Opinion
Case No. 22-cv-00179-EJD
2023-02-13
MLW MEDIA LLC, Plaintiff, v. WORLD WRESTLING ENTERTAINMENT, INC., Defendant.
Jason Takenouchi, Kasowitz Benson Torres LLP, San Francisco, CA, Christine Montenegro, Nicholas Rendino, Pro Hac Vice, Marc Elliot Kasowitz, Pro Hac Vice, Kasowitz Benson Torres and Friedman LLP, New York, NY, for Plaintiff. Daniel William Fox, K & L Gates LLP, San Francisco, CA, Jerry S. McDevitt, Pro Hac Vice, K & L Gates LLP, Pittsburgh, PA, Christopher S. Finnerty, Pro Hac Vice, Morgan T. Nickerson, Pro Hac Vice, K & L Gates LLP, Boston, MA, Derek Kelley, Pro Hac Vice, K & L Gates LLP, Washington, DC, for Defendant.
Jason Takenouchi, Kasowitz Benson Torres LLP, San Francisco, CA, Christine Montenegro, Nicholas Rendino, Pro Hac Vice, Marc Elliot Kasowitz, Pro Hac Vice, Kasowitz Benson Torres and Friedman LLP, New York, NY, for Plaintiff. Daniel William Fox, K & L Gates LLP, San Francisco, CA, Jerry S. McDevitt, Pro Hac Vice, K & L Gates LLP, Pittsburgh, PA, Christopher S. Finnerty, Pro Hac Vice, Morgan T. Nickerson, Pro Hac Vice, K & L Gates LLP, Boston, MA, Derek Kelley, Pro Hac Vice, K & L Gates LLP, Washington, DC, for Defendant.
ORDER GRANTING WWE'S MOTION TO DISMISS WITH LEAVE TO AMEND AND DENYING AS MOOT WWE'S MOTIONS FOR PROTECTIVE ORDER AND ADMINISTRATIVE MOTION FOR STATUS CONFERENCE
Re: ECF Nos. 19, 51, 57 EDWARD J. DAVILA, United States District Judge
Before the Court is Defendant World Wrestling Entertainment, Inc.'s ("WWE") Motion to Dismiss Plaintiff MLW Media LLC's Complaint. See ECF No. 19 ("Mot."). In addition to the Motion to Dismiss, WWE has filed a Motion for Protective Order and an Administrative Motion for Status Conference Regarding Discovery Schedule. ECF Nos. 51, 57. The Court finds each of the three motions appropriate for decision without oral argument pursuant to Civil Local Rule 7-1(b). See ECF No. 41 (taking the Motion to Dismiss under submission). For the reasons discussed below, the Court GRANTS the Motion to Dismiss with leave to amend. The Court DENIES as moot the Motion for Protective Order and the Administrative Motion.
I. BACKGROUND
Plaintiff MLW Media LLC ("MLW") is a professional wrestling company that is in "the business of promoting sporting events, particularly live events, programming, and digital content related to professional wrestling." Complaint, ECF No. 1 ("Compl.") ¶¶ 2, 13. According to MLW, it competes with WWE and non-parties All Elite Wrestling ("AEW") and Impact Wrestling ("Impact") for distribution channels—e.g., television networks, cable, and streaming services—for professional wrestling content. Id. ¶¶ 10, 17-18. MLW describes itself as an "innovative startup," and by contrast alleges that Defendant WWE "has been in the entertainment business promoting wrestling and sports entertainment for decades." Id. ¶¶ 14, 30. WWE is the dominant player and has used its media rights contracts with major networks and distribution channels to lock in those networks to only offer WWE content and to give WWE content more favorable time slots and marketing opportunities. Id. ¶ 27.
MLW alleges that WWE used its stature to harm MLW's business prospects on at least two occasions. In June 2021, upon learning of a television broadcasting deal between MLW and VICE TV ("VICE") to air MLW's archival content, WWE's Senior Vice President informed a VICE executive that WWE's owner wanted VICE to cease airing MLW's content. Compl. ¶¶ 34-35. As a result of this call, MLW asserts, VICE aired only a single MLW archival program and stopped engaging in business negotiations about airing new MLW content. Id. ¶ 36. Similarly, in August 2021, a different WWE executive exerted pressure on an executive of Tubi—a streaming service owned by Fox Corporation—and caused Tubi to terminate an agreement with MLW. Id. ¶¶ 7, 45. According to MLW, the terms of the agreement greatly increased MLW's valuation, strengthened its brand recognition, including among viewers of Fox television and NFL football, and would have made MLW more attractive to new wrestling talent. Id. ¶ 41. After executing the agreement with Tubi, MLW ceased talks with other potential partners and began preparing two live events. Id. ¶¶ 42-43. But on the same day that WWE contacted Tubi about its agreement with MLW, Tubi wrote to MLW and purported to terminate the agreement, despite an agreement to issue a joint press release announcing the deal the very next day. Id. ¶¶ 44-45.
Based on these acts by WWE, the Complaint asserts claims for intentional interference with contractual relations; intentional interference with prospective economic relations; violation of Section 2 of the Sherman Antitrust Act; and violation of California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200, et seq. Compl. ¶¶ 53-81.
II. LEGAL STANDARD
A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). A complaint that falls short of the Rule 8(a) standard may be dismissed if it fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). To survive a Rule 12(b)(6) motion to dismiss, the factual allegations in the complaint must "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting 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 it "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. The Court "accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party." Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). However, the complaint "may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively." Levitt v. Yelp! Inc., 765 F.3d 1123, 1135 (9th Cir. 2014) (quoting Eclectic Props. East, LLC v. Marcus & Millichap Co., 751 F.3d 990, 996 (9th Cir. 2014)). In evaluating a Rule 12(b)(6) motion, the district court is limited to the allegations of the complaint, documents incorporated into the complaint by reference, and matters which are subject to judicial notice. See Louisiana Mun. Police Emps.' Ret. Sys. v. Wynn, 829 F.3d 1048, 1063 (9th Cir. 2016) (citing Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007)).
III. DISCUSSION
The only claim over which the Court has original subject matter jurisdiction is the alleged violation of Section 2 of the Sherman Act. Compl. ¶ 15; 28 U.S.C. § 1337. The Court therefore addresses MLW's antitrust claim before the state law claims.
A. Sherman Act Claim
WWE argues that MLW's Sherman Act claim should be dismissed because MLW does not plausibly allege (1) a relevant market; (2) monopoly power; or (3) antitrust injury. Mot. 4.
1. Relevant Market
"Antitrust law requires [an] allegation of both a product market and a geographic market." Newcal Indus., Inc. v. Ikon Office Sol., 513 F.3d 1038, 1045 n.4 (9th Cir. 2008). "[T]he plaintiff must allege both that a 'relevant market' exists and that the defendant has power within that market." Id. at 1044; 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."). Although the definition of a relevant market for antitrust purposes is typically a factual inquiry, an antitrust claim may be dismissed under Rule 12(b)(6) if the plaintiff's relevant market definition is "facially unsustainable." Newcal, 513 F.3d at 1045 (citing Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 436-37 (3d Cir. 1997)); see also Apple, Inc. v. Psystar Corp., 586 F. Supp. 2d 1190 (N.D. Cal. 2008).
"The principle most fundamental to product market definition is 'cross-elasticity of demand' for certain products or services, a measure of interchangeability or substitutability of related products." Kaplan v. Burroughs Corp., 611 F.2d 286, 291-92 (9th Cir. 1979). That is, a relevant product market must "encompass the product at issue as well as all economic substitutes for the product." Newcal, 513 F.3d at 1045. "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; see also Reilly v. Apple Inc., 578 F. Supp. 3d 1098, 1109 (N.D. Cal. 2022) ("[W]here the plaintiff fails to define its proposed relevant market with reference to the rule of reasonable interchangeability and cross-elasticity of demand, . . . the relevant market is legally insufficient.")
MLW alleges that the relevant antitrust market is the "the national market for the sale of broadcasting rights for professional wrestling programs to networks, cable and streaming services." Compl. ¶ 17. WWE does not dispute the geographic market of the United States. See Mot. 5-7. WWE does, however, argue that MLW has not plausibly alleged facts supporting its proposed product market, particularly due to the lack of allegations about the structure of the television and streaming industries, the production of professional wrestling programming, and the unavailability of reasonably interchangeable alternatives to professional wrestling content. Id. at 6. In response, MLW asserts that it is not required to include express allegations regarding the cross-elasticity of demand or the absence of reasonably interchangeable products, that products with potentially interchangeable substitutes can nonetheless constitute a relevant antitrust submarket, and that WWE's arguments "at most raise[ ] factual issues that cannot be decided on a motion to dismiss." Opp'n 8-9.
MLW's argument that it need not "allege cross-elasticity of demand and the absence of 'reasonably interchangeable alternatives' to professional wrestling programming" is unavailing. Opp'n 9. 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. See Nat'l Collegiate Athletic Ass'n v. Bd. of Regents of Univ. of Oklahoma, 468 U.S. 85, 111, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984) ("The District Court employed the correct test for determining whether college football broadcasts constitute a separate market—whether there are other products that are reasonably substitutable for televised NCAA football games.") (emphasis added); Hicks v. PGA Tour, Inc., 897 F.3d 1109, 1120-21 (9th Cir. 2018) (affirming dismissal for failure to plead a plausible product market and noting the market "must encompass the product at issue as well as all economic substitutes for the product") (emphasis added) (quoting Newcal, 513 F.3d at 1045); Tanaka, 252 F.3d at 1063 ("[Plaintiff's] conclusory assertion that the [proposed product market] is 'unique' and hence 'not interchangeable with any other program in Los Angeles' is insufficient."). 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.
The Court notes, however, that a complaint need not identify every alleged competitor or include an extensive economic analysis of product substitutability. See Klein v. Facebook, Inc., 580 F. Supp. 3d 743, 765 (N.D. Cal. 2022); FTC v. Facebook, Inc., 560 F. Supp. 3d 1, 20 (D.D.C. 2021).
The Court finds that MLW has not included sufficient facts to plausibly allege a relevant antitrust product market. Regarding the proposed market, the complaint alleges only that there are four competitors in the "United States professional wrestling market"; that the "business of promoting professional wrestling as sports entertainment is fundamentally a media industry, with revenues and business valuation[s] driven largely by fees obtained from broadcasting rights deals"; and that corporations such as NBCUniversal and Fox Sports "purchase broadcasting rights in the [proposed market] for their various distribution channels such as broadcast networks, cable and satellite services, streaming networks, and film production companies." Compl. ¶¶ 17-19. These facts, as pled, are not sufficient to provide an understanding of the characteristics of the relevant market, including the existence or lack of substitutes. For example, there are no allegations addressing why other "sports entertainment" or "media" content for which broadcasting rights might be sold to distribution channels are not appropriate substitutes. MLW is correct that a single sport may constitute a relevant market, Opp'n 8; see, e.g., Le v. Zuffa, LLC, 216 F. Supp. 3d 1154, 1165 (D. Nev. 2016), but there are no facts alleged in the complaint to support that legal conclusion. Additionally, the complaint uses multiple formulations to describe the proposed market, which further complicates the question of the market's boundaries and the reasonably interchangeable products contained within. Compare Compl. ¶ 17 (defining as the "Relevant Market" the "national market for the sale of broadcasting rights for professional wrestling programs to networks, cable and streaming services") with, e.g., id. ¶ 1 ("the U.S. broadcasting market for professional wrestling"), id. ("media markets and wrestling talent"), id. ¶ 10 ("the U.S. wrestling market"), id. ¶ 46 ("major national media markets").
The same analysis applies where the proposed market is a submarket of a broader industry: a plaintiff must allege facts indicating that the products in the submarket are economically distinct from the more general market of substitutable products. Brown Shoe Co. v. U.S., 370 U.S. 294, 325, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962) ("The boundaries of such a submarket may be determined by examining such practical indicia as industry or public recognition of the submarket as a separate economic entity, the product's peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors."); Olin Corp. v. FTC, 986 F.2d 1295, 1299 (9th Cir. 1993) ("Because every market that encompasses less than all products is, in a sense, a submarket, [the Brown Shoe] factors are relevant even in determining the primary market to be analyzed for antitrust purposes.") (citation omitted).
MLW argues that the existence of reasonably interchangeable substitutes is a factual issue inappropriate for resolution on a motion to dismiss, relying on Reveal Chat Holdco, LLC v. Facebook, Inc., 471 F. Supp. 3d 981 (N.D. Cal. 2020). That reliance is misplaced. In Reveal Chat Holdco, the court expressly noted that "Plaintiffs need to clearly define the boundaries of the market." 471 F. Supp. 3d at 999. The court rejected defendant's argument that the proposed data market did not "encompass all economic substitutes" as requiring a "more developed factual record" because plaintiffs' allegations supported their arguments that specific characteristics distinguished the data products at issue from other types of data. Id.; see Plaintiffs' Corrected Memorandum of Points & Authorities in Opposition to Facebook's Motion to Dismiss the Class Action Complaint at 11, Reveal Chat Holdco, LLC v. Facebook, Inc., 471 F. Supp. 3d 981 (N.D. Cal. 2020) (No. 20-cv-00363, ECF No. 43), 2020 WL 3892265 (quoting operative complaint).
For the reasons above, the Court finds that MLW's allegations are insufficient to plausibly allege a relevant product market. See hiQ Labs, Inc. v. LinkedIn Corp., 485 F. Supp. 3d 1137, 1148 (N.D. Cal. 2020) (finding plaintiff failed to adequately allege antitrust product market because "the parameters of the [proposed relevant] market—as pled—are vague" and "it is not clear what substitutes there are for [ ] products such as those offered" by defendant). Accordingly, the Court GRANTS WWE's motion to dismiss MLW's Sherman Act claim.
2. Monopoly Power and Antitrust Injury
Although the Court dismisses the Sherman Act claim based on the insufficiency of the relevant market allegations, it notes briefly that MLW's allegations regarding monopoly power and antitrust injury, as currently pled, are unlikely to withstand a motion to dismiss for many of the reasons outlined in WWE's Motion. With respect to monopoly power, the Court finds particularly concerning the bare allegation that WWE "holds approximately 85% of the market," Compl. ¶ 24, because "Plaintiff does not even allege what it is measuring." FTC v. Facebook, Inc., 560 F. Supp. 3d 1, 18 (D.D.C. 2021). In the paragraphs immediately prior to the market share allegation, MLW alleges facts regarding WWE's annual revenue, the "combined average annual value of WWE's U.S. TV rights" for certain programs, U.S. television viewership numbers for certain WWE programs, and average television viewership ratings. Compl. ¶¶ 21-23. Although the Court might, in some circumstances, "reasonably infer how Plaintiff arrived at its calculations—e.g., by proportion of total revenue . . . Plaintiff's allegations make it even less clear what [it] might be measuring." FTC v. Facebook, Inc., 560 F. Supp. 3d at 18. And the Court is troubled by MLW's argument that it alleged direct evidence of monopoly power, including that "WWE has also increased prices." Opp'n 11 (citing Compl. ¶¶ 10, 25, 52, 71-73). From the Court's review of the complaint, including the cited paragraphs, MLW alleges only that WWE has "ke[pt] prices high," Compl. ¶ 10, "has the ability to raise prices," id. ¶ 25; see also id. ¶ 73, prevented "access to [content] at lower prices," id. ¶ 52, and "eliminat[ed] price competition," id. ¶¶ 71-72. If MLW wishes to argue that WWE has "increased" prices, it should so allege.
It is not clear to the Court why WWE's market power metrics were only compared to AEW's, as opposed to overall numbers for the proposed market. Compl. ¶¶ 21-23. Similarly, the significance of the comparison of the metrics for two or three WWE programs to one AEW program is not apparent to the Court. Id. ¶ 23. The latter metrics appear to compare apples to oranges, and both sets of metrics appear only to indicate the relative success of WWE and AEW, rather than WWE's position in the overall proposed market.
MLW states that it "is a fundamental principle of supply and demand that decreased out-put leads to increased price." Opp'n 11 n.9. This "fundamental principle" requires assumptions, such as constant demand, that MLW has not supported with allegations.
MLW's allegations regarding antitrust injury appear similarly lacking, as the harms it has alleged—e.g., loss of contract revenues due to WWE's interference—are specific to MLW, rather than to competition at large. See, e.g., Compl. ¶¶ 48-51. MLW includes a single allegation that consumers would have increased access to higher quality professional wrestling entertainment content at lower prices but for WWE's conduct, but it appends no additional facts to support this conclusion. Id. ¶ 52; Brantley v. NBC Universal, Inc., 675 F.3d 1192, 1198 (9th Cir. 2012) (stating plaintiffs must, "at a minimum, sketch the outline of [antitrust injury] with allegations of supporting factual detail").
B. State Law Claims
Because the Court dismisses the Sherman Act claim, it lacks subject matter jurisdiction over MLW's remaining claims under California law for intentional interference with contractual relations, intentional interference with prospective economic relations, and violation of the UCL. 28 U.S.C. § 1367; see Compl. ¶ 15. MLW's state law claims are therefore DISMISSED.
C. Leave to Amend
The Court finds that additional allegations may cure the deficiencies outlined above and in WWE's Motion. Accordingly, the Court GRANTS MLW leave to amend. Any amendment must be filed within 21 days of the issuance of this order.
D. Other Motions
Because the Court here resolves WWE's Motion to Dismiss, it DENIES as moot WWE's Motion for Protective Order staying discovery during the pendency of the Motion to Dismiss. Likewise, because MLW's complaint is dismissed, the Court DENIES as moot WWE's Administrative Motion for Status Conference Regarding Discovery Schedule.
IV. CONCLUSION
For the foregoing reasons, WWE's Motion to Dismiss is GRANTED with LEAVE TO AMEND. WWE's Motion for Protective Order and Administrative Motion for Status Conference Regarding Discovery Schedule are DENIED as moot. Discovery in this action is STAYED until further Court order.
IT IS SO ORDERED.