GovernmentGPT Incorporated et al v. Axon Enterprise Incorporated et al

Filing 146

ORDER granting Safariland's 110 Motion to Dismiss for Lack of Personal Jurisdiction and denying as moot Safariland's 111 Motion to Dismiss for Failure to State a Claim. Because the Court cannot exercise jurisdiction over Safariland, it will be dismissed from this case with prejudice. IT IS FURTHER ORDERED granting Microsoft's 90 Motion to Dismiss and dismissing Microsoft from this case without prejudice. IT IS FURTHER ORDERED granting Axon's 106 Motion to Dismiss an d dismissing Axon from this case without prejudice. IT IS FURTHER ORDERED instructing GovGPT that if it wishes to file a Second Amended Complaint, it must do so within thirty (30) days of the date of this Order. Signed by Judge Susan M. Brnovich on 3/7/2025. (ESG)

1

WO

2
3
4
5
6

IN THE UNITED STATES DISTRICT COURT

7

FOR THE DISTRICT OF ARIZONA

8
9

GovernmentGPT Incorporated,
Plaintiff,

10
11

v.

12

Axon Enterprise Incorporated, et al.,

13

No. CV-24-01869-PHX-SMB
ORDER

Defendants.

14
15

Before the Court are Microsoft Corporation (“Microsoft”), Axon Enterprise Inc.

16

(“Axon”), and Safariland LLC’s (“Safariland”) separate Motions to Dismiss (Doc. 90; Doc.

17

106; Doc. 110; Doc. 111) Plaintiff GovernmentGPT Inc.’s (“GovGPT”) First Amended

18

Complaint (“FAC”) (Doc. 74). The briefing is complete, and the Motions are ripe. Having

19

reviewed the briefing and the relevant case law, the Court will grant Axon’s Motion, grant

20

Microsoft’s Motion, and grant Safariland’s Motion to Dismiss for Lack of Personal

21

Jurisdiction (Doc. 110) but deny Safariland’s Motion to Dismiss for Failure to State a

22

Claim (Doc. 111) as moot.

23

I.

BACKGROUND

24

Despite the FAC clocking in at just under one-hundred and ten pages, the

25

background of this case is rather straightforward. In capsule form, this action arises from

26

a series of alleged illegal acquisitions and anticompetitive agreements occurring between

27

the named Defendants. (See Doc. 74.) Now, before describing the background of those

28

claims, the Court will briefly discuss the procedural history of this case.

1

A. Procedural History

2

GovGPT and a group of now-excised Plaintiffs filed their Initial Complaint on July

3

29, 2024. (Doc. 1.) They concurrently filed a Motion for Preliminary Injunction titled:

4

“Emergency Motion for Immediate Order to Prohibit use of Axon Body 4 Cameras at

5

Political Events,” citing the potential danger Quectel “chips” housed in the Axon Body 4

6

(the “AB4”). (Doc. 2 at 2.) Shortly after the filings, this Court set a telephonic status

7

conference to discuss the Motion (Doc. 23). At that conference, the Court announced that

8

it would forego a hearing and take the Motion under advisement. (Doc. 51.)

9

While the Court was considering the request for a preliminary injunction, Axon and

10

Microsoft filed Motions to Dismiss the Initial Complaint. (Doc. 66; Doc. 67; Doc. 68.)

11

Shortly thereafter, the Court denied GovGPT’s Motion for Preliminary Injunction (Doc.

12

2), finding that the Motion, the supporting memoranda, and the initial Complaint failed to

13

support ordering the requested relief. (See Doc. 71.) In that Order, the Court scrutinized

14

GovGPT’s allegations about the Quectel “chips,” finding them to be unsubstantiated. (See

15

id.) There, the Court also ordered GovGPT and former Plaintiff Raj Abhyanker to appear

16

for a hearing in which they needed to (1) justify the filing of the “emergency motion”

17

absent any actual testing of the AB4 and (2) to support the repeated allegations that a

18

hackable Quectel “chip” is used in the AB4. (Id. at 11.)

19

At the hearing, the Court asked Mr. Abhyanker whether he had tested or specifically

20

identified the presence of a Quectel “chip” in the AB4 that was susceptible to hacking by

21

the Chinese Communist Party. (Doc. 105 at 25–26.) Mr. Abhyanker responded, stating:

22

They are unidentified chips, not all of them are identified. Some of them are
from Qualcomm, some are not identified, but there is an ESMT chip which
has a label on that directly. If you look that up, directly up right now, it is a
chip that’s made in the People’s Republic of China and Taiwan. And so it’s
not true to say they’re all Quectel chips. There is a whole bunch of other
smaller chips underneath there—
....
Well, an integrated circuit board is what I called a chip, an integrated circuit
board having chips thereon. I should have called it a module,
....
Taiwan is the People’s Republic of China, isn’t it?

23
24
25
26
27
28

-2-

1

(Id. at 26, 30.) These statements, among others, led the Court to find that the Quectel chip

2

allegations and Emergency Motion were brought in bad faith.

3

Consequently, the Court sanctioned Mr. Abhyanker. (Id.)

(Id. at 31–32.)

4

Then, on September 22, 2024, GovGPT filed its FAC, which added Safariland as a

5

Defendant and regurgitated many of the allegations in the Initial Complaint. (Doc. 74.)

6

Safariland has filed two Motions to Dismiss the FAC, one for lack of personal jurisdiction

7

and the other for failure to state a claim. (Doc. 110; Doc. 111.) Axon and Microsoft also

8

filed new Motions to Dismiss for failure to state claim. (Doc. 106; Doc. 90.)

9

On December 20, 2024, GovGPT gave notice to the Court and Defendants of its

10

intent to “Seek Motion before the Judicial Panel on Multidistrict Litigation to Consolidate

11

and Transfer the Cases to One District,” (Doc. 123; Doc. 124), and sought a stay pending

12

a panel decision (Doc. 144). The Court denied issuing a stay. (Doc. 144.) Defendants

13

have opposed consolidating the case and have requested expedited consideration of the

14

pending Motions to Dismiss. (Doc. 127; Doc. 131.) This Order follows Defendants’

15

request. (Doc. 144.)

16

B. The FAC

17

1. The Parties

18

GovGPT is a Delaware corporation with its principal place of business in California.

19

(Doc. 74 ¶ 4.) It is an early-stage startup that develops and markets artificial intelligence

20

technologies, such as 360-degree body camera vests. (Doc. 74 ¶ 4.) The company also

21

offers a digital evidence management system (“DEMS”), hostable on “AWS, Microsoft,

22

Google Cloud, private storage, or other vendors.” (Id. ¶ 25.) It seeks to compete with

23

Axon in the market for body-worn cameras (“BWCs”) and DEMS. (See generally id.)

24

Although, GovGPT does not operate in the “Public Safety Video Integration and

25

Management Platforms,” market but intends to compete directly with Axon at some

26

undesignated future time. (Id. ¶ 25 n.2.)

27

Defendants in this case include Axon, Microsoft, and Safariland. Axon is a publicly

28

traded Delaware Corporation with its principal place of business in Arizona. (Id. ¶ 5.)

-3-

1

Axon designs, manufactures, and sells, among other things, BWCs and DEMS. (Id.) The

2

FAC claims that Axon supplies over 94% of American law enforcement agencies. (Id. ¶

3

2.)

4

conjunction with Axon’s BWCs, including the AB4. (Id. ¶¶ 2, 109, 175.) Microsoft is a

5

publicly traded technology company incorporated in Washington and maintains

6

datacenters in El Mirage and Goodyear, Arizona. (Id. ¶ 6.) The FAC alleges that Axon

7

exclusively uses Microsoft’s cloud platform, Microsoft Azure, to store footage uploaded

8

to Axon’s Evidence.com platform.

9

Delaware-organized limited liability company headquartered in Florida. (Doc. 74 ¶ 7.)

10

The antitrust violations asserted against it in this case center around the 2018 sale to Axon

11

of former Safariland subsidiary, VieVu, LLC (“VieVu”). (Id. ¶ 27.)

12

Axon’s DEMS, Evidence.com, is an integrated software product that works in

(Doc. 13 ¶ 5; Doc. 74 ¶ 41.)

Safariland is a

2. The Claims

13

GovGPT asserts the following claims for relief: (1) false advertising under the

14

Lanham Act; (2) violation of Section 7 of the Clayton Act; (3) conspiracy to retrain trade

15

in violation of Section 1 of the Sherman Act; (4) monopolization in violation of Section 2

16

of the Sherman Act; (5) attempted monopolization in violation of Section 2 of the Sherman

17

Act; (6) conspiracy to monopolize in violation of Section 2 of the Sherman Act; and (7)

18

violation of California Unfair Competition Law (the “UCL”). (See Doc. 74.)

19

For the Lanham Act and UCL claims, GovGPT alleges that Axon makes several

20

false or misleading statements on its “Responsibility” and “Principles” webpages. (See id.

21

¶¶ 152–191, 310–317.) Regarding the antitrust claims, GovGPT alleges that Axon violated

22

the Clayton and Sherman Acts when it acquired Fusus, a real-time crime center (“RTCC”)

23

company. (See Doc. 74 ¶¶ 200–205, 267–283.) Similarly, GovGPT alleges that both Axon

24

and Safariland violated the Clayton and Sherman Acts when Safariland sold VieVu to

25

Axon. (See id. ¶¶ 192–266, 284–309.) Additionally, GovGPT alleges that Axon and

26

Microsoft violated the Sherman Act by entering an anticompetitive cloud services

27

agreement in 2018. (See id. ¶¶ 231–248, 284–309.) Axon’s alleged violations are also

28

based on the acquisitions and agreements having created a self-contained BWC and DEMS

-4-

1

ecosystem that prevents competitors from meaningfully participating the market. (See

2

generally id.)

3

The FAC also asserts many of the same claims regarding the Quectel “chips” but

4

now labels them “modules” and “components.” (See, e.g., id. ¶¶ 53–55, 58, 61, 154–157,

5

213.) These claims echo the same concerns about the Chinese Community Party being

6

able to exploit the Quectel “components” or “modules” to compromise national security.

7

(See, e.g., id ¶¶ 154–157, 164, 167, 213, 265, 311.) Like the Initial Complaint, the FAC

8

does not allege that GovGPT has tested the “components” or “modules.” (See id.) Instead,

9

GovGPT generally alleges that several congresspersons and persons testifying before

10

Congress have noted the danger of Quectel IoT Modules (See id. ¶¶ 78–79), and that

11

GovGPT “warned” Axon about the danger of Quectel chips. (Id. ¶ 85.)

12

II.

LEGAL STANDARD

13

A. Rule 12(b)(2)

14

Personal jurisdiction refers to the power that a court has over the parties. This

15

jurisdiction is proper when it is provided for by law and the exercise of jurisdiction

16

comports with due process. Walden v. Fiore, 571 U.S. 277, 283 (2014). “Federal courts

17

ordinarily follow state law in determining the bounds of their jurisdiction over persons.”

18

Daimler AG v. Bauman, 571 U.S. 117, 125 (2014). Arizona has authorized its courts to

19

exercise jurisdiction over persons “to the maximum extent permitted by . . . the United

20

States Constitution.” Ariz. R. Civ. P. 4.2(a).

21

Due process requires that a defendant have at least “minimum contacts” with the

22

forum state so that “maintenance of the suit does not offend traditional notions of fair play

23

and substantial justice.” Int’l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945) (internal

24

quotations omitted). “[T]he defendant’s conduct and connection with the forum State

25

[must be] such that he should reasonably anticipate being haled into court there.”

26

World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). When analyzing

27

sufficient minimum contacts, courts distinguish between general jurisdiction and specific

28

jurisdiction.

General jurisdiction exists when the defendant has “continuous and

-5-

1

systematic” contacts with the forum state, whereas specific jurisdiction exists when the

2

controversy arises from or is related to the defendant’s contact with the forum state. See

3

Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414–16 (1984). The

4

court “employ[s] a three-part test to assess whether a defendant has sufficient contacts with

5

the forum state” to establish specific personal jurisdiction:

6
7
8
9
10

(1) The non-resident defendant must purposefully direct his activities or
consummate some transaction with the forum or resident thereof; or perform
some act by which he purposefully avails himself of the privilege of
conducting activities in the forum, thereby invoking the benefits and
protections of its laws;
(2) the claim must be one which arises out of or relates to the defendant’s
forum-related activities; and
(3) the exercise of jurisdiction must comport with fair play and substantial
justice, i.e. it must be reasonable.

11
12

Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015). “The plaintiff bears the burden of

13

satisfying the first two prongs of the test.” Schwarzenegger v. Fred Martin Motor Co., 374

14

F.3d 797, 802 (9th Cir. 2004). If the plaintiff satisfies the first two prongs, “the burden

15

then shifts to the defendant to ‘present a compelling case’ that the exercise of jurisdiction

16

would not be reasonable.” Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462,

17

477 (1985)).

18

B. Rule 12(b)(6)

19

To survive a Rule 12(b)(6) motion for failure to state a claim, a complaint must meet

20

the requirements of Rule 8(a)(2). Rule 8(a)(2) requires a “short and plain statement of the

21

claim showing that the pleader is entitled to relief,” so that the defendant has “fair notice

22

of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly,

23

550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). This exists

24

if the pleader sets forth “factual content that allows the court to draw the reasonable

25

inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556

26

U.S. 662, 678 (2009). “Threadbare recitals of the elements of a cause of action, supported

27

by mere conclusory statements, do not suffice.” Id.

28

Dismissal under Rule 12(b)(6) “can be based on the lack of a cognizable legal theory

-6-

1

or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v.

2

Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). A complaint that sets forth a

3

cognizable legal theory will survive a motion to dismiss if it contains sufficient factual

4

matter, which, if accepted as true, states a claim to relief that is “plausible on its face.”

5

Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). Plausibility does not equal

6

“probability,” but requires “more than a sheer possibility that a defendant has acted

7

unlawfully.” Id. “Where a complaint pleads facts that are ‘merely consistent with’ a

8

defendant’s liability, it ‘stops short of the line between possibility and plausibility.’” Id.

9

(quoting Twombly, 550 U.S. at 557).

10

In ruling on a Rule 12(b)(6) motion to dismiss, the well-pled factual allegations are

11

taken as true and construed in the light most favorable to the nonmoving party. Cousins v.

12

Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). However, legal conclusions couched as

13

factual allegations are not given a presumption of truthfulness, and “conclusory allegations

14

of law and unwarranted inferences are not sufficient to defeat a motion to dismiss.” Pareto

15

v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). A court ordinarily may not consider evidence

16

outside the pleadings in ruling on a Rule 12(b)(6) motion to dismiss. See United States v.

17

Ritchie, 342 F.3d 903, 907 (9th Cir. 2003).

18

materials—documents attached to the complaint, documents incorporated by reference in

19

the complaint, or matters of judicial notice—without converting the motion to dismiss into

20

a motion for summary judgment.” Id. at 908.

“A court may, however, consider

21

C. Rule 9(b)

22

Claims sounding in fraud or mistake are subject to the heightened pleading

23

requirements of Federal Rule of Civil Procedure 9(b), which requires that a plaintiff

24

alleging fraud “must state with particularity the circumstances constituting fraud.” Fed. R.

25

Civ. P. 9(b); see also Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009). To

26

satisfy Rule 9(b), the allegations must be “specific enough to give defendants notice of the

27

particular misconduct which is alleged to constitute the fraud charged so that they can

28

defend against the charge and not just deny that they have done anything wrong.” Semegen

-7-

1

v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). Thus, claims sounding in fraud must allege

2

“an account of the ‘time, place, and specific content of the false representations as well as

3

the identities of the parties to the misrepresentations.’” Swartz v. KPMG LLP, 476 F.3d

4

756, 764 (9th Cir.2007) (per curiam). The plaintiff must set forth “what is false or

5

misleading about a statement, and why it is false.” In re Glenfed, Inc. Sec. Litig., 42 F.3d

6

1541, 1548 (9th Cir. 1994) (en banc), superseded by statute on other grounds as stated in

7

Ronconi v. Larkin, 253 F.3d 423, 429 n. 6 (9th Cir.2001).

8

III.

DISCUSSION

9

A. Judicial Notice

10

In ruling on a motion to dismiss, the Court may consider “matters of judicial notice,”

11

see United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003), including information that

12

is “generally known within the trial court’s territorial jurisdiction; or can be accurately and

13

readily determined from sources whose accuracy cannot reasonably be questioned,” Fed.

14

R. Evid. 201(b); but see Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir.

15

2018) (“[A] court cannot take judicial notice of disputed facts contained in . . . public

16

records.”). Importantly, considering matters of judicial notice does not transmute a motion

17

to dismiss into one for summary judgment. See Ritchie, 342 F.3d at 908. Moreover, a

18

court should not accept as true “allegations that contradict matters properly subject to

19

judicial notice,” nor “allegations that are merely conclusory, unwarranted deductions of

20

fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th

21

Cir. 2008) (citation omitted). Proper subjects of judicial notice include judgments and

22

other court documents. See, e.g., United States v. Black, 482 F.3d 1035, 1041 (9th Cir.

23

2007); see also Khoja, 899 F.3d at 999 (“Just because the document itself is susceptible to

24

judicial notice does not mean that every assertion of fact within that document is judicially

25

noticeable for its truth.”).

26

GovGPT asks the Court to take judicial notice of an opinion issued in a case

27

involving Axon’s acquisition of VieVu in the District Court of New Jersey. (Doc. 145.)

28

Since the time of the request, the case has been made available on Westlaw. See In re Axon

-8-

1

Vievu Antitrust Litig., No. 23-7182 (RK) (RLS), 2025 WL 366751, at *1 (D.N.J. Jan. 31,

2

2025). Seeing no objection, the Court will grant GovGPT’s Motion (Doc. 145) and take

3

judicial notice of the opinion.

4

B. Safariland’s Motions to Dismiss (Doc. 110; Doc. 111)

5

In its first Motion to Dismiss, Safariland offers two arguments for why this Court

6

lacks personal jurisdiction over it: (1) Section 12 of the Clayton Act does not apply to

7

limited liability companies (“LLCs”), like Safariland; and (2) Safariland lacks sufficient

8

minimum contacts with Arizona. (Doc. 110 at 6.) Unsurprisingly, GovGPT disagrees.

9

(See generally Doc. 117.)

10

1. Section 12 of the Clayton Act

11

Section 12 provides:

12

14

Any suit, action, or proceeding under the antitrust laws against a corporation
may be brought not only in the judicial district whereof it is an inhabitant,
but also in any district wherein it may be found or transacts business; and all
process in such cases may be served in the district of which it is an inhabitant,
or wherever it may be found.

15

15 U.S.C. § 22. With respect to corporations, the Ninth Circuit has held that “the

16

worldwide service provision of [Section] 12 justifies [the] conclusion that personal

17

jurisdiction may be established in any district, given the existence of sufficient national

18

contacts.” Go-Video, Inc. v. Akai Elec. Co., 885 F.2d 1406, 1415 (9th Cir. 1989). Here,

19

as with other cases, the parties’ fervently dispute whether Section 12 applies to LLCs. By

20

its plain terms, the statute governs service upon “corporations.” See 15 U.S.C. § 22.

13

21
22

Faced with whether Section 12 applied to a “voluntary association,” one district
court reasoned:

25

“Persons,” as defined in the Clayton Act, are “deemed to include
corporations and associations”; yet section 12 of the same act, which
authorizes extraterritorial service, specifies only “corporation.” This
specificity necessarily excludes individuals and voluntary associations from
those amenable to extraterritorial service.

26

McManus v. Tato, 184 F. Supp. 958, 959 (S.D.N.Y. 1959) (cleaned up). Safariland

27

contends that this reasoning also applies to LLCs because Congress has not extended

28

Section 12 to unincorporated entities. (Doc. 110 at 7.) The Court agrees.

23
24

-9-

1

As Safariland points out, time and again courts have cabined Section 12’s

2

applicability to corporations. See Cal. Clippers, Inc. v. U.S. Soccer Football Ass’n, 314 F.

3

Supp. 1057, 1061 (N.D. Cal. 1970) (“NASL is, however, an unincorporated association,

4

not a corporation, so Clayton Act § 12 is [sic] inapplicable by its own terms to provide for

5

services of process against NASL in this action.”); S.F. Comprehensive Tours, LLC v.

6

Tripadvisor, LLC, No. 2:20-CV-02117-GMN-DJA, 2021 WL 4394253, at * 5 (D. Nev.

7

Sep. 24 2021) (holding that Section 12 did not apply to defendant because it is an LLC);

8

Shat Acres Highland Cattle, LLC, v. Am. Highland Cattle Ass’n, No. 21-CV-1348-WJM-

9

SKC, 2023 WL 7089906, at *3 & n.3 (D. Colo. Oct. 26, 2023) (“Section [12], by its terms,

10

only applies to corporations.”); In re Chicken Antitrust Litig., 407 F. Supp. 1285, 1299 (D.

11

Ga. 1975) (holding that Section 12’s “transacting business” test was inapplicable to a

12

partnership); Kingsepp v. Wesleyan Univ., 763 F. Supp. 22, 25 (S.D.N.Y 1991) (collecting

13

cases) (“Given the narrow construction of the term ‘corporation’ in section 12 and the

14

reluctance of courts to extend nationwide service of process under section 12 to

15

non-corporate defendants, it would be inappropriate to extend section 12 to encompass a

16

trust . . . .”).

17

In response, GovGPT contends that the Supreme Court has recognized LLCs,

18

among other entities, may fall with Section 12’s ambit when they act in concert with

19

corporations to suppress competition. (Doc. 117 at 5 (citing Keeton v. Hustler Magazine,

20

Inc., 465 U.S. 770 (1984)).) In the same breath, however, GovGPT admits that its offered

21

authority is “not directly related to Section 12.” (Id.) Indeed, Keeton dealt with the

22

application of one state’s long arm state and the traditional minimum contacts analysis to

23

assert jurisdiction in a libel action. 465 U.S. at 770. Despite offering no apposite authority,

24

GovGPT posits that the Court ought to extend its jurisdiction based on “the functional

25

involvement of entities in relevant conduct affecting the forum state.” (Doc. 117 at 5.)

26

This approach not only comes before the Court without support, but also contravenes the

27

wealth of well-reasoned, persuasive case law offered by Safariland. Therefore, the Court

28

rejects GovGPT’s arguments.

- 10 -

1

Based upon the statute’s plain language, and the supporting persuasive case law,

2

there is no question that Section 12 does not apply to Safariland. As an LLC, and not a

3

corporation, it is not subject to the jurisdictional hook that 15 U.S.C. § 22 provides.

4

Therefore, whether the Court has personal jurisdiction over Safariland must be determined

5

through a traditional minimum contacts analysis.

6

2. Minimum Contacts

7

Safariland argues that this Court lacks personal jurisdiction over it because (1) it

8

does not have continuous or systematic contacts with Arizona; and (2) it does not

9

purposefully direct activities at Arizona residents such that litigation would arise out of

10

those activities. (Doc. 110 at 8–11.) To support this argument, Safariland points out that

11

it owns no property in Arizona, employs one remote employee in the state, and its sales in

12

the state are not related to BWCs or DEMS. (Doc. 110 at 9–10.) In response, GovGPT

13

contends that Safariland’s sale of VieVu to Axon in 2018, coupled with extensive

14

non-compete agreements, satisfies minimum contacts such that the Court has jurisdiction

15

over Safariland. (Doc. 117 at 5–8.)

16

The traditional minimum contacts analysis requires the Court to determine whether

17

it has “general” or “specific” personal jurisdiction over Safariland. See Bristol-Myers

18

Squibb Co. v. Super. Ct. of Cal., 582 U.S. 255, 262 (2017). General jurisdiction exists over

19

entities where its forum state “affiliations” are “so continuous and systematic as to render

20

[it] essentially at home.” Daimler, 571 U.S. at 139. Generally, an entity is “at home” in

21

its place of organization and its principal place of business. Id. at 134. Safariland is an

22

LLC organized in Delaware and headquartered in Florida. (Doc. 74 ¶ 7; Doc. 110 at 9.)

23

Therefore, under the traditional “at home” view, the Court would not have general

24

jurisdiction over Safariland. See Daimler, 571 U.S. at 139. Safariland further posits that

25

the Court lacks general jurisdiction over it because it owns no real property in Arizona,

26

employs a single remote employee in the state, and does not sell BWCs or DEMS in

27

Arizona. (See Doc. 110 at 9; Doc. 110-1 at 2 ¶¶ 6–9.) GovGPT seemingly does not attempt

28

to rebut this argument. At bottom, Court agrees that Safariland’s limited contacts with

- 11 -

1

Arizona precludes finding that the Court possesses general personal jurisdiction over the

2

company.

3

Specific jurisdiction exists when an out-of-state defendant (1) purposefully directs

4

his activities at residents of the forum state, or purposefully avails himself of the privilege

5

of conducting activities in the forum; (2) the asserted claim must be one arising out of the

6

defendant’s forum related activities; and (3) exercising jurisdiction must be reasonable.

7

Picot, 780 F.3d at 1211. GovGPT “bears the burden of satisfying the first two prongs of

8

the test.” See Schwarzenegger, 374 F.3d at 802.

9

Regarding prong one and two, GovGPT asserts that Safariland’s intentional act was

10

selling VieVu to Axon and executing the related non-compete agreements. (Doc. 117

11

at 5–6.) According to GovGPT, Safariland knew that selling VieVu to Axon would “have

12

substantial effects in Arizona.” (Id. at 6.) Further, GovGPT contends that the Court “must

13

look beyond” Safariland’s incorporation and headquarters, and instead consider that

14

Safariland holds a vested financial interest in Axon’s Arizona-based monopoly through

15

stock arrangements and Axon’s monopolistic pricing. (Doc. 117 at 6–7.)

16

GovGPT’s muddled allegations and argument misunderstand what “purposeful

17

direction” requires. To show that Safariland purposefully directed its acts at Arizona,

18

GovGPT must show that Safariland has “(1) committed an intentional act, (2) expressly

19

aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered

20

in the forum state.” Wash. Shoe Co. v. A-Z Sporting Goods, Inc., 704 F.3d 668, 673 (9th

21

Cir. 2012). The only relevant intentional act that GovGPT contends Safariland directed at

22

Arizona was enter a contract to sell VieVu to Axon. However, “a contract alone does not

23

automatically establish minimum contacts in the plaintiff’s home forum.” Boschetto v.

24

Hansing, 539 F.3d 1011, 1017 (9th Cir. 2008). Rather, there must be “actions by the

25

defendant himself that create a ‘substantial connection’ with the forum State.” Burger

26

King, 471 U.S. at 475 (quoting McGee v. Int’l Life Ins., 355 U.S. 220, 223 (1957)). Further

27

attenuating Safariland’s alleged contacts to Arizona is the argument that the sale of VieVu

28

in 2018 was governed by Delaware law without reference to Arizona or its laws. (See Doc.

- 12 -

1

110 at 11.) To be sure, as Safariland contends, that transaction involved Safariland,

2

Delaware-organized

3

Washington-organized LLC headquartered in Washington, to Axon, a Delaware-organized

4

corporation headquartered in Arizona. (Id.) Thus, to some degree, Arizona is implicated

5

in the sale of VieVu. However, given the specific facts of this case show that the sale was

6

not purposefully directed at the forum state, nor did Safariland avail itself of Arizona law

7

to affect the transaction. (See id.)

LLC

headquartered

in

Florida,

selling

VieVu,

a

8

The remainder of GovGPT’s argument is seemingly directed at the fallout from the

9

sale of VieVu to Axon. (See, e.g., Doc. 117 at 6 ¶ 13.) Whether the sale VieVu impacted

10

“Arizona’s law enforcement agencies and GovGPT” is not the standard. Rather, GovGPT

11

must show that Safariland undertook an “external manifestation of [will]” to direct actions

12

at Arizona without relying on such act’s “results, even the most direct, immediate, and

13

intended.” Morill v. Scott Fin. Corp., 873 F.3d 1136, 1142 (9th Cir. 2017). To affect the

14

forum state is not always enough, there must be a showing of an intentional act expressly

15

aimed at it. Washington Shoe, 704 F.3d at 673. As Safariland puts it, GovGPT must show

16

more than the alleged effects that the sale of VieVu had on the location of the ultimate

17

purchaser—Axon. (Doc. 12 at 5); see also Helicopteros Nacionales de Colombia, 466

18

U.S. at 417 (“[The] unilateral activity of another party or a third person is not an appropriate

19

consideration when determining whether a defendant has sufficient contacts with a forum

20

State to justify an assertion of jurisdiction.”).

21

Therefore, the Court finds that GovGPT has failed to carry its burden to show that

22

Safariland (1) purposefully directs its activities at Arizona; and (2) that the asserted claim

23

arose from Safariland’s forum related activities. See Picot, 780 F.3d at 1211. As a result,

24

Safariland lacks the minimum contacts required for this Court to have personal jurisdiction

25

over it.1 Therefore, the Court will grant Safariland’s Motion to Dismiss (Doc. 110) and

26

1

27
28

The FAC alleges that Safariland’s contacts arise from substantial business in this district,
including the sale of BWCs. (Doc. 74 ¶ 22.) In response, Safariland provided an affidavit
from its Vice President of Legal and Compliance, who averred that Safariland does not
make sales for BWCs or DEMS in Arizona, casting doubt on the plausibility of GovGPT’s
allegation. (Doc. 110-1 at 2 ¶ 9.) GovGPT does not engage with its own allegation or the
affidavit in its Response, and instead directs its argument at Safariland’s sale of VieVu to
- 13 -

1

dismiss it from this case with prejudice. With this dismissal, Safariland’s other Motion to

2

Dismiss (Doc. 111) is now moot. Therefore, the Court will deny that Motion (Doc. 111).

3

C. Microsoft’s Motion to Dismiss (Doc. 90)

4

Microsoft argues that GovGPT’s FAC must be dismissed because: (1) the claims

5

are time barred; (2) GovGPT has not pleaded an antitrust injury and therefore lacks

6

standing; and (3) the FAC does not plausibly allege an unlawful agreement. 2 (Doc. 90

7

at 6–7.) For the reasons set forth, the Court agrees with Microsoft.

8

1. The Statute of Limitations and Antitrust Standing

9

Under federal antitrust laws, an action must be commenced within four years after

10

the cause of action accrues. See Zenith Radio Corp. v. Hazeltine Rsch., Inc., 401 U.S. 321,

11

338 (1971); see also In re Animation Workers Antitrust Litig., 87 F. Supp. 3d 1195, 1211

12

(N.D. Cal. 2015) (dismissing antitrust claims as time barred). “A cause of action in

13

antitrust accrues each time a plaintiff is injured by an act of the defendant and the statute

14

of limitations runs from the commission of the act.” See Pace Indus., Inc. v. Three Phx.

15

Co., 813 F.2d 234, 237 (9th Cir. 1987) (citation omitted). A plaintiff may plead that a

16

defendant’s acts constitute a continuing violation, in which case allegations of “an overt

17

act by the defendant is required to restart the statute of limitations and the statute runs from

18

the last overt act.” Id.; see also Klehr v. A.O. Smith Corp., 521 U.S. 179, 189 (1997).

19

Here, GovGPT alleges that Microsoft injured it by entering into an unlawful

20

agreement with Axon in 2018, which was then extended in 2022 (the “2022 Extension”).

21

(Doc. 74 ¶¶ 26–27, 40, 44, 208–212.) Because GovGPT’s claims accrued when Microsoft

22

and Axon executed the 2018 agreement, the inquiry becomes whether the 2022 Extension

23

was a continuing violation. See Pace Industries, 813 F.2d at 237.

24

Courts in the Ninth Circuit have explained that pleading a continuing violation

25

Axon. (See Doc. 117.) The Court, therefore, finds that GovGPT has conceded the
allegation regarding Safariland’s sale of BWCs in Arizona. See Morgan v. Kalaco
Scientific, Inc., No. CV-07-0786-PHX-SRB, 2008 WL 11449239, at *2 (D. Ariz. Mar. 5,
2008) (“Generally, where a party fails to respond to a non-frivolous legal argument raised
by opposing counsel in a dispositive motion, that argument is deemed conceded.”).
2
Microsoft also moves to dismiss Plaintiff’s Clayton Act claim. Plaintiff states that it has
not alleged such a claim against Microsoft. (Doc. 94 at 10.) Therefore, the Court will not
address the parties’ arguments on the Clayton Act claim.

26
27
28

- 14 -

1

requires more than “bald assertion[s]” that a defendant adhered to, enforced, and reaffirmed

2

the alleged anticompetitive agreements. See, e.g., Garrison v. Oracle Corp., 159 F. Supp.

3

3d 1044, 1070–71 (N.D. Cal. 2016); Ryan v. Microsoft Corp., 147 F. Supp. 3d 868, 884

4

(N.D. Cal. 2015) (finding allegations that defendant had non-solicitation agreements it

5

“maintained and renewed” to be “insufficient to quality for the continuing violation

6

doctrine”). For a continuing violation to restart the limitations period, GovGPT must plead

7

an overt act that (1) “[is] a new and independent act that is not merely a reaffirmation of a

8

previous act”; and (2) “[the overt act] must inflict [a] new and accumulating injury on the

9

plaintiff.” See Pace Indus., 813 F.2d at 238.

10

GovGPT’s allegations regarding the 2022 Extension are inconsistent and difficult

11

to follow. For example, it alleges that the 2022 Extension “grant[ed] Microsoft continued

12

exclusive access to the extensive law enforcement data.” (Doc. 74 ¶ 208.) And “[t]hrough

13

the 2022 extension, Microsoft maintained exclusive control over Axon’s body camera

14

data,” (Doc. 74 ¶ 209), which “enabled Microsoft to monopolize AI development . . . by

15

providing it with unparallelled access to data that competitors could not obtain, (Id. ¶ 210).

16

Then, however, GovGPT seemingly asserts that only after the 2022 Extension did the

17

agreement require Axon’s Evidence.com platform “to work exclusively with Microsoft

18

Azure.” (Id. ¶ 41.) In his Response to the Motion, GovGPT explains that the 2022

19

Extension “included new terms granting Microsoft ongoing exclusive access to Axon’s

20

body camera data and related AI technologies.” (Doc. 94 at 3 (emphasis added).); cf.

21

Samsung Elecs. Co. v. Panasonic Corp., 747 F.3d 1199, 1204 (9th Cir. 2014) (expanding

22

a license agreement in 2006 to include products not covered by the previous 2003 license

23

agreement was an overt act because the “2003 license did not contemplate future

24

expansion”).

25

On one hand, GovGPT seems to allege that Microsoft and Axon extended,

26

maintained, and reinforced its existing agreement, which would not amount to an overt act.

27

See Pace Industries, 813 F.2d at 238. On the other, GovGPT’s allegations suggest that the

28

2022 Extension added “exclusivity” terms that were not part of the 2018 cloud storage

- 15 -

1

contract, including a term that “requires [Axon’s] Evidence.com platform to work

2

exclusively with Microsoft Azure.” (Doc. 74 ¶ 41; see also id. ¶¶ 40, 42, 44.) However,

3

GovGPT has not expressly pleaded what terms in the 2022 Extension are “new” to satisfy

4

the continuing violation requirement of a new and independent act that inflicts a new and

5

accumulating injury. See Ryan 147 F. Supp. 3d at 884 (“[W]here the defendant entered

6

into an allegedly unlawful contract prior to the limitations period, the defendant still must

7

take an unlawful new and independent act that is not merely a reaffirmation of a previous

8

act during the limitations period.” (quotation marks omitted)). And, reading the allegations

9

in the light most favorable to GovGPT, the Court cannot determine what aspect of any

10

cognizable “new” allegations materially changed the agreement such that the 2022

11

Extension was an overt act by Microsoft. See id.

12
13
14
15
16

GovGPT does draw the Court’s attention to the following allegation, which it
believes shows an overt act:
Microsoft has been known to offer better pricing and incentives, like cloud
credits, to entice companies to move more data to Azure. Microsoft’s
preferential pricing strategy, such as offering $500 million in Azure credits
exclusively to OpenAI, gives preferential pricing or better terms to select
partners. Upon information and belief, this preferential pricing was extended
to Axon.

17

(Doc. 74 ¶ 40; Doc. 94 at 3–4.) According to GovGPT, Microsoft’s pricing strategy

18

“reinforced the barriers to entry for competitors,” and has ostensibly cost GovGPT

19

opportunities and profit. (Doc. 94 at 4.) Even assuming that this allegation is true, it has

20

nothing to do with the 2022 Extension that GovGPT so fervently believes reset the statute

21

of limitations.

22

generally cannot support a separate antitrust claim. (Doc. 90 at 18 (citing Brooke Grp. Ltd.

23

v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 223–24 (1993) (analyzing a

24

predatory pricing claim under § 2 of the Sherman Act requires showing “prices complained

25

of are below an appropriate measure of its rival’s costs . . . . [And] demonstrat[ing] that the

26

competitor had a reasonable prospect . . . of recouping its investment in below-cost

27

prices”). As it stands, Plaintiff has done no more than allege that Microsoft uses an

28

effective pricing model to entice businesses to use its Azure cloud service rather than

And, as Microsoft has pointed out, offering discounts or incentives

- 16 -

1

competing services. Thus, GovGPT has failed to plead an overt act. See, e.g., Garrison,

2

159 F. Supp. 3d at 1070–71; Ryan, 147 F. Supp. 3d at 884.

3

Even if GovGPT had pleaded a new and individual act, the FAC fails to allege that

4

such an act caused a cognizable antitrust injury. Antitrust laws were designed to redress

5

injuries suffered by plaintiffs “injur[ed] in the market where competition is being

6

restrained.” Am. Ad Mgmt., Inc. v. Gen. Tele. Co. of Cal., 190 F.3d 1051, 1057 (9th Cir.

7

1999) (“As a broker for the advertisements whose prices are allegedly retrained, [plaintiff]

8

is a participant in the relevant market and it has suffered an injury in that market, the loss

9

of commissions on advertisement purchases.”).3 In other words, the injured party “must

10

be a participant in the same market as the alleged malefactors.” In re Dynamic Access

11

Memory (DRAM) Antitrust Litig. (“DRAM II”), 536 F. Supp. 2d 1129, 1137 (N.D. Cal.

12

2008) (internal quotation marks omitted).

13

Here, GovGPT alleges that the relevant market is “body-worn cameras, digital

14

evidence management systems, and public safety video integration and management

15

platforms.” (Doc. 74 ¶¶ 125–28.) Somewhat troubling, however, is GovGPT’s contention

16

that it “intends to enter and compete in the digital evidence management market,” (Doc. 94

17

at 10), which calls into question the veracity of its market allegations, (see Doc. 74

18

¶¶ 125–128.) If GovGPT has not entered the market, claims that it was injured in such

19

market are merely speculative, which does not suffice to show injury for an antitrust claim

20

or standing purposes. See DRAM II, 536 F. Supp. 2d at 1137; Clapper v. Amnesty Int’l

21

USA, 568 U.S. 398, 414 (2013) (finding that a “speculative chain of possibilities” cannot

22

establish an actual or imminent injury in fact); see also City of Oakland v. Oakland Raiders,

23

20 F.4th 441, 458 (9th Cir. 2021) (“The harm may not be derivative and indirect or

24

secondary, consequential, or remote.” (quotation marks omitted)). That concern aside,

25

conspicuously absent from the FAC are any allegations of the market in which Microsoft

26

competes. (See generally id.) Thus, on its face, the FAC does not set forth any allegation

27

3

28

An antitrust injury has four requirements: (1) unlawful conduct, (2) causing an injury to
the plaintiff, (3) that flows from that which makes the conduct unlawful, and (4) that is of
the type that antitrust laws were intended to prevent. Id.at 1055–57.

- 17 -

1

that GovGPT and Microsoft compete in the same market.

2

GovGPT contends that it need not show that it participates in the “same” market if

3

its injury was a direct result of the anticompetitive conduct. (Doc. 94 at 9.) Supporting

4

this argument is a passing reference to Blue Shield of Virginia v. McCready, 457 U.S. 465,

5

484 (1982) (“Although [plaintiff] was not a competitor of the conspirators, the injury she

6

suffered was inextricably intertwined with the injury the conspirators sought to inflict on

7

psychologists and the psychotherapy market.”). In McCready, the Supreme Court held

8

that, under § 4 of the Clayton Act, the defendant’s act of selectively refusing to reimburse

9

the plaintiff under an employer health plan brought defendant within the relevant market

10

for antitrust injury purposes. 457 U.S. at 450–51. Here, GovGPT has not alleged that it

11

had a previous relationship with Microsoft such that the company’s denial of service would

12

bring it within the alleged markets. (See generally Doc. 74.)

13

At bottom, GovGPT has not alleged that Microsoft engaged in a “new and

14

independent act,” or that such act caused a cognizable antitrust injury to GovGPT. Pace

15

Indus., 813 F.2d at 238; Am. Ad Mgmt., 190 F.3d at 1057. Thus, based on the allegations

16

in the FAC, the statute of limitations bars GovGPT’s claims, and GovGPT has failed to

17

allege an antitrust injury that would confer standing.

18

GovGPT also asserts that the statute of limitations was tolled under 15 U.S.C.

19

§ 16(i) because the Federal Trade Commission (“FTC”) filed a complaint against Axon for

20

its acquisition of VieVu, LLC from Defendant Safariland. (Doc. 74 ¶¶ 134–141.) To toll

21

the statute of limitations under § 16(i), a plaintiff must show that the current suit is “based

22

in whole or in part on any matter complained of in [a government antitrust] proceeding.”

23

Further, a plaintiff must show a “real relation” between the private and public causes of

24

action. Leh v. Gen. Petrol. Corp., 382 U.S. 54, 59 (1965); Chipanno v. Champion Int’l

25

Corp., 702 F.2d 827, 831–32 (9th Cir. 1983). To determine whether a plaintiff has met its

26

burden, courts consider the following: (1) the “substantial identity of the parties”; (2)

27

whether the plaintiff has alleged “a conspiracy that included the objectives, means, time

28

span, and geographic scope of the conspiracy alleged in the government suit”; and (3)

- 18 -

1

whether “evidence adduced in the trial of the government suit would be of practical

2

assistance to plaintiff.” Garrison, 159 F. Supp. at 1067–68 (cleaned up).

3

Microsoft contends that the statute cannot toll GovGPT’s claims against it because

4

the FTC complaint against Axon did not “have anything to do with Microsoft.” (Doc. 90

5

at 14.) GovGPT contends that Microsoft’s argument is “without merit” because the FTC

6

complaint is directly relevant to “Microsoft’s role as an enabler of Axon’s monopolistic

7

practices.” (Doc. 94 at 4.) GovGPT’s argument completely ignores § 16(i)’s requirements.

8

The FTC complaint does not name, involve, or implicate Microsoft. (See generally Doc.

9

95.) The complaint concerns Axon’s acquisition of a competitor, not its use of Microsoft’s

10

cloud service as a repository for its Evidence.com footage. (See id.) GovGPT even admits

11

that Microsoft is not a direct party to the FTC’s action, but nevertheless constructs an

12

unsupported narrative about how the FTC complaint “addresses barriers to competition,

13

including switching costs and data migration challenges,” which is “relevant to cloud

14

hosting services.” (Doc. 94 at 5.) Section 16(i) requires a party to show a “real relation”

15

and not a conspiracy theory that rests on a series of dubious, conclusory accusations.

16

Therefore, GovGPT’s argument is without merit, and the Court finds that 15 U.S.C. § 16(i)

17

does not toll the statute of limitations on its claims against Microsoft thus its claims are

18

time barred.

19

1. The Unlawful Agreement

20

Although GovGPT lacks standing and its claims are barred, the Court will afford

21

some discussion regarding the unlawful agreement allegations. Microsoft argues that

22

GovGPT’s FAC is replete with conclusory allegations regarding the agreement, but that no

23

allegation suggests that the companies did anything more than enter an arms-length,

24

vertical supply agreement. (Doc. 90 at 15.) In response, GovGPT contends that the FAC

25

sets forth allegations showing that Microsoft and Axon entered a strategic partnership

26

designed to foreclose competing firms from providing DEMS to law enforcement agencies.

27

(Doc. 94 at 6.)

28

To plausibly allege a claim under § 1 or § 2 of the Sherman Act, a plaintiff must

- 19 -

1

allege that defendant engaged in anti-competitive conduct and harm flowed from that

2

conduct. Brantley v. NBC Universal, Inc., 675 F.3d 1192, 1197 (9th Cir. 2012) (Section

3

1); Aerotec Int’l, Inc v. Honeywell Int’l, Inc., 4 F. Supp. 3d 1123, 1137 (D. Ariz. 2014),

4

aff’d, 836 F.3d 1171 (9th Cir. 2016) (Section 2). For a § 2 claim, a plaintiff must allege a

5

“specific intent to monopolize.” See Paladin Assocs., Inc. v. Mont. Power Co., 328 F.3d

6

1145, 1158 (9th Cir. 2003). Consistent with Rule 12’s pleading requirements, it is not

7

enough to merely allege that parties merely entered an unlawful agreement. See Twombly,

8

550 U.S. at 551; cf. Freeman v. San Diego Ass’n of Realtors, 322 F.3d 1133, 1155 (9th Cir.

9

2003) (explaining “[a]bsent additional evidence that the [agreement’s] restrictive

10

provisions were adopted for improper reasons,” an agreement alone cannot “support a

11

conspiracy to monopolize claim”).

12

A plaintiff alleges an anticompetitive agreement when it plausibly asserts “a

13

‘conscious commitment to a common scheme designed to achieve an unlawful objective.’”

14

Toscano v. Pro Golfers Ass’n, 258 F.3d 978, 983 (9th Cir. 2001) (quoting Monsanto Co.

15

v. Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984)). But a scheme will not be inferred

16

“when factual allegations just as easily suggest rational, legal business behavior.”

17

Name.Space, Inc. v. Internet Corp. for Assigned Names & Numbers, 795 F.3d 1124, 1130

18

(9th Cir. 2015). Therefore, courts have required plaintiffs to plead more than “ultimate

19

facts,” which means that allegations cannot simply label a defendant’s actions a

20

“conspiracy” or assert unsupported legal conclusions. Kendall v. Visa U.S.A., Inc., 518

21

F.3d 1042, 1047–48 (9th Cir. 2008). Instead, a plaintiff must plead “evidentiary facts” that

22

plausibly allege “(1) a contract, combination or conspiracy among two or more persons or

23

distinct business entities; (2) by which the persons or entities intended to harm or restrain

24

trade or commerce among the several states, or with foreign nations; (3) which actually

25

injures competition.” Id.; Twombly, 550 U.S. at 556–57.

26

Here, GovGPT pleaded no more than ultimate facts and legal conclusions to support

27

its Section 1 and Section 2 claims. It describes Microsoft and Axon’s agreement as a

28

“strategic partnership” and an “exclusive agreement” that created barriers for competing

- 20 -

1

firms in the digital evidence management market. (Doc. 94 ¶ 11; Doc. 74 ¶¶ 117, 288).

2

Those allegations, however, lack supporting evidentiary allegations that elucidate how the

3

agreement amounts to more than a supply contract for cloud services.4 See Matsushita

4

Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986) (“[C]onduct that is as

5

consistent with permissible competition as with illegal conspiracy does not, without more,

6

support even an inference of conspiracy.”); Leegin Creative Leather Prods. v. PSKS, Inc.,

7

551 U.S. 877, 889–92 (2007) (recognizing that vertical agreements often have

8

procompetitive justification and thus do not commonly give rise to Sherman Act

9

violations). Moreover, GovGPT’s Section 2 claim predicated on conspiracy to monopolize

10

theory otherwise fails because it is premised upon a “dual monopoly” theory, upon which

11

a Section 2 claim cannot be based. See Standfacts Credit Serv’s Inc. v. Experian Info. Sol.,

12

Inc., 405 F. Supp. 2d 1141, 1152–53 (C.D. Cal. 2005) (“[A]n allegation of conspiracy to

13

create a shared monopoly does not plead a claim of conspiracy under section 2.”); (Doc.

14

74 ¶ 292 (“[T]he collaboration between Microsoft and Axon established a dual

15

monopoly.”).)

16

GovGPT has failed to state a claim for relief against Microsoft under the Sherman

17

Act. Therefore, the Court will dismiss Microsoft, and the Counts asserted against it,

18

without prejudice.

19

D. Axon’s Motion to Dismiss (Doc. 106)

20

Axon moves to dismiss the entirety of the FAC, arguing lack of standing, issues

21

with conflicting, insufficient factual allegations, untenable legal theories, and outright false

22

assertions regarding the danger of its AB4. (Doc. 105 at 8–9.) GovGPT maintains that its

23

FAC plausibly states a claim for relief under each of its asserted legal theories. (See Doc.

24
4

25
26
27
28

Twombly is instructive here. There, the Supreme Court held that the defendant telephone
companies “have entered into a contract, combination or conspiracy to prevent competitive
entry in their respective local telephone and/or high speed internet services markets and
have agreed not to compete with one another and otherwise allocated customers and
markets to one another” insufficient because no evidentiary facts were pleaded which could
prove the conspiracy. 550 U.S. at 551. The Court is faced with a complaint, as Plaintiff
alleges that Microsoft and Axon entered an illegal, exclusive agreement that injured it and
competitors. Alas, no evidentiary facts abut these allegations, and thus, the claims are
insufficient.
- 21 -

1

121.)

2

1. Count I—Lanham Act

3

a. Standing

4

When a claim is brought under a federal statute, courts must make sure the plaintiff

5

comes within the “zone of interests” protected by that statute. See Bennett v. Spear, 520

6

U.S. 154, 162 (1997) (internal citations omitted). “To come within the zone of interests in

7

a suit for false advertising under [the Lanham Act] a plaintiff must allege an injury to a

8

commercial interest in reputation or sales.”

9

Components, Inc., 572 U.S. 118, 131–32 (2014). A statutory cause of action is presumed

10

to be limited to plaintiffs whose injuries are “proximately caused by violations of the

11

statute.” Id. at 132. A plaintiff suing under the Lanham Act for false advertising

12

“ordinarily must show economic or reputational injury flowing directly from the deception

13

wrought by the defendant’s advertising; and that that occurs when deception of consumers

14

causes them to withhold trade from the plaintiff.” Id. at 133. “That showing is generally

15

not made when the deception produces injuries to a fellow commercial actor that in turn

16

affect the plaintiff.” Id. at 133–34. When a plaintiff and a defendant are direct competitors

17

there is a presumption of harm, although they do not have to be direct competitors for the

18

plaintiff to be injured. See TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 827 (9th

19

Cir.

20

No. CV-18-04189-PHX-JAT, 2019 WL 3840988, at *6 (D. Ariz. Aug. 15, 2019) (citing

21

Lexmark, 572 U.S. at 120–21).

2011);

ThermoLife

Int’l

LLC

v.

Lexmark Int’l, Inc. v. Static Control

Am.

Fitness

Wholesalers

LLC,

22

Axon argues that that GovGPT’s claims do not fall within the zone of interest

23

because the FAC does no more than allege vague and conclusory injuries to reputation and

24

sales. (Doc. 106 at 12.) Additionally, Axon argues that GovGPT failed to plead that its

25

economic or reputational injury flows directly from Axon’s alleged deceptive advertising.

26

(Id.) In response, GovGPT contends that it has sufficiently pleaded a commercial injury

27

directly caused by Axon’s deceptive statements. (Doc. 121 at 12.) Specifically, GovGPT

28

maintains that it “allege[d] a causal connection between misleading statements and lost

- 22 -

1

sales.” (Id.)

2

GovGPT alleges that it seeks to compete with Axon in the BWC and DEMS market.

3

(See Doc. 74 ¶¶ 23, 85.) The extent to which GovGPT has engaged in such competition is

4

not alleged. (See generally id.; id. ¶ 133 (describing GovGPT as a “potential entrant[]” of

5

the alleged cluster market of BWCs and DEMS), ¶ 25 n.2 (GovGPT announces that it

6

currently does not operate in the RTCC market).) GovGPT does plead that Axon’s

7

behavior injured GovGPT through “reduced opportunities to compete for business” due to

8

Axon’s failure to disclose risks associated with Quectel modules.

9

Additionally, GovGPT contends that because of Axon’s “material omission, competitors

10

like GovGPT have suffered commercial harm, including lost sales and diminished market

11

value.” (Doc. 74 ¶¶ 180, 184.)

(See id. ¶ 180.)

12

Based on the FAC, GovGPT’s current market position is unclear. GovGPT alleges

13

it has developed products to “compete” with Axon in the alleged markets but uses language

14

like “GovGPT and other potential entrants” and “potential entrants like GovGPT” when

15

making allegations of harm. (See, e.g., id. ¶¶ 88, 133.) In other places, GovGPT’s

16

allegations of harm paint GovGPT as an active competitor: “Microsoft and

17

Axon . . . significantly harm[ed] competition . . . including GovGPT.” (Id. ¶ 292; see also

18

id. ¶¶ 163, 177, 202.) Without clearly describing its own attempts to compete, GovGPT

19

goes on to allege lost sales due to Axon’s failure to disclose the presence of Quectel

20

modules. (See id.)5 GovGPT’s allegations of harm to its supposed sales are anything but

21

clear. (See, e.g., id. ¶¶ 166–167, 182–184.) Therefore, the Court finds that the FAC does

22

not sufficiently allege an injury to its sales based on Axon’s alleged false advertising under

23

the Lanham Act. See TrafficSchool.com, 653 F.3d at 827.

24

The link between GovGPT’s purported lost sales and Axon’s failure to disclose the

25

Quectel module is tenuous. To show proximate cause, false advertising must drive

26

customers away from GovGPT’s product. See Lexmark, 572 U.S. at 133. Here, GovGPT

27

5

28

GovGPT tries to explain away the absence of its allegations relates to sales in its
Response, the Court “[will] not consider new allegations plaintiffs try to ‘sneak’ into their
responses.” See Sobh v. Phx. Graphix. Inc., No. CV-18-04073-PHX-DWL, 2019 WL
3973697, at *6 (D. Ariz. Aug. 22, 2019).
- 23 -

1

alleges that Axon’s corporate value and responsibility statements promoting transparency

2

and equitable business practices are false and that the statements themselves impacted

3

GovGPT’s sales. (See Doc. 74 ¶¶ 166, 184.) Further, GovGPT alleges that if customers

4

were “informed about the [Quectel] security risks, it is likely they would have reconsidered

5

purchasing Axon’s products or chosen alternative vendors.” (Id. ¶ 182.) Accepting these

6

allegations as true still does not ameliorate the lack of claims that the omission of the

7

presence Quectel modules or components resulted in customers shying away from

8

GovGPT’s DragonFly or Hiago to instead buy the AB4 and an Evidence.com subscription.

9

(Id. ¶¶ 182–183; but see id. ¶ 184 (“[C]ompetitors like GovGPT have suffered commercial

10

harm, including lost sales.”).)

11

definitive proof that a defendant’s advertisements caused plaintiffs to lose sales,

12

TrafficSchool.com, 653 F.3d at 827, but those plaintiffs must otherwise put forth sufficient

13

facts to show a plausible inference of economic or reputational injury wrought by the

14

deceptive marketing, Lexmark Int’l, 572 U.S. at 133. GovGPT must allege with greater

15

specificity how Axon’s deceptive marketing resulted in customers not purchasing

16

GovGPT’s comparable products. It is not enough to allege that customers may have chosen

17

Axon over other unnamed competitors or GovGPT. Cf. ThermoLife Int’l LLC v. BPI Sports

18

LLC, No. CV-20-02091-PHX-SPL, 2021 WL 661981, at *5 (D. Ariz. Feb. 19, 2021), aff’d,

19

No. 21-15339, 2022 WL 612669 (9th Cir. Mar. 2, 2022). In the absence of such allegations,

20

GovGPT has not alleged that its purported injury was proximately caused by Axon’s

21

allegedly false statements. See Lexmark, 572 U.S. at 133.

To be sure, hypothetical plaintiffs need not provide

22

Because GovGPT has failed to establish standing, its Lanham Act claim must be

23

dismissed. That notwithstanding, the Court will otherwise provide an analysis on why the

24

claim fails on the merits.

25
26

///
b. False Advertising

27

Count I is premised on 15 U.S.C. § 1125(a)(1)(B), which provides in pertinent part:

28

(1) Any person who, on or in connection with any goods or services, or any
container for goods, uses in commerce any word, term, name, symbol, or
- 24 -

4

device, or any combination thereof, or any false designation of origin, false
or misleading description of fact, or false or misleading representation of fact
which . . . (B) in commercial advertising or promotion, misrepresents the
nature, characteristics, qualities, or geographic origin of his or her or another
person's goods, services, or commercial activities, shall be liable in a civil
action by any person who believes that he or she is or is likely to be damaged
by such act.

5

The elements of a Lanham Act false advertising claim include:

6

10

(1) a false statement of fact by the defendant in a commercial advertisement
about its own or another's product; (2) the statement actually deceived or has
the tendency to deceive a substantial segment of its audience; (3) the
deception is material, in that it is likely to influence the purchasing decision;
(4) the defendant caused its false statement to enter interstate commerce; and
(5) the plaintiff has been or is likely to be injured as a result of the false
statement, either by direct diversion of sales from itself to defendant or by a
lessening of the goodwill associated with its products.

11

Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997). Further,

12

the Lanham act requires allegedly false statements to pertain to a product. Jack Russel

13

Terrier Network of N. Cal. v. Am. Kennel Club, 407 F.3d 1027, 1037 (9th Cir. 2005).

1
2
3

7
8
9

14

Axon first argues that Count I fails to allege a plausible violation of the Lanham Act

15

because it is premised on unfounded claims that the AB4 house hackable Quectel modules.

16

(Doc. 106 at 9.) Beyond that, Axon asserts that most of GovGPT’s claims fail as a matter

17

of law as they do not pertain to a product, or are, at most, inactionable puffery. (Id. at

18

9–10.) Finally, Axon argues that the single statement that references a product fails

19

because GovGPT admits it is true. (Id. at 11.)

20

GovGPT responds by asserting that certain alleged false statements are in fact

21

directed at Axon’s products, including the AB4. (Doc. 121 at 5.) Moreover, the statement

22

about Evidence.com’s export potential has plausible falsity and is misleading. (Id. at 10.)

23

And, unsurprisingly, GovGPT claims that the statements are not mere puffery. (See id.)

24

GovGPT alleges that the following five statements are false:

25
26
27
28

1. WINNING RIGHT: We maintain transparency and operate equitably.
2. We’re Transparent.
3. We also allow for bulk exports of your evidence data out of Evidence.com
in case you want to try another system.

- 25 -

4. We will win and retain your business by providing great products and an
awesome user experience, not by restricting your ability to leave.

1
2
3

5. We use data to drive ideas and constantly put ethical rigor behind how we
design.

4

(Doc. 74 ¶ 159). The related allegations in the FAC argue that the statements are directed

5

at the AB4 as well as Axon’s failure to disclose the presence of Quectel components to law

6

enforcement agencies.

7

codependency of the AB4 and Evidence.com, meaning law enforcement agencies are

8

unable to try another DEMS without rendering their AB4’s inoperable. (Id. ¶¶ 173–174.)

9

(See id. ¶¶ 154–155.)

The claims are further based on the

a. Statements 1, 2, 4, and 5

10

The FAC makes clear that these statements are cabined to the “responsibility” and

11

“principles” web pages on Axon’s website.

12

statements 1, 2, 4, and 5 do not reference any product. (Doc. 74 ¶¶ 161, 168–170, 175–177,

13

178, 181–183.) Nevertheless, GovGPT maintains that these statements tie into the AB4’s

14

marketing, and the failure of Axon to disclose the Quectel components somehow render

15

statements of transparency and ethical business practice false. (Doc. 121 at 5–10.) The

16

location on Axon’s website and the plain language of these statements are enough to

17

dispense with GovGPT’s claims. Indeed, while both transparency and ethical practices are

18

positive tenets for business, the statements simply do not refer to a product as required by

19

the Lanham Act.6 Jack Russel, 407 F.3d at 1037.

(Doc. 74 ¶ 159, nn.82–83.)

Facially,

20
21
22
23
24
25
26
27
28

6

Even if Statements 1, 2, and 5 implicated the AB4, the allegations and supporting
argument are predicated on claims nearly identical to those the Court previously found to
be implausible, unsubstantiated, and brought in bad faith. (See Doc. 71; Doc. 105 at 31;
Doc. 24-2 ¶ 23.) Truly, the only difference is that GovGPT has altered its diction, pleading
that the Quectel “chips” are now “components” or “modules.” (Doc. 71; Doc. 121 at 5, 7,
10.) When the Court denied GovGPT’s request for preliminary injunction (Doc. 71), it
considered affidavits containing uncontroverted attestations that “[t]he [Quectel] module
cannot be remotely accessed.” (Doc. 24-2 ¶ 23.) This information is important because
GovGPT’s false advertising allegations are, in large part, predicated on a theory that the
Chinese Communist Party use Quectel modules as “gateways to espionage” through
over-the-air (“OTA”) updates. (Doc. 74 ¶¶ 72–73.) To be clear, the Court will not vitiate
its obligation to read well-plead allegations as true, and will not consider Axon’s affidavit
as conclusive evidence that defeats the FAC. However, the Court is skeptical that these
allegations are plausible after having closely scrutinized them throughout the life of this
case. (See, e.g., Doc. 105 at 23, 25, 31.)

- 26 -

1

GovGPT claims that statement 4 “is misleading because it implies that Axon does

2

not restrict the ability to leave its platform, when in fact, Axon body cameras only work

3

with Evidence.com subscriptions.”

4

reference the AB4, Evidence.com, or the alleged codependency. And even assuming the

5

statement did reference either product, GovGPT does not sufficiently allege that the

6

statement led to an injury. (See id. ¶¶ 25, 175–177.) More specifically, GovGPT does not

7

allege that the statement caused potential customers to purchase Axon’s AB4 and an

8

Evidence.com subscription instead of GovGPT’s “Hiago” product.

9

175–177.)

(Doc. 74 ¶ 175.)

The statement itself does not

(See id. ¶¶ 25,

10

If a statement claimed to be false constitutes mere “puffery,” then they are not

11

actionable under the Lanham Act. See Cook, Perkiss, and Liehe, Inc. v. N. Cal. Collection

12

Serv. Inc., 911 F.2d 242, 246 (9th Cir. 1990); see also Newcal Indus., Inc. v. Ikon Office

13

Sol., 513 F.3d 1038, 1053 (9th Cir. 2008) (“[T]he determination of whether an alleged

14

misrepresentation is a statement of fact or is instead mere puffery is a legal question that

15

may be resolved on a Rule 12(b)(6) motion.”). Puffery “is exaggerated advertising,

16

blustering, and boasting upon which no reasonable buyer would rely.” Southland Sod

17

Farms, 108 F.3d at 1145; cf. Cook, 911 F.2d at 246 (explaining that an actionable false

18

advertising claim involve “specific or absolute characteristics of a product”).

19

Axon contends that the challenged statements simply elucidate Axon’s company

20

principles and values, rather than describe specific characteristics of a product that a

21

customer can evaluate. (Doc. 106 at 11.) In response, GovGPT suggest that the statements

22

are objectively measurable, capable of verification, contrary to Axon’s business practices,

23

and explicitly tied to Axon’s claims of “ethical rigor” to its design practices. (Doc. 121

24

at 4–9.)

25

The Ninth Circuit has held that generally describing the “high priority” that

26

defendant placed on product development “d[id] not state an actionable fraud or negligent

27

misrepresentation claim” because such claims were “generalized, vague and unspecific

28

assertions” that constituted mere puffery. Glen Holly Enter., Inc. v. Tektronix, Inc., 352

- 27 -

1

F.3d 367, 379 (9th Cir. 2003). Similarly, this Court has resounded the common holding

2

that claims of “innovative” designs or “proprietary ingredients” are “not specific, concrete,

3

not measurable, and therefore puffery.” Soilworks, LLC v. Midwest Indus. Supply, Inc.,

4

575 F. Supp. 2d 1118, 1133 (D. Ariz. 2008) (citing Rosenthal Collins Grp., LLC v. Trading

5

Techs. Int’l., Inc., No. 05 C 4088, 2005 WL 3557947, at *10 (N.D. Ill. Dec. 26, 2005);

6

Oestricher v. Alienware Corp., 544 F. Supp. 2d 964, 973 (N.D. Cal. 2008)); see also

7

Summit Tech., Inc. v. High-Line Med. Instr., Co., 933 F. Supp. 918, 931 (C.D. Cal. 1996)

8

(“The Court agrees that [defendant’s] statement that the used Excimer lasers are ‘perfectly

9

reliable’ is mere puffery, not actionable under the Lanham Act.”). Finally, statements

10

about “ensur[ing] transparent regulatory compliance” have been deemed non-actionable

11

puffery. In re Lottery.com, Inc. Sec. Litig., 715 F. Supp. 3d 506, 550 (S.D.N.Y. 2024).

12

Statements 1, 2, 4, and 5 are quintessential puffery. General, unspecified claims

13

about transparency, operation and design, as well as ethical standards have frequently been

14

regarded as inactionable under the Lanham Act. See id; Strougo v. Barclays PLC, 105 F.

15

Supp. 3d 330, 344 (S.D.N.Y. 2015) (explaining “statements about reputation, integrity, and

16

compliance with ethical norms” are non-actionable puffery); Glen Holly Ent., 352 F.3d

17

at 379; Soilworks, 575 F. Supp. 2d at 1133. GovGPT’s Response does not address any of

18

these cases, let alone set forth a discernable, legally-supported theory as to why these

19

statements are not puffery. (See Doc. 121.) Therefore, the Court finds that, even had these

20

statements referenced a product, they would at most be non-actionable puffery. At bottom,

21

statements 1, 2, 4, and 5 do not make any specific claim about a complained about Axon

22

product, and thus fall outside the scope of a Lanham Act false advertising claim.

23

b. Statement 3

24

Statement 3 references Axon’s Evidence.com platform, which GovGPT claims is

25

“misleading” because there are “practical limitations on data export,” making the process

26

potentially “cumbersome, incomplete, or technically challenging.” (Doc. 74 ¶¶ 59, 173.)

27

Axon contends that customers in the DEMS market would likely be aware that “bulk

28

export” of large data repositories would be cumbersome and technically challenging. (Doc.

- 28 -

1

106 at 11.) Moreover, Axon argues that the FAC fails to allege any customers were or

2

would likely be deceived by statement 3 and GovGPT essentially admits that bulk export

3

is possible and therefore not false. (Id.); see also Southland Sod Farms, 108 F.3d at 1139

4

(an actionable false advertising statement must be factually untrue). In response, GovGPT

5

argues that “while technically true,” the statement entices customers to use Evidence.com

6

without realizing the financial barriers associated with trying another DEMS. (Doc. 121

7

at 10–11.)

8

By its own admission, GovGPT concedes that statement 3 is true. (Doc. 121 at 9;

9

Doc. 74 ¶¶ 59, 173.) When an advertisement is not “literally false,” a plaintiff may still

10

obtain relief under the Lanham Act if it can show that “the advertisement has misled,

11

confused, or deceived the consuming public.” See Southland Sod Farms, 108 F.3d at 1140.

12

The FAC maintains that “Axon creates an illusion of freedom” that “prevents competitors

13

from attracting customers who believe they have the flexibility to switch [DEMS]” and

14

thus “customers are deceived into believing they have options when they do not.” (Id.

15

¶¶ 173–174.) GovGPT’s allegations are confusing in light of its admission that the

16

statement is literally true. (Doc. 121.) Indeed, customers can leave Axon’s DEMS with

17

their data in tow. Bulk export may be difficult on any number of DEMS platforms, not just

18

Evidence.com. Moreover, the statement itself does not promise a seamless transition, it

19

simply maintains that Axon offers customers the ability to bulk export its data if it wishes

20

to try another service. And, contrary to GovGPT’s allegations, the statement does not

21

promise that law enforcement agencies AB4’s would work with another DEMS platform.

22

(See Doc. 74 ¶ 174.) GovGPT has failed to sufficiently plead that statement 3 is either

23

false or misleading to sustain a Lanham Act claim.

24
25
26

Thus, GovGPT has failed to state a claim for relief under the Lanham Act and the
Court will dismiss Count I without prejudice.
2. Count VII—UCL

27

GovGPT claims that Axon violated the UCL by failing to disclose that the AB4

28

contains Quectel modules. (Doc. 74 ¶¶ 310–317.) Axon argues that GovGPT failed to

- 29 -

1

allege a sufficient violation of any of the UCL prongs. (Doc. 106 at 13 (citing Cal. Bus. &

2

Prof. Code § 17200 et seq.).) In response, GovGPT contends that the FAC demonstrates

3

Axon’s failure to disclose the Quectel modules created an uneven playing field by

4

misleading customers. (Doc. 121 at 15.) According to GovGPT, Axon’s failure to disclose

5

has “unfairly lock[ed] customers into its ecosystem through deceptive practices.” (Id.)

6

The UCL prohibits “any unlawful, unfair or fraudulent business act or practice and

7

unfair deceptive, untrue or misleading advertising.” Cal. Bus. & Prof. Code § 17200. “An

8

act can be alleged to violate any or all of the three prongs of the UCL—unlawful, unfair,

9

or fraudulent.” Berryman v. Merit Prop. Mgmt., Inc., 62 Cal. Rptr. 3d 177, 186 (Cal. Ct.

10

App. 2007). The Court will discuss each prong in turn.

11

To allege that conduct is “unlawful,” a plaintiff must allege a violation of a different

12

statute. See Stearns v. Select Comfort Retain Corp., 763 F. Supp. 2d 1128, 1150 (N.D. Cal.

13

2010) (“[T]he UCL borrows violations of other laws and treats them as unlawful practices

14

that the unfair competition law makes independently actionable.” (quotation marks

15

omitted)). GovGPT alleges that Axon’s conduct violated the Lanham Act and California’s

16

Consumer Legal Remedies Act (“CLRA”). (Doc. 74 ¶ 312.) GovGPT’s UCL claim based

17

on violation of the Lanham Act fails because it has failed to establish standing or plead a

18

valid Lanham Act claim. Moreover, GovGPT does not provide any more than a passing

19

reference to the CLRA in its FAC, leaving any claim of violation threadbare and

20

conclusory. It has therefore failed to plead the necessary facts to show Axon’s omission

21

was “unlawful” under the UCL.

22

Under the UCL, the factors that define unfairness are: “(1) the consumer injury must

23

be substantial; (2) the injury must not be outweighed by any countervailing benefits to

24

consumers or competition; and (3) it must be an injury that consumers themselves could

25

not reasonably have avoided. Camacho v. Automobile Club of S. Cal., 48 Cal. Rptr. 3d

26

770, 776 (Cal. Ct. App. 2006). GovGPT alleges that Axon’s failure to disclose the Quectel

27

modules “reduces competition because it conceals a material fact that [AB4s] could be

28

compromised by foreign interference, hurting public safety.” (Doc. 74 ¶ 313.) This

- 30 -

1

allegation is deficient for a few reasons.

2

requirements of pleading a substantial consumer injury and instead merely concludes that

3

Axon’s failure to disclose reduced competition. (See Doc. 74 ¶ 313.) Second, GovGPT’s

4

allegations of hacking and espionage related to the Quectel modules are preposterous. (See

5

Doc. 71; Doc. 105 at 31.) Therefore, GovGPT has not stated a claim under the unfair

6

business practice prong.

First, GovGPT largely ignores the UCL

7

Finally, to allege conduct is a “fraudulent” business practice likely to deceive the

8

public, a plaintiff must satisfy the heightened standard of Federal Rule of Civil Procedure

9

9(b). See Backhaut v. Apple, Inc., 74 F. Supp. 3d 1033, 1051 (N.D. Cal. 2014). Rule 9(b)

10

requires a plaintiff alleging fraud “state with particularity the circumstances constituting

11

fraud.” Fed. R. Civ. P. 9(b); see also Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th

12

Cir. 2009).

13

advertising and misrepresentation must “demonstrate actual reliance on the allegedly

14

deceptive or misleading statements.” Kwikset Corp. v. Superior Court, 246 P.3d 877, 888

15

(Cal. 2011) (cleaned up). GovGPT’s fraud allegations maintain that Axon’s omissions of

16

the Quectel security risks “was likely to deceive and mislead customers who reasonably

17

relied on Axon’s representations.” (Doc. 74 ¶ 314.) Noticeable absent is demonstrable

18

reliance or particularized allegations regarding Axon’s fraudulent acts. As a result,

19

GovGPT has failed to state a UCL claim under the fraudulent business practices prong.

20
21
22

Additionally, plaintiffs asserting a theory of fraud predicated on false

Because GovGPT has failed to state a claim under any of the three UCL prongs, the
Court will dismiss the claim.
3. Counts II–VI—The Antitrust Claims

23

“Section 7 of the Clayton Act generally prohibits business acquisitions whose effect

24

may be to substantially lessen competition, or tend to create a monopoly in a relevant

25

market.” DeHoog v. Anheuser-Bush InBev, 899 F.3d 758, 762 (9th Cir. 2018). To

26

plausibly allege a claim under Section 1 or Section 2 of the Sherman Act, a plaintiff must

27

allege that defendant engaged in anti-competitive conduct and harm flowed from that

28

conduct. Brantley, 675 F.3d at 1197 (Section 1); Aerotec, 4 F. Supp. 3d at 1137 (Section

- 31 -

1

2). “The purpose of the Act is not to protect businesses from the working of the market; it

2

is to protect the public from the failure of the market.” Spectrum Sports, Inc. v. McQuillan,

3

506 U.S. 447, 458, (1993). Here, GovGPT offers three theories to show how Axon violated

4

the Clayton Act: (1) the 2018 agreement with Microsoft; (2) the 2024 acquisition of Fusus;

5

and (3) the 2018 acquisition of VieVu. (See Doc. 74 ¶¶ 192, 200, 208.) Similarly, GovGPT

6

relies on the acquisitions, the Microsoft agreement, and the Quectel allegations to

7

substantiate its Sherman Act claims. (See Doc. 74 ¶¶ 192–309.)

8

a. The Microsoft Agreement

9

The Court is unsure why GovGPT brought a Section 7 Clayton Act claim against

10

Axon predicated on the 2018 Microsoft agreement, as the Act governs the acquisition by

11

one corporation of the stock of another, not cloud computing contracts. See 15 U.S.C. § 18.

12

GovGPT’s Response does not clarify its position on the matter. (See Doc. 121.) Thus,

13

GovGPT’s Clayton Act claim must be dismissed with prejudice to the extent that it is

14

premised on the 2018 Microsoft contract or 2022 extension.

15

The Sherman Act claims predicated on the Microsoft agreements will be dismissed

16

for the reasons the Court stated in the portion of this Order dismissing the claims against

17

Microsoft. Namely, the statute of limitations has run, and GovGPT has not sufficiently

18

pleaded an overt act to toll the statute. See, e.g., Garrison, 159 F. Supp. 3d at 1070–71;

19

Ryan, 147 F. Supp. 3d at 884.

20

b. Standing to Challenge Fusus Acquisition

21

Axon argues that GovGPT lacks standing to challenge the 2024 acquisition of Fusus

22

because GovGPT does not compete in the Public Safety Video Integration and

23

Management Platforms’ (“real-time crime centers” or “RTCC”) market. (See Doc. 74 ¶ 25

24

n.2 (GovGPT does not operate in the [RTCC] market today. However, it has plans to.”)

25

In response, GovGPT contends that its products inherently compete with offerings in the

26

RTCC markets, and therefore, it has standing. (See Doc. 121 at 18.) Interestingly, in its

27

Response to Safariland’s Motion to Dismiss (Doc. 110), GovGPT claims that it is a “new

28

entrant into the BWC, DEMS, and now [RTCC] markets.” (Doc. 117 at 2.)

- 32 -

1

The attorney argument offered in GovGPT’s Response directly contradicts the

2

allegations in its FAC. (See id.; Doc. 74 ¶ 25 n.2.) The FAC explicitly alleges that

3

GovGPT does not compete in the RTCC market. (Doc. 74 ¶ 25 n.2.) A party challenging

4

the legality of an acquisition or merger under the Clayton Act must compete in the market

5

with the party against whom the claim is asserted. United States v. Marine Bancoration,

6

Inc., 418 U.S. 602, 621 (1974); Somers v. Apple, Inc., 729 F.3d 953, 963 (9th Cir. 2013).

7

Since the FAC does not allege GovGPT’s participation in the RTCC market, any

8

subsequent argument that GovGPT currently competes in this market through its existing

9

products is disingenuous and without merit. Because GovGPT admittedly does not

10

compete in this market, it lacks standing to challenge the Fusus acquisition. Therefore, the

11

Court will dismiss with prejudice the Clayton Act claim to the extent that it is based upon

12

the Fusus acquisition. Additionally, Count V—attempted monopolization of the RTCC

13

market—will be dismissed with prejudice. See Somers, 729 F.3d at 963.

14

c. Antitrust Standing

15

Axon argues that GovGPT fails to establish antitrust standing as it merely

16

“complains that as a new startup it is difficult to compete with Axon’s product offerings.”

17

(Doc. 106 at 30.) With respect to the claims relating to the VieVu Acquisition, Axon

18

argues that GovGPT has only recently joined the BWC and DEMS market and therefore

19

lacks injury because it was not a market participant when the alleged violative conduct

20

occurred. (Id.) Seemingly, GovGPT does not attempt to refute Axon’s argument regarding

21

standing to challenge the VieVu Acquisition or the Microsoft Agreement. (See Doc. 121.)

22

To bring a claim under the Clayton and Sherman Acts, GovGPT must have antitrust

23

standing. “[C]ourts have constructed the concept of antitrust standing, under which they

24

evaluate the plaintiff’s harm, the alleged wrongdoing by defendants, and the relationship

25

between them, to determine whether a plaintiff is a proper party to bring an antitrust claim.”

26

Am. Ad Mgmt., 190 F.3d at 1054 (internal citation omitted). Our Supreme Court recognized

27

that it is “virtually impossible to announce a black-letter rule that will dictate the result in

28

every case,” and thus offered several factors. Associated Gen. Contractors of Cal., Inc. v.

- 33 -

1

Cal. State Council of Carpenters, 459 U.S. 519, 530–535 (1983). Those factors include:

2

(1) The nature of the plaintiff’s alleged injury; that is, whether it was the type the antitrust

3

laws were intended to forestall; (2) The directness of the injury, i.e., causation; (3) The

4

speculative measure of the harm; (4) The risk of duplicative recovery; and (5) The

5

complexity in apportioning damages. See Amarel v. Connell, 102 F.3d 1494, 1507 (9th

6

Cir. 1996) (citing Associated General Contractors, 459 U.S. at 535). These factors must

7

be balanced, i.e., “[n]o single factor is decisive,” but great weight is given to the nature of

8

the plaintiff’s alleged injury. R.C. Dick Geothermal Corp. v. Thermogenics, Inc., 890 F.2d

9

139, 146 (9th Cir. 1989); Amarel, 102 F.3d 1507. But an injury is necessary. See Oakland

10

Raiders, 20 F.4th at 456 (“[T]he first factor—antitrust injury—is mandatory.”).

11

“Antitrust injury is defined not merely as an injury caused by an antitrust violation,

12

but more restrictively as ‘injury of the type of the antitrust laws were intended to prevent

13

and that flows from that which makes [defendant’s] acts unlawful.’” Glen Holly Ent., 352

14

F.3d at 371 (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489

15

(1977)). Antitrust laws protect against anticompetitive conduct, not competition in the

16

marketplace. United States v. Topco Assoc., Inc., 405 U.S. 596, 608 (1972). Antitrust

17

injury has four requirements: “(1) unlawful conduct, (2) causing an injury to the plaintiff,

18

(3) that flows from that which makes the conduct unlawful, and (4) that is of the type the

19

antitrust laws were intended to prevent.” Am. Ad Mgmt., Inc. v. Gen. Tel. Co. of Cal., 190

20

F.3d 1051, 1054–55 (9th Cir. 1999). As stated by the Supreme Court:

21
22
23

Antitrust laws in general, and the Sherman Act in particular, are the Magna
Carta of free enterprise. They are as important to the preservation of
economic freedom and our free-enterprise systems as the Bill of Rights is to
the protection of our fundamental personal freedoms.

24

Topco, 405 U.S. at 608. “One form of antitrust injury is “[c]oercive activity that prevents

25

its victims from making free choices between market alternatives.” Glen Holly Ent., 352

26

F.3d at 374 (citing Amarel, 102 F.3d at 1509). However, “[antitrust] injury, although

27

causally related to an antitrust violation, nevertheless will not qualify as ‘antitrust injury’

28

unless it is attributable to an anti-competitive practice under scrutiny.” Atl. Richfield Co.

- 34 -

1

v. USA Petroleum Co., 495 U.S. 328, 334 (1990). This is because “[i]t is inimical to [the

2

antitrust] laws to award damages’ for losses stemming from continued competition.”

3

Cargill, Inc. v. Monfort of Colo., Inc., 479 U.S. 104, 109–110 (1986).

4

With respect to the Clayton Act, GovGPT resounds Section 7’s requirements before

5

it was injured due to “[t]he effect of th[e] [VieVu] acquisition” having substantially

6

lessened competition thereby creating a monopoly in the Markets. (Doc. 74 ¶ 194.)

7

Thereafter, GovGPT declares that “[h]igh barriers to entry and expansion have made it

8

infeasible for a competitor like GovGPT to enter the Markets.” (Id. ¶ 198.) Reading past

9

the conclusory nature of these allegations, and taken as true, the claimed harm is a common

10

injury to competition that the antitrust laws were intended to forestall. See Cargill, 479

11

U.S. at 113 (explaining that a private plaintiff must show an injury “of the type the antitrust

12

laws were designed to prevent”).

13

maligned by its position as a competitor and its non sequitur allegations.

However, the sufficiency of GovGPT’s injury is

14

Reduced competition and quality, as well as higher prices, are prime types of

15

consumer injuries that the antitrust laws aim to prevent. See Brunswick Corp., 429 U.S.

16

at 489. However, GovGPT, as a competitor, would primarily seek to gain from these

17

consequences. See Am. Ad Management., 190 F.3d at 1056 (“There can be no antitrust

18

injury if the plaintiff stands to gain from the alleged unlawful conduct.”); Sprint Nextel

19

Corp. v. AT&T Inc., 821 F. Supp. 2d 308, 319 (D.D.C. 2011) (“[While] harm to consumers

20

by way of increased prices is the type of injury the antitrust laws were designed to

21

prevent, . . . it is not an injury-in-fact that competitors suffer.”). Courts have recognized

22

that reduced competition and the ability to charge higher prices would, in most

23

circumstances, benefit competitors. See Matsushita, 475 U.S. at 583 (“[R]estraints that

24

have the effect of either raising market price or limiting output . . . actually benefit

25

competitors by making supracompetitive pricing more attractive.”); Novation Ventures,

26

LLC v. J.G. Wentworth Co., LLC, 156 F. Supp. 3d 1094, 1101 (C.D. Cal. 2015) (“If the

27

merger has benefitted Defendants by reducing the number of competitors in the

28

market . . . then it has similarly benefitted the other participants in that market by reducing

- 35 -

1

competition for them.”). Although, the Ninth Circuit has found that a competitor who may

2

gain from a defendant’s alleged anticompetitive conduct is not completely precluded from

3

showing an antitrust injury. Cf. Ellis v. Salt River Proj. Improvement and Power Dist., 24

4

F.4th 1262, 1274–75 (9th Cir. 2022). Although, the Ninth Circuit’s finding does not

5

change the fact that the plaintiff must plead a cognizable injury, it may not, as GovGPT

6

has done here, cobble together a mix of consumer, competitor, and conspiracy-based injury

7

allegations related to an acquisition, and hope that the Court pieces the puzzle together. See

8

Atl. Richfield, 495 U.S. at 334.

9

GovGPT’s allegations of high barriers to market entry are similarly insufficient.

10

(Doc. 74 ¶ 198.) Aside from declaring that Axon’s anticompetitive conduct made it

11

“infeasible for a competitor” to enter the market, GovGPT provides no factual

12

enhancement to demonstrate that it has been foreclosed or impeded from the opportunity

13

of competing in the relevant product market because of the VieVu acquisition. (See

14

generally id.); cf. Novation Ventures, 156 F. Supp. 3d at 1102. Again, the law requires

15

GovGPT to demonstrate that it has suffered an injury the antitrust laws were designed to

16

prevent, which requires more than regurgitating the elements in myriad allegations. (See

17

Doc. 74 ¶¶ 198, 205.)

18

GovGPT also alleges that the acquisition restrained trade because “conceal[ed]

19

critical information about the security vulnerabilities . . . [of] Quectel modules, and thereby

20

misleading [customers] into buying Axon products.” (Id. ¶ 213); Glen Holly Ent., 352 F.3d

21

at 374 (explaining that antitrust injury may result from “[c]oercive activity that prevents its

22

victims from making free choices between market alternatives.”) According to GovGPT,

23

but for Axon’s deception, law enforcement agencies would have bought from competing

24

firms, and this failure to disclose “has distorted the competitive landscape . . . at the expense

25

of competitors like Plaintiff.” (Id.) This allegation, however, does not stand up to even

26

modest scrutiny. First, the procedural history of this case casts some doubt on the

27

plausibility of GovGPT’s allegations regarding the Quectel “chips,” “components,” or

28

“modules.” (See Doc. 71; Doc. 105.) Second, GovGPT’s FAC is unclear as to whether it

- 36 -

1

is even a competitor. (See Doc. 74 ¶¶ 88, 133, 163, 177, 202.) Third, GovGPT alleges no

2

more than bald conclusions that the presence of the Quectel parts actually led to it losing

3

business. (See id. ¶ 213.) And fourth, the link between the acquisition of VieVu, the

4

Quectel parts, and GovGPT’s alleged injury is tenuous and nearly incomprehensible. (See

5

id.) In other words, the FAC not only fails to allege an antitrust injury for a Section 7

6

claim, but also fails to comply with the fundamental requirement of Rule 8: “a short and

7

plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.

8

8(a)(2). The facts alleged concerning the Quectel parts do little to enhance GovGPT’s

9

generalized allegations of “substantially lessened competition” and “monopolization.”

10

Interestingly included in the Section 7 allegations is the following: “Plaintiff have

11

[sic] been injured and have [sic] paid artificially inflated prices for the Products.” (Doc.

12

74 ¶¶ 228, 233, 253, 261.) The same or similar allegations of injury are present in Counts

13

III and VI as well. The FAC is having an identity crisis, as it has failed to the draw the line

14

between consumer-based injury and competitor-based injury. GovGPT’s has not pleaded

15

an antitrust injury that would confer standing upon it for a Section 7 Clayton Act claim.

16

GovGPT similarly fails to plead an antitrust injury for its Sherman Act claims. In

17

Count III, which alleges a conspiracy to restrain trade, GovGPT contends that Axon entered

18

into several agreements with Safariland and Microsoft that have reduced competition in

19

violation of Section 1. (Doc. 74 ¶ 233.) GovGPT does not plead specific allegations

20

regarding the conspiracy to restrain trade as it relates to the VieVu Acquisition. (See id.)

21

Instead, this section is largely directed at Axon and Microsoft’s agreements and hosting of

22

bodycam footage. (See id. ¶¶ 231–248.) The Court has previously explained that the

23

statute of limitations bars GovGPT’s antitrust claims based on the 2018 Microsoft

24

agreement. Additionally, as alleged, it is unclear how the agreements with Safariland

25

establish an injury, as the non-compete provisions have been rescinded. (Id. ¶¶ 134, 233.)

26

To the extent that the injury is premised on the Quectel modules, GovGPT’s claim

27

is no more successful. As explained, those allegations lack plausibility and factual

28

enhancement, making them at most, an attempt to further support an already rejected

- 37 -

1

conspiracy theory about the AB4. Unfortunately, the allegations in Count III, like most of

2

the FAC, is rife with ultimate, conclusory facts about GovGPT’s alleged injuries. (See,

3

e.g., id. ¶ 238 (“Defendants’ conduct has caused Plaintiff to suffer damages in the form of

4

injuries to their business or property.).)

5

Count IV, which alleges monopolization of the BWC and DEMS markets, GovGPT

6

contends that the VieVu acquisition has resulted in “substantial anticompetitive effects”

7

such as higher prices in the product markets and injured competition. (Doc. 74 ¶ 253.)

8

GovGPT goes on to allege that Axon’s conduct has caused it to suffer injuries to its

9

business and property due to the acquisition and because of “Axon’s deliberate

10

concealment of the security risks associated with the Quectel Modules . . . mislead

11

[consumers] into adopting Axon’s technology.” (Id. ¶ 265.) Like the preceding Counts,

12

the FAC lacks any factual enhancement to show how the VieVu Acquisition resulted in

13

injurious conduct that has or will injure GovGPT. (See id.) Instead, GovGPT peddles its

14

conspiracy theory about the potential danger of Quectel modules and Axon’s deceptive

15

sales practices. (Id.)

16

Similarly, Count VI, which alleges conspiracy to monopolize, does not set forth how

17

Axon’s illegal conduct related to the VieVu Acquisition injured GovGPT as a competitor.7

18

(See id. ¶¶ 284–309.) Even if GovGPT successfully established standing for this claim, it

19

would otherwise fail because it is premised upon a “dual monopoly” theory, upon which a

20

Section 2 claim cannot be based. See Standfacts Credit Serv’s Inc. v. Experian Info. Sol.,

21

Inc., 405 F. Supp. 2d 1141, 1152–53 (C.D. Cal. 2005) (“[A]n allegation of conspiracy to

22

create a shared monopoly does not plead a claim of conspiracy under section 2.”); (Doc.

23

74 ¶ 292 (“[T]he collaboration between Microsoft and Axon established a dual

24

monopoly.”).)

25

Earlier, the Court afforded GovGPT Lanham Act claim some analysis after finding

26

that it lacked standing to bring it. The same benefit will not be afforded to GovGPT

27

7

28

In Count VI, GovGPT contends that competitors are unable to compete in part because
Axon will not provide competitors with footage from its Evidence.com repository. (Id.
¶ 288.) Or in other words, GovGPT’s claim is partly based on its issue with the fact that,
without a court order, it cannot utilize Axon’s work for its own gain. (See id.)
- 38 -

1

regarding its antitrust claims, as the FAC and its Response to Axon’s Motion are near

2

indecipherable regarding these claims. GovGPT has consistently misrepresented and

3

attempted to rewrite the allegations in its FAC and the precedent upon which it relies. (See,

4

e.g., Doc. 121 at 22 (citing In re Lithium Ion Batteries Antitrust Litigation,

5

No.:13-MD-2420 YGR, 2024 WL 309192, at *1 (N.D. Cal. Jan. 21, 2014)).)

6

On its face, the FAC is confusing, inconsistent, and as a result, fails to properly

7

plead antitrust injury. Similarly, the FAC fails to state a claim for relief under the Lanham

8

Act or the UCL. Consequently, the entire FAC will be dismissed without prejudice as to

9

Axon.

10

IV.

LEAVE TO AMEND

11

Federal Rule of Civil Procedure 15(a) requires that leave to amend be “freely give[n]

12

when justice so requires.” Leave to amend should not be denied unless “the proposed

13

amendment either lacks merit or would not serve any purpose because to grant it would be

14

futile in saving the plaintiff’s suit.” Universal Mortg. Co. v. Prudential Ins. Co., 799 F.2d

15

458, 459 (9th Cir. 1986). Therefore, “a district court should grant leave to amend even if

16

no request to amend the pleading was made, unless it determines that the pleading could

17

not possibly be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122,

18

1127 (9th Cir. 2000) (cleaned up).

19

Here, GovGPT filed an Initial Complaint, a Proposed Amended Complaint (Doc.

20

69) which it later withdrew, and now the FAC (Doc. 74). Each iteration of the Complaint

21

in this case has asserted similar claims, including those claims regarding the potential

22

danger of Quectel “chips,” “components,” or “modules.” (See Doc. 1; Doc. 69; Doc. 74.)

23

Axon contends that the FAC ought to be dismissed with prejudice because GovGPT has

24

had ample opportunities to cure its deficient allegations and has failed to do so. (Doc. 106

25

at 32 (citing McHenry v. Renne, 84 F.3d 1172 (9th Cir. 1996)).)

26

The Court agrees that GovGPT’s FAC fails to state a claim, but it does not believe

27

that all claims in this case should be dismissed with prejudice at this time. Although the

28

Court can say with certainty that GovGPT has not buried a cognizable claim somewhere

- 39 -

1

in his 110-page FAC. Indeed, the FAC is so long, dense, and inconsistent that GovGPT’s

2

claims often collapse in on themselves. That notwithstanding, the Court will allow

3

GovGPT an additional attempt at amendment. However, the Court warns GovGPT that its

4

Second Amended Complaint must comply with Rule 8(a). The Court will not pronounce

5

a hard-and-fast page limit, but the Court notes that 110-pages is excessive in a case wherein

6

a great deal of the alleged facts more to do with supporting a conspiracy theory than

7

substantiating Lanham Act or antitrust claims. It is not lost on the Court that the very

8

nature of antitrust actions typically begets a detailed complaint. However, pleadings in

9

such cases ought to (1) avoid alleging a horde of irrelevant, conspiratorial facts; and (2)

10

comport with the requirements that pleadings in federal court be “short and plain.” See

11

Fed. R. Civ. P. (8)(a)(2). Failure to comply with this directive will result in the dismissal

12

of GovGPT’s amended pleading. If GovGPT wishes to have another bite at the apple, it

13

will file a Second Amended Complaint within thirty (30) days of the date of this Order.

14

V.

CONCLUSION

15

Accordingly,

16

IT IS HEREBY ORDERED granting Safariland’s Motion to Dismiss for Lack of

17

Personal Jurisdiction (Doc. 110) and denying as moot Safariland’s Motion to Dismiss for

18

Failure to State a Claim (Doc. 111). Because the Court cannot exercise jurisdiction over

19

Safariland, it will be dismissed from this case with prejudice.

20
21
22
23

IT IS FURTHER ORDERED granting Microsoft’s Motion to Dismiss (Doc. 90)
and dismissing Microsoft from this case without prejudice.
IT IS FURTHER ORDERED granting Axon’s Motion to Dismiss (Doc. 106) and
dismissing Axon from this case without prejudice.

24

IT IS FURTHER ORDERED instructing GovGPT that if it wishes to file a

25

Second Amended Complaint, it must do so within thirty (30) days of the date of this Order.

26

Dated this 7th day of March, 2025.

27
28

- 40 -