Process Controls Int'l Inc. v. Emerson Process Mgmt.

753 F.Supp.2d 912

PROCESS CONTROLS INTERNATIONAL, INC., d/b/a Automation Service, Plaintiff,

v.EMERSON PROCESS MANAGEMENT, et al., Defendants.

Case No. 4:10 CV 645 CDP.

United States District Court, E.D. Missouri, Eastern Division.

Nov. 10, 2010.

John D. Ryan, Scott J. Dickenson, John T. Walsh, Lathrop and Gage, LLP, St. Louis, MO, for Plaintiff.Edward L. Dowd, Jr., James F. Bennett, John D. Comerford, Dowd Bennett, LLP, Clayton, MO, Glenn E. Davis, Gallop Johnson, Steven P. Sanders, Sr., Seth J. Hawkins, Williams and Venker, LLC, St. Louis, MO, James G. Kress, Jennifer M. Schmidt, Howrey, LLP, Washington, DC, for Defendants.

MEMORANDUM AND ORDER

CATHERINE D. PERRY, District Judge.

This is an antitrust and false advertising dispute arising from defendants' refusal to deal with plaintiff and from one defendant's advertisements declaring the superior safety of its products. Plaintiff Process Controls International, Inc., doing business as Automation Service (“Automation”), remanufactures used process control equipment originally manufactured by defendant Emerson Process Management. The remanufacturing process involves completely disassembling the equipment, inspecting and cleaning its parts, and reassembling it after inspection. Emerson also remanufactures its own products through its Encore division.

Defendant Factory Mutual Insurance Company insures industrial companies that use process control equipment. In an effort to increase safety and reduce its clients' premiums, Factory Mutual's subsidiary, defendant FM Approvals, LLC has created a set of safety standards for process control equipment and certifies companies as ‘FM approved’ if their products satisfy its standards. One of these standards includes an Original Equipment Manufacturer (“OEM”) requirement, which requires a remanufacturer such as Automation to enter an agreement with an original manufacturer like Emerson to provide the remanufacturer with safety and equipment updates. Emerson's Encore brand has been certified as FM approved because it has access to Emerson's information, and Emerson has advertised this fact as well as the superior safety of its Encore brand as compared to other remanufacturers without FM certification.

In the face of Emerson's advertisements, Automation tried to have its products certified as FM approved, but it could not, because Emerson refused to enter an OEM agreement with it. Automation now brings this complaint, alleging all defendants unlawfully agreed (1) to restrain its sales by refusing to certify its products as FMA approved, and (2) to monopolize the market for remanufactured Emerson products, in violation of federal and Missouri antitrust laws. Automation also claims Emerson's advertisements are false and violate the Lanham Act, 15 U.S.C. § 1125, and amount to tortious interference with a business expectancy and defamation under Missouri law. For the reasons that follow, I will grant defendants' motions to dismiss Automation's antitrust claims, but I will deny Emerson's motion to dismiss Automation's Lanham Act and state-law claims. I will also grant intervenor Fisher Controls International, LLC's unopposed motion to intervene.

Background ¹

Plaintiff Automation Service remanufactures process control equipment, which is used to control and/or regulate the flow of hazardous substances through piping systems. Such equipment is originally manufactured by companies such as defendant Emerson, but Automation and several other companies, including Emerson through its Encore brand, remanufacture it because some consumers prefer to replace their worn-out equipment with used, but remanufactured equipment rather than brand-new equipment. Remanufacturing involves completely disassembling equipment, replacing all faulty parts, inspecting and cleaning all parts, testing the proper functioning of parts, and reassembling the equipment. When Automation remanufactures Emerson equipment, it leaves the Emerson trademarks on the equipment on it because its customers wish to match existing equipment with equipment from the same brand, but it also marks the equipment as remanufactured.²

Defendant Factory Mutual Insurance Company insures industrial companies that use process control equipment. Its subsidiary, defendant FM Approvals, has established safety standards for these companies and certifies certain process control equipment as “FM approved” if it satisfies the safety standards. Companies that use FM-approved equipment are entitled to discounts on their insurance premiums from Factory Mutual. In 1998, FM Approvals created a set of safety standards for remanufactured process control equipment, which included the Original Equipment Manufacturer requirement: to be certified, a remanufacturer must enter an agreement with the original equipment manufacturer according to which the original manufacturer will provide the remanufacturer with product and safety updates. Emerson's Encore brand of remanufactured equipment satisfies this requirement and has been certified as FM Approved, because it has access to Emerson's product updates. Emerson has advertised that fact, and has asserted in its advertisements that this certification makes its products safer than other, non-FM-certified remanufactured process control equipment. Emerson has also sent letters to Automation's customers containing this same message. Additionally, Emerson is Factory Mutual's largest insurance client, and several of Emerson's officers are also members of Factory Mutual's boards.

After discovering Emerson's advertisements and letters to its clients, Automation attempted to have its products certified as FM approved. FM Approvals informed Automation about the OEM requirement, and Automation attempted to enter such an agreement with Emerson. However, Emerson refused to enter any such agreement with Automation. Automation then requested that FM Approvals relax the OEM requirement for it, but FM Approvals also refused. To this date, Automation's products have not certified as FM approved.

In the face of defendants' refusal to deal with it, Automation brought this complaint alleging that it has lost customers because of defendants and that their behavior violates federal and state antitrust laws as well as state law. Specifically, in Counts I and II, Automation claims that defendants conspired together to restrain Automation's sales by creating the OEM requirement and then refusing to certify Automation's products because of Emerson's refusal to enter such an agreement with Automation, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. In Counts III–VIII, Automation asserts that defendants have conspired to monopolize, have attempted to monopolize, or have successfully monopolized the aftermarket of remanufactured Emerson process control equipment, in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. Automation next claims in Count IX that Emerson's advertisements and letters are false, in violation of the Lanham Act, 15 U.S.C. § 1125. Additionally, Automation asserts in Counts X and XI that this same behavior amounts to tortious interference with a business expectancy and defamation under Missouri law. Finally, Automation claims in Count XII that it is entitled to declaratory judgment that its activities, including leaving Emerson's marks on the process control equipment it remanufactures, does not amount to a violation of any trademark law.

Factory Mutual and FM approvals now move to dismiss all counts against them, Counts I–II, V, and VI–VII. Emerson also moves to dismiss all claims except Automation's claim for declaratory judgment. Intervenor Fisher Controls International, LLC, a company related to Emerson, moves to intervene as of right under Fed.R.Civ.P. 24(a), because it actually owns the trademarks that are the subject of Automation's claim for declaratory judgment in Count XII. Automation does not oppose that motion, but it does oppose all motions to dismiss.

Discussion

As discussed above, defendants' motions to dismiss and Fisher's motion to intervene are pending before me. I will first consider the motions to dismiss and then Fisher's motion to intervene.

I. Sherman Act Section I Claims

Citing Fed.R.Civ.P. 12(b)(6) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), all defendants move to dismiss Automation's Section 1 claims (Counts I–II), contending that the complaint fails to plausibly suggest defendants conspired or agreed to restrain Automation's sales. I agree.

The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of the complaint. When considering a 12(b)(6) motion, the court assumes the factual allegations of a complaint are true and construes them in favor of the plaintiff. Neitzke v. Williams, 490 U.S. 319, 326, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989). When, as here, a plaintiff attaches an exhibit to its complaint, that exhibit is considered to be part of the pleadings. Fed.R.Civ.P. 10(c) (“A copy of a written instrument that is an exhibit to a pleading is part of the pleading for all purposes.”); see also, e.g., Cole v. Homier Distrib. Co., 599 F.3d 856, 863 (8th Cir.2010) (in deciding a motion to dismiss, a court may consider the allegations made in the complaint, documents attached to the complaint, and matters of public and administrative record referenced in the complaint).

Federal Rule of Civil Procedure 8(a)(2) provides that a complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” In Twombly, the Supreme Court clarified that Rule 8(a)(2) requires complaints to contain “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action ...” 550 U.S. at 555, 127 S.Ct. 1955; accord Ashcroft v. Iqbal, ––– U.S. ––––, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). Specifically, to survive a motion to dismiss, a complaint must contain enough factual...