National Association of Investors Corporation v. Bivio, Inc. et al

Filing 37

ORDER Defendants Motion to Dismiss is GRANTED in part and DENIED in part. Plaintiffs Sherman Act claimsCounts IV and Vare DISMISSED without prejudice. Plaintiff is GRANTED leave to file an amended complaint consistent with this Order not later than May 29, 2012, by Judge William J. Martinez on 5/15/2012.(ervsl, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 11-cv-02435-WJM
NATIONAL ASSOCIATION OF INVESTORS CORPORATION, a Michigan non-profit
corporation
Plaintiff
v.
BIVIO, Inc., a Delaware corporation
BIVIO SOFTWARE ARTISANS, Inc., a Colorado corporation,
ROBERT NAGLER, an individual
Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’
MOTION TO DISMISS AND GRANTING PLAINTIFF’S REQUEST
FOR LEAVE TO FILE AN AMENDED COMPLAINT

Plaintiff National Association of Investors Corporation (“Plaintiff”) brings this
action against Defendants Bivio, Inc, Bivio Software Artisans, Inc., and Robert Nagler
(collectively “Defendants”) alleging various state law contract claims as well as two antitrust claims under the Sherman Act, 15 U.S.C. § 1 et seq. (Compl. (ECF No. 1) at 5-9.)
Before the Court is Defendants’ Motion to Dismiss (“Motion”). (ECF No. 6.) For the
reasons set forth below, the Motion is granted in part and Plaintiff’s request for leave to
file an amended complaint is granted.
I. LEGAL STANDARD
Defendants move to dismiss this action pursuant to Federal Rule of Civil
Procedure 12(b)(1), (3), (6), and (7). However, the Court’s ruling in this Order examines

only Defendants’ arguments with respect to whether Plaintiff has stated a claim upon
which relief could be granted, as required by Rule 12(b)(6). Therefore, the only relevant
legal standard is that for a Rule 12(b)(6) motion.
The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test “the
sufficiency of the allegations within the four corners of the complaint after taking those
allegations as true.” Mobley v. McCormick, 40 F.3d 337, 340 (10th Cir. 1994). To
survive a Rule 12(b)(6) motion, "[t]he complaint must plead sufficient facts, taken as
true, to provide ‘plausible grounds’ that discovery will reveal evidence to support the
plaintiff’s allegations.” Shero v. City of Grove, Okla., 510 F.3d 1196, 1200 (10th
Cir.2007) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974, 167
L.Ed.2d 929 (2007)). “The court's function on a Rule 12(b)(6) motion is not to weigh
potential evidence that the parties might present at trial, but to assess whether the
plaintiff’s complaint alone is legally sufficient to state a claim for which relief may be
granted.” Sutton v. Utah State Sch. for the Deaf & Blind, 173 F.3d 1226, 1236 (10th
Cir.1999) (citation omitted).
II. FACTUAL BACKGROUND
The relevant facts, as pled in Plaintiff’s Complaint, are as follows:
In March 2010, Plaintiff brought suit against Defendants in this Court for breach
of contract alleging that Bivio breached a 2006 Strategic Alliance Agreement (the
“Original Action”). (Compl. ¶ 11.) On August 2, 2011, the parties attended a settlement
conference with U.S. Magistrate Judge Michael E. Hegarty. (Id. ¶ 13.) At the
settlement conference, the parties agreed to resolve their dispute and signed a

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“Material Terms of Settlement Agreement” contract (“MTSA”). (Id.) Paragraph 7 of the
MTSA stated: “The parties agree to a mutual nondisparagement clause.” (Compl. Ex.
A.) Paragraph 8 of the MTSA provided that the parties shall cooperate in the
preparation of a formal settlement agreement. (Compl. ¶ 15.) The Original Action was
dismissed based on this settlement. (Id. ¶ 23.)
After the settlement conference, the parties attempted to negotiate the terms of
the formal settlement agreement. After exchanging drafts, the parties agreed on all
terms except the text of the non-disparagement clause. (Id. ¶ 17.) The failure to agree
on a non-disparagement clause has prevented execution of the formal agreement. (Id.
¶ 21.)
On these facts, Plaintiff brings the following claims: (1) breach of contract; (2)
declaratory relief; (3) intentional interference with contract; (4) attempted
monopolization in violation of Section 2 of the Sherman Act; and (5) conspiracy to
restrain trade in violation of Section 1 of the Sherman Act. (Compl. pp. 5-9.) Plaintiff
seeks damages in the amount of $160,000 (the amount Defendant was to pay pursuant
to the terms of the MTSA), a declaration that Defendants’ obligations under the MTSA
are binding, punitive damages against Defendant Nagler, and costs and fees. (Id. at 9.)
Shortly before this action was filed, Defendants filed a declaratory judgment
action in Boulder County District Court against Plaintiff and ICLUB, a wholly-owned
subsidiary of Plaintiff who was a party to the Original Action. (ECF No. 6-1.) The
Boulder County action seeks a declaratory judgment regarding the parties’ obligations
under the MTSA. (Id. at 2.)

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III. ANALYSIS
Defendants raise the following arguments in the Motion: (1) Plaintiff’s Complaint
fails to state a claim for Sherman Act violations; (2) Plaintiff’s Complaint fails to
establish that its claims meet the $75,000 minimum for federal diversity jurisdiction; (3)
Plaintiff’s Complaint fails to name an indispensible party, ICLUB, whose participation
would destroy diversity jurisdiction; and (4) the Court should abstain from exercising its
jurisdiction over this matter pursuant to Colorado River Water Conservation Dist. v.
United States, 424 U.S. 800, 817-18 (1976).
A.

Sherman Act Claims
Plaintiff’s Complaint brings two anti-trust claims under the Sherman Act: (1)

Count IV—Attempted Monopolization in violation of Section 2; and (2) Count
V—Conspiracy to Restrain Trade in violation of Section 1. (Compl. at 7-8.) The Court
will address each of these claims in turn below.
1.

Attempted Monopolization

Plaintiff alleges that Defendants violated Section 2 of the Sherman Act by
attempting to force Plaintiff to enter into a settlement agreement that contained an anticompetitive non-disparagement clause. (Compl. ¶¶ 42-46.)
Section 2 of the Sherman Act prohibits monopolization or attempted
monopolization of any part of interstate trade or commerce. 15 U.S.C. § 2. In this
circuit, a plaintiff bringing an attempted monopolization claim must allege the following:
(1) that the defendant has engaged in predatory or anti-competitive conduct; (2) with a
specific intent to monopolize; and (3) a “dangerous probability” of achieving monopoly

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power. Christy Sports LLC v. Deer Valley Resort Co., 555 F.3d 1188, 1992 (10th Cir.
2009). The third element requires consideration of “the relevant market and the
defendant's ability to lessen or destroy competition in that market.” Id.
Plaintiff’s allegations of anti-competitive conduct appear in paragraphs 18 and 19
of the Complaint:
18. NAIC takes the position that any nondisparagement clause in the definitive agreement must have
an element of falsity — because in the absence of such a
falsity element, NAIC could not carry out its mandate. In
one example of Bivio’s refusal to cooperate, Bivio refused to
consider NAIC’s concerns that any disparagement clause
had to allow NAIC to make truthful comments to its
members — especially if Bivio did something to jeopardize
its members. On August 30, 2011, NAIC made the
underlined comments below on the non-disparagement
section:
Non-Disparagement. No Party, nor its
officers, directors, employees, agents or
affiliates, shall at any time directly or indirectly,
orally, in writing or through any other medium,
make any statements, assertions or allegations
concerning any other Party or its products
which are disparaging and false. This
paragraph was is not intended to restrict
honest and fair competition between bivio and
ICLUB. [Note — we need some qualified here
— because otherwise the provision is a S. 1
violation of the Sherman Act. Restrictions
against comparative advertising are per se
illegal where the parties have market power.
Also, what happens if bivio (or NAIC) steals
money from customers or does something else
egregious?]
19. Another example of Bivio’s breach of paragraph
8 of the MTSA, is the fact that Bivio insisted on a per se
illegal prohibition of truthful advertising between ICLUB and
Bivio — even though together these entities have in excess
of 80% of the Relevant Market. NAIC and ICLUB take the
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position that making truthful statements about a competitor’s
products, even if negative, is a required element of
competition — and that any prohibition on such truthful
statements violated the Sherman Act.
(Compl. at 4-5.)
The Court finds it difficult to determine whether these allegations state a Section
2 claim because these two paragraphs are confusing and contradictory. Plaintiff
alleges that Defendants demanded a per se illegal non-disparagement clause because
Defendants wanted to prohibit truthful advertising. (Compl. ¶ 19.) However, the only
example of language proposed by Defendants—the non-underlined section of the
second paragraph in ¶ 18—appears to allow truthful advertising. In this section,
Defendants proposed that the parties agree not to make any “statements, assertions, or
allegations” against the other party that are both “disparaging and false.” (Compl. ¶ 18.)
Defendants also proposed that the non-disparagement clause was “not intended to
restrict honest and fair competition.” (Id.) Defendants’ proposed language would not
prohibit truthful advertising, even if it is disparaging.
Thus, the Court finds that Plaintiff has failed to plead sufficient facts showing that
Defendants engaged in anti-competitive conduct by demanding that Plaintiff enter into
an agreement that contained a non-disparagement clause that would prohibit truthful
comparative advertising. To the extent Plaintiff is alleging that the proposed language
quoted in ¶ 18 is anti-competitive, Plaintiff has failed to cite authority showing that an
agreement not to make false statements about a competitor would violate the Sherman
Act.
Because Plaintiff’s Complaint fails to allege that Defendants engaged in anti-6-

competitive conduct, the Court finds that the Complaint fails to state a claim for violation
of Section 2 of the Sherman Act. In its Opposition to the Motion to Dismiss, Plaintiff
requests that it be granted leave to amend if the Court decides to grant the Motion with
respect to Plaintiff’s Sherman Act claims. (ECF No. 7 at 4.) The Tenth Circuit has held
that the Court “may dismiss without granting leave to amend when it would be futile to
allow the plaintiff an opportunity to amend his complaint.” Brereton v. Bountiful City
Corp., 434 F.3d 1213, 1219 (10th Cir. 2006). Because the Court cannot say that
permitting the filing of an amended complaint would be futile in this case, Plaintiff’s
request to amend its Complaint is granted with respect to its Section 2 claim.
2.

Conspiracy to Restrain Trade

Plaintiff alleges that Defendants violated Section 1 of the Sherman Act by
attempting to form a conspiracy to restrain trade through Defendants’ alleged insistence
on a “per se unlawful agreement to limit competition.” (Compl. ¶¶ 47-51.) Section 1 of
the Sherman Act provides as follows:
Every contract, combination in the form of trust or otherwise,
or conspiracy, in restraint of trade or commerce among the
several States or with foreign nations, is declared to be
illegal.
15 U.S.C. § 1.
Defendant moves to dismiss this claim and argues that Plaintiff has failed to
allege a contract, combination or conspiracy sufficient to state a claim for a Section 1
violation. (ECF No. 6 at 3.) An essential element of any Section 1 claim is a showing of
concerted action. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 76768 (1984). That is, Section 1 applies only to agreements between two or more
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businesses or persons; it does not cover unilateral conduct. Fisher v. City of Berkeley,
475 U.S. 260, 266 (1986) (“Even where a single firm’s restraints directly affect prices
and have the same economic effect as concerted action might have, there can be no
liability under § 1 in the absence of agreement.”); See also Monsanto Co. V. SprayRite Serv. Corp., 465 U.S. 752, 761 (1984) (noting that it is fundamental that a plaintiff
establish an agreement between two or more persons to restrain trade; unilateral
conduct is not prohibited by § 1); Gregory v. Fort Bridger Rendezvous Ass’n, 448 F.3d
1195, 1200 (10th Cir. 2006) (“Section 1 has been interpreted as prohibiting only
concerted, multilateral action.”).
Plaintiff’s Complaint alleges that Defendants’ insistence on a non-disparagement
clause that would prohibit truthful marketing was “an attempted conspiracy to restrain
trade—in violation of Section 1 of the Sherman Act.” (Compl. ¶ 50.) However, Plaintiff
fails to cite—and the Court has been unable to locate—any authority showing that there
is a cause of action for attempted conspiracy. Rather, the fact that Plaintiff alleges that
the conspiracy was only attempted implicitly if not expressly shows that there was no
actual concerted action. Accordingly, the Court finds that Plaintiff’s Complaint fails to
state a claim for a Section 1 violation. As with the Section 2 claim, the Court cannot
say that it would be futile to allow amendment and, therefore, Plaintiff is granted leave
to amend her Section 1 claim.
B.

All Remaining Arguments
Plaintiff alleges that the Court has jurisdiction over this matter under both the

federal question doctrine, 28 U.S.C. § 1331, as well as based on complete diversity

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between the parties pursuant to 28 U.S.C. § 1332. The only federal claims in this
action are Plaintiff’s Sherman Act claims, which are discussed above, and which the
Court has granted Plaintiff leave to amend. The remainder of the arguments raised in
Defendants’ Motion assume that the Sherman Act claims have been dismissed by the
Court. If Plaintiff’s amended complaint states a Sherman Act claim under either
Section 1 or Section 2, Defendants’ remaining arguments are likely moot. Therefore,
the Court declines to address these issues until it can determine fully and finally
whether Plaintiff can state a claim under the Sherman Act. Accordingly, all remaining
arguments in Defendants’ Motion to Dismiss are denied without prejudice to
Defendants re-asserting these arguments in any subsequent motion.
IV. CONCLUSION
For the reasons set forth above, Defendants’ Motion to Dismiss is GRANTED in
part and DENIED in part. Plaintiff’s Sherman Act claims—Counts IV and V—are
DISMISSED without prejudice. Plaintiff is GRANTED leave to file an amended
complaint consistent with this Order not later than May 29, 2012.
Dated this 15th day of May, 2012.
BY THE COURT:

William J. Martínez
United States District Judge

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