Tyler Techs., Inc. v. Lexur Enters. Inc.
| Decision Date | 29 June 2021 |
| Docket Number | Case No. 4:20-cv-00173-TWP-DML |
| Parties | TYLER TECHNOLOGIES, INC., Plaintiff, v. LEXUR ENTERPRISES INC., ROBERT FRY, and JOHN DOES 1-100, Defendants. |
| Court | U.S. District Court — Southern District of Indiana |
This matter is before the Court on separate Motions to Dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) by Defendants Lexur Enterprises Inc. ("Lexur") (Filing No. 29), and Robert Fry ("Fry") (Filing No. 31), (collectively, "Defendants"). This case was initiated by Plaintiff Tyler Technologies, Inc. ("Tyler") against Defendants "for (1) violation of the Sherman Antitrust Act, 15 U.S.C. § 1, et seq., (2) violation of the Indiana Antitrust Act, Ind. Code § 24-1-2-1, et seq., (3) tortious interference with contract, (4) tortious interference with business relationships, and (5) civil conspiracy." (Filing No. 1 at 1).1 Defendants have separately moved to dismiss, arguing that all claims against them, as alleged, fail (Filing No. 29; Filing No. 31).2 For the following reasons, the Defendants Motions are granted.
The following facts are not necessarily objectively true, but, as required when reviewing a motion to dismiss, the Court accepts as true all factual allegations in the Complaint and draws all inferences in favor of Tyler as the non-moving party. See Bielanski v. County of Kane, 550 F.3d 632, 633 (7th Cir. 2008). Though the Complaint goes into much greater detail, the following factual background suffices to provide adequate context for purposes of this Entry.
Pursuant to Indiana law, county assessors must physically inspect and reassess the value of all real property over the course of four years (Filing No. 1 at 8). To achieve this task, assessors regularly contract with private enterprises to provide necessary support and advice with these so-called "cyclical reassessments." Id. As part of this process, assessors must advertise for bids, which usually occurs in the year before the start of a new cycle. Id. Consistent with this practice, Tyler—"the largest software company in the nation that focuses solely on providing integrated software and technology services to the public sector"—bid in 2017 for contracts with Dearborn, Floyd, Jackson, Jefferson, Ripley, and Switzerland Counties (the "Counties") to provide reassessment support starting in 2018. Id. at 5, 6, 8. Lexur—"a regional competitor" with work "limited almost exclusively to Ohio"—was one of Tyler's rivals for the contracts. Id. at 6, 8-9. Ultimately, Tyler won the contracts with their terms running from May 1, 2018, through April 30, 2022. Id. at 8-9.
Davis and Thornsberry were both long-time Tyler employees who, in their respective roles, served as liaisons between the company and the Counties. Id. at 9-10. Starting in May 2020, however, Davis and Thornsberry worked in conjunction with Lexur and Fry (Lexur's President and Chief Financial Officer) to covertly create a scheme to (1) convince the Counties to reopen a bidding process "mid-cycle" (that is, before the four-year cycle concluded in 2022), (2) leave other competitors (including Tyler) in the dark about the process (rendering them unable to meaningfully submit bids), (3) guarantee that Lexur was awarded the contracts (by submitting bids that werelower than Tyler's previous successful proposals), (4) coordinate the termination of Tyler's contracts with the Counties, and (5) solicit other Tyler employees to work for Lexur on the newly-awarded contracts. Id. at 6, 12-18.3
Specifically, the Complaint alleges that Defendants directly solicited the assessors to pledge to rebidding the contracts, terminating Tyler, and hiring Lexur (Filing No. 1 at 12). In fact, Defendants drafted a calendar that outlined the plan, providing a day-by-day contour of the scheme. Id. at 13-14. As shown by this agenda, the rebidding process was to be advertised the week preceding the Fourth of July holiday weekend in 2020. Id. The Counties were then to close the bidding windows either immediately or just before the next scheduled county commissioner meetings where Lexur (the only bidder) would be approved to replace Tyler. Id. Finally, the Counties would immediately halt all activities of Tyler with certain staff resigning from Tyler and transitioning to Lexur. Id.
Defendants themselves drafted the termination notices the Counties were to send to Tyler and organized the timing of the terminations, while, of course, knowing about the pre-existing contracts. Id. at 13, 20-22. Defendants also prepared the rebid notices, working with the Counties to make sure that the planned timeline came to fruition. Id. at 16-18. Despite Davis and Thornsberry working for the company at the time, Tyler, and no other competitors, were privy to this out-of-cycle rebid process with Davis even directly denying having knowledge of the Counties (for which he was responsible) planning to rebid. Id. at 18. None of the Counties directly told Tyler about the rebidding, and Tyler only learned about the request for bids by coincidence, leavingTyler with neither sufficient time nor context to submit a bid. Id. In fact, by the time Tyler learned about the rebidding, the windows had already closed in two Counties. Id. In the end, with the plan followed dutifully, Lexur was the sole bidder in the rebid process. Id. at 19.4 And on schedule, Davis resigned from Tyler on July 6, 2020. Id. Ultimately, on August 10, 2020, and under various theories, Tyler sued Defendants, who, for their part, move to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).
Federal Rule of Civil Procedure 12(b)(6) allows a defendant to move to dismiss a complaint that has failed to "state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). When deciding a motion to dismiss under Rule 12(b)(6), the Court accepts as true all factual allegations in the complaint and draws all inferences in favor of the plaintiff. Bielanski, 550 F.3d at 633. Courts, however, "are not obliged to accept as true legal conclusions or unsupported conclusions of fact." Hickey v. O'Bannon, 287 F.3d 656, 658 (7th Cir. 2002).
The complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). In Bell Atlantic Corp. v. Twombly, the Supreme Court explained that the complaint must allege facts that are "enough to raise a right to relief above the speculative level." 550 U.S. 544, 555 (2007). Although "detailed factual allegations" are not required, mere "labels," "conclusions," or "formulaic recitation[s] of the elements of a cause of action" are insufficient. Id.; see also Bissessur v. Ind. Univ. Bd. of Trs., 581 F.3d 599, 603 (7th Cir. 2009) (). The allegations must "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Twombly, 550 U.S. at 555. Stated differently, the complaint must include "enough facts to state a claim to relief that is plausible on its face." Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009) (citation and quotation marks omitted). To be facially plausible, the complaint must allow "the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).
Tyler brings five claims against Defendants: (1) Sherman Antitrust Act violations, (2) Indiana Antitrust Act violations, (3) tortious interference with a contract, (4) tortious interference with a business relationship, and (5) civil conspiracy. As Defendants largely attack each claim successively, the Court will discuss the Counts in turn.
In Count I, Tyler brings a claim for violation of the Sherman Antitrust Act (the "Sherman Act"), alleging that "Defendants restrained competition for public works contracts by reducing the number of potential bidders and rigging the result of the bidding process." (Filing No. 1 at 26.) Defendants maintain that Tyler has failed to "allege an anti-trust injury necessary to state a claim under Section 1 of the Sherman Act." (Filing No. 30 at 4.) To demonstrate an antitrust injury, a plaintiff must show "that its injury is 'of the type the antitrust laws were intended to prevent.'" McGarry & McGarry, LLC v. Bankr. Mgmt. Sols., Inc., 937 F.3d 1056, 1065 (7th Cir. 2019) (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)). It does not suffice "to allege that the injury is merely causally linked to the alleged anticompetitive behavior"; instead, a plaintiff "must also demonstrate that its injury 'is attributable to an anti-competitiveaspect of the practice under scrutiny.'" Id. (quoting Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990)).
Defendants argue that "[a]ccording to Tyler's own allegations, Lexur's alleged actions resulted in the six counties at issue receiving bids from Lexur that were lower than Tyler's bids." (Filing No. 30 at 6 (emphasis in original).) Because "no antitrust injury exists" when "an alleged conspiracy results in lower prices to consumers," the claim should be dismissed. Id. (citing James Cape & Sons Co. v. PCC Constr. Co., 453 F.3d 396, 399 (7th Cir. 2006)). Defendants additionally note that Tyler also alleges that "Lexur's activities resulted in a new entrant to the Indiana real estate assessment market," which, in fact, "suggests a pro-competitive result." Id. (citing Chicago Studio Rental, Inc. v. Illinois Dept. of Commerce, 940 F.3d 971, 978 (7th Cir. 2019)). In sum, "Tyler has only pleaded injuries to itself rather than an anticompetitive injury to the market," and "any alleged conspiracy by the Defendants resulted in the entry of a new competitor into the Indiana market and lower bids being made for cyclical reassessment...
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