CVB, Inc. v. Corsicana Mattress Co.

Decision Date23 May 2022
Docket NumberCase No. 1:20-CV-00144-DBB
Citation604 F.Supp.3d 1264
Parties CVB, INC., Plaintiff, v. CORSICANA MATTRESS COMPANY, Elite Comfort Solutions, Inc., Future Foam, Inc., FXI Holdings, Inc., Leggett & Platt, Inc., Serta Simmons Bedding, LLC, Tempur Sealy International, Inc., and Brooklyn Bedding, Inc., Defendants.
CourtU.S. District Court — District of Utah

Andrew John Rudowitz, Sarah O'Laughlin Kulik, Duane Morris LLP, Philadelphia, PA, Jeffrey D. Steed, CVB Inc., Logan, UT, Paul A. Rigali, Robert C. O'Brien, Larson LLP, Los Angeles, CA, for Plaintiff.

MEMORANDUM DECISION AND ORDER GRANTING [72] DEFENDANTSMOTION TO DISMISS

David Barlow, United States District Judge

Before the court is DefendantsMotion to Dismiss the Amended Complaint (Motion).1 Having considered the briefing, the record, and the relevant law, the court concludes the Motion may be resolved without oral argument.2 For the reasons discussed, the Motion is granted.

BACKGROUND

As many of the allegations will be addressed in detail throughout this order, the court provides a chronological and procedural summary of the allegations in the Amended Complaint. CVB filed its original complaint against eight competitors on October 28, 2020.3 The Defendants moved to dismiss the complaint on December 11, 2020.4 On September 15, 2021, the court granted the motion to dismiss and permitted CVB to seek leave to file an amended complaint.5 CVB filed the Amended Complaint on December 15, 2021.6

A majority of the underlying claims center on two antidumping petitions filed by Defendants before the Department of Commerce (Commerce) and the U.S. International Trade Commission (ITC). CVB brings eight claims against Defendants: (1) Fraudulent Petitioning in Violation of Section 1 of the Sherman Act; (2) Monopolization in Violation of Section 2 of the Sherman Act; (3) Monopoly Leveraging in Violation of Section 2 of the Sherman Act; (4) Conspiracy to Monopolize in Violation of Sections 1 & 2 of the Sherman Act; (5) Violation of Section 43(a) of the Lanham Act; (6) Violation of the Utah Antitrust Act; (7) Intentional Interference with Prospective Economic Advantage; and (8) Defamation.

Defendants filed the First Petition on September 18, 2018, alleging that mattress imports from China were being sold, or were likely to be sold, at less than fair market value ("dumped"), materially injuring the domestic industry.7 The agencies made preliminary determinations on the First Petition.8 On October 19, 2019, Commerce issued its Final Determination finding that mattresses from China had been sold, or were likely to be sold, at less than fair value.9 On December 9, 2019, the ITC issued its Final Determination concluding that the domestic mattress industry had been materially injured by imports from China.10

On March 31, 2020, Defendants filed the Second Petition alleging that mattress imports from seven countries were being dumped, materially injuring the domestic market.11 The ITC and Commerce issued preliminary determinations.12 Commerce issued its Final Determinations on March 25, 2021, concluding that mattresses from the relevant countries had been sold, or were likely to be sold, at less than fair value.13 On or about May 10, 2021, the ITC issued its Final Determination concluding that the domestic industry was materially injured by imports from the relevant countries.14 Also on or about May 10, 2021, Commerce amended its Final Affirmative Determination as to mattresses from Cambodia, still finding dumping but correcting "two ministerial errors in the final estimated weighted-average dumping margin."15

In addition to claims based on the two foregoing petitions, the Amended Complaint further alleges that the Defendants conspired to make false and misleading public statements to disrupt competition and engaged in anticompetitive conduct that was unrelated to the filing of the two petitions including issuing press releases, engaged in price fixing, interfered with CVB's business relationships, and falsely advertised products as "Made in America."16 During the pendency of this litigation, CVB filed a complaint with the United States Court of International Trade seeking judicial review of the ITC's Final Determination on the Second Petition.17

STANDARD

The court accepts "as true the well-pleaded (‘that is, plausible, non-conclusory, and non-speculative’) facts alleged in the complaint, unless they are controverted by sworn statements"18 and views them in the light most favorable to the plaintiff.19 To survive a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ "20 This standard requires a complaint to "permit the court to determine whether the allegations, if proven, will entitle the plaintiff to relief."21 The factual allegations "must be enough to raise a right to relief above the speculative level."22 Mere labels, conclusions, and formulaic recitations of the elements "will not do."23

Furthermore, CVB has made various allegations regarding fraud, which subject those claims to a heightened pleading standard. Federal Rule of Civil Procedure 9(b) requires that when alleging fraud or mistake, "a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." Additionally, a plaintiff's complaint "must ‘set forth the time, place and contents of the false representation, the identity of the party making the false statements and the consequences thereof.’ "24 In short, Rule 9(b) requires that a complaint "set forth the ‘who, what, when, where and how’ of the alleged fraud."25

ANALYSIS
I. DEFENDANTS ARE ENTITLED TO IMMUNITY ON CVB'S CLAIMS BASED ON PETITIONING ACTIVITY.

CVB brings six claims against Defendants related to violations of the Sherman Act, Lanham Act, and Utah Antitrust Act.26 The majority of these claims are based on the Petitions filed before Commerce and the ITC.

A. History of Noerr-Pennington Immunity and the Sham Exception

The First Amendment protects many rights, including the right to petition the government.27 The Supreme Court recognizes this as "one of ‘the most precious of the liberties safeguarded by the Bill of Rights.’ "28 The Supreme Court has determined that the "same philosophy" regarding the right to petition the government applies to petitions to administrative agencies and to courts.29 From that right, the Supreme Court has found immunity that protects those seeking redress from liability for petitioning activities.30 This immunity was developed specifically in antitrust cases and is referred to as Noerr-Pennington immunity.31 However, this immunity extends beyond the antitrust context and is known as "Petition Clause" immunity.32 The Tenth Circuit has referred to both of these as "broad" immunities.33

The Supreme Court has "carved out only a narrow exception" to Noerr-Pennington immunity for "sham petitions."34 The Supreme Court established a two-part test to determine if something is "sham petitioning."35 The first step requires a showing that the petitioning activity is "objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits."36 Second, the court must determine "whether the baseless lawsuit conceals ‘an attempt to interfere directly with the business relationships of a competitor,’ through the ‘use of the governmental process —as opposed to the outcome of that process—as an anticompetitive weapon.’ "37 As to the first step, the Supreme Court has stated that a "winning lawsuit is by definition a reasonable effort at petitioning for redress and therefore not a sham."38 If a party prevails on the first step, the court need not address the second step.39

The Amended Complaint contains numerous allegations that both the First and Second Petitions were successful.40 The Amended Complaint summarizes the relevant processes. First, the ITC makes a preliminary determination using a reasonable indication standard that an industry is materially injured or is threatened with material injury by imports sold at less than fair value.41 If the ITC makes this determination, Commerce then makes a preliminary determination regarding whether there is a reasonable basis to believe imports are being sold, or likely to be sold, at less than fair value.42 It also makes findings of duties to be imposed.43 If Commerce makes that determination, then the ITC conducts its last phase of the investigation to make a final determination whether the domestic industry is materially injured or threatened with material injury.44 If the ITC makes such a finding, then Commerce issues an antidumping order.45

The Amended Complaint alleges that the Petitions were successful as to both the preliminary and the final determinations by both the ITC and Commerce.46 As to the First Petition, CVB alleges that Commerce ultimately found that mattresses from "China had been sold at less than fair value" but at percentages lower than what was alleged in the First Petition.47 And in a 393-page decision, the ITC found that the domestic mattress industry had been materially injured by the dumping of mattresses from China, as alleged in the First Petition.48

As to the Second Petition, the ITC issued its preliminary determination that the petition had met the reasonable indication standard.49 Commerce issued final determinations that imports of mattresses as alleged in the Second Petition were being sold, or likely to be sold, at less than fair market value.50 The ITC then issued a 512-page final determination as to the Second Petition concluding that the domestic industry had been materially injured by imports of mattresses as alleged in the Second Petition.51

As the Supreme Court has indicated, a successful outcome cannot be a sham. In discussing successful petitioning, it is important to note the complexity and thorough nature of the two ITC...

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