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GROSS v. NEW BALANCE ATH. SHOE

February 11, 1997

MARK GROSS and ELLEN M. SULLIVAN, individually and on behalf of all others similarly situated, Plaintiffs, against NEW BALANCE ATHLETIC SHOE, INC., Defendant.


The opinion of the court was delivered by: SWEET

 Sweet, D.J.,

 Defendant New Balance Athletic Shoe, Inc. ("New Balance") has moved to dismiss Plaintiffs' antitrust class action lawsuit and certain pendent state law claims.

 For the reasons set forth below, New Balance's motion will be granted.

 Parties

 Defendant New Balance is an athletic shoe manufacturer.

 Plaintiffs Ellen M. Sullivan ("Sullivan") and Mark Gross ("Gross") are individuals residing in New York, New York.

 Background

 For purposes of the instant motion to dismiss, the allegations of the complaint are taken as true. The facts are presented below accordingly, and do not constitute factual findings.

 On June 12, 1996, the Federal Trade Commission ("FTC") announced that New Balance had agreed to settle charges that it had engaged in a vertical resale price maintenance scheme to fix the resale prices of its shoes in violation of antitrust laws. The settlement was the result of coordinated investigations by the FTC and the Attorneys General of New York and the other forty-nine states of pricing policies in the athletic shoe industry. Pursuant to the settlement, New Balance, which had a 2% share of the market, signed a Consent Order with the FTC. *fn1"

 On June 27, 1996, Plaintiffs filed the instant action, relying extensively on the allegations used by the FTC in the Consent Order. The Complaint alleges two causes of action: one under Sections 4 and 16 of the Clayton Act (15 U.S.C. §§ 15, 26) alleging violation of Section 1 of the Sherman Act and the other under Section 349(h) of New York's Consumer Protection from Deceptive Acts and Practices Act (Article 22-A, General Business Law § 349(h)).

 The named Plaintiffs allege that between 1991 and 1996, New Balance, a large athletic footwear manufacturer, engaged in a systemic and nationwide scheme to coerce retail shoe dealers to enter into express or tacit agreements to fix or maintain the prices of New Balance footwear. To obtain agreement from recalcitrant retailers to adhere to its price maintenance scheme, New Balance allegedly engaged in surveillance of retail prices, threats to terminate or suspend shipments to discounting retailers, and demands that retailers raise their prices. The result of New Balance's scheme was that price competition among retailers of New Balance shoes was restricted and the prices of New Balance shoes were inflated to the detriment of consumers, such as the present Plaintiffs.

 Plaintiffs allege they "purchased New Balance footwear and suffered economic injury" as a result of New Balance's alleged wrongful conduct. Plaintiffs purportedly have brought the action "on their own behalf and on behalf of all members of a class ... consisting of all persons situated in the United States who purchased New Balance footwear through retail shoe sellers" over a four-year period. As a result of the conspiracy, Plaintiffs allege that they "and the other Class members paid more for such shoes" than they otherwise would have paid.

 The instant motion to dismiss was filed on September 10, 1996. Oral argument was heard on December 4, 1996, at which time the motion was considered fully submitted.

 On February 6, 1997, the Judicial Panel on Multidistrict Litigation granted New Balance's motion to transfer to this district all pending actions in this multidistrict litigation, MDL-1154, In re New Balance Athletic Shoe, Inc., Antitrust Litigation, pursuant to 28 U.S.C. section 1407.

 Discussion

 I. Standards for Reviewing a 12(b)(6) Motion

 On a Rule 12(b)(6) motion to dismiss, the factual allegations of the complaint are presumed to be true and all factual inferences must be drawn in the plaintiff's favor and against the defendants. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 1686, 40 L. Ed. 2d 90 (1974); Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989); Dwyer v. Regan, 777 F.2d 825, 828-29 (2d Cir. 1985). Accordingly, the factual allegations considered here are presumed to be true only for the purpose of deciding the present motions.

 Rule 12(b)(6) imposes a substantial burden of proof upon the moving party. A court may not dismiss a complaint unless the movant demonstrates "beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 101-102, 2 L. Ed. 2d 80 (1957). Accord Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S. Ct. 2229, 2232-33, 81 L. Ed. 2d 59 (1984) (quoted in H.J., Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 250-51, 109 S. Ct. 2893, 2906, 106 L. Ed. 2d 195 (1989)).

 "In practice 'a complaint ... must contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory.'" Fort Wayne Telsat v. Entertainment & Sports Prog. Network, 753 F. Supp. 109, 111 (S.D.N.Y. 1990), quoting, ...


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