Antitrust Law Daily Wrap Up, ANTITRUST—C.D. Cal.: Nike dodges soccer monopoly suit, wins attorney sanctions, (Feb 20, 2015)

By Linda O’Brien, J.D., LL.M.

The federal district court in Los Angeles has dismissed monopolization, price fixing, and unfair competition and trade practices claims by a Virgin Island investment company against apparel and footwear manufacturer Nike, after finding that the plaintiff’s counsel submitted a false affidavit. Nike’s motion for sanctions was also granted (Havensight Capital LLC v. Nike, Inc., February 18, 2015, Real, M.).

Benjamin Woodhouse, principal and attorney for Havensight Capital, an investment company in the U.S. Virgin Islands, filed suit against Nike, alleging that the company was monopolizing the soccer equipment market through predatory pricing. The complaint alleged six causes of action, including monopolization, vertical and horizontal price fixing, and unfair competition and trade practices in violation of California’s Unfair Competition Law (UCL). Subsequently, Nike moved for dismissal and for sanctions.

Motion to dismiss. The court determined that the plaintiff failed to state a plausible claim for vertical or horizontal price fixing. Horizontal price fixing occurs when competitors agree on prices to charge customers for goods or services. Vertical price fixing occurs when a party agrees with another entity further down the distribution chain regarding prices to charge customers. According to the court, the plaintiff’s allegation that Nike “constrained trade and affected the market through controlling the amount of capacity that a distributor must purchase” was merely a bare conclusion with any supporting facts.

The plaintiff’s negligence claim that Nike “should have known that its monopolistic predatory pricing schemes would cause harm to competitors, customers, and the general public,” was vague and ambiguous to whether Nike owed the plaintiff a legal duty or how Nike breached any potential duty to the plaintiff and should also be dismissed, in the court’s view.

Additionally, the plaintiff failed to plead sufficient facts to support a claim for monopolization. The court noted that Woodhouse made vague assertions that that Nike required customers to purchase a mix of products and provided special pricing to large retailers. However, the plaintiff failed to provide any facts to support the allegation or any explanation regarding how the special pricing constituted anticompetitive conduct. The plaintiff also failed to allege any facts that Nike had the specific intent to monopolize or had monopoly power in the relevant market.

In this case, even if the plaintiff’s complaint was broadly construed, there was no basis to find that the deficiencies in the plaintiff’s claims could be cured by amending the complaint. Since there was no cognizable legal theory that could support liability against the defendant, dismissal with prejudice was appropriate, the court concluded.

Motion for sanctions. Under Federal Rule of Civil Procedure 11, sanctions may be imposed upon attorneys for submitting documents to the court that are frivolous, legally unreasonable, baseless, or filed for an improper purpose. Nike moved for sanctions on the grounds that the plaintiff’s complaint was based on a false affidavit by its counsel, Benjamin Woodhouse. In the affidavit, Woodhouse represented that he interviewed a soccer equipment store owner, who said that he was required to make minimum purchases and purchase a mix of products. Nike submitted declarations from the store owner and store manager stating that (1) the affidavit was inaccurate, (2) there were no purchase requirements from Nike, (3) there were no tying arrangements with Nike products, and (4) the store carried many brands based on customer preference.

The court noted plaintiff’s counsel previously filing frivolous documents in which he declared that he obtained a default judgment against Nike when no such judgment had been entered. Since there was no evidentiary support for the plaintiff’s claims and there was an attempt to deceive the court, the imposition of sanctions was warranted.

Plaintiff’s motion to vacate. On February 19, the plaintiff moved to vacate the judgment and attorney fees, and to reassign the case. The plaintiff argued that the defendant took the deposition of the store owner before discovery commenced and that the store owner’s statement was improperly obtained. The plaintiff also contended that the court was prejudiced by the defendant’s conduct and therefore the case should be reassigned.

The case is No. 2:14-cv-08985.

Attorneys: Benjamin James Woodhouse for Havensight Capital LLC. Austin Van Schwing (Gibson Dunn and Crutcher LLP) for Nike, Inc.

Companies: Havensight Capital LLC; Nike, Inc.

Cases: Antitrust CaliforniaNews