United States District Court, W.D. New York
March 24, 2004.
AGENCY DEVELOPMENT, INC., a Michigan corporation, et al., Plaintiffs,
MED AMERICA INSURANCE COMPANY of NEW YORK, A New York Corporation, et al., Defendants
The opinion of the court was delivered by: DAVID LARIMER, Chief Judge, District
DECISION AND ORDER
Plaintiffs Agency Development, Inc. ("ADI") and Patrick D. Patterson
("Patterson"), ADI's President and Managing General Agent, commenced this
action against MedAmerica Insurance Company of New York ("MANY") and its
various parent and affiliated companies ("defendants") asserting federal
and state antitrust and common law claims, including breach of contract,
fraud, and unfair competition. Plaintiffs allege that defendants
conspired with former ADI officers and employees to restrain trade,
attempted to monopolize or created a monopoly in the individual long term
care insurance ("LTCI") market in the Rochester, New York area in
violation of the Sherman Act, 15 U.S.C. § 1 and 2, and engaged in
various unfair business practices, all in an effort to drive ADI out of
business and reduce competition.
There are several motions currently pending before the Court.
Defendants have moved for summary judgment*fn1 (Dkt. #24) and for
sanctions pursuant to Fed.R.Civ.P. 11 (Dkt. #29). Plaintiffs have filed
three separate motions for leave to amend the complaint to add new claims
and an additional party defendant.*fn2
For the reasons set forth below, the Court grants in part and denies in
part plaintiffs' motions to amend. The Court treats defendants' motion
for summary judgment relative to plaintiffs' complaint as amended.
Defendants' motion for summary judgment is granted. Defendants' motion
for sanctions is denied.
The following facts are not in dispute. Long term care generally is
understood to mean institutional or non-institutional health care,
including nursing home care and home health care. Most often, long term
care is needed when a person suffers a chronic or disabling condition
which requires nursing care or constant supervision. (Dkt. #24, Patterson
Aff, Ex. B).
Plaintiff*fn3 is in the business of selling LTCI products underwritten
by various insurance companies. MANY is an insurance company that
administers and underwrites LTCI policies in New York State. MANY is a
for-profit corporation organized under Article 42 of the New York
Insurance Law. Excellus Health Plan, Inc., MANY's parent corporation, is
a subsidiary of Excellus, Inc., which is a New York not-for-profit
corporation. The Excellus companies provide health insurance coverage as
licensees of Blue Cross and Blue Shield.
In 1991, MANY*fn4 entered into a written contract with plaintiff in
which plaintiff agreed to train and employ insurance agents to sell
MANY's LTCI products in the six-county Rochester Region.*fn5 In turn,
MANY agreed to pay first-year and renewal commissions to plaintiff based
on the premiums paid for the policies sold by plaintiff's agents.
Pursuant to its express terms, either party could terminate the contract,
with or without cause, on thirty days written notice to the other party.
(Dkt. #25, Ex. 2). By the late 1990s, eighty percent of MANY's business
was generated by plaintiff's agents.
In 1998, the parties amended their contract to allow ADI's agents to
sell LTCI of Network America, a subsidiary company of Perm Treaty, Inc.,
a competitor of MANY. MANY permitted ADI to sell Network America LTCI,
but under very specific and limited circumstances. For instance, MANY had
a right-of-first-refusal on all applications for insurance and ADI's
received lower commissions from sales of Network America policies.
Further, MANY received a percentage of the premiums collected by ADI from
these sales as a "handling fee." (Dkt. #24, Patterson Aff, Ex. D).
In January of 1999, Perm Treaty, MANY's competitor, purchased ADI and
became its parent company. On July 7, 1999, MANY gave thirty days
written notice to plaintiff that it was terminating the contract as of
August 6, 1999.
Several months before MANY terminated the contract, ADI had moved its
offices into MANY's headquarters in Rochester. Subsequent to that move,
on July 6, 1999, Eric Dellinger, ADI's Senior Vice President of the
Rochester Region, resigned and took a position with MANY. (Dkt. #41,
Patterson Aff. ¶ 116; Dkt. #24, Dellinger Aff., ¶ 4, 10). On the
same day that MANY terminated the contract, William Gilbert, another ADI
officer, resigned to take a position with MANY. In August 1999, Anne
Cahill, ADI's top selling agent, resigned from ADI and began working as
an agent for MANY. (Dkt. #49, Cahill Aff, ¶ 11). In 2001, other ADI
officers and agents, including Kenneth Schroeder, Peter Embury, and
William Jones, left ADI to work for MANY or to sell MANY's or one of its
corporate affiliate's LTCI.
Since MANY terminated the contract, it continues to pay ADI renewal
commissions pursuant to the terms of the contract. From 1999 to 2001,
those commissions exceeded $5,000,000.
Plaintiff filed a lengthy, detailed proposed second amended complaint
(Dkt. #43) and two follow-up motions to amend the proposed second
amended complaint (Dkts. ##51, 53). In all, plaintiff asserts nine
federal and state law antitrust and common law claims that are based
essentially on the same factual allegations. Plaintiff alleges that
defendants engaged in a course of conduct
designed to put plaintiff out of business, to restrain trade and to
secure a monopoly in the LTCI market in the Rochester, New York area.
Specifically, plaintiff claims that defendants secretly raided ADI's
officers and agents while the parties still had an agency relationship
and then terminated the contract with ADI and created its own in-house
sales force. Plaintiff alleges that, since then, defendants unfairly
compete with plaintiff by utilizing MANY's corporate affiliation with its
Excellus parent companies who are licensees of the Blue Cross and Blue
Shield mark and logo. Because Blue Cross and Blue Shield of Rochester
insures seventy percent of the population of the Rochester Region,
defendants have access to prospective customer information which is not
available to ADI or other competitors of MANY.
Plaintiff claims that by engaging in this course of conduct, defendants
have acted with the intent to put plaintiff out of business and reduce
competition in the LTCI market by destroying a company that sells
competing LTCI in the relevant market. Plaintiff alleges that MANY has
achieved a sixty to seventy percent market share in the LTCI market in
the Rochester Region. Because of its market advantage, and its improper
use of its Blue Cross and Blue Shield affiliation, competitors of MANY,
including plaintiff, find it difficult to compete effectively in the LTCI
market. Therefore, plaintiff alleges that overall competition in the LTCI
market has been adversely affected.
Plaintiff claims that defendants have restrained trade and created a
monopoly or attempted to create a monopoly in the LTCI market, in
violation of the Sherman Act, 15 U.S.C. § 1 and 2, and New York's
Donnelly Act, N.Y. Gen. Bus. L. § 340. Plaintiff also claims that
defendants violated the Lanham Act, 15 U.S.C. § 1125(a), and New
York's Unfair Competition Law, N.Y. Gen. Bus. L. § 349, by
misrepresenting the nature of its business as not-for-profit and its
product as a Blue
Cross and Blue Shield insurance product. Finally, plaintiff asserts
common law fraud, breach of contract, and other related state law claims
I. Summary Judgment Standards
Defendants are entitled to summary judgment if they can show as a
matter of law that there is no genuine issue as to any material fact that
would require a trial of the action. Fed.R.Civ.P. 56(c). Defendants have
the initial burden of proving, through affidavits and other evidence, the
absence of genuine factual issues. If they meet this burden, plaintiff
then has the burden of producing probative evidence and "specific facts
showing that there is a genuine issue for trial." Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Although
summary judgment "may be difficult to obtain due to the factual
complexities of antitrust cases, the motion can serve as a tool by which
`to isolate and dispose of factually unsupported claims.'" Virgin Atl.
Airways Ltd. v. British Airways PLC, 257 F.3d 256, 263 (2d Cir. 2001)
(quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)); see also
Tops Mkts., Inc., v. Quality Mkts., Inc., 142 F.3d 90, 95 (2d Cir. 1998)
("By avoiding wasteful trials and preventing lengthy litigation that may
have a chilling effect on pro-competitive market forces, summary judgment
serves a vital function in the area of antitrust law.").
II. Antitrust Claims
The Clayton Act, 15 U.S.C. § 15, allows a private party like ADI to
sue under federal antitrust laws, including the Sherman Act, for
violations of those laws. The Clayton Act reads, in
pertinent part, that "any person who shall be injured in his business or
property by reason of anything forbidden in the antitrust laws may sue
therefor in any district court of the United States . . ., and shall
recover threefold the damages by him sustained, and the cost of suit,
including a reasonable attorney's fee." 15 U.S.C. § 15(a).
A threshold requirement for proceeding under the Clayton Act is to show
that plaintiff has standing to sue. To have standing, ADI must
demonstrate that it suffered an "injury" as a result of defendants'
actions; an injury that the antitrust laws were meant to prevent. Merely
showing that it was harmed in some fashion by defendants' conduct is not
enough. Balaklaw v. Lovel, 14 F.3d 793, 797 (2d Cir. 1994) (plaintiff
"must show more than that the defendants' conduct caused [it] an
injury."). Rather, the injury suffered by plaintiff must be attributable
to the anticompetitive aspect of the practice of the defendants that is
under scrutiny, "since `[i]t is inimical to [the antitrust] laws to award
damages' for losses stemming from continued competition." Atl. Richfield
Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990) (quoting Cargill,
Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 109-110 (1986)). If
competition is not affected, there is no injury.
The antitrust injury requirement ensures that a plaintiff recover only
if the loss stems from a competition-reducing aspect or effect of the
defendants' behavior. Atl. Richfield, 495 U.S. at 334; see also Virgin
Atl. Airways, 257 F.3d at 265. The antitrust injury requirement applies
equally to plaintiffs' Sherman Act and New York State Donnelly Act
After reviewing all the papers submitted, I grant defendants' motion
for summary judgment and dismiss plaintiff's antitrust claims. ADI lacks
standing to bring these claims because it has not suffered the requisite
antitrust injury. The only injury that ADI has asserted is injury to
itself as a result of MANY's termination of the contract and the
migration of a handful of ADI's officers and agents to MANY after the
contract was terminated. This is not the type of injury that the
antitrust laws were meant to prevent, nor is it the kind of injury that
is actionable under the Clayton Act.
First, the termination of one distributor of a product for another in a
given market is not, standing alone, a violation of the antitrust laws.
See The Serpa Corp. v. McWane, Inc., 199 F.3d 6 (1st Cir. 1999); Crown
Beverage Co., Inc. v. Cerveceria Moctezuma, S.A., 663 F.2d 886 (9th Cir.
1981) (distributor failed to present evidence that its replacement by
another distributor violated the Sherman Act); Cancall PCS v. Omnipoint
Corp., No. 99Civ. 3395, 2000 WL 272309, *8(S.D.N.Y. Mar. 10, 2000); Hsing
Chow v. Union Cent. Life Ins. Co., 457T. Supp. 1303 (E.D.N.Y. 1978). This
is true even where a company chooses to replace a distributor by
vertically integrating distribution of its product through an in-house
sales department, as MANY did here. Absent some anticompetitive effect,
vertical integration does not violate antitrust laws. See Theatre Party
Assocs., Inc. v. Shubert Org., Inc., 695 F. Supp. 150, 155 (S.D.N.Y.
1988) ("Because a manufacturer or seller is free to control the
distribution of its own product, it can unilaterally terminate or replace
independent distributors and vertically integrate without violating the
antitrust laws. Vertical integration without more, even by a monopolist,
does not offend Section 2.") (citing Belfwre v. New York Times Co.,
826 F.2d 177 (2d Cir. 1987)). Plaintiff's allegation that defendants have
a large market share does not change this analysis. Id. ("It is well
settled that a manufacturer's monopoly over the distribution of its own
product cannot form the basis of a valid monopolization claim.").
Plaintiff conceded at oral argument that replacement of one distributor
for another or by utilization of an in-house sales force is not an
antitrust violation. Plaintiff claims, however, that this case is
different and that it has shown sufficient antitrust injury because
defendants committed various business torts (i.e. unfair competition,
improper use of the Blue Cross and Blue Shield logo, predatory hiring of
ADI's officers/agents) that resulted in a reduction of plaintiffs sales
of competing LTCI, thereby reducing overall competition in the LTCI
market. This theory is flawed. Not every business tort or breach of
contract that has an adverse impact on a competitor can form the basis of
an antitrust claim. See Brooke Group Ltd. v. Brown & Williamson
Tobacco. Corp., 509 U.S. 209, 226 (1993) ("Even an act of pure malice by
one business competitor against another does not, without more, state a
claim under the federal antitrust laws; those laws do not create a
federal law of unfair competition. . . ."); Kaplan v. Burroughs Corp.,
611 F.2d 286, 291 (9th Cir. 1979) ("It is the impact upon competitive
conditions in a definable product market which distinguishes the
antitrust violation from the ordinary business tort.").
Further, plaintiff seems to equate anticompetitive conduct with
antitrust injury. The injury required for antitrust standing is one that
flows from the unlawful (anitcompetitive) nature of the defendants'
acts. See Clayton Act, 15 U.S.C. § 15(a) (granting private right of
action to anyone who has been injured "by reason of anything forbidden in
the antitrust laws. . . ."). Plaintiff asserts here that its injury (a
reduction in its sales and profits) as a result of the termination of the
contract and its agents leaving to work for MANY has resulted in reduced
sales of competing LTCI and, therefore, less competition in the overall
market. Plaintiff has it backwards. The defendants' anticompetitive
conduct must cause plaintiffs injury, not the other way around. That is,
plaintiffs injury cannot cause the anticompetitive conduct, which is
precisely what plaintiff here alleges.
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)
("Plaintiffs must prove antitrust injury, which is to say injury of the
type the antitrust laws were intended to prevent and that flows from that
which makes defendants' acts unlawful. The injury should reflect the
anticompetitive effect either of the violation or of anticompetitive acts
made possible by the violation.").
In addition, plaintiff improperly equates decreased sales of LTCI with
decreased competition in the overall LTCI market. However, the latter
does not necessarily follow the former. If it did, any conduct by a
competitor that caused another to go out of business (or as ADI alleges
here, any conduct that results in reduced sales of a competing product),
would be an antitrust violation. That is not the law. The "antitrust
injury requirement underscores the fundamental tenet that `[t]he
antitrust laws . . . were enacted for the protection of competition, not
competitors.'" Balaklaw, 14 F.3d at 797 (emphasis in original) (quoting
Brunswick, 429 U.S. at 488).
What is clear from the record is that plaintiff's alleged injury is the
result of it losing a lucrative contract with MANY. The cancellation of
that contract, which is entirely proper, eliminated a lucrative business
arrangement. It is evident that MANY's cancellation of the contract was
prompted in large part because one of MANY's competitors in the LTCI
business purchased ADI. By continuing the former arrangement, MANY would
be directly benefitting its competitor.
Plaintiff's alleged drop in sales and lost profits, however, are not
the result of any anticompetitive conduct of defendants. Rather, they
are the result of the lawful termination of an agency contract. That
lawful act, even when considered in light of ADI's claim that MANY
engaged in "predatory hiring" of ADI officers and agents, cannot serve
as the basis for an antitrust claim. All ADI has shown is that it has
been harmed as an individual competitor in the market by
MANY. That is not enough to confer standing under the Clayton Act. See
Brunswick, 429 U.S. at 488; The Serpa Corp., 199 F.3d at 12; Balaklaw, 14
F.3d at 797-98.
Finally, even assuming that ADI could raise a question of fact
regarding whether it suffered a sufficient antitrust injury, each of
ADI's antitrust claims fail for other reasons. Plaintiff's Sherman Act
§ 1 conspiracy-in-restraint-of-trade claim fails because plaintiff
has not met its "`initial burden of showing that the challenged action
has had an actual adverse effect on competition as a whole in the
relevant market. . . .'" K.M.B. Warehouse Distrib, Inc. v. Walker Mfg.
Co., 61 F.3d 123, 127 (2dCir. 1995) (emphasis in original) (quoting
Capital lmaging Assocs., P.C. v. Mohawk Valley Med. Assocs., 996 F.2d 537,
543 (2d Cir. 1993)); see also Virgin Atl. Airways, 257 F.3d at 264 ("The
fact that the defendant's actions prevent a plaintiff from competing in a
market is not enough, standing alone, to satisfy this initial burden of
proof."); Capital Imaging Assocs., 996 F.2d at 546 (plaintiff bears the
burden of showing that defendants' conduct had "a substantially harmful
effect on competition.").
Here, however, plaintiff has made no such showing. Plaintiff has
produced no evidence that competition between companies who sell LTCI has
been reduced, or that MANY has utilized its market power to set
unreasonably high prices for LTCI. In fact, when MANY terminated the
contract, ADI was free to sell Perm Treaty (and presumably any other)
LTCI policies without restriction, thereby increasing competition in the
market. Further, there is absolutely no evidence that other insurance
products have become less available to consumers in the Rochester Region
or that other competitors have been pushed out of the market.
According to information provided by plaintiff from the New York State
insurance department, twenty-seven companies were offering individual
LTCI policies in New York State in
2003. (Dkt. #24, Patterson Aff, EC. B). From the consumers' perspective
then, the LTCI market has not changed. Balaklaw, 14 F.3d at 798. That ADI
allegedly has experienced difficulty competing with MANY does not
translate into a reduction in competition in the LTCI market overall.
K.M.B. Warehouse Distrib., 61 F.3d at 127. Importantly, plaintiff does
not allege that defendants have restrained plaintiff's ability to sell
LTCI of other carriers. There is also uncontroverted evidence in the
record that MANY's sales actually declined after the contract was
terminated, thereby leaving the market open for further competition from
ADI and others. See Balaklaw, 14 F.3d at 799.
Plaintiff's Sherman Act § 2 monopolization claims fail because
plaintiff has not shown that it suffered any direct injury based on MANY's
alleged market power. Even assuming that plaintiff could prove that MANY
has a sixty to seventy percent market share of the individual LTCI
market, that fact did not cause any direct antitrust injury to
plaintiff. MANY's market share may or may not have an actual adverse
effect on other insurance companies who compete in the LTCI market in the
Rochester Region. However, plaintiff is not an insurance company.
Instead, it sells insurance policies underwritten by insurance
companies. Therefore, the fact that MANY may have a large market share of
the current policy holders of LTCI cannot be the basis for a
monopolization claim by this plaintiff.
Whatever business injury plaintiff suffered as a result of the
termination of the contract is attributable only to the fact that
plaintiff is no longer the agent authorized to sell MANY's products. To
the extent plaintiff suffered damage because MANY's competitors find it
hard to compete with MANY, that injury is too remote to be compensable
under the antitrust laws. See G.K.A. Beverage Corp. v. Honickman,
55 F.3d 762, 767 (2d Cir. 1995) (distributors of soft drinks did not
antitrust standing to bring monopolization claim against bottling
companies based on bottling companies' alleged monopolization of soft
drink market; although the monopoly drove out of business a bottling
company with whom distributors had exclusive distribution contract,
distributors' injuries were too remote from antitrust violation to have
standing under the Clayton Act); The Serpa Corp., 199 F.3d at 11-13
(former exclusive sales representative of plumbing supplies lacked
standing to sue plumbing supplies manufacturer that had acquired
eighty-five percent market power because only a competitor or consumer in
the plumbing supplies market had standing under the Clayton Act for
alleged monopoly; as a distributor of those products, plaintiff was only
"incidentally connected to the alleged antitrust violation" and its
injury "too remote.").
III. Lanham Act 15 U.S.C. § 1125(a).
Plaintiff seeks to amend the second amended complaint to add a claim
for false advertising under the Lanham Act, 15 U.S.C. § 1125(a). That
motion is denied. Although leave to amend should be granted freely, it is
not an abuse of discretion to deny leave where any such amendment would
be fufile. Health-Chem Corp. v. Baker, 915 F.2d 805, 810 (2d Cir. 1990)
("where . . . there is no merit in the proposed amendments, leave to
amend should be denied").
An amendment is considered fufile if the proposed claim could not
withstand a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6).
Dougherty v. Town of North Hempstead Bd. of Zoning Appeals, 282 F.3d 83,
88 (2d Cir. 2002). In determining whether to allow the amendment to add a
Lanham Act claim here, I consider both the factual allegations contained
in the proposed claim as well as the exhibits plaintiff has attached to
the proposed second amended complaint, including the
annual reports that allegedly contain the misleading statements. (Dkt.
#24, Patterson Aff, Exs. I and K). See Gregory v. Daly, 243 F.3d 687, 691
(2d Cir. 2001) (When determining the sufficiency of a claim under Rule
12(b)(6), the Court can consider the factual allegations in the amended
pleading and "those contained in documents attached to the pleadings or in
documents incorporated by reference.").
Here, plaintiff's proposed Lanham Act claim is fufile. Plaintiffs
complaint centers around his belief that by touting its relationship with
Excellus (Blue Cross and Blue Shield), consumers may be led to conclude
that MANY is a not-for-profit corporation, when it is in fact a
for-profit corporation. I fail to see why consumers would be concerned
with that distinction but, in any event, the pleadings here do not
demonstrate any deception worthy of Lanham Act protection. It is
important to note that plaintiff does not contend that defendants'
statements concerning MANY's relationship to its Excellus parent are
Here, plaintiffs theory is that by not disclosing that MANY is a
for-profit company on its website and in its annual report, while at the
same time referencing its corporate relationship with its not-for-profit
Excellus parent, consumers are misled. Plaintiff's proposed claim must
fail because it cannot base a Lanham Act claim on the defendants' failure
to disclose a fact. See Avon Products, Inc. v. S.C. Johnson &
Son, Inc., 984 F. Supp. 768, 798 (S.D.N.Y. 1997) ("Avon cannot be
held liable under the Lanham Act for failing to state publicly that SSS
is not an effective insect repellent."); Int'l Paint Co. v. Grow
Group, Inc., 648 F. Supp. 729, 730 (S.D.N.Y. 1986) (The Lanham Act
"imposes no affirmative duty of disclosure."). Plaintiff points to no
affirmative statement by defendants that it is a not-for-profit company.
Further, plaintiff cannot rely on the speculative claim that LTCI
consumers may misinterpret literally true statements on defendants'
websites and in their annual reports. See Mylan Labs., Inc. v. Matkari,
1 F.3d 1130, 1138-39 (4th Cir. 1993) (granting 12(b)(6) motion to dismiss
Lanham Act claim where plaintiff relied on an alleged false implication
created in a drug manufacturer's advertising that its product had been
approved by the PDA because plaintiff failed to point to any affirmative
misrepresentation of fact in that advertising in which defendant declared
that its product was granted FDA approval). Therefore, plaintiff's motion
to amend to add a Lanham Act claim is denied as fufile.
IV. State Law Claims
Plaintiff also asserts a number of claims based on New York law,
including breach of contract, fraud, unjust enrichment, and unfair
competition. Having granted summary judgment against plaintiff on its
federal claims, I decline to exercise pendent jurisdiction over
plaintiff's state law claims, and they are dismissed. See Valencia ex
rel. Franco. v. Lee, 316 F.3d 299, 305 (2d Cir. 2003) ("in the usual case
in which all federal-law claims are eliminated before trial, the balance
of factors to be considered under the pendent jurisdiction
doctrine-judicial economy, convenience, fairness, and comity-will point
toward declining to exercise jurisdiction over the remaining state-law
claims"); Town of West Hartford v. Operation Rescue, 915 F.2d 92, 104 (2d
Cir. 1990) ("it is well settled that `if the federal claims are dismissed
before trial . . . the state claims should be dismissed as well'")
(quoting United Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966)); see
also 28 U.S.C. § 1367(c)(3).
V. Rule 56(f) Affidavit of Plaintiff's Attorney
Plaintiff argues that the Court should deny defendants' motion for
summary judgment at this time because no discovery has taken place.
Plaintiff's attorney filed an affidavit pursuant to Fed.
R. Civ. P. 56(f).*fn7 The Second Circuit has established a four-part
test for an affidavit filed pursuant to Rule 56(f). The affidavit must
describe what discovery still needs to be completed, how the facts sought
reasonably can be expected to create a genuine issue of material fact,
the parties' efforts to obtain that discovery to date, and why those
efforts were unsuccessful. Paddington Partners v. Bouchard, 34 F.3d 1132,
1138 (2d Cir. 1994) (citing Hudson River Sloop Clearwater, Inc. v. Dep't
of Navy, 891 F.2d 414, 422 (2d Cir. 1989)). However, "Rule 56(f) is not a
shield against all summary judgment motions. Litigants seeking relief
under the Rule must show that the material sought is germane to the
defense, and that it is neither cumulative nor speculative."
Sundsvallsbanken v. Fondmetal, Inc., 624 F. Supp. 811, 815 (S.D.N.Y.
1985); see also Powers v. McGuigan, 769 F.2d 72, 76 (2d Cir. 1985)
("where the discovery sought would not meet the issue that the moving
party contends contains no genuine issue of fact, it is not an abuse of
discretion to decide the motion for summary judgment without granting
Here, plaintiffs attorney states that plaintiff needs discovery on
nearly every aspect of its case. Dkt. #38, ¶ 3. However, plaintiffs
attorney fails to address how this discovery would raise a material issue
of fact to withstand summary judgment on the antitrust claims. Defendants
have been granted summary judgment on plaintiffs antitrust claims because
plaintiff cannot show, based
on the facts alleged, that it has suffered the requisite antitrust
injury. Discovery would not raise a material issue of fact on ADI's
Where a request for discovery is based on speculation as to what might
be discovered, the court should deny the request, even if properly and
timely made. Paddington Partners, 34 F.3d at 1138; Gray v. Town of
Darien, 927 F.2d 69, 74 (2d Cir. 1991) ("In a summary judgment context,
an `opposing party's mere hope that further evidence may develop prior to
trial is an insufficient basis upon which to justify the denial of [a
summary judgment] motion'") (quoting Contemporary Mission, Inc. v. U.S.
Postal Serv., 648 F.2d 97, 107 (2d Cir. 1981)); Capital Imaging Assocs.
v. Mohawk Valley Med. Assocs., 725 F. Supp. 669, 680 (N.D.N.Y. 1989)
(citing Waldron v. Cities Serv. Co., 361 F.2d 671, 673 (2d Cir. 1966)
(citations omitted) (while "Rule 56(f) discovery is specifically designed
to enable a plaintiff to fill material evidentiary gaps in its case . .
. it does not permit a plaintiff to engage in a `fishing expedition'"),
aff'd 996 F.2d 537 (2d Cir. 1993)). Here, plaintiff's broad request to
conduct discovery is based solely on the hope that it can develop facts
essential to support almost all of the assertions in its second amended
complaint. This is not the purpose of Rule 56(f), and plaintiff's
conclusory discovery request is not sufficient to withstand summary
V. Motion to Amend to Add MedAmerica, Inc. as a Defendant
Plaintiff also seeks to add MedAmerica, Inc. as a defendant in this
case. In light of the Court's dismissal of all of plaintiff's claims,
this motion is denied as moot.
VI. Defendants' Motion for Rule 11 Sanctions
Defendants have moved pursuant to Fed.R.Civ.P. 11 for sanctions
against plaintiffs and their counsel for attorneys' fees and expenses
incurred in defending this lawsuit. (Dkt. #29). That motion is denied.
The decision to levy sanctions against an attorney or a litigant rests in
discretion of the Court. See Corroon v. Reeve, 258 F.3d 86, 92 (2d Cir.
2001); Revson v. Cinque & Cinque, P.C., 221 F.3d 71, 78 (2d Cir.
2000). Under Rule 11, a Court may impose sanctions where "it is clear
under existing precedents that a pleading has no chance of success and
there is no reasonable argument to extend, modify, or reverse the law as
it stands." Corroon, 258 F.3d at 92.
Despite the fact that I have granted summary judgment and dismissed
plaintiff's claims, I cannot say that the amended complaint had no chance
of success. Although plaintiff's counsel advanced certain tenuous legal
arguments and theories in support of the claims asserted, I cannot say
that the amended complaint was so deficient nor counsel's conduct so
egregious or objectively unreasonable as to require sanctions. See
K.M.B. Warehouse Distribs., 61 F.3d at 131 (quoting Rodick v. City of
Schenectady, 1 F.3d 1341, 1350 (2d Cir. 1993)) ("Sanctions should only be
imposed if `it is patently clear that a claim has absolutely no chance of
success,' and all doubts should be resolved in favor of the signing
Plaintiffs' first motion for leave to file an amended complaint (Dkt.
#36) is deemed withdrawn. Plaintiffs' second motion to amend the amended
complaint (Dkt. #43) is granted in part and denied in part, as follows:
Plaintiffs' motion to amend the first, second,
and third claims based on the Sherman Act and the
Donnelly Act is granted, and the Court considers
defendants' motion for summary judgment as against
these amended claims;
Plaintiffs' motion to amend the fourth, fifth,
sixth, seventh, eighth and ninth claims based on
state law is denied as moot.
Plaintiffs' motion for miscellaneous relief (Dkt. #51) that pertains to
a claim for punitive damages is denied as moot.
Plaintiffs' third motion to amend the complaint (Dkt. #53) to add
claims under the Lanham Act and New York's General Business Law § 349
Defendants' motion for summary judgment (Dkt. #24) is granted and
plaintiffs' first, second, and third amended claims based on the Sherman
Act and the Donnelly Act are dismissed with prejudice. The Court declines
to exercise supplemental jurisdiction over plaintiffs' fourth, fifth,
sixth, seventh, eighth, and ninth state law claims and those claims are
Defendants' motion for sanctions (Dkt. #29) is denied.
IT IS SO ORDERED.