Subsolutions, Inc. v. Doctor's Associates, Inc.

• Decision Date: 02 August 1999
• Docket Number: No. 3:98CV470 AHN.,3:98CV470 AHN.
• Citation: 62 F.Supp.2d 616
• Parties: SUBSOLUTIONS, INC., et al. v. DOCTOR'S ASSOCIATES, INC., et al.
• Court: U.S. District Court — District of Connecticut

62 F.Supp.2d 616

SUBSOLUTIONS, INC., et al. v. DOCTOR'S ASSOCIATES, INC., et al.

No. 3:98CV470 AHN.

United States District Court, D. Connecticut.

August 2, 1999.

COPYRIGHT MATERIAL OMITTED

Raul Davila-Carlos, E. Glastanbury, CT, for Plaintiffs.

Edward Wood Dunham, New Haven, CT, for Defendants.

RULING ON DEFENDANTS' MOTION TO DISMISS

NEVAS, District Judge.

The plaintiffs, Subsolutions, Inc. ("SSI") and Deco Solutions Group, Inc. ("DSG"), bring this action against the defendants, Doctor's Associates, Inc. ("DAI") and Computer Register Associates, Inc. ("CRA"), alleging violations of section 1 of the Sherman Act, 15 U.S.C. § 1, and section 14 of the Clayton Act, 15 U.S.C. § 14. The plaintiffs also bring a state law claim for tortious interference with a business expectancy and allege violations of the Connecticut Unfair Trade Practices Act, Conn. Gen.Stat. §§ 42-110a to -110q ("CUTPA").¹

Now pending is DAI and CRA's Motion to Dismiss. For the reasons set forth below, the motion [doc. #74] is GRANTED IN PART and DENIED IN PART.

STANDARD OF REVIEW

In deciding a motion to dismiss under Rule 12(b)(6), the court is required to accept as true all factual allegations in the complaint and must construe any well-pleaded factual allegations in the plaintiff's favor. See Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir.1998); Easton v. Sundram, 947 F.2d 1011, 1014-15 (2d Cir. 1991). A court may dismiss a complaint only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see also Still v. DeBuono, 101 F.3d 888 (2d Cir.1996). A court must not consider whether the claim will ultimately be successful, but should merely "assess the legal feasibility of the complaint." See Cooper, 140 F.3d at 440 (citation omitted). In fact, "in antitrust cases, where the proof is largely in the hands of the alleged conspirators, dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly." Hospital Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738, 746, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976) (internal citations and quotation marks omitted); accord George Haug Co. v. Rolls Royce Motor Cars Inc., 148 F.3d 136, 139 (2d Cir.1998); Strobl v. New York Mercantile Exch., 561 F.Supp. 379, 383 (S.D.N.Y.1983); CBS, Inc. v. Ahern, 108 F.R.D. 14, 28 (S.D.N.Y.1985); Eye Encounter, Inc. v. Contour Art., Ltd., 81 F.R.D. 683, 686 (E.D.N.Y.1979). In deciding such a motion, consideration is limited to the facts stated in the complaint or in documents attached thereto as exhibits or incorporated therein by reference. See Kramer v. Time Warner Inc., 937 F.2d 767, 773 (2d Cir.1991).

FACTS

DAI, one of the defendants, is a Florida corporation with its principal place of business in Milford, Connecticut, that sells and services "Subway" sandwich shop franchises. (See Am. Compl. ¶ 4.) DSG, one of the plaintiffs, is a Florida corporation which develops and services point of sales systems ("POS systems"), a computerized alternative to conventional cash registers. (See id. ¶ 2.) SSI, the other plaintiff and another Florida corporation, markets and sells DSG's POS systems to Subway franchisees.² (See id. ¶ 3.) SSI also provides extended service agreements to Subway franchisees who purchase DSG's POS system. (See id.) CRA, the other defendant, is a Florida corporation and DAI affiliate, that is in the process of developing POS system software for use in Subway sandwich shops. (See id. ¶¶ 5, 21.)

Under the Subway franchise agreement, franchisees are only permitted to use Subway approved products and equipment.³ (See id. ¶ 18.) A Subway franchisee who uses unauthorized goods or equipment is subject to termination by DAI. (See id.) Since 1992, SSI has been an approved Subway POS system vendor. (See id. ¶ 14.) In this capacity, SSI has sold approximately 1,565 POS systems to Subway franchisees. (See id.)

For the past fifteen years, RBS, a New York corporation, has exclusively supplied cash registers to Subway restaurants. (See id. ¶ 6.) RBS also provides POS hardware and software systems to Subway franchisees. (See id.)

On February 24, 1998, DAI implemented a policy which mandated that all Subway franchisees employ a POS system by January 1, 2001. (See id. ¶ 9.) Franchisees who refuse to comply with this policy are subject to termination. (See id.) This policy evolved out of an agreement between DAI and RBS, in which they recognized that RBS would be the "sole DAI approved POS vendor in the Subway POS market."⁴ (Id. ¶ 19.) Apparently, RBS's exclusive vendor status terminates once DAI's affiliate, CRA, develops its own POS system. (See id. ¶ 22.) This agreement effectively forecloses SSI, as well as other POS vendors, from the Subway POS market.⁵ (See id. ¶ 19) The plaintiffs allege that this agreement is part of a conspiracy between DAI, RBS and CRA to unreasonably restrain competition in the Subway POS market. (See id. ¶ 20.)

On March 12, 1998, the plaintiffs commenced this action. An amended complaint was subsequently filed on October 27, 1998, raising various antitrust and state law claims against DAI and CRA.

DISCUSSION

I. Allegations of an "Antitrust Injury"

In order to have standing to bring a private antitrust claim, a plaintiff must allege more than a personal injury. See Balaklaw v. Lovell, 14 F.3d 793, 797 (2d Cir.1994); George Haug Co., 148 F.3d at 139. Such an action may be pursued only where an antitrust injury is present. See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977). An antitrust injury is an "injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful. The injury should reflect the anticompetitive effect either of the violation or of anticompetitive acts made possible by the violation." Brunswick Corp., 429 U.S. at 489, 97 S.Ct. 690. In examining this requirement, a court must keep in mind "the fundamental tenet that [t]he antitrust laws ... were enacted for the protection of competition, not competitors." Balaklaw, 14 F.3d at 797 (citations and internal quotation marks omitted).

The defendants initially argue that the plaintiffs' antitrust claims must be dismissed because the plaintiffs have not alleged a cognizable antitrust injury, i.e., an injury to competition as a whole. The defendants rely heavily on Balaklaw in support of their position. In Balaklaw, the plaintiff physician was the president of a private group of doctors who were solely responsible for meeting a hospital's anesthesiology requirements. See Balaklaw, 14 F.3d at 795-96. No written contract governed this relationship. See id. The hospital subsequently decided to solicit proposals from outside physicians in an effort to establish an exclusive contract for its anesthesiology needs. See id. at 796. Nine interested parties, including the plaintiff physician's group, submitted proposals to the hospital. See id. Although interviewed by the hospital, the plaintiff physician's group was ultimately not awarded the contract. See id. The plaintiff physician brought suit claiming that the selection process was anticompetitive and thus, a violation of the Sherman Act. See id. In affirming the district court's grant of summary judgment, the Second Circuit held that there was no antitrust injury because the plaintiff's "claimed injury came as a result of his losing out in the competition for an exclusive anesthesiology contact at [the hospital], and nothing more." Id. at 798.

The defendants argue that the present case is similar to Balaklaw because: (1) DAI unilaterally selected RBS as the supplier of POS systems at the culmination of an open and vigorous competitive process, and (2) DAI chose RBS for pro-competitive reasons, including the fact that RBS's POS system offered the lowest price to the consumer. (See Mem. of Law of DAI and CRA in Supp. of Mot. to Dismiss at 6 [hereinafter "Defs.' Mem."].) Neither of these facts are contained in the plaintiffs' amended complaint. Rather, the defendants extract this information from the plaintiffs' original complaint. Because "[i]t is well established that an amended complaint ordinarily supercedes the original, and renders it of no legal effect," Dluhos v. Floating & Abandoned Vessel, 162 F.3d 63, 68 (2d Cir.1998) (citations and internal quotation marks omitted), the defendants' reliance on the plaintiffs' original complaint is misplaced. While statements from the original complaint may be used as impeachment evidence at trial, see Andrews v. Metro North Commuter R.R. Co., 882 F.2d 705, 707 (2d Cir.1989); Decker v. Vermont Educ. Television, Inc., 13 F.Supp.2d 569, 572 (D.Vt. 1998), the court should not consider such statements on a motion to dismiss.

Here, the plaintiffs' amended complaint contains numerous allegations that other competitors in the POS market have been injured as a result of the defendants' actions. (See Am. Compl. ¶¶ 19-20, 24.) Such allegations are sufficient to survive a motion to dismiss. See Delaware Health Care, Inc. v. MCD Holding Co., 893 F.Supp. 1279, 1291 (D.Del.1995) (finding that plaintiff had "satisfied its minimal burden of pleading harm not only to itself, but also to others in the competitive landscape and thus to competition"); Capital Imaging Assoc., P.C. v. Mohawk Valley Med. Assoc., 725 F.Supp. 669, 677-78 (N.D.N.Y.1989) (same); cf. Falstaff Brewing Co. v. Stroh Brewery Co., 628 F.Supp. 822, 827 (N.D.Cal.1986) (holding that an antitrust complaint was defective where it failed to allege an injury to competition). When the facts of Balaklaw are compared to those alleged in the plaintiffs' amended complaint, it is evident that Balaklaw is distinguishable. First, the physician plaintiff in that case alleged nothing more than a personal injury. See Balaklaw, 14 F.3d at 796. Second, the Balaklaw c...