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Consumers Warehouse Center, Inc. v. Intercounty Appliance Corp.

March 26, 2007

CONSUMERS WAREHOUSE CENTER, INC., PLAINTIFF,
v.
INTERCOUNTY APPLIANCE CORP. AND NECO ALLIANCE, LLC, DEFENDANTS.



The opinion of the court was delivered by: John Gleeson, United States District Judge:

MEMORANDUM AND ORDER

Defendants Intercounty Appliance Corporation ("Intercounty") and Neco Alliance LLP ("Neco") are cooperatives, or "buying groups," comprised of small and mid-size retailers of household appliances. By cooperating, member retailers are able to take advantage of certain economies of scale -- chief among them volume discounts offered by appliance manufacturers -- that would otherwise be available only to larger retailers. Plaintiff Consumers Warehouse Center ("CWC") brought this action after Intercounty and Neco denied CWC's applications for membership. This exclusion, the complaint alleges, constituted a concerted refusal to deal, or "group boycott," in per se violation of § 1 of the Sherman Act, 15 U.S.C. § 1. CWC seeks treble damages pursuant to § 4 of the Clayton Act, 15 U.S.C. § 15(a), and an injunction ordering Intercounty and Neco to grant its applications for membership.

Intercounty has moved to dismiss the complaint, arguing that CWC has failed to allege a per se violation of § 1 and, in any event, lacks antitrust standing to prosecute this case. Neco has joined that motion and argues additionally that the court has no personal jurisdiction over it. Oral argument was heard on the motions on May 12, 2006. For the reasons set forth below, the motions are denied.

BACKGROUND

The following facts are alleged in the complaint, which I must accept as true for the purpose of deciding this motion. CWC is a retailer of kitchen and bath furnishings on Long Island. Although it currently specializes in high-end brands of appliances, it would like to broaden its business to sell mid-level brands as well. To that end, CWC applied for membership in the Intercounty buying cooperative on August 16, 2005.

Intercounty's members are retailers of "mid-level appliances to the Long Island, New York market." Complaint ¶ 7. The complaint identifies three specific competitive advantages that cooperative members enjoy: (1) lower purchase prices on appliances, resulting from volume discounts offered by the mid-level appliance manufacturers; (2) maintenance of a shared warehouse facility, which allows for faster delivery of customer orders; and (3) access to "approved dealer" status from all major brands of mid-level appliances. Although individual cooperative members compete against each other for retail sales, these shared advantages allow members of Intercounty, as a group, "to dominate and control the Long Island mid-level appliance market," and it is impossible to compete in the Long Island retail market for mid-level appliances without Intercounty membership.*fn1

Unfortunately for CWC, its application was "voted down" by Intercounty. No reason was given for the denial. Thereafter, CWC applied for membership in Neco, which the complaint describes as a larger cooperative "comprised of a group of members, each of whom is engaged in the business of the sale of mid-level appliances ... in the northeastern part of the United States." Id. ¶ 9. Neco also denied CWC's application, as "Neco will only admit an individual dealer to membership if that dealer is admitted to membership in a local buying group or cooperative." Id. ¶ 10. In this way, "Neco is an aggregate of ... approximately five" individual buying groups in the northeast. Id. ¶ 11.

The complaint alleges Neco and Intercounty "engaged in joint activity" in denying CWC's applications, id. ¶ 28, with Intercounty acting both on its own behalf and "as agent for Neco," id. ¶ 35. CWC alleges there is "no reasonable ground upon which it should be denied membership" in Intercounty and Neco.

DISCUSSION

A. The Motion to Dismiss Standard

In considering a motion to dismiss under Rule 12(b)(1) or (6), a federal court is required to accept as true the factual assertions in the complaint and to make all reasonable inferences in favor of the plaintiff. Zinermon v. Burch, 494 U.S. 113, 118 (1990) (Fed. R. Civ. P. 12(b)(6)); Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir. 1998) (Fed. R. Civ. P. 12(b)(1)). The motion may not be granted "unless it appears beyond doubt . . . that the plaintiff can prove no set of facts which would entitle him to relief," Jaghory v. New York State Dep't of Educ., 131 F.3d 326, 329 (2d Cir. 1997) (internal quotation marks and citation omitted), because the question on a motion to dismiss "is not whether a plaintiff will ultimately prevail but, [rather,] whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). However, in order to survive a motion to dismiss, "the complaint must allege facts which, assumed to be true, confer a judicially cognizable right of action." York v. Ass'n of the Bar of New York, 286 F.3d 122, 125 (2d Cir. 2002), cert. denied, 537 U.S. 1089 (2002).

B. The Merits

Intercounty argues CWC has failed to state a per se violation of the Sherman Act and that, in any event, it lacks antitrust standing to prosecute the case at all. Neco argues it is not subject to the personal jurisdiction ...


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