Flovac, Inc. v. Airvac, Inc.

• Decision Date: 06 February 2015
• Docket Number: Civil No. 12–1348 SEC.
• Citation: 84 F.Supp.3d 95
• Parties: FLOVAC, INC., Plaintiff, v. AIRVAC, INC., et al., Defendants.
• Court: U.S. District Court — District of Puerto Rico

84 F.Supp.3d 95

FLOVAC, INC., Plaintiff

v.AIRVAC, INC., et al., Defendants.

Civil No. 12–1348 SEC.

United States District Court, D. Puerto Rico.

Signed Feb. 6, 2015.

Roberto E. Ruiz–Comas, RC Law and Litigation Services PSC, San Juan, PR, for Plaintiff.

Ineabelle Santiago–Camacho, Rafael Escalera–Rodriguez, Reichard & Escalera, San Juan, PR, Courtney A. Rosen, David M. Schiffman, John W. Treece, Zachary A. Madonia, Sidley Austin LLP, Chicago, IL, for Defendants.

OPINION AND ORDER

SALVADOR E. CASELLAS, Senior District Judge.

Before the Court are the defendants' summary-judgment motion, Docket # 108, the plaintiff's opposition thereto, Docket # 96, and the defendants' reply. Docket # 123. After reviewing the filings and the applicable law, this motion is GRANTED.

Factual and Procedural Background

Flovac, Inc. (Flovac), a manufacturer of vacuum sewer systems, brings this antitrust suit under sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 –2, against its competitor, Airvac, Inc. (Airvac) and its president, Mark Jones, charging them with conspiring to influence municipalities to issue specifications for vacuum sewer systems installation projects that favored Airvac's system, and by sending a letter misrepresenting Flovac's compliance with certain requirements. The complaint also asserts pendent and parallel local-law claims under Puerto Rico's antitrust statute, P.R. Laws Ann. tit. 10, §§ 258, 260, and for tortious interference, P.R. Laws Ann. tit. 31, § 5141.

The Court recounts below the background leading up to the alleged antitrust violations, reserving for later discussion a more detailed dissertation of the facts pertinent to the analysis. In doing so, and whenever the parties quarrel over what occurred, the Court “adhere[s] to the plaintiff's version in keeping with ... [its] role in reviewing” summary-judgment motions, Ahmed v. Johnson, 752 F.3d 490, 492 (1st Cir.2014), assuming, of course, that those facts are neither inadmissible nor unsupported by the record.

I.

This action concerns sewer systems. Governmental entities like municipalities, but also land developers, use sewer systems to collect and treat wastewater from homes and buildings. Docket # 98(SUF), ¶ 6. And they come in different varieties—“gravity sewer systems, grinder-pump low pressure sewer systems, septic tank effluent pump systems, and septic tank effluent gravity sewer systems,” and, most relevant to this case, vacuum sewer systems—but they are all used for the same purpose: Conveying wastewater from a source to an area for treatment. SUF ¶ 6. According to a July 2010 study by the Environmental Protection Agency (EPA), there are around 16,000 sewers systems in the US, the majority of which are gravity, Docket # 98–4, p. 6, and approximately 365 are vacuum sewer systems. SUF ¶ 9.

Airvac and Flovac are two corporations that manufacture, market, and sell vacuum sewer systems, SUF ¶ 1, and so are Iseki and Saksui. See Docket # 119, p. 17 (ASUF), ¶ 5. Neither Airvac nor Flovac, however, constructs vacuum sewer systems (that is done by general contractors); they merely sell equipment and manufactured goods essential to sewer systems, e.g., interface valves, valve pit components, vacuum pumps, and other vacuum station equipment. SUF ¶ 5.

Founded in 1968, Airvac is an Indiana corporation, and Mark Jones became its president in 1999, though he had worked there since 1992. ASUF ¶¶ 1–2. Airvac describes itself as “the world leader in vacuum sewer technology.” Docket # 98–3, p. 2. And for good reason: Of the approximately 365 vacuum sewer systems in the US, 320 are Airvac's. SUF ¶ 9. The opposite is true of the greater sewer system market, however. Since 2004, Airvac has marketed vacuum sewer system technology for more than 750 different potential sewer system installations projects in the US; of those, it secured around 60, meaning that Airvac persuaded a municipality or engineer to install its vacuum sewer system less than 8% of the time. SUF ¶ 10. This is so, in part, because of our free market system. Before constructing or modifying a sewer system, municipalities evaluate different types of sewer systems, including gravity, low pressure, and vacuum. SUF ¶ 7. Airvac's business and marketing strategy thus centers on convincing municipalities and design engineers to install vacuum sewer systems, rather than other sewer systems. SUF ¶ 17.

Flovac, a Puerto Rico corporation, is a newcomer in the vacuum sewer system business. It was founded in 2009 by Héctor Rivera, Flovac's sole owner and president. Docket # 119–47, p. 76; Docket # 1, V. ¶ 3. (Confusingly, “Flovac Inc.,” the plaintiff, and “Flovac International,” a Dutch corporation, are actually two different entities, the former being a “franchise” of the latter.) The nub of Flovac's complaint is that Airvac and Jones have hindered its attempts to “penetrate” the Puerto Rico and continental United States market for vacuum sewer systems. Docket # 1, V. ¶ 5. And the summary-judgment record, viewed in the light most favorable to Flovac, indeed shows that Airvac has proven to be a hardhearted competitor; but, as Judge Easterbrook once remarked, “a desire to extinguish one's rivals is entirely consistent with, often is the motive behind, competition.” A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc., 881 F.2d 1396, 1402 (7th Cir.1989).

In this venue, Flovac challenges Airvac's conduct in connection with five vacuum sewer system installations projects. SUF ¶ 24. But only the “Ingenio Project,” located in Toa Baja, Puerto Rico, necessitates discussion. (Flovac's tortious interference claims concern only the Ingenio Project, whereas the other four projects relate only to the alleged antitrust violations, which as explained below, fail given Airvac's lack of market power; Airvac's conduct concerning these four projects is therefore irrelevant for present purposes.)

The Ingenio Project, one of the projects for which Airvac and Flovac competed, was commissioned by the Puerto Rico Aqueduct and Sewer Authority (PRASA), and it was partially funded with funds earmarked by the American Recovery and Reinvestment Act of 2009 (ARRA), Pub.L. No. 111–5, 123 Stat. 115. SUF ¶ 25. PRASA advertised the Ingenio Project for bid on August 30, 2009, and although the project's specifications provided that Airvac “was used as the basis of design,” they also stated that the would-be contractor could consider “other manufactures that comply with the requirement and intent of the drawing....” SUF ¶ 29. Around this time, one of Airvac's Puerto Rico sales representatives told Jones that Flovac had been trying to enter the U.S. market. Docket # 119–44, pp. 37–38. This sales representative also tipped off Jones that some of Flovac's vacuum sewer components had not been manufactured in the US. Docket # 124, ¶ 17.

As it happened, the winning bidder and contractor chose Flovac's vacuum sewer system over Airvac's. SUF ¶ 30. And Jones, dissatisfied with that outcome, wrote to PRASA on May 20, 2010, questioning Flovac's compliance with ARRA's “Buy American” requirements. Jones took issue with the valve of Flovac's vacuum sewer system, “because it [was] manufactured in the Netherlands.” Docket # 89–14, p. 3. Jones also stated that Flovac could not meet the Ingenio Project's independent requirement “that all the main components of the sewer system must be purchased from the same manufacturer.” SUF ¶ 34. Flovac's Rivera became aware of Jones's letter shortly after it was sent. And as soon as PRASA received the letter, it forbade the builder from “continu[ing] forward with the installation of the Flovac system,” SUF ¶ 36, presumably while it investigated Jones's imputations.

PRASA wrote back to Jones in June, and essentially “sustained” its “position that [Flovac's] vacuum systems complied with the ARRA and the project's contractual requirements.” Docket # 119–25, p. 2. Undeterred, Jones contacted the EPA, asking it “to investigate the concerns” just discussed. Docket # 119–26, p. 4. The EPA investigated Jones's claims, and “recommended” that Flovac manufacture the upper body component in Puerto Rico “[t]o make the substantial transformation process more complex.” Docket # 98–6, pp. 16–17. And that is exactly what Flovac did; it began assembling and manufacturing, “by injection molding one sub-component of the valve,” Docket # 98–6, p. 11, in Puerto Rico. Although the EPA and other environmental agencies “supervised” the above process, the EPA never disqualified Flovac from participating in the Ingenio Project. Id.; Docket # 119, ¶ 37. This presumably infuriated Airvac, who had hoped to win this project. See ASUF ¶ 31. One of Airvac's representatives in Puerto Rico even referred to this whole matter as the “ ‘Ingenio fraud case.’ ” ASUF ¶ 37.

Ultimately, Flovac resumed and completed the Ingenio Project, whose subcontract (which Flovac signed) provided for $3.02 million in compensation, Docket # 98–16, though it is unclear from the record whether Flovac actually received that whole amount. Rivera nonetheless testified in his deposition that the project's paralyzation, which according to Rivera, lasted for “about ten months,” injured Flovac, because it was “paying [its] staff” but “not b [eing] paid.” Docket # 98–6, pp. 5–6.

II.

On May 16, 2012, this antitrust action ensued. Docket # 1. The original discovery deadline was set for February 14, 2013, Docket # 15, and, at the parties' behest, extended until May 31, 2013. Docket # 17. Flovac then requested until October 31, 2013 to finish discovery, Docket # 55, and the Court granted this request. Docket # 65. At the December 18, 2013 conference, Flovac requested the reopening of the discovery; the Court reluctantly granted this request, pushing back the discovery cut-off date to February 17, 2014. Docket # 80. (Flovac was then admonished for violating a discovery order, Docket # 91, which forced the Court to push back the deadline one last time.)

In due course, the defendants moved for summary judgment, see ...