Solent Freight Services, LTD Inc. v. Alberty et al

Filing 35

MEMORANDUM & ORDER: Omni Defendants' 26 Motion to Dismiss for Lack of Subject Matter Jurisdiction and for Failure to State a Claim is GRANTED. The court declines to exercise supplemental jurisdiction over Plaintiff's remaining state law claims, and they are DISMISSED without prejudice. So Ordered by Judge Nicholas G. Garaufis on 12/18/2012. (fwd'd for jgm) (Lee, Tiffeny)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

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SO LENT FREIGHT SERVICES, LTD. INC.,
d/b/a/ EGGSBY AIR,

MEMORANDUM & ORDER
11-CV-4375 (NGG) (RLM)

Plaintiffs,
-againstCARLOS ALBERTY, OMNI E)(PORT SERVICES,
INC., JOHN KHODOV, and DELE)(, INC.,
Defendants.

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NICHOLAS G. GARAUFIS, United States District Judge.

Plaintiff So lent Freight Services, Ltd. Inc. brought this action against Carlos Alberty,
Omni Export Services, Inc. ("Omni"), (collectively, the "Omni Defendants"), John Khodov, and
DelEx, Inc. ("DelEx") (collectively, the "DelEx Defendants") alleging violations of federal
antitrust law, defamation, tortious interference with business relations, and civil conspiracy
arising from Defendants' actions in the freight forwarding business. (Am Campi. (Dkt. 17).)
Omni Defendants have moved to dismiss the Amended Complaint under Federal Rules of Civil
Procedure 12(b)(l) and (b)(6) for lack of subject matter jurisdiction and failure to state a claim.
(Omni Mot. to Dismiss (Dkt. 26).)
For the reasons stated below, Omni Defendants' motion is GRANTED.
I.

BACKGROUND
A.

Factual Background

For the purposes of contemplating Omni Defendants' motion to dismiss, the court accepts
as true the following facts from Plaintiff's Amended Complaint. This antitrust action has been
brought by Plaintiff, a freight forwarder, against

O~ni,

1

a competitor freight forwarder. (See Am.

Compl.) Plaintiffhas also sued Carlos Alberty, Omni's principal; DelEx, Omni's New York
agent; and John Khodov, DelEx's Director of Logistics. (See id. ~~ 2-8.) The relevant product
market for the alleged antitrust violations is the "logistics and transportation of Hatching Eggs
for export originating from the East Coast of the United States." (Id. at 16.)
Plaintiff is a New York corporation formed in 1994. (I d. ~~ 1, 22.) Plaintiff is in the
business of"freight forwarding," which involves arranging logistics and transportation for the
shipment of products, operating primarily out ofthe East Coast. (ld. ~~ 16, 22, 24.) This often
includes negotiating with cargo shippers for favorable worldwide shipping rates for its clients. 1
(Id.

~

24.) Over the course of its business, Plaintiff has offered freight forwarding services for "a

variety of different products." (ld.

~

22.)

Omni is a Florida corporation formed in 1995. (I d.

~~

2, 23 ). Omni operates freight

forwarding services for hatching eggs 2 originating from the East Coast of the United States.
(I d.

~

23.) Del Ex is the New York agent for Omni and Alberty, and routinely arranges logistics

and cargo shipments on their behalf. (ld.

~~

4-5.) Omni maintains 75% or more of the market

for freight shipping of hatching eggs originating from the East Coast. (Id.

~

25.)

In 2011, Plaintiff decided to start freight forwarding hatching eggs. 3 (ld. ~~ 32-35.) By
entering the freight forwarding of hatching eggs market, Plaintiff "decided to compete directly"
with Omni. (ld.

~

35.) Besides Plaintiff and Omni, there are four other companies that offer

freight forwarding of hatching eggs. (I d.

~

26.) These four companies comprise about 15% of

the market. (ld.) There are eight companies in the United States that produce and sell hatching

A helpful characterization of this business is that freight forwarders are "travel agents" for cargo. (See
Omni Mem. (Dkt. 28) at 2.)
Hatching eggs, according to the Amended Complaint, are "poultry hatching eggs." (Am. Compl., 15.)
Plaintiff does not specify whether it began shipping exclusively hatching eggs, or simply added hatching
eggs to the variety of different products it already shipped.

2

eggs for export, and five of the eight ship the majority of their products using Omni's freight
forwarding services. (Id. ~ 27.)

B.

Business Dealings Giving Rise to Plaintiff's Claims

Plaintiffs claims stem from two of Ornni's business dealings: (1) an arrangement
between Omni and Morris Hatchery ("Morris"), an egg hatchery; and (2) an email Alberty sent
on behalf of Omni to several cargo shippers with whom Plaintiff had previous business
relationships. (See Am. Compl.)
1.

Omni 's Agreement with Morris
~

Diane Alberty-Defendant Alberty's wife-works for the President of Morris. (ld.

31.)

This relationship has allowed Morris to develop an arrangement with Omni wherein Ornni gives
Morris confidential shipping information4 on purchasers of hatchery eggs that Omni receives in
the course of providing freight forwarding for other hatcheries. (ld.) In return for the
information on its competitors' customers, Morris requires all of its customers to use Omni's
freight forwarding services. (I d.)
When Plaintiff entered the market, several small egg hatcheries approached it about its
services and "expressed displeasure with Omni." (Id.

~~

32-34.) The hatcheries complained that

after they used Omni for shipping, their customers would receive calls from Morris. (ld.

~

34.)

Plaintiff alleges that this arrangement is set up so that Omni can monopolize the market for
freight forwarding of hatching eggs, and that it has resulted in artificially high prices for hatching
eggs and the shipping of hatching eggs in the relevant product market. (ld.)

4

This shipping information includes the name of the purchaser and the type and quantity of eggs being
purchased. (l.Q_,_)

3

2.

Omni 's Email

After recently entering into the market for shipping hatching eggs, Plaintiff offered its
services to a customer and negotiated with KLM Cargo for favorable shipping rates. (Id. ~~ 3537.) According to Plaintiff, this customer was a former customer ofOmni's. (Id. ~ 38.) KLM
erroneously listed the shipping contents as flowers, rather than hatching eggs, but corrected the
mistake before shipping. (ld. ~ 42.) Plaintiff alleges that, at some point, Omni and Alberty were
made aware that Plaintiff was "undercutting [Omni's] rates and undermining its price fixing and
monopolistic conspiracy," and that as a consequence, Omni sought to preserve its monopoly by
having KLM and other shippers increase the rates they offered to other freight forwarders for
shipment of hatching eggs. (Id.
Plaintiffs new customer. (ld.

~

~

43-44.) Thereafter, KLM raised the rates almost six-fold on

45.) Plaintiff avers that KLM's action was a direct result of

Omni's efforts to preserve its monopoly. (ld.)
Shortly thereafter, on April6, 2011, Defendant Alberty authored and sent an email on
behalf of Omni to many of Plaintiffs contacts at airlines and shippers, including KLM. (Id.
~

46.) The email, reprinted in full in the Amended Complaint, advised the recipients that

Plaintiff was trying to enter the business of freight forwarding hatching eggs, and was attempting
to secure lower rates for its customers by misleading the shippers about the cargo they would be
shipping. (ld.

~

47.) The email says of Plaintiff and Plaintiffs trade name entity "Eggsbyair,"

"[h]opefully you will make [it] more difficult for them to ship or just close your doors to them,
they are up to no good and are lying to each of you in order to get you to move their cargo."
(l.QJ Khodov, on behalf of De lEx, forwarded Omni' s email to several of Plaintiffs shipping

contacts. (ld.

~

49.) Shortly after the contacts received the email, Plaintiff was "advised that

certain cargo owners would no longer ship [Plaintiffs] cargo." (ld.)

4

C.

Procedural Background

Plaintiff brings six causes of action arising from the two business dealings described
above: (1) defamation per se; (2) tortious interference and unfair competition; (3) civil
conspiracy; (4) per se violation of Section 1 ofthe Sherman Act, 15 U.S.C. § 1, for unreasonable
and illegal restraint of trade; (5) violation of Section 1 under the "rule of reason"; and
(6) violation of Section 2 of the Sherman Act, 15 U.S.C. § 2, for an unlawful monopoly. (See
Am. Compl.) Plaintiff pleads that the court has original subject matter jurisdiction over the
federal antitrust claims, and supplemental jurisdiction over the remaining state law claims. (See
id. ~~ 9-12.) Plaintiff amended its Complaint as a matter of right to add details about the relevant
market, and enhance its allegations relating to Omni's business dealings. (See Compl.; Am.
Compl.

~~

31, 59-71.)

Omni Defendants have moved to dismiss Plaintiff's Amended Complaint. 5 (Omni Mot.
to Dismiss.) They argue that the court should dismiss the federal antitrust claims for failure to
state a claim and should decline to exercise supplemental jurisdiction over Plaintiff's remaining
state law claims. 6 (See Omni Mem. (Dkt. 28).) Plaintiff opposes this motion. (See Pl. Mem.
(Dkt. 31 ).)

II.

PLAINTIFF'S ANTITRUST CLAIMS
Omni Defendants argue that Plaintiff's antitrust claims all fail as a matter of law because

After the court granted Omni Defendants leave to file a motion to dismiss Plaintiffs Amended Complaint,
DeiEx Defendants requested leave to move to dismiss Plaintiffs Amended Complaint against them. (Dkt. 19.)
Because DeiEx Defendants raised substantially different issues than those raised in Omni Defendants' motion, the
court denied Del Ex Defendants' request. (Jan. 12, 2012, Order.) After a pre-motion conference with the court,
DeiEx Defendants answered Plaintiffs complaint and cross-claimed against Omni Defendants for indemnification
and contribution. (Dkt. 22).
6

Omni Defendants requested oral argument on their motion. (Dkt. 33.) The court denied Omni Defendants'
request without prejudice and stated that it would advise the parties if it were to determine that oral argument would
be helpful. (March 22,2012, Order (Dkt. 34).) The court has determined that this motion can be resolved without
oral argument.

5

Plaintiff lacks antitrust standing to allege harm to the hatching eggs market, and has failed to
plead facts alleging harm to the market for freight forwarding of hatching eggs, as required to
bring such antitrust claims. (See Omni Mem.) For the reasons explained below, the court
agrees.
A.

Legal Standards
1.

Fed. R. Civ. P. 12(b)(6) Motion to Dismiss

"To survive a motion to dismiss, a claim must contain sufficient factual matter, accepted
as true, to 'state a claim for reliefthat it plausible on its face."' 7 Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). To determine
whether a claim survives, the court must be mindful of two important principles. First, claims
that are "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory
statements" need not be accepted as true. ld. Second, "only a complaint that states a plausible
claim for relief survives a motion to dismiss." Id. A plausible claim must have "factual content
that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged." ld. Plausibility "is not akin to a probability requirement," but requires
"more than a sheer possibility that a defendant has acted unlawfully." ld. (internal quotation
marks omitted).

Plaintiff seems to suggest a lower standard that would allow the court to "look beyond the well-pled
allegations when assessing [the] complaint." (Pl. Mem. at 6.) The appropriate standard, however, is the Twombly
standard, which arose from an antitrust case and has since been held to apply to cases more broadly. In re Elevator
Antitrust Litig., 502 F.3d 47, 50 (2d Cir. 2007); see also Habitat. Ltd. v. The Art of Muse. Inc., No. 07-CV-2883
(ORH), 2009 WL 803380, at *3 (E.D.N.Y. Mar. 25, 2009). Twombly requires more than mere allegations of
unlawful behavior-it requires "enough facts to 'nudge [Plaintiffs'] claims across the line from conceivable to
plausible." Elevator Antitrust, 502 F.3d at 50. Plaintiff also relies on the proposition that judges should be cautious
before dismissing an antitrust complaint in advance of discovery. (Pl. Mem. at 7.) As the Twombly court
explained, however, this must be balanced by the principle that "a district court must retain the power to insist upon
some specificity in pleading before allowing a potentially massive factual controversy to proceed," and must decline
to send parties into discovery when there is no reasonable likelihood that the plaintiffs can construct a claim from
the facts alleged in the complaint. Twombly, 550 U.S. at 558 (quoting Associated Gen. Contractors of Cal.. Inc. v.
Carpenters, 459 U.S. 519 (1983)).

6

2.

Antitrust Claims

To adequately plead an antitrust claim, a plaintiff must: "( 1) define the relevant market,
(2) allege an antitrust injury, and (3) allege conduct in violation of the antitrust laws." N.Y.
Medscan LLC v. N.Y. Univ. Sch. ofMed., 430 F. Supp.2d 140, 145 (S.D.N.Y. 2006). In
addition, a private plaintiff suing under federal antitrust laws must demonstrate antitrust
standing, which is distinct from and additional to the constitutional standing requirement. Port
Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117, 121 (2d Cir. 2007); N.Y. Medscan
LLC, 430 F. Supp.2d at 145-46.

B.

Antitrust Standing

Plaintiffs Amended Complaint alleges harm to two markets: hatching eggs market and
the freight forwarding of hatching eggs market. (Pl. Mem. at 13.) Omni Defendants argue that
Plaintiff, a freight forwarder, does not have standing to assert antitrust claims relating to the
market for the production and sale of hatching eggs. (Omni Mem. at 15-16.) Plaintiff argues
that it has standing to raise claims relating to the market for hatching eggs because it has been
injured by Defendants' actions in that market. 8 (See Pl. Mem. at 13-14.)
It is well-settled that private plaintiffs bringing antitrust claims must show more than the
fact that the defendants' conduct caused them injury-they must also show antitrust standing.
Balaklaw v. Lovell, 14 F.3d 793, 797 n.9 (2d Cir. 1994). The factors relevant to a determination
of whether the plaintiff has antitrust standing are: ( 1) injury in fact to plaintiffs business or
property; (2) that is not remote from or duplicative of that sustained by a more directly injured
Specifically, Plaintiff argues that it was injured by: ( 1) the agreement between Morris and Omni, which
makes it more difficult for P1aintiffto obtain customers; and (2) Defendants' actions~notably, the email sent to
Plaintiffs contacts-that have made it more difficult for Plaintiff to book transportation because cargo owners
refuse to work with Plaintiff. (Pl. Mem. at 14.) According to Plaintiff, "[a]s a new market entrant trying to break
into the relevant product market it is difficult to imagine a plaintiff that has been more harmed than [it has]." (ld.)
Although Plaintiff does not clarify, this statement must refer to the market of freight forwarding of hatching eggs,
the only market Plaintiff has tried to enter.

7

party; (3) that qualifies as an "antitrust injury"; and (4) that translates into reasonably
quantifiable damages. Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408,437-48 (2d Cir.
2005) (citations omitted).
Generally, a plaintiff that is "neither a consumer nor a competitor in the market in which
trade was restrained" does not have standing to allege an antitrust injury to that market. George
Haug Co., Inc. v. Rolls Royce Motor Cars, Inc., 148 F.3d 136, 140 (2d Cir. 1998) (quoting
Assoc. Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 539
(1983)). Plaintiff, a freight forwarder, is not directly impacted by the agreement between Morris
and Omni. A purchaser of hatching eggs that is required to use Omni' s services would have a
more direct injury and would be a more "efficient enforcer" of the alleged antitrust violation.
Daniel, 428 F.3d at 443-44.
In raising a claim of harm to the hatching eggs market, Plaintiff seeks only to vindicate
its own monetary losses. (Am. Compl. at 16.) Therefore, awarding the requested relief to
Plaintiff would in no way address or remedy the violation for those actually competing in the
hatching eggs market. This indicates that Plaintiff has not suffered an antitrust injury, but has
merely suffered damages. Cf. ld. at 440 (noting that the narrow scope of plaintiffs' requested
injunctive relief would not address the alleged violation and concluding that this indicated that
they had not suffered an antitrust injury). Therefore, Plaintiffhas no standing to assert antitrust
injuries suffered in the hatching egg market.
C.

Analysis

Plaintiff presents three different legal theories for how Defendants' conduct violates
antitrust law: ( 1) that the agreement between Omni and Morris is an illegal agreement that
restrains trade, that Omni has used the advantages it has gained from this agreement to squeeze

8

competition out of the market, and that such activity constitutes a per se violation of Section 1 of
the Sherman Act (the "per se violation claim") (see Am. Compl. ~~ 78-92); (2) that Omni
Defendants' email to cargo shippers, and the shippers' subsequent increase in rates for other
freight forwarders (including Plaintiff), constitutes an agreement unreasonably restraining trade
violating Section 1 under a rule of reason/vertical restraint9 theory (the "rule of reason claim")
(see id.

~~

93-101); (3) that Omni has taken steps to acquire a monopoly of the relevant product

market raise prices in the market (the "monopoly claim") (see id.

I.

~~

102-08).

Plaintiff's per se violation claim

Plaintiffs Amended Complaint alleges per se violations in: (1) the agreement between
Omni and Morris, and (2) the agreements between Omni and other cargo shippers to raise prices
for shipping. (See id.

~~

78-92.) Plaintiff also argues that it has alleged elements of several

different recognized per se violations, and thus has sufficiently alleged a per se violation. (ld.

~

9.) Omni Defendants argue that Plaintiffs per se claim must be dismissed because Plaintiff has
not pleaded activity that falls within a category that courts consider to be per se violations of
Section 1. (See Omni Mem. at 5-9.)
Section 1 of the Sherman Act prohibits "[e]very contract, combination in the form oftrust
or otherwise, or conspiracy, in restraint of trade or commerce among the several States."
15 U.S.C. § 1. Alleging a violation of Section 1 generally requires demonstrating "a
combination or other form of concerted action between two legally distinct entities resulting in
an unreasonable restraint on trade." E&L Consulting, Ltd., 472 F.3d at 29. Most Section 1
claims are analyzed under the "rule of reason," which requires a court to decide whether the
alleged illegal practice "imposes an unreasonable restraint on competition, taking into account a
9

Horizontal restraints are those imposed by agreements between competitors, whereas vertical restraints are
those imposed by agreement between entities at different levels of the supply chain. E&L Consulting. Ltd. v.
Doman Industries Ltd., 472 F.3d 23, 29 n.4 (2d Cir. 2006).

9

variety of factors." State Oil Co. v. Khan, 522 U.S. 3, 10 (1997). However, some categories of
restraints are "necessarily illegal" and thus a court "need not study the reasonableness of an
individual restraint in light of the real market forces at work." Lee gin Creative Leather Prods.,
Inc. v. PSKS, Inc., 551 U.S 877, 886-87 (2007). This is sometimes called the "per se rule." Id.
The per se rule must only be applied when the type of restraint at issue is one with which courts
have had considerable experience so that they can predict with confidence that the restraint
would be invalidated in all or almost all instances under the rule of reason. Id. (citations
omitted). Application of the per se rule must be based on "demonstrable economic effect."
Cont'l T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 50-51 (1977).
Plaintiff argues that it has invoked the per se rule by alleging a tying agreement 10
between Omni and Morris. (Pl. Mem. at 9.) Omni and Morris are not competitors-Omni
provides a service for Morris, a producer. (See Am. Compl.

~~

25-28.) Thus, any restrictive

agreement between them is a vertical restraint. Under current precedent, vertical restraints are
analyzed under the rule ofreason. 11 Leegin, 551 U.S. at 907. Moreover, outside of Plaintiffs

10

Plaintiff mischaracterizes the agreement between Omni and Morris by calling it a tying agreement. A tying
agreement is "an agreement by a party to sell one product but only on the condition that the buyer also purchase a
different (or tied) product." E & L Consulting, 472 F.3d at 31. To show a tying agreement, a plaintiff must
demonstrate: (I) a tying and a tied product; {2) evidence of actual coercion by the seller that forced the buyer to
accept the tied product; (3) sufficient economic power in the tying product market to coerce purchaser acceptance of
the tied product; (4) anticompetitive effects in the tied market; and (5) the involvement of a not insubstantial amount
of interstate commerce in the tied market. lQ.,_ "The essential characteristic of an invalid tying arrangement lies in
the seller's exploitation of its control over the tying product to force the buyer into the purchase of a tied product
that the buyer either did not want at all, or might have preferred to purchase elsewhere on different terms." De Jesus
v. Sears. Roebuch & Co., Inc., 87 F.3d 65, 70 (2d Cir. 1996). Purchasers of hatching eggs from Morris are not
forced to buy an additional product, but are required to use the services of a particular freight forwarder. However,
even putting aside Plaintiffs mischaracterization of the agreement, the vertical agreement between Omni and Morris
fails to fall under the per se rule.
II

Vertical restraints that do not involve price restraints have always fallen outside the per se rule.
Continental T.V., 433 U.S. at 58 ("When anticompetitive effects are shown to result from particular vertical
restrictions they can be adequately policed under the rule of reason .... "). Vertical restraints involving price fixing
used to be considered per se violations. See. e.g., id. at 51 n.18. But this is no longer the case. See Leegin, 551
U.S. at 907 (overruling prior precedent to hold that"[ v]ertical price restraints are to be judged according to the rule
of reason").

10

conclusory allegations that prices have been impacted, the economic impact of the alleged
agreements is far from clear. See id. at 890-900 (explaining the ways in which vertical restraints
can have positive or negative effects on competition). Therefore, the vertical restraint Plaintiff
alleges between Omni and Morris does not fall under the per se rule.
Plaintiff also argues that it has invoked the per se rule by alleging a group boycott
between Omni and the cargo shippers. (Pl. Mem. at 7-9.) In order to invoke a per se rule against
group boycotts, a plaintifT must allege a horizontal agreement among direct competitors.
NYNEX Corp. v. Discon, Inc., 525 U.S. 128 (1998) ("[P]recedent limits the per se rule in the
boycott context to cases involving horizontal agreements among direct competitors .... "). Here,
Omni does not directly compete with the cargo shippers, but arranges for use of their services.
(Am. Compl. ~ 24 ("The business of [Plaintiff] and Omni is to negotiate with airlines favorable
rates on behalfoftheir customers to ship products worldwide.").) Therefore, an agreement
between Omni and the cargo shippers is not a horizontal agreement among competitors, and
cannot be considered a group boycott.
To the extent that Plaintiff argues it has alleged a horizontal agreement or group boycott
between Omni and DelEx, the Amended Complaint does not have enough factual matter to
suggest that an agreement was made. Cf. Twombly, 550 U.S. at 556-57 (requiring more than
mere allegations of parallel legal actions to plausibly suggest an illegal agreement). According
to the Amended Complaint, DelEx was Omni Defendants' "New York agent," (Am. Compl.
~

4.), and there is no allegation that Omni and DelEx had any agreement. Indeed, the only fact

relating to DelEx is that Khodov forwarded the email sent by Alberty. (Id.

~~

48, 54.) These

scant allegations fall short of allowing a reasonable inference that DelEx and Omni had a
horizontal agreement to restrain trade.

11

In sum, because Plaintiff has failed to allege an antitrust claim that falls under the per se
rule, Plaintiffs per se claim must be dismissed. 12

2.

Plaintiff's rule of reason claim

Plaintiff alleges that Defendants' actions are illegal under a rule of reason analysis of
Section 1 because they have "illegally restrained trade," and "prices have been adversely
affected, are artificially high and competitors have been prevented from entering the relevant
market." (See id.

~~

93-101.) Omni Defendants argue that Plaintiffs' rule of reason claim must

be dismissed because PlaintitT failed to plead an actual adverse effect on competition in the
relevant product market. (Omni Mem. 10-13.)
The rule of reason is so-called because it requires a court to analyze a Section 1 claim by
determining whether the alleged restraint is "unreasonable because its anticompetitive effects
outweigh its procompetitive effects." E & L Consulting, Ltd., 472 F.3d at 29 (citation omitted).
Under the rule of reason analysis, however, a plaintiff is obligated to "demonstrate, as a
threshold matter, 'that the challenged action has had an actual adverse effect on competition as a
whole in the relevant market."' George Haug Co., 148 F.3d at 139 (quoting Capital Imaging v.
Mohawk Valley Med. Assoc., 996 F.2d 537,543 (2d Cir. 1993)) (emphasis in original). The fact
that a plaintiff has been harmed as an individual competitor will not suffice. Id. This threshold
requirement safeguards the principle that antitrust laws were enacted for the protection of

competition, not competitors. Habitat, Ltd. v. The Art of Muse, Inc., No. 07-CV-2883 (DRH),
2009 WL 803380, *4 (E.D.N.Y. Mar. 25, 2009) (citations omitted) (emphasis in original).

12

Plaintiff also argues that the per se rule applies because the violation it pleads has "elements" from per se
violations, including horizontal price fixing, horizontal market divisions, concerted refusals to deal, and unlawful
tying agreements. (Pl. Mem. at 8.) Plaintiff provides no precedent for recognition of such an anomalous violation.
Moreover, there is no evidence that the alleged violation would allow the court to predict with confidence that the
restraint would be invalidated under the rule of reason, as is required for application of the per se rule. See Leegin
551 U.S. at 886-87. Plaintiffs argument indicates a misunderstanding of the per se rule.

12

Plaintiff alleges that Defendants' antitrust violations have harmed two markets: ''[t]he
first injured market is the hatching egg market and the second is the transportation of hatching
eggs market." (Pl. Mem. at 13.) As discussed above, Plaintiff does not have standing to allege
antitrust injury to the egg hatching market. See George Haug Co., 148 F.3d at 139.
According to Plaintiff, the harm to the freight forwarding of hatching eggs market is
evidenced by the fact that Ornni maintains 75% of the market, and that as a result Omni has been
able to raise prices for the shipping of hatching eggs and take steps to keep other competitors out
of the market. (I d.

~~

26, 31 ). Plaintiff makes concl usory allegations that Omni accomplished

its position through "unlawful combination, conspiracy and deceitful practices to restrain and
monopolize interstate trade and commerce," and Defendants' actions "have had a substantial,
actual, adverse and unreasonable effect on competition as a whole" and "do not have any procompetitive redeeming virtues." (ld.

~~

30, 97-98.) After removing such allegations, however,

the remaining facts demonstrate merely that: ( 1) there have been two recent incidents wherein
shippers raised prices on Plaintiff or refused to do business with it; (2) Omni sent an email that
harmed Plaintiffs reputation and caused it to lose business; (3) Morris and Omni have a vertical
agreement that Morris customers will use Omni's services; and (4) Omni has a large share ofthe
market (Id.

~~

31, 36-45, 93-101.) These factual allegations are insufficient to demonstrate harm

to competition.
Cargo shippers raising prices on Plaintiff does not establish injury to competition on the
market. 13 George Haug Co., 148 F.3d at 139. Plaintiff also alleges that, as a result ofOmni's
email, cargo shippers "stopped accepting Hatching Eggs cargo from freight forwarders other

13

Plaintiff alleges that as a result of Defendants' antitrust violations, its business has been harmed to the tune
of $1 million (before trebling damages). (See Am. Com pl.) Harm to Plaintiff as an individual competitor, however,
does not suffice to establish antitrust injury under the Sherman Act. George Haug Co., 148 F.3d at 139.

13

than Omni." (Am. Compl. ~~ 94-95.) Plaintiff argues that this, along with Omni's email,
sufficiently alleges harm to the market. (Pl. Mem. at 12.) The full text ofthe email clearly
indicates that the subjects of the email are Plaintiff and Eggsbyair, Plaintiff's trade name entity.
(Am. Compl.

~

47.) The email's stated purpose was "to advise each of [the recipients] about the

two companies mentioned above." (ld.) Accordingly, the court finds it wholly implausible that
because of this email regarding Plaintiff, cargo shippers would cease doing business with the
other freight forwarders in the market, which are not named or mentioned in the email. These
facts do not give rise to a reasonable inference that the market was injured by Omni's email.
The fact that Omni harmed Plaintiff's business by giving information-whether truthful
or not-that caused cargo shippers not to deal with Plaintiff does not establish harm to
competition in the marketplace. A defendant's alleged inducement to prevent dealings with one
of its competitors--even if it may amount to tortious conduct-does not establish that the
defendant's conduct is anticompetitive in purpose or effect. See Oreck Corp. v. Whirlpool
Corp., 579 F.2d 126, 133-34 (2d Cir. 1978) (concluding that, without further showing of
anticompetitive effect, a competitor's alleged tortious interference with plaintiff's business did
not amount to an antitrust violation). If the court were to allow Plaintiff's claim for relief based
on these facts to continue, it would disregard the purpose of federal antitrust laws by protecting
an individual competitor, rather than protecting competition. ld.

14

Plaintiff also argues that it could successfully plead a rule of reason claim by alleging that
Defendants possess market power in the relevant market, as demonstrated through Omni's 75%
control of the market. (Pl. Mem. at 11 (citing Tops Mkts., Inc. v. Quality Mkts., Inc., 142 F.3d
90 (2d Cir. 1998); Wellnx Life Scis. Inc. v. Iovate Health Scis. Research Inc., 516 F. Supp. 2d
270 (S.D.N.Y. 2007)).) Plaintiffs allegation that Omni has 75% of the relevant market is not
itself a sufficient showing of market power to discharge the requirement that Plaintiff show harm
to the market. Tops Mkts., 142 F.3d at 97 ("A plaintiff seeking to use market power as a proxy
for adverse effect must show market power, plus some other ground for believing that the
challenged behavior could harm competition in the market .... "); Wellnx Life Scis., 516 F.
Supp. 2d at 294 (dismissing a plaintiffs complaint for failure to state a claim where the plaintiff
demonstrated market share but no other ground for believing that the challenged behavior could
harm the market). Here, besides Plaintiffs conclusory allegations of harm to the market, there is
no other ground to believe that Omni's market share constitutes market power.
Besides Plaintiff and Omni, there are four other freight forwarders in the market. (Am.
Com pl.

~

26.) Even though Plaintiff alleges that customers of Morris are "forced" to use Omni' s

services (id.

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31 ), there are no facts in the Amended Complaint suggesting that these purchasers

are not free to simply choose another hatching eggs provider, and thus use a competing freight
forwarder. In other words, nothing in the Amended Complaint suggests that Omni had market
power such that it could unilaterally raise prices for freight forwarding to supracompetitive levels
without losing its business. See Wellnx Life Scis., 516 F. Supp. 2d at 294. Therefore, Plaintiff
has not made a market power showing sufficient to discharge its obligation to show harm to the
competition in the market. See Top Mkts., Inc., 142 F.3d at 97.

15

After disregarding Plaintiffs conclusory allegations of injury to the freight forwarding
market, Plaintiffs factual allegations fail to provide a basis for the court to reasonably infer that
there was an injury to competition in the market. Accordingly Plaintiffs rule of reason claim
must be dismissed.
3.

Plaintiff's monopoly claim

Plaintiff alleges that Defendants violated Section 2 of the Sherman Act, which provides
that a person shall not "monopolize, or attempt to monopolize, or combine or conspire with any
other person or persons, to monopolize .... " 15 U.S.C. § 2. A monopoly claim, just as a rule of
reason claim, must show harm to competition in the relevant market. 14 Elecs. Commc'ns Com.
v. Toshiba Am. Consumer Prods., Inc., 129 F.3d 240, 246 (2d Cir. 1997); see also Habitat, 2009
WL 803380, at* 10. As discussed above, Plaintiff fails to allege harm to competition in the
freight forwarding market resulting from Defendants' actions. Therefore, Plaintiffs monopoly
claim is dismissed.

4.

Leave to amend

Plaintiff has not moved for leave to amend its antitrust claims in the event that the court
finds them lacking, and has already amended its Complaint once before. Thus, it is within the
court's discretion to dismiss Plaintiffs claims without giving it leave to amend its complaint to
cure the pleading defects. Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1132 (2d Cir. 1994).
Even if Plaintiff indicated that it had additional facts it could allege to cure its pleading
deficiencies, the court concludes that amendment would be futile. In addition to the numerous
specific pleading failures explained above, the actual factual occurrences Plaintiff complains
14

According to Plaintiff, it need only show "probability of substantial competitive injury" and need not prove
actual injury. (Pl. Mem. at II.) Plaintiffs contention is incorrect. George Haug Co., 148 F.3d at 139 (explaining
that "(a] private plaintiff seeking to state a claim for violation of sections I or 2 ofthe Sherman Act must allege that
it has suffered 'antitrust injury'" which obligates a plaintiff to show that the challenged action has had "an actual
adverse effect on competition as a whole in the relevant marketplace").

16

of-namely, the email from Omni to cargo shippers-are simply not the type of activities that
antitrust laws prohibit. See Oreck Corp., 579 F.2d at 133-34; see also Habitat, 2009 WL 803380,
at *10. Accordingly, the court declines to give Plaintiff leave to amend its federal antitrust
claims, and they are dismissed with prejudice.

III.

PLAINTIFF'S REMAINING CLAIMS
Omni Defendants move the court to dismiss Plaintiffs federal antitrust claims for failure

to state a claim, and to dismiss the remaining state law claims for lack of subject matter
jurisdiction. (See Omni Mot. to Dismiss.) Plaintiffs Amended Complaint pleads that this court
has original subject matter jurisdiction over the federal antitrust claims and supplemental
jurisdiction over the remaining state law claims of defamation, tortious interference, and civil
conspiracy. (Am. Compl.

~~

9-12 (citing 28 U.S.C. §§ 1331, 1337(a)).) Because the court has

dismissed all of the claims over which it had original jurisdiction and the resolution of the state
law claims would require resolving additional legal and factual issues, it declines to exercise
supplemental jurisdiction over Plaintiffs remaining state law claims. 15 See 28 U.S.C. § 1367(a)(c); N.Y. Mercantile Exch., Inc. v. IntercontinentalExchange, Inc., 497 F.3d 109, 119 (2d Cir.
2007) ("In general, where the federal claims are dismissed before trial, the state claims should be
dismissed as well."). Accordingly, Plaintiffs state law claims of defamation, tortious
interference, and civil conspiracy are dismissed without prejudice.
IV.

CONCLUSION
For the reasons explained above, Plaintiffs federal antitrust claims fail as a matter of law

and are DISMISSED with prejudice. The court declines to exercise supplemental jurisdiction

15
There is no diversity between the Plaintiff and Defendants (see Am. Compl.
does not have diversity jurisdiction over these claims under 28 U.S.C. § 1332.

17

~~

1-4), and thus the court

over Plaintiffs remaining state law claims, and they are DISMISSED without prejudice. The
Clerk of the Court is directed to close this case.
SO ORDERED.

s/Nicholas G. Garaufis
Dated: Brooklyn, New York
December~. 2012

United States District Judge

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