Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-01057/USCOURTS-cand-3_07-cv-01057-12/pdf.json

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

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

KOREA KUMHO PETROCHEMICAL,

 Plaintiff,

 v.

FLEXSYS AMERICA LP,

Defendant. /

No. C07-01057 MJJ

ORDER GRANTING IN PART AND

DENYING IN PART DEFENDANTS’

MOTION TO DISMISS

INTRODUCTION

Before the Court is Defendants’ Motion To Dismiss With Prejudice Plaintiff’s Second

Amended Complaint. (Docket No. 66.) 

For the following reasons, the Court GRANTS IN PART AND DENIES IN PART

Defendants’ Motion.

FACTUAL BACKGROUND

Plaintiff Korea Kumho Petrochemical Company (“KKPC” or “Plaintiff”) is a corporation

organized and existing under the laws of the Republic of Korea, with its principal place of business

in Seoul. (SAC ¶ 2.) Plaintiff manufactures and sells chemicals, including 6PPD, a rubber

chemical that Plaintiff makes at is Yeosu City, South Korea plant. (SAC ¶¶ 2, 18.) In this

litigation, Plaintiff alleges that Defendants Flexsys America L.P., Flexsys N.V., Akzo Nobel

Chemical Int’l B.V., and Akzo Nobel Chemicals, Inc. (collectively “Defendants”) conspired together

to restrain trade, foreclose markets, allocate customers, reduce supply, and monopolize trade in the

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United States market for 6PPD.

Plaintiff originally filed its Complaint in this action on April 26, 2006 in the Central District

of California. On July 12, 2006, the Central District of California transferred the case to the

Northern District of Ohio. Plaintiff filed a First Amended Complaint on August 8, 2006, and a

Revised First Amended Complaint (the current operative pleading) on October 16, 2006. On

February 16, 2007, the Judicial Panel on Multidistrict Litigation (“JPML”) transferred the litigation

to this Court as part of ongoing MDL proceedings.

On August 13, 2007, this Court issued an order dismissing Plaintiff’s Revised First Amended

Complaint (“RFAC”) in its entirety, with leave to amend. (Docket No. 61.) The Court found that

Plaintiff had not adequately alleged in the First Amended Complaint that it suffered antitrust injury,

and further found that Plaintiff had also failed to adequately plead its state law claims. 

On September 12, 2007, Plaintiff filed a Second Amended Complaint (“SAC”). Defendants

now bring a second motion to dismiss, seeking dismissal of each of the six causes of action in the

SAC: (1) conspiracy to restrain trade under Section 1 of the Sherman Act; (2) conspiracy to

monopolize under Section 2 of the Sherman Act, (3) attempted monopolization under Section 2 of

the Sherman Act, (4) violation of the Cartwright Act (Cal. Bus. & Prof. Code §§ 16720 et seq.), (5)

unfair business practices (Cal. Bus. & Prof. Code § 17200), and (6) intentional interference with

prospective economic advantage. Defendants raise attacks on subject matter jurisdiction under Rule

12(b)(1), and also challenge the legal sufficiency of Plaintiff’s claims under Rule 12(b)(6).

LEGAL STANDARD

A. Rule 12(b)(1)

Rule 12(b)(1) authorizes a party to move to dismiss a claim for lack of subject matter

jurisdiction. Federal courts are courts of limited jurisdiction; thus, the Court presumes lack of

jurisdiction, and the party seeking to invoke the court’s jurisdiction bears the burden of proving that

subject matter jurisdiction exists. See Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377

(1994). A party challenging the court's jurisdiction under Rule 12(b)(1) may do so by raising either

a facial attack or a factual attack. See White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). 

A facial attack is one where “the challenger asserts that the allegations contained in a

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complaint are insufficient on their face to invoke federal jurisdiction.” Safe Air for Everyone v.

Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). In evaluating a facial attack to jurisdiction, the Court

must accept the factual allegations in plaintiff's complaint as true. See Miranda v. Reno, 238 F.3d

1156, 1157 n. 1 (9th Cir. 2001). For a factual attack, in contrast, the Court may consider extrinsic

evidence. See Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir.1987). Further, the court does

not have to assume the truthfulness of the allegations, and may resolve any factual disputes. See

White, 227 F.3d at 1242. Thus, “[o]nce the moving party has converted the motion to dismiss into a

factual motion by presenting affidavits or evidence properly before the court, the party opposing the

motion must furnish affidavits or other evidence necessary to satisfy its burden of establishing

subject matter jurisdiction.” Savage v. Glendale Union High Sch., 343 F.3d 1036, 1039 n.2 (9th Cir.

2003). 

 In the Ninth Circuit, “[j]urisdictional dismissals in cases premised on federal-question

jurisdiction are exceptional, and must satisfy the requirements specific in Bell v. Hood, 327 U.S. 678

[] (1946).” Sun Valley Gas., Inc. v. Ernst Enters., 711 F.2d 138, 140 (9th Cir. 1983); see Safe Air for

Everyone, 373 F.3d at 1039. The Bell standard provides that jurisdictional dismissals are warranted

“where the alleged claim under the [C]onstitution or federal statute clearly appears to be immaterial

and made solely for the purpose of obtaining federal jurisdiction or where such a claim is wholly

insubstantial and frivolous.” 327 U.S. at 682-83. Additionally, the Ninth Circuit has admonished

that a “[j]urisdictional finding of genuinely disputed facts is inappropriate when ‘the jurisdictional

issue and substantive issues are so intertwined that the question of jurisdiction is dependent on the

resolution of factual issues going to the merits’ of an action.” Sun Valley, 711 F.2d at 139. The

jurisdictional issue and the substantive issues are intertwined where “a statute provides the basis for

both the subject matter jurisdiction of the federal court and the plaintiff’s substantive claim for

relief.” Safe Air for Everyone, 373 F.3d at 1039 (quoting Sun Valley, 711 F.2d at 139).

B. Rule 12(b)(6)

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal

sufficiency of a claim. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Because the focus of a

Rule 12(b)(6) motion is on the legal sufficiency, rather than the substantive merits of a claim, the

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Court ordinarily limits its review to the face of the complaint. See Van Buskirk v. Cable News

Network, Inc., 284 F.3d 977, 980 (9th Cir. 2002). In considering a Rule 12(b)(6) motion, the Court

accepts the plaintiff’s material allegations in the complaint as true and construes them in the light

most favorable to the plaintiff. See Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000). 

Generally, dismissal is proper only when the plaintiff has failed to assert a cognizable legal theory or

failed to allege sufficient facts under a cognizable legal theory. See SmileCare Dental Group v.

Delta Dental Plan of Cal., Inc., 88 F.3d 780, 782 (9th Cir. 1996); Balisteri v. Pacifica Police Dep’t,

901 F.2d 696, 699 (9th Cir. 1988); Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th

Cir. 1984). In pleading sufficient facts, however, a plaintiff must suggest his or her right to relief is

more than merely conceivable, but plausible on its face. See Bell Atlantic Corp. v. Twombly, 127

S.Ct. 1955, 1974 (2007).

ANALYSIS

Courts vet a plaintiff's ability to establish antitrust injury at the pleading stage, because a

plaintiff's ability to establish antitrust injury depends less on the plaintiffs’ proof than on its

underlying theory of injury, and antitrust injury is necessary, but not sufficient, for antitrust

standing. See, e.g., George Haug Co. v. Rolls Royce Motor Cars, 148 F.3d 136, 139-40 (2d Cir.

1998) (affirming dismissal of antitrust complaint for failure to adequately plead antitrust injury);

Schuylkill Energy Resources v. Pennsylvania Power & Light Co., 113 F.3d 405, 413-14 (3d Cir.

1997) (same); G.K.A. Beverage Corp. v. Honickman, 55 F.3d 762, 766-67 (2d Cir. 1995) (same). In

antitrust actions brought in this circuit, “the facts demonstrating standing must be clearly alleged in

the complaint.” Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981).

A. KKPC Does Not Assert Antitrust Claims On Behalf Of The KMI Joint Venture.

It is undisputed that Plaintiff has not alleged facts that would permit it to assert antitrust

claims on behalf of the Kumho-Monsanto, Inc. (“KMI”) joint venture. As it did at the July 18, 2007

oral argument on Defendant’s prior motion to dismiss, Plaintiff again concedes that it does not seek

to assert claims on KMI’s behalf. (Opp. at 9-10.) Plaintiff therefore must plead facts that establish

its standing to assert antitrust claims on behalf of the KKPC entity itself.

///

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 Defendants assert that the facts alleged in the SAC demonstrate KKPC could not have standing earlier than

December 31, 2001, the date that (according to allegations in Plaintiff’s original Complaint) the actual asset transfer between

KMI and KKPC occurred. (Complaint ¶¶ 45-46.) However, both the original Complaint and the SAC allege that the process

of purchasing KMI’s 6PPD production facilities commenced as early as October 2001. (Complaint ¶¶ 45-46, SAC ¶ 47.)

At the pleading stage, during which this Court must draw all reasonable factual inferences in favor of Plaintiffs, the Court

cannot rule out the possibility that KKPC will be able to prove that it was a 6PPD competitor importing 6PPD into the United

States as early as October 2001, and therefore had standing to assert antitrust injury resulting from Defendants’ alleged

attempts to exclude them from the domestic 6PPD market as of October 2001. 

5

B. KKPC’s Allegations Fail To Establish Standing To Assert Antitrust Injury Prior To

October 2001.

Defendants allege that Plaintiff has failed to allege a factual basis establishing standing to

assert any antitrust injury prior to its acquisition of the 6PPD production facilities in the second half

of 2001. The Court agrees. 

Plaintiffs’ allegations in the SAC, together with earlier allegations in its original Complaint

and its RFAC, make clear that prior to its acquisition of the rubber chemicals production facilities in

the second half of 2001, KKPC itself was not an actual 6PPD competitor and had no 6PPD

production facilities. (SAC ¶¶ 20, 47; RFAC ¶ 19, Complaint ¶¶ 45-46.) All such production

facilities had been transferred to the joint venture KMI in 1987 (SAC ¶ 20), and the SAC does not

allege that KKPC required such facilities until October 2001 (SAC ¶ 47). The SAC alleges that only

after it purchased all the assets of the former KMI joint venture did KKPC “immediately [begin] the

process of selling 6PPD to customers in the United States.” (SAC ¶ 48.) Plaintiff concedes that,

based on its acquisition of assets from KMI, “KKPC was entitled to begin importing 6PPD to the

United States beginning in October 2001.” (Opp. at 10:8-9, emphasis added.)1

 

KKPC nonetheless asserts that it has standing to assert antitrust claims for injury that it

suffered earlier than October 2001 based on its allegations that in 2000 and 2001 Defendants

prolonged negotiations in bad faith with KKPC regarding dissolution of the KMI joint venture. 

(SAC ¶ 45.) On this point, the SAC alleges:

Flexsys improperly tried to delay the dissolution of the Joint Venture

for over a year, prolonging negotiations in bad faith for the sole and

improper purpose of delaying the time when KKPC would compete

directly against Flexsys in the United States, and preventing KKPC

from implementing its business plans, which included the independent

manufacture of 6PPD for sale in the United States.

(SAC ¶ 45.) 

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 KKPC does not identify any factual allegations, other than those concerning Defendants’ dilatory approach to

dissolving the joint venture, that would convey standing upon KKPC to assert antitrust claims prior to October 2001. (Opp.

at 10-11; February 13, 2008 Hearing Transcript at 10-12.) 

3

 The alleged misconduct referenced in paragraphs 46 of the SAC, which references unsuccessful efforts in 2000

and 2001 by Defendants to solicit KKPC to join the alleged conspiracy, is not adequate to establish antitrust injury and

therefore cannot confer standing. 

4

 “Indicia of preparedness include adequate background and experience in the new field, sufficient financial

capability to enter it, and the taking of actual and substantial affirmative steps toward entry, such as the consummation of

relevant contracts and procurement of necessary facilities and equipment.” Andrx Pharmaceuticals, 256 F.3d at 807 (quoting

Hecht v. Pro-Football, Inc., 570 F.2d 982, 994 (D.C. Cir. 1977)).

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Plaintiff contends that such “foot-dragging” constituted an antitrust injury suffered by KKPC

because it delayed the date that KKPC could take possession and control of the KMI production

facilities, and therefore delayed the date that KKPC could manufacture 6PPD for sale in the U.S.

market. In essence, Plaintiff contends that it was a potential competitor that would have entered the

market earlier had the defendant’s alleged exclusionary conduct not kept it out.2

The Court finds that, as currently pleaded, KKPC’s threadbare allegations regarding delay in

dissolving the joint venture are insufficient to establish either standing or antitrust injury.3

 KKPC

generally alleges that it had “business plans” to enter the domestic 6PPD market, but does not allege

sufficient facts to establish its preparedness to do so. For standing purposes, “[a] competitor that has

not yet entered the market may also suffer injury but courts require a ‘potential’ competitor to

demonstrate both its intention to enter the market and its preparedness to do so. Andrx

Pharmaceuticals, Inc. v. Biovail Corp. Int’l, 256 F.3d 799, 806 (D.C. Cir. 2001). Here, KKPC has

not adequately alleged facts demonstrating its preparedness to enter the United States 6PPD market

on an earlier time frame than it actually did.4

 See id. at 807. 

Moreover, KKPC’s allegations in connection with the dissolution of the joint venture also

fall short of establishing facts demonstrating the elements of injury-in-fact, causation and antitrust

injury that are a prerequisite to antitrust standing. As a threshold matter, KKPC alleges only that

Flexsys “tried” to delay dissolution of the joint venture (SAC ¶ 45), but does not allege that

Flexsys’s foot-dragging actually slowed the speed with which the dissolution occurred. This

allegation falls short of establishing an injury-in-fact. Even assuming the alleged foot-dragging by

Flexsys did slow the dissolution, KKPC has also not alleged any facts suggesting such delay

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 The Court disagrees with Defendants’ contention that Vinci v. Waste Management, Inc., 80 F.3d 1372 (9th Cir.

1996) categorically bars KKPC from being able to plead facts establishing standing merely because it was a shareholder in

the KMI joint venture. In Vinci, the court found that a shareholder of a corporation had no standing to sue in his own name

based on injury to the corporation, even if the shareholder alleged that the antitrust violations were intended to drive the

shareholder out of the industry. See id. at 1375. Unlike the allegations in Vinci, KKPC does not appear to assert here that

it suffered injury as a result of any injury inflicted upon the KMI joint venture. Instead, KKPC asserts that it suffered a more

direct form of injury, insofar as Defendants’ alleged attempts to slow the dissolution of the joint venture delayed KKPC’s

(but not KMI’s) entry into the domestic 6PPD market. 

7

frustrated any pre-existing rights to re-acquire the production facilities upon dissolution of the joint

venture. KKPC has therefore failed to adequately allege causation and antitrust injury. From

KKPC’s sparse allegations, it is impossible to determine whether Flexsys alleged conduct had any

actual effect on the timing on KKPC’s entry into the domestic 6PPD market. Cf. Andrx

Pharmaceuticals, 256 F.3d at 807 & n.11 (failure to allege facts demonstrating preparedness to enter

market also meant plaintiff had failed to adequately allege injury and causation).

Although KKPC’s allegations regarding dilatory conduct surrounding the dissolution of the

joint venture are presently too sparse to satisfy antitrust pleading requirements, the Court finds that

granting Plaintiff further leave to amend with respect to such dilatory conduct is appropriate. KKPC

may be able to allege sufficient facts to demonstrate its preparedness to enter the domestic 6PPD

market in 2000 and 2001. If KKPC can allege predicate facts establishing such preparedness, as

well as injury-in-fact and causation, KKPC may plausibly be able to plead facts that demonstrate an

injury of the type the antitrust laws were designed to prevent.5

 

C. Plaintiff Fails To Adequately Allege Any Antitrust Injury In October 2001 Or Later

Stemming From Restrictions On The Supply of 4-ADPA.

Defendants assert that the post-September 2001 allegations in the SAC regarding antitrust

injury are too conclusory to specify a cognizable antitrust injury relating to the supply of 4-ADPA. 

The Court agrees.

 In order to recover under the Sherman Act, a plaintiff is required to establish causal antitrust

injury. To assert antitrust injury, a plaintiff “must show an injury to them[selves] resulting from the

illegal conduct.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); see

also American Ad Mgmt, Inc. v. Genreal Tel. Co. of Cal., 190 F.3d 1051, 1056 (9th Cir. 1999)

(plaintiff must “allege some credible injury caused by the unlawful conduct”); Eichman v. Fotomat

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Corp., 880 F.2d 149, 163 (9th Cir. 1989) (plaintiff must establish “injury to himself as a result of the

alleged anti-trust violation”). 

Here, the SAC lacks any allegations that KKPC suffered a cognizable injury proximately

caused by a restriction in the supply of 4-ADPA caused by Defendants in October 2001 or later. In

the SAC, Plaintiff alleges that as a result of Defendants’ efforts to restrict supply of 4-ADPA to

KKPC, by “refus[ing] to sell KKPC any 4-ADPA and pressur[ing] other manufacturers of 4-ADPA

also not to sell 4-ADPA to KKPC, KKPC “turned to an independent producer of supply its 4-ADPA

needs (Sinorgchem).” (SAC ¶ 55.) Plaintiff does not include any factual allegations showing any

injury proximately caused by the shift in its source for 4-ADPA. To the contrary, Plaintiff appears

to have been able to locate an alterative supply for 4-ADPA and to have continued to produce 6PPD

for sale. Plaintiff has not pleaded otherwise – nor could it. In the RFAC, Plaintiff explicitly pleaded

that it “continued to competitively produce 6PPD using this alternative source of supply” (RFAC ¶

36). Because an “amended complaint may only allege other facts consistent with the challenged

pleading”, see Reddy v. Litton Indus., Inc., 912 F.2d 291, 297 (9th Cir. 1990), Plaintiff would clearly

be unable to plead facts consistent with its allegations in the RFAC that could establish that

Defendants efforts to restrict the supply of 4-ADPA to Plaintiff interrupted its ability to produce or

sell 6PPD.

It is evident to the Court that it would be futile to grant further leave to amend in connection

with the allegation that Defendants’ efforts to restrict the supply of 4-ADPA interrupted Plaintiff’s

ability to produce 6PPD or otherwise proximately caused antitrust injury. The Court had previously

identified this specific shortcoming when it considered Defendant’s motion to dismiss the RFAC 

(Docket No. 61 at 6:14-17), and has already given KKPC leave to amend once to attempt to cure this

deficiency. When pressed at the hearing on the instant Motion as to how any sourcing restriction

proximately caused antitrust injury, Plaintiff was unable to identify any theory of injury that resulted

directly from an interruption or restriction on its supply of 4-ADPA. (February 13, 2008 Hearing

Transcript at 19:16-25:2.) Instead, Plaintiff was only able to link the sourcing restriction into its

separate allegations that Defendants later harassed and threatened Plaintiff’s customers, explaining

that the sourcing restriction caused KKPC to turn to Sinorgchem for its supply of 4-ADPA, and that

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Defendants then “started to harass our customers saying your can’t do business with them because

they are sourcing from Sinorgchem.” (Id. at 20:21-22; accord id. at 22:17-20, 24:22-23.) But this is

not a theory of injury predicated upon an interruption of or decrease in its supply of 4-ADPA. 

Instead, it is a theory of injury caused by threats made to Plaintiff’s customers, for which

Defendants’ refusal to supply KKPC with 4-ADPA was at most a “but-for” cause. Moreover,

Plaintiff’s allegations in its RFAC and SAC make clear that the threats made to Plaintiff’s customers

regarding Plaintiff’s use of Sinorgchem-produced 4-ADPA (RFAC ¶¶ 39-40, SAC ¶¶ 51, 55) were

all patent-related communications that this Court has previously found constituted protected conduct

under the Noerr-Pennington immunity doctrine. (Docket No. 61 at 6:18-7:3.) Accordingly, Plaintiff

is not only unable to plead proximately-caused antitrust injury as a result of any restriction on 4-

ADPA supply caused by Defendants, but is also unable, because of Noerr-Pennington immunity, to

plead any downstream antitrust injury for which the restriction on 4-ADPA supply might be a “butfor” cause. Accordingly, the Court will dismiss this liability theory without leave to amend.

D. The FTAIA Does Not Bar Subject Matter Jurisdiction Over Plaintiff’s Claims.

 Defendants argues that even assuming Plaintiff could adequately allege the existence of

antitrust injury either: (1) before October 2001as a result of dilatory conduct in dissolving the KMI

joint venture; or (2) in October 2001or later resulting from restrictions on the supply of 4-ADPA to

KKPC, the FTAIA would bar subject matter jurisdiction over such assertions. The Court disagrees. 

As a threshold matter, the Court agrees with Defendants that the FTAIA framework applies

to Plaintiff’s allegations. Although the FTAIA parenthetically excludes “import trade and import

commerce” (15 U.S.C. § 6a) from its limitations on subject matter jurisdiction, the trade and

commerce that is scrutinized for purposes of this analysis is the conduct of the defendant, not of the

plaintiff. “The dispositive inquiry is whether the conduct of defendants, not plaintiffs, involves

‘import trade and commerce.” Turicentro, S.A. v. Am. Airlines Inc., 303 F.3d 293, 303 (3d Cir.

2002); see also Carpet Group Int’l v. Oriental Rug Imp. Ass’n, 227 F.3d 62, 70 (3d Cir. 2000). 

Here, the relevant alleged misconduct by the Defendants reflects no “involvement” in import trade

or commerce – rather, it simply reflects dilatory conduct in dissolving a joint venture and/or

restraints on foreign trade for 4-ADPA. Neither factual allegation constitutes “involvement” in

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import trade or commerce such that it would be removed from the ambit of the FTAIA. Cf. Carpet

Group, 227 F.3d at 72; Turicentro, 303 F.3d at 304. The FTAIA test must therefore be applied to

Plaintiff’s allegations to determine if there is subject matter jurisdiction.

However, as to the question of whether the FTAIA test is satisfied, Defendants have

overstated the scope of this Court’s prior ruling as to the effect of the FTAIA. Assuming Plaintiff

could adequately allege the existence of antitrust injury either (1) before October 2001as a result of

dilatory conduct in dissolving the KMI joint venture; or (2) in October 2001or later resulting from

restrictions on the supply of 4-ADPA to KKPC, it appears to the Court that such allegations would

meet the FTAIA test for subject matter jurisdiction. The FTAIA brings conduct involving trade or

commerce with foreign nations back within the scope of the Sherman Act where such conduct has a

“direct, substantial and reasonably foreseeable effect . . . on import trade or import commerce with

foreign nations . . .” 15 U.S.C. § 6a(1)(A). Here, where Plaintiff alleged that Defendants

specifically intended their actions to interference with KKPC’s ability to import 6PPD into the

United States, the FTAIA jurisdictional test would be satisfied had Plaintiff adequately alleged a

cognizable antitrust injury. The allegations involving dilatory conduct, and the allegations

involving restrictions on the supply of 4-ADPA, both involve conduct with a “direct, substantial and

reasonably foreseeable effect” on import commerce, and that effect would give rise to Plaintiff’s

injuries.

E. Plaintiffs Has Not Adequately Pleaded Its Antitrust Claims Premised Upon PostSeptember 2001 Communications By Defendants With Plaintiff’s Customers.

The only other allegations of injury suffered by KKPC from October 2001 onward concern

communications directed at Plaintiff’s customers. (SAC ¶¶ 48-54.) Defendants contend that these

remaining allegations fail to establish any Sherman Act claims for three reasons. First, Defendants

argue that Noerr-Pennington immunity shields the alleged conduct from liability. Second,

Defendants contend that Plaintiffs’ first and second causes of action (for conspiracy to restrain trade

under Section 1 and conspiracy to monopolize under Section 2) are infirm because Plaintiff has not

sufficiently alleged the threats were part of a conspiracy. Third, Defendants contend that Plaintiff’s

third cause of action (for attempted monopolization) must be dismissed because Plaintiff has not

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 Contrary to Defendants’ contentions (Mot. at 18. n. 27), the allegations of non-patent communications are not

merely conclusory or general allegations. The allegations in the SAC provides provide detail as to the timing and content

of such communications for a specific customer, Michelin. (SAC ¶¶ 50, 52, 53.) The Court finds that these allegations as

to Michelin are detailed enough to meet the Twombly standard.

7

 Although Plaintiff’s Sherman Act claims are not defeated in their entirety by Noerr-Pennington immunity, some

of the patent-related communications that Defendants are alleged to have engaged in with KKPC’s customers may well be

unactionable because of Noerr-Pennington immunity. The Court need not resolve this question today. To the extent it is

necessary, any determination as to which communications with customers fall within the scope of such immunity will await

the merits stage of the litigation.

11

adequately alleged that Flexsys had a dangerous probability of achieving monopoly power. 

The Court will address each of these arguments in turn.

1. Noerr-Pennington Immunity Does Not Bar Plaintiff’s Claims Premised Upon

Defendants’ Communications With Plaintiff’s Customers In Their Entirety.

Defendants contend that the Noerr-Pennington doctrine immunizes them from liability with

respect to the customer communications alleged in the SAC. The Court disagrees. Whereas

Plaintiffs’ RFAC alleged solely patent-related communications that constituted protected conduct

under the Noerr-Pennington immunity doctrine, Plaintiff’s SAC alleges additional communications

by Defendants to Plaintiff’s customers. Accepting the facts alleged in the SAC and all reasonable

inferences drawn therefrom, at least some of these communications were unrelated to enforcement of

patents and instead constituted threats to cut off supplies of 6PPD to KKPC’s customers and

solicitations to participate in a boycott of KKPC (SAC ¶¶ 49, 50, 52, 53.) Assuming such

allegations to be true (as this Court must at the pleading stage), such communications do not involve

petitioning the government and do not qualify for Noerr-Pennington immunity.6

The Court rejects Defendants’ argument that allegations of these non-patent communications

directly contradict the averments contained in Plaintiff’s earlier complaints. There is no

inconsistency created by allegations that, in addition to making patent-related communications that

might be subject to Noerr-Pennington scrutiny, Defendants made threats or solicitations unrelated to

patents that fall outside such immunity. (Compare RFAC ¶¶ 37-40 with SAC ¶¶ 48-54.)

Accordingly, the Court finds that Noerr-Pennington immunity does not require the dismissal

of Plaintiff’s Sherman Act claims premised upon Defendants’ communications with KKPC’s

customers.7

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2. Plaintiff’s Assertion That A Broader Conspiracy Continued Into 2005 Even

After Criminal Indictments, Fines, And Pleas Fail To Meet The Twombly

Standard.

Defendants allege that Plaintiff’s two conspiracy counts under the Sherman Act must be

dismissed because Plaintiff has failed to properly allege that the customer threats were part of a

conspiracy. In particular, Defendants contend that the SAC provides no plausible factual basis that

meets the Twombly standard to establish a conspiracy during the relevant time frame between

Flexsys and the identified co-conspirators, Bayer and Chemtura. Conspiracy is a necessary element

of both a Section 1 claim and a Section 2 conspiracy to monopolize claim. See Eichman v. Fotomat

Corp., 880 F.2d 149, 162 (9th Cir. 1989). 

The Court finds that the SAC does not meet the Twombly standard for establishing the

existence of a conspiracy in 2005 or later, the time frame during which the alleged customer

communications were made. Disregarding conclusory allegations, all of the factual allegations of

conspiracy found in the SAC predate 2002 (SAC ¶¶ 28(a)-(j)), but the only factual allegations

regarding threats or other communications directed at KKPC’s customers concern events that took

place in or after September 2005. (SAC ¶¶ 50-52). The SAC contains no factual allegations of any

post-2001 parallel conduct by Bayer or Chemtura in furtherance of the conspiracy. Moreover,

Plaintiff’s own allegations render it implausible that a continuing conspiracy extended past 2001,

given that Plaintiff has pleaded that two of the three conspirators had pleaded guilty before the

alleged threats to customers, and the third (Flexsys) was “turn[ing] over evidence against” those two

co-conspirators. (SAC ¶¶ 33, 35, 36.) Plaintiff’s contention in its opposition brief that a “different”

and “broader” conspiracy extended into 2005 and beyond is simply not found even in conclusory

fashion in the SAC, let alone supported by factual allegations in the SAC that meet the Twombly

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conspiracy (Opp. at 15:17-16:20) is misplaced. Based on the allegations found in the SAC, Plaintiff’s own allegations

concerning the behavior of the other two alleged co-conspirators renders it implausible that any conspiracy continued into

2005.

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standard. See Twombly, 127 S.Ct. at 1965-66.8

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3. Plaintiff Has Not Adequately Alleged That Flexsys Had Market Dominance Or

A Dangerous Probability Of Achieving Monopoly Power. 

 Defendants argue that Plaintiff’s Sherman Act claim for attempted monopolization should be

dismissed because Plaintiff has failed to establish that Flexsys has sufficient market power to have a

dangerous probability of achieving monopoly power. The Court agrees.

Plaintiff’s allegation regarding dangerous probability reads: “Given Flexsys’s dominance of

the U.S. 6PPD market, there was a dangerous probability that it would by its unlawful actions

achieve monopoly power in violation of Section 2 of th Sherman Act, 15 U.S.C. § 2.” (SAC ¶ 78.) 

This allegation consists merely of “labels and conclusions, and a formulaic recitation of the elements

of a cause of action” which “will not do.” Twombly, 127 S.Ct. at 1966. Although Plaintiff need not

necessarily quantify Flexsys’ market share with precision, Plaintiff must assert some facts in support

of its assertions of market power that suggest those assertions are plausible. Plaintiff has not done

so. Indeed, Plaintiff’s only concrete factual allegation regarding Flexsys’ market power cuts against

the conclusion that Flexsys enjoyed market power. Plaintiff alleged that “Flexsys’ attempts to raise

prices . . . failed because buyers sought out the lowest cost 4-ADPA and 6PPD regardless of source. 

Flexsys continued to face eroding prices and new competition from manufacturers based off-shore. 

(SAC ¶ 26.) 

Moreover, Plaintiff’s allegations that Flexsys’ threats to U.S. 6PPD customers caused

KKPC’s sales to decline (SAC ¶¶ 49-50) are insufficient to establish the dangerous probability

element. A drop in Plaintiff’s sales does not, by itself, establish that the reduction in sales was the

result of a Sherman Act antitrust violation. See Eichman, 880 F.2d at 1623.

F. Plaintiff’s State Law Claims.

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1. Plaintiff’s Cartwright Act Claim Must Be Dismissed.

Plaintiff’s failure to plead a cognizable Sherman Act claim requires dismissal of the fourth

cause of action under California’s Cartwright Act as well. See McGlinchy v. Shell Chem Co., 845

F.2d 802, 811 n.4 (9th Cir. 1988) (“We have recognized that Cartwright Act claims raise basically

the same issues as do Sherman Act claims. California state courts follow federal cases in deciding

claims under the Cartwright Act.”) (citations omitted). Plaintiff advances no argument as to how the

Cartwright Act claim can survive in the absence of antitrust injury with respect to 4-ADPA, in the

absence of sufficient allegations of conspiracy, and in the absence of sufficient allegations of market

power.

2. Plaintiff Has Adequately Pleaded A Section 17200 Claim.

Plaintiff has adequately pleaded a Section 17200 claim premised upon unfairness. An act

need not violate the antitrust laws to be actionable by a competitor as unfair, it can be actionable if it

“significantly threatens or harms competition.” Cel-Tech Communications, Inc. v. Los Angeles

Cellular Tel. Co., 20 Cal. 4th 163, 187 (1999). Unlike it in its RFAC, here Plaintiff has adequately

alleged that it suffered injury-in-fact, in the form of lost business and sales, as a result of

Defendant’s alleged threats and attempts to organize boycotts directed at its customers. The fact that

such injury may not be cognizable as antitrust injury does not render the Section 17200 claim infirm.

3. Plaintiff Has Adequately Pleaded A Tortious Interference With Prospective

Economic Advantage Claim.

Plaintiff has also adequately pleaded a tortious interference with prospective economic

advantage. Unlike it its RFAC, Plaintiff has adequately alleged that it suffered injury as a result of 

Defendant’s alleged threats and attempts to organize boycotts directed at its customers. The Court

therefore finds that the basis upon which it dismissed this state law claim during prior motion

practice is no longer applicable.

G. Plaintiff Has Not Alleged Sufficient Facts Against Akzo Nobel.

Plaintiff alleges no specific acts against the Akzo Nobel defendants other than to assert that

they “controlled and dominated” Flexsys’ rubber chemicals business and that they sold rubber

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chemicals in the United States. (SAC ¶¶ 3-4.) This “unadorned invocation of dominion and control

is simply not enough” to state a claim. In re Currency Fee Antitrust Litig., 265 F. Supp. 2d 385, 426

(S.D.N.Y. 2003). In order to overcome the presumption of separateness afforded to related

corporations, Plaintiff is required to plead more specific facts supporting its claims, not mere

conclusory allegations.

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CONCLUSION

For the foregoing reasons, the Court GRANTS IN PART AND DENIES IN PART

Defendant’s Motion as follows:

• The Court DISMISSES the first, second, third and fourth causes of action in the

Second Amended Complaint in their entirety. 

• The Court further DISMISSES Plaintiff’s fifth and sixth causes of action against

Defendants Akzo Nobel Chemical Int’l, B.V. and Akzo Nobel Chemicals, Inc.

• Plaintiff is granted leave to amend its allegations with respect to the deficiencies

identified in this Order, with the exception of Plaintiffs’ allegation of antitrust injury

resulting from a restriction in the supply of 4-ADPA caused by Defendants, for which

this Court has determined that further amendment would be futile. Plaintiff shall file

a Third Amended Complaint, if any, within twenty (20) days of entry of this Order. 

Because Plaintiff has previously been granted leave to amend to attempt to cure these

deficiencies, the Court will not be inclined to permit further leave beyond that

permitted by this Order.

• In all other respects, the Motion is denied.

IT IS SO ORDERED.

Dated: March 11, 2008 

MARTIN J. JENKINS

UNITED STATES DISTRICT JUDGE

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