United States District Court, N.D. California
March 23, 2004.
GARY GERLINGER, individually, on behalf of all others similarly situated, and on behalf of the California general public Plaintiff,
AMAZON.COM, INC.; BORDERS GROUP, INC.; BORDERS, INC.; BORDERS ONLINE, LLC; and BORDERS ONLINE, INC., Defendants
The opinion of the court was delivered by: MARILYN PATEL, Chief Judge, District
MEMORANDUM & ORDER
RE: PLAINTIFF'S MOTION FOR
JUDGMENT ON THE PLEADINGS:
DEFENDANTS' MOTION FOR
Plaintiff challenges an agreement between Amazon.com, Inc. and
Borders Online, LLC as violating federal and California antitrust laws,
the California unfair competition law and the common law of unjust
enrichment. Defendants have moved for summary judgment on all claims.
Plaintiff moves for judgment on the pleadings pursuant to Federal Rule of
Civil Procedure 12(c) or in the alternative, for a continuance pursuant
to Rule 56(f) to conduct further discovery. Having considered the
submissions of the parties, and for the reasons set forth below, the
court rules as follows.
Plaintiff is a consumer who purchases books online and who "purchased
books directly from at least one of the [d]efendants." FAC ¶ 10.
Amazon.com Inc. ("Amazon") is a market leader in the online retail book
market. Amazon has invested hundreds of millions of dollars in technology
and the content design of its website, Amazon.com. Declaration of Steven
Kessel ("Kessel Decl. ¶ at ¶ 6. In addition to selling products
to consumers, Amazon.com generates revenue by providing technology and
services to other retailers. Declaration of Daniel Cooper in Support of
Defendants' Motion for Summary Judgment ("Cooper Decl.")*fn2 at ¶ 3.
Beyond selling its own products on its website, Amazon.com operates
Amazon Marketplace where sellers of new and used books (among other
products) offer their products for sale on the Amazon.com website. When a
visitor to the Amazon.com website searches for a book title, they will be
provided with both the Amazon.com offering for that title as well as any
available Marketplace seller's offering and prices for that title, even
if the price is lower than that offered by Amazon.com. Id. at ¶ 5. See
also Declaration of Kyle Graham ("Graham Decl.") at ¶ 2 (copy of book
Empire Falls available on Amazon.com website through Amazon.com for
$14.46 and from Amazon Marketplace seller for $11.37, both including
Amazon.com also hosts auction sites on its website, where sellers offer
products available for consumers to bid on. Merchants can also establish
their own "storefronts" through Amazon.com's zShops, which enables
sellers to offer their merchandise for sale at the prices they choose.
Thus, a given product on Amazon.com's website may be listed for sale
simultaneously by Amazon.com as well as several different Marketplace,
zShops, and auction sellers. Cooper Decl. at ¶ 6.
Amazon.com has also entered into collaborations with other retailers.
These collaborations take many different forms. For example, Amazon.com
and Toys `R' Us agreed to launch a toy and video game store on the
Amazon.com website. In that arrangement, Toys `R' Us supplies the
inventory and Amazon.com provides the hosting, order fulfillment and
customer relations services. Cooper Decl. at ¶ 7. For Target Stores,
Amazon.com operates Target's website selling Target's products under the
Target brand name.
Amazon.com also has arrangements with a number of partners who wish to
maintain a presence on the web but do not wish to incur the cost involved
in selling products through the Internet. In these arrangements
("Syndicated Stores") Amazon.com uses the partner's website, (which site
retains the partner's name and URL) but Amazon.com sells its own products
and is responsible for filling orders and for customer service.
Amazon.com's partners in these arrangements earn commissions on the
products sold through the site. Amazon.com has a "Syndicated Store"
arrangement with Borders as well as with partners such as Virgin Mega
stores and Waterstones in the United Kingdom. Id. at ¶ 8.
Defendant Borders, Inc. is a wholly-owned subsidiary of defendant
Borders Group, Inc. Defendant Borders, Inc. (collectively "Borders")
operates and manages more than 400 brick-and-mortar stores. Declaration of
Edward Wilhelm ("Wilhelm Decl.) at ¶ 2. Borders touts itself as the
nation's second largest operator of retail book "superstores." Borders
did not launch a website until 1998 and even then did so with some
reservations based on its lack of experience as an Internet retailer and
the fact that at that point the ability to earn an acceptable return on
investment in the Internet arena was uncertain. Id. at ¶ 5. Borders did
not make a large capital investment in its website. Id., at ¶ 7. Borders
instead invested in expansion and improvement of its brick-and-mortar
stores. Id. at ¶ 8. Between 1998 and 2000, Borders.com sales accounted
for less than 1% of Borders' total consolidated sales. Sales on the
Borders.com website account for less than one-tenth of one percent of
industry-wide book sales (i.e., both online and brick-and-mortar stores
book sales). Kessel Decl. at ¶ 14; Graham Decl., Exh. L at 2 and Exh. M.
Although sales on Borders.com increased, so did its losses. Wilhelm
Decl. at ¶ 9 (In fiscal year 1999, Borders.com generated sales of $17.9
million and losses of $17.2 million but in fiscal year 2000, Borders.com
lost $29.7 million on sales of $27.4 million). Because of these losses,
in 2000 Borders considered various options in regards to its website such
as shutting it down, spinning it off as a public company or outsourcing
the web site to a third party.*fn4 In November of 2000, Borders began
discussions with Amazon.com about a co-branded website. Id., at ¶¶ 10-12.
At this time Amazon.com was actively pursuing its strategy of providing
technology and business services to other retailers and believed that
entering a venture with Borders would "further validate its model of
providing services to brick-and-mortar retailers." Cooper Decl. at ¶ 11.
Moreover, the Agreement with Borders helped Amazon.com achieve additional
economies of scale, thus reducing Amazon's costs. Id. At ¶ 11; Kessel
Decl. ¶ 18.
In April 2001, Amazon and Borders executed a "Syndicated Store"
agreement (the "Agreement" or "Mirror Site Hosting Agreement") under
which they would jointly relaunch www.borders.com as a co-branded
website.*fn5 The Agreement provides that www.borders.com will be
operated by Amazon and that Amazon will provide the inventory
fulfillment, customer services, and site content for the new co-branded
website. Under the Agreement, Amazon.com unilaterally determines the
selection of products offered, the
terms of sale and the prices for the books sold on the web site except
for those books available for in store pickup at a Borders
brick-and-mortar store. Borders sets the price for books to be purchased
online but picked up in its stores. Wilhelm Decl. at ¶ 13.
Amazon is the actual seller of the books sold on the website and
accordingly retains proceeds for those sales. Borders paid Amazon.com a
one-time fee for creating the website and Borders receives a commission
on each sale. Defendants assert that the Agreement is a service
agreement. Amazon must achieve certain service levels or risk being in
breach of the Agreement which would enable Borders to terminate the
Agreement prior to the expiration of the Agreement term (originally two
years, then extended an additional three years). Borders alleges that its
objectives in entering into the Agreement were to "maintain a retail
presence on the Internet, preserve a connection from the Internet back to
[their] stores, reduce [their] losses and improve [their] financial
returns." Wilhelm Decl. at ¶ 12. The Agreement has no impact on the
legal ownership of the www.borders.com URL which continues to be held by
Borders. In April 2002, the parties extended the Agreement to include the
www.waldenbooks.com site as well. Cooper Decl. ¶ 16 Plaintiff generally
alleges that the Agreement eliminates competition between two former
rivals in the market for online sales of books and that consumers are
therefore denied a competitive choice for their online book purchases. As
discussed in detail below, plaintiff claims that two provisions of the
Agreement are per se violations of the antitrust laws.
Earlier in 2003 Defendants brought a motion to dismiss several counts
of plaintiff's complaint. At the hearing on April 7, 2003 this court
denied defendant's motion to dismiss without prejudice for renewal of it
on a motion for summary judgment. See Hearing Transcript attached as Exh.
A to the Declaration of Roy Katriel in support of Plaintiff's Opposition
to Defendants' Motion for Summary Judgment ("Katriel Decl.") Defendants
have now filed a motion for summary judgment and plaintiff has filed a
Motion for Judgment on the Pleadings as to liability on counts II, IV, V,
VI, and VII of the First Amended Complaint.
A. Motion for Judgment on the Pleadings
After all parties have submitted their pleadings, any party may invoke
Federal Rule of Civil Procedure 12(c) and move for judgment on the
pleadings as long as consideration of the motion does not delay trial.
Fed.R.Civ.P. 12(c). "Judgment on the pleadings is proper when the moving
party clearly establishes on the face of the pleadings that no material
issue of fact remains to be resolved and that it is entitled to judgment
as a matter of law." Hal Roach Studios. Inc. v. Richard Feiner & Co.,
896 F.2d 1542, 1550 (9th Cir. 1989). The court accepts all allegations of
the nonmoving party as true. Doleman v. Meiji Mut. Life Ins. Co.,
727 F.2d 1480, 1482 (9th Cir. 1984). If the court reviews matters outside
the pleadings, the motion is properly treated as a motion for summary
judgment. Fed.R.Civ.P. 12(c). In deciding such a motion, the court may
also consider facts that are properly the subject of judicial notice.
Cf. MGIC Indem. Corp. v. Weismaa 803 F.2d 500, 504 (9th Cir. 1986).
Interpretation of a contract is a purely legal question which is
susceptible to a motion for judgment on the pleadings. Cf. Atel Financial
Corp. v. Quaker Coal Co., 321 F.3d 924, 925-26 (9th Cir.
2003)(interpretation of a contract is a pure question of law).
Defendants assert that plaintiff has not met the legal standard for
judgment on the pleadings. A plaintiff is not entitled to judgment on the
pleadings if the defendant's answer raises issues of fact or an
affirmative defense, which, if proved, would defeat plaintiff's
recovery. Owest Communications Corp. v. City of Berkeley. 208 F.R.D. 288,
291 (N.D. Cal. 2002)(plaintiff's motion on the pleadings can be granted
only if all affirmative defenses raised in answer are legally
insufficient). Both Borders and Amazon.com in their answers to the FAC,
raised the affirmative defenses that plaintiff lacked standing and that
he had suffered no antitrust injury. Plaintiff has not countered these
defenses in his motion.
In order to determine whether the plaintiff has "antitrust standing"
the court must evaluate the plaintiff's harm, the alleged wrongdoing by
the defendants and the relationship between them. Associated Gen.
Contractors of California. Inc. v. California State Council of
Carpenters. 459 U.S. 519. 5353 (1983): Knevelbaard Dairies v. Kraft
Foods. Inc., 232 F.3d 979, 987 (9th Cir. 2000). As discussed below,
plaintiff has made no showing that the alleged price-fixing, if analyzed
pursuant to the rule of reason would in fact be detrimental to
plaintiffs. On first blush it appears that section 4.3 of the Agreement
would lead to lower prices available to consumers on the Borders.com
website. Plaintiff has adduced no evidence that, but for Section 4.3
Amazon would have lowered its prices but did not do so because it would
have been obligated to list the lower prices on both the Borders.com
website and the Amazon.com website. In contrast, Amazon.com has
introduced evidence that despite Section 4.3 of the Agreement, Amazon.com
has lowered prices five times since July 2001. Kessel Decl. at ¶ 5;
Zapolsky Decl. Exh. T.
Nor has plaintiff demonstrated that he has suffered an "antitrust
injury." Injury that flows from aspects of a defendant's conduct that are
beneficial or neutral to competition is not "antitrust injury." MetroNet
Servs. v. U.S. West. 325 F.3d 1086 (9th Cir. 2003); Rebel Oil. 51 F.3d at
1433. Where the defendant's conduct harms the plaintiff without adversely
affecting competition generally, there is no antitrust injury. MetroNet
Servs. 325 F.3d 1086; Pool Water Prods. v. Olin Corp., 258 F.3d 1024,
1034-36 (9th Cir. 2001).
The court questions plaintiff's standing and whether plaintiff has
suffered an "antitrust injury." Nonetheless, the court will analyze the
B. Motion for Summary Judgment
Under Federal Rule of Civil Procedure 56, summary judgment shall be
granted "against a party who fails to make a showing sufficient to
establish the existence of an element essential to that party's case, and
on which that party will bear the burden of proof at trial . . . since a
complete failure of proof concerning an essential element of the
nonmoving party's case necessarily renders all other facts immaterial."
Celotex Corp. v. Catrett. 477 U.S. 317, 322-23 (1986); see also T.W.
Elec. Serv. v. Pacific Elec. Contractors Ass'a 809 F.2d 626, 630 (9th
The moving party bears the initial burden of Id. entifying those
portions of the record which demonstrate the absence of a genuine issue of
material fact. The burden then shifts to the nonmoving party to "go
beyond the pleadings, and by [its] own affidavits, or by the
`depositions, answers to interrogatories, or admissions on file,'
designate `specific facts showing that there is a genuine issue for
trial.'" Celotex. 477 U.S. at 324 (citations omitted); see also Anderson
v. Liberty Lobby. Inc., 477 U.S. 242, 248 (1986)(a dispute about a
material fact is genuine "if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party"). The moving party
discharges its burden by showing that the nonmoving party has not
disclosed the existence of any "significant probative evidence tending to
support the complaint." First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253.
The court's function on a motion for summary judgment is not to make
credibility determinations. See Andersoa 477 U.S. at 249. The inferences
to be drawn from the facts must be viewed in a light most favorable to
the party opposing the motion. See T.W. Elec. Serv., 809 F.2d at 631. In
an antitrust case, "if the factual context renders [plaintiff's] claim
implausible if the claim is one that simply makes no economic sense
[plaintiff] must come forward with more persuasive evidence to support
[his] claim than would otherwise be necessary." Matushita Electric
Industrial Co., Ltd, v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The
Id. ea that Amazon and Borders are trying to maintain some artificially
high price structure to the detriment of consumers is fairly ludicrous on
its face as both the Amazon and Borders websites list numerous third
party sellers of the same books Amazon and Borders are offering without
any attempt to regulate the prices offered by these third parties and
with the effect that these parties frequently offer lower prices than
those of offered by Amazon. See Graham Decl. and related exhibits.
C. Motion for a Continuance Under Federal Rule of Civil Procedure 56(f)
Pursuant to Federal Rule of Civil Procedure 56(f), upon a showing by
the party opposing a motion for summary judgment that it "cannot for
reasons stated present by affidavit facts essential to justify the
party's opposition," the court may deny or continue the motion for summary
judgment in order to permit that party an opportunity to obtain necessary
discovery. "Ordinarily, summary judgment should not be granted when there
are relevant facts remaining to be discovered, but the party seeking a
continuance bears the burden to show what specific facts it hopes to
discover that will raise an issue of material fact." Continental Maritime
v. Pacific Coast Metal Trades. 817 F.2d 1391, 1395 (9th Cir. 1987).
A Rule 56(f) motion should be granted where the party opposing summary
judgment makes a timely application that specifically Id. entifies
relevant information to be discovered, and there is some basis for
believing that such information actually exists. Visa Int'l Serv. Ass'n
v. Bankcard Holders. 784 F.2d 1472, 1475 (9th Cir. 1986). Granting of
such a motion is particularly appropriate where the Id. entified
information is the subject of outstanding discovery requests. Id.
I. The Antitrust Claims: Alleged Per Se Violations
Plaintiff's motion for judgment on the pleadings hinges primarily on
interpretation of two provisions of the Agreement: one regarding prices
and the other provision which limits Borders from engaging in other
online retailing pursuits during the time of the Mirror Site Hosting
Agreement. Plaintiff asserts that both of these provisions independently
constitute per se violations of 15 United States Code, section 1 ("the
Sherman Act"). The court will address each of these arguments in turn.
A. Allegations of Per Se Price Fixing
Section 1 of the Sherman Act forbids contracts, combinations, or
conspiracies in restraint of trade, including price-fixing agreements
between competitors. See 15 U.S.C. § 1. The Mirror Site Hosting Agreement
is without question, an "agreement." The question is whether the
Agreement is "unreasonable" under section 1. Am. Ad.Mgmt., 92 F.3d at
788. See also N'west Wholesale Stationers. Inc. v. Pac. Stationery and
Printing Co., 472 U.S. 284, 289 (1985). To determine whether the
agreement is unreasonable, the court must decide at the threshold whether
it is per se illegal or whether it must be analyzed under the "rule of
reason." Paladin Assoc., Inc. v. Montana Power Co., 328 F.3d 1145, 1155
(9th Cir. 2003).
Treating an agreement as per se illegal is appropriate only if the
agreement falls within the category of "agreements or practices which
because of their pernicious effect on competition and lack of any
redeeming virtue are conclusively presumed to be unreasonable and
therefore illegal without elaborate inquiry as to the precise harm they
have caused or the business excuse for their use."N'west Wholesale
Stationers. 472 U.S. at 289, 105 S.Ct. 2613. The decision to apply the
per se rule turns on "whether the practice facially appears to be one that
would always or almost always tend to restrict competition and decrease
output." Id. at 289-90. 105 S.Ct. 2613. See also Nat'l Collegiate
Athletic Ass'n v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 103-04,
104 S.Ct. 2948, 82 L.Ed.2d 70 (1984)("Per se rules are invoked when
surrounding circumstances make the likelihood of anticompetitive conduct
so great as to render unjustified further examination of the challenged
Price fixing occurs when two competitors jointly set prices for their
respective goods. Broadcast Music. Inc. v. Columba Broadcasting Sys.,
Inc., 441 U.S. 1, 9 (1979). Impermissible price-fixing arrangements are
not limited to agreements to charge uniform or Id. entical prices. See
e.g., United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 222
(1940)(combination with the purpose and effect of raising, depressing,
fixing, pegging or stabilizing the price of a commodity in interstate or
foreign commerce is illegal per se); Local 36 of Intern. Fisherman &
Allied Workers of Am. v. United States. 177 F.2d 320, 337 (9th
Cir. 1949) (same); In re Wheat Rail Freight Antitrust Litig.,
579 F. Supp. 517, 538 (N.D. Ill. 1984), aff'd 759 F.2d 1305 (7th Cir.
1985) (agreement which sets manner in which rates/prices are calculated
illegal price fixing).
Plaintiff alleges that the Agreement contains a "price fixing
arrangement," which arrangement, he alleges, is a per se violation of
Section 1 of the Sherman Act. The provision in question, Section 4.3 of
the Agreement provides that:
As between the Parties, Amazon.com or its Affiliates
will determine the prices and other fees and terms and
conditions (including without limitation, shipping and
handling) for all Products offered for sale through
the Mirror Site and the Amazon.com Site; provided, that
process, other fees, and terms and conditions for sale
of the Mirror Products through the Mirror Site will be
at least as favorable as the prices offered for each
of the same Mirror Products sold through the
Amazon.com site (other than any applicable taxes
required or chosen to be collected through the Mirror
Wilhelm Decl., Exh. B, at p.8 (Agreement § 4.3 (emphasis added)).
The parties agree that this section of the Agreement forbids Amazon
from selling a book on its own site at a price lower than the price for
which Amazon offers the book for sale at the www.Borders.com site. Beyond
this, the parties hotly contest the effect of this section. Plaintiff
interprets this language as a horizontal price-fixing term that is per
se unlawful. Neither party has cited to the court a case with a similar
type of arrangement.*fn6 While book-selling, including online
book-selling is not a new industry, the court is required in this case to
determine whether the per se analysis should apply to a ne method of
The court concurs that section 4.3 of the Agreement concerns prices.
However, the court rejects plaintiff's suggestion that because the
provision of the Agreement may have an affect on prices, that it is
automatically aper se illegal "price-fixing agreement." The court is not
persuaded by plaintiff's citations on this point to Catalano. Inc. v.
Target Stores. Inc., 446 U.S. 643 (1980); United States v. Masonite
Corp., 6 U.S. 2655 (1942); and General Cinema Corp. v. Buena Vista
Distribution Co., Inc., 532 F. Supp. 1244 (C.D. Cal. 1982). Although in
each of these cases per se price-fixing was found, none of the agreements
is sufficiently similar to the Mirror Site Hosting Agreement to be
persuasive. In Catalano competing wholesalers conspired to fix credit
terms offered to customers. See Catalano. 446 U.S. at 644-45. In
Masonite. the relevant contracts provided for specific minimum prices.
See Masonite. 316 U.S. at 271. In General
Cinema, the parties arranged to "split" rights of first negotiation for
new films. See General Cinema. 532 F. Supp. at 1256-57.
As the Supreme Court stated in BMI, "not all arrangements among actual
or potential competitors that have an impact on price are per se
violations of the Sherman Act or even unreasonable restraints." BMI, 441
U.S. at 23. In order for the court to apply the per se rule plaintiff
must convince the court that Amazon's agreement not to undercut the
prices it offers on behalf of its partner "threatens the `central nervous
system of the economy,' that is, competitive pricing." BMI, 441 U.S. at
23, quoting United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 226
Plaintiff takes many different runs at trying to explain how this
section amounts to price-fixing. Defendant and Plaintiff concur that a
company can unilaterally set the price of its own products. However,
plaintiff rejects the premise that Amazon.com can in fact make pricing
decisions unilaterally for the books offered on the two sites. Plaintiff
claims that Section 4.3 of the Agreement "limits the parties' discretion
to price products on the two sites." Pl. Opp. To Def's Motion for Summary
Judgment at 4:21-23.*fn7 Plaintiff argues that Amazon's discretion in
setting prices would end were Amazon to use that discretion to set a more
advantageous price for a book on its own website than it were to set on
the www.Borders.com site. Plaintiff takes this argument one step further
alleging that the Agreement is "a binding assurance that Amazon.com will
not price the books it sells on the www.Amazon.com website below a
certain threshold." Plaintiff's Reply Brief in Support of Motion for
Judgment on the Pleadings at 3:11 14. The court finds this last
interpretation to be a blatant misconstruction of Section 4.3. The court
finds that nothing in the Agreement would ban Amazon.com from selling
each and every book on its website for $1 as long as the same price were
listed on the Borders.com website.
Defendant counters that since all the books belong to Amazon, Amazon is
only setting prices for its own product. Defendants cite the BMI case in
defense of their Agreement. While the case at bar does have certain
similarities to the BMI case the facts of the BMI case are not
sufficiently similar to the current case to provide this court with an
easy answer. In BMI. the Supreme Court focused on the question of whether
the fees BMI and ASCAP set for blanket licensing agreements of individual
copyright owners' works constituted per se unlawful price-fixing. The
Supreme Court upheld the blanket licensing fee based on the Court's
[T]he blanket-license fee is not set by competition
among individual copyright owners, and it is a fee for
the use of any of the compositions covered by the
license. But the blanket license cannot be wholly
equated with a simple horizontal arrangement among
competitors. ASCAP does set the price for its blanket
license, but that license is quite different from
anything any individual owner could issue. The
individual composers and authors have neither agreed
not to sell individually in any other market nor use
the blanket license to mask price fixing in such other
markets. Moreover, the substantial restraints placed
on ASCAP and its members by the consent decree must
not be ignored.
BMI at 23-24.
The Agreement between Amazon and Borders is substantially different
from the agreement between ASCAP and BMI and the composers; the service
offered by the blanket license fee was both unique to the music industry
and had been tested many times over in prior litigation. Thus, the
Supreme Court's holding in BMI does not mandate a particular conclusion
regarding the Mirror Site Hosting Agreement.
Plaintiff avers that the Agreement constitutes horizontal price-fixing
since it "gives Borders the right to control the minimum price at which
books will be sold, even when those books do not belong to Borders." Id.
at 7:13-15. Plaintiff looks to Arizona v. Maricopa County Medical
Society, 457 U.S. 332 (1982). for support that an agreement which sets an
outside price range is a "naked restraint" on trade.
In Maricopa County, a group of Arizona doctors agreed through their
affiliation in a medical foundation to adhere to a fee schedule
establishing a maximum payment that any participating physician could
collect from his or her patients who had medical insurance. Nothing
prevented the physicians from charging less than the maximum, but they
could never charge more that the agreed upon upper limit. The Supreme
Court disallowed the agreement, finding it per se price-fixing. Id. at
The court does not find that the Agreement at issue here contains the
same constrictions as the agreement in Maricopa County. Read literally,
the Agreement does not mandate a minimum price as plaintiff suggests.
Conceivably under the Agreement Amazon could sell a book at a lower price
on the Borders.com website than the price it would list the same book for
on its own Amazon.com site. Although there would be no apparent business
reason for doing so, this is still a relevant consideration in
determining whether the provision "fixes" prices. The court finds that
the Agreement does not set a minimum, maximum or range for the prices
Amazon.com can charge for the books it sells on the web sites. The court
concurs with Amazon that it has unfettered discretion to choose a price
at which a book will be sold.
The court further finds that the Agreement in any no way affects the
prices that Borders can sell books for at its brick-and-mortar stores or
the price that Borders sets for books to be purchased on the
Borders.com website for books which will be picked up at the store; nor
does the Agreement affect the price Borders can list the book for on its
own Bordersstores.com site to be reserved and purchased in the store.
Thus the court finds that § 4.3 does not constitute per se price-fixing.
B. Allegations that Section 4.3 is at Most an Ancillary Restraint
Defendants propound the same argument both to defend against
plaintiff's motion for judgment on the pleadings and in seeking summary
judgment on their favor on the Section 1 claim i.e., that the Agreement
is procompetitive and thus permissible under a rule of reason analysis.
Defendants assert that "even if Section 4.3 could be characterized as
affecting prices, it would still not mentper se condemnation because it
is an ancillary provision within a procompetitive agreement between
Amazon.com and Borders. Section 4.3, defendants argue, is a small part of
an arrangement under which Amazon.com agrees to operate and maintain the
Mirror Site. An agreement will be reviewed under the rule of reason where
the agreement on price is ancillary to the overall agreement. Polk
Bros., Inc. v. Forest City Enterprises. Inc., 776 F.2d 185, 188-89 (7th
Cir. 1985)(if at the time ancillary restraint was adopted it may promote
the success of a more extensive cooperation, then the rule of reason is
applied). In Polk Brothers. two retailers agreed to share space to provide
customers with a full line of home supplies. Polk Bros, sold appliances,
Forest Enterprises sold building materials. As part of their agreement,
the parties negotiated a fifty year restrictive covenant specifying
products that each retailer could and could not sell. Id. at 187. The
trial court found this arrangement to be a per se violation of the
antitrust laws, but the Court of Appeal reversed holding that the
horizontal restriction was ancillary to the agreement and therefore
subject to the rule of reason. Id. at 188. The restriction, the court
found, was intended to prevent one party "free-riding" off the other.
Id. at 190.
Defendants argue that the same analysis applies here. Were Amazon.com
able to offer lower prices for books on its own website than it did on
Borders.com, then shoppers originally lured to the Borders.com site by
the Borders name (its contribution to the Agreement) could be induced to
purchase the book at a lower price from Amazon.com thus cheating Borders
out of its commission. As in Polk Bros, section 4.3 of the Agreement
prevents Amazon.com from free-riding off of Borders. See also Paladin
Assoc., Inc. v. Montana Power Co., 328 F.3d 1145, 1155 (9th Cir. 2003)
and Rother v. Storage and Van Co. v. Atlas Van
Lines. Inc. 792 F.2d 210, 229 (D.C. Cir. 1986). As the Polk Bros case
makes clear, the court may look beyond the language of the agreement to
the context in which the agreement was entered to determine whether the
provision is ancillary. Polk Bros. 776 F.2 at 189. Looking beyond merely
the language of the Mirror Site Hosting Agreement to the conduct of the
parties and the context in which the agreement was entered into, the court
concurs that § 4.3 is an ancillary provision.
Once the court has determined that the provision is ancillary, then the
rule of reason applies. The rule of reason weighs legitimate
justifications for a restraint against any anticompetitive effects. In a
rule of reason analysis, the court must review all the facts, including
the precise harms alleged to the competitive markets, and the legitimate
justifications provided for the challenged practice, and determine
whether the anticompetitive aspects of the challenged practice outweigh
its procompetitive effects. See NVest Wholesale Stationers. 472 U.S. at
290-93; see also Cal. Dental Ass'n v. FTC. 224 F.3d 942, 947 (9th Cir.
2000) (on remand from the Supreme Court). Amazon.com's agreement with
Borders regarding pricing on the two websites is anticompetitive if it
"[harms] allocative efficiency and raises the prices of goods above
competitive levels or diminishes their quality" Rebel Oil Co. v. Atl.
Richfield Co., 51 F.3d 1421, 1433 (9th Cir. 1995). Currently, the court
does not have before it sufficient evidence to make a determination on
the issue of whether the Agreement has an anti-competitive effect.
C. Allegations of an Impermissible Horizontal Market Allocation
In the FAC, plaintiff alleges that the provision of the Agreement which
limits Border's online activity is a horizontal market division and per
se illegal. FAC ¶¶ 46-57; 65-72. Interestingly, plaintiff does not raise
this issue at all in his motion for judgment on the pleadings, but
defendants raise the issue in their motion for summary judgment.
Amazon.com is the seller of record and inventory supplier of any books
sold online either through the www.Amazon.com or the www.Borders.com
website. See Agreement §§ 4.2.1 and 4.3. Section 6.1 of the Agreement
prohibits Borders from selling any book online directly or through an
affiliation with another party. Section 6.1 provides in pertinent part:
Commencing on the Launch Date and thereafter during
the Term, Borders.com will not, and will cause its
Affiliates not to, (a) operate, endorse, link to from
the Borders.com Hosted Sites, or promote the
e-commerce functionality of any web-based or online
service that permits Persons not located in a Borders
Physical Outlet to purchase products for shipment to a
destination not located in a Borders Physical Outlet
(e.g. Yahoo! Shopping,
Shop@AOL, or barnesandnoble.com); (b) sell or
distribute products for compensation through any
web-based or online service that in either case
permits Persons not located in a Borders Physical
Outlet to purchase products (e.g. Yahoo! Shopping,
Shop@AOL, or barnesandnoble.com).
Agreement § 6.1. (Emphasis added).
Thus, plaintiff asserts, the parties have allocated the online
bookselling market venue solely to Amazon.com, leaving Borders to sell
books only in the brick-and-mortar venue. Plaintiff claims that as a
result of the Agreement two competitors have agreed to divide up a
"market" and that this is per se impermissible. Palmer v. BRG of
Georgia. 498 U.S. 46 (1990)(per curiam); United States v. Brown.
936 F.2d 1042, 1045 (9th Cir. 1991)
Defendants propose several analyses as to why this provision is not
illegal. Defendants assert that the Agreement does not restrict any other
sales activity of Borders such as off-line sales of books, use of the
Bordersstores.com website for shoppers to reserve books for in-store pick
up or Amazon.com's right to build brick-and-mortar stores if it chose.
Defendants also argue that the Agreement involves "only an ancillary
restraint in the context of an integrative venture with procompetitive
goals and effects" and should thus be judged according to the "rule of
reason." Polk Bros., Inc. v. Forest City Enterprises. Inc., 776 F.2d 185,
188-89 (7th Cir. 1985).
Plaintiff asserts that the holding of Palmer v. BRG of Georgia.
498 U.S. 46 (1990)(per curiam) compels a finding of illegal per se market
allocation. Plaintiffs in Palmer were purchasers of Georgia Bar review
courses. Prior to entering into an agreement, defendants BRG and HBJ were
competitors each offering bar review courses in Georgia. The Palmer
defendants entered into an agreement whereby HBJ agreed to turn its
Georgia bar review operations over to BRG and to grant BRG an exclusive
license to market bar review courses under HBJ's "BarBri" trade name.
Id. at 47. The Palmer plaintiffs moved for partial summary judgment. The
Supreme Court reversed denials of summary judgment by both the trial and
appeals court, and found the agreement per se unlawful. The Court held
Here, HBJ and BRG had previously competed in the
Georgia market; under their allocation agreement, BRG
received that market, while HBJ received the remainder
of the United States. Each agreed not to compete in
the other's territories. Such agreements are
anticompetitive regardless of whether the parties
split a market within which both do business or
whether they merely reserve one market for one and
another for the other. Thus, the 1980 agreement
between HBJ and BRG was unlawful on its face
Id. at 49-50.
Plaintiff argues that the same rationale applies here because under the
Agreement Borders exited the "online book sales market segment and
allocate[d] that market segment Amazon.com only." PI. Opp. at
10:24-11:2. (emphasis added) Before the court can determine whether
section 6.1 constitutes an agreement to split a market, the court must
determine what the relevant market is. In the Palmer case, the question
was very straightforward, the market was the State of Georgia. Here the
question is not so clear. No conclusive evidence has been adduced either
by plaintiff or by defendants regarding the appropriate market
definition. Amazon.com refers to a survey it conducted to support its
allegation that consumers who purchase books online will also be just as
likely if not more so to purchase books in a bricks-and-mortar book store
and thus the "market" is books sold in all venues. See Kessel Decl. at ¶¶
15-16.*fn9 (Amazon.com commissioned study by Lewis Mobilio which showed
that Amazon.com customers purchased books both online and in
brick-and-mortar stores). If this is correct, then the court would find
no clear per se market allocation. Plaintiff contests the admissibility
of this evidence yet offers nothing but unsupported allegations that
there is a separate and distinct "online market segment." Without such
evidence the court is precluded from finding a per se violation such as
that found in Palmer.
Defendant asserts that this provision is at most an ancillary restraint
which prevents "free-riding" by Borders. Defendants also claim that the
exclusivity provision is "narrowly limited to the specific area in which
Amazon.com and Borders agreed to collaborate online sales of books for
direct home delivery." Defs' Reply at 10:1-3, citing to Rothery Storage.
The court finds this last contention troubling. If the provision is in
fact intended to prevent free-riding i.e. allowing Borders to dilute
its name recognition in the on-line market, then the provision goes
beyond the "narrow tailoring" defendant asserts. Under section 6.1 during
the term of the agreement Borders could not even provide overstock books
to another online marketer even if there were no mention online that
these books came from Borders. The court has insufficient evidence on
this issue to make a determination at this time. Therefore, Defendants'
Motion for Summary Judgement on this issue is denied.
II. Claims Regarding an Alleged Conspiracy to Monopolize
Count IV of the FAC alleges that defendants entered into a conspiracy
to monopolize the market in violation of Section 2 of the Sherman Act,
15 U.S.C. § 2. The elements of this claim are: (1) a combination,
conspiracy, or agreement; (2) specific intent to monopolize; and (3) an
overt act to further the conspiracy. Paladin Assoc., Inc. v. Montana
Power Co., 328 F.3d 1145, 1155 (9th Cir. 2003). citing United States v.
Yellow Cab Co., 332 U.S. 218. 224-25 (1947).
The existence of an agreement is not in dispute. As noted above, proof
of a conspiracy requires proof of a specific intent to monopolize.
Plaintiff's sole evidence of intent is his alleged "proof of an
underlying violation of Section 1 of the Sherman Act." Pl. Motion at
13:20-22. Because the court has rejected plaintiff's arguments regarding
per se violations and has not conclusively determined any Section 1
violation, plaintiff has not, at this stage of the proceedings, proven
intent. Therefore, plaintiff's motion for judgment on the pleadings on
this cause of action is denied.
III. Alleged Clayton Act Violations
Each party argues that the court should rule in its favor on Count V of
the FAC the Clayton Act Claim. Count V of the FAC alleges that
defendants have violated Section 7 of the Clayton Act, 15 U.S.C § 18.
("Section 7"). See FAC ¶¶ 79-82. The language of Section 7 makes it
unlawful for a firm to "acquire" the equities or assets of another firm
where the necessary anti-competitive effects occur but it says nothing
about liability for the seller. As a result, "a [S]ection 7 claim for
monetary damages, as a matter of law, does not exist against the person
or entity selling the assets but rather must be brought against the
acquiring person or entity." Arbitron Co. v. Tropicana Prod. Sales. 1993
WL 138965, at *4 (S.D.N.Y. Apr. 28, 1993); see also United States v.
Coca-Cola Bottling Co., 575 F.2d 222, 230 (9th Cir. 1978) (stating that
sellers in Section 7 cases are not technically violators of the law);
Fricke-Parks Press. Inc. v. Fang. 149 F. Supp.2d 1175, 1185 (N.D. Cal.
2001) (stating that Section 7 does not cover claims against sellers for
damages); Tim W. Koerner & Assocs., Inc. v. Aspen Labs., Inc.,
492 F. Supp. 294, 300 (S.D. Tex. 1980), aff'd. 683 F.2d 416 (5th Cir.
1982) (holding that "by its express terms, [S]ection 7 of the Clayton Act
is directed only against the acquiring corporation."). As a result, there
can be no claim as a matter of law against Borders as there is no
indication that Borders acquired an asset pursuant to the Agreement. The
court will however, review the claim as it stands against defendant
Section 7 of the Clayton Act is the principal antitrust statute
applicable to mergers and acquisitions. It provides in relevant part
No person engaged in commerce or in any activity
affecting commerce shall acquire, directly or
indirectly, the whole or any part of the stock or
other share capital and no person subject to the
jurisdiction of the Federal Trade Commission shall
acquire the whole or any part of the assets of another
person engaged also in commerce or in any activity
affecting commerce, where in any line of commerce or
in any activity affecting commerce in any section of
the country, the effect of such acquisition may be
substantially to lessen competition, or to tend to
create a monopoly.
15 U.S.C. § 18 (emphasis added). For those subject to the jurisdiction of
the Federal Trade Commission, the following transactions are within the
reach of the statute: (1) both of the participants the acquiring firm
and the acquired firm must be engaged either in interstate or foreign
commerce or an activity affecting such commerce; (2) the challenged
transaction must constitute an "acquisition" within the meaning of
Section 7; (3) the acquisition must be of "stock" or "assets"; (4) the
acquisition may be indirect as well as direct; and (5) the acquisition may
be of all or any part of the stock or assets of the acquired person. 2
Julian O. von Kalinowski et al., Antitrust Laws and Trade Regulation, §
29.02 [l][c] (2d ed. 2003).
A. The Acquisition Issue
Previously, defendants brought a Motion to Dismiss, claiming that
plaintiff had failed to allege any facts or allegations that the Agreement
constituted a merger or its functional equivalent within the purview of
Section 7 and alleging that the Agreement between Amazon.com and Borders
constitutes an "acquisition" of "asset(s)" within the meaning of Section
The words "acquire" and "acquisition" are not defined in Section 7 or
elsewhere in the Clayton Act. In keeping with the broad mandate of
antitrust laws, however, courts have generally adopted a flexible
approach in determining the scope of this language. Addamax Corp. v. Open
Software Found. Inc., 888 F. Supp. 274, 285 (D. Mass. 1995) (citing
United States v. Philadelphia Nat'l Bank. 374 U.S. 321, 337-339 (1963)):
see also United States v. Columbia Pictures Corp., 189 F. Supp. 153,
181-82 (S.D.N.Y. 1960) (holding that the words "acquire" and "assets" are
generic terms, which are to be given liberal interpretation by the
The term "asset," as used in Section 7, has been broadly interpreted.
It has been construed to include, among other things, patents, SCM Corp.
v. Xerox Corp., 645 F.2d 1195, 1205 (2d Cir. 1981), cert denied.
455 U.S. 1016 (1982); trademarks, United States v. Beatrice Foods Co.,
344 F. Supp. 104, 114 (D. Minn. 1972), aff'd on other grounds.
493 F.2d 1259 (8th Cir. 1974), cert. denied, 420 U.S. 961
(1975); and even sales routes and sales volumes, United States v.
ITT-Continental Baking Co., 485 F.2d 16, 20 (10th Cir. 1973), rev'd on
other grounds. 420 U.S. 223 (1975).
At the April 7, 2002 hearing on defendants' Motion to Dismiss, this
court ruled that plaintiff's allegations on the Section 7 claim were
sufficient to put defendants on notice as to the nature of his claims.
See Katriel Decl., Exh A (April 7, 2003 Hearing Transcript at
22:9-23:5). The court did not, however, preclude defendants from raising
this argument again as part of a motion for summary judgment. Defendants
have, in fact, now made a claim for summary judgment on the Section 7
claim, and plaintiff has moved for judgment on the pleadings on this
claim as well.
Plaintiff makes two arguments as to how the Agreement constitutes an
"acquisition of assets" within the meaning of Section 7. First, plaintiff
argues that in defendants' answer to the FAC, defendants "concede that,
pursuant to their transaction, Borders granted Amazon.com the legal right
to redirect users of the www.Borders.com website to Amazon.com's
www.Amazon.com website." Pl. Mot. At 17:10-14 citing to Defendants'
Answers at ¶ 35. Plaintiff then asserts that this legal permission is
equivalent to the grant of a license from Borders to Amazon.com for the
use of Border's website and thus falls into the definition of an
acquisition as set out in United States v. Columbia Pictures Corp.,
189 F. Supp. 153, 181-82 (S.D.N.Y. 1960)(Section 7 imposes no specific
method of acquisition, rather with the end result of a transfer of a
sufficient part of the bundle of legal rights and privileges to give the
transfer economic significance and a proscribed adverse effect.).
Many courts, including this one, have deferred to the ruling in
Columbia Pictures. 189 F. Supp. 153, as guidance for the interpretation
of Section 7. See Nelson v. Pacific Southwest Airlines. 399 F. Supp. 1025,
1028 (S.D. Cal. 1975): see also ITT-Continental Baking. 485 F.2d at 20:
Mr. Frank. Inc. v. Waste Mgmt. Inc., 591 F. Supp. 859, 866 (N.D. Ill.
1984); Southern Concrete Co. v. United States Steel Corp., 394 F. Supp. 362,
374 (N.D. Ga. 1975), affd. 535 F.2d 313, reh'g denied. 540 F.2d 1085 (5th
Cir. 1976), cert. denied. 429 U.S. 1096 (1977).
In Columbia Pictures. 189 F. Supp at 181-82, Screen Gems, Inc., a
wholly owned subsidiary of Columbia, was granted the exclusive right to
distribute for fourteen years approximately 600 feature films owned by
Universal Pictures Company, Inc. The court held that such an agreement
constituted an acquisition in light of Section 7:
As used here, the words `acquire' and `assets' are
not terms of art or technical legal language. In
the context of this statute, they are generic,
imprecise terms encompassing a broad spectrum of
transactions whereby the acquiring person may
accomplish the acquisition by means of purchase,
assignment, lease, license or otherwise . . .
Id. at 182.
Courts have held that there may be an "acquisition" within the scope of
Section 7 in cases of a lease or license. See United States v.
Archer-Daniels Midland Co., 584 F. Supp. 1134 (S.D. Iowa 1984) (operating
lease); Columbia Pictures. 189 F. Supp. 153 (long term exclusive
license). In fact, one court has held that the obtaining of a local
delivery route in the apparent absence of consideration was an
"acquisition" under Section 7. United States v. ITT-Continental Baking
Co., 485 F.2d 16, 20 (10th Cir. 1973), rev'd on other grounds. 420 U.S. 223
Plaintiff argues that Section 9.1 of the Agreement offers an
independent basis for finding an "acquisition." Section 9.1 provides
As between the Parties: (a) Amazon.com reserves all
right, title and interest in and to the Amazon.com
Site, the Mirror Site (excluding all Borders.com
Intellectual Property), and the Amazon.com
Intellectual Property, together with all Intellectual
Property Rights associated therewith and no title or
ownership of any of the forgoing is transferred, or.
except as expressly set forth in Section 9.2. licensed
to Borders.com. or any other Person pursuant to this
Ex. A to Kolbe Decl. At p. 14, § 9.1 (emphasis added).
Plaintiff asserts that Section 9.1 reallocates ownership of the
Borders.com website from Borders to Amazon.com. In Columbia Pictures. 189
F. Supp. at 183, the court stated that "asset" should be construed to
mean anything of value. In the case at bar, there is no question that
www.borders.com has value. As compensation for the arrangement, Borders
obtains a percentage of the transaction revenues generated from the
purchase of products through the site. Id. § 7.2. Accordingly, the website
is an "asset" pursuant to the Clayton Act.
Defendants contend that the no acquisition has taken place and that the
Agreement is merely a straightforward contract in which Amazon agrees to
independently design, host, operate and maintain a new website accessible
through the www.borders.com URL. The court need not determine this issue
as plaintiff cannot in any event demonstrate the necessary
B. The Issue of Anticompetitive Effect
Assuming arguendo that the Agreement constituted a merger or
acquisition, defendant claims that the Agreement poses no violation of
Section 7 because plaintiff cannot prove that the Agreement may
"substantially . . . lessen competition, or . . . tend to create a
monopoly." 15 U.S.C. § 18. Plaintiff argues that the standard for showing
an anticompetitive effect is quite minimal. "Section 7 is an incipiency
statute that prohibits transactions even before any anticompetitive harm
occurs." Pl. Mot. At 18:12-15. Still, plaintiff must show that the
"merger create[s] an appreciable danger of [anticompetitive] consequences
in the future. A predictive judgment, necessarily probabilistic and
judgmental rather than demonstrable is called for." California v. Sutter
Health Sys., 130 F. Supp.2d 1109, 1118 (N.D. Cal. 2001). quoting Hospital
Corp. of America v. Federal Trade Comm'n, 807 F.2d 1381, 1389 (7th Cir.
1986). Evidence of a "mere possibility" of prohibited restraint or
tendency toward monopoly is insufficient. FTC v. Consolidated Foods
Corp., 380 U.S. 592, 598 (1965).
In order to determine whether there is anticompetitive activity as a
threshold matter plaintiff must define the relevant market. The parties
do not agree on the relevant market. Plaintiff urges that the market is
online sales, defendants look to industry-wide sales. While defendants
argue for a wider market definition they assert that even applying
plaintiff's proposed definition of online book sales, Borders.com
represented a de minimis share of the market, about 1% of all book sales
through online sales channels. See Kessel Decl. at ¶ 14. As a matter of
law, "foreclosure of a de minimis share of the market will not tend
`substantially to lessen competition.'" Brown Shoe Co. v. United States.
370 U.S. 294, 329 (1962).
Plaintiff counters that the defendants have only given gross total
estimates as part of the declaration of Steven Kessel and thus the court
cannot rule on this issue as part of a motion for summary judgment since
it asserts defendants' sales figures are based on "inadmissible hearsay."
Pl. Opp. at 17:13-19, citing Fed.R.Civ.P. 56(e)(summary judgment
affidavit cannot recite hearsay"). Plaintiff, correctly anticipating that
on reply defendants would bolster their evidence argues that plaintiff is
entitled to cross-examine defendants on their evidence and to take
discovery on this point. Plaintiff therefore requests a continuance under
Rule 56(f). See Katriel Decl. at ¶ 3. While the court suspects that
ultimately discovery will in fact show that Border's share of the market
was de minimis, it concurs with plaintiff that summary judgment is not
appropriately granted based on unsubstantiated "estimates," especially at
this early stage of the proceedings. Thus the court grants
plaintiff's request for a continuance on this claim so that the parties
may engage in discovery. The court will forbear ruling on defendants'
motion for summary judgment at this point.
The court is not persuaded, however that plaintiff has adduced any more
reliable evidence on this claim in its motion for judgment on the
pleadings. Plaintiff asserts that he may show "merely that the size of the
entities involved `makes them suspect in light of Congress' design to
prevent undue [economic] concentration.'" Pl. Mot. For Judgment on the
Pleadings at 19:1-7, quoting Domed Stadium Hotel. Inc. v. Holiday Inns,
Inc., 732 F.2d 480, 492 (5th Cir. 1984). The "evidence" plaintiff relies
on to demonstrate that the Agreement is suspect is Amazon.com's public
statement that it is the "Earth's Biggest Bookstore" and "the leading
online retailer of books" and that Borders is the largest operator of
mall-based bookstores. Leaving aside for the moment the fact that
plaintiff is switching relevant market definitions mid-stream (online
books vs. all books sales), these alleged admissions in no way constitute
evidence on which this court would grant a motion for judgment on the
Moreover, plaintiff's claim that Borders.com was becoming a force to be
reckoned with based on its revenue growth rate insults the court's
intelligence. Firstly the revenue growth rate declined dramatically from
289 percent in 1999 to 53.1 percent in 2000, at the same time that
Borders.com's losses increased. Since Borders.com sold such a small
relative number of books online, a large internal percentage increase
does not correlate with a large increase in market share for online book
IV. Liability under State Law Claims
Liability on the state law claims is derivative of the federal
antitrust claims. Plaintiff alleges that defendants were unjustly
enriched at the expense of plaintiff and members of the class who made
purchases from defendants during the class period by entering into the
Agreement and by engaging in anti-competitive practices. FAC ¶ 90.
Plaintiff further contends that given such unlawful conduct, plaintiff is
entitled to the disgorgement by defendants of their ill-gotten gains. FAC
Defendants argue that there is no state law liability because there is
no federal liability. Although the court has not made a final
determination on the federal law claims, an independent basis exists for
dismissing the unjust enrichment claim.
Plaintiff cannot assert an express contract between him and one of the
defendants in order to establish standing, while also bringing a claim
for unjust enrichment. A plaintiff may recover for unjust enrichment only
where there is no contractual relationship between the parties.
Under California law, unjust enrichment is an action in
quasi-contract. Paracor Fin, v. Gen. Elec. Capital Corp., 96 F.3d 1151,
1167 (9th Cir. 1996). An action based on quasi-contract cannot lie where
a valid express contract covering the same subject matter exists between
the parties. Id. (citing Wal-Noon Corp. v. Hill. 45 Cal.App.3d 605. 613
(1975): see also Lance Camper Mfg. Corp. V. Republic Indem. Ca,
44 Cal.App.4th 194, 203 (1996).
Plaintiff's unjust enrichment claim expressly incorporates by reference
the allegation that plaintiff "purchased books directly from at least one
of the [d]efendants." FAC ¶ 10. Plaintiff is claiming restitution for
overpayments made by himself and class members in their purchases of
books from Amazon or Borders, which resulted from defendants' alleged
unlawful practices. These damages result from the direct purchase which,
under the California Commercial Code, creates an express contract between
the buyer and seller. See Cal. Com. Code §§ 2106(1) & 2204(1).
Accordingly, a valid express contract covering the same subject matter
exists between the parties, and therefore an action in quasi-contract is
inappropriate. It should be noted that plaintiff contends that he should
nevertheless be permitted to plead unjust enrichment in the alternative.
Such an alternative claim might be stated if in count eight plaintiff
alleged that no express agreement existed between plaintiff and either
defendant. Instead, plaintiff has pleaded the opposite and relies on that
contract as the basis for standing in the case at bar. See FAC ¶ 10.
Even though Rule 8(e)(2) of the Federal Rules of Civil Procedure allows a
party to state multiple, even inconsistent claims, it does not alter a
substantive right between the parties and accordingly does not allow a
plaintiff invoking state law to an unjust enrichment claim while also
alleging an express contract. See, e.g., New Paradigm Software Corp. v.
New Era Networks. Inc., 107 F. Supp.2d 325, 329 (S.D.N.Y. 2000); Allied
Vision Group. Inc. v. RLI Professional Techs., Inc., 916 F. Supp. 778,
782 (N.D. Ill. 1996); Klutsv v. Taco Bell Corp., 909 F. Supp. 516, 521
(S.D. Ohio 1995). As a result, plaintiff cannot assert his unjust
enrichment claim in the alternative.
Because plaintiff cannot allege in good faith, while maintaining his
other claims, that no contract exists between himself and either Amazon
or Borders, this court dismisses plaintiff's unjust enrichment claim
without leave to amend. See, e.g., Samuels v. Old Kent Bank. 1997 WL
458434, at *15 (N.D. Ill., Aug. 1, 1997).
As set out in detail above, the court finds that § 4.3 does not
constitute per se price-fixing. The court further finds that § 4.3 is an
ancillary provision, however, currently the record is not sufficiently
developed for the court to determine whether the Agreement has an
anti-competitive effect. Nor does the court have sufficient evidence
before it to rule on defendants' motion for summary judgment on the issue
of whether the Agreement constitutes an impermissible horizontal market
Plaintiff's motion for judgment on the pleadings on claims of an
alleged conspiracy to monopolize the market is DENIED as plaintiff has
not, at this stage of the proceedings, proven intent. The court also
DENIES plaintiff's motion for judgment on the pleadings on the alleged
Clayton Act violations, as plaintiff has not demonstrated on the record
before the court sufficient anti-competitive effect. The court also
DISMISSES Plaintiff's state law unjust enrichment claim.
The issue of whether plaintiff has standing by reason of having
suffered sufficient antitrust injury is not clear from the record.
Therefore the parties are requested to address this issue. Plaintiff
shall file within twenty-one (21) days of the date of this order a brief
not to exceed 15 pages addressing the issue of antitrust injury.
Twenty-one (21) days thereafter defendants shall respond also in a brief
not to exceed 15 pages. There will be no reply briefs. The court will
then set a further hearing on this matter. Depending upon the court's
resolution of the antitrust injury issue or if after the hearing the
court is still not able to determine this issue conclusively, the court
may ask the parties to conduct a damage study.
IT IS SO ORDERED.