Novation Ventures, LLC v. J.G. Wentworth Co.

• Decision Date: 18 May 2015
• Docket Number: CV 15–00954 BRO (PJWx)
• Citation: 156 F.Supp.3d 1094
• Parties: Novation Ventures, LLC v. The J.G. Wentworth Company, LLC et al.
• Court: U.S. District Court — Central District of California

156 F.Supp.3d 1094

Novation Ventures, LLC

v.The J.G. Wentworth Company, LLC et al.

CV 15–00954 BRO (PJWx)

United States District Court, C.D. California.

Signed May 18, 2015

Courtney A. Palko, Maxwell M. Blecher, Blecher Collins Pepperman and Joye PC, Los Angeles, CA, for Novation Ventures, LLC.

Harold A. Barza, Kristen Bird, Shahin Rezvani, Michael E. Williams, Quinn Emanuel Urquhart and Sullivan LLP, Los Angeles, CA, for The J.G. Wentworth Company, LLC et al.

ORDER GRANTING MOTION TO DISMISS [17]

BEVERLY REID O'CONNELL, United States District Judge

Pending before the Court is Defendants' motion to dismiss Plaintiff's Complaint for failure to state a claim. (Dkt. No. 17.) After consideration of the papers filed in support of and in opposition to the instant motion, the Court deems this matter appropriate for decision without oral argument of counsel. See Fed.R.Civ.P. 78 ; C.D. Cal. L.R. 7–15. For the following reasons, Defendants' motion is GRANTED.

I. BACKGROUND

A. Factual Background

Plaintiff Novation Ventures, LLC is a Delaware limited liability company that is engaged in the business of factoring structured settlement payment rights by buying the right to receive scheduled future payments from settlement recipients who do not wish to or cannot wait years for their annuitized payments. (Compl. ¶ 3.) Defendant The J.G. Wentworth Company, LLC (“J.G. Wentworth”) is also a Delaware limited liability company and is, along with its subsidiaries, “by far the largest participant in the factoring of structured settlements.” (Compl. ¶ 4.) In August 2011, J.G. Wentworth acquired its largest competitor in the market for the purchase of structured settlement payment rights, Defendant Peach Holdings, LLC (“Peachtree”). (Compl. ¶¶ 5, 7–9.)

Before this merger, J.G. Wentworth funded approximately 40–45% of the structured settlement factoring transactions completed in the United States annually, whereas Peachtree funded 25–30%. (Compl. ¶¶ 7–8.) In an attempt to increase their relative market share, these companies would broadcast television ads and compete against each other “for on-screen ‘shelf space’ and position in pay-per-click Internet advertising.” (Compl. ¶¶ 7–8.) Following the merger, Plaintiff alleges that “a common ownership and management entity [ ] maintains and promotes both brands, running ads for both JG Wentworth and Peachtree as though they continue to be separate, competitive entities when in fact they are commonly owned and managed.” (Compl. ¶ 27.) Plaintiff claims that this merger, in addition to Defendants' allegedly deceptive conduct following the merger, constitutes a violation of both section 7 of the Clayton Act and section 2 of the Sherman Act. (Compl. 32–34.)

While Google, Inc. (“Google”) is not named as a Defendant in this matter, much of Plaintiff's antitrust claims rely on alleged conduct involving Google. For example, the Complaint alleges that Google operates a business called “AdWords,” through which, “[e]very moment of every day, commercial advertisers bid to display their ads in the search results shown to those who use the Google online search engine to find information about a designated search term.” (Compl. ¶ 12.) Google operates this advertising business “as a dynamic online auction in which competing businesses bid against one another to pay Google a ‘per click’ fee whenever (a) a Google user seeks information about a designated search term, (b) the advertiser's listing is displayed, and (c) the user ‘clicks' on the displayed listing, thereby taking the user to the advertiser's website or phone number.” (Compl. ¶ 13.) According to the Complaint, “[t]ypically, individuals (or their advisors) seeking to find a buyer for structured settlement payment rights will search the Internet using Google”; moreover, “only the top listings on the first page of results are likely to be reviewed and ‘clicked’ on.” (Compl. ¶ 22.) As a result, Plaintiff alleges, it is very valuable to be among these first few listings. (Compl. ¶ 13.)

Plaintiff alleges that “[b]y coordinating their Google AdWords ‘pay-per-click’ bidding and budgets, JG Wentworth and Peachtree are able to consistently grab two of the top three or four search listing results on many of the keywords used by consumers searching for structured settlement buyers.” (Compl. ¶ 23.) According to Plaintiff, this constitutes anti-competitive behavior because it “crowds out competitors and/or drives up the cost of being in second or third position in any given search ranking, making it more difficult and expensive for Novation to be found by potential customers looking for genuinely competing offers,” and it “also harms consumers, who are led to believe they are shopping among competing alternatives, but really are not.” (Compl. ¶ 24.) Plaintiff therefore filed the instant antitrust lawsuit to prevent such behavior.

Plaintiff defines the relevant product market in this action as “the factoring of structured settlement payment rights” and the relevant geographic market as the United States of America. (Compl. ¶ 16.) Within this market, Plaintiff alleges that “[t]here are only a handful of companies competing for the factoring of structured settlement payment rights in the United States. Post-merger, JG Wentworth is by far the largest, with a market share of about 75%. Novation has a market share believed to be no more than 7%.” (Compl. ¶ 17.) The essence of Plaintiff's claims is that “[t]he actual and likely continued effect of JG Wentworth's acquisition of Peachtree[ ] has substantially lessened and will continue to substantially lessen competition and to create a monopoly in interstate trade and commerce in the United States factoring of structured settlements.” (Compl. ¶ 32.) Plaintiff also alleges that Defendants' merger, “[c]oupled with their subsequent conduct, ... violate[s] the attempt to monopolize, conspiracy to monopolize, and monopolization clauses of Section 2 of the Sherman Act.” (Compl. ¶ 15.)

B. Procedural History

Plaintiff filed its Complaint on February 10, 2015, naming J.G. Wentworth; Peachtree; JGWPT Holdings, LLC; The J.G. Wentworth Company; JGWPT, Inc.; J.G. Wentworth S.S.C.; and Peachtree Financial Solutions as Defendants. (Dkt. No. 1.) Defendants then filed the instant motion to dismiss on April 6, 2015. (Dkt. No. 17.) Plaintiff opposed this motion on April 22, 2015, (Dkt. No. 19), and Defendants replied on May 4, 2015, (Dkt. No. 20).

II. LEGAL STANDARD

Under Rule 8(a), a complaint must contain a “short and plain statement of the claim showing that the [plaintiff] is entitled to relief.” Fed.R.Civ.P. 8(a). If a complaint fails to do this, the defendant may move to dismiss it under Rule 12(b)(6). Fed.R.Civ.P. 12(b)(6). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A claim is plausible on its face “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “Factual allegations must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Thus, there must be “more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. “Where a complaint pleads facts that are ‘merely consistent with’ a defendant's liability, it ‘stops short of the line between possibility and plausibility’ ” that the plaintiff is entitled to relief. Id.

Where a district court grants a motion to dismiss, it should provide leave to amend unless it is clear that the complaint could not be saved by any amendment. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir.2008) (“Dismissal without leave to amend is improper unless it is clear, upon de novo review, that the complaint could not be saved by any amendment.”). But leave to amend “is properly denied ... if amendment would be futile.” Carrico v. City & Cnty. of S.F., 656 F.3d 1002, 1008 (9th Cir.2011).

III. DISCUSSION

Defendants have raised several arguments as to why Plaintiff has failed to state a claim, including that Plaintiff has failed adequately to allege an antitrust injury and that Plaintiff has failed to state a violation of section 2 of the Sherman Act. As a preliminary matter, however, Plaintiff contends in opposition that it would not be appropriate to consider these arguments at this stage in the proceedings. Instead, Plaintiff argues that the Court should defer ruling on these claims until summary judgment, at which point the factual record will be more fully developed. Plaintiff even goes so far as to assert that “[n]othing more than notice pleading is required,” and that “a complaint need only give the defendant fair notice of the claims and grounds upon which they rest.” (Opp'n at 2.) As Defendants argue in reply, however, “[a]t least for the purposes of adequate pleading in antitrust cases, the Court specifically abrogated the usual ‘notice pleading’ rule which requires only ‘a short and plain statement of the claim showing that the pleader is entitled to relief,’ to ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ ” Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1047 (9th Cir.2008) (internal citations omitted) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ); accord Rick – Mik Enters., Inc. v. Equilon Enters. LLC, 532 F.3d 963, 970–71 (9th Cir.2008) (“In Twombly, at least in antitrust matters, the Supreme Court ‘retired’ the familiar language derived from Conley v. Gibson, 355 U.S. 41, 45–46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), which provided ‘the accepted rule that 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...