Jain Irrigation, Inc. v. Netafim Irrigation, Inc.
| Decision Date | 13 May 2019 |
| Docket Number | No. 1:18-cv-01311-DAD-BAM,1:18-cv-01311-DAD-BAM |
| Citation | 386 F.Supp.3d 1308 |
| Parties | JAIN IRRIGATION, INC., et al., Plaintiffs, v. NETAFIM IRRIGATION, INC., Defendant. |
| Court | U.S. District Court — Eastern District of California |
Andrew Peter Rausch, Jr., Jennifer Young, Law Offices of A. Peter Rausch, Jr., Lodi, CA, Joseph Ferraro, Ferraro Mediation Group, Copperopolis, CA, for Plaintiffs.
Kendall H. MacVey, Best & Krieger LLP, Riverside, CA, Kenneth Reinker, PHV, Leah Brannon, PHV, Cleary Gottlieb Steen & Hamilton LLP, Washington, DC, for Defendant.
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS WITH LEAVE TO AMEND
This matter is before the court on defendant Netafim Irrigation, Inc.'s motion to dismiss the first amended complaint. (Doc. No. 18.) On May 7, 2019, that motion came before the court for hearing. Attorney A. Peter Rausch, Jr. appeared on behalf of plaintiffs Jain Irrigation, Inc. ("Jain"), Agri-Valley Irrigation ("AVI"), and Irrigation Design & Construction LLC ("IDC"). Attorneys Kendall H. MacVey and Kenneth Reinker appeared on behalf of defendant. Having considered the parties' briefing, and for the reasons that follow, defendant's motion will be granted with leave to amend.
In the first amended complaint, plaintiffs allege as follows. Jain manufactures and sells a wide variety of drip and micro-irrigation equipment throughout the United States, and as of 2017 has sales of approximately $80,000,000.00. (Doc. No. 14 ("FAC") at ¶ 10.) IDC is in the business of designing, engineering, fabricating, installing, and maintaining agricultural irrigation systems and selling irrigation supplies and parts at seven retail locations serving the Central and Salinas Valleys of California. (Id. at ¶ 11.) AVI does similar work throughout the Central Valley. (Id. at ¶ 12.) Like Jain, defendant Netafim also manufactures and sells drip and micro-irrigation products. (Id. at ¶ 14.)
On or about April 19, 2017, IDC and AVI announced that they had each entered into an agreement to provide equity to a newly formed company, Jain Distribution Holdings, Inc. ("Jain Distribution"), funded by Jain. (Id. at ¶ 13.) Although Jain Distribution became an investor and part owner of AVI and IDC, each continued to be managed and operated as an independent distributor. (Id. ) Beginning that same month, plaintiffs allege that Netafim began to form and enter into a conspiracy with other companies to boycott IDC and AVI. (Id. at ¶ 28.) These companies include, but are not limited to, Rivulis Irrigation, Inc. ("Rivulis"), Eurodrip U.S.A., Inc. ("Eurodrip"), The Toro Company ("Toro"), Bowsmith, Inc. ("Bowsmith"), Rain Bird Corporation ("Rain Bird"), Landmark Irrigation, Inc. ("Landmark"), and Hydratec, Inc. ("Hydratec"). (Id. at ¶¶ 15–22, 28.) In furtherance of the conspiracy, each of these companies (collectively, the "Conspiring Manufacturers") terminated their prior business relationships with IDC and AVI and refused to supply any further products to either company. (Id. at ¶ 28.) That same month, and pursuant to the same conspiracy, the Conspiring Manufacturers agreed with an unknown number of distributors (including at least Landmark and Hydratec) that in exchange for the Conspiring Manufacturers' agreement to boycott AVI and IDC, the distributors would boycott Jain by reducing or terminating their purchases of Jain products. (Id. at ¶ 29.)
The FAC describes Netafim as the "instigator" of the conspiracy and alleges that it sought to recruit other manufacturers to join. (Id. at ¶ 30.) The FAC also alleges that following the announcement of Jain Distribution's formation, Netafim's president telephoned an executive of Fresno Valve & Casting ("Fresno Valve"), a manufacturer of irrigation equipment and a direct competitor of both Netafim and Jain, and stated in substance that Jain "broke the rule" prohibiting manufacturers from selling directly to growers. (Id. ) The Netafim president then asked Fresno Valve to join Netafim to stop the violation of this "rule." (Id. ) Fresno Valve did not agree to join, and after speaking to executives at AVI and IDC confirming their intention and ability to continue to act independently, Fresno Valve's executive advised that Fresno Valve would not cut off sales to them. (Id. ) A few days after that phone call, Netafim publicly announced that it was terminating its relationship with IDC and AVI. (Id. at ¶ 31.) In May and June 2017, Rivulis, Toro, Rain Bird, and Bowsmith took similar action. (Id. at ¶¶ 32–35.)
Although Fresno Valve did not join the boycott of AVI and IDC, it remained under significant pressure to do so. (Id. at ¶ 36.) The FAC alleges that various distributors had direct discussions with Fresno Valve executives, stating in substance that "you are either with us or against us." (Id. ) Representatives from Bowsmith visited Fresno Valve and suggested to their executives that it would be better to cut off AVI and IDC. (Id. at ¶ 37.) The FAC further alleges that there was particular pressure on Fresno Valve because it was virtually the only source of filters for AVI and IDC. (Id. at ¶ 36.) Thus, if Fresno Valve could be persuaded to join the boycott, it would effectively "cripple" AVI and IDC. (Id. )
The FAC also describes an incident in which AVI and Rivulis representatives met over lunch to discuss the boycott. The Rivulis representative revealed that although Rivulis had projected a loss of 20% of its business due to the boycott, it turned out that the boycott had caused much greater losses. (Id. at ¶ 42.) The Rivulis representative went on to state that "Netafim started this whole thing" and was the "ring leader" of the arrangement. (Id. ) The representative further stated that Netafim had asked Rivulis to "join them in cutting off Jain" for the purpose of hurting Jain because Jain had "crossed the line" by getting into the distribution market, that Netafim had been calling other "suppliers" and asking them not to sell to AVI or IDC, and that Netafim and Rivulis intended to cost AVI and IDC business. (Id. )
In August 2017, Netafim brought several distributors in California to a meeting in Washington State. (Id. at ¶ 43.) At the meeting, the distributors discussed strategies to "take out" AVI and IDC and agreed that they should work together to damage AVI and IDC. (Id. ) The FAC lists numerous companies who had representatives present at this meeting. Ultimately, as a result of the conspiracy, or by reason of threats or pressure from the Conspiring Manufacturers, numerous companies have either reduced or eliminated their purchases from Jain. (Id. at ¶ 50.)
Plaintiffs seek both damages and injunctive relief under the Sherman Act, 15 U.S.C. § 1, and the Cartwright Act, California Business and Professions Code §§ 16720 and 16726. In addition, plaintiffs assert that defendants have interfered with prospective economic relations. Defendant moved to dismiss the FAC on February 6, 2019. (Doc. No. 18.) On March 19, 2019, plaintiffs filed an opposition. (Doc. No. 23.) Defendant filed a reply on April 2, 2019. (Doc. No. 24.)
The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal sufficiency of the complaint. N. Star Int'l v. Ariz. Corp. Comm'n , 720 F.2d 578, 581 (9th Cir. 1983). "Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't , 901 F.2d 696, 699 (9th Cir. 1990). A plaintiff is required to allege "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). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
In determining whether a complaint states a claim on which relief may be granted, the court accepts as true the allegations in the complaint and construes the allegations in the light most favorable to the plaintiff. Hishon v. King & Spalding , 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984) ; Love v. United States , 915 F.2d 1242, 1245 (9th Cir. 1989). However, the court need not assume the truth of legal conclusions cast in the form of factual allegations. U.S. ex rel. Chunie v. Ringrose , 788 F.2d 638, 643 n.2 (9th Cir. 1986). While Rule 8(a) does not require detailed factual allegations, "it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation."
Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. A pleading is insufficient if it offers mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ; see also Iqbal , 556 U.S. at 676, 129 S.Ct. 1937 (). Moreover, it is inappropriate to assume that the plaintiff "can prove facts which it has not alleged or that the defendants have violated the ... laws in ways that have not been alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters , 459 U.S. 519, 526, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983).
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