Inline Packaging, LLC v. Graphic Packaging Int'l, Inc.

164 F.Supp.3d 1117

Inline Packaging, LLC, Plaintiff,

v.Graphic Packaging International, Inc., Defendant.

Civil No. 15-3183 ADM/LIB

United States District Court, D. Minnesota.

Signed February 23, 2016

Brent Lorentz, Esq., Robert Weinstine, Esq., and Justice Lindell, Esq., Winthrop & Weinstine, PA, Minneapolis, MN, on behalf of Plaintiff.

Amanda Ames, Esq., David Hamilton, Esq., and Jason Hicks, Esq., Womble Carlyle Sandridge & Rice, LLP, Washington, D.C., and Felicia Boyd, Esq., Barnes & Thornburg LLP, Minneapolis, MN, on behalf of Defendant.

MEMORANDUM OPINION AND ORDER

ANN D. MONTGOMERY, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

On November 24, 2015, the undersigned United States District Judge heard oral argument on Defendant Graphic Packaging International, Inc.'s (“Graphic”) Motion to Dismiss [Docket No. 25]. Plaintiff Inline Packaging, LCC (“Inline”) opposes the Motion. For the reasons stated herein, Defendant's Motion is granted in part and denied in part.

II. BACKGROUND

Inline and Graphic compete in the susceptor food packaging industry. Compl.

[Docket No. 1] ¶ 2. Susceptor food packaging is a type of active food packaging that converts microwave energy to high surface temperatures which in turn crisps and browns foods. Id. ¶ 60. Inline identifies itself as a small player, whereas Graphic is one of the largest paperboard packaging companies in the United States with at least a 95% share of the susceptor food packaging market. Id. ¶¶ 13–14, 17. Inline and Graphic primarily compete within this susceptor food packaging market for supply contracts with companies such as Nestle, Heinz, Little Lady Foods, Nation Pizza Products, and Smuckers. Id. ¶¶ 20–21.

Inline alleges that Graphic, in response to price competition from Inline and others, engages in anticompetitive conduct to maintain a monopolizing position in the crisping and browning susceptor packaging market. Id. ¶¶ 23–58, 81–110. Inline posits that Graphic's conduct produces no pro-competitive benefits and, because of this conduct, Inline has lost both existing and potential customers. Id. ¶¶ 111, 114. Inline asserts five claims against Graphic: (1) Count I—Tortious Interference with Prospective Business Relations; (2) Count II—Tortious Interference with Existing Contractual Relations; (3) Count III—Misappropriation of Trade Secrets; (4) Count IV—Violation of Minn. Stat. § 325D.52 for Maintenance or Use of a Monopoly Power; and (5) Count V—Violation of the Sherman Antitrust Act, 15 U.S.C. § 2. Id. ¶¶ 121–48. Graphic moves to dismiss the Complaint in its entirety.

III. DISCUSSION

A. Motion to Dismiss Standard

Rule 12 of the Federal Rules of Civil Procedure provides that a party may move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). In considering a motion to dismiss under Rule 12(b)(6), the pleadings are construed in the light most favorable to the nonmoving party, and the facts alleged in the complaint must be taken as true. Hamm v. Groose , 15 F.3d 110, 112 (8th Cir.1994) ; Ossman v. Diana Corp. , 825 F.Supp. 870, 879–80 (D.Minn.1993). Any ambiguities concerning the sufficiency of the claims must be resolved in favor of the nonmoving party. Ossman , 825 F.Supp. at 880.

A pleading must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw a reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Determining whether a complaint states a plausible claim for relief is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. “But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but not ‘shown’—‘that the pleader is entitled to relief.’ ” Id. (quoting Fed. R. Civ. P. 8(a)(2) ).

B. Antitrust Claims

Inline asserts antitrust claims against Graphic under both Minn. Stat. § 325D.52 (Count IV) and the Sherman Antitrust Act, 15 U.S.C. § 2 (Count V). Section 2 of the Sherman Act imposes liability on “[e]very person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States.” 15 U.S.C. § 2. To establish a § 2 violation, Inline must plausibly allege that Graphic (1) “possessed monopoly power in the relevant market,” and (2) “willfully acquired or maintained this monopoly power by anticompetitive conduct as opposed to gaining that power as a result of a superior product, business acumen, or historical accident.” Concord Boat Corp. v. Brunswick Corp. , 207 F.3d 1039, 1060 (8th Cir.2000). “Minnesota antitrust law is interpreted consistent with the federal court's construction of the Sherman Act.” Lamminen v. City of Cloquet , 987 F.Supp. 723, 734 (D.Minn.1997) (citing State by Humphrey v. Road Constructors, Inc. , 474 N.W.2d 224, 225 n. 1 (Minn.Ct.App.1991) ); see also Lorix v. Crompton Corp. , 736 N.W.2d 619, 626 (Minn.2007) (“As the purposes of Minnesota and federal antitrust law are the same, it is sensible to interpret them consistently.”).

Inline's antitrust claims are premised on several theories of anticompetitive behavior, including: (1) discount bundling; (2) baseless threats of sham litigation; and (3) submarine patent activities. Graphic counters that none of these three antitrust theories advanced by Inline are legally viable, nor are they supported by sufficient factual allegations. Graphic additionally moves for dismissal based on Inline's failure to plead a relevant market and Inline's lack of standing to assert an antitrust claim. The Court will address each argument in turn.

1. Relevant Market

To state a viable claim under Section 2 of the Sherman Act, Inline has the burden of identifying a valid relevant market. Double D. Spotting Serv., Inc. v. Supervalu, Inc. , 136 F.3d 554, 560 (8th Cir.1998). A relevant market has components of both a product market and a geographic market. Bathke v. Casey's Gen. Stores, Inc. , 64 F.3d 340, 345 (8th Cir.1995). “The relevant product market includes all reasonably interchangeable products. The geographic market is defined by considering the commercial realities faced by consumers. It includes the geographic area in which consumers can practically seek alternative sources of product.” Double D. Spotting Serv. , 136 F.3d at 560 (internal citations omitted). “Without a well-defined relevant market, a court cannot determine the effect that an allegedly illegal act has on competition.” Little Rock Cardiology Clinic PA v. Baptist Health , 591 F.3d 591, 596 (8th Cir.2009) (citing FTC v. Freeman Hosp. , 69 F.3d 260, 270–71 (8th Cir.1995) ). Generally, “proper market definition can be determined only after a factual inquiry into the commercial realities faced by consumers.” Double D. Spotting Servs. , 136 F.3d at 560 (quoting Queen City Pizza, Inc. v. Domino's Pizza, Inc. , 124 F.3d 430, 436 (3d Cir.1997) ). However, this rule does not equate to “a per se prohibition against dismissal of antitrust claims for failure to plead a relevant market under Fed. R. Civ. P. 12(b)(6).” Id. (quoting Queen City Pizza , 124 F.3d at 436 ). Here, Inline defines the product market as the “susceptor food packaging market” and the geographic market as the United States. Graphic disputes these market designations.

Inline has sufficiently pled both the product and geographic components of a relevant market to withstand a motion to dismiss. As to the product market, Graphic contends that the “susceptor food packaging market” is too narrow. Graphic argues that the Complaint refers to the larger markets of “paperboard food packaging” and “microwaveable foods,” and that it is “obvious from any trip down a grocery store aisle” that “susceptor technology is only one way for food products to be packaged and microwaves are only one way to cook food.” Mem. Supp. Mot. Dismiss [Docket No. 27] 9. As such, Graphic contends that Inline has not adequately pled facts to identify the susceptor food packaging market as an independently relevant product market because variations in product type do not automatically equate to differing product markets. See Craftsmen Limousine, Inc. v. Ford Motor Co. , 491 F.3d 380, 389–90 (8th Cir.2007) (finding that a speciality limousine market was not distinguishable from the general market of limousines).

Graphic's position is without merit. “The relevant product market should include ‘products that have reasonable interchangeability for the purpose for which they are produced.’ ” Little Rock Cardiology Clinic PA , 591 F.3d at 596 (quoting United States v. E.I. du Pont de Nemours & Co. , 351 U.S. 377, 404, 76 S.Ct. 994, 100 L.Ed. 1264 (1956) ). As alleged in the Complaint, susceptor food packaging serves the specialized purpose of crisping and browning foods when microwaved. See Compl. ¶ 60. The Complaint further alleges that this packaging is unique in the marketplace as it “includes only active packaging that crisps and browns foods, which effect cannot be achieved using standard paperboard packaging.” Id. Thus, the purposes of susceptor food packaging and paperboard packaging are not necessarily interchangeable. Moreover, the Complaint adequately alleges why there is a lack of reasonable substitutes for susceptor packaging—there are no similarly-priced or effective ways to crisp and brown microwaveable foods. Id. ¶ 67. These allegations are sufficient at the this stage. Inline has “alleged specific facts that support a narrow product market in a way that is plausible and bears a rational relation to the methodology courts prescribe.” Anchor Wall Sys., Inc. v. Rockwood Retaining Walls, Inc. , ...