Opinion ID: 2981417
Heading Depth: 2
Heading Rank: 5

Heading: state-law counterclaims

Text: The district court dismissed Static Control’s counterclaims for unfair competition and false advertising under North Carolina law for lack of standing. Static Control appeals and agrees that substantively the state law claims all “substantially mirror” the federal claims. First Appellant Br. at 54.11 The parties dispute whether standing under the North Carolina Unfair Deceptive Trade Practices Act (“NCUDTPA”), N.C. Gen. Stat. §§ 75-1, et seq., which is the statelaw equivalent of the Sherman, Clayton, and Lanham Acts, is identical to the standing requirements of the federal acts. The district court held that North Carolina had not yet decided the question, and applying “North Carolina’s general rule that federal case law is persuasive and instructive in construing North Carolina’s own antitrust statutes,” the district court dismissed the state-law counterclaims “for the same reasons that it dismissed [Static Control’s] federal claims above.” R. 392 (D. Ct. Order 9/28/06 at 16). Static Control disagrees that the North Carolina standard is the same. conduct supposedly in violation of the Lanham Act is the same as the conduct supposedly violating the Sherman Act. In particular, Static Control alleges that Lexmark violated the Lanham Act when Lexmark falsely advertised that Static Control infringed Lexmark’s patents. Because this was not part of Static Control’s antitrust allegations, the district court at a minimum should have applied the AGC factors to Static Control’s allegations of false advertising directly targeting Static Control (not just the Prebate program) and its injuries in conducting the five-factor analysis. 11 The district court also dismissed the state-law civil-conspiracy claim for lack of standing; however, Static Control has not raised this issue on appeal. Static Control mentioned in a footnote in its opening brief that the district court also erred in dismissing its state-law civil-conspiracy claim. First Appellant Br. at 56 n.14. Lexmark then pointed out the waiver, Second Appellee Br. at 62, and Static Control did not dispute the waiver or make any arguments on either waiver or the civil-conspiracy claim in its Third Brief. Nos. 09-6287/6288/6449 Static Control v. Lexmark Int’l Page 28 North Carolina has held that the AGC factors “do not apply in determining which indirect purchasers have standing to sue under the North Carolina antitrust statutes.” Teague v. Bayer AG, 671 S.E.2d 550, 557 (N.C. Ct. App. 2009). Static Control is a supplier rather than an indirect purchaser, but Static Control argues that Teague supports the general proposition that North Carolina antitrust standing diverges from federal antitrust standing. Although ruling before Teague came down, the district court rejected the relevance of a similar case upon which Teague relied—Hyde v. Abbott Labs., Inc., 473 S.E.2d 680, 681-82 (N.C. Ct. App.), rev. denied, 344 N.C. 734 (1996)—precisely because the present case did not involve an indirect purchaser. Teague does not state, as Static Control suggests, that antitrust standing under North Carolina law is generally more flexible than the equivalent federal law. We must therefore closely examine North Carolina’s departure from federal law on the question of standing for indirect purchasers to determine whether North Carolina would similarly depart on the question of standing for suppliers. In deciding to reject the federal test for standing for indirect purchasers, the North Carolina Court of Appeals examined the standing landscape when the North Carolina statute governing standing, N.C. Gen. Stat. §§ 75-16, was most recently substantively amended in 1969. Hyde, 473 S.E.2d at 684-85 (citing Ill. Brick Co. v. Illinois, 431 U.S. 720 (1977), and Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481 (1968)). Because the amendments expanded the class of persons who could recover under the Act to all consumers, and indirect purchasers were frequently consumers, the court found it “unlikely” that the legislature intended to exclude indirect purchasers as a class. Id. at 684. Although acknowledging federal law as “persuasive authority” in interpreting North Carolina antitrust provisions, id. at 685, the court observed that most federal circuits permitted suit by indirect purchasers in 1969 when the amendments were passed. The Supreme Court’s decision in Illinois Brick that indirect purchasers lacked standing to bring antitrust claims was not issued until 1977. Id. at 683. Nos. 09-6287/6288/6449 Static Control v. Lexmark Int’l Page 29 Applying the same considerations to the circumstances at hand, we believe North Carolina would grant standing to suppliers such as Static Control. Prior to 1969, the law, at least in the Sixth Circuit, was that suppliers like Static Control lacked standing. See Volasco Prods. Co. v. Lloyd A. Fry Roofing Co., 308 F.2d 383, 395 (6th Cir. 1962) (“It is well established in the law that a supplier is too remote and too far removed from the direct injury to recover damages resulting from violation of the anti-trust laws directed against the supplier’s customer.”), cert. denied, 372 U.S. 907 (1963). However, the Fourth Circuit had declined to say that no supplier could bring a claim and followed what was previously known as the “target area” test for antitrust standing. S.C. Milk Council of Milk Producers, Inc. v. Newton, 360 F.2d 414, 418 (4th Cir.), cert. denied, 385 U.S. 934 (1966). The “target area” test gave antitrust standing to anyone who was within the zone of economic harm caused by the anticompetitive conduct whose harm was proximately caused by such conduct. Id. In ruling that indirect purchasers were not subject to the AGC factors, the court in Teague emphasized the differences between cases involving indirect purchasers and those, such as AGC itself, that did not. Teague, 671 S.E.2d at 556 (rejecting analogies to AGC and other state cases applying AGC factors to state-law claims because they did not involve indirect purchasers). However, the Hyde court independently rejected many of the concerns identified in Illinois Brick (and later repeated in AGC) as simply inapplicable to state-law antitrust statutes. Hyde, 473 S.E.2d at 687-88 (addressing issues of multiple liability, incentives to sue, and complexity of damages). Because the state of the law in 1969 in the Fourth Circuit appears more consistent with North Carolina’s reasoning in Hyde than the Sixth Circuit’s position on supplier standing in 1969, we conclude that North Carolina would not apply the AGC factors to cases like this one. As a result, Static Control’s counterclaims under state law were incorrectly dismissed for lack of standing. We REVERSE and REMAND for further proceedings on these claims. Nos. 09-6287/6288/6449 Static Control v. Lexmark Int’l Page 30