A-World Trade, Inc. v. Apmex, Inc. ( 2022 )

FILED
NOT FOR PUBLICATION
APR 28 2022
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
A-WORLD TRADE, INC., No. 21-55262
Plaintiff-Appellant, D.C. No.
2:20-cv-01032-SB-MAA
v.
APMEX, INC.; et al., MEMORANDUM*
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
Stanley Blumenfeld, Jr., District Judge, Presiding
Argued and Submitted March 18, 2022
San Francisco, California
Before: CHRISTEN and BRESS, Circuit Judges, and LYNN,** District Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Barbara M. G. Lynn, Chief United States District
Judge for the Northern District of Texas, sitting by designation.
Plaintiff A-World Trade, Inc. appeals the district court’s dismissal of its
Third Amended Complaint alleging that defendants1 violated § 1 of the Sherman
Act, 15 U.S.C. § 1. We review the district court’s decision de novo, Hicks v. PGA
Tour, Inc., 897 F.3d 1109, 1117 (9th Cir. 2018), and we affirm. Because the
parties are familiar with the facts of this case, we need not recite them here.
1. The district court did not err in dismissing plaintiff’s Sherman Act claim.
“To establish liability under § 1, a plaintiff must prove (1) the existence of an
agreement, and (2) that the agreement was in unreasonable restraint of trade.”
Aerotec Int’l, Inc. v. Honeywell Int’l, Inc., 836 F.3d 1171, 1178 (9th Cir. 2016). In
the absence of direct evidence of an agreement, a plaintiff must plead that the
defendants’ parallel conduct, coupled with “plus factors,” plausibly suggests the
existence of an agreement. See In re Musical Instruments & Equip. Antitrust
Litig., 798 F.3d 1186, 1193 (9th Cir. 2015).
Plaintiff alleges that parallel conduct existed because defendants made
significant sales of precious metal bullion products (“PMBs”) in short periods,
followed by sharp returns to normal sales. Plaintiff alleges four, interrelated “plus
1
The defendants in this case are Apmex, Inc., Bay Precious Metals,
Inc., Bullion Exchange, LLC, Bullion Shark, LLC, DBS Coins, LP, JM Bullion,
Inc., Liberty Coin, LLC, Moderncoinmart, LLC, Pinehurst Coin Exchange, Inc.,
Scottsdale Mint, LLLP, SD Bullion, Inc., Silver Towne, Inc., Texas Gold and
Silver Exchange, Ltd., and Silver Gold Bull USA, Inc. (collectively, “defendants”).
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factors”: (1) anomalous pricing behavior whereby one defendant would lower its
prices below cost to sell large quantities of PMBs, and none of the other defendants
followed suit to compete; (2) defendants acted against their own interests by
forfeiting price control to eBay; (3) defendants’ knowledge of each other and the
coordinated plan; and (4) defendants’ “written commitments” with eBay that
marked the material terms defendants promised to abide by in furtherance of their
alleged price-fixing scheme.
These “plus factors” do not plausibly suggest the existence of a horizontal
agreement between defendants because they are explained by defendants’
agreements to participate in eBay’s Daily Deals Program. The Program spans
many categories of products and is not limited to PMBs. The more obvious
alternative explanation is that defendants individually participated in the Daily
Deals Program for rational, economic reasons—to reap the benefits of the
Program’s subsidies and to obtain a higher volume of sales. Like sellers in other
industries, defendants’ decisions to participate in the Daily Deals Program is fully
consistent with unilateral conduct. See In re Musical Instruments, 798 F.3d at
1194. Notably, eBay is not a defendant in this case, and plaintiff does not allege
that the Daily Deals Program agreements between defendants and eBay violate § 1.
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Plaintiff responds that the Daily Deals Program “does not explain how
[defendants] knew to wait for, and not compete with, the single [defendant]
consuming all of the market demand for the given time period.” But as the district
court correctly noted, it made no apparent economic sense for defendants to
undercut the “Featured Seller” and sell their products at a loss absent the eBay
subsidy.
Plaintiff also alleges that defendants engaged in a predatory pricing scheme
by selling PMBs at below cost. “In a typical predatory-pricing scheme, the
predator reduces the sale price of its product (its output) to below cost, hoping to
drive competitors out of business. Then, with competition vanquished, the
predator raises output prices to a supracompetitive level.” Weyerhaeuser Co. v.
Ross-Simmons Hardwood Lumber Co., Inc., 549 U.S. 312, 318 (2007) (citing
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 584-85 (1986)).
According to plaintiff, defendants’ costs of selling an item on eBay include
the purchase cost of the PMBs, eBay transaction fees, shipping costs of the PMBs,
payment processing fees, and certain additional costs. Plaintiff estimated each of
these costs, compared them to recorded PMB transactions in which defendants sold
PMBs during a two-month period in 2019, and concluded that defendants sold
PMBs at below cost.
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But the allegation that defendants sold PMBs on eBay at below cost is
implausible. As the district court correctly held, “[b]y failing to account for the
eBay subsidy—a key financial incentive to participate in the Daily Deals
Program—Plaintiff’s calculations and allegations neglect the economic reality of
each eBay sale at issue and miss Defendants’ means of recouping the discounts
offered to consumers.” See also U.S. v. Concentrated Phosphate Exp. Ass’n, 393
U.S. 199, 208 (1968) (“In interpreting the antitrust laws, we . . . . must look at the
economic reality of the relevant transactions.”) (internal citation omitted). It is
necessary to consider both the PMB’s sale price and the subsidy from eBay, and
indeed, plaintiff does not allege that defendants’ sales would be below cost if the
eBay subsidy were included.
2. The district court did not abuse its discretion in declining to exercise
supplemental jurisdiction over plaintiff’s state law claims brought pursuant to §§
17043 and 17045 of the California Business and Professions Code. See Costanich
v. Dep’t of Soc. & Health Servs., 627 F.3d 1101, 1107 (9th Cir. 2010) (stating
standard of review). In declining to exercise supplemental jurisdiction, the district
court considered “judicial economy, convenience, fairness, and comity,” see
United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726 (1966), and determined
that “[t]hese factors tip in favor of allowing Plaintiff’s state-law claims to proceed
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in state court.” The court explained that comity interests were especially strong
because “the remaining state claims imply that eBay’s popular Daily Deals
Program may be unlawful under California law,” and expressed concern about the
parties’ cursory briefing of the state law claims. Thus, the district court did not
abuse its discretion in declining to exercise supplemental jurisdiction over
plaintiff’s state law claims. See 28 U.S.C. § 1367(c)(3); Acri v. Varian Associates,
Inc., 114 F.3d 999, 1001 (9th Cir. 1997) (en banc).
AFFIRMED.
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