Opinion
Civil Action 1:22-cv-01275-NYW-SKC
03-03-2023
CROWNALYTICS, LLC, Plaintiff, v. SPINS LLC, et al., Defendants.
RECOMMENDATION RE: DEFENDANTS' MOTIONS TO DISMISS [DKTS. 40 & 42]
S. KATO CREWS, UNITED STATES MAGISTRATE JUDGE
In the market for natural and organic consumer packed goods (NOCPG), manufacturers of these goods utilize point-of-sale (POS) tracking data to optimize their sales and marketing strategies. [Dkt. 1 at ¶4.] After the manufacturers purchase POS data from companies like Defendants SPINS LLC and Information Resources, Inc. (IRI), they often retain data-analytics services from companies like Plaintiff Crownalytics, LLC. [Id. at ¶¶4-8.] According to Plaintiff, there are only three companies that presently harvest POS data for NOCPG manufacturers: SPINS, IRI, and The Nielsen Company (not a party). [Id. at ¶¶22-24.]
SPINS has exclusive data harvesting contracts with smaller or regional natural and organic retailers, while IRI harvests data from large grocery stores and retail chains. [Id. at ¶23.] ¶ 2014, SPINS and IRI reached an agreement to coordinate the sale of their respective data into a package called the SPINS bundle. [Id. at ¶26.] SPINS and IRI have built relationships with various retail channels over many years. Due to SPINS exclusive contracts, replication of the SPINS bundle is impossible, and it is the only source of “cross-channel visibility across the full [NOCPG] market.” [Id. at ¶27.]
Before the actions underlying the claims in this case, Plaintiff and Defendants enjoyed a cooperative relationship where NOCPG manufacturers would buy the SPINS bundle then provide the information to Plaintiff for data analysis based on third-party access agreements. [Id. at ¶32.] Although SPINS and IRI also offered data-analytics, Plaintiff and Bedrock Analysis (not a party) were the leading providers. [Id. at ¶¶38-39.]
During the spring and summer of 2021, SPINS and IRI began limiting third-party data-analysts' access to Defendants' data, including the SPINS bundle. [See generally id. at ¶¶52-67.] As a result, if manufacturers wanted to use third-party analytics providers (like Plaintiff), they were required to buy more expensive and “inferior data,” which was nearly useless for the purpose of market analysis. [Id. at ¶59.] And if the manufacturers wanted to continue using the SPINS bundle, they were required to retain SPINS for data analysis. [Id. at ¶65.] Because of this allegedly anticompetitive behavior, other data-analytic services have been forced to consolidate their businesses or exit the market altogether. [Id. at ¶79.]
Plaintiff filed its Complaint on May 23, 2022, asserting claims against SPINS and IRI under the Sherman Act, 15 U.S.C. § 1, et seq., and the Colorado Antitrust Act, Colo. Rev. Stat. § 16-4-101, et seq. Plaintiff also asserts claims for tortious interference with existing and potential business relations and breach of contract against SPINS. Defendants filed separate Motions to Dismiss seeking dismissal of this action in its entirety [Dkts. 40 and 42]. These matters are before this Court on referral for a recommendation.[Dkt. 43.]
Many of Defendants' arguments overlap or are equally applicable to both, and therefore, the Court primarily refers to them together. To the extent any arguments diverge, the Court address them specifically.
The Court has reviewed the Complaint, both Motions, the related briefing, and applicable law.No hearing is necessary. For the following reasons, the Court RECOMMENDS Defendants' Motions be GRANTED IN PART and DENIED IN PART.
IRI attaches a copy of the cease-and-desist letter and Plaintiff's response to its Motion to Dismiss. Because the arguments are inherently factual in nature, the Court declines to consider these attachments. Prager v. LaFaver, 108 F.3d 1185, 1189 (10th Cir. 1999) (a court may in its discretion decline to consider documents attached to a motion to dismiss even if it could properly do so).
STANDARD OF REVIEW
Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a court may dismiss a complaint for “failure to state a claim upon which relief can be granted.” See Fed.R.Civ.P. 12(b)(6). The Court accepts the well-pleaded facts as true and views the allegations in the light most favorable to the non-movant. Casanova v. Ulibarri, 595 F.3d 1120, 1124-25 (10th Cir. 2010). But the Court is not “bound to accept as true a legal conclusion couched as a factual allegation.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To survive a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Id. at 678 (internal quotation marks omitted).
The Twombly/Iqbal pleading standard requires courts to take a two-prong approach to evaluating the sufficiency of a complaint. Id. at 678-79. The first prong requires the court to identify which allegations “are not entitled to the assumption of truth” because, for example, they state legal conclusions or merely recite the elements of a claim. Id. at 678. The second prong requires the court to assume the truth of the well-pleaded factual allegations “and then determine whether they plausibly give rise to an entitlement to relief.” Id. at 679. “Accordingly, in examining a complaint under Rule 12(b)(6), [courts] will disregard conclusory statements and look only to whether the remaining, factual allegations plausibly suggest the defendant is liable.” Khalik v. United Air Lines, 671 F.3d 1188, 1191 (10th Cir. 2012). The standard is a liberal one, and “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that recovery is very remote and unlikely.” Dias v. City & Cty. of Denver, 567 F.3d 1169, 1178 (10th Cir. 2009).
As a general observation of the briefing in this matter, the Court notes Plaintiff and Defendants each attempt to side-step around allegations not particularly favorable to their position. This only supports the Court's conclusion this matter is not amendable to resolution at this stage.
ANALYSIS
A. The Sherman Act
The Sherman Act is a federal statute prohibiting restraints on trade. The purpose of the Act “is to protect the public from the failure of the market.” Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458 (1993). Generally, Section 1 of the Act prohibits contracts and conspiracies “in restraint of trade or commerce among the several States[.]” 15 U.S.C. § 1. Section 2 prohibits monopolization, attempts to monopolize, and conspiracies to monopolize “any part of trade or commerce among the several States[.]” 15 U.S.C. § 2.
1. Sherman Act Standing
Defendants contend Plaintiff lacks standing to bring its claims because it has failed to allege an “antitrust injury” as required by the Act. [Dkts. 40 at pp.10; 42 at p.21.] The Court disagrees.
To establish Article III standing, Plaintiff must allege (1) it has suffered an injury in fact that is concrete and particularized, and actual or imminent; (2) the injury is traceable to Defendants' conduct; and (3) a favorable federal court decision is likely to redress the injury. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)). Antitrust standing, however, requires a heightened inquiry-a plaintiff must show an antitrust injury and a causal connection between a defendant's antitrust violation and the alleged antitrust injury. Tal v. Hogan, 453 F.3d 1244, 1253 (10th Cir. 2006). An antitrust injury is “an injury of the type the antitrust laws were designed to prevent and that flows from that which makes defendants' acts unlawful.” Abraham v. Intermountain Healthcare, Inc., 461 F.3d 1249, 1267 (10th Cir. 2006).
The allegations in the Complaint meet this threshold and, at least at this stage of the proceedings, are sufficient to plausibly allege antitrust injury. Plaintiff alleges Defendants have entered into an agreement which has restrained competition for the POS data-analytic services Plaintiff provides to NOCPG manufacturers. Plaintiff further alleges these unlawful acts have injured its business because it has lost customers and will likely lose more, and Defendants' conduct effectively precludes Plaintiff from gaining new customers. [Dkt 1 at ¶87.] These well-pleaded allegations provide a plausible basis for antitrust standing. Plaintiff alleges an injury, a restraint of competition that the Sherman Act is specifically designed to prevent, and an injury flowing from concerted action by Defendants. See Compliance Mktg., Inc. v. Drugtest, Inc., No. 09-cv-01241-JLK, 2010 WL 1416823, at *4 (D. Colo. Apr. 7, 2010).
The Court discusses the factual allegations supporting this assertion below. See Section A.3 infra.
Defendants also argue Plaintiff must further allege injury to competition. Although Plaintiff disputes this is a requirement of antitrust standing, the Court need not address this question because even if injury to competition is required, Plaintiff has sufficiently pleaded competitive harm. According to the allegations in the Complaint, Defendants' actions have not only reduced Plaintiff's ability to survive in the marketplace, but other data-analysis firms have also been forced to consolidate or exit the market altogether.[Dkt. 1 at ¶79.] Thus, the Court recommends finding Plaintiff's Complaint survives the challenge to standing.
Defendants challenge this and other of Plaintiff's allegations as conclusory. Allegations are deemed “conclusory” where they state a legal conclusion without supplying a factual narrative which supports that conclusion, such that they “amount to nothing more than a ‘formulaic recitation of the elements' of a ... claim”. Ashcroft v. Iqbal, 556 U.S. 662, 681 (2009) (quoting Twombly, 550 U.S. at 555). For example, were this a conclusory allegation, Plaintiff would allege little more than “the Defendants' actions unreasonably restrained trade.” But here, Plaintiff alleges supporting facts, such as other data-analytics companies were forced to consolidate or exit the market. While this allegation is thin, it is nevertheless an allegation of fact the Court must accept as true.
2. Relevant Market
To maintain an antitrust claim, it is critical a plaintiff sufficiently define the relevant market. Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965) (“Without a definition of [the relevant] market there is no way to measure [the defendant's] ability to lessen or destroy competition.”). An appropriately defined market consists of the relevant product market and relevant geographic market. Plaintiff alleges the relevant geographic market is national. Defendants do not challenge this aspect of the relevant market. Therefore, the Court focuses its analysis on the allegations of the relevant product markets for NOCPG data and data analytics.
A plaintiff must specifically define the relevant product market by reference to “the reasonable interchangeability of use or the cross-elasticity of demand between the product [in question] and substitutes for it.” Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962). In plainer terms, this means the inquiry focuses on “whether there are substitute products such that when the price of product A goes up, consumers switch to product B.” Total Renal Care, Inc. v. W. Nephrology & Metabolic Bone Disease, P.C., No. 08-cv-0513-CMA-KMT, 2009 WL 2596493, at *7 (D. Colo. Aug. 21, 2009) (citing Telecor Comm'cns, Inc. v. Sw. Bell, 305 F.3d 1124, 1131 (10th Cir.2002)). Notably, market definition “is a deeply fact-intensive inquiry, [and therefore,] courts hesitate to grant motions to dismiss for failure to plead a relevant product market.” Christou v. Beatport, LLC, 849 F.Supp.2d 1055, 1066 (D. Colo. 2012) (citing Todd v. Exxon Corp., 275 F.3d 191, 199-200 (2d Cir. 2001)).
Regarding the relevant market for NOCPG data, Plaintiff alleges Defendants are two of only three providers collecting, storing, and selling retail tracking data to NOCPG manufacturers. [Dkt. 1 at ¶22.] The Complaint alleges IRI collects POS data from large grocery chains and retail outlets, while SPINS has exclusive contracts with specialized local and regional natural/organic retailers for their POS data. [Id. at ¶23] The third company, Nielsen, collects data similar in nature to IRI. [Id. at ¶24.]
SPINS argues Plaintiff's market definition fails because it is too narrow and does not account for Nielsen's data as a potential substitute. The Court disagrees. While Plaintiff does not use the phrase “cross-elasticity of demand” when alleging the relevant product market, that is not fatal to its Complaint. Christou, 849 F.Supp.2d at 1065. This is because, in addition to alleging consumers consider Nielsen a third choice or last choice in this market, Plaintiff also alleges SPINS' contracts with local and regional organic retailers are exclusive. [Dkt. 1 at ¶¶23, 27.] Plaintiff further alleges the SPINS bundle is “the industry's only source of cross-channel visibility across the full market landscape.” [Id. at ¶27.] These allegations alone make it plausible that SPINS gathers exclusive and relevant data-particularly to those in the natural and organic manufacturing market-that Nielsen cannot replicate. Further, Plaintiff alleges SPINS has prohibited customers from harmonizing SPINS data with Nielsen data. [Dkt. 1 at p.17 n.7.] Consequently, the Court concludes Plaintiff has plausibly alleged the relevant product market, including sufficient facts to establish “the reasonable interchangeability of use or the cross-elasticity of demand” between the SPINS bundle and any substitutes offered by Nielsen.
With respect to the data-analytics market, SPINS argues Plaintiff has not sufficiently accounted for a manufacturer's ability to bring data analysis in-house. [Dkt. 40 at p.27.] SPINS relies on Fed. Trade Comm'n v. Cardinal Health, Inc., where the District Court for the District of Columbia observed, “[c]ourts have generally recognized that when a customer can replace the services of a wholesaler with an internally-created delivery system, this ‘captive output' (i.e. the self-production of all or part of the relevant product) should be included in the same market.” 12 F.Supp.2d 34, 48 (D.D.C. 1998). The court went on to say, however, that “it can only be considered to the extent that such inclusion reflects its competitive significance in the relevant market prior to the merger.” Id. (emphasis added).
It is noteworthy this opinion issued after an extensive evidentiary hearing.
Here, the Complaint acknowledges some manufacturers perform data analysis themselves. But according to the allegations, the customers capable of this are larger and more sophisticated manufacturers. [Dkt. 1 at ¶34.] The Complaint further alleges these large manufacturers nevertheless retain outside assistance to supplement their in-house analysis, while other manufacturer customers rely entirely on outside analytics providers to avoid the costs associated with hiring and retaining in-house experts. [Id. at ¶34.] And it alleges SPINS prohibited manufacturers from performing in-house analysis if they were using Plaintiff's analytic software tools. [Id. at ¶71.]
Although this presents a closer question than the relevant NOCPG data market, the Court concludes these allegations sufficiently address the cross-elasticity of in-house analysis and finds Plaintiff's pleading amounts to “more than a cursory mention of a relevant product . . . market.” Total Renal Care, Inc., 2009 WL 2596493, at *7. And because of the factual nature of these allegations, these questions are better addressed at a later stage of the proceedings.
Having concluded the Complaint plausibly alleges antitrust standing and the relevant market(s), the Court now turns to Plaintiff's claims for relief.
3. Unreasonable Restraint on Trade (Claim One)
To state a plausible claim for unreasonable restraint on trade in violation of Section 1 of the Sherman Act, a plaintiff must allege sufficient facts showing, “‘the defendant entered a contract, combination, or conspiracy that unreasonably restrains trade in the relevant market.'” Full Draw Prods. v. Easton Sports, Inc., 182 F.3d 745, 756 (10th Cir. 1999) (quoting TV Communications Network, Inc. v. Turner Network Television, Inc., 964 F.2d 1022, 1027 (10th Cir. 1992)). At the pleading stage, there must be ample factual allegations “‘to suggest that an agreement was made ... [and] to raise a reasonable expectation that discovery will reveal evidence of illegal agreement.'” Kissing Camels Surgery Ctr., LLC v. Centura Health Corp., No. 12-cv-3012-WJM-BNB, 2014 WL 560462, at *4 (D. Colo. Feb. 13, 2014) (quoting Twombly, 550 U.S. at 556). A plaintiff can establish the requisite agreements with evidence the conspiring parties “had a conscious commitment to a common scheme designed to achieve an unlawful objective.” Id. (citing Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 764 (1984)).
Defendants contend Plaintiff has failed to adequately allege an unlawful agreement between SPINS and IRI. Where, as here, a complaint makes allegations of parallel conduct in support of a Section 1 claim, the allegations “must be placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action.” Twombly, 550 U.S. at 557. Plaintiff alleges during the summer of 2021, SPINS and IRI moved to limit Plaintiff's access to their databases, including the SPINS bundle. [Dkt. 1 at ¶¶52-65.] IRI argues Plaintiff fails to even allege parallel conduct, noting IRI sent Plaintiff a cease-and-desist letter in May 2021, while SPINS did not officially terminate the third-party access agreements until May 2022. Taken in isolation, these allegations likely would not state parallel conduct.
But this argument overlooks Plaintiff's allegations that SPINS began the process of limiting access to its data, including the SPINS bundle, contemporaneously with IRI's letter. Moreover, the Complaint further alleges an agreement between SPINS and IRI for the sale of the SPINS bundle to their customers, and that they informed customers they would only be able to access the full data purchased (including the bundle) if they also retained SPINS for analytic services. [Id. at ¶¶63-65.] Plaintiff also alleges Edricco Reina, SPINS' agent, admitted or acknowledged that given the exclusive nature of the SPINS bundle, third-party data-analytics services would not exist in the future. [Id. at ¶67.]
SPINS' characterization of Mr. Reina's statements as “subjective musings” is an argument better made on summary judgment.
These allegations, taken together and construed in the light most favorable to Plaintiff, support a plausible inference of an agreement between SPINS and IRI to unreasonably restrain the data-analytics market. The Court, therefore, concludes Plaintiff has given Defendants fair notice as to the basis for this claim, and Plaintiff states a plausible claim for unreasonable restraint on trade. Full Draw Prods., 182 at 755-56 (“In the end, what is determinative is whether ... it cannot be said that defendants did not have fair notice of the plaintiff's claims.”).
Although Plaintiff's allegations primarily concern SPINS' actions, it is IRI's continued authorization of the SPINS bundle that supports an inference it is a willing participant in this alleged restraint on trade.
4. Unilateral Refusal to Deal (Claims Two and Three)
Generally, purely unilateral conduct does not violate Section 2 of the Sherman Act because “businesses are free to choose whether or not to do business with others and [are] free to assign what prices they hope to secure for their own products.” Novell, Inc. v. Microsoft Corp., 731 F.3d 1064, 1072 (10th Cir. 2013) (cleaned up). A discrete exception to that rule, however, is the theory of unilateral refusal to deal. This requires a plaintiff to demonstrate “a preexisting voluntary and presumably profitable course of dealing between the monopolist and rival.” Id. at 1074. In addition, “the monopolist's discontinuation of the preexisting course of dealing must ‘suggest[] a willingness to forsake short-term profits to achieve an anti-competitive end.'” Id. (quoting Verizon Commc'ns Inc. v. L. Offs. of Curtis v. Trinko, LLP, 540 U.S. 398, 409 (2004)). Defendants contend Plaintiff has failed to state a claim of unilateral refusal to deal. The Court agrees.
Even if the Court were to presume Plaintiff established a voluntary and profitable relationship existed between it and Defendants, there are no well-pleaded allegations that Defendants' conduct indicated a willingness to sacrifice short-term profits. Plaintiff alleges Defendants' plan caused Defendants' product to be less valuable to those customers who preferred to use a third-party data analyst. [Dkt. 1 at ¶¶59-63, 110, 123.] Critically, however, the Complaint does not allege any customers stopped buying Defendants' product to retain Plaintiff's services, or more directly, that Defendants have lost any profit in the short term. Instead, the allegations in the Complaint suggest Defendants' decisions “came about as a result of a desire to maximize the company's immediate and overall profits.” Novell, Inc. v. Microsoft Corp., 731 F.3d 1064, 1076 (10th Cir. 2013). To be sure, Plaintiff alleges some customers were “coerced” into leaving Plaintiff from the beginning, and many followed thereafter, to switch to SPINS. [Dkt. 1 at ¶¶69,74.]
As presently alleged, the Complaint does not plausibly establish either Defendants' willingness to sacrifice short-term profits. The Court recommends these claims be dismissed.
5. Tying (Claim Four)
A tying arrangement under the Sherman Act “is an agreement by a party to sell one product-the ‘tying product'-only on condition that the buyer also purchase a second product-the ‘tied product'-or at least agree not to buy that product from another supplier.” SolidFX, LLC v. Jeppesen Sanderson, Inc., 935 F.Supp.2d 1069, 1078 (D. Colo. 2013) (quoting Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 461-62 (1992)), aff'd, 841 F.3d 827 (10th Cir. 2016). To succeed on a per se tying claim, a plaintiff must show that “(1) two separate products are involved; (2) the sale or agreement to sell one product is conditioned on the purchase of the other; (3) the seller has sufficient economic power in the tying product market to enable it to restrain trade in the tied product market; and (4) a ‘not insubstantial' amount of interstate commerce in the tied product is affected.” Suture Express, Inc. v. Owens & Minor Distribution, Inc., 851 F.3d 1029, 1037 (10th Cir. 2017). Defendants challenge elements two and three.
a. Conditioned Sale - The Second Element
Defendants, argue Plaintiff's allegations fail to sufficiently establish a tying agreement because Plaintiff has not identified specific contracts or parties to those contracts wherein a sale of NOCPG data (tying product) was conditioned on buying SPINS' data analytics services (tied product). The Court disagrees.
Defendants' cited cases each involved a plaintiff who alleged little more than legal conclusions masquerading as facts. For example, in CCBN.Com, Inc. v. Thomson Fin., Inc., 270 F.Supp.2d 146 (D. Mass. 2003), the plaintiff's allegations were “upon information and belief” and did little more than parrot the element of a tying claim without providing any factual underpinnings. The district court, consequently, concluded the plaintiff failed to allege a tie. Id. at 154-55. Similarly, in Garshman v. Universal Res. Holding, 824 F.2d 223 (3d Cir. 1987), the plaintiff's “factual allegations” merely recited the test for unreasonable restraint on trade, which the Third Circuit found insufficient. And in Five Smiths, Inc. v. Nat'l Football League Players Ass'n, 788 F.Supp. 1042 (D. Minn. 1992), the court confirmed the uncontroversial truism that general allegations of conspiracy are insufficient to maintain a claim. The Court is not persuaded these cases-even if they were binding precedent-require antitrust claims to be pleaded with greater specificity than other claims. See Hunt-Wesson Foods, Inc. v. Ragu Foods, Inc., 627 F.2d 919, 924 (9th Cir. 1980) (“There is no special rule requiring more factual specificity in antitrust pleadings.”); see also Statement of Particular Matters-Antitrust, Monopoly, and Restraint of Trade, 5 Fed. Prac. & Proc. Civ. § 1228 (4th ed.) (“There is no reason for the federal courts to revert to the technical concepts of pleading that existed prior to the adoption of the federal rules in order to solve the inherent difficulties that are presented by antitrust actions.”).
Here, Plaintiff alleges Defendants would only permit customers to purchase access to the NOCPG data (which included data exclusive to SPINS) on the condition they also purchased SPINS analytic services. [Dkt. 1 at ¶¶32-35, 139.] Plaintiff also alleges, as a result, many of its customers cancelled or terminated their contracts with Plaintiff to hire SPINS, despite their desire to stay with Plaintiff. [Id. at ¶¶68-69, 74.] Contrary to Defendants' assertions otherwise, there is no requirement that Plaintiff establish the existence of specific contracts, and therefore, these are indeed allegations of fact sufficient to plausibly allege a conditioned sale of a tying product.
Defendants also rely on Plaintiff's allegation that Red Fox has apparently been exempted from the conditioned sales. To be sure, this may ultimately weigh against Plaintiff's claim, but given Plaintiff's allegations regarding Red Fox's limited market power and its inability to act as a bona fide competitor, the Court is not convinced Plaintiff has pleaded itself out of court via these allegations. Rather, the issue is one better addressed at a later stage of the proceedings.
b. Economic Power - Third Element
Evaluating the relevant tying market requires an appropriate product market and geographic market. Lantec, Inc. v. Novell, Inc., 306 F.3d 1003, 1024 (10th Cir. 2002) The Court has already concluded Plaintiff has sufficiently alleged the relevant markets; consequently, “the question now becomes whether Plaintiff sufficiently alleged [Defendants'] economic power in the identified tying [market].” Chase Mfg., Inc. v. Johns Manville Corp., No. 19-cv-00872-MEH, 2020 WL 1433504, at *6 (D. Colo. Mar. 23, 2020). “Market power is the ability to force a purchaser to do something that he would not do in a competitive market.” Id.
“While market share is relevant to the determination of the existence of market or monopoly power, market share alone is not dispositive to establish market power.” Chase Mfg., Inc., 2020 WL 1433504, at *7 (citing Reazin v. Blue Cross & Blue Shield of Kan., Inc., 899 F.2d 951, 968 (10th Cir. 1990)). In this instance, even if the Court were to accept SPINS argument that Plaintiff failed to sufficiently allege market share, Plaintiff's other allegations plausibly allege both Defendants have market power in the NOCPG data market. Plaintiff alleges Defendants are two of only three providers of NOCPG data, with the third provider being a last choice of consumers.Plaintiff also makes allegations concerning the significant barriers to entry in the data market. [Dkt. 1 at ¶¶28-29.] And critically, Plaintiff alleges the SPINS bundle is highly valuable and cannot be replicated given SPINS exclusive contracts with local and regional specialty grocers and distributors. Fortner Enterprises, Inc. v. U.S. Steel Corp., 394 U.S. 495, 503 (1969) (“[C]rucial economic power may be inferred from the tying product's desirability to consumers or from uniqueness in its attributes.”) (cleaned up).
SPINS relies on IRI's amended complaint filed in Info. Res., Inc. v. Dun & Bradstreet Corp., No. 96 Civ. 5716(LLS) (S.D.N.Y. 1997) for the argument “Nielsen is no fringe player” in the market. The Court notes the case is over twenty-five years old and is based on allegations dating back even further. Thus, despite Plaintiff attaching the case to its Complaint, the Court is not inclined to consider that case for an accurate description of the present market(s). Further, given the allegations in the Complaint regarding Nielsen's limited market power today, the Court again concludes these are matters raising factual disputes that are not appropriate for resolution on a motion to dismiss.
Taking all reasonable inferences in Plaintiff's favor, Plaintiff has plausibly alleged Defendants “[have] the ability to force [customers] to do something they would not do in a competitive market and, thus, sufficiently alleges” Defendants have market power. Chase Mfg., Inc., 2020 WL 1433504, at *8.
6. Conspiracy to Monopolize (Claim Five)
To establish conspiracy to monopolize under Section 2 of the Sherman Act, the plaintiff must plead: “[1] the existence of a combination or conspiracy to monopolize . . . [2] overt acts done in furtherance of the combination or conspiracy . . . [3] an effect upon an appreciable amount of interstate commerce . . . [and] [4] a specific intent to monopolize.” Olsen v. Progressive Music Supply, Inc., 703 F.2d 432, 438 (10th Cir. 1983). Defendants contend Plaintiff has failed to allege the existence of a conspiracy or the specific intent to monopolize.
Concerning the first element, Defendants rely on their argument Plaintiff failed to sufficiently plead the existence of a contract, combination, or conspiracy that unreasonably restrains trade. The Court concludes otherwise for the reasons already discussed above. Those same allegations also support a plausible inference of Defendants' intent to monopolize. Specifically, Plaintiff alleges SPINS' agent admitted that given SPINS' requirement customers use SPINS data analysis service, the third-party data analytics market would cease to exist. Plaintiff also alleges IRI ceded at least part of its own data-analytics business to SPINS and continued authorizing use of the SPINS bundle. All of these allegations support a plausible inference these parties intended to drive Plaintiff and other data analytics businesses from the market.
Whether Plaintiff can prove Defendants' specific intent to monopolize is an entirely different matter-particularly considering Defendants' arguments that they could not monopolize the analytics market because of both Nielsen's and Red Fox's presence. But these are fact-intensive inquires that cannot be resolved at this stage and which further suggest dismissal is not warranted at this time. See Altitude Sports & Ent., LLC v. Comcast Corp., No. 19-cv-3253-WJM-MEH, 2020 WL 8255520, at *12 (D. Colo. Nov. 25, 2020).
B. State Law Claims
1. Colorado Antitrust Claims (Claims Six, Seven, Eight)
Defendants' arguments regarding Plaintiff's Colorado antitrust claims rely entirely on their arguments under the Sherman Act. Consequently, the Court's above recommendations are the same here. The Court, therefore, recommends Plaintiff's claim for unilateral refusal to deal (Claim Seven) be dismissed.
2. Tortious Interference with Business Relations (Claim Nine)
SPINS contends Plaintiff has failed to state a claim for tortious interference with existing and prospective business relations. The Court agrees.
First, a claim for tortious interference with existing business relations requires a plaintiff to show the defendant “(1) was aware of the existence of the contract; (2) intended that one of the parties breach the contract; (3) induced the party to breach the contract or make it impossible for him or her to perform; and (4) acted ‘improperly' in causing the breach.” Hertz v. Luzenac Grp., 576 F.3d 1103, 1118 (10th Cir. 2009) (citing Krystkowiak v. W.O. Brisben Cos., 90 P.3d 859, 871 (Colo. 2004)). For the claim to succeed there must be a breach of contract between Plaintiff and a third party; thus, if “the contract has been fully performed, then there has been no interference.” Id.
The Complaint alleges Defendants' conduct caused customers to leave and “terminate their agreements with [Plaintiff],” [Dkt. 1 at ¶¶69, 74] but it does not allege these terminations were in breach of those contracts. Consequently, Plaintiff has not plausibly alleged the elements of intentional interference with existing business relations.
Second, “[t]ortious interference with prospective business relations requires essentially the same elements as with current business relations, except that it does not require an existing contract.” AMG Nat'l Corp. v. Wright, No. 20-cv-02857-PAB-KLM, 2021 WL 4170459, at *10 (D. Colo. Sept. 14, 2021) (citing MDM Grp. Assocs., Inc. v. CX Reinsurance Co., 165 P.3d 882, 886 (Colo.App. 2007)). Plaintiff must plausibly allege SPINS' improper and intentional interference prevented the formation of a contract between Plaintiff and a third party. Id. This showing requires “a reasonable likelihood or reasonable probability that a contract would have resulted.” Id.
Here, Plaintiff alleges only that “potential new customers opted not to reach out to [Plaintiff] in the first place[.]” But this is too vague to plausibly allege a reasonable likelihood that a contract would have resulted or that SPINS' alleged interference prevented those alleged contracts. Rather, as presently pleaded, these unidentified potential customers were a “mere hope, which will not suffice.” AMG Nat'l Corp., 2021 WL 4170459, at *10 (citing Hertz v. Luzenac Grp., 576 F.3d 1103, 1119 (10th Cir. 2009)). The Court recommends Plaintiff's claim for tortious interference with business relations be dismissed as a result.
3. Breach of Contract (Claim Ten)
SPINS' sole argument concerning Plaintiff's contract claim is an argument that venue is inappropriate in Colorado. A civil action may be filed in “a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred....” 28 U.S.C. § 1391(b)(1). In the Tenth Circuit, a plaintiff bears the burden of proving proper venue. See Pierce v. Shorty Small's of Branson, 137 F.3d 1190, 1192 (10th Cir.1998) (district court appropriately dismissed for improper venue where defendant controverted facts in plaintiff's complaint regarding venue, and plaintiff failed to come forward with any contrary evidence).
In evaluating the propriety of venue, “the Court must accept the well-pleaded allegations of the complaint as true to the extent that they are uncontested by the defendant's affidavits.” Karl W. Schmidt & Assocs., Inc. v. Action Envtl. Sols., LLC, 2014 WL 6617095, at *2 (D. Colo. Nov. 21, 2014) (citing Hancock v. AT & T Co., 701 F.3d 1248, 1260-61 (10th Cir. 2012)). “Moreover, unless the balance is strongly in favor of the [defendant], the plaintiff's choice of forum should rarely be disturbed.” Scott v. Buckner Co., 388 F.Supp.3d 1320, 1324 (D. Colo. 2019) (cleaned up).
Here, SPINS presents no evidence supporting its venue arguments. Instead, it relies on the allegations it is a Delaware corporation headquartered in Illinois and that it breached the contract in Illinois. This, however, overlooks Plaintiff's allegations that it is a Colorado LLC with its principal place of business in Longmont, Colorado. [Dkt. 1 at ¶4.] Plaintiff further alleges it entered a contract with SPINS to provide consulting services and did, in fact, provide those services. [Id. at 183-85.]
SPINS faults Plaintiff for failing to present evidence in support of its venue arguments, but neither did SPINS. SPINS venue arguments relied solely on the sufficiency of the pleadings.
Without any evidence to the contrary, and construed in the light most favorable to Plaintiff, these allegations support a reasonable inference Plaintiff negotiated the contract in Colorado and performed its consulting services from here. Further, given its principal place of business in this state, it is reasonable to infer Plaintiff suffered any related economic damages in Colorado. The Court concludes Plaintiff has made a prima facie showing that venue is proper in this forum, and therefore, recommends SPINS motion to dismiss on this basis be denied.
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Based on the foregoing, the Court RECOMMENDS Defendants' Motions to Dismiss [Dkts. 40 and 42] be GRANTED IN PART and DENIED IN PART.
IT IS FURTHER RECOMMENDED, Plaintiff's claims for unilateral refusal to deal against SPINS and IRI and Plaintiff's claim for tortious interference with business relations against SPINS be DISMISSED.
The parties have 14 days after service of this recommendation to serve and file any written objections to obtain reconsideration by the District Judge to whom this case is assigned. Fed.R.Civ.P. 72(b). The party filing objections must specifically identify those findings or recommendations to which the objections are made. The District Court need not consider frivolous, conclusive, or general objections. A party's failure to file such written objections to proposed findings and recommendations contained in this report may bar the party from a de novo determination by the District Judge of the proposed findings and recommendations. United States v. Raddatz, 447 U.S. 667, 676-83 (1980); 28 U.S.C. § 636(b)(1). Additionally, the failure to file written objections to the proposed findings and recommendations within 14 days after being served with a copy may bar the aggrieved party from appealing the factual findings and legal conclusions of the Magistrate Judge that are accepted or adopted by the District Court. Thomas v. Arn, 474 U.S. 140, 155 (1985); Moore v. United States, 950 F.2d 656, 659 (10th Cir. 1991).