Dutra v. BFI Waste Management Systems of North America, Inc.

Filing 68

ORDER GRANTING MOTION TO DISMISS WITHOUT LEAVE TO AMEND AND DENYING MOTIONS FOR SANCTIONS Re: Dkt. Nos. 34 44 57 . Signed by Judge Nathanael Cousins. (lmh, COURT STAFF) (Filed on 5/13/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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HAROLD DUTRA,

United States District Court
Northern District of California

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v.

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Case No.14-cv-04623-NC

Plaintiff,

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BFI WASTE MANAGEMENT
SYSTEMS OF NORTH AMERICA,
INC.,

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ORDER GRANTING MOTION TO
DISMISS WITHOUT LEAVE TO
AMEND AND DENYING MOTIONS
FOR SANCTIONS

Defendant.

Re: Dkt. Nos. 34, 44, 57

Before the Court are BFI’s motion to dismiss the first amended complaint, BFI’s

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motion for sanctions, and Dutra’s cross-motion for sanctions. This is the second time

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Dutra has sued BFI over his dissatisfaction with a settlement agreement the parties entered

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into in 2009. Now, Dutra alleges that BFI has entered into an agreement with Recology to

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bar plaintiff from employment with Recology. The Court finds Dutra’s antitrust

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allegations and breach of the covenant of good faith and fair dealing are meritless and

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GRANTS defendant’s motion to dismiss without leave to amend. However, the Court

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does not find that sanctions are appropriate and DENIES both BFI’s and Dutra’s motions

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for sanctions.

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I.

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BACKGROUND
Plaintiff Harold Dutra is a former employee of defendant, BFI (now Republic), a

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waste management service company. Dkt. No. 30 at ¶ 9. Dutra was a driver who collected

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waste in San Mateo County. Id. BFI terminated Dutra in 2007, and the parties engaged in
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arbitration, ultimately, ending in a settlement agreement in 2009. Id. at ¶¶ 11-14. The

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settlement agreement provided a $35,000 monetary payment for Dutra, and required Dutra

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to relinquish all employment rights with BFI including right to seek re-employment with

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BFI and its successors. Id. at ¶ 14.

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In June 2012, Dutra sued BFI for a variety of claims, seeking to overturn the

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settlement agreement. Id. at ¶ 15. The district court dismissed Dutra’s complaint in July

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2013. Id. at ¶ 16.

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After July 2013, Dutra applied for a job with Recology, another waste disposal
company. Id. at ¶ 18. Dutra alleges that he was deemed qualified by Recology, and he

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believes that his application was rejected because of communications between Recology

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United States District Court
Northern District of California

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and BFI. Id. at ¶ 18.

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II.

DISCUSSION

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Before the Court are two separate motions, which the Court will address in turn.

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First, defendant’s motion to dismiss argues that this Court should dismiss the complaint

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without leave to amend because the complaint is meritless. Dkt. No. 34. Second,

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defendant moves for sanctions under Rule 11, 28 U.S.C. § 1927, and the Court’s inherent

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power, and asks the Court to award it attorney’s fees. Dkt. No. 44. Plaintiff filed a cross-

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motion for sanctions, seeking recovery of attorney’s fees in defending the motion for

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sanctions. Dkt. No. 57.

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A.

Motion To Dismiss

A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal

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sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). On a

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motion to dismiss, all allegations of material fact are taken as true and construed in the

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light most favorable to the non-movant. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-

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38 (9th Cir. 1996). The Court, however, need not accept as true “allegations that are

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merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re

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Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). Although a complaint need

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not allege detailed factual allegations, it must contain sufficient factual matter, accepted as
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true, to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly,

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550 U.S. 544, 570 (2007). A claim is facially plausible when it “allows the court to draw

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the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft

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v. Iqbal, 556 U.S. 662, 678 (2009).

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If a court grants a motion to dismiss, leave to amend should be granted unless the

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pleading could not possibly be cured by the allegation of other facts. Lopez v. Smith, 203

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F.3d 1122, 1127 (9th Cir. 2000). However, dismissal without leave to amend is proper if it

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is clear that the complaint could not be saved by amendment. Eminence Capital, LLC v.

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Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).

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Dutra sues for (1) a violation of the Sherman Antitrust Act §1 alleging a conspiracy

United States District Court
Northern District of California

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to restrict trade; (2) a violation of the Sherman Antitrust Act § 2, alleging an unlawful

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monopoly; (3) the Cartwright Antitrust Act; and (4) breach of covenant of good faith and

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fair dealing.

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1.

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Sherman Antitrust Act § 1

Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form

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of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several

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States, or with foreign nations.” 15 U.S.C. § 1. In antitrust claims, the Supreme Court has

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required a heightened pleading standard:

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In applying these general standards to a § 1 claim, we hold that
stating such a claim requires a complaint with enough factual
matter (taken as true) to suggest that an agreement was made.
Asking for plausible grounds to infer an agreement does not
impose a probability requirement at the pleading stage; it
simply calls for enough fact[s] to raise a reasonable expectation
that discovery will reveal evidence of illegal agreement.... [A]n
allegation of parallel conduct and a bare assertion of
conspiracy will not suffice.

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Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556-57 (2007). “This is because

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discovery in antitrust cases frequently causes substantial expenditures and gives the

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plaintiff the opportunity to extort large settlements even where he does not have much of a

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case.” Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1046-47 (9th Cir. 2008).

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To state a claim under Section 1 of the Sherman Act, claimants must plead not just
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ultimate facts (such as a conspiracy), but evidentiary facts which, if true, will prove: (1) a

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contract, combination or conspiracy among two or more persons or distinct business

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

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commerce among the several States, or with foreign nations; (3) which actually injures

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competition. Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1047 (9th Cir. 2008); Les

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Shockley Racing Inc. v. Nat’l Hot Rod Ass’n, 884 F.2d 504, 507 (9th Cir.1989); see also

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Twombly, 550 U.S. at 553-56. To satisfy the first prong, a plaintiff may not simply allege

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an agreement or conspiracy, but rather must provide information as to the “specific time,

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place, or person involved in the alleged conspiracies.” Twombly, 550 U.S. at 564; Kendall

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United States District Court
Northern District of California

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v. Visa U.S.A., Inc., 518 F.3d 1042, 1046-47 (9th Cir. 2008).
Here, Dutra alleges that sometime after the July 22, 2013 dismissal, he applied for a

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job with Recology. Dkt. No. 30 at ¶ 18. “[O]n information and belief, after

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communications between Recology and BFI (Republic), Plaintiff’s application was

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rejected.” Id. Dutra alleges that he learned in late 2013 and early 2014 “of the collusion

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between BFI (Republic) and Recology as that collusion or conspiracy relates to Plaintiff’s

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re-employment.” Id. at ¶ 21. These allegations do not include any factual information to

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give rise to plausible grounds that a conspiracy exists. The Court finds that such

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allegations are exactly the sort that the Twombly court rejected, and so too, this Court

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rejects the conspiracy claim as insufficiently pled.

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On the restraint of trade, Dutra alleges “[b]y locking up certain markets, with fixed

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rates and single company locales, BFI (Republic) and Recology are able to harm persons

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seeking employment, consumers of their products, and others.” Id. at ¶ 26. Dutra alleges

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that BFI and Recology control all of the San Francisco Bay Area’s waste management

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services, and “have divided the Area into sections or regions within which there is no

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competition.” Id. at ¶ 5. “BFI and Recology set wages, rates for collection, and dictate

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hiring and collection practices throughout the Bay Area.” Id.

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On a motion to dismiss, the Court may take judicial notice of matters of public
record. Harris v. County of Orange, 682 F.3d 1126, 1132 (9th Cir. 2012). BFI has
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provided public record information that Bay Area municipalities, such as San Mateo

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County and the City of San Francisco, grant exclusive licenses to both companies within

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particular boundaries. Dkt. No. 34 at 9. Thus, Dutra’s restraint of trade claims are both

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unsupported legal conclusions and factually inaccurate statements. Dutra’s Sherman

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Antitrust Act § 1 claim is dismissed.

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2.

Sherman Antitrust Act § 2

Section 2 of the Sherman Act requires allegations that the defendant (1) possesses
monopoly power in a valid relevant market; and (2) willfully acquired, maintained, or used

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that power by anti-competitive or exclusionary means. United States v. Grinnell Corp.,

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384 U.S. 563, 570-71 (1966). To satisfy the first prong, a plaintiff must allege that the

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United States District Court
Northern District of California

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defendant has market power within a legally cognizable relevant market. Newcal Indus.,

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Inc. v. Ikon Office Solution, 513 F.3d 1038, 1044 (9th Cir. 2008). “[T]he plaintiff must

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allege both that a ‘relevant market’ exists and that the defendant has power within that

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market.” Id.; see also Tanaka v. Univ. of S. Cal., 252 F.3d 1059, 1063 (9th Cir.

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2001)(“Failure to identify a relevant market is a proper ground for dismissing a Sherman

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Act claim”). A plaintiff must delineate a relevant market and show that the defendant

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plays enough of a role in that market to impair competition significantly. Bhan v. NME

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Hospitals, Inc., 929 F.2d 1404, 1413 (9th Cir. 1991). Additionally, antitrust laws are

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intended to protect only those activities that have anticompetitive effects on the market as a

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whole. Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 441 U.S. 1, 23 (1979); Eichorn v.

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AT&T Corp., 248 F.3d 131, 148 (3d Cir. 2001), as amended (June 12, 2001).

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Here, Dutra alleges that BFI possesses a monopoly on the “waste labor market,” but

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also that BFI and Recology together control the market. Dkt. No. 30 at ¶¶ 5, 17.

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Additionally, Dutra alleges that the relevant market is “waste drivers and related industries

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in the Bay Area and throughout the State.” Id. at ¶ 26. Finally, Dutra does not allege any

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specific injury to anyone but himself. Together, these legal conclusions do not support a

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claim of § 2 antitrust liability. Dutra has not alleged a cognizable relevant market or

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alleged BFI’s role in the market with any specificity. Plaintiff has proffered no further
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facts in briefing or at the hearing that could provide even a plausible allegation of

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monopoly power or antitrust liability. Therefore, the Court dismisses the Sherman

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Antitrust Act § 2 claim.

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3.

Cartwright Antitrust Act

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“The analysis under California’s antitrust law mirrors the analysis under federal law

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because the Cartwright Act, Cal. Bus. & Prof.Code § 16700 et seq., was modeled after the

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Sherman Act.” Cnty. of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1160 (9th Cir.

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2001). Because plaintiff’s Sherman Antitrust Act claims lack merit, so too does his

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Cartwright Antitrust Act claim. This claim is also dismissed.

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United States District Court
Northern District of California

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4.

Breach of the Implied Covenant of Good Faith and Fair Dealing

The covenant of good faith and fair dealing is implied in a contract and requires the

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party to uphold the contract’s purposes and the parties’ legitimate expectations. Carma

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Developers (Cal.), Inc. v. Marathon Dev. Cal., Inc., 3 Cal.4th 342, 373 (1992).

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Dutra claims that BFI breached its duty of good faith by refusing to set aside part of

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the settlement agreement between the parties. Dkt. No. 30 at ¶ 35. This statement is at

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odds with the law of good faith and fair dealing, which requires parties to uphold contract

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terms, not to set them aside. Additionally, Dutra claims that BFI breached a duty by

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“interfer[ing] in Plaintiff’s efforts to gain hire with another company.” Dkt. No. 30 at ¶

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36. Again, such a claim is not properly within the scope of the law, as plaintiff does not

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claim that BFI was obligated to refrain from any actions in the parties’ settlement

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agreement.

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5.

Conclusion

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Although generally, leave to amend should be granted freely, plaintiff has not

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proffered any additional facts that could cure the deficiencies in the complaint. Instead, at

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hearing, plaintiff noted that a different cause of action, interference with prospective

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economic advantage, might be more appropriate. This was not presented in briefing, and

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the Court declines to rule on the permissibility of that claim because, brought alone, it is

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not a federal claim within the Court’s jurisdiction. In addition, plaintiff has amended the
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complaint once with the benefit of defendant’s pending motion to dismiss, so he was put

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on notice of defendant’s arguments and had an opportunity to cure the complaint’s

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deficiencies. Therefore, the Court believes amendment would be futile and dismisses

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without leave to amend. See Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1051-52 (9th Cir.

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2008)(finding amendment of the complaint futile when plaintiff proffered no additional

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facts or discovery that could be conducted to cure the complaint).

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B.

Sanctions

“Three primary sources of authority enable courts to sanction parties or their
lawyers for improper conduct: (1) Federal Rule of Civil Procedure 11, which applies to

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signed writings filed with the court, (2) 28 U.S.C. § 1927, which is aimed at penalizing

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Northern District of California

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conduct that unreasonably and vexatiously multiplies the proceedings, and (3) the court’s

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inherent power.” Fink v. Gomez, 239 F.3d 989, 991 (9th Cir. 2001).

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Federal Rule of Civil Procedure 11(b) provides in part that “[b]y presenting to the

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court a pleading, written motion, or other paper,” an attorney certifies that “to the best of

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the person’s knowledge, information, and belief, formed after an inquiry reasonable under

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the circumstances”: “it is not being presented for any improper purpose, such as to harass,

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cause unnecessary delay, or needlessly increase the cost of litigation”; and “the factual

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contentions have evidentiary support or, if specifically so identified, will likely have

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evidentiary support after a reasonable opportunity for further investigation or discovery.”

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Fed. R. Civ. P. 11(b).

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For § 1927 sanctions to apply, “if a filing is submitted recklessly, it must be

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frivolous, while if it is not frivolous, it must be intended to harass . . . . [R]eckless

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nonfrivolous filings, without more, may not be sanctioned.” B.K.B. v. Maui Police Dep’t,

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276 F.3d 1091, 1107 (9th Cir. 2002) (quoting In re Keegan Mgmt. Co., Sec. Lit., 78 F.3d

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431, 436 (9th Cir. 1996)).

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Under its inherent powers, a court may impose sanctions in the form of attorneys’

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fees when the losing party has acted “in bad faith, vexatiously, wantonly, or for oppressive

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reasons.” Primus Auto. Fin. Servs., Inc. v. Batarse, 115 F.3d 644, 648 (9th Cir. 1997)
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(quoting Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 258-59 (1975)).

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However, “because of their very potency, inherent powers must be exercised with restraint

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and discretion.” See B.K.B., 276 F.3d at 1108 (quoting Chambers v. NASCO, Inc., 501

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U.S. 32, 44 (1991)). “[A]n attorney’s reckless misstatements of law and fact, when

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coupled with an improper purpose . . . are sanctionable under a court’s inherent power.”

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Fink, 239 F.3d at 994.

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The Ninth Circuit instructs courts to be reluctant in imposing sanctions, “especially

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errors in papers filed before an opportunity for discovery.” Greenberg v. Sala, 822 F.2d

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882, 887 (9th Cir. 1987). “The court is expected to avoid using the wisdom of hindsight
and should test the signer’s conduct by inquiring what was reasonable to believe at the

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United States District Court
Northern District of California

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time the pleading . . . was submitted.” Id.

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The Court denies BFI’s request to impose sanctions because it finds that the

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requested relief is disproportionate to the sanctions requested and not in the interest of

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justice. BFI’s motion is premised in large part on argument that the 2012 case was

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frivolous. This is irrelevant to the inquiry that this Court is permitted to entertain on the

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current case, except as it may demonstrate Dutra or his counsel’s intent to harass. Here,

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the action is only at the pleading stage, and BFI only had to engage in one round of

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pleading. Additionally, the complaint is short, lacking in factual matter, and generally

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straightforward. Therefore, the Court does not agree that BFI was required to expend

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significant time and money to defend the action. In addition, BFI argues that Dutra

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required BFI to spend unnecessary time and money preparing for two motions to dismiss;

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however, the Court notes, and BFI acknowledges, that the original complaint and the first

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amended complaint were substantially similar and suffered from the same flaws. Thus,

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there was no need for defendant engage in an extensive effort to submit the second motion

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to dismiss. Finally, although the action is meritless, the Court does not find evidence of

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intention to harass.

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The Court also denies plaintiff’s motion for sanctions. “A motion for sanctions

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must be made separately from any other motion and must describe the specific conduct
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that allegedly violates Rule 11(b).” Fed. R. Civ. P. 11(c)(2). Dutra moved for sanctions

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under Rule 11 at the end of his opposition to BFI’s sanctions, not on a separate motion.

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Dkt. No. 57 at 16-17. Dutra does not describe BFI’s conduct that merits sanctions, except

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to suggest that BFI’s motion for sanctions is meritless. Id. Thus, Dutra has not complied

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with the procedural requirements for bringing a motion for sanctions under Rule 11.

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Additionally, Dutra must demonstrate that BFI’s motion was filed for an improper

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purpose, such as to harass, which he has not done. Fed. R. Civ. P. 11(b). The Court

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disagrees with Dutra’s arguments because his complaint did lack factual and legal merit, so

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BFI’s motion was not improper. Therefore, Dutra’s motion for sanctions is denied.

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United States District Court
Northern District of California

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III. CONCLUSION
In conclusion, the Court dismisses the complaint without leave to amend and denies
all motions for sanctions.
IT IS SO ORDERED.

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Dated: May 13, 2015

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_____________________________________
NATHANAEL M. COUSINS
United States Magistrate Judge

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Case No.:14-cv-04623-NC

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