Opinion
No. C-04-2070 SC.
October 28, 2004
ORDER RE: DEFENDANTS' MOTION TO DISMISS PLAINTIFF'S SECOND, FIFTH, SIXTH, SEVENTH, EIGHTH, TENTH, TWELFTH AND THIRTEENTH CAUSES OF ACTION
I. INTRODUCTION
Defendant Therasense, Inc. ("Defendant" or "Therasense") has moved to dismiss Plaintiff Richmond Pharmacy Surgical, Inc.'s ("Plaintiff" or "Richmond") Second, Fifth, Sixth, Seventh, Eighth, Tenth, Twelfth, and Thirteenth Causes of Action. Having reviewed the parties' papers and the relevant law, the Court declines to dismiss any of the claims.
Therasense Sales Corporation is also a defendant in this action. However, for clarity and brevity, this Order treats Defendants as a singular entity.
II. BACKGROUND
Defendant Therasense is a manufacturer of medical devices including a blood-glucose monitoring system. The glucose monitoring system includes a monitoring device, a lancet (needle) for taking blood samples, and disposable test strips. Complaint at 2. Therasense sells the device to retailers, medical care professionals, and individual users. Id. Once a user has a monitoring device, lancets and test strips must be purchased on a regular basis. Id. at 6. Plaintiff Richmond, a retailer of medical devices, supplies medical equipment prescribed by a doctor for use in the home. Id.
At the end of 2001, Therasense and Richmond entered into an agreement for Richmond to distribute Therasense's blood-glucose monitoring system. Id. at 8. Under the agreement, Richmond provided detailed customer sales data, including customer lists, to Therasense on a monthly basis. Id. at 9. The parties entered into a superseding agreement in late 2002 which called for continued detailed monthly reports to Therasense. Id. at 9-10.
Richmond's allegations include the following: 1) Despite its agreements with Richmond, Therasense entered into improper distribution agreements with Richmond's competitors that unlawfully diverted Richmond's customers to its competitors.Id. at 11-12. 2) Therasense improperly made use of the detailed customer information which Richmond had provided to Therasense.Id. 3) Therasense conducted an abusive audit of Richmond in order to gain additional customer data. Id. 4) Therasense refused to ship products to Richmond in violation of their prior agreements. Id. at 13. Based on these allegations, Richmond has alleged a variety of claims against Therasense. Id. at 15-32.
In the Motion currently before the Court, Defendant Therasense has moved for dismissal of Plaintiff Richmond's Second, Fifth, Sixth, Seventh, Eighth, Tenth, Twelfth, and Thirteenth Causes of Action pursuant to Federal Rule of Civil Procedure 12(b)(6).
III. LEGAL STANDARD
When presented with a motion to dismiss, "all allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party." Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). "[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). See also Gompper v. VISX, Inc., 298 F.3d 893, 896 (9th Cir. 2002).
IV. DISCUSSION
Applying the above legal standard, the Court will look at each cause of action as follows:
Second and Tenth Causes of Action
In the Second and Tenth Causes of Action, Plaintiff alleges breach of contract and misappropriation of trade secrets. In the former, Plaintiff alleges that Defendant "breached the implied covenants of good faith and fair dealing in the [parties'] 2001 and 2002 agreements by misappropriating [Plaintiff's confidential customer data]." Complaint at 16. In the latter, Plaintiff alleges that Defendant "acquired this trade secret information by improper means, including breach of a duty of good faith and fair dealing to maintain secrecy." Complaint at 28. Because both these claims turn on whether Defendant improperly used Plaintiff's customer data, the Court looks at these two claims together.
Here, California law determines whether the customer data can be a trade secret. Generally, California law holds that "the more difficult information is to obtain, and the more time and resources expended . . . in gathering it, the more likely a court will find such information constitutes a trade secret." Morlife, Inc. v. Perry, 66 Cal. Rptr. 2d 731, 736 (Cal.Ct.App. 1997). The parties differ as to whether or not Richmond's list deserves protection under this standard.
Therasense alleges that Richmond's customer list is available in a public Medicare database and thus cannot be a trade secret. Defendant's Motion at 10. Richmond counters that the Medicare database consists of companies eligible to purchase and resell the glucose-monitoring system in question, but that its list is of companies actually selling the product. Plaintiff's Opposition at 19. California courts have granted trade secret status to customer lists that distinguish actual customers from potential customers. Abba Rubber Co. v. Seaquist, 235 Cal. App. 3d 1, 32 (Cal.Ct.App. 1991). While Plaintiff Richmond has merely asserted facts suggesting that its customer list is such a protectable list, this Court must construe these facts in the light most favorable to Richmond. Therefore, this Court declines to dismiss the Second and Tenth Causes of Action.
Fifth, Sixth, Seventh Causes of Action
Plaintiff brings these three claims under California Business Professions Code Sections 17043, 17044, 17045 ("California Unfair Practices Act" or "UPA"). In the Fifth Cause of Action, Plaintiff alleges that Defendant supplied to Plaintiff's competitors monitoring devices at reduced or no cost "for the purpose of injuring or destroying competition." Complaint at 23. In the Sixth Cause of Action, Plaintiff alleges that Defendant gave "secret payments and allowances" to Defendant's competitors in order to "destroy fair and honest competition." Complaint at 23-24. In the Seventh Cause of Action, Plaintiff makes similar allegations. Complaint at 24-25.
Defendant alleges that Plaintiff cannot recover under the California UPA because it has not suffered any actual injury. Defendant's Memorandum at 8. However, under the UPA, "[o]nce a below-cost sale is shown, whether the competitor's sale was conducted with the intent of injuring competitors and whether such sales had the tendency or capacity to injure the plaintiff, are usually questions of fact." Fisherman's Wharf Bay Cruise Corp. v. Superior Court, 7 Cal. Rptr. 3d 628, 642-43 (Cal.Ct.App. 2003). Richmond has alleged injury. Complaint at 23. As described above, it has also alleged favorable treatment of its competitors. Since these are questions of fact under Fisherman's Wharf, these issues are not suitable for dismissal at this stage. Therefore, this Court must deny the motion to dismiss the Fifth, Sixth, and Seventh Causes of Action.
Eighth Cause of Action
In the Eighth Cause of Action, Plaintiff alleges that the conduct alleged in the Fifth, Sixth, and Seventh Causes of Action also violates California Business Professions Code Section 17200. Complaint at 25-26. Defendant moves for dismissal on the basis that "Richmond has no claim for price discrimination under either California or federal antitrust law." Motion at 9. However, in the immediately above section of this Order, this Court denies dismissal of the California claims, and in the immediately below section, this Court denies dismissal of the federal antitrust claims. Therefore, given that the Court has denied dismissal of the other claims that form the basis of this claim, Defendant's basis for dismissal of this claim is inapplicable. Thus, the Court denies the motion to dismiss the Eighth Cause of Action.
Twelfth and Thirteenth Causes of Action
Plaintiff alleges that Defendant's actions "included the unlawful discrimination in price between purchasers . . . with the effect of substantially lessening competition." Complaint at 31. Plaintiff also alleges that Defendant made unlawful payments and allowances to Plaintiff's competitors in order to impede competition in the glucose monitoring device market. Complaint at 32-33. Plaintiff alleges that these actions violated two Robinson-Patman Act provisions, 15 U.S.C. § 13(a) and (d).
Defendant asserts that these claims must be dismissed because Richmond "has not alleged an antitrust injury, the sine qua non of a private damages action under the antitrust laws." Defendant's Motion at 5-6. Defendant cites to Rutman Wine Co. v. E. J. Gallo Winery, which sets out two elements required to allege a Robinson-Patman claim: 1) an allegation of actual injury attributable to something the antitrust laws were designed to prevent, and 2) an allegation that the disadvantage adversely affected the claimant's ability to compete with favored competitors. 829 F.2d 729, 737 (9th Cir. 1987). Defendant asserts that "Richmond has pointedly not alleged that it is worse off because two of its competitors were favored by Therasense." Motion at 6. The Court does not agree with this reading of the Complaint. Rather, the Court finds that Plaintiff has alleged actual injury and an adverse effect. For example, Plaintiff stated in its Complaint, "By reason of . . . the contract, combination or conspiracy among Therasense, Diamond and Invacare, Richmond was unable to fill monthly purchase orders from Liberty of approximately two hundred thousand dollars per month." Complaint at 14. In its Reply, Defendant stated, "There are two recognized forms of Robinson-Patman injury: (a) business lost to a favored competitor who passed on the discounts it received and (b) profits lost from meeting the favored competitor's lower prices." Defendant's Reply at 2. Clearly the example quoted above shows that Plaintiff has plead the first type. Whether or not Plaintiff's allegations are true is not at issue here; what is at issue is whether the Plaintiff's allegations are sufficient to defeat a motion to dismiss. This Court finds that they are sufficient. V. CONCLUSION
For the foregoing reasons, the Court finds that for each cause of action Defendant has not shown that Plaintiff "can prove no set of facts in support of its claims which would entitle it to relief." Therefore, Defendants' Motion to Dismiss is hereby DENIED in its entirety.
IT IS SO ORDERED.