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From Antitrust Law Daily, July 26, 2016

Sham litigation claims proceed against cable company

By Greg Hammond, J.D.

A video franchise could proceed with claims that a cable company violated the Sherman Act and Puerto Rico Anti-Monopoly Act by conducting sham litigation. The federal district court in San Juan, Puerto Rico, determined that a reasonable jury could conclude that during portions of a four-year period there was a genuine dispute as to whether the cable company’s numerous filings constituted "sham" litigation that were repetitive and meritless, and intended to delay the video franchise’s entrance into the market, and thus, were a "material cause" to the franchise’s injury. Summary judgment in favor of the defending cable company was denied as to certain periods (Puerto Rico Telephone Co., Inc. v. San Juan Cable Company LLC, July 25, 2016, Woodcock, J.).

Puerto Rico Telephone Company, Inc. (PRTC) claims that San Juan Cable Company LLC, doing business as OneLink Communications, violated the Sherman Act and Puerto Rico Anti-Monopoly Act by conducting sham litigation over a period of four years. PRTC claims the conduct delayed its entry into the competitive market. PRTC filed numerous applications for a video franchise with the Telecommunications Regulatory Board of Puerto Rico (TRB). PRTC claims, however, that OneLink "embarked on a course of conduct designed to thwart, or at a minimum delay, PRTC’s entry into OneLink’s markets" by hijacking board proceedings, numerous unsuccessful motions to disqualify one of the commissioners, and the filing and vigorous prosecution of multiple objectively baseless lawsuits in both state and federal court—every one of which, with the exception of the most recent attack, was allegedly resolved against OneLink. OneLink moved for summary judgment.

State action immunity. The court first concluded that OneLink did not prove it was entitled to state action immunity under Parker. OneLink, a private party, contended that it was immune from liability for antitrust injury caused by state action. According to the plaintiff, under the U.S. Supreme Court’s 1980 decision inCal. Retail Liquor Dealers Ass’n v. Midcal Aluminum, OneLink had to show that the restraint was clearly articulated and affirmatively expressed as state policy and that the policy was actively supervised by the state. Because OneLink did not argue that it fit within the framework of Midcal, and because the court was skeptical that OneLink could have satisfied Midcal, the court concluded that OneLink could not invoke state action immunity.

Governmental action. The court, however, agreed with OneLink that when the Puerto Rico courts issued stays at OneLink’s requests, those events triggered immunity for OneLink under Noerr-Pennington. OneLink’s subjective intent was irrelevant because the court did not find that the motions to stay were objectively baseless. Consequently, for the stays the Puerto Rico courts did grant, Noerr-Pennington barred all of PRTC’s claims for damages arising from those stays and PRTC cannot present any evidence at trial of harm that resulted from those stays, including any incidental effects, the court concluded. In addition, the court determined that Noerr-Pennington bars all of PRTC’s claims for damages arising from OneLink’s successful litigation.

Nevertheless, the court concluded that some, but not all time periods, presented a genuine dispute as to whether OneLink’s filings constituted "sham" litigation that were repetitive and meritless, and intended to delay PRTC’s entrance into the market, and thus, were a "material cause" to its alleged injury. A reasonable jury could find that: (1) a number of filings were intended to stall and delay PRTC’s entrance into the market, rather than to seek a favorable outcome from the TRB; (2) OneLink was attempting to use process—as opposed to the outcome of that process—as an anticompetitive weapon by using repetitive filings; (3) OneLink’s purpose in filing another action was to further delay PRTC’s entrance into the market, because, under the terms of a settlement agreement that OneLink reached with the TRB, the TRB agreed to delay its approval of PRTC’s franchise agreement for nearly two months and to provide at least seven days’ notice to OneLink before acting on the franchise agreement; and (4) the filings the court concluded raised a genuine dispute of being "sham" ones were intended to impose the type of enormous expense that PRTC claims it accrued as a result—an estimated $3.2 million—some of which were filed even after the franchise agreement was approved by the TRB.

The case is No. 3:11-cv-02135-JAW.

Attorneys: Hugh M. Stanley (Tucker Ellis LLP) and Luis A. Oliver-Fraticelli (Fiddler Gonzalez & Rodriguez) for Puerto Rico Telephone Co., Inc. Brian K. Grube (Jones Day) and Orlando Fernandez (Orlando Fernandez Law Offices) for San Juan Cable LLC.

Companies: Puerto Rico Telephone Company, Inc.; San Juan Cable Company, LLC

MainStory: TopStory Antitrust PuertoRicoNews

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