Curtin Maritime Corp. v. Santa Catalina Island Company ( 2019 )

NOT FOR PUBLICATION FILED
OCT 7 2019
UNITED STATES COURT OF APPEALS
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
CURTIN MARITIME CORP., a California No. 18-55338
corporation,
D.C. No.
Plaintiff-Appellant, 2:16-cv-03290-TJH-AGR
v.
MEMORANDUM*
SANTA CATALINA ISLAND
COMPANY, a Delaware corporation;
AVALON FREIGHT SERVICES, LLC, a
Delaware corporation,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
Terry J. Hatter, Jr., District Judge, Presiding
Argued and Submitted September 11, 2019
Pasadena, California
Before: RAWLINSON, IKUTA, and BENNETT, Circuit Judges.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
1
Curtin Maritime Corp. appeals from an order dismissing with prejudice its
claims under Sections 1 and 2 of the Sherman Act. We have jurisdiction under 28
U.S.C. § 1291.
1. The district court did not err in dismissing Curtin Maritime’s Section 1 claim
because Curtin Maritime failed to allege an antitrust injury to support that claim.
“Antitrust injury” requires that the plaintiff “‘prove that its alleged injury ‘flows
from that which makes defendants’ acts unlawful.’” Lucas Automotive
Engineering, Inc. v. Bridgestone/Firestone, Inc., 140 F.3d 1228, 1233 (9th Cir.
1998) (citing Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 113 (1986)).
Curtin Maritime claims it suffered antitrust injury because the exclusive lease
between Santa Catalina Island Co. (the Island Company) and Avalon Freight
Services, LLC (Avalon Freight) precludes it from using the Pebbly Beach freight
seaport, which in turn prevents it from competing in the Catalina freight-shipping
market. However, Curtin Maritime would have suffered the same injury had the
Island Company leased the facility to multiple companies, but not Curtin Maritime.
See Lucas, 140 F.3d at 1233. Therefore, Curtin Maritime cannot demonstrate
antitrust injury.
We respectfully disagree with the dissent that “both Brunswick and Lucas
Automotive stand for the proposition that a plaintiff does not suffer an antitrust
injury merely because a large player competes in the market,” dissent at 1-2, and
2
decline the dissent’s invitation to cabin Lucas to the facts of Brunswick based on
one line in a factually dissimilar case. Whatever the original teaching and limits of
Brunswick; in Lucas, we extended its principles beyond market competition to
instances of market exclusion.1 See Lucas, 140 F.3d at 1233. We also did not
condition our holding in Lucas on the pro-competitive aspects of the executive
license.2
Because Curtin Maritime had three opportunities to allege an antitrust injury
to support its Section 1 claim and was unable to do so, the district court did not
abuse its discretion in denying Curtin Maritime leave to amend the Section 1
claim. See Foman v. Davis, 371 U.S. 178, 182 (1962).
2. The district court did not err in dismissing Curtin Maritime’s claim under
Section 2 to the extent it was based on a theory of unlawful monopolization.
Curtin Maritime failed to make the necessary allegation that a single entity (either
the Island Company or Avalon Freight) had monopoly power by itself in the
relevant market, or that Island Company and Avalon Freight constitute a single
1
Even if Lucas was incorrectly decided, we are bound by decisions of prior panels.
See Miranda v. Selig, 860 F.3d 1237, 1243 (9th Cir. 2017).
2
We have serious doubts that the proper standard in the Ninth Circuit is to require
a defendant to demonstrate a pro-competitive aspect to the agreement. See Rebel
Oil, Inc. v. Atlantic Richfield Co., 51 F.3d 1421, 1433 (9th Cir. 1995) (noting that
the standard is whether defendant’s conduct is beneficial or neutral to
competition); see also Pool Water Products v. Olin Corp., 258 F.3d 1024, 1034
(9th Cir. 2001) (same).
3
entity for purposes of a monopolization claim. See Rebel Oil Co., Inc. v. Atl.
Richfield Co., 51 F.3d 1421, 1443 (9th Cir. 1995).
The district court erred in dismissing Curtin Maritime’s Section 2 claim to
the extent it is based on a conspiracy-to-monopolize theory. Curtin Maritime’s
Second Amended Complaint (SAC) plausibly alleged the elements of a claim for
conspiracy to monopolize. The SAC first alleged that the Island Company and
Avalon Freight entered into an agreement in August 2012 that Avalon Freight
would be the sole provider of freight services between Santa Catalina Island and
the California mainland and, in exchange, Avalon Freight would share its profits
with the Island Company. According to the SAC, the parties entered into this
agreement with the specific intent to monopolize the Catalina freight-shipping
market. Further, the SAC alleged that the Island Company and Avalon Freight
took an overt act in furtherance of the conspiracy; they conducted a sham RFP
process, which resulted in Avalon Freight being “awarded” an exclusive lease to
the Pebbly Beach facility giving it 100 percent control of the “freight originating
from or shipped to the City of Avalon by barge,” Finally, the SAC alleged that this
conspiracy precluded competition, causing injury to competitors, indeed, the
district court held, and neither the Island Company nor Avalon Freight contest, that
Curtin Maritime adequately alleged an antitrust injury with respect to the Pre-RFP
4
Agreement. See Paladin Assocs., Inc. v. Mont. Power Co., 328 F.3d 1145, 1158
(9th Cir. 2003); see also Hunt–Wesson Foods, Inc. v. Ragu Foods, Inc., 627 F.2d
919, 926 (9th Cir.1980).
Each party shall bear its own costs.
AFFIRMED IN PART, REVERSED IN PART, and REMANDED.
5
FILED
Curtin Maritime Corp. v. Santa Catalina Island Co., 18-55338 OCT 07 2019
IKUTA, Circuit Judge, dissenting: MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
If two companies enter into a collusive agreement that completely precludes
any competition in a particular market, an excluded competitor has suffered an
antitrust injury. See Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An
Analysis of Antitrust Principles and Their Application ¶ 348a (3rd & 4th eds., 2019
Cum. Supp.) (“[A] rival clearly has standing to challenge the conduct of rival(s)
that is illegal precisely because it tends to exclude rivals from the market, thus
leading to reduced output and higher prices.”). That’s exactly the situation here.
The Island Company and Avalon Freight entered into an exclusive lease agreement
that precludes Curtin Maritime or any other company from competing in the
market for shipping freight to some 4,000 inhabitants of Catalina Island for a
period of ten years. The defendants have failed to identify any plausible pro-
competitive effects of the exclusive lease. At least at the motion to dismiss stage,
Curtin Maritime has more than adequately alleged an antitrust injury to supports its
Section 1 claim.
The majority concludes otherwise based on Brunswick Corp. v. Pueblo
Bowl–O–Mat, Inc., 429 U.S. 477 (1977), and Lucas Automotive Engineering, Inc.
v. Bridgestone/Firestone, Inc., 140 F.3d 1228 (9th Cir. 1998), a case in which we
applied Brunswick. But this reliance is misplaced. Both Brunswick and Lucas
Automotive stand for the proposition that a plaintiff does not suffer an antitrust
injury merely because a larger player competes in a market. In Brunswick, the
plaintiffs alleged they were injured when a large owner of bowling alleys acquired
three failing bowling alleys near where plaintiffs’ bowling alleys were located.
429 U.S. at 480. In Lucas Automotive, the plaintiff claimed it was injured when a
larger competitor acquired the exclusive right to distribute one of four original
equipment brands of vintage tires. 140 F.3d at 1231. In both cases, the plaintiffs
alleged that the defendants’ superior competitive strength in a particular market
was the source of the harm; the plaintiffs did not claim that the specific agreement
at issue hurt competition. Because in each case a company with less competitive
strength could have lawfully entered into the same agreements (i.e., acquired the
bowling alleys in Brunswick or acquired the exclusive distribution right in Lucas
Automotive), and the resulting injury to the plaintiffs would have been the same,
the plaintiffs had not suffered an antitrust injury.
These cases are not applicable here. In this case, Curtin Maritime alleges it
was injured due to the specific agreement at issue—the exclusive lease—not
because of Avalon Freight’s comparative competitive strength. Indeed, Curtin
Maritime’s Section 1 claim would be the same regardless which competitor entered
into an exclusive ten-year lease with the Island Company. Moreover, “the
2
Brunswick line of cases,” which includes Lucas Automotive, does not deny antitrust
standing to plaintiffs whose injury is caused by strategic agreements that have “no
pro-competitive aspects.” Glen Holly Entm’t, Inc. v. Tektronix, Inc., 343 F.3d
1000, 1013 (9th Cir. 2003).1 Here, the defendants have failed to identify any pro-
competitive aspects of the exclusive lease arrangement. Under these
circumstances, Curtin Maritime has alleged an antitrust injury that survives a
motion to dismiss. See L.A. Mem’l Coliseum Comm’n v. Nat’l Football League,
791 F.2d 1356, 1363–64 (9th Cir. 1986) (antitrust injury where agreement
“restrained competition between NFL teams and among football stadia by
restraining the Raiders attempting to move and operate in Los Angeles”).
Accordingly, I dissent from the decision to affirm the dismissal of Curtin
Maritime’s Section 1 claim but otherwise concur in the memorandum disposition.
1
The majority asserts that Lucas Automotive “extended” the “principles” of
Brunswick to cases where competitors are excluded from the relevant market, Maj.
at 3, but in fact Lucas Automotive merely applied Brunswick’s holding that a
disgruntled competitor did not suffer an antitrust injury when a large company
entered into an agreement that increased its market share but there was still
competition in the relevant market.
3