Dm Research v. College of American Pathologists, Civil Action No. 96-617.

• Citation: 2 F.Supp.2d 226
• Decision Date: 14 April 1998
• Docket Number: Civil Action No. 96-617.
• Parties: DM RESEARCH, INC., formerly known as New England Reagent Laboratories, Inc. v. COLLEGE OF AMERICAN PATHOLOGISTS and National Committee for Clinical Laboratory Standards.
• Court: U.S. District Court — District of Rhode Island

Page 226

2 F.Supp.2d 226

DM RESEARCH, INC., formerly known as New England Reagent Laboratories, Inc. v. COLLEGE OF AMERICAN PATHOLOGISTS and National Committee for Clinical Laboratory Standards.

Civil Action No. 96-617.

United States District Court, D. Rhode Island.

April 14, 1998.

Evan Slavitt, Susan E. Raitt, Laura A. Pisaturo, Hinckley, Allen & Snyder, Providence, RI, for Plaintiffs.

Steven M. Richard, Tillinghast, Licht & Semonoff, Providence, RI, Jack R. Bierig, Sidley & Austin, Chicago, IL, for Defendants.

MEMORANDUM AND ORDER

TORRES, District Judge.

The College of American Pathologists (CAP) and the National Committee for Clinical Laboratory Standards (NCCLS) have moved, pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss the complaint filed by DM Research, Inc., (DM). The issue presented is whether the complaint states a claim for conspiracy to restrain trade in violation of § 1 of the Sherman Act. 15 U.S.C. § 1.

Because the facts alleged are insufficient to establish the existence of a conspiracy, the Sherman Act claim is dismissed, with prejudice, and the related state law claims are dismissed, without prejudice.

Background

The pertinent facts alleged in the complaint are as follows. DM produces Type I "Reagent Grade Water" that it bottles and sells to clinical laboratories for use in scientific testing. NCCLS is a non-profit corporation composed of hundreds of members throughout the United States. It develops and promotes standards for the clinical laboratory community which includes individual laboratories, laboratory professional associations, industries and governmental agencies. CAP is a non-profit corporation composed of hundreds of board-certified pathologists throughout the United States. It accredits medical laboratories and its purpose is to insure that the test results obtained from those laboratories are accurate.

In 1991, NCCLS published a guideline stating that Type I reagent water should be used immediately after being processed because it quickly degrades. Accordingly, the guideline encouraged the use of Type I water produced in-house on a daily basis instead of bottled water produced off site. The guideline also prescribes a limit for the concentration of ions in Type I water. Ion concentrations are determined by a resistivity test that measures the degree to which the water conducts electrical current.

CAP incorporated the NCCLS guideline into the checklist it utilizes in determining whether a hospital or laboratory should be or remain accredited. As a result, many laboratories purchased purification equipment and began producing their own Type I water. That, in turn, adversely affected DM's sales.

DM's four-count complaint asserts claims for: (1) conspiracy to restrain trade in violation of § 1 of the Sherman Act, 15 U.S.C. § 1; (2) conspiracy to restrain trade in violation of the Rhode Island Antitrust Act, R.I. Gen. Laws § 6-36-4; (3) tortious interference with existing and prospective business relationships and (4) defamation. The Sherman Act claim is predicated on allegations that NCCLS and CAP "conspired to restrain trade" and that, in furtherance of the conspiracy, they adopted "faulty and arbitrary standards" and engage in unspecified "economic threats and intimidation of certain laboratories and referring pathologists to cease or refrain from doing business with DM Research and other bottled reagent water manufacturers."

NCCLS and CAP make a number of different arguments in support of their motions to dismiss all of DM's claims. However, there is no need to go beyond the argument that the complaint fails to state a claim for relief under the Sherman Act.

Standard of Review

A Rule 12(b)(6) motion to dismiss should be granted only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). In making that determination, the Court must "accept the well-pleaded factual averments of the ... complaint as true, and construe these facts in the light most flattering" to the plaintiff. Gooley v. Mobil Oil Corp., 851 F.2d 513, 514 (1st Cir.1988) (quoting Chongris v. Board of Appeals, 811 F.2d 36, 37 (1st Cir.1987)).

However, the complaint must allege facts that establish all of the elements of the claim asserted. Id. at 515; Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir.1984). Bald assertions, subjective characterizations and legal conclusions are insufficient. United States v. AVX Corp., 962 F.2d 108, 115 (1st Cir.1992); Dartmouth Review v. Dartmouth College, 889 F.2d 13, 16 (1st Cir.1989). Moreover, the factual allegations must be specific enough to justify "drag[ging] a defendant past the pleading threshold." Gooley, 851 F.2d at 515.

These principles are especially applicable in antitrust cases where further litigation is likely to be protracted and expensive and, therefore, the impact of unfounded claims is severe. See Car Carriers, 745 F.2d at 1106-07; see also Faulkner Advertising Assocs. v. Nissan Motor Corp., 905 F.2d 769, 772 (4th Cir.1990) (antitrust complaint must "allege with reasonable definiteness facts from which the Court may infer conduct ... prohibited by the antitrust laws.") (quoting Nelligan v. Ford Motor Co., 262 F.2d 556, 559 (4th Cir. 1959)); Sutliff, Inc. v. Donovan Cos., 727 F.2d 648, 654 (7th Cir.1984) (bare legal conclusions do not prevent dismissal of antitrust claims); Bryan v. Stillwater Bd. of Realtors, 578 F.2d 1319, 1321 (10th Cir.1977) (conclusions or opinions are not sufficient to state an antitrust claim).

While antitrust complaints are not subjected to any heightened pleading requirements, courts must be vigilant to insure that the underlying facts in an antitrust complaint are pled with sufficient specificity to state a claim. Thus, an antitrust complaint "must contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory." Car Carriers, 745 F.2d at 1106 (quoting In re Plywood Antitrust Litig., 655 F.2d 627, 641 (5th Cir.1981)) (emphasis in the original).

Discussion

I. The Sherman Act Claim

Section I of the Sherman Act provides, in relevant part:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal.

15 U.S.C. § 1.

To state a claim under § 1, a plaintiff must allege:

1. the existence of an unlawful contract, combination or conspiracy among the defendants;

2. that the contract, combination or conspiracy unreasonably restrained trade;

3. that the restraint affected interstate commerce; and,

4. that the defendants' concerted action proximately caused injury to the plaintiff.

Mathews v. Lancaster Gen. Hosp., 87 F.3d 624, 639 (3d Cir.1996); Lee v. Life Ins. Co. of

North America, 829 F.Supp. 529, 535 (D.R.I. 1993).

A. The Conspiracy Requirement

A conspiracy is an agreement, either express or implied, between two or more parties to accomplish an unlawful objective or to accomplish a lawful objective by unlawful means. Pearl Brewing Co. v. Anheuser-Busch, Inc., 339 F.Supp. 945, 950-951 (S.D.Tex.1972) (citing United States v. Kissel, 218 U.S. 601, 31 S.Ct. 124, 54 L.Ed. 1168 (1910); American Tobacco Co. v. United States, 328 U.S. 781, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946); Standard Oil Co. v. Moore, 251 F.2d 188 (9th Cir.1957)). Unilateral action by one party is not sufficient even when it involves the conduct of several persons within a single enterprise. Day v. Fallon Community Health Plan, Inc., 917 F.Supp. 72, 77 (D.Mass.1996) (citing Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984)). The participation of two or more parties is required.

When highly factual and subjective questions of intent and purpose are at issue, "summary procedures should be used sparingly" because "the proof is largely in the hands of the alleged conspirators." Car Carriers, 745 F.2d at 1106 (quoting Poller v. Columbia Broadcasting Sys., 368 U.S. 464, 473, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962)). However, that caveat does not exempt a plaintiff from the requirement of pleading facts from which the existence of a conspiracy reasonably may be inferred. Id.

Conclusory allegations of conspiracy or unlawful purpose do not satisfy the requirement that sufficient supporting facts be pled. Id.; see also Gilbuilt Homes, Inc. v. Continental Homes of New England, 667 F.2d 209, 210 (1st Cir.1981); cf. Americana Indus., Inc. v. Wometco de Puerto Rico, Inc., 556 F.2d 625, 627-628 (1st Cir.1977). Nor is the "invocation of antitrust terms of art" a substitute for the necessary factual allegations. Car Carriers, 745 F.2d at 1110; Gilbuilt Homes, 667 F.2d at 210 ("liberal use of terms such as `conspire'" will not prevent dismissal of an antitrust complaint).

B. DM's Complaint

In support of its Sherman Act Claim, DM alleges two facts amounting to what, in antitrust parlance, is referred to as "conscious parallel behavior." See Kreuzer v. American Academy of Periodontology, 735 F.2d 1479, 1487 (D.C.Cir.1984). Those facts are: (1) that NCCLS promulgated the guideline in question and (2) that CAP incorporated that guideline into its accreditation checklist.

However, parallel behavior, by itself, does not constitute a conspiracy. Id. That is especially true when, as here, the behavior is engaged in by two independent professional organizations and relates to a matter of mutual interest and concern. Id. at 1488. The facts must be sufficient to establish that the alleged conspirators reached an agreement or understanding to accomplish an unlawful purpose. Id. at 1488-89.

Direct evidence of an explicit agreement is not required to prove a conspiracy. The existence of a conspiracy may be inferred from the actions of the alleged conspirators. Id...