Opposition Brief — Allied Tube & Conduit Corp. v. Indian Head, Inc.

| , weprenic UUUTL, U.

- FILED

No. 87-157 AUG 21 1987

JOSEPH F. SPANIOL,

CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1987

\

>

ALLIED TUBE & CONDUIT CORPORATION,

Petitioner,

—_—V—

INDIAN HEAD, INC.,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

RESPONDENT’S BRIEF IN OPPOSITION

FREDRIC W. YERMAN

425 Park Avenue

New York, New York 10022

(212) 836-8000

Attorney for Respondent

Of Counsel:

Michael Malina

Randolph S. Sherman

Ira S. Sacks

Richard A. De Sevo

Bert L. Slonim

Donna M. Gerber

KAYE, SCHOLER, FIERMAN,

HAYS & HANDLER

425 Park Avenue

New York, New York 10022

(212) 836-8000

August 21, 1987

_« COUNTERSTATEMENT OF QUESTION PRESENTED

Should this Court invoke its certiorari jurisdiction to deter-

mine whether a unanimous Court of Appeals erred in refusing

to extend the Noerr-Pennington doctrine to immunize from

antitrust scrutiny under the Rule of Reason a conspiracy

among competitors—motivated, at least in part, by a desire to

maintain their hold on a concentrated market—to exclude a

competing product from an industry code (and, hence, from

the marketplace), where:

(a) The jury found that the conspiracy had “sub-

vert[ed] the consensus standard making process” of the

private trade association, thus eliminating the procom-

petitive benefit that justifies voluntary non-governmental

standard making;

(b) The conspiracy was implemented by stacking the

association’s membership vote with “bodies” who were

“instructed” “how to vote” and ordered to remain

“nailed to [their] seats” until the agreed-upon exclusion

was accomplished; and

(c) The product’s exclusion from the code caused direct

marketplace injury separate and apart from any injury

caused by the code’s adoption by organs of state and local

government?

TABLE OF CONTENTS

STATEMENT OF THE CASE ..........---e eee eeee>

ee ee Cede sees eccercsecceccecce

1. The Parties and Their Products.............

2. The NFPA and the National Electrical Code .

3. The Admitted Conspiracy to Exclude ENMT

I cu ceccccccencccsceces

a. The Conspiracy’s Formation............

b. The May, 1980 Meeting—The Conspiracy

ced cee eeeccececcseossece

4. The Sanders Committee Report.............

5. The Conspiracy’s Market Effect ............

B. The Proceedings Below ............--+-eeeeee:

tv

eect wececcece

The District Court’s Oral Decision..........

The Court of Appeals’ Decision ............

REASONS FOR DENYING THE WRIT.........---.

1. This Case Does Not Involve “Political Activity”

with No Direct Market Impact...............--

Il. Imposing Antitrust Liability for Allied’s Con-

certed Subversion of the NFPA’s Consensus

Standard Making Process Will Not Chill Good-

Faith Debate in Standard Making Bodies........

CONCLUSION .....cccccccccccccccecees mekeee ieee

27

TABLE OF AUTHORITIES

Cases: PAGE

American Society of Mechanical Engineers, Inc. v.

Hydrolevel Corp., 456 U.S. 556 (1982)........... 18-19, 25,

25nn.34&35

Arizona v. Maricopa County Medical Society, 457 U.S.

SN 5 Cc oe uccuawaeducnesesasecesteneanaeel 25n.35

Ashley Meadows Farm, Inc. v. American Horse Shows

Association, 1983-2 Trade Cas. (CCH) 4 65,653

GEE Gs Oe BOD cc cscccccss Vie wuunde dk maaan sean 20n.23

Associated Press vy. United States, 326 U.S. 1 (1945). ..25n.35

Board of Directors of Rotary International v. Rotary

Coe OFS. Gh, Fe es ove cccwnvendevesenses 23

California Motor Transport Co. v. Trucking Unlimited,

SS OB. Fe Ce che neccxpccaveecs esekeneunee 23-24

City of Lafayette v. Louisiana Power & Light Co., 435

DFO vcs h cc evkeceecnvscweneseeneureens 17n.19

City of Los Angeles v. Preferred Communications, Inc.,

8 Re Ree rT eee 23

Consolidated Farmers Mutual Ins. Co. vy. Anchor Sav-

ings Association, 1980-2 Trade Cas. (CCH) 4 63,530

(10th Cir. 1980), aff’g 480 F. Supp. 640 (D. Kan.

SVE a ckdccknudcedsedtecs bankebieeieaeseccenaees 21n.27

E. A. McQuade Tours, Inc. v. Consolidated Air Tour

Manual Comm., 467 F.2d 178 (Sth Cir. 1972), cert.

Geet, GP A. CH Oe 66446 ve ckceacasaceues 21n.27

Eastern Railroad Presidents Conference v. Noerr Motor

Fretes, Bie. « Fae wis CST CRORE cc cccccccecucosns passim

ill

PAGE

ECOS Electronics Corp. vy. Underwriters Laboratories,

743 F.2d 498 (7th Cir. 1984), cert. denied, 469 U.S.

SPN: 3 bueuseeS Kabkesenbsinkeeeeudiennnes 21n.27

Feminist Women’s Health Center, Inc. v. Mohammad,

586 F.2d 530 (Sth Cir. 1978), cert. denied, 444 U.S. 924

twee tectiat eee caeehieedaeebees | acids 19

FTC v. Indiana Federation of Dentists, 106 S. Ct. 2009

GEE wcwene i cdduatlaceuddevescadestsuluaeeteas 25, 26

Giboney v. Empire Storage & Ice Co., 336 U.S. 490

GE ao sok cadecéekesecetedakeneiceriaese 24&n.31

Litton Systems, Inc. vy. American Telephone & Telegraph

Co., 700 F.2d 785 (2d Cir. 1983), cert. denied, 464

i. EE ss dc nknedk cneennda@enceeeunsee 20n.23

MCI Communications Corp. v. American Telephone &

Telegraph Co., 708 F.2d 1081 (7th Cir.), cert. denied,

eee ee re Se 20n.23

Mid-Texas Communications Systems, Inc. v. American

Telephone & Telegraph Co., 615 F.2d 1372 (Sth Cir.),

cert. denied, 449 U.S. 912 (1980). ....6........005. 20n.23

National Society of Professional Engineers v. United

Saaten, GSS UD. G70 CITED vc vcccscccesc 24n.31, 25&n.35

Posadas De Puerto Rico Associates v. Tourism Co., 106

Oa. chal e's pine db aeéu eked eae Carer 24n.32

Roberts v. United States Jaycees, 468 U.S. 609 (1984)... 23

Roofire Alarm Co. vy. Royal Indemnity Co., 202 F.

Supp. 166 (E.D. Tenn. 1962), aff’d without opinion,

313 F.2d 635 (6th Cir.), cert. denied, 373 U.S. 949

Gn gsc vk eve kw ceees5d0 ss sacusnk bineeneekens 21n.27

Rush-Hampton Industries v. Home Ventilating Institute,

419 F. Supp. 19 (M.D. Fla. 1976) .......... 20n.23, 23n.30

PAGE

Sessions Tank Lines, Inc. v. Joor Mfg., Inc., 1986-1

Trade Cas. (CCH) € 66,989 (C.D. Cal. 1986), appeal

pending, Dkt. No. 86-6208 (9th Cir.) .......20n.23, 23n.30

Standard Sanitary Mfg. Co. v. United States, 226 U.S.

ERS x ad 6 ce ka Oise oseeke SACO En eae eee 25n.35

Structural Laminates, Inc. v. Douglas Fir Plywood

Ass’n, 261 F. Supp. 154 (D. Or. 1966), aff'd, 399 F.2d

155 (9th Cir. 1968), cert. denied, 393 U.S. 1024

Seen Ue a vucuu cal ba aden eee beeekan aed eeanseus 21n.27

Sure-Tan, Inc. v. NLRB, 467 U.S. 883 (1984)......... 24n.33

Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985) 19

United States v. Johns-Manville Corp., 259 F. Supp. 440

ee ee I ah A A as ead pee uae bs 19-20

United States v. Johnston, 268 U.S. 220 (1925) ....... 18n.21

United States v. O’Brien, 391 U.S. 367 (1968)......... 23

United States v. Southern Motor Carriers Rate Confer-

ence, Inc., 702 F.2d 532 (Sth Cir. 1983), reaff’g en

hanc 672 F.2d 469 (Sth Cir. 1982), rev’d on other

erases. Gt TF. Ge CRO kos sce secccéscvcccecess 20n.23

Wheeling-Pittsburgh Steel Corp. v. Allied Tube & Con-

duit Corp., 573 F. Supp. 833 (N.D. Ill. 1983) ...... 20n.23,

23n.30

United States Constitution:

es id pabekeee ee upeenenee’ passim

Statutes, Rules and Regulations:

Internal Revenue Code:

eT SS Lk 8 oe By er ryan 3

rr ee ee ee ee aeese bees 3

PAGE

Sherman Act:

Se ol § err rrr rrr passim

Rules of the United States Supreme Court:

Ee a eee

Federal Trade Commission:

Administrative Opinion and Ruling, 16 C.F.R.

$f fe Torr rr ret TTT Teter 21n.27

STATEMENT PURSUANT TO

SUPREME COURT RULE 28.1

The parents of respondent (whose name was changed to

TBG, Inc. after the filing of the complaint) are TBG North

America Limited, TBG Holdings, N.V., Favorita Holding

Company Limited, Tamara Corporation, and Thyssen-

Bornemisza Continuity Trust. Respondent has no non-wholly-

owned subsidiaries. Respondent’s domestic affiliates are TBG

North America Ltd., Agriquip Midwest, inc., CCL Leasing

Corp., Cap Inc., CLSI, Inc., C L Systems, Inc., Computer

Library Services International Ltd., Continental Healthcare

Systems, Inc., Ball-InCon Glass Packaging Corp., Greenland

(Delaware) Inc., Information Handling Services, Inc., TBG

Information Systems, Inc., Innotec Group Inc., International

Berkefeld-Celle Filter Corp. of USA, Madera Glass Company,

Moba USA Inc., Multi-Amp Corporation, Multi Amp Services

Corporation, Mokveld Valves Inc., Predicasts International,

Inc., Staalkat U.S.A. Inc., TBG Information Co. Inc., Vulcan

Petroleum Inc., Vicon Credit Corporation, Vicon Farm Ma-

chinery, Inc., and Vicon Southeast, Inc. All of respondent’s

foreign affiliates are privately held companies.

iN THE

Supreme Court of the United States

OCTOBER TERM, 1987

No. 87-157

—~>—

ALLIED TUBE & CONDUIT CORPORATION,

Petitioner,

—_V—_—

INDIAN HEAD, INC.,

| Respondent.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

>

RESPONDENT’S BRIEF IN OPPOSITION

The Petition does not present any issue meriting review by

this Court, since neither of the reasons advanced to justify

granting certiorari arises from the record in this case.

(1) Contrary to petitioner’s assertion, the decision of the

Court of Appeals does not apply the Sherman Act to political

activity with no direct marketplace impact. The conspiracy in

question did not involve political activity; it entailed a

deliberate—and successful—effort by competitors in a concen-

trated market to subvert the consensus standard making pro-

| cess of a private trade association in order to deny marketplace

access to a competitive product. Moreover, the jury found that

petitioner’s conspiracy did have a direct impact on the

marketplace—a finding expressly affirmed by the Court of

Appeals, which denied rehearing, inter alia, on that precise

issue.

(2) Nor does this record support petitioner’s contcntion that

the ruling below will chill any First Amendment right to engage

in good-faith debate in private code-making bodies. Far from

good-faith debate, the conspiracy for which Allied was found

liable involved anticompetitive conduct which, as the jury

found, subverted the code-making process and unreasonably

restrained trade.

The Court of Appeals, in reinstating a jury finding of an

unreasonable restraint of trade violative of the Sherman Act’s

Rule of Reason, applied settled principles of law and declined

to extend the Noerr-Pennington doctrine beyond its proper

ambit. That eminently correct ruling does not conflict with any

decision of this Court or of any court of appeals and does not

warrant review by this Court.

STATEMENT OF THE CASE

The Petition correctly states that “[t]he facts giving rise to

this case are well stated in the opinion of the Court of

Appeals.” (Petition (“Pet.”) 2). The Second Circuit’s decision,

however, does not recite all of the pertinent facts material to

consideration of the Counterstatement of the Question Pre-

sented. Accordingly, we set forth such facts below.

A. The Facts

1. The Parties and Their Products

Petitioner and respondent are manufacturers of products

which compete head-on in the marketplace. Carlon, a division

of respondent Indian Head, Inc., manufactures and sells vari-

ous types of electrical conduit and fittings made of polyviny!

chloride (“PVC”). (A. 1554, 508, 515, 517).' Defendant Allied

Tube and Conduit Corporation (“Allied”) is the largest pro-

ducer of electrical metallic tubing (“EMT”)—i.e., steel

conduit—in the United States. (A. 1009).

Electrical conduit is a hollow tube that carries insulated

wires which transmit electrical current. (A. 906-07). The

I Citations to the record conform to those in the Petition.

Carlon product involved in this case—electrical nonmetallic

tubing (“ENMT”)—has a number of significant competitive

advantages over steel conduit due to its pliability, its lower

installed cost and its lower susceptibility to short circuiting. (A.

§18-20, 531-34, 1503 B-C, 1554-55, 1896).* In 1980, when

Carlon began offering ENMT as a substitute for EMT, it

confronted a stable market dominated by five EMT producers,

the largest of which was Allied, with a market share of 35% to

40%. (A. 520, 535-36, 990, 1009-10, 1555, 1647, 1669A).

2. The NFPA and the National Electrical Code

The National Fire Protection Association (“NFPA”) is a

“private, non-governmental . . . voluntary membership orga-

nization” barred by law from “attempt[ing] to influence legis-

lation.”* One of its principal activities is the promulgation,

through a process called “consensus standard making,” of

product standards and codes related to fire protection. (A. 496,

595, 1170-71). As the term implies, NFPA members attempt to

reach a consensus, objectively arrived at on the merits, with

respect to standards that are then offered to the public. (A.

709, 718, 1170). Although the NFPA encourages new member-

ship “so that it can represent as broad a spectrum as possible,”

no single interest is supposed to become so large that it “can

predominate and make the standard the creature of that

interest.” (A. 595, 707-10, 756-58, 1193). While there are no

prerequisites for voting at the annual meetings at which the

standards are adopted, there is an “inherent assumption” that

the members voting at the meeting “know what they are

2 The Petition’s assertion (Pet. 9) that the parties agreed that “the

exclusion of PVC conduit from the 1981 NEC was supported by objective

scientific evidence” is misleading. It was stipulated below that there is a

substantial body of opinion, including views held by those in both the plastic

and steel industries, disagreeing on the relative safety of plastic and steel

conduit. As the district court instructed the jury, “[aJll the jury should

assume is that the parties do not dispute that people disagree on the issue and

there is an objective basis for a concern for safety.” (A. 69).

-

3 A. 1555; see 26 U.S.C. §§ 170(c(2)(D), 501(c)(3).

4

doing” based on full disclosure of all relevant information. (A.

711, 1139-40, 1340, 1556). “=

The NFPA code at issue here is the National Electrical Code

(“NEC”) which sets standards for electrical systems, including

electrical conduit. (A. 496-97, 1556). The NFPA publishes the

NEC every third year following a multistep, several-year-long

process, ending with a vote by the full membership at the

annual meeting. (A. 544-48, 554, 905-06, 1556, 1848-55, 1897).

In 1980, a simple majority vote of those members present at

the meeting was sufficient to approve or defeat a proposal. (A.

1849).

Following NFPA adoption, in addition to serving as the

basis for private decisions that directly affect market competi-

tion,’ the NEC is adopted, in whole, in part or with amend-

ments, by many governmental entities, including state

legislatures and administrative boards and county, city and

other local governmental bodies. (A. 496-97, 690, 900-01,

1557; see generally A. 137-362, 364-453). Because of the NEC’s

reputation as the product of consensus standard making and

the large number of governmenta! bodies involved, inclusion in

the NEC is a practical prerequisite to any product’s inclusion

in governmental codes. (See, e.g., A. 365, 690, 718, 458-59).

Adoption by organs of government, however, is neither

automatic nor routine. (A. 432-53, 903-04). There is significant

lobbying at the legislative level. Indeed, approximately one-

half of the states that adopt electrical codes do not adopt the

NEC verbatim. (A. 433-34). As Allied conceded, the NEC

“does not itself have the force of law” and “is not itself legally

operative.” (A. 1556-57).

3. The Admitted Conspiracy to Exclude ENMT from

the Market

Just before the case was submitted to the jury, Allied

conceded that it had conspired with, inter alia, Republic Steel

Corporation (“Republic”), Wheatland Tube Company

(“Wheatland”), other EMT competitors and Allied’s indepen-

4 See pages 10-11, infra.

5

dent sales agents to exclude ENMT from the 1981 NEC by

stacking the May, 1980 NFPA meeting. (A. 1397, 18-22). Allied

also conceded that it “had a pecuniary or commercial interest

in seeing to it that the product was not approved.” (A. 77-78).

The evidence that compelled these concessions was overwhelm-

ing.

a. The Conspiracy’s Formation

On September 18, 1978, Carlon submitted to the NFPA a

proposal (denominated “Article 331”) to include ENMT in the

NEC. (A. 1560, 563-70, 1756-59). Following approval by the

appropriate technical committees, Article 331 was submitted to

the NFPA membership for consideration at the annual meeting

to be held in May, 1980 in Boston. (A. 1894-95).

When Allied and the other EMT producers became aware of

Article 331, they immediately recognized, as one conspirator

later wrote, that it was the “first major battleground for the

attack on steel markets by segments of the plastic industry

during the 80’s.” (A. 1634). Fully cognizant of the “severe

competitive threat” posed by ENMT (A. 1206), the conspira-

tors agreed to exclude it from the market by rigging the vote on

Article 331 at the May, 1980 meeting. Following committee

approval of Article 331, an “urgent” meeting of the Steel Rigid

Conduit and Electrical Section of the National Electrical Man-

ufacturers Association (the “NEMA Steel Section”) was held

to discuss the matter. (A. 1641, 1701, 970-71, 1558-59). At that

meeting (and another held shortly thereafter), representatives

of Allied and its coconspirators agreed that each Steel Section

member company would “be asked to provide for the attend-

ance of as many NFPA voting members as possible” at the

upcoming meeting, noting that under the NFPA’s then-current

rules persons only had to be members for thirty days to be

5 A. 991, 1205-06, 1351, 1355, 1511-13, 1563. After a study “in detail”

of the adverse effect that Article 331’s adoption would have on Allied’s sales,

Allied’s Board of Directors was told that the company would lose 40% of its

EMT volume by 1984—a loss which in 1984 alone would amount to $20

million. (A. 992-99, 1002-09, 1650).

6

eligible to vote. (A. 1561-62, 1703, 1094, 1207-09, 1562-63).°

For its part, Allied pledged to bring at least 100 people to vote

against Article 331. (A. 1708-13, 974, 1563).

The conspirators left nothing to chance. A formal “battle

plan” was prepared, calling for, among other things, each

participant to “go[ ] all out to have bodies on the floor to

vote” at the May meeting and “to contact all steel companies

. . urging them to add new members and to be in Boston to

vote.” (A. 1708-13, 1634, 1725-29, 1832-34, 1730, 974-77,

1563). As the “battle plan” put it, “[t}he question to ask is:

What is it worth to save our conduit business .. . ?” (A.

1708-13).

Allied immediately took steps to recruit and get its “troops”

in line. (A. 1029, 1212-13). Beginning in February, 1980,

Allied’s national sales manager began contacting its indepen-

dent sales agents—separate companies unaffiliated with

Allied—as an additional source for new-NFPA votes. (A. 1018-

19, 1938, 1515-17, 1562). Allied discussed with them the

adverse economic effect that approval of Article 331 would

have and assigned them targeted numbers of new members to

recruit. (A. 1012-19).

All told, Allied and its coconspirators brought at least 230

voters to the meeting. (A. 1231). Among the 155 persons that

Allied alone brought to the annual meeting to vote against

Article 331 were its employees, sales agents, the agents’ em-

ployees, company executives, employees of two of Allied’s

divisions—neither of which sold electrical products and one of

whose businesses was “lawn furniture and things like that” —

and the wife of the national sales director. (A. 1566, 1032-34).

For the express purpose of “gathering [their] votes,” Allied

paid all of these individuals’ expenses, totalling over $100,000

for membership fees, travel expenses and other costs. (A. 987-

88, 1020-21, 1214-15, 1566-67, 1908-14).

6 It was also agreed that because “[p]roblems regarding restraint of

trade are a very real concern,” there would not be “direct{ ]” discussion of

these problems; instead, future discussions regarding ENMT “must be”

limited to the alleged “safety aspects.” (A. 1703, 972-73, 1095).

b. The May, 1980 Meeting—The Conspiracy

Succeeds

Implementation of the conspiracy to exclude ENMT from

the market commenced with a cocktail party in Boston on the

night of May 18th. “All Allied salesmen, representatives and

personnel” were informed that attendance was “imperative.”

(A. 1585, 1025-27). Allied’s self-described “troops” were given

“Tc]omplete instructions” on what to do at the meeting, includ-

ing (1) where to sit, based on a detailed seating chart broken

down by “groups,” (2) the appointment of “group leaders”

responsible for “keep[ing] order among the troops,” (3) that

“Tlo]nce the NEC ratification starts” the “troops” were “ex-

pected to stay nailed to [their] seats,” and (4) that box lunches

would be provided “in case the session carries over into the

evening—NO ONE leaves . . . until after this evening ses-

sion.” (A. 1587, 1593, 1028-36, 1566). The “troops” were

explicitly told that “[y])our Group Leader will instruct you how

the discussion is progressing and how to vote.” (A. 1593

(emphasis added), A. 1035-37). Representatives of Allied,

Wheatland, Republic and another EMT competitor met “to

reach a consensus. . . as to the procedures that were going to

be followed at the meeting”; and Allied distributed walkie-

talkies to the other steel companies to assure that the “troops”

voted as instructed.’

In accordance with their instructions, the 155 Allied

members—sitting in their predesignated “groups” —“stay[ed]

nailed to their seats” during the annual meeting. (A. 1221,

1566). Paying “no attention” to the substance of the proceed-

ings, the “troops” had no idea as to the merits of what was at

issue. (A. 1106-09, 1177, 1815-21). Thus, even though ENMT’s

claimed safety risk was the purported reason for Allied’s

opposition, very few of its voters had any of the technical

documentation necessary to follow the proceedings; nor did a

single one of them speak in opposition to Article 331 during

the course of the meeting. (A. 1106-08, 1310-11; compare A.

7 A. 1086-92, 1219-21; see also A. 1215-18, 1518-19, 1677, Plaintiff's

Trial Exhibit (“PX”) 412, A. 1567.

8

1352 with A. 606-18, 1761-80). As one stated when questioned

at the meeting as to why, as he put it, he was “instructed to

vote to return [Article 331] to committee,” “I was just told to

come to the meeting and be present when they voted... .”

(A. 1111-12).

Although Allied’s voters paid no attention to the substance

of the proceedings, they were careful to follow the conspira-

tors’ instructions communicated to them via their “group

leaders” by walkie-talkies and “signals”’—“thumbs up, yes,

thumbs down, no.” (A. 1037-40, 1306-09, 1566-67). Two votes

were taken on Allied’s coconspirator’s motion to return Article

331 to committee. (A. 606, 1041-42). The first, a voice vote,

was inconclusive. (A. 618, 1774). The second, a standing vote,

was taken amidst “a lot of confusion and congestion.” (A. 619-

23, 1041-43). When the dust settled, the Chair ruled that

Article 331 had been defeated by only four votes—394 to 390.

(A. 634, 1567). Despite requests by Carlon and others, no

recount was permitted under the NFPA’s rules, since no one

who voted against Article 331 requested one. (A. 627-34, 1775-

80). Finally, “[t]o insure that there would not be [any] change”

in the outcome, Allied’s “troops” were kept in their seats until

2:00 a.m. when the final vote on the complete NEC was taken.

(A. 1228-30, 1317-18). Absent the 230 “troops” brought by

Allied and its coconspirators to do their bidding (A. 1231),

Article 331 would have been overwhelmingly approved.

The subversion of the NFPA’s consensus standard making

process was the subject of criticism during the meeting itself.

(A. 1771-73, 1110-11, 1127-28, 1142-45). After the meeting,

there was a “negative reaction” to the conspirators’ conduct,

including editorials in trade magazines castigating the “mob

rule” that had “abuse[d]” the NFPA and turned its “codemak-

ing process . . . into a battleground for establishing commer-

cial preference for competing product types.” (A. 1332,

1934-37, 1224-27, 1304). Allied, however, was unrepentant.

The only “lesson” that its Director of Public Safety Issues

drew from this hostile reaction was that the next time Allied

9

sought to rig a vote, it should “not [be] so obvious.” (A. 1330-

31, 1606-09).

Following the defeat of Article 331, Carlon (and the Na-

tional Association of Home Builders) appealed on the ground

that the vote was not based on the “technical merit[s],” was

“not representative of the membership of the association and

cannot be construed as [a] consensus.” (A. 1905-06, 636-37,

642, 1567). The NFPA Board of Directors, eschewing any

investigation of the substance of these allegations and viewing

the scope of its review as limited to the question of whether the

Association’s rules had been followed, found that, while the

rules had been “circumvented,” they had not been violated,

and denied the appeal, returning Article 331 to committee “for

further study.”* :

4. The Sanders Committee Report

In the wake of the May, 1980 meeting, the NFPA Board of

Directors was “concerned. . . very much” about the “circum-

vent{ion]” of the Association’s rules. (A. 1163, 1171-72, 1194-

98). As Jack Sanders, its Chairman, testified, the conspirators’

“battle plan” was inconsistent with the spirit and intent of the

NFPA’s consensus standard making procedures. (A. 1173). For

it was wholly contrary to the NFPA’s goals “for a company

that would like to keep a competitive product off the market to

register as many of its employees as possible . . . so that they

can vote against that competitive product.” (A. 1193-94; see A.

674-75, 1571).

In order to “combat any potential” for the repeat of “that

kind of activity,” the NFPA Board appointed a committee

headed by Mr. Sanders to review the “stacking” of the 1980

meeting and to take steps “to maintain the integrity of the

[Association’s] standards.” (A. 1163, 1171-72, 1571). After a

“review in-depth [of] the entire procedural activities under

which we develop our codes and standards,” the committee

recommended, and the Board adopted, new regulations. (A.

8 A. 638-46, 1164-69, 1177-79, 1181-84, 1186-87, 1835-37, 1568.

10

1169-70, 1174-75, 1856-75, 1571). These included increasing to

180 days from 30 the minimum time that a person must be an

NFPA-member in order to vote at the annual meeting. (A.

1197-98). As Mr. Sanders testified, the specific purpose of this

change was “to avoid block voting by special interest groups in

the future.” (A. 1174, 1197).’

5. The Conspiracy’s Market Effect

The successful conspiracy to exclude Article 331 from the

1981 NEC had the direct effect of excluding Carlon’s product

from the marketplace. In addition to the exclusionary impact

in those jurisdictions which adopted the NEC as their electrical

code and precluded the lawful use of Carlon’s product alto-

gether, Carlon was injured by the “stigma”—and Allied’s

marketing of that stigma—resulting from the wrongful exclu-

sion of ENMT from the NEC even in those jurisdictions where

Carlon’s innovative and less expensive product could be law-

fully used, /.e., jurisdictions which (1) had no electrical code;

(2) had adopted the 1981 NEC, but modified it to permit

ENMT’s use; or (3) later adopted the 1984 NEC, which itself

permitted the use of ENMT. This stigmatization of ENMT was

successful because of the NEC’s reputation as a product of

consensus standard making. Thus, it was undisputed that

“{t}hird party certifiers of electrical equipment such as Under-

writers Laboratories will normally not list and label a product

without NEC approval.” (A. 1557-58; see A. 694-95, 704, 922-

23, 1706, 1989). Similarly, many electrical inspectors, contrac-

tors and distributors will not use a product absent NEC

approval and the UL label, and underwriters will refuse to

insure structures that are not built in conformity with the

NEC. (A. 556-57, 693-94, 700-01, 1558). And Allied fully

capitalized on Carlon’s predicament, doing “everything it

9 With the new rules in place, and without opposition by Allied,

Article 331 was finally included in the 1984 NEC, but with the limitation that

ENMT could be used only in structures up to three stories in height. (A. 672,

674, 1353, 1381, PX-S595 pp. 201-03). At its May, 1986 meeting, the NFPA

approved a new Article 331 deleting the three-story limitation from the 1987

NEC. Allied’s appeals from that approval were denied.

11

could to make sure that as many people as possible found out

about the defeat of Article 331,” including advertisements and

distribution of documents to “people in the industry” inform-

ing them of the defeat.'”

In short, ENMT’s exclusion from the 1981 NEC—the “pfti-

mary code for the electrical industry in the United States” —

effectively excluded it from the marketplace. (A. 1556; see A.

696, 704, 800). This adverse market effect flowed directly from

the consensus standard making process itself and tlie public’s

reliance on the NEC as the purported product of unbiased

industry consensus. (See A. 719, 916-17). The 198i NEC gives

no hint that it was the product of subversion or that it was

adopted on any grounds other than the merits (see A. 1917-26);

and, needless to say, neither Allied nor its coconspirators

informed the public that the Code resulted from a stacked

meeting at which the process had been subverted. To the

contrary, as noted above, Allied fully exploited the “stigma”

that its own conduct brought about throughout the market-

place.

B. The Proceedings Below

1. The Trial

After extensive pretrial proceedings, a bifurcated trial com-

menced on March 4, 1985 before Hon. John E. Sprizzo and a

jury on Carlon’s claim that Allied and its coconspirators had

“combined and conspired to prevent competition from non-

metallic tubing by excluding it from the 1981 NEC” by “sub-

vert[ing the] . . . NFPA’s consensual standards, rules and

procedures.” (A. 18-22). After four days of deliberation, the

jury, in response to special questions, rendered its verdict,

finding, inter alia, that “Allied’s conduct in opposing Article

10 ‘Trial Transcript pp. 2979-89; see A. 1454-55.

11 As the above discussion demonstrates, Allied is plainly wrong when

it asserts that its subversion “caused Carlon no harm,” that Carlton “proved

damages only for injury attributable to legislative enactment of the NEC,”

and that “the record contains no evidence supporting the ‘stigma’ theory or

indicating that Allied ‘marketed’ the stigma.” (Pet. 19-20) (emphasis added).

12

331 adversely impact[ed] competition,” “constitute[d] an un-

reasonable restraint of trade in violation of the antitrust laws,”

and was “a substantial or material factor in excluding Article

331 from the 1981 NEC.”'* Among its other findings, the jury

concluded that “[rjegardless of whether Allied’s conduct vio-

lated any of the rules or regulations of the NFPA”—which the

jury found it did not—“Allied’s conduct subvert[ed] the con-

sensus standard making process of the NFPA” and did not

“constitute the least restrictive means of effectively expressing

Allied’s opposition to the use of ENMT in the marketplace.””’

At the conclusion of the damages phase of the trial, the

court instructed the jury that any award of damages must be

limited to those incurred by Carlon as a result of the actions of

Allied and its coconspirators “at the May 1980 meeting and

[their] marketing of that defeat [of Article 331] in the market-

place.”'* The court went on to instruct the jury that Carlon did

12. A. 474M, 474N, 474K. Under the court’s Rule-of-Reason charge,

the jury was instructed to consider whether the NFPA’s rules were “reasona-

bly designed to secure a consensus with respect to safety of products as they

were accepted or not accepted in the electrical code” and whether “the

procedures that were followed at the floor meeting in May of 1980 [were]

consistent with the spirit . . . of the rules of the NFPA.” (A. 1446-47). In

finding that Allied’s conduct unreasonably restrained trade under that

charge, the jury implicitly answered these questions in the negative—findings

buttressed by the specific determination that Allied’s conduct “subvert[ed]

the consensus standard making process of the NFPA.” (A. 474G).

13 A. 474F, 474G, 474L. The parties agreed upon the wording of the

questions put to the jury. Contrary to petitioner’s assertion that the jury did

not understand the subversion question (see, e.g., Pet. 18), Allied did not

challenge at trial or in its post-trial motion the wording of any of the

questions or of the district court’s charge relating to subversion.

14 A. 118. Judge Sprizzo charged the jury that:

[T)he plaintiff's argument is what happened in May 1980 has created a

certain stigma on the product which has carried through and that the

defendants have attempted to market that stigma in the years which

have ensued so that the extent of the damages which it now suffered

13

not claim, and the jury could not award, damages based on

any lobbying activities of Allied. (A. 118). Based upon these

instructions, the jury found that “as a proximate result of

Allied’s unreasonable restraint of trade in violation of the

antitrust laws,” Carlon lost $3.8 million in profits."

2. The District Court’s Oral Decision

In an oral ruling from the bench, Judge Sprizzo held that the

Noerr-Pennington doctrine “require[{d]” that the jury’s verdict

be set aside. (App. 23a-24a, 25a). The underlying rationale of

the court’s decision is not entirely clear. On the one hand, the

district court suggested that the NFPA functions as a quasi-

legislature and that, as a result, Allied’s conduct in causing the

Association to keep Article 331 out of the NEC constituted

petitioning for legislation. (See, e.g., App. 25a-26a, A. 467).

On the other hand, the court also expressed a view that once

the NEC is adopted by the NFPA it “will almost inescapably be

are a direct result of what happened in 1980, and that is the plaintiff’s

claim. The plaintiff claims [its] damages do result from what happened

in May 1980 and not from any conduct of the defendants that they

were engaged in other than the marketing of that defeat in 1980 in the

years that follow. That's the plaintiff’s claim. (A. 117) (emphasis

added).

15 A. 1494, 4740. In light of, inter alia, the court’s charge, Carlon’s

and Allied’s counsel’s opening and closing arguments at the damages phase

of the trial, and Allied’s stipulation of facts as incorporated in the final pre-

trial order (A. 117-18, 1479-80, 1485-88, 2627-36, 2678; see page 10, supra),

it is remarkable that Allied could now claim that “Judge Sprizzo did not

submit the stigma theory to the jury” and that “from complaint through trial

openings, summation and verdict” the “only theory on which Carlon

litigated the case” was that governmental adoption of the subverted NEC

“excluded its ENMT product from the market.” (Pet. 19, 20) (emphasis in

original). If, as Allied argues, Carlon was injured exclusively by legislative

enactment of the NEC (Pet. 19), i.e., only in those jurisdictions adopting the

NEC, there would have been no need for Allied to have “marketed” the

defeat of Article 331; for exclusion from the NEC would ipso facto have

resulted in exclusion of Carlon’s product from the market in those jurisdic-

tions. Allied’s “marketing efforts” served to put the nail in the coffin in the

- remaining jurisdictions. (See pages 10-11, supra).

14

followed by the legislatures of the various states” and, as a

result, the entire NFPA standard setting process—including the

complained-of concerted conduct—was an attempt by Allied

and its coconspirators to persuade state legislatures to adopt

their anti-ENMT position. (App. 25a-26a).

3. The Court of Appeals’ Decision

On April 22, 1987, the Court of Appeals for the Second

Circuit (in an opinion by Senior Circuit Judge Lumbard,

joined by Circuit Judges Kearse and Pratt) unanimously re-

versed, rejecting both of Allied’s arguments for antitrust ex-

emption.'® At the outset, “declinfing] Allied’s invitation to

extend Noerr-Pennington immunity to lobbying activities di-

rected toward a ‘quasi-legislative body’ such as the NFPA,” the

Court recognized that none of the concerns upon which

Noerr’s holding was based applied to private organizations.

(App. 12a). Unlike a government, a private organization is

unelected, unaccountable and “ ‘presumed to be acting primar-

ily on. . . its own behalf.’ ” (App. 13a-14a, quoting Town of

Hallie v. City of Eau Claire, 471 U.S. 34, 45 (1985)). Thus,

“(njo . . . safeguards [similar to these-applicable to govern-

ments] exist to prevent a private organization from adopting

policies contrary to the interests of the general public—in the

instant case, establishing an anticompetitive restraint of trade.”

(App. 14a). Echoing this Court’s decision in American Society

of Mechanical. Engineers, Inc. v. Hydrolevel, Inc., 456 U.S.

556, 570 (1982), Judge Lumbard emphasized that the concern

that private standard setting organizations “might operate

contrary to the public interest becomes particularly acute in

view of their importance within the economy.” (App. 15a).

Agreeing with the Fift1 Circuit’s analysis in Feminist Women’s

Health Center, Inc. v..Mohammad, 586 F.2d 530 (Sth Cir.

1978), cert. denied, 444 U.S. 924 (1979), the Court concluded

that the fact that state and local governments may—but are

16 The Court’s decision is officially reported at 817 F.2d 938.

15

not required to—adopt the NEC “does not transform the

NFPA into a governmental organ.” (App. 16a).

Turning to Allied’s second argument—that its subversion of

the standard making process was protected as an “indirect

petition” —the Court held that “Allied’s behavior, which itself

caused independent antitrust injury to Carlon, should not be

excused merely because its actions also indirectly influenced

state and local governments.” (App. 17a). Again agreeing with

the view of the Fifth Circuit,’’ the Court differentiated be-

tween the “submission of a group’s recommendations to the

government”—which is protected—and “the antecedent con-

duct which generated those recommen *ations”—which is not

protected. (App. 17a). Nor was the Court “swayed by Allied’s

contention that . . . the only effective method of influencing

. . governments is through the NEC amendment process.”

(App. 18a). As Allied conceded, it had the opportunity to

lobby the governments and, indeed, “over half the states and

cities [that Allied] polled either amended the NEC before

adopting it or refused to adopt it at all.” (App. 18a-19a). The

Court of Appeals likewise rejected Allied’s argument that

denial of antitrust immunity “woulda be inconsistent” with this

Court’s ruling in Noerr since, unlike the railroads’ publicity

campaign in that case, Allied’s subversion did not “constitute

‘political activity’ conducted within the ‘political arena.’ ”

(App. 19a). “Simply put, Allied’s conduct did not constitute

petitioning of the government within the meaning of Noerr-

Pennington; rather, its conduct was a subversion of the legiti-

mate purposes of the NFPA.” (App. 17a)."*

17 See Feminist Women’s Health Center v. Mohammad, supra, 586

F.2d at 545; United States v. Southern Motor Carriers Rate Conference, Inc.,

702 F.2d 532, 542 (Sth Cir. 1983), reaff’g en banc 672 F.2d 469 (Sth Cir.

1982), rev'd on other grounds, 47) U.S. 48 (1985).

18 The Court of Appeals also rejected Allied’s contention that “its

conduct did not constitute an unreasonable restraint of trade.” (App. 19a-

20a). First, the Court “refuse[d] to permit [Allied] to use its literal compli-

ance with [the NFPA’s] rules as a shield to protect [its conspiracy] from

16

Following the panel’s decision, Allied petitioned the Second

Circuit for rehearing and rehearing en banc, arguing, inter alia,

that the Court of Appeals had misconceived the trial record in

concluding that Carlon’s damage award was based on injury

stemming from the direct marketplace effect of Allied’s con-

duct. (See Petition for Rehearing at 7-13). On June 11, 1987,

that petition was denied, no judge who heard the appeal and

no active judge of the Court “ha[ving] requested that a vote be

taken thereon.”

REASONS FOR DENYING THE WRIT

The Petition’s effort to implicate the doctrine of Eastern

Railroad Presidents Conference v. Noerr Motor Freight, Inc.,

365 U.S. 127 (1961), and its progeny, and thereby raise issues in

this case worthy of review by this Court, proceeds on two

critical but manifestly false assumptions: (1) that the case -

involves “political activity that has no direct market place

impact”; and (2) that application of the Sherman Act to

Allied’s conduct “will chill good-faith debate in private code-

making bodies . . . .” (Pet. 12). Since both assumptions are

demonstrably incorrect, the Petition collapses like a house of

cards.

This case does not concern political activity of the sort

exempted from antitrust scrutiny by the Noerr-Pennington

doctrine. Nor will the imposition of Sherman Act liability for

the blatantly anticompetitive conspiracy proved—indeed,

admitted—here chill any good-faith debate in private code-

making bodies.

antitrust liability.” (App. 21a). Nor did the Court “find any merit” in Allied’s

reliance on the existence of objective scientific evidence to support the

exclusion of Carlon’s product from the NEC since the “ ‘objective validity’

of a restraint has never been a defense to an antitrust charge.” (App. 22a).

17

I. This Case Does Not Involve “Political Activity” with No

Direct Market Impact.

In Noerr, this Court held that the antitrust laws do not apply

to “activities compris[ing] mere solicitation of governmental

action with respect to the passage and enforcement of laws.”

365 U.S. at 138.'? Put another way, the Sherman Act does not

prohibit conduct which seeks to induce the government to take

action in restraint of trade, since any other rule would impinge

on constitutionally protected rights of free speech and petition.

But when private conduct itself unreasonably restrains trade by

directly impacting the marketplace, Noerr and the policies it

reflects are not pertinent and the antitrust laws apply with full

vigor.

Petitioner, apparently aware of this limitation on Noerr’s

scope, strives to bring this case within the doctrine by asserting

that Allied’s conduct was solely political and had no direct

marketplace impact. (Pet. 12). The record, however, is clear

that the conspiracy to exclude Carlon’s product had a direct

market impact separate and apart from any action by organs

of state or local government with respect to the adoption of the

NEC. (See pages 10-11, supra).

As the Court of Appeals specifically noted (App. 17a),

“Allied’s behavior . . . itself caused independent antitrust

injury to Carlon. . . ,” a conclusion that follows inexorably

from the jury’s finding that Carlon suffered compensable

19 Petitioner takes issue with the Court of Appeals’ treatment of the

Noerr doctrine as an “exemption” from the antitrust laws to be construed

narrowly. (Pet. 12). Petitioner’s semantic quibbling takes it nowhere. As

Justice Brennan noted in City of Lafayette v. Louisiana Power & Light Co.,

435 U.S. 389, 399 (1978), the doctrine is one of “implied exclusion from

coverage of the antitrust laws” and is subject to a “presumption against

repeal by implication.” Indeed, as the Court there pointed out, the doctrine

has been “unavailing to prevent antitrust enforcement which, though impli-

cating [the] fundamental policies [underlying the doctrine,] was not thought

severely to impinge upon them.” /d. at 400. In this case, the policies

underlying the Noerr doctrine are not implicated at all because Allied’s

conspiracy in unreasonable restraint of trade in no way entailed the solicita-

tion of governmental action.

18

injury arising from the stigma of not obtaining NFPA approvai

of its product and Allied’s marketing of that stigma. (App. 9a

n.3).”” Unable to square its Noerr theory with that critical fact,

petitioner would have this Court review the Court of Appeals’

decision with respect to the adequacy of the trial record to

support the jury’s finding.”' That finding knocks the prop out

from under the Petition’s effort to raise a significant Noerr

issue here. For, on Allied’s own statement of the issue it seeks

to present, its anticompetitive conduct did have a “direct

marketplace impact,” and that alone disposes of the Noerr

claim.

Nor did the conspiracy in this case comprise “mere solicita-

tion of governmental action” within the meaning of Noerr.

Allied’s conspiracy was a classic combination in unreasonable

restraint of trade, not an effort to persuade government to act.

The NFPA—a concededly “private, non-governmental . . .

organization” (A. 1555)—is not an organ of government; and

subverting its consensus standard making process was not

governmental petitioning.

In marked contrast to the concerted publicity campaign

immunized in Noerr, Allied’s conspiracy to exclude Carlon’s

product from-the marketplace by excluding it from the NEC

was a restraint of trade squarely within antitrust’s mainstream.

In Noerr’s language, it was “characterized by an express. . .

agreement . . . that the participants will jointly . . . help one

another to take away the trade freedom of others. . . .” 365

U.S. at 136. As this Court noted in American Society of

20 In Noerr, by contrast, the private truckers’ only injury was conced-

edly caused by the Governor’s veto of legislation. 365 U.S. at 130.

21 Thus, petitioner argues that “Allied’s vote packing and other activity

at the NFPA meeting . . . caused Carion no harm. Carlon suffered injury

only when state and local legislatures enacted the NEC without Article 331.”

(Pet. 19). The record is directly to the contrary (see pages 10-11, supra), as

the Court of Appeals held in reversing the grant of judgment n.o.v. Indeed,

Allied focused its petition for rehearing on this very issue—a petition the

Court unanimously rejected. In any event, this Court “dofes] not grant

certiorari to review evidence and discuss specific facts.” United States v.

Johnston, 268 U.S. 220, 227 (1925).

Lets er

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19

Mechanical Engineers v. Hydrolevel Corp., 456 U.S. 556, 571

(1982), “a standard setting organization like ASME can be rife

with opportunities for anticompetitive activity . . . .” Allied

and its cohorts seized that opportunity to hamper their com-

petitor’s access to the marketplace. In Hydrolevel’s words,

Allied “successfully used its position within [the NFPA] in an

effort to thwart [Carlon’s] competitive challenge.” Jd. at 562.

It is inconceivable that Congress intended to shield such

conduct from Sherman Act scrutiny solely because some state

legislatures and municipal bodies decided to adopt the Code

that Allied utilized to further its anticompetitive scheme.

The Court of Appeals’ refusal to extend Noerr immunity to

lobbying activities directed towards a so-called “quasi-

legislative” body properly maintained the doctrine’s limited

applicability to true governmental petitioning. (See App. 12a).

The NFPA, while possessing very substantial power to affect

the economic well-being of companies attempting to market

products covered by the codes it adopts, is not an organ of

government and has not been delegated any governmental

authority.” As this Court has noted, “[w]e may presume,

absent a showing to the contrary, that [a governmental organ]

acts in the public interest. A private party, on the other hand,

may be presumed to be acting primarily on his or its own

behalf.” Town of Hallie v. City of Eau Claire, 471 U.S. 34, 45

(1985). For that reason, concerted efforts to persuade private

groups to take anticompetitive action do not constitute the type

of political petitioning the Noerr doctrine excludes from anti-

trust scrutiny. See, e.g., Feminist Women’s Health Center, Inc.,

v. Mohammad, 586 F.2d 530, 542 (5th Cir. 1978), cert. denied,

444 U.S. 924 (1979) (communications within hospital staff “as

a matter of law unprotected [under Noerr]”; United States v.

Johns-Manville Corp., 259 F. Supp. 440, 452-54 (E.D. Pa.

22 _ Significantly, the NFPA itself has eschewed any such role by stating

that it “is not an administrative arm of any state or local jurisdiction. . . .”

(Decision of NFPA Board of Directors on Appeal of Allied Tube and

Conduit Corp., Sept. 26, 1986, p. 8) (emphasis in original).

20

1966) (communications before private standard setting associa-

tion not Noerr protected).”*

As for the Petition’s assertion that Allied’s conduct here was

nothing more than an effort to bring “indirect influence” to

bear on state legislatures (Pet. 13), it is both factually and

legally incorrect. As a matter of fact, petitioner’s statement

that “lobbying within the code-making body is the only effec-

tive way to influence ensuing legislation” (Pet. 11; emphasis

added), is contrary to the record, as both the district court”

23. See also MCI Commun. Corp. v. American Tel. & Tel. Co., 708 F.2d

1081, 1159-60 (7th Cir.), cert. denied, 464 U.S. 891 (1983); United States v.

Southern Motor Carriers Rate Conference, 702 F.2d 532, 542 (Sth Cir. 1983),

reaff’g en banc 672 F.2d 469, 477 (Sth Cir. 1982), rev’d on other grounds, 471

U.S. 48 (1985); Mid-Texas Commun. Sys., Inc. v. American Tel. & Tel. Co.,

615 F.2d 1372, 1382 (Sth Cir.), cert. denied, 449 U.S. 912 (1980); Litton Sys.

Inc. v. American Tel. & Tel. Co., 700 F.2d 785, 807 (2d Cir. 1983), cert.

denied, 464 U.S. 1073 (1984); Ashley Meadows Farm, Inc. v. American

Horse Shows Ass’n, 1983-2 Trade Cas. (CCH) 4 65,653, at 69,352-53

(S.D.N.Y. 1983).

The three district court decisions the petitioner cites as reaching a conclu-

sion opposite to that of the Court of Appeals here all treated the standard

setting organization as the equivalent of an organ of government for Noerr

purposes. Sessions Tank Lines, Inc. v. Joor Mfg., Inc., 1986-1 Trade Cas.

(CCH) § 66,989 (C.D. Cal. 1986), appeal pending, No. 86-6208 (9th Cir.);

Wheeling-Pittsburgh Steel Corp. v. Allied Tube & Conduit Corp., 573 F.

Supp. 833 (N.D. Ill. 1983); Rush-Hampton Indus. v. Home Ventilating Inst.,

419 F. Supp. 19 (M.D. Fla. 1976) (Pet. 15). This view misconstrues the

essence of the right to petition underlying Noerr, as the Court of Appeals

properly explained. (App. 15a-17a). In any event, those decisions are plainly

distinguishable and in no way conflict with the decision below. (See page 23

n.30, infra).

24 Petitioner makes the same incorrect assertion when it states that “fhe

effective route to Allied’s goal was via the NFPA.” (Pet. 13) (emphasis

added).

25 “[T]here is obviously an opportunity to change the mind of the

legislature and . . . there is an opportunity for the defendant and the

plaintiff to lobby at that level . . . .” (App. 26a). And the record is plain

that Allied availed itself of that opportunity. (A. 1204, 1322-29).

21

and the Court of Appeals” expressly noted. And, as a matter

of law, to suggest that concerted subversion of the NFPA’s

standard making process was merely a political effort to

persuade state and local governments to adopt the Code would

mean that the Sherman Act could never be applied to standard

setting conspiracies, so long as some governmental organ

ultimately adopted the agreed-upon standards.”’

It is most significant that, in finding that Allied’s conduct

unreasonably restrained trade, the jury—pursuant to the

district court’s instruction—found that the conspiracy’s anti-

competitive effect outweighed whatever procompetitive justifi-

cation the standard setting process may have had. To immunize

conduct that the fact finder determined had a net anticompeti-

tive impact in the marketplace solely because the code pro-

duced by the conspiracy later was adopted by some—though

26 “Nor are we swayed by Allied’s contention that, because of the

heavy reliance placed upon the NEC by various governments, the only

effective method of influencing these governments is through the NEC

amendment process. Allied’s own survey shows that over half the states and

cities polled either amended the NEC before adopting it or refused to adopt

it at all. As the district court acknowledged, ‘there is obviously an opportu-

nity to change the mind of the legislature and . . . there is an opportunity

for the defendant and the plaintiff to lobby at that level... . *° ” (App.

18a-19a).

27 Needless to say, the Sherman Act’s Rule of Reason has been

consistently applied to standard-setting conspiracies. E.g., ECOS Elec. Corp.

v. Underwriters Laboratories, 743 F.2d 498, 502-03 (7th Cir. 1984), cert.

denied, 469 U.S. 1210 (1985); Consolidated Farmers Mut. Ins. Co. v.

Anchor Sav. Ass’n, 1980-2 Trade Cas. (CCH) 4 63,530, at 76,843 (10th Cir.

1980), aff*g 480 F. Supp. 640, 648-56 (D. Kan. 1979); E.A. McQuade Tours,

Inc. v. Consolidated Air Tour Manual Comm., 467 F.2d 178, 185-88 (Sth Cir.

1972), cert. denied, 409 U.S. 1109 (1973); Structural Laminates, Inc. v.

Douglas Fir Plywood Ass’n, 261 F. Supp. 154, 158 (D. Or. 1966), aff’d, 399

F.2d 155 (9th Cir. 1968), cert. denied, 393 U.S. 1024 (1969); Roofire Alarm

Co. v. Royal Indemnity Co., 202 F. Supp. 166, 169-70 (E.D. Tenn. 1962),

aff'd without opinion, 313 F.2d 635 (6th Cir.), cert. denied, 373 U.S. 949

(1963).

The Federal Trade Commission has also issued Administrative Opinions

and Rulings proscribing standardization or certification programs that have

the purpose or effect of lessening competition. See, e.g., 16 C.F.R.

§ 15.457(e) 44 1-3 (1986).

22

not all—state and local governments would effectively elimi-

nate any antitrust review of private standard making. The

Court of Appeals, in accord with the amicus curiae views of

both antitrust enforcement agencies, properly declined to ex-

pand the Noerr doctrine to reach so extreme a result; and there

is no reason for this Court to review that eminently sound

conclusion.”

II. Imposing Antitrust Liability for Allied’s Concerted

Subversion of the NFPA’s Consensus Standard Making

Process Will Not Chill Good-Faith Debate in Standard

Making Bodies.

In attempting to manufacture a “special and important

reason” for grant of the writ,” Allied asserts that application

of the Sherman Act to its conduct “will chill good-faith debate

in private code-making bodies” in violation of the First

Amendment. (Pet. 12). Again, petitioner puts a question not

presented by this record. The decision below does not limit

anyone’s right to debate or express an opinion as to the safety

or suitability of any product on any occasion. Allied’s conspir-

acy involved far more than the exercise of any First Amend-

ment right. No amount of rhetoric can transform this

vote-packing conspiracy—a “battle plan” which enlisted hun-

dreds of know-nothing “bodies” with “instructions” on how to

vote—into the “expression” of “opinion” or “debate” or

“persua(sion].” (Pet. 11, 17, 12, 18). Allied’s protestations of

free speech have a hollow ring in light of the fact that not one

of the conspirators’ executives or “troops” spoke at the May,

1980 meeting in opposition to Article 331. It is fatuous to

28 _Petitioner’s effort to analogize this case to Noerr itself is unavailing.

(See Pet. 14-15). The advertising campaign in Noerr was merely part of a

general effort to elicit public support for the railroads’ lobbying efiorts.

Here, in sharp contrast, Allied’s actions at the NFPA were entirely outside

the political arena, involving no contacts with government or appeals to the

public to support direct lobbying efforts. Indeed, it is undisputed that the

NFPA itself did not engage im lobbying efforts; nor could it, in light of its

Status as a charitable organization under the Internal Revenue Code. (See

page 3 n.3, supra).

29° -—s«US. Sup. Ct. R. 17.1.

23

suggest that application of the Sherman Act to Allied’s con-

spiracy to subvert the NFPA’s processes will chill “good-faith”

debate by anyone.”

There is simply no substance to the Petition’s effort to cloak

Allied’s conduct in the First Amendment. “Where speech and

conduct are joined in a single course of action, the First

Amendment values must be balanced against competing soci-

etal interests.” City of Los Angeles v. Preferred Communica-

tions Inc., 106 S. Ct. 2034, 2038 (1986), citing United States v.

O’Brien, 391 U.S. 367, 376 (1968). As this Court established in

Roberts v. United States Jaycees, 468 U.S. 609, 623 (1984),

“It}]he right to associate for expressive purposes is not...

absolute.” Rather, “[iJnfringements on that right may be justi-

fied by regulations adopted to serve compelling state interests,

unrelated to the suppression of ideas, that cannot be achieved

through means significantly less restrictive of associational

freedoms.” Jd. Accord, Board of Directors of Rotary Interna-

tional v. Rotary Club, 107 S. Ct. 1940, 1947-48 (1987). Here,

even if—contrary to the record—one were to view Allied’s

conspiracy as, to some extent, an association “for expressive

purposes,” applying the Sherman Act to it would cause only an

“incidental abridgment” of Allied’s First Amendment right to

expressive association “no greater than is necessary to accom-

plish the [Sherinan Act’s] legitimate purposes.” Roberts v.

Jaycees, supra, 468 U.S. at 628. See California Motor Trans-

port Co. v. Trucking Unlimited, 404 U.S. 508, 514-15 (1972)

(“It is well settled that First Amendment rights are not immu-

30 ~=—- Alllied’s conduct distinguishes this case from the district court

decisions on which it relies because there was no subversion of the consensus

standard making process in any of those cases. See Sessions Tank Lines, Inc.

v. Joor Mfg. Inc., supra, 1986-2 Trade Cas. at 62,065; Rush-Hampton

Indus. v. Home Ventilating Inst., supra, 419 F. Supp. at 23-24; Wheeling-

Pittsburgh Steel Corp. v. Allied Tube & Conduit Corp., supra, 573 F. Supp.

at 836. It is noteworthy that Allied, which was the plaintiff in Wheeling-

Pittsburgh and which already had been sued by Carlon, elected not to appeal

the district court’s decision granting Noerr protection to concerted activity

before the NFPA—a conclusion which Allied had argued to that court

“would establish a dangerous precedent.” (Memorandum of Law of Allied,

filed May 20, 1980, at 11-12).

24

nized from regulation when they are used as an integral part of

conduct which violates a valid statute”), citing Giboney v.

Empire Storage & Ice Co., 336 U.S. 490, 502 (1949).*!

That Allied’s conspiracy was not constitutionally protected

speech is most apparent when one considers the consequences

of a contrary result. No one could seriously contend that the

First Amendment would bar legislation by Congress or a state

legislature specifically designed to protect the public from the

anticompetitive consequences of the conduct demonstrated on

this record. Surely, if a state may constitutionally proscribe

truthful advertising of lawful conduct” and the NLRB may

constitutionally prohibit a truthful request to the executive to

enforce a valid law,” then Congress can constitutionally pro-

hibit trade association members from combining to subvert

consensus standard making by stacking membership meetings

and causing the added voters to cast their ballots on instruction

with no regard for the merits, all in order to keep a new, better

or more economical product out of an industry code and, thus,

off the market.

To apply Noerr’s antitrust exemption to the egregious sub-

version of consensus standard making involved in this case

would, as a practical matter, remove the Sherman Act’s protec-

tion from all aspects of the standard making process whenever

the resulting standards are ultimately adopted by some organ

of government. Since there are many thousands of privately

promulgated standards covering a vast array of products,

many of which are adopted in whole or in part by organs of

31 In Giboney, in an opinion by Noerr’s author, Justice Black, this

Court unanimously held that a state could constitutionally prohibit, under its

general prohibition of conspiracies in restraint of trade, a union’s peaceful

and truthful picketing. Cf. National Soc’y of Prof. Eng’rs v. United States,

435 U.S. 679, 697 (1978) (ban on standard making organization’s expressing

“opinion [or] policy statement . . . implying that competitive bidding is

unethical” is constitutional).

32 ~Posadas De Puerto Rico Assocs. v. Tourism Co., 106 S. Ct. 2968,

2976-80 (1986).

33, Sure-Tan Inc. v. NLRB, 467 U.S. 883, 894-97 (1984).

25

government, application of the Noerr doctrine to legitimize

Allied’s conspiracy would enable members of private organiza-

tions that this Court has recognized are “rife with opportuni-

ties for anticompetitive activity” to seize such opportunities

in order to injure their rivals and deprive the public of new,

innovative and more economical products.

But that is not all. It would also undermine the credibility of

standard making throughout the economy (and thus deprive

the public of its benefits), since the public could not know

whether the standards promulgated by trade associations are

truly the product of a “consensus” on the merits, or whether,

as here, they are simply the result of economically motivated,

private combinations of competitors who have subverted the

standard making process.

In this regard, Allied’s protestations that its subversion of

the standard making process to exclude ENMT was motivated

by a concern for safety are beside the point. (See Pet. 14-15).

For, as this Court held in FTC v. Indiana Federation of

Dentists, 106 S. Ct. 2009 (1986), the belief that a restraint of

trade is lawful because it allegedly prevents consumers from

making “unwise and even dangerous choices” is “ ‘nothing less

than a frontal assault on the basic policy of the Sherman

Act.’ ” Id. at 2020, quoting National Society of Professional

Engineers v. United States, 435 U.S. 679, 695 (1978). Even

assuming the best of motives—although Allied’s motive to save

its conduit business from competition was conceded here (see

page 5, supra)—if one may rig a code to exclude an unsafe

product, one may equally rig a code to include one.”

34 American Soc’y of Mech. Eng’rs v. Hydrolevel, supra, 456 U.S. at

559, 571.

35 _— Alllied’s repeated reliance on the fact that its conduct did not violate

the NFPA’s rules is misplaced (see Pet. 11, 16, 20), for the Sherman Act “is

its own measure of right and wrong.” Standard Sanitary Mfg. Co. v. United

States, 226 U.S. 20, 49 (1912). See also National Soc’y of Prof. Eng’rs v.

United States, supra, 435 U.S. at 688. Plainly, if the rules or by-laws of a

trade association, or the abuse of such rules, may contravene the Sherman

Act, then the absence of a rule cannot shelter conduct that unreasonably

26

It would constitute a supreme irony to invoke the very factor

that makes standard making organizations’ potential for in-

flicting anticompetitive harm so great—the influential role they

play in the adoption of standards by governmental entities—as

a basis for providing them and their members a blanket

antitrust immunity. The Noerr doctrine—narrowly crafted to

preserve the right to petition the government—is not so per-

verse as to license combinations of competitors to deprive the

public of new and economical products by subverting private

industry codes. Nothing in the Court of Appeals’ opinion

infringes Allied’s or anyone else’s right to petition. The only

conduct that the decision will “chill” is conspiracies, such as

Allied’s, that exclude rivals from the marketplace by subvert-

ing private standard making proceedings, thus “impair[ing] the

ability of the market to advance social welfare by ensuring the

provision of desired goods and services to consumers at a price

approximating the marginal costs of providing them.” FTC v.

Indiana Federation of Dentists, supra, 106 S. Ct. at 2018. The

sparing exercise of this Court’s certiorari jurisdiction is not

warranted to review a decision which correctly refused to

accord such anticompetitive conduct blanket Sherman Act

immunity through an unsound extension of the Noerr doctrine.

restrains trade. See, e.g., Arizona v. Maricopa Cty. Med. Soc’y, 457 U.S. 332

(1982); National Soc’y of Prof. Eng’rs v. United States, supra, 435 U.S. at

692-96; Associated Press v. United States, 326 U.S. 1, 14-19 (1945); Ameri-

can Soc’y of Mech. Eng’rs v. Hydrolevel, supra, 456 U.S. at 570-74.

27

CONCLUSION

For the foregoing reasons, it is respectfully submitted that

the Petition should be denied.

Dated: August 21, 1987

New York, New York

Respectfully submitted,

FREDRIC W. YERMAN

425 Park Avenue

New York, New York 10022

(212) 836-8000

Of Counsel: Attorney for Respondent

Michael Malina

Randolph S. Sherman

Ira S. Sacks

Richard A. De Sevo

Bert L. Slonim

Donna M. Gerber

KAYE, SCHOLER, FIERMAN,

HAYS & HANDLER

425 Park Avenue

New York, New York 10022

(212) 836-8000

28

PROOF OF SERVICE

1, Fredric W. Yerman, attorney for Respondent herein, and a

member of the Bar of the Supreme Court of the United States,

do hereby certify that on the 2lst day of August, 1987, I

caused to be served by hand three copies of the foregoing

Respondent’s Brief in Opposition to Petition for Writ of

Certiorari on Marvin E. Frankel, Kramer, Levin, Nessen,

Kamin & Frankel, 919 Third Avenue, New York, New York

10022. I further certify that all parties required to be served

have been served.

Dated: August 21, 1987

Fredric W. Yerman

425 Park Avenue

New York, New York 10022

(212) 836-8000

Attorney for Respondent