United States District Court, Southern District of New York
July 10, 2003
AGFA CORPORATION, PLAINTIFF,
UNITED MARKETING GROUP, INC., AND PROFICO, LTD., DEFENDANTS.
The opinion of the court was delivered by: Loretta Preska, District Judge
MEMORANDUM AND ORDER
Presently pending are plaintiff Agfa Corporation's ("Agfa") motion to dismiss the counterclaim of defendants United Marketing Group, Inc. and Profico, Ltd. (collectively, the "defendants") and defendants' cross-motion to dismiss plaintiff's complaint. For the reasons stated herein, plaintiff's motion is granted, and defendants' cross-motion is denied.
Plaintiff's complaint alleges the following pertinent facts. Agfa is engaged in the business of manufacturing and selling graphic arts films, papers, chemicals, accessories and electronic prepress equipment and proofing products. (Complaint, hereafter, "Compl.," at ¶ 9). Among the products manufactured and sold by Agfa are categories of products known as recording films and papers (referred to throughout plaintiff's complaint as "Recording Product"), which are used extensively in the graphics arts industry. (Id.). Agfa distributes Agfa-branded Recording Product in the United States primarily through authorized Agfa dealers (hereafter, "Authorized Dealers") pursuant to an express Authorized Dealer agreement. (Id. at ¶ 10). The dealer agreement utilized by Agfa provides that Authorized Dealers are obligated to purchase all of their requirements for Agfa-branded products, including Recording Products, from Agfa. (Id. at ¶ 11). In addition to its system of Authorized Dealers, Agfa also sells Recording Product in the United States through alternative channels of distribution. (Id. at ¶ 16). However, Recording Product sold by Agfa through such alternative channels of distribution is not intended to be sold by Agfa's Authorized Dealers. (Id. at ¶ 17).
According to plaintiff's complaint, defendants are engaged in the sale of Recording Product to graphic arts suppliers. (Compl. at ¶ 19). Defendants have not contracted with Agfa to participate in Agfa's distribution channels in any capacity. (Id. at ¶ 20). Upon information and belief, defendants acquired Agfa-branded Recording Product on the "gray market," that is, they purchased Recording Product that had either been improperly diverted from Agfa's official distribution system or they imported the Recording Product from foreign markets. (Id. at ¶ 21). Defendants then re-sold the Agfa-branded Recording Product to one or more graphic arts suppliers known to defendants to be Agfa Authorized Dealers. (Id. at ¶ 22). At the time of such sales, defendants were aware of the contractual obligation of Agfa's Authorized Dealers to purchase all of their Agfa-branded Recording Product exclusively from Agfa. (Id. at ¶ 23). In at least one case, defendants made sales of more than $750,000 to an entity known by them to be an Agfa Authorized Dealer. (Id. at ¶ 24).
As a result of defendants' activities, Agfa purportedly lost selling opportunities to one or more Authorized Dealers, incurred exposure to end-users' warranty and rebate claims without consideration, and mistakenly extended credits and rebates to one or more Authorized Dealers. (Compl. at ¶ 25). In at least one case, Agfa was compelled to terminate its relationship with an Authorized Dealer as a result of that Dealer's purchases from defendants. (Id. at ¶ 26).
Defendants' counterclaim, in turn, alleges that defendants purchased certain Agfa products products in the stream of interstate and foreign commerce from sellers other than Agfa. (Defendants' counterclaim, hereafter, "Defs' Counterclaim," at ¶ 7). According to defendants, they have never had a contractual relationship with Agfa and have "every right" to purchase Agfa products from the stream of interstate and foreign commerce without interference by Agfa. (Id. at ¶ 9).
On October 23, 2002, plaintiff filed an original Complaint (the "Complaint") against defendants alleging tortious interference with contract. On January 31, 2003, defendants filed an Answer, Affirmative Defense, and Counterclaim (the "Counterclaim").*fn1 In their Counterclaim, defendants allege that the filing of this action by Agfa constitutes a violation of sections one and two of the Sherman Act and of the Donnelly Act, the New York analog of the Sherman Act.
On December 9, 2002, plaintiff moved to dismiss the Counterclaim. On February 12, 2003, defendants cross-moved to dismiss the Complaint.
I. Legal Standard
When deciding a motion to dismiss under Rule 12(b)(6), I must construe the complaint liberally, "accepting all factual allegations in the complaint as true, and drawing all reasonable inferences in the [pleader's] favor." Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002). "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Villager Pond, Inc. v. Town of Darien, 56 F.3d 375, 378 (2d Cir. 1995) (quoting Scheuer v. Rhodes, 416 U.S. 232, 235-36 (1974)). Dismissal is proper only when "it appears beyond doubt that the [pleader] 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 (1957); accord Cohen v. Koenig, 25 F.3d 1168, 1172 (2d Cir. 1994).
II. The Noerr-Pennington Doctrine and Plaintiff's Motion to
Dismiss the Counterclaim
The Noerr-Pennington doctrine provides immunity from liability for conduct seeking to influence government action. Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127
, 136 (1961); United Mine Workers of Am. v. Pennington, 381 U.S. 657
, 669-70 (1965). "Essentially, the Doctrine protects under the First Amendment efforts to influence governmental action through litigation, lobbying, and the like. Such activities are immunized from antitrust liability, provided that such activities are more than a mere `sham.'" Bath Petroleum Storage, Inc. v. Market Hub Partners, L.P., No. 00-7302, 2000 U.S.App. LEXIS 25440, at *3 (2d Cir. Oct. 11, 2000) (affirming district court's dismissal of a claim under the Noerr-Pennington doctrine). Immunity under the Noerr-Pennington doctrine attaches regardless of whether the claim is based on a state or a federal cause of action. See Cheminor Drugs, Ltd. v. Ethyl Corp., 168 F.3d 119
, 128-29 (3d Cir. 1999) (applying Noerr-Pennington to state tort law claims because "we have been presented with no persuasive why these state tort claims, based on the same petitioning activity as the federal claims, would not be barred by the Noerr-Penninqton doctrine"); H.L. Hayden Co. v. Siemens Medical Sys., Inc., 672 F. Supp. 724, 745 (S.D.N.Y. 1987) (granting summary judgment on state Donnelly Act claim because summary judgment was appropriate on federal Sherman Act claims).
To invoke the "sham" exception to the doctrine, a party must allege that the lawsuit is "objectively baseless in the sense that no reasonable [person] could realistically expect success on the merits." Bath Petroleum, 2000 U.S.App. LEXIS 25440, at *3-4 (quoting Professional Real Estate Investors, Inc. v. Columbia Pictures Indus., 508 U.S. 49, 56-57 (1993). If a court first determines that the challenged litigation is objectively meritless, that court may then examine the subjective motivation of the litigant. See T.F.T.F. Capital Corp. v. Marcus Dairy, Inc., 312 F.3d 90, 93 (2d Cir. 2002); see also Cheminor Drugs, 168 F.3d at 122-23. "Where possible, . . . this analysis should be addressed to the face of the complaint, in order to avoid chilling a litigant's exercise of the right to petition." Twin City Bakery Workers & Welfare Fund v. Astra Aktiebolag, 207 F. Supp.2d 221, 223 (S.D.N.Y. 2002).
Here, defendants do not argue that consideration of Noerr-Pennington immunity is improper but only that the "sham" exception applies. (Defendants' Memorandum of Law in Opposition to Plaintiff's Motion to Dismiss Counterclaim and in Support of Defendants' Motion to Dismiss the Complaint, hereafter, "Defs' Br.," at 2). Defendants, however, have not carried their burden on this argument. As a threshold matter, defendants do not allege, in their Counterclaim, that Agfa's lawsuit is "objectively baseless." See Bath Petroleum, 2000 U.S.App. LEXIS 25440, at *3-4. To the contrary, defendants do not even address the merit of the claims set forth in Agfa's Complaint, viz., defendants' alleged tortious interference with contract and interference with prospective economic advantage. Instead, defendants assert their own right to purchase Agfa products and to resell them on the secondary market. (Defs' Counterclaim at ¶¶ 7-9). Defendants then allege, in conclusory fashion, that Agfa's Complaint constitutes a violation of the Sherman Act and the Donnelly Act. (Id. at ¶¶ 10-11). Such a conclusion is inconsistent with the requirement, as set forth in the prior case law, that allegations of "sham" litigation be contained in the pleadings, see, e.g., Twin City Bakery Workers, 207 F. Supp.2d at 223, and is, as such, insufficient to defeat the application of the Noerr-Penninqton doctrine. In any event, Agfa has pleaded the elements of tortious interference with contract and interference with prospective economic advantage, see section III, infra, and has included facts in its Complaint to support its claims. Thus, defendants have failed to carry their burden on the first step of the sham litigation exception to the Noerr-Penninqton doctrine of showing the claim to be objectively baseless. See T.F.T.F. Capital Corp., 312 F.3d at 93.
Proceeding directly to the second step of the sham litigation exception, plaintiff's motivation, defendants introduce evidence in the form of two affidavits (one from the President of defendants, the other from one of the attorneys for defendants) of efforts by Agfa to acquire defendants' list of suppliers during pre-litigation, settlement-type discussions. Relying on those affidavits, defendants assert that the instant case is a sham because it was filed only after defendants refused to share the pertinent list of suppliers with Agfa and for the sole purpose of obtaining this list, which defendants maintain is a trade secret. (Defs' Br. at 4-6).
First, because this is a motion to dismiss not converted to summary judgment, it is not clear that the affidavits may even be considered. Second, assuming, arguendo, that the conversations discussed in defendants' affidavits would be admissible (which they almost certainly would not be), such evidence is insufficient to render Agfa's claim a sham because motivation may only be considered if the claim is found to be objectively meritless. Here, as noted above, I cannot so find. Accordingly, defendants have not satisfied their burden of demonstrating the sham litigation exception to the Noerr-Penninqton doctrine, and, therefore, Agfa is entitled to invoke immunity from defendants' Counterclaim under that doctrine. Accordingly, Agfa's motion is granted, and defendants' Counterclaim is dismissed.
III. Defendants' Cross-Motion to Dismiss
Under New York law, the elements of a claim for tortious interference with contract are: "(1) existence of a valid contract between plaintiff and a third party; (2) defendant's knowledge of the contract; (3) defendant's intentional procuring of the breach of that contract; and (4) damages." G-I Holdings, Inc. v. Baron & Budd, 179 F. Supp.2d 233, 252 (S.D.N.Y. 2001); see also Lama Holding Co. v. Smith Barney, Inc., 88 N.Y.2d 413, 424 (1996). To state a claim for tortious interference with prospective economic advantage, "a plaintiff must also plead facts that demonstrate that the defendant acted with the sole purpose of harming the plaintiff or that the defendant used dishonest, unfair or improper or wrongful means." G-I Holdings, 179 F. Supp.2d at 254 (internal citations omitted).
Here, Agfa's Complaint alleges that Agfa had a contractual relationship with its authorized dealers, in particular one dealer to whom defendants purportedly sold over $750,000 in Recording Product. (Compl. at ¶¶ 10, 24). The Complaint alleges that defendants were aware of the contractual relationship and the requirement that the dealer purchase all of their Agfa branded Recording Product exclusively from Agfa. (Id. at ¶ 23). Moreover, the Complaint details the actions of defendants to induce Agfa's dealer to breach its dealer agreement. (Id. at ¶¶ 21-24). The Complaint also alleges that Agfa suffered damages as a result of defendants' actions. (Id. at ¶¶ 25-26).
As to the interference with prospective economic advantage claim, the Complaint also alleges, in addition to the facts recited above, that defendants maliciously and intentionally interfered with Agfa's prospective economic relationship with its authorized dealers, including a dealer by the name of Arkin Medo, Inc. (Id. at ¶¶ 37-38).
Other than alleging that plaintiff's claim is "sham" litigation, defendants do not specify any pleading deficiency in plaintiff's claims. Because, on a motion to dismiss, all allegations in the non-movant's pleadings are presumed to be true, see Chambers, 282 F.3d at 152, and because Agfa's complaint pleads the elements of its causes of action for tortious interference with existing contractual relations and tortious interference with prospective economic advantage, defendants' cross-motion to dismiss is denied.
For the foregoing reasons, Agfa's motion to dismiss the Counterclaim (docket entry no. 5) is granted. Defendants' cross-motion to dismiss the Complaint (docket entry no. 9) is denied.
Counsel shall confer as to the steps necessary to resolve this action and shall appear for a conference on July 28, 2003 at 9:30 a.m. in Courtroom 12A at 500 Pearl Street, New York, New York.