California Motor Transport Company v. Trucking Unlimited

PETITIONER:California Motor Transport Company
RESPONDENT:Trucking Unlimited
LOCATION:Former Ada County Courthouse

DOCKET NO.: 70-92
DECIDED BY: Burger Court (1972-1975)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 404 US 508 (1972)
ARGUED: Nov 10, 1971
DECIDED: Jan 13, 1972

ADVOCATES:
Boris H. Lakusta
Michael N. Khourie – for respondents

Facts of the case

Question

Audio Transcription for Oral Argument – November 10, 1971 in California Motor Transport Company v. Trucking Unlimited

Warren E. Burger:

We’ll hear arguments next in Number 92, California Motor Transport Company against Trucking Unlimited.

Mr. Lakusta, you may proceed whenever you’re ready.

Mr. Lakusta.

Boris H. Lakusta:

Mr. Chief Justice and may it please the Court.

The — the issue in this proceeding is whether the — the facts in a treble damage antitrust complaint, constitute a violation on — under the Sherman Act.

In this case, a — a group of 15 certificated motor carriers brought the complaint against a group of 19 motor carriers, certificated motor carriers, alleging that the defendant had violated the Sherman Act.

The complaint was amended and the first amended complaint is one with which we are concerned.

I — I shall refer to it simply as the complaint.

We move to dismiss it on the ground that it fails to state a cause of action under the Sherman Act.

Judge Sweigert of the Federal District Court agreed with our position and wrote a really extensive opinion.

In support of his views, he gave the plaintiff an opportunity to amend and they did not avail themselves about and instead appealed to the Ninth Circuit.

The Ninth Circuit reversed by a 2-to-1 vote.

The dissenting judge, Senior Judge Hamlin, wrote a separate dissenting opinion.

We then petitioned for a writ of certiorari to this Court.

Now, I turn to the complaint and we’ll summarize the — the fact which it alleges.

That alleges that these defending carriers got together in early 1961 and agreed on a program of protesting all certificate proceedings which might result in competition to the defendant.

All certificate proceedings brought before either the Interstate Commerce Commission or the California Public Utilities Commission.

The program was to include court review in the event the protest before the administrative body should prove unsuccessful.

The allegation is that the defendants agreed to finance a program jointly, under an arrangement under which each carrier would contribute monthly, a sum based on his gross annual revenues, rather than according to his interest or participation in any given case.

The agreement was that the program should be publicized to the carrier industry.

The complaint goes on to allege that the agreement was carried out and has been carried out consistently since 1961.

As to purpose, the allegation is that the agreement and program were designed to reduce or eliminate competition and that to achieve that — that anticompetitive result, the complaint alleges if we accept plaintiff’s version, which I think we must, for purposes of this case, that in defendant’s primary intent was to use the words of the complaint, to discourage and deter the plaintiff and others in like position from filing certificate applications or from pursuing those applications, was they did file.

In this connection, the — the plaintiff say that defendants — that the defending carriers intended to make as effective, a presentation in each case before the relevant commission as possible.

In fact they recognized that such an intent was essential to the primary purpose of giving authority to the desire to discourage or deter plaintiffs and others in the like position from coming before the Commission.

There’s no — there’s no suggestion in the complaint that the defendants were, at anytime, guilty of dishonesty or deception.

There is no suggestion in the complaint that the defendant at anytime offers false or irrelevant testimony.

I would like to turn now to the reasons why we believe the Sherman Act should — should not be extended to the fact that’s alleged.

The two cases on which we chiefly rely are Eastern Railroad Conference versus Noerr, decided in 1961 by this Court.

It — it was a unanimous decision and Justice Black wrote the decision.

The other case since United Mine Workers versus Pennington, decided four years later in 1965.

Boris H. Lakusta:

Mr. Justice White wrote the opinion for the majority in that case.

We start with a proposition in Noerr that a restraint imposed by Government is immune from the Antitrust Act.

That has been held in Parker versus Brown and U.S. versus Royal Rock.

It would seem to follow that — reason to believe that the efforts to influence Government to impose such governmental restraint should also be immune from the Sherman Act.

I think that is at least in broad terms, the — the holding in — in Noerr and in Pennington.

The joint efforts involved in Noerr were efforts to influence at least one state governor and more than one state legislature and also certain law enforcement agencies.

The joint effort in Pennington involved joint efforts to influence the Secretary of Labor and officials of the Tennessee Valley Authority.

Now, the Noerr case sets for three reasons for holding that the Sherman Act should not apply to these joint efforts.

The first reason was essential dissimilarity.

In other words that appeals to governmental bodies are essentially dissimilar from a kind of — of trade restraint which Congress had in mind when it enacted the — the Sherman Act.

The second reason given in Noerr was that there is indeed a — a strong policy of Government to encourage the — the free flow of information to governmental officials towards — with adopting or imposing restrictive action.

The third reason given was that if the Sherman Act were extended to apply in — in — in these joint efforts, it would raise serious questions of whether the First Amendment right to petition would be jeopardized.

So the second reason deserves our particular attention, namely, the strong policy of Government to encourage the free flow of information to governmental officers charged with action, which may have a restrictive effect.

The concept is that in such an area, the Government can do its job best in this very discretionary sphere, if it can call upon the information of members of the public who have an interest.

It is and as noted in Noerr, it is those that a competitive interest who can be best counted on and certainly are the most motivating to furnish the very kind of information which will be of assistance to the Government.

And I suppose you to charge (Inaudible) that that should be true, but it is true that those with anticompetitive motive can often be most useful in assisting the governmental body to make its determination.

Mr. Khourie, counsel for the plaintiffs, recognizes that reason in — in the Noerr case, but he says “And the doctrine should apply only to legislative and executive activity and in any event not to applications for certificates of public convenience and necessity for the general certificating process, engaged in by the Interstate Commerce Commission and the Public Utilities Commission.”

He goes to great efforts to say that their activities are judicial in — in nature and equates to the fact that certainly the procedures of those bodies have many, if the — the overtones of proceedings before a court, the calling of witnesses, swearing of witnesses and the receipt of false evidence, which is not here and so on.

Then he turns to the — hereto say that what these bodies do is — is to adjudicate in the realm of certification, then herein as to the patent cases, which he relies on very heavily for the proposition that efforts to obtain a restraint for the use of the judicial machinery maybe actionable under the Sherman Act.

I submit that the patent cases which in law of the grant of an absolute monopoly have little relevance to the case we have here and that all of them can be readily explained, if — if — to the extent they do present any conflict with the Noerr-Pennington doctrine.

Now, I submit that it is immaterial whether the action of the — of the Utilities Commission or the Interstate Commerce Commission be described as adjudication or adjudicatory or by any — any other name.

The pertinent question is whether the agency is substantially aiding by the kind of information which competitive interests can be expected to produce, if they are protected from the Sherman Act.I submit that the answer is yes, vis-à-vis, the ICC and the PUC.

So I — to substantiate that I — I point out what the certificate regulating function is.Senior Judge Hamlin, the dissenting judge of the Ninth Circuit, correctly characterized it as, “One, I can to policymaking”.

The concept of public convenience and necessity connotes a — a very broad discretion.

This Court has repeatedly said so.

The content can vary a great deal according to time and circumstances.

I would suggest that in practical effect, there is great difference between what I might describe as the public good standard, which a — a legislature or a governor employs, when he makes a — when he takes action of a restrictive nature and the public convenience and necessity standards which enable such the ICC or PUC applies.

The agency contract about Mr. Khourie would say, does not adjudicate rights.

There’s no such thing as a right by carrier A to a certificate.

On the contrary the agency is regulating in the public interest.

Boris H. Lakusta:

And the grant or denial of a certificate is simply an incident to that overall regulation of one segment of the public utility industry.

Now, with such understanding of a certificating function, it is perhaps no surprise that protests from existing carriers are sanctioned and encouraged.

The Interstate Commerce Act and the Public Utilities Code, both contained provisions which indicate an anticipation that the protest and participation of competitors in the form of those already holding certificates shall be entertained.

Then very specifically, the procedures of the two agencies provide for the invention of competitors.

That will be competitors is, so far the count for any permission goes at least, required to or entitled to receive notice of the application, if the application is for a certification in his area and such carrier is entitled to come in and protest and say his piece.

Indeed, it is customary both before the ICC and the PUC for groups of carriers to come in and protest as the defendant are alleged to have done here.

The only difference that I can see being that in this case, their program was a considered program to participate in all proceedings that came along rather than sporadically.

This leads me to comment on the concept of probable cause.

The — the complaint alleges that protests were filed in all cases and it goes on from the say thing to so say, “With or without probable cause and regardless of the merits.”

I suggest to Your Honors, that the concept of probable cause simply has no place in a proceeding which involves the issue of public convenience and necessity.

It is not the adjudication of a private right.

Probable cause is a concept which applies for instance in a — a suit on the contract, involving the payment of money in a — and most of the time, be determined very quickly, whether the complaint is frivolous or whether there is probable cause.

Byron R. White:

Well, Mr. Lakusta, we have — I take it, we’re approaching this case on the assumption that the allegation is in the complaint is true, I think.

Boris H. Lakusta:

We must, Your Honor, yes.

Byron R. White:

And — so we will you take this true that we — that in advance, the defendants agreed to oppose every petition of the time listed in the complaint.

We got without ever having seen it.

Boris H. Lakusta:

Yes.

Byron R. White:

And I — and I take as they did, regardless of what it says.

Boris H. Lakusta:

We — we accept that allegation.

And that —

Byron R. White:

Well, if they had agreed — if the parties had agreed to bribe one of the Commissioners to get a favorable decision in order to monopolize commerce, would you have a different argument?

Boris H. Lakusta:

I certainly would.

I consider that (Voice Overlap) —

Byron R. White:

Would it be (Voice Overlap) as you — well, I know it that it might be — there might be duly a bribery that — but it would — that if — duly of a Sherman Act violation, if they did it to — did it by subverting the — the adjudicatory process for the purpose of achieving a monopoly.

Boris H. Lakusta:

I should take they well might be.

The — the concept is —

Byron R. White:

Well, then you accept the Wood case.

Boris H. Lakusta:

I — I accept the Wood case.

Byron R. White:

Where if you agreed to file false information with the —

Boris H. Lakusta:

Yes, assuming that the facts are as they were found by — by the Court of Appeals —

Byron R. White:

Yes.

Boris H. Lakusta:

— in that case —

Byron R. White:

Yes.

Boris H. Lakusta:

— then I accept the Wood case.

I — I say that in — and if — in — found adjudicative — I — I beg your pardon.

In — in a proceeding before the Interstate Commerce Commission or the Public Utilities Commission which has its own procedures and which is designed to get a fact.

The — the presentation of — or false information should very welcome come in a — in a different category.

The presentation of facts which are relevant and bear upon that overall concept of what is in the public interest and which any two people can differ.

Byron R. White:

Well now, how many defendants are there?

Boris H. Lakusta:

There are 19.

Byron R. White:

19, they don’t operate on the same area, I take it.

Boris H. Lakusta:

No, there’s — to some extent they do.

They — they —

Byron R. White:

Would you think that —

Boris H. Lakusta:

— they’re overlapped.

Byron R. White:

— in every single defendant — every single defendant who’s named — would really have substantial interest in every single petition of any kind that was ever filed before the PUC or the ICC?

Boris H. Lakusta:

Well, I — I you — you will — you will observe, Your Honor, that the complaint alleges that the protests were filed in every case where there was a competitive interest, not in — not quite to me in — in every case, every conceivable case.

Byron R. White:

Well, I know, but what interest that some — what interest would A operating in Southern California, having agreeing with B, in Northern California for B to help him oppose and help — and jointly to finance the opposition before the PUC of a transfer of some operating right in Southern California.

Boris H. Lakusta:

Well —

Byron R. White:

What interest does the Northern California men does in contributing to — to —

Boris H. Lakusta:

I — I think, I — I understand your question, Mr. Justice White.

And — and the — the answer lies from the fact that what the Commission does is to regulate a whole industry and it is very much in the interest — it was very much in the interest of these defendants to make an effort to persuade the Commission to apply a more restrictive policy.

So that in every case since that the Commission does determine policy on a case by case basis, it means that every case that comes along, does involve an issue of the overall policy of the extent to which certification would be in the public interest.

Byron R. White:

But it’s — it’s hard to conceive that out of — there were 500 petitions filed, there wouldn’t be a single one of them that was meritorious.

Boris H. Lakusta:

Well —

Byron R. White:

And that every one of them deserves joint — jointly commenced doctrine.

Boris H. Lakusta:

Well, I — I think we — we have to bear in mind that the — the — our position was only to the extent and as permitted by the regulatory agency that there’s no allegation of abuse of the administrative process.

So I — I would say that the interest of every carrier who participated in — in this program arises from the fact that he has an interest in the overall way in which the Commission formulates its continuing policy in determining the scope and content to be given in —

Warren E. Burger:

In this respect is it basically fundamentally any different from collective enterprises by working men or collective enterprises of trade associations?

Boris H. Lakusta:

I —

Warren E. Burger:

This is — this is in fact a trade association, is it not?

Boris H. Lakusta:

Yes, it is, Mr. Chief Justice.

Warren E. Burger:

It’s a trade association of the ins against the outs.

Boris H. Lakusta:

It’s not really altogether the ins against the outs because the (Voice Overlap) plaintiffs as well or — or certificate of carriers.

Warren E. Burger:

Well, because it’s cast in this case.

Boris H. Lakusta:

Yes, it is.

It is, Mr. Chief Justice.

But I think basically it is what trade associations do when they group together to produce a — a joint result.

I — I believe that so long as the evidence offered by these protesters is honest and relevant, they are — and — and they are helping the agency formulate the policy.

Their activity should not be allowed to fall under the Sherman Act.

Now —

Warren E. Burger:

Don’t you have to — don’t you have to argue to make your case look even — with this First Amendment rights that underlies the case includes the right to act in bad faith and for improper motives.

Boris H. Lakusta:

Well, I — I think if — if it includes —

Warren E. Burger:

Improper is defined by the Sherman Act.

Boris H. Lakusta:

It — it includes the — the right to — to act for that kind of motive.

Yes, provided the — the intent, the one intent, namely, to influence the governmental body is — is genuine.

Now, in — in the Noerr case, also it’s a devious means were — were used to influence the legislature and the governor.

That kind of thing would — would not be allowed in an administrative body such as the ICC or PUC.

I would say that in that category, it has to be shown that the intent was to be as effective as possible with honest evidence and relevant evidence in order to come within the — the purview of the — the Noerr doctrine.

Byron R. White:

And are also, isn’t that the base of the matter that a — a question of whether the PUC, if it — in taking the action, can — well, we’ll put it this way, assume the ICC or the PUC decided to reduce the number of carriers in a certain area, the one given the monopoly.

How can it — how can a state PUC body do that under the antitrust law?

You have to get back to Parker don’t you?

Boris H. Lakusta:

Yes.

Well, you got back to Parker and they — that Parker can’t hold of course that any — any action by — by the Government (Voice Overlap) —

Byron R. White:

I didn’t say you.

Boris H. Lakusta:

And —

Byron R. White:

The State can authorize private individuals to violate the antitrust laws I suppose.

Boris H. Lakusta:

No.

Byron R. White:

It’s — but it can take action that isn’t reached by the — by the antitrust law.

Boris H. Lakusta:

That is quite true.

Boris H. Lakusta:

Now, I — I suggest that the — the action in this case, any restraint in this case is governmentally imposed because the final result is what the Commission does based upon evidence in granting or denying certificates.

As to the value of the participation in defendants, the complaint makes the remarkably revealing allegation that there were instances in which certificates were denied only because the defendants and only because the defendants were — were present.

That I think Judge White had put his finger on it, when he said that if you don’t have a protest, these applications otherwise become one-sided affairs, the Commissioners rendered more or less helpless, it does not have the manpower to go out and make all the investigations which the defendant motivated to come in and — and give evidence on.

And unless you permit them to come in, the Commission is — is in the very unhappy possession of having to give a certificate based only on what they see in — in the application.

Warren E. Burger:

So we — we don’t have in this case the distance where there’s joint efforts to persuade a governmental body or an administrative due simply doesn’t have power to do.

Boris H. Lakusta:

No.

There’s no allegation of that kind and I think that — that is the fatal weakness in this complaint.

The — the power, there’s no allegation that the administrative bodies ever lacked complete power to control their processes and prevent abuses in the form of redundancy or excessive protest.

There’s no allegation that the complaint that — that the agency’s lack the power to make determinations on the merit.

William O. Douglas:

I’ve seen the — in the comments in the California Law Review in this case that what this amounts to is that the defendants — I’m reading from this lower — this one sentence here —

Boris H. Lakusta:

Yes.

William O. Douglas:

— “Defendants substitute themselves for the Public Utility Commission and regulated for their own property.

The registration and transfer to certificates of public convenience and necessity.”

Boris H. Lakusta:

Well —

William O. Douglas:

Is that substantially correct?

Boris H. Lakusta:

I — I don’t — I don’t think that it — that it is correct, unless you —

William O. Douglas:

It’s supported by citing the — the decline application is a —

Boris H. Lakusta:

Yes.

Well, they — the decline in — in application is most significant, because it — it shows that the agency was enabled to — first of all that there was an effect of discouraging and deterring those from coming before the agency who did not — were not willing to withstand the — the test of — of making a — a presentation.

I — I submit, Your Honor, that the — the real crux of the matter is that a person who comes in and presents an application to the Commission should expect to have to under — undergo the — the burden of having to prove up.

Now, the effect of — of the program of the defendant was to keep out those who do not have the responsibility or the sense of responsibility to be willing to prove up, but they wanted in the sense was a free ride.

They wanted to take advantage of a situation that had obtained before when the Commission had nothing to go on except the application and therefore, was granting certificates more or less, freely and I — I think the —

William O. Douglas:

Does your organization intervene in those PUC cases?

Boris H. Lakusta:

It — it did.

Yes.

William O. Douglas:

I mean prior to the time that you were doing the things you charge would do here.

Boris H. Lakusta:

No.

Prior to the time of the activity alleged here, there were virtually no protests.

In fact, I think that’s alleged in — in the complaint certainly in — in the plaintiff’s briefing.

That there were virtually no protest and that Commission was granting certificates as they say under a legal policy.

Boris H. Lakusta:

The Commission does not have any liberal policy as such on — on the books.

It — it — contrary to what Mr. Khourie says, there was — indeed, there was a grace period to clean up the bad situation, but after that, the — the policy was public convenience and necessity.

And during the period until the defendants came, the certificates were granted as very freely, not because of any liberal policy, but because of the absence of the kind of — of counter evidence, which is very useful to the governmental body in making its determinations —

William J. Brennan, Jr.:

(Voice Overlap) issues hereto, with some — of conduct on the part of your clients to discourage applicants from ever going after certificates and threatening them that if they did, they’d be met with the kind of resistance which would make it very, very expensive?

Boris H. Lakusta:

Well if — if one reads to the factual context in the —

William J. Brennan, Jr.:

No, but are there allegations to that effect?

Boris H. Lakusta:

Yes.

And — and the —

William J. Brennan, Jr.:

And that’s — that’s — that was in the defense that you’re making?

Boris H. Lakusta:

Well, the — the allegation is that the way in which that threat occurs was to say to publicize fact, we will go in and we will protect.

So I say that any discouragement or deterrent is the result of governmental action –

William J. Brennan, Jr.:

Well, do you think —

Boris H. Lakusta:

— the governmental process.

William J. Brennan, Jr.:

(Voice Overlap) do you think that’s within Noerr that kind of conduct?

Boris H. Lakusta:

Yes, I think it is.

Because, unless — unless this kind of activity is protected.

It simply means that the agency is — is deprived of the kind of information —

William J. Brennan, Jr.:

Yes, but I — I thought this or this misconduct, as I understood the allegation, it discouraged (Inaudible) can never go and deviate, by threatening him and if he did he — he’s going to be met with a kind of resistance which would make the proceeding a very, very expensive one for him.

Boris H. Lakusta:

Well, there is — there is nothing — nothing wrong in — in imposing upon an applicant a requirement that he make out of his case.

Certainly, he has no — no right to — to receive a certificate without — without proving up his case.

And I think that — that is what — what justifies whatever discouragement or — or deterrent may have arisen on the program.

William J. Brennan, Jr.:

Well, certainly — certainly the fact situation is in neither Noerr nor (Inaudible) prove that aspect.

Boris H. Lakusta:

No.

It’s quite true.

It — it is different in that respect, Your Honor.

William J. Brennan, Jr.:

And there’s much more here than your practice of merely intervening in these cases.

Boris H. Lakusta:

I — I didn’t understand, Your Honor.

William O. Douglas:

That as Justice Brennan points up there’s much more than merely intervening in these PUC proceedings.

Boris H. Lakusta:

No, in the contrary Your Honor, that the factual allegations, Mr. — Mr. Justice Brennan has referred to conclusions but the factual allegation’s been supported or simply that the defendants publicized this program and said, “If you come in, we shall protest.”

Now, the — the expense can — can always be controlled by the agency itself.

Boris H. Lakusta:

There is no — no problem of — of an inability on the part of — of the plaintiff to complain to the Commission and say this proceeding is — is becoming too burdensome.

The evidence is being repetitious and I’d see many of cases where such an allegation has been made and the — and the proceeding has been carefully restricted.

Now, there was no — certainly, no allegation here that the defendants or — or that the agencies in question were rendered powerless to control any abuses.

Warren E. Burger:

Are you suggesting that this is essentially the same as though a newspaper carried a box on the front page saying, “If anyone sues us for libel — libel by virtue of what we say, we will — we will keep them in litigation for years and it will not be profitable to sue us for libel, something of that kind.

Are you suggesting this First Amendment right is the same as this hypothetical I’m giving you?

Boris H. Lakusta:

Well, your hypothetical goes a little bit far if that — if that news item said, “If you sue us libel, we will fight you and fight you hard and fight you all the way,” then I would say that is perhaps what we have here.

Warren E. Burger:

And you say that that’s what your point for doing?

Boris H. Lakusta:

Well, that — that is the allegation.

Warren E. Burger:

The allegation as distinguished from the conclusion as — and inferences drawn from those allegations.

Boris H. Lakusta:

Yes.

I — I figured it’s true to say that the — the allegation is that the defendants would protest in every — in every case, but always with that — that caveat that the protest would be within the realms of the administrative processes and would not transgress those protests and that the protest would be for the purpose of offering honest evidence and — and never falsify.

And I say that caveat is — is there because there’s no — no allegation in the complaint to the contrary.

Warren E. Burger:

Very well.

You consumed your entire time, Mr. Lakusta.

Mr. Khourie.

Boris H. Lakusta:

Thank you, Your Honor.

Michael N. Khourie:

Mr. Chief Justice, may it please the Court.

I — I think from Mr. Lakusta’s remarks about the content of the complaint, it’s certainly emphasized in my mind that a trial is needed in this case to determine what this plan embraced, whether it embraced as you posited this ad in the paper saying, “We’ll sue anyone or whether it said in effect, “If you sue us, we’ll defend on the good grounds.”

Because although we admit in our complaint, in our brief, that no lies were told because we don’t know of any.

We do not say that relevant information was given in all protest because many of the protests were made without any cost at all.

We’ve alleged this agreement was made in advance at one point.

In Coronado Hotel, in 1961, in San Diego which said that, “We will protest each and every application irrespective of what it is, where its location is, which is hereafter filed by any applicant.

Now, I would like in a moment, if I may, to review the — what I believe, the allegation clearly to say, but I think it’s important that at least that I communicate to this Court that what the charge here is that there is an abuse of the processes by which Government receives information by these defendants for anticompetitive purposes.

Now, the processes in this case are the processes which follow — happens to be the way that was set up for certification.

The processes are in the judicial model.

We have filled our appendix perhaps over full with regulatory processes — processes and rules which show that it isn’t a judicial model.

And of course, it’s the way that California and United States Congress and legislature has set up certification.

This is done because these are individually decided cases, based upon as Judge Browning said in the Ninth Circuit, “Standards of more or less generality,” but they still are individually-decided cases which much more are in the — not in the political rough and tumble which is all I believe that Noerr dealt with and that all Noerr meant to deal with.

Now, the processes that I’m speaking of are not government action, they’re self-actuated.

In other words, just like all court processes.

Michael N. Khourie:

You file a protest and things start happening without any Government official making any kind of a decision.

And those things are things which cause delay and expense.

And it is knowledge of these things and their impact on competitors which the defendants relied upon to harass and make expensive any protest.

Now, when a notice of appeal is filed, that’s just things in a motion and no government official and authority has made any kind of a decision.

Warren E. Burger:

So to every adjudicatory body possessed of enhanced powers to deal with, what we might call abuses of its process.

Michael N. Khourie:

Certainly is, Mr. Chief Justice Burger.

Warren E. Burger:

Isn’t — isn’t that — isn’t that the factor that backstops this situation?

Michael N. Khourie:

It is.

It’s the —

Warren E. Burger:

Why isn’t that enough ground without the Sherman Act?

Michael N. Khourie:

Because it is a — the abuse of the judicial process was — was designed to restrain competition.

Now, I don’t think the law is that — if there is another remedy that the Sherman Act is thereby ousted of jurisdiction, I believe that with — unless there’s a specific exemption in legislation as in some of the Interstate Commerce Commission Act exemptions, the Reed-Bullwinkle exemption etcetera, or unless there is an implied immunity as there was in the — in the Pan American case where there’s a coalition between the regulatory scheme and the antitrust laws or unless there’s a Parker against Brown type of immunity, which is a judge-created immunity, which construe the Sherman Act not to apply the valid state action or unless there’s a kind of immunity given in Noerr-Pennington.

I do believe sincerely that there is no immunity for tortfeasors who commit other torts and as against whom a competitor may have a tort action that that tortfeasor is thereby entitled to an immunity from the Sherman Act.

I believe the — the Sherman Act is a law of general application and you can violate it by lawful means and unlawful means.

And the mere fact for example that slander is perhaps a remedy which is available, or perhaps the Public Utilities Commission, although I don’t’ think it is within their can to remedy this situation because they would have to have a hearing on standing first, to see if there is probable cause for this person to be there.

But to answer your question, as I see it, I don’t believe that the mere fact that the regulatory body may have and prospectively I might say, the right to remedy this situation, can be used to deny these defendants the right to certain treble damages and they have been found to be damaged.

And I don’t think it oust the federal courts of jurisdiction.

I don’t think that was a congressional intent.

I think that these rules, these rules which are actuated by private citizens, because in Noerr, you have the — you have two things in Noerr, you had genuine attempts to influence Government for the purpose of restraining trade.

And that’s what was protected.

Here, there are no genuine attempts in our view.

The plan cannot be segmented between those applications which were protested and which there was probable cause and those applications which were — protests and which there were none.

What the defendants plan embraced was to protest everything and to appeal everything and to take everything to the highest level without exception.

And the thing that separates their plan, I think from Noerr, is that they knew that these government processes they were using would act directly upon — upon the applicants.

And they also knew — they also didn’t let the Public Utilities Commission know of their plan, nor the public, nor others.

They let their competitors know — they let their competitors know that as we say, they would appeal all the way.

The plan we say was a plan which was devised solely to deter the filing of applications.

It wasn’t devised for any other reason and Mr. Lakusta is incorrect at saying that we alleged that the plan was to provide information to Government in every case.

That’s not what we alleged at all.

We have alleged and we believe that we can prove that the plan was to deter other people from informing Government and from coming before Government and to intensify the — and here again, we admit there’s a burden to litigation.

Michael N. Khourie:

There’s an — there’s a burden to meeting the protests, legitimate protests of your competitor, but the plan here was to intensify it to such a degree, to let competitors know the wealth and the determination and the binding agreement that these 20 or so carriers had to take every protest and — and they protested to the — to the degree that they did.

This was made known immediately after the 1961 meeting.

William J. Brennan, Jr.:

If that is true that the protest automatically entitled the protestors to intervention?

Michael N. Khourie:

To a hearing, yes, it does.

William J. Brennan, Jr.:

It does.

Michael N. Khourie:

Now, there are other —

William J. Brennan, Jr.:

(Voice Overlap) that’s two of the ICC’s (Inaudible) of these?

Michael N. Khourie:

That’s correct.

And Entitles him under the rules to a rehearing.

Entitles him to bring it before the full commission, entitles him to go into the court system, entitles him to appeal to the — to the highest courts.

And that was a feature of a plan.

That’s what they said they were going to do.

It was in effect a — the use of the processes to terrorize, I believe, the competitors, smaller competitors by use of this gigantic force.

William J. Brennan, Jr.:

Do you conceive that would be part of your burden that he’d go to trial to prove that there were respective applicants who did not apply, because of misconduct that would be coming?

Michael N. Khourie:

We desire, Mr. Justice Brennan, to obtain damages for them.

We will have to prove under the applicable rules of damages that the impact —

William J. Brennan, Jr.:

That they did not apply.

Michael N. Khourie:

— that they did not apply.

Byron R. White:

You ask for an injunction, too?

Michael N. Khourie:

Yes.

Byron R. White:

At least you want that.

Michael N. Khourie:

We want an injunction.

Yes, we do.

Because we believe that the policy of the PUC have not changed.

The policy is still a liberal policy.

That’s why we say they have subverted the policies of the PUC.

They’ve done it by employing mechanisms which merely are expensive in — in coping with.

We do not believe — now, the point is made that they made the best case possible now, in every case.

Now, obviously they did because we believe that part of their plan and the plan couldn’t have been effective, must they went before the Commission with competent counsel, which they did.

They made every argument conceivable, which they did.

Michael N. Khourie:

And I submit that even if they — that there’s no probable cause whatsoever to our position that counsel can always think of arguments, always arguments, but the basic purpose was there and the result on a policy basis was that information stopped flowing to Government.

Because if you — in 1961, if you can take that breath of hands that were — these many applications.

And — and there was the right to protest.

And information was flowing to Government.

In 1962, there were that many applications and information to that extent was flowing to Government.

In 1964 and 1965 this — with these many applications and to that extent, information the Government was being curtailed.

It got to the point where no information was flowing to Government.

Thurgood Marshall:

You mean — you mean, it’s so effective that no application sufficed?

Michael N. Khourie:

Extremely few.

It — I can tell you that we can prove in my opinion that applications went from a level of pure competition because the policy of the Public Utilities Commission was that they were going to grant virtually every application upon a showing of fitness.

They had adopted and the — and in our brief, we cite opinions of the Public Utilities Commission, where they have adopted a policy of open competition.

Byron R. White:

They may have never changed that policy.

Michael N. Khourie:

We have — we do not believe they had changed that policy.

We believe that applications have dried up and we believe we can prove that applications have dried up.

We can prove that applications have dried up.

Byron R. White:

Are there any allegations in the complaint that they — that the defendants agreed to agree, if upon what — on what transactions not to oppose?

Let’s assume there was a merger proposed between one of the defendants and some smaller carrier or something.

Did they — did they agree among themselves not to (Inaudible) certain — certain transactions or is there — you just don’t allege that.

Michael N. Khourie:

We allege that Mr. Justice White, that the — they agree to oppose applications for certificates, applications to transfer certificates and applications to register certificates with the Interstate Commerce Commission.

And those are the — and they agreed to oppose all of their applications.

And as far as we know, they didn’t agree to —

Byron R. White:

All right.

Michael N. Khourie:

— do anything else.

Warren E. Burger:

I suppose good arguments could be made advanced if you ever get the trial in this case on the part of your opponents that it is not in the public interest to grant all applications.

Somehow, this is an enormous number of people holding certificates, the arguments have decided now.

Michael N. Khourie:

Well, they could but that —

Warren E. Burger:

So that extent, a further argument can be made, they serve public interest by keeping the operations confined to strong carriers.

Michael N. Khourie:

Well, any monopolist, I suppose, could take that position and perhaps they sincerely feel that that is a correct position.

Warren E. Burger:

Now, it’s almost the history of the railroads in the United States, doesn’t it?

Michael N. Khourie:

That’s correct, Your — Your Honor.

Michael N. Khourie:

However, I think, that’s the job of the Commission and not these defendants.

The defendants have, I believe in California taken over the job of regulating carriers.

And they’ve done so by — they don’t have to bribe.

They’re too powerful to have to bribe or too powerful to have to lie.

They have taken this power and they have used and abused a procedure, a delicate proceeding of Government, which is not the Noerr-Pennington type of behavior.

Potter Stewart:

In Noerr I suppose it was the prerogative of the Governor to veto or not to veto that so-called fair truck bill that the allegation in our complaint was that the defendants had filed their political clout and power had forced the governor to veto that bill.

And they complained it Noerr was that the whole course of conduct by the defendants was.

I’m quoting from the complaint, “Vicious, corrupt and fraudulent.”

And that their whole purpose was to absolutely destroy their competitors.

And yet the — well, you know what the Court held in Noerr, that despite those allegations there was no violation of the — of the Sherman Act.

Michael N. Khourie:

That’s right.

I believe that the Court in Noerr held that the values protectable in the —

Potter Stewart:

Political process.

Michael N. Khourie:

— in the political process where a representative government is involved and where the free access to — to the elected representative of people in the manner in which it was achieved in Noerr, was protected by the right to petition Government.

Noerr did have, Mr. Justice Stewart, the caution that there must be a genuine effort to influence Government.

In other words, no doubt in Noerr, there’s no doubt in Pennington that the defendants there sought to have the Government do their restraining for them.

Potter Stewart:

There have to be a genuine — genuine effort.

Michael N. Khourie:

Genuine effort.

Potter Stewart:

My understanding of your argument is in this case is that the effort was all too genuine and all too effective.

Michael N. Khourie:

The —

Potter Stewart:

Not just — not just a threat.

I am — I’m familiar with the language in Noerr that talks about a sham.

Michael N. Khourie:

Yes.

The effort in this case was not to have Government restrain trade.

The effort in this case was to make the processes of Government and I’m talking about these self-initiating processes where a government doesn’t have to act at all in a decision making kind of — kind of a proceeding, whereby filing a protest, there’s a hearing, but filing a petition for rehearing, there has to be another hearing.

That’s what has restrained trade in this case and not the decisions of the governmental body —

Potter Stewart:

(Voice Overlap) of the regulatory commission.

Michael N. Khourie:

That’s correct.

This is an abuse case.

It’s an abuse of process.

Potter Stewart:

It’s not a — you certainly, as I understand it, that it’s common ground that there was no misrepresentation of fact.

Michael N. Khourie:

We know of none.

But we do not —

Potter Stewart:

And — and there’s no allegation of any.

Michael N. Khourie:

We do not say by that, that there was always relevant information given that Mr. Lakusta has argued.

Potter Stewart:

(Voice Overlap) be very strange, if there were and there’s never been a lawsuit and it’s carried out as relevant.

Michael N. Khourie:

Well, there are always objections found —

Warren E. Burger:

Would the legislature —

Michael N. Khourie:

(Voice Overlap) excuse me.

Warren E. Burger:

— would the legislature of California has the power to meet your problem by providing that after one hearing, the decision of the Utilities Commission should be made and that would be unreviewable and final.

And — and then there could be no harassment.

Would that — would they have that power?

Michael N. Khourie:

It could.

The — the — as a matter of fact, the Public Utilities Committee — Commission is a creature of the legislature of California.

Warren E. Burger:

Well, that would be a solution to the harassment by repetitive appeals and that sort of thing, wouldn’t it?

Michael N. Khourie:

It would be a —

Warren E. Burger:

I’m not sure this (Voice Overlap) —

Michael N. Khourie:

— prospective goods —

Warren E. Burger:

— suggestion a good solution, but it (Voice Overlap) —

Michael N. Khourie:

— and it would be a prospective solution which might be achieved by lobbying and by persuading the legislature, which incidentally, these defendants could have tried to achieve this liberal policy that erred this shortening of a liberal policy that they objected to.

Warren E. Burger:

But your opponents would not like this kind of an amendment —

Michael N. Khourie:

No.

Warren E. Burger:

— of statute presumably.

Michael N. Khourie:

Exactly.

No —

Warren E. Burger:

But your —

Michael N. Khourie:

— prospectively, I’d — I believe that — well, prospectively, there’s no question, Mr. Chief Justice, that you’re right.

But for — and I don’t think that the antitrust laws would — would or could apply in that situation.

However, in the situation we have found ourselves in, where the legislature has decided to put this certificating function into the hands of the Public Utilities Commission and has decided to make certification and adjudicating procedure.

It didn’t have to do that, but it did that.

Michael N. Khourie:

And it isn’t adjudicated procedure.

And they set up the rules of procedure which have to be followed.

And these are — we believe that these — the abuse of these procedures for anticompetitive purposes have put these defendants forever within the Sherman Act.

Certainly, the mere fact their Public Utilities is subject to regulation and certainly, the mere fact that their may be pervasive regulation does not immunize them from the Sherman Act.

We believe and we argue that Sherman Act is applicable to them and that they are just like any other defendants because they chose this method.

They might have chosen lobbying and then protected by Noerr, but they did not choose the Noerr method.

Thank you very much.

Warren E. Burger:

Thank you, Mr. Khourie.

Your time has been consumed, Mr. Lakusta.

The case is submitted.