Diverse Power Inc. v. City of Lagrange, GeorgiaMOTION TO DISMISS FOR FAILURE TO STATE A CLAIM with Brief In SupportN.D. Ga.April 3, 2017IN 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 THE FIRST AMENDED COMPLAINT For the reasons set forth in the accompanying Memorandum in Support of Motion to Dismiss Plaintiff’s First Amended Complaint, Defendant City of LaGrange, Georgia (“LaGrange”) hereby moves to dismiss with prejudice Plaintiff Diverse Power Inc.’s First Amended 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 the First Amended Complaint be granted and that the claims in the First Amended Complaint be dismissed with prejudice. Dated: April 3, 2016. Respectfully submitted, By: /s/ Allison S. Thompson Case 3:17-cv-00003-TCB Document 17 Filed 04/03/17 Page 1 of 3 2 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 17 Filed 04/03/17 Page 2 of 3 CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the foregoing was filed on April 3, 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 17 Filed 04/03/17 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 FIRST AMENDED COMPLAINT Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 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 III. Plaintiff Fails to Properly Plead a State-Law Antitrust Claim ............... 15 IV. Plaintiff Fails to State a Claim for Tortious Interference ....................... 19 A. Plaintiff has Not Alleged Facts Showing that LaGrange Acted Improperly. ......................................................................... 19 B. Plaintiff’s Allegations of Interference with Prospective Business Relationships, and the Resulting Financial Harm, are Speculative. ............................................................................. 21 CONCLUSION ........................................................................................................22 Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 2 of 31 TABLE OF AUTHORITIES Page(s) CASES Alberta Ltd. v. Lee, No. 1:10-cv-02735, 2011 WL 2899385 (N.D. Ga. July 15, 2011) ..................... 21 Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486 (11th Cir. 1985) .................................................................... 10, 15 Ashcroft v. Iqbal, 556 U.S. 662 (2009) .................................................................................... 4, 5, 21 Bartholomew v. AGL Res., Inc., 361 F.3d 1333 (11th Cir. 2004) .......................................................................... 19 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ...................................................................... 4, 12, 14, 21, 22 Brown v. Jacobs Pharmacy Co., 41 S.E. 553 (Ga. 1902) ....................................................................................... 16 Budget Charge Accounts, Inc. v. Peters, 213 Ga. 17 (1957) ......................................................................................... 17, 18 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 Cobb Theatres III, LLC v. AMC Enter. Holdings, Inc., 101 F. Supp. 3d 1319 (N.D. Ga. 2015) ............................................................... 11 Cook v. Robinson, 216 Ga. 328 (1960) ....................................................................................... 17, 18 Culpepper v. Thompson, 254 Ga. App. 569 (2002) .................................................................................... 19 Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 3 of 31 ii Disaster Servs., Inc. v. ERC P’ship, 228 Ga. App. 739 (1997) .................................................................................... 20 F.T.C. v. Phoebe Putney Health Sys., Inc., 133 S. Ct. 1003 (2013) ...................................................................................... 5, 9 Fortson v. Brown, 302 Ga. App. 89 (2010) ...................................................................................... 19 Galardi v. Steele-Inman, 266 Ga. App. 515 (2004) .................................................................................... 21 Griffin v. Vandegriff, 205 Ga. 288 (1949) ............................................................................................. 15 Griffiths v. Blue Cross & Blue Shield, 147 F. Supp. 2d 1203 (N.D. Ala. 2001) .............................................................. 14 Illinois Tool Works, Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006) .............................................................................................. 15 In re Am. Online, Inc., 168 F. Supp. 2d 1359 (S.D. Fla. 2001) ............................................................... 14 J. & C. Ornamental Iron Co. v. Watkins, 114 Ga. App. 688 (1966) .................................................................................... 17 Jacobs v. Tempur-Pedic Int’l, Inc., 626 F.3d 1327 (11th Cir. 2010) .............................................................. 11, 12, 13 Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984) ................................................................................................ 10 JES Props., Inc. v. USA Equestrian, Inc., 253 F. Supp. 2d 1273 (M.D. Fla. 2003) .............................................................. 14 Lady Deborah’s, Inc. v. VT Griffin Servs., Inc., No. 207-079, 2007 WL 4468672 (S.D. Ga. Oct. 26, 2007) ............................... 14 McCallum v. City of Athens, Ga., 976 F.2d 649 (11th Cir. 1992) ............................................................ 1, 5, 8, 9, 10 Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 4 of 31 iii McCrary v. AA Music Service, Inc., 115 Ga. App. 65 (1967) ...................................................................................... 17 Palmer v. Atlantic Ice & Coal Co., 173 S.E. 424 (Ga. 1934) ..................................................................................... 16 Parker v. Brown, 317 U.S. 341 (1943) ................................................................................ 5, 7, 9, 10 Parsons v. Bright House Networks, LLC, No. 2:09-cv-0267, 2010 WL 5094258 (N.D. Ala. Feb. 23, 2010) ..................... 11 Phigenix, Inc. v. Genentech, Inc., No. 1:14-cv-287, 2015 WL 10910488 (N.D. Ga. Mar. 12, 2015) ........................ 4 Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430 (3d Cir. 1997) ............................................................................... 11 Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421 (9th Cir. 1995) .............................................................................. 12 Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252 (11th Cir. 2009) .......................................................................... 14 Singleton v. Itson, 192 Ga. App. 78 (1989) ................................................................................ 19, 21 Smith v. Network Sols., Inc., 135 F. Supp. 2d 1159 (N.D. Ala. 2001) .............................................................. 12 Strykr v. Long County Bd. Of Com’rs, 277 Ga. 624 (2004) ............................................................................................. 15 Tic-X-Press, Inc. v. Omni Promotions Co. of Ga., 815 F.2d 1407 (11th Cir. 1987) .................................................................... 10, 11 Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985) .......................................................................................passim U.S. Anchor Mfg., Inc. v. Rule Indus., Inc., 7 F.3d 986 (11th Cir. 1993) ................................................................................ 15 Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 5 of 31 iv U.S. Anchor Mfg. v. Rule Indus., 264 Ga. 295 (1994) ................................................................................. 16, 17, 18 United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377 (1956) ............................................................................................ 11 Webb v. Primo’s, 706 F. Supp. 863 (N.D. Ga. 1988) ...................................................................... 10 Wilson v. City of Sardis, 264 Ga. App. 178 (2003) .................................................................................... 21 Zepp v. Mayor & Council of City of Athens, 255 Ga. 449 (1986) ........................................................................................... 7, 8 RULES Federal Rule of Civil Procedure 8 ............................................................................. 4 Federal Rule of Civil Procedure 12(b)(6) .................................................................. 4 STATUTES Ga. Code § 20-15-6 .................................................................................................... 3 O.C.G.A. § 13-8-2 .................................................................................................... 15 O.C.G.A. § 36-34-5(a)(3)(B) ..................................................................................... 6 O.C.G.A. §§ 36-65-1 .................................................................................................. 8 O.C.G.A. § 36-65-2 .................................................................................................... 9 OTHER AUTHORITIES LaGrange, Ga. Code § 20-15-6, Adopted at Ord. No. 04-29 ..................................... 3 Georgia Constitution Article 9, § 2, ¶ III ............................................................... 6, 9 Georgia Constitution Article III, § VI, ¶ 5 ............................................................... 15 Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 6 of 31 Plaintiff Diverse Power Inc. (“Plaintiff”) alleges that the City of LaGrange, Georgia (“LaGrange”) violated the federal 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 Amended 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 a proper tying product market, and has not alleged facts to support LaGrange’s alleged power in the relevant tying product market. Plaintiff’s allegations in support of its state-law antitrust claim also fail because LaGrange is entitled to immunity and because Plaintiff has not alleged facts plausibly establishing that claim. Finally, Plaintiff’s state-law claim for tortious Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 7 of 31 2 interference is insufficiently pled because it fails to identify any wrongful conduct by LaGrange and because the alleged interference (and resultant injury to Plaintiff) is purely speculative. 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. Am. Compl. ¶ 15. Each city provides water utility services within its own city limits, as well as in various undefined areas in unincorporated Troup County. Id. ¶¶ 2, 5, 16. Plaintiff claims that LaGrange is the “sole supplier of water utility service in the majority of unincorporated Troup County.” Id. ¶ 18. LaGrange also offers natural gas and electric utility services inside and outside of its city limits. Id. ¶¶ 7, 19, 21. Plaintiff claims that LaGrange is the sole supplier of natural gas “in much of unincorporated Troup County.” Id. ¶ 21. Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 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. Am. Compl. ¶ 9 (citing LaGrange, Ga. Code § 20-15-6). Plaintiff’s Claims Against LaGrange Plaintiff is a LaGrange-based electric utility company that provides service in “much of Troup County and in other counties in southwest Georgia.” Id. ¶ 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. ¶ 20; 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 17-1 Filed 04/03/17 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. ¶ 24. Plaintiff calls the Ordinance an illegal “tying arrangement” predicated on LaGrange’s “provision of water utility service.” Id. ¶ 24. 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. ¶¶ 46, 51, 54. 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 17-1 Filed 04/03/17 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 17-1 Filed 04/03/17 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. Am. Compl. ¶¶ 33, 45. 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. ¶ 34. The Amended Complaint does not challenge LaGrange’s authority to provide or refuse to provide either water or natural gas utility services outside its city limits. Instead, Plaintiff 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 the 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 Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 12 of 31 7 and maintenance of “water … or sewage” for “[p]ersons to whom the system is made 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 Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 13 of 31 8 authorized the City to provide sewage services and also to determine the areas to be served” because “it is 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- Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 14 of 31 9 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 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. LaGrange is likewise 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 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 17-1 Filed 04/03/17 Page 15 of 31 10 water utility services to new construction customers located outside city limits was a foreseeable and logical result of Georgia’s statutory framework. Because “we 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.” Hallie, 700 F.2d at 381. Accordingly, LaGrange is entitled to Parker immunity from Plaintiff’s federal antitrust claims. See id. at 42; McCallum, 976 F.2d at 654. II. Plaintiff Fails to State a Federal Claim for Unlawful Tying Plaintiff’s federal antitrust claim also fails because it is insufficiently pled. 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).3 Here, Plaintiff’s allegations fail to establish the 3 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 Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486, 1502-03 (11th Cir. 1985) (citing Jefferson Parish Hosp. Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 16 of 31 11 plausibility of the third element of its federal tying claim-that LaGrange “possesses sufficient economic power in the tying product market to coerce buyer acceptance of the tied product.” See Tic-X-Press, 815 F.2d at 1414. To state a claim for unlawful tying, “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). The relevant product market is “composed of products that have reasonable interchangeability.” Jacobs, 626 F.3d at 1337 (quoting Levine, 72 F.3d at 1552). In examining an alleged product market, courts consider “the uses to which the product is put by consumers in general.” Id. (quoting Maris Distrib. Co., 302 F.3d at 1221); see also United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 404 (1956). A relevant product market includes all alternative products a consumer might reasonably substitute for one another, for the same purpose. See, e.g., E.I. DuPont de Nemours & Co., 351 U.S. at 394-96 (1956); Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430, 438 (3d Cir. 1997); Cobb Theatres III, LLC v. AMC Enter. Holdings, 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). Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 17 of 31 12 Inc., 101 F. Supp. 3d 1319, 1337 (N.D. Ga. 2015); Smith v. Network Sols., Inc., 135 F. Supp. 2d 1159, 1168 (N.D. Ala. 2001). In determining whether a relevant product market exists as a distinct subset of a larger product market, “[a] court should pay particular attention to evidence of the cross-elasticity of demand and reasonable substitutability of the products, because ‘[i]f consumers view the products as substitutes, the products are part of the same market.’” Jacobs, 626 F.3d at 1337 (quoting Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1435 (9th Cir. 1995)) (second alteration in original). Moreover, at the pleadings stage, Plaintiff is obligated “to indicate that [it] could provide evidence plausibly suggesting the definition of the alleged submarket.” Id. at 1338. “Water utility services” constitute an alleged submarket of all water sources, but Plaintiff’s allegations do not suffice to meet its “responsibility under Twombly to plead facts ‘plausibly suggesting’” the composition of this alleged submarket. See Jacobs, 626 F.3d at 1338. The Amended Complaint alleges that (1) other methods of obtaining water are not reasonably interchangeable with water utility services, (2) there is no significant cross-elasticity of demand between water utility and other methods of obtaining water, and (3) non-utility water sources are “particularly poor substitutes” for new construction customers. Am. Compl. ¶¶ 35, 36. However, “[these] conclusional statement[s] merely beg[] the question of what, exactly, makes Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 18 of 31 13 [water utility service] comprise this submarket.” Jacobs, 626 F.3d at 1338. There is “no factual allegation[] of the cross-elasticity of demand or other indication[] of price sensitivity that would indicate whether consumers treat [water utility services] differently than they do [all other methods of obtaining water].” Id. Nor does Plaintiff make any allegation that consumers purchase water through a utility for a different purpose or use than they would purchase water through another available method. Although Plaintiff alleges that water utility service is the “preferred” method of obtaining water, Am. Compl. ¶ 40, the Amended Complaint does not provide factual support for the conclusory suggestion that other sources (e.g., well water) are not reasonably substitutable for utility water. Plaintiff alleges that other water sources “involve … investments and efforts that go far beyond simply turning on one’s water tap or connecting to available water utility services,” id. ¶ 35, but that allegation is not supported by any factual detail about the nature or degree of the difference in “investment and efforts” between utility and non-utility water service. The Amended Complaint does not include any factual allegation to explain who maintains the alleged preference for water utility, where or when the utility is preferred over other sources of water, or why the alleged preference exists. Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 19 of 31 14 In effect, Plaintiff requests that the Court simply assume, without support, that consumers of water do not consider other sources of water to be reasonably interchangeable with water utility service. Such assumptions are not sufficient to “nudge [Plaintiff’s federal antitrust] claim ‘across the line from conceivable to plausible.’” Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1261 (11th Cir. 2009) (quoting Twombly, 550 U.S. at 570). Where, as here, “an antitrust plaintiff fails to define its proposed relevant market with reference to the rule of reasonable interchangeability and cross-elasticity of demand, or alleges a proposed relevant market that clearly does not encompass all interchangeable substitute products even when all factual inferences are granted in plaintiff’s favor, the relevant market is legally insufficient and a motion to dismiss may be granted.” JES Props., Inc. v. USA Equestrian, Inc., 253 F. Supp. 2d 1273, 1281-82 (M.D. Fla. 2003); see also 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.”); 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, 1375-76 (S.D. Fla. 2001). Plaintiff simply has Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 20 of 31 15 not alleged a plausible tying product market, and thus its federal antitrust claims are insufficiently pled.4 III. Plaintiff Fails to Properly Plead a State-Law Antitrust Claim In addition to its federal antitrust claim, Plaintiff purports to state a claim 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, 4 Because Plaintiff artificially narrows the product market to exclude interchangeable means of obtaining water (e.g., well water), Plaintiff’s allegations regarding LaGrange’s purported power in the relevant market are also untenable. See Illinois Tool Works, Inc. v. Indep. Ink, Inc., 547 U.S. 28, 46 (2006); Palmyra Park Hosp., 604 F.3d at 1297; Amey, Inc. v. Gulf Abstract & Title, Inc., 758 F.2d 1486, 1503 (11th Cir. 1985); see also 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”). Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 21 of 31 16 LaGrange is immune from the state-law 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). To address its standing problem, Plaintiff accuses LaGrange of (1) “conspiring with West Point” and (2) entering into “agreements and arrangements with builders and developers (notwithstanding their unwilling participation) pursuant to the City’s tying ordinance and policy, which agreements and arrangements constitute conspiracies.” Am. Compl. ¶ 53. Neither point is sufficient to plead a conspiracy sufficient to sustain the state law antitrust claim. In Georgia, “[a] conspiracy is a combination of two or more persons to accomplish an unlawful end or to accomplish a lawful end by unlawful means.” U.S. Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 22 of 31 17 Anchor Mfg. v. Rule Indus., 264 Ga. 295, 297 (1994). “The essential element [of a conspiracy] is the common design[.]” Cook v. Robinson, 216 Ga. 328, 330 (1960); Budget Charge Accounts, Inc. v. Peters, 213 Ga. 17, 18 (1957). However, a Plaintiff “must allege all the elements of a cause of action for the [underlying] tort the same as would be required if there were no allegation of a conspiracy.” J. & C. Ornamental Iron Co. v. Watkins, 114 Ga. App. 688, 691 (1966). In the antitrust context, “where a petition merely alleges an oppressive course of conduct characterized by sharp business practices without setting forth all the necessary elements of a distinct tort committed during the course of conduct resulting in damage,” the complaint must be dismissed. McCrary v. AA Music Service, Inc., 115 Ga. App. 65, 69 (1967). At the outset, Plaintiff’s attempt to plead a conspiracy between LaGrange and “unwilling” builders and developers is nonsensical. See Am. Compl. ¶ 54. The face of this allegation belies any argument that the alleged co-conspirators-the builders and developers-reached any “agreement” or “common design” with LaGrange “to accomplish a lawful end by unlawful means.” See U.S. Anchor Mfg., 264 Ga. at 297; Cook, 216 Ga. at 330. The acknowledgement in the Amended Complaint that these alleged co-conspirators were “unwilling” participants in the alleged conspiracy renders Plaintiff’s claim defunct as a matter of law. Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 23 of 31 18 With respect to the alleged conspiracy with West Point, the only agreement identified is the Second Amendment to Intergovernmental Contract Regarding Utility Services between LaGrange and West Point. See Am. Compl. ¶¶ 53, 27-31; Ex. C. Plaintiff has identified an agreement, but not an unlawful conspiracy. Neither the face of the agreement nor the allegations in Plaintiff’s Amended Complaint set forth any factual support for West Point’s alleged participation in the purportedly unlawful purpose of the agreement. U.S. Anchor Mfg., 264 Ga. at 297. While Plaintiff alleges that LaGrange “entered into such agreements and engaged in such conduct to secure for itself control of the energy market in the specified areas, with the specific aim of destroying competition” and “to exclude competitors from the marketplace,” “injuring competition” and “injuring the competitors so excluded,” Am. Compl. ¶ 54, there is not one allegation-conclusory or otherwise-that West Point shared this “common design.” See Cook, 216 Ga. at 330; Budget Charge Accounts, 213 Ga. at 18. Without any allegation that both alleged conspirators conspired or combined “to accomplish an unlawful end or to accomplish a lawful end by unlawful means,” U.S. Anchor Mfg., 264 Ga. at 297, Plaintiff’s state-law antitrust claim fails as a matter of law. Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 24 of 31 19 IV. Plaintiff Fails to State a Claim for Tortious Interference To state a claim for tortious interference, Plaintiff must allege facts to show 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). This claim is insufficiently pled because the Amended Complaint does not establish an independent wrongful act by LaGrange and because the allegedly wrongful inducement (and resultant financial injury to Plaintiff) is purely speculative. A. Plaintiff has Not Alleged Facts Showing that LaGrange Acted Improperly. To establish tortious interference under Georgia state law requires allegations of “an independent wrongful act.” Singleton v. Itson, 192 Ga. App. 78, 80 (1989). “Improper actions constitute conduct wrongful in itself; thus, improper conduct means wrongful action that generally involves predatory tactics such as physical violence, fraud or misrepresentation, defamation, use of confidential information, abusive civil suits, and unwarranted criminal prosecutions.” Culpepper v. Thompson, 254 Ga. App. 569, 572 (2002). Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 25 of 31 20 The only “wrongful conduct” alleged in the Amended Complaint is the purportedly “illegal tying arrangement.” Am. Compl. ¶ 48; see also id. ¶ 49. But unless the tying agreement violates federal or state antitrust laws, it cannot be characterized as “illegal.” Because Plaintiff has not pled any “illegal tying arrangement,” it similarly has not pled any wrongful conduct to support the tortious interference claim. Nor are there any factual allegations to plausibly establish that the Ordinance is otherwise “wrongful.” To the contrary, as discussed above, the Georgia legislature has expressly authorized LaGrange to elect not to provide water utility services outside city limits, or to place conditions on the provisions of such services if it elects to do so. See supra, Section I. Thus, absent an unlawful antitrust violation, the Ordinance represents nothing more than LaGrange’s lawful bargaining with customers otherwise not entitled to its water utility services. “[T]he 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). Aside from the Ordinance, the Amended Complaint does not identify any other “predatory tactic”-no “physical violence, fraud or misrepresentation, defamation, use of confidential information, abusive civil suits, [or] unwarranted criminal prosecutions”-to support the tortious interference count. Thus, the Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 26 of 31 21 allegations are insufficient to establish “an independent wrongful act” by LaGrange and the tortious interference claim fails as a matter of law. See Singleton, 192 Ga. App. at 80. B. Plaintiff’s Allegations of Interference with Prospective Business Relationships, and the Resulting Financial Harm, are Speculative. Plaintiff’s tortious interference claim also 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 - rests on a single potential customer relationship, is almost entirely speculative, and cannot survive dismissal under Twombly and Iqbal. “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 Amended Complaint only identifies a single customer-the developer of the Cameron Pointe subdivision-who allegedly would have purchased Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 27 of 31 22 additional electric energy services from Plaintiff but for the Ordinance.5 See Am. Compl. ¶ 14. It is entirely speculative to infer from this allegation, without any additional factual basis, that any other hypothetical customer was reasonably likely to purchase Plaintiff’s electric service. Put simply, the sparse allegations in the Amended Complaint are not sufficient to “‘nudge[] [Plaintiff’s] claim[] across the line from conceivable to plausible’” without mere conjecture and guesswork. Am. Dental Ass’n, 605 F.3d at 1289 (quoting Twombly, 127 S. Ct. at 1974).6 CONCLUSION For the foregoing reasons, Plaintiff has failed to properly plead any plausible entitlement to relief and the Amended Complaint should be dismissed in its entirety. Respectfully submitted, this 3rd day of April, 2017. By: /s/ Allison S. Thompson Teresa T. Bonder Georgia Bar No. 703969 5 Plaintiff alleges that the Cameron Pointe developer built homes on the south side of the development “to use electricity for all the home appliances” and “would have built [homes on the north side” to use electricity for [appliances covered by the Ordinance] were it not for the City’s [O]rdinance and policy.” Am. Compl. ¶ 14. However, the Ordinance does not fully displace electricity with natural gas-wall outlets, for example, would still require electric utility service-and Plaintiff never alleges that the Cameron Point developer actually purchased any electric utility service from Plaintiff. 6 To the extent that Plaintiff’s tortious interference claim is allowed to proceed, that claim should be limited to the sole business relationship identified in the Amended Complaint (i.e., Cameron Pointe). Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 28 of 31 23 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 17-1 Filed 04/03/17 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 3rd day of April, 2017. By: /s/ Allison S. Thompson Allison S. Thompson Georgia Bar No. 779509 Case 3:17-cv-00003-TCB Document 17-1 Filed 04/03/17 Page 30 of 31 CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the foregoing was filed on April 3, 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 17-1 Filed 04/03/17 Page 31 of 31