Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-02728/USCOURTS-caed-2_04-cv-02728-5/pdf.json

Parties Involved:
John Bodrozic
Counter Defendant
Mike Carrington
Counter Defendant
Computer Methods International Corp
Counter Claimant
Hardin Construction Company, LLC
Counter Claimant
Meridian Project Systems, Inc
Counter Defendant
James Olsen
Counter Defendant

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

MERIDIAN PROJECT SYSTEMS,

INC.,

Plaintiff,

v. NO. CIV. S-04-2728 FCD DAD

MEMORANDUM AND ORDER

HARDIN CONSTRUCTION COMPANY,

LLC, and COMPUTER METHODS

INTERNATIONAL CORP., 

Defendants.

___________________________/

COMPUTER METHODS INTERNATIONAL

CORP., and HARDIN CONSTRUCTION

COMPANY, LLC, 

Counterclaimants,

v.

MERIDIAN PROJECT SYSTEMS,

INC., JAMES OLSEN, JOHN

BODROZIC, and MIKE CARRINGTON,

Counterdefendants.

_____________________________/

----oo0oo----

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Counterdefendants request the court to take judicial 1

notice of an industry survey relied upon by CMIC in the TACC. 

For the reasons set forth herein, the court denies this request. 

In the alternative, Meridian requests that this motion to dismiss

be converted into a motion for summary judgment pursuant to Fed.

R. Civ. P. 12(b). Where evidence outside the pleadings is

presented as part of a Rule 12(b)(6) motion, the court has

discretion either to consider or reject such evidence. Keams v.

Tempe Tech. Inst., 110 F.3d 44, 46 (9th Cir. 1996). 

Consideration of and reliance on such evidence will convert the

motion to dismiss into a motion for summary judgment. Id. 

Conversion is generally disfavored if the motion comes quickly

after the complaint was filed and discovery is in its infancy. 

Rubert-Torres v. Hosp. San Pablo, Inc., 205 F.3d 472, 475 (1st

Cir. 2000). Thus, because this motion was filed shortly after

CMIC’s TACC and because discovery is in its infancy, this court

declines to convert the motion to dismiss into a motion for

summary judgment. 

Defendant and counterclaimant Hardin is not a party to 2

the Second through Fourth Counterclaims and has not filed an

opposition to counterdefendants’ motion to dismiss.

Because oral argument will not be of material 3

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

E.D. Cal. L. R. 78-230(h).

2

This matter is before the court on counterdefendants’

Meridian Project Systems, Inc. (“Meridian”) and John Bodrozic’s

(“Bodrozic”) motion to dismiss counterclaimant Computer Methods

International Corp.’s (“CMIC”) second and third counterclaims for

relief asserted in its Third Amended Answer and Counterclaim

(“TACC”), pursuant to Fed. R. Civ. P. 12(b)(6). CMIC opposes 1

the motion. For the reasons set forth below, 2 3

counterdefendants’ motion is DENIED. 

BACKGROUND

Meridian is a software company that provides project

management software for large real estate projects and other

capital-intensive construction initiatives. (First Amended

Complaint (“FAC”) ¶ 9). Meridian’s “flagship” product is Prolog

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Manager (“Prolog”), a project management software package that

automates all aspects of the construction process, from project

design to closeout. (Id.)

Counterclaimant Hardin Construction Company, LLC (“Hardin”)

is a large construction company in Georgia and long-time customer

of Meridian for its Prolog product. (Id. ¶ 11). Counterclaimant

CMIC is a software company based in Canada that provides software

products and software consulting. (Id. ¶ 14). 

Meridian alleges that, beginning in late 2000 or early 2001,

Hardin and CMIC initiated a scheme to reverse engineer Prolog for

the purpose of developing a competing project management software

solution that CMIC could combine with its existing financial and

operational software. (Id. ¶ 16). As part of this scheme, CMIC

allegedly sent a programmer to Hardin’s facilities on numerous

occasions to view screen shots of Prolog; CMIC then reverse

engineered and analyzed the functions, features, screens,

architecture, logic and operation of Prolog, in violation of

Meridian’s standard End User License Agreement. (Id.) Thereby,

Hardin and CMIC allegedly developed a competing project

management software product, called CMIC Projects, that has the

same overall look and feel as Prolog, and among other

similarities, copies many of the features and functions of

Prolog. (Id. ¶ 17). Meridian alleges that Hardin and CMIC now

are targeting Meridian customers to induce them to switch from

Prolog to CMIC Projects. (Id. ¶ 18).

On November 29, 2004, Meridian filed a complaint against

CMIC and Hardin in the Superior Court of Sacramento County. CMIC

and Hardin subsequently removed the action to this court. 

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Meridian asserts eight causes of action for breach of contract

against CMIC, breach of contract against Hardin, breach of the

implied covenant of good faith and fair dealing, fraud,

interference with contractual relations, intentional interference

with prospective economic advantage, unfair competition, and

copyright infringement. (Id. ¶¶ 20-68). 

On February 3, 2005, CMIC and Hardin filed an Answer and

Counterclaims, which added three Meridian officers, Olsen,

Bodrozic and Carrington, as parties to the lawsuit. The next

day, CMIC and Hardin filed an Amended Answer and Counterclaims.

On February 28, 2005, Meridian moved to dismiss the counterclaims

in the Amended Answer and Counterclaims. In response, CMIC and

Hardin filed a Second Amended Answer and Counterclaims (“SACC”)

on March 11, 2005. 

In the SACC, Hardin and CMIC denied that they infringed

Meridian’s copyright or created a derivative work of any of

Meridian’s products. (SACC ¶ 97). In addition, Hardin and CMIC

jointly asserted a counterclaim for declaratory judgment under 28

U.S.C. §§ 2201 and 2202 as to the extent of Meridian’s rights

under the Copyright Act, and that defendants did not infringe the

copyright (“First Counterclaim”). 

CMIC individually asserted three counterclaims against

Meridian, Olsen, Bodrozic, and Carrington for attempted

monopolization, interference with prospective economic advantage,

and unfair competition under California Business & Professions

Code § 17200 et seq. (Id. ¶¶ 99-113).

///// 

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These counterclaims were based on the following allegations: 

Meridian invited CMIC’s potential customers to a meeting on

November 30, 2004, in Chicago, Illinois. (Id. ¶¶ 103-104). 

Present at the meeting were Bodrozic, Meridian’s President, and

Carrington, Meridian’s Senior Vice President for Global Sales. 

(Id. ¶ 104). At the meeting, Bodrozic allegedly notified the

potential customers of Meridian’s lawsuit against CMIC and

Hardin, stated that CMIC had infringed Meridian’s copyright, and

impliedly threatened the customers with copyright infringement

lawsuits if they purchased software from CMIC. (Id. ¶ 104). 

On April 1, 2005, counterdefendants filed a motion to

dismiss CMIC’s counterclaims. Counterdefendants contended that

all three counterclaims failed to meet the applicable pleading

requirement in Federal Rule of Civil Procedure 9(b); the three

counterclaims were barred by the Noerr-Pennington Doctrine; the

state law claims were barred by the litigation privilege in

California Civil Code § 47(b); CMIC failed to plead the necessary

elements of the attempted monopolization claim; the unfair

competition claim failed because it was based on conduct outside

of California; and CMIC failed to state a claim against

counterdefendants Olsen and Carrington. On July 6, this court

granted counterdefendants’ motion to dismiss in part and denied

it in part. This court granted CMIC leave to amend. 

On August 2, 2005, CMIC and Hardin filed a Third Amended

Answer and Counterclaims (“TACC”). Hardin and CMIC again jointly

asserted a counterclaim for declaratory judgment under 28 U.S.C.

§§ 2201 and 2202. (TACC ¶ 93). CMIC individually asserted two

counterclaims against Bodrozic and Meridian, for attempted

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monopolization and interference with prospective economic

advantage (“Second and Third Counterclaims”) (Id. ¶¶ 97-130). 

On August 19, 2005, counterdefendants Meridian and Bodrozic

(“Meridian”) filed the instant motion to dismiss the Second and

Third Counterclaims (“MTD”). Meridian asserts that the few new

allegations in the complaint do not remedy CMIC’s failure to

plead the necessary elements of an attempted monopolization

claim. Moreover, Meridian asserts that CMIC fails to state a

claim for tortious interference with prospective economic

advantage. 

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. 

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.

1986).

Nevertheless, it is inappropriate to assume that plaintiff

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

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have violated the . . . laws in ways that have not been alleged.” 

Associated Gen. Contractors of Cal., Inc. v. Cal. 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. 

See Mir v. Little Co. Of Mary Hosp., 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. Second Counterclaim for Attempted Monopolization

According to Meridian, the court must dismiss CMIC’s

attempted monopolization claim because CMIC does not sufficiently

allege the elements of such a claim. In order to sufficiently

plead a claim for attempted monopolization, CMIC must allege: 1)

defendant’s specific intent to control prices or destroy

competition; 2) defendant’s predatory or anti-competitive conduct

directed at accomplishing that purpose; 3) a dangerous

probability of defendant achieving monopoly power; and 4) causal

antitrust injury to competition. Rebel Oil Co. v. Atl. Richfield

Co., 51 F.3d 1421, 1433 (9th Cir. 1995). Specifically, Meridian

contends that CMIC does not sufficiently allege the elements of

dangerous probability of achieving monopoly power and causal

antitrust injury.

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A. Dangerous Probability of Achieving 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). 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. 

In its Second Amended Answer and Counterclaim (“SACC”), CMIC

alleged that Meridian and CMIC sell project management software

to architects, engineers, and contractors (“AECs”) in the United

States and Canada. (SACC ¶ 109). CMIC further alleged that

Meridian’s acts create a dangerous probability of it achieving

monopoly power in the relevant market which is the market for

project management software for AECs in the United States and

Canada. (SACC ¶ 110). 

In response to Meridian’s Motion to Dismiss the SACC, this

court noted in its order that “CMIC does define the relevant

market.” (Order, entered July 6, 2005, at 17). The Third

Amended Answer and Counterclaim (“TACC”) alleges the same

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This is the percentage required for actual 4

monopolization claims, not attempted monopolization claims. See

Rebel Oil, 51 F.3d at 1438 (stating that minimum showing of

market share is lower for attempt cases than actual

monopolization cases). 

The Rebel Oil court actually stated that for an 5

attempted monopolization claim, most cases hold a market share of

30% presumptively insufficient to establish the power to control

price. Id. at 1438 (emphasis added). 

9

relevant market that this court has already found sufficient. 

Thus, CMIC has satisfied this prong of its attempted

monopolization claim.

2. Pleading a Dominant Share of the Market 

Both CMIC and Meridian have engaged in percentage games

regarding the amount of market power necessary to show attempted

monopolization. Meridian asserts that “[c]ourts generally

require a 65% market share to establish a prima facie case of

market power.” (MTD at 8); Image Technical Servs., Inc. v.

Eastman Kodak Co., 125 F.3d 1195, 1206 (9th Cir. 1995). This 4

blanket assertion has no application to the facts in this case. 

CMIC argues that the Ninth Circuit in Rebel Oil has “noted that

allegations of 30% market share could be sufficient.” (Opp’n to 5

MTD, filed September 23, 2005, at 9 (“Opp’n”)). This bare

conclusion is unsupported by Rebel Oil. 

The Ninth Circuit, however, 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

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The court addressed this factor at the summary judgment 6

level.

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the capacity of existing competitors to expand output” when

considering market power for attempt-to-monopolize claims. Id.

The court in Rebel Oil stated that 30% market share is

presumptively insufficient to establish the power to control

price. Id. However, when a lower market share percentage is 6

combined with other market characteristics such as high entry

barriers and/or anticompetitive conduct, courts have found as low

as a 20% market share sufficient to show attempted

monopolization. See Twin City Sportservice, Inc. v. Charles O.

Finley & Co., 676 F.2d 1291, 1298, 1309 (9th Cir. 1982) (finding

24% market share and attempted monopolization on basis of

anticompetitive conduct); Dimmitt Agri Indus., Inc. v. CPC Int’l,

Inc., 679 F.2d 516, 533 (5th Cir. 1982) (stating that market

shares of 20% may raise attempted monopolization liability,

depending on other characteristics of market); Lektro-Vend Corp.

v. Vendo Corp., 403 F. Supp. 527, 534 (N.D. Ill. 1975) (finding

company with 20% market power liable for attempt to monopolize

because it extracted broad noncompetition agreements). Thus,

CMIC’s allegation of 37% market share may be adequate if combined

with allegations of high entry barriers or anticompetitive

conduct.

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. CMIC alleges in the TACC that: “there

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are high entry barriers to the market for project management

software for [AECs]”; “there are limited numbers of [AECs] who

use project management software, and the software must be

designed for the unique and complex needs of each user”; and

“development of project management software for [AECs] requires

substantial investment, research, and development.” (TACC ¶

112). These allegations are sufficient to plead high entry

barriers because these facts allege high entry costs for new

participants entering the market as well as factors that would

deter entry into the market. 

The presence of an expansion barrier is another factor to

consider in a market power analysis. Rebel Oil, 51 F.3d at 1439. 

The ability to control output and prices depends largely on the

ability of existing firms to quickly increase their own output in

response to a contraction by the defendant. Id. at 1441. A

competitor may not be able to increase its output if there are

barriers to expansion, indicating that a defendant possesses the

market power to control marketwide output. Id. CMIC alleges

that “existing competitors in the market have limited capacity to

expand their output” and that “in an attempt to increase its

market share by taking customers from other software providers,

Meridian . . . has provided . . . an aggressive incentive by

offering license upgrade credits.” (TACC ¶ 113). These

allegations are sufficient to plead expansion barriers to

competitive market participants.

In its TACC, CMIC alleges a 37% market share as well as high

entry and expansion barriers. Accordingly, these allegations are

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sufficient to plead that Meridian owns a dominant share of the

market for purposes of attempted monopolization.

Meridian asserts that CMIC’s market share allegations do not

even purport to measure the market defined in the complaint as

“the market for project management software for [AECs] in the

United States and Canada.” (MTD at 9). Rather, according to

Meridian, CMIC highlights only a slice of the relevant market,

that of revenues from sales to general contractors. (Id. at 10). 

CMIC alleges that “based on claims on Meridian’s website and

surveys for the construction industry, [it] is informed and

believes that Meridian has at least 37% of the market for project

management software for [AECs] in the United States and Canada.” 

(TACC ¶ 111). At this juncture, it is not up to the court to

determine the accuracy of such statement. This court must accept

as true CMIC’s factual allegations and reasonable inferences that

can be drawn from them. Shell v. Shell Oil Co., 165 F. Supp. 2d

1096, 1105 (C.D. Cal. 2001). 

Meridian further asserts that CMIC’s allegation of a 37%

market share does not accurately reflect the document on which

the allegation is based. (MTD at 10). Meridian asks this court

to take judicial notice of the Construction Financial Management

Association’s 2004 Information Technological Survey for the

Construction Industry (“CFMA Survey”) for the “limited purpose of

assessing what the text of the document states, so as to enable

the Court to inquire whether CMIC’s characterization of the

document may be accepted as valid” for a 12(b)(6) motion to

dismiss. (Req. for Judicial Notice, filed Aug. 19, 2005, at 1);

(MTD at 10-11). This court declines to do so for two reasons. 

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First, a survey is not the proper subject for judicial notice

because its results are reasonably subject to dispute. See

Sharon P. v. Arman, Ltd., 21 Cal. 4th 1181, 1192 n.3 (1999)

(declining to take judicial notice of United States Department of

Justice statistical data because it is reasonably subject to

dispute); Gerken v. Fair Political Practices Com., 6 Cal. 4th

707, 724 n.3 (1993) (holding that exit poll survey not proper

subject for judicial notice because it can be inaccurate). 

Second, CMIC asserts that its allegations for attempted

monopolization are “based on claims on Meridian’s website and

surveys for the construction industry.” (TACC ¶ 111). CMIC does

not specifically reference the CFMA Survey in the TACC. However,

even if CMIC had relied on the CFMA Survey, this court could not

consider Meridian’s exhibit on a motion to dismiss. Thus,

Meridian’s refutation based on the survey provides no basis for

dismissal.

3. Pleading Significant Barriers

The third pleading requirement is the demonstration of

significant barriers to entry and incapacity to increase output

in the shortrun. 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). As previously discussed within the context of the

dominant market share, CMIC has alleged both entry and output 

barriers. (TACC ¶¶ 112-13). These allegations are sufficient to

satisfy the third pleading requirement. 

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Accordingly, because CMIC has properly plead a relevant

market, a dominant share of the market, and significant barriers,

it has sufficiently alleged a dangerous probability of achieving

monopoly power.

B. Causal Antitrust Injury

Meridian asserts that CMIC fails to plead causal antitrust

injury because the TACC does not allege that Meridian took any

actions or measures addressed to any competitor other than CMIC. 

(MTD at 12). Meridian contends that CMIC “must demonstrate that

[Meridian’s] conduct intended to or did have some anticompetitive

effect beyond [its] own loss of business or the market’s loss of

a competitor.” (MTD at 12) (emphasis added); see Cal. Computer

Prods., Inc. v. Int’l Bus. Mach. Corp., 613 F.2d 727, 732 (9th

Cir. 1979). 

Here, CMIC need only plead antitrust injury, which requires

that it 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). CMIC alleges in the TACC that as a result

of Meridian’s actions, it “has suffered antitrust injury, has

suffered the disruption of its relationships with [customers] and

has lost profits and good will.” (TACC ¶ 115). Moreover, CMIC

alleges that “Meridian’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.” (TACC ¶ 116). These allegations are

sufficient to plead causal antitrust injury.

///// 

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For the foregoing reasons, CMIC has sufficiently stated

facts to support a claim against Meridian for attempted

monopolization. Thus, Meridian’s motion to dismiss CMIC’s

attempted monopolization claim is DENIED. 

II. Third Counterclaim for Interference with Prospective

Economic Advantage

According to Meridian, the court must dismiss CMIC’s

tortious interference with prospective economic advantage claim

because CMIC must plead and prove that Meridian’s alleged

interference was independently wrongful by some measure beyond

the fact of the interference itself. (MTD at 13); Della Penna v.

Toyota Motor Sales, USA, Inc., 11 Cal. 4th 376, 393 (1995). 

Meridian contends that the only allegedly wrongful act is the

“implied threat” to the Walsh, O’Neil, and McCarthy companies

that Meridian would sue them if they licensed project management

software from CMIC. (MTD at 13). Meridian further asserts that

courts have rejected, as a matter of law, attempts to derive an

“implied threat” of litigation from allegations much stronger

than those proffered by CMIC. (MTD at 14). 

In contrast, CMIC asserts that an implied threat is not an

element in a claim for interference with prospective economic

advantage. (Opp’n at 7); Della Penna, 11 Cal. 4th at 389. CMIC

agrees that a party pursuing a claim for interference must allege

that the interference was independently wrongful. CMIC argues,

however, that Meridian’s interference was independently wrongful

because the false statement to CMIC’s potential customers, that

CMIC violated Meridian’s copyright, was fraudulent. (Opp’n at 

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8); (see also TACC ¶ 124) (stating that Bodrozic’s statements

were false . . . and Bodrozic knew his statements were false).

This court agrees with CMIC. In Visto Corp. v. Sproqit

Techs., Inc., 360 F. Supp. 2d 1064, 1067 (N.D. Cal. 2005), the

court described independently wrongful conduct:

[A]lthough the California courts have not provided

a definitive meaning of wrongful conduct . . . the

California Court of Appeal acknowledged that

various courts have defined that phrase as

follows: (1) conduct that is independently

tortious or a restraint of trade; (2) conduct

violating a statute, regulation, a recognized rule

of common law, or an established standard of a

trade or profession, or (3) conduct that is

illegal, unfair, or immoral according to common

understandings of society.

(citations omitted). Given the above standard, CMIC has

alleged the element of independently wrongful conduct

because it has alleged that Meridian’s claims of copyright

infringement were false. Id.; (TACC ¶ 124).

Therefore, CMIC has sufficiently stated facts to

support a claim against Meridian for alleged interference

with prospective economic advantage. Meridian’s motion to

dismiss CMIC’s claim for alleged interference with

prospective economic advantage is thus DENIED.

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CONCLUSION

For the reasons set forth above, Meridian’s motion to

dismiss the Second Counterclaim for attempted monopolization

and the Third Counterclaim for interference with prospective

economic advantage is DENIED. 

IT IS SO ORDERED.

DATED: October 14, 2005

/s/ Frank C. Damrell Jr. 

FRANK C. DAMRELL, Jr.

UNITED STATES DISTRICT JUDGE

Case 2:04-cv-02728-FCD-DAD Document 60 Filed 10/14/05 Page 17 of 17