The opinion of the court was delivered by: Scheindlin, District Judge.
This action involves defendants' alleged scheme to rig the
bidding process at public stamp auctions held in New York,
Maryland and California (collectively, the "States"). The
States, by their Attorneys General, claim that defendants'
conduct deprived sellers, auction houses and others of the
benefits of a competitive market-place, thereby violating
federal antitrust law as well as various state statutes.
Defendants John Apfelbaum, Lewis Berg, Davitt Felder, Davitt
Felder, Inc. and Earl P.L. Apfelbaum, Inc. (the "defendants")
move pursuant to Rule 12(b) of the Federal Rules of Civil
Procedure to dismiss certain claims brought by New York and
Maryland for failure to state a claim upon which relief can be
granted. For the reasons stated below, the motion is denied.
I. MOTION TO DISMISS STANDARD
Dismissal of a complaint for failure to state a claim pursuant
to Rule 12(b)(6) is proper only where "`it appears beyond doubt
that the plaintiff can prove no set of facts in support of [its]
claim that would entitle [it] to relief.'" ICOM Holding, Inc.
v. MCI Worldcom, Inc., 238 F.3d 219, 221 (2d Cir. 2001)
(quoting Harris v. City of New York, 186 F.3d 243, 247 (2d
Cir. 1999)). "At the Rule 12(b)(6) stage, `[t]he issue is not
whether a plaintiff is likely to prevail ultimately, but whether
the claimant is entitled to offer evidence to support the
claims. Indeed it may appear on the face of the pleading that a
recovery is very remote and unlikely but that is not the test.'"
Sims v. Artuz, 230 F.3d 14, 20 (2d Cir. 2000) (quoting Chance
v. Armstrong, 143 F.3d 698, 701 (2d Cir. 1998) (quotation marks
omitted)). The task of the court in ruling on a Rule 12(b)(6)
motion is "merely to assess the legal feasibility of the
complaint, not to assay the weight of the evidence which might
be offered in support thereof." Sims, 230 F.3d at 20 (quoting
Ryder Energy Distrib. Corp. v. Merrill Lynch Commodities,
Inc., 748 F.2d 774, 779 (2d Cir. 1984)).
In deciding a Rule 12(b)(6) motion, the court must accept as
true all material facts alleged in the complaint and draw all
reasonable inferences in the nonmoving party's favor.*fn1
See ICOM Holding, 238 F.3d at 221; Harris v. City of New
York, 186 F.3d 243, 247 (2d Cir. 1999). However, "bald
assertions and conclusions of law will not suffice" to defeat
even the liberal standard applied to a Rule 12(b)(6) motion.
Tarshis v. Riese Org., 211 F.3d 30, 35 (2d Cir. 2000).
Postage stamp dealing has become a profitable business in the
United States.*fn2 See Amended Complaint ("Compl."), Ex. A
to 12/14/01 Affirmation of James A. Mitchell, counsel for
defendants John Apfelbaum and Earl P.L. Afpelbaum, Inc.
("Mitchell Aff."), ¶ 1. Many stamp dealers purchase their
merchandise at auctions, which are held on a regular basis at
auction houses in New York, Maryland, California and elsewhere
throughout the United States, as well as abroad. See id. ¶ 2.
At these auctions, sellers and auctioneers rely on the
competitive bidding process to obtain the best prices for the
stamps offered. See id. ¶ 4. A large majority of sellers at
these auctions are individuals, many of whom are elderly or one
time participants in the auction market and have neither the
means nor the information to detect collusive bidding. See id
According to the Complaint, defendants conspired for at least
seventeen years to rig bids at public stamp auctions. See id.
1 3; Plaintiff States' Memorandum in Opposition to Motion of
Defendants John Appelbaum, Lewis Berg, Davitt Felder, Davitt
Felder, Inc. and Earl P.L. Apfelbaum, Inc., to Dismiss the
Third, Fourth and Fifth Claims for Relief in the Amended
Complaint ("Pl.Opp.") at 2. Defendants, who referred to
themselves as "the Ring", conducted their own secret bidding
sessions prior to the actual public auctions. Id. ¶¶ 3-4. At
the secret session, the highest bidder for a particular lot of
stamps agreed to bid up to that price at the public auction and
the losing bidders agreed to refrain from bidding on that
particular lot. See id. ¶ 3. The losers were compensated for
refraining based on an elaborate payoff scheme whereby the
"winning" Ring member's profits were divided among the Ring.
See id. ¶ 5. As a result of defendants' scheme, there was less
competition at the public auction, sellers received lower
prices, and auction houses received reduced commissions. See
id. ¶ 3.
The States filed a complaint against defendants on July 23,
2001 and filed the Amended Complaint on August 21, 2001. See
Memorandum of Law in Support of Defendants' Motion to Dismiss
the Third, Fourth and Fifth Claims for Relief in the Amended
Complaint ("Def.Mem.") at 2. The Complaint includes seven causes
of action. In the first claim, the States allege that defendants
violated section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1.
See Compl. ¶¶ 75-78. In the second claim, New York alleges that
defendants violated New York's antitrust statute, the Donnelly
Act, N.Y. Gen. Bus. Law §§ 340 et seq. See Compl. 81. These
first two claims seek recovery on behalf of stamp collectors
residing in plaintiffs' respective states. See id. ¶¶ 79, 85.
In the third and fourth claims, New York alleges that defendants
engaged in fraudulent and illegal conduct in violation of N.Y.
Exec. Law § 63(12) and engaged in deceptive acts and practices
in violation of N.Y. Gen. Bus. Law § 349. See Compl. ¶¶ 86-88,
90-94. Under both of these claims, New York seeks to recover for
all injuries caused by defendants' fraudulent and deceptive
conduct. See id ¶¶ 89, 95. In the fifth claim, Maryland alleges
that defendants violated the Maryland Antitrust Act, Md.Code
Ann., Com. Law §§ 11-201 et seq., and seeks to recover losses
suffered by all persons and entities injured by defendants'
conduct as well as civil penalties pursuant to Md.Code
Ann., Com. Law § 11-209. See Compl. ¶¶ 96-101. In the sixth and
seventh claims, California alleges that defendants violated
California's antitrust statute, Cal. Bus. & Prof.Code §§ 16720
et seq., and the California Unfair Competition Act., Cal. Bus. &
Prof.Code § 17200 et seq. See Compl. ¶¶ 1102-106, 108-110.
California only seeks to recover damages for its own citizens.
See 2/5/02 Letter from David Weinstein, Assistant Attorney
General of New York ("2/5/02 Ltr.").
Defendants move pursuant to Rule 12(b)(6) to dismiss the
third, fourth and fifth claims for relief.*fn3 First, they
argue that the third and fourth claims must be dismissed because
the New York statutes upon which these claims are based were not
intended to address antitrust violations. See Def. Mem. at 15.
Second, defendants assert that the third claim must be
dismissed because New York may not use N.Y. Exec. Law § 63(12)
to seek damages not available under the Donnelly Act. See id.
at 13-14. Third, they argue that the third and fifth claims
must be dismissed because neither New York's nor Maryland's
antitrust statute authorizes the Attorney General to bring a
damages action on behalf of non-residents of the state. See
id. at 12. Fourth, defendants contend that, even if state law
permits the Attorney General to sue for antitrust injuries
incurred by non-residents, these claims are preempted by federal
law. See id. at 5.
A. May New York Rely on N.Y. Exec. Law § 63(12) and N.Y.
Gen. Bus. Law § 349 to Address Antitrust Violations?
Defendants argue that neither N.Y. Exec. Law § 63(12) nor N.Y.
Gen. Bus. Law § 439 were intended to address antitrust
violations. See id. at 15. They claim that these provisions
were enacted as "consumer protection legislation" focused on
"the regulation of deceptive advertising and sales practices"
that injure consumers. Id.
1. N.Y. Exec. Law § 63(12)
Section 63(12) of the Executive Law of New York provides, ...