Allen v. Verizon Commc'ns, Inc.

BRANDY A. ALLEN, Plaintiff, v. VERIZON COMMUNICATIONS, INC.AND CELLCO PARTNERSHIP d/b/a VERIZON WIRELESS, Defendants.

Civil Action No.: 3:18-cv-8918 (PGS)(LHG)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

January 31, 2019

MEMORANDUM AND ORDER

SHERIDAN, U.S.D.J.

This matter comes before the Court on Defendants Verizon Wireless Communications, Inc. and Cellco Partnership d/b/a Verizon Wireless' (hereinafter "Verizon") Motion to dismiss Plaintiff Brandy A. Allen's amended complaint pursuant to Fed. R. Civ. Pro. 12(b)(6), (ECF No. 18). Plaintiff alleges that Verizon and AT&T colluded to limit their customers' ability to change wireless service providers, and colluded to set industry standards that "would allow wireless carriers to lock devices to a certain network" by conspiring to prevent the use of eSIM technology. (Amended Compl., ECF No. 3, at ¶¶ 2, 4).¹ As a result, Plaintiff, a subscriber of AT&T, allegesthat she has been injured by Verizon and AT&T's conduct of " artificially limit[ing] choices in the market for wireless communications services and artificially inflat[ing] prices." (Id. at ¶¶ 9, 19).

Plaintiff brought the present complaint on behalf of herself and all others similarly situated, against Verizon alleging violations of Section I of the Sherman Antitrust Act, 15 U.S.C. § 1, "specifically, the anticompetitive combination, conspiracy, and/or agreement alleged . . . is a per se violation of Section I of the Sherman Act, 15 U.S.C. § 1" or "alternatively, the anticompetitive combination, conspiracy, and/or agreement alleged . . . resulted in substantial anticompetitive effects in the market for wireless communication services in the United States" (Count I); and a claim for injunctive relief for violations of Section I of the Sherman Antitrust Act, (Count II).

I.

A brief description of the technology at issue in this dispute is necessary. Cell phones utilize subscriber identity modules, or SIM cards, that contain unique identifying information about a specific user, which identifies that user to a specific wireless network. (Id. at ¶ 32). Wireless service providers, such as Verizon or AT&T, use SIM cards to determine if a particular cell phone belongs to a user who is paying for a subscription to use that mobile network's services. (Id.) SIM cards are "tiny piece[s] of plastic that users slide into a tray on their mobile device." (Id. at ¶ 5). Consumers will typically need to purchase a new SIM card when changing wireless service providers. (Id.) eSIM technology "enables remote SIM provisioning of any mobile device. . . ." (Id. at ¶ 33). Essentially, eSIM technology is embedded into devices, including mobile phones. (Id. at ¶ 34). With eSIM technology, mobile phones and other devices no longer require a physical SIM card to use a wireless network. (Id.) Plaintiff explains that eSIM technologyallows consumers to switch wireless carriers remotely, without having to travel to physical store, because "eSIMS can store and adopt different profiles (or accounts)." (Id. at ¶ 37). Plaintiff explains, "[t]he eSIM technology is supported by other wireless carriers across the country and around the world, as well as several gadget makers, including Apple, Google and Microsoft." (Id. at ¶ 36).

In 2016, the Groupe Speciale Mobile Association ("GSMA"), "a mobile industry standard group," released guidelines that supported the use of eSIM technology. (Id. at ¶ 6). GSMA is "an industry organization which represents the interests of mobile operators worldwide, uniting nearly 800 operators with more than 300 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and internet companies, as well as organizations in adjacent industry sectors." (Id. at ¶ 8). Further, "GSMA also produces industry events such as Mobile World Congress, Mobile World Congress Shanghai, Mobile World Congress Americas and the Mobile 360 Series of conferences." (Id.). Plaintiff alleges that after the GSMA released the guidelines, Verizon and AT&T opposed the guidelines, and "colluded to (1) lock customer eSIMS to their respective networks; and (2) to have GSMA set new standards allowing the same." (Id. at ¶ 7). Plaintiff explains that "locking eSIMS to a single carrier disables one of the most important functions of eSIM technology - the ability to simply switch to another carrier without visiting a physical store and changing a physical SIM card." (Id.)

The complaint alleges that Verizon and AT&T have colluded to prevent the use of eSIM technology in an effort to "restrict the ability of consumers to move easily from one wireless carrier to another." (Id. at ¶ 38). Plaintiff alleges that Verizon and AT&T's goals were to raise, fix, maintain, or stabilize prices in the market for wireless communication services by reducing competition. (Id. at ¶ 48).

In support of these allegations, Plaintiff contends the GSMA offered opportunities for Verizon to conspire with AT&T, because (1) Verizon's Executive Vice President/Chief Strategy Officer and AT&T's Executive Vice President of Global Connection Management both serve as members of the GSMA board and attend board meetings three times per year; (2) Verizon and AT&T are using their positions on the GSMA to influence the GSMA to adopt standards that do not support eSIM technology, and (3) Verizon and AT&T have participated in a "private" GSMA meeting,² wherein AT&T and Verizon advocated for their ability to lock phones to their own networks, not for antitrust purposes, but to prevent theft and fraud. (Id. at ¶ 41). Finally, in February 2018, Plaintiff alleges that the Antitrust Division of the United States Department of Justice began investigating Verizon for its anticompetitive conspiracy with AT&T, following formal complaints made by Google and Apple to the DOJ. (Id. at ¶ 51).

However, despite these allegations, Plaintiff's complaint does not allege any facts that show Verizon and AT&T were parties to a conspiracy, or that they entered into an agreement to stifle completion. The complaint also fails to allege any facts that show the individual actions of Verizon and AT&T were in furtherance of any agreement or conspiracy. Nor does the complaint provide facts describing what occurred at any "private" GSMA meetings, whether votes are required to pass industry standards and if so, whether the large market share of Verizon and AT&T impacts the weight of the votes.

II.

On a motion to dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6), the Court is required to accept as true all allegations in the Complaint and all reasonable inferences that can be drawn therefrom, and to view them in the light most favorable to the non-moving party. See Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 (3d Cir. 1994). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

The "inquiry is normally broken into three parts: (1) identifying the elements of the claim, (2) reviewing the complaint to strike conclusory allegations, and then (3) looking at the well-pleaded components of the complaint and evaluating whether all of the elements identified in part one of the inquiry are sufficiently alleged." Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011). While a court will accept well-pleaded allegations as true for the purposes of the motion, it will not accept bald assertions, unsupported conclusions, unwarranted inferences, or sweeping legal conclusions cast in the form of factual allegations. Iqbal, 556 U.S. at 678-79; see also Morse v. Lower Merion School District, 132 F.3d 902, 906 (3d Cir. 1997). A complaint should be dismissed only if the well-pleaded alleged facts, taken as true, fail to state a claim. See In re Warfarin Sodium, 214 F.3d 395, 397-98 (3d Cir. 2000).

III.

Section I of the Sherman Act states that "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal . . ." 15 U.S.C. § 1. To maintain an antitrust action, plaintiffs must plead the following two elements: (1) "that the defendant was a party to a contract,combination . . . or conspiracy" and (2) "that the conspiracy to which the defendant was a party imposed an unreasonable restraint on trade." Burtch v. Millberg Factors, Inc., 662 F.3d 212 (3d Cir. 2011) (quoting In re Ins. Brokerage, 618 F.3d 300, 315 (3d Cir. 2010)). The Court will address the first element initially.

A.

"The first element—a contract, combination, or conspiracy—requires 'some form of concerted action'" which the Third Circuit has defined as "'unity of purpose or a common design and understanding or a meeting of minds' or 'a conscious commitment to a common scheme.'" Burtch, 662 F.3d at 221 (quoting Ins. Brokerage Antitrust Litig., 618 F.3d at 315). Therefore, Section 1 claims "always require the existence of an agreement," and plaintiffs "must establish that agreement existed." Id.; see also W. Penn Allegheny Health Sys. v. UPMC, 627 F.3d 85, 99 (3d Cir. 2010). "Unilateral action, regardless of the motivation, is not a violation of Section 1." Id. Instead, a plaintiff must plead "some form of concerted action . . . , in other words, a unity of purpose or a common design and understanding or a meeting of minds or a conscious commitment to a common scheme . . . ." LifeWatch Servs. v. Highmark Inc., 902 F.3d 323, 333 (3d Cir. 2018) (quoting Ins. Brokerage, 618 F.3d at 315).

An agreement may be shown by either direct or circumstantial evidence. LifeWatch Servs., 902 F.3d at 333. The Third Circuit has described direct evidence as "evidence that is explicit and requires no inferences to establish the proposition or conclusion...