Host Int'l, Inc. v. MarketPlace, PHL, LLC, Civil No. 2:19-cv-02036-JMG
| Decision Date | 13 August 2020 |
| Docket Number | Civil No. 2:19-cv-02036-JMG |
| Parties | HOST INTERNATIONAL, INC., Plaintiff, v. MARKETPLACE, PHL, LLC, Defendant. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Plaintiff Host International ("Host") brings this lawsuit after ending negotiations to lease two concession spaces at Philadelphia International Airport ("PHL") from Defendant MarketPlace, PHL ("MarketPlace"). Host presents antitrust and tortious interference claims arising from pouring rights provisions in the proposed leases that give one beverage company exclusive distribution rights at the airport's concession spaces. Specifically, Host alleges Sherman Antitrust Act claims of an anticompetitive tying arrangement (Count I), and a conspiracy and agreement in restraint of trade (Count II), as well as a common law claim for tortious interference with prospective contractual relationships (Count III), against MarketPlace. See Compl., ECF No. 1. MarketPlace filed a Motion to Dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b)(6). See Def.'s Br., ECF No. 14.
The Court finds Plaintiff failed to state a claim upon which relief can be granted under the Sherman Antitrust Act for Counts I and II. After dismissing those claims, the Court declines to exercise supplemental jurisdiction over Plaintiff's claim for tortious interference and dismisses the entire Complaint with prejudice.
MarketPlace is a real estate company and de facto landlord of food and retail space at PHL on behalf of the airport's owner, the City of Philadelphia. Compl. ¶ 3. As landlord, MarketPlace leases space at the airport to concessionaires and restaurants. Compl. ¶ 3. Host is a concessionaire, operating multiple vending and restaurant spaces at 120 airports around the world, including PHL. Compl. ¶ 10.
In late 2017 and early 2018, the parties began negotiating two leases for concession spaces at the airport that Host alleges it would have subleased to Starbucks and Buena Onda restaurant.2 Compl. ¶ 37. The proposed leases between Host and MarketPlace contained pouring rights provisions requiring non-alcoholic beverages sold in those spaces be subject to MarketPlace's control. Compl. ¶ 3. MarketPlace requires its lessees to follow these provisions, which give a contracted third-party beverage company exclusive rights to distribute at the airport's concession spaces. Compl. ¶ 3. Pouring rights arrangements are a fixture in the concession industry, as both parties cite examples of venues and marketplaces that impose pouring rights conditions on their vendors. Compl. ¶ 21; Oral Arg. Tr. 8:22-9:3, ECF No. 27. As a result of these provisions, Host rejected the leases, ended negotiations, and alleges it lost "significant profits and other benefits." Compl. ¶¶ 32, 37.
On May 10, 2019, Host filed suit against MarketPlace. See Compl. On July 9, 2019, MarketPlace filed the instant Motion to Dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b)(6). See Def.'s Br. On August 12, 2019, Host responded in opposition to the motion. See Pl.'s Br., ECFNo. 16. On February 28, 2020, the case was re-assigned to this Court. See ECF No. 18. On March 10, 2020, MarketPlace filed a reply brief in further support of its motion. See Def.'s Reply Br., ECF No. 20. On May 27, 2020, the Court heard oral arguments on the motion. See Oral Arg. Tr. On June 10, 2020, both parties submitted their post-argument supplemental briefs. See Pl.'s Supp. Br., ECF No. 30; Def.'s Supp. Br., ECF No. 31.
To survive a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6), the factual allegations in the complaint "must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true even when doubtful in fact." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While a complaint does not need detailed factual allegations, it needs to provide more than labels, conclusions, and "a formulaic recitation of the elements of a cause of action." Id. The Court's inquiry into a motion to dismiss can be broken into these three steps: 1) identifying the claim's elements; 2) striking conclusory allegations from the complaint; and 3) evaluating whether the well-pleaded allegations of the claim's elements are sufficiently alleged. Malleus v. George, 641 F.3d 560, 564 (3d Cir. 2011).
Host brings two claims arising under the Sherman Antitrust Act—an anticompetitive tying arrangement, and conspiracy and agreement in restraint of trade. See Compl. ¶¶ 43-57. Under the Sherman Act, an anticompetitive tying arrangement is "an agreement by a party to sell one product or service but only on the condition that the buyer also purchases a different or tied product or service." Avaya Inc., RP v. Telecom Labs, Inc., 838 F.3d 354, 397 (3d Cir. 2016). However, not all such ties are illegal. Id. at 398. Antitrust concerns over tying arrangements only arise when the "seller can exploit its power in market for tying product to force buyers to purchase tied product whenthey otherwise would not." Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 442 (3d Cir. 1997).3
Under the Sherman Act, a restraint of trade claim consists of a concerted action imposing an unreasonable restraint on trade that "inhibits competition in the relevant market." Lifewatch Services, Inc. v. Highmark Inc., 902 F.3d 323, 332-35 (3d Cir. 2018). A restraint of trade claim requires an allegation of a contract, combination, or conspiracy that restrains trade unreasonably. Toledo Mack Sales & Service, Inc. v. Mack Trucks, Inc., 530 F.3d 204, 218 (3d Cir. 2008).
To plead a Sherman Act claim, the complainant must have antitrust standing and plead a "relevant geographic market." City of Pittsburgh v. West Penn Power Co., 147 F.3d 256, 264 (3d Cir. 1998); Queen City Pizza, Inc., 124 F.3d at 436. Here, Host sufficiently pleads standing from its injury, however, it fails to establish the necessary relevant geographic market.
In the Complaint, Host alleges the relevant geographic market at issue is the premises of PHL. Compl. ¶ 40. As discussed below, Host's basis for standing and its proposed relevant geographic market are incompatible. The Court recognizes Host's standing to bring an antitrust claim, but we find its relevant geographic market to exceed the bounds of PHL.
Antitrust standing demands more than the Article III standing requirements of injury in fact, causation, and redressability. In re Processed Egg Prods. Antitrust Litig., 881 F.3d 262, 268 (3d Cir. 2018). An antitrust plaintiff needs to establish its injury, but an injured party is not always a "proper plaintiff." Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 110 n.5 (1986). To show antitrust injury, the complainant must establish that it suffered an injury "of the type the antitrust laws wereintended to prevent," and the injury flows from defendants' unlawful conduct. Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 349 (1990). Beyond injury, the Third Circuit considers the following several factors in determining antitrust standing:
(1) the causal connection between the antitrust violation and the harm to the plaintiff and the intent by the defendant to cause that harm, with neither factor alone conferring standing; (2) whether the plaintiff's alleged injury is of the type for which the antitrust laws were intended to provide redress; (3) the directness of the injury, which addresses the concerns that liberal application of standing principles might produce speculative claims; (4) the existence of more direct victims of the alleged antitrust violations; and (5) the potential for duplicative recovery or complex apportionment of damages.
In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144, 1165-66 (3d Cir. 1993).
Host argues it has antitrust standing because it suffered an "injury of the type the antitrust laws were intended to prevent and that flows from that which makes the defendant's acts unlawful." See Pl.'s Br., 25 ( Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)). Host alleges MarketPlace's pouring rights practice violates the Sherman Act by suppressing competition, and as a result, Host suffered the injury of exclusion from PHL's concession market. Pl.'s Br., 25; Pl.'s Supp. Br., 10.
At the motion to dismiss stage, the Court acknowledges Plaintiff's antitrust injury. Contrary to MarketPlace's argument, Host pleads a plausible injury from refusing to agree to a contract with pouring rights provisions, even though Host terminated contract negotiations. At issue is whether such intervening conduct can affect the causation of antitrust injury. The District Court has held that intervening conduct "does not sever the chain of causation where that conduct was a foreseeable consequence of the original antitrust violation." In re Flonase Litigation, 798 F. Supp. 2d 619, 629 (E.D. Pa. 2011). Whether the intervening conduct is a foreseeable consequence of the original action is a question of fact, and therefore, not a basis for dismissal at this stage.4 Thabault v. Chait, 541 F.3d512 (3d Cir. 2008); see Callahan v. A.E.V., Inc., 182 F.3d 237, 257 (3d Cir. 1999) ().
At this stage of pleadings, the intervening conduct is Host's refusal to continue negotiations for the two concession spaces. Whether that conduct is a foreseeable consequence of the pouring rights agreement is not for the Court to decide as a matter of law. At this stage, Host plausibly pleads MarketPlace's pouring rights agreement inflicted an antitrust injury by excluding Host from PHL. Host has standing to bring a claim to remedy this specific injury, but only this specific injury.
To be clear, the alleged antitrust injury in this case is Host's exclusion from PHL, and an...
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