Hanover 3201 Realty, LLC v. Village Supermarkets, Inc.
2015 U.S. App. LEXIS 19694, 2015 WL 7003365, 806 F.3d 162 (2015)
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Rule of Law:
The 'inextricably intertwined' exception to antitrust injury allows a non-competitor or non-consumer plaintiff to have antitrust standing if its injury is a direct and indispensable means by which defendants seek to achieve anticompetitive ends in a related market. For a series of petitions, the 'sham litigation' exception to Noerr-Pennington immunity applies if the petitions are brought without regard to their merits, as part of a policy to use the governmental process to restrain trade, rather than requiring each individual petition to be objectively baseless.
Facts:
- In July 2012, Hanover 3201 Realty, LLC (Hanover Realty), a real estate developer, entered into a lease and site-development agreement with Wegmans to construct a full-service supermarket on its property in Hanover, New Jersey.
- The agreement required Hanover Realty to obtain all necessary governmental permits and approvals within two years, or Wegmans could terminate the deal.
- Village Supermarkets, Inc. (ShopRite) owned a ShopRite supermarket in Hanover, about two miles from the proposed Wegmans site, and was the only full-service supermarket operating in the greater Morristown area.
- Upon learning of Wegmans' potential entry, ShopRite and its subsidiary, Hanover and Horsehill Development LLC (collectively, Defendants), initiated a campaign of administrative and court challenges to Hanover Realty’s permit applications.
- Defendants appealed Hanover Realty’s Flood Hazard Area Permit from the New Jersey Department of Environmental Protection (NJDEP), claiming their existing ShopRite would be detrimentally impacted by competition.
- Defendants challenged Hanover Realty’s Wetlands Permit application, raising objections about notice and potential endangered species like the Indiana bat, with their ecological consultant boasting about delaying issuance.
- Defendants objected to Hanover Realty’s Major Street Intersection Permit application, arguing the Wegmans project triggered obligations for Hanover Realty to build a highway overpass, which Hanover Realty disputed.
- In August 2013, after Hanover Realty received zoning approval and a bulk variance without prior objections from Defendants, ShopRite filed an action in New Jersey state court seeking to nullify the approval.
Procedural Posture:
- Hanover 3201 Realty, LLC (Hanover Realty) entered an agreement with Wegmans to develop a supermarket and applied for necessary governmental permits.
- Village Supermarkets, Inc. and Hanover and Horsehill Development LLC (collectively, 'Defendants') filed multiple administrative appeals and a state court action challenging Hanover Realty's permit applications and site plan approval.
- The New Jersey Department of Environmental Protection (NJDEP) denied Defendants' request for an adjudicatory hearing on a Flood Permit, finding no standing, and later denied a similar request for a Wetlands Permit.
- The New Jersey Department of Transportation (NJDOT) acknowledged Defendants' objections to a Street Permit but recommended negotiation for modifications rather than rejecting the permit.
- The Superior Court of New Jersey dismissed Defendants' action in lieu of prerogative writs challenging Hanover Realty's site plan approval, finding a lack of standing and no merit to the claims.
- Hanover Realty sued Defendants in the United States District Court for the District of New Jersey, alleging antitrust violations under Section 2 of the Sherman Act (attempted monopolization of the full-service supermarket market and the full-service supermarket shopping center market) and various state law claims.
- The District Court dismissed Hanover Realty's complaint, holding that it lacked antitrust standing because it was not a competitor, consumer, or participant in the restrained markets, and its injury was not 'inextricably intertwined' with the alleged antitrust violation. It declined to exercise supplemental jurisdiction over the state-law claims.
- Hanover Realty appealed the District Court's dismissal to the United States Court of Appeals for the Third Circuit.
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Issue:
1. Does a real estate developer, not a direct competitor or consumer in the retail supermarket market, have antitrust standing under the Clayton Act when its injury (costs and delays in securing permits for a prospective tenant) is inextricably intertwined with the defendant's alleged attempted monopolization of that market? 2. When evaluating a series of legal challenges for the 'sham litigation' exception to Noerr-Pennington immunity, should courts apply the single-suit 'objectively baseless' standard from Professional Real Estate Investors or the more flexible 'pattern of baseless claims' standard from California Motor Transport?
Opinions:
Majority - Fuentes, Circuit Judge
Yes, a real estate developer can have antitrust standing where its injury is inextricably intertwined with an alleged attempt to monopolize the supermarket market, and a series of legal challenges brought without regard to the merits, for the purpose of restraining trade, falls within the sham litigation exception to Noerr-Pennington immunity. Regarding the full-service supermarket market, Hanover Realty's injury (costs, delays) was 'inextricably intertwined' with Defendants' alleged scheme to keep Wegmans out of the market. Denying permits to Hanover Realty was the 'very means' by which Defendants sought to achieve their illegal ends, making Hanover Realty a 'conduit' or 'fulcrum' for the anticompetitive conduct, consistent with Blue Shield of Va. v. McCready. The court rejected the notion that the 'inextricably intertwined' exception is limited to parties selling goods or services in the same market, citing McCready's broader application. Furthermore, Hanover Realty sufficiently alleged a causal connection, directness of injury (bearing costs directly), and low risk of duplicative recovery. However, the court affirmed dismissal of the claim for attempted monopolization of the full-service supermarket rental space market because Hanover Realty failed to show it competed with H & H Development in that market, specifically lacking 'cross-elasticity of demand.' For the Noerr-Pennington immunity defense, the court held that the California Motor Transport 'pattern of baseless claims' standard applies to a series of legal proceedings, rather than Professional Real Estate Investors' stricter 'objectively baseless' standard for single petitions. This standard assesses whether a series of petitions was filed without regard to merits and for the purpose of using the governmental process to harm a rival. Hanover Realty's allegations were sufficient to establish that Defendants had a policy of filing anticompetitive sham petitions. The challenges to the Flood Permit and prerogative writs action were objectively baseless. The Wetlands Permit challenge yielded only minimal success, and there was evidence of bad faith. The Street Permit challenge resulted in a partial success for Defendants but did not lead to the permit's rejection. Defendants' overall meager record and lack of genuine interest in the issues, coupled with significant expense and delay imposed on Hanover Realty, supported the sham finding. The court also found that Hanover Realty plausibly defined the product market (full-service supermarkets) and geographic market (greater Morristown), and sufficiently alleged a specific intent to monopolize through the sham proceedings.
Concurring-in-part-and-dissenting-in-part - Ambro, Circuit Judge
No, Hanover Realty lacks antitrust standing because its injury did not stem from the anticompetitive effects within the market for full-service supermarkets. Hanover Realty, as a landlord/developer, was not a consumer or competitor in the supermarket market. Its injuries (costs, delays) arose from the alleged wrongful use of civil proceedings and contractual risk allocation, not from the market's anticompetitive effects (e.g., higher prices, reduced output), which antitrust laws are designed to address. He views landlords as 'suppliers of an input' and generally denied standing for antitrust violations targeting tenants. However, Judge Ambro joined the majority's opinion regarding the lack of antitrust standing for the full-service supermarket rental space market. Crucially, he also agreed with the majority that the defendants' Noerr-Pennington immunity defense was unavailing, accepting the majority's application of the sham litigation exception. He explained his vote on Noerr-Pennington by stating he felt 'obliged to consider the merits' of the suit after the majority (Fuentes and Greenberg) established antitrust standing as 'the law of this Circuit,' despite his personal disagreement on that threshold issue. He advocated for 'issue voting' over 'outcome voting' in such paradoxical situations, believing it better serves the court's dual responsibilities of dispute resolution and law declaration by ensuring rationale aligns with outcome on each legal issue.
Dissenting - Greenberg, Circuit Judge
No, the District Court's dismissal should be affirmed. While Judge Greenberg concurred with the majority's conclusion that Hanover Realty had antitrust standing for the full-service supermarket market claim, he dissented from the majority's Noerr-Pennington analysis. He believed the Professional Real Estate Investors two-prong test (objective baselessness first) should apply even to a series of petitions, not the more flexible California Motor Transport standard. His reasoning against the majority's Noerr-Pennington application was threefold: (1) Hanover Realty waived the argument for the California Motor Transport standard by conceding PRE's two-prong test in the District Court. (2) Even if not waived, the four actions filed by Defendants were too few to qualify as a 'series' that would trigger the California Motor Transport standard, which typically applies to much larger numbers of suits. (3) He doubted the legal basis for distinguishing California Motor Transport from PRE, arguing California Motor Transport's reference to 'baseless' implies an objective standard. Furthermore, he found that Defendants' challenges were not objectively baseless: their standing arguments for the Flood Permit and prerogative writs action had a reasonable basis, and they achieved some success with the Wetlands Permit (re-noticing, bat survey) and the Street Permit (NJDOT agreed on need for improvements). Thus, he concluded Defendants were immune under Noerr-Pennington. He emphasized that, because Judge Ambro found no antitrust standing and he found Noerr-Pennington immunity, a majority of the panel believed the District Court's dismissal should be affirmed, even if for different reasons. He argued for 'outcome voting,' where the court's judgment should reflect the majority of judges' votes on the ultimate outcome (affirm/reverse) rather than a shifting majority on individual issues, to uphold the judgment of the lower court.
Analysis:
This case significantly clarifies and potentially expands the 'inextricably intertwined' exception to the antitrust injury doctrine, making it more accessible to non-market participants whose harm is instrumental to an anticompetitive scheme. It provides a crucial distinction for applying the 'sham litigation' exception to Noerr-Pennington immunity, establishing a more flexible 'pattern of baseless claims' standard for serial petitioning as opposed to the stricter 'objectively baseless' standard for single petitions. This distinction lowers the bar for plaintiffs challenging repeated, abusive governmental process use by competitors. The sharp disagreement among the judges regarding 'issue voting' versus 'outcome voting' highlights a fundamental jurisprudential debate within multimember courts, underscoring the complexities in how legal precedents are established and interpreted, especially in cases with multiple dispositive issues.
