City of Cleveland v. The Cleveland Electric Illuminating Company

BOYCE F. MARTIN, Jr., Circuit Judge,

dissenting.

This is a complicated case with a complicated past. It presents a number of difficult antitrust issues in a unique setting. Moreover, it has already been before a jury twice, and a reversal by this Court would require yet another trial. For these reasons, I can sympathize with the majority’s desire to uphold the trial judge’s rulings and dispose of the case once and for all. Nonetheless, where, as here, the trial judge has committed clear error, I believe this Court has an obligation to reverse and remand no matter what the consequences. Accordingly, I must dissent as to the majority’s rulings on both the admissibility of the Miller Stipulations and on the collateral estoppel effect to be given the findings of fact by the Nuclear Regulatory Commission.

On the Miller Stipulations issue, I conclude that the district court erred in excluding the Miller Stipulations from evidence because they were admissible to show “the purpose and character of the particular transactions under scrutiny.” United Mine Workers v. Pennington, 381 U.S. at 670 n. 3, 85 S.Ct. at 1594 n. 3 (1965). Under this caveat to the Noerr-Pennington doctrine, acts which are not in themselves actionable under the antitrust laws nonetheless can be admitted into evidence if “probative and not unduly prejudicial.” The test here is the same as that under Fed.R.Evid. 403. Under this standard, the trial judge is required to view the evidence “in a light most favorable to its proponent, maximizing its probative value and minimizing its prejudicial effect.” United States v. Hans, 684 F.2d 343, 346 (6th Cir.1982), quoting from United States v. Brady, 595 F.2d 359, 361 (6th Cir.1979).

In this case, the trial judge failed to employ this standard. He did not give any consideration to the probative value of the stipulations despite the fact that this evidence was crucial to the City’s case. The jury was instructed that in order to find Cleveland Electric had a specific intent to monopolize, a necessary element of an attempt to monopolize violation, it must find not just that “CEI ‘wanted to win the competitive struggle’ ” but that it “intended to remove its opposition by unfair or unrea *1171 sonable means.” The evidence in the Miller Stipulations goes right to the heart of the question of whether Cleveland Electric’s means were unfair or unreasonable, particularly when the jury also had before it claims by Cleveland Electric that it was trying its best to comply with the Federal Power Commission order.

Moreover, in considering the prejudicial effect of the evidence, the trial judge did not look to what is normally considered prejudice in an evidentiary setting, that is, whether or not the evidence would inflame the jury’s passions against the defendant or otherwise make it decide the case on a basis unrelated to the merits, but rather to whether admission of the evidence would prejudice Cleveland Electric’s first amendment rights. See City of Cleveland v. Cleveland Electric Illuminating Co., 538 F.Supp. 1257, 1278-79 (N.D.Ohio 1981) (“To adopt the City’s position would emasculate and indeed gut the constitutional protection afforded under the Noerr-Pennington doctrine and have a ‘chilling effect’ upon the exercise of First Amendment rights.”) While I am aware that another court has apparently adopted a similar approach, see Feminist Women’s Health Center v. Mohammad, 586 F.2d 530 , 543 n. 7 (5th Cir.1978), ce rt. denied, 444 U.S. 924 , 100 S.Ct. 262 , 62 L.Ed.2d 180 (1979), I do not believe that this was the test laid down by the Supreme Court in Pennington when it said that such evidence was admissible if

probative and not unduly prejudicial, under the “established judicial rule of evidence that testimony of prior or subsequent transactions, which for some reason are barred from forming the basis for a suit, may nevertheless be introduced if it tends reasonably to show the purpose and character of the particular transactions under scrutiny.”

Pennington, supra, 381 U.S. at 670 n. 3, 85 S.Ct. at 1593-1594 n. 3. The way I read this language, decisions about probative value under Noerr-Pennington are to be made just as they would in any other case.

Moreover, even if I were to agree with the trial judge’s formulation of what constitutes prejudice in this case, the deference which he gives to first amendment rights is much too absolute. If, given the significance of the Miller Stipulations to its case, the City’s attempt to take advantage of the evidentiary exception to Noerr-Pennington will “gut” the protections afforded by Noerr-Pennington, it is difficult to think of any attempt which would not.

I note that Cleveland Electric, on appeal, attempts to justify the trial judge’s decision to exclude the Miller Stipulations based on traditional probative/prejudice calculations. It does not succeed. It argues first that the probative value of the stipulations was slight because merely cumulative, Cleveland Electric having already admitted that it desired to eliminate competition between itself and Muny Light. Cleveland Electric also claims that the Miller Stipulations would be highly prejudicial because they would “impugn” the character of its general counsel, who had written a letter to Muny Light stating that he would be happy to work with the City on the interconnection while, at the same time, recruiting Mr. Miller to file his lawsuit against the interconnection. I have already stated my belief that the evidence was highly probative. As to Cleveland Electric’s claim of prejudice, if the jury was inclined to conclude that Cleveland Electric’s attorney was acting duplicitously, that is not prejudice, it is common sense.

Accordingly, because I find no justification whatever for the exclusion of the Miller Stipulations from evidence, and because I find that this evidence was a crucial part of the City’s case, I would reverse the trial judge on this issue and remand the case for a new trial.

I also believe that the trial judge erred in not granting collateral estoppel effect to the findings of fact made in proceedings before the Nuclear Regulatory Commission.

It is well-settled that collateral estoppel effect can be given to final decisions of administrative agencies. See Kremer v. Chemical Construction Co., 456 U.S. 461 , 484 n. 26, 102 S.Ct. 1883 , 1899 n. 26, 72 *1172 L.Ed.2d 262 (1982); United States v. Utah Construction Co., 384 U.S. 394, 422 , 86 S.Ct. 1545, 1560 , 16 L.Ed.2d 642 (1966). The doctrine may, however, be more selectively applied in the administrative context. See United States v. Lasky, 600 F.2d 765, 768 (9th Cir.), cert. denied, 444 U.S. 979 , 100 S.Ct. 480 , 62 L.Ed.2d 405 (1979). In any event, “Neither collateral estoppel nor res judicata is rigidly applied. Both rules are qualified or rejected when their application would contravene an overriding public policy or result in manifest injustice.” Tipler v. E.I. duPont deNemours and Co., 443 F.2d 125, 128 (6th Cir.1971). The trial judge gave four different rationales for his refusal to give collateral estoppel effect to the Commission’s findings: (1) the Commission’s findings conflicted with findings on the same issues made by another administrative agency, the Federal Power Commission; (2) it was impossible to determine the specific factual findings underlying the Commission’s decision because of the irregular manner in which the Commission’s Appeal Board issued its decision; (3) the statutory mandate of the Nuclear Regulatory Commission is different from that of a federal court sitting in an antitrust action; and (4) the decision of the Commission was not final. Because I disagree with the trial judge's conclusions, 1 and because I do not believe that giving collateral estoppel effect to the Commission’s findings of fact would “contravene public policy or result in manifest injustice,” I would give collateral estoppel effect to the Commission’s findings of fact.

The initial argument against using collateral estoppel is based on the conflicting factual findings of the Nuclear Regulatory Commission and the Federal Power Commission. According to the trial judge, because each agency’s findings should be entitled to the same collateral estoppel effect, neither can be given any. I disagree. As the trial judge’s own order acknowledges, the factual findings made by the Federal Power Commission relative to alleged anti-competitive conduct were not at all essential to its ultimate decision, that a temporary, emergency interconnection should be built between Cleveland Electric and Muny Light. See City of Cleveland v. Cleveland Electric Illuminating Co., 538 F.Supp. 1227, 1234 (N.D.Ohio 1980). If a factual finding is not essential to an agency decision, it is not entitled to be given collateral estoppel effect. See United States v. School District of Ferndale, 577 F.2d 1339 , 1349 (6th Cir.1978); Continental Can Co., U.S.A. v. Marshall, 603 F.2d 590 , 594-5 (7th Cir.1979); 1B Moore’s Federal Practice ¶ 0.441[2], at 729-30 (2d ed. 1974). The statute pursuant to which the Federal Power Commission issued its order authorizes the Commission to require interconnection when it is in the public interest. 16 U.S.C. § 824a. The Commission found that the unstable nature of Muny Light’s generating system required that an interconnection be built. The City had also argued that the public interest required the interconnection because Cleveland Electric was operating in an anti-competitive manner. The administrative law judge rejected these contentions, but this rejection clearly was not necessary to his ultimate decision, because he had already concluded that an interconnection was necessary. Moreover, as the City points out, the Federal Power *1173 Commission hearings were conducted in March, 1972, and did not consider evidence of Cleveland Electric’s conduct after that time which was available to the Nuclear Regulatory Commission at its hearings. Finally, there was no full and fair hearing on the anticompetitive issues as is required to actuate the doctrine. See id., at ¶ 0.441[3.3]; Kremer v. Chemical Construction Corp., 456 U.S. 461, 480-81 , 102 S.Ct. 1883, 1896-1897 , 72 L.Ed.2d 262 (1982).

The second reason given to deny collateral estoppel effect was the irregular circumstances surrounding the issuance of the Commission’s decision. After the Licensing Board made its initial decision, Cleveland Electric and the other utilities appealed to the three-member, Nuclear Regulatory Commission Appeal Board. One member of that Board, Mr. Sharfman, wrote an opinion affirming in relevant part the Licensing Board’s determinations and its findings of fact. However, before the other members could complete their review of his opinion, Mr. Sharfman left the Appeal Board and entered the private practice of law. To avoid any appearance of impropriety, the remaining members did not discuss the case further with Mr. Sharfman. They wrote a separate opinion generally concurring in Sharfman’s opinion, but with certain exceptions, particularly as regarded relief. The trial judge found that certain language in their concurring opinion made it impossible to decide just what the three members were agreeing to:

Had Mr. Sharfman remained a member of this Board, or continued to be available for consultation, we might well have suggested revisions in his treatment of certain issues and have endeavored in other respects to persuade - him of the correctness of our views (particularly on the question of relief) to the extent that they do not coincide with his. Those options have not been open to us. In the circumstances, we file his opinion as it was presented to- us. We concur in its ultimate factual and legal conclusions and the result it' reaches except where indicated in our separate opinion, which follows immediately.

I do not share this uncertainty. The other two members specifically stated that they concurred in Sharfman’s “ultimate factual and legal conclusions” except where indicated in their separate opinion. That separate opinion shows no disagreement with any of the factual findings at issue here. Therefore, I do not agree that this provides a sufficient basis for declining to apply collateral estoppel.

The trial judge also declined to give collateral estoppel effect to the Nuclear Regulatory Commission’s findings because he found that the statutory mandate of the Commission differed significantly from that of a federal court sitting in an antitrust case. I do not agree with this argument, either. The statute at issue, 42 U.S.C. § 2135 (c)(5), directs the Commission “to make a finding whether the activities under the license would create or maintain a situation inconsistent with the antitrust laws.” In order to do that, the Commission must examine the past conduct of the utilities to determine if they have committed antitrust violations. This is exactly the task of the trial judge in a Sherman Act monopolization case.

The cases cited by the trial judge are readily distinguishable. In Tipler v. E.I. duPont deNemours and Co., 443 F.2d 125 (6th Cir.1971), this Court was presented with a situation in which the statutory mandates truly were different. The defendant was asking the Court to grant collateral estoppel effect in a Title VII race discrimination case to a NLRB finding that an employee was fired for cause and not for his union activities. The Court properly held that because the NLRB’s task was to determine only if union activities led to the employee’s discharge and not whether he was dismissed because of his race, it would not give collateral estoppel effect in the Title VII race discrimination case to the NLRB’s decision that the employee was properly discharged for cause.

The trial court also cited as support for its order a decision by another Nuclear *1174 Regulatory Commission Licensing Board refusing to grant collateral estoppel effect to a federal district court’s conclusion that certain utilities were not guilty of antitrust violations. See In Re Matter of Houston Lighting & Power Co., 10 N.R.C. 563 (1979), aff'd by Appeal Board, 11 N.R.C. 14 (1980). This case is also not relevant. There, the Nuclear Regulatory Commission was refusing to apply collateral estoppel to a conclusion of law by the district court, that there was no antitrust violation, and not to the findings of fact. In addition, there actually were different legal standards involved. The district court’s decision considered only section one, conspiracy allegations whereas the Nuclear Regulatory Commission was prepared to consider section two, monopolization and section five, unfair trade practices charges. In our situation, the Commission concluded that Cleveland Electric had committed section two, monopolization and attempt to monopolize violations. These are the issues that would be tried on remand, and it is only the factual findings which support those conclusions that the City seeks to have granted collateral estoppel effect.

Finally, the trial judge found that he could not give collateral estoppel effect to the Appeal Board’s findings because the agency’s decision in the case was not final. Cleveland Electric and the other utilities had petitioned the full Commission to review the Appeal Board’s decision. The Commission cannot change the Appeal Board’s findings of fact, but it can change its conclusion of law. Moreover, any decision by the full Commission could be appealed to the federal court of appeals. See 42 U.S.C. § 2239 , 28 U.S.C. § 2342 . A final decision is necessary before collateral estoppel can be invoked. See Ashe v. Swenson, 397 U.S. 436, 443 , 90 S.Ct. 1189, 1194 , 25 L.Ed.2d 469 (1970). Nevertheless, because neither party raised this issue on appeal, I assume that the Commission’s decision has indeed become final. In any event, the passage of time would cure any questions about finality if this case were heard on remand.

For these reasons, then, I would grant a new trial.

. I note that the district judge believed that he was entitled to exercise "broad discretion" in deciding whether to employ collateral estoppel. See City of Cleveland v. Cleveland Electric Illuminating Co., 538 F.Supp. 1227, 1232 (N.D.Ohio 1981). The majority seems to agree. However, in the case which is cited for this proposition, Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322 , 99 S.Ct. 645 , 58 L.Ed.2d 552 (1979), the Supreme Court was referring only to decisions concerning the use of so-called "offensive" collateral estoppel. In such cases, where there is no mutuality between the parties, the Court recognized that there could exist many complicating circumstances that would make the imposition of collateral estoppel unfair in particular cases. The Court's solution to this problem was to give the trial judge broad latitude in considering whether to apply the doctrine in a given case. When, as here, there is mutuality between the parties, these considerations do not apply. The decision to invoke or not to invoke collateral estoppel becomes a question of law, and like all such questions, is freely reviewable by this Court.