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Lorenzo v. Qualcomm Inc.

August 10, 2009

CHRISTOPHER LORENZO, SUING INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
QUALCOMM INCORPORATED, A DELAWARE CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Hayes, Judge

ORDER

The matter before the Court is the Motion to Dismiss the First Amended Complaint (Doc. # 24).

Background

On November 18, 2008, Plaintiff Christopher Lorenzo initiated this action by filing a complaint (Doc. # 1). The complaint challenged the lawfulness of Qualcomm's licensing practices with respect to its intellectual property used for Code Division Multiple Access ("CDMA") wireless technology. The complaint alleged the following claims for relief: (1) violation of California's Cartwright Act, section 16720, et seq., of the California Business and Professions Code; (2) violation of California's Unfair Practices Act ("UPA"), 17000, et seq., of the California Business and Professions Code; (3) violation of California's Unfair Competition Law ("UCL"), section 17200, et seq., of the California Business and Professions Code; (4) equitable and injunctive relief pursuant to section 16 of the Clayton Act; (5) common law monopoly; and (6) unjust enrichment.

On March 3, 2008, this Court issued an order granting a motion to dismiss filed by Qualcomm (Doc. # 20). The Court concluded that Plaintiff lacked standing under the Clayton Act because "Plaintiff's injury as alleged in the Complaint is too remote from Qualcomm's alleged antitrust violations to support standing under the Clayton Act;" and "the Complaint fails to allege sufficient facts to support a finding that Plaintiff's alleged injury is inextricably intertwined with Qualcomm's unlawful conduct so as to fit within the narrow exception to the market participant requirement." March 3 Order, p. 11 (internal quotations omitted). The Court concluded that "Plaintiff's injuries as alleged in the Complaint are too remote to support standing under the Cartwright Act because Plaintiff's injuries occurred in a different market from the allegedly anticompetitive conduct, Plaintiff's injuries are separated by at least three intermediaries to the antitrust violation, and Plaintiff's injuries were not the direct result of Qualcomm's allegedly unlawful conduct." Id. at 13. With respect to the claim for violation of the UCL, the Court concluded "that Plaintiff has failed to satisfy the second prong of the test for standing under the UCL because the Complaint does not allege that Plaintiff relied on any misrepresentation made by Qualcomm." Id. at 15. The Court concluded that the complaint failed to state a claim for violation of the UPA because the complaint failed to allege facts to support a finding that Qualcomm has secretly allowed unearned discounts from purchasers. The Court concluded that the complaint failed to state a claim for common law monopolization because a claim for common law monopoly is not cognizable under California law. The Court concluded that the complaint failed to state a claim for unjust enrichment because a cause of action for unjust enrichment is not cognizable under California law, and the complaint failed to allege any contractual or quasi-contractual relationship between Plaintiff and Qualcomm. The Court dismissed the complaint with leave to amend.

On April 2, 2009, Plaintiff filed the First Amended Complaint ("FAC"), which is the operative pleading in this case (Doc. # 22). The FAC alleges the following claims for relief:

(1) violation of the Cartwright Act; (2) violation of the UPA; and (3) violation of the UCL. The allegations with respect to the first claim for relief for violation of the Cartwright Act in the FAC are essentially identical to the allegations in the original complaint, except that the FAC also alleges:

Qualcomm's CDMA licensing practices have proximately caused antitrust injury to Plaintiff and other members of the CDMA Device and CDMA Service Classes and threaten additional antitrust injury if it is allowed to continue. This antitrust injury consists of damages from supracompetitive prices - which are passed down from Qualcomm's licensees to CDMA vendors, including cellular carriers, to end consumers of CDMA devices and cellular services - as well as impaired non-price competition in the form of deterred innovation.

Id., ¶ 71. The allegations with respect to the second claim for relief for violation of the UPA are identical to the allegations supporting the UPA claim in the original complaint. With respect to the third claim for relief for violation of the UCL, the FAC contains the following additional allegations: The FAC alleges that

[i]n reliance on Qualcomm's representation to offer its licensing on FRAND terms, standard-setting organizations adopted CDMA technology that incorporated Qualcomm's 'essential' patented technology. As a result of Qualcomm's failure to abide by its representations and commitment to licensing on FRAND terms, Plaintiff and other end users and consumers paid supracompetitive prices for the purchase of their CDMA-compliant devices and/or services. These supracompetitive prices were proximately caused by Qualcomm's misconduct and would not have been paid by consumers but for Defendant's misrepresentation and anticompetitive acts.

Id., ¶ 89; see ¶¶ 91-97. The FAC alleges that "[h]ad Plaintiff known that Defendant's anticompetitive conduct had resulted in supracompetitive prices in the cost of his Palm Treo 700Wx and Blackberry Curve cellular handsets, he would not have purchased those phones." Id., ¶ 96.

On April 20, 2009, Qualcomm filed the Motion to Dismiss the FAC. Qualcomm moves to dismiss the FAC due to lack of standing and for failure to state a claim pursuant to Rules 12(b)(1), 12(b)(6), and 17 of the Federal Rules of Civil Procedure. On May 18, 2009, Plaintiff filed the Opposition (Doc. # 25). On June 26, 2009, Qualcomm filed the Reply (Doc. # 28). On July 6, 2009, the Court heard oral argument (Doc. # 29).

Standard of Review

A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the pleadings. See De La Cruz v. Tormey, 582 F.2d 45, 48 (9th Cir. 1978). A complaint may be dismissed for failure to state a claim under Rule 12(b)(6) where the factual allegations do not raise the right to relief above the speculative level. See Bell Atlantic v. Twombly, 127 S.Ct. 1955, 1965 (2007). Conversely, a complaint may not be dismissed for failure to state a claim where the allegations plausibly show that the pleader is entitled to relief. See id. (citing Fed R. Civ. P. 8(a)(2)). In ruling on a motion pursuant to Rule 12(b)(6), a court must construe the pleadings in the light most favorable to the plaintiff, and must accept as true all material ...


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