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Emigra Group, LLC v. Fragomen

March 31, 2009

EMIGRA GROUP, LLC, PLAINTIFF,
v.
FRAGOMEN, DEL REY, BERNSEN & LOEWY, LLP, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Lewis A. Kaplan, District Judge

OPINION

Table of Contents

Facts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Immigration Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

The Background of the Dispute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

This Lawsuit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

The Antitrust Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

The Motion for Summary Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

1. The Theory of the Motion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

(a) The Section 2 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

(b) The Section 1 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

2. The Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

3. Emigra's Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

(a) The DuPuis Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

(b) The Flyer Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

I. The Law Governing Summary Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

A. General Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

B. S.D.N.Y. CIV. R. 56.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

II. The Section 1 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

A. Intra-enterprise Conspiracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

B. Vertical Restraint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

III. Monopolization and Attempted Monopolization -- Relevant Markets . . . . . . . . . 28

A. Cluster Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

B. TheBrown Shoe Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

1. Industry or Public Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . 36

2. Special Characteristics and Uses . . . . . . . . . . . . . . . . . . . . . . . . . 38

3. Distinct Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

4. Distinct Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

5. Sensitivity to Price Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

6. Specialized Vendors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

C. Conclusion - Market Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

IV. Monopolization and Attempted Monopolization -- Monopoly Power . . . . . . . . . 46

V. The Conspiracy to Monopolize Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

VI. The Rule 56(f) Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

A. Section 1 Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

B. The Service Submarket -- Market Definition . . . . . . . . . . . . . . . . . . . . . . 55

C. The Service Market -- Monopoly Power . . . . . . . . . . . . . . . . . . . . . . . . . 59

VII. The Pendent State Law Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

This is a dispute over the hiring by one competitor of an employee of another that has been dressed in the raiment of an antitrust case. The antitrust claims are the only basis of federal subject matter jurisdiction. The matter is before the Court on the defendants' motion for summary judgment dismissing the antitrust claims on the merits, thus sending the state law tort claims to state court.

Plaintiff has offered very little evidence in support of its allegations. It resists dismissal chiefly by contending that it is entitled to discover defendants' sensitive business information, purportedly to test the reliability of defendants' declarations.

Plaintiff's opposition to the motion rests on at least two fundamental misconceptions. First, it mistakenly asserts that it is defendants' burden to prove conclusively the negative of the allegations of the complaint. Second, it supposes, again wrongly. that summary judgment is categorically improper prior to discovery rather than something that is permissible in the perhaps rare appropriate case. After stripping away these mistaken views and carefully considering both the evidence of record and plaintiff's proposed discovery, the Court has concluded that there is no genuine issue of material fact, that plaintiff has not satisfied the requirements of Fed. R. Civ. P. 56(f) and therefore is not entitled to discovery, and that defendants are entitled to judgment as a matter of law. In other words, this is one of those unusual cases in which summary judgment prior to discovery is warranted.

Facts

The Parties

Plaintiff Emigra Group LLC ("Emigra") is a provider of business-related immigration services. It claims to offer a wide range of consultation in immigration matters, document procurement, consular processing, and related services to assist corporations in their movement of employees across national borders. Its business plan is to be a single source provider of immigration services for large corporations around the world.

The defendants are Fragomen, Del Rey, Bernsen & Loewy, LLP ("Fragomen LLP"), Fragomen, Del Rey, Bernsen & Loewy, LLP ("Fragomen II"), Fragomen Global LLP ("Fragomen Global"), Fragomen Global Immigration Services, LLC ("FGIS") (collectively, the "Fragomen Organization"), and Ryan Freel.

Fragomen LLP is a law firm headquartered in New York that specializes in providing legal advice and services concerning U.S. immigration laws to domestic and foreign clients, typically companies seeking to relocate foreign employees to the United States.*fn1 Fragomen Global is an intermediate holding company owned by the Class A equity partners of Fragomen LLP. It owns 93 percent of FGIS, which is a vehicle for providing information, guidance, and assistance to clients concerning the immigration requirements and procedures of various foreign countries. Thus, the Fragomen Organization offers immigration services with respect to persons seeking to enter the United States from abroad (inbound work) and to persons seeking to enter foreign countries (outbound work), the former principally through Fragomen LLP and the latter principally through FGIS. Defendants say that inbound work accounts for 80 to 85 percent of the revenues of the Fragomen Organization as a whole.

Immigration Services

Within the United States, immigration services generally are considered the practice of law and may be provided only by licensed attorneys or people working under their supervision. Outside the United States, some categories of immigration services are provided by non-lawyers, presumably in competition with lawyers.

There is no internationally uniform set of immigration laws and procedures. Even where regional or supra-national immigration arrangements exist, local implementation varies among member states. However, U.S. firms wishing to meet the outbound immigration needs of corporate clients need not maintain an office in every country where its clients might need to send employees. They can form alliances or working relationships with local firms in relevant foreign countries, enabling them to provide outbound services abroad without maintaining a physical presence in every potential foreign jurisdiction.

The Background of the Dispute

Defendant Ryan Freel is a lawyer who first worked for Fragomen LLP from August 1999, following his graduation from law school, until January 2005. On August 16, 2005, however, he began work at Emigra as its vice president of operations.

During his tenure at Emigra, Freel allegedly was a member of Emigra's highest management team. He reported to the chief executive officer and allegedly had access to all aspects of its business, trade secrets, and confidential information including, among other things, its strategies, customer lists, pricing, profit and loss data, and the like.

Freel resigned from Emigra on or about September 19, 2007, and returned to Fragomen on October 1, 2007. Emigra claims -- on "information and belief" -- that Freel disclosed Emigra confidential information to Fragomen and, after beginning work at Fragomen, began contacting certain Emigra customers on Fragomen's behalf.

This Lawsuit

Companies who feel that their trade secrets and confidential information are being betrayed by former employees hired by competitors typically file suit and promptly seek preliminary injunctions. Such controversies often are quickly resolved, at least on a preliminary injunction basis and often by accelerated plenary trial.*fn2 Emigra, however, did not follow that path.

It filed this action on November 29, 2007, about two months after Freel began work at Fragomen, and asserted the usual state law claims for misappropriation of trade secrets, unfair competition, and the like. But it did not seek a preliminary injunction. Rather, its complaint asserts also five antitrust claims relating principally to what Emigra claims are relevant markets for immigration services. As will appear, there is reason to believe that Emigra adopted this strategy at least in part to gain access through pretrial discovery to precisely the sort of competitively sensitive information about Fragomen's business that Emigra claims Freel improperly disclosed to Fragomen about Emigra's business. Defendants' motion therefore poses, among other questions to be sure, the issue whether Emigra should be permitted to gain that access by asserting antitrust claims rather than being remitted to state court to pursue its trade secret and unfair competition claims, matters as to which this Court lacks subject matter jurisdiction if there is no substantial federal question.

The Antitrust Claims

The amended complaint contains five antitrust claims:

* Count I alleges that the Fragomen Organization monopolized an alleged market for immigration services provided to corporations who are employers of U.S. citizens and/or foreign nationals (the so-called "Service Market") and an alleged submarket for business-related immigration services provided by single-source providers to large multinational corporations who are major employers of U.S. citizens and foreign nationals (the so-called "Service Submarket")*fn3 in violation of Section 2 of the Sherman Act.*fn4

* Count II alleges that two or more of the defendants have conspired to monopolize the Service Market and the Service Submarket,*fn5 also in violation of Section 2.

* Count III asserts that the Fragomen Organization has attempted to monopolize the Service Market and the Service Submarket,*fn6 also in violation of Section 2.

* Count IV contends that "[t]wo or more of the Defendants, not having complete common ownership (upon information and belief)," conspired to restrain trade and commerce in the Service Market and Service Submarket*fn7 in violation of Section 1 of the Sherman Act.*fn8

* Finally, Count V asserts that the Fragomen Organization violated Section 1 of the Sherman Act by entering into a vertical arrangement with Emigra's former vendor in Japan.*fn9

The Motion for Summary Judgment

At the initial Rule 16 conference, defendants asserted thatEmigra's antitrust claims -- the only basis of federal subject matter jurisdiction -- are not viable and indicated a desire to move for summary judgment dismissing those claims. The Court concluded that there was substantial doubt as to whether the case could survive such a motion and that full blown antitrust discovery perhaps would serve only to increase the cost of litigation ...


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