Big River Indus., Inc. v. Headwaters Res., Inc.

• Decision Date: 11 September 2013
• Docket Number: Civil Action No. 13–212–JJB.
• Citation: 971 F.Supp.2d 609
• Parties: BIG RIVER INDUSTRIES, INC. v. HEADWATERS RESOURCES, INC.
• Court: U.S. District Court — Middle District of Louisiana

971 F.Supp.2d 609

BIG RIVER INDUSTRIES, INC.

v.HEADWATERS RESOURCES, INC.

Civil Action No. 13–212–JJB.

United States District Court, M.D. Louisiana.

Sept. 11, 2013.

Brent Paul Frederick, Danielle Nicole Goren, Michael T. Beckers, Dodson, Hooks & Frederick, APLC, Baton Rouge, LA, for Big River Industries, Inc.

Christine Lipsey, Edgar Stewart Spielman, Kimberly D. Higginbotham, McGlinchey Stafford, PLLC, Baton Rouge, LA, Michael L. Sibarium, Pillsbury Winthrop Shaw Pittman LLP, Washington, DC, for Headwaters Resources, Inc.

RULING ON DEFENDANT'S MOTION TO DISMISS

JAMES J. BRADY, District Judge.

This matter is before the Court on a Motion to Dismiss (doc. 10–1) pursuant to Federal Rule of Civil Procedure 12(b)(6), filed by Defendant, Headwaters Resources, Inc. (“Headwaters”). Plaintiff, Big River Industries, Inc. (“BRI”), has filed an Opposition (doc. 14), to which the Defendant has filed a Reply (doc. 17). BRI then filed a Sur-reply (doc. 20). In Plaintiff's Opposition, BRI has argued the sufficiency of its claim, and, alternatively, requested leave to amend any allegations that this Court deems insufficient. Oral argument is not necessary. The Court's jurisdiction exists pursuant to 28 U.S.C. § 1331 and 28 U.S.C. § 1367 pendent jurisdiction as to Plaintiff's state law claims. For the reasons stated herein, the Defendant's Motion to Dismiss (doc. 10–1) is DENIED and the Plaintiff's request for leave to amend (doc. 14 at 28–30) is GRANTED.

I. Background

BRI brought this action pursuant to the Sherman Act, 15 U.S.C. §§ 1 and 2, the Robinson–Patman Act (“RPA”), 15 U.S.C. § 13, and parallel Louisiana state laws, La.Rev.Stat. Ann. §§ 51: 121, 122, 123, and 137.

Defendant's Motion to Dismiss is brought on the following grounds: (1) BRI's claims are insufficiently pled, (2) BRI fails to state a predatory pricing claim because the allegations inadequately address the relevant market(s), market power, and barriers to entry, (3) BRI cannot establish below-cost pricing, (4) BRI fails to allege that Headwaters conspired to restrain trade and to attempt monopolization through collusion with Louisiana Generating, LLC (“LaGen”), (5) BRI has not alleged the requisite elements of a civil price discrimination claim and has no other right to action under the Clayton Act, and (6) BRI's state law claims fail for the same reasons that the Sherman Act claims fail and because such claims are barred by Louisiana's applicable one-year liberative prescription period under La. C.C. art. 3492.

The following facts are from the Complaint (doc. 1) and are accepted as true for the purposes of this motion. See Bass v. Stryker Corp., 669 F.3d 501, 507 (5th Cir.2012). BRI initially entered into an Ash Marketing Agreement (“AMA”) with Cajun Electric Power Cooperative, Inc. (“Cajun”) on July 24, 1979 to develop a market for fly ash to be produced at the Big Cajun II power station in New Roads, Louisiana. (Doc. 1, ¶ VI). Subsequent marketing agreements gave BRI an exclusive right to market Big Cajun II fly ash and a right-of-first-refusal of future marketing contracts. (Doc. 1, ¶ VII). In 2000, a bankruptcy court approved the assignment of the existing marketing agreement from Cajun to LaGen. (Doc. 1, ¶ VIII). A year later, BRI and LaGen entered into an amended AMA which extended the existing agreement until the end of 2008. (Doc. 1, ¶ IX). Before the extended marketing period expired, Headwaters contacted LaGen seeking to replace BRI as the exclusive marketer of Big Cajun II fly ash. (Doc. 1, ¶ X). During discussions with LaGen on August 21, 2007, Headwaters stated, in an unidentified email to LaGen, that an exclusive agreement between the two would place Headwaters in a lucrative marketing position, allowing it to demand a higher price for fly ash in the “I–10 corridor”.¹ (Doc. 1, ¶ XI). The “I–10 corridor,” one of the largest commercial markets in the United States, contains no substitute for fly ash and most of the federal and state construction projects continuously arising therein require its use. (Doc. 1, ¶ XII).

While negotiating with Headwaters, LaGen issued a request for proposals (“RFP”) for a new fly ash marketing contract with an anticipated award date of November 18, 2008 and commencement date of January 1, 2009. (Doc. 1, ¶ XIII). Although BRI had a right-of-first-refusal, LaGen, at Headwaters' insistence, required BRI to submit a proposal in order to exercise that right. (Doc. 1, ¶ XIV). Three entities submitted proposals (Headwaters, BRI, and Charah, Inc.), and LaGen, deeming the latter non-competitive, only considered the proposals of Headwaters and BRI. (Doc. 1, ¶ XV). BRI submitted the most competitive bid, but on December 9, 2008, Headwaters “clarified and offered” a new proposal, which LaGen considered in violation of the RFP Instructions to Proposers. (Doc. 1, ¶ XVI). On December 15, 2008, LaGen notified BRI of Headwaters' latest proposal and informed BRI that it would be required to match. Id. Despite BRI eventually agreeing to match Headwaters' latest proposal, LaGen continued to negotiate with Headwaters, receiving another draft Exclusive Marketing Agreement (“EMA”) on January 8, 2009. (Doc. 1, ¶ XVIII). Four days later, after BRI matched the proposal, Headwaters submitted another offer, which BRI ultimately matched on January 29, 2009. (Doc. 1, ¶ XVIII(2)). ² This agreement contained terms proposed by Headwaters that were significantly different from the terms proposed by BRI. Id.

BRI was unable to comply with the terms of the marketing agreement and eventually defaulted on February 10, 2010. (Doc. 1, ¶ XX). BRI, desiring to try and continue to operate under the agreement despite default, requested relief that LaGen later refused. (Doc. XXI). Thereafter, BRI informed LaGen that it would consider the EMA's original terms terminated as of January 21, 2011 unless LaGen issued a new EMA to BRI. (Doc. 1, ¶ XXII). LaGen responded by accepting BRI's “notice of termination,” rather than by issuing a new EMA. Id. Headwaters began marketing fly ash produced at Big Cajun II on January 22, 2011 and subsequently increased the price of fly ash between February 15, 2011 and September 30, 2011. During this time period, the price of fly ash increased from $17.00 per ton to $26.00 per ton, despite there being a national surplus of fly ash and a concomitant decline in demand nationwide. (Doc. 1, ¶ XXV).

II. Legal Standard

A complaint may be dismissed for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). When reviewing the complaint, the court must accept all well-pleaded facts in the complaint as true. C.C. Port, Ltd. v. Davis–Penn Mortg. Co., 61 F.3d 288, 289 (5th Cir.1995). Additionally, a reviewing court must confine its analysis to the allegations made in the complaint and its attachments. Hale v. King, 642 F.3d 492, 498 (5th Cir.2011). In order to survive a motion to dismiss, the complaint must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). While the plaintiff is not required to prove its entire case at this preliminary stage of litigation, it must allege sufficient factual matter for the court to determine whether or not the plaintiff's claim has crossed the line from speculative to plausible. Ashcroft v. Iqbal, 556 U.S. 662, 680, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955).

III. Discussion

BRI claims that the Defendant conspired with LaGen to monopolize, and then successfully monopolized, the market for fly ash in the I–10 corridor in violation of §§ 1 and 2 of the Sherman Act and the RPA. To support these claims, BRI alleges that the Defendant engaged in anticompetitive conduct including predatory pricing, collusive exclusive dealing, and price discrimination. Since the standards applicable under these acts are distinct, these claims will be addressed individually in turn.

A. Monopolization Under Section 2 of the Sherman Act

Section 2 of the Sherman Act applies to unilateral firm activity. 15 U.S.C. § 2. Specifically, it proscribes conduct that would monopolize, attempt to monopolize, or conspire to monopolize the relevant market. Id. To state a claim for monopolization, the plaintiff must allege that the defendant: (1) possesses monopoly power in the relevant market and (2) willfully acquired or maintained that power. Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 481, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992). To state a claim for attempted monopolization, the plaintiff must allege that: (1) the defendant has engaged in predatory or anticompetitive conduct, (2) the defendant had a specific intent to monopolize, and (3) there existed a dangerous probability that the defendant would achieve monopoly power in the relevant market. Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993). Finally, to state a claim for conspiracy to monopolize, the plaintiff must allege that: (1) the defendant had the specific intent to monopolize, (2) a combination or conspiracy to monopolize existed, (3) there was an overt act in furtherance of the combination or conspiracy, and (4) there was an effect upon a substantial portion of interstate commerce. Stewart Glass & Mirror, Inc. v. U.S. Auto Glass Disc. Centers, Inc., 200 F.3d 307, 316 (5th Cir.2000).

The measure of proof for each claim is distinct. See generally Vaughn Medical Equipment Repair Service, L.L.C. v. Jordan Reses Supply Co., 2010 WL 3488244, at *9–10 (E.D.La. Aug. 26, 2010). That said, all of the claims will require an analysis of the relevant market and the possession of, or possibility to acquire, market power.³ Therefore, the Court will evaluate BRI's claims in light of market definition and market power before addressing the individual elements of each claim.

a. Market Definition

The relevant market is determined by...