Application of Antitrust Principles to Business Tort Claims

• Pages: 21-52

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CHAPTER II

APPLICATION OF ANTITRUST

PRINCIPLES TO BUSINESS TORT CLAIMS

The previous chapter explored how the role of business tor ts

in establishing antitrust violations has evolved over the last

century. This chapter examines how business tort defendants

have attempted to use some of the concepts successfully invoked

in defense of antitrust claims when defending against tort claims

based upon competitive conduct. – Eds.

A. Introduction

This chapter focuses upon two defensive theories with connections to

antitrust that have enjoyed increasing acceptance in business tort

litigation.

The so called “competitive privilege” or “freedom to compete”

theories increasingly are viewed as principles of nonliability rather than

as affirmative defenses to business tort claims. The Noerr doctrine,

which likewise originated in the antitrust context, is now widely

recognized as an immunity from business tort liability. This chapter also

briefly examines several other antitrust principles that have been used

with varying degrees of success in business tort litigation.

B. The Competitive Privilege and the Freedom to Compete

As noted in Chapter I, antitrust plaintiffs long have attempted with

varying success to import business tort principles into antitrust cases. As

business torts have gained prominence and antitrust defenses have

strengthened, business tort defendants increasingly have sought to import

antitrust concepts into business tort cases. Foremost among these is the

so-called “competitive privilege.”

Business tort doctrine long has recognized a privilege for conduct

that is legitimately competitive.

1

This privilege is embodied in the

formulation of standards concerning tortious interference with business

1

. See, e.g., The Schoolmaster Case, Y.B. 11, Hen. IV, f.47 pl. 21 (C.P. Hil.

Term 1 410); see also Pacific Express v. U nited Airlines, 959 F.2d 814,

818-20 (9th Cir. 1992).

22 Business Torts and Unfair Competition Hand book

relations set forth in the Restatement (Second) of Torts.

2

Recognizing

that “[t]he freedom t o engage in busi ness and to compete for the

patronage of prospective customers is a fundamental premise of the free

enterprise system,” the Restatement (Third) of Unfair Competition

recognizes a broader “freedom to compete.”

3

This more recent

Restatement rejects the view that competition is a “privilege” as to which

the defendant has the burden of proof; instead, it places the burden on the

plaintiff to allege and prove that the defendant’s conduct amounted to

something more than mere competition.

4

1.

The Competitive Privilege

“One of the most firmly established principles of the common law is

that competition is not a tort.”

5

Although competition literally is an

intentional interference with a competitor’s prospective contractual

relations, to conclude that it is therefore tortious would disrupt the

system of free enterprise and thus makes no sense from a legal or

economic standpoint.

6

The law of contract exists to provide a means of enforcing business

expectations; however, when a business relation affords the parties no

enforceable expectations, but only the hope of continued benefits, the

law must allow for the rights of others,

7

since no business has a

proprietary interest in its customers.

8

Thus, while a company is not

justified in inducing a breach of contract simply because it is in

2

. RESTATEMENT (SECOND) OF TORTS § 768 (1979) [hereinafter

RESTATEMENT (SECOND)].

3

. RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 1 & cmt. a (1995)

[hereinafter RESTATEMENT (THIRD)].

4

. Id. at cmt. a.

5

. Shank v. William R. Hague, Inc., 192 F.3d 675, 687 (7th Cir. 1 999)

(quoting Frandsen v. Jensen-Sundquist Agency, 802 F.2d 941, 947 (7th

Cir. 1986)); see Speakers of Sport, Inc. v. ProServ, Inc., 178 F.3d 862,

865 (7th Cir. 1999) (citing Keeble v. Hickeringill, 103 Eng. Rep. 1127

(K.B. 1706-07)); Grempler v. Multiple Listing Bureau, 258 Md. 419, 425

(Md. App. 1970).

6

. Shank, 192 F.3d at 687; Fr andsen, 802 F.2d at 947; see Macklin v.

Robert Logan Assocs., 639 A.2d 112, 119 (Md. App. 1994).

7

. See Bed, Bath & Beyond of La Jolla, Inc. v. La Jolla Vill. Sq uare Venture

Partners, 60 Cal. Rptr. 2d 830, 837-38 (Cal. App. 1997); Belden Corp. v.

InterNorth, 413 N.E.2d 98, 101 (Ill. App. 1980); Macklin, 639 A.2d at

120-21.

8

. See Prudential Ins. Co. of Am. v. Sipula, 776 F.2d 157, 163 (7th Cir.

1985).

Application of Antitrust Princip les 23

competition with one of the parties to the contract and seeks to further its

own economic interests, competitive freedom is of sufficient importance

to justify inducement of a third party to abandon its relationship with

another in the absence of an existing contractual relationship.

9

Applying this reasoning, courts generally have held that, while

competition is not a defense to a claim of interference with an existing

contract not terminable at will, it is a valid defense to a claim of

interference with a contract that is terminable at will, or to a claim of

interference with prospective advantage.

10

Many of these decisions have

relied upon section 768 of the Restatement (Second), which provides:

(1) One who intentionally causes a third person not to enter into a

prospective co ntractual relati on with another who is his competitor or

not to continue an existing contract ter minable at will does not interfere

improperly with the other’s relation if

(a) the relation concerns a matter involved in the

competition between the actor and the other and

(b) the actor does not employ wrongful means and

(c) his action does not create or continue an unlawful

restraint of trade and

(d) his purpose is at least in part to advance his interest in

competing with the other.

(2) The fact that one is a competitor of another for the business of a

third person does not prevent his causing a breach of an existing

9

. Macklin, 639 A.2d at 120; see Jewel Cos. v. Pay Less Drug Stores Nw.,

741 F.2d 1555, 1568 (9th Cir. 1984); Republic Tobacco v. N. Atl.

Trading Co., 254 F. Supp. 2d 1007, 1011-12 (N.D. Ill. 2003).

10

. See Navellier v. Sletten, 262 F.3 d 923, 937-38 (9th Cir. 20 01);

International Sales & Ser v. v. Austral Insulated Prods., 262 F.3d 1152,

1159 (11th Cir. 2001); P roServ, 178 F.3d at 865; Nobody in Particular

Presents, Inc. v. Clear Channel Commc’ns, 311 F. Supp. 2d 1048, 1072

(D. Colo. 2004); Cacique, Inc. v. Gonzalez, 2004 U.S. Dist. LEXIS 4966,

at *5-7 (N.D. Ill. 2004); Edwards v. Anaconda Co., 565 P.2d 190, 193-94

(Ariz. Ct. App. 1977); Heavener, Ogier Servs. v. R.W. Fla. Region, 418

So. 2d 1074, 1076 -77 (Fla. Dist. Ct. App. 1982); Automated Solutions

Enters. v. Clearview Soft ware, 567 S.E .2d 335, 339 (Ga. Ct. App. 2002);

Belden, 413 N.E.2d at 101-02; Macklin, 63 9 A.2d at 120; North

Plumbing & Htg. v. Henderson Bros., 268 N.W.2d 296, 302 (Mich. Ct.

App. 1 978); United Wild Rice v. Nelson, 313 N.W.2d 628, 633 (Minn.

1982); Fred Siegel Co. v. Arter & Hadden, 707 N.E.2d 853, 861 (Ohio

1999); Martin v. Phillips Petroleum Co., 4 55 S.W.2d 429, 435 (Tex. App.

1970); Wilder v. Cody Country Chamber of Commerce, 868 P.2d 211,

225 (Wyo. 1994).