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William Dominick; and Westwood Rare Coin Gallery, Inc v. Collectors Universe

December 18, 2012

WILLIAM DOMINICK; AND WESTWOOD RARE COIN GALLERY, INC., PLAINTIFFS,
v.
COLLECTORS UNIVERSE, INC.; CERTIFIED ASSET EXCHANGE, INC. A/K/A CERTIFIED COIN EXCHANGE; DAVID HALL RARE COINS; DAVID HALL; CASSI EAST; AND MICHAEL BRANDOW; AND DOES 1 THROUGH 10, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Otis D. Wright, II United States District Judge

O JS-6

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS [50]

I.INTRODUCTION

The Defendants in this matter collectively move to dismiss Plaintiffs' Second Amended Complaint ("SAC"). (ECF No. 50.) Having carefully considered the papers filed in support of and in opposition to this Motion, the Court deems the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; L.R. 7--15. For the reasons discussed below, Defendants' motion is GRANTED.

II.FACTUAL BACKGROUND

William Dominick is a full-time professional numismatist and rare-coin dealer who owns Westwood Rare Coin Gallery, Inc. ("WRCG"). WRCG is a New Jersey corporation in the business of selling rare coins, bullion, and other numismatic material*fn1 in California. (SAC ¶¶ 22, 25, 31.) Both Dominick and WRCG are Plaintiffs in this case.

David Hall is also a full-time professional numismatist and rare-coin dealer. (Id. ¶ 38.) Hall wears many hats: he owns David Hall Rare Coins ("DHRC"), a California corporation that deals in rare coins and bullion; he acts as the president, director, and chief executive officer of Collectors Universe, Inc., a Delaware corporation engaged in business in the coin industry; he serves as the director of Certified Coin Exchange ("CCE"), a Delaware corporation owned by Collectors Universe that operates the main website for real-time trading of numismatic materials; and he is a founding member and the chief executive officer of Professional Coin Grading Service ("PCGS"), the service that grades most of the rare coins traded on the CCE website. (Id. ¶¶ 40--50, 53--54.) Hall, DHRC, Collectors Universe, and CCE are all named Defendants.*fn2

Cassi East and Michael Brandow are additional Defendants in this action. East is CCE's president, while Brandow is CCE's sales director. (Id. ¶¶ 57--58.) Hall, East, and Brandow jointly manage CCE. (Id. ¶ 129.)

Defendants allegedly engaged in numerous acts to establish their control over the relevant market of real-time trading in numismatic materials and eliminate their competition, including Plaintiffs. Specifically, Plaintiffs take issue with Defendants' secret allocation agreement, exclusive-dealing agreement, and certain instances of price fixing.

First, Plaintiffs allege Hall and DHRC entered into a secret allocation agreement with third-party dealers who utilize the CCE website. (Id. ¶¶ 114, 159.) According to Plaintiffs, this agreement "constitutes an unreasonable restraint on trade because it secretly divides and distributes the customers on the CCE website primarily among Hall, DHRC and Third Party Dealers, thereby limiting Plaintiffs' access to customers in the market for real-time trading in numismatic materials in the United States." (Id. ¶ 161.)

Second, Hall and DHRC allegedly entered into an exclusive-dealing agreement with third-party dealers that afforded Defendants the benefit of a monopoly in the market for rare coins and other numismatic materials. (Id. ¶¶ 172, 179.) This agreement prevented Plaintiffs from accessing deals on the CCE website, and even made them the victim of "sham offers" made by Defendants Hall or DHRC, or both. (Id. ¶¶ 174--176.) Plaintiffs describe one such sham offer: "Dominick and/or WRCG accepted Hall's and/or DHRC's offer to sell eleven gold commemorative coins on the CCE website, but Hall and/or DHRC only delivered one of the eleven coins . . . because Plaintiffs are not a part of the Exclusive Dealing Agreement [Hall and DHRC] has with other dealers." (Id. ¶¶ 175--76.)

Finally, Plaintiffs contend Defendants prepared the CCE price list in a manner that constitutes illegal price fixing. (Id. ¶ 162.) Hall, East, and Brandow were responsible for creating the CCE price list, and they selectively decided which prices to disclose and failed to be transparent with how the price list was initially compiled. (Id. ¶¶ 168--70.) This created problems because the CCE price list was supposed to accurately provide CCE members and other price-reporting services with "the latest spot metal and bullion coin prices." (Id. ¶ 166.)

Plaintiffs additionally allege that Hall engaged in false advertising on the CCE website. Specifically, Plaintiffs contend that Hall falsely claimed that PCGS-graded rare coins are "valued accurately and impartially" and that rare-coin dealers can become CCE members as long as they fulfill CCE's requirements. (Id. ¶¶ 243, 254.) According to Plaintiffs, neither of these statements are true. (Id. ¶ 225.)

Following this Court's dismissal of portions of Plaintiffs' First Amended Complaint ("FAC"), Plaintiffs filed their SAC on October 10, 2012. As with the FAC, the SAC asserts nine causes of action: (1) violation of Section 1 of the Sherman Act against Hall and DHRC; (2) violation of Section 2 of the Sherman Act against Hall and DHRC; (3) violation of Section 3 of the Clayton Act against Hall; (4) violation of the Lanham Act against Hall; (5) unreasonable restraint of trade in violation of the California Cartwright Act, Cal. Bus. & Prof. Code § 16720, against Hall, DHRC, East, and Brandow; (6) unfair competition in violation of California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200, against Hall and DHRC; (7) intentional interference with prospective economic advantage against Collectors Universe, CCE, Hall, DHRC, East, and Brandow; (8) negligent interference with prospective economic advantage against Collectors Universe, CCE, Hall, DHRC, East, and Brandow; and (9) breach of contract against Collectors Universe, CCE, Hall, DHRC, East, and Brandow. Defendants filed this Motion to Dismiss on November 12, 2012. (ECF No. 50.)

III.LEGAL STANDARD

Dismissal under Rule 12(b)(6) can be based on "the lack of a cognizable legal theory" or "the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). A complaint need only satisfy the minimal notice pleading requirements of Rule 8(a)(2)-a short and plain statement-to survive a motion to dismiss for failure to state a claim under Rule 12(b)(6). Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003); Fed. R. Civ. P. 8(a)(2). For a complaint to sufficiently state a claim, its "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). While specific facts are not necessary so long as the complaint gives the defendant fair notice of the claim and the grounds upon ...


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