Armacell LLC v. Bailey Sales & Associates Inc

• Court: District Court, W.D. Washington
• Decided: October 18, 2019
• Docket: 2:19-cv-00506
• Status: Unknown

Opinion

6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 7 AT SEATTLE

8 ARMACELL, LLC, CASE NO. C19-506 RSM

9 Plaintiff, ORDER GRANTING PLAINTIFF ARMACELL, LLC’S MOTION TO 10 v. DISMISS DEFENDANT BAILEY’S COUNTERCLAIM 11 BAILEY SALES & ASSOCIATES INC.,

12 Defendant.

13 14 I. INTRODUCTION 15 This matter comes before the Court on Plaintiff Armacell LLC’s Motion to Dismiss 16 Defendant Bailey’s counterclaim under Rule 12(b)(6). Dkt. #53. For the reasons stated below, 17 the Court GRANTS Plaintiff Armacell’s Motion. 18 II. BACKGROUND 19 Plaintiff Armacell, LLC (“Armacell”) filed a Complaint alleging that Defendant Bailey 20 Sales & Associates, Inc. (“Bailey”) failed to pay $544,992.17 for insulation products, breaching 21 their Buy/Sell Representative Agreement. Dkt. #1-7. The Complaint states that “over the course 22 of 2017 and 2018 . . . Armacell sold and shipped to [Bailey] various quantities of products.” Dkt. 23 #1-7 at 6. Payment for the products was due within 31 days after receipt. Id. at 2. Armacell 24 1 states Bailey failed to pay amounts owed as they came due. Id at 8. Armacell requests damages 2 in the total principal amount of $544,992.17, plus interest. Id. at 11. 3 Bailey answered the Complaint and asserted its own Counterclaim. Dkt. #10. Bailey 4 claims Armacell engaged in discriminatory sales of products to another customer in direct 5 violation of federal and Oregon state law. Id. at 8, 10 (relying on 15 U.S.C. § 13; OR. REV. STAT.

6 § 646.040). In response to Bailey’s Counterclaim, Armacell filed a Motion to Dismiss for failure 7 to state a claim under Rule 12(b)(6). Dkt. #53. 8 III. DISCUSSION 9 A. Legal Standard under Rule 12(b)(6) 10 In making a 12(b)(6) assessment, the court accepts all facts alleged in the complaint as 11 true, and makes all inferences in the light most favorable to the non-moving party. Baker v. 12 Riverside County Office of Educ., 584 F.3d 821, 824 (9th Cir. 2009). However, the court is not 13 required to accept as true a “legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 14 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The

15 complaint “must contain sufficient factual matter, accepted as true, to state a claim to relief that 16 is plausible on its face.” Id. at 678. This requirement is met when the plaintiff “pleads factual 17 content that allows the court to draw the reasonable inference that the defendant is liable for the 18 misconduct alleged.” Id. The complaint need not include detailed allegations, but it must have 19 “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action 20 will not do.” Twombly, 550 U.S. at 555. Absent facial plausibility, a plaintiff’s claims must be 21 dismissed. Id. at 570. 22 // 23 // 24 1 B. Plaintiff’s Motion to Dismiss under Rule 12(b)(6) 2 Bailey’s Counterclaim asserts Armacell engaged in price discrimination, violating federal 3 and Oregon law, by selling the same products to Bailey’s competitor, Jones Stephens, at a lesser 4 rate of 25% to 40%. Dkt. #10 at 7 (citing 15 U.S.C. § 13; OR. REV. STAT. § 646.040). Bailey 5 argues this disparate pricing for identical products prevented free competition with Armacell’s

6 other distributors and resulted in Bailey being forced out of the market. Id. at 8. 7 Armacell argues Bailey has failed to state a claim upon which relief can be granted. Dkt. 8 #53. Armacell contends the Counterclaim fails to (1) allege facts that would establish harm to 9 interbrand competition, (2) allege harm to competition generally, (3) allege that a buyer with 10 market power received better pricing, (4) define a geographic or product market, and (5) allege 11 facts showing products at issue were of like grade and quality. Id. at 3. Armacell argues that 12 without well-pled factual allegations that competition itself was harmed – as opposed to harm to 13 single firm – the Counterclaim must be dismissed. Id. at 8. 14 The Court agrees with Armacell. Under 15 U.S.C. § 13(a), it is unlawful for “any person

15 engaged in commerce . . . to discriminate in price between different purchasers of commodities 16 of like grade and quality . . . where the effect of such discrimination may be substantially to 17 lessen competition or to create a monopoly.” According to the Supreme Court, 15 U.S.C. § 13 18 should be interpreted to the protection of competition as opposed to the protection of existing 19 competitors. Volvo Trucks North America, Inc. v. Reeder – Simco GMC, Inc., 546 U.S. 164, 181 20 (2006). Here, as pointed out by Armacell, Bailey only identifies one competitor, Jones Stephens. 21 Bailey fails to identify in which states Jones Stephens competed with Bailey, fails to identify the 22 specific products it purchased at a higher price, and fails to allege facts that the products in 23 question were of like and grade quality. Overall, Bailey’s claims alleging discriminatory harm to 24 1 competition are conclusory. Even when making all inferences in the light most favorable to 2 Bailey, the Court concludes there are not adequate factual allegations that competition has been 3 harmed as a result of the alleged price discrimination.1 4 Where a complaint is dismissed for failure to state a claim, “leave to amend should be granted 5 unless the court determines that the allegation of other facts consistent with the challenged

6 pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture 7 Co., 806 F.2d 1393, 1401 (9th Cir. 1986). If Bailey can allege additional facts to support the 8 claim that Armacell violated 15 U.S.C. § 13, Bailey is entitled to amend the counterclaim and 9 therefore leave to amend is granted. 10 IV. CONCLUSION 11 Having reviewed the relevant pleadings and the remainder of the record, the Court hereby 12 finds and ORDERS that Plaintiff Armacell’s Motion to Dismiss Defendant’s Counterclaim (Dkt. 13 #53) is GRANTED. Bailey is granted leave to file an Amended Counterclaim curing the above- 14 mentioned deficiencies no later than (21) days from the date of this Order.

15 Dated this 18th day of October 2019. 16 A 17 RICARDO S. MARTINEZ 18 CHIEF UNITED STATES DISTRICT JUDGE 19 20 21 1 Armacell asserts that Oregon’s price discrimination statute, OR. REV. STAT. § 646.040, was 22 modeled after 15 U.S.C. § 13 and that “the statutes are analytically coextensive.” Dkt. #53 at 4 n.1. Armacell argues that dismissal of the federal claim necessitates dismissal of the state law 23 claim. Id. Bailey does not contest the issue and abandons its state law claim in its response. Dkt. #56 (not making substantive arguments under state law). The Court therefore addresses 24 only the relevant federal statute.