Alarmax Distribs., Inc. v. Honeywell Int'l, Inc.
| Decision Date | 04 May 2015 |
| Docket Number | Civil Action No. 14-01527 |
| Parties | ALARMAX DISTRIBUTORS, INC., Plaintiff, v. HONEYWELL INTERNATIONAL, INC., Defendant. |
| Court | U.S. District Court — Western District of Pennsylvania |
Plaintiff AlarMax Distributors, Inc. ("AlarMax" or "Plaintiff") initiated this action by filing a Complaint on November 6, 2014, seeking redress for the actions of Defendant Honeywell International, Inc. ("Honeywell" or "Defendant") which allegedly constitute breaches of two contracts entered into by the parties and violations of the Clayton Act, as amended by the Robinson-Patman Act, 15 U.S.C. § 13 (the "RPA"). (ECF No. 1). Pending before the Court is Honeywell's Motion to Dismiss. (ECF No. 18).
For the following reasons, it is respectfully recommended that Honeywell's Motion to Dismiss, ECF No. 18, be GRANTED in part and DENIED in part.
In considering a Rule 12(b)(6) motion, federal courts require notice pleading, as opposed to the heightened standard of fact pleading. Federal Rule of Civil Procedure 8(a)(2) requiresonly "'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the . . . claim is and the grounds on which it rests.'" Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).
Building upon the landmark United States Supreme Court decisions in Twombly and Ashcroft v. Iqbal, 556 U.S. 662 (2009), the United States Court of Appeals for the Third Circuit explained that a District Court must undertake the following three steps to determine the sufficiency of a complaint:
First, the court must "take note of the elements a plaintiff must plead to state a claim." Second, the court should identify allegations that, "because they are no more than conclusions, are not entitled to the assumption of truth." Third, "when there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief." This means that our inquiry is normally broken into three parts: (1) identifying the elements of the claim, (2) reviewing the complaint to strike conclusory allegations, and then (3) looking at the well-pleaded components of the complaint and evaluating whether all of the elements identified in part one of the inquiry are sufficiently alleged.
Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011) (quoting Iqbal, 556 U.S. at 675, 679) (internal alterations omitted). The third step of this sequential evaluation requires this Court to consider the specific nature of the claims presented and to determine whether the facts pled to substantiate the claims are sufficient to show a "plausible claim for relief." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). "'While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.'" Henry v. City of Erie, 728 F.3d 275, 280 (3d Cir. 2013) (quoting Iqbal, 556 U.S. at 679). This Court may not dismiss a complaint merely because it appears unlikely or improbable that Plaintiff can prove thefacts alleged or will ultimately prevail on the merits. Twombly, 550 U.S. at 563 n.8. Instead, this Court must ask whether the facts alleged raise a reasonable expectation that discovery will reveal evidence of the necessary elements. Id. at 556. Generally speaking, a complaint that provides adequate facts to establish "how, when, and where" will survive a motion to dismiss. Fowler, 578 F.3d at 212; see also Guirguis v. Movers Specialty Servs., Inc., 346 F. App'x. 774, 776 (3d Cir. 2009). In short, a motion to dismiss should not be granted if a party alleges facts, which could, if established at trial, entitle him/her to relief. Twombly, 550 U.S. at 563, n.8.
Given this general standard, it is important to note that "antitrust claims are not subject to a heightened standard of pleading." Mumford v. GNC Franchising LLC, 437 F. Supp. 2d 344, 348 (W.D. Pa. 2006) (citing Lum v. Bank of America, 361 F.3d 217, 220 (3d Cir. 2004)). To the contrary, the United States Court of Appeals for the Third Circuit has explained that district courts "should be extremely liberal in construing antitrust complaints." Knuth v. Erie-Crawford Dairy Coop. Ass'n, 395 F.2d 420, 423 (3d Cir. 1968) (). At least part of the rationale for this "liberal" approach is the recognition that "'the proof is largely in the hands of the alleged [violators],'" in antitrust cases. Hosp. Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738, 746 (1976) (quoting Poller v. Columbia Broadcasting, 368 U.S. 464, 473 (1962)). As such, "dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly." Id. Overall, the proponent of dismissing an antitrust complaint must meet a "concededly rigorous standard." Id.
According to the Complaint, AlarMax is a Pennsylvania corporation which has dealt in the wholesale distribution of electronic fire and security products1 for use in residential and commercial applications since 1990. (ECF No. 1, at ¶¶ 6, 10). Honeywell is a Fortune 100 diversified technology and manufacturing company incorporated in Delaware with a portfolio of products that includes a number of electronic fire and security products, such as those it markets under the names Fire-Lite, Silent Knight, and System Sensor. (ECF No. 1, at ¶¶ 13, 15, 22). In addition to its relevant manufacturing activities, Honeywell also operates ADI Global Distribution ("ADI"), the largest wholesale distributor of electronic fire and security products in the world. (ECF No. 1, at ¶¶ 7, 14). The electronic fire and security products distributed by AlarMax and ADI are manufactured by Honeywell and several other companies, such as Altronix, Wheelock, RCI, Ditek, Bosch, Flir, Edwards Signaling, Proficient Audio, Viking Electronics, and Arecont Vision. (ECF No. 1, at ¶ 84). AlarMax and ADI are direct competitors in the United States, each selling primarily to system installers, government entities, and schools. (ECF No. 1, at ¶¶ 12, 16).
In 2003 and 2004, AlarMax claims to have become aware of certain anti-competitive activities engaged in by Honeywell. (ECF No. 1, at ¶ 17). In particular, AlarMax asserts that Honeywell intended to terminate all third-party distribution of its own electronic fire and security products and was using its market power to extract unfair and discriminatory pricing terms from other manufacturers. (ECF No. 1, at ¶¶ 17-19). In response to these actions, AlarMax presenteda draft complaint to Honeywell on April 19, 2004, alleging multiple antitrust violations and several related state causes of action. (ECF No. 1, at ¶ 20; ECF No. 26-1, at p. 4). However, before litigation was formally initiated, the parties were able to negotiate a settlement on September 20, 2004, when they contemporaneously executed both a Settlement Agreement and a Supply Agreement. (ECF No. 1, at ¶ 21; ECF No. 26-1; ECF No. 26-2).
By executing the Settlement Agreement, Honeywell agreed to the following relevant terms. First, Section 4(b) requires Honeywell to continue to supply certain electronic fire products to AlarMax, including Fire-Lite, Silent Knight, and System Sensor products. (ECF No. 1, at ¶ 23; ECF No. 26-1, at p. 5). Further, AlarMax must "not be disadvantaged on the final purchase price (including all discounts, rebates, or any other incentive programs), and/or payment or warranty terms for electronic fire products as compared to other third party distributors in the same channel or ADI." (ECF No. 1, at ¶ 24; ECF No. 26-1, at p. 6).2 Second, concerning Honeywell's purchase of electronic fire and security products, Section 5(b) precludes Honeywell from "induc[ing] or knowingly accept[ing] more favorable price or payment terms, as compared to AlarMax, from non-Honeywell manufacturers." (ECF No. 1, at ¶ 26; ECF No. 26-1, at p. 7). Third, pursuant to Section 5(c), Honeywell must generally "not enter into exclusive sale or distribution agreements, or otherwise suggest, encourage or coerce exclusive dealings, with non-Honeywell manufacturers." (ECF No. 1, at ¶ 26; ECF No. 26-1, at pp. 7-8). Fourth, according to Section 5(d), Honeywell must not encourage other manufacturers to boycott AlarMax. (ECF No. 1, at ¶ 26; ECF No. 26-1, at p. 8). Finally, Section 5(f) prohibits Honeywellfrom pricing "packaged" products in such a way that "the pricing differential between the separate products and the packaged products . . . unlawfully coerces the package purchase." (ECF No. 26-1, at p. 9).
The scope of the Supply Agreement is limited to electronic security products to be supplied by Honeywell to AlarMax. (ECF No. 26-2, at p. 2). Similar to the provisions of the Settlement Agreement, Section 3.2 of the Supply Agreement necessitates that AlarMax receive "the lowest price and most advantageous terms afforded" to any of its competitors, including ADI, when purchasing electronic security products from Honeywell. (ECF No. 26-2, at p. 5). "Exhibit A," attached to the Supply Agreement, lists electronic security products previously or currently purchased by AlarMax and provides the discount percentage applicable to each. (ECF No. 26-2, at pp. 15-20). According to Section 3.1(b), the price of any electronic security products "identified by AlarMax" which are not already included in Exhibit A must "be negotiated in good faith by the parties." (ECF No. 1, at ¶ 30; ECF No. 26-2, at p. 5). Section 2.1 states that...
To continue reading
Request your trial