Jones v. Varsity Brands, LLC

1

JESSICA JONES and CHRISTINA LORENZEN on Behalf of Themselves and All Others Similarly Situated, Plaintiffs, v. VARSITY BRANDS, LLC, et al., Defendants.

No. 2:20-cv-02892-SHL-tmp

United States District Court, W.D. Tennessee, Western Division

August 31, 2023

ORDER GRANTING INDIRECT PURCHASERS' MOTION TO RECONSIDER AND GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO STRIKE

SHERYL H. LIPMAN CHIEF UNITED STATES DISTRICT JUDGE

Before the Court are two motions. First is Defendants Varsity Brands, LLC; Varsity Spirit, LLC; Varsity Spirit Fashions & Supplies, LLC; U.S. All Star Federation; Charlesbank Capital Partners, LLC, Bain Capital Private Equity, LP; and Jeff Webb's (together, “Defendants”) combined Motion to Strike Class Allegations, (ECF No. 55), and Memorandum of Law in Support, (ECF No. 56), filed March 12 2021, Plaintiffs Jessica Jones and Christina Lorenzen's (together, “Indirect Purchasers”) Response, (ECF No. 70), filed April 15, 2021, and Defendants' Reply (ECF No. 76), filed April 29, 2021. Second is the Indirect Purchasers' Motion to Reconsider Order Granting in Part and Denying in Part Defendants' Motion to Dismiss, (ECF No. 335), filed August 12, 2022, Defendants' Response (ECF No. 345), filed August 26, 2022, and the Indirect Purchasers' Reply, (ECF No. 348), filed September 1 2022. The Court held oral argument on both Motions on April 24, 2023. (ECF No. 440.)

As described below, the Court DENIES Defendants' Motion to Strike the Indirect Purchasers' allegations supporting the Injunctive Relief Class. As for the Nationwide Damages Class and/or State Law Damages Class, as well the Indirect Purchasers' Motion to Reconsider, the Court:

• GRANTS Indirect Purchasers Motion to Reconsider the Tennessee Trade Practices Act (“TTPA”) and Tennessee Consumer Protection Act (“TCPA”) claims;

• upon reconsideration, DISMISSES Indirect Purchasers' TTPA claims relating to the Cheer Camp and Competition markets;

• DENIES Defendants' Motion to Strike as to class-based claims asserted under the consumer protection laws of Tennessee;

• GRANTS Defendants' Motion to Strike the Nationwide Damages Class proceeding under the TTPA; and

• DENIES Defendants' Motion to Strike the Statewide Damages Class due to predominance and manageability deficiencies.

BACKGROUND^[1]

Varsity^[2] is a prominent host of competitive cheerleading competitions and camps. The company advanced the modern style of cheer, in which the athletes performing cheer routines are the “main event” - requiring year-round training and summer camps for athletes to maintain their strength, flexibility, coordination and teamwork. (ECF No. 1 at PageID 14.)

Plaintiffs Jessica Jones and Christina Lorenzen are the parents of Competitive Cheer Athletes who were members of either All-Star Gym teams or school cheer teams. (Id. at PageID 6.) They allege that they paid artificially inflated prices for goods and services, including enrollment in cheer competitions and apparel purchased indirectly from Varsity, and seek to represent a class of all indirect purchasers of Varsity products and all entrants into Varsity or All-Star Cheer Competitions. (Id.) Ms. Jones is a citizen and resident of Kansas, and Ms. Lorenzen is a citizen and resident of Colorado. (Id. at PageID 6-7.)

In their Complaint, the Indirect Purchasers allege that Defendants engaged in an exclusionary scheme in three markets by: (1) creating a system of bids^[3] for admission to national tournaments as a means to funnel athletes to their own local and regional tournaments, thereby preventing rivals from entering the industry; (2) creating and enforcing restrictive rules that favor Varsity and deny competitors a “foothold” in the industry; (3) using exclusive agreements with gyms and schools to limit access to the relevant markets; (4) limiting access to the Cheer Apparel and Cheer Camp markets by using its monopoly power; and (5) counter-programming rival competitions to deprive them of revenue streams. (Id. at PageID 29-38.) The Indirect Purchasers allege that Defendants' exclusionary schemes violate Sections 1, 2, and 3 of the Sherman Act, 15 U.S.C. §§ 1-3, and seek injunctive and declaratory relief for these violations. (ECF No. 1.) They also allege that Defendants violated the antitrust and consumer protection laws of 31 states, and, alternatively, that Defendants benefitted from higher profits resulting from the Indirect Purchasers' overpayments to them and should be compelled to disgorge all proceeds that they unjustly derived from their anticompetitive scheme. (Id. at PageID 56-59.)

Plaintiffs pursue these claims on a class-wide basis, proposing three classes, with one of the three proposed in the alternative. (Id. at PageID 10-11.) First, the Injunctive Relief Class, consists of all persons and entities in the United States that indirectly paid Varsity or any subsidiary or affiliate thereof from December, 10, 2016, until the end of the alleged exclusionary scheme for: (1) registration and other entry fees to Varsity Cheer Competitions and fees to the USASF, (2) apparel, (3) camp fees, or (4) accommodations at one or more cheer competitions. (Id.) Second, the Nationwide Damages Class bears the same class definition as the Injunctive Relief Class but seeks damages for violations of the TTPA, Tenn. Code Ann. §§ 47-25-101, et seq., for all class members. (Id.) Last, the State Law Damages Class, identical to the Nationwide Damages Class in most respects, seeks damages for violations of each class member's respective state's antitrust and consumer protection laws, should the Indirect Purchasers be unable to certify the second class.^[4] (Id.)

The Indirect Purchasers filed their Complaint on December 10, 2020. (ECF No. 1. Defendants filed their combined Motion to Strike, as well as individual Motions to Dismiss^[5] on March 12, 2021. (ECF Nos. 55, 57, 58, 59 & 60.) The Court previously ruled on Defendants' Motions to Dismiss which largely addressed alleged substantive infirmities in the Indirect Purchasers' arguments. (ECF No. 333.) The Indirect Purchasers seek reconsideration of several of the Court's rulings on Defendants' Motions to Dismiss. (ECF No. 335.)

In the Motion to Strike, Defendants seek to strike the Indirect Purchasers' class allegations. They contend that the proposed classes cannot be certified because internal class conflicts between class members (1) make it impossible for the representative parties' claims to satisfy the typicality requirement; and (2) undermine their ability to adequately represent the interests of the class. For the same reasons, they argue that many class members do not have standing. According to Defendants, these internal conflicts between class members also prevent them from seeking injunctive relief by means of the Injunctive Relief Class. Finally, Defendants also argue that questions of law or fact common to all class members will not predominate in either of the proposed (b)(3) classes and thus the harm cannot be shown by common proof.

In the Motion to Reconsider, Indirect Purchasers argue for reinstatement of their Tennessee antitrust and consumer protection claims against Varsity and Webb. They contend that they did not waive those claims, as previously found.

ANALYSIS

The Court first addresses the Indirect Purchasers' Motion to Reconsider the dismissal of two claims because the result there impacts the issues to be considered as to the Motion to Strike. The Court then turns to Defendants' Motion to Strike the class claims, considering the arguments in broad-to-narrow order, starting first with objections that impact all three putative classes, before turning to the issues related to each specific class.

I. Motion to Reconsider

Rule 54(b) of the Federal Rules of Civil Procedure allows a district court to revise an order adjudicating fewer than all the claims or rights and liabilities of all parties any time before final judgment. Fed.R.Civ.P. 54(b). District courts “have authority both under common law and Rule 54(b) to reconsider interlocutory orders and to reopen any part of a case before entry of final judgment.” Rodriguez v. Tenn. Laborers Health & Welfare Fund, 89 Fed.Appx. 949, 959 (6th Cir. 2004). Local Rule 7.3(b) requires a motion for revision of an interlocutory order to show:

(1) a material difference in fact or law from that which was presented to the Court before entry of the interlocutory order for which revision is sought . . .; (2) the occurrence of new material facts or a change of law occurring after the time of such order; or (3) a manifest failure by the Court to consider material facts or dispositive legal arguments that were presented to the Court before such interlocutory order.

LR 7.3(b).^[6]

The Indirect Purchasers seek reconsideration of the determination that they conceded the argument that the TTPA is inapplicable to the Cheer Camp and Cheer Competition markets because it applies only to tangible goods, not intangible services. (ECF No 335-1 at PageID 7285-6.)In the Order Granting in Part and Denying in Part Defendants' Motion to Dismiss, the Court stated:

Webb first argues that the TTPA is inapplicable to the Cheer Camp and Cheer Competition markets because it applies only to tangible goods, not intangible services. (ECF No. 58-1 at PageID 298 (citing Tenn. Code. Ann. § 47-25-101).) Because the Indirect Purchasers do not respond to this argument, the Court finds that point conceded. See 4th Leaf, LLC v. City of Grayson, 425 F.Supp.3d 810, 823 (E.D. Ky. 2019) (“[A] plaintiff generally concedes a defense when they fail to respond to the defendant's argument.”). Thus, the Court GRANTS Defendants' Motion as to the applicability of the TTPA to the Cheer Camps and Cheer Competitions markets, leaving only the

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