High Tek USA, Inc. v. Heat and Control, Inc.

Filing 35

ORDER by Judge Yvonne Gonzalez Rogers granting in part and denying in part 14 Motion to Dismiss the Complaint with Leave to Amend. (fs, COURT STAFF) (Filed on 7/18/2012)

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2
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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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6
7
8

HIGH TEK USA, INC.,
Plaintiff,

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10

Northern District of California

United States District Court

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12
13

vs.

Case No.: 12-CV-00805 YGR
ORDER GRANTING IN PART AND DENYING IN
PART MOTION OF DEFENDANT HEAT AND
CONTROL, INC. TO DISMISS THE COMPLAINT
WITH LEAVE TO AMEND

HEAT AND CONTROL, INC. and DOES 1
through 50, inclusive,
Defendants.

14
15

Plaintiff High Tek USA, Inc. (“High Tek”) brings this antitrust action against Defendant Heat

16

and Control, Inc. (“H&C”) alleging unilateral refusal to deal in the aftermarket for packaging and

17

weighing equipment of food packaging and processing materials. Plaintiff alleges seven causes of

18

action: (1) Violation of Section 1 of the Sherman Act, 15 U.S.C. § 1; (2) Violation of Section 2 of the

19

Sherman Act, 15 U.S.C. § 2; (3) Violation of the Robinson-Patman Act, 15 U.S.C. § 13; and state law

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claims for (4) Intentional Interference with Contractual Relations; (5) Intentional Interference with

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Prospective Economic Advantage; (6) Promissory Estoppel; and (7) Unfair, Unlawful and Fraudulent

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Business Practices in Violation of California Business and Professions Code § 17200 et seq.

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Defendant has filed a Motion to Dismiss the Complaint on the grounds that this is a garden

24

variety business dispute between a supplier and its former customer that does not implicate federal

25

antitrust law. The Court held oral argument on July 13, 2012.

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Having carefully considered the papers submitted, the Complaint, and the argument of

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counsel, for the reasons set forth below, the Court hereby GRANTS IN PART and DENIES IN PART the

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Motion to Dismiss WITH LEAVE TO AMEND.

1
2

I.

BACKG
GROUND
This case involves access to repl
lacement par for proce
rts
essing, packa
aging, and w
weighing

3

equi
ipment used in food prod
duction. The equipment is used to w
t
weigh and fil bags, pouc
ll
ches, cans,

4

jars, cartons, cas and trays with a variety of fresh, processed, and frozen f
,
ses
s
,
foods. H&C is the
C

5

excl
lusive North America distributor of scales, equip
h
s
pment and parts manufac
ctured by Ish Co., Ltd
hida
d.

6

(“Ish
hida”). Dkt. No. 1 (“Co
omplaint”) ¶ 8. H&C als manufactu food pro
so
ures
ocessing and packaging
d

7

equi
ipment. Id. High Tek al
lleges that it inability to purchase Ishida parts f
ts
o
from H&C v
violates feder
ral

8

antit
trust and Ca
alifornia state laws.
e

9

In 2004, High Tek was founded by two form H&C em
w
mer
mployees who began serv
vicing food

serv
vicing Ishida scales, High Tek sells used scales w
a
h
u
which it has refurbished and reconditioned. Id. ¶

12

Northern District of California

proc
cessing and packaging eq
p
quipment, in
ncluding sca manufac
ales
ctured by Ish
hida. Id. ¶ 9. In addition to
.
n

11

United States District Court

10

11. High Tek al
lleges that it sale of refu
ts
furbished and recondition scales di
d
ned
irectly comp
petes with

13

H&C sale of new scales. Id. In order to refurbish recondition and servic Ishida sca
C’s
n
I
h,
n,
ce
ales, High Te
ek

14

mus purchase Ishida parts from H&C. Id. ¶ 12.
st
f

15

Beginnin in early 2007, and con
ng
2
ntinuing unt December 20, 2011, H
til
r
H&C provid High Tek
ded
k

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with a parts acco
h
ount to purch
hase Ishida parts. Id. ¶¶ 14-16. H& required H
p
¶
&C
High Tek to pay a 10-20
0%

17

mar
rkup on all Is
shida parts, which is som
w
mething that other compa
anies who w not in di
were
irect

18

com
mpetition with H&C were not require to pay. Id ¶ 15. Prio to entering into the par account,
h
e
ed
d.
or
g
rts

19

H&C required th High Tek remove lan
C
hat
k
nguage from its catalog that stated s
m
something to the effect of
o

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“Hig Tek is the best in the industry.” Id. ¶ 14. Hig Tek alleg that it det
gh
e
I
gh
ges
trimentally r
relied upon the
t

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prom of a lon
mise
ng-term parts account an made the r
s
nd
requested ch
hanges to its catalog. Id.
d.

22

High Tek alleges tha on Decem
k
at
mber 20, 2011 soon after H&C and H
1,
r
High Tek hel tables nea
ld
ar

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each other at an industry tra show, H& eliminat High Tek parts accounts withou explanatio
h
ade
&C
ted
k’s
ut
on.

24

Id. ¶ 16. High Tek then atte
T
empted to pu
urchase Ishid parts from Ishida distr
da
m
ributors outs of North
side
h

25

Ame
erica and even from Ishi directly, but they all told High T that parts could only be purchase
ida
Tek
s
ed

26

in North Americ from H&C Id. ¶¶ 17-18. High T also attem
N
ca
C.
Tek
mpted to pu
urchase parts from third-

27

part who had initially pur
ties
d
rchased parts from H&C but H&C th
s
C
hwarted such efforts by threatening
h

28

the third-parties that they wi lose their parts accoun with H& if they resell parts to High Tek.
t
s
ill
unts
&C

2

High Tek inability to purchase Ishida parts has halted the company ability to conduct
k’s
y
e
s
y’s
o

1
2

busi
iness. Id. ¶ 20. High Tek has contr
T
racts, of whi H&C is a
ich
aware, that r
require it to o
obtain Ishida
a

3

part but H&C has prevente High Tek from fulfill
ts,
ed
k
ling its contr
ractual oblig
gations becau H&C will
use

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not sell it Ishida parts and High Tek has cut off any alternative m
a
H
s
means to pur
rchase such parts. Id. ¶

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20. As a result of H&C’s re
o
efusal to sell Ishida parts High Tek h been for
l
s,
has
rced to breac its contrac
ch
cts

6

and turn away business. Id. ¶ 20.
b

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II.

To survi a motion to dismiss pursuant to F
ive
p
Federal Rule of Civil Pro
e
ocedure 12(b
b)(6), “a

8
9

LEGAL STANDAR
L
RD

com
mplaint must contain suff
ficient factua matter, acc
al
cepted as tru to ‘state a claim to re
ue,
elief that is

Two
ombly, 550 U.S. 544, 557 (2007)). In the antitru context, “ court must determine w
U
7
n
ust
“a
t
whether an

12

Northern District of California

plau
usible on its face.’” Ashc
croft v. Iqba 556 U.S. 6
al,
662, 678 (20
009) (quoting Bell Atl. C
g
Corp. v.

11

United States District Court

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antit
trust claim is ‘plausible’ in light of basic econom principle
’
b
mic
es.” William O. Gilley E
m
Enters., Inc. v.

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Atl. Richfield Co 588 F.3d 659, 662 (9t Cir. 2009 ) (citing Two
o.,
th
ombly, supra 550 U.S. a 556).
a,
at

14

hough the co must con
ourt
nstrue all all
legations of m
material fact in the light most favora to the
t
t
able
Alth

15

plain
ntiff, “a plai
intiff’s oblig
gation to prov the grou
vide
unds of his e
entitle[ment] to relief req
]
quires more

16

than labels and conclusions, and a formu
n
c
,
ulaic recitati of the ele
ion
ements of a cause of act
tion will not

17

do.” Twombly, supra, 550 U.S. at 555 (alteration in original). I the allegat
”
U
(
n
If
tions in the c
complaint fa
ail

18

to give rise to a plausible cla for relie “‘this basi deficiency should . . . be exposed at the point of
aim
ef,
ic
y

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nditure of tim and mone by the par
me
ey
rties and the court.’” Id. at 558 (citat
e
tions omitted).
minimum expen

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III.

DISCUS
SSION
1
COUNT I: SECTION 1 SHERMAN ACT – CONTRA IN REST
E
H
T
ACT
TRAINT OF TRADE

21

A.

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As to Co
ount I, allegi a violatio of Section 1 of the Sh
ing
on
n
herman Act, High Tek fa to allege
ails
e

23

suff
ficiently each of the requ
h
uired elemen of the clai
nts
im. Liability under Sect
y
tion 1 of the Sherman Act,

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15 U.S.C. § 1, requires a “co
U
ontract, com
mbination . . . or conspira in restra of trade or
.,
acy,
aint

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28

1

15 U.S.C. § 1. Trusts, etc., in restraint of trade illegal; p
T
n
t
penalty
Every con
ntract, combination in the form of trust or otherwise, or conspirac in restrain of
cy,
nt
trade or commerce am
c
mong the sever States, or with foreign nations, is de
ral
eclared to be
illegal. Every person who shall mak any contra or engage in any combi
w
ke
act
ination or
conspirac hereby dec
cy
clared to be ill
legal shall be deemed guil of a felony . . .
e
lty
y

3

1

com
mmerce.” Tw
wombly, supr 550 U.S. at 548.
ra,
To state a claim for conspiracy under Sectio 1 of the Sh
c
u
on
herman Act, a plaintiff m plead not
,
must
n

2
3

just ultimate fac (such as a conspiracy but eviden
cts
y),
ntiary facts w
which, if true will prove “‘(1) a
e,
e:

4

cont
tract, combin
nation or con
nspiracy among two or m
more person or distinct business en
ns
ntities; (2) by
y

5

whic the persons or entities intended to harm or res
ch
o
strain trade o commerce among the several
or
e

6

Stat or with foreign natio (3) whic actually in
tes,
f
ons;
ch
njures compe
etition.’” Br
rantley v. NB Universa
BC
al,

7

Inc., 675 F.3d 1192, 1197 (9 Cir. 2012 (quoting K
9th
2)
Kendall v. V U.S.A., I
Visa
Inc., 518 F.3 1042, 104
3d
47

8

(9th Cir. 2008)). “[A] concl
h
lusory allega
ation of agre
eement at som unidentified point do not supply
me
oes

9

facts adequate to show illegality” for pu
o
urposes of Se
ection 1 of th Sherman Act. Twombly, supra,
he

10

550 U.S. at 567.
Here, the Complaint identifies H&C’s contra with Ishi which m
e
t
H
act
ida,
makes H&C t exclusive
the

11

Northern District of California

United States District Court

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Nor America distributor of Ishida part but the Co
rth
d
o
ts,
omplaint do not allege that either H&C or Ishida
oes
e

13

ente
ered into the contract for the purpose of harming or restrainin commerc Moreove as to the
r
e
g
ng
ce.
er,

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third element, th Complain alleges onl the ultima fact that “ [unspec
d
he
nt
ly
ate
“the
cified] way [
[H&C]

15

exec
cutes those contracts in North Ameri unreason
c
N
ica
nably restrain trade” without provid
ns
ding any

16

evid
dentiary fact of injury to competition See Comp
n.
plaint ¶ 25. “[T]o withst
tand a motio to dismiss
on
s,

17

‘a se
ection one cl
laimant may not merely recite the ba legal con
y
are
nclusion that competition has been
t
n

18

restr
rained unrea
asonably.’” Brantley, sup 675 F.3 at 1198 (q
B
pra,
3d
quoting Les S
Shockley Ra
acing, Inc. v.

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Nat’l Hot Rod Ass’n, 884 F. 504, 507
A
.2d
7-08 (9th Cir 1989)).
r.
Based on the foregoi analysis, the Court G RANTS the Motion to D
n
ing
,
Dismiss Coun I WITH
nt

20
21

AVE
END
LEA TO AME .

COUNT II: SECTION 2 SHERMAN AC – ILLEGA MONOPO 2
CT
AL
OLY

22

B.

23

As to Co
ount II, alleg
ging a violati of Sectio 2 of the S
ion
on
Sherman Act, Plaintiff fa to plead
ails

24

facts regarding the relevant product mar
t
rket. Section 2 of the Sh
n
herman Act m
makes it unl
lawful to

25

mon
nopolize, atte
empt to mon
nopolize, or combine or c
c
conspire to m
monopolize.
.

26
2

27
28

15 U.S.C. § 2. Monopolizing trade a felon penalty
M
g
ny;
Every per
rson who sha monopolize or attempt t monopoliz or combine or conspire
all
e,
to
ze,
with any other person or persons, to monopolize any part of t trade or co
o
e
the
ommerce amo
ong
the severa States, or with foreign nations, shall b deemed gu
al
w
n
be
uilty of a felo . . .
ony

4

To state a cause of action for the offense of monopoly under Section 2 of the Sherman Act, a

1
2

plaintiff must plead: (1) the relevant market that defendant has monopolized; (2) possession of

3

monopoly power in that market; and (3) willful acquisition or maintenance of that power through

4

competitively unreasonable means, rather than as a consequence of a superior product, business

5

acumen, or historic accident. United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966).
Charges of monopolization can only be judged in the framework of the relevant market, which

6
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has two dimensions: the “relevant geographic market” and the “relevant product market.” Newcal

8

Indus. v. Ion Office Solution, 513 F.3d 1038, 1044 n.3 (9th Cir. 2008). While the parties agree that

9

the relevant geographic market is the United States, they differ on the scope of the “relevant product

Ishida parts. Complaint ¶ 29. In its Opposition Brief, High Tek adds two additional markets: the

12

Northern District of California

market.” In the Complaint, High Tek alleges that the relevant product market is the purchase of

11

United States District Court

10

aftermarket for refurbished Ishida scales and the aftermarket for servicing Ishida scales. H&C argues

13

that the relevant product market is all food processing scales sold in the United States.
High Tek alleges no facts from which it plausibly could be inferred that the relevant product

14
15

market is the purchase of Ishida parts (the aftermarket for refurbished Ishida scales and/or the

16

aftermarket for servicing Ishida scales)3 as opposed to all food processing scales sold in the United

17

States. See Brown Shoe Co. v. United States, 370 U.S. 294, 325-26 (1962) (“The outer boundaries of

18

a product market are determined by the reasonable interchangeability of use . . . between the product

19

itself and the substitutes for it.”). This infirmity is fatal to its Section 2 Sherman Act claim. United

20

States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391 (1956) (“where there are market

21

alternatives that buyers may readily use for their purposes, illegal monopoly does not exist.”); see

22

also Volvo Trucks N. Am., Inc. v. Reeder-Simco GMC, Inc., 546 U.S. 164, 180 (2006) (“Interbrand

23

competition, our opinions affirm, is the ‘primary concern of antitrust law.’”).

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25
3

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28

In its Opposition Brief, High Tek attempts to explain why it believes that Ishida parts is the relevant market.
For example, it argues that Ishida equipment is the “premium brand,” the “gold standard” of weighing and
packaging equipment, that Ishida equipment is utilized by a majority of manufacturers and distributors of
packaging equipment. Facts not alleged in the Complaint will not prevent dismissal for failure to state a claim.
Without deciding whether these additional facts are sufficient to state a Section 2 Sherman Act claim, the
Court will permit High Tek to amend its Complaint to allege additional facts.

5

1

Because High Tek has failed to show a relev
h
s
vant market a
against whic H&C’s m
ch
market power
r

2

and the alleged anticompetit effects of its practic can be ju
tive
o
ces
udged,4 High Tek has failed to state a
h

3

tion 2 Sherm Act claim
man
m.
Sect
Based on the foregoi analysis, the Court G RANTS the Motion to D
n
ing
,
Dismiss Coun II WITH
nt

4
5

LEA TO AME .
AVE
END

6

C.

COUNT III: VIOLATION OF THE ROB
BINSON-PAT
TMAN ACT, 1 U.S.C. § 13
15

7

As to Co
ount III for violation of the Robinson
v
t
n-Patman Ac High Tek fails to alle each of th
ct,
k
ege
he

8

requ
uired elemen of the cla
nts
aim. The Robinson-Patm Act of 1936, 15 U.S § 13, for
man
S.C.
rbids price

9

disc
crimination when it is apt to have an anticompeti
w
itive effect. To state a cl
laim for a vi
iolation of

were made in in
e
nterstate com
mmerce; (2) the products sold were o the same g
t
of
grade and qu
uality; (3) tha
at

12

Northern District of California

Sect
tion 2(a) of the Robinson
t
n-Patman Ac a plaintif must plead four elements: (1) the relevant sale
ct,
ff
d
es

11

United States District Court

10

H&C discrimina in price as between High Tek an another p
C
ated
e
nd
purchaser; an (4) the dis
nd
scrimination
n

13

had a prohibited effect on co
d
ompetition. See Texaco Inc. v. Hasb
brouck, 496 U.S. 543, 55 (1990).
56

14

or
ination had t prohibite effect on competition – requires,
the
ed
The fourth facto – whether the discrimi

15

r
ations that th price discrimination is between pu
he
s
urchasers in direct comp
petition.
inter alia, allega

16

The Com
mplaint alleg that "H& required H
ges
&C
HICH TEK t pay a 10-20% markup on all Ishid
to
p
da

17

part
ts--something other comp
g
panies who were not in d
w
direct compe
etition with H&C were n required to
not

18

pay. Complain ¶ 15. Thu High Tek alleges that it was not in competitio with the p
."
nt
us,
t
n
on
purchasers who
w

19

were allegedly the beneficia
e
t
aries of the price discrim
p
mination. As such, the Complaint all
leges a price

20

diffe
erence but no price disc
ot
crimination. Accordingl High Tek has failed to state a clai for price
ly,
k
im

21

disc
crimination under the Ro
u
obinson-Patm Act.
man

22
23
24
25
26
27
28

4

The term “mono
opolize,” as used in the fed
u
deral antitrust laws, means the power either to obtain or to mainta
t
n,
ain,
p
ove
de
eld
tition in a part
ticular busine or industry
ess
y.
the power to remo or exclud competitors from the fie of compet
Sinc H&C is the exclusive distributor of Is
ce
e
shida parts, H
H&C maintain its so-called monopoly p
ns
d
power to
purc
chase Ishida parts because of H&C’s con
p
ntract with Is
shida to be the exclusive N
e
North America distributor
an
for Ishida parts, not because of any of the al
I
n
f
lleged anticom
mpetitive beh
havior. Addit
tionally, High Tek’s theory
h
y,
that because it is a competitor that has been harmed, that H&C has ha
n
t
armed compet
tition does no state a claim
ot
m
unde the antitrus laws. “[T]h plaintiff he must alleg and prove h
er
st
he
ere
ge
harm, not just to a single c
t
competitor, bu
ut
to th competitive process, i.e., to competiti itself.” N
he
e
ion
NYNEX Corp. v. Discon, In 525 U.S. 128, 135
nc.,
(199
98).

6

1
2

Based on the foregoi analysis, the Court G RANTS the Motion to D
n
ing
,
Dismiss Coun III WITH
nt
LEA TO AME .
AVE
END

3

D.

COUNT IV: INTENTIONA INTERFER
AL
RENCE WITH CONTRACTUAL RELATIONS
H

4

As to Co
ounts IV and V for intentional interfe
d
ference with contractual relations and intentional
d
l

addr the suffi
ress
ficiency of th allegation in the Com
he
ns
mplaint. The elements fo a cause of action for
e
or
f

7

inten
ntional inter
rference with contractual relations an intentiona interferenc with pros
h
l
nd
al
ce
spective

8

econ
nomic advan
ntage essenti
ially are: (1) the existenc of a contr or other economic re
ce
ract
elationship

9

betw
ween plaintif and a third party; (2) the defendan knowled of the con
ff
d
nt’s
dge
ntract or rela
ationship; (3
3)

10

defe
endant intend to disrup the contra or relation
ded
pt
act
nship throug wrongful conduct; (4) the conduc
gh
)
ct

11

did disrupt the contract or re
c
elationship; and (5) defe
endant cause damage. K
ed
Korea Suppl Co. v.
ly

12

Northern District of California

inter
rference with prospectiv economic advantage, H
h
ve
H&C attack the merits of the claim but does no
ks
m
ot

6

United States District Court

5

Lock
kheed Marti Corp., 29 Cal. 4th 113 1153 (Ca 2003); Qu
in
34,
al.
uelimane Co v. Stewart Title
o.

13

Gua
aranty Co., 19 Cal. 4th 26, 55 (Cal. 1998); see al Judicial Council of C
1
2
1
lso,
California C
Civil Jury

14

Instr
ructions (2011 Ed.) secti
ions 2201, 2202 and the cases cited therein.
2

15

H&C arg
gues that its decision not to sell Ishid parts to H
t
da
High Tek wa not wrongful and was
as

16

justi
ified by com
mpetition. At oral argum
t
ment, counsel for H&C ar
l
rgued that no wrongful a is alleged
o
act
d

17

beca
ause the Com
mplaint alleg only legi
ges
itimate busin
ness activity. Counsel al argued th the
lso
hat

18

busi
iness tort cla
aims are base upon the antitrust alle
ed
egation; and since the an
ntitrust claim fail, the
ms

19

busi
iness tort cla
aims necessa
arily fail, as well.
w

20

To say th no wrong conduct is alleged s
hat
gful
t
simply ignor the allega
res
ations in the Complaint.

21

The wrongfulne is apparen from the allegations o fact: High Tek had co
ess
nt
a
of
h
ontracts with its custome
h
ers

22

that required it to obtain Ish parts and H&C know
t
hida
d
wingly preve
ented High T from per
Tek
rforming tho
ose

23

cont
tracts by refu
using to sell Ishida parts and cutting off access t alternate s
s
g
to
sources from third partie
m
es

24

by th
hreatening to terminate their parts ac
o
t
ccount if the deal with High Tek. C
ey
Complaint ¶ 20. No

25

addi
itional plead
ding of wrongfulness is required. Ad
r
dditionally, n every bu
not
usiness tort v
violates feder
ral

26

antit
trust law. Thus, a failure to state a Sherman Act violation d
S
t
does not nece
essitate dism
missal of the

27

busi
iness tort cla
aims.

28

7

As to H&
&C’s argument that its acts were jus
a
stified by rea
asonable noti
ions of comp
petition, no

1
2

such “competition” justifica
h
ation appears on the face of the Com
s
e
mplaint.5 H& may assert, as an
&C

3

affir
rmative defe
ense, that its actions were in fact just
e
tified (by com
mpetition or otherwise) in its Answe 6
r
er.

4

How
wever, witho facts in th Complain alleging th H&C’s a
out
he
nt
hat
allegedly tort
tious acts we motivated
ere

5

by competition, the defense of justificat
c
tion is not a b
basis to dism the Com
miss
mplaint.
Accordin
pleading def in High
ngly, the Co conclude that H&C has failed to identify a p
ourt
es
C
o
fect

6
7

Tek intentiona interferenc claims.7
k’s
al
ce

8

Based on the foregoi analysis, the Court DENIES the M
n
ing
,
Motion to Di
ismiss Coun IV and V.
nts

9

E.

COUNT VI: PROMISSOR ESTOPPEL
RY
L

As to Co
ount VI, Hig Tek fails to state a cla for prom
gh
t
aim
missory estop because the Compla
ppel
aint

10

Northern District of California

alleg that H&C performed the very pr
ges
C
d
romise the H
High Tek see to enforce. The elem
eks
ments for a

12

United States District Court

11

claim of promissory estoppe are: “‘(1) the party to be estopped must be app
m
el
t
d
prised of the facts; (2) he
e
e

13

mus intend that his conduct shall be act upon, or must so act that the part asserting the estoppel
st
t
t
ted
ty

14

has a right to be
elieve it was so intended; (3) the othe party mus be ignoran of the true state of fact
;
er
st
nt
ts;

15

and (4) he must rely upon th conduct to his injury.’ People v. Castillo, 49 Cal. 4th 14 156 n.10
he
o
’”
.
9
45,

16
17
18
19
20
21
22
23
24
25
26
27
28

5

H& relies on the Restateme of Torts to insinuate tha it may interfere with High Tek’s con
&C
t
ent
o
at
ntracts with
impu
unity so long as the contracts are termin
nable at-will. See H&C’s B 17 (“beca
Br.
ause [the Com
mplaint]
conc
cerns a matter involving co
r
ompetition be
etween High T and H&C High Tek h no [tortiou interference]
Tek
C,
has
us
claim as to its [atm
-will] contrac
cts”). The Re
estatement pro
ovides that co
ompetition do not justify inducing
oes
y
brea of contrac where the contract is not terminable a
ach
ct
at-will. See R
Restatement (S
Second) of To § 768,
orts
com subs. 2 (1979). This do not mean, as Defendan appears to a
mm.
oes
,
nt
argue, that int
terference wi an at-will
ith
cont
tract is always justified by competition. See H&C’s Br. 17.
s
The “com
mpetition as ju
ustification” defense rests solely on the notion that w
d
when a contract is terminab
ble
at-w there is on an expectancy of a con
will,
nly
ntinuing contr
ractual relatio
onship and the
erefore, the te
ermination of
cont
tractual relatio interferes with future relations for w
ons
s
r
which the plai
intiff has no l
legal assuranc Thus, a
ce.
defendant may pl
lead, as an aff
firmative defe
ense, that com
mpetition justi
ified its acts i inducing br
in
reach. On the
e
othe hand, when the contract is not termina at-will, th
er
n
able
here is greate definiteness of the legal relationship and
er
s
a
the defendant is not justified by the mere fa of competi
d
n
act
ition to induc a breach. A
ce
Accordingly, competition is
i
not a defense to an intentional interference claim where t contract i for a specifi term.
a
the
is
fic
6

No
otably, the firs line of the opinion on wh Defenda itself relied at oral argu
st
o
hich
ant
d
ument (and wh is cited in
hich
its briefs) provide that: “The competition privilege is an affirmative defense to th tort of inter
es
p
n
he
rference with
prospective econo
omic advantage.” San Fra
ancisco Desig Ctr. Associ
gn
iates v. Portm Compani 41 Cal. Ap
man
ies,
pp.
4th 29 (Cal. Ct. App. 1995) (em
2
A
mphasis adde
ed.)
7

In its Reply brie H&C raises the issue tha High Tek h not suffici
ef
s
at
has
iently specifie the parties with whose
ed
relat
tionships H&C has interfer
red. Reply Br. 13. The Co will not c
ourt
consider an ar
rgument raise for the first
ed
time in a reply me
e
emorandum because Plain did not ha an opport
b
ntiff
ave
tunity to addr this issue.
ress

8

1

(Cal 2010) (quo
l.
oting City of Goleta v. Su
f
uperior Cou 40 Cal. 4 270, 279 (Cal. 2006)). If the
urt,
4th

2

prom sought to be enforc was perfo
mise
ced
formed, then the doctrine is inapplica
e
able. Money Store Inv.
y

3

Corp v. S. Calif
rp.
fornia Bank, 98 Cal. App 4th 722, 7 (Cal. Ct. App. 2002) (“A cause o action for
,
p.
732
.
)
of
r

4

prom
missory esto
oppel would be superfluo
b
ous”). More
eover, becaus promissor estoppel i an equitable
se
ry
is

5

doct
trine that pro
ovides a substitute for co
onsideration to enforce a promise, if the only cla
f
aimed relianc
ce

6

is pe
erformance of the act ba
o
argained for, the doctrine is inapplica
e
able. See Fo
ontenot v. W
Wells Fargo

7

Ban N.A., 198 Cal. App. 4th 256, 275 (Cal. Ct. Ap 2011).
nk,
4
pp.

8
9

The Com
mplaint alleg that prior to entering into a parts account, H& required that High Tek
ges
r
&C
T
rem
move languag from its ca
ge
atalog that st
tated someth
hing to the ef
ffect of “Hig Tek is the best in the
gh
e

term parts accou and mad the reques change to its catalog H&C pro
m
unt,
de
sted
g.
ovided High Tek with a

12

Northern District of California

indu
ustry.” Com
mplaint ¶ 14. High Tek alleges that it detrimental relied upon this prom of a longa
t
lly
mise

11

United States District Court

10

part account to purchase Ishida parts fr
ts
rom early 20 until Dec
007
cember 20, 2
2011. Id. ¶¶ 14-16.
¶

13

Either ad
dequate cons
sideration was given her i.e., H&C promised a long-term p
re,
C
parts account if

14

High Tek remov certain language from its catalog or it was r
h
ved
m
g,
rendered moot by H&C’s performan
nce

15

of it obligation under the agreement, i.e., H&C gr
ts
ns
a
i
ranted High T a parts a
Tek
account and provided Hi
igh

16

Tek with Ishida parts for fou over years To the ex
k
ur
s.
xtent that Hig Tek belie
gh
eves that it w entitled to
was
t

17

a lon
nger term co
ontract, to be valid under California law, an agre
e
r
eement not to be perform within a
o
med

18

year must be red
r
duced to wri
iting. See Ca Civ. Code § 1624(a)( (statute o frauds).
al.
e
(1)
of

19
20
21
22

Based on the foregoi analysis, the Court G RANTS the Motion to D
n
ing
,
Dismiss Coun VI WITH
nt
LEA TO AME .
AVE
END
F.

COUNT VII: UNFAIR, UNLAWFUL A FRAUDU
N
AND
ULENT BUSIN
NESS PRACTI
ICES IN
VIOLATION OF CALIFOR
O
RNIA BUSINE AND PRO
ESS
OFESSIONS CODE §§ 172
200 et seq.

23

As to Co
ount VII, for violations of California Unfair Co
r
o
a’s
ompetition L (“UCL” Cal. Bus.
Law
”),

24

Prof Code. § 17
f.
7200, High Tek claims are based upo its federa antitrust cl
T
a
on
al
laims. Calif
fornia’s UCL
L

25

statu prohibits “any unlaw
ute
s
wful, unfair or fraudulent business ac or practice Cal. Bus. Prof. Code. §
o
t
ct
e.”

26

1720 Cel-Tech Comm., In v. Los Ang
00;
h
nc.
geles Cellula Tel. Co., 20 Cal. 4th 163, 180 (Ca 1999).
ar
al.

27

Because High Tek simply borrows from its federal a
T
m
antitrust clai
ims, and bec
cause High T has faile
Tek
ed

28

9

1

to ad
dequately pl
lead its antitr claims, its UCL clai necessari fails as w
rust
im
ily
well. See Ing v.
gels

2

Wes
stwood One Broad. Servs Inc., 129 Cal. App. 4t 1050, 106 (Cal. Ct. A
B
s.,
th
60
App. 2005).
Based on the foregoi analysis, the Court G RANTS the Motion to D
n
ing
,
Dismiss Coun VII WITH
nt
H

3
4

LEA TO AME .
AVE
END

5

IV.

6
7

CONCL
LUSION
For the reasons set forth above, Defendant’s Motion to D
r
fo
D
s
Dismiss is GRANTED IN PART and

DEN
NIED IN PAR . Counts I, II, III, VI, and VII are D ISMISSED WITH LEAV TO AMEN .
RT
a
VE
ND

8

Plaintiff shall have until August 3, 2012 to f an amen
f
u
t
file
nded complai
int.

9

This Ord Terminat Docket Number 14.
der
tes
N

10

IT IS SO ORDERED.

11

Northern District of California

United States District Court

12
13

Date July 18, 2012
e:

__
__________
___________
__________
__________
YVON GONZAL ROGERS
NNE
LEZ
UNITED ST
TATES DISTR
RICT COURT JUDGE
T

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27
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