HANOVER 3201 REALTY, LLC v. VILLAGE SUPERMARKETS, INC. et al

Filing 29

OPINION. Signed by Judge Stanley R. Chesler on 10/2/14. (jd, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
:
HANOVER 3201 REALTY, LLC,
:
:
Plaintiff, :
:
v.
:
:
VILLAGE SUPERMARKETS, INC. et al., :
:
Defendants. :
:
:

Civil Action No. 14-1327 (SRC)

OPINION

CHESLER, District Judge
This motion comes before the Court on the motion to dismiss the Complaint, pursuant to
Federal Rule of Civil Procedure 12(b)(6), for failure to state a valid claim for relief by
Defendants Village Supermarkets, Inc. and Hanover and Horsehill Development LLC. For the
reasons stated below, the motion to dismiss will be granted.
The Amended Complaint alleges a dispute between Plaintiff Hanover 3201 Realty, LLC
(the “Developer”) and Defendants Village Supermarkets, Inc. and Hanover and Horsehill
Development, LLC, alleged in the Amended Complaint to be a wholly-owned subsidiary of
Village Supermarkets (collectively, “ShopRite”). In brief, the Amended Complaint alleges that
the Developer owns a piece of property near Morristown, New Jersey, that the Developer has a
lease and site development agreement for the property with Wegman’s, the supermarket
company, and that ShopRite has worked to prevent the development of a Wegman’s store on the
property. (Am. Compl. ¶¶ 1-4.) The Amended Complaint asserts seven claims. The First and
Second Counts assert claims for monopolization, attempted monopolization, and conspiracy to

monopolize, in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. The other five claims
arise under state law.
Defendants move to dismiss the Sherman Act claims on several grounds. Among them
are arguments that the First and Second Counts fail to state valid claims for relief because the
Developer lacks antitrust standing and the Amended Complaint fails to sufficiently allege
antitrust injury.
The Third Circuit has summarized the factors to be considered in the antitrust standing
inquiry as follows:
(1) the causal connection between the antitrust violation and the harm to the
plaintiff and the intent by the defendant to cause that harm, with neither factor
alone conferring standing; (2) whether the plaintiff's alleged injury is of the type
for which the antitrust laws were intended to provide redress; (3) the directness of
the injury, which addresses the concerns that liberal application of standing
principles might produce speculative claims; (4) the existence of more direct
victims of the alleged antitrust violations; and (5) the potential for duplicative
recovery or complex apportionment of damages. In re Lower Lake Erie Iron Ore
Antitrust Litig., 998 F.2d 1144, 1165-66 (3d Cir. 1993).
The second factor, antitrust injury, is a necessary but insufficient condition of
antitrust standing. If it is lacking, we need not address the remaining . . . factors.
Ethypharm S.A. Fr. v. Abbott Labs., 707 F.3d 223, 232-233 (3d Cir. 2013). Thus, where
antitrust injury has not been adequately pled, a party necessarily lacks antitrust standing.
As to antitrust injury, the Third Circuit has held:
As a general matter, the class of plaintiffs capable of satisfying the antitrust-injury
requirement is limited to consumers and competitors in the restrained market, and
to those whose injuries are the means by which the defendants seek to achieve
their anticompetitive ends . . .
W. Penn Allegheny Health Sys. v. UPMC, 627 F.3d 85, 102 (3d Cir. 2010) (citations omitted).
The Third Circuit has recognized a limited exception to this rule “where the harm is ‘inextricably

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intertwined’ with the defendant’s wrongdoing.” Carpet Group Int'l v. Oriental Rug Importers
Ass'n, 227 F.3d 62, 77 (3d Cir. 2000). The Third Circuit subsequently limited the scope of the
exception stated in Carpet Group:
There, we found that brokers, who were neither direct competitors of the
defendants nor consumers, had standing to assert an antitrust action against an
association of importer/wholesalers of oriental rugs because their injury was
“inextricably intertwined” with defendants’ alleged anticompetitive conduct in the
market for oriental rugs. Since that time, however, we have declined to extend the
“inextricably intertwined” exception beyond cases in which both plaintiffs and
defendants are in the business of selling goods or services in the same relevant
market.
Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 320-321 (3d Cir. 2007). ShopRite contends
that antitrust injury is lacking because the parties are not direct competitors, the Developer is not
a consumer, and the requirements of the limited exception are not satisfied.
The Developer argues in opposition that it fits within the limited exception because its
injuries are inextricably intertwined with those of consumers or competitors. The Developer’s
reasoning in support of this position, however, is unpersuasive. First, the Developer contends
that the Amended Complaint alleges antitrust injury in two different markets, “the full-service
supermarket market, and the full-service supermarket shopping center market, i.e., the shopping
center landlord market.” (Pl.’s Opp. Br. 18.) The Developer argues that it competes directly
with ShopRite in the shopping center landlord market (the “Development Market”), but points to
no supporting factual allegations in the Amended Complaint. This Court finds nothing in the
Amended Complaint that indicates that ShopRite competes as a landlord of shopping centers.
Nor does the Amended Complaint plead facts that make plausible that the Developer competes
as a grocer. The parties do not appear to compete against each other in either market.
The Developer cites in support the Seventh Circuit’s decision in Serfecz v. Jewel Food
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Stores, 67 F.3d 591, 599 (7th Cir. 1995), which is not analogous. In Serfecz, Plaintiffs were
lessors of rental space to grocers. Id. at 597. Five Defendants were alleged to have been
involved in mall development. Id. at 595 n.5. Serfecz thus involved a dispute between shopping
center developers. The Amended Complaint does not allege that ShopRite engaged in
misconduct as a lessor of rental space for grocers, or as a shopping center developer.
As to the Development Market, the Amended Complaint does not allege facts which
make plausible an inference that Plaintiff has sustained an injury which is of the type for which
the antitrust laws were intended to provide redress. The Amended Complaint fails to adequately
allege antitrust injury as to this market.
As to the supermarket shopping center market (the “Supermarket Market”), the
Developer argues that it has standing to assert these antitrust claims because it was the intended
target of Defendants’ anti-competitive activities. There are two main problems with this
argument. First, setting aside for the moment the question of whether Defendants are right on
the law, the Amended Complaint does not allege a factual basis for an inference that ShopRite
targeted the Developer. Rather, it seems obvious from the Amended Complaint that ShopRite, if
it targeted anyone, would have targeted its grocer competitor, Wegman’s. More significantly,
however, the Developer has not overcome the limitation to the “inextricably intertwined”
exception stated in Broadcom. Plaintiff contends, correctly, that Broadcom does not take a stand
against extending the “inextricably intertwined” exception, but notes that the Third Circuit
merely stated that it has, so far, declined to do so. This Court similarly declines to break new
ground in this regard; perhaps Plaintiffs, on appeal, will convince the Third Circuit to expand the
exception. At this point, it does not appear to this Court that Plaintiff’s claims as to the

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Supermarket Market fall within the “inextricably intertwined” exception. The Developer and
ShopRite are not direct competitors in the Supermarket Market. The Amended Complaint fails
to adequately allege antitrust injury as to this market.
Furthermore, the argument that this Court should break new ground and expand the
exception, because the Third Circuit has not expressly forbidden it, is not a persuasive argument
in favor of doing so. The Developer does not explain what makes that a just outcome. In Carpet
Group, the Third Circuit explained that it had created the exception because not doing so could
“lead to results that conflict with Supreme Court and other precedent.” 227 F.3d at 76. The
Developer’s opposition brief does not explain how such a conflict would be produced in this
case, absent an expansion of the law.
It is also helpful to look at the Third Circuit’s comments about the exception in
Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, 171 F.3d 912, 926 (3d Cir.
1999):
[W]e have sometimes expressed the injury requirement in terms of the harm being
“inextricably intertwined” with the defendant's wrongdoing. See, e.g., Gulfstream
III Assocs., 995 F.2d at 429 (holding that plaintiff's injury may flow from
defendant's wrongdoing if “there exists a ‘significant causal connection’ such that
the harm to the plaintiff can be said to be ‘inextricably intertwined’ with the
antitrust conspiracy” (citation to McCready and other cases omitted)). The simple
invocation of this phrase, however, will not allow a plaintiff to avoid the
fundamental requirement for antitrust standing that he or she have suffered an
injury of the type--almost exclusively suffered by consumers or competitors--that
the antitrust laws were intended to prevent.
This makes clear that the bottom line requirement here is that the injury must be of the type that
the antitrust laws were intended to prevent. The Developer has made no showing that its injuries
meet this standard.
In support of its “inextricably intertwined” argument, the Developer cites Blue Shield of
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Va. v. McCready, 457 U.S. 465, 478 (1982). McCready is indeed a key case here – but it does
not support the Developer’s position. In McCready, the plaintiff was a consumer who was not
the intended target of the anti-competitive scheme, but rather an indirect victim. Id. at 483. The
Amended Complaint does not allege that the Developer is a consumer, but rather a business that
is the indirect victim of ShopRite’s acts against Wegman’s. There is nothing in McCready that
supports the argument that the Developer has suffered the kind of injury that the antitrust laws
were intended to prevent.
The Sixth Circuit’s application of McCready in Southaven Land Co. v. Malone & Hyde,
Inc., 715 F.2d 1079, 1086 (6th Cir. 1983), is on point. Southaven involved a shopping center
owner-lessor, Southaven, who complained of suffering injury from the acts of a grocer, Malone,
accused of interfering with Southaven’s attempts to secure a competing grocer tenant. Id. at
1080. Applying McCready, the Sixth Circuit held:
McCready instructs that an injury “inextricably intertwined” with the injury
sought to be inflicted upon the relevant market or participants therein may fall
“within the area of congressional concern” so as to satisfy the § 4 inquiry. . . . In
the case at bar Southaven’s injury cannot be construed as “inextricably
intertwined”, within the meaning of McCready, with the injury allegedly inflicted
by Malone upon the relevant grocery market so as to make Southaven’s injury “of
a type that Congress sought to redress in providing a private remedy for violations
of the antitrust laws.” McCready, 457 U.S. at 483. Southaven is not alleged to be
a member of a class of “consumers” of grocery products or a class otherwise
manipulated or utilized by Malone as a fulcrum, conduit or market force to injure
competitors or participants in the relevant product and geographical markets.
Although Southaven’s injury may be a tangential by-product of Malone’s averred
monopolistic conduct, such injury is not inextricably intertwined to any injury
inflicted upon the relevant market. Accordingly, Southaven is not a consumer,
customer, competitor or participant in the relevant market or otherwise
inextricably intertwined with any such entity. Its injury is not sufficiently linked
to the pro-competitive policy of the antitrust laws.
Id. at 1086-1087. Such is the case here.

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A district court case on all fours is Rosenberg v. Cleary, Gottlieb, Steen & Hamilton, 598
F. Supp. 642 (S.D.N.Y. 1984). In Rosenberg, a landowner/developer, who was not a grocer, but
a lessor to a supermarket under construction, sued a number of defendants who had attempted to
block the supermarket’s construction with state court litigation. Id. The district court, citing
Southaven, held that, while the complaint alleged a conspiracy among grocer-competitors to
prevent competition, it did not allege that the developer had sustained any antitrust injury. Id. at
645. The Rosenberg court found that, since the developer was not a grocer, its injury was remote
and tangential, and not of the type that should be addressed by the antitrust laws. Id. at 646. The
court stated that the developer’s “lack of actual involvement in the retail grocery market makes it
an inappropriate complainant of an antitrust violation in that market.” Id. at 645. Again, such is
the case here.
As to the parts of the First and Second Counts which allege a conspiracy to violate the
Sherman Act, the Amended Complaint provides only vague and conclusory statements. The
Amended Complaint does not identify the alleged co-conspirators except as “John Doe”
defendants, nor does it state any facts about alleged conspiring conduct. Under Third Circuit
law, “only allegations of conspiracy which are particularized . . . will be deemed sufficient.”
Pennsylvania ex rel. Zimmerman v. Pepsico, Inc., 836 F.2d 173, 181 (3d Cir. 1988). “The
allegation of unspecified contracts with unnamed other entities to achieve unidentified
anticompetitive effects does not meet the minimum standards for pleading a conspiracy in
violation of the Sherman Act.” Garshman v. Universal Resources Holding, Inc., 824 F.2d 223,
230 (3d Cir. 1987). The Amended Complaint does not contain particularized allegations of
conspiracy, and the claims for conspiracy to violate the Sherman Act will be dismissed.

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The claims in the Amended Complaint for violation of the Sherman Act fail to state a
valid claim for relief because they fail to plead an antitrust injury in either the Development
Market or the Supermarket Market. Amendment is futile; no additional factual allegations will
remedy this defect. These claims will be dismissed with prejudice.
Because this Court has dismissed the claims arising under federal law, and because there
is no independent basis asserted for this Court’s subject matter jurisdiction over this case, this
Court now lacks original jurisdiction over this case. “The district courts may decline to exercise
supplemental jurisdiction over a claim under subsection (a) if . . . the district court has dismissed
all claims over which it has original jurisdiction.” 28 U.S.C. § 1367(c)(3). Because this Court
has now dismissed all claims over which it had original jurisdiction, it exercises its statutory
discretion and declines to exercise supplemental jurisdiction over the remaining state law claims.
The motion to dismiss is granted, and the First Count and Second Count are dismissed
with prejudice. The remaining counts are dismissed for lack of subject matter jurisdiction.

s/ Stanley R. Chesler
Stanley R. Chesler, U.S.D.J
Dated: October 2, 2014

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