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Genesee Vending, Inc. v. Lorillard Tobacco Co.

United States District Court, E.D. Michigan, Southern Division
Nov 2, 2004
Case No. 04-60091 (E.D. Mich. Nov. 2, 2004)

Opinion

Case No. 04-60091.

November 2, 2004


OPINION AND ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND GRANTING PLAINTIFFS LEAVE TO AMEND THEIR COMPLAINT


I. INTRODUCTION

Before the Court is Defendant Lorillard Tobacco's Motion to Dismiss Complaint (Doc. #3), brought pursuant to Fed.R.Civ.P. 8(a) and 12(b)(6). Defendants argue that the Complaint fails to provide adequate notice because it fails to address the individual claims of each of the two hundred and twenty-three Plaintiffs. As discussed below, the Court GRANTS the motion to dismiss. However, Plaintiffs are granted leave to amend their complaint in a manner consistent with this opinion.

II. STATEMENT OF FACTS

Plaintiffs are two hundred and twenty-three machine vendors of cigarettes. They seek to bring this suit on behalf of a class of over three hundred owners and operators of cigarette vending machines in the United States. At this early stage of the litigation, no request for class certification has been made. Defendant Lorillard Tobacco Company is the country's third largest cigarette manufacturer and distributes cigarettes under several brands, including Newport. Plaintiffs filed this suit on May 14, 2004, alleging violations of the Clayton Act. Plaintiffs' central claim is that Defendant engaged in price discrimination by offering rebates and other promotional programs exclusively to a competing class of cigarette retailers. These retailers include convenience stores, gas stations, mini-marts, kiosks and discount stores.

III. STANDARD OF REVIEW

A Fed.R.Civ.P. 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted tests the legal sufficiency of a plaintiff's claims. A court considering a motion to dismiss must "construe the complaint in the light most favorable to the plaintiff [and] accept all factual allegations as true." Cline v. Rogers, 87 F.3d 176, 179 (6th Cir. 1996). A complaint should not be dismissed unless a plaintiff can prove no set of facts in support of her claims that would entitle her to relief. Hishon v. King Spalding, 467 U.S. 69, 73 (1984). The court should primarily consider the allegations in the complaint; however, "matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint, also may be taken into account." Amini v. Oberlin College, 259 F.3d 493, 502 (6th Cir. 2001) (citation omitted).

Notwithstanding the decidedly liberal standard of 12(b)(6), the complaint must contain either direct or inferential allegations with respect to all material elements necessary to sustain recovery under a viable legal theory. Scheid v. Ranny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988). While the complaint need not specify every detail of a plaintiff's claim, it must give the defendant "fair notice of what the plaintiff's claim is and the grounds upon which it rests." Gazette v. City of Pontiac, 41 F.3d 1061, 1064 (6th Cir. 1994).

IV. ANALYSIS

The dispositive issue in this motion is whether Plaintiffs are required to individually plead the elements of each vendor's claims. Defendant contends that the Complaint fails to state the following three required jurisdictional elements as to each vendor: "(i.) that Lorillard discriminated as between two identified competing purchasers; (ii.) that applicable sales were made in the course of interstate commerce; or, (iii) with respect to their claims under Section 2(a), that any alleged price discrimination had a prohibited effect on competition." Def.'s Br. at 10. In response, Plaintiff contends that neither Fed.R.Civ.P. 8(a)(2) nor the Clayton Act requires the level of individualized pleading that Defendant proposes.

The Clayton Act is an antitrust law that seeks to prevent "'primary-line' price discrimination, or price discrimination tending to injure the price discriminator's competitors." Lewis v. Philip Morris, Inc., 355 F.3d 515, 520 (6th Cir. 2004) (citing 14 HOVENKAMP, ANTITRUST LAW: AN ANALYSIS OF ANTITRUST PRINCIPLES AND THEIR APPLICATION, ¶ 2303 (1999)). Congress passed the Robinson-Patman Act to amend the Clayton Act so as to "protect small retail stores from the concentrated buying power of larger chain stores." Id. See also FTC v. Henry Broch Co., 363 U.S. 166, 168 (explaining that the new legislation sees to "curb and prohibit all devices by which large buyers gained discriminatory preferences over smaller ones by virtue of their greater purchasing power").

The type of antitrust violations alleged in this case are "secondary-line" violations. These violations occur "when a seller's discrimination impacts competition among the seller's customers; i.e., the favored purchasers and disfavored purchasers."George Haug Co., Inc. v. Rolls Royce Motor Cars, Inc., 148 F.3d 136, 141 n. 2 (2d Cir. 1998). To succeed in establishing secondary-line discrimination under section 2(a) of the Robinson-Patman Act, a plaintiff bears the burden of establishing:

Section 2(a) indicates, in relevant part:

It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality . . . where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them.
15 U.S.C. § 13(a).

(1) that the seller's sales were made in interstate commerce; (2) that the seller discriminated in price as between the two purchasers; (3) that the product or commodity sold to the competing purchasers was of the same grade and quality; and (4) that the price discrimination had a prohibited effect on competition.
Industrial Burner Sys., Inc. v. Maxon Corp., 275 F.Supp. 878, 883-84 (E.D.Mich. 2003) (citation omitted). If a violation is established, treble damages may be available under § 4 of the Clayton Act, if the plaintiff is able to establish that it suffered actual injury to its business or property as a result of the price discrimination. Id. The elements underlying claims under § 2(d) and § 2(c) of the Robinson-Patman Act differ only in that it is unnecessary to demonstrate a prohibited effect on competition. Lewis, 355 F.3d at 521-22, n. 6, 7.

Section 2(d) states:

It shall be unlawful for any person engaged in commerce to pay or contract for the payment of anything of value to or for the benefit of a customer of such person in the course of such commerce as compensation or in consideration for any services or facilities furnished by or through such customer in connection with the processing, handling, sale, or offering for sale of any products or commodities manufactured, sold, or offered for sale by such person, unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities.
15 U.S.C. § 13(d).

Section 2(d) provides:

It shall be unlawful for any person to discriminate in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale, with or without processing, by contracting to furnish or furnishing, or by contributing to the furnishing of, any services or facilities connected with the processing, handling, sale, or offering of sale of such commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms.
15 U.S.C. § 13(e).

In support of its motion, Defendant argues that Plaintiffs have failed to provide fair notice of their claims because the Complaint "group pleads" the common allegations. Defendant relies upon two cases in support of the proposition that each vendor-plaintiff must make individualized allegations pertaining to each of the elements of its Robinson-Patman claim. See Mountain View Pharmacy v. Abbott Labs., 630 F.2d 1383 (10th Cir. 1980); Chawla v. Shell Oil Co., 77 F.Supp. 2d 626 (S.D.Tex. 1999). Thus, in Defendant's view, the Complaint must set forth the factual bases necessary to support the hundreds of separate causes of action for unlawful price and promotion discrimination. Having reviewed these cases, the Court concludes that the pleading requirements for price-discrimination claims are not as stringent as Defendant asserts. Nonetheless, it is clear that the cases discussed by the parties lean in favor of dismissal because the Complaint is too vague to provide meaningful notice of the claims asserted by the individual vendors.

Plaintiffs have failed to present any case where a similar group of plaintiffs has been permitted to group plead their claims under the Clayton Act. Instead, Plaintiffs invest their efforts in attempting to distinguish the instant case from Mountain View and Chawla.

In Mountain View, the Tenth Circuit reviewed a complaint and an amended complaint brought by thirteen independent retail druggist against 28 drug manufactures, alleging, inter alia, that the defendants violated the Robinson-Patman Act by giving unlawful price discounts to hospitals. 630 F.2d at 1388. The Tenth Circuit dismissed the vast majority of the claims for want of particularity:

Except as noted below, plaintiff's amended complaint fails to specify any products that were the subject of discriminatory treatment, nor does it identify the favored and disfavored purchasers of a particular product. In view of the number of plaintiffs, defendants, and products involved in this suit, a complaint that fails to allege at least some of this information does not give fair notice of the grounds upon which the Robinson-Patman claim rests.
Id.

Similarly, the Chawla court found inadequate a complaint filed by seventy-three individuals who operated Shell-brand gasoline stations, alleging, inter alia, that Shell offered unlawful discounts to their competitors. 77 F.Supp.2d at 630. The court found that the blanket statements in the complaint failed to set forth factual claims addressing the elements of their Robinson-Patman Act claims:

The Court concludes that the sweeping allegations in the Plaintiffs' First Amended Complaint, despite initial appearances of adequacy, do not state a claim under the Robinson-Patman Act. This is not a class action. It is a case in which seventy-three different lessee-dealers from various states have elected to proceed in a single suit. The case must be analyzed from the perspective of each Plaintiff separately.
Id. at 654 (emphasis added).

These two cases make clear that the Complaint fails to apprise Defendant of the nature of the legal claims asserted by the individual vendors. Both Mountain View and Chawla demonstrate that, in suits of this nature, the individual plaintiffs are required to address each of their separate claims. Plaintiffs' Complaint must be dismissed because it is phrased as a class action rather than a lawsuit asserting the separate factual claims of multiple plaintiffs. As such, it makes no effort to discuss the individual claims of the vendors. No mention is made of the type of promotional discounts Defendant offered. None of the vendors' competitors or their geographical markets are identified. Nor is there any discussion of how the alleged discrimination had an unlawful effect on competition or injured Plaintiffs' businesses. In short, no factual details support any of the elements of the Robinson-Patman claims. Given this complete lack of individualized factual allegations, the Court refrains from making any specific ruling on whether the vendors will be able to demonstrate the elements of their claims, and dismisses the Complaint for want of particularity.

Notably, Defendant has cited persuasive authority indicating that Robinson-Patman Act claims, such as the case at bar, are inherently unsuited for class treatment. See Mekani v. Miller Brewing Co., 93 F.R.D. 506, 511 (E.D.Mich. 1982) ("Each class member's proof as to competitive injury and thus to liability will be highly individualistic. For this reason the courts have generally denied class action motions in Robinson-Patman Act cases."). Plaintiffs appear to concede this point by recommending that this litigation be split up into groups of ten plaintiffs and tried one at a time.

However, Plaintiffs should be granted leave to amend their complaint. The Supreme Court has dictated that federal courts be quite permissive in allowing an amendment of the complaint under Fed.R.Civ.P. 15(a). Foman v. Davis, 371 U.S. 178, 182 (1962). "In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. — the leave should, as the rule requires, be 'freely given.'" Id. As there is no evidence of bad faith, Plaintiffs are granted leave to amend their complaint with individual factual allegations addressing each of the elements of their Robinson-Patman claims.

V. CONCLUSION

For the reasons state above, Defendant's Motion to Dismiss is GRANTED, and Plaintiffs are granted leave to amend their complaint in a manner consistent with this opinion.

IT IS SO ORDERED.


Summaries of

Genesee Vending, Inc. v. Lorillard Tobacco Co.

United States District Court, E.D. Michigan, Southern Division
Nov 2, 2004
Case No. 04-60091 (E.D. Mich. Nov. 2, 2004)
Case details for

Genesee Vending, Inc. v. Lorillard Tobacco Co.

Case Details

Full title:GENESEE VENDING, INC., et. al, Plaintiffs, v. LORILLARD TOBACCO CO.…

Court:United States District Court, E.D. Michigan, Southern Division

Date published: Nov 2, 2004

Citations

Case No. 04-60091 (E.D. Mich. Nov. 2, 2004)