Nirvana, Inc. v. Nestle Waters North America Inc.

Filing 28

MEMORANDUM-DECISION AND ORDER granting in part and denying in part 23 Motion to Dismiss: The Court hereby ORDERS that Defendant's motion to dismiss pursuant to section 12(b)(6) of the Federal Rules of Civil Procedure (Dkt. No. 23) is GRANTE D with regard to Plaintiff's claims for 1. violation of section 2 (a) of the Robinson-Patman Act, 15 U.S.C. § 13(a), 2. violation of section 2 (c) of the Robinson-Patman Act, 15 U.S.C. § 13(c), 3. violation of section 3 of the Clayton Act, 15 U.S.C. § 14, 4. violation of the New York Donnelly Act, N.Y. General Business Law § 340, and 5. New York common law claim for tortious interference; and the Court further ORDERS that Defendant's motion to dismiss pursuant t o section 12(b)(6) of the Federal Rules of Civil Procedure (Dkt. No. 23) is DENIED with regard to Plaintiff's claims for 1. New York common law claim for unfair competition, and 2. New York common law breach of contract; and the Court further ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision and Order on all parties in accordance with the Local Rules. Signed by U.S. District Judge Mae A. D'Agostino on 8/10/15. (ban)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
____________________________________________
NIRVANA, INC.,
Plaintiff,
vs.

6:14-cv-01181
(MAD/ATB)

NESTLE WATERS NORTH AMERICA INC.,
Defendant.
____________________________________________
APPEARANCES:

OF COUNSEL:

OFFICE OF RICHARD PERTZ
12280 Rt. 365
Remsen, New York 13438
Attorneys for Plaintiff

RICHARD PERTZ, ESQ.

MAYER BROWN LLP
1999 K Street NW
Washington, District of Columbia 20006
Attorneys for Defendants

ADAM L. HUDES, ESQ.
CARMINE R. ZARLENGA, III, ESQ.
STEPHEN M. MEDLOCK, ESQ.

SMITH SOVIK KENDRICK &
SUGNET, P.C.

KAREN G. FELTER, ESQ.

Mae A. D'Agostino, U.S. District Judge:

MEMORANDUM-DECISION AND ORDER
I. INTRODUCTION
On August 20, 2014, Plaintiff commenced this suit in New York State Supreme Court of
Oneida County. See Dkt. No. 1-1. In the complaint, Plaintiff asserted violations of federal and
state antitrust laws as well as claims for breach of contract, tortious interference, unfair
competition, and trade disparagement, among other related claims. See id. On September 2,
2014, Plaintiff filed an amended summons and complaint. See Dkt. No. 1-2. On September 26,

2014, Defendant removed the action from the Supreme Court of the State of New York of Oneida
County to this Court. See Dkt. No. 1. This Court has original jurisdiction pursuant to 28 U.S.C. §
1331 based on the federal law violations alleged in the complaint. See id. This Court also has
original jurisdiction pursuant to 28 U.S.C. § 1332 based on the diversity of the parties and the
amount in controversy exceeds $75,000. See id. Defendant filed a motion to dismiss the
complaint, see Dkt. No. 9-1, which was subsequently dismissed as moot because Plaintiff timely
filed a first amended complaint (the "complaint") on November 30, 2014. See Dkt. Nos. 15; 20.
Currently before the Court is Defendant's motion to dismiss Plaintiff's first amended
complaint for failure to state a claim upon which relief can be granted under Rule 12(b)(6) of the
Federal Rules of Civil Procedure. See Dkt. No. 23.
II. BACKGROUND
Plaintiff is a New York corporation with its corporate headquarters in Forestport, New
York. See Dkt. No. 15 at ¶ 1. Plaintiff's business is the bottling and distribution of unflavored,
still, natural spring water that is collected from its property located in the foothills of the
Adirondack Mountains. See id. at ¶¶ 1, 17. Defendant is a Delaware corporation that maintains
its corporate headquarters in Stamford, Connecticut. See id. at ¶ 2. Defendant is the largest
distributor of "bottled water in the United States," according to Plaintiff's complaint. See id.
Plaintiff and Defendant are direct competitors in the market for "bottled spring water in the
northeastern United States," and both parties engage in interstate commerce by selling and
shipping to "New York, New Jersey, Connecticut, Pennsylvania and Massachusetts." See id. at ¶
3.1

Plaintiff refers to these five states as the "northeastern United States" without any
justification for that definition. See Dkt. No. 15 at ¶ 16. Plaintiff does not definitely state in the
complaint that it sells and ships water to only these five states, but it indicates that Plaintiff does
1

2

In or about 2005, Plaintiff packaged its own water under one of Defendant's labels, a
practice called co-packaging, and, later that year, Defendant made an oral offer to purchase
Plaintiff, but the offer was declined. See id. at ¶¶ 19, 20. During the period from 2005 through
2011, a majority of Plaintiff's product was co-packed bottled water under other companies' labels.
See id. at ¶ 22. According to Plaintiff, for this reason, it was not a significant competitor to
Defendant during this time. See id. at ¶ 22. However, in 2011, Plaintiff introduced its own selfbranded water and was taking market share from Defendant's labels, which included brands such
as Poland Spring and Deer Park. See id. at ¶ 22. During that same year, Defendant approached
Plaintiff again about a potential buyout. See id. at ¶ 23. Executives of the two companies met at
Defendant's headquarters in Connecticut and entered into a non-disclosure agreement dated
February 20, 2012, agreeing to not disclose or discuss the potential transaction or the terms,
conditions, or other facts related to the potential transaction. See id. at ¶ 24.
Defendant then visited and researched Plaintiff's buildings, springs, and facilities. See id.
at ¶ 25. Defendant also requested to see complete financial information from the years 2011
through 2013 as well as projected financial information for 2014 and 2015. See id. at ¶ 25. Upon
Plaintiff's information and belief, during this same period of time, Defendant disclosed to
Plaintiff's commercial customers that Defendant planned to purchase Plaintiff and showed these
customers a letter from Plaintiff to Defendant indicating a desire to sell out in the face of financial
difficulties. See id. at ¶ 30. As a result of this disclosure and related rumors, Plaintiff alleges that
wholesale buyers and supermarket retailers ceased purchasing from Plaintiff. See id. at ¶ 31.

not account for all states of competition in every allegation of the complaint. See Dkt. No. 15 at ¶
46.
3

Plaintiff also claims that, in 2011, Defendant entered into an "exclusive dealing contract"
with Stew Leonard, a supermarket company, by paying Stew Leonard a sum of money to stop
carrying Plaintiff's water. See id. at ¶ 32. Plaintiff states that Stew Leonard abruptly stopped
purchasing from Plaintiff. See id. It is alleged in the complaint that, in 2014, Defendant paid
another supermarket company, A&P, a sum of money to remove Plaintiff from its promotional
calendar. See id. at ¶ 34. These supermarket promotions sold certain brands of bottled water at
reduced prices for certain periods of time, and Plaintiff claims that its removal from the
promotional calendar caused its sales to fall. See id. at ¶¶ 33-35. Plaintiff submits that its market
share of bottled water at the A&P supermarkets was reduced from 30% in the Fall of 2012 to 5%
in the Fall of 2014 compared to Defendant's market share of bottled water at the A&P
supermarkets, which increased from 40% to 70% during that same period. See id. at ¶ 37.
Plaintiff also claims that Defendant charged a higher price to its commercial buyers, who
also purchased water from Plaintiff, as compared to its commercial buyers of water that did not
purchase from Plaintiff. See id. at ¶ 38. Plaintiff alleges that Defendant's practice was to
incentivize these commercial buyers to not purchase Plaintiff's product. See id. Except for
Dave's Market, these commercial buyers are not identified by Plaintiff. See id. Plaintiff also
makes generalized allegations that Defendant offered these types of incentives to "other
supermarkets" that Plaintiff was attempting to sell to. See id. at ¶ 39. Plaintiff specifically claims
that, in 2011, Defendant offered Dave's Market "a better price" for their water in exchange for not
carrying Nirvana and, as a result, Dave's Market stopped carrying Plaintiff's product. See id. at ¶
38. According to Plaintiff, Defendant has moved or cause to have moved Plaintiff's bottled water
to be less visible in the retail stores, and Defendant had also asked A&P to removed Plaintiff's
product from the shelves entirely. See id. at ¶¶ 36, 42.
4

Plaintiff states that "[a]s the price of [Defendant's] bottled water fell relative to the price of
[Plaintiff's] bottled water, demand for [Plaintiff's bottled water] fell." Id. at ¶ 41. Plaintiff claims
that its sales have "fallen dramatically, in part because of [Defendant's] predatory and
discriminatory pricing, insistence of exclusivity, and other anti-competitive practices." Id. at ¶
43. The alleged injury to competition, according to the complaint, can be inferred from the
changes in the market shares of Plaintiff and Defendant in six regional supermarket chains.
Plaintiff acknowledges that the sales data and market share information of Plaintiff and
Defendant, as alleged in the complaint, do not account for "all sales of bottled water in every
venue in every state where the two companies sell natural spring water" but claims that the sales
are "an accurate statistical sample and reflect the anti-competitive effects of [Defendant's]
conduct on the market, and the degree to which [Defendant] has foreclosed competition from
other brands." See id. at ¶ 46.
In the complaint, Plaintiff alleges the following causes of action:
1.

violation of section 2(a) of the Robinson-Patman Act, 15 U.S.C. § 13(a),

2.

violation of section 2(c) of the Robinson-Patman Act, 15 U.S.C. § 13(c),

3.

violation of section 3 of the Clayton Act, 15 U.S.C. § 14,

4.

violation of New York State Donnelly Act, N.Y. General Business Law § 340,

5.

common law claim for tortious interference,

6.

common law claim for unfair competition, and

7.

common law breach of contract claim.

See id. at ¶¶ 53-71.

5

Presently before the Court is Defendant's motion to dismiss Plaintiff's seven causes of action for
failure to state claims upon which relief can be granted pursuant to section 12(b)(6) of the Federal
Rules of Civil Procedure. See Dkt. No. 23.
III. DISCUSSION
A.

Standard of review
"Federal Rule of Civil Procedure 8(a)(2) requires only 'a short and plain statement of the

claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of
what the claim is and the grounds upon which it rests.'" Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 555 (2007) (quoting Conley v. Gibson, 55 U.S. 41, 47 (1957)). A motion to dismiss for
failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the
legal sufficiency of the party's claim for relief. See Patane v. Clark, 508 F.3d 106, 111-12 (2d
Cir. 2007). "[T]he Supreme Court rejected the 'oft quoted' standard . . . that a complaint should
not be dismissed, 'unless it appears beyond doubt that the plaintiff can prove no set of facts in
support of his claim which would entitled him to relief,'" Li Xi v. Apple, Inc., 603 F. Supp. 2d 464,
467 (E.D.N.Y. 2009) (quoting Conley, 355 U.S. at 45-46), and, instead, held that a plaintiff must
"plead enough facts 'to state a claim to relief that is plausible on its face.'" Id. at 467 (quoting
Twombly, 550 U.S. at 555). Although detailed factual allegations are not required in a pleading, a
plaintiff must provide the grounds for their entitlement to relief. See Twombly, 550 U.S. at 555
(quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)).
When considering whether a complaint has facial plausibility, that is to say that a plaintiff
has "nudged their claims across the line from conceivable to plausible," a court must accept as
true all well-pleaded facts in the complaint. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508, n.1
(2002); see also Twombly, 550 U.S. at 570; ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d
6

87, 98 (2d Cir. 2007) (citation omitted). This presumption of truth, however, does not extend to
legal conclusions. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). The Court
"should not credit 'mere conclusory statements' or 'threadbare recitals of the elements of a cause
of action'" as well-pleaded facts because they "do not suffice." Coalition for a Level Playing
Field, L.L.C. v. AutoZone, Inc., 737 F. Supp. 2d 194, 215 (S.D.N.Y. 2010) (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 678-79 (2009) and Twombly, 550 U.S. at 555). Further, "the Court must also
determine whether [the creditable facts] plausibly suggest an entitlement to relief." AutoZone,
Inc., 737 F. Supp. 2d at 215. Ultimately, when the allegations in a complaint, however true, could
not raise a claim of entitlement to relief, the complaint must be dismissed. See Twombly, 550
U.S. at 558, 570.
B.

Analysis
Plaintiff contends that Defendant violated federal and state anti-trust laws when Defendant

engaged in aggressive competitive actions with the intention to lessen competition. See Dkt. No.
15 at ¶¶ 53-64. Specifically, Plaintiff alleges that Defendant has violated section 2(a) of the
Robinson-Patman Act by selling its bottled water at higher prices to its commercial buyers, who
also purchased Plaintiff's bottled water, and by giving incentives to its commercial buyers, who
do not purchase Plaintiff's bottled water. See Dkt. No. 15 at ¶ 38. Next, Plaintiff claims that
Defendant violated section 2(c) of the Robinson-Patman Act when it paid a sum of money to
Stew Leonard to stop carrying Plaintiff's water. See id. at ¶¶ 32-36, 53-64. Plaintiff is also
claiming that the sum of money paid to A&P in exchange for removing Plaintiff from that
supermarket's promotional calendar violated section 2(c) of the Robinson-Patman Act. See id. at
¶¶ 33-34, 38-39. In Plaintiff's view, presumably the payment to Stew Leonard and A&P were
commercial bribes, in violation of section 2(c) of the Robinson-Patman Act.
7

Plaintiff further claims that the agreement with Stew Leonard and the agreement with
Dave's Market were both violations of the Donnelly Act, as unlawful exclusive dealing
agreements, because these agreements imposed an unreasonable restraint on trade. See Dkt. Nos.
15 at ¶¶ 62-64; 25 at 8-9. In addition to the antitrust claims, Plaintiff also brings claims based
upon New York common law, including tortious interference with Plaintiff's prospective business
relations, unfair competition, and breach of contract relating to the non-disclosure agreement.
1. Antitrust Standing
Section 4 of the Clayton Act creates a private right of action for those injured as a result of
any federal antitrust law violation. See 15 U.S.C. § 15 (providing that "any person who shall be
injured in his business or property by reason of anything forbidden in the antitrust laws may sue .
. . without respect to the amount in controversy, and shall recover threefold the damages by him
sustained"); Gatt Commc'n, Inc. v. PMC Asscs., L.L.C., 711 F.3d 68, 75 (2d Cir. 2013); Genesco,
Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 853 (2d Cir. 1987). Antitrust violations can cause
"ripples of harm" throughout an economy. See Associated Gen. Contractors of Cal., Inc. v.
California State Council of Carpenters, 459 U.S. 519, 534 (1983) (internal quotation marks and
citations omitted). "[H]owever, 'Congress did not intend the antitrust laws to provide a remedy in
damages for all injuries that might conceivably be traced to an antitrust violation.'" Gatt, 711 F.3d
at 75 (quoting Contractors of Cal., 459 U.S. at 534). As a result, "limiting contours" have
developed and "are embodied in the concept of 'antitrust standing.'" Gatt, 711 F.3d at 75 (quoting
Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408, 436-38 (2d Cir. 2005)).
Antitrust standing is a threshold determination to be addressed at the pleading stage, and
"when a complaint by its terms fails to establish this requirement," the complaint must be
dismissed as a matter of law. See Gatt, 711 F.3d at 75; NicSand, Inc. v. 3M Co., 507 F.3d 442,
8

450 (6th Cir. 2007) (stating that antitrust standing prevents the antitrust laws from becoming "a
treble-damages sword rather than the shield against competition-destroying conduct that Congress
meant them to be"). To establish that a plaintiff has antitrust standing to bring a private cause of
action under an antitrust statute, there are several factors that are considered, which the Second
Circuit has "distilled . . . into two imperatives." See Gatt, 711 F.3d at 76. First, a private antitrust
plaintiff must plausibly allege that "it suffered a special kind of antitrust injury," and, second, that
it is an "efficient enforcer" of the antitrust laws, meaning that the plaintiff is suited "to pursue the
alleged antitrust violations." Gatt, 711 F.3d at 76 (internal quotation marks omitted) (citing Port
Dock & Stone Corp. v. Oldcastle Northeast, Inc., 507 F.3d 117, 121-22 (2d Cir. 2007); see also
Associated Gen. Contractors, 459 U.S. at 537-45.
The sufficiency of a plaintiff's alleged antitrust injury is analyzed in a three-step process,
which requires the courts to (1) identify the anticompetitive practice complained of "and the
reasons such a practice is or might be anticompetitive;" (2) identify the actual injury alleged by a
plaintiff; and (3) "compar[e] the anticompetitive effect of the specific practice at issue to the
actual injury the plaintiff alleges." Gatt, 711 F.3d at 76 (internal quotation marks and citations
omitted). Antitrust standing is not established "merely by showing injury causally linked to an
illegal presence in the market;" but "[i]nstead, a plaintiff must prove the existence of antitrust
injury, which is to say injury of the type the antitrust laws were intended to prevent and that flow
from that which makes defendants' acts unlawful." Blue Tree Hotels, Inc. v. Starwood Hotels
Investment (Canada), Ltd., 369 F.3d 212, 220 (2d Cir. 2004) (internal quotation marks omitted)
(quoting Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990) (quoting
Brunswich Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1997))).

9

In this case, Plaintiff's complaint has plausibly stated antitrust injury for each of its
antitrust claims. Plaintiff's discriminatory pricing claim, in violation of section 2(a) of the
Robinson-Patman Act, alleges that Defendant charged a higher price to commercial buyers who
also purchased Plaintiff's bottled water as compared to commercial buyers who did not. See Dkt.
No 15 at ¶¶ 38-39. As a result, Dave's Market stopped purchasing from Plaintiff. See id..
Plaintiff claims that Defendant unlawfully bribed commercial buyers, in violation of section 2(c)
of the Robinson-Patman Act, when it paid money to A&P and Stew Leonard's in exchange for
removing Plaintiff from the promotional calendar and discontinue carrying Plaintiff's water,
respectively. See id. at ¶¶ 32, 34. Plaintiff's complaint describes that Defendant entered into
exclusive dealing agreements with Dave's Market and Stew Leonard's in violation of section 3 of
the Clayton Act. Plaintiff also claims that Defendant violated New York's Donnelly Act by
making exclusive dealing agreements, whereby competition was restrained. See id. at ¶¶ 62-64.
Each of these alleged practices by Defendant plausibly states an anticompetitive practice in
violation of an antitrust statute.
As a result of each of these practices, Plaintiff claims that it suffered an actual injury, a
significant decrease in its sale revenues. See id. at ¶ 43. This plausibly states a worse position
that Plaintiff is in as a result of the identified anticompetitive practices, in satisfaction of the
second step. See DNAML PTY, Ltd. v. Apple Inc., 25 F. Supp. 3d 422, 428 (S.D.N.Y. 2014)
(finding that the plaintiff satisfied step two of the analysis by stating its actual injury was the loss
of the profits it hoped to achieve). Plaintiff's lost revenues are the type of injury that the antitrust
laws were intended to prevent and Plaintiff's injuries also flow from Defendant's alleged unlawful
acts. Plaintiff has alleged more than a mere causal link but has factually set forth that it was the

10

specific target of Defendant's alleged anticompetitive practices and that Defendant intended to it
drive out of business. See Dkt. No. 15 at ¶ 29.
To determine whether a plaintiff is an "efficient enforcer" of the antitrust laws – in
satisfaction of the second imperative to antitrust standing, the courts must examine the following
factors:
(1) the directness or indirectness of the asserted injury;
(2) the existence of an identifiable class of persons whose selfinterest would normally motivate them to vindicate the public
interest in antitrust enforcement;
(3) the speculativeness of the alleged injury; and
(4) the difficulty of identifying damages and apportioning them
among direct and indirect victims so as to avoid duplicative
recoveries.
Gatt, 711 F.3d at 78 (internal quotation marks omitted) (quoting Paycom Billing Servs., Inc. v.
Matercard Int'l, 467 F.3d 283, 290-91 (2d Cir. 2006)) (noting that the weight assigned to each of
these factors will vary with the facts of each case). Upon review of the pleaded facts in the
complaint and examination of the "efficient enforcer" factors, the Court finds that Plaintiff is a
suitable plaintiff to bring these antitrust claims.
Directness, as it is referred to in this context, "means close in the chain of causation." Id.
"This is essentially a proximate cause analysis and asks 'whether the harm alleged has a
sufficiently close connection to the conduct the statute prohibits.'" See DNAML PTY, 25 F. Supp.
2d at 430 (internal quotation marks and citations omitted). The lost revenue alleged here is a
direct injury under this analysis because, as discussed above, Plaintiff alleges that it was the
specific target of Defendant's actions. See Dkt. No. ¶¶ 32-34, 38-39, 42. The injury sustained
was the injury intended as described by Plaintiff. See id. Defendant's alleged actions do not
11

implicate a class of potential plaintiffs, and the injury, a sustained loss of sales revenue due to lost
customers, which was identified in the complaint, is not speculative. Finally, there is no potential
for duplicative recoveries because the unlawful acts complained of here were designed to harm
Plaintiff specifically.
The Court, after analyzing Plaintiff's complaint under the three-step process to determine
antitrust injury and the four factors to determine "efficient enforcer" status, concludes that
Plaintiff has established antitrust standing. It should be noted that this standing analysis is
equally applicable to Plaintiff's Donnelly Act claim. See Gatt, 711 F.3d at 81-82; Yong Ki Hong
v. KBS Am., Inc., 951 F. Supp. 2d 402, 419-20 (E.D.N.Y. 2013).
2. Sections 2(a) of the Robinson-Patman Act
Plaintiff claims that Defendant violated section 2(a) the Robinson-Patman Act through its
use of discriminatory pricing. See Dkt. No. 15 at ¶¶ 53-55. Although Plaintiff alleges that
Defendant offered "a better price" to its commercial buyers who did not also purchase Plaintiff's
bottled water than its commercial buyers who did purchase Plaintiff's bottled water, Plaintiff only
specifically identifies Dave's Markets as one of those commercial buyers. See id. at ¶¶ 38-39.
Defendant argues that Plaintiff has failed to plead the elements of a claim under section 2(a) of
the Robinson-Patman Act. See Dkt. No. 23-2 at 11-12.
The predatory practice of deliberately selling below cost to drive a competitor out of
business is prohibited by the federal anti-trust statutes – the Sherman Act, 15 U.S.C. § 2, and the
Clayton Act, as amended by, the Robinson-Patman Act, 15 U.S.C. § 13(a). See Brooke Group
Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 219-22 (1993) (stating that the essence
of a section 2(a) claim under the Robinson-Patman Act is that "[a] business rival has priced its
products in an unfair manner with an object to eliminate or retard competition and thereby gain
12

and exercise control over prices in the relevant market"). Both anti-trust statutes require sales
below cost and anticompetitive intent, see id. at 251 (Stevens, J., dissenting), but "the RobinsonPatman Act requires only that there be 'a reasonable possibility' of substantial injury to
competition before its protections are triggered" as compared to the Sherman Act that condemns
"predatory pricing when it poses 'a dangerous probability of actual monopolization.'" See id. at
222.
Section 2(a) of the Robinson-Patman Act states that
It shall be unlawful for any person engaged in commerce, in the
course of such commerce, either directly or indirectly, to
discriminate in price between different purchasers of commodities
of like grade and quality . . . where the effect of such discrimination
may be substantially to lessen competition or tend to create a
monopoly in any line of commerce, or to injury, destroy, or prevent
competition with any person who either grants or knowingly
receives the benefit of such discrimination, or with customers of
either of them.
15 U.S.C. § 13(a). In order to trigger the protection of the Robinson-Patman Act, a plaintiff must
allege a price discrimination that threatens injury to competition because mere price differences
charged to different purchasers for the same product are not banned. See Brooke Group Ltd., 509
U.S. at 220 ("Congress did not intend to outlaw price differences that result from or further the
forces of competition.").
There are "three categories of competitive injury that may give rise to a Robinson-Patman
Act claim: primary line, secondary line, and tertiary line." Volvo Trucks N. Am. v. Reeder-Simco
GMC, Inc., 546 U.S. 164, 176 (2006). Primary-line injury involves harm to direct competitors of
the discriminating seller through conduct, "most conspicuously, predatory pricing," which is the
type of injury at issue in this case. See Volvo Trucks, 546 U.S. at 176 (citing Brooke Group Ltd.,
509 U.S. at 220-22). Secondary-line injury involves price discrimination that injures competition
13

among the discriminating seller's buyers. See Volvo Trucks, 546 U.S. at 176. And, tertiary-line
injury involves injury to competition at the level of the purchaser's customers.2 See id.
To establish a price discrimination claim based upon primary-line injury under section
2(a) of the Robinson-Patman Act, Plaintiff had to show that (1) Defendant's bottled water sales
were made in interstate commerce; (2) the bottled water was of like grade and quality; (3)
Defendant discriminated in price between a favored purchaser and a disfavored purchaser; and (4)
this price discrimination threatened substantial competitive injury. See 15 U.S.C. § 13(a); Brooke
Group, Ltd., 509 U.S. at 219-20; John B. Hull, Inc. v. Waterbury Petroleum Prods., Inc., 588 F.2d
24, 26 (2d Cir. 1978). "[P]rimary-line competitive injury under the Robinson-Patman Act is of
the same general character as the injury inflicted by predatory pricing schemes actionable under §
2 of the Sherman Act." See Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., 549 U.S.
312, 318, n.1 (2007); Brooke Group, Ltd., 509 U.S. at 221.
Whether under the Sherman Act or the Robinson-Patman Act, predatory pricing schemes
have two prerequisites to recovery that must be pleaded to establish a threat to substantial
competitive injury. See Brooke Group Ltd., 509 U.S. at 221. "First, a plaintiff seeking to
establish competitive injury resulting from a rival's low prices must prove that the prices
complained of are below an appropriate measure of its rival's costs." See id. at 224 (citing
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585, n.8 (1986)). Those prices

"A hallmark of the requisite competitive injury [in secondary-line cases]. . . is the
diversion of sales or profits from a disfavored purchaser to a favored purchaser" of a
discriminating seller. Volvo Trucks, 546 U.S. at 177. Therefore, the disfavored purchaser and
favored purchaser must be in direct competition with one another. See G.L.M. Sec. & Sound, Inc.
v. LoJack Corp., No. 10-CV-4701, 2012 WL 4512499, *11 (E.D.N.Y. Sept. 28, 2012). In
tertiary-line cases, the customers of the favored and disfavored purchasers can show their injury
through diverted sales; but, however, the favored and disfavored purchasers do not have to be
direct competitors. See Falls City Indus., Inc. v. Vanco Beverage, Inc., 460 U.S. 428, 437-38
(1983); G.L.M. Sec. & Sound, Inc., 2012 WL 4512499, at *11.
2

14

that are above an appropriate measure of a rival's costs "reflect[] the lower cost structure of the
alleged predator," and those above cost prices also "represent[] competition on the merits."3 See
Weyerhaeuser Co., 549 U.S. at 319 (2007) (quoting Brooke Group Ltd., 509 U.S. at 223)
(declining "to allow plaintiffs to recover for above-cost price cutting, concluding that
'discouraging a price cut and . . . depriving consumers of the benefits of lower prices . . . does not
constitute sound antitrust policy").
"The second prerequisite to holding a competitor liable under the antitrust laws for
charging low prices is a demonstration that the competitor had a reasonable prospect . . . of
recouping its investment in below-cost prices." Brooke Group Ltd., 509 U.S. at 224 (citing
Matsushita, 475 U.S. at 589). "Recoupment is the ultimate object of an unlawful predatory
pricing scheme; it is the means by which a predator profits from predation. Without it, predatory
pricing produces lower aggregate prices in the market, and consumer welfare is enhanced." See
Brooke Group, Ltd., 509 U.S. at 224.
As explained by the Supreme Court these two prerequisites are necessary because,
"[c]utting prices in order to increase business often is the very essence of competition." Pac. Bell
Tel. Co. v. Linkline Commc'n, Inc., 555 U.S. 438, 451 (2009) (internal quotation marks omitted)
(quoting Matsushita, 475 U.S. at 594); Brooke Group, Ltd., 509 U.S. at 226. Improperly
imposing liability for prices that are too low will "chill the very conduct the antitrust laws are

In the Second Circuit, the appropriate measure of cost in predatory pricing cases is
average variable cost, as a surrogate for marginal cost, because marginal cost cannot be
determined from conventional accounting methods. See Northeastern Tel. Co. v. Am. Tel. and
Tel. Co., 651 F.2d 76, 88 (2d Cir. 1981) (adopting marginal cost as the appropriate measure of
cost in predatory pricing cases). "Marginal cost is the increment to total cost that results from
producing an additional increment of output. It is a function solely of variable costs. . . . Marginal
cost usually decreases over low levels of output and increases as production approaches plant
capacity." Phillip Areeda and Donald F. Turner, Predatory Pricing and Related Practices Under
Section 2 of the Sherman Act, 88 HAR. L. REV. 697, 700 (1975).
3

15

designed to protect." Weyerhaeuser Co., 549 U.S. at 320 (internal quotation marks and citations
omitted) (quoting Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 121, n.17 (1986).
In the present case, Plaintiff has neither pleaded facts that support nor alleged the two
essential components of a predatory pricing scheme. Specifically, Plaintiff does not alleged that
Defendant priced and sold its bottled water at a level below its average variable cost – or at a
level below any level of cost. Upon a reading of Plaintiff's complaint, the Court finds that
Plaintiff has also failed to allege that Defendant had a reasonable prospect of recouping its
investment in below-cost pricing. Plaintiff pleaded that Defendant had the intent to harm them
with aggressive, competitive acts, but these facts, taken as true, do not state a claim for price
discrimination under section 2(a) of the Robinson-Patman Act. "Even an act of pure malice by
one business competitor against another does not, without more, state a claim under the federal
antitrust laws; those laws do not create a federal law of unfair competition or 'purport to afford
remedies for all torts committed by or against persons engaged in interstate commerce.'" Brooke
Group Ltd., 509 U.S. at 225 (quoting Hunt v. Crumboch, 325 U.S. 821, 826 (1945)). "It is
axiomatic that the antitrust laws were passed for 'the protection of competition, not competitors.'"
Brooke Group Ltd., 509 U.S. at 224 (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320
(1962).
3. Section 2(c) of the Robinson-Patman Act
Plaintiff contends that Defendant violated section 2(c) of the Robinson-Patman Act, 15
U.S.C. § 13(c), by paying Stew Leonard and A&P a sum of money in exchange for not
purchasing Plaintiff's bottled water and excluding Plaintiff from the promotional calendar,
respectively. See Dkt. No. 15 at ¶¶ 32-34, 56-58. Defendant argues that this section was only

16

intended to address the practice of "dummy brokerages."4 See Dkt. No. 23-3 at 22-23. According
to Defendants, because Plaintiff has no allegations involving a brokerage arrangement, this claim
should be dismissed. Section 2(c) of the Robinson-Patman Act states that
[i]t shall be unlawful for any person engaged in commerce, in the
course of such commerce, to pay . . . anything of value as a
commission, brokerage, or other compensation, or any allowance or
discount in lieu thereof, except for services rendered in connection
with the sale or purchase of goods, wares, or merchandise, either to
the other party to such transaction or to an agent, representative, or
other intermediary therein where such intermediary is acting in fact
for or in behalf, or is subject to the direct or indirect control, of any
party to such transaction other than the person by whom such
compensation is so granted or paid.
15 U.S.C. § 13(c). The Second Circuit, quoting Justice Frankfurter, stated that "precision of
expression is not an outstanding characteristic of the Robinson-Patman Act," see Blue Tree
Hotels, 369 F.3d at 218 (internal quotation marks omitted) (quoting Automatic Canteen Co. of
Am. v. FTC, 346 U.S. 61, 65 (1953), before parsing out section 2(a) claims as follows:
It is unlawful for any person to
(1) pay (or receive)a. anything of value as a commission, brokerage, or other
compensation, or
b. any allowance or discount in lieu of brokerage,
except for services rendered in connection with a sale or
purchase of goods,
(2) when the payment is made to (or by)
a. the other party to the transaction, or
b. an agent, representative or other intermediary where
the intermediary is
(i) acting for or in behalf of, or
(ii) subject to the direct or indirect control of

The practice of "dummy brokerages" occurred when "large retail buying groups – such as
large grocery store chains, which, unlike smaller stores, did not need to use intermediary brokers
to purchase their merchandise – would require suppliers to pay fees to "dummy brokers," who
then passed the fees on to the large retailer, effectively reducing the price the retailer paid for the
goods." Blue Tree Hotels, 369 F.3d at 221.
4

17

any party to the transaction other than the person by whom the
compensation is paid.
Id.
Indeed, Defendant is correct that section 2(c) was primarily enacted to prevent the practice
of "dummy brokerages," see Blue Tree Hotels, 369 F.3d at 221, but the courts have found that
Congress intentionally drafted broad language in this section to also cover other methods by
which brokerage fees could be used to effect price discrimination in the form of payment or
discount. See Am. Fed'n of State, Cty. & Mun. Emps. Dist. Council 37 Health & Sec. Plan v.
Bristol-Myers Squibb Co., 948 F. Supp. 2d 338, 357 (S.D.N.Y. 2013) (citing World Wrestling
Entm't, Inc. v. Jakks Pac., Inc., 425 F. Supp. 2d 484, 502 (S.D.N.Y. 2006). Here, Plaintiff does
not make out a prima facie case even giving a broader interpretation to this section because there
are no allegations of agents, fiduciaries, or brokerage fees within Plaintiff's complaint.
"Some courts, applying § 2(c) to circumstances far removed from the paradigmatic
'dummy brokerage' scheme, have held that § 2(c) also proscribes commercial bribery." Blue Tree
Hotels, 369 F.3d at 221 (collecting cases in which commercial bribery was found to be a violation
of section 2(c) of the Clayton Act). The Second Circuit has not yet determined whether
commercial bribery is prohibited by the Robinson-Patman Act. However, as in other cases, this
Court need not reach this determination here because "a necessary requirement for stating such a
claim would be allegations sufficient to establish commercial bribery," id. at 221 (citing Excel
Handbag Co. v. Edison Bros. Stores, Inc., 630 F.2d 379, 387-88 (5th Cir. 1980), which Plaintiff
has failed to do.
"The essence of commercial bribery is the corruption of the duty that an agent owes his
principal;" and, therefore, in order for commercial bribery to be "within the reach" of section 2(c),
a plaintiff must allege that a person, who purports to be an agent for – or maintains a fiduciary
18

duty to – one party to a transaction, receives "for his own account and contrary to the interests of
his principal[] commissions or payments from the other party to the transaction." Bristol-Myers
Squibb Co., 948 F. Supp. 2d at 357. Accordingly, "[t]o the extent that section 2(c) prohibits
bribery, it prohibits 'cases of commercial bribery involving a breach of a fiduciary duty by the
buyer's agent.'" United Magazine Co. v. Murdoch Magazines Distribution, Inc., 146 F. Supp. 2d
385, 397 (S.D.N.Y. 2001) (quoting Phillips Morris, Inc. v. Grinnelle Lithographic Co., 67 F.
Supp. 2d 126, 131 (E.D.N.Y. 1999). The payment of a sum of money from Defendant to a
supermarket, as alleged by Plaintiff, does not implicate an agent, a fiduciary duty, or a breach of
fiduciary duty. Accordingly, Plaintiff has not sufficiently pleaded a commercial bribery or, in
turn, a potential claim under section 2(c) of the Clayton Act.
4. Exclusive Dealing Agreements
Plaintiff alleges in its third claim alleges that Defendant has violated section 3 of the
Clayton Act, 15 U.S.C. § 14, ("section 3 of the Clayton Act") prohibiting exclusive dealing
agreements. See Dkt. No. 15 at ¶ 32. Presumably, Plaintiff is alleging that Defendant's payment
to Stew Leonard, a supermarket company, and Defendant's discounted price to Dave's Markets,
both in exchange for not purchasing Plaintiff's bottled water, were unlawful exclusive dealing
agreements. See id. at ¶¶ 32, 59-61. In opposition, Defendant argues that plaintiff did not
sufficiently plead a relevant market or substantial foreclosure of competition in the relevant
market. See Dkt. No. 23-3 at 24-29. The Court agrees with Defendant.
In relevant part, section 3 of the Clayton Act, 15 U.S.C. § 14, prohibits the sale or contract
for sale of goods on the condition, agreement, or understanding that the buyer will not use or deal
in the goods of the seller's competitor where the effect of the sale may be to substantially lessen
competition. Even if the contract for the sale of goods does not contain an explicit term to not use
19

the goods of a competitor, "it comes within the condition of the section as to exclusivity" when
"the practical effect is to prevent such use." See Tampa Elec. Co. v. Nashvill Coal Co., 365 U.S.
320, 326 (1961). Exclusive dealing agreements are not, standing alone, a violation of section 3 of
the Clayton Act. See Tampa, 365 U.S. at 327; Xerox Corp. v. Media Scis. Int'l, Inc., 511 F. Supp.
2d 372, 389 (S.D.N.Y. 2007). To state a violation, the exclusive dealing agreement must
foreclose competition in a substantial share of the relevant market. See Tampa, 365 U.S. at 32729; Xerox, 511 F. Supp. 2d at 389-90 ("Where a substantial share of the market is foreclosed,
competing manufacturers and new entrants will be unable to find outlets for their products.");
Commercial Data Servers v. Int'l Bus. Machs. Corp., 262 F. Supp. 2d 50, 75 (S.D.N.Y. 2003).
The Supreme Court provided guidelines with three considerations to determine if an
exclusive dealing agreement violates section 3 of the Clayton Act. See Tampa, 365 U.S. at 32729. First, the line of commerce must be defined, meaning "the type of goods." See id. at 327.
"Second, the area of effective competition in the known line of commerce must be charted by
careful selection of the market area in which the seller operates, and to which the purchaser can
practicably turn for supplies." Id. These first two considerations describe the "relevant market"
which is "the area of effective competition" because it is that "proportion of coverage" which
needs to be considered in protecting competition. Id. at 328 (citing Standard Oil of Cal. and
Standard Sol., Inc. v. United States, 337 U.S. 293, 299 (1949)). "[T]he threatened foreclosure of
competition must be in relation to the market affected." Id. at 327 ("It is clear, of course, that the
line of commerce affected need not be nationwide, at least where the purchasers cannot, as a
practical matter, turn to suppliers outside their own area." (internal quotation marks omitted)
(citing Standard Oil, 337 U.S. at 299)).

20

The final consideration is whether "the competition foreclosed by the contract" makes up
a "substantial share of the relevant market." Id. at 328 ("That is to say, the opportunities for other
traders to enter into or remain in that market must be significantly limited."). The substantiality
of the relevant market in a given case is determined by weighting "the probable effect of the
contract on the relevant area of effective competition, taking into account the relative strength of
the parties, the proportionate volume of commerce involved in relation to the total volume of
commerce in the relevant market area" as well as "the probable immediate and future effects
which pre-emption of that share of the market might have on effective competition therein." Id. at
329. Ultimately, "the relevant market is the prime factor" in determining whether a "contract
forecloses competition in a substantial share of the line of commerce involved." Id. at 329.
The relevant market "must include all products 'that have reasonable interchangeability for
the purpose for which they are produced – price, use and qualities considered.'" Commercial
Data Servers, 262 F. Supp. 2d at 63 (quoting United States v. E.I. du Pont de Nemours & Co.,
351 U.S. 377, 404 (1956)). The cross-elasticity of demand, meaning that, in response to an
increase in price, consumers of one product will respond by purchasing another, must also be
considered. See id. (citing AD/SAT, a Div. of Skylight, Inc. v. Associated Press, 181 F.3d 216,
227 (2d Cir. 1999). The failure to properly plead a relevant market is fatal to a plaintiff's claim at
the motion to dismiss stage. See Todd v. Exxon Corp., 275 F.3d 191, 200 (2d Cir. 2001);
Commercial Data Servers, 262 F. Supp. 2d at 63; Carell v. The Shubert Org., 104 F. Supp. 2d
236, 264 (S.D.N.Y. 2000).
"To survive a Rule 12(b)(6) motion to dismiss, an alleged product market must bear a
'rational relation to the methodology courts prescribe to define a market for antitrust purposes –
analysis of the interchangeability of use or the cross-elasticity of demand, and it must be
21

plausible." Todd, 275 F.3d at 200 (internal citation omitted). Determining the relevant market is
the same consideration in claims for violations of the Sherman Act and the Clayton Act. See
Standard Oil, 337 U.S. at 314; Todd, 275 F.3d at 200; Commercial Data Servers, 262 F. Supp. 2d
at 63.
Frequently, it is the situation that an antitrust claim is dismissed because the pleading
failed to even "attempt a plausible explanation as to why a market should be limited in a
particular way." See Todd, 275 F.3d at 200. Where a pleading alleges a proposed relevant market
that "clearly does not encompass all interchangeable substitute products even when all factual
inferences are granted . . . the relevant market is legally insufficient." City of N.Y. v. Group
Health Inc., 649 F.3d 151, 155 (2d Cir. 2011). Plaintiff's pleading in this case falls into this
category. Plaintiff's complaint presumably identifies the product line to be "bottles of
noncarbonated unflavored still natural spring water."5 See Dkt. No. 15 at ¶ 12. It further states
that the market for this type of bottled water is "discreet and identifiable, with cross-elasticity of
demand among interchangeable substitute products." See id. at ¶ 13. It is further described in the
complaint that the bottled water produced by Plaintiff and Defendant are interchangeable
products. See id. at ¶¶ 17-19.
Upon review of the complaint, the Court concludes that the product line in this case, as
pleaded, does not have any plausible basis. Despite identifying the product as bottled spring
water, Plaintiff does not reference the product market in its exclusive dealings claims beyond the
bottled water produced by Plaintiff and Defendant. It is stated in the complaint that Plaintiff, and
then Defendant, both bottled water under the Walmart brand in the past, see id. at ¶ 21, but the

Although the complaint does identify different sizes of bottled water, it is never clear
whether all the sizes of bottled water are part of the product market. See Dkt. No. 15 at ¶¶ 14-15.
5

22

product market, as referenced in the complaint, does not include other brands of bottled water
despite this allegation of co-packaging for other brands of bottled water.
Moreover, in its complaint, Plaintiff identifies that "all bottled water serves the same
purpose of quenching thirst." See id. This use does not support limiting Plaintiff's product
market to just "noncarbonated unflavored still natural spring water." See id. at ¶ 13. Defendant
argues that, under Plaintiff's definition that "water is water," see id. at ¶ 18, there is no plausible
basis why other types of bottled water are not part of the relevant product market, such as filtered
water, distilled water, purified water, artesian water, and mineral water. See Dkt. No. 23-3 at 26.
The Court agrees with Defendant that Plaintiff's relevant market is under-inclusive pursuant to its
own defining characteristics of its bottled water because it clearly does not encompass all
interchangeable substitute products.
Further, as part of the relevant market, a plaintiff must also plead a geographic market.
See Tampa, 365 U.S. at 327; Smugglers Notch Homeowners' Ass'n, Inc. v. Sumgglers' Notch
Mgmt. Co., 414 Fed. Appx. 372, 375-76 (2d Cir. 2011). Without identifying the geographic
boundaries of the product market, a complaint fails to state a cause of action. See Commercial
Data Servers, Inc., No 00CIV5008(CM)(LMS), 2002 WL 1205740, *4 (S.D.N.Y. Mar. 15, 2002).
"The geographic market encompasses the geographic area in which purchasers of the product can
practicably turn for alternative sources of the product." In re Aluminum Warehousing Antitrust
Litig., ___ F. Supp. 3d ___, ___, No. 13-md-2481, 2015 WL 1378946, *25 (S.D.N.Y. Mar. 26,
2015). Any barriers in sales transactions due to a different location or a consumer's preferences
for travel and price are some factors that are considered in a geographic market. See id. "The
geographic market for 'goods sold nationwide is often the entire United States, though it need not

23

be if purchasers cannot practicably turn to areas outside their own area for supply of the relevant
product.'" Id. (quoting Standard Oil, 337 U.S. at 299 n.5).
After careful review of the complaint, the Court finds that Plaintiff's alleged geographic
market is also legally insufficient. Plaintiff initially claims that the geographic market is the sale
of "bottled water" in five northeastern states where the parties compete to supply water to retail
outlets. See Dkt. No. 15 at ¶ 16. Plaintiff does not provide any plausible basis for the selection of
these five states. In fact, Plaintiff concedes that some of the market shares alleged in the
complaint do not account for all sales of bottled water in every retail outlet and do not account for
the sales of bottled water in every state where the two companies compete. See id. at ¶ 46. In this
case, Plaintiff has not attempted to give any explanation as to why the geographic market should
be limited to these five states. Because its failure to sufficiently state a product market and
geographic market, Plaintiff's section 3 claim is dismissed.
5. The Donnelly Act
Plaintiff's fourth claim alleges that Defendant violated section 340 of the New York
General Business Law, also known as the Donnelly Act (the "Donnelly Act"). See Dkt. No. 15 at
¶¶ 62-64. Presumably, Plaintiff is alleging that Defendant's payments/discounts to Stew Leonard
and Dave's Markets in exchange for not purchasing Plaintiff's product were agreements that
unlawfully restrained competition in violation of the state statute. New York modeled the
Donnelly Act after the Sherman Act, and the New York Court of Appeals has held that the state
antitrust claims should be construed in light of federal precedent.6 See X.L.O. Concrete Corp. v.
Rivergate Corp., 83 N.Y.2d 513, 518 (1994) (citing People v. Rattenni, 81 N.Y.2d 166, 171
(1993)); Anheuser-Busch, Inc. v. Abrams, 71 N.Y.2d 327, 335 (1988). Accordingly, the Donnelly

6

Plaintiff does not maintain a separate claim for a violation of the Sherman Act.
24

Act is governed by the Sherman Act standards. Assocs. Capital Servs. Corp. of N.J. v. Fairway
Private Cars, Inc., 590 F. Supp. 10, 13 (1982) (citing State v. Mobil Oil Corp., 38 N.Y.2d 460,
461 (1976).
In order to sufficiently plead a claim under the Donnelly Act, the Sherman Act, and
section three of the Clayton Act, a "'plaintiff must allege a relevant product market in which the
anti-competitive effects of the challenged activity can be assessed.'" Commercial Data Servs. v.
Int'l Bus. Mach. Corp., No. 00CIV5008, 2002 WL 1205740, *4 (S.D.N.Y. Mar. 15, 2002)
(quoting Carrell, 104 F. Supp. 2d at 264); see also Tampa, 365 U.S. at 325-26. The claims being
alleged under the Donnelly Act are the same as Plaintiff's claims underlying its alleged violation
of section 3 of the Clayton Act. Because the Court found that the relevant market, as alleged by
Plaintiff in the complaint, does not have any plausible basis and, thus, is legally insufficient to
support Plaintiff's claimed violation of section 3 of the Clayton Act, the Court likewise finds that
Plaintiff's claim for violations under the Donnelly Act also fails for the same reasons. The failure
to sufficiently plead a relevant market is just as fatal to Plaintiff's claim under the Donnelly Act as
it is to Plaintiff's claim under the section 3 of the Clayton Act. See City of N.Y. v. Group Health,
Inc., No. 06 Civ. 13122, 2010 WL 2132246, *2; Commercial Data Servs., 262 F. Supp. 2d at 78
(S.D.N.Y. 2003); see also Tampa Elec. Co., 365 U.S. at 325-26.
6. Tortious Interference with Prospective Business Relations
Plaintiff's fifth cause of action is for tortious interference with prospective business
relations in violation of New York common law. See Dkt. No. 15 at ¶¶ 65-66. Plaintiff claims
that Defendant schemed to take its business and convert its customers by disclosing to several
supermarkets that Plaintiff was considering selling out the business to Defendant in the face of
financial difficulties. See Dkt. Nos. 15 at ¶¶ 65-66; 25 at 9. To state a claim for tortious
25

interference with prospective business relations, the plaintiff must allege: "(1) business relations
with a third party, (2) the defendant's interference with those business relations, (3) the defendant
acted with the sole purpose of harming the plaintiff or used dishonest, unfair, or improper means,
and (4) injury to the business relationship." See Excellus Health Plan, Inc. v. Tran, 287 F. Supp.
2d 167, 177 (W.D.N.Y. 2003) (citing Nadel v. Play-by-Play Toys & Novelties, Inc., 208 F.3d 368,
382 (2d Cir. 2000)).
A claim for tortious interference with prospective business relations "requires more
culpable conduct on the part of the interferer" as compared to a defendant in tortious interference
with a contract, see Lane's Floor Coverings, Inc. v. Ardex, Inc., No. CV-95-4078, 1996 WL
19182, *3 (E.D.N.Y. Jan. 4, 1996), because "courts are more protective of existing contractual
relationships than prospective business relationships." Excellus Health Plan, 287 F. Supp. 2d at
177.
The Second Circuit has held that "mere suspicions are inadequate to support a claim for
tortious interference with business relations." Scutti Enters., LLC v. Park Place Entm't Corp.,
322 F.3d 211, 217 (2d Cir. 2003) (citing Nadel, 208 F.3d at 382). Claims for speculative future
economic advantage should be dismissed. See Am. Bldg. Maint. Co. of N.Y. v. Acme Prop. Servs.,
Inc., 515 F. Supp. 2d 298, 316 (N.D.N.Y. 2007); Jim Mazz Auto, Inc. v. Progressive Cas. Ins.
Co., Nos. 08-CV-00494(A)(M), 08-CV-00541(A)(M), 08-CV-00566(A)(M), 08-CV00583(A)(M), 2009 WL 891837, *6 (W.D.N.Y. Feb. 5, 2009); Commercial Data Servers., Inc. v.
Int'l Bus. Mach. Corp., 166 F. Supp. 2d 891, 898 (S.D.N.Y. 2001). A plaintiff "must specify
some particular, existing relationship through which plaintiff would have done business but for
the allegedly tortious behavior." See Commercial Data Servers, 166 F. Supp. 2d at 898 (internal
quotation marks and citations omitted).
26

"A general allegation of interference with customers without any sufficiently particular
allegation of interference with a specific contract or business relationship does not state a claim."
Commercial Data Servers, Inc., 166 F. Supp. 2d at 898 (internal quotation marks and citations
omitted). Accordingly, the failure to identify the specific potential customers or the third-party
businesses in the pleading is fatal to a plaintiff's claim. See Jim Mazz Auto, 2009 WL 891837, at
*6; Commercial Data Servers, Inc., 166 F. Supp. 2d at 898 (dismissing the complaint because
pleading that the potential customers were a group of resellers with identifying characteristics was
too vague to sustain a tortious interference claim).
In this case, Plaintiff has stated that Defendant interfered with Plaintiff's business
relationships by showing "several supermarkets" a letter from Plaintiff indicating financial
difficulties. See Dkt. Nos. 15 at ¶ 30; 25 at 9. The Court finds that Plaintiff has not sufficiently
identified a business relationship or customer by pleading "several supermarkets," and, therefore,
the allegations do not rise above mere speculation. Plaintiff's claim for tortious interference with
a prospective business relations is dismissed.
7. Unfair Competition
Plaintiff's sixth cause of action is for unfair competition under New York common law.
See Dkt. No. 15 at ¶¶ 67-68. This claim "exists where the defendant (1) misappropriates the skill,
expenditures, and labor of the plaintiff, (2) to its own commercial advantage, (3) in bad faith."
Excellus, 287 F. Supp. 2d at 178-79. Although this claim encompasses "a litany of illegal
practices . . . , one element deemed essential to the type of unfair competition claim set forth here
is that the defendant has misappropriated the benefit or property right of another for its own
commercial advantage." Winner Int'l v. Kryptonite Corp., No. 95 Civ. 247, 1996 WL 84476, *3
(S.D.N.Y. Feb. 27, 1996); see also Norbrook Lab. Ltd. v. G.C. Hanford Mfg. Co., 297 F. Supp. 2d
27

463, 491 (N.D.N.Y. 2003) ("[T]he gravamen of a claim of unfair competition is the bad faith
misappropriation of a commercial advantage belonging to another."). The function of this tort is
to "protect property rights of value . . . from any form of commercial immorality." See Norbrook,
297 F. Supp. 2d at 491 (internal citations omitted).
Plaintiff claims that Defendant accessed confidential and proprietary information –
specifically its financial data – pursuant to the non-disclosure agreement, and then wrongly used
and disclosed this information to cause damage to Plaintiff. See Dkt. Nos. 15 at ¶¶ 25, 30-31, 6768; 25 at 10-11. Whether the financial information allegedly taken and disclosed by Defendant
constitutes a property right or trade secret is ordinarily a question of fact, see Ashland Mgmt. Inc.
v. Altair Investments NA, LLC, 59 A.D.3d 97 (1st Dep't 2008), but, however, where the parties
have entered into a confidentiality agreement, the information can be treated as a trade secret,
even if the information did not independently rise to the level of a trade secret. See Paz Sys., Inc.
v. The Dakota Group Corp., 514 F. Supp. 2d 402, 408 (E.D.N.Y. 2007) (finding that, by gaining
information from the plaintiff via their confidential relationship, the defendants "incurred a duty
not to use it to [the] plaintiff's detriment") (citing Panther Sys. II, Ltd. v. Pather Comput. Sys.,
Inc., 783 F. Supp. 53 (E.D.N.Y. 1991)).
Where a relationship of trust is abused by the misappropriation and exploitation of
confidential information for commercial business, the courts have found this to be unfair
competition even if the confidential information would not alone rise to the level of a trade secret.
See Paz Sys., Inc., 514 F. Supp 2d at 409; Ecolab Inc. v. Paolo, 753 F. Supp. 1100, 1111
(E.D.N.Y. 1991); Allan Dampf, P.C. v. Bloom, 127 A.D.2d 719, 719 (2d Dep't 1987). In this
case, the financial data that was allegedly obtained pursuant to a non-disclosure agreement and

28

then unlawfully disclosed by Defendant for its commercial benefit plausibly states a claim for
unfair
competition.
8. Breach of Contract
Defendant moves to dismiss Plaintiff's seventh claim for breach of contract. See Dkt. No.
23-3 at 23-25. According to Defendant, Plaintiff has failed to state a claim for which relief can be
granted under Delaware law, the applicable law to the contract. See id. Defendant submits that
Plaintiff's pleading alleges speculative and unforeseeable consequential damages that are not
available under the applicable law. See id. Although a court's review of a motion to dismiss is
generally limited to the facts presented in the pleading, the court may consider documents that are
"integral" to that pleading, even if they are neither physically attached to, nor incorporated by
reference into, the pleading. See Mangiafico v. Blumenthal, 471 F.3d 391, 398 (2d Cir. 2006)
(quoting Chambers v. Time Warner, Inc., 282 F.3d 147, 152-53 (2d Cir. 2002)). The Court has
reviewed the contract at issue even though it was not attached to the complaint.
"A federal court sitting in a diversity case applies the choice of law rules of the forum
state." Dessert Beauty, Inc. v. Platinum Funding Corp., 519 F. Supp. 2d 410, 418-19 (S.D.N.Y.
2007); see also Fin. One Pub. Co. v. Lehman Bros. Special Fin., Inc., 414 F.3d 325, 331 (2d Cir.
2005). "The validity of a contractual choice-of-law clause is a threshold question that must be
decided not under the law specified in the clause, but under the relevant forum's choice-of-law
rules governing the effectiveness of such clauses." See Fin. One Pub., 414 F.3d at 332. In New
York, "absent fraud or violation of public policy, contractual selection of governing law is
generally determinative so long as the State selected has sufficient contacts with the transaction."
Hawes Office Sys. v. Wang Labs., Inc., 537 F. Supp. 939, 942 (E.D.N.Y. 1982). At this time, the
29

Court declines to make a definitive finding that Delaware Law applies to the non-disclosure
agreement in this action. See Speedmark Transp., Inc. v. Mui, 778 F. Supp. 2d 439, 444
(S.D.N.Y. 2011) (finding that the choice-of-law determination was premature at the motion to
dismiss stage) (collecting cases).
However, even assuming for purposes of this motion only that Delaware law applies to the
breach of contract claim, the Court finds that Plaintiff has plausibly stated a claim. "In order to
survive a motion to dismiss for failure to state a breach of contract claim, the plaintiff must
demonstrate: first, the existence of the contract. . . ; second, the breach of an obligation imposed
by that contract; and third, the resultant damage to the plaintiff." VLIW Tech., LLC v. HewlettPackard Co., 840 A.2d 606, 612 (Del. 2003); see also Greenstar, LLC v. Heller, 814 F. Supp. 2d
444, 450 (D. Del. 2011). "Recovery is limited to those damages that arise naturally from the
breach or that were reasonably foreseeable at the time the contract was made." Tackett v. State
Farm Fire and Cas. Ins. Co., 653 A.2d 254, 265 (Del. 1995).
According to the complaint, there was a valid non-disclosure agreement between Plaintiff
and Defendant, see Dkt. No. 15 at ¶ 24, Defendant breach the terms of this agreement by
disclosing to third-party retailers that Plaintiff was looking to sell out due to financial
difficulties, see id. at ¶ 30, and this disclosure, in violation of the contract, caused wholesale
buyers to refuse to purchase from Plaintiff out of fear that Plaintiff would be unable to deliver
their product and that these purchasers would be able to buy Plaintiff's product from Defendant at
a reduced price. See id. at ¶ 31. Contrary to Defendant's contention, there is not a heightened
pleading requirement for proximate cause in a breach of contract claim in Delaware. Plaintiff has
plausibly alleged damage that was proximately cause by Defendant's breach of the non-disclosure
agreement. The Court finds that Plaintiff has sufficiently stated a claim for breach of contract.
30

IV. CONCLUSION
After carefully reviewing the entire record in this matter, the parties' submissions and the
applicable law, and for the above-stated reasons, the Court hereby
ORDERS that Defendant's motion to dismiss pursuant to section 12(b)(6) of the Federal
Rules of Civil Procedure (Dkt. No. 23) is GRANTED with regard to Plaintiff's claims for
1.

violation of section 2(a) of the Robinson-Patman Act, 15 U.S.C. § 13(a),

2.

violation of section 2(c) of the Robinson-Patman Act, 15 U.S.C. § 13(c),

3.

violation of section 3 of the Clayton Act, 15 U.S.C. § 14,

4.

violation of the New York Donnelly Act, N.Y. General Business Law § 340, and

5.

New York common law claim for tortious interference; and the Court further

ORDERS that Defendant's motion to dismiss pursuant to section 12(b)(6) of the Federal
Rules of Civil Procedure (Dkt. No. 23) is DENIED with regard to Plaintiff's claims for
1.

New York common law claim for unfair competition, and

2.

New York common law breach of contract; and the Court further

ORDERS that the Clerk of the Court shall serve a copy of this Memorandum-Decision
and Order on all parties in accordance with the Local Rules.
IT IS SO ORDERED.
Dated: August 10, 2015
Albany, New York

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