Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Disgruntled employee’s antitrust action meritless, but sanctions denied, (May 14, 2015)

By Peter Reap, J.D., LL.M.

Sherman Act and California Cartwright Act claims brought against BFI Waste Management Systems of North America by a disgruntled former employee were meritless, the federal district court in San Jose has ruled. However, a request for sanctions was denied (Dutra v. BFI Waste Management Systems of North America, Inc., May 13, 2015, Cousins, N.).

Background. Harold Dutra was a driver who collected waste for BFI until he was terminated in 2007. The parties engaged in arbitration, ending in a settlement agreement in 2009. The settlement agreement provided a $35,000 monetary payment for Dutra, and required Dutra to relinquish all employment rights with BFI, including right to seek re-employment with BFI and its successors.

In June 2012, Dutra sued BFI for a variety of claims, seeking to overturn the settlement agreement. The district court dismissed Dutra’s complaint in July 2013.

After July 2013, Dutra applied for a job with Recology, another waste disposal company. Dutra alleges that he was deemed qualified by Recology, but that his application was rejected because of communications between Recology and BFI.

Dutra brought suit against BFI for (1) a violation of the Sherman Antitrust Act §1, alleging a conspiracy to restrict trade; (2) a violation of the Sherman Antitrust Act § 2, alleging an unlawful monopoly; (3) the Cartwright Antitrust Act; and (4) breach of covenant of good faith and fair dealing.

Sherman Act §1 claim. In antitrust claims, the Supreme Court has required a heightened pleading standard. This is because discovery in antitrust cases frequently causes substantial expenditures and gives the plaintiff the opportunity to extort large settlements even without much of a case, the court noted.

To state a claim under Section 1 of the Sherman Act, claimants must plead not just ultimate facts (such as a conspiracy), but evidentiary facts which, if true, will prove: (1) a contract, combination or conspiracy among two or more persons or distinct business entities; (2) by which the persons or entities intended to harm or restrain trade or commerce among the several States, or with foreign nations; (3) which actually injures competition.

Here, Dutra alleged that sometime after his July 22, 2013 dismissal, he applied for a job with Recology. “[O]n information and belief, after communications between Recology and BFI (Republic), Plaintiff’s application was rejected.” Dutra alleged that he learned in late 2013 and early 2014 “of the collusion between BFI (Republic) and Recology as that collusion or conspiracy relates to Plaintiff’s re-employment.” These allegations did not include any factual information to give rise to plausible grounds that a conspiracy existed, the court determined. The conspiracy claim was rejected as insufficiently pled.

On the restraint of trade, Dutra alleged that “[b]y locking up certain markets, with fixed rates and single company locales, BFI (Republic) and Recology are able to harm persons seeking employment, consumers of their products, and others.” Dutra alleged that BFI and Recology control all of the San Francisco Bay Area’s waste management services, and “have divided the Area into sections or regions within which there is no competition.”

BFI provided public record information that Bay Area municipalities, such as San Mateo County and the City of San Francisco, grant exclusive licenses to both companies within particular boundaries. Thus, Dutra’s restraint of trade claims were both unsupported legal conclusions and factually inaccurate statements, the court held. Dutra’s Sherman Antitrust Act § 1 claim was dismissed.

Sherman Antitrust Act § 2 claim. Section 2 of the Sherman Act requires allegations that the defendant (1) possesses monopoly power in a valid relevant market; and (2) willfully acquired, maintained, or used that power by anti-competitive or exclusionary means. A plaintiff must delineate a relevant market and show that the defendant plays enough of a role in that market to impair competition significantly.

Dutra alleged that BFI possessed a monopoly on the “waste labor market,” but also that BFI and Recology together control the market. Additionally, Dutra alleged that the relevant market is “waste drivers and related industries in the Bay Area and throughout the State.” However, Dutra did not allege any specific injury to anyone but himself.

Together, these legal conclusions did not support a claim of § 2 antitrust liability, according to the court. Dutra failed to allege a cognizable relevant market or to allege BFI’s role in the market with any specificity. Dutra proffered no further facts in briefing or at the hearing that could provide even a plausible allegation of monopoly power or antitrust liability. Therefore, the Sherman Antitrust Act § 2 claim was dismissed.

Cartwright Antitrust Act claim. The analysis under California’s antitrust law mirrored the analysis under federal law because the Cartwright Act was modeled after the Sherman Act, the court observed. Because Dutra’s Sherman Act claims lacked merit, so too did his Cartwright Antitrust Act claim. This claim was also dismissed.

Implied covenant of good faith/fair dealing claim. The covenant of good faith and fair dealing is implied in a contract and requires the party to uphold the contract’s purposes and the parties’ legitimate expectations, the court noted.

Dutra claimed that BFI breached its duty of good faith by refusing to set aside part of the settlement agreement between the parties. This statement was at odds with the law of good faith and fair dealing, which requires parties to uphold contract terms, not to set them aside, the court said. Additionally, Dutra claimed that BFI breached a duty by “interfer[ing] in Plaintiff’s efforts to gain hire with another company.” Again, such a claim was not properly within the scope of the law, and the claim was dismissed.

Leave to amend. Dutra did not proffer any additional facts that could cure the deficiencies in the complaint. Therefore, the amendment would be futile and the complaint was dismissed without leave to amend, the court held.

Sanctions. BFI’s request to impose sanctions was denied because the requested relief was disproportionate to the sanctions requested and not in the interest of justice. BFI’s motion was premised in large part on arguments that the 2012 case was frivolous. This was irrelevant to the inquiry that the court was permitted to entertain on the current case, except as it could demonstrate Dutra’s or his counsel’s intent to harass. Here, the action was only at the pleading stage, and BFI only had to engage in one round of pleading. Therefore, BFI was not required to expend significant time and money to defend the action. Finally, although the action was meritless, there was no evidence of intention to harass.

The court also denied Dutra’s motion for sanctions. “A motion for sanctions must be made separately from any other motion and must describe the specific conduct that allegedly violates Rule 11(b).” Fed. R. Civ. P. 11(c)(2). Dutra moved for sanctions under Rule 11 at the end of his opposition to BFI’s sanctions, not on a separate motion. Further, Dutra did not describe BFI’s conduct that merited sanctions, except to suggest that BFI’s motion for sanctions was meritless. Therefore, Dutra’s motion for sanctions was denied.

The case is No. 14-cv-04623-NC.

Attorneys: Russell Alan Robinson (Law Office of Russell A. Robinson) for Harold Dutra, Jr. Mark Gerard Kisicki (Ogletree Deakins Nash Smoak & Stewart PC) for BFI Waste Management Systems of North America, Inc.

Companies: BFI Waste Management Systems of North America, Inc.

Cases: Antitrust CaliforniaNews