Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-02395/USCOURTS-caed-2_05-cv-02395-0/pdf.json

Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 15:1 Antitrust Litigation

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

AXIOM ADVISERS AND

CONSULTANTS, INC. AND

DEAN GETZ, 

Plaintiffs,

 NO. CIV. 2:05-CV-02395-FCD-PAN

v.

SCHOOL INNOVATIONS AND

ADVOCACY, INC. AND 

KEVIN GORDON,

Defendants.

__________________________/

----oo0oo----

This matter comes before the court on defendants School

Innovations and Advocacy, Inc. (“SIA”) and Kevin Gordon’s

(“Gordon”) (collectively, “defendants”) motion to dismiss

plaintiff Axiom Advisors and Consultants, Inc. (“Axiom”) and Dean

Getz’s (“Getz”) (collectively, “plaintiffs”) complaint on the

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 1 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1 All further references to a “Rule” are to the Federal

Rules of Civil Procedure.

2 Because oral argument will not be of material

assistance, the court orders this matter submitted on the briefs. 

E.D. Cal. Local Rule 78-230(h).

2

grounds that (1) the court should decline to exercise

jurisdiction, pursuant to the “primary jurisdiction doctrine,”

over plaintiffs’ federal claim for attempted monopolization

and/or (2) said claim should be dismissed for failure to state a

claim pursuant to Federal Rule of Civil Procedure 12(b)(6).1 In

either case, defendants request the court dismiss the entire

action by declining to exercise supplemental jurisdiction over

plaintiffs’ other state law claims. For the reasons set forth

below, defendants’ motion is DENIED in part and GRANTED in part.2

BACKGROUND

Axiom is a California corporation whose shareholder and

president is Getz. (Pls.’ Compl., filed November 23, 2005, at ¶¶

1-2). Gordon is the president of SIA, a California corporation,

with offices in California and Texas. (Id. at ¶¶ 3-4, 12). Both

Axiom and SIA are in the business of providing services to

California school districts relating to the reimbursement of

expenses mandated by the State of California and to the

preparation and distribution of school accountability report

cards (“SARCs”). (Id. at ¶¶ 8-10). SIA and Axiom share mutual

clients, where one may provide SARC preparation services while

the other may provide reimbursement services. (Id. at ¶ 22). 

Plaintiffs allege that two markets are implicated in this

matter. (Id. at ¶¶ 18-19). The first relevant market is

comprised of California school districts that hire contractors to

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 2 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

obtain reimbursement of state-mandated expenses (the “First

Market”). (Id. at ¶ 18). The second relevant market is

comprised of California school districts that hire contractors to

prepare SARCs (the “Second Market”). (Id. at ¶ 19). Plaintiffs

maintain that SIA provides services to nearly 70% of California

school districts. (Id. at ¶ 17).

In so servicing its clients, plaintiffs assert SIA engaged

in predatory and anticompetitive conduct with the specific intent

to monopolize the relevant markets. (Id. at ¶¶ 20-21). 

Specifically, plaintiffs allege that, in an effort to establish

an unlawful monopoly, SIA wrongfully disrupted Axiom’s contracts

by advising SIA’s clients to seek only partial reimbursement for

the costs associated with Axiom’s preparation of SARCs. (Id. at

¶¶ 23-24). Prior to a recent change in the law, expenses related

to the preparation of SARCs were reimbursable as a state-mandated

expense. (Ex. A to Defs.’ Req. For Judicial Notice, filed

January 13, 2006 [“RJN”], and Ex. A to Defs.’ Supplemental Req.

For Judicial Notice, filed February 16, 2006 [“Second RJN”]). 

Plaintiffs allege that SIA uses its power in the First Market to

acquire and maintain a monopoly in the Second Market. (Pls.’

Compl. at ¶ 25). 

In addition, plaintiffs assert that SIA engaged in acts to

prevent Axiom from competing in the First Market. (Id. at ¶ 26). 

In particular, plaintiffs maintain that SIA refused to return

cost data for the current fiscal year collected during SIA’s

preparation of a school district’s reimbursements for the prior

fiscal year, without a written agreement, where such school

district had replaced SIA with Axiom to provide reimbursement

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 3 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

services. (Id. at ¶¶ 26-27). Although plaintiffs believe that

such cost data belongs to and is the confidential information of

the school district, plaintiffs assert that SIA required the

school district and Axiom to sign an agreement acknowledging that

the cost data was SIA’s confidential information and agreeing to

substantial restrictions of the use of the cost data. (Id. at ¶¶

27-28). Plaintiffs allege that SIA engaged in such conduct to

disrupt Axiom’s contracts and with the specific intent to

establish an unlawful monopoly. (Id. at ¶ 28). Additionally,

plaintiffs allege that SIA attempted to purchase Centration,

Inc., one of its competitors, to increase its share in the First

Market. (Id. at ¶ 30). 

Plaintiffs assert that SIA’s conduct, which Gordon

authorized, creates a dangerous probability that it will achieve

monopoly power in the two relevant markets. (Id. at ¶¶ 31-32). 

Moreover, plaintiffs allege that SIA’s anticompetitive conduct

has injured competition and consumers by harming the competitive

process and limiting consumer choice. (Id. at ¶ 33). As a

result of SIA’s conduct, plaintiffs maintain that Axiom has

suffered an antitrust injury through the disruption of its

relationships with school districts, lost profits, and a loss of

goodwill. (Id. at ¶ 34). Finally, plaintiffs assert that SIA

will continue its acts of attempted monopolization unless

restrained by this court. (Id. at ¶ 35). 

Plaintiffs’ complaint includes claims for: (1) attempted

monopolization in violation of the Sherman Act, 15 U.S.C. § 2,

(2) libel, (3) trade libel, (4) tortious interference with

contractual relations, (5)intentional interference with

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 4 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

prospective economic relations, (6) declaratory relief, (7)

unfair competition, and (8) false advertising. 

Defendants now move to dismiss plaintiffs’ sole federal

claim of attempted monopolization. They argue that upon

dismissal of that claim, the court should decline to exercise

supplemental jurisdiction over the remaining state law claims.

STANDARD

On a motion to dismiss, the allegations of the complaint

must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322

(1972). The court is bound to give plaintiff the benefit of

every reasonable inference to be drawn from the “well-pleaded”

allegations of the complaint. Retail Clerks Int'l Ass'n v.

Schermerhorn, 373 U.S. 746, 753 n.6 (1963). Thus, the plaintiff

need not necessarily plead a particular fact if that fact is a

reasonable inference from facts properly alleged. See id. 

A complaint need not plead all elements of a prima facie

case in order to survive a motion to dismiss. Swierkewicz v.

Sorema N.A., 534 U.S. 506, 510-512 (2002) (rejecting a heightened

pleading standard for employment discrimination and civil rights

cases). Fair notice of the grounds for relief along with a short

and plain statement of the claim are all that is required. Id.

at 508 (citing Fed. R. Civ. Proc. 8(a)(2)).

Given that the complaint is construed favorably to the

pleader, the court may not dismiss the complaint for failure to

state a claim unless it appears beyond a doubt that the plaintiff

can prove no set of facts in support of the claim which would

entitle him or her to relief. Conley v. Gibson, 355 U.S. 41, 45

(1957); NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir.

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 5 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3 The court takes judicial notice of Exhibits A and B to

defendants’ Request for Judicial Notice filed on January 13,

2006, and Exhibits A and B to defendants’ Supplemental Request

for Judicial Notice filed on February 16, 2006. The court

declines to consider the additional extrinsic evidence provided

by defendants as it is unnecessary for purposes of this motion. 

6

1986). Nevertheless, it is inappropriate to assume that

plaintiff “can prove facts which it has not alleged or that the

defendants have violated the . . . laws in ways that have not

been alleged.” Associated Gen. Contractors of Cal., Inc. v.

California State Council of Carpenters, 459 U.S. 519, 526 (1983). 

Moreover, the court “need not assume the truth of legal

conclusions cast in the form of factual allegations.” United

States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th

Cir. 1986).

In ruling upon a motion to dismiss, the court may consider

only the complaint, any exhibits thereto, and matters which may

be judicially noticed pursuant to Federal Rule of Evidence 201.3

See Mir v. Little Co. Of Mary Hospital, 844 F.2d 646, 649 (9th

Cir. 1988); Isuzu Motors Ltd. v. Consumers Union of United

States, Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998). 

ANALYSIS

I. Primary Jurisdiction Doctrine

Preliminarily, defendants argue the court should decline to

exercise jurisdiction over plaintiffs’ attempted monopolization

claim pursuant to the “primary jurisdiction doctrine.” Under

that doctrine, a court may suspend review of a claim if the

resolution of that claim involves issues that have been placed

within the jurisdiction of an administrative body. U.S. v. W.

Pac. R.R. Co., 352 U.S. 59, 64 (1956). The primary jurisdiction

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 6 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

doctrine seeks to “promot[e] proper relationships between the

courts and administrative agencies charged with particular

regulatory duties.” Id. Moreover, the primary jurisdiction

doctrine assures the maintenance of “[u]niformity and consistency

in the regulation of a business entrusted to a particular

agency.” Far East Conference v. U.S., 342 U.S. 570, 574-75

(1952). 

Contrary to defendants’ contention, the primary jurisdiction

doctrine is a discretionary doctrine. Thereunder, a court may

stay further proceedings so as to give the parties a reasonable

opportunity to seek an administrative ruling. Reiter v. Cooper,

507 U.S. 258, 268 (1993). It is within the sound discretion of

the court to determine “when protection of the integrity of a

regulatory scheme dictates preliminary resort to the agency which

administers the scheme.” Syntek Semiconductor Co., Ltd. v.

Microchip Tech., Inc., 307 F.3d 775, 781 (9th Cir. 2002) (quoting

U.S. v. General Dynamics Corp., 828 F.2d 1356, 1362 (9th Cir.

1987)). In determining if an agency has “primary jurisdiction,”

the court may consider if the need to resolve an issue, which has

been placed within the jurisdiction of an administrative body,

requires expertise or uniformity in administration. Id.

Referral of the issue to an administrative agency does not

deprive the court of jurisdiction. Reiter, 507 U.S. at 268. 

In California, reimbursement of state-mandated costs is

governed by an extensive constitutional, statutory and regulatory

scheme. Cal. Const. § 6, Art. XIII B; Cal. Gov’t Code §§ 17500,

et seq. The California legislature created the Commission on

State Mandates (the “Commission”) to adjudicate disputes over the

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 7 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

existence of a state-mandated program and to adopt procedures for

submission and adjudication of reimbursement claims. Cal. Gov’t

Code §§ 17525, 17551, 17553, 17557 (West 2006). 

In its decision adopted on April 23, 1998, the Commission

announced that costs to compile, analyze, and report specific

information in a SARC were reimbursable state-mandated activities

under Cal. Const. § 6, Art. XIII B and Cal. Gov’t Code § 17514. 

(Ex. A to Defs.’ RJN). The Commission’s decision clearly

outlined the specific information for which a school district

could seek reimbursement. (Id.) Pursuant to the Commission’s

decision, school districts could seek reimbursement for SARC

preparation, which included the following: salaries paid to

school teachers, school site principals, and school district

superintendents; statewide salary averages; the total number of

instructional minutes offered in the school year; the total

number of minimum days in the school year; results by grade

levels from the assessment tool used by the school district; the

average verbal and math SAT scores; and the drop-out rate for the

most recent three-year period. (Id.) This is a sample of the

exhaustive list of information which the Commission set forth as

reimbursable. (Id.) However, on February 1, 2006, the

Commission announced its decision that school districts could no

longer seek reimbursement for SARC-related expenses, which

applied retroactively to January 1, 2005. (Ex. A. to Defs.’

Second RJN). 

 Plaintiffs allege that SIA’s anticompetitive conduct

included, among other things, advising its clients that only a

portion of Axiom’s SARC preparation expenses were reimbursable as

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 8 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

a state-mandated cost. Defendants argue that the court should

decline to adjudicate plaintiffs’ attempted monopolization claim

because it requires the determination of what portion of Axiom’s

charges were reimbursable. That determination, defendants

contend, is wholly within the purview of the Commission.

Initially, the court notes that this issue is only one

aspect of plaintiffs’ attempted monopolization claim. Plaintiffs

allege other anticompetitive conduct, including SIA’s attempt to

create and maintain a monopoly in the relevant markets by

disrupting Axiom’s contracts, refusing to turn over data

belonging to the school districts, and attempting to purchase a

competitor. (Pls.’ Compl. at ¶¶ 25-28, 30). Thus, even if

defendants are correct, their argument would only apply to one

aspect of plaintiffs’ claim. As to the other bases for

plaintiffs’ claim, the primary jurisdiction doctrine is

inapplicable. 

However, with respect to the issue of reimbursement of

state-mandated expenses, this case is not about school districts

seeking reimbursement or Axiom seeking collection of monies for

its school district clients. This case does not involve any of

the school district clients of Axiom or SIA. Rather, this case

involves two competitors in the market and one competitor’s

allegedly anticompetitive conduct in the market. Therefore, the

adjudication of this antitrust dispute is well within the

jurisdiction of the federal courts. Section 2 of the Sherman

Act, 15 U.S.C. § 2. 

Indeed, Axiom cannot seek a remedy for SIA’s alleged

antitrust violations through the administrative process. The

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 9 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10

statutory scheme to which defendants ask the court to defer

provides the sole and exclusive procedure by which a local agency

or school district may claim reimbursement for costs mandated by

the state. Kinlaw v. State of California, 54 Cal. 3d 326, 333

(1991); Cal Gov’t Code § 17552 (West 2006) (emphasis added). 

Thus, Axiom cannot seek resolution of its antitrust claim against

SIA from the Commission. 

The court acknowledges that the determination of whether

SIA’s alleged conduct was anticompetitive may require a predicate

finding as to which SARC-related preparation costs were

reimbursable. However, in its April 23, 1998 decision, the

Commission clearly outlined the specific items properly included

in a SARC for which a school district could seek reimbursement. 

(Ex. A. to Defs.’ RJN). Because of the clarity of the

Commission’s decision, the court finds it unlikely that the issue

of which SARC-related preparation costs were reimbursable will

require an extensive or complicated factual inquiry as to require

the expertise of the Commission. Therefore, the court finds it

unnecessary to refer the issue to the Commission and declines to

invoke the primary jurisdiction doctrine. Accordingly,

defendants’ motion to dismiss plaintiffs’ attempted

monopolization claim pursuant to the primary jurisdiction

doctrine is DENIED. 

II. Attempted Monopolization Under the Sherman Act § 2

Defendants contend that plaintiffs’ complaint fails to

allege facts to state an antitrust claim and such claim should,

therefore, be dismissed. To establish a violation of Section 2

of the Sherman Act, 15 U.S.C. § 2, for attempted monopolization,

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 10 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

11

Axiom must demonstrate (1) SIA’s specific intent to control

prices or destroy competition; (2) SIA’s predatory or

anticompetitive conduct directed at accomplishing that purpose;

(3) a dangerous probability of SIA achieving monopoly power; and

(4) a causal antitrust injury. Rebel Oil v. Atlantic Richfield

Co., 51 F.3d 1421, 1432-1433 (9th Cir. 1995). 

Specifically, defendants argue that plaintiffs fail to 

allege facts to support the elements of anticompetitive conduct,

a dangerous probability of achieving monopoly power, and a causal

antitrust injury. The court addresses these elements in turn. 

A. Predatory or Anticompetitive Conduct

Defendants contend that plaintiffs cannot establish that

SIA’s advice regarding reimbursement of SARC-related expenses was

anticompetitive because of a recent change in the law, which no

longer permits reimbursement for SARC-related expenses. In

addition, defendants argue that plaintiffs’ allegations related

to SIA’s alleged refusal to transfer cost data to Axiom and SIA’s

attempted acquisition of Centration, Inc. fail to demonstrate

anticompetitive conduct.

“The purpose of the [Sherman Act] is not to protect business

from the working of the market; it is to protect the public from

the failure of the market.” Spectrum Sports, Inc. v. McQuillan,

506 U.S. 447, 458 (1993). The Act is directed at conduct which

unfairly tends to destroy competition itself. Id. Out of

concern for the public interest, the Sherman Act makes the

conduct of a single firm unlawful when it actually monopolizes or

dangerously threatens to do so. Id. at 458-459. 

Here, plaintiffs have alleged facts sufficient to support

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 11 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12

SIA’s conduct was anticompetitive with harmful effects not only

on Axiom’s business, but also on competition and consumers. 

(Pls.’ Compl. at ¶¶ 33-34). First, plaintiffs allege that, in an

effort to establish an unlawful monopoly, SIA wrongfully

disrupted Axiom’s contracts by advising SIA’s clients to seek

only partial reimbursement for the costs associated with Axiom’s

preparation of SARCs. (Id. at ¶¶ 23-24). Prior to a recent

change in the law, expenses related to the preparation of SARCs

were reimbursable as a state-mandated expense. Contrary to the

defendants’ argument, the recent change in the law does not

render plaintiffs’ SARC-related allegations moot. Plaintiffs’

complaint does not place a temporal limit on the allegations of

SIA’s allegedly anticompetitive SARC-related reimbursement

conduct. Therefore, any of SIA’s SARC-related conduct occurring

prior to January 1, 2005, is still ripe for adjudication pursuant

to plaintiffs’ antitrust claim. 

Furthermore, plaintiffs contend that SIA, in an effort to

prevent Axiom from competing in the First Market, refused to turn

over cost data belonging to clients who chose to replace SIA with

Axiom for reimbursement services. (Id. at ¶¶ 26-27). Axiom

complains that SIA allegedly engaged in such conduct with the

specific intent to establish an unlawful monopoly and to disrupt

Axiom’s contracts. (Id. at ¶ 28). In addition, plaintiffs

allege that, in an attempt to increase its share in the First

Market, SIA attempted to purchase one its competitors,

Centration, Inc. (Id. at ¶ 28). 

Taking the allegations as true, plaintiffs’ allegations of

injury to its business, competition, and consumers as a result of

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 12 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

13

SIA’s allegedly anticompetitive conduct are sufficient to show

that SIA’s conduct may unfairly tend to destroy competition. 

Spectrum Sports, 506 U.S. at 458. Therefore, the court concludes

that plaintiffs sufficiently set forth facts to establish that

SIA engaged in anticompetitive conduct. 

B. Dangerous Probability of Obtaining Monopoly Power

Monopoly power is the power to control prices or exclude

competition. United States v. E.I. DuPont de Nemours & Co., 351

U.S. 377, 391 (1956). Whether there is a dangerous probability

of achieving monopoly power requires an inquiry into the relevant

product and geographic market, and the defendants’ economic power

in that market. See Spectrum Sports, 506 U.S. at 456. In order

to demonstrate market power circumstantially, a plaintiff must: 

(1) define the relevant market; (2) show that the

defendant owns a dominant share of that market; and (3)

show that there are significant barriers to entry and

show that existing competitors lack the capacity to

increase their output in the short run.

Rebel Oil, 51 F.3d at 1434. 

1. Pleading a Relevant Market

A market definition is essential to establish a

monopolization claim. Big Bear Lodging Ass’n v. Snow Summit,

Inc., 182 F.3d 1096, 1105 (9th Cir. 1999). Unless alleging a per

se violation, plaintiffs must identify the relevant geographic

and product markets in which plaintiffs and defendants compete. 

Id. at 1104. 

Plaintiffs’ complaint identifies two relevant markets. 

(Pls.’ Compl. at ¶¶ 18-19). The First Market identified by

plaintiffs includes California school districts that hire

contractors to obtain reimbursement of state-mandated expenses. 

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 13 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

14

(Id. at ¶ 18). Plaintiffs identified the Second Market as

California school districts that hire contractors to prepare

SARCs. (Id. at ¶ 19). These allegations clearly set forth the

relevant geographic market, California, and product markets,

school districts who hire contractors to obtain reimbursement and

prepare SARCs. Therefore, plaintiffs satisfied this prong of its

attempted monopolization claim. 

2. Pleading a Dominant Share of the Market 

Defendants argue that plaintiffs failed to allege SIA’s

market share in each of the two relevant markets. Defendants are

correct that plaintiffs did not specifically address SIA’s market

share with respect to either of the relevant markets. However,

plaintiffs did allege, generally, that SIA services 70% of the

school districts in California. (Pls.’ Compl. at ¶ 17). 

It is not necessary that plaintiffs plead “market share” in

its complaint in order to have adequately pled that defendants

have a dangerous probability of successfully monopolizing the

relevant market. Rolite, Inc. v. Wheelabrator Environmental

Systems, Inc., 958 F. Supp. 992, 1000 (E.D.Pa. 1997). Although

“market share” may be the most significant factor in determining

monopoly power, it is not exclusive. Id. Indeed, the Ninth

Circuit has cautioned courts to “be wary of the numbers game of

market percentage when considering attempt-to-monopolize claims.” 

Rebel Oil, 51 F.3d at 1438 (citing Dimmitt Agri Indus., Inc. v.

CPC Int’l, Inc., 679 F.2d 516, 533 (5th Cir. 1982)). Instead,

the Ninth Circuit has instructed courts to analyze “market share,

entry barriers, and the capacity of existing competitors to

expand output” when considering market power for attempted

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 14 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

15

monopolization claims. Id.

It is possible for the court to infer that SIA holds a

significant share of the relevant markets in light of the liberal

notice pleading standards and because the minimum showing of

market share required in an attempt case is a lower quantum of

proof than that required in an actual monopolization case. Id. 

However, as discussed below, Axiom failed to allege the other

factors that must be considered in determining SIA’s monopoly

power. Therefore, based on Axiom’s bald allegation that SIA

provides services to 70% of the school districts in California,

the court cannot find that Axiom adequately alleged SIA has a

dangerous probability of achieving market power. 

3. Pleading Significant Barriers

The third pleading requirement is the demonstration of

significant barriers to entry and incapacity to increase output

in the short run. Rebel Oil, 51 F.3d at 1434. The Ninth Circuit

has incorporated significant barriers into the analysis of a

sufficiently pled dominant share of the market. Rebel Oil, 51

F.3d at 1438; see Am. Prof’l Testing Serv. v. Harcourt Brace

Jovanovic Legal & Prof’l Publs., 108 F.3d 1147, 1154 (9th Cir.

1997). The Rebel Oil court defined entry barriers as “additional

long-run costs that were not incurred by incumbent firms but must

be incurred by new entrants,” or “factors in the market that

deter entry while permitting incumbent firms to earn monopoly

returns.” Id. at 1439. 

Plaintiffs failed to plead any facts to demonstrate that

significant barriers to entry or an incapacity to increase output

in the short run exist in the relevant markets. Therefore,

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 15 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

16

plaintiffs have failed to set forth sufficient facts to establish

that SIA has a dangerous probability of achieving monopoly power. 

Accordingly, defendants’ motion to dismiss plaintiffs’ attempted

monopolization claim is GRANTED. 

However, because Rule 15(a) of the Federal Rules of Civil

Procedure provides that leave to amend shall be freely given when

justice so requires, the court will allow plaintiffs to amend

their complaint to allege facts sufficient to establish that SIA

has a dangerous probability of achieving monopoly power. 

C. Causal Antitrust Injury

In passing, defendants appear to also suggest plaintiffs

have failed to allege a causal antitrust injury. Plaintiffs need

only plead antitrust injury, which requires plaintiffs to allege

sufficient facts from which the court can discern the elements of

an injury resulting from an act forbidden by the antitrust laws. 

Newman v. Universal Pictures, 813 F.2d 1519, 1522 (9th Cir.

1987). Plaintiffs allege that Axiom has suffered (1) antitrust

injury; (2) the disruption of its relationships with its school

district clients; and(3) lost profits and goodwill. (Pls.’

Compl. at ¶ 34). Moreover, plaintiffs also allege that SIA’s

conduct has injured competition and consumers and that its acts

have an anticompetitive effect of harming the competitive

process, limiting consumer choice, and harming consumers. (Pls.’

Compl. at ¶ 33). These allegations are sufficient to plead

causal antitrust injury. 

/////

/////

/////

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 16 of 17
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

17

CONCLUSION

For the foregoing reasons, defendants’ motion to dismiss

plaintiffs’ attempted monopolization claim is DENIED in part and

GRANTED in part. Because the court grants plaintiffs leave to

amend, defendants’ request that the court dismiss the entire

action by declining to exercise supplemental jurisdiction over

the remaining state law claims is DENIED. 

Plaintiffs are granted fifteen (15) days from the date of

this order to file a first amended complaint in accordance with

this order. Defendants are granted thirty (30) days from the

date of service of plaintiffs’ first amended complaint to file a

response thereto. 

IT IS SO ORDERED.

DATED: March 20, 2006.

/s/ Frank C. Damrell Jr. 

FRANK C. DAMRELL, JR.

United States District Judge

Case 2:05-cv-02395-FCD-PAN Document 19 Filed 03/20/06 Page 17 of 17