Smart Commc'ns Holding, Inc. v. Glob. Tel-Link Corp.
| Decision Date | 01 November 2022 |
| Docket Number | Civil 1:21-CV-01708 |
| Parties | SMART COMMUNICATIONS HOLDING, INC., et al., Plaintiffs, v. GLOBAL TEL-LINK CORPORATION, et al., Defendants. |
| Court | U.S. District Court — Middle District of Pennsylvania |
This case involves allegations of anticompetitive behavior brought under the Sherman Act, 15 U.S.C. § 1 (against all Defendants), and tortious interference with prospective business relations, unfair competition, and champerty and maintenance against Defendant Global Tel-Link Corp. (“GTL”). (Doc. 1.) The other Defendants in this case include: York County, Pennsylvania (“York County”), York County Prison (“YCP”), and Mr. Adam Ogle, in his official capacity as acting Warden of YCP (“Warden Ogle”) (collectively “the York Defendants”). Presently before the court are two motions to dismiss, one filed by the York Defendants and the other filed by GTL. (Docs. 28, 29.) For the reasons that follow, the court will grant Defendants' motions to dismiss.
Plaintiffs Smart Communications Holding, Inc. and HLFIP Holding, Inc. d/b/a Smart Communications IP Holdings (collectively “Plaintiffs”) filed a complaint against GTL and the York Defendants alleging a violation of the Sherman Act and state-law claims of tortious interference with prospective business relations, unfair competition, and champerty and maintenance. (Doc. 1.) All four counts of the complaint relate, in full or in part, to GTL's conduct in relation to and during the pendency of the related patent litigation.[1] (Id.)
The related patent litigation was initiated via complaint on February 3, 2020. (Id. ¶ 30.) The patent action alleged infringement by the York Defendants of Plaintiffs' MailGuard technology, which involves processing postal mail for inmates. (Id. ¶¶ 26-30.) Several months after the patent complaint was filed, counsel arranged for former YCP warden Clair Doll (“Warden Doll”) and the CEO of Smart Communications, Mr. Logan, to directly communicate to discuss settlement. (Id. ¶ 34-35.)
According to the complaint in this action, during Mr. Logan and Warden Doll's first day of settlement discussions in the patent litigation on August 25, 2020, “Smart Communications learned that YCP's [inmate calling services (“ICS”)] contract with GTL would expire in December of 2020 and became aware of the financial terms of that contract.” (Id. ¶ 36.) Notably, GTL (and its predecessor company) has been contracted to provide ICS to YCP since 2003. (Id. ¶ 22.) The following day, Mr. Logan forwarded Warden Doll marketing materials highlighting Plaintiffs' various inmate communication technologies services and options and Warden Doll scheduled a call with Mr. Logan for the following day to discuss Smart Communications' services in more detail. (Id. ¶¶ 37-38.) During the next call, Warden Doll invited Mr. Logan to meet with him and his team at YCP to discuss “a resolution of the Patent Litigation and to have Smart Communications present to the YCP team an overview of Smart Communications' inmate communication services included in the marketing materials, including Smart Communications' telephone system and services.” (Id. ¶ 39.)
Over the next several months, while the patent litigation was stayed pending settlement negotiations, Mr. Logan and Warden Doll engaged in extensive contract negotiations for Smart Communications to provide ICS to YCP. (See id. ¶¶ 40- 60.) Not surprisingly, these contract negotiations garnered the attention of the current contractor for ICS services, GTL. (See id. ¶¶ 61-71.) As a result, GTL engaged in contract discussions with YCP to extend their ICS contract. (Id. ¶¶ 6667.) Plaintiffs further allege that during these discussions, GTL made false and detrimental statements about Smart Communications in an effort to convince YCP not to contract with Plaintiffs. (Id. ¶¶ 68-70.)
On November 5, 2020, counsel for Plaintiffs contacted then-counsel for the York Defendants for ICS. (Id. ¶ 75.) Then, “[b]ased on assurances from York Defendants' Patent Litigation counsel of record, on November 13, 2020, Smart Communications agreed to join the York Defendants in representing to the Court presiding over the Patent Litigation that ‘[t]he parties have engaged and continue to engage in good-faith settlement discussions aimed at resolving this action and reaching a resolution of their dispute.'” (Id. ¶ 78.)
Ultimately, YCP did not enter an ICS contract with Smart Communications and instead entered into a new ICS contract with GTL (“YCP-GTL contract”) that contained an indemnification agreement in which GTL agreed to pay the York Defendants' attorneys' fees already incurred in the patent litigation; pay the York Defendants' attorney's fees and costs that would be incurred to litigate the case to judgment; indemnify the York Defendants for all claims, actions, suits, financial judgment, liability, losses, costs, expenses or damages incurred as a result of the patent litigation; indemnify the York Defendants for all claims of tortious interference; and control the patent litigation, including selection of counsel and determining which arguments to advance in the litigation. (Id. ¶¶ 114-116.) GTL's attorneys from Sterne Kessler entered their appearance in the patent litigation on behalf of the York Defendants on January 29, 2021. (Id. ¶¶ 88 -94.)
Existing counsel for the York Defendants withdrew their appearances the same day.
About eight months later, on October 6, 2021, Plaintiffs filed the instant complaint, naming the York Defendants and GTL in this antitrust lawsuit. (Doc. 1.) On February 23, 2022, Plaintiffs filed a motion for preliminary injunction, seeking to invalidate the indemnification agreement between GTL and the York Defendants in the related patent litigation based on a theory of maintenance. (Doc. 62.) On April 7, 2022, the court denied that motion, finding that Plaintiffs failed to demonstrate that they would suffer irreparable harm if preliminary injunctive relief were denied. (Docs. 77, 78.)
On December 6, 2021, both the York Defendants and GTL filed motions to dismiss. (Docs. 28, 29.) The briefs in support of these motions were filed on December 20, 2021. (Docs. 36, 37.) Plaintiffs timely filed a brief in opposition to the York Defendants' motion on January 14, 2022, and a brief in opposition to GTL's motion on January 27, 2022. (Docs. 47, 51.) The York Defendants and GTL each filed a reply brief on January 28, 2022. (Docs. 52, 53.)
On April 29, 2022, GTL submitted a notice of supplemental authority to notify the court of a recent precedential opinion by the Third Circuit Court of Appeals addressing antitrust standing: Host Int'l, Inc. v. MarketPlace, PHL, LLC, 32 F.4th 242 (3d Cir. 2022). (Doc. 86.)[2] Upon reviewing this decision, the court issued an order directing supplemental briefing to address the issue of antitrust standing, and scheduling oral argument for August 26, 2022. (Doc. 88.) In accordance with that order, GTL and the York Defendants submitted their supplemental letter briefs on July 6, 2022. (Docs. 89, 90.) Plaintiffs then timely filed their responsive letter brief on July 20, 2022. Doc. 91.) Oral argument on these motions was held on August 26, 2022. Thus, these motions are ripe for review.
This court has jurisdiction under 28 U.S.C. § 1331, which allows a district court to exercise subject matter jurisdiction in civil cases arising under the Constitution, laws, or treaties of the United States. Moreover, this court has jurisdiction pursuant to 28 U.S.C. § 1332 because there is complete diversity between the Plaintiff and Defendant and Plaintiff asserts that the amount in controversy exceeds $75,000. The court also has supplemental jurisdiction over the related state-law claims pursuant to 28 U.S.C. § 1367. Venue is appropriate under 28 U.S.C. § 1391.
In order “[t]o survive a motion to dismiss, a 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 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible on its face “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (quoting Twombly, 550 U.S. at 556). “Conclusory allegations of liability are insufficient” to survive a motion to dismiss. Garrett v. Wexford Health, 938 F.3d 69, 92 (3d Cir. 2019) (quoting Iqbal, 556 U.S. at 678-79). To determine whether a complaint survives a motion to dismiss, a court identifies “the elements a plaintiff must plead to state a claim for relief,” disregards the allegations “that are no more than conclusions and thus not entitled to the assumption of truth,” and determines whether the remaining factual allegations “plausibly give rise to an entitlement to relief.” Bistrian v. Levi, 696 F.3d 352, 365 (3d Cir. 2012).
In Count 1 of the complaint, Plaintiffs allege unlawful exclusive dealing in violation of Section 1 of the Sherman Act. (See Doc. 1, ¶¶ 142-156.) “Liability under § 1 of the Sherman Act, 15 U.S.C § 1, requires a contract, combination . . . or conspiracy, in restraint of trade or commerce.” Twombly, 550 U.S. at 570 (internal quotations...
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