Aya Healthcare Services, Inc. et al v. AMN Healthcare, Inc.

REPLY to Response to Motion re MOTION to Dismiss for Failure to State a Claim Plaintiffs' Second Amended Complaint

S.D. Cal.March 21, 2018

DLA PIPER LLP (US) SA N D IEG O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WEST\280661595 DEFENDANTS’ REPLY ISO MOTION TO DISMISS SAC CASE NO. 3:17-CV-00205 MMA (MDD) DAVID H. BAMBERGER (Pro Hac Vice) david.bamberger@dlapiper.com DLA PIPER LLP (US) 500 Eighth Street, NW Washington, D.C. 20004 Tel: 202.799.4000 Fax: 202.799.5000 NOAH A. KATSELL (Bar No. 217090) noah.katsell@dlapiper.com AMANDA C. FITZSIMMONS (Bar No. 258888) amanda.fitzsimmons@dlapiper.com DLA PIPER LLP (US) 401 B Street, Suite 1700 San Diego, CA 92101-4297 Tel: 619.699.2700 Fax: 619.699.2701 Attorneys for Defendants AMN HEALTHCARE, INC., AMN HEALTHCARE SERVICES, INC., AMN SERVICES LLC, MEDEFIS, INC., and SHIFTWISE, INC. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA AYA HEALTHCARE SERVICES, INC., and AYA HEALTHCARE, INC., Plaintiffs, v. AMN HEALTHCARE, INC., AMN HEALTHCARE SERVICES, INC., AMN SERVICES LLC; MEDEFIS, INC., and SHIFTWISE, INC., Defendants. CASE NO. 3:17-cv-00205 MMA (MDD) DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS PLAINTIFFS’ SECOND AMENDED COMPLAINT [SPECIAL BRIEFING SCHEDULE ORDERED] Date: None Time: None Courtroom: 3D Judge: Hon. Michael M. Anello Complaint Filed: February 2, 2017 FAC Filed: February 24, 2017 SAC Filed: January 8, 2018 Trial Date: None Set Case 3:17-cv-00205-MMA-MDD Document 32 Filed 03/21/18 PageID.1122 Page 1 of 15 DLA PIPER LLP (US) SA N D IEG O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS Page -i- WEST\280661595 DEFENDANTS’ REPLY ISO MOTION TO DISMISS SAC CASE NO. 3:17-CV-00205 MMA (MDD) I. AYA HAS FAILED AGAIN TO PLEAD ANTITRUST INJURY. ............... 1 II. AYA HAS FAILED TO PLEAD A PER SE CLAIM. .................................... 5 III. AYA HAS FAILED TO PLEAD A RULE OF REASON CLAIM. ............... 8 IV. AYA HAS FAILED TO STATE A CLAIM FOR ATTEMPTED MONOPOLIZATION. .................................................................................... 9 V. AYA’S STATE LAW CLAIMS ALSO SHOULD BE DISMISSED. ......... 10 VI. CONCLUSION. ............................................................................................ 10 Case 3:17-cv-00205-MMA-MDD Document 32 Filed 03/21/18 PageID.1123 Page 2 of 15 DLA PIPER LLP (US) SA N D IEG O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Page -ii- WEST\280661595 DEFENDANTS’ REPLY ISO MOTION TO DISMISS SAC CASE NO. 3:17-CV-00205 MMA (MDD) Cases Aerotec Int’l, Inc. v. Honeywell Int’l, Inc., 836 F.3d 1171 (9th Cir. 2016) ............................................................................... 5 Amer. Ad Mgmt., Inc. v. GTE Corp., 190 F.3d 1051 (9th Cir. 1999) ............................................................................... 4 Amer. Prof. Testing Serv., Inc. v. Harcourt Brace Jovanovich, 108 F.3d 1147 (9th Cir. 1997) ........................................................................... 2, 9 Anchor Wall Sys., Inc. v. Rockwood Retaining Walls, Inc., 2007 WL 4465195 (D. Minn. 2007) ...................................................................... 9 Ashcroft v. Iqbal, 556 U.S. 662 (2009) .............................................................................................. 9 Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) .............................................................................................. 5 Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990) .......................................................................................... 2, 4 Authenticom, Inc. v. CDK Global, LLC, 874 F.3d 1019 (7th Cir. 2017) ............................................................................... 5 Aydin Corp. v. Loral Corp., 718 F.2d 897 (9th Cir. 1983) ................................................................................. 6 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) .............................................................................................. 9 Blackburn v. Sweeney, 53 F.3d 825 (7th Cir. 1995) ................................................................................... 7 Bus. Elects. Corp. v. Sharp Elects. Corp., 485 U.S. 717 (1988) .............................................................................................. 6 In re Debes Corp., 115 F.T.C. 701 (1992) ........................................................................................... 7 Case 3:17-cv-00205-MMA-MDD Document 32 Filed 03/21/18 PageID.1124 Page 3 of 15 DLA PIPER LLP (US) SA N D IEG O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES (continued) Page -iii- WEST\280661595 DEFENDANTS’ REPLY ISO MOTION TO DISMISS SAC CASE NO. 3:17-CV-00205 MMA (MDD) In re High-Tech Employee Antitrust Litig., 856 F. Supp. 2d 1103 (N.D. Cal. 2012)................................................................. 7 Int’l Healthcare Mgt. v. Hawaii Coalition for Health, 332 F.3d 600 (9th Cir. 2003) ................................................................................. 6 K.M.B. Warehouse Distibs., Inc. v. Walker Mfg. Co., 61 F.3d 123 (2d Cir. 1995) .................................................................................... 9 Kendall v. VISA U.S.A., Inc., 518 F.3d 1042 (9th Cir. 2008) ............................................................................... 8 Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007) .............................................................................................. 6 Lektro-Vend Corp. v. Vendo Co., 660 F.2d 255 (7th Cir. 1981) ................................................................................. 6 Los Angeles Mem. Coliseum Com’n v. Nat’l Football League, 726 F.2d 1381 (9th Cir. 1984) ............................................................................... 6 MacDermid Printing Sols. LLC v. Cortron, Corp., 833 F.3d 172 (2d Cir. 2016) .............................................................................. 3, 9 Major League Baseball Properties, Inc. v. Salvino, Inc., 542 F.3d 290 (2d Cir. 2008) .................................................................................. 7 Monsanto Co. v. Scruggs, 342 F. Supp. 2d 568 (N.D. Miss. 2004) ................................................................ 9 NCAA v. Bd. of Regents, 468 U.S. 85 (1984) ............................................................................................ 7, 8 Pac. Bell Tel. Co. v. Linkline Communs., Inc., 555 U.S. 438 (2009) .............................................................................................. 5 Polk Bros., Inc. v. Forest City Enterprises, Inc., 776 F.2d 185 (7th Cir. 1985) ............................................................................. 6, 8 Pool Water Prods. v. Olin Corp., 258 F.3d 1024 (9th Cir. 2001) ............................................................................... 2 Case 3:17-cv-00205-MMA-MDD Document 32 Filed 03/21/18 PageID.1125 Page 4 of 15 DLA PIPER LLP (US) SA N D IEG O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES (continued) Page -iv- WEST\280661595 DEFENDANTS’ REPLY ISO MOTION TO DISMISS SAC CASE NO. 3:17-CV-00205 MMA (MDD) Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421 (9th Cir. 1995) ............................................................................... 10 Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210 (D.C. Cir. 1986) .............................................................................. 7 Snap-on Tools Corp. v. F.T.C., 321 F.2d 825 (7th Cir. 1963) ................................................................................. 6 Texaco, Inc. v. Dagher, 547 U.S. 1 (2006) .................................................................................................. 6 Tops Markets, Inc. v. Quality Markets, Inc., 142 F.3d 90 (2d Cir. 1998) .................................................................................... 9 United States v. Addyston Pipe & Steel Co., 85 F. 271 (6th Cir. 1898) ....................................................................................... 8 United States v. Colgate, 250 U.S. 300 (1919) .............................................................................................. 4 United States v. eBay, Inc., 968 F. Supp. 2d 1030 (N.D. Cal. 2013)............................................................. 7, 8 United States v. Syufy Ents., 903 F.2d 659 (9th Cir. 1990) ................................................................................. 3 Treatises IIA Areeda, Hovenkamp, et al., Antitrust Law (4th ed. 2014) ................................... 4 Other Authorities DOJ issued Memorandum, January 25, 2018, available online at https://www.justice.gov/file/1028756/download .................................................. 7 Case 3:17-cv-00205-MMA-MDD Document 32 Filed 03/21/18 PageID.1126 Page 5 of 15 DLA PIPER LLP (US) SA N D IEG O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -1- WEST\280661595 DEFENDANTS’ REPLY ISO MOTION TO DISMISS SAC CASE NO. 3:17-CV-00205 MMA (MDD) Defendant AMN submits this Reply in further support of its Motion to Dismiss Aya’s Second Amended Complaint (Doc. No. 29) (“SAC”). I. AYA HAS FAILED AGAIN TO PLEAD ANTITRUST INJURY. In its Opposition (Doc. No. 31), Aya candidly admits that “Aya’s SAC and FAC set forth the same essential allegations in support of the same claims.” Opp’n at 6:27-28. AMN agrees, and it is not surprising that the same fatal deficiencies that undermined Aya’s claims of antitrust injury before also remain fundamentally unchanged. As this Court found in its Order dismissing Aya’s federal claims in the FAC (Doc. 22): “Plaintiffs do not allege that the number of available medical travelers decreased to a certain number, or that Plaintiffs are unable to fill temporary assignments at hospitals, as a result of the alleged conduct. In fact, Plaintiffs admit that they have a ‘substantial pool of highly qualified medical travelers . . . .’” (emphasis by the Court). Those findings apply with equal force to the SAC, which confirms that competition is robust and Aya is thriving. According to the SAC: • Aya has a “substantial pool of travelers” and a network of sub-contract providers sufficient to “meet the needs of medium-sized hospitals and credibly bid for some work for larger hospitals.” SAC ¶¶ 89, 264, 269, 272-73, 279 n.12. • Whereas AMN’s pool of recruiters has remained stable at about 200 (now only 50% of the recruiters in San Diego County, down from 70% a few years ago), Aya itself has grown to having a pool of 150 recruiters. Id. ¶¶ 266, 273. • Aya admits it “acquiesced” in the challenged restrictions until 2015 in order to reap the benefits of collaborating with AMN. SAC ¶¶ 10, 129, 144 n.8, 263. But it then walked away, as it was free to do all along (and as other rivals remain free to do). According to Aya’s Opposition: “after Aya ceased to acquiesce in the restraints it immediately was able to hire talented recruiters, enlarge its traveler pool, win contracts, and expand its operations.” Opp’n at 9:17-19. • Aya has prospered, and it has done so largely at the expense of AMN. Aya proudly recounts that it has hired 16 of AMN’s recruiters and 11 other AMN Case 3:17-cv-00205-MMA-MDD Document 32 Filed 03/21/18 PageID.1127 Page 6 of 15 DLA PIPER LLP (US) SA N D IEG O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -2- WEST\280661595 DEFENDANTS’ REPLY ISO MOTION TO DISMISS SAC CASE NO. 3:17-CV-00205 MMA (MDD) corporate employees. SAC ¶ 273. It also has boosted both its own pool of “travelers” and its revenues by 350%. Id. In light of such admissions, Aya’s claim of antitrust injury cannot be sustained. Aya argues at length that AMN’s various forms of alleged conduct are “exclusionary.” Opp’n at 7:9-13:7. AMN already has explained in its initial brief why the alleged facts do not support such a characterization. See Doc. No. 30-1 at 5:15- 10:16; see generally Amer. Prof. Testing Serv., Inc. v. Harcourt Brace Jovanovich, 108 F.3d 1147, 1151 (9th Cir. 1997) (“We therefore insist on a ‘preliminary showing of significant and more-than-temporary effects on competition . . . before these practices can rise to the level of exclusionary conduct.”) (citation omitted). But even if the alleged conduct may be of a type that might support a claim in some context, here there are no facts alleged to show it caused exclusionary harm to Aya.1 Instead, Aya alleges that it has enjoyed growth and success, largely at AMN’s expense. Aya’s claimed “injury,” if any, certainly does not qualify as antitrust injury. The “lost profits” allegedly resulting from AMN’s unwillingness to collaborate with Aya, SAC ¶¶ 285-88, do not “stem[] from a competition-reducing aspect or effect” of AMN’s alleged conduct. Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 344 (1990) (“ARCO”). Termination of those collaborations results in more competition, and the antitrust laws were not intended to subsidize individual competitors for having to compete.2 Antitrust injury means injury resulting from higher prices or lower output. Pool Water Prods. v. Olin Corp., 258 F.3d 1024, 1034 (9th Cir. 2001). In regard to prices, 1 Aya suggests that AMN may believe that a competitor can never suffer antitrust injury. Opp’n at 15:5. This statement is just a strawman. AMN has been clear from the outset that it takes no such position. See AMN’s Reply in support of its Motion to Dismiss the FAC, Doc. No. 18 at 7:2-5 (“AMN has not argued that rivals can never show antitrust injury. Instead Aya’s claim fails because Aya has not alleged any facts to show that it suffered such injury as a result of the challenged conduct.”). 2 Aya’s ironic complaint that it “must offer inducements to [its] best employees to avoid losing them,” Opp’n at 9:23-24, also does not support a claim of antitrust injury. It refers to a result of more competition in the markets, not less. Case 3:17-cv-00205-MMA-MDD Document 32 Filed 03/21/18 PageID.1128 Page 7 of 15 DLA PIPER LLP (US) SA N D IEG O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -3- WEST\280661595 DEFENDANTS’ REPLY ISO MOTION TO DISMISS SAC CASE NO. 3:17-CV-00205 MMA (MDD) Aya contends that AMN charges “supracompetitive” prices to its “largest customers.”3 Opp’n 3:25-26, 4:20-5:1-3, 16:15-19. As AMN explained in its initial brief, Doc. No. 30-1 at 3:23-4:10, the only facts alleged to support this contention of higher prices are “Aya’s data” and some sort of “survey,” both relating to a single hospital network (Kaiser) dating from 2015, SAC ¶ 99, as well as what Aya “is informed and believes.” Id. ¶¶ 101-02. These sketchy “facts” fail to show supracompetitive pricing in the marketplace(s) generally.4 Stunningly, Aya even admits that it “does not allege that AMN . . . has taken [] measures that generally increase the prices for traveler services.” Opp’n at 16:12-15 (emphasis in original). Yet, market-wide pricing impact is precisely what Aya must show. See MacDermid Printing Sols. LLC v. Cortron, Corp., 833 F.3d 172, 182 (2d Cir. 2016) (plaintiff may show direct harm to competition “by proving higher prices, reduced output, or lower quality in the market as a whole”) (emphasis supplied). In any event, the alleged facts fail to show that Aya itself has suffered any injury as a result of pricing effects. As explained in AMN’s initial brief, higher pricing hypothetically might impact some customers (hospitals), but they would not impact Aya, a seller of services, who would benefit from higher prices.5 3 Aya focuses repeatedly on AMN’s relationships with “the largest customers,” but Aya also readily concedes that “some providers might naturally cater to certain kinds of hospitals.” Opp’n at 3:12. To the extent that Aya is suggesting that there is some sort of separate or sub-market for “the largest customers,” that concept is not even alleged in the SAC, let alone supported by specific factual allegations. Additionally, Aya alleges in conclusory fashion that there should be “economies of scale” in serving larger customers. SAC ¶ 225. AMN challenged that contention. See Doc. No. 30-1 at 4 n.6; see also United States v. Syufy Ents., 903 F.2d 659, 670-71 (9th Cir. 1990) (size can have advantages but also “very substantial drawbacks, such as increased management costs and other diseconomies of scale”). In its Opposition, Aya reverses course and argues just the opposite of its own allegations, stating that actually “there are no economies of scale.” Opp’n at 3:8. As to the argument that AMN “obliged” its large customers to accept “long-term” exclusive dealing contracts, id. at 3:27-28, Aya simply fails to address the points raised in AMN’s initial brief about those conclusory allegations. Doc. No. 30-1 at 7:15-9:3. 4 Aya alleges that AMN charges higher prices to larger customers than other providers charge to smaller ones. SAC ¶¶ 98-99, 101. This invidious apples-to- oranges comparison does not demonstrate pricing above a competitive level and, further, is conclusory and unsupported by specific factual allegations. 5 Without citing any authority, Aya attempts to confine to price-fixing cases the Case 3:17-cv-00205-MMA-MDD Document 32 Filed 03/21/18 PageID.1129 Page 8 of 15 DLA PIPER LLP (US) SA N D IEG O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -4- WEST\280661595 DEFENDANTS’ REPLY ISO MOTION TO DISMISS SAC CASE NO. 3:17-CV-00205 MMA (MDD) Insofar as output is concerned, Aya repeatedly argues that AMN “prevents” other rivals from amassing a sufficient pool of travelers to serve the needs of “large customers.” Opp’n at 1:17-23, 3:17-19, 4:12-18, 7:12-16, 16:15-19. Aya seems to be suggesting a restraint on output due to AMN’s rivals’ inability to find available travelers. But the alleged facts refute any such theory. First, from the perspective of hospitals, the overall number of available travelers would not be affected by non- solicitation restrictions between providers. Second, there are plenty of providers to place those travelers. According to Aya, there are “numerous other firms [that] also provide traveler services,” Opp’n at 2:22-23, and there is no allegation in the SAC that specifies even a single rival that has been excluded from the alleged relevant markets. Most tellingly, many rival firms (including for a time Aya) have sought to collaborate with AMN to supply traveling nurses to meet demand that AMN cannot meet on its own. In other words, AMN has insufficient capacity and must turn to rivals, many of which have excess capacity.6 These facts do not indicate any reduction in overall market output; indeed, overall output is boosted by these collaborations. Whatever grievance Aya may have about not being allowed to collaborate with AMN and instead having to compete more with AMN, that is not “injury” that the antitrust laws were intended to address. It does not flow from any anti-competitive effects. See ARCO, 495 U.S. at 342. Aya’s claim of “retaliatory harm” in the SAC is essentially the same as it was in principle that conduct benefitting a party cannot constitute antitrust injury. Opp’n at 16:12. But that doctrine is one of general application. See IIA Areeda, Hovenkamp, et al., Antitrust Law ¶ 348a (4th ed. 2014) (“When a … collaboration among competitors substantially reduces competition, consumers suffer while existing rivals benefit.”); Amer. Ad Mgmt., Inc. v. GTE Corp., 190 F.3d 1051, 1056 (9th Cir. 1999) (“There can be no antitrust injury if the plaintiff stands to gain from the unlawful conduct.”). 6 There are no factual allegations to support Aya’s assertion that rival firms have been coerced to collaborate. Opp’n at 8:23-9:14. Aya’s own decision to walk away shows that this is not the case. If rivals seek out collaborative opportunities, that stems from their need to place available nurses, a fact that actually undercuts Aya’s whole theory that AMN has some sort of stranglehold on personnel. To the extent that AMN refuses to provide such opportunities to Aya (which AMN has every right to do under United States v. Colgate, 250 U.S. 300, 307 (1919)), Aya’s apparent grievance is that it too has available capacity that it would like to deploy. Case 3:17-cv-00205-MMA-MDD Document 32 Filed 03/21/18 PageID.1130 Page 9 of 15 DLA PIPER LLP (US) SA N D IEG O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -5- WEST\280661595 DEFENDANTS’ REPLY ISO MOTION TO DISMISS SAC CASE NO. 3:17-CV-00205 MMA (MDD) the FAC, and Aya again cites inapposite cases dealing with circumstances when a cartel punishes a cartel member who breaks ranks. Opp’n at 14:4-15. This Court already rejected the application of those cases to the circumstances of this case in its December 6, 2017 Order (Doc. No. 22 at 12:12-13:2). None of the amended allegations in the SAC dictate a different result in regard to the SAC. Aya’s passing attempt to rely on what it acknowledges as the “narrow doctrine” articulated by the Supreme Court in Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985), Opp’n at 14:18-15:3, is also to no avail. That doctrine requires a showing of monopoly power, which Aya has not shown and for which it makes no claim. Pac. Bell Tel. Co. v. Linkline Communs., Inc., 555 U.S. 438, 448 n.2 (2009); see also Authenticom, Inc. v. CDK Global, LLC, 874 F.3d 1019, 1025 (7th Cir. 2017) (“Even monopolists are almost never required to assist their competitors. . . . ”). There are also no alleged facts supporting Aya’s suggestion that AMN forsook short- term profits or diminished its own services in ceasing its collaboration with Aya. Opp’n at 14:23-26. Aya’s basic complaint in the SAC is essentially that AMN acted out of spite. But even assuming that were true, that sort of conduct is not compensable under the antitrust laws. Aerotec Int’l, Inc. v. Honeywell Int’l, Inc., 836 F.3d 1171, 1184 (9th Cir. 2016) (“Competitors are not required to engage in a lovefest; indeed, ‘[e]ven an act of pure malice by one business competitor against another does not, without more, state a claim under the federal antitrust laws.’”) (citation omitted). For all of the reasons set forth above, Aya again has failed to plead facts demonstrating antitrust injury, and its federal and state antitrust claims should be dismissed, this time with prejudice. II. AYA HAS FAILED TO PLEAD A PER SE CLAIM. Aya admits that the agreements between AMN and its subcontracting rivals are vertical arrangements, Opp’n at 19:20-22, and that the challenged provisions “appear in contracts that memorialize legitimate business collaborations.”7 Id. at 17:1-2. See 7 The non-solicitation restrictions challenged by Aya are ancillary to collaborative Case 3:17-cv-00205-MMA-MDD Document 32 Filed 03/21/18 PageID.1131 Page 10 of 15 DLA PIPER LLP (US) SA N D IEG O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -6- WEST\280661595 DEFENDANTS’ REPLY ISO MOTION TO DISMISS SAC CASE NO. 3:17-CV-00205 MMA (MDD) Bus. Elects. Corp. v. Sharp Elects. Corp., 485 U.S. 717, 735-36 (1988) (vertical agreements are not unlawful per se unless they include some agreement on price), subsequently modified by Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 885 (2007) (even vertical price restraints are now judged by the rule of reason); Polk Bros., Inc. v. Forest City Enterprises, Inc., 776 F.2d 185, 188 (7th Cir. 1985) (collaborations between competitors are to be judged by the rule of reason). Aya contends, however, that the scope and duration of the alleged restrictions make them nonancillary and per se unlawful. As AMN explained in its initial brief, courts uniformly have treated matters of scope and duration as part of a rule of reason analysis.8 Doc. No. 30-1 at 14:17-15:2. For example, in Los Angeles Mem. Coliseum Com’n v. Nat’l Football League, 726 F.2d 1381 (9th Cir. 1984), a case cited by Aya, the Ninth Circuit applied the rule of reason and held that the issue of less restrictive means is properly part of the rule of reason inquiry. Id. at 1395. That the rule of reason is the correct approach is all the more clear, given that the instant case involves an economically complex industry, a factor not addressed in Aya’s response. See Texaco, Inc. v. Dagher, 547 U.S. 1, 5 (2006) (“Per se liability is reserved for only those agreements that are ‘so plainly anticompetitive that no elaborate study of the industry is needed to establish their illegality.’”); Int’l Healthcare Mgt. v. Hawaii Coalition for Health, 332 F.3d 600, 605 (9th Cir. 2003) (“Per se categories are not to be expanded indiscriminately to new factual situations.”) (citations omitted); Aydin Corp. v. Loral Corp., 718 F.2d 897, 900 (9th Cir. 1983) (courts have had inadequate experience with noninterference covenants to warrant per se categorization). AMN challenged Aya in its initial brief, stating: “AMN is unable to find even a subcontracts that rivals like Aya are free to avoid: no collaboration, no restriction. 8 Given Aya’s acknowledgement that these restrictions, if lesser in scope and duration, could be entirely lawful, there is also no feasible way other than through a rule of reason approach that a court might draw the line as to what scope/duration would be permissible. Courts routinely have done this through the “blue pencil” method. See, e.g., Lektro-Vend Corp. v. Vendo Co., 660 F.2d 255, 267 (7th Cir. 1981) (overbroad language of the restrictions was irrelevant; courts enforce such restrictions to the extent they are reasonable); Snap-on Tools Corp. v. F.T.C., 321 F.2d 825, 837 (7th Cir. 1963) (same). Case 3:17-cv-00205-MMA-MDD Document 32 Filed 03/21/18 PageID.1132 Page 11 of 15 DLA PIPER LLP (US) SA N D IEG O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -7- WEST\280661595 DEFENDANTS’ REPLY ISO MOTION TO DISMISS SAC CASE NO. 3:17-CV-00205 MMA (MDD) single case holding that a non-solicitation covenant included in a subcontract or joint venture arrangement (of any scope or duration) is per se unlawful.” Doc. No. 30-1 at 13:8-10 (bold italics added). In response, Aya cites United States v. eBay, Inc., 968 F. Supp. 2d 1030 (N.D. Cal. 2013), In re High-Tech Employee Antitrust Litig., 856 F. Supp. 2d 1103 (N.D. Cal. 2012) and In re Debes Corp., 115 F.T.C. 701 (1992), none of which involved any form of joint venture, sub-contract or collaboration.9 High- Tech did not rule on the issue of per se versus rule of reason. 856 F. Supp. 2d at 1115 n.9, 1122. The other cases cited by Aya are also unavailing. Major League Baseball Properties, Inc. v. Salvino, Inc., 542 F.3d 290, 334 (2d Cir. 2008) (“MLB”) (applying the rule of reason to exclusivity agreements);10 Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 228-29 (D.C. Cir. 1986) (horizontal restraints were lawful under the rule of reason where elimination of free riding was an efficiency justification); Blackburn v. Sweeney, 53 F.3d 825, 828-29 (7th Cir. 1995) (agreement was per se unlawful and not ancillary because it was entered into after the transaction concluded).11 Most significantly, Aya has no response to NCAA v. Bd. of Regents, 468 U.S. 85, 103, 114 (1984), cited by AMN, where the Supreme Court applied the rule of reason, even though the provision restrained the ability of the members to compete on both price and output and was not “necessary” to market the product. In summary, AMN’s statement that “there is no case holding that a non-solicitation covenant included in a subcontract or joint venture arrangement (of any scope or duration) is 9 The Debes case involved a boycott claim that was resolved by a Consent Order, and it does not even mention the per se standard. 10 The pages in MLB cited by Aya are part of the concurring opinion, not the majority opinion. 11 Aya also relies upon language in the Joint Guidance for HR Professionals issued by the DOJ/FTC in October 2016. Such publications do not have the force of law, Doc. No. 30-1 at 13:24-28, and Aya cites no authority to the contrary. Further reinforcing AMN’s position, the DOJ recently issued a Memorandum, dated January 25, 2018, available online at https://www.justice.gov/file/1028756/download, confirming that “[g]uidance documents cannot create binding requirements that do not already exist by statute or rule.” The fact “[t]hat a party fails to comply with agency guidance expanding upon statutory or regulatory requirements does not mean that the party violated those underlying requirements.” Id. Case 3:17-cv-00205-MMA-MDD Document 32 Filed 03/21/18 PageID.1133 Page 12 of 15 DLA PIPER LLP (US) SA N D IEG O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -8- WEST\280661595 DEFENDANTS’ REPLY ISO MOTION TO DISMISS SAC CASE NO. 3:17-CV-00205 MMA (MDD) per se unlawful” remains unrefuted by Aya.12 As a back-up argument, Aya contends, citing eBay, that the issue of per se versus rule of reason should not be decided on a motion to dismiss. Opp’n at 20:6-15. But eBay was not a collaboration or subcontracting case. Furthermore, unlike this case, it was not clear from the pleadings in eBay whether the restraint furthered the proffered business purpose (service of an Intuit executive on eBay’s board). eBay, Inc., 968 F. Supp. 2d at 1039. Here, Aya concedes that the type of restraint at issue serves a legitimate output-enhancing collaboration.13 Rule of reason treatment is therefore proper, as a matter of law. III. AYA HAS FAILED TO PLEAD A RULE OF REASON CLAIM. Aya, in conclusory fashion, asserts that it has adequately pleaded the relevant service and geographic markets, but Aya has failed to address the deficiencies pointed out in AMN’s initial brief. Opp’n at 21:10-22; Doc. No. 30-1 at 18:1-19:19. If anything, Aya only confuses the relevant market issue by its repeated reference to undefined “large customers.” Aya’s failure to allege direct evidence of competitive harm already has been addressed in the above discussion of antitrust injury and in AMN’s initial brief. As for circumstantial evidence of competitive harm, Aya defends the contrived market shares it alleges and its suggested barriers to entry by merely asserting that it has pleaded them sufficiently and then claiming that AMN is “arguing its own case.” Opp’n at 23:8. But the burden to plead sufficient and plausible facts rests with the plaintiff, 12 Citing United States v. Addyston Pipe & Steel Co., 85 F. 271 (6th Cir. 1898), aff’d, 175 U.S. 211 (1899), Aya accuses AMN of “misapplying” 120 years of antitrust law. Given Aya’s failure to cite even a single case on point in response to AMN’s challenge, AMN respectfully would suggest that Aya is ignoring 120 years of antitrust jurisprudence. See, e.g., NCAA, 468 U.S. at 103; Polk Bros., 776 F.2d at 190 (“The reason for distinguishing between ‘ancillary’ and ‘naked’ restraints is to determine whether the agreement is part of a cooperative venture with prospects for increasing output. If it is, it should not be condemned per se.”). 13 In its Opposition, Aya does not even attempt to counter AMN’s motion in regard to the supposed “employers cartel.” As previously explained, those allegations fail to satisfy the minimum required pleading standards for stating a claim. See Kendall v. VISA U.S.A., Inc., 518 F.3d 1042, 1048 (9th Cir. 2008). Case 3:17-cv-00205-MMA-MDD Document 32 Filed 03/21/18 PageID.1134 Page 13 of 15 DLA PIPER LLP (US) SA N D IEG O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -9- WEST\280661595 DEFENDANTS’ REPLY ISO MOTION TO DISMISS SAC CASE NO. 3:17-CV-00205 MMA (MDD) and conclusory assertions and speculation are to be ignored by the Court, under the standards established by the Supreme Court.14 Moreover, the patent licensing cases on which Aya relies to justify its padding of market shares by some undefined factor are inapposite. In such cases, the licensor’s permission is required for every sale.15 In contrast, just because a rival avails itself of AMN’s software on one or more projects, that does not give AMN control of the rival’s entire business. Cf. Monsanto Co. v. Scruggs, 342 F. Supp. 2d 568, 583 (N.D. Miss. 2004) (“no legal precedent supports” including the market shares of contract partners in Monsanto’s market shares).16 AMN is not “arguing its own case” by shining a light on Aya’s obvious gaming of the market share issue. Aya relies on two Second Circuit cases17 to suggest that, in addition to large market shares protected by market barriers, it needs to show only trade restraints that “appear to be the kind that ‘will harm competition market-wide.’” Opp’n at 23:17-23. However, a later Second Circuit case, MacDermid, supra, clarified that such possible “appearance” is not enough. “[T]here is really only one way to prove an adverse effect on competition under the rule of reason: by showing actual harm to consumers in the relevant market.” 833 F.3d at 182. Aya has fails to meet that standard. IV. AYA HAS FAILED TO STATE A CLAIM FOR ATTEMPTED MONOPOLIZATION. AMN’s opening brief discussed in detail the inadequacy of Aya’s claim for attempted monopolization. Doc. No. 30-1 at 20:18-25:1. In response, Aya merely 14 See Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007); Ashcroft v. Iqbal, 556 U.S. 662 (2009). In its Opposition, Aya fails to explain why it relies upon its own internally generated data and undisclosed “adjustments” instead of referencing objective and available third-party market share data or why such data is plausible. 15 In the Anchor case, the licensor did not even sell the product, so the licensee’s sales were assumed to be used as a proxy. Anchor Wall Sys., Inc. v. Rockwood Retaining Walls, Inc., 2007 WL 4465195, at *6-*7 (D. Minn. 2007). 16 Aya also cites Am. Prof’l Testing, 108 F.3d at 1154, where the court defines “monopoly power” as the power to “control prices” or exclude competition. This unrelated concept, which also happens to use the word “control,” offers no support for Aya’s novel suggestion that market shares should include sales that AMN “controls.” 17 K.M.B. Warehouse Distibs., Inc. v. Walker Mfg. Co., 61 F.3d 123, 129 (2d Cir. 1995); Tops Markets, Inc. v. Quality Markets, Inc., 142 F.3d 90, 97 (2d Cir. 1998). Case 3:17-cv-00205-MMA-MDD Document 32 Filed 03/21/18 PageID.1135 Page 14 of 15 DLA PIPER LLP (US) SA N D IEG O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -10- WEST\280661595 DEFENDANTS’ REPLY ISO MOTION TO DISMISS SAC CASE NO. 3:17-CV-00205 MMA (MDD) alludes to paragraphs in the SAC and to AMN’s supposed market shares, based upon “Aya’s most recent market review.” Opp’n at 25:7 (emphasis supplied). The deficiencies in the market share allegations already have been discussed above. But critically, AMN also pointed out in its initial brief the absence of any alleged facts to support Aya’s claim that “barriers to entry” have prevented entry or expansion by rival firms. Doc. No. 30-1 at 23:26- 24:11; Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1439 (9th Cir. 1995) (even a dominant market share is not sufficient if plaintiff has not shown that rivals cannot enter or existing competitors expand in response to higher prices). To this, Aya has offered no rebuttal. By its own account, Aya has grown exponentially. It describes itself as a “rising” competitor, expanding in recent years by 350% and boasting 150 recruiters and a “substantial pool” of medical travelers. SAC ¶¶ 89, 264, 269, 272-73, 279 n.12. Additionally, providers like Aya (and AMN) can and regularly do expand their capacity by subcontracting with other providers. Id. ¶ 34. In short, even if the market shares conjured by Aya were supportable, the alleged facts could not support a claim for attempted monopolization. V. AYA’S STATE LAW CLAIMS ALSO SHOULD BE DISMISSED. Because Aya’s federal and state antitrust claims fail, this Court should decline to exercise supplemental jurisdiction over Aya’s state law claims. Even if jurisdiction were exercised, they should be dismissed for the reasons stated in AMN’s motion to dismiss the FAC. See Doc. No. 15 at 22:3-25:18. VI. CONCLUSION. For the reasons set forth in AMN’s opening brief and above, AMN respectfully requests that the Court dismiss Aya’s SAC without leave to amend. Dated: March 21, 2018 DLA PIPER LLP (US) By s/ Noah A. Katsell NOAH A. KATSELL DAVID H. BAMBERGER AMANDA C. FITZSIMMONS Attorneys for Defendants Case 3:17-cv-00205-MMA-MDD Document 32 Filed 03/21/18 PageID.1136 Page 15 of 15