Contractor Tool Supply, Inc. v. JPW Industries, Inc.

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA OCALA DIVISION CONTRACTOR TOOL SUPPLY, INC., Plaintiff, v. Case No. 5:24-cv-347-JA-PRL JPW INDUSTRIES, INC., Defendant. ORDER This case is before the Court on Defendant’s motion to dismiss (Doc. 16) and Plaintiffs amended response (Doc. 23). Based on the Court’s review of the parties’ submissions, the motion must be granted. I, BACKGROUND Plaintiff, Contractor Tool Supply, Inc. (CTS), is a distributor of specialized woodworking and metalworking tools alleging unlawful trade practices by a prominent manufacturer of those tools Defendant, JPW Industries, Inc. (JPW). (Compl., Doc. 2). JPW manufactures several brands of specialty tools including the brands Axiom, Baileigh, Edwards, J ET, Powermatic, and Wilton—and CTS was among its top distributors for years. (Id. {{ 11-13, 39). As a distributor, CTS’s business model is to purchase tools directly from manufacturers such as JPW and resell them through its brick-and-mortar store location, its onlin store, and its Vera Tools Storefront on Amazon.com. Ud. 4 18, 21-24). JPV granted CTS “Preferred Vendor Status” in the autumn of 2021, meaning tha JPW agreed to provide CTS with favorable trading terms so long as CTS me certain volume requirements. (dd. {| 32). The relationship initially □□□□□□ successful, and CTS became the third largest source of sales for JPW. (Id 7 35-39). In an effort to “protect the reputation and value” of its brands, JPV instituted a Minimum Advertised Price (MAP) policy, meaning that resellers o JPW’s tools were prohibited from advertising those tools for sale below a price point defined by JPW. (Id. 44] 26-27; Doc. 16-1 at 3). The MAP policy is referenced in the Complaint and attached as an exhibit to JPW’s motion (Compl. 9] 55, 57, 84; Doc. 16-1). In light of the pleadings and the parties briefings on the motion to dismiss, the Court finds the MAP policy is “(1) central to the plaintiffs claims[] and (2) undisputed, meaning that its authenticity is not challenged.” Johnson v. City of Atlanta, 107 F.4th 1292, 1300 (11th Cir. 2024). It therefore may be considered at this stage of the case. See id. at 1300Ql. As relevant here, the MAP policy provides as follows: The use of any language on the digital space to direct the customer to the shopping cart for actual selling price is limited to: “We offer the best prices”, “Call for Price”, “Call with any questions”, “Call for additional questions related to the product”... . Unacceptable language can be defined as “Price too low to display” “See Price in Cart”, “Add to Shopping Cart to See Price”, etc., and are all violations of the MAP policy. (Doc. 16-1 at 4). Nevertheless, CTS employed an “aggressive marketing strategy on Amazon. (Compl. § 44). For customers not logged into an □□□□□□ account who searched for a tool covered under the MAP policy, CTS listed nx price at all and instead prompted the customer to see the price displayed in ths online shopping cart. (Id. § 29). And for customers logged into an Amazor account CTS advertised the price set by the MAP policy but provided a lowe: price once the customer added the item to their online shopping cart. (Id. J 28) Even though CTS is permitted to sell JPW’s brands of tools on Amazon’s website, Amazon itself also sells JPW’s tools and is therefore a competitor of! CTS. Ud. J 25). Amazon allegedly became frustrated by CTS’s sales tactics, and Amazon’s representatives met with JPW to discuss ways “to prevent CTS from selling in a manner that put pressure on Amazon and J PW’s margins.” (Id. {| 46). Amazon and JPW allegedly agreed that JPW would “charge new fees to CTS that were not imposed on Amazon and other distributors[] and prevent CTS from selling JPW’s products at prices lower than the advertised prices.” (Id. { 47). Based on this alleged agreement with Amazon, JPW’s representatives sent CTS email correspondence on March 11, 2024, stating that: (1) CTS’s “Price in Cart” discounts violate the MAP policy; (2) additional fees for credit card payments would be imposed; (3) rebate to sales generated through CTS’s brick and-mortar store would be limited; (4) JPW would adjust rebates and sales goal for CTS; (5) CTS should strive to generate less than five percent of its sale through Amazon; (6) CTS’s Amazon storefront should be managed by JPW’ eCommerce team; and (7) CTS should not sell or stock through Amazon. (Id |] 55-63). CTS rejected these proposed terms and JPW thereafter ceased fillins CTS’s orders for its products. (Id. {| 64-65). CTS alleges that the agreement between JPW and Amazon and the enforcement of the MAP policy constitute unreasonable restraints on trade. Tx that end, it seeks damages and injunctive relief under the Sherman Act, □□ U.S.C. § 1 (Count II); the Robinson-Patman Act, 15 U.S.C. § 18 (Count IID; the Florida Deceptive and Unfair Trade Practices Act, §§ 501.201-501.213, Florids Statutes (Count IV); and the Florida Antitrust Act, § 542.18, Florida Statute: (Count V).1 II. LEGAL STANDARD “A pleading that states a claim for relief must contain... a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “[D]etailed factual allegations” are not required, but “[a] pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the 1 CTS is no longer pursuing Count I for breach of contract. (Doc. 22). elements of a cause of action will not do.” Ashcroft v. Iqbal, 566 U.S. 662, 67 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “T survive a [Rule 12(b)(6)] motion to dismiss, a complaint must contain sufficien factual matter, accepted as true, to “state a claim to relief that is plausible o: its face.” Id. (quoting Twombly, 550 U.S. at 570 ). In considering a motion t dismiss brought under Rule 12(b)(6), a court limits its “consideration to the well pleaded factual allegations, documents central to or referenced in the complaint and matters judicially noticed.” LaGrasta v. First Union Sec., Inc., 358 F.3¢ 840, 845 (11th Cir. 2004). III. DISCUSSION A. Sherman Act Claim Section one of the Sherman Act makes unlawful “[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 . This section “applies both to agreements between companies that directly compete with one another, called ‘horizontal’ agreements, and to agreements between businesses operating at different levels of the same product’s production chain or distribution chain, known as ‘vertical’ agreements.” Spanish Broad. Sys. of Fla., Inc. v. Clear Channel Comme'ns, Inc., 376 F.3d 1065, 1071 (11th Cir. 2004). “The elements of a [Sherman Act] claim are that: ‘1) a conspiracy exists between two or more entities and 2) the conspiracy unreasonably restrains trade.” Tucci v. Smoothie King Franchises, Inc., 215 F. Supp. 2d 1295, 1300 (MLD. Fla. 2002) (quotin Boczar v. Manatee Hosp. & Health Sys., Inc., 731 F. Supp. 1042, 1046 (M.D. Fle 1990)). Despite the sweeping language of § 1, “the Supreme Court' interpretation of the [Sherman] Act indicates that many forms of concerte action are to be evaluated under a flexible, case-by-case standard: the so-calle ‘rule of reason.”2 Jacobs v. Tempur-Pedic Inti, Inc., 626 F.3d 1327, 1333 (1111 Cir. 2010) (citing Standard Oil Co. v. United States, 221 U.S. 58, 62 (1911)) Vertical price restraints like the one alleged here are subject to the rule o reason. See Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 890 (2007). 1, Vertical Resale Price Maintenance The crux of CTS’s Sherman Act claim is that JPW conspired with Amazor to vertically fix prices. CTS alleges that JPW’s MAP policy and the conditions set forth in Defendant’s March 11, 2024 email amount to a “resale price maintenance” scheme, (Compl. { 57), defined as “ [a] form of price-fixing in which a manufacturer forces or persuades several different retailers to sell the manufacturer’s product at the same price, thus preventing competition.” 2 The primary alternative to the rule of reason is the “per se rule,” which is “reserved only for those agreements that are ‘so plainly anticompetitive that no elaborate study of the industry is needed to establish their illegality.” Procaps S.A. v. Patheon, Inc., 845 F.3d 1072 , 1083 (11th Cir. 2016) (quoting Nat’ Soc’y. of Profl Eng’rs v. United States, 435 U.S. 679, 692 (1978)). Neither party claims that the per se rule is applicable to this case. Resale-Price Maintenance, Black’s Law Dictionary (12th ed. 2024). CTS allege that JPW’s prohibition on “Price in Cart” discounts amounts to resale pric maintenance because these restrictions prevented CTS from selling JPW’ products at prices lower than the price designated in the MAP policy. (Comp. 4 47). JPW, on the other hand, argues that these restrictions do not amount t resale price maintenance because the MAP policy expressly allows for th: communication of below-MAP prices by phone or email. (Doc. 16-1 at 4). Li short, JPW argues that enforcement of the MAP policy, including the restrictio1 on “Price in Cart” discounts, “cannot be the basis of a vertical [resale price maintenance] claim because it does not restrain resale prices, but merely restricts advertising.” Worldhomecenter.com, Inc. v. KWC Am., Inc., No. 1¢ CIV. 7781 NRB, 2011 WL 4352390 , at *5 (S.D.N.Y. Sept. 15, 2011). JPW supports its argument by reference to several out-of-circuit cases. See, e.g., id.: Blind Dr. Inc. v. Hunter Douglas, Inc., No. C-04-2678 MHP, 2004 WL 1976562 , at *7 (N.D. Cal. Sept. 7, 2004); Campbell v. Austin Air Sys., Ltd., 423 F. Supp. 2d 61 , 69 n.6 (W.D.N.Y. 2005). In its response, CTS does not directly engage JPW’s argument. Based on JPW’s argument, the Court finds that CTS has not plausibly alleged the existence of a vertical resale price maintenance scheme. 2. Rule of Reason Even assuming CTS has adequately alleged the existence of vertice resale price maintenance, the Complaint still comes up short under the rule c reason. To state a claim under the rule of reason, an antitrust plaintiff mus plead “(1) the anticompetitive effect of the defendant’s conduct on the relevan market, and (2) that the defendant’s conduct has no pro-competitive benefit o justification.” Levine v. Cent. Fla. Med. Affiliates, Inc., 72 F.3d 1538 , 1551 (111! Cir. 1996). This requires an antitrust plaintiff to plead “(1) a geographic marke and (2) a product market.” Jacobs, 626 F.3d at 1336 (citing Rossi v. □□□□□□□□ Roofing, Inc., 156 F.3d 452 , 464 (3d Cir.1998)).3 From there, the Complain must “adequately allege actual or potential harm to competition.” Jd. at 1339. “Actual harm is indicated by a factual connection between the allegec harmful conduct and its impact on competition in the market... .” Jacobs, 62¢ F.3d at 1339. To state a claim, an antitrust plaintiff must make “specific factua allegations” of the “[a]ctual anticompetitive effects” of the defendant’s conduct Id. (quoting Spanish Broad. Sys., 376 F.3d at 1073 ). “By ‘anticompetitive,’ the 3 JPW does not contest the sufficiency of CTS’s geographic- and productmarket allegations and the Court does not otherwise find them to be deficient. See, e.g., Brown Shoe Co. v. United States, 370 U.S. 294 , 336—37 (1962) (holding that “the geographic market in some instances may encompass the entire Nation” and that “men’s, women’s, and children’s shoes” is an adequately defined product market). law means that a given practice both harms allocative efficiency and coul ‘raise[ ] the prices of goods above competitive levels or diminish[ ] their qualit ....” Id. (alterations in original) (emphasis removed) (quoting Rebel Oil Co. 1 Ail. Richfield Co., 51 F.3d 1421 , 1433 (9th Cir. 1995)). “Actual anticompetitiv effects include, but are not limited to, reduction of output, increase in price, o deterioration in quality.” Id. (citing United States v. Brown Univ., 5 F.3d 668 (3d Cir. 1993)). However, “the primary purpose of the antitrust laws is t protect interbrand competition,” or competition among manufacturers sellin; different brands of the same type of product. State Oil Co. v. Khan, 522 U.S. 3 15 (1997) (emphasis added). Indeed, it is well-established that interbranc competition may be stimulated by reducing the intrabrand competition tha takes place “among retailers of the same brand.” Leegin Creative Leathe Prods., Inc., 551 U.S. at 878 . Thus, in general, “reduction in intrabranc competition is not an anticompetitive effect under the Sherman Act.” □□□□□ Distrib. LLC v. Mitchell Grp. USA, LLC, 558 F. Supp. 3d 1275 , 1290 (S.D. Fla 2021) (citing Leegin Creative Leather Prods., Inc., 551 US. at 890). Here, CTS’s “bald statement[s]” that “JPW’s resale price maintenance has adversely affected interbrand competition” through “higher prices and diminish[ed] competition in the marketplace,” (Compl. 9§ 85, 90), are inadequate to “establish[] the competitive level above which [JPW]’s allegedly anticompetitive conduct artificially raised prices.” Jacobs, 626 F.3d at 1339 . Likewise, CTS’s claim that JPW’s conduct “dangerously limits” CTS’s ability t “provide appropriate tools for its customers,” (Compl. {J 18, 20), fails to alleg actual harm “above the speculative level.” Twombly, 550 U.S. at 545 . Indeec CTS’s “sparse allegation” that the elimination of “Price in Cart” discounts wil generate anticompetitive effects “is precisely the type of bare legal conclusio: that was insufficient in Twombly and Iqbal.” Jacobs, 626 F.3d at 1340 . At most the well-pleaded allegations in the Complaint allege harm only to □□□□□□□□□□ competition, which does not amount to actual harm under the rule of reason See Leegin Creative Leather Prod., Inc., 551 U.S. at 902 . Failing to plausibly plead actual harm to competition, CTS’s “only avenu: of relief [is] to sufficiently allege potential harm.” Jacobs, 626 F.3d at 1339 . Ti do so, CTS must (1) “define the relevant market and establish that the defendants possessed power in that market” and (2) make “specific allegation: linking market power to harm to competition in that market.” Id. (quoting Levine, 72 F.3d at 1551, and Spanish Broad. Sys., 376 F.3d at 1073 ). The Complaint is also deficient on both of these requirements. First, the Complaint does not plausibly allege that JPW has market power. The Eleventh Circuit has defined “market power” as the “ability to raise price significantly above the competitive level without losing all of one’s business.” Graphic Prods. Distribs., Inc. v. Itek Corp., 717 F.2d 1560, 1570 (11th Cir. 1983) (citing Valley Liquors, Inc. v. Renfield Imps., Ltd., 678 F.2d 742 , 745 — 10 — (7th Cir. 1982)). Because quantifying a company’s “market power” ; “conceptually difficult,” courts often look to reliable indicia of market powerincluding market share and product differentiation—when undertaking thi analysis. Id. Here, the Complaint alleges JPW has “significant market powe throughout the United States as the parent company for the multiple bran names of the Products.” (Compl. § 14). But without allegations of produc differentiation, JPW’s market share, or specific factual allegations suggestin “restricted output and supercompetitive prices,” the Complaint falls flat Jacobs, 626 F.3d at 1340 (quoting Rebel Oil, 51 F.3d at 1434). CTS cites Graphic Products Distributors, Inc. for the proposition that ai antitrust plaintiff “satisf[ies] their burden of showing substantial market powe by alleging the imposition of vertical restraints on distributors.” (Doc. 28 at 1 (citing 717 F.2d at 1571 )). But the Graphic Products Distributors court did no state that an antitrust plaintiff discharges their burden of showing the defendant’s market power merely by alleging the imposition of vertica restraints on distributors. When considered in context, it is clear that ths Graphics Products Distributors court found that the plaintiffs allegation that the defendant had market power at the time it imposed vertical price restraint: was sufficient in light of the plaintiffs specific factual allegations pertaining t« the defendant’s market share and product differentiation. See id. at 1570-71 . — 11 — Next, the Complaint “is bereft of the critical allegations linking [JPW] market power to harm to competition.” Jd. Indeed, the Complaint does nc plausibly allege that competitors have reacted to the allegedly higher prices JPW’s tools, nor does the Complaint specifically allege marketwide increases i price or reduced output. In the absence of these types of factual allegation linking JPW’s market power to harm to competition in the market, CTS fails t state a claim. B. Robinson-Patman Act Claim CTS alleges JPW engaged in unlawful price fixing under the Robinson Patman Act, 15 U.S.C. § 13 . The elements of a price discrimination claim unde the Robinson-Patman Act are “1) that the defendant discriminated in price discounts, or services between purchasers of commodities of like grade an quality in the course of interstate commerce; 2) that the price discriminatio1 resulted in the requisite injury to competition or competitors; and 3) at least th approximate amount of damages.” Walker v. Hallmark Cards, Inc., 992 F. Supp 1335, 1338 (M.D. Fla. 1997) (citing Chrysler Credit Corp. v. J. Truett Payne Co Inc., 670 F.2d 575 , 578 (5th Cir.1982)); see also McGahee v. N. Propane Gas Co. 858 F.2d 1487, 1493 (11th Cir. 1988). “Price discrimination is not per s violative of the [Robinson-Patman Act]” the plaintiff must also show “some sor of real competitive injury.” Id. (citing Foremost Dairies, Inc. v. FTC, 348 F.2¢ — 12 — 674, 679 (5th Cir. 1965), and DeLong Equip. Co. v. Washington Mills Electr Minerals Corp., 990 F.2d 1186 , 1202 (11th Cir. 1993)). And the injury must b “causally connected to the alleged antitrust violation.” Id. (citing Alan’s Atlanta, Inc. v. Minolta Corp., 903 F.2d 1414, 1426-27 (11th Cir. 1990)). In the Complaint, CTS alleges that JPW “unlawfully discriminates in th pricing of the Products between different purchasers, such as CTS and Amazor (Compl. 97), by “allow[ing] Amazon to advertise and sell [its products] a prices below that which JPW permits .. . CTS[] to advertise and sell” it products, (id. § 100); that these products are of “like grade and quality,” (a {| 99); and that “no legal justification” exists for JPW’s discriminatory pricing (id. § 103). CTS claims that it “has suffered and continues to suffer actua damages as a direct and proximate result of JPW’s discriminatory pricing of thi Products, including without limitation monetary losses .. . over $1,000,000.00 Ud. | 65, 94). These conclusory allegations that JPW engaged in □□□□□□□□ discriminatory pricing are not sufficient to state a claim under the Robinson Patman Act. As an initial matter, a price discrimination claim that does no even indicate the products or prices at issue “fail[s] to provide [a defendant] witl adequate notice of the basis for the claim.” Pentair Filtration Sols., LLC v Superior Water Sys. Co., No. 12-62163-CIV, 2013 WL 12091626 , at *4 (S.D. Fla Nov. 14, 2013). CTS is not required to plead “with exactitude,” but th — 13 — Complaint still must be “supported by facts constituting a legitimate claim fo relief.” Tires Inc. of Broward v. Goodyear Tire & Rubber Co., 295 F. Supp. 2 1349, 1352 (S.D. Fla. 2003) (quoting Mun. Utils. Bd. of Albertville v. Ala. Powe Co., 934 F.2d 1493 , 1501 (11th Cir.1991)). At a minimum, CTS must adequate notice of the kind of price discrimination and the range of [tools] c like grade and quality” that are implicated in the Robinson-Patman Act claim Id, at 1353 (citing United Mag. Co. v. Murdoch Mag. Distrib., Inc., 146 F. Supy 2d 385, 395 (S.D.N.Y. 2001)). CTS has also not adequately alleged that JPW’ practices have plausibly caused an injury to competition. Because CTS ha failed to satisfy these minimum pleading thresholds, this claim must also □□ dismissed. C. State Law Claims Having found that CTS’s claims under the Sherman Act and th Robinson-Patman Act must be dismissed, the Court must also dismiss CTS’. state law claims under the Florida Deceptive and Unfair Trade Practices Ac and the Florida Antitrust Act. See All Care Nursing Serv., Inc. v. High Tecl Staffing Servs., Inc., 135 F.3d 740 , 745 n. 11 (11th Cir. 1998) (“Federal anc Florida antitrust laws are analyzed under the same rules and case □□□□□□□ se also St. Petersburg Yacht Charters, Inc. v. Morgan Yacht, Inc., 457 So. 2d 1028 1032 (Fla. 2d DCA 1984) ( “[T]he Florida legislature has, in effect, adopted a: — 14 — the law of Florida the body of antitrust law developed by the federal court under the Sherman Act.”); § 542.16, Fla. Stat. IV. CONCLUSION For the reasons given above, it is ORDERED that Defendant’s Motion t Dismiss (Doc. 16) is GRANTED. The Complaint (Doc. 2) is DISMISSEI without prejudice. Plaintiff may file an amended complaint on or befor January 10, 2025. DONE and ORDERED in Orlando, Florida, on December ft, 2024, | Co . , ( □ HN ANTOON II United States District Judge Copies furnished to: Counsel of Record 1k