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HEWLETT-PACKARD CO. v. ARCH ASSOCS. CORP.

December 7, 1995

HEWLETT-PACKARD COMPANY
v.
ARCH ASSOCIATES CORPORATION, et al.



The opinion of the court was delivered by: JOYNER

 JOYNER, J.

 DECEMBER 7, 1995

 Plaintiff, Hewlett-Packard Company (HP), asks this Court to dismiss Defendant Arch Associates Corporation's Amended Counterclaims against HP for failure to state claims upon which relief can be granted. These Counterclaims allege violations of sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1-7 (1973), the Robinson-Patman Act, 15 U.S.C. § 13 (1973) and state common law, including negligent and/or intentional misrepresentation and unjust enrichment.

 STANDARD OF REVIEW

 In considering a Rule 12(b)(6) motion, a court must primarily consider the allegations contained in the complaint, although matters of public record, orders, items appearing in the record of the case and exhibits attached to the complaint may also be taken into account. Chester County Intermediate Unit v. Pennsylvania Blue Shield, 896 F.2d 808, 812 (3d Cir. 1990). The Court must accept as true all of the allegations in the pleadings and must give the plaintiff the benefit of every favorable inference that can be drawn from those allegations. Schrob v. Catterson, 948 F.2d 1402, 1405 (3d Cir. 1991); Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir. 1990). A complaint is properly dismissed only if it appears certain that the plaintiff cannot prove any set of facts in support of its claim which would entitle it to relief. Ransom v. Marrazzo, 848 F.2d 398, 401 (3d Cir. 1988).

 FACTUAL BACKGROUND

 According to Arch's Counterclaim, HP produces a broad range of electronic instruments and systems for measurement, analysis and computation, including personal printers for computers. The sale and distribution of HP's printers is the subject matter of this litigation. Arch, which was an authorized dealer of HP printers from 1985 to 1991, alleges that HP sells its printers to two types of resellers: aggregators and dealers. Aggregators are companies that purchase directly from HP and resell to authorized dealers, other resellers and consumers. Dealers purchase either from HP or from aggregators and resell to consumers, other dealers or other resellers. It is evident, therefore, that aggregators and dealers compete directly in several markets.

 In 1989, HP allegedly determined to modify its distribution system to increase sales through aggregators and decrease sales through dealers. As part of that change, HP instituted a promotional program known as the Co-op Advertising Program. Through this program, aggregators and dealers are able to receive credits (Co-op Credits) to their promotional account with HP if they submit supporting documentation for their claims.

 According to Arch, however, HP determined to secretly assist aggregators by giving them, and not dealers, cash rebates without the need for supporting documentation for their claims. In addition, HP has also restricted the geographic territory in which dealers can sell and has raised its minimum buying levels to force small dealers to buy from aggregators rather than HP directly. Arch charges that these and other acts tend to destroy competition.

 In 1990, HP audited Arch and obtained its customer lists. In 1991, HP deauthorized Arch and contacted Arch's customers to tell them not to deal with Arch anymore. Further, HP engaged in other conduct directed at harming Arch, for example, telling other dealers that Arch had submitted Co-op Credit claims for two fictitious customers.

 DISCUSSION

 1. SECTION ONE OF THE SHERMAN ACT

 Section 1 of the Sherman Act "prohibits every contract, combination or conspiracy in restraint of trade." Fuchs Sugars & Syrups v. Amstar Corp., 602 F.2d 1025, 1029 (6th Cir.), cert. denied, 444 U.S. 917, 100 S. Ct. 232, 62 L. Ed. 2d 172 (1979); Alvord-Polk, Inc. v. F. Schumacher & Co., 37 F.3d 996, 999 (3d Cir. 1994), cert. denied, 115 S. Ct. 1691, 131 L. Ed. 2d 556 (1995). Accordingly, to state a § 1 claim, a plaintiff must plead that the defendant contracted, combined or conspired with another entity or entities, that the concerted action produced adverse anti-competitive effects within the relevant product and geographic markets and that the plaintiff suffered antitrust injury as the proximate result of the concerted action. J.F. Feeser, Inc. v. Serv-a-Portion, Inc., 909 F.2d 1524, 1541 (3d Cir. 1990), cert. denied, 499 U.S. 921, 111 S. Ct. 1313, 113 L. Ed. 2d 246 (1991); Martin B. Glauser Dodge Co. v. Chrysler Corp., 570 F.2d 72, 81 (3d Cir. 1977), cert. denied, 436 U.S. 913, 98 S. Ct. 2253, 56 L. Ed. 2d 413 (1978). HP contends that Arch has not adequately pleaded any of these elements.

 A. Concerted Activity

 HP's first objection to Arch's § 1 claim is that Arch does not adequately allege concerted activity. HP points out that throughout Arch's pleading HP is referred to as acting secretly and alone, with the exception of a smattering of references to HP acting in concert with certain of its authorized distribution network. HP asserts that Arch cannot state a claim with unnamed conspirators and conclusory statements. *fn1"

 We find that Arch's pleading is sufficient. The pleading alleges that HP combined with certain members of its distribution network. This network is a finite group whose members can be determined through discovery. Further, the subject matter of the alleged contracts is sufficiently identified by the pleading. Cf. Garshman v. Universal Resources Holding Inc., 824 F.2d 223, 230 (3d Cir. 1987) (complaint dismissed when neither co-conspirators, contracts nor unlawful acts were specified); but see American Health Sys. v. Crozer-Keystone Health Sys., 1993 U.S. Dist. LEXIS 18060, 93-0543, 1993 Westlaw 533102 at *2 (E.D. Pa. Dec. 21, 1993) (although co-conspirators unnamed, pleading specific enough to permit a responsive pleading).

 HP's second objection is that Arch has failed to allege that HP's purported actions are contrary to HP's interests absent a conspiracy. This, it asserts, is essential to a § 1 claim. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). HP alleges that its conduct, as described in Arch's Counterclaim, is fully consistent with its own self-interest and therefore, no inference of a conspiracy can be found.

 In fact, HP argues that Arch's own pleading demonstrates that it acted legally. HP contends that manufacturers are free to distribute their products in any legal manner and that a mere change in distribution systems does not state an antitrust claim. H.J., Inc. v. ITT, 867 F.2d 1531, 1544-45 (8th Cir.), reh'g denied, 876 F.2d 59 (1989); Fuchs, 602 F.2d at 1030. This is so even if a manufacturer threatens a distributor with termination if it does not cooperate. Id. ; International Logistics Group v. Chrysler Corp., 884 F.2d 904, 907 (6th Cir. 1989), cert. denied, 494 U.S. 1066, 110 S. Ct. 1783, 108 L. Ed. 2d 784 (1990). A manufacturer has the right to deal or not deal with whomever the manufacturer chooses. Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 760, 104 S. Ct. 1464, 79 L. Ed. 2d 775 (1984); United States v. Colgate & Co., 250 U.S. 300, 307, 39 S. Ct. 465, 63 L. Ed. 992 (1919). HP professes that because it can choose with whom to deal, it cannot have violated antitrust laws by deauthorizing Arch.

 In turn, Arch declares that HP's arguments are more suited to a motion for summary judgment, not one to dismiss. It argues that evidence as to self-interest is only relevant when addressing the merits of a claim. Further, it asserts, self-interest is only relevant in a "conscious parallelism" case, which this is not. Schoenkopf v. Brown & Williamson Tobacco Corp., 637 F.2d 205, 207-08 (3d Cir. 1980).

 While Arch agrees that a manufacturer generally can wholly abandon one distribution system in favor of another, can deauthorize dealers at will and take other similar actions, it insists that a manufacturer cannot take those actions if in addition, "the manufacturer attempts to exact some collateral anti-competitive advantage." Monsanto, 465 U.S. at 760; Fuchs, 602 F.2d at 1030. Arch maintains that its Counterclaim sufficiently alleges that HP acted in concert with others to coerce its resellers from selling outside of designated markets and threatened Arch with loss of ...


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