EI DU PONT DE NEMOURS AND CO. v. KOLON INDUS.

• Decision Date: 18 December 2009
• Docket Number: Civil Action No. 3:09cv58.
• Citation: 683 F. Supp.2d 401
• Parties: E.I. DU PONT DE NEMOURS AND COMPLANY, Plaintiff, v. KOLON INDUSTRIES, INC., Defendant.
• Court: U.S. District Court — Eastern District of Virginia

683 F.Supp.2d 401

E.I. DU PONT DE NEMOURS AND COMPLANY, Plaintiff, v. KOLON INDUSTRIES, INC., Defendant.

Civil Action No. 3:09cv58.

United States District Court, E.D. Virginia, Richmond Division.

December 18, 2009.

Rodney A. Satterwhite, Brian Charles Riopelle, Kristen Marie Calleja, Robyn Suzanne Gray, Thomas Moultrie Beshere, III, McGuirewoods LLP, Richmond, VA, Andrew David Kaplan, Kent Alan Gardiner, Shari Ross Lahlou, Crowell & Moring LLP, Washington, DC, for Plaintiff.

Dana Johannes Finberg, Rhodes Beahm Ritenour, Leclair Ryan PC, Richmond, VA, Jeffrey Graham Randall, Paul Hastings Janofsky & Walker LLP, Palo Alto, CA, Scott Mitchell Flicker, Paul Hastings Janofsky & Walker LLP, Washington, DC, Victoria Anne Cundiff, Paul Hastings Janofsky & Walker LLP, New York, NY, for Defendant.

MEMORANDUM OPINION

ROBERT E. PAYNE, Senior District Judge.

This matter is before the Court on Plaintiff and Counter-Defendant DuPont's Motion to Dismiss Defendant and Counterclaimant Kolon's Second Amended Counterclaim (Docket No. 63). For the reasons discussed below, the motion will be granted, with leave to amend.

BACKGROUND

This action arises out of a trade dispute between E.I. du Pont de Nemours and Co. ("DuPont") and Kolon Industries, Inc. ("Kolon"), over a product known generally as "para-aramid" fibers, which includes DuPont's commercially successful KELAR para-aramid product. The background facts of this dispute, which will not be repeated here, are fully described in this court's recent memorandum opinion, E.I. DuPont De Nemours & Co. v. Kolon Industries, ___ F.Supp.2d ____, 2009 WL 2762614, 2009 U.S. Dist. LEXIS 76795 (E.D.Va. Aug. 27, 2009). In that opinion, the Court assessed and denied Kolon's motion to dismiss DuPont's complaint, which alleged misappropriation of trade secrets and various other business torts. The opinion also assessed DuPont's motion to dismiss Kolon's Counterclaim, under Section 2 of the Sherman Act and Section 16 of the Clayton Act, "for monopolization and attempted monopolization of the paraaramid fiber market." Id. at ____, at *3, 2009 U.S. Dist. LEXIS 76795 at *7-8. DuPont's motion was granted because of the inadequacy of Kolon's proffered geographic market, but allowed Kolon leave to amend the counterclaim to correct that pleading deficiency.

Kolon has attempted to make that correction in its Second Amended Counterclaim. The fatal flaw¹ in Kolon's initial Counterclaim was its allegation that "the relevant geographic market for para-aramid fibers is the United States," Counterclaim ¶ 24. Because the Counterclaim, read in its entirety, made clear that foreign producers competed in the United States, the geographic market that Kolon alleged was "both conclusory and self-defeating," DuPont v. Kolon, ___ F.Supp.2d at ___, 2009 WL 2762614, at *11, 2009 U.S. Dist. LEXIS 76795, at *33.

Kolon's most recent attempt at defining the geographic market states, in full:

The relevant geographic market is worldwide supply of para-aramid fiber to commercial purchasers in the United States. The geographic market includes foreign supply practicably available to U.S. commercial purchasers, but the extent and nature of that supply is not known and will have to be determined on a factual record. Competition for U.S. commercial para-aramid buyers occurs in the United States where the buyers are located. Many U.S. buyers require particular qualification analysis and tests for their specific commercial uses. And prices in the United States are distinct from other nations. There are only five global producers of paraaramid fiber. DuPont is the only domestic producer. Teijin is the only other supplier to U.S. commercial customers, but the amount of its supply and shipments to the United States for commercial use are not known. Its capacity to divert production for supply to United States commercial customers also is not known. Accordingly, the extent of its production that should be included in market definition and market share calculations must be left for factual determination. Kolon is the only other manufacturer that supplies commercial customers in the United States, and its sales to date are de minimis. Kamenskvolokno and Yenta Spandex do not supply commercial customers or otherwise ship para-aramid fiber into the United States.

The adequacy of this geographic market definition is the threshold issue for Kolon's Counterclaim. The definition offered in the amendment is clearly less conclusory than Kolon's initial one. The Court still must assess, however, whether the new definition remains internally inconsistent with the remainder of Kolon's Amended Counterclaim, thus defeating it. Even if the definition does not render the Amended Counterclaim internally inconsistent, the Court must decide whether it adequately states a geographic market.

Also at issue is whether Kolon, in its Second Amended Counterclaim, has pled, in its allegations of exclusive dealing arrangements, anticompetitive conduct sufficient to support its claims of monopolization and attempted monopolization. Its original Counterclaim, as the Court recognized in the recent memorandum opinion (DuPont v. Kolon, ___ F.Supp.2d at ____, 2009 WL 2762614, at *14, 2009 U.S. Dist. LEXIS 76795, at *39-40) was adequately pled, based upon the information available to DuPont at the time. In developing its Second Amended Counterclaim, however, Kolon had access to all of DuPont's relevant supply agreements during the time period in question. Kolon has incorporated the information from those agreements into its amended pleading, and DuPont now asserts that Kolon's amended allegations of anticompetitive conduct are legally insufficient. Thus, it is necessary to reassess whether the anticompetitive conduct that Kolon alleges is enough to state a claim upon which relief may be granted.

DISCUSSION

A. The Applicable Legal Standard

A motion to dismiss under Rule 12(b)(6) seeks to test the legal sufficiency of the factual allegations made in the Complaint. Under Fed.R.Civ.P. 8(a)(2), a pleading must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Id. As the Supreme Court held in Bell Atlantic v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the pleading standard that Rule 8(a) announces does not require "detailed factual allegations," but it demands more than an unadorned accusation. Id. at 555, 127 S.Ct. 1955. A pleading that offers mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action will not do." Id. Nor does a complaint suffice if it tenders only "naked assertions" devoid of "further factual enhancement." Id. at 557, 127 S.Ct. 1955.

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." Id. at 570, 127 S.Ct. 1955. A claim has facial "plausibility" when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. at 556, 127 S.Ct. 1955. The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Id. Where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility of entitlement to relief." Id. at 557, 127 S.Ct. 1955.

Although "all civil actions and proceedings in the United States district courts" are now governed by the pleading standard set forth in Twombly (Ashcroft v. Iqbal, ___ U.S. ____, 129 S.Ct. 1937, 1953, 173 L.Ed.2d 868 (2009)), the standard's genesis in an antitrust case is significant here. Twombly, 550 U.S. at 558, 127 S.Ct. 1955, noted that "antitrust discovery can be expensive." As part of a lengthy citation of the decisional law and academic literature regarding the expense of antitrust discovery, Twombly quoted Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir.1984), to underscore that "the costs of modern federal antitrust litigation and the increasing caseload of the federal courts counsel against sending the parties into discovery when there is no reasonable likelihood that the plaintiffs can construct a claim from the events related in the complaint." Twombly at 558, 127 S.Ct. 1955. Thus, Twombly admonishes district courts to make every effort to ensure that every element of a claim is plausibly pled in every relevant respect, particularly for cases such as the broad scope antitrust case here at issue.

This case raises a fundamental problem confronting district courts in the postTwombly era. On one hand, DuPont's pleadings rely in large part upon cases decided at summary judgment or at trial. On the other hand, Kolon does not give Twombly its due. See Kolon Oppo. Memo. at 18-19 (failing to recognize Twombly's warning that a claim is subject to 12(b)(6) dismissal if it only alleges conduct equally consistent with both legitimate and anticompetitive conduct). DuPont argues that a claim which is "merely consistent with" anticompetitive behavior may not rise to the level of plausibility required by Twombly, 550 U.S. at 557, 127 S.Ct. 1955. Neither party acknowledges, however, the difficulties in assessing, without the benefit of full discovery, what exactly it takes to make a claim "plausible" as opposed to "merely consistent with" an antitrust violation.

It is also worth noting that, while this action shares an antitrust origin with Twombly, and the alleged anticompetitive actor also has a plausible alternative explanation for its conduct and the results,² the context of the two actions is meaningfully different. Twombly rejected unadorned accusations of collusion amongst disparate actors. In this action, Kolon focuses its inquiry on unilateral practices by the unquestioned industry leader. Whereas the court in Twombly was...