Court Opinion

ID: 3034976
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:51:53.865495+00
Date Added: 2024-06-11T09:33:02.943750
License: Public Domain

NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS                            FILED
                            FOR THE NINTH CIRCUIT                             MAR 15 2010

                                                                           MOLLY C. DWYER, CLERK
                                                                            U.S. COURT OF APPEALS

KOREA KUMHO PETROCHEMICAL                        No. 09-15003
CO., LTD.,
                                                 D.C. No. 3:07-cv-01057-MMC
             Plaintiff - Appellant,

  v.                                             MEMORANDUM *

FLEXSYS AMERICA LP; FLEXSYS
N.V.,

             Defendants - Appellees.

                  Appeal from the United States District Court
                     for the Northern District of California
               Maxine M. Chesney, Senior District Judge, Presiding

                     Argued and Submitted February 10, 2010
                            San Francisco, California

Before: HALL, THOMPSON and McKEOWN, Circuit Judges.

       Plaintiff-appellant Korea Kumho Petrochemical Co., Ltd. (“KKPC”), a seller

of the rubber chemical 6PPD, appeals the dismissal of its third amended complaint

alleging that the defendants (collectively, “Flexsys”) violated sections 1 and 2 of

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
the Sherman Act and California antitrust law, California Business and Professions

Code § 16700 et seq. KKPC specifically alleges that Flexsys, a competing seller of

6PPD, coerced two potential buyers of 6PPD into boycotting KKPC and publicly

threatened a patent infringement lawsuit to further intimidate customers.

      We have jurisdiction under 28 U.S.C. § 1291, and we AFFIRM.

I.    Injury to Competition

      Injury to competition is a requisite of claims under §§ 1 and 2 of the

Sherman Act, McGlinchy v. Shell Chem. Co., 845 F.2d 802, 811 (9th Cir. 1988),

and of KKPC’s claims under California antitrust law, County of Tuolumne v.

Sonora Cmty. Hosp., 236 F.3d 1148, 1160 (9th Cir. 2001) (explaining that the

analysis under state law “mirrors the analysis under federal law”). “It is

competition, not competitors, which the Act protects.” Brown Shoe Co. v. United

States, 370 U.S. 294, 344 (1962).

      KKPC argues that it adequately alleged an injury to competition by

identifying two potential customers that allegedly succumbed to Flexsys’s threats.

In support of this argument, KKPC relies on Klor’s, Inc. v. Broadway-Hale Stores,

Inc., 359 U.S. 207 (1959).

      In Klor’s, several manufacturers and distributors conspired among

themselves and with a major retailer, Broadway-Hale, either not to sell to Klor’s or

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to sell to it only at discriminatory prices and highly unfavorable terms. Id. at 208-

09. Klor’s is distinguishable in that it alleges a widespread vertical and horizontal

combination. KKPC fails to allege any such widespread combination and

specifically fails to allege the existence of a horizontal agreement among

competitors.

       In its operative complaint, KKPC alleges that: (1) the market of 6PPD

purchasers consists of only a handful of major tire manufacturers; (2) Flexsys

dominates that market with a 48-55% share; and (3) KKPC itself suffered injury.

KKPC also alleges that certain costs (e.g., tariffs and costs of constructing

chemical plants) limit entry into the market. KKPC does not, however, plausibly

allege that it is a low price competitor or that it provides a superior product.

Compare Pinhas v. Summit Health, Ltd., 894 F.2d 1024, 1032 (9th Cir. 1989) (“[If

Pinhas provides cheaper services], the preclusion of Pinhas from practicing could

conceivably injure competition by allowing other similar doctors to charge higher

prices for their services.”).

       Nor are KKPC’s additional allegations sufficient to allege an injury to

competition. KKPC does not allege that it lacks market strength relative to

Flexsys, nor that a substantial portion of the 6PPD market was foreclosed by

Flexsys’s threats. KKPC does not allege any injury to other sellers of 6PPD or to

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the 6PPD market. See Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 329

(1961) (explaining that, to assess injury to competition, courts should take into

account “the relative strength of the parties, the proportionate volume of commerce

involved in relation to the total volume of commerce in the relevant market area,

and the probable immediate and future effects which pre-emption of that share of

the market might have on effective competition therein”). Furthermore, KKPC

does not allege that 6PPD buyers suffer from higher prices or the lack of access to

a superior product. Thus, the decisions of two manufacturers to buy from Flexsys

do not suggest an illegal conspiracy. See Kendall v. Visa U.S.A., Inc., 518 F.3d
1042, 1049 (9th Cir. 2008) (“Allegations of facts that could just as easily suggest

rational, legal business behavior by the defendants as they could suggest an illegal

conspiracy are insufficient to plead a violation of the antitrust laws.”). Because

KKPC has failed to allege an injury to competition, we affirm the district court’s

dismissal of the complaint on this ground.1

II.   Motion to Supplement

      KKPC challenges the district court’s denial of KKPC’s motion to

supplement its complaint with allegations that Flexsys subsequently initiated sham

      1
        Because we affirm the district court’s dismissal on this ground, we need
not and do not consider Flexsys’s contention that alternate grounds support
dismissal.

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patent infringement litigation and an improper associated publicity campaign. We

disagree. The district court did not abuse its discretion in concluding that the

proposed supplemental allegations would address only the nature of the threats

directed at KKPC, not an injury to competition, which is needed to save the

complaint.

III.   Leave to Amend

       Although district courts should “freely give leave [to amend] when justice so

requires,” where amendment is futile, leave may be denied. Fed. R. Civ. P.

15(a)(2); Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 1007 (9th Cir.

2009). See also Chodos v. West Publ’g Co., 292 F.3d 992, 1003 (9th Cir. 2002)

(“[W]hen a district court has already granted a plaintiff leave to amend, its

discretion in deciding subsequent motions to amend is particularly broad.”

(quotation marks omitted)).

       The district court denied leave to amend on the ground of futility. The

district court criticized KKPC for its inability to allege an injury to competition

after two dismissals and five iterations of amendment, despite clear case law and a

previous warning that the district court would not be inclined to permit further

amendment. Moreover, both in the district court and in this court, KKPC has

failed to assert how it might remedy the complaint. We conclude that the district

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court acted within its discretion in denying KKPC an additional opportunity to

amend the complaint.

                                 CONCLUSION

      We AFFIRM the district court’s dismissal of KKPC’s third amended

complaint. We also AFFIRM the district court’s denials of KKPC’s motions to

supplement and to amend.

      AFFIRMED.

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