Delta Turner, Ltd. v. Grand Rapids-Kent County, Case No. 1:08-cv-544.

• Decision Date: 30 January 2009
• Docket Number: Case No. 1:08-cv-544.
• Parties: DELTA TURNER, LTD., Plaintiff, v. GRAND RAPIDS-KENT COUNTY CONVENTION/ARENA AUTHORITY, a Michigan Municipal Authority, and SMG, a Pennsylvania General Partnership, Defendants.
• Court: U.S. District Court — Western District of Michigan

600 F.Supp.2d 920

DELTA TURNER, LTD., Plaintiff, v. GRAND RAPIDS-KENT COUNTY CONVENTION/ARENA AUTHORITY, a Michigan Municipal Authority, and SMG, a Pennsylvania General Partnership, Defendants.

Case No. 1:08-cv-544.

United States District Court, W.D. Michigan, Southern Division.

January 30, 2009.

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Douglas W. Van Essen, Aaron M. Halvas, Lee T. Silver, Silver & Van Essen PC, Grand Rapids, MI, for Plaintiff.

Erin E. Gravelyn, Richard A. Glaser, Dickinson Wright PLLC, Grand Rapids, MI, Richard A. Glaser, Timothy Bunker Hardwicke, Latham & Watkins LLP, Chicago, IL, Edward Marcellus Williamson, Jason Daniel Cruise, Latham & Watkins LLP, Washington, DC, for Defendants.

OPINION

JANET T. NEFF, District Judge.

This case presents an unusual application of federal antitrust principles to the entertainment industry. At issue is whether a "Preferred Promoter Agreement" (PPA) negotiated on behalf of defendants Grand Rapids—Kent County Convention/Arena Authority (CAA) and its manager, SMG, that includes a reciprocal agreement with the promoter Live Nation for sharing arena and promoter revenue from competitor events, violates antitrust laws. Pending before the Court are CAA's and SMG's separate Motions to Dismiss. For the reasons that follow, the Court grants in part, and denies in part, defendants' motions.

I. Summary of Analysis

Defendants have filed Motions to Dismiss pursuant to FED. R. CIV. P. 12(b)(6). As a procedural device, Rule 12(b)(6) establishes the trial court as the sentinel standing guard at the border between viable and deficient causes of action. As emphasized in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), this is a particularly important charge in antitrust litigation given the often obscure or weak antitrust premise and sometimes immense expense of mounting even a preliminary defense of the merits.

The essential role of the Court in this case falls squarely within the fundamental Rule 12(b)(6) charge: the foremost question to be decided is whether plaintiff's allegations of antitrust violations meet the threshold for causes of action under § 1 or § 2 of the Sherman Act such that this case may proceed to the discovery stage. Defendants contend that plaintiff's claims must be dismissed since they fail outright in numerous respects. While plaintiff's antitrust case is by no means clear-cut, the Court is convinced after careful consideration of the pleadings, arguments and legal principles, that plaintiff's antitrust claims are not properly dismissed at this juncture. The Court recognizes that plaintiff faces the burden of proving the anticompetitive effects of the PPA to secure relief on its claims of antitrust violations. Nonetheless, the Court is convinced that plaintiff's burden can legitimately fail or succeed only with further development of the factual record and the proper application of the correct legal principles. This is particularly so given the lack of any factual record as to the genesis, purpose, and effect of the PPA.

In short, the Court finds, based on the parties' arguments, that plaintiff's antitrust claims are not merely speculative, but instead plausible, and thus, not subject to dismissal pursuant to Rule 12(b)(6). To the contrary, the Court concludes that plaintiff's claim under 42 U.S.C. § 1983 does not "possess enough heft" to survive dismissal. Twombly, 127 S.Ct. at 1966. The Court also declines to exercise its discretion to grant plaintiff's request for a declaratory judgment declaring that the PPA is ultra vires, illegal, and unenforceable under state law. Plaintiff has failed to show that such relief is warranted. Finally, given that the parties have only briefly addressed the remaining state law claims, dismissal at this stage of the proceedings is unjustified.

II. Background and Facts

This case involves a dispute over contracts for event bookings at the DeltaPlex and Van Andel Arena in Grand Rapids, Michigan. Plaintiff Delta Turner owns and operates the Delta Plex. Defendant CAA owns, and defendant SMG manages, Van Andel Arena. At issue is a PPA that SMG entered into with Cellar Door Productions of Michigan, Inc. (Live Nation), which (1) gives SMG/CAA two-thirds of the net revenue from events at Van Andel Arena that are promoted or produced by a promoter other than Live Nation, and gives Live Nation the remaining one-third; and (2) requires that Live Nation pay SMG/CAA one-third of the net revenue from Live Nation events at competitor venues in the surrounding west Michigan area (DeltaPlex, Kellogg Arena in Battle Creek, Wings Stadium in Kalamazoo, and the LC Walker Arena in Muskegon). Plaintiff alleges that this latter feature of the PPA, referred to by plaintiff as "Competitor Arena Revenue Siphoning," is intended to monopolize arena events and revenues and thereby inhibit interstate commerce by (1) limiting the number of concerts and directing most or all of the concerts to Van Andel Arena, and (2) raising the costs of concerts, thereby generating more revenue for defendants. Plaintiff further alleges that the net effect of this contractual arrangement is that fewer concerts come to West Michigan or they come at a higher cost to Van Andel Arena competitors and the general public because Live Nation must increase ticket prices and/or reduce the rent paid to competitors to cover the "cut" to SMG/CAA.

Plaintiff initially filed a five-count complaint alleging federal and state antitrust violations, a violation of 42 U.S.C. § 1983, and three state law claims. The Court stayed discovery in light of defendants' pending Motions to Dismiss. On October 3, 2008, plaintiff filed a First Amended Complaint, alleging seven counts: Count 1—Violation of Federal Antitrust Act (the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2, and the Clayton Act 15 U.S.C. §§ 4, 15, and 22) [against CAA and SMG]; Count 2—Violation of State Antitrust Act [against CAA and SMG]; Count 3—Violation of 42 U.S.C. § 1983 [against CAA and SMG]; Count 4—Declaratory Judgment— PPA's Competitor Arena Revenue Siphoning is Ultra Vires [presumably against CAA and SMG]; Count 5—Tortious Interference with Prospective Business Advantage [against CAA and SMG]; Count 6— Violation of Open Meetings Act and CFAA (Michigan Convention Facility Authority Act, MICH. COMP. LAWS § 141.1401 et seq.) [against CAA]; and Count 7—Violation of the Freedom of Information Act and CFAA [against CAA]. Defendants have moved to dismiss all claims.

III. Issue

Whether defendants are entitled to dismissal of the alleged federal claims on the basis (1) of immunity under the Parker state action doctrine, Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943); (2) of immunity under the Local Government Antitrust Act of 1984 (LGAA), 15 U.S.C. § 34 to § 36; (3) of failure to meet the pleading standard of Twombly; (4) of failure to plead a claim under 42 U.S.C. § 1983 and qualified immunity; and (5) that the Court should decline to exercise its discretion to provide declaratory relief?

IV. Legal Standard

In deciding a motion to dismiss for failure to state a claim under FED. R. CIV. P. 12(b)(6), the court must treat all well-pleaded allegations in the complaint as true and draw all reasonable inferences from those allegations in favor of the nonmoving party. Lambert v. Hartman, 517 F.3d 433, 439 (6th Cir.2008); Moon v. Harrison Piping Supply, 465 F.3d 719, 723 (6th Cir.2006). "A claim survives this motion where its `[f]actual allegations [are] enough to raise a right to relief above the speculative level on the assumption that all of the complaint's allegations are true.'" Zaluski v. United Am. Healthcare Corp., 527 F.3d 564, 570 (6th Cir.2008) (quoting Twombly, 127 S.Ct. at 1959). Stated differently, the complaint must present "enough facts to state a claim to relief that is plausible on its face." Twombly, 127 S.Ct. at 1974.¹

"`A motion to dismiss for failure to state a claim is a test of the plaintiff's cause of action as stated in the complaint, not a challenge to the plaintiff's factual allegations.'" Lambert, 517 F.3d at 439 (quoting Golden v. City of Columbus, 404 F.3d 950, 958-59 (6th Cir.2005)). The factual allegations in a complaint need not be detailed, but they must go beyond mere speculation of a legally cognizable cause of action. Lambert, 517 F.3d at 439. "The complaint should give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." German Free State of Bavaria v. Toyobo Co., Ltd., 480 F.Supp.2d 958, 963 (W.D.Mich. 2007). Accordingly, the complaint must contain either direct or inferential allegations respecting all the material elements to sustain recovery under a viable legal theory. Id.; see also Lillard v. Shelby County Bd. of Educ., 76 F.3d 716, 726 (6th Cir.1996).

V. Analysis

A. Federal Antitrust Claim (Count 1)

Defendants argue that they are entitled to dismissal of plaintiff's federal antitrust claim, Count 1, on the grounds that (1) they have immunity from suit under either the state action doctrine or the LGAA, and (2) plaintiff has failed to plead an antitrust claim under the Sherman Act, based on the pleading standard in Twombly. At this juncture in this case, the Court is not persuaded that dismissal is mandated on the grounds asserted.

1. State Action Doctrine Immunity

Under the state action doctrine, antitrust laws generally do not apply to a state operating in its sovereign capacity, or to private conduct approved and supervised by the state as a matter of state policy. WILLIAM C. HOLMES, ANTITRUST LAW HANDBOOK (Thomson-West, 2007-2008 ed.) § 8.7, pp. 789-90. The test for determining whether the state action doctrine applies depends on the nature of the defendant (state legislature, state agency, local government body, private party) and the challenged conduct (legislative directive, agency ruling, private...