SHARION AYCOCK, District Judge.
Before the Court are numerous motions filed by the party Defendants to the lawsuit, AT & T, Inc., AT & T Mobility, LLC, Motorola Solutions, Inc., Motorola Mobility, Inc., and Qualcomm Incorporated, brought by Plaintiffs, Corr Wireless Communications, LLC, Cellular South, Inc., and Cellular South Licenses, LLC, for violations of federal antitrust laws.
The motions now currently pending and ripe for judicial review are as follows: (1) a Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(2) [61] filed by AT & T, Inc.; (2) Motion to Dismiss for Failure to State a Claim or, in the alternative, Pursuant to the Doctrine of Primary Jurisdiction by AT & T Mobility LLC [65]; (3) a Motion to Dismiss for Failure to State a Claim or, in the alternative, Pursuant to the Doctrine of Primary Jurisdiction [67] by Qualcomm Incorporated; (4) Motion Request for Judicial Notice [69] filed by Qualcomm Incorporated; (5) Motion to Dismiss for Failure to State a Claim [70] filed by Motorola Solutions, Inc.; and (6) Supplemental Motion for Request for Judicial Notice [90] filed by Qualcomm Incorporated. On July 17, 2012, the Court entertained oral arguments on all of the aforementioned motions.
After marshaling through the motion-to-dismiss record, carefully considering the arguments articulated in the hearing, and reviewing the pertinent authority,
The antitrust allegations in this case concern electromagnetic spectrum, which at a basic level, essentially refers to wireless capacity. Since the mid-1990s, the Federal Communications Commission ("FCC") has conducted auctions of licenses for such electromagnetic spectrum. That is, the FCC makes available, through auctions and a competitive bidding process, new spectrum for mobile telephony and/or broadband. The spectrum at issue in Plaintiffs' complaint is the 700 MHz band, which is comprised of 70 megahertz of commercial, non-guard band spectrum, 4 megahertz of guard band spectrum, 24 megahertz of public safety spectrum, and 10 megahertz of spectrum that will be reallocated for public safety use pursuant to congressional mandate.
The FCC recently launched proceedings to "free up" the 700 MHz band for commercial mobile services, as this spectrum was once occupied by analog television broadcasters in TV channels 52-69. Commercial licenses for this spectrum were assigned through several FCC auction proceedings. The FCC auctioned licenses for the guard bands in the Upper 700 MHz band in 2000, and it initially auctioned licenses in the Lower C and D Blocks in 2002. In 2008, the FCC auctioned licenses in the Lower 700 MHz band A, B, and E Blocks, as well as the Upper 700 MHz band C Block.
The service at issue here is the fourth-generation ("4G")
As noted, the FCC held an auction to sell and repurpose licenses in the 700 MHz spectrum in 2008. The complaint filed in this action focuses on three blocks of spectrum in the Lower 700 MHz band: the A, B, and C Blocks. AT & T purchased licenses in the Lower B and C Block. Cellular South purchased spectrum in the Lower A Blocks.
Band Class 17 was created through the 3GPP process after "Auction 73," and the creation of Band Class 17 is the focal point of Plaintiffs' claims of conspiracy, as Band Class 17 does not include the Lower A Block that was purchased by Cellular South.
In 2009, Cellular South Licenses, Inc., Cavalier Wireless, LLC, Continuum 700, LLC, and King Street Wireless, L.P. — all holders of Lower 700 MHz A Block licenses — filed a petition for rulemaking, asking the FCC to assure that consumers will have access to all paired 700 MHz spectrum that the FCC licenses. The FCC was also requested to put an immediate freeze on the authorization of mobile equipment that is not capable of operation on all paired commercial 700 MHz frequencies. The Wireless Telecommunications Bureau sought comment on the petition in 2010, and the FCC received comments and reply comments. In order to update the record and gather additional information, the Wireless Telecommunications Bureau held a workshop on the status and availability of interoperable mobile user equipment across commercial spectrum blocks in the 700 MHz band. Thereafter, the FCC issued a notice of proposed rulemaking to address the issues raised by the petition for rulemaking, seeking comment, data, and evidence on the argument that an interoperability requirement in the 700 MHz band is necessary to obtain affordable, advanced mobile devices to deploy service to consumers in smaller, regional, and rural service areas. This notice of proposed rulemaking was issued in March 2012, and less than two weeks before Plaintiffs filed the instant action. All of the Defendants named in this action maintain that the FCC has "primary jurisdiction"
Plaintiffs filed their complaint on April 2, 2012, filed an amended complaint on June 8, 2012, and provide a "summary of the allegations in the complaint" in their
After Motorola proffered its proposal, Plaintiffs assert that, in June 2008, AT & T submitted a paper that "supported the creation of what became Band Class 17." In the report for the June 2008 meeting, Qualcomm also allegedly agreed with AT & T's conclusion on Band Class 17 with respect to "user equipment." Plaintiffs maintain that Qualcomm's support for the creation of Band Class 17 was against its own self-interest, and "can only be explained by a preceding agreement with AT & T." Plaintiffs further argue that "neither [Qualcomm or Motorola] would have taken such steps ... without such a prior agreement [with AT & T]." Plaintiffs contend that Ericsson, a device manufacturer, raised concerns that the creation of a separate band class would "go[] against the economies of scale." Ericsson, however, subsequently withdrew its initial objection to the creation of this separate band class.
In August 2008, the 3GPP, acting by a consensus, adopted the proposal to create Band Class 17, with no dissent. Plaintiffs maintain that the 3GPP "rubber-stamped" the "concerted work" of the Defendants concerning Band Class 17. Plaintiffs, however, do not contest that the 3GPP process itself was strictly followed. That is, technical arguments supporting the creation of Band Class 17 were set out in writing for evaluation by experts, and the 3GPP acted by a consensus with no objection from anyone concerning Band Class 17.
Plaintiffs assert that after the Defendants "caused 3GPP to fragment Band 12 by creating Band 17, AT & T and the other Defendants continued to preserve what their concerted action had wrought (i.e., AT & T's private ecosystem) when that private ecosystem was threatened by Cellular South." After Plaintiffs filed the aforementioned petition for rulemaking with the FCC, Plaintiffs maintain that AT & T and the other Defendants agreed to improperly delay Band Class 12 standards. Plaintiffs contend that they "do[] not claim that the Defendants' opposition to the Interoperability Petition before the FCC was actionable ... Rather, the Complaint alleges that it was the Defendants' conduct beyond its opposition before the government in threatening Cellular South with the delay of Band 12, actually delaying Band 12, and attempting to secure Cellular South's withdrawal of the Interoperability Petition which was, and is, actionable." Plaintiffs maintain that while Band Class 12 was recognized prior to "Auction 73," "work was left to be done by 3GPP to develop the technical specifications necessary for the implementation of Band 12 by carriers and equipment manufacturers." Plaintiffs maintain that Defendants
First, Plaintiffs maintain that in May 2010 — approximately two years after Band Class 17 was created — Qualcomm representative, Michael Chard, allegedly stated to Brian Caraway of Cellular South that "there may be individuals participating in 3GPP discussions who would oppose amendments to the Band 12 standard." Chard allegedly also commented that the Interoperability Petition was a "conflict generator" and that "there could be some `blocking' of Band 12 by the 3GPP participants that were concerned about the Interoperability Petition." In the same conference call, Chard also allegedly stated that "Qualcomm was concerned that the actions of the companies that filed the Interoperability Petition — including Cellular South — conflicted with the best interests of Qualcomm's `other carrier partners.'" In Plaintiffs' brief in opposition to the motions to dismiss, Plaintiffs contend that "Chard's reference to its `carrier partners'... had to include AT & T." Chard also allegedly commented that "most if not all of what happens in RAN 4 [discussions] happens before the meeting."
Second, Plaintiffs contend that at a June 2010 3GPP meeting, Gene Fong of Qualcomm had a conversation with Brian Caraway of Cellular South. When asked by Caraway if the Interoperability Petition had caused delays in the advancement of Band 12 standards, Fong allegedly stated, "I would be lying if I said no." However, Fong then also stated, "but I am still going to do my job." Fong also allegedly noted that Qualcomm's position on adoption of Band Class 12 standards was subject to "external influences."
Third, Plaintiffs assert that at the same 3GPP June 2010 meeting, Edgar Fernandes of Motorola, who was also the Vice Chairman of the RAN 4 Working Group at 3GPP, asked Brian Caraway of Cellular South and others if their companies were part of the group that had filed the Interoperability Petition. Caraway confirmed that Cellular South, among others, had filed the Interoperability Petition. Fernandes allegedly stated to Caraway that the petition and related filings "have made us hesitant to do anything with Band 12." Fernandes also allegedly commented that the petition "had gummed up the works."
As it relates to these comments from Qualcomm and Motorola employees, Plaintiffs argue that because they "came virtually simultaneously, it is clear that they acted in concert both to protect the newly created AT & T private ecosystem and to punish Cellular South for its role in filing the Interoperability Petition." Plaintiffs further maintain that the "only interpretation that can be given to these statements which directly evidence concerted action is that Motorola and Qualcomm were acting at least with AT & T." Plaintiffs additionally assert that Qualcomm refused to build chipsets that function on Band Class 12; however, Plaintiffs concede that "[s]hortly thereafter ... Qualcomm announced that it had decided to build a Band 12 chip after all." Plaintiffs maintain that Qualcomm decided to build the Band 12 chip to "cover its tracks" concerning the alleged conspiracy. According to Plaintiffs, the revised final standards for Band 12 were approved by 3GPP in November 2010.
Plaintiffs also base their antitrust claims on alleged exclusive dealing arrangements. That is, Plaintiffs proffer that, "on information and belief, Cellular South believes that AT & T has secured its 4G-LTE devices on an exclusionary basis." In their response in opposition to the motions to dismiss, Plaintiffs contend that, "[t]hose
Plaintiffs additionally set forth allegations concerning AT & T's "increased power and opportunity" to deny Cellular South roaming on AT & T's national network. Roaming services are essentially network services that customers of regional carriers, such as Cellular South, may utilize when outside of their service area. Plaintiffs contend that "[b]ased on prior knowledge and experience, AT & T will abuse its monopoly power over 4G-LTE nationwide data roaming in the Lower 700 MHz spectrum to delay or refuse to provide meaningful nationwide roaming to [Plaintiffs]." As the complaint sets forth by its very language, and as Plaintiffs concede in oral argument, Plaintiffs' claim for denial of roaming is not based on any action that AT & T has already taken. Rather, it is based on a course of future action that AT & T, at some point, may pursue.
Plaintiffs maintain that Defendants' alleged conduct presents a "very mixed combination" of (a) concerted action by all three Defendants; and (b) unilateral abuse of monopoly power by AT & T." Plaintiffs allege that these claims fall under both Section 1 and 2 of the Sherman Act. According to Plaintiffs, the complaint "has alleged a claim for violation of Section 1 arising out of two types of conduct: (1) the Defendants' collective and concerted action to fragment and delay Band 12, delaying the development of Band 12 devices and depriving Cellular South and others of roaming; and (2) AT & T's exclusive agreements with manufacturers to produce Band 17 devices, and refusal to sell devices to AT & T's competitors."
Plaintiffs' complaint further alleges that AT & T is also liable under Section 2 of the Sherman Act. Plaintiffs contend that, in assessing Section 2 liability, "AT & T's conduct must be considered as a whole — including the creation of Band 17, the agreements with device manufacturers, and AT & T's pattern of conduct designed to deprive competitors of roaming access."
Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, a plaintiff must state a claim upon which relief can be granted or the complaint may be dismissed with prejudice as a matter of law. FED. R.CIV.P. 12(b)(6). When considering a motion to dismiss for failure to state a claim, the "court accepts `all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.'" In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir.2007) (quoting Martin K. Eby Constr. Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir.2004) and Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999)). To withstand a Rule 12(b)(6) motion, the plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570-72, 127 S.Ct. 1955.
Rule 8 of the Federal Rules of Civil Procedure sets out the fundamental pleading standard for civil litigation and governs all claims in a civil suit, requiring "a short plain statement of the claim showing that the pleader is entitled to relief." FED. R.CIV.P. 8(a)(2). "A plaintiff's obligation to provide the `grounds' of his `entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555, 127 S.Ct. 1955. Factual allegations must be enough to raise a right to relief above the speculative level. Id. Although the Supreme
When ruling on a motion to dismiss under Rule 12(b)(6), a court must accept as true all of the factual allegations contained in the complaint. Twombly, 550 U.S. at 555-56, 127 S.Ct. 1955 (citing Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508 n. 1, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002); Neitzke v. Williams, 490 U.S. 319, 326-27, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989); Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)). But, a court need not accept as true "conclusory allegations, unwarranted factual inferences, or legal conclusions," which will not defeat a Rule 12(b)(6) motion to dismiss. Plotkin v. IP Axess, Inc., 407 F.3d 690, 696 (5th Cir. 2005) (citing Southland Sec. Corp. v. INSpire Ins. Solutions, Inc., 365 F.3d 353, 361 (5th Cir.2004)).
In Iqbal, the Court formalized a two-pronged approach to apply the underlying jurisprudential principles of Twombly. The first prong requires the Court to separate factual allegations from legal conclusions. Id. The Court in Iqbal dismissed those allegations deemed to be "conclusory" on the basis that bare legal conclusions are not entitled to the privilege that all well-pleaded facts be taken as true at the motion to dismiss stage. Id.
Section 1 of the Sherman Act states: "Every contract, combination in
Regarding the conspiracy element, the Supreme Court recently observed that "the crucial question [in a § 1 claim] is whether the challenged anticompetitive conduct stems from independent decision or from an agreement." Twombly, 550 U.S. at 553, 127 S.Ct. 1955 (internal quotations omitted). The plaintiff must present evidence that the defendants engaged in concerted action, defined as having "a conscious commitment to a common scheme designed to achieve an unlawful objective." Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984). Concerted action may be shown by either direct or circumstantial evidence. Direct evidence explicitly refers to an understanding between the alleged conspirators, while circumstantial evidence requires additional inferences in order to support a conspiracy claim. See Tunica Web Adver. v. Tunica Casino Operators Ass'n, 496 F.3d 403, 409 (5th Cir.2007). Independent parallel conduct, or even conduct among competitors that is consciously parallel, does not alone establish the contract, combination, or conspiracy required by § 1. See Twombly, 550 U.S. 544, 127 S.Ct. 1955.
As noted supra, Plaintiffs "ha[ve] alleged a claim for violation of Section 1 arising out of two types of conduct: (1) the Defendants' collective and concerted action to fragment and delay Band 12, delaying the development of Band 12 devices and depriving Cellular South and others of roaming; and (2) AT & T's exclusive agreements with manufacturers to produce Band 17 devices, and refusal to sell devices to AT & T's competitors." While, in considering whether Plaintiffs' allegations state an antitrust violation, the Court considers the allegations together, the Court analyzes each allegation separately in order to flesh out all of Plaintiffs' arguments in more detail.
The genesis of Plaintiffs' antitrust claims begins in 2008. Plaintiffs maintain that "AT & T — with the assistance of Motorola and Qualcomm — [ ] caused the 3GPP to create a private band for the benefit of AT & T." During oral argument on this issue, Plaintiffs again reiterated that Motorola "started" the alleged concerted action by proffering a paper at the 2008 3GPP meeting recommending the creation of a separate band class. While Plaintiffs contend that Motorola would never have made its 2008 proposal at 3GPP to create Band Class 17 without the "prior consent, blessing, and agreement of AT & T," Plaintiffs provide no factual support for such a proposition either in the complaint or the response in opposition to Defendants' motions to dismiss. Due to this factual void in Plaintiffs' filings, the Court inquired from Plaintiffs at oral argument what facts they had to support the claim that Motorola recommended the creation of a separate band class based on a prior "agreement" with AT & T. Plaintiffs, instead of providing facts, simply maintained that Motorola "had to have talked to AT & T about it." Plaintiffs further stated, "We can be reasonably assured that Motorola did not change AT & T's spectrum because it made a difference to AT & T." Plaintiffs, as to this issue, additionally stated, "That just doesn't happen."
Plaintiffs have articulated the same threadbare allegations concerning Qualcomm as it relates to the creation of Band Class 17 in 2008. Plaintiffs contend that, in June 2008, AT & T and Qualcomm joined Motorola in support of the creation of Band Class 17. According to Plaintiffs, "Qualcomm's support, like Motorola's ... can only be explained by a preceding agreement with AT & T." Plaintiffs provide no factual support for such an assertion. In fact, when questioned about whether Plaintiffs had any facts to support the proposition that there was a prior agreement amounting to concerted action, Plaintiffs simply reiterated that Motorola "started it," Qualcomm "supported it," and "they had to have some reason to do it." Plaintiffs continued with this highly speculative and entirely conclusory argument, noting that the parties "had strong motives to act in concert" because they "needed AT & T as a customer."
While Plaintiffs maintain that Qualcomm and Motorola had such "motives" to engage in concerted action, accusations of a motive do not establish a Sherman Act violation, and Plaintiffs provide no factual allegations to plausibly show the existence of an agreement. That is, there are no allegations of when such a purported agreement happened, nor are there facts showing that particular individuals met at particular times, or even what such an alleged agreement entailed. It should go without saying that merely articulating that an agreement "had to have" occurred prior to Motorola's 2008 recommendation to create a separate band class is not a factual allegation that raises Plaintiffs' right to relief above the speculative level in accordance with Twombly. See Twombly, 550 U.S. at 565 n. 10, 127 S.Ct. 1955; TruePosition, Inc. v. LM Ericsson Tel. Co., 844 F.Supp.2d 571, 594-96 (E.D.Pa.2012). Even if Motorola, Qualcomm, and AT & T all supported the creation of Band Class 17 during the 3GPP process — due to what each contend is technologically justified because of interference concerns with the Lower A Block — "[c]ircumstantial evidence of parallel behavior must be pled in `a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action.'" Burtch v. Milberg Factors, Inc., 662 F.3d 212, 226-27 (3d Cir.2011) (quoting Twombly, 550
Here, other than Plaintiffs' conclusory statements that an agreement happened regarding the creation of Band Class 17, the only factual allegations provided show that Motorola, Qualcomm, and AT & T participated in the 3GPP process. Yet, the Fifth Circuit has consistently maintained that "it has long been recognized that the establishment and monitoring of trade standards is a legitimate and beneficial function." Consol. Metal Prods. Inc. v. Am. Petroleum Inst., 846 F.2d 284, 293-94 (5th Cir.1988) (finding that though a trade association naturally involves collective action by competitors, it is not by its nature a "walking conspiracy"). In Golden Bridge Technology, Inc. v. Motorola, Inc., 547 F.3d 266 (5th Cir.2008), the court affirmed summary judgment in a challenge brought by the developer of wireless communications technologies for cellular networks against other members of the 3GPP nonprofit origination. There, Golden Bridge Technology, a member of 3GPP, alleged that the defendants unlawfully conspired not to deal with Golden Bridge in violation of the Sherman Act. Id. The Fifth Circuit, in addressing the function of the 3GPP, noted as follows:
Id.; see also, e.g., Consolidated Metal Prods., 846 F.2d at 294; TruePosition, 844 F.Supp.2d at 575-76 (dismissing antitrust claim based on alleged conspiracy to exclude technology from 3GPP standard).
To be clear, the Court is not holding that joint standard setting cannot be the basis of a Sherman Act violation, as such standard setting has been successfully challenged under Section 1. See Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 108 S.Ct. 1931, 100 L.Ed.2d 497 (1988). Plaintiffs rely heavily on Allied Tube to support their claim. However, Allied Tube is quite distinguishable.
In that case, the Supreme Court addressed both the risks and benefits of standard-setting. The case involved a steel manufacturing corporation that set out to convince an SDO not to change its standards in a way that would negatively affect steel manufacturers. Id. at 495-97, 108 S.Ct. 1931. The standards setting organization, the National Fire Protection Association, published the National Electric Code each year. Until 1981, the Code had approved only steel as an electrical conduit. When a new material suitable for use as an electrical conduit became available, the steel company rounded up everyone it could to vote against incorporating this new material into the code as another viable material for electrical conduits. Id. (stating the facts). The issue in the case was whether this behavior violated Section 1 of the Sherman Act by unreasonably restraining trade, or whether the steel company was immune from such liability because it was merely lobbying a legislative body for the result it desired. Id. at 495, 108 S.Ct. 1931 (citing Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523,
The Court in Allied Tube held that the steel company did not enjoy any such immunity. Id. at 509-10, 108 S.Ct. 1931. The Court found that the steel company, which had a clear economic interest in stifling competition from this new material, was biasing the standard setting process. It therefore refused to grant the steel company antitrust immunity, and concluded that efforts to influence private standard setting organizations may violate antitrust laws. Id. at 509-10, 108 S.Ct. 1931.
Unlike Allied Tube, which involved a standard setting process that was biased through the use of improper and unfair practices and procedures, see Clamp-All Corp. v. Cast Iron Soil Pipe Institute, 851 F.2d 478, 488 (1st Cir.1988) (Breyer, J.) (discussing Allied Tube), in this case sub judice, the Defendants' conduct during the 3GPP process in 2008 is, on its face, lawful. While Plaintiffs argue that Defendants' technical justifications set forth during the 3GPP process are merely pretext for anticompetitive behavior, the 3GPP process was followed to the letter. That is, there are no facts demonstrating procedural irregularities within the process, that the 3GPP process was subverted or turned into a sham, or that the Defendants agreed to employ — or indeed did employ — any improper practices within the standard setting process. The highly complex and technical arguments in favor of creating Band Class 17 were set out in writing for evaluation by experts, and the concerns relating to such creation of Band Class 17 were duly contemplated at 3GPP meetings. The 3GPP acted by a consensus as it relates to the creation of Band Class 17, and there was no objection from any person or entity, including the Plaintiffs and Verizon Wireless, who also holds spectrum licenses in the Lower A Block. As the Court made clear in Golden Bridge,
547 F.3d at 273. Here, Plaintiffs have not alleged plausible facts demonstrating that the 3GPP standard setting process was biased or otherwise subverted, or that the Defendants engaged in any type of conspiracy or concerted action as it relates to the creation Band Class 17.
Plaintiffs additionally contend that AT & T agreed with Defendants Motorola and Qualcomm to improperly delay Band Class 12 standards. During oral argument, Plaintiffs attempted to clarify their argument related to the alleged delay of Band Class 12. Plaintiffs maintain that, in order to preserve Band Class 17, the Defendants conspired to delay the finalization of Band Class 12, and that such a threat was made in order to force Cellular South to withdraw its Interoperability Petition filed with the FCC. At the outset, the Court notes that the Plaintiffs, during oral argument, noted that Band Class 12 was,
As it relates to such comments, Plaintiffs first contend that they are "direct evidence" of concerted action taken by the Defendants. Allegations of direct evidence of an unlawful agreement must be "explicit and require[ ] no inferences to establish the proposition or conclusion being asserted." In re Baby Food Antitrust Litig., 166 F.3d 112, 118 (3d Cir.1999); Golden Bridge, 547 F.3d at 272 ("Direct evidence explicitly refers to an understanding between the alleged conspirators"); Tunica, 496 F.3d at 410 (finding that email communications show conspiracy because they contain direct evidence stating that the parties entered into a "gentlemen's agreement" not to deal with another company). Here, unlike Tunica, the statements made by Qualcomm and Motorola employees do not constitute direct evidence of any type of conspiracy. Accordingly, the Court reviews such allegations under the standard required for circumstantial evidence.
As discussed above, regarding the conspiracy element, the Supreme Court has
Plaintiffs additionally cite evidence that Qualcomm initially allegedly announced it would not supply Band Class 12 chips. However, Qualcomm — only one month later — unilaterally and publically announced it would supply such chips. Plaintiffs have provided no factual evidence suggesting there was an agreement between Motorola, AT & T, and Qualcomm not to provide such chips, much less that it was agreed amongst the Defendants — one month later — to change course and supply Band Class 12 chips after all. In fact, both alleged announcements were made publically by Qualcomm. Nevertheless, it is not enough for Cellular South to state Qualcomm initially refused to supply Band Class 12 chips, as Cellular South cannot claim that Qualcomm had an obligation under federal antitrust law to engage in the immediate development of chips in order to satisfy Cellular South's needs as they related to Band Class 12. Far to the contrary; Cellular South has the burden to allege a plausible agreement between the Defendants to delay such Band Class 12 devices and standards. Neither the complaint and memorandum brief nor oral arguments proffered by Plaintiffs plausibly allege such an agreement.
Plaintiffs' antitrust allegations also concern AT & T's alleged refusal to provide roaming services
Additionally, the Court notes that when mobile wireless carriers must provide roaming access is already the subject of FCC regulation, see 47 C.F.R. § 20.12, and Cellular South has not alleged that AT & T has presently failed to comply with its regulatory obligation to provide roaming access on commercially reasonable terms and conditions. Further, beyond this regulatory obligation, Plaintiffs have not alleged that AT & T has an independent duty under federal antitrust laws to provide roaming services to one particular regional company such as Cellular South. Indeed, such antitrust laws generally do not "`restrict the long recognized right of [a] trader or manufacturer ... freely to exercise his own independent discretion as to parties with whom he will deal.'" Verizon Commc'ns Inc. v. Law Offices of Curtis v. Trinko, LLP, 540 U.S. 398, 408, 124 S.Ct. 872, 157 L.Ed.2d 823 (2004) (quoting United States v. Colgate & Co., 250 U.S. 300, 307, 39 S.Ct. 465, 63 L.Ed. 992 (1919)).
However, as the Trinko Court recognized, "`[t]he high value that we have placed on the right to refuse to deal with other firms does not mean that the right is unqualified.'" 540 U.S. at 408, 124 S.Ct. 872 (quoting Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 601, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985)). "Under certain circumstances, a refusal to cooperate with rivals can constitute anticompetitive conduct and violate § 2." Trinko, 540 U.S. at 408, 124 S.Ct. 872. The Supreme Court, however, has been "very cautious in recognizing such exceptions, because of the uncertain virtue of forced sharing and the difficulty of identifying and remedying anticompetitive conduct by a single firm." Id. The leading case for § 2 liability based on refusal to cooperate with a rival is Aspen Skiing, a case upon which all parties to this litigation understandably devote time to discussing.
The Aspen ski area consisted of four mountain areas. Aspen Skiing, 472 U.S. 585, 105 S.Ct. 2847. The defendant in Aspen Skiing, who owned three of those areas, and the plaintiff, who owned the fourth, had cooperated for years in the issuance of a joint, multiple-day, all-area ski ticket. After repeatedly demanding an increased share of the proceeds, the defendant canceled the joint ticket. The plaintiff, concerned that skiers would bypass its mountain without some joint offering, tried a variety of increasingly desperate measures to re-create the joint ticket, even to
As the Trinko Court expressly made clear, "Aspen Skiing is at or near the outer boundary of § 2 liability." Trinko, 540 U.S. at 409, 124 S.Ct. 872. The Court in Aspen Skiing found significance in the defendant's decision to cease participation in a cooperative venture. Aspen Skiing, 472 U.S. at 608, 610-11, 105 S.Ct. 2847. The Court found that the unilateral termination of a voluntary (and thus presumably profitable) course of dealing suggested a willingness to forsake short-term profits to achieve an anticompetitive end. Id. Similarly, the Court concluded that the defendant's unwillingness to renew the ticket even if compensated at retail price revealed a distinctly anticompetitive bent. Id. Moreover, in Aspen Skiing, the defendant turned down a proposal to sell at its own retail price, suggesting a calculation that its future monopoly retail price would be higher. Id.
In the case sub judice, the claims related to an alleged refusal to deal do not fit within the "limited exception" recognized by Aspen Skiing. Trinko, 540 U.S. at 409, 124 S.Ct. 872; see also Four Corners Nephrology Assocs., P.C. v. Mercy Med. Ctr. of Durango, 582 F.3d 1216, 1224-25 (10th Cir.2009) (quoting Trinko, 540 U.S. at 409, 124 S.Ct. 872) (emphasis in original) ("Aspen Skiing controls only where the monopolist's `unilateral termination of a voluntary (and thus presumably profitable) course of dealing suggest[s] a willingness to forsake short-term profits to achieve an anticompetitive end.'"); In re Elevator Antitrust Litig., 502 F.3d 47, 53-54 (2nd Cir.2007) (per curiam) (noting that termination after prior course of dealing is "sole exception to the right of refusal to deal"). That is, a speculative and entirely conjectural refusal to provide roaming access to Cellular South at some unknown point in the future does not state a claim under federal antitrust laws in this case.
Along the same lines, Plaintiffs have not alleged how a speculative future dispute over roaming access with one particular regional carrier could give rise to competition as a whole. See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977) ("[A]ntitrust laws ... were enacted for the protection of competition, not competitors.") (internal quotations omitted); Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993) ("The purpose of the [Sherman] Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market."). Accordingly, Plaintiffs' allegations concerning AT & T's alleged refusal to allow roaming services fail, as such arguments do not challenge any present conduct, provide concrete factual evidence that there is a threat of such conduct in the future, allege that AT & T has a duty under federal antitrust law to provide such access, or factually allege how some possible future refusal to provide roaming to Cellular South will harm competition.
Plaintiffs also base their antitrust claims on alleged exclusive dealing arrangements. That is, Plaintiffs proffer that, "on information and belief, Cellular South believes that AT & T has secured its 4G-LTE devices on an exclusionary basis." Plaintiffs contend that "[u]pon information
Instead, Plaintiffs assert that the "existence and [ ] content" of such alleged agreements "are known (at least before the parties to this litigation have conducted discovery) solely to the defendants." As such a statement makes clear, Plaintiffs apparently seek to utilize discovery in order to establish whether such agreements exist. That is, Plaintiffs request this Court to allow enormously expensive and protracted antitrust discovery to proceed in order so that Plaintiffs may "discover" whether they have claim for purported exclusive dealing agreements between AT & T and such unnamed manufacturers. But, as the Court in Twombly made clear in applying the plausibility standard to a Sherman Act claim, "stating such a claim requires a complaint with enough factual matter (taken as true) to suggest that an agreement was made." 550 U.S. at 556, 127 S.Ct. 1955 Plaintiffs' complaint in this action provides no factual matter to infer an agreement "was made." Instead, Plaintiffs concede that their complaint rests on factual matter currently not known, and Plaintiffs' contention that "[w]hether such agreements exist now is a red herring" is directly contrary both to Twombly and basic pleading standards. Federal Rule 8(a)(2) — even before Twombly articulated its plausibility standard — requires Plaintiffs to set forth a "`plain statement' possess[ing] enough heft to `sho[w] that the pleader is entitled to relief.'" Id. (quoting FED.R.CIV.P. 8(a)(2)). That is, Rule 8(a)(2) does not state that plaintiffs may set forth a plain statement showing they might be entitled to relief if they can engage in discovery and such discovery reveals the existence and content of an agreement, and such agreement is unlawful and runs afoul of federal antitrust laws. If Rule 8(a)(2) allowed a pleader to overcome a motion to dismiss for failure to state a claim simply by stating that discovery could reveal such a claim, even though the "existence and content" of the claim is not yet known, Federal Rule 12(b)(6) would become utterly futile.
Antitrust litigation is expensive, see Twombly, 550 U.S. at 558, 127 S.Ct. 1955; Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U.S. 519, 528 n. 17, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983) ("a district court must retain the power to insist upon some specificity in pleading before allowing a potentially massive factual controversy to proceed."),
Plaintiffs' complaint further alleges that AT & T is also liable under Section 2 of the Sherman Act. Plaintiffs contend that, in assessing Section 2 liability, "AT & T's conduct must be considered as a whole — including the creation of Band 17, the agreements with device manufacturers, and AT & T's pattern of conduct designed to deprive competitors of roaming access." Section 2 of the Sherman Act establishes a cause of action against single firms that monopolize, or attempt to monopolize, or conspire to monopolize, "any part of the trade or commerce among the several States, or with foreign nations." 15 U.S.C. § 2; Stewart Glass & Mirror, Inc. v. U.S. Auto Glass Discount Ctrs., Inc., 200 F.3d 307, 315 (5th Cir.2000); C.A.T. Indus. Disposal, Inc. v. Browning-Ferris Indus., Inc., 884 F.2d 209, 210 (5th Cir.1989). The Court addresses all three causes of action, and concludes that Plaintiffs' complaint fails to state a claim against AT & T under Section 2 of the Sherman Act.
The Court begins by addressing Plaintiffs' conspiracy to monopolize claim. Such a claim can be established only by proof of (1) the existence of specific intent to monopolize; (2) the existence of a combination or conspiracy to achieve that end; (3) overt acts in furtherance of the conspiracy; and (4) an effect upon a substantial amount of interstate commerce. Stewart Glass & Mirror, Inc., 200 F.3d at 316. Such proof is nonexistent here. As the Court's analysis under Section 1 demonstrates, Plaintiffs have failed to plead sufficient plausible facts of any agreement or conspiracy, anticompetitive or otherwise, between the Defendants. Because a conspiracy to monopolize claim requires joint action, Plaintiffs' deficiencies are fatal to their Section 2 claim. Accordingly, Plaintiffs' claims under Section 2 of the Sherman Act for conspiracy to monopolize shall also be dismissed.
Next, the Court addresses the claims of attempted monopolization and monopolization. In order to prevail on an attempt to monopolize claim under section 2, a plaintiff must prove that (1) the defendant has engaged in predatory or anti-competitive conduct with (2) a specific intent to monopolize and (3) a dangerous
Plaintiffs' complaints against AT & T concern allegations of exclusion from the Lower A Block 700 MHz "competitive playing field." Plaintiffs base such allegations on "three different but related types of conduct." This conduct, as quoted by Plaintiffs, is as follows:
The Court has already addressed many of Plaintiffs' allegations under its Section 1 analysis. First, even accepting all factual allegations as true, the Court concludes that Plaintiffs have failed to state a plausible antitrust violation as it relates to the creation of Band Class 17. In fact, the only factual evidence presented as it relates to AT & T's actions regarding the creation of Band Class 17 is that AT & T supported Motorola's position on the issue during the 3GPP standard setting process.
In Plaintiffs' amended complaint, it is alleged that AT & T's "motives in creating Band 17 have become even clearer in light of two recent statements of AT & T's Chief Executive Officer." The statement Plaintiffs rely on is included in Plaintiffs' complaint and is as follows:
Based on this statement, Plaintiffs maintain that AT & T sought to develop Band Class 17 in order to devalue the Lower A Block, and then purchase it for a lower price years later. Thus, Plaintiffs maintain that AT & T defrauded both the FCC and the 3GPP in order to make the Lower A Block spectrum available for purchase at a cheaper price. Such an allegation is based on layer after layer of factual speculation as to make the theory utterly implausible.
Such suggestions based on entirely unsupported factual predicates create only implausible speculations. Moreover, inserting into an amended complaint a factually unsupported yet possible "motive" on AT & T's part does not establish an antitrust violation.
As it relates to Plaintiffs' claims of exclusionary conduct, the Court has already addressed Plaintiffs' allegations regarding AT & T's alleged exclusive agreements with manufacturers. Other than providing a blanket assertion that such agreements exist and/or will exist at some unknown time in the future, Plaintiffs provide no facts plausibly supporting such an allegation. Plaintiffs' speculative claims concerning roaming access are also discussed in more detail above and they fall on the same footing as Plaintiffs' allegations related to exclusive dealing agreements. The complaint does not allege that AT & T has ever denied Cellular South the opportunity to roam, or that AT & T even has a duty under antitrust law — as opposed to a regulatory obligation from the FCC — to allow Cellular South to do so.
Plaintiffs' claims of monopolization, as distinguished from attempted monopolization, also fail. As noted, Section 2 of the Sherman Act declares that a firm shall not "monopolize" or "attempt to monopolize." It is settled law that this offense requires, in addition to the possession of monopoly power in the relevant market, "the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966); Trinko, 540 U.S. at 407, 124 S.Ct. 872. "The mere possession of monopoly power ... is not only not unlawful; it is an important element of the free-market system." Trinko, 540 U.S. at 407, 124 S.Ct. 872. As the Supreme Court has made clear, "[t]o safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct." Id. (emphasis in original). Plaintiffs' complaint is void of plausible factual allegations illustrating anticompetitive conduct on the part of AT & T. While Plaintiffs' complaint details, in 146 pages, its allegations and the background leading up to this action, Twombly does not require longer complaints. Twombly, instead, requires that a complaint state enough facts, as opposed to conclusions, so that relief is plausible. That is, Plaintiffs must "nudge[ ] their claims across the line from conceivable to plausible." Plaintiffs have failed to do so here.
For the foregoing reasons, Defendants' motions to dismiss for failure to state a
Id. at 1951.