POURfect Products v. KitchenAid, No. 2:2009cv02660 - Document 21 (D. Ariz. 2010)
Court Description: ORDER granting Defendant's 17 Motion to Dismiss with respect to Count 1; Counts 2 and 3 are dismissed without prejudice; directing the Clerk to terminate this action. Signed by Judge G Murray Snow on 8/30/10.(REW)
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POURfect Products v. KitchenAid 1 Doc. 21 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 10 11 12 13 14 15 16 POURfect Products, a division of DYCE) LLC, an Arizona limited liability) ) company, ) ) Plaintiff, ) ) vs. ) ) KitchenAid, a division of Whirlpool) ) Corporation, a Delaware corporation, ) ) Defendant. ) ) No. CV-2009-02660-PHX-GMS ORDER 17 18 19 Pending before the Court is Defendant’s Motion to Dismiss (Doc. 17). For the following reasons, the Court grants the Motion. BACKGROUND 20 21 Defendant KitchenAid (“KitchenAid” or “Defendant”) manufactures and sells stand 22 mixers and mixer attachments directly to consumers and through retailers. KitchenAid 23 allegedly sells approximately 80% of the stand mixers in the United States and 90% of the 24 beater attachments for KitchenAid stand mixers. Plaintiff POURfect Products (“POURfect” 25 or “Plaintiff”) makes and sells an aftermarket beater attachment (the “Scrape-A-Bowl”) for 26 use with KitchenAid stand mixers. 27 In early 2009, POURfect had existing and prospective contracts with unspecified 28 retailers to supply the Scrape-A-Bowl, which allegedly would have resulted in sales of not Dockets.Justia.com 1 less than $8,000,000 in 2010. But, in May 2009, KitchenAid advised its trade customers, 2 which were four major retailers, that “bowl-scraper accessories” may shorten the life of the 3 stand mixer motor and cause damage that would be excluded from warranty coverage. 4 KitchenAid advised its retailers that it had performed tests that showed that the use of bowl- 5 scraper accessories caused motor temperatures to exceed those allowed under the 6 Underwriter Laboratories’ requirements. 7 The Amended Complaint alleges, however, that KitchenAid’s tests did not conform 8 to the Underwriter Laboratories’ testing requirements and did not fairly test the bowl-scraper 9 beaters in a manner generally representative of actual service conditions. Further, the 10 Amended Complaint alleges that the use of KitchenAid attachments caused greater motor 11 problems than did Scrape-A-Bowl beaters under actual service conditions. POURfect claims 12 that KitchenAid’s false and misleading statements to its retailers, with a specific intent to 13 destroy competition, has caused POURfect to lose profits based on beater attachment sales. 14 Count One of POURfect’s Complaint alleges that KitchenAid violated Section 2 of 15 the Sherman Act (15 U.S.C. § 2). Counts Two and Three allege state law claims based on 16 product disparagement and interference with contractual relations. On May 3, 2010, the 17 Court issued an order granting Defendant’s previous motion to dismiss in part, dismissing 18 Plaintiff’s federal claim with leave to amend and declining to exercise pendent jurisdiction 19 over the remaining two state law claims. (Doc. 15). Plaintiff filed an amended complaint on 20 May 13, and Defendant again moves to dismiss. 21 LEGAL STANDARD FOR MOTION TO DISMISS 22 To survive dismissal for failure to state a claim pursuant to Federal Rule of Civil 23 Procedure 12(b)(6), a complaint must contain more than “labels and conclusions” or a 24 “formulaic recitation of the elements of a cause of action[;]” it must contain factual 25 allegations sufficient to “raise a right to relief above the speculative level.” Bell Atl. Corp. 26 v. Twombly, 550 U.S. 544, 555 (2007). While “a complaint need not contain detailed factual 27 allegations . . . it must plead ‘enough facts to state a claim to relief that is plausible on its 28 face.’” Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir. 2008) (quoting -2- 1 Twombly, 550 U.S. at 570). “A claim has facial plausibility when the plaintiff pleads factual 2 content that allows the court to draw the reasonable inference that the defendant is liable for 3 the misconduct alleged.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 4 550 U.S. at 556). The plausibility standard “asks for more than a sheer possibility that a 5 defendant has acted unlawfully. Where a complaint pleads facts that are ‘merely consistent 6 with’ a defendant’s liability, it ‘stops short of the line between possibility and plausibility of 7 entitlement to relief.’” Id. (quoting Twombly, 550 U.S. at 555) (internal citations omitted). 8 Similarly, legal conclusions couched as factual allegations are not given a presumption of 9 truthfulness, and “conclusory allegations of law and unwarranted inferences are not sufficient 10 to defeat a motion to dismiss.” Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). 11 12 DISCUSSION I. Section 2 of the Sherman Act 13 As explained in its previous Order, a claim for actual monopolization under Section 14 2 of the Sherman Act requires (1) the “possess[ion] [of] monopoly power,” (2) that power 15 exercised “in a properly defined relevant market,” and (3) “anticompetitive conduct.” (Doc. 16 15) (citing United States v. Grinnell Corp., 384 U.S. 563, 570–71 (1966); Verizon Commc’ns 17 Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004)). 18 A. 19 Dismissal is appropriate because Plaintiff has not alleged a relevant market. “Failure 20 to identify a relevant market is a proper ground for dismissing a Sherman Act claim.” Tanaka 21 v. Univ. of S. Cal., 252 F.3d 1059, 1063 (9th Cir. 2001). The “relevant market” includes both 22 the relevant geographic market, as well as the relevant product market, including “product 23 use, quality, and description.” Id. (internal quotation omitted). Relevant Market 24 The Amended Complaint repeatedly speaks of monopoly power in the stand-mixer 25 market, the overall mixer-attachment market, and the market for various KitchenAid mixer 26 attachments, none of which necessarily bears a sufficient relationship in and of itself to 27 aftermarket scraper attachments for KitchenAid mixers. 28 Complaint alleges a market of attachments for KitchenAid mixers, “market power” “with -3- For instance, the Amended 1 respect to” the KitchenAid stand mixer (but not necessarily with respect to aftermarket 2 attachments), and the “relevant market of aftermarket attachments” generally (without any 3 specific mention of KitchenAid-brand stand mixers). (Id. at ¶ 6, 7, 12, 13). Further, when 4 discussing KitchenAid’s attachment’s, the Amended Complaint discusses the “dough hook, 5 grain mill, meat grinder and ice cream maker,” (Id. at ¶ 11), without clarifying whether these 6 types of attachments are part of the relevant market and without ever alleging that 7 KitchenAid makes an attachment similar to the Scrape-A-Bowl. It appears that both 8 KitchenAid and POURfect make numerous types of aftermarket attachments, for which the 9 Scrape-A-Bowl and any alleged KitchenAid equivalent are but one type. Accordingly, 10 clarification of the market is critical. The Response likewise offers no clarification, alluding 11 to “the market” generally, the “market for mixers,” the market for “useful attachments,” and 12 the “market for aftermarket attachments for KitchenAid” mixers. (Doc. 18 at 1–5). 13 Despite the Amended Complaint’s failure to clarify the relevant market or submarket, 14 to the extent Plaintiff intends to allege a relevant market for a particular type of attachment 15 (i.e. a bowl-scraper style attachment like the Scrape-A-Bowl) for use on KitchenAid stand 16 mixers, Plaintiff must meet the standard set forth in Universal Avionics Systems Corporation 17 v. Rockwell International Corporation, 184 F. Supp.2d 947 (D. Ariz. 2001). Upon further 18 review of the claims asserted, it again seems that Plaintiff’s claims for antitrust injury make 19 sense only when considered within the bounds of a market limited to particular types of 20 aftermarket attachments for KitchenAid stand mixers. Plaintiff misinterprets the Court’s 21 previous citation to Universal Avionics, which explained that courts are generally reluctant 22 to define a relevant product market as a single brand of product, such as derivative 23 aftermarkets for a particular manufacturer’s line of base products. Id. at 954. For example, 24 the proposed relevant market in Universal Avionics was flight management systems for 25 aircraft equipped with integrated flight control systems manufactured by the plaintiff’s 26 competitor, id., which is analogous to a potential market in this case for particular types of 27 aftermarket attachments to KitchenAid stand mixers. “Because it makes no economic sense 28 to punish a manufacturer for asserting the ‘natural’ monopoly in the sale and distribution of -4- 1 its own products, courts have historically declined to limit their antitrust analysis to a 2 defendant’s brand of products alone.” Id. 3 “However, in very limited circumstances it is possible for ‘switching costs,’ 4 ‘information costs,’ and a ‘lock-in’ to create a potential for aftermarket power in the 5 derivative aftermarkets for the manufacturer’s own equipment.” Id. Specifically, for such 6 a lock-in to occur, a plaintiff must allege facts making the following four factors plausible: 7 8 9 10 11 12 1. High “switching costs”: A substantial number of customers must have made brand-specific investments that still have a useful life but that are substantially unrecoverable if they shift to other brands; 2. High “information costs”: A substantial number of those customers must be too ignorant of “lifecycle” prices to protect themselves by judicious interbrand comparisons or by contract before they become locked in; 3. Ability to exploit ignorant customers: The knowledgeable customers who can protect themselves must either be unimportant to the defendant or be protected by effective price discrimination from above market prices paid by the ignorant; and 13 14 4. Ability to exploit must be “substantial”: The defendant's resulting ability to exploit the ignorant must be “substantial.” 15 Id. at 955. The Court speculated in its previous Order that POURfect intended to define the 16 relevant product market as the aftermarket for a single brand of product—particular types of 17 aftermarket attachments for KitchenAid stand mixers. 18 Nonetheless, Plaintiff’s Response to the present Motion asserts that Universal 19 Avionics is irrelevant and that it need not allege facts relevant to these factors to state a claim 20 under Section 2 of the Sherman Act. Contrary to Plaintiff’s assertion, this analysis of the 21 relevant product market is applicable to both Sherman Act Section 1 and Section 2 claims. 22 See Univ. Avionics, 184 F. Supp.2d at 952 (explaining that defining the relevant product 23 market is a fundamental element of both Section 1 and Section 2 Sherman Act claims); see 24 also U.S. Anchor Mfg., Inc. v. Rule Indus., Inc., 7 F.3d 986, 994 (11th Cir. 1993) (“Defining 25 the market is a necessary step in any analysis of market power and thus an indispensable 26 element in the consideration of any monopolization or attempt case arising under section 2.”). 27 To the extent Plaintiff concedes it does not allege any such facts, the Court finds that Plaintiff 28 -5- 1 has not alleged a relevant product market of particular aftermarket attachments to KitchenAid 2 stand mixers. 3 Even if Plaintiff is correct that the relevant market is not so narrow as to be required 4 to meet the Universal Avionics test, Plaintiff still has not alleged facts defining the relevant 5 market as a broader submarket, i.e. as a market for mixer attachments generally, and certainly 6 not has alleged facts supporting a generalized market of all mixer-related products. 7 Typically, a product market includes “the pool of goods or services that qualify as economic 8 substitutes because they enjoy reasonable interchangeability of use and cross-elasticity of 9 demand.” Thurman Indus., Inc. v. Pay ‘N Pak Stores, Inc., 875 F.2d 1369, 1374 (9th Cir. 10 1989). Plaintiff offers no allegation or argument that stand mixers and/or any or all mixer 11 attachments are largely economic substitutes or reasonably interchangeable, or that they 12 enjoy cross-elasticity of demand. 13 Plaintiff likewise has not alleged facts supporting such a submarket. In considering 14 whether a relevant market exists, the Ninth Circuit considers “whether ‘the product and its 15 substitutes are reasonably interchangeable by consumers for the same purpose,’ as well as 16 ‘industry or public recognition of the submarket as a separate economic entity, the product’s 17 peculiar characteristics and uses, unique production facilities, distinct customers, distinct 18 prices, sensitivity to price changes, and specialized vendors.’” Coalition for ICANN 19 Transparency, Inc. v. VeriSign, Inc., ___F.3d___, 2010 WL 2701095, at *10 (9th Cir. 2010) 20 (citing M.A.P. Oil Co., Inc., v. Texaco Inc., 691 F.2d 1303, 1306 (9th Cir. 1982) (internal 21 quotations omitted)). Plaintiff alleges no facts relating to the recognition of any submarket 22 as a separate economic entity, no facts relating to any group of products’ peculiar 23 characteristics and uses, and no facts relating to production facilities, distinct customers, or 24 prices. 25 B. 26 Even assuming Plaintiff had alleged a relevant market, Plaintiff also has failed to 27 allege that KitchenAid possessed monopoly power within the relevant market. Monopoly 28 power is “‘the power to control prices or exclude competition.’” Forsyth v. Humana, Inc., Monopoly Power -6- 1 114 F.3d 1467, 1475 (9th Cir. 1997) (quoting Grinnell, 384 U.S. at 571). To allege 2 monopoly power, a plaintiff must allege facts supporting either a direct-proof theory or a 3 circumstantial-evidence theory of liability. Forsyth, 114 F.3d at 1475. The direct-proof path 4 requires allegations of “restricted output and supracompetitive prices,” see id., neither of 5 which is alleged in the Amended Complaint. The circumstantial-evidence theory requires 6 the plaintiff to allege facts that: (1) define the relevant market, (2) show that the defendant 7 owns a dominant share of that market, and (3) show that there are significant barriers to entry 8 and show that existing competitors lack the capacity to increase their output in the short run.” 9 Id. at 1476 (internal quotations omitted). As discussed supra, the Amended Complaint does 10 not properly define the relevant market and thus does not allege monopoly power. Even so, 11 Plaintiff has failed to allege the second and third elements required to utilize circumstantial- 12 evidence theory of monopoly power. With respect to KitchenAid’s alleged dominant share 13 of the market, the Response concedes that its allegations focus on KitchenAid’s dominance 14 of the market for stand mixers, not the market for KitchenAid stand mixer attachments. 15 POURfect’s claims, however, appear to be based on aftermarket attachments, not on stand 16 mixers themselves; accordingly, Plaintiff’s discussion of the stand mixer market is 17 inapposite. To the extent the Amended Complaint could be read broadly to support an 18 argument that KitchenAid possesses monopoly power in the alleged aftermarket-attachment 19 market, Plaintiff has not pointed to any such facts. Likewise, Plaintiff’s Response points to 20 no part of the Amended Complaint alleging that competitors face significant barriers to entry 21 or that existing competitors lack the capacity to increase their output in the short run. 22 C. 23 POURfect’s Sherman Act claim is based on allegations that KitchenAid disparaged 24 POURfect’s product to four retailers in May 2009. As the Court stated in its previous Order, 25 the disparagement of a rival ordinarily does not result in anticompetitive conduct sufficient 26 to state a Section 2 claim. Am. Prof’l Testing Servs., Inc. v. Harcourt Brace Jovanovich Legal 27 & Prof’l Publ’n, Inc., 108 F.3d 1147, 1151 (9th Cir. 1997). Therefore, Plaintiff must make, 28 in addition to other requirements, at least “a ‘preliminary showing of significant and Anticompetitive Conduct -7- 1 more-than-temporary harmful effects on competition (and not merely upon a competitor or 2 customer)’ before these practices can rise to the level of exclusionary conduct.”1 Id. (quoting 3 3 P. Areeda & D. Turner, Antitrust Law ¶ 737b at 278 (1978)); see also United States v. 4 Microsoft Corp., 253 F.3d 34, 58 (D.C. Cir. 2001) (holding that an act is anticompetitive only 5 if it “harm[s] the competitive process and thereby harm[s] consumers” because “harm to one 6 or more competitors will not suffice”). The Amended Complaint does not appear to add any 7 facts to allege harm on the competitive process, nor does the Complaint explain how the 8 alleged harm is to the competitive process as opposed to POURfect as a competitor. Rather, 9 as with the original complaint, the Amended Complaint focuses on harm to POURfect, rather 10 than on harm to competition generally. In fact, while the Amended Complaint now alleges 11 that KitchenAid products constitute a large share of both the stand mixer and KitchenAid- 12 attachment markets, nothing else in the Amended Complaint discusses harm to other 13 competitors. Rather, the Amended Complaint seems to be based on the faulty premise that 14 other companies, which may compete with both KitchenAid and POURfect, are irrelevant 15 to stating a Sherman Act claim. As the Response offers no argument why a discussion of the 16 market and its many competitors is not essential, the Court again dismisses Plaintiff’s claim. 17 II. The Court Declines To Exercise Pendant Jurisdiction. 18 When a district court “dismisses [federal claims] leaving only state claims for 19 resolution, the court should decline jurisdiction over the state claims and dismiss them 20 without prejudice.” Les Shockley Racing, Inc. v. Nat’l Hot Rod Ass’n, 884 F.2d 504, 509 (9th 21 Cir. 1989). Only in the “unusual” case should federal courts retain jurisdiction over the state 22 law claims. Gini v. Las Vegas Metro. Police Dept., 40 F.3d 1041, 1046 (9th Cir. 1994). In 23 this determination, courts consider “economy, convenience, fairness, and comity.” 24 Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 351 (1988). As explained in its previous 25 26 27 28 1 TYR Sport, Inc. v. Warnaco Swimwear, Inc., 2010 WL 1948608, at *8 (C.D. Cal. May 3, 2010), explains that the requirement of showing enduring effects on competition generally was separate from, and in addition to, the requirement of showing six factors from Harcourt Brace, 108 F.3d at 1152. -8- 1 Order, these factors favor dismissal of the state law claims without prejudice. (Doc. 15 at 2 9–10).2 CONCLUSION 3 Plaintiff fails to sufficiently plead a claim for a violation of Section 2 of the Sherman 4 5 Act. Plaintiff has not asked for further leave to amend. IT IS THEREFORE ORDERED that Defendant’s Motion to Dismiss (Doc. 17) is 6 7 GRANTED with respect to Count 1. 8 IT IS FURTHER ORDERED that Counts 2 and 3 are dismissed without prejudice. 9 IT IS FURTHER ORDERED directing the Clerk of the Court to terminate this 10 11 action. DATED this 30th day of August, 2010. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 In its response to the previous motion to dismiss, POURfect explained that supplemental jurisdiction is the “only” basis of jurisdiction over the state-law claims and asserted that, “[i]f there were no federal law claim, there would be no justification for the court to exercise supplemental jurisdiction over the state law claims,” for to do so “would require an inappropriate exercise of the court’s supplemental jurisdiction.” (Doc. 12 at 5). -9-
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