Millcraft Paper Co. v. Veritiv Corp.

MILLCRAFT PAPER CO., Plaintiff, v. VERITIV CORPORATION, Defendant.

CASE NO. 1:15CV2175

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF OHIO EASTERN DIVISION

July 14, 2016

JUDGE CHRISTOPHER A. BOYKO

OPINION AND ORDER

CHRISTOPHER A. BOYKO, J.:

This matter comes before the Court upon the Motion (ECF DKT #9) of Defendant, Veritiv Corporation, to Dismiss. For the following reasons, the Motion is denied.

I. BACKGROUND

Plaintiff's Complaint alleges the following factual situation. Both Plaintiff and Defendant are, among other business activities, wholesale distributors of printing paper products for automotive advertising projects. Automotive companies, or advertising companies they work with, contract with printing companies for the production of advertising materials on premium coated paper products. The printing companies issue requests for production (RFQ) to paper distributors for the supply of specified paper for particular contracts. Paper distributors, such as Plaintiff and Defendant, submit proposals to supply the paper identified in an RFQ. Thus, in the paper food chain at the heart of this case there are three levels: the paper manufacturers, paper distributors (Plaintiff and Defendant) and end users (automotive companies or their advertising companies).

Plaintiff alleges that on several occasions it has paid higher prices than Veritiv Corporation for contemporaneous purchases of paper of like grade and quality for automotive advertising projects. Plaintiff has requested that paper manufacturers extend the same low prices to Millcraft as they do for Veritiv. These requests have been refused due to alleged pressures from Veritiv that have prevented Millcraft from receiving the same pricing. Millcraft has alleged that the price discrimination has been substantial, has gone on for a significant period of time and has injured competition. Plaintiff's claims include a Robinson-Patman Act violation under 15 U.S.C. § 13(f) that Veritiv Corporation knowingly induced and/or received a discrimination in price in the purchase of commodities of like grade and quality. Millcraft further alleges that there is no cost or other justification for paper manufacturers to extend more favorable pricing to Veritiv other than Veritiv's use of its market power to insist upon more favorable pricing for itself while pressuring paper manufacturers to keep from extending the favorable pricing to Millcraft. Plaintiff seeks attorneys fees, treble damages and injunctive relief.

Defendant bases its Motion to Dismiss on Plaintiff's alleged failure to state the essential elements of a Robinson-Patman Act Section 2(f) claim. Defendant claims the Complaint does not adequately allege a relevant market, threatened harm to competition or antitrust standing and does not allege that Veritiv knew that the prices were not subject to aSection 2(a) defense under the Robinson-Patman Act ("RPA").

II. LAW AND ANALYSIS

A. Standard of Review

A motion under Rule 12(b)(6) of the Federal Rules of Civil Procedure tests whether a claim has been adequately stated in the complaint. Broyde v. Gotham Tower, Inc., 13 F.3d 994, 996 (6th Cir. 1994)(citing Nishiyama v. Dickson County, Tenn. 814 F.2d 277, 279 (6th Cir. 1987)). The basic pleading requirements are set out in Rule 8(a) and call for "a short and plain statement of the claim showing that the pleader is entitled to relief." Id.; Fed.R.Civ.P. 8(a). Rule 8(a) does not, however, "unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

When considering a motion to dismiss for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6) a court must "construe the complaint in the light most favorable to the plaintiff and accept all factual allegations as true." Laborers' Local 265 Pension Fund v. iShares Trust, 769 F.3d 399, 403 (6th Cir. 2014). A complaint only requires "fair notice of what plaintiff's claim is and the grounds upon which it rests." Andrews v. State of Ohio, 104 F.3d 803, 806 (6th Cir. 1997)(citing In re DeLorean Motor Co., 991 F.2d 1236, 1240 (6th Cir. 1993)). While construing the complaint in favor of the non-moving party, a court will not accept conclusions of law or unwarranted inferences cast in the form of factual allegations. See City of Heath, Ohio v. Ashland Oil, Inc., 834 F.Supp. 971, 975 (S.D. Ohio 1993); see also Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).

A complaint will only be dismissed pursuant to Rule 12(b)(6) when there is no law to support the claims made, if the facts alleged are insufficient to state a claim, or if there is aninsurmountable bar to relief on the face of the complaint. Rauch v. Day & Night Mfg. Corp., 576 F.2d 697, 702 (6th Cir. 1978). However, "in antitrust cases, where 'the proof is largely in the hands of the alleged conspirators,' Poller v. Columbia Broadcasting, 368 U.S. 464, 473 (1962), dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly." Hosp. Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738, 746 (1976).

B. Discussion

Pleading Requirements

"The RPA was enacted in response to the comparative competitive advantage of large purchasers, who could induce advertising allowances, rebates, and special services from sellers due to their size. Small independent stores were at a 'hopeless competitive disadvantage' compared to large stores and thus the RPA was enacted 'to eliminate these inequities.'" Williams v. Duke Energy Intern., Inc., 681 F.3d 788, 799 (6th Cir. 2012) citing FTC v. Simplicity Pattern Co., 360 U.S. 55 (1959). Millcraft complains of a secondary-line injury under the RPA. Secondary-line price discrimination occurs when a seller's discrimination impacts competition among the seller's customers; such as favored purchasers and disfavored purchasers. See F.T.C. v. Sun Oil Co., 371 U.S. 505 (1963).

A secondary line claim under the RPA requires Millcraft to show that: (1) the relevant sales "were made in interstate commerce"; (2) the paper products were of "like grade and quality"; (3) manufacturers discriminated in price between Millcraft and another customer; and (4) the effect of such discrimination may be to injure, destroy, or prevent competition to the advantage of a favored customer (i.e. Veritiv) other than Millcraft. Volvo Trucks N. Am. Inc. v. Reeder-Simco GMC, Inc., 546 U.S. 164, 177 (2006). Millcraft has met these pleadingrequirements required under a secondary-line RPA claim.

1. Relevant sales and market

Millcraft sufficiently alleges in the Complaint that the relevant sales were made in interstate commerce. The Complaint indicates that various "U.S. based paper coated manufacturers" are utilized in supplying paper for automotive advertising projects. Compl. ¶ 14. The Complaint also specifically alleges that the purchases "have been made in interstate commerce" and that the purchased paper products have been sold for use in the United States. Id. ¶ 23. Additionally, the principal places of business of the Plaintiff (Cleveland, Ohio) and Defendant (Atlanta, Georgia) require that purchases were made in interstate commerce. The Court finds that the requirement that relevant sales were made in interstate commerce has been sufficiently plead.

The Defendant's argument that Millcraft has failed to allege a relevant market is inconsistent with the pleading requirements for a claim under the RPA. The applicable pleading standard cited above does not require that a relevant market be plead in the Complaint. The cases cited by the Defendant do not indicate that relevant market is a specific pleading requirement and most of the cited cases apply to either the Sherman Act, a different antitrust statute, or to primary-line RPA claims; thus they are distinguishable.

Two unreported cases are central to the Defendant's argument and heavily relied upon. The first, Sheet Metal Duct, Inc. v. Lindab, Inc., indicates that relevant market is a necessary claim under the RPA, however the case is an outlier and not only is unpersuasive, it is non-binding. No. 99-6299, 2000 U.S. Dist. LEXIS 9928 (E.D. Pa. July 18, 2000). Furthermore, the two appellate cases the decision uses to support this proposition are silent asto the RPA and any relevant market requirements. The second unreported case cited by Defendant, Beuff Enter. Florida, Inc. v. Gilbert, relies on the Sheet Metal case and is similarly an unpersuasive and non-binding authority. No. 07-2159, 2008 U.S. Dist. LEXIS 50591 (D.N.J., June 25, 2008).

Assuming, arguendo, that relevant market is required to be identified in the Complaint, then Millcraft has satisfied this requirement. The facts alleged in the Complaint infer that the relevant market is the geographic market of the United States and the relevant product market is the market for premium coated paper for automotive advertising industry projects. See Compl. ¶ 13; See also Compl. ¶ 23.

The Court finds that the relevant sales in interstate commerce requirement has been sufficiently plead and, if necessary, that a relevant market has also be sufficiently plead.

2. Like Grade and Quality

It is undisputed that the paper products were of like grade and quality. The Complaint alleges in several paragraphs that the paper products are "of like grade and quality." See Compl. ¶ 17. The Court finds that the like grade and quality requirement has been sufficiently plead.

3. Price Discrimination

Also undisputed is the alleged price discrimination by paper manufacturers against Millcraft in favor of Veritiv. Price discrimination, under the RPA, is merely a price difference. F.T.C. v. Anheuser-Busch, 363 U.S. 536, 549 (1960). The Complaint alleges in several places that Millcraft has paid a higher price and discriminatory low prices have been afforded to Veritiv. Thus, price differences and therefore, price discrimination, is present.The Court finds that the price discrimination requirement has been sufficiently plead.

4. Harm to...