TYR Sport Inc. v. Warnaco Swimwear Inc.

• Decision Date: 27 May 2009
• Docket Number: Case No. SACV 08-00529-JVS (MLGx).
• Parties: TYR SPORT INC. v. WARNACO SWIMWEAR INC., et al.
• Court: U.S. District Court — Central District of California

679 F.Supp.2d 1120

TYR SPORT INC. v. WARNACO SWIMWEAR INC., et al.

Case No. SACV 08-00529-JVS (MLGx).

United States District Court, C.D. California.

May 27, 2009.

Christopher W. Arledge, Turner Green LLP, Costa Mesa, CA, Jennifer Sun, Lawrence J. Hilton, William E. Halle, Hewitt and O'Neil, Irvine, CA, for TYR Sport Inc.

Stuart M. Richter, Gregory S. Korman, Katten Muchin Rosenman, Los Angeles, CA, Adam Paul Brezine, Jonathan G. Fetterly, Holme Roberts & Owen LLP, Los Angeles, CA, Richard R. Young, Holme Roberts And Owen LLP, Colorado Springs, CO, Richard J. Foster, Law Office of Richard J. Foster, Seal Beach, CA, for Warnaco Swimwear Inc., et al.

Proceedings: (In Chambers) Order re Defendant Warnaco Swimwear, Inc.'s Motion to Dismiss Complaint (filed 09/15/08); Defendants U.S. Swimming and Mark Schubert's Motion to Dismiss Complaint (filed 9/19/08) and Motion to Strike Speech-Related Claims (Anti-SLAPP) (filed 09/17/08)

JAMES V. SELNA, District Judge.

Defendant Warnaco Swimwear, Inc. dba Speedo USA ("Speedo") moves the Court for an order dismissing the First through Fourth and Sixth through Tenth Claims asserted by Plaintiff TYR Sport, Inc. ("TYR") in the Complaint.¹ Defendants United States Swimming, Inc. and Mark Schubert ("Schubert") (collectively, "USA Swimming") move to dismiss the First, Third, and Sixth through Tenth Claims, and Speedo seeks to join this motion with respect to the First and Third Claims. Both motions are brought under Federal Rule of Civil Procedure 12(b)(6). Additionally, USA Swimming moves to strike the Third and Sixth through Tenth Claims under California Code of Civil Procedure Section 425.16 ("the anti-SLAPP statute").² TYR opposes these motions. The Court GRANTS IN PART AND DENIES IN PART the motions to dismiss, and DENIES the Anti-SLAPP motion.

I. BACKGROUND

TYR and Speedo both design and manufacture high-end swimwear and accessories sold to competitive swimmers. (Compl. ¶ 9.) The United States Olympic Committee ("USOC") recognizes USA Swimming as the national governing body ("NGB") of the sport of swimming, per the Ted Stevens Amateur Sports Act ("Sports Act"), 36 U.S.C. § 220522. (Id. ¶ 4.) In 2006, USA Swimming hired Schubert to be the national and Olympic team head coach, though Schubert remained a paid spokesperson for Speedo. (Id. ¶¶ 14, 22.)

TYR alleges a combination between Speedo and USA Swimming that makes USA Swimming a de facto sales agent for Speedo. (Id. ¶ 15.) TYR specifically alleges as follows. In exchange for payments from Speedo, USA Swimming agreed to act as a promoter for Speedo, and to make false statements that Speedo's products are "superior" and that its rivals' products are "inferior." (Id. ¶¶ 15-17, 22.) Notably, Schubert misled national team members by claiming that the Speedo suit, the LZR Racer ("LZR"), provides "a 2% advantage" over the equipment made by Speedo's rivals. (Id. ¶ 16.) USA Swimming also agreed to alter images of sponsored athletes to remove logos of Speedo's competitors. (Id. ¶ 11.) USA Swimming refused Speedo's competitors the ability to advertise in the official NGB publication, Splash Magazine, and to sponsor USA Swimming-sanctioned meets or to post signs at meets. (Id. ¶¶ 11-12.) TYR further alleges that Speedo has falsely advertised its products to team dealers, who account for a large portion of competitive swimwear sales. (Id. ¶¶ 28-32.)

Against this backdrop, TYR alleges ten claims for relief. All of these claims are asserted against Speedo and USA Swimming together, except for the Second and Fourth Claims—alleged against Speedo alone—and the Fifth Claim—alleged against Erik Vendt ("Vendt"). (Id. ¶¶ 35-86.) Presently before the Court are (1) the defendants' 12(b)(6) motions to dismiss, and (2) an anti-SLAPP motion to strike speech-related claims. The Court will address each issue in turn.

II. MOTIONS TO DISMISS

A. Legal Standard

Under Rule 12(b)(6), a defendant may move to dismiss for failure to state a claim upon which relief can be granted. A plaintiff must state "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim has "facial plausibility" if the plaintiff pleads facts that "allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). In resolving a 12(b)(6) motion under Twombly, the Court must follow a two-pronged approach. First, the Court must accept all well-plead factual allegations as true, but "thread-bare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. at 1949. Nor must the Court "accept as true a legal conclusion couched as a factual allegation." Id. (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). Second, assuming the veracity of wellpleaded factual allegations, the Court must "determine whether they plausibly give rise to an entitlement to relief." Id. This determination is context-specific, requiring the Court to draw on its experience and common sense, but there is no plausibility "where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct." Id.

Because factual challenges have no bearing under Rule 12(b)(6), generally speaking, the Court may not consider material beyond the pleadings in ruling on a motion to dismiss for failure to state a claim. There are, however, two exceptions to this general rule which do not demand converting the motion to dismiss into one for summary judgment. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir.2001). First, a court may consider material that is either attached to the complaint or material upon which the complaint relies, provided the material's authenticity is not contested. Id. Second, under Federal Rule of Evidence 201, the Court may take judicial notice of matters of public record if the facts are not subject to reasonable dispute. Id.

B. Discussion

The Court considers two 12(b)(6) motions, one brought by Speedo, the other by USA Swimming. Because of significant overlap between these motions, the Court treats them here together. To extent they are based on divergent grounds, Speedo seeks to join USA Swimming's motion with respect to the First and Third Claims. The Court considers the challenged claims sequentially, as set forth below.

1. Federal and State Antitrust Claims (First through Third Claims)

i. Speedo's Motion

TYR alleges the First and Second Claims under the Sherman Act, Sections 1 and 2, respectively, 15 U.S.C. §§ 1 & 2; and the Third Claim under the Cartwright Act, Cal. Bus & Prof.Code §§ 16720, et seq. Speedo contends that the federal antitrust claims should be dismissed because TYR has failed to (1) plead facts necessary to define a relevant market; (2) show that Speedo has done anything to foreclose competition in any relevant market; (3) establish that it meets the stringent test in the Ninth Circuit for establishing antitrust liability based on a defendant's advertising and promotional statements; and (4) show that it has suffered injury in fact and antitrust injury. Speedo asserts that the state antitrust claim fails for the same reasons. The Court finds these arguments unavailing.

For purposes of this motion, the Court must construe the Complaint in the light most favorable to TYR, and accept TYR's well-pleaded factual allegations as true. Iqbal, 129 S.Ct. at 1949-50; see also Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996). The Court therefore rejects Speedo's attempt to bifurcate the antitrust claims by treating Speedo's sponsorship of USA Swimming separately from Speedo's and Schubert's promotion of the LZR swimsuit. The Court also rejects Speedo's attempt to analogize these claims to monopoly leveraging. Instead, the Court accepts TYR's broader claim that Speedo has bought not only exclusive access to USA Swimming, which has agreed to exclude or limit Speedo's competitors from participating in official functions and from advertising in Splash Magazine, but also USA Swimming's affirmative and exclusive endorsement of Speedo's products. (Compl. ¶¶ 11-16.) TYR further alleges that USA Swimming disparaged the products of Speedo's competitors with no factual basis to do so. (Id. ¶¶ 13-16, 22-23.)

On this basis the Court turns to the question of whether TYR's antitrust claims allege a legally cognizable "relevant market." To state a valid claim under the Sherman Act,³ TYR must allege both that a relevant market exists and that the defendants have power within that market. Newcal Indus. Inc. v. Ikon Office Solution, 513 F.3d 1038, 1044 (9th Cir.2008). The Court finds no requirement that these elements be pled with specificity here. Id. at 1045. As the Ninth Circuit recently explained,

an antitrust complaint ... survives a Rule 12(b)(6) motion unless it is apparent from the face of the complaint that the alleged market suffers a fatal legal defect. And since the validity of the "relevant market" is typically a factual element rather than a legal element, alleged markets may survive scrutiny under Rule 12(b)(6) subject to factual testing by summary judgment or trial.

Id. Under the circuit's precedent in Big Bear Lodging Association v. Snow Summit, Inc., 182 F.3d 1096, 1104-05 (9th Cir. 1999), TYR "must identify the relevant geographic and product markets in which the parties compete and allege facts demonstrating that Defendants' conduct has an anticompetitive effect on those markets." TYR alleges that the relevant product market is for "high-end competitive swimwear and accessories ... sold to competitive swimmers in the professional, collegiate, high school and club ranks," and that the relevant geographic market "consists of the entire United States and its territories." (Compl. ¶ 9.)

Speedo contends that this market definition is legally...