Opinion ID: 1921
Heading Depth: 2
Heading Rank: 2

Heading: Jersey Dental

Text: In Jersey Dental, the Plaintiffs alleged a conspiracy to monopolize in violation of Section 2 of the Sherman Act in Counts Two and Three of their amended complaint and a conspiracy to restrain trade in violation of Section 1 in Counts Four and Five. A Section 2 conspiracy claim has four elements: (1) an agreement to monopolize; (2) an overt act in furtherance of the conspiracy; (3) a specific intent to monopolize; and (4) a causal connection between the conspiracy and the injury alleged. See, e.g., United States v. Yellow Cab Co., 332 U.S. 218, 224-25, 67 S.Ct. 1560, 91 L.Ed. 2010 (1947); Am. Tobacco Co. v. United States, 328 U.S. 781, 788, 809, 66 S.Ct. 1125, 90 L.Ed. 1575 (1946). A plaintiff asserting a Section 1 claim also must allege four elements: (1) concerted action by the defendants; that produced anti-competitive effects within the relevant product and geographic markets; (3) that the concerted actions were illegal; and (4) that it was injured as a proximate result of the concerted action. Gordon v. Lewistown Hosp., 423 F.3d 184, 207 (3d Cir. 2005) (citations omitted). The District Court dismissed all four counts on several grounds. The Court dismissed Counts Three and Five, which sought injunctive relief against Dentsply, for the same reasons it denied the Plaintiffs' summary judgment motion in Hess. The Court dismissed Counts Two and Four, to the extent they sought damages from the Dealers, on the basis of Illinois Brick, concluding that the coconspirator exception of that case did not apply because Dentsply and the Dealers were not coequal participants in the conspiracy. The District Court also dismissed Counts Two and Three, against the Dealers and Dentsply, respectively, based on its determination that the Plaintiffs did not sufficiently allege the element of specific intent on the part of the Dealers. Finally, the Court found that the dismissal of Counts Two through Five was proper because of the Plaintiffs' failure to adequately allege the agreement element of the Section 1 and Section 2 claims asserted in those counts. The Plaintiffs dispute nearly all of the District Court's conclusions. [5] Given these overlapping alternative holdings, we find it most expeditious to begin with the District Court's finding as to the agreement element of Counts Two through Five, and then move on to the other portions of the District Court's ruling. [6]
The District Court found the dismissal of Counts Two through Five warranted in part based on its conclusion that the Plaintiffs did not adequately allege an agreement among Dentsply and the Dealers. The Plaintiffs seek to revive their conspiracy claims essentially by reference to their allegations that every Dealer agreed to the same planDealer Criterion 6; that every Dealer knew that every other Dealer agreed, or would agree, to this same plan; and that it ... was obvious to each Dealer thatonly if all of the other Dealers compliedwould the purpose of Dealer Criterion 6 be achieved. (Appellants' Br. 68-69.) Section 1 claims are limited to combinations, contracts, and conspiracies, and thus always require the existence of an agreement. See In re Ins. Brokerage Antitrust Litig., 579 F.3d 241, 267 (3d Cir.2009). Section 2 claims, in contrast, do not require an agreement except where, as here, the specific charge is conspiracy to monopolize. See Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 767 n. 13, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984). Therefore, the viability of the Plaintiffs' Section 1 and Section 2 claims in Counts Two through Five turns on whether the Plaintiffs have adequately alleged an agreement among Dentsply and the Dealers. See Englert v. City of McKeesport, 872 F.2d 1144, 1150 (3d Cir.1989); Fragale & Sons Beverage Co. v. Dill, 760 F.2d 469, 473-74 (3d Cir.1985). [7] To allege such an agreement between two or more persons or entities, a plaintiff must allege facts plausibly suggesting a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement. Copperweld, 467 U.S. at 771, 104 S.Ct. 2731 (quotation omitted); see also, e.g., Sunkist Growers, Inc. v. Winckler & Smith Citrus Prods. Co., 370 U.S. 19, 29-30, 82 S.Ct. 1130, 8 L.Ed.2d 305 (1962). The amended complaint in this case alleges a two-tiered conspiracy. First, it alleges that the defendants conspired to maintain Dentsply's monopoly of the manufacture of artificial teeth and/or premium artificial teeth for sale in the United States, to restrain trade for the sale of artificial teeth and/or premium artificial teeth in the United States by the implementation of an exclusive dealing arrangement, and to exclude Dentsply's competitors from the markets for such teeth in the United States[.] (App.435.) Second, it alleges that the defendants conspired to sell such teeth to dental laboratories at anticompetitive prices determined by Dentsply and agreed to by the Dealer Defendants. (Id.) To carry out this conspiracy, Dentsply allegedly has sold teeth to the Dealers on the condition that [the Dealers] restrict their dealings with rival manufacturers[.] (Id. at 452.) The Dealers, the Plaintiffs allege, knew that this exclusive dealing arrangement was and is an illegal restraint of trade designed to maintain Dentsply's monopoly. (Id. at 440.) In our review of the amended complaint, we understand the Plaintiffs to allege a hybrid of both vertical and horizontal conspiracies. ( See, e.g., id. at 435) (Defendants, each with all of the others, have entered into two interrelated conspiracies[.] (emphasis added).) That sort of conspiracy, sometimes dubbed a hub-and-spoke conspiracy, see, e.g., Impro Prods., Inc. v. Herrick, 715 F.2d 1267, 1279 (8th Cir.1983), has a long history in antitrust jurisprudence, see, e.g., Interstate Circuit, Inc. v. United States, 306 U.S. 208, 59 S.Ct. 467, 83 L.Ed. 610 (1939). Such a conspiracy involves a hub, generally the dominant purchaser or supplier in the relevant market, and the spokes, made up of the distributors involved in the conspiracy. The rim of the wheel is the connecting agreements among the horizontal competitors (distributors) that form the spokes. Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 435 n. 3 (6th Cir.2008); see also 2 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application, ¶ 1426, at 188 n. 11 (2d ed.2000); ABA Section of Antitrust Law, Antitrust Law Developments 24 (6th ed.2007). Here, even assuming the Plaintiffs have adequately identified the hub (Dentsply) as well as the spokes (the Dealers), we conclude that the amended complaint lacks any allegation of an agreement among the Dealers themselves. The amended complaint states only in a conclusory manner that all of the defendantsDentsply and all the Dealers includedconspired and knew about the alleged plan to maintain Dentsply's market position. The amended complaint alleges, for instance, that Dentsply made clear to each ... dealer that every other Dentsply dealer was ... required to agree to the same exclusive dealing arrangement, and that every other Dentsply dealer had so agreed. (App. 442.) Iterations of this allegation are sprinkled throughout the amended complaint. ( E.g., id. at 443, 451, 454, 456, 458-59.) But to survive dismissal it does not suffice to simply say that the defendants had knowledge; there must be factual allegations to plausibly suggest as much. See Twombly, 550 U.S. at 564, 127 S.Ct. 1955. There are none here. In other words, the rim connecting the various spokes is missing. Cf. Total Benefits Planning, 552 F.3d at 436; Toys R Us, Inc. v. F.T.C., 221 F.3d 928, 934-36 (7th Cir.2000). Instead of underscoring factual allegations plausibly suggesting the existence of an agreement, the Plaintiffs invite us to infer that the Dealers were aware of each other's involvement in the conspiracy because, as market participants, they all knew that Dentsply was the dominant player in the artificial tooth market and because they all had an economic incentive to create and maintain a regime in which Dentsply reigned and the Dealers did its bidding. In that regime, the Plaintiffs tell us, the Dealers would all benefit from Dentsply's policies because they would all be able to charge dental laboratories artificially inflated prices for teeth in their various regions of operation. We do not disregard the logical appeal of this argument. Certainly, the objective of many antitrust conspiracies is to control pricing with an eye to increasing profits. But simply because each Dealer, on its own, might have been economically motivated to exert efforts to keep Dentsply's business and charge the elevated prices Dentsply imposed does not give rise to a plausible inference of an agreement among the Dealers themselves. Cf. Twombly, 550 U.S. at 566, 127 S.Ct. 1955 (noting the logic of the complaint's allegation of an agreement but finding it insufficient because it did not suggest actual joint action). Notwithstanding Twombly 's requirement that an antitrust plaintiff state enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement[,] id. at 556, 127 S.Ct. 1955 (footnote omitted), the Plaintiffs' allegations do not offer even a gossamer inference of any degree of coordination among the Dealers. Those allegations are not placed in a context that raises a suggestion of a preceding agreement among the Dealers. Id. at 557, 127 S.Ct. 1955. Instead, they do no more than intimate merely parallel conduct that could just as well be independent action. Id. As a consequence, the Plaintiffs have fallen short of their pleading obligations. [8] Before both the District Court and us, the Plaintiffs have tried to hedge their bets. They argue that even if they have not adequately alleged an overarching conspiracy between and among Dentsply and all of its Dealers, they at least have adequately alleged several bilateral, vertical conspiracies between Dentsply and the Dealers. There is arguably some support for what amounts to a rimless conspiracy. See Kotteakos v. United States, 328 U.S. 750, 755, 66 S.Ct. 1239, 90 L.Ed. 1557 (1946); Dickson v. Microsoft Corp., 309 F.3d 193, 203 (4th Cir.2002). However, we need not weigh in on the alternative theory the Plaintiffs now press, for even assuming it is legally viable or even relevant here, the Plaintiffs cannot pursue it under the circumstances of this case because the amended complaint cannot be fairly understood to allege the existence of several unconnected, bilateral, vertical conspiracies between Dentsply and each Dealer. While pleading in the alternative is, of course, authorized by the Federal Rules of Civil Procedure, see Fed.R.Civ.P. 8(a)(3); see also Langer v. Monarch Life Ins. Co., 966 F.2d 786, 802 (3d Cir.1992), we have an obligation to read allegations not in isolation but as a whole and in context, see Chabal v. Reagan, 822 F.2d 349, 357 (3d Cir.1987); Pace Res., Inc. v. Shrewsbury Twp., 808 F.2d 1023, 1026 (3d Cir.1987). As we read the amended complaint, we see no indication of the Plaintiffs' intention to allege that every single agreement between Dentsply and each Dealer had anticompetitive effects. All throughout the amended complaint are substantially similar variations on the allegation that the Defendants have agreed, each with all of the others, to implement an exclusive dealing arrangement[.] (App. 439 (emphasis added).) Indeed, the amended complaint is rife with additional references to the conspiracy between [t]he Defendants,... each with all of the others[.] (E.g., id. at 446, 451 (emphasis added).) These allegations are just not the stuff of several mini-agreements lacking a horizontal tether. In other words, the Plaintiffs simply did not draft their amended complaint to encompass their alternative legal theory. In short, the Plaintiffs are bound by the four corners of their amended complaint, which clearly seeks to allege one conspiracy to which Dentsply and all of the Dealers, as a collective, were parties. To the extent the Plaintiffs are recasting their allegations in an effort to circumvent a motion to dismiss, we must reject that approach. See Leegin Creative Leather Prods. v. PSKS, Inc., 551 U.S. 877, 907-08, 127 S.Ct. 2705, 168 L.Ed.2d 623 (2007); In re New Motor Vehicles Canadian Exp. Antitrust Litig., 533 F.3d 1, 5 (1st Cir. 2008). The Plaintiffs have failed to allege any facts plausibly suggesting a unity of purpose, a common design and understanding, or a meeting of the minds between and among Dentsply and all of the Dealers. Accordingly, we will affirm the District Court's determination that the Plaintiffs have failed to adequately allege the agreement element of their Section 1 and Section 2 claims.
The District Court dismissed the conspiracy to monopolize claims asserted in Counts Two and Three on the alternative ground that the Plaintiffs failed to adequately allege specific intent on the part of the Dealers. [9] Specific intent is an essential element of a conspiracy to monopolize claim. Bonjorno v. Kaiser Aluminum & Chem. Corp., 752 F.2d 802, 807 (3d Cir.1984). It means an intent which goes beyond the mere intent to do the act. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 602, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985) (discussing specific intent in the attempt to monopolize context) (quoting United States v. Aluminum Co. of Am., 148 F.2d 416, 432 (2d Cir.1945)). In other words, the defendant must have intended to achieve an illegal monopoly. Joseph P. Bauer & William H. Page, II Kintner's Federal Antitrust Law § 14.40, at 423 (2002) (footnote omitted); see also Times-Picayune Pub. Co. v. United States, 345 U.S. 594, 626, 73 S.Ct. 872, 97 L.Ed. 1277 (1953); Am. Tobacco Co., 328 U.S. at 809, 66 S.Ct. 1125. Specific intent in the antitrust context may be inferred from a defendant's unlawful conduct. See, e.g., Advo, Inc. v. Phila. Newspapers, Inc., 51 F.3d 1191, 1199 (3d Cir.1995). Here, the Plaintiffs point us to their allegations that the defendants have acted with the specific intent to unlawfully maintain a monopoly[,] (App.452); that the intended effect of th[e] exclusive dealing arrangement ... has been the elimination of any and all competition[,] (id. at 440); and that the defendants knew that this exclusive dealing arrangement was and is an illegal restraint of trade designed to maintain Dentsply's monopoly[,] (id.). In essence, the Plaintiffs allege that Dentsply's pricing policies were unlawful, that the Dealers knew as much, and that they signed on to those policies knowing full well they were unlawful. But that allegation, in its many iterations, is conclusory. There are no facts behind it, so it does not plausibly suggest knowledge of unlawfulness on the Dealers' part. We could feasibly infer the Dealers' specific intent to further Dentsply's monopolistic ambitions if the Plaintiffs had stated enough factual matter to suggest some coordination among the Dealers, something to suggest that they knew that Dentsply was spearheading an effort to squash its competitors by pressing the Dealers into its service and keeping prices artificially inflated. [10] We have already determined, however, that the Plaintiffs' allegations that the Dealers conspired with Dentsply are deficient, so we cannot infer the Dealers' specific intent from their mere participation in the conspiracy, as the Plaintiffs urge. In fact, the only actual conduct the Plaintiffs have alleged on the part of the Dealers is that each one of them, acting on its own, signed a bilateral dealing agreement with Dentsply. The only plausible inference from that conduct is that each Dealer sought to acquire, retain and/or increase its own business. Significantly, the antitrust laws do not prohibit such conduct. See, e.g., U.S. Steel Corp. v. Fortner Enters., Inc., 429 U.S. 610, 612 n. 1, 97 S.Ct. 861, 51 L.Ed.2d 80 (1977). At bottom, the Plaintiffs' allegations of specific intent rest not on facts but on conclusory statements strung together with antitrust jargon. It is an axiom of antitrust law, however, that merely saying so does not make it so for pleading-sufficiency purposes. See Twombly, 550 U.S. at 555, 127 S.Ct. 1955 ([A] plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do[.] (internal quotation marks, alteration and citation omitted)). Because we find that the Plaintiffs failed to sufficiently allege specific intent, we agree with the District Court's dismissal of Counts Two and Three on this ground.
In addition to finding that the Plaintiffs did not adequately allege specific intent or an agreement, the District Court dismissed Counts Two and Four under Illinois Brick. The Court recognized that Hess I did not address whether the Plaintiffs could pursue damages claims against the Dealers because the Dealers were not parties to that suit. The District Court concluded, however, that Illinois Brick 's general coconspirator exception did not apply here because the Plaintiffs did not allege facts to show that the Dealers were in fact coconspirators with Dentsply. The Plaintiffs fault the District Court's consideration of any exception at all to Illinois Brick. In the Plaintiffs' view, Illinois Brick is inapposite because they buy directly, not indirectly, from the Dealers. But that circumstance is immaterial because the amended complaint does not adequately allege that the Dealers are members of a conspiracy with Dentsply. As we explained in Hess I, the Plaintiffs could come within Illinois Brick 's coconspirator exception only if the Dealers were precluded from asserting claims against Dentsply because their participation in the conspiracy was truly complete. Hess I, 424 F.3d at 383. As we have already concluded, however, the amended complaint does not give rise to a plausible inference that the Dealers' involvement in the conspiracy was truly complete. Therefore, to state a viable claim against the Dealers, the Plaintiffs must come within the coconspirator exceptionor some other exceptionto Illinois Brick. Because they have failed to do so, the Plaintiffs in essence are asserting their claims against the Dealers as mere middlemen. This they cannot do. See, e.g., Kansas v. UtiliCorp United Inc., 497 U.S. 199, 204, 207, 110 S.Ct. 2807, 111 L.Ed.2d 169 (1990); Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1044-50 (9th Cir.2008); McCarthy, 80 F.3d at 855. The Plaintiffs also argue that, even assuming the District Court's application of Illinois Brick was correct as to their request for overcharge damages, the Court made no finding as to their request for lost profits. In Hess I, we explained that [w]hen antitrust violators cause prices to increase through monopolization, a price-fixing conspiracy, or exclusionary conduct, the harm they cause members of the distribution chain comes in two forms: (1) overcharges paid for goods actually purchased; and (2) lost profits resulting from the lost opportunity to buy and resell a greater volume of goods. 424 F.3d at 373 (footnote and citations omitted). After canvassing various sources on the subject, we held that the Plaintiffs did not have standing to recover lost profits from Dentsply. Our rationale for barring lost profits damages was based mostly on the Plaintiffs' status as indirect purchasers vis-à-vis Dentsply. See id. at 375. We also explained that lost profits damages are widely disfavored and cited approvingly from a law journal article by Judge Easterbrook in which he argued that overcharge damages, as opposed to lost profits damages, should be the basis of all [antitrust] damages. Id. (quoting Frank H. Easterbrook, Treble What?, 55 Antitrust L.J. 95, 101 (1986)) (quotation marks omitted and alteration in original). The Plaintiffs acknowledge that portion of our holding but assert that we have not had any occasion to rule on whether lost profits damages may be recovered from the Dealers. (Appellants' Br. 59.) Although Hess I admittedly did not categorically bar lost profits damages in this circuit, we need not explore this issue any further in this case. In this Court, issues that are not specifically presented to the District Court ordinarily are waived on appeal, see Pension Benefit Guar. Corp. v. White Consol. Indus., Inc., 215 F.3d 407, 418-19 & n. 14 (3d Cir.2000) (collecting cases); see also In re Ins. Brokerage Antitrust Litig., 579 F.3d at 262; Bagot v. Ashcroft, 398 F.3d 252, 256 (3d Cir.2005), and there is no evidence in the record that the Plaintiffs specifically litigated in the District Court whether they may recover lost profits damages from the Dealers. It is true that we have the discretionary power to address issues that have been waived[,] Bagot, 398 F.3d at 256 (citations omitted), and we sometimes exercise that power when prompted by exceptional circumstances[,] Selected Risks Ins. Co. v. Bruno, 718 F.2d 67, 69 (3d Cir.1983) (citations omitted). But no such circumstances are attendant here. A substantial part of Hess I was dedicated to an analysis of whether the Plaintiffs could recoup lost profits damages from Dentsply. See 424 F.3d at 373-76. We concluded that they could not do so. Id. at 376. Despite how central both that analysis and that conclusion were to Hess I, the Plaintiffs did not leverage our discussion to persuade the District Court on remand to allow them to seek such damages from the Dealers, electing instead to broach this issue in the District Court in only the broadest terms. [11] Accordingly, under these particular circumstances we are convinced that a waiver finding is appropriate. See, e.g., In re Stone & Webster, Inc., 558 F.3d 234, 241 n. 8 (3d Cir.2009).