Rockbit Industries USA, Inc. v. Baker Hughes, Inc.

• Decision Date: 24 June 1991
• Docket Number: Civ. A. No. H-89-3802.
• Citation: 802 F. Supp. 1544
• Parties: ROCKBIT INDUSTRIES U.S.A., INC., Plaintiff, v. BAKER HUGHES, INC. and Hughes Tool Company, Defendants.
• Court: U.S. District Court — Southern District of Texas

802 F. Supp. 1544

ROCKBIT INDUSTRIES U.S.A., INC., Plaintiff, v. BAKER HUGHES, INC. and Hughes Tool Company, Defendants.

Civ. A. No. H-89-3802.

United States District Court, S.D. Texas, Houston Division.

June 24, 1991.

COPYRIGHT MATERIAL OMITTED

Michael D. Mosher Law Offices, Paris, Tex., for plaintiff.

Morton L. Susman, Houston, Tex., John B. Lay, McLean, Sanders, Price, Head & Ellis, Ft. Worth, Tex., for defendants.

ORDER

HITTNER, District Judge.

Pending before the Court is the Rule 12(b)(6) motion to dismiss (Document # 7) filed by defendants Baker Hughes, Inc. and Hughes Tool Company (Baker Hughes). Having considered that motion, the submissions of the parties, the arguments of counsel, and the applicable law, the Court is of the opinion that Baker Hughes' motion should be granted.

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff Rockbit Industries U.S.A., Inc. (Rockbit) and Baker Hughes produce equipment for the oil drilling industry. In 1982 Rockbit and Hughes Tool Company were involved in an action in the United States District Court for the Northern District of Texas in Hughes Tool Company v. Rockbit Industries U.S.A., Inc., Civil Action No. CA 4-82-152K, a patent litigation concerning drill bits. This suit was settled by agreement of the parties. Rockbit agreed to a consent judgment and a license agreement whereby Rockbit was permitted to manufacture the infringing drill bits under the terms of the license agreement and a payment formula for royalties due to Hughes Tool Company.

The payments were not made when due under the terms of the license agreement and prior to the filing of this action by Rockbit, Hughes Tool Company filed a suit styled Hughes Tool Company v. Rockbit Industries U.S.A., Inc. in the 236th Judicial District Court of Tarrant County, Texas, Cause No. 236-120470-89 (the state action), complaining that Rockbit had breached the license agreement. The patent issues raised in Count Four of this case were raised by Rockbit in that case. The record reflects that Hughes Tool Company has successfully prosecuted the state action to a jury verdict, and a final judgment was entered in the state action in favor of Hughes Tool Company against Rockbit for $3,005,806.00 on August 23, 1990.

On November 7, 1989 Rockbit filed its complaint (Document # 1) in the instant action, alleging that Baker Hughes had engaged in activities prohibited by Sections 1 and 2 of the Sherman Act. One week later Rockbit filed its first amended complaint (Document # 2) in this action. In December 1989 Baker Hughes filed a motion to dismiss the first amended complaint (Document #7) under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Rockbit responded on May 21, 1990 by filing a motion for leave to file a second amended complaint, a proposed second amended complaint (Document #21), and a memorandum of law in opposition to Defendants' motion to dismiss (Document # 23 filed May 24, 1990). By stipulation (Document # 24) the parties agreed that (i) Baker Hughes would not oppose the filing of Rockbit's second amended complaint; (ii) as of the filing of the second amended complaint, the first amended complaint would be deemed withdrawn; (iii) Baker Hughes' motion to dismiss filed as to the first amended complaint would be deemed filed as to the second amended complaint; and (iv) Baker Hughes would be given an opportunity to file a reply in response to Rockbit's memorandum of law in opposition to Defendants' motion to dismiss.

Therefore, Baker Hughes' motion to dismiss (document # 7) which is currently before the Court seeks to dismiss for failure to state a claim Rockbit's second amended complaint (Document # 27). In that complaint, Rockbit alleges that Baker Hughes: (1) violated Section 1 of the Sherman Act, 15 U.S.C. § 1, by price fixing; in essence, entering into an agreement with Reed Tool Company (Reed) to eliminate discounts in the sale of drill bits;¹ (2) violated Section 1 of the Sherman Act through a tying arrangement under which it would not provide horizontal drilling technology to customers unless they also purchased Baker Hughes' drill bits; and (3) violated Section 2 of the Sherman Act, 15 U.S.C. § 2, by (a) monopolizing, (b) attempting to monopolize, (c) or jointly monopolized an alleged market for premium tungsten carbide drill bits through predatory pricing, tying, and sham litigation.

ANALYSIS

A. Standard of evaluation

Rule 12(b)(6) provides that a complaint should be dismissed if that claim fails to state a claim upon which relief can be granted. Dismissal of a complaint is warranted when the plaintiff has failed to plead the necessary elements of the offenses claimed and thus could not prevail even if it could adduce evidence to support each such allegation. See Elliott v. Foufas, 867 F.2d 877 (5th Cir.1989); see also In re Plywood Antitrust Litig., 655 F.2d 627 (5th Cir.1981), cert. dismissed, 462 U.S. 1125, 103 S.Ct. 3100, 77 L.Ed.2d 1358 (1983). While a court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations, Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957)), mere conclusory recitation of the elements of the claims alleged is insufficient to forestall dismissal; a plaintiff must plead each element of its claims with specificity. Kaiser Aluminum & Chemical Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir.1982), cert. denied, 459 U.S. 1105, 103 S.Ct. 729, 74 L.Ed.2d 953 (1983). Dismissal is also appropriate if the plaintiff cannot establish standing to bring a claim. Dickens v. Lewis, 750 F.2d 1251 (5th Cir.1984).

B. Section 1 — Price Fixing

Rockbit's first claim is that Baker Hughes and Reed conspired in violation of Section 1 to raise prices for tungsten carbide drill bits by agreeing to discontinue discounts to customers. The alleged agreement purportedly led to higher prices on sales of these drill bits by Baker Hughes and Reed than would have prevailed absent the alleged conspiracy. Even if such an agreement, if proved, could violate Section 1 of the Sherman Act, Rockbit lacks standing to advance a claim of price fixing based on this alleged conspiracy.

Section 4 of the Clayton Act limits the right to bring a private antitrust action for treble damages to 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 similar standard applies to suits for injunctions brought under Section 16 of the Clayton Act. See Cargill v. Monfort of Colorado, Inc., 479 U.S. 104, 113, 107 S.Ct. 484, 491, 93 L.Ed.2d 427 (1986). To have standing, a plaintiff must demonstrate that it suffered antitrust injury, i.e., injury of the type the antitrust laws were designed to prevent and that flows from that which makes the defendants' acts unlawful. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977). In an antitrust suit, proof of antitrust injury is required to establish standing. Bell v. Dow Chem. Co., 847 F.2d 1179, 1182 (5th Cir.1988); Feeney v. Chamberlain Mfg. Corp., 831 F.2d 93 (5th Cir. 1987); Walker v. U-Haul Co., 747 F.2d 1011, 1014-15 (5th Cir.1984). Injury to the general public is insufficient; a private plaintiff must show personal injury. See Krempp v. Dobbs, 775 F.2d 1319, 1321 (5th Cir.1985).

Relying on Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), Baker Hughes asserts that as a competitor of Baker Hughes, Rockbit cannot demonstrate such injury as a matter of law. In the Matsushita case, two domestic consumer electronic products (CEP) manufacturers sued various Japanese CEP manufacturers to recover damages allegedly suffered as a result of defendants' claimed participation in a price-fixing conspiracy to charge high prices for CEPS in the United States market. The Supreme Court rejected this claim as a matter of law, holding that a company does not have standing to challenge a conspiracy among competitors to charge higher than competitive prices because the plaintiff is a beneficiary of such a conspiracy:

Plaintiffs cannot recover damages for any conspiracy by petitioners to charge higher than competitive prices in the American market. Such conduct would indeed violate the Sherman Act (citations omitted), but it could not injure plaintiffs: as petitioners' competitors, plaintiffs stand to gain from any conspiracy to raise the market price in CEPs.

Matsushita, 475 U.S. at 582-83, 106 S.Ct. at 1353-54.

Baker Hughes maintains that for exactly the same reason, the alleged conspiracy between Baker Hughes and Reed to charge higher than competitive prices for bits would benefit, not injure, Rockbit. Rockbit could respond to the alleged conspiracy by raising its prices, thus reaping windfall profits, or by maintaining lower—but still profitable—prices and taking sales away from the claimed conspirators. Either way, Rockbit could have suffered no injury as a result of the alleged price-fixing conspiracy, and thus would lack standing to advance the Section 1 price-fixing claim.

Rockbit acknowledges the validity of the case law cited on standing, but takes issue with the conclusion that it has suffered no injury as a result of the alleged Section 1 violation. Rockbit advances the theory that if Baker Hughes engaged in a price-fixing conspiracy which did not in itself hurt Rockbit, but tried to drive Rockbit out of business as part of an overall scheme to protect the conspiracy, then Rockbit has standing. In support of this theory, Rockbit cites several cases which attack overall anticompetitive schemes. See Coastal States Marketing, Inc. v. Hunt, 694 F.2d 1358 (5th Cir.1983); Clipper Exxpress v. Rocky Mountain Motor Tariff Bureau, Inc., 690 F.2d 1240 (9th Cir.1...