In re Pool Prods. Distribution Mkt. Antitrust Litig., MDL 2328.
| Decision Date | 24 May 2013 |
| Docket Number | No. MDL 2328.,MDL 2328. |
| Citation | 946 F.Supp.2d 554 |
| Parties | In re POOL PRODUCTS DISTRIBUTION MARKET ANTITRUST LITIGATION. |
| Court | U.S. District Court — Eastern District of Louisiana |
OPINION TEXT STARTS HERE
Camilo Kossy Salas, III, Salas & Co., LC, Russ M. Herman, Herman, Herman, Katz & Cotlar, LLP, New Orleans, LA, Thomas J.H. Brill, Law Office of Thomas H. Brill, Leawood, KS, Arnold Levin, Levin, Fishbein, Sedran & Berman, Philadelphia, PA, Daniel W. Krasner, Wolf, Haldenstein, Adler, Freeman & Herz, LLP, Jay L. Himes, Labaton Sucharow, LLP, Linda P. Nussbaum, Grant & Eisenhofer, PA, Robert N. Kaplan, Kaplan Fox & Kilsheimer LLP, Ronald J. Aranoff, Bernstein Liebhard LLP, Scott R. Bickford, Martzell & Bickford, New York, NY, Douglas G. Thompson, Finkelstein ThompsonLLP, Washington, DC, Matthew B. Moreland, Becnel Law Firm, LLC, Reserve, LA, Richard J. Arsenault, Neblett, Beard & Arsenault, Alexandria, LA, Vincent J. Esades, Heins, Mills & Olson, PLC, Minneapolis, MN, for In re Pool Products Distribution Market Antitrust Litigation.
THIS DOCUMENT RELATES TO ALL INDIRECT–PURCHASER PLAINTIFF CASES ORDER AND REASONS
Before the Court are defendants' 1 motions to dismiss indirect-purchaser plaintiffs' state law claims.2 For the following reasons, defendants' motions are granted in part and denied in part.
This is an antitrust case that direct-purchaser plaintiffs (DPPs) and indirect-purchaser plaintiffs (IPPs) filed against Pool and Manufacturer Defendants. On April 11, 2013, the Court issued a ruling on the federal law claims brought by DPPs.3 The Court granted defendants' motion to dismiss plaintiffs' Sherman Act Section 2 monopolization claim and plaintiffs' claim that defendants engaged in a per se illegal group boycott under Section 1 of the Sherman Act. The Court denied the motion to dismiss plaintiffs' Sherman Act Section 2 attempted monopolization claim and plaintiffs' Sherman Act Section 1 claims under the rule of reason. The Court also dismissed plaintiffs' claim that defendants fraudulently concealed their antitrust offenses. In this Order and Reasons the Court addresses defendants' motions to dismiss the IPPs' complaint.4
IPPs are owners of pools who indirectly purchased Pool Products 5 manufactured by the Manufacturer Defendants and distributed by Pool. The named IPPs and their state citizenship are: Jean Bove (CA), Kevin Kistler (AZ), Lorraine O'Brien (FL), and Ryan Williams (MO). IPPs allege violations of state laws on behalf of classes of individuals and entities who purchased Pool Products not for resale in California, Arizona, Florida, and Missouri. IPPs allege a nationwide conspiracy in which Pool conspired with the Manufacturer Defendants and other Pool Products manufacturers to restrict the supply of Pool Products to Pool's rival distributors. They allege that defendants' conduct resulted in higher prices, reduced output, and reduced customer choice for Pool Products sold indirectly to IPPs.6
IPPs allege that Pool and the Manufacturer Defendants' conduct violated various antitrust and deceptive trade practices laws of California, Arizona, Florida, and Missouri. The IPPs seek compensatory damages under the Unfair Competition Law, §§ 17200, et seq., of the California Business & Professional Code; the state antitrust provisions of Ariz.Rev.Stat. §§ 44–1401 et seq.; the consumer protection provisions of the Florida Deceptive and Unfair Trade Practices Act, Fl. Stat. §§ 501.201 et seq., including § 501.204; and of the Missouri Merchandising Practices Act, §§ 407.010 et seq., R.S.M.7 The IPPs also seek certification of a California Class, an Arizona Class, a Florida Class, and a Missouri Class pursuant to Federal Rule of Civil Procedure 23. Each class is defined as “all individuals and entities residing in [the class state] who indirectly purchased and not for resale swimming pool products manufactured by Pentair, Hayward, or Zodiac and distributed by [Pool] Defendants' [ sic ] from January 1, 2003 through the present.” 8
The claims brought by IPPs are based on allegations of the same underlying conduct alleged by DPPs in their Sherman Act claims. Like DPPs, IPPs allege that Pool pursued a deliberate strategy to restrain trade and monopolize through the acquisition of competitors and through the foreclosure of actual and potential competition by conditioning access to its distribution network on promises by manufacturers not to supply Pool's rivals. They allege that PoolCorp is the world's largest Pool Products distributor with roughly $1.8 billion in net sales revenue in 2011 and the only Pool Products distributor that operates nationwide.9 Pool is alleged to operate more than 200 distribution centers throughout the country, with the next largest U.S. distributor operating less than 40.10 The IPPs allege that PoolCorp “prices its products on a national basis and controls its pricing from its headquarters.” 11 They allege that Pool's anticompetitive conduct occurred in a relevant market consisting of Pool Products distribution in the United States, or alternatively in California, Arizona, Florida, and Missouri. 12 They allege that the relevant product market is the wholesale distribution of Pool Products, which they define as “the equipment, products, chemicals, parts or materials for the construction, maintenance, repair, renovation or service of residential and commercial swimming pools.” 13
IPPs generally allege that the Manufacturer Defendants, the only full-line Pool Products vendors, agreed with Pool Defendants to eliminate existing distribution competitors and prevent new entrants from obtaining the products necessary to compete. IPPs allege that the Manufacturer Defendants collectively represent more than 50 percent of sales of Pool Products at the wholesale distribution level and that as the only Manufacturers carrying a full line of pool products, they are “must have” inputs for wholesale distributors. 14 They allege that each of the three Manufacturer Defendants markets itself as either the leading manufacturer of Pool Products in the world or one of the world's leaders.15
IPPs allege that Pool eliminated competition by acquiring rivals. Specifically, the IPP's complaint describes 12 instances from 1995 to 2009 when Pool purchased all or some of the assets of existing Pool Products distributors or suppliers in the U.S.16
IPPs also allege that Pool entered into exclusionary agreements with manufacturers. Pool allegedly “often represent[s] 30 to 50 percent of a manufacturer's total sales.” 17 IPPs allege that Pool used the leverage of its high volume purchasing to induce manufacturers, including Manufacturer Defendants, to agree to exclude Pool's rivals upon Pool's command. IPPs allege that Pool “conditioned access to its distribution network on promises by manufacturers not to supply PoolCorp's rivals.” 18 The complaint alleges that Pool carried this out primarily through a Preferred Vendor Program (PVP). The complaint describes the PVP as a program by which Pool promoted member manufacturers' goods to customers, and provided advertising and marketing programs and product support.19 IPPs allege that Pool informed PVP members, including the three Manufacturer Defendants and “virtually all of the other major Pool Products manufacturers,” that they were to discontinue favorable pricing or sales of Pool Products altogether to rival distributors if PoolCorp so directed.20 They allege that manufacturers, including the Manufacturer Defendants, complied with this condition because they feared losing Pool's business since no other distributor could replace Pool's volume and geographic coverage. IPPs allege that when a new entrant sought to distribute Pool Products in a particular geographic area, Pool threatened to refuse to sell the manufacturers' products throughout the U.S., not just in the geographic area of the new entrant. The complaint includes allegations of eight rival distributors that were denied supply from manufacturers because Pool demanded that they be foreclosed.21 IPPs allege that one of those companies went out of business, while the others allegedly experienced increased costs because of Pool's actions.22 IPPs cite these instances as “examples” of a broader pattern of conduct.
IPPs allege that Pool tended to target new entrants into the Pool Products distribution industry because new entrants “represented a unique threat to PoolCorp because they were more likely to compete aggressively on price to earn new business.” 23
IPPs also specifically allege that, in the mid–2000s, Mareva, a manufacturer of specialty chemicals in Florida, entered into an agreement to sell exclusively to PoolCorp and not to any other Pool Products distributor. 24 They allege that Mareva would have preferred to sell to more distributors but could not afford to risk losing PoolCorp's substantial business.25 IPPs allege that PoolCorp entered into agreements with rival distributors to refrain from competing with each other, such as a 2002 agreement with Cardinal Systems in Pennsylvania to avoid competition “for each other's customers on products they both sold.” 26
The IPP's complaint alleges that Pool's agreements with preferred vendors generally included a most favored nation (MFN) clause, by which the supplier agreed to give PoolCorp prices and terms that were at least as favorable as any provided to other purchasers with the same or similar volume levels as those of PoolCorp.27 IPPs allege that the MFNs operated to suppress the ability of competitors to compete on price with Pool because they established a price floor for products bought from manufacturers.28
Finally, IPPs allege that the conduct of Pool and the Manufacturer Defendants “substantially impaired and foreclosed competition from PoolCorp's rivals in the relevant market, ... raised barriers to entry for potential rivals,” “enabled PoolCorp to establish and maintain...
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