified interpretation, the Board required that CSMN’s “clinic component be
operated as an outpatient facility[,]” not inpatient, as CSMN had proposed. Id. at 598.
On November 8, 2016, CMD and CPOA took their case to Colorado state
court, seeking review of the Board’s ruling under Colorado Rule of Civil Procedure
106(a)(4).4 The Colorado state district court affirmed the Board’s decision. Though
CMD did not appeal, CPOA did, and on November 29, 2018, the Colorado Court of
4
This rule allows for the Colorado district court to review whether “any
governmental body . . . exercising judicial or quasi-judicial functions has exceeded
its jurisdiction or abused its discretion, . . . based on the evidence in the record before
the defendant body . . . .” Colo. R. Civ. P. 106(a)(4).
6
Appeals affirmed the Board and the district court in an unpublished decision.5 See
Benson v. Eagle County, No. 17CA1973, 2018 WL 6241502 (Colo. App. Nov. 29,
2018). And on August 19, 2019, the Colorado Supreme Court denied certiorari. See
Benson v. Eagle County, No. 18SC893, 2019 WL 3934442 (Colo. Aug. 19, 2019).
II. Civil Rights Actions Against CPOA, CMD, and Associated Individuals
On December 28, 2017, with the state-court appeals pending, CSMN turned
the tables, filing a civil-rights action in Colorado federal district court against CPOA,
CMD, and various associated people—the CMD board members, the CMD district
manager, and the Legal Committee members. CSMN’s complaint contains three
claims, each against a different subset of defendants.
First, CSMN alleges that CMD violated the Americans with Disabilities Act
(ADA).6 It asserts that the ADA protects both CSMN’s future clients—drug- and
alcohol-addicted people—and CSMN (as a “service provider” to those individuals).
App. vol. 2 at 446. By this view, CMD’s legal actions restricted CSMN’s “use of the
Property . . . due to [CSMN’s] efforts to provide residential services to persons with
disabilities,” so CMD had engaged in “intentional discrimination against CSMN and
its future clients[,] in violation of Title II of the ADA[.]” Id. Second, CSMN alleges
5
The state district court consolidated CMD and CPOA’s case with a similar
case brought by Cordillera homeowners.
6
CSMN limited its claim to CMD, the only defendant that qualifies as a public
entity under 42 U.S.C. § 12131(1) (defining “public entity” under the ADA to include
“any . . . special purpose district, or other instrumentality of a State or States or local
government”).
7
that all Appellees violated the Fair Housing Act (FHA) by seeking to prevent
CSMN’s future clients from residing at the property (which CSMN calls a “dwelling”
under the FHA) due to their disabilities. Id. at 447. CSMN alleges that Appellees
accomplished this by pursuing a PUD interpretation that would have prevented
CSMN from providing housing to disabled people. And third, CSMN brings a 42
U.S.C. § 1983 action against CMD, David Bentley, David Davies, Robert Egan, Kitty
George, Larry Kyte, Judith McBride, Rachel Oys, Ed Shriner, Bruce Smathers,
Patrick Wilhelm, and Tom Wilner (only CPOA is excluded). The claim alleges that
“[u]nder color of state law,” those Appellees “injured CSMN by conspiring to
deprive, failing to stop the deprivation, or depriving CSMN and its future Clients of
equal protection . . . and due process . . . under the First and Fourteenth
Amendments . . . , and as guaranteed under the ADA[.]” Id. at 448.
In response, Appellees moved under Federal Rule of Civil Procedure 12(b)(6)
to dismiss all claims, arguing that the right to petition immunized their conduct.
CSMN countered that Appellees’ claim of immunity was unfounded because the
petitioning had sought an unlawful outcome, and that even if the immunity somehow
did apply, the petitioning fell within an exception to that immunity, that is, the
petitioning was a “sham.” The district court sided with Appellees, dismissing all but
8
one7 of the claims on the ground that their conduct was protected by Noerr-
Pennington immunity—based on the First Amendment’s right to petition—and that
no exception to the immunity applied. CSMN timely appealed.
DISCUSSION
The First Amendment protects “the right of the people . . . to petition the
Government for a redress of grievances.” U.S. Const. amend. I.8 The Supreme Court
has “recognized this right to petition as one of ‘the most precious of the liberties
safeguarded by the Bill of Rights,’ and . . . explained that the right is implied by
‘[t]he very idea of a government, republican in form[.]’” BE & K Constr. Co. v.
7
The district court thought that all claims involved petitioning for a redress of
grievances, except the one for “FHA Retaliation.” App. vol. 3 at 761. Under that
claim, CSMN argued that Appellees had “encourag[ed] community sentiment and
action” against CSMN’s plans. Id. (internal quotation marks and citation omitted).
The district court dismissed it for failure to state a claim. CSMN has failed to
challenge this dismissal in its opening brief, so we do not consider it. See Opening
Br. 40 (“In light of the fact that this case presents a question of first impression with
respect to the only issue presented for review, . . . CSMN respectfully requests oral
argument.” (emphasis added)). “An appellant’s opening brief must identify
‘appellant’s contentions and the reasons for them, with citations to the authorities and
parts of the record on which the appellant relies.’” Bronson v. Swensen, 500 F.3d
1099, 1104 (10th Cir. 2007) (quoting Fed. R. App. P. 28(a)(9)(A)). “[W]e routinely
have declined to consider arguments that are not raised, or are inadequately
presented, in an appellant’s opening brief.” Id. “Scattered statements in the
appellant’s brief are not enough to preserve an issue for appeal.” Exum v. U.S.
Olympic Comm., 389 F.3d 1130, 1133 n.4 (10th Cir. 2004) (citing Murrell v. Shalala,
43 F.3d 1388, 1389 n.2 (10th Cir. 1994)).
8
Because the First Amendment applies to state and local governments through
the Fourteenth Amendment, the petition clause “applies fully to municipal activities.”
New W., L.P. v. City of Joliet, 491 F.3d 717, 722 (7th Cir. 2007); see also City of
Columbia v. Omni Outdoor Advert., Inc., 499 U.S. 365, 384 (1991) (applying Noerr-
Pennington immunity to municipal activities).
9
NLRB, 536 U.S. 516, 524–25 (2002) (first alteration in original) (citation omitted)
(first quoting United Mine Workers of Am., Dist. 12 v. Ill. Bar Ass’n, 389 U.S. 217,
222 (1967); and then quoting United States v. Cruikshank, 92 U.S. 542, 552 (1875)).
Immunity flows from this right, protecting those who seek redress through the courts
from liability for petitioning activities. See, e.g., Cal. Motor Transp. Co. v. Trucking
Unlimited, 404 U.S. 508, 510 (1972) (“[T]he right to petition extends to all
departments of the Government[, and] [t]he right of access to the courts is . . . but
one aspect of the right of petition.” (citations omitted)).
The contours of this immunity developed in a line of antitrust cases, giving
rise to the moniker, Noerr-Pennington immunity. United Mine Workers of Am. v.
Pennington, 381 U.S. 657 (1965); E.R.R. Presidents Conference v. Noerr Motor
Freight, Inc., 365 U.S. 127 (1961); see also Prof ’l Real Estate Inv’rs, Inc. v.
Columbia Pictures Indus., Inc., 508 U.S. 49, 60–61 (1993) (holding litigants immune
from an antitrust claim under Noerr-Pennington immunity). In Noerr, for example,
the Supreme Court considered whether a complainant could “base a Sherman Act
conspiracy [claim] on evidence consisting entirely of activities of competitors
seeking to influence public officials.” Pennington, 381 U.S. at 669 (discussing Noerr,
365 U.S. at 140). The Court said it could not, holding in light of the Petition Clause
that “the Sherman Act does not prohibit . . . persons from associating . . . in an
attempt to persuade the [government] to take particular action with respect to a law
that would produce a restraint or a monopoly.” BE & K, 536 U.S. at 525 (omissions
in original) (internal quotation marks omitted) (quoting Noerr, 365 U.S. at 136).
10
But the Court recognized that this broad immunity could shield litigants to use
the courts to harass enemies with impunity. With this concern in mind, the Supreme
Court carved out an exception, disallowing immunity for “sham” petitioning:
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 relationships of a competitor and the application of the
Sherman Act would be justified.
Noerr, 365 U.S. at 144 (emphasis added). Thus, under the Noerr-Pennington “line of
cases . . . genuine petitioning is immune from antitrust liability, [but] sham
petitioning is not.” BE & K, 536 U.S. at 525–26 (discussing Noerr, 365 U.S. at 144).
In determining what constitutes “sham petitioning” under Noerr-Pennington,
the Supreme Court has adopted a two-step test. See Prof ’l Real Estate, 508 U.S. at
60–61. Under the first step, a court considers whether the petitioning has an
objectively reasonable basis. Id. at 60. If so, immunity applies. Id. But if not, a court
proceeds to the second step, considering the subjective motivation behind the
petitioning. See id. at 57 (“We . . . hold that an objectively reasonable effort to
litigate cannot be sham regardless of subjective intent.”). Put another way, under
Professional Real Estate’s sham-petitioning test, subjective intent matters only if the
petitioning activity lacks objective reasonableness.
In this circuit, this immunity extends beyond antitrust situations. See
Cardtoons, L.C. v. Major League Baseball Players Ass’n, 208 F.3d 885, 889 (10th
Cir. 2000) (en banc) (“[W]e do not question the application of the right to petition
outside of antitrust . . . .”). But we refer to it as Petition Clause immunity, reserving
11
the name, Noerr-Pennington, for antitrust cases. See id. at 889–90 (“In our view, it is
more appropriate to refer to immunity as Noerr-Pennington immunity only when
applied to antitrust claims. In all other contexts, . . . such immunity derives from the
[Petition Clause].” (footnote omitted)). This circuit has not yet had occasion to
determine the scope of that immunity. In particular, we have not yet considered the
applicability of Professional Real Estate’s two-step test beyond antitrust.
CSMN argues that we need not reach this question because the Petition Clause
does not apply when the petitioning party seeks an “unlawful objective.” Opening Br.
21 (capitalization removed). Appellees counter that we should apply Professional
Real Estate to sustain the district court’s dismissal. We agree with Appellees, and as
later explained, we decline CSMN’s invitation to create an unlawful-objective
exception to Petition Clause immunity.
Below, we first analyze whether Professional Real Estate is the proper sham-
petitioning test for the conduct at issue here and conclude that it is. We then apply it
to Appellees’ petitioning, concluding it was objectively reasonable. We wrap up by
explaining our rejection of an unlawful-objective exception to Petition Clause
immunity.
I. Sham-Petitioning Exception
In determining the proper sham-petitioning test, Professional Real Estate
provides a two-step approach: (1) is the petitioning objectively reasonable? (2) and
only if not, what is the subjective intent behind the petitioning? CSMN offers an
12
alternative approach, which looks solely to the subjective intent behind the
petitioning when determining whether it constitutes a sham.
We adopt Professional Real Estate here, meaning we must resolve whether the
district court erred in finding Appellees’ petitioning objectively reasonable.
Concluding that the petitioning was objectively reasonable, we affirm the district
court.
A. The Proper Test
Because it presents a question of constitutional law, we review de novo the
proper test for determining what constitutes sham petitioning. See, e.g., Biodiversity
Assocs. v. Cables, 357 F.3d 1152, 1160 (10th Cir. 2004). CSMN contends that
Petition Clause immunity is improper for objectively reasonable “lawsuits that are
unsuccessful and filed with the subjective purpose of interfering with legally-
protected rights or imposing litigation costs regardless of the outcome.” Opening Br.
26 (citing Cardtoons, 208 F.3d at 889 n.4; Bill Johnson’s Rests., Inc. v. NLRB, 461
U.S. 731, 742–43 (1983); BE & K, 536 U.S. at 532; id. at 538 (Breyer, J.,
concurring)). Because these three cases form the basis of CSMN’s argument, we
begin there.
In Bill Johnson’s, the Supreme Court considered whether the National Labor
Relations Board (NLRB) could enjoin a state-court proceeding “brought by an
employer to retaliate against employees for exercising federally-protected labor
rights, without also finding that the suit lacks a reasonable basis in fact or law.” 461
U.S. at 733. In resolving this issue, the Court held that the NLRB “may not halt the
13
prosecution of a state-court lawsuit, regardless of the plaintiff’s motive, unless the
suit lacks a reasonable basis in fact or law.” Id. at 748. But the Court also
commented—even though the issue was not before it—that if the plaintiff lost the
suit, the NLRB could consider the suit’s “retaliatory intent” and order relief. Id. at
748–49.
And because unsuccessful suits can still have been objectively reasonable, this
Bill Johnson’s dicta contemplates liability even for objectively reasonable suits if
brought with an improper purpose. In Cardtoons, we noted, in dicta,9 the tension
between this result and the result later prescribed by Professional Real Estate—
subjective motivation matters only if the petitioning is objectively unreasonable. See
Cardtoons, 208 F.3d at 889 n.4. Given this tension, we offered this way of
reconciling the two cases:
The only way to reconcile [Professional Real Estate and Bill Johnson’s]
is to limit them to the contexts in which they arose. [Professional Real
Estate] is an antitrust case; Bill Johnson’s is not. . . . [Thus, Professional
Real Estate] must be limited to the antitrust context. Outside of that
context, the Petition Clause protects objectively reasonable lawsuits from
being enjoined, but requires a court to look at the underlying statute to
determine whether the initiator of the suit can be held liable.
9
“Dicta are statements and comments in an opinion concerning some rule of
law or legal proposition not necessarily involved nor essential to determination of the
case in hand.” Thompson v. Weyerhaeuser Co., 582 F.3d 1125, 1129 (10th Cir. 2009)
(citation and internal quotation marks omitted). In Cardtoons, the issue before the
court was whether Petition Clause immunity applies to “purely private threats” “of
litigation between purely private parties in a non-antitrust setting.” 208 F.3d at 886.
The sham exception was not at issue.
14
Id. Thus, the Cardtoons dicta favors the Bill Johnson’s dicta over Professional Real
Estate for determining what constitutes sham petitioning for all non-antitrust
contexts.
But two years after Cardtoons, the Supreme Court decided BE & K, which
undercut the basis on which the Cardtoons dicta rested. First, in BE & K, the
Supreme Court identified the Bill Johnson’s language as dicta (the language relied on
in Cardtoons to differentiate between what was required to show that petitioning was
a sham in antitrust cases versus all other case types). See BE & K, 536 U.S. at 527–28
(explaining that Bill Johnson’s concerned whether the NLRB could enjoin an ongoing
suit without finding that it was reasonably based, meaning the Court “had no actual
need to decide whether the [NLRB] could declare unlawful reasonably based suits
that were ultimately unsuccessful”). And in BE & K, the Supreme Court rejected the
Bill Johnson’s dicta, choosing to “exercis[e] [its] ‘customary refusal to be bound by
dicta.’” Id. at 528 (quoting U.S. Bancorp Mortg. Co. v. Bonner Mall P’ship, 513 U.S.
18, 24 (1994)). Thus, though we take special heed of dicta from our en banc
decisions, the Supreme Court’s later words steer us elsewhere here.
In addition to rejecting the Bill Johnson’s dicta, BE & K provided three reasons
for why it would be desirable for the Petition Clause to immunize unsuccessful but
reasonably based lawsuits.10 First, the Court noted that refusing immunity simply
10
BE & K concluded that by imposing liability on “all reasonably based but
unsuccessful suits filed with a retaliatory purpose,” the NLRB ran afoul of the
National Labor Relations Act (NLRA) by ensnaring “petitioning that is objectively
and subjectively genuine.” 536 U.S. at 534–36. But because the issue was
15
because the petitioning ultimately fails would ignore that “the genuineness of a
grievance does not turn on whether it succeeds.” 536 U.S. at 532. Given this,
Supreme Court doctrine has “protected petitioning whenever it is genuine, not simply
when it triumphs.” Id. (citing Prof’l Real Estate, 508 U.S. at 58–61; Pennington, 381
U.S. at 670). In fact, the framers recognized this in the First Amendment’s text:
“[T]he text of the First Amendment [does not] speak in terms of successful
petitioning—it speaks simply of ‘the right of the people . . . to petition the
Government for a redress of grievances.’” Id. (omission in original) (quoting U.S.
Const. amend. I). Thus, we see, in both the Petition Clause’s text and in Supreme
Court cases, a preference for immunizing unsuccessful, reasonably based petitioning.
Second, good reasons support this preference because “even unsuccessful but
reasonably based suits advance some First Amendment interests.” Id. For example,
extending First Amendment protection to such suits allows for “the public airing of
disputed facts” and “rais[ing] matters of public concern.” Id. (internal quotation
marks and citation omitted). This allows parties to “promote the evolution of the law
by supporting the development of legal theories that may not gain acceptance the first
time around.” Id. “Moreover, the ability to lawfully prosecute even unsuccessful suits
unpresented, the Court “d[id] not decide whether the [NLRB] may declare unlawful
any unsuccessful but reasonably based suits that would not have been filed but for a
motive to impose the costs of the litigation process, regardless of the outcome, in
retaliation for NLRA protected activity[.]” Id. at 536–37. But a concurring opinion
argued that the effect of the decision was to impose the Professional Real Estate test
on NLRA cases. See id. at 537 (Scalia, J., concurring). We agree with Justice Scalia’s
statement and conclude that BE & K supersedes anything to the contrary in
Cardtoons.
16
adds legitimacy to the court system as a designated alternative to force.” Id. Again,
these reasons weigh heavily in favor of broad immunity for petitioning activities, so
long as the petitioning has a legitimate basis in the law.
Third, the Court recognized that some speech is unprotected, including false
statements. Id. And though baseless suits are “analogous to false statements,”
reasonably based, unsuccessful suits are not. Id. “For even if a suit could be seen as a
kind of provable statement, the fact that it loses does not mean it is false.” Id. at 532–
33.
These considerations weigh heavily in favor of protecting objectively
reasonable petitioning. And these interests still exist when petitioning may have been
brought with improper motives, provided it was commenced with an objectively
reasonable basis. Asking courts to divine the subjective mindset motivating a lawsuit
is a big ask. Litigants may have mixed reasons for suing, some proper, others not.
Thus, without looking to objective reasonableness first, courts may need to balance
improper motives against proper ones. Doing so would be difficult, requiring courts
to peer inside the petitioning parties’ minds to make a judgment about their
intentions. If the petitioning is objectively reasonable, a court risks chilling legitimate
litigation by withholding immunity for parties with legitimate grievances.11
11
We recognize valid concerns over whether reasonably based petitioning
could be so abusive as to be a sham and discuss that infra regarding California
Motors’s test for sham petitioning.
17
These interests do not weigh as heavily in favor of immunity if the petitioning
is objectively unreasonable. After all, such unreasonableness might evince improper
motivation. Parties with legitimate grievances can realistically expect some success.
Absent that, courts can reasonably question whether the subjective intent is to harass,
discriminate, or interfere with legally protected rights. The sham-petitioning
exception was created to stop this sort of behavior. We agree that CSMN raises a
valid concern about courts becoming an avenue for discrimination, but the
Professional Real Estate test guards against that outcome, by requiring that the
petitioning be objectively reasonable.12 So, for these reasons, we adopt Professional
Real Estate’s sham-petitioning test for determining whether conduct is a sham, such
that it loses Petition Clause immunity.13
12
We also recognize that by adopting the Professional Real Estate test,
immunity may be extended to lawsuits brought to interfere with an opponent’s legally
protected rights, provided such suits are reasonably based. But the First Amendment
often extends its protection to activity we may not like. See, e.g., Matal v. Tam, 137
S. Ct. 1744, 1751 (2017) (recognizing First Amendment protection for “ideas that
offend”); R.A.V. v. City of St. Paul, 505 U.S. 377, 391 (1992) (“The First Amendment
does not permit [the government] to impose special prohibitions on those speakers
who express views on disfavored subjects.” (citations omitted)).
13
Further, Professional Real Estate says that its sham-petitioning test applies
outside antitrust situations. 508 U.S. at 59 (“Whether applying Noerr as an antitrust
doctrine or invoking it in other contexts, we have repeatedly reaffirmed that evidence
of anticompetitive intent or purpose alone cannot transform otherwise legitimate
activity into a sham.” (emphasis added)). And other federal circuit courts have
recognized this, adopting Professional Real Estate’s test outside of antitrust cases.
See, e.g., Real Estate Bar Ass’n for Mass., Inc. v. Nat’l Real Estate Info. Servs., 608
F.3d 110, 124–25 (1st Cir. 2010) (granting Petition Clause immunity from § 1983
litigation to a “nonfrivolous” but unsuccessful suit); Bryant v. Military Dep’t of
Miss., 597 F.3d 678, 691–94 (5th Cir. 2010) (same with various civil-rights suits);
White v. Lee, 227 F.3d 1214, 1233 (9th Cir. 2000) (same with FHA litigation).
18
B. Applying Professional Real Estate’s Sham-Petitioning Test
We review de novo the district court’s decision to grant Appellees’ motion to
dismiss. See Albers v. Bd. of Cty. Comm’rs, 771 F.3d 697, 700 (10th Cir. 2014). On a
motion to dismiss, courts “must accept all the well-pleaded allegations of the
complaint as true and . . . construe them in the light most favorable to the plaintiff.”
Id. (quoting Cressman v. Thompson, 719 F.3d 1139, 1152 (10th Cir. 2013)) (internal
quotation mark omitted). Under this standard, we conclude that Appellees’
petitioning was objectively reasonable.
At the outset, we note that Appellees’ losing in the Colorado district court and
the Colorado Court of Appeals does not make their petitioning objectively
unreasonable. As the Court discussed in BE & K, Petition Clause immunity applies
“whenever [the petitioning] is genuine, not simply when it triumphs.” 536 U.S. at
532. So in determining whether Petition Clause immunity applies, we review the
merits of the petitioning and, in doing so, look for litigation “so baseless that no
reasonable litigant could realistically expect to secure favorable relief.” Prof’l Real
Estate, 508 U.S. at 62. We do not find that here.
First, Appellees were partially successful in their appeal to the Board. On
review, the Board agreed with Appellees that the PUD restricted CSMN’s clinical use
to “outpatient,” not “inpatient.” CSMN tries to mitigate the importance of this ruling
by claiming that it had always planned to provide only outpatient treatment and, thus,
the Board’s limitation was meaningless. Though CSMN’s plans identified only
outpatient treatment, the fact remains that CSMN sought a PUD interpretation
19
allowing for inpatient treatment. Whether this was on accident or purposeful, had the
Board not limited care to outpatient services, CSMN could have operated an
inpatient-treatment center in the future. This alone shows that Appellees’ petitioning
had some merit.
Next, the history of the 2009 PUD amendment supported Appellees’
arguments to the Board and Colorado court, showing their arguments were
reasonable, though unsuccessful. With the 2009 amendments, Cordillera homeowners
tried to clarify that new uses would not substantively change the PUD. So in 2009,
when then-owner BHC proposed changing the PUD’s language to allow a “Medical
Offices/Facility” on the Village and Lodge parcels, CPOA objected that the proposed
use was “overbroad.” App. vol. 4 at 602. CPOA helped rewrite the provision,
resulting in language finally adopted in the 2009 PUD—language that the
homeowners believed was consistent with the PUD’s earlier-allowed uses. Thus,
when CSMN bought the property in 2016 and proposed closing the Lodge and
Village parcels to the public and opening an addiction-treatment center, we can
understand why the Cordillera homeowners would be surprised. In light of all their
input leading to the 2009 PUD, Appellees’ arguments that the new PUD
interpretation improperly restricted the formerly public Lodge and Village parcels to
private use make some sense. And while we agree with the state courts’ interpretation
of the PUD, we conclude that Appellees’ contrary arguments in the Colorado courts
were reasonable. The homeowners had a right to be concerned about a change to the
properties’ uses—especially one that restricted public access to a traditionally-open
20
community amenity—and to press for an interpretation that would preserve public
access.
Finally, we consider the state-court rulings in determining whether the suits
were objectively reasonable. The state district court opinion is thorough and well-
reasoned. Though the court criticized some of Appellees’ legal arguments as making
“little sense,” the court certainly did not deem them frivolous. Id. at 610–11. Rather,
both the district and appellate courts submitted lengthy opinions containing in-depth
analysis, treating Appellees’ arguments as time-worthy though ultimately
unpersuasive.
In sum, we find that Appellees’ appeals of the Director’s PUD interpretation
were objectively reasonable, meaning the sham exception does not apply. And
because the appeals were objectively reasonable,14 we need not consider Professional
Real Estate’s second step.
C. The California Motor Sham Test
CSMN presents an alternative basis for deeming Appellees’ petitioning a
“sham”: it argues that Appellees filed a “series of petitions without regard to merit[s]
and for the purpose of harming [CSMN’s] legal interest.” Opening Br. 31. Under
California Motor, “a slew of ‘state and federal proceedings to resist and defeat
applications by respondents to acquire operating rights or to transfer or register those
14
CSMN argues that it should be allowed further discovery about the objective
reasonableness of the appeals. But we can determine the objective reasonableness of
the appeals by examining the court filings and court rulings.
21
rights’” constituted a “sham.” Waugh Chapel S., LLC v. United Food & Commercial
Workers Union Local 27, 728 F.3d 354, 363 (4th Cir. 2013) (quoting Cal. Motor, 404
U.S. at 509). Thus, “sham litigation occurs where ‘a pattern of baseless, repetitive
claims . . . emerge[s] which leads the factfinder to conclude that the administrative
and judicial processes have been abused.’” Id. (omission and alteration in original)
(quoting Cal. Motor, 404 U.S. at 513).
We do not find this to be the case here. Appellees appeared before three
tribunals: (1) the Board, (2) the Colorado district court, and (3) the Colorado Court of
Appeals (CPOA only). Each of these appeals originated from the same case, meaning
multiple suits were not brought on the same issue—instead, the Appellees simply
appealed. In fact, CMD did not even continue its appeal after losing in state district
court. In contrast, the petitioners in California Motor repeatedly brought claims in
both state and federal courts, trying to prevent competitors from obtaining operating
licenses. 404 U.S. at 509. Unlike in that case, Appellees here pursued only a straight
line of appeals. Given these considerations, we do not find that Appellees engaged in
a series of lawsuits that were intended to abuse judicial processes. And thus,
Appellees’ conduct does not qualify for the California Motor sham exception and
Petition Clause immunity applies.
II. Unlawful-Objective Exception
CSMN asks us to adopt an unlawful-objective exception to Appellees’
“entitle[ment] to Petition Clause immunity.” Opening Br. 21 (title case removed).
Under its proposed exception, Petition Clause immunity would not apply to
22
petitioning seeking an unlawful objective. To support this exception, CSMN relies on
a Bill Johnson’s footnote and two circuit court cases.15 We decline to extend this test
outside the labor-relations context.
As discussed earlier, in Bill Johnson’s, the Court considered whether the
NLRB could enjoin “an [ongoing] employer’s lawsuit that the federal law would not
bar except for its allegedly retaliatory motivation.” 461 U.S. at 737 n.5. The Court
concluded that it could not. Id. at 743 (“The filing and prosecution of a well-founded
lawsuit may not be enjoined . . . even if it would not have been commenced but for
the plaintiff’s desire to retaliate against the defendant for exercising rights protected
by the [NLRA].”). The Court contrasted that situation with another, noting that the
NLRB could enjoin a suit seeking “an objective that is illegal under federal law.” Id.
at 737 n.5
Recasting these two situations, we see the following: (1) an employer lawsuit
with an improper motive (one that would be legal but for its improper motive), and
(2) a lawsuit seeking an illegal objective. Under Bill Johnson’s, the NLRB could
enjoin the second suit but not the first if that suit was objectively reasonable. The
15
One of the cases CSMN cites, Premier Electrical Construction Co. v.
National Electrical Contractors Association, Inc., 814 F.2d 358 (7th Cir. 1987), does
not apply here. It involved antitrust claims arising from conduct that sought “to use
the courts to carry out private cartel agreements.” Id. at 374. So unlike Appellees
here, who merely sought “a favorable rule of law,” the petitioners in Premier
Electrical sought more, because “[t]here is no such thing as the lawful enforcement
of a private cartel.” Id. at 376. Moreover, if Premier Electrical were decided today,
Professional Real Estate would apply to its antitrust claims, with the same result,
because a party cannot realistically expect success when asking a court to enforce a
private cartel.
23
first situation mirrors Professional Real Estate’s sham-petitioning test, while the
second situation applies that test to the labor-relations context, announcing a per se
rule that petitioning is objectively and subjectively unreasonable if seeking an illegal
objective.16 So in resolving a labor dispute, Bill Johnson’s used the method that
Professional Real Estate would adopt ten years later. In fact, Professional Real
Estate recognized Bill Johnson’s when it fashioned its two-step sham-petitioning
rule.17 Given these considerations, we limit the application of this per se unlawful-
objective rule to the Bill Johnson’s context, meaning it speaks only to what the
NLRB must show to enjoin an ongoing lawsuit.
Further, good reasons counsel against extending this per se rule beyond the
labor-relations context. For starters, the rule assumes that a suit seeking an illegal
objective is brought with improper motive. This would bypass a review of the
16
In International Longshoremen’s & Warehousemen’s Union v. NLRB, 884
F.2d 1407, 1414 & n.12 (D.C. Cir. 1989), the D.C. Circuit recognized that its
conclusion that a union had sought an illegal objective with its petitioning meant that
the union’s petitioning “necessarily had an improper motive” and “necessarily lacked
a reasonable basis.” So even several years before Professional Real Estate was
decided, courts were recognizing that the unlawful-objective exception contained
both an objective and subjective prong.
17
In Professional Real Estate, the Supreme Court partly relied on Bill
Johnson’s in concluding that “[o]ur decisions . . . establish that the legality of
objectively reasonable petitioning ‘directed toward obtaining governmental action’ is
‘not at all affected by any anticompetitive purpose [the actor] may have had.’” Prof’l
Real Estate, 508 U.S. at 59 (omission and second alteration in original) (quoting
Noerr, 365 U.S. at 140). To reach this conclusion, the Court noticed that Bill
Johnson’s had used an “analogy to Noerr’s sham exception . . . [to hold] that even an
‘improperly motivated’ lawsuit may not be enjoined under the [NLRA] as an unfair
labor practice unless such litigation is ‘baseless.’” Id. (quoting Bill Johnson’s, 461
U.S. at 743–44).
24
plaintiffs’ subjective motivation, substituting a per se rule that lawsuits seeking an
illegal objective are brought with improper intent. But in practice, not all litigation
seeking an illegal objective does so.18
By adopting an unlawful-objective exception to Petition Clause immunity, we
would eliminate immunity even in cases in which the party petitioning for redress
does so for benign reasons. We reject that result. Petition Clause immunity exists to
promote access to the courts, allowing people to air their grievances to a neutral
tribunal. In fact, “the ability to lawfully prosecute even unsuccessful suits adds
legitimacy to the court system as a designated alternative to force” and ensures that
litigants can argue for “evolution of the law.” BE & K, 536 U.S. at 532. For instance,
litigants might advocate in good faith for changes to laws, outside what is presently
allowed. See, e.g., Loving v. Virginia, 388 U.S. 1, 3–5 (1967) (seeking to validate a
marriage that petitioners recognized was then illegal under settled Virginia law).
Applying an unlawful-objective exception in these circumstances could expose those
parties to liability. Such a rule could stifle litigation and slow the law’s development.
We should promote development of the law, even when the result may be unpopular.
“It is important to emphasize that a person’s speech or petitioning activity is not
removed from the ambit of First Amendment protection simply because it advocates
an unlawful act.” White v. Lee, 227 F.3d 1214, 1227 (9th Cir. 2000).
18
We question whether a per se unlawful-objective exception survives BE & K
even under the NLRA. There, the Court stressed the importance of looking at both
objective reasonableness and subjective intent. BE & K, 536 U.S. at 526, 528.
25
With the two-step sham test from Professional Real Estate, we strike the
appropriate balance between protecting individuals’ First Amendment petitioning
rights and preventing lawsuits that are used to harass or discriminate against others.
Both the subjective and objective components are necessary to protect important First
Amendment rights. Adopting a categorical, unlawful-objective exception to the First
Amendment’s right to petition the government for a redress of grievances would run
the risk of imposing liability on individuals who seek to undermine what they
consider unjust laws. So for these reasons, we reject adopting a broad unlawful-
objective exception to Petition Clause immunity.
CONCLUSION
For the above reasons, we reject CSMN’s proposed unlawful-objective
exception to Petition Clause immunity and adopt Professional Real Estate’s two-
prong test for determining whether the sham exception to Petition Clause immunity
applies. Applying that test here, we affirm the district court and hold that Appellees
engaged in objectively reasonable litigation, and thus, the Petition Clause immunizes
their conduct.
26