NICHOLAS G. GARAUFIS, District Judge.
Plaintiff Solent Freight Services, Ltd. Inc. brought this action against Carlos Alberty, Omni Export Services, Inc. ("Omni"), (collectively, the "Omni Defendants"),
For the reasons stated below, Omni Defendants' motion is GRANTED.
For the purposes of contemplating Omni Defendants' motion to dismiss, the court accepts as true the following facts from Plaintiff's Amended Complaint. This antitrust action has been brought by Plaintiff, a freight forwarder, against Omni, a competitor freight forwarder. (See Am. Compl.) Plaintiff has also sued Carlos Alberty, Omni's principal; DelEx, Omni's New York agent; and John Khodov, DelEx's Director of Logistics. (See id. ¶¶ 2-8.) The relevant product market for the alleged antitrust violations is the "logistics and transportation of Hatching Eggs for export originating from the East Coast of the United States." (Id. at 16.)
Plaintiff is a New York corporation formed in 1994. (Id. ¶¶ 1, 22.) Plaintiff is in the business of "freight forwarding," which involves arranging logistics and transportation for the shipment of products, operating primarily out of the East Coast. (Id. ¶¶ 16, 22, 24.) This often includes negotiating with cargo shippers for favorable worldwide shipping rates for its clients.
Omni is a Florida corporation formed in 1995. (Id. ¶¶ 2, 23). Omni operates freight forwarding services for hatching eggs
In 2011, Plaintiff decided to start freight forwarding hatching eggs.
Plaintiff's claims stem from two of Omni's business dealings: (1) an arrangement between Omni and Morris Hatchery
Diane Alberty—Defendant Alberty's wife—works for the President of Morris. (Id. ¶ 31.) This relationship has allowed Morris to develop an arrangement with Omni wherein Omni gives Morris confidential shipping information
When Plaintiff entered the market, several small egg hatcheries approached it about its services and "expressed displeasure with Omni." (Id. ¶¶ 32-34.) The hatcheries complained that after they used Omni for shipping, their customers would receive calls from Morris. (Id. ¶ 34.) Plaintiff alleges that this arrangement is set up so that Omni can monopolize the market for freight forwarding of hatching eggs, and that it has resulted in artificially high prices for hatching eggs and the shipping of hatching eggs in the relevant product market. (Id.)
After recently entering into the market for shipping hatching eggs, Plaintiff offered its services to a customer and negotiated with KLM Cargo for favorable shipping rates. (Id. ¶¶ 35-37.) According to Plaintiff, this customer was a former customer of Omni's. (Id. ¶ 38.) KLM erroneously listed the shipping contents as flowers, rather than hatching eggs, but corrected the mistake before shipping. (Id. ¶ 42.) Plaintiff alleges that, at some point, Omni and Alberty were made aware that Plaintiff was "undercutting [Omni's] rates and undermining its price fixing and monopolistic conspiracy," and that as a consequence, Omni sought to preserve its monopoly by having KLM and other shippers increase the rates they offered to other freight forwarders for shipment of hatching eggs. (Id. ¶ 43-44.) Thereafter, KLM raised the rates almost six-fold on Plaintiff's new customer. (Id. ¶ 45.) Plaintiff avers that KLM's action was a direct result of Omni's efforts to preserve its monopoly. (Id.)
Shortly thereafter, on April 6, 2011, Defendant Alberty authored and sent an email on behalf of Omni to many of Plaintiff's contacts at airlines and shippers, including KLM. (Id. ¶ 46.) The email, reprinted in full in the Amended Complaint, advised the recipients that Plaintiff was trying to enter the business of freight forwarding hatching eggs, and was attempting to secure lower rates for its customers by misleading the shippers about the cargo they would be shipping. (Id. ¶ 47.) The email says of Plaintiff and Plaintiff's trade name entity "Eggsbyair," "[h]opefully you will make [it] more difficult for them to ship or just close your doors to them, they are up to no good and are lying to each of you in order to get you to move their cargo." (Id.) Khodov, on behalf of DelEx, forwarded Omni's email to several of Plaintiff's shipping contacts. (Id. ¶ 49.) Shortly after the contacts received the email, Plaintiff was "advised that certain cargo owners would no longer ship [Plaintiff's] cargo." (Id.)
Plaintiff brings six causes of action arising from the two business dealings described
Omni Defendants have moved to dismiss Plaintiff's Amended Complaint.
Omni Defendants argue that Plaintiff's antitrust claims all fail as a matter of law because Plaintiff lacks antitrust standing to allege harm to the hatching eggs market, and has failed to plead facts alleging harm to the market for freight forwarding of hatching eggs, as required to bring such antitrust claims. (See Omni Mem.) For the reasons explained below, the court agrees.
"To survive a motion to dismiss, a claim must contain sufficient factual matter, accepted as true, to `state a claim for relief that it plausible on its face.'"
To adequately plead an antitrust claim, a plaintiff must: "(1) define the relevant market, (2) allege an antitrust injury, and (3) allege conduct in violation of the antitrust laws." N.Y. Medscan LLC v. N.Y. Univ. Sch. of Med., 430 F.Supp.2d 140, 145 (S.D.N.Y.2006). In addition, a private plaintiff suing under federal antitrust laws must demonstrate antitrust standing, which is distinct from and additional to the constitutional standing requirement. Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117, 121 (2d Cir.2007); N.Y. Medscan LLC, 430 F.Supp.2d at 145-46.
Plaintiff's Amended Complaint alleges harm to two markets: hatching eggs market and the freight forwarding of hatching eggs market. (Pl. Mem. at 13.) Omni Defendants argue that Plaintiff, a freight forwarder, does not have standing to assert antitrust claims relating to the market for the production and sale of hatching eggs. (Omni Mem. at 15-16.) Plaintiff argues that it has standing to raise claims relating to the market for hatching eggs because it has been injured by Defendants' actions in that market.
It is well-settled that private plaintiffs bringing antitrust claims must show more than the fact that the defendants' conduct caused them injury—they must also show antitrust standing. Balaklaw v. Lovell, 14 F.3d 793, 797 n. 9 (2d Cir.1994). The factors relevant to a determination of whether the plaintiff has antitrust standing are: (1) injury in fact to plaintiff's business or property; (2) that is not remote from or duplicative of that sustained by a more directly injured party; (3) that qualifies as an "antitrust injury"; and (4) that translates into reasonably quantifiable damages. Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408, 437-48 (2d Cir.2005) (citations omitted).
In raising a claim of harm to the hatching eggs market, Plaintiff seeks only to vindicate its own monetary losses. (Am. Compl. at 16.) Therefore, awarding the requested relief to Plaintiff would in no way address or remedy the violation for those actually competing in the hatching eggs market. This indicates that Plaintiff has not suffered an antitrust injury, but has merely suffered damages. Cf. Id. at 440 (noting that the narrow scope of plaintiffs' requested injunctive relief would not address the alleged violation and concluding that this indicated that they had not suffered an antitrust injury). Therefore, Plaintiff has no standing to assert antitrust injuries suffered in the hatching egg market.
Plaintiff presents three different legal theories for how Defendants' conduct violates antitrust law: (1) that the agreement between Omni and Morris is an illegal agreement that restrains trade, that Omni has used the advantages it has gained from this agreement to squeeze competition out of the market, and that such activity constitutes a per se violation of Section 1 of the Sherman Act (the "per se violation claim") (see Am. Compl. ¶¶ 78-92); (2) that Omni Defendants' email to cargo shippers, and the shippers' subsequent increase in rates for other freight forwarders (including Plaintiff), constitutes an agreement unreasonably restraining trade violating Section 1 under a rule of reason/vertical restraint
Plaintiff's Amended Complaint alleges per se violations in: (1) the agreement between Omni and Morris, and (2) the agreements between Omni and other cargo shippers to raise prices for shipping. (See id. ¶¶ 78-92.) Plaintiff also argues that it has alleged elements of several different recognized per se violations, and thus has sufficiently alleged a per se violation. (Id. ¶ 9.) Omni Defendants argue that Plaintiff's per se claim must be dismissed because Plaintiff has not pleaded activity that falls within a category that courts consider to be per se violations of Section 1. (See Omni Mem. at 5-9.)
Section 1 of the Sherman Act prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States." 15 U.S.C. § 1. Alleging a violation of Section 1 generally requires demonstrating "a combination or other form of concerted action between two legally
Plaintiff argues that it has invoked the per se rule by alleging a tying agreement
Plaintiff also argues that it has invoked the per se rule by alleging a group
To the extent that Plaintiff argues it has alleged a horizontal agreement or group boycott between Omni and DelEx, the Amended Complaint does not have enough factual matter to suggest that an agreement was made. Cf. Twombly, 550 U.S. at 556-57, 127 S.Ct. 1955 (requiring more than mere allegations of parallel legal actions to plausibly suggest an illegal agreement). According to the Amended Complaint, DelEx was Omni Defendants' "New York agent," (Am. Compl. ¶ 4.), and there is no allegation that Omni and DelEx had any agreement. Indeed, the only fact relating to DelEx is that Khodov forwarded the email sent by Alberty. (Id. ¶¶ 48, 54.) These scant allegations fall short of allowing a reasonable inference that DelEx and Omni had a horizontal agreement to restrain trade.
In sum, because Plaintiff has failed to allege an antitrust claim that falls under the per se rule, Plaintiff's per se claim must be dismissed.
Plaintiff alleges that Defendants' actions are illegal under a rule of reason analysis of Section 1 because they have "illegally restrained trade," and "prices have been adversely affected, are artificially high and competitors have been prevented from entering the relevant market." (See id. ¶¶ 93-101.) Omni Defendants argue that Plaintiff's' rule of reason claim must be dismissed because Plaintiff failed to plead an actual adverse effect on competition in the relevant product market. (Omni Mem. 10-13.)
The rule of reason is so-called because it requires a court to analyze a Section 1 claim by determining whether the alleged restraint is "unreasonable because its anticompetitive effects outweigh its procompetitive effects." E & L Consulting, Ltd., 472 F.3d at 29 (citation omitted). Under the rule of reason analysis, however, a plaintiff is obligated to "demonstrate, as a threshold matter, `that the challenged action has had an actual adverse effect on competition as a whole in the relevant market.'" George Haug Co., 148 F.3d at 139 (quoting Capital Imaging v. Mohawk Valley Med. Assoc., 996 F.2d 537, 543 (2d Cir.1993)) (emphasis in original). The fact that a plaintiff has been harmed as an individual competitor will not suffice. Id.
Plaintiff alleges that Defendants' antitrust violations have harmed two markets: "[t]he first injured market is the hatching egg market and the second is the transportation of hatching eggs market." (Pl. Mem. at 13.) As discussed above, Plaintiff does not have standing to allege antitrust injury to the egg hatching market. See George Haug Co., 148 F.3d at 139.
According to Plaintiff, the harm to the freight forwarding of hatching eggs market is evidenced by the fact that Omni maintains 75% of the market, and that as a result Omni has been able to raise prices for the shipping of hatching eggs and take steps to keep other competitors out of the market. (Id. ¶¶ 26, 31). Plaintiff makes conclusory allegations that Omni accomplished its position through "unlawful combination, conspiracy and deceitful practices to restrain and monopolize interstate trade and commerce," and Defendants' actions "have had a substantial, actual, adverse and unreasonable effect on competition as a whole" and "do not have any pro-competitive redeeming virtues." (Id. ¶¶ 30, 97-98.) After removing such allegations, however, the remaining facts demonstrate merely that: (1) there have been two recent incidents wherein shippers raised prices on Plaintiff or refused to do business with it; (2) Omni sent an email that harmed Plaintiff's reputation and caused it to lose business; (3) Morris and Omni have a vertical agreement that Morris customers will use Omni's services; and (4) Omni has a large share of the market (Id. ¶¶ 31, 36-45, 93-101.) These factual allegations are insufficient to demonstrate harm to competition.
Cargo shippers raising prices on Plaintiff does not establish injury to competition on the market.
The fact that Omni harmed Plaintiff's business by giving information—whether truthful or not—that caused cargo shippers not to deal with Plaintiff does not establish harm to competition in the marketplace. A defendant's alleged inducement to prevent dealings with one of its competitors—even if it may amount to tortious conduct—does not establish that the defendant's conduct is anticompetitive in purpose or effect. See Oreck Corp. v. Whirlpool Corp., 579 F.2d 126, 133-34 (2d
Plaintiff also argues that it could successfully plead a rule of reason claim by alleging that Defendants possess market power in the relevant market, as demonstrated through Omni's 75% control of the market. (Pl. Mem. at 11 (citing Tops Mkts., Inc. v. Quality Mkts., Inc., 142 F.3d 90 (2d Cir.1998); Wellnx Life Scis. Inc. v. Iovate Health Scis. Research Inc., 516 F.Supp.2d 270 (S.D.N.Y.2007)).) Plaintiff's allegation that Omni has 75% of the relevant market is not itself a sufficient showing of market power to discharge the requirement that Plaintiff show harm to the market. Tops Mkts., 142 F.3d at 97 ("A plaintiff seeking to use market power as a proxy for adverse effect must show market power, plus some other ground for believing that the challenged behavior could harm competition in the market. . . ."); Wellnx Life Scis., 516 F.Supp.2d at 294 (dismissing a plaintiff's complaint for failure to state a claim where the plaintiff demonstrated market share but no other ground for believing that the challenged behavior could harm the market). Here, besides Plaintiff's conclusory allegations of harm to the market, there is no other ground to believe that Omni's market share constitutes market power.
Besides Plaintiff and Omni, there are four other freight forwarders in the market. (Am. Compl. ¶ 26.) Even though Plaintiff alleges that customers of Morris are "forced" to use Omni's services (id. ¶ 31), there are no facts in the Amended Complaint suggesting that these purchasers are not free to simply choose another hatching eggs provider, and thus use a competing freight forwarder. In other words, nothing in the Amended Complaint suggests that Omni had market power such that it could unilaterally raise prices for freight forwarding to supracompetitive levels without losing its business. See Wellnx Life Scis., 516 F.Supp.2d at 294. Therefore, Plaintiff has not made a market power showing sufficient to discharge its obligation to show harm to the competition in the market. See Tops Mkts., Inc., 142 F.3d at 97.
After disregarding Plaintiff's conclusory allegations of injury to the freight forwarding market, Plaintiff's factual allegations fail to provide a basis for the court to reasonably infer that there was an injury to competition in the market. Accordingly Plaintiff's rule of reason claim must be dismissed.
Plaintiff alleges that Defendants violated Section 2 of the Sherman Act, which provides that a person shall not "monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize. . . ." 15 U.S.C. § 2. A monopoly claim, just as a rule of reason claim, must show harm to competition in the relevant market.
Plaintiff has not moved for leave to amend its antitrust claims in the event that the court finds them lacking, and has already amended its Complaint once before. Thus, it is within the court's discretion to dismiss Plaintiff's claims without giving it leave to amend its complaint to cure the pleading defects. Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1132 (2d Cir. 1994).
Even if Plaintiff indicated that it had additional facts it could allege to cure its pleading deficiencies, the court concludes that amendment would be futile. In addition to the numerous specific pleading failures explained above, the actual factual occurrences Plaintiff complains of—namely, the email from Omni to cargo shippers—are simply not the type of activities that antitrust laws prohibit. See Oreck Corp., 579 F.2d at 133-34; see also Habitat, 2009 WL 803380, at *10. Accordingly, the court declines to give Plaintiff leave to amend its federal antitrust claims, and they are dismissed with prejudice.
Omni Defendants move the court to dismiss Plaintiff's federal antitrust claims for failure to state a claim, and to dismiss the remaining state law claims for lack of subject matter jurisdiction. (See Omni Mot. to Dismiss.) Plaintiff's Amended Complaint pleads that this court has original subject matter jurisdiction over the federal antitrust claims and supplemental jurisdiction over the remaining state law claims of defamation, tortious interference, and civil conspiracy. (Am. Compl. ¶¶ 9-12 (citing 28 U.S.C. §§ 1331, 1337(a)).) Because the court has dismissed all of the claims over which it had original jurisdiction and the resolution of the state law claims would require resolving additional legal and factual issues, it declines to exercise supplemental jurisdiction over Plaintiff's remaining state law claims.
For the reasons explained above, Plaintiff's federal antitrust claims fail as a matter of law and are DISMISSED with prejudice. The court declines to exercise supplemental jurisdiction over Plaintiff's remaining state law claims, and they are DISMISSED without prejudice. The Clerk of the Court is directed to close this case.
SO ORDERED.