Antitrust Law Daily Wrap Up, ANTITRUST—D.D.C.: Market-wide injury lacking in real estate development dispute, (May 16, 2016)

By Greg Hammond, J.D.

A property developer’s allegations that two competitors conspired to exploit local laws to drive him out of business were inadequately pleaded to state a claim under Section 1 of the Sherman Act. The federal district court in Washington, D.C. granted the competitors’ motions to dismiss, finding that the developer failed to plausibly plead a market-wide anticompetitive injury (Gross v. Wright, May 13, 2016, Cooper, C.).

The property developer claimed that the defendants—“under the auspices of historical preservation”—petitioned the local government to halt the developer’s planned renovation of a rowhouse in Washington, D.C.’s upward-trending Petworth neighborhood. He alleged that the defendants’ conspiracy unreasonably restrained trade in the market for renovation properties in Washington, D.C. The defendants collectively filed four motions to dismiss.

Relevant markets. The developer was described as being in the business of purchasing or investing in properties, renovating them, and then offering them for either sale or rent. The court found that these allegations encompassed four product markets: (1) the market for purchasing suitable property for renovation; (2) the market for the sale of subsequently renovated property; (3) the rental market for renovated property; and (4) the market for brokerage services in connection with transactions in the foregoing properties. These markets were deemed plausible at the current stage of the litigation, the court concluded. In addition, the court found that it was at least plausible that Washington, D.C. was the approximate “geographic scale on which competition actually occurs.”

Market-wide injury. The developer, however, failed to put forth a plausible claim that the defendants either intended to restrain, or actually restrained, trade in the renovation-property market in Washington, D.C. as a whole. Rather, the developer merely alleged in bare and conclusory terms the language of the antitrust statute, according to the court, offering no allegations concerning the parties’ respective market shares or the extent to which the developer’s elimination from the market would enable the defendants to initiate market-wide price increases. Further, even without knowing the developer’s market share, the court found that common sense suggested that his elimination from the market would not meaningfully affect the available supply of renovation properties or brokers in the District. The defendants’ conduct could therefore not possibly or plausibly cause an increase in the price of such properties or that of brokerage services to potential buyers and renters. The Sherman Act claim was therefore dismissed with prejudice and the court declined to exercise supplemental jurisdiction over the remaining common-law claims.

The case is No. 15-cv-01166 (CRC).

Attorneys: Roger C. Simmons (Gordon & Simmons, LLC) for Jay Gross. Edward Paul Trivette (Kalbaugh, Pfund & Messersmith, PC) and Robert Courtney Gill (Saul Ewing LLP) for Stephen C. Wright.

Cases: Antitrust DistrictofColumbiaNews