Greencycle Paint, Inc. v. Paintcare, Inc.

250 F.Supp.3d 438

GREENCYCLE PAINT, INC., Plaintiff,

v.PAINTCARE, INC., et al., Defendants.

Case No. 15-cv-04059-MEJ.

United States District Court, N.D. California.

Signed April 11, 2017

Greggory C. Brandt, Wendel, Rosen, Black & Dean LLP, Oakland, CA, for Plaintiff.

Thomas Edward Wallerstein, Cody Scott Lonning, Venable LLP, San Francisco, CA, Eric Gordon Lasker, Hollingsworth LLP, Washington, DC, Kimberly Irene Culp, Venable LLP, Los Angeles, CA, Katherine Anna Scott–Smith, Thomas Michael Downey, Eugene Sok Lee, Burnham Brown, LLP, Oakland, CA, Raymond J. Etcheverry, Cory D. Sinclair, Parsons, Behle & Latimer, Salt Lake City, UT, Matthew Schechter, McManis Faulkner, San Jose, CA, for Defendants.

ORDER RE: SECOND MOTIONS TO DISMISS

MARIA–ELENA JAMES, United States Magistrate Judge

INTRODUCTION

Plaintiff GreenCycle Paint, Inc. ("Plaintiff") alleges Defendants PaintCare, Inc. ("PaintCare"); Clean Harbors Environmental Services, Inc. ("Clean Harbors"); and Stericycle Environmental Solutions ("Stericycle") (collectively, "Defendants") violated California's antitrust and unfair competition laws by conspiring to exclude Plaintiff from the recycled paint market. The Court dismissed Plaintiff's initial complaint but granted Plaintiff leave to amend on all claims, which Plaintiff has done. Order, Dkt. No. 47; see First Am. Compl. ("FAC"), Dkt. No. 48. Defendants now again move to dismiss all claims. Clean Harbors Mot., Dkt. No. 50; PaintCare Mot., Dkt. No. 51; Stericycle Mot., Dkt. No. 52. Plaintiff filed a single Opposition to Defendants' Motions. Opp'n, Dkt. No. 57. Clean Harbors and PaintCare each filed a Reply (Clean Harbors Reply, Dkt. No. 62; PaintCare Reply, Dkt. No. 63); Stericycle joins both Replies (Dkt. No. 65). Having considered the parties' positions, the relevant legal authority, and the record in this case, the Court GRANTS IN PART and DENIES IN PART Defendants' Motions for the following reasons.

BACKGROUND

A. Defendants and the PaintCare Program

The American Coatings Association ("ACA") is the primary trade association of the paint and coatings industry and represents, among other things, paint and coatings manufacturers. FAC ¶ 10. The ACA created and is the sole member of PaintCare, which represents paint manufacturers in their efforts to plan and operate paint stewardship programs. Id.

In 2010, California enacted the statewide Architectural Paint¹ Recovery Program (the "Program"), Cal. Pub. Res. Code § 48700 et seq., to reduce leftover paint, promote its reuse and recycling, and properly manage unwanted leftover paint. Id. ¶¶ 8, 13. The California Department of Resources Recycling and Recovery ("CalRecycle") is the state agency that oversees the Program. Id. ¶ 9. In 2012, CalRecycle designated PaintCare as the sole steward for the Program; PaintCare was the only stewardship organization that submitted a paint stewardship plan to CalRecycle to implement a paint recovery program (the "PaintCare Program"). Id. ¶ 8. Clean Harbors and Stericycle (together, the "Hauler Defendants") are haulers that work with PaintCare to transport post-consumer paint collected under the PaintCare Program. Id. ¶ 23.

To fund the PaintCare Program, consumers pay an additional $0.35 to $1.60 assessment on all architectural paint sold in California. Id. ¶ 11. PaintCare receives 100% of these assessments, and uses them to pay for collection bins, training materials, transportation of paint from collection sites, and paint processing. Id. In 2015, PaintCare collected approximately $34 million in assessments. Id. ¶ 12.

B. Plaintiff's Efforts to Join the PaintCare Program

Plaintiff was founded in 2012 as a latex paint processor and manufacturer. Id. ¶ 21. It opened a latex paint recycling facility in Oakland, California; while operating, it was the only latex paint recycler in the San Francisco Bay Area. Id. ; see id. ¶¶ 19, 43.

In April 2012, Plaintiff's Chief Executive Officer, Alan Beilke, entered into discussions with PaintCare about participating in the PaintCare Program as a latex paint processor. Id. ¶ 22. PaintCare introduced Plaintiff to Stericycle and Clean Harbors (together, the "Hauler Defendants"). Id. ¶ 23. Plaintiff thereafter received contradictory information about the approval process from Defendants. See id. ¶ 24. PaintCare advised Plaintiff to go through the Hauler Defendants to facilitate receipt of paint under the PaintCare Program. Id. PaintCare represented that recyclers had to enter into contracts with the Hauler Defendants and that the Hauler Defendants decided which recycling facilities received post-consumer paint. Id. ¶¶ 23–24. But according to Fred Gabriel of Clean Harbors, PaintCare had to approve Plaintiff as a recycler before Clean Harbors could audit or approve Plaintiff for the receipt of paint. Id. ¶ 24.

In September 2012, Plaintiff again met with Defendants' representatives to discuss Plaintiff's desire to participate in the PaintCare Program as a recycler. Id. ¶ 25. Glen Dilman of Stericycle informed Beilke that Plaintiff needed to establish a paint recycling facility that was ready to receive post-consumer paint before Stericycle would arrange an audit, which was required prior to Plaintiff's approval to receive used paint. Id.

That month, Plaintiff moved into a 5,000 square foot facility. Id. ¶ 26. It was ready to receive and process paint in November 2012. Id. By December 2012, Plaintiff had done everything Defendants required to become an approved latex paint recycling facility and receive paint under the PaintCare Program. Id. ¶ 27. Plaintiff also established its own relationship with a household hazardous waste program to receive post-consumer paint and began to receive and process paint from this source. Id. ¶¶ 27–28. Prior to closing, Plaintiff was in discussions with the cities of Hayward and Emeryville, Alameda County, and the Bay Area Rapid Transit ("BART") district to sell recycled paint to them. Id. ¶ 17.

Between April 2012 and April 2015, Plaintiff repeatedly met with and spoke to each Defendant about receiving paint under the PaintCare Program, and Defendants took actions that led Plaintiff to believe that it would be approved to receive post-consumer paint. Id. ¶¶ 21–40. Over the course of dozens of discussions and meetings, Plaintiff was led to believe that it would receive paint under the PaintCare Program. See id. ¶ 30 (Mark "Winkler of Stericycle told GreenCycle that Stericycle had 3–4 truckloads of paint per month that needed a processor, and that GreenCycle would be a suitable processor."). Defendants' message was that as long as Plaintiff complied with certain requirements first, then it would receive paint under the PaintCare Program. Id. ¶¶ 29, 46. Despite meeting those requirements, Plaintiff did not receive paint from Defendants. See id. ¶¶ 27, 29.

Plaintiff raised its concerns at a July 2014 meeting with Defendants, CalRecycle, and CalEPA. Id. ¶ 32. CalRecycle's Howard Levensen urged Defendants to increase the amount of paint being recycled in the Bay Area by using facilities like Plaintiff's for paint that is collected in Alameda, Contra Costa, and other Bay Area counties. Id. Bill Pollock, the Program Director of the Alameda County Household Hazardous Waste Program, spoke directly with Gabriel about using Plaintiff instead of shipping paint to an out-of-state facility. Id. ¶ 33. Gabriel and Kurt Locke, also with Clean Harbors, immediately visited Plaintiff's facility to make sure Plaintiff could receive Clean Harbors' roll-off bins and, in August 2014, told Plaintiff that Clean Harbors would mail an audit package for it to complete. Id. ¶¶ 33–34. Plaintiff did not receive the package. Id. ¶ 34.

In April 2014, Stericycle approved Plaintiff as a recycler for used latex paint. Id. ¶ 31. But Plaintiff did not receive its first shipment of paint under the PaintCare Program until January 2015; it received its second and final shipment in March 2015. Id. ¶¶ 31, 40. Plaintiff received only two shipments despite the fact that the amount of latex paint collected in California has increased by approximately 1.4 million gallons—approximately 700 truckloads—since the first year after the adoption of the Architectural Paint Recovery Program. Id. ¶ 41. The lack of used latex paint and the realization that it was not going to receive paint under the PaintCare Program forced Plaintiff to shut down its paint recycling operations in April 2015. Id.

C. The Alleged Conspiracy

Plaintiff contends it was unable to obtain paint because Defendants entered into a secret agreement to exclude Plaintiff as a recycler under the PaintCare Program in order to reduce the amount of recycled paint that was available in the San Francisco Bay Area market. Id. ¶¶ 29, 36, 40. PaintCare knew that the availability of recycled paint was a threat to the profits of its members—the largest paint manufacturers in the country. Id. ¶¶ 10, 14–16, 18. The ACA, PaintCare, and paint manufacturers are concerned about the negative impact that the sale of recycled paint, which sells at a discount compared to mid and high-grade paint products, has on their revenue and profits. Id. ¶¶ 15–18. Although collection facilities are concentrated in urban areas, the paint collected in the Bay Area is shipped out of state, which increases total program costs. Id. ¶ 13. The Hauler Defendants agreed to go along with PaintCare's plan to exclude Plaintiff from the market because they received larger payments for transporting paint to more distant facilities in Sacramento and out-of-state. Id. ¶¶ 20, 48, 53. This also reduced competition for paint sales in the Bay Area and maintained sales and profits of PaintCare's members. Id. ¶ 48. Defendants knew that they were excluding an otherwise qualified recycler from the market. Id. ¶ 41.

Defendants' actions also harmed Bay Area consumers by depriving them of the opportunity to purchase as much as 100,000 gallons of recycled paint per year, and misled all California consumers by increasing costs over those...