In the
United States Court of Appeals For the Seventh Circuit ____________________ No. 18-3558 U.S. FUTURES EXCHANGE, L.L.C., et al., Plaintiffs-Appellants, v.
BOARD OF TRADE OF THE CITY OF CHICAGO, INC., et al., Defendants-Appellees. ____________________
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:04-cv-06756 — Thomas M. Durkin, Judge. ____________________
ARGUED DECEMBER 13, 2019 — DECIDED MARCH 23, 2020 ____________________
Before MANION, KANNE, and BRENNAN, Circuit Judges. MANION, Circuit Judge. This antitrust case comes to us from the commodities and futures marketplace. As USFE tells it, Defendants torpedoed its new futures exchange by delay- ing the regulatory approval process and enacting an internal rule that deprived the new exchange of liquidity. The real question is whether Defendants violated the antitrust laws in doing so. We hold they did not. 2 No. 18-3558
I. Background In the early 2000s, U.S. Exchange Holdings, Inc., and its subsidiary U.S. Futures Exchange, L.L.C. (together, “USFE”), set out to offer a then-novel electronic-based futures trading platform. Electronic trading posed a direct competitive threat to entrenched exchanges that utilized the more traditional but less efficient floor-trading model, like the Board of Trade of the City of Chicago, Inc. (“CBOT.”) USFE targeted February 1, 2004, as its launch date. That would have given USFE about a month to establish itself be- fore a number of futures and options contracts were set to ex- pire, at which time traders could transfer their business from CBOT and elsewhere to USFE. Before it could begin opera- tions, however, USFE needed to be approved as a designated contract market (“DCM”) by the Commodity Futures Trading Commission. USFE filed its DCM application in July 2003 and hoped for fast-track approval by mid-November. The Commission solicited public comment as part of the application review. CBOT and another futures exchange, Chi- cago Mercantile Exchange Inc. (“CME”), raised fifty-four ob- jections to USFE’s application. Many other members of the public submitted critical letters and raised objections, too. At the close of the comment period, the Commission set a public hearing on USFE’s application for December 17, 2003. But be- fore the hearing could convene, Defendants CBOT and CME requested the matter be postponed due to scheduling con- flicts. The Commission obliged. In the background, USFE approached the Board of Trade Clearing Corporation (“BOTCC”) to negotiate an agreement No. 18-3558 3
for clearing services.1 This would have provided USFE with access to essential startup liquidity in the form of open inter- est created by market participants and held at BOTCC.2 The problem for USFE was that CBOT also used this clearing- house. Once it caught wind that USFE intended to contract with BOTCC, CBOT proposed a new exchange rule—Rule 701.01—to the Commission for approval. The Commission approved the rule after more than a month of deliberation. Rule 701.01 compelled the transfer of CBOT’s open interest from BOTCC to its new, exclusive clearing partner: CME.3 By draining its open contracts from BOTCC, CBOT deprived USFE of access to a significant amount of liquidity. The Commission finally approved USFE as a DCM on Feb- ruary 4, 2004, and USFE launched on February 8. According to USFE, the delay—attributable to Defendants—caused such uncertainty that market participants were unable and/or un- willing to trade on the new exchange. The exchange flopped. USFE sued Defendants for violating the Sherman Anti- trust Act and related state common law prohibitions against tortious interference. The case spent fifteen years in federal dis- trict court before reaching us. After multiple amended
1 Every futures exchange must either provide its own clearing services
or otherwise contract with a clearinghouse like BOTCC. A clearinghouse is an intermediary between buyers and sellers; it acts as the buyer for every seller and the seller for every buyer. The clearinghouse thus as- sumes counterparty risk; if a trade falls through on one end, the clearing- house shields the other side. 2 “Open interest” refers to trades or contracts that remain outstanding
at the clearinghouse and is used as a predictor of liquidity. 3 CME offers both clearing and trading services. It agreed to provide clearing services exclusively for CBOT in April 2003. 4 No. 18-3558
complaints and motions to dismiss, a venue change, on-and- off discovery, three rounds of summary judgment briefing, and reassignment to a new district judge, the matter culmi- nated in summary judgment for Defendants. USFE appeals. II. Discussion We review summary judgment de novo, asking whether a genuine dispute exists over any material fact. Kopplin v. Wis. Cent. Ltd., 914 F.3d 1099, 1102 (7th Cir. 2019). USFE’s antitrust claims can be divided into two theories. The first is the “delay theory,” whereby Defendants flooded the Commission with frivolous objections in order to stall DCM approval and harm USFE. Second, in the “open interest theory,” Defendants conspired to deprive USFE of liquidity by transferring CBOT’s open interest from BOTCC to CME.4 We address each theory in turn. A. Delay Theory: Noerr-Pennington and its Exceptions In connection with USFE’s DCM application, Defendants filed fifty-four objections (most, considered but rejected by the Commission) and submitted letters requesting the December 2003 hearing on USFE’s application be postponed. Defend- ants engaged in this petitioning despite their apparent belief that USFE’s application would be approved eventually. The district court held this petitioning immune from anti- trust liability under the Noerr-Pennington doctrine.5 The
4The parties also debate whether USFE’s open interest claims are ac- tionable at all. The district court did not rule on this issue so neither will we. 5 The doctrine takes its name from two Supreme Court decisions: East-
ern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) No. 18-3558 5
doctrine “extends absolute immunity under the antitrust laws to businesses and other associations when they join together to petition legislative bodies, administrative agencies, or courts for action that may have anticompetitive effects.” Mer- catus Grp., LLC v. Lake Forest Hosp., 641 F.3d 834, 841 (7th Cir. 2011) (internal quotation and citations omitted). The doctrine flows from First Amendment origins: antitrust laws do not su- persede the people’s right to petition their government in fa- vor of a desired monopoly. See id. at 841–42 (citing Premier Elec. Constr. Co. v. Nat’l Elec. Contractors Ass’n, Inc., 814 F.2d 358, 371 (7th Cir. 1987)). Noerr-Pennington immunity is not ab- solute, however. Exceptions exist for petitioners who present fraudulent misrepresentations or bring sham lawsuits.6 USFE invokes both. i. The “Fraudulent Misrepresentations” Exception Fraudulent misrepresentations made in an adjudicative proceeding before an administrative agency are not protected from antitrust liability. Mercatus, 641 F.3d at 842. Those made in a legislative, political setting, however, enjoy immunity. Mercatus identifies five considerations to weigh when draw- ing the line between legislative and adjudicative proceedings
(holding railroads’ publicity campaign to promote legislation and law en- forcement practices that harmed trucking industry did not violate the Sherman Act); and United Mine Workers of America v. Pennington, 381 U.S. 657, 670 (1965) (“Joint efforts to influence public officials do not violate the antitrust laws even though intended to eliminate competition.”). 6 Mercatus describes these exceptions as “two specific kinds of con- duct” that trigger a single exception to immunity: the “sham exception,” first mentioned in Noerr itself. See Mercatus, 641 F.3d at 842. We discuss them as separate exceptions to avoid confusing the distinction between “sham lawsuits” and the broader “sham exception” Noerr contemplates. 6 No. 18-3558
for Noerr-Pennington purposes: (1) the general nature of the authority exercised by the agency; (2) the formality of the agency’s fact-finding process; (3) the extent to which fact gath- ering is subject to political influence; (4) whether the agency received any testimony made under oath, affirmation, or pen- alty of perjury; and (5) whether the agency acted ultimately as a matter of discretionary authority or instead acted in ac- cordance with more definite standards subject to judicial re- view. Id. at 845–46. This is a threshold inquiry; the fraud ex- ception “does not apply at all outside of adjudicative proceed- ings.” Id. at 844.7 Applying Mercatus’s factors here, we conclude the district court classified the Commission’s DCM application review process properly as legislative instead of adjudicative. First, we consider the nature of the Commission’s authority when it reviewed USFE’s application. The Commission’s DCM re- view process mirrors its public rulemaking function, which includes entertaining ex parte meetings on proposed rules, providing notice to the public, and seeking comment before promulgating, amending, or repealing a rule. In certain circumstances not present here, like when re- viewing a decision to deny a DCM application, the Commis- sion adjudicates. Blurring this line, USFE interprets the Com- mission’s review of a denied application and the Commis- sion’s initial assessment of a DCM application as “different phases of the same proceeding.” (Reply Br. at 4.) The
7 Should an antitrust plaintiff overcome this threshold, it still must demonstrate the alleged misrepresentation “(1) was intentionally made, with knowledge of its falsity; and (2) was material, in the sense that it ac- tually altered the outcome of the proceeding.” Mercatus, 641 F.3d at 843. We do not address this second stage given the outcome here. No. 18-3558 7
regulations reflect the opposite. The procedures governing in- itial designation are found at subpart 38.3. And as encom- passed by part 38, the designation procedures apply only to “every board of trade that has been designated or is applying to become designated as a contract market … .” 17 C.F.R. § 38.1 (emphasis added). They do not apply to boards that have ap- plied but were denied designation. Instead, when the Commis- sion denies a DCM application, the aggrieved party may ini- tiate review of the denial through a new, distinct proceeding subject to the Commission’s Rules of Practice, which govern “adjudicatory proceedings.” 17 C.F.R. §§ 10.1, 10.1(a).8 These Rules contemplate filing a complaint and notice of hearing, see §§ 10.21, 10.22, filing an answer, § 10.23, discovery, §§ 10.42, 10.44, and motions practice, § 10.26. An administrative law judge presides over all proceedings covered by the Rules, § 10.8, evidence must meet admissibility standards, § 10.67, and in stark contrast to the DCM application review process, ex parte communications are prohibited and even sanctiona- ble, § 10.10. The Rules of Practice employ many signature adjudicative features, yet none applied to the Commission’s review of USFE’s application. The regulations illustrate a clear dichot- omy between the process for reviewing DCM applications and that for reviewing denials. We reject USFE’s attempt to bring the two under the same roof. Second, the Commission utilized an informal fact-finding process. Although the Commission compiled a “record,” the contents of that record were not bound by any “strict rules of
8 The regulations define “adjudicatory proceeding” as “a judicial-type
proceeding leading to the formulation of a final order.” 17 C.F.R. § 10.2(b). 8 No. 18-3558
relevance and admissibility” as if before a court or other ad- judicative body. Mercatus, 641 F.3d at 845. The Commission was “free to base its actions on information and arguments that [came] to it from any source,” including information, opinion, and argument submitted by the public. Metro Cable Co. v. CATV of Rockford, Inc., 516 F.2d 220, 228 (7th Cir. 1975). Third, the weight afforded to ex parte communications and public comment subjected the Commission’s fact-finding ef- forts to political influence—a hallmark of the legislative pro- cess. In Mercatus, a local hospital successfully petitioned the village board to deny development of plaintiff’s interloping physician center. We held this petitioning immune from anti- trust scrutiny based in large part on the parties’ and the pub- lic’s lobbying efforts: Both Mercatus and the Hospital engaged in ex parte lobbying of individual Board members prior to the hearings. Mercatus executives con- tacted or met personally with individual Board members, and at least one Board member even took a tour of Mercatus’ facilities. A number of Lake Bluff residents also contacted the Board members to voice their views on the Mercatus project. … In fact, the lobbying was encouraged by the village president … . … At least one Board member, on his own initia- tive, contacted independent think tanks for guidance. Members of the general public were allowed to voice their opinions regarding Mer- catus’ proposed site plan. No. 18-3558 9
641 F.3d at 848. These facts led us to label the board’s review “decidedly legislative or political in nature.” Id. Much of the same occurred here. USFE’s representatives, including outside counsel and at least one lobbyist, met with the Commission, its staff, and its attorneys on several occa- sions to discuss the DCM application. These meetings oc- curred over the phone and in person, ex parte. Commission staff visited USFE’s facilities for a demonstration of its pro- posed trading platform. The Commission twice sought public comment on USFE’s application and received letters from trading firms, individual traders, newsletter and magazine publishers, academics, and other government agencies. It re- viewed and considered every one of these submissions before approving USFE’s application. All of this activity was “per- fectly legitimate” in the context of the Commission’s DCM ap- plication review process, “as would not be the case in an ad- judicative proceeding.” Id. Fourth, the Commission received no testimony under oath, affirmation, or penalty of perjury from the petitioning De- fendants as part of the application review. A witness or other source of information in an adjudicative proceeding “is not ‘at liberty to exaggerate or color his version of an event,’ as might be possible in a more political or legislative setting.” Id. at 845 (quoting United States ex rel. Haywood v. Wolff, 658 F.2d 455, 463 (7th Cir. 1981)). Requiring a perjury-backed oath or affir- mation drives this home by “impress[ing] upon a witness the solemnity of the occasion and the importance of telling the truth.” Mercatus, 641 F.3d at 845. But the Commission gave no such impression to Defendants or any other public commen- tators here. It did not require their written opinions and con- cerns to be made under penalty of perjury. 10 No. 18-3558
USFE points to the warning contained in “Form DCM”: “Intentional misstatements or omissions of material fact may constitute federal criminal violations (7 U.S.C. § 13 and 18 U.S.C. § 1001) or grounds for disqualification from designa- tion.” 17 C.F.R. pt. 38, App’x A.9 Form DCM—used to compile the usual information and exhibits all applicants must sub- mit—and its warning do not apply to the challenged petition- ing here, however. The Commission no doubt relied on the facts presented in USFE’s application materials, submitted with the understanding that intentional misrepresentations could subject USFE to federal prosecution. But the Commis- sion also devoted significant consideration to unsworn public opinions, diluting the importance of truthful and accurate in- formation inherent in adjudicative settings. Each commenta- tor other than USFE was free and welcome to present its views in any color. This factor leans legislative. Consideration of the fifth and final factor is less one-sided. “The absence of definite standards” subject to judicial review “is more characteristic of purely political or legislative activity than of adjudication.” Mercatus, 641 F.3d at 846; see also Kottle v. Nw. Kidney Ctrs., 146 F.3d 1056, 1061 (9th Cir. 1998) (observ- ing petitions to influence agency decisions that are “virtually
9 The statutes cited by Form DCM—7 U.S.C. § 13 and 18 U.S.C. § 1001—criminalize knowingly submitting materially false or misleading information to the Commission in connection with a DCM application. Although they do not touch on “perjury,” citation to these statutes simi- larly impresses upon the submitter that designation review and approval depends on accurate information. See Clipper Exxpress v. Rocky Mountain Motor Tariff Bureau, Inc., 690 F.2d 1240, 1261–62 (9th Cir. 1982) (likening 18 U.S.C. § 1001 to perjury penalty in discussing the prohibitions against sub- mitting false information to adjudicative bodies for anticompetitive pur- poses). No. 18-3558 11
unguided by enforceable standards” and appealable only to a legislative body receive Noerr-Pennington protection). Here, USFE had to demonstrate it met and would continue to comply with more than twenty statutory requirements in order to be designated. The parties debate the limits of the Commission’s reviewing discretion and whether the require- ments themselves qualify as “definite standards.” We need not engage in these side disputes. At the very least, designa- tion requires compliance with far more definite prerequisites than in Mercatus, where the local ordinance “provided no standards governing the grant or denial” of plaintiff’s zoning application. 641 F.3d at 848 (emphasis added); cf. Boone v. Re- development Agency of City of San Jose, 841 F.2d 886, 896 (9th Cir. 1988) (immunizing petitioning of city council to approve a zoning plan that harmed plaintiffs; council’s review held legislative based on broad discretion to approve or deny new projects whenever deemed “‘necessary or desirable’ to carry out the ends of redevelopment”). In addition, while “matters of discretionary authority” fall into the legislative basket, the Commission has no discretion to deny an application that meets the statutory requirements. And again, the Commis- sion’s assessment of USFE’s application was subject to judicial review, albeit through a distinct proceeding as discussed above. These details illustrate several adjudicative aspects of the DCM application review process. We emphasized in Mercatus, however, that “it may often not be clear whether, in a given circumstance, an agency is acting legislatively, adjudicatively, or perhaps somehow even in both capacities simultaneously.” 641 F.3d at 844 (citation omitted). The agency process in this case involves a combina- tion of legislative and adjudicative features. Nevertheless, the 12 No. 18-3558
Commission’s exercise of rulemaking-like authority, the en- couragement of lobbying and ex parte influence, a tolerance for petitions made outside perjury’s confines, and informal fact gathering render the DCM application review process a legislative one. Thus, USFE cannot rely on alleged fraudulent misrepresentations to circumvent Noerr-Pennington. ii. The “Sham Lawsuits” Exception Noerr-Pennington’s “sham lawsuits” or “abuse-of-process” exception holds liable objectively baseless lawsuits brought in “an attempt to interfere directly with the business relation- ships of a competitor through the use of the governmental pro- cess—as opposed to the outcome of that process—as an anti- competitive weapon.” Prof’l Real Estate Investors, Inc. v. Colum- bia Pictures Indus., Inc., 508 U.S. 49, 60–61 (1993) (“PRE”) (in- ternal quotation marks and citations omitted). The sham ex- ception is “extraordinarily narrow.” Kottle, 146 F.3d at 1061; see also 1 PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW: AN ANALYSIS OF ANTITRUST PRINCIPLES AND THEIR APPLICATION 262 (4th ed. 2013) (The exception is “most difficult” to apply in legislative contexts, “where it is virtually impossible to identify the sham.”). The Ninth Circuit has even doubted whether the exception applies at all where, as here, plaintiffs allege a “pattern” of petitions in the legislative arena: “[S]ubjecting the same defendant to antitrust liability because it engaged in numerous unsuccessful attempts” to petition a legislative body “would eviscerate the Petition Clause.” Kottle, 146 F.3d at 1061. The exception requires a two-step inquiry: (1) only if chal- lenged litigation is objectively meritless may a court (2) exam- ine the litigant’s subjective motivation. PRE, 508 U.S. at 60. In other words, an antitrust plaintiff must “disprove the No. 18-3558 13
challenged lawsuit’s legal viability” before proceeding to the second, subjective step. Id. at 61. Objectively reasonable suits therefore enjoy Noerr-Pennington immunity regardless of the reasons for their filing. An objectively reasonable lawsuit is one “reasonably cal- culated to elicit a favorable outcome.” Id. at 60. Baseless, friv- olous efforts, “as distinct from colorable suits brought in bad faith,” receive no protection. Creek v. Vill. of Westhaven, 80 F.3d 186, 192 (7th Cir. 1996). Notably, a successful action self-proves its reasonableness and “certainly cannot be characterized as a sham.” Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 502 (1988); PRE, 508 U.S. at 60 n.5 (“A winning lawsuit is by definition a reasonable effort at petitioning for redress and therefore not a sham.”); see also, e.g., New West, L.P. v. City of Joliet, 491 F.3d 717, 722 (7th Cir. 2007) (rejecting plaintiff’s ar- gument that defendant filed sham lawsuits when none had been adjudicated in plaintiff’s favor). USFE insists the district court employed the wrong stand- ard by relying on PRE. It argues Defendants’ various com- ments, letters, etc., comprise a “pattern” of sham petitioning that triggers a more generous examination than what PRE calls for. This approach stems from the Supreme Court’s lan- guage in California Motor Transport Co. v. Trucking Unlimited: “[A] pattern of baseless, repetitive claims may emerge which leads the factfinder to conclude that the administrative and judicial processes” have been used improperly “to deprive the competitors of meaningful access to the agencies and courts.” 404 U.S. 508, 512 and 513 (1972). Filing petitions with “such a purpose or intent,” the Court stated, would “fall within the exception to Noerr.” Id. at 512. 14 No. 18-3558
The district court applied the correct standard. We do not agree California Motor provides a separate rubric to use when- ever a “pattern” of sham filings is alleged. The First Circuit rejected this same reading of California Motor recently in Puerto Rico Telephone Co. v. San Juan Cable LLC, 874 F.3d 767 (2017), splitting from the four circuit opinions cited by USFE, all of which adopt some version of the view that PRE applies only to single-lawsuit cases while California Motor applies to all others.10 The Puerto Rico Telephone panel reasoned persua- sively: [There is no] pragmatic reason to presume that [PRE’s] protections for nonfrivolous petitioning activity disappear merely because the defend- ant exercises its right to engage in such activity on multiple occasions. One large lawsuit or in- tervention in an agency proceeding can impose much more of a burden on a competitor than might a series of smaller claims. 874 F.3d at 772. Relying on California Motor and the just-mentioned four circuit opinions, USFE invites us to discard the first question of the two-part sham inquiry whenever more than a single pe- tition has been made and to proceed only with the second step’s evaluation of subjective motive. This position
10See Hanover 3201 Realty, LLC v. Vill. Supermarkets, Inc., 806 F.3d 162, 178–81 (3d Cir. 2015); Waugh Chapel S., LLC v. United Food & Commercial Workers Union Local 27, 728 F.3d 354, 363–64 (4th Cir. 2013); Primetime 24 Joint Venture v. Nat’l Broad. Co., 219 F.3d 92, 101 (2d Cir. 2000); and USS– POSCO Indus. v. Contra Costa Cnty. Bldg. & Constr. Trades Council, AFL– CIO, 31 F.3d 800, 810–11 (9th Cir. 1994). No. 18-3558 15
misconstrues California Motor and ignores PRE’s thorough ex- planation of that opinion’s role in the sham exception land- scape. The Court in PRE described California Motor as requir- ing courts to draw the “difficult line” that separates out objec- tively reasonable claims from patterns of “baseless, repetitive claims” before finding a sham. 508 U.S. at 58 (emphasis added). In that sense, California Motor—issued more than twenty years before PRE—contains the very origins of the sham exception inquiry’s first step: an objective reasonable- ness assessment. PRE further confirmed the sham exception has never hinged on the petitioner’s subjective intent alone. 508 U.S. at 59 (collecting cases). This aligns with the teachings of both Noerr and Pennington: “Noerr rejected the contention that an attempt ‘to influence the passage and enforcement of laws’ might lose immunity merely because the lobbyists’ ‘sole pur- pose … was to destroy [their] competitors.’” Id. at 57 (quoting Noerr, 365 U.S. at 138); the right of the people to petition for desired outcomes “cannot properly be made to depend upon their intent in doing so.” Id. at 58 (quoting Noerr, 365 U.S. at 139); “‘Noerr shields from the Sherman Act a concerted effort to influence public officials regardless of intent or purpose.’” Id. (quoting Pennington, 381 U.S. at 670). Accepting USFE’s po- sition would subvert these core principles. Moreover, the Supreme Court has acknowledged the ob- jective reasonableness inquiry with regularity since California Motor. Valid efforts to influence government action, for exam- ple, do not qualify as a sham, while insubstantial claims might evidence one. PRE, 508 U.S. at 58 (citing Allied Tube, 486 U.S. at 500 n.4; Otter Tail Power Co. v. United States, 410 U.S. 366, 380 (1973)). And in City of Columbia v. Omni Outdoor Advertising, 16 No. 18-3558
Inc., the Court “dispelled the notion that an antitrust plaintiff could prove a sham merely by showing that its competitor’s ‘purposes were to delay [the plaintiff’s] entry into the market and even to deny it a meaningful access to the appropriate … administrative and legislative fora.’” PRE, 508 U.S. at 59–60 (discussing and quoting 499 U.S. 365, 381 (1991)). That same “notion” describes USFE’s argument precisely. We stand with the First Circuit. Faced with only one al- leged sham lawsuit, at no point did the PRE Court link its rul- ing to the number of suits or suggest the outcome would be different if it encountered multiple actions. We, too, find “lit- tle logic” in concluding a petitioner loses the right to file an objectively reasonable petition merely because it chooses to exercise that right more than once in the course of pursuing its desired outcome. See Puerto Rico Tel., 874 F.3d at 772. Trac- ing the Ninth Circuit’s lead in USS–POSCO, the Second, Third, and Fourth Circuits all reconciled California Motor and PRE “by reading them as applying to different situations.” USS–POSCO, 31 F.3d at 810. Nothing in either opinion indi- cates as much. As the Court made clear in PRE, the sham ex- ception’s objective component is “indispensable” and Califor- nia Motor does not suggest otherwise. 508 U.S. at 58. Even if PRE and California Motor provided two different standards for non-pattern and pattern cases, respectively, the district court still did not err by applying PRE. Unlike the four circuit opinions endorsing this divide, Defendants here did not bring multiple lawsuits or petition across various legisla- tive and administrative fronts.11 This case is not characterized
11 See Hanover 3201, 806 F.3d at 167–70 (defendants alleged to have pursued one state court lawsuit and three challenges before two state ad- ministrative bodies); Waugh Chapel, 728 F.3d at 357–58 (union defendants No. 18-3558 17
by a wide-ranging “pattern.” It involves a single legislative proceeding within which Defendants made multiple efforts to influence the Commission’s decision regarding one overarch- ing issue: whether to approve USFE’s application. Just as mo- tions within a lawsuit support the lawsuit’s objective, individ- ual lobbying efforts play a part in obtaining the ultimate de- sired legislative action. But in neither scenario do multiple fil- ings, submissions, or other efforts transform one lawsuit or proceeding into many. See, e.g., Hanover 3201, 806 F.3d at 169 and 181 (applying “pattern” standard where defendants initi- ated four distinct legal proceedings, but counting multiple let- ters submitted to a state agency as one proceeding). With PRE in hand, the district court correctly determined Defendants’ efforts did not “constitute the pursuit of claims so baseless that no reasonable litigant could realistically ex- pect to secure favorable relief.” PRE, 508 U.S. at 62. USFE counters by focusing on the fact that the Commission eventu- ally approved USFE’s application. According to USFE, its suc- cess in obtaining approval undermines the reasonableness of Defendants’ fifty-four objections submitted in response to the application. This is especially so, USFE argues, because De- fendants themselves knew the application would be ap- proved in the end. We reject USFE’s position. Although a successful, winning petition proves its own reasonableness, it does not follow that
orchestrated a “barrage of legal challenges” that included multiple state court lawsuits and challenges to at least eleven separate zoning permits); Primetime 24, 219 F.3d at 101 (plaintiff alleged defendants abused provi- sions of the Satellite Home Viewers Act by conducting prelitigation chal- lenges of thousands of individual subscribers); USS–POSCO, 31 F.3d at 811 (defendants filed twenty-nine separate lawsuits). 18 No. 18-3558
a petition lacks merit simply because it did not prevail. Be- sides, the petitioning here was colorable. Defendants’ Decem- ber 2003 scheduling letters persuaded the Commission to postpone the public hearing on USFE’s application in light of legitimate and well-documented conflicts. The letters were not frivolous. Neither were Defendants’ objections to USFE’s application. Before granting USFE’s application, the Commis- sion held USFE to several remedial efforts it undertook in re- sponse to Defendants’ objections regarding USFE’s proposed one-member board, cross-border clearing link, and incentive programs. Furthermore, while Commission staff elected not to acknowledge many of the objections raised by other com- mentators, it addressed each of Defendants’ fifty-four con- cerns. This speaks to the substantiality of Defendants’ submis- sions, even those rejected by the Commission. Finally, whether Defendants believed or “knew” USFE’s application would succeed does not change our analysis. Even if petition- ers believe a regulator may ultimately approve an application, that does not eliminate their right to encourage the governing body to consider shortcomings in the application. Proving sham petitioning in a legislative context like this one is virtu- ally impossible, and the record does not meet that high bar. As with fraudulent misrepresentations, the “sham law- suits” exception cannot save USFE’s delay theory claims. Noerr-Pennington therefore immunizes Defendants’ petition- ing, even if that conduct delayed the Commission’s approval of USFE’s application and created market uncertainty that harmed USFE. B. Open Interest Theory: Implied Antitrust Immunity USFE claims CBOT, conspiring with CME, enacted Rule 701.01 to transfer open interest away from USFE’s preferred No. 18-3558 19
clearinghouse and thus deprive USFE of much-needed liquid- ity. Defendants advocate for implied antitrust immunity be- cause the Commission itself ordained the rule. Regulatory statutes sometimes preclude application of the antitrust laws in explicit terms. If not, courts must determine whether the regulations implicitly preclude those laws’ appli- cation. Credit Suisse Securities (USA) LLC v. Billing, 551 U.S. 264, 270–71 (2007). Implied immunity arises when a regula- tory regime clashes with the antitrust laws to create a “clear repugnancy” or “clear incompatibility” between the two. Id. at 275. Only a clear showing will do; findings of implied im- munity are not favored otherwise. Am. Agric. Movement, Inc. v. Bd. of Trade of the City of Chicago, 977 F.2d 1147, 1158 (7th Cir. 1992) (citations omitted). Once the conflict has been demon- strated, the antitrust laws are “ousted” or “repealed” in favor of the regulatory scheme. See Credit Suisse, 551 U.S. at 271–72 (discussing Silver v. N.Y. Stock Exch., 373 U.S. 341 (1963), and Gordon v. N.Y. Stock Exch., 422 U.S. 659 (1975)). Implied antitrust immunity has its roots in securities caselaw. In its most recent discussion of the doctrine, the Su- preme Court in Credit Suisse identified a four-part test for im- plied immunity: (1) the existence of clear and adequate regu- latory authority to supervise the activity in question; (2) evi- dence that the responsible regulatory entities exercise that au- thority in an active and ongoing manner; (3) a resulting risk that the antitrust laws and those governing the challenged ac- tivity, if both applicable, would produce conflicting guidance, requirements, duties, privileges, or standards of conduct; and (4) whether the questioned activity lies squarely within the heartland of the regulated area. 551 U.S. at 275–77. Assessing these four factors, the district court held Defendants’ role in 20 No. 18-3558
the open interest theory immune from antitrust scrutiny. USFE challenges the district court’s findings on all but the fi- nal factor. The facts here satisfy Credit Suisse’s criteria easily. First, the Commission has clear and adequate regulatory authority to approve exchange rules. See 7 U.S.C. § 7a-2(c); 17 C.F.R. § 40.5. It also has clear and adequate authority over clearinghouses and the clearing of futures transactions. See 7 U.S.C. § 7a-1(a)– (c).12 Second, the Commission indeed exercised this regulatory authority by approving CBOT’s proposed rule. The Commis- sion’s overall regulation in this area, moreover, was both ac- tive (Commission staff reviewed the proposal for over a month, soliciting and considering more than a dozen com- ment letters) and ongoing (the same competition concerns raised by Rule 701.01 had been studied during the previous year through a Commission roundtable and report). Third, the Commission approved Rule 701.01 in spite of potential anti- competitive effects, creating conflict with the antitrust laws. Per statute, the Commission must “take into consideration the public interest to be protected by the antitrust laws and en- deavor to take the least anticompetitive means” when ap- proving exchange rules. 7 U.S.C. § 19(b). Keeping with this mandate, the Commission considered and acknowledged comment letters raising anticompetitive concerns but
12 Even though exchange and clearing rules can be self-certified with- out the Commission’s input, that is not what happened here. Defendants voluntarily submitted Rule 701.01 for the Commission’s prior approval. Be- cause of this, the Commission was required to exercise its authority to re- view and approve. 7 U.S.C. § 7a-2(c)(4)(C) (“If prior approval is requested … the Commission shall take final action on the request ….”) (emphasis added). No. 18-3558 21
nonetheless deemed those concerns outweighed by the inno- vative gains to be had in the futures industry. With this and the other Credit Suisse factors met, the district court rightly concluded the Commission’s approval of Rule 701.01 was “clearly incompatible” with the antitrust laws and their objec- tives. Granted, the Supreme Court has not addressed implied antitrust immunity in the futures and commodities context, but this Circuit did so in American Agriculture—a decision pre- dating Credit Suisse by twenty-five years. Seizing on this, USFE contends the district court erred by applying the four- part test from Credit Suisse—a securities case—instead of our instruction in American Agriculture that immunity may be im- plied so long as the challenged action receives “active, intru- sive, and appropriately deliberative” scrutiny and approval from the relevant agency. 977 F.2d at 1167. We disagree. USFE relies on the Court’s statement in Credit Suisse that implied immunity determinations “may vary from statute to statute,” 551 U.S. at 271, but that language does not make Credit Suisse’s factors irrelevant beyond the securities context. While the ultimate determination might depend on the regulations in play, the analysis does not. Credit Suisse’s test applies across regulatory boundaries and nothing in that opinion points to the contrary. Furthermore, that the Com- mission regulates exchanges and clearinghouses through a “principles-based approach”—as opposed to the “rules-based approach” of its securities counterpart—does not require us to apply wholly distinct standards to each regulatory scheme. Nowhere does American Agriculture indicate these inherent 22 No. 18-3558
differences warrant separate standards.13 Indeed, American Agriculture derives its own “test” from the same securities cases that provide the foundation for Credit Suisse’s four fac- tors—Silver and Gordon—and relies significantly on decisions from other regulatory contexts as well. See Am. Agriculture, 977 F.2d at 1164 (discussing MCI Commc’ns Corp. v. Am. Tel. & Tel. Co., 708 F.2d 1081 (7th Cir. 1983) (holding no implied an- titrust immunity for alleged predatory pricing in telecommu- nications markets)). At most, American Agriculture’s emphasis on “active, intrusive, and appropriately deliberative” scrutiny is just another way to measure Credit Suisse’s second factor: active and ongoing exercise of regulatory authority. Implied immunity is neither a securities doctrine nor a commodities doctrine. It is an antitrust doctrine. And the question of whether it applies in a given case is answered ably by Credit Suisse. The regulatory setting—securities, commod- ities, or something else—simply provides the backdrop against which the template is applied. In any event, were we to accept USFE’s argument, implied immunity would still attach under the “standard” it pushes. Given the Commission’s focus on market competition in the year leading up to Defendants’ proposed rule change, the Commission’s solicitation and consideration of public com- ment and anticompetitive concerns, and its express, affirma- tive approval of Rule 701.01, this is not at all like the situation presented in American Agriculture. That case involved a chal- lenge to an emergency resolution passed by CBOT to combat
13 Following USFE’s argument to its logical conclusion would compel
a unique implied immunity test for every regulated industry. We do not glean that intention from either Credit Suisse or American Agriculture. No. 18-3558 23
market manipulation. Unlike here, however, the Commission took no official action in response to that resolution; Commis- sion staff conducted an informal, nonpublic investigation only. The Commission’s “casual and modest” supervision and its “halfhearted and nonpublic review of the challenged practice” compelled us to reverse the district court’s finding of implied immunity. 977 F.2d at 1165 and 1167. The unavail- ability of judicial review in American Agriculture—a factor considered “extremely important” to the implied immunity calculus—further directed our decision in that case. Id. at 1167. But here, USFE could have sought judicial review of the Commission’s approval under the Administrative Procedure Act—it apparently elected not to. See 5 U.S.C. §§ 702, 706. All told, the Commission’s approval of Rule 701.01 creates a “clear repugnancy” between the regulatory scheme and the antitrust laws. Implied immunity precludes USFE’s open in- terest claims. III. Conclusion Based on Defendants’ petitioning before the Commission and their forced transfer of open interest, USFE brought this antitrust action to hold Defendants accountable for its failed exchange. But the Noerr-Pennington doctrine shields Defend- ants’ petitioning from antitrust scrutiny. And since neither ex- ception to the doctrine applies, USFE’s delay theory fails. Moreover, the Commission’s explicit approval of Rule 701.01 impliedly repeals the antitrust laws here, immunizing De- fendants against USFE’s open interest claims. The district court got it right for both theories, so summary judgment for Defendants is AFFIRMED.