Matthew Enterprise, Inc. v. Chrysler Group LLC

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR SUMMARY JUDGMENT [RE: ECF 166]

          BETH LABSON FREEMAN United States District Judge

         Plaintiff, Mathew Enterprise, Inc., a Chrysler, Jeep, Dodge and Ram (“CJDR”) dealer operating as Stevens Creek CJDR (“Stevens Creek”), alleges that Defendant Chrysler Group LLC (“Chrysler”) offered incentive payments to other CJDR dealers in Northern California but not to Stevens Creek in violation of § 2(a) of the Robinson-Patman Act (“RPA”). Stevens Creek initially brought four claims, but only the § 2(a) claim for damages remains. Chrysler now asks the Court to grant summary judgment in its favor on that claim. For the reasons below, the Court GRANTS IN PART and DENIES IN PART Chrysler’s motion.

         I.BACKGROUND

         A. Preliminary Facts

         The Court begins by summarizing preliminary facts, which the parties have not deemed to be material, but the Court includes as background.^[1] Chrysler manufactures and distributes CJDR vehicles through a network of authorized dealers, including Stevens Creek. Ans. ¶¶ 9-11, ECF 57. Stevens Creek has been a CJDR dealer in San Jose, California since 2006, before alleged competitors San Leandro CJDR (“San Leandro”) and Fremont CJDR (“Fremont”) entered the market. See Zaheri Decl. ¶ 3, ECF 197; Ans. ¶¶ 21, 31. While Stevens Creek’s pleadings focus on competition with San Leandro and Fremont, it also identifies other CJDR dealers to whom Chrysler sells vehicles in Northern California, including Putnam CJDR (“Putnam”) and Normandin CJDR (“Normandin”). Ans. ¶ 14; Stockton Report (“Stockton”) Tab 3 at 1, ECF 171-5. The Court refers to Fremont, San Leandro, Putnam, and Normandin collectively as “Surrounding Dealers.”^[2]

         Chrysler assists dealers by offering them incentive programs. Ans. ¶ 18. For example, in or about April 2011, Chrysler implemented the Volume Growth Program (“VGP”), under which Chrysler provided incentive payments to dealers that met or exceeded sales objectives. Id. ¶¶ 18, 30. Some of the sales objectives were set monthly, based in part on the dealer’s sales history. Id. ¶¶ 18-19; see also Def.’s Exh. 13 (Thompson Depo.) at 86:12-16, ECF 171-10. With the exception of April 2012, Stevens Creek met its monthly sales objectives from July 2011 through June 2012. Ans. ¶ 29.

         B. Undisputed Facts

         The following facts are undisputed unless otherwise noted.^[3] Once a dealer earns its VGP incentive payments, Chrysler does not require dealers to use the VGP payments for any particular purpose. Thompson Depo. at 15:1-14. In the ordinary course of business, Stevens Creek used its payments to lower prices to price-sensitive customers or to increase its profits. Def.’s Exh. 3 (No. 20). From April 2011 through June 2012, Stevens Creek’s average transaction price for a vehicle was $30, 699, see Def.’s Exh. 10 (Woroch Report) ¶ 55, ECF 173-12, while incentives averaged over $700 per vehicle or about 2.3% of the average price, see Stockton ¶ 41, ECF 171-5.

         In June 2012, Fremont became an authorized CJDR dealer. From June 2012 to June 2013, Chrysler continued to base Stevens Creek’s monthly objectives in part on Stevens Creek’s sales history from the prior year without taking into account Fremont’s entry into the market. At the same time, Chrysler calculated Fremont’s sales objectives using a different formula. Stockton Report ¶¶ 40-41; see also Def.’s Exh. 5 (No. 7). A year after Fremont’s entry, objectives for all relevant dealers were set using the same formula. (That occurred because Fremont then had a sales history on which to base its incentive benchmarks.)

         In the year following Fremont’s entry, Stevens Creek missed its VGP incentives each month from July 2012 to June 2013. In July 2012, Stevens Creek earned a “fast start” payment- which is different from a VGP payment-and tried but failed to meet its VGP objective. Stockton Tab 14 at 1, ECF 173-7. Stevens Creek received no incentive payments from August 2012 to June 2013. Id. at 1. In contrast, Fremont earned its incentives in each month over that period. Id. at 1. For the purposes of this motion, the parties agree that if the definition of a “Favored Dealer” is one that earned its incentives, Fremont was a Favored Dealer from at least August 2012 through June 2013. See Reply Statement of Undisputed Facts (“Reply Statement”) (Fact No. 30), ECF 228.

         Over the same period, other Surrounding Dealers sometimes earned and sometimes missed their incentives. Id.; see also Stockton Tab 14 at 1. Specifically, in the 12 months following Fremont’s entry, Normandin met its objectives five times, San Leandro met its objectives eight times, and Putnam met its objectives two times. Stockton Tab 14 at 1. As a result, the parties dispute whether San Leandro, Normandin, and Putnam were also Favored Dealers from August 2012 to June 2013 because they did not receive incentives in some months but enjoyed greater average incentives than Stevens Creek over the entire period. Id. at 1.

         For the purposes of this motion, the parties do not dispute that the alleged incentive discrimination caused Stevens Creek to lose sales from August 2012 through June 2013. See Reply Statement (Fact No. 47). This price discrimination did not cause Stevens Creek to raise its published or advertised prices, see Def.’s Exh. 3 (Interrog. No. 12), but Stevens Creek did raise its actual prices, on average, by approximately the amount of the lost incentives. See Def.’s Exh 8 (Stockton Depo. 3) at 749:21-24. The missed incentives did not drive Stevens Creek from the market. Id. at 793:19-23.

         Stevens Creek has not identified any customer that purchased a vehicle of like grade and quality from a Favored Dealer after negotiating with Stevens Creek, nor does Stevens Creek have any evidence of “specific customers or the number of customers who compared Stevens Creek’s retail prices with those of a [Surrounding] Dealer” or who did not purchase from Stevens Creek because the Surrounding Dealers’ retail prices were lower. Def.’s Exh. 2 (Interrog. Nos. 15-18), ECF 171-2; see also Def.’s Exh 12 (Zaheri Depo.) at 34:21- 35:8, ECF 173-16. Similarly, Stevens Creek does not know how many customers negotiated with it but instead bought a vehicle of another brand, a different CJDR vehicle, or no vehicle at all. Id. at 131:14-132:20. Stevens Creek’s expert also does not have any “specific knowledge of the purchasing practices of specific customers” or “what the cross elasticity of demand is between Stevens Creek and any particular dealer.” Stockton Depo. 1 at 260:5-22. In addition, Stevens Creek has not conducted a survey of customers, nor has Stevens Creek compared a list of customers that contacted but did not purchase a vehicle from it to Surrounding Dealers’ customer lists from the relevant period. Id. at 520:1-22.

         II.LEGAL STANDARD

         “A party is entitled to summary judgment if the ‘movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’” City of Pomona v. SQM North America Corp., 750 F.3d 1036, 1049 (9th Cir. 2014) (quoting Fed.R.Civ.P. 56(a)). “The moving party initially bears the burden of proving the absence of a genuine issue of material fact.” In re Oracle Corp. Sec. Litig., 627 F.3d 376, 387 (9th Cir. 2010) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). “Where the non-moving party bears the burden of proof at trial, the moving party need only prove that there is an absence of evidence to support the non-moving party’s case.” Id.

         “Where the moving party meets that burden, the burden then shifts to the non-moving party to designate specific facts demonstrating the existence of genuine issues for trial.” Id. “[T]he non-moving party must come forth with evidence from which a jury could reasonably render a verdict in the non-moving party’s favor.” Id.

         “The court must view the evidence in the light most favorable to the nonmovant and draw all reasonable inferences in the nonmovant’s favor.” City of Pomona, 750 F.3d at 1049. “‘Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.’” Id. (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).

         III.DISCUSSION

         Chrysler seeks summary judgment on Stevens Creek’s remaining damages claim for price discrimination under § 2(a) of the RPA, 15 U.S.C. § 13(a), which makes it “unlawful for any person engaged in commerce . . . to discriminate in price between different purchasers of commodities of like grade and quality . . . where the effect of such discrimination may be substantially to lessen competition.” 15 U.S.C. § 13(a).

         Through § 2(a), Congress “sought to target the perceived harm to competition occasioned by powerful buyers, rather than sellers; specifically, Congress responded to the advent of large chainstores, enterprises with the clout to obtain lower prices for goods than smaller buyers could demand.” Volvo Trucks N. Am., Inc. v. Reeder-Simco GMC, Inc., 546 U.S. 164, 175 (2006). At the same time, “Robinson-Patman does not ban all price differences charged to different purchasers of commodities of like grade and quality; rather, the Act proscribes price discrimination only to the extent that it threatens to injure competition.” Id. at 177 (internal citation omitted). In other words, the Act is intended to stimulate competition, not to protect existing competitors. Id. at 181.

         Where, as here, a plaintiff seeks damages for price discrimination, the plaintiff must establish both “competitive injury” and “antitrust injury.” For an injunction, “all that is required . . . is proof that competitive injury may result.” Hasbrouck v. Texaco, Inc., 842 F.2d 1034, 1042 (9th Cir. 1987), aff'd, 496 U.S. 543 (1990) (emphasis in original). To recover damages, however a plaintiff must also show “antitrust injury, ” which requires “some showing of actual injury and causation.” Id. at 1041. Chrysler argues that Stevens Creek lacks evidence to establish either form of injury, and the Court considers each in turn.

         A. Competitive Injury

         To establish competitive injury, a plaintiff must “show that (1) the relevant . . . sales were made in interstate commerce; (2) the [goods] were of ‘like grade and quality’; (3) [the seller] ‘discriminated in price between’ [the plaintiff] and another purchaser of [the goods]; and (4) ‘the effect of such discrimination may be . . . to injure, destroy, or prevent competition’ to the advantage of a favored purchaser.” Volvo, 546 U.S. at 176-77 (quoting 15 U.S.C. § 13(a)). Here, Chrysler challenges Stevens Creek’s proof regarding only the last element.

         A plaintiff may establish the last element either directly, through evidence that sales or profits were diverted from a disfavored purchaser to a favored purchaser, or indirectly, through evidence that a “favored competitor received a significant price reduction over a substantial period of time, ” which gives rise to what is called a Morton Salt presumption. Id. at 177; see also Fall City Industries, Inc. v. Vanco Beverages, Inc., 460 U.S. 428, 437-38 (483); FTC v. Morton Salt Co., 334 U.S. 37, 49-51 (1948). Chrysler argues that Stevens Creek lacks evidence to make either showing here, see Mot. at 10-19, ECF 166, and the Court considers each option in turn.

         1. Direct Evidence of Diverted Sales or Profits

         Chrysler contends that Stevens Creek lacks evidence to directly show competitive injury through diversion of sales or profits to a favored competitor because, as noted above, it is undisputed that Stevens Creek cannot identify any customers who (1) did not purchase a vehicle from Stevens Creek because a Surrounding Dealer offered a lower price, (2) purchased a similar vehicle from a Surrounding Dealer after negotiating with Stevens Creek, (3) informed Stevens Creek that s/he had received a lower offer from a Surrounding Dealer, or (4) even compared Stevens Creek’s prices to those of a Surrounding Dealer. See Def.’s Exh. 2 (Interrog. Nos. 15-18).

         To argue that such evidence is necessary, Chrysler relies on Volvo, which considered an RPA claim brought by a Volvo dealer to challenge Volvo for failing to offer identical concessions to dealers bidding for the same custom projects. Volvo, 546 U.S. at 169-71. As evidence, the plaintiff offered two instances where it directly competed with another Volvo dealer for the same project, including one where the plaintiff lost to the allegedly favored competitor, but in both cases Volvo in fact offered the dealers matching concessions for their bids. Id. at 172, 180. The plaintiff also compared concessions Volvo gave to it and other dealers, but for different sales. Id. The Supreme Court found these comparisons insufficient to show diverted sales because “in none of the discrete instances . . . did [the plaintiff] compete with ...