Data Capture Solutions-Repair v. Symbol Technols.

520 F.Supp.2d 343

DATA CAPTURE SOLUTIONS-REPAIR & REMARKETING, INC., Plaintiff, v. SYMBOL TECHNOLOGIES, INC, Defendant.

Civil Action No. 07CV237 JCH.

United States District Court, D. Connecticut.

October 18, 2007.

COPYRIGHT MATERIAL OMITTED

Eliot B. Gersten, John Henry Van Lenten, Gersten & Clifford, William M. Rubenstein, Axinn, Veltrop & Harkrider, Hartford, CT, Philip J. Walsh, Mound, Cotton, Wollan & Greengrass, Jonathan M. Sobel, Victoria Zaydman, Hogan & Hartson, New York City, for Plaintiff.

Allison J. Schoenthal, Eric J. Lobenfeld, Rachel Strom, Hogan & Hartson, Jon Quint, Philip J. Walsh, Mound, Cotton, Wollan & Greengrass, New York City, Hugh F. Keefe, Nicole M. Fournier, Lynch, Traub, Keefe & Errante, New Haven, CT, Eliot B. Gersten, John Henry Van Lenten, Gersten & Clifford, Hartford, CT, for Defendant.

AMENDED RULING ON DEFENDANT'S MOTION TO DISMISS (Doc. No. 12) AND PLAINTIFF'S MOTION FOR LEAVE TO FILE SUR-REPLY (Doc. No. 24)

JANET C. HALL, District Judge.

I. INTRODUCTION

Plaintiff Data Capture Solutions-Repair and Remarketing, Inc. ("Data Capture") brings this action against defendant Symbol Technologies, Inc. ("Symbol"), alleging that Symbol has engaged in illegal price discrimination in the sale of its products. Data Capture has stated claims under section 2 of the Sherman Act as amended by the Robinson-Patman Act, 15 U.S.C. § 13, and under the Connecticut Antitrust Act, Conn. Gen.Stat. § 35-45, and the Connecticut Unfair Trade Practices Act, Conn. Gen.Stat. § 42-110(b). Defendant Symbol moves to dismiss all claims, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, for failure to state a claim upon which relief may be granted.

I. FACTS¹

Data Capture, a Connecticut corporation, is a reseller of products made by Symbol, a Delaware corporation. The products involved are hand-held, scanner-integrated, wireless information capture and management systems and the components of those systems (hereinafter "Products"). These Products are used by large retailers for inventory control by scanning bar code information for transmittal to a central location for data processing. Pl. Memo in Opp. at 2 (Doc. No. 19). These Products cost between $500 and $2,000 per device. End-users typically buy hundreds or thousands of these devices at a time and supplement their supply as needed during the 5-10 year life-span of the device. End-users usually buy these products from resellers, such as Data Capture, who submit bids to supply the products. Resellers wanting to bid will request a discount from Symbol known as a "price exception." The reseller's bid to the end-user will reflect any price exception granted. Thus a reseller who has been granted a price exception will usually be able to offer a lower price to the end user and win the bid. Resellers usually do not buy the products from Symbol until they have successfully won a bid. Data Capture has been reselling Symbol Products purchased from Symbol or another distributor since 1992.

Beginning as early as 2002, and continuing to the present, Symbol has been providing price exceptions to Data Capture competitors without providing equivalent price exceptions to Data Capture on the same bids. As a result, Data Capture has been unable to win bidding opportunities and has lost both sales of Symbol Products and sales of the related products and services that resellers typically supply end-users. Data Capture cites four specific examples where Data Capture lost bids due to price exceptions given by Symbol to Data Capture's competitors but not offered to Data Capture.

Data Capture maintains a large inventory of new and used Symbol products with which it competes directly with Symbol to sell refurbished Products and hybrid Products combining new and refurbished components. Data alleges that Symbol has engaged in discriminatory pricing by offering price exceptions to Data Capture's competitors with the intent to injure Data Capture in its business.

III. STANDARD OF REVIEW

In deciding a motion to dismiss, the court takes the allegations of the Complaint as true, and construes them in a manner favorable to the pleader. Hoover v. Ronwin, 466 U.S. 558, 587, 104 S.Ct. 1989, 80 L.Ed.2d 590 (1984); see Grandon v. Merrill Lynch & Co., 147 F.3d 184, 188 (2d Cir.1998); Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183, 104 S.Ct. 3012, 82 L.Ed.2d 139 (1984).

A motion to dismiss for failure to state a claim, pursuant to Rule 12(b)(6) tests only the adequacy of the complaint. United States v. City of New York, 359 F.3d 83, 87 (2d Cir.2004). A Rule 12(b)(6) motion to dismiss cannot be granted simply because recovery appears remote or unlikely on the face of a complaint. Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir. 1996). However, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, ___ U.S. ___, ___-___, 127 S.Ct. 1955, 1964-5, 167 L.Ed.2d 929 (2007).

IV. DISCUSSION

A. The Robinson-Patman Act Claim (Count One)

The Sherman Act, as amended by the Robinson-Patman Act (the "RPA"), states in relevant part in section 2, that:

"[i]t shall be unlawful for any person engaged in commerce ... to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce ... and 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...." 15 U.S.C. § 13.

Congress' goal in enacting section 2 was to "curb the use by financially powerful corporations of localized price-cutting tactics which had gravely impaired the competitive position of other sellers." Volvo Trucks North America, Inc. v. ReederSimco GMC, Inc., 546 U.S. 164, 175, 126 S.Ct. 860, 163 L.Ed.2d 663 (2006)(internal citations omitted). The changes to the Sherman Act implemented by the RPA were "to target the perceived harm to competition occasioned by powerful buyers, rather than sellers; specifically, Congress responded to the advent of large chain stores, enterprises with the clout to obtain lower prices for goods than smaller buyers could demand." Id. (internal citations omitted).

The four elements of a claim under the RPA are: (1) that the sales were made in interstate commerce, (2) the products were of like grade and quality, (3) that the seller discriminated in price between the plaintiff and another purchaser, and (4) that the effect of such discrimination may be to injure, destroy, or prevent competition to the advantage of a favored purchaser. Id., at 870.

Symbol argues that Data Capture has failed to state a claim under the RPA because it has failed to allege "two completed comparable sales to two different purchasers" under the so-called "Two-Purchaser Rule." Def.'s Mem. in Supp. of Mot. to Dis., Attach. 1, p. 4 (hereinafter "Def.'s Mem.") (Doc. No. 12). Neither the Supreme Court for the Second Circuit have decided whether discriminatory quotes to resellers competing for the same bid establishes a claim under the RPA. See Volvo, 546 U.S. at 180, 126 S.Ct. 860 ("... Volvo and the United States argue, the Act does not reach markets characterized by competitive bidding and special-order sales, as opposed to sales from inventory. ... We need not decide that question today.").

Courts across the country have varied widely on their interpretation of the RPA and the Two-Purchaser Rule. On one end, two Circuit Courts have found there is no Two-Purchaser requirement. The Sixth Circuit has held that an unsuccessful bidder can state a claim for price discrimination under the RPA. Allied Accessories & Auto Parts Co., Inc., v. General Motors Corp., 825 F.2d 971, 973 (6th Cir.1987)(allowing claim to proceed but not discussing "bidder" or "purchaser" status). Likewise, the Fifth Circuit has held that no actual purchases must be made to state a claim under the RPA. American Can Co., v. Bruce's Juices, 187 F.2d 919, 925 (5th Cir.1951)("plaintiff was not bound to purchase [the more expensive product] in order to attain status of a competing purchaser under the Act, as its failure to do so was directly attributable to defendant's own discriminatory practice."); see also Industrial Burner Systems, Inc., v. Maxon Corp., 275 F.Supp.2d 878, 886-7 (E.D.Mich.2003)(holding that unsuccessful bidders can state an RPA claim because "the relevant competition is the market for the bid.").

Other courts have found that the Two Purchaser rule applies, but that there are exceptions to it. One common interpretation is that previous purchases can be used to establish "purchaser" status for a claim under the RPA. See DeLong Equipment Co. v. Washington Mills Electro Minerals Corp., 990 F.2d 1186, 1202 (11th Cir. 1993)("While there must be two sales made by the same seller to at least two different purchasers at two different prices, there is no requirement that the two sales be made at precisely the same time or place."); Hartley & Parker, Inc. v. Florida Beverage Corp., 307 F.2d 916, 921 (5th Cir.1962)("substantial stock" purchased before the price discrimination began can establish purchaser status for claim under the RPA);² Toledo Mack Sales & Service, Inc. v. Mack Trucks, Inc., 2005 WL 724117, *8 (E.D.Pa.2005)(some successful past bids gave plaintiff "purchaser status"); Maier-Schule GMC, Inc., v. General Motors Corp., 780 F.Supp. 984, 990 (W.D.N.Y.1991) (distinguishing Hartley but acknowledging that prior purchases sold out of inventory could satisfy purchaser status). Another exception is that some purchases made during the period...