A.I.B. Express, Inc. v. Fedex Corp.
| Decision Date | 08 November 2004 |
| Docket Number | No. 03 Civ.8087 SAS.,03 Civ.8087 SAS. |
| Citation | 358 F.Supp.2d 239 |
| Parties | A.I.B. EXPRESS, INC., Plaintiffs, v. FEDEX CORP. and Federal Express Corp., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Jerry S. Goldman, Gina M. MacNeill, Law Offices of Jerry S. Goldman, P.C., New York, NY, for Plaintiffs.
Justin M. Ross, Federal Express Corporation, Litigation Department, Memphis, TN, Olivia M. Gross, Newman, Fitch, Altheim & Myers, New York, NY, for Defendants.
A.I.B. Express, Inc. ("AIB") is suing Federal Express Corporation and its parent, FedEx Corporation (collectively, "FedEx"), alleging federal antitrust claims as well as state law claims for misappropriation of trade secrets, unfair competition, breach of the implied covenant of good faith and fair dealing, and tortious interference with business relations and contractual relations. FedEx now moves for judgment on the pleadings under Federal Rule of Civil Procedure 12(c).
AIB alleges the following facts. AIB is a New York corporation engaged in the business of facilitating the transportation of gems and jewelry, primarily for merchants in the New York Diamond District.1 At the time it filed its complaint, AIB provided two primary services (hereinafter, "facilitation services"). First, AIB picked up from its customers' places of business packages containing gemstones and/or jewelry that were intended to be shipped overnight to locations throughout the United States.2 AIB employed armed couriers to transport these packages to Kennedy airport or other FedEx distribution centers, whereupon the packages were shipped to their ultimate destinations using AIB's FedEx account.3 Second, AIB offered its customers insurance against the loss of their shipments.4 AIB billed the majority of its customers an aggregate price, reflecting both transportation and insurance costs.5
AIB started a business relationship with FedEx sometime in 1998.6 On August 11, 1999, the parties entered into a written agreement.7 Under the terms of the agreement, AIB received a discount on FedEx transportation charges.8 The agreement also provided that either party could terminate the agreement upon thirty days written notice.9 Until the filing of its complaint, AIB used FedEx as its sole shipper, in part because many jewelry insurers required that AIB use FedEx.10 AIB alleges that FedEx's share of the market for the time-sensitive transportation of jewelry valued under $75,000 was in excess of 70%.11
While the agreement was in force, AIB's customers had the option of creating FedEx shipping labels containing AIB's account information at their own places of business.12 Packages labeled in this manner bore no external indication that they contained jewelry or were being shipped to or from a jeweler; the true contents of the package were concealed from everyone, including FedEx employees.13 This practice was a convenience not only for AIB's customers, but even more significantly for AIB itself, which thus avoided the burden of generating hundreds of shipping labels every day on its own premises.14
By plaintiff's account, this business model proved successful.15 Over the course of approximately five and a half years, AIB built up its business in the Diamond District, to the point where AIB handled roughly 175,000 packages a year.16 In early 2002, FedEx introduced a service, which it called "Declared Value Exception" ("DVX"), to provide secure pick-up of high-value packages in direct competition with AIB.17 While DVX provides some coverage against loss, the level of coverage is not the same as the all-risk insurance provided by AIB.18 FedEx made no significant inroads into AIB's market, however, even after reducing prices for its DVX service to a level competitive with those charged by AIB.19
In mid-September, 2003, FedEx provided AIB written notice of its intention to terminate the pricing agreement between the parties as of October 20, 2003 — immediately prior to the holiday shipping season.20 FedEx advised that it was willing to enter into a new arrangement with AIB, but with two crucial differences that cut to the heart of AIB's business model.21 First, AIB would no longer enjoy a discounted shipping rate as under the old pricing agreement; the new rate represented a 70% increase.22 Second, AIB's customers could no longer use AIB's account when preparing shipping labels at their places of business.23 Instead, AIB would be required to create labels on its own premises. AIB alleges that these changes in its relationship with FedEx will effectively destroy the business model AIB established over the course of five years.24
At the same time it terminated the pricing agreement, FedEx began contacting AIB's customers directly in an effort to convince them to switch to the DVX service.25 In so doing, FedEx allegedly made use of confidential information obtained from AIB concerning AIB's customers and their shipping practices.26 FedEx offered these customers a greater shipping discount than it offered AIB, even though FedEx itself would have to provide an armed courier to pick up their packages.27 In addition, FedEx allowed AIB's customers the convenience of printing labels at their own places of business.28
AIB alleges that its customers as well as the customers of similar businesses whose contracts with FedEx were also cancelled will be forced to use the DVX service.29 AIB predicts that it will be driven out of business, along with other jewelry transportation facilitators.30
In deciding a motion for judgment on the pleadings under Rule 12(c), the court applies "the same standard as that applicable to a motion under Rule 12(b)(6)."31 The movant bears a heavy burden since pleading a claim under the Federal Rules is remarkably easy. Unless a claim falls into one of the exceptions set forth in Rule 9, a plaintiff need provide nothing more than "a short and plain statement of the claim showing that the pleader is entitled to relief."32 The long-standing rule in appraising a complaint's sufficiency is that a claim should not be dismissed "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."33 Put another way, the task of a federal court in reviewing the sufficiency of a complaint prior to the receipt of any evidence is a narrow one. "34
When deciding a motion to dismiss, a court must accept all factual allegations in the complaint as true, and draw all reasonable inferences in plaintiff's favor.35 The court may not consider matters outside the pleadings, but may consider documents attached to the pleadings, documents referenced in the pleadings, or documents that are integral to the pleadings.36
"No heightened pleading requirements apply in antitrust cases."37 Moreover, dismissals in antitrust cases "prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly."38 "Nonetheless, `[i]t is not ... proper to assume that the [plaintiff] can prove facts that it has not alleged or that the defendants have violated the antitrust laws in ways that have not been alleged.'"39
To plead an antitrust action, a plaintiff must first allege standing to bring suit. The Second Circuit has provided a two-prong test for determining whether a plaintiff has antitrust standing. "[C]ourts must [first] determine whether the plaintiff suffered an antitrust injury."40 If that prong is satisfied, the court must next "determine whether any of the other factors, largely relating to the directness and identifiability of the plaintiff's injury, prevent the plaintiff from being an efficient enforcer of the antitrust laws."41
An antitrust injury is an "injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful."42 "The injury should reflect the anticompetitive effect either of the violation or of the anticompetitive acts made possible by the violation."43 Because the purpose of the antitrust laws is to protect competition, not competitors, "[a]n antitrust plaintiff must allege not only cognizable harm to [himself], but an adverse effect on competition market-wide."44
To aid in determining whether a plaintiff is an "efficient enforcer" of the antitrust laws, the Second Circuit has offered a non-exhaustive list of factors to examine:
(1) the directness or indirectness of the asserted injury; (2) the existence of an identifiable class of persons whose self-interest would normally motivate them to vindicate the public interest in antitrust enforcement; (3) the speculativeness of the alleged injury; and (4) the difficulty of identifying damages and apportioning them among direct and indirect victims so as to avoid duplicative recoveries.45
In order to state a claim for monopolization, a plaintiff must establish: "(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident."46 The Supreme Court recently provided a helpful gloss on the second element: "the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct."47
In order to state an attempted monopolization claim, a plaintiff must establish: "(1) that the defendant...
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