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

Supreme Court brief1988

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/'TO THE UNITED STATES

OR THE SECOND CIRCUIT

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‘FREDRIC:W, YERMAN

(Counsel of Record)

New York, New York 10022

Attorney for Respondent

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QUESTIONS PRESENTED

Motivated at least in part by a desire to maintain their

control over a concentrated market, petitioner and other man-

ufacturers of steel conduit conspired to exclude respondent’s

competing product from the National Electrical Code by stack-

ing the trade association meeting that adopted the Code with

“bodies” who were “instructed” “how to vote” and ordered to

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

was accomplished. While the Code was subsequently adopted,

in whole or in part, by a number of state and local governmen-

tal bodies, the exclusion of respondent’s product from the

Code also had a direct marketplace impact separate and apart

from the impact of such governmental action. In addition,

petitioner marketed the stigma of the product’s exclusion from

the Code throughout the marketplace, causing further anti-

competitive impact. The jury, under admittedly proper Rule-

of-Reason instructions, found that the conspiracy, by

“subvert[ing] the consensus standard making process” of the

private trade association, and thus eliminating the procompeti-

tive benefit that ordinarily justifies voluntary non-

governmental standard making, produced an unreasonable

restraint of trade injuring respondent. The questions presented

are:

1. Does the doctrine of Eastern Railroad Presidenis Confer-

ence v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961), which

exempts from the application of the Sherman Act “activities

compris[ing] mere solicitation of governmental action with

respect to tne passage and enforcement of laws,” immunize

petitioner’s conspiracy from antitrust scrutiny merely because

the Code was eventually adopted, in whole or in part, by some

organs of state or local government? -

2. If petitioner’s conspiracy was not immunized from anti-

trust scrutiny by the Noerr doctrine, was there evidence to

support the jury’s determination that the conspiracy in ques-

tion unreasonably restrained trade in violation of Section | of

the Sherman Act?

TABLE OF CONTENTS

STA eres OF THE CASE ... 0... ccccccccccccees

Nee tea ceeseeree

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

NFPA, Consensus Standard Making and the

National Electrical Code...................

The Admitted Conspiracy to Exclude ENMT

i ed pec dbecceces ceueeG é.

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

b. The May 1980 Meeting—The Conspiracy

EES SEES COOP TETELEEET

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

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

B. The Proceedings Below ................0.0e08-

| 2.

IEE

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

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

SUMMARY OF ARGUMENT.................+-05-

CCE edie a cavedesseecccoscccccces

1. THE NOERR DOCTRINE DOES NOT IMMU-

NIZE ALLIED’S ANTICOMPETITIVE CON-

SPIRACY FROM ANTITRUST SCRUTINY....

A. Allied’s Vote-Stacking Conspiracy Was Not Mere

Solicitation of Governmental Action............

2. The Conspiracy Was a Traditional Restraint of

3. The Conspiracy Did Not Constitute Petition-

ing Of GOVEFNMEN........-cccccccccccsces

a. NFPA Is Not an Organ of Government ..

b. Allied’s Conduct Was Not Lobbying.....

c. The Conspiracy Caused Independent Mar-

hotpiae BEY... cc cccccsccssccvecers

B. Imposing Antitrust Liability for Allied’s Con-

certed Subversion of the Consensus Standard

Making Process Is Necessary to Preserve the Pro-

cess’s Social Utility and Will Not Stifle Uninhib-

ee eS Fs vc bbc cecees cs ceetewensbebeeneds

C. If Otherwise within the Noerr Doctrine, Allied’s

Conduct Falls Squarely within the Sham Excep-

I i ill ee eee aS ate

Il. THERE BEING NO NOERR IMMUNITY, THE

JURY’S FINDING THAT ALLIED’S VOTE-

STACKING CONSPIRACY UNREASONABLY

RESTRAINED TRADE IS AMPLY SUP-

PORTED BY THE EVIDENCE ...............

CN PY, S.nvievcs cescusdeceseuesctedstecenens

PAGE

At FIRE

TABLE OF AUTHORITIES

Cases: PAGE

American Society of Mechanical Engineers, Inc. v. Hy-

drolevel Corp., 456 U.S. 556 (1982) ......... 20, 24, 29, 36

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

Ro 88 ies ESC ede Ke OOK Hac kebeeecedanct 41n.59

Associated Press v. United States, 326 U.S. 1

es eee ol Fake a ough wae emadecied 23, 41n.59

Bond Crown & Cork Co. v. FTC, 176 F.2d 974 (4th Cir.

California Motor Transport Co. v. Trucking Unlimited,

RS Ee ee 23 n.34, 35, 37-38

Chicago Board of Trade v. United States, 246 U.S. 231

Silda sn ch bveedwadesccantéra dhheescee hee 24, 39

Columbia Broadcasting System, Inc. v. American Soci-

ety of Composers, Authors and Publishers, 620 F.2d

930 (2d Cir. 1980), cert. denied, 450 U.S. 970 (1981). = =40

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

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

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

CE cis iwi wahikee dans danse kh ch aide aaiae 24 n.35

Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36

Ra nik eaen kee eeneehonns Cecseneebassureen aes 40

PAGE

C-O-Two Fire Equipment Co. v. United States, 197 F.2d

489 (9th Cir.), cert. denied, 344 U.S. 892 (1952) ....25 n.35

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

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

denied, 409 U.S. 1109 (1973). .......... cece eee eee 24 n.35

Eastern Railroad Presidents Conference vy. Noerr Motor

Freight, Inc., 365 U.S. 127 (1961)... 2.6.6 eee ee ee passim

ECOS Electronics Corp. v. Underwriters Laboratories,

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

YW od cuhu deusadbecécesveaneed 4ae eu 24 n.35

Fash. % Originators’ Guild of America, Inc. v. FTC,

312 vu S. 457 (1941)......... Cae a tog Sail a tel 23

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

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

Ne ee ese iene alin nde ekbisen ern eneeie nna 27 n.38

Fort Howard Paper Co. v. FTC, 156 F.2d 899 (7th Cir.),

cert. denied, 329 U.S. 795 (1946) ..........002 eee 25 n.35

FTC vy. Indiana Federation of Dentists, 476 U.S. 447,

4 i eR er ee ee 37

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

REE pee ey sep ceaneeen Remy Perera ny 35

Gunter Harz Sports, Inc. v. United States Tennis Associ-

ation, 665 F.2d 222 (8th Cir. 1981)...............- 24 n.35

Hoover v. Ronwin, 466 U.S. 558 (1984) ............45- 31-32

Israel v. Baxter Labs., Inc., 466 F.2d 272 (D.C. Cir.

ee Oe eee Aa indie ey we be eee eu as 37

Litton Systems, Inc. vy. American Telephone & Telegraph

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

i a ue peye Poa bea peed ees 37

Vil

PAGE

Milk & Ice Cream Can Institute v. FTC, 152 F.2d 478

SR ee a ae wen eee sees ebede 25 n.35

National Macaroni Mfrs. Ass’n v. FTC, 345 F.2d 421

SP eee tedbauanveues oun 25 n.35

National Society of Professional Engineers v. United

States, 435 U.S. 679 (1978) ............. 40, 41 nn.58 & 59

Northwest Wholesale Stationers, Inc. v. Pacific Station-

ery & Printing Co., 472 U.S. 284 (1985) ............... 4]

Parker v. Brown, 317 U.S. 341 (1943) ............. 18, 31-32

Radiant Burners, Inc. v. Peoples Gas Light & Coke Co.,

es OIE vc cba cccaudeebehiesdeuese dec 24 n.35

Roberts v. United States Jaycees, 468 U.S. 609 (1984) ..... 35

Roofire Alarm Co. v. 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

SCS cou erdcncd ou ceed vp eeauerndee dees ote4 24 n.35

Sessions Tank Liners, Inc. v. Joor Mfg., Inc., 827 F.2d

cer cenkeuseeeeebeed 19, 33 n.45,.38

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

A ere 7 me

Stewart v. Wvoming Cattle Ranche Co., 128 U.S. 383

CN A ease eas ce winiae Scan beats bweadeen ee ¥ n.46

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

Sct tare aecunt hae cate edad vvasiasendeeucaes 24 n.35

Town of Hallie v. City of Eau Claire, 471 U.S. 34(1985) 26

United Mine Workers v. Pennington, 381 U.S. 657°

I ee A rea are fT

Vill

PAGE

United States v. American Radiator & Standard Sanitary

Corp., 433 F.2d 174 (3d Cir. 1970), cert. denied, 401

en cite aaa hh ecu agdhscneaan oan 25 n.35

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

ee cde ON ae as eee ae bked dddedeeeknas 27 n.38

United States v. National Malleable & Steel Castings

Co., 1957 Trade Cas. (CCH) € 68,890 (N.D. Ohio

oo 4 Be Bk ll eee 25 n.35

United States v. Topco Associates, 405 U.S.~- 596

Sy aL IER ey eg Soe et aa ne Ae 20 n.31

United States Constitution:

EE ee eee tase bin e'ecceeteneie st passim

Statutes, Rules and Regulations:

Internal Revenue Code:

rr rr rr ee. oh ee. cc ceeecevcerwis 3 n.6

I ns ew eeeee een 3 n.6

Sherman Act:

eS ee a TD da wennbe ve vecuces canoer passim

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 1BG 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., Internationa!

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

ALLIED TUBE & CONDUIT CORPORATION,

Petitioner,

—

INDIAN HEAD, INC.,

Respondent.

ON WRIT OF CERTIORARI 10 THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

BRIEF FOR THE RESPONDENT

STATEMENT OF THE CASE

A. The Facts

Petitioner’s brief (“Pet. Br.”) incorporates the basic facts as

stated in the opinion of the court of appeals. The Second

Circuit’s opinion, however, does not recite all of the pertinent

facts material to consideration of the case. We accordingly set

forth a more complete statement of facts below.

1. The Parties and Their Products

Petitioner and respondent manufacture products which com-

pete head-on in the marketplace. Carlon, a division of respon-

dent Indian Head, Inc.,' manufactures and sells various types

| After the complaint was filed, Indian Head’s name was changed to

TBG., Inc. For convenience, we refer to the respondent as Carlon.

of electrical conduit and fittings made of polyviny! chloride.

Petitioner Allied Tube and Conduit Corporation (“Allied”) is

the largest producer of electrical metallic tubing (“EMT”)—

i.e., steel conduit—in the United States. (Tr. 772).

Electrical conduit is a hollow tube that carries insulated

wires which transmit electrical current. (Tr. 95-96). Carlon’s

product—electrical nonmetallic tubing (“ENMT”)—has a

number of significant competitive advantages over steel con-

duit due to its pliability, its lower installed cost and its lower

susceptibility to short circuiting.’ Allied and other EMT pro-

ducers accordingly considered ENMT a “severe competitive

threat.” (Tr. 1063).

In 1980, when Carlon began offering ENMT as a substitute

for EMT, it confronted a stable market dominated by five steel

conduit producers, the largest Of which was Allied, with a

market share of 35% to 40%.* During the period in which

ENMT was excluded from the market, these EMT manufactur-

ers continued to enjoy close to 100% of all electrical conduit

sales. (Tr. 773-74).

2. NFPA, Consensus Standard Making and the National

Electrical Code

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

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

nization” barred by law from attempting to influence legisla-

JX-1 © 3; Tr. 97, 104, 106. Citations to the record are as follows:

“Tr.” refers to pages of the trial transcript; “App.” refers to the

appendix to the petition for certiorari; “J.A.” refers to the Joint

Appendix in this Court; “PX,” “DX” and “JX” refer, respectively, to

plaintiff's, defendant's and joint trial exhibits. References to pages of

the transcripts of deposition testimony given to the jury are set forth as

“[name of witness] Tr.”

3 Tr. 107-109, 118-24; Beile Tr. 20-21; JX-1 €€ 7-8; PX-553.

4 Tr. 124-25, 772-73; JX 44 11-12; PX-69 p. 1; PX-70 p. 15.

5 JX-1 ©1158,

tion.° One of its principal activities is the promulgation,

through a process called “consensus standard making,” of

product standards and codes related to fire protection. (Tr. 85,

184, 1005-06). As the term implies, through consensus stand-

ard making, NFPA’s members—comprising varying interests

including industry, insurance, medicine, fire fighters and gov-

ernment officials—attempt to reach a consensus, objectively

arrived at on the merits, with respect to standards that are then

offered to the public. (Tr. 305, 314, 1005). Although NFPA

encourages new membership “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.” (Tr. 184, 303-06, 352-55,

1032). While there are no prerequisites for voting at the annual

meetings at which the standards are adopted (other than NFPA

membership for a minimum time period, 30 days as of 1980),

there is an “inherent assumption” that the members voting at

the meeting “know what they are doing” based on the full

disclosure of all relevant information. (Tr. 307, 947-48, 1571;

JX-1 ¢ 24).

The NFPA code at issue here is the National Electrical Code

(“NEC”), which promulgates standards for electrical systems,

including electrical conduit. (Tr. 85-86; JX-1 44 18-19). NFPA

publishes the NEC every third year following a multistep,

several-year-long process, ending with a debate and vote by the

full membership at the annual meeting.’ In 1980, a simple

majority vote of those members present at the meeting was

sufficient to approve or defeat a proposal. (PX-330 p. 5).

6 NFPA is registered as a tax-exempt corporation under Section 170(c)

of the Internal Revenue Code. 26 U.S.C. § 170(c). As such, the

distribution of “propaganda, or otherwise attempting, to influence

legislation” may form “no substantial part of [its] activities.” 26

U.S.C. §§ 170(c)(2)(D), S01(c)(3).

7 Tr. 133-37, 143; JX-1 ¢ 22-23; PX-330 pp. 5, 36-41; PX 554.

Following NFPA adoption, the NEC forms the basis for

private decisions that directly affect market competition.” In

addition, the Code is adopted, in whole, in part or with

amendments or modifications, by many governmental entities,

including state legislatures and administrative boards and

county, city and other local governmental bodies.” Because of

the NEC’s reputation as the product of consensus standard

making and the large number of governmental bodies in-

volved, inclusion in the NEC is a practical prerequisite to any

product’s inclusion in governmental codes.”

Adoption by organs of government, however, is neither

universal, automatic nor routine.'’ A number of jurisdictions

have no electrical code. And in those states which do adopt the

NEC in one form or another, 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.'* As Allied conceded in the district court, the NEC

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

operative.” (JX-1 ¢€ 26-27).

3. The Admitted Conspiracy to Exclude ENMT from the

Market

While Allied’s answer denied the conspiracy alleged in the

complaint (J.A. 17), the evidence was so overwhelming that

just before the case was submitted to the jury, Allied admitted

it—i.e., that it had conspired with, inter alia, Republic Steel

Corporation, Wheatland Tube Company, other steel conduit

manufacturers and Allied’s independent sales agents to exclude

8 See pp. 10-12, infra.

9 Tr. 85-86, 286, 516-17; JX-1 4427-28; see generally Post Trial

Affidavit of John Lison; Post Trial Supplemental Affidavit of John

Lison.

10s See, e.g., Post Trial Supplemental Affidavit of John Lison € 1; Tr.

286; JX-1 € 29.

il See Post Trial Affidavit of Ira Sacks; Supplemental Response of

Allied to Plaintiff’s Fourth Set of Interrogatories.

Post Trial Affidavit of Ira Sacks €€ 3-6.

Carlon’s product from the 1981 NEC by stacking the May 1980

NFPA meeting with new Association members whose only

function was to vote against the new product. (Tr. 1984; see

J.A. 8-11). Allied also conceded that it “had a pecuniary or

commercial interest in seeing to it that the product was not

approved.” (Tr. 2187-88). The evidence that compelled these

concessions was as follows:

a. The Conspiracy’s Formation

On September 18, 1978, Carlon submitted to NFPA a

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

NEC. (JX-1 4 48; Tr. 152-59; PX-214). Following approval on

the safety merits by the appropriate technical committees, |’

Article 331 was submitted to the NFPA membership for con-

sideration at the annual meeting to be held in May 1980 in

Boston. (PX-552 pp. 81-82).

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.” (PX-50 p. 1). Fully cognizant of the “severe

competitive threat” posed by the new product (Tr. 1063), the

conspirators agreed to exclude it from the market by rigging

the vote on Article 331 at the May 1980 meeting.'* After

committee approval of Article 331 had been obtained, an

“urgen[t]” meeting of the Steel Rigid Conduit and Electrical

Section of the National Electrical Manufacturers Association

13 The approval of Article 331 on the merits followed a thorough

investigation, including a factfinding report by Underwriters Labora-

tories, field demonstrations for the committee membership and review

of committee comments. (Tr. 167-69, 556-57, 581-626, 731; JX-1 €€ 48-

59; PX-214, PX-419, PX-420, PX-453, PX-456).

14 Tr. 751, 1062-63, 1637, 1671; Chehi Tr. 17-19; JX-1 44 64, 65, 69-75.

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 that year alone would amount to $20 million. (Tr. 755-62,

765-67; PX-69 p. 4)

was held-to discuss the matter.'° At that meeting (and another

held shortly thereafter), representatives of Allied and its cocon-

spirators agreed that each Steel Section member company

would “be asked to provide for the attendance of as many

NFPA voting members as possible” at the upcoming meeting,

noting that under NFPA’s then-current rules persons only had

to be members for thirty days to be eligible to vote.'® 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 re-

garding ENMT were to be limited to the “safety aspects” of

the issue. (J.A. 84; Tr. 687-88, 888-89).'’ For its part, Allied

pledged to bring at least 100 people to vote against Article 331.

(J.A. 86-87; Tr. 689; JX-1 4 74).

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.” (J.A. 86, 87, 80; PX-167, PX-289, PX-168; Tr. 689-92;

JX-1 44 72-75). As the “battle plan” put it, “[t]he question to

ask is: What is it worth to save our conduit business. . . ?”

(J.A. 88).

Allied immediately took steps to get its “troops” in line. (Tr.

792, 1069-70). Commencing in February 1980, Allied’s na-

tional sales manager began contacting the company’s indepen-

dent sales agents—separate companies unaffiliated with

15 PX-55 p. 1; J.A. 83; Tr. 684-85; JX-1 44 33-38, 61-63.

16 —- JX-1 44 64-65, 69-72; PX-127; Tr. 888, 1064-66.

17 Petitioner’s statement that Carlon conceded that “the safety stan-

dard sought by Allied was supported by objective scientific evidence”

(Pet. Br. 44) is misleading. It was stipulated in the district court that

there are substantial bodies 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 trial court instructed the jury,

“lajll 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.” (Tr. 2179).

Allied—as an additional source of new NFPA voters. (Tr. 779-

82, PX-588, Rosen Tr. 4-6, JX-1 4 65). 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. (Tr. 775-82).

All told, the conspirators delivered at least 230 members to

vote against Article 331 at the meeting. Among the 155 voters

that Allied alone brought to the annual meeting were its

employees, sales agents and their employees, company execu-

tives, 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. (JX-1 4 95; Tr. 795-97). For the express purpose

of “gathering [their] votes,” Allied paid all of these individ-

uals’ expenses, totaling over $100,000 for membership fees,

travel expenses and other costs. (J.A. 91; Tr. 702-03, 783-84,

1070-72; JX-1 ¢ 96; PX-572; PX-412).

b. The May 1980 Meeting—The Conspiracy Succeeds

Implementation of the conspiracy to exclude Carlon’s prod-

uct from the market went forward with a cocktail party in

Boston on the night of May 18th. “All Allied salesmen,

representatives and personnel” were informed that attendance

was “imperative.” (PX-28; Tr. 788-90). Allied’s self-described

“troops” were given “jc]omplete instructions” on what to do at

the meeting, including where to sit, based on a detailed seating

chart broken down by “groups”; “group leaders” responsible

for “keep[ing] order among the troops” were appointed; the

“troops” were told that “[o]nce the NEC ratification starts”

they were “expected to stay nailed to [their] seats”; and box

lunches were to be provided “in case the session carries over

into the evening—NO ONE leaves . . . until after this evening

session.” (PX-30 pp. 2, 8; Tr. 791-99; JX-1 44 98, 100). The

“troops” were explicitly informed that “{y]our Group Leader

will instruct you how the discussion is progressing and how to

vote.” (PX-30 p. 8 (emphasis added); Tr. 798-800). Representa-

tives of a number of steel conduit manufacturers 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."

Faithful to their instructions, the Allied members—sitting in

their predesignated “groups”—“stay[ed] nailed to their seats”

during the annual meeting. (Tr. 1078; JX-1 4 98). Paying “no

attention” to the substance of the proceedings, the “troops”

had no idea as to the merits of what was at issue. (Tr. 908-11,

1013; PX-255). 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. (Tr.

908-09, 1372-73; compare Tr. 1656 with Tr. 195-207, PX-215

pp. 43-62). As one stated when asked 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. . . .” (Tr. 913-14).

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.” (Tr. 800-03, 1368-71; JX-1 44 101-10). Two

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

Article 331 to committee. (Tr. 195, 804-05). The first, a voice

vote, was inconclusive. (Tr. 207, PX-215 p. 56). The second, a

standing vote, was taken amidst “a lot of confusion and

congestion.” (Tr. 208-12, 804-06). When the dust settled, the

Chair ruled that Article 331 had been defeated by only four

votes—394 to 390. (Tr. 216; JX-1 4112). Despite requests by

Carlon and others, no recount was permitted under NFPA’s

rules, since no one who voted against Article 331 was willing to

request one. (Tr. 216-23; PX-215 pp. 57-62). Finally, “[t]o

insure that there would not be [any] change” in the outcome,

18 Tr. 880-86, 1076-78; see also Tr. 1072-75, Rosen Tr. 53-54, PX-90

p. 1, PX-412, JX-1 €4€ 104-07.

Allied’s “troops” were kept in their seats until 2 A.M. when

the final vote on the complete Code was taken. (Tr. 1085-87,

1379-80). Absent the hundreds of “troops” enlisted by Allied

and its coconspirators to do their bidding (Tr. 1088), Article

331 would have been overwhelmingly approved.

The patent subversion of NFPA’s consensus standard mak-

ing process was the subject of criticism during the meeting

itself. (PX-215 pp. 53-57). Thereafter, there was a “negative

reaction” to the conspirators’ conduct, including editorials in

trade magazines castigating the “mob rule” that had

“abuse[d]” NFPA and turned its “code-making process. . .

into a battleground for establishing commercial preference for

competing product types.” (Tr. 1517, PX-584, PX-585 p. 5).

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 sought to rig a vote, it should

“not [be] so obvious.” (Tr. 1510-11, PX-32).

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 “merits,” was “not repre-

sentative of the membership of the association and cannot be

construed as [a] consensus.” (PX-568; Tr. 225-26, 231). 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

“circumvent{ed],” 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. (Tr. 994, 1006-07, 1033-

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

19 Tr, 228-36, 995-99, 1013-15, 1017-20, 1022-23; PX-319, JX-1 114.

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

NFPA’s consensus standard making procedures. (Tr. 1008,

JX-1 p. 4). For it was wholly contrary to the Association’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 may vote against that competitive

product.” (Tr. 1032-33; see Tr. 270-74, JX-1 € 140).

In order to “combat any potential” for repeating “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.” (Tr. 994, 1033; JX-1 4@ 141-44). After a “review in-

depth [of] the entire procedural activities under which we

develop our codes and standards,” the committee recom-

mended, and the Board adopted, new regulations. (Tr. 1004-05,

1010-11; PX-333, JX-1 4¢ 141-45). These included increasing

to 180 days the minimum time that a person must be an NFPA

member in order to vote at the annual meeting. (Tr. 1036-37).

As Mr. Sanders testified, the specific purpose of this change

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

future.” (Tr. 1010, 1036).”°

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 thereby precluded the lawful use of Carlon’s product

altogether, competition was inhibited by the stigma—and

Allied’s marketing of that stigma—resulting directly from the

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

Article 331 was finally included in the !984 NEC, but with the

limitation that ENMT could be used only in structures up to three

stories in height. (Tr. 268, 270, 1658; PX-595 pp. 201-03). At its May

1986 meeting, NFPA approved a new Article 331 deleting the three-

Story limitation from the 1987 NEC. Allied’s appeals from that

approval were denied, and the Code now includes Article 331 without

material limitation on ENMT’s use.

wrongful exclusion of ENMT from the NEC even in those

jurisdictions where Carlon’s innovative and less expensive

product could be lawfully used, i.e., jurisdictions which (1) had

no electrical code; (2) had adopted the 1981 NEC, but modi-

fied it to permit ENMT’s use; or (3) later adopted the 1984

NEC, which permitted the use of ENMT.

This stigmatization of ENMT was successful because of the

reliance by private decision-makers on the NEC’s reputation as

a product of consensus standard making. Thus, it was stipu-

lated that “[t}hird party certifiers of electrical equipment such

as Underwriters Laboratories will normally not list and label a

product without NEC approval.”*' Similarly, many electrical

inspectors, contractors 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. (Tr. 145-46, 288-90, 296-97; JX-1 ¢ 32).” And Allied

fully capitalized on Carlon’s predicament, doing “everything it

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. (Tr. 2979-89).

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

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

effectively excluded the product from the marketplace. (JX-1

94 25, 29; see Tr. 292, 300, 2589-90). This adverse market

impact flowed directly from the conspiracy which subverted

the consensus standard making process and from the public’s

reliance on the NEC as the purported product of unbiased

industry consensus. (See Tr. 314, 532-33). The 1981 NEC gives

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

adopted on any grounds other than the merits (PX-581); and,

21 JX-1 4 31; see JX-1 | 30; Tr. 290-91, 300, 556-57; PX-138 p. 2; DX-

WS p. 3.

22 Petitioner's suggestion (Pet. Br. 40) that the conspiracy’s direct

market effect was an afterthought introduced only in the damages

phase of the trial is incorrect. The stipulation cited in the text was

introduced into evidence as a joint exhibit during the liability phase.

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 marketplace.

B. The Proceedings Below

1. The Trial

After extensive pretrial proceedings, a bifurcated jury trial

commenced on March 4, 1985 on Carlon’s claim that Allied

and its coconspirators had combined and conspired to “subvert

NFPA’s . . . consensual standards, rules and procedures” in

order “to prevent competition ‘rom non-metallic tubing by

excluding it from the 1981 NEC.” (J.A. 10, 8). After four days

of deliberation on the liability issues, the jury, in response to

special questions, rendered its verdict, finding, inter alia, that

“Allied’s conduct in opposing Article 331 adversely impact[ed]

competition,” “constitute[d] an unreasonable 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 violated any of the rules or

regulations of the NFPA”-—which the jury found it did not

(J.A. 24)—“Allied’s conduct subvert{ed] the consensus stand-

23 J.A. 24-25. Under the district court’s Rule-of-Reason charge, the

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

ably designed to secure a consensus with respect to safety of products

as they were accepted or not iccepted 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.” (Tr. 2250-51). In finding that Allied’s conduct unreasonably

restrained trade (J.A. 25) under that charge (the correctness of which is

not challenged in this Court), the jury implicitly answered these

questions in the negative—findings buttressed by the specific determi-

nation that Allied’s conduct “subvert{ed] the consensus standard

making process of the NFPA.” (J.A. 24).

ard making process of the NFPA” and did not “constitute the

least restrictive means of effectively expressing Allied’s opposi-

tion 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

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

any lobbying activities on Allied’s part. (Tr. 3266). Based upon

these instructions, the jury found that “as a pr: <imate result of

24 Id. While petitioner now asserts that the jury did not understand the

subversion question and that the question was too vague for the jury to

answer (Pet. Br. 27), Allied did not challenge at trial or in its post-trial

motion in the district court the wording of any of the questions or of

the court’s charge relating to subversion. Indeed, the parties agreed

upon the wording of the questions put to the jury.

25 J.A. 25. The jury also found that the “vote of the membership at the

{May 1980] annual meeting [did not] effectively determine whether

Article 331 would be excluded from the NEC,” that “the NFPA rules

and regulations [were] fair in that they provided a full and effective

appeal from the vote of the membership,” that “Allied’s conduct [did

not] deprive Carlon of full and effective access to the NFPA,” that

“Allied ha[d] a genuine belief as of May 1980 that. . . [ENMT] was

unsafe,” and that “[i]n opposing Article 331 in May, 1980, . . . Allied

act{ed], at least in part,” on that belief. (J.A. 23-25).

26 ss Tr. 3266. The district court 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

are as 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.

(J.A. 30) (emphasis aided).

Allied’s unreasonable restraint of trade in violation of the

antitrust laws,” Carlon lost $3.8 million in profits. (Tr. 3288,

J.A. 25).

In light of, inter alia, the district court’s charge, Carlon’s

and Allied’s counsels’ opening and closing arguments at the

damages trial, and Allied’s stipulation of facts as incorporated

in the final pre-trial order,”’ it is remarkable that Allied claims

that “[t}he injury to Carlon, if any, was caused by the adoption

of the NEC by various state legislatures . . .”; and that “[iJ]f

Allied’s lobbying efforts had been unsuccessful in obtaining

State legislation, there would have been no harm to Carlon.”

(Pet. Br. 40-41). If, as Allied argues, Carlon was injured

exclusively by legislative enactment of the NEC, i.e., only in

those jurisdictions that adopted the NEC, there would have

been no need for Allied tc 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 jurisdictions. Allied’s “marketing” efforts were the coup

de grace in the other jurisdictions which did not enact the

Code.

2. The District Court’s Oral Decision

In an oral bench decision, the district court held that the

Noerr doctrine “require[d]” that the jury’s verdict be set aside.

(App. 25a). The underlying rationale of the court’s ruling is

not entirely clear. On the one hand, the court suggested that

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). On the other hand, the court also

expressed the view that once the NEC is adopted by NFPA it

“will almost inescapably be followed by the legislatures of the

</ J.A. 30-31; Tr. 3220-21, 3247-50, 2311-20, 3195; see pp. 10-12,

supra.

28 See also Hearing Transcript, June 27, 1986, at p. 69.

various states” and, as a result, the entire NFPA standard

setting process—including the complained-of concerted

conduct—was no more than 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, “declin{ing] Allied’s invitation to extend

Noerr-Pennington immunity to lobbying activities directed to-

ward 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 primarily 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 those applicable to governments] 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 Mechani-

cal Engineers, Inc. v. Hydrolevel Corp., 456 U.S. 556, 570

(1982), the court of appeals 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). The court

agreed with the Fifth 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), and concluded that

the fact that state and local governments may—but are 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

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

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

duct which generated those recommendations”—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 rejccted Allied’s argument that denial

of antitrust immunity “would 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

legitimate purposes of the NFPA.” (App. 17a).

29 The court expressly noted that the district court had instructed the

jury to allow damages only on the basis of direct injury flowing from

Allied’s conduct and not for “any injury arising from the adoption of

the NEC by the various governments” (App. 9a n.3); and that Allied

had challenged neither the correctness of, nor the foundation for, the

jury’s computation of the damage directly resulting from the stigma of

exclusion from the NEC. (/d.) Significantly, Allied did not move for a

directed verdict at the close of the damages phase of the trial, implicitly

conceding the sufficiency of the evidence on the issue.

30 See Feminist Women’s Health Center, Inc. v. Mohammad, supra,

586 F.2d at 545; United States v. Southern Motor Carriers Rate

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

F.2d 469 (Sth Cir. 1982), rev'd on other grounds, 471 U.S. 48 (1985).

——- =

The court of appeals also rejected Allied’s further conten-

tion that, even if not immunized by Noerr, its conduct did not

constitute an unreasonable restraint of trade. (App. 19a-22a).

The court “refuse[d] to permit [Allied] to use its literal compli-

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

from antitrust liability.” (App. 21a). Nor did it 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).

Following the panel’s decision, Allied petitioned the Second

Circuit for rehearing and rehearing en banc, arguing specifi-

cally 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

conduct. (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.”

SUMMARY OF ARGUMENT =

The court of appeals held that Allied’s admitted conspiracy

to exclude Carlon’s product from the market by denying it

inclusion in the National Electrical Code—a conspiracy found

by the jury to constitute an unreasonable restraint of trade

under the Rule of Reason—was not immunized from antitrust

scrutiny by the doctrine of Eastern Railroad Presidents Con-

ference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961).

That holding confined the Noerr doctrine to that category of

cases involving “mere attempts to influence the passage or

enforcement of laws” (365 U.S. at 135) and properly declined

to extend it to the concerted conduct involved in this case: an

agreement to subvert the standard making process by rigging

the vote at a trade association meeting for the purpose of

excluding a competitive product from a widely accepted indus-

try code. Even though the code produced by those processes

was eventually adopted by some organs of state and local

government, that circumstance did not bring Allied’s conduct

within the category of governmental petitioning with which the

Noerr doctrine is concerned.

I. The Second Circuit’s decision correctly distinguished be-

tween traditional restraints of trade governed by the Sherman

Act and petitions by private parties seeking governmental

action which itself may restrain trade. Antitrust principles have

long been applied to regulate the opportunities for anticom-

petitive abuse inherent in standard making trade associations

whose membership, like that of NFPA, includes commercial

interests. Allied’s conspiracy to exclude a competitive product

from the market by polluting a widely-accepted industry code

thus falls well within the antitrust mainstream.

By the same token, Allied’s conspiracy was not a political

effort designed to persuade state governments to act in a

manner favorable to Allied and its steel conduit manufacturing

cohorts. NFPA is not an organ of government, nor has it been

delegated any governmental authority. What is more, Allied’s

conduct in conspiratorially stacking the vote at a standard

setting meeting is the antithesis of the type of political lobbying

which implicates the Noerr doctrine. Rather than rely on open

debate in an effort to persuade, Allied and its coconspirators

subverted the process by rigging the vote to produce a preor-

dained result. The conspiracy, by stigmatizing Carlon’s prod-

uct, had a direct anticompetitive impact on the marketplace

separate and apart from any effect flowing from ultimate

adoption of the Code by organs of state and local government.

That direct effect renders the state action doctrine of Parker v.

Brown, 317 U.S. 341 (1943), inapposite and underscores the

concomitant inapplicability of Noerr.

Petitioner’s invocation of First Amendment rights of free

speech, association and petition is inappropriate when viewed

in the context of its admitted conduct—pollution of an indus-

try code by voters whose presence was paid for and who did as

they were told with no participation in any debate. And

Allied’s suggestion that application of the Sherman Act to its

conspiracy will somehow injure the code-making process is

equally without foundation. Rather, it is the application of

Noerr to shelter Allied’s conduct from antitrust scrutiny that

would cast a pall over all consensus standard making. When

open discussion is eschewed in favor of vote rigging, no one—

neither private citizens nor governmental organs—can safely

rely on privately promulgated standards, and the public safety

invariably suffers as a result.

Finally, even if Allied’s conduct were somehow viewed as

part of the petitioning process, it plainly was a sham. The

conspiracy to subvert the National Electrical Code effectively

diluted Carlon’s vote within the Association and abused the

process which Allied claims led to acts of government. As

such, as the Ninth Circuit concluded in Sessions Tank Liners,

Inc. v. Joor Mfg., Inc., 827 F.2d 458 (1987), Allied forfeited

any Noerr protection.

Il. Once the claim of Noerr immunity is rejected, the jury’s

finding that Allied’s admitted conspiracy to exclude competi-

tion unreasonably restrained trade is unassailable. Allied did

not challenge the trial court’s Rule-of-Reason instructions, and

the evidence was more than sufficient to support the jury’s

verdict.

ARGUMENT

THE NOERR DOCTRINE DOES NOT IMMUNIZE

ALLIED’S ANTICOMPETITIVE CONSPIRACY FROM

ANTITRUST SCRUTINY

In American Society of Mechanical Engineers, Inc. v.

Hydrolevel Corp., 456 U.S. 556, 570-71 (1982), the Court

emphasized that private standard setting organizations

“wield[ ] gftat power in the Nation’s economy” and are “rife

with opportunities for anticompetitive activity,” which can

have a widespread impact given the pervasive influence that

voluntary codes have on governments and private parties alike.

This case presents a paradigmatic instance of how such oppor-

tunities can be seized to destroy the marketplace’s competitive

fabric and injure those seeking the chance, guaranteed by the

Sherman Act, to compete on the merits of price. quality and

service free from unreasonable restraint.

Petitioner’s effort to cloak its conspiracy in the Noerr

doctrine boils down to the assertion that Congress, although it

enacted the Sherman Act as “the Magna Carta of . . . our

free-enterprise system,”*' intended to remove from all antitrust

scrutiny the concerted and calculated subversion of private

standard-making procedures for the purpose of excluding a

competitor’s product from the market—solely because some

organs of state and local government ultimately decide to

adopt the Code resulting from that subversion. Nothing this

Court said, much less heid, in Noerr even remotely supports

that remarkable proposition.

For the Noerr doctrine applies only to those “activities

compris[ing] mere solicitation of governmental action with

respect to the passage and enforcement of laws.” 365 U.S. at

138. And Allied’s admitted conspiracy to exclude Carlon’s

product from the market involved neither lobbying nor politi-

31 United States v. Topco Assoes., 405 U.S. 596, 610 (1972).

cal activity. The Second Circuit was thus eminently correct in

concluding that “Allied’s conduct did not constitute petition-

ing of the government within the meaning of Noerr... .”

(App. 17a).

A. Allied’s Vote-Stacking Conspiracy Was Not Mere Solici-

tation of Governmental Action

The linchpin of petitioner’s argument is its proclamation—

repeated time and again throughout its brief—that the conduct

for which it has been found liable was nothing more than

“lobbying directed at quasi-legislative code-making bodies”

“where the ultimate goal is to influence state legislatures that

will rely upon the final code.” (Pet. Br. 17, 21). To characterize

Allied’s conspiracy in such a manner not only distorts the

record,” but utterly mischaracterizes the essential teaching of

Noerr and its progeny. What this record amply reveals is a

blatant conspiracy in unreasonable restraint of trade which was

designed to, and actually did, produce a polluted industry code

that improperly excluded a competifive product from the

marketplace. The fact that the code was, in one form or

another, eventually adopted by some organs of government in

no way transforms that restraint of trade into the type of

political petitioning with which the Noerr doctrine is con-

cerned.

1. The “eerr Doctrine

In Noerr, this Court upheld the defendant railroads’ effort,

through a concerted publicity campaign, to influence state

government decision-making with respect to proposed legisla-

tion. The Court concluded that those petitioning efforts did

not run afoul of the antitrust laws because Congress did not

intend the Sherman Act to prohibit “mere solicitation of

32 As we demonstrate, infra, NFPA is not a “quasi-legislative body,”

since it has never been delegated to perform governmental functions by

any organ of government and, in fact, eschews such a governmental

role; and the conspiracy was designed to have, and actually had, a

Significant direct impact on the marketplace regardless of the actions

of any state legislature.

governmental action with respect to the passage and enforce-

ment of laws.” 365 U.S. at 138.°° As Justice Black explained,

the Sherman Act “does not prohibit two or more persons from

associating together in an attempt to persuade the legislature or

the executive to take particular action with respect to a law that

would produce a restraint or a monopoly.” /d. at 136.

The Court’s conclusion that Congress did not intend the

Sherman Act to reach such conduct derived from two comple-

mentary propositions: (a) There is an “essential dissimilarity”

between “an agreement jointly to seek legislation or law

enforcement and agreements traditionally condemned by § | of

the Act” (id.); and (b) applying the Sherman Act to concerted

petitioning of the government “would raise important constitu-

tional questions” since “[t]he right of petition is one of the

freedoms protected by the Bill of Rights, and we cannot, of

course, lightly impute to Congress an intent to invade these

freedoms” (id. at 138).

In light of these principles, it did not matter that the

railroads’ “sole purpose in seeking to influence the passage and

enforcement of laws was to destroy the truckers as competitors

... . Id. Given the “right of the people to inform their

representatives in government of their desires with respect to

the passage or enforcement of laws” (id. at 139), the Court

refused to condemn the railroads’ conduct: “[A]t least insofar

as [it] was directed toward obtaining government action, its

33 _— Petitioner takes issue with the court of appeals’ characterization of

Noerr’s rule as one of antitrust “exemption” to be construed narrowly.

(Pet. Br. 17). But such semantic quibbling takes Allied nowhere. As the

Court explained 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 Justice Brennan went on to

note, the doctrine has been “unavailing to prevent antitrust enforce-

ment which, though implicating [the] fundamental policies [underlying

the doctrine] was not thought severely to impinge upon them.” /d. at

400. Here, as we explain infra, the policies underlying the Noerr

doctrine are not implicated because Allied’s conspiracy in unreasona-

ble restraint of trade did not constitute petitioning for governmental

action.

legality was not at all affected by any anticompetitive purpose

it may have had.” /d. at 139-40.

The Noerr doctrine accordingly shelters anticompetitive

private conduct only when that conduct does not itself partake

of a traditional restraint of trade but, instead, seeks to induce

the government to take action which restrains. Here, Allied’s

conspiracy was a traditional restraint of trade, not mere

solicitation of a restraint to be imposed by organs of govern-

ment.

2. The Conspiracy Was a Traditional Restraint of Trade

The contrast between Allied’s conspiracy to exclude Carlon’s

product from the market and the publicity campaign immu-

nized from antitrust in Noerr could not be more striking. The

conspiracy in this case falls squarely within antitrust’s main-

stream. It was, in Noerr’s words, “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.

Antitrust, from its very beginnings, has had a strong antipa-

thy toward private combinations that act “in reality [as} an

extragovernmental agency, which prescribes rules for the regu-

lation and restraint of interstate commerce.” Fashion Origina-

tors’ Guild of America, Inc. v. FTC, 312 U.S. 457, 465 (1941).

“The Sherman Act was specifically intended to prohibit inde-

pendent businesses from becoming ‘associates’ in a common

plan which is bound to reduce their competitor’s opportunity

to buy or sell the things in which the groups compete.”

Associated Press v. United States, 326 U.S. 1, 15 (1945).

In accordance with these settled principles, the antitrust laws

have long been applied to horizontal combinations which have

the purpose or effect of excluding competing goods or services

34s In United Mine Workers v. Pennington, 381 U.S. 657, 670 (1965),

and California Motor Transport Co. v. Trucking Unlimited, 404 U.S.

508 (1972), the doctrine was held to apply to petitioning of the

executive, administrative and judicial branches of government as well

as the legislature.

from the marketplace. Trade associations engaged in standard

making, which has an obvious potential for anticompetitive

abuse, are a prime example of such combinations. In American

Society of Mechanical Engineers, Inc. v. Hydrolevel Corp.,

456 U.S. 566 (1982), for example, the Court affirmed a

Sherman Act judgment against a standard setting association

based on its agents’ manipulative interpretation of an existing

industry code. A fortiori, concerted conduct which subverts

the standard making process so as to produce an exclusionary

industry code in the first place runs afoul of antitrust. To

paraphrase Hydrolevel, “{Allied] successfully used its position

within [NFPA] in an effort to thwart [Carlon’s] competitive

challenge.” 456 U.S. at 562.

Over decades of Sherman Act litigation, the courts have

routi 2ly subjected agreements concerning the setting and

implementation of standards to traditional antitrust analysis

with no hint of Noerr immunity. Indeed, petitioner itself

recognizes as much when it correctly states (Pet. Br. 42-43) that

“(slince Chicago Board of Trade v. United States, 246 U.S.

231, 238 (1918), this Court and the lower courts have consist-

ently applied the rule of reason to Sherman Act claims arising

out of certification, standardization and self-regulation pro-

grams of trade associations that do not involve boycotting,

price fixing, or market division.”*

35. See ECOS Elec. Corp. v. Underwriters Laboratories, 743 F.2d 498,

§02-03 (7th Cir. 1984), cert. denied, 469 U.S. 1210 (1985); Gunter Harz

Sports, Inc. v. United States Tennis Ass'n, 665 F.2d 222, 223 (8th Cir.

1981); Consolidated Farmers Mut. Ins. Co. v. Anchor Sav. Ass’n,

1980-2 Trade Cas. (CCH) € 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).

Where standard setting has involved price fixing agreements or

horizontal boycotts, the per se rule has been applied. See Radi-

In short, Allied’s conspiratorial conduct falls well within the

category of traditional restraints of trade with which the

Sherman Act is vitally concerned. By the same token, the

conspiracy was not political activity which merely petitioned

the government to restrain.

3. The Conspiracy Did Not Constitute Petitioning of

Government

Allied’s conspiracy to subvert NFPA’s consensus standard

making process and exclude Carlon’s product from the market

was manifestly not a mere political effort to lobby and per-

suade state governments to take action favorable to Allied and

the other coconspirator steel companies. Noerr draws a sharp

distinction between the “proscriptions of the [Sherman] Act,

tailored as they are for the business world,” and the rules

properly applicable to “the political arena.” 365 U.S. at 141.

Allied’s conspiracy to corrupt NFPA’s code-making processes

did not take place in the political arena; nor did it involve

political conduct. Petitioner is wide of the mark when it

describes its conduct as “lobbying an agency like the NFPA.”

(Pet. Br. 27). NFPA is not an agency of government; and what

Allied and its coconspirators did was not lobbying.

ant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656

(1961); Standard Sanitary Mfg. Co. v. United States, 226 U.S. 20, 41-

42, 49 (1912); United States v. American Radiator & Standard Sanitary

Corp., 433 F.2d 174, 180-81, 198-200 (3d Cir. 1970), cert. denied, 401

U.S. 948 (1971); National Macaroni Mfrs. Ass’n v. FTC, 345 F.2d 421,

426 (7th Cir. 1965); C-O-Two Fire Equip. Co. v. United States, 197

F.2d 489, 493-97 (9th Cir.), cert. denied, 344 U.S. 892 (1952); Bond

Crown & Cork Co. v. FTC, 176 F.2d 974, 979-81 (4th Cir. 1949); Fort

Howard Paper Co. v. FTC, 156 F.2d 899, 901-03, 905 (7th Cir.), cert.

denied, 329 U.S. 795 (1946); Milk & Ice Cream Can Inst. v. FTC, 152

- F.2d 478, 480-83 (7th Cir. 1946); United States v. National Malleable &

Steel Castings Co., 1957 Trade Cas. (CCH) © 68,890, at 73,588,

73,595, 73,600-01 (N.D. Ohio 1957), aff'd, 358 U.S. 38 (1958).

a. NFPA Is Not an Organ of Government

The court of appeals’ refusal to extend Noerr immunity to

“lobbying” activities directed towards so-called “quasi-

legislative” bodies properly confined the doctrine’s limited

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

NFPA, while possessing very substantial power to affect the

economic well-being of companies attempting to market prod-

ucts covered by its codes, is a private organization and not an

organ of any government.”®

A private association of competitors taking commercially

motivated action with no delegation of any legislative, execu-

tive or judicial authority of any kind from any federal, state or

municipal government is not clothed with governmental status

for Noerr purposes simply because organs of government later

elect to adopt its code in whole or in part. And for good

reason. “We may presume, absent a showing to the contrary,

that [a government] 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).

As the court of appeals acutely observed, bestowing upon

private bodies like NFPA governmental status for purposes of

Noerr immunity would run a grave risk that they will act

contrary to the public interest’ —a risk which the record in this

case graphically reveals is very real indeed. That is why

concerted efforts to persuade private groups to take anticom-

36 As the court of appeals noted, “Allied-has made no claim of any

official delegation of governmental power to the NFPA.” (App. !2a-

13a n.4). And NFPA itself has eschewed any governmental role by

Stating that it “is mot 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, at 8) (emphasis in

Original).

37s “A private organization's agenda often will not coincide with, and

may be directly contrary to, the interests of the broader public. Neither

the organization, its membership, nor its leadership is checked by any

accountability to the general public.” (App. 14a).

petitive actions do not constitute the type of political petition-

ing shielded by the Noerr doctrine.™*

Thus, even if Allied, as it claims (Pet. Br. 24-25), was

“attempting to influence a private group whose decisions

would . . . have direct . . . influence upon state and local

governments,” the private nature of NFPA renders efforts to

“lobby” before it is ineligible for Noerr immunity.

b. Allied’s Conduct Was Not Lobbying

Nor was the admitted conspiracy to subvert NFPA’s code-

making processes effectuated by anything resembling political

lobbying in the sense of attempts by constituents to persuade

representatives to take desired governmental action. Rather,

Allied’s conspiracy was designed to “fix” the vote—the anti-

thesis of genuine lobbying in which one seeks to influence the

government through persuasion and debate. For petitioner to

invoke notions of free speech and open debate is the epitome

of irony in light of the undisputed fact that not one of its

“troops” spoke at the meeting. As the court of appeals point-

edly observed, “[f]ew of Allied’s voters had any of the techni-

cal documentation necessary to follow the meeting; nor did

any of them speak in opposition to Article 331 in the course of

the meeting.” (App. 8a).

Allied cannot properly characterize its conduct as “getting

out the vot.” (Pet. Br. 13). What it did was to “create” the

vote in the crassest way by intentionally enrolling new NFPA

members whose sole task was to attend a meeting, remain

glued to their seats until called upon to act and, when in-

structed to do so by their leaders, cast an uninformed ballot

for the “candidate” of Allied’s choice. For petitioner to sug-

gest (Pet. Br. 24-25) that this conduct was no more than

38 See, e.g., Feminist Women’s Health Center, Inc. v. Mohammad, 586

F.2d 530, 542 (Sth Cir. 1978), cert. denied, 444 U.S. 924 (1979)

(communications within hospital staff as a matter of law unprotected

by Noerr); United States v. Johns-Manville Corp., 259 F. Supp. 440,

452-54 (E.D. Pa. 1966) (communications before private standard

setting association not Noerr-protected).

“political advocacy” is to disregard the reality of what hap-

pened. Allied’s vote-packing conspiracy “influenced” no one

other than the purchased voters the conspirators brought to the

meeting. If all that Allied did was to urge NFPA’s members to

reject Carlon’s products because of the safety issue, the jury

could not have found that NFPA’s processes were subverted,

and there would have been no unreasonable restraint of trade.

As for Allied’s claims that “the effective route to Allied’s

goal was via the NFPA,” tha’ “[e]fforts directly to lobby local

governments . . . would be largely futile,” and that “parties

seeking to be heard with respect to the NEC must join the

political process at the NFPA” (Pet. Br. 25), they are refuted by

the record. There is ample opportunity to lobby at the legisla-

tive level, as both the district court and the court of appeals

expressly noted. In the Second Circuit’s words:

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 acknewl-

edged, “there 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. 18a-19a).

And the evidence showed that Allied in fact availed itself of

that opportunity. (Tr. 1499-1503).

Petitioner argues that its corruption of the standard making

process is irrelevant to the Noerr calculus because the applica-

bility of the doctrine does not turn on whether dishonest or

unethical tactics were used in an effort to lobby organs of

government. This misses the point. The publicity campaign in

Noerr, whatever methods may have been used to implement it,

was part of an overall program directed at persuading state

governments to enact legislation favorable to the railroads.

Here, in stark contrast, Allied organized a private conspiracy

outside the political arena directed at an admittedly private

body which was barred by law from lobbying activities. Far

from trying to persuade anyone, the conspirators stacked the

deck in order to forestall any debate on the merits and thwart

the result that would have followed a legitimate vote. Thus,

unlike Noerr, where the defendants combined solely for the

purpose of mounting a campaign directed at the body politic,

here competitors misused a trade association already organized

and existing for non-political purposes and rigged the associa-

tion’s code which, although held out to the world as the

product of an unbiased consensus, was, in fact, anything but.

Cf. American Society of Mechanical Engineers, Inc. v. Hydro-

level Corp., 456 U.S. 556 (1982).

c. The Conspiracy Caused Independent Marketplace

Injury

The Noerr doctrine is grounded on the premise that “where a

restraint upon trade or monopolization is the result of valid

governmental action, as opposed to private action, no viola-

tion of the [Sherman] Act can be made out.” 365 U.S. at 136.

It follows that a restraint which results directly from private,

not governmental, action, is not within Noerr’s protection and,

if unreasonable, violates the law. When private parties do no

more than petition the government to take action which re-

strains, they are protected by the doctrine; but when they

combine to restrain trade themselves, they are not. Put another

way, private restraints of trade which a governmental entity

may later decide in its discretion to adopt in whole or in part

are not sheltered by Noerr. And that is precisely the case here.

Painfully aware of the critical nature of the point, petitioner

asserts that the “actions of Allied in the NFPA did not in

themselves have any anticompetitive effect.” (Pet. Br. 40). But

that assertion is demonstrably incorrect.

Wholly apart from the restraint resulting from the adoption

of the NEC by some state and local governments, the exclusion

of Carlon’s product from the NEC directly restrained trade

and injured Carlon by stigmatizing the product throughout the

marketplace. This restraint occurred in jurisdictions in which

the code was not adopted at all and in jurisdictions where it

was adopted with Article 331 included, either by modification

of the NEC before 1984 or as part of the NEC after 1984. The

evidence supporting that fact, which was introduced in the

“liability” phase of the trial,’ was more than sufficient to

justify the jury’s finding that Allied’s conspiracy unreasonably

restrained trade“’—as the court of appeals found on two

occasions: once in its opinion on the merits and again in

denying Allied’s petition for rehearing, which focused specifi-

cally on this very issue.

The jury found that Carlon’s injury flowed from that direct

market restraint. The district judge’s instruction on the issue

could not have been clearer:

[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

39 Allied is therefore incorrect when it states that the direct market

impact of the conspiracy was an afterthought introduced for the first

time at the damages stage of the trial. (Pet. Br. 39-40).

40 The evidence included the parties’ stipulation that “[t}hird party

certifiers of electrical equipment such as Underwriters Laboratories

will normally not list and label a product without NEC approval” (JX-

1 €31); evidence that many electrical inspectors, contractors and

distributors will not use a product if it is not in the NEC or if it does

not have an Underwriters Laboratory label (Tr. 145-46, 288-90, 296-97;

JX-1 ¢ 32); and proof that underwriters will refuse to insure structures

that are not built in conformity with the NEC (Tr. 296-97).

In addition to this evidence in the trial’s liability phase, the evidence

during the damages phase further proved that Allied marketed the

defeat of Article 331 and ENMT'’s resultant exclusion from the 1981

NEC. (Tr. 2291, 2589-90, 2605-06, 2667-69, 2682, 2724-25, 2727-28; see

Tr. 3220-21, 3247-50). Indeed, Allied’s own witness testified that Allied

“was doing everything it could to make sure that as many people as

possible found out about the defeat of Article 331,” that it took out

advertisements and distributed documents to “people in the industry”

informing them of the defeat, and that in all of these efforts it never

once informed the recipients that the defeat was the result of subver-

sion of the standard-making process. (Tr. 2979-89). While Allied now

characterizes this evidence as “trivial” (Pet. Br. 42), it was plainly

sufficient to support the jury’s findings, which petitioner implicitly

conceded when it failed to challenge the damage verdict.

to market that stigma in the years which have ensued

. . . . The plaintiff does not seek damages resulting from

any of the defendant’s conduct other than its conduct at

the May 1980 meeting and its marketing of that defeat in

the marketplace. (J.A. 30-31).*!

In light of the trial court’s instructions and the jury’s

damage finding, the court of appeals was plainly correct in

concluding that “Allied’s behavior . . . itself caused indepen-

dent antitrust injury to Carlon. . . .” (App. 17a). That fact

of the conspiracy’s direct impact disposes of petitioner’s argu-

ment that the only restraint injuring Carlon was the product of

State action protected by the doctrine of Parker v. Brown, 317

U.S. 341 (1943), and its concomitant assertion—equally

unfounded—that the anticompetitive conduct which brought

about Carlon’s injury was no more than petitioning for such

state action.”

Nor is there any substance to petitioner’s reliance on Hoover

v. Ronwin, 466 U.S. 558 (1984). Contrary to Allied’s conten-

tion, that decision does not extend Parker protection to con-

duct of private parties such as NFPA (much less Allied and its

steel conduit coconspirators) merely because the state later

chooses to adopt as its own what they have done. Hoover

holds no more than that there can be no antitrust liability when

the sovereign act of the state a/one restrains trade, even if such

State action may have been the product of the concerted

4) The trial court went on to make clear that lobbying activities could

not form the predicate of any damage award: “To the extent that the

defendant has sought to bring to the public’s attention safety ques-

tions, to the extent the defendant has sought to legislate—to lobby

before legislative bodies or political bodies with respect to the safety

question, the plaintiff does not claim any damages from that conduct,

and such conduct may not be a proper predicate for you to assess any

damages because that type of conduct would be protected and is not a

violation of the antitrust laws.” (J.A. 31).

42 As the court of appeals noted, citing Parker, Carlon did not seek,

and the jury did not award, any redress for injury resulting from

adoption of the NEC by governmental units. (App. 9a n.3).

conduct of private parties delegated by the state to perform

advisory functions.”

In short, Allied’s reliance on the doctrine of Parker v.

Brown, like its reliance on Noerr, stands on the faulty premise

that the conspiracy in this case did not directly impact the

marketplace and Carlon. Since the jury, under proper instruc-

tions, found precisely the contrary, that is the end of the

matter.“

43 The distinction between Hoover and this case is readily apparent. In

Hoover, an alleged conspiracy among private parties delegated by the

state to perform a governmental function ultimately produced a

decision by the highest court of the state to deny the plaintiff

admission to the bar—a restraint and an injury which only the state

could effectuate. Here, in marked contrast, the jury found that a

conspiracy among private persons not authorized by any organ of

government to perform any governmental function caused a direct

market restraint and direct injury to Carlon—effects which would have

occurred whether or not any organ of government adopted the NEC.

44 In a last ditch argument Allied asserts that the injury caused by the

conspiracy was “incidental” to otherwise lawful petitioning and thus

not a bar to application of the Noerr doctrine. (Pet. Br. 41-42). The

point takes Allied nowhere. To begin with, as explained supra, the

conduct of Allied and its coconspirators was not petitioning of the

government within the contemplation of the /Voerr doctrine. Beyond

that, the marketplace injury found by the jury was direct, not inciden-

tal. The only injury claimed by the plaintiff truckers in Noerr was

concededly caused by the governor's veto of proposed legislation. 365

U.S. at 130. The Court's discussion of other possible incidental injury

was, thus, unrelated to the claimed damages in that case. Here, on the

other hand, the jury awarded damages based on Carlon’s direct,

reasonably foreseeable and significant marketplace injury in states

which did not adopt the conspiratorially polluted NEC and on Allied’s

conduct in marketing the conspiratorial defeat of Carlon’s product at

the NFPA meeting. To say that such injury, it, *ntionally inflicted with

an admitted purpose to exciude Carlon’s competition from the market-

place, was “at most an incidental accompaniment of the Allied

campaign for legislative exclusion of ENMT” (Pet. Br. 42) flies in the

face of reality.

CT le ly ele

er ae

B. Imposing Antitrust Liability for Allied’s Concerted

Subversion of the Consensus Standard Making Process

Is Necessary to Preserve the Process’s Social Utility and

Will Not Stifle Uninhibited Debate

Allied would have the Court believe that applying the Sher-

man Act to its blatantly anticompetitive conduct would “un-

dervalue[ ] the role of code-making bodies in the political

process” and would have a “chilling effect . . . on code-

making activities.” (Pet. Br. 31). Far from undervaluing the

importance of private code-making, the Second Circuit sought

to protect that vital function from the abuse that this record

reveals would be all too easy to accomplish in the absence of

antitrust regulation. '

Petitioner’s essay on the unquestioned importance of trade

associations in “creating, through internal bargaining and the

winnowing of options, a consensus that can be presented to

political decision makers” (Pet. Br. 32) has a hollow ring

against the background of Allied’s conduct here. Petitioner

and its steel conduit coconspirators made a mockery of NFPA’s

consensus standard making procedures and thwarted the true

consensus that NFPA would have reached but for Allied’s vote

packing. It is especially because so many people, including a

number of governmental organs, rély on the standard making

activities of associations such as NFPA, and because such

associations render valuable civic services,” that the antitrust

laws should be applied to protect the process from subversion.

45 The Ninth Circuit's statement to that effect in Sessions Tank Liners,

Inc. v. Joor Mfg., Inc., 827 F.2d 458, 463-64 (9th Cir. 1987), is correct;

but as that court itself recognized in concluding that Allied’s conduct

here should not be protected by the Noerr doctrine because of the

sham exception (id. at 465), the importance of that civic function

requires that the process of consensus standard making be protected

from the type of subversion revealed by this record—protection that

can be provided only by application of the antitrust laws. Significantly,

the trade association involved in Sessions limits its voting membership

to public officials (see id. at 461), so that the type of vote-packing

conspiracy involved in this case could not be effectuated there.

In the usual case of legislative petitioning—exemplified by

Noerr itself—the legislature expects to receive partisan views

from all areas of the citizenry and is in a position to assess their

relative merits and reach a governmental decision. But parti-

sanship is the antithesis of legitimate private standard making,

since both government and private citizens alike expect pri-

vately promulgated codes to be the unbiased product of genu-

ine consensus on the merits. The government’s very need to

rely on private parties to weigh the evidence and arrive at

appropriate safety standards makes it critical for the process to

be objective and for standards to be arrived at on the merits

free from anticompetitive bias. When NFPA adopted the NEC

without Article 331, the legislatures and organs of local gov-

ernment, accustomed to accepting such codes as the product of

true consensus, were intentionally misled.“ They did not re-

ceive the benefit of the “full and vigorous participation in the

code-making process” that Allied proclaims is vital. (Pet. Br.

35).

As for petitioner’s suggestion that application of the Sher-

man Act to its conduct would “stifle uninhibited debate” (Pet.

Br. 31), it is pure fantasy. No one claims that Allied should

have been restrained in any way from expressing its views,

either within or outside NFPA. The fact is that Allied did not

engage in any discussion or debate at the May 1980 meeting at

which it fixed the vote. Debate was unnecessary because the

outcome was preordained. The decision below in no way limits

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

or suitability of any product on any occasion. Allied’s rhetoric

cannot transform this vote-packing conspiracy—with its “bat-

tle plan” to enlist hundreds of know-nothing “bodies” and give

46 In a very real sense, what Allied and its coconspirators did was to

perpetrate a fraud on the state and local governments they now say

they were legitimately trying to influence. Cf. Stewart v. Wyoming

Cattle Ranche Co., 128 U.S. 383, 388 (1888) (“THe gist of the action ts

fraudulently producing a false impression upon the mind of the other

party”). For Allied to state that it “deceived no one” (Pet. Br. 14),

“spoke the truth and misrepresented nothing” (Pet. Br. 46) ts thus, to

say the least, disingenuous.

ks ee ES it

them “instructions” on how to vote—into a “robust and wide-

open debate” involving “advocacy.” (Pet. Br. 34). In light of

the fact that not a single one of Allied’s executives or “troops”

spoke at the May 1980 meeting in opposition to Article 331, it

is fatuous to suggest that application of the Sherman Act to

this conduct will inhibit debate by anyone. Allied’s invocation

of the “traditional democratic process” (Pet. Br. 35) reflects a

unique view of America’s heritage. Our Nation’s democratic

tradition calls for free and fair elections, not stuffing the ballot

box.

Finally, Allied half-heartedly suggests that its conduct might

be protected by the First Amendment. (Pet. Br. 49-50). That

notion has no substance whatsoever. Even if 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 First Amendment

rights to expressive association “no greater than is necessary to

accomplish the [Sherman Act’s] legitimate purposes.” Roberts

v. United States Jaycees, 468 U.S. 609, 628 (1984). See Califor-

nia Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508,

514-15 (1972) (“It is well settled that First Amendment rights

are not immunized 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)

(state may constitutionally prohibit, under general prohibition

of conspiracies in restraint of trade, a union’s truthful and

peaceful picketing).”

47 Allied has the temerity to suggest that its conduct was nothing more

than traditional politics and that Carlon should have engaged in the

same subversive tactics. (Pet. Br. 35). How the creation of uninformed

and uninterested “voters” by both sides in a standards debate is

supposed to produce an objective safety standard on which anyone

may rely remains a mystery.

48 See also City of Los Angeles v. Preferred Commun., Inc., 476 U.S.

488, 106 S.Ct. 2034, 2038 (1986) (“where speech and conduct are

joined in a single course of action, the First Amendment values must

be balanced against competing societal interests”).

To confer Noerr’s antitrust immunity upon Allied’s egre-

gious subversion of consensus standard making would, as a

practical matter, remove the Sherman Act’s protection from all

aspects of the standard making process whenever the resulting

standards are ultimately adopted by some organ of govern-

ment. Since there are thousands of privately issued standards

covering a vast array of products,” many of which are adopted

in whole or in part by governmental units, application of

Noerr to legitimize Allied’s conspiracy would enable members

of private organizations that are “rife with opportunities for

anticompetitive activity” to seize such opportunities in order

to injure their rivals and deprive the public of new, innovative

and more economical products. That, of course, is precisely

what happened in this case.

What is more, immunizing Allied’s conduct would seriously

undermine the credibility of standard making throughout the

economy and thus deprive the public of its benefits. For the

public could never know whether standards generated by trade

associations are the product of a true consensus on the merits

or whether, as here, they are simply the result of economically

motivated private combinations of competitors who have sub-

verted the process for their own anticompetitive ends.°'

In the final analysis, Allied’s invocation of the influential

role played by standard making bodies in the economy as a

justification for its subversion of the consensus standard mak-

ing process is supremely ironic. The Noerr doctrine, narrowly

crafted to preserve the right to petition the government, is not

sO perverse as to license private combinations to deprive the

public of new products by subverting private industry codes.

Nothing in the opinion below infringes Allied’s, or anyone

49 See Pet. Br. 33: “More than 420 private organizations now partici-

pate in promulgating some 32,000 codes and standards.” See American

Soc’y of Mech. Eng'rs, Inc. v. Hydrolevel Corp., supra, 456 U.S. at

559.

50 American Soc’y of Mech. Eng'rs, Inc. v. Hydrolevel Corp., supra,

456 U.S. at 571.

S| See generally, briet amicus of New York and other states.

a ee eee

else’s, right to debate a product’s merits or petition the

government to act on its behalf. The only conduct that the

decision will “inhibit” is conspiracies in unreasonable restraint

of trade which exclude rivals from the marketplace by subvert-

ing standard making procedures,’ 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, 476 U.S. 447, 106 S. Ct. 2009,

2018 (1986).

C. If Otherwise within the Noerr doctrine, Allied’s Conduct

Falls Squarely within the Sham Exception

If, contrary to our submission, Allied’s conspiracy to sub-

vert NFPA’s standard making process were deemed to consti-

tute solicitation of governmental action within the meaning of

Noerr, the shield of the doctrine would still not protect it

because it would then fall squarely within Noerr’s sham excep-

tion.

The sham exception embraces the entire spectrum of im-

proper activities which, in the guise of petitioning, abuse or

corrupt governmental processes to further anticompetitive

goals. See, e.g., California Motor Transport Co. v. Trucking

Unlimited, 404 U.S. 508, 513 (1972); Litton Systems, Inc. v.

American Telephone & Telegraph Co., 700 F.2d 785, 809-12 (2d

Cir. 1983), cert. denied, 464 U.S. 1073 (1984); Israel v. Baxter

Labs., Inc., 466 F.2d 272, 278-79 (D.C. Cir. 1972).

That Allied abused NFPA’s processes is. beyond dispute. The

jury specifically found that it subverted the Association’s

standard making process, a finding with overwhelming eviden-

tiary support in the record. Allied’s protestations that it “genu-

inely” sought to influence legislation cannot dispel the fact that

its conspiracy deprived Carlon of a meaningful vote at the May

52 As the court of appeals noted, petitioner's “conduct ‘subverted’ the

code making process which Allied admits contained an inherent ‘po-

tential for abuse.’ " (App. 21a).

1980 NFPA meeting.”’ If NFPA’s standard making procedures

are to be viewed as part of the political process, then the

deliberate dilution of the nonconspirators’ votes by virtue of

Allied’s conspiratorial vote-packing plan constitutes an abuse

of the worst kind. And that is precisely what the Ninth Circuit

concluded in Sessions Tank Liners, Inc. v. Joor Manufactur-

ing, Inc., 827 F.2d 458, 465 (9th Cir. 1987). While taking what

we submit is too broad a view of the Noerr doctrine, the Ninth

Circuit nonetheless had no hesitation in concluding that Al-

lied’s conduct forfeited the doctrine’s protection because it was

a sham.™

Whatever the rubric, when all is said and done the result is

the same and straightforward: The law does not provide a

shield, in the guise of governmental “petitioning,” for anti-

competitive perversions of consensus standard making by com-

petitors conspiring to exclude the products of their rivals from

the marketplace. That was the essence of the court of appeals’

decision below. It was eminently correct and should be af-

firmed.

53 See California Motor Transport Co. v. Trucking Unlimited, 404

U.S. 508, 511 (1972).

54 Significantly, the amicus brief on behalf of The Western Fire Chiefs

Association (and three other associations), while styled in support of

petitioner, in fact does not argue for application of Noerr immunity on

the facts of this case. Rather, those amici assert that the Court should

adopt the view of the Ninth Circuit in Sessions and “regulate abuses of

the [standard making] process through tle sham exception.” Brief of

Western Firechiefs Association ef a/. as a:nici curiae at 4; see also id. at

19 (“Excepting ‘inappropriate’ or ‘improper’ lobbying activities from

Noerr-Pennington protection by invoking the sham exception is an

effective way of regulating subterfuge of the political process. The

sham exception precludes the possibility that any activity, whether it is

model code-making or otherwise, may be totally exempt from antitrust

scrutiny”).

eee le es Re ee MO AO

ee ee)

THERE BEING NO NOERR IMMUNITY, THE JURY’S

FINDING THAT ALLIED’S VOTE-STACKING CONSPIR-

ACY UNREASONABLY RESTRAINED TRADE IS

AMPLY SUPPORTED BY THE EVIDENCE

The inapplicability of the Noerr doctrine to concerted sub-

version of an association’s code-making process does not mean

that the Sherman Act will invariably be applied to stifle that

process and deprive the public of the very real benefits of

consensus standard making. For the fact that standard making

by a trade association may have an injurious effect on competi-

tion does not necessarily make the concerted conduct unlawful.

It becomes unlawful only if found by the trier of fact to be

unreasonable in all the circumstances.*° The jury in this case

properly applied the Rule of Reason in finding that the

antitrust laws had been violated; and there is no legal infirmity

in that finding.

Petitioner concedes that “[s]ince Chicago Board of Trade v.

United States, 246 U.S. 231, 238 (1918), this Court and the

lower courts have consistently applied the Rule of Reason to

Sherman Act claims arising out of certification, standardiza-

tion, and self-regulation programs of trade associations that do

not involve boycotting, price fixing or market division” (Pet.

Br. 42-43). That concession provides the complete answer to

Allied’s argument that the jury’s finding of an unreasonable

restraint here is somehow legally erroneous. There is no dispute

that the trial court correctly instructed the jury on the elements

of the Rule of Reason; and, considering all of the evidence, the

jury concluded that the conspiracy’s anticompetitive effect in

subverting the standard making process and directly restraining

competition outweighed whatever procompetitive justifications

there might ordinarily be for consensus standard making.

55s Neither the district court nor the court of appeals so much as

suggested that a rule of per se illegality should be applicable here; and

Carlon takes no such position in this Court.

Under the Rule of Reason, “the factfinder weighs all of the

circumstances of a case in deciding whether a restrictive prac-

tice should be prohibited as imposing an unreasonable restraint

on competition.” Continental T.V., Inc. v. GTE Sylvania Inc.,

433 U.S. 36, 49 (1977). This factfinding process requires “a

determination of whether an agreement is on balance an

unreasonable restraint of trade, that is, whether its anti-

competitive effects outweigh its pro-competitive effects.” Co-

lumbia Broadcasting System, Inc. v. American Society of

Composers, Authors and Publishers, 620 F.2d 930, 934 (2d Cir.

1980), cert. denied, 450 U.S. 970 (1981). The only limitation is

that the inquiry must be “confined to a consideration of [the

restraint’s] impact on competitive conditions.” National Soci-

ety of Professional Engineers v. United States, 435 U.S. 679,

690 (1978). The district court put precisely that inquiry to the

jury.” Weighing the procompetitive benefits usually ascribed to

standard making—the dissemination of product information

which is valuable only to the extent that it results from an

untainted consensus—against the anticompetitive effect result-

ing from the fact that the Association’s processes had been

subverted, the jury found an unreasonable restraint of trade.”

It is no answer for Allied to argue that “Carlon’s concession

at trial that the safety standard sought by Allied was supported

by objective scientific evidence” (Pet. Br. 44) somehow under-

mines the jury’s Rule-of-Reason verdict. All that Carlon con-

ceded was that there was objective evidence on both sides of

56 The district judge instructed the jury, inter alia, that “[yJou have to

decide whether or not the pro-competitive aspect of the defendant's

conduct in this case and the standard making process, which was

involved in this case, as such outweigh any anticompetitive aspect.”

(Tr. 2168).

57 The jury’s subversion finding alone was sufficient to warrant a

judgment under the Sherman Act for Carlon. For Allied’s own expert

witness testified that voting on a product standard without regard to

the product's merits—which is exactly what Allied’s “trcops” were

enlisted to do—would eliminate the procompetitive valu: usually

associated with the standard making process. (Tr. 1571-73).

cee 6

the dispute and that reasonable people could differ. The issue,

in short, was debatable. But, as a result of Allied’s concerted

conduct, fair and open debate was frustrated. To characterize

Allied’s acts as no more than the “dissemination” of truthful

information (Pet. Br. 44) ignores what happened—a bald

conspiracy to exclude replete with vote creation and ballot

stuffing. It is small wonder that the jury characterized this as a

subversion of the standard making process.

Nor does it advance petitioner’s case to argue (Pet. Br. 46-

49) that its compliance with NFPA’s rules and the so-called

“procedural fairness” of the proceedings negates the jury’s

restraint of trade determination. The presence or absence of

“procedural safeguards” is an antitrust irrelevancy. Northwest

Wholesale Stationers, Inc. v. Pacific Stationery & Printing

Co., 472 U.S. 284 (1985). It is settled law that a trade

assOciation’s rules may themselves violate the Sherman Act:”

and it follows that it is no defense to a Sherman Act charge

that there was no violation of an association’s rules. Indeed, if

compliance with the association’s rules were all that is required

to avoid Sherman Act liability, there would be nothing to stop

association members from enacting rules expressly permitting

the very type of brazen anticompetitive behavior that occurred

here.

As for “procedural fairness,” it ill behooves Allied, whose

conduct polluted the NFPA proceedings from top to bottom,

to talk about the fairness of the association’s procedures.

Allied did substantially more than act “unethically in its

58 As a matter of law safety considerations cannot legitimize an

otherwise unlawful conspiracy in unreasonable restraint of trade.

National Soc’y of Prof. Eng’rs v. United States, 435 U.S. 679, 693-96

(1978). In any event, the scientific view proffered by Carlon ultimately

prevailed, and today Carlon’s product is in the NEC with no meaning-

ful restrictions.

59 E.g., Arizona v. Maricopa County 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);

Standard Sanitary Mfg. Co. v. United States, 226 U.S. 20, 47-49

(1912).

. 42

campaign to have the NFPA adopt a scientifically supportable

safety standard.” (Pet. Br. 47). It corrupted the association and

produced a code which was demonstrably nor the product of

unbiased and objective consensus—all for the. purpose and

with the direct and foreseeable effect of excluding Carlon’s

product from the marketplace. Once pretensions of Noerr

immunity are stripped aside, this conspiracy stands as a classic

unreasonable restraint of trade. The jury so found, and its

finding is fully supported by the evidence.

CONCLUSION

For all the reasons stated above, the judgment of the court

of appeals should be affirmed in all respects.

Dated: December 31, 1987 Ps

New ‘York, New “ork

Respectfully submitted,

FREDRIC W. YERMAN

(Counsel of Record)

425 Park Avenue

New York, New York 10022

(212) 836-8000

Attorney for Respondent

Of Counsel:

Michael Malina

Randolph S. Sherman

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

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.