Origami Owl LLC v. Mayo
| Decision Date | 07 August 2015 |
| Docket Number | No. CV-15-00110-PHX-DGC,CV-15-00110-PHX-DGC |
| Parties | Origami Owl LLC, Plaintiff, v. Julie E. Mayo, et al., Defendants. |
| Court | U.S. District Court — District of Arizona |
Origami Owl has moved to dismiss West Coast Charm's antitrust counterclaims. Doc. 52. The motion is fully briefed and neither side has requested oral argument. Docs. 53, 54. The Court will deny the motion.
Origami Owl is in the business of low-priced jewelry. Doc. 20, ¶ 13. The jewelry includes lockets, chains, dangles, tags, bracelets, and earrings. Id. Origami Owl sells its products online as well as through a salesforce of independent "designers." Id., ¶¶ 13-14. Origami Owl has registered patents, trademarks, and copyrights that protect its unique designs. Id., ¶ 18. Defendants West Coast Charms, LLC, 5th Avenue Pets, Julie Mayo, and Ann Mayo are also in the business of ornamental jewelry. Id., ¶ 20. Origami brought suit claiming infringement of its intellectual property rights. Doc. 1.
West Coast Charms, LLC ("WCC") filed counterclaims against Origami Owl. Doc. 48. WCC alleges that Origami Owl copies and reproduces jewelry that others have designed. Id., ¶ 2. Origami allegedly discounts its retail prices for jewelry by eightypercent from its wholesale prices. Id., ¶ 29. WCC also alleges that Origami "bull[ies] competitors with false claims of proprietary intangible asset ownership" (id., ¶ 32) and that competitors cannot compete with Origami's pricing and "army of its so-called designers" (id., ¶ 34). WCC claims that it owns various copyrights and a trademark that Origami has infringed. Id., ¶¶ 38-103.
WCC also claims that Origami has violated antitrust laws under the Sherman Act. Id., ¶¶ 104-24. Specifically, WCC claims that Origami has attempted to monopolize the market and has conspired with its designers to restrain trade. Id. (citing 15 U.S.C. §§ 1-2). Origami Owl moves to dismiss the antitrust counterclaims.
A party may move to dismiss a counterclaim for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). In analyzing whether a counterclaim has failed to state a claim, the well-pled factual allegations are taken as true and construed in the light most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). Legal conclusions couched as factual allegations are not entitled to the assumption of truth. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Furthermore, "the factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). This plausibility standard "is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).
Antitrust laws are designed for "the protection of competition, not competitors[.]" Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962). Section 1 of the Sherman Act makes unlawful "[e]very contract, combination . . . or conspiracy, in restraint of trade or commerce[.]" 15 U.S.C. § 1. Section 2 makes unlawful the attempted or actual monopolization of trade or commerce. Id. § 2. WCC brings claims under both of thesesections. Origami Owl objects to these claims on various grounds, which the Court will address in the order presented.
Origami argues that WCC has failed to plausibly allege a relevant market. "Failure to identify a relevant market is a proper ground for dismissing a Sherman Act claim." Tanaka v. Univ. of S. California, 252 F.3d 1059, 1063 (9th Cir. 2001) (citing Big Bear LodgingAss'n v. Snow Summit, Inc., 182 F.3d 1096, 1105 (9th Cir. 1999)). Plausibly alleging the size and characteristics of the relevant market is a prerequisite to claiming that a company has sufficient market power to build a monopoly or engage in anticompetitive conduct within that market. Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965) (); see also Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d 1038, 1044 & n.3 (9th Cir. 2008).
"A 'relevant market' is determined by a product market and a geographic market." Portney v. CIBA Vision Corp., 593 F. Supp. 2d 1120, 1126 (C.D. Cal. 2008). "'The outer boundaries of a product market are determined by the reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it.'" Olin Corp. v. F.T.C., 986 F.2d 1295, 1298 (9th Cir. 1993) (quoting Brown Shoe Co., 370 U.S. at 325). "The geographic market extends to the area of effective competition . . . where buyers can turn for alternative sources of supply." Tanaka, 252 F.3d at 1063 (quotation marks and citations omitted). There is no requirement that the relevant market "be pled with specificity," but a court may dismiss an antitrust claim if its relevant-market definition is "facially unsustainable." Newcal Indus., 513 F.3d at 1045.
The allegations in WCC's counterclaim are as follows:
WCC has plausibly alleged a relevant market. The product market consists of the online market for customized, ornamental, and low-priced jewelry. The geographic market is the United States. Origami Owl objects to the narrowing of the market to online sales. Origami argues that local jewelry stores can compete with online sales and that any claim to the contrary is implausible. Origami emphasizes that "[t]he relevant market must include sellers or producers who have the actual or potential ability to deprive one another of significant levels of business." Doc. 52 at 8 (citing Thurman Indus., Inc. v. Pay 'N Pak Stores, Inc., 875 F.2d 1369, 1374 (9th Cir. 1989)).
Courts have found a claimant's alleged relevant market to be implausible at the motion to dismiss stage. In Tanaka, a student athlete complained of a university's refusal to allow her to transfer to a different school. 252 F.3d at 1061-62. For her antitrust claim, she alleged that the "relevant geographic market is Los Angeles and the relevant product market is the 'UCLA women's soccer program.'" 252 F.3d at 1063. She also alleged that other universities across the country had recruited her. Id. Relying on this fact, the Ninth Circuit found that numerous universities with athletic programs "compete in the recruiting of student-athletes and, hence, are interchangeable with each other for antitrust purposes." Id. at 1064. Even though the claimant alleged that the UCLA women's soccer program was "unique," the court found this conclusory allegation to be insufficient. Id. at 1063.
In Little Rock Cardiology Clinic PA v. Baptist Health, the claimant alleged that the relevant product market was "the market for cardiology procedures obtained in hospitals by patients covered by private insurance." 591 F.3d 591, 596 (8th Cir. 2009) (emphasis added). The claimant also alleged that doctors providing these cardiology procedures can and did "accept payment from sources other than private insurers." Id. at 597. Thus, the claimant was attempting to narrow the market to cardiology procedures obtained by patients covered by private insurance, even though the claimant admitted that the doctors accepted public insurance. For that reason, the Eighth Circuit found the alleged relevant market to be implausible. Id. at 597-98.
WCC's allegations are not like those in Tanaka and Little Rock. WCC alleges that the relevant market is online sales of certain types of jewelry. WCC further alleges a reason for narrowing the market to online sales, namely, that customers are unable to acquire these products at local retail stores and these stores do not have "the same type of electronic ordering efficiency and capability as an online market." Doc. 48, ¶ 24. These allegations are not implausible, as was the allegation in Tanaka that the market was limited to one university's athletic program. Nor are WCC's allegations internally inconsistent, as were the allegations in Little Rock.
Origami Owl may well be correct that WCC's alleged relevant market is unlikely to survive summary judgment. But at this stage, the Court is required to assume the truth of WCC's allegations and to construe them in WCC's favor. Cousins, 568 F.3d at 1067. Furthermore, the definition of the relevant market is normally "a factual inquiry for the jury." Thurman Indus., 875 F.2d at 1374.1
Origami argues that WCC has failed to allege that Origami has "market power"...
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