711 F.3d 68 (2nd Cir. 2013), 11-1111-cv, Gatt Communications, Inc. v. PMC Associates, L.L.C.
|Citation:||711 F.3d 68|
|Opinion Judge:||SUSAN L. CARNEY, Circuit Judge:|
|Party Name:||GATT COMMUNICATIONS, INC., Plaintiff-Appellant, v. PMC ASSOCIATES, L.L.C., dba PMC Associates, PMC Associates, Inc., dba PMC Associates, Phillip M. Casciano Associates, Inc., dba PMC Associates, Phillip M. Casciano, Bryan Casciano, Thomas Wineland, Vesel Radivic, Defendants-Appellees, John Doe, Henry Hoe, Richard Roe, Defendants.|
|Attorney:||Karen F. Neuwirth, Law Office of Martin S. Rapaport, New York, New York, for Plaintiff-Appellant Gatt Communications, Inc. Michael J. Hahn (Kristin A. Muir, on the brief), Lowenstein Sandler PC, New York, NY, for Defendants-Appellees Philip M. Casciano Associates, Inc., DBA PMC Associates, Philip...|
|Judge Panel:||Before: WESLEY, CARNEY, Circuit Judges, and CEDARBAUM, District Judge. WESLEY, Circuit Judge, concurring:|
|Case Date:||February 14, 2013|
|Court:||United States Courts of Appeals, Court of Appeals for the Second Circuit|
Argued: Feb. 6, 2012.
[Copyrighted Material Omitted]
This case involves an alleged bid-rigging scheme that sought to defraud various New York State and City government agencies in connection with the purchase by those agencies of a particular brand of mobile radio. Plaintiff-Appellant Gatt Communications, Inc. (" Gatt" ), an admitted past participant in the purported scheme, seeks to recover damages from alleged co-conspirators for losses arising from the termination of Gatt's at-will distribution contract for those radios. Gatt's federal and state antitrust claims arise under the Sherman Act, 15 U.S.C. § 1, and the Donnelly Act, N.Y. Gen. Bus. Law § 340; its other claims sound in New York common law. The district court (Deborah A. Batts, Judge ) dismissed the complaint for failure to state a claim. Gatt Commc'ns, Inc. v. PMC Assocs., L.L.C., No. 10 Civ. 8, 2011 WL 1044898 (S.D.N.Y. Mar. 10, 2011). We conclude that Gatt lacks antitrust standing to pursue its antitrust claims and that its common law claims were properly dismissed as a matter of law. We therefore AFFIRM the district court's dismissal of Gatt's complaint.
As alleged in Gatt's amended complaint and the affidavit of Pietro Gattini, Gatt's owner and president, the relevant facts are as follows.2
A. Factual Background
Gatt buys, markets, and sells commercial land mobile radios in New York State. Vertex Standard USA, Inc. (" Vertex" ), which is not a party to this action, manufactures and distributes the radios that are the subject of this dispute, and from 2005 through 2008, Defendant-Appellee Thomas Wineland worked for Vertex as its Vice President of Sales and Marketing. Defendant-Appellee PMC Associates, Inc. (" PMC" ) is both a dealer of Vertex products and Vertex's sales representative in New York State.3
In May 2002, Gatt and Vertex entered into an agreement (the " Dealer Agreement" or the " Agreement" ) pursuant to which Gatt became a licensed dealer of Vertex radios and equipment. The Dealer Agreement was subject to termination by either party without cause on thirty days' written notice. 4 In connection with the Agreement, Vertex advised Gatt that PMC, as Vertex's sales representative in New York, would orchestrate and support Gatt's efforts to sell Vertex products. Vertex instructed Gatt to follow PMC's directions and " to keep PMC closely informed of all of Gatt's sales efforts and progress in contacting, cultivating, developing and ... selling Vertex branded radios" to potential customers. Am. Compl. ¶¶ 36-37. Vertex explicitly warned Gatt that failure to cooperate with PMC could result in termination of the Dealer Agreement.
Between 2002 and 2007, various New York City and State government agencies purchased significant quantities of Vertex radios for security and other communication purposes. These agencies often made their purchases by soliciting bids from Vertex dealers. In December 2006, PMC and New York State's Procurement Services Group entered into a contract (the " New York Catalog Contract" ) that " set the price at which any [New York government] agency could buy each particular Vertex radio model if such agency did not want to conduct a bidding process." Am. Compl. ¶ 49-50. The New York Catalog Contract thus set a maximum price for Vertex products, but left state agencies free to solicit bids from Vertex dealers with the aim of securing a lower price. PMC, however, forbade Vertex dealers from selling to government agencies at prices below those listed in the New York Catalog Contract. At least six Vertex dealers in addition to Gatt and PMC had both Vertex's contractual permission and the practical wherewithal to submit (and fulfill) bids in response to solicitations by local agencies.
Gatt alleges that PMC and Wineland (acting for Vertex) orchestrated a " bid-rigging" or " bid rotation" scheme between at least 2005 and 2007. The plan called for PMC to determine in advance which Vertex dealer would submit the lowest (and, they reasonably expected, winning) bid for each government contract involving the purchase and sale of Vertex products. At PMC's direction, the designated Vertex dealer would then submit a bid at a price set by PMC. The remaining dealers either would refrain from bidding or submit artificially inflated " dummy quotations" for the contract. The alleged scheme thus maintained the superficial appearance of a competitive bidding process, while ensuring the outcome desired by PMC and Vertex. If a Vertex dealer did not comply with the sham bidding process, however, PMC " could and would cause" Vertex to terminate that dealer's license. Id. ¶ 53. Gatt alleges that Vertex knew that PMC was " organizing, arranging and orchestrating quotations" and " supported and encouraged such unlawful activity." Id. ¶ 156.
Gatt admits that it participated in the scheme at least from September 2005 to May 2007. On at least five occasions in that period, Gatt submitted artificially-inflated bids to various New York government agencies at PMC's request, thereby helping to steer contracts to the predetermined bid-winning Vertex dealer, which— as it happened— was usually PMC itself. In addition, in April 2007, PMC convinced Gatt to refrain from bidding on a particular government contract by promising that once the contract had been awarded to PMC, PMC would hire Gatt as the principal subcontractor on the project. Gatt alleges that it went along with the scheme out of fear that its Vertex dealership license would otherwise be terminated.
Gatt profited from the scheme. Indeed, Gatt estimates that it was " one of the most productive Vertex dealers in the United States" by volume of sales. Id. ¶ 35. It acknowledges obtaining more than one hundred contracts because of the collusive bidding scheme. Gattini Aff. ¶ 28. For instance, Gatt often responded to bid solicitations from the New York City Department of Education, which required a minimum of three bidders before it would award a contract. Each time Gatt intended to bid on a Department of Education contract, it first faxed a copy of its bid to PMC, and PMC arranged for other Vertex dealers to submit sham, higher bids, all but guaranteeing that Gatt would be awarded the contract if the Department chose to purchase Vertex radios.5
Although Gatt actively participated in and benefited from the scheme for at least two years, by the fall of 2007, it had begun to feel that PMC had " abused" its relationship with Gatt. Am. Compl. ¶ 123. Gatt had also become frustrated with the share of government contracts allocated to it under the scheme, especially by comparison with the higher-value contracts that PMC kept for itself. See Gattini Aff. ¶ 79 (" Gatt won some contracts under the [bid-rigging] scheme[, but] all the big contracts were being taken by PMC and [Gatt] wanted ... to become a significant business." ). Accordingly, in August 2007, when the New York City Transit Authority requested bids for the purchase of 1,200 Vertex radios and related equipment— a contract worth in excess of $1 million in revenues to the successful bidder— Gatt broke ranks and independently set and submitted a quotation, despite PMC's instruction to the contrary. In September 2007, the Transit Authority informed Gatt that it was the lowest bidder and likely would win the contract.
When PMC learned of Gatt's rogue bid, however, it reported to Wineland that Gatt was a " troublemaker" and recommended that Vertex terminate Gatt's Dealer Agreement. Am. Compl. ¶ 128-129. PMC also offered Gatt $40,000 to withdraw its Transit Authority bid. When Gatt complained to Wineland about PMC's conduct, Wineland advised Gatt to accept PMC's $40,000 offer, advice that Gatt rejected.
Gatt soon received a letter from Wineland dated October 22, 2007, giving notice that Vertex had exercised its " option" to terminate Gatt's Vertex dealership, effective thirty days later. On October 30,
2007, the Transit Authority sought new bids for the contract after realizing that its original bid request contained technical errors. No longer authorized to sell Vertex products, Gatt could not rebid. PMC eventually won the contract.
B. Procedural History
In January 2010, Gatt filed this action against PMC and others (but not Vertex) in the United States District Court for the Southern District of New York. In its amended complaint, Gatt sought damages for defendants' alleged violations, through the bid-rigging scheme, of the Sherman Act, 15 U.S.C. § 1; the Donnelly Act, N.Y. Gen. Bus. Law § 340; and the Racketeer Influenced and Corrupt Organizations Act (" RICO" ), 18 U.S.C. § 1961 et seq. The amended complaint also asserted New York common law claims for tortious interference with...
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