Opinion
Case No. 5:22-cv-00968-SPG-SHK
2023-04-07
SOUTHERN CALIFORNIA ELECTRICAL FIRM, a California corporation; Jason Farr, an individual; David Kanowsky, an individual; and Rob Morgan, an individual, Plaintiffs, v. SOUTHERN CALIFORNIA EDISON COMPANY, a California corporation; and Does 1 through 10, inclusive, Defendants.
Jason R. Fair, Daniel Lewis Allender, Nargess N. Hadjian, Robins Kaplan LLP, Los Angeles, CA, for Plaintiff. Kyle W. Mach, Brad Dennis Brian, Erin Joan Cox, Miranda E. Rehaut, Munger Tolles and Olson, Los Angeles, CA, Jeffrey S. Renzi, Law Dept, Rosemead, CA, Lauren E. Ross, Pro Hac Vice, Munger Tolles and Olson LLP, Washington, DC, for Defendants.
Jason R. Fair, Daniel Lewis Allender, Nargess N. Hadjian, Robins Kaplan LLP, Los Angeles, CA, for Plaintiff. Kyle W. Mach, Brad Dennis Brian, Erin Joan Cox, Miranda E. Rehaut, Munger Tolles and Olson, Los Angeles, CA, Jeffrey S. Renzi, Law Dept, Rosemead, CA, Lauren E. Ross, Pro Hac Vice, Munger Tolles and Olson LLP, Washington, DC, for Defendants.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS FIRST AMENDED COMPLAINT [ECF No. 38]
SHERILYN PEACE GARNETT, UNITED STATES DISTRICT JUDGE
Before the Court is Southern California Edison Company's ("Defendant") motion to dismiss plaintiff's First Amended Complaint ("FAC"), pursuant to Federal Rule of Civil Procedure 12(b)(6) ("Motion"). (ECF No. 38 ("Mot.")). Having considered the parties' submissions, the relevant law, and the record in this case, the Court found pursuant to Federal Rule of Civil Procedure 78(b) and Central District of California Local Rule 7-15 that the matter was suitable for resolution without oral argument. For the following reasons, the Court GRANTS IN PART and DENIES IN PART the Motion.
I. BACKGROUND
A. Factual Background
The FAC alleges as follows:
Defendant is a utility company that generates, transmits, and distributes electric power, (ECF No. 35 ¶ 18 ("FAC")), and "is the only electrical utility service provider in more than one-hundred-eighty incorporated cities, fifteen counties, thirty-three unincorporated communities, thirty-four census designated places and thirteen federally recognized tribal lands, all within the 50,000 square miles of service areas" in Southern California (the "SCE Territory"). (Id. ¶ 2). As the only electric utility provider within the SCE Territory, Defendant has power over all electrical contractor services within the SCE Territory. (Id. ¶ 19). All electrical contractors who seek to provide services for the design and installation of new electrical utility lines, distribution lines, and service line extensions within the SCE Territory must comply with any restrictions imposed by Defendant. (Id. ¶¶ 20-22).
Defendant controls the SCE Territory through its implementation of Electrical Tariff Rules 15 and 16. (Id. ¶ 22). Under Tariff Rules 15 and 16, the applicant consumer (the property owner within the SCE Territory) may elect to design and install that portion of the new distribution line extension (Rule 15) and/or that portion of the new service extension (Rule 16) in accordance with Rule 15's outside applicant design and applicant installation options. (Id. ¶ 23). The only alternative is to hire Defendant directly for the design and/or installation services. (Id.).
Defendant implements a company-wide policy prohibiting certain terminated Defendant employees from working, in any manner, on construction projects requiring Defendant's approval, oversight, or involvement. (Id. ¶ 24). In July of 2018, Defendant integrated this policy into Electric Tariff Rules 15 and 16 by adding the following two conditions to its internal qualifications for Applicant Designer and/or Applicant Installer:
(1) Must not currently, or in the future as a qualified designer, work as a design contractor (or its employee) that does business directly with [Defendant], or as a subcontractor
to a firm that does business directly with [Defendant]; and(Id. ¶ 25 (citing Application Distribution Design Standards, § 2.7(A)). The Section 2.7(A) prequalification requirements are referred to as the "ADS Policy." (Id. ¶ 26).
(2) Must not have been terminated from [Defendant] under a classification that makes them ineligible for rehire or ineligible to work on SCE assets or systems.
Jason Farr, David Kanowsky, and Rob Morgan (the "Individual Plaintiffs") were terminated from Defendant's employment in or around April of 2017. (Id. ¶ 30). As part of their termination, Defendant issued a letter stating: "as part of the conditions of your employment termination, you may never come back onto company property." (Id.). The Individual Plaintiffs have been unable to obtain employment in the SCE Territory "due to [Defendant's] restrictive policies." (Id. ¶ 32). The Individual Plaintiffs started Southern California Electrical Firm ("SCEF," collectively with Individual Plaintiffs, "Plaintiffs") due, in part, to Defendant's ability to push them out of the SCE Territory. (Id. ¶ 33).
SCEF contracts with consumers in the SCE Territory to provide them with electrical consulting services, design services, and installation services. (Id. ¶ 34). In particular, SCEF provides its customers with electrical consulting services relating to the design and relocation of electrical poles and wires, design and installation of new distribution and service line extensions, and design and installation of underground conduit installation. (Id.). While all of SCEF's work begins as consultant work, some of its relationships transition into providing services that are governed by Defendant's ADS Policy-the design and installation for new utility lines and distribution and services lines. (Id.). SCEF has completed performance of five different contracts for applicant design and install work, totaling $732,449.92 in value. (Id. ¶ 35). SCEF also entered into and is still working on three different applicant installation contracts, totaling $267,925 in value (collectively with the application design and install contracts, the "SCEF Tariff Contracts"). (Id. ¶ 36).
SCEF has also completed performance on 207 different contracts for purely consulting services. (Id. ¶ 39). Additionally, SCEF has entered into and is currently working on 86 different consulting projects, totaling $2,282,300 in value (collectively with the completed consulting contracts, the "SCEF Consulting Contracts"). (Id. ¶¶ 40-41). SCEF's prospective contracts include partnering with contractors Mike Davis Home Builders ("MD Home Builders") and Cypress Equity Investments, Inc. ("CEI"). See (id. ¶ 62).
As to the SCEF Tariff Contracts, the FAC alleges that SCEF has been "continuously met with obstacles, additional costs, hardships, and burdens imposed" due to Defendant's enforcement of the ADS Policy. See (id. ¶ 38). To mitigate this harm, SCEF subcontracts all of its work in the SCE Territory to contractors that qualify under the ADS Policy. (Id.). Plaintiffs estimate that SCEF "suffers losses at a minimum of 85 percent of the contract value due to outsourcing this work." (Id.). The FAC also alleges that Defendant "interferes with each and every one of SCEF's Consulting Contracts through the following acts, including but not limited to:
a. Instructing [Defendant's] employees in the South Bay District that they could not communicate with Plaintiffs nor Plaintiffs['] employees;
b. Informing owners and contractors that it will not acknowledge SCEF's work;
c. Informing owners and contractors that it will not recognize the validity of any contracts with SCEF;(Id. ¶ 42).
d. Instructing owners and contractors not to use SCEF, even though SCEF was under contract with these owners and contractors to provide them meaningful consultation services;
e. Intentionally damaging SCEF's reputation by discussing [Defendant's] past dealings and issues with SCEF during site inspections with SCEF's customers; and
f. Interfering with the progression of work on projects that SCEF is working on.
For example, on or about February of 2018, Defendant contacted MD Home Builders to let them know that Defendant would not honor SCEF's work and would not communicate with anyone that works for SCEF. (Id. ¶ 63). At that time, SCEF and MD Home Builders had a contract for a project located within the SCE Territory (the "MD Home Builders Project"). (Id.). MD Home Builders was told that it would have to communicate with Defendant directly to process Rule 15 and 16 designs for the MD Home Builders Project. (Id.). As a result, SCEF could not finish the MD Home Builders Project as contemplated by its contract. (Id.). Prior to the MD Home Builders Project, SCEF had completed at least four separate contracts for MD Home Builders and was expected to receive additional contracts for consulting and design work. (Id. ¶ 64). After Defendant's interference, SCEF did not receive any additional work from MD Home Builders. (Id.).
On February 18, 2018, SCEF sent Defendant a cease and desist letter, identifying Defendant's conduct as restrictive. (Id. ¶ 43). On March 29, 2018, Defendant confirmed in writing its position that it "is not required to conduct business with" SCEF. (Id. ¶ 44). On April 6, 2018, SCEF informed Defendant:
SCEF is working its active projects to mitigate exposure for both parties. In the spirit of truly resolving this situation amicably, SCEF is restricting its dealings with [Defendant] by funneling all communications and contact with [Defendant] through persons that are not subject to the imposed restrictions. Until the reasonable restrictions are deemed acceptable, SCEF will perform under this arrangement.(Id. ¶ 45). On August 12, 2020, Defendant informed SCEF that it was aware of SCEF's projects being carried out by SCEF's third parties and that Defendant would no longer permit SCEF to utilize third parties in furtherance of its projects within the SCE Territory. (Id. ¶ 46). In a meeting with Plaintiffs, Defendant's personnel informed them that:
a. [Defendant] will not accept any new submittals for new service design and construction from SCEF, including local planning submittals, applicant design or applicant install;
b. [Defendant] will not accept work that was submitted on behalf of SCEF through a third-party company (a subcontractor) for applicant design and installation work;
c. [Defendant] will not honor future work requests submitted by SCEF under third-party authorization letters;
d. [Defendant] unilaterally contracted SCEF's subcontractors and notified them that [Defendant] would not accept new work that originated with SCEF; and
e. [The Individual Defendants] were not permitted on [Defendant's] property
or allowed to communicate with [Defendant's] employees per their termination conditions.(Id. ¶ 46).
Between August 2020 and April 2022, SCEF continued to mitigate the impact of Defendant's conduct by assigning both SCEF Tariff Contracts and SCEF Consultant Contracts to subcontractors in order to continue processing work through the Defendant's system. (Id. ¶ 47). As a result, SCEF would receive only a small fraction of the contract value, resulting in "significant losses to the business." (Id.). To further mitigate the impacts of Defendant's conduct, SCEF hired "at least" four full-time employees for the sole purpose of submitting claims and paperwork to Defendant in an effort to circumvent Defendant's interference with the SCEF Consulting Contracts and SCEF Tariff Contracts and to comply with Defendant's ADS Policy. (Id. ¶ 48). From 2017 through April 2022, SCEF's contract value for SCEF Tariff Contracts exceeded $1 million, and the contract value for SCEF Consultant Contracts exceeded $4.5 million. (Id. ¶ 49). For all of its contracts, the FAC alleges that SCEF was forced to incur losses in its efforts to mitigate the harm Defendant was causing through its wrongful conduct. (Id.).
Plaintiffs' harm is ongoing. For example, the FAC alleges that Plaintiffs have suffered recent difficulties in its business dealings with CEI. In early 2022, SCEF received six consulting and design contracts from CEI for consulting and applicant design services for multiple multifamily high-rise buildings in Santa Monica, California, including a consulting services agreement dated May 18, 2022, for a project located in Torrance, California ("CEI Projects"). (Id. ¶ 65). CEI told SCEF that they had several more projects developing and requested proposals from SCEF. (Id. ¶ 66). After CEI was made aware that SCEF had to use subcontractors to complete its work with CEI, CEI did not award SCEF the three projects for which SCEF had submitted proposals. (Id.). CEI has also not requested additional proposals from SCEF to complete the consultant services or applicant design of any additional projects since the CEI Projects were awarded earlier in 2022. (Id.). CEI stated that they were going to review all active contracts with SCEF and possibly cancel the CEI Projects because "they hired [SCEF] to work directly with [Defendant]." (Id.).
Further, according to the FAC, Defendant has "intentionally slowed projects on which SCEF is working for the purpose of frustrating SCEF's ability to perform under the SCEF Consultant Contracts and SCEF Tariff Contracts." (Id. ¶ 77). For example, Defendant's employee - Carmen McNeal - "intentionally interfered with and delayed the approval of SCEF's application submitted by a subcontractor for design and installation services on a project located at 916 Foothill Ave, Beverly Hills, CA." (Id.). As a result, "SCEF incurred unnecessary delays to its project, rendering performance more difficult and expensive." (Id.). The FAC also alleges that Defendant "intended to disrupt the relationships and/or knew that the disruption of the relationship was certain or substantially certain to occur. As a direct and proximate result of [Defendant's] conduct, the relationships were disrupted and SCEF suffered, and will continue to suffer, significant damages to its business, goodwill and reputation . . . ." (Id. ¶ 70).
Plaintiffs bring this lawsuit "to enjoin [Defendant] from enforcing its unreasonable prequalification and ongoing qualification standards under its ADS Policy against Plaintiffs and declaring Section 2.7(A) and Edison's practice of extending its disqualification impact to corporate entities to be unreasonable and unlawful." (Id. ¶ 50).
B. Procedural History
On June 9, 2022, Plaintiffs filed their original complaint against Defendant. (ECF No. 1). The original complaint raised the following causes of action: (1) Violation of Section 2 of the Sherman Antitrust Act, 15 U.S.C. § 2 ("Section 2"); (2) Intentional Interference with Prospective Economic Relations; (3) Negligent Interference with Prospective Economic Relations; (4) Intentional Interference with Contractual Relationship; (5) Violation of California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 ("UCL"); and (6) Declaratory Relief. (Id. ¶¶ 46-83). On September 12, 2022, Defendant filed a motion to dismiss. (ECF No. 23). Per this motion, Defendant argued that this Court lacked subject matter jurisdiction over Plaintiffs' claims because they were preempted by the California Public Utilities Code. See (id. at 17-23). Defendant also argued that Plaintiffs' claims should be dismissed for failure to state a claim and being filed beyond the relevant statute of limitations. (Id. at 23-35).
On January 10, 2023, the Court granted Defendant's motion to dismiss ("MTD Order"). (ECF No. 31 ("MTD Order")). Although the Court found that Plaintiffs' claims were neither preempted nor barred by the relevant statutes of limitations, (id. at 7-17, 26-29), the Court nevertheless concluded that Plaintiffs failed to allege any cognizable claims. See (id. at 17-29). The Court dismissed without prejudice Plaintiffs' Section 2 claim for failure to state a sufficiently definite product market. (Id. at 17-19). The Court also dismissed without prejudice Plaintiffs' claims for intentional interference with prospective economic relations and intentional interference with contractual relationship because the original complaint failed to allege specific facts establishing the existence of any business relationships between Plaintiffs and identifiable third parties, along with factual allegations showing the terms of these agreements. See (id. at 19-24). The Court dismissed with prejudice Plaintiffs' claim for negligent interference with prospective economic relations because there is no duty between competitors under California law. (Id. at 21-22). The Court dismissed without prejudice Plaintiffs' claim under the UCL for lack of an underlying statutory violation. (Id. at 24-25). Finally, the Court dismissed Plaintiffs' claim for declaratory relief because it merely replicated Plaintiff's other causes of action. (Id. at 26).
On January 26, 2023, Plaintiffs filed the FAC. (FAC). The FAC reasserts the following causes of action: (1) Violation of Section 2, (id. ¶¶ 51-59); (2) Intentional Interference with Prospective Economic Relations, (id. ¶¶ 60-71); (3) Intentional Interference with Contractual Relationship, (id. ¶¶ 72-80); and (4) Violation of the UCL for engaging in "unlawful, unfair, dishonest, deceptive, and destructive business acts and practices by which fair and honest competition is destroyed and prevented," (id. ¶¶ 81-84). On February 8, 2023, Defendant filed the instant Motion pursuant to Federal Rule of Civil Procedure 12(b)(6). (Mot.). Plaintiff filed their opposition on March 1, 2023. (ECF No. 39 ("Opp.")). On March 8, 2023, Defendant filed its reply. (ECF No. 40 ("Reply")).
Plaintiffs originally filed a first amended complaint on January 24, 2022. (ECF No. 32). However, the Court issued a Notice of Filer Deficiencies explaining that the filing had an incorrect case number. (ECF No. 33). Thereafter, Plaintiffs filed the instant FAC. (FAC).
Defendant originally filed the Motion on February 7, 2023. (ECF No. 36). However, the Court issued a Notice of Filer Deficiencies explaining that the Defendants had selected an incorrect "event" for purposes of its digital filing. See (ECF No. 37). Thereafter, Defendants filed the instant "Corrected" Motion. (Mot.).
II. LEGAL STANDARD
Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a complaint to include "a short and plain statement of the claim showing that the pleader is entitled to relief." A complaint that fails to meet this standard may be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). Dismissal is proper "when the complaint either (1) lacks a cognizable legal theory or (2) fails to allege sufficient facts to support a cognizable legal theory." Somers v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013) (citation omitted). To survive a 12(b)(6) motion, the plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is facially plausible when the plaintiff pleads facts that "allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted). There must be "more than a sheer possibility that a defendant has acted unlawfully." Id. While a complaint does not need detailed factual allegations, "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (internal citations and quotations omitted); Ashcroft, 556 U.S. at 678, 129 S.Ct. 1937 ("The tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions."). A plaintiff must allege facts sufficient to "raise a right to relief above the speculative level." Twombly, 550 U.S. at 555, 127 S.Ct. 1955. In deciding whether the plaintiff has stated a claim upon which relief can be granted, the court accepts the plaintiff's allegations as true and draws all reasonable inferences in favor of the plaintiff. In re Tracht Gut, LLC, 836 F.3d 1146, 1150 (9th Cir. 2016) (citation omitted).
III. DISCUSSION
A. Section 2 of the Sherman Act
Section 2 of the Sherman Act prohibits monopolies, as well as attempts to monopolize and conspiracies toward monopolization. 15 U.S.C. § 2. To make a claim of monopolization, a plaintiff must show: (1) defendant's possession of monopoly power in the relevant market; (2) defendant's willful acquisition or maintenance of that power through exclusionary conduct; and (3) causal antitrust injury. Am. Pro. Testing Serv. v. Harcourt Brace Jovanovich Legal & Prof. Publs., 108 F.3d 1147, 1151 (9th Cir. 1997) (citation omitted). To satisfy the first of these requirements, a plaintiff must allege a relevant product market and geographic market. See Coal. for ICANN Transparency, Inc. v. VeriSign, Inc., 452 F. Supp. 2d 924, 936 (N.D. Cal. 2006).
For its Section 2 claim, the FAC alleges that the relevant geographic market is the SCE Territory, and the relevant product market is "the market for the design and installation of new distribution line and service extensions for electricity to connect new consumers to existing grids within the [SCE Territory], a market in which [Defendant] and third-party designers and installers compete to provide services to consumers" (the "Design and Installation Market"). (FAC ¶¶ 54-55). The FAC also alleges that Defendant "has possession of monopoly power in the [SCE Territory], thus owning and controlling a dominant share of the [Design and Installation Market] amounting to at least 75%." (Id. ¶ 52 (emphasis in original)). The FAC also alleges that "[t]hrough deceptive and anticompetitive conduct, [Defendant] has willfully maintained such monopoly power by erecting significant barriers of entry into the [Design and Installation Market] and has consequently caused antitrust injury by significantly decreasing or eliminating completely competitors' abilities and/or capacity to be part of the [Design and Installation Market]." (Id.). In particular, Plaintiffs argue that, "[d]ue to [Defendant's] unreasonable prequalification requirements under the ADS Policy to not work with former [Defendant] employees, SCEF was required to mitigate harm caused to it by [Defendant's] conduct by hiring third-party contractors to assist in its work." (Id. ¶ 56). Thus, "[b]y reason of, and as direct and proximate result of the violations alleged herein, SCEF has been, and will continue to be, irreparably injured in its business by [Defendant's] continuing violations." (Id. ¶ 57).
Defendant argues that Plaintiffs' Section 2 claim should be dismissed with prejudice on various grounds. (Id. at 14-21). Among them, Defendant asserts that Plaintiffs' proposed product market is "facially unsustainable" and, assuming the product market is sustainable, Defendant cites Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 124 S.Ct. 872, 157 L.Ed.2d 823 (2004) ("Trinko") to argue that Plaintiffs cannot use the Sherman Act to force Defendant to work with them. (Id. at 19-20). The Court addresses each argument in turn.
1. The FAC Does Not State a Viable Product Market Definition
As previously discussed, antitrust law requires an allegation of a valid product market and geographic market (i.e., a "relevant market"). See Newcal Indus., Inc. v. Ikon Office Sol., 513 F.3d 1038, 1045 n.4 (9th Cir. 2008) ("Newcal"); see also Tanaka v. Univ. of S. Cal., 252 F.3d 1059, 1063 (9th Cir. 2001) ("Failure to identify a relevant market is a proper ground for dismissing a Sherman Act claim."). There is no requirement that a relevant market be pled with specificity. See Newcal, 513 F.3d at 1045 (citing Cost Mgmt. Servs., Inc. v. Wash. Nat. Gas Co., 99 F.3d 937, 950 (9th Cir. 1996)). Rather, "[a]n antitrust complaint . . . survives a Rule 12(b)(6) motion unless it is apparent from the face of the complaint that the alleged market suffers a fatal legal defect." Id. "And since the validity of the 'relevant market' is typically a factual element rather than a legal element, alleged markets may survive scrutiny under Rule 12(b)(6) subject to factual testing by summary judgment or trial." Id. (citing High Tech. Careers v. San Jose Mercury News, 996 F.2d 987, 990 (9th Cir. 1993)).
"There are, however, some legal principles that govern the definition of an antitrust 'relevant market,' and a complaint may be dismissed under Rule 12(b)(6) if the complaint's 'relevant market' definition is facially unsustainable." Id. (citing Queen City Pizza v. Domino's Pizza, 124 F.3d 430, 436-37 (3d Cir. 1997)). "First and foremost, the relevant market must be a product market. The consumers do not define the boundaries of the market; the products or producers do." Id. (citing Brown Shoe v. United States, 370 U.S. 294, 325, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962)) (emphasis in original). "Second, the market must encompass the product at issue as well as all economic substitutes for the product." Id. (citing Brown Shoe, 370 U.S. at 325, 82 S.Ct. 1502). "The outer boundaries of a product market are determined by the reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it." Id. (quoting Brown Shoe, 370 U.S. at 325, 82 S.Ct. 1502) (internal quotations omitted). "As such, 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.' " Id. (quoting Thurman Indus., Inc. v. Pay 'N Pak Stores, Inc., 875 F.2d 1369, 1374 (9th Cir. 1989). "Third, although the general market must include substitutes, it is legally permissible to premise antitrust allegations on a submarket. That is, an antitrust claim may, under certain circumstances, allege restrains of trade within or monopolization of a small part of the general market of substitutable products." Id.
The principle most fundamental to product market definition is cross-elasticity of demand. Kaplan v. Burroughs Corp., 611 F.2d 286, 291-92 (9th Cir. 1979). Cross-elasticity of demand occurs where an increase in the price of one product or service leads to an increase in demand for another; in that circumstance, both should be included in the relevant product market. See Olin Corp. v. F.T.C., 986 F.2d 1295, 1298 (9th Cir. 1993). "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, the relevant market is legally insufficient and a motion to dismiss may be granted." Queen City Pizza, 124 F.3d at 436 (citations omitted). "It is true that there is no mandate that a plaintiff include in her complaint the exact phrases 'cross-elasticity of demand' or 'reasonably interchangeable alternatives'-in fact, using these phrases is neither necessary nor sufficient to survive a motion to dismiss." MLW Media LLC v. World Wrestling Ent., Inc., Case No. 22-cv-00179-EJD, 655 F.Supp.3d 946, 951 (N.D. Cal. Feb. 13, 2023) (citations omitted). "That there is no magic phrase required by the courts does not, however, relieve a plaintiff of her duty to plausibly allege the contours of the product market, which necessarily requires allegations that speak to the question of substitute products." Id.
Defendant argues that Plaintiffs' proposed product market is "facially unsustainable" because "Applicant Designers and Installers provide two very different services," and "[t]he qualifications for these roles are also materially different . . . . Despite these differences, Plaintiffs have combined these functions into an overbroad single product market . . . [b]ut there is no reason to believe their single competitive dynamics are the same . . . And, crucially, there is also no reason to think that if the price of designing a new Distribution Line Extension goes up to a consumer will increase their demand for an Applicant Installer's services, or vice versa, as the design of new Distribution Line Extensions is not a substitute for the installation of those same lines - no customer who designers the installation of new electrical service would choose to merely design a new electrical connection as an alternative." See (id. at 14-16). In other words, Defendant argues that Plaintiffs' product market is invalid because it constitutes two separate product markets, rather than one.
In their opposition, Plaintiffs acknowledge that they "are not alleging that the services of a designer is a substitute for the services of an installer. Rather, the functions of design and installation are both components of the same market for 'services for the design and installation of new electrical utility lines and distribution line and service line extensions.' . . . [B]oth design and installation are two steps required to perform a single service . . . . The two functions are not in competition with one another." (Opp. at 11). In other words, Plaintiffs appear to be arguing that the design and installation of new electrical utility lines, distribution lines, and service line extensions within the SCE Territory are complementary services, as opposed to substitutes.
Defendant's explanation is problematic because "a product market is generally about substitutes, not complements." Intel Corp. v. Seven Networks, 562 F. Supp. 3d 454, 461 (N.D. Cal. 2021) (emphasis added). After all, "[t]he outer boundaries of a product market are determined by the reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it." Newcal, 513 F.3d at 1045. Of course, "there are cases in which courts have held that commercial realities weigh in favor of putting what might appear to be different products or services into a single market." Intel Corp., 562 F. Supp. 3d at 461-62 (citing Ohio v. Am. Express Co., 585 U.S. 529, 138 S. Ct. 2274, 2285-86, 201 L.Ed.2d 678 (2018); Image Tech. Servs. v. Eastman Kodak Co., 125 F.3d 1195, 1203-04 (9th Cir. 1997)). For example, in American Express, the Supreme Court found the markets for credit card merchants and credit cardholders belonged to a single product market because a credit card network "cannot sell transaction services to either cardholders or merchants individually"; rather, "the network can sell its services only if a merchant and cardholder both simultaneously choose to use the network." 138 S. Ct. at 2286 (describing a two-sided transaction platform). However, the FAC does not allege that installation and design work must always be sold together and/or performed together. To the contrary, the FAC alleges that these services can and are sold separately. See (FAC ¶ 23 ("The only alternative option to the consumer is to hire [Defendant] directly for the design and/or installation services." (emphasis added))). Moreover, the Tariff Rules themselves treat these services as separate and capable of being independently performed. For example, the Tariff Rules require entirely different qualifications for contractors seeking to do these respective services. Compare Elec. Tariff Rule 15(F), with Elec. Tariff Rules 15(G), 16(D)(3)(b). Work performed by an Applicant Designer must be performed "by or under the direction of a licensed professional engineer," Elec. Tariff Rule 15(F), while, in contrast, an Applicant Installer need only be "licensed in California for the appropriate type of work (electrical and general, etc.)." Elec. Tariff Rule 15(G)(2); see also Elec. Tariff Rule 16(D)(3)(b). For these reasons, the Court concludes that Plaintiffs' proposed market definition is legally deficient.
2. The FAC Does not State a Viable Section 2 Refusal to Deal Claim
Per the FAC, Plaintiffs' appear to raise a Section 2 refusal-to-deal claim against the Defendant "[d]ue to [Defendant's] unreasonable prequalification requirements under the ADS Policy to not work with former [Defendant] employees . . . ." (FAC ¶ 56). On this point, Defendant cites Trinko to argue that "[e]ven if Plaintiffs had adequately alleged that [Defendant] has monopoly power with [a] relevant market, Plaintiffs still cannot prevail on their Sherman Act claim" because Plaintiffs cannot force Defendant to authorize Plaintiffs as Applicant Designers and Installers. (Mot. at 19). Plaintiffs, on the other hand, cite Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985) to assert that Defendant cannot prevent them from participating in the relevant market because, "[i]f [Defendant] is allowed to force customers to hire [Defendant], rather than Plaintiffs and other similar contractors, consumers will be harmed. Just like in Aspen, [Defendant] is using its monopoly power to unlawfully exclude Plaintiffs from the market for its own anticompetitive advantage." Id. at 17.
The Court agrees with Defendant. Even if the Court were to assume that the FAC states a viable product market definition, it would still conclude that the FAC fails to state a viable refusal-to-deal claim under Section 2. As the Supreme Court explains: "[f]irms may acquire monopoly power by establishing an infrastructure that renders them uniquely suited to serve their customers." Trinko, 540 U.S. at 407, 124 S.Ct. 872. "Compelling such firms to share the source of their advantage is in some tension with the underling purpose of antitrust law, since it may lessen the incentive for the monopolist, the rival, or both to invest in those economically beneficial facilities." Id. at 407-08, 124 S.Ct. 872. "Enforced sharing also requires antitrust courts to act as central planners, identifying the proper price, quantity, and other terms of dealing—a role for which they are illsuited." Id. "Moreover, compelling negotiation between competitors may facilitate the supreme evil of antitrust: collusion. Thus, as a general matter, the Sherman Act 'does not restrict the long recognized right of [a] trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal.' " Id. (quoting United States v. Colgate, 250 U.S. 300, 307, 39 S.Ct. 465, 63 L.Ed. 992 (1919)). "However, '[t]he high value that we have placed on the right to refuse to deal with other firms does not mean that the right is unqualified.' " Id. (quoting Aspen Skiing Co., 472 U.S. at 601, 105 S.Ct. 2847). "Under certain circumstances, a refusal to cooperate with rivals can constitute anticompetitive conduct and violate [Section] 2." Id.
To determine Defendant's potential liability on a refusal-to-deal claim, the Court looks to Aspen Skiing and Trinko. In Aspen Skiing, the Supreme Court considered whether a monopolist had any antitrust duty to continue engaging in a voluntary, joint marketing program with its only competitor. Aspen Skiing, 472 U.S. at 587-600, 105 S.Ct. 2847. The case involved a defendant which owned three ski resorts in Aspen, Colorado, and a plaintiff that owned a fourth. Id. The two parties cooperated for years in the issuance of a joint, multi-day, all-area ski ticket covering both of their resorts in which the parties shared in the proceeds. Id. at 591, 105 S.Ct. 2847. After the plaintiff refused to accept a lower share of the joint proceeds, the defendant canceled the joint ticket marketing program. Id. at 591-93, 105 S.Ct. 2847. The plaintiff, concerned that skiers would bypass its mountain without some joint offering, tried a variety of increasingly desperate measures to re-create the joint ticket, including offering to buy the defendant's tickets at retail price. Id. at 593-94, 105 S.Ct. 2847. After the defendant refused even these requests, the plaintiff filed suit under Section 2. See id. at 594-95, 105 S.Ct. 2847. The Supreme Court upheld a jury verdict for the plaintiff, reasoning that "[t]he jury may well have concluded that [the defendant] elected to forgo these short-run benefits because it was more interested in reducing competition . . . over the long run by harming its smaller competitor." Aspen Skiing, 472 U.S. at 608, 610, 105 S.Ct. 2847.
The Supreme Court revisited Aspen Skiing in Trinko. There, the defendant, Verizon Communications Inc., was a local telephone exchange carrier ("LEC") serving New York State. See 540 U.S. at 402, 124 S.Ct. 872. Like other LECs, defendant enjoyed an exclusive franchise within its local service area. Id. However, through passage of the Telecommunications Act of 1996, Congress deregulated those markets and passed legislation to increase competition that required monopolists to share their network with new market entrants, who are competitive LECs. Id. As required by that legislation, the defendant entered into "interconnection agreements" with rivals, such as AT&T, detailing the terms on which it would make its network elements available. Id. The state public utilities commission approved these interconnection agreements and monitored the defendant's compliance with regulatory requirements governing its network-sharing duties. Id. at 402-03, 124 S.Ct. 872. As part of those duties, the defendant was required to provide its competitors with access to its "operations support systems," a "set of systems used by incumbent [firms] to provide services to customers and ensure quality." Id. at 403, 124 S.Ct. 872. These interconnection agreements specified the mechanics by which the defendant would meet its obligation to provide operations support systems to new entrants. Id. Per their terms, new entrants would send service orders through an electronic interface with the defendant's ordering system and then the defendant would fill the order and send confirmation back through the same interface. Id.
Within a few years, the new entrants complained that many orders were going unfilled, in breach of the defendant's duty to provide access to operations support systems functions. Id. The plaintiff, a local telephone service customer of defendant's rival, AT&T, filed suit against the defendant alleging that it had filled rivals' LEC's orders on a discriminatory basis thus impeding the rivals' ability to compete with the defendant in the local telephone service market. Id. at 404, 124 S.Ct. 872. The result, the plaintiff alleged, was to deter potential customers of the rival LECs from switching to the rivals' service, in violation of Section 2. Id. at 405, 124 S.Ct. 872. The trial court dismissed for failure to state a claim, but the court of appeals for the Second Circuit reinstated the case. Id.
On appeal, the Supreme Court reversed and held that the defendant's intentional interference with the terms of its interconnection agreements with new entrants was not a cognizable claim under Section 2. In doing so, the Supreme Court initially noted that even though "Congress created these duties [to require optional operations support,]" that did not "automatically lead to the conclusion that they can be enforced by means of an antitrust claim." Id. at 406, 124 S.Ct. 872. To determine whether antitrust liability could exist, the Supreme Court turned its focus to Aspen Skiing, "the leading case for § 2 liability based on refusal to cooperate with a rival[.]" Id. at 408, 124 S.Ct. 872. The Supreme Court described the holding of Aspen Skiing as "at or near the boundary of § 2 liability[,]" and that it may be narrowed to situations where a defendant engages in a "unilateral termination of a voluntary (and thus presumably profitable) course of dealing [that] suggested a willingness to forsake short-term profits to achieve an anticompetitive end." Id. at 409, 124 S.Ct. 872. The Supreme Court then noted that the fact that the defendant was statutorily compelled to cooperate with its rivals at a "cost-based rate of compensation . . . tells us nothing about dreams of monopoly" because "the services allegedly withheld are not otherwise marketed or available to the public." Id. at 409-10, 124 S.Ct. 872. The Supreme Court has since characterized its holding in Trinko as: "a firm with no antitrust duty to deal with its rivals at all is under no obligation to provide those rivals with a 'sufficient' level of service.' " See Pac. Bell Tel. Co. v. Linkline Commc'ns, Inc., 555 U.S. 438, 444, 129 S.Ct. 1109, 172 L.Ed.2d 836 (2009); see also FTC v. Qualcomm Inc., 969 F.3d 974, 993 (9th Cir. 2020)
As currently pleaded, the Court finds Aspen Skiing to be inapplicable to the present matter. The FAC does not allege that Defendant unilaterally terminated a preexisting, voluntary, and profitable course of dealing with Plaintiffs. To the contrary, the FAC alleges that, as soon as the Individual Plaintiffs were terminated from their employment, Defendant informed Plaintiffs that they were prohibited from conducting business in the SCE Territory. See (FAC ¶ 30 ("[The Individual Plaintiffs] were terminated from [Defendant in or around April 2017. As part of their termination, [Defendant] issued a termination letter to these individuals that states, 'as part of the conditions of your employment termination, you may never come back onto company property.' ")).
Further, there are strong parallels between Trinko and this case. Like the defendant in Trinko, Defendant is, essentially, a deregulated monopolist that was compelled by the California Legislature and Public Utilities Commission ("PUC") to allow third-party applicants to conduct installation and design work within the SCE Territory. As for installation work, on January 1, 1982, the California Legislature enacted Senate Bill 48 which "made numerous legislative findings relating to the [PUC's] proposed new rules for extension of utility gas and electric services by adding § 783 to the Public Utilities (PU) Code." See In re Competitive Bidding Tariff Language, Decision No. 85-08-043, Investigation No. 84-07-045, 1985 WL 1204993, 1985 Cal. PUC LEXIS 684, at *1 (Aug. 21, 1985). Section 783(a) mandated the PUC to amend its existing rules to permit third-party applicants for electric and gas installation services. Id. As for design work, "[h]istorically, the utilities had sole control over the design of distribution services, and the design service was provided at applicant's expense subject to refund." In re Line Extension Rules of Elec. & Gas Utils., 1997 WL 1938745, 1997 Cal. PUC LEXIS 1215, at *4 (Dec. 16, 1997). However, via D.95-12-013, the PUC approved a 24-month pilot program to test the feasibility of third-party applicants designing distribution facilitates for gas and electric service to their projects. See id. at *1-2. In doing so, Defendant (along with the other public utilities) were allowed to set prequalification requirements for design applicants in order to "help ensure a high quality of effort and reduce the number of additional plan checks." Id. at *14. After the pilot program was deemed a success, the PUC determined that it was "[i]n the public interest to implement an applicant design utility tariff option for residential gas and electric line and distribution systems." Id. at *17-18. Thus, the utilities, including Defendant, were ordered to file an applicant design utility tariff option for new residential gas and electric line and distribution system, effective July 1, 1998. Id. at *18. As this Court explained in its previous opinion, Defendant adopted Electric Tariff Rules 15 and 16 in furtherance of these mandates.
Importantly, neither the California Legislature nor the PUC forces Defendant to allow Plaintiff - or any other third-party installation/design applicant - to work within the SCE Territory. To the contrary, Defendant is empowered to set its own prequalification for design and installation contractors seeking to work in the SCE Territory and thus, may freely choose who is allowed to compete against them in this market. In other words, Defendant has "no antitrust duty to deal with [Plaintiffs] at all," and for this reason, "is under no obligation to provide [Plaintiffs] with a sufficient level of service" related to installation and design work within the SCE Territory. See Pac. Bell Tel. Co., 555 U.S. at 444, 129 S.Ct. 1109. Therefore, as a matter of law, Plaintiffs' theory of liability is insufficient to state a claim under Section 2. See also North Star Gas Co. v. Pac. Gas & Elec. Co., Case No. 15-cv-02575-HSG, 2016 WL 5358590, 2016Dist. LEXIS 131684 (N.D. Cal. Sept. 26, 2016).
The Court notes that the Northern District of California dismissed a factually similar cause of action in North Star Gas Co. v. Pacific Gas and Electric Co., Case No. 15-cv-02575-HSG, 2016 WL 5358590, 2016 Dist. LEXIS 131684 (N.D. Cal. Sept. 26, 2016) ("North Star"). There, the defendant was also a public utility monopolist, albeit in Northern California. North Star, 2016 WL 5358590, at *1, 2016 Dist. LEXIS 131684, at *3. In 1991, PUC started a pilot program that deregulated the natural-gas utility market, giving residential and small commercial natural-gas utility customers the option to aggregate their natural gas utility purchasing and participate in a competitive natural gas market. Id. PUC certified privately-owned natural gas providers as "core transport agents" ("CTAs"). Id. These CTAs were allowed to compete with the defendant (and other utility monopolists) by selling natural gas directly to core customers who elected to participate in the pilot program. Id. However, the CTAS still relied on defendant's physical distribution system to deliver the natural gas to core customers. Id. For that reason, defendant charged a "transportation" fee to the core customers who purchase their natural gas from CTAs. Id. Another aspect of the pilot program was that the CTAs had the right to choose to have their billing consolidated with defendant's billing. Id. Thus, the CTAs could have their bill to participating natural-gas utility customers appear as a part of the same bill that defendant sent to collect other charges to those customers, i.e., electricity charges. Id. The customers paid both sets of charges with a single payment to defendant, which then was supposed to remit funds to the CTA, deducting the transportation charge and defendant's electricity charge (if any). Id.
The North Star plaintiff was a participating CTA serving the natural-gas market of Northern California, who elected to use the consolidated billing program with defendant. Id. The plaintiff accused defendant of engaging in five forms of anticompetitive conduct with respect to the operation of the consolidated billing program. See id. at *5-10. This included: (1) failing to remit funds that were owed to plaintiff; (2) intentionally sending EDIs containing false information to damage relations between plaintiff and its customers; (3) impermissibly offsetting the amounts owed to plaintiff for natural gas service with credits earned against its electricity charges; (4) withholding money owed to plaintiff by claiming that the charges were "reversed," i.e., cancelled as wrongly billed; and (5) improperly and inaccurately telling plaintiff's customers that defendant's natural gas prices were less expensive. Id. Thus, the plaintiff brought a refusal to deal cause of action pursuant to Section 2. See id. at *75-76. The Northern District of California dismissed the claim, explaining:
Like the defendant in [Trinko], [defendant] is a deregulated monopolist that was statutorily compelled to provide optional access to an internal operational service not available to retail customers under a regulator-approved operations and services contract. And like the plaintiff in [Trinko], Plaintiff brings its Section 2 claim under the theory that [defendant's] discriminatory and tortious conduct in the implementation of that optional program was insufficient under the terms of the contract and state regulations. Because the Supreme Court has made clear that Plaintiff's theory of antitrust injury is not cognizable under Section 2, the Court dismisses Plaintiff's attempt to monopolize claim.Id. at *25, 2016 Dist. LEXIS 131684, at *81.
Nevertheless, Plaintiffs' Section 2 claim is, again, dismissed without prejudice. The Court is unable to conclude that it is impossible for Plaintiff to state one (or more) viable product definitions for purposes of this Section 2 claim, and whether Plaintiffs can raise a sufficient theory of liability under the Sherman Act. See Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995) ("A district court should grant leave to amend . . . unless it determines that the pleading could not possibly be cured by the allegations of other facts."). The Court notes that this is the second time that Plaintiffs have failed to state a viable product market definition. If Plaintiffs choose to file a second amended complaint with a cause of action under Section 2, they are warned that a third failure will likely result in dismissal with prejudice. Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993).
Defendant also argue that Plaintiffs' Section 2 claim should be dismissed because the FAC does not sufficiently allege that Defendant has market power in the relevant market or a viable antitrust injury. Because the Court finds Plaintiffs' market definition and theory of liability to be deficient, it finds it unnecessary to address these remaining arguments.
B. Intentional Interference with Prospective Economic Relations
Defendant argues, among other things, that Plaintiffs' claim for intentional interference with prospective economic relations should be dismissed with prejudice because, to the extent Plaintiffs' claim is premised on Defendant's communications with SCEF's customers, it is barred by the First Amendment to the United States Constitution. The Court agrees.
To prove a claim for intentional interference with prospective economic relations, the plaintiff must show: (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefits to the plaintiff, (2) the defendant's knowledge of the relationship, (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant. Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1153, 131 Cal.Rptr.2d 29, 63 P.3d 937 (2003) (citing Buckaloo v. Johnson, 14 Cal. 3d 815, 827, 122 Cal.Rptr. 745, 537 P.2d 865 (1975)) (internal quotations omitted). In Unelko Corp. v. Rooney, 912 F.2d 1049 (9th Cir. 1990), the Ninth Circuit held that claims for trade libel and tortious interference with business relationships were "subject to the same first amendment requirements that govern actions for defamation." 912 F.2d at 1057-58. In Gardner v. Martino, 563 F.3d 981 (9th Cir. 2009), the Ninth Circuit expanded Unelko to actions for intentional interference with economic relations. Gardner, 563 F.3d at 992. Thus, when a claim for intentional interference with prospective economic relations is brought as a result of constitutionally protected speech, the claim is subject to the same First Amendment requirements that govern actions for defamation. Id. As is relevant here, under California law, a statement is not actionable if it is true or privileged. Baez v. Pension Consulting Alliance, Inc., Case No. 2:17-cv-01938-RGK (AGR), 2017 WL 9500979, at *5 (C.D. Cal. July 20, 2017) (citing Francis v. Dun & Bradstreet, Inc., 3 Cal. App. 535, 540, 86 P. 916 (1992)).
Plaintiffs' claim for intentional interference with prospective economic relations is premised on Defendant communicating truthful information to Plaintiffs' contractors, including MD Home Builders and CEI. See (FAC ¶¶ 60-71). As alleged in the FAC, Defendant contacted MD Home Builders "to let them know that [Defendant] would not honor SCEF work and would not communicate with anyone that works for SCEF." (FAC ¶ 63). As to CEI, the FAC states that "[a]fter CEI was made aware that SCEF had to use subcontractors to complete its work with CEI, CEI did not award SCEF the three projects that SCEF submitted proposals for." (Id. ¶ 66). In opposition to the Motion, Plaintiffs fail to point to legal authority suggesting that their cause of action is otherwise not barred by the First Amendment for communicating this truthful information, nor has the Court found such authority. See (Opp. at 18). Therefore, because the Court finds that Plaintiffs are incapable of curing this deficiency, it dismisses this cause of action with prejudice.
C. Intentional Interference with Contract
To prove a claim for intentional interference with economic relations, Plaintiffs must show: "(1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption and (5) resulting damage." Quelimane Co., Inc. v. Stewart Title Guaranty Co., 19 Cal. 4th 26, 55, 77 Cal.Rptr.2d 709, 960 P.2d 513 (1998) (internal quotations and citation omitted). "To establish the claim, the plaintiff need not prove that a defendant acted with the primary purpose of disrupting the contract, but must show the defendant's knowledge that the interference was certain or substantially certain to occur as a result of his or her action." Reeves v. Hanlon, 33 Cal. 4th 1140, 1148, 17 Cal.Rptr.3d 289, 95 P.3d 513 (2004) (citing Quelimane Co., 19 Cal. 4th at 56, 77 Cal.Rptr.2d 709, 960 P.2d 513). Defendant argues that Plaintiffs' claim for intentional interference with contract should be dismissed because the FAC "fails to plausibly allege [Defendant's] knowledge of a valid contract between plaintiff and a third party, much less [Defendant's] intentional acts designed to induce breach or disruption of the contract." (Mot. at 26 (citation and internal quotations omitted)). Defendant also argues that Plaintiffs' claim is barred by the applicable statute of limitations. (Id. at 27-28). The Court addresses each argument in turn.
1. The FAC Sufficiently Alleges Both Knowledge and Intent
The FAC alleges that Defendant "was aware of SCEF's contractual relationships and its business expectations," (FAC ¶ 75), and that Defendant intentionally interfered with said contractual relationships through its enforcement of the ADS Policy, (id. ¶¶ 76-77). These assertions are supported by various factual allegations in the FAC. For example, the FAC lists a total of 293 different SCEF Consulting Contracts that are applicable for this cause of action. See (id. ¶¶ 39-41). 207 of these contracts are completed, (id. ¶ 39), with 86 still pending. (Id.). For several of these SCEF Consulting Contracts, the FAC lists the project location, client, and their respective value. See (id.). The FAC goes on to allege that, on April 6, 2018, SCEF informed Defendant that it was working on these "active projects" by "funneling all communications and contact with [Defendant] through [third-parties] that are not subject to the imposed restrictions." (Id. ¶ 45). On August 12, 2020, Defendant informed SCEF that it was aware of these projects and that it "would no longer permit SCEF to utilize third-parties in furtherance of its projects within the SCE Territory." (Id. ¶ 46). The FAC also alleges that, in a meeting with Defendant's employees, said employees confirmed that Defendant would not accept this work and that it had been "unilaterally contact[ing] SCEF's subcontractors and notif[ying] them that [Defendant] would not accept new work that originated with SCEF[.]" (Id.). Finally, the FAC provides an example of how Defendant "slowed projects on which SCEF is working for the purpose of frustrating SCEF's ability to perform under the SCEF Consultant Contracts and SCEF Tariff Contracts": Defendant's employee "Carmen McNeal intentionally interfered with and delayed the approval of SCEF's application submitted by a subcontractor for design and installation services on a project located at 916 Foothill Ave, Beverly Hills, CA." (Id. ¶¶ 77). Collectively, the Court finds these allegations to be sufficient to show that Defendant had knowledge of the relevant contracts, and that Defendant intended to disrupt these contracts for purposes of this cause of action.
2. The Claim is Not Barred by the Statute of Limitations
An assertion that a suit is barred by the statute of limitations is an affirmative defense. E.g., Felicien v. PNC Mortg., No. C-11-2388 EMC, 2012 WL 1413231, at *2 (N.D. Cal. Apr. 23, 2012). However, a defendant may still raise a motion to dismiss based on this defense if the running of the limitations period is apparent on the face of the complaint. See Jablon v. Dean Witter & Co., 614 F.2d 677, 682 (9th Cir.1980) ("If the running of the statute is apparent on the face of the complaint, the defense may be raised by a motion to dismissed."). A motion to dismiss on statute of limitations grounds may be granted "only if the assertions of the complaint, read with the required liberality, would not permit the plaintiff to prove the statute was tolled." Morales v. City of L.A., 214 F.3d 1151, 1153 (9th Cir. 2000) (internal quotations omitted).
The limitations period for a claim of intentional interference with contract under California law is two years, accruing once each element of the cause of action is satisfied. See Cal. Civ. Proc. § 339; Fox v. Ethicon Endo-Surgery, Inc., 35 Cal. 4th 797, 806, 27 Cal.Rptr.3d 661, 110 P.3d 914 (2005); see also Lawrence v. Barrel Cellar, Case No.CGC-17-561363, 2019 Cal. Super. LEXIS 627, at *29 (Mar.11, 2019). Defendant argues that "by the time [Plaintiffs] filed their initial complaint in June 2022, they were time-barred from bringing a claim for intentional interference with respect to any contracts that had begun performance by June 2020." (Reply at 20). Defendant asserts that "[t]he only disruption and source of damages Plaintiffs claim stem from their use of subcontractors," and "[f]or any contracts SCEF entered into by mid-2018, they would have begun using subcontractors before mid-2020." (Id.). Thus, "Plaintiffs would have been aware by June 2020 that all the elements of their intentional interference claim were satisfied with respect to those contracts -rendering any claim of interference untimely under the two-year limitations period." (Id.).
The Court disagrees. As to the element of knowledge, the FAC states that, on August 12, 2020, Defendant "informed SCEF that it was aware of SCEF's projects being carried out by SCEF's third parties . . . ." (Id. ¶ 46). Based on the wording of this allegation, it is unclear whether, by this date, Defendant was aware of each and every SCEF Consulting Contract that had begun performance by June of 2020. On a motion to dismiss, the Court must construe the facts in the light most favorable to the plaintiff and resolve all doubts in the plaintiff's favor. Parks School of Business, Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Moreover, a complaint need not anticipate or plead against a statute of limitations or any other affirmative defenses. U.S. Commodity Future Trading Comm'n v. Monex Credit Co., 931 F.3d 966, 972 (9th Cir. 2019); see also Lusnak v. Bank of Am., N.A., 883 F.3d 1185, 1194 n.6 (9th Cir. 2018) ("Ordinarily, affirmative defenses . . . may not be raised on a motion to dismiss except when the defense raises no disputed issues of fact."). To the contrary, granting a motion to dismiss under Rule 12(b)(6) based on an affirmative defense is uncommon, and is only appropriate if "the defendant shows some obvious bar to securing relief on the face of the complaint." ASARCO, LLC v. Union Pac. R.R. Co., 765 F.3d 999, 1004 (9th Cir. 2014); see also United States v. McGee, 993 F.2d 184, 187 (9th Cir. 1993) ("[T]he running of a statute of limitations is an affirmative defense . . . . [and plaintiff] is not required to plead on the subject of an anticipated affirmative defense."). Thus, because the Court is unable to conclude, at this time, whether Plaintiffs' claim for intentional interference with contract is wholly or partially barred by the statute of limitations, given that it is unclear when the cause of action related to the SCEF Consulting Contracts accrued, it denies Defendant's Motion as to this cause of action.
D. California's UCL
The FAC asserts a final cause of action under California's UCL. (Id. ¶¶ 81-84). The UCL prohibits "any unlawful, unfair or fraudulent business act or practice," and any "unfair, deceptive, untrue, or misleading advertising . . . ." Cal. Bus. & Prof. Code § 17200. Its coverage is "sweeping, embracing anything that can properly be called a business practice and that at the same time is forbidden by law." Cel-Tech Commc'ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999) (internal quotations omitted). Each of the three "prongs" under the UCL - (1) unlawful, (2) unfair, and (3) fraudulent - creates an independent theory of liability. Eidmann v. Walgreen Co., 522 F. Supp. 3d 634, 643 (N.D. Cal. 2021) (citing Hadley v. Kellogg Sales Co., 243 F. Supp. 3d 1074, 1089 (N.D. Cal. 2017)). The FAC only implicates the first two prongs. See (FAC ¶ 82). For this reason, the Court addresses each in turn.
1. Unlawful Business Act or Practice
California's UCL prohibits "any unlawful . . . business act or practice." Cal. Bus. & Prof. Code § 17200. By proscribing "any unlawful" business practice, section 17200 "borrows" violations of other laws and treats them as unlawful practices that the unfair competition law makes independently actionable." Cel-Tech Commc'ns, Inc., 20 Cal. 4th at 180, 83 Cal.Rptr.2d 548, 973 P.2d 527. "Virtually any law, federal, state or local can serve as a predicate for an action under [the UCL]." Smith v. State Farm Mut. Auto. Ins. Co., 93 Cal. App. 4th 700, 718, 113 Cal.Rptr.2d 399 (2001). However, to state a claim for unfair competition, a plaintiffs must identify an underlying statute that the defendant violated. Ingels v. Westwood One Broad. Servs., Inc., 129 Cal. App. 4th 1050, 1060, 28 Cal.Rptr.3d 933 (2005) (finding no UCL liability "for committing 'unlawful business practices' without having violated another law"); see also Zeppeiro v. Green Tree Servicing, LLC, No. 14-CV-01336-MMM, 2014 WL 12596427, at *6 C.D. Cal. Oct. 17, 2014 ("A plaintiff must identify the underlying law on which his UCL claim is based to plead the claim sufficiently." (citations omitted)), aff'd, 679 Fed. Appx. 592 (9th Cir. 2017); see also Hodges v. Apple Inc., Case No. 13-cv-01128-WHO, 2013 WL 4393545, *6 (N.D. Cal. Aug. 12, 2013) (dismissing a UCL claim under the unlawful prong because plaintiff had not "ple[ ]d with particularity that Apple violated any law"); Sleep Science Partners v. Lieberman, No. 09-04200 CW, 2010 WL 1881770, at *12 (N.D. Cal. May 10, 2010) ("Plaintiff must plead facts that identify the conduct of Sleeping Well that is actionable under the UCL, and specify whether it is unlawful-and if so, under what law-or if it is unfair or fraudulent."); In re Actimmune Marketing Litigation, No. C 08-02376 MHP, 2009 WL 3740648, *15 (N.D. Cal. Nov. 6, 2009) ("[Plaintiff] must at a minimum [ ] identify the statutory or regulatory provisions that defendants allegedly violated").
Plaintiffs base their UCL claim for unlawful conduct on the causes of action already discussed. See (Compl. ¶¶ 81-84). Because the Court finds that Plaintiffs have stated a viable claim for intentional interference with contract, it also finds that Plaintiffs have stated a viable claim under the UCL's "unlawful" prong. See Oracle Am., Inc. v. Hewlett Packard Enter. Co., Case No. 16-cv-01393-JST, 2016 WL 3951653, at *9, 2016 U.S. Dist. LEXIS 96122, at *26-27 (N.D. Cal. July 15, 2016) ("Therefore, because the Court has already concluded that Oracle has sufficiently pleaded a claim for intentional interference with contractual relations [under California law], Oracle has also sufficiently pleaded a claim under the unlawful prong of section 17200." (citing Procongps, Inc. v. Star Sensor LLC, No. C 11-3975 SI, 2011 WL 5975271, at *3 (N.D. Cal. Nov. 29, 2011)).
2. Unfair Business Act or Practice
California's UCL also prohibits "any . . . unfair . . . business act or practice." Cal. Bus. & Prof. Code § 17200. "Unfair" conduct among competitors means "conduct that threatens an incipient violation of an antitrust law, or violates the spirit or policy of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition." L.A. Cellular Tel. Co., 20 Cal. 4th at 187, 83 Cal.Rptr.2d 548, 973 P.2d 527. Where the same conduct is alleged to support both a plaintiff's federal antitrust claims and a state-law unfair competition claim, a finding that the conduct is not an antitrust violation precludes a finding of unfair competition. See, e.g., Chavez v. Whirlpool Corp., 93 Cal. App. 4th 363, 375, 113 Cal.Rptr.2d 175 (2001) ("If the same conduct is alleged to be both an antitrust violation and an 'unfair' business act or practice for the same reason . . . the determination that the conduct is not an unreasonable restraint of trade necessarily implies that the conduct is not 'unfair' toward consumers."); see also LiveUniverse Inc. v. My-Space, 304 Fed. App'x 554, 557-58 (9th Cir. 2008) (citation omitted). Here, the FAC does not allege any "unfair" conduct separate from the facts alleged for Plaintiffs' Section 2 claim. See (FAC ¶¶ 81-84). Therefore, because the Court has already dismissed Plaintiffs' Section 2 claim, it also dismisses its UCL claim under the "unfair" prong.
IV. CONCLUSION
For the foregoing reasons, Defendant's Motion is GRANTED IN PART and DENIED IN PART as follows:
(1) Defendant's Motion is granted as to Plaintiffs' Section 2 claim and that claim is DISMISSED WITHOUT PREJUDICE;
(2) Defendant's Motion is granted as to Plaintiffs' claim for intentional interference with prospective economic relations, and that claim is DISMISSED WITH PREJUDICE;
(3) Defendant's Motion is DENIED as to Plaintiffs' claims for intentional interference with contract; and
(4) Defendant's Motion is DENIED as to Plaintiffs' California UCL claim, insofar as it is based on a theory of unlawful business act or practice, and GRANTED as to Plaintiffs' California UCL claim, insofar as it is based on a theory of unfair business act or practice. However, that portion of the California UCL claim is dismissed WITHOUT PREJUDICE.
Any amendment of the complaint shall be filed in accordance with this order no later than fourteen (14) calendar days from the date of this order.