Opinion
CIVIL ACTION NO. 03-1875 Sect. "T"
February 10, 2004
Before the Court is a motion by the plaintiff, Fort James Operating Company ("Fort James") and Counter-Defendant Georgia-Pacific Corporation ("Georgia-Pacific") to dismiss the Defendant A L Sales, Inc.'s ("AL") counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(6). The Court, having reviewed the said motion and the applicable law, is fully advised and ready to rule.
ORDER AND REASONS
I. BACKGROUND:
Fort James Operating Company is a manufacturer of various products, including toilet tissue, paper napkins, and paper towels. A L Sales, Inc. is one of the distributors of Fort James' products. On June 30, 2003, Plaintiff Fort James filed a complaint against Defendant A L Sales seeking recovery for unpaid invoices and other credits. On September 30, 2003 A L filed an answer, along with a counterclaim alleging that they sustained damages as a result of Fort James' use of discriminating pricing schemes, discriminatory minimum resale pricing schemes, and unfair methods of competition. Fort James and the counter-defendant, Georgia-Pacific, contend that A L's counterclaim fails to allege specific facts upon which relief can be granted and now request that it be dismissed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.
II. LAW AND ARGUMENT
A. Law on Rule 12(b)(6) Motion to Dismiss
A motion to dismiss for failure to state a claim upon which relief can be granted pursuant to FRCP 12(b)(6), "is viewed with disfavor and is rarely granted." The complaint must be liberally construed in favor of the plaintiff, and all facts pleaded in the original complaint must be taken as true. A district court may not dismiss a complaint under FRCP 12(b)(6) "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." The Fifth Circuit defines this standard as, "whether in the light most favorable to the plaintiff, with every doubt resolved in his behalf, the complaint states any valid claim for relief." Therefore, a motion to dismiss admits the facts alleged in the complaint, but challenges the plaintiff's rights to relief based upon those facts, . . . the court must examine the complaint to determine whether the allegations provide relief on any possible theory."
Lowery v. Texas AM University System, 117 F.3d 242, 247 (5th Cir. 1997); Kaiser Aluminum Chem. Sales v. Avondale Shipyards, 677 F.2d 1045, 1050 (5th Cir. 1982).
Oliver v. Scon, 276 F.3d 736, 740 (5th Cir. 2002); Campbell v. Wells Fargo Bank, 781 F.2d 440, 442 (5th Cir. 1980).
Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001) (quoting Conley. supra), cert. denied U.S. ___, 122 S.Ct. 2665, 153 L.Ed.2d 838 (2002); Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957); Blackburn v. Marshall, 42 F.3d 925, 931 (5th Cir. 1995).
Lowery v. Texas AM University System, 117 F.3d 242, 247 (5th Cir. 1997) (citing 5 Charles A. Wnght Arthur R. Miller, FEDERAL PRACTICE AND PROCEDURE § 1357, at 601 (1969)).
Ramming, 281 F.3d at 161-62.
III. ARGUMENTS OF FORT JAMES AND GEORGIA-PACIFIC IN SUPPORT OF MOTION TO DISMISS
A. Liberal Nature of Federal Pleading Rules Does not Preclude Dismissal
Fort James and Georgia-Pacific claim that although a motion to dismiss pursuant to F.R.C.P. 12(b)(6) is "viewed with disfavor and rarely granted," A L's counterclaim presents legal conclusions of price discrimination unsupported by specific facts and therefore, should be dismissed. Fort James and Georgia-Pacific cite case law which provides that a motion to dismiss based on complaints asserting anti-trust violations must allege facts that if proven would establish each element of the claim and that courts with antitrust complaints "do not accept as true conclusionary [sic] allegations in the complaint." In Strobe! v. Fitness Espo, 1997 WL 191485, (E.D. La. April 17, 1997), the court held that, "Conclusory allegations that defendant violated antitrust laws and plaintiff suffered injury will not survive a motion to dismiss if not supported by facts constituting a legitimate claim for relief." Id at 2. Similarly to Strobel, Fort James and Georgia-Pacific claim that A L makes conclusory allegations without any specific supporting facts that Fort James violated anti-trust laws and that A L suffered injury. Based on the previous cases, Fort James claims that because A L makes these legal conclusions without showing any factual basis, the motion to dismiss should be granted.
Lowery v. Texas AM University System, 117 F.3d 242, 247 (5th Cir. 1997).
Oreman Sales. Inc. v. Matsushita Electrical Corp. of America, 768 F. Supp. 1174, 1184 (E. D. La. 1991) (quoting Kaiser Aluminum Chem. Sales. Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982), reh'g en banc denied mem., 683 F.2d 1373 (5th Cir. 1982), cert. denied, 459 U.S. 1105, 103 S.Ct. 729, 74 L.Ed.2d 953 (1983); see Lombard's, Inc. v. Prince Manufacturing, Inc., 753 F.2d 974, 975 (11th Cir. 1985), cert. denied, 474 U.S. 1082, 106 S.Ct. 851, 88 L.Ed.2d 892 (1986).
In its counterclaim, A L alleges that Fort James participates in discriminatory and anti-competitive pricing schemes. However, A L does not allege specific facts that if proven would establish each element of the anti-trust violation claims. Furthermore, A L's allegations appear to be conclusory allegations that Fort James violated anti-trust laws, namely the Robinson-Patman Act, and that A L suffered injury. Therefore, these conclusory allegations will not survive the motion to dismiss because they are not supported by any facts constituting a legitimate claim for relief.
See Counterclaim, ¶ 20 and 21.
B. Counterclaim Fails to Allege Sufficient Facts Required Under the Robinson-Patman Act.
Fort James also alleges that A L failed to state a claim for a violation of 15 U.S.C. § 13(a), commonly known as the Robinson-Patman Act. 15 U.S.C. § 13(a), provides, in part, that: It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, . . . . where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them.
In support of the motion to dismiss, Fort James claims that A L is accusing Fort James of a secondary-line violation where the discriminating seller's price discrimination injures competition among his customers. Fort James relies on the court in Oreman Sales, Inc. v. Matsushita Electrical Corp. of America, 768 F. Supp. 1174, 1184 (E. D. La. 1991) which explained that, in order to survive dismissal, both parties agree, a complaint asserting a § 13(a) claim must allege at least the following facts:
Eximco. Inc. v. Trane Co., 737 F.2d 505, 515 (5th Cir. 1984); Best Brands Beverage, Inc. v. Falstaff Brewing Corp., 842 F.2d 578, 584 n. 1 (2d Cir. 1987).
(1) the same seller made two or more contemporaneous sales (2) of commodities of similar grade and quality (3) at different prices; (4) at least one of the sales was in interstate commerce; and (5) the price discrimination injured the plaintiff and (6) tended to lessen competition of the commodity line (7) substantially. Id. at 1184.
citing Rutledge v. Electric Hose Rubber Co., 511 F.2d 668, 677 (9th Cir. 1975).
In Oreman Sales, Inc., a distributor of computer printers sued the manufacturer for price discrimination. There, the court held that the complaint was insufficient to state a claim under the Robinson-Patman Act. The court concluded that the complaint failed because it did not make any factual allegations that the alleged price discrimination lessened competition in any "line of commerce." Similarly, Fort James and Georgia-Pacific claim that A L's counterclaim does not meet factors (1), (5), (6), and (7) of those listed in Oreman Sales, Inc.
Fort James claims that in order to meet the first factor, the complaint must allege and prove that the seller made two or more contemporaneous sales transactions to two distinct purchasers. However, in the counterclaim, A L does not specifically allege that Fort James made two or more contemporaneous sales transactions to two distinct purchasers. A L only implies this by alleging that Fort James, "practiced pricing discrimination between and among its customers in interstate commerce on its products despite such goods being of like grade and quality." Therefore, because A L does not make this allegation, Fort James claims and this court agrees that A L does not meet the first requirement under the Act.
Security Tire Rubber Co. v. Gates Rubber Co., 598 F.2d 962, 964 (5th Cir. 1979); Adcom. Inc. v. Nokia Corp., 812 F. Supp. 81, 83 (E.D. La. 1993) (quoting Best Brands Beverage. Inc. v. Falstaff Brewing Corp., 842 F.2d 578, 584 (2d Cir. 1987)
See Counterclaim, ¶ 8, 9, 10, and 11.
Fort James also claims that A L does not allege that the price discrimination resulted in an adverse impact on the entire "line of commerce" thereby not meeting factors (6) and (7) of the Robinson-Patman Act as interpreted by the courts. A L states that Fort James manufacturers toilet tissue, paper napkins, and paper towels and Fort James' insistence of adherence to its anticompetitive minimum resale pricing structure hampers A L's ability to compete in the free market. However, A L does not allege that (5) the price discrimination injured the plaintiff and (6) tended to lessen competition of the commodity line (7) substantially. In their opposition to the motion to dismiss, A L states that if this Court will grant leave to allow them to amend and supplement their counterclaim, they will allege that Fort James' price discrimination lessens competition of the paper products lines at issue. Yet, again A L seems to be making a legal conclusion here instead of a factual allegation that the court can consider. Additionally, Fort James explains that in the Oreman case, the court dismissed the plaintiff's claims under the Robinson-Patman Act even though the complaint contained specific factual allegations supporting their conclusion unlike A L's counterclaim. The court in Oreman Sales, Inc., stated that,
See Counterclaim, ¶ 5 and 28.
Even assuming that lower prices by Panasonic to other distributors might well harm Oreman's own ability to compete with those distributors in the sale of all comparable computer printers, one competitor's mere inability to compete is not actionable per se under section 13(a).
See International Air Industries, Inc. v. American Excelsior Co., 517 F.2d 714, 721 (5th Cir.), reh'g en banc denied mem., 521 F.2d 815 (5th Cir. 1975), cert. denied, 424 U.S. 943, 96 S.Ct. 1411, 47
Likewise, A L does not allege that the discrimination tended to lessen competition of the commodity line substantially, therefore, it fails to meet this requirement. Fort James also claims that because A L does not allege that it actually competed with the favored purchasers or that it lost profits or sales due to Fort James' discriminatory pricing scheme in favor of other purchasers in the same geographic market, the counterclaim must be dismissed. Fort James relies on case law to show that these requirements must be met in order for the claim to be valid under the Robinson-Patman Act. To support its claims, Fort James cites Alexander v. Texas Company, 149 F. Supp. 37 (W.D. La. 1957) where the court held that the plaintiff failed to state a claim for damages upon which relief can be granted by only claiming that the defendant had participated in price discrimination, without showing any facts that suggest that the difference in price affected competition between his business and any of the other favored dealers negatively. Similarly, here A L has only claimed that Fort James has participated in discriminatory pricing schemes which result in unfair methods of competition between its customers and that Fort James has established minimum resale pricing schemes which reduce the same competition. However, again A L makes no factual allegations about how these events occurred.
Chrysler Credit Corp., v. J. Truett Payne Co., 670 F.2d 575, 580 (5th Cir. 1982).
See Counterclaim, ¶ 15 and 16.
C. Defendant A L Improperly Seeks to Avoid Its Contractual Obligations by Raising Irrelevant Antitrust Concerns
Fort James also claims that with this counterclaim, A L is attempting to shift the focus away from its obligation to pay for the goods delivered to them. Fort James relies on U.S. Supreme Court, 5th Circuit Court of Appeals, and E.D. of La. cases to support its argument. In Kelly v. Kosuga, 358 U.S. 516 (1959), the Supreme Court stated that,
See Fort James' Motion to Dismiss, p. 13.
Kelly v. Kosuga, 358 U.S. 516 (1959); Kaiser Aluminum Chemical Sales, Inc., 677 F.2d 1045 (5th Cir. 1982); Lifemark Hospitals of Louisiana. Inc., v. Liljeberg Enterprises, Inc., 161 B.R. 21, 24-25 (Bank. E.D. La. 1993); Ziegler v. Howard P. Foley Co., 468 F. Supp. 221, 224 n. 1 (E.D. La. 1979).
As a defense to an action based on contract, the plea of illegality based on violation of the Sherman Act has not met with much favor in this Court. This has been notably the case where the plea has been made by a purchaser in an action to recover from him the agreed price of goods sold.
Id. at 518.
Fort James relies on this statement to suggest that the Supreme Court has held that a defendant in breach of contract action should be permitted to raise antitrust concerns in only the most limited circumstances. Even though the complaint before the Supreme Court in Kelly was different than the current complaint, the same logic would apply to this situation and would therefore, not be met with favor in this Court also.
See Fort James' Motion to Dismiss, p. 13.
D. Georgia-Pacific Should be Dismissed Because A L Has Failed to Adequately Plead the Elements of Successor Liability.
Lastly, Fort James claims that A L's allegation that Georgia-Pacific should be responsible for all acts, omissions, commissions, and obligations of Fort James because Georgia-Pacific is a successor to Fort James is inadequate to sustain a valid claim for successor liability. Under Allstate Ins. Co. v. Wal-Mart, 2000 WL 388844 (E.D.La., April 13, 2000) (quoting Golden State Bottling Co. v. National Labor Relations Board, 414 U.S. 168, 182 n. 5, 94 S.Ct. 414, 424 n. 5(1973)),
See Counterclaim, ¶ 32.
When a corporation sells all of its assets to another, the latter is not responsible for the seller's debts or liabilities, except where (1) the purchaser expressly or impliedly agrees to assume the obligations; (2) the purchaser is merely a continuation of the selling corporation; or (3) the transaction is entered into to escape liability.
Therefore, the general rule concerning successor liability is that when one corporation sells or transfers its assets to a second corporation, the successor does not become liable for the debts and liabilities of the predecessor. However, when one of the conditions previously listed is met, the successor can be held liable. Yet, in the counterclaim A L does not specify which of these conditions, if any, Georgia-Pacific's liability would be based on. Therefore, if the general rule is applied, A L's successor Georgia-Pacific would not be liable for the debts of A L. For example, In In re Milk Products Antitrust Litigation, 84 F. Supp.2d 1016, 1025 (D.Minn., 1997), the court dismissed Plaintiffs' claims of successor liability because in proving liability, Plaintiffs only relied on the fact that LOL acquired Country Lake Foods and Dairy Fresh. Additionally, in Forrest v. Beloit Corp., 2001 WL 1251460, *2 (E.D. Pa. 2001), a successor liability claim was dismissed because the court concluded that the fact that HII acquired Beloit does not, by itself, establish HII's liability for Beloit's alleged tortious acts. In the case at bar, rather than allege one of these exceptions in their counterclaim, A L simply alleges that because Georgia-Pacific has acquired A L, they are responsible for all acts of Fort James. However, because A L does not prove liability under one of the exceptions, Georgia-Pacific should not be held liable for A L's debt.
LaFountain v. Webb Indus. Corp., 951 F.2d 544, 546 (3d Cir. 1991).
Forrest v. Beloit Corp., 2001 WL 1251460, *2 (E.D. Pa. 2001).
IV. A L'S ARGUMENTS IN OPPOSITION TO THE MOTION TO DISMISS.
Defendant A L argues that this Court should deny the motion to dismiss and in the alternative, requests Leave of Court to supplement and amend its complaint to allege with specificity the facts necessary to set forth the anti-trust violations upon which relief can be granted. A L claims that if the Court grants leave to amend the counterclaim, it will be more specific in its allegations including naming a customer that A L actually competes with and claiming that Fort James made at least two contemporaneous sales at different prices which resulted in lost sales or profits to A L making them less competitive in the free and open market. They will also allege that Fort James' price discrimination lessens competition of the paper products lines at issue and that Fort James' anti-competitive pricing has a substantial adverse effect on competition within the geographic region as it pertains to the products at issue. A L is essentially requesting leave to amend the complaint to satisfy all the elements under the Robinson-Patman Act which they did not satisfy in the original complaint.
See Defendant's Opposition to Plaintiff's Motion to Dismiss, p. 2.
V. CONCLUSION
The law on motions to dismiss suggests that they are "viewed with disfavor and rarely granted." In order for the complaint to be dismissed, the complaint must be liberally construed in favor of the plaintiff, and all facts pleaded in the original complaint must be taken as true. However, in Lipson v. Socony-Vacuum Corporation, 76 F.2d 213, 217 (C.A.I Cir. 1935), the court held that, "Having alleged only generalities and legal conclusions, in the language of the statute, plaintiff has failed to state a claim for damages, on account of price discrimination, upon which relief may be granted." Likewise, in the complaint at issue, Defendant A L does not allege any facts to support its conclusions of discriminatory practices by Fort James. In the counterclaim, A L only alleges that Fort James has participated in discriminatory pricing schemes which result in unfair methods of competition between its customers and that Fort James has established minimum resale pricing schemes which reduce the same competition. Therefore, this Court finds that A L has alleged "only generalities and legal conclusions," and has failed to state a claim, on account of price discrimination, upon which relief may be granted.
Lowery v. Texas AM University System, 117 F.3d 242, 247 (5th Cir. 1997); Kaiser Aluminum Chem. Sales v. Avondale Shipyards, 677 F.2d 1045, 1050 (5th Cir. 1982).
Oliver v. Scon, 276 F.3d 736, 740 (5th Cir. 2002); Campbell v. Wells Fargo Bank, 781 F.2d 440, 442 (5th Cir. 1980).
Lipson v. Socony-Vacuum Corporation, 76 F.2d 213, 217 (C.A. I Cir.); National Used Car Market Report, Inc., v. National Auto Dealers Association, D.C., 108 F. Supp. 692, 694.
See Counterclaim, ¶ 15 and 16.
Accordingly,
IT IS ORDERED that Plaintiff and Counter-Defendant's Motion to Dismiss is hereby GRANTED and Defendant's counterclaim is hereby DISMISSED WITHOUT PREJUDICE. IT IS FURTHER ORDERED that Defendant A L's request of leave of court to supplement and amend its complaint is hereby DENIED.