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NOT FOR PUBLICATION 

UNITED STATES DISTRICT COURT 

DISTRICT OF NEW JERSEY 

__________________________________________

 

CRESTRON ELECTRONICS, INC., 

 Plaintiff, 

 

 v. 

 

CYBER SOUND & SECURITY INC., 

 

Defendant. 

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Hon. Faith S. Hochberg, U.S.D.J. 

Civil Case No. 11-3492 (FSH)(MAH)

OPINION

Date: February 9, 2012 

 

HOCHBERG, District Judge; 

This matter comes before the Court upon Plaintiff and Counterclaim-Defendant Crestron 

Electronics, Inc.’s (“Crestron”) motion to dismiss Defendant and Counterclaim-Plaintiff Cyber 

Sound & Security Inc.’s (“Cyber Sound”) Amended Counterclaim pursuant to Fed. R. Civ. P. 

12(b)(6) [Docket # 32]. The Court has reviewed the submissions of the parties and considered 

the motion on the papers in accordance with Fed. R. Civ. P. 78. 

I. FACTUAL BACKGROUND1

Counterclaim-Plaintiff Cyber Sound, an Arizona corporation, is a dealer, integrator, and 

installer of high-end automation and control products for the residential market. These products 

control residential systems including audio/video, lighting, heating and air-conditioning. Cyber 

Sound’s clients include homeowners, home builders, and architects. Counterclaim-Defendant 

Crestron, a New Jersey corporation, is a manufacturer of residential and commercial control and 

 

1

 The facts set forth here are drawn from Counterclaim. At the motion to dismiss stage, this 

Court accepts these facts as true. See In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 

1426 (3d Cir. 1997).

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automation systems. Cyber Sound purchases components from manufacturers such as Crestron 

and installs automation and control systems in its customers’ homes. Cyber Sound is an 

authorized dealer of several manufacturers and, from May 2000 through April 2011, was an 

authorized dealer of Crestron products pursuant to a non-exclusive dealer agreement (the 

“Agreement”). 

Crestron terminated the Agreement on April 29, 2011, following a nearly two-year period 

during which Crestron sought to pressure Cyber Sound into dropping its distribution of products 

manufactured by Savant, a direct competitor of Crestron’s. Cyber Sound alleges that in August 

2009, after it began selling and installing Savant products, Crestron executives threatened to 

terminate the Agreement unless Cyber Sound ceased its distribution of Savant products. Cyber 

Sound ceded to this demand and dropped Savant products because Crestron was the largest 

supplier in the market and Cyber Sound had installed hundreds of Crestron systems, which it 

wanted to continue to service. One month later, Cyber Sound began selling Savant products 

again after being informed by Crestron that after receiving bad publicity regarding its demands 

that its dealers drop Savant, it no longer objected to Cyber Sound offering Savant products. 

On year later, on September 5, 2010, Crestron informed Cyber Sound that unless it 

ceased offering Savant products, Crestron “would work together with a band of local Crestron 

dealers to beat Cyber Sound on any jobs that Cyber Sound might pursue that did not involve 

Crestron equipment.” Am. Countercl. ¶ 17. Crestron then contacted several Cyber Sound 

customers directly and attempted to divert their business to other Crestron dealers. When 

confronted, Crestron stated that it demanded all of Cyber Sound’s business or none, to which 

Cyber Sound responded “that it would be ‘none then.’” Id. ¶ 18. Crestron immediately 

contacted local Arizona dealers to inform them that it had dropped Cyber Sound as a dealer and 

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also contacted Cyber Sound customers to tell them that because Cyber Sound had been dropped 

as a dealer it could no longer service those customers’ installed Crestron systems. 

At Cyber Sound’s request, Crestron then agreed that Cyber Sound could remain a 

Crestron dealer in order to continue servicing customers with installed Crestron systems, but 

stated that it would do everything possible to compete with Cyber Sound on new installations 

that did not involve Crestron products. As a result of this conflict and “reliability issues” with 

Crestron products, Cyber Sound began promoting Savant more actively for high-end residential 

sales, though it continued to offer Crestron products. 

Crestron finally terminated the Agreement on April 29, 2011 following the publication in 

a trade magazine of an interview with Cyber Sound’s President, in which he made several 

positive comments about Savant products. On June 16, 2011, Crestron filed its suit against 

Cyber Sound and on July 21, 2011, demanded that Cyber Sound cease providing technical 

assistance to its customers with installed Crestron systems. Cyber Sound then arranged for 

another Crestron dealer to service Cyber Sound’s Crestron customers, but Crestron threatened to 

block that dealer from providing such service “[i]n an attempt to crush Cyber Sound and destroy 

[its] good will.” Id. ¶ 23. 

Cyber Sound claims that it has lost customers, and will continue to lose customers, due to 

its inability to service their installed Crestron systems. Cyber Sound alleges that Crestron caused 

this harm by: informing the public that Cyber Sound cannot service its customers with installed 

Crestron systems; threatening Cyber Sound with substantial penalties if it uses the customerspecific reprogrammed software to service a customer; and intimidating authorized Crestron 

dealers and programmers from dealing with Cyber Sound in connection with servicing its 

customers. 

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Crestron now moves to dismiss Cyber Sound’s counterclaims for: Violation of the 

Sherman Act, 15 U.S.C. § 1 (Count I); Violation of the Sherman Act, 15 U.S.C. § 2 (Count II); 

Violation of the Clayton Act, 15 U.S.C. § 14 (Count III); Violation of the Arizona Antitrust Act, 

§§ 44-1401 et seq. (Count IV); Interference with Contract (Count V); Interference with 

Prospective Economic Advantage (Count VI); Defamation (Count VII); and Violation of the 

Lanham Act, 15 U.S.C. § 1125(a) (Count VIII). 

II. PROCEDURAL BACKGROUND 

Crestron filed the original Complaint on June 16, 2011 and the First Amended Complaint 

on June 20, 2011. Cyber Sound filed its Answer and Counterclaim on August 16, 2011. 

Crestron filed a motion to dismiss the Counterclaim on September 9, 2011. That motion was 

dismissed as moot after Cyber Sound filed an Amended Answer and Counterclaim on October 3, 

2011. Crestron then filed the motion to dismiss that is currently before the Court. 

III. STANDARD OF REVIEW 

“To survive a motion to dismiss, a [counterclaim] must contain sufficient factual matter, 

accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 

U.S. 662, 127 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 

(2007)); see also Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (“[S]tating 

. . . a claim requires a [counterclaim] with enough factual matter (taken as true) to suggest the 

required element. This does not impose a probability requirement at the pleading stage, but 

instead simply calls for enough facts to raise a reasonable expectation that discovery will reveal 

evidence of the necessary element.”) (internal quotations omitted). 

When considering a motion to dismiss under Iqbal, the Court must conduct a two-part 

analysis. “First, the factual and legal elements of a claim should be separated. The District Court 

must accept all of the [counterclaim’s] well-pleaded facts as true, but may disregard any legal 

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conclusions. Second, a District Court must then determine whether the facts alleged in the 

[counterclaim] are sufficient to show that the plaintiff has a plausible claim for relief.” Fowler v. 

UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009) (internal citations and quotations 

omitted). “A pleading that offers labels and conclusions or a formulaic recitation of the elements 

of a cause of action will not do. Nor does a [counterclaim] suffice if it tenders naked assertions 

devoid of further factual enhancement.” Iqbal, 129 S. Ct. at 1949 (internal quotations and 

alterations omitted). 

IV. DISCUSSION 

A. Violation of the Sherman Act § 1 

Section 1 of the Sherman Act declares to be illegal “[e]very contract, combination in the 

form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the Several 

States, or with foreign nations.” 15 U.S.C. § 1. “To establish a section 1 violation for 

unreasonable restraint of trade, a plaintiff must prove (1) concerted action by the defendants; (2) 

that produced anti-competitive effects within the relevant product and geographic markets; (3) 

that the concerted action was illegal; and (4) that the plaintiff was injured as a proximate result of 

the concerted action.” Queen City Pizza, Inc. v. Domino’s Pizza Inc., 124 F.3d 430, 442 (1997). 

Crestron argues that Cyber Sound has not alleged facts sufficient to satisfy these elements. 

1. Concerted Action

To establish liability under section 1, a plaintiff must demonstrate that the challenged 

practice imposed an unreasonable restraint on trade. In re Ins. Brokerage Antitrust Litig., 618 

F.3d 300, 315 (3d Cir. 2010). The illegality of the restraint may be demonstrated under the per 

se standard or under a rule of reason analysis. Id. at 315-16. The per se standard applies to some 

practices whose anticompetitive effect is presumed based on judicial experience. Id. at 316; see 

also United States v. Brown Univ., 5 F.3d 658, 670 (3d Cir. 1993) (“Per se rules of illegality are 

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judicial constructs and are based in large part on economic predictions that certain types of 

activity will more often than not unreasonably restrain competition.”) (citations omitted). Cyber 

Sound does not argue that Crestron’s actions constitute a per se violation of the antitrust laws, 

therefore, its claims will be considered under a rule of reason analysis. “Proving a section 1 

claim by this approach requires the plaintiff to show that the defendant's conduct had an 

‘adverse, anticompetitive effect within the relevant product market.’” Franco v. Conn. Gen. Life 

Ins., No. 07-6039(SRC)(PS), 2011 WL 4448908, at *27 (D.N.J. Sep. 23, 2011) (quoting Gordon 

v. Lewistown Hosp., 423 F.3d 184, 210 (3d Cir. 2005)). 

According to Cyber Sound, the “concerted action” by Crestron underlying this § 1 claim 

is the existence of “exclusionary agreements” that Crestron entered into with “Cyber Sound and 

other Crestron dealers for the purpose of excluding competition in the Market . . . by precluding 

[them] . . . from handling” Savant products. Am. Countercl. ¶ 38. Cyber Sound further alleges 

that Crestron “used its dominant power in the market to prevent Cyber Sound from servicing its 

existing and prospective customers who have installed systems with Crestron products.” Id. ¶ 

39. The “exclusionary agreements” that Cyber Sound refers to are the dealer agreements 

between Crestron and its authorized dealers. Cyber Sound, itself, was party to such an 

agreement with Crestron for over ten years. It is undisputed that Crestron’s dealer agreements 

are expressly non-exclusive and permit dealers to sell products manufactured by Crestron’s 

competitors such as Savant. Based on this non-exclusivity, Crestron contends that Cyber 

Sound’s allegation of concerted action in restraint of trade fails. 

Cyber Sound argues that despite the non-exclusive language in these dealer agreements, 

Crestron threatens to terminate dealers who “defy Crestron’s unwritten, but manifest rule of 

exclusivity.” Opp. Br. 4. Crestron points out that, because the dealer agreements are nonCase 2:11-cv-03492-FSH-PS Document 53 Filed 02/09/12 Page 6 of 23 PageID: 926
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exclusive, Cyber Sound’s allegations regarding Crestron’s anticompetitive actions towards its 

dealers necessarily implicate unilateral, as opposed to concerted action. 

The Third Circuit has held that “unilateral activity by a defendant, no matter the 

motivation, cannot give rise to a section 1 violation.” Cosmetic Gallery, Inc. v. Schoeneman 

Corp., 495 F.3d 46, 55 (3d Cir. 2007) (internal quotations and alterations omitted); see also In re 

Baby Food Antitrust Litig., 155 F.3d 112, 117 (3d Cir. 1999) (“The existence of an agreement is 

the hallmark of a Section 1 claim. Liability is necessarily based on some form of concerted 

action.”) (internal citation and quotation omitted). Cyber Sound neither responded to this 

argument nor cited any case law supporting its position that Crestron’s actions satisfy the 

concerted action requirement. Cyber Sound has failed to allege facts (take as true) sufficient to 

demonstrate any concerted action involving Crestron. Therefore, Cyber Sound’s Sherman Act § 

1 claim will be dismissed. 

2. Relevant Product Market

Crestron argues that Cyber Sound’s Sherman Act § 1 claim (as well as the Sherman Act § 

2 and the Clayton Act claims) should be dismissed because Cyber Sound fails to allege 

anticompetitive effects within a properly defined relevant product market. Cyber Sound has the 

burden of defining the relevant market. Queen City Pizza, 124 F.3d at 436. “The outer 

boundaries of a product market are determined by the reasonable interchangeability of use or 

cross-elasticity of demand between the product itself and substitutes for it.” Id. (internal 

quotations omitted). “Where the plaintiff fails to define its proposed relevant market with 

reference to the rule of reasonable interchangeability and cross-elasticity of demand, or alleges a 

proposed relevant market that clearly does not encompass all interchangeable substitute products 

even when all factual inferences are granted in plaintiff's favor, the relevant market is legally 

insufficient and a motion to dismiss may be granted.” Id. “Interchangeability implies that one 

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product is roughly equivalent to another for the use to which it is put; while there may be some 

degree of preference for the one over the other, either would work effectively.” Id. at 437 

(internal quotations omitted). Cross-elasticity of demand between products means that “the rise 

in the price of a good within a relevant product market would tend to create a greater demand for 

other like goods in that market.” Tunis Bros. Co. v. Ford Motor Co., 952 F.2d 715, 722 (3d Cir. 

1991). 

In its Counterclaim, Cyber Sound defines the relevant market as “the sale and distribution 

of high-end residential automation and control systems,” Am. Countercl. ¶ 33, defining “highend” systems as those “cost[ing] the dealer twenty five thousand dollars or more in 

manufacturer’s equipment.” Id. ¶ 8. Cyber Sound defines the geographic market as the United 

States, with Arizona as a relevant submarket. Id. ¶¶ 34-35. Cyber Sound alleges, on information 

and belief, that Crestron has an 80% market share in this market for high-end residential systems. 

Id. ¶ 8. 

Crestron argues that Cyber Sound’s failure to refer to the rule of interchangeability or 

cross-elasticity of demand is an independent basis on which to dismiss each of the anti-trust 

claims (Counts I-IV). Specifically, Crestron argues that Cyber Sound fails to allege a relevant 

market “that clearly encompasses all interchangeable substitute products,” Graco, Inc. v. PMC 

Global, Inc., No. 08-1304, 2009 WL 904010, at *32 (D.N.J. Mar. 31, 2009), because it does not 

allege which products or components that make up these control systems are interchangeable 

with one another functionally and/or economically. Cyber Sound contends that its description of 

the relevant market along with its allegation that Savant products directly compete with Crestron 

products, Am. Countercl. ¶ 15, is sufficient and that it is not necessary to allege that specific 

products within the market of high-end residential control systems are interchangeable on a 

product by product basis. With respect to the price boundary of the relevant market alleged by 

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Cyber Sound, Crestron argues that the $25,000 threshold is arbitrary and that Cyber Sound has 

failed to allege that systems costing dealers less than that amount do not compete with systems in 

the proposed relevant market. 

The Court agrees with Crestron that Cyber Sound fails to sufficiently allege a relevant 

product market. “As pled, [Cyber Sound] does not define its proposed relevant market with 

reference to the rule of reasonable interchangeability and cross-elasticity of demand nor does it 

allege a proposed relevant market, as pled, that clearly encompasses all interchangeable 

substitute products.” Graco, 2009 WL 904010, at *32. Cyber Sound fails to allege which 

components of these systems are interchangeable and also fails to allege that the overall systems 

are interchangeable. Cyber Sound does not allege that Crestron and its competitors such as 

Savant, manufacture and sell automation and control systems off the shelf. In fact, the 

Counterclaim clearly alleges that, as the dealer, Cyber Sound, itself, designs these systems by 

“select[ing] among components offered by various manufacturers depending on the nature of the 

component, its cost, its quality, and its ease of installation and maintenance, among other 

factors.” Am. Countercl. ¶ 4. Therefore, the interchangeability of these components produced 

by different manufacturers is vital to defining the relevant product market. 

Additionally, Cyber Sound has not pled any facts supporting its price-based market 

definition, in that it has not alleged that the market for automation and control systems with 

dealer costs over $25,000 is distinct from the market for automation and control systems with 

dealer costs below $25,000, or that there products across that divide do not compete with each 

other. See e.g., In re Super Premium Ice Cream Distrib. Antitrust Litig., 691 F. Supp. 1262, 

1268 (N.D. Cal. 1988) (rejecting plaintiff’s alleged product market of “super-premium ice 

cream” because it could not show that “people who buy so called ‘super-premium’ or ‘luxury’ 

ice creams do not buy others which are lower in the spectrum of price or quality.”); United States 

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v. Jos. Schlitz Brewing Co., 253 F. Supp. 129, 145 (N.D. Cal. 1966) (rejecting plaintiff’s product 

market of “premium” beer due to failure to demonstrate that beer does not compete across price 

ranges). Therefore, Cyber Sound has not sufficiently established that its proposed $25,000 and 

up market “encompass[es] all interchangeable substitute products.” Queen City Pizza, 124 F.3d 

at 436. 

3. Anticompetitive Effects and Antitrust Injury

Crestron argues that Cyber Sound has not sufficiently alleged that Crestron’s actions led 

to anticompetitive effects in the relevant market or that Cyber Sound suffered an antitrust injury 

stemming from any anticompetitive effects caused by Crestron. 

In order to state a claim for relief under either sections 1 or 2 of the Sherman Act, Cyber 

Sound must plausibly allege that Crestron’s conduct “harm[ed] the competitive process itself,” 

not that its conduct “merely harm[ed] competitors.” Broadcom Corp. v. Qualcomm, Inc., 501 

F.3d 297, 308 (3d Cir. 2007). “It is axiomatic that the antitrust laws were passed for the 

‘protection of competition, not competitors.” Brooke Grp. Ltd., v. Brown & Williamson Tobacco 

Corp., 509 U.S. 209, 224 (1993) (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 

(1962)); see also Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993) (“The law directs 

itself not against conduct which is competitive, even severely so, but against conduct which 

unfairly tends to destroy the competitive process.”). 

Cyber Sound argues that it has sufficiently pled that Crestron’s actions had 

anticompetitive effects because they were designed to “prevent[] competitors such as Savant 

from entering the market of high-end residential control systems.” Opp. Br. 7. However, Cyber 

Sound has not alleged sufficient facts indicating that Crestron’s actions had any actual 

anticompetitive effects by keeping Savant or any other competitors out of the market. It is 

undisputed that Crestron’s dealer agreements were not exclusive. Cyber Sound does not even 

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allege that Crestron attempted to coerce its dealers into exclusively carrying Crestron products. 

Rather, Cyber Sound concedes that Crestron knew that Cyber Sound was carrying products 

manufactured by Control4, but did not require Crestron to drop them. Am. Countercl. ¶ 15. 

While Cyber Sound does allege that Crestron demanded that it drop Savant products in August 

2009, it admits that Crestron withdrew that demand in September 2009. Id. ¶¶ 15-16. Therefore, 

Cyber Sound merely alleges that due to Crestron’s demands, it ceased carrying Savant products 

for less than two months. Moreover, Cyber Sound does not plausibly allege that Crestron’s 

competitors, including Savant, were substantially harmed or prevented from competing in the 

proposed relevant market as a result of Crestron’s actions. 

Cyber Sound’s reliance on LePage’s Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003) is 

misplaced. Cyber Sound cites LePage’s for the proposition that “[w]hen a monopolist's actions 

are designed to prevent one or more new or potential competitors from gaining a foothold in the 

market by exclusionary, i.e. predatory, conduct, its success in that goal is not only injurious to 

the potential competitor but also to competition in general.” Id. at 159. First, as discussed 

below, Cyber Sound has not alleged sufficient facts demonstrating Crestron’s monopoly power. 

Second, the defendant in LePage’s was shown to have entered into actual exclusive contracts 

with certain dealers as well as to have offered bundling rebates to other dealers that “effectively 

required dealing exclusively” with the defendant. Id. at 147, 159. Cyber Sound has not alleged 

that Crestron entered into exclusive dealer agreements with its dealers or that its practices 

effectively required dealers to deal exclusively with Crestron. 

Because Cyber Sound has not sufficiently alleged that Crestron’s actions “had substantial 

anticompetitive effects,” Gordon, 423 F.3d at 211, its Sherman Act claims will be dismissed. 

With respect to antitrust injury, Crestron argues, and the Court agrees, that Cyber Sound 

has failed to plead facts, which (taken as true), demonstrate that it has sustained an “injury of the 

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type the antitrust laws were intended to prevent and that flows from that which makes 

defendants’ acts unlawful,” as a proximate result of Crestron’s actions. Syncsort Inc. v. 

Sequential Software, Inc., 50 F. Supp. 2d 318, 329 (D.N.J. 1999) (quoting Brunswick Corp. v. 

Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)). Cyber Sound alleges that as a result of 

Crestron’s “exclusionary practices” (i.e., the “exclusionary agreements with Cyber Sound and 

other Crestron dealers for the purpose of excluding competition in the Market . . . by precluding 

Cyber Sound and other present or former dealers from handling the products of a new, and 

potentially major, competitor, namely, Savant,” Am. Countercl. ¶ 38, it has “suffered damage.” 

Id. ¶ 40. However, Cyber Sound has admitted that it only refrained from offering Savant 

products for a period of less than two months. The only actual harm alleged by Cyber Sound in 

its Counterclaim, is its lost business caused by Crestron not permitting it to service customers 

with installed systems using Crestron products. Id. ¶ 24. However, Cyber Sound has failed “to 

articulate the connection between [this harm] and a restraint on trade.” Franco, 2011 WL 

4448908, at *36 (dismissing a Sherman Act § 1 claim and stating that “[t]he essence of an 

antitrust claim is to provide redress for injury which flows from an unreasonable restrain on 

competition”). 

Therefore, Cyber Sound has not actually alleged any harm resulting from the 

anticompetitive effects of Crestron’s allegedly exclusionary practices. 

B. Violation of the Sherman Act § 2 

Section 2 of the Sherman Act provides that it is illegal to “monopolize or attempt to 

monopolize, or combine or conspire with any other person or persons, to monopolize any part of 

the trade or commerce among the several States, or with foreign nations.” 15 U.S.C. § 2. To 

state a monopolization claim under this section, a plaintiff must allege facts sufficient to 

demonstrate: “(1) the possession of monopoly power in the relevant market and (2) the willful 

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acquisition or maintenance of that power as distinguished from growth or development as a 

consequence of a superior product, business acumen, or historic accident.” Schuylkill Energy 

Res., Inc. v. Pa. Power & Light Co., 113 F.3d 405, 412-13 (3d Cir. 1997) (internal quotations 

omitted). In order to prevail on an attempted monopolization claim under this section, “a 

plaintiff must prove that the defendant (1) engaged in predatory or anticompetitive conduct with 

(2) a specific intent to monopolize and (3) a dangerous probability of achieving monopoly 

power.” Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 456 (1993). 

Here, Cyber Sound’s failure to sufficiently define the relevant product market dooms this 

claim. See Syncsort Inc., 50 F. Supp. 2d at 330-31 (“Viability of claims of monopolization and 

attempted monopolization under Section Two of the Sherman Act are dependent upon 

demonstration by a plaintiff why a proposed market is the relevant market.”). However, Cyber 

Sound’s monopolization and attempted monopolization claims fail for other reasons as well. 

Cyber Sound fails to allege sufficient facts to demonstrate that Crestron possesses 

monopoly power in the relevant market or is dangerously close to achieving monopoly power. 

“Monopoly or market power has been defined as the power to control prices or exclude 

competition in the relevant market.” Syncsort Inc., 590 F. Supp. 2d at 329 (citing United States 

v. Grinnell Corp., 384 U.S. 563, 571 (1966)). “[A]lthough the size of a defendant's market share 

is a significant determinant of whether a defendant has a dangerous probability of successfully 

monopolizing the relevant market, it is not exclusive. Other factors to be considered include the 

strength of competition, probable development of the industry, the barriers to entry, the nature of 

the anti-competitive conduct, and the elasticity of consumer demand.” Barr Labs., Inc. v. Abbott 

Labs., 978 F.2d 98, 112 (3d Cir. 1992) (internal citations omitted). 

Here, Cyber Sound alleges, on information and belief, that Crestron possesses an 80% 

market share in the market for high-end residential automation and control systems in the United 

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States. Am. Countercl. ¶ 8. Other than this conclusory assertion of market power, Cyber Sound 

pleads no other facts in support of Crestron’s supposed monopoly power. Cyber Sound makes 

no allegations regarding the market-shares held by Crestron’s competitors, the strength of the 

competition between Crestron and its competitors, the barriers to entry, or the elasticity of 

consumer demand. “Accepting as true all factual allegations contained in the Answer and 

Counterclaims, this single statement of market power in the pleadings of [Cyber Sound] is an 

insufficient allegation of the possession of monopoly power, or even of the dangerous probability 

of achieving monopoly power.” Syncsort Inc., 50 F. Supp. 2d at 330. Therefore, Cyber Sounds 

Sherman Act § 2 claim will be dismissed. 

C. Violation of the Clayton Act, 15 U.S.C. § 14 

Cyber Sound did not respond to Crestron’s arguments in support of its motion to dismiss 

Cyber Sound’s claim for a violation of the Clayton Act; therefore, the motion will be considered 

unopposed with respect to this claim. However, the Court finds that Crestron has convincingly 

demonstrated that Cyber Sound has failed to state a claim for a violation of the Clayton Act for 

which relief can be granted. In order to state a claim for relief under this section of the Clayton 

Act, a plaintiff must plead three elements: 

First, the line of commerce, i.e., the type of goods, wares, or merchandise, etc., 

involved must be determined, where it is in controversy, on the basis of the facts 

peculiar to the case. Second, the area of effective competition in the known line 

of commerce must be charted by careful selection of the market area in which the 

seller operates, and to which the purchaser can practicably turn for supplies. 

. . . 

Third, and last, the competition foreclosed by the contract must be found to 

constitute a substantial share of the relevant market. That is to say, the 

opportunities for other traders to enter into or remain in that market must be 

significantly limited as was pointed out in Standard Oil Co. v. United States,[337 

U.S. 293 (1949)]. 

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Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 328 (1961). Cyber Sound fails to allege 

sufficient facts, taken as true, to plausibly demonstrate that Crestron’s actions have “significantly 

limited” opportunities for other competitors to enter into or remain the market; therefore, Cyber 

Sound has not adequately alleged that a substantial share of the market has been foreclosed. 

Accordingly, Cyber Sound’s Clayton Act claim will be dismissed. 

D. Violation of the Arizona Antitrust Act, §§ 44-1401 et seq. 

Cyber Sound claims that Crestron has violated section 44-1403 of the Arizona Antitrust 

Act, which provides that “[t]he establishment, maintenance or use of a monopoly or an attempt 

to establish a monopoly of trade or commerce, any part of which is within this state, by any 

person for the purpose of excluding competition or controlling, fixing or maintaining prices is 

unlawful.” Ariz. Rev. Stat. § 44-1403. Both parties agree that the pleading requirements under 

the Arizona Antitrust Act are identical to those under the Federal antitrust statutes. See Pasco 

Indus., Inc. v. Talco Recycling, Inc., 985 P.2d 535, 542 (Ariz. Ct. App. 1998) (“Because § 2, like 

A.R.S. section 44-1403, prohibits monopolistic behavior by individual persons or entities . . . we 

analyze the requirements necessary to prove a violation of section 44-1403 under federal case 

law interpreting § 2 of the Sherman Act.”); Laborers’ & Operating Eng’rs’ Util. Agreement 

Health & Welfare Trust Fund for Arizona v. Philip Morris, Inc., 42 F. Supp. 2d 943, 949 (D. 

Ariz. 1999) (“Arizona’s antitrust act mirrors federal law and is analyzed and construed in 

harmony with federal law.”). Accordingly, for the same reasons discussed above in relation to 

Cyber Sound’s Federal antitrust claims, the Arizona Antitrust Act claim will be dismissed. 

E. Choice of Law 

Because Cyber Sound’s counterclaims for Interference with Contract, Interference with 

Prospective Economic Advantage, and Defamation are based on state law, the Court must 

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consider which State’s laws apply.2 This Court applies New Jersey choice of law rules in 

determining which law applies. Zavala v. Wal-Mart Stores, Inc., 393 F. Supp. 2d 295, 333 

(D.N.J. 2005). New Jersey applies the “most significant relationship” test in determining which 

law applies. P.V. v. Camp Jaycee, 962 A.2d 453 (N.J. 2008). Under this test, the court first 

determines whether an actual conflict exists among the potentially applicable laws, and second, 

if a conflict exists, the court weights the factors enumerated in the Restatement section 

corresponding to the cause of action. Id. at 460. Where no conflict exists, there is no choice-oflaw issue to be resolved. Id. 

There is no conflict between the laws of New Jersey and Arizona with regard to the 

elements of a claim for Interference with Contract. Compare Dello Russo v. Nagel, 817 A.2d 

426, 434 (N.J. Super. Ct. App. Div. 2003) (“plaintiff must prove: (1) actual interference with a 

contract; (2) that the interference was inflicted intentionally by a defendant who is not a party to 

the contract; (3) that the interference was without justification; and (4) that the interference 

caused damage”); with Hill v. Peterson, 35 P.3d 417, 420 (Ariz. App. 2001) (“plaintiff must 

prove the existence of a valid contractual relationship or business expectancy; the interferer's 

knowledge of the relationship or expectancy; intentional interference inducing or causing a 

breach or termination of the relationship or expectancy; and resultant damage to the party whose 

relationship or expectancy has been disrupted. Furthermore, the interference must be improper 

as to motive or means before liability will attach.”) (internal quotations and citations omitted). 

 

2

 Crestron, in its motion to dismiss, analyzes these claims under New Jersey law, while Cyber 

Sound, in its opposition, analyzes them under Arizona law. Without any choice of law analysis, 

Cyber Sound asserts that Arizona law “certainly must be the relevant prevailing law under which 

to test Cyber Sound’s claims.” Opp. Br. 12. In its reply brief, Crestron contends that the 

question is immaterial as there is no conflict between Arizona and New Jersey law with respect 

to these claims. Reply Br. 11 n.4. 

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Likewise, there is no conflict between the laws of the two states with regard to the 

elements of a claim for Interference with Prospective Economic Advantage. Compare Fineman 

v. Armstrong World Indus., Inc., 980 F.2d 171, 186 (3d Cir. 1992) (“Under New Jersey law, the 

five elements of a claim of tortious interference with a prospective business relationship are: (1) 

a plaintiff's reasonable expectation of economic benefit or advantage, (2) the defendant's 

knowledge of that expectancy, (3) the defendant's wrongful, intentional interference with that 

expectancy, (4) in the absence of interference, the reasonable probability that the plaintiff would 

have received the anticipated economic benefit, and (5) damages resulting from the defendant's 

interference.”) with Hill, 35 P.3d at 420 (same elements as those for Interference with Contract). 

Finally, there is also no conflict between the laws of New Jersey and Arizona regarding 

the elements of defamation claim. Compare Dello Russo, 817 A.2d at 431 (“To establish a 

prima facie case of defamation . . . a plaintiff must show that defendant communicated a false 

statement about plaintiff to a third person that harms plaintiff's reputation in the eyes of the 

community or deters third persons from associating with the plaintiff.”) and Zoneraich v. 

Overlook Hosp., 514 A.2d 53, 63 (N.J. Super. Ct. App. Div. 1986) (“In the case of a complaint 

charging defamation, plaintiff must plead facts sufficient to identify the defamatory words, their 

utterer and the fact of their publication. A vague conclusory allegation is not enough.”) with 

Peagler v. Phoenix Newspapers, Inc., 560 P.2d 1216, 1222 (Ariz. 1977) (defamation claim 

requires a false statement that is published and fault amounting to at least negligence on the part 

of the publisher) and Athans v. Starbucks Coffee Co., No. 06-1841, 2007 WL 899130, at *2 (D. 

Ariz. Mar. 23, 2007) (applying Arizona law and dismissing defamation claim based, in part, on 

failure to specifically allege the identity of the people who made the allegedly defamatory 

statements or the content of those statements). 

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1. Defamation

The basis of Cyber Sound’s claims for Defamation, Interference with Contract, and 

Interference with Prospective Economic Advantage is Crestron’s allegedly false and misleading 

statements about Cyber Sound to its customers and potential customers. See Am. Countercl. ¶¶ 

67, 70, 73. 75, 79. Cyber Sound alleges that Crestron intentionally harmed Cyber Sound by 

falsely stating that: Cyber Sound was no longer an authorized Crestron dealer and could not 

service Crestron products at a time when it was still authorized; that “Cyber Sound and its 

technical staff were incompetent in regard to the design, installation, programming and servicing 

of high-end residential automation and control systems;” and that due to Crestron’s lawsuit 

against Cyber Sound, “Cyber Sound’s viability as a company was questionable and it likely 

would not be in business for very long.” Id. ¶ 70. 

Crestron argues that Cyber Sound’s claim for defamation fails to demonstrate entitlement 

to relief because: the allegations fail to provide sufficient specificity regarding who stated what 

specific words to whom and when; some of the alleged statements are not false; and some are 

statements of opinion, which cannot be defamatory. Cyber Sound argues that its Counterclaim 

lists specific customers and prospective customers to whom the allegedly defamatory statements 

were made. However, the paragraphs in the Amended Counterclaim cited by Cyber Sound do 

not provide lists of individuals to whom statements were made. See Am. Countercl. ¶¶ 68, 74. 

Rather, these paragraphs simply list customer and prospective customers with which Crestron 

allegedly interfered. In other words, Cyber Sound does not allege who said what to these entities 

and individuals when. 

 For example, in paragraph 68 of the Amended Counterclaim, Cyber Sound lists 

customers with which Crestron allegedly interfered. Cyber Sound then alleges that “[i]n 

connection with such contacts, Crestron, with and through competitive Crestron dealers . . . made 

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19 

knowingly false or misleading statements about Cyber Sound, in order to induce Cyber Sound’s 

customers to switch to Crestron products.” Am. Countercl. ¶ 69. Therefore, Cyber Sound does 

not allege that Crestron actually made any of the statements listed in paragraph 70 to any of the 

customers listed in paragraph 68. Cyber Sound merely alleges that “in connection” with its 

customers, Crestron, “with and through” third parties, made allegedly defamatory statements. 

These allegations fail to state who at Crestron made such statements, who at Crestron’s dealers 

made these statements that are somehow attributable to Crestron, when these statements were 

made, and to whom at these customers (which are home building and/or design entities) these 

statements were made.3

 “A claim for defamation ‘must be plead (sic) with particularity and thus must set forth the 

facts identifying the defamatory statements, their utterer, and their publication.’” Novartis 

Pharms. Corp. v. Bausch & Lomb, Inc., No. 07-5945, 2008 WL 4911868, at *5 (D.N.J. Nov. 13, 

2008) (quoting Zoneraich, 514 A.2d at 63). As in Novartis Pharms. Corp., Cyber Sound fails to 

state a claim for defamation because it “fails to allege by whom, or to whom, the allegedly 

defamatory statements were made, what words were uttered, or when the statements were made.” 

Id. at *6. Accordingly, the claim for defamation will be dismissed. 

2. Interference with Contract & Interference with Prospective Economic 

Advantage

Crestron argues that Cyber Sound fails to state a claim for Interference with Contract and 

Interference with Prospective Economic Advantage because it has not sufficiently alleged facts 

 

3

 To the extent that Cyber Sound alleges that these defamatory statements were made by 

Crestron’s dealers to Cyber Sound’s customers, Cyber Sound does not allege who at these 

dealers made the statements. In fact, Cyber Sound names only two Crestron dealers “with and 

through” whom such statements were made. See Am. Countercl. ¶¶ 69, 75. To the extent that 

Cyber Sound’s allegations of statements by unknown individuals at third parties to unknown 

recipients at unknown times are sufficient, Cyber Sound offers no explanation as to why such 

statements should be attributable to Crestron. In fact, as Crestron points out, its dealer 

agreements expressly provide that its dealers are not agents or legal representatives of Crestron. 

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indicating that Crestron’s interference was improper or without justification. Crestron contends 

that because Cyber Sound cannot show that Crestron’s statements were defamatory, these 

statements cannot satisfy the improper or without justification element for an Interference with 

Contract claim. Cyber Sound argues that it has sufficiently pled facts satisfying this 

requirement: that Crestron and its competitive dealers made false and misleading claims about 

Cyber Sound to its customers. Crestron has not demonstrated that because Cyber Sound has 

failed to allege facts sufficient to state a claim for defamation it automatically follows that it 

cannot satisfy the pleading requirements for a claim of Interference with Contract, with respect 

to the “improper” or “without justification” element. See Syncsort Inc. v. Innovative Routines 

Int’l, Inc., No. 94-3623, 2008 WL 1925304, at *8 (D.N.J. Apr. 30, 2008) (“The inquiry into 

whether the defendant's actions were improper is flexible and guided by the following factors on 

a case-by-case basis: (i) the nature of the actor's conduct; (ii) the actor's motive; (iii) the interests 

of the party with which the actor's conduct interferes; (iv) the interests sought to be advanced by 

the actor; (v) the social interests in protecting the freedom of action of the actor and the 

commercial interests of the other party; (vi) the proximity or remoteness of the actor's conduct to 

the interference; and (vii) the relations between the parties.”) (citing DiGiorgio Corp. v. Mendez 

& Co., 230 F. Supp. 2d 552, 564 (D.N.J. 2002)). Indeed, Crestron has cited no legal authority 

for such a proposition. 

While the Court finds that Cyber Sound has not pled facts sufficient to demonstrate 

entitlement to relief for defamation, at this stage, the Court does not find that Cyber Sound has 

failed to state a claim for relief for Interference with Contract or Prospective Economic 

Advantage. Cyber Sound has alleged that it had valid contracts or reasonably probable 

expectations of economic benefit; that Crestron knew of these contracts or expectancies; that 

Crestron intentionally interfered with these contracts or expectancies without justification; and 

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21 

that Cyber Sound would have received the expected economic benefit but for Crestron’s 

interference. Crestron has not demonstrated that Cyber Sound’s allegations fail to satisfy the 

“improper” or “without justification” requirement of the claims for Interference with Contract 

and Prospective Economic Advantage, and it chose not to challenge Cyber Sound’s pleading 

with respect to any of the other elements of these claims. Accordingly, the motion to dismiss 

will be denied as to the claims for Interference with Contract and Prospective Economic 

Advantage. 

F. Violation of the Lanham Act, 15 U.S.C. § 1125(a) 

In order to state a claim for relief for false advertising under the Lanham Act, a plaintiff 

must allege that: (1) the defendant made false or misleading statements about the nature, 

characteristics, qualities, geographic origins of his or another's goods, services, or commercial 

activities in commercial advertising or promotion; (2) there is actual deception or a tendency to 

deceive a substantial portion of the intended audience; (3) the deception is material in that it is 

likely to influence purchasing decisions; (4) the advertised goods traveled in interstate 

commerce; and (5) there is a likelihood of injury to the plaintiff. 15 U.S.C. § 1125(a); United 

States Healthcare, Inc. v. Blue Cross of Greater Philadelphia, 898 F.2d 914, 922-23 (3d Cir. 

1990). District courts in the Third Circuit apply an intermediate pleading standard to false 

advertising claims under the Lanham Act, requiring “more particularity than traditional notice 

pleading under [Fed. R. Civ. P.] 8, but something less than the specificity required under Rule 

9.” Graco, 2009 WL 904010, at *24. 

Crestron argues that Cyber Sound fails to meet this intermediate standard for pleading the 

“false or misleading statements” element of its Lanham Act claim, because it does not provide 

the necessary specificity regarding the speaker, recipient, and content of these statements. Cyber 

Sound alleges that the statements referenced in paragraph 70 of the Counterclaim, discussed 

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22 

above, constitute the requisite false or misleading statements of its false advertising claims. As 

discussed above in the section addressing the defamation claim, Cyber Sound has not alleged 

with sufficient specificity what false or misleading statements were actually made by individuals 

at Crestron, the context in which those statements were made, and two whom they were made. 

Additionally, Cyber Sound has failed to make clear that any allegedly false or misleading 

statements were made by Crestron itself, as opposed to its dealers, who are not agents or legal 

representatives of Crestron. Therefore, due to its vague and imprecise allegations regarding 

Crestron’s statements, Cyber Sound has failed to meet the heightened pleading standard applied 

to its Lanham Act Claim. Accordingly, this claim will be dismissed. 

V. CONCLUSION 

For the reasons set forth above, the Court will grant in part and deny in part Crestron’s 

motion to dismiss. Cyber Sound’s counterclaims for Interference with Contract (Count V) and 

Interference with Prospective Economic Advantage (Count VI) will proceed. Cyber Sound’s 

counterclaims for Violation of the Sherman Act, 15 U.S.C. § 1 (Count I); Violation of the 

Sherman Act, 15 U.S.C. § 2 (Count II); Violation of the Clayton Act, 15 U.S.C. § 14 (Count III); 

Violation of the Arizona Antitrust Act, §§ 44-1401 et seq. (Count IV); Defamation (Count VII); 

and Violation of the Lanham Act, 15 U.S.C. § 1125(a) (Count VIII) will be dismissed. 

These claims being dismissed will be dismissed with prejudice as permitting Cyber 

Sound another opportunity to amend would be futile. Cyber Sound has already amended its 

counterclaims once in response to Crestron’s first motion to dismiss and has, therefore, 

“presented [its] best allegations, and . . . any further amendment would not cure the 

deficiencies.” Dock v. Rush, 432 Fed. Appx. 130, 134 (3d Cir. 2011); see also In re Savient 

Pharm., Inc. Sec. Litig., 283 Fed. Appx. 887, 888 (3d Cir. 2008) (affirming district court’s 

dismissal of a second amended complaint with prejudice where district court found that “plaintiff 

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had already had ‘two large bites at the apple’ and because further amendment would be futile”); 

Hill v. City of Scranton, 411 F.3d 118, 134 (3d Cir. 2005) (“a district court has discretion to deny 

a request to amend if it is apparent from the record that . . . the amendment would be futile”). 

With respect to Cyber Sound’s antitrust claims, permitting it to amend would be futile as Cyber 

Sound, even if it could cure its deficient definition of a relevant product market, cannot 

demonstrate an “injury of the type the antitrust laws were intended to prevent and that flows 

from that which makes defendants’ acts unlawful.” Syncsort Inc. v. Sequential Software, Inc., 50 

F. Supp. 2d 318, 329 (D.N.J. 1999) (quoting Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 

U.S. 477, 489 (1977)). With respect to its defamation and false advertising claims, Cyber Sound, 

after already amending its complaint once, has failed to allege with adequate specificity that an 

agent or representative of Crestron actually made false statements about Cyber Sound. An 

appropriate Order follows. 

 /s/ Faith S. Hochberg__________ 

 Hon. Faith S. Hochberg, U.S.D.J.

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