Cates et al v. Crystal Clear Technologies LLC et al
Filing
95
MEMORANDUM OPINION OF THE COURT. Signed by District Judge Aleta A. Trauger on 8/17/2016. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(eh)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
COURTNEY CATES, BRIAN STOVER, and
JASON MILLER, on behalf of themselves and
all others similarly situated,
Plaintiffs,
v.
CRYSTAL CLEAR TECHNOLOGIES, LLC;
CARBINE & ASSOCIATES, LLC; HOOD
DEVELOPMENT, LLC; TOLLGATE
VILLAGE ASSOCIATION, INC.;
BRIDGEMORE VILLAGE OWNERS’
ASSOCIATION, INC.; CANTERBURY
HOMEOWNERS ASSOCIATION, INC.;
TOLLGATE FARMS, LLC; BRIDGEMORE
DEVELOPMENT GROUP, LLC; and
DIRECTV, LLC,
Defendants.
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Case No. 3:16-cv-08
Judge Aleta A. Trauger
MEMORANDUM
Pending before the court are three Motions to Dismiss: 1) a Motion to Dismiss filed by
defendants Crystal Clear Technologies, LLC (“Crystal Clear”) and Carbine & Associates, LLC
(“Carbine”) (Docket No. 52); 2) a Motion to Dismiss filed by defendants Tollgate Farms, LLC
(“Tollgate Farms”) and Bridgemore Development Group, LLC (“Bridgemore Development”)
(Docket No. 55); and 3) a Motion to Dismiss filed by defendants Tollgate Village Association,
Inc. (the “Tollgate POA”) and Bridgemore Village Owner’s Association, Inc. (the “Bridgemore
POA”) (Docket No. 56). The plaintiffs have filed an Omnibus Response in opposition to all of
the Motions to Dismiss (Docket No. 77), to which Crystal Clear and Carbine have filed a Reply
(Docket No. 83). Also pending before the court is a Motion to Compel Arbitration and Stay
Litigation (“Arbitration Motion) filed by defendant DIRECTV, LLC (“DIRECTV”) (Docket No.
1
65), to which the plaintiffs have filed a response (Docket No. 85), and DIRECTV has filed a
Reply (Docket No. 90). For the reasons discussed herein, the Motions to Dismiss will be granted
and all claims in this action will be dismissed. As a result, DIRECTV’s Arbitration Motion will
be denied as moot.
BACKGROUND1
Each of the three named plaintiffs – Courtney Cates, Brian Stover, and Jason Miller
(collectively, the “Plaintiffs”) – is a homeowner and resident in one of three planned
neighborhoods in Thompson’s Station, Tennessee: Canterbury, Bridgemore, and Tollgate
(collectively, the “Neighborhoods”). Each of the Neighborhoods is comprised of hundreds of
houses with common facilities. The Bridgemore neighborhood was developed by Bridgemore
Development, which then established the Bridgemore POA (or property owners’ association) to
represent the interests of homeowners in the neighborhood. The Tollgate neighborhood was
developed by Tollgate Farms, which similarly established the Tollgate POA. Finally, the
Canterbury neighborhood was developed by defendant Hood Development, LLC (“Hood),
which, in turn, established the defendant Canterbury Homeowners Association, Inc. (the
“Canterbury POA”). Bridgemore Development, Tollgate Farms, and Hood are referred to,
collectively, throughout this opinion, as the developers or the developer defendants. The
Bridgemore POA, the Tollgate POA, and the Canterbury POA are referred to, collectively, as the
POAs or the POA defendants.2
1
For the purposes of the currently pending Motions to Dismiss, the facts are drawn from the
First Amended Class Action Complaint (Docket No. 31) and presumed to be true.
2
As noted below, the Canterbury POA is no longer a party to this action. Nevertheless, factual
allegations involving the Canterbury POA remain relevant, particularly with respect to claims
against defendant Hood. While Hood has not filed a motion to dismiss, the court finds that the
allegations against it are similar enough to the allegations against the other developer defendants
2
This action arises from allegations that the POA defendants, while under the control of
the respective developer defendants (and not the homeowners and residents of the
Neighborhoods), each entered into an agreement with defendant Crystal Clear for the provision
of telecommunications services to the respective neighborhood (collectively, the “Agreements”)
and that the Agreements are improper, illegal, and counter to the interests of the homeowners in
the Neighborhoods.3 According to the First Amended Class Action Complaint (Docket No. 31
(the “Complaint”)), which is the current operative pleading, the Agreements, all of which are
substantially the same, require all homeowners in the Neighborhoods to purchase basic
telecommunications services – including telephone, internet, and cable – from Crystal Clear and
to make one-time payments to Crystal Clear toward Crystal Clear’s development of
telecommunications infrastructure in the Neighborhoods. Pursuant to the Agreements, the
homeowners cannot opt out of purchasing these basic services from Crystal Clear, regardless of
whether they want or actually use the services, or whether they also obtain telecommunications
services from another provider. The Agreements further authorize Crystal Clear to be an
exclusive agent for the homeowners in procuring telecommunications services from any outside
that it is efficient to review the claims against them simultaneously. Accordingly, the court will
refer in this opinion to allegations that involve the Canterbury POA and Hood and will include
the Canterbury POA in its reference to the “POA defendants,” though at this time the Canterbury
POA is no longer truly a defendant.
3
According to the Complaint, it is typical for developers of newly planned neighborhoods to
initially establish and control a neighborhood POA, which would eventually be turned over to
the homeowners once a certain percentage of residential units are sold. During the time that the
developer controls the POA, the Complaint alleges, the developer is responsible to make
decisions that will benefit the prospective homeowners and that will, in turn, increase the
desirability of the neighborhood. According to the Complaint, then, it is not the fact that the
developer defendants controlled the POAs at the time the Agreements were entered that is
problematic. Instead, – as discussed below – the plaintiffs are challenging the Agreements on
the basis that they were entered only because of the advantages they conferred on the developer
defendants, while they are detrimental to the homeowners and, ultimately, to the Neighborhoods.
3
providers. By the terms of the Agreements, the homeowners may not negotiate or contract
directly with outside providers but must go through Crystal Clear, and they may be required to
pay additional markups or premiums to Crystal Clear for its representation in procuring these
services. The Agreements are in effect for a term of 25 years, with an automatic renewal clause.
Only the POAs (which remain controlled by the developers and not the homeowners themselves)
can terminate the Agreements.
According to the Complaint, the Agreements are not the product of arms-length
transactions between independent entities, as they purport to be. The POAs entered the
Agreements under the control and direction of the developer defendants. Meanwhile, Crystal
Clear, the Complaint alleges, operates at the direction, and to the benefit, of the developer
defendants as well. Moreover, the Complaint alleges that Crystal Clear’s services are not
actually necessary or beneficial to the POAs or the homeowners. Were it not for the
Agreements, the POAs – or the individual homeowners themselves – would be able to contract
directly with telecommunications providers such as DIRECTV or AT&T, and these companies
could themselves create the necessary infrastructure to deliver services4 and could provide better
service at a more competitive rate than what the homeowners receive by being forced to
purchase their services through Crystal Clear. In sum, the Complaint alleges that Crystal Clear
“operates only as a shill for the developers to soak the residents for more money than they would
actually spend (if any) on telecommunications services provided by DIRECTV or another
legitimate service provider.” (Docket No. 31 ¶ 1.)
4
The Plaintiffs allege that, while the Agreements misleadingly refer to Crystal Clear’s
“easement” from the City of Thompson’s Station to build telecommunications infrastructure in
the Neighborhoods, in fact Crystal Clear obtained only a nonexclusive franchise agreement with
the City to use streets and easements for the construction and maintenance of
telecommunications infrastructure, and there is no barrier to other service providers obtaining the
same access.
4
The Complaint specifically describes the relationship between Crystal Clear and the
developer defendants as follows. Despite the fact that Bridgemore and Tollgate were developed
by Bridgemore Development and Tollgate Farms, respectively, Carbine holds itself out publicly
as the owner and developer of these neighborhoods, advertising new residential properties for
sale. While there may be corporate formalities separating Carbine from Bridgemore
Development and Tollgate Farms, these entities operate under common ownership, direction, and
control. Crystal Clear, which purports to be an independent provider of telecommunications
services, is actually under the same common ownership, direction, and control as Carbine,
Bridgemore Development, and Tollgate Farms. All four of these entities (referred to,
collectively, in the Complaint as the “Carbine family”) have the same business address, the same
registered agent, and overlapping boards of directors, officers, and shareholders.5 Hood, which
5
In their Motion to Dismiss, Carbine and Crystal Clear argue that the court cannot consider the
Plaintiffs’ allegations that Carbine, Crystal Clear, Bridgemore Development, and Tollgate Farms
are all one entity, because these allegations are made “upon information and belief” and are,
therefore, conclusory assertions not based in fact. (Docket No. 53 p.4, n.4.) To support this
proposition, Carbine and Crystal Clear cite Southfield L.P. v. Flagstar Bank, 727 F.3d 502, 506
(6th Cir. 2013). (Id.) Southfield, however, simply states that “a plaintiff cannot overcome a Rule
12(b)(6) motion to dismiss simply by referring to conclusory allegations in the complaint that the
defendant violated the law. Instead, the sufficiency of a complaint turns on its factual content,
requiring the plaintiff to plead enough factual matter to raise a plausible inference of
wrongdoing. The plausibility of an inference depends on a host of considerations, including
common sense and the strength of competing explanations for the defendant’s conduct.” 727
F.3d at 504 (emphasis added) (internal citations omitted). Southfield held that a plaintiff’s claim
for national origin discrimination could not survive a motion to dismiss where the plaintiff
alleged no specific facts to support an inference of discrimination other than the conclusory
allegation that, on information and belief, others who did not share his national origin were
treated differently, but the plaintiff made no specific allegations identifying any such individuals
or any basis for the belief. The fact that the allegations in Southfield were made upon
“information and belief” was not the problem, so much as the fact that the allegations were
conclusory and unsupported by factual content. Here, to the contrary, the Plaintiffs make
specific factual allegations to support the inference that the Carbine family is one entity: namely,
that these entities are run by the same people, that they have the same address and business
agent, that they publicly take credit for one another’s work (e.g. Carbine’s website taking credit
for the development that is supposedly the work of the developers), and that they entered into
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developed the Canterbury neighborhood, is not a part of the Carbine family of entities. Hood,
however, entered into an independent contract with Crystal Clear prior to the Agreements, by
which Hood agreed to force the Canterbury POA to enter into the same type of
telecommunications agreement with Crystal Clear that the other POAs entered, in exchange for
Crystal Clear’s providing Hood with some of the generated revenue. While the Plaintiffs, and
other homeowners in the Neighborhoods, were aware of the Agreements at the time they
purchased their homes, they were not aware of the underlying self-dealing or of the relationships
among the developer defendants and Crystal Clear.
The Complaint further alleges that Crystal Clear is not a legitimate telecommunications
provider; has no previous experience building telecommunications infrastructure, operating a
telecommunications network, or conducting any part of the business of providing
telecommunications services; and, to the present day, does not provide telecommunications
services to any customers outside of the Neighborhoods. Moreover, the Complaint alleges that
Crystal Clear is unable, on its own, to actually deliver television content or high speed internet to
the Neighborhoods and, therefore, in order to deliver the basic cable and internet services it is
obligated to provide under the Agreements, Crystal Clear has contracted with DIRECTV. Rather
than allowing the homeowners to enter into direct service contracts with DIRECTV, however,
the services are sold through Crystal Clear, as per Crystal Clear’s rights as exclusive agent to the
contracts with one another that do not benefit them as independent parties but make sense only if
they are one and the same. Moreover, the allegation that the Carbine family is one entity is not
even itself a conclusory allegation of wrongdoing, but is, instead, one piece of the factual content
needed to support the ultimate inference that the defendants are guilty of self-dealing. Finally,
factual allegations in any complaint are, as a rule, made upon information and belief and their
veracity is assumed for purposes of a 12(b)(6) motion to dismiss but cannot be confirmed until
discovery is completed. Here, the court finds that the allegations in the Complaint are more than
sufficiently pled to support an inference – for purposes of the motions to dismiss – that the
Carbine family is one entity, and the court will not overlook these allegations as conclusory
assertions of wrongdoing.
6
Neighborhoods for any contracts with outside telecommunications providers. Crystal Clear has
negotiated a bulk rate with DIRECTV, and it then resells DIRECTV’s services to the
homeowners pursuant to the terms of the Agreements that require homeowners to purchase basic
services from Crystal Clear. The rate for these basic cable and internet services reflects the price
Crystal Clear is paying DIRECTV plus a premium payable to Crystal Clear. 6 This price is
significantly greater than the promotional prices offered by DIRECTV to customers outside of
the Neighborhoods. DIRECTV has always been given the right to market to homeowners in the
Neighborhoods for additional services it offers beyond the basic packages purchased by Crystal
Clear (those services would also be purchased through Crystal Clear if homeowners wish to add
them). DIRECTV is aware of the Agreements and the pricing arrangements between Crystal
Clear and the homeowners.
In addition, because Crystal Clear delivers the homeowners’ DIRECTV services through
Crystal Clear’s infrastructure – rather than contracting for DIRECTV to create its own
infrastructure in the Neighborhoods – the homeowners receive services that are of significantly
lower quality than the services received by DIRECTV customers outside of the Neighborhoods
(or by customers of other outside providers). Specifically, homeowners in the Neighborhoods
experience a higher rate of service disruptions than other DIRECTV users and must install
satellite dishes on their homes, at their own expense. In addition, the homeowners cannot
contact DIRECTV directly about their cable and internet service or the interruptions to service
that they experience, but, instead, all communications with DIRECTV must go through Crystal
Clear. The Agreements also govern the terms by which the homeowners may be reimbursed, if
6
The homeowners may also purchase additional DIRECTV cable and internet services – beyond
those provided by Crystal Clear through the basic services packages – but, again, homeowners
must purchase any additional DIRECTV services through Crystal Clear at a price that reflects
Crystal Clear’s negotiations with DIRECTV plus a premium to Crystal Clear.
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at all, for disruptions to service, terms which are less favorable than those offered to DIRECTV
customers outside of the Neighborhoods or offered by other providers.
The Complaint alleges that the terms of the Agreements, as a practical matter, prevent
them from obtaining basic telecommunications services from any providers other than Crystal
Clear and DIRECTV (through Crystal Clear) because 1) they are already paying Crystal Clear
for basic services from DIRECTV, so obtaining basic services from another outside provider
would essentially mean paying for the same services twice, and 2) they would have to contract
for these services through Crystal Clear at a premium.7
Finally, according to the Complaint, the POAs never have pursued, and never will pursue
(so long as they are controlled by the developers), action against Crystal Clear for the poor
quality and overpriced telecommunications services that breach the direct terms, and implied
7
Significantly, however, the Complaint does not allege that the Agreements expressly provide
for Crystal Clear to be the exclusive provider of telecommunications services to the
Neighborhoods. Quite to the contrary, the Agreements – both as they appear in the record and as
they are characterized by the Complaint – expressly lay out the terms by which outside providers
can be engaged – namely, through negotiation with Crystal Clear as an exclusive agent. (Only
two of the three Agreements are in the record – the agreement between Crystal Clear and the
Tollgate POA and the agreement between Crystal Clear and the Bridgemore POA (Docket Nos.
31-4, 31-5 (Exhibits B and C to the Complaint) – but the Complaint alleges that all three
Agreements are substantially the same). Moreover, the Complaint alleges that Crystal Clear is
incapable of providing services directly and must, at a minimum, negotiate with an outside
provider in order to provide the basic service packages obligated by the Agreements, as Crystal
Clear has done in its negotiations with DIRECTV. Likewise, the Complaint does not allege that
Crystal Clear’s agreement with DIRECTV expressly provides DIRECTV with any exclusive
rights to serve the Neighborhoods. Rather, Crystal Clear has chosen to contract with DIRECTV
for all of the basic services it is obligated to provide in the Neighborhoods, but there is no
indication in the Complaint that Crystal Clear may not switch providers for the basic services it
provides, or engage with other outside providers to provide additional services to the
Neighborhoods. All references in the Compliant to Crystal Clear and/or DIRECTV being
“exclusive” providers of cable and internet services in the Neighborhoods are, therefore,
understood to denote that the end result of the Agreements, plus Crystal Clear’s contract with
DIRECTV, is that it would be economically unsustainable for homeowners to purchase services
through other outside providers, making DIRECTV (through Crystal Clear) the de facto sole
provider of cable and internet services in the Neighborhoods.
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warranties, of the Agreements. Nor will the POAs terminate the Agreements or decline to renew
them. This is because, the Complaint alleges, doing so would go against the self interests of the
developer defendants who control the POAs, since Bridgemore Development and Tollgate Farms
are members of the same Carbine family of entities as Crystal Clear and, accordingly, share in
Crystal Clear’s profits, and Hood has an insider contract with Crystal Clear by which Hood reaps
some of the profits from Crystal Clears’ agreement with the Canterbury POA.
PROCEDURAL HISTORY
This action was initially filed on January 5, 2016. (Docket No. 1.) The (Amended)
Complaint was filed on February 15, 2016. (Docket No. 31.) The Complaint requests that this
action be tried as a class action under Federal Rules of Civil Procedure 23(a) and 23(b)(1), (2),
and (3), and the Plaintiffs’ proposed class consist of all homeowners in the Neighborhoods, with
three subclasses for each of the three individual neighborhoods. According to the Complaint, the
Plaintiffs are all residents of Tennessee and the defendants, with the exception of DIRECTV, are
all Tennessee corporations. DIRECTV is a California corporation. The Complaint asserts that
the basis for this court’s subject matter jurisdiction arises from the federal statutes governing
their federal law claims. The Complaint contains the following six counts:
Count I is a claim for unlawful tying, in violation of Section 1 of the Sherman Antitrust
Act, 15 U.S.C. § 1. This claim is based on allegations that the defendants illegally tied
the sale of residential lots in the Neighborhoods to the sale of telecommunications
services from Crystal Clear. The Complaint alleges that the defendants “have sufficient
market power in the sale of lots in the Neighborhoods and/or the sale of
telecommunications in the Neighborhoods,” and that “the amount of interstate commerce
affected in the market for the sale of lots in the Neighborhoods and/or the sale of
telecommunications in the Neighborhoods is substantial.” (Docket No. 31 ¶¶ 89, 90.)
Count II is a claim for unlawful market allocation, also in violation of Section I of the
Sherman Antitrust Act. This claim is based on the allegation that Crystal Clear and
DIRECTV are horizontal competitors for the provision of telecommunications services in
the Neighborhoods and that the agreement between Crystal Clear and DIRECTV,
combined with the Agreements, “eliminate a significant form of competition to allow
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DIRECTV via Crystal Clear to be the exclusive provider of telecommunications within
the Neighborhoods to the exclusion of other telecommunications providers or direct
competition between Crystal Clear and DIRECTV.” (Docket No. 31 ¶ 96.)
Count III is a claim for self-dealing that seeks a declaratory judgment voiding the
Agreements as a product of self-dealing that was never disclosed to potential
homeowners in the Neighborhoods.
Count IV is a claim for violation of the following Federal Communications Commission
Order: In the Matter of Exclusive Service Contracts for Provision of Video Services in
Multiple Dwelling Units and Other Real Estate Developments, 22 FCC Rcd. 20235
(2007) (the “FCC Exclusivity Order”). This count seeks a declaratory judgment that the
Agreements are void for violating the FCC Exclusivity Order, by creating sufficient
barriers for outside providers to compete with Crystal Clear to provide
telecommunications services in the Neighborhoods, effectively giving Crystal Clear “the
exclusive rights to serve the Neighborhoods.” (Docket No. 31 ¶ 115.)
Count V is a claim for unjust enrichment, based on allegations that the defendants are
unjustly enriched by the Plaintiffs’ monthly payments to Crystal Clear for
telecommunications services and one-time payments to Crystal Clear for
telecommunications infrastructure.
Count VI is a claim for unconscionability, again seeking a declaratory judgment that the
Agreements are void because they are unconscionable.
The Complaint seeks class action certification, an injunction preventing the enforcement of the
Agreements, a declaration that the Agreements are void, monetary damages (including treble
damages), and attorney’s fees.
On March 3, 2016, Carbine and Crystal Clear filed a Motion to Dismiss, along with a
Memorandum in support. (Docket Nos. 52, 53.)
On March 7, 2016, Bridgemore Development and Tollgate Farms filed a Motion to
Dismiss, incorporating by reference the Memorandum of law filed by Carbine and Crystal Clear.
(Docket No. 55.)
On March 14, 2016, the Bridgemore POA and the Tollgate POA filed a Motion to
Dismiss, along with an accompanying Memorandum, also incorporating by reference the
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Memorandum filed by Carbine and Crystal Clear and adding additional arguments. (Docket
Nos. 56, 57.)
Also on March 14, 2016, DIRECTV filed is Arbitration Motion, along with a
Memorandum in support, the Declaration of Clark Milner, the Declaration of Katherine Bradley,
and a number of supporting exhibits attached to the Declarations. (Docket Nos. 65, 66, 68, 69.)
While the Complaint does not expressly state which of the six counts are brought against which
defendants, DIRECTV, in its Arbitration Motion, takes the position that only the horizontal
allocation claim and the unjust enrichment claim could potentially implicate DIRECTV.
DIRECTV appears to argue that the tying claim cannot apply to DIRECTV because the tying
claim arises from tying the purchase of residential lots in the Neighborhoods to the purchase of
Crystal Clear’s telecommunications services, neither of which involved DIRECTV. DIRECTV
also argues that the claim for violating the FCC Exclusivity Order, the unconscionability claim,
and the self-dealing claim cannot apply to DIRECTV because, in the Complaint, these claims are
all expressly aimed at invalidating the Agreements, to which DIRECTV was not a party.
On March 28, 2016, the Plaintiffs filed an Omnibus Response in opposition to the
Motions to Dismiss.8 (Docket No. 77.)
On April 1, 2016, Carbine and Crystal Clear filed a Reply in further support of their
Motion to Dismiss. (Docket No. 83.)
On April 4, 2016, the Plaintiffs filed a Response in opposition to DIRECTV’s Arbitration
Motion. (Docket No. 85.) In their Response, the Plaintiffs concede that the only two claims they
are bringing against DIRECTV are the horizontal allocation claim (which is based on the alleged
8
The Omnibus Response also responds to a Motion To Dismiss filed by the Canterbury POA on
March 14, 2016 (Docket No. 63). That motion is no longer pending because the claims against
the Canterbury POA were voluntarily dismissed on May 13, 2016, pursuant to a settlement
agreement. (Docket No. 93.)
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agreement between DIRECTV and Crystal Clear) and the claim for violating the FCC
Exclusivity Order. (Docket No. 85 p. 10.) Counter to DIRECTV’s position, the Plaintiffs appear
to concede that the unjust enrichment claim is not brought against DIRECTV.
On April 18, 2016, DIRECTV filed a Reply in further support of its Arbitration Motion.
(Docket No. 90.)
ANALYSIS
For the reasons discussed below, the court finds that the Plaintiffs have failed to state a
claim with respect to the federal claims in this action – the tying claim and unlawful market
allocation claims, brought under the Sherman Act, and the claim for violation of the FCC
Exclusivity Order – and those claims will, therefore, be dismissed. The court will dismiss these
claims as against all defendants, even though Hood and DIRECTV have not moved for
dismissal. Finally, the remaining claims in this action – the claims against all defendants except
DIRECTV for self-dealing, unjust enrichment, and unconscionability under Tennessee law – will
also be dismissed for lack of jurisdiction for the reasons discussed more fully below.
I.
THE CLAIMS AT ISSUE
The Complaint is not entirely clear with respect to which of the six counts are being
brought against which of the nine defendants. In the Arbitration Motion briefing, however, the
plaintiffs have expressly conceded that no claims other than those for unlawful market allocation
and violation of the FCC Exclusivity Order are being brought against DIRECTV. For purposes
of this motion, then, the court will assume that all six counts are brought against each of the
defendants, except DIRECTV, and that only the claims for unlawful market allocation and
violation of the FCC Exclusivity Order are brought against DIRECTV.
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Despite DIRECTV’s assumption, in its Arbitration Motion, that the unjust enrichment
claim might apply to DIRECTV, the Plaintiffs concede, in their Response, that the unjust
enrichment claim – along with the tying claim, the unconscionability claim, and the self-dealing
claim – is not brought against DIRECTV. Indeed, there are no allegations in the Complaint to
suggest that DIRECTV actually received an unjust rate from Crystal Clear for the services it
provided (only that Crystal Clear charged an unjust premium to the homeowners for procuring
these services from DIRECTV). The court further notes that, while the Plaintiffs assert that the
claim for violating the FCC Exclusivity Order is also brought against DIRECTV, this claim is
pled in the Complaint as relating only to the Agreements, to which DIRECTV is not a party, as
DIRECTV points out in its Arbitration Motion. Moreover, the Plaintiffs’ only argument, in their
Response to DIRECTV’s Arbitration Motion, for why DIRECTV should be liable for violating
the FCC Exclusivity Order is that DIRECTV was a beneficiary of the rights given to Crystal
Clear by the Agreements. For these reasons, it is not entirely clear that that the claim for
violating the FCC Exclusivity Order has been properly brought against DIRECTV. To the extent
that this claim is brought against DIRECTV, based on DIRECTV’s agreement with Crystal
Clear, this claim cannot survive anyway for the reasons discussed below.
II.
LEGAL STANDARD FOR MOTIONS TO DISMISS
In deciding a motion to dismiss for failure to state a claim under Rule 12(b)(6), the court
will “construe the complaint in the light most favorable to the plaintiff, accept its allegations as
true, and draw all reasonable inferences in favor of the plaintiff.” Directv, Inc. v. Treesh, 487
F.3d 471, 476 (6th Cir. 2007); Inge v. Rock Fin. Corp., 281 F.3d 613, 619 (6th Cir. 2002). The
Federal Rules of Civil Procedure require only that a plaintiff provide “a short and plain statement
of the claim that will give the defendant fair notice of what the plaintiff’s claim is and the
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grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957). The court must
determine only whether “the claimant is entitled to offer evidence to support the claims,” not
whether the plaintiff can ultimately prove the facts alleged. Swierkiewicz v. Sorema N.A., 534
U.S. 506, 511 (2002) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).
The complaint’s allegations, however, “must be enough to raise a right to relief above the
speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). To establish the
“facial plausibility” required to “unlock the doors of discovery,” the plaintiff cannot rely on
“legal conclusions” or “[t]hreadbare recitals of the elements of a cause of action,” but, instead,
the plaintiff must plead “factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678-79
(2009). “[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss.”
Id. at 679; Twombly, 550 U.S. at 556.
III.
THE FEDERAL LAW CLAIMS
The court now turns to the merits of the Motions to Dismiss with respect to the federal
law claims for tying, unlawful market allocation, and violation of the FCC Exclusivity Order.
For the reasons discussed below, the court finds that these claims are not sufficiently supported
by the allegations in the Complaint and they will, therefore, be dismissed.
A.
Tying Claim
A tying arrangement is defined as an agreement by a party to sell one product . . .
only on the condition that the buyer also purchases a different (or tied) product, or
at least agrees that he will not purchase that product from any other supplier. In
other words, a supermarket that will sell flour to consumers only if they will also
buy sugar is engaged in tying. Flour is referred to as the tying product, sugar as
the tied product. The typical case involves a seller’s attempt to exploit its
economic power over one product or in one market to force a less desirable, tied
product on a buyer. Illegal tying therefore occurs only if the seller has
appreciable economic power in the tying product market and if the arrangement
affects a substantial volume of commerce in the tied market.
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Michigan Division-Monument Builders of North Am. v. Michigan Cemetery Ass’n, 524 F.3d 726,
732 (6th Cir. 2008) (internal citations omitted). While the questions of whether a tying product
market has been properly defined and whether a defendant has sufficient power within that
market are fact-intensive questions that generally require discovery, the Sixth Circuit has held
that dismissal is appropriate where a plaintiff fails to identify a potentially relevant market for
the tying product. Id. at 733 (quoting Found. for Interior Design Educ. Research v. Savannah
Coll. of Art & Design, 244 F.3d 521, 531 (6th Cir. 2001). The plaintiff must identify “the
geographic area in which consumers can practically seek alternative sources of the product.” In
Michigan Division-Monument, the plaintiffs attempted to define the market for the tying product
at issue as the market for the defendant’s specific product itself, namely burial lots within an
individual cemetery being sold by a defendant cemetery owner. The Sixth Circuit rejected this
argument, holding that a market cannot be defined to include solely the defendants’ own
products (over which the defendant necessarily has significant, if not exclusive, market power)
but must include all other interchangeable product options within a reasonable geographic range.
While some products may be unique so as to not be interchangeable with any alternative,
the Sixth Circuit specifically held that this is not the case with real property, absent a specific
showing that the location of the land “‘lends the defendant a competitive advantage others cannot
meet.’” Michigan Division-Monument, 524 F.3d at 733 (quoting Baxley-DeLamar Monuments,
Inc. v. Am. Cemetery Ass’n, 938 F.2d 846, 852 (8th Cir. 1991)). The Plaintiffs have not alleged
that the residential lots in the Neighborhoods are unique in this way, nor have they argued any
basis for establishing that the residential lots in the Neighborhoods cannot be interchanged with
residential lots in other planned neighborhoods in the region.
15
The Plaintiffs argue that Michigan Division-Monument is not relevant to this case
because the plaintiffs there were competitors rather than customers and, therefore, the relevant
market was right to access customers rather than the product itself, citing Apani Southwest, Inc.
v. Coca-Cola, Enters. (300 F.3d 620 (5th Cir. 2002)) and Illinois ex rel. Hartigan v. Panhandle
E. Pipe Line Co. (730 F.Supp. 826, 899 (C.D. Ill. 1990)). (Docket No. 77 pp. 10-11.) There is
nothing in these cases, however, to support an inference that the standard differs depending on
who the plaintiffs are, or that customers, rather than competitors, can hinge a market analysis on
the market for one particular product rather than the entire market of interchangeable
alternatives. Indeed, it would make no sense for such a differentiation to exist when the question
at the heart of a tying claim is whether the defendants had the power to induce customers to
purchase the tying product rather than an alternative, despite the alleged tying.
Similarly, a Second Circuit case cited by the Plaintiffs also holds that, where a claim
turns on a defined product market, “[t]o survive a Rule 12(b)(6) motion to dismiss, an alleged
product market must bear a rational relation to the methodology courts prescribe to define a
market for antitrust purposes – analysis of the interchangeability of use or the cross-elasticity of
demand and it must be plausible.” Todd v. Exxon Corp., 275 F.3d 191, 199 (2d Cir. 2001)
(internal citations omitted). Another case cited by the Plaintiffs, Southeastern Milk Antitrust
Litigation, similarly found that an antitrust claim could proceed where the plaintiffs had “clearly
allege[d] relevant product and geographic markets.” 555 F.Supp.2d 934, 946 (E.D. Tenn. 2008).
Here, the Complaint references no market for the tying product (residential homes in the
Neighborhoods), let alone one that the court can find plausible.
The Complaint makes only the conclusory assertion that the defendants “have sufficient
market power in the sale of lots in the Neighborhoods and/or the sale of telecommunications in
16
the Neighborhood” and that “the amount of interstate commerce affected in the market for the
sale of lots in the Neighborhoods and/or the sale of telecommunications in the Neighborhoods is
substantial.” (Docket No. 31 ¶¶ 89, 90.) It is self-evident that the developer defendants have
substantial market power over the sale of their own particular product – residential lots in the
Neighborhoods – just as the defendants in Michigan Division-Monument had substantial market
power over burial lots in their own cemeteries. This does not on its own, however, explain why
they might have the type of market power that would deprive consumers of a meaningful choice
as to whether to purchase those lots and, therefore, coerce them to also purchase the tied product
of Crystal Clear’s telecommunications services. Nowhere in the Complaint do the Plaintiffs
attempt to define the geographic product market within which the defendants compete in their
sale of lots in the Neighborhoods. Nor do the Plaintiffs raise any allegations or arguments to
show that the defendants control a substantial share of that market. They make no allegations
regarding how many other interchangeable residential lots in planned neighborhoods might be
available in the relevant geographic region, or even what that region would be. While it would
ultimately be a fact-intensive question, subject to discovery, whether a particular geographic
region and product type does in fact encompass the entire relevant market, and whether the
defendants’ power over that market is sufficient, the Plaintiffs have made no attempt to define
the market, so as to even warrant beginning the discovery process. Moreover, the Plaintiffs
have made no allegations that the defendants have any power within that market (above and
beyond the power they necessarily have in selling lots in the Neighborhoods).
The Complaint does not indicate that the tying claim is brought solely against the
developer defendants, and, thus, the court must consider whether this claim can proceed as
against any of the defendants, aside from DIRECTV. As discussed in this section, a tying claim
17
requires conditioning the sale of a tying product (in this case the residential lots in the
Neighborhoods) on the buyer’s purchase of a tied product (in this case Crystal Clear’s
telecommunications services). Without reaching the question of whether a party other than the
seller of a tying product can ever be liable for such a claim, or which of the defendants in this
action were actually sellers of the lots in the Neighborhoods, the court notes that the Plaintiffs
have not alleged that any of the defendants has power within the market that encompasses lots in
the Neighborhoods.9 In their briefing, the Plaintiffs ignore the question of the tying product
market and argue only that the defendants have substantial market power over sale of
telecommunications services to the Neighborhoods. This confuses the burden to show market
power over the tying product with the burden to also show a significant volume of commerce in
the tied market.
In fact, the Sixth Circuit expressly rejected this sort of circular reasoning in Michigan
Division-Monument. There, too, the plaintiffs argued that their tying claim could be supported
by the fact that once the burial lots (the tying products) were purchased, the customers had no
choice but to buy monuments (the tied product) for the particular cemetery where the lots were
purchased. The Sixth Circuit held that “[f]ocusing on what happens only after a grave site is
purchased ignores the competitive market for the initial sale of burial lots.” 524 F.3d at 735. In
other words, the fact that the purchase of the tied product is rendered necessary by the sale of the
tying product does not make up for a failure to allege market power in selling the tying product
itself in the first place. The Plaintiffs have sufficiently alleged that, once they purchased their
homes in the Neighborhoods, they were bound to purchase telecommunications services through
9
This applies equally to defendant Hood, which has not moved for dismissal, but which is
likewise not alleged in the Complaint to have the requisite power within the market that includes
lots in the Canterbury neighborhood to be liable for an antitrust violation based on tying the
purchase of those lots to the purchase of Crystal Clear telecommunications services.
18
Crystal Clear, but they have not made any allegations that the purchase of their homes was
induced by the defendants’ market power, a necessary element of an unlawful tying claim.
Finally, even with respect to the tied product, an unlawful tying claim requires more than
simply showing that the purchase of the tied product was forced by the sale of the tying product.
The plaintiffs must further allege that the tying affects a substantial volume of commerce in the
tied market. The tied market, for the purposes of this action, is not simply telecommunications
services in the Neighborhoods, which are clearly substantially affected by the alleged tying, but
telecommunications services in the region more generally. The Plaintiffs have, again, made no
allegations as to how that telecommunications market in the region might be impacted by a
transaction that affects the sales of telecommunications services in the Neighborhoods.
For these reasons, the court finds that the Plaintiffs have not pled a tying claim as a
matter of law, and this claim will be dismissed.
B.
Unlawful Market Allocation Claim
An unlawful market allocation claim requires that two horizontal competitors agree not to
compete with one another in a certain market and, instead, allocate among themselves portions of
the market to which they will each sell their products. See In re Cardizem CD Antitrust Lit., 332
F.3d 896, 907 (6th Cir. 2003); see also Expert Masonry, Inc. v. Boone County, Ky, 440 F.3d 336
(6th Cir. 2006).
‘One of the classic examples of a per se violation of § 1 [of the Sherman Act] is
an agreement between competitors at the same level of the market structure to
allocate territories in order to minimize competition. Such concerted action is
usually termed a ‘horizontal’ restraint, in contradistinction to combinations of
persons at different levels of the market structure, e.g. manufacturers and
distributors, which are termed ‘vertical’ restraints. This court has reiterated time
and time again that horizontal territorial limitations . . . are naked restraints of
trade with no purpose except stifling of competition.’
In re Cardizem, 332 F.3d at 907 (quoting United States v. Topco Assocs., 405 U.S. 596,
19
608 (1972)).
The Plaintiffs make the conclusory allegation, in Count II of the Complaint, that
DIRECTV and Crystal Clear are horizontal competitors and that the agreement by which Crystal
Clear purchased cable and internet services for the Neighborhoods from DIRECTV improperly
restricts competition between them. As an initial matter, this claim fails because the notion that
DIRECTV and Crystal Clear are horizontal competitors is directly belied by all of the other
allegations in the Complaint. Specifically, the Complaint states that Crystal Clear is unable, on
its own, to provide the type of cable and internet services that are sold by DIRECTV. For this
reason, according to the Complaint, Crystal Clear was forced to purchase these services from an
outside provider and resell them to the homeowners in the Neighborhoods, in order to fulfill
Crystal Clear’s obligation under the Agreements to provide basic cable and internet services to
the Neighborhoods. Crystal Clear chose to purchase these services from DIRECTV. In doing
so, Crystal Clear did not eliminate competition between itself and DIRECTV, nor did it eliminate
competition with other outside providers. Arguably, DIRECTV, in fact, had to compete with
other outside providers to secure Crystal Clear’s business. For these reasons, Crystal Clear and
DIRECTV are not horizontal competitors.10
10
A vertical agreement, between entities that occupy different levels of the distribution chain but
are not horizontal competitors, such as manufacturers and retailers, can violate antitrust laws in
certain circumstances. See, e.g., Expert Masonry, 440 F.3d at 345 (holding that, in order to
allege an antitrust violation based on a vertical agreement, the pleadings must outline a relevant
market, the defendants’ power in that market, and the basis for a finding that the agreement
restrained trade according to the “rule of reason”). Because vertical agreements are a necessary
component of trade, these agreements are scrutinized under a heightened standard and “market
allocation” is not a recognized basis for unlawfulness in these types of agreements; rather they
must be the sort of agreement that restrain competition among horizontal competitors of one of
the parties to the agreement. See id.; see Southeastern Milk, 555 F.Supp. at 720 (citing Denny’s
Marina, Inc. v. Renfro Productions, Inc., 8 F.3d 1217 (7th Cir. 1993)). Here, there is no claim of
an unlawful vertical agreement between DIRECTV and Crystal Clear. Moreover, there are no
20
The Plaintiffs argue that Crystal Clear and DIRECTV cannot enter into an agreement that
transforms their nature as horizontal competitors by becoming a buyer and supplier when, in fact,
they are really both providers of cable services. This argument, however, ignores the plain facts
alleged in the Complaint, which states that 1) Crystal Clear, irrespective of how it defined itself
in its transactions with the POAs, is not a provider of cable services and cannot be, because it is
incapable of providing cable service; and 2) in entering the contract with DIRECTV, Crystal
Clear occupied the role of an intermediary and reseller of DIRECTV’s service and did not
operate as a provider. The agreement between DIRECTV and Crystal Clear did not, as the
Plaintiffs argue, eliminate competition between two entities that provide the same product, and
then disguise itself as a vertical agreement. It truly is a vertical agreement between parties that
provide very different services, in which each party profits solely from a different level of the
chain of commerce.
The fact, as the Plaintiffs assert, that Crystal Clear has a website whereby it bills itself as
a provider of cable and internet services does not change the fact that it did not operate as a
horizontal competitor of DIRECTV. In fact, many distributors may advertise products or
services for sale while, in reality, they are reselling products or services from other providers.
Similarly, the fact that DIRECTV can and does distribute its services directly to homeowners in
other areas (without relying on an intermediary) does not render it a horizontal competitor of
Crystal Clear for distribution services in the Neighborhoods. DIRECTV and Crystal Clear did
not enter into a contract because they were both poised to distribute services directly to
allegations that the agreement between DIRECTV and Crystal Clear sought to restrain trade
among competitors of either party. If anything, the record suggests that DIRECTV would have
had to compete with other providers to obtain the contract with Crystal Clear to provide service
to the Neighborhoods (and will have to continue to do so going forward in order to retain Crystal
Clear’s business).
21
homeowners in the Neighborhoods but decided, instead, to share the territory. Rather, Crystal
Clear already had exclusive agency rights to procure services from outside providers and
distribute them in the Neighborhoods. Crystal Clear then chose to enter into a contract to
purchase those services from DIRECTV. DIRECTV and Crystal Clear each profit from the
arrangement in which Crystal Clear purchases services from DIRECTV and then Crystal Clear
resells those services at a premium. DIRECTV is profiting from the sale of cable and internet
services, and Crystal Clear is profiting from the sale of its services as an agent, reseller, and
intermediary.
The essence of the alleged injury to the Plaintiffs appears to be in the fact that the POAs
allowed Crystal Clear to hold this position as exclusive agent and reseller of services and to
effectively charge the homeowners in the Neighborhoods a premium above the price they would
pay for DIRECTV services, with no benefit conferred to the homeowners in exchange. This
allegation, however, does not support an unlawful market allocation claim.
For these reasons, the unlawful market allocation claims will be dismissed.
C.
Claim for Violation of FCC Order
The FCC Exclusivity Order specifically prohibits contractual agreements that grant
exclusive rights to cable operators11 to serve a multiple dwelling unit or real estate development.
22 FCC Rcd. 20235. For the purposes of the FCC Exclusivity Order, these prohibited
agreements are defined as contracts by which only one provider is permitted to sell cable
11
The FCC Exclusivity Order uses a distinct definition of cable operators that are covered by this
Order, namely multichannel video programming distributors or “MVPDs.” It is not entirely
clear that Crystal Clear would meet this definition of a cable provider, given the allegations in
the Complaint that it is unable to itself provide cable services to the Neighborhoods, and does not
provide such services elsewhere. The court need not reach this question, however, because – as
discussed in this section – there are simply no allegations of exclusivity that would render the
Agreements or the contract between Crystal Clear and DIRECTV subject to the FCC Exclusivity
Order.
22
services to a development (precluding even future competition from other providers). These
prohibited arrangements are expressly differentiated from contracts that provide exclusive rights
to market cable services to residents (agreements which are not prohibited) and are also
differentiated from “bulk billing” contracts in which a development chooses to purchase cable
services for all residents from one provider at an agreed upon bulk rate. Id. at 20265. In a
second order supplementing the FCC Exclusivity Order, the FCC found that bulk billing
arrangements, unlike exclusive provider contracts, are not prohibited, despite the fact that bulk
billing may mean, as a practical matter, that only one provider is servicing a particular
development at any given time. In the Matter of Exclusive Service Contracts For Provision of
Video Services in Multiple Dwelling and Other Real Estate Developments, 25 FCC Rcd. 2460
(2010). The distinction appears to lie in the ability for market competition among providers to
continue after the agreement is in place. If a development offers a provider exclusive rights to
serve that development for a set period of time, there is no ability for other providers – including
new providers who were not in existence at the time the agreement was entered – to compete for
that business. If, on the other hand, a development establishes a bulk billing arrangement with a
provider, it has not only already selected that provider through the competitive market process,
but it will continue to have the opportunity to reevaluate that relationship and switch providers if
a better competitor comes along. Likewise, competitors may find other ways of selling
additional services to residents beyond those provided in a bulk billing agreement.
The agreement between Crystal Clear and DIRECTV, as alleged in the Complaint, is
clearly a bulk billing arrangement and not an exclusive contract. There are no allegations that
DIRECTV has exclusive rights to service the Neighborhoods (though they may have exclusive
rights to market there, but this arrangement is expressly exempted from the FCC Exclusivity
23
Order’s prohibition). To the extent that DIRECTV functions as a de facto exclusive cable
provider in the Neighborhoods at this time, this is a result of the competition that allowed
DIRECTV to receive Crystal Clear’s contract in the first place, and it is the same result as would
occur with any bulk billing arrangement. With respect to the Agreements rendering Crystal
Clear the exclusive entity through which plaintiffs purchase telecommunications services, again,
these do not grant an exclusive right to Crystal Clear to provide cable services. As the
Complaint alleges, Crystal Clear is not even able to provide cable services on its own and has to
purchase these service from DIRECTV (or another provider) and resell them to the homeowners.
For this reason, it is not even clear that Crystal Clear is a cable provider for the purposes of the
FCC Exclusivity Order. Moreover, the Agreements expressly provide that outside providers may
serve the Neighborhoods, and at least one outside provider – DIRECTV – actually does.
The fact that Crystal Clear has exclusive rights to serve as an agent for the homeowners
in negotiations with outside providers does not implicate the prohibitions of the FCC Exclusivity
Order. Nor does the fact that the POAs mandate the purchase of basic services for all
homeowners through Crystal Clear at a set rate. At best, this represents just another bulk billing
agreement, this time between the POAs and Crystal Clear. As with the agreement between
Crystal Clear and DIRECTV, it was ostensibly necessary for Crystal Clear to compete with other
intermediary service providers in order to secure the POAs’ business. The Complaint, of course,
alleges that this is not the case because any such competition was stifled by the relationship
between the POAs and Crystal Clear. If there is anything wrong with the Agreements, however,
it is not that they are exclusive contracts that violate the FCC Exclusivity Order, but that they are
the product of self-dealing, as addressed by the state law claims at issue in this action.
For these reasons, the claims for violating the FCC Exclusivity Order will be dismissed.
24
IV.
REMAINING STATE LAW CLAIMS
The remaining claims – for self-dealing, unjust enrichment, and unconscionability – arise
under Tennessee common law, rather than federal law. As discussed above, the Plaintiffs have
conceded that these claims are not brought against DIRECTV, but only against the remaining
defendants, who are all residents of Tennessee, as are the Plaintiffs. Accordingly, neither
diversity jurisdiction nor federal question jurisdiction applies to these claims.
As discussed above, the state law claims appear to be at the heart of the Plaintiffs’ action,
as they touch upon the inherent unfairness in the Agreements as alleged in the Complaint.
Nevertheless, there are arguments raised in the Motions to Dismiss that these claims should not
proceed. The court need not reach the merits of these arguments, however, because these are all
Tennessee state law claims among parties within the state of Tennessee. Therefore, the court
must decide, as an initial matter, whether it will exercise supplemental jurisdiction over the
Plaintiffs’ remaining state law claims.
There is a strong presumption against the exercise, under 28 U.S.C. § 1367, of
supplemental jurisdiction over remaining state law claims, once all federal claims have been
dismissed, and residual supplemental jurisdiction should be exercised sparingly. Packard v.
Farmers Ins. Co. of Columbus Inc., 423 F. App’x 580, 584 (6th Cir. 2011); see also
Experimental Holdings, Inc. v. Farris, 503 F.3d 514, 522 (6th Cir. 2007) (“[R]esidual
supplemental jurisdiction [should] be exercised with hesitation, to avoid needless decisions of
state law.”); Moon v. Harrison Piping Supply, 465 F.3d 719, 728 (6th Cir. 2006) (“[A] federal
court that has dismissed a plaintiff’s federal-law claims should not ordinarily reach the plaintiff’s
state-law claims.”). There is little reason, at this early stage of the litigation, for the court to
retain supplemental jurisdiction over the state law claims. The parties have not yet engaged in
25
discovery, set any trial or pretrial deadlines, and there is no indication that any statute of
limitations concerns would be implicated, were this matter to be filed in state court. The court,
therefore, declines to exercise supplemental jurisdiction over the plaintiff’s remaining state law
claims.
V.
DIRECTV’S ARBITRATION MOTION
Because the court finds that the Plaintiffs have failed to state a claim with respect to the
claims brought against DIRECTV, the court need not reach DIRECTV’s Arbitration Motion,
wherein DIRECTV has moved for any claims against it to be decided through arbitration rather
than by this court. The court notes, however, that it is unlikely that any claims against
DIRECTV in this action would be subject to the arbitration provision contained in the Customer
Agreements that DIRECTV asserts it sent to the Plaintiffs upon their receipt of DIRECTV
service. Without deciding whether the Plaintiffs even entered into any contractual relationship
with DIRECTV that is governed by the Customer Agreements (the Plaintiffs argue that they
never did, because all price negotiations and payments for their DIRECTV service, as well as all
service calls, went through Crystal Clear, while DIRECTV argues that simply by receiving
DIRECTV services, the Plaintiffs were bound by the terms of the Customer Agreements they
received) the conduct giving rise to this action takes place separate and apart from any such
relationship.
This action is about the transactions between DIRECTV and the other defendants that
allegedly unfairly limited the Plaintiffs’ ability to choose their own telecommunications service
provider and receive quality of service and pricing consistent with an unencumbered market.
This alleged injury took place at the point in time that the agreements among the defendants were
reached and occurred irrespective of whether the Plaintiffs ever received DIRECTV service at
26
all, let alone entered into any kind of contractual relationship with DIRECTV that would be
governed by the terms of DIRECTV’s Customer Agreements. The court is neither bound, nor
swayed, by the Central District of California case cited by DIRECTV: Bischoff v. DIRECTV,
Inc., 180 F. Supp. 2d 1097, 1006 (C.D. Cal. 2002) (holding that antitrust claims brought by
customers relating to DIRECTV’s alleged conspiracies were arbitrable under DIRECTV’s
customer agreement, over Plaintiffs’ objections that the antitrust action had nothing to do with
the terms of their contractual relationship with DIRECTV). Instead, this court is bound by the
Sixth Circuit’s holding that an action is outside of the scope of an arbitration clause where the
action “could be maintained without reference to the agreement containing the arbitration
clause.” NCR Corp. v. Korala Assocs., Ltd., 512 F.3d 807, 813-14 (6th Cir. 2008). There would
be no need for the court to reference the DIRECTV Customer Agreements, or otherwise
reference any direct contractual relationship that may exist between the Plaintiffs and DIRECTV,
in order to decide whether DIRECTV injured the Plaintiffs through DIRECTV’s dealings with
Crystal Clear.
CONCLUSION
For the foregoing reasons, the Motions to Dismiss will be granted, and all of the claims in
this action, including the claims against DIRECTV and Hood, which did not file motions to
dismiss, will be dismissed without prejudice. The Arbitration Motion will be denied as moot.
An appropriate order will enter.
______________________________
ALETA A. TRAUGER
United States District Judge
27
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