Aiming the Big Guns

My first antitrust trial was uncommon. Our client had previously sued a competitor for patent infringement and for inducing a breach of contract, in a heated bout of litigation that continued for seven years through two trials, an appeal, and proceedings before the Patent Trial and Appeal Board. When those lawsuits proved unsuccessful, the competitor filed its own suit in response, claiming that our client’s prior lawsuits had in fact been an act of racketeering and an effort to monopolize the market.

This struck me at the time, and may strike others, as an oddly aggressive tack. Lawyers and litigants who file frivolous lawsuits can be subjected to court sanctions, such as having to pay their opponents’ attorney fees. They can be sued for malicious prosecution. The lawyers can even be referred to the state bar for discipline. But a lawsuit for RICO and antitrust violations, in effect claiming that the prior lawsuits had been elaborate crimes? I hadn’t known that was an option.

Thus was I introduced to the Noerr-Pennington doctrine. An outgrowth of the First Amendment, the doctrine originally held that one cannot be liable under the antitrust laws for petitioning the legislative or executive branches (via lobbying) or the judicial branch (via litigation), even if the goal of the petitioning is to suppress competition. Courts have since expanded it to immunize petitioning conduct against other types of claims, including under RICO.

The idea is essentially that individuals should be free to ask the courts (or other branches) for help without worrying about retaliation through aggressive lawsuits seeking treble damages. Were such retaliation allowed, then either parties with legitimate claims could be scared away from raising them in court, or else litigation could turn into endless cycles of suit and counter-suit.

But the courts have also created an exception for “sham litigation.” If A sues B on “objectively baseless”—that is, frivolous—grounds, and if A does so not in hopes of winning, but instead to harm B merely through the litigation process (the cost, burden, and distraction), then the litigation can be deemed a “sham.” And B can then sue A for antitrust, RICO, or other claims on the basis of that litigation.

But that’s a hard case to make. In my trial, the opponent was required to prove to that our client’s patent and contract claims were so weak that it could never have realistically expected to win. And it was also required to prove that our client never actually believed it would win, or did not care whether it did. That was a tall order; our client had actually won on its contract claim (before it was reversed on appeal), and had fully expected to prevail on its patent claims after the opponent made what appeared to be a carbon copy of its product—which the opponent itself called a “knock off.” The judge in our case threw out the RICO claim, and the jury rejected the antitrust claim.

In the couple of years since then, I have watched with interest as a series of large companies has used the RICO statute to sue plaintiffs’ lawyers for what are allegedly abusive litigation tactics. [Disclosure: colleagues at my law firm represent one of those companies, and I will not be discussing that case.]

The theories vary. Ford alleges that a group of lawyers has sued it in various cases for defective cars under “lemon laws,” while inflating the fees they have claimed as part of the lemon law recovery. 3M asserts that other lawyers recruited coal miners to fabricate testimony that its face masks failed and caused their “black lung” disease. Uber has alleged that plaintiff lawyers conspired with doctors and others to fabricate injuries, rack up unnecessary medical bills, and pursue resulting cases against the company. And Blue Cross Blue Shield has said that certain medical providers are manipulating a claims settlement system created to handle billing for emergency medical services.

A couple things could make a difference. First, different courts have handled RICO cases based on prior litigation conduct differently. The Ninth Circuit has held that making fraudulent representations to a court in litigation can create a separate exception to Noerr-Pennington immunity. The Third Circuit has rejected any such exception. And other circuits have either been silent on the issue or come down somewhere in between. So the RICO cases filed in California (like Ford’s and one of Uber’s) may have an easier time than those filed in, say, Philadelphia. The Supreme Court just refused to take up a case that could have resolved this split, so the distinct approaches will continue for at least a while.

Second, the companies pursuing RICO claims have differed in how broad they claim the illegal conduct was. Ford, for example, seems to be focusing entirely on attorney fee submissions to the court—that seems to be purely a form of “petitioning” usually protected under the First Amendment. Uber, by contrast, has described a range of fraudulent out-of-court actions, such as unnecessary medical procedures. That conduct is not traditional petitioning, and a court could find that the alleged scheme is not subject to Noerr-Pennington analysis at all.

Motions to dismiss in these recent cases are pending, so I expect that within the next year, we’ll have at least a smattering of new decisions to analyze, and we’ll have some better idea where the “sham litigation” model of RICO litigation is headed.