Application of Antitrust Principles to Business Tort Claims

• Pages: 13-45

CHAPTER II

APPLICATION OF ANTITRUST

PRINCIPLES TO BUSINESS TORT CLAIMS

As the role of business torts in establishing antitrust

violations has diminished, business tort claims have enjoyed

increasing prominence in their own right. 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

As defensive theories have proliferated in private antitrust litigation

and business tort claims have grown in popularity,1 business tort

defendants have come to rely upon principles that have been used

successfully to defend against antitrust claims. This chapter focuses

upon two of the most popular – the so-called “competitive privilege” and

the Noerr-Pennington doctrine – and briefly examines several others that

have been used with varying degrees of success in litigation involving

claims of anticompetitive conduct.

B. The Competitive Privilege

As noted in Chapter 1, antitrust plaintiffs in years past attempted

with some success to import business tort principles into antitrust cases.

Today the situation is reversed. 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.”

1. See Chapter 1.

14 Business Tort Law

Business tort doctrine long has recognized a privilege for conduct

that is legitimately competitive.2 This privilege is embodied in the

formulation of standards concerning tortious interference with business

relations set forth in the Restatement (Second) of Torts,3 and in the more

recent Restatement (Third) of Unfair Competition, which recognizes a

broader “freedom to compete.”4 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 upon the plaintiff to

allege and prove something other than that the defendant engaged in

mere competition.5

1. General Principles

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

that competition is not a tort.”6 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.7

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, it must

allow for the rights of others,8 since no business has a proprietary interest

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

Term 1410); see also Pac. Express, Inc. v. United Airlines, Inc., 959 F.2d

814, 818-20 (9th Cir. 1992).

3. RESTATEMENT (SECOND)OF TORTS § 768 (1977).

4. RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 1 (1993).

5. Id. at cmt. a.

6. 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)); see

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

Cir. 1986)); Grempler v. Multiple Listing Bureau, 266 A.2d 1 (Md. App.

1970).

7. ProServ, 178 F.3d at 865; Frandsen, 802 F.2d at 947; see also Macklin v.

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

8. See Bed, Bath & Beyond of La Jolla, Inc. v. La Jolla Vill. Square 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 119.

Application of Antitrust Principles 15

in its customers.9 Thus, while a company is not justified in inducing a

breach of contract simply because it is in competition with one of the

parties to the contract and seeks to further the company’s own economic

interests, competitive freedom is of sufficient importance to justify

inducement of a third party to abandon his relationship with another in

the absence of an existing contractual relationship.10

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.11 Many of these decisions have

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

provides:

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

prospective contractual relation with another who is his

competitor or not to continue an existing contract terminable at

will does not interfere improperly with the other’s relation if

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

1985).

10. See Macklin, 639 A.2d at 120; Imperial Ice Co. v. Rossier, 112 P.2d 631,

633 (Cal. 1941); Republic Tobacco, L.P. v. N. Atl. Trading Col., 254 F.

Supp. 2d 1007, 1011-12 (N.D. Ill. 2003).

11. See Navellier v. Sletten, 262 F.3d 923, 937-38 (9th Cir. 2001); Int’l Sales

& Serv. v. Austral Insulated Prods., 262 F.3d 1152, 1159 (11th Cir. 2001);

Nobody in Particular Presents, Inc. v. Clear Channel Commc’ns, Inc., No.

01N1523, 2004 U.S. Dist. LEXIS 5665 (D. Colo. April 2, 2004); Cacique,

Inc. v. Gonzalez, No. 03C5430, 2004 U.S. Dist. LEXIS 4966 (N.D. Ill.

March 26, 2004); ProServ, 178 F.3d at 865; Fred Siegel Co. v. Arter &

Hadden, 85 Ohio St. 3d 171, 180 (1999); Automated Solutions Enters. v.

Clearview Software, Inc., 567 S.E.2d 335 (Ga. App. 2002); Volt Servs.

Group v. Adecco Empl. Servs., Inc., 35 P.3d 329 (Or. App. 2001);

Edwards v. Anaconda Co., 565 P.2d 190 (Ariz. App. 1977); Heavener,

Ogier Servs. v. R.W. Fla. Region, 418 So. 2d 1074 (Fla. App. 1982);

Belden, 413 N.E.2d at 101-02; Macklin, 639 A.2d at 120; N. Plumbing &

Htg. v. Henderson Bros., 268 N.W.2d 296 (Mich. App. 1978); United Wild

Rice v. Nelson, 313 Nw.2d 628 (Minn. 1982); Martin v. Phillips Petroleum

Co., 455 S.W.2d 429, 435 (Tex. App. 1970); Wilder v. Cody Country

Chamber of Commerce, 868 P.2d 211, 225 (Wyo. 1994).