Oxbow Carbon & Minerals LLC v. Union Pac. R.R. Co.

• Decision Date: 26 February 2013
• Docket Number: Civil Action No. 11–1049 (PLF).
• Citation: 926 F.Supp.2d 36
• Court: U.S. District Court — District of Columbia
• Parties: OXBOW CARBON & MINERALS LLC, et al., Plaintiffs, v. UNION PACIFIC RAILROAD COMPANY, et al., Defendants.

926 F.Supp.2d 36

OXBOW CARBON & MINERALS LLC, et al., Plaintiffs,

v.UNION PACIFIC RAILROAD COMPANY, et al., Defendants.

Civil Action No. 11–1049 (PLF).

United States District Court, District of Columbia.

Feb. 26, 2013.

Merril Jay Hirsh, John Richard Gerstein, Troutman Sanders LLP, Washington, DC, Barry J. Brett, Daniel N. Anziska, Troutman Sanders LLP, Robert Silver, Boies Schiller & Flexner LLP, New York, NY, David Boies, Boies Schiller & Flexner LLP, Armonk, NY, for Plaintiffs.

John M. Majoras, Jones Day, Columbus, OH, Kristen A. Lejnieks, Jones Day, Alan Mitchell Wiseman, Michael L. Rosenthal, Covington & Burling LLP, Washington, DC, Carolyn A. Woodson, David G. Meyer, Tyrone R. Childress, Jones Day, Los Angeles, CA, for Defendant, Union Pacific Railroad Company.

Richard Joseph Favretto, Mayer Brown LLP, Washington, DC, Bradley S. Phillips, Henry Weissmann, Lindsay McCaskill, Munger, Tolles & Olson, LLP, Los Angeles, CA, for Defendant, BNSF Railway Company.

OPINION

PAUL L. FRIEDMAN, District Judge.

This matter is before the Court on defendants' motions to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. The Court has carefully considered the arguments made by the parties in their papers and the oral arguments presented by counsel in court on October 26, 2012.¹ The Court concludes that plaintiffs have failed to allege adequate facts to state claims under Section 1 and Section 2 of the Sherman Act, although it is plausible that plaintiffs could amend their complaint to sufficiently allege a claim under the Act. Accordingly, defendants' motions to dismiss will be granted; plaintiffs' claims will be dismissed without prejudice.

I. BACKGROUND

Six related companies—Oxbow Carbon & Minerals LLC, Oxbow Mining, LLC, Oxbow Calcining International LLC, Oxbow Midwest Calcining LLC, Oxbow Calcining LLC and Terror Creek LLC—have brought this suit against defendants Union Pacific Railroad Company (“Union Pacific” or “UP”) and BNSF Railway Company (“BNSF”), claiming that plaintiffs have been harmed by a variety of anticompetitive actions undertaken by defendants in violation of Section 1 and Section 2 of the Sherman Act. Plaintiffs engage in various aspects of the production, marketing, sale, and shipment of coal and petroleum coke. Compl. ¶¶ 12–17. Plaintiffs allege that they have been harmed by supra-competitive pricing and inferior rail freight services resulting from defendants' alleged misconduct. Defendants have moved to dismiss both claims.

In support of their first claim, brought under Section 1 of the Sherman Act, 15 U.S.C. § 1, plaintiffs allege that Union Pacific and BNSF engaged in price-fixing through the adoption of a uniform fuel surcharge, in violation of Section 1's prohibition on contracts, combinations, and conspiracies in restraint of trade. Compl. ¶¶ 33–68. The conspiracy alleged is virtually identical to that alleged in a related class action before this Court, In re Rail Freight Fuel Surcharge Antitrust Litigation, Misc. No. 07–0489 (“Rail Freight Action”). In that suit, a class of direct and indirect purchasers of rail freight transportation services claim that BNSF and Union Pacific, along with two other railroad companies, violated Section 1 of the Sherman Act by conspiring to raise freight prices above competitive levels through the imposition of a uniform fuel surcharge. In re Rail Freight Fuel Surcharge Antitrust Litig. (“ Rail Freight I ”), 587 F.Supp.2d 27, 29–31 (D.D.C.2008). ² According to the Complaint in the instant case, plaintiffs together have paid over thirty million dollars in wrongfully imposed fuel surcharges. Compl. ¶ 124.

In support of their second claim, brought under Section 2 of the Sherman Act, plaintiffs allege that defendants engaged in monopolization, attempted monopolization, and conspiracy to monopolize. The heart of plaintiffs' second claim is that Union Pacific and BNSF engaged in a conspiracy to monopolize by (a) imposing the aforementioned fuel surcharge on customers and (b) allocating the market such that defendants ceased competing with each other for customers. Compl. ¶¶ 133–37. Plaintiffs also argue that UP independently monopolized or attempted to monopolize the rail freight market in the Western United States by participating in the alleged conspiracies and failing to take certain pro-competitive actions, including expanding rail infrastructure in the Western United States. Id. ¶ 110.

Plaintiffs bring this suit pursuant to sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15, 26, which provide a private right of action for “any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws.” 15 U.S.C. § 15(a).

II. MOTION TO DISMISS UNDER RULE 12(b)(6)

Rule 12(b)(6) of the Federal Rules of Civil Procedure allows dismissal of a complaint if a plaintiff fails “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “Federal Rule of Civil Procedure 8(a)(2) requires only ‘a short and plain statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ ” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). Although “detailed factual allegations” are not necessary to withstand a Rule 12(b)(6) motion to dismiss, the facts alleged must be “enough to raise a right to relief above the speculative level.” Id. The complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotations omitted). “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.” In re Interbank Funding Corp. Sec. Litig., 629 F.3d 213, 218 (D.C.Cir.2010) (quoting Ashcroft v. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937).

In considering a motion to dismiss under Rule 12(b)(6), the Court “must accept as true all of the factual allegations contained in the complaint.” Bell Atlantic Corp. v. Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (quoting Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508 n. 1, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002)). The complaint is construed liberally in plaintiffs' favor, and the Court gives plaintiffs “the benefit of all inferences that can be derived from the facts alleged.” Hettinga v. United States, 677 F.3d 471, 476 (D.C.Cir.2012) (internal quotations omitted). Nevertheless, the Court need not accept inferences drawn by the plaintiff if those inferences are unsupported by facts alleged in the complaint, nor must the Court accept the plaintiffs' legal conclusions. Id. (citing Kowal v. MCI Commc'ns Corp., 16 F.3d 1271, 1276 (D.C.Cir.1994)).

III. ANALYSIS

The Sherman Act, passed by Congress in 1890, prohibits “certain practices and agreements inimical to free trade as a means ‘to promote the national interest in a competitive economy.’ ” Brown v. Pro Football, Inc., 50 F.3d 1041, 1044 (D.C.Cir.1995) (quoting Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 635, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985)). Section 1 of the Act prohibits two or more entities from entering into contracts or conspiracies in restraint of trade, and thus is frequently used to regulate anticompetitive agreements between two or more firms. See United States v. Topco Associates, Inc., 405 U.S. 596, 92 S.Ct. 1126, 31 L.Ed.2d 515 (1972) (considering market allocation under Section 1); see also Bell Atlantic Corp. v. Twombly, 550 U.S. at 553–54, 127 S.Ct. 1955 (same). Section 2, by contrast, is intended to inhibit the willful market domination by a single firm, and therefore “addresses the actions of single firms that monopolize or attempt to monopolize, as well as conspiracies and combinations to monopolize.” Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 454, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993); see also United States v. Microsoft Corp., 253 F.3d 34, 58 (D.C.Cir.2001) (reviewing alleged monopoly charges against single manufacturer).

Plaintiffs have framed their allegations in a curious manner. Plaintiffs' price-fixing allegations, which in the Rail Freight Action were brought only under Section 1 of the Sherman Act, are cast here as violating both Sections 1 and 2 of the Act. Plaintiffs' allegations of market allocation by defendants—conduct that typically gives rise to claims under Section 1—are presented only as part of plaintiffs' Section 2 monopoly claim.

After careful consideration of the Sherman Act's statutory requirements, and the pleading requirements under the Federal Rules of Civil Procedure, the Court finds that plaintiffs have failed to state a claim under either section of the Act. Accordingly, plaintiffs' claims must be dismissed.

A. Section 1 Claim

Section 1 of the Sherman Act prohibits any “contract, combination ... or conspiracy, in restraint of trade or commerce[.]” 15 U.S.C. § 1. To make out a Section 1 claim, “plaintiffs must allege: (1) that the defendants entered into some agreement, contract, combination, conspiracy, or other concerted activity; (2) that at least one defendant committed an overt act in furtherance of the conspiracy; and (3) that the agreement constituted an unreasonable restraint of trade in the relevant market in a manner that had an impact on interstate commerce.” Jung v. Ass'n Am. Med. Colls., 300 F.Supp.2d 119, 157–58 (D.D.C.2004) (internal citations omitted). Price-fixing is considered to be one of those types of agreements that “so often prove so harmful to competition and so rarely prove justified that the antitrust laws do not require proof that an agreement of that kind is, in fact, anticompetitive in the particular circumstances.” NYNEX...