Reynolds & Reynolds Co. v. Superior Integrated Solutions, Inc.
| Decision Date | 06 June 2013 |
| Docket Number | Case No. 1:12-cv-848 |
| Court | U.S. District Court — Southern District of Ohio |
| Parties | THE REYNOLDS & REYNOLDS COMPANY, Plaintiff, v. SUPERIOR INTEGRATED SOLUTIONS, INC., Defendant. |
ENTRY AND ORDER GRANTING REYNOLDS' MOTION TO DISMISS
(Doc. #29) AND OVERRULING SIS's EMERGENCY MOTION FOR A
PRELIMINARY INJUNCTION (Doc. #28)
Now before the Court is a Motion To Dismiss Defendant Superior Integrated Solutions, Inc.'s ("SIS's") Amended Counterclaims brought by Plaintiff Reynolds & Reynolds Company ("Reynolds"). (Doc. #29.) Reynolds seeks to dismiss SIS's Amended Counterclaims pursuant to Fed. R. Civ. P. 8 and 12(b)(6).
Count I of SIS's Amended Counterclaim is for tortious interference with contractual relationships. Count II is for violation of Section 1 of the Sherman Antitrust Act. Count III is for violation of Section 2 of the Sherman Antitrust Act and Count IV is for violations of the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030, et seq. In addition to damages for each Count, SIS seeks temporary and permanent injunctive relief.
Reynolds' Motion To Dismiss is now fully briefed and ripe for decision. A relevant factual background based upon SIS's Amended Counterclaim will first be set forth. This will be followed by the relevant legal provisions and an analysis of Reynolds' Motion.
RELEVANT FACTUAL BACKGROUND
The Parties
Reynolds is an Ohio Corporation with its principal place of business in Kettering, Ohio. (Am. Countercl. ¶ 2.) SIS is a New Jersey corporation with its principal place of business in Edison, New Jersey. (Id. at ¶ 1.)
Reynolds owns and operates a proprietary dealer management system ("DMS"). (Id. at ¶ 9.) Reynolds provides its DMS, called ERA,1 through direct contracts with retail automotive dealers throughout the country. (Id. at ¶ 5.) "Reynolds is the largest provider of DMS to auto dealers... occupying a large percentage of the market." (Id.) Approximately 40% of the auto dealers served by SIS use Reynolds' ERA. (Id. at 22.)
SIS develops and provides software that integrates third-party applications with DMSs, including Reynolds ERA. (Id. ¶ 10.) SIS derives approximately 40% of its revenue by integrating third-party applications with ERA. (Id. at ¶ 23.)
DMS
A DMS allows auto dealers to efficiently organize and utilize numerous types of information that is necessary to operate their business, such as customer information, inventory information and finance and insurance information. (Id. at ¶ 6.) Other companies, sometimes referred to as third-party application providers, sell software and other technology products to dealerships that use the dealers' information that is kept on the dealers' DMS. (Id. at ¶ 7.)
When the dealerships use Reynolds' ERA, the software provided by the third-party application providers must be integrated with ERA in order to function in an optimal fashion.(Id. at ¶ 9.) SIS develops and provides integration software that allows this integration to occur. (Id. at 10.)
Reynolds also provides integration of third-party applications with its ERA. (Id. at ¶ 11.) In addition, Reynolds permits third parties, including third-party integrators, access to its ERA if the third-party is willing to become "Reynolds certified for an exorbitant fee."2 (Id. at 12.)
Reynolds' Agreements With ERA Customers
This Court may take notice of the contracts between Reynolds and its ERA customers referenced in SIS's Amended Counterclaim for purposes of this Motion To Dismiss because these contracts are mentioned in the Amended Counterclaim and are central to SIS's allegations. See Rondigo, L.L.C. v. Township of Richmond, 641 F.3d 673, 681 (6th Cir. 2011).
Reynolds' auto-dealership customers agree to certain prohibitions on integration of third-party applications when the customers license Reynolds' ERA. (Reynolds Response To Emergency Motion (doc. # 30), Ex. A-2.) When they sign up for ERA, customers typically agree to prohibitions on connecting third-party applications to ERA. (Id.) The customers also agree to prohibitions on allowing third-party integrators that are not licensed by Reynolds, like SIS, to interface with ERA. (Id.) Finally, the customers agree to permit Reynolds to access the systems obtained from Reynolds and to access the auto dealer's business data. (Id.)
Relationship Background
Reynolds is, according to SIS, restricting data access of third-party vendors offering services to the auto dealers to force the auto dealers to purchase similar products being offeredby Reynolds. (Id. at 14.) Thus, according to SIS, Reynolds is, in effect, eliminating the purchase options of the auto dealers and preventing them from choosing the best available services. (Id. at 15.) Finally, according to SIS, Reynolds recently intensified its efforts to prevent auto dealers from using third-party vendor services, and is using information that Reynolds wrongfully acquired from the internal SIS support site to actively interfere with the interface between SIS's integration software and ERA that is on auto dealers' computers. (Id. at 19.)
All of SIS's business relationships depend on, among other things, SIS's ability to integrate its customers' software applications with SIS's customers' DMS. (Id. at 24.) Thus, "Reynolds current interference with the use of SIS's integration software is causing, and will continue to cause, SIS to lose its corporate goodwill in the marketplace...." (Id. at 25.) Finally, "the auto dealers have been led to believe that they cannot do business with SIS or third-party application providers, or that if they do their data security will be compromised." (Id. at 27.)
Prior Litigation
Reynolds and SIS were parties to a lawsuit previously adjudicated in this Court, case no. 3:09-cv-314 (the "2009 Case").3 Therein, in a Complaint filed on August 18, 2009, SIS claimed that Reynolds had begun terminating SIS's rights under an RIA and sought declaratory judgment, injunctive relief and damages for various alleged torts. (2009 Case, doc. #1.) The Court declined to enter a temporary restraining order or a preliminary injunction on September 23, 2009. (Doc. #26.) On October 12, 2009, the Court ordered Reynolds to place SIS's VOCentries back into the appropriate VOC file4 and to further refrain from removing any SIS code from dealer systems without dealer approval. (Doc. #37.) On October 13, 2009, Reynolds reported to the Court that it had moved the VOC entries back into the appropriate files and that it expects that the SIS integration product will remain disabled due to changes Reynolds made to its own ERA software code. (Doc. #38.) Reynolds and SIS resolved this lawsuit by entering into a stipulated settlement agreement, and agreed to dismissal of the lawsuit with prejudice. (Doc. #61.)
Relevant Procedural Background
Reynolds filed its initial Complaint in this matter on November 1, 2012. (Doc. #1.) SIS answered on January 17, 2013. (Doc. #16.) Reynolds amended its Complaint on February 7, 2013, (doc. #22), and SIS amended its Counterclaim on February 29, 2013 (doc. #25).
Reynolds' initial Motion To Dismiss SIS's Counterclaim was filed on February 7, 2013. (Doc. # 21.) After being declared moot because SIS filed its Amended Counterclaim (doc. #27), Reynolds renewed this Motion To Dismiss on March 25, 2013 (doc. #29).
SIS's initially filed an Emergency Motion for a Preliminary Injunction on February 25, 2013. (Doc. #24.) After being declared moot because SIS filed its Amended Counterclaim (doc. #27), SIS renewed this Motion on March 5, 2013 (doc. #28).
RELEVANT LEGAL PROVISIONS
Reynolds seeks dismissal of SIS's Amended Counterclaim pursuant to Fed. R. Civ. P. 8 and 12(b)(6). Pursuant to Rule 8(a)(2) a pleading must contain a "short and plain statement ofthe claim showing that the pleader is entitled to relief." Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009)(quoting Fed. R. Civ. P. 8(a)(2)). This pleading requirement does not require detailed factual allegations but it does require more than an unadorned accusation. Id. at 678.
To survive a motion to dismiss, a complaint or counterclaim must contain sufficient factual allegations, accepted as true, to "state a claim to relief that is plausible on its face." Id. at 678 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007)). A claim is plausible on its face when the plaintiff pleads factual allegations that allows the court to draw the reasonable inference that the defendant is liable for the alleged misconduct. Id. Finally, while a court must accept all of the factual allegations in a or counterclaim as true, a court need not accept legal conclusions couched as factual allegations as true. Id.
Rule 12(b)(6) provides a defense to a claim for relief. Under this Rule, a claim upon which relief cannot be granted may be dismissed.
ANALYSIS
Section 1 and 2 of the Sherman Antitrust Act
Reynolds first argues that SIS has not stated a plausible claim under Section 1 or 2 of the Sherman Antitrust Act because SIS has not alleged facts supporting an antitrust injury to a relevant market, because SIS has not alleged facts supporting antitrust standing and because SIS has not alleged facts supporting market power by Reynolds. SIS responds that it has sufficiently alleged an antitrust injury, that it has sufficiently alleged that it is a proper plaintiff in this action and that it has sufficiently alleged facts regarding Reynolds' market power.
Antitrust Injury To a Relevant Market
Section 1 of the Sherman Antitrust Act prohibits conspiracies to restrain trade. StaticControl Components, Inc. v. Lexmark International, Inc., 697 F.3d 387, 401 (6th Cir. 2012). "Section 2 of the Sherman [Antitrust] Act prohibits the illegal monopolization of a market." Id.
Protecting competition is the sine qua non of antitrust laws. Wee Care Child Center, Inc. v. Lumpkin, 680 F.3d 841, 847 (6th Cir. 2012). "To prove injury, the key inquiry is whether competition - not necessarily a competitor - suffered as a...
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