Coalition for a Level Playing Field, L.L.C. v. Autozone, Inc.
Filing
115
MEMORANDUM OPINION AND ORDER re: 108 MOTION to Amend/Correct 107 Order Notice of Motion for Leave to File Proposed 3rd Amended and Supplemental Complaint containing curative amendments filed by 47th Street Auto Parts, inc., Automotive Hard Parts, Inc., Workman's Portage Lakes Auto Parts, Inc., Joyce's Automotive Supply Inc., Avenue Auto Parts, Inc., Lant ENT., Inc., Mid-City Automotive Warehouse, Inc., Gemini of Westmont, Inc., Dyke, Inc., Wal, Inc., Doc Meyer Auto Supply, I nc., Goffstown Auto Parts, Inc., Perry's Auto Parts & Equipment Co., Inc., PEMA Associates, Inc., Pioneer Auto Center, Inc., Superior Motor Parts, Inc., Chicopee Automotive Warehouse, Inc., The Miller Dudley Co., Inc. of MD, Ken Washington Auto Parts, Inc., Auto Parts Discount Center, Inc., Millenium Autmotive Logistics, Inc., M & B, Inc., Cash Automotive, Inc., Prevatte Auto Supply, Inc., Clyde Everett Sisson, Marty's Auto Supply, Inc., HLR Shocks, Inc., Suburban Auto Supply, Inc., Bo b's Tools & Auto, Inc., Land & Lake Wholesale Supply, Inc., Mader Automotive Center, Inc., Manny's Auto Supply, Inc., David Wilcox, Parts Mart, Inc., Workman's Auto Parts, Inc., Midwest Warehouse Corporation, Sloan Auto Parts, Inc., S & G Automotive, Inc., Dennis E. Remiger, Motor Supply Corp, Automotive Warehouse, Inc. of Lakeland, Cardone Industries, USA, Barlex, Inc., Dixie Diggs Auto Parts Inc., Easton Electrical Devices, Inc., Owenby Auto Parts, Inc., Mutt Radicke Auto Supply , Inc., Line Auto Supply, Inc., North Shore Metals, Inc., Wyan Parts & Service, Inc., Dyke Motor Supply Co., Inc., LaCava & Sowersby, Inc., Paramount Auto Parts, Inc., Met's Auto Supply, Inc., Superior Bumper Products, Inc., Best Auto Supply, In c., Airport Auto Supply Inc., Auto Parts & Supply, Inc., Eastern Auto Parts Inc., M & M Auto Parts, Inc., Keen's Automotive Machine Shop, Inc., L. J. Hutchins Automotive Supply, Inc., Towne Auto Parts, Inc., Willy's Auto Supply, Inc., Myra Myers, Braintree Automotive Supply, All Parts Auto Supply, Automotive Supply Associates, Toledo Auto Electric, Inc., Willard C. Starcher, Inc., Southport Auto & Marine, Inc., Arvin Industries, Inc., Poquoson Auto Parts, Titan Truck Equipment Co.,Inc. , uto Supply, Inc., The Belshe Co., Inc., Glo Auto Supply Inc., Columbia Auto Parts Co, Ed Schroeder's Auto Parts, Inc., Dusenberry's, Bachelders' Automotive Distributors, Inc., Associate Jobbers Warehouse, Inc., Steve's Auto Supp ly, Inc., Ralph A. Dickson, III, Weather's Auto Supply Inc., Pelletier's Automotive, Inc., E & S Auto Parts, Inc., Partners Auto Parts, Inc., Jobbers Warehouse Service, Inc., Wesson's Mobil, Inc., ASPA Management Corp, Henry Garcia 9;s Enterprises, Inc, Niles Auto Supply of Syracuse, Inc., APW Co., Wallace, Wallace, & Wallace, Inc., Burns Automotive Parts, Inc., West, Inc., S & L Auto Supply, Inc., Dyke Motor Supply Co., Irving Levine Automotive Distributors, Inc., Hopkins Auto Supply, Inc., W. L. Greenfield Corp, Stewart's Inc., Joyce Auto Parts of Mt.Airy, Inc., Napa Clover Auto Parts, Inc., Racer's Equipment Warehouse Inc., Larry A. Skillman, Alfredo Carranza, Jr., Springfield Auto Supply, One Stop Auto Parts, Inc., McAlhaney Enterprises, Inc., Truck Suppliers Inc, Crest Auto Stores, Inc., Ritchie Auto Parts, Inc., Cambridge Four Star, Inc., The Driver's Seat, Speed Equipment Corp., Steve's Auto Parts, Inc., Johnston Distributing Co, Taylor Auto Supply, Inc., Siggs Auto Parts, South Austin Auto Supply, Inc., Nelson Truck Equipment Co., Inc., A & T Enterprises, Inc., Robert Elgart & Son Inc., A to Z Auto Parts #2, Inc., Graffman's, Inc., Apponaug Auto Supply, Inc., Janice D. Mercer, Cro wn Automotive Distributors, LTD, Hebert Auto Supply of Concord, LLC, Hoffman Auto Parts, Ralph A. Dickson, Jr., Alco Auto Parts Co., J. S. Auto Parts, Inc., Coalition for a Level Playing Field, L.L.C., Charles R. Russell, Gil's Auto Parts, Gener al Auto Repair, Burlington County Auto Parts, Inc., Mariclare, Inc., Joe Sackett & Sons, Inc., Workman's Auto Parts of Hartville, Inc., TI Management Co., Paga, Inc., Carmac, Inc., Wendell Whelchell, Knox Bros.,Inc., Automotive Parts Warehouse, Inc., Cee-Kay Auto Supply, Inc., Arcand Sales & Service, Inc., A & G Auto Parts, Inc., Buckeye Auto Parts, Inc., U.S.A Auto Parts Corp., Main Auto Supply of Fairfield, Inc., Auto Parts & Equipment Co., National Auto Parts, Inc. of Appomattox, B & H A uto Supply, Inc., The Bill Hebert Co, Inc, Amelia"s Automotive Inc., Homestead Automotive Supply, Parts Pro Warehouse, Inc., Citizen's Auto Parts, Inc. For the foregoing reasons, plaintiffs' motion to amend 108 is DENIED. The Court does not reach defendants' alternative arguments in opposition to amendment. (Signed by Judge Richard J. Holwell on 9/27/2011) (mro)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
COALITION FOR A LEVEL PLAYING FIELD,
L.L.C., ET AL.,
Plaintiffs,
1:04-cv-08450-RJH
-againstMEMORANDUM OPINION
AND ORDER
AUTOZONE, INC., ET AL.,
Defendants.
Richard J. Holwell, District Judge:
This is a price discrimination action under the Robinson-Patman Act, 49 Stat.
1526, 15 U.S.C. § 13 (2006) (the “RPA”). Plaintiffs, a number of small solely owned
auto parts stores and a trade association including such stores, allege they have been
competitively injured by defendants’ price discrimination in violation of the RPA.
Defendants are several auto parts manufacturers, as well as large chain retailers that sell
auto parts. Plaintiffs allege that the manufacturer defendants discriminate in favor of the
large chain retailer defendants, injuring disfavored purchasers such as the small store
plaintiffs.
The Court previously dismissed plaintiffs’ second amended complaint (the “Prior
Complaint”) because it did not plausibly allege violations of the RPA. Coalition for a
Level Playing Field, L.L.C. v. AutoZone, Inc., 737 F.Supp.2d 194 (S.D.N.Y. 2010) (the
“September 2010 Opinion”). Rather than dismiss with prejudice, the Court permitted
plaintiffs to propose curative amendments, and plaintiffs have in turn moved to amend,
attaching a third amended complaint (the “Proposed Complaint”). In support of that
1
motion, they note: (1) the addition of putatively curative allegations; (2) a change in the
focus of the complaint from auto parts in general to auto part product lines; and (3) their
inability to determine or plead the extent of price discrimination without discovery.
Defendants oppose amendment and seek dismissal with prejudice, arguing inter alia that
the proposed additions are entirely conclusory and do not cure the defects in the Prior
Complaint. For the reasons that follow, plaintiffs’ motion to amend is denied.
I.
BACKGROUND
The facts of this case and its procedural history are discussed at length in the
Court’s September 2010 Opinion, so only a brief exposition follows. As always at the
motion to dismiss stage, the Court takes the well-pled factual allegations of the complaint
as true and draws reasonable inferences in plaintiffs’ favor. ATSI Commc’ns, Inc. v.
Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007).
The plaintiffs in the Proposed Complaint are four small solely-owned auto parts
stores, and the “Coalition for a Level Playing Field, LLC,” a coalition of small stores and
the warehouse middle-man distributors such stores buy parts through. (Proposed
Complaint ¶¶ 3-6.) The solely owned stores and warehouse distributors operate in a
segment of the auto parts aftermarket that is generally three-step: manufacturers sell to
distributors, distributors sell to small locally owned stores, and the small local stores sell
to consumers.1 (Proposed Complaint ¶ 74(B).) Over the last several decades the small
stores and warehouse distributors have fallen on hard times, as they struggle to compete
1
Apparently distributors may sometimes also sell directly to consumers, and locally owned stores
may sometimes buy directly from manufacturers. (Proposed Complaint ¶ 74(B).) However the
core of the plaintiffs’ allegations regards the three-step process, (e.g. Proposed Complaint ¶¶ 89,
94(B)(14)), so the Court refers to warehouses and local stores as operating in the “three-step”
segment throughout. The existence of some direct sales is not material to this opinion.
2
with the large chain stores that have become an increasingly prevalent feature of the
American consumer goods market. (Proposed Complaint ¶ 79.) Such chain stores
operate in a two-step segment of the auto parts market: manufacturers sell to large chain
retailers, then the chain retailers handle all distribution functions and sell to consumers.
(Proposed Complaint ¶¶ 61-62 (distribution functions); ¶ 74 (direct resale).) Defendants
are nine such manufacturers and four such chain stores. (Proposed Complaint ¶¶ 726(A), 27-57.)
Plaintiffs’ core allegation is that the chain stores’ success, at least with respect to
the auto parts market, is the result of pervasive price discrimination in violation of the
RPA. (Proposed Complaint ¶ 83.) They allege that the chain stores in the two step
segment of the market force manufacturers to charge them favorable prices for parts,
(Proposed Complaint ¶¶ 94(L)-(M)), giving them a significant competitive advantage
over the disfavored small stores and warehouse distributors in the three-step segment of
the market. (Proposed Complaint ¶¶ 78-79.)
Plaintiff Coalition for a Level Playing Field, LLC, joined by 133 small stores and
warehouse distributors, first filed suit against the retailer defendants in the Eastern
District of New York on February 16, 2000. See Complaint, Coalition for a Level
Playing Field v. Autozone Inc., No. 00 Civ. 953 (E.D.N.Y. Feb. 16, 2000). After
completion of discovery, a representative number of plaintiffs proceeded to trial which
resulted in a jury verdict for defendants, and judgment was entered in defendants’ favor
on January 28, 2003. (Prager Decl. Ex. 4.) On October 27, 2004, the Coalition, joined
by certain of the plaintiffs from the Eastern District Action who had not gone to trial,
filed this suit in the Southern District of New York, re-alleging a number of RPA claims
3
and also raising a new claim alleging discovery misconduct on the part of the defendants
in the Eastern District action. The Eastern District action and this one are similar, and in
the September 2010 Opinion the Court found aspects of this action precluded by the
Eastern District action. Further details on that subject are beyond the scope of this
opinion.
Within the scope of this opinion are the claims, dismissed without prejudice in the
September 2010 Opinion, which plaintiffs now seek to press in the Proposed Complaint.
There are two such claims. First, the Proposed Complaint again raises a claim for direct
price discrimination against the manufacturer defendants under Section 2(a) of the RPA,
and against the retailer defendants under Section 2(f) of the RPA. Section 2(a) prohibits
a seller from discriminating in price when certain conditions are met, and Section 2(f)
prohibits a buyer from knowingly receiving discriminatory prices. 15 U.S.C. § 13(a), (f).
Second, the Proposed Complaint again raises a claim for indirect price discrimination
under Sections 2(d) and 2(e), which prohibit sellers from selectively providing or funding
advertising and promotional programs to buyers in order to indirectly discriminate in
price between favored and disfavored purchasers. Buyers are likewise prohibited from
knowingly receiving prohibited discriminatory advertising and promotional favors. Id.
§ 13(d), (e).
As regards the Section 2(a) and Section 2(f) price discrimination claim, in the
September 2010 Opinion the Court found that the Prior Complaint failed to plausibly
state a claim. That Complaint had supported its allegations of illegality primarily with a
price sheet showing certain price differentials at the retail and warehouse level: retail
prices set by the defendant retailers were sometimes lower than the prices warehouse
4
distributors charged to small store plaintiffs. From that, the complaint alleged
anticompetitive price discrimination in violation of the RPA. Noting that “courts may not
presume illegality when the ‘nub’ of a complaint alleges conduct that is equally capable
of being legal,” September 2010 Opinion, 737 F.Supp.2d at 214 (citing Ashcroft v. Iqbal,
129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009)), the Court concluded that the Prior
Complaint failed because it alleged conduct equally capable of being lawful under the
RPA. Id. at 215-19. Specifically, the Court noted that the Proposed Complaint also
raised the reasonable inferences that: (1) price differentials resulted from functional
discounts given by manufacturers for the mix of services provided by the retailer
defendants, and (2) price differentials resulted from materially different terms of sale
between the retailer and manufacturer defendants as opposed to those between the
warehouse distributors and manufacturer defendants. Both types of conduct are lawful
under the RPA. See id. at 210-13. Because the Prior Complaint did not allege facts that
rendered plausible an inference of illegality, particularly in light of the lawful conduct its
factual allegations suggested, the Court dismissed the price discrimination claim. Id. at
216.2
2
The Prior Complaint also contained certain allegations relating to non-price terms of sale that
were not adequately alleged to have the “practical effect” of changing the price charged to
favored sellers, which the Court found were not properly within the purview of a Section 2(d) or
2(e) price discrimination claim. September 2010 Opinion, 737 F.Supp.2d at 212-13, 217-18,
(citing Corn Prods. Refining Co. v. FTC, 324 U.S. 726, 740, 65 S.Ct. 961, 89 L.Ed. 1320 (1945);
Black Gold, Ltd. v. Rockwool Industries, Inc., 729 F.2d 676, 682 (10th Cir. 1984)). The Proposed
Complaint has been shorn of such allegations, replacing them with the general formula for
determining price discrimination in paragraphs 94A. (Proposed Complaint ¶¶ 94(A), 94(H); Pl.
Mem. 6.) Nonetheless, defendants object to the possibility that the proposed calculation would
include non-price terms of sale. (Def. Mem. 10.) Since the Court finds the Proposed Complaint
otherwise deficient, it does not pass on the viability of plaintiffs’ proposed calculation, or address
whether that calculation would inappropriately treat non-price terms as indirect price
discrimination.
5
Also in the September 2010 Opinion, the Court found that the Section 2(d) and
2(e) advertising and promotion claim suffered from an additional defect—its allegations
were at too high a level of generality to state a claim on behalf of any particular plaintiff
as against any particular defendant. Id. at 218. The Prior Complaint alleged that vendor
agreements between the various defendants afforded advertising and promotional
program kickbacks, without describing or identifying any particular programs received
by any particular defendants. Nor did the Prior Complaint plead which of several
hundred plaintiffs were denied the opportunity to share in which advertising or
promotional program of which defendant manufacturer. Noting that each plaintiffs’
claim against each defendant must be plausibly plead, the Court found that this en masse
approach to pleading hundreds of claims did not satisfy Rule 8. Id.
The Court did not dismiss either the price discrimination or advertising and
promotion program claims with prejudice. Rather, the Court deferred decision on
whether to grant leave to amend and afforded plaintiffs an opportunity to propose
curative amendments.
II.
THE PROPOSED COMPLAINT
The Proposed Complaint makes a number of changes that plaintiffs contend cure
the deficiencies in the Prior Complaint.
A.
Fewer Plaintiffs and Defendants
The Proposed Complaint drastically reduces the number of plaintiffs. While the
Prior Complaint had 134 plaintiffs (Prior Complaint ¶ 6), the Proposed Complaint has but
four—the Coalition itself, Gil’s Auto Parts, Amelia’s Automotive, Inc., and M&M Auto
6
Parts, Inc. (Proposed Complaint ¶¶ 3-6.) Plaintiffs contend that this “was done to
dramatically simplify the case and make it easier to set forth the required allegations, and
enabled the Proposed Pleading to do so without any attached schedules.” (Pl. Mem. 3.)
As for Retailer Defendants, the Proposed Complaint again alleges that four
different store chains are independently engaged in the same behavior of inducing price
discrimination to competitively injure small parts stores:
90. Wal-Mart and Sam’s Club have systematically violated the Robinson-Patman
Act since approximately 1981 by activities … that ha[ve] resulted in lower costs
of product (including auto parts) for Wal-Mart than its competitors are paying for
the same products, and this strategy of violating the Robinson-Patman Act to
drive competitors out of business has been adopted and used successfully by
AutoZone and Advance, which are admittedly attempting to emulate Wal-Mart’s
activities…
(Proposed Complaint ¶ 90.)
The Proposed Complaint has reduced from twelve to nine the number of parts
manufacturers that are allegedly complicit in each of the four retailer defendants’ price
discrimination efforts. The “Manufacturer Defendants” are defined as ArvinMeritor,
Inc., Ashland, Inc. (Valvoline Division), Cardone Industries USA, Ford Motor Company
(Motorcraft division), Pennzoil-Quaker State Company, SOPUS Products, Inc., Standard
Motor Products, Inc., Stant Manufacturing, and The Armor All/STP Products Company.
(Proposed Complaint ¶¶ 31-57.) All of the allegations in the complaint refer to all nine
manufacturers as a group, the “Manufacturer Defendants.”
B.
Product Lines, Determination of Prices
The Proposed Complaint differs from the Prior Complaint in that it alleges price
discrimination not with respect to auto parts, but with respect to auto part product lines.
60A. The Manufacturer Defendants and other auto-part manufacturers offer,
price and sell their parts according to product lines, whether or not a customer
7
buys each and every part within the product line, and with the price of a specific
part being dependent on overall purchases of the product line by the
Manufacturer’s customer.
(Proposed Complaint ¶ 60(A).)
60B. Auto-part lines are offered, marketed, sold and priced by the Manufacturer
defendants as a line, and not by specific parts within a line. The Plaintiffs and the
Defendant Retailers are sold a product line, and the ultimate resale of the line by
bits and pieces does not change the way in which parts are negotiated and sold as
a group called a line…
(Proposed Complaint ¶ 60(B).)
Plaintiffs explain that the purpose of pleading product lines rather than particular parts is
to remove some of the burden of proving their RPA claims.
60. The purpose of pleading ‘auto-part product lines’ instead of specific auto
parts is to enable the plaintiffs to prove that the discriminatory pricing
occurred…without having to allege or prove that, as to each different part within a
product line purchased by a plaintiff, the same part was contemporaneously
purchased…which is burdensome to perform for plaintiffs carrying several
hundred thousand parts…. Also, the discovery requirements as to ‘parts’ as
distinguished from ‘product lines’ makes Robinson-Patman Act litigation too
costly to maintain and effectively eliminates the Robinson-Patman Act from the
nation’s antitrust laws if required.
(Proposed Complaint ¶ 60.)
The Proposed Complaint now leads its pricing section with the allegation that the
alleged discriminatory prices on product lines cannot be directly determined, but must be
computed according to a formula introduced in the Proposed Complaint.
94. Each of the Retailer Defendants purchases its auto-part product lines from the
Manufacturer Defendants at a price that is not set forth in writing and which can
be determined only by calculating all of the Retailer Defendant’s payments to the
Manufacturer and the value of any services received by the Manufacturer or
saving resulting to the Manufacturer (the “Product-Line Price”) for the total of the
individual parts purchased for such price.
(Proposed Complaint ¶ 94.)
94A. The agreement[s] between Autozone, Advance, Wal-Mart and Sam’s Club
and each of the Manufacturer Defendants is a lengthy document (exceeding 35
pages) in which numerous provisions exist, creating rights and duties between the
contracting arties, and providing for payments and credits for the purchase of
parts, various fees and allowances, including promotional and advertising
8
allowances, penalties and other charges. The total cost of parts can only be
determined by knowing (i) the amount of money which changed hands under the
agreement; (ii) the basis for the payment; (iii) the value of the services provided
by one to the other under the agreement; and (iv) the Blue Book or other reference
value for the parts sold to the Retailer Defendant under the agreement. …. To
determine the extent of the price discrimination alleged by one of the Plaintiff
Retailers requires a similar analysis of the supplying WD’s agreement with the
Manufacturer Defendant, as to the same auto-part product line, and then the
results compared, through comparing what discount was given to the Retailer
Defendants from the Manufacturer’s Blue Book price of the parts actually
purchased with the discount given to the supplying WD from the Manufacturer’s
Blue Book price of the parts actually purchased by the WD.
(Proposed Complaint ¶ 94(A).)
The Proposed Complaint explains why these complex calculations are needed to
determine the amount of price discrimination:
94L. The Retailer Defendants have created their present system of contracts for
the purpose of hiding their illegal pricing scheme…
(Proposed Complaint ¶ 94(L).)
C.
Price Discrimination Allegations
Despite alleging that the existence and extent of price discrimination cannot be
determined without engaging in the calculations described in ¶¶ 94-94(A), the Proposed
Complaint again alleges price discrimination on the part of all nine manufacturer
defendants in their dealings with each of the four retailer defendants:
80. The Manufacturer Defendants are selling their auto-part product lines to the
Major Retailers, including the Retailer Defendants, at a price which is 25% (or
more) lower than the price which the Manufacturers’ [sic] charge to the WD’s
who resell the auto-part product lines to Retailer Plaintiffs and other retailer
members of the Coalition.
(Proposed Complaint ¶ 80.)
The Proposed Complaint alleges that the manufacturer defendants are induced to
price discriminate by the retailer defendants, and that the manufacturers sell at cost or at a
loss to the retailer defendants:
9
94L. The Retailer Defendants have created their present system of contracts for
the purpose of hiding their illegal pricing scheme, and the Manufacturers have
been forced to go along with it to be able to get the auto-parts business of the
Retailer Defendants, even though the Manufacturers themselves are being injured
in the process….
(Proposed Complaint ¶ 94(L).)
94M. The Manufacturers are intimidated from complaining about the
discriminatory pricing arrangement for fear of losing the business they are
obtaining, even though the business is unprofitable for most of the Manufacturers;
accepting unprofitable business is preferred by them to letting their competitors
obtain the business….
(Proposed Complaint ¶ 94(M).)
The Proposed Complaint again purports to state factual content in support of its
allegations of price discrimination. It explains that price discrimination is apparent from:
(1) the fact that manufacturers also engage in discrimination in their promotional and
advertising allowance programs as alleged in Count II (¶ 94(B)(1)); (2) the significant
decline in the number and profitability of warehouse distributors, independent auto parts
stores, and parts manufacturers since 1990, especially as compared to the success of the
retailer defendants (¶¶ 94(B)(2)-(5), (12)); (3) the fact that plaintiffs’ retail prices are
higher than the retailer defendants’ (¶ 94(B)(6)); (4) the retailer defendants’ use of a
bidding process to purchase auto parts (¶ 94(B)(10)); (5) the fact that the Retailer
Defendants have hidden their price discrimination to make it difficult to plead
((¶ 94(B)(11); ¶¶ 94(K)-(L)); and (6) the fact that warehouse distributors sometimes
charge the small retailer plaintiffs higher prices for auto parts than the retailer defendants
charge to consumers (¶ 94(B)(14).)
The Proposed Complaint has added allegations that explicitly disclaim the
possibility that the alleged price differentials are due to lawful conduct by defendants
such as functional discounting or materially different terms of sale:
10
81. The Discriminatory Price is not attributable to any saving, service or
efficiency received, obtained or promised by the Major Retailer to the
Manufacturer, as to which there results an additional disparity in price to the
WD’s.
(Proposed Complaint ¶ 81.)
94F. The discriminatory prices charged to the supplying WD’s (and to any directbuying independent retailers) reflect anticompetitive price discrimination rather
than permissible functional discounts when the required analysis is made, as
described in ¶¶ 94A and 94C above.
(Proposed Complaint ¶ 94(F).)
94G. The contractual arrangements between any one of the Manufacturer
Defendants any of the Retailer Defendants is not materially different from the
contractual arrangements between the Manufacturer and the buying groups
through which all WD’s make their direct purchases from the Manufacturer, but
for the discriminatory terms involved (favoring the Retailer Defendants) and
disfavoring the buying groups and their WD members.
(Proposed Complaint ¶ 94(G).)
D.
Promotional and Advertising Allowances
The Section 2(d) and 2(e) claim in the Proposed Complaint is similar to that in the
Prior Complaint. Plaintiffs allege that “each of the Manufacturer Defendants has
provided an advertising and promotional program to each of the [defendant retailers]
without making a proportionate or substantially equivalent advertising and promotional
program available to [plaintiffs].” (Proposed Complaint ¶ 158.) They describe the types
of programs as being “display, endcap and other slotting allowances…; promotional
allowances, fees and discounts; and advertising allowances and discounts.” (Proposed
Complaint ¶ 159.) The Proposed Complaint again provides no description as to which of
the nine defendants discriminated with respect to which programs, nor does it describe
which particular plaintiffs were denied promotional opportunities or were injured
thereby.
11
III.
DISCUSSION
Under Federal Rule of Civil Procedure 15(a), leave to amend a complaint should
be given freely “when justice so requires.” Fed. R. Civ. P. 15(a)(2). However, “motions
to amend should generally be denied in instances of futility, undue delay, bad faith or
dilatory motive, repeated failure to cure deficiencies by amendments previously allowed,
or undue prejudice to the non-moving party.” Burch v. Pioneer Credit Recovery, Inc.,
551 F.3d 122, 126 (2d Cir. 2009) (citing Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct.
227, 9 L.Ed.2d 222 (1962)). Amendment is futile where the “proposed amended
complaint would be subject to immediate dismissal.” Jones v. New York State Div. of
Military & Naval Affairs, 166 F.3d 45, 55 (2d Cir. 1999). Moreover justice does not
require a plaintiff be permitted to amend when, being “on the plainest notice of what was
required,” he fails to correct the deficiencies in a prior pleading. Denny v. Barber, 576
F.2d 465, 471 (2d Cir. 1978); Abadin v. Marvel Entm’t, Inc., No. 09 Civ. 715 (PAC),
2010 WL 1257519, at *4 (S.D.N.Y. Mar. 31, 2010) (when plaintiff is on “plainest of
notice of the deficiencies in his original complaint, and ha[s] previously filed an amended
complaint,” justice does not require “the busy district court to engage in still a third goaround.”). Since the Proposed Complaint fails to correct the deficiencies previously
identified by the Court, plaintiffs’ motion to amend must be denied.
A.
Price Discrimination Claim
As did the Prior Complaint, the Proposed Complaint fails to state a claim for price
discrimination. “[I]n order to establish a violation of the [RPA], a plaintiff has the
burden of proving that: (1) a ‘commodity’ was sold in interstate commerce to at least two
buyers; (ii) the commodity sold to the disfavored purchaser was of ‘like grade and
12
quality’ to that sold to the favored purchaser; (iii) the seller ‘discriminate[d] in price
between’ the favored and disfavored purchaser; and (iv) that discrimination had a
prohibited effect on competition.” September 2010 Opinion, 737 F.Supp.2d at 209-10
(citing 15 U.S.C. § 13(a)); Texaco Inc. v. Hasbrouck, 496 U.S. 543, 556, 110 S.Ct. 2535,
110 L.Ed.2d 492 (1990); George Haug Co. v. Rolls Royce Motor Cars Inc., 148 F.3d
136, 141 (2d Cir. 1998). At the motion to dismiss stage, a plaintiff need only give “‘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.’” September 2010 Opinion, 737 F.Supp.2d at 214 (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 554, 127 S.Ct. 1955, 1964, 167 L.Ed.2d 929 (2007)). The Court
keeps in mind two requirements when adjudicating the sufficiency of a complaint’s
factual allegations: “[f]irst, although the Court must still accept factual allegations as true,
it should not credit ‘mere conclusory statements’ or ‘threadbare recitals of the elements
of a cause of action’[;]…[s]econd, accepting creditable allegations as true, the Court must
also determine whether they plausibly suggest an entitlement to relief.” Id. at 213
(quoting Iqbal, 129 S.Ct. at 1949) (citing Harris v. Mills, 572 F.3d 66, 72 (2d Cir.
2009)).3
The Complaint lists many allegations that it claims make defendants’ alleged
price discrimination scheme obvious. But most of those factual allegations are either
conclusory or non-responsive to the existence of price discrimination. First, the fact that
plaintiffs also allege promotional program discrimination in Count II (Proposed
Complaint ¶ 94(B)(1)), does nothing to support plaintiffs price discrimination allegations
3
The Court further discussed the RPA in the September 2010 Opinion, 737 F.Supp.2d at 209-14,
the pleading standard at 214-15, and their application to the Prior Complaint at 216-19. That
discussion is incorporated herein by reference.
13
in Count I, especially in light of the fact that Count II is plead with similarly ambiguous
and conclusory allegations. Second, the relative success of the retailer defendants in the
auto parts market as compared to the dwindling small retailer plaintiffs, (Proposed
Complaint ¶¶ 94B(2)-(5), (12)), is as easily explained by numerous other competitive
differences without concluding that defendants routinely violate the RPA. Third and
similarly, the fact that the retailer plaintiffs themselves charge higher retail prices than the
retailer defendants, (Proposed Complaint ¶ 94B(6)), is also as easily explained by their
competitive differences than by the alleged discriminatory pricing at a different level of
distribution. Fourth, the retailer defendants use of competitive bidding, (Proposed
Complaint ¶ 94B(10)), to purchase auto parts actually refutes an inference of price
discrimination, since it indicates that hard bargaining and individual contractual
circumstances define prices. Fifth, the allegation that the retailer defendants intentionally
hide their price discrimination, (Proposed Complaint ¶ 94(B)(11); ¶¶ 94(K)-(L)), is itself
conclusory and depends on the existence of that price discrimination; absent facts tending
to show that the various manufacturer and retailer defendants are engaged in a coverup,
that allegation does not support the related allegation of wrongdoing.
Like in the Prior Complaint, the only creditable allegation in the Proposed
Complaint tending to support price discrimination is the allegation that warehouse
distributors sometimes charge the small retailer plaintiffs higher prices for auto parts than
the retail defendants charge directly to consumers. (Proposed Complaint ¶ 14.) This
allegation, with the corresponding price lists demonstrating instances of this occurrence,
properly and plausibly alleges that there is sometimes a price differential at the
manufacturer level between sales to warehouse distributors and to retailer defendants.
14
However, as the September 2010 Opinion noted, not all price differentials are
unlawful under the act. Price differentials could as easily result from lawful practices and
not a pattern of price discrimination as alleged by plaintiffs. First, the Court noted that “a
seller may charge a buyer reduced prices if the reduced prices reflect a bona fide
‘functional discount’—in essence, a set-off for the value of services the purchaser
performs for the seller.” September 2010 Opinion, 737 F.Supp.2d at 210. Such
arrangements are a natural reading of the Proposed Complaint. Like the Prior Complaint
before it, the Proposed Complaint describes a group of retailer defendants that, compared
to warehouse distributors and local stores, operate in a different distribution chain and
provide a different mix of distribution, warehousing, marketing, and promotional services
to parts manufacturers. In this context the alleged conduct (price differentials) is
“presumptively allowable.” Texaco, 496 U.S. at 548-49.
Second, the September 2010 Opinion noted that “a seller is not obligated to
charge the same prices for a commodity if its sales contracts with different buyers contain
materially different terms.” September 2010 Opinion, 737 F.Supp.2d at 212 (citing
Coastal Fuels of Puerto Rico, Inc. v. Caribbean Petroleum Corp., 990 F.2d 25, 27 (1st
Cir. 1993)). The Proposed Complaint, like the Prior Complaint before it, indicates that
auto parts manufacturers enter into unique sales arrangements with each retailer, within
which individual part prices fluctuate. This is particularly so in light of the newly added
“product line” allegations, which indicate that individual parts sales occur in the context
of a product line buying scheme that defies reduction to simple pricing calculations.
In this context, the Proposed Complaint again asks the Court to infer—from
occasional price differentials on particular auto parts at the retail and warehouse levels—
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that four different, competing, chain retailers forced nine different manufacturers into a
price discrimination scheme to injure the small store plaintiffs. To do so would stretch
the limits of plausibility since it is as likely that in each business relationship,
manufacturers and buyers engage in hard bargaining for price, bargaining that leads to
lawful discounts for the different functions chain retailers perform, and results in
materially different contract terms between the various buyers and manufacturers. For
the reasons explained in the September 2010 Opinion, such conduct does not violate the
RPA.
Instructed of this deficiency in their Prior Complaint, plaintiffs have attempted to
remedy it by adding new allegations to the Proposed Complaint that purport to refute the
inference that functional discounting or materially different terms of sale are responsible
for the occasional downstream price differentials. However those allegations in the
Proposed Complaint are completely conclusory. Plaintiffs allege that:
81. The Discriminatory Price is not attributable to any saving, service or
efficiency received, obtained or promised by the Major Retailer to the
Manufacturer, as to which there results an additional disparity in price to the
WD’s.
(Proposed Complaint ¶ 81.)
94F. The discriminatory prices charged to the supplying WD’s (and to any directbuying independent retailers) reflect anticompetitive price discrimination rather
than permissible functional discounts when the required analysis is made, as
described in ¶¶ 94A and 94C above.
(Proposed Complaint ¶ 94(F).)
94G. The contractual arrangements between any one of the Manufacturer
Defendants any of the Retailer Defendants is not materially different from the
contractual arrangements between the Manufacturer and the buying groups
through which all WD’s make their direct purchases from the Manufacturer, but
for the discriminatory terms involved (favoring the Retailer Defendants) and
disfavoring the buying groups and their WD members.
(Proposed Complaint ¶ 94(G).)
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Each of these allegations is conclusory. It is common ground that, although the Court
must accept factual allegations as true, it should not credit “mere conclusory statements”
or “threadbare recitals of the elements of a cause of action.” Iqbal, 129 S.Ct. at 1949.
Accordingly, the additional allegations in the Proposed Complaint fail to cure the
deficiencies in the price discrimination claim.
B.
Promotional Programs
In the September 2010 Opinion, the Court found that plaintiffs’ advertising and
promotional program claims failed to state a claim as to any particular defendants. The
allegations in the Prior Complaint operated at too high a level of generality to permit an
inference of misconduct as to any particular defendant. September 2010 Opinion, 737
F.Supp.2d at 218. The Court also found that the allegations were too general to support
the inference that any particular plaintiff suffered an injury as a result of being denied an
advertising or promotional program. Id. The Court cannot identify any additions in the
Proposed Complaint that correct these deficiencies, and plaintiffs have not pointed any
out in their memorandum in support of amendment. Accordingly, plaintiffs have failed
to cure the deficiencies in the promotional program claim.
C.
Inability to Develop Necessary Factual Content
Plaintiffs essentially concede that they cannot plead factual content supporting
their claims because the requisite pricing information is unavailable to them—it is in the
hands of defendants. The crux of plaintiffs’ motion to amend is not the new allegations
that they add in the Proposed Complaint, but rather their contention that they need
discovery to develop the necessary factual content to plausibly plead (and eventually
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prove) their claims. As the Proposed Complaint alleges, defendants have complicated
pricing schemes and a flow of services back and forth between manufacturer and retailer
that together defy ready reduction to part-by-part prices. (e.g. Proposed Complaint ¶¶ 60,
94.) And in their reply memorandum in support of amendment, plaintiffs exhort the
Court that:
The interpretation of pleading requirements ha[s] to take into account that the
Defendant Manufacturers’ product-line costs are not available to the Plaintiffs,
and probably are not even available to the Defendant Manufacturers []because
such calculation of product-line costs by their independent accounting firms
would require the accountants to quit the account to avoid civil and criminal
liability for falsification of accounting reports.
The only way to obtain the needed product-line figures is through litigation, such
as this, and the only way the pleading can be drafted is by describing the
information needed. The information itself, as stated above, is not available, and
has never been sought through any discovery by the Plaintiffs. …
The specifics being demanded … are not available, but the way in which the price
discrimination proof can be assembled has been pleaded by the Plaintiffs….
(Pl. Rep. Mem. 3-4.)
Plaintiffs’ implicit plea for discovery runs contrary to the pleading requirements
of Iqbal and Twombly. In this regard, the recent decision of the Sixth Circuit Court of
Appeals in New Albany Tractor, Inc. v. Louisville Tractor, Inc., ___ F.3d ___, 2011 WL
2448909 (6th Cir. June 21, 2011)), is instructive. In that case, New Albany Tractor, a
Tractor Retailer, brought a Robinson-Patman Act price discrimination claim against Scag
Power Equipment and Louisville Tractor Inc., respectively a manufacturer of tractors and
a distributor/dealer. Reviewing the district court’s grant of a motion to dismiss, the Sixth
Circuit encountered a similar situation to the one here:
This new ‘plausibility’ pleading standard causes a considerable problem for
plaintiff because [defendants] are apparently the only entities with the information
about the price at which Scag sells its equipment to Louisville Tractor. This
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pricing information is necessary in order for New Albany to allege that it pays a
discriminatory price for the same Scag equipment, as required by the language of
the Act.
Id. at *3.
The Sixth Circuit noted that “[b]efore Twombly and Iqbal, courts would probably have
allowed this case to proceed so that plaintiff could conduct discovery in order to gather
the pricing information.” Id. However, even in light of New Albany’s inability to obtain
the factual information necessary to plausibly plead price discrimination, the Sixth
Circuit affirmed the district court’s dismissal of the complaint. It based that decision on
two conclusions about Iqbal: (1) it “specifically directs that no discovery may be
conducted in cases such as this [where a complaint lacks the requisite factual content],
even when the information needed to establish a claim of discriminatory pricing is solely
within the purview of the defendant,” id. (emphasis in original); and (2) “[t]he language
of Iqbal, ‘not entitled to discovery,’ is binding on the lower federal courts.” Id., citing
Iqbal, 129 S.Ct. at 1954. While this procedural limitation may create inequities in some
cases, it does not do so here as plaintiffs have already had the benefit of discovery and
trial in the Eastern District action.
Other factors diminish the pull of plaintiffs’ argument for a reduced pleading
standard. This is a case where further discovery would be particularly expensive and
complicated—plaintiffs’ allegations cover all auto parts sales of a host of manufacturers
over a lengthy time period, and their proposed price discrimination calculation requires
an accounting of every service provided by retailers and manufacturers alike. See also
Tires Inc. of Broward v. Goodyear Tire & Rubber Co., 295 F.Supp.2d 1349, 1353 (S.D.
Fla. 2003) (dismissing similar RPA complaint under notice pleading) (“Allowing this
case to go forward based upon these general allegations would create unmanageable
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discovery regarding nearly every Goodyear tire sold in Broward County.”). Additionally,
RPA claims in more traditional settings or with a better factual basis should still satisfy
the plausible pleading requirement. Plaintiffs’ difficulty in pleading this case is in large
part due to plaintiffs’ strategy of attacking industry wide sales arrangements that make
price term comparisons and claims of discrimination across two different distribution
chains difficult to support with the requisite factual allegations. And despite that, their
pleading would still be tenable were plaintiffs to plead any factual content that explained
why it is plausible—not merely possible—that defendants have broken the law.
Although these plaintiffs have failed to do so, the bar is not so high that others—those
with a plausible basis for their RPA allegations—will be unable to reach it.
Accordingly, the Court declines to apply a loosened version of the Rule 8
pleading standard to the Robinson-Patman Act claims in the Proposed Complaint.
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IV.
CONCLUSION
For the foregoing reasons, plaintiffs' motion to amend [108] is DENIED. The
Court does not reach defendants' alternative arguments in opposition to amendment.
SO ORDERED.
Dated: New York, New York
September .l..7, 2011
s=1'w-------..
Richard J. Holwell
United States District Judge
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