PPG Industries, Inc. v. Pilkington plc

• Decision Date: 09 July 1993
• Docket Number: No. CIV 92-753-TUC-WDB.,CIV 92-753-TUC-WDB.
• Citation: 825 F. Supp. 1465
• Parties: PPG INDUSTRIES, INC., a Pennsylvania corporation, Plaintiff, v. PILKINGTON PLC, an English corporation; Libbey-Owens-Ford Co., a Delaware corporation, Defendants.
• Court: U.S. District Court — District of Arizona

825 F. Supp. 1465

PPG INDUSTRIES, INC., a Pennsylvania corporation, Plaintiff, v. PILKINGTON PLC, an English corporation; Libbey-Owens-Ford Co., a Delaware corporation, Defendants.

No. CIV 92-753-TUC-WDB.

United States District Court, D. Arizona.

July 9, 1993.

Lawrence G.D. Scarborough, Jack E. Brown, Brown & Bain, P.A., Phoenix, AZ, and Thomas Barr, and Paul Michael Dodyk, Cravath Swaine & Moore, New York City, for plaintiff.

Jack Kaufmann, Dewey Ballantine, New York City, Donald C. Klawiter, Robert Schlossberg, John H. Shenefield, Morgan, Lewis & Bockius, Washington, DC, and David Alwin Paige, Snell & Wilmer, Tucson, AZ, for defendants.

ORDER

WILLIAM D. BROWNING, Chief Judge.

Pending before the Court are: (1) the December 18, 1992 Motion of Defendant Pilkington plc ("Pilkington") to Dismiss Counts Four and Five; and (2) Pilkington's December 18, 1992 Motion to Stay Proceedings and Compel Arbitration or Dismiss.

ORDER AND OPINION

I. Factual and Procedural Background

Plaintiff, PPG Industries, Inc. ("PPG"), has filed a Complaint alleging antitrust violations by Defendants Pilkington and Libbey-Owens-Ford Company ("LOF"). The allegations describe "a wheel-like scheme in which Pilkington operates at the hub to monopolize the markets for float process technology and for flat glass." PPG's November 4, 1992 Memorandum in Support of its Application for Temporary Restraining Order, at 2. See Complaint ¶ 20.

In the late 1950s, Pilkington developed and patented the first commercially successful float process for manufacturing flat glass. In 1962, it licensed its technology to PPG among others. Plaintiff states that "Pilkington operates or has licensed more than ninety-five percent of the existing float glass manufacturing plants worldwide." Id. at 3. Pilkington states that it has entered into more than 50 separate agreements under which 150 float glass manufacturing plants operate in some 35 countries.

In the middle 1970s, PPG patented another float process technology known as the "LB process." Subsequently, PPG and Pilkington have had a number of disputes concerning PPG's efforts to license, develop, construct, and operate float glass manufacturing plants using the LB process. Pilkington has maintained that the LB process was derivative of its technology and, thus, fell under its 1962 licensing agreement with PPG. Thus, Pilkington has sought to prevent PPG from licensing its LB process except as authorized by Pilkington by initiating the arbitration of its claims.¹

In the middle 1980s, the most recent dispute arose. PPG attempted to participate in the construction and operation of a float glass manufacturing plant based on the LB process in the People's Republic of China. In 1985, Pilkington again responded by initiating arbitration proceedings in London. In July or August 1992, the arbitrators issued their decision. According to PPG, they found that most of the float process technology items claimed as confidential by Pilkington were public knowledge,² and that PPG would have developed its LB process, without using Pilkington's technology, by the time PPG attempted to participate in the Chinese venture. Nonetheless, the arbitrators awarded Pilkington with a "notional" royalty on PPG's use of the LB process in China.

II. Defendants' Motion to Dismiss Counts Four and Five

A. Pilkington's Argument

Count Four of PPG's Complaint is a monopolization claim. Count Five is an attempted monopolization claim. Pilkington argues that PPG's allegations supporting each count are defective and do not state a claim for relief under Section 2 of the Sherman Act. 15 U.S.C. § 2 (1988).

One of the essential elements of a Section 2 monopolization claim is the existence of monopoly power in the relevant market. According to Pilkington, "to state a claim for monopolization (Count Four), PPG must allege, inter alia, facts that, if true, establish that Pilkington currently possesses monopoly power in the production and sale of flat glass." Motion, at 2 (citing Oahu Gas Serv., Inc. v. Pacific Resources Inc., 838 F.2d 360, 363 (9th Cir.), cert. denied, 488 U.S. 870, 109 S.Ct. 180, 102 L.Ed.2d 149 (1988)).

One of the essential elements of a Section 2 attempted monopolization claim is the existence of a dangerous probability of monopolization. Morgan, Strand, Wheeler & Biggs v. Radiology, Ltd., 924 F.2d 1484, 1491 n. 8 (9th Cir.1991) (citing McGlinchy v. Shell Chem. Co., 845 F.2d 802, 811 (9th Cir.1988)). Thus, Pilkington argues that, "to state a claim for attempted monopolization (Count Five), PPG must allege, inter alia, facts that, if true, establish the presence of a dangerous probability of monopolization by Pilkington." Motion, at 2.

Pilkington notes that courts may not condemn unilateral conduct, such as that which PPG targets in Counts Four and Five, absent the existence or impending threat of monopoly power. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 767-68, 104 S.Ct. 2731, 2739-40, 81 L.Ed.2d 628 (1984); Alaska Airlines, Inc. v. United Airlines, Inc., 948 F.2d 536, 541 (9th Cir.1991), cert. denied, ___ U.S. ___, 112 S.Ct. 1603, 118 L.Ed.2d 316 (1992).

According to Pilkington, "PPG's only cognizable factual allegation relating to Pilkington's `monopoly power' in the production and sale of flat glass is that Pilkington enjoys an `approximately 20 percent' share of a `worldwide' market for flat glass." Motion, at 3 (citing PPG's Complaint ¶¶ 1, 10). Pilkington asserts, in a footnote, that PPG's attempt to "preserve" claims of monopolization in smaller geographic markets fails because PPG did not allege facts supporting monopoly power in these markets. Id. at 3 n. 2. Thus, it argues that a 20 percent share of the world market "is insufficient, as a matter of law, to support PPG's claims either of monopolization or attempted monopolization under Section 2 of the Sherman Act." Id. at 3.

Pilkington states that, "in order to survive a motion to dismiss a monopolization claim when the only relevant fact that plaintiff has alleged is a specific market share, the alleged market share must be `at least above some level ... such that an inference of monopoly power is not implausible on its face.'"³ Id. at 6 (quoting Hunt-Wesson Foods, Inc. v. Ragu Foods, Inc., 627 F.2d 919, 925 (9th Cir.1980), cert. denied, 450 U.S. 921, 101 S.Ct. 1369, 67 L.Ed.2d 348 (1981)). Pilkington then contrasts PPG's allegation that Pilkington has a 20 percent world market share with Ragu's 65 percent share found to be sufficient to state a claim in Hunt-Wesson. Pilkington asserts that an allegation of a 20 percent share is "implausible on its face" and, thus, that PPG's allegation is not "sufficient, as a matter of pleading, to withstand a motion for dismissal." Id.

As support for its attack on Count Four, Pilkington cites a "legion" of cases supporting the proposition that, as a matter of law, a market share of 20 percent is insufficient to support a monopolization claim. See United Air Lines, Inc. v. Austin Travel Corp., 867 F.2d 737, 742 (2nd Cir.1989) (appeal of summary judgment); Dimmitt Agri Indus., Inc. v. CPC Int'l, Inc., 679 F.2d 516, 529 (5th Cir.1982), cert. denied, 460 U.S. 1082, 103 S.Ct. 1770, 76 L.Ed.2d 344 (1983) (appeal of trial court's ruling on motion for judgment notwithstanding the verdict); Yoder Bros. v. California-Florida Plant Corp., 537 F.2d 1347, 1367 (5th Cir.1976), cert denied, 429 U.S. 1094, 97 S.Ct. 1108, 51 L.Ed.2d 540 (1977) (appeal of directed verdicts); Twin Cities Sportservice, Inc. v. Charley O. Finley & Co., 512 F.2d 1264, 1274 (9th Cir.1975), cert. denied, 459 U.S. 1009, 103 S.Ct. 364, 74 L.Ed.2d 400 (1982) (appeal of trial court judgment); R.C. Dick Geothermal Corp. v. Thermogenics, Inc., 566 F.Supp. 1104, 1111 (N.D.Cal.1983) (entry of summary judgment). See also Colorado Interstate Gas Co. v. Natural Gas Pipeline Co. of Am., 885 F.2d 683, 694 n. 18 (10th Cir.1989), cert. denied, 498 U.S. 972, 111 S.Ct. 441, 112 L.Ed.2d 424 (1990) (appeal of denial of motions for judgment notwithstanding the verdict and for new trial); Syufy Enterprises v. American Multicinema, Inc., 793 F.2d 990, 995 (9th Cir.1986), cert. denied, 479 U.S. 1031, 107 S.Ct. 876, 93 L.Ed.2d 830 and 479 U.S. 1034, 107 S.Ct. 884, 93 L.Ed.2d 838 (1987) (appeal of ruling on motion for judgment notwithstanding the verdict).

Pilkington states that "PPG resorts to a tortured analysis to convert the 20 percent worldwide market share ... into something more by referencing Pilkington's position in a different alleged market, ... `the development, construction, and licensing of float process plants.'" Motion, at 7 (quoting PPG's Complaint ¶ 13). Pilkington asserts that PPG alleges that Pilkington uses its monopoly control of the float process technology through licensing agreements to dictate who may enter the market for the production and sale of flat glass. Pilkington argues that "the law does not permit PPG to graft Pilkington's position in this second `market' onto Pilkington's position in the alleged market for the production and sale of flat glass" thereby creating a Section 2 attempted monopolization claim. Id. at 7 (citing Alaska Airlines, 948 F.2d at 547). According to Pilkington, the Ninth Circuit has rejected the use of this "monopoly leveraging" theory to create a Section 2 violation. Id.

Because market share is the "chief barometer" for assessing market power, Pilkington asserts that PPG's allegation that Pilkington possesses a 20 percent world market share is likewise insufficient to support its allegation that there exists a dangerous probability of success by Pilkington. See, e.g., Richter Concrete Corp. v. Hilltop Concrete Corp., 691 F.2d 818, 826 (6th Cir.1982) (appeal of directed verdicts); Lektro-Vend Corp. v. Vendo Co., 660 F.2d 255, 271 (7th Cir.1981), cert. denied, 455 U.S. 921, 102 S.Ct. 1277, 71 L.Ed.2d 461 (1982) (appeal of district court's findings after bench trial); Nifty Foods Corp. v. Great Atl. & Pac. Tea...