New Albany Tractor Inc. v. Louisville Tractor Inc.

• Decision Date: 21 June 2011
• Docket Number: No. 10–5100.,10–5100.
• Citation: 650 F.3d 1046,2011 Trade Cases P 77498,79 Fed.R.Serv.3d 1362
• Parties: NEW ALBANY TRACTOR, INC., Plaintiff–Appellant,v.LOUISVILLE TRACTOR, INC.; Metalcraft of Mayville, dba Scag Power Equipment, Inc., Defendants–Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

650 F.3d 1046

2011-1 Trade Cases P 77,498

79 Fed.R.Serv.3d 1362

NEW ALBANY TRACTOR, INC., Plaintiff–Appellant,

v.LOUISVILLE TRACTOR, INC.; Metalcraft of Mayville, dba Scag Power Equipment, Inc., Defendants–Appellees.

No. 10–5100.

United States Court of Appeals, Sixth Circuit.

June 21, 2011.

ON BRIEF: Thomas E. Roma, Jr., Parker & O'Connell, PLLC, Louisville, Kentucky, for Appellant. D. Craig York, Jill F. Endicott, Dinsmore & Shohl LLP, Louisville, Kentucky, C. Kent Hatfield, Justin D. Clark, Stoll Keenon Ogden PLLC, Louisville, Kentucky, David A. Westrup, von Briesen & Roper, s.c., Milwaukee, Wisconsin, for Appellees.Before: MERRITT, CLAY, and GRIFFIN, Circuit Judges.

OPINION

MERRITT, Circuit Judge.

Plaintiff, New Albany Tractor, appeals the Federal Rule of Civil Procedure 12(b)(6) (“failure to state a claim upon which relief can be granted”) dismissal of its complaint alleging violations of the Robinson–Patman Act, an amendment to the Clayton Act. Plaintiff also contends that it should have been allowed to amend the complaint, or, alternatively, it should have been dismissed without prejudice. The basic question before us is the effect of two recent Supreme Court decisions, Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), which addressed pleading requirements under Rule 8 of the Federal Rules of Civil Procedure (“short and plain statement of the claim”). For the reasons that follow, we agree that these cases required the district court to dismiss the complaint with prejudice.

I.

Plaintiff, New Albany Tractor, Inc., filed a complaint against defendants, Metalcraft of Mayville, Inc., d/b/a Scag Power Equipment and Louisville Tractor, Inc., alleging violation of the Robinson–Patman Act, 15 U.S.C. § 13(a). The Robinson–Patman Act prohibits, among other things, a seller from selling the same product to two different buyers at different prices.¹ Its primary purpose is to stop large buyers from receiving discriminatory preferences over smaller buyers due to the larger buyers' greater purchasing power. Defendant Scag, a Wisconsin corporation, manufactures mowing equipment that it sells to distributors that in turn sell to retailers. Defendant, Louisville Tractor, wears two hats: it is the exclusive wholesale distributor of Scag equipment to retailers in the Louisville area, and it is also a retailer of Scag equipment in the Louisville market. Plaintiff, New Albany Tractor, is solely a retailer, selling Scag mowers as well as other brands in the Louisville area. Scag requires New Albany to buy its Scag product line and parts from Louisville Tractor, its exclusive distributor in the Louisville area. Scag will not sell directly to New Albany Tractor (or any other retailer) and it will not allow New Albany Tractor to purchase Scag equipment from a Scag distributor outside the Louisville area.

Essentially, New Albany Tractor's complaint alleges a discriminatory pricing scheme between defendant Scag, the manufacturer, and defendant Louisville Tractor, in its role as the exclusive wholesaler of Scag equipment in the Louisville market, with the effect of reducing competition. In order to satisfy the requirement in the language of the Act that the sales must be to “different purchasers,” plaintiff alleges that Louisville Tractor, which is the only purchaser of Scag products in the Louisville market due to its exclusive distributorship, is a “dummy” or strawman operation that is controlled by Scag so that any sale from Louisville Tractor to plaintiff is a fiction. Plaintiff alleges that it is Scag, not Louisville Tractor, selling directly to New Albany Tractor and the other retailers in the Louisville area. This “dummy” or “strawman” arrangement is known as “the indirect purchaser doctrine” for purposes of the Robinson–Patman Act.

II.

Procedurally, this case had a somewhat confused history in the district court. After plaintiff, New Albany Tractor, filed its complaint, defendants, Scag Power Equipment and Louisville Tractor, filed individual motions to dismiss on the ground that New Albany Tractor had not made sufficient factual allegations that, as to pricing, would provide relief under Robinson–Patman. The district court initially denied the motions to dismiss, but, upon defendants' motions for reconsideration, agreed with defendants and granted the motions to dismiss the complaint.² In a short order granting reconsideration and dismissing plaintiff's Robinson–Patman Act claim, the district court found insufficient the allegation that Louisville Tractor was a “dummy” wholesaler or distributor. It concluded that plaintiff did not allege sufficient facts as to pricing to indicate that Scag “set or controlled [the distributor's] resale price.” Order of January 5, 2010, at 1 (quoting Barnosky Oils, Inc. v. Union Oil Co. of Calif., 665 F.2d 74, 84 (6th Cir.1981)). In the January 5, 2010, order, the district court said that its November 2, 2009, decision to deny defendants' motions to dismiss was based on the court's erroneous belief that the pricing sheet filed with the district court was a sufficient allegation that Scag actually set or controlled Louisville Tractor's resale prices of Scag products. Instead it concluded that the allegations were insufficient to claim that the relationship was other than a “traditional” or “normal” manufacturer-distributor relationship and would have the “absurd result of extending the [indirect purchaser] doctrine to cover every resale of goods.” Jan. 5 Order at 3 (quoting Barnosky, 665 F.2d at 84).

III.

Plaintiff raises two main issues on appeal: (1) the district court erred in granting the motions to dismiss by finding plaintiff's factual allegations in the complaint and the affidavit of its president, Richard Kesselring, insufficient to state a claim for relief under the Robinson–Patman Act, 15 U.S.C. § 13, and (2) the district court erred in failing to allow plaintiff to amend its complaint rather than giving the plaintiff an opportunity to amend.

Two recent decisions have changed the long-standing rule of Conley v. Gibson, in which the Supreme Court stated, “a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim....” 355 U.S. 41, 45–46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Supreme Court said that a plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” In Twombly, the Court changed the standard applicable to Rule 12(b)(6) motions to dismiss Sherman Act claims by directing that Rule 12(b)(6) must be read in conjunction with Rule 8(a), which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Acknowledging that material allegations must be accepted as true and construed in the light most favorable to the nonmoving party, the Court nevertheless held that complaints in which plaintiffs have failed to plead enough factual detail to state a claim that is plausible on its face may be dismissed for failure to state a claim. 550 U.S. at 569–70, 127 S.Ct. 1955. The Court explained that courts may no longer accept conclusory legal allegations that do not include specific facts necessary to establish the cause of action.

This new “plausibility” pleading standard causes a considerable problem for plaintiff here because defendants Scag and Louisville Tractor are apparently the only entities with the information about the price at which Scag sells its equipment to Louisville Tractor. This pricing information is necessary in order for New Albany to allege that it pays a discriminatory price for the same Scag equipment, as required by the language of the Act. This type of exclusive distribution structure makes it particularly difficult to determine whether discriminatory pricing exists.

Before Twombly and Iqbal, courts would probably have allowed this case to proceed so that plaintiff could conduct discovery in order to gather the pricing information that is solely retained within the accounting system of Scag and Louisville Tractor. It may be that only Scag and Louisville Tractor have knowledge of whether Scag exercises control over the terms and conditions of Louisville Tractor's sales to retailers, including the retail operations of Louisville Tractor. The plaintiff apparently can no longer obtain the factual detail necessary because the language of Iqbal specifically directs that no discovery may be conducted in cases such as this, even when the information needed to establish a claim of discriminatory pricing is solely within the purview of the defendant or a third party, as it is here. Ashcroft v. Iqbal, 129 S.Ct. at 1954 (“Because respondent's complaint is deficient under Rule 8, he is not entitled to discovery, cabined or otherwise.”). By foreclosing discovery to obtain pricing information, the combined effect of Twombly and Iqbal require plaintiff to have greater knowledge now of factual details in order to draft a “plausible complaint.” See Arthur R. Miller, From Conley to Twombly to Iqbal: A Double Play on the Federal Rules of Civil Procedure, 60 Duke L.J. 1, 105 (2010) (discussing the need for greater factual information after Twombly ). Without discovery, pricing information or any fact that would support an allegation of illegal economic collusion becomes far harder to obtain. Under the new Twombly standard set forth by the Supreme Court in an antitrust case, even though a complaint need not contain detailed factual allegations, its “[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true.” 550 U.S. at 555, 127 S.Ct. 1955. In this case that means,...