Opinion
Civil Action File No. 1:03-CV-2558-TWT.
June 29, 2004
ORDER
Plaintiffs HLD Enterprises, Inc. and Quick Fleet Tire Sales, Inc. filed this action for violations of the Sherman Act, 15 U.S.C. §§ 1, 2(a), (d), (e), the Robinson-Patman Act, 15 U.S.C. §§ 13(a), (d), (e), and for various state law claims. It is before the Court on the Motion to Dismiss Counts III through VII of Plaintiffs' Complaint [Doc. 7] filed by the Defendant Michelin North America, Inc. For the reasons set forth below, the Defendant's motion is granted in part and denied in part.
I. BACKGROUND
Plaintiff HLD Enterprises, Inc. is a corporation organized under the laws of the state of Georgia with its principal place of business in Rockdale County, Georgia. Plaintiff Quick Fleet Tire Sales, Inc. is a corporation organized under the laws of the state of Georgia with its principal place of business in Fulton County, Georgia. The Plaintiffs are in the business of selling and servicing automobile and light truck tires. The Defendant is a corporation organized under the laws of the state of New York, with its principal place of business in Greenville, South Carolina. The Defendant is engaged in the business of manufacturing and selling tires to retailers such as the Plaintiffs.
The Plaintiffs have purchased tires in interstate commerce from the Defendant since 1978, and have resold those tires through their commercial establishments. (Complaint ¶ 14.) Agreements between the Plaintiffs and the Defendant set sales quotas and price guidelines for all of the Defendant's tires offered for resale by the Plaintiffs, and prohibited the Plaintiffs from dealing with the Defendant's competitors. (Complaint ¶¶ 16-17.) Failure to comply with the agreements, including sales quotas and pricing guidelines, would result in termination by the Defendant. (Complaint ¶ 18.) Throughout their relationship with the Defendant, the Plaintiffs cultivated a clientele loyal to the Defendant's products, and received a substantial portion of their business profits from selling and servicing those products. (Complaint ¶ 20.)
The Plaintiffs allege that the Defendant grouped its distributors into three different categories, principally consisting of: (1) national discount price clubs; (2) large national retail establishments; and (3) small independent retailers, such as the Plaintiffs. (Complaint ¶¶ 24-26.) The Plaintiffs were in competition with the other two categories of the Defendant's distributors. (Complaint ¶¶ 27.) Although the products distributed to the different categories were largely identical, the Defendant initiated programs to direct business away from distributors such as the Plaintiffs toward the national discount price clubs. (Complaint ¶¶ 28, 30.) In doing so, the Defendant allowed the national discount price clubs to sell its products for less than the Plaintiffs could buy the same products from the Defendant. (Complaint ¶ 31.) The Defendant also prohibited the Plaintiffs from advertising any prices below a certain level, which was typically twenty percent higher than the limitations placed on the national discount price clubs. (Complaint ¶¶ 34-35.) These restrictions deprived the Plaintiffs of their ability to compete on the basis of price. (Complaint ¶ 37.) As a consequence, the Plaintiffs suffered a decline in their business in sales and service of the Defendant's products, and are unable to compete with the Defendant's other classes of distributors. (Complaint ¶¶ 39-41.)
II. MOTION TO DISMISS STANDARD
A complaint should be dismissed under Rule 12(b)(6) only where it appears beyond doubt that no set of facts could support the plaintiff's claims for relief. Fed.R.Civ.P. 12(b)(6); see Conley v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80 (1957); Linder v. Portocarrero, 963 F.2d 332 (11th Cir. 1992). In ruling on a motion to dismiss, the court must accept the facts pleaded in the complaint as true and construe them in the light most favorable to the plaintiff. See Quality Foods de Centro America, S.A. v. Latin American Agribusiness Development Corp., S.A., 711 F.2d 989, 994-95 (11th Cir. 1983). Generally, notice pleading is all that is required for a valid complaint. See Lombard's, Inc. v. Prince Mfg., Inc., 753 F.2d 974, 975 (11th Cir. 1985), cent. denied, 474 U.S. 1082 (1986). Under notice pleading, the plaintiff need only give the defendant fair notice of the plaintiff's claim and the grounds upon which it rests. Id.
III. DISCUSSION
A. Count III: Antitrust Conspiracy ClaimTo state a claim under section one of the Sherman Act, plaintiff must allege facts which, if proven, show a concerted action to restrain trade. Levine v. Central Florida Medical Affiliates. Inc., 72 Fad 1538, 1545 (11th Cir. 1996). The Defendant contends the Plaintiffs failed to allege such facts, arguing that the Plaintiffs' Complaint sets forth nothing more than unilateral action on the part of the Defendant, which is not actionable under section one of the Sherman Act. Id.
The Plaintiffs' Complaint refers to putative co-conspirators in two places. Paragraph five of the Plaintiffs' Complaint alleges that unnamed co-conspirators "adhered to, participated in, communicated with others and facilitated the conspiracy," and "acted willingly or, due to coercion, unwillingly in furtherance of the Defendant's anti-competitive actions. (Complaint ¶ 5.) Then in Count III, the Plaintiffs' Complaint again refers to unnamed co-conspirators and alleges that their conspiracy with the Defendant violated section one of the Sherman Act. (Complaint ¶¶ 56-60.) These references to concerted action, however, amount to nothing more than mere conclusory allegations of a conspiracy, which cannot survive a motion to dismiss unless supported by factual allegations sufficient to form a legitimate claim for relief. Lombard's. Inc. v. Prince Mfg., Inc., 753 F.2d 974, 975 (11th Cir. 1985) (allegations that named defendant and unknown co-conspirators conspired to restrain trade are insufficient to survive a motion to dismiss absent factual allegations allowing each element of the claim for relief to be identified). The entirety of the factual allegations in the Plaintiffs' Complaint allege only unilateral conduct on the part of the Defendant — there is no indication of concerted action outside of the conclusory allegations referenced above. (Complaint ¶¶ 10-42.) Even the final paragraph in Count III, the conspiracy count, alleges that it was the Defendant's unilateral conduct which caused the Plaintiffs' injury. (Complaint ¶ 60.) Because the Complaint does not allege facts which, if proven, show a conspiracy to restrain trade, the Plaintiffs' failed to state a claim under section one of the Sherman Act. Dismissal of Count III of the Plaintiffs' Complaint is proper.
In an attempt to save Count III, the Plaintiffs argue in their responsive pleading that the Defendant's use of a franchise agreement with them suffices to show a conspiracy to restrain trade. The Plaintiffs' Complaint, however, specifically excludes them from part of any alleged conspiracy to restrain trade, because the only alleged co-conspirators are "other retailers and distributors," not the Plaintiffs. (Complaint ¶ 5.) The Complaint is simply without factual allegations which, if proven, would show a conspiracy to restrain trade — dismissal is warranted.
B. Count IV: Breach of the Implied Duty of Good Faith and Fair Dealing
In Georgia, to state a claim for breach of the implied duty of good faith and fair dealing, the Plaintiffs must set forth facts showing a breach of an actual term of an agreement between the Plaintiffs and the Defendant. Alan's of Atlanta, Inc. v. Minolta Corp., 903 F.2d 1414, 1429 (11th Cir. 1990) (covenant of good faith and fair dealing is not an independent contract term, but is "a doctrine that modifies the meaning of all explicit terms in a contract, preventing a breach of those explicit terms de facto when performance is maintained de jure"). The Defendant contends that the Plaintiffs' Complaint fails to state a claim for breach of this implied covenant because it does not set forth what terms of an agreement between the parties were breached by the Defendant. The Plaintiffs contend that their Complaint does set forth the breach of an agreement required for this claim. Specifically, the Plaintiffs refer the Court to their allegations of franchise agreements wherein the Defendant "established tire quotas" and then "became unable or unwilling to supply Plaintiffs with the quantity of tires required to meet [Defendant's] established quotas." (Complaint ¶¶ 16, 19.) Accepting the facts pleaded in the Complaint as true, and construing them in the light most favorable to the Plaintiffs, these allegations are enough to show a contractual relationship between the parties and the Defendant's breach of that agreement.Cf. Alan's of Atlanta. Inc., 903 F.2d at 1429 (dismissal proper in case where plaintiff did not allege any explicit term in its agreement with the defendant which was breached). Thus, the Complaint states a claim for breach of the implied covenant of good faith and fair dealing.
C. Count V: Interference with Business Relations
In Georgia, to state a claim for interference with business relations, a plaintiff must allege facts which, if proven, will show that a defendant "(1) acted improperly and without privilege; (2) purposely and with malice with the intent to injure; (3) induced a third party or parties not to enter into or continue a business relationship with the plaintiff; and (4) for which the plaintiff suffered some financial injury." St. Mary's Hosp. of Athens, Inc. v. Radiology Professional Corp., 205 Ga. App. 121, 124 (1992). The Defendant contends that the Plaintiffs failed to state a claim for interference with business relations because there are no allegations in the Complaint that the Defendant induced any customer of Plaintiffs to do or not do anything.
In St. Mary's, the Georgia Court of Appeals held that a plaintiff must allege and prove that the defendant engaged in some form of direct inducement to a third party before a claim will lie for interference with business relations. In that case, the plaintiff complained that because of the defendant's actions, the plaintiff's employees left their positions and plaintiff had difficulty recruiting persons to fill the positions once vacated. The Court of Appeals, considering the plaintiff's allegations, found that they concerned the defendant's performance of its contractual obligations to the plaintiff, and did not concern any inducement directed towards the plaintiff's employees or recruits. Id. Such facts, even if proven, do not state a claim for improper interference with business relations because there was no showing that the defendant induced the plaintiff's employees or recruits to act or refrain from acting. Id. A claim for improper interference with business relations will not lie simply because part of a plaintiff's damage is that others did not want to do business with him, Id.
Similarly, in this case, the Plaintiffs fail to allege any way in which the Defendant induced any of the Plaintiffs' customers to refrain from engaging in commerce with them. The Plaintiffs' Complaint alleges that the Defendant engaged in price discrimination and prevented them from competing with other retailers of the Defendants products. As a result of those actions, the Plaintiffs contend they were injured when their customers bought the Defendant's products and services from other retailers. But the Complaint does not allege that the Defendant took any action with respect to the Plaintiffs' customers to induce them to act or refrain from acting. The actions of the Defendant vis-a-vis, the Plaintiffs will not support a claim for improper interference with business relations where the Defendant did nothing to directly induce the Plaintiffs' customers to act or refrain from acting. Mere damage in the form of declining sales does not make out a claim for improper interference with business relations. Having failed to set out facts which, if proven, would support a claim for improper interference with business relations, dismissal of Count V is proper.
D. Count VI: Uniform Deceptive Trade Practices Act
Georgia's Uniform Deceptive Trade Practices Act provides that "a person engages in a deceptive trade practice when, in the course of his business, vocation or occupation, he . . . makes false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions." O.C.G.A. § 10-1-372(a)(11). While the courts of Georgia have not directly addressed the issue, the Comment to the Uniform Act and the judicial decisions from other jurisdictions agree that the goal of that section is to prevent sellers from "luring customers with dubious representations that prices have been `slashed' by large percentages, sometimes said to be forced by `going out of business,' `removal,' or `fire sales.'" Sanders v. Francis, 561 P.2d 1003, 1006 (Or. 1977) (citing official comment). There is no indication that the Georgia General Assembly intended for this section of the Uniform Deceptive Trade Practices Act to be an additional method for antitrust enforcement. Laughlin v. Evanston Hosp., 550 N.E.2d 986, 993 (Ill. 1990). Rather, the goal of the statute is the protection of consumers from overreaching and fraud on the part of sellers. This is made evident by the fact that the balance of the relevant code section deals with misrepresentations as to the origin, approval, or quality of goods or services, or "any other conduct which similarly creates a likelihood of confusion or misunderstanding." See O.C.G.A. § 10-1-372(a)(1)-(12). Count VI of the Plaintiffs' Complaint, in contrast, deals with allegations that the Defendant did not offer the same price reductions to the Plaintiffs which the Defendant offered to other classes of distributors, and misled the Plaintiffs about whether it was offering price reductions to their competitors. (Complaint ¶¶ 71-74.) Having failed to allege facts which, if proven, would show that the Defendant engaged in actionable "false and misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions," dismissal of Count VI is proper.
E. Counts VI and VII: Fraud
Both Counts VI and VII allege fraudulent acts on the part of the Defendant, and are subject to the heightened pleading requirements of Rule 9(b). Rule 9(b) requires that "in all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Fed.R.Civ.P. 9(b). A plaintiff satisfies Rule 9(b) when the Complaint sets forth "(1) precisely what statements were made in what documents or oral representations or what omissions were made; and (2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) same; and (3) the content of such statements and the manner in which they misled the plaintiff; and (4) what the defendants obtained as a consequence of the fraud." Ziemba v. Cascade Intern., Inc., 256 F.3d 1194, 1202 (11th Cir. 2001). The Rule and its requirements serve an "important purpose in fraud actions by alerting defendants to the `precise misconduct with which they are charged' and protecting defendants `against spurious charges of immoral and fraudulent behavior.'" Id. The Plaintiffs' Complaint, however, fails to allege what misrepresentations or omissions were made, much less any of the particulars noted above which will satisfy the requirements of Rule 9(b). Accordingly, Counts VI and VII are subject to dismissal.
IV. CONCLUSION
For the reasons set forth above, the Defendant's Motion to Dismiss Counts III through VII of Plaintiffs' Complaint [Doc. 7] is GRANTED IN PART AND DENIED IN PART. Given the liberal policy with which motions to amend are treated, this Court grants the Plaintiffs' request to amend their Complaint with respect to the dismissed counts. Friedlander v. Nims, 755 F.2d 810, 813 (11th Cir. 1985). An amended complaint must be filed within 10 days from the docketing of this Order. If no amended complaint is filed, the Defendant must file its answer within 30 days from the docketing of this Order.
SO ORDERED.