Apani Southwest, Inc. v. Coca-Cola Enterprises

• Decision Date: 08 January 2001
• Docket Number: No. CIV.A.5:00-CV-228-C.,CIV.A.5:00-CV-228-C.
• Citation: 128 F.Supp.2d 988
• Parties: APANI SOUTHWEST, INC., Plaintiff, v. COCA-COLA ENTERPRISES, INC., Defendant.
• Court: U.S. District Court — Northern District of Texas

128 F.Supp.2d 988

APANI SOUTHWEST, INC., Plaintiff, v. COCA-COLA ENTERPRISES, INC., Defendant.

No. CIV.A.5:00-CV-228-C.

United States District Court, N.D. Texas, Lubbock Division.

January 8, 2001.

Harold H. Pigg, Clifford, Field, Krier, Manning, Stone & Wilkerson, P.C., Lubbock, TX, for plaintiff.

William J. Wade and Matt D. Matzner, Crenshaw, Dupree & Milam, L.L.P., Lubbock, TX, Jerry L. Beane & Kay Lynn Brumbaugh, Strasburger & Price, L.L.P., Dallas, TX, for defendant.

ORDER

CUMMINGS, District Judge.

On this day the Court considered Defendant, Coca-Cola Enterprises, Inc.'s ("Coke") Motion to Dismiss, filed August 23, 2000. Plaintiff, Apani Southwest, Inc. ("Apani") filed a Response to the Motion to Dismiss on September 12, 2000. Coke filed a Reply to Apani's Response to the Motion to Dismiss on September 23, 2000. Apani submitted a letter to the Court in response to Coke's Reply to the Motion to Dismiss on October 17, 2000, which was not considered by the Court as leave was not granted to file a surreply and such letter was not in proper format for consideration by the Court. Also considered by the Court is Apani's Motion for Leave to Amend, filed October 27, 2000. Coke filed a Response to the Motion for Leave to Amend on November 13, 2000. After considering all of the relevant argument and evidence, the Court GRANTS Coke's Motion to Dismiss with regard to all of Apani's antitrust claims and DENIES Coke's Motion to Dismiss with regard to Apani's tortious-interference claim. The Court GRANTS Apani's Motion for Leave to Amend and orders Apani to show cause, on or before 9:00 a.m. on January 19, 2001, why its tortious-interference claim should not be dismissed for lack of jurisdiction.

I. BACKGROUND

Apani is a manufacturer of purified bottled water operating in and around the Lubbock, Texas area. Prior to the events in question Apani had developed a business relationship with the City of Lubbock ("the City") to supply private-label water to City facilities. On August 26, 1999, however, the City of Lubbock entered a contractual agreement with Coke to supply beverages to all City facilities and precluding the City from purchasing beverages from other parties, effectively eliminating the City's business relationship with Apani.

In response, Apani filed the instant suit alleging violations of § 3 of the Clayton Act, violations of the Texas Free Enterprise and Antitrust Act, and tortious interference with a business relationship. Coke subsequently filed the instant Motion to Dismiss.

II. STANDARD

A. Generally

Under Federal Rule of Civil Procedure 12(b)(6), motions to dismiss raise the defense of failure to state a claim upon which relief may be granted. This motion is appropriate when the defendant or counter-plaintiff attacks the complaint because it fails to state a legally cognizable claim. In other words, a motion to dismiss an action for failure to state a claim "admits the facts alleged in the complaint, but challenges plaintiff's rights to relief based upon those facts." Tel-Phonic Servs., Inc. v. TBS Int'l, Inc., 975 F.2d 1134, 1137 (5th Cir.1992).

While this motion is often filed before the first responsive pleadings of the defendant, it is not waived if it is not filed in the answer or pre-answer stage. FED. R. CIV. P. 12(h)(2).

The test for determining the sufficiency of a complaint under Rule 12(b)(6) was set out by the United States Supreme Court in Conley v. Gibson:

[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.

355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see also Grisham v. United States, 103 F.3d 24, 25-26 (5th Cir.1997).

The Conley test is a rigorous standard, but subsumed within it is the requirement that the plaintiff state its case with enough clarity to enable a court or an opposing party to determine whether a claim is sufficiently alleged. Elliott v. Foufas, 867 F.2d 877, 880 (5th Cir.1989).

In a Rule 12(b)(6) motion to dismiss, the allegations of the complaint must be taken as true. Grisham, 103 F.3d at 25. Further, the allegations in the complaint should be construed favorably to the pleader. Oppenheimer v. Prudential Securities, Inc., 94 F.3d 189, 194 (5th Cir. 1996). This requirement is consistent with the well-established policy that the plaintiff be given every opportunity to state a claim. Hitt v. City of Pasadena, 561 F.2d 606, 608 (5th Cir.1977).

B. Antitrust Market Definition

Where the plaintiff fails to define its proposed relevant market with reference to the rule of reasonable interchangeability and cross-elasticity of demand, or alleges a proposed relevant market that clearly does not encompass all interchangeable substitute products even when all factual inferences are granted in plaintiff's favor, the relevant market is legally insufficient and a motion to dismiss may be granted. See, e.g., Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 436 (3d Cir.1997)(affirming district court's dismissal of claim for failure to plead relevant market; proposed relevant market defined too narrowly); TV Communications Network, Inc. v. Turner Network Television, Inc., 964 F.2d 1022, 1025 (10th Cir.1992) (affirming district court's dismissal of claim for failure to plead a relevant market; proposed relevant market consisting of only one specific television channel defined too narrowly); Tower Air, Inc. v. Federal Exp. Corp., 956 F.Supp. 270 (E.D.N.Y.1996) ("Because a relevant market includes all products that are reasonably interchangeable, plaintiff's failure to define its market by reference to the rule of reasonable interchangeability is, standing alone, valid grounds for dismissal."); B.V. Optische Industrie De Oude Delft v. Hologic, Inc., 909 F.Supp. 162 (S.D.N.Y. 1995) (dismissal for failure to plead a valid relevant market; plaintiffs failed to define market in terms of reasonable interchangeability or explain rationale underlying narrow proposed market definition); Re-Alco Industries, Inc. v. Nat'l Center for Health Educ., Inc., 812 F.Supp. 387 (S.D.N.Y.1993) (dismissal for failure to plead a valid relevant market; plaintiff failed to allege that specific health education product was unique or explain why product was not part of the larger market for health education materials); E. & G. Gabriel v. Gabriel Bros., Inc., No. 93 Civ. 0894, 1994 WL 369147 (S.D.N.Y.1994) (dismissal for failure to plead valid relevant market; proposed relevant market legally insufficient because it clearly contained varied items with no cross-elasticity of demand).

III. DISCUSSION

A. Antitrust Violations

1. Clayton Act Generally

Section 3 of the Clayton Act ("the Act") makes it an offense to sell or lease a "commodity" on the "condition, agreement or understanding" that the purchaser or lessee refrain from dealing with the seller's or lessor's competitors, if the effect may be to substantially lessen competition or tend to create a monopoly. HOLMES, WILLIAM C., ANTITRUST LAW HANDBOOK § 4.02 (1999 ed.). It provides:

It shall be unlawful for any person engaged in commerce, in the course of such commerce, to lease or make a sale or contract for sale of goods, wares, merchandise, machinery, supplies, or other commodities, whether patented or unpatented, for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies, or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce.

15 U.S.C. § 14 (1997).

Private plaintiffs may enforce § 3 in the form of an injunction or through treble-damage actions for three times the amount of the injuries they sustain from a violation. HOLMES, WILLIAM C., ANTITRUST LAW HANDBOOK § 4.02 (1999 ed.). Two types of restrictions on competition may be challenged under § 3: tying restraints and exclusive-dealing arrangements. Tying restraints result from an arrangement where the availability of one commodity is conditioned upon purchase or rental of another commodity from the seller or upon the buyer's agreement not to deal with the seller's competitors in the tied item. Id. at § 4.02[2]. Exclusive dealing, in contrast, occurs when a seller agrees to sell its output of a commodity to a particular buyer, or when a buyer agrees to purchase its requirements of a commodity exclusively from a particular seller. Id. at § 4.02[3].

To prove a violation under § 3 of the Act, a plaintiff must show the following: (1) that the violator is engaged in interstate commerce and that the alleged unlawful act occurred in the course of such interstate commerce, (2) the violation involved a contract for sale, a sale, or a lease, (3) that the agreement is for goods, wares, merchandise, machinery, supplies or other tangible commodities, (4) that the agreement was conditioned or made on the understanding that the buyer or lessee will not use or deal in the goods of a competitor of the seller or lessor, (5) that the probable effect of the agreement is to substantially lessen competition or create a monopoly. KINTNER, EARL W., FEDERAL ANTITRUST LAW: VOLUME IV THE CLAYTON ACT SECTION 3; SECTION 7; MERGERS AND MARKETS § 32.7 (1984); Transource Int'l, Inc. v. Trinity Indus., Inc., 725 F.2d 274, 284 (5th Cir.1984).

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