Witt Company v. RISO, Inc.

Filing 58

OPINION & ORDER: The motion to dismiss 27 is granted. Any amended complaint is due within fourteen (14) days of the date of this Opinion & Order. See 37-page opinion & order attached. Signed on 6/7/2013 by Judge Marco A. Hernandez. (mr)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
WITT COMPANY, an Oregon
corporation,

No. 03:13-cv-00166-HZ

Plaintiff,
v.

OPINION & ORDER

RISO, INC., a Massachusetts corporation,
Defendant.
John F. McGrory, Jr.
Kaley L. Fendall
DAVIS WRIGHT TREMAINE LLP
1300 S.W. Fifth Avenue, Suite 2400
Portland, Oregon 97201-5610
Attorneys for Plaintiff
Thomas M. Triplett
Roman D. Hernandez
SCHWABE, WILLIAMSON & WYATT
1211 S.W. Fifth Avenue, Suite 1900
Portland, Oregon 97204
///
1 - OPINION & ORDER

Edwin G. Harvey
Matthew L. Landwehr
David M. Mangian
THOMPSON COBURN LLP
One US Bank Plaza
St. Louis, Missouri 63101
Attorneys for Defendant
HERNANDEZ, District Judge:
Plaintiff Witt Company brings this antitrust action against Defendant RISO, Inc.,
contending that Defendant has violated the Sherman and Clayton Acts with an unlawful tying
arrangement. Plaintiff also brings state law claims of intentional interference with economic
relations, breach of contract, and breach of the implied duty of good faith and fair dealing.
Defendant moves to dismiss the four claims. I agree with Defendant that depending on
how the antitrust claim is construed, it is either barred by the statute of limitations or fails to state
a claim. I further agree with Defendant that the state law claims fail to state a claim and that this
Court lacks personal jurisdiction over Defendant as to the contract-based claims. I grant the
motion to dismiss.
BACKGROUND
The facts are taken from the Complaint with some additional facts provided by Exhibits
A-1 to A-4 to the March 27, 2013 Kathryn Hawkes Declaration. The Complaint refers to and
quotes from these exhibits and neither party questions their authenticity. Plaintiff raises no
objection to considering them in resolving the motion to dismiss. Therefore, I rely on them in the
context of this motion. See Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010)
(court may consider materials incorporated into the complaint or matters of public record)

2 - OPINION & ORDER

Plaintiff provides office technology products and related services, including hardware,
software, and supplies, as well as both maintenance and consulting services for document
imaging, document output, and digital storage. Compl. at ¶ 1. Defendant manufactures and
distributes hardware and supplies for document printing and duplicating. Id. at ¶ 2.
Plaintiff has been an authorized dealer of RISO digital duplicators and other related
products since approximately 1988. Id. at ¶ 7. As such, it entered into several RISO Domestic
Dealer Agreements ("Dealer Agreements") from time to time which set forth the terms and
conditions of the parties' business relationship. Id.
On April 1, 2007, Plaintiff and Defendant entered into a 2007 Dealer Agreement.1 Id. at ¶
8; see also Ex. A-1 to Mar. 27, 2013 Hawkes Decl. In December 2009, Defendant offered to
replace the 2007 Dealer Agreement with a succeeding Dealer Agreement which contained terms
Plaintiff objected to. Id. at ¶ 9. The 2007 Dealer Agreement ceased to remain in effect sometime
in March 2010, ninety days after Defendant offered the succeeding Dealer Agreement which
Plaintiff did not execute. Id. (citing 2007 Dealer Agreement termination paragraph 4(b)(ii)).
Plaintiff has not been a party to any Dealer Agreement with Defendant since the 2007
Dealer Agreement ceased to be effective (with the exception of a ninety-day period discussed
below). Id. Despite the absence of a formalized Dealer Agreement with Defendant, Plaintiff has
continued to be an authorized RISO dealer as of the time this Complaint was filed on January 29,
1

Defendant refers to this same agreement as the "FY 2008 Dealer Agreement." Because
the Complaint refers to it as the "2007 Dealer Agreement," I have as well. Additionally, even
though the Complaint refers to the "2007 Dealer Agreement" in the singular, there were multiple
2007 Dealer Agreements pertaining to multiple geographic areas. Exhibit A-1 to the March 27,
2013 Hawkes Declaration contains a full copy of the 2007 Dealer Agreement for Plaintiff's Brea,
California location, as well as relevant pages from identical 2007 Dealer Agreements pertaining
to Oregon and Washington.
3 - OPINION & ORDER

2013. Id.
On April 1, 2011, the parties executed an Asset Purchase Agreement (APA) under which
Plaintiff acquired from Defendant markets in two counties in California and five counties in
Arizona. Id. at ¶ 10; see also Ex. A-2 to Mar. 27, 2013 Hawkes Decl. Under the APA, Plaintiff
paid Defendant $700,000 for the purchase of Defendant's operations in those markets. Id. at ¶
11; Ex. A-2 to Hawkes Decl. at §§ 1.10, 1.11.
Plaintiff alleges that approximately two weeks before the closing of the APA, Defendant
told Plaintiff that Plaintiff had to sign a new Dealer Agreement as part of the closing of the APA.
Compl. at ¶ 12. Plaintiff objected to executing a new Dealer Agreement because of terms it
considered to be overly restrictive. Id. at ¶ 13. Plaintiff told Defendant it would not finalize the
APA if it was required to sign the new Dealer Agreement. Id. Among other things, Plaintiff
objected to paragraph 3 of the new Dealer Agreement which provided that
[d]uring the term of this Agreement, Dealer shall not also be a dealer for, nor
make sales of, digital duplicators, accessories, or parts or supplies for digital
duplicators, directly or substantially competitive with [RISO] Products.
Id.
Plaintiff objected to paragraph 3 because it would deny Plaintiff the right to purchase and
sell RISO digital duplicators unless it also agreed to exclusively purchase RISO brand supplies
for use in RISO equipment, and not use any competitive supplies. Id. at ¶ 14. At the closing of
the APA, Plaintiff and Defendant agreed to reinstate the terms of the 2007 Dealer Agreement for
a period of ninety days following the execution of the APA so that the parties could attempt to
negotiate terms that would be acceptable to Plaintiff. Id. They further agreed to "attempt in good
faith" to resolve their concerns about the proposed Dealer Agreement so that the "terms of the
4 - OPINION & ORDER

reinstated Dealer Agreement may be replaced by a new dealer agreement." Id. at ¶ 15 (citing
section 5.7 of the APA).
After the APA closing, Plaintiff made "several good-faith efforts" to negotiate a new
Dealer Agreement. Id. at ¶ 16. Plaintiff alleges that RISO was largely non-responsive. Id.
Eventually, Defendant presented Plaintiff with a new Dealer Agreement on September 12, 2012.
Id. at ¶ 17; see also Ex. A-3 to Mar. 27, 2013 Hawkes Decl. Plaintiff alleges that Defendant told
Plaintiff that Plaintiff would be required to execute a new Dealer Agreement to remain an
authorized dealer. Id. On September 20, 2012, Defendant sent Plaintiff a letter stating that if
Plaintiff did not sign a new Dealer Agreement, Plaintiff's status as an authorized RISO dealer
would expire on March 31, 2013.2 Id. at ¶ 18; Ex. A-4 to Hawkes Decl.
Plaintiff alleges that the September 20, 2012 Letter specifically stated that Plaintiff's
acceptance of the new Dealer Agreement constituted an acknowledgment that it would abide by
paragraph 3 of the Dealer Agreement which prohibits the sale of any digital duplicators,
accessories, parts, or supplies that compete with RISO products. Id. at ¶ 19. Plaintiff also
alleges that RISO stated that it would not sell Plaintiff RISO digital duplicators unless Plaintiff
agreed to purchase exclusively RISO supplies for use in RISO equipment, and not use any
competitive supplies. Compl. at ¶ 19. Plaintiff further alleges that after termination as a RISO
dealer, Defendant prohibited Plaintiff from purchasing RISO parts to service and maintain
duplicators it had previously sold unless it also continued to purchase only RISO supplies, and
from using any competitive supplies, as provided in paragraph 5(d) of the new Dealer
Agreement. Id.
2

This was extended to May 31, 2013.

5 - OPINION & ORDER

Since September 20, 2012, the parties have not reached agreement on the terms of a new
Dealer Agreement. Id. at ¶ 20. Plaintiff has told Defendant that it will not agree to the terms of
the 2012 Dealer Agreement as written and Defendant has maintained its position that if Plaintiff
did not agree to the new Dealer Agreement, Plaintiff will cease being an authorized dealer after
March 31, 2013. Id. at ¶¶ 20, 22.
Any additional allegations are incorporated into the discussion below.
STANDARDS
On a motion to dismiss, the court must review the sufficiency of the complaint. Scheuer
v. Rhodes, 416 U.S. 232, 236 (1974). All allegations of material fact are taken as true and
construed in the light most favorable to the nonmoving party. Am. Family Ass'n, Inc. v. City &
County of San Francisco, 277 F.3d 1114, 1120 (9th Cir. 2002). However, the court need not
accept conclusory allegations as truthful. Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir.
1992).
A motion to dismiss under Rule 12(b)(6) will be granted if plaintiff alleges the "grounds"
of his "entitlement to relief" with nothing "more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action[.]" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007). "Factual allegations must be enough to raise a right to relief above the speculative level,
. . . on the assumption that all the allegations in the complaint are true (even if doubtful in
fact)[.]" Id. (citations and footnote omitted).
To survive a motion to dismiss, the complaint "must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on its face[,]" meaning "when the
plaintiff pleads factual content that allows the court to draw the reasonable inference that the
6 - OPINION & ORDER

Defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(internal quotation omitted). Additionally, "only a complaint that states a plausible claim for
relief survives a motion to dismiss." Id. The complaint must contain "well-pleaded facts" which
"permit the court to infer more than the mere possibility of misconduct." Id. at 679.
DISCUSSION
I. The Antitrust Claim
A. Description of the Claim
Plaintiff's First Claim for Relief is for "illegal tying" and is brought under section 1 of the
Sherman Act, 15 U.S.C. § 1, and section 3 of the Clayton Act, 15 U.S.C. § 14.3 Plaintiff alleges
that digital duplicators and supplies used in digital duplicators constitute two separate and
distinct products. Id. at ¶ 38. By requiring its authorized dealers to sell only RISO supplies (and
requiring them not to sell supplies that compete with RISO supplies) in order to sell digital
duplicators under the explicit terms of its Dealer Agreement, Plaintiff alleges that Defendant has
illegally tied the purchase of RISO supplies to the purchase of RISO digital duplicators in
violation of the antitrust laws. Id. at ¶ 39. Plaintiff contends that Defendant possesses sufficient
economic power in the digital duplicator market to coerce its authorized dealers to agree not to
sell any competing non-RISO supplies and to sell only RISO supplies for use in conjunction with
RISO digital duplicators. Id. at ¶ 40. Given that Defendant "has made clear" that Plaintiff will
no longer be an authorized dealer after March 31, 2013 if it does not agree to refrain from selling
competing non-RISO supplies under the terms of its Dealer Agreement, Defendant is attempting
3

The elements for establishing a tying violation under these two statutes "are virtually
the same" and the court treats them alike in its analysis. Airweld, Inc. v. Airco, Inc., 742 F.2d
1184, 1189 n.2 (9th Cir. 1984).
7 - OPINION & ORDER

to coerce Plaintiff to purchase only RISO supplies. Id. at ¶ 41.
Plaintiff alleges that by tying RISO supplies to RISO digital duplicators in this way,
Defendant has substantially foreclosed competing digital duplicator suppliers from the largest
channel of distribution, and competing manufacturers of these supplies find it exceptionally
difficult to reach end-user consumers. Id. at ¶ 42. And, Defendant's conduct results in Defendant
charging supra-competitive prices for its supplies. Id. at ¶ 43. Defendant's conduct has
unreasonably restrained competition in the relevant market and has caused Plaintiff, other RISO
authorized dealers, and consumers of RISO digital duplicators to suffer antitrust injuries by being
coerced into purchasing products they don't want or need, being forced to purchase RISO
supplies at a supra-competitive price, and having their choice of available products artificially
limited. Id.
Defendant moves to dismiss the antitrust claim because it is barred by the statute of
limitations. Alternatively, Defendant argues that the claim fails to state a claim in a number of
respects.
B. Statute of Limitations
Antitrust claims are subject to a four-year statute of limitations. 15 U.S.C. § 15b;
Airweld, 742 F.2d at 1189. A cause of action under section 15b "accrues and the statute begins
to run when a defendant commits an act that injures a plaintiff's business." Zenith Radio Corp. v.
Hazeltine Research, Inc., 401 U.S. 321, 338 (1971). Because the Complaint in this case was filed
on January 29, 2013, the limitations period began on January 29, 2009.
It is clear from the Complaint that the origin of the antitrust claim is in paragraph 3 of the

8 - OPINION & ORDER

Dealer Agreement, quoted above.4 What is less clear is whether Plaintiff bases the claim on the
current enforcement of that provision in the Dealer Agreements or on the threat of losing its
authorized dealer status for refusing to sign the 2012 Dealer Agreement.
To the extent the claim is based on the actual enforcement of paragraph 3 of the 2007
Dealer Agreement, I agree with Defendant that such a claim accrued on April 1, 2007, the
effective date of that agreement. The Complaint alleges that the 2007 Dealer Agreement expired
in March 2010 (other than its brief ninety-day resurrection in 2011 as part of the APA). The
2012 Dealer Agreement has never been executed. There is, therefore, no operative express
agreement under which Defendant is allegedly enforcing the illegal provision in paragraph 3(a).
Moreover, Plaintiff alleges in the Complaint that although there is no express Dealer Agreement
in place, its status as an authorized dealer has continued. Plaintiff does not allege that Defendant
has continued to enforce paragraph 3(a) during this time.
Any enforcement of the allegedly illegal tying provision in paragraph 3(a) began with the
2007 Dealer Agreement.5 Accordingly, any antitrust cause of action based on the current
enforcement of paragraph 3(a) accrued with the effective date of the 2007 Dealer Agreement or
April 1, 2007. Because this claim was filed more than four years after that date, it is time barred.
Eichman v. Fotomat Corp., 880 F.2d 149, 160 (9th Cir. 1989) (statute of limitations barred tying
claim when lease contract containing alleged illegal tying provision was entered into outside the

Paragraph 3(a) is the same in the 2007 Dealer Agreement and the 2012 Dealer
Agreement. Exs. A-1, A-3 to Hawkes Decl.
4

5

While the parties' relationship predates the 2007 Dealer Agreement, the Complaint
recites terms of only the 2007 Dealer Agreement and Defendant bases its motion and argument
on that agreement.
9 - OPINION & ORDER

limitations period); Aurora Enters., Inc. v. Nat'l Broad. Co., 688 F.2d 689, 693 (9th Cir. 1982)
(statute of limitations barred plaintiff's claim because the contract containing the alleged illegal
tying provision was entered into more than four years before the complaint was filed); Irving v.
Lennar Corp., No. CIV S–12–290 KJM EFB, 2013 WL 1308712, at *15 (E.D. Cal. Apr. 1, 2013)
("When a plaintiff alleges that an agreement is an illegal tying agreement, he must bring suit
within four years after the agreement was executed, as a general rule.").
Additionally, although continuing violations may restart the antitrust statute of
limitations, there must be a "new and independent act that is not merely a reaffirmation of a
previous act," and "it must inflict new and accumulating injury on the plaintiff." Pace Indus., Inc.
v. Three Phoenix Co., 813 F.2d 234, 237, 238 (9th Cir. 1987). Here, any sales of digital
duplicators and supplies pursuant to paragraph 3(a) of the 2007 Dealer Agreement and occurring
during the limitations period do not amount to continuing violations because performance of an
alleged illegal contractual tie-in provision does not satisfy the continuing violation requirements.
E.g., Eichman, 880 F.2d at 160 (rejecting plaintiff's argument that each payment under the
allegedly illegal lease contract was a new injury for the purposes of the statute of limitations);
Aurora Enters., 688 F.2d at 694 (continued receipts by the defendant from the contract did not
amount to an overt act capable of restarting the statute of limitations); see also Varner v. Peterson
Farms, 371 F.3d 1011, 1019 (8th Cir. 2004) ("[p]erformance of the alleged anticompetitive
contracts during the limitations period is not sufficient to restart the period"; claim barred by
statute of limitations when contract entered into outside of limitations period ).
Finally, I reject Plaintiff's argument that the claim was not actionable until sometime in
the spring of 2012 when non-RISO supplies allegedly first became available. Plaintiff contends
10 - OPINION & ORDER

that the presence of the contractual tying provision in paragraph 3(a) alone did not start the
statute of limitations because no alternative supplies were available to authorized dealers until
March or April of 2012. Plaintiff makes no such allegations in the Complaint and thus, on the
face of the Complaint, any claim based on enforcement of the allegedly illegal tying provision in
paragraph 3(a) of the 2007 Dealer Agreement accrued on April 1, 2007. Also, Plaintiff's
argument is inconsistent with allegations in the Complaint that as early as 2011 when the APA
was being negotiated, Plaintiff objected to the illegal tying provision. Compl. at ¶¶ 12-14.
Moreover, as indicated above, the Complaint fails to allege that Defendant enforced paragraph
3(a) after the March 2010 expiration of the 2007 Dealer Agreement (other than the ninety days in
2011 it became part of the APA). Therefore, the Complaint does not support any claim accruing
in the spring of 2012 based on enforcement of paragraph 3(a). To the extent the antitrust claim is
based on the enforcement of paragraph 3(a) pursuant to the contractual relationship commencing
April 1, 2007 when the 2007 Dealer Agreement became effective, it is time barred and is
dismissed with prejudice.
The Complaint also suggests, however, that the alleged injurious act is not the
enforcement of paragraph 3(a) over the years, but is the present threat to end Plaintiff's
authorized dealer status as a consequence for Plaintiff's refusal to sign the 2012 Dealer
Agreement. Defendant gave Plaintiff the proposed 2012 Dealer Agreement on September 11,
2012. Compl. at ¶ 17. In the September 20, 2012 Letter sent by Defendant to Plaintiff,
Defendant told Plaintiff that Defendant would interpret Plaintiff's failure to accept the proposed
2012 Dealer Agreement by December 31, 2012, as a determination by Plaintiff that Plaintiff no
longer wished to remain an authorized dealer and in that event, the September 20, 2012 Letter
11 - OPINION & ORDER

was notice that Defendant would not renew Plaintiff as an authorized dealer and that Plaintiff's
status as an authorized dealer would expire on March 31, 2012. Ex. A-4 to Mar. 27, 2013
Hawkes Decl. Defendant also told Plaintiff that it had reason to believe that Plaintiff had sold
non-RISO supplies for Defendant's duplicator machines. Id. Defendant then stated that if
Plaintiff entered into the 2012 Dealer Agreement, Defendant would consider such an act as an
acknowledgment by Plaintiff of its agreement to abide by paragraph 3(a) of the agreement going
forward and Defendant would forgive any such prior sales of non-RISO supplies. Id.
As characterized by Plaintiff in the Complaint, the September 20, 2012 Letter is an
attempt by Defendant to coerce Plaintiff into purchasing only RISO supplies. Compl. at ¶ 42.
To the extent an antitrust tying claim can be based on the September 20, 2012 Letter, it appears
that such a claim is timely because it accrued on September 20, 2012.
However, Defendant argues that the September 20, 2012 Letter creates no such claim
because it is unilateral conduct not prohibited by section 1 of the Sherman Act. Section 1
declares illegal "[e]very contract, combination . . . , or conspiracy, in restraint of trade or
commerce among the several States[.]" 15 U.S.C. § 1. "The phrase 'contract, combination, or
conspiracy' has been interpreted to require concerted action of more than a single entity." The
Jeanery, Inc. v. James Jeans, Inc., 849 F.2d 1148, 1152 (9th Cir. 1988).
Unilateral conduct by a single firm, even if it "appears to restrain trade
unreasonably," is not unlawful under section 1 of the Sherman Act. FN1.
FN1. Unilateral conduct may be unlawful under section 2 of the
Sherman Act, . . . , if the conduct threatens monopolization. . . .
[P]urely unilateral conduct is illegal only under § 2 and not under §
1. Monopolization without conspiracy is unlawful under § 2, but
restraint of trade without a conspiracy or combination is not
unlawful under § 1.
12 - OPINION & ORDER

Id. at 1152 & n.1 (citations and internal quotation marks omitted).
Based on the requirements of section 1, the Supreme Court held in 1919 that a
manufacturer's unilateral refusal to deal with distributors did not violate antitrust laws. United
States v. Colgate, 250 U.S. 300, 307 (1919); see also The Jeanery, 849 F.2d at 1153 ("under the
Colgate doctrine, a manufacturer is free to announce resale prices and refuse to deal with dealers
who sell below the announced price").
In a case from this Court, and relied upon by Defendant, the defendant eyewear
manufacturer6 imposed certain restrictions on its distributors including one prohibiting them from
selling to high-volume distributors rather than to optometrists, ophthalmologists, and retail
optical stores. Glacier Optical, Inc. v. Optique Du Monde, Ltd., 816 F. Supp. 646 (D. Or. 1993),
aff'd, 1995 WL 21565 (9th Cir. 1994). Typically, the high-volume distributor would "undersell"
their competitors causing concern to some of the defendant's other distributors. Id. at 648. The
defendant was also concerned that the high-volume distributors, whose interest was in "turnover
volume," operated inconsistently with the defendant's philosophy of promoting brand loyalty and
long-term satisfaction. Id.
The plaintiff, a distributor who had been selling to high volume-distributors such as WalMart and Costco, objected to the defendant's attempt to enter into a written distribution
agreement incorporating the defendant's policy. As a result, the defendant terminated the
plaintiff's distributorship primarily because of the plaintiff's refusal to enter into the new
agreement with the customer limitations imposed by the defendant. The plaintiff then brought

6

The defendant actually held the license from the manufacturer, but the court treated the
defendant as the manufacturer itself.
13 - OPINION & ORDER

antitrust and other claims against the defendant, contending that the defendant unlawfully
restrained trade in violation of section 1 of the Sherman Act. Id. at 649-50.
Judge Frye granted the defendant's motion for summary judgment on the antitrust claim
because she found that "[t]here was no evidence that [the defendant] acted anything but
unilaterally." Id. at 652. She explained that it "was not a violation of antitrust laws for [the
defendant] to terminate [the plaintiff] because [the plaintiff] refused to agree to the customer
restrictions in the written agreement proposed by [the defendant] if [the defendant] acted
unilaterally in terminating [the plaintiff]." Id.; see also id. at 650 (discussing concerted action
requirement of section 1 and stating "[u]nilateral action by the manufacturer is not proscribed").
Defendant argues that just as in Glacier Optical, its action here in terminating Plaintiff's
status as an authorized dealer is, according to the allegations in the Complaint, solely unilateral
action by Defendant. There are, for example, no allegations that Defendant acted with any other
entity or person; thus, there are no allegations of concerted action or collusion.
In response, Plaintiff does not deny the absence of concerted action allegations but argues
that the Colgate doctrine applies only when a manufacturer/supplier refuses to sell for a lawful
reason. In other words, if the manufacturer/seller refuses to sell to a distributor for an unlawful
reason, the refusal to sell alone is actionable under section 1. See Pl.'s Resp. to Def.'s Mot. to
Dismiss at 1. Plaintiff cites no cases in support of this argument. Id.
While Glacier Optical was concerned with resale price maintenance and not tying, either
type of conduct may be prohibited under antitrust law. Nonetheless, Judge Frye never discussed
whether the object of the agreement proposed by the defendant and which the plaintiff refused to
sign, triggering the plaintiff's termination as a distributor for the defendant, was or was not illegal
14 - OPINION & ORDER

under section 1. Rather, the claim failed solely because defendant acted unilaterally. The
unlawfulness of the terms of the agreement was a non-issue. Plaintiff's attempt to distinguish
Glacier Optical is unavailing because the case does not suggest that the price maintenance
purpose of the agreement, as opposed to an agreement whose purpose was unlawful tying, was
relevant to the outcome.
Other cases support Defendant's argument. For example, in a Tenth Circuit case, the
plaintiff alleged that the defendant engaged in an illegal tying practice by conditioning the sale of
blown wool insulation to the sale of batts insulation. Black Gold, Ltd. v. Rockwoll Indus., Inc.,
729 F.2d 676, 678-79 (10th Cir.), supplemented, 732 F.2d 779 (10th Cir. 1984). The defendant
then terminated its sales of blown wool to the plaintiff. Id. at 679. The plaintiff brought various
claims against the defendant including an illegal tying claim and a claim that the defendant's
refusal to deal with the plaintiff "was in furtherance of the tying arrangement and amounted to a
conspiracy in restraint of trade in violation of section 1 of the Sherman Act." Id.
In analyzing the refusal to deal claim, the court explained that under Colgate, a unilateral
refusal to deal does not violate section 1 of the Sherman Act. Id. at 685. The court then noted
that cases after Colgate suggested that nonetheless, a unilateral refusal to deal could be actionable
under certain circumstances:
a plaintiff who contends a seller has unlawfully used a refusal to deal as a means
of enforcing an anticompetitive practice (such as tying or price fixing) may
establish the requisite combination or conspiracy in either of two ways: [1] by
showing that he himself unwillingly complied with the practice, or [2] by showing
that although he refused to acquiesce, other buyers agreed to the arrangement
under threat of termination.
Id. at 686 (emphasis added, discussing Colgate, 250 U.S. at 307, citing United States v. Parke,

15 - OPINION & ORDER

Davis & Co., 362 U.S. 29, 45 (1960)). Black Gold indicates that the Colgate doctrine, as
subsequently refined by the Supreme Court, may apply when the alleged refusal to deal is in
furtherance of an illegal tying arrangement but only when certain other facts are present.
Similarly, cases recognize that the coercive aspect of an illegal tying arrangement is not
found when the distributor plaintiff refuses to acquiesce in the proposed tying arrangement. For
example, in an Eighth Circuit case, the plaintiff alleged that the defendant tied the sale of one
product to the purchase of other products the plaintiff did not desire. Famous Brands, Inc. v.
David Sherman Corp., 814 F.2d 517, 519-20, 522 (8th Cir. 1987). The plaintiff refused to
purchase the tied product and the defendant began distributing its products through someone else.
On the illegal tying claim, the Famous Brands court discussed that the Supreme Court's
1984 case of Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752 (1984), a case also
discussed by Judge Frye in Glacier Optical, had reaffirmed the doctrine of Colgate and made
clear that the plaintiff in a section 1 Sherman Act claim must show a contract, combination, or
conspiracy, and that under Monsanto, a manufacturer "'has a right to deal, or refuse to deal, with
whomever it likes, as long as it does so independently.'" Id. at 523 (quoting Monsanto, 465 U.S.
at 761).
The Famous Brands court then dismissed the antitrust claim because the plaintiff itself
refused to purchase the tied product from the defendant and thus, no concert of action existed
between the two of them, and because the plaintiff could not establish that the defendant coerced
third parties into acquiescing to the defendant's demands. Id. at 523-24. Citing a Second Circuit
decision, the Famous Brands court explained that "'[a]ctual coercion by the seller that in fact
forces the buyer to purchase the tied product is an indispensable element of a tying violation.'"
16 - OPINION & ORDER

Id. at 523 (quoting Unijax, Inc. v. Champion Int'l, Inc., 683 F.2d 678, 685 (2d Cir. 1982)). Thus,
because the section 1 claim required evidence of concerted conduct, the court dismissed the
claim in the absence of the plaintiff's refusal to purchase the tied conduct or evidence that third
parties had been coerced into doing so.
Additionally, the Famous Brands court explained that to the extent the tying claim was
based on section 3 of the Clayton Act, it also failed. Id. at 524. Although section 3 of the
Clayton Act "proscribes sales made on the condition that the buyer not use or deal in competing
products[,]" the court explained that "[j]ust as in section 1 of the Sherman Act, this provision
requires proof that a buyer acquiesced in such an arrangement." Id. Thus, the tying claim could
not succeed.
The Northern District of California addressed the same situation in a 2005 case. There,
the plaintiff alleged that the defendant terminated the contract it had with the plaintiff because the
plaintiff refused to comply with the defendant's allegedly illegal tying policy. Strawflower
Elecs., Inc. v. Radioshack Corp., No. C-05-0747 MMC, 2005 WL 2290314, at *8 (N.D. Cal.
Sept. 20, 2005). The court dismissed the claim on a motion to dismiss because the plaintiff
failed to allege that it had actually been coerced into buying the tied product.
The court explained:
The Ninth Circuit has stated that an "essential" element of a tying claim is
"proof that the seller coerced a buyer to purchase the tied product." See Paladin
Associates v. Montana Power Co., 328 F.3d [1145] at 1159 [9th Cir. 2003]
(emphasis in original). In Paladin, the Ninth Circuit further noted that "mere sales
pressure" does not constitute evidence of the requisite coercion. See id. at 1160.
Because Paladin did not involve a plaintiff who refused to purchase the tied
product, the Ninth Circuit did not address whether evidence of acts that could be
described as attempted coercion were sufficient to state a tying claim. Other
circuits, however, have held that no tying claim can be stated where the plaintiff
17 - OPINION & ORDER

refused to purchase the tied product. See, e.g., Famous Brands, Inc. v. David
Sherman Corp., 814 F.2d 517, 523 (8th Cir. 1987) (citing Unijax, Inc. v.
Champion Int'l, Inc., 683 F.2d 678, 685 (2nd Cir. 1982) ("Actual coercion by the
seller that in fact forces the buyer to purchase the tied product is an indispensible
element of a tying violation.")). Additionally, a leading antitrust treatise concurs
that "an express tying contract that is proposed to buyers but rejected by them
does not constitute a tie" and that "the mere termination or rejection of a dealer or
customer who refuses to comply with a tie" is not unlawful tying. See Areeda,
Elhauge, and Hovenkamp, Antitrust Law, §§ 1753a, 1753f (2d ed. 2004).
Id.
As explained in the cited treatise, there are three relevant scenarios involving a
unilaterally proposed tie: (1) the defendant demands a tie that the buyer rejects completely; (2)
the defendant insists on the buyer's agreement to buy the tied product and refuses to deal with the
buyer who refuses to agree or does not comply; and (3) the buyer may explain it will not comply
with an announced condition that it take the tied product. Phillip E. Areeda & Herbert
Hovenkamp, Antitrust Law, ¶1753f (3d ed. 2011). In any of these situations, the "buyers are thus
declining to buy the tied product and are likely to be denied the tying product." Id. And "the
defendant may simply not sell the tying product to buyers who do not take its tied product." Id.
Regardless of which scenario occurs, no section 1 Sherman Act claim nor section 3
Clayton Act claim is stated:
In all these cases, there is no conditioned sale of the tying product. The
defendant's refusal to sell the products separately does thus not itself come within
Clayton Act §3. And absent an express tying contract, the nonpurchase of the tied
product means that nothing - not even earlier purchases of the tying product created any Sherman Act § 1 agreement. Thus, the mere termination or rejection
of a dealer or customer who refuses to comply with a tie is neither a tying
agreement nor a conditioned sale.
Id. (footnotes omitted).
Without an operative agreement under which paragraph 3(a) of the Dealer Agreement is
18 - OPINION & ORDER

being enforced, there is no actionable tying contract. Accordingly, the threat of terminating
Plaintiff's dealership status is unilateral conduct not subject to section 1 of the Sherman Act or
section 3 of the Clayton Act without allegations that other buyers agreed to the tying arrangement
under threat of termination. There are no such allegations in the Complaint. Although Plaintiff
alleges that on information and belief, Defendant requires all of its authorized dealers to abide by
paragraph (3) of the Dealer Agreement, Compl. at ¶ 31, and that Defendant possesses sufficient
economic power to coerce its dealers to sell only RISO supplies, Compl. at ¶ 40, there is no
allegation that other dealers have been coerced into entering such agreements under threat of
termination by Defendant.7
The Complaint fails to state an antitrust tying claim. Any claim based on the expired
2007 Dealer Agreement provisions is dismissed with prejudice because it is time barred and
incapable of being resurrected. The claim based on the September 20, 2012 threat of termination
for failing to agree to the 2012 Dealer Agreement could in theory be amended to state a claim.8
7

Moreover, given Plaintiff's representation that the antitrust claim was not ripe until
spring of 2012 when suitable alternative supplies first became available, any allegations of third
parties being coerced under threat of termination would have to relate to that time period or later.
8

While not clearly alleged in the Complaint, Plaintiff contends that it alleges the
existence of a separate tying agreement related to Defendant's sale of parts to Plaintiff after
Plaintiff's termination as a dealer. Compl. at ¶ 19. This allegation refers to statements Defendant
allegedly made in the September 20, 2012 letter regarding paragraph 5(d) of the 2012 Dealer
Agreement. I find no such reference to paragraph 5(d) in that letter, or to any other subsection of
paragraph 5 of the 2012 Dealer Agreement. Ex. A-4 to Mar. 27, 2013 Hawkes Decl. Putting that
issue aside, I note that this allegation does not appear in the section of the Complaint reciting the
allegations in support of the antitrust claim, Compl. at ¶¶ 24-36, or in the allegations recited in
support of the First Claim for Relief for Illegal Tying. Id. at ¶¶ 37-47. Although Plaintiff
attempted to explain this claim in its response to the motion to dismiss, at this point, I agree with
Defendant that the claim is so vaguely asserted that it cannot stand as pleaded. Furthermore,
even if it were more clearly stated, it would be dismissed for the same reasons as the primary
tying claim discussed above.
19 - OPINION & ORDER

Therefore, that claim is dismissed without prejudice.9
C. Failure to State a Claim
Although I dismiss the antitrust claim for the reasons stated above, I address Defendant's
other arguments in the event Plaintiff amends its Complaint. Defendant contends that the
antitrust claim fails to state a claim because Plaintiff does not adequately plead the required
elements of relevant market and market power, and does not adequately identify the tied and
tying products. I agree with Defendant regarding the market power argument, but otherwise find
that the Complaint sufficiently states the relevant market and describes the tied and tying
products.
A plaintiff must prove three elements to prevail on an illegal tying claim:
(1) that there exist two distinct products or services in different markets whose
sales are tied together; (2) that the seller possesses appreciable economic power in
the tying product market sufficient to coerce acceptance of the tied product; and
(3) that the tying arrangement affects a “not insubstantial volume of commerce” in
the tied product market.
Paladin Assocs., Inc. v. Montana Power Co., 328 F.3d 1145, 1159 (9th Cir. 2003). The "plaintiff
must allege both that a 'relevant market' exists and that the defendant has power within that
market." Newcal Indus., Inc. v. IKON Office Solutions, 513 F.3d 1038, 1044 (9th Cir. 2008).
Newcal makes clear that "[t]here is no requirement that these elements of the antitrust

9

I do not separately address Plaintiff's argument regarding its requested injunctive relief
other than to note that because the doctrine of laches is coextensive with the statute of
limitations, the same time period will apply, regardless of the nature of the relief. Aurora Enters.,
688 F.2d at 694 ("four-year statute of limitations . . . furnishes a guideline for computation of the
laches period in antitrust suits) (citing Int'l Tel. & Tel. Corp. v. Gen. Tel. & Elecs. Corp., 518
F.2d 913, 929 (9th Cir. 1975) ("the four-year limitation period in Clayton Act § 4B, 15 U.S.C. §
15b, furnishes a guideline for computation of the laches period"), disapproved of on other
grounds, Cal. v. Am. Stores Co., 495 U.S. 271 (1990)).
20 - OPINION & ORDER

claim be pled with specificity." Id. at 1045. Moreover, "since the validity of the 'relevant market'
is typically a factual element rather than a legal element, alleged markets may survive scrutiny
under Rule 12(b)(6) subject to factual testing by summary judgment or trial." Id.
The relevant market must be a product market and must "encompass the product at issue
as well as all economic substitutes for the product." Id. The "outer boundaries" of the product
market are "determined by the reasonable interchangeability of use or the cross-elasticity of
demand between the product itself and substitutes for it." Id. (internal quotation marks omitted)
Plaintiff alleges that "the relevant product market consists of digital duplicators, and the
relevant geographic market consists of the United States. . . . On information and belief, RISO
has approximately a 65% share of the relevant market." Compl. at ¶ 24. Further, Plaintiff alleges
that digital duplicators create an image to be copied once on a "master," then use that master for
copies which are created by pressing ink through microscopic holes in the master using a thermal
imaging process. Id. at ¶ 26. Fewer supplies are required than in other reproduction techniques,
making the cost per copy lower. Id. at ¶¶ 26-28. For that reason, digital duplicators are often
used by organizations that need to create large volumes of documents for the lowest possible
cost, including school districts, government offices, healthcare organizations, and non-profit
organizations. Id. at ¶¶ 26-30.
Defendant argues that Plaintiff's relevant market allegations fail to state a claim because
they do not address the interchangeability or cross-elasticity of demand between digital
duplicators and other copying devices identified in the Complaint. See Compl. at ¶ 25 (alleging
that digital duplicators are a separate and distinguishable product market from copiers, printers,
or other multifunctional printing products). Defendant argues that Plaintiff must allege facts
21 - OPINION & ORDER

sufficient to establish how or why duplicators do not compete with other document imaging
devices alleged in the Complaint which are produced and sold by companies such as Canon,
Ricoh, and Xerox.
While conclusory allegations regarding interchangeability are insufficient to state a claim,
see Tanaka v. University of Southern California, 252 F.3d 1059, 1063 (9th Cir. 2001) (allegation
that the "'UCLA women's soccer program' is 'unique' and hence 'not interchangeable with any
other program in Los Angeles'" was insufficient to state a claim), it is not fatal for the Complaint
to omit express references to "reasonably interchangeable substitutes" or "cross-elasticity." Id.
(noting that defining a relevant market in terms of reasonable interchangeability "encompasses
notions of . . . product use, quality, and description") (internal quotation marks omitted). Thus,
factual allegations regarding the distinct nature of the relevant product market, the relevant
product's difference from other products, and the relevant product's consumer base are enough to
state the relevant market portion of a tying claim under section 1 of the Sherman Act. E.g.,
McCabe Hamilton & Renny Co. v. Matson Terminals, Inc., Civil No. 08-00080 JMS/BMK, 2008
WL 2437739, at *7 (D. Haw. June 17, 2008) (complaint would have been sufficient if it
contained factual allegations regarding distinct nature of the product, the product's difference
from other products, and the consumer base).
Here, Plaintiff's allegations regarding the unique features of digital duplicators include
how they create a copy, the different supplies they use, and the ability to create large numbers of
copies for a low cost and at high speed. This is adequate to show the distinct nature of digital
duplicators and how they are different from other products. Plaintiff also puts forth allegations
as to the typical consumer of digital duplicators. These alleged facts adequately state the relevant
22 - OPINION & ORDER

market.
As to market power, "in all cases involving a tying arrangement, the plaintiff must prove
that the defendant has market power in the tying product." Ill. Tool Works, Inc. v. Indep. Ink.,
547 U.S. 28, 46 (2006). "Market power is the ability to raise prices above those that would be
charged in a competitive market." NCAA v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 109
n.38 (1984).
In a 2008 case, the plaintiff alleged that the defendant Equilon, doing business as Shell
Oil Products, required the plaintiff to use its credit-card processing services (the tied product)
when the plaintiff obtained a retail gasoline franchise (the tying product). Rick–Mik Enters., Inc.
v. Equilon Enters., LLC, 532 F.3d 963, 972 (9th Cir. 2008). The plaintiff alleged specific facts
as to Equilon's power in the retail gasoline market. But, the plaintiff failed to adequately allege
market power in the relevant market for the tying product—the retail gasoline franchise
market—because, the court explained, the complaint failed to include such relevant factual
allegations as "what percentage of gasoline franchises are Equilon's (Shell/Texaco) as compared
to other franchises[,] . . . the percentage of gasoline retail sales that are made through
non-franchise outlets[,] . . . the amount of power or control that Equilon has over prospective
franchisees[,] . . . [or] the relative difficulty of a franchisee to switch franchise brands." Id.
Relying on Rick-Mik, the Eastern District of California recently dismissed an illegal tying
claim on a Rule 12(b)(6) motion for failure to state a claim when the plaintiffs failed to
sufficiently allege the defendant's market power. Cherrone v. Florsheim Dev., No. CIV.
2:12–02069 WBS CKD, 2013 WL 772526, at*2-3 (E.D. Cal. Feb. 28 2013). The plaintiffs
contended that the defendant illegally tied home sales to financing. The court noted that although
23 - OPINION & ORDER

the plaintiffs alleged that the defendant had built "literally thousands" of homes between a certain
period of time, the complaint "lacks any factual allegations as to the percentage of homes in the
relevant market built by Florsheim compared to other builders, the percentage of home sales by
non-Florsheim developers in the relevant market, or the relative difficulty of obtaining a
comparable home in the relevant market" Id. at *3. As a result, the court concluded that under
Twombly and Iqbal, the complaint failed to state an illegal tying arrangement because it did not
include factual allegations of market power in the relevant market.
Defendant argues that the Complaint lacks factual allegations such as those noted in the
cited cases to support Plaintiff's "65% share" allegation. Defendant argues that to adequately
allege market power, Plaintiff must allege that there are significant barriers to entry and that
existing competitors lack the capacity to increase their output in the short run.
I agree with Defendant. Newcal Industries holds that the "[t]he 'relevant market' and
'market power' requirements apply identically under [section 1 and section 2] of the Act[.]" 513
F.3d at 1044 n.3. Thus, Plaintiff must plead allegations regarding barriers to entry and the lack
of ability by competitors to increase their share of the market. See Dominick v. Collectors
Universe, Inc., No. 2:12-CV-04782-ODW, 2012 WL 4513548, at *6-7 (C.D. Cal. Oct. 1, 2012)
(describing elements of both the direct evidence and circumstantial evidence tests used to
establish market power).
While the Complaint alleges that defendant possesses 65% of the market, exerts sufficient
power in the digital duplicator market to coerce its dealers to refrain from selling competitors'
supplies, and charges supra-competitive prices for its supplies, there are insufficient allegations
establishing barriers to entry and that defendant's conduct precludes competitors from increasing
24 - OPINION & ORDER

their output. Neither can these facts be inferred from the allegations that are in the Complaint.
As a result, the Complaint fails to adequately allege market power.
Finally, although I agree with Defendant that the Complaint can be confusing regarding
the tied and tying products, I do not think the confusion is fatal to the claim. A fair reading of the
entire Complaint establishes that Plaintiff alleges that the tying product is RISO digital
duplicators and the tied product is RISO digital duplicator supplies.
II. The State Law Claims
A. Intentional Interference with Economic Relations (IIER)
To state a claim for IIER Plaintiff must allege
(1) the existence of a professional or business relationship (which could include,
e.g., a contract or a prospective economic advantage), (2) intentional interference
with that relationship, (3) by a third party, (4) accomplished through improper
means or for an improper purpose, (5) a causal effect between the interference and
damage to the economic relationship, and (6) damages.
Mannex Corp. v. Bruns, 250 Or. App. 50, 53, 279 P.3d 278, 281 (2012) (citing McGanty v.
Staudenraus, 321 Or. 532, 535, 901 P.3d 841, 844 (1995)).
As to improper means or purpose, Plaintiff alleges that Defendant has used the improper
means of "threatening to terminate Witt Company's authorized dealer status unless Witt
Company agrees to all the terms and conditions of RISO's Dealer Agreement as written,
including not to sell any non-RISO equipment, parts, or supplies that compete with RISO's
products, in violation of federal antitrust laws." Compl. at ¶ 54.
Defendant moves to dismiss the claim because the improper means allegation is
inseparably tied to the antitrust claim which Defendant argues must fail. See Willamette Dental
Group, P.C. v. Or. Dental Serv. Corp., 130 Or. App. 487, 498-99, 882 P.2d 637, 644 (1995)
25 - OPINION & ORDER

(competitive conduct permitted under the antitrust laws cannot be punished as tortious
interference). Plaintiff concedes this argument, Pl.'s Resp. at 16, and thus, because the IIER
claim is based on the improper means of antitrust violations and the antitrust claim is dismissed,
the IIER is also dismissed.
B. Breach of Contract/Breach of the Duty of Good Faith & Fair Dealing
These two claims are based on the APA. Plaintiff alleges that the APA "specifically
provides" that Defendant will supply Plaintiff with its products until April 1, 2014. Compl. ¶ 60.
Plaintiff alleges that Defendant breached the APA by terminating Plaintiff's authorized dealer
status and refusing to provide Plaintiff with any of Defendant's products after March 31, 2013,
due to Plaintiff's refusal to execute the 2012 Dealer Agreement. Id. Plaintiff also alleges that
Defendant breached the duty of good faith and fair dealing because the APA expressed
Defendant's intent to continue a business relationship with Plaintiff for three years. Id. at ¶ 6768. Plaintiff alleges that Defendant has prevented Plaintiff from receiving the benefits of the
APA by inhibiting Plaintiff's ability to properly serve its customers and participate in the Annual
Bonus Program. Id. at ¶ 69.
Defendant moves to dismiss these claims for failure to state a claim, lack of personal
jurisdiction, and improper venue.
1. Failure to State a Claim
Defendant argues that the breach of contract claim must be dismissed because the APA
does not require Defendant to sell its products to Plaintiff absent the execution of a Dealer
Agreement. Plaintiff initially argues that whether the APA requires Defendant to sell its products
to Plaintiff is a "factual matter" that should be resolved through summary judgment or at trial. I
26 - OPINION & ORDER

disagree. Contract interpretation is a question of law for the court. Wall Data, Inc. v. Los
Angeles Cnty. Sheriff's Dep't, 447 F.3d 769, 786 (9th Cir. 2006); Squier Assocs,, Inc. v. Secor
Invs., LLC, 196 Or. App. 617, 522, 103 P.3d 1129, 1133 (2004).
Next, Plaintiff appears to concede that the express language of the APA does not create
an obligation for Defendant to sell its products to Plaintiff for three years beginning April 2,
2011. Pl.'s Resp. Mem. at 18 (arguing that court can imply contractual provision necessary to
effectuate contract's purpose). The claim is dismissed to the extent Plaintiff alleges that the APA
contains express language requiring Defendant to continue to supply Plaintiff with products until
April 2014.
Plaintiff argues that the obligation should be implied based on sections 1.11 and 2.8 of
the APA. Id. (citing Compl. at ¶ 11). "The law will imply a provision in a contract that is
necessary to carry out the purpose for which the contract was made." Morrow v. Red Shield Ins.
Co., 212 Or. App. 653, 661, 159 P.3d 384, 388 (2007) (citing Card v. Stirnweis, 232 Or. 123,
134, 374 P.2d 472 (1962)). "Whether a provision is implied by necessity is a legal question that
we decide as a matter of contract construction." Id. (citing Pinnacle Packing Co. v. Herbert, 157
Or. 96, 105–06, 70 P.2d 31 (1937)). "Although a court may declare what is implicit in the terms
of a contract, it may not create an entirely new obligation under the guise of 'necessary
implication.'" Id.
Section 1.11 of the APA addresses the "Deferred Purchase Price." Ex. A-2 to Mar. 27,
2013 Hawkes Decl. The total price to be paid by Plaintiff to Defendant for the purchase of the
assets subject to the APA was $700,000. Id. at §§ 1.10, 1.11. $200,000 was to be paid at
closing. Id. at § 1.10. $500,000 was the deferred purchase price, to be paid in thirty-six equal
27 - OPINION & ORDER

monthly payments of $13,888.89 per month, due the first of each month beginning May 1, 2011,
one month after the April 1, 2011 closing. Id. at § 1.11.
Section 1.11 also contemplated a reduction in the deferred purchase price for credits
earned by Plaintiff under the "Annual Bonus Program," detailed in section 2.8 of the APA. Id.
Under the Annual Bonus Program, Plaintiff could earn credits based on sales of Defendant's
products and services during the first thirty-six months following closing. Id. at § 2.8. The
details of the amount of credit and how it is earned are explained in the five subsections of
section 2.8 but there is no dispute that under the APA, Plaintiff could earn credit for selling
Defendant's products.
Plaintiff alleges and argues that sections 1.11 and 2.8 show the parties' intent to continue
their business relationship and their intent for Defendant to continue to provide its products to
Plaintiff until April 1, 2014, three years after the execution of the APA. Compl. at ¶ 11.
Defendant argues that these sections reflect only the three-year promissory note to pay for the
purchase of the assets and the corresponding credit program that allowed Plaintiff to offset the
payments on that note.
Although I agree with Plaintiff that the APA suggests that the parties contemplated an
ongoing business relationship where Plaintiff would continue to buy products from Defendant so
Plaintiff could sell them in the California and Arizona counties to which the APA applied, the
actual sale of those products by Defendant to Plaintiff was expressly governed by a Dealer
Agreement which Plaintiff refuses to sign. The APA contains multiple references to the
existence of a Dealer Agreement which would provide the terms and conditions for the sale of
products by Defendant to Plaintiff. See Id. at p. 1 (Recitals stating that Plaintiff had previously
28 - OPINION & ORDER

entered into the 2007 Dealer Agreement and that Plaintiff desired its Brea, California dealership
be appointed as a RISO dealer and be authorized to sell RISO products and service "in
accordance with the terms of the Dealer Agreement"); Id. at § 3.9 (Defendant warrants that it is
not in breach of the Dealer Agreement, that Plaintiff is not in breach, and that Defendant has no
basis for suspecting that Plaintiff "may have breached the Dealer Agreement in the past"); § 4.3
(Plaintiff warrants it has adequate funds to fulfill its obligations under the Dealer Agreement as
an authorized dealer in the territories at issue); § 4.6 (Plaintiff warrants that it is not in breach of
the Dealer Agreement, that Defendant is not in breach, and that it has no basis to suspect
Defendant is in breach of the Dealer Agreement); § 5.7 (parties acknowledged that 2007 Dealer
Agreement had expired but was reinstated for ninety days during which parties were to attempt in
good faith to resolve issues surrounding the 2011 Dealer Agreement Defendant had previously
presented to Plaintiff so that the 2011 Dealer Agreement could replace the reinstated 2007 Dealer
Agreement); §§ 6.4, 7.4 (acknowledging amendment to Dealer Agreement).
The APA contemplated ongoing sales by Defendant to Plaintiff but only subject to an
executed Dealer Agreement and not by virtue of any provision in the APA itself. The purpose
of the APA was for Defendant to sell business territories in California and Arizona to Plaintiff.
Ex. A-2 to Mar. 27, 2013 Hawkes Decl. at p. 1 (Recitals), at § 1.1 (defining assets). This is
independent of any obligation for Defendant to continue to sell its products to Plaintiff. Implying
a provision obligating Defendant to sell products to Plaintiff under the APA as a matter of law is
inconsistent with the terms of the APA absent the execution of a Dealer Agreement and is not,
therefore, a necessary implication.
The breach of contract claim is dismissed because the APA does not contain an express
29 - OPINION & ORDER

obligation for Defendant to provide Plaintiff with products and implying such a term as a matter
of law is inappropriate for the reasons explained above. Moreover, this dismissal is with
prejudice because the issue of contract interpretation is a matter of law and the complete APA is
in the record. Any further amendment would be futile.
The breach of the duty of good faith and fair dealing claim is also dismissed. "[S]o long
as it is not inconsistent with the express terms of a contract, the duty of good faith and fair
dealing is a contractual term that is implied by law into every contract." Eggiman v.
Mid-Century Ins. Co., 134 Or. App. 381, 386, 895 P.2d 333, 335 (1995) (internal quotation
marks omitted). The purpose of the duty of good faith is to prohibit improper behavior in the
performance and enforcement of contracts, and to ensure that the parties "will refrain from any
act that would 'have the effect of destroying or injuring the right of the other party to receive the
fruits of the contract.'" Iron Horse Eng'g Co. v. Nw. Rubber Extruders, Inc., 193 Or. App. 402,
421, 89 P.3d 1249, 1259 (2004) (quoting Perkins v. Standard Oil Co., 235 Or. 7, 16, 383 P.2d
107 (1963)). The duty "does not operate in a vacuum[;]" rather it "focuses on the agreed
common purpose and the justified expectations of the parties, both of which are intimately
related to the parties' manifestation of their purposes and expectations in the express provisions
of the contract." Or. Univ. Sys. v. Or. Pub. Emp. Un, 185 Or. App. 506, 515-16, 60 P.3d 567,
572 (2002). The duty "cannot contradict an express contractual term, nor does it provide a
remedy for an unpleasantly motivated act that is permitted expressly by the contract." Stevens v.
Foren, 154 Or. App. 52, 58, 959 P.2d 1008, 1011 (1998).
Plaintiff argues that by refusing to continue to supply Plaintiff with products after March
31, 2013, Defendant violates the duty of good faith and fair dealing implicit in the APA. But, the
30 - OPINION & ORDER

law imposes the "duty of good faith and fair dealing to facilitate performance and enforcement of
the contract when it is consistent with and in furtherance of the agreed-upon terms of the
contract, or where it effectuates the parties' objectively reasonable expectations under the
contract[.]" Morrow, 212 Or. App. at 661-62, 159 P.2d at 388-89. The "implied covenant of
good faith and fair dealing does not vary the substantive terms of the contract or impose
obligations inconsistent with the terms of the contract." Id. Because the APA contemplates the
sale of products to Plaintiff by Defendant only upon execution of a Dealer Agreement,
Defendant's refusal to sell products to Plaintiff absent such an agreement does not violate the
duty of good faith and fair dealing. This claim is dismissed with prejudice.
2. Jurisdiction and Venue
Even if I did not dismiss Plaintiff's contract-based claims for failure to state a claim, I
agree with Defendant that this Court lacks personal jurisdiction over Defendant in regard to those
claims.10 Fed. R. Civ. P. 12(b)(2).
Plaintiff has the burden of showing personal jurisdiction. Boschetto v. Hansing, 539 F.3d
1011, 1015 (9th Cir. 2008).
If the district court decides the motion without an evidentiary hearing, . . . then the
plaintiff need only make a prima facie showing of the jurisdictional facts. Absent
an evidentiary hearing this court only inquires into whether the plaintiff's
pleadings and affidavits make a prima facie showing of personal jurisdiction.
Uncontroverted allegations in the plaintiff's complaint must be taken as true.
Conflicts between the parties over statements contained in affidavits must be
resolved in the plaintiff's favor.
Id. (citations and internal quotation marks omitted).
Generally, personal jurisdiction exists over an out-of-state defendant if (1) the forum
10

I decline to address the separate improper venue argument.

31 - OPINION & ORDER

state's long-arm statute permits the assertion of jurisdiction, and (2) assertion of jurisdiction does
not violate due process. Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1155 (9th Cir. 2006).
Oregon Rule of Civil Procedure (ORCP) 4 governs personal jurisdiction issues in Oregon.
Because Oregon's long-arm statute confers jurisdiction to the extent permitted by due process,
Gray & Co. v. Firstenberg Machinery Co., 913 F.2d 758, 760 (9th Cir. 1990) (citing ORCP 4L;
Oregon ex rel. Hydraulic Servocontrols Corp. v. Dale, 294 Or. 381, 657 P.2d 211 (1982)), I
proceed directly to the federal due process analysis. See Harris Rutsky & Co. Ins. Servs., Inc. v.
Bell & Clements Ltd., 328 F.3d 1122, 1129 (9th Cir. 2003) (when state long arm statute reaches
as far as the Due Process Clause, court need only analyze whether the exercise of jurisdiction
complies with due process).
To comport with due process, the nonresident defendant must have certain "minimum
contacts with the forum state such that the exercise of jurisdiction "'does not offend traditional
notions of fair play and substantial justice.'" Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d
1218, 1223 (9th Cir. 2011) (quoting Int'l Shoe v. Wash., 326 U.S. 310, 316 (1945)). The forum
state may exercise either general or specific jurisdiction over a nonresident defendant.
Boschetto, 539 F.3d at 1016.
Plaintiff concedes there is no specific personal jurisdiction over Defendant in connection
with these claims. Instead, Plaintiff contends that there is general jurisdiction or pendent
personal jurisdiction.
"General jurisdiction exists when a defendant is domiciled in the forum state or his
activities there are 'substantial' or 'continuous and systematic.'" Panavision Int'l, L.P. v. Toeppen,
141 F.3d 1316, 1320 (9th Cir. 1998) (quoting Helicopteros Nacionales de Colombia, S.A. v.
32 - OPINION & ORDER

Hall, 466 U.S. 408, 414-16 (1984)). Because Defendant is not domiciled in Oregon, the question
is whether Defendant's activities here have been "substantial" or "continuous and systematic."
"It is the nature and extent of the contacts that determines whether they are 'substantial' or
'continuous and systematic.' Longevity, continuity, volume, economic impact, physical presence,
and integration into the state’s regulatory or economic markets are among the indicia of such a
presence." Tuazon v. R.J. Reynolds Tobacco Co., 433 F.3d 1163, 1172 (9th Cir. 2006) (internal
quotation marks omitted). The lack of a regular place of business in the forum state is
significant, and is not overcome by a few visits. Omeluk v. Langsten Slip & Batbyggeri A/S, 52
F.3d 267, 270 (9th Cir. 1995) (citing Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1331 (9th
Cir. 1984)). Additionally, general jurisdiction cannot be predicated on "random, fortuitous, or
attenuated contacts." Core-Vent Corp. v. Nobel Indus., 11 F.3d 1482, 1490 (9th Cir. 1993)
(internal quotation marks omitted); see also Helicopteros, 466 U.S. at 410-11, 418-19 (no general
jurisdiction despite sales negotiations, purchasing of equipment, and training of personnel in
forum state); Gates, 743 F.2d at 1330-31 (no general jurisdiction despite several visits and
purchases in the forum, solicitation of a contract in the forum that included choice-of-law
provision favoring the forum, and letters, faxes, and phone calls sent into the forum).
The standard for establishing general jurisdiction is "fairly high," Brand v. Menlove
Dodge, 796 F.2d 1070, 1073 (9th Cir. 1986), and requires that the defendant’s contacts be of the
sort that approximate physical presence. Gates, 743 F.2d at 1331; see also Tuazon, 433 F.3d at
1169 ("Put another way, a defendant must not only step through the door, it must also sit down
and make itself at home.") (internal quotation marks omitted).
It is undisputed that Defendant has never maintained an office, employee, telephone,
33 - OPINION & ORDER

mailing address, bank account, or registered agent for service of process in Oregon. Mar. 27,
2013 Alexander Olshan Decl. at ¶ 11 (appended as Ex. B to Mar. 27, 2013 Hawkes Decl.).
Defendant is not licensed to do business in Oregon. Id. Defendant does not own or lease real
property in the state and has never owned a warehouse in Oregon. Id. at ¶ 10-11. Authorized
dealers in Oregon operate independently, purchasing RISO products at warehouse locations
outside Oregon. Id. at ¶ 10. Title and risk of loss passes to the dealer outside of Oregon and the
dealer then imports Defendant's products into Oregon. Id. The Dealer Agreements contain a
choice of law provision under which the agreement is governed by Massachusetts law. Id. at ¶ 9.
Plaintiff relies on the Declaration of Philip Garcia, its service technician, who states that
Defendant sends representatives to Oregon to provide training to Plaintiff's technicians, to
provide technical service to Defendant's equipment on Plaintiff's sales floor, to accompany
Plaintiff's technicians on customer calls, and from "time to time," to visit Defendant's customers
in Oregon. Garcia Decl. at ¶ 2. However, he names only one employee of Defendant's who has
made visits to Oregon for these purposes, id. at ¶ 3, and fails to state how regularly or often these
visits have occurred.
Plaintiff also relies on the Declaration of Rex Parker, Plaintiff's Portland Branch Sales
Manager, who states that in the last eight years, Defendant's representatives have regularly made
sales and technical visits to Oregon. Parker Decl. at ¶ 2. Parker states that Maggie Curry, Senior
Sales Engineer for Defendant, visited Oregon over the years, accompanied representatives on
sales calls in Oregon, and helped resolve technical issues. Id. at ¶¶ 3-4. Parker further states that
in 2011, Defendant's District Sales Manager Sidney Castle, who "has somewhat the same role
that [] Curry had]," has visited Plaintiff in Oregon and has gone on customer visits with Plaintiff
34 - OPINION & ORDER

in Oregon. Id. at ¶¶ 5-6.
Additionally, Parker states that Defendant's former representative Rob Clark used to visit
customers and sales prospects in Oregon Id. at ¶ 7. Finally, Parker generally states that he is
aware of Defendant's representatives visiting Oregon to work with Plaintiff's technicians and
"from time to time" to work directly with customers. Id. at ¶ 8; see also Gary Plinario Dec. at ¶
14 (noting that Defendant has its own service technicians in the field). Other than using the word
"regularly" and the phrase "from time to time," Parker provides no information as to the
frequency of any of the visits he describes.
Given the high standard required to establish general jurisdiction, I conclude that Plaintiff
fails to meet its burden. The cases cited above indicate that Plaintiff must show more than some
undefined number of visits by Defendant's employees to provide support to Plaintiff or other
authorized dealers in Oregon. As the Ninth Circuit has stated, "engaging in commerce with
residents of the forum state is not in and of itself the kind of activity that approximates physical
presence within the state's borders." Bancroft & Masters, Inc. v. Augusta Nat'l Inc., 223 F.3d
1082, 1086 (9th Cir. 2000); see also Congoleum Corp. v. DLW Aktiengesellschaft, 729 F.2d
1240, 1242-43 (9th Cir. 1984) (marketing efforts and hiring a non-exclusive sales agent in
California were insufficient contacts to establish general personal jurisdiction in California;
noting that "no court has ever held that the maintenance of even a substantial sales force within
the state is a sufficient contact to assert [general] jurisdiction.").
An undefined number of discrete forum contacts by a handful of Defendant's
representatives does not support general jurisdiction when considered with the other facts
demonstrating that Defendant has no other physical presence in the state. The contacts
35 - OPINION & ORDER

established here are neither substantial nor continuous and systematic. There is no general
personal jurisdiction over Defendant for the contract-based claims.
Alternatively, Plaintiff argues that there is pendent personal jurisdiction over Defendant
for these claims. "[A] court may assert pendent personal jurisdiction over a defendant with
respect to a claim for which there is no independent basis of personal jurisdiction so long as it
arises out of a common nucleus of operative facts with a claim in the same suit over which the
court does have personal jurisdiction." Action Embroidery Corp. v. Atl. Embroidery, Inc., 368
F.3d 1174, 1180 (9th Cir. 2004). "[T]he actual exercise of personal pendent jurisdiction in a
particular case is within the discretion of the district court[,]" and is driven by considerations of
"judicial economy, avoidance of piecemeal litigation, and overall convenience of the parties[.]"
Id.
Plaintiff argues that the antitrust claim and the state law contract-based claims arise out of
the same nucleus of operative facts. I agree with Defendant that they do not.
The facts at issue in the contract-based claims relate to the terms of the APA and whether
there has been a breach of the agreement for Defendant to sell its business territories in
California and Arizona to Plaintiff. As discussed above, the facts related to these claims involve
the terms of the APA, what obligations those terms impose on Defendant, and whether
Defendant has complied with the terms. In contrast, the antitrust claim involves analyzing tieins, relevant markets, market power, and other issues that go to whether Defendant may require
authorized dealers to purchase only RISO products. Even if Defendant violated antitrust law, it
is possible that there has been no breach of contract. Conversely, there could be no violation of
antitrust law, yet still a breach of the APA. Therefore, the relevant facts for analyzing the breach
36 - OPINION & ORDER

of contract and duty of good faith and fair dealing claims are distinct enough that they do not
arise "out of a common nucleus of operative facts" with the antitrust claim.
CONCLUSION
The motion to dismiss [27] is granted. Any amended complaint is due within fourteen
(14) days of the date of this Opinion & Order.
IT IS SO ORDERED.
Dated this

day of

Marco A. Hernandez
United States District Judge

37 - OPINION & ORDER

, 2013