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Morning Star Packing Co. v. SK Foods

November 16, 2010

THE MORNING STAR PACKING COMPANY, ET AL., PLAINTIFFS,
v.
SK FOODS, L.P., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge

MEMORANDUM AND ORDER

Presently before the Court is a Motion by Defendants Ingomar Packing Company, Greg Pruett, Los Gatos Tomato Products, and Stuart Woolf ("Defendants") to dismiss the claims alleged against them in the First Amended Complaint ("Complaint") of Plaintiffs The Morning Star Packing Company, Liberty Packing Company, LLC, California Fruit & Tomato Kitchens, and The Morning Star Company ("Plaintiffs") for failure to state a claim upon which relief may be granted pursuant to Federal Rule of Civil Procedure Rule 12(b)(6). For the reasons set forth below, Defendants' Motion is granted in part and denied in part.

BACKGROUND*fn1

Plaintiffs are in the business of processing raw tomatoes into processed tomato products. Defendants are also in the processed tomato products business, and are direct competitors of Plaintiffs. The tomato goods sold by Plaintiffs and Defendants are purchased by large corporations, such as Kraft Foods, Agusa, B&G Foods, and Safeway. Companies wishing to purchase processed tomato products utilize purchasing agents to handle transactions between the company and the processor. These agents, known as customers' purchasing agents, are typically employees of the purchasing company. In the processed tomato industry, goods are typically sold by tomato processors submitting bids to customers' purchasing agent.

In 2006, Defendants and Co-Defendant SK Foods*fn2 , who is also in the business of processing tomatoes, formed a partnership named CTEG. The purported purpose of this venture was to promote the export of processed tomato products overseas. Plaintiffs allege that the real purpose of the partnership was for their members to agree and collude on domestic prices for the sale of their products. Plaintiffs claim that in 2005, prior to forming CTEG, Defendants and SK Foods made several anticompetitive agreements.

Defendants agreed to, among other things, fix prices for tomato paste and diced tomatoes, and to allocate customers by not competing for customers with whom other CTEG members had longstanding business relationships.*fn3

In addition to price fixing and allocating customers, Plaintiffs also claim that Defendants and SK Foods made bribe payments to customers' purchasing agents. These alleged bribes were paid by Defendants and SK Foods to ensure that SK Foods' submitted bids would be the winning bids for contracts for the sale of processed tomato products. SK Foods also allegedly paid bribes to purchasing agents in exchange for information regarding bids submitted by competitors of Defendants and SK Foods, including bid information submitted by Plaintiffs. The acquired bid information was shared with Defendants who utilized this information in preparing their own bids. As a result of these practices, Plaintiffs claim that they were unable to compete for contracts and were not awarded contracts they otherwise would have been awarded.

STANDARD

A party may seek dismissal of a claim if the pleadings are insufficient because they fail to state a claim upon which relief may be granted.

On a motion to dismiss for failure to state a claim under Rule 12(b)(6), "[a]ll allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party." Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) "requires only a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the...claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted).

Although "a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do."

Id. (internal citations and quotations omitted). "Factual allegations must be enough to raise a right to relief above the speculative level." Id. (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) ("[T]he pleading must contain something more...than...a statement of facts that merely creates a suspicion [of] a legally cognizable right of action."). If the "plaintiffs...have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed." Twombly, 550 U.S. at 570.

Once the court grants a motion to dismiss, they must then decide whether to grant a plaintiff leave to amend. Rule 15(a) authorizes the court to freely grant leave to amend when there is no "undue delay, bad faith, or dilatory motive on the part of the movant." Foman v. Davis, 371 U.S. 178, 182 (1962). In fact, leave to amend is generally only denied when it is clear that the deficiencies of the complaint cannot possibly be cured by an amended version. See DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992); Balistieri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990) ("A complaint should not be dismissed under Rule 12(b)(6) unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.") (internal citations omitted).

ANALYSIS

Plaintiffs contend that Defendants' conduct is unlawful under the Sherman Act, the Racketeering Influenced and Corrupt Organizations Act ("RICO"), California Common Law Unfair Competition, and California Business and Professions Code § 17000 et seq.*fn4 The issue presently before the court is whether Plaintiffs' Complaint contains ...


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