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Witt Co. v. Riso, Inc.

United States District Court, D. Oregon

June 7, 2013

WITT COMPANY, an Oregon corporation, Plaintiff,
RISO, INC., a Massachusetts corporation, Defendant

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For Plaintiff: John F. McGrory, Jr., Kaley L. Fendall, DAVIS WRIGHT TREMAINE LLP, Portland, Oregon.

For Defendant: Thomas M. Triplett, Roman D. Hernandez, SCHWABE, WILLIAMSON & WYATT, Portland, Oregon; Edwin G. Harvey, Matthew L. Landwehr, David M. Mangian, THOMPSON COBURN LLP, St. Louis, Missouri.


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Marco A. Hernandez, United States District Judge.

Plaintiff Witt Company brings this antitrust action against Defendant RISO, Inc., contending that Defendant has violated the Sherman and Clayton Acts with an unlawful tying arrangement. Plaintiff also brings state law claims of intentional interference with economic relations, breach of contract, and breach of the implied duty of good faith and fair dealing.

Defendant moves to dismiss the four claims. I agree with Defendant that depending on how the antitrust claim is construed, it is either barred by the statute of limitations or fails to state a claim. I further agree with Defendant that the state law claims fail to state a claim and that this Court lacks personal jurisdiction over Defendant as to the contract-based claims. I grant the motion to dismiss.


The facts are taken from the Complaint with some additional facts provided by Exhibits A-1 to A-4 to the March 27, 2013 Kathryn Hawkes Declaration. The Complaint refers to and quotes from these exhibits and neither party questions their authenticity. Plaintiff raises no objection to considering them in resolving the motion to dismiss. Therefore, I rely on them in the context of this motion. See Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010) (court may consider materials incorporated into the complaint or matters of public record)

Plaintiff provides office technology products and related services, including hardware, software, and supplies, as well as both maintenance and consulting services for document imaging, document output, and digital storage. Compl. at ¶ 1. Defendant manufactures and distributes hardware and supplies for document printing and duplicating. Id. at ¶ 2.

Plaintiff has been an authorized dealer of RISO digital duplicators and other related products since approximately 1988. Id. at ¶ 7. As such, it entered into several

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RISO Domestic Dealer Agreements (" Dealer Agreements" ) from time to time which set forth the terms and conditions of the parties' business relationship. Id.

On April 1, 2007, Plaintiff and Defendant entered into a 2007 Dealer Agreement.[1] Id. at ¶ 8; see also Ex. A-1 to Mar. 27, 2013 Hawkes Decl. In December 2009, Defendant offered to replace the 2007 Dealer Agreement with a succeeding Dealer Agreement which contained terms Plaintiff objected to. Id. at ¶ 9. The 2007 Dealer Agreement ceased to remain in effect sometime in March 2010, ninety days after Defendant offered the succeeding Dealer Agreement which Plaintiff did not execute. Id. (citing 2007 Dealer Agreement termination paragraph 4(b)(ii)).

Plaintiff has not been a party to any Dealer Agreement with Defendant since the 2007 Dealer Agreement ceased to be effective (with the exception of a ninety-day period discussed below). Id. Despite the absence of a formalized Dealer Agreement with Defendant, Plaintiff has continued to be an authorized RISO dealer as of the time this Complaint was filed on January 29, 2013. Id.

On April 1, 2011, the parties executed an Asset Purchase Agreement (APA) under which Plaintiff acquired from Defendant markets in two counties in California and five counties in Arizona. Id. at ¶ 10; see also Ex. A-2 to Mar. 27, 2013 Hawkes Decl. Under the APA, Plaintiff paid Defendant $700,000 for the purchase of Defendant's operations in those markets. Id. at ¶ 11; Ex. A-2 to Hawkes Decl. at § § 1.10, 1.11.

Plaintiff alleges that approximately two weeks before the closing of the APA, Defendant told Plaintiff that Plaintiff had to sign a new Dealer Agreement as part of the closing of the APA. Compl. at ¶ 12. Plaintiff objected to executing a new Dealer Agreement because of terms it considered to be overly restrictive. Id. at ¶ 13. Plaintiff told Defendant it would not finalize the APA if it was required to sign the new Dealer Agreement. Id. Among other things, Plaintiff objected to paragraph 3 of the new Dealer Agreement which provided that

[d]uring the term of this Agreement, Dealer shall not also be a dealer for, nor make sales of, digital duplicators, accessories, or parts or supplies for digital duplicators, directly or substantially competitive with [RISO] Products.


Plaintiff objected to paragraph 3 because it would deny Plaintiff the right to purchase and sell RISO digital duplicators unless it also agreed to exclusively purchase RISO brand supplies for use in RISO equipment, and not use any competitive supplies. Id. at ¶ 14. At the closing of the APA, Plaintiff and Defendant agreed to reinstate the terms of the 2007 Dealer Agreement for a period of ninety days following the execution of the APA so that the parties could attempt to negotiate terms that would be acceptable to Plaintiff. Id. They further agreed to " attempt in good faith" to resolve their concerns about the proposed Dealer Agreement so that the " terms of the reinstated Dealer Agreement may be replaced by a new dealer

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agreement." Id. at ¶ 15 (citing section 5.7 of the APA).

After the APA closing, Plaintiff made " several good-faith efforts" to negotiate a new Dealer Agreement. Id. at ¶ 16. Plaintiff alleges that RISO was largely non-responsive. Id. Eventually, Defendant presented Plaintiff with a new Dealer Agreement on September 12, 2012. Id. at ¶ 17; see also Ex. A-3 to Mar. 27, 2013 Hawkes Decl. Plaintiff alleges that Defendant told Plaintiff that Plaintiff would be required to execute a new Dealer Agreement to remain an authorized dealer. Id. On September 20, 2012, Defendant sent Plaintiff a letter stating that if Plaintiff did not sign a new Dealer Agreement, Plaintiff's status as an authorized RISO dealer would expire on March 31, 2013.[2] Id. at ¶ 18; Ex. A-4 to Hawkes Decl.

Plaintiff alleges that the September 20, 2012 Letter specifically stated that Plaintiff's acceptance of the new Dealer Agreement constituted an acknowledgment that it would abide by paragraph 3 of the Dealer Agreement which prohibits the sale of any digital duplicators, accessories, parts, or supplies that compete with RISO products. Id. at ¶ 19. Plaintiff also alleges that RISO stated that it would not sell Plaintiff RISO digital duplicators unless Plaintiff agreed to purchase exclusively RISO supplies for use in RISO equipment, and not use any competitive supplies. Compl. at ¶ 19. Plaintiff further alleges that after termination as a RISO dealer, Defendant prohibited Plaintiff from purchasing RISO parts to service and maintain duplicators it had previously sold unless it also continued to purchase only RISO supplies, and from using any competitive supplies, as provided in paragraph 5(d) of the new Dealer Agreement. Id.

Since September 20, 2012, the parties have not reached agreement on the terms of a new Dealer Agreement. Id. at ¶ 20. Plaintiff has told Defendant that it will not agree to the terms of the 2012 Dealer Agreement as written and Defendant has maintained its position that if Plaintiff did not agree to the new Dealer Agreement, Plaintiff will cease being an authorized dealer after March 31, 2013. Id. at ¶ ¶ 20, 22.

Any additional allegations are incorporated into the discussion below.


On a motion to dismiss, the court must review the sufficiency of the complaint. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). All allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party. Am. Family Ass'n, Inc. v. City & County of San Francisco, 277 F.3d 1114, 1120 (9th Cir. 2002). However, the court need not accept conclusory allegations as truthful. Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992).

A motion to dismiss under Rule 12(b)(6) will be granted if plaintiff alleges the " grounds" of his " entitlement to relief" with nothing " more than labels and conclusions, and a formulaic recitation of the elements of a cause of action[.]" Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). " Factual allegations must be enough to raise a right to relief above the speculative level, . . . on the assumption that all the allegations in the complaint are true (even if doubtful in fact)[.]" Id. (citations and footnote omitted).

To survive a motion to dismiss, the complaint " must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face[,]" meaning

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" when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the Defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation omitted). Additionally, " only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. The complaint must contain " well-pleaded facts" which " permit the court to infer more than the mere possibility of misconduct." Id. at 679.


I. The Antitrust Claim

A. Description of the Claim

Plaintiff's First Claim for Relief is for " illegal tying" and is brought under section 1 of the Sherman Act, 15 U.S.C. § 1, and section 3 of the Clayton Act, 15 U.S.C. § 14.[3] Plaintiff alleges that digital duplicators and supplies used in digital duplicators constitute two separate and distinct products. Id. at ¶ 38. By requiring its authorized dealers to sell only RISO supplies (and requiring them not to sell supplies that compete with RISO supplies) in order to sell digital duplicators under the explicit terms of its Dealer Agreement, Plaintiff alleges that Defendant has illegally tied the purchase of RISO supplies to the purchase of RISO digital duplicators in violation of the antitrust laws. Id. at ¶ 39. Plaintiff contends that Defendant possesses sufficient economic power in the digital duplicator market to coerce its authorized dealers to agree not to sell any competing non-RISO supplies and to sell only RISO supplies for use in conjunction with RISO digital duplicators. Id. at ¶ 40. Given that Defendant " has made clear" that Plaintiff will no longer be an authorized dealer after March 31, 2013 if it does not agree to refrain from selling competing non-RISO supplies under the terms of its Dealer Agreement, Defendant is attempting to coerce Plaintiff to purchase only RISO supplies. Id. at ¶ 41.

Plaintiff alleges that by tying RISO supplies to RISO digital duplicators in this way, Defendant has substantially foreclosed competing digital duplicator suppliers from the largest channel of distribution, and competing manufacturers of these supplies find it exceptionally difficult to reach end-user consumers. Id. at ¶ 42. And, Defendant's conduct results in Defendant charging supra-competitive prices for its supplies. Id. at ¶ 43. Defendant's conduct has unreasonably restrained competition in the relevant market and has caused Plaintiff, other RISO authorized dealers, and consumers of RISO digital duplicators to suffer antitrust injuries by being coerced into purchasing products they don't want or need, being forced to purchase RISO supplies at a supra-competitive price, and having their choice of available products artificially limited. Id.

Defendant moves to dismiss the antitrust claim because it is barred by the statute of limitations. Alternatively, Defendant argues that the claim fails to state a claim in a number of respects.

B. Statute of Limitations

Antitrust claims are subject to a four-year statute of limitations. 15 U.S.C. § 15b; Airweld, 742 F.2d at 1189. A cause of action under section 15b " accrues and the statute begins to run when a defendant commits an act that injures a plaintiff's business." Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 338, 91 S.Ct. 795, 28 L.Ed.2d 77 (1971). Because the Complaint in this case was

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filed on January 29, 2013, the limitations period began on January 29, 2009.

It is clear from the Complaint that the origin of the antitrust claim is in paragraph 3 of the Dealer Agreement, quoted above.[4] What is less clear is whether Plaintiff bases the claim on the current enforcement of that provision in the Dealer Agreements or on the threat of losing its authorized dealer status for refusing to sign the 2012 Dealer Agreement.

To the extent the claim is based on the actual enforcement of paragraph 3 of the 2007 Dealer Agreement, I agree with Defendant that such a claim accrued on April 1, 2007, the effective date of that agreement. The Complaint alleges that the 2007 Dealer Agreement expired in March 2010 (other than its brief ninety-day resurrection in 2011 as part of the APA). The 2012 Dealer Agreement has never been executed. There is, therefore, no operative express agreement under which Defendant is allegedly enforcing the illegal provision in paragraph 3(a). Moreover, Plaintiff alleges in the Complaint that although there is no express Dealer Agreement in place, its status as an authorized dealer has continued. Plaintiff does not allege that Defendant has continued to enforce paragraph 3(a) during this time.

Any enforcement of the allegedly illegal tying provision in paragraph 3(a) began with the 2007 Dealer Agreement.[5] Accordingly, any antitrust cause of action based on the current enforcement of paragraph 3(a) accrued with the effective date of the 2007 Dealer Agreement or April 1, 2007. Because this claim was filed more than four years after that date, it is time barred. Eichman v. Fotomat Corp., 880 F.2d 149, 160 (9th Cir. 1989) (statute of limitations barred tying claim when lease contract containing alleged illegal tying provision was entered into outside the limitations period); Aurora Enters., Inc. v. Nat'l Broad. Co., 688 F.2d 689, 693 (9th Cir. 1982) (statute of limitations barred plaintiff's claim because the contract containing the alleged illegal tying provision was entered into more than four years before the complaint was filed); Irving v. Lennar Corp., No. CIV S-12-290 ...

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