Dang v. Niners

964 F.Supp.2d 1097

Patrick Dang, on behalf of himself and all others similarly situated, Plaintiff,

v.San Francisco Forty Niners, et al., Defendants.

Case No.: 5:12–CV–5481 EJD

United States District Court, N.D. California. SAN JOSE DIVISION

Filed August 2, 2013

Ralph B. Kalfayan, Krause Kalfayan Benink & Slavens, Roy A. Katriel, The Katriel Law Firm, San Diego, CA, Roy Arie Katriel, The Katriel Law Firm, P.L.L.C., Washington, DC, for Plaintiff.

Sonya Diane Winner, Covington & Burling LLP, Svetlana Michelle Berman, Latham & Watkins LLP, San Francisco, CA, Derek Ludwin, Washington, DC, Michael Nelson, Timothy Hardwicke, Latham And Watkins LLP, Chicago, IL, for Defendants.

ORDER DENYING DEFENDANTS' MOTION TO DISMISS

[Re: Docket No. 29]

EDWARD J. DAVILA, United States District Judge

Plaintiff Patrick Dang (“Plaintiff”), an individual, has brought this putative class action against the National Football League (“NFL”), its member clubs, National Football League Properties, Inc. (“NFLP”), and Reebok International, Ltd. (“Reebok”)—collectively “Defendants.” Plaintiff Dang has alleged that Defendants have engaged in anticompetitive behavior and entered into agreements in violation of state and federal antitrust laws. The allegedly unlawful conduct relates to agreementsabout the licensing of NFL's and NFL teams' intellectual property for use in apparel for consumer retail.

Presently before the Court is Defendants' Motion to Dismiss Plaintiff's Complaint. The Court found this matter suitable for decision without oral argument pursuant to Civil Local Rule 7–1(b) and previously vacated the hearing date. For the reasons explained below, Defendants' Motion to Dismiss is DENIED.

I. Background

The allegations contained in this section are taken largely from the Complaint, which was filed by Plaintiff on October 24, 2012. See Compl., Docket Item No. 1.

Defendant NFL is an unincorporated association founded in 1963 comprising, through their respective owners, the various football teams in the NFL. Id. ¶ 37. Defendant NFLP is a corporation established by the NFL and NFL teams for the purpose of licensing the trademarks, logos, and other branding of NFL teams and the NFL. Id. ¶ 36. Defendant Reebok is a corporation that markets sports apparel. Id. ¶ 38.

Plaintiff bases his suit on an agreement that took place in December 2000. During that time, the individual NFL teams, the NFL, and the NFLP jointly agreed to grant Reebok an exclusive license to manufacture NFL-branded apparel. ¹Id. ¶ 63. The agreement, Plaintiff argues, marked a shift in the NFL's licensing landscape. Id. Before December 2000, he argues, NFL-related licensees had to compete against one another in order to obtain an NFLP license for the NFL or a particular NFL team. Id. ¶ 59. He also contends that the individual NFL teams competed against each other for the licensing of their own intellectual property.²Id. ¶¶ 63–64. This arena of competition among both the individual NFL teams and the prospective licensees, Plaintiff argues, “ensured that the market for such apparel was subject to free market forces that served to provide the ultimate consumer of such apparel with superior product selection and competitive prices.” Id. ¶ 62.

Plaintiff alleges that in November 2011, he purchased an item of apparel bearing an NFL team's logo and other intellectual property from a sports merchandise retailer. Id. ¶¶ 5, 76. Plaintiff asserts that he was an “indirect purchaser” of this apparel product bearing the NFL team's intellectual property. Id. He argues that due to the allegedly anticompetitive and unlawful agreement among the Defendants, he paid an “anticompetitive overcharge for his purchase.” Id. ¶ 5.

Plaintiff's Complaint brings forth four causes of action. Count I alleges that the December 2000 agreement is a horizontal agreement in restraint of trade that violates California's Cartwright Act, Cal. Bus. & Prof.Code §§ 16720 et seq. Count II alleges that the agreement also constitutes a vertical agreement in restraint of trade unlawful under the Cartwright Act. Count III alleges that Defendants' conduct is unfair and unlawful in violation of California's Unfair Competition Law (“UCL”), Cal. Bus. & Prof.Code §§ 17200 et seq. These three Counts are brought on behalf of a class of California indirect purchasers of apparel products branded with NFL team intellectual property. Count IV alleges a violation of the federal Sherman and Clayton Antitrust Acts, 15 U.S.C. §§ 1 et seq. This Count is brought on behalf of a nationwide class of indirect purchasers and seeks injunctive relief pursuant to 15 U.S.C. § 26.

Defendants filed the Motion to Dismiss presently before the Court on February 5, 2013. See Docket Item No. 29. Defendants seek dismissal of the Complaint on the grounds that Plaintiff fails to allege a proper relevant market, that Plaintiff lacks antitrust standing, and that Plaintiff fails to state claims upon which relief can be granted.

II. Legal Standard 12(b)(6) Motion to Dismiss

Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient specificity to “give the defendant fair notice of what the ... claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotations omitted). A complaint which falls short of the Rule 8(a) standard may therefore be dismissed if it fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). “Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir.2008).

When deciding whether to grant a motion to dismiss, the court must accept as true all “well–pleaded factual allegations.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The court must also construe the alleged facts in the light most favorable to the plaintiff. Love v. United States, 915 F.2d 1242, 1245 (9th Cir.1989). However, “courts are not bound to accept as true a legal conclusion couched as a factual allegation.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955. Moreover, anything beyond the pleadings generally may not be examined. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 (9th Cir.1989). But “material which is properly submitted as part of the complaint may be considered.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955.

III. DiscussionA. Relevant Market Antitrust Requirement

Three of Plaintiff's four causes of action directly allege violations of California and federal antitrust laws: Counts I and II allege violations of the Cartwright Act, and Count IV alleges a violation of the Sherman and Clayton Acts. The remaining cause of action—Count III, violation of the UCL—is based on the same allegedly unlawful anticompetitive activity that also forms the basis of the direct antitrust claims. As such, the Court will apply the standard antitrust violation analysis to all of Plaintiff's causes of action. The Court also notes that the Cartwright Act is “California's antitrust law” and “was modeled after the Sherman Act.” County of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1160 (9th Cir.2001). Accordingly, analysis under the Cartwright Act “mirrors the analysis under federal law.” Id. (citing Nova Designs, Inc. v. Scuba Retailers Ass'n, 202 F.3d 1088, 1091 (9th Cir.2000), and Mailand v. Burckle, 20 Cal.3d 367, 375, 143 Cal.Rptr. 1, 572 P.2d 1142 (1978)); see alsoColonial Med. Grp., Inc. v. Catholic Health Care W., 444 Fed.Appx. 937, 939 (9th Cir.2011) (“[T]he requirements for a claim under California's Cartwright Act are identical to those for a claim under the Sherman Act”). As such, the Court will apply the same analysis to both the federal and state antitrust claims.

In order to state a valid antitrust claim, a plaintiff must allege that the defendant has market power within a legally cognizable relevant market. Newcal Indus., Inc. v. Ikon Office Solution, 513 F.3d 1038, 1044 (9th Cir.2008). “[T]he plaintiff must allege both that a ‘relevant market’ exists and that the defendant has power within that market.” Id.; see alsoTanaka v. Univ. of S. Cal., 252 F.3d 1059, 1063 (9th Cir.2001) ( “Failure to identify a relevant market is a proper ground for dismissing a Sherman Act claim.”). A plaintiff must delineate a relevant market and show that the defendant plays enough of a role in that market to impair competition significantly. Bhan v. NME Hospitals, Inc., 929 F.2d 1404, 1413 (9th Cir.1991). This requirement applies both to the California and federal antitrust law claims. See Cnty. of Tuolumne, 236 F.3d at 1160. Also, for purposes of this Order, there is no need to distinguish or differentiate among Plaintiff's several antitrust claims; its market allegations are either sufficient or insufficient. See Newcal, 513 F.3d at 1044 n. 3.

While the definition of a “relevant market” for antitrust purposes is typically a factual inquiry, certain legal principles govern the definition, and antitrust claims may be dismissed under Rule 12(b)(6) if the plaintiff's “relevant market” definition is facially unsustainable. Id. at 1045 (citing Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 436–37 (3d Cir.1997)); see alsoApple, Inc. v. Psystar Corp., 586 F.Supp.2d 1190 (N.D.Cal.2008). Generally, the relevant market must be a “ product market. ” Newcal, 513 F.3d at 1045 (emphasis in original). Such a market is “composed of products that have reasonable interchangeability for the purposes for which they are produced.” United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 404, 76 S.Ct. 994, 100 L.Ed. 1264 (1956); see alsoBrown 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...