Aya Healthcare Services, Inc. et al v. AMN Healthcare, Inc.

Filing 22

ORDER Granting in Part 15 Defendants' Motion to Dismiss. The Court grants in part Defendants' motion and dismisses Plaintiffs' claims under the Sherman Act without prejudice. The Court defers ruling on Plaintiffs' state law claims. Plaintiffs may file a Second Amended Complaint that cures the pleading deficiencies identified in this Order on or before 1/5/2018. Signed by Judge Michael M. Anello on 12/6/2017. (rmc)

Download PDF
1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 10 11 SOUTHERN DISTRICT OF CALIFORNIA AYA HEALTHCARE SERVICES, INC., AYA HEALTHCARE, INC., 12 Case No.: 17cv205-MMA (MDD) ORDER GRANTING IN PART DEFENDANTS’ MOTION TO DISMISS Plaintiffs, 13 v. 14 AMN HEALTHCARE, INC., AMN HEALTHCARE SERVICES, INC., AMN SERVICES, LLC, MEDEFIS, INC., and SHIFTWISE, INC., 15 16 17 18 [Doc. No. 15] Defendants. Plaintiffs Aya Healthcare Services, Inc. and Aya Healthcare, Inc. (collectively, 19 “Plaintiffs”) filed a First Amended Complaint (“FAC”) against Defendants AMN 20 Healthcare, Inc., AMN Service, Inc., AMN Services, LLC, MEDEFIS, Inc., and 21 Shiftwise, Inc. (collectively, “Defendants”) alleging four federal antitrust claims under 22 the Sherman Act, 15 U.S.C. §§ 1, 2, and three California state law claims. See FAC. 23 Defendants now move to dismiss Plaintiffs’ FAC for failure to state a claim pursuant to 24 Federal Rule of Civil Procedure 12(b)(6). See Doc. No. 15. Plaintiffs filed an opposition 25 to Defendants’ motion, to which Defendants replied. See Doc. Nos. 17, 18. After 26 entertaining the oral arguments of counsel, the Court took the matter under submission 27 for further review and consideration. See Doc. No. 20. For the reasons set forth below, 28 the Court affirms in part its tentative ruling and GRANTS IN PART Defendants’ motion -1- 17cv205-MMA (MDD) 1 to dismiss. BACKGROUND1 2 3 Plaintiff Aya Healthcare Services, Inc. is a corporation formed under Delaware law 4 that maintains its headquarters in San Diego, California. FAC ¶ 54. Plaintiff Aya 5 Healthcare, Inc. is a corporation formed under Delaware law that maintains its 6 headquarters in San Diego, California. FAC ¶ 54. “Plaintiffs are affiliated companies 7 that operate under common control and ownership.” FAC ¶ 54. 8 Defendant AMN Healthcare, Inc. is a corporation formed under the laws of 9 Nevada that maintains its headquarters in San Diego, California. FAC ¶ 55. Defendant 10 AMN Healthcare Services, Inc. is a corporation formed under the laws of Delaware that 11 maintains its headquarters in San Diego, California. FAC ¶ 56. Defendant AMN 12 Services, LLC is a limited liability company formed under state law that maintains its 13 headquarters in San Diego, California. Defendant Medefis, Inc. is a corporation formed 14 under state law that maintains its headquarters in Omaha, Nebraska. FAC ¶ 58. 15 Defendant Shiftwise, Inc. is a corporation formed under state law that maintains its 16 headquarters in Portland, Oregon. FAC ¶ 59. Defendant AMN Healthcare Services, Inc. 17 owns and controls Defendant AMN Healthcare, Inc. and the various affiliated companies 18 also sued in this action. FAC ¶ 5. 19 Plaintiffs are two affiliated temporary personnel agencies that arrange to have 20 medical travelers perform temporary assignments at hospitals2 and other healthcare 21 facilities. FAC ¶ 3. Defendants also operate a temporary employment agency, providing 22 various kinds of temporary medical employees to hospitals. FAC ¶ 5. Defendants are the 23 dominant provider of medical travelers in the country, and compete with Plaintiffs. FAC 24 25 26 27 28                                                 1 Because this matter is before the Court on a motion to dismiss, the Court must accept as true the allegations set forth in the FAC. See Hosp. Bldg. Co. v. Trs. Of Rex Hosp., 425 U.S. 738, 740 (1976). 2 “Hospitals” hereinafter refers to both hospitals and other healthcare facilities. -2- 17cv205-MMA (MDD) 1 ¶ 5. 2 “Medical travelers are licensed nurses and medical technicians who travel from 3 region to region to perform temporary assignments at hospitals.” FAC ¶ 4. Hospitals do 4 not directly hire medical travelers, but utilize the services of personnel agencies like 5 Plaintiffs and Defendants. These personnel agencies are thus responsible for recruiting 6 qualified medical travelers and coordinating their temporary assignment to hospitals. 7 FAC ¶ 4. 8 Generally, Plaintiffs allege that Defendants’ strategy “is to make use of contractual 9 restraints and other anticompetitive practices to ensure that none of its competitors can 10 compete to hire any of its temporary employees, even when it is not employing them.” 11 FAC ¶ 7. Regarding Plaintiffs’ federal claims, Plaintiffs assert that Defendants’ alleged 12 no-poaching restraints constitute a violation of Section 1 of the Sherman Act, that 13 Defendants created an employers’ cartel in violation of Section 1 of the Sherman Act, 14 and that Defendants intend to acquire monopoly power in the medical-traveler markets in 15 violation of Section 2 of the Sherman Act. 16 A. 17 No-Poaching Allegations Plaintiffs allege Defendants have successfully convinced rival providers “to agree 18 to unlawful no-poaching restraints that run one way in its favor and harm both its rivals 19 and its employees.” FAC ¶ 12. Smaller providers “depend on the good graces” of 20 Defendants because “AMN has so much business that it often turns to smaller providers 21 to help fill its orders . . . when it lacks available medical travelers of its own for pending 22 assignments. Some providers depend on receiving AMN’s spillover work in order to 23 remain in business.” FAC ¶ 13. “AMN has delegated spillover work to many providers 24 in exchange for their acceptance of its subcontractor agreements . . . [which] include “no- 25 poaching” covenants. FAC ¶ 16. These subcontractor agreements require rival providers 26 to “agree in perpetuity never to solicit any of its employees.” FAC ¶ 16. 27 B. 28 Employers’ Cartel Allegations Plaintiffs contend AMN twice invited Aya “to collude in an unlawful antitrust -3- 17cv205-MMA (MDD) 1 conspiracy” (an employers’ cartel), requesting Plaintiffs agree to a reciprocal no-hire 2 agreement under which each employer would never hire employees of the other. FAC ¶ 3 17. Plaintiffs “believe[] that AMN has entered into similar no-hire arrangements with 4 other providers of medical travelers, demanding and obtaining either unilateral or 5 reciprocal no-hire agreements with them.” FAC ¶ 18. Plaintiffs have “specific 6 confirmation” that at least one other provider of medical travelers, Host Healthcare, Inc. 7 (“Host”) agreed to a unilateral no-hire agreement under which Host ceased to hire 8 AMN’s recruiters and other corporate employees. FAC ¶ 19. Plaintiffs claim these no- 9 hire agreements affect medical travelers because if a provider is restrained by agreement 10 from hiring AMN’s recruiters, it is also appreciably restrained from seeking, screening, 11 soliciting, and hiring AMN’s vast pool of qualified medical travelers, even those who 12 lack any current assignment from AMN. FAC ¶ 20. 13 Plaintiffs allege Defendants retaliated against them by refusing to join this 14 employers’ cartel by litigating baseless claims against it, terminating a longstanding 15 mutually profitable collaboration, and temporarily cutting off Plaintiffs’ access to certain 16 accounts on Defendants’ software platform, costing Plaintiffs lost revenue in the millions 17 of dollars. FAC ¶ 22. 18 C. 19 Attempted Monopolization Allegations Finally, Plaintiffs allege Defendants intended to acquire monopoly power in the 20 medical-traveler markets. FAC ¶ 282. Plaintiffs claim AMN is the dominant provider of 21 the relevant service and it wields or nearly wields monopoly power in the national market 22 as well as many of the regional submarkets including: the Greater San Francisco Bay 23 Area; the Greater Lost Angeles Metropolitan Area; the New York City Area; the Greater 24 Chicago Metropolitan Area; the Greater Baltimore Metropolitan Area; the Greater 25 Washington, D.C. Metropolitan Area; the Greater Richmond Metropolitan Area; and the 26 Greater Norfolk Metropolitan Area. FAC ¶ 283. Defendants make or substantially 27 control at least 45% of all sales in the national market, and at least 50% of all sales in the 28 above-referenced regional submarkets. FAC ¶ 283. Plaintiffs claim “there exists a -4- 17cv205-MMA (MDD) 1 dangerous probability that it will succeed in the effort unless there is an antitrust 2 intervention.” FAC ¶ 282. 3 D. 4 Summary of Plaintiffs’ Allegations In sum, Plaintiffs assert, “[t]he overall effect of [Defendants’] business strategy has 5 been to discourage and prevent [Defendants’] rivals from considering, evaluating, 6 soliciting and hiring qualified medical travelers.” FAC ¶ 8. Thus, “AMN has 7 successfully used unlawful restraints and other anticompetitive practices to restrain its 8 recruiters and rivals in order to restrict the supply and circulation of qualified medical 9 travelers.” FAC ¶ 8. “AMN not only restricts supply and raises its prices, but also 10 imposes surcharges for providing various categories of medical travelers whom it reports 11 to be in short supply to certain hospital customers.” FAC ¶ 9. Defendants have “been 12 able to depress the pay of medical travelers and recruiters of medical travelers and restrict 13 their employment opportunities, mobility, and access to information about employment 14 conditions offered by rival employers.” FAC ¶ 10. 15 Defendants move to dismiss Plaintiffs’ FAC pursuant to Federal Rule of Civil 16 Procedure 12(b)(6). Doc. No. 15. Defendants argue Plaintiffs’ allegations “boil down to 17 a single theory: that Aya is somehow entitled to enjoy a free ride on AMN’s business 18 acumen and the benefits of collaborating with AMN, while blissfully violating with 19 impunity the non-solicitation clauses binding on former AMN personnel.” Doc. No. 15-1 20 at 2. “To the extent this theory is supported by any alleged facts, these facts do not show 21 an unreasonable restraint of trade—let alone conduct susceptible to the per se standard.” 22 Id. 23 24 25 LEGAL STANDARDS A. Request for Judicial Notice Generally, a court must take judicial notice if a party requests it and supplies the 26 court with the requisite information. Fed. R. Evid. 201(d). “A judicially noticed fact 27 must be one not subject to reasonable dispute in that it is either (1) generally known 28 within the territorial jurisdiction of the trial court or (2) capable of accurate and ready -5- 17cv205-MMA (MDD) 1 determination by resort to sources whose accuracy cannot reasonably be questioned.” 2 Fed. R. Evid. 201(b); see Mack v. South Bay Beer Distributors, 798 F.2d 1279, 1282 (9th 3 Cir. 1986) (citing Sears, Roebuck & Co. v. Metropolitan Engravers, Ltd., 245 F.2d 67, 70 4 (9th Cir. 1956)). While a court may take judicial notice of matters of public record, it 5 may not take judicial notice of a fact that is subject to reasonable dispute. Fed. R. Evid. 6 201(b); Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). For example, 7 “when a court takes notice of another court’s opinion, it may do so not for the truth of the 8 facts recited therein, but for the existence of the opinion, which is not subject to 9 reasonable dispute over its authenticity.” Lee, 250 F.3d at 690. 10 11 B. Rule 12(b)(6) A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint. Navarro 12 v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A pleading must contain “a short and plain 13 statement of the claim showing that the pleader is entitled to relief. . . .” Fed. R. Civ. P. 14 8(a)(2). However, plaintiffs must also plead “enough facts to state a claim to relief that is 15 plausible on its face.” Fed. R. Civ. P. 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 16 570 (2007). The plausibility standard thus demands more than a formulaic recitation of 17 the elements of a cause of action, or naked assertions devoid of further factual 18 enhancement. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Instead, the complaint “must 19 contain allegations of underlying facts sufficient to give fair notice and to enable the 20 opposing party to defend itself effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 21 2011). 22 In reviewing a motion to dismiss under Rule 12(b)(6), courts must assume the truth 23 of all factual allegations and must construe them in the light most favorable to the 24 nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 (9th Cir. 1996). 25 The court need not take legal conclusions as true merely because they are cast in the form 26 of factual allegations. Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987). 27 Similarly, “conclusory allegations of law and unwarranted inferences are not sufficient to 28 defeat a motion to dismiss.” Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). -6- 17cv205-MMA (MDD) 1 In determining the propriety of a Rule 12(b)(6) dismissal, courts generally may not 2 look beyond the complaint for additional facts. United States v. Ritchie, 342 F.3d 903, 3 908 (9th Cir. 2003). “A court may, however, consider certain materials—documents 4 attached to the complaint, documents incorporated by reference in the complaint, or 5 matters of judicial notice—without converting the motion to dismiss into a motion for 6 summary judgment.” Id.; see also Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 7 2001). Where dismissal is appropriate, a court should grant leave to amend unless the 8 plaintiff could not possibly cure the defects in the pleading. Knappenberger v. City of 9 Phoenix, 566 F.3d 936, 942 (9th Cir. 2009). 10 11 12 DISCUSSION I. Plaintiffs’ Request for Judicial Notice Plaintiffs request that the Court take judicial notice of various documents filed in a 13 civil action between the same parties in the Superior Court for the County of San Diego 14 (AMN Healthcare, Inc. v. Aya Healthcare Servs., Inc., Case No. 37-2015-00033229-CU- 15 BT-CTL) (“AMN’s State Court Action”). See Doc. No. 17-1. Specifically, Plaintiffs 16 request the Court take judicial notice of: (1) the state court’s order rending summary 17 judgment against AMN on all of its claims on November 4, 2016 (Exhibit 1); (2) a 18 stipulation listing the issues to be tried at the trial in the state court action (Exhibit 2); (3) 19 the state court’s order granting judgment in favor of Aya Healthcare, Inc. and the four 20 Aya employees on January 26, 2017 (Exhibit 3); and (4) the state court’s award of 21 attorneys’ fees and costs (Exhibit 4). See Doc. Nos. 17-1, 17-2. Defendants oppose 22 Plaintiffs’ request for judicial notice, asserting counsel “goes well beyond requesting 23 judicial notice, characterizing and purporting to summarize the state court litigation.” 24 Doc. No. 18 at 10 n.6. 25 Plaintiffs request the Court take judicial notice of these documents for the sole 26 purpose of establishing that the filings were made in AMN’s State Court Action, and not 27 to establish the truth of the matters asserted therein. See id. Accordingly, the Court 28 GRANTS Plaintiffs’ request for judicial notice. See In re Bare Escentuals, Inc. Sec. -7- 17cv205-MMA (MDD) 1 Litig., 745 F. Supp. 2d 1052, 1067 (N.D. Cal. 2010) (“[t]he court may take judicial notice 2 of the existence of unrelated court documents, although it will not take judicial notice of 3 such documents for the truth of the matter asserted therein.”). 4 II. 5 Defendants’ Motion to Dismiss The FAC asserts four federal statutory claims and three California statutory claims. 6 Specifically, the FAC asserts: three claims under § 1 of the federal Sherman Act; one 7 claim under § 2 of the federal Sherman Act; one claim under the California Cartwright 8 Act; one claim for tortious interference with prospective economic relations; and one 9 claim under the California Unfair Competition Law (“UCL”). See Doc. No. 11-1. 10 Defendants move to dismiss the FAC in its entirety, arguing Plaintiffs fail to state a claim 11 for relief on all seven causes of action. See Doc. No. 15-1. For the reasons stated below, 12 the Court finds that Plaintiffs fail to sufficiently allege antitrust injury. 13 1. Sherman Act Claims: Antitrust Injury 14 “Private suits to enforce the Sherman Act are authorized by Section 4 of the 15 Clayton Act, 15 U.S.C. § 15(a), which provides that ‘any person who shall be injured in 16 his business or property by reason of anything forbidden in the antitrust laws may sue 17 therefor . . . .’” Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979, 987 (9th Cir. 18 2000). The Supreme Court has interpreted “any person” to mean any person who has 19 suffered an “antitrust injury, which is to say injury of the type the antitrust laws were 20 intended to prevent and that flows from that which makes defendants’ acts unlawful.” 21 Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990) (quoting Brunswick 22 Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)); Knevelbaard Dairies, 232 23 F.3d at 987. “An injury caused by an antitrust violation will not count as an antitrust 24 injury ‘unless it is attributable to an anti-competitive aspect of the practice under 25 scrutiny.’” Int’l Longshore and Warehouse Union v. ICTSI Oregon, Inc., 863 F.3d 1178, 26 1186 (9th Cir. 2017) (quoting Atl. Richfield Co., 495 U.S. at 334). “If the injury flows 27 from aspects of the defendant’s conduct that are beneficial or neutral to competition, 28 there is no antitrust injury, even if the defendant’s conduct is illegal per se.” Rebel Oil -8- 17cv205-MMA (MDD) 1 Co. v. Atl. Richfield Co., 51 F.3d 1421, 1433 (9th Cir. 1995). 2 In determining whether a plaintiff has antitrust standing, the Ninth Circuit 3 considers various factors: (1) whether the plaintiff’s injury is of “the type the antitrust 4 laws were intended to forestall;” (2) the directness of the injury; (3) the speculative nature 5 of the harm; (4) the risk of duplicative recovery; and (5) the complexity of apportioning 6 damages. Knevelbaard Dairies, 232 F.3d at 987. “A showing of the first factor— 7 antitrust injury—is ‘necessary, but not always sufficient, to establishing standing under 8 [section] 4 [of the Clayton Act].’” Tawfilis v. Allergan, Inc., 157 F. Supp. 3d 853, 862 9 (C.D. Cal. 2015) (citing Am. Ad Mgmt. Inc. v. Gen. Tel. Co. of Cal., 190 F.3d 1051, 1055 10 (9th Cir. 1999) (internal quotation marks and citation omitted)). The Ninth Circuit also 11 requires “that the injured party be a participant in the same market as the alleged 12 malefactors.” Bhan v. NME Hosps., Inc., 772 F.2d 1467, 1470 (9th Cir. 1985). “In other 13 words, the party alleging the injury must be either a consumer of the alleged violator’s 14 goods or services or a competitor of the alleged violator in the restrained market.” Glen 15 Holly Entm’t, Inc. v. Tektronix, Inc., 352 F.3d 367, 372 (9th Cir. 2003) (citation omitted). 16 Plaintiffs contend that they have made the requisite showing of antitrust injury by 17 alleging two types of harm: (1) exclusionary harm; and (2) retaliatory harm. See Doc. 18 No. 17 at 23-25. Defendants contend the FAC “is bereft of any facts that plausibly show 19 either any impact on competition in a well-defined relevant market or that Aya suffered 20 injury as a result of any anticompetitive effects.” Doc. No. 15-1 at 1 (emphasis in 21 original). Rather, Defendants assert “the FAC repetitively recites the same conclusory 22 allegations about ‘reduced output’ and ‘supracompetitive prices,’ not providing a single 23 specific factual example of such supposed market effects.” Id. 24 Regarding exclusionary harm, Plaintiffs assert that Defendants’ alleged 25 anticompetitive practices restrain and exclude Plaintiffs and other rivals so that 26 Defendants can “maintain and enhance [their] dominant position in the relevant markets, 27 restrict the circulation and supply of medical travelers, contrive shortages, charge 28 supracompetitive prices, and generally insulate [themselves] from competitive pressures -9- 17cv205-MMA (MDD) 1 that its rivals would impose in markets unhindered by [their] trade restraints[.]” Doc. No. 2 17 at 23; see FAC ¶ 207. Plaintiffs claim “[t]he overall effect of AMN’s business 3 strategy has been to discourage and prevent AMN’s rivals from considering, evaluating, 4 soliciting and hiring qualified medical travelers.” FAC ¶ 8. Plaintiffs “believe[] that 5 AMN’s various anticompetitive practices have caused it to lose profits of at least 6 $250,000 in 2013, at least $250,000 in 2014, at least $750,000 in 2015, and at least $3 7 million [in] 2016. On present trends, these losses will persist and worsen in 2017 and 8 future years.” FAC ¶ 216. 9 Here, Plaintiffs’ exclusionary harm allegations are insufficient to demonstrate 10 antitrust injury. Throughout the FAC, Plaintiffs repeatedly claim Defendants’ alleged 11 conduct resulted in higher prices (FAC ¶¶ 7, 9, 49, 96, 179, 207, 284) and reduced output 12 (FAC ¶¶ 28, 50, 128-129, 150, 195, 207, 225, 268). However, Plaintiffs do not allege 13 facts or anecdotal evidence supporting this contention. For example, Plaintiffs do not 14 allege that prices increased from $X to $Y amount as a result of the alleged conduct. As 15 Defendants remarked at the hearing, Plaintiffs are “in the industry,” and thus are in a 16 position to detect and allege specific facts supporting higher prices. Doc. No. 21 at 28. 17 Moreover, Plaintiffs’ assertion that “there have been fewer available medical 18 travelers for assignments” is conclusory. FAC ¶ 129. Plaintiffs do not allege that the 19 number of available medical travelers decreased to a certain number, or that Plaintiffs are 20 unable to fill temporary assignments at hospitals, as a result of the alleged conduct. In 21 fact, Plaintiffs admit that they have a “substantial pool of highly qualified medical 22 travelers . . . .” FAC ¶ 129 (emphasis added). Plaintiffs also claim Defendants have 23 “stultified competition in the medical-traveler markets and maintained its stranglehold 24 over the circulation of the largest pool of qualified medical travelers in the industry,” 25 thereby restricting supply. Doc. No. 17 at 1. Yet, Plaintiffs concede that the purpose of 26 the subcontractor agreements is to provide medical travelers to Defendants’ customers 27 “for assignments that AMN was unable to fulfill on its own.” FAC ¶ 128 (emphasis 28 added). Defendants assert “Aya’s whole theory of injury makes no economic sense.” -10- 17cv205-MMA (MDD) 1 2 Doc. No. 18 at 7. Further, Defendants argue that even if there actually were reduced output that 3 could affect customers of staffing companies, the increased demand would likely benefit 4 suppliers like Plaintiffs. Doc. No. 15-1 at 11. See Rebel Oil Co., 51 F.3d at 1433. 5 Defendants claim that Plaintiffs would stand to benefit from fewer agencies competing to 6 woo the same medical personnel. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio 7 Corp., 475 U.S. 574, 582-83 (1986) (noting a competitor stands to gain from a conspiracy 8 among its competitors to raise market prices). In response, Plaintiffs contend that “Aya’s 9 losses . . . belong to a long-recognized category of antitrust injury—exclusionary harm to 10 a competitor.” Doc. No. 17 at 24. The Court is well aware that “a rival clearly has 11 standing to challenge the conduct of rival(s) that . . . tends to exclude rivals from the 12 market, thus leading to reduced output and higher prices.” Areeda ¶ 348a3; see also Am. 13 Ad. Mgmt., Inc., 190 F.3d at 1057 (“[C]onsumers and competitors are most likely to 14 suffer antitrust injury”). However, a plaintiff cannot merely rely on “labels and 15 conclusions.” Twombly, 550 U.S. at 555. As noted above, Plaintiffs do not allege any 16 facts to show exclusionary harm as a result of the challenged conduct, i.e., higher prices 17 or reduced output. See Areeda ¶ 337a (“In order to survive a motion to dismiss, the 18 plaintiff must allege not only that the antitrust laws have been violated; it must also allege 19 facts concerning how its own injuries resulted.”). As such, Plaintiffs’ allegations are 20 insufficient to allege antitrust injury on the basis of exclusionary harm. Cf. Catch Curve, 21 Inc. v. Venali, Inc., 519 F. Supp. 2d 1028, 1035-36 (C.D. Cal. 2007) (finding competitor 22 sufficiently pleaded antitrust injury where the defendant’s conduct “rendered competitors 23 less competitive” and had a “dangerous probability of stifling innovation in the market.”) 24 (internal quotation marks omitted). 25 26 Regarding retaliatory harm, Plaintiffs allege that when they declined to collude in                                                 27 28 3 Citations to “Areeda” refer to PHILLIP E. AREEDA & HERBERT HOVENKAMP, AN ANALYSIS OF ANTITRUST PRINCIPLES AND THEIR APPLICATION (4th ed. 2013). -11- 17cv205-MMA (MDD) 1 Defendants’ employers’ cartel, Defendants punished Plaintiffs by terminating their 2 subcontractor agreements (i.e., the spillover contracts), temporarily cutting off Plaintiffs’ 3 access to certain accounts on one of their key software platforms, and initiating sham 4 litigation in state court. FAC ¶¶ 210-11. In opposition, Defendants argue Plaintiffs’ lost 5 profits allegedly attributable to the spillover opportunities withdrawn by AMN “might be 6 asserted in a breach of contract case, but they do not give rise to antitrust injury, as they 7 do not flow from any impact of the competitive process.” Doc. No. 15-1 at 11 (emphasis 8 in original). A party unilaterally may determine with whom it will deal. See United 9 States v. Colgate, 250 U.S. 300, 307 (1919). Thus, Defendants assert Plaintiffs have no 10 right to collaboration with AMN, and Plaintiffs suffer no injury from the loss of such 11 collaboration. Doc. No. 18 at 6. 12 Here, Plaintiffs’ retaliation allegations are similarly insufficient to demonstrate 13 antitrust injury. Plaintiffs rely primarily on a decision from the Seventh Circuit, wherein 14 the court stated that “[l]osses inflicted by a cartel in retaliation for an attempt by one 15 member to compete with the others are certainly compensable under the antitrust laws, 16 for otherwise an effective deterrent to successful cartelization would be eliminated.” 17 Hammes v. AAMCO Transmissions, Inc., 33 F.3d 774, 783 (7th Cir. 1994). Plaintiffs’ 18 reliance on Hammes, however, is misplaced. The Seventh Circuit later clarified that 19 Hammes “holds that antitrust damages may result if a cartel inflicts damage on one of its 20 own members in retaliation for that member’s attempt to undercut the cartel’s prices and 21 therefore lower consumer prices.” James Cape & Sons Co. v. PCC Const. Co., 453 F.3d 22 396, 401 (7th Cir. 2006) (emphasis added). The Seventh Circuit went on to note that in 23 the case at bar, the heart of the plaintiff’s claim “is that it was never a member of the 24 cartel in the first place;” thus, “[t]he Hammes case is . . . inapplicable here.” Id. Because 25 Plaintiffs similarly claim Aya was never a member of the alleged cartel, Hammes is 26 27 28 -12- 17cv205-MMA (MDD) 1 inapplicable.4 Therefore, based on the current record, Plaintiffs have not sufficiently 2 alleged antitrust injury on the basis of retaliatory harm. 3 In viewing Plaintiffs’ allegations in the light most favorable to Plaintiffs, the Court 4 finds that, as currently pleaded, the FAC does not sufficiently demonstrate that Plaintiffs 5 have suffered an “injury of the type the antitrust laws were intended to prevent and that 6 flows from that which makes defendants’ acts unlawful.” Atl. Richfield Co., 495 U.S. at 7 334. Because antitrust injury is an element of each of Plaintiffs’ federal causes of action, 8 the Court GRANTS IN PART Defendants’ motion and DISMISSES Plaintiffs’ claims 9 under the Sherman Act without prejudice. 10 2. State Law Claims 11 In light of the Court’s finding that Plaintiffs fail to sufficiently allege antitrust 12 injury, a requirement for Plaintiffs’ federal claims, the Court DEFERS ruling on 13 Plaintiffs’ state law claims. 14 15 CONCLUSION Based on the foregoing, the Court GRANTS IN PART Defendants’ motion and 16 DISMISSES Plaintiffs’ Sherman Act claims without prejudice. Plaintiffs may file a 17 Second Amended Complaint (“SAC”) that cures the pleading deficiencies identified in 18 this Order on or before January 5, 2018. 19 20 IT IS SO ORDERED. Dated: December 6, 2017 21 _____________________________ HON. MICHAEL M. ANELLO United States District Judge 22 23 24 25 26 27 28                                                 4 Plaintiffs also cite Big Bear Lodging Ass’n v. Snow Summit, Inc., 182 F.3d 1096, 1102 (9th Cir. 1999), which generally stands for the proposition that retaliation by a cartel member against one member attempting to compete is compensable. See id. However, Plaintiffs do not allege Defendants retaliated for trying to compete with the cartel’s members. Rather, Plaintiffs seek “lost profits that run in the millions of dollars” from Defendants’ decision to not continue collaborating with Plaintiffs. Doc. No. 17 at 25. As such, Big Bear is inapposite. -13- 17cv205-MMA (MDD)

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.


Why Is My Information Online?