Natsource LLC. v. Gfi Group, Inc.

• Decision Date: 20 August 2004
• Docket Number: No. 03 Civ. 10071(RWS).,03 Civ. 10071(RWS).
• Citation: Natsource LLC. v. Gfi Group, Inc., 332 F.Supp.2d 626 (S.D. N.Y. 2004)
• Parties: NATSOURCE LLC, Plaintiff, v. GFI GROUP, INC., Patrick Curley, Christopher M. D'Ambrosi, Richard G. Heffernan, John Prendergast, Angelo Primavera, Jr., Joshua D. Slansky and Gregory Woyshner, Defendants.
• Court: U.S. District Court — Southern District of New York

332 F.Supp.2d 626

NATSOURCE LLC, Plaintiff, v. GFI GROUP, INC., Patrick Curley, Christopher M. D'Ambrosi, Richard G. Heffernan, John Prendergast, Angelo Primavera, Jr., Joshua D. Slansky and Gregory Woyshner, Defendants.

No. 03 Civ. 10071(RWS).

United States District Court, S.D. New York.

August 20, 2004.

COPYRIGHT MATERIAL OMITTED

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Kasowitz, Benson, Torres & Friedman, By: Daniel B. Goldman, Gary W. Dunn, of counsel, New York, NY, for Plaintiff.

Epstein, Becker & Green, By: Peter L. Altieri, Lauri F. Rasnick, of counsel, New York, NY, for Defendants.

OPINION

SWEET, District Judge.

The defendants have moved under Fed.R.Civ.P. 12(b)(6) to dismiss the complaint of Natsource LLC ("Natsource") and under Fed.R.Civ.P. 56 for summary judgment. For the reasons set forth below, the motion to dismiss the complaint is denied, and the motion for summary judgment is granted.

The Parties

Natsource is an inter-dealer broker of electrical power.

GFI Group, Inc. ("GFI") is the parent of non-party GFI Brokers LLC, and is also an inter-dealer of electrical power. GFI Brokers LLC is the employer of Patrick Curley ("Curley"), Christopher D'Ambrosi ("D'Ambrosi"), Richard Heffernan ("Heffernan"), John Prendergast ("Prendergast"), Angelo Primavera ("Primavera"), Joshua Slansky ("Slansky"), and Gregory Woyshner ("Woyshner") (collectively the "Individual Defendants"). The Individual Defendants are brokers of electrical power formerly employed by Natsource who have been hired by GFI.

Prior Proceedings

Natsource filed its complaint in this action on December 18, 2003, seeking redress for damages that it suffered as the result of, inter alia, GFI's unlawful attempt to monopolize the voice brokerage of electric power in the "Eastern Market," which includes the New England states, New York, Pennsylvania, New Jersey, Maryland and the "ANC business," which "involves the buying and selling of electrical line capacity, as it is conducted in the Eastern market and other markets." Complaint. ¶ 19. Natsource alleged that in an attempt to obtain monopoly power, GFI, through wrongful means, induced a large group of Natsource's brokers to leave the employ of Natsource and to join GFI, effectuating the transfer of the vast majority of Natsource's customers in the Eastern Market to GFI. Complaint ¶ 28-52.

To achieve its goal of attaining monopoly power, Natsource has alleged that GFI misappropriated confidential information from Natsource, (see id. at ¶¶ 28-32), breached a confidentiality agreement with Natsource and used confidential information protected by that agreement in furtherance of its plan to co-opt Natsource's customers, see id., aided and abetted breaches of the fiduciary duties of Natsource's former brokers, see id. at ¶¶ 33-38, and tortuously interfered with the employment contracts between Natsource and such brokers, see id. at ¶¶ 33-38, 44-45.

As the result of this wrongdoing, GFI achieved a market share in excess of 60% of the Eastern Market, and Natsource, suffering millions of dollars in damages, can no longer effectively compete in that market. See id. at ¶¶ 39-43, 47-48.

No discovery has been conducted. The instant motion was heard and marked fully submitted on April 28, 2004.

The Facts

The facts are set forth in the Rule 56.1 Statement of GFI and have not been challenged by Natsource and consequently are not contested except as noted.

GFI and Natsource are both inter-dealer brokerage firms which engage in voice-based brokerage, id. at ¶ 18, and function as intermediaries, matching the bids and offers for various products, including financial products and energy-related products. These bids and offers are made by institutions, primarily large banks and utility companies (the "dealers" or "customers"). Id. at ¶ 21.

Electric power, which is one of the products brokered by the Individual Defendants, is a highly homogeneous product, differentiated primarily by the region in which it is traded. Id. at ¶ 20. Customers of electric power do not necessarily use the power that is bought and sold. Id. at ¶ 21. Some customers, such as financial institutions, merely engage in speculative trading of the product. Other customers, such as utilities, may buy or sell electric power depending upon the needs of their respective companies. Id. at ¶ 20. Regardless of the purpose behind the purchase, customers of inter-dealer brokerage firms want one thing — to efficiently get the best price for the purchase or sale of electric power. Id. at ¶ 18.

As the customers of inter-dealer brokerage firms which broker electric power are large financial institutions and utility companies, they are readily identifiable by all brokers of electric power and can be easily located in public sources such as OPIS/-Stalsby's Who's Who in Natural Gas & Power. Neither trade secrets nor proprietary information are involved in the identification of possible customers. The relationships between brokers and traders, by necessity, are personal, and they can only be developed over many years in both a business and, often, a non-business context. Id. at ¶ 4. Traders in the Eastern Market allow a select few brokers with whom they regularly do business to establish a direct phone line to traders, which operate like an intercom in which traders and brokers can instantly communicate with each other by simply touching a button and talking into a speaker. Id. at ¶ 25. The traders allow only a few of these lines to be installed at their desks. Only the brokers who have the closest relationship with them secure this privilege.

Each institutional customer routinely utilizes the services of competing inter-dealer brokerage firms simultaneously. No inter-dealer brokerage firm possesses a proprietary interest in any of these customers concerning the buying and/or selling of electric power. While an inter-dealer broker can act as an intermediary between or among customers regarding the negotiation of a price, the broker does not take a proprietary position during the transactional process, nor does (or can) he or she set the price or have any particular interest in whether prices of the electricity are higher or lower. In exchange for successfully completing transactions, inter-dealer brokerages earn commissions from both counter-parties to the trade.

The Motion To Dismiss The Complaint Is Denied

The complaint has stated a claim for attempted monopolization. In reviewing a 12(b)(6) motion, courts must "accept as true the factual allegations of the complaint, and draw all inferences in favor of the pleader." Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir.1993) (citing IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1052 (2d Cir.1993)). However, "legal conclusions, deductions or opinions couched as factual allegations are not given a presumption of truthfulness." L'Europeenne de Banque v. La Republica de Venezuela, 700 F.Supp. 114, 122 (S.D.N.Y.1988). The complaint may only be dismissed when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see also Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir.1996). "This rule applies with no less force to a Sherman Act claim....'" McLain v. Real Estate Board of New Orleans, Inc., 444 U.S. 232, 246, 100 S.Ct. 502, 62 L.Ed.2d 441 (1980).

In determining a motion to dismiss, "only the facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the pleadings and matters of which judicial notice may be taken are considered." Samuels v. Air Transport Local 504, 992 F.2d 12, 15 (2d Cir.1993). "A court's task in ruling on a Rule 12(b)(6) motion is `merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence to which might be offered in support thereof.'" Levitt v. Bear Stearns & Co., Inc., 340 F.3d 94, 101 (2d Cir.2003) (quoting Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir.1998)).

"No heightened pleading requirements apply in antitrust cases. `[A] short plain statement of a claim for relief which gives notice to the opposing party is all that is necessary in antitrust cases, as in other cases under the Federal Rules.'" Todd v. Exxon Corp., 275 F.3d 191, 198 (2d Cir.2001) (quoting George C. Frey Ready-Mixed Concrete, Inc. v. Pine Hill Concrete Mix Corp., 554 F.2d 551, 554 (2d Cir.1977)). "The discovery process is designed to provide whatever additional sharpening of the issues is necessary." George C. Frey, 554 F.2d at 554. "[I]n antitrust cases in particular, the Supreme Court has stated that `dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly.'" Todd, 275 F.3d at 198 (quoting George Haug Co. v. Rolls Royce Motor Cars Inc. 148 F.3d 136, 139 (2d Cir.1998)).

Natsource has pleaded a claim for attempted monopolization. Section 2 of the Sherman Act makes it unlawful to "attempt to monopolize ... any part of the trade or commerce among the several States ..." 15 U.S.C. § 2 (1997). "To establish a claim for attempted monopolization, a plaintiff must prove: (1) that the defendant has engaged in predatory or anticompetitive conduct with (2) a specific intent to monopolize¹ and (3) a dangerous probability of achieving monopoly power." Tops Markets, Inc. v. Quality Markets, Inc. 142 F.3d 90, 99-100 (2d Cir.1998).

Natsource has alleged, inter alia, that GFI tortiously interfered with its contracts and business relationships, that it aided and abetted certain Natsource employees in breaching their fiduciary duties, that it intentionally breached a confidentiality agreement for the purposes of co-opting Natsource's business, and that it misappropriated Natsource's trade secrets. (Id. at ¶¶ 28-65, 75-83).

While the hiring of employees alone generally cannot give rise to antitrust liability, the hiring of a competitor's employees in...