The opinion of the court was delivered by: STANLEY SPORKIN
This case arose out of the failure of Animated Playhouses Corporation (APC), a restaurant chain founded by Plaintiffs Andrew Whelan and Edward Whelan. In 1982 Defendants Tyler Abell and Anthony Chase
purchased one of APC's restaurants, located in Putty Hill Maryland. They subsequently sold a one-third interest in their investment to John Toomey, and formed a partnership, called ACT Associates. The Putty Hill restaurant, as well as the entire chain, proved unsuccessful and a dispute over the cause of the business' failure ensued.
In February 1984, after negotiations between the parties broke down, Abell wrote a letter to the Maryland Securities Commission, complaining that APC had violated Maryland franchise law (the "MSC letter"). In March 1984 ACT Associates filed a lawsuit against the Whelans and APC, alleging mail and wire fraud, securities fraud and franchise law violations (the "Putty Hill lawsuit"). The claims in the Putty Hill suit all stemmed from alleged misrepresentations made during the purchase negotiations for the Putty Hill restaurant. Abell and Toomey moved to dismiss the Whelans from the case in October 1984 and the Putty Hill action subsequently was dismissed.
In December 1984 ACT filed a second lawsuit against the lawyers who had represented the Whelans and APC during the sale of the Putty Hill restaurant; neither the Whelans nor APC were named as defendants in this suit. Following a bench trial, the suit was dismissed by Judge Gesell.
In 1987 the Whelans turned the tables and sued Abell, Chase and Toomey, alleging a number of common law torts, including malicious prosecution, tortious interference with prospective business advantage, breach of fiduciary duty, abuse of process and wrongful involvement in litigation. It is this suit which is currently before this Court on remand from the Court of Appeals.
Before the case went to trial, the district court granted Defendants Abell's and Toomey's partial summary judgment motions to dismiss the malicious prosecution, abuse of process and wrongful involvement in litigation claims, leaving only Plaintiffs' claims for tortious interference with prospective business advantage and breach of fiduciary duty. A jury trial on these claims was held in May 1989. At the close of Plaintiffs' case, the trial court directed a verdict for Defendants Abell and Toomey on breach of fiduciary duty. The jury returned a verdict for Andrew Whelan and against Defendants, but against Edward Whelan and for Defendants, on the remaining tortious interference claim. Defendants filed a motion for judgment n.o.v. or a new trial based on 19 separate grounds. The trial court granted Defendants' motion for judgment n.o.v. on one of the grounds raised, but did not rule on the other 18 grounds.
The Court of Appeals affirmed the district court's directed verdict on the breach of fiduciary duty claim. The Court of Appeals reversed the district court's grant of summary judgment to the Defendants on the malicious prosecution, abuse of process and wrongful involvement in litigation claims. The Court of Appeals also reversed the district court's award of judgment n.o.v. and remanded the case for a determination of the other grounds for judgment n.o.v. raised in the defendants' original j.n.o.v. motion. See Whelan v. Abell, 293 U.S. App. D.C. 267, 953 F.2d 663 (D.C. Cir. 1992).
It is Defendants' motion for judgment n.o.v. which is presently before this Court.
Consistent with the Court of Appeals' decision, if Defendants' motion were to be denied, the jury verdict would not be reinstated, but a second trial would be required on Andrew Whelan's tortious interference claim as well as on Andrew and Edward Whelan's abusive process, malicious prosecution and wrongful involvement in litigation claims.
Defendants have pared down their motion for judgment n.o.v. to two grounds which they seek to have this Court review. The first ground concerns whether or not the activities underlying the Whelans' claims in this action were privileged. The second ground concerns whether or not Defendants possessed the actual knowledge of Andrew Whelan's prospective business advantage required for liability. Because the Court agrees with Defendants' first argument, the Court need not, and will not, reach the second.
The First Amendment protects an individual's right to petition his or her government. Thus, a person cannot be held liable as a result of his or her filing a good-faith lawsuit or administrative claim or otherwise seeking governmental redress. See Eastern R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 5 L. Ed. 2d 464, 81 S. Ct. 523 (1961); accord, Mine Workers v. Pennington, 381 U.S. 657, 14 L. Ed. 2d 626, 85 S. Ct. 1585 (1965). This principle has become known as the Noerr-Pennington Doctrine.
The immunity provided under Noerr-Pennington is qualified; a so-called "sham exception" exists. Under the sham exception, otherwise protected activity does not qualify for Noerr-Pennington immunity "if it is a mere sham to cover an attempt to interfere directly with the business relationships of a competitor." Professional Real Estate Investors, Inc. v. Columbia Pictures Industries, 113 S. Ct. 1920, 123 L. Ed. 2d 611 (1993). In Professional Real Estate, decided after the Court of Appeals remanded the case presently before this Court, the Supreme Court articulated a two-part test to determine whether or not activity otherwise protected under Noerr-Pennington loses its immunity under the sham exception:
First, the lawsuit must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits. If an objective litigant could conclude that the suit is reasonably calculated to elicit a favorable outcome, the suit is immunized. . . Only if challenged litigation is objectively meritless may a court examine the litigant's subjective motivation. Under this second part of our definition of sham, the court should focus on whether the baseless lawsuit conceals an attempt to interfere directly with the business ...