In re Elevator Antitrust Litigation, No. 06-3128 (2d Cir. 2007)

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06-3128-cv In re Elevator Antitrust Litigation UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 August Term, 2006 (Argued: June 14, 2007 Decided: September 4, 2007) Docket No. 06-3128-cv - - - - - - - - - - - - - - - - - - - -x In re ELEVATOR ANTITRUST LITIGATION TRANSHORN, LTD., 1775 HOUSING ASSOCIATES, ROCHDALE VILLAGE, INC., BIRMINGHAM BUILDING TRADES TOWERS, INC., TRIANGLE HOUSING ASSOCIATES, L.P., BAY CREST CONDOMINIUM ASSOCIATION, OLEN COMMERCIAL REALTY CORP., RIVERBAY CORP., 181 MAPLE AVENUE ASSOCIATES, D.F. CHASE, INC., LENOX ROAD ASSOCIATES and TOWERS OF CORAL SPRINGS LTD., Plaintiffs-Appellants, JOSEPH M. BENNARDI, doing business as BUILDING SUPERS OF CAMDEN, INC., doing business as NEDMAC MANAGEMENT, INC., Consolidated-PlaintiffAppellant, -v.UNITED TECHNOLOGIES CORPORATION, OTIS ELEVATOR COMPANY, KONE CORPORATION, KONE, INC., SCHINDLER HOLDING, LTD., SCHINDLER ELEVATOR CORPORATION, THYSSENKRUPP AG, THYSSENKRUPP ELEVATOR CAPITAL CORP., and THYSSENKRUPP ELEVATOR CORP., 1 1 2 3 4 5 6 7 8 9 Defendants-Appellees. - - - - - - - - - - - - - - - - - - - -x Before: JACOBS, Chief Judge, STRAUB and B.D. PARKER, Circuit Judges. Appeal from a judgment entered by the United States 10 District Court for the Southern District of New York 11 (Griesa, J.) on June 6, 2006, granting defendants-appellees 12 motion to dismiss the complaint and denying leave to re- 13 plead. 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 We affirm. ERIC ALAN ISAACSON (Mark Solomon, Christopher M. Burke, David W. Mitchell, Tami Falkenstein Hennick, on the brief), Lerach, Coughlin, Stoia, Geller, Rudman & Robbins LLP, San Diego, CA, for PlaintiffsAppellants. Mary Jane Fait, Wolf Haldenstein Adler Freeman & Herz, LLP, New York, NY, for PlaintiffsAppellants. Nadeem Faruqi, Antonio Vozzolo, Beth A. Keller, Faruqi & Faruqi, LLP, New York, NY, for Plaintiffs-Appellants. MARK LEDDY (Leah Brannon, on the brief), Cleary Gottlieb Steen & Hamilton, LLP, Washington, DC, for Defendants-Appellees United Technologies Corporation and Otis Elevator Company. 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 Kenneth M. Kramer (Jerome S. Fortinsky, Paula Howell, on the brief), Shearman & Sterling LLP, New York, NY, for DefendantsAppellees Schindler Holding Ltd. and Schindler Elevator Corporation. Gerald Zingone (Michael Evan Jaffe, on the brief), Thelen Reid Brown Raysman & Steiner LLP, Washington, DC, for Defendants-Appellees Kone Corporation and Kone, Inc. Terry Myers (Anthony A. Dean, on the brief), Gibbons Del Deo, Dolan, Griffinger & Vecchione, P.C., New York, NY, for Defendant-Appellee ThyssenKrupp AG. Scott Martin (Christopher V. Roberts, on the brief), Weil Gotshal & Manges LLP, New York, NY, for Defendants-Appellees Thyssenkrupp Elevator Capital Corp., and Thyssenkrupp Elevator Corp. A. Paul Victor, Dewey Ballantine LLP, New York, NY, for Defendants-Appellees Thyssenkrupp Elevator Capital Corp., and Thyssenkrupp Elevator Corp. PER CURIAM: 39 This appeal is taken from a judgment of the United 40 States District Court for the Southern District of New York 3 1 (Griesa, J.), dismissing a complaint alleging that defendant 2 elevator companies conspired to engage in anticompetitive 3 conduct in violation of Sections 1 and 2 of the Sherman Act, 4 15 U.S.C. § 1 et seq. (the conspiracy claims ), and that 5 they unilaterally monopolized and attempted to monopolize 6 the maintenance market for their elevators, in violation of 7 Section 2 of the Sherman Act (the unilateral-monopolization 8 claims ). 9 plausible ground to support the inference of an unlawful We affirm. The conspiracy claims provide no 10 agreement, and the allegations of unilateral monopolization 11 fail to allege a prior course of dealing. 12 district court did not abuse its discretion by refusing 13 leave to amend the complaint. Finally, the 14 15 16 I Plaintiffs represent a putative class of persons who 17 purchased elevators and/or elevator maintenance and repair 18 services from defendants, sellers of elevators and 4 1 maintenance services.1 2 complaint alleges that: 3 2d Am. Compl. ¶¶ 5, 20-28. The (1) Defendants conspired to fix prices for the 4 sale and the continuing maintenance of elevators, 5 in violation of Section 1 of the Sherman Act, 15 6 U.S.C. § 1 (Count I); 7 (2) Defendants conspired to monopolize the 8 markets for the sale and maintenance of elevators, 9 in violation of Section 2 of the Sherman Act, 15 10 U.S.C. § 2 (Count II); and 11 (3) Each defendant unilaterally monopolized 12 and attempted to monopolize the maintenance market 13 for its own elevators by making it difficult for 14 independent maintenance companies (and each other) 15 to service each defendant s elevators, in 1 Defendants are: United Technologies Corporation and Otis Elevator Company (collectively Otis ); Kone Corporation and Kone, Inc. (collectively Kone ); Schindler Holding Ltd. and Schindler Elevator Corporation (collectively Schindler ); ThyssenKrupp AG, ThyssenKrupp Elevator Corporation, and ThyssenKrupp Elevator Capital Corporation (collectively Thyssen ). 5 1 violation of Section 2 of the Sherman Act 2 III X).2 3 4 (Counts As to the conspiracy claims, plaintiffs allege that, beginning in 2000, defendants agreed: 5 6 7 8 9 10 11 12 13 14 2d Am. Compl. ¶ 41. 15 was undertaken (and its effects felt) in Europe as well as 16 in the United States, and that the conspiracy was effected 17 by price fixing, bid rigging, and collusion to drive 18 independent repair companies out of business. 19 ¶¶ 41-43. 20 into alleged antitrust violations by defendants and their 21 affiliates, one in Italy (1998) and another by the European 22 Commission (2004). 23 to suppress and eliminate competition in the sale and service of elevators by fixing the price of elevators [and] replacement parts and services, rigging bids for contracts for elevator sales, allocating markets and customers for elevator sales and maintenance services, and rigging bids for contracts for elevator maintenance and repair services. Plaintiffs assert that the conspiracy 2d Am. Compl. The complaint references various investigations 2d Am. Compl. ¶¶ 62-69. As to the unilateral-monopolization claims, plaintiffs 24 assert that each defendant monopolized the maintenance 25 market for its own elevators by such measures as interfering 2 Counts III and IV are against Otis, V and VI, Kone; VII and VIII, Schindler; and IX and X, Thyssen. 6 1 with delivery of replacement parts and intentionally 2 designing their elevators to require proprietary maintenance 3 tools which are not made available to competing service 4 companies (e.g., embedded computer systems that can only be 5 interfaced with defendant-controlled handheld units). 6 Am. Compl. ¶¶ 50-57. 7 2d The district court granted defendants Rule 12(b)(6) 8 motion to dismiss on the ground that the claims lacked the 9 requisite factual predicate. In re Elevator Antitrust 10 Litig., No. 04 Civ. 1178, 2006 WL 1470994 (S.D.N.Y. May 30, 11 2006). 12 judgment in favor of defendants. 13 followed. The court denied leave to re-plead and entered Id. at *12. This appeal 14 15 16 II We review the district court s grant of a Rule 12(b)(6) 17 motion de novo, see In re Tamoxifen Citrate Antitrust 18 Litig., 466 F.3d 187, 200 (2d Cir. 2006), cert. denied, 127 19 S. Ct. 3001 (2007), draw[ing] all reasonable inferences in 20 plaintiffs favor, Freedom Holdings Inc. v. Spitzer, 357 21 F.3d 205, 216 (2d Cir. 2004) and accepting as true all the 7 1 factual allegations in the complaint, see Roth v. Jennings, 2 489 F.3d 499, 501 (2d Cir. 2007). 3 We affirm the district court s dismissal of the 4 conspiracy claims because plaintiffs are unable to allege 5 facts that would provide plausible grounds to infer an 6 agreement, Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 7 1965 (2007). 8 breadth of the Supreme Court s recent decision in Twombly. 9 Iqbal v. Hasty, 490 F.3d 143, 155 (2d Cir. 2007). Considerable uncertainty surrounds the But we 10 need not draw fine lines here; our precedents support 11 application of Twombly to the conspiracy claims asserted 12 under both Section 1 and Section 2.3 13 dismiss under Twombly, it is not enough to make allegations 14 of an antitrust conspiracy that are consistent with an 15 unlawful agreement; to be viable, a 3 To survive a motion to complaint must contain A narrow view of Twombly would have limited its holding to the antitrust context, or perhaps only to Section 1 claims; but we have concluded that Twombly affects pleading standards somewhat more broadly. See Iqbal, 490 F.3d at 157 ( We are reluctant to assume that all of the language of Bell Atlantic[ v. Twombly] applies only to section 1 allegations based on competitors parallel conduct or, slightly more broadly, only to antitrust cases. ); ATSI Commc ns, Inc. v. Shaar Fund, Ltd., ___ F.3d ___, No. 055132, 2007 WL 1989336, at *15 n.2 (2d Cir. July 11, 2007) ( We have declined to read Twombly s flexible plausibility standard as relating only to antitrust cases. (citing Iqbal, 2007 WL 1717803, at *11)). 8 1 enough factual matter (taken as true) to suggest that an 2 agreement [to engage in anticompetitive conduct] was made. 3 Twombly, 127 S. Ct. at 1965 (citation and internal quotation 4 marks omitted). 5 fact pleading of specifics, it does require enough facts to 6 nudge[ plaintiffs ] claims across the line from conceivable 7 to plausible. 4 While Twombly does not require heightened Twombly, 127 S. Ct. at 1974. 8 Plaintiffs argue that a plausible inference can be 9 drawn from three sources in the complaint: [A] averments of 10 agreements made at some unidentified place and time; [B] 11 averments of parallel conduct; and [C] evidence suggesting 12 anticompetitive wrongdoing by certain defendants in Europe. 13 These allegations are insufficient to establish a plausible 14 inference of agreement, and therefore to state a claim. 15 16 [A] Conclusory Allegations of Agreement. As the district court observed, the complaint enumerates basically 4 The potentially enormous cost of fact discovery was cited as a factor in Twombly; the Court explained that, while judges should be cautious before dismissing an antitrust complaint in advance of discovery, they must also keep in mind that proceeding to antitrust discovery can be expensive. Id. at 1966-67. Accordingly, district courts retain the power to insist upon some specificity in pleading before allowing a potentially massive factual controversy to proceed. Id. at 1967 (quoting Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U.S. 519, 528 n.17 (1983)). 9 1 every type of conspiratorial activity that one could imagine 2 . . . . 3 specification of any particular activities by any particular 4 defendant[; it] is nothing more than a list of theoretical 5 possibilities, which one could postulate without knowing any 6 facts whatever. 5 7 1470994, at *2-*3 (citing 2d Am. Compl. ¶¶ 43, 78, 85). 8 Such conclusory allegation[s] of agreement at some 9 unidentified point do[] not supply facts adequate to show The list is in entirely general terms without any In re Elevator Antitrust Litig., 2006 WL 10 illegality. Twombly, 127 S. Ct. at 1966; cf. Amron v. 11 Morgan Stanley Inv. Advisors Inc., 464 F.3d 338, 344 (2d 12 Cir. 2006) (concluding that, in resisting a motion to 5 Specifically, plaintiffs assert that, in order to effect the conspiracy, defendants: (a) Participated in meetings in the United States and Europe to discuss pricing and market divisions; (b) Agreed to fix prices for elevators and services; (c) Rigged bids for sales and maintenance; (d) Exchanged price quotes; (e) Allocated markets for sales and maintenance; (f) Collusively required customers to enter long-term maintenance contracts; and (g) Collectively took actions to drive independent repair companies out of business. 2d Am. Compl. ¶ 43. 10 1 dismiss, bald assertions and conclusions of law will not 2 suffice ). 3 [B] Parallel Conduct. Plaintiffs argue that certain 4 parallel conduct evinces a conspiracy, such as similarities 5 in contractual language, pricing, and equipment design. 6 Am. Compl. ¶¶ 41-42, 61-70. 7 constitute plausible grounds to infer an agreement 8 because, while that conduct is consistent with conspiracy, 9 [it is] just as much in line with a wide swath of rational 10 and competitive business strategy unilaterally prompted by 11 common perceptions of the market. 12 1964. 13 power and commercial goals (not to mention boilerplate); 14 similar contract language can reflect the copying of 15 documents that may not be secret; similar pricing can 16 suggest competition at least as plausibly as it can suggest 17 anticompetitive conspiracy; and similar equipment design can 18 reflect the state of the art. 19 conduct . . . gets the complaint close to stating a claim, 20 but without some further factual enhancement it stops short 21 of the line between possibility and plausibility of 2d But these allegations do not Twombly, 127 S. Ct. at Similar contract terms can reflect similar bargaining An allegation of parallel 11 1 entitlement to relief. 2 marks omitted). 3 [C] Id. at 1966 (internal quotation European Misconduct. Plaintiffs assert that the 4 conspiracy claims are rendered plausible by specific factual 5 allegations of defendants apparent anticompetitive 6 misconduct in Europe. 7 margin.6 ) 8 existence of a worldwide conspiracy; and even if the 9 misconduct took place only in Europe, it is alleged that the 10 (The particulars are set out in the The European misconduct is alleged to reflect the market in elevators is a global market, such that prices 6 Plaintiffs allege: that the Italian Antitrust Authority and the European Commission have initiated investigations into possible wrongdoing by the defendants, 2d Am. Compl. ¶¶ 62-66; that the European Commission raided the offices of each defendant and issued a statement that it has good reason to believe that the manufacturers [including . . . Kone Corporation, Schindler Holding, and ThyssenKrupp AG] may have shared between themselves the tenders for sale & installation of elevators . . . and may have colluded to restrict competition with regard to aftersales services, 2d Am. Compl. ¶ 66; that news reports claim that UTC and Kone Corporation have admitted wrongdoing by some of its European employees, 2d Am. Compl. ¶¶ 67-69; and that (subsequent to the filing of the complaint) extraordinary fines have been levied by the European Commission against defendants and their affiliates for various antitrust violations. [Pl. Ltr. Br. (June 6, 2007) at 3]. 12 1 charged in the European market affect the prices in the 2 United States and vice versa. 7 3 2d Am. Compl. ¶ 61. Plaintiffs provide an insufficient factual basis for 4 their assertions of a worldwide conspiracy affecting a 5 global market for elevators and maintenance services. 6 Allegations of anticompetitive wrongdoing in Europe--absent 7 any evidence of linkage between such foreign conduct and 8 conduct here--is merely to suggest (in defendants words) 9 that if it happened there, it could have happened here. 10 And, regarding the nature of the elevator market, plaintiffs 11 offer nothing more than conclusory allegations: for example, 12 there are no allegations of global marketing or fungible 13 products, see Empagran S.A. v. F. Hoffmann-LaRoche, 14 Ltd., 417 F.3d 1267, 1270 (D.C. Cir. 2005), no indication 15 that participants monitored prices in other markets, see 16 Dee-K Enters., Inc. v. Heveafil Sdn. Bhd, 299 F.3d 281, 17 295 (4th Cir. 2002), and no allegations of the actual 18 pricing of elevators or maintenance services in the United 7 Plaintiffs allege: that the effects [of defendants conspiracy] were felt by plaintiffs . . . in the United States, that the prices charged in the European market affect the prices in the United States and vice versa, and that pricing in Europe and the United States is intertwined. 13 1 States or changes therein attributable to defendants 2 alleged misconduct. 3 F.3d 191, 200 (2d Cir. 2001) ( To survive a Rule 12(b)(6) 4 motion to dismiss, an alleged product market must bear a 5 rational relation to the methodology courts prescribe to 6 define a market for antitrust purposes--analysis of the 7 interchangeability of use or the cross-elasticity of demand, 8 and it must be plausible. (citations and internal quotation 9 marks omitted)). See generally Todd v. Exxon Corp., 275 Without an adequate allegation of facts 10 linking transactions in Europe to transactions and effects 11 here, plaintiffs conclusory allegations do not nudge[ 12 their] claims across the line from conceivable to 13 plausible. 8 Twombly, 127 S. Ct. at 1974. 14 15 III 16 It is also alleged that each defendant unilaterally 17 employed exclusionary conduct to acquire and attempt to 18 acquire a monopoly in the maintenance market for its own 8 Because the pleadings do not state a claim, we need not consider the extra-territorial reach of the Sherman Act. See Hartford Fire Ins. Co. v. California, 509 U.S. 764, 796 (1993) ( [T]he Sherman Act applies to foreign conduct that was meant to produce and did in fact produce some substantial effect in the United States. ). 14 1 elevators, such as: designing the elevators to prevent 2 servicing by other providers (including each other); 3 refusing to sell competitors the parts, tools, software or 4 diagrams necessary to service the elevators; and obstructing 5 competitors attempts to purchase elevator parts. 6 Compl. ¶¶ 51-58. 7 refusal to deal with third-party maintenance providers 8 violates Section 2 of the Sherman Act. 9 94, 100, 106, 112, 118, 124, 130. 2d Am. Thus, plaintiffs contend that defendants 2d Am. Compl. ¶¶ 89, But because plaintiffs do 10 not allege that defendants terminated any prior course of 11 dealing--the sole exception to the broad right of a firm to 12 refuse to deal with its competitors--the allegations are 13 insufficient to state a unilateral-monopolization claim. 14 In Verizon Commc ns v. Trinko, 540 U.S. 398 (2004), the 15 Supreme Court explained that a refusal to deal with 16 competitors does not typically violate § 2: 17 18 19 20 21 22 23 24 25 26 27 Firms may acquire monopoly power by establishing an infrastructure that renders them uniquely suited to serve their customers. Compelling such firms to share the source of their advantage is in some tension with the underlying purpose of antitrust law . . . . [C]ompelling negotiation between competitors may facilitate the supreme evil of antitrust: collusion. Thus, as a general matter, the Sherman Act does not restrict the long recognized right of [a] trader or manufacturer engaged in an entirely private 15 1 2 3 4 Id. at 407-08 (quoting United States v. Colgate & Co., 250 5 U.S. 300, 307 (1919)); see also MetroNet Servs. Corp. v. 6 Qwest Corp., 383 F.3d 1124, 1131 (9th Cir. 2004). 7 obvious commercial interests would justify a competitor in 8 assuring its own control over the maintenance of the 9 elevators it markets, because maintenance is important in business, freely to exercise his own independent discretion as to parties with whom he will deal. Here, 10 upholding the product s reputation for reliability and 11 safety (no small considerations when it comes to elevators). 12 Trinko cautioned that the right to refuse to deal, 13 while capacious, is not unlimited: The high value that we 14 have placed on the right to refuse to deal with other firms 15 does not mean that the right is unqualified. 540 U.S. at 16 408 (quoting Aspen Skiing Co. v. Aspen Highlands Skiing 17 Corp., 472 U.S. 585, 601 (1985)). 18 been very cautious in creating exceptions to the right to 19 refuse to deal, the Trinko Court noted a sole exception, set 20 forth in the earlier case of Aspen Skiing, which Trinko 21 described as situated at or near the outer boundary of § 2 22 liability. 23 monopolist seeks to terminate a prior (voluntary) course of Id. at 409. Observing that it has That exception applies when a 16 1 dealing with a competitor. Id. (observing that [t]he 2 refusal to deal alleged in the present case does not fit 3 within the limited exception recognized in Aspen Skiing. 4 The complaint does not allege that Verizon voluntarily 5 engaged in a course of dealing with its rivals . . . . ). 6 The Trinko Court explained the relevance of a prior course 7 of dealing in antitrust analysis: The unilateral 8 termination of a voluntary (and thus presumably profitable) 9 course of dealing suggested a willingness to forsake short- 10 term profits to achieve an anticompetitive end. 11 (emphasis in original). 12 Id. Plaintiffs argue that Trinko only applies where there 13 is a pervasive regulatory scheme, which diminishes the 14 likelihood of antitrust harm. 15 Trinko did address the telecommunications regulatory scheme, 16 along with at least two other considerations, which 17 militated against creating further exceptions to the right 18 of refusal to deal. 19 considerations were not essential to Trinko s holding. 20 neither of two other Supreme Court cases dealing with this 21 exception involves a regulated industry. In arriving at its holding, Id. at 412-14. 17 But these And See Aspen Skiing, 1 472 U.S. at 587 (ski resorts); Eastman Kodak Co. v. Image 2 Technical Servs., 504 U.S. 451 (1992) (photocopiers). 3 The limited nature of this exception to the right of 4 refusal to deal is further supported by Eastman Kodak. 5 After five years working with independent service 6 organizations ( ISOs ) to provide maintenance services on 7 Kodak copiers, Kodak suddenly implemented a policy of 8 refusing to do business with the ISOs; as a result, ISOs 9 were unable to obtain parts . . . and many were forced out 10 of business. 11 Kodak adopted its [refusal to deal] policies as part of a 12 scheme of willful acquisition or maintenance of monopoly 13 power, it will have violated § 2. 14 Eastman Kodak does not expressly say that a Section 2 claim 15 premised on a refusal to deal cannot survive absent a prior 16 course of dealing, it was decided in that fact context, and 17 has been read to support that proposition: 18 19 20 21 22 23 24 25 Id. at 458. The Court concluded that [i]f Id. at 483. While [Initially,] Kodak sold copiers that customers could service themselves (or through independent service organizations). Having achieved substantial sales, Kodak then moved to claim all of the repair work for itself. That change had the potential to raise the total cost of copierplus-service above the competitive level-and . . . above the price that Kodak could have charged had 18 1 2 3 4 Schor v. Abbott Labs., 457 F.3d 608, 614 (7th Cir. 2006), 5 cert. denied, 127 S. Ct. 1257 (2007). 6 it followed a closed-service model from the outset. The unilateral-monopolization claims in this case do 7 not fall within the sole exception to the right of refusal- 8 to-deal: the complaint does not allege that defendants 9 terminated a prior relationship with elevator service 10 providers--a change which (by taking advantage of their 11 customers sunk costs) could evince monopolistic motives. 12 13 IV 14 We review a district court s denial of a motion to 15 amend for abuse of discretion. 16 Corp., 488 F.3d 586, 592 (2d Cir. 2007). 17 concluded that plaintiffs second amended complaint (at 18 issue here) contains as much specificity as plaintiffs can 19 muster consistent with Federal Rule of Civil Procedure 11.9 9 See Gorman v. Consol. Edison The district court At argument in district court, an attorney for plaintiffs suggested that she knew of facts supporting more specific allegations of misconduct in the United States; but when pressed as to the substance of those facts, or for an explanation for why they don t appear in the complaint, she replied: Your honor, I really don t feel at liberty to [disclose the information]. It is confidential. 19 1 In re Elevator Antitrust Litig., No. 04 Civ. 1178, 2006 WL 2 1470994, at *12 (S.D.N.Y. May 30, 2006). 3 record before us, we cannot say that this conclusion falls 4 outside the district court s discretion. Based on the 5 6 7 * * * Plaintiffs remaining arguments are less substantial 8 and without merit. 9 The judgment of the district court is affirmed. 20

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