William Dominick et al v. Collectors Universe Inc et al, No. 2:2012cv04782 - Document 55 (C.D. Cal. 2012)
Court Description: ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS MOTION TO DISMISS SECOND AMENDED COMPLAINT 50 by Judge Otis D Wright, II: This action is hereby DISMISSED WITH PREJUDICE. The Clerk of Court shall close this case.(Made JS-6. Case Terminated.) (lc). Modified on 12/19/2012 (lc).
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William Dominick et al v. Collectors Universe Inc et al Doc. 55 O JS-6 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 12 13 WILLIAM DOMINICK; and WESTWOOD RARE COIN GALLERY, INC., 16 17 18 19 20 ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS [50] Plaintiffs, 14 15 Case No. 2:12-cv-04782-ODW(CWx) v. COLLECTORS UNIVERSE, INC.; CERTIFIED ASSET EXCHANGE, INC. a/k/a CERTIFIED COIN EXCHANGE; DAVID HALL RARE COINS; DAVID HALL; CASSI EAST; and MICHAEL BRANDOW; and DOES 1 through 10, inclusive, 21 22 Defendants. 23 I. 24 INTRODUCTION The Defendants in this matter collectively move to dismiss Plaintiffs’ Second 25 Amended Complaint (“SAC”). 26 papers filed in support of and in opposition to this Motion, the Court deems the matter 27 appropriate for decision without oral argument. Fed. R. Civ. P. 78; L.R. 7–15. For 28 the reasons discussed below, Defendants’ motion is GRANTED. (ECF No. 50.) Having carefully considered the Dockets.Justia.com II. 1 FACTUAL BACKGROUND 2 William Dominick is a full-time professional numismatist and rare-coin dealer 3 who owns Westwood Rare Coin Gallery, Inc. (“WRCG”). WRCG is a New Jersey 4 corporation in the business of selling rare coins, bullion, and other numismatic 5 material1 in California. 6 Plaintiffs in this case. (SAC ¶¶ 22, 25, 31.) Both Dominick and WRCG are 7 David Hall is also a full-time professional numismatist and rare-coin dealer. 8 (Id. ¶ 38.) Hall wears many hats: he owns David Hall Rare Coins (“DHRC”), a 9 California corporation that deals in rare coins and bullion; he acts as the president, 10 director, and chief executive officer of Collectors Universe, Inc., a Delaware 11 corporation engaged in business in the coin industry; he serves as the director of 12 Certified Coin Exchange (“CCE”), a Delaware corporation owned by Collectors 13 Universe that operates the main website for real-time trading of numismatic materials; 14 and he is a founding member and the chief executive officer of Professional Coin 15 Grading Service (“PCGS”), the service that grades most of the rare coins traded on the 16 CCE website. (Id. ¶¶ 40–50, 53–54.) Hall, DHRC, Collectors Universe, and CCE are 17 all named Defendants.2 18 Cassi East and Michael Brandow are additional Defendants in this action. East 19 is CCE’s president, while Brandow is CCE’s sales director. (Id. ¶¶ 57–58.) Hall, 20 East, and Brandow jointly manage CCE. (Id. ¶ 129.) 21 Defendants allegedly engaged in numerous acts to establish their control over 22 the relevant market of real-time trading in numismatic materials and eliminate their 23 competition, including Plaintiffs. Specifically, Plaintiffs take issue with Defendants’ 24 /// 25 26 27 28 1 Plaintiffs define “numismatic materials” as “all types of numismatic material, including bullion, rare coins, certified coins, bags, state quarters, eagles, foreign coins, and ancient currency.” (SAC ¶ 108.) 2 PCGS merged into Collectors Universe in 2008 and is no longer an independent corporate entity. (SAC ¶ 54.) 2 1 secret allocation agreement, exclusive-dealing agreement, and certain instances of 2 price fixing. 3 First, Plaintiffs allege Hall and DHRC entered into a secret allocation 4 agreement with third-party dealers who utilize the CCE website. (Id. ¶¶ 114, 159.) 5 According to Plaintiffs, this agreement “constitutes an unreasonable restraint on trade 6 because it secretly divides and distributes the customers on the CCE website primarily 7 among Hall, DHRC and Third Party Dealers, thereby limiting Plaintiffs’ access to 8 customers in the market for real-time trading in numismatic materials in the United 9 States.” (Id. ¶ 161.) 10 Second, Hall and DHRC allegedly entered into an exclusive-dealing agreement 11 with third-party dealers that afforded Defendants the benefit of a monopoly in the 12 market for rare coins and other numismatic materials. 13 agreement prevented Plaintiffs from accessing deals on the CCE website, and even 14 made them the victim of “sham offers” made by Defendants Hall or DHRC, or both. 15 (Id. ¶¶ 174–176.) Plaintiffs describe one such sham offer: “Dominick and/or WRCG 16 accepted Hall’s and/or DHRC’s offer to sell eleven gold commemorative coins on the 17 CCE website, but Hall and/or DHRC only delivered one of the eleven coins . . . 18 because Plaintiffs are not a part of the Exclusive Dealing Agreement [Hall and 19 DHRC] has with other dealers.” (Id. ¶¶ 175–76.) (Id. ¶¶ 172, 179.) This 20 Finally, Plaintiffs contend Defendants prepared the CCE price list in a manner 21 that constitutes illegal price fixing. (Id. ¶ 162.) Hall, East, and Brandow were 22 responsible for creating the CCE price list, and they selectively decided which prices 23 to disclose and failed to be transparent with how the price list was initially compiled. 24 (Id. ¶¶ 168–70.) This created problems because the CCE price list was supposed to 25 accurately provide CCE members and other price-reporting services with “the latest 26 spot metal and bullion coin prices.” (Id. ¶ 166.) 27 Plaintiffs additionally allege that Hall engaged in false advertising on the CCE 28 website. Specifically, Plaintiffs contend that Hall falsely claimed that PCGS-graded 3 1 rare coins are “valued accurately and impartially” and that rare-coin dealers can 2 become CCE members as long as they fulfill CCE’s requirements. (Id. ¶¶ 243, 254.) 3 According to Plaintiffs, neither of these statements are true. (Id. ¶ 225.) 4 Following this Court’s dismissal of portions of Plaintiffs’ First Amended 5 Complaint (“FAC”), Plaintiffs filed their SAC on October 10, 2012. As with the 6 FAC, the SAC asserts nine causes of action: (1) violation of Section 1 of the Sherman 7 Act against Hall and DHRC; (2) violation of Section 2 of the Sherman Act against 8 Hall and DHRC; (3) violation of Section 3 of the Clayton Act against Hall; 9 (4) violation of the Lanham Act against Hall; (5) unreasonable restraint of trade in 10 violation of the California Cartwright Act, Cal. Bus. & Prof. Code § 16720, against 11 Hall, DHRC, East, and Brandow; (6) unfair competition in violation of California’s 12 Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 17200, against Hall and 13 DHRC; (7) intentional interference with prospective economic advantage against 14 Collectors Universe, CCE, Hall, DHRC, East, and Brandow; (8) negligent interference 15 with prospective economic advantage against Collectors Universe, CCE, Hall, DHRC, 16 East, and Brandow; and (9) breach of contract against Collectors Universe, CCE, Hall, 17 DHRC, East, and Brandow. Defendants filed this Motion to Dismiss on November 18 12, 2012. (ECF No. 50.) 19 III. LEGAL STANDARD 20 Dismissal under Rule 12(b)(6) can be based on “the lack of a cognizable legal 21 theory” or “the absence of sufficient facts alleged under a cognizable legal theory.” 22 Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). A complaint 23 need only satisfy the minimal notice pleading requirements of Rule 8(a)(2)—a short 24 and plain statement—to survive a motion to dismiss for failure to state a claim under 25 Rule 12(b)(6). Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003); Fed. R. Civ. P. 26 8(a)(2). For a complaint to sufficiently state a claim, its “[f]actual allegations must be 27 enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. 28 Twombly, 550 U.S. 544, 555 (2007). While specific facts are not necessary so long as 4 1 the complaint gives the defendant fair notice of the claim and the grounds upon which 2 the claim rests, a complaint must nevertheless “contain sufficient factual matter, 3 accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. 4 Iqbal, 556 U.S. 662, 678 (2009). 5 Iqbal’s plausibility standard “asks for more than a sheer possibility that a 6 defendant has acted unlawfully,” but does not go so far as to impose a “probability 7 requirement.” Id. Rule 8 demands more than a complaint that is merely consistent 8 with a defendant’s liability—labels and conclusions, or formulaic recitals of the 9 elements of a cause of action do not suffice. Id. Instead, the complaint must allege 10 sufficient underlying facts to provide fair notice and enable the defendant to defend 11 itself effectively. 12 determination whether a complaint satisfies the plausibility standard is a “context- 13 specific task that requires the reviewing court to draw on its judicial experience and 14 common sense.” Iqbal, 566 U.S. at 679. Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). The 15 When considering a Rule 12(b)(6) motion, a court is generally limited to the 16 pleadings and must construe “[a]ll factual allegations set forth in the complaint . . . as 17 true and . . . in the light most favorable to [the plaintiff].” Lee v. City of L.A., 250 F.3d 18 668, 688 (9th Cir. 2001). Conclusory allegations, unwarranted deductions of fact, and 19 unreasonable inferences need not be blindly accepted as true by the court. Sprewell v. 20 Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Yet, a complaint should be 21 dismissed only if “it appears beyond doubt that the plaintiff can prove no set of facts” 22 supporting plaintiff’s claim for relief. Morley v. Walker, 175 F.3d 756, 759 (9th Cir. 23 1999). 24 As a general rule, leave to amend a complaint that has been dismissed should be 25 freely granted. Fed. R. Civ. P. 15(a). However, leave to amend may be denied when 26 “the court determines that the allegation of other facts consistent with the challenged 27 pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well 28 /// 5 1 Furniture Co., 806 F.2d 1393, 1401 (9th Cir.1986); see Lopez v. Smith, 203 F.3d 2 1122, 1127 (9th Cir. 2000). IV. 3 DISCUSSION 4 Defendants move to dismiss Plaintiffs’ SAC in its entirety. The Court first 5 considers Plaintiffs’ federal claims, which include antitrust claims under the Sherman 6 Act and the Clayton Act, as well as a false-advertising claim under the Lanham Act. 7 Because the Court holds that Plaintiffs’ federal claims do not contain sufficient factual 8 matter to survive Defendants’ Motion to Dismiss, the Court declines to exercise 9 supplemental jurisdiction over Plaintiffs’ state-law claims and therefore does not reach 10 those claims on the merits. 11 A. Antitrust Claims 12 Plaintiffs bring antitrust claims alleging (1) unreasonable restraint of trade in 13 violation of Section 1 of the Sherman Act, 15 U.S.C. § 1 (“Section 1”), and the 14 California Cartwright Act, Cal. Bus. & Prof. Code § 16720; (2) actual monopolization 15 in violation of Section 2 of the Sherman Act (“Section 2”); and (3) exclusive dealing 16 in violation of Section 3 of the Clayton Act, 15 U.S.C. § 14 (“Section 3”). As the 17 Court noted in its October 1, 2012 order dismissing Plaintiffs antitrust claims as 18 alleged in the FAC, each of Plaintiffs’ antitrust claims require a showing of market 19 power under the rule of reason. (ECF No. 38, at 10–14); see also Newcal Indus., Inc. 20 v. Ikon Office Solution, 513 F.3d 1038, 1044 n.3 (9th Cir. 2008) (“The ‘relevant 21 market’ and ‘market power’ requirements apply identically under” Section 1 and 22 Section 2.); Omega Envt’l, Inc. v. Gilbarco, Inc., 127 F.3d 1157, 1162 (9th Cir. 1997) 23 (“The main antitrust objection to exclusive dealing is its tendency to ‘foreclose’ 24 existing competitors or new entrants from competition in the covered portion of the 25 relevant market during the term of the agreement.”). Once again, Plaintiffs have 26 failed to plead market power sufficiently for motion-to-dismiss purposes. 27 /// 28 /// 6 1 Market power is defined as having the ability “to force a purchaser to do 2 something that he would not do in a competitive market.” Church & Dwight Co., Inc. 3 v. Mayer Labs., Inc., 868 F. Supp. 2d 876, 896 (N.D. Cal. 2012), vacated on other 4 grounds, Church & Dwight Co., Inc. v. Mayer Labs., Inc., No. C-10-4429 EMC, 2012 5 WL 1745592 (N.D. Cal. May 16, 2012). A plaintiff can prove market power either 6 directly or circumstantially. Id. Under the direct-evidence test, a plaintiff must allege 7 both restrictive output and supracompetitive prices. Id. Restrictive output exists only 8 when a defendant can limit marketwide output by reducing its own output. 9 Additionally, “artificially high” prices cannot be equated to supracompetitive prices 10 unless a plaintiff provides evidence to the contrary. See, e.g., id. at 14 (stating that 11 when a plaintiff is able to charge similarly high prices, allegations of a defendant’s 12 high prices are insufficient to prove supracompetitive prices). Id. 13 Under the circumstantial-evidence test, a plaintiff must “(1) define the relevant 14 market[;] (2) show that the defendant owns a dominant share of that market[;] and 15 (3) show that there are significant barriers to entry and that existing competitors lack 16 the capacity to increase their output in the short run.” Rebel Oil Co., Inc. v. Atlantic 17 Richfield Co., 51 F.3d 1421, 1434 (9th Cir. 1995). 18 The Court finds that Plaintiffs’ allegations satisfy neither the direct-evidence 19 test nor the circumstantial-evidence test. With respect to the direct-evidence test, the 20 SAC still fails to illustrate Defendants’ ability to affect the marketwide quantity of 21 rare coins by suppressing their own supply of rare coins—or that Defendants’ online 22 trading platform (CCE) could even do so in light of the various other available 23 channels for purchase and sale of rare coins outside the realm of real-time trading on 24 the Internet. 25 Under the circumstantial-evidence test, Plaintiffs define the relevant market as 26 online “real-time [dealer-to-dealer] trading in numismatic materials in the United 27 States” (SAC ¶¶ 80–81; see SAC ¶¶ 51–52, 86–87), and they explain that “[t]he CCE 28 website is the only marketplace for dealers to compete for the real-time sale and 7 1 purchase of sight-seen and sight unseen numismatic materials in the United States” 2 (SAC ¶ 52).3 Assuming the sustainability of the relevant market as Plaintiffs define it 3 (which definition the Court has already held is at least sufficient to survive a motion to 4 dismiss (ECF No. 38, at 10)), Plaintiffs’ allegation that CCE is the only dealer in that 5 market suffices to establish the first two elements of the circumstantial-element test 6 (market definition and market share). But Plaintiffs still struggle on the third prong— 7 barriers to competitors’ entry into the relevant market. 8 “A mere showing of substantial or even dominant market share alone cannot 9 establish market power . . . .” Rebel Oil, 51 F.3d at 1439. Thus, in addition to 10 defining the relevant market and demonstrating that the defendant owns a dominant 11 share of that market, an antitrust plaintiff must also “show that new rivals are barred 12 from entering the market and show that existing competitors lack the capacity to 13 expand their output to challenge” the anticompetitive conduct. See id.; see also 14 United States v. Syufy, 903 F.2d 659, 664 (9th Cir. 1990) (“A high market share, 15 though it may ordinarily raise an inference of monopoly power, will not do so in a 16 market with low entry barriers or other evidence of a defendant’s inability to control 17 prices or exclude competitors.”) 18 Entry barriers may be additional long-run costs not incurred by incumbent firms 19 in the relevant market but that must be incurred by any new entrant into that market. 20 Rebel Oil, 51 F.3d at 1439. Alternatively, entry barriers may be “factors in the market 21 that deter entry while permitting incumbent firms to earn monopoly returns.” Id. 22 (quoting L.A. Land Co. v. Brunswick Corp., 6 F.3d 1422, 1427–28 (9th Cir. 1993)). In 23 Rebel Oil, the Ninth Circuit identified the “main sources of entry barriers” as: 24 /// 25 /// 26 27 28 3 Plaintiffs note that there is another online dealer-to-dealer trading platform available in the United States: CoinNet. (SAC ¶ 51.) Plaintiffs distinguish CoinNet from CCE and exclude it from their definition of the relevant market on grounds that it “does not offer real-time trading.” (Id.) 8 3 (1) legal license requirements; (2) control of an essential or superior resource; (3) entrenched buyer preferences for established brands; (4) capital market evaluations imposing higher capital costs on new entrants; and, in some situations, (5) economies of scale. Id. 4 Here, Plaintiffs allege that the primary barriers to entry into the market for 5 online real-time dealer-to-dealer trading in numismatic materials are CCE’s alleged 6 secret allocation agreement and exclusive dealing agreement: 1 2 7 8 9 10 11 12 New rivals in the relevant market for real-time trading in numismatic materials in the United States are barred from entering the market because customers on the CCE website have already been divided and distributed among Hall, DHRC and Third Party Dealers pursuant to the Secret Allocation Agreement, and the Exclusive Dealing Agreement limits the sale of tangible rare coins and other numismatic materials in the United States to Hall, HRC, Third Party Dealers, and no one else. (SAC ¶ 118.) 13 14 But these “barriers” are not relevant to entry into the market Plaintiffs defined 15 in this case. The Court does not dispute that the alleged secret allocation and 16 exclusive-dealing agreements could prevent dealers and purchasers of numismatic 17 materials from participating fully in CCE’s platform. Yet because Plaintiff define the 18 relevant market as online real-time numismatic trading platforms, Plaintiffs antitrust 19 claims do not concern CCE’s users; they concern only CCE’s competitors in the 20 market for online real-time numismatic trading platforms—of which Plaintiffs allege 21 CCE currently has none. 22 Plaintiffs’ apparently confuse the nature of their own market definition. 23 Plaintiffs state that the “relevant market is the market for real-time trading in 24 numismatic materials in the United States” and that the “platform for the relevant 25 market is the CCE online trading platform on the internet [sic].” (SAC ¶¶ 80, 83.) On 26 this basis, Plaintiffs perfectly equate the relevant market with CCE’s customers. But 27 Plaintiffs misunderstand that a market is defined by products, not by users of those 28 products. Plaintiffs’ approach here would be akin to equating Time Warner Cable’s 9 1 high-speed Internet subscribers with the relevant market for high-speed Internet 2 providers in the Greater Los Angeles Area. Such a market would not include a single 3 provider’s subscribers, but rather all of the high-speed Internet providers in the 4 Greater Los Angeles Area, including Time Warner, AT&T, Verizon, and others. The 5 fact that CCE is currently the only real-time numismatic exchange provider in the 6 market as Plaintiffs define it does not change this fact, as new providers of a 7 reasonably interchangeable service could emerge at any given time, absent significant 8 entry barriers. 9 Further, to the extent Plaintiffs may contend the alleged secret allocation and 10 exclusive-dealing agreements could somehow preclude new online real-time trading 11 platforms from entering the market to compete with CCE, Plaintiffs plead no facts 12 explaining how this could be. Indeed, one could easily surmise that rare-coin dealers 13 spurned from CCE as a result of its secret allocation and exclusive-dealing agreements 14 could band together and create a comparable real-time trading platform to compete 15 with CCE. This prospect is even more realistic in light of CoinNet’s presence in the 16 online dealer-to-dealer market and Plaintiffs’ failure to explain even in the broadest 17 terms why CoinNet could not begin offering real-time services with relative ease. 18 Plaintiffs allege two further entry barriers related to customers of real-time 19 trading exchanges: (1) costs involved in finding customers in the relevant market that 20 are not already covered by the secret allocation and exclusive-dealing agreements 21 (SAC ¶ 119); and (2) access to CCE’s customers, which Plaintiffs contend are an 22 “essential resource” that CCE, Hall, and DHRC control (SAC ¶ 121). But there is no 23 indication in the SAC that CCE’s customers—the subjects of the secret allocation and 24 exclusive dealing agreements—could not also be customers of a new trading platform. 25 Thus, Plaintiffs fail to establish how CCE’s alleged division of its own customers 26 would constitute an entry barrier to a firm determined to compete with CCE. 27 Finally, Plaintiffs allege that Hall’s control of PCGS, CCE’s primary coin 28 grading service, would pose a barrier to entry into the market for real-time numismatic 10 1 exchange services. As with Plaintiffs’ other alleged entry barriers, this too fails for its 2 narrow-sighted focus on CCE, as opposed to a potential CCE competitor. While 3 Plaintiffs allege PCGS is CCE’s primary coin grading service, they do not contend it 4 is the primary (or even just a significant) grading service for the numismatic industry 5 at large. Were this the case, one could presume that Hall’s control of both PCGS and 6 CCE may pose an entry barrier to any new CCE competitor, which necessarily would 7 require coin grading services. But the SAC offers no basis by which to draw this 8 inference. 9 The only Rebel Oil entry barrier this Court can detect from Plaintiffs’ SAC is 10 the potential for entrenched numismatic-trader preferences for CCE since CCE the 11 only established real-time exchange—a barrier Plaintiffs do not explicitly allege. But 12 even if the Court could infer the existence of such a barrier from the facts alleged in 13 the SAC, the SAC still lacks sufficient facts demonstrating either the depth of any 14 such entrenchment or how big of a role real-time numismatic trading on the Internet 15 plays the broader market for the exchange of numismatic materials generally (as 16 compared to in-person trading and non-real-time trading on the Internet (like 17 CoinNet), for example). Without this context, it is impossible for the Court to discern 18 whether an entrenched preference for CCE could sufficiently preclude entrants into 19 the market for real-time numismatic trading such that CCE could be said to control 20 market power. 21 Plaintiffs therefore fail to establish any barriers to entry in the relevant market, 22 much less significant ones. Of course, Plaintiffs attempt to avoid this fate with respect 23 to their Section 1 claim by arguing the Court need not even look to relevant market 24 and market power because Defendants’ acts are per se illegal. To this end, Plaintiffs 25 contend that “[t]he SAC describes two specific agreements Hall and DHRC have with 26 select third party dealers which, individually and collectively, have the effect of 27 restricting a competitor’s access to and ability to compete in the relevant market.” 28 /// 11 1 (Opp’n 9.) Thus Plaintiffs’ core complaint is that Defendants secret allocation and 2 exclusive-dealing agreements have forced them out of Defendants’ CCE service. 3 The Court notes again, however (as it did in its October 1, 2012 Order ruling on 4 Defendants’ motion to dismiss Plaintiffs’ First Amended Complaint), that although 5 Plaintiffs allege price fixing, they still fail to allege sufficient facts demonstrating a 6 clear act of anticompetitive, per se illegal price fixing. See generally Nat’l Collegiate 7 Athletic Ass’n v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 103–04 (1984) (“Per se 8 rules are invoked when surrounding circumstances make the likelihood of 9 anticompetitive conduct so great as to render unjustified further examination of the 10 challenged conduct.”); Arizona v. Maricopa Cnty. Med. Soc’y, 457 U.S. 332, 361–62 11 (1982) (“[I]t is . . . well settled that this characterization [of price fixing] is not to be 12 applied as a talisman to every arrangement that involves a literal fixing of prices.”). 13 In sum, the antitrust laws are designed to protect competition, not competitors. 14 E.g., Syufy, 903 F.2d at 668. “When competition is impaired, producers may be able 15 to reap monopoly profits, denying consumers many of the benefits of a free market.” 16 Id. at 663. While this may perhaps have been the case here had Plaintiffs defined the 17 relevant market differently, Plaintiffs are the masters of their complaint and chose to 18 focus on competition between producers of platforms for real-time numismatic trading 19 on the Internet. Having chosen this market and taken three bites at the apple to date, 20 Plaintiffs still have alleged no facts to show how Defendants’ actions in operating 21 CCE has harmed any present or potential competition in the relevant market. Absent 22 such facts, the Court simply cannot find that Plaintiffs have alleged any plausible 23 antitrust claims against Defendants. 24 In light of Plaintiffs’ three failed opportunities to plead their antitrust claims 25 against Defendants, the Court hereby DISMISSES Plaintiffs’ first, second, and third 26 claims for violations of the antitrust laws WITH PREJUDICE. See AE ex rel. 27 Hernandez v. County of Tulare, 666 F.3d 631, 636 (9th Cir. 2012) (“A district court 28 abuses its discretion by denying leave to amend unless amendment would be futile.”). 12 1 B. Violation of the Lanham Act 2 In addition to their antitrust claims, Plaintiffs allege that Defendant David Hall 3 made false advertisements on the CCE trading website in violation of section 43(a) of 4 the Lanham Act, 15 U.S.C. § 1125(a)(1)(B). (SAC ¶¶ 241–59.) The two statements 5 at issue are (1) “that rare coins graded by PCGS, one of Hall’s companies and a 6 company owned by CU, are valued accurately and impartially” (SAC ¶ 243); and 7 (2) “that rare coin dealers can become members on CCE (a company of Hall’s) if they 8 meet the CCE membership requirements” (SAC ¶ 254). 9 contend that Plaintiffs have no standing to bring their Lanham Act claim because the 10 statements concern the partiality of grading services by PCGS and the membership 11 requirements for CCE—neither of which are named as defendants in Plaintiffs’ 12 Lanham Act claim. (Mot. 15.) Defendants primarily 13 In a false advertising suit, “a plaintiff establishes Article III injury if some 14 consumers who bought the defendant’s product under a mistaken belief fostered by 15 the 16 TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 825 (9th Cir. 2011) (internal 17 quotation marks and alterations omitted). In addition to Article III standing, a plaintiff 18 suing for false advertising under the Lanham Act must also have Lanham Act 19 standing. To establish Lanham Act standing, a plaintiff must demonstrate that the 20 false statement caused a “competitive” commercial injury. Id. at 826 (quoting Jack 21 Russell Terrier Network of N. Cal. v. Am. Kennel Club, Inc., 407 F.3d 1027, 1037 (9th 22 Cir. 2005)). In other words, the injury must hinder or be likely to hinder the plaintiff’s 23 ability to compete with the defendant. Id. defendant would have otherwise bought the plaintiff’s product.” 24 Analysis of the SAC demonstrates that Plaintiffs lack standing to bring their 25 Lanham Act claim against Hall. Curiously, Plaintiffs persist in alleging a Lanham 26 Act only against Hall, Plaintiffs’ “direct commercial competitor . . . in the numismatic 27 materials business.” (SAC ¶ 242.) But while portions of Plaintiffs’ SAC ascribe the 28 false statements to Hall (“Hall . . . made false advertisements on the CCE trading 13 1 website” (SAC ¶ 242)), other portions suggest that the false statements are more 2 properly attributable to PCGS and CCE, not Hall. For example, paragraph 247 notes 3 that PCGS “is permanently restrained and enjoined from representing, directly or by 4 implication, that PCGS grading is ‘objective’ . . . if such representation is contrary to 5 fact.” Moreover, that Hall owns PCGS and CCE is not to say that he made the false 6 statements. Plaintiffs’ own SAC alleges that CCE and PCGS are separate entities 7 (CCE a Delaware corporation, and PCGS a division of Collectors Universe, also a 8 Delaware corporation), even if Hall does own and operate them to some degree. 9 Because the false misrepresentations Plaintiffs complain of are more properly 10 attributable to PCGS and CCE, Plaintiffs must allege that the misrepresentations have 11 hindered their ability to compete with PCGS and CCE. But Plaintiffs have not alleged 12 their Lanham Act claim against PCGS or CCE, nor have they alleged that they 13 provide coin grading services that compete with PCGS or an online trading platform 14 that competes with CCE. 15 establish standing to bring their Lanham Act claim against Hall (or PCGS or CCE, for 16 that matter). Given Plaintiffs’ repeated failure to cure their pleading deficiencies with 17 respect to this claim, Plaintiffs’ Lanham Claim is hereby DISMISSED WITH 18 PREJUDICE. 19 C. The Court therefore finds that Plaintiffs again fail to California State-Law Claims 20 To supplement the foregoing federal claims, Plaintiffs allege several state-law 21 claims for (1) unfair competition; (2) intentional interference with prospective 22 economic advantage; and (3) negligent interference with prospective economic 23 advantage. But because the Court has dismissed all of Plaintiffs’ federal claims with 24 prejudice, the Court currently lacks federal-question jurisdiction. The Court therefore 25 declines to exercise supplemental jurisdiction over the remaining state law-claims 26 pursuant to 28 U.S.C. § 1367(c)(3). Ove v. Gwinn, 264 F.3d 817, 826 (9th Cir. 2001) 27 (“A court may decline to exercise supplemental jurisdiction over state-law claims 28 once it has dismissed all claims over which it has original jurisdiction.”); see also San 14 1 Pedro Hotel Co. v. City of L.A., 159 F.3d 470, 478 (9th Cir. 1998) (district courts not 2 required to provide explanation when declining jurisdiction under 28 U.S.C. 3 § 1367(c)(3)). V. 4 5 CONCLUSION For the above reasons, Defendants’ Motion to Dismiss Plaintiffs’ Second 6 Amended Complaint (ECF No. 50) is GRANTED. This action is hereby 7 DISMISSED WITH PREJUDICE. The Clerk of Court shall close this case. 8 9 IT IS SO ORDERED. 10 11 December 18, 2012 12 13 14 ____________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 15 16 17 18 19 20 21 22 23 24 25 26 27 28 15
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