U.S. Supreme Court Narrows "Sham Exception" to Noerr-Pennington Doctrine

Date: August 1993

The First Amendment protects the right to petition the government,  even when the petition is motivated purely by self-interest. Thus, a business is free to seek enactment of laws that will insulate it from competition without risk of antitrust liability. The antitrust immunity accorded to these petitions to the government is referred to as the Noerr-Pennington doctrine.

Noerr-Pennington protection extends to the filing of lawsuits for anti-competitive purposes. For example, a company may file a suit to prevent a competitor from using confidential customer lists in the hope that the outcome of the suit will be to drive the competitor out of business. Notwithstanding the anticompetitive motivations underlying the suit, the company pursuing the litigation is immune from antitrust liability under Noerr-Pennington. Nevertheless, a company that files a lawsuit in the hope that the process of litigation with its attendant cost (as opposed to the outcome of the litigation) will injure a competitor does not enjoy Noerr-Pennington immunity. A suit filed with the intention of using the litigation process to injure a competitor is regarded as "sham" litigation not entitled to First Amendment protection.

In Professional Real Estate Investors v. Columbia Pictures Industries, Inc., 113 S.Ct.  1920  (1993),  the United States Supreme Court set forth a two-prong standard which must be met before a suit loses antitrust immunity and is termed a "sham." First, the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect to succeed on the merits of the suit. Second, there must be a showing that this baseless lawsuit was an attempt to use the litigation process - as opposed to the outcome of the litigation - as an anticompetitive weapon.

Professional Real Estate Investors puts new teeth into Noerr-Pennington's First Amendment protection. Litigants may no longer seek treble damages on the grounds that their competitors have violated the antitrust laws through filing of litigation against them merely by labeling that litigation a "sham." Rather, to strip a lawsuit of its Noerr-Pennington protection, the party asserting the antitrust violation must show that the suit was "objectively baseless" in addition to being improperly motivated. Absent such a showing, the initial litigation is protected from antitrust attack under Noerr-Pennington.

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