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concluding that plaintiff need not file a more definite statement when the complaint alleged specific transactions that "involved two defendants" and "put defendants on fair notice [of] the nature of the claim, the products involved, and the parties involved in the allegedly unlawful conduct"
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CIVIL ACTION No. 00-2518-KHV.
May 10, 2001
MEMORANDUM AND ORDER
Plaintiff OMB Supply, Inc. brings two antitrust claims under Section 1 of the Sherman Act, 15 U.S.C. § 1, and a state law claim of tortious interference with business expectancy. This matter is before the Court on Defendants' Motion to Dismiss (Doc #6) and Defendants' Alternative Motion For More Definite Statement (Doc #8) both filed December 18, 2000. For the reasons stated below, defendants' motion to dismiss is overruled and defendants' alternative motion for more definite statement is sustained in part and overruled in part.
Motion To Dismiss Standards
In ruling on a motion to dismiss for failure to state a claim under Rule 12(b)(6), the Court must assume as true all well pleaded facts in plaintiff's complaint and view them in a light most favorable to plaintiff. Zinermon v. Burch, 494 U.S. 113, 118 (1990); see also Swanson v. Bixler, 750 F.2d 810, 813 (10th Cir. 1984). The Court must make all reasonable inferences in favor of plaintiff. Zinermon, 494 U.S. at 118;see also Fed.R.Civ.P. 8(a); Lafoy v. HMO Colo., 988 F.2d 97, 98 (10th Cir. 1993). The Court, however, need not accept as true those allegations that are conclusory in nature. See Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir. 1991). The issue in reviewing the sufficiency of plaintiff's complaint is not whether plaintiff will prevail, but whether plaintiff is entitled to offer evidence to support its claims. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The Court may not dismiss a cause of action for failure to state a claim unless it appears beyond a doubt that plaintiff can prove no set of facts in support of its theory of recovery that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); see Jacobs, Visconsi Jacobs, Co. v. City of Lawrence, 927 F.2d 1111, 1115 (10th Cir. 1991). Although plaintiff need not precisely state each element of its claims, it must plead minimal factual allegations on those material elements that must be proved. Hall, 935 F.2d at 1110.
Motion For A More Definite Statement Standards
A motion for a more definite statement should only be granted when the defendants cannot respond intelligently to plaintiff's complaint because of the minimal factual allegations. See Perington Wholesale, Inc. v. Burger King Corp., 631 F.2d 1369, 1371 (10th Cir. 1980). Although the pleading standard does not vary from case to case, what is needed to give defendant fair notice of the complaint in order to formulate a responsive pleading changes according to the level of complexity of the suit. See Mountain View Pharmacy v. Abbott Labs., 630 F.2d 1383, 1386 (10th Cir. 1980).
Factual Background
For the purposes of the motion to dismiss, the Court accepts plaintiff's allegations as true. OMB Police Supply, Inc. is a Kansas corporation with its principal place of business in Overland Park, Kansas. Elbeco, Inc. is a Pennsylvania corporation with its principal place of business in Reading, Pennsylvania. Marlowe Wertjes is a Kansas resident. Elbeco manufactures police and security uniforms, and Wertjes is a manufacturer's representative for Elbeco. She works with independent distributors of Elbeco products who buy and re-sell Elbeco police uniforms. OMB distributes police and security products in the Midwest.
Buyers of police and security uniforms are loyal to particular brands. If a police department has been using Elbeco uniforms, it is likely to insist on ordering only Elbeco uniforms. Numerous purchasers of police and security uniforms in the Midwest buy security products only from distributors who can supply them with Elbeco uniforms.
Elbeco and Wertjes rejected OMB's request to act as an authorized independent distributor of Elbeco police uniforms, and refused to sell uniforms to it. Defendants entered into an unlawful combination and conspiracy with each other as well as with OMB competitors to deprive OMB of a supply of Elbeco uniforms. As part of the conspiracy, Elbeco and Wertjes agreed with some OMB competitors to refuse to fill OMB uniform orders and to cut off OMB access to such uniforms from other sources. In furtherance of this conspiracy, defendants threatened some distributors with termination if they sold Elbeco uniforms to OMB. Defendants advised distributors to sell Elbeco uniforms to OMB only at artificially inflated prices which Elbeco approved. As a result, Elbeco distributors refused to resell Elbeco uniforms to OMB. The conspiracy has unreasonably restrained trade in the retail sale of police and security uniforms in the Midwest.
In Counts 1 and 2, plaintiff alleges that defendants violated Section 1 of the Sherman Act, 15 U.S.C. § 1. Count 1 alleges a refusal to deal and Count 2 alleges price fixing. In Count 3, plaintiff alleges that defendants interfered with plaintiff's business expectancy. Defendants argue that the Court should dismiss all three counts of plaintiff's complaint because plaintiff has not stated claims on which relief can be granted. Specifically, defendants argue that Counts 1 and 2 fail because defendants are legally considered one entity and cannot conspire with each other for purposes of antitrust law. Defendants argue that Count 3 (the tortious interference claim) cannot survive without the antitrust counts because without them, OMB lacks an allegation of improper conduct. In the alternative, defendants seek a more definite statement because OMB has not identified other co-conspirators or the specifics of the alleged conspiracy.
Analysis
I. Defendants' Reply
Defendants have filed a reply brief in support of their motions to dismiss and for a more definite statement. As to Counts 1 and 2, the reply included numerous arguments that were not included in either of the original motions. In the original motion to dismiss, defendants argued that the Court should dismiss the antitrust claims because defendants are legally considered one entity and cannot conspire with one another under federal antitrust law. In the original motion for a more definite statement, defendants argued that the Court should require OMB to amend Counts 1 and 2 because they failed to identify other co-conspirators or plead details of the alleged conspiracy. The crux of defendants' original argument was that defendants could not prepare responsive defenses because of OMB's minimal factual allegations.
Defendants' reply sought to defeat plaintiff's refusal to deal claim (Count 1) on grounds that (1) OMB did not allege that defendants had the requisite monopoly power in the relevant market or that defendants competed in the relevant market; (2) defendants cannot be found to have a monopoly over their own product; and (3) OMB did not sufficiently allege antitrust injury. Defendants' reply also presented new arguments why the price fixing antitrust claim should be dismissed: (1) plaintiff made a conclusory allegation that Elbeco advised other distributors of Elbeco police uniforms to sell the uniforms at artificially inflated prices; (2) OMB did not provide the necessary details of a pricing agreement or allege that a pricing agreement even existed; and (3) for a group boycott to exist, OMB must allege that the distributors conspired together. Defendants did not present these issues in either of the original motions.
D. Kan. Rule 7.1 governs motion practice in this Court. The rule permits parties to file a motion, a response to the motion and a reply by the movant. Id.; see Thurston v. Page, 931 F. Supp. 765, 768 (D.Kan. 1996). Courts in this district have been reluctant to consider issues raised for the first time in a reply brief. See id. ("The court will not consider the new argument presented in defendants' reply brief when that issue was not raised in the initial motion for summary judgment."); Glad v. Thomas County Nat'l Bank, No. 87-1299-C, 1990 WL 171068 (D.Kan. Oct. 10, 1990) (court will not consider new arguments and issues presented in reply brief because opposing party has not had an opportunity to respond); Mike v. Dymon, Inc., No. 95-2405-EEO, 1996 WL 427761, at *2 (D.Kan. July 25, 1996) ("In pursuit of fairness and proper notice, the court generally summarily denies or excludes all arguments and issues first raised in reply briefs.") (quotations omitted). Based on the above authorities, the Court will disregard the arguments which were first presented in defendants' reply brief.
II. Defendants' Motion To Dismiss For Failure to State A Claim
In Counts 1 and 2 of the complaint, plaintiff alleges that Wertjes, as an agent of Elbeco, conspired with Elbeco to refuse to sell uniforms to OMB and conspired with OMB competitors to deprive OMB of Elbeco uniforms. Defendants claim that Counts 1 and 2 must fail because it is legally impossible for a corporate defendant to conspire with an employee for the purpose of antitrust liability under the Sherman Act. See Freeman v. Medevac Midamerica of Kan., Inc., 719 F. Supp. 1014, 1015 (D.Kan. 1989) (corporate officers generally incapable of conspiring with their corporation). In response, OMB argues that a conspiracy claim can be asserted because Wertjes is an agent and not an employee of Elbeco.See Holter v. Moore Co., 702 F.2d 854, 855 (10th Cir.) (agents of corporations capable of conspiring with corporations in limited circumstances), cert. denied, 464 U.S. 937 (1983). In order to ultimately prevail, OMB must show that the agent and the corporation are separate economic entities in substance as well as in name. See id.
Defendants submitted materials outside of the pleadings by attaching Wertjes' W-2 form to their reply brief. Because OMB has not had an opportunity to conduct discovery on the factual issues which are raised by the W-2 form (e.g., why no amounts are listed), the Court will not convert defendants' motion to dismiss to one for summary judgment.
OMB argues that it has satisfied the notice pleading requirements of Fed.R.Civ.P. 8(a) by alleging that Wertjes is an agent of Elbeco. The two purposes of the modern complaint are "to give opposing parties fair notice of the basis of the claim against them so that they may respond to the complaint, and to apprise the court of sufficient allegations to allow it to conclude, if the allegations are proved, that the claimant has a legal right to relief." Monument Builders of Greater Kansas City, Inc. v. Am. Cemetery Ass'n of Kan., 891 F.2d 1473, 1480 (10th Cir. 1989) (quoting Perington Wholesale, 631 F.2d at 1371), cert. denied, 495 U.S. 930 (1990). A complaint does not satisfy antitrust pleading requirements if it is "beyond doubt" that OMB is unable to prove its claim of conspiracy. See Monument Builders, 891 F.2d at 1480. At this point, however, it cannot be said "beyond doubt" that OMB will be unable to prove that defendants are separate economic entities for purposes of antitrust law.
Defendants also argue that plaintiff has failed to state a claim for tortious interference with a business expectancy under Kansas law. First, defendants argue that this claim fails because plaintiff does not allege sufficient facts to establish an antitrust violation. Because the Court finds that plaintiff has satisfied the notice pleading requirements with regard to its antitrust claims, the Court must reject this argument. Second, defendants argue that to establish tortious interference under Kansas law, plaintiff must allege "malicious" conduct. To state a claim for tortious interference with a business expectancy, plaintiff must allege:
(1) the existence of a business relationship or expectancy with the probability of future economic benefit to the plaintiff;
(2) knowledge of the relationship or expectancy by the defendant;
(3) that, except for the conduct of the defendant, plaintiff was reasonably certain to have continued the relationship or realized the expectancy;
(4) intentional misconduct by defendant; and
(5) damages suffered by plaintiff as a direct or proximate cause of defendant's misconduct.Turner v. Halliburton Co., 240 Kan. 1, 12, 722 P.2d 1106 (1986). Defendants argue that plaintiff has not alleged that malice which is necessary to establish the fourth element, i.e. intentional misconduct. To satisfy the notice pleading requirements, plaintiff does not have to specifically include the word "malice" in the complaint. Rule 8(a), Fed.R.Civ.P., does not require plaintiff to allege detailed facts that establish its right to judgment. See Blackwell v. Harris Chem. N. Am. Inc., 11 F. Supp.2d 1302, 1307 (D.Kan. 1998); Trevino v. Union Pac. R. Co., 916 F.2d 1230, 1234 (7th Cir. 1990). Rather, plaintiff must "set forth factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory." Nwakpuda v. Falley's Inc., 14 F. Supp.2d 1213, 1216 (D.Kan. 1998) (quoting Gooley v. Mobil Oil Corp., 851 F.2d 513, 515 (1st Cir. 1988)). Plaintiff alleges that defendants intentionally conspired to restrain trade and fix prices, which is sufficient to allege malice by implication. See In re Indep. Serv. Orgs. Antiturst Litig., 114 F. Supp.2d 1070, 1081 (D.Kan. 2000) (noting under Connecticut law, malice may be inferred by intentional interference with business expectancy without justification.).
In a related argument, defendants contend that a violation of antitrust laws is insufficient to establish "intentional misconduct" under Kansas law. The Restatement (Second) of Torts § 767, comment c provides:
Conduct specifically in violation of statutory provisions or contrary to established public policy may for that reason make an interference improper. This may be true, for example, of conduct that is in violation of antitrust provisions or is in restraint of trade or of conduct that is in violation of statutes, regulations, or judicial or administrative holdings regarding labor relations.
See Stafford v. Puro, 63 F.3d 1436, 1441-42 (7th Cir. 1995) (under Illinois law, violation of a statute may also constitute unjustified interference). In Turner, the Kansas Supreme Court cited approvingly Section 767 of the Restatement. This Court predicts that the Kansas Supreme Court would similarly approve comment c to that section. Accordingly, plaintiff's allegations of a violation of antitrust laws is sufficient to establish "intentional misconduct" by defendants.
For these reasons, defendants' motion to dismiss is overruled.
III. Defendants' Motion for a More Definite Statement
Defendants argue that Counts 1 and 2 of plaintiff's complaint are so vague that a more definite statement is required. In Count 1, OMB alleges that defendants conspired with unidentified distributors to deprive OMB of Elbeco police uniforms. In Count 2, OMB alleges that defendants conspired with unidentified distributors to fix resale prices in violation of Section 1 of the Sherman Act.
Defendants argue that OMB's failure to identify co-conspirators or details of the alleged conspiracy interferes with their ability to evaluate issues of joinder, venue, jurisdiction and other defenses. In response, OMB argues it cannot identify co-conspirators because defendants have the information regarding their identities. OMB argues that the Court should not dismiss the case before discovery because it needs discovery to identify co-conspirators.
In support of the original argument that plaintiff's complaint must identify co-conspirators, defendants rely on three cases outside the Tenth Circuit. These cases, however, are distinguishable. In Van Dyke Ford, Inc. v. Ford Motor Co., 399 F. Supp. 277 (E.D.Wis. 1975), the court required plaintiffs to specifically identify which of five plaintiffs and nine defendants were parties to particular transactions. In that case, defendants could not respond intelligently because the complaint was not clear which defendant was party to any particular illegal transaction. The present case does not involve similar issues or the same potential for confusion. In Encore Stores Inc. v. May Dep't Stores Co., 164 F. Supp. 82 (S.D.Cal. 1958), the court did not require plaintiff to identify co-conspirators who were allegedly involved in transactions that violated the Sherman Act. In George W. Warner Co, Inc. v. Black Decker Mfg. Co., Inc., 167 F. Supp. 860, 862 (E.D.N.Y. 1958), the court did require plaintiff to identify co-conspirators, but more recent Second Circuit cases have held that plaintiff is not required to identify non-defendant co-conspirators. See Gross v. New Balance Athletic Shoe, Inc., 955 F. Supp. 242, 247 (S.D.N.Y. 1997) (most courts do not require complaint to identify co-conspirators); Expoconsul Int'l, Inc. v. A/E Sys., Inc., 711 F. Supp. 730, 735 (S.D.N Y 1989) (plaintiff should be allowed discovery to identify specific co-conspirators because information is within defendant's knowledge).
In their reply, defendants rely on Mountain View Pharmacy, supra, in which the Tenth Circuit held that "[i]n view of the number of plaintiffs, defendants, and products involved in this suit, a complaint that fails to allege at least some of this information does not give fair notice of the grounds upon which the Robinson-Patman claim rests." 630 F.2d at 1386. Again, however, that case addressed the issue whether plaintiff had to identify which of 28 defendants and 13 plaintiffs were involved in each illegal transaction.
Unlike the Mountain View Pharmacy case, the present complaint alleges that each transaction involved two defendants. In addition, plaintiff alleges that Elbeco police uniforms were the subject of discriminatory treatment. These allegations put defendants on fair notice as to the nature of the claim, the products involved, and the parties involved in the allegedly unlawful conduct. Accordingly, analysis of Mountain View Pharmacy is not germane in this case.
In their reply brief, defendants also rely on Fisher v. Blazer, No. 88-1716-T, 1991 WL 86158, at *8 (D.Kan. Apr. 30, 1991). There the court dismissed the complaint not because plaintiff had failed to identify co-conspirators or dates of illegal transactions, but because plaintiff had not given adequate notice of the nature of the alleged antitrust violations. Further, cases that address whether plaintiff must identify non-defendant co-conspirators have found that plaintiff should not be required to do so when the identities of the co-conspirators are "largely in the hands of the alleged conspirators." Gross, 955 F. Supp. at 247 (quoting Poller v. Colombia Broad., 368 U.S. 464, 473 (1962));Expoconsul, 711 F. Supp. at 735.
Defendants also argue that plaintiff must allege other details of the alleged transactions, such as the approximate times when the alleged illegal agreements took place and whether they were oral or written in nature. See e.g, Van Dyke Ford, supra (oral or written nature of agreements and dates of such agreements are proper subjects of motion to make more definite).
The complaint informs defendants of alleged illegal actions that have resulted in restraint of trade. Defendants do not need more information to intelligently respond to the complaint. Defendants are entitled, however, to know the approximate time when the alleged conspiracy took place and ended. Plaintiff is not required to set forth the time when each transaction took place and in fact may not be in a position to give these exact dates. See Caroline Scenic Stages, Inc. v. Greyhound Corp., 38 F.R.D. 313, 316 (E.D.S.C. 1965). Further, plaintiff most likely is not in a position to know whether the agreements were oral or written and will need discovery to find this information. Thus, it is not necessary for plaintiff to identify whether the agreements were oral or written. Defendants argue that plaintiff's complaint must itemize all customers whose business was lost, including the amount of loss. Defendants rely on a case that involves libel per quod, which requires that plaintiffs allege damages with specificity. In federal antitrust cases, however, courts do not impose such a requirement on plaintiffs. See Ancar v. Sara Plasma, Inc., 964 F.2d 465, 468 (5th Cir. 1992); Dillard v. Merrill Lynch, Pierce, Fenner Smith, Inc., 961 F.2d 1148, 1159 (5th Cir. 1992), cert denied, 506 U.S. 1079 (1993).
In summary, defendants' motion for a more definite statement is sustained to the extent that plaintiff must provide the approximate dates of the alleged conspiracy and combination. Defendants' motion is otherwise overruled.
IT IS THEREFORE ORDERED that Defendants' Motion to Dismiss (Doc. #6) filed December 18, 2000 be and hereby is OVERRULED.
IT IS FURTHER ORDERED that Defendants' Alternative Motion For a More Definite Statement (Doc. #8) filed December 18, 2000 be and hereby is SUSTAINED IN PART, in that no later than May 25, 2001, plaintiff shall file and serve an amended complaint which includes the approximate dates of the alleged conspiracy and combination. Defendants' motion is otherwise OVERRULED.
Dated this 10th day of May, 2001 at Kansas City, Kansas.
KATHRYN H. VRATIL United States District Judge