Big River Industries, Inc. v. Headwaters Resources, Inc.

Filing 24

RULING denying 10 Defendant's MOTION to Dismiss for Failure to State a Claim. The Plaintiff's 14 Request for Leave to Amend (doc. 14 at 28 - 30) is GRANTED. Signed by Judge James J. Brady on 9/11/2013. (SMG)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
BIG RIVER INDUSTRIES, INC.
CIVIL ACTION
VERSUS
NO. 13-212-JJB
HEADWATERS RESOURCES, INC.
RULING ON DEFENDANT’S MOTION TO DISMISS
This matter is before the Court on a Motion to Dismiss (doc. 10-1) pursuant to Federal
Rule of Civil Procedure 12(b)(6), filed by Defendant, Headwaters Resources, Inc.
(“Headwaters”). Plaintiff, Big River Industries, Inc. (“BRI”), has filed an Opposition (doc. 14),
to which the Defendant has filed a Reply (doc. 17). BRI then filed a Sur-reply (doc. 20). In
Plaintiff’s Opposition, BRI has argued the sufficiency of its claim, and, alternatively, requested
leave to amend any allegations that this Court deems insufficient.

Oral argument is not

necessary. The Court’s jurisdiction exists pursuant to 28 U.S.C. § 1331 and 28 U.S.C. § 1367
pendent jurisdiction as to Plaintiff’s state law claims.

For the reasons stated herein, the

Defendant’s Motion to Dismiss (doc. 10-1) is DENIED and the Plaintiff’s request for leave to
amend (doc. 14 at 28-30) is GRANTED.
I.

Background
BRI brought this action pursuant to the Sherman Act, 15 U.S.C. §§ 1 and 2, the

Robinson-Patman Act (“RPA”), 15 U.S.C. § 13, and parallel Louisiana state laws, La. Rev. Stat.
Ann. §§ 51: 121, 122, 123, and 137.
Defendant’s Motion to Dismiss is brought on the following grounds: (1) BRI’s claims are
insufficiently pled, (2) BRI fails to state a predatory pricing claim because the allegations
inadequately address the relevant market(s), market power, and barriers to entry, (3) BRI cannot
establish below-cost pricing, (4) BRI fails to allege that Headwaters conspired to restrain trade
1

and to attempt monopolization through collusion with Louisiana Generating, LLC (“LaGen”),
(5) BRI has not alleged the requisite elements of a civil price discrimination claim and has no
other right to action under the Clayton Act, and (6) BRI’s state law claims fail for the same
reasons that the Sherman Act claims fail and because such claims are barred by Louisiana’s
applicable one-year liberative prescription period under La. C.C. art. 3492.
The following facts are from the Complaint (doc. 1) and are accepted as true for the
purposes of this motion. See Bass v. Stryker Corp., 669 F.3d 501, 507 (5th Cir. 2012). BRI
initially entered into an Ash Marketing Agreement (“AMA”) with Cajun Electric Power
Cooperative, Inc. (“Cajun”) on July 24, 1979 to develop a market for fly ash to be produced at
the Big Cajun II power station in New Roads, Louisiana. (Doc. 1, ¶ VI). Subsequent marketing
agreements gave BRI an exclusive right to market Big Cajun II fly ash and a right-of-first-refusal
of future marketing contracts. (Doc. 1, ¶ VII). In 2000, a bankruptcy court approved the
assignment of the existing marketing agreement from Cajun to LaGen. (Doc. 1, ¶ VIII). A year
later, BRI and LaGen entered into an amended AMA which extended the existing agreement
until the end of 2008. (Doc. 1, ¶ IX). Before the extended marketing period expired, Headwaters
contacted LaGen seeking to replace BRI as the exclusive marketer of Big Cajun II fly ash. (Doc.
1, ¶ X).

During discussions with LaGen on August 21, 2007, Headwaters stated, in an

unidentified email to LaGen, that an exclusive agreement between the two would place
Headwaters in a lucrative marketing position, allowing it to demand a higher price for fly ash in
the “I-10 corridor”.1 (Doc. 1, ¶ XI). The “I-10 corridor,” one of the largest commercial markets
in the United States, contains no substitute for fly ash and most of the federal and state
construction projects continuously arising therein require its use. (Doc. 1, ¶ XII).
1

Although the facts of this Complaint are accepted as true for the purposes of this motion, the Court recognizes the
contested nature of this claim and encourages Plaintiff to ponder the propriety of including such allegations in its
amended pleading.

2

While negotiating with Headwaters, LaGen issued a request for proposals (“RFP”) for a
new fly ash marketing contract with an anticipated award date of November 18, 2008 and
commencement date of January 1, 2009. (Doc. 1, ¶ XIII). Although BRI had a right-of-firstrefusal, LaGen, at Headwaters’ insistence, required BRI to submit a proposal in order to exercise
that right. (Doc. 1, ¶ XIV). Three entities submitted proposals (Headwaters, BRI, and Charah,
Inc.), and LaGen, deeming the latter non-competitive, only considered the proposals of
Headwaters and BRI.

(Doc. 1, ¶ XV).

BRI submitted the most competitive bid, but on

December 9, 2008, Headwaters “clarified and offered” a new proposal, which LaGen considered
in violation of the RFP Instructions to Proposers. (Doc. 1, ¶ XVI). On December 15, 2008,
LaGen notified BRI of Headwaters’ latest proposal and informed BRI that it would be required
to match. Id. Despite BRI eventually agreeing to match Headwaters’ latest proposal, LaGen
continued to negotiate with Headwaters, receiving another draft Exclusive Marketing Agreement
(“EMA”) on January 8, 2009. (Doc. 1, ¶ XVIII). Four days later, after BRI matched the
proposal, Headwaters submitted another offer, which BRI ultimately matched on January 29,
2009. (Doc. 1, ¶ XVIII(2)).2 This agreement contained terms proposed by Headwaters that were
significantly different from the terms proposed by BRI. Id.
BRI was unable to comply with the terms of the marketing agreement and eventually
defaulted on February 10, 2010. (Doc. 1, ¶ XX). BRI, desiring to try and continue to operate
under the agreement despite default, requested relief that LaGen later refused. (Doc. XXI).
Thereafter, BRI informed LaGen that it would consider the EMA’s original terms terminated as
of January 21, 2011 unless LaGen issued a new EMA to BRI. (Doc. 1, ¶ XXII). LaGen
responded by accepting BRI’s “notice of termination,” rather than by issuing a new EMA. Id.

2

The Complaint contains two paragraphs numbered XVIII. Citations denoting the second will contain “(2)”.

3

Headwaters began marketing fly ash produced at Big Cajun II on January 22, 2011 and
subsequently increased the price of fly ash between February 15, 2011 and September 30, 2011.
During this time period, the price of fly ash increased from $17.00 per ton to $26.00 per ton,
despite there being a national surplus of fly ash and a concomitant decline in demand nationwide.
(Doc. 1, ¶ XXV).
II.

Legal Standard
A complaint may be dismissed for “failure to state a claim upon which relief can be

granted.” FED. R. CIV. P. 12(B)(6). When reviewing the complaint, the court must accept all
well-pleaded facts in the complaint as true. C.C. Port, Ltd. v. Davis-Penn Mortg. Co., 61 F.3d
288, 289 (5th Cir. 1995). Additionally, a reviewing court must confine its analysis to the
allegations made in the complaint and its attachments. Hale v. King, 642 F.3d 492, 498 (5th Cir.
2011). In order to survive a motion to dismiss, the complaint must plead “enough facts to state a
claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570
(2007). While the plaintiff is not required to prove its entire case at this preliminary stage of
litigation, it must allege sufficient factual matter for the court to determine whether or not the
plaintiff’s claim has crossed the line from speculative to plausible. Ashcroft v. Iqbal, 556 U.S.
662, 680 (2009) (quoting Twombly, 550 U.S. at 570).
III.

Discussion
BRI claims that the Defendant conspired with LaGen to monopolize, and then

successfully monopolized, the market for fly ash in the I-10 corridor in violation of §§ 1 and 2 of
the Sherman Act and the RPA. To support these claims, BRI alleges that the Defendant engaged
in anticompetitive conduct including predatory pricing, collusive exclusive dealing, and price

4

discrimination. Since the standards applicable under these acts are distinct, these claims will be
addressed individually in turn.
A. Monopolization Under Section 2 of the Sherman Act
Section 2 of the Sherman Act applies to unilateral firm activity.

15 U.S.C. § 2.

Specifically, it proscribes conduct that would monopolize, attempt to monopolize, or conspire to
monopolize the relevant market. Id. To state a claim for monopolization, the plaintiff must
allege that the defendant: (1) possesses monopoly power in the relevant market and (2) willfully
acquired or maintained that power. Eastman Kodak Co. v. Image Tech Servs., Inc., 504 U.S.
451, 481 (1992). To state a claim for attempted monopolization, the plaintiff must allege that:
(1) the defendant has engaged in predatory or anticompetitive conduct, (2) the defendant had a
specific intent to monopolize, and (3) there existed a dangerous probability that the defendant
would achieve monopoly power in the relevant market. Spectrum Sports, Inc. v. McQuillan, 506
U.S. 447, 456 (1993). Finally, to state a claim for conspiracy to monopolize, the plaintiff must
allege that: (1) the defendant had the specific intent to monopolize, (2) a combination or
conspiracy to monopolize existed, (3) there was an overt act in furtherance of the combination or
conspiracy, and (4) there was an effect upon a substantial portion of interstate commerce.
Stewart Glass & Mirror, Inc. v. U.S. Auto Glass Disc. Centers, Inc., 200 F.3d 307, 316 (5th Cir.
2000).
The measure of proof for each claim is distinct.

See generally Vaughn Medical

Equipment Repair Services, L.L.C., v. Jordan Reeses Supply Co., 2010 WL 3488244, at *9-10
(E.D. La. Aug. 26, 2010). That said, all of the claims will require an analysis of the relevant
market and the possession of, or possibility to acquire, market power.3 Therefore, the Court will

3

The Fifth Circuit has not explicitly stated whether or not an analysis of the relevant market is required to support a
conspiracy to monopolize claim. J.T. Gibbons, Inc. v. Crawford Fitting Co., 704 F.2d 787, 797 (5th Cir. 1995).

5

evaluate BRI’s claims in light of market definition and market power before addressing the
individual elements of each claim.
a. Market Definition
The relevant market is determined by analyzing the relevant geographic and product
markets. Apani Sw., Inc. v. Coca-Cola Enterprises, Inc., 300 F.3d 620, 626-28 (5th Cir. 2002).
The Fifth Circuit has recognized that a trial court may dismiss a § 2 claim for a plaintiff’s failure
to define the relevant market. Id. at 628 (explaining that the deficient market definition may be
grounds to grant a motion to dismiss a § 2 claim).4 The Complaint must account for crosselasticity of demand, i.e., whether a product is “reasonably interchangeable by consumers for the
same purposes.” PSKS, Inc. v. Leegin Creative Leather Products, Inc., 615 F.3d 412, 417 (5th
Cir. 2010). A plaintiff must offer evidence demonstrating where consumers currently purchase
the product and where alternative products or alternative sources of the product could be found if
a competitor raises prices. Doctor's Hosp. v. Southeast Med. Alliance, 123 F.3d 301, 311 (5th
Cir. 1997); see also Apani, 300 F.3d at 628 (explaining that geographic market “must correspond
to the commercial realities of the industry and be economically significant.”).

However, Fifth Circuit courts have found that an analysis of the relevant market is necessary to determine if the
defendant had the requisite specific intent. See Beef Industry Antitrust Litigation, 907 F.2d 510 (5th Cir. 1990);
Total Ben. Services, Inc. v. Group Ins. Admin., Inc. 875 F.Supp 1228, 1234 (E.D. La. 1995). If a conspiracy would
not be economically feasible in the relevant market, it tends to show that the defendant did not intend to create a
monopoly. Id.; see also Matsushita Elec. Indus. Co., Ltd. V. Zenith Radio Corp. 475 U.S. 574, 592-94 (1986)
(reemphasizing that “courts should not permit factfinders to infer conspiracies when such inference are
implausible…”).
4

According to the Fifth Circuit,
Whether a relevant market has been identified is usually a question of fact; however, in some
circumstances, the issue may be determined as a matter of law. Where the plaintiff fails to define
its proposed relevant market with reference to the rule of reasonable interchangeability and crosselasticity of demand, or alleges a proposed relevant market that clearly does not encompass all
interchangeable substitute products even when all factual inferences are granted in plaintiff's
favor, the relevant market is legally insufficient, and a motion to dismiss may be granted.
Apani, 300 F.3d at 628 (internal quotations and citations omitted).

6

The Complaint describes the relevant market in vague terms, failing to define both the
necessary geographic and product characteristics.

Turning first to the relevant geographic

market, Plaintiff describes the relevant geographic market as the “I-10 corridor”. Though the
Court can comfortably infer notice of the claim’s relationship to interstate commerce from this
description, little more can be extracted. Defendant contends that BRI’s alleged market fails to
meet the standards of a notice pleading because the term “I-10 corridor” does not denote any
specific, unambiguous geographic region. Additionally, the Defendant argues that the “I-10
corridor” does not allege the relevancy of any corresponding geographic area to the market for
fly ash, and finally that Plaintiff’s descriptions of this market are fatally inconsistent.
BRI fails to sufficiently define the geographic limitations of the “I-10 corridor,” even as
revised in its Opposition to Defendant’s motion to include the “corridor” from “Houston, Texas
to Mobile, Alabama,” because this description provides no economically significant bounds to
North or South and fails to address whether consumers can practically turn to other geographic
areas or to competing suppliers from outside the area. In order to “solidify its hold” on a market,
one must necessarily not have had previous control over that market, thus this statement allows
the inference that there is more than one player in this fly ash market. (Doc. 1, XI). Yet, the
Complaint fails to allege specific facts regarding the number of competitors, the “area of
effective competition,” Apani, 300 F.3d at 628, and whether competing suppliers face barriers to
entry effectively barring movement into the market.
The Complaint also fails to sufficiently define the relevant product market. Granting all
factual inferences in Plaintiff’s favor, BRI nevertheless fails to propose a relevant product market
with reference to all interchangeable substitute products or to the cross-elasticity of demand for
the particular variety of fly ash marketed by the present parties. Id. BRI references fluctuations
7

in a national fly ash market, as well as an initial period of time in which fly ash was not yet
marketable, and then merely asserts that “there is no substitute product for fly ash in this
market,” should that market be defined.

(Doc. 1, XII). Plaintiff fails to differentiate the

contemporary relevant fly ash market by its pertinent characteristics of elasticity or
substitutability and asserts an unsupported legal conclusion of the product’s reasonable
interchangeability. Leegin, 615 F.3d at 417. An analysis of Defendant’s monopolistic conduct is
critically dependent upon the sufficiency of the definition of the relevant market. Without these
elements, the Court cannot analyze whether the Defendant has market power in the relevant
market, whether barriers to entry exist in the market, or whether Defendant can or has
maintained monopoly power in the relevant market. Greater specificity will be required in BRI’s
amended complaint.
b. Market Power
The Court agrees with Headwaters’ contention that BRI’s Complaint must be dismissed
for failure to allege sufficient facts regarding Headwaters’ market power. This conclusion must
be reached since the Court has found that the Complaint insufficiently defines the relevant
market. Such a definition is necessary to assessments of market power. Roy B. Taylor Sales,
Inc. v. Hollymatic Corp., 28 F.3d 1379, 1386 (5th Cir. 1994).
Market power is the ability to raise prices or exclude competition in the relevant market.
United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391 (1956). Market power may
be measured by a firm’s control over market share or some characteristics that allow a large
share to be controlled by that firm even without a disproportionate share of it. Domed Stadium
Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d 480, 489 (5th Cir. 1984). A plaintiff must show that a

8

defendant had a “legally significant share of the market” in order to establish monopolization or
attempted monopolization under § 2 of the Sherman Act. Pastore, 24 F.3d at 490. In addition to
market share, measuring market power requires consideration of “the strength of the competition,
probable development of the industry, the barriers to entry, the nature of the anti-competitive
conduct, and the elasticity of consumer demand.” Pastore v. Bell Tel. Co. of Pennsylvania, 24
F.3d 508, 513 (3d Cir. 1994). These additional factors to statistical market share are important
because, absent barriers to entry, there is no way to exclude competition thereby controlling
prices. See Roy B. Taylor, 28 F.3d at 1388.
Plaintiff asserts that Headwaters cut the price of fly ash in order to drive BRI’s revenue
stream unsustainably low. (Doc. 1, XIX). Once Headwaters secured the contract with LaGen,
the Complaint states that Headwaters raised prices for a period of time, despite an excess supply
and declining demand “throughout the United States.” (Doc. 1, XXV). The Court recognizes
that some inference of Headwaters’ market power could be drawn from these assertions of price
control, but only if the Court assumes their applicability to the relevant market by calculating the
relationship between the national supply and demand for fly ash and that of the “I-10 corridor.”
Additionally, the inference of Headwaters’ dominant market position may be drawn from BRI’s
assertion that Headwaters’ tactics placed it in default. The Court, however, is left to analyze
insufficiently pled assertions regarding each factor of market domination. BRI must amend to
provide further factual support of Headwaters’ purported control of market prices in the relevant
market.
The Complaint also fails to define any current barriers to entry in the relevant market, a
key factor in a market power analysis. Plaintiff contends that “most of the concrete in this
market is required to contain fly ash” and that “there is no substitute for fly ash in this market.”
9

(Doc. 1, XII). BRI leaves the Court to wonder at the composition of the concrete not defined as
“most” in this market and to the basis of this proposed market-wide requirement. The Court
recognizes that fly ash is a classification of coal combustion residual, of which a few exist and
are used in the production of concrete. Although the class of fly ash supplied by LaGen may be
so highly preferred, or “required,” in the relevant market to create barriers to entry, the
Complaint cannot rest upon a naked assertion of its non-substitutable nature.
It is possible that the claimed decline and subsequent rise in fly ash prices successfully
excluded competitors for a time, but that assertion does not provide any sustained barrier.
Furthermore, it cannot be properly taken that such a barrier is “large enough to trigger judicial
concern” without a sufficiently described relevant market. Stearns Airport Equipment Co., Inc.
v. FMC Corp., 170 F.3d 518, 531 (5th Cir. 1999); see also Doctor’s Hosp., 123 F.3d at 311
(explaining that a description of relevant market, including availability of competitor substitutes,
is of critical importance). BRI must amend its Complaint to include more specific allegations
regarding the definition of the relevant market, the number of competitors in the market, and the
current state of competition. Although courts do not require a specific market share percentage
to warrant recovery for a § 2 claim, BRI must provide specific allegations supporting that the
Defendant’s relevant market share is significant. Finally, BRI must provide further specifics as
to why the Defendant has legally significant market power given (1) the nature of the relevant
market(s) and (2) Defendant’s market share therein.

10

Now that the relevant market analysis pertinent to each of BRI’s claims has been
addressed, the Court turns its attention to the elements of BRI’s remaining § 2 claims.5
c. Attempt to Monopolize
BRI asserts that the exclusionary conduct through which Headwaters allegedly attempted
or gained a monopoly is predatory pricing. It is difficult for a plaintiff to successfully bring a
predatory pricing claim. FMC Corp., 170 F.3d at 528 (recognizing that “the standard for
inferring an impermissible predatory pricing scheme is high.”). This is because, to be successful,
a plaintiff must demonstrate that the predatory pricing scheme was plausible, or economically
feasible. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 595 (1986).
Predatory pricing occurs when “[a] business rival has priced its products in an unfair
manner with an object to eliminate or retard competition and thereby gain and exercise control
over prices in the relevant market.” Brooke Group Ltd. V. Brown & Williamson Tobacco Corp.,
509 U.S. 209, 221 (1993). Under § 2 of the Sherman Act, two prerequisites of predatory pricing
recovery must be alleged: (1) the defendant’s pricing is below an appropriate measure of its
costs, and (2) there is a dangerous probability that the defendant will recoup any losses sustained
during the below-cost pricing period. Id. at 222-24.6 The focal point of any predatory pricing
claim is the element of probable recoupment. Matsushita, 475 U.S. at 589 (“The success of any
predatory scheme depends on maintaining monopoly power for long enough both to recoup the

5

To avoid redundancy, the Court summarily finds that BRI failed to state a claim of monopolization under Section
2. As previously addressed, BRI has failed to allege facts regarding the relevant market which is necessary to
determine whether or not the Defendant had the requisite monopoly power.
6

While § 2 of the Sherman Act condemns “predatory pricing when it poses a dangerous probability of actual
monopolization,” the RPA “requires only that there be a reasonable possibility of substantial injury to competition
before its protections are triggered.” Brooke Group, 509 U.S. at 222 (internal quotations and citations omitted).

11

predator's losses and to harvest some additional gain.”) (emphasis in original). For this reason,
the Court will focus its analysis on the probability of recoupment.7
i. Recoupment
A plausible claim of recoupment requires that the pleadings show: (1) that the predatory
scheme “could actually drive the competitor out of the market,” and (2) “…evidence that the
surviving monopolist could then raise prices to consumers long enough to recoup his costs
without drawing new entrants to the market.” FMC Corp., 170 F.3d at 528-29. BRI argues that
it has pled facts sufficient to meet the first prong of recoupment because it was eliminated from
the relevant fly ash market as a result of Defendant’s lowball price bidding and that Headwaters
is certain to recoup associated losses because there are no relevant substitutes. The Defendant
contends that (1) BRI fails to allege that Headwaters’ pricing, before or after winning the
solicitation, was below cost, (2) BRI fails to allege facts regarding the relevant market, and (3)
BRI has failed to support its legal conclusion that the relevant market contains absolute barriers
to entry because there is no substitute for fly ash. The Court agrees with the Defendant.
First, the Complaint must be amended to adequately support that Headwaters’ alleged
predatory conduct drove BRI out of the market. Adequate definitions of the relevant market and
Defendant’s market power are essential to an analysis of Headwaters’ conduct and associated
impact upon BRI. The Court’s analysis will proceed under the assumption that a relevant market

7

Though focusing its analysis on the probability of recoupment, the Court also finds that BRI failed to plead facts
sufficient to support that the Defendant’s price fell below an appropriate measure of their costs or that the Defendant
acted with specific intent to gain monopoly power. Accordingly, BRI must amend its Complaint to include facts
sufficient to define the relevant market, the associated substitutability of fly ash, and allege that Headwaters’ pricing
was predatory, i.e., below some “appropriate measure” of cost. Brooke Group, 509 U.S. at 223. This Court,
following the “long embraced: standard adopted by the Fifth Circuit, considers an “appropriate measure” of cost to
be the average variable cost. FMC Corp., 170 F.3d at 528.

12

exists and that Defendant has sufficient market power to warrant antitrust concern under § 2 of
the Sherman Act.
BRI appears to allege that it was driven out of the market by the Defendant’s “pricesqueezing” scheme. Defendant contends that BRI has failed to allege “price-squeezing” as part
of its anticompetitive conduct claim. Although BRI has not done so with requisite specificity,
Defendant incorrectly asserts that BRI has not alleged that Headwaters took part in predatory
bidding in the upstream market. The Court is not wholly persuaded that this case merely consists
of “an instance of a wholesaler replacing one exclusive distributor with another.” (Doc. 10-1, p.
18). BRI alleges that it was eliminated from the fly ash market after Headwaters engaged in
predatory bidding with LaGen to minimize the profitability of that enterprise for BRI, and then
ensured its elimination by “cutting the price of fly ash in the I-10 corridor to a level that it was
certain that BRI could not generate enough revenue” to maintain operations. (Doc. 1, XIX). At
this stage of the litigation, however, BRI has not adequately addressed market power or market
definition. While it is possible that the Defendant’s bidding and pricing practices could have
constituted a predatory “price-squeeze,” and that BRI’s elimination from the fly ash market was
the result of Headwaters’ practices, greater specificity will be required in the amended Complaint
to permit a fuller analysis.
Second, the Complaint must be amended to provide sufficient facts supporting the
probability that the Defendant could charge supracompetitive prices for a period of time long
enough to recoup the losses suffered as a result of the below-cost predatory pricing period.
Brooke Group, 509 U.S. at 225. Courts will not condemn behavior where it appears likely that a
predator’s plan will fail to be profitable, because such behavior “produces lower aggregate prices
in the market, and consumer welfare is enhanced.” Id. The Defendant asserts that BRI’s
13

allegations are not sufficient to show that recoupment is plausible because BRI has provided
insufficient factual support regarding market definition and the potential for future barriers to
entry. Defendant also argues that BRI fails to allege that Defendant took part in predatory
pricing because BRI does not allege that it engaged in below-cost pricing.
If barriers to entry are not significant, as the monopolist raises market prices to its own
benefits, new competitors will enter the market under that inducement.

It is, in fact, the

condition of the market following the defendant’s removal of rivals to which courts should turn
in analyzing predatory pricing claims. Cargill, Inc. v. Monfor of Colorado, Inc., 479 U.S. 104,
119 n. 15 (1986). It is then that the monopolist may charge supracompetitive prices and the
existent barriers might well “prove insignificant,” and the antitrust charge unworthy of litigation.
Id. Assuming that BRI alleged below-cost pricing, it has not alleged facts sufficiently supporting
any barriers to entry in the relevant market that would likely allow Headwaters to recoup the
losses sustained by such predatory practices. The barriers to entry alleged by BRI include only
the naked assertions that there are no substitutes to fly ash in the relevant market and that
Headwaters exercised monopolistic market power when it raised its prices after acquiring the
LaGen contract without inducing any entries into the relevant market.

To support BRI’s

prediction that Headwaters will maintain a monopolistic hold upon the relevant market,
additional facts to show how the particular market is susceptible to a monopoly takeover is
essential. Felder’s Collision Parts, Inc., 2013 U.S. Dist. LEXIS 55097, at *20, (explaining the
critical necessity of market definitions when assessing the recoupment prong of predatory pricing
allegations). The Defendant correctly contends that the latter assertion cannot survive a motion
to dismiss as pled because the relevant market power and definition have not been provided,

14

making assessment of the claim’s plausibility impossible. BRI must address the deficiencies
described by amendment.
After discussing the recoupment element under the predatory pricing analysis, the Court
returns to the remaining elements of an attempt to monopolize claim under § 2.
ii. Specific Intent to Achieve Monopoly Power
“The intent must be to do more than compete vigorously; vigorous competition is
precisely what the antitrust laws are designed to foster.” Adjusters Replace-A-Car, Inc. v.
Agency Rent-A-Car, Inc., 735 F.2d 884, 887 (5th Cir. 1984). BRI must show Headwaters’
specific intent to acquire and exercise the power to fix price or exclude competition. Id. BRI
asserts that Headwaters planned and conspired to monopolize the relevant market by acquiring
the LaGen contract through predatory pricing. Defendant did not contest this issue in its Motion
to Dismiss. Therefore, the Court will reserve analysis of Headwaters’ specific intent to engage
in conduct contrary to provisions of the Sherman Act for review of BRI’s allegations of
conspiracy to monopolize under § 2 of the Sherman Act.
iii. Dangerous Probability of Obtaining Monopoly Power
The third element of an attempted monopolization claim requires a plaintiff to show
whether there is a dangerous probability of the defendant obtaining monopoly power through
anticompetitive conduct. The Court finds that the above analysis of the recoupment prong of the
predatory pricing element applies equally here. BRI’s amended complaint must provide further
factual support regarding the Defendant’s market power, its ability to hold market control at the
exclusion of competitors, and its associated ability to recoup losses from the alleged predatory
conduct.
15

d.

Conspiracy to Monopolize

BRI claims that Headwaters made its intent known to monopolize the market by pointing
to an email sent by Headwaters to LaGen, in which Headwaters outlined that if it could “solidify
its hold” on fly ash along the I-10 corridor, both entities would reap lucrative financial rewards.
(Doc. 1 ¶XI) However, this contested email, without more, does not allege enough factual
matter to state a valid claim. In order for a plaintiff to show that there was intent to monopolize,
the plaintiff must demonstrate that the monopoly was plausible, or, economically feasible. In re
Beef Industry Antitrust Litigation, 907 F.2d 510, 515 (5th Cir. 1990). Economic feasibility is
determined by an analysis of the defendant’s market power in the relevant market. Total Ben.
Services Inc. v. Groups Ins. Admin., Inc. 875 F.Supp. 1228, 1234 (E.D. La. 1995). As previously
discussed, BRI has failed to allege facts tending to show the relevant market that the defendant
has conspired to monopolize or relevant conditions thereof. Therefore, BRI must address these
deficiencies by amending their complaint.
B. Vertical Restraint of Trade Under Section 1 of the Sherman Act
Section 1 of the Sherman Act prevents concerted activity in the form of any contract,
combination, or conspiracy in restraint of trade. 15 U.S.C. §1.

A claim of conspiracy or

agreement to unreasonably restrain trade in contravention of § 1 of the Sherman Act requires the
provision of factual support, taken as true, to suggest that an agreement was made. Bell Atlantic
Corp. v. Twombly, 550 U.S. 544 (2007). “An allegation of parallel business conduct and a bare
assertion of conspiracy will not suffice to state a claim” and “without more, parallel conduct does
not suggest conspiracy…” Id. at 557-58. The elements of an unreasonable restraint on trade are
(1) the defendant engaged in conspiracy, (2) the conspiracy had effect of restraining trade (3) the

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trade was restrained in the relevant market and (4) there was a causal antitrust injury. Stewart
Glass & Mirror, Inc. v. U.S. Auto Glass Discount Centers, Inc., 200 F.3d 307 (5th Cir. 2000).
BRI claims that the negotiations and the resulting exclusive distributor agreement between
Headwater and LaGen constituted an unreasonable vertical restraint of trade. BRI further alleges
that this was done because Headwaters convinced LaGen that the arrangement would ensure that
Headwater monopolized the market which would be lucrative for both parties. Courts evaluate
most vertical restraints under a rule of reason analysis. Continental T.V., Inc. v. GTE Sylvania,
Inc., 433 U.S. 36 (1977). A decision to unilaterally transfer one’s business from one entity to
another is normally adjudged to be legitimate under the Colgate doctrine. Aladdin Oil Co. v.
Texaco, Inc., 603 F.2d 1107, 1113-1115 (5th Cir. 1979). However, this decision will come under
judicial scrutiny if it is made for an anticompetitive goal or purpose such as “to acquire a
monopoly…or to establish market dominance and drive out existing competitors…” Id. at 111516 (citations omitted). “The requirement of illegitimate purpose or effect marks the distinction
between concerted activity which is an innocent aspect of business and concerted activity which
is inimical to competition.” Id.
Here, BRI has failed to allege facts supporting this claim. Instead of alleging specific
factual matter, BRI has merely made a bare assertion that LaGen and Headwaters entered into a
conspiracy. Furthermore, BRI has not alleged facts to support that the exclusive distributor
agreement had any anticompetitive effects on the relevant market. As discussed previously, such
facts would need to show the competitive climate in the market, including, the number of
competitors, the barriers to entry, and whether there are available substitutes. To the contrary,
BRI has focused on the anticompetitive effects that the arrangement has had on its own business
ignoring that it is axiomatic that the antitrust laws are meant to protect competition not
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competitors. Brooke Group, 509 U.S. 224 (citing Brown Shoe Co. v. United States, 370 U.S. 294,
320 (1962)). Therefore, BRI must amend its Complaint to plead more sufficient facts.
C. Price Discrimination Under the RPA
To establish a claim under the RPA, a plaintiff must show: (1) sales made in interstate
commerce, (2) the commodities sold were of like grade and quality, (3) the defendant-seller
discriminated in price between buyers, and (4) that the price discrimination had a prohibited
effect on competition. Infusion Res., Inc. v. Minimed, Inc., 351 F.3d 688, 692 (5th Cir. 2003).
The complained-of injury8 must flow from a defendant’s acts of price discrimination, which is
“merely a price difference.” Water Craft Management, L.L.C. v. Mercury Marine, 361 F. Supp.
2d 518, 526 (M.D. La. 2004) (citing Texaco Inc. v. Hasbrouck, 496 U.S. 543, 559 (1990)). Price
discrimination is “defined as charging different buyers different prices for the same items.” Id.
The Defendant argues that BRI has failed to allege facts to address any of these elements.
However, the Complaint does support an inference that sales were made in interstate commerce
as it alleges that both BRI and the Defendant operate in the “I-10 corridor” which denotes
interstate commerce. It is not necessary at this stage for BRI point to specific customers to
whom the Defendant sold commodities of like grade and quality. It is however necessary for
BRI to allege facts demonstrating that the commodities were of like grade and quality, the
defendant discriminated in price among buyers, and the price discrimination had an effect on
competition. BRI has failed to allege any of these requisite facts.
Finally, to the extent that BRI asserts a claim under Section 13a of the Clayton Act, this
claim is not viable. More commonly referred to as Section 3 of the Robinson-Patman Act, this
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Two basic types of injury are recognized under the RPA: primary-line injury and secondary-line injury. Infusion,
351 F.3d at 692. A primary-line injury results when one seller’s acts of price discrimination between favored and
disfavored buyers results in an injury to a market player competing at the same level of direct competition. Water
Craft, 361 F. Supp. 2d at 565. A secondary-line injury results from a seller’s price discrimination between favored
and disfavored buyers. Infusion, 351 F.3d at 692.

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statute is a means for the Department of Justice to criminally enforce the statute and is wholly
inapplicable here. See Native Am. Distrib. V. Seneca-Cayuga Tobacco Co., 546 F.3d 1288, 1298
(10th Cir. 2008) (“[P]laintiff’s may not bring a civil claim under §13a because it is reserved for
criminal enforcement by the Department of Justice.”) (citation omitted). Therefore, BRI may not
proceed with this claim.
D. Louisiana Antitrust Claims
In addition to its claims under federal law, BRI brings several claims under the Louisiana
antitrust statutes. BRI alleges that the Defendant has violated La. R.S. 51:122 and La. R.S.
51:123 which are the functional equivalents of §§1 and 2 of the Sherman Act. As a result of the
statutes’ similarity, “Louisiana courts have turned to the federal jurisprudence analyzing those
parallel federal provisions for guidance.” Southern Tool & Supply, Inc. v. Beerman Precision,
Inc., 826 So.2d 271, 278 (La. App. 4 Cir. 2003). For this reason, the preceding discussion is
relevant and BRI must amend its Complaint for the same reasons mentioned in the foregoing
analysis.
Additionally, the Defendant asserts that BRI’s state law claims fail because the claims
have not been brought within the applicable prescriptive period. In response, BRI argues that the
prescriptive period did not begin to run until BRI became aware of the alleged illegal activity, or
in the alternative, until the time that the continuing tort ended. The Louisiana Civil Code does
not explicitly set a liberative prescriptive period within which a plaintiff must institute an
antitrust action. State ex rel. Ieyoub v. Bordens, Inc., 684 So.2d 1024. 1026 (La. App. 4 Cir.
1996). That said, the Louisiana Supreme Court has held that an antitrust action is analogous to a
tort and therefore the one-year prescriptive period for torts is applicable to antitrust actions.
Loew’s, Inc. v. Don George, Inc., 110 So. 2d 553 (La. 1959).

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Prescription begins to run at the time that the cause of action accrues unless an exception
applies. Corsey v. State, Through Dept. of Corrections, 375 So. 2d 1319, 1321 (La. 1979). One
such exception, the doctrine of contra non valentem, suspends the running of the prescriptive
period when the cause of action is not known or reasonably knowable by the plaintiff. Id. at
1322. Generally, the party excepting on the basis of prescription has the burden to prove that the
prescriptive period has lapsed. Campo v. Correa, 828 So. 2d 502, 508 (La. 2002). However,
when the cause of action is prescribed on the face of the pleadings, the burden shifts to the
plaintiff to show that the action has not been prescribed. Id. To satisfy this burden, “the
plaintiffs must initially allege facts with particularity which indicate that the injury and its causal
relationship to the alleged misconduct were not apparent or discoverable until within the year
before the suit was filed.” Id. at 509, n.9. Another exception to the general rule is the continuing
tort doctrine which acts to delay the beginning of a prescription period in complex business torts
until the continuing tort ceases. State ex rel Ieyoub, 684 So. 2d at 1027.
BRI argues that contra non valentem applies here because it was not aware of the
Defendant’s conduct until April 25, 2012 when discovery that was gathered in a separate
litigation revealed evidence of the potential misconduct. In the alternative, BRI argues that the
monopoly that the Defendant currently maintains is a continuing tort and the prescriptive period
will not begin to run until the tort ceases. In response, the Defendant argues that BRI knew of all
of the relevant facts supporting its claim no later than January of 2011 and therefore BRI had
inquiry notice of any potential misconduct at that time. The Defendant further argues that the
continuing tort doctrine is inapplicable in the present case. The Court agrees with the Defendant
that the continuing tort doctrine is wholly inapplicable here because the continuing tort doctrine
requires that there be continuous wrongful action, not just continuing ill effects. Crump v. Sabine
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River Auth., 737 So. 2d 720, 728 (La. 1999) (“A continuing tort is occasioned by unlawful acts,
not the continuation of the ill effects of an original, wrongful act.”); State ex rel. Ieyoub, 684 So.
2d at 1027 (“There must be continuing acts coupled with continued damages.”). Here, the last
alleged illegal act occurred in January 2011. As to the viability of the contra non valentem
doctrine, the Court reserves findings on this issue until BRI submits its amended Complaint,
wherein, BRI must allege facts with particularity to satisfy its burden to prove that the state law
claims are not prescribed.
E. BRI’s Request For Leave to Amend
BRI has requested leave to file an amended complaint to cure any deficiencies that the
Court may find. The Defendant, in reply, argues that BRI’s request should be denied because
BRI has not properly requested leave to amend and any amendment that BRI could make would
not aid it in making out a claim. Accordingly, the Defendant maintains that BRI’s request should
be denied.
While it is true that “a bare request in an opposition to a motion to dismiss…does not
constitute a motion for [leave to amend],” Pension Fund v. Integrated Electrical Services, Inc.,
497 F.3d 546, 555-56 (5th Cir. 2007) (citations omitted), district courts may allow plaintiffs at
least one opportunity to cure any deficiencies found in the pleadings before dismissing their case.
Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 329 (5th Cir. 2002).
A court may deny a request to amend to avoid “undue delay, bad faith or dilatory motive on the
part of the movant, repeated failure to cure deficiencies by amendments previously allowed,
undue prejudice to the opposing party by virtue of allowance of the amendment, futility of
amendment, etc.” Pension Fund, 497 F.3d at 556 (citation omitted).

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Despite Defendant’s argument to the contrary, the Court does not believe that allowing
BRI to amend its claim would be futile. Though the Complaint is deficient in many ways, there
are enough factual allegations, taken as true, that give reason for some suspicion. As previously
mentioned, the Court is not wholly convinced that, given the alleged circumstances, this was an
innocent replacement of one exclusive distributor with another. Therefore, the Court is inclined
to grant BRI’s request for leave to amend.
IV.

Conclusion
Accordingly, Defendant’s Motion to Dismiss (doc. 10) is DENIED, and Plaintiff’s

request for leave to amend (doc. 14) is GRANTED.

Signed in Baton Rouge, Louisiana, on September 11, 2013.





JUDGE JAMES J. BRADY
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

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