Jacobs v. Tempur-Pedic Int'l Inc.

• Decision Date: 02 December 2010
• Docket Number: No. 08-12720,08-12720
• Parties: Benny JACOBS, Wanda Jacobs, Plaintiffs-Appellants, v. TEMPUR-PEDIC INTERNATIONAL, INC., Tempur-Pedic North America, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

626 F.3d 1327

78 Fed.R.Serv.3d 41

Benny JACOBS, Wanda Jacobs, Plaintiffs-Appellants,

v.TEMPUR-PEDIC INTERNATIONAL, INC., Tempur-Pedic North America, Inc., Defendants-Appellees.

No. 08-12720.

United States Court of Appeals,Eleventh Circuit.

Dec. 2, 2010.

James M. Wilson, Jr., Craig Gordon Harley, Chitwood, Harley, Harnes, LLP, Atlanta, GA, Robert Kirtley Finnell, The Finnell Firm, Rome, GA, Philip D. Bartz, Donna M. Donlon, Nicholas S. Sloey, McKenna, Long & Aldridge, LLP, Washington, DC, for Plaintiffs-Appellants.

William N. Berkowitz, Brandon L. Bigelow, Bingham McCutchen, LLP, Boston, MA, Jesse Anderson Davis Brinson, Askew, Berry, Seigler, Richardson & Davis, LLP, Rome, GA, for Defendants-Appellees.

Appeal from the United States District Court for the Northern District of Georgia.

Before TJOFLAT and EDMONDSON, Circuit Judges, and RYSKAMP,^* District Judge.

TJOFLAT, Circuit Judge:

Tempur-Pedic North America, Inc. ("TPX") manufactures visco-elastic Tempur-Pedic foam mattresses and sells them to consumers nationwide through distributors and its own website. These sales amount to eighty to ninety percent of the visco-elastic foam mattresses sold in the United States. ¹ TPX sets the minimum retail prices the distributors can charge for its mattresses; TPX adheres to those minimum prices in the sales it makes through its website.

Benny and Wanda Jacobs ("Jacobs")² purchased a Tempur-Pedic mattress from a TPX distributor in Rome, Georgia, at a price equal to or above the minimum price stated in the distributor's agreement with TPX. After purchasing the mattress, Jacobs brought this antitrust action in the Northern District of Georgia, Rome Division, against TPX under the Sherman Act,15 U.S.C. § 1.³ He claims that TPX created an "unreasonable restraint of trade" in violation of the Act in two ways: by enforcing the vertical retail price maintenance agreements with its distributors and by engaging with its distributors in horizontal price fixing. Jacobs seeks treble damages against TPX on behalf of all who have purchased Tempur-Pedic mattresses in the United States and an injunction against TPX's further implementation of the retail price maintenance agreements.⁴

The district court, on TPX's motion, dismissed Jacobs's complaint for failure to state a claim for relief⁵ and entered a final judgment for TPX. The court then denied Jacobs's motions to alter or amend the judgment⁶ or, alternatively, for leave to amend the complaint.⁷ Jacobs now appeals all three rulings. We affirm.

We review the district court's rulings in two parts. We first determine whether Jacobs's antitrust allegations were sufficient to withstand TPX's motion to dismiss. We then consider whether the district court should have granted either of Jacobs's alternative post-judgment motions.

I.

We begin our assessment of the sufficiency of Jacobs's antitrust claims by setting out the standard for reviewing a motion to dismiss an antitrust claim. The review is de novo. Spanish Broad. Sys. of Fla., Inc. v. Clear Channel Commc'ns, Inc., 376 F.3d 1065, 1070 (11th Cir.2004). As the Supreme Court instructed in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), in a case brought under § 1 of the Sherman Act, we must determine whether the complaint, in asserting a conspiracy or agreement in restraint of trade, contains "allegations plausibly suggesting (not merely consistent with) [a conspiracy or] agreement," that is, whether the complaint "possess[es] enough heft to show that thepleader is entitled to relief." Id. at 557, 127 S.Ct. at 1966 (quotations and alteration omitted). Plausibility is the key, as the "well-pled allegations must nudge the claim 'across the line from conceivable to plausible.' " Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1261 (11th Cir.2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. at 1974). And to nudge the claim across the line, the complaint must contain "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. at 1965. "[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 556 U.S. ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 555, 127 S.Ct. at 1964-65).

In conducting de novo review, we engage in the same exercise a district court does in assessing the sufficiency of an antitrust complaint. It is a two-step process:

[A] court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.

Id. at 1950.

In this case, therefore, after determining whether the complaint's averments are more than bare legal conclusions, we examine the complaint for a sufficient quantum of allegations to plausibly suggest that TPX agreed with its distributors to restrain trade in violation of the Sherman Act. We do this mindful that this is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id.

II.

Jacobs contends that the district court erred in two ways in dismissing the complaint. First, he argues that the complaint sufficiently alleged vertical resale price maintenance agreements between TPX and its distributors that were illegal under the rule of reason. Second, he argues that the complaint provided facts sufficient to establish horizontal price fixing by TPX and its distributors under the per se rule. We address these arguments in order.

A.

Section 1 of the Sherman Act makes unlawful "[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. Although the section's language seems automatically to prohibit any kind of concerted restraint of trade, the Supreme Court's interpretation of the Act indicates that many forms of concerted action are to be evaluated under a flexible, case-by-case standard: the so-called "rule of reason." See Standard Oil Co. v. United States, 221 U.S. 1, 58-62, 31 S.Ct. 502, 515-16, 55 L.Ed. 619 (1911) (adopting the rule of reason). Under the rule of reason, "the factfinder weighs all of the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition."Cont'l T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49, 97 S.Ct. 2549, 2557, 53 L.Ed.2d 568 (1977).⁸

By contrast, per se violations of § 1 of the Sherman Act are limited to a very small class of antitrust practices whose character is well understood and that almost always harm competition. Texaco Inc. v. Dagher, 547 U.S. 1, 5, 126 S.Ct. 1276, 1279, 164 L.Ed.2d 1 (2006); Sylvania, 433 U.S. at 50, 97 S.Ct. at 2557. Examples of such per se illegality include horizontal price fixing among competitors, group boycotts, and horizontal market division—business relationships that, in the courts' experience, virtually always stifle competition. See, e.g., United States v. Topco Assocs., Inc., 405 U.S. 596, 607-08, 92 S.Ct. 1126, 1133-34, 31 L.Ed.2d 515 (1972).

For many years, vertical resale price maintenance agreements, like the one alleged in Jacobs's complaint, were per se unlawful. Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U.S. 373, 405, 31 S.Ct. 376, 383, 55 L.Ed. 502 (1911) ("Nor can the manufacturer by rule and notice, in the absence of contract or statutory right, even though the restriction be known to purchasers, fix prices for future sales."), overruled by Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 907, 127 S.Ct. 2705, 2725, 168 L.Ed.2d 623 (2007). Even though Dr. Miles's reasoning rested on infirm economic rationales,⁹ the Supreme Court implicitlyupheld the per se illegality of vertical resale price maintenance agreements for nearly a century after Dr. Miles came down. See, e.g., Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761, 104 S.Ct. 1464, 1469, 79 L.Ed.2d 775 (1984); Sylvania, 433 U.S. at 51 n. 18, 97 S.Ct. at 2558 n. 18 ("The per se illegality of [vertical] price restrictions has been established firmly for many years ...."); cf. Bus. Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 735-36, 108 S.Ct. 1515, 1525, 99 L.Ed.2d 808 (1988) ("[E]conomic analysis supports the view, and no precedent opposes it, that a vertical restraint is not illegal per se unless it includes some agreement on price or price levels.").

But even as the Supreme Court nominally upheld the per se illegality of vertical resale price minimums, it relaxed per se rules on other vertical restraints in favor of rule of reason analysis. The Court, for example, declared maximum resale price maintenance agreements subject to the rule of reason. State Oil Co. v. Khan, 522 U.S. 3, 18-22, 118 S.Ct. 275, 283-85, 139 L.Ed.2d 199 (1997), overruling Albrecht v. Herald Co., 390 U.S. 145, 88 S.Ct. 869, 19 L.Ed.2d 998 (1968). The Court also declared non-price vertical restraints inappropriate for per se condemnation, applying instead the rule of reason. Sylvania, 433 U.S. at 57-58, 97 S.Ct. at 2561-62, overruling United States v. Arnold, Schwinn & Co., 388 U.S. 365, 87 S.Ct. 1856, 18 L.Ed.2d 1249 (1967). And the Court also made clear that it evaluates a manufacturer's termination of its agreement with an undesired discounting distributor under rule of reason analysis. Bus. Elecs., 485 U.S. at 727, 108 S.Ct. at 1521. Thus, by the time the Court decided Leegin, the jurisprudential foundations...