Dale v. Deutsche Telekom AG

1

ANTHONY DALE, BRETT JACKSON, JOHNNA FOX, BENJAMIN BORROWMAN, ANN LAMBERT, ROBERT ANDERSON, and CHAD HOHENBERY, on behalf of themselves and all others similarly situated, Plaintiffs, v. DEUTSCHE TELEKOM AG, T-MOBILE US, INC., and SOFTBANK GROUP CORP., Defendants.

No. 1:22-cv-03189

United States District Court, N.D. Illinois, Eastern Division

November 2, 2023

MEMORANDUM OPINION AND ORDER

HONORABLE THOMAS M. DURKIN, UNITED STATES DISTRICT JUDGE

Plaintiffs representing a proposed class of AT&T and Verizon customers, filed this suit under the federal antitrust statutes challenging the April 2020 merger between T-Mobile and Sprint. Defendant SoftBank Group Corp. (“SBG”) moves to dismiss under Federal Rules of Civil Procedure 12(b)(2) and 12(b)(3) and joins Defendant T-Mobile US, Inc. (“T-Mobile”) in moving to dismiss under Federal Rule of Civil Procedure 12(b)(6). For the reasons stated below, SBG's motion to dismiss for lack of jurisdiction and improper venue [76] is granted, and T-Mobile and SBG's motion to dismiss for failure to state a claim [78] is denied.

Background

On April 29, 2018, wireless service providers T-Mobile and Sprint (“Merging Entities”) announced an agreement to merge. R. 1 ¶ 46. What followed was significant scrutiny by the Federal Communications Commission (“FCC”), the U.S. Department of Justice (“DOJ”) Antitrust Division, 14 State Attorneys General, two federal judges, and others. R. 1 ¶¶ 63-64, 67-68; see also R. 79-3 (“FCC Order”); R. 79-4 (“DOJ Complaint”); R. 79-5 (“Settlement Agreement”); R. 79-14 (“Proposed Final Judgment”); R. 79-17 (“Final Judgment Order”); R. 79-20 (“Bradt Dismissal”); New York v. Deutsche Telekom AG 439 F.Supp.3d 179, 186 (S.D.N.Y. 2020); United States v. Deutsche Telekom AG, No. 19-2232, 2020 WL 1873555, at *5 (D.D.C. Apr. 14, 2020); Bradt v. T-Mobile US, Inc., No. 19-cv-07752, 2020 WL 1809716, at *1 (N.D. Cal. Feb. 28, 2020).^[1]

First, on June 18, 2018, the Merging Entities applied for FCC approval. After investigating the potential impact of the proposed transaction, the FCC concluded that “as conditioned, the transaction would not substantially lessen competition and would be in the public interest.” FCC Order ¶ 11; see also id. ¶¶ 21-24, 385. The Merging Entities committed “to offer T-Mobile and Sprint legacy rate plans available as of February 4, 2019 for three years following consummation of the transaction or until better plans that offer a lower price or more data are made available,” id. ¶ 209, divest Sprint's Boost Mobile business and provide a wholesale agreement to the buyer with terms to “ensure that New Boost will be an aggressive competitor,” id. ¶ 25, and “build out” and “deploy” 5G service to certain percentages of the U.S. population and at certain speeds on a specified schedule for the next six years, id ¶¶ 26-29. Accordingly, on October 16, 2019, the FCC approved the transfer of Sprint's licenses. Id. ¶¶ 5, 384.

Further, the DOJ Antitrust Division conducted a fifteen-month review of the merger's likely effect on competition and U.S. consumers. R. 1 ¶ 63. On July 26, 2019, the DOJ filed a civil antitrust complaint along with a Proposed Final Judgment that contained the terms of the settlement. See id. ¶ 64; DOJ Complaint; Proposed Final Judgment. The Merging Entities agreed, among other things, to divest Boost Mobile and other Sprint assets to DISH and to lease network access to DISH for seven years, while DISH built out its 5G network. R. 1 ¶ 64; Proposed Final Judgment at 6-20. On April 1, 2020, the court approved the Proposed Final Judgment in light of the conditions imposed by the FCC and the DOJ. Deutsche Telekom AG, 2020 WL 1873555, at *5, *6.

Additionally, on June 19, 2019, State Attorneys General from thirteen States and the District of Columbia sued to enjoin the merger in the Southern District of New York. R. 1 ¶ 67; see also Deutsche Telekom, 439 F.Supp.3d at 186. They alleged that the proposed merger would substantially lessen competition in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. Id. After a two-week bench trial, the court entered judgment in favor of the defendants and denied the request to enjoin the merger. Id. at 187-89. Following the court's decision, in early March 2020, T-Mobile and Sprint settled with the State Attorneys General for Illinois and eleven other states. See Settlement Agreement. The Merging Entities made additional commitments, including an extension of the consumer pricing commitments from three years to five, low-cost plans, and a nationwide broadband Internet access program. Id. at ¶¶ 1-4. The Settlement Agreement remains in force through April 2025, and all disputes arising out of the agreement are to be heard in the Southern District of New York. Id. ¶¶ 9, 17.

Moreover, on November 25, 2019, a group of consumers of national mobile service providers sued to enjoin the merger in the Northern District of California. See Bradt, 2020 WL 1809716, at *1. After the Southern District of New York court denied the States' request to enjoin the merger, the Bradt court denied the motion for a temporary restraining order, and the plaintiffs subsequently dismissed their claims with prejudice. See id. at *3; Bradt Dismissal.

The merger closed on April 1, 2020. Just over two years later, Plaintiffs brought this putative class action on behalf of themselves and other AT&T and Verizon customers against Deutsche Telekom AG, T-Mobile, and SBG. In Plaintiffs' telling, the concerns that the merger would cause price increases and harm consumers have come to fruition. Specifically, they allege that the reduced competition following the merger has caused class members to pay billions of dollars more for wireless services than they would have without the merger, in violation of Section 7 of the Clayton Act (15 U.S.C. § 18) and Section 1 of the Sherman Act (15 U.S.C. § 1). With this action, Plaintiffs seek to unwind the T-Mobile-Sprint merger, create a viable fourth competitor in the marketplace, and recover damages for the overcharges they allegedly paid. As described above, this suit was not filed on a blank slate. The merger was reviewed several times over before it was consummated. However, this case does not focus on the wisdom of the merger, but rather its consequences.

This Court previously denied T-Mobile's motion to transfer the case to the Southern District of New York. See R. 63. Since then, certain defendants filed motions to dismiss. SBG moves to dismiss for lack of personal jurisdiction and improper venue under Rules 12(b)(2) and 12(b)(3). R. 76. And both SBG and T-Mobile (“Defendants”) move to dismiss for failure to state a claim under Rule 12(b)(6). R. 78. The Court held oral argument on both motions. See R. 110 (“Tr.”).

Legal Standard

When a defendant moves to dismiss under Rule 12(b)(2), the plaintiff bears the burden of demonstrating that jurisdiction exists. See Purdue Res. Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003). The Court must read the complaint “liberally, in its entirety, and with every inference drawn in favor” of the plaintiff to determine whether it has set forth a prima facie case for personal jurisdiction. Cent. States, Se. & Sw. Areas Pension Fund v. Phencorp Reinsurance Co., 440 F.3d 870, 877-78 (7th Cir. 2006). “[O]nce the defendant has submitted affidavits or other evidence in opposition to the exercise of jurisdiction, the plaintiff must go beyond the pleadings and submit affirmative evidence supporting the exercise of jurisdiction.” Purdue, 338 F.3d at 783. Likewise, when a defendant moves for dismissal under Rule 12(b)(3), the plaintiff bears the burden of showing that venue is proper. Brunswick Corp. v. Thorsell, No. 13 C 9222, 2014 WL 1612668, at *2 (N.D. Ill. Apr. 21, 2014) (citing Int'l Travelers Cheque Co. v. BankAmerica Corp., 660 F.2d 215, 222 (7th Cir. 1981)). The Court takes the allegations in the complaint as true unless they are contradicted by the defendant's affidavits and may look beyond the complaint to determine if venue is proper. Deb v. SIRVA, Inc., 832 F.3d 800, 809 (7th Cir. 2016).

Additionally, a Rule 12(b)(6) motion challenges the “sufficiency of the complaint.” Gunn v. Cont'l Cas. Co., 968 F.3d 802, 806 (7th Cir. 2020). A complaint must provide “a short and plain statement of the claim showing that the pleader is entitled to relief,” Fed.R.Civ.P. 8(a)(2), sufficient to provide defendant with “fair notice” of the claim and the basis for it. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). This standard “demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While “detailed factual allegations” are not required, “labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. The complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “Facial plausibility exists ‘when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'” Thomas v. Neenah Joint Sch. Dist., 74 F.4th 521, 523 (7th Cir. 2023) (quoting Iqbal, 556 U.S. at 678). In applying this standard, the Court accepts all well-pleaded facts as true and draws all reasonable inferences in favor of the non-moving party. See Hernandez v. Ill. Inst. of Tech., 63 F.4th 661, 666 (7th Cir. 2023).

Discussion

I. SBG's Motion to Dismiss

An antitrust plaintiff can establish personal jurisdiction and venue through (1) “the rules that govern in the general case,” namely Federal Rule of Civil Procedure 4(k) for personal...