Dakota Territory Tours ACC v. Sedona-Oak Creek Airport Authority Incorporated et alMOTION to Dismiss CaseD. Ariz.September 24, 20181 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- David L. O'Daniel (SBN: 006418) GORDON REES SCULLY MANSUKHANI, LLP 111 W. Monroe Street, Suite 1600 Phoenix, AZ 85003 Telephone: (602) 794-2472 Facsimile: (602) 265-4716 dodaniel@grsm.com Attorneys for Defendants Sedona-Oak Creek Airport Authority, Inc. and Amanda Shankland IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Dakota Territory Tours, ACC, an Arizona close corporation, Plaintiff, v. Sedona-Oak Creek Airport Authority, Inc., an Arizona nonprofit corporation; Guidance Air Service, LLC; Yavapai County and Amanda Shankland, Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CASE NO. CV-17-08162-PCT-SPL MOTION TO DISMISS BY SEDONA-OAK CREEK AIRPORT AUTHORITY, INC., AND AMANDA SHANKLAND (Oral Argument Requested) I. INTRODUCTION Under the authority granted by Rule 12(b)(6), Fed.R.Civ.P., Defendants Sedona- Oak Creek Airport Authority, Inc. (“SOCAA”) and Amanda Shankland (“Ms. Shankland”) (collectively “SOCAA Defendants”) respectfully request this Court to dismiss the claims against them and the Amended Complaint against them with prejudice. The Amended Complaint fails to state claims against the SOCAA Defendants for the following reasons: 1. SOCAA is a “body politic” as a matter of law under A.R.S. § 28-8424, and as such, is a “local government” under the Local Government Antitrust Act, 15 U.S.C. § 34-36 and has absolute immunity from liability for Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 1 of 18 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- antitrust damages. And, as the former employee of SOCAA acting within the scope of her employment, Ms. Shankland has the same immunity. 2. SOCAA Defendants are protected from liability under the state action doctrine. 3. SOCAA Defendants do not compete with Plaintiffs and the alleged claim under Section 2 of the Sherman Act fails. 4. Ms. Shankland is not an employee at this time and injunctive relief as to her is moot and cannot be granted. 5. Plaintiffs failed to allege antitrust damages. II. BACKGROUND This lawsuit arises out of an alleged dispute between Plaintiff Dakota Territory Tours, ACC (“Dakota”) and SOCAA regarding SOCAA’s request for proposal (“RFP”) for a Part 135 Operator to sublease commercial space at the Sedona Airport and the subsequent acceptance of a proposal from and the granting of a sublease of commercial space at the Sedona Airport to Guidance Air Service, LLC (“Guidance”). The Sedona Airport is located on land owned by Yavapai County. (Am. Compl. at ¶ 1, ECF No. 72.) Yavapai County entered into a long-term Amended Airport Lease Agreement (“Lease”) with SOCAA for it to manage the Sedona Airport for the “public good.” (Am. Compl; at ¶¶ 7-8, ECF No. 72.). A copy of the Lease is attached as Exhibit A. 1 Dakota alleges that it “is in the business of arranging and providing helicopter and fixed wing air tours out of the Sedona Airport.” (Am. Compl. at ¶ 5, ECF No. 72.) Dakota alleges that Guidance “has subleased on-airport space adjacent to Dakota at the Sedona Airport from which it operates, among other things, air tours of the Sedona area”, 1 Although generally a district court may not consider material beyond the pleadings in ruling on a Rule 12(b)(6) motion, this rule is subject to two exceptions. Lee v. City of L.A., 250 F.3d 668, 688 (9th Cir. 2001). First, if a document is not physically attached to the complaint, it may be considered if its authenticity is not contested and the plaintiff’s complaint necessarily relies on the document. Id. Second, pursuant to Federal Rule of Evidence 201, a court may take judicial notice of “matters of public record.” Id. at 689 (citation omitted). The Lease falls within both exceptions. Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 2 of 18 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- and is a direct competitor of Dakota for air tours originating out of the Sedona Airport. (Am. Compl. at ¶ 10, ECF No. 72.) Paragraph 5 of the Amended Complaint describes Dakota as an Arizona close corporation. Paragraph 6 describes Solid Edge, LLC (“Solid Edge”) as an Arizona limited liability company and as “Dakota’s Part 135 Operating Company.” After acknowledging the indisputably separate and distinct nature of the two entities, Plaintiffs then refer to the two entities “collectively as ‘Dakota’ for convenience.” Referring to two separate entities as one is neither convenient nor appropriate. Dakota does not allege that Solid Edge is wholly owned nor explain why or how the corporate separateness should be ignored. It is difficult, if not impossible, to determine which entity is acting or being affected as alleged in the remainder of the Amended Complain. “Dakota” and SOCAA were engaged in prior litigation in Yavapai County Superior Court, Case No. CV2014-80422 based on SOCAA’s alleged breach of the lease between Dakota and SOCAA. (Am. Compl. at ¶ 30, ECF No. 72.) Dakota claims that during settlement negotiations for that prior action and as an inducement to settle, SOCAA represented that Dakota would be able to provide input to SOCAA to consider for use in drafting a RFP and that SOCAA expected Dakota would be the successful bidder. (Am. Compl. at ¶ 37, ECF No. 72.) Dakota further claims that on May 1, 2017, SOCAA transmitted a RFP which sought proposals for “’Commercial 135 Operations’” at the Sedona Airport. (Am. Compl. at ¶ 40, ECF No. 72.) On June 26, 2017, SOCAA awarded the RFP to Guidance. (Am. Compl. at ¶ 50, ECF No. 72.) Among other things, Dakota claims that “[t]he RFP process was a sham and the ultimate outcome was rigged by virtue of a pre-determination by SOCAA calculated to insure that no competitive air tour provider other than defendant Guidance could emerge as the RFP ‘winner.’” (Am. Compl. at ¶ 48, ECF No. 72.) Dakota further claims that “SOCAA undertook an illegal, deliberate and bad faith course of action to deprive Dakota of its continued lease and to award the RFP to Dakota’s side-by-side competitor, defendant Guidance.” (Am. Compl. at ¶ 59, ECF No. 72.) Based on its allegations, Dakota and Solid Edge filed the Amended Complaint on August 24, 2018, alleging causes of action against the SOCAA Defendants under Sections 1 and 2 of the Sherman Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 3 of 18 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- Act. Plaintiffs allege damages, but in the single prayer for relief do not expressly seek damages from Ms. Shankland. Plaintiffs do seek treble damages from Guidance and SOCAA, but not Yavapai County presumably because of the Court’s granting of Yavapai County’s Motion for Judgment on the Pleadings based on the Local Government Antitrust Act that makes it immune from damages for antitrust violations. Plaintiffs do not request treble damages from Ms. Shankland. Plaintiffs also request injunctive relief under 15 U.S.C. § 26. (Am. Compl. at ¶¶ 98-127, ECF No. 72.) III. ARGUMENT Plaintiffs’ claims for damages against SOCAA and Ms. Shankland (if such claims are made) should be dismissed because even assuming the well-pled allegations of the Amended Complaint are true, SOCAA and Ms. Shankland have absolute immunity from liability for antitrust damages under the Local Government Antitrust Act, 15 U.S.C. §§ 34-36 (“LGAA”). And, SOCAA and Ms. Shankland are entitled to dismissal under the state action doctrine because their actions in dispute were undertaken pursuant to the sovereign authority of Yavapai County pursuant to the Lease and pursuant to the sovereign authority of SOCAA as an agency of the State of Arizona. Plaintiffs’ claims against the SOCAA Defendants should therefore be dismissed. Plaintiffs also failed to allege the requisite facts to state claims under the Sherman Act. A. Motion to Dismiss Standard To survive a motion to dismiss under Rule 12(b)(6), Fed. R. Civ. P., a complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012). The complaint must provide “’more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.’” Martin v. Medtronic, Inc., 32 F. Supp. 3d 1026, 1033 (D. Ariz. 2014). All allegations of material fact are assumed to be true and are construed in the light most favorable to the non-moving party. Courts are not required to accept legal conclusions couched as factual allegations as true. Papasan v. Allain, 478 U.S. 265, 286 (1986). This assumption of truth does not apply, however, to legal conclusions or conclusory factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To survive a motion to dismiss under Rule 12(b)(6), a plaintiff must allege Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 4 of 18 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- “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). The Court in Twombly interpreted Rule 12(b)(6) in conjunction with Rule 8(a)(2), which requires a “showing” that the plaintiff is entitled to relief, “rather than a blanket assertion” of entitlement to relief. Id. at 555 n. 3. While blanket assertions may provide a defendant with the requisite “fair notice” of the nature of a plaintiff’s claim, only factual allegations can clarify the “grounds” on which that claim rests. Id. The plaintiff’s “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Id. at 555 (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235–236 (3d ed. 2004)). B. SOCAA And Ms. Shankland Are Immune From Liability For Alleged Damages For Alleged Sherman Act Violations Under the LGAA, “local governments” are immune from antitrust claims for damages, costs, and fees. 15 U.S.C. § 35(a). Specifically, the LGAA provides that “[n]o damages, interest on damages, costs, or attorney’s fees may be recovered under section 4, 4A, or 4C of the Clayton Act (15 U.S.C. 15, 15a, or 15c) from any local government, or official or employee thereof acting in an official capacity. 15 U.S.C. § 35(a)(emphasis added). Section 4 of the Clayton Act is the damages remedy for violations of the Sherman Act. Therefore, the LGAA provides local governments with absolute immunity from antitrust damages when the statute’s terms are met. For purposes of the LGAA, the definition of “local government” includes “any other special function governmental unit established by State law in one or more States.” 15 U.S.C. § 34(1)(B). SOCAA is such an “other special function governmental unit established by State law.” Under state law, a county is authorized to lease land owned by it to a nonprofit corporation for airport or air terminal purposes pursuant to a lease agreement that provides that title to all buildings, structures and additions made or added to the leased premises by the nonprofit corporation vests in the county. A.R.S. § 28- 8423(A). The Lease between Yavapai County and SOCAA contains this provision. See Exhibit A at paragraph 13. A.R.S. §28-8424(A) provides that such a lessee is a “body politic and corporate” and is an “agency of the state” and states: A. A nonprofit corporation that is a lessee as provided in section 28-8423: Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 5 of 18 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- 1. Is a validly organized and existing body politic and corporate exercising its powers for the benefit of the people, for the improvement of the people’s health and welfare and for the increase of the people’s traffic and prosperity. 2. Is engaged in a public purpose essential to transportation and communication. 3. Performs an essential governmental function as an agency or instrumentality of the city, town, county or state. 4. Is exempt from property taxation by this state or an agency of this state. 5. Possesses and may exercise police powers and other governmental powers on the terms, conditions, limitations, restrictions and agreements provided in the lease agreements. 6. May issue bonds, incur obligations and pledge its revenues as security for the payment of bonds and obligations for airport and air terminal purposes to the extent provided by the lease agreement as it exists or as it may be amended, without regard to any statutory limitation of indebtedness of corporations having authorized capital stock. The Amended Complaint acknowledges that SOCAA is a non-profit corporation that has a long-term lease with Yavapai County to operate the Sedona Airport for the public good. (Am. Compl. at ¶¶ 7-8, ECF No. 72.) See also the Lease attached as Exhibit A. 2 Just as SOCAA is an immunized special function governmental unit, Ms. Shankland is similarly protected as an “official or employee thereof.” The Amended Complaint acknowledges that Ms. Shankland was the General Manager of the Sedona Airport “who acted on SOCAA’s behalf”. (Am. Compl. at ¶ 3, 9, ECF No. 72.) All of Ms. Shankland’s actions on which Plaintiffs rely for their claims were undertaken while performing her position as General Manager of the Sedona Airport. Plaintiffs allegations arise entirely 2 Paragraph 13 provides the language required by A.R.S. § 28-8423 and states: “13. Ownership of Airport Property. Title to buildings, structures and additions made to buildings, structures and additions made to the premises by LESSEE or any of Its subtenants shell vest In the LESSOR immediately upon termination of this lease, No building, structure or addition shall be removed from the leased premises without written consent of LESSOR unless the lease, permit, license, or other agreement under which the building, structure or addition was affixed to the land provide a right of removal and said lease, permit, license or other agreement was presented to and approved by the LESSOR before title vested in LESSOR.” Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 6 of 18 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- out of Ms. Shankland’s role in the RFP process and her role as “SOCAA management.” (Am. Compl. at ¶¶ 41, 51, 61, 62-64, 68-69, 74, 75-76 & 88, ECF No. 72.) The SOCAA Defendants therefore satisfy the requirements of the LGAA and SOCAA is a “local government” for purposes of the LGAA. Indeed, federal courts have found that airport authorities fit within the definition of “any other special function governmental unit established by State law,” which is one of the entities included in the definition of “local government” under the LGAA. See, e.g., Ne. Jet Center, Ltd. v. Lehigh-Northampton Airport Auth., 767 F. Supp. 672, 680 (E.D. Pa. 1991) (holding that the Lehigh-Northampton Airport Authority would fit the definition of “any other special governmental unit established by State law” under the LGAA and noting that the House Judiciary Committee expressly included airport authorities or port authorities as examples of special purpose governmental units); Montauk-Caribbean Airways, Inc. v. Hope, 784 F.2d 91 (2d Cir. 1986) (holding that the district court correctly held that the LGAA barred the Clayton Act claims for damages because a New York statute broadly delegates authority to municipalities in the operation of local airports, through an exclusive lease arrangement which “evidences an intent to displace competition with regulation” and “[t]he state legislature must have contemplated the kind of anticompetitive conduct that would result” where Montauk-Caribbean Airways asserted Sherman Act claims against members of the town board of East Hampton, the town’s attorney, the manager of the town’s airport, a competitor airline, and the competitor airline’s chief executive officer). Additionally, Arizona courts have found non-profit airport corporations to be a “public arm of the state” and their officers to be performing public rather than private functions. See, e.g., Hertz v. Driv-Ur-Self System v. Tucson Airport Authority, 81 Ariz. 80, 299 P.2d 1071 (1956) (holding that the Tucson Airport Authority, a non-profit corporation organized under A.R.S. § 2-312(A) [repealed in 1995], which provided that the airport authority was a body politic engaged in a public purpose and was functioning as an “agency or instrumentality of the city and state” was a “public arm of the state and its officers [perform] public rather than private functions”). Moreover, a municipal corporation can only act through its officers, employees, agents, departments, or instrumentalities, like Ms. Shankland. See U.S. v. City of Rancho Palos Verdes, 841 F.2d Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 7 of 18 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- 329 (9th Cir. 1988). The immunity provided to SOCAA extends to Ms. Shankland regardless of whether Plaintiffs allege that she acted with an improper motive because “the LGAA makes no provision for consideration of a defendant’s motive.” Wee Child Care Center, Inc. v. Lumpkin, 680 F.3d 841, 849 (6th Cir. 2012). In Wee Child Care Center, Inc., for example, the child care center accused city and county employees of anti-competitive behavior through an alleged conspiracy to interfere with its government contracts and licensing. Id. at 844-46. The court found that the county and city employees were entitled to dismissal under Rule 12(b)(6) because 15 U.S.C. § 35(a) barred the claims against them. Id. at 847-49. “The phrase ‘acting in an official capacity’ includes those lawful actions, undertaken in the course of a defendant’s performance of his duties, that reasonably can be construed to be within the scope of his duties and consistent with the general responsibilities and objectives of his position.” Id. at 848. Therefore, as the employee of SOCAA at the time, Ms. Shankland is provided immunity, too. Both counts in the Amended Complaint against SOCAA and Ms. Shankland, to the extent damages are requested against them, may arguably request damages for alleged violations of Sections 1 and 2 of the Sherman Act. (Am. Compl. at ¶¶ 98-127, ECF No. 72.) The damages requested are therefore requested under Section 4 of the Clayton Act, which provides for damages for any person injured in his business or property by reason of anything forbidden in the antitrust laws. 15 U.S.C. § 15(a). As explained above, SOCAA is a “local government” for purposes of the LGAA, so SOCAA and its former employee, Amanda Shankland, are therefore absolutely immune from Plaintiffs’ claims for antitrust damages and the claims should be dismissed. C. SOCAA and Ms. Shankland are immune from the claims of Dakota and Solid Edge under the state action doctrine. Under the state action doctrine, courts have held that the Sherman Act was not intended to apply against certain state action. Parker v. Brown, 317 U.S. 341 (1943). The Supreme Court created the state action doctrine because of its concern for federalism and because of the absence of any evidence that Congress intended the antitrust laws to extend to the behavior of state and municipal governments. Id. at 350-51. Under the doctrine, an entity is immune from federal antitrust liability if its conduct was pursuant to Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 8 of 18 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- a state regulatory program. City of Vernon v. Southern Cal. Gas Co., 92 F.3d 1191, 1191 (9th Cir. 1996). The state action doctrine further exempts state and local regulation from federal and state antitrust liability. Cost Mgmt. Servs., Inc. v. Wash. Nat. Gas Co., 99 F.3d 937, 941 (9th Cir. 1996). Authorization of anticompetitive conduct does not need to be explicit. Hilman Flying Serv., Inc. v. City of Roanoke, 652 F.Supp. 1142, 1145 (W.D. Va. 1987). In Hilman Flying Services, Inc., the plaintiff sued the City of Roanoke, four of its officers, Piedmont Aviation, Inc., and one of Piedmont’s vice presidents for, among other claims, federal antitrust claims. Id. at 1144. The City of Roanoke derived its authority to operate the airport by statute, which grants Virginia municipalities the general authority to “‘acquire, construct, maintain, and operate airports and related structures, properties and facilities.’” Id. at 1145. The Virginia law did not expressly anticipate exclusive or anticompetitive arrangements, but the state action doctrine “realistically anticipates that anticompetitive results are often foreseeable when a political subdivision implements a state grant of general authority to act efficiently and in the best public interest. Id. at 1146. The court held that under the circumstances, the state action immunity protected the municipal defendants from antitrust liability. Id. That is consistent with the facts at issue in this matter. Like Hilman Flying Services, Inc., Plaintiffs allege causes of action arising out of conduct SOCAA undertook while performing pursuant to the Lease with Yavapai County through which SOCAA is acting as a body politic. A.R.S. § 28-8424. The Lease provides that SOCAA is empowered to operate, manage, and oversee the Sedona Airport. (Am. Compl. at ¶ 7, ECF No. 72.) The Lease further provides that SOCAA has decision- making authority over subleases and access to the airport by commercial entities. (Am. Compl. at ¶ 7, ECF No. 72.) SOCAA’s authority is derived from state statute, which states that SOCAA “performs an essential governmental function as an agency or instrumentality of the city, town, county or state.” A.R.S. § 28-8424(A)(3). SOCAA’s actions were pursuant to its Lease with Yavapai County and therefore, its acts in regards to the RFP were compelled by Yavapai County acting as a sovereign, and as a result, the Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 9 of 18 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- conduct is exempt from such Sherman Act challenges. See Bates v. State of Arizona, 433 U.S. 350, 359-60 (1977). D. In additional to immunity as discussed in the preceding paragraphs, Dakota and Solid Edge failed to allege all the elements for claims under the Sherman Act against SOCAA and Ms. Shankland, and the Amended Complaint should be dismissed with prejudice. Even assuming the well-pled allegations of the Amended Complaint are true for purposes of this Motion, the Amended Complaint failed to allege all the elements for claims under Sections 1 or 2 of the Sherman Act against SOCAA and Ms. Shankland. The Amended Complaint should be dismissed on this basis. 1. Dakota and Solid Edge failed to state a plausible claim against SOCAA and Ms. Shankland under Section 2 of the Sherman Act. Section 2 of the Sherman Act provides: Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several states, or with foreign nations, shall be deemed guilty of a misdemeanor. 15 U.S.C. § 2. The basis of a claim under Section 2 is the “…deliberate use of market power by a competitor to control price or exclude competition.” Name. Space, Inc. v. Internet Corp. for Assigned Names and Numbers, 795 F.3d 1124, 1131 (9th Cir. 2015) (emphasis added). To establish liability, a plaintiff must prove: (1) the defendant’s possession of monopoly power in the relevant market; (2) the willful acquisition or maintenance of that power; and (3) causal antitrust injury. Id.; Somers v. Apple, Inc., 729 F.3d 953, 963 (9 th Cir. 2013) (quoting Allied Orthopedic Appliances, Inc. v. Tyco Health Care Group LP, 592 F.3d 991, 998 (9 th Cir. 2010). The allegations do not support any of these elements. 2. Dakota and Solid Edge failed to allege that SOCAA and Ms. Shankland possessed any monopoly power in the relevant market or that they willfully acquired or maintained such power. Dakota and Solid Edge allege in paragraph 101 of the Amended Complaint that the relevant product/service market is “on-airport air tours originating from and returning to the Sedona Airport,” and that the relevant geographic market is the Sedona Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 10 of 18 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 -11- area. That is not the relevant product/service market, but for purposes of this Motion it will be assumed to be the market. SOCAA and Ms. Shankland are not competitors of Dakota and Solid Edge in that market or in any market. No allegation is made to the contrary, i.e., that they fly air tours of Sedona to and from the Sedona Airport. And, no allegation is made that Solid Edge participates in that market. Only through the deceptive use of the collective term “Dakota” could that be asserted. And, the Amended Complaint asserts that the use of the term Dakota is for convenience, and does not allege that Solid Edge competes in that market. The vague and conclusory allegation that Solid Edge is an operating company does not allege that it competes in that market. The only alleged competitor in the alleged narrowly cast market is Defendant Guidance. (Am. Compl. at ¶ 10, ECF No. 72.) As a matter of law, SOCAA and Ms. Shankland cannot have or use “monopoly power” to exclude competition in a market in which they do not compete. And, no allegation is made nor could it credibly be made that SOCAA and Ms. Shankland can “willfully” acquire or maintain such monopoly power. See Mercy- Peninsula Ambulance, Inc. v. San Mateo County, 791 F.2d 755, 759 (9th Cir. 1986) (holding that because county did not compete in health care provision market, it could not be charged with excluding competition in that market by entering into exclusive contracts for paramedic services). Accordingly, Plaintiffs failed to allege the first and second elements of a Section 2 claim and the Section 2 claim should be dismissed with prejudice. 3. Dakota and Solid Edge failed to allege any facts showing that SOCAA and Ms. Shankland engaged in a conspiracy or combination to monopolize. Dakota and Solid Edge may attempt to argue that Section 2 liability is based on an alleged “conspiracy to monopolize” (Am. Compl. at ¶ 102, ECF No. 72.)], SOCAA and Ms. Shankland cannot be held liable as a matter of law because they are competitors in the alleged relevant market. See G.U.E. Tech, LLC v. Panasonic Avionics Corp., No. SACV 15-00789-CJC(DFMx), 2015 WL 12696203, at *2 (C.D. Cal. Sept. 15, 2015) (holding “a defendant may not be found liable under the Sherman [A]ct for . . . conspiring to monopolize a market unless that defendant is a competitor in the relevant Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 11 of 18 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 -12- market”). And, Ms. Shankland was not a party to the behavior that Plaintiffs characterizes as a “conspiracy to monopolize,” i.e., “the exclusive written lease between SOCAA and Guidance for use of the Sedona Airport on-airport facilities.” (Am. Compl. at ¶ 102, ECF No. 72.) Plaintiffs failed to allege any other conduct making it plausible that the SOCAA Defendants engaged in a conspiracy or combination to monopolize with the other Defendants. Plaintiffs also failed to allege any plausible overt act by the SOCAA Defendants in furtherance of the alleged conspiracy. See Paladin Associates, Inc. v. Montana Power Co., 328 F.3d 1145, 1158 (9th Cir. 2003) (conspiracy claim under § 2 requires “a combination or conspiracy to monopolize” and “an overt act in furtherance of the conspiracy,” among other elements). E. Dakota and Solid Edge failed to allege a plausible “antitrust injury.” Plaintiffs failed to state the element of a plausible antitrust injury from the alleged monopolization as the third element of a claim under Section 2 of the Sherman Act. Their use of the term “Dakota” as a collective reference does not provide specific allegations of how each of the Plaintiffs individual sustained an antitrust injury. An “antitrust injury” is an “injury of the type the antitrust laws were intended to prevent,” i.e., an injury to competition. Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990) (citations omitted); see also Somers., 729 F.3d 953, 967 (9th Cir. 2013). An injury to competition must flow from the anti-competitive conduct under scrutiny. Atlantic Richfield, 495 U.S. at 334. Antitrust plaintiffs are required to “sketch the outline of the injury to competition with allegations of supporting factual detail.” Brantley v. NBC Universal, Inc., 675 F.3d 1192, 1198 (9th Cir. 2012) (internal alteration, quotation marks, and citation omitted). They “may not merely recite the bare legal conclusion that competition has been restrained unreasonably.” Id. (internal quotation marks and citation omitted). Plaintiffs must also “plead an injury to competition beyond the impact on the plaintiffs themselves.” Id. “Where the defendant’s conduct harms the plaintiff without adversely affecting competition generally, there is no antitrust injury.” Paladin Associates, 328 F.3d at 1158. Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 12 of 18 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 -13- The Amended Complaint alleges that the Guidance Sublease “was intended to and will ultimately foreclose and end competition (where competition formerly existed) in the provision of on-airport tours of the Sedona area departing from a[nd] returning to the Sedona Airport,” and further alleges this “contractual foreclosure of all competition . . . causes Dakota’s anticompetitive harm and antitrust injury and harms tourists in Sedona.” (Am. Compl. at ¶¶ 68, 110 & 121, ECF No. 72.) These allegations do not state an antitrust injury because they allege harm solely to “Dakota.” Dakota was alleged to be the only pre-RFP “competition” for “on-airport tours of the Sedona area.” No allegation is made that other competitors were shut out of the market. Later in the Amended Complaint, Dakota and Solid Edge stated in a conclusory fashion that “[o]ther air tour operators, such as Dakota, would like to lease Sedona Airport facilities but are precluded from doing so” by the Guidance Sublease. (Am. Compl. at ¶ 118, ECF No. 72.) However, Dakota and Solid Edge failed to allege any facts that make this claim plausible with respect to air tour operators other than “Dakota.” This is highly implausible based on the allegation that only two air tour operators responded to the RFP, i.e., Guidance and Dakota (not including Solid Edge). Because the only arguably plausible injury is injury to “Dakota,” not to competition generally, the Amended Complaint fails to allege an “antitrust injury” as a matter of law. See Brantley, 675 F.3d at 1198; Paladin Associates, 328 F.3d at 1158. Plaintiffs’ conclusory allegations about harm to “tourists” and supra competitive prices do not meet the Iqbal/Twombly plausibility standard and in any event, are legally insufficient. Plaintiffs’ failure to allege the actual alleged supra competitive prices and this failure highlights the legally insufficient conclusory allegations. For these reasons, this Motion should be granted and the Section 2 claim dismissed with prejudice. 1. Dakota and Solid Edge failed to state an antitrust injury, as required for a plausible claim against SOCAA and Ms. Shankland under Section 1 of the Sherman Act. Section 1 of the Sherman Act prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 13 of 18 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 -14- several States, or with foreign nations.” 15 U.S.C. § 1. A claim under Section 1 must prove: (1) a contract, combination or conspiracy among two or more persons or distinct business entities; (2) which is intended to restrain or harm trade; (3) which actually injures competition; and (4) harm to the plaintiff from the anti-competitive conduct. Name.Space, Inc. v. Internet Corp. for Assigned Names and Numbers, 795 F.3d 1124, 1129 (9th Cir. 2015). “Because § 1 . . . does not prohibit all unreasonable restraints of trade but only restraints effected by a contract, combination, or conspiracy, the crucial question is whether the challenged anticompetitive conduct stems from independent decision or from an agreement, tacit or express.” Twombly, 550 U.S. at 553 (alterations, citations, and internal quotation marks omitted). Stating a Section 1 claim “requires a complaint with enough factual matter (taken as true) to suggest that an agreement was made.” Id. at 556. Plaintiffs make conclusory allegations that Defendants “entered into and engaged in an unlawful agreement in restraint of the trade and commerce” and “coordinated” with each other to eliminate or restrict competition. (Am. Compl. at ¶ 116, 118 ECF No. 72.) The only specific “agreement” or “coordination” mentioned by Plaintiffs, however, is the Guidance Sublease. [See, e.g., (Am. Compl. at ¶ 116-118, 122, ECF No. 72.) The Guidance Sublease is no different than any other sublease for property and no allegation is made that it somehow precludes Plaintiffs from using the Sedona Airport. In fact, Plaintiffs do not allege that they cannot use the Sedona Airport to land and depart. Obviously, they can use this public use airport. “Dakota” simply wants to lease the space for which it was not the successful bidder. And, importantly, for the reasons discussed above, Plaintiffs failed to adequately allege an antitrust injury. SOCAA and Ms. Shankland should have their Motion granted as to the claim related to Section 1 of the Sherman Act and the claim dismissed with prejudice. F. Dakota and Solid Edge failed to state a claim for injunctive relief. Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 14 of 18 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 -15- In addition to unknown monetary damages, the Amended Complaint seeks injunctive relief under Section 16 of the Clayton Act, 15 U.S.C. § 26. Section 16 provides that “[a]ny person, firm, corporation, or association shall be entitled to sue for and have injunctive relief . . . against threatened loss or damage by a violation of the antitrust laws . . . .” Id. “Section 16 does not furnish an independent cause of action. Rather, it allows the court to fashion relief upon a showing of a separate violation of the antitrust laws.” Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1051 (9th Cir. 2008). To obtain injunctive relief, the plaintiff must allege facts showing that the remedy “is needed to prevent a threatened antitrust injury.” Somers, 729 F.3d at 967 (internal quotation marks and citations omitted). Because Dakota and Solid Edge failed to state a claim under Section 1 or 2 of the Sherman Act, and in particular failed to adequately allege an “antitrust injury,” their injunction request predicated on alleged Sherman Act violations is barred. See id. This is especially true as to Solid Edge. No specific, separate allegations are made as to Solid Edge concerning the alleged actions after paragraph 6 of the Amended Complaint. Solid Edge is hidden in the collective term “Dakota.” Specific allegations should have been made as to Solid Edge but were not. Its claims and its request for injunctive relief should be denied and judgment dismissing its claims granted. Additionally, Plaintiffs’ request for an injunction seeks an ineffective remedy as to Ms. Shankland. The original Complaint alleged that she is the airport manager. The Amended Complaint alleged that she was, at all material times, the airport manager. Plaintiffs do not allege that she is, as of the date of the Amended Complaint, the airport manager. Based on the lack of a factual allegation that she is the airport manager, any injunctive relief would be ineffective as to her because she has no power or right to deal with anything involving Plaintiffs and SOCAA. The Amended Complaint does not identify any conduct by Ms. Shankland that is currently causing or contributing to an alleged antitrust violation, or that is likely to do so in the future. See State ex rel. Babbitt v. Goodyear Tire & Rubber Co., 128 Ariz. 483, 487, 626 P.2d 1115, 1119 (App. 1981) Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 15 of 18 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 -16- (plaintiff has burden of showing likelihood that defendant will engage in conduct sought to be enjoined). Accordingly, the request for injunctive relief should be dismissed with prejudice. IV. CONCLUSION For the foregoing reasons, the SOCAA Defendants respectfully request that the Court grant the Motion to Dismiss and enter an order dismissing the action against the SOCAA Defendants. The SOCAA Defendants also request that they be granted their costs and their attorneys’ fees pursuant to the Sherman Act, if allowed by this Court, and pursuant to A.R.S. §§ 12-341.01 and 12-349. Dated this 24 th day of September, 2018. GORDON REES SCULLY MANSUKHANI, LLP By: /s/David L. O’Daniel David L. O'Daniel Attorneys for Defendants Sedona-Oak Creek Airport Authority, Inc. and Amanda Shankland O’CONNOR & CAMPBELL, P.C. Dan Campbell Ellen Davis Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 16 of 18 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 -17- CERTIFICATE OF SERVICE I certify that on September 24 th , 2018, the foregoing document was served on all parties of record via ECF to the following counsel of record: Bradley Weech Marshall Hunt DAVIS MILES McGWIRE GARDNER 40 E. Rio Salado Pkwy., Ste. 425 Tempe, AZ 85281 Efile.dockets@davismiles.com Attorneys for Plaintiff Nicole Goodwin Aaron Lloyd Jeff Walsh GREENBERG TRAURIG, LLP 2375 E. Camelback Rd., Ste. 700 Phoenix, AZ 85016 goodwinn@gtlaw.com lloyda@gtlaw.com walshj@gtlaw.com Attorneys for Guidance Air Services, LLC Georgia Staton Robert Berk Thomas M. Stoxen JONES SKELTON & HOCHULI, PLC 40 N. Central Ave., 2700 Phoenix, AZ 85004 GStaton@JSHFIRM.com RBerk@JSHFIRM.com Thomas.Stoxen@yavapai.us Attorneys for Yavapai County Dan Campbell Ellen Davis O’Connor & Campbell, P.C. 7955 S. Priest Dr. Tempe, AZ 85284-1050 Dan.Campbell@occlaw.com Ellen.Davis@occlaw.com Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 17 of 18 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 -18- Jeffrey D. Gardner Jimmie W. Pursell, Jr. Paul G. Johnson JENNINGS, STROUSS & SALMON, P.L.C. One East Washington Street, Suite 1900 Phoenix, AZ 85004-2554 Telephone: (602) 262-5911 jgardner@jsslaw.com jpursell@jsslaw.com pjohnson@jsslaw.com Attorneys for Plaintiff, Dakota Territory Tours, ACC By: Angelina Chavez Case 3:17-cv-08162-SPL Document 81 Filed 09/24/18 Page 18 of 18
