Choker v. Pet Emergency Clinic PS

• Court: District Court, E.D. Washington
• Decided: August 4, 2022
• Docket: 2:20-cv-00417
• Status: Unknown

Opinion

1 EASTERN DISTRICT OF WASHINGTON 2 Aug 04, 2022 3 SEAN F. MCAVOY, CLERK 4 5 6 UNITED STATES DISTRICT COURT 7 EASTERN DISTRICT OF WASHINGTON 8 9 DRU CHOKER, D.V.M.; and MATTHEW 10 DEMARCO, D.V.M., No. 2:20-CV-00417-SAB 11 Plaintiffs, 12 v. ORDER GRANTING 13 PET EMERGENCY CLINIC, P.S., by and DEFENDANTS’ MOTION FOR 14 through its Board of Directors; and SUMMARY JUDGMENT 15 NATIONAL VETERINARY 16 ASSOCIATES, INC., acting on its own 17 behalf and that of NVA PARENT, INC., 18 Defendants. 19 20 21 Before the Court is Defendant Pet Emergency Clinic, P.S.’ Motion for 22 Summary Judgment as to Antitrust Claims, ECF No. 134, and Plaintiffs Dru 23 Choker and Matthew DeMarco’s Counter-Motion for Summary Judgment on 24 Sherman Act Claims, ECF No. 142. The Court heard oral argument on the motions 25 on July 7, 2022 by Video Conference. Plaintiffs Dru Choker and Matthew 26 DeMarco are represented by Mary Schultz. Defendant Pet Emergency Clinic, P.S. 27 (“PEC”) is represented by Jeffrey A. Beaver, Brian William Esler, David C. 28 1 Lundsgaard, and Geoffrey D. Swindler. Defendant National Veterinary Associates, 2 Inc. (“NVA”) is represented by James McPhee. 3 The Court concludes that Plaintiffs lack an antitrust injury and antitrust 4 standing, and therefore, PEC and NVA are entitled to judgment as a matter of law 5 on Plaintiffs’ federal antitrust claims. With all federal claims being disposed, the 6 Court declines to retain jurisdiction over the remaining state-law claims. Plaintiffs’ 7 causes of action under state law are dismissed without prejudice. 8 I. Facts1 9 Plaintiffs are former employees and shareholders of PEC, which provides 10 emergency veterinary services in Spokane, Washington. Plaintiffs are also the 11 owners and operators of an emergency veterinary hospital in Coeur d’Alene, Idaho. 12 Plaintiffs allege that PEC violated antitrust laws by entering an illegal conspiracy 13 with NVA. The alleged conspiracy proceeded in two stages. 14 First, Plaintiffs claim that PEC entered a conspiracy with NVA in violation 15 of the antitrust laws to insert non-compete provisions in Plaintiffs’ employment 16 agreements with PEC, and then terminate Plaintiffs when they refused to sign those 17 agreements. 18 PEC initially presented the proposed employment agreements to Plaintiffs in 19 June 2017. Between then and November, PEC negotiated with Plaintiffs and other 20 emergency veterinarians over the proposed contracts. A deadline in November was 21 set for the veterinarians to sign the agreements. The agreement included a 22 “moonlighting clause” that provided PEC veterinarians could not, without prior 23 written consent and during the period of their employment with PEC, render 24 veterinary services to any person or firm that was competitive with PEC, or engage 25

26 1 The following facts derive from the parties’ respective statements of fact, 27 submitted pursuant to Federal Rule of Civil Procedure 56(c) and Local Civil Rule 28 56(c)(1). 1 in any emergency activity competitive with or adverse to PEC’s business. Plaintiffs 2 declined to sign the agreements, and their employment terminated as of December 3 31, 2017. However, Plaintiffs remained shareholders in PEC until approximately 4 December 2019. 5 Second, Plaintiffs claim PEC entered into a conspiracy with NVA in 6 violation of the antitrust laws in connection with a proposed merger, and in 7 particular by signing a “Non-Binding Letter of Intent” (“Non-Binding LOI”) that 8 included proposed terms that would require selling shareholders to agree “not to 9 compete within a radius of 25 miles of [PEC] or refer such business to any hospital 10 other than [PEC] for a period of five years.” Def. SMF, ¶ 7. Plaintiffs claim that 11 they and other emergency veterinarians believed the proposed employment 12 agreements were being required for purposes of the NVA sale. 13 Beginning in April 2017, PEC discussed a potential purchase of NVA. 14 Despite Plaintiffs’ vigorous objections, on February 21, 2018, NVA disclosed an 15 offer to purchase PEC. The offer was rejected, but PEC sent a revised offer on 16 April 3, 2018. On April 16, 2018, NVA also sent the proposed Non-Binding LOI 17 to PEC, which included non-competition, non-solicitation, and referral provisions 18 in connection with the potential sale to NVA. The Non-Binding LOI was signed on 19 May 14, 2018. It provided that a purchase agreement between PEC and NVA 20 would include noncompetition clauses within a 25-mile radius for PEC 21 shareholders as well as prevent shareholders from routinely referring emergency 22 cases to any other hospital for five years. 23 By August 18, 2018, PEC received a draft of NVA’s proposed merger 24 agreement, which contained non-compete and referral obligations like those 25 disclosed in the Non-Binding LOI. PEC returned the proposed merger agreement 26 to NVA with changes on October 22, 2018, which (1) reduced the non-compete 27 obligation to businesses providing overnight emergency veterinary services to 28 small animals within a 15-mile radius, (2) excluded veterinary services consistent 1 with any shareholder’s past practice, including operations during evening and 2 weekend hours, and (3) excluded any “exclusive referrals” clause. By October 31, 3 2018, PEC and NVA ended discussions regarding a potential merger. No final 4 agreement was reached and NVA did not purchase PEC. Plaintiffs claim that these 5 negotiations are merely suspended, and PEC and NVA do not contend that a future 6 merger is precluded. 7 When NVA disclosed its first offer to PEC, Plaintiffs purchased property in 8 Coeur d’Alene, Idaho to establish their own veterinary hospital, which does 9 business as Emergency Veterinary Hospital (“EVH”). They claim they originally 10 looked for a location in Spokane but declined to go further given the restrictions 11 PEC and NVA were discussing. 12 II. Summary Judgment Standard 13 Summary judgment is appropriate “if the movant shows that there is no 14 genuine dispute as to any material fact and the movant is entitled to judgment as a 15 matter of law.” Fed. R. Civ. P. 56(a). There is no genuine issue for trial unless there 16 is sufficient evidence favoring the non-moving party for a jury to return a verdict in 17 that party’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). The 18 moving party has the initial burden of showing the absence of a genuine issue of fact 19 for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the moving party 20 meets its initial burden, the non-moving party must go beyond the pleadings and “set 21 forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 22 U.S. at 248. 23 In addition to showing there are no questions of material fact, the moving 24 party must also show it is entitled to judgment as a matter of law. Smith v. Univ. of 25 Wash. Law Sch., 233 F.3d 1188, 1193 (9th Cir. 2000). The moving party is entitled 26 to judgment as a matter of law when the non-moving party fails to make a sufficient 27 showing on an essential element of a claim on which the non-moving party has the 28 burden of proof. Celotex, 477 U.S. at 323. The non-moving party cannot rely on 1 conclusory allegations alone to create an issue of material fact. Hansen v. United 2 States, 7 F.3d 137, 138 (9th Cir. 1993). When considering a motion for summary 3 judgment, a court may neither weigh the evidence nor assess credibility; instead, 4 “the evidence of the non-movant is to be believed, and all justifiable inferences are 5 to be drawn in his favor.” Anderson, 477 U.S. at 255. 6 Where, as here, parties submit cross-motions for summary judgment, ‘[e]ach 7 motion must be considered on its own merits.’” Fair Hous. Council of Riverside 8 Cty., Inc. v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001). Accordingly, it is 9 the district court’s duty to “review each cross-motion separately . . . and review the 10 evidence submitted in support of each cross-motion.” Id. 11 III. Discussion 12 PEC moves for partial summary judgment on all of Plaintiffs’ antitrust 13 claims; that is, their causes of action under Sections 1 and 2 of the federal Sherman 14 Antitrust Act (15 U.S.C. §§ 1, 2) and their Washington state analogues (RCW 15 §§ 19.86.030, 19.86.040). The motion presents two core legal arguments. First, 16 PEC contends that Plaintiffs have failed to assert a cognizable antitrust injury. 17 Second, and relatedly, it argues that Plaintiffs lack antitrust standing. 18 Plaintiffs also move for summary judgment on their antitrust claims. 19 Plaintiffs contend that they have proffered sufficient evidence to demonstrate that 20 Defendants engaged in a per se unlawful restraint of trade, and their actions are 21 also unlawful pursuant to the rule of reason, in violation of Section 1. Plaintiffs 22 further argue that PEC and NVA’s proposed merger, in conjunction with the 23 restrictive terms of the employment agreements, amounts to an attempted 24 monopoly in violation of Section 2. 25 A. Federal Causes of Action 26 Section 1 of the Sherman Antitrust Act declares illegal all conspiracies in 27 restraint of trade. 15 U.S.C. § 1. Relatedly, Section 2 of the Sherman Act makes it 28 unlawful for any person to attempt to monopolize. Id. § 2. Actions for damages 1 under the Sherman Act, like this one, are authorized by Section 4 the Clayton 2 Antitrust Act. 15 U.S.C. § 15(a); City of Oakland v. Oakland Raiders, 20 F.4th 3 441, 455 (9th Cir. 2021). Section 4 provides that “any person who shall be injured 4 in his business or property by reason of anything forbidden in the antitrust laws 5 may sue therefor . . . and shall recover threefold the damages by him sustained[.]” 6 Despite its apparent breadth, courts have since read limitations into the language of 7 Section 4 on the premise that “Congress did not intend [it] to have such an 8 expansive scope.” Am. Ad Mgmt., Inc. v. Gen. Tel. Co. of California, 190 F.3d 9 1051, 1054 (9th Cir. 1999). Now, a plaintiff must demonstrate “antitrust standing.” 10 Oakland Raiders, 20 F.4th at 455; Knevelbaard Dairies v. Kraft Foods, Inc., 232 11 F.3d 979, 987 (9th Cir. 2000). 12 The Supreme Court has identified certain factors for determining whether 13 antitrust standing exists: (1) the nature of the plaintiff’s alleged injury; that is, whether it was the type 14 the antitrust laws were intended to forestall; 15 (2) the directness of the injury; (3) the speculative measure of the harm; 16 (4) the risk of duplicative recovery; and 17 (5) the complexity in apportioning damages. 18 Oakland Raiders, 20 F.4th at 455 (quoting Am. Ad Mgmt., 190 F.3d at 1054). A 19 court “need not find in favor of the plaintiff on each factor.” Id. (quoting Am. Ad 20 Mgmt., 190 F.3d at 1055). Rather, antitrust standing requires a “case-by-case 21 analysis,” Amarel v. Connell, 102 F.3d 1494, 1507 (9th Cir. 1996), and a court may 22 “find standing if the balance of factors so instructs.” L.A. Mem’l Coliseum Comm’n 23 v. Nat’l Football League, 791 F.2d 1356, 1363 (9th Cir. 1986). Nevertheless, the 24 first factor, antitrust injury, is mandatory. Cargill, Inc. v. Monfort of Colo., Inc., 25 479 U.S. 104, 109, 110 n.5 (1986); Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 26 429 U.S. 477, 489 (1977); Oakland Raiders, 20 F.4th at 455; Am. Ad Mgmt., 190 27 F.3d at 1055. 28 1 An antitrust injury is “of the type the antitrust laws were intended to prevent 2 and that flows from that which makes defendants’ acts unlawful.” Atl. Richfield 3 Co. v. USA Petroleum Co., 495 U.S. 328, 334 (1990). The Ninth Circuit has 4 identified four requirements for an antitrust injury: (1) unlawful conduct; (2) 5 causing an injury to the plaintiff; (3) that flows from that which makes the conduct 6 unlawful; and (4) that is of the type the antitrust laws were intended to prevent.” 7 Am. Ad Mgmt., 190 F.3d at 1055. The second and fourth elements are dispositive to 8 this case. 9 Plaintiffs assert three distinct injuries from PEC and NVA’s allegedly 10 anticompetitive conduct. First, Plaintiffs claim they were injured when their 11 employment was terminated after they refused to sign the purportedly unlawful 12 employment agreements.2 Second, Plaintiffs claim harm because they were 13 compelled to base their business out of Coeur d’Alene, Idaho, as opposed to 14 Spokane, Washington. Third, Plaintiffs claim they are injured because they 15 “remain unable to return to the market,” due to risk of an anti-competitive merger. 16 ECF No. 173 at 16. None of these alleged injuries are cognizable antitrust injuries. 17 Plaintiffs’ loss of their jobs does not constitute an antitrust injury. Vinci v. 18 Waste Management, 80 F.3d 1372 (9th Cir. 1994). In Vinci, the plaintiff owned 19 and operated a waste recycling business that received recyclable materials from 20 Waste Management. Id. at 1373. Vinci alleged that Waste Management breached 21 their recycling agreement with the purpose of driving his company out of business. 22 Id. at 1373–74. Waste Management subsequently acquired his recycling plant, and 23 hired Vinci as its employee; however, Vinci asserted that the Waste Management 24

25 2 PEC disputes that it “terminated” Plaintiffs, arguing instead that Plaintiffs 26 “quit rather than sign[ ] the proposed employment agreements.” ECF No. 162 at 27 98. The matter need not be resolved here because it is irrelevant to the Court’s 28 analysis. 1 fired him when he refused to cooperate in anti-competitive schemes. Id. at 1374. 2 Vinci’s purported injuries were (1) economic damage to his recycling business, 3 and (2) his employment termination. Id. at 1375. 4 The district court dismissed Vinci’s antitrust claims for lack of antitrust 5 standing. Id. at 1374. The Ninth Circuit affirmed and held that “[t]he loss of a job 6 is not the type of injury that the antitrust laws were designed to prevent.” Id. at 7 1376. Rather, the court reasoned those antitrust laws were intended to “preserve 8 competition for the benefit of consumers in the market in which competition 9 occurs.” Id. (quotation omitted). Vinci was neither a competitor nor a consumer in 10 his role as an employee, and therefore, his termination did not constitute an 11 antitrust injury. See id. As in Vinci, Plaintiffs’ job termination in this case is not an 12 antitrust injury. 13 For the same reason, the location selected by Plaintiffs for their business 14 does not constitute an antitrust injury, much more one Plaintiffs can assert in their 15 individual capacities. Plaintiffs claim they were forced to open EVH in a different 16 city due to fears regarding an impending merger. Plfs. SMJ, ¶¶ 333–34. Plaintiffs 17 concede EVH is not a competitor to PEC and NVA, but a competitor in “an 18 entirely new market in Coeur D’Alene, Idaho.” Plfs. SMJ, ¶¶ 288.I, 324, 333. EVH 19 is not a competitor to PEC or NVA, and thus, it similarly cannot suffer an antitrust 20 injury. See Vinci, 80 F.3d at 1376; Somers v. Apple, 729 F.3d 953, 963 (9th Cir. 21 2013). 22 Plaintiffs also cannot assert the injury on behalf of EVH. The Ninth Circuit 23 in Vinci held that an injury to Vinci’s recycling business—even if he was the sole 24 shareholder of the business—was not an injury to himself and did not provide him 25 with antitrust standing. See id. In so holding, the court reasoned that “‘[i]f 26 shareholders were permitted to recover their losses directly, there would be the 27 possibility of a double recovery, once by the shareholder and again by the 28 1 corporation.’” Id. (quoting Stein v. United Artists Corp., 691 F.2d 885, 896–97 (9th 2 Cir. 1982)). 3 Relatedly, Plaintiffs’ claim that they are unable to enter the Spokane market 4 is not supported by the record and cannot provide Plaintiffs with antitrust standing. 5 Plaintiffs can compete in the relevant market because they are not bound by any 6 restrictive covenants in the unexecuted employment agreements or merger 7 agreement. Plaintiffs are also no longer shareholders of PEC and therefore could 8 not be bound by restrictions in a future merger agreement between PEC and NVA. 9 To the extent Plaintiffs are concerned about how restrictions in a future merger 10 could affect referrals to EVH if it became a competitor in the market, the harm is 11 too speculative and indirect to amount to an antitrust injury to EVH or Plaintiffs as 12 individuals. See Oakland Raiders, 20 F.4th at 455. The factors weigh against a 13 finding that Plaintiffs have antitrust standing. See id. 14 Without an antitrust injury, Plaintiffs lack antitrust standing to sue. Oakland 15 Raiders, 20 F.4th at 455. Defendants are entitled to summary judgment on the 16 Sherman Act claims. 17 B. State Causes of Action 18 The Court declines to retain supplemental jurisdiction over the remaining 19 state-law claims. See 28 U.S.C. § 1367(c)(3). Therefore, Plaintiffs’ state antitrust, 20 wrongful termination, and breach of contract claims are dismissed without 21 prejudice. 22 Accordingly, IT IS HEREBY ORDERED: 23 1. Defendant Pet Emergency Clinic, P.S.’ Motion for Summary 24 Judgment as to Antitrust Claims, ECF No. 134, is GRANTED. 25 2. Plaintiffs’ Counter-Motion for Summary Judgment, ECF No. 142, is 26 DENIED. 27 3. Plaintiffs’ Motion to Amend/Correct Complaint, ECF No. 181, is 28 DISMISSED as moot. 1 4. Plaintiffs’ Motion to Exclude Defense Expert Keith B. Leffler, ECF No. 60, is DISMISSED as moot. 3 5. The District Court Clerk is directed to ENTER JUDGMENT in favo of Defendants, and against Plaintiffs, as to their claims under Section 1 and 2 of the 5|| Sherman Antitrust Act. IT IS SO ORDERED. The District Court Clerk is hereby directed to enter this Order, provide copies to counsel, and close the file. 8 DATED this 4th day of August 2022. 9 10 11 : 12 2 by Sect Stanley A. Bastian Chief United States District Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ORDER GRANTING DEFENDANTS’ MOTION FOR SUMMARY TIMCONIENT «10