Opinion
C21-0896JLR
08-12-2022
ZUNUM AERO, INC., Plaintiff, v. THE BOEING COMPANY, et al., Defendants.
ORDER
JAMES L. ROBART UNITED STATES DISTRICT JUDGE
I. INTRODUCTION
Before the court is Defendants The Boeing Company (“Boeing”) and Boeing HorizonX Ventures, LLC's (“HorizonX”) (collectively, “Boeing”) partial motion to dismiss Plaintiff Zunum Aero, Inc.'s (“Zunum”) second amended complaint (“SAC”). (Mot. (Dkt. # 62); Reply (Dkt. # 66).) Zunum opposes the motion. (Resp. (Dkt. # 63).) The court has considered the parties' submissions, the balance of the record, and the applicable law. Being fully advised, the court GRANTS IN PART and DENIES IN PART Boeing's motion to dismiss.
When citing to the parties' pleadings, the court uses the pleadings' internal pagination unless otherwise stated.
Both parties request oral argument (see Mot.; Resp.), but the court finds that oral argument would not be helpful to its disposition of Boeing's motion, see Local Rules W.D. Wash. LCR 7(b)(4).
II. BACKGROUND
This suit centers on hybrid-electric and electric aircraft technology that Boeing, Safran S.A. (“Safran”), and certain of Safran's affiliates allegedly misappropriated from Zunum while falsely assuring Zunum that they would invest in its technology. (See SAC (Dkt. # 60) ¶¶ 1-22.) The court details the relevant factual background, as alleged by Zunum, before reviewing the procedural background.
These affiliates include Safran Corporate Ventures, S.A.S. (“SCV”), Safran Electrical & Power, S.A.S. (“SEP”), and Safran Helicopter Engines, SASU (“SHE”) (collectively with Safran, the “Safran Defendants”). Zunum dismissed its claims against the Safran Defendants in October 2021. (See Not. (Dkt. # 43).)
A. Factual Background
Zunum, which was founded in 2013, strived “to develop the word's [sic] first hybrid-electric and all-electric . . . regional aircraft for commercial service and to develop this new market as the first-mover.” (Id. ¶¶ 32-33.) To protect its first-mover advantage, Zunum operated in “stealth mode” from 2013 to 2017 as it executed the initial phases of its business plan. (Id. ¶ 79.) Afterwards, Zunum sought outside funding from a strategic partner. (Id. ¶ 91.) It “approached a few of the major aerospace companies to explore investments” and identified Boeing, a leader in the aircraft industry, as a “prospective investor and strategic partner.” (Id. ¶¶ 48, 93-94; see also id. ¶¶ 91-92 (alleging that it “faced limited options for financing” and approached Boeing to obtain “outside funding”).)
Boeing “quickly became interested” (id. ¶ 95) and, as it explored the potential investment, “undertook extensive due diligence to evaluate Zunum's concepts, technologies, and business plans” (id. ¶ 105). The parties entered into a proprietary information agreement in August 2016 (the “2016 PIA”) (Nordlund Decl. (Dkt. # 51) ¶ 2, Ex. A (“2016 PIA”)), and Boeing was accordingly “granted access to extensive details of Zunum's business plans; go-to-market strategy; patent pending aircraft and propulsion technologies; and development, production, and certification plans,” including propriety information such as “confidential whitepapers, technical reports, business plans, and provisional patent applications.” (SAC ¶¶ 104-06, 116-17.) Boeing eventually invested $5 million, accompanied by the right to appoint a non-voting “Observer” onto Zunum's Board of Directors. (See id. ¶¶ 125-26.) Pursuant to this appointment, Boeing continued to have “access to information . . . about ‘significant business issues' and ‘annual operating plans.'” (Id. ¶ 130.) Thereafter, the Safran Defendants, a French aerospace conglomerate that supplied electrical systems equipment to Boeing and other aircraft manufacturers, allegedly began to show interest in partnering with Zunum as well. (See id. ¶¶ 9, 144, 265, 268.)
Boeing made its 2017 investment through a convertible promissory note and note purchase agreement (collectively, the “2017 Notes”), which were accompanied by an investor rights letter (the “2017 IRL”). (See SAC ¶¶ 125-26; Nordlund Decl. ¶¶ 3-4, Exs. B-C (“2017 Notes”); id. ¶ 5, Ex. D (“2017 IRL”).)
The partnerships began unraveling in 2017 when Boeing allegedly showed signs of its intent to take Zunum's technology for itself. (Id. ¶¶ 152-64.) In November 2017, Zunum learned that Boeing was developing its own hybrid-electric aircraft that mimicked Zunum's aircraft; Boeing was allegedly engaging its partners, including the Safran Defendants, on developing propulsion for its own aircraft. (Id. ¶¶ 170-71, 174-93.) Zunum's partnership with the Safran Defendants similarly unraveled. Initially, Safran Defendants' officials expressed interest in Zunum and accessed Zunum's proprietary information when performing their due diligence. (Id. ¶¶ 271, 273-75, 282-83, 292.) However, the Safran Defendants ultimately pulled out of the investment, allegedly because of Boeing's influence. (Id. ¶¶ 296, 299, 348-49.) Boeing, “in turn, used the reversal by [the Safran Defendants] as a basis to withdraw its own support for co-leading the . . . financing.” (Id. ¶ 297; see also id. ¶ 166 (alleging that, after completing due diligence, Boeing was “expressing concerns” that Zunum was “overpromising”).)
Boeing did, however, make another $4 million investment in Zunum in 2018 through a convertible promissory note and note purchase agreement (collectively, the “2018 Notes”), which were accompanied by a new investor rights letter (the “2018 IRL”). (See SAC ¶¶ 246-47; Nordlund Decl. ¶¶ 6-7, Exs. E-F (“2018 Notes”); id. ¶ 8, Ex. G (“2018 IRL”).)
Instead of further investing in Zunum, the Safran Defendants and Boeing “deepened their close partnership” by “collu[ding] . . . to usurp Zunum's first-mover advantage in the market for commercial hybrid and all-electric aircraft and propulsion systems.” (Id. ¶¶ 305-06.) The Safran Defendants and Boeing further filed patents for hybrid-electric propulsion technology that is “directly inspired by confidential information that Zunum supplied.” (Id. ¶¶ 383-85.) For example, Zunum alleges that Boeing's Thin Haul Hybrid Electric Propulsion System patent “borrows heavily from Zunum's ZA10 architecture” and Boeing's Active Voltage Control for Hybrid Electric Aircraft (“Active Voltage”) patent “relates closely to issues addressed by the control system in an international patent filed by Zunum,” raising issues around “inventorship.” (Id. ¶¶ 384-85.)
Ultimately, Zunum failed to obtain any other significant investment, “r[a]n out of operating funds,” and “close[d] all of its centers” and laid off all employees in April 2019. (See id. ¶¶ 296, 323-356, 368.)
B. Procedural History
Zunum filed this lawsuit against Boeing, Safran, and certain affiliates of Safran on November 23, 2020 in King County Superior Court. (State Records (Dkt. # 2) at 7.) Shortly thereafter, Zunum filed its first amended complaint (“FAC”), which includes claims for: (1) breach of the 2016 PIA (FAC (Dkt. # 1-1) ¶¶ 405-25); (2) breach of the 2017 IRL (id. ¶¶ 426-41); (3) breach of the 2018 investor rights letter (the “2018 IRL”) (id. ¶¶ 442-50); (4) breach of the implied covenant of good faith and fair dealing (id. ¶¶ 451-60); (5) breach of fiduciary duty (id. ¶¶ 461-77); (6) declaratory judgment (id. ¶¶ 478-82); (7) tortious interference with business expectancy (id. ¶¶ 483-92); (8) violation of Washington Trade Secrets Act (“WTSA”) (id. ¶¶ 493-512); (9) violation of Washington Consumer Protection Act (“WCPA”)-antitrust conspiracy (id. ¶¶ 513-29); (10) violation of WCPA-attempted monopolization (id. ¶¶ 530-42); (11) violation of Securities Act of Washington (“WSSA”) (id. ¶¶ 543-69); and (12) violation of WCPA-unfair competition (id. ¶¶ 570-76). Boeing filed a motion to dismiss seven of the counts in the FAC for failure to state a claim, which the King County Superior Court Judge summarily denied. (See State Records at 313-51; 1165-66.)
The court uses the CM/ECF page numbers when citing to the state court records.
Zunum asserts some claims against Boeing and HorizonX jointly and some claims against them individually.
In July 2021, Boeing answered the complaint and filed multiple counterclaims. (See Answer (Dkt. # 1-2).) Boeing and the Safran Defendants then removed the case to this court. (NOR (Dkt. # 1).) Zunum sought to remand the case back to King County Superior Court, but this court denied its motion. (See Remand Mot. (Dkt. # 26); 8/17/21 Order (Dkt. # 36).) Zunum dismissed its claims against the Safran Defendants, who had not yet answered the FAC, in October 2021. (See Not.; see also Dkt.) Two months later, Boeing amended its counterclaims to add an additional claim for declaratory relief based on a recently issued patent. (See Mot to Amend (Dkt. # 46); Boeing FAA (Dkt. # 48); see also Zunum Answer (Dkt. # 49).)
On April 14, 2022, Boeing filed a motion for partial judgment on the pleadings on Zunum's WCPA antitrust conspiracy (FAC ¶¶ 513-29), WCPA attempted monopolization (id. ¶¶ 530-42), WCPA unfair competition (id. ¶¶ 570-76), WSSA (id. ¶¶ 543-69), and breach of fiduciary duty (id. ¶¶ 461-77) claims. (MJOP (Dkt. # 50) at 1.) The court granted Boeing's motion, dismissing Zunum's WCPA unfair competition, WSSA, and breach of fiduciary duty claims with prejudice and dismissing Zunum's WCPA antitrust conspiracy and WCPA attempted monopolization claims without prejudice and with leave to amend. (See 6/13/22 Order (Dkt. # 58) at 43.) Shortly after, Zunum filed its SAC (see SAC; Dkt.) and a motion for reconsideration of the court's dismissal of its WCPA unfair competition and WSSA claims, which the court denied (see MFR (Dkt. # 59); 6/29/22 Order (Dkt. # 61)).
III. ANALYSIS
Boeing now asks the court to dismiss Zunum's WCPA antitrust conspiracy (SAC ¶¶ 499-522), WCPA attempted monopolization (id. ¶¶ 523-36), and tortious interference with business expectancy (id. ¶¶ 469-78) claims under Federal Rule of Civil Procedure 12(b)(6). (Mot. at 2.) The court evaluates each claim in turn. The court begins by setting forth the standard of review before turning to Boeing's motion.
A. Standard of Review
Federal Rule of Civil Procedure 12(b)(6) provides for dismissal of a complaint for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “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.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible “when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. While “detailed factual allegations” are not required, a complaint must include “more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id.
When considering a Rule 12(b)(6) motion, the court may consider the complaint, documents attached to the complaint, documents incorporated therein, or matters of judicial notice. See United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003); Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). The court must accept the non-moving party's well-pleaded factual allegations as true and draw all reasonable inferences in favor of the non-moving party. See Hines v. Youseff, 914 F.3d 1218, 1227 (9th Cir. 2019); Daniels-Hall, 629 F.3d at 998. However, the court is not required to accept as true “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” Daniels-Hall, 629 F.3d at 998 (noting that the court is also not required “to accept as true allegations that contradict exhibits attached to the [c]omplaint or matters properly subject to judicial notice”); Chavez v. United States, 683 F.3d 1102, 1008 (9th Cir. 2012) (stating that the court is not required to accept as true legal conclusions or “formulaic recitation[s] of the elements of a cause of action”).
B. WCPA Antitrust Conspiracy Claim
RCW 19.86.030 prohibits any “contract, combination, . . . or conspiracy in restraint of trade or commerce.” This provision “is essentially identical to section 1 of the Sherman Act,” and “courts are to be guided by federal decisions interpreting comparable federal provisions” when construing RCW 19.86.030 claims. See Murray Pub. Co. v. Malmquist, 832 P.2d 493, 497 (Wash.Ct.App. 1992). To establish an antitrust conspiracy claim, Zunum must plead sufficient facts to establish: “(1) the existence of an agreement, and (2) that the agreement was [a]n unreasonable restraint of trade” under either a per se rule of illegality or a rule of reason analysis. FTC v. Qualcomm Inc., 969 F.3d 974, 989 (9th Cir. 2020) (emphasis omitted) (quoting Aerotec Int'l, Inc. v. Honeywell Int'l, Inc., 836 F.3d 1171, 1178 (9th Cir. 2016)); see also Optronic Techs., Inc. v. Ningbo Sunny Elec. Co., 20 F.4th 466, 479 (9th Cir. 2021).
In addition to proving injury to competition, a private antitrust plaintiff must also plead “antitrust injury,” meaning they must allege that “they are the proper parties to bring the antitrust action because they were harmed by the defendants' contract, combination, or conspiracy, and the harm they suffered was caused by the anti-competitive aspect of the defendants' conduct.” In re NFL's Sunday Ticket Antitrust Litig., 933 F.3d 1136, 1150 (9th Cir. 2019) (citing Brantley v. NBC Universal, Inc., 675 F.3d 1192, 1197 (9th Cir. 2012) (noting that this is also referred to as “antitrust standing”)).
For the purposes of the instant motion, the court assumes, without deciding, that Boeing and the Safran Defendants agreed to “exclud[e] Zunum from the worldwide market for aircraft serving commercial air travel up to 1,500 miles, commercial hybrid and all-electric aircraft, and commercial hybrid and all-electric propulsion systems” (the “Alleged Markets”). (SAC ¶ 501; see also id. ¶ 502 (alleging that Boeing and the Safran Defendants “did this through a systematic and coordinated campaign to deny Zunum access to additional funding and to key inputs, like funding, aerostructures support, and support for a turboshaft”).) Thus, the court focuses on whether such an agreement was an unreasonable restraint of trade. A plaintiff must sufficiently plead that the restraint of trade is unreasonable under either a per se approach or the rule of reason analysis. PLS.Com, LLC v. Nat'l Ass'n of Realtors, 32 F.4th 824, 833 (9th Cir. 2022).
A third test, the “quick look” analysis, falls somewhere between the rule of reason analysis and per se approach. The “quick look” analysis is an abbreviated form of the rule of reason that may be used when “an observer with even a rudimentary understanding of economics could conclude that the arrangements in question could have an anticompetitive effect on customers and markets.” Cal. Dental Ass'n v. FTC, 526 U.S. 756, 770 (1999) (rule of reason is a continuum and must be applied in a case-specific manner). Because neither party advocates for nor applies the quick look analysis, the court also declines to do so.
A small group of restraints “have such predictable and pernicious anticompetitive effect, and such limited potential for procompetitive benefit, that they are deemed unlawful per se.” California ex rel. Harris v. Safeway, Inc., 651 F.3d 1118, 1133 (9th Cir. 2011) (quoting State Oil Co. v. Khan, 522 U.S. 3, 10 (1997)); Ohio v. Am. Express Co., - U.S. -, 138 S.Ct. 2274, 2283 (2018) (stating that these types of restraints “always or almost always tend to restrict competition and decrease output”). Accordingly, such restraints “are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use.” Harris, 651 F.3d at 1133 (quoting Nw. Wholesale Stationers, Inc. v. Pac. Stationery & Printing Co., 472 U.S. 284, 289 (1985)). Because per se treatment is reserved for conduct that is “manifestly anticompetitive” and without “any redeeming virtue,” the Supreme Court has “expressed reluctance to adopt per se rules where the economic impact of certain practices is not immediately obvious.” Harris, 651 F.3d at 1133 (first quoting Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 886 (2007); and then quoting Texaco Inc. v. Dagher, 547 U.S. 1, 5 (2006)).
“Restraints that are not unreasonable per se are judged under the ‘rule of reason.'” Qualcomm, 969 F.3d at 989 (quoting Am. Express, 138 S.Ct. at 2283). This is the default standard under which most antitrust claims are analyzed. See State Oil, 522 U.S. at 10; see also Harris, 651 F.3d at 1133. This test “requires courts to conduct a fact-specific assessment of ‘market power and market structure . . . to assess the [restraint]'s actual effect' on competition.” State Oil, 522 U.S. at 10 (quoting Am. Express, 138 S.Ct. at 2283); Harris, 651 F.3d at 1133 (“[A] plaintiff [must] ‘demonstrate that a particular contract or combination is in fact unreasonable and anticompetitive.'” (quoting Dagher, 547 U.S. at 5)). Courts “examine ‘the facts peculiar to the business, the history of the restraint, and the reasons why it was imposed,' to determine the effect on competition in the relevant product market.” See In re NFL's Sunday Ticket, 933 F.3d at 1150 (quoting Nat'l Soc'y of Prof'l Eng'rs v. United States, 435 U.S. 679, 692 (1978)).
Below, the court discusses whether the alleged restraint is per se unlawful or whether it is unreasonable under the rule of reason analysis.
1. Per Se Violation
While the SAC is “silent as to the specific type of established per se violation,” the court again accepts Zunum's characterization of its alleged per se violation as a “boycott” between Boeing and the Safran Defendants, which denied Zunum “access to additional funding and to key inputs.” (See 6/13/22 Order at 14; Resp. at 3; SAC ¶¶ 502, 504.) As the court previously noted (see 6/13/22 Order at 14), “precedent limits the per se rule in the boycott context to cases involving horizontal agreements among direct competitors.” See NYNEX Corp. v. Discon, Inc., 525 U.S. 128, 135 (1998); see also Am. Express, 138 S.Ct. at 2283-84 (“Typically only ‘horizontal' restraints-restraints ‘imposed by agreement between competitors'-qualify as unreasonable per se.” (quoting Business Elecs. Corp. v. Sharp Elecs. Corp., 485 U.S. 717, 730 (1988))). On the other hand, vertical agreements-i.e., agreements made up and down a supply chain, such as between a manufacturer and a supplier or retailer-“are analyzed under the rule of reason.” In re Musical Instruments & Equip. Antitrust Litig., 798 F.3d 1186, 1191-92 (9th Cir. 2015). Accordingly, Zunum's ability to establish a per se violation based on the alleged boycott between Boeing and the Safran Defendants turns on whether the boycott was the product of a horizontal agreement.
In its June 13, 2022 order, the court concluded that “the alleged agreement between Boeing and the Safran Defendants to exclude Zunum from the Alleged Markets was [not susceptible to per se treatment because it was] not an ‘agreement between competitors,' Am. Express, 138 S.Ct. at 2283-84, as the Safran Defendants are suppliers to Boeing, not competitors.” (See 6/13/22 Order at 14 (citing FAC ¶¶ 8, 521).) While Zunum continues to allege the Safran Defendants are suppliers to Boeing in its SAC (see, e.g., SAC ¶¶ 9, 171, 264-66, 507), it now also alleges, on “information and belief,” that the Safran Defendants and Boeing compete in the markets for commercial “hybrid-electric and all-electric aircraft and propulsion” systems and “electric air taxis” by filing “numerous patents” and “developing . . . technologies . . . based on information derived from Zunum” (id. ¶¶ 380-81). Referencing those newly added allegations, as well as other allegations in the SAC, Zunum asks the court to conclude that the alleged agreement is horizontal because while the Safran Defendants may be suppliers to Boeing in some contexts, they are horizontal competitors with Boeing in the markets for “hybrid-electric and all-electric aircraft and propulsion” systems and “electric air taxis” (id.). (See Resp. at 3-4 (citing SAC ¶¶ 303, 305, 379-81, 383-85).)
The court admonishes Zunum for making statements like “[t]he SAC further pleads numerous allegations that support its theory of a per se violation” and string citing to more than sixty paragraphs. (See Resp. at 3.) Rather than identify the individual facts that support Zunum's theory of competition, Zunum asks the court to go find the facts to support Zunum's theory. The court declines to do Zunum's work for it; “[j]udges are not like pigs, hunting for truffles buried in briefs.” A.H. Lundberg Assocs., Inc. v. TSI, Inc., No. C14-1160JLR, 2016 WL 9226998, at *10 (W.D. Wash. Feb. 18, 2016).
Boeing disagrees. (Mot. at 6-8; Reply at 1-3.) It argues that Zunum fails to establish a horizontal agreement because: (1) the SAC still alleges that the Safran Defendants are suppliers to Boeing; (2) the Safran Defendants and Boeing cannot be competitors in the markets for “hybrid-electric and all-electric aircraft and propulsion” systems and “electric air taxis” because such markets do not exist; (3) the timeline underlying Zunum's horizontal competition theory is “self-defeating” because Zunum alleges that Boeing and the Safran Defendants “agreed to shut Zunum out, and then became competitors through the use of Zunum's intellectual property”; and (4) Zunum's theory of horizontal competition-that Boeing and the Safran Defendants “conspired together to take down Zunum,” “but later parted ways to compete against each other with Zunum's proprietary information”-“is implausible on its face.” (Mot. at 7-8 (emphasis omitted); Reply at 2-3.)
On the present record, the court finds that Zunum's newly added allegations fail to plausibly establish that the alleged boycott was the product of a horizontal, rather than a vertical, agreement. The court cannot credit Zunum's theory of horizontal competition because Zunum has not established that the markets that Boeing and Safran allegedly compete in-i.e., the markets for “hybrid-electric and all-electric aircraft and propulsion” systems and “electric air taxis” (SAC ¶¶ 380-81)-actually exist, as discussed in more detail below. (See 6/13/22 Order at 20-21 (concluding that a market for “hybrid-electric and all-electric aircraft” “has yet to be established” and that Zunum has not established that . . . all-electric air taxies . . . currently exist[]”); SAC ¶ 535 (alleging that “[t]he market for commercial hybrid or all-electric aircraft and propulsion systems is still emerging”).) The fact that Boeing and the Safran Defendants were not competitors in an existing market when they allegedly agreed to exclude Zunum from the Alleged Markets is fatal to Zunum's efforts to establish a per se violation. See Siegler, 2019 WL 581719, at *11-12 (stating that a viable antitrust claim “depend[s] on a defendant's anti-competitive actions vis-a-vis an established, clearly-defined market,” not one that “has yet to be established”). Finally, the court agrees with Boeing's contention that Zunum's theory of horizontal competition between Boeing and the Safran Defendants is implausible on its face and thus fails under Rule 12(b)(6)'s standard. (See Mot. At 7-8; Reply at 2-3; SAC ¶¶ 380-81, 501-02); see also, e.g., Lombardo v. Alhambra Police Dep't, No. 15-cv-6262, 2015 WL 9906167, at *4 (C.D. Cal. Dec. 15, 2015) (dismissing claim where “the allegations . . . are so irrational and implausible as to be frivolous”).
(See also, e.g., SAC ¶ 32 (alleging that Zunum was formed to “develop the word's [sic] first hybrid-electric and all-electric . . . regional aircraft for commercial service and to develop this new market as the first-mover”); id. ¶ 39 (admitting that it never produced such an aircraft and only had a “ground prototype”); id. ¶ 402 (calling the markets for commercial hybrid and all-electric aircraft, and commercial hybrid-electric and all-electric propulsion systems “nascent markets”); id. ¶¶ 369-98 (failing to allege that any entities currently selling completed, commercial hybrid-electric or all-electric aircraft or commercial hybrid-electric and all-electric propulsion systems).)
Zunum cites numerous cases to support its argument that “[t]he nascency of a market is not fatal to an antitrust claim.” (See Resp. at 6.) However, the cases Zunum cites in no way undermine the court's holding that where an alleged market “has yet to be established,” an antitrust plaintiff's reliance on that market “is facially unsustainable.” (See 6/13/22 Order at 20 (first citing Siegler v. Sorrento Therapeutics, Inc., No. 18-cv-1681, 2019 WL 581719, at *11-12 (S.D. Cal. Feb. 13, 2019) (“If there is no extant product market, then it necessarily follows that there is no viable anti-trust claim.”); and then citing Newcal Indus., Inc. v. Ikon Office Sol., 513 F.3d 1038, 1044 (9th Cir. 2008) (“Plaintiff must allege . . . that a ‘relevant market' exists ....”)); see also Reply at 2-3 & n.2 (explaining why the cases Zunum cites do not “stand[] for the proposition that merely labeling a market as ‘nascent' or ‘emerging' permits plaintiffs to evade the requirement to plead an existing market with defined attributes”)).)
For these reasons, the court again concludes that “the agreement alleged by Zunum . . . is simply not susceptible to per se treatment under the controlling law.” (See 6/13/22 Order at 14); see also Calculators Haw., Inc. v. Brandt, Inc., 724 F.2d 1332, 1337 n.2 (9th Cir. 1983) (“The district court properly found per se analysis inappropriate because Brandt and Hallett were not competitors. Any ‘group boycott' therefore consisted of a vertical agreement, to which the rule of reason applies.”); Orchard Supply Hardware LLC v. Home Depot USA, Inc., 967 F.Supp.2d 1347, 1357 (N.D. Cal. 2013) (rejecting plaintiff's argument that a conspiracy involving “manufacturers, distributors, and a retailer” was per se unlawful because a manufacturer's agreements with its distributors are vertical agreements, to which per se analysis does not apply). Accordingly, the court must analyze whether the alleged restraint of trade is unreasonable under the rule of reason.
2. Rule of Reason
Under the rule of reason's “three-step, burden-shifting framework, courts must determine if a practice unreasonably restrains trade by “analyz[ing] the degree of harm to competition along with any justifications or procompetitive effects to determine whether the practice is unreasonable on balance.” Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1410 (9th Cir. 1991). As “[a] threshold step,” the court must “accurately define the relevant market, which refers to ‘the area of effective competition.'” See Qualcomm, 969 F.3d at 992 (quoting Am. Express, 138 S.Ct. at 2285 (“[C]ourts usually cannot properly apply the rule of reason without an accurate definition of the relevant market.”)).
a. Establishing a Relevant Market
The relevant market must include “both a geographic market and a product market.” Hicks v. PGA Tour, Inc., 897 F.3d 1109, 1120 (9th Cir. 2018). The geographic market extends to the “‘area of effective competition' . . . where buyers can turn for alternative sources of supply.” Tanaka v. Univ. of S. Cal., 252 F.3d 1059, 1063 (9th Cir. 2001); L.A. Mem'l Coliseum Comm'n v. NFL, 726 F.2d 1381, 1393 (9th Cir. 1984) (defining geographic market as the “‘economically significant' area of effective competition in which the relevant products are traded”). A product market “must encompass the product at issue as well as all economic substitutes for the product.” Newcal Indus., 513 F.3d at 1045. Economic substitutes are those that have a “reasonable interchangeability of use” or sufficient “cross-elasticity of demand” with the relevant product. Id. (quoting Brown Shoe v. United States, 370 U.S. 294, 325 (1962)). Finally, the relevant market must include “the group or groups of sellers or producers who have actual or potential ability to deprive each other of significant levels of business.” Thurman Indus., Inc. v. Pay ‘N Pak Stores, Inc., 875 F.2d 1369, 1374 (9th Cir. 1989).
Cross-elasticity of demand refers to “the extent to which consumers will change their consumption of one product in response to a price change in another.” Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451, 469 (1992). Reasonable interchangeability of use refers to whether consumers could use the products for the same purposes and depends on the products' “price, use[,] and qualities.” United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 395 (1956).
Without an “accurate definition of the relevant market” “there is no way to measure [the defendant's] ability to lessen or destroy competition.” Am. Express, 138 S.Ct. at 2285 (quoting Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965)). Thus, while plaintiffs need not plead a relevant market with specificity, “a complaint may be dismissed under Rule 12(b)(6) if the complaint's ‘relevant market' definition is facially unsustainable.” Newcal Indus., 513 F.3d at 1045; Tanaka, 252 F.3d at 1063 (“Failure to identify a relevant market is a proper ground for dismissing a Sherman Act claim.” (citing Big Bear Lodging Ass'n v. Snow Summit, Inc., 182 F.3d 1096, 1105 (9th Cir. 1999)). For example, a relevant market definition may be “facially unsustainable” where “the plaintiff fails to define its proposed relevant market with reference to the rule of reasonable interchangeability and cross-elasticity of demand, or alleges a proposed relevant market that clearly does not encompass all interchangeable substitute products even when all factual inferences are granted in plaintiff's favor.” RealPage, Inc. v. Yardi Sys., Inc., 852 F.Supp.2d 1215, 1224-25 (C.D. Cal. 2012) (quoting Colonial Med. Group, Inc. v. Catholic Healthcare W., No. 09-2192 MMC, 2010 WL 2108123, at *3 (N.D. Cal. May 25, 2010)); see also Nicolosi Distrib., Inc. v. FinishMaster, Inc., No. 18-cv-03587-BLF, 2019 WL 1560460, at *5 (N.D. Cal. Apr. 10, 2019) (rejecting a geographic market based on county lines where there was no plausible explanation for excluding other neighboring counties).
b. Zunum's Proposed Geographic and Product Markets
The court previously concluded that Zunum's proposed geographic markets- “national and international”-and product markets-the “hybrid-electric and all-electric aircraft” market; the market for “short-haul flights under 1,500 miles”; and market for “integrated door-to-door travel”-were “facially unsustainable.” (See 6/13/22 Order at 17-22.) With respect to the proposed product markets, the court stated that:
(1) “Zunum's alleged product market for ‘hybrid-electric and all-electric aircraft' is facially unsustainable because such a market has yet to be established (id. at 19-20);
(2) “Zunum fails to plausibly establish a market for short-haul flights under 1,500 miles” because it is unclear whether “this alleged market encompasses products or services” (id. at 20-21); and (3) the market for “integrated door-to-door travel” is deficient because “Zunum does not plead any facts showing what exactly such a market encompasses” (id. at 21-22 (“[T]he court is unconvinced that [defining this market as including “all-electric air taxies”] would be sufficient because Zunum has not established that such a product . . . currently exists.”)). The court noted that if Zunum chose to amend its antitrust conspiracy claim, it must address the aforementioned deficiencies and “take care to define the proposed market(s) ‘with reference to the rule of reasonable interchangeability and cross-elasticity of demand.'” (Id. at 22 (quoting RealPage, Inc. v. Yardi Sys., Inc., 852 F.Supp.2d 1215, 1224 (C.D. Cal. 2012)).)
In its SAC, Zunum identifies the proposed geographic market as “worldwide” and the proposed product markets as (1) “aircraft serving commercial air travel up to 1,500 miles”; (2) “commercial hybrid and all-electric aircraft”; and (3) “commercial hybrid and all-electric propulsion systems.” (SAC ¶¶ 501, 516.) Boeing argues that the three proposed product markets “are virtually identical to the three that this [c]ourt already considered and rejected in the FAC” and fail for several reasons. (Mot. at 8.) The court evaluates Zunum's proposed product markets in turn.
i. Product Market for Aircraft Serving Commercial Air Travel up to 1,500 Miles
With respect to Zunum's “aircraft serving commercial air travel up to 1,500 miles” market, Boeing argues that this proposed market fails because it is arbitrary. (Mot. at 9; Reply at 4-5.) It notes that “‘[c]ommercial flights up to 1,500 miles' . . . can be flown by virtually any commercial aircraft,” including “the aircraft Zunum places in this Alleged Market (‘single-aisles, twin-aisles, regional jets, and turboprops'), as well as the ones it arbitrarily excludes (‘business jets and small passenger aircraft').” (Mot. at 9 (quoting SAC ¶¶ 32, 516).) Boeing further notes that the “SAC offers no reason why ‘regional jets[] and turboprops' are not interchangeable with ‘business jets' and ‘small passenger aircraft' (an entirely undefined term), but are interchangeable with large jets (i.e., ‘single-aisles[] and twin-aisles').” (Id. (quoting SAC ¶ 516).)
Boeing alleges that the proposed market “has the same flaw the [c]ourt previously identified as to the FAC's alleged market for ‘short-haul flights under 1,500 miles'-it is entirely ‘unclear whether this alleged market encompasses products or services,' or perhaps both.” (Mot. at 8 (quoting 6/13/22 Order at 20).) However, the allegations in the SAC sufficiently establish that the market encompasses only products, specifically “single-aisles, twin-aisles, regional jets, and turboprops.” (See SAC ¶ 516 (stating that this market includes the above-mentioned products but does not include “business jets and small passenger aircraft”); Resp. at 8.)
Zunum's response illustrates the arbitrary line-drawing from which its proposed product market continues to suffer. In an attempt to justify the proposed market's boundaries, Zunum redefines the parameters of the proposed market, noting that it includes: “(a) short-haul aircraft such as turboprops and regional jets, 100% of which departures are to distances less than 1,500 miles; (b) medium-haul single-aisles, 80% of which departures are to 1,500 miles; and (c) long-haul twin-aisles, 20% of which departures are to 1,500 miles.” (Resp. at 9.) However, none of these specifications appear in the SAC. (See generally SAC); Apple Inc. v. Allan & Assocs. Ltd., 445 F.Supp.3d 42, 59 (N.D. Cal. 2020) (noting that plaintiff could not amend complaint through opposition to a motion to dismiss). Zunum also claims that its first proposed product market excludes “small turboprops,” “piston aircraft,” and “air taxis”-even though the SAC includes turboprops in the market definition, says nothing about piston aircraft, and relies on an alleged market for air taxis to supposedly show competition in the market. (See Resp. at 8; see also SAC ¶¶ 516, 381.) The court agrees that these statements demonstrate “that Zunum is gerrymandering this Alleged Market on the fly- in a way that conveniently tracks its goal of developing aircraft with a 1,500-mile range by 2030.” (Reply at 4 (citing SAC ¶ 35).)
Additionally, Zunum claims that its market is not arbitrarily defined because the 1,500-mile number is “consistent with ‘short-haul' ranges, a common metric used by airlines” and “with [the] ‘generally accepted' segmentation [of the commercial aircraft market],” citing a Commission of the European Communities decision regarding the Boeing/McDonnell Douglas merger and a Japanese “market forecast.” (Resp. at 9-10.) However, the SAC “contains no factual allegations that purchasers of aircraft actually use this metric, and [Zunum's] only support for this claim is a Japanese ‘market forecast' that postdates the underlying allegations and was not even provided to the [c]ourt.” (Reply at 4 (citing Resp. at 9-10); see generally SAC (lacking any mention of this Japanese “market forecast”).)
Moreover, the Boeing/McDonnell Douglas decision that Zunum relies on does not support its proposed market. Indeed, that decision noted that the market for large commercial jet aircraft, like Boeing's 737, is distinct from the regional jet market because the manufacturers in the large commercial jet aircraft market do not “have products below the 100 seat/1,700 nautical mile maximum-range thresholds, which are considered to be the approximate combined upper limits for the specific requirements of regional carriers.” See Boeing/McDonnell Douglas (Case IV/M.877), Commission Decision 97/816/EC [1997] OJ L 336/16, ¶ 15, https://tinyurl.com/bjzx84km. Thus, that decision did not declare that a market consisting of “aircraft serving commercial air travel of up to 1,500 miles” (SAC ¶¶ 501, 516) is consistent with “[the] ‘generally accepted' segmentation [of the commercial aircraft market]” (Resp. at 9-10). “Zunum's “attempt to declare an equivalency between th[e] limit of 1,700 nautical miles (roughly 1,950 miles) [described in the Boeing/McDonnell Douglas decision] and its own invented ‘1,500 mile' metric merely demonstrates that Zunum's market allegations are arbitrary and detached from reality.” (Reply at 5.) In any event, Zunum cannot supplement its SAC with unpled allegations attempting to justify the boundaries of its first proposed product market. See, e.g., Staley v. Gilead Scis., Inc., 446 F.Supp.3d 578, 617 (N.D. Cal. 2020) (dismissing antitrust claim where scope of the product market was not clearly set forth in complaint); Allan & Assocs. Ltd., 445 F.Supp.3d at 59 (noting that plaintiff could not amend complaint through opposition to a motion to dismiss). Nor can Zunum “ignore economic reality and ‘arbitrarily choose the product market relevant to its claims.'” Epic Games, Inc. v. Apple Inc., 559 F.Supp.3d 898, 1015 (N.D. Cal. 2021) (quoting Buccaneer Energy (USA) v. Gunnison Energy Corp., 846 F.3d 1297, 1313 (10th Cir. 2017)).
Both parties cite to the European Commission's decision and the court finds it appropriate to take judicial notice of the decision in order to discuss its contents. See, e.g., In re European Gov. Bonds Antitrust Litig., No. 19 Civ. 2601, 2022 WL 768680, at *5 (S.D.N.Y. Mar. 14, 2022) (taking judicial notice of European Commission decision on motion to dismiss); In re German Auto. Man. Antitrust Litig., 392 F.Supp.3d 1059, 1063 n.2 (N.D. Cal. 2019) (taking judicial notice of European Commission press release on motion to dismiss).
Boeing next argues that Zunum's first proposed product market fails because Zunum failed to follow the court's direction to define its Alleged Markets with reference to the rule of reasonable interchangeability of use, which “refers to whether consumers could use the products for the same purposes and depends on the products' ‘price, use[,] and qualities.'” (See Mot. at 10-11 (quoting 6/13/22 Order at 16 & n.4).) Boeing notes that the European Commission, in the Boeing/McDonnell Douglas decision, “emphasized that, on the demand side, consumers generally approach purchasing decisions based on ‘operating requirements' (e.g., routes to be flown, optimal seating or loading, flight frequency, and the availability of airport slots), ‘technical requirements' (e.g., performance, reliability, and maintenance and service networks), and ‘economic and financial aspects' (e.g., purchase price, forecasted operating revenues and costs, and residual value).” (Id. at 10 (citing Boeing/McDonnell Douglas (Case IV/M.877), ¶ 14).) It contends that “[t]hese customer considerations underscore the implausibility of how Zunum has attempted to gerrymander its first Alleged Market,” which “has nothing to do with things that consumers actually care about, such as routes to be flown, the availability of airport slots, maintenance and service networks, and purchase price.” (Id. at 10-11 (“Indeed, Zunum's attempt to lump large jets and regional jets together is fundamentally wrong.”).)
The court agrees. Zunum fails to point to allegations in the SAC that specifically describe why the products it identifies as being in the first proposed product market are reasonably interchangeable in light of common customer considerations, like those discussed above-i.e., operating requirements, technical requirements, and economic and financial aspects. (See generally Resp.; SAC); Boeing/McDonnell Douglas (Case IV/M.877), ¶ 14. Instead, it points to the paragraph of the SAC that alleges that “[i]nterchangeability of use in the market for aircraft serving commercial air travel up to 1,500 miles is driven primarily by ‘Cost per Available Seat Mile' [“CASM”] of the aircraft.” (Resp. at 8 (quoting SAC ¶ 517).) Zunum then claims, without support from the SAC, that “CASM is an integrated economic metric that carriers use, which includes the cost of fuel, electricity, maintenance and service, as well as the purchase price per available seat mile through depreciation and amortization of the aircraft.” (Id. at 10.) CASMs, in Zunum's view, “explain why certain aircraft that technically can fly between 0 and 1,500 miles are not interchangeable because they are not economically competitive for commercial air travel, such as business jets and small passenger aircraft like small turboprops, piston aircraft, or air taxis.” (Id. at 8 (“CASMs for conventional aircraft increase steeply as the size of the aircraft decreases, the precise economic condition that Zunum's innovations invert.” (citing SAC ¶ 517)).) //
Even though Zunum's interchangeability of use argument essentially revolves around CASMs, Zunum again improperly relies on unpled allegations, regarding what CASMs are and why they are the proper metric to establish interchangeability of use, to attempt to plausibly establish this proposed market. Moreover, even if CASMs were a proper metric to evaluate interchangeability of use, the paragraphs in the SAC that discuss CASMs do not answer the question of whether the products within Zunum's first proposed product market are, in fact, reasonably interchangeable. For example, the SAC “includes no factual allegations permitting the inference that ‘single-aisles, twin-aisles, regional jets, and turboprops” are so comparable in CASM that they are reasonably interchangeable, and thus, that Zunum is justified in placing them in the same market. (See Reply at 5 (quoting SAC ¶ 516 (describing the type of aircraft in Zunum's first proposed product market).) “In fact, the [SAC] implies the opposite: because the CASM for ‘conventional aircraft' ‘increas[es] very steeply as the size of the aircraft decreases,' the smallest aircraft in the first Alleged Market must be vastly different in CASM from the largest aircraft” in that market. (Id. (quoting SAC ¶ 517).) Additionally, with respect to the CASM metric, the allegations in the SAC do not explain why “business jets and small passenger aircraft” are excluded from its market definition, despite the inclusion of “regional jets” and “turboprops.” (See generally SAC.) Based on the allegations in the SAC, the court is unable to plausibly conclude that Zunum's first proposed product market comports with the “commercial realities” faced by customers and includes products that are reasonably interchangeable in light of consumer considerations. Epic Games, 559 F.Supp.3d at 1015 (quoting High Tech. Careers v. San Jose Mercury News, 996 F.2d 987, 990 (9th Cir. 1993)).
Because Zunum's first proposed product market is arbitrarily drawn and is not defined with reference to the rule of reasonable interchangeability of use, the court does not address Boeing's argument that Zunum also fails to plead facts supporting cross-elasticity of demand. (See Mot. at 11-12.)
For the above-mentioned reasons, Zunum fails to plausibly establish a market for “aircraft serving commercial air travel up to 1,500 miles.”
ii. Product Markets for Commercial Hybrid and All-electric Aircraft and Commercial Hybrid and All-electric Propulsion Systems
Turning to Zunum's “commercial hybrid and all-electric aircraft” and “commercial hybrid and all-electric propulsion systems” markets, Boeing argues that these proposed markets are deficient because they “do not exist, let alone satisfy the reasonable interchangeability and cross-elasticity of demand requirements.” (Reply at 6; Mot. at 12.) As noted above, the court has already held that a “hybrid-electric and all-electric aircraft” market does not “currently exist.” (6/13/22 Order at 19-20.) Rather than add allegations to dispute that point, the SAC admits that the “commercial hybrid and all-electric aircraft” and “commercial hybrid and all-electric propulsion systems” markets are “still emerging.” (See SAC ¶ 535; see also id. ¶ 277 (same).)
(See, e.g., SAC ¶ 32 (alleging that Zunum was formed to “develop the word's [sic] first hybrid-electric and all-electric . . . regional aircraft for commercial service and to develop this new market as the first-mover”); id. ¶ 39 (admitting that it never produced such an aircraft and only had a “ground prototype”); id. ¶ 402 (calling the markets for commercial hybrid and all-electric aircraft, and commercial hybrid-electric and all-electric propulsion systems “nascent markets”); id. ¶¶ 369-98 (failing to allege that any entities currently selling completed, commercial hybrid-electric or all-electric aircraft or commercial hybrid-electric and all-electric propulsion systems); id. ¶ 385 (alleging that “[t]he market [sic] for commercial hybrid or all-electric aircraft and propulsion systems is still emerging”).)
As noted above, see supra Section III.B.1, Zunum again fails to provide the court with cases to support its argument that “[t]he nascency of a market is not fatal to an antitrust claim” (see Resp. at 6).
Zunum attempts to avoid this admission and establish the existence of these markets by alleging that it had “launch orders” for its ZA10 aircraft. (See Resp. at 11 (citing SAC ¶ 47).) However, the SAC says nothing else about these alleged “launch orders” such that the court could infer the existence of a product market, “nor does it say anything to suggest Boeing or Safran ever had any order for a competing product or with the same customers, and it admits that Zunum never completed a prototype engine, much less an aircraft.” (See Reply at 6 (citing SAC ¶¶ 39, 47); see generally SAC). And while Zunum argues that there is a “long lead time to certification and production” in the aviation industry (see Resp. at 11-12), such an argument simply underscores the fact that second and third proposed product markets will not come into existence anytime soon. The court agrees that “admittedly nascent technology many years from ripening into a product cannot support an antitrust claim.” (Reply at 6); see Siegler, 2019 WL 581719, at *12 (“If there is no extant product market, then it necessarily follows that there is no viable anti-trust claim.”). Accordingly, the court concludes that Zunum's proposed product markets for “commercial hybrid and all-electric aircraft” and “commercial hybrid and all-electric propulsion systems” are facially unsustainable because such markets have yet to be established. See Siegler, 2019 WL 581719, at *12; Newcal Indus., 513 F.3d at 1044 (“Plaintiff must allege . . . that a ‘relevant market' exists ....”).
Again, these allegations appear nowhere in the SAC and Zunum cannot rely on them to bolster its claim. (See generally SAC (lacking lead time allegations)); see Allan & Assocs. Ltd., 445 F.Supp.3d at 59. Nor can Zunum rely on its unpled allegations regarding hybrid and all-electric aircraft and hybrid and all-electric propulsion system projects pursued by other parties (see Resp. at 12) to establish the existence of its second and third proposed product markets. See Allan & Assocs. Ltd., 445 F.Supp.3d at 59.
Because Zunum's second and third proposed product markets do not exist, the court does not address Boeing's arguments regarding Zunum's failure to sufficiently define the boundaries of these two markets and demonstrate that there is reasonable interchangeability of use and cross-elasticity of demand within these two markets. (See Reply at 6-7; Mot. at 12-13.)
In sum, Zunum's Alleged Markets are facially unsustainable. Newcal Indus., 513 F.3d at 1045; Tanaka, 252 F.3d at 1063. Therefore, the court DISMISSES Zunum's WCPA antitrust conspiracy claim (Count IX). Whether to grant leave to amend is generally within the discretion of the district court. In re Daisy Sys. Corp., 97 F.3d 1171, 1175 (9th Cir. 1996). This discretion is particularly broad where the plaintiff has previously filed an amended complaint. Sisseton-Wahpeton Sioux Tribe v. United States, 90 F.3d 351, 355 (9th Cir. 1996). Here, Zunum has already had an opportunity to remedy the deficiencies with respect to its Alleged Markets (see 6/13/22 Order at 22, 42-43; SAC) and has not requested leave to amend nor proposed any new facts or legal theories that it could not have incorporated into prior iterations of its complaint (see generally Dkt.; Resp.). See, e.g., Turner v. Cnty. of Los Angeles, 18 Fed.Appx. 592, 597 (9th Cir. 2001) (concluding that the court did not abuse its discretion in denying the second amended complaint with prejudice and without leave to amend where the court had already allowed the plaintiff to amend their complaint with instructions on how to cure the complaint's deficiencies); Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1052 (9th Cir. 2008) (“Appellants fail to state what additional facts they would plead if given leave to amend .... Accordingly, amendment would be futile.”). Therefore, the court concludes that further amendment to this claim would be futile and DISMISSES Zunum's WCPA antitrust conspiracy claim with prejudice and without leave to amend.
C. WCPA Attempted Monopolization Claim
Zunum brings this claim against Boeing individually. (See SAC at 112.)
RCW 19.86.040 makes it “unlawful for any person to monopolize, or attempt to monopolize or combine or conspire with any other person or persons to monopolize any part of trade or commerce.” This provision is “equivalent” to Section 2 of the Sherman Act. Catlin v. Wash. Energy Co., 791 F.2d 1343, 1350 (9th Cir. 1986); Ceiling & Interior Sys. Supply, Inc. v. USG Interiors, Inc., 878 F.Supp. 1389, 1393 n.2 (W.D. Wash. 1993) (Section 19.86.040 “essentially follows [S]ection 2 of the Sherman Act.”). To state a claim for attempted monopolization, Zunum must allege facts that, if true, will prove: (1) specific intent to control process or destroy competition; (2) predatory or anticompetitive conduct directed at accomplishing that purpose; (3) a dangerous probability of achieving “monopoly power”; and (4) a causal antitrust injury. Khalid v. Microsoft Corp., 409 F.Supp.3d 1023, 1032 (W.D. Wash. 2019) (citing Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1432-33 (9th Cir. 1995)).
“A threshold step in any antitrust case is to accurately define the relevant market ....” Qualcomm, 969 F.3d at 992; see also Am. Ad Mgmt., Inc. v. Gen. Tel. Co. of Cal., 190 F.3d 1051, 1057 (9th Cir. 1999) (noting that, in assessing injury to competition, courts must focus on anticompetitive effects “in the market where competition is [allegedly] being restrained”). As such, an attempted monopolization claim, like an antitrust conspiracy claim, requires a plaintiff to sufficiently define the relevant market. See Newcal Indus., 513 F.3d at 1044 & n.3 (stating that a plaintiff is required to define the relevant market under Section 1 of the Sherman Act, which governs restraints of trade, and Section 2 of the Sherman Act, which governs monopolization and attempted monopolization); see also Murray, 832 P.2d at 500 (“A successful claimant under RCW 19.86.040 must also show an unreasonable restraint on competition. Because Malmquist failed to establish an actual injury to competition under RCW 19.86.030, his claim under RCW 19.86.040 fails for the same reason.”).
Because Zunum's Alleged Markets are facially unsustainable, see supra Section III.B, the court is unable to determine whether Boeing's alleged conduct actually injured competition. As noted in the court's June 13, 2022 order, “Zunum's failure to state an antitrust conspiracy claim under RCW 19.86.030 is dispositive of [its attempted monopolization claim] as well.” (See 6/13/22 Order at 24); see, e.g., PBTM LLC v. Football Nw., LLC, 511 F.Supp.3d 1158, 1178-82 (W.D. Wash. 2021) (dismissing the plaintiff's RCW 19.86.040 and 19.856.030 claims, as well as its claims under Sections 1 and 2 of the Sherman Act, for failure to adequately plead a relevant product market); CaptiveAire Sys., Inc. v. ITW Food Equip. Grp., LLC, No. C09-0244JLR, 2009 WL 10676075, at *5 (W.D. Wash. Sept. 28, 2009) (dismissing the plaintiff's RCW 19.86.040 claim because a plaintiff “must establish an unreasonable restraint on competition to prevail on a monopolization or attempted monopolization claim under RCW 19.86.040,” and the plaintiff failed to do so “because it does not define the relevant geographic market”). Accordingly, the court DISMISSES Zunum's WCPA attempted monopolization claim (Count X) because Zunum's Alleged Markets are facially unsustainable. Newcal Indus., 513 F.3d at 1045; Tanaka, 252 F.3d at 1063. The district court has broad discretion to deny leave to amend where the plaintiff has previously filed an amended complaint. Sisseton-Wahpeton Sioux Tribe, 90 F.3d at 355. For the same reasons that the court dismissed Zunum's WCPA antitrust conspiracy claim with prejudice and without leave to amend, see supra Section III.B.2, the court concludes that further amendment to this claim would be futile and DISMISSES Zunum's WCPA attempted monopolization claim with prejudice and without leave to amend.
D. Tortious Interference Claim
Zunum brings this claim against Boeing individually. (See SAC at 103.)
A party claiming tortious interference with a contractual relationship or business expectancy must prove: “(1) that a valid contractual relationship or business expectancy existed; (2) that the defendant knew of that relationship or expectancy; (3) that the defendant intentionally interfered by inducing or causing a breach or termination of that relationship or expectancy; (4) that the defendant interfered with an improper purpose or by improper means; and (5) that damage to the plaintiff resulted from the interference.” Libera v. City of Port Angeles, 316 P.3d 1064, 1068 (Wash.Ct.App. 2013) (citing Pac. Nw. Shooting Park Ass'n v. City of Sequim, 144 P.3d 276 (Wash. 2006)). A plaintiff needs to show either improper means or an improper purpose, not both, to establish the fourth element of their tortious interference claim. See Pleas v. City of Seattle, 774 P.2d 1158, 1163 (Wash. 1989) (noting that a cause of action for tortious interference can arise from “either the defendants' pursuit of an improper objective of harming the plaintiff or the use of wrongful means that in fact cause injury to plaintiff's contractual or business relationships” (emphasis added)); Woods View II, LLC v. Kitsap Cnty., 352 P.3d 807, 824-25 (Wash.Ct.App. 2015) (“While improper purpose and improper means are separate inquiries, ‘impropriety may be more easily found if the means of interference was wrongful.'” (quoting Pleas, 774 P.2d at 1164)). “‘Interference for improper purpose' is interference with an intent to harm” the plaintiff, and “‘[i]nterference by improper means' is interference that violates a statute, a regulation, a recognized rule of common law, or an established standard of the trade or profession.'” 6A WASHINGTON PRACTICE: WASHINGTON PATTERN JURY INSTRUCTIONS: CIVIL WPI 352.03 (7th ed. 2022); see also Westmark Dev. Corp. v. City of Burien, 166 P.3d 813, 822-23 (Wash.Ct.App. 2007) (approving the use of this jury instruction to define improper purpose); Greensun Grp., LLC v. City of Bellevue, 436 P.3d 397, 408 (Wash.Ct.App. 2019) (“To show improper means, the plaintiff must demonstrate the defendant had a duty not to interfere. To establish such a duty, the plaintiff may point to a statute, regulation, recognized common law, or established standard of trade or profession.” (citation omitted)).
In its SAC, Zunum alleges that “[t]hrough its fundraising and development efforts, Zunum developed valid business expectancies with several investors and business partners, including [the Safran Defendants] and UTAS.” (SAC ¶ 470.) It contends that “Boeing was aware of [Zunum and the Safran Defendants'] business relationship” (id. ¶¶ 471-72.) and “interfered with each of these business expectancies” through “improper means and for improper purposes,” resulting in the termination of Zunum's relationship with each such party (id. ¶¶ 473, 475, 478). Zunum alleges that “[t]hese improper means included with and by use of misappropriated proprietary information, trade secrets, and intellectual property in breach of restrictive covenants in at least three agreements and the attendant covenant of good faith and fair dealing. The improper means also included Boeing's breach of its fiduciary duties to Zunum as an investor with Board observation rights, including as to confidential financial plans, and finance constraints and vulnerabilities.” (Id. ¶ 476.) Zunum further alleges that Boeing's “improper motives included for the purpose of attempting to restrain trade and exclude Zunum from the market opportunities that it had innovated and was in the process of developing through a pathway disclosed to [Boeing].” (Id. ¶ 477.)
Boeing argues that Zunum's “failure to plead that Boeing used ‘improper means' to interfere with a valid business expectancy and cause[d] ‘resultant damage[s]' is dispositive” of its claim. (Mot. at 23 (quoting Pac. Nw. Shooting Park, 144 P.3d at 280).) First, Boeing contends that “Zunum cannot establish ‘improper means' based on claims that have been dismissed (i.e., breach of fiduciary duty) or should now be dismissed with prejudiced (i.e., antitrust).” (Id. at 24; see also Resp. at 23-24 (failing to contest this point).) The court agrees. See, e.g., Moore v. Com. Aircraft Interiors, LLC, 278 P.3d 197, 200-01 (Wash.Ct.App. 2012) (concluding that the plaintiff could not show improper means based on a statutory violation when the plaintiff failed to prove each element of that statutory claim). Thus, having dismissed Zunum's breach of fiduciary (see 6/13/22 Order at 41) and antitrust claims, see supra Sections III.B-C, Zunum cannot use those claims to establish the improper means element of its tortious interference claim.
The remaining improper means alleged in the SAC are based on Zunum's claims for trade secret misappropriation, breach of contract, and breach of the implied covenant of good faith and fair dealing. (See, e.g., SAC ¶ 476.) While Boeing argues that Zunum fails to establish improper means based on these remaining claims (see Mot. at 24; Reply at 11-12), it does not address whether the improper purpose alleged in the SAC is also deficient (see generally Mot. at 24; Reply at 11-12). (See SAC ¶ 477 (“[Boeing's] improper motives included for the purpose of attempting to restrain trade and exclude Zunum from the market opportunities that it had innovated and was in the process of developing through a pathway disclosed to [Boeing].”).) Because a plaintiff only needs to show “either that the defendant had an improper purpose or that the defendant used improper means” to establish the fourth element of a tortious interference claim, Woods View II, 352 P.3d at 824-25 (emphasis added), and because Boeing failed to address whether Zunum's improper purpose allegations fail to establish “interference with an intent to harm,” 6A WASHINGTON PRACTICE, supra, WPI 352.03, dismissal of Zunum's tortious interference claim is inappropriate at this time. To avoid piecemeal litigation of this claim, the court declines to address whether Zunum has alleged improper means based on its claims for trade secret misappropriation, breach of contract, and breach of the implied covenant of good faith and fair dealing, as a finding that Zunum failed to sufficiently allege improper means would not dispose of this claim. Therefore, Boeing's motion to dismiss is DENIED with respect to Zunum's tortious interference claim (Count VII).
“The terms [improper means and improper purpose] are not synonymous.” Woods View II, 352 P.3d at 824-25. To the extent that Boeing implicitly argues that the dismissal of Zunum's antitrust claims requires the court to reject the improper purpose alleged in the SAC (see SAC ¶ 477), the court cannot accept that conclusion absent supporting case law. See, e.g., United Fed'n of Churches, LLC v. Johnson, No. C20-0509RAJ, 2022 WL 1128919, at *9 (W.D. Wash. Apr. 15, 2022) (“Although Defendants are correct that the ‘improper means' prong of the fourth element requires a violation of a ‘statute, regulation, common law rule, or professional standard,' the ‘improper purpose' prong bears no such requirement.”).
The court does, however, note that it agrees with Boeing's contention that Zunum cannot support its improper means allegations with unpled allegations. (Compare Resp. at 23 (“Zunum has pleaded that Boeing had a duty not to interfere, including under trade custom.”), with Reply at 12 (“Zunum claims to have ‘pleaded that Boeing had a duty not to interfere, including under trade custom'-words never mentioned in the SAC.”)); see Allan & Assocs. Ltd., 445 F.Supp.3d at 59.
IV. CONCLUSION
For the foregoing reasons, the court GRANTS IN PART and DENIES IN PART Boeing's partial motion to dismiss Zunum's SAC (Dkt. # 62). The court GRANTS Boeing's motion with respect to Zunum's WCPA antitrust conspiracy and WCPA attempted monopolization claims and DISMISSES those claims with prejudice and without leave to amend. The court DENIES Boeing's motion with respect to Zunum's tortious interference with business expectancy claim.