The opinion of the court was delivered by: Ambrose, District Judge.
OPINION and ORDER OF COURT
Pending before the Court is the Joint Motion of Defendants
Philip Morris Incorporated ("Philip Morris"), R.J. Reynolds
Tobacco Company ("R.J.Reynolds") and Brown & Williamson Tobacco
Corp. ("B & W") (collectively "the Defendants") to Dismiss the
Complaint filed against them by Plaintiff A.D. Bedell Wholesale
Company, Inc. ("Plaintiff") pursuant to Fed.R.Civ.P. 12(b)(6).
Plaintiff has brought a putative
class action against Defendants under § 1 and 2 of the Sherman
Act, 15 U.S.C. § 1 and 2, and § 7 of the Clayton Act,
15 U.S.C. § 18. The primary basis for the motion to dismiss is that "[a]s a
matter of law, plaintiff's Complaint fails to state a claim for
relief under the anti-trust laws" in that "plaintiff's claims are
barred in their entirety by either (or both) of two
closely-related antitrust immunity doctrines: the
Noerr-Pennington doctrine and the `state action' doctrine."
Defendants' Joint Memorandum of Law in Support of Their Motion to
Dismiss the Complaint ("Defendants' Supporting Brief"), p. 3.
Additionally, Defendants argue that Plaintiff's Third Claim for
Relief ("Count III"), which is brought only against Defendant
Philip Morris, must be dismissed for failure to state a claim
under § 7 of the Clayton Act upon which relief can be granted. An
amici curiae Brief in Support of the Defendants' Motion to
Dismiss has been filed by certain state Attorneys General, all
members of the Tobacco Committee of the National Association of
Attorneys General "to the extent that Plaintiff seeks to impose
antitrust liability upon the Defendants for the entering into
settlement agreements with the sovereign states, and acts taken
in compliance with the terms of such settlement agreements. Brief
of Amici Curiae State Attorneys General ("Amici Curiae Brief"),
p. 5.
In deciding a motion to dismiss, all factual allegations and
all reasonable inferences therefrom must be accepted as true and
viewed in the light most favorable to the plaintiff. Colburn v.
Upper Darby Tp., 838 F.2d 663, 666 (3d Cir. 1988), cert.
den'd, 489 U.S. 1065, 109 S.Ct. 1338, 103 L.Ed.2d 808 (1989). A
court may dismiss a plaintiff's complaint only if it appears
beyond doubt that the plaintiff can prove no set of facts in
support of his claims which would entitle him to relief. Conley
v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). In
ruling on a motion to dismiss for failure to state a claim, the
court looks to "whether sufficient facts are pleaded to determine
that the complaint is not frivolous, and to provide defendants
with adequate notice to frame an answer." Colburn, 838 F.2d at
666.
In November, 1998, the Defendants entered into a settlement
agreement (the "Master Settlement Agreement" or "MSA") with
forty-six (46) states and six (6) other United States
jurisdictions (collectively "the settling states") to settle
lawsuits brought or threatened by the settling states for
violation of their laws, including consumer protection and/or
antitrust laws. MSA, Section 1. Various officials of the settling
states (the attorney generals, governors, corporation counsel and
mayors) signed the Master Settlement Agreement "on behalf of
their respective Settling States." Id. The Master Settlement
Agreement was voluntarily entered into by each of the settling
states and the Defendants and is the result of arms-length
negotiations between the parties to the Agreement. The stated
reason for the settling states entering into the M.S.A. § was
because "the undersigned Settling State officials believe that
entry of this Agreement . . . with the tobacco industry is
necessary in order to promote the Settling States' policies
designed to reduce Youth smoking, to promote the public health
and to secure monetary payments to the Settling States." MSA,
Section 1.
SUMMARY OF PLAINTIFF'S CLAIMS AGAINST THE DEFENDANTS
Count I of Plaintiff's Complaint alleges a violation of § 1 of
the Sherman Act. More specifically, Count I of the Plaintiff's
Complaint alleges that the Renegade Clause of the Master
Settlement Agreement and the $50 million enforcement fund were
made part of the Master Settlement Agreement by the Defendants as
part of a conspiracy to prevent competition at a discount level
by existing SPMs and nonparticipating manufacturers ("NPMs") and
potential new entrants to the cigarette sales market and to raise
and maintain the price of cigarettes in the U.S. cigarette market
at artificially high levels. Thus, Plaintiff argues, the Master
Settlement Agreement on its face sets forth a classic horizontal
conspiracy to restrict output, allocate market shares and raise
prices between three competitors having nearly 90% of the market.
In Count I, Plaintiff also alleges that the acts committed by the
Defendants in furtherance of their unlawful conspiracy included
the payment by Philip Morris to Liggett, a tobacco manufacturer
and then a NPM in the MSA, of $300 million for the sale of three
relatively insignificant brands of cigarettes which was
conditioned upon Liggett signing the Master Settlement Agreement
and the pressuring by the Defendants, through their own attorneys
and indirectly through the NAAG and its private attorneys, of the
few remaining small competitors to join the Master Settlement
Agreement.
Count II of Plaintiff's Complaint alleges a violation of § 2 of
the Sherman Act. More particularly, in Count II of the Complaint,
Plaintiff alleges that the above-described alleged acts and
agreements by the Defendants constitute a conspiracy in
furtherance of Philip Morris' monopolization of the U.S.
cigarette market in violation of § 2 of the Sherman Act in that
the agreements and the acts taken in furtherance of the
agreements were specifically intended to exclude and have in fact
excluded meaningful price competition in the United States
domestic cigarette market. Plaintiff further alleges in Count II
that the acts of Philip Morris constitute monopolization and
attempted monopolization of the U.S. cigarette market; that
Philip Morris has and has had the specific intent to monopolize
the U.S. cigarette market; and that there is a reasonable
probability that it has or soon will have attained monopoly power
in the U.S. cigarette market.
Count III of Plaintiff's Complaint alleges a violation of § 7
of the Clayton Act against Defendant Philip Morris only. More
specifically, Plaintiff alleges that Philip Morris paid Liggett
to join the Master Settlement Agreement to remove Liggett as a
competitive threat. Specifically, Plaintiff alleges that on
November 20, 1998, three (3) days after the Master Settlement
Agreement was signed, Philip Morris purchased three brands of
premium cigarettes from Liggett which constituted about
two-thirds of the 2% of the overall domestic cigarette market
that were sold by NPMs (or 0.2% of the domestic cigarette market)
in exchange for Liggett's agreement to become a SPM in the MSA.
Plaintiff further alleges that this acquisition would constitute
a purchase of assets illegal under § 7 of the Clayton Act in that
its effect may be, and has been, to substantially lessen
competition and to further or create a monopoly in the sale of
domestic cigarettes. Plaintiff argues that until that time
Liggett was a NPM and although NPMs comprised only approximately
2% of the overall domestic cigarette market, they represented a
clear and present danger of price competition. Liggett
sales made up about two-thirds of that 2% and therefore,
Plaintiff argues, having Liggett join the Master Settlement
Agreement was a necessary step to eliminating virtually all price
competition with the domestic tobacco market.
A. Counts I and II: Sherman Act claims.
1. Application of Noerr-Pennington ...