Host Int'l, Inc. v. MarketPlace, PHL, LLC

• Decision Date: 27 April 2022
• Docket Number: 20-2848
• Citation: 32 F.4th 242
• Parties: HOST INTERNATIONAL, INC., Appellant v. MARKETPLACE, PHL, LLC
• Court: U.S. Court of Appeals — Third Circuit

32 F.4th 242

HOST INTERNATIONAL, INC., Appellant

v.MARKETPLACE, PHL, LLC,

No. 20-2848

United States Court of Appeals, Third Circuit.

Argued September 24, 2021

Filed: April 27, 2022

Thomas C. Goldstein [ARGUED], Eric F. Citron, Goldstein & Russell, PC, 7475 Wisconsin Avenue, Suite 850, Bethesda, MD 20814, Howard I. Langer, Edward Diver, Peter E. Leckman, Langer Grogan & Diver, PC, 1717 Arch Street, Suite 4130, Philadelphia, PA 19103, R. Paul Yetter, Bryce L. Callahan, Yetter Coleman LLP, 811 Main Street, Suite 4100, Houston, TX 77002, Counsel for Appellant

Angelo I. Amador, Restaurant Law Center, 2055 L Street, NW, 7th Floor, Washington, DC 20036, Gabriel K. Gillett, Kelsey L. Stimple, Jenner & Block LLP, 353 North Clark Street, Suite 4500, Chicago, IL 60654, Counsel for Restaurant Law Center, Amicus Curiae in Support of Appellant

Leslie E. John [ARGUED], Jason A. Leckerman, Elizabeth P. Weissert, Ballard Spahr LLP, 1735 Market Street, 51st Floor, Philadelphia, PA 19103, Counsel for Appellee

Before: CHAGARES, Chief Judge, HARDIMAN, and MATEY, Circuit Judges.

OPINION

MATEY, Circuit Judge.

After winning a bid for retail concession space at Philadelphia International Airport ("PHL"), Host International, Inc. ("Host") heard a common question: "Is Pepsi okay?" Host decided that it was not and, eager to pour what it pleased, filed an antitrust action. From that most ordinary origin bubbles up the novel question of whether an exclusive beverage agreement at an airport can be challenged under the federal antitrust laws. We conclude that it cannot, because Host lacks antitrust standing and has not adequately pled a violation of Section 1 of the Sherman Act. So we will affirm the District Court's judgment.

I.

Host is a familiar face to travelers, operating food, beverage, and merchandise concessions at over 120 airports globally, including PHL. The City of Philadelphia owns PHL and uses a private firm, MarketPlace, PHL, LLC ("MarketPlace"), as landlord. PHL is a big operation, serving more than thirty million passengers each year, and producing equally big food and beverage sales, more than $100M in 2016.

After a competitive bidding process, Host won two concession spots at PHL, planning to open a coffee shop in one, and a restaurant in the other. But negotiations between Host and MarketPlace for a lease hit a wall when MarketPlace insisted on a term allowing it to "enter into agreements ... granting ... third-parties exclusive or semi-exclusive rights to be sole providers of certain foods, beverages or other types of products." (App at 24.) That included a "pouring-rights agreement" ("PRA"), "granting a beverage manufacturer, bottler, distributor or other company (e.g., Pepsi or Coca-Cola) the exclusive control over beverage products advertised, sold and served at [PHL]." (App. at 24 (alteration in original)). Host balked and demanded that the PRA be left out. MarketPlace refused, and Host walked away from the deal and into federal court.

Host's Complaint sketches a "scheme to gain control over the sale of beverages at PHL" by tying the PRA to leases for commercial space. (App. at 14.) If successful, Host alleges, MarketPlace would enjoy outsized profits "at the expense of PHL consumers, competing beverage suppliers, and lessees of concession and retail space at PHL." (App. at 15.) Host also alleges that MarketPlace would receive payoffs from a "big soda company" courtesy of an exclusive pouring-rights agreement. (App. at 16.)¹ Host grounds those allegations in two theories: 1) an unlawful tying arrangement in violation of Section 1 of the Sherman Act; and 2) an illegal conspiracy and agreement in restraint of trade, another Section 1 violation.²

MarketPlace moved to dismiss the Complaint under Federal Rule of Civil Procedure 12(b)(6). The District Court held that Host had standing to bring its antitrust claims but granted the motion with prejudice, finding Host failed to adequately plead a relevant geographic market. Host timely appealed, and we will affirm the District Court's judgment.³

II.

Surviving a motion to dismiss requires "only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Further, "[w]e accept as true the factual allegations in the complaint, and draw all reasonable inferences in the plaintiff's favor." Phila. Taxi , 886 F.3d at 338. But "we are not compelled to accept ‘unsupported conclusions and unwarranted inferences.’ " Baraka v. McGreevey , 481 F.3d 187, 195 (3d Cir. 2007) (quoting Schuylkill Energy Res., Inc. v. Pa. Power & Light Co. , 113 F.3d 405, 417 (3d Cir. 1997) ). As a result, we draw on "judicial experience and common sense," rather than follow an attenuated chain of assumptions. Ashcroft v. Iqbal , 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

Finally, while "it is inappropriate to apply Twombly 's plausibility standard with extra bite in antitrust and other complex cases," W. Penn Allegheny Health Sys., Inc. v. UPMC , 627 F.3d 85, 98 (3d Cir. 2010), we need not "accept as true a legal conclusion couched as a factual allegation," Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) (cited with approval in Twombly , 550 U.S. at 555–56, 127 S.Ct. 1955 ); Iqbal , 556 U.S. at 678–79, 129 S.Ct. 1937 (quoting Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ).

A. Host Fails to Plead Antitrust Standing

Despite the sweeping commands of the Sherman and Clayton Acts, courts have read a limit into their text.⁴ So while Section 4 of the Clayton Act permits enforcement of the Sherman Act through civil suits for treble damages by "any person who shall be injured in his business or property," 15 U.S.C. § 15, courts have decided that not every person may sue. See Steamfitters Loc. Union No. 420 Welfare Fund v. Philip Morris, Inc. , 171 F.3d 912, 922 (3d Cir. 1999) (citing Blue Shield of Virginia v. McCready , 457 U.S. 465, 477, 102 S.Ct. 2540, 73 L.Ed.2d 149 (1982) ). Instead, the cause of action is subject to an additional, a-textual requirement known as "antitrust standing."⁵ See Ethypharm S.A. France v. Abbott Labs. , 707 F.3d 223, 232 (3d Cir. 2013) (quoting City of Pittsburgh v. W. Penn Power Co. , 147 F.3d 256, 264 (3d Cir. 1998) ). While the name echoes the familiar formulation of Article III, the judicially imposed requirement of antitrust standing is far more limiting. Gulfstream III Assocs., Inc. v. Gulfstream Aerospace Corp. , 995 F.2d 425, 429 (3d Cir. 1993). So even though " ‘[h]arm to the antitrust plaintiff is sufficient to satisfy the constitutional standing requirement of injury in fact,’ courts must also consider ‘whether the plaintiff is a proper party to bring a private antitrust action.’ " Phila. Taxi , 886 F.3d at 343 (quoting AGC , 459 U.S. at 535 n.31, 103 S.Ct. 897 ).

Naturally, determining who is a "proper party" is complicated by a consideration of generalized concepts like "foreseeability and proximate cause, directness of injury, certainty of damages and privity of contract." Gulfstream , 995 F.2d at 429 (quoting AGC , 459 U.S. at 532–33, 103 S.Ct. 897 ). And so courts whipped up a list of factors:

(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) (citing AGC , 459 U.S. at 545, 103 S.Ct. 897 ).⁶ But we need not pore over the list, as one, the absence of antitrust injury, is enough to affirm the District Court's judgment.

1. There is No Antitrust Injury on These Facts

"The second [ AGC ] factor, antitrust injury, ‘is a necessary ... condition of antitrust standing.’ If it is lacking, [a court] need not address the remaining AGC factors." Ethypharm , 707 F.3d at 233 (quoting Barton & Pittinos, Inc. v. SmithKline Beecham Corp. , 118 F.3d 178, 182 (3d Cir. 1997) ). We start our search there, looking for an "injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendant['s] acts unlawful."

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc. , 429 U.S. 477, 489, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977). Somewhat circular, but it means the "challenged conduct affected the prices, quantity or quality of goods or services, not just [the plaintiff's] own welfare." Mathews v. Lancaster Gen. Hosp. , 87 F.3d 624, 641 (3d Cir. 1996) (quotations omitted). All of which "aims to protect competition, not competitors," consistent with the judicial gloss on the antitrust laws. Id. And the injury required for antitrust standing must flow from the unlawful nature of defendants' acts. See 15 U.S.C. § 15(a).

Accepting Host's argument, the District Court reasoned that "the alleged antitrust injury" is "exclusion from PHL." (App. at 9.) But Host was not excluded; Host chose to walk away from the table because it did not like the lease terms MarketPlace offered. And the conclusion that Host pled a plausible antitrust injury stretches the boundaries of antitrust law too far. First, because a breakdown in contract negotiations is outside the Sherman Act's scope; second, because injury to competitors, rather than to competition, is beyond the law's sphere.

i. Failure to Secure Preferred Contractual Terms is Not an Antitrust Injury

Begin with the narrow contours of Host's claim. MarketPlace selected Host to develop retail space and offered a proposed lease. Host did not like the terms and, weighing its...