Mariana v. Fisher , 338 F.3d 189 ( 2003 )

Opinions of the United
2003 Decisions States Court of Appeals
for the Third Circuit
7-30-2003
Mariana v. Fisher
Precedential or Non-Precedential: Precedential
Docket No. 02-2906
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PRECEDENTIAL
Filed July 30, 2003
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 02-2906
ROBERT MARIANA; MICHAEL J. MCFADDEN;
KAREN M. MORAN; EDWARD M. NANKERVIS,
Appellants
v.
D. MICHAEL FISHER, in his official capacity as
Attorney General of the Commonwealth of Pennsylvania;
LARRY WILLIAMS, in his official capacity as Secretary of
Revenue of the Commonwealth of Pennsylvania
On Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. No. 01-cv-02070)
District Judge: Hon. Sylvia H. Rambo
Argued March 12, 2003
Before: SLOVITER, NYGAARD, and ALARCON,*
Circuit Judges
(Filed July 30, 2003)
* Hon. Arthur L. Alarcon, Senior Judge, United States Court of Appeals
for the Ninth Circuit, sitting by designation.
2
David F. Dobbins
Patterson, Belknap, Webb & Tyler
New York, NY 10036
Alan R. Wentzel (Argued)
Leonard Violi
Windels, Marx, Lane & Mittendorf
New York, NY 10019
William M. Wycoff
Thorp, Reed & Armstrong
Pittsburgh, PA 15219
Dennis J. O’Brien
Pittsburgh, PA 15219
Donald W. Ricketts
Santa Clarita, CA 91387
Peter R. Mahler
Derfner & Mahler
New York, NY 10016
Attorneys for Appellants
D. Michael Fisher (Argued)
Attorney General of Pennsylvania
John G. Knorr, III
Chief Deputy Attorney General
Chief, Appellate Litigation Section
Joel M. Ressler
Chief Deputy Attorney General
Chief, Tobacco Enforcement Section
Office of Attorney General of
Pennsylvania
Department of Justice
Harrisburg, PA 17120
Attorneys for Appellees
3
Bill Lockyer
Attorney General of California
Richard M. Frank
Chief Assistant Attorney General
Dennis Eckhart
Senior Assistant Attorney General
Michelle L. Fogliani
Karen Leaf
Deputy Attorneys General
Office of the Attorney General
of California
Sacramento, CA 95814
Attorneys for Amici Curiae
Alaska, Arkansas, California,
Colorado, Connecticut, Delaware,
District of Columbia, Georgia,
Hawaii, Idaho, Illinois, Indiana,
Iowa, Kansas, Kentucky,
Louisiana, Maine, Maryland,
Massachusetts, Minnesota,
Mississippi, Montana, Nebraska,
Nevada, New Jersey, New Mexico,
New York, North Dakota, Northern
Mariana Islands, Ohio, Oklahoma,
Oregon, Puerto Rico, South
Carolina, South Dakota,
Tennessee, Utah, Vermont, Govt.
V.I., Washington, West Virginia,
Wisconsin, Wyoming
OPINION OF THE COURT
SLOVITER, Circuit Judge.
This appeal presents us with yet another round of
litigation surrounding the multi-billion dollar national
tobacco settlement, known as the Master Settlement
Agreement (“MSA”).1 In 1998, the MSA was entered into
1. This suit is just one in a series attacking the MSA and statutes passed
pursuant to it. Thus far, these suits have been unsuccessful. See Star
4
between 46 States and the four largest domestic tobacco
companies that together made 98% of cigarette sales in the
United States at that time, referred to as the “Majors.”2
Plaintiffs Robert Mariana, Michael McFadden, Karen Moran
and Edward Nankervis, all Pennsylvania residents who
smoke cigarettes, filed suit claiming that certain provisions
of the MSA violate Section 1 of the Sherman Act, 15 U.S.C.
§ 1, the Commerce Clause, U.S. Const. art. I, § 8, cl. 3, and
the Compact Clause, U.S. Const. art. I, § 10, cl. 3, of the
United States Constitution.
In their complaint, Plaintiffs sued Larry Williams,
Pennsylvania’s Secretary of Revenue, and Michael Fisher,
the Attorney General of Pennsylvania in their official
capacities. We note that the Majors are not named
defendants in this particular litigation as this court
concluded in an earlier decision that the Majors were
immune from antitrust liability under the Noerr-Pennington
doctrine. See A.D. Bedell Wholesale Co., Inc. v. Philip Morris
Inc., 263 F.3d 239 (3d Cir. 2001), cert. denied, 122 S.Ct.
813 (2002).
The District Court dismissed the complaint pursuant to
Federal Rule of Civil Procedure 12(b)(6), and Plaintiffs
appeal.
I.
FACTS AND PROCEDURAL HISTORY
A comprehensive history of the MSA can be found in
Scientific, Inc. v. Beales, 278 F.3d 339 (4th Cir.), cert. denied sub nom.
Star Scientific, Inc. v. Kilgore, 123 S. Ct. 93 (2002); A.D. Bedell Wholesale
Co., Inc. v. Philip Morris Inc., 263 F.3d 239 (3d Cir. 2001), cert. denied,
122 S. Ct. 813 (2002); PTI, Inc. v. Philip Morris Inc., 100 F. Supp. 2d
1179 (C.D. Cal. 2000); Hise v. Philip Morris Inc., 46 F. Supp. 2d 1201(N.D. Okla. 1999), aff ’d mem., 208 F.3d 226 (10th Cir.), cert. denied,
531 U.S. 959 (2000); Forces Action Project LLC v. California, No. C99-
0607 MJJ, 2000 WL 20977 (N.D. Cal. Jan. 5, 2000), aff ’d in part, rev’d
in part, 2001 WL 923124 (9th Cir. 2001).
2. The Majors consist of Philip Morris, R.J. Reynolds, Brown &
Williamson, and Lorillard Tobacco.
5
Bedell and will be repeated here only to the extent
necessary for the discussion and analysis. The MSA was
negotiated after various lawsuits were either brought or
threatened against the Majors and other tobacco companies
by States seeking to recover Medicaid funds that they spent
to treat tobacco-related diseases. Pennsylvania filed suit
against the Majors in April 1997 and the suit was settled as
part of the MSA.3
Under the MSA, the Majors agreed to pay the settling
States billions of dollars and to restrict their marketing of
cigarettes, one of the practices complained about in the
States’ lawsuits. In return, the MSA included provisions
designed to enable the Majors to transfer billions of dollars
to the States, provisions that the Plaintiffs allege were to be
funded by the payment by wholesalers and consumers of
artificially high prices for cigarettes. Plaintiffs further
contend that after the MSA was entered into, the prices
charged by the Majors have generated revenue much
greater than needed to fund the MSA and have enabled the
Majors to spend record amounts on advertising.
After the execution of the MSA, additional tobacco
manufacturers representing 2% of the market joined the
settlement as Subsequent Participating Manufacturers
(“SPMs”). That joinder meant that nearly all of the domestic
cigarette producers had signed the MSA. Bedell, 263 F.3d
at 243.
The addition of the SPMs was significant, as the Majors
allegedly had feared that cigarette manufacturers who had
been left out of the MSA would be able to expand their
market share or enter the market by offering lower prices.
Id. The MSA is explicit that its purpose is to reduce the
ability of non-signatory cigarette manufacturers to gain
market share due to the competitive advantage gained by
not contributing to the multi-billion dollar settlement. Id. at
246. Indeed, the MSA declares that it “effectively and fully
neutralizes the cost disadvantages that the Participating
Manufacturers experience vis-a-vis Non-Participating
3. Initially, the States and the Majors asked Congress to resolve the suits
through a national legislative remedy. The MSA was executed by the
parties only after congressional efforts failed. Bedell, 263 F.3d at 241.
6
Manufacturers with such Settling States as a result of the
provisions of this Agreement.” MSA § IX(d)(2)(E).
On January 10, 2002, Plaintiffs filed this suit against the
Pennsylvania Attorney General and the Secretary of
Revenue, in their official capacities, seeking injunctive relief
from the continued implementation, enforcement and
performance of the MSA on behalf of Pennsylvania.
Plaintiffs claim that a major objective of the MSA is to
prevent SPMs and Non-Participating Manufacturers
(“NPMs”) from expanding their market share and to prevent
new or potential competitors from entering the market.
Specifically, they challenge the MSA’s so-called “Renegade
Clause,” the settlement’s primary mechanism for allocating
payment responsibilities based on production levels, and
the MSA’s provision calling for enactment by the settling
States of “Qualifying Statutes,” laws requiring NPMs to
make payments into state escrow accounts for each sale
made. See Bedell, 263 F.3d at 243. Pennsylvania’s
Qualifying Statute, the Tobacco Settlement Agreement Act
(“TSAA”), 35 Pa. Cons. Stat. §§ 5672-5674 (2003), requires
each NPM either to become a signatory to the MSA as an
SPM or to make payments into an escrow account fund to
be held to pay any judgment or settlement that the
Commonwealth secures in subsequent litigation against the
NPM. 35 Pa. Cons. Stat. § 5674(a) and (b)(1). The payments
are to be returned to the NPM after 25 years if they are not
needed to pay judgments or settlements. 35 Pa. Cons. Stat.
§ 5674(b)(3).
The Renegade Clause provides that the SPM need not
make payments to the States under the MSA as long as the
market share of an SPM does not exceed the greater of its
1998 market share or 125% of its 1997 market share. MSA
§ IX(I). This mechanism allegedly discourages SPMs from
underpricing the Majors to increase their market share,
even if they could do so efficiently. See Bedell, 263 F.3d at
244. This provision, the Plaintiffs claim, effectively puts a
market share cap on SPMs and restricts their output.
Similarly, if NPMs, including potential new entrants into
the market, gain market share, thereby reducing the
Majors’ market share, the Majors may decrease their
payments to the settlement fund. Bedell, 263 F.3d at 244.
7
The Qualifying Statute requires that the NPMs choose
between joining the MSA, thereby subjecting themselves to
the same restrictions on market share as SPMs, or be
subject to tobacco related lawsuits for which they must
make payments into the State established escrow account
for any potential adverse judgments. Id. at 246. The MSA
also creates a $50 million Enforcement Fund provided by
the Majors to investigate and sue NPMs to enforce the
settlement. Id. at 245-46.
According to Plaintiffs, economics force SPMs to join the
scheme while new entry is precluded. This enables the
Majors to cling to their 98% market share, thereby creating
an unregulated cartel. Plaintiffs claim that this output
cartel has allowed and continues to allow the Majors to
raise prices to artificially high and supracompetitive levels
without fear of significant competition and without any
monitoring, regulation, or active supervision by the States.
In fact, Plaintiffs allege that since the execution of the MSA,
the Majors have raised wholesale prices of cigarettes by
nearly 60% while losing less than 5% of their market share.
This, according to Plaintiffs, is a violation of the Sherman
Act. Finally, Plaintiffs allege that the MSA violates the
Commerce and Compact Clauses of the U.S. Constitution.
In dismissing the antitrust claims asserted in the
complaint, the District Court held that in light of Bedell,
Defendants, like the Majors, enjoy Noerr-Pennington
immunity. It further found that Plaintiffs could prove no set
of facts that would establish violations of the Commerce
and Compact Clauses of the United States Constitution.
Plaintiffs timely appealed. Forty states, the District of
Columbia, and the Northern Mariana Islands, all parties to
the MSA, have filed an amicus brief urging us to affirm the
order of the District Court.
II.
JURISDICTION AND STANDARD OF REVIEW
We have jurisdiction to hear this appeal pursuant to 28
U.S.C. § 1291. We exercise de novo review over the
dismissal of claims under Federal Rule of Civil Procedure
8
12(b)(6). Bedell, 263 F.3d at 249 n.25. Furthermore, we
must take all factual allegations and reasonable inferences
as true and view them in the light most favorable to
Plaintiffs. Id. The District Court properly dismissed
Plaintiffs’ complaint only if Plaintiffs could have proved no
set of facts entitling them to relief. Id.III.
ANTITRUST CLAIM
As an initial matter, we consider whether Plaintiffs
properly have stated a cause of action under the Sherman
Act.4 Defendants argue that Plaintiffs fail to state a claim as
the MSA does not establish an output cartel in violation of
the Sherman Act. The vigor with which Defendants argued
this issue came as a surprise to us as Bedell clearly
forecloses their argument. See Bedell, 263 F.3d at 249-50.
During oral argument, Attorney General Fisher, who argued
on behalf of both Defendants, conceded that the facts and
allegations in this case are “virtually similar” to those in
Bedell. Tr. of Oral Argument, Mar. 12, 2003, at 20.
Nonetheless, he contended that the Bedell court based its
findings on the Bedell plaintiffs’ characterization of the MSA
rather than the MSA itself. According to General Fisher, we
must consider both Plaintiffs’ allegations and the MSA
itself. This, however, is precisely what the Bedell court did
as evidenced by the various times it quoted actual sections
of the MSA. E.g., id. at 244 n.17-19. Even a cursory reading
of Bedell discredits Defendants’ argument, which we now
reject. Thus, it is to Bedell itself that we now turn.
Plaintiff in Bedell was a cigarette wholesaler that brought
a class action suit against the Majors on behalf of itself and
900 similarly situated wholesalers. Like the Plaintiffs in the
case before us, the Bedell plaintiffs alleged that the MSA’s
Renegade Clause and Qualifying Statutes created an output
4. Under § 1 of the Sherman Act, “Every contract, combination in the
form of trust or otherwise, or conspiracy, in restraint of trade or
commerce among the several States, or with foreign nations, is hereby
declared to be illegal.” 15 U.S.C. § 1.
9
cartel, thereby violating the Sherman Act. The district court
dismissed the complaint pursuant to Federal Rule of Civil
Procedure 12(b)(6), and the plaintiffs appealed. Before
reaching the defendants’ arguments on immunity, this
court considered — and rejected — the argument that the
terms of the MSA do not constitute an agreement to limit
output in violation of the antitrust laws. We stated: “An
agreement which has the purpose and effect of reducing
output is illegal under § 1 of the Sherman Act.” Id. at 247.
We cited Cal. Dental Ass’n v. FTC, 526 U.S. 756, 777
(1999), where the Court discussed the effects of
anticompetitive output restrictions and Nat’l Collegiate
Athletic Ass’n v. Bd. of Regents of Univ. of Okla., 468 U.S.
85, 99 (1984), where the Court stated that “the challenged
practices create a limitation on output; our cases have held
that such limitations are unreasonable restraints of trade.”
We noted further,
The Court has made clear that a pure restriction on
output is anticompetitive and in the absence of special
circumstances, would violate the antitrust laws. NCAA,
468 U.S. at 85, 104 S. Ct. 2948 (recognizing that
output restrictions may be permissible if required in
order to market the product at all). By limiting
production, the cartel is able to raise prices above
competitive levels.
Bedell, 263 F.3d at 248.
We pointed out that the Federal Trade
Commission/Department of Justice Guidelines also
recognize that agreements to reduce output violate the
antitrust laws. Id. Applying those general principles to the
MSA, we stated,
Plaintiffs allege the agreement between the States and
the Majors purposefully creates powerful disincentives
to increase cigarette production. Although the
Multistate Settlement Agreement contains no explicit
agreement to raise prices or restrict market share, any
signatory who increases production beyond historic
levels automatically will increase its proportionate
share of payments to the Multistate Settlement
Agreement. Normally, a company which lowers prices
10
would be expected to increase market share. But the
penalty of higher settlement payments for increased
market share would discourage reducing prices here.
For this reason, signatories have an incentive to raise
prices to match increases by competitors. It appears
this incentive structure has proven true. The Majors’
prices increased dramatically and simultaneously after
signing the Multistate Settlement Agreement.
Id. at 248-49.
After noting that plaintiffs had alleged that defendants
formed an output cartel through the MSA that restricts
production and effectively bars entry to the cigarette
tobacco market and that the defendants injured the
tobacco wholesalers by charging artificially high prices, the
court, speaking through Judge Scirica, stated, “[w]e hold
that plaintiffs have properly pleaded an antitrust violation
by alleging defendants agreed to form an output cartel
through the [MSA] that violates § 1 and § 2 [ ] of the
Sherman Antitrust Act.” Id. at 249-50 (emphasis added)
(footnote omitted). That was the holding of the court and
General Fisher’s attempt to argue to the contrary is without
basis. The holding was critical to our conclusion as to
immunity. Without having held that plaintiffs properly
pleaded a claim under the Sherman Act, the Bedell court
would never have reached the immunity issue. Not only are
we bound by the Bedell court’s holding that the allegations
of an output cartel created by the MSA and resulting
Qualifying Statutes state a claim for a violation of the
Sherman Act, but we reaffirm the legal proposition. We turn
therefore to the question whether Defendants are immune
under either the Noerr-Pennington or the state action — also
known as the Parker — doctrine.
IV.
ANTITRUST IMMUNITY
Having concluded that Plaintiffs sufficiently state an
antitrust claim in that the MSA creates an output cartel
that on its face violates the Sherman Act, we consider
Defendants’ argument that their conduct is immunized
11
from liability. In dismissing Plaintiffs’ suit against the
Pennsylvania officials, the District Court held that the State
officials were entitled to immunity on the basis of the Noerr-
Pennington doctrine and predicted, on the basis of the
language in Bedell, that they would not be entitled to
Parker immunity. The Plaintiffs argue that the court erred.
They posit that a State’s implementation and enforcement
of a restraint of trade it has adopted or sanctioned is
governed by the state action, and not the Noerr-Pennington,
immunity doctrine. Plaintiffs argue that the state action
doctrine fails to shield Defendants from antitrust liability in
this case.
Defendants, on the other hand, claim that they are
immune from antitrust liability under both the Noerr-
Pennington and Parker doctrines. If we were writing on a
clean slate, we might find some logic in Plaintiffs’ argument
that the conduct of private parties must be evaluated under
Noerr-Pennington and that of government units under
Parker. But the slate is not tabula rasa.
We consider each immunity doctrine in turn.
A. Noerr-Pennington Immunity
In Bedell, we concluded that although plaintiffs had
properly pleaded an antitrust injury, the Noerr-Pennington
immunity doctrine nonetheless shielded the Majors from
liability, thereby making it appropriate for the district court
to dismiss plaintiffs’ complaint under Rule 12(b)(6). 263
F.3d at 266-67. The narrow question before us, then, is
whether that same immunity extends to the other party to
the MSA — the state actors. Here, those actors are
Defendants Fisher and Williams. Under the Noerr-
Pennington doctrine, “ ‘[a] party who petitions the
government for redress generally is immune from antitrust
liability.’ ” Id. at 250 (citation omitted). That immunity is so
potent that it protects petitioning notwithstanding an
improper purpose or motive. Id.The doctrine was first established in E.R.R. Presidents
Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961),
where the Court held that the Sherman Act is not violated
simply by attempts by private parties to influence the
passage or enforcement of laws favorable to the petitioner
12
despite the anticompetitive effects of those laws. Several
years later in United Mine Workers v. Pennington, the Court
reaffirmed that decision, holding that “[j]oint efforts to
influence public officials do not violate the antitrust laws
even though intended to eliminate competition.” 381 U.S.
657, 670 (1965) (emphasis added).
The dual principles underlying the Noerr-Pennington
doctrine are the constitutional right to petition under the
First Amendment and the importance of open
communication in representative democracies. See
California Motor Transport Co. v. Trucking Unlimited, 404
U.S. 508, 510 (1972). The Noerr Court explained:
In a representative democracy such as this, [the
legislative and executive] branches of government act
on behalf of the people and, to a very large extent, the
whole concept of representation depends upon the
ability of the people to make their wishes known to
their representatives. To hold that the government
retains the power to act in this representative capacity
and yet hold, at the same time, that the people cannot
freely inform the government of their wishes would
impute to the Sherman Act a purpose to regulate, not
business activity, but political activity, a purpose which
would have no basis whatever in the legislative history
of that Act[ ].
365 U.S. at 137 (footnote omitted). Thus, Noerr-Pennington
immunity shields actions that might otherwise violate the
Sherman Act because “ ‘[t]he federal antitrust laws do not
regulate the conduct of private individuals in seeking
anticompetitive action from the government.’ ” Bedell, 263
F.3d at 250-51 (quoting City of Columbia v. Omni Outdoor
Adver., Inc., 499 U.S. 365, 379-80 (1991)).
Highlighted as particularly relevant in Bedell, and equally
relevant to us here, is the recognition that parties are
immune from liability arising from the antitrust injuries
caused by government action resulting from the petitioning.
263 F.3d at 251. Thus, if the conduct constitutes valid
petitioning, the petitioner is immune from antitrust liability
whether or not the injuries stem from the actual act of
petitioning or from the government action resulting from
the petitioning. Id.13
In Bedell, we noted the district court’s finding that
negotiating the MSA “was akin to petitioning the
government” and we agreed that “defendants engaged in
petitioning activity with sovereign states . . . are immune
under the Noerr-Pennington doctrine[ ].” Id. at 252 (footnote
omitted). We recognized that other courts have also reached
this conclusion. Id. at 252 n.31 (citing Hise v. Philip Morris
Inc., 46 F. Supp. 2d 1201, 1206 (N.D. Okla. 1999), aff ’d
mem., 208 F.3d 226 (10th Cir. 2000); Forces Action Project
LLC v. California, No. C99-0607 MJJ, 2000 WL 20977, at *8
(N.D. Cal. Jan. 5, 2000); PTI, Inc. v. Philip Morris Inc., 100
F. Supp. 2d 1179, 1193 (C.D. Cal. 2000)). Acknowledging
plaintiffs’ contention that a motivating purpose behind the
MSA was to create a cartel with its attendant
supracompetitive profits and that the States were motivated
by a desire to share in these profits, we nonetheless stated
that “the parties’ motives are generally irrelevant and carry
no legal significance [ ].” Id. at 253 (footnote omitted) (citing
Noerr, 365 U.S. at 138). Instead, we noted that the
petitioning invoked the States’ traditional powers to
regulate the health and welfare of their citizens. See id.Accordingly, in Bedell we granted Noerr-Pennington
immunity to the Majors. Id. at 254.
As noted previously, Plaintiffs argue that Noerr-
Pennington immunity is applicable to shield private parties
but that it is inapplicable to Defendants because immunity
for state actions, if any, must be found in the state action
doctrine that applies to a State’s implementation and
enforcement of an antitrust injury under the Supreme
Court’s decision of Parker v. Brown, 317 U.S. 341 (1943).
The District Court concluded that by instituting a lawsuit
on behalf of Pennsylvania against the tobacco companies,
Defendant Fisher was petitioning the courts “ ‘to recover
damages which the Commonwealth and its citizens have
sustained as a result of the unlawful and concerted actions
of the [tobacco companies].’ ” Mariana v. Fisher, 226 F.
Supp. 2d 575, 582 (M.D. Pa. 2002) (citation omitted).
Because the MSA arose from a petition in proceedings
before “other governmental agencies authorized to resolve
such issues,” Defendants were entitled to Noerr-Pennington
immunity. Id.14
In support of that conclusion, we note that Defendant
Fisher was among the dozens of Attorneys General across
the country who filed suit against the tobacco companies,
effectively petitioning the judiciary. In Trucking Unlimited,
the Supreme Court made explicit that the Noerr-Pennington
doctrine immunizes petitioning directed at any branch of
government, including the executive, legislative, judicial,
and administrative agencies. 404 U.S. at 510. In Bedell, we
held that the settlement that arose from the tobacco
lawsuits was petitioning for Noerr-Pennington purposes. 263
F.3d at 252.
Plaintiffs argue that Noerr-Pennington immunity cannot
apply because petitioning immunity cannot apply to a
public entity. They provide no persuasive authority. In the
one case they cite, Video Int’l Prod., Inc. v. Warner-Amex
Cable Communications, Inc., 858 F.2d 1075, 1086 (5th Cir.
1988), the plaintiff did not seek to impose liability on the
defendant city based on petitioning activity but instead
sued the city based on its own zoning enforcement
decisions. Thus, the statement in that opinion that “it is
impossible for the government to petition itself,” id., hardly
serves as authority for us. More important, this court in
Herr v. Pequea Twp., 274 F.3d 109, 119 n.9 (3d Cir. 2001)
(questioned on other grounds by United Artists Theatre
Circuit, Inc. v. Twp. of Warrington, 316 F.3d 392, 400 (3d
Cir. 2003)), rejected the proposition in Video Int’l that
petitioning immunity cannot apply to a public entity.
In Herr, a land developer sued a township and three of its
supervisors alleging that the township violated his
substantive due process rights through a campaign to
obstruct his development project. 274 F.3d at 110. The
action of the government defendants was participation in
proceedings before various courts and the Lancaster
County Planning Commission, the Department of
Environmental Review, the Environmental Hearing Board,
and the Zoning Hearing Board. Id. Although Herr involved
constitutional claims, not an antitrust claim, we stated that
the Noerr-Pennington doctrine was not limited to the
antitrust arena, id. at 116, and concluded, over a dissent,
that the government officials were entitled to Noerr-
Pennington immunity as public officials sued in their
15
individual capacities. Id. at 119. We acknowledged that we
could not find a case addressing whether a municipal
corporation is entitled to such immunity, but “predict[ed]
. . . that the Supreme Court would hold that it is.” Id.Although the dissent in Herr relied on Video Int’l, the
majority distinguished it because it did not involve a
situation, as in Herr, where the plaintiff sought to impose
liability on a municipality for petitioning a distinct public
entity authorized by state law to resolve land planning
issues. Id. at 119-20 n.9.
Plaintiffs argue that unlike Herr, this action does not
implicate Defendants’ petitioning activity and they do not
seek to recover damages, but only an injunction against
Defendants in their official capacities. But the basis for
their claim is that the MSA is a contract or combination
that violates the Sherman Act. If the government officials
have Noerr-Pennington immunity for entering into the MSA,
that immunity must extend to complying with and
enforcing its provisions. Like the defendants in Herr,
Defendants in the current case petitioned governmental
entities authorized to resolve the pertinent issues — here
the courts and the legislature — in an attempt to advance
the goals of Pennsylvania residents. In Bedell, we found the
Majors’ participation in the settlement agreement to be
petitioning. 263 F.3d at 252. If the Majors’ role in that
agreement is petitioning, the role of the state actors, who
actually initiated the chain of events leading up to the MSA
by initiating the lawsuit and lobbying the legislature, surely
must be petitioning.
Although Noerr-Pennington immunity typically applies to
private, not public, actors, this would not be the first time
an appellate court has applied such immunity to public
actors. Both the Ninth and Second Circuit Courts of
Appeals have extended Noerr-Pennington immunity to
government actors. See, e.g., Manistee Town Center v. City
of Glendale, 227 F.3d 1090 (9th Cir. 2000); Miracle Mile
Assocs. v. City of Rochester, 617 F.2d 18 (2d Cir. 1980). In
Miracle Mile, the Second Circuit held that the City of
Rochester’s petitions to state and federal agencies opposing
expansion of a regional shopping center were immunized
under Noerr-Pennington without a discussion of the public
16
versus private dichotomy. Id. at 20-21. However, the Ninth
Circuit examined the issue in some detail in Manistee.
Plaintiff, Manistee Town Center, purchased and
renovated a rundown shopping mall. Manistee, 227 F.3d at
1091. When unsuccessful in attracting major retail tenants
to the mall, the plaintiff began to explore alternative lease
arrangements which were opposed by defendants, the City
of Glendale and the Mayor, City Manager, and two City
Council members. Id. Defendants sought to prevent the
plaintiff ’s efforts to lease space to certain lessors by
encouraging residents and the local press to vocally oppose
non-commercial use of the space and by lobbying
government officials of the County. Id. at 1092. When
Manistee Town Center’s lease arrangements fell through, it
filed a complaint against defendants, in their official
capacities, pursuant to 42 U.S.C. §§ 1983 and 1985. Id.The district court dismissed plaintiff ’s § 1983 claim on
Noerr-Pennington immunity grounds. Id.
In affirming the dismissal, the Ninth Circuit
acknowledged that the applicability of Noerr-Pennington
immunity to government actors was a “question of first
impression.” Id. at 1093. The court reasoned that extending
such immunity to state actors is consistent with the
“representative democracy” rationale enunciated by the
Supreme Court in Noerr, as “[g]overnment officials are
frequently called upon to be ombudsmen for their
constituents” whereby “they intercede, lobby, and generate
publicity to advance their constituents’ goals.” Id. In
holding that Noerr-Pennington immunity extended to
defendants, the court concluded that this form of
petitioning is “nearly as vital” to democracy as petitioning
by private citizens. Id.
We know of no Supreme Court or federal appellate case
holding that Noerr-Pennington cannot apply to government
actors, and are persuaded by the reasoning employed by
the Manistee court. Governmental petitioning is as crucial
to the modern democracy as is that of private parties.
Accordingly, we agree with the District Court that by
instituting a lawsuit against the tobacco companies on
behalf of the Commonwealth and lobbying the legislature to
17
pass the TSAA, Defendants engaged in petitioning activities
that qualify for Noerr-Pennington immunity.
Noerr-Pennington immunity notwithstanding, Defendants
argue that they are also eligible for the state action
immunity recognized by the Supreme Court 60 years ago in
Parker. Thus, we consider Defendants’ claims as to Parker
immunity.
B. Parker Immunity
Defendants argue with considerable vigor that they also
are entitled to state action immunity stemming from the
Supreme Court’s decision in Parker. Plaintiffs counter that
because the Bedell court found no Parker state action
immunity for the Majors, we are bound to find no Parker
immunity for the States.
It is indeed true that this court strictly adheres to its
Internal Operating Procedure 9.1 which provides: “It is the
tradition of this court that the holding of a panel in a
precedential opinion is binding on subsequent panels.
Thus, no subsequent panel overrules the holding in a
precedential opinion of a previous panel. Court en banc
consideration is required to do so.” It is also well
established that a subsequent panel is not bound by
dictum in an earlier opinion. See, e.g., Burstein v. Ret.
Account Plan for Employees of Allegheny Health Educ. and
Research Found., 2003 WL 21509028 at *7 (3d Cir. 2003).
In Bedell, once we held that the Majors were immune
from antitrust liability under the Noerr-Pennington doctrine,
we recognized that “our analysis could end here.”
Nonetheless, we continued by stating, “[b]ut the District
Court found Parker immunity, so we will address it as well.”
263 F.3d at 254. From this comment, one may deduce we
recognized that our subsequent discussion on Parker
immunity was unnecessary to the holding in Bedell and
that arguably the state action discussion was dicta. If
Bedell had concluded that the Majors were immune under
the Parker doctrine as well as under Noerr-Pennington, it
would have been an alternate ground for the holding, and
therefore not dicta. See United States ex rel. Caruso v.
Zelinsky, 689 F.2d 435, 440 (3d Cir. 1982) (“We note first
that an alternate holding has the same force as a single
18
holding; it is binding precedent.”). But Bedell did not so
conclude. 263 F.3d at 266. We therefore turn once again to
our opinion in Bedell to examine whether its rejection of the
applicability of Parker immunity for the Majors was dicta or
whether it binds us to reject Parker immunity for the State
Defendants.
In Bedell, we embarked on a thorough discussion of the
rationale and scope of the Parker immunity doctrine. We
rescribe only the highlights of that discussion. We
characterized as well established that “[a]ntitrust laws do
not bar anticompetitive restraints that sovereign states
impose ‘as an act of government.’ ” Id. at 254 (quoting
Parker, 317 U.S. at 352). In Parker, the Supreme Court
held that the California Agriculture Prorate Act, a state
statute restricting competition among food producers in
California by imposing a market sharing scheme, did not
violate the Sherman Act. 317 U.S. at 352. Since then, the
Court has consistently held that the federal antitrust laws
are subject to supersession by state regulatory programs.
See, e.g., FTC v. Ticor Title Ins. Co., 504 U.S. 621, 632-33
(1992).
The Parker doctrine is grounded in federalism and
respect for state sovereignty. Bedell, 263 F.3d at 254. As
explained in Bedell, the “interest in protecting the acts of
the sovereign state, even if anticompetitive, outweighs the
importance of a freely competitive marketplace.” Id. at 254-
55. Therefore, clear congressional intent is required before
a federal law will be held to invalidate state programs
because “an unexpressed purpose to nullify a state’s
control over its officers and agents is not lightly to be
attributed to Congress.” Parker, 317 U.S. at 351.
As we acknowledged in Bedell, “[w]hen a state clearly acts
in its sovereign capacity it avoids the constraints of the
Sherman Act and may act anticompetitively to further other
policy goals.” 263 F.3d at 255. For example, in Hoover v.
Ronwin, 466 U.S. 558 (1984), the Court considered the
claim of an unsuccessful candidate for admission to the
Arizona Bar that the members of Arizona’s admissions
committee violated the Sherman Act by “artificially reducing
the numbers of competing attorneys in the State.” Id. at
565 (quotation omitted). The Court held that defendants’
19
actions with regard to the bar examination grading formula
could not be divorced from the Arizona Supreme Court’s
exercise of its sovereign power, and thus defendants were
immune under Parker. Id. at 570-73. It cautioned, however,
that conduct that is not directly that of the state legislature
and judiciary requires “closer analysis” for purposes of
Parker immunity “to ensure that the anticompetitive
conduct of the State’s representative was contemplated by
the State” itself. Id. at 568. In Bedell, we stated that when
it is uncertain whether we should treat an act as state
action because it has been neither approved nor authorized
by the State, courts should apply the two-pronged test
enunciated by the Supreme Court in California Retail Liquor
Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980).
263 F.3d at 259.
To qualify as state action under the Midcal test, the
challenged restraint must, first, be one that is “ ‘clearly
articulated and affirmatively expressed as state policy,’ ”
and, second, the resulting antitrust violation must be
“ ‘actively supervised’ ” by the State. Id. at 104 (quoting City
of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389,
410 (1978)). In Bedell, we recognized that it is unnecessary
to undertake a Midcal analysis if the alleged antitrust injury
was the direct result of a clear sovereign state act. 263 F.3d
at 256.
Illustrative is our decision in Massachusetts Sch. of Law
at Andover, Inc. v. Am. Bar Ass’n, 107 F.3d 1026 (3d Cir.
1997), a case in which an unaccredited law school that
failed to receive accreditation filed an antitrust suit against
the American Bar Association (“ABA”) alleging a group
boycott. We reasoned that any potential antitrust injury
arising from the inability of plaintiff ’s graduates to take bar
examinations was the result of state action because it is the
State, and not the ABA, that makes the decision as to bar
admissions. Id. at 1036. We concluded that because the
States are sovereign in imposing the bar admission
requirements, the ABA was immune from liability under
Parker, and the Midcal test urged by plaintiff was
inapplicable. Id. at 1036.
Nonetheless, in Bedell we did apply the Midcal test.
Although we recognized that “one could find direct state
20
action foreclosing the application of Midcal” because the
MSA “was a negotiated settlement by State Attorneys
General, and the state legislatures were responsible for
passing the Qualifying Statutes to enforce important
components of the agreement,” we stated, “it would appear
that . . . the anticompetitive injury here resulted from the
tobacco companies’ conduct after implementation of the
[MSA], and not from any further positive action by the
States.” Bedell, 263 F.3d at 257-58.
Because this court in Bedell examined precisely the same
facts and the same documents and concluded that we must
apply the Midcal test, we believe we are not free to decide
to the contrary.
In applying Midcal’s first prong, we concluded that “it is
evident the Multistate Settlement Agreement was backed by
clearly articulated state policy.[ ]” Id. at 260 (footnote
omitted). We believe that conclusion is unassailable and, of
course, it applies equally in this case. It was our analysis
of the second Midcal prong that led us to conclude that the
Majors were not entitled to Parker immunity. In that
connection, we stated that “[t]he essential inquiry of the
‘actively supervised’ prong is to determine if the
‘anticompetitive scheme is the State’s own.’ ” Id. (quoting
Ticor Title, 504 U.S. at 635). We cited Patrick v. Burget, 486
U.S. 94, 101 (1988), for the proposition that active
supervision “ ‘requires that state officials have and exercise
power to review particular anticompetitive acts of private
parties,’ ” thereby ensuring that a private party’s
anticompetitive conduct promotes state policy rather than
the party’s own interest. Bedell, 263 F.3d at 260. We
concluded that “[t]he States actively and continually
monitor the implementation of portions of the [MSA],” id. at
261, but we were “not convinced that the States satisfy
Midcal’s ‘active supervision’ prong . . . . because the States’
supervision does not reach the parts of the [MSA] that are
the source of the antitrust injury.” Id. at 262.
It is arguable that in determining that the Majors were
not entitled to Parker state action immunity, the Bedell
court placed too little significance on the States’ role in the
implementation of the MSA. Plaintiffs’ principally complain
about the rise in cigarette prices following the MSA. Bedell
21
recognized that the State has immunity for its role in
negotiating, entering into, and enforcing the MSA, but
noted that the MSA contains no provision giving the State
responsibility to supervise cigarette prices. As the court
stated in Bedell, “it is clear the [MSA] empowers the tobacco
companies to make anticompetitive decisions with no
regulatory oversight by the States. Specifically, the
defendants are free to fix and raise prices, allegedly without
fear of competition.” Id. at 260.
However, the absence of such a provision is as much
state action as are the provisions included in the MSA. The
rise in cigarette prices was made possible, at least in part,
by the States’ enforcement of the MSA provisions that
prevent SPMs and NPMs from expanding their market
share, specifically through the market share cap created by
the MSA and imposed on SPMs, MSA § IX(i)(1), and the
TSAA provisions forcing NPMs to either face the same
market share cap or pay into a state established escrow
account. 35 Pa. Cons. Stat. § 5674. As a matter of logic,
there may be some inconsistency in holding the State loses
its Parker immunity for that which it did in its capacity as
a State.
Nonetheless, even though the case before us differs from
Bedell in that the parties are different, we feel bound by
Bedell to abstain from reaching a different conclusion on
Parker immunity. We cannot in conscience characterize the
discussion on Parker immunity in Bedell as dicta. The
Supreme Court, in discussing dicta, has stated, “this Court
does not decide important questions of law by cursory dicta
inserted in unrelated cases.” In re Permian Basin Area Rate
Cases, 390 U.S. 747, 775 (1968) (emphasis added). This is
neither “cursory dicta” nor an “unrelated case.” The
discussion makes clear the connection. As we stated in
Bedell, “[b]ecause private participants in state action enjoy
Parker immunity only to the extent the States enjoy
immunity, the defendants are not shielded by Parker.[ ]” Id.
at 266 (footnote omitted). Perhaps unintentionally, because
the issue was not before it, by this sentence Bedell seems
to have assumed, if not decided, that the States have no
Parker immunity. Accordingly we, as did Bedell for the
Majors, hold that the State officials are not entitled to
Parker immunity.
22
Critics may with some justification regard our discussion
of Parker immunity as dictum, and well it may be. In any
event, the parties argued Parker immunity, Bedell
discussed it at length and our discussion serves to
complete the cycle.
V.
CONSTITUTIONAL CLAIMS
In addition to their antitrust claims, Plaintiffs include
claims challenging the constitutionality of the MSA under
the Dormant Commerce Clause and Compact Clause. The
District Court dismissed Plaintiffs’ constitutional claims,
concluding that Plaintiffs can prove no set of facts that the
MSA violates either clause. Mariana v. Fisher, Civ. No. 1:
CV-01-2070 (M.D. Pa. June 17, 2002). On appeal, we
consider whether Plaintiffs properly have stated a cause of
action under either the Commerce or Compact Clause.5
Although the District Court did not address Plaintiffs’
standing, we do so now and conclude that because
standing is a jurisdictional requirement, the District Court
should have dismissed Plaintiffs’ constitutional claims on
this ground. Our analysis begins with a review of the
rudimentary principles of standing. The standing doctrine
is grounded in Article III of the Constitution, which limits
the jurisdiction of federal courts to actual “cases” or
“controversies.” U.S. Const. art. III, § 2. Thus, it is a
jurisdictional requirement that a person challenging a
government action be a party to a live case or controversy.
Star Scientific, Inc. v. Beales, 278 F.3d 339, 358 (4th Cir.
2002).
The doctrine of standing is comprised of both
“ ‘constitutional and prudential components.’ ” Oxford
Assocs. v. Waste Sys. Auth. of E. Montgomery County, 271
5. As an initial matter, we note that in their brief, Plaintiffs argue that
both the MSA and TSAA violate the Commerce Clause. However, we need
only address their claims as to the MSA as Plaintiffs’ complaint alleges
a violation under the Commerce Clause based only on the MSA, and not
the TSAA.
23
F.3d 140, 145 (3d Cir. 2001) (citation omitted).
Summarizing its standing jurisprudence over the years, the
Supreme Court articulated three “irreducible” elements for
constitutional standing. Lujan v. Defenders of Wildlife, 504
U.S. 555, 560 (1992). First, the plaintiff must have suffered
an “injury in fact,” which is an invasion of a legally
protected interest that is (a) concrete and particularized
and (b) actual or imminent, not conjectural or hypothetical.
Id. Second, there must be a “causal connection between the
injury and the conduct complained of.” Id. Third and
finally, it must be “ ‘likely’ ” rather than “ ‘speculative’ ” that
a favorable decision will redress the injury. Id. at 561(citation omitted).
The prudential components of standing address the need
for judicial restraint, thereby constituting a “supplemental
aspect of the basic standing analysis.” Oxford Assocs., 271
F.3d at 145. When considering prudential standing, we
examine the plaintiff ’s role because “ ‘[t]he aim of this form
of judicial self-governance is to determine whether the
plaintiff is ‘a proper party to invoke judicial resolution of
the dispute and the exercise of the court’s remedial
powers.’ ” Id. (citations omitted). Thus, the limits of
prudential standing are used to ensure that those parties
who can best pursue a particular claim will gain access to
the courts. Id.
This court has recently articulated a three-part test for
assessing whether a party satisfies prudential standing.
First, prudential standing requires that a litigant assert his
or her own legal interests rather than those of a third party.
Id. at 145-46. Second, courts refrain from adjudicating
abstract questions of wide public significance amounting to
generalized grievances. Id. at 146. Third, a plaintiff must
demonstrate that his or her interests are arguably within
the “zone of interests” that are intended to be protected by
the statute, rule, or constitutional provision on which the
claim is based. Id. For the purposes of determining
standing, the court must accept as true all material
allegations set forth in plaintiffs’ complaint and must
construe those facts in favor of the plaintiffs. Storino v.
Borough of Point Pleasant Beach, 322 F.3d 293, 296 (3d Cir.
2003).
24
Bearing these principles in mind, it seems clear to us
that Plaintiffs fail the test for both constitutional and
prudential standing. During oral argument, Plaintiffs
argued that our decision in Oxford Assocs. provided the
authority for standing. In Oxford Assocs., a group of
building owners brought a suit pursuant to 42 U.S.C.
§ 1983 against a county’s Waste Authority, challenging the
Authority’s implementation of a waste generation fee
(“WGF ”) structure that forced them to use the local facility
to the exclusion of cheaper out of state options. 271 F.3d
at 143. Under the challenged fee structure, the building
owners had to pay private trash haulers to transport their
waste and also had to pay a separate WGF to the Authority
to process that waste. Id. at 144. They alleged that the
purpose and effect of the WGF was to compel them to
subsidize trash processing at the local facility in violation of
the Commerce Clause. Id. The Authority challenged the
building owner’s standing on the third prong of the
prudential standing test, arguing that their interests were
outside the “zone of interests.” Id. at 145-46. This court, by
a divided panel, found that plaintiffs’ interests fell within
the “zone of interests” because the WGF was imposed
directly on plaintiffs, the waste generators, and therefore
they had standing to bring their Commerce Clause claim.
Id. at 148.
Plaintiffs in this case have argued that because Oxford
Assocs. “permitted [consumers] to bring a suit,” they too
have standing to make claims under the Commerce Clause.
Tr. of Oral Arg., Mar. 12, 2003, at 13. Plaintiffs’ reliance on
Oxford Assocs. is misplaced. The building owners, plaintiffs
in Oxford Assocs., were directly subjected to the challenged
fee and thus were asserting their own, rather than a third
party’s, interest. The court was not being asked to address
a generalized grievance.
The case before us is easily distinguishable. We need not
even reach the “zone of interests” prong of the prudential
standing test as Plaintiffs (smokers) fail the test’s first
prong. Plaintiffs do not allege any personal injury as
smokers. Instead, their brief is replete with instances of
injury the MSA causes SPMs and NPMs. For example,
Plaintiffs argue that:
25
The MSA and TSAA do not expressly favor
Pennsylvania manufacturers over out-of-state
manufacturers; nor do they treat more favorably
cigarettes manufactured or processed in Pennsylvania
in comparison to cigarettes manufactured or processed
elsewhere. This state regulation, however, has the
purpose and effect of favoring a finite set of businesses,
i.e., the Majors, by protecting their market share
through the output limitations and payment
obligations imposed on SPMs and NPMs alleged in the
complaint.
Br. of Plaintiffs at 45-46.
Plaintiffs do not complain that the MSA’s payment
structure injures them as smokers. Because Plaintiffs are
not asserting their own legal interests but instead those of
third parties - here the SPMs and NPMs - they are not
analogous to the plaintiffs in Oxford Assocs., who alleged
that they personally were injured by the fee structure at
issue in that case. Instead, Plaintiffs’ Commerce Clause
arguments devolve into nothing more than generalized
grievances against the MSA. Accordingly, the doctrine of
prudential standing precludes us from hearing such claims.
Moreover, Plaintiffs cannot get past the first of the
constitutional standing requirements — injury in fact. The
Court has made clear that to have constitutional standing,
the “ ‘injury in fact’ test requires more than an injury to a
cognizable interest. It requires that the party seeking review
be himself among the injured.” Lujan, 504 U.S. at 563
(citation omitted). This injury must be concrete and
particularized rather than conjectural or hypothetical. Id. at
560. Unlike their allegations directed to the antitrust laws,
Plaintiffs make what can only be described as conjectural
allegations as to their constitutional claims. The relevant
Commerce Clause allegation in the complaint is merely:
“The MSA unduly encroaches upon the enumerated federal
power over interstate commerce set forth in the United
States Constitution, Article I, Section 8, Clause 3.” App. at
52.
Plaintiffs’ allegation as to the Compact Clause is no more
descriptive:
26
The MSA is a multistate agreement that violates the
Compacts Clause of the United States Constitution,
Article I, Section 10, Clause 3, in that it is a
combination tending to the increase of power in the
states which has or may encroach upon the just
supremacy of the United States to regulate interstate
trade in the domestic cigarette market.
App at. 53.
Although Plaintiffs’ brief is filled with generalized
grievances as to how the MSA and TSAA force SPMs and
NPMs to make payments that violate the antitrust laws, it
fails to make particularized and concrete allegations as to
how Plaintiffs, as smokers, suffer injury in fact, and
therefore Plaintiffs lack constitutional standing.
VI.
CONCLUSION
For the reasons set forth, we will affirm the District
Court’s order dismissing Plaintiffs’ complaint. As to
Plaintiffs’ antitrust claims, we have concluded that
Defendants are entitled to immunity under Noerr-
Pennington. We affirm the District Court’s dismissal of
Plaintiffs’ constitutional claims, but we do so on
jurisdictional grounds rather than on the merits.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit