COALITION FOR A LEVEL PLAYING
FIELD LLC, et al.,
AUTOZONE, INC., et al.,
Carl E. Person
Attorney for Plaintiffs
325 W. 45 1h Street
New York, New York 10036
LATHAM & WATKINS
Attorneys for Defendant Autozone, Inc.
885 Third Avenue
New York, New York 10022
By: Patricia Lynne Ball
WEIL, GOTSHAL & MANGES LLP
Attorneys for Defendant Wal-Mart Stores
767 Fifth Avenue
New York, New York 10153
Jon B. Comstock
Wal-Mart Stores, Inc.
702 S.W. 811 Street
Bentonville, Arizona 72716
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FLIPPIN DENSMORE MORSE RUTHERFORD & JESSE
Attorneys for Defendant Advance Stores
1800 First Union Tower
Roanoke, Virginia 24006
By: Kevin P. Oddo
BAKER & HOSTETLER LLP
Attorneys for Defendant Advance Stores
1050 Connecticut Avenue NW
Washington, DC 20036
GIBSON, DUNN & CRUTCHER LLP
Attorneys for Defendant CSK Auto, Inc.
200 Park Avenue, 47th Floor
New York, New York 10166
By: John Andrew Herfort
H. Wayne Porter
Joann M. Kronzer
Richard K. Fueyo
Attorneys for Defendant Discount Auto Parts
101 East Kennedy Boulevard
Tampa, Florida 33602
WILLKIE FARR & GALLAGHER
Attorneys for Defendant
The Pep Boys-Manny, Moe and Jack, Inc.
787 Seventh Avenue
New York, New York 10019
By: William H. Rooney
Elliot M. Berman
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STEIN, MITCHELL & MEZINES, LLB
Attorneys for Defendant O'Reilly Automotive, Inc.
1100 Connecticut Avenue, NW
Washington, DC 20036
By: Glenn A. Mitchell
David U. Fierst
Basil J. Mezines
Andrew M. Beato
PEPPER HAMILTON LLP
Attorneys for Defendant Keystone
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, Pennsylvania 19103
By: Nicole Dominique Galli
Laurence Z. Shiekman
Barbara T. Sicalides
MISHLER, District Judge:
This is an action to recover damages and for injunctive relief for violations of the Robinson-Patman Act, 15 U.S.C. §§ 13(f) and 13(c). Presently before the Court is a motion by all of the defendants to dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim on which relief may be granted. Also before the Court are motions by defendants O'Reilly Automotive, Inc. ("O'Reilly") and CSK Auto Inc. ("CSK") to dismiss the charges against them for lack of personal jurisdiction and venue, or alternatively to sever the claims against them and transfer these actions to another district. The plaintiffs cross-
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move to amend the Amended Complaint. For the following reasons, the motions by defendants O'Reilly and CSK are denied. The motion to dismiss for failure to state a claim is granted in part and denied in part. The plaintiffs' motion for leave to file an amended complaint is granted.
This is an action by 143 different plaintiffs (some of which are divided into multiple corporations) against eight defendants that allegedly benefitted from sales by 16 non-defendant suppliers of automotive products in violation of the Robinson-Patman Act. The lead plaintiff, Coalition for a Level Playing Field, LLC, is a New Hampshire corporation comprised of six trade associations for warehouse distributors and jobbers of automotive parts and accessories. The remaining plaintiffs are individual warehouse distributors and jobbers of automotive parts and accessories located in different states.
Plaintiffs allege that defendants' participation in prohibited conduct enables the defendants to buy goods from manufacturers at prices approximately forty percent lower than those paid by plaintiffs when purchasing the same goods from the same manufacturers. This alleged conduct includes, inducing and receiving volume discounts, slotting and other allowances, free inventory, sham advertising, promotion
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payments, sharing manufacturer's profits, and excessive payments for services purportedly performed for the manufacturers. Plaintiffs allege that as a result of this conduct, defendants are able to sell these goods at prices lower than plaintiffs are able to offer. Accordingly, plaintiffs assert, many of defendants' competitors have been forced out of business, and that the plaintiffs who still remain in business may be faced with business closure.
The Amended Complaint states two causes of action: (1) violation of section 2(f) of the Robinson-Patman Act by volume discounts, slotting fees, rebates, other fees and allowances, free merchandise and sham programs, and (2) violation of section 2(c) of the Robinson-Patman Act by compensation to defendants from manufacturers for services not performed or for excessive compensation for services.
The defendants move to dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). In support of this motion, defendants assert that the plaintiffs have engaged in impermissible group pleading, that the complaint fails to state a prima facie case for violation of either section 2(f) or section 2(c), and that the plaintiffs lack standing to bring this lawsuit. For the following reasons, this motion is
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granted insofar as it pertains to Count II of the Amended Complaint (section 2(c)), but denied insofar as it pertains to Count I of the Amended Complaint (section 2(f)).
On a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the court must accept as true the allegations in the complaint and construe all reasonable inferences in favor of the plaintiff. Gant v. Wallingford Bd. of Educ., 69 F.3d 669, 67-31 (2d Cir. 1995). "The court's function on a Rule 12(b)(6) motion is not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Festa v. Local 3 Int'l Brh. of Elec. Workers, 905 F.2d 35, 37 (2d Cir. 1990). The court should dismiss the complaint only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Hartford Fire Ins. Co. v. California, 509 U.S. 764, 811 (1993) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).
1. Impermissible Group Pleading
Defendants assert that this action should be dismissed because the plaintiffs have engaged in impermissible group pleading. We find, however, that the proposed amended complaint sets forth, with sufficient particularity, the claims of each individual plaintiff. Thus, there is no impermissible group pleading.
It is well established that there are no special pleading requirements for anti-
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trust cases. See Nagler v. Admiral Corp., 248 F.2d 319, 322 (2d Cir. 1957) ("antitrust litigation may be of wide scope and without a central point of attack, so that defense must be diffuse. prolonged, and costly ... it is quite clear that the federal rules contain no special exception for antitrust cases"); National Assoc. of College Bookstores, Inc. v. Cambridge Univ. Press, 990 F. Supp. 245, 252 (S.D.N.Y. 1997) ("A Complaint is sufficient for the purposes of this rule if it gives the defendant 'fair notice of what the plaintiff's claim is and the grounds upon which it rests"' (citations omitted)). Accordingly, all that is required of an antitrust plaintiff is that the complaint provide a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a).
Courts have made clear, however, that although "notice pleading is acceptable in antitrust cases ... plaintiffs may not achieve through generalized pleadings the benefits of a class action when no class allegations are made or appropriate." Chawla v. Shell Oil Co., 75 F. Supp.2d 626, 654 (S.D. Tex. 1999). The Chawla court explained that, in order to meet the pleading requirements for a Robinson-Patman Act claim, each plaintiff "must allege facts pertaining to each of the elements of the claim." Id. at 654. The court then directed, that in order to meet this requirement, the plaintiffs should attach an appendix to the complaint which included the following information for each plaintiff:
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(i) the name and location of the source of the particular Plaintiff's [store/station], and if known, the name and location of the source of [merchandise] acquired by the [competitors].
(ii) the type of Robinson-Patman violation that is alleged ... and whether there is a contention that Defendants use a functional discount as a subterfuge vis a vis a particular Plaintiff.
(iii) the identity and location of the particular [competitors] ... that receive an allegedly unlawful favorable price, the approximate price that [the competitor] received (if known), and the approximate time period of the allegedly unlawful favorable treatment.
(iv) the geographic area in which the specific Plaintiff competes with each [competitor] in issue as to the Plaintiff, [and]
(v) what or how the competition has or may have been injured as a result of price discrimination suffered by that Plaintiff.
Id. at 654.
In the instant case, the plaintiffs have offered an Amended Complaint, including an appendix, which provides a more succinct statement of the facts pertaining to each of the Robinson-Patman claims. Specifically, proposed Appendix E alleges the approximate prices and dates of comparable sales between a specific
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manufacturer, plaintiff and competitor. (n1) The allegations address: the name and location of the manufacturer from whom they received the automotive parts in question (as well as the address of the manufacturers headquarters), and if known, the name and location of the manufacturer from whom their competitors received similar automotive parts, whether the alleged violation was direct or indirect, the identity and location of the particular competitors receiving an allegedly unlawful favorable price, the approximate price that the product was sold for (when known), the approximate date of the unlawful favorable treatment and the specific geographic area in which the specific plaintiff competes with each competitor in issue as to that plaintiff. Plaintiffs also allege the other information required by the Chawla court, i.e., whether there is a contention that defendants used a functional discount as a subterfuge vis a vis the particular plaintiff and what or how competition may have been injured as a result of the price discrimination suffered by that plaintiff, as to each defendant in the Amended Complaint.
In addition, the allegations in the Amended Complaint estimate that defendants have been receiving items are a price of 40% lower than the same
_________________________________________ [footnote 1 below]
(1) Plaintiffs do not have extensive records of such transactions, however, "[a]n antitrust plaintiff need not alleged specific transactions in the complaint . . ., a 'general description of the conduct and practices at issue' will suffice." National Assoc. of College Bookstores, Inc. v. Cambridge Univ. Press, 990 F. Supp. 245, 252 (S.D.N.Y. 1997).
__________________________________________[end of footnote]
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manufacturers were charging plaintiffs for the same items, and approximate the time period of the unlawful conduct as a whole.
All of these specific allegations in the proposed amended complaint and appendix clearly place the defendants on notice of the claims against them by each plaintiff. Accordingly, plaintiffs have not engaged in impermissible group pleading, and defendants motion to dismiss on this ground is denied.
2. Failure to State a Claim - Count I
Defendants additional assert that the Amended Complaint should be dismissed because plaintiffs have failed to plead a prima facie claim for violation of the Robinson-Patman Act. We find that plaintiffs have adequately plead a violation of section 2(f) of the Act, and accordingly defendants' motion is denied as to Count I of the Amended Complaint.
Section 2(f) of the Robinson-Patman Act makes it unlawful for purchasers, such as defendants, "knowingly to induce or receive a discrimination in price which is prohibited by this section." 15 U.S.C. § 1 3 )(f). "Liability under §2(f) is derivative in nature - a buyer may be held liable under §2(f) only if his seller could be held liable under §2(a)." Intimate Bookshop, Inc. v. Barnes & Noble, Inc., 88 F. Supp.2d 1-33, 137 (S.D.N.Y. 2000) (citing Great Atl. & Pac. Tea Co. v. Federal Trade Comm'n, 440
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U.S. 69, 77 (1979)). Therefore, in determining whether plaintiffs have sufficiently pled a §2(f) violation against defendants, it is necessary to determine whether the facts they have put forth support §2(a) claims against defendant sellers. Id. at 137.
Section 2(a) of the Robinson-Patman Act makes it unlawful for anyone engaged in commerce:
[t]o discriminate in price between different purchasers of commodities of like grade and quality, where ... the effect of such discrimination may be to substantially lessen competition. . . with any person who either grants or knowingly receives the benefits of such discrimination, or with customers of either of them.15 U.S.C. § D(a)(1997).
To state a claim for secondary-line price discrimination (n2) under §2(a), a plaintiff must show:
(i) the seller made sales in interstate commerce;
(ii) the seller discriminated in price between two buyers;
(iii) the product sold to both purchasers was the same grade and quality, and;
(iv) the price discrimination had an unlawful effect on competition.
______________________________________ [footnote 2 below]
(2) "The theory of secondary-line Robinson-Patman injury is that the unlawful price discrimination injures disfavored purchasers in its ability to compete with the favored purchaser." XIV HERBERT HOVENKAMP, ANTITRUST LAW Para. 2333a (1999).
______________________________________ [end of footnote]
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George Haug Co. v. Rolls Royce Motor Cars Inc., 148 F.3d 136, 141 (2d Cir. 1998).
1. Sales in Interstate Commerce
The requirement that the seller have made sales in interstate commerce has been interpreted "to mean that §2(a) applies only where 'at least one of the two transactions which, when compared, generate a discrimination ... [that crosses] a state line." Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186, 200 (1974) (citations omitted). Therefore, to state a claim under §2(a), "it is necessary to allege ... that the transactions complained of are actually in interstate commerce." Willard Dairy Corp. v. National Dairy Prods. Corp., 309 F.2d 943 (6th Cir. 1962).
Plaintiffs allege that the discriminatory sales were made in interstate commerce. See Amended Complaint Para. 67. Additionally, in Appendix E, where plaintiffs allege comparable sales between specific manufacturers, plaintiffs and competitor defendants, plaintiff lists the city and state of each manufacturer, plaintiff and defendant. The addresses of each plaintiff-seller and defendant-seller pairing demonstrates that the products allegedly sold at discriminatory prices crossed state lines, and thus were "actually in interstate commerce." Therefore, the Amended Complaint adequately pleads the "interstate commerce" jurisdictional prerequisite.
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2. Discrimination in Price
The second element of a §2(a) claim, that the seller have discriminated in price between two buyers, does not require allegations of specific transactions, rather "a general description of the conduct and practices at issue will suffice." National Assoc. of College Bookstores, Inc., 990 F. Supp. at 252. Here, the Amended Complaint is sufficiently descriptive to meet this burden. The Amended Complaint alleges various conduct which enabled the defendants to buy their goods from manufacturers at approximately 40% less than the price paid by plaintiffs. It also identifies the types of products which were generally the subject of discriminatory treatment. In addition to these general allegations, Appendix E provides descriptions and item numbers of specific products that were the subject of discriminatory sales, as well as the prices paid for the products by plaintiffs and defendants respectively. Plaintiffs also identify the specific plaintiff and defendant that was party to each transaction. Thus, the Amended Complaint, incorporating Appendix E, provides defendants with fair notice of the grounds upon which plaintiffs' discrimination claims rest. (n3) See National Assoc. of College Bookstores, Inc., 990 F. Supp. at 253.
______________________________________ [Footnote 3 below]
(3) Defendants, relying on the case of Mountain View Pharmacy v. Abbott Laboratories, 630 F.2d 1383 (1Oth Cir. 1980), argue that the Amended Complaint is inadequate because it does not demonstrate discriminatory sales by a mutual supplier to a plaintiff and defendant. Defendants reliance on Mountain View, however, is to no avail. There, the court held that "a complaint drafted only in
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[footnote 3 continued at bottom of Page 14 below]
3. Same Grade and Quality
The third element of a §2(a) claim is that the products sold to both purchasers be of the same grade and quality. Here, as in National Assoc. of College Bookstores, Inc., the plaintiffs have alleged that the discriminatory sales to defendants involve the identical products that plaintiffs have purchased from these manufacturers. Notwithstanding the adequacy of these allegations, the proposed Amended Complaint surpasses the minimal pleading requirements, and, in Appendix E, details sales of specific items from manufacturers to the respective plaintiff and defendant pairings. Accordingly, plaintiffs have adequately pled the "same grade and quality" element.
4. Effect on Competition
The fourth element of a §2(a) claim is that the price discrimination have had an unlawful effect on competition. "In secondary-line price discrimination cases,
_____________________________________ [Continuation of Footnote 3 below]
terms of the statutory language in a case involving thirteen plaintiffs alleging Sherman Act and Robinson-Patman Act violations by twenty-eight defendants cannot satisfy Rule 8(a)(2). Id. at 1387. The Mountain View court found that the complaint 'furnishe[d] not the slightest clue" as to the what conduct that plaintiffs claimed violated the antitrust laws in that "[ilt failed to specify any products that were the subject of the discriminatory treatment [or] identify the favored purchasers of a particular product. Id. at 1388. Here, as is outlined above, the proposed Amended Complaint is more than sufficient to place the defendants on notice of the nature of the claims against them.
[End of footnote 3]
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such as this action, competitive injury may be inferred from evidence demonstrating injury to an individual competitor." Intimate Bookshop, Inc. v. Barnes & Noble, Inc., 88 F. Supp.2d 133, 139 (S.D.N.Y. 2000) (citing George Haug Co., 148 F.3d at 142). "The Supreme Court has held that an inference of injury to competition can be drawn from evidence that some purchasers were required to pay substantially more than their competitors for the same goods." National Assoc. of College Bookstores, Inc.,, 990 F. Supp. at 252-53 (citing Morton Salt, 334 U.S. 37, 46-47 (1948)). "Allegations of such a price differential and identification of the relevant competitors are therefore sufficient to notify the defendants of the facts on which plaintiffs intend to establish this inference." Id.
Here, the plaintiffs have alleged price differentials for the same product sold by the same manufacturer. Additionally, the Amended Complaint alleges that the plaintiffs were in actual competition with the defendants that they are suing. Plaintiffs further allege that the price discrimination has caused thousands of competitors to go out of business in the past five years, and is threatening business closure to the plaintiffs that remain in business. Therefore, plaintiffs have adequately plead that the alleged unlawful discrimination has an effect on competition.
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Although, as set forth above, plaintiffs have adequately pled a prima facie claim under §2(a) of the Robinson-Patman Act (n4) to state a claim under §2(f), plaintiffs must additionally demonstrate that defendants "knowingly [induced] or receive[d] a discrimination in price which is prohibited by this section." 15 U.S.C. § 13(f).
Defendants claim that plaintiffs have failed to allege facts sufficient to establish that they knowingly induced the price discrimination. "The knowledge requirement has been construed to mean that the buyer must have either actual knowledge, i.e., he or she must have known that the price in question was illegal, or constructive knowledge, i.e., he or she must have been reasonably cognizant of its illegality." Automatic Canteen Co. v. FTC, 346 U.S. 61, 79-80, 97 L. Ed. 1454, 73 S. Ct. 1017 (1953).
In the immediate case, plaintiffs have sufficiently pled that each of the defendants "knowingly induced or received" the allegedly discriminatory discounts, fees, rebates, free inventory and other payments from the manufacturers. The Amended Complaint alleges, inter alia that, "[a]cquisitions of competing retail
______________________________________ [Footnote 4 below]
(4) Notwithstanding the thoroughness of the proposed Amended Complaint, we note that courts have held that "even a complaint that fails to allege an element of an antitrust claim may be adequate." Donson Stores, Inc. v. American Bakeries Co., 58 F.R.D. 485, 487-88 (S.D.N.Y. 1973) (Robinson-Patman Act claim not dismissed despite its failure to allege lessening of competition).
[End of Footnote 4]
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chains ... by some of the defendants ... have provided such defendants with precise data to show defendants that they have been receiving favorable discriminatory prices, whereas the companies being acquired were the disfavored purchasers." See Amended Complaint Para. 77E. Furthermore, plaintiffs allege that defendants' knowledge of the discriminatory pricing was apparent from information and discussions that plaintiffs conducted with salespersons from the manufacturers. Id. at Para. 77H. Thus, the Amended Complaint sufficiently pleads the knowledge element of plaintiffs' §2(f) claim.
Accordingly, defendants' motion to dismiss Count I of the Amended Complaint is denied.
3. Failure to State A Claim - Count II
Defendants claim that Count II of the Amended Complaint, asserting violation of section 2(c) of the Robinson-Patman act should be dismissed because plaintiffs have not alleged either an unlawful brokerage agreement or commercial bribery. We agree, and accordingly, Count II of the Amended Complaint is dismissed.
Section 2(c) of the Robinson-Patman Act provides:
It shall be unlawful for any person engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any
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allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, representative or other intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect control, of any party to such transaction other than the person by whom such compensation is so granted or paid.
15 U.S.C. § 13(c).
Plaintiffs assert a violation of this section based on "sham transactions, subterfuge payments and property transfers from the 16 manufacturers to defendants which are not attributable to specific auto-parts purchases." Memorandum of Law in Opposition to Defendants' Motion to Dismiss the Amended Complaint at p. 32. Defendants assert, however, that section 2(c) applies only to illegal brokerage arrangements, discounts given in lieu of brokerage, and commercial bribery, and thus, plaintiffs allegations do not amount to a section 2(c) violation. Defendants' Opening Brief in Support of Their Motion to Dismiss the Amended Complaint p. 41.
In addressing section 2(c), a leading authority on antitrust law has stated that "[a]lthough many things about this complex prohibition are unclear, one thing that is apparent is that it was intended to reach price discrimination disguised as the provision of or rebates for the 'dummy' use of brokers." XIV HERBERT HOVENKAMP, ANTITRUST LAW Para. 2362a (1999). More specifically,
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[t]he prolix and obscure statute is a model of bad drafting but seems to contemplate and condemn three specific types of practices: 1. The payment for brokerage services by one party (typically the seller) when the person performing those services is controlled by the other party (typically the buyer);Id. at 2362.
2. The payment of brokerage fees when no brokerage services are actually performed;
3. The offer of an allowance or discount "in lieu of' brokerage - that is, compensation given, typically to a large buyer, when brokerage services are not used.
Thus, where, as here, there is no allegation that allegedly impermissible discounts were disguised as brokerage, or that discounts were provided in lieu of brokerage, there is no section 2(c) violation. See Intimate Bookshop, Inc., 88 F. Supp. at 139-40 ("Section 2(c) was enacted to deal with abuses of the brokerage function.... the case law and legislative history of Section 2(c) make it clear that Section 2(c) was not intended to apply outside of the brokerage context... Courts have routinely dismissed claims under Section 2(c) when the plaintiff has not alleged that a discount or payment is in lieu of a brokerage or commission"). The Amended Complaint makes no allegations of a brokerage arrangement or commercial bribery at all. Therefore, the legality of the discounts that plaintiffs premise their section 2(c)
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claim on are more appropriately judged under plaintiffs' section 2(a) and 2(f) claim.
Accordingly, defendants motion to dismiss Count II of the Amended Complaint is granted.
Defendants additionally assert that the Amended Complaint should be dismissed because many of the plaintiffs lack standing to bring this action. Defendants make two standing claims: (1) that the "indirect purchaser" plaintiffs may not bring suite under the Robinson-Patman Act; and (2) that some of the plaintiffs do not "compete" with the defendants. We find that the plaintiffs have standing to bring this action, and thus deny defendants' motion to dismiss on these ground.
1. Indirect Purchasers
Defendants assert that the "indirect purchaser" plaintiffs, meaning those plaintiffs who did not buy parts directly (or through buying groups), have no standing to bring a Robinson-Patman Act claim. Defendants premise their assertion on the holding of the Supreme Court case of Illinois Brick Co. v. Illinois that "the antitrust laws will be more effectively enforced by concentrating the full recovery for the overcharge in the direct purchasers rather than by allowing every plaintiff potentially
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affected by the overcharge to sue for the amount it could show was absorbed by it." 431 U.S. 720, 735 (1977).
Although defendants are correct that the Illinois Brick decision restricts an indirect purchaser's ability to recover damages for a Robinson-Patman violation, courts have interpreted Illinois Brick's limitations as applying only to suits for monetary damages, not to suites for equitable relief. (n5) See Campos v. Ticketmaster, 140 F.3d 1166, 1172 (8th Cir. 1998), cert denied, 525 U.S. 1102, 119 S. Ct. 865, 142 L. Ed.2d 768 (1999); Collins v. International Dairy Queen, 59 F. Supp.2d 1305, 1311 (M.D. Ga. 1999). Here, plaintiffs seek both monetary damages and an injunction. Therefore, although any "indirect purchaser" plaintiffs may be restricted in their ability to recover monetary damages, the claims should not be dismissed because the Illinois Brick doctrine does not preclude their claims for injunctive relief.
Defendants additionally assert that there is a lack of standing because the "warehouse distributor" plaintiffs do not sell products to end users, and therefore are
______________________________ (Footnote 5 below)
(5) The question of whether a plaintiff is an "indirect purchaser" is not always a simple one. Accordingly, we think that discovery will aid in identifying which, if any, of the plaintiffs qualify as "indirect purchasers" under Illinois Brick. See In re Mercedes-Benz Antitrust Litigation, 157 F. Supp.2d 355, 366 (D. N.J. 2001).
[End of footnote 5]
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not in competition with the defendants. They claim that "each plaintiff must allege that it was in actual competition with at least one of the defendants", and thus that "to compete with the [warehouse distributors] in a three-step distribution, defendants must compete with plaintiffs in sales to jobbers." Defendants' Opening Brief in Support of Their Motion to Dismiss the Amended Complaint p. 32. We disagree, and accordingly, defendants motion to dismiss for lack of standing is denied.
The Second Circuit has stated that "even if we were to assume that the parties were not in actual competition in the relevant market, Section 2(a) does not categorically exempt price discrimination between parties competing at different functional levels." George Haug Co., Inc. v. Rolls Royce Motor Cars Inc., 148 F.3d 136, 142 (2d Cir. 1998). Additionally, plaintiffs allege that the competitive advantage that defendants gain through price discrimination enables them to take away business from the "warehouse distributor" plaintiffs. See Memorandum of Law in Opposition to Defendants' Motion to Dismiss the Amended Complaint, p. 26 (the "WDs compete with the defendants in the purchasing of parts from the 16 manufacturers and compete through the WD's customers (with retail branches) in the sale of parts to retail customers (or with their own related corporation having retail branches). The sale of a part by a defendant is often the loss of a sale by the competing jobber, and the WD plaintiff from whom the jobber buys the parts").
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Specifically, the Amended Complaint alleges:
57. Defendants buy their goods from the Manufacturers at substantially lower prices per unit than paid by the plaintiffs or their WD suppliers who buy the same type and quality of goods at the same time from the same Manufacturer, with the predictable result that the defendants offer and sell these goods at lower prices than the plaintiffs, and often at prices lower than the per-unit price being paid by the plaintiffs or their suppliers for the same goods at the same time.Amended Complaint Paras. 57-58.
58. The result is that the defendants are able to and do take away business from the plaintiffs, by selling at the jobber level of distribution at a lower price than the plaintiffs are able to sell for at the same jobber level of distribution, and the defendants have the added advantage of a substantially higher profit margin with which to provide such things as better location, larger selection of goods more advertising and promotion, and free parking.
Accordingly, the allegations in the Amended Complaint demonstrate that each of the plaintiffs has standing to participate in this action.
Personal Jurisdiction, Venue and Transfer
Defendants O'Reilly and CSK additionally move for dismissal of the claims against them on grounds of lack of personal jurisdiction and venue. Alternatively, these defendants request that the claims against them be severed and transferred. For
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the following reasons, these motions are denied.
1. Personal Jurisdiction
Defendants O'Reilly and CSK assert that plaintiffs have not alleged a sufficient factual predicate for this Court's assertion of personal jurisdiction over them. We conclude that the Amended Complaint makes a prima facie showing of jurisdiction, and thus, pre-discovery dismissal of the claims is inappropriate.
The procedure for ruling on a motion to dismiss for lack of personal jurisdiction has recently been set forth by a court in this district as follows:
The Second Circuit has stated that "[iln deciding a pretrial motion to dismiss for lack of personal jurisdiction, a district court has considerable procedural leeway." [The Court] may determine the motion on the basis of affidavits alone; or it may permit discovery in aid of the motion; or it may conduct an evidentiary hearing on the merits of the motion....Kowalski-Schmidt v. CLS Mortgage, Inc., 981 F. Supp. 105, 108 (E.D.N.Y. 1997).
"If the court chooses not to conduct a full blown evidentiary hearing on the motion, the plaintiff need make only a prima facie showing of jurisdiction through its own affidavits and supporting materials."
"Eventually, of course the plaintiff must establish jurisdiction by a preponderance of the evidence, either at a pretrial evidentiary hearing or at trial"...
Like the Kowalski-Schmidt court, we elect not to hold an evidentiary hearing
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prior to ruling on defendants' motion to dismiss for lack of personal jurisdiction. Accordingly, "Plaintiffs need only make a "prima facie showing of jurisdiction through [their] own affidavits and supporting materials . . ., notwithstanding any controverting presentation by ... [Defendants], to defeat the motion." Id.
Here, plaintiffs assert that jurisdiction over defendants O'Reilly and CSK is appropriate under New York Civil Practice Law and Rules sections 301, 302(a)(1) and 302(a)(2). These sections provide:
§ 301. Jurisdiction over persons, property or statusN.Y. C.P.L.R. §§ 301 & 302 (McKinney 1999).
A court may exercise such jurisdiction over persons, property or status as might have been exercised heretofore.
§ 302. Personal jurisdiction by acts of non-domiciliaries
(a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent:
1. transacts any business within the state or contracts anywhere to supply goods or services in the state; or
2. commits a tortious act within the state, except as to a cause of action for defamation of character arising from the act...
It is well-settled that section 301 applies to a defendant who is "doing
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business" and therefore "present" in New York with respect to any cause of action, either related or not related, if the defendant does business in New York "not occasionally or casually, but with a fair measure of permanence and continuity." Beacon Enter., Inc. v. Menzies, 715 F.2d 757, 762 (2d Cir. 1983) (quoting Simonson v. Int'l Bank, 14 N.Y.2d 281, 251 N.Y.S.2d 433, 436, 200 N.E.2d 427 (1964)). Section 302(a)(1) permits a court to exercise personal jurisdiction over a foreign defendant when two conditions are met: first, the foreign defendant must 'transact business' within New York; and second, the claim against the foreign defendant must arise out of the business transacted in the state. Although "the standard of 'transacting business' is considerably less than the requirements under the 'doing business' test ... unlike the 'doing business' basis, jurisdiction is conferred only to those acts arising out of the transaction." Goldenberg v. Lee, No. 97 CV 5297, 1999 WL 390611, *2 (S.D.N.Y. April 15, 1999).
Defendants O'Reilly and CSK assert that plaintiffs' have not alleged sufficient and reliable facts from which the Court may conclude that they "transact business" or "do business" in New York, and thus have not demonstrated a valid statutory or constitutional basis for the assertion of jurisdiction over them. Plaintiffs allege, inter alia, that both O'Reilly and CSK purchased auto-parts from manufacturers in New York "at discriminatory prices and with Phantom Payments." Thus, a portion of the
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"business" which forms the basis of the charges in the complaint allegedly was conducted in New York. Additionally, plaintiffs assert that O'Reilly makes sales to customers in New York directly through its website. These allegations support this Court's exercise of jurisdiction over these defendants. Accordingly, although at some point the plaintiffs will be required to establish jurisdiction by a preponderance of the evidence, at this juncture, these allegations, which are supported by plaintiffs' memoranda and the declaration of Gil Harris', are sufficient to establish a prima facie case of personal jurisdiction.
Defendants O'Reilly and CSK additionally challenge the propriety of venue in this Court. We find that venue is proper in this district both because the plaintiffs have alleged that defendants "transact business" in the Eastern District of New York and because, according to the allegations in the Amended Complaint, a substantial part of the events or omissions giving rise to the claims occurred in New York.
15 U.S.C. § 22 provides:
Any suit, action, or proceeding under the antitrust laws against a corporation may be brought not only in the
___________________________________ (Footnote 5.1 below)
(5.1) Gil Harris is the Executive Vice President of plaintiff Coalition for a Level Playing Field, LLC.
[End of footnote 5.1]
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judicial district whereof it is an inhabitant, but also in any district wherein in may be found or transacts business; and all process in such cases may be served in the district of which it is an inhabitant, or wherever it may be found.
28 U.S.C. § 1 3191 provides, in relevant part
(b) A civil action wherein jurisdiction is not founded solely on diversity of citizenship may be brought only in the judicial district where all defendants reside, or in which the claim arose, except as otherwise provided by law.
As discussed above, with reference to the defendant's challenge of personal jurisdiction, the plaintiffs' allegations establish both that O'Reilly and CSK "transact business" in the Eastern District of New York, and that some of the allegedly discriminatory transactions out of which this action arose took place within the Eastern District of New York. Accordingly, plaintiffs have alleged facts supporting venue in the Eastern District of New York pursuant to both 15 U.S.C. § 22 and 28 U.S.C. § 1391.
As an alternative to dismissal, defendants O'Reilly and CSK request that the claims against them be severed and transferred to a different forum. We find, however, that interests of convenience and judicial efficiency militate against
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severance of these claims.
The standard to be applied on a motion to sever and transfer have recently been summarized as follows:
Rule 21 of the Federal Rules of Civil Procedure authorizes the severance of any claim against a party in order that it be transferred pursuant to Section 1404(a) of the Judicial Code. Section 1404(a), in turn, permits the Court to transfer any civil action to any other district where it might have been brought "[flor the convenience of parties and witnesses, in the interest of justice."Hallwood Realty Partners, L.P. v. Gotham Partners, L.P., 104 F. Supp.2d 279, 287- 88 (S.D.N.Y. 2000).
Severance under Rule 21 generally is appropriate if venue is improper as to one or more defendant or a party has been joined improperly under Rule 20. However, in a multi-defendant case, the Court may sever and transfer a claim against one or more defendants where "the administration of justice would be materially advanced" thereby. This analysis requires the Court to consider:
(1) whether the issues sought to be tried separately are significantly different from one another, (2) whether the separable issues require the testimony of different witnesses and different documentary proof, (3) whether the party opposing the severance would be prejudiced if it is granted and (4) whether the party requesting the severance will be prejudiced if it is not granted."
We find that severance is inappropriate in this case. First, we note that the
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issues in the claims against O'Reilly and CSK are very close, if not identical, to the issues in the claims against the other defendants. These claims will likely require overlapping testimonial and documentary evidence. Additionally, in that this action alleges nationwide conduct, it is likely that no matter where these claims are heard, witnesses and documents will have to be brought in from out of state. These facts, taken together with the plaintiffs' interest in litigating their claims in one action, and the judicial efficiency that is attained by litigating the claims against O'Reilly and CSK together with the claims against the other defendants, tilt the balance against severance and transfer.
Accordingly, defendants O'Reilly and CSK's motions for severance and transfer are denied.
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For the foregoing reasons, defendants' motion to dismiss the complaint for failure to state a claim is DENIED as to Count I, and GRANTED as to Count II of the Amended Complaint. Defendants O'Reilly and CSK's motions to dismiss for lack of personal jurisdiction and venue, or alternatively to sever and transfer the claims against them are DENIED. Plaintiffs' motion for leave to file an amended complaint is GRANTED.
Pursuant to Federal Rule of Civil Procedure 54(b), the Court finds that there is no just reason for delay, and the Clerk is directed to enter partial judgment in favor of defendants and against plaintiffs on Count II of the Amended Complaint.
DATED: October 18, 2001
Central Islip, New York
/s/ Jacob Mishler
U.S. DISTRICT COURT
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