GREENAWAY, JR., District Judge
This matter comes before the Court on the motion for summary judgment of Lowenstein, Sandler, Kohl, Fisher & Boylan, attorneys for defendant Ethyl Corporation ("Ethyl").
Cheminor Drugs, Ltd. ("Cheminor") and its recently-formed subsidiary, Reddy-Cheminor, Inc. ("Reddy-Cheminor"), allege that Ethyl is liable under theories of antitrust, malicious prosecution, abuse of process, tortious interference and unfair competition. On July 31, 1991, Ethyl filed a petition (the "Petition")
with the Department of Commerce ("DOC") and the United States International Trade Commission ("USITC"), requesting the imposition of anti-dumping and countervailing duties ("AD/CVD") on imports of bulk ibuprofen from India. The Petition, which is at the heart of this litigation, alleges that from 1988 through 1991, the Government of India subsidized Cheminor, an Indian company
, in excess of 76% of the export value of its bulk ibuprofen. Cheminor 12G P 18.
The Petition also alleges that from 1988 through 1991 Cheminor dumped bulk ibuprofen into the U.S. market at less than fair value ("LTFV"). Id. at P 19. Cheminor does not dispute either that it received subsidies or dumped ibuprofen in the U.S. market. Cheminor does assert, however, that Ethyl could not have prevailed on its Petition because it could not have proven that it was materially injured by the sale of the imported product. Cheminor also claims that Ethyl wrongfully filed and prosecuted a Petition, replete with intentional misrepresentations,
causing Cheminor to withdraw from the U.S. market and lose sales.
Ethyl filed the instant summary judgment motion and denied making any misrepresentations. Assuming arguendo, that Ethyl somehow misled the USITC about its financial condition, the issue presented, according to Ethyl, is whether plaintiffs can establish that the entire petitioning process was "objectively baseless". In short, Ethyl asserts that the record demonstrates that it had probable cause to file the Petition; as such, it is immune from antitrust liability pursuant to the First Amendment and the Noerr-Pennington doctrine. In the alternative, Ethyl claims that its legitimate petitioning of its government not only entitles it to First Amendment protection but also defeats each of plaintiffs' individual claims -- i.e., malicious prosecution, abuse of process, tortious interference, unfair competition and violations of federal and state antitrust laws.
Ethyl manufactures numerous chemicals, including bulk ibuprofen. Ethyl began manufacturing this anti-inflammatory drug in 1978. Turnispeed Certif. P 2.
In May 1984, the FDA gave ibuprofen manufacturers, Upjohn Co. ("Upjohn") and Boots Co. USA, Inc. ("Boots")
, its approval for a two and one-half year period of marketing exclusivity to sell over-the-counter ("OTC") ibuprofen in 200 milligram dosages. Id. at P 5. In September 1986, the period of exclusivity granted to Upjohn and Boots to market OTC ibuprofen expired and new ibuprofen products flooded the market. Id. As of June 1990, the FDA approved 27 companies to sell ibuprofen in one or another of several dosage forms. Id.7
In 1987, bulk ibuprofen manufactured in India began entering the U.S. market. In 1988, Cheminor received FDA approval to sell its bulk ibuprofen to tablet manufacturers in the U.S. From 1988 through 1991, Cheminor was the only Indian manufacturer, selling bulk ibuprofen to formulators in the U.S., that had secured appropriate FDA approval. Turnispeed Certif. P 6.
Ethyl contends that from the time Cheminor entered the U.S. market with commercial quantities of bulk ibuprofen in 1988, it experienced remarkable success in gaining both overall volume as well as market share. The success occurred primarily as a result of Cheminor's pricing strategy of selling bulk ibuprofen at LTFV. Id. at P 12. Ethyl also contends that it learned that Cheminor had been benefitting from numerous subsidies from its own government. Id. at P 16. Further, by 1991, Ethyl believed Cheminor was receiving subsidies from the Indian government in excess of 76% of the bulk ibuprofen's export value. Id. According to Ethyl, Cheminor went from importing 57,000 kilograms in 1988 to importing 200,000 kilograms in the first six months of 1991. Id. at P 7. This growth represented an increase in Cheminor's U.S. market share from 2.19% in 1988 to 11.19% for the first six months of 1991. Id. at P 10.
In 1988, based on Ethyl's belief that Cheminor was receiving substantial subsidies and that its sales were LTFV, Ethyl filed a petition with the Chairman of the Generalized System of Preferences ("GSP") Subcommittee, Office of the U.S. Trade Representative, asking it to "withdraw GSP eligibility for duty-free treatment on ibuprofen imports from India." Turnispeed Certif. at Ex. C. Because bulk ibuprofen was on the list of eligible articles under the GSP program, Cheminor -- unlike the foreign importers (and competitors) from the U.K., Japan and Spain -- did not have to pay any duty on its export of bulk ibuprofen to the U.S. The President of the United States denied Ethyl's request.
Id. P 21 and Ex. D. On May 19, 1989, Turnispeed received a letter from the Office of the United States Trade Representative ("USTR"), explaining that the USTR denied the Petition because "imports from GSP countries comprise only two percent of the U.S. market. Consequently, the USITC determined that removing ibuprofen from India from the list of eligible articles under GSP would have little [effect.]" Id. However, imports from India continued to increase substantially during 1989-1990. Thus, in 1991, Ethyl filed a renewed request with the USITC asking that the U.S. withdraw ibuprofen imports from India from the GSP eligibility list. The USITC granted this request, effective July 1, 1991. Id. at 27.
The U.S. government's decision to remove bulk ibuprofen from India from GSP eligibility did not obviate Ethyl's concern that Cheminor would continue to use the Indian government's subsidization it was enjoying at home to dump bulk ibuprofen in the U.S. market. Ethyl Brief at 5
On July 31, 1991, Ethyl filed an AD/CVD Petition with the DOC and the USITC
Ethyl's Petition alleged that ibuprofen from India was being sold in the U.S. at LTFV margins of 34% to 39%, Petition at 9, and that Cheminor was benefitting from over thirteen separate subsidies from the Indian government, amounting to more than 76% of the total export value. Id. at 18-34. Ethyl also alleged that Cheminor's continued practice of dumping subsidized bulk ibuprofen into the U.S. "has caused and is causing material injury to petitioner and threatens it with further injury." Id. at 34.
Upon the filing of the Petition, the DOC investigated whether bulk ibuprofen from India was sold in the U.S. at LTFV and whether it was subsidized by the Indian government. The USITC investigated whether Ethyl was materially injured, or threatened with material injury, as a result of the dumped and subsidized imports. Ethyl 12G P 27.
As part of its investigation, the USITC asked Ethyl to complete a questionnaire. On August 13, 1991, Ethyl returned the completed questionnaire to the USITC. Id. P 28. The USITC also sent questionnaires to Flavine and tablet manufacturers. Id. at P 29.
The DOC issued questionnaires to Cheminor as part of its AD and CVD investigations. Id. at PP 32 & 35.
Cheminor claims that Ethyl knowingly misrepresented information to the USITC in its Petition and responses to the questionnaires. Specifically, Cheminor alleges that Ethyl intentionally: (1) failed to disclose a product recall that reduced its 1990 profits by at least $ 1.2 million. Cheminor 12G P 105; (2) reduced its first half-year 1991 profits by $ 2.7 million by including research and development and manufacturing costs for S ibuprofen -- as opposed to ibuprofen -- a product which was not being imported from India in 1991 and therefore was not being investigated by the USITC. Id. at PP 88-93; and (3) reduced its first half-year 1991 profits by another $ 2.1 million by including future environmental and expansion costs. Id. at PP 74-87.
On September 16, 1991, the USITC issued its preliminary determination (the "USITC Report"), concluding that there was a reasonable indication that the ibuprofen industry in the U.S. had been materially injured by reason of bulk ibuprofen imports that the Government of India allegedly subsidized these imports, and Cheminor sold bulk ibuprofen imports in the U.S. at LTFV. Leonard Certif. P 17.
The USITC Report cited two separate and distinct indications of material injury: (1) that Ethyl's "financial trends" demonstrated material injury; and (2) that "other factors, such as apparent domestic consumption and market share, further provide a reasonable indication of present injury." USITC Report at 16.
The USITC began its injury analysis by identifying the factors it would consider in making its injury determination. The factors employed included domestic consumption, production, capacity, capacity utilization, shipments, inventories, employment, financial performance, capital investment and research and development efforts. USITC Report at 15-16. In articulating the bases for its conclusion that Ethyl was being materially injured, the USITC used the same reasoning it had initially set forth in the Report. Id. at 16.
Cheminor claimed that the USITC's preliminary determination had little significance because: (1) respondents had little or no input into the questionnaire the USITC used for its preliminary determination; and (2) the USITC had little or no time in its preliminary investigation to probe the accuracy of the information that the domestic industry submitted and must, in preliminary determinations, resolve all doubts in favor of the petitioner. Cheminor 12G PP 136-37.
On August 26, 1991, the DOC announced its determination to initiate the AD and CVD investigations and issued its preliminary CVD questionnaire to Cheminor and the Government of India. Leonard Certif. P 22. On December 13. 1991, the DOC made its preliminary CVD determination in favor of Ethyl, finding a subsidy in the amount of 43.71%. Id. at P 24 & Ex. N. Along with this preliminary determination, the DOC directed the United States Customs Service to require a cash deposit or bond for all entries of this merchandise, equal to 43.71% ad valorem, for bulk ibuprofen produced and exported by Cheminor. Id.
In a letter dated January 13, 1992, Cheminor informed the DOC of its intention to withdraw from the U.S. bulk ibuprofen market and that because of the DOC's CVD determination "all outstanding orders and letters of credit for Cheminor's bulk ibuprofen were canceled by its exclusive U.S. importer, Flavine International, Inc." Leonard Certif. P 25 & Ex. O. Cheminor also informed the DOC that it would not participate in either the AD or CVD verification. Id. at P 25.
On February 27, 1992, the DOC issued its preliminary determination that imports of ibuprofen from India were being sold in the U.S. at LTFV and that there was an estimated dumping margin of 115.94%. Leonard Certif. P 26.
On March 4, 1992, Ethyl informed the DOC that it was withdrawing its Petition. Id. at P 26. Ethyl claimed that Cheminor's announcement that it was withdrawing from the U.S. market undermined Ethyl's ability to allege that bulk ibuprofen from India posed a "threat of material injury to Ethyl." Turnispeed Certif. P 44. In addition, Cheminor's decision also had the practical effect of granting Ethyl more relief than it had sought by filing the Petition.
Cheminor claims that Ethyl's explanations for withdrawing its Petition are implausible. Cheminor alleges that "when Ethyl withdrew its petition, there was no assurance that Cheminor would not re-enter the United States market which assurance could have been obtained had Ethyl successfully prosecuted its petition to a conclusion or had the Department of Commerce entered into a suspension agreement with Cheminor and/or the Indian government." Cheminor 12G P 185. Cheminor claims that its announcement that it was leaving the bulk ibuprofen business could not, by itself, render moot the threat of material injury allegations in Ethyl's Petition. Id. at P 187. Cheminor also points out that Ethyl withdrew its Petition because it believed, and was advised by counsel, that it could not show material injury and would lose the USITC case.
Fed. R. Civ. P. 56(c) provides for summary judgment when the moving party demonstrates that there is no genuine issue as to a material fact and the evidence establishes the moving party's entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986); Orson, Inc. v. Miramax Film Corp., 79 F.3d 1358, 1366 (3d Cir. 1996). In making this determination, the court must draw all reasonable inferences; in favor of the non-movant. National State Bank v. Federal Reserve Bank of New York, 979 F.2d 1579, 1581 (3d Cir. 1992).
Once the moving party has satisfied its initial burden, the party opposing the motion must establish that a genuine issue as to a material fact exists. Jersey Cent. Power & Light Co. v. Lacey Township, 772 F.2d 1103, 1109 (3d Cir. 1985). However, the party opposing the motion for summary judgment cannot rest on mere allegations and must instead present actual evidence that creates a genuine issue as to a material fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 243, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Siegel Transfer, Inc. v. Carrier Express, Inc., 54 F.3d 1125, 1130-31 (3d Cir. 1995); Quiroga v. Hasbro, Inc., 934 F.2d 497, 500 (3d Cir. 1991) (citing Sound Ship Building Corp. v. Bethlehem Steel Co., 533 F.2d 96, 99 (3d Cir. 1976)); see also Schoch v. First Fidelity Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990) ("unsupported allegations in [a Plaintiff's] memorandum and pleadings are insufficient to repel summary judgment"); Fed. R. Civ. P. 56(e) (requiring non-moving party to "set forth specific facts showing that there is a genuine issue for trial.")
The so-called Noerr-Pennington doctrine "provides broad antitrust immunity for defendants who have invoked administrative and judicial processes irrespective of anti-competitive intent[.]" Miracle Mile Associates v. City of Rochester, 617 F.2d 18, 20 (2d Cir. 1980) (citing Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 5 L. Ed. 2d 464, 81 S. Ct. 523 (1961); United Mine Workers v. Pennington, 381 U.S. 657, 14 L. Ed. 2d 626, 85 S. Ct. 1585 (1965)). Thus, pursuant to Noerr-Pennington, "mere solicitation of governmental action with respect to the passage and enforcement of laws" is protected by the First Amendment and, therefore, is immune from Sherman Act liability. Noerr, 365 U.S. at 138; see also Pennington, 381 U.S. at 670 ("Noerr shields from the Sherman Act a concerted effort to influence public officials regardless of intent or purpose.") The broad immunity granted by the Noerr-Pennington doctrine was also extended to proceedings before administrative agencies and the courts in California Motor Co. v. Trucking Unlimited, 404 U.S. 508, 510, 514, 30 L. Ed. 2d 642, 92 S. Ct. 609 (1972).
The Court in Noerr, however, also held that immunity may not be enjoyed when the underlying litigation or solicitation of governmental action is determined to be "a mere sham to cover what is actually nothing more than an attempt to interfere directly with the business relationships of a competitor." 365 U.S. at 144; see also Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, Inc., 508 U.S. 49, 57, 123 L. Ed. 2d 611, 113 S. Ct. 1920 (1993) ("PRE ") (Court withheld immunity from "sham" transactions "because 'application of the Sherman Act' would be justified when petitioning activity, 'ostensibly directed toward influencing governmental action, is a mere sham to cover . . . an attempt to interfere directly with the business relationships of a competitor."') (citation omitted).
The Court in PRE outlined a two-part test which defined "sham" litigation and the circumstances in which the immunity exception to the Noerr-Pennington doctrine applies:
First, the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits. If an objective litigant could conclude that the suit is reasonably calculated to elicit a favorable outcome, the suit is immunized under Noerr, and an antitrust claim premised on the sham exception must fail. Only if challenged litigation is objectively meritless may a court examine the litigant's subjective motivation. Under this second part of our definition of sham, the court should focus on whether the baseless lawsuit conceals "an attempt to interfere directly with the business relationships of a competitor," through the "use [of] the governmental process--as opposed to the outcome of that process--as an anticompetitive weapon[.] This two-tiered process requires the plaintiff to disprove the challenged lawsuit's legal viability before the court will entertain evidence of the suit's economic viability.
508 U.S. at 60-61 (emphasis added) (citations omitted).
Moreover, "the existence of "probable cause to institute legal proceedings precludes a finding that an antitrust defendant has engaged in sham litigation'" Id. at 62. The Court added in PRE that probable cause is proven when the Plaintiff shows "that the Defendant pressed the action for an improper, malicious purpose." Id. (citations omitted). In short, probable cause to institute civil proceedings requires no more than a 'reasonable belief that there is a chance that [a] claim may be held valid upon adjudication." Id. at 62-63 (citations omitted); see also Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 422, 54 L. Ed. 2d 648, 98 S. Ct. 694 (1978) ("even when the law or the facts appear questionable or unfavorable at the outset, a party may have an entirely reasonable ground for bringing suit.")
Defendant in this case points to Music Center S.N.C. Di Luciano Pisoni & C. v. Prestini Musical Instruments Corp., 874 F. Supp. 543 (E.D.N.Y. 1995), as an example of a case where the court did not view the defendant's act of filing a petition with the USITC as "objectively baseless" even though the antidumping petition at issue was ultimately unsuccessful. In Music Center, the plaintiffs -- an Italian manufacturer of keypads for woodwind instruments, and a New York importer of these products -- sued an American competitor and its principal. Plaintiffs alleged violations of the Sherman Act, as well as state law claims of unfair trade practices, abuse of process and wrongful institution of civil proceedings. Plaintiffs also alleged, inter alia, that the defendants made misrepresentations in their antidumping petitions filed with the USITC. However, the USITC had previously made preliminary determinations that (1) the petition was sufficient to initiate an investigation and (2) there was a reasonable indication that the key pad industry in the U.S. was being materially injured by sales at LTFV. Id. at 553-54.
However, ultimately, the petition at issue in Music Center was unsuccessful, and the USITC, in its final determination found that, despite its initial finding of sales at LTFV, the industry in the U.S. was not being materially injured by reason of imports sold at LTFV. Id. at 554. Nevertheless, the court held that the prior antidumping petitions filed by the Defendant corporation could not be viewed as "objectively baseless", so as to allow an antitrust suit by the target of the antidumping investigation. Id. at 552-55. Specifically, the court held that:
the possibility does exist, however remote, that the institution of two unsuccessful antidumping proceedings nine years apart was intended solely to injure plaintiffs competitively in a trade war that defendants appear to be losing, and not to secure the trade relief for which such petitions were created by Congress. Even if such a malevolent intent could be shown, plaintiffs cannot sustain their burden of proving that defendants could not have reasonably expected success on the merits.
Id. at 554-55.
Moreover, the court in Music Center added that "an inaccurate petition, even one containing deliberate misstatements, might nonetheless not be so lacking in merit as to be objectively baseless." Id. at 549. Articulating the policy considerations behind its application of Noerr-Pennington, the court also said:
To allow antitrust claims based solely on broad and indistinct allegations of misrepresentation and "sham litigation" to reach discovery, regardless of the role the claimed misrepresentations played, or could have played, in the prior proceeding, would predicate the viability of an antitrust complaint on a petitioner's subjective intent, and not the objective merit of its petition, and thus directly contravene the Supreme Court's holding in PRE. Moreover, such discovery would have the effect of encouraging antitrust "strike suits", and effectively chill the First Amendment rights which Noerr immunity was intended to protect.