Quintiles Ims Incorporated et al v. Veeva Systems, Inc.

BRIEF in Opposition

D.N.J.June 5, 2017

Tonia Ouellette Klausner WILSON SONSINI GOODRICH & ROSATI Professional Corporation 1301 Avenue of the Americas, 40th Floor New York, New York 10019 Telephone: (212) 999-5800 Attorney for Defendant Veeva Systems Inc. UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY QUINTILES IMS INCORPORATED and IMS SOFTWARE SERVICES, LTD., Plaintiffs - Counterclaim Defendants, v. VEEVA SYSTEMS INC., Defendant - Counterclaim Plaintiff. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No.: 2:17-cv-00177-CCC-MF Hon. Claire C. Cecchi OPPOSITION TO PLAINTIFFS - COUNTERCLAIM DEFENDANTS’ MOTION TO DISMISS Motion Date: Monday, June 19, 2017 Document Electronically Filed Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 1 of 48 PageID: 672 TABLE OF CONTENTS I. INTRODUCTION ..................................................................................... 1 II. FACTUAL BACKGROUND .................................................................... 2 III. LEGAL STANDARD ................................................................................ 5 IV. IMS’S ANTICOMPETITIVE CONDUCT VIOLATES SECTION 2 OF THE SHERMAN ACT................................................... 6 A. IMS Engages in Illegal Anticompetitive Conduct in Both the Reference Data and MDM Markets ..................................... 8 1. IMS Illegally Refuses To Deal with Customers .......................... 8 2. IMS’s Anticompetitive Conduct is an Unsavory Monopoly Broth of Section 2 Violations ...................................13 3. Even if IMS’s Conduct is Mischaracterized as a Refusal To Deal with a Competitor, it Still Violates Section 2 ...................................................................................16 B. IMS Has a Dangerous Probability of Monopoly in MDM .................21 V. IMS VIOLATED SECTION 1 OF THE SHERMAN ACT THROUGH TWO PER SE ILLEGAL GROUP BOYCOTTS ..............................................................................................25 A. IMS and Cegedim’s Boycott of Veeva Is a Per Se Violation of Section 1 of the Sherman Act ........................................25 B. IMS’s Agreement with Reltio Is a Per Se Violation of Section 1 .......................................................................................29 VI. VEEVA’S STATE LAW CLAIMS ARE PROPERLY PLED ...............33 A. Veeva States a Claim under the Cartwright Act and UCL .................34 B. Veeva’s Claims of Intentional Interference with Contractual Relations and Prospective Economic Advantage are Well-Pled ..................................................................34 VII. IMS’S FOREIGN EXCLUSIONARY CONDUCT HAS A DIRECT, SUBSTANTIAL, AND FORSEEABLE EFFECT IN THE UNITED STATES AND MUST BE CONSIDERED ...................................................................................38 VIII. CONCLUSION .........................................................................................40 Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 2 of 48 PageID: 673 -ii- TABLE OF AUTHORITIES CASES A&E Plastik Pak Co. v. Monsanto Co., 396 F.2d 710 (9th Cir. 1968) ................... 10 ABS Glob., Inc. v. Inguran, LLC, No. 14-CV-503-WMC, 2017 WL 1194723 (W.D. Wis. Mar. 31, 2017), appeals pending, Nos. 17-1847, 17-2055 (7th Cir. filed Apr. 24 & May 19, 2017) ..................................................... 20 Access Telecom, Inc. v. MCI Telecomms. Corp., 197 F.3d 694 (5th Cir. 1999) ..... 39 Animal Science Prods., Inc. v. China Minmetals Corp., 654 F.3d 462 (3d Cir. 2011) ....................................................................................... 39-40 Apple Inc. v. Samsung Elecs. Co., No. 11-CV-01846, 2012 WL 1672493 (N.D. Cal. May 14, 2012) ........................................................................... 34 Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) ....... 16-19 Barr Labs., Inc. v. Abbott Labs., 978 F.2d 98 (3d Cir. 1992)........................... 21, 23 Bayer AG v. Schein Pharm., Inc., 129 F. Supp. 2d 705 (D.N.J. 2001), aff’d, 301 F.3d 1306 (Fed. Cir. 2002) .......................................................... 33 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) .............................................. 6, 28 Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297 (3d Cir. 2007) ........................................... 6, 7, 9, 14, 17, 19-23 Byars v. Bluff City News Co., 609 F.2d 843 (6th Cir. 1979) .............................. 8, 14 City of Mishawaka v. American Elec. Power Co., 616 F.2d 976 (7th Cir. 1980) ..... 6 Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690 (1962) ....... 6 Conwood Co. v. United States Tobacco Co., 290 F.3d 768 (6th Cir. 2002) ........... 15 Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451 (1992) .............. 5, 11 Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 3 of 48 PageID: 674 -iii- Ecker v. Williamsport Hosp., No. 1:16-CV-00693, 2016 WL 8200436 (M.D. Pa. Oct. 7, 2016) ............................................................................... 23 Elevator Antitrust Litig., In re, 502 F.3d 47 (2d Cir. 2007) ................................... 12 ES Dev., Inc. v. RWM Enters., Inc., 939 F.2d 547 (8th Cir. 1991) ................... 30, 31 Flat Glass Antitrust Litig., In re, 385 F.3d 350 (3d Cir. 2004) ........................ 27, 28 Glory Licensing LLC v. Toys “R” Us, Inc., No. CIV. 09-4252 FSH, 2011 WL 1870591 (D.N.J. May 16, 2011) .................................................. 33 Independent Serv. Orgs. Antitrust Litig., In re, 203 F.3d 1322 (Fed. Cir. 2000) ...... 9 Inserra Supermarkets, Inc. v. Stop & Shop Supermarket Co., No. 16-01697, 2017 WL 773876 (D.N.J. Feb. 28, 2017) .................................................... 23 Insurance Brokerage Antitrust Litig., In re, 618 F.3d 300 (3d Cir. 2010) .............. 25 International Constr. Prods. LLC v. Caterpillar Inc., Civ. A. No. 15-108-RGA, 2016 WL 4445232 (D. Del. Aug. 22, 2016) ................................................ 27 LePage’s Inc. v. 3M Co., 324 F.3d 141 (3d Cir. 2003) ............................ 6, 7, 12, 13 Lorain Journal Co. v. United States, 342 U.S. 143 (1951) ............................ 8, 9, 11 Magnesium Oxide Antitrust Litig., In re, No. CIV. 10-5943 DRD, 2011 WL 5008090 (D.N.J. Oct. 20, 2011) .................................................. 29 Neel v. Magana, Olney, Levy, Cathcart & Gelfand, 491 P.2d 421 (Cal. 1971) ............................................................................ 37 Omnicare, Inc. v. Unitedhealth Grp., Inc., 524 F. Supp. 2d 1031 (N.D. Ill. 2007) ........................................................................................... 27 Otter Tail Power Co. v. United States, 410 U.S. 366 (1973) ................................. 12 Pacific Gas & Elec. Co. v. Bear Stearns & Co., 791 P.2d 587 (Cal. 1990) ..... 35, 37 Palmer v. BRG of Ga., Inc., 498 U.S. 46 (1990) ................................................... 33 Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 4 of 48 PageID: 675 -iv- Pastore v. Bell Tel. Co. of Pa., 24 F.3d 508 (3d Cir. 1994) ................................... 23 Petruzzi’s IGA Supermarkets, Inc. v. Darling-Del. Co., 998 F.2d 1224 (3d Cir. 1993) ............................................................................................. 26 Popescu v. Apple Inc., 204 Cal. Rptr. 3d 302 (Ct. App. 2016)......................... 34-35 RealPage, Inc. v. Yardi Systems, Inc., 852 F. Supp. 2d 1215 (C.D. Cal. 2012).................................................................. 10, 11, 22, 35, 36 Redwood Theatres, Inc. v. Festival Enters., Inc., 908 F.2d 477 (9th Cir. 1990) ..... 34 Rossi v. Standard Roofing, Inc., 156 F.3d 452 (3d Cir. 1998) .................... 25, 30-32 SCEcorp v. Superior Ct. of San Diego Cnty., 4 Cal. Rptr. 2d 372 (Ct. App. 1992) ........................................................................................... 36 Schor v. Abbott Labs., 457 F.3d 608 (7th Cir. 2006) ............................................. 14 SD3, LLC v. Black & Decker (U.S.) Inc., 801 F.3d 412 (4th Cir. 2015), cert. denied, 136 S. Ct. 2485 (2016) ............................................................ 28 Starr v. Sony BMG Music Entm’t, 592 F.3d 314 (2d Cir. 2010) ............................ 29 Storis, Inc. v. GERS Retails Sys., Inc., No. 94-4400, 1995 WL 337100 (D.N.J. May 31, 1995) .......................................................................... 23-24 Strobl v. N.Y. Mercantile Exch., 582 F. Supp. 770 (S.D.N.Y. 1984), aff’d, 768 F.2d 22 (2d Cir. 1985) ................................................................ 28 Sullivan v. Finn, No. 16-CV-01948-WHO, 2017 WL 1209933 (N.D. Cal. Apr. 3, 2017) ............................................................................. 36 Tableware Antitrust Litig., In re, 485 F. Supp. 2d 1121 (N.D. Cal. 2007) ............. 31 TI Inv. Servs., LLC v. Microsoft Corp., 23 F. Supp. 3d 451 (D.N.J. 2014) ............ 39 Toys ‘R’ Us, Inc. v. FTC, 221 F.3d 928 (7th Cir. 2000)................................... 28-29 Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 5 of 48 PageID: 676 -v- Transcription Commc’ns Corp. v. John Muir Health, No. C 08-4418 TEH, 2009 WL 666943 (N.D. Cal. Mar. 13, 2009) ............................................... 36 Trembath v. Digardi, 118 Cal. Rptr. 124 (Ct. App. 1974) ..................................... 38 United States v. American Airlines, Inc., 743 F.2d 1114 (5th Cir. 1984) ...... 7, 22-23 United States v. Dentsply Int’l, Inc., 399 F.3d 181 (3d Cir. 2005) ................... 12-13 United States v. General Motors Corp., 384 U.S. 127 (1966) ......................... 30, 31 United States v. Griffith, 334 U.S. 100 (1948)......................................................... 7 United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) ................... 9-11, 14 United W. Med. Ctrs. v. Superior Ct. of Orange Cnty., 49 Cal. Rptr. 2d 682 (Ct. App. 1996) ........................................................................................... 37 Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) ........................................................................... 8, 16-19 West Penn Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85 (3d Cir. 2010) .................................................................. 5, 6, 14 ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254 (3d Cir. 2012).................. 12, 13, 20 STATUTES Foreign Trade Antitrust Improvement Act, 15 U.S.C. § 6a ................................... 39 15 U.S.C. § 6a(1)(B) ................................................................................... 39 Sherman Antitrust Act, 15 U.S.C. §§ 1-7 ...............................1, 6, 25, 29, 31, 34, 35 Section 1, 15 U.S.C. § 1 ........................................................................ 25, 29 Section 2, 15 U.S.C. § 2 ...................................................... 6, 8-12, 14-18, 20 Cal. Civ. Proc. Code § 339(1) ............................................................................... 38 Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 6 of 48 PageID: 677 -vi- California Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq. ....................................................... 34 Cal. Bus. & Prof. Code § 17203 .................................................................. 34 Cartwright Act, Cal. Bus. & Prof. Code § 16700 et seq. ................................. 33, 34 OTHER MATERIALS Comm’n of the European Communities, Commission Decision Relating to a Proceeding Under Article 82 of the EC Treaty, (EC) No. COMP D3/38.044 (Aug. 13, 2003), available at http://eur-lex.europa.eu/legal- content/EN/TXT/PDF/?uri=CELEX:32003D0741&from=EN .................... 38 Restatement (Second) of Torts .............................................................................. 36 3B Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law (4th ed. 2015) .......... 20 6 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law (2d ed. 2003) .............. 28 Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 7 of 48 PageID: 678 I. INTRODUCTION IMS, 1 a monopolist in two life sciences data markets, uses exclusionary conduct to avoid competition on the merits. It punishes customers who try to use IMS data with Veeva products. It uses threats, deception, and disruption to maintain market share. And it has entered into at least two per se illegal group boycotts. Such conduct is illegal under the Sherman Act and California state law. IMS attempts to dodge Veeva’s claims of monopolization and attempted monopolization by asserting that it only refuses to deal with Veeva, and may do so for “any reason.” ECF No. 45 (“Motion”) at 1. But as Veeva has alleged, IMS uses anticompetitive conduct against customers as a means to exclude Veeva - IMS’s only major rival and an industry innovator. IMS’s Motion is silent as to these allegations. Moreover, to the extent IMS’s conduct is a refusal to deal, IMS is simply wrong that a monopolist can refuse to deal for anticompetitive reasons. IMS’s other arguments are equally baseless. Veeva alleged sufficient facts to show IMS has a dangerous probability of monopolizing the Master Data Management (“MDM”) market - an issue best decided on summary judgment in any case. IMS’s group boycott agreement with Cegedim (now merged with IMS) is clearly alleged and clearly illegal. And the IMS-Reltio partnership is an illegal 1 Unless otherwise noted, “IMS” refers to Quintiles IMS, Inc., IMS Software Services, Ltd., and the data business bought from Cegedim. Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 8 of 48 PageID: 679 2 agreement in support of IMS’s own vertical restraints. Finally, IMS’s state law arguments are easily dismissed. In sum, IMS asks the Court to allow it to punish customers who deal with a rival, enter into group boycotts, and assert an unfettered right to use monopolies to avoid competition on the merits. Its Motion should be denied. II. FACTUAL BACKGROUND IMS and Veeva compete in rapidly growing life sciences data and analytics product markets. Over several decades, IMS has used mergers and anticompetitive conduct to become the world’s largest life sciences data and analytics company. See ECF No. 12 (Counterclaim Complaint (“CC”)) ¶¶ 15, 61-66. Veeva is a new entrant who is challenging IMS’s dominance. See CC ¶¶ 9-14. Both companies’ customers are pharmaceutical companies. See CC ¶ 10. This case involves four worldwide product markets. The first is Healthcare Reference Data, which is contact information for healthcare professionals (like doctors) and organizations (like hospitals) that pharmaceutical company customers use to sell their products. See CC ¶¶ 29-33. IMS and Veeva compete in Reference Data, but IMS maintains monopoly power protected by high barriers to entry. See CC ¶¶ 34-36. Second is Sales Data, which is information about prescriptions and drug sales volumes. See CC ¶¶ 37-43. Veeva does not compete in this market, and IMS holds a monopoly protected by high barriers to entry. See CC ¶¶ 44-46. Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 9 of 48 PageID: 680 3 Third is MDM - software that customers use to “match” and then analyze Reference Data, Sales Data, and their own proprietary data in order to identify sales opportunities. See CC ¶¶ 52-55. IMS (in partnership with its rival Reltio) and Veeva compete in this market, which also has high barriers to entry. See CC ¶¶ 56-60. Finally, Customer Relationship Management (“CRM”) is software that uses data and the results of MDM analysis to help customers’ sales representatives during sales calls. See CC ¶¶ 47-50. IMS and Veeva also compete in CRM. See CC ¶ 51. These product markets are interrelated. For instance, MDM requires both Sales Data and Reference Data to be maximally effective. See CC ¶ 54. In theory and past practice, customers can use data and software from rival companies under the terms of their license agreements with their data suppliers. See CC ¶ 26-27. To do so, a customer requests that the data supplier (like IMS) agree to an industry-standard Third Party Access (“TPA”) agreement that allows a software provider (like Veeva) to have “access” to data during implementation of the customer’s software and by hosting the data on a server. See, e.g., CC ¶¶ 3, 27, 49, 54, 74, 91, 111. Importantly, the software provider agrees not to use this data for its own benefit - use of the data within the software is controlled by the customer Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 10 of 48 PageID: 681 4 for the benefit of the customer. 2 See CC ¶ 27. If a data supplier rejects a TPA, it is not refusing to give something to a software provider; rather, it is refusing to permit a customer’s use of a rival’s product. See, e.g., CC ¶¶ 86, 111. Before mid-2014, customers were generally free to buy data and analytics software separately, and from the company of their choosing. See CC ¶¶ 28, 68. Indeed, the industry’s main data suppliers - IMS and Cegedim - granted TPAs as a matter of course, including for the use of their data in Veeva MDM. See CC ¶ 68. Thus, companies competed on the merits of each product. But all that changed when IMS agreed to acquire Cegedim’s data: after the announcement of their deal (but before their merger closed), both companies abruptly and simultaneously implemented a policy of refusing to sign TPAs for customers who sought to use their data in Veeva MDM. See CC ¶¶ 69-76. This was the beginning of IMS’s strategy to maintain its reference data monopoly and monopolize MDM by using increasingly restrictive TPA policies to block customers from using Veeva Reference Data and MDM. Today, IMS 2 Consider an illustration involving Reference Data and MDM. Reference Data is like a phonebook, while MDM is like a cloud-based Microsoft Excel that customers use to analyze that phonebook. When a PC user runs a personal version of Excel, in some limited sense Microsoft might be said to have “access” to a spreadsheet stored in the Microsoft Cloud, but the Excel user controls Excel and uses it for his own benefit. Just so, when a customer loads data into its personal Veeva MDM program (“instance”), Veeva may have “access” to the data (in the sense that it is hosted in a segregated part of Veeva’s cloud server), but Veeva never uses the data for a commercial purpose of its own - rather, the customer uses it to analyze sales opportunities. See generally CC ¶¶ 26-36, 52-59. Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 11 of 48 PageID: 682 5 pursues that strategy in three principal ways. First, it maintains its reference data monopoly by blocking customers who switch to Veeva Reference Data from matching Veeva and IMS data, creating high and unnecessary switching costs. See CC ¶¶ 96-100. Second, it also maintains its reference data monopoly by blocking customers from matching IMS Sales Data and Veeva Reference Data, making customers’ data analysis difficult and raising their costs. See, e.g., CC ¶¶ 101-108. Third, it uses both its sales and reference data monopolies to block customers from using IMS data in Veeva MDM. See, e.g., CC ¶¶ 67-95. These blocks are aimed at excluding Veeva by punishing its actual (or potential) customers - IMS simply refuses to deal with customers who use (or would use) Veeva products. 3 III. LEGAL STANDARD On a motion to dismiss, all of the facts in Veeva’s Counterclaim Complaint must be taken as true, and all reasonable inferences drawn in Veeva’s favor. See West Penn Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85, 91 (3d Cir. 2010). 3 IMS argues a business justification for these refusals: “security.” See Mot. at 14 n.6. But business justification is a fact-based rebuttal argument suited for a trier of fact. See Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 483-84 (1992). In any event, Veeva plausibly alleged IMS’s “justification” is pretextual. CC ¶ 91 (IMS always allows its customers to use CRM, but blocks their use of MDM as a matter of policy); CC ¶¶ 80-83, 92-93 (IMS requested Veeva make costly security changes, but later admitted its request was pointless); CC ¶ 95 (IMS unable to explain security concerns). And much of IMS’s conduct is not explained by “security.” See, e.g., CC ¶¶ 109-112 (IMS blocks customers loading Veeva data into IMS software); CC ¶ 114 (IMS blocks customers matching IMS and Veeva data on personal systems); CC ¶ 99, 111, 114-117 (threats and deception). Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 12 of 48 PageID: 683 6 “Antitrust claims . . . are subject to the notice-pleading standard,” which requires “only a short and plain statement of the claim showing that the pleader is entitled to relief.” Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 317 (3d Cir. 2007). Though claims must “allege facts sufficient to raise a right to relief above the speculative level,” id., any plausibility is sufficient - the complaint’s theory need not be the only plausible reading of the facts, nor even the most plausible, see West Penn, 627 F.3d at 98. Put simply, a plaintiff need allege only “‘enough facts to raise a reasonable expectation that discovery will reveal evidence’ of the necessary element.” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). When considering the sufficiency of antitrust allegations, courts “look to the monopolist’s conduct taken as a whole rather than considering each aspect in isolation . . . . [The] overall combined effect” of a monopolist’s acts should be considered. LePage’s Inc. v. 3M Co., 324 F.3d 141, 162 (3d Cir. 2003) (en banc). Indeed, it is “the mix of the various ingredients of . . . behavior in a monopoly broth that produces the unsavory flavor.” City of Mishawaka v. American Elec. Power Co., 616 F.2d 976, 986 (7th Cir. 1980); see Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 698-99 (1962). IV. IMS’S ANTICOMPETITIVE CONDUCT VIOLATES SECTION 2 OF THE SHERMAN ACT IMS uses anticompetitive conduct to maintain its monopoly power in the life sciences Reference Data market in violation of Section 2 of the Sherman Act. See Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 13 of 48 PageID: 684 7 CC ¶ 124 (Count 1); United States v. Griffith, 334 U.S. 100, 107 (1948) (stating test for monopolization). Courts recognize that anticompetitive conduct takes “a variety of forms, but generally it is . . . [c]onduct that impairs the opportunities of rivals and either does not further competition on the merits or does so in an unnecessarily restrictive way.” Broadcom, 501 F.3d at 308. 4 IMS does not challenge that it possesses monopoly power, but argues that its conduct was legal because it may refuse to deal with a competitor “for any reason.” See Mot. at 1. IMS’s argument is irrelevant and wrong. It is irrelevant because Veeva alleges an array of anticompetitive conduct directed almost exclusively at customers (not competitors) and an unchallenged line of cases holds this to be illegal. IMS’s Motion does not mention most of these allegations, let alone contest their sufficiency. And even if Veeva had alleged that IMS refuses to deal only with Veeva, IMS’s conduct is still illegal under the circumstances. IMS has also leveraged its Reference Data monopoly in an attempt to monopolize the MDM market. See CC ¶¶ 129, 152 (Counts 2, 5). The elements of both monopoly leveraging and attempted monopolization are: anticompetitive conduct, specific intent to monopolize, and a dangerous probability of success. See 4 Because anticompetitive conduct comes in “many different forms” and is “dependent upon context,” LePage’s, 324 F.3d at 152, courts reject the idea that “conduct cannot violate the antitrust laws” because no previous case presented the same set of circumstances. United States v. American Airlines, Inc., 743 F.2d 1114, 1122 n.14 (5th Cir. 1984) (collecting cases). Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 14 of 48 PageID: 685 8 Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 415 n.4 (2004). Here, IMS first reasserts that its conduct was not anticompetitive. But once again, it relies on an erroneous refusal to deal argument. Second, IMS contends that it has no dangerous probability of monopolizing MDM. But IMS overstates Veeva’s burden on the pleadings and acknowledges controlling Third Circuit authority contradicts IMS’s position. A. IMS Engages in Illegal Anticompetitive Conduct in Both the Reference Data and MDM Markets 1. IMS Illegally Refuses To Deal with Customers IMS - a monopolist of Sales and Reference Data - excludes Veeva from the Reference Data and MDM markets by refusing to deal with customers who choose (or would choose) Veeva. 5 This refusal to deal with customers who choose a rival’s product is “inherently anti-competitive.” Byars v. Bluff City News Co., 609 F.2d 843, 858 (6th Cir. 1979). Indeed, the Supreme Court established that proposition more than 60 years ago in the seminal Lorain Journal Co. v. United States, 342 U.S. 143 (1951). The Lorain Court held that a monopolist newspaper violated Section 2 when it refused to sell advertising to customers who also bought 5 See, e.g., CC ¶ 27 (TPAs are for “the benefit of joint customers” and are “typically provided . . . upon the request of” a customer.); CC ¶ 49 (“[T]he customer must request a TPA Agreement between the data provider(s) and the CRM provider.”); CC ¶ 54 (“[T]he customer requests a TPA Agreement between the data provider(s) and the MDM provider.”); CC ¶ 91 (“Veeva and IMS have signed TPA Agreements allowing [customers] to use IMS” data in Veeva CRM.); CC ¶ 111 (refusal to allow a customer to match IMS and Veeva data). Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 15 of 48 PageID: 686 9 ads on a radio station in the same market. See id. at 149. The Court found that punishing customers merely for buying from a rival was exclusionary and illegal. Id. at 154. When the monopolist asserted a “right” to refuse to deal for any reason, the Court rejected the idea: “The right claimed by the publisher is neither absolute nor exempt from regulation. Its exercise a[s] a purposeful means of monopolizing interstate commerce” violates Section 2. Id. at 155. Fifty years later, the D.C. Circuit applied Lorain’s rationale to software. In United States v. Microsoft Corp., Microsoft licensed its software to Original Equipment Manufacturers (OEMs) under terms that barred them from installing or displaying browsers that competed with Microsoft’s Internet Explorer. See 253 F.3d 34, 62 (D.C. Cir. 2001). These terms restricted OEM choice, raised costs, and reduced those competing browsers’ market share. Id. The court found that exclusionary: “Microsoft reduced rival browsers’ usage share not by improving its own product but, rather, by preventing OEMs from taking actions that could increase rivals’ share of usage.” Id. Retreating, Microsoft asserted an “unfettered right to use its intellectual property as it wishe[d].” Id. at 63. But the court rejected that idea as “no more correct than the proposition that use of one’s personal property, such as a baseball bat, cannot give rise to tort liability.” Id. 6 6 See also Broadcom, 501 F.3d at 316-17 (finding abuse of intellectual property violates Section 2); In re Independent Serv. Orgs. Antitrust Litig., 203 F.3d 1322, 1325 (Fed. Cir. 2000) (“Intellectual property rights do not confer a privilege to Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 16 of 48 PageID: 687 10 Here, IMS leverages its data licenses to prevent customers from using products made by industry upstart Veeva. Here, too, IMS licensing terms reduce choice, raise customer costs, and exclude IMS’s main rival from the market. See, e.g., CC ¶ 103. And, by denying its own customers access to Veeva products, IMS also avoids competition on the merits by “preventing [customers] from taking actions that could increase [Veeva’s] . . . usage.” Microsoft, 253 F.3d at 63. In response, IMS asserts the same unfettered right to deny access to its intellectual property “for any reason” that Microsoft rejected. See Mot. at 1. Courts have applied this same reasoning to “cloud” technologies. In RealPage, Inc. v. Yardi Systems, Inc., Yardi (IMS) held a monopoly in industry- specific accounting software with high switching costs. See 852 F. Supp. 2d 1215, 1219 (C.D. Cal. 2012) (attached hereto as Exh. 1). Yet, it also sought to dominate the cloud computing services market where products were only viable if they could host Yardi’s accounting software, and where RealPage (Veeva) was Yardi’s only major rival. See id. In pursuit of this new monopoly, Yardi employed threats, intimidation, and leveraging of switching costs to force its old and new accounting software customers to sign licensing agreements that prohibited “hosting” and “implement[ation]” by “outside contractors.” Id. at 1219-20. And Yardi violate the antitrust laws.”); A&E Plastik Pak Co. v. Monsanto Co., 396 F.2d 710, 715 (9th Cir. 1968) (finding a licensing requirement could violate Section 2 where it was “a sham set up for the purpose of controlling competition while avoiding” antitrust laws). Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 17 of 48 PageID: 688 11 intentionally defined outside “contractors” to include RealPage, effectively blocking customers from using RealPage’s cloud services and excluding it from the market. Id. Just as in Lorain and Microsoft, the court concluded that Yardi’s alleged use of its licensing agreements to exclude RealPage was anticompetitive, denying Yardi’s motion to dismiss. See id. at 1229. RealPage’s holding applies in this case. First, like Yardi, IMS leverages its monopolies through a licensing agreement that blocks customers from using its rival’s products by restricting “access” in the form of hosting and implementation. See CC ¶¶ 3, 74. Under RealPage, IMS’s unjustified use of licensing agreements to block this minimal form of “access” is exclusionary because its purpose is to block customers from using Veeva’s products, and so exclude Veeva from the market. Second, like Yardi, IMS uses threats and high switching costs to back these exclusionary agreements. See, e.g., CC ¶¶ 114-117. Finally, like Yardi, IMS harms customers and reduces competition. See, e.g., CC ¶ 108. Thus, like Yardi, IMS’s conduct violates Section 2. Lorain, Microsoft, and RealPage are not outliers. Courts have consistently held that a monopolist may not use its monopoly power to punish or block customers who choose a rival’s product. See, e.g., Eastman Kodak, 504 U.S. at 476, 483 (holding plaintiffs had raised question of fact concerning violation of Section 2 where monopolist refused to sell parts to customers who used Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 18 of 48 PageID: 689 12 competitors for aftermarket services); Otter Tail Power Co. v. United States, 410 U.S. 366, 378 (1973) (finding violation of Section 2 where monopolists “refus[ed] to [deal with certain customers] . . . solely to prevent . . . eroding its monopol[y]”). Finally, the Third Circuit’s reasoning in de facto exclusive dealing cases also shows that IMS’s conduct is exclusionary, because a monopolist’s de facto exclusive contracting is exclusionary. See United States v. Dentsply Int’l, Inc., 399 F.3d 181, 186-87 (3d Cir. 2005). In Dentsply, the Third Circuit found that a monopolist engaged in illegal exclusive dealing by including a term in its purchase orders that threatened to cut off sales to customers if they bought rivals’ products. See id. at 193-96. Even though the purchase orders were a series of at-will agreements, they still amounted to de facto exclusive dealing because the court looked to the “real world” exclusionary effect of the monopolists’ threats. See id. at 191, 194. Likewise, LePage’s found exclusionary conduct when a monopolist’s bundling and rebates forced customers to buy only from the monopolist, driving competitors out of the market for reasons other than “competition on the merits.” See 324 F.3d at 146, 158-59, 167-68; see also ZF Meritor, LLC v. Eaton Corp., 696 F.3d 254, 286-88 (3d Cir. 2012) (finding partial de facto exclusive dealing where contracts forced dealers to buy a certain percentage of products from a monopolist). All of these cases also noted that coercion of customers supports a Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 19 of 48 PageID: 690 13 finding of exclusionary conduct. See ZF Meritor, 696 F.3d at 285; Dentsply, 399 F.3d at 187; LePage’s, 324 F.3d at 159. IMS’s conduct is exclusionary under the rationale of these cases. IMS locks customers into theoretically short, but de facto indefinite contracts by raising transition costs and tailoring contracts to prevent customers from leaving. See CC ¶¶ 97-99. And although its contracts do not expressly bar customers from using rival products, IMS’s anti-Veeva TPA policy prevents customers from choosing Veeva for MDM and discourages them from choosing Veeva for data, see, e.g., CC ¶ 86, ensuring at least partial de facto exclusivity by blocking IMS’s main rival. IMS backs those contracts with threats. See CC ¶ 99. Because the “real world” effect of IMS’s contracts is to prevent competition on the merits by effectively forcing customers to deal only with IMS, they are exclusionary. 2. IMS’s Anticompetitive Conduct is an Unsavory Monopoly Broth of Section 2 Violations IMS uses deception, threats, and market interruptions to exclude Veeva from the MDM and Reference Data markets. Taken as a whole, this conduct is an illegal campaign of anticompetitive behavior under Section 2. IMS’s deceptive practices violate Section 2. IMS first invited customers to use its data on the understanding that they could use it with other products - including Veeva’s MDM or Reference Data. See CC ¶ 68. Then, it changed policy and blocked customers from using Veeva products, harming both customers Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 20 of 48 PageID: 691 14 and Veeva. See CC ¶¶ 68-71. Later, it agreed to negotiate TPA agreements between itself, customers, and Veeva in good-faith, but then used bad-faith stall tactics and shifting demands to block a resolution. See CC ¶¶ 80-84. These tactics are illegal when combined with the rest of IMS’s conduct. See Broadcom, 501 F.3d at 316-17 (reversing dismissal of complaint that alleged a violation of Section 2 where a monopolist induced reliance on certain terms of use, and later refused to license on those terms); cf. Schor v. Abbott Labs., 457 F.3d 608, 614 (7th Cir. 2006) (noting the plaintiff did “not accuse [a company] of [trying to] . . . exploit customers’ sunk costs”). 7 Separately, IMS has deceived Veeva into wasting money by first demanding Veeva make costly (but nonsensical) security changes, and then casually admitting that these demands were, indeed, nonsensical. See CC ¶ 93; Microsoft, 253 F.3d at 76 (violation of Section 2 where Microsoft tricked programmers into creating software that would only work with Windows). IMS also violates Section 2 when it threatens customers. See West Penn, 627 F.3d at 109 (reversing dismissal as monopolist’s threats to block customers from using a rival could violate Section 2); Byars, 609 F.2d at 854 n.30 (intimidation of customers or threats to rivals can violate Section 2); see also Microsoft, 253 F.3d at 77-78. For IMS, making threats is routine: IMS threatened 7 Cf. In re Elevator Antitrust Litig., 502 F.3d 47, 54 (2d Cir. 2007) (no Aspen inference where “the complaint does not allege . . . a change which (by taking advantage of their customers’ sunk costs) could evince monopolistic motives”) (emphasis added) Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 21 of 48 PageID: 692 15 a customer with “unlimited liability” if it matched IMS and Veeva Reference Data on the customer’s own system and without involvement by Veeva as part of a switch from IMS data to Veeva data. See CC ¶¶ 99, 114. IMS sales agents make clear that customers will be punished for switching to Veeva. See CC ¶¶ 115-118. Finally, IMS’s disruption of the market in order to exclude competitors has caused market-wide harm to competition in violation of Section 2. See Conwood Co. v. United States Tobacco Co., 290 F.3d 768, 783 (6th Cir. 2002) (finding a monopolist’s pattern of conduct that disrupted competition violated Section 2). Here, IMS has repeatedly interfered with relationships and contracts between Veeva and its customers. For instance, IMS often announces unexpected and unexplained changes to its TPA agreement policies as to Veeva, which imposes significant costs on both customers and Veeva. See, e.g., CC ¶¶ 68-74, 79, 101- 108 (describing how IMS began denying Brick data to Veeva customers even though IMS is compelled to provide such data under an EU antitrust ruling). Often, these changes occur amidst competition for customers, or after Veeva wins a contract. See CC ¶¶ 99-100, 110-114. And IMS has even gone so far as to block customers from using National Provider Identifier (“NPI”) numbers, unique identifiers for each healthcare provider assigned by the federal government and available from the American Medical Association, to match IMS and Veeva data, despite the fact that Veeva independently possesses rights to NPI numbers. See Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 22 of 48 PageID: 693 16 CC ¶¶ 101-102. IMS compounds these disruptions with stalling tactics, shifting demands, and refusals to define its concerns. See, e.g., CC ¶¶ 81-93, 96-104. 3. Even if IMS’s Conduct is Mischaracterized as a Refusal To Deal with a Competitor, it Still Violates Section 2 Although Veeva alleges IMS refuses to deal with customers, IMS insists that it only refuses to deal with Veeva, and that it has a right to do so. This argument mischaracterizes the Counterclaim Complaint: IMS denies customer requests to use IMS data in Veeva products. 8 But even supposing that IMS only refuses to deal with Veeva, its conduct still violates Section 2. IMS - a monopolist in two data markets - argues that it is free to refuse to deal with a competitor “for any reason.” Mot. at 1. This is false. After all, “[t]he high value . . . placed on the right to refuse to deal with other firms does not mean that the right is unqualified.” Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 601 (1985). Thus “a refusal to cooperate with rivals can constitute anticompetitive conduct and violate § 2” when it is the product of an anticompetitive intent to exclude that rival. Trinko, 540 U.S. at 408. Aspen discussed, and Trinko recognized, two examples of conduct that show a monopolist’s clear intention to exclude: an unjustified end to a voluntary course of conduct, and a willingness to sacrifice short-run benefits and customer goodwill. See Aspen, 472 U.S. at 610-11. Neither Aspen, Trinko, nor any other Supreme 8 See supra n.5. Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 23 of 48 PageID: 694 17 Court case has held that these are the only types of conduct that evince an illegal refusal to deal. 9 And the Third Circuit defines exclusionary conduct broadly as that which “impairs the opportunities of rivals and either does not further competition on the merits or does so in an unnecessarily restrictive way.” Broadcom, 501 F.3d at 308 (citing Aspen, 472 U.S. at 604-05 & n.32). To that end, this circuit has recognized that refusals to deal after inviting cooperation, or within a network market reliant on cooperation, are illegal. See id. at 312, 317. IMS’s conduct is illegal under Aspen. First, IMS ended an established course of conduct in both the MDM and Reference Data markets. In the MDM market, it signed at least one TPA agreement allowing customer use of all IMS data in Veeva MDM before changing course and rejecting all such requests for Reference Data and certain types of sales data. See CC ¶¶ 67-70. Cegedim, a data provider IMS later purchased, did the same. See id.; infra Part V.A (change in conduct evidences illegal IMS-Cegedim group boycott). Moreover, IMS allows customers to use its data in Veeva CRM, a product IMS is not trying to 9 Trinko’s holding relies on facts absent here. Trinko held that a defendant’s failure to comply with industry regulations that required interoperation with competitors under certain terms could not, of itself, constitute an antitrust violation. See id. at 409, 411-16; Broadcom, 501 F.3d at 316-17 (distinguishing Trinko because it rested on a regulatory framework). But there is no regulatory framework here. Moreover, Trinko’s plaintiffs sought “services . . . [un]available to the public” and costly to the defendant. See Trinko, 540 U.S. at 410. Here, customers request that IMS sign industry-standard TPA agreements with Veeva that it already regularly signed and that cost it nothing. Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 24 of 48 PageID: 695 18 monopolize. See CC ¶ 91. But in MDM, which IMS is trying to monopolize, it denies such requests on “security” grounds, even though both products have substantially similar security features. See id. Thus, IMS had (and has) a policy of allowing customers to use Veeva software generally - and Veeva products with a particular security level specifically - but changed course only as to MDM. 10 Separately, IMS signed TPAs allowing customers to match IMS Sales Data and Veeva Reference Data for years, before it abruptly changed course in early 2016. See CC ¶¶ 101, 108. And IMS twice allowed customers to map IMS Reference Data and Veeva Reference Data before changing course there as well. See CC ¶ 98. IMS does not even respond to this allegation, implicitly acknowledging its change of conduct as to Reference Data. Second, IMS has been “willing to sacrifice short-run benefits and consumer goodwill” to exclude Veeva. Aspen, 472 U.S. at 610-11. IMS disputes this on the ground that Trinko says a monopolist must end a “profitable” course of conduct to violate Section 2, and IMS is not paid to sign TPAs. See Mot. at 13. Once again, IMS is wrong. Trinko actually notes that the Aspen monopolist terminated “a 10 IMS asks the Court to ignore CRM because Aspen “involved no such switch from one product to another.” See Mot. at 15. Not so. Aspen twice expressly refers to the defendant’s willingness to cooperate in other markets (that it was not trying to monopolize) as proof that its “pattern of conduct” in the market it was trying to monopolize amounted to an illegal refusal to deal. See Aspen, 472 U.S. 608-10 (“Moreover, in other markets Ski Co. itself participated in interchangeable lift tickets using coupons . . . . Moreover, Ski Co. admitted that it was willing to associate with what it considered to be inferior products in other markets.”). Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 25 of 48 PageID: 696 19 voluntary (and thus presumably profitable) course of dealing.” Trinko, 540 U.S. at 409. Elsewhere, Trinko quotes Aspen’s language emphasizing the sacrifice of short-term “benefits,” not profits. Id. As for Aspen, it did not hold that a monopolist’s change of conduct must decrease profit. 11 Here, IMS terminated a “voluntary (and thus presumably profitable)” policy of granting customers’ TPA requests for use of Veeva’s MDM and Reference Data. And IMS offers no reason the presumption should not apply. Indeed, the facts raise a natural inference that granting customer requests to use Veeva software was profitable. After all, customers’ complaints when IMS ended that policy suggest that they chose IMS data in expectation that they could use it with Veeva products. See, e.g., CC ¶ 71 (quoting customer who contracted with Veeva for MDM only to be surprised and angered when TPA policy changed). Even putting that aside, in Broadcom, the Third Circuit noted an illegal refusal to deal where the monopolist voluntarily agreed to certain licensing terms, and then sought to increase profits by raising prices after locking-in users. See Broadcom, 501 F.3d at 316-17. Clearly then, it is the monopolist’s voluntary course of conduct - not its post hoc assertions of profit motive - that governs refusals to deal with rivals. 11 Indeed, Aspen never speaks of the defendant’s profit, and the decision indicates that the defendant thought it might increase revenues by changing its course of conduct with respect to the plaintiff. See Aspen, 472 U.S. at 592-93. Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 26 of 48 PageID: 697 20 As for a willingness to sacrifice benefits and goodwill, the pleadings are replete with examples. IMS’s refusal to sign TPA agreements raises customers’ costs, implicitly threatens them, creates fear, and delays and disrupts contracts. See, e.g., CC ¶¶ 97-100, 111-114; see also supra Part IV.A.2. Customers do not like it. See CC ¶ 71. The fact that some customers nevertheless persist in switching to Veeva shows IMS knows its policies cost it customers. See CC ¶ 100. Refusals to deal violate Section 2 “in an environment . . . in which participants expected each other to act cooperatively.” Broadcom, 501 F.3d at 312, 316-17. 12 Pharma data and analytics is just such a market: CRM and MDM are useless without data. See, e.g., CC ¶¶ 49, 54. Because these products cannot function without each other, and because customers rely on combining different types of data in different types of software, the market is inefficient where a monopolist uses its power to block customers’ options. By refusing to deal with customers and refusing to negotiate with Veeva, that is exactly what IMS has done. 12 See also ZF Meritor, 696 F.3d at 285; ABS Glob., Inc. v. Inguran, LLC, No. 14- CV-503-WMC, 2017 WL 1194723, at *32 (W.D. Wis. Mar. 31, 2017), appeals pending, Nos. 17-1847, 17-2055 (7th Cir. filed Apr. 24 & May 19, 2017); 3B Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 772, at 250 (4th ed. 2015) (refusal to deal liability appropriate in network markets where “cooperation is necessary” for “efficient operation” and a “previous sharing regime itself created the baseline duty and market participants, including consumers, had adjusted their commitments based on it”). Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 27 of 48 PageID: 698 21 B. IMS Has a Dangerous Probability of Monopoly in MDM IMS, partnering with Reltio, has a dangerous probability of monopolizing the MDM market. See CC ¶¶ 133, 156. IMS disputes this, pointing to summary judgment cases and arguing that Veeva did not plead IMS’s specific market share of MDM. See Mot. at 16. But this argument is contrary to controlling authority. Broadcom recognizes that whether a monopolist has a “dangerous probability” of acquiring market power is “a particularly fact-intensive inquiry.” 501 F.3d at 318. Thus, unless it is “ ‘clear on the face of the complaint that the “dangerous probability” standard cannot be met as a matter of law,’” a court should not dismiss a claim of attempted monopolization. Id. at 319 (citation omitted). “Dangerous probability is a question of []proximity and degree,[] . . . and the elements of an attempted monopolization claim are frequently interdependent ‘so that proof of one may provide circumstantial evidence or permissible inferences of other elements.’” Id. at 318 (quoting Barr Labs., Inc. v. Abbott Labs., 978 F.2d 98, 112 (3d Cir. 1992)). The full competitive landscape, including “factors such as significant market share coupled with anticompetitive practices, barriers to entry, the strength of competition, the probable development of the industry, and the elasticity of consumer demand may be considered.” Id. “No single factor is dispositive.” Id. Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 28 of 48 PageID: 699 22 The Broadcom court found plausible allegations of a dangerous probability where a monopolist of related markets tried to monopolize a nascent, rapidly growing market where the only new entrant was “effectively foreclosed” from entering. Id. at 319. Here, Veeva alleges much more than that. IMS (the world’s largest data and analytics company, see CC ¶ 15) is a monopolist of life sciences data that is effectively foreclosing Veeva (a new entrant) from the related MDM market, which is new and rapidly growing. See CC ¶¶ 54-55, 119-120. Turning to the other Broadcom factors, Veeva alleged high barriers to entry in the MDM market. See CC ¶ 59 (describing regulatory burdens that create high costs for potential entrants). Veeva also alleged that it competes “directly” with the IMS-Reltio partnership, and that IMS leverages its data monopolies to exclude Veeva MDM. See CC ¶ 60. This raises an inference that IMS can attain similar MDM market share. See RealPage, 852 F. Supp. 2d at 1229 (finding allegations that a monopolist’s power in one market created a dangerous probability in another were sufficient when plaintiff pled high barriers to entry and direct competition, noting that even an inference that could be characterized as “flimsy” or “tenuous” was sufficient to overcome motion to dismiss). Moreover, because IMS seeks to monopolize MDM with the help of Reltio’s product, the Court may consider their combined market power in dangerous probability analysis. See American Airlines, 743 F.2d at 1118-19 (dangerous probability where airline sought to monopolize Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 29 of 48 PageID: 700 23 with rival, and combined market share was high). IMS cannot meet its burden to show it is “clear on the face of the complaint that the dangerous probability standard cannot be met as a matter of law.” Broadcom, 501 F.3d at 319. IMS’s main argument - that Veeva cannot show attempted monopolization without pleading market share - is wrong. See, e.g., Inserra Supermarkets, Inc. v. Stop & Shop Supermarket Co., No. 16-01697, 2017 WL 773876, at *4 (D.N.J. Feb. 28, 2017) (denying motion to dismiss where plaintiff did not allege market share, but did allege exclusionary conduct, high barriers to entry, and facts supporting an inference of cross-elasticity of demand); Ecker v. Williamsport Hosp., No. 1:16- CV-00693, 2016 WL 8200436, at *8 (M.D. Pa. Oct. 7, 2016) (denying motion to dismiss and interpreting Broadcom as the “Third Circuit’s directive” not to dismiss a claim where plaintiff alleged exclusionary conduct but no market share, no barriers to entry, and no details of market growth). The cases on which IMS relies are irrelevant or easily distinguished. It cites to two dated cases decided on summary judgment. See Mot. at 16. 13 IMS’s other citation is an unreported opinion that predates Broadcom by more than two decades and involved very different allegations. See Storis, Inc. v. GERS Retails 13 See Barr Labs., 978 F.2d 98; Pastore v. Bell Tel. Co. of Pa., 24 F.3d 508 (3d Cir. 1994). Pastore is also inapposite because there plaintiffs pled that defendants did not participate in the relevant market. Compare 24 F.3d at 513 (“[w]ithout any share in the relevant market as described by plaintiffs, there can be no inference” of dangerous probability), with CC ¶¶ 56-58, 60 (IMS ceased to enter into new contracts for its own product and began selling Reltio’s through partnership). Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 30 of 48 PageID: 701 24 Sys., Inc., No. 94-4400, 1995 WL 337100 (D.N.J. May 31, 1995) (alleging only that the defendants’ conduct would allow them to grow from 25% to 40% of market share, while several competitors remained; no allegation of high barriers to entry or that defendants would eventually monopolize the market). IMS’s fallback argument is that because it has currently “discontinued” its MDM software, see CC ¶ 137, it makes no sense for IMS to work with Reltio to monopolize MDM, see Mot. at 17. But, as discussed infra Part V.B., Veeva did not plead that IMS left the market, but rather that it stopped entering into new contracts for its own MDM. See CC ¶ 56. IMS instead partnered with Reltio in order to monopolize MDM: under their deal, IMS discontinued its own software offering and now sells Reltio’s software in IMS’s software suite. See CC ¶¶ 56-58; infra Part V.B. Once Reltio gains a monopoly, IMS can buy it, or threaten Reltio with the same restrictions on data that it now imposes on Veeva. 14 After all, no software-only company (such as Reltio) poses a threat, because IMS monopolizes the market’s essential input: data. See CC ¶ 54. Thus, even if IMS succeeded in establishing its joint-venture with Reltio as an MDM monopolist, Reltio would remain reliant on IMS’s good graces, for IMS could easily cut off supply on a pretext. 14 IMS calls Reltio its “supplier.” See Mot. at 18. Not true. Veeva did not plead that IMS purchases MDM from Reltio. See CC ¶¶ 27, 54. Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 31 of 48 PageID: 702 25 V. IMS VIOLATED SECTION 1 OF THE SHERMAN ACT THROUGH TWO PER SE ILLEGAL GROUP BOYCOTTS A. IMS and Cegedim’s Boycott of Veeva Is a Per Se Violation of Section 1 of the Sherman Act IMS and Cegedim boycotted Veeva’s MDM product - a per se violation of Section 1 of the Sherman Act. See CC ¶ 145 (Count 4). IMS, however, asserts that Veeva has not alleged enough facts to plausibly show an agreement. This argument ignores precedent and defies common sense. The Court should reject it. Agreements to boycott a competitor are illegal under Section 1 of the Sherman Act. See Rossi v. Standard Roofing, Inc., 156 F.3d 452, 464-65 (3d Cir. 1998). But because companies hide such agreements, it is “frequently difficult” to show a boycott via direct evidence. Id. at 465. Thus, pleadings may “rely solely on circumstantial evidence (and the reasonable inferences . . . therefrom).” Id. A showing of parallel conduct, and one or more “plus factors,” plausibly alleges an agreement. In re Insurance Brokerage Antitrust Litig., 618 F.3d 300, 323 (3d Cir. 2010). These plus factors include a motive to conspire, action against self-interest, and evidence of a traditional conspiracy. Id. at 322. IMS and Cegedim’s parallel conduct is stark. After Veeva launched MDM in late 2013, it spent six months reaching a form TPA Agreement with IMS that allowed both companies’ customers to use IMS data in Veeva MDM. See CC ¶ 68. During this same period - which was well after the launch of Veeva’s MDM - Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 32 of 48 PageID: 703 26 Cegedim happily signed TPA agreements allowing its data into any Veeva software. CC ¶ 69. But as soon as IMS and Cegedim announced their merger in mid-2014, both companies dramatically and simultaneously reversed course. Id. IMS abruptly renounced the negotiated form TPA Agreement, and refused to allow any future customer to use IMS Reference Data in Veeva’s MDM. See CC ¶ 68. Meanwhile, Cegedim refused to supply data to customers whose TPA agreements already allowed use of Veeva MDM until those customers agreed to stop using that product and modify their TPAs. See CC ¶¶ 70-74. This abrupt, simultaneous, and inexplicable reversal of course - after direct, high-level communication and a provisional merger deal that incentivized a boycott - is clear parallel conduct. See Petruzzi’s IGA Supermarkets, Inc. v. Darling-Del. Co., 998 F.2d 1224, 1243 (3d Cir. 1993) (noting parallel behavior where defendants merely “acted similarly”). The pending merger establishes the first plus factor: “motive to enter” a conspiracy. Id. at 1247. IMS’s aim in acquiring Cegedim was to build market power in the data market that it could leverage elsewhere. See CC ¶ 78. Before the merger, IMS apparently believed its worldwide market share in data was insufficient to block its customers from using Veeva MDM. See CC ¶¶ 68-69. But with a deal in place to bolster that market power by buying Cegedim’s data, IMS suddenly had the power to exclude. This not only incentivized IMS to block Veeva MDM after the merger, it also motivated IMS to conspire with Cegedim Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 33 of 48 PageID: 704 27 immediately. As for Cegedim, it had to avoid displeasing IMS, which could derail the merger. This shift in incentives explains why IMS began excluding Veeva MDM after the merger announcement, not when Veeva first launched MDM. The second plus factor - action against self-interest in the absence of a conspiracy - mirrors the first. Action against self-interest occurs where defendants act in a way that would be irrational “assuming . . . a competitive market.” In re Flat Glass Antitrust Litig., 385 F.3d 350, 360-61 (3d Cir. 2004). In this case, we need not “assume” a competitive market because before their merger, IMS and Cegedim were actual rivals. And while rivals, it was irrational for either company to unilaterally punish customers for choosing Veeva MDM, because it would have risked driving customers to a rival. See, e.g., International Constr. Prods. LLC v. Caterpillar Inc., Civ. A. No. 15-108-RGA, 2016 WL 4445232, at *2-*3 (D. Del. Aug. 22, 2016) (finding that suppliers’ threats to block a dealer were action contrary to self-interest that plausibly alleged an agreement because unless such threats were concerted, they would have driven dealers to rival suppliers). Thus, neither company tried to exclude Veeva. These competitive conditions should have continued until the merger. See, e.g., Omnicare, Inc. v. Unitedhealth Grp., Inc., 524 F. Supp. 2d 1031, 1037 (N.D. Ill. 2007) (denying motion to dismiss where complaint alleged pre-merger coordination between defendants). Instead, Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 34 of 48 PageID: 705 28 IMS and Cegedim conspired to jump the gun and thwart competition - conduct that would be irrational absent their conspiracy. Finally, there is ample support for the third plus factor: traditional evidence of a conspiracy. Here, courts look to evidence of parallel behavior that would not result by chance, see 6 Areeda & Hovenkamp, Antitrust Law ¶ 1425, at 181-82 (2d ed. 2003) (quoted by Twombly, 550 U.S. at 556 n.4), and meetings, exchanges of information, and separate agreements between conspirators. SD3, LLC v. Black & Decker (U.S.) Inc., 801 F.3d 412, 432 (4th Cir. 2015) (“Allegations of communications and meetings among conspirators can support an inference of agreement because they provide the means and opportunity to conspire.”), cert. denied, 136 S. Ct. 2485 (2016). As discussed above, IMS and Cegedim’s abrupt change in TPA policy is just the sort of event that cannot be explained by coincidence and indicates an agreement. See, e.g., Strobl v. N.Y. Mercantile Exch., 582 F. Supp. 770, 776 (S.D.N.Y. 1984) (finding defendants’ “highly irregular” defaults evidenced an agreement), aff’d, 768 F.2d 22 (2d Cir. 1985). Moreover, as in any merger, negotiations between Cegedim and IMS would have meant frequent meetings and “high-level” information exchange that, along with other factors, make an agreement plausible. Flat Glass, 385 F.3d at 369. Indeed, this is just the sort of “practice . . . that facilitates [an antitrust conspiracy and] would be difficult for the authorities to detect.” SD3, 801 F.3d at 432; see also Toys ‘R’ Us, Inc. v. Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 35 of 48 PageID: 706 29 FTC, 221 F.3d 928, 935 (7th Cir. 2000) (finding manufacturers’ “abrupt shift from the past,” abandonment “of a profitable sales outlet,” and “direct evidence of communications” plausibly alleged an agreement). IMS’s Motion does not address these plus factors. Instead, it ventures a few excuses for parallel conduct supported by citations to cases decided on summary judgment. See Mot. at 23. But at the pleading stage, Veeva “need not rule out all potential alternative explanations” for IMS and Cegedim’s behavior. In re Magnesium Oxide Antitrust Litig., No. CIV. 10-5943 DRD, 2011 WL 5008090, at *15 (D.N.J. Oct. 20, 2011) (citing Starr v. Sony BMG Music Entm’t, 592 F.3d 314, 352 (2d Cir. 2010)). Veeva has plausibly alleged a per se illegal agreement between IMS and Cegedim by showing parallel conduct and strong evidence of three plus factors. B. IMS’s Agreement with Reltio Is a Per Se Violation of Section 1 The IMS-Reltio partnership is per se illegal under Section 1 of the Sherman Act. See CC ¶ 137 (Count 3). IMS argues the partnership as alleged is not per se illegal. But the partnership allocates customers to support IMS’s attempt to exclude Veeva and monopolize the MDM market. That is a per se illegal horizontal restraint. The Court should deny IMS’s Motion. The foundation of the IMS-Reltio partnership is IMS’s decision to stop writing new contracts for its own MDM product (while continuing to service Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 36 of 48 PageID: 707 30 existing customers), and offer MDM software made by Reltio - a rival - in the IMS software suite. See CC ¶ 56. This was a rational (though illegal) approach given that IMS wished to acquire Reltio, see id., but feared merger-related antitrust scrutiny. See CC ¶ 57. The Reltio partnership achieved IMS goals: it allowed IMS to keep its legacy MDM customers and allocated new MDM customers to Reltio (and thus IMS’s software suite), all while avoiding antitrust questions. See CC ¶¶ 56-57. The result is that IMS can block Veeva’s MDM customers, direct them to use Reltio, yet disclaim any interest in monopolizing MDM. See, e.g., Mot. at 27. And if IMS succeeds in excluding Veeva and establishing a monopoly for Reltio, IMS can either buy Reltio or, as its supplier, extract Reltio’s share of monopoly rents. The IMS-Reltio partnership fits into a well-established category of per se illegal agreements: a group boycott in support of vertical restraints on a horizontal rival. In Rossi, roofing material dealers agreed both to threaten suppliers to induce them to refuse to deal with a rival dealer, and to support a supplier who actually refused to deal with that dealer. 156 F.3d at 457, 461-64. The court held that such deals between horizontal rivals to support or induce a vertical restraint against another rival were per se illegal. Id. at 462-64. 15 It is the group boycott itself that is per se illegal: a plaintiff succeeds by alleging the agreement; whether a supplier 15 See also United States v. General Motors Corp., 384 U.S. 127, 140-46 (1966); ES Dev., Inc. v. RWM Enters., Inc., 939 F.2d 547, 556-57 (8th Cir. 1991). Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 37 of 48 PageID: 708 31 ever implemented a vertical restraint is irrelevant. See RWM, 939 F.2d at 556-57; In re Tableware Antitrust Litig., 485 F. Supp. 2d 1121, 1124 (N.D. Cal. 2007). The IMS-Reltio partnership is a contract between horizontal rivals that supports vertical restraints - IMS’s own refusal to deal with Veeva’s customers. Under the logic of Rossi, General Motors, and progeny, this is per se illegal. In Rossi, the dealers’ boycott supported a vertical restraint that cut a rival’s supply of materials. 156 F.3d at 456-57. Here, the IMS-Reltio deal enables IMS’s vertical restraint that cuts off Veeva’s supply of customers. 16 In both instances, the key fact is that rivals combine to support a vertical restraint against another rival. To be sure, unlike Rossi, IMS is both Veeva’s horizontal rival and the instigator of the illegal vertical restraint. But this distinction is irrelevant. After all, it is the act of making the horizontal agreement between rivals that is per se illegal, and thus IMS violated the Sherman Act the moment it signed the partnership with Reltio. See RWM, 939 F.2d at 556-57; Tableware Antitrust, 485 F. Supp. 2d at 1124. 17 Veeva has also made a threshold showing that confirms the IMS-Reltio partnership is likely to fall into the per se illegal category. See Rossi, 156 F.3d at 463. After all, “per se boycott cases usually contain three elements: denial of 16 If IMS insists that it refuses to deal only with Veeva, the effect is the same. 17 IMS also asserts that “on its face” there is nothing illegal about contracting to offer a software product. That is irrelevant. After all, on its face, there is nothing illegal in writing a letter of complaint to a supplier, but “even an otherwise lawful device may be used as a weapon in restraint of trade.” RWM, 939 F.2d at 555-57. Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 38 of 48 PageID: 709 32 something a competitor needs to compete effectively, defendants with a dominant position in the relevant market, and the absence of any plausible contention that the challenged behavior would enhance overall efficiency and make markets more competitive.” Id. At this stage, Veeva need not establish all three traits to plausibly allege per se illegality, see id., but establishing those three traits here is simple. First, the IMS-Reltio partnership deprives Veeva of a market for its MDM product by supporting IMS’s use of its monopoly in data to punish Veeva’s MDM customers. Second, IMS does not challenge the fact that it has market power in data, which it uses to enforce a vertical refusal to deal in the MDM market. Moreover, as discussed above, IMS and Reltio have a dangerous probability of achieving monopoly of MDM. Finally, Veeva has plausibly alleged that the partnership is anticompetitive, because it supports vertical restraints that directly punish customers in order to exclude a competitor. While IMS argues that there may be “efficiencies” associated with using Reltio’s MDM in IMS’s software suite, it is implausible to suggest that the market’s “overall efficiency” is enhanced by an agreement that aims to establish a monopoly. Finally, as mentioned above, the IMS-Reltio partnership allocates customers, which is a separate per se violation of Section 1. Here, IMS and Reltio agreed that IMS would continue servicing legacy customers, while Reltio was allocated new Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 39 of 48 PageID: 710 33 customers of IMS’s software suite. See CC ¶¶ 56-57. Stated differently, IMS agreed not to bid on new MDM contracts. Such agreements are per se illegal. See Palmer v. BRG of Ga., Inc., 498 U.S. 46, 49-50 (1990) (per curiam) (“Each agreed not to compete in the other’s territories. Such agreements are anticompetitive regardless of whether the parties split a market within which both do business or whether they merely reserve one market for one and another for the other.”). VI. VEEVA’S STATE LAW CLAIMS ARE PROPERLY PLED Veeva states claims for relief under California’s Cartwright Act (Count 8), Unfair Competition Law (UCL) (Count 9), Intentional Interference with Contractual Relations (Count 6), and Intentional Interference with Prospective Economic Advantage (Count 7). 18 18 IMS briefly mentions that Veeva pleads under California law, labeling the allegation Veeva sustained an injury in its home state “conclusory” and citing (without explanation) a part of a separate brief that discusses the locus of IMS’s alleged trade secret harm. See Mot. at 28 (citing ECF No. 23, at 24-32). This is not an argument. See Glory Licensing LLC v. Toys “R” Us, Inc., No. CIV. 09- 4252 FSH, 2011 WL 1870591, at *4 (D.N.J. May 16, 2011) (finding no argument where a brief failed to argue legal factors or provide legal authority to support assertions). IMS thus waives argument on California choice of law as to these claims. See, e.g., Bayer AG v. Schein Pharm., Inc., 129 F. Supp. 2d 705, 716 (D.N.J. 2001), aff’d, 301 F.3d 1306 (Fed. Cir. 2002). Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 40 of 48 PageID: 711 34 A. Veeva States a Claim under the Cartwright Act and UCL IMS admits that neither Veeva’s Cartwright Act claim (Count 8) nor its UCL claim (Count 9) can be dismissed if Veeva states a claim under the Sherman Act. 19 And Veeva has stated five such claims. See supra Parts IV-V. IMS also argues that Veeva cannot receive restitution under the UCL. As Veeva does not request restitution, see CC Prayer for Relief ¶¶ A-I, this argument is irrelevant. Veeva does, however, request injunctive relief, id. ¶ D, which the UCL expressly provides, see Cal. Bus. & Prof. Code § 17203. B. Veeva’s Claims of Intentional Interference with Contractual Relations and Prospective Economic Advantage are Well-Pled IMS’s Motion fails as to Veeva’s claims of interference with contract (Count 6) and interference with prospective economic advantage (Count 7). IMS’s first challenge to Veeva’s prospective economic advantage claim fails because it assumes Veeva did not state a claim under the Sherman Act. See Mot. at 31-32. But as shown, supra Parts IV-V, Veeva adequately pled those claims. Thus, IMS’s Motion should be denied. See Popescu v. Apple Inc., 204 Cal. Rptr. 3d 302, 323 19 See also Redwood Theatres, Inc. v. Festival Enters., Inc., 908 F.2d 477, 481-82 & n.3 (9th Cir. 1990); Apple Inc. v. Samsung Elecs. Co., No. 11-CV-01846, 2012 WL 1672493, at *8 (N.D. Cal. May 14, 2012) (not distinguishing between the unfair and unlawful prongs of the UCL; ruling that because plaintiff stated a claim under the Sherman Act, it stated a claim under the UCL). Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 41 of 48 PageID: 712 35 (Ct. App. 2016) (plaintiff “alleged independently wrongful conduct . . . including (1) a violation of the Sherman Antitrust Act”). IMS’s challenge to Veeva’s intentional interference with contractual relations claim also fails: As relevant here, intentional interference with contractual relations occurs when a defendant intentionally induces a breach or disruption of an enforceable contract between a plaintiff and a third party. See Pacific Gas & Elec. Co. v. Bear Stearns & Co., 791 P.2d 587, 589 (Cal. 1990). “Disruption” includes interference that makes a plaintiff’s performance “more costly or more burdensome,” id. at 592, or forces a third party to cancel all or part of the contract, see RealPage, 852 F. Supp. 2d at 1230-31. Veeva’s Counterclaim Complaint alleges numerous disruptions of its customers’ contracts. See CC ¶¶ 103-108 (IMS’s anticompetitive Brick data and TPA practices toward existing Veeva customers, which raise costs and lower quality); CC ¶¶ 110-112 (IMS’s disruption of two Veeva customers’ use of IMS software); CC ¶¶ 80-85 (companies that contracted with Veeva but then canceled part or all of their contracts because IMS prevented the occurrence of a condition precedent). Yet IMS does not even address the allegations in CC ¶¶ 103-108 and ¶¶ 110-112. For that reason alone, its Motion should be denied. IMS challenges the allegations in CC ¶¶ 80-85, but only on the basis that the contracts were unenforceable because they contained a condition precedent and Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 42 of 48 PageID: 713 36 allowed customers to “cancel” them. See Mot. at 32-33. First, a condition precedent does not render a contract unenforceable. See Sullivan v. Finn, No. 16- CV-01948-WHO, 2017 WL 1209933, at *5 (N.D. Cal. Apr. 3, 2017) (“[A] condition precedent is generally an act or event that occurs subsequent to the formation of a contract.”). Indeed, “[i]t is well-established that contracts subject to conditions precedent can be the basis for tortious interference claims.” SCEcorp v. Superior Ct. of San Diego Cnty., 4 Cal. Rptr. 2d 372, 377 (Ct. App. 1992) (citing Restatement (Second) of Torts § 766, cmt. f) (holding plaintiff stated a claim for interference with a contract containing a condition precedent). Second, there is no basis for IMS’s argument that contracts “subject to being cancelled by the parties” cannot support an intentional interference claim. Interference with contract includes disruption causing cancelation. See RealPage, 852 F. Supp. 2d at 1230- 31 (sufficient allegation of intentional interference with contract where a customer “cancel[ed]” a contract with the plaintiff software company after the defendant software competitor intentionally blocked the customer from using both programs together). The cases IMS cites are inapposite because they concern at-will employment contracts terminable at any time for any reason. See, e.g., Transcription Commc’ns Corp. v. John Muir Health, No. C 08-4418 TEH, 2009 WL 666943, at *8-*9 (N.D. Cal. Mar. 13, 2009). Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 43 of 48 PageID: 714 37 Finally, IMS asserts that both of Veeva’s interference torts are barred by California’s two-year statute of limitations. Here, IMS presents two logically alternative arguments. First, Veeva did not allege interference after September 2014. Second, because Veeva alleged that IMS’s policy of interference started in 2014 and continues to the present, Veeva’s knowledge of that policy in 2014 means its claims are time-barred. 20 These arguments fail. As to IMS’s first argument, Veeva alleges multiple instances of interference with contractual relations in 2015 and 2016. See supra pp. 35-36 (discussing CC ¶¶ 80-85, 103-108, 110-112, all of which involve conduct in 2015-2016). And, as IMS acknowledges, Veeva alleges “dozens” of instances of interference with prospective economic advantage that began in 2014 and continued to the present. CC ¶ 75; see also CC ¶¶ 86, 97, 99-100. At the pleading stage, undated allegations are not dismissed on statute of limitations grounds. See, e.g., United W. Med. Ctrs. v. Superior Ct. of Orange Cnty., 49 Cal. Rptr. 2d 682, 683-85 (Ct. App. 1996). Moreover, a “statute of limitations . . . begins to run upon the occurrence of the last element essential to the cause of action.” Neel v. Magana, Olney, Levy, Cathcart & Gelfand, 491 P.2d 421, 428 (Cal. 1971). Because both the existence of a specific contract or relationship, and disruption of that contract or relationship, are essential elements of an interference tort, see Pacific Gas, 791 P.2d at 589, 20 Tellingly, IMS cites no precedent for its second argument. See Mot. at 34-35. Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 44 of 48 PageID: 715 38 these causes of action did not accrue until IMS disrupted a specific contract or relationship. See Cal. Civ. Proc. Code § 339(1) (a claim “upon a contract” does not “accrue[] until discovery of the . . . damage suffered by the . . . party thereunder.”) (emphasis added); Trembath v. Digardi, 118 Cal. Rptr. 124, 125 (Ct. App. 1974). As a matter of logic and precedent, IMS’s Motion should be denied. VII. IMS’S FOREIGN EXCLUSIONARY CONDUCT HAS A DIRECT, SUBSTANTIAL, AND FORSEEABLE EFFECT IN THE UNITED STATES AND MUST BE CONSIDERED IMS claims, with no support, that because “many of Veeva’s allegations relating to alleged monopoly maintenance of Reference Data relate to conduct affecting the market in Europe” they “should not be considered.” 21 This conclusory assertion is contrary to the plain text of the law and precedent. Under the Foreign Trade Antitrust Improvement Act (“FTAIA”), American antitrust law applies to anticompetitive conduct in foreign countries where the conduct involving foreign trade “has a direct, substantial and reasonably foreseeable effect 21 IMS implies in a footnote, Mot. at 21 n.8, that the European Commission decision referred to in CC ¶ 63 was overturned. That decision’s subsequent withdrawal, however, was based on material changes in the circumstances of the complainants (such as the withdrawal of one from the relevant geographic market), not a reversal of the commission’s determination on the merits. See Comm’n of the European Communities, Commission Decision Relating to a Proceeding Under Article 82 of the EC Treaty, (EC) No. COMP D3/38.044 (Aug. 13, 2003), available at http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/ ?uri=CELEX:32003D0741&from=EN. Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 45 of 48 PageID: 716 39 . . . on export trade or export commerce with foreign nations, of a person engaged in such trade or commerce in the United States.” 15 U.S.C. § 6a(1)(B). 22 Veeva has plausibly pled a global market in which major pharmaceutical companies make acquisitions on a global basis, see, e.g., CC ¶ 58, and that the foreign conduct by IMS, a U.S. corporation, tending to exclude Veeva, a U.S. competitor, from the market has a direct and reasonably foreseeable effect within the United States. Because IMS’s foreign conduct is alleged to have a direct and reasonably foreseeable proximate effect on competition in the United States, it is properly considered and plausibly states a claim for relief. See CC ¶ 58 (“life sciences companies often standardize MDM company-wide. Company-wide purchases often follow test runs in specific countries, making toehold positions critically important to the growth of an MDM Software product.”). The sole case IMS cites in fact supports this. Animal Science Prods., Inc. v. China Minmetals 22 See Access Telecom, Inc. v. MCI Telecomms. Corp., 197 F.3d 694, 712-13 (5th Cir. 1999) (exporter of United States telephone “reorigination” services demonstrated a significant effect on a United States export market and, thus a prima facie showing that it met the FTAIA exception, by alleging that defendants’ actions were aimed at shutting down export market for United States reorigination services in Mexico and that defendants’ actions resulted in harm to competitors in the United States); cf. TI Inv. Servs., LLC v. Microsoft Corp., 23 F. Supp. 3d 451, 469-70 (D.N.J. 2014) (dismissing foreign conduct claims where “Plaintiffs’ pleadings me[t] [the FTAIA export] standard[] [because] Defendant, a United States corporation, [was] alleged to have sold services, utilizing infrastructure in the United States, to consumers in a foreign market” but “[t]he injury alleged in th[e] case [was] to foreign competitors of a U.S. exporter in a foreign market” rather than to a domestic competing exporter). Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 46 of 48 PageID: 717 40 Corp., 654 F.3d 462, 466, 471 n.12 (3d Cir. 2011) (reversing grant of motion to dismiss customer class’s complaint as improper and noting that “[a]t the motion to dismiss stage . . . the effects test may be satisfied by allegations that the domestic injury is direct, substantial, and reasonably foreseeable, without regard to whether United States consumers are alone in suffering that injury”). VIII. CONCLUSION IMS’s motion to dismiss should be denied. Dated: June 5, 2017 Steven F. Benz, pro hac vice Benjamin L. Rudofsky, pro hac vice Stefan J. Hasselblad, pro hac vice KELLOGG, HANSEN, TODD, FIGEL & FREDERICK, P.L.L.C. 1615 M Street, N.W., Suite 400 Washington, D.C. 20036 Tel: (202) 326-7900 Fax: (202) 326-7999 sbenz@kellogghansen.com brudofsky@kellogghansen.com shasselblad@kellogghansen.com By s/ Tonia Ouellette Klausner Tonia Ouellette Klausner Charles T. Graves, pro hac vice WILSON SONSINI GOODRICH & ROSATI Professional Corporation 1301 Avenue of the Americas, 40th Floor New York, New York 10019 Telephone: (212) 999-5800 tklausner@wsgr.com tgraves@wsgr.com Attorneys for Defendant Veeva Systems Inc. : Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 47 of 48 PageID: 718 41 CERTIFICATE OF SERVICE I, Tonia Ouellette Klausner, hereby certify that on June 5, 2017, the foregoing document was filed through the Court’s CM/ECF system and will be sent electronically to the registered participants as identified on the Notice of Electronic Filing. By: s/ Tonia Ouellette Klausner Tonia Ouellette Klausner Case 2:17-cv-00177-CCC-MF Document 51 Filed 06/05/17 Page 48 of 48 PageID: 719 Exhibit 1 Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 1 of 19 PageID: 720 1215REALPAGE, INC. v. YARDI SYSTEMS, INC. Cite as 852 F.Supp.2d 1215 (C.D.Cal. 2012) ceeds from the foreclosure sale that took place: No judgment shall be rendered for any deficiency upon a note secured by a deed of trust or mortgage upon real property or an estate for years therein hereafter executed in any case in which the real property or estate for years therein has been sold by the mortgagee or trustee under power of sale contained in the mortgage or deed of trust. Cal.Civ.Proc.Code § 580d. But Mr. Jara’s claim is still deficient. Like he did in his Third Amended Complaint, he again im- plies that there is something nefarious about dividing a mortgage into two loans, but he again provides only speculation why this would be true. Moreover, he still does not allege how dividing a mortgage loan into two loans violates § 580d; § 580d, after all, says nothing about that. In addition, Mr. Jara’s allegation that Aurora divided the loan into two is belied by the relevant documents, which identify Pacific as the lender and First Priority Financial, Inc. as the mortgage broker. RJN, ECF No. 62, Exs. 1 (adjustable rate note for $648,750 identifying Pacific as lender), 2 (note for $216,250 identifying Pacific as lender), 3 (deed of trust identify- ing Pacific as lender), 5 (fee disclosure identifying First Priority Financial, Inc. as mortgage broker). In light of these docu- ments, Mr. Jara’s allegations that Aurora was responsible for the structure of the loans does not ‘‘raise a right to relief above the speculative level.’’ Twombly, 550 U.S. at 555, 127 S.Ct. 1955. Because Mr. Jara has had multiple at- tempts to sufficiently allege a claim for a declaratory judgment with respect to his split-the-loans theory but has yet to do so, his claim is DISMISSED WITH PREJU- DICE. See Ferdik, 963 F.2d at 1261. V. CONCLUSION Based on the foregoing, the court GRANTS Defendants’ motion to dismiss Mr. Jara’s Fourth Amended Complaint. All of his claims are DISMISSED WITH PREJUDICE. IT IS SO ORDERED. , REALPAGE, INC., Counter-Claimant, v. YARDI SYSTEMS, INC., Counter-Defendant. Case No. CV 11-00690-ODW (JEMx). United States District Court, C.D. California, Western Division. Feb. 13, 2012. Background: Provider of vertical cloud hosting services filed suit against its com- petitor alleging violation of Sherman Act, intentional interference with contract, in- tentional interference with prospective economic advantage, and unfair competi- tion in violation of California’s Unfair Competition Law (UCL). Defendant moved to dismiss. Holdings: The District Court, Otis D. Wright, II, J., held that: (1) complaint sufficiently alleged existence of relevant market, as required to state claim under Sherman Act for restraint of trade based on tying arrangement; (2) complaint sufficiently alleged defen- dant’s market power for purposes of claim for tying arrangement; Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 2 of 19 PageID: 721 1216 852 FEDERAL SUPPLEMENT, 2d SERIES (3) complaint stated claim against compet- itor for monopolization under Sherman Act; (4) complaint stated claim against compet- itor for exclusive dealing; (5) complaint stated claim for intentional interference with contractual relations with one client; but (6) allegations that a breach or disruption of another of plaintiff’s contracts ‘‘could’’ occur were too speculative to state claim. Motion granted in part and denied in part. 1. Federal Civil Procedure O1838 Although leave to amend a complaint which has been dismissed should be freely granted prior to trial, leave to amend may be denied when court determines that alle- gation of other facts consistent with the challenged pleading could not possibly cure the deficiency. Fed.Rules Civ.Proc. Rule 15(a), 28 U.S.C.A. 2. Antitrust and Trade Regulation O569 Pleading requirements for illegal ty- ing arrangements under the Sherman Act’s restraint of trade provision mirror those of California’s Cartwright Act. Sherman Act, § 1, 15 U.S.C.A. § 1; West’s Ann.Cal.Bus. & Prof.Code § 16720 et seq. 3. Antitrust and Trade Regulation O569, 570, 571 Tying arrangements will be con- demned as illegal per se upon a showing of: (1) a tie-in between two products or services sold in separately defined product markets; (2) sufficient market power in the tying product market to affect the tied product market; and (3) an effect on a not insubstantial volume of commerce. Sher- man Act, § 1, 15 U.S.C.A. § 1. 4. Antitrust and Trade Regulation O557 A product market, for purposes of restraint of trade claim under Sherman Act, comprises products that have reason- able interchangeability for the purposes for which they are produced; price, use and qualities considered. Sherman Act, § 1, 15 U.S.C.A. § 1. 5. Antitrust and Trade Regulation O554, 556 A Sherman Act complaint for illegal tying arrangement should be dismissed for failure to state a claim if complaint’s rele- vant market definition is facially unsustain- able; facially unsustainable relevant mar- ket definition results when plaintiff fails to define its proposed relevant market with reference to the rule of reasonable inter- changeability and cross-elasticity of de- mand, or alleges a proposed relevant mar- ket that clearly does not encompass all interchangeable substitute products, even when all factual inferences are granted in plaintiff’s favor. Sherman Act, § 1, 15 U.S.C.A. § 1; Fed.Rules Civ.Proc.Rule 12(b)(6), 28 U.S.C.A. 6. Antitrust and Trade Regulation O577 Provider of vertical cloud hosting ser- vices sufficiently pled existence of relevant market, as required to state claim against competitor under Sherman Act for re- straint of trade based on tying arrange- ment; proposed vertical services market definition in complaint considered and re- jected multiple interchangeable substitute products, such as self-hosting and generic cloud computing services, with reference to the rule of reasonable interchangeabili- ty. Sherman Act, § 1, 15 U.S.C.A. § 1. 7. Antitrust and Trade Regulation O571 ‘‘Market power,’’ for purposes of dem- onstrating tying arrangement under Sher- Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 3 of 19 PageID: 722 1217REALPAGE, INC. v. YARDI SYSTEMS, INC. Cite as 852 F.Supp.2d 1215 (C.D.Cal. 2012) man Act, is the power to force a purchaser to do something that he would not do in a competitive market. Sherman Act, § 1, 15 U.S.C.A. § 1. See publication Words and Phras- es for other judicial constructions and definitions. 8. Antitrust and Trade Regulation O571 In determining whether an antitrust defendant has market power in the tying product, court must focus on whether sell- er has the power to raise prices, or impose other burdensome terms such as a tie-in, with respect to any appreciable number of buyers within the market. Sherman Act, § 1, 15 U.S.C.A. § 1. 9. Antitrust and Trade Regulation O571 ‘‘Market power,’’ for purposes of dem- onstrating tying arrangement under Sher- man Act, is something less than monopoly power, but something more than the mere possibility of collusion or anticompetitive effects in the market. Sherman Act, § 1, 15 U.S.C.A. § 1. 10. Antitrust and Trade Regulation O577 Provider of vertical cloud hosting ser- vices sufficiently pled competitor’s market power, as required to state claim under Sherman Act for restraint of trade based on illegal tying arrangement; complaint al- leged that competitor wielded its economic advantage by effectively stopping its exist- ing customers from migrating their data to plaintiff’s cloud hosting services. Sherman Act, § 1, 15 U.S.C.A. § 1. 11. Antitrust and Trade Regulation O713, 714, 715 To state a claim for attempted monop- olization under Sherman Act, plaintiff must allege: (1) that defendant has en- gaged in predatory or anticompetitive con- duct with (2) a specific intent to monopo- lize, and (3) a dangerous probability of achieving monopoly power. Sherman Act, § 2, 15 U.S.C.A. § 2. 12. Antitrust and Trade Regulation O641, 644, 647 A plaintiff may establish market pow- er, for purposes of claim for monopoliza- tion in violation of Sherman Act, directly by presenting evidence of injurious exer- cise of market power, or circumstantially by: (1) defining the relevant market; (2) showing that defendant owns a dominant share of that market; and (3) showing that there are significant barriers to entry and that existing competitors lack capacity to increase their output in the short run. Sherman Act, § 2, 15 U.S.C.A. § 2. 13. Antitrust and Trade Regulation O672 Provider of vertical cloud hosting ser- vices sufficiently stated claim against com- petitor for monopolization under Sherman Act; complaint alleged that competitor was using its power in the software market to foreclose and monopolize in the vertical cloud market, that competitor’s power over its customers, derived from the high switching costs attendant to abandoning its software after adopting it, gave competitor a substantial market power in the vertical cloud market, that competitor’s customers represented a substantial share of poten- tial vertical cloud services customers, and that competitor intended to steal trade secrets, coerce agreements with its cus- tomers not to use plaintiff’s services, and block new competitors from entry into the market. Sherman Act, § 2, 15 U.S.C.A. § 2. 14. Antitrust and Trade Regulation O564 Under the antitrust rule of reason, an exclusive dealing arrangement violates Sherman Act’s restraint of trade provision only if its effect is to foreclose competition in a substantial share of the line of com- Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 4 of 19 PageID: 723 1218 852 FEDERAL SUPPLEMENT, 2d SERIES merce affected. Sherman Act, § 1, 15 U.S.C.A. § 1. 15. Antitrust and Trade Regulation O577 Provider of vertical cloud hosting ser- vices sufficiently stated claim against com- petitor for exclusive dealing, in violation of Sherman Act’s restraint of trade provision; complaint alleged that competitor’s soft- ware license agreements precluded its cus- tomers from hosting the software on any cloud service other than competitors, and that such restriction foreclosed a substan- tial share of the vertical cloud market by significantly limiting the opportunities for other cloud service providers to enter into or remain in the market. Sherman Act, § 1, 15 U.S.C.A. § 1. 16. Torts O212 Under California law, to establish a claim for intentional interference with a contract plaintiff must allege: (1) a valid contract between plaintiff and a third par- ty; (2) defendant’s knowledge of contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the con- tractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage. 17. Torts O212 Under California law, a plaintiff need not allege an actual or inevitable breach of contract in order to state a claim for dis- ruption of contractual relations; rather, un- like the tort of inducing breach of contract, intentional interference with contractual relations requires only proof of interfer- ence. 18. Torts O242, 255 Provider of vertical cloud hosting ser- vices stated claim, under California law, against competitor for intentional interfer- ence with contractual relations by alleging an ‘‘executed, valid and enforceable agree- ment’’ with software client for cloud host- ing services, and that due to competitor’s interference, client had canceled agree- ment, thus depriving plaintiff of substan- tial revenue. 19. Torts O242, 255 Under California law, vertical cloud hosting services provider’s allegations that a breach or disruption of its contract with a current client ‘‘could’’ occur, based on competitor’s threats to client, was insuffi- cient to state claim against competitor for intentional interference with contractual relations, since claim was contingent on client’s decision to migrate its storage ser- vices, which had not yet occurred. Chad Russell, Bingham McCutchen LLP, San Francisco, CA, Chad Russell, Gabrielle Daneeka Hann, Geoffrey M. Howard, Bingham McCutchen LLP, San Francisco, CA, James B. Lewis, Bingham McCutchen, East Palo Alto, CA, Jessica Mahon Scoles, Bingham McCutchen LLP, Santa Monica, CA, for Counter-Defendant. David R. Eberhart, James Michael Pearl, Sharon M. Bunzel, Mark Alan Sam- uels, O’Melveny and Myers LLP, San Francisco, CA, Allan Gabriel, Sidney Christopher Winter, Dykema Gossett LLP, Los Angeles, CA, for Counter- Claimant, Order GRANTING IN PART and DE- NYING IN PART Counter-Defen- dant’s Motion to Dismiss [141] OTIS D. WRIGHT, II, District Judge. I. INTRODUCTION Pending before the Court is Counter- Defendant Yardi Systems, Inc.’s (‘‘Yardi’’) Motion to Dismiss Counter-Claimant Real- Page, Inc.’s (‘‘RealPage’’) Second Amended Counterclaims (‘‘SACC’’) pursuant to Fed- eral Rule of Civil Procedure 12(b)(6). Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 5 of 19 PageID: 724 1219REALPAGE, INC. v. YARDI SYSTEMS, INC. Cite as 852 F.Supp.2d 1215 (C.D.Cal. 2012) (Dkt. No. 141.) RealPage filed an Opposi- tion to the instant Motion, to which Yardi filed a Reply. (Dkt. Nos. 146, 148.) Hav- ing carefully considered the papers filed in support of and in opposition to the instant Motion, the Court deems the matter ap- propriate for decision without oral argu- ment. See Fed.R.Civ.P. 78; C.D. Cal. L.R. 7-15. For the following reasons, Yardi’s Motion to Dismiss is GRANTED in PART and DENIED in PART. II. FACTUAL BACKGROUND RealPage and Yardi are competitors in the real property management business. (See SACC 1 ¶ 2.) Perhaps Yardi’s greatest success has been its popular property management back office accounting soft- ware, Voyager-a computer accounting program especially designed to meet the needs of property managers. (SACC ¶¶ 4, 17.) Yardi tailors its Voyager software to property managers that manage 1,000 or more individual apartment units, who typi- cally have more complex and specialized needs. (SACC ¶¶ 21.) Once a property management customer adopts the Voyager software, it becomes especially difficult- and in some cases prohibitively expen- sive-for that customer to switch to an alternative back office accounting software because of the high switching costs associ- ated with moving the customer’s data to a new system, the cost of new licensing fees, and the disruption of day-to-day business attendant to re-aligning IT systems and transferring data. (SACC ¶ 4.) Yardi and RealPage are currently the only two competitors in the market for supplying vertically integrated cloud com- puting services specifically designed to meet the needs of real property owners and managers. (SACC ¶ 1.) Vertically in- tegrated cloud computing services (‘‘verti- cal cloud services’’) enable customers with multiple software applications-such as back office accounting (including Yardi’s Voyager), maintenance, leasing, revenue management, payment processing, and background screening applications-to have those applications hosted and man- aged in an off-site data center. (SACC ¶ 2.) These applications are then accessible to the customer remotely via the Internet. (Id.) Yardi and RealPage’s cloud services differ from more generic cloud services in that their services are industry-specific. (Id.) RealPage was the first company to offer vertical cloud services (the ‘‘RealPage Cloud’’). (SACC ¶ 3.) RealPage contends that Yardi was only able to offer its com- peting Yardi Cloud Services by misappro- priating RealPage’s trade secrets. (SACC ¶ 3.) RealPage further alleges that rather than innovate and invest in a superior cloud system, Yardi embarked on a cam- paign to leverage its powerful position in the property management back office ac- counting software market (the ‘‘Software Market’’)-attained via its industry-leading Voyager software-to stifle competition in the vertical cloud market (the ‘‘Vertical Cloud Market’’) through customer interfer- ence and intimidation. (SACC ¶¶ 39-42.) Specifically, RealPage avers that Yardi began forcing its Voyager clients, through express and implied threats, into anti-com- petitive exclusionary amendments to their Voyager licensing agreements. (SACC ¶ 40.) The amendments to the licensing 1. Yardi notes in its Motion that RealPage’s SACC, as initially filed, was improper under Federal Rules of Civil Procedure 7 and 13. (Mot. at 5 n. 2.) The parties stipulated that RealPage would re-file its SACC consolidated with its Answer, and that Yardi would move to dismiss that version of RealPage’s SACC. (Id.; Dkt. Nos. 139-40.) Accordingly, all ref- erences to RealPage’s SACC are to RealPage’s September 30, 2011 Consolidated Second Amended Counterclaims and Answer to Yar- di’s First Amended Complaint. (Dkt. No. 142.) Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 6 of 19 PageID: 725 1220 852 FEDERAL SUPPLEMENT, 2d SERIES agreements prohibited Yardi’s Voyager li- censees from using any ‘‘contractor’’ to implement or host the Yardi software, and defined ‘‘contractor’’ broadly to include both the RealPage Cloud and any other potential vertical cloud services providers. (SACC ¶ 47.) While many Voyager cus- tomers either already hosted their Voyag- er software in the RealPage Cloud or de- sired to do so, Yardi coerced customer acquiescence to the prohibitive amend- ments by threatening to terminate its cus- tomers’ Voyager software licenses. (SACC ¶¶ 40-41.) Because of the prohibi- tively high costs associated with switching away from the Voyager software, Yardi’s Voyager customers were effectively locked into the software and faced no choice but to succumb to Yardi’s threats. (SACC ¶ 41.) Examples of this misconduct were allegedly manifested in relation to five RealPage clients, three of which-Client 1, Client 2, and Client 3-are relevant for the purposes of Yardi’s instant Motion. Client 1, a large property management firm and user of Voyager, entered into a Letter Agreement for Interim Services with RealPage (the ‘‘Letter Agreement’’). (SACC ¶ 49.) The Letter Agreement indi- cated that RealPage would provide transi- tion and migration services, as well as hosting and other services, during an in- terim term for all non-Yardi applications until RealPage and Client 1 entered into an additional agreement at a later date. (Id.) RealPage alleges that when Yardi learned of the Letter Agreement, it set out to interfere with RealPage’s new client relationship by advising Client 1 that Client 1 could not continue to work with RealPage under this agreement. (Id.) Yardi further amended Client 1’s Voyager software license agreement to prohibit Client 1 from hosting its Yardi Voyager software in the RealPage Cloud, as con- templated by an existing but unexecuted plan. (SACC ¶ 50.) As a result, RealPage was deprived of over $100,000 annually. (SACC ¶ 51.) Client 2, a top-ten property management firm and user of Voyager, entered into a five-year agreement with RealPage for RealPage to host Client 2’s software appli- cations-including Voyager. (FACC ¶ 55.) As a result of the agreement, several Client 2 employees transitioned to Real- Page to help facilitate the hosting of Client 2’s software on the RealPage Cloud. (Id.) At that time, Yardi assured Client 2 that so long as Client 2 allowed Yardi to com- pete for Client 2’s vertical cloud services business, Yardi would respect Client 2’s decision. (Id.) When Client 2 ultimately chose to host its applications in the Real- Page Cloud following head-to-head compe- tition between Yardi and RealPage, Yardi again indicated that it would respect Client 2’s decision. (Id.) More than a year later, however, Yardi repudiated its prior repre- sentations and informed Client 2 that its hosting of the Voyager software in the RealPage Cloud violated Client 2’s Voyag- er license agreement. (Id.) As a result of Yardi’s continued assertions that Client 2 is in breach of its Voyager license agree- ment and will therefore forfeit its license to use the Voyager software, Client 2 is left with no option other than to recall its employees who migrated to RealPage. (Id.) This will result in a significant cost to RealPage. (Id.) Client 3, a multifamily and commercial real estate owner, had agreed with Real- Page to move its data center to the Real- Page Cloud and was in the process of doing so. (SACC ¶ 57.) During the data- transfer process, however, Yardi demand- ed that Client 3 not use the RealPage Cloud or even publicly associate itself with RealPage. (Id.) As a result of Yardi’s interference, Client 3 decided not to use the RealPage Cloud to host its Voyager software, thereby causing damages to RealPage in the form of lost revenue and Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 7 of 19 PageID: 726 1221REALPAGE, INC. v. YARDI SYSTEMS, INC. Cite as 852 F.Supp.2d 1215 (C.D.Cal. 2012) reputational benefit associated with Client 3’s business. (Id.) On January 24, 2011, Yardi filed a Com- plaint against RealPage. (Dkt. No. 1.) In response, RealPage filed a Counterclaim on March 28, 2011 (Dkt. No. 23), followed by its First Amended Counterclaims (‘‘FACC’’) on May 18, 2011 (Dkt. No. 34). On August 11, 2011, 2011 WL 3565112, this Court granted in part and denied in part Yardi’s June 16, 2011 Motion to Dis- miss RealPage’s FACC. (Dkt. No. 83.) The Court granted RealPage leave to amend, and RealPage filed its SACC on September 2, 2011. (Dkt. No. 114.) The SACC proceeds on six counterclaims: (1) misappropriation of trade secrets; (2) vio- lation of Section 1 of the Sherman Anti- trust Act; (3) violation of Section 2 of the Sherman Antitrust Act; (4) violation of the California Cartwright Act, Cal. Bus. & Prof.Code §§ 16720, 16722, 16726 & 16727; (5) intentional interference with contract; (6) intentional interference with prospec- tive economic advantage; and (7) unfair competition in violation of the California Business and Professions Code section 17200, also known as the Unfair Competi- tion Law (‘‘UCL’’). Subsequently, Yardi filed the instant Motion to Dismiss on Sep- tember 30, 2011. (Dkt. No. 141.) III. LEGAL STANDARD ‘‘To survive a motion to dismiss for fail- ure to state a claim under Rule 12(b)(6), a complaint generally must satisfy only the minimal notice pleading requirements of Rule 8(a)(2).’’ Porter v. Jones, 319 F.3d 483, 494 (9th Cir.2003). Rule 8(a)(2) re- quires ‘‘a short and plain statement of the claim showing that the pleader is entitled to relief.’’ Fed.R.Civ.P. 8(a)(2). For a complaint to sufficiently state a claim, its ‘‘[f]actual allegations must be enough to raise a right to relief above the speculative level.’’ Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Dismissal under Rule 12(b)(6) can be based on ‘‘the lack of a cognizable legal theory’’ or ‘‘the absence of sufficient facts alleged under a cognizable legal theo- ry.’’ Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.1990). While specific facts are not necessary so long as the complaint gives the defendant fair no- tice of the claim and the grounds upon which the claim rests, Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007), a complaint must nevertheless ‘‘contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.’’ Iq- bal, 129 S.Ct. at 1949 (internal quotation marks omitted). ‘‘The plausibility stan- dard is not akin to a probability require- ment, but it asks for more than a sheer possibility that a defendant has acted un- lawfully. Where a complaint pleads facts that are merely consistent with a defen- dant’s liability, it stops short of the line between possibility and plausibility of enti- tlement of relief.’’ Id. (internal citation and quotation marks omitted). The deter- mination whether a complaint satisfies the plausibility standard is a ‘‘context-specific task that requires the reviewing court to draw on its judicial experience and com- mon sense.’’ Id. at 1950. When considering a Rule 12(b)(6) mo- tion, a court is generally limited to consid- ering material within the pleadings and must construe ‘‘[a]ll factual allegations set forth in the complaint TTT as true and TTT in the light most favorable to [the plain- tiff].’’ Lee v. City of L.A., 250 F.3d 668, 688 (9th Cir.2001) (citing Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996)). A court is not, however, ‘‘required to accept as true allegations that are mere- ly conclusory, unwarranted deductions of fact, or unreasonable inferences.’’ Spre- well v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.2001). [1] As a general rule, leave to amend a complaint which has been dismissed should Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 8 of 19 PageID: 727 1222 852 FEDERAL SUPPLEMENT, 2d SERIES be freely granted. Fed.R.Civ.P. 15(a). However, leave to amend may be denied when ‘‘the court determines that the alle- gation of other facts consistent with the challenged pleading could not possibly cure the deficiency.’’ Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir.1986); see Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir.2000). IV. DISCUSSION Yardi moves to dismiss all of RealPage’s antitrust counterclaims, as well as Real- Page’s counterclaims for intentional inter- ference with contract, intentional interfer- ence with prospective economic advantage, and violation of California’s UCL. The Court first considers RealPage’s antitrust counterclaims, followed by the RealPage’s intentional interference with contract counterclaim. Because RealPage’s coun- terclaims for interference with prospective economic advantage and violation of the UCL both hinge in part upon the viability of RealPage’s other counterclaims, the Court concludes by considering these counterclaims together. A. REALPAGE’S ANTITRUST COUNTER- CLAIMS RealPage brings antitrust counterclaims alleging (1) an illegal tying arrangement in violation of Section 1 of the Sherman Anti- trust Act, 15 U.S.C. § 1 (‘‘Section 1’’), and the California Cartwright Act, Cal. Bus. & Prof.Code §§ 16720, 16722, 16726 & 16727 (the ‘‘Cartwright Act’’); (2) attempted mo- nopolization in violation of Section 2 of the Sherman Antitrust Act (‘‘Section 2’’); and (3) exclusive dealing in violation of Section 1. The Court considers each in turn. 1. Tying Counterclaims [2, 3] Both Section 1 and the Cart- wright Act prohibit illegal tying arrange- ments. Blough v. Holland Realty, Inc., 574 F.3d 1084, 1088 (9th Cir.2009); Nicolo- si Distrib., Inc. v. BMW of N. Am., No. 10-03256, 2011 WL 1483424, at *2 (N.D.Cal. Apr. 19, 2011). The pleading requirements under the Sherman Act mir- ror that of the Cartwright Act. County of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1160 (9th Cir.2001). ‘‘A tying arrangement is ‘an agreement by a party to sell one product but only on the condi- tion that the buyer also purchase a differ- ent (or tied) product, or at least agree that he will not purchase that product from any other supplier.’ ’’ Image Technical Serv., Inc. v. Eastman Kodak Co., 903 F.2d 612, 615 (9th Cir.1990) (quoting N. Pac. Ry. Co. v. United States, 356 U.S. 1, 5-6, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958)), aff’d, 504 U.S. 451, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992); Blough, 574 F.3d at 1088 (a tying arrangement is where a party ties ‘‘two products or services together, whereby ‘the seller conditions the sale of one prod- uct (the tying product) on the buyer’s pur- chase of a second product (the tied prod- uct)’ ’’) (quoting Cascade Health Solutions v. PeaceHealth, 515 F.3d 883, 912 (9th Cir.2008)). ‘‘Tying arrangements are for- bidden on the theory that, if the seller has market power over the tying product, the seller can leverage this market power through tying arrangements to exclude other sellers of the tied product.’’ Peace- Health, 515 F.3d at 912. Accordingly, ty- ing arrangements will be condemned as illegal per se 2 upon a showing of (1) a tie- 2. While Section 1 prohibits ‘‘[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or com- merce,’’ the Supreme Court has narrowed Section 1 to prohibit only unreasonable re- straints of trade. See State Oil Co. v. Khan, 522 U.S. 3, 10, 118 S.Ct. 275, 139 L.Ed.2d 199 (1997). ‘‘Certain types of contractual arrangements are deemed unreasonable as a matter of law’’ and are condemned as per se illegal. Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2, 9, 104 S.Ct. 1551, 80 Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 9 of 19 PageID: 728 1223REALPAGE, INC. v. YARDI SYSTEMS, INC. Cite as 852 F.Supp.2d 1215 (C.D.Cal. 2012) in between two products or services sold in separately defined product markets; (2) sufficient market power in the tying prod- uct market to affect the tied product mar- ket; and (3) an effect on a not insubstan- tial volume of commerce. Datagate, Inc. v. Hewlett-Packard Co., 60 F.3d 1421, 1423-24 (9th Cir.1995). Yardi contends that RealPage’s tying counterclaims under Section 1 and the Cartwright Act are in- sufficient to withstand a motion to dismiss because RealPage has failed to allege the existence of a tying arrangement, define a proper product market as a matter of law, or establish that Yardi has market power in the product market for the tying prod- uct such that it could affect competition in the tied product market. (Mot. at 6.) a. Existence of a Tying Arrangement Yardi begins its attack on RealPage’s tying counterclaims on grounds that Real- Page cannot establish the existence of a tying arrangement at all because ‘‘Yardi’s Voyager software need not be used with any cloud computing services.’’ (Mot. at 6.) In its August 11, 2011 Order dismissing RealPage’s tying counterclaim as pleaded in RealPage’s FACC, this Court noted, [F]or an illegal tying arrangement to exist, the sale of the Voyager software must be conditioned upon the purchase of cloud computing, or at least the non- purchase of cloud computing from Real- Page. Yet, the facts indicate that Voy- ager software does not have to be used with any cloud computing servicesTTTT Thus, because Yardi does not tie the sale of Voyager with a tied product, i.e. the purchase of cloud computing or the non- purchase of cloud computing from Real- Page, the facts as pleaded do not fit the definition of a tying arrangement. (Dkt. No. 83, at 7-8.) With respect to RealPage’s SACC, Yardi contends that ‘‘RealPage has failed to cure the flaw that led to the Court’s dismissal of the prior antitrust counterclaims.’’ (Mot. at 6.) RealPage responds Yardi’s position is plainly foreclosed by the Ninth Circuit’s opinion in Kodak, 903 F.2d 612. (Opp’n at 4.) Upon careful reconsideration, and par- ticularly in light of the close factual paral- lels between this case and Kodak, the Court finds that RealPage has sufficiently pleaded the existence of an illegal tying arrangement. In Kodak, plaintiffs alleged that Ko- dak’s refusal to sell spare parts to Kodak equipment owners unless those equipment owners agreed not to use the services of independent service operators (‘‘ISOs’’) constituted a per se illegal tying arrange- ment. Id. at 615. The Ninth Circuit re- jected Kodak’s contention that this policy failed to constitute a negative tying ar- rangement because Kodak would still sell parts to equipment owners who agreed to self-service their machines and allowed the case to proceed to trial. Id. (emphasis added). The Supreme Court affirmed. Eastman Kodak Co. v. Image Technical L.Ed.2d 2 (1984), rev’d on other grounds, Ill. Tool Works Inc. v. Indep. Ink, Inc., 547 U.S. 28, 126 S.Ct. 1281, 164 L.Ed.2d 26 (2006). Tying arrangements have traditionally been designated as per se illegal under Section 1 of the Sherman Act and Section 3 of the Clayton Act, 15 U.S.C. § 14. Int’l Salt Co. v. United States, 332 U.S. 392, 396, 68 S.Ct. 12, 92 L.Ed. 20 (1947). However, while true per se illegality eschews any analysis of actual mar- ket conditions, the Supreme Court has recog- nized that not every tying arrangement can be said to restrain competition. See id. at 11, 118 S.Ct. 275. Accordingly, the per se analy- sis as applied to tying arrangements entails some inquiry into relevant market conditions, particularly with regards to the seller’s ability to exploit its control over the tying product to force the buyer into purchasing another un- wanted-or in the case of a negative tie, fore- going purchase of a desired-tied product. See id. Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 10 of 19 PageID: 729 1224 852 FEDERAL SUPPLEMENT, 2d SERIES Serv., Inc., 504 U.S. 451, 463, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992). Here, RealPage alleges that ‘‘Yardi’s newly amended software license agree- ments condition licensees’ use of Yardi’s Voyager Back Office Accounting Software (the tying product) on an agreement not to use the Vertical Cloud Services (the tied product) of competing property manage- ment software companies, the only one of which today belongs to RealPage.’’ (SACC ¶ 61.) Yardi argues that there can be no negative tie in this case because licensees of Yardi’s Voyager software are not required to host the software with any Vertical Cloud Service, as licensees could host the software on-premises (‘‘self-host- ing’’). However, this argument merely mirrors the argument the Ninth Circuit and Supreme Court found unavailing Ko- dak, i.e., that no negative tie existed be- cause Kodak equipment owners seeking to purchase spare parts were not required to use any outside service providers-includ- ing ISOs-as equipment owners could sim- ply self-repair their equipment. The Court therefore rejects Yardi’s argument and finds that the facts as pleaded do in fact fit the definition of a negative tying arrangement. Accordingly, the Court pro- ceeds to consider whether RealPage has pleaded a relevant market sufficient to withstand a motion to dismiss. b. Relevant Market Yardi next contends that RealPage’s product market definition for Vertical Cloud Services (‘‘Vertical Cloud Mar- ket’’)-on which all of RealPage’s antitrust counterclaims hinge in some way-fails as a matter of law for the definition’s failure to include self-hosting of management soft- ware. (Mot. at 8-9.) RealPage counters that Yardi’s argument impermissibly asks the Court ‘‘to summarily resolve the ‘fact intensive’ question of reasonable substitut- ability at the pleading stage.’’ (Opp’n at 8.) The Court agrees. [4, 5] ‘‘The definition of an antitrust ‘relevant market’ is typically a factual rather than a legal inquiry, but certain legal principals govern the definition.’’ Apple Inc. v. Psystar Corp., 586 F.Supp.2d 1190, 1196 (N.D.Cal.2008) (citing Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d 1038, 1045 (9th Cir.2008)). A product market comprises ‘‘products that have rea- sonable interchangeability for the purposes for which they are produced-price, use and qualities considered.’’ United States v. E.I. duPont de Nemours & Co., 351 U.S. 377, 406, 76 S.Ct. 994, 100 L.Ed. 1264 (1956); see also Brown Shoe Co. v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962) (‘‘The outer boundaries of a product market are determined by the reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it.’’). Pursuant to these guidelines, ‘‘the relevant market must include ‘the group or groups of sellers or producers who have actual or potential ability to deprive each other of significant levels of business.’ ’’ Newcal Indus., 513 F.3d at 1045 (quoting Thur- man Indus., Inc. v. Pay ’N Pak Stores, Inc., 875 F.2d 1369, 1374 (9th Cir.1989)). Accordingly, a complaint should be dis- missed under Rule 12(b)(6) only where ‘‘the complaint’s ‘relevant market’ defini- tion is facially unsustainable.’’ Newcal In- dus., 513 F.3d at 1045. Such a ‘‘facially unsustainable’’ relevant market definition may be found in cases where ‘‘the 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.’’ Colonial Med. Group, Inc. v. Catholic Healthcare W., No. 09- 2192 MMC, 2010 WL 2108123, at *3 (N.D.Cal. May 25, 2010) (quoting Queen Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 11 of 19 PageID: 730 1225REALPAGE, INC. v. YARDI SYSTEMS, INC. Cite as 852 F.Supp.2d 1215 (C.D.Cal. 2012) City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430, 436 (3d Cir.1997)). [6] Taking the allegations in Real- Page’s SACC as true and resolving all factual inferences in RealPage’s favor, RealPage’s Vertical Cloud Market defini- tion is not facially unsustainable. Real- Page defines this market as ‘‘the market for vertically-integrated [sic] cloud com- puting services specialized to the needs of real estate owners and property manag- ers,’’ which includes only Yardi and Real- Page. (SACC ¶ 28.) Viewed alone, this definition appears quite narrow. Howev- er, RealPage proceeds to consider and re- ject multiple conceivably interchangeable substitutes in great factual detail. Specif- ically, RealPage distinguishes ‘‘generic cloud computing services, such as those offered by Amazon and Rackspace,’’ as insufficiently specialized to tailor to real estate owners and property managers. (SACC ¶ 30). RealPage further explains that ‘‘single-application hosting services, in which a client accesses its own individual copy of a software program (such as Voy- ager) remotely via the internet,’’ are not reasonable substitutes because such ser- vices, by definition, do not constitute Ver- tical Cloud Services. (SACC ¶ 33.) Fi- nally, RealPage rejects self-hosting as a reasonably interchangeable substitute in the Vertical Cloud Market. (SACC ¶ 35.) RealPage avers that self-hosting is not reasonably interchangeable with Vertical Cloud Services because ‘‘a [small but sig- nificant increase in price] in the Vertical Cloud Market would not cause cloud cus- tomers to switch to on premise hosting because the small price increase in the cost of Vertical Cloud Services would be offset by the much higher costs to the customer of hiring IT personnel, purchas- ing hardware, and managing and main- taining the infrastructure necessary for on premise hosting,’’ among other reasons. (Id.) The specificity with which RealPage pleaded the relevant market in this case contrasts starkly with the paucity of facts courts have found fails to withstand a mo- tion to dismiss for failure to plead a rele- vant market as a matter of law. E.g., Tanaka v. Univ. of S. Calif., 252 F.3d 1059, 1063 (9th Cir.2001) (‘‘[Plaintiff’s] con- clusory assertion that the ‘UCLA women’s soccer program’ is ‘unique’ and hence ‘not interchangeable with any other program in Los Angeles’ is insufficient.’’); Big Bear Lodging Ass’n v. Snow Summit, Inc., 182 F.3d 1096, 1105 (9th Cir.1999) (finding plaintiff’s product market definition of ‘‘lodging accommodation and ski pack- ages’’ insufficient for failure to allege that there were no other goods or services rea- sonable interchangeable with such accom- modations or packages); Davies v. Gene- sis Med. Ctr. & Anesthesia & Analgesia, P. C., 994 F.Supp. 1078, 1099 (S.D.Iowa 1998) (finding a narrow market for cardiac anesthesiology insufficient as a matter of law for, inter alia, failure to include any allegations distinguishing the cardiac an- esthesiology market from the broader an- esthesiology market). To the contrary, RealPage’s proposed Vertical Services Market definition conscientiously consid- ers and rejects multiple interchangeable substitute products with reference to the rule of reasonable interchangeability. While Yardi vigorously contests Real- Page’s exclusion of self-hosting from the relevant market in this case, Yardi’s pro- testations turn on issues of fact inappro- priate for resolution at this stage of the litigation. Accordingly, the Court finds that RealPage’s definition of the relevant product and geographic markets in this case withstand scrutiny for the purposes of Rule 12(b)(6). c. Market Power Finally, Yardi contends that RealPage’s tying counterclaim is subject to dismissal Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 12 of 19 PageID: 731 1226 852 FEDERAL SUPPLEMENT, 2d SERIES because RealPage has failed to allege ade- quately that Yardi possesses market power in the Property Management Back Office Accounting Software Market. Specifically, Yardi argues that RealPage has failed to establish that Yardi played a ‘‘significant role’’ in the relevant market. The Court finds, however, that market power allega- tions at the pleading stage do not demand such an exacting standard. [7, 8] ‘‘[I]n all cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product.’’ Ill. Tool Works, 547 U.S. at 46, 126 S.Ct. 1281. Market power for purposes of tying arrangements ‘‘is the power to ‘to force a purchaser to do some- thing that he would not do in a competitive market.’ ’’ Kodak, 504 U.S. at 464, 112 S.Ct. 2072 (quoting Jefferson Parish, 466 U.S. at 14, 104 S.Ct. 1551). In determin- ing whether an antitrust defendant has market power in the tying product, the Court must focus on ‘‘whether the seller has the power to raise prices, or impose other burdensome terms such as a tie-in, with respect to any appreciable number of buyers within the market.’’ Fortner En- ters., Inc. v. U.S. Steel Corp., 394 U.S. 495, 89 S.Ct. 1252, 22 L.Ed.2d 495 (1969). [9] It stands to reason that market power needs be something less than mo- nopoly power, but something more than the mere possibility of collusion or anti- competitive effects in the market. See Fortner Enters., Inc. v. U.S. Steel Corp., 394 U.S. 495, 502, 89 S.Ct. 1252, 22 L.Ed.2d 495 (1969) (‘‘The standard of ‘suf- ficient economic power’ does not TTT re- quire that the defendant have a monopoly or even dominant position throughout the market for the tying product’’); Sheridan v. Marathon Petroleum Co., 530 F.3d 590, 595-96 (7th Cir.2008). Moreover, ‘‘eco- nomic power over the tying product can be sufficient TTT even though the power exists only with respect to some of the buyers in the market.’’ Fortner, 394 U.S. at 502-03, 89 S.Ct. 1252 (emphasis added). The stan- dard rejecting the need for proof of truly dominant power over the tying product recognizes that ‘‘because tying arrange- ments generally serve[ ] no legitimate business purpose that cannot be achieved in some less restrictive way, the presence of any appreciable restraint on competi- tion provides a sufficient reason for invali- dating the tie.’’ Id. at 503, 89 S.Ct. 1252 (emphasis added). [10] Here, RealPage alleges that the proper product market definition for the tying product is property management back office accounting software (‘‘Property Management Back Office Accounting Soft- ware Market’’ or ‘‘Software Market’’). (SACC ¶ 20.) RealPage supports this defi- nition by claiming that the Property Man- agement Back Office Accounting Software Market ‘‘is recognized as a distinct product market in the property management in- dustry’’ (id.) and properly excludes indus- try-neutral or generic back office account- ing software because such software ‘‘is not an adequate substitute for Property Man- agement Back Office Accounting Software’’ (id. ¶ 22). Yardi does not appear to con- test RealPage’s definition of the tying product market. Yardi does contest, however, RealPage’s assertions of Yardi’s market power in the Software Market. As a threshold matter, the Court agrees with Yardi that Yardi’s own promotional materials touting itself as ‘‘the industry-leading asset and property management software solution’’ and inde- pendent industry analysts’ assessments that Yardi has a ‘‘competitive advantage[ ]’’ or particular strength in its back office accounting capabilities are insufficient alone to establish a plausible assertion of market power in the Software Market. (SACC ¶ 24.) Similarly lacking are Real- Page’s bald contentions that ‘‘Yardi offers Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 13 of 19 PageID: 732 1227REALPAGE, INC. v. YARDI SYSTEMS, INC. Cite as 852 F.Supp.2d 1215 (C.D.Cal. 2012) the market-leading Property Management Back Office Accounting Software’’ and that Yardi derives market power from Voyag- er’s ‘‘high penetration among Property Management Back Office Accounting Soft- ware customers.’’ (SACC ¶ 4.) Absent some data to support these assertions,3 RealPage offers nothing more than generic conclusions that do not suffice to support any contention of market power. More persuasive, however, are Real- Page’s allegations that Yardi has ‘‘recently changed its software license agreements to illegally counter the RealPage competitive threat and lock its installed base of Voyag- er Back Office Accounting Software clients out of the RealPage Cloud.’’ (SACC ¶ 46.) RealPage asserts that Yardi has coerced its Voyager customer base-which is locked into the Voyager software due to prohibitively high switching costs and the threat of significant business interruption attendant to abandoning the Yardi soft- ware-into signing anticompetitive amend- ments to their Voyager software licensing agreements by threatening to terminate the licenses of those who refuse to accede to the amendments. (E.g., SACC ¶ 42.) RealPage specifically cites Clients 1 and 3 as two such customers whose existing plans to migrate their data into the Real- Page Cloud were thwarted by Yardi’s anti- competitive tactics. (SACC ¶¶ 51-53, 57.) RealPage’s SACC thus pleads with some particularity two discrete examples in which Yardi has wielded its economic ad- vantage in its Voyager software to the competitive detriment to the RealPage Cloud. These allegations suffice to dem- onstrate that Yardi has market exerted power over at least some buyers in the market to effect at least an appreciable restraint on competition. See Fortner, 394 U.S. at 502-03, 89 S.Ct. 1252. While Real- Page may be presented with some difficul- ty proving that Yardi has sufficient market power to invalidate the tying arrangement alleged in this case, the Court nevertheless finds that RealPage’s allegations are suffi- cient to make a finding of market power for tying-arrangement purposes plausible at this stage in the proceedings. In sum, the Court finds that RealPage has pleaded sufficient facts to establish the existence of an illegal tying arrangement, properly defined a relevant market for the tied product, and adequately established for the purposes of a motion to dismiss that Yardi has market power in the prod- uct market for the tying product to affect competition in the tied product market. Accordingly, the Court DENIES Yardi’s Motion to Dismiss RealPage’s counter- claims alleging illegal tying arrangements under Section 1 and the Cartwright Act. 2. Attempted Monopolization Counterclaim RealPage’s third counterclaim alleges that Yardi has attempted to monopolize the Vertical Cloud Market in violation of Section 2. Yardi argues that RealPage’s 3. RealPage does offer some data, although its reliance on the data it provides is misplaced. RealPage avers that ‘‘when looking at the total number of apartment units managed by the top 50 property managers, over 75% of those that are fee managed (over 1.1 million units) are managed using Yardi’s Voyager Back Office Accounting Software. Yardi’s dominance is even more apparent when look- ing at the total number of apartment units managed by the top 25 property managers TTT: among that subset, over 90% of those units that are fee managed are managed using Yardi’s’’ Voyager software. (SACC ¶ 26 (em- phasis in original).) However, individual apartment units do not use Yardi’s software; property managers do. Thus, absent addi- tional context, the number of units that are fee-managed by property managers employ- ing Yardi’s software says nothing of the num- ber property managers actually using Yardi’s software. Indeed, it is conceivable that only one property manager using Yardi’s Voyager software accounts for all of the units Real- Page cites. Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 14 of 19 PageID: 733 1228 852 FEDERAL SUPPLEMENT, 2d SERIES attempted monopolization counterclaim fails because RealPage has insufficiently alleged a dangerous probability of success- ful monopolization. [11] To state a claim for attempted monopolization, a plaintiff must allege ‘‘(1) that the defendant has engaged in predato- ry or anticompetitive conduct with (2) a specific intent to monopolize and (3) a dan- gerous probability of achieving monopoly power.’’ Spectrum Sports, Inc. v. McQuil- lan, 506 U.S. 447, 456, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993). The Ninth Circuit ‘‘has noted that while the three elements are discrete, they are often interdepen- dent; i.e., proof of one of the three ele- ments may provide circumstantial evidence or permissible inferences of the other ele- ments.’’ Twin City Sportservice, Inc. v. Charles O. Finley & Co., 676 F.2d 1291, 1308 (9th Cir.1982). ‘‘In order to determine whether there is a dangerous probability of monopolization, courts have found it necessary to consider the relevant market and the defendant’s ability to lessen or destroy competition in that market.’’ Id. This necessarily re- quires plaintiffs to adequately plead that the defendant has market power in the relevant market. Digital Sun v. The Toro Co., No. 10-CV-4567-LHK, 2011 WL 1044502, at *3 (N.D.Cal. Mar. 22, 2011) (citing Newcal Indus., 513 F.3d at 1044 n. 3 (9th Cir.2008)). [12] A plaintiff may establish market power for Section 2 purposes directly by presenting evidence of injurious exercise of market power or circumstantially by (1) defining the relevant market; (2) showing that the defendant owns a dominant share of that market; and (3) showing that there are significant barriers to entry and that existing competitors lack the capacity to increase their output in the short run. Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1434 (9th Cir.1995). ‘‘No single fac- tor is dispositive.’’ Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 318 (3d Cir.2007). However, ‘‘although market share does not alone determine monopoly power, market share is perhaps the most important factor to consider in determin- ing the presence or absence of monopoly power.’’ Movie 1 & 2 v. United Artists Commc’ns, Inc., 909 F.2d 1245 (9th Cir. 1990). As explained above, the Court finds that RealPage has adequately defined the rele- vant markets for the purposes of a Rule 12(b)(6) motion. With respect to market power, RealPage contends that ‘‘[t]here is a dangerous probability that Yardi will achieve monopoly power in the Vertical Cloud Market.’’ (SACC ¶ 102.) There- fore, RealPage must allege that Yardi has market power in the Vertical Cloud Mar- ket. [13] RealPage’s allegations regarding Yardi’s market power in the Vertical Cloud Market are anchored solely in the market power Yardi is alleged to hold in the Soft- ware Market. (See SACC ¶ 103; see also Opp’n at 16 (‘‘[T]he entire theme of Real- Page’s SACC is that Yardi is using its power in the TTT Software Market to fore- close and monopolize in the Vertical Cloud Market.’’).) Specifically, RealPage con- tends that Yardi’s power over its Voyager customers-derived from the high switch- ing costs attendant to abandoning the Voy- ager software after adopting it-‘‘gives Yardi a substantial market power in the Vertical Cloud Market.’’ (Id.) In addition, RealPage avers that Yardi’s Voyager cus- tomers ‘‘represent a substantial share of potential Vertical Cloud Services custom- ers.’’ (SACC ¶¶ 9, 75 (emphasis added).) However, as Yardi points out, ‘‘such allega- tions say nothing about market size, mar- ket share, or market power in the Soft- ware Market as a whole, much less in the Vertical Cloud Market that Yardi is pur- portedly attempting to monopolize.’’ (Mot. Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 15 of 19 PageID: 734 1229REALPAGE, INC. v. YARDI SYSTEMS, INC. Cite as 852 F.Supp.2d 1215 (C.D.Cal. 2012) at 15.) Instead, RealPage’s contentions create only a tenuous inference that any market share it has in the Software Mar- ket can be imputed to its market share in the Vertical Cloud Market. Nevertheless, ‘‘determining whether a defendant has a ‘dangerous probability’ of successful monopolization is a fact-sensi- tive inquiry, in which market share is sim- ply one factor.’’ Broadcom Corp. v. Qual- comm Inc., 501 F.3d 297, 319 (3d Cir. 2007). Despite RealPage’s flimsy conten- tions regarding market share, the Court finds significant RealPage’s allegation that ‘‘Yardi and RealPage are the only competi- tors’’ in the Vertical Cloud Market. (SACC ¶ 105.) Moreover, RealPage has alleged multiple barriers to entry preclud- ing other competitors from entering the market: industry-specific software exper- tise; trade secret information in the form of the knowledge, expertise, and technolo- gy necessary for cloud hosting specific to the property management industry, which requires substantial financial investment; market acceptance, premised on custom- ers’ trust in Vertical Cloud Service provid- ers’ knowledge and expertise; and the market’s preference for established ven- dors. (SACC ¶¶ 31-32.) Coupled with RealPage’s contentions regarding Yardi’s market share in the Software Market, the Court finds that these allegations state sufficient facts to plausibly suggest a dan- gerous probability of success. In addition, ‘‘dangerous probability of success’’ is but one element required to state an attempted monopolization claim under Section 2. As discussed above, the Court has determined that Yardi’s Voyag- er license amendments constitute anticom- petitive conduct. Thus, the Court is left to consider the ‘‘specific intent to monopolize’’ prong of RealPage’s attempted monopoli- zation claim. See Spectrum Sports, 506 U.S. at 456, 113 S.Ct. 884. RealPage av- ers that Yardi’s intent to monopolize the Vertical Cloud Market is manifested in its campaign of stealing trade secrets, com- municating with Wall Street analysts to try and drive down the RealPage stock price, forcing changes to contract terms threatening to terminate existing license agreements threatening to communicate with its licensee’s customers, condition- ing its clients’ ability to use [the Voyag- er software] on their coerced agreement not to use the RealPage Cloud, and in- terfering with RealPage’s client relation- ships. (SACC ¶ 70.) Viewed in light of Real- Page’s allegations that RealPage and Yar- di are the only competitors to date in the Vertical Cloud Market and that significant entry barriers block new competitors from the market, the Court finds RealPage’s specific intent contentions particularly compelling. Accordingly, the Court finds that RealPage has stated sufficient facts to state an attempted monopolization claim. Yardi’s Motion to Dismiss RealPage’s third claim is therefore DENIED. 3. Exclusive Dealing Counterclaim Finally, Yardi contends that RealPage has failed to state a claim for exclusive dealing under Section 1 because RealPage fails to adequately allege that Yardi’s amended Voyager license agreements fore- close substantial competition in the Verti- cal Cloud Market. Specifically, Yardi ar- gues that RealPage’s exclusive dealing claim fails as a matter of law because it ‘‘rests on the faulty premise that whatever degree of control Yardi possesses over its purportedly ‘locked-in’ [Voyager] software customers somehow translates into a sub- stantial foreclosure of the Vertical Cloud Market.’’ (Mot. at 18-19.) ‘‘Exclusive dealing involves an agree- ment between a vendor and a buyer that prevents the buyer from purchasing a giv- Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 16 of 19 PageID: 735 1230 852 FEDERAL SUPPLEMENT, 2d SERIES en good from any other vendor.’’ Allied Orthopedic Appliances Inc. v. Tyco Health Care Group LP, 592 F.3d 991, 996 (9th Cir.2010). Because ‘‘[t]here are well-rec- ognized economic benefits to exclusive dealing arrangements, including the en- hancement of interbrand competition[,] TTT an exclusive-dealing arrangement does not constitute a per se violation of section 1.’’ Id. Rather, exclusive dealing arrangements are assessed under the rule of reason. [14] ‘‘Under the antitrust rule of rea- son, an exclusive dealing arrangement vio- lates Section 1 only if its effect is to fore- close competition in a substantial share of the line of commerce affected.’’ Id. (quot- ing Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961)). Substantial foreclosure of the relevant requires a showing that ‘‘the op- portunities for other traders to enter into or remain in that market [are] significantly limited.’’ Tampa Elec. Co., 365 U.S. at 327, 81 S.Ct. 623. [15] Thus, to state a claim for exclusive dealing in this case, RealPage must show that Yardi’s Voyager license agreements precluding Voyager customers from host- ing the Voyager software on any cloud service other than Yardi’s Cloud Services forecloses a substantial share of the Verti- cal Cloud Market by significantly limiting the opportunities for other cloud service providers to enter into or remain in the Vertical Cloud Market. For the reasons discussed with respect to RealPage’s at- tempted monopolization claim, the Court finds that RealPage has alleged sufficient facts to show that Yardi’s amended Voyag- er license agreements could significantly limit not only RealPage’s ability to remain in the Vertical Cloud Market, but also opportunities for other traders to enter the Vertical Cloud Market. While RealPage’s allegations tying Yardi’s market share in the Vertical Cloud Market to Yardi’s mar- ket share in the Software Market alone are insufficient to establish an exclusive dealing claim, RealPage has also asserted that Yardi and RealPage are the only two participants in the Vertical Cloud Market and that several entry barriers inhibit en- try into the Vertical Cloud Market. These facts are sufficient to render plausible RealPage’s contention that Yardi’s amend- ed Voyager license agreements foreclose competition in a substantial share of verti- cal cloud services commerce. Accordingly, the Court DENIES Yardi’s Motion with respect to RealPage’s exclusive dealing claim under Section 1. B. INTENTIONAL INTERFERENCE WITH CON- TRACT COUNTERCLAIM [16, 17] RealPage’s fifth counterclaim alleges that Yardi intentionally interfered with valid contracts RealPage had with Client 1, Client 2, and other unnamed third parties. To establish a claim for intention- al interference with a contract, RealPage must allege (1) a valid contract between RealPage and a third party; (2) Yardi’s knowledge of this contract; (3) Yardi’s in- tentional acts designed to induce a breach or disruption of the contractual relation- ship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage to RealPage. Guidiville Band of Pomo Indians v. NGV Gaming, Ltd., 531 F.3d 767, 774 (9th Cir.2008); Pac. Gas & Electric Co. v. Bear Stearns & Co., 50 Cal.3d 1118, 1126, 270 Cal.Rptr. 1, 791 P.2d 587 (1990). ‘‘A plaintiff need not allege an actual or inevitable breach of contract in order to state a claim for dis- ruption of contractual relations’’; rather, unlike the tort of inducing breach of con- tract, intentional interference with contrac- tual relations requires only proof of inter- ference. Pac. Gas & Electric Co., 50 Cal.3d at 1129, 270 Cal.Rptr. 1, 791 P.2d 587. [18] With respect to Client 1, Real- Page alleges that it had an ‘‘executed, valid Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 17 of 19 PageID: 736 1231REALPAGE, INC. v. YARDI SYSTEMS, INC. Cite as 852 F.Supp.2d 1215 (C.D.Cal. 2012) and enforceable agreement’’ with Client 1 (the Letter Agreement); that Yardi set out to interfere with this Letter Agree- ment upon learning of its existence by ‘‘advising Client 1 that [Client 1] could not continue to work with RealPage TTT under its existing Letter Agreement’’ with Real- Page; that, as a result of such advisement, ‘‘Client 1 was forced to cancel the services that RealPage was providing TTT under the Letter Agreement’’; that ‘‘[a]bsent Yardi’s interference and disruption of the contractual relationship, RealPage would have continued to perform [services for Client 1] pursuant to the Letter Agree- ment’’; and that Yardi’s interference and disruption ‘‘depriv[ed] RealPage of sub- stantial revenue.’’ (SACC ¶ 49.) These facts are more than sufficient to state a plausible claim for intentional interference with contractual relations as to Client 1. [19] RealPage’s assertions regarding Client 2, however, fail to meet the ele- ments required to establish an intentional interference with contractual relations. RealPage does successfully allege that it had a ‘‘five year agreement for RealPage to host Client 2’s software applications,’’ of which Yardi was aware and attempted to interfere with by claiming that Client 2’s hosting with RealPage violates Client 2’s Voyager license agreement and by ‘‘mak[ing] threats to Client 2 and Client 2’s customers that they will no longer be able to use Yardi’s applications if they host with the RealPage Cloud.’’ (SACC ¶ 55.) It is not so clear from RealPage’s SACC, how- ever, that there has been actual breach or actual disruption of Client 2’s contractual relationship with RealPage. RealPage merely contends that, as a result of Yardi’s threats, Client 2 employees that had shift- ed to RealPage pursuant to the five-year hosting agreement ‘‘will need to move back to Client 2-at great financial cost to RealPage.’’ (Id. (emphasis added).) As alleged, this statement does not suggest that any actual breach or disruption al- ready occurred, but that breach or disrup- tion could occur should Yardi continue with its alleged threats. Moreover, any resulting damage at this point appears to be contingent on the Client 2 employees actual migration back to Client 2. Accord- ingly, RealPage’s SACC has failed to al- lege sufficient facts to show that Yardi has intentionally interfered with RealPage’s contractual relations with Client 2. Finally, with respect to any as-of-yet unidentified third parties, RealPage as not pleaded sufficient facts to raise anything more than the sheer possibility that a Yar- di has acted unlawfully. See Iqbal, 129 S.Ct. at 1949 Indeed, ‘‘Rule 8 TTT does not unlock the doors of discovery for a plaintiff armed with nothing more than conclu- sions.’’ Id. at 1950. Accordingly, Yardi’s Motion is GRANTED WITH PREJU- DICE with respect to Client 2 and all unnamed third parties. However, Yardi’s Motion is DENIED with respect to Client 1. C. INTENTIONAL INTERFERENCE WITH PRO- SPECTIVE ECONOMIC ADVANTAGE AND UNFAIR COMPETITION COUNTERCLAIMS Finally, Yardi urges that the Court must dismiss RealPage’s sixth counterclaim for intentional interference with prospective economic advantage and seventh counter- claim for violation of California’s Unfair Competition Law insofar as they rely on RealPage’s insufficiently pleaded antitrust claims.4 However, the Court has found 4. Yardi also contends that these counter- claims should be dismissed to the extent that they are predicated on RealPage’s misappro- priation of trade secrets counterclaim because the California Uniform Trade Secrets Act (‘‘UTSA’’) provides the exclusive remedy for misappropriation of trade secrets and preempts other tort claims based on trade secret misappropriation. (Mot. at 24.) Be- cause the Court finds that RealPage’s tying Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 18 of 19 PageID: 737 1232 852 FEDERAL SUPPLEMENT, 2d SERIES that RealPage sufficiently pleaded a tying claim under Section 1 and the Cartwright Act. Accordingly, the Court DENIES Yar- di’s Motion to dismiss RealPage’s sixth and seventh counterclaims. V. CONCLUSION For the foregoing reasons, Yardi’s Mo- tion to Dismiss RealPage’s Second Amend- ed Counterclaims is GRANTED in PART and DENIED in PART. Specifically, the Court DENIES Yardi’s Motion with re- spect to RealPage’s second counterclaim for violation of Section 1; third counter- claim for violation of Section 2; fourth counterclaim for violation of the Cart- wright Act; fifth counterclaim for inten- tional interference with contract, insofar as that counterclaim pertains to Client 1; sixth counterclaim for intentional interfer- ence with prospective economic advantage; and seventh counterclaim for violation of the UCL. However, the Court GRANTS Yardi’s Motion with respect to RealPage’s fifth counterclaim for intentional interfer- ence with contract, which is DISMISSED WITH PREJUDICE insofar as it pertains to clients other than Client 1. IT IS SO ORDERED. , Jaco VAN MAANEN, Plaintiff, v. YOUTH WITH A MISSION-BISHOP; Youth With a Mission International, Inc. d/b/a YWAM Office of the Found- ers; University of the Nations, Inc. d/b/a YWAM-University of the Na- tions, and Does 1-10, Defendants. No. 1:10-CV-00493 AWI-JLT. United States District Court, E.D. California. Feb. 14, 2012. Background: Plaintiff brought action against university to recover for personal injuries he sustained while using zip line during wilderness leadership training course. Plaintiff moved to strike, and uni- versity moved for summary judgment. Holdings: The District Court, Anthony W. Ishii, Chief Judge, held that: (1) university’s failure to include witness in its initial disclosures was harmless; (2) corporation that offered course was not common carrier; (3) no university-student relationship ex- isted between plaintiff and university; (4) no agency relationship existed between university and non-profit corporation that offered course; and (5) corporation that offered course was not university’s ostensible agent. Motion to strike denied; motion for sum- mary judgment granted. 1. Federal Civil Procedure O1278 Defendant’s failure to include witness in its initial disclosures was harmless, where witness’s identity, position, location, claims under Section 1 and the Cartwright Act survive Yardi’s Motion to Dismiss, the Court does not reach the issue whether the UTSA preemption applies in this case. Case 2:17-cv-00177-CCC-MF Document 51-1 Filed 06/05/17 Page 19 of 19 PageID: 738