A California appellate court has considered whether association lawyers and their clients could be liable for violating the antitrust laws through discovery violations.
In 1998, Arleen Freeman and James Alexander (collectively, "Plaintiffs") brought a lawsuit against Sandicor, a regional multiple listing service owned by a group of REALTOR® associations. In 2003, the Plaintiffs filed a second lawsuit naming various association executives from the REALTOR® associations who were part of the original lawsuit, their attorneys, and the California Association of REALTORS® (collectively, the "Defendants"). During the initial lawsuit (now resolved), the Plaintiffs had been awarded damages for the wrongful withholding of discovery documents. The new lawsuit claimed that the Defendants had purposefully engaged in the discovery misconduct so as to delay a judgment in the original lawsuit, thereby extending an unlawful price fixing agreement. The trial court dismissed the lawsuit, and the Plaintiffs appealed.
The United States Court of Appeals for the Ninth Circuit affirmed the rulings of the trial court. The trial court had based its decision on the Noerr-Pennington doctrine, derived from the First Amendment of the Constitution of the United States. Noerr-Pennington protects statements made in petitioning governmental bodies from antitrust lawsuits. This doctrine extends to statements made in judicial proceedings, unless the statements are made as part of a "sham" petition.
The court considered whether the Defendants qualified for the Noerr-Pennington immunity. The court found that while discovery requests are not a "petition" to the court and so do not directly implicate Noerr-Pennington, they are still conduct incidental to a lawsuit and so would fall under Noerr-Pennington, so long as none of the "sham" exceptions applied.
Next, the court considered the applicable "sham" exception. Courts use a two-part test in evaluating whether the defense of a lawsuit is a “sham”. First, the court looks to see whether the defense raised is "objectively baseless". Since the Defendants had prevailed at the trial court in this case, the court ruled that the Defendants passed this test. Next, the court examines the defense to determine whether the defense is a "concealed attempt to interfere with the plaintiff's business operations". Again, the court found there was no evidence that the defense was intended to interfere with the Plaintiffs' business operations. The court found that the Defendants' defense of the original lawsuit to entitled them to the Noerr-Pennington immunity. Thus, the court affirmed the dismissal of the lawsuit.
Freeman v. Lasky, Haas & Cohler, 410 F.3d 1180 (9th Cir. 2005).