The U.S. Court of Appeals for the Eleventh Circuit has affirmed a district court’s dismissal of monopolization, attempted monopolization, and tangential claims under state law, for failure to state a claim. The case was between Starpro Greens Inc. and Polyloom Corporation of America and Challenger Turf, both companies are part of the TenCate Grass Group.
Earlier this month we reported that StarPro Greens had asked the US Court of Appeals to revive their lawsuit against Challenger Turf, another company that is part of the TenCate Grass Group. StarPro Greens claims it was lured into a business partnership and then cut out of production.
The U.S. Court of Appeals for the Eleventh Circuit has now ruled that the allegations did not show the defendants were attempting to exclude other manufacturers from entering the market for a particular manufacture of synthetic cross-stitched putting turf. At best, the facts showed the defendants made a business decision to sell MPT directly to consumers.
Both the district court and the Eleventh Circuit observed that the plaintiffs’ allegations undercut its own claims. The state law breach of duty and breach of agreement claims implicated Georgia’s adoption of the Uniform Commercial Code (UCC) and failed for various reasons pertinent thereunder, including the lack of a written agreement. The Eleventh Circuit affirmed dismissal in all respects except insofar as it observed that Georgia law may confirm a partnership by oral agreement alone. The district court agreed with the defendants that the monopolization and attempted monopolization claims failed as a matter of law. StarPro alleged, at most, that the defendants managed to supplant the unnamed company as the sole manufacturing source of MPT and then began marketing and selling the product on their own, without Star Pro. That did not indicate harm to the market as a whole.
Wolter Kluwers VitalLaw writes that it appeared consumers never had a choice about where to obtain MPT to begin with because StarPro had been the sole distributor. The allegation that the purported sole manufacturer of cross-over stitched putting turf was marketing and selling the product on its own, rather than through StarPro, apparently only harmed StarPro. The district court noted that could not establish an antitrust claim. It also appeared that the defendants could have decided to stop manufacturing MPT altogether and StarPro would still be in the same position.
Allegations about the relevant market were also fundamentally flawed. In the Eleventh Circuit, relevant considerations include reasonable interchangeability and cross-elasticity of demand with substitutes. These can be difficult to measure, but in this case, StarPro quixotically alleged North Georgia is “replete” with synthetic turf manufacturers. That appeared to undercut any showing of a unique and distinctive product market for the MPT cross-over stitched turf based on cross-elasticity of demand. The unnamed company appeared to be available to make the same MPT product before the defendants stopped production, and the court did not see why other turf manufacturer could not simply start making MPT.
The geographical market definitions were also flawed due to a conclusory assertion about shipping costs and the entrepreneur’s personal product-quality assessment. None of the allegations addressed supply and demand between regions or how other manufacturers were precluded from entry.
State law claims
The district court found the breach of duty of good faith and fair dealing and breach of supply agreement claims failed for lack of a writing under the Uniform Commercial Code (UCC). StarPro did not allege the existence of any written “partnership” or supply agreement between the parties. StarPro also failed to state a claim under the UCC because a purchase order is generally something a seller can reject.
The breach of fiduciary duty claim, based on a price increase and later cessation of providing MPT to StarPro, failed because there was no plausible allegation of a confidential relationship. It also appeared the defendants did not have much leverage over StarPro, at least not in connection with costs or obligations before sale.
The remaining claims for fraud, breach of contract or warranty, and breach of the duty of good faith, all failed because StarPro accepted the nonconforming goods and distributed them to customers. The UCC applied to the state law claims because they involved transactions in goods. Under the UCC, if a buyer accepts goods made in full knowledge of nonconformity, the buyer cannot reject acceptance. A permissible rejection would have been untimely anyway, and StarPro did not allege any attempted return to Challenger Turf. The UCC also did not provide for an independent cause of action for failure to perform a contract in good faith.
Dismissal affirmed
StarPro appealed the dismissal of the monopolization, attempted monopolization, breach of duty of good faith and fair dealing, and breach of warranty claims. Applying plenary review, the United States Court of Appeals for the Eleventh Circuit affirmed largely based on the district court analysis. The Eleventh Circuit emphasized deficient indicia of monopolization over the district court’s finding of no market harm.
With respect to the monopolization and attempted monopolization claims, the Eleventh Circuit agreed that unilateral refusal to deal is generally not unlawful and that it was not unlawful here. The Eleventh Circuit echoed the district court’s doubts about whether there was a product market for MPT alone, separate from comparable golf putting turfs. Allegations that MPT was somehow unique given its price and cross-stitching seemed vague. The Eleventh Circuit agreed with the district court that there appeared to be a lack of allegations about reasonable interchangeability or cross-elasticity with the products of numerous other manufacturers.
The Eleventh Circuit also agreed with the district court that StarPro allegations about numerous other manufacturers negated any plausible inference of monopoly power or incipient acquisition of monopoly power. Moreover, StarPro did not allege barriers to entry. It did not allege any MPT patent. StarPro even alleged that a new company approached StarPro about making MPT.
The Eleventh Circuit also found no error in district court dismissal of the state law claims despite agreeing with the appellants that, under Georgia law, an oral agreement might indeed create a partnership. The problem here was that the complaint did not plead a partnership in terms of risk sharing and other indicia of partnership. It looked instead like a serial purchase order relationship. Everything else was conclusory and could not support claims for breach of duty of good faith, fair dealing, and loyalty.
The breach of warranty claims failed because StarPro not only accepted known nonconforming goods, it sold them, before it objected a later point. Charitably read, StarPro seemed to be saying it accepted nonconforming goods only to discover later that they were not just non-conforming, but also defective irrespective of the issue of nonconforming status, based on customer complaints. Even so, StarPro did not support or cite how it objected within a reasonable time. The Eleventh Circuit said StarPro accordingly waived that issue.