Killian Pest Control, Inc. v. Hometeam Pest Defense, Inc. et al
Filing
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ORDER by Judge Vince Chhabria granting 29 Motion to Dismiss with Leave to Amend. (knm, COURT STAFF) (Filed on 6/16/2015)
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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KILLIAN PEST CONTROL, INC.,
Case No. 14-cv-05239-VC
Plaintiff,
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v.
ORDER GRANTING DEFENDANTS'
MOTION TO DISMISS
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HOMETEAM PEST DEFENSE, INC., et al.,
Re: Dkt. No. 29
Defendants.
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The motion to dismiss the First Amended Complaint is granted with leave to amend.
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United States District Court
Northern District of California
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"In order to state a valid claim under the Sherman Act, a plaintiff must allege that the
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defendant has market power within a 'relevant market.' That is, the plaintiff must allege both that
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a 'relevant market' exists and that the defendant has power within that market." Newcal Indus.,
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Inc. v. Ikon Office Solution, 513 F.3d 1038, 1044 (9th Cir. 2008). The "relevant market" has two
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components, "a relevant product market and a relevant geographic market." Sidibe v. Sutter
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Health, 4 F. Supp. 3d 1160, 1174 (N.D. Cal. 2013). "The process of defining the relevant market
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is a factual inquiry for the jury." High Tech. Careers v. San Jose Mercury News, 996 F.2d 987,
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990 (9th Cir. 1993). However, "a complaint may be dismissed under Rule 12(b)(6) if the
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complaint's 'relevant market' definition is facially unsustainable." Newcal Indus., Inc. v. Ikon
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Office Solution, 513 F.3d 1038, 1045 (9th Cir. 2008).
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Killian has adequately pled relevant product markets—the markets for installation and
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servicing of tube-in-the-wall pest control systems. HomeTeam contends that the product market
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must include other forms of pest control, but "in some instances one brand of a product can
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constitute a separate market," Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451,
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482 (1992), and it's reasonable to infer from the allegations in the complaint that tube-in-the-wall
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pest control systems are quite distinct, such that they form a separate market from the market for
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other forms of pest control. See, e.g., RealPage, Inc. v. Yardi Sys., Inc., 852 F. Supp. 2d 1215,
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1225 (C.D. Cal. 2012) (allegation that particular cloud computing services were distinct from
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"generic" cloud computing services); TYR Sport Inc. v. Warnaco Swimwear Inc., 679 F. Supp. 2d
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1120, 1129 (C.D. Cal. 2009) (allegation that "high-end competitive swimwear" was distinct from
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other types of swimwear).
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Killian has not, however, adequately defined the relevant geographic market. The
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complaint alleges that HomeTeam installs tube-in-the-wall systems in a number of states across
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the nation, "including the states of California, Arizona, Florida, Georgia, Maryland, Missouri,
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Nevada, New Mexico, North Carolina, South Carolina, Tennessee, Texas, Virginia, and West
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Virginia." But the complaint provides no details about whether customers in states other than the
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ones listed—or even whether customers throughout each of the listed states—"can practicably
turn" to HomeTeam for installation of tube-in-the-wall systems. See Tampa Elec. Co. v. Nashville
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United States District Court
Northern District of California
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Coal Co., 365 U.S. 320, 327 (1961).
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The complaint further alleges that HomeTeam's website is "available nationwide," but
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obviously the mere fact that people all over the country (and presumably the world) can access
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HomeTeam's website has no bearing on where HomeTeam's system is actually available to
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customers. And the complaint alleges that "HomeTeam engages in national planning of the
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installation of tube-in-the-wall systems," but without a better understanding of where the systems
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are actually available, an allegation of national planning is not enough. Compare United States v.
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Grinnell Corp., 384 U.S. 563, 575 (1966).
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Overall, Killian's "definition of the relevant geographic market [for installation of tube-in-
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the-wall systems] is vague and conclusory." See Orchard Supply Hardware LLC v. Home Depot
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USA, Inc., 939 F. Supp. 2d 1002, 1010 (N.D. Cal. 2013).
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Similarly, in describing the geographic market for servicing tube-in-the-wall systems, the
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complaint alleges that "HomeTeam[] services tube-in-the-wall systems nationwide, including at
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least the states of California, Arizona, Florida, Georgia, Maryland, Missouri, Nevada, New
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Mexico, North Carolina, South Carolina, Tennessee, Texas, Virginia, and West Virginia." It also
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alleges that HomeTeam's "customers are located in every state in which HomeTeam operates,
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including California, Arizona, Florida, Georgia, Maryland, Missouri, Nevada, New Mexico, North
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Carolina, South Carolina, Tennessee, Texas, Virginia, and West Virginia." These allegations are
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vague, but they seem to work against Killian by implicitly acknowledging that HomeTeam does
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not in fact operate throughout the United States. Thus, the complaint does not plead sufficient
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facts to plausibly allege that HomeTeam's "area of effective competition" in the tube-in-the-wall
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servicing market is nationwide.
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The FAC alternatively alleges "geographic markets for the servicing of tube-in-the-wall
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systems . . . correspond[ing] to the areas of service for the individual offices providers [sic] of
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such servicing." But the complaint doesn't say anything specific about the "areas of service" for
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"individual offices." And it provides no details about the competitive structure—the alternative
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sources of supply or lack thereof—in these individual local markets. "Information about the reach
of th[ese] market[s] is not exclusively within the Defendants' possession. Plaintiff should plead
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United States District Court
Northern District of California
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the geographic range of the relevant market[s] with greater specificity." Orchard Supply, 939 F.
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Supp. 2d at 1010 (N.D. Cal. 2013).
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Because the federal claims must be dismissed for failure to adequately plead the relevant
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geographic market, the Court does not reach HomeTeam's remaining objections to the federal
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claims (except for HomeTeam's arguments pertaining to the product market, which have been
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rejected). However, the hearing on the motion to dismiss, as well as HomeTeam's briefs, have put
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Killian on notice of other potential defects, and the Court assumes that the next version of the
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complaint will represent Killian's best and last shot to state a claim. In addition, because it is
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highly likely Killian can state an antitrust claim with respect to the market for servicing tube-in-
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the-wall systems, and because this case has already languished for quite some time, discovery may
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proceed on Killian's claims relating to the servicing market immediately upon the filing of an
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amended complaint. The discovery stay remains in place, however, for Killian's claims relating to
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the installation market.
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Killian's state-law antitrust claims are dismissed for the same reasons as his Sherman Act
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claims. See Cnty. of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1160 (9th Cir. 2001) ("The
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analysis under California's antitrust law mirrors the analysis under federal law because the
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Cartwright Act was modeled after the Sherman Act." (citation omitted)).
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Killian's claims under California's Unfair Practices Act are also dismissed. The First
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Amended Complaint alleges that HomeTeam charges builders $75 to install the tube-in-the-wall
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system, and alleges that this price is below HomeTeam's cost. But this is not enough to state a
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claim. "To satisfy the requirements of section 17043, a plaintiff must allege, in other than
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conclusionary terms, the defendant's sales price, costs in the product, and cost of doing business."
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Fisherman's Wharf Bay Cruise Corp. v. Superior Court, 7 Cal. Rptr. 3d 628, 639 (Ct. App. 2003).
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Finally, Killian acknowledges that his claims under California's Unfair Competition Law
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rise and fall with the success of his other claims. See Docket No. 32, p. 13. Because the Court
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grants HomeTeam's motion to dismiss each of these other claims, Killian's UCL claim is likewise
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United States District Court
Northern District of California
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dismissed.
Accordingly, HomeTeam's motion to dismiss is granted with respect to each claim, with
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leave to amend. Any amended complaint must be filed within 21 days of the date of this order, or
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the dismissal shall be with prejudice.
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IT IS SO ORDERED.
Dated: June 16, 2015
______________________________________
VINCE CHHABRIA
United States District Judge
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