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Stiles v. Wal-Mart Stores, Inc.

United States District Court, E.D. California

August 29, 2017

SHARIDAN STILES, Plaintiff,
v.
WAL-MART STORES, INC.; AMERICAN INTERNATIONAL INDUSTRIES, INC.; and DOES 1-100, Defendants.

          MEMORANDUM AND ORDER

          MORRISON C. ENGLAND JR UNITED STATES DISTRICT JUDGE

         Plaintiff Sharidan Stiles (“Plaintiff” or “Stiles”) brings this action against Defendants Wal-Mart Stores, Inc. (“Walmart”) and American International Industries (“AI”) (collectively, “Defendants”) alleging intellectual property and antitrust violations related to her Stiles Razor, a patented styling razor with a 1/8 inch blade and ergonomic handle allowing for safe and precise shaving. Plaintiff's First Amended Complaint was dismissed with leave to amend.

         In her Second Amended Complaint (“SAC”), Plaintiff asserts the following causes of action: (1) Patent Infringement related to the ‘468 Patent; (2) Patent Infringement related to the ‘329 Patent; (3) Trade Dress Infringement in violation of the Lanham Act § 43(a), 15 U.S.C. § 1125(a); (4) False Advertising/False Association in violation of the Lanham Act § 43(a), 15 U.S.C. § 1125(a); (5) Violation of Section 1 of the Sherman Act, 15 U.S.C. § 1; (6) Violation of Section 2 of the Sherman Act, 15 U.S.C. § 2; (7) Violation of the California Cartwright Antitrust Act, Bus. & Prof. Code § 16700 et seq.; and (8) Intentional Interference with Prospective Economic Advantage.

         Presently before the Court are Defendant Walmart's Motion to Dismiss Plaintiff's Fifth, Sixth, and Seventh Causes of Action (ECF No. 64), [1] Defendant AI's Motion to Dismiss Plaintiff's Eighth Cause of Action (ECF No. 65), Walmart's Motion to Dismiss Plaintiff's Third and Fourth Causes of Action (ECF No. 71) (“Second Motion to Dismiss”), and Plaintiff's Motion to Strike Walmart's Second Motion to Dismiss (ECF No. 75). For the reasons set forth below, Walmart's Motion to Dismiss (ECF No. 64) is GRANTED, AI's Motion to Dismiss (ECF No. 65) is GRANTED, Plaintiff's Motion to Strike is GRANTED, and Walmart's Second Motion to Dismiss is STRICKEN.[2]

         BACKGROUND [3]

         As set forth in the SAC, Plaintiff is the inventor, designer, and creator of the patented Stiles Razor, a disposable razor with a uniquely narrow blade designed for detailed shaving. Plaintiff began selling her razor in Walmart stores on a test run basis in 2006, and-after experiencing some success-began selling it in the Wet Shave Department in 2007. Stiles was told her product would continue to be sold at Walmart if she could sell two units per store per week. Despite Stiles exceeding that mark, Walmart “began actively suppressing [its] growth.” Specifically, Walmart refused to lower the price of the razor in an attempt to increase sales, removed the Stiles Razor from the stores where it was performing most successfully, failed to restock the razors, and increased the units per store per week requirement from two to six. In 2009, Walmart discontinued sales of the Stiles Razor in the Wet Shave Department. After selling the Stiles Razor in the Beauty Department from 2011 to 2012, Walmart terminated Stiles' contract in May 2012, and stopped selling the Stiles Razor in December of that year.

         According to the SAC, AI had been manufacturing and selling its Ardell Brow Precision Shaper-which Plaintiff claims also infringes on the Stiles Razor-in 2008. In 2011, Walmart entered into an agreement with AI to sell the Ardell Brow Precision Shaper under Walmart's store brand, Salon Perfect. Plaintiff further alleges that in 2012 Walmart approached the Executive Vice President of Defendant AI and asked AI to create a knockoff of the Stiles Razor that would be sold under the Salon Perfect brand, and AI agreed. Walmart began selling the Salon Perfect Micro Razor in 2013. In 2014, the Vice President of AI called Plaintiff and admitted to her that Walmart had approached her in 2012, had given her the Stiles Razor, asked AI to copy it, and AI agreed.

         STANDARD

         On a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), all 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) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require detailed factual allegations. However, “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). A court is not required to accept as true a “legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). “Factual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555 (citing 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) (stating that the pleading must contain something more than “a statement of facts that merely creates a suspicion [of] a legally cognizable right of action”)).

         Furthermore, “Rule 8(a)(2) . . . requires a showing, rather than a blanket assertion, of entitlement to relief.” Twombly, 550 U.S. at 555 n.3 (internal citations and quotations omitted). Thus, “[w]ithout some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirements of providing not only ‘fair notice' of the nature of the claim, but also ‘grounds' on which the claim rests.” Id. (citing Wright & Miller, supra, at 94, 95). A pleading must contain “only enough facts to state a claim to relief that is plausible on its face.” Id. at 570. If the “plaintiffs . . . have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed.” Id. However, “[a] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that a recovery is very remote and unlikely.'” Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

         A court granting a motion to dismiss a complaint must then decide whether to grant leave to amend. Leave to amend should be “freely given” where there is no “undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of the amendment . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to be considered when deciding whether to grant leave to amend). Not all of these factors merit equal weight. Rather, “the consideration of prejudice to the opposing party . . . carries the greatest weight.” Id. (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 185 (9th Cir. 1987)). Dismissal without leave to amend is proper only if it is clear that “the complaint could not be saved by any amendment.” Intri-Plex Techs. v. Crest Group, Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (citing In re Daou Sys., Inc., 411 F.3d 1006, 1013 (9th Cir. 2005); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989) (“Leave need not be granted where the amendment of the complaint . . . constitutes an exercise in futility . . . .”)).

         ANALYSIS

         A. Defendants' First Motions to Dismiss

         By way of its first Motion to Dismiss, ECF No. 64, Walmart seeks dismissal of Plaintiff's antitrust claims (Counts Five, Six, and Seven of Plaintiff's SAC) under Federal Rule of Civil Procedure 12(b)(6) on the bases that (1) Plaintiff fails to plead a plausible antitrust claim; (2) the claims “do not make economic sense”; (3) Plaintiff's monopoly claims are based on a “shared monopoly” theory (shared as between Walmart and AI), which has been rejected by the majority of courts; (4) Plaintiff has not alleged a “horizontal agreement” and therefore has not alleged antitrust conduct that is per se illegal; and-relatedly-(5) Plaintiff has not alleged a relevant market in which Defendants had significant market power, as required when alleging antitrust conduct in the form of a “vertical agreement.” AI joins in Walmart's motion, and additionally moves under Rule 12(b)(6) to dismiss Plaintiff's Eighth Count for intentional interference with prospective economic advantage on the basis that Plaintiff fails to state a plausible claim for relief, ECF No. 65.

         1. Sherman Act § 1 and Cartwright Act: Per Se Violation

         The Court finds Plaintiff has not alleged facts sufficient to state a claim of per se illegal antitrust conduct. Plaintiff argues that it has adequately alleged the existence of a horizontal agreement between Walmart and AI that constitutes a per se unreasonable restraint on trade. This allegation is premised on the contention that both Walmart and AI are suppliers because Walmart has its own store brand. The facts alleged, however, do not support that premise, and accordingly, the conclusion that Walmart and AI have entered into an unlawful horizontal agreement in restraint of trade is untenable. First, not all horizontal agreements in restraint of trade are unlawful per se. Only those agreements that are “so plainly anticompetitive that no elaborate study of the industry is needed to establish their illegality” are considered per se antitrust violations. Nat'l Soc'y of Prof. Eng'rs v. United States, 435 U.S. 679, 692 (1978). Second, even if all horizontal agreements were unlawful per se, the Court is not convinced that Walmart could be characterized as a supplier under the facts presented, and thus it is not possible to consider Walmart and AI to be in a horizontal relationship. Plaintiff essentially claims that Walmart is a supplier of its own brand to itself. While Walmart may actually produce some of its store branded products, saying that Walmart is a supplier of Salon Perfect Razors is not accurate. Rather, as conceded in the SAC, AI produces the razors and supplies them ...


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