Sourceone Dental, Inc. v. Patterson Cos.

• Decision Date: 10 April 2018
• Docket Number: 2:15–cv–05440–BMC–GRB,15–cv–5440 (BMC) (GRB)
• Citation: 310 F.Supp.3d 346
• Parties: SOURCEONE DENTAL, INC., Plaintiff, v. PATTERSON COMPANIES, INC. and Benco Dental Supply Company, Defendants.
• Court: U.S. District Court — Eastern District of New York

310 F.Supp.3d 346

SOURCEONE DENTAL, INC., Plaintiff,

v.PATTERSON COMPANIES, INC. and Benco Dental Supply Company, Defendants.

15–cv–5440 (BMC) (GRB)

2:15–cv–05440–BMC–GRB

United States District Court, E.D. New York.

Signed April 10, 2018

Jack G. Stern, Boies Schiller & Flexner LLP, New York, NY, Abby Dennis, Pro Hac Vice, Christopher G. Renner, Pro Hac Vice, James P. Denvir, Jessica Phillips, Pro Hac Vice, Michael S. Mitchell, William A. Isaacson, Boies, Schiller & Flexner LLP, Washington, DC, for Plaintiff.

James J. Long, Pro Hac Vice, Jay William Schlosser, Pro Hac Vice, Ruvin Jayasuriya, Pro Hac Vice, Scott M. Flaherty, Pro Hac Vice, James J. Long, Briggs and Morgan, P.A., Minneapolis, MN, Michael B. Miller, Morrison & Foerster LLP, New York, NY, Howard D. Scher, Carrie G. Amezcua, Pro Hac Vice, David Schumacher, Pro Hac Vice, Kenneth L. Racowski, Samantha Lee Southall, Thomas P. Manning, Buchanan Ingersoll & Rooney PC, Philadelhia, PA, for Defendant.

MEMORANDUM DECISION & ORDER

Cogan, District Judge.

Plaintiff SourceOne, Inc. has sued fellow dental-supplies distribution companies Patterson Companies, Inc. and Benco Dental Supply Company, accusing them of violating § 1 of the Sherman Act. SourceOne contends that defendants conducted a group boycott against SourceOne's distribution partners and pressured manufacturers and at least one individual dentist to join the boycott. SourceOne also brought various state-law claims based on the same conduct. Before the Court are defendants' motions for summary judgment on all of SourceOne's claims.

Because SourceOne has produced evidence that tends to exclude the possibility that defendants acted independently (in other words, evidence that the inference that defendants conspired is reasonable in light of the competing inference of independent action), defendants' motions for summary judgment on the Sherman Act claim are DENIED. Defendants' motions for summary judgment on plaintiff's damages claim are also DENIED. As to the state-law claims, the Court concludes that under applicable law, SourceOne has demonstrated a genuine issue of material fact as to its civil-conspiracy and tortious-interference claims, and therefore defendants' motions for summary judgment are DENIED as to those claims. However, the Court concludes that the applicable state law would not recognize an aiding-and-abetting claim in this context, so defendants' motions for summary judgment are GRANTED as to that claim.

BACKGROUND

SourceOne alleges that dental-supplies distributors Patterson and Benco, as well as distributor Henry Schein, Inc. (which was originally named in the complaint but which settled with SourceOne), conspired to exclude it from the market and took overt acts in furtherance of that conspiracy by boycotting the Texas and Arizona Dental Associations' annual meetings and by pressuring manufacturers and individual dentists not to do business with SourceOne. The following is a non-exhaustive summary of the key evidence. As is required on a motion for summary judgment, the Court views the contested facts in the light most favorable to SourceOne.

I. Texas Dental Association's 2014 Meeting

SourceOne alleges that defendants formed the conspiracy sometime between October 2013 and January 2014. In October 2013, the Texas Dental Association (TDA) launched "TDA Perks Supplies," a TDA–branded online marketplace for dental supplies and equipment created through a partnership with SourceOne. Defendants found out about TDA Perks Supplies in mid-October 2013.

Sometime before October 23, 2013, Ron Fernandez, Benco's regional manager for San Antonio, Austin, and Houston, called John Hyden, Patterson's San Antonio regional manager, to discuss the TDA's upcoming annual meeting and whether their respective companies would be attending in light of the TDA's partnership with SourceOne. Fernandez testified at his deposition that one of his goals during this discussion was to identify whether Patterson would be attending the TDA meeting to avoid placing Benco at a competitive disadvantage if it pulled out of the TDA meeting and Patterson attended. Fernandez told Hyden that Benco was considering pulling out of the 2014 TDA, and asked Hyden if Patterson planned to do the same. Fernandez testified that he offered information to Hyden to induce Hyden to share similar information. Fernandez discussed what Hyden told him with others at Benco, and Hyden discussed the call with Clint Edens, his supervisor at Patterson.

On October 23, 2013, Clint Edens, Patterson's decision-maker on attending the TDA meeting, emailed his superiors, informing them that "[a]s for Patterson, we have briefly discussed this TDAPerks site (not the source) with our dealer competitors at the local San Antonio & Houston level ... I am committed to pulling from the TDA if they do not reconsider competing with us via TDA perks [sic ]." Glenn Showgren, a manager at Schein, also reported internally as early as October 31, 2013 that Patterson, Benco, and another distributor, Burkhart, were considering pulling out of the 2014 TDA meeting.

Sometime before November 20, 2013, Randall McLemore, Schein's Dallas branch manager, visited his Patterson counterpart, Bob Ingersoll, to discuss the TDA annual convention. At his deposition, McLemore conceded that this in-person conversation with Ingersoll violated Schein's antitrust policy.

By December 11, 2013 (before Patterson had publicly announced that it would pull out of the 2014 TDA), Benco's Fernandez claimed that Patterson had already decided not to attend based on a conversation he had with a Patterson manager "about three weeks ago." That same day, Fernandez told Barrett Spencer, a Benco salesperson, in a text message: "I have been talking to the directors of Schein and Patterson. We are going to be taking a stand together against them [the TDA]."

Patterson announced that it would not attend the 2014 TDA meeting on December 13, 2013. Immediately after Patterson's announcement, a regional manager at Schein informed his supervisor that Patterson had dropped out of the 2014 TDA convention and that "I firmly believe they made the move expecting us to follow suit."

Dave Steck, a Schein vice president, later echoed this same sense of obligation to Patterson, or at least an obligation to keep Patterson apprised of Schein's decision. In late December 2013 or early January 2014, Dave Misiak, then-Vice President of Sales at Patterson, called Steck to tell him that Patterson was not going to attend the 2014 TDA convention and asking Steck if Schein was attending. Steck testified that, although he had known Misiak for five or six years, it was "unusual" for Misiak to contact him. Steck told Misiak that Schein had not yet decided, but that Steck would let Misiak know once it had. Steck testified at his deposition that he felt some obligation to tell Misiak Schein's final decision because Misiak had told him of Patterson's plans. Steck testified that he informed his boss, Tim Sullivan, of the call because he thought it was important for Sullivan to know of Patterson's plans for the 2014 TDA.

A few weeks after the Misiak–Steck call, on January 21, 2014, Schein's Steck told his employees in an internal email that he needed to inform Patterson about whether Schein was attending the 2014 meeting ("Guys, I have to get back to PDCO on whether or not we are attending the TDA."). That same day, Steck emailed Misiak at Patterson to say that he would "be calling you to let you know about our decision on the matter we recently discussed in the next couple of days." In the same email thread, Misiak expressed outrage to Tim Rogan, another Patterson higher-up, because Steck "already told me that they were out. Full blown!" Rogan replied to Misiak immediately: "That sucks. You should call him. ‘Thought I could trust you’ type of conversation."

On April 8, 2014 (the day before Schein and Benco officially announced that they were not attending the 2014 TDA), Mike Rowe, Benco's Director of Sales, rejected a suggestion from Fernandez, his direct report, that Benco advertise at the TDA that it would match the prices of TDA Perks Supplies, and said that Fernandez should instead "encourage more vendor partners to join the big three dealers and boycott future conventions. [The TDA convention] dying a slow death will have more impact than matching prices."

On April 9, 2014, Schein announced that it would not attend the 2014 TDA. Later that day, Benco's Fernandez informed Steck (his counterpart at Schein) that Benco had officially decided to pull out of the 2014 TDA—before Fernandez had informed the sales representatives he managed. Fernandez also called Kevin Upchurch, a Schein manager in Arizona, that same day.

II. Arizona Dental Association's 2015 Meeting

Patterson's decisions not to attend the 2014 TDA and 2015 AZDA conventions¹ were made at the local level by different managers (Clint Edens for the TDA convention and Chad Bushman, Patterson's Arizona branch manager, for the AZDA convention), but both defendants' Arizona decision-makers knew about the Texas boycott and discussed it with their Texas counterparts.

On July 21, 2014, Dan Reinhardt, Patterson's Mountain West Region Manager (which included Arizona) contacted Clint Edens, the Patterson's South–Central Regional Manager, saying that Patterson's Arizona team had heard that the AZDA was collaborating with SourceOne and asking Edens about the status of Patterson's relationship with the TDA and SourceOne. Dave Misiak replied to both Reinhardt and Edens less than an hour later, instructing them to "[p]lease discuss live and no more emails on this topic."

On April 17, 2014, Chuck Cohen, Benco's managing director in Texas, emailed Brian Evans, Benco's Director for the Western District (including Arizona), informing Evans about "a new program called #TDAPerks, an effort by the Texas Dental Association to compete with traditional dental distributors" and about Schein, Patterson, and Benco's decision ...