Rolite, Inc. v. Wheelabrator Environmental Systems, Inc.

• Decision Date: 25 March 1997
• Docket Number: Civil Action No. 94-5894.
• Citation: 958 F.Supp. 992
• Parties: ROLITE, INC., Plaintiff, v. WHEELABRATOR ENVIRONMENTAL SYSTEMS, INC., and WMX Technologies, Inc., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

958 F.Supp. 992

ROLITE, INC., Plaintiff, v. WHEELABRATOR ENVIRONMENTAL SYSTEMS, INC., and WMX Technologies, Inc., Defendants.

Civil Action No. 94-5894.

United States District Court, E.D. Pennsylvania.

March 25, 1997.

COPYRIGHT MATERIAL OMITTED

Robert A. Swift, Kohn, Savett, Klein & Graf, P.C., Philadelphia, PA, David H. Weinstein, Robert S. Kitchenoff, Paul J. Scarlato, Weinstein, Kitchenoff, Scarlato & Goldman, Ltd., Philadelphia, PA, for Rolite, Inc.

Roberta D. Liebenberg, Mager, Liebenberg & White, Philadelphia, PA, Kenneth J. Rudofski, Kyle K. Kappes, Richard A. Clegg, Paul H. Berghoff, Allegretti and Witcoff, Ltd., Chicago, IL, Natalie Finkelman, Mager, Liebenberg & White, Philadelphia, PA, for Wheelabrator Environmental Systems, Inc., WMX Technologies, Inc.

MEMORANDUM AND ORDER

ANITA B. BRODY, District Judge.

On September 27, 1994, Plaintiff Rolite, Inc. filed a fivecount complaint against Defendants Wheelabrator Environmental Systems, Inc. and its corporate parent, WMX Technologies, Inc., seeking a declaratory judgment of non-infringement of Wheelabrator's patent and alleging various unfair trade practices. On November 6, 1995, I granted Rolite summary judgment with regard to the patent claim (Count I of the Complaint), finding that, based upon my interpretation of the patent, Rolite could not be held to have infringed upon the patent in question. After a number of deadline extensions due to the complexity of the case, Rolite filed an Amended Complaint on July 10, 1996, which sought the following: (1) injunctive relief and treble damages for Defendants' alleged violation of Section 2 of the Sherman Act (Count II); (2) injunctive relief and treble damages for Defendants' alleged violation of Section 1 of the Sherman Act (Count III); (3) injunctive relief and treble damages for Defendants' alleged violation of Section 43(a) of the Lanham Act (Count IV); and (5) damages for alleged violations of state laws against unfair competition, defamation, commercial disparagement, and tortious interference with prospective business advantage (Count V). Defendants have moved to dismiss Counts II and III and parts of Count V pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons that follow, I will grant their motion in part and deny it in part.

I. SUMMARY OF FACTS AS ALLEGED IN THE AMENDED COMPLAINT

For the purpose of this dismissal motion, I must take to be true all facts alleged by Rolite in its Amended Complaint. I will briefly review those facts. All parties are involved in municipal waste management, and both Rolite and Wheelabrator operate systems for the conversion and recycling of ash residue ("Ash Residue Waste" or "ARW") from waste incinerators. Wheelabrator holds a patent, United States Patent No. 4,804,147, for its recycling procedure. This patent lapsed on August 14, 1992 due to Wheelabrator's failure to pay a maintenance fee, but was reinstated on February 14, 1994, after Wheelabrator petitioned for reinstatement and payed the maintenance fee and late fees.

Rolite claims that on several occasions Wheelabrator has accused Rolite of infringing upon its patent through Rolite's process for making ash residue into "Rolite Aggregate," and that Wheelabrator threatened litigation if the alleged infringement did not cease. Additionally, Rolite alleges that representatives of one or both Defendants have stated to Rolite's customers or potential customers that Rolite's process infringes Wheelabrator's patent, and have misrepresented to customers and potential customers the nature, characteristics, and qualities of Rolite Aggregate. Furthermore, Rolite has been compelled to disclose the infringement claim and threats of suit as material facts to existing and potential investors. Rolite claims that the effect of the statements and misrepresentations by Defendants and the disclosure by Rolite has been to discourage customers and potential customers from dealing with Rolite.

II. DISMISSAL STANDARD

In moving to dismiss Rolite's antitrust and state tort claims at the pleading stage, Defendants must meet a very high standard. Addressing summary dismissal generally, the Supreme Court has stated: "[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the Plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957); Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984). "[T]he Federal Rules of Civil Procedure do not require a claimant to set out in detail the facts upon which he bases his claim. To the contrary, all the Rules require is `a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests....Such simplified `notice pleading' is made possible by the liberal opportunity for discovery and the other pretrial procedures established by the Rules to disclose more precisely the basis of both claims and defense and to define more narrowly the disputed facts and issues." Conley, at 47-48, 78 S.Ct. at 103 (footnotes omitted).

The dismissal standard is even higher in antitrust cases than it is generally: "[S]ummary procedures should be used sparingly in complex antitrust litigation where motive and intent play leading roles, the proof is largely in the hands of the alleged conspirators, and hostile witnesses thicken the plot." Poller v. Columbia Broadcasting Sys., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962); see also Hospital Bldg. Co. v. Trustees, 425 U.S. 738, 746, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1976)("[I]n antitrust cases, ... dismissal prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly."); Commonwealth of Pennsylvania ex rel. Zimmerman v. PepsiCo, Inc., 836 F.2d 173, 179 (3d Cir.1988)("[W]e should be extremely liberal in construing antitrust complaints." Quoting Knuth v. Erie-Crawford Dairy Co-op. Ass'n, 395 F.2d 420, 423 (3d Cir.1968), cert. denied, 410 U.S. 913, 93 S.Ct. 966, 35 L.Ed.2d 278 (1973)); Abbott Laboratories v. Brennan, 952 F.2d 1346 (Fed.Cir. 1991), cert. denied, 505 U.S. 1205, 112 S.Ct. 2993, 120 L.Ed.2d 870 (1992) ("In an antitrust action, the complaint need only allege sufficient facts from which the court can discern the elements of an injury resulting from an act forbidden by the antitrust laws." (Internal quotations and citations omitted)).

At least two circuits, however, have declined to adhere strictly to the high standard seemingly set by Conley and Hishon. In Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101 (7th Cir.1984), cert. denied, 470 U.S. 1054, 105 S.Ct. 1758, 84 L.Ed.2d 821 (1985), the Court of Appeals for the Seventh Circuit said the following:

[A]s this court has recognized, Conley has never been interpreted literally. Sutliff, Inc. v. Donovan Cos., 727 F.2d 648, 654 (7th Cir.1984). In practice, "a complaint ... must contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory." Id. at 654 (quoting In re Plywood Antitrust Litig., 655 F.2d 627, 641 (5th Cir.1981), cert. dismissed, , 462 U.S. 1125, 103 S.Ct. 3100, 77 L.Ed.2d 1358 (1983)).

Id. at 1106.

In this Circuit, it has been held that, "[e]ven given the teachings of Conley, ... the plaintiff must allege sufficient facts in the complaint to survive a Rule 12(b)(6) motion." Commonwealth of Pennsylvania v. PepsiCo, Inc., 836 F.2d 173, 179 (3d Cir.1988). "[T]he court must review the allegations of fact contained in the complaint; for this purpose the court does not consider conclusory recitations of law." Id. The Court of Appeals quoted the Supreme Court in Associated Gen. Contractors of Cal. v. California State Council of Carpenters, 459 U.S. 519, 526, 103 S.Ct. 897, 902, 74 L.Ed.2d 723 (1983), which said that "[a]s the case comes to us, we must assume that the [plaintiff] can prove the facts alleged in its amended complaint. It is not, however, proper to assume that the [plaintiff] can prove facts that it has not alleged or that the defendants have violated the antitrust laws in ways that have not been alleged." Id. at 180.

It should be noted, however, that the Court of Appeals, in dismissing the complaint in PepsiCo, pointed out that this case came under the Soft Drink Act, and stated that "[b]ecause the soft drink industry is involved, [the plaintiff] has a pleading burden much higher than that in a mine-run antitrust complaint." Id. at 181. This is so because "the Soft Drink Act was enacted to remove certain soft drink industry practices from the reach of the antitrust laws...." Id. at 175. "Congress decided that the distribution practices of the soft drink industry merited special protection on the theory that territorial restraints foster the competitive spirit by encouraging each bottler to invest and promote in its own territory." Id. at 179.

III. MOTION TO DISMISS COUNTS II AND III

A. Failure to Allege Relevant Product Market

Defendants contend that Rolite's monopolization, attempted monopolization and conspiracy to monopolize claims (Count II) under Section 2 of the Sherman Act should be dismissed for failure to allege a relevant product market. They further contend that Rolite's conspiracy to restrain trade claim (Count III) under Section 1 of the Sherman Act should be dismissed for the same reason.

To state a claim of monopolization under Section 2 of the Sherman Act, a plaintiff must allege (1) possession of monopoly power in the relevant product and geographic market, and (2) willful acquisition or maintenance of that power as distinguished from justifiable business decision. U.S. v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1703-04, 16 L.Ed.2d 778 (1966). Thus, a plaintiff must allege a relevant product market to plead a monopolization claim under Section 2....