Diverse Power Inc. v. City of Lagrange, Georgia

MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM with Brief In Support

N.D. Ga.February 10, 2017

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA NEWNAN DIVISION DIVERSE POWER INC., ) ) Plaintiff, ) ) Civil Action No. 3:17-cv-3-TCB ) v. ) ) CITY OF LAGRANGE, GEORGIA, ) ) Defendant. ) MOTION TO DISMISS COMPLAINT For the reasons set forth in the accompanying Memorandum in Support of Motion to Dismiss Plaintiff’s Complaint, Defendant City of LaGrange, Georgia (“LaGrange”) hereby moves to dismiss with prejudice Plaintiff Diverse Power Inc.’s Complaint, in its entirety, pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted. WHEREFORE, LaGrange respectfully requests that this Motion to Dismiss be granted and that the claims in the Complaint be dismissed with prejudice. Dated: February 10, 2016. Respectfully submitted, By: /s/ Allison S. Thompson Teresa T. Bonder Georgia Bar No. 703969 Case 3:17-cv-00003-TCB Document 8 Filed 02/10/17 Page 1 of 3 2 teresa.bonder@alston.com Allison S. Thompson Georgia Bar No. 779509 allison.thompson@alston.com ALSTON & BIRD LLP 1201 West Peachtree Street Atlanta, Georgia 30309-3424 Telephone: 404-881-7000 Facsimile: 404-881-7777 Jeffrey M. Todd Georgia Bar No. 713738 jtodd@lttpc.com LEWIS, TAYLOR & TODD, P.C. P.O. Box 1027 LaGrange, Georgia 30241 Telephone: 706-882-2501 Facsimile: 706-882-4905 Attorneys for Defendant the City of LaGrange, Georgia Case 3:17-cv-00003-TCB Document 8 Filed 02/10/17 Page 2 of 3 CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the foregoing was filed on February 10, 2017 with the Court and served electronically through the CM/ECF system to all counsel of record registered to receive a Notice of Electronic Filing for this case. By: /s/ Allison S. Thompson Allison S. Thompson Georgia Bar No. 779509 Case 3:17-cv-00003-TCB Document 8 Filed 02/10/17 Page 3 of 3 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA NEWNAN DIVISION DIVERSE POWER INC., ) ) Plaintiff, ) ) Civil Action No. 3:17-cv-3-TCB ) v. ) ) CITY OF LAGRANGE, GEORGIA, ) ) Defendant. ) DEFENDANT CITY OF LAGRANGE, GEORGIA’S MEMORANDUM IN SUPPORT OF MOTION TO DISMISS PLAINTIFF’S COMPLAINT Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 1 of 31 TABLE OF CONTENTS SUMMARY OF ALLEGATIONS .........................................................................2 STANDARD FOR DISMISSAL .............................................................................4 ARGUMENT ............................................................................................................5 I. LaGrange Is Protected From Federal Antitrust Liability Under The State Action Doctrine......................................................................................... 5 A. LaGrange’s Alleged Anticompetitive Conduct............................... 6 B. Imposing Conditions on the Provision of Water Utility Services Outside LaGrange City Limits is a Foreseeable Consequence of the State’s Grant of Discretionary Authority ....... 6 II. Plaintiff Fails To State A Federal Claim For Unlawful Tying ............... 10 A. Plaintiff Has Not Alleged The Geographic Contours of Any Tying Product Market ................................................................... 11 B. Plaintiff Has Not Properly Alleged A Tying Product Market, Or That LaGrange Has Sufficient Market Power In That Market............................................................................................ 14 C. Plaintiff Has Not Alleged a “Not Insubstantial” Amount of Interstate Commerce...................................................................... 16 III. Plaintiff Fails To State A Claim For Tortious Interference Because The Alleged Financial Injury Is Purely Speculative ...................................... 18 IV. Plaintiff Fails to Properly Plead a State Law Antitrust Claim................ 20 CONCLUSION.......................................................................................................22 Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 2 of 31 TABLE OF AUTHORITIES Page(s) CASES 1524948 Alberta Ltd. v. Lee, No. 1:10-cv-02735, 2011 WL 2899385 (N.D. Ga. July 15, 2011).....................19 Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283 (11th Cir. 2010) ..........................................................................19 Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486 (11th Cir. 1985) ........................................................11, 14, 16, 18 Aquatherm Indus., Inc. v. Fla. Power & Light Co., 971 F. Supp. 1419 (M.D. Fla. 1997)...................................................................12 Ashcroft v. Iqbal, 556 U.S. 662 (2009)..............................................................................4, 5, 18, 19 Bartholomew v. AGL Res., Inc., 361 F.3d 1333 (11th Cir. 2004) ..........................................................................18 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)............................................................................4, 16, 18, 19 Brown Shoe Co. v. United States, 370 U.S. 294 (1962)............................................................................................12 Brown v. Jacobs Pharmacy Co., 41 S.E. 553 (Ga. 1902) .......................................................................................21 Budget Charge Accounts, Inc. v. Peters, 213 Ga. 17 (1957) ...............................................................................................22 City of Lafayette v. La. Power & Light Co., 435 U.S. 389 (1978)..............................................................................................5 Clark Memorials of Ala. Inc. v. SCI Ala. Funeral Servs. LLC, 991 F. Supp. 2d 1151 (N.D. Ala. 2014)..............................................................15 Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 3 of 31 ii Crane v. Intermountain Health Care, Inc., 637 F.2d 715 (10th Cir. 1980) ............................................................................17 Disaster Servs., Inc. v. ERC P’ship, 228 Ga. App. 739 (1997) ....................................................................................20 E.T. Barwick Indus., Inc. v. Walter E. Heller & Co., 692 F. Supp. 1331 (N.D. Ga. 1987)....................................................................22 F.T.C. v. Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003 (2013)......................................................................................5, 9 Fortner Enters., Inc. v. U.S. Steel Corp., 394 U.S. 495 (1969)............................................................................................17 Fortson v. Brown, 302 Ga. App. 89 (2010) ......................................................................................18 Galardi v. Steele-Inman, 266 Ga. App. 515 (2004) ....................................................................................19 Griffin v. Vandegriff, 205 Ga. 288 (1949) .............................................................................................20 Griffiths v. Blue Cross & Blue Shield, 147 F. Supp. 2d 1203 (N.D. Ala. 2001)..............................................................16 Illinois Tool Works, Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006)..............................................................................................14 In re Am. Online, Inc., 168 F. Supp. 2d 1359 (S.D. Fla. 2001) ...............................................................16 Jacobs v. Tempur-Pedic Int’l, Inc., 626 F.3d 1327 (11th Cir. 2010) ........................................................11, 12, 15, 16 Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984)....................................................................................11, 16, 17 L.A. Draper & Son v. Wheelabrator-Frye, Inc., 735 F.2d 414 (11th Cir. 1984) ............................................................................12 Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 4 of 31 iii Lady Deborah’s, Inc. v. VT Griffin Servs., Inc., No. 207-079, 2007 WL 4468672 (S.D. Ga. Oct. 26, 2007) ...............................16 McCallum v. City of Athens, Ga., 976 F.2d 649 (11th Cir. 1992) .....................................................................passim Palmer v. Atlantic Ice & Coal Co., 173 S.E. 424 (Ga. 1934) .....................................................................................21 Parker v. Brown, 317 U.S. 341 (1943).....................................................................................passim Parsons v. Bright House Networks, LLC, No. 2:09-cv-0267, 2010 WL 5094258 (N.D. Ala. Feb. 23, 2010) .........11, 14, 17 Phigenix, Inc. v. Genentech, Inc., No. 1:14-cv-287, 2015 WL 10910488 (N.D. Ga. Mar. 12, 2015)........................4 Shahawy v. Harrison, 778 F.2d 636 (11th Cir. 1985) ............................................................................17 Smith v. Network Solutions, Inc., 135 F. Supp. 2d 1159 (N.D. Ala. 2001)..............................................................14 Strykr v. Long County Bd. Of Com’rs, 277 Ga. 624 (2004) .............................................................................................20 Thompson v. Metro. Multi-List, Inc., 934 F.2d 1566 (11th Cir. 1991) ....................................................................11, 14 Tic-X-Press, Inc. v. Omni Promotions Co. of Ga., 815 F.2d 1407 (11th Cir. 1987) ....................................................................10, 16 Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985).......................................................................................passim Town of Hallie v. City of Eau Claire, 700 F.2d 376 (7th Cir. 1983) ..............................................................................10 U.S. Anchor Mfg., Inc. v. Rule Indus., Inc., 7 F.3d 986 (11th Cir. 1993) ................................................................................20 Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 5 of 31 iv United States v. E.I. DuPont de Nemours & Co., 351 U.S. 377 (1956)............................................................................................14 Webb v. Primo’s, 706 F. Supp. 863 (N.D. Ga. 1988)......................................................................11 Wilson v. City of Sardis, 264 Ga. App. 178 (2003) ....................................................................................19 Zepp v. Mayor & Council of City of Athens, 255 Ga. 449 (1986) ...........................................................................................7, 8 RULES Fed. R. Civ. P. 8 ...................................................................................................4, 19 Fed. R. Civ. P. 12(b)(6)..............................................................................................4 STATUTES O.C.G.A. § 13-8-2....................................................................................................20 O.C.G.A. § 20-15-6....................................................................................................3 O.C.G.A. § 36-34-5....................................................................................................6 O.C.G.A. § 36-65-1....................................................................................................8 O.C.G.A. § 36-65-2................................................................................................8, 9 OTHER AUTHORITIES GA. CONST. art. 9, § 2, ¶ III....................................................................................6, 9 GA. CONST. art. 3, § 6, ¶ V.......................................................................................20 Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 6 of 31 Plaintiff Diverse Power Inc. (“Plaintiff”) alleges that the City of LaGrange, Georgia (“LaGrange”) violated the Sherman and Clayton Acts and certain state laws by adopting an Ordinance (the “Ordinance”) that requires new construction customers outside city limits to install certain natural gas-powered appliances as a condition to receiving LaGrange’s water utility service. But Plaintiff’s Complaint is groundless because the State of Georgia has authorized LaGrange to do exactly what the Ordinance does. In fact, both the United States Supreme Court and the Eleventh Circuit have recognized that municipalities like LaGrange, empowered to exercise discretion in deciding whether (and how) to provide public utilities, are entitled to state action immunity. See Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985); McCallum v. City of Athens, Ga., 976 F.2d 649 (11th Cir. 1992). Plaintiff also has failed to allege the necessary factual support for each of its substantive claims. Specifically, the federal antitrust claim is insufficiently pled because Plaintiff has not identified the relevant geographic or product markets, has not alleged facts to support LaGrange’s alleged power in the tying product market, and has not sufficiently pled that LaGrange’s anticompetitive conduct affects a “not insubstantial” amount of interstate commerce. Plaintiff’s allegations in support of its state-law claim for tortious interference are similarly lacking as to any identifiable prospective business relationship. Finally, Plaintiff’s state-law antitrust claim also Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 7 of 31 2 fails because LaGrange is entitled to immunity and because Plaintiff has not alleged facts plausibly establishing that claim. For all of these reasons, as fully set out below, each of Plaintiff’s claims should be dismissed. SUMMARY OF ALLEGATIONS LaGrange’s Provision of Public Utilities LaGrange is one of three incorporated municipalities in Troup County, along with the cities of West Point and Hogansville. Compl. ¶ 14. Each city provides water services within its own city limits, as well as in various undefined areas in unincorporated Troup County. Id. ¶¶ 2, 5, 15. Plaintiff claims that LaGrange is the “sole supplier of water utility service in the majority of unincorporated Troup County.” Id. ¶ 17. LaGrange also offers natural gas and electric utility services inside and outside of its city limits. Id. ¶¶ 7, 19, 20. Plaintiff claims that LaGrange is the sole supplier of natural gas “in much of unincorporated Troup County.” Id. ¶ 20. Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 8 of 31 3 Pursuant to a local ordinance enacted more than twelve years ago,1 LaGrange has placed the following condition on providing water utility service to new construction outside its corporate limits: For all new construction outside of the corporate limits of the city, and upon natural gas service to such structure being available, said availability being within the sole discretion of the city, water service as set forth in this chapter shall be available only to those customers who install at least one (1) natural gas furnace, one (1) natural gas water heater, and a least one (1) additional natural gas outlet sufficient for potential future use for a clothes dryer, range, grill, pool, heater or outdoor lighting fixture. LaGrange, Ga. Code § 20-15-6 (the “Ordinance”). Plaintiff’s Claims Against LaGrange Plaintiff is a LaGrange-based utility company that provides electric service in “much of Troup County and in other counties in southwest Georgia.” Compl. ¶ 1. According to Plaintiff, LaGrange’s natural gas utility service competes with Plaintiff’s electric service in undefined areas both within and outside of LaGrange’s corporate limits. Id. ¶ 19; see also id. ¶ 8. Plaintiff alleges that the Ordinance “coerces” owners or builders of new subdivisions and homes outside of LaGrange “into buying natural gas” from 1 The Ordinance was adopted on September 14, 2004. Adopted at Ord. No. 04-29. Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 9 of 31 4 LaGrange and denies those customers “the opportunity to choose electricity for their furnaces and water heaters (and at least one other appliance).” Id. ¶ 12; see also id. ¶ 23. Plaintiff calls the Ordinance an illegal “tying arrangement” predicated on LaGrange’s “provision of water utility service.” Id. ¶ 23. Plaintiff alleges that, as a consequence of the Ordinance, (1) it has been, and is, losing customers and revenues, and is “being foreclosed from the tied markets,” and (2) its “ability to provide efficient, economical electric service” is impaired. Id. ¶¶ 38, 43, 46. STANDARD FOR DISMISSAL To avoid dismissal under Rule 12(b)(6), a plaintiff must plead “enough facts to state a claim for relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “[A] plaintiff's obligation to provide the grounds of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. at 555. “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice .... Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions.” Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009); see also Phigenix, Inc. v. Genentech, Inc., No. 1:14-cv-287, 2015 WL 10910488, at *1-2 (N.D. Ga. Mar. 12, 2015). Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 10 of 31 5 “Where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not ‘show[n]’-‘that the pleader is entitled to relief.’” Iqbal, 556 U.S. at 678. ARGUMENT I. LaGrange Is Protected From Federal Antitrust Liability Under The State Action Doctrine The United States Supreme Court has long recognized that federal antitrust liability cannot attach to states acting as sovereigns. See Parker v. Brown, 317 U.S. 341, 351-53 (1943). “Although ‘cities are not themselves sovereign,’ states may sanction cities’ anticompetitive conduct, enshrouding the cities within the protective cloak of Parker immunity.” McCallum, 976 F.2d at 652 (quoting City of Lafayette v. La. Power & Light Co., 435 U.S. 389, 412-13 (1978)). A local government entity is entitled to Parker immunity when its action is undertaken pursuant to a “clearly articulated and affirmatively expressed” state policy to displace competition. F.T.C. v. Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003, 1011 (2013). It is not necessary that the state legislature “expressly state in a statute or its legislative history that [it] intends for the delegated action to have anticompetitive effects.” Town of Hallie, 471 U.S. at 43. Rather, it is sufficient that the “anticompetitive effect” of the conduct is the “foreseeable result of what the State authorized.” Phoebe Putney, 133 S. Ct. at 1011. Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 11 of 31 6 A. LaGrange’s Alleged Anticompetitive Conduct Plaintiff characterizes the Ordinance as an unlawful tying arrangement that constitutes a per se violation of federal antitrust laws or, alternatively, violates the rule of reason. Compl. ¶¶ 32, 37. Plaintiff claims that it is anticompetitive for LaGrange to condition its sale of water utility services on “the buyer also purchasing a different product (natural gas).” Id. ¶ 33. The Complaint does not challenge LaGrange’s authority to provide or refuse to provide either water or natural gas utility services outside its city limits, but instead challenges LaGrange’s exercise of discretion by conditioning its agreement to sell water utility service to new construction customers in unincorporated Troup County. However, LaGrange is entitled to state action immunity because this condition on the sale of water utility services was a “clear” and “logical result” of the Georgia State Legislature’s grant of authority to provide or refuse to provide such services outside city limits. B. Imposing Conditions on the Provision of Water Utility Services Outside LaGrange City Limits is a Foreseeable Consequence of the State’s Grant of Discretionary Authority In Georgia, “any municipal corporation” may provide water utility services. GA. CONST. art. 9, § 2, ¶ III(a)(7) (authorizing municipalities to develop, store, treat, purify, and distribute water); O.C.G.A. § 36-34-5(a)(3)(B) (authorizing operation and maintenance of “water … or sewage” for “[p]ersons to whom the system is made Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 12 of 31 7 available at the property owned by such persons”). In Zepp v. Mayor & Council of City of Athens, 255 Ga. 449 (1986), the Georgia Supreme Court reaffirmed that a municipality’s authority to provide water utility services beyond its territorial limits is discretionary: “A municipal corporation may not compel any person outside its territorial limits to accept water service which it undertakes to furnish, nor may the municipal authorities be compelled to render such service.” Id. at 449-50. Under this authorizing framework, LaGrange is empowered to refuse to provide water utility services beyond its territorial limits. With this broad discretionary authority, LaGrange is entitled to Parker immunity based on precedential rulings from both the United States Supreme Court and the Eleventh Circuit. In Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985), the Supreme Court analyzed whether an allegedly coercive tying arrangement was a foreseeable result of a Wisconsin statute that allowed cities to develop sewage systems and “describe with reasonable particularity the district to be served.” Id. at 41. In extending Parker immunity to the City of Eau Claire, the Court noted that “the statutes clearly contemplate that a city may engage in anticompetitive conduct” as “a foreseeable result of empowering the City to refuse to serve unannexed areas.” Id. at 42. The Court found it “sufficient that the statutes authorized the City to provide sewage services and also to determine the areas to be served” because “it is Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 13 of 31 8 clear that anticompetitive effects logically would result from this broad authority to regulate.” Id. The same holds true in this case, where LaGrange is authorized to provide water utility services beyond its territorial boundaries and also to determine whether and how to offer such services in those areas. See Zepp, 255 Ga. at 449-50. Specifically addressing “Georgia’s extensive statutory regime governing municipal waterworks,” the Eleventh Circuit has similarly concluded “that Georgia has ‘clearly articulated and affirmatively expressed’ a state policy to displace competition in the provision of water treatment services.” McCallum v. City of Athens, Ga., 976 F.2d 649, 653 (11th Cir. 1992). In McCallum, an unincorporated association of commercial and residential water customers sued the City of Athens for anticompetitive conduct that allegedly resulted in Athens having 90 percent of the treated water business in Clarke County. In reaching its decision, the McCallum court determined that the Georgia water statutes were “at least as clear” as those in Hallie that anticompetitive effects logically would result. Id. at 653-54. But the McCallum court also considered Georgia’s “additional legislation designed to dispel any doubt about its cities’ immunity from antitrust liability.” Id. at 655. The court observed that Georgia has positioned two important provisions- O.C.G.A. §§ 36-65-1 and 36-65-2-at the end of the code section authorizing municipal waterworks. Section 36-65-1 states that “in the exercise of powers Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 14 of 31 9 specifically granted to them by law, local governing authorities of cities and counties are acting pursuant to state policy,” and Section 36-65-2 “articulate[s] clearly and express[es] affirmatively the policy of the State of Georgia that in the exercise of such powers, such local governing authorities shall be immune from antitrust liability to the same degree and extent as enjoyed by the State of Georgia.”2 Taking these in combination with the water statutes themselves, the McCallum court held that “Georgia unequivocally revealed that it contemplated that its municipalities might engage in anticompetitive conduct” and granted Parker immunity to the City of Athens. McCallum, 976 F.2d at 655. Like the City of Eau Claire in Hallie and the City of Athens in McCallum, LaGrange is broadly authorized to develop water utilities and distribute water. GA. CONST. art. 9, § 2, ¶ III. And LaGrange, too, is permitted to exercise discretion in implementing its right to provide water utility services outside its territorial limits. The fact that LaGrange has elected to impose a condition on its agreement to provide water utility services to new construction customers outside LaGrange city limits was a foreseeable and logical result of Georgia’s statutory framework. Because “we 2 Notably, the language of O.C.G.A. § 36-65-2 exactly tracks (and meets) the Supreme Court’s standard articulated in Phoebe Putney-that is, “‘the challenged restraint … be one clearly articulated and affirmatively expressed as state policy.’” 133 S. Ct. at 1010 (internal citation omitted). Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 15 of 31 10 can determine that the state gave [LaGrange] authority to operate in the area of [water utility] services and to refuse to provide [those] services, then we can assume that the State contemplated that anticompetitive effects might result from conduct pursuant to that authorization.” Town of Hallie v. City of Eau Claire, 700 F.2d 376, 381 (7th Cir. 1983), aff’d, 471 U.S. 34 (1985). Accordingly, LaGrange is entitled to Parker immunity from Plaintiff’s federal antitrust claims. See Hallie, 471 U.S. at 42; McCallum, 976 F.2d at 654. II. Plaintiff Fails To State A Federal Claim For Unlawful Tying Separate and apart from the issue of immunity, Plaintiff’s federal antitrust claim is insufficiently pled and should be dismissed for failure to state a claim. To plead an unlawful tying arrangement, a plaintiff must allege facts demonstrating: 1) that there are two separate products, a “tying” product and a “tied” product; 2) that those products are in fact “tied” together-that is, the buyer was forced to buy the tied product to get the tying product; 3) that the seller possesses sufficient economic power in the tying product market to coerce buyer acceptance of the tied product; and 4) involvement of a “not insubstantial” amount of interstate commerce in the market of the tied product. Tic-X-Press, Inc. v. Omni Promotions Co. of Ga., 815 F.2d 1407, 1414 (11th Cir. 1987) (citations omitted). A plaintiff must properly plead each of these elements to support an antitrust claim of either per se illegality or under the rule of reason. See Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 16 of 31 11 Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486, 1502-03 (11th Cir. 1985) (citing Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 37 (1984) (O’Connor, J., concurring)); Webb v. Primo’s, 706 F. Supp. 863, 867 (N.D. Ga. 1988). Here, Plaintiff has failed to properly identify the relevant geographic and product markets, or adequately plead that LaGrange possesses coercive power in the relevant markets. Plaintiff has also failed to sufficiently allege that a “not insubstantial” amount of interstate commerce in the tied product market was or is affected by the alleged anticompetitive conduct. Each failure warrants dismissal. A. Plaintiff Has Not Alleged The Geographic Contours of Any Tying Product Market To plead restraint of trade under the Sherman Act, “Section One plaintiffs must define both (1) a geographic market and (2) a product market.” Jacobs v. Tempur-Pedic Int’l, Inc., 626 F.3d 1327, 1336 (11th Cir. 2010); Parsons v. Bright House Networks, LLC, No. 2:09-cv-0267, 2010 WL 5094258, at *6 (N.D. Ala. Feb. 23, 2010) (“Markets are defined in terms of two separate dimensions: products and geography.”). The purpose of defining the relevant market is to allow the court to determine whether or not the defendant possesses market power in that market. Thompson v. Metro. Multi-List, Inc., 934 F.2d 1566, 1572-73 (11th Cir. 1991). The relevant geographic market consists of the geographic area where buyers could reasonably turn for alternative sources of supply. Any attempt to define a Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 17 of 31 12 relevant geographic market must take into account the “commercial realities” of the geographic area and industry faced by consumers. See, e.g., Brown Shoe Co. v. United States, 370 U.S. 294, 336 (1962); L.A. Draper & Son v. Wheelabrator-Frye, Inc., 735 F.2d 414, 426 (11th Cir. 1984). To adequately plead a geographic market, plaintiffs “must present enough information in their complaint to plausibly suggest the contours” of the relevant geographic market. Jacobs, 626 F.3d at 1336. A complaint is properly dismissed when it fails to sufficiently plead a relevant geographic market. See Aquatherm Indus., Inc. v. Fla. Power & Light Co., 971 F. Supp. 1419, 1426 (M.D. Fla. 1997), aff’d 145 F.3d 1258 (11th Cir. 1998). In this case, the only relevant geographic market is the unincorporated area of Troup County where: (1) LaGrange provides both water and natural gas utility services, and (2) Plaintiff provides electric utility service. It is impossible to decipher from the face of the Complaint where this area (to the extent it exists) is located. Plaintiff describes the area in which LaGrange “has built water lines” as “to the east of the City, all the way to the Troup County line; to the north and west of the City, all the way to West Point Lake; and in extensive areas southwest of the City up to areas served by the City of West Point.” Compl. ¶ 15. Though this allegation does not clearly define the areas in which LaGrange provides water utility service, it is significantly more specific than any other allegation of the location of Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 18 of 31 13 relevant utility services. Plaintiff only vaguely describes the area in which LaGrange provides natural gas services as “much of unincorporated Troup County,” id. ¶ 20, and is similarly imprecise in describing the availability of Plaintiff’s electric utility, id. ¶ 1 (describing service area as “much of Troup County”). It is impossible to determine from the face of the Complaint where, or even whether, any of these areas overlap. In fact, nowhere does the Complaint even generally allege that either LaGrange’s natural gas or Plaintiff’s electric utility service is actually available in the specific areas where LaGrange offers water utility service. See, e.g., id. ¶ 8 (without reference to water utility, alleging that LaGrange’s natural gas service competes with Plaintiff’s electric service “in [unidentified] areas of unincorporated of Troup County”). Although Plaintiff claims that LaGrange is the “sole provider of water utility services” in “significant geographic areas outside the LaGrange city limits,” id. ¶ 15, the Complaint does not tie this unspecified “significant geographic area” to any relevant overlapping natural gas or electric utility service area. And, significantly, Plaintiff omits any allegation that would allow either LaGrange or this Court to decipher the competitive landscape for water utility services in any relevant geographic market. See id. ¶ 15 (acknowledging that West Point provides water utility services in “certain nearby areas” and Hogansville provides water utility service “mainly,” but not exclusively, within its city limits). Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 19 of 31 14 Without defining any decipherable, relevant geographic market in which LaGrange is alleged to exercise market power over water utility services and both LaGrange’s natural gas and Plaintiff’s electric utility services are available, Plaintiff has failed to state a viable tying claim and Count I should be dismissed. B. Plaintiff Has Not Properly Alleged A Tying Product Market, Or That LaGrange Has Sufficient Market Power In That Market Plaintiff has also failed to meet its burden to allege facts sufficient to support a claim that LaGrange has sufficient power in the tying product market. See Illinois Tool Works, Inc. v. Indep. Ink, Inc., 547 U.S. 28, 46 (2006) (“In all cases involving a tying arrangement, the plaintiff must prove the defendant has market power in the tying product.”); see also Amey, Inc., 758 F.2d at 1503. This Court must have sufficient factual support to “consider whether [LaGrange] ‘had enough power within the marketplace to abuse its position,’” Parsons, 2010 WL 5094258, at *6 (quoting Thompson, 934 F.2d at 1572), and Plaintiff simply has not provided it. Plaintiff identifies the relevant tying product market as “the water market in [unincorporated Troup County].” Compl. ¶¶ 17, 34. But the Complaint never describes the “water” product market. A relevant “water” product market includes all alternative products to which a consumer might reasonably substitute for one another. See, e.g., United States v. E.I. DuPont de Nemours & Co., 351 U.S. 377, 394-96 (1956); Smith v. Network Sols., Inc., 135 F. Supp. 2d 1159, 1168 (N.D. Ala. Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 20 of 31 15 2001) (“the relevant market includes those commodities or services that are reasonably interchangeable by consumers for the same purposes”). The Complaint does not even attempt to define the “water” market with reference to the reasonable interchangeability of products or cross-elasticity of demand as the law requires. See, e.g., Jacobs, 626 F.3d at 1337-38. Plaintiff never acknowledges that there are other potential available water sources, such as ground wells or springs, and the Complaint does not state what portion of the overall “water” market is comprised of water utility services, whether from LaGrange or another supplier. See Clark Memorials of Ala. Inc. v. SCI Ala. Funeral Servs. LLC, 991 F. Supp. 2d 1151, 1162 (N.D. Ala. 2014) (“market power in a tying claim frequently requires an analysis of market share”). The Complaint is similarly lacking in any factual support for Plaintiff’s claim that LaGrange “has appreciable economic and market power in the water market” as the alleged “exclusive supplier of water utility service in the vast majority of unincorporated Troup County.” Compl. ¶ 34. LaGrange’s alleged dominance in the supply of water utility service is not itself sufficient to show that LaGrange possesses “appreciable economic and market power in the water market.” See Clark Memorials, 991 F. Supp. 2d at 1161, n. 6 (well-pleaded product market must include facts supporting the purported product market definition); see also Jacobs, 626 F.3d at 1336. It is Plaintiff’s burden to allege facts showing that LaGrange “possess[es] Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 21 of 31 16 some special ability to force a purchaser to do something that he would not do in a competitive market, which is usually called ‘market power.’” Tic-X-Press, 815 F.2d at 1420 (citing Jefferson Parish, 466 U.S. at 13-14). Having failed to plead either a relevant tying product market or LaGrange’s market power in such a market, Plaintiff’s Complaint should be dismissed for failure to state a claim. See, e.g., Jacobs, 626 F. 3d at 1338 (at the pleading stage, the plaintiff has “the obligation under Twombly to indicate that [it] could provide evidence plausibly suggesting the definition of the alleged [market]”); Lady Deborah’s, Inc. v. VT Griffin Servs., Inc., No. 207-079, 2007 WL 4468672, at *10 (S.D. Ga. Oct. 26, 2007) (“[F]ailure to allege facts regarding substitute products, to distinguish among comparable products and services, if any, or to aver other facts regarding the cross-elasticity of demand are grounds for dismissal.”); see also Griffiths v. Blue Cross & Blue Shield, 147 F. Supp. 2d 1203, 1215 (N.D. Ala. 2001); In re Am. Online, Inc., 168 F. Supp. 2d 1359, 1375 (S.D. Fla. 2001). C. Plaintiff Has Not Alleged a “Not Insubstantial” Amount of Interstate Commerce Also absent from Plaintiff’s Complaint is any allegation of “a not insubstantial amount of interstate commerce.” Amey, 758 F.2d at 1503. To satisfy this jurisdictional requirement, Plaintiff must allege “a logical connection as a matter of practical economics between the unlawful conduct and interstate commerce.” Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 22 of 31 17 Shahawy v. Harrison, 778 F.2d 636, 640 (11th Cir. 1985) (quoting Crane v. Intermountain Health Care, Inc., 637 F.2d 715, 723 (10th Cir. 1980).3 Plaintiff does not allege any facts showing a nexus, either direct or indirect, between LaGrange’s alleged anticompetitive activities and any interstate commerce. Although Plaintiff claims that “LaGrange’s tying arrangement affects a not insubstantial volume of commerce,” this allegation limits the alleged impact to “the retail energy market in the areas of unincorporated Troup County served by LaGrange’s natural gas utility.” Compl. ¶ 35 (emphasis added). All other allegations likewise specifically focus on business and markets within Troup County, Georgia, and make no mention of interstate commerce. See, e.g. Compl. ¶¶ 1, 2, 5, 6, 7, 8, 14. Plaintiff alleges no facts indicating “as a matter of practical economics” that LaGrange’s alleged anticompetitive tying affects “a not insubstantial amount of 3 Plaintiff also must allege “a total amount of business, substantial enough in terms of dollar-volume so as not to be merely de minimis.” Fortner Enters., Inc. v. U.S. Steel Corp., 394 U.S. 495, 501 (1969); Jefferson Parish, 466 U.S. at 16 (“[I]f only a single purchaser were forced” to the purchase a tied item, the resultant impact on competition would not be sufficient to warrant the concern of antitrust law. It is for this reason that we have refused to condemn tying arrangements unless a substantial volume of commerce is foreclosed thereby.”); see also Parsons, 2010 WL 5094258, at *7. Plaintiff’s allegations of “lost revenue” do not indicate what “dollar-volume” of commerce the Ordinance has allegedly affected. Compl. ¶ 38. And with no clear allegation identifying the overlapping service areas for LaGrange’s water and natural gas utilities and Plaintiff’s electric utility, it is impossible to infer what number of customers may be impacted by the alleged anticompetitive tie. Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 23 of 31 18 interstate commerce,” Amey, 758 F.2d at 1503, and thus has not alleged this jurisdictional requirement of a federal tying claim. III. Plaintiff Fails To State A Claim For Tortious Interference Because The Alleged Financial Injury Is Purely Speculative To state a claim for tortious interference, Plaintiff must allege facts that LaGrange, “(1) acting improperly and without privilege (2) and acting purposely and with malice with the intent to injure, (3) induced a third party or parties not to enter into or continue a business relationship with the plaintiff (4) for which the plaintiff suffered some financial injury.” Bartholomew v. AGL Res., Inc., 361 F.3d 1333, 1340 (11th Cir. 2004); see also Fortson v. Brown, 302 Ga. App. 89, 91 (2010). Here, Plaintiff’s claim fails because the only alleged financial injury - i.e., the lost revenue Plaintiff would have received selling electric utility service to energy customers in unincorporated Troup County - is purely speculative and cannot survive dismissal under Twombly and Iqbal. According to Plaintiff’s theory, the Ordinance tortiously induced and continues to induce energy customers with new construction to avoid doing business with Plaintiff, thereby causing Plaintiff financial harm in the form of lost revenue from those energy contracts. Compl. ¶¶ 41, 43. Plaintiff’s claim focuses on LaGrange’s alleged interference with Plaintiff’s “anticipated” (i.e., prospective) Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 24 of 31 19 business relations. Id. ¶ 41.4 “To show that [LaGrange] induced a third party or parties not to enter into or continue a business relationship, [Diverse Power] must demonstrate that absent [LaGrange’s] interference, prospective business relations ‘were reasonably likely to develop in fact.’” 1524948 Alberta Ltd. v. Lee, No. 1:10- cv-02735, 2011 WL 2899385, at *9 (N.D. Ga. July 15, 2011) (citing Galardi v. Steele-Inman, 266 Ga. App. 515, 521-22 (2004)); see also Wilson v. City of Sardis, 264 Ga. App. 178 (2003). Yet, the Complaint does not identify a single customer who allegedly would have purchased Plaintiff’s electric energy services but for the Ordinance, nor does it allege any other factual basis to support the mere assumption that Plaintiff could have obtained additional business. It is entirely speculative that any hypothetical business relationships were reasonably likely to develop, and Plaintiff cannot “‘nudge[] [its] claim[] across the line from conceivable to plausible’” with mere conjecture and guesswork. Am. Dental Ass’n, 605 F.3d at 1289 (quoting Twombly, 127 S. Ct. at 1974). 4 Although the Complaint alleges financial injury also resulted from customers’ decision not to continue to purchase Plaintiff’s electric service, Compl. ¶ 41, this claim is not plausible, and thus fails as a matter of law, because the Ordinance only applies to customers with new construction (i.e., those previously without any need for utility services). See Am. Dental Ass’n v. Cigna Corp., 605 F.3d 1283, 1288-90 (11th Cir. 2010) (outlining the facial plausibility pleading standard of Rule 8 as interpreted by Iqbal and Twombly). Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 25 of 31 20 Plaintiff’s tortious interference claim also fails because “the exercise of an absolute legal right is not and cannot be considered an interference with a contractual or potential contractual relationship.” Disaster Servs., Inc. v. ERC P’ship, 228 Ga. App. 739, 741 (1997). As discussed in Section I above, LaGrange was statutorily empowered to enact and enforce the Ordinance. Given LaGrange’s “absolute legal right,” Plaintiff cannot use this state law theory to make an end-run around the immunity defense to its antitrust claims. IV. Plaintiff Fails to Properly Plead a State Law Antitrust Claim Plaintiff’s third and final claim arises under Article III, § VI, ¶ 5 of the Georgia Constitution and O.C.G.A. § 13-8-2, which “mean precisely the same thing” and invalidate certain contracts in restraint of trade. Griffin v. Vandegriff, 205 Ga. 288, 293 (1949); see also U.S. Anchor Mfg., Inc. v. Rule Indus., Inc., 7 F.3d 986, 1002 (11th Cir. 1993). First and foremost, Plaintiff is not entitled to pursue this claim against LaGrange because LaGrange is entitled to state action immunity. As with the federal claim, the Georgia Supreme Court has recognized that a local government entity is immune from state-law antitrust claims “when engaged in anticompetitive conduct pursuant to a clearly expressed state policy.” Strykr v. Long County Bd. Of Com’rs, 277 Ga. 624, 625 (2004). Thus, LaGrange is immune from the state-law Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 26 of 31 21 antitrust claim for the same reasons it is immune from the federal claim. See supra Section I. The state-law antitrust claim also fails because Plaintiff has not alleged facts establishing its standing to pursue such claim. To have standing to challenge the enforceability of an allegedly anticompetitive contract, the plaintiff either must be a party to the agreement or otherwise allege that the contracting parties conspired to injure the plaintiff. See Palmer v. Atlantic Ice & Coal Co., 173 S.E. 424, 428-30 (Ga. 1934) (no standing where plaintiff was not a party to challenged contract and did not allege facts showing a conspiracy to injure plaintiff); Brown v. Jacobs Pharmacy Co., 41 S.E. 553, 556-57 (Ga. 1902) (allowing plaintiff to challenge a contract where the parties conspired to injure plaintiff). The only agreement Plaintiff identifies as allegedly made in restraint of trade is the agreement between LaGrange and West Point “tying the provision of water and sewer services by the City of West Point to the provision of natural gas by LaGrange.” Compl. ¶ 26. This claim is significantly narrower than Plaintiff’s federal antitrust claim because it focuses on a different “tying” product-West Point’s water utility services rather than LaGrange’s, see Compl. ¶ 26-30-and is plainly limited to the geographic area covered by the Second Amendment to Intergovernmental Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 27 of 31 22 Contract Regarding Utility Services, attached as Exhibit C to the Complaint.5 But Plaintiff lacks standing to pursue this claim because it does not claim to be a party to the alleged anticompetitive agreement and has failed to properly plead a conspiracy between LaGrange and West Point aimed at injuring Plaintiff. Although Plaintiff asserts that LaGrange and West Point are “co- conspirator[s],” Compl. ¶ 30, there are no factual assertions made to plausibly support this legal conclusion. See Budget Charge Accounts, Inc. v. Peters, 213 Ga. 17, 18 (1957). Moreover, Plaintiff has not pled facts to support that the alleged agreement between LaGrange and West Point was done with the purpose and intent of injuring Plaintiff’s business. See Brown, 41 S.E. at 556-57. Given these failures, Count III should be dismissed. CONCLUSION For the foregoing reasons, Plaintiff has failed to properly plead any plausible entitlement to relief and the Complaint should be dismissed in its entirety. 5 In addition, if Plaintiff prevailed on Count III, its only available relief would be to have the agreement declared unenforceable. See E.T. Barwick Indus., Inc. v. Walter E. Heller & Co., 692 F. Supp. 1331, 1349 (N.D. Ga. 1987). Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 28 of 31 23 Respectfully submitted, this 10th day of February, 2017. By: /s/ Allison S. Thompson Teresa T. Bonder Georgia Bar No. 703969 teresa.bonder@alston.com Allison S. Thompson Georgia Bar No. 779509 allison.thompson@alston.com ALSTON & BIRD LLP 1201 West Peachtree Street Atlanta, Georgia 30309-3424 Telephone: 404-881-7000 Facsimile: 404-881-7777 Jeffrey M. Todd Georgia Bar No. 713738 jtodd@lttpc.com LEWIS, TAYLOR & TODD, P.C. P.O. Box 1027 LaGrange, Georgia 30241 Telephone: 706-882-2501 Facsimile: 706-882-4905 Attorneys for Defendant the City of LaGrange, Georgia Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 29 of 31 CERTIFICATE OF COMPLIANCE Pursuant to LR 7.1D, the undersigned certifies that the foregoing complies with the font and point selections permitted by LR 5.1B. This document was prepared on a computer using the Times New Roman font (14 point). Respectfully submitted, this 10th day of February, 2017. By: /s/ Allison S. Thompson Allison S. Thompson Georgia Bar No. 779509 Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 30 of 31 CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the foregoing was filed on February 10th, 2017 with the Court and served electronically through the CM/ECF system to all counsel of record registered to receive a Notice of Electronic Filing for this case. By: /s/ Allison S. Thompson Allison S. Thompson Georgia Bar No. 779509 Case 3:17-cv-00003-TCB Document 8-1 Filed 02/10/17 Page 31 of 31