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Cable Line, Inc. v. Comcast Cable Communications of Pennsylvania, Inc.

United States District Court, M.D. Pennsylvania

October 18, 2017

CABLE LINE, INC. and MCLAUGHLIN COMMUNICATIONS INC. Plaintiffs,
v.
COMCAST CABLE COMMUNICATIONS OF PENNSYLVANIA, INC., et al., Defendants.

          MEMORANDUM OPINION

          Robert D. Mariani United States District Judge

         I. Introduction and Procedural History

         Plaintiffs are cable installation companies that were former subcontractors of Comcast Cable Communications of Pennsylvania, Inc. ("Comcast"). They have brought suit against Comcast and two other cable installation subcontractors for violations of the Sherman Act and related state antitrust laws, as well as an employment discrimination claim.

         All three defendants moved to dismiss Plaintiffs original complaint on July 29, 2016 and August 1, 2016. Docs. 31, 33, 36. Plaintiffs filed an Amended Complaint on September 14, 2016 with additional allegations, though the claims remained substantively the same. Doc. 41. Defendants then moved to dismiss all counts of the Amended Complaint on October 14, 2016. Docs. 48, 50, 52. For reasons stated below, this Court will grant Defendants' motions to dismiss the claims without prejudice, but with leave to file a Second Amended Complaint.

         II. Factual Allegations

         Plaintiffs are cable installation companies incorporated in Pennsylvania. Doc. 41 ¶¶ 1, 2. Comcast is a cable television company and an internet service provider. Id. ¶ 10. In order to provide cable and internet services to its customers, Comcast subcontracts with cable installation companies, such as plaintiffs, to install and maintain cable fibers and related devices in customer homes. Id. ¶ 11. Plaintiffs, along with co-defendants Decisive Communications ("Decisive") and Vitel Communications ("Vitel"), have all competed for Comcast's business in the past. Id. ¶ 15. In 2010, plaintiffs, Vitel, and Decisive were all selected by Comcast to provide cable installation service after a competitive process. Id. ¶ 16. In particular, Plaintiffs were awarded contracts with Comcast to provide cable installation services in parts of Pennsylvania, Maryland, Virginia, and West Virginia. Id. ¶¶ 16-22. Comcast then advised its selected subcontractors to "ramp up" operations in order to prepare for incoming installation work. Id. ¶ 24. Plaintiffs understood that Comcast had solicited cable installation firms to work for at least three years. Id. ¶ 34.

         However, two years after it hired plaintiffs, Comcast initiated a "national subcontractor reduction plan" that called for a reduction of Comcast's cable installation subcontractors from 176 firms to 39 firms nation-wide. Id. ¶¶ 27, 28. Plaintiffs were among the firms that were terminated. Id. ¶ 33. They were notified of the decision by letter in February 2012, though the termination was not "formalized" until May 2012. Id. In making the decision as to which subcontractors which would be terminated, Comcast allegedly chose to only work with the larger subcontractors such as Decisive and Vitel, who were purportedly underbilling Comcast by not acknowledging invoices, not billing for service calls, and falsifying performance metrics. Id. ¶¶ 29-31. Specifically, Plaintiffs allege that "larger companies, such as Defendants Decisive, could view and change the information stored in [Comcast's internal system]" and that Decisive deleted its number of service calls in the system, i.e. "truck roll" reports. Id. ¶¶ 80-82. Thus, larger companies like Decisive and Vitel "gained a competitive advantage" by underreporting "truck rolls, " absorbing the immediate expenses, and thereby seeming cheaper to Comcast and giving the impression of better service quality. Id. ¶¶ 92, 93. Decisive and Vitel also allegedly encouraged Comcast's customers to call them directly about service issues instead of calling Comcast, therefore making their performance appear better to Comcast. Id. ¶¶ 87, 89. Plaintiffs further allege that Comcast "knew" about these practices by Vitel and Decisive, but did not do anything about them because it resulted in Comcast not having to reimburse Vitel and Decisive for service calls. Id. ¶ 99. Finally, they allege that when Comcast initiated the subcontractor reduction plan, it made a "preliminary determination" on February 28, 2012 to terminate Vitel and Decisive. Id. ¶ 104. However, executives at Comcast "intervened to keep Decisive and Vitel" so that they can "profit[] without producing good results." Id. ¶ 105.

         Separately, plaintiffs allege that Comcast "had an extra motive for working with Vitel, despite [its] spotty record, " because it was classified as "diverse." Id. ¶ 108. Comcast has committed to developing more "diverse" cable content and at least ten minority-owned cable channels by 2019. Id. ¶ 110. Comcast is allegedly "struggling" with its efforts to develop content by minority artists, and has thus turned its focus on "boosting minority participation in other segments" such as the hiring of its cable installation subcontractors. Id. ¶ 113. Plaintiffs allege that one of the reasons Vitel was kept on by Comcast was that it happened to be "tracked as diverse, [while] plaintiffs were not." because they are Caucasian-owned and operated. W. ¶¶ 118, 119.

         After their termination, plaintiffs were forced to lay off their workers and liquidate their inventory. Id. ¶ 36. Some of plaintiffs' equipment was sold to Decisive and Vitel for "pennies on the dollar, " while their former employees were recruited by Decisive and Vitel. Id. ¶¶ 36-45. Plaintiffs allege that Comcast "informed Defendants Vitel and Decisive that Plaintiffs had been terminated before it informed Plaintiffs, in order to give [them] a chance to recruit [plaintiffs'] trained technicians, " and they did so "just before Plaintiffs received their termination letter." Id. ¶¶ 44, 45. Plaintiffs allege that Comcast did so in order to "eliminate smaller companies and competitors to Vitel and Decisive." Id. ¶ 48. Between February 28, 2012 to May 27, 2012, Vitel and Decisive were allegedly able to work with Comcast to "consolidate] the market for cable installation in specific municipalities in Pennsylvania, West Virginia, Virginia, and Maryland." Id. ¶ 52. Plaintiffs allege that as a result of the consolidation, there has been a decrease in quality of cable installation service, id. ¶ 52, because smaller companies like plaintiffs were more familiar with rural territories and could service such communities better. Id. ¶¶ 64-66. Plaintiffs also allege that the reduction plan "flatten[ed] wage rates and employment choices for individual installers, " though it is unclear from the Amended Complaint how that effect came to be. Finally, plaintiffs allege that cable services and equipment costs for consumers had increased "nationally" since their termination. Id. ¶¶ 57, 58.

         III. Standard of Review

         A complaint must be dismissed under Federal Rule of Civil Procedure 12(b)(6) if it does not allege "enough facts to state a claim to relief that is plausible on its face." Bell All. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009).

         "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief requires more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do." Twombly, 550 U.S. at 555 (internal citations and alterations omitted). "[T]he presumption of truth attaches only to those allegations for which there is sufficient 'factual matter' to render them 'plausible on [their] face'...Conclusory assertions of fact and legal conclusions are not entitled to the same presumption." Schuchardt v. President of the United States, 839 F.3d 336, 347 (3d Cir. 2016) (citing Iqbal, 556 U.S. at 679, 129 S.Ct. 1937).

         "Although the plausibility standard 'does not impose a probability requirement, ' it does require a pleading to show 'more than a sheer possibility that a defendant has acted unlawfully.'" Connelly v. Lane Const. Corp., 809 F.3d 780, 786 (3d Cir. 2016) (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 and Iqbal, 556 U.S. at 678, 129 S.Ct. 1937). "The plausibility determination is 'a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'" Id. at 786-87 (citing Iqbal, 556 U.S. 679, 129 S.Ct. 1937).

         IV. Analysis

         A. Plaintiffs Have Failed to Adequately Plead Antitrust Standing

         Plaintiffs assert an antitrust claim under Section 1 of the Sherman Act. The text of Section 1 of the Sherman Act is broad in scope, prohibiting "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States." 15 U.S.C. § 1. However, the Supreme Court has instructed that Section 1 prohibits only "unreasonable" restraints of trade. Standard Oil Co. v. United States, 221 U.S. 1, 58, 31 S.Ct. 502, 55 L.Ed. 619 (1911). See also United States v. Brown Univ., 5 F.3d 658, 668 (3d Cir.1993). To establish a violation under Section 1, a plaintiff must prove: (1) concerted action by the defendants; (2) that produced anti-competitive effects within the relevant product and geographic markets; (3) that the concerted actions were illegal; and (4) that it was injured as a proximate result of the concerted action." Gordon v. Lewistown Hosp., 423 F.3d 184, 207 (3d Cir. 2005).

         Before delving into the elements of Section 1 of the Sherman Act however, plaintiffs must establish that they have "antitrust standing." City of Pittsburgh v. West Penn Power Co., 147 F.3d 256, 264 (3d Cir. 1998). The term "antitrust standing" should not be confused with the constitutional requirement of Article III standing. See In re Wellbutrin XL Antitrust Litig. Indirect Purchaser Class, 868 F.3d 132, 163-64 (3d Cir. 2017). In antitrust law, the standing requirement "goes beyond the Constitutional standing requirement of 'injury in fact' and is not satisfied by the mere allegation of a causal connection between an alleged antitrust violation and harm to the plaintiff." Caldon, Inc. v. Advanced Measurement & Analysis Grp., Inc., 515 F.Supp.2d 565, 575 (W.D. Pa. 2007) (internal citations omitted). Instead, causation in an antitrust suit "requires a showing that the defendants' antitrust violation was both a 'but for' cause of the injury, and that it was the proximate cause." Id. (citing Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992)).

         The Third Circuit has set forth a multifactor test in analyzing antitrust standing:

"(1) the causal connection between the antitrust violation and the harm to the plaintiff and the intent by the defendant to cause that harm, with neither factor alone conferring standing; (2) whether the plaintiffs alleged injury is of the type for which the antitrust laws were intended to provide redress; (3) the directness of the injury, which addresses the concerns that liberal application of standing principles might produce speculative claims; (4) the existence of more direct victims of the ...

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