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Univac Dental Co. v. Dentsply International

March 14, 2008

UNIVAC DENTAL COMPANY, PLAINTIFF
v.
DENTSPLY INTERNATIONAL, INC., DEFENDANTS



The opinion of the court was delivered by: Judge Conner

MEMORANDUM

Plaintiff Univac Dental Company ("Univac") brings this antitrust action pursuant to § 2 of the Sherman Act, 15 U.S.C. § 2 and Pennsylvania common law, alleging that defendant Dentsply International ("Dentsply") monopolized the market for artificial teeth. Dentsply has filed a motion to dismiss (Doc. 14) the complaint for failure to file suit within the applicable limitations period. For the reasons that follow, the motion will be denied.

I. Statement of Facts*fn1

Univac and Dentsply are competitors in the market for artificial teeth. (Doc. 1 ¶ 10.) Dentsply controls approximately seventy-five percent of the market, and Univac has a market share of two percent. (Id. ¶ 20.) The present suit arises from Dentsply's alleged attempts to exercise monopolistic power in the market during the early- and mid-1990s. (Id. ¶¶ 21-34.)

For reasons unspecified in the complaint, most artificial teeth are distributed through manufacturers' direct sales to wholesale dealers, which resell them to dental laboratories that assemble consumer dental products. (Id. ¶ 13.) In 1993, Dentsply issued a set of mandatory guidelines, known as Dealer Criteria, for dealers distributing Dentsply teeth. (Id. ¶ 26.) One of these guidelines, Dealer Criterion 6, required dealers to enter exclusivity relationships with Dentsply and forbade them from adding product lines of Dentsply's competitors to their inventories. (Id.) It exempted competing product lines carried by dealers at the time of its issuance but applied prospectively to future product lines. (Id.) Dentsply's avowed purpose in issued Dealer Criterion 6 was to "block competitive distribution points" and "[t]ie up dental products dealers." (Id. ¶ 27 (alteration in original)).

Dentsply allegedly engaged in a variety of anticompetitive conduct incident to its implementation of the Dealer Criteria. It threatened to withhold sales from dealers that continued to offer competing manufacturers' products not exempted by Dealer Criterion 6, and it purchased or exchanged dealers' inventories of competing products. (Id. ¶¶ 28-29, 31-33.) Dentsply dealers also agreed that they would replace depleted stocks of competitors' products with Dentsply teeth. (Id. ¶ 34.) Dentsply often used promotions involving free teeth to obtain these results. (Id.) Finally, it attempted to leverage sales of dental caulk to coerce dealers to carry exclusively Dentsply teeth. (Id. ¶ 42.)

Univac contends that in 1994 Dentsply threatened to restrict sales of its teeth to a Connecticut dealer unless the dealer ceased carrying Univac's products. (Id. ¶ 29.) It also alleges that on two unspecified instances Dentsply purchased dealers' supplies of its products in exchange for exclusive dealing relationships. (Id. ¶¶ 32-33.) It contends that these and other anticompetitive practices caused prices of its products to plummet and its selling and advertising costs to increase. (Id. ¶ 35.) Dealer Criterion 6 allegedly foreclosed Univac's access to wholesale dealers and required it to pursue less efficient, more costly distribution methods such as drop shipments*fn2 and direct sales to laboratories. (Id.) Dentsply's extensive control over the dealer network in the market for artificial teeth rendered Univac unable to distribute its teeth competitively. (Id. ¶ 39.) Univac eventually divested components of the company that directly competed with Dentsply due to unprofitability. (Id. ¶ 35)

In January 1999, the U.S. Department of Justice instituted an antitrust action against Dentsply, alleging that its conduct violated the Sherman Act's prohibition on monopolization, 15 U.S.C. § 2. See (id. ¶ 44); United States v. Dentsply Int'l, Inc., 277 F. Supp. 2d 387, 390 (D. Del. 2003). The district court found that Dentsply had not violated the Sherman Act, and an appeal to the United States Court of Appeals for the Third Circuit followed. See United States v. Dentsply Int'l, Inc., 399 F.3d 181 (3d Cir. 2005). The Third Circuit reversed, finding that Dentsply's aggressive market-control strategies, including Dealer Criterion 6, violated § 2 of the Sherman Act. See id. at 196. The proceedings brought by the government closed on April 26, 2006, when the district court entered final judgment against Dentsply. See United States v. Dentsply Int'l, Inc., No. Civ. A. 99-005, 2006 WL 2612167, at *5 (D. Del. Apr. 26, 2006).

Univac commenced the instant action on March 15, 2007, demanding recovery for antitrust injuries suffered as a result of Dentsply's anticompetitive conduct and contending that the Clayton Act, 15 U.S.C. § 16(i) tolled the four-year statute of limitations during the pendency of the government proceedings. Dentsply filed a motion to dismiss, arguing that Univac's complaint is time-barred and fails to allege a substantive antitrust claim. The parties have fully briefed these issues, and Dentsply's motion is ripe for disposition.

II. Standard of Review

Rule 12(b)(6) of the Federal Rules of Civil Procedure provides for the dismissal of complaints that fail to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). When ruling on a motion to dismiss under Rule 12(b)(6), the court must "accept as true all factual allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view them in the light most favorable to the plaintiff." Kanter v. Barella, 489 F.3d 170, 177 (3d Cir. 2007) (quoting Evancho v. Fisher, 423 F.3d 347, 350 (3d Cir. 2005)). Although the court is generally limited in its review to the facts in the complaint, it "may also consider matters of public record, orders, exhibits attached to the complaint and items appearing in the record of the case." Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 n. 2 (3d Cir. 1994); see also In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997).

Federal notice pleading rules require the complaint to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Sershen v. Cholish, No. 3:07-CV-1011, 2007 WL 3146357, at *4 (M.D. Pa. Oct. 26, 2007) (quoting Erickson v. Pardus, --- U.S. ---, 127 S.Ct. 2197, 2200 (2007)). The plaintiff must present facts that, if true, demonstrate a plausible right to relief. See FED. R. CIV. P. 8(a) (stating that the complaint should include "a short and plain statement of the claim showing that the pleader is entitled to relief"); Bell Atl. Corp. v. Twombly, ---U.S. ---, 127 S.Ct. 1955, 1965 (2007) (requiring plaintiffs to allege facts sufficient to "raise a right to relief above the speculative level"); Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007). Thus, courts should not dismiss a complaint for failure to state a claim if it "contain[s] either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory." Montville Twp. v. Woodmont Builders LLC, No. 05-4888, 2007 WL 2261567, at *2 (3d Cir. 2007) (quoting Twombly, --- U.S. at ---, 127 S.Ct. at 1969). Under this liberal pleading standard, courts should generally grant plaintiffs leave to amend their claims before dismissing a complaint that is merely deficient. See Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002); Shane v. Fauver, 213 F.3d 113, 116-17 (3d Cir. 2000).

III. Discussion

Dentsply moves for dismissal of Univac's complaint on two grounds. It contends that Univac filed its complaint after expiration of the limitations period applicable to its federal and state claims. Alternatively, it argues that the ...


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