eBay Inc. v. Digital Point Solutions, Inc. et al
Filing
135
MOTION to Stay Action Pending Resolution of Criminal Proceedings; Memorandum of Points and Authorities filed by Todd Dunning, Dunning Enterprise, Inc.. Motion Hearing set for 11/20/2009 09:00 AM in Courtroom 3, 5th Floor, San Jose. (Attachments: # 1 Exhibit A, # 2 Exhibit B)(Foreman, Stewart) (Filed on 10/15/2009)
eBay Inc. v. Digital Point Solutions, Inc. et al
Doc. 135
EXHIBIT 1 TO THE DECLARATION OF MEHRNAZ BOROUMAND SMITH
Dockets.Justia.com
Case 1 :09-cv-22535-WMH Document 1
Entered on FLSD Docket 08/27/2009 Page 1 of 15
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA FORT LAUDERDALE DIVISION
PsysGilit02r5 S" Plaintif
v.
APPLE
ivtl\(d::d:ril:\'f.i~, A(iüUt~
'(. .B"~-" V R .LA
FILED BY
Case No. 09-cvJury D mandedAUG -2 7 2009
D.C.
INC.,
STEVEN M. LARIMORE
Defendant.
CLERK U.S. DIST. CT. S.D. OF FLA. FT. LAUD.
ORIGINAL COMPLAINT
1. Psystar is a Florida corporation with its headquarters and principal
place
of business at 10475 NW 28th Street, Doral, Florida. Psystar assembles and sells
personal computers in the United States and abroad. Its products include the Open(3),
Open(Q), Open(7), and OpenPro, and the all-in-one Rebel Series, which includes the
Rebe119" and the Rebel 22". Psystar's computers are capable of running a variety of
operating systems, including Microsoft Windows, many variants of Linux, and Mac OS
X. This dispute is over Psystar's right to continue sellng computers running Mac OS X
- and, in particular, to sell computers running the newly released successor to Mac OS
X Leopard, Mac OS X Snow Leopard.
2. Psystar computers outperform comparable Macintoshes sold by Apple, in
large part because of the superior hardware that Psystar sells. Using Geekbench
benchmarks, the Rebel 19" outperformed the iMac 20" and the Rebel 22" outperformed
-I'.
the iMac 24" on every~;inetric. According to Jason D. O'Grady of ZDNet: "In short, the
Psystar prett much trounces the closest price Mac available from Apple." According to
Rich Brown of CNET: "The Psystar's hardware advantage translates to some impressive
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performance wins." Psystar competes with Apple by sellng superior personal computers
at substantially lower prices.
3. Apple is a California corporation with its headquarers and principal place
of business at 1 Infinite Loop, Cupertno, California. Apple developed the Mac OS X
operating system, the current model of which is called Mac OS X Leopard. Apple has
anounced that it views Psystar's assembling and sellng personal computers ruing
Mac OS X Leopard as ilegaL. Apple has sued Psystar in the United States District Cour
for the Nortern District of California alleging that Psystar's use of
Mac OS X Leopard is
ilegaL. Apple seeks a permanent injunction shutting down Psysta's business.
4. Apple has announced that it wil release Mac OS X Snow Leopard as a
successor to Mac OS X Leopard on Friday, August 28, 2009. Psystar believes that it is
legally entitled to resell copies of Mac OS X Snow Leopard on Psystar computers, but is
confident, based on the ongoing litigation with Apple over Mac OS X Leopard, that
Apple wil view Psystar's decision to sell computers running Mac OS X Snow Leopard
as ilegaL. Counsel for Apple has also so stated. Accordingly, Psystar brings this action
to seek a declaratory judgment that it may sell and continue to sell computers ruing
Mac OS X Snow Leopard, provided, of course, that Psystar continues to purchase copies
of Mac OS X Snow Leopard from Apple and others, like Amazon and Best Buy, who
resell Apple's products.
5. Psystar further brings this action to seek an injunction, and damages
pending the issuance of such an injunction, for Apple's anticompetitive attempts to tie
Mac OS X Snow Leopard to its Macintosh line of computers (sometimes referred to as
"Apple-branded hardware"). Apple is the only company in the world that integrates
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operating system and hardware development. Although it sells copies of Mac OS X
Snow Leopard separately from its Macintoshes - the line of computers that includes the
Mac Mini, the iMac, the MacBook, the MacBook Pro, the MacBook Air, and the Mac
Pro - it purports to limit the use of these copies of Mac OS X Snow Leopard to
Macintoshes. It does this both technically, by computer code that attempts to verify that
Mac OS X Snow Leopard is running on a Macintosh, and through the "license
agreement" that is associated with Mac OS X Snow Leopard.
6. By tying its operating system to Apple-branded hardware, Apple restrains
trade in personal computers that run Mac OS X, collects monopoly rents on its
Macintoshes, and monopolizes the market for "premium computers." Apple's share of
revenue in the market for premium computers - computers priced at over $1,000 - is
curently 91 %. Apple's conduct violates the Clayton and Sherman Acts in that Apple is
monopolizing the market for premium computers, ilegally integrating across the markets
for hardware and operating systems for use in personal computers, entering into ilegal
exclusive-dealing agreements that prevent buyers of Mac OS X from buying their
hardware from competitors like Psystar, ilegally tying Mac OS X to Macintoshes and
thereby substantially decreasing competition in the market for hardware for premium
personal computers, and entering into license agreements and, upon information and
belief, reseller agreements that restrain trade in that they require that Mac OS X be run
only on Apple-branded hardware.
7. Like Windows, Mac OS X is an operating system that allows a computer
to function and to run applications like word processors, Internet browsers, and the like.
Unlike Windows, Mac OS X is based on a variety of open source (i.e., publicly available)
3
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pieces of computer softare, including the Mach microkernel developed at Carnegie
Mellon University and the so-called Berkeley Softare Distribution (BSD), a varant of
UNiX. Apple has continued to release part of Mac OS X as open source, as it is
required to do because of its decision to incorporate open-source softare. Apple calls
these open-source releases Darwin. A critical difference between Mac OS X and
Windows is that Mac OS X is built on a foundation of open-source software not
developed by Apple and in which Apple cannot and does not claim any exclusive rights.
8. The Psystar computers that ru Mac OS X Snow Leopard are able to do so
by running softare, wrtten by Psystar, that interfaces with the open-source portion of
Mac OS X Snow Leopard. The manner in which Psystar computers ru Mac OS X Snow
Leopard is entirely different from the maner in which Psystar computers ru Mac OS X
Leopard. Both the technical details of Apple's attempt to tie Mac OS X to Macintoshes
and the computer softare that Psystar uses to enable Mac OS X to ru on Psystar
computers changed with the release of Snow Leopard. Accordingly, the factual and
technical issues in this case are entirely different from those at issue in the California
litigation, which is limited to Psystar computers that ru Mac OS X Leopard.
II. JURISDICTION AND VENUE
9. This Cour has subject-matter jurisdiction pursuant to 28 U.S.C. §§ 133 i
(federal question), 1332 (diversity), and 1338 (copyrights and trademarks). This case
arises under the Clayton Antitrust Act, the Sherman Antitrust Act, the Lanham Act, and
the Copyright Act. This Cour therefore has subject-matter jurisdiction under § 1331.
This case is between citizens of different States - Psystar is a citizen of Florida and
4
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Apple is a citizen of California - and involves more than $75,000 in controversy. This
Court therefore has subject-matter jurisdiction under § 1332.
LO. This Court has both general and specific personal jursdiction over
Defendant Apple Inc. This Cour has general jursdiction over Apple because Apple has
engaged in pervasive and intentional business contacts in this Distrct, including but not
limited to advertising and selling copies of Mac OS X, Macintosh computers, iPods,
iPhones, and other products in this District both though physical Apple Stores and
through the online Apple Store. Some of these sales were sales to Psystar. This Cour
has specific jursdiction over Apple because the unlawful actions here alleged affect
Psystar's business in this District, were targeted at those who sell Macintosh OS X on
non-Apple hardware (a group that principally includes Psystar), and, upon information
and belief, were in many instances specifically targeted at Psystar itself.
11. Venue is proper in this Court under 28 U.S.C. § 1391 because Apple
resides in this distrct as reside is defined in § 1391(c), that is, because Apple's contacts
with this District, as described in the preceding paragraph, are suffcient to give rise to
personal jursdiction over Apple in this District were this District a State. Each of the
contacts described in the preceding paragraph also satisfy the requirements for
jursdiction of Florida courts contained in Fla. Stat. Ann. § 48.l93.
12. Apple may be served through its registered agent for service of
process in
Florida, CT Corporation System, l200 South Pine Island Road, Plantation, Florida
33324. Apple's headquarters and principal place of business are at 1 Infinite Loop,
Cupertino, California 95014.
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III. THE CALIFORNIA LITIGATION
13. This case raises a wholly separate set of issues wholly those in Apple Inc.
v. Psystar Corp., No. 3:08-cv-3251-WHA, in the United States Distrct Court for the
Northern District of California, because that case is limited to Psystar computers ruing
Mac OS X Leopard. This case concerns the successor to Mac OS X Leopard, Mac OS X
Snow Leopard. Both the technical mechanisms used by Apple to tie Mac OS X Snow
Leopard to MaCIntoshes and the technology used by Psystar to get Mac OS X Snow
Leopard to run on Psystar computers are new and different and not within the scope of
the California litig~tion. Moreover, fact discovery in the California litigation has closed,
the deadline for amendments to pleadings has passed, and that.litigation is proceeding
expeditiously to trial on January ll, 2010; any attempt to pursue these claims in that
forum would inevitably and unnecessarily delay triaL.
IV. CAUSES OF ACTION
A. Declaratory Judgment Act
14. Psystar is subject to the threat of a coercive action filed by Apple with
respect to Snow Leopard parallel to the action that Apple has fied in California with
respect to Leopard. In particular, Psystar stands threatened by a lawsuit by Apple
alleging at least that Psystar's selling computers that run Mac OS X Snow Leopard
constitutes copyright infrngement in violation of the Copyright Act, circumvention of a
technological access-control mechanism in violation of the Digital Milenium Copyright
Act, and a breach of the "license agreement" that Apple contends governs the relationship
between it and those who buy copies of Mac OS X Snow Leopard. Psystar also stands
threatened with potential claims for contributory copyright infrgement and inducing
6
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copyright infrngement, inducing breach of contract, trademark infringement and dilution,
trade-dress infringement, and unfair competition - all claims that Apple has asserted
with respect to Leopard in the California litigation.
l5. A large part ofPsysta's business is sellng computers that run Mac OS X.
Psystar expects to sell substantial numbers of computers rung Mac OS X Snow
Leopard following Snow Leopard's release on Friday. Psystar seeks to clarify for its own
benefit and for the benefit of its customers the application of federal law to its computers
running Mac OS X Snow Leopard. A declaration by this Cour of the legal rights of
Apple and Psystar with respect to Psystar computers running Mac OS X Snow Leopard
would clarify, to put it bluntly, the legality of Psystar's business - and would remove
the substantial negative effect on Psystar's business of continued uncertinty and legal
wrangling between Apple and PsySIar. In particular, Psystar seeks declarations on the
following topics.
l6. Psystar seeks first a declaration that its activities with respect to Mac OS
X Snow Leopard do not constitute copyright infrngement. Psystar intends to purchase
every copy of Mac OS X Snow Leopard that it resells with its computers, as has been its
practice with prior versions of Mac OS X. It purchases these copies both directly from
Apple and through resellers like Amazon and Best Buy. The Copyright Act expressly
permits Psystar to take steps necessary to ru Mac OS X Snow Leopard on its computers,
even if these steps require making incidental copies of
Mac OS X Snow Leopard. See 17
U.S.C. § 1 17(a). The Copyright Act also expressly permits Psystar to resell the particular
copies of Mac OS X Snow Leopard that it has lawfully purchased. See l7 U.S.C. § 109
(the first-sale doctrne). Psystar's customers are then permitted by § 117 to again make
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copies necessary to run Mac OS X Snow Leopard on their Psystar computers. Together,
§§ 109 and 117 render Psystar's actions with respect to Mac OS X Snow Leopard not
copyright infringement.
l7. Psystar furter seeks a declaration that its actions do not constitute a
violation of the anti-circumvention provisions of the Digital Milenium Copyright Act.
See 17 U.S.c. § 1201. Psystar does not gain access to Apple's copyrighted work - the
.
code for Mac OS X Snow Leopard - at any point during the operation of its computers.
Psystar merely allows Mac OS X Snow Leopard to ru in the ordinary fashion, while
providig software of its own to make Mac OS X Snow Leopard compatible with its
hardware. Moreover, Psystar's acts fall within § 1201(f), which permits circumvention
for purposes of achieving interoperability between a copyrighted computer program and
other programs. Any circumvention by Psystar is solely for the purpose of making
Psystar's software (which allows Mac OS X Snow Leopard to run on Psystar computers)
interoperable with Mac OS X Snow Leopard.
18. Psystar's position with respect to Mac OS X Snow Leopard is analogous
to that of a person developing a softare application to run on top of Mac OS X Snow
Leopard. Just as Microsoft writes Word to run with Mac OS X and Google writes its web
browser Chrome to run with Mac OS X, Psystar writes its softare to run with Mac OS X
Snow Leopard. In fact, the part of
Mac OS X Snow Leopard that Psystar interacts with is
within the open-source portion of Mac OS X and makes use of featues of Mac OS X
Snow Leopard designed to allow software developers to extend Mac OS X Snow
Leopard to work with different hardware. Admittedly, Apple hopes that this hardware be
peripherals such as video cameras or USB memory sticks, but nothing in the technology
8
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of Mac OS X Snow Leopard prevents use of the same facilities to extend Mac OS X
Snow Leopard for use on non-Apple personal computers.
19. Psystar fuher seeks a declaration that the "license agreement" that
accompanies Mac OS X Snow Leopard is not enforceable insofar as it purorts to prevent
owners of copies of Mac OS X Snow Leopard from ruing that softare on their own
non-Macintosh computers - and, in particular, on Psystar's computers. To the extent
that the license agreement purorts to make copyright infringement that which is not
copyright infrngement under federal law or purports to forbid as a matter of contract law
that which is expressly permitted by federal copyright law, state law that permits
enforcement of the license agreement is in conflct with federal law and is therefore
preempted.
20. Moreover, Psystar seeks a declaration that the license agreement is
unenforceable for lack of privity and lack of consideration. The license agreement is
accessible only after a user purchases a shrnkwrapped copy of Mac OS X Snow
Leopard. And the license expressly states that it may be returned only according to the
terms of the reseller - for example, Amazon or Best Buy. These resellers often include
return terms that forbid the return of unwrapped software. Putting these terms together, a
purchaser of Mac OS X Snow Leopard has no opportity to see the license agreement
before losing the ability to undo the sale by returning his or her copy of Snow Leopard.
Although shrinkap license agreements may be enforceable in other contexts, the
paricular facts of Apple's shrnkwrap agreement for Mac OS X render it unenforceable
against Psystar or Psystar's customers.
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B. Federal Antitrust Acts
21. Apple violated § 1 of the Sherman Act, 15 U.S.C. § l, by tying and
attempting to tie Mac OS X Snow Leopard to Macintosh computers - that is, by
requiring those who want access to Mac OS X Snow Leopard to also buy a Macintosh
computer on which to ru Mac OS X Snow Leopard. See Technical Resource Services,
Inc. v. Dornier Medical Systems, Inc., 134 F.3d l458, l464-5 (lIth Cir. 1998)
.
(collecting cases). The software license agreement that accompanies Mac OS X Snow
Leopard constitutes a contract in restraint of trade. It furter constitutes an ilegal
exclusive-dealing arangement under § 3 of
the Clayton Act, l5 U.S.C. § l4, because it
purport to condition sales of Mac OS X Snow Leopard on an agreement that the
purchaser wil not deal with those who compete with Apple in selling personal
computers, a group that includes Psystar. See, e.g., Omega Environmental, Inc. v.
Gilbarco, Inc., 127 F.3d 1157, 1 169 (9th Cir. 1997).
22. Apple violated § 2 of the Sherman Act, 15 U.S.C. § 2, by monopolizing
and attempting to monopolize the market for premium personal computers, that is,
p'crsonal computers priced above $ 1,000. The elements of a monopolization claim are
"(l) the possession of monopoly power in the relevant market and (2) the wilful
acquisition or maintenance of that power as distinguished from growth or development as
a consequence of a superior product, business acumen, or historic accident." Morris
Comm. Corp. v. PGA Tour, Inc., 364 F.3d l288, 1293-94 (1Ith Cir. 2004) (citing United
States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966)).
23. Apple has the power to control prices and exclude competition from the
market for premium personal computers because it has the exclusive right to Mac OS X
10
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Snow Leopard and uses that right to prevent competitors such as Psystar from sellng
competing personal computers that run Mac OS X Snow Leopard. Apple's Macintoshes have a 9l % revenue market share in the market for premium personal computers. Apple
wilfully acquired this market power by abusing its copyrght monopoly in Mac OS X.
Although Apple properly has a monopoly in those aspects of Mac OS X that are original
works of authorship and that are therefore copyrightable, Apple is not entitled to extend
its monopoly over Mac OS X Snow Leopard - a piece of softare - to the quite
different market for the computers on which Mac OS X Snow Leopard can run.
24. These violations of the federal antitrust acts affected interstate commerce
because Apple ties Mac OS X Snow Leopard to Macintoshes and attempts to enforce this
tying arrangement in every state. In paricular, Apple has attempted to prevent Psystar
from sellng computers running Mac OS X Snow Leopard not only in Florida, but in
every state.
25. These violations of the federal antitrust acts have damaged and wil
damage Psystar in its business and propert because they deny Psystar business that
otherwise would go to Psystar by creating doubt about the legality of Psystar computers
running Mac OS X Snow Leopard. The items of damage to Psystar include damage to
Psystar's business reputation and to the reputation of
its products and sales lost that could
have been made absent Apple's attempts to restrict Mac OS X Snow Leopard to
Macintoshes.
C. Lanham Act
26. Apple represents that only Macintoshes can legally run Mac OS X Snow
Leopard. This representation is false. Apple's misrepresentation hars Psystar's
11
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Entered on FLSD Docket 08/27/2009 Page 12 of 15
business because it creates the false impression that it is ilegal for Psystar to make and
sell computers that ru legally purchased copies of
Mac OS X Snow Leopard. Apple's
misrepresentations about its exclusive right to ru Mac OS X Snow Leopard violate the
Lanham Act, l5 U.S.c. § 1125(a), which prohibits false or misleading descriptions or
representations of fact that misrepresent the nature of the speaker's or another's goods,
services, or commercial activities. Here, Apple's misrepresentation both misrepresents
that Apple is the exclusive legal seller of personal computers that ru Mac OS X Snow
Leopard and misrepresents that Psystar has no right to sell personal computers that ru
Mac OS X Snow Leopard.
27. Apple's misrepresentations about the legality of
running Mac OS X Snow
Leopard on non-Apple computers appear throughout Apple's advertising and
promotional materials. The license agreement that accompanies Mac OS X Snow
Leopard represents that Mac OS X Snow Leopard can only be run on Apple-branded
hardware and, specifically, that it is not to be ru on non-Apple hardware. Apple
describes its operating system as an operating system for Macintosh computers, using the
"Macintosh" brand name, which refers to computers made by Apple. Apple describes its
operating system as integrated with the hardware it sells, as though it could not operate
on hardware sold by others. And Apple in its cour filings has made clear its claim that
Mac OS X Snow Leopard can be legally run only on Macintoshes.
V. JURY DEMAND
28. Psystar demands trial by jur on all claims, defenses, and other issues in
this case.
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Entered on FLSD Docket 08/27/2009 Page 13 of 15
VI. PRAYER FOR RELIEF
29. Psystar respectfully prays for relief as follows:
a. money damages for lost sales and injur to Psysta's business
reputation and to the reputation of its personal computer products;
b. attorneys' fees for bringing this action;
c. treble damages;
d. a declaration of the legal rights of the paries including those items
identified in Part IV(A) of
this complaint;
e. an injunction preventing Apple from attempting to prevent Psystar
from makng and sellng computers that run Mac OS X Snow
Leopard and from representing that Psystar's making and sellng
such computers is other than perfectly legal;
f. an injunction requirng Apple to cease tying Mac OS X Snow
Leopard to its Macintosh personal computers; and
f. any other relief
to which Psystar may be entitled in law or equity.
Dated: August 26,2009.
13
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Entered on FLSD Docket 08/27/2009 Page 14 of 15
Respectfully submitted,
K.A.D. Camara (not admitted to S.D. Fla.)
l-o~~
camarcmcamarsibley.com
CAM & SIBLEY LLP
Texas Bar No. 24062646 / Mass. Bar No. 66 I 087
2339 University Boulevard
Houston, Texas 77005
Telephone: (713)-893-7973 Facsimile: (713)-583-l13l
Alex D. Weisberg
ÛQI$)JJ;~
Florida Bar Number: 056655l aweisbergcmattorneysforconsumers.com Aaron D. Radbil
Florida Bar Number: 0047117 aradbiicmattorneysforconsuers.com WEISBERG & MEYERS LLC 9369 Sheridan Street, Ste. 656 Cooper City, FL 33024 Phone: (866) 775-3666 Facsimile: (866) 577-0963
Attorneys for Plaintif Psystar Corporation
14
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Document 1
Entered on FLSD Docket 08/27/~009
Page 15 of 15
11:~ :4~R;i:.I; ~:::"r'h"etiiOil1,tl::n22fi~,tl~1
Ill,. C'"¡1 docket sheet. ISEE INSTR(ICTlONS ON TilE RE"I,RSE or TIll' FORM, NOTICE: Attorneys MUST'lndicate All
i. (a) nAINTIFFS
PSYSTAR CORPORA TlON
DEFENDANTS
APPLE
D.C.
AUG 272009
INC
Listed Dcfe dant Santa-Clara. CA
(IN II.S, I'(AINT IT CAHs O!\-mR~QJ.;~t8n;T"b'tE
(b) CouniyofResidenec uffirst Listed Plaintiff Miami-Dade. FL
¡EXCEPT IN V.!'. PLI\iNTIFF C,\Sr:S)
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County of Rcsidcne.' of First
NOlL sES. USE rsJO,(l\ffÇ. '" i
LANH INVOLVED.
Camara & Sibley LLP, 2339 University Blvd. Houston. TX 17005; (73) 893-7973 / Weisberg & Meyers LLC. 9369 Sheridan Street. Sie. 656 Cooper City. FL 33024; (866) 775-3666
Attorneys flrl(IUI\\.nJ
Townsend and Townsend and Crew LLP, Two Emba
Eigth Floor, San Francisco, CA 94111-3834; (415) 273-7559
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V.OIHGIN
.¡ I Original
ll50 Constitutionality ,)fSf:ili: Stamic::
(Platc an "X" in Oni' Bux Only)
Proceeding
o 2 Removed from 0 3
Stat~ Coun
Re.tiled. (see Vi below)
tJ 4 Reinstated or 0
Transferred from
5 another distriel
Appeal to Dislric!
Reopened
o 6 Multidistriet
Litigation
Vi. RELA TED/RE-FILED
CASE(S).
(Sili: im:frucil\n~
~c(.'ond p-al!c~
aJ Re.ficd Case 0 YES .¡ NO
JUDGE
(sJlcifY
1:1 7
Judge from
b) Related Cases o YES ÇJNO
DOCKET NUMßER
Magistrale Judmnenf
Cit~ the U.S. Civil Statule under which you iire filing and Write a ßrief Stalcmeni ofCausc (Do nol ciie jurisdietinnal slalules unless
diversily):
VII. CAUSE OF ACTION 15 U.s.C. § i, 15 U.S.C. § 2.15 U.S.C. § 14. (Sherman & Clayton Federal Antitrust Acts)
is i J.S.f' S II 2:'(;1). (f .,inham Ac:i.f:ilse or misleadiiil7 rfescriniioii~/renresenl:ijon~ of faC'i reliitinri to rioor~), D
VHI. REQUESTED IN 0 CHECK IITHIS IS A CLASS ACTION DEMAND $ CHECK YES only ifdemanded in compl"in!:
'LENGTH OF TRIAL via _IJL..., days estimated (Ii" both sides 10 try entire case)
COM PLAINT: UNDER F.R.C.P. 2~ .JURY DEMAND: ø Yes 0 No
TIlE BEST OF MY KNOWLEDGE .LA
ABOVE INFORMATION IS TRUE & CORRECT TO / .-SGIiATlIRl' QF ATrORNEY OF RECORtl
DATE
AMOUNT ~ RECEIPT ,;~T.
FOR'§!§J?i(Z/'lJ --.I 1/
August 27, 2009
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